On the Road to Economic Recovery and Productivity, with Lingering Concerns over Inequality

TL;DR

Furman discusses economic recovery, inequality, and productivity challenges.

Transcript

KEENE: This is a brave crowd. I grew up in Rochester, New York, where this is partly December. It is my great honor to be here with Jason Furman. I'll keep the introduction short so we can get every moment of value out of this, of course, C. Peter McColough Series on International Economics, "Economic Policymaking in the Obama Administration" with ... Read More

Key Insights

• Jason Furman highlights the slowdown in productivity growth since 1973 and the rise in inequality since 1979 as key challenges for the U.S. economy.
• The U.S. economy has made a rapid recovery from the 2007-2008 financial crisis, regaining pre-crisis GDP levels by 2012, faster than other affected countries.
• Despite economic recovery, the U.S. faces high long-term unemployment and stagnant middle-class income growth.
• Furman emphasizes the need for continued efforts to return the economy to its full potential, expand economic potential, and address inequality.
• The Obama administration's economic agenda includes measures like immigration reform, patent reform, and infrastructure investment to boost growth and reduce inequality.
• Furman discusses the impact of globalization on inequality and the importance of managing its trade-offs to ensure shared benefits.
• He acknowledges challenges in business investment despite favorable conditions like low interest rates and high profit shares.
• The U.S. energy boom, driven by increased oil and gas production, is seen as a significant economic opportunity with implications for national security and manufacturing.

Questions & Answers

Q: What are the key economic challenges highlighted by Jason Furman?

Jason Furman highlights two major challenges: the slowdown in productivity growth since 1973 and the rise in inequality since 1979. These challenges have contributed to slower growth in typical household incomes over the last several decades. He emphasizes that reversing these trends will not happen overnight, as they are deeply ingrained and decades in the making.

Q: How has the U.S. economy recovered from the 2007-2008 financial crisis?

The U.S. economy has made a rapid recovery from the 2007-2008 financial crisis, regaining pre-crisis GDP levels by the first quarter of 2012, which is faster than most other countries that experienced systemic financial crises. This recovery is attributed to effective policy responses, including fiscal and monetary measures, financial rescues, and support for key industries like autos.

Q: What measures does Furman suggest to address inequality?

Furman suggests a range of measures to address inequality, including investments in infrastructure, high-quality preschool education, and raising the minimum wage. He also emphasizes the importance of balanced deficit reduction and policies that ensure economic growth benefits are widely shared. These measures are part of a broader agenda to expand economic potential and reduce inequality.

Q: How does globalization impact inequality, according to Furman?

Furman acknowledges that globalization has contributed to inequality, as it coincides with a decline in the labor share of national income, particularly in industries exposed to trade. He emphasizes the need for active efforts to ensure that the benefits of globalization are shared, including policies like the Affordable Care Act, which aims to protect people from the downsides of a globalized economy.

Q: What is the current state of business investment in the U.S.?

Despite favorable conditions such as low interest rates and high profit shares, business investment in the U.S. has been lagging. Furman expresses uncertainty about this trend but suggests that uncertainty and the need for more certainty in policy may be factors. He hopes for stronger investment growth in the future as conditions stabilize.

Q: What role does the U.S. energy boom play in the economy?

The U.S. energy boom, driven by increased oil and gas production, is seen as a significant economic opportunity. It enhances national security, contributes to climate security by shifting energy generation towards natural gas, and boosts the economy by creating jobs and attracting manufacturing back to the U.S. due to cheap and abundant energy resources.

Q: What are Furman's views on the potential GDP growth rate?

Furman is cautious about predicting the potential GDP growth rate, noting that it depends on future innovations and inventions. While some economists argue for a secular stagnation hypothesis, Furman believes that current economic challenges can be explained by factors like the financial crisis and fiscal contraction, and he remains optimistic about future growth potential.

Q: How does Furman view the current state of fiscal policy and deficit reduction?

Furman highlights the significant progress made in deficit reduction, with the U.S. deficit shrinking rapidly in recent years. He acknowledges long-term challenges related to demographics and healthcare but notes that recent policy measures have improved the long-term fiscal outlook. He emphasizes the importance of continued efforts to address these challenges while supporting economic growth.

Summary & Key Takeaways

• Jason Furman discusses the U.S. economic recovery post-2008 financial crisis, emphasizing the rapid regaining of pre-crisis GDP levels by 2012, faster than most affected countries. He highlights challenges such as high long-term unemployment and stagnant middle-class income growth, urging continued efforts to return the economy to its full potential.

• Furman addresses the slowdown in productivity growth since 1973 and the rise in inequality since 1979 as key challenges. He emphasizes the need for policies to expand economic potential and address inequality, including immigration reform, patent reform, and infrastructure investment to boost growth and reduce inequality.

• Despite economic recovery, the U.S. faces high long-term unemployment and stagnant middle-class income growth. Furman discusses the impact of globalization on inequality and the importance of managing its trade-offs to ensure shared benefits, while highlighting the U.S. energy boom as a significant economic opportunity.