The following is a transcript of an interview with former White House Economic Advisory Board Chairman Jason Furman, which aired on “Face the Nation” on Sunday, May 22, 2022.
MARGARET BRENNAN: Now with Jason Furman. He served as Chairman of the Economic Advisory Board under former President Obama and joined today from Davos, Switzerland. Welcome to FACE THE NATION. It’s been a really tough week for the market. When the Treasury Secretary started talking about high energy prices and the effects of high food prices on the economy, people were terrified. Former Fed Chairman Ben Bernanke also coined the term stagflation. Do US consumers need to understand what’s going on?
JASON FURMAN: Hey, I want to give you a little perspective on what we’re going through right now. A market is different from an economy. If you look at the economy, you can see that unemployment is 3.6%, 500,000 jobs are created per month, and consumer spending is fairly strong. So a lot of good things are happening. However, the market is giving a signal and we need to be somewhat concerned and heeded and there is no time to panic.
MARGARET BRENNAN: But the finance minister was signaling that this could be a burden on consumers. This will offset the positive data points you just pointed out. Looking at this, what are the chances of a recession?
FURMAN: Look, we saw something amazing. Consumers are very pessimistic and negative about the economy through surveys. When they voted with their wallets, we got consumer spending data for April and we saw that figure was much higher. Consumer spending on almost everything has skyrocketed. For the next six to 12 months, I’m not too worried about a recession. After that, I start to get worried as the Fed’s policies start to have more of an impact.
MARGARET BRENNAN: You know, we’re talking about inflation in this program. Of course, the role of the Fed as a central banker is to act and control as just mentioned. But politically, it comes at a cost. As you know, Democrats are pushing legislation in Congress to limit what they call so-called price surges, as Congressman Jeffries just said. As President Biden talks about raising taxes on the rich, he hears him use the phrase. As an economist, do these have any measurable impact on consumers battling inflation?
FURMAN: See, as you said, most of the fight against inflation is the Fed’s job. There are a few things the president can do. He did good things, including opening ports, getting more truckers, and releasing oil from the Strategic Petroleum Reserve. I’d like to see him act like the lower tariffs that President Bush has put on China. But I don’t think these half-price exorbitant bills will do much to lower inflation. They only increase the type of tribe consumers dislike much more than the high price.
MARGARET BRENNAN: You quoted that corporate greed is a bad theory for inflation. Is this another way of saying that Democrats are just cheating?
FURMAN: In my opinion, this price comes and goes. What happens when demand increases? The price goes up. There is an old saying that expensive medicines are expensive. It’s a bit painful to deal with, but elicits an extra supply. It attracts more producers to the market, that’s what drives prices down and we need to make the process work. Trying to interfere will only make the situation worse. We tried it in the ’70s, but it was a huge failure. We shouldn’t repeat it again.
Margaret Brennan: You said that you think the president should take steps to lower inflation, at least in part by removing tariffs on China. That’s the trade tariffs in the Trump era. But within the administration, there is disagreement about doing so because they like leverage for consumers. How do we understand that the inflation they are experiencing is due to this fight?
FURMAN: Only a fraction of it. I think it’s about 1/4 to 0.5 point of inflation. That’s out of the 8% inflation rate. So it’s not huge. I think it’s only natural that you’re president and you have made inflation your number one priority. And this is one of the bigger tools he has. It’s not without controversy, but in terms of employment, we’re seeing record hiring now. I think this is the right time to take this action because we need some reassurance from consumers. Everything you can do is worth it.
MARGARET BRENNAN: I think the finance minister would agree. Here in the bigger picture, we’re hearing a lot of accusations of where inflation is coming from in the campaign trail. And, there are claims that this is equal to the value of spending in 20 years. And, you know, all kinds of added geopolitical issues of all kinds are going on. How do you digest it for the viewer at home? How much were Democrats really to blame for continuing to pour in pandemic-era spending last spring when the economy was already recovering?
FURMAN: Look, in March 2021 the President signed the American Rescue Plan. This is part of the reason why the US is recovering faster than any other economy. But it’s also part of the reason we have incredibly high inflation. I was hoping he would do a smaller job. I think it was bigger than necessary. But it’s nice to have things happen. Since then, the Fed has made many mistakes. It was lagging behind for most of last year. I kept thinking that inflation was temporary. It did not continue to move to normalize interest rates. And now you add to Putin’s invasion of Ukraine. And it’s like the cherry on top of this horrible mixture we already have.
MARGARET BRENNAN: Yeah, that’s a really cool picture. Jason, thank you for your analysis and for being with us today. I’ll be back in a little while.