Yuval Levin joins today's podcast, a very special episode in which we delve deeply into a revelatory conversation between the New York Times's Ezra Klein and leading liberal economist Larry Summers—in which Klein reveals his horrified discomfort at the fact that many of the policies he thought were going to save America are instead driving us into an economic ditch. Give a listen.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
The the. Welcome to the Commentary Magazine Daily podcast today is Wednesday March 30th. Twenty twenty two, I jump out hordes the editor of commentary got a week to make your mom. And up about joining us in Palm Beach a week from today April, sixth late after freight for a live. Taping of the commentary magazine podcast go to commentary that Org Slash live podcast for more. it joining me then, and now executive editor, a Greenwald hi, hi John
your writer Christine Rosen hi Christine. I can associate editor no Rothman, hi, Noah, hi, John and joining us today, but not next week, unless he you know wants to. You know, fly down on his private jet A high poobah scholar There are many books commentary contributor, you Volor, then how you, while I can't wait to be with you, so you out. I wanted to ask you to join us cause we're going to do something a little different today, and there as of yesterday as recline of the New York Times founder of VOX I probably the most successful. amateur. I want in american history as he started. A blog in the early two thousands and emerged from that blog with a this company.
VOX that ended up here with a valuation somewhere north of four hundred million dollars, basically as an m, something that emerged from that, blog and associated things, and he's a classic liberal to progressive demo, article, wind guy who fancies himself something of an economic and eat. I'm savant, He has a podcast now at the New York Times, and the New York Times runs transcripts of that podcast. His podcast cast them. We yesterday was with Lawrence Summers, head of Obama's Council of Economic advisers, Treasury secretary to Bill Clinton and the former president of Harvard and
I think a lot of people know Larry Larry Summers alone among serve mainstreaming, mainstream democratic economists. was sounding the alarm at the very beginning stages of the Biden presidency, about the inflationary threat to the United States and and was doing so in a way that started out with people being annoyed. You know on the democratic side that he was kind of like harsh, their mellow and yakking. There Yamini wasn't like joining in the exuberance of the sub rebirth of the new deal and the progressive experiment in the new LBJ, the new JFK, the new efforts here, but I, the data are looking very bad and very worrisome and yet but everything proceeded as it proceeded with six that will. I asked for trillion dollars in the Bible,
see entirely new spending to offs, the coronavirus a pandemic, and then, of course, I very The proposals and climb was one of those people who was either indifferent or skeptical. About the dangers that that, summers was laying out and this This podcast column thing that is in the New York Times yesterday, is a rueful acknowledgement of his own interesting intellectual. Honest rueful, acknowledgement of his own error and the fact that increasingly summers looks like a prophet without honor, the guy who told the Democrats that they were walking the country into deep peril.
was not listened to and we're now you know sixteen months or fifteen months into the Biden presidency and we have the worst inflation forty years and the FED now talking but tightening and all sorts of stuff and here's what as recline says of summers in in in the interim production to the two this conversation month after month summer said that The inflation wasn't just transitory. Wasn't just going to go away there weren't, you supply chain problems that would unkink that this wasn't just We are problem of autos energy that the markets were wrong and the forecasters wrong independence. Wrong of the FED was wrong and we were headed for a serious, bad inflation and dammit. He was more fight them. He was wrong by the way that sentence, which is nice is also false cause. He wasn't wrong, so he was
eight bought more write them wrong. He was right and he was right that there is very little wrong, but none the less. Heading back to as replied. You can debate it, and people do if he was right for the right reasons are right for some of the raw hastens or It's contingency or locker, or what will happen next, but the things he was saying six months ago are conventional wisdom. Now inflation is still here. It seems in many ways to be getting worse, even as the economy is weakening a bit. The idea of trance for inflation that has gone that has been retired. The data now show that inflation is pretty broad based. It's not just in a few. goods and throughout this error view as will detail it all that he keeps saying. I can't I you know it gives me no pleasure to admit this, but. Inflation is bad and the expectations that things were just going to come along, that would melted away.
at right and therefore I guess that every thing that I believed was wrong now: what? Why is this of interest to us and then I want you all to respond to this is of interest to us cause. He was liberals were wrong. you're, not liberal. Economists were wrong. The liberals who thought that you know at creating Nor is throwing this enormous amount of money at the coronavirus virus pandemic and flooding the country with a government large and all of this I was going to have salutary consequences and some of them still think there are. As I see five thirty eight has a piece out today about how terrible it is at the child tax credit, the one year, child tax credit, has been eliminated or you know, heads has been allowed to sunset by the Congress because that one program you know, if the millions of people from poverty, so we now know that government spending can have this wonderful.
In fact, I'm lifting people from poverty except The simple fact that, as people are being lifted from poverty, we now have inflation rate of eight percent annually she eats away at every every every person's, not wage gross salary, and all of that and a lot of that comes from stuff, like the child tax credit, so they were wrong. We were not wrong, and this is an important. This is an important proviso as we discuss this, which is now use. Podcast the conservatives all replace them, not just the ones who were you know, just will say. Every everything Biden does is bad and anything that happens is bad and all gas prices are due to Biden all that that kind of stuff. but the very simple logic that, if you flood the economy with gigantic amounts of government spending that that's inherently inflationary, so axiomatic to us that we said, though this is not going to be good on the patient front and
and this is a discussion between S, recline and Larry. Summers takes place entirely within the within the confines of of Libya, talking, points and liberal and and sort this night of the soul. For liberal economics which got this big demonstrate- Jim Project test in twenty twenty one of its priors and how it's been handed a terribly depressing set of lessons So should we you ve all be taking a victory lap here and saying see. We were right. All along or is there more. In the lines of, it is heartening to see that relatively Lest liberals, seeing the results of the policies that they wished to see. Inst, you know instituted her arm. a reckoning with the consequences of those palace. Is they celebrated? Well, look I think,
is first of all worth saying that this is an impressive thing to see, and that what Ezra Klein does in this interview is pretty impressive. He just acknowledges the you sort of see him you see it dawning on him, the that's a lot of them, he kind of sloganeering economics of of of the left over the past, twenty years has missed something very important and his journey they coming to terms with it. There is a kind of bad into reality and at the heart of that reality is the danger of inflation and the cost of inflation it's something that we haven't really had to think about for more than a generation now, and that the left is therefore allowed itself to imagine that the only it stands in the way of all of the socio economic transformations that they want is the will to spend
What's missing in american politics is the will to spend money to push wages up to push money out, but Larry Summers reminds him over and over that spending like that has diminishing returns after some point, because purchasing power starts to decline. and wages can only rise so fast before the rise itself becomes counterproductive and that Really is something that concerns have been saying a long time now. I think we have to acknowledge that concern I've been warning about inflation for along. long time and have been wrong until lately. So it is worth saying that you know the Wall Street Journal editorials about this in the past year have turned out to be absolutely correct, but they were writing. There are two areas fifteen years ago and so nobody's been quite right about twenty first century inflation. I do
in the way that summers explain some of this in that conversation, is very helpful that essentially, you have to deal with reality The reality that matters is not the fact that you're I finally won the election, that's not the reality! That makes a difference the reality that matters is that economies in a certain situation, and that means that you have to respond to it realistically. One other thing. I'd say, though, is that there's one more facet of this that summers didn't talk about because he himself is not very comfortable with it, and that is not just the the the cost of this kind of stimulative spending but the overall burden of public spending and borrowing and debt and the inflationary risks of a just massive government debt, which is also very relevant to this inflation question, and you know it.
We find ourselves with much higher interest rates, as as summers expect, we will the cost of that debt becomes dramatically worse very quickly. You really are playing a dangerous game here that, even so for now is not willing to draw the attention of liberals to, but sooner or later we have to deal with right, so Should we should maybe unpack that a little bit, and I'm very very glad that you pointed out that that the the conservative expectations of inflation, pretty much, the financial meltdown onward turned out that those fears were honest and they were they were realistic and they seem to deal just that we were printed, that another giant sinkhole that opened in the economy and that what the FED was being effectively. Was pumping money into the sinkhole, with the hopes that it would help it up the sinkhole with it would fill the hole and then we could get back
to par and even was pumping and pump and putting all this money into the same call the economy wasn't strengthening. So was a pumping. My simple and bee keeping interest rates. Fact of lean. get it for many many years? Without all that much this is the perfect, but it certainly did not have an inflationary effect and then somewhere around twenty seventeen twenty eighteen and we can argue what causes of that war, but it could also have just been time ten years of doing three or whatever none at the Trump tax cuts are Trump Pino. Eleven economic uncertainty that maybe those were the reasons we we don't. We don't really know, but by twenty nineteen the economy was hot. The american economy was hot unemployment was effectively gone. Wage growth was significant
job mobility was starting up again in a way that it hadn't been. You know nearly twenty years and stuff like that and then came the six doggedness events, horrible exhaustion, this event and and. Trump or the Republicans reacted to it in two thousand and twenty, as did the Democrats with two trillion dollars in in in in economic relief and seem to have a Positive impact and then Biden comes in and decides literally to double down or triple down on that economic relief and go for it. other four trillion, and so the commonsensical reaction. The Biden idea that, let's not even call it an ideological reaction, was but wait. Are the conditions present so that if you throw four trillion dollars into the economy, the and he isn't going to overheat and in full. she isn't going to spiral
demand isn't going to go out absolutely bananas, when we already know that supply the of goods being produced to meet that demand had been in. erupted in a kind of pretty dangerous way for the previous year, so as well as well for housing. Then we asked what different it's a supply crunch. Two thousand one, two thousand eight, does we're all efforts subsidize demand, because credit was drying up, and here we had purchased. Subsidize demand when there was just Much demand, that's what was different too much demand for not enough Why that's what changed everybody's activations remember in November of last year have no tongue in cheek, throwing out a picture of Paul Volcker Boker saying you miss me yet son on on Twitter right, saying we kind of need a mini recession to truncate eight demands to curb demand to catch up with
apply, which is artificially limited and everybody's expected. I was all going to clear up, but it didn't clear up and it's not going clear up and the war in Europe suggests not going to clear up any time soon and that's what's giving everybody these palpitation and making them realize that not only do we need a tighter money supply according to summers, we will not get two percent patient without at least having a mild recession and acknowledgement of reality. But it's not just the feds burden here them amazing part of that interview was when he talks about They should be doing and is not doing up to and including reducing tariffs on foreign imports and not subsidize during the purchase of american goods made in America to benefit key constituencies and may be paring back some of our regulatory restrictions like allowing airlines to fly people and continuing routes from from Europe. And not you know not a licensing professionals who other is don't need a license to operate in their professions like cutting people. ere. He didn't talk about how the White House is artificially truncated
again reject production, but that's probably in in this rubric is discussing, and all of these are libertarian economic prescriptions. That is the right. So I want to read some from the interview to give you a say, and of of summers who remember is maybe the leading public economic intellectual On the liberal, laughter has been really for thirty years. You know I'm a Clinton Harvard. Serious guy says in the course of this interview that he supported the build back better bill. He is now if he's not one of us he's not, you know, he's not a conservative, he. He says he spent his entire career, supporting keynesian economic policies, and even that is an insane with context of this entire interview. No, but
what he says, and it's true that his wife and he's like I was too much money in the supply, but I definitely support more money in this book where I know I know, but anyway, the point is that he's you know he he this is his religion and he is still singing from the prayer book. He hasn't converted. You know, he hasn't converted his religion, but and then still wants. Liberals You know policies in place, but here's here's the thing: the clients as to him and then there's the supply side. We are not being able to produce the goods. Factories are not being able to do things. There's a war An important natural resource is developed or there's a locked down where there's a lot of manufacturing capacity and the argument you ve been having with a lot of other economists to some degree, with the FED over the past year, twenty twenty one's inflation was coming from demand. We did too much stimulus or supply. The pandemic had just messed up supply chains. But now, in addition to that argument, there's also the question of do supply. Shocks is what you're saying that Russia and China adding more supply problems.
Onto what we already have is that the right way to think about it in summer says no its, not here's what he says. I think that's right in part, but I think it we states what I think is a bit of a popular confusion, the following sense supply. I is what it is. Monetary policy can't change it fiscal She you can change it, except in the long run, and so given what supply is it's the task? The demand to balance supply. This is a very interesting and kind of unusual formulation cause I'm not. I haven't really heard it before and he he he stated very beautifully here. If demand is greater than supply, then you're going to have access inflation you're going out the problems of financial excess. That's not the beauty here. It is so the job demand managers principally the is to judge what suppliers and calibrate appropriately it's that excuse for inflation to blame it on supply. It's a reality in the environment that you have to deal with
until the job is to look for measures of overheating and when you see the measures overheating to apply restraint and other, birds six eight months ago, when they saw the supply chain problems and saw that this was creating overheated demand. That was when the FED was supposed to react, then, because you don't want to overheat and then say: oh, you know what now is the time for me to pour water on you know into the car radiator. This is by the way, a totally anachronistic thing, because nobody has water jugs to points of karate or when your car overheats in the desert anymore. the only analogy I can think of you. Don't you can't wait until the car's overheated because then getting You have to wait a long time for the car to cool down so that you can put the water in so that it doesn't turned into steam and then or destroys the engine.
it's these measures that I saw as developing through twenty twenty one that were not being responded to the led to my being quite alarmed and led to a situation where, before we had the Ukraine WAR before New problems in China, wage inflation, the United States, was running a tab of a six percent rate in the labor market was only getting tighter. So we had a problem that was a success to man, whether the extent to which the excessed a man was real it's a supply being different. That someone might have forecast years before is a second order question the job is to manage so as to avoid access demand. So if you make economic policy if you're, if you're, if you're, in a position of managing of helping to manage the economy the management trick is to prevent the bad thing. That is now already happened, and now, where we are Larry, Summers says too, as reclining Ezra crying has to grudgingly knowledge. Is that
job number one now is to manage the crisis that was created in twenty twenty one. Any form for thinking any positive liberal economic policies that can be pursued to be shelved, because Apple things are happening and, what's more terrible, things are going to happen to the very people that recline Larry summers think there should be a preferred preferential option, for you know with the poor Inflation is a regressive tax. Is the most regressive tax there is, it hits it hits everybody at the same level, so the less money you have the more the more corrosive it is to the power of your money. And then you have the interesting thing you buy that you brought up, which is wage growth for twenty years. All we've heard is: there's this terrible stagnation of wage growth and it's terrible in the producers have all the power. The bosses.
All the power there's no wage growth is, though, is terrible that there's no wage growth exit, when there's a lot of wage growth because of I eat offs because of the nature of the balance of the you of economic activity, if you have too much age, growth too fast, then you all- no other condition in which you overheat, because big. since I have to pay too much for labour were now paying way too much more for labour. They have to compete for labour and then they pay. more for labor and then they have to pass on the cost. If they're not going to go, broke, and then the very people who have gotten these wage increases now have to go to the store. and pay more for food and gas and pay more for all this all the stuff, as every It is going through the same cycle, so they may have wage growth of five percent. But if you get inflation at seven percent, your effective wage growth is negative. You dont have wage growth. Your effective,
He added two percent decline. Not a five percent gain that this is where I think one of the under appreciated things about this transcript. You know this. This conversation that they had is that summers first of all his tone, he managed to be sort of more therapeutic than condescending, which I mean that must have taken some discipline because there were so many moments where, as recline wanted to make the political pitch make. This argument, which we've heard over and over again, such as look at the greedy corporations, who have earned all this money during during this time of of diff.
For markets. We have to punish them, thus the sort of Elizabeth Warren tone he he Knox that one down very simply again with very simple economic. Lessons like we know that this is how things work, supply, demand, etc, but he also really does push back every time as reclined tries to make excuse, which I think is also the same communication line. We ve been hearing consistently from the bottom industries that it's not our fault, just look at all the crazy stuff. That's been happening to us right it's week. How could we possibly be blamed for a lack of leadership and in decision making on economic policy, but we ve had a pandemic and now a war I was I was. It was notable to me how often as reclined, kept trying to bring up the Russia Ukraine crisis, because that has been the effort. In the last few weeks, the by demonstrations tried to respond to questions about inflation, but we know Americans are not concerned their concern about their gas prices. Yes, but they're, not making that leap
Is they ve been experiencing this for a longer stretch of tightening before the war broke out? So I did appreciate that there is a political messaging pushed back. He was doing again very gently, but he wasn't allowing that that political message to come through, because if it does not comply with the facts economically on the ground, ok even worthy, I just want to absorb a good. But what would just with regard to Christine's point about, Larry Summers not being condescending. It was remarked what really struck me about this. I command as reclined for doing this, but so much of what seemed to first be dawning on him strikes me as sort of conventional, on economics, and I don't, if that's entirely, because I'm conservative Larry I was, of course, is not, and these you know, through things like
lessons of stagflation, that that that's a that's a that's a new one on Ezra Klein, somehow an entity that haunts unintended consequences. The fact that too much money chasing too few goods is is is is a problem I I couldn't get over it. So, as recline I am, I believe, his forty year. Doc was not yet forty years old and there is a real. I don't mean to be, and I don't know is also It can get ugly, my new heights Falco there you got well. That's that's me I I don't have a comeback for that. Indeed, you have read the commanding heights, and that is a object lesson, but the point if you've all Europe you're at your, I got your aw even a your young people, and you don't remember what it was like to live through inflation. And I do Larry Summers is older than I am and he remembers what it was like to live through inflation, and he says what happened.
in the seventies that is happening now and he is he expects. Italy says this reminds me of the seventies: is it got Thatcher and Reagan elected has liberal economics was proved to have deal macro economic consequences on it. Scale that even the people who put them in place never for even fathoms could happen, they did. Not know they had all the best intentions in the world and then all these trade offs and all of these unintended consequences happened and they were uniquely ill equipped to address The failure of their own policies, which is not surprising, like it's hard for people, can't manage their own failures. You know Chamberlain leads the world war. Two he's got a he's he's gotta he's got eventually resign and let let Churchill run World WAR took as he got. He got all the
all the priors wrong. But I want to read a by want you to respond to this. cuz. This is where the poignancy of a certain type, even though I don't really feel them emotionally invested in Ezra Klein's pain, but nonetheless he says summers. I know you're a hard nosed economist who looks at the numbers here, but I want to locate if the emotional, in some degree, even political frustration of this conversation because a lot of the dynamics you're talking about that they'd get framed as excess demand. These are things that feel just that many of the have wanted for a walk, time. More hiring wage increases particularly at the bottom end, stimulus checks, were people have had a lot of bad years and didn't a cushion behind them. Child tax credits families
could really use that, and so there are a lot of policies that came together. I mean there was a reason: the Biden Israeli, and wanted to run the economy hot. There was a long period where didn't just didn't, feel the economy. ensure that expansions were reaching people on the margins and it felt like. Finally, we were reaching p margins. We are putting a lot of firepower to do that, but Eve It's terrible time. This horrifying pandemic. We were giving people whom you that quite a bit of help and then for that to turn into this horrifying inflation problem, which is now eating back those wage increases, potentially require much sharper action from the FED. I recognise that the world doesn't have to please me, but it is a maddening
I think fantastic. This is like d, stalinist asian. I swear to God. This is like people going the m. I just learned that the emperor that I you know has no clothes. I've never read anything like this. Before I mean I didn't hear and kids it parian. Apparently you value listen to the conversation. I've only read it. I listened as well, and I think this is also where Larry Summers had a great formulation in response. He said. Well, look I buy share that concern. about the same people and I want the same ends but if you consider the doctor who prescribes painkillers, for someone who's in great pain, Yes, it alleviates their pain in the short term if they get addicted. However, in the long term they have not done them have a good service here. What's
I can about as reclined saying this is, I think it it it points to the obvious. Is that well be, Has he believed in these in because as recline one of these things and believed in these policy areas, because they were just the idea- is that if you didn't believe in these policies, if you oppose them, it was because you wanted unjust ends. You wanted injustice visited upon these people and I think, there's a he. He wasn't and evincing it explicitly, but especially if, things like stagflation and unintended consequences and and so on are new. To you? If you, if you were unaware on the whole that that that these worthy the the arguments against the liberal economic policy, what you argued with on your side was was-
come purely bad faith? It would you know the the arguments against things, but what summers were saying, ran along the lines of you know. People just want to be greedy and people don't want to help the poor and if you want to engineer a recession, you just want people there to suffer pain and economic consequences, people that you'll never meet because their poorer than you at least that's what the amount is used, present, during a very brief moment and twenty twenty one, when that's modern monetary policy, that that's the idea that you could spend you could deficit spend forever with literally no? We can all the consequences that that was my four months as part of that theory, which is that you have to tax the hell out of all that money that your borrowing at extremely low rates in order to him. Inflation inflation part of modern, modern monetary theory. It's just completely ignored by all of its advocates,
The ways that the last few years have really shown up this way of thinking is that to actually be in the moment for that kind of decision would have to be made. It's perfectly obvious to everybody that that that that that raising of taxes is never going to happen or, for example, we've learned that the the green new deal, which would have required much higher gas prices, obviously never going to happen. We have slightly higher gas prices and it is being treated as the disastrous end of the world and it's very bad for a lot of people. So we now will or should know very clearly that none of the environmental policies that Democrats have been pushing for twenty five years are, in any sense, realistic. I think I think that there's there's this kind of larger story, that's advanced by what summers is able to do here, which is that, I think alike, implicitly a lot of what the left has argued for a generation now, is it Over learn the lessons of the nineteen seventies and that Republicans always think it's the nineteen seventies
whether it's on crime, whether it's on foreign policy, whether it's not economics, there is a way in which some Republicans always think it's the nineteen seventy, but there also times better, are actually like that and what's the not whether you use have liked it or didn't? What's wrong What's going on now and how should we react to it and one way too a step back from what summers did here is for him to say, yeah You can like this or we can dislike there, but what actually going on Now- and you know that the loop that the Did you read John, which really is studying a minute it? It's like you, your listening to John Taylor. You know the sort of classic republican opponent of Larry Summers over all those years. Just saying you know that's gonna do its job. It can't ask what the politics demands it has to ask. What's going on in the economy and summers to his credit, sees that in this moment, and just says there are things we can control and there are things we can't control and
we can control require us to take steps to maybe unpopular, and I don't have to run for office. well, here's what I think needs to happen and the the inability to contain. With that set of realities is just a really striking fact about. The contemporary Like you said, I don't know that I've ever seen it revealed. Plainly than in this extraordinary conversation, I am I want to draw an interesting cuz. You know since you've, all since you mentioned at the beginning, you know that Republicans got inflation. You've got inflation wrong before liberals clearly got inflation very wrong. Let me offer this analogy: maybe it's in precise and an and it deserves criticism, but something but in two thousand and eight with the market meltdown, which is that that the. For one of bare were the conservative economic theory or the conservative idea was the markets where self correcting and that what
happened in two thousand and eight wasn't? Billy? Couldn't? We wasn't really supposed to happen that if you created these financial instruments that ended up? Ah, you know basically The Arab hollowing out the financial system by creating this enormous amount of debt that could never be repaid once you know where our or couldn't error, but margins calls it could never be met once you know one the tide started going out and you saw where everything was that what we have been assured of by let people you were who came to be called market fundamentalist. Was that really well And possible that the market would self correct that people wouldn't take that kind of risk? It was too dangerous to take on that kind of risk and that and that, therefore those wouldn't be a people might want to try to convince you to do it
that wiser heads would prevail and the wisdom of the wisdom of the you know the collective my mind of the of the markets would would fix that and then you had this massive market failure in the form, the the c collapse and therefore the the hollowing out of banks and in this maelstrom. And what we have here is a, liberal a keynesian failure that leads and honest person like Larry Summers to say: well, we stepped in it. Like he tried to do something and we thought that it was going to be okay for all kinds. self justifying reasons in our own heads and it really wasn't and now the very people that we want to help are going to be. disproportionately hurt by
The things are happening here and not just them everybody, but really them more than anybody else. So, like I said you create a child child tax credit for a year and it stop whittling away at the purchasing power of the poor. You haven't done them a lot of good. I mean it. It's an end, the purchasing power and- and that has a- and he summers keeps making reference here too, short term and long term consequences like you think that the problem is this year and that inflation will come down over this year, but decisions are being made as a result of inflation by businesses by forecasters by all of that. then start having a cascading effect in out years in the years to come in the years to follow which is why the medicine
you know in the sense that it keep what they're saying that you made them diction. You brought up summers, addiction argument, but it's like. If you have a condition- and it goes untreated- the further you let the condition go untreated, the more severe the tree is going to have to be once you treat it. So if you had inflation go unanswered, if the FED Presses on the brake too lightly in the course of this year, for example, as it appears it is going to do it that is actually going to press on the brake too lightly. Debt of I have to press on the brake twice as hard and twenty twenty three and summer says. Which I'm sure is really something. The Democrats are desperate to hear that we are going to go into a recession in twenty twenty three or two thousand and twenty four. It is like dates in the cake. Now because the only answer to inflation is going to be very high interest rates and they're going to get higher and higher the
The inflation goes to to cut it down. You know, as I think, as Klein mentions like by nineteen eighty one, there were interest rates in the United States were nineteen percent, and you know what, and we we had an unemployment rate over ten percent higher, except for that one crazy quarter when everybody had to stay home because a walk down higher than it has ever been you no higher than it was at the worst, but a moment of the of the financial meltdown recession. And that was necessary in order to choke to kill the inflation was going to kill the american economy. So, here's, what summers a saint as replied. Yes, we did wonderful fits so great. We wanted to help A poor we wanted to do all these wonderful things. Well, guess what there are trade offs we get a lot of wage growth that causes inflation than eat away at the wage. Growth of the wage growth is not does not. Slide upper slope up gradually
It is going to have this consequence that it will be net zero or worse. because everybody else is getting wage growth and everybody got other business has to adjust its prices to account, for the loss of revenue that its ear or them off set in its revenue that it has to pay its labour force, and so on that, that's where conservatism versus liberalism comes in as far as I'm concerned, or maybe this is just a deeper and you If this is your observe, subjected in political philosophy, so the deepest thing about. conservatism, vs progressivism, which is, I think, there's a way that the it's been possible for a long time to describe the difference between the right and the left on economics by saying the right thinks that the term as a function of long term conditions. The left thinks the long term as a function of short term policy, so that liberal economists tend to focus.
short term things on reacting to the immediate moment in the business cycle, by spending or not trying to control things and republican say, create the conditions for growth and over time will have a very strong. Economy and here's Larry Summers playing the conservative, economist and basically saying we've got to think about how to be in a better place in five years, and we cannot be in a better place in five months. Those things are not going to align well and it you could see just how hot this is the process and in a conversation among among to liberals. Basically, this is this one goes to Abe's point about why none of this comes as a surprise to us, but is incredibly difficult for someone like as recline, because if your worldview, if your deepest understanding of human nature, is that Man is born to sin, and the sparks fly upward. That.
There is no, you know, goldilocks meme, oh the too hot, too cold, or just write that maybe there is- or maybe there is for a while, but that every thing you do as a consequence, positives, have negatives negatives upon everything has a consequence and that because human nature is flawed or because society is inherently conflict and strife, and all of that that You should not believe that you can deliver things without costs. It's still It is wrong to think it is a misunderstanding of order of human society. I mean we're not having this huge fight on the right about the origins of the liberal order, and you know, but if
we take the source of the original liberal order in a very illiberal book. Let's say, Hobbs is leviathan. Basically, he says in order for us to live in a world in which were not killed are not under threat of being killed every single day by somebody else who wants are our boy, here are our deer pelt. You know They're cold have to surrender some of our freedoms to add to it social structure that will control that person they got the the deer, pelt or control us from taking his deer pelt and similarly, we have no choice but to make these hard choices, because if we don't make them, then we live in a world that is nasty brutish in short, and so do I since founding originating document. That is both liberal and conservative.
That we've taken the lesson of the we've taken, the conservative lesson and people like, recline, partially out of use partially out of the delusions created by progressive in reality. Have I to some weird idea that there Those drums don't have offsetting, the quinces. I don't know why that is exactly except they don't want them. Who does? And you know, obviously all politicians do this. They say they're going to deliver only good things, And so then they have to deal with the consequences when bad things come with the good things. But that's not what an intellectual is supposed to do or you say you know what great you know, what there's going to be inflation weren't. You know we need bill back, but we need to go to a green economy. and it's going to be wrenchingly difficult and called and going to be immense, enormous dislocations and we
have to do it anyway, because the world is gonna end. that's the serious way to handle. You know those kinds of policies right, it's not to say we can do it. It'll create lots of jobs and they'll, be no they'll, be no fallout cuz then Joe Manchin was going to say, you're not going to destroy West Virginia, I'm standing here and I'm not going to let you destroy the economy of West Virginia cuz. I represent West Virginia. You know If you pretend that there are no consequences, then you can answer. You can't answer an objection like that. I think there is implicit in some of the Such a sense that what stands in the way of things working out is other people's bad intentions rather than what stands in the way of working out is a complicated world where everything has a price, and those really are two very different. thinking about why we have the problems me. I mean that's a very I you know and end look. We do
ooh right. I mean it's a it's a it's a curse on the right to say that you know. Democrats want x, Y or Z, because what they want is a totalitarian state which they can control everybody or they want. You know they want. You know whatever it is. They want to destroy western civilization. They don't want to destroy western civilization, their ideas may just strings of liberation. But that's but their goal. That's not there ain't they want. Not. Everybody mostly wants nice things. They want the poor to be wealthy. They want everyone to get a good education. They want families to thrive. Everybody wants pretty The same thing. And the problem is that you know in the in the quotas that I can never find the source of. But then I am sure is true and I have asked you ball and he can no one can find it. and end no asked me the same thing, but I'm going to say it anyway, Nat Glaser, probably at a symposium that I was at so was never transcribed said that
in the nineteen sixties. liberals in particular or government. Check your stop doing the things that it knew how to do like tat. Up the garbage and keeping the streets. The orderly and started trying to do things that nobody knew how to do like and poverty. Nobody knew how to do it. Nobody knows how to do it. No one will ever know how to do it in aggregate, according to various people, including Steven Pinker, and whoever wrote that book, the bottom billion we ve done it in aggregate like enormous numbers of people have been lifted out of poverty on the planet earth in the last seventy five years, astounding numbers of people, but we don't know how we don't know if that happened, and we can't duplicate the conditions well sure we can
No, we can't. We know, we know how it happened. No, we know how it happened. We know it. I'm just saying that, while we don't know is how to fix, you know in the end the states, we don't know how to take. People, don't know how to eliminate relativity right right bottom, five percent right, exactly yeah? He'll get bottom quintal right, but this goes to something that I think in. In the opinion, peace that you ve, all the you read this week in the New York Times it we talk. I think one of the things it was was so refreshing about the as recline conversation. Is it an economy and a pundit were talking about economics, and you cannot make terms not in political terms the entire time, but our elected officials too often just talked about economics and political terms, and that's particularly true right now for fringes on the right and the left that are controlling a lot of the parties messaging and make the possible for four, actually, when Joe Manchin says, I'm not going to support this cuz, it's going to make the people in my state have to pay more for gas. That's a plain spoken political response.
Economic issued. That's not how either side tends to talk about this, because they both seem to be playing to the more extreme ideological base that they believe is the heart of their party, and I I was struck after because I'd read your piece evolved than we were reading. I read the transcript of the summer's Klein conversation and there's there's some connection there to why. We can't talk about these issues and in straightforward terms, and when we see them spoken in those terms, they're far more understandable and you could seek both sides of the political aisle having points that they could make off of this. It's also important that summer says block like everything plays in it's a painful things play an enormous outsize role in our existences, We didn't know there was going to be a virus and just as in the nineteenth you 19th in the nineteen seventies, as We were dealing with all the results of these guys keynesian policies that we're having that work
working out very well and then we got a whale shocks and then we got no. We got exogenous confident we got the revolution in IRAN. We had things that were exceptional consequences that had enormous effects that were we the bad luck, he calls them bad luck and we have bad luck from the corona virus and we now have actively have bad luck in those terms, although interesting from from Russia, waiting Ukraine and the destabilization that that represents, except for this I'll, just go. Read the last chunk of summers and Klein having a debate, because I think this is the first and all the coup de Graf, ok so summer says you know, just as in the nineteen. Seventy excessively inflationary policies were followed by bad luck, justice nineteen. Seventeen, the authors of the expansionary policies chose to interpret problems as being a consequence of the bad luck, even though it was a consequence of their policies. I think it's pretty clear we're going to have significantly higher inflation this year.
because the increase in oil prices and because the increase in food prices and because of what happened in China but basically says that's not where this all originated and and and if those things go away, that's not going to solve the problem climb. So the counter argument you'll hear to this is that as much as telling the grim restoring makes sense to you to me the subject of the show. Actually, there is a place where you can look too it. Particularly markets are telling the grammar story, and, as you just you have there really not yet at least not yet one you're inflation expectations of shot up. But if you look at three look at five, you look at ten expectations. They haven't moved all that much and so the ideas if the long term market expectations haven't moved. Maybe we don't need to slam the brakes on the economy so hard. Maybe people aren't telling that longer story, they're still open to this as being the now buried. Adjective goes transient, and summer says So look Ezra of for all that stuff to be true ice.
In twenty years pushing various kinds of strongly keynesian theories that were directed at the idea that we should promote, demand more and promote demand permanently. I was Prominent people pushing the idea of secular stagnation, which was a whole theory about how we should need more demand. So these are ideas that are emotionally very attractive to me, but I think you after work, look at the facts and then he goes into the facts that basically and to discredit the kinds of keynesian demand side efforts that he was such a big proponent of. so this just going to be meaningful to people like us as it cuz cause. We like the gotcha, I told you so in all of that or does this herald a kind of crisis of the soul, that a precursor to some kind of. Nineteen. Eighty events, Reagan
Tat we now seventy nine and Britain with that, her beating Callaghan eighty Reagan slaughtering car, her. You know winning by ten points, even with a third party candidate in the race, or you know, is even this tragedy in the sense that you now ok, so most Democrats are going to say whatever I still have the Republicans and most problems. You know they're not I served changed switch switch up there there gears. You know, I think, a lot of this debate first of all depends on and on stances on how bad things get and alibi mistress reacts to them and what that looks like the voters, but I think it all It depends on the capacity of the right to respond with something substantive and appealing, and in that sense it's very important that our politics look forward and not back where that we'd, not just think of this, is showing well. We were right, we're right the whole time and that's that, but trying to offer the countries something that says we could be in a man
better place in five years and ten years. If we do the following things, which in a sense This is what is what supply side and reaganism did in the late seventies? They did not say things were around immediately and of course, they didn't tell me one thousand nine hundred and eighty two was worse than one thousand nine hundred and seventy nine not better. But there was an argument. It was an idea there was a confidence in the capacity of the country to turn things around and ultimately it was persuasive. I think it would take that for this moment to be political. the consequential. It would be very easy for both parties now to fall back into the place where they are most comfortable, which is as having the same argument over and over about who was right and and and whose terrible and evil with really offering the country very much. I think that one. Last really striking thing for me about the summers. Conversation was that it suggests that
macro economics in General needs a needs, a new phase. If it's going to be useful in the twenty first century, all the category If our macroeconomics were created to explain the great depression, which happened almost a hundred years ago, they are still basically there as competing theories of what happened in the great depression. Competing explanations between Keynes and higher can friedmann and they still do DR an economy, that is a kind of the their the economist Arnold, causing a GDP factory idea of the economy where there but have one big economy, and there are levels of this and levels of that and we now live in a much more complicated world where we are in need of new ways of thinking about what can economically policy can and can't do a huge future unity for the right to offer what is based
play a more market, oriented way to think about how recessions happen about what unemployment really is about, what the kind of economic shocks we're facing are now, but the universe. These are not there to do that. Work. Academic economics is now completely disconnected from anything that is useful to policymakers. It runs these experiments in social psychology basically, and that the work that would need to be done to, help. Policymakers have a new language to describe how our economy will grow in this century and has not been done. Sort of listen to that as a as a think tank. some thinking, there's a huge opening here and who's gonna feel that space. That is what the the our potential to exceed and economic policy is going to depend on, and it's an open question, because the people These are not demanding that kind of change of vocabulary and attitude, and it's going to somehow have to come from the outside
but the polluter has been a couple of they right is not capable of making this argument the political incentives in twenty twenty three, twenty, twenty four. If we, if Larry Summers, is right, there's multiple the hikes were curbing demand and we start seeing Current recessionary signals like we're, seeing from the inverted yield curve curve now you're going to have economic hardship and, what's the right going to say, they're going to say well, this is necessary to curb demand, absolutely not going to attack the the Biden administrations there was a feds tight money policy and they're going to attack the binding ministration for doing by the ministrations things. Surely, but also they could do more by administration. Things like subsidize the right, the right constituencies by american increased terror what have you trumpian economics everything? Worse again? According to Larry Summers, What is the incentive on the right here to be fiscally sound to advocate fiscally sound principles, because they will be accompanied by short term hardship. Nobody wants to advocate short term hardship.
That's a very interesting question. I do think that you know it's almost like you want to when Septa visionary leader and you can't cuz, that's not the way the world works. When you could it had been up. The landscape was somehow inserted into sometimes you know, a wild existential crises do sort cept that and The word. were there yet, but you know happened little bits and pieces of this attempt I mean in some of them, seemed very you know dead. Spacey often you know EU at them. Andrew Yang, you know trying to introduce radically new concepts into the democratic. A political electorate and getting this kind of weird grassroots support from weird. You know to Silicon Valley, as people who are interested in in in novel programs that seem to break through old The barriers- and you know you ve- had you ve had
things on the on the on the right. Every now and then, and even in this interview, you have this conversation. They have about whether or not We need a national political economic policy targets regions. You know they they say like stop doing is that you know overheat. The economies in certain very specific places try to do what you can to stimulate demand. Supply in dead play. Or in quite you now in in the in in low places or something like that. but you know the funny things we already have a system like that: that's what that's where the democratic liberal, biased when all national action exists The states are in competition with each other tax. You know that different different differential tax rates, corporate tax
Wade said you know the policies at the state level to encourage a business, let less regulation. All of that stuff. There is in the United States. Unlike Europe, there is a real. There is a fifty state ability to to pull that. off, there's a reason. The people moving to the South West in Texas in places like that cause it's easier to do. Business in their movements are being created as a result in sight some of us live here in New York and we keep thinking. You know it's crazy that. We haven't embraced. Some of these policies cause like no rational person, wants to live in upstate New York, it's cold, it's snowy, its infrastructure is a hundred years out of date, and that you have to give them set is to go to to go there and you know it's like. The only thing they can think of to do is to is to liberalize casino laws. Was you know that that kind of thing- and it is some- you know it said,
trusting interesting problem, but you ve all in the end, your European than your time such came out yesterday, the day before yesterday, you make a very bay. We were getting to know his point. Like The political parties have now perverse incentives that political parties have never had before They seem to have internal political reasons, to want themselves to be smaller, to limit outreach to to shrink the size of their tents which, flies in the face of all rational understanding of what a party is for a party is for getting people elected, and you therefore want the most voters that you can get and the idea making yourself sort of What would be the term be sort of them? You know inimical or are hostile, the people who have had it with the other side, but art with you necessarily in policy terms.
is, is is bizarre there, both in this spiral together yeah, let's I mean the parties have driven each other into this kind of malpractice, where they, both the essential we as if they have too many voters and not too few voters. They're looking for heretics, they're, not looking for converts and in a sense that part of the reason, for this is a kind of is a kind of negative polarization spiral where each party's core argument to the country is. Country's biggest problem is the other party or focusing on what strike most voters as the problems they face in their lives. They cigar human is the most important thing about the next election. Is that those guys not win, and that creates an odd said, incentives internally, where party unity becomes extremely important, and so you find both parties now, literally censuring the the people in the party who are best at winning,
Voters who don't usually vote for you. You, It happened in Arizona where the Democratic Party in the state censured, Cruz, Custom Cinema. In the same week as the and party censured. Doug do see. These are both people who, in a purple state, have been able to win elections relatively comfortably by appeal, lying to voters who might not normally like the party and here's the party saying to them. Don't do that. That makes us uncomfortable and you're you You should have want to see a moment in these parties. Were somebody says, look what do we do here? What is our business ultimate? if the businesses to build a broad coalition to get people elected and as long as the parties fail to see that we're stuck it's weird situation. Where, really for thirty years now, we ve had exceptionally close elections. It's happened for long enough that we don't about that, but it's a very unusual thing in american politics, where every election Congress, could go either way and the presidency could go either way. The general pattern
in american history before the MID 1990s was for durable periods of party dominance and then some kind of realignment so that the Majority Party becomes the majority again for a long. and we've now been stuck in a very long period. Without a majority party, we have to minority parties they're both losing all the time. But six has no winners and hasn't since the nineties and they seem Be okay with it. They don't mind it because the other parties losing too so we must be doing something right and your party is really had to confront the fact that it been losing elections that are winnable for a generation, and so there for by all rights should be out of business and the should have had a break out of that is is part of the question we've been getting at here. It is the incentives they face or so perverse that there is a huge opportunity out there for a candidate who wants to think a little bit differently about how to build a coalition, but there
very powerful incentives against that internally, within both parties- and here we are we're stuck with with losers. I bring an anecdote to the table that it's this, but is totally outside the remit of what we ve been talking about the last hour, but this comes across the wire the Marquette University law pull very reputable Paul of a very important swing states. Electorate about this bring court nomination fight that we're going through right now, but to the extent it is a fight, pretty boring. Now. Come this predetermine, but nevertheless they're pulling on it sixty two those had a favorable opinion of judge, Ketanji Brown Jackson in January, the highest able to rate figure for a current job. was fifty five percent for whom Clarence Thomas these are our most popular justices, and they there today most polarizing figures of both sides of the political spectrum,
who only seemed to be talking to each other to the n a with, while excluding just about everybody else in the middle of the country, which is a much larger group. Yeah that you know there there's a kind of, there's an assumption that goes untested at the heart of this, which is that polarisation has to mean parody that the fact that there are no, the voters in the middle should mean that that we have a fifty. Fifty election but there's actually no reason why that should be the case. Polarization is is the usual, is the norm in America. We forget this because we went through a very long period after world war. Two where huge swaths of voters were willing to vote Republican for President and Democrat for Congress at the same time, and so the Democrats told contest for forty years and Republicans won the White House almost every time, but then was very unusual. What we're living with now I was polarization the parties hate each other. That's fine! It's still entirely!
it's for one of them to be at fifty eight percent and the other forty two, that's how things have normally work. The parties seem to assume that's, not possible and so neither of them is trying to work with that kind of all knights and asked themselves. What's a sixty percent issue, what can I focus on that? Get me more than the voters, who already will crawl over broken glass to vote against the other guy? Those people are going to vote for me. Who else can I get you'd? Think again, you think that's the business of a politician, but apparently it's not like that and that's the short term verses, long term thing we ve also been talking about in both context today, because I think you actually do occasionally see either Democratic Republic in making the short term argument on that sixty four,
then issue, but in Biden kind of did this you know returned to normal, see we're gonna. You know he brought in a lot of people who previously voted for trample the upset suburban moms or wine moms, but if you want to call them, but then he got into office new government to the left so that their then it's gone so that there is no in there's no durability to that too. That attempt it's all very short term. Here's yeah, I'm going to I'm conclude with this, which is a detail from the from a new NBC News poll just out this morning. Test in fifteen different candidate issues for the twenty twenty two midterms speaking of six We percent. Seventy percent issues, the leading issue, a candidate, more likely to support a candidate. Seventy five percent, less likely eleven percent for a net difference of sixty four percent on this issue, the cat.
date who supports funding the police and providing them the resources and training they need to protect our communities. That is a seventy five percent issue. So you basically, the mainstream of the Democratic Party, not using the phrase defining the police but effectively acting measures to restrict, can train control and limit the? power of police If I percent issue, there's no wonder that The Democrats who are you know in not in you know, by radical districts. Are terrified of this and there's also? But what is a wonder and it's no wonder Biden then said you know we should find the police in his stay. The union but it is a wonder that the party still backs policies that three quarter, the country dislike the Democratic Party, and there is no comparable.
issue, although I will point out that a candidate who wants the? U S Supreme Court, to overturn the ROE V Wade decision That would mean that a woman does not have a constitutional right to an abortion twenty percent, more likely fifty eight percent less likely. so there you have the issue on the other side. Let's say just have just just to provide it illogical, polarization parity, though way, People believe in funding the police and given the resources they need then act We also believe that there should be constitutional right to an abortion, but nonetheless, there we are Yuval Levin. Thank you! So much for joining us, everybody If you want to read or listen to this interview, though we ve been the said discussion, we ve been talking about it at the New York Times as just search as recline, and and and you'll, find it you can listen to it. You can read it. You should that you should delve into it the deeply in case we ve.
Been unfair, but we haven't. We have an explicit support, all the depths of it and- and this has been a refreshing relief from the usual conversations that we have had over the last months, Sherwood back to those and remember commentary dot. Org slash lie podcast. If you want to hear us blather in person a week from today and Palm Beach Florida, so for a christian and no a jump at hordes, Keats Camper.
Transcript generated on 2022-03-31.