>> not available in the c-span shop, c-span's 2022 congressional directory. go there today to order a copy of this spiral book that is your contact to government, state governors in the biden administration cabinet. order your copy today at c-spanshop.org. every purchase helps support c-span's nonprofit operations. >> we return to the u.s. economy. our guest is the president of the economic policy institute here in washington d c. remind viewers what epi is, your mission? >> the economic policy institute is a think tank centered on

metal income people in economic policy discussions, to use the tools of economics to actually uplift those people. >> how are low and middle income people doing in today's economy? >> that is a very good question. this recovery has been an absolutely remarkable to cover. we lost 22 million jobs in march and april of 2020. it was the most sinking feeling i could imagine. it was 20 to 30 times the number of jobs lost during covid compared to the great recession ended took 10 years to recover from the great recession. so i thought this was going to be a nightmare and was going to particularly had low and middle income people.

because that is what happens when there is a recession and what happens when there is a slow recovery like the aftermath of the great recession. but congress did step up to do the kinds of policies that we needed to spur a strong recovery. and we have had this remarkable recovery. right now, the private sector has more than gained back the jobs that it lost in the worst of covid when covid first hit. the public sector still has a ways to go. we can talk about that. there are issues with the need to hire back in the public sector. but the low to middle income people, the hit that they took from the recession was ameliorated as much as possible by the very quick recovery. that does not mean everything is great.

nobody has to return back to the february 2020 economy. there were real problems, rising inequality, structural issues, a big gap between black-and-white unemployment, wage gaps, other inequities, but lower and middle income people, the speed of this recovery has meant that the lower and middle income people did not take the hit that they had in the aftermath of prior recessions. >> are we in the recovery right now? >> -- are we in a recession right now? >> we are not in a recession right now. there are a lot of conversations about this. we got numbers from july that are extraordinarily strong. we added 520,000 jobs in july, over half a million jobs.

that, those are not the kind of statistic that support a recession. right now, we are very much not in a recession. i have some trepidation about the future. we know the federal reserve has been raising interest rates to try to slow the economy. and they raised interest rates aggressively. if they have raised them too fast, we don't get out but they raised them aggressively. if it has gone too fast, they may have secured a recession in coming months. that remains to be seen. i very much hope that is not the case. john: why has the economy been contracting for two quarters in a row, one of the definitions of

a recession. how do you explain that at a time when we are getting good job numbers? >> that is a really good question. there was always a difference between headline numbers, the overall gnp growth and the broad picture of the numbers and what they say about underlying trends. there are some differences going on right there. we did ca contracting in -- contract -- we did see a contraction in the overall headline numbers for the second quarter of 2022. but when you dig into the headlines, i don't think the first quarter contraction was an actual contraction because it was driven by things that don't reflect underlying trends. it was driven by a real decline in inventory and real decline in net exports. and both of those things do not actually signify purchasers

within the u.s. pulling back. they don't. they are not really a contraction in the way the other measures within gdp are. so, i don't think the underlying numbers signal a pullback in the first quarter. they signal a very slight pullback in the second quarter. i think instead what we are seeing when you look at gdp numbers is not two quarters of contraction. all that spells to me a slow down, but not yet a contraction. and if you combined that with what is going on in the labor market, the labor market numbers, it is particular that we are not yet in a recession. chair: -- john: let me give our numbers if you want to talk about economic body -- economic policy with

heidi schierholtz. republicans,, democrats -- republicans, host: -- republicans, (202) 748-8000 democrats, (202) 748-8001, independent, (202) 748-8002. >> it looks like we have reached the peak. we actually subzero -- saw zero inflation in july. john: talk to me about that, there is confusion? >> there are two different

measures. the zero is month-to-month. from june to july there were no price increases on average. 8.5 percent is year-over-year, so that is comparing july to the prior july. that is the difference. those numbers are good numbers if you want to look in the longer run. it is 8.5% over the year, but to get an idea of where things are heading right now, how things are changing in the recent past, then you look got what is going on in the last month, so that is where the 0.0 percent comes in. i think we have reached that peak and it is going to come down. the reason we didn't see inflation in july is that it was driven by a big decline in oil and gas prices, big decline in airline fares.

and one of the other things is, we know gas prices have declined further since the inflation reading, so i expect that to continue put downward pressure on it laois and that -- downward pressure on it. we have seen supply-chain issues that have been boosting inflation. we know that businesses and people, people bought a lot of goods during covid. covid is still going on, but they have started to back in the purchase of goods. and you see businesses having their inventories built up now higher than they want to. in order to move that inventory, they have to reduce prices. that is going to start putting more downward pressure on prices.

so, you're saying a lot of the dynamics that were keeping prices high starting to abate. inflation is still very, very hot. but all signs that i see, most signs i see, are pointing to its coming down substantially. john: do you believe the inflation reduction act will reduce inflation? heidi: it will. the direct way it reduces inflation is that the bill the president biden is going to sign today that congress passed last week reduce inflation because it reduces the deficit. there is a lot of spending in that bill on climate, health care, that is all paid for by taxes on corporations and the wealthy.

and it is actually more than pay for -- paid for by taxes on the corporate's and the wealthy, so it will actually bring the deficit down and that will put downward pressure on inflation. so it will have an effect on inflation. and the more immediate effect on families, things families pay for, will come through things like health insurance subsidies, for example, the caps on prescription drug expenditures, those kind of things will reduce costs for millions of families immediately. and the broader inflation-reducing effect, it will take somewhat longer to produce results more broadly. john: this is ron in winter haven, florida, calling for the republicans. caller: my question is a

comment. my wife works for walmart. you say the economy is not bad, there is no inflation. i went to the store yesterday and know that a specific item that i buy on a weekly basis has gone up at least four dollars in two weeks. i don't understand how everything is getting reduced here and you say it is coming down, i think your comment was prices will go lower, but every buddy -- everybody talks about prices getting lower, but they are not getting lower. the president said the other day, when one thing goes up, another things go down. that is zero inflation. that is the dumbest thing i have heard. thank you. i hope we get this country right because democrats are destroying it. john: what is your response? heidi: i am so i for not

explaining this carefully. when i say inflation is going to come down, that means prices will continue -- will not continue rising as dramatically. for most goods, we are not actually going to see prices drop. in good times and bad times, we have rising prices, it is a core part and a -- and not a bad part of our economy they see rising prices a little bit at a time come all the time. the problem is, that inflation right now is very high. i don't think we are going to be seeing a big deflationary per iod, i don't think overall we are part to see prices come down. but what we want to see is the peak inflation slowing, and that is coming down the pike. it some prices will come down, and some prices will go up.

so the broad inflation numbers that we hear in the news, those are averages across the whole economy. so any individual prices can look a lot different than the overall average. john: to the jersey shore, this is albert in as bare a part, a democrat. good morning. caller: good morning. i am a big democrat, but i have mainly republican friends. i feel so bad for them. because they are looking at a fellow by the name of jim jones, that led everybody down to guyana for a more beautiful life. that did not turn out so well for two years ago, when they drank the kool-aid. john: do you want to bring us to economic policy? caller: the economic policy, mr.

biden is right on the money. because things are starting to turn around. and during the upcoming election in november, i will be working the polls for the democrats. and i wish everybody would calm out and vote, republican and democrat. god bless president biden. thank you. john: that is albert in new jersey. anything you want to pick up on? heidi: taking us back to economic policy, one key thing that you can see is very different from president biden and his predecessor is their approach on taxes. under president trump, there was a massive decrease in taxes for corporations on the wealthy, a huge portion, the language --

the lions share of the expenditures of the tax cuts under the trump administration was very, very lopsided. the biden doing the opposite. in order to protect the climate and health care, the biden administration is raising taxes on the wealthy and raising taxes on corporations and making sure corporations pay their fair share of taxes in this country. so, that is a real difference. i think it is actually ensuring corporations to pay their fair share, and that is the way we get to the kind of an economy that works for everyone. that is a big difference between the two presidents. john: this is tommy portland, oregon. good morning. caller: hello.

i am stunned and at a loss. heidi shierholz, i am sure i am not the only one. what are you trying to talk about with economic policies? everything that trump did, biden did the opposite out of pure arbitraryness. i don't understand. trump cut taxes. we had low unemployment. economic policies, asking other enemy countries for oil? eight is just one doctor another -- it is just one after another. it is absolutely imbecilic that

heidi or anybody else -- what are you talking about? john: i think we got your point, tom. heidi? heidi: there are big differences between president trump and president biden. one of the key differences is that policies with president biden are about a fair economy, about ensuring that prosperous growth is fairly shared. i talked about one of the big differences in their tax policies, where trump really cut taxes for the wealthy and the corporations. biden is increasing taxes on the wealthy and corporations, to pay for things like health care and policy to fight climate change. that is a stark difference between the two president. john: i want to come back to the inflation reduction act and plenty of tax provisions in that

as well. jason smith, top republican on the budget committee during the debate over the inflation reduction act for it passed, arguing against what is in the legislation. this is what he had to say. >> we are debating what democrats called the inflation reduction act, which everyone from the congressional budget office to 230 economists, even senator bernie sanders says will not reduce inflation. when you strip away the fake sunset policies, this bill spends $745 billion and adds $146 billion to our debt. it adds $54 billion worth of debt in the first five years, and 80% of the budget deficits

don't even begin until after the year 2029. so, lots of spending upfront, debt upfront and maybe savings eight years from now. how is that going to put out the fire of inflation when the price of groceries is up 13.1% over the past year? senators manchin and schumer, secretary gallen and former president obama are on record saying you don't raise taxes during a recession. but that is what this bill does. it includes $599 billion in new taxes and it him. half of the tax burden falls on taxpayers making less than $400,000 a year. the choice this bill puts in front of families making less than $200,000 is clear -- but

the government at the center of your health care decisions or face a $10 billion tax burden. it gets worse. this bill doubles the size of the irs. it doubles the size of the irs so it can target and audit more middle-class families, and snooping to their bank accounts. i am not sure how subducting americans to more audits cells the inflation crisis. in my state of missouri, this bill would quadruple the number of audits. 18,000 more audits on hard-working americans who make less than $200,000 a year. john: representative jason smith. heidi shierholz? a lot there. heidi shierholz there is a light

-- heidi: a lot there and it is all wrong. economists saying that this will not fix inflation, that is wrong including nobel laureates, two former federal treasury secretaries, two former chairs of the federal reserve into former chairs of the white house council of economic advisors -- all of them signing this letter saying that the inflation reduction act will bring down inflation. so, he is wrong on that. the idea that this will not bring down the deficit is also dead wrong. the idea that it is frontloaded is dead wrong. he may be confusing the inflation reduction act with the build back better act, which is an earlier iteration.

that was very much front loaded, there was a lot of spending in the front, the deficit increasing in the beginning and then, deficit reduction down the road. that is not the case for the inflation reduction act. it is not going to be a big deficit increase in the beginning. and his point on the irs, he is right, it will increase resources going to the irs. and the idea that that is bad for the american people is laughable. the irs is deeply underfunded. the people who have the money to pay the most sophisticated accountants can get away with not paying their fair share. the money going to the irs closes loopholes that allow corporations and wealthy

individuals to get away with actually skirting the law, breaking the law, not paying their fair share. so, us investing in the irs means that more taxes are going to come in from the wealthy, and corporations who are skirting the law because there is not enough enforcement. the irs may have a bad name related to paying your taxes, which is never fun for anyone. actually filling out the taxes can be stressful. but what we do want from the irs is for them to have enough resources to audit the wealthy, audit corporations so that they pay their fair share. he is very right, it will increase the irs at that is a

really good thing for the american people, that we have an irs that can actually do the kind of enforcement to make sure that people who have a lot of money, to start paying their taxes, are less able to do that. john: about 20 minutes left with heidi shierholz, she's the president of the economic policy institute, epi.org and on twitter @economicpolicy. gary in corpus christi texas, independent, thanks for waiting. caller: thanks for taking my call. with the spending this bill does, i don't understand how that is going to reduce the deficit. and basically, i find it

impossible to spend your way out of debt. increasing debt is going to increase the debt and my grandchildren are going to be paying for what we. john: are tongue to get the money out now for gary, thanks for the question. heidi: i appreciate the question. it is a great question. the inflation reduction act increases spending and increase its. it does both things. it does increase spending on crucial things like health care and climate in the climate crisis. but it increases revenues more. so, it more than offsets, the increase in revenue we get from raising taxes in the inflation reduction act more than offsets the spending. that is how you get deficit reduction john: sammy rome,

georgia, the line for democrats. good morning. caller: thank you for c-span. my question is to my gop comrades with all these lofty accolades about trump and his economy, help me understand. when trump came into office, did he not inherit a healthy market? -- inherit a bowl market? if i think back, bush inherited able market through clinton, and to think the democrats have wasted two years trying to clean up the stock market crashes from the last republican. if i'm not mistaken, the last two stock market crashes we have had were both during republican administrations. can you talk about those transition economies and also talk about which economy has reduced the deficit the most

since the clinton years? heidi: really good question. this idea of what kind of economy presidents and here it fascinating one. obama inherited an economy in absolute freefall. he took office in january 2009, when we lost something like 850,000 jobs, in that ballpark. it was an economy in absolute freefall. over the course of his eight years in office, there was a recovery. one of the big problems was that congress stalled out and wouldn't do the kinds of things that we needed to create a strong economy in the aftermath of the great recession. that was not on obama. that was on congress. they didn't to enough to create a strong recovery. so, we had a very, very weak

recovery from the great recession. but then, by the time trump took office, it was starting to look a lot better. trump really didn't inherit that was growing. he then did get hit by something completely out of the loop the coronavirus. that was not his fault. the weak response to it, you can pin a lot of that on him. but that was a completely random event. it is absolutely true that biden inherited an economy that was on the upswing. let me say that a little bit differently. in the last few months of the trump administration, the economy was starting to slow down again.

in august -- wait, i'm going to get the numbers wrong, but we started to see the coming slowing. and when biden came into office and past the american recovery plan act in march 2021, that really put the economy back on a really strong trajectory. so, the kind of economy that a president inherits is a very interesting question. it is not in their control, so what they really do with it is the most important thing. john: the american rescue plan, $1.9 trillion in spending. what was the most important that plan? heidi shierholz the most

important -- heidi: the most important part of the play was it size. it really put us on track to a very strong recovery. there was aid to state and local governments, state and local governments took a big hit, and it was getting aid to state and local governments so they could sure up and hire back, there were some caveats, but that was a big part of it. extending the child tax credit, and making the child tax credit fully refundable. those provisions have now expired. those benefits for children were actually held hostage to their parents being able to find a job. you don't get that child tax credit if you are not employed.

the recovery act, they made it known as fully refundable, and that is a way to stay -- way to say you get those credits even if you don't have a job come even if you don't have enough income to offset the size of the benefits. and that alone dramatically reduced child poverty. in the midst of a pandemic, we saw a decline in child poverty because of these guns of provisions. it was a remarkable package. john: to denison, texas, david, republican, good morning. caller: thanks. the recovery act spurred the big jump in inflation. it has continued since. good lord. the inflation, excuse me, this current, inflation reduction act, only 12% of people believe it is going to reduce it in 40%

believe it is what to make it worse paid the others don't know. $400 billion for climate. $80 million for the irs. 26 billion dollars for three years of health care subsidies, which is a budget gimmick. they know it is going to get extended for the rest of the 10 years. if they put it out for 10 years, this plan would have been negative or no budget deficit reduction under any copulation. that is what they commonly do with budget connect, using an impartial year. nothing in this is going to increase the supply of anything and it is going to bring demand down. this idea that you can't take money out of the free market economy, give it to the government and expect an increase in wealth resulting in more taxes, resulting in a decrease of the deficit, is impossible. they are taking money out of the productive parts of the economy. this tax bill where they are going to make corporations pay their fair share, quote unquote,

the reason they get into a no tax payable scenario is because of the incentive for investment and the accelerated depreciation which has allowed companies to increase manufacturing, bringing companies back to the u.s. for manufacturing, the 600,000 jobs that came back that were supposedly only going to come back due to a magic wand. $400 billion for climate change. john: you bring up a lot of issues, can i give heidi a chance to respond? heidi: the idea that the recovery act spurred the big spending bill to fight the recession that we had in march 2021, the idea that that caused this inflation is flat wrong. one of the ways you can look at it is, look at what is going on around the rest of the globe.

you see that inflation is high everywhere. and as you look at the relationship between how much countries spent on the recent recovery and how much their inflation accelerated, there is no relationship. inflation grew dramatically no matter what countries did, as far as fighting, as far as relief and recovery from the global recession. the global rise in inflation is not the fault of the u.s. relief and recovery package --. , that is just not what is driving our inflation -- full stop, that is not what is driving our inflation. another point the caller made about how raising taxes on the

wealthy and corporations make hurt, because the wealthy and corporations may not make investments that would boost the economy, that is also totally false. and we can look took every recent experience to show that it is in default. during the trump administration, there was a massive tax got for the wealthy and corporate -- tax cut for wealthy and corporations. if it were true that the tax increase now was going to hurt investments, you would definitely think that the tax increase back then would unleash investment. but if you look at the data, it 100% did not. you look at data on investments, you see the trump tax cuts, and there is no break. the tax cuts had zero effect on

investments. though this idea that if we raise taxes on the wealthy and corporations, it is going to hurt our broader economy, that is a total myth that has been used over and over and over again to keep wealthy and corporations from having to pay their fair share. john: is the best way to fight inflation to raise interest rates? heidi: really good question. i think it depends on the situation. what raising interest rates really does is, it slows the economy down. it makes it so -- it reduces job openings, so workers have less bargaining power, so wages grow more slowly. then, any feeding of higher wages into higher prices gets stop.

that is the idea behind the fed raising interest rates. so you want to look and see if that is the appropriate thing to do now. i look at the data and i am like, they should really think hard about doing more increases in interest rates. because if you look over a longer period, an increase in july in wages, but over the longer period, wages have been steadily declining. wages are declining, wage growth -- wages are not declining, wage growth is steadily declining. it is coming down. >> the president of the united states accompanied by senate majority leader chuck schumer and house minority whip jim clyburn. ♪