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tv   Federal Reserve Chair Jerome Powell Testifies on Economic Outlook  CSPAN  November 13, 2019 7:46pm-9:13pm EST

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and i think it's a great process. think that the republicans need to step it up more. instead of using jim jordan as and actually him asking questions. host: all right. watch u got a chance to it and thanks for tuning in to c-span during school. we are going to get your reaction tomorrow as well. everyngton journal" is on morning at 7:00 a.m. eastern time. and we'll get your reaction to impeachment inquiry tomorrow morning as well. ou can also follow the house mpeachment inquiry and the administration's response. going to change topics here. also heard today from the chair of the federal reserve, powell, and he spoke before the joint economic committee and, again, a our coverage of the entire impeachment inquiry from going to bey, we're
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showing in its entirety over on c-span2. that's going to start at 8:00 p.m. eastern time. >> the committee will be in order.
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the chairman is on his way. he wants me to give my opening statement and hopefully he will be here. e're honored to have chairman powell. we thank him so much for testifying today. i look forward to hearing your the current state of the economy and the potential challenges ahead. like to thank you for your thoughtfulness as you help through what omy in some ways are extremely times.ging as you have said in your testimony, by some measures, our the national unemployment rate duringom 10% at its peak the great recession to only 4.7% president trump took office. and it has continued to fall. only 3.6%.ds at addeconomy has continued to jobs now for 109 consecutive months. than nine years.
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inflation remains low. fed's target. wages are moving up though not as fast as we would like. ways. is weak in other but other measures tell a very story.nt g.d.p. growth has slowed, third below 2% in the quarter. job growth is also slowing. lagged behind the last year's of the obama 35,000 ration, about fewer jobs have been added per monthsuring the first 33 of trump than the last 33 months obama. manufacturing is in recession. business investments have been the past two quarters. and productivity fell last the first time since 2015. of these more troubling
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developments may be a sign of a decade-long to our economic expansion or a slow sugar high of the 2017 tax cuts. of the most likely cause economic uncertainty is the president's trade war. to a fundamental question. how should the federal reserve major n one of the challenges facing our economy is erratic behavior of our president? so i won't ask you to answer question, but it's on everyone's mind. ou have an extremely difficult job. and not everyone has benefited economy. in past months, you have conducted a federal reserve called fed ur listens, and i want to thank you for taking the time to hear from walks of life all ho experience our economy very differently. as you know, the economy as a
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hole can be very strong while entire segments of the u.s. population struggle. not regions still have recovered from the great recession. groups have ratic shared equally in the economic growth of the past decade. members of congress, we need to serve all americans. that this is your concern, too. it used to o be -- be that a rising tide lifts all has become less true, and we know that the tide ifts some boats more so than others. that's why i introduced legislation that would give us insight into whom the economy is working for. y bill, with a lot of my colleagues, the measuring real income growth act, would require analysis of economic to report g.d.p. growth by the top 1% alongside
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the top line number. us who is ll benefitting from economic growth. back to the s me fundamental question before fed policymakers. should unemployment go? how does the fed weigh the enefits of very low unemployment versus the risks of inflation? 11 straight quarters of an unemployment rate below c.b.o. tells us is a so-called natural rate of unemployment. inflation remains uncomfortably -- remains targetably below the fed rate. which raises the question, has he traditional relationship between unemployment and inflation weakened? has, then why? is it down-ward price pressure the globe or market conis
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concentration in areas of the united states eroding market power, or are there other in play? and what is unemployment is extremely low, suggesting that employment?ll but the unemployment rate for frican-americans or latinos remains much higher. what if the unemployment rate or people in some communities are those -- or those who work in some occupations is low?bornly these are questions with wide-ranging implications for and monetary i look forward to your testimony our yield back and chairman is here. very much for being here, chairman powell, and i appreciate your patience with schedule. votes in committee and on the floor are often difficult to predict. welcome to the joint economic committee's annual with the chair of the
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ederal reserve's board of governors. chairman powell, i'd like to extend you a warm welcome. our discussionto today. senator lee: our economy has recovered from the final crisis of 2008. economy has reached a 50-year low of 3.5%. it reached that in september and most recently stood at 3.6%. the share of working age adults job has returned mercifully to precrisis levels. despite this welcomed eturn to normalcy within our economy, and in terms of many ment measures, aspects of our economy remain unusual. and particularly so for central bankers. persistently ins low in four of the past five quarters. below the as been federal reserve's 2% target.
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remain low lds also with a 10-year burrowing -- at 1.9%. rate interest rates that were considered extraordinarily low become a long-run expectation. low phenomenon of inflation at low interest rates are not unique to the united but rather they're echoed in most of the developed markets around the world today. brings with it some challenges such as building a framework for fighting in a low interest rate environment. owever, be it also brings some significant opportunities. with inflation still in check, yet room to expand employment even further. will be important for the federal reserve board to communicate how it addresses these hallenges and opportunities. in this regard, a greater transparency demonstrated by the federal reserve during your
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chairmanship, mr. chairman, is commended. in particular, the fed has fed listen number of events around the country, including an historic conference feedback on to hear current policy conduct as well as to better understand the monetary policy at the local level. not only will these initiatives in the federal reserve and in its ecisionmaking, they'll provide important information relevant from etary policy americans who do not always get a seat at that table. in the past, haven't been able to understand how these they operate as well as are able to today. our witness.oduce mr. powell is the 16th and
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current chairman of the board of federal reserve system. serving in that role since 2018. e first joined the board of governors in 2012. prior to his appointment to the board, mr. powell was a visiting bipartisan policy center where he focused on federal and state fiscal issues. powell previously served as an assistant secretary and as ndersecretary of the treasury under president george h.w. bush. with responsibility for policy institutions, the treasury debt market, and related areas. prior to joining the worked as a n, he lawyer and investment banker in new york city. we thank you chairman powell for attending today's hearing and insights.ard to his you are now recognized for your testimony, mr. powell. chairman powell: thank you, vice chair , and aloney and members of the committee. let me start by saying my colleagues and i support the of max mument employment
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nd we are committed to providing clear explanations about our policies and our actions. congress has given us an degree of independence so that we can effectively pursue our statutory goals based on facts and objective analysis. we appreciate that our with it an brings obligation for transparency and accountability. i'll discuss the outlook for the economy and for monetary policy. he u.s. economy is now in the 11th year of this expansion and he baseline outlook remains favorable. gross domestic product, or g.d.p., increased at an annual 1.9% in the third quarter of this year after rising at around 2.5% rate last in the first -- and the first half of this year. he moderate third quarter readings is partly due to the transto strike at g.m. motors. investment is being restrained sluggish growth abroad and by
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trade developments. these factors have also weighed on exports and manufacturing this year. in contrast, household consumption has continued to supported by a healthy job market, rising incomes, and favorable levels of consumer confidence. and reflecting a decline in 2018, e rates since late residential investment turned up in the third quarter following an extended period of weakness. the unemployment rate was 2.6 percent, nearly a half-century love. low. we expected some slowing after the strong pace. at the same time, participation in the labor force i people in their prime working years has been increasing. have job opportunities encouraged many people to join the workforce. this is a very welcome development. improvement in the jobs market.
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beent wage gains have strongest for lower paid workers. people who work in the middle thate communities tell us many who have struggled to find work are getting opportunities to add new and better chapters to their lives. significant differences exist in different areas of the country. unemployment rates for african-americans and his next are well below that for whites and asians. the proportion is lower in rural communities. index forprice personal consumption expenditures increased over the 12 months, held down by declines in energy prices. which excludes food and energy prices and is a
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better indicator was 1.7% over the same period. looking ahead, my colleagues and activity andnded inflation year our 2% objective as most likely. this favorable baseline reflects the policy adjustment that we have made to provide support for the economy. risksr, noteworthy remain, in particular sluggish growth abroad and trade development. moreover, inflation pressures remain muted. they are at the lower end of the historical range. it could lead to an unwelcome downward slide in expectation. we will continue to monitor these developments and assess for economic activity and inflation.
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we also continue to monitor the risk to the financial sector. vulnerabilities have remained at a moderate level. elevated in some asset classes. is low, relative to its pre-crisis level and has been gradually declining. leverage low and funding risk limited. week, we willthis be releasing our third financial stability report. turning to monetary policy. weakness int year, growth has prompted them to adjust their assessment. byce july, they have lowered
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three quarters of a percentage point. they put the current target range at 1.5 percent. trying to keep inflation year the 2% objective and provide insurance against risks. the full effect of these adjustments on economic growth, the job market and inflation will be realized over time. we see the current stance as likely to remain appropriate, as long as incoming information remains consistent with our outlook. we will be monitoring the effects of our policy actions and other information as we assess the appropriate path. thatvelopments emerge cause a reassessment, below
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respond accordingly. policy is not our present course. we are committed to ensuring that the policy framework remains and meets its statutory goals. nonetheless, the current low .nterest environment we are conducting a public review of our strategy, tools and communication. the first of its kind for the fed. -- now is thee to time to conduct such a review. we have been hearing a diverse range. will draw on these insights as we assess how best to achieve maximum employment and price stability. we will share our conclusions when we finish the review.
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in a downturn, it will be .mportant for fiscal policy as noted in the congressional budget, the long-term budget outlook, they are on a unsustainable path. over time, this could restrain policy makers willingness to support economic activity during a downturn. i remain concerned that the debt can restrain private investment and reduce productivity and overall growth, putting the stable pathet on a would help to ensure that use fiscals can policy to stabilize the economy, is it we can. weakens. in january, they made the
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decision to implement monetary policy and ample reserve -- ample reserves regime. ratesl set our administer and not through frequent interventions to manage the supply of reserves. in the transition to the effective level in this regime, we slowed the gradual decline and we stopped it in july. in response, we decided to maintain a level of reserve at or above levels in september. we announced we would purchase treasury bills into the second quarter of next year and continued market operation through january. these are purely technical measures as we continue to learn about the appropriate level of reserve. they do not represent a change.
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thank you. i will be glad to answer your question. >> thank you for your testimony. chair needs to , he is suggesting that we limit our questions to four minutes, so that everybody gets the chance to question. until the chairman comes back. the full unemployment rate is well below the fed's long-run estimate of 4.2%. unemployment are also at a year decade low. the unemployment rate for some groups is substantially higher, for example the black unemployment rate, while at a historic low is still above 5%.
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could a tighter labor market draw more people back into the workforce? >> thank you. we had charged to achieve maximum employment. only unemployment but labor force participation, wages, many data points. haveld say that what we learned and what we continue to economy cant u.s. operate at a lower level of unemployment that many -- then many would have thought. we are at levels of unemployment that we have not seen in 50 years. this is the first time we have had it below 4% for 18 months. is actually moving sideways and wages are moving at a healthy clip, but not up in a way that would suggest an upward
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price pressure. i think that we are with -- very open to the idea. we do not know where maximum employment is. we have to let the data speak to us. they are not sending any signal that the labor market is so hot or that inflation is moving up. what we have learned is that the current level of unemployment is consistent with a strong labor market, but it is not one that is presenting difficulties. it has many beneficial side effects, including pulling people back into the labor market. there is a lot to like about today's labor market. we are using our tools to make that happen. forconomy has added jobs consecutive months.
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growth, the annual wage is just 3%. why is wage growth still below what we would expect with a strong labor market? >> we may have expected wages to in an ongoing expansion, particularly with low unemployment. there are a number of explanations for why that happened. wages should equal inflation plus productivity. that is about where we are. it accounts for about 2% inflation out about 1% wage growth. there are other possibilities. there is still slack in the labor market. we do not know with any precision. rate of interest is lower than what we were
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thinking. we are bidding the data speak to us. we are carefully monitoring the situation. >> some have said it is the increased concentration and giving employers power. >> there are a number of institutional explanations. you can point to globalization or concentration among industries where overtime, they get more concentrated. you can point to lower unionization. any of those factors could be in what is arole bit of a puzzle. why we have not seen an uptick in wages. >> my time has expired. >> thank you, madam chairman.
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thank you for being here, chairman. today focus my questions primarily on preparing for the next downturn, whether it be three years from now, five years from now, whenever it comes, historically speaking, is the federal reserve positioned as well as it has been positioned in past recessions when the federal reserve was the primary federalency where the government said, we need help from you to stimulate the economy? are we positioned there? are we out of position? >> if you look at typical postwar recessions, they have on interest rates and
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average, the amount of cuts has been 5% or so. 4%h them having peaked at and being a little bit above 1.5%, we do not have that kind of run. looking at the longer-term interest rates, which are not directly affected by the policy, they have been declining because of inflation being lower and less volatile and agent demographics. it needs more savings relative to investment, which puts more pressure on interest rate. is lower interest rates, lower inflation and lower growth. you are seeing it into a much greater extent in many parts of the world and what we are seeing here. that is the basic reason why we are having this public review
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for our monetary policy framework, to see if there are ways to alter our strategies and communications to make us more effective in this world where we are to close. that is one thing. fiscal policy will also be important. we have looking hard at ways to make sure that we can use our ultimately, fiscal policy has been a key part. directionestion, this -- disruption that took place, anticipated, not anticipated, do you anticipate keeping the expansion at a level to this until you are sure it will not happen again? >> anticipated or not, it is a
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different world post crisis. what we have done, as we now hire financial tuitions to have a lot more liquidity on their balance sheet. that is a big benefit to the financial system, but a lot of that liquidity is held in our reserves. we used to keep the reserves scarce. 1.5 trillionhave in reserve. we are trying to find that level as be allowed the balance sheet to shrink. there was no way to know the data that we had suggested, that we are not close to that point. we are still very much looking at what happened in september, but we learned that we need to make sure that reserves did not go under that level that we were at in mid-september. that is really what we are
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doing. it is technical and i think we have it under control. that does nots have any implications for the general public. >> thank you, madam vice chair. and thank you, chairman powell to be here. i have three questions. one that we talked about is very important to me. fedow that recently, the and office of comptroller has been working on a proposal to revamp that 1977 cra act. it is my understanding that they wanted to do a joint, but they were not sure if they would go along.
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my is important to me and to congressional district in ohio because of the resources that it put back into communities and in minority communities. do you have any insight on where they are or if they are working >> we stronglyk submit the mission of support -- support the mission of cra ensure credit availability in the areas that banks served in low income communities. we think it is a time to modernize. we have been working very hard to try to find common ground. we are committed to making sure in a betterputs us place to serve the intended beneficiaries. ,e have not quite gotten there but we will keep trying. we hope to come together with a
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common answer, which will be better for everyone. >> the federal reserve bank of san francisco recently held a conference entitled economics of climate change. i believe this was the first ever conference by the fed on climate change and the economy. can you discuss how they used the impact of climate change on our economy and monetary policy and how it has evolved over time? >> climate change is an important issue but not principally for the fed. it is not so much assigned to canfed, but over time, it affect us in some ways, which i will mention. we require financial institutions and utilities that are so fundamental to the system, to be resilient against
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severe weather and climate change. severe weather is becoming more common and it is added to our supervision. we do a lot of research in this area. our perspective, we are not going to be the ones who decide society's response. itterms of monetary policy, does not have any near-term implication. over time, climate change could have effects. question is, there was a report that found that 80% of venture capital investment like california, new york and texas -- i am from ohio. my question is, startups throughout the rest of the country, especially the midwest
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are overlooked. are there any thoughts on the fact that an overwhelming majority -- what effect does this having on regions in the midwest? >> i would have to look at that study. franciscoin san should be able to invest in a company in ohio. so we should look at some partnerships and how that works? >> many are not located in those areas. >> thank you. >> more at global question. if you look at the data from the society isers, our .ctually in a sweet spy
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-- sweet spot. he would agree with that #how do we not screw it up? how do we actually move towards a positive? >> 50 year low in unemployment. inflation is low and under control. labor force participation is kicking up. the outlook is good. households are focused on this healthy job market. it is actually a very good place from that standpoint. not every community has benefited. how do we keep it there? risksy to this, given the that we see are slowing growth and weaker manufacturing. that affects u.s. manufacturing. the key to keep it continuing is
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that we keep job creation at a solid level. that wages keep on living up. that seems to be the engine driving the u.s. economy up. issues. faces long-term that need your attention around labor force participation and productivity. those are two things. that is something that we can do something about that the fed cannot do much about. it is more about fiscal policy. >> most of the policy we engage in could be pushing up labor force participation. models, we did not think that we would get that far, but we demonstrated that there is slack out there. can you touch on what we can do
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in that demographic headwind, where we are in the u.s. to encourage that labor force participation? olderentives for someone to stay in the workforce, --ting millennial males there is a range of policies and across.ld appeal i think many of them would work. for young males, it will be addressing the opioid problem, skills and training and internships. we had a great meeting with experts on internship programs recently. you are seeing older people stay in the workforce more and more. their participation is moving up. there are a lot of programs that are pulling people -- women who have been out of the labor force going back in after their
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children are grown up. there are so many things that can be done and eli every other wealthy country in the world for prime age workers. this is not where we should be. there are things that we can do about it. mandate, howual often do you get into the discussion of currency differentials and headwinds that actually create capital coming into the country? are we currency wise in your conversations? be one assigned to the treasury department. treasury has full responsibility. we do not. it is in all economic models. it is just a model input. it is not a principal driver of
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how we think of central policy. >> and, madam chair. and you for being here. i want to read you something that has been recently posted and get your comment on it. i have a couple questions related to this. we have all heard about the gender wage gap. it is much worse for women of color, but there are two sides to a family's budget. finding that in addition to the wage gap, there is rising inequality to quickly -- how quickly prices are rising for families struggling the most in the economy. productsthe kinds of proportionately consumed by
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rose in pricelds at a slower rate than the kind of product consumed by low and moderate income households. just released research and columbia university quantifies for inflation inequality and it goes on to suggest that an appropriate course of action would be to peg the threshold to a higher rate of inflation given how many more people would be in poverty when looking at the expense side of the ledger. we ask you whether or not any had this enters into your decision-making, whether you have any research on this or comment on this? >> i did see that research, which showed some different groups of people.
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if principal inflation can be higher or lower, this was a piece of research that showed that the basket of goods bought at the lower end of the spectrum has experienced higher inflation. their veal incomes are lower than what we think. i would like to see a lot more research on that. it is getting a lot of attention right now. there is no definitive answer. there is a series that the government conducts for consumer price that looks at the basic basket of goods that find a much smaller difference. it needs further research. would bek someone else doing that research? >> our researchers would do it, but you would see the agent the -- agency -- they would do that. we have researchers on inflation
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all the time. -- i do not think it was a fed piece. >> it was at columbia university. severalhere were co-authors. >> another subject, can you explain the relationship of our immigration policy to employment rate in the economy? we do not have responsibility for immigration policy. we do not advise anybody on immigration policy. role inconnect to our analyzing the economy, so you can think of the economy's ability to grow as fisting as two things. how fast is the labor force growing and how much is output
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per hour growing? , the trend growth of our labor force has been very slow. it is about half a percent and half of that is immigration. immigration is a key input. toould say, if you look population growth as a way to support higher growth in the u.s., immigration would need to be in there. you i healed back. >> thank you for being here today. on labore questions market participation and i think you have addressed those. how it can help us increase our labor pool. i was thinking about the status across the country now. over 30 states have put in minimum wage laws.
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isre is something that affected everywhere. it to address the situation on the mismatch between labor scarcity and yet this very low wage growth we see, and how does that tie into inflation? not take a position on minimum wage. it is an issue you have to balance. if i were you, i would look at a broad range of research. research comes to different perspectives. basically all the research you see, when the minimum wage is raised, you will see job loss and wage gains. i would look at a range of that research and try to think with the policy is -- the right policy is. in terms of inflation, it does not play in. first of all, our mandate is wage -- is price inflation, not wage inflation. we do not see prices moving up
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in any way that would put unwelcome upward pressure on prices. i don't think it is an important part of the inflation discussion right now. >> trying to translate this labor scarcity we have at higher wages for the american workers, from 2012 to 2000 16, we had $120 increase per month in average wages, then in 2016 to current, the has been cut in half, about $56 per month. this is in the time of the lowest inflation you have set in 50 years in the last 18 months. --t is that mitchell mismatch mean to our economy? chair powell: we look at a wide range of compensation measures. what they tend to show is if you go back five years, wages and compensation were going up 2%.
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that has moved up to 3%. that is really the trend has been upward. that is consistent with the thought that a tighter labor market, lower unemployment, and surveys that suggest the labor market is tight, it is consistent with that. we see wages moving up. i could tell you the principal ones we look at, but i think that is true across all major measures of wages over the last 5, 6 years. >> why do you think they have slowed so dramatically? chair powell: it is hard to say. average hourly earnings is an important one, which peaked at 3.4% earlier this year or the end of last year, and has been trickling down. it is right 3% now. it is a fairly modest one. i am not at all sure why that is. some argue that as older workers retire, younger workers come in and make lower.
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in any case, it is consistent with this idea that we are not seeing excessive tightness in the labor market that is generating outsized wage gains. we are seeing nice wage gains given the inflation in productivity, but nothing that is out of line with that. >> thank you. powell, borrowing as a country, as a government, more held by theith debt public expected to reach 95% of gross domestic product within the next 10 years, yet we are also paying interest on that debt at an all-time historic low, a 30 year borrowing cost of just 2.4%. -- iis the reason for this guess some would say fortunate fiscal reprieve, at a time when congress is an institution that
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has shown really no sign of physical discipline at all? where does it come from? is a powell: it really long-term trend. if you were to look at a graph of what the 10 year treasury yield, if you went back 40 years, what you would see is a ski slope down all the way to today. it has been a long-term trend. by the way, it's true around the globe. why is it happening? first of all, it's inflation getting under control. volatile.ess ultimately continuing to decline to the point where the risk of lower inflation is actually greater than the risk of higher inflation. that's part of it. it is also just aging demographics. as people get into their later years, they save more. that creates more savings per dollar investment. that tends to drive interest rates down. i don't know that that trend shows no signs of reversing or anything like that. that's really what's going on with these rates. rep. lee: some have suggested
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that because we in the united states, the united states government borrows in its own currency, this level of spending is not a problem because the fed can just monetize the debt and keep doing so more or less indefinitely. what is your reaction to that? chair powell: as i mentioned in my testimony, the fact that interest rates are lower does lessean that we will pay in interest. it does not mean we can ignore deficits at all. we are going to have to get on a sustainable path. what does that mean? the debt is growing faster than the economy. it is as simple as that in nominal terms. that is by definition unsustainable. you will have to get to where the debt is not growing faster than the economy. it is growing faster in the united states by a significant margin. even with lower rates and decent growth, there is still going to
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be a need to reduce deficits. --. lee: >> we are not advising you went to do that or how. it is inevitable we will have to. frankly, if we don't, what happens is our children will wind up spending their tax dollars more on interest than things they really need like education, security, health. rep. lee: you have mentioned uncertainties in international trade as imposing a headwind for us. years,e last couple of we have had a lot of trade measures going into effect. has the fed learned about the interaction between trade and monetary policy? we shouldll: first, never be heard to be commenting on trade policy. it is not our job. it is -- our lane is the economy. our lane is the economy, so in
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principle, anything that affects our ability to achieve our mandated goals is an inappropriate subject for monetary policy. we have been hearing from companies and i think this is widely -- tariffs but uncertainty around trade policy for now has been weighing on business sentiment and is probably part of the global slowdown in manufacturing, business investment, exports, and trade. there is a much bigger story out there, but it is part of that. rep. lee: my time is inspired. senator klobuchar -- has expired. senator klobuchar. >> thank you for being here today. some of the issues i was going to raise have been discussed. the challenges with our economy, including the deficit, which was greatly exacerbated by the last tax bill.
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as well as problems in some sectors such as agriculture, which is very important to us in the midwest. i wanted to focus on a third issue, which is income inequality. even if people have jobs, it is often hard for them to afford things and then you have the added problems. the washington post reported in september that income inequality in america is the highest it has been since the census bureau started tracking it more than five decades ago. the top 1% have experienced inome growth of over 200% the last decades and between 2007 and 2016, the median wealth of lower income families fell by 42%. opinion, will widening inequality lead to lower growth expectations over the long-term? what should we be doing about this? chair powell: i would start by saying i think we probably would
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all agree that prosperity should be as widely shared as possible. i would point to two aspects of the broader problem that i think are important and need attention. the first is just the relative below the of incomes fairly high part of the distribution. that is even after allowing for taxes and benefits and things like that. incomes moving up broadly across the income spectrum. the second is mobility. you want to see people moving from the bottom to the top and vice versa, by the way. it has to happen as a matter of arithmetic. for example, the bottom 20%, what are the chances that if you are born in the bottom 20% you will make it to the middle 20% or the top 20%? the united states lags most other wealthy countries in that measure now. it is very much not our self-image as a country. those are things we need to address. --se are important areas
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important. sen. klobuchar: as you talk about that, one of our challenges right now is hooking up our education system with the jobs that are available right now and making sure everyone has access to those jobs. i don't think it always means a four-year degree. some of the fastest-growing job areas are one into your degrees. -- one and to your degrees. one of the things i'm focusing on is apprenticeships and trying to make it easier for people to access those kinds of degrees. could you briefly talk about that? chair powell: we met last week with six people who run apprenticeship programs and funding of apprenticeship programs across the country. i have to tell you, it is very impressive what they can do. they are focusing on low and moderate income communities. they are getting them in high schools and out of high schools and matching them up with
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employers who need those people. they are getting good jobs. it is really working. the thing that limits their ability to do this on a much wider scale is funding. sen. klobuchar: exactly. chair powell: it is very impressive -- sen. klobuchar: i think a lot of this is how we use our resources for education. i will ask you in writing a question on retirement. i think it is becoming a challenge in our new economy with -- senator kunz and i have a bill to address that called up savings accounts, which is a great idea for small and medium businesses. back to the income equality, very briefly, how would reporting economic statistics like income brackets benefit our understanding of the economy? we don't have that right now. chair powell: we are doing something with that at the fed. we like to cut data up and look at it in new ways. this is one of the things we are doing. combining a couple of data sets we have with quarterly
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publishing a distributional account. sen. klobuchar: when will we get that? chair powell: every quarter. it is a new thing we are doing. we think it is an interesting insight into the economy. there are a lot of different ways to look at what's happening, and that is important. sen. klobuchar: thank you. >> i apologize if i have already -- if some of this ground has been covered, but it is a pleasure to be here and to have you. the growth in the forecast of our economy is the number one thing that impacts the people i serve in southwest washington. it is helpful to hear from your perspective. specifically, in rural communities where on a play meant is higher than the national average, most of my areas are rural, the we are bumping up everywhere, i wanted
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to hear some of your biggest takeaways. i have gone through some of your testimony. i apologize if you are repeating. and somerms of outlook of the things we have done in the most recent years with the tax cuts and jobs act, different regulatory changes, to either maintain the growth we have seen or expand it, what recommendations would you give? chair powell: first, i think the outlook is still positive. there is no reason expansion cannot continue. there is a lot of value in continuing it. we are trying to use our tools to accomplish that. we are seeing in this, the 11th year of an expansion, now the longest in u.s. recorded history , what we are seeing is income gains are being -- are the highest at the lower end of the wage schedule -- scale.
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it is very positive. we are also seeing people being pulled back into the labor market. there is a lot to like about this rare place of the 11th year of an expansion. we are certainly committed to doing what we can to extend it. i knowrrera beutler: your testimony touched on concerns with regard to the national debt. could you elaborate on that? how it should be addressed, particularly as it rates to expanding or at least not contracting the economy. chair powell: it is a longer-term issue that i imagine we all realize will have to be addressed over time. thes just the case now that debt is growing faster than the economy and the nominal gdp. in the long run, that is not a sustainable place to be. how to fix that, it is easy to say that. how you do that and when you do that is an issue that is up to you, not to us, but i would be
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remiss in not pointing out that the consequences of not addressing it are that we will be spending more and more -- our kids and grandkids will be spending their tax dollars servicing debt rather than on the things they really need. education, health care, security, all the things we need, they will need, they will be spending more and more of their money on -- you don't need to balance the budget or pay down the debt. you just need to get the economy growing faster than the debt. that should be the goal. successful programs for countries to get back on a sustainable path tend to take time over a long period of and be relatively gradual. i would be looking at something that would work overtime that really would not be giving you a lot of advice on how to do it. rep. herrera beutler: with my final 30 seconds, do you anticipate maintaining the current fed rate through the
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next year? i would not say that at all. i will go right to the actual language. we see the current stance of monetary policy is likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate growth, a strong labor market, and inflation near our 2% objective. that is a very data dependent statement. we think monetary policy is in a good place, but we are going to be watching very carefully incoming data, and if developments emerge that cause a material reassessment of the outlook, we will act. context,era beutler: context, context. i appreciate that. i will yield back. >> mr. chairman, thank you for your equanimity, and for providing the most straightforward answers of anybody we talk to. yesterday the economic club of new york, the president continued his criticism of the
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fed, saying it put the u.s. at a competitive disadvantage. he also floated the idea of negative interest rates. do you take comments from public officials into account when implement ring monetary policy? policy?menting monetary chair powell: we look exclusively at the data, at the research, and at the performance of the u.s. economy. we have a careful, thoughtful process that has been developed over decades, over a century, really. that is how we set interest rates. we don't consider political factors in what we do. rep. beyer: i have a friend in switzerland who went to borrow $10 million and got a negative interest rate. they are paying him $30,000 a year to borrow $10 million. do you see any prospect for negative interest rates in the u.s. economy? chair powell: negative interest rates would not be appropriate in the current environment.
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we have growth, we have a strong consumer sector, we have inflation below target. the very low and negative rates we see around the world would not be appropriate for our economy. you tend to see negative rates in the larger economies at times and growth is quite low inflation is quite low. it is just not the case here. it is different for smaller european countries. it is really about keeping their currency. there is a slow consistent increases in rates. we have turned that around with recent cuts this year. is there enough room to cut rates further if we get another slowdown? policy given up monetary as a tool for dealing with that at the moment? the typical: post-world war ii recession has
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involved rate cuts close to 5%. the current rate is in the mid one 50's. we are well short of that. fact not just for the united states, but around the world, that central bank's are going to have less room to cut in this new normal of lower rates and low inflation. that's why we are conducting this external review of monetary policy at the fed. we are looking for ways to have the tools to do what we are assigned to do by you, which is achieved maximum employment and stable prices, even in downturns. i will say also that fiscal policy is often a big part of the answer when there is a severe downturn. we would certainly look for that to be the case if needed. you, publicthank debt faces all of us. i was raised to believe money supply and growth were causally
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related. year. less than 2% this we have muted expectations. is there no longer a connection between money supply growth and inflation? should i pay any attention to modern monetary theories? chair powell: the connection between monetary aggregates and inflation is something we all learned in econ 101. it was generally thought to be empirically a good relationship. 40 years ago as the financial system developed all kinds of alternative forms of money, the relationship between monetary aggregates and -- has gone away. they no longer are the driving part of the theory. >> i'm out of time, but thank. >> senator cotton. >> i want to start by talking
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about china's economic growth. maybe i should say china's economic growth in quotes. they have reported most recently six and a half percent growth, down from most of the last 30 years. probably somewhat inflated. the carnegie endowment for international peace says chinese industrialists find it hard to find any economic sector in china enjoying growth. they had a few findings i found to be quite interesting. first, gdp is not a particularly useful measure for determining chinese growth because they have such massive investments in nonproductive activities. second, china likely distorts its gdp significantly in a way that is systematically pushing it higher. third, increasingly, gdp is a matter china is not of output, but political intent,
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given the benchmarks china imposes on local governments as many state owned enterprises as well as they -- as long as they have capacity. they can essentially achieve any growth target they want. what are your thoughts about this? growth in of chinese the points this research has found? i certainly feel it is very hard to understand china. you can read all you want. you can visit all the time. nonetheless, it is hard for me anyway to really feel like you understand the way the economy works, the way society works. i think you have to, as a general matter, except that it is really hard to know. economic data in particular, and i'm familiar with michael pettis and his research, we have not
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taken a view as an institution about that. a couple things are worth noting. morey be there is information in changed and there is in the level, if you know what i mean. we have noticed the last few years that the volatility of their economic reports has declined substantially, which kind of suggests more management. know.eless, we don't we have to take the data, and we do take it with a grain of salt. sen. cotton: you spend at the federal reserve a lot of time looking at underlying indicators and statistics to try to assess the direction of our economy. when you look at not just how in thenese leadership communist party behave, but when you look at indicators on how the people are behaving, other things like energy inputs or shipping, so forth, do you see a country behaving as if they have
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almost 7% growth right now? chair powell: it is hard to say. one thing that is notable is that they have not responded with massive stimulus to this current situation. over a longer period of time, growth has been slowing from three decades of 10% as an economy matures, and i think they are trained to manage that decline. they put an awful lot of stimulus to work after the financial crisis. morenk they have been much cautious and careful. they have a deleveraging campaign, as i'm sure you know, that has been going on for one or two years. they have not backed away for that -- from that. that is part of the global slowdown, is trying to at least , in chinafrom growing where they have unusually high debt. i would say they are behaving relatively thoughtfully and
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responsibly in response, they appear to be, in response to this current slowdown. sen. cotton: thank you. my time has expired. thank you chair, and i appreciate your and the vice chair's convening of this meeting. chair powell, thank you for being here. mr. powell, you know it is critical to the long-term safety and stability of the u.s. economy that the federal reserve makes data-driven decisions and remains independent from political influence. unfortunately, recent political pressure on the fed is having real-world economic consequences. a recent study found markets react east time you are publicly pressured to intervene in the economy. with a quantifiable change in investors' expectations that the fed interest rate targets will drop. can you tell the committee what actions you are taking at the federal reserve to not only
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insulate against political influence, but also signal to investors that the fed makes independent decisions based on sound economic analyses? playspowell: politics absolutely no role in our decisions. we use the best data, the best analysis we can muster. we are human. we will make mistakes. we will not make mistakes of character and integrity. with that research and i would just say it is very incrediblyk at our complicated financial markets and economy where many many things are driving results and pull out one or two tiny effects. there is other research that points to different results. it is absolutely essential that everyone understands that we are doing our jobs as we always have without regard to politics. we serve all americans. we do the best we can based on analysis. we try to be as transparent as we can. we put everything we do on the
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record. when people dissent, they put their dissent on the record. that is as it should be. sen. hassan: i think it is important understanding research is complicated that we don't complicated further -- complicate it further with political actors putting pressure on the fed. that is the norm and it is one i hope we can return to. i wanted to follow up on something senator lee talked about. i am pushing for clear strategic trade policy that provides certainty to struggling small businesses. as you and i have talked about, i have heard from businesses across my state targeted by china's unfair trade practices, including the theft of intellectual property and the first transfer of proprietary technology. harms,of these economic the administration has manufactured endless trade uncertainty and heaped damaging tariffs on businesses. saidw you have repeatedly
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trade uncertainty has created risk for the u.s. and global economies. tradeu expand on how uncertainty has impacted the economic outlook and what you've u.s. the fed's proper role responding to the ongoing trade tensions china? chair powell: we hear from businesses and have been for a year and a half that this is a big issue for them, holding them back from making decisions. we are looking at ways to rearrange their supply chains. almost all manufacturing businesses have supply chains. it has been a distraction for management and it has weighed on willingness and ability to invest and keep growing. in terms of the appropriate response, our response is not to give advice on trade policy, but it is to react to whatever is helping or hurting our ability to achieve our mandated goals.
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this is one of those things. we call it out as something we are aware of and as something that is weighing on business sentiment and ultimately on the economy. sen. hassan: thank you for that. we may submit to the record that i share representative franco's interest and concern in the inflation gap. it is not just a wage gap, but the impact of inflation on middle-class families. i hope that is something we can learn more about from the fed. thank you, mr. chairman. >> welcome, chairman. thank you for coming to testify today. i had a chance to meet with a number of european central bankers, and they really outlined for the group of us the steps they are taking to understand, quantify, and mitigate the risks that climate change is posing to the financial market. i wanted to ask what the fed is doing to understand those risks
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and to look at their role in the >> climate change is an important issue but it is not one that is given principally to the fed to deal with. other agencies have that. case.arly that is the i just want to understand if we are looking at risk and understanding data from that lens. lens for us ishe risk management. through the fed are thinking about the longer implications of climate change for financial institutions, the economy, and all kinds of things. i think that is appropriate research. we are just at the beginning of understanding matt and there is a lot of research going on, including at the fed. not anetary policy it is
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current consideration or have an current effect of monetary policy. over time it could affect the volatility of economic activity. those are things we are thinking about longer. i think the public will expect us to assess any risk and use the assessment in the way we regulate financial institutions and potentially over the longer term in terms of monetary policy. >> do you have an opinion on robustness of how u.s. banks are analyzing the risk? do we need to start thinking through whether or not we need to either self-imposed or impose some stress test to look at the assets banks are holding and they don't have some
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concentration of risk? chair powell: what we are doing now is trying to make sure that financial institutions in regions that might be subject to severe weather have systems to be resilient. that is the main thing we are doing. doingnk of england is the a stress test based on climate scenarios, but it is meant to be informative. it would not do what our stress tests do. it is an interesting situation and we will be monitoring it and i think we will benefit from some of the activity around the world we are seeing. >> we are all rib -- obviously already seeing some places where it is harder to turn over the house in flood prone areas and if you had a concentration of mortgages holding in areas like
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that, obviously that can pose a real financial risk. do you think the gdp data adequately gives us enough of a picture about who is in a fitting from the economy? howld we be looking at economic growth is being distributed across? ? the economy chair powell: it is hard to capture gross domestic product in a $22 trillion economy. it is quite difficult. -- inches -- it's interesting to cut income data and we are doing some of that now with accounts. other agencies are doing the same. with data we have a tendency to want to cut it up different ways to see what we learn and we are doing that. it is informative about how income and wealth are shared broadly in the country. >> we are looking forward to seeing that data.
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cruz: thank you for your testimony. are now experiencing remarkable economic growth across the country. we have the lowest unemployment and 50 years. lowest african-american unemployment and hispanic unemployment ever recorded. in your judgment, what economic policies have played the most important part in generating that economic growth we are seeing? beir powell: i would reluctant to single out a particular policy but i will say it has been a long, slow recovery, but it has come a long way. we are in the 11th year since we keeping record since the 1800s, the longest one and we think it is a significant way to go.
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we have seen significant improvement. these long expansions are common now and that is because we conquered high inflation. we have seen three of the four longest in u.s. history has -- have been along the last four expansions. i think everyone takes credit for the good economy. it's a good place. low inrth noting 50 year unemployment and wages moving up. growth continuing at a solid pace in the 11th year of the expansion. it is a good time and i want everybody to get credit for it. senator cruz: i have concerns going into 2020 that we may see aslowdown in investments those allocating capital look at the political scene and some of
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the economic proposals being put forth by democratic candidates for president. i have concerns that may cause people to tap the brakes in terms of deploying capital until at least after the election and finding out if these policies might be implemented. in your judgment, what with the likely economic impact be of the federal government implementing a massive tax increase? chair powell: i am reluctant to be pulled into the 2020 election . senator cruz: i do not expect you to comment on the election, but if a massive tax increase is good or bad for the economy? your powell: indirectly as started at your question, it is
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about proposals of candidates. i do not to get into that fistfight. senator: -- senator cruz: a number of candidates are proposing a wealth tax. views on theny economic behavior that would likely follow from a wealth tax scaling as high as 8% annually? chair powell: it is not our role to evaluate campaign proposals. that is with the cbo does and other people do. we try to stay out of that business. senator cruz: let's try it differently. 2014 called in shale revolution one of the most beneficial economic developments in the country. do you share that assessment? conversely, do you have concerns about the impact on the economy if the federal government were to ban fracking
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and shut down shale revolution? agree.owell: i would agree i think the energy independence of the united states is something people have been talking about for 50 years and i never thought it would happen, and here it is. it is a great thing. that is not to say there are not issues to manage. environmental issues and other issues. but i think it has been a great thing for the country. senator cruz: would it be harmful to end it economically? i think to shut down the shale industry would not be a good thing for the economy. senator cruz: thank you. >>: i want to ask a final question. of somen the middle pretty strong economic activity. low unemployment.
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almost unprecedented economic stability. what policies should we pursue to keep this going? i think if you are asking for onviews, the thing to focus if i were in your shoes is the longer issues we face surrounding growth. it is about the potential growth of the united states. we are seeing how important and good it is to have a long expansion with a lot of growth and how it benefits people across the spectrum. i cannot overstate the importance of it. in the long run, the things we need to address our labor force participation and productivity, close to education. our workers need to have the skills to win in a global economy. those of the things that will matter for our children and grandchildren. what can we do now to keep the
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u.s. sustainable growth rate as high as it can be going forward. >> thank you very much. and thank you for joining us and for your service on behalf of our country. thank you.l:
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