-- [captions copyright national cable satellite corp. 2021] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy visit ncicap.org] >> this morning a three-judge panel before the d.c. appeals heard more in the case with the january 6 committee's request to get president trump's call logs and other records surrounding the capital attack in 2021. watch tonight ghing at 9 p.m. eastern on c-span. online at c-span.org. or watch full coverage on c-span now our new video app. wednesday, the supreme court hears the case on the constitutional it of a mississippi law banning most abortions after 15 weeks of pregnancy. live coverage of oral argument at 10a.m. eastern on c-span3, online at c-span.org, or coverage on c-span now our new video app. continues. host: our next guest thomas hoenig has served as the federal reserve bank of kansas city and

is a distinguished senior fellow at george mason university. welcome back to washington journal. guest: glad to be back. thank you for inviting me. host: we can start out picking up on the comments of the new covid variant. after the news came out on that, it was not good news on black friday, it was a bad day for the markets. what do you think the administration has to do going forward to reassure not only the markets but the broader swath of americans that the economy, at least in terms of its response to covid and the oma chronic variant -- and the omicron variant will be stable. guest: the most important thing you can do is find out what this new variant brings to us. that is an environment of uncertainty and uncertainty is difficult for the markets to deal with or for consumers to deal with or businesses.

we have to get to an understanding it better, making sure it can be dealt with. i assuming that will be possible given the ability we have so far shown in dealing with some variants of covid. we have to bring greater certainty to the economy in the marketplace, or we will continue to have greater volatility. finding out what it is, dealing with it, and giving the people confidence we can deal with it will be important steps. host: the virus has been with us for 21 months or so. since last october the inflation rate has risen 6.2%. it is not surprising economist thought there would be some inflation coming out of this. as the level of inflation surprising to you? guest: not necessarily. what the number is is just a

fact. the truth is everyone did understand there would likely be inflation. for a couple of reasons. one is if you think about it, we have had accommodative monetary policy for nearly a decade, and we have seen prices rise across the board, not just the single bubble, but housing, land, stock market. there has been inflation. then it went over to the broader prices. that has been a little bit of a surprise for many people that it came so quickly. given the supply disruptions, the fact that they were globally constraining trade, we have had issues with tariffs for some time, that reduces supply. there are what i will call

hopefully transitory logistic issues we will do with, that there are more fundamental issues we have to confront. until we do that i think inflation will continue to be a challenge for the united states and the world. host: part of the story is the parallel rise in wages, at least in some sectors. is that likely to continue as we see inflation remain high? guest: i suspect it will remain. number one, we have seen a fundamental change in the labor force. it is more cautious about the covid virus. we have changed how people work and people have become used to that and are not willing to reenter the market easily. we have seen a major support system through the covid relief program, which i'm not

criticizing at all, but they do put a lot of spending power in the hands of labor and individuals. that means they would be slower to come back into the labor force and it may take time. monetary policy has been very accommodative through this and has put a lot of dollars in the world today, and those dollars are going to be absorbed, part of it in honor of prices. i think we will have inflation for a while. it will depend on what congress decides to do and what the federal reserve decides to do printing money going forward. those decisions have not been made yet. how they are made will affect inflation going forward as well. we have a lot of moving parts in this economic engine of ours and has not been decided how they are all going to work together. host: what has been the

historical role of the fed in helping to halt or minimize inflation? guest: the issues for the fed in trying to deal with the nation's how much money you put out, what your interest rate policies are going to be. number one, having very low-interest rates near zero for a good part of last decade and certainly the last when he one months, that has the of -- the last 21 months has the effect of raising asset values and the requirement you put a lot of money into the system that has shown to have pressures on general prices themselves. what the fed has to do is decide how to back away from that policy. they have started about tapering, which means they would slow their major increases in money into the economy.

that will be a challenge going forward. if the infrastructure bill goes through and build back better goes through, those will require major increases in spending. that will put pressure on the federal reserve to add to the amount of money they are putting into the system by buying the government's debt. those are factors they have to think through because they have to withdraw some of that stimulus if you're going to bring inflation down. part of it is the supply side. what policies we decide and what support to give the labor will have some effect on that. how we deal with supply shortages, getting through the logistics issue, but also our trade policies will have an effect on that. these are the sorts of decisions that lie ahead and will define

how deep and how long inflation will last. host: our guest has a phd in economics from iowa state university and was vice chair of the fbi see and a former -- of the fdic and former federal reserve president. the line for democrats and republicans, (202) 748-8001 and independents and others, (202) 748-8002. people see the prices on the shelves but often times they see their favorite products missing. how does the supply chain exacerbate supply chain shortages and problems, exacerbate inflation? guest: any time you have a given

level of demand, whether they are consumer goods or other goods, that demand is out there. if the supply meets that demand at the given price, then we would have little inflation. if the demand is greater than that supply or if supply suddenly cut short because of logistical issues, ships at anchor in the harbors waiting to be unloaded, though shortages mean there are fewer goods for the same amount of demand and we will see prices rise. the rationale of the supply to go where we are most willing to pay. that is fundamental economics and i think it is having a role in the disinflation our environment. the question is how much of it is transitory. we have also seen globally, we have become more regional.

we have differences between the united states and china. those differences will also make it happen effect on some by -- an effect on supply and effect prices not only in united states but globally. those are big issues for policymakers. host: the president address this issue yesterday. the headline from the new york times, the president says the stores will be stop for the holidays. the president telling large retailers yesterday his administration is committed to partnering with them to untangle some i changed ensure american consumers -- untangle supply chains and ensure consumers they can find everything they want. the federal government is limited in terms of its toolkit to be able to respond to something like this, are they not? guest: i think they are limited.

basically you have a fundamental problem. that is you have not enough labor, not enough capital for these ships to be unloaded, for them to be reloaded on trains and trucks across the country to be distributed. those are the things that, as much as we might like it as much as the government would like to solve, they take time to solve given the depths of this covid event. the fact that they are willing to stay out of the way and let businesses find solutions to these issues, that is a good thing. to the extent they can help, that is support for the improvements in logistical systems and so forth, those are probably positive things but slow to come. it is going to be a challenge for business and for government

to work through this. logistical issues will be taken care of. there are bigger issues globally in terms of trade and trade restrictions than where we are going from here that i think will make -- we have an effort underway. it is to the greening of america, to get off some of the fossil fuels. those have transition costs. we have to be prepared for that. these are the challenges government and the private sector have to deal with, and we have to be aware of. we the public have to be aware of as our economy changes in the next decade and of the next two to three years. host: i wanted to get your thoughts on the president's announcement last week, a renomination of jay powell as federal reserve chair, and leo brainard to be his vice chair --

and lael brainard to be his vice chair. guest: from what i understand and what i read, these were efforts to keep things, keep continuity at the fed as much as possible. there are a lot of new governors that will have to be named. considering the fact you have two, chairman powell and vice chairman lael brainard who would provide some of that continuity. on monetary policy they are very close. on supervision issues they are less close, but i think they're able to work together, that is what the goal of the administration was and would understand that to be reasonable. host: we go to greensboro, north carolina and anne on our democrats line. caller: the statements this

morning seem to be giving some type of credence to saying the biden administration is not doing as much as they can. first of all, for inflation should be pointed out in patient is global. all of the -- inflation is global. all countries are experiencing inflation. all countries are dealing with the virus. some of the people called in and said how many more people had died this administration has been in effect than the previous. of course the more the virus spreads and the more it circulates to the community, the more people. that is the same thing happening in other countries. by asking questions and focusing, you try to give credence and make it seem like this administration is not

operating as best they can. with inflation, if they had not put money in the economy, other countries may have as well, is my understanding there may have been a depression. that was why the administration put money into the economy. now people have funds and supply is not equal to the demand, but otherwise if they did not have money, had there been an -- had there been a depression, there would not have been the demand. guest: you have a couple points. inflation is global. that is part of logistical issues that are confronting the world in terms of moving goods and obtaining goods. that is correct. part of it is due to the global situation, where many countries are in the process of

instituting new trade restrictions. that also constrained supply. it is a combination of a couple things that we have to be aware of, whatever administration, the biden administration goes forward to think about and deal with. that is correct. in terms of the actions taken, i think it is correct that at the moment the uncertainty was created at the start of this pandemic in march 2020 were a little before that, the markets froze up. it is appropriate for the government and the central bank to provide liquidity into the market to address that, and it did. it was successful. the issue that is going to confront whomever is involved in the economy is how long you continue those kinds of policies over time. you had a very accommodative,

very stimulative policy following the period since the recovery of the economy started in fall 2020 and continuing those very easy policies through that may have contributed to the inflationary problem. that is where some of the debates will go between one party and another, independents will weigh in and we have to sort that out. it is true that in a crisis, you do what you have to do. it is how long following the crisis that will decide how deep and how long your inflationary trend will be. we have yet to see where we are with that and how it might be addressed in the coming months. guest: steve in alexandria, indiana. republican line.

host: yes. host: steve, make sure you mute your volume and go ahead with your question or comment. caller: i wanted to say that i think the reason our economy, the gas prices is the main reason. once the gas prices go up it caused a chain reaction to everything. from truck drivers, it was a chain reaction. the truck drivers have to pay more for their fuel. if everybody's paying more for the fuel than all the prices will be going up.

it is not going to end until we get relief on these gas prices. it costs more to transport all of our goods all over the country and i think it is going to be with us for a while until we can get these gas prices lowered. host: ok, steve. guest: you are right. gas prices contribute to inflation when they are rising as rapidly as they have been. it is not the only contributing factor. we also have commodity prices going up as demand for goods have risen with the economy's recovery. we have house prices going up and lumber prices going up. there is a host of goods that are rising they all contribute to inflation to some degree,

some more than others. you'll is one of the more -- fuel is one of the more important ones but in the computation of the consumer price index is weighted according to its impact to the economy, as his other goods, lumber and so forth. the fact that we have inflation is more broad-based than just energy, but i would admit energy is a contributing factor. host: the president says we are going to tap the strategic reserve. what does that mean? does that mean it will help ease prices at the pump? guest: tapping the reserve will have a very marginal effect. in that sense, i think people will have some benefit from it. 50 million barrels in the

relative context of global demand is small. energy is a global commodity. that is why the administration was coordinating with china and japan and other countries to try to have them release some of their reserves to make it more broad-based. at the same time, the issue with energy is fundamental supply and man, and the fact that opec is maintaining its quotas will have an effect, and the fact the united states is producing less will have an effect, perhaps a bigger effect over time. it is worth trying, but it is not a solution to the energy price problem. host: a question for you on twitter. can you explain how tariffs impact inflation and the supply chain? guest: certainly. when you impose a tariff on

goods, you raise the price of those goods to the consumer. it does not matter if there is a shortage for the weather or whatever, you have these goods being offered at a higher price and therefore you demand less of them. that contributes to inflation and it also lessens the demand for the good. you see the inflationary impacts over time through the tariff arrangement. that is how tariffs will also add -- in time -- it is not a logistics problem, it is a raising the price problem. he raise the tariff one time you have supply and demand adjuster that, and may not continue to cause inflation but you have

higher prices over time. caller: i have a question in reference to the housing crisis that took place 2000 to 2008. we are almost at a zero interest rate prior to 2000. from 2000 to 2008 we had the capital crunch, or the credit crunch. my question is why did we start winding up rates? we gave 10 years for the banks to get themselves out of that rises. why did we start stepping up rates from 2008, which they talked about constantly, when will the fed come in? i see will be at a zero rate interest rate environment, i'm 57, until the day we die. i am assuming that is because of the heavy debt load the federal government carries.

it seems like the fed is always behind the curve. they seem to be one step behind. i understand they are supposed to be independent of the government and react based on their policies. that would be my one question. my last question would be when it came to supply chains, the problem is we do not make anything in america. outsourcing and off shoring where the two worst things we could've done for the united states of america. i would love to hear your response, especially to the interest rates. will we ever see 2% or 3% or 4%? i've been waiting since 2008 to see that take ways that get to see that happen. on treasury bills after 2008, treasury bill shot from 1.75% in one week to 10%, and jay powell had to cap that because there was no way the government was going to pay 10% on short-term interest rate instruments, which really upset me, because that

kind of goes against the law of the prospectus of capital markets going door crisis, short-term borrowing goes up, your interest rates will skyrocket. they went from 1.7% to 10%. host: thanks for the call. guest: on your question, i understand. there was an issue after the prices of 2008 about the need to normalize interest rates. they delayed. they kept interest rates near zero for several years. they did a quantitative easing two and three and four, and those were contributors to the low-interest rate environment we had. they were instrumental to that. that was different people had different opinions. at that time i did oppose that

zero interest rate environment, but the reason the majority felt they should do it is because they wanted to make sure recovery stays in place and therefore they continue that policy, plus there were other events going on in the world creating uncertainty. they wanted to address that. they left interest rates zero for several years. the effect of that has been admixed borrowing for the government much more easy. now we have very large debt. our debt went from $11 trillion in 2010 to about $24 trillion and now it is approaching $30 trillion. it makes it very difficult for the government to carry that debt should interest rates rise significantly. there will be a lot of pressure on the central bank to continue to buy those debt, especially if

we engage in new policies that require borrowing. that will be a problem for the future because that will then contribute to inflation. once inflation gets out, if it were to stay above 6% or 5% for a long time, that puts real pressure on the fed to raise rates and bring that inflation number down. i want you to think about it like this. it is a huge challenge for the federal reserve going forward because you have all of these assets, policy, the stock market, commercial real estate. that had seen very large increases in price, so you have this very inflated asset market. then you have this now turning in going over to price in

nation. if you rate -- to price inflation. if you raise interest rates you will put downward pressure on all of the asset types. the fed will try to balance how it deals with this asset market and not having it implode company yet address this rise in inflation if it is more than transitory or more the logistical, which there is evidence it is. i would say they have their hands full. why they behind the curve? in some people's judgment they are not. in other people's judgment they are stop the human nature of things are the fed does not see things preemptively -- more preemptively than anyone else. you see the issue of a slow economy, a pandemic, and you want to err on the side of being easy for longer.

that has taken place over the last decade and that will be a big part of their debates going forward in terms of how to deal with price inflation and not sink the economy and asset values that many of us have come to rely on in terms of housing and so forth. we will see how this plays out. host: a question from richard in florida, who asks what happens when the natural -- when the national debt cannot be mathematically paid back at the impact to our grandchildren? guest: in the united states for now common for some time to come , because it is a global reserve currency and it does create its own money, what will happen is the fed will print more money to pay for the debt. they will buy the new debt and that will help them pay. over the long term, this weakens

your economic system, makes it more dependent upon debt, less reliant on the productive capacity of the economy, and that is when our real standard of living, because our growth rate will slow. we grow at 2% a year real growth. let's say these policies create an environment where the economy grows only 1.75%. that is a huge reduction in wealth over one generation. those are the sorts of things we have to think about in terms of policies that will be chosen over the next several months and years ahead of us. difficult choices ahead for this country. not just on monetary policy, on how we choose our visible bank policy as well. -- on how we choose our fiscal policy as well.

it is a challenge of on the government side and for the central banks. host: let's hear from james calling from west virginia on the independent line. caller: i'm a truck driver. i was listening to the news they were talking about empty containers on the docks while they are unloading full containers. east coast, new york, new jersey , were empty containers. these were held in off-site yards not close to the container yards. i know for a fact a lot of these companies will not pay for return shipping of empty container so they sell them to the u.s. and are used by storage by walmart and other big companies at christmas time and other uses.

they build houses out of them. i think they need to get their facts straight and quit lying to the american people about what is holding it up. it is the unions that controls the ports. i'm a truck driver and will not go to the ports because the unions control them. that is all i have to say. host: did you have a comment? guest: i did not hear it all. the fact that if you are constraining the supply by not allowing truck drivers into these ports, that would contribute. that would be a long term issue and would have been in place before the pandemic. the pandemic is the major source of the supply shortage, and then how people react to that, what they learn from labor having greater power because there is a

shortage of labor, those will change the dynamics of the labor market and will raise real wages. whether or not they raise the wages enough to overcome inflation, that will yet to be seen. i do not quite -- i would suggest the important thing is to get labor working and that could also be paid a fair wage so they not falling behind. those are difficult discussions i had as well. it shows the complexities of guiding this economy back to a more normal environment that goes back before even the pandemic. we have many challenges ahead. host: another topic entirely,

question on twitter. what is your opinion of cryptocurrency? guest: cryptocurrency is a consequence of new technology. block jane and so forth. i also think it is reaction to an environment where the u.s. dollar and other global currencies have been produced at an accelerating rate. when people see the amount of dollars to help accommodate our increase in debt, they are for other options. they believe the cryptocurrency has a formula to where it limits its ability to increase supply by some formula, and therefore they are looking at that as inflation hedge, and it has transaction capabilities. they're looking at that as a substitute.

i do not know that whatever replaces the dollar, but i see why people might be turning to it. it is available and it may be in inflation hedge and therefore they choose to invest a portion of their wealth and their ability to transact business through cryptocurrency. i'm not necessarily surprised by its growth in the united states. host: the next call from wisconsin is corinne on the independent line. caller: thank you for taking my call. i appreciate c-span and allowing actual people to give their opinions instead of the news media. my question is the gas, which the other caller has talked about, you said gas is weighted towards inflation, but did you did not say how heavily weighted it is. i do not understand how this new

administration is looking at a package to push more money out there and more items in the hands of people right now with this inflation without opening up the gas market in this country, and at the same time not increasing the interest rates and bumping up just a little bit to start a little bit of control on this inflation. i do understand that because of their debt they do not want to increase the interest rates. people are hurting with how fast costs are for everything right now. host: thanks. guest: let me explain the comment on the weighing of energy. what i'm trying to say is when they make the estimate for the consumer price index they take a basket of goods and they tried to weight the prices with the

amount of goods that compose the economy. energy is a very important part of the economy. it would give that more weight than some kind of a toy or an inexpensive consumer good so you get the impact of the consumer that are estimated. that is what i mean by trying to take in the fact energy is more important to us than a nonsense good. that is number one. number two, the fact that we have prices rising is a major factor. there should be, and there are efforts now begin to address the fact we have had this inflation. we can debate whether they should have done this six months ago were 10 months ago, but that is behind us.

there is now a debate in terms of do they paper this, do they begin to slow down their purchase of government debt, that is their willingness to put new money into the economy over the next six months, or do they do it over the next four months? then do they raise interest rates modestly before they can finish the tapering, or do they wait until they get done with the tapering and begin to raise rates? those are decisions that to this point have not been made. the only decisions made to this point is they will put less money into the economy than they did last month. they have not decided whether to raise interest rates. you raise a fair point. should they do that sooner? that is part of the debate that is going on. there is a good case for doing very modest in reese's -- increases.

they have to prepare the market for that or you will have a panic. they have to be careful in doing that, but that is a fair question to ask and answer going forward. the other issue you raise is how much government spending can we afford? that is another debate going on right now in the senate for the new building was out there, the so-called build back better bill. is there the capacity in our system to borrow the funds to pay for that bill or do we have to raise taxes to pay for that? those will make a big difference on how the economy grows in the future, so how we decide that is very important. i do not know how they will decide it, but if they were to do these packages and borrow all the funds to do it, i can assure you they would put in a norm is meant a pressure on the federal reserve to buy that debt to keep interest rates low. that has other long-term

consequences, perhaps lower -- more inflation, more uncertainty, and lower growth in the future. those are hard decisions but they need to be made, and not just for the immediate future, not just for today, but for the long run. that is where the debate should focus. host: five more minutes with our guest thomas hoenig. we go to new york city and hear from hazel on the democrat line. caller: thank you for taking my call. are you there? host: yes we are. caller: i call before in my question was never really answered. i do not know if there was confusion. i am a middle-aged single white female, no children. i lost my job due to covid. i just got may raise in january of 2020 and then lost the job.

it took me forever to find the job. i've been trying to find a job for almost two years. people that have children are getting some kind of help because they get the child tax credit. single people, middle-aged, and there are millions of us out there, that have nothing. i have nothing. can't our president do some kind of executive order to help a little bit for the older americans that lost their jobs, that has no other help? if i had kids i would get some kind of income. i am by myself, i have nobody. my mother is dying of brain cancer.

can't the president tap into the unused unemployment to help a limited number of us? host: i will let you go, hazel. there is still additional funding that has not been spent. i do not know that it affects her case, but there are still billions that has yet to be spent, correct? guest: that is correct. more than billions that has not yet been spent. i feel terrible for your circumstances. i want you to know that. part of it is i assume you got some unemployment benefits initially, then those have worn off and you've still not been able to find a job. that is one of those terribly unfortunate circumstances for you. i do know there are jobs opening up that will be available to you

, but given the world we live and i am not sure what that is. there may be other programs at the state level and the federal level that may be able to help you through the set of circumstances. i do not know the suit -- a specific program other than unemployment that would solve your problem. i know there are different groups available that might help you, but i do not have a solution. i am sorry. host: jay powell be testifying before the senate banking committee along with treasury secretary janet yellen on some of that spending, the oversight of some of that spending. the headline from cnbc says powell to tell senate omicron variant poses downside risk to

the economy and complicates the inflation picture. what is the role of the fed chair in terms of these hearings before congress, aside from talking to congress, and what is their role in getting the public message out of reassurance or calm or confidence to the public. host: it is very important, and he has to do it in a way that is factual. he cannot sugarcoat it to say everything is fine. his job will be to say here is what we face, we have this new macron variant -- we have this new omicron variant and that creates further uncertainty. our role is to say we will try to not monetary policy that supports efforts to bring the economy back online fully without creating bad side effects. that may not sound like a lot. that is the job. there is no way you can predict the future.

there is no way you can assure outcomes, but you judge what you think is best and you implement those policies. they are not always perfectly correct. that is what one of your listeners said. those are risks you take. his job is to say here is what we can do, here's what we are willing to do, but here's what we cannot do, because we cannot solve every problem the world faces. the monetary system is not equipped to do that. getting that balance right is his main challenge, and number two to communicate well. host: that hearing coming up in about one hour and 15 minutes live on c-span. let's get one more call from brian in tampa, florida. good morning. caller: thanks for taking my call. i'm frustrated with all of the rhetoric that goes on within our

politicians. it does not seem to make sense that they talk about things that are going >> watch the last few minutes of this "washington journal" segment on our website, c-span.org. now live to the u.s. house of representatives. taking up legislation today dealing with cybersecurity. the opioid edmonton, and h.p.v. vaccines. the speaker pro tempore: the house will be in order. the chair lays before the house a communication from the speaker. the clerk: the speaker's room, washington, d.c., november 30, 2021. i hereby appoint the honorable james p. mcgovern to act as speaker pro tempore on this day, signed, nancy pelosi, speaker of the house of representatives. the speaker pro tempore: the prayer will be offered by the guest chaplain, rear admiral brent w. scott, u.s. navy, chief of navy chaplains, washington, d.c. the