Claudia Sahm on Economic Policy (Podcast)

and it was either March or April um. The some rule essentially gives you a way, by using unemployment data to figure out in real time when you're in a recession, and it's really tremendously helpful. I know Claudia from a number of economic dinners and events I've attended. I always thought she was kind of interesting and wanted to have her on the show, and I just need an excuse to get her on. And then last month she wrote

this fiery blog post economics is a Disgrace. I'll link to it on the blog, and and she specifically calls out people by names, she calls out institutions, She talks about sexism, she talks about racism, She talks about misogyny, she talks about bullying, She does not hesitate to name names. And really it was just a blistering blog post. I don't say that very often, UM, for someone within an industry, within a respected institution, to say, hey, this is an

utter mess. We better get our acts together soon. And you know, by the way physician heal thyself, it was really something that that caught my eye. UM. Economics isn't the only industry that has these sorts of issues. Between the Me Too movement and what we've been seeing with Black Lives Matter, it's pretty clear that that this is endemic in a lot of institutions and a lot of professions. But it's kind of rare to see somebody who's within

that institution calling it out. We also talk wank out about stimulus checks and and recessions and macroeconomic policy and what's being done correctly this time and what should have been run right In O eight oh nine, it's it's good wonky fun. I save all the grievances for the last segment, So if that's not UM floating your boat, you don't have to listen to that. But she does an excellent job explaining what the profession is getting wrong

and what it needs to fix. And this includes both policy and research and publication as well as hiring practices and other things. So I think you'll find this very interesting. With no further ado, my conversation with Claudia some vis is Masters in Business with Barry Ridholts on Bloomberg Radio. My special guest this week is Claudia Sam. She is the director of macroeconomic Policy at the Washington Center for Equitable Growth. She was previously a senior economist at the

Council of Economic Advisors for the Obama administration. In from two thousand and seven to she was a researcher and section chief at the Board of Governors of the Federal Reserve, where she specialized in macroeconomics and household of finance. She is also the creator of the some Rule, which determines if a recession is occurring in real time. Claudia Sam, Welcome to Bloomberg. Thank you. I'm so happy to be here. Tell us about how you found your way to the

Council of Economic Advisors for the Obama ministry. Yes, so, by the time I went to the Council of Economic Advisors which was in the summer off. I had been at the Board for several years, so I went as the macroeconomic senior economists. I covered at the White House all of domestic macro and housing policy. So when I arrived, I thought, oh wow, they were like a hundred economists or more at the Board that cover these two topics. And but by the time I went there, I was

trained to be able to do that. I started in two thousand and seven as an expert on consumer spending. Over time I got to manage and oversee the staffs forecast. I had been able to do a lot of briefings and writing. So by the time I went to c A, and that is true of everyone that they sent over there, I had the experience to step into that role and it for me it was really refreshing because I was like, oh, I am a generalist. I said, most of my time

doing business investment. As I said, no one would have asked me what I thought about business investment, and there was a really rewarding experience. Jason Furman was chair at the time. He is excellent. He worked as so hard in a good way. Jay Campbell was a member that I worked with UH really closely, and I mean really everyone that I worked with, from member to senior economists to junior economists too, in terms like they were just fabulous.

My last day adds the Council of Economic Advisors was Brexit, and so uh, I'm really good at picking good times, right. My first forecast at the FED was the start of the Great Recession. My last day at the e A was Brexit. I worked all through the weekend. What was funny is when I got back to the board on Monday, no, it was crickets, Like nobody was going to come ask me what I thought about Brexit. We have a whole team of international economists. So it was a really interesting experience.

Ants I'm glad I did it. It really focused my mind on what economic policy could be, frankly should be. And I'll end this piece with just a funny story and how like the journey to the CEA started back in undergraduate So I went to Dennison University, a liberal arts college, and in my intermediate macro class, Dick Lucier taught the class and part of the class was us being like we were economists at the count of Economic Advisors.

We had to cut things out of the newspaper and do analysis, and then he role played being the president and we had do presentations. I got to when he um when I was at the Council of Economic Advisors, he came to visit in d C. And I got to take him on a tour of the Oval Office. So to me, it was just this really special connection from how I fell in love with economics as an undergraduate and then when I got to contribute as an

economist to the policy world. Huh. Quite interesting. You were also a section chief the Division of Consumer and Community Affairs at the FED. What does that mean exactly? What is the role of a section chief? Right? So, in my last two years as a fellow Reserve, I was a section in chief for a research section and the Division of Consumer and Community Affair. There were a lot of things unique about that because I had moved at

that point out of a quote unquote economics division. So the team that I managed were the only economists doing economic research in that whole division. So to me, it was very eye opening. I worked with attorneys, I worked with policy analysts, and they were all really impressive. The division focuses on low and moderate incomes families and communities. So they were from the very beginning ahead of the game in terms of thinking about diversity and inclusion and

racial injustice and educational disparity in rural versus urban. So that that was a really good experience for me. Back to what it means to be a section chief. So it is widely known that the section chief is the worst job or the hardest job, and the only one that comes closed is being a division director. So right, that's the very top of the house, and the section

chief is the first manager job the board. Now it didn't when I joined the board, but the board now has very intensive management training for section chiefs or anyone who starts as a group manager, which is like one level down. So anyone who's supervising goes to a manager boot camp. It was like three months, every other week, three hours, uh, and that was really good. They brought up, brought in external consultants. I learned a lot from that.

I learned a lot from my team, especially the research assistant, in how to be a good manager. Now, it won't surprise anyone, and this isn't just at the board. You get promoted because you're good at doing the job you started with, like I was I've made Section chief because I'm a very good economist and I could lead my team on their economic policy work. That didn't mean I knew anything about being a manager, and they don't teach us that in the PhD doctoral programs, and often they

teach us what not to do as a manager. UM So that was a really hard year. That was like my impostor syndrome year, on par with that year in two thousand and eight when I was like, oh my gosh, I'm supposed to forecast the US economy in crisis. So it was a very different time and I handled it weight better than two thousand eight. But it's a tricky job, and it's one where the board helps us do a good job now. But if you don't do a good job, you can not only have a team that's not effective

at doing policy work, you can really damage people. And we don't want to do that because that doesn't help any We're going to talk more about that and how the UM field, especially the academic programs, not only do they not teach management, they really don't teach writing. They don't teach a lot of skills that would be helpful.

So but we'll come back to that. What also makes you a little unusual as an economist is you are pretty active on Twitter and you maintain an active blog, as do I. Why are you uh using these platforms? Tell us what an economist gets out of participating in social media. So I joined the platforms Twitter. The blogging came later. Uh my gateway quote unquote drug to economic social media was commenting on economic blogs like marginal Revolution, money illusion. Um, that was really how I dipped my

toe in the water there Twitter. I spent time on it. The reason I went to Twitter was because after I'd had some difficult periods at the board and also was trying to figure out how are all these smart, caring colleagues, Like, how are we missing it that the recovery from the Great Recession is going to be really slow? I like, our staff forecast was consistently too strong, and I and there were others were consistently saying, what are you thinking?

There's no way we have families that are absolutely decimated from this recession. And so for me that moment and then reflecting back, remember I showed up in the summer of two thousand and seven reflecting back, and I was like, how did we miss this right, Like, there's all these people and that was a moment where I said, Okay, maybe it's because we don't have enough diverse voices, we're not connected enough to reality. And well Twitter has got a lot of diverse voices, right, So I went on

to econ Twitter. I like to as it would be apparent to anyone who knows me, I like to talk to people. I like people. I like people that are a little prickly. I mean, I'm a macro economist, right like, so I went there to hear from people who don't they're not inside the building, and frankly, it's probably a good idea, Like some of them would be absolutely horrible macro forecasters at the board. But that was for me

very important. Now that was my upside. No one at the board saw that as an upside, right, and I was a walking downside risk within a very short time of being on Twitter. It's very good about it. I don't talk about monetary policy, but I was linked to things on the board's website like Bernankee gave us speed and Da Da Da Da. So I got found out by public affairs because I was driving traffic to the

board's website and yeah, and it was bad. And I got called to an off site coffee that was basically like, what is wrong with you? You were the only staff economist talking about economics on Twitter. And the reward for that is I had all of public if not all, I had Michelle Smith and several other public affairs people following me on Twitter when I would do something that they felt was a miss step. Even I've never broke like ah, I never talked about um information that wasn't

public like forecast information. But I would get within a half an hour a call from my division director or via my boss saying you got you can't do that. You gotta do you know. And so there was this aspect of surveillance, which I get, Like Michelle Smith, public affairs at the Board has such a hard job, and every once in a while I stepped in their lane. I never meant to like, how how dare you promote something that we've hidden in public view on our publicly

accessible website. Yeah. No. And when my last year at the FED, and I really thought, because Howell like loves Twitter, right when he was a brand a governor, I was in his office with another economist he wanted to understand like labor markets superstar effect. We went and talked to him at the end of the meeting. He looked at me and he's like, oh, yeah, you had a really big day. And I'm like, well, duh, I'm here, you know, breathing a governor and he's like, no, it's Smiths retweeted

you on Twitter. I over I know no, because I was like, you're on Twitter and you followed Noah and you were on Twitter during the day, right. So I was just blown. When he became chair, I thought, oh, Twitter is gonna be okay. Yeah, that was wrong. Um. So I got in trouble two more times because Poal read one of my tweets and asked about it and he shouldn't be learning anything from my tweets, so I

was told. And twice I got in trouble for linking to the distributional financial accounts on the board's website because they didn't want attention drawn to it. And I was always like, you know, the board's website is the best place to put information you don't want anyone to see. Um, but that's hilarious. I love the board. I understand much better than I did in the beginning why what I was doing could be problematic. And I never never wanted to be the person who brought down the bed right

or cause immense stress. I was just having fun, and like I said, I was trying to learn from people who weren't like anybody else that was in the building. That's so funny that, by the way, bringing down the FED is Judy Shelton's job. It's not Clodius Tom's job. So we can leave that, we can leave that to home. I'm coming now, I know. That's why I'm sticking my

two bits in. And by the way, my economics gateway drug was Brad DeLong, the economist from Berkeley, and he was one of the earliest academic bloggers, just musing in public on a blog and discussing economic data. And it was so refreshing compared to the sort of stayed releases from BLS and even back then the Wall Street economists were very, very tame, and to have someone come out and just like boom, here's what's wrong with the data

analysis was really a refreshing change of pace. Yeah, and I will say there are two things that I really like about Brad DeLong on Twitter, Like I liked him off Twitter. I've learned a lot from him. One he is an economic history why he has a good grounding in economic history, that's not the only thing he works.

And he does a lot in macro space. To his blog, I mean he was like live tweeting World War two or you know, I mean like it would have it showed a side of him that was like not like an economy that you wouldn't have seen this in an economic seminar. The other thing that Brad does on Twitter, which is very rare, is that he engages with people,

like he will reply to tweets. Have I looked on from Paul Krubin's Twitter feed, and I Paul like does so much in terms of communicating economics and pushing us to think and pushing a broader audience. He never replies to tweets, like never, So I like Brad that he engages like I like to engage. So that to me is like econ Twitter can be a special place, but it's hard if it's a lecture and not a conversation. Huh. Quite fascinating. So let's talk a little bit about fiscal stimulus.

You know, when we look back at the financial crisis of oh eight oh nine. The vast majority of that response seemed to be coming from the Federal Reserve and a monetary ast response, not a fiscal stimulus compared to this one, How would you do a side by side comparison between two thousand and eight and on a fiscal basis.

So I have done a lot of work thinking about how compares to two thousand and eight, And the reason for that is I had a very unique experience at the Board in terms of understanding what happened in two thousand and eight and the years after that. And it may is the encounterintuitive. So I covered consumer spending at the Federal Reserve. I didn't advise on monetary policy. What my job was to do was say, Okay, what's going to happen, what is happening for families and they're spending

in the economy. To do that during the crisis and during the recovery, I had to understand and have an opinion, expert opinion on what is fiscal relief doing or fiscal stimulus doing in the economy. Because then the Board in the monetary policy, they work around the edges. They need to know what we think is happening in the economy, and part of that is what is Congress doing? And so not only did I follow the data in real time, I would update my forecast as the data came in.

This is a very unique UH expertise and experience for a macro economist to have. Academics do not do this right and people at the board do and I learned very well. So in addition to that, I started a research program with Matthew Shapiro, who was my advisor at Michigan, and Joel Slemrod, who's also a professor there. They had a prior research program studying the changes in tax withholding the two thousand one rebates they had me joined this product,

this research program of THEIRS in two thousand eight. We did research and ran surveys on the two thousand eight tax rebates, the two thousand nine and ten Making Work pay tax credit, and the two thousand eleven and two thousand twelve payroll tax cut. Fast forward to last year, I contributed to a volume called Recession Ready that the Hamilton's Project of Brookings and Equitable Growth Right Now Work oversaw the volume. I had a chapter on individual payments

that would happen automatically in a recession. I from my expertise that it's got to be big direct payments to household This little divvy debby changing with holdings. This is not a good way to find a recession. It doesn't help families fast enough, and they don't even know what happens like still stimulus, Like I don't know much about politics, but I know enough to know that probably won't help you a lot in terms of saying, you know, Congress,

the President saying we help the American people. So I took my forecasting expertise, my research knowledge, and the research knowledge from a lot of other people who work in this space. One of the things that the board because you don't put your forecast together. You don't walk into the boardroom and say, I think this is the right thing to do, or this is the right way to

think about the economy. And here's my research paper, right like you come in with here's my paper, here's three other papers, here's how they agree, here's how they disagree, like and so these were again skills that a lot of economists don't have. But that's what I've put into my chapter. And in addition, I said, we know the two thousand eight in particular, worked really well, like that's the way to do it. And and then the add on was me thinking about, well, how will we do

that automatically? And the reason that I had it automatic and I had also my proposal in a severe recession, not every recession is severe, but in our severe recession, those payments would happen automatically on a repeated basis until the unemployment rate came down. And that was born out of a very painful experience, because I have a very

emotional reaction to the macro economy. It came from a painful experience in two thousand and twelve when the payroll tax cut stopped and there wasn't anything else that went to a large number of families, and the unemployment rate was still high. So I knew from fiscal policy that they stepped away. I mean, they're the politicians. I'm not, but they made a decision that it was time to stop the fiscal relief and in fact they cut back on government spending that had a lot of damage the economy.

Are last recovery was very long, but that's actually a bad sign in some ways because it took us so long to get the unemployment right down. And that was the fiscal policy stepped away, and frankly, monetary policy did not step up enough in the recovery. Like they didn't save Main Street, they saved Wall Street. There were political existential risks to the FED that are why they justified, at least internally or in my impression, the like not

going all in on Main Street. But it it hurts people, right, so I knew, like the Fed really can't do this in some ways they really shouldn't. But the Congress not only can, but they have to. And that is what has been so hard right now, Like last week when the extra six d a week to the unemployed expired, that is going to hurt so many families this year. And that program should have been and could have been on autopilot, and it was. So let's talking the fallout.

So let's talk about that program. When Congress passed the Cares Act, they sent a check to everybody making I think it was less than dollars if memory serves, plus five dollars per dependent and then a six hundred dollar was that a a weekly or monthly unemployment bonus? How much weekly? So? And and that's based roughly on the median income across the country. So so that's quite a

substantial fiscal stimulus or or is it not. What do you think of those six hundred plus extending unemployment plus five hundred per dependent on a one time check plus

twelve hundred on a one part check. How would you rate that fiscal stimulus and what was the impact in the economy in a period where the I think that at its worst the Atlanta GDP now then they're now casting tool had GDP contracting at fift not on an annual basis, but when they happen to take that snapshot at the worst part of the economic contraction, the economy was effectively cut in half. So I did not sleep the night of the vote in the Senate until they

passed it, which I think men. I stayed up until like one am or something the next day. And the reason is by the time it got to the Senate, I knew this was really good for families and the unemployed.

I mean, frankly, I was shocked that the six d dollars a week made it through, and it almost didn't Like the Senate Republicans, there was a group that woke up and they're like, that is a lot of money, right, and so especially given what the base benefits to the unemployed would be now as a macro economist, so setting aside how I feel about families and the unemployed as a macro economist, this was huge because they passed it in March. I mean it took later, longer than the Fed.

But my goodness for Congress, they really moved right, so they moved fast. The rebates I mean, honestly, the rebates were better than what I had for a posed in my chapter because I didn't think it was possible. They are huge. They are twice and I think they should be. I'm not saying this was a bad thing. The benefits, the relief that went out in these direct payments is like twice in generosity what happened in two thousand eight.

And in addition, the eligibility is expanded. Basically anybody with a SO Security number has a claim on those checks. And the Treasury did things that sped up the delivery relative to two thousand eight. And I mean they said up a website where you could go and put your payment information in if you hadn't filed taxes. Now, it was not perfect. Some people got checked that didn't need them. I mean, honestly, a over well over eight of the US population, like not even adults, but the population got

some money from those rebates. That is just like wow. Anyway, And the thing is is they got it out fast, like the rebates were. In my opinion, the rebates were the best administered piece of the entire Cares Act. I'm not thinking they were the most important. Like the aid that went to the most hurt, like the unemployed, that was that's really like, we have to help the people who are hurting the most. The thing is, in March, we didn't know who was all going to get hurt,

like the American people were really scared. So it helps. And one last thing about the six hundred dollars, there's been a lot of discussions that that extra money is holding people back from going back to work. I know small business owners, even in my own family, who have had a difficult time rehiring workers to do work in like service industry job because they're like, well, why should

I go back. I'm getting more every week than I would doing your job, and that is legitimate, and yet for many many workers, the problem is their employers don't need them back because nobody's in the store or not enough. And so like that extra money, the unemployed are spending it right, and so it is pumping demand in the

economy that needs it, and it is going away. What do you make of the Yale study that said, when we look at people who are receiving the six D dollar benefit and those who are not, they are both returning back to the workforce in the same numbers. So at this point there are various research studies and and this is this is coming from academics, this is coming from policy analysts. I've done work in this space. Also that that money that support is mattering and it is

not holding back the economy. Now, there will be a point, in my expert opinion, as the unemployment rate comes down and jobs become more plentiful, that we should think hard about our were paying are not paying? Are we giving

people more money than they normally would have gotten? The very important piece out of the study I saw it yesterday that I'm sorry, I'm not going to attribute it correctly, but they showed that in past recessions what enhanced benefits, and in that case it was the extended durations being

able to stay on longer than twenty six weeks. It showed that it allowed people the time to go get a job again that was commensurate with their skills, and that was particularly important for people in disadvantaged groups, so people of color, the less educated, and women. So we don't want people to go back too fast because they'll get in jobs that aren't the right jobs for them. And right now, oh my goodness, a lot of these jobs are not safe. So we want to make sure

that we don't kill people. Right So there's six hundred dollars right now, makes a lot of sense reasonable people. When we get five years into this and unemployment rate of six percent, then let's talked about it. And I am in the group that thinks we should phase it down automatically as the unemployment rate comes down. Oh, I like the idea of using a metric to UH to make that determination and taking it out of the political realm.

Last question on unemployment and these fiscal stimulus in these checks. We're recording this in the first weekend of August. There is no deal yet for the Cares Act renewal. What do you think would be appropriate for Congress to pass relative to unemployment and another one off check or not. I want Congress to pass a new relief package that is between four and six trillion dollars. I am not expecting to get that. I truly believe, in my expert opinion that they need to go big again and they

need to do what works. So I just I want Treasure to just push the button again and send out those checks we would have for people who have direct deposits. They would have that money within a week of Congress approving it because the heavy lifting of putting together a file of who gets the check, where's their bank account? That file exists. So if you do it exactly like you did last time, it goes really fat. So yeah,

that is good. I want to see the unemployment benefits continue, just like I said, tie them to the economy, keep them where they are right now. Especially the six dollars is so big because when the Cares Act was past, we were in a pandemic. We did not expect to be in a pandemic now, but we are now. I know from having I've been doing a lot of work with a lot of different offices and members in Congress. That's why I left the FED. Couldn't do that when

I was there. I spent Mother's Day weekend putting together a cost estimate for the unemployment insurance, the enhanced benefits time to the unemployment rate. Doing forecasters. I mean, there's something I learned how to do it defense there are not a lot of people that know how to do this, and I came out with an estimate that was about

it was a little over two trillion. And the expensive part of that is Congressional Budget Office and a lot of forecasters think this is going to take a long time, right, so the phase down of those benefits is going to happen slowly, and that puts the big price tag on Now the CBO, the Congressional Budget Office, doesn't do the feedback effects. I think in the end it would really cost the cost taxpayers less than two trillions because we get the economy going faster. But at the end of

the day, that's one reason it's a big ticket. One more I'll say that I think is really important. Wait before you move past that point, I just have to say, you're describing the sort of supply side unemployment benefit where it's cheaper than it looks because its own economic activity is going to help pay for itself. Is that what you're saying that's right. Well, in a wonky world, they call this dynamic scoring, where Congressional Budget Office would take

into account of feedback. In this case, relief has positive feedback effects definitely now. Right now, the Congressional Budget Office can only do that kind of analysis for changes in taxes. There's just something Congress decided. So you know, we can't run this through and expect to get back a smaller score. I have to make the argument, and others have that we know it will help the economy. And if we help the economy right now, it is a down payment on the next few years being a lot better than

they look like they're headed to be. So let's talk about the some rule a bit. When the three month moving average of unemployment moves above its previous low, you say we're in recession. Tell us why that is. So, it's just it's an empirical regularity, right. I spent a lot of time with a spreadsheet over weekends. Again, this was in part to do my proposal of automatic payments to people like you gotta know when to send out hundreds of billions of dollars, right, You don't particularly want

to mess that up. And I knew, and this is a principle that Federal Reserve economists, no people on Wall Street know that a small increase in the unemployment rate is a bad sign. Now, I wanted to really understand when it's accurate and when it's in a recession. The Federal Reserve has a rule of thumb, which I did check. After they called this assomb rule. I asked one of my former bosses. I'm like, did I scoop the board's rule?

Like I do not want to, because we'll rename it will be the FED rule, right, And he said no. The internal rules the FED was a three tents increase in the unemployment rate, and that happens ahead of recessions. And I know one time in two thousands three, because I tried everything under the sun when I came up with my rule, that it triggered and it was a false positive, right, because that small increase happened in that jobless recovery, it didn't end up being considered a recession.

So three tents was the rule. It makes sense for the FED because monetary policy wants to get ahead of the game if it can, because it often is believed that it acts with the lags you know, if you're lowering interest rates, and frankly, if they cut a quarter point and it is an actually a recession, like they'll pat themselves on the back and it's not like, you know, taxpayers have just lost three hundred billion dollars of their money, quote unquote. So I had a different goal because mine

was about what Congress does. And so I found a rule that always triggered within the first few months of a recession. And I also believe that the indicator I use is such a good one because it is the reason that we hate recessions and we fight back. It is people losing their jobs. Those people, especially in a recession, especially if it takes well to get a new job, they will pay for that in terms of their careers and their families will pay for it for a very

long time. So to me, it's a widely followed statistic. It makes a lot of sense. It's a federal reserve. They also use things called regimes switching factor models. I am not taking that to Congress, like, this is not what you want to have, you know, money, but at a futtal reserve. I mean, you ought to use everything under the sun to understand the macro economy. You have to have a simple rule if you want to put

fiscal policy on autopilot. So to me, it was a great rule in my chap her is called a recession indicator. When I showed up at the launch event for the book and they started calling the somb rule, I was very uncomfortable, and to the point that after the event, I went and talked to Christie Romer. I wanted to talk to her about some physcal stimula. She was one of the main panelists, and I said, I'm so uncomfortable

with the som rule thing. And she looked at me and she's like, Claudia, you have got to own this. Any man would And I was like, okay, Christie is my hero. I would listen to Christie what I learned Since then, and I've joked a little bit about this and ribbed some people online like Bill Dudley that owning it actually meant I had to defend it, right, because again, this principle is there and it was great and it was important for me to understand like the intellectual history

of it. But like I already did um anyways, but I am thrilled and I always tell the people that are like, oh, well, we knew this and that that, And I was like, but if everybody in the world new it, it wouldn't be in the Bloomberg terminals, in haveor in Fred's with my name. So maybe I wasn't like the person who thought the big thought. I think I did not think the big thoughts, and yet I got it out to the world. And to me, that's important.

And I've spent a lot of time with Congress trying to help them understand why this is such a good thing to do. So let me let me push back on your um false modesty, I'll call it. There was a Wall Street Art Wall Street Journal article. I love this headline quote, are we in a recession? Experts agree? Ask Claudius some So that is quite a m accolade in the journal. I would have that on my wall in my office. What sort of pushback did you get

to that that article? And I'm curious was it intellectual pushback to the idea or was it pushed back to who really owned authorship of it? So when I saw that article and I was thrilled. Kate Davidson has been

such a booster of my career. So the response to that well even my response when I when I saw the headline is I was like, if you asked settle reserved staff economists, I would not be the names that they would bring out, right like, and I knew that, and I knew it because you know, months before is when the somber was born, and you know there had been some attention to it. Like I just had people that were really clear and not in a like mean way.

But there's the board is a very interesting place. There are times and the summer was an example of many the things that I know about the macro economy I learned at the FED. Like it's it's the board right where this kind of brain that passes along macro. Now that meant that when I spoke out and this had happened on Twitter, so I knew this was an issue. It's like, well, it's not fair you get the credit because you're speaking out and you learned it from everybody.

And I tried always be cognizant of that and give credit where credit is due. Part of where credit is due is with me, Like I'm the one that spent weekends with this spreadsheet. I had someone contact me after, you know, a friend, it's a FED contact me afterwards, and he was like, so the spreadsheet, she said, it was this massive spreadsheet. Seriously, this rule is so simple.

And I looked at him and I said, well, I pulled all the real time data, which means that I looked at all the data as people saw it at that time, which is more complicated. And frankly, this man, who I truly think as an amazing economist, he works on the financial side of the FED. I work on the real side. If I had asked him to do the real time analysis, it would have taken him a long time, right, But those are the kind of like, oh,

this is so simple. And it wasn't saying that I didn't deserve it so much as we all deserved it, like the whole staff, and like the staff from years before, and you know, like as with Twitter, I I take the risk of speaking out. So I don't know, but

I was used to this and I wasn't surprised. And honestly, if I hadn't have been a FED forecaster, if I hadn't spent a year at c A where finally early in twenty six things were wobbly, right, so um and I actually at the event tried to give the credit off to Jason Furman, who then said, oh the fight, this is more like Doug Elmendorff. And then Christie's like, you have to stop, like this is you um anyway? So it's interesting experience. I'm not really like, is this

a peculiarity of the FED? And what bothers me the most about it is we knew. It's like the FED knew for a long time. And what happened is when I heard it with the world, the world didn't know. Now that's quite that's quite interesting. If let me ask you this question as an author, and I'll get off of the some rule after this, was anyone in the FED using the rule of thumb, three month average jobless rate rising half a percent from a previous twelve month low?

Was that anywhere um on any FED sheets before you publicized it in that format and with that conclusion no, So then then then you get the authorship is the principle there's no principle. There's no principle. The principle is you wrote it, you created it. I'm I'm listen, you know I'm gonna say this. I might as well say it on the record instead of saying off the record. When I first started blogging in the nineties and then

in the early two thousands, I was a guest. How frequently I would write something on a blog and then weeks later or a days later, see it show up in a mainstream paper with no credit, no link, no citation, just oh you like that idea? What do you think? I'm your writing staff, I'm I'm I'm punching up your your script. You just stole this. I mean sometimes it

was word for word. So I think if you create something that has not been created before, even if other people contribute to it, hey we're we're all standing on the shoulders of giants. You were entitled to the to the authorship credit not hereby deem the som rule. Officially yours.

I have that authority because I'm on the radio. Let's talk about a fiery blog post you wrote a couple of weeks ago titled economics is a disgrace, And I'm going to suggest listeners go to macro mom and find that blog post and it you make a number of really interesting allegations, the first of which is economics research replicable sixty published papers from thirteen generals say usually not these various research papers were only able to replicate about

a third of previous research that was published in various economic journals. What's wrong with the state of economic research today? It says a lot of things about the field of research. One that I didn't touch on in my blog post is it it shows that we don't have a culture of going back and checking each other's work, right I. And there was pushback, and I'll come back to this about the paper, because it wasn't like they went and did like a news study. You know, like I work

in consumer spending. I have written so many papers showing falsification of a basic principle of consumer spending models, as as like hundreds of other people. Right, So it's not like someone's checking my work where I'm not checking Jonathan Parker's work. We're just doing different studies. What this paper by Andrew Chang and Philip Lee did is they said, Okay, let's go to the top journals and let's just see if we can get their main results. They weren't even

trying to replicate all the results. They just wanted the main takeaway empirical results of the finding. And they they did this in a way Andrew Kang was a colleague of mine. For you is at the Federal Reserve. He is an absolutely industrious person, not as fire as me, like he's more soft spoken. He completely rolled up his sleeves. He had an army practically of research assistance. He was also in the macro forecasting section with me, and they

spent hundreds of hours on this project. They were so careful, like there were no cutting corners, there was no playing fast and loose. They wanted to be able to replicate. They put a lot of time into it, and it should have been a finding that we as a profession took really seriously. And instead from very elite members of the profession they were they were received with derision. I mean they were outright criticized, put down in public. The

paper was death rejected it. In addition, where I talked about in the blog post, Andrew shared with me a correspondence that he received from a very senior person in the profession because he knew I had had problems with this person. And I was furious, but I told Andrew, this man does it, but it is absolutely unacceptable. The paper was rejected at all the top journals. It did finally find a home and adding injury to insults in

one of those top journals. Another researcher, much more prominent, published a paper later saying we should do more replication. I mean, it was just it was astounding to me on so many different levels of this elitism and the profession pushing back on uncomfortable conversations, and then like, we actually need a culture of replication, Like I know that

is a policy analyst. I never took a result, a piece of advice into the boardroom that was one paper, especially if it was some paper that was like totally different than every other paper written on the topic. Academia

rewards novel surprising findings. Those are the ones that we absolutely should be checking the map, right, because I'm not saying they're all wrong, but I mean Andrew and Phillips research showed yeah, you should really, we should really do more of this, and and we don't economics and frankly

his paper, their paper was ignored. Let me push back a little bit against your argument with a quote from famous physicist Max Planck, basically saying, what the old guard believes doesn't go away until the old guard is dead. So how is economics any different from physics? Or other fields where you have this entrenched, calcified belief system that literally takes a generation to get past. So when I hear the quote now, and I've heard it in the past, and I agree with it, and I think the direction

you're going. But a few weeks ago, Emmanuel Fari, who is a forty one year old brilliant macro economists really pushing the boundaries of the field in a very good way, and a kind man and a mentor too many he killed himself, and in the last four years Marty Weisman killed himself, and Alan Krueger and build Standholme, And these are people who are creative. They were trying to change the field, both in the way we treat people and in the things that we think and explore and the

questions and the findings. And to me that that shows the opposite of progress. I mean, those were funerals that nobody should have had to go to UM So, yes, the quote, And honestly, when Emmanuel death happened, that was when I took what had been a priv reflection that I sent to Janet Yell and in Member Nankee, because they were heads of the American Economics Association, to say we have a problem. And when Emmanuel killed himself, I said, I needed to tell more people because this has to stop.

So let's get into some specifics. Some of the things you mentioned in your boast involved misogyny and sexism and racism and other things. Let's let's start with the New York Times quote um from June of this year, economics dominated by white men is royaled by Black Lives Matter? So is economics dominated by men and is a mixed

mostly white and what should we be doing about that? Yes, there's absolutely a domination in the sense that the elite members of the profession, the ones you see on t be the ones who are in the White House, in the top positions, many many of them are white men. I like to joke, and I've been to so many seminars, especially these online virtual seminars about COVID with macroeconomists, so many of them. It is just a sea of whiteness

and maleness. And I like to joke that the diversity here is the degree of hair loss, right, Like, I mean, this is and um, you know, I'm kind of a paint and in general, but you know this is serious that you've gon joke about it. But that means that you are not bringing the lived experiences. White men do not experience misogyny like I mean, they can experience something from women that you know and being degraded by other men colleagues. But white men also just like I as

a white woman, do not experience racism. Like I can be empathetic, but I will never walk in those shoes. Right, So you can as a researcher, are like I can write about race, I can think about race, but particularly during Black Lives Matter, I still figured out, you know, my voice is not what we hear need to hear right now. But I can amplify the voices, particularly of black scholars, because I can retweet. You know, I have a platform on Twitter that a lot of them don't.

And to me, I wanted the world and I needed to see their voices because there are economous There are scholars who think very hard, have thought very hard for decades about structural racism and injustice in the U. S. Economy and the global economy. They exist, they have been marginalized, they are told their research is not economics. They're rejected

from top journals. I saw someone talking about like they put racial injustice in a paper and a referee said that's inflammatory, and I'm like, no, that's like the real world for these people like you know, So that this culture and then in addition, we had white men jumping into the conversation of black Lives matter in a very problematic and frankly racist way. So let's talk a little

bit about the research aspect of this. A month after that Time's Peace was out, there was a Wall Street journal piece vote Economic journals faulted for neglecting studies on race and discrimination. That was in July of this year, to which you responded, economics has a race problem. So how do you recognize the race problem? And what can you do to solve the race problem? Because in your blog post it's apparent it's not just at the big

institutions in government or Wall Street or corporate America. It starts at at freshman academia and goes the whole whole way from when you first decided to become an economist and follows your entire career. So what can economics do about its race problem? It has to do so much like there is no magic wand there is no silver bullet. The thing that economics has fallen down on and race raises frankly a much more serious conversation that we need

to have the gender right. I mean, Ray is just deplorable. And what surprised me about my blog post on many different dimensions is I didn't think it was newsworthy because everything I said we already knew. Now, the economics profession has this amazing ability to explain away its problems. I've done a lot of work speaking on gender and economics.

I don't do research in this area, but again, I want to amplify the research, and I have a presentation where I go through and debunk every single one of the criticisms. One of them is women can't do maths. This is not true. Plenty of women are math majors. Another one is well, women just don't want to do economics.

And it's like, well, why do you think that's the case, right Like, if they show up and you say sexually explicit jokes in class, they might not feel real comfortable, or if the curriculum doesn't even talk about it, right like. And so it just shows that a lot of economists either are completely ignorant of race, or in some cases, they are openly hostile to raise and many of these

people not everyone. I don't there could people in economics, right, but too often, in too many cases, we have gatekeepers of the profession who are not being inclusive. They're doing the opposite, they're pushing people away. And if that is the case, then you have a big problem. And frankly, like, how do I know it? Because look around, like there was one black woman economists out of over four hundreds

that I worked with at the Federal Reserves. Over time, there's like two other black people that I know that have worked and have since left. Like, seriously, don't you think maybe you know and so? And you can see this in top journals. Good luck, good luck finding a black person Latina Asian, Like, there's just there. There's so many layers of pushing people away that we need because they bring something in an authentic way that most of

us can't. Huh. Quite interesting, And our last question on economics problems, this is a quote from your blog post quote economics hurt people outside economics with bad policy advice. Explain. So this goes back to my soul searching in the very worst time time of the recovery from the Great Recession, when I was like, how did we miss this at the Federal Reserve the crisis, the housing crisis? How did we miss it now in the Great Recession the recovery.

And I got to this point of saying, it's because we do not have diversity. The diversity comes in a lot of dimensions. And the thing that really nailed it for me is I went back again. I was really trying to understand this, Like, I was so puzzled. And I'm one of those people that loves to read FED

transcripts from the Federal Open Market Committee meeting. So I started pouring through the transcripts prior to the financial crisis, and I found a meeting and I go back in my like low points of being at the FED or just doing economic policy, and I reread this one transcript. It was in two thousand five. Josh Gallen, who has now a very senior economist as the board, he was a junior economist. Then he briefed off and see he argued that house prices were overvalued. This is in two

thousand five. The whole I mean green space like everybody else. There's some exceptions, but basically everyone else at this meeting, especially the ones that were very prominent like Greenspan totally shut him down. Now years later, I've always told Josh I like, he's a hero. He spoke up, like I tried to speak up. You get like smothered when you try to speak up. But if you're persistent, I'm a persistent person, you can move. The needle is a very

slow moving needle, but it does move. And recently I saw him and he knows, like, I sah, you're my hero, and he's like, but Claudia, I never forgave myself because he said after they came down, after they explained it away, I could have kept pushing loudly and I didn't, And I thought, to me, that was a really important lesson. And I have been not with the consensus since this

crisis started. I have very loudly said we have the mother of all demand shocks, like, yes, the pandemic is, you know, causing what we you know, a supply shock, but this is a big one. And I spent a lot of time and I was told by people who I have very much respect in economic policy circle, its Claudie, you need to tone it down because you're gonna look bad at the other side of this. And I was like, I won't right, and I didn't back down on the blog post because I know people that have hurt and

are continued to be hurt. Like I'm fine nine years ago when they come in my office, I'm like, yeah, go away. Uh, but I know people that have been hurt are being hurt, not just the FED but all over and the undergrads that I hear from where the people have been pushed out of the profession. I mean, they make me angry. He read the post. I found angry. I am like, this is completely unfair. And so many of them would have been great economists. I know it,

some of them. I saw their research getting going. I was so excited, and they walked away and I said, you know what, we don't deserve you. We need you, but we don't deserve you. And like that has to change, because until it changes, we are going to continue to give advice that is not aware of. Well, how do people of color, how does it less educated, How do the people on the margins of the economy experience a recession?

Let's talk about that. Let's do research on that. And it has been ignored, and the Federal Reserve has done so much to improve that research. But like where was it in two thousand eight? Like how is it possible? Because it was out in the world, out in academia, out in other policy circles. This conversation was happening, this research was happening, and we just totally ignored it. Wow, quite fascinating. I am almost out of time. I know we only have you for an hour, So let jumped

to our speed round. These are our favorite questions we ask all our guests. There sixty seconds each and it's how we wrap up the show each week. So let's jump right into this. Tell us what you're streaming these days. Give us your favorite either Netflix or Amazon shows, or any podcasts you're listening to. So I have become an avid podcast listener, right. I didn't think I would because

for a long time I like to read. I loved econ blogs, but they just they aren't what they used to be, uh in terms of just not as many voices. So I was like, Okay, I'm gonna I'm gonna listen to these podcasts. One of my coping mechanisms in this crisis has been go fred long walk every day, and podcasts made a great soundtrack to my long walk. I listened to a very wide range of podcast I listened to The Indicator, I listened to various podcasts on Bloomer.

I love Joe Wisenal and Tracy ol Ways podcast. I just it's so informative and they're fun, right. And I listen to the Brunix, right, Matt and Elizabeth Brune. I mean, this is a very different perspective. I don't always agree with them, it's very interesting. And I listen to podcasts that are not about economics. A friend pointed me Caatebon pointed me to Forever thirty five. It's about facial products and like what to wear in the pandemic from these two women, and it's like, I need to take a

break from economics sometimes, right. And so to me, it's been a great way just to hear people other voices. And I've been really privileged, like today to actually be part of those conversations. I can never listen to the ones that I'm on later, um, but I love the fact it's a it's a it's a difficult skill to learn to listen to yourself without cringing. Trust me, I know from where I come. Second question, who are your mentors who helped shape your career, so I have a

lot of them. Sarabe Dad was my first economics professor at Dennison. He was my senior thesis advisor. I wouldn't be an economist if he hadn't like really pushed me. And I learned economic history from him, like I never saw that again, history of economic thought at the University of Michigan. Matthew Shapiro was my advisor. I continue to come to him and especially recently with advice. I do

research with him. He's just really important and you have to have allies, and I need an ally that understood economics. But my parents are awesome, but they're like, listen to Matthew. He cares and he understands your world. We do not understand your world. And I will say a big mentor an ally to me. David Lebo was my first section chief at the Board, and he is someone who I

always felt I could go to. He was someone I went to when I just completely melted down in two thousand eleven, and it's really special to have people who you know you can go to. They care about you and they will not judge you. Because I was a total mess and he helped me get better. He gave me the space, he made sure they didn't fire me. Um and and I try to do that as a mentor.

The thing that I learned and I pushed out this post is I learned that like helping people get better and as the absolute first thing to do is important, but if you don't go back and try and figure out how to shut down the harasser, it doesn't stop. And that's a very recent lesson for me. And that's a tough lesson for all of the allies I've had because they just want to help me and I get and that's what I needed most. But I also there's

a systemic problem. We've got to fix it, and it will be the allies that do it, but we we gotta we gotta do it, alright. So our favorite question, this is the one that everybody always asks about. Tell us what you're reading? What are you reading currently? And one are some of your all time favorite books? The

this one is tough. Like I read a lot and frankly, I read a lot of Twitter, right like I just um, I am what Tyler Cowen refers to as an info war, Like I just love all this stuff flying by me, and that unfortunately means that, like, that's what I spend a lot of time doing, right, because I can't read two things at once. Um, and I'm going to send you a tweet showing you one book. I'm going to send you a tweet showing you my biggest fear during

the pandemic is not reading any books and only reading Twitter. Yeah, and I read a lot of journal articles. I mean, economics does not have a culture of writing books. Though our paper drew up in eighty pages, so it's kind of like a little mini book. What sort of advice would you give to a recent college graduate just beginning their career in economics? It's not your fault as a new person. No, I'm serious and actually right now and imports like putting it in the context of this recession.

People who are early in their career, people who are graduating college, people who are finishing up their PhDs this year, they are going to have a very rough time. And there's research that shows that you have a rough time

for a whole career. Like these poor millennials. We totally slammed them because it came out in the job market in the early days of the Great Recession and its recovery and oh my gosh, they finally have enough money to buy a house, and we're doing this to them again, right, So I just it's important in like the context of the world that you're in, like it's not their fault. Matthew Shapiro reminds me that the macro economy is not

my fault because you know, it's a good forecaster. I can't fix this, and so I have to like chill out a little bit um And but in terms of and it's not your fault is also porton. When you get into a this profession of economics, you're going to see things differently than the more senior people. Like we forget what it's like to be new. We forget like how problematic some of our norms are. So you have your eyes open and it's really hard to balance this.

This doesn't feel okay, but I feel like I gotta do it to fit in. And and when something bad happens too often, I see young economists and I did this to blaming themselves and it's not about them. It's it's a it's not about the person who has heard, it's about the person who's hurting them. But like that's a tricky thing. And that's like, you know, pro pro tip of like working through a career. Right, this is not just economics, but if you haven't lived it, how

how would you possibly know how to react to it? Huh? Quite quite interesting. And our final speed round question, what do you know about the world of economics today that you wish you knew twenty years ago? Were so when you were first getting out of school. I became an economist because I believe that economics could do good in the world, and in particular, I became a macro economist because I believed economic policy, like the big stuff, could

do good. Again, it was there to do good. And something I have grappled with in my career as an economic policy advisor is we don't always do good. Now I am, I am totally a glass half full, if not overflowing. I have a lot of energy. I did not give up, and I think we can do this and we definitely do in some cases. But as like economics, we got to do more good in the world. And I think for me that was you know, I'm a naive person and I love people and I think everyone

else should. But you know, like there are racist and misogynists and people were totally close minded and we'll protect their elite position, and it's like, yeah, we've got to change that, because like that is not helping us do good in the world. Thanks so much, Claudia for being

so generous with your time. We have been speaking with Claudia sam She is a former senior economist in the Council of Economic Advisors for the Obama administration, as well as being a researcher and section chief for the Board of Governors for the Federal Reserve. If you enjoy this conversation, well, be sure to look up an Incher Down an Inch on Apple iTunes and you can see any of the previous three hundred plus conversations we've done over the past

Wow six years. That's a long time. You can also find us at any of your favorite podcast hosts, Spotify, Overcast, Stitcher, wherever finer podcasts are sold. You can check out my weekly column on Bloomberg dot com Slash Opinion, follow me on Twitter at rit Halts, sign up for our daily reads at rit Halts dot com. I would be remiss if I did not thank the crack staff that helps put this conversation together each week. Michael Boyle is my producer.

Maroufal is our audio engineer. Michael bat Nick is my head of research. Attica val Brunn is our project manager. I'm Barry Ritolts. You've been listening to Masters in Business on Bloomberg Radio.