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it's our home, too. we're all facing our greatest challenge. that's when we work around the clock to keep you connected. we are doing our part, so it's a little easier to do yours. >> sparklight supports c-span as a public service, along with these other television providers, giving you a front row seat to democracy. host: joining us is jon hilsenrath, author of "yellen: the trailblazing economist who navigated an error of the people." welcome to the program. the federal reserve is making a decision on rates yesterday. what did you take away from the decision? guest: that they are slowing down the process of interest rate increases. they moved aggressively in 2022 and they are starting to see signs that the inflation that hurt so many households is slowing down but they do not

want to declare victory yet. they will probably raise rates at least one more time this year. we might see an end of it by the middle of the year. host: when you take a look at the fed and how it does these things, what is the process? where does the board fit in, how does the process work? guest: it is complicated and it is like the old tanker analogy, it takes time for it to turn around. our 19 and officials involved in these discussions, and the original 12 -- the original 12 federal banks around the country, and then seven governors, 12 of them kind of rotate to make a decision. and they have to reach a consensus. it takes time for them to reach a consensus and for them to become convinced that the data is moving one way or the other. because of that they can be late

to things. most economists agree now that they were too slow to start raising interest rates which is why we got inflation in the first place. the risk and why one of -- and why many people are talking about a recession is that they might be too slow to stop the process that they intensified last year. host: they make a decision collectively and it is the chair that delivers the message. i want to play portion from yesterday. [end video clip] >> my colleagues and i understand the hardship that high inflation is causing and we are strongly committed to bringing inflation back down to the 2% goal. over the past year we have taken forceful actions to tighten the stance of monetary policy. we have covered the grant -- we have covered a lot of ground and the full effects are yet to be felt. even so we have more work to do. price stability is a responsibility of the federal reserve and serves as the bedrock of our economy.

without price stability the economy does not work for anyone. without price stability we will not achieve a sustained period of labor market conditions that benefit all. today the fomc raised the policy interest rate by 25 basis points. we continue to anticipate that ongoing increases will be appropriate to obtain a stance of monetary policy -- monetary policy that is sufficient to return inflation to 2%. we are continuing the process of reducing the size of our balance sheet. restoring price stability will likely require maintaining a restrictive stance for some time. host: that is the chair from yesterday. what is magic about the 2% figure? guest: the fed set a target about a decade ago, 2% inflation. they do not want inflation to be more than 2% or less than 2%.

for a long time after the financial crisis of 2008 inflation was running below that target. they did not expect that it would jump so much above that, and they are trying to get back to 2%. why is to present important? what the fed is looking for is a stable rate that everyone can plan around. if you are a business and you want to know how much you should expect to be able to increase your prices next year, if you are a worker you want to know how much you expect to see wages increase to keep up with the price increases. and the fed came to a conclusion and most central banks around the world came to a conclusion that 2% is around the right number. they do not want to have zero inflation because if you have zero inflation than interest rates are low all of the time. what that means is that in a recession it cannot deal with

the kind of interest rate cutting that they try to do during a recession to stimulate the economy. they thought 2% is a number that gives them operating room, but leaves us with inflation that is not so out-of-control that it depletes paychex. host: he also used the term price stability. how does that factor into the decision? guest: it means the same thing, it means basically 2% inflation. the key thing is that it is stable around the 2% level. you do not want to see it going wildly below, which is deflation or wildly above it because all of a sudden people have been planning for their budgets or for household budgets or business investments around 2% and then all of a sudden it goes to 5%, 6% or negative two and then you have to change things and it causes disruptions. host: if you have questions for

him about the economy you can call the lines. 202-748-8001 for republicans. 202-748-8000 for democrats. independents, 202-748-8002, he is a article writer and the author of a book, what is the treasury secretary's role? guest: the federal reserve and the treasury are two of the main economic guardians of the policymaking arena. what the fed's is controls the supply of money. pulled up a dollar bill and it says federal reserve note across the top. they decide how much money is out there. while that matters because that affects the interest rate which is the cost of money. if you want to borrow $10,000 to get a new car it will cost you

20 or 30,000 nowadays, but if you want to buy a new car and you have to borrow money, the cost of the interest rate is the cost of the money, buy a new house and credit card, all of those things. when the fed is talking about this, why does it matter to households? one, it affects the day-to-day borrowing. credit card, mortgage and auto rates. it also affects the stock market portfolio because the stock market is also very important, evaluation of companies and how they invest is very influenced by the cost. that is why they see the market kind of going nuts every time people think jay powell sneezed or walked into the office differently. that is the fed. the treasury manages the government's budget. they are responsible for making sure that the government has the funds to pay social security

recipients and military contractors and medicare beneficiaries. and so it manages the borrowing and spending and revenue conduction of the government -- collection of the government which happens to be a big deal because debt increases and there is a fight at the capital brewing between congress and the white house about the debt limit and how much debt should the government take on. and should there be spending restraints. janet yellen is in the middle of those conversations. host: what prompted the book? especially navigating this era of upheaval? guest: it was an important part of the book. i covered yelling when she was the fed chair -- yellen when she was the fed chair of the obama administration and the first two years of the trumpet ministration. donald trump thought about re-nominating her but also decided he should have a republican in that job.

janet yellen is a democrat. when biden asked her to become the treasury secretary i said here is someone who has been in the middle of every major economic debate and she is a vehicle or character that i could examine the economy upheaval. american households have been through a lot. trade disruptions, covid crisis, and here is an economic policymaker who has been in the middle of all of it. the reason -- she is a consequential figure in the first woman to ever run the treasury and fed. what really drew me to writing about her was actually a love story. so janet yellen is married to a nobel prize winner, he is a pharaoh with -- theorist. and between the two of them they have been in the middle of every major economic debate. i saw them as two characters

through which i could examine 60 years of economic debate and upheaval. the book i wrote, she has on the cover of it but it is a story of modern economics and how did the united states get to this place? how did we get this really disruptive economy that we are living through. host: we have some calls lined up. we start with mark, las vegas. democrats line. you are on. caller: hello, could you tell me or update us on the effect of trump's failed trade war with china and the money that has been given to the farmers in the united states? how has that affected the economy? and what do you expect the effects will be in the future? guest: so trump's trade war was a turning point in global economic policy. and frankly, the has continued

u.s. confrontation -- the biden administration has continued the confrontation. the tariffs have not been removed by the biden administration and they have dialed up the pressure. for instance by placing restrictions on china's access to u.s. ships and high technology. i think that the u.s. trade confrontation with china is a seminal event. and the u.s. trade relationship with china was a seminal event over the last 25 years. we let the united states assure the chinese into the world trade organization. and china imports from china to the u.s. had profound effects on the economy. it lowered the cost of a lot of goods.

any american who shops at walmart, costco or almost anywhere got access to really cheap clothing, cheap household appliances etc. etc. and at the same time it was disruptive to manufacturing communities. i spent a lot of time in my book in hickory, north carolina which was the furniture manufacturing capital of the united states and it got washed out by china. as a country we are trying to reorient how we deal with the chinese as a rival and a trade rival. and that is a story that will play out for many years. and both sides have a lot at stake. the chinese really depend on us as the primary export market. our supply chains, american

companies invested billions of dollars into manufacturing operations in china over the last 25 years. so they have a lot at stake. we saw the cost of disruptions during covid and our prices went up. it will take time to sort it out. i think we have a long cold war, so to speak, but this is a cold economic war. host: the president mentioned china when he was talking about infrastructure spending. we have a weaponize asian -- weaponization committee looking at congress. talk about how this might lead to economic concern. guest: are trade relationship is fascinating. it is just one of the things it does not make sense to me is that the united states helped bring china into a global trading system. no country benefited more from its entrance into that global trading system than the chinese. 700 million chinese were lifted

out of poverty during this economic boom that they experienced. there have been huge gains. but xi jinping and the communist party control the levers of the government. and there is only so much liberalization that they can tolerate and out looks like they will tolerate less liberalization in order to keep control of the economy and ironically to me, they say the united states is a rival trying to hold them back when in fact it was a united states that made them prosperous. we are trying to hold them back. the biden administration made it clear that we do not trust their intentions and we are concerned about them getting access to high technology. we are treating them as a rival and not as a partner. host: barbara in martha's

vineyard. independent line. caller: good morning. your guests are just spectacular. the way he answered the first question about the 2% target, in 90 seconds he just listed -- lifted the cloud of mystery for me, and then he goes on to this china answer, you guys, you have to do a block five day a week 8:00 a.m. series where you bring this guy back or his equivalent geniuses and we get all of our question answered 1, 2, 3. guest: can i ask you a question before you answer? can you cover me on my book jacket? i need someone to talk about the job i am doing and i appreciate what you just said. i am sorry i interrupted you. caller: i am a regular hotshot caller to this extraordinary program. a dual in the crown of the

united -- jewel in the crown of the united states if i may say so, even though my cable rates aren't -- are obscene. we talked about globalization and i believe that we are tied to each other as a planet and there is no going back so let us make lemonade if there are any lemons. what i am curious about now is why is there so much attention on the financial news programs about what the other european banks are doing, what the bank of england is doing? why is so much focus on their interest rates and how are they related to our interest rates? is that a clear question? guest: i will give you two answers, one specifically about that and then globalization. you answered your own question. we are all tied together as a global economy, not just through trade channels and the sneakers and washers that we bring in

from vietnam and china, but also through financial channels. european banks lend money to you american -- lend money to american banks. the dollar is at the center of a global financial system. oil is traded in u.s. dollars. so when the europeans raise interest rates or the japanese for that matter, that affects our economy and our interest rate increases affect their economy. one of the links between our economies is through currency. so, if we are raising interest rates more than the europeans are raising their interest rates, that is going to tend to make the dollar stronger than the euro, and that will affect an american business that wants to export to the europeans and it will affect an american who is thinking about taking a trip

this summer. so we are tied together. and this leads to the broader point that i wanted to make about globalization. there has been a lot of talk in part because the growing rivalry with the chinese and also because of the disruption in world relations with russia that globalization is dead. if you look at the numbers it is not dead. trade flows have flattened out and they are not rising they way they did in the to thousands and 2010 -- in the 2000's or 2010's, but they are raising. it is the same thing with financial flows we are not seeing a deglobalization but a shifting of trade and financial channels. american companies are pulling businesses out of china and putting them in vietnam because vietnam's economy is booming. ironically it is another country

run by a one party communist government and offending from the movement out of china. because of technology, communication, and travel we are bound together with the rest of the world and we have to find ways to operate in a world with more rivalries, and that has led to inefficiencies and volatile markets and it has led to supply chain disruption that we keep hearing about. and it is also -- it has also led to volatility in stock markets. it is not going away. host: matt is in maryland, republican line. caller: thank you for taking my call. my question has to do with the inflation topic specifically from the perspective of the regular guy, the regular worker.

i take issue with the fact that 2% is a good level of inflation. i think the argument is that in less you are heavily leveraged and you are just a person trying to save any type of erosion over the value of money is not the best thing. specifically my question has to do with cpi and its calculation over time. i was hoping you could inform me how that changed and you think that the way that cpi is calculated is a true representation of what we experience as consumers? thank you. guest: i will give you two answers one about cpi and 2% inflation in workers. cpi, is it a true representation of inflation? the simple answer is no, it is the best that the labor department does at coming up with an estimate.

the inflation that any individual experiences appends on a lot of factors unique to that individual. so, if you are a renter, the inflation you are a renter -- the inflation you experience will be different than someone who has a family with kids that you are putting through college because education inflation is different than medical inflation. what the government does with the consumer price index is that an estimate for the population as a whole and it is imperfect and everyone will experience something different. some households are living paycheck-to-paycheck, they are going to feel the rise in prices

at the grocery store a lot more acutely than someone who has a lot of disposable income and is spending a lot of that disposable income on other things like fancy cars or meals out or vacations or whatever. in terms of the 2% inflation target, which you said you have your doubts about, i think what is really important is not only what is happening on the inflation front, but with wages. you will be better off as long as your wages are rising faster than inflation. if inflation is going up 2% a year you are better off as long as your wages are rising because your paycheck is growing faster than cost-of-living. things get bad if inflation grows above your inflated -- above your paycheck or if your paycheck goes below inflation.

what happened in 2022, inflation started growing faster than paychecks so when the cost of eggs and milk was going up faster than what you are bringing home, then the bank account was getting smaller. i think in 2023, one piece of good news could be that we see that flip because workers negotiated for higher wage increases. social security adjusted in september based on a very strong consumer price index report. so they will be getting wage increases this year at a time when inflation looks like it is slowing. so there might be relief coming on the horizon this year. but we really have these debates if 2% is the right number or should it be zero? it comes down to our wages growing fast enough to keep up

with the inflation. host: there was a debate last year on whether the country was entering recession, what do you think about that and what is the potential for this year? guest: it is a fascinating question. here is my model for whether we are going into a recession. it is hard to know. last year gross domestic product which is a measure of how much stuff we produce as a nation, all the goods and services, cars, restaurants and hospital visited -- visits. that contracted because companies were cutting back on inventories. they had built up too much during covid so they produce less to bring back there inventories. a traditional measure of a recession is when gdp contracts and gdp contracted so a lot of people were saying that was a recession. at the same time companies cap hiring workers.

so the question is what was going on? my analogy is think about a big tank filled with water, think about the economy has a big tank filled with water. if you drop rocks in the water you are going to get splashes that make it kind of hard to know what the undercurrents are and we have had a lot of rocks dropped. we had covid, the government's response to covid with all of the stimulus, the low interest rates and all of the checks that people that households and businesses got, rent relief. and then we had russia's invasion of ukraine and then the withdrawal of covid, there is a lot of splashing going on. it makes it hard to say if this is or is not a recession. there was some indicator that people on wall street suggest that a recession is coming in 2023. but it is a lot horror -- a lot harder to make that call now

than it is in normal times because we have had all of the shocks and splashes in the water tank. host: indiana where tom is. democrat line. caller: thank you for taking my call. my question deals with the fault and i will paraphrase shakespeare who says the fault, dear brutus lies not in the stars but in that we like cheaper goods. and isn't that why china can bring our good -- there goods in and mess up our businesses because americans want to buy cheap goods. the other point is, on the other end where americans -- american companies will sell out to these -- it seems to me that is a very anti-american business attitude, but that is so widespread. nobody seems to talk about the fact that it boils down to

americans want to cheap goods and therefore they will go to walmart and buy it. thank you. i will take my answer off air. host: i think your guest is completely right. the main benefits to the united -- that the united states got by bringing china into the global system is that it held down inflation for a lot of time, which is another way of saying is that you got to shop at walmart and costco and those benefits are real, the cost of clothing your children went down and that helps millions of american households. the cost of getting to and from work was held down because we imported tires, windshields and other products from overseas and there were benefits from that. the problem is that it was a shock and many manufacturing communities that people felt

very discreetly. and i think what we are going through as a country is a reassessment of just how deeply connected that we want to be in sourcing goods from around the world. we saw during covid that there are cost trade-offs. that the supply chain disruption and we depend on china and all of a sudden covid strikes and they shut down their economy and we cannot get there -- we cannot get our hands on the goods we expected and maybe china is less of a partner and more a rival than we realize. on companies, absolutely. they call themselves multinational. they are multinational companies which means that companies, not just american companies but european company and global companies' adherence for many

years to what the shareholders. what shareholders want is a return. and sourcing cheap labor in china held down your cost, and also allows you to export and sell to american companies at a lower cost. you can increase your profit margin and sales. and by the way, they saw it as an entry point to selling it to the chinese as a win-win. it turned out the world was more complex. a lot of these multinational companies went overseas to china and discovered some of their technology was ripped off and some of them also discovered that getting access to these supply chains could be disrupted in the case of a shock like covid. we are going through as a country and world economy a reorientation where people are

looking for more safety valves for work, for supply chains and for allies and alliances. host: adam, kentucky. independent line. caller: good morning. my question ties into that. we just saw the biden administration propose a moratorium of 24,000 acres outside of minnesota on a copper/nickel deposit operated by twin metals. you talk about reorientation on different commodity sectors and people looking inward. i want to know the opinion on how does any administration, how does the biden administration reconcile that there is a demand for mineral commodities that are needed for ev's, batteries, and high end electronics and their

environmental policy? it seems like they are trying to do two things at once and government has a hard time walking and chewing at the same time. it is a question of how does the government and biden administration's approach for the demand to high end minerals equate to the -- the environmental demands that they are getting from mostly the left on environmental policy? host: let me say first of all i am not familiar with the minnesota decision that the caller asked about. i would say that the caller certainly is right that minerals and minerals specific to the creation of green energy are really important. minerals that are used in the production of batteries, one of the things that we discovered about our alliance with china over the years is that we became dependent on them for criminal cash for critical minerals --

for critical minerals and there is a search for more diversification. i cannot speak to that specific case, but i have looked at the case of fossil fuels. it is really interesting what is going on. the biden administration cannot be called a friend to the fossil fuel industry and permitting on public lands has receded and was receding during the trump administration. we are still a market driven economy. and what happened despite the reduction of permitting on public land is that we have had a revival, actually, and 2022 of fracking on private land. the united states produced record amounts of natural gas, a lot exported to our allies in europe and in exported records of -- record amounts of

petroleum coming out of private lands and places like louisiana and the haynesville basin. and taxes. the government affects the way the flows go, these are still market economies and there are still demand and supply considerations. and if there is a demand for mineral diversification put in -- in places away from china, it is already finding places such as latin america. i do not know what is going on in minnesota but the private sector is at work. host: you can find his work at wsj.com. the book is " >> next, president biden stressing the importance of bipartisanship at the prayer breakfast. then, a proposal to remove

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