This piece was reprinted by OpEd News with permission or license. It may not be reproduced in any form without permission or license from the source.
Tom FergusonWell, the Fed can do a lot without the approval of Congress. There was an enormous debate about this when the so-called 13(3) Federal Reserve provisions were rewritten in the wake of 2008. But as I read that language, it would still justify a lot of things and in an emergency, almost anything. But we could all debate it forever. People are debating it already. But fundamentally, if the Fed wants to keep doing what it was doing in the last few months, they need somebody to sort of give them a loss cushion, which the Treasury was providing. Now, that's apparently been withdrawn. The sort of fundamental
Paul JayHang on, hang on for one sec. Just for people that may not know this, the Fed can't take a loss. So, how does the Treasury give them a loss cushion?
Tom FergusonThey had that fund, and any losses would have been absorbed out of that. That means the Fed would have had to send less money back [to the Treasury] because it typically sends a lot of money back to the US government.
But the bigger story is this: people here, just like in 2008, are all walking around saying, "Oh, it's just terrible. The Republicans will control the Senate and nothing can be done." That's not really true. There were some efforts to push on Republicans, but Obama mainly didn't do it. He was defending himself the other day. Well, you know, the truth is, they blew the first two years and they brought you to 2010. That really stuck gridlock in the system and brought you Trump. They did everything too little, too late.
I mean, let's repeat that: you got Trump because of the Obama administration failures in economic policy.
Now, in the case of Biden, the president's got real power to persuade. And you're sitting in the middle of a deep recession. If he goes out there and says, look, we really need this and it would be helpful if other groups would get in behind him"you could at least make the effort. There's nothing like TV ads in states where Republican senators are up for re-election in two years. They did a few of those [during the Obama years]. Just a little, but hardly any. They don't have to sit there and be passive and just say, "Oh, that's really bad. Mitch McConnell won't get along." Everybody is vastly underestimating what you can do if somebody wants to make the effort. We haven't seen anybody make the effort. Clinton did not in '93 and '94.
Paul JayBy effort, you mean, spending the money to persuade people that the senator blocking support that might come to your family
Tom FergusonYes, that, but also naming names. Now, look, if you read the daily press accounts, I mean, just read the accounts of what was holding up the current action on trying to renew the CARES Act. They rarely carry it down to any granular detail. Like, "We were told that several Republican senators objected to having wages too high." Tell us more. I mean, basically reporters, don't write very much more than what they are handed off a fork by somebody. I mean, one thing I gotta say here: yeah, I'd like a free press and I'd like one that's factual to. You will forgive my plain English here, but it beats Fox News. But, you know, you're a long way from [a free, factually based press] in the United States. That's why I'm talking to you, as it were. I mean, you're not going to see me on any major network any time in my life, I don't think.
The truth is that the press just won't cover this stuff. They all follow very clear implicit rules, sometimes made very explicit, where if some politician in power actually says something, they'll usually cover that. Not quite always. We saw some very interesting things coming in the final weeks of the election. But in general, they will cover it. But what typically happens is that the press is given briefings on all sides for public purposes that are very general. They don't name names. I remember one that was wonderfully topical. It's nice to look back in the news today because he just got appointed yesterday to the climate position. But I remember when John Kerry held up and tried to ban and I think he succeeded the use of the Dartmouth Medical Atlas to sort of drive down costs in the medical sector back when they were doing the legislation on cost controls and Obama's thing [the ACA]. You know, that's ridiculous. They didn't report that in The Boston Globe for years.
Paul JayLet me ask you, to wind this one up and we'll talk more again soon. Do you see any indication that the Sanders/Warren/AOC part of the Democratic Party and that's a big part of the Democratic Party when you look at the primaries are going to have any influence in this administration? And if they don't have much or any, what are they going to be the repercussions of that?
Tom FergusonWell, my reading of what's going on right now I mean this is to get into more detail than we have time for. I'm conscious of the fact we need to wind up. I could see that the Biden people are listening a bit there. I don't regard this as all a zero, at least not yet. I also think that that wing of the party has not really engaged. They've been defending themselves, which, of course, since they were under attack, I quite get that. But they ought to be championing the fairly straightforward, high-tech approach to Covid. They're all pretty quiet about that stuff. I mean, I'm not hearing the sort of things that folks should be doing. Just pushing testing. Though, the Biden people are coming late on this and they came late to the OSHA integration of that [into the testing push]. They are now doing it. But I'm not hearing the type of economic stuff, except we could spend anything we want, which is actually clearly not true. I am not the only person: Lance Taylor and other folks have all made the point about Modern Monetary Theory [MMT]. You can, in fact, put your currency at risk. Now, we're a long way from that. We're not anywhere near that right now. But in the next few years, you're going to see one inflation scare after another. You're going to see all of these funny things, flight to gold, which you saw somewhat earlier, all this stuff. My sense is that the macroeconomics and the Covid responses are, frankly, a little behind best practice. And progressives sort of need to get their act together.
I mean, it's absolutely clear that we have a severe racial justice problem in the United States. They have got to do something about that. And that's one of the glories of that wing of the party that they're spotlighting it. They also have to deal with the vast number of other Americans. We're pauperizing people of all colors. I mean, it's an equal-opportunity pauperization scheme right now in the way wealth and income are being redistributed under this pandemic recession. Folks got to address that in very broad terms, and they've got to do it fast. They have to deal with the fears of large numbers of folks when they start to do major programs, that they'll just turn us into Weimar, Germany or something. Now, you don't have to do that. I have written and done a lot of work on Weimar; we're not there yet.
Paul JayYou're talking about hyperinflation. There's no certainly no sign of any inflation right now.
Tom FergusonYeah, except in food. Look at food. You will see that food prices have risen, and rather fast, actually.
Paul JayAs have grocery store profits.
Tom FergusonYeah. Look, in general, if you set up a situation where you are subsidizing firms but not workers, you're going to create a lot of unemployment. People gotta go to work. They go to work even if they get sick and firms continue to make profits. This is a really ugly sequence.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
