Ep. 219: Jason Furman on Inflation Persistence, Fed Policy and Debt Levels
Jun 7, 2024
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Jason Furman, former economic adviser to President Obama, discusses inflation persistence post-COVID, challenges in policymaking vs. academia, and the impact of Federal Reserve policies on the economy and climate change.
Balancing demand and supply is crucial in economic policymaking, citing the example of climate change policy.
Increased demand from fiscal measures primarily drives recent inflation, with caution needed for its persistence.
Long-term analysis of productivity growth, especially in AI, is vital for understanding economic development.
Deep dives
The Intersection of Economics and Policy Making
Jason Furman discusses his journey from a math and physics enthusiast to an economist and policy advisor, emphasizing the challenges of economic policy making compared to academic research. He highlights the need to balance demand and supply considerations, citing the example of climate change policy. Furman also delves into the complexities of managing inflation and the importance of understanding the interplay between economic and political factors in policy decisions.
Navigating Inflation and Monetary Policy
Furman provides insights on the recent surge in inflation, attributing it primarily to increased demand fueled by fiscal measures. He distinguishes between supply-related price hikes and the fundamental role of demand in driving inflation. Discussing the Fed's response, he expresses caution about the persistence of inflation, suggesting that a delicate balance between interest rates and economic growth is crucial to avoid potential risks of sustained high inflation.
Assessing Productivity and Technological Innovations
The conversation shifts to the dynamics of productivity growth and the impact of technological advancements, especially in AI, on economic development. Furman underscores the need to analyze long-term productivity trends beyond short-lived data fluctuations, emphasizing the uncertain trajectory of productivity growth and its implications for future economic performance.
Challenges and Opportunities in US Fiscal Policy
Furman delves into the complexities of US fiscal policy, addressing concerns around debt sustainability and healthcare costs. He discusses the nuances of cost-saving measures in healthcare systems, highlighting the difficulty in streamlining expenditures while ensuring quality care. Additionally, he explores the perennial debate on eliminating waste in government spending and the underlying challenges in achieving significant cost reductions.
Geopolitical Perspectives and Policy Considerations
The conversation concludes with insights on geopolitics, focusing on the evolving US-China relationship and the implications for economic and security frameworks. Furman stresses the need for strategic decoupling while maintaining critical economic ties with China. Addressing concerns around US elections and societal trends, he underscores the importance of fostering viewpoint diversity and collaborative dialogue in academia and beyond.
Jason Furman is the Aetna Professor of the Practice of Economic Policy jointly at Harvard Kennedy School (HKS) and the Department of Economics at Harvard University. He is also non-resident senior fellow at the Peterson Institute for International Economics. Previously, Furman served eight years as a top economic adviser to President Barack Obama, including serving as the 28th Chairman of the Council of Economic Advisers from August 2013 to January 2017, acting as both Obama’s chief economist and a member of the cabinet. In this podcast we discuss the difference between policymaking and academia, what caused post-COVID inflation, inflation persistence, and much more.
