Ryan Cooper on Economic Anxiety, Populism, and Population Growth

Ryan Cooper is a national correspondent at The Week. He joins Macro Musings to discuss how bad economic policy has hindered strong economic recovery from the Great Recession. Ryan and David also discuss the folly of limiting population growth as a means of combating climate change and how slowing population growth presents many long-term economic challenges.

Read the full episode transcript:

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

David Beckworth: Welcome to the show, Ryan.

Ryan Cooper: Thanks for having me.

Beckworth: You're a national correspondent, but you've done a lot of work that has focused on economic issues, Federal Reserve, the white working class, economic growth in general. So you have done a lot of work in that area. What led you down that path into the economics journalism area?

Cooper: The single biggest factor, definitely was a graduated from college in 2008. I was a chemistry major. And that academic year, from 2007 to 2008, I was doing research thesis in synthetic organic chemistry. And I've always been very interested in politics, but it seemed like economics was something that was more or less sorted out. That there was nothing like The Great Depression, certainly wasn't on the horizon. But then it turned out, no, that was... Actually it was. Queued up right for me, right when I was graduating in that spring. And I remember, finishing up my classes, and it was, I think it was March, and the economy really started to take a nosedive. There was loss of something like 500,000 jobs that month, and it was 600,000 jobs and 800,000 jobs, like, "Oh, this sounds bad. I should learn about this."

Cooper: And so I just started reading. I think probably Paul Krugman was my entry point. Because that's where people were just sort of glomming on to anybody who seemed like they knew what they were talking about, and he had a pretty credible explanation. And so that started a process of going back through economic textbooks that I had, and reading a lot of the classics Keynes and I read some Milton Friedman, and I actually read Karl Marx too. Just from curiosity. Polanyi and anybody who seemed interesting and sort of self-educated, to some extent, though, I had take one economics course in school. But it just, it was as I was sort of coming of age as a journalist, and a writer that was unquestionably the most important issue. And so it seemed like anybody who wanted to be serious, anybody who wanted to just engage with politics at all needed to be conversant with economics and be able to argue the merits of various things.

Beckworth: So you cut your teeth on The Great Recession.

Cooper: Yeah.

Beckworth: It's a way to be baptized by fire. So was it difficult, because economics is not always easy. And one of the reasons that we do this podcast is because I think there's a need for more understanding the macroeconomic issues. So I mean, delving into this, this must have been challenging at some level?

Cooper: Yeah, it certainly was, because it was just hard to know what to take seriously. Because, at the one, there had been this sort of neoliberal consensus that gigantic recessions were a thing of the past. "This is a solved problem," as I think Bernanke said in 2002, at the birthday dinner for Milton Friedman or something, just like, "Oh, the Fed did it. We're very sorry, but we won't do it again."

Beckworth: Yes.

Cooper: Turns out, not so much.

Beckworth: Last words, right?

Cooper: Yeah. But then, there's all these sort of heterodox critics. Some of them had more credible sounding views than others, but it but it was like, it seemed like the whole sort of discipline was in crisis. And trying, especially as an outsider, who do you listen to? The MMT guys, the Orthodox Marxists who were like, "Oh, this is all about declining rate of profit," or, various other heterodox, Steve Keen, is that that guy's name?

Beckworth: Yeah.

Cooper: But so it was just kind of reading around, seeing what made sense. What sort of logical views and models fit with what was happening. And sort of constructing, I think a fairly ad hoc is one of the things that I ended up concluding, is like, there's no such thing as a general theory that holds for every single occasion. And one idea may hold in a particular place in time, and then the cracks will start to show in a different place in time. And you shouldn't be... This is a chemistry sort of viewpoint. When you're connecting two atoms into a molecule, organic chemistry it's like, "This is just a line. These are two shared electrons that are just holding these two together."

Cooper: And you look at that, from a quantum mechanics standpoint, that's completely ridiculous. But it's good enough to be able to do organic chemistry most of the time, just whenever you run into a little problem, like, "Oh, this mechanism doesn't work out." "We'll just paste in a new model that just sort of gets you over the hump." And that, I think is a pretty good way at least, in my somewhat limited experience of getting to a workable place where you can make decent recommendations for policymakers and individuals.

Beckworth: Okay. So what is your view of the Great Recession? And what caused it? Why has it taken so long for the recovery?

The Great Recession and Its Long Recovery

Cooper: Well, I haven't a comprehensive, I just said, I don't like comprehensive theory. But my view is sort of set out, I take from Steve Randy Waldman, who's probably my favorite economics guy. And he says that it's all about inequality, declining rate of interest, and financialization, all sort of colliding. So he says, and I agree, that inequality is a structural drag on aggregate demand, because of marginal propensity to consume effects, that poor people spend a greater fraction of their income. So as you get more and more income going to wealthy people, then it shows up as less consumption and then a knock on, less investment. It was like that break point in the 1970s, when inequality started to rise, workers weren't getting their share of productivity benefits. People quibble with that data, but it seems pretty convincing to me.

Cooper: And then that was reconciled with more or less full employment. People argue about that too, but at least there wasn't mass unemployment, by a slowly declining rate of interest. So you look from the '70s to 2008, it's pretty much just a straight line down. Each time they try to go back up to the normal thing, they'd hit another crisis and have to reduce it further. And then in 2008, you had the worst financial crisis, which caused a big drop in aggregate demand and the Fed could only partially compensate until they hit the zero lower bound. And neither Congress nor the Federal Reserve was really willing. They did have initial glug of stimulus, monetary and fiscal, but then they got scared and went for austerity in both domains.

Cooper: And so that is why I think, you had the roots of it in inequality, oversized financial sector, lack of regulation or even prosecution of fraud, that's become a big problem with Wall Street. And then it all sort of came apart in 2008, and the policymakers were not able to put it back together again. It was sort of pasted back slightly, but it still had mass unemployment, a big kink down in the output figures that we're still not anywhere close to where they thought we would be in 2007 as far as total output or productivity has been terrible. And so that's my sort of considered view as of 2014. But I'm sure there are many more wrinkles you could find with that.

Beckworth: No. So I sense that you're sympathetic to the movement against Wall Street that happened right after, Occupy Wall Street. And you still, I'm sensing you still think there's probably too much financialization of the economy?

Cooper: Yes, certainly. I think that, Occupy Wall Street, they didn't have a real considered view. But I think that the basic instinct was right, that A, Wall Street is too big, and too much of Wall Street. You look at what was finance's share of GDP back in the '50s, it was three, 4% something like that. Now it's like 8%. But Mike Hanson wrote a great piece about looking at the efficiency of, what is the cost of financial products? Equivalent financial products between then and now? They've gotten less efficient. Now it's more expenses by the same thing, than it was back 40, 50 years ago.

Cooper: And I don't know if you're familiar with, oh, what is his name, Barry Lynn, the anti-monopoly guy. And he has a really compelling argument about how financialization is enabling monopolization. Where you basically have a big chunk of financial activities, have become about not facilitating the allocation of capital, or exchanges between businesses, but extracting money out of productive enterprises. Or just committing straight up fraud, there was a ton of that in the financial crisis and almost none of it was punished because of fear of cracking the whole system apart.

Cooper: But there's unquestionably some character of just socially negative extractive behavior on the part of very smart people who are just rigging the system, but rolling up markets and the big oligopolies with no competition, and getting them shareholder payouts by forcing the workers to give that or cutting back on investment, that's been a real problem during the recession. Profits are really high, corporations aren't investing. Why is that? Well, I think that's part of the story. So, certainly not, over the last 10 years or so, it certainly hard to see that Wall Street is really giving us it's 8% of GDP worth of goodies as it should be.

Beckworth: So you see a lot of rent seeking still taking place?

Cooper: Exactly. That's the word.

Beckworth: Yeah, no, that's a good word. But a lot of rent seeking still going on by Wall Street. And there is this, I think growing interest in the decline in business dynamism in the Us. There's fewer entries, fewer startups. Also, I had a guest on recently, we were talking about declining labor mobility in the US. There's a number of indicators that things are slowing down in terms of just the rapid... Cowboy capitalism is kind of fading into more of a static view. And there is these concerns and how to solve them. I'm not sure I understand the issue completely, I don't know the answer to it. But there is, I think you're right, this observation that there is declining dynamism in the US.

Beckworth: So you have this view of it, let me share my view, I want you to respond to what you think. So the listeners won't be surprised to hear this, but I think the recovery was slower than would have been expected otherwise. And by that, I mean, by historical comparisons, a recession this deep would usually lead to a quicker recovery. And it was a relatively slow anemic recovery, some would say we've now barely reached full employment, which is a long time, right?

Cooper: Yeah.

Beckworth: It's eight years to get back to full employment, as opposed to a quick bounce back. And I think part of the story is that the Federal Reserve, as you mentioned earlier, was reluctant to really be aggressive. On one hand, they were very radical. They tried QE, which has never been done before in the US. There's the big fiscal stimulus, but at this same time that radical tool was used, they never were willing to cross 2% inflation.

Cooper: No.

Beckworth: They never were willing to tolerate rapid catch up growth in spending. And if you're trying to maintain a level path of price level or nominal GDP or any kind of spending, you've got to have catch up growth and that was never tolerated. And so, whether it was an unconscious thing or maybe it was a conscious thing, there just wasn't this tolerance for inflation and I think it has partly to do with worrying about the 1970s inflation, fighting that last war and so forth. So I do think macro policy broadly defined that. And I'll put more emphasis on monetary policy, someone put it on, like Paul would put on fiscal, but macro policy broadly defined, really kind of put the brakes on the recovery. Things could have been done more aggressively.

Beckworth: And I'm a right at center guy, I would have done this in a rule's based predictable systematic approach, having like a price level target, or nominal GDP level target. It would have created more flexibility to do that. But is that a reasonable view, is that consistent with what you think?

Cooper: Yeah, I think... I'm not sure that that would address the dynamism, but I think that something like that, there's no reason why you wouldn't try it. I think Krugman would agree with you that... He's been saying over and over again, regarding full employment for example, that all the debates about the natural rate of unemployment and so on and so forth, "You don't know where the bottom is for sure until you hit it." And so going with some sort of wild stimulus, it certainly couldn't hurt any of these things. And especially the herky-jerky sort of hesitant way that they've gone about this, I think has made it... They've what? Quintupled the monetary base with the stimulus sense, that sense finished off.

Cooper: Whereas if you're just saying like, "Here's our target, we're going to double asset purchases every month until we hit that target," or something like that. And then you could just get over the hump, get the economy out of stall speed. But instead they've been like, a little bit here, a little bit there. And not been real, what's the phrase? Roosevelty in resolve, whatever.

Beckworth: Mm-hmm (affirmative), yeah.

Cooper: Yeah, I mean, certainly. But everybody ought to think that we should at least be trying that.

Beckworth: Yeah. And it's easy for me to sit here and say this, Monday morning quarterbacking, but I do think I think... And again, from my perspective, you want to have some kind of structure in which to do it, it might be a rule like a price level target, a normal GDP level target, but this never was on the table. All right, so given this context of the Great Recession, you have an article, it was very interesting, and the title of the piece was, *The Great Recession Clearly Gave Rise to Right-Wing Populism,* and I'm going to read a quote from your article in The Week.

Beckworth: And it's the second paragraph, but you've mentioned here, "Over at Vox, Zack Beauchamp had an entry in this debate. He argues that left-wing economic policy actually causes people to be more racist, largely because welfare states tend to disproportionately benefit poor minorities and immigrants, and hence raise resentment among whites. But his account of economics is jarringly incomplete. In particular, skipping almost entirely over the financial collapse of 2008, the ensuing plague of austerity, and the ongoing Eurozone currency crisis. And this provides by far the strongest evidence for the leftist case." So you're arguing here, that the rise of populism, particularly among the white working class, was one byproduct of The Great Recession, is that right?

The Rise of Populism

Cooper: Yeah, certainly. I mean, this debate is, there's a debate between the center-left like Hillary Clinton types and the left-left, Bernie Sanders types. And there's been this constant search for any way to exculpate the center-left from the rise of right-wing populism. Because center-left parties were in charge of, well, the United States, the UK, Greece, all sorts of countries across the world where there was horrible disaster, economic policy and outcomes. And then after that, a rise in extremist right-wing politics. And so one of the things that Bernie Sanders and company have been saying is that if we had, sort of as you were talking about with the monetary policy, if we hadn't had a gigantic collapse in employment and output just an economic cataclysm that was much worse and still very bad in parts of Europe like Greece and Spain, we wouldn't have had this sort of counter mobilization of extreme right parties, like The Golden Dawn, and there's the sort of neo-Nazi or Nazi esque parties in Germany and The National Front in France.

Cooper: And I think if you zoom out a little bit, and you look at history, and you look at the sort of basic facts on the ground, the position that this collapse can't have anything to do with with extreme right politics is completely preposterous. Before the 2016 primary, that was a completely consensus... Nobody would ever have bothered to question the fact that the first Nazi Party electoral high tide came during hyperinflation in the early '20s in Germany. And when they actually took power was in 1932, when German unemployment was 30%. The idea that that's a coincidence just does not compute. It's social collapse, and that empowers extremist parties.

Cooper: And it wasn't just the Nazis, it was also the communists. That was in '32, the crisis of, I forget what they call it, but the communists and the Nazis had a majority in the German parliament, The Reichstag. And so they couldn't form a government because there was not a pro democracy majority, that could actually govern. But at any rate, just people are have been looking for any sort of excuse to absolve the sort of neoliberal technocracy that has, in my view... And less bad in the United States, certainly, but especially in the Eurozone has just made a hush of everything from responsibility for the rise of Neo-fascism, Fascism, right? Whatever you want to call it, and just, I don't buy it.

Beckworth: What about the other voters who voted for Trump? Your article, and I think, the Vox piece, they focus a lot on the working white class, kind of that group, but I know many people who voted for Trump who aren't in that group, and my sense is from them, is that they voted for him because they have fatigue from maybe the experts, the technocrats. We had this Great Recession they've tried their magic. We're still here.

Cooper: Yeah.

Beckworth: This sense of frustration. "Let's try something different." Do you think there's anything to that?

Cooper: I think there’s certainly one big aspect of Trump that got him a lot of mileage was that he was a total political novice. He had never held any sort of office at all. And he always was railing against the establishment. Hillary Clinton could not have been a more establishmentaterian candidate if she had been bread in a vat for that specific purpose. I think you have to distinguish between the average Trump voter and the marginal Trump voter.

Beckworth: Okay.

Cooper: I think the average Trump voter was just ordinary Republicans. Republican voting is very deeply acculturated in parts of the country. And so people just vote according to their habit I think, most of the time. But what tipped the election was a pretty significant population of people who went from Obama to Trump. And I think a lot of those, it was the white working class, which I think have gotten somewhat disproportionate attention. But people from, Rust Belt towns, you look at Obama's campaign in 2012, he had all these ads, these old welder, guys who were talking about how Romney came in with Bain Capital, and then he shut down the factory. It was very like FDR. Whereas, like, "I saved GM with my rescue package." And Hillary didn't really even try to do anything like that.

Cooper: But then secondarily, there was just a general drop off of enthusiasm among core democratic constituencies, particularly young people and minorities. So I think it's not really... Hillary didn't really have a working class whites problem, she just had a working class problem across the board. And it was black working class people in Detroit and other places as well as the canonical white ex-factory worker whose job got shipped to Mexico or China or something.

Beckworth: Yes, I have an anecdotal story along those lines. I had an Uber driver here in DC last year before the election, and he was an African-American gentleman and he was very distraught that Hillary was going to be the Democratic candidate. He was a Bernie supporter, obviously. But he had been a clerk in a law firm. He had a decent job, and he got arrested for some possession of marijuana and he could no longer work at the law firm, he could no longer do a lot of things. And so he was driving Uber and he's trying to rebuild his life, but he has this blot on his record now. And it really frustrated him to see, in his view, Hillary gets away with murder. And she's still in the establishment. And he felt very frustrated that she didn't represent him, that she didn't know his experience. And if anything, she's immune to all the challenges he was going through. And he really wanted Bernie to have been the candidate.

Cooper: Yeah, Hillary did really well in the south, during the primary. Rolled up huge majorities among the black voters in those states. But after the election, there was a lot of stories. Again, not nearly as much attention as the white working class has gotten, but there were, I think, non-trivial number of black people who had that exact same, if not the specific viewpoint that Hillary has gotten away with something, but just that Hillary is just a candidate of status quo, "Not going to fix any of the problems. We're just going to keep on going with what we're doing and maybe adjust the child tax credit. We're going to make it slightly more partially refundable, if we happen to get democratic majorities in Congress, which we won't." It's just like the most uninspiring message.

Cooper: But yeah, certainly, it was not like, even though she had in her platform, a lot of goodies she could have run on, she mostly didn't talk about that stuff during the campaign. As studies over her advertisements have showed, it was just all about Trump, "He's a misogynist. He's sexually assaulted people." Didn't really mention her actual policies.

Beckworth: Yeah, going back to the white working class, because it has received so much attention. I mean, the book, the Hillbilly Elegy I mean, there's so much attention being given to soul searching being done.

Cooper: Yeah.

Beckworth: And this debate you've mentioned, I've kind of looked on from the outside, between maybe the far-left and the center-left. It's been fascinating to watch, but the Atlantic and the Public Religion Research Institute has studied recently, you probably saw this, and they went out, and they're going to dispel the myth that it was economic anxiety that caused these people to vote for Trump. And so here it is. So this, just quickly, I don't buy this. And I can see that look on your face, you have some problems too, but they found things about fears about cultural displacement. So we're losing our Americanness. They found people who supported deporting immigrants were also likely to vote for Trump, economic fatalism, people who just resigned to the fact that college isn't for them, and they're in a terrible job.

Beckworth: And then they show that economic hardship was not a significant factor. People who voted for Trump, the white working class, they weren't in economic hardship. But if you read closer, there's never problems with this. They actually looked at people who had fair or poor financial shape. So I'm not sure, I've once debated it myself, but my critique of this whole study is they're looking at white working class in the first place. So think of that whole group, and then they're looking at a small subset who said they had economic hardship, well, by definition, the whole group is facing some level of hardship, right? They're white working class. It kind of begs the question, why are they acting the way they are? Or why do they have the views they have? And maybe that has to do with where they are. And maybe there's longer trends that explain some of that. But again, I want to take this back to The Great Recession. I think The Great Recession made their lot far worse than it would have otherwise have been and made them more susceptible to views about immigration, about trade.

Cooper: Yeah.

Beckworth: You mentioned Germany, if you go back to The Great Depression, there was a certain xenophobia back then. And it was interesting, in preparing for the show, I looked this up, there was The Mexican Repatriation Act, and we forcibly deported, there's varying estimates, one million and two million Mexicans back to Mexico in the 1930s for the same reasons we have certain concerns today. And some of these were US citizens. I mean we-

Cooper: Oh, God.

Beckworth: ... So some of them were volunteers, some of them left on their own. But of course, they were encouraged. But they were actually US citizens, they looked Mexican, they were deported. There's also the Filipino Repatriation Act of 1935. I mean, I've read elsewhere, Italians felt pressured and they formed unions then because of this. So this is not their first time something like this has happened. You have a real severe economic crisis, you begin to look for culprits. "It's trading with the foreigners." Or, "It's the foreigners who live in our country." And-

Cooper: Yeah.

Beckworth: ... it's this kind of a national…It's an unfortunate but natural response. And so my critique, and I think this is your critique and I read your article is, you get so hung up in dissecting the voting patterns of the white working class. You're not stepping back and seeing the bigger picture here. And that's the Great Recession.

Cooper: Yeah, I think that's exactly right. These things are not... It's a false dichotomy. There's clearly a huge amount of resentment, xenophobia, bigotry of some kind or another or just toleration of same, among the people who voted for Trump. You know what I mean? He's speeches are not sort of Hitler style, just tirades against perceived enemies, but you had to be able to look past a lot of horrible nonsense to be able to vote for Trump. But I think, yeah, as you're saying, when times are hard, people turn inward, they become more resentful and suspicious, they become less willing to give people a chance. They look for scapegoats, "Somebody who's taking my stuff." It's hard to think generously, I think about the other people in general, not just people inside the country, but foreign nations. You start to become really suspicious of, Iran or something like that.

Cooper: I think it again, with efforts like this, to conclusively disprove that economic factors had nothing to do with the election of Trump is just a way to say that it wasn't Obama's fault. "Obama's wretched economic outcomes did not have anything to do with this. It's not our fault. Blame somebody. Blame anybody but us. Us the good liberals, read the New York Times and vote to reduce the deficit." And then a final factor I think is, when you're talking about trying to aggregate sentiments, if you look at the very most desperate people in society, don't vote at all, for the most part. It's in place the people that sort of... I think that the really average canonical Trump supporter is somebody who's like a small business owner, but in one of these really depressed communities.

Cooper: And I think that it's, democracy doesn't work where it's people sit down with a spreadsheet and make super logical calculations, "I believe x candidate is following my viewpoints on 51% of the issues and I'm going to cast my vote in this way." It's just like swirling stew of different things and people are sort of making spur of the moment decisions and oftentimes they don't really come out in as logical fashion. But I think as you say, you zoom out a little bit and you think, "There's this huge economic crisis, only about 50% fixed," and then we had a really extreme right-wing candidate who's managed to squeak into the presidency. There's got to be some kind of relationship there. And it's not to say there's no racism or anything like that, the contrary thesis is of course not true. But economic disaster of this scale, has to have something to do with it.

Beckworth: Again, in my view, it's not just racism or xenophobia, it's just in general, as you mentioned, turning in, we don't like trade, we don't like anything external. It's us against them. And I had Doug Irwin on the show, he's a trade economist, and he mentioned, usually after every recession, there's some push against trade, even the early 1990s recession, which was mild, well, who's the candidate after that? Pat Buchanan. He had for a while, a partly successful run, Ross Perot comes out of that as well.

Beckworth: So you typically see this. And this is just an extreme case of that. Interestingly, I was at an event this week, where Jonah Goldberg of the National Review was on a panel and they were talking about the rise of nationalism and how unhealthy it can be, how dangerous it can be. There's maybe a natural desire to beat your fellow people, but it can turn into this nasty thing if left unchecked. And the discussion did come up about what role the Great Recession played. And he mentioned, I'm not sure whose work, but someone has shown he said, "That whenever there's," in particularly financial crisis, "it tends to stoke the coals." Because it's a little bit mysterious to the average person. There's this big... It's not like a bomb, where it's dropped and it killed people and you can point the finger.

Cooper: Yeah.

Beckworth: There's, suddenly wealth disappears, but somehow Wall Street people, they seem to do well. And Jonah Goldberg is Jewish, and he goes, "And then you get these Jewish conspiracy theories, because it's finance, and so it breeds xenophobia." So I do think, and to kind of wrap this all up, just to get back to the point, it's so important to have the right macroeconomic policy-

Cooper: Yeah.

Beckworth: ... to avoid a lot of this. I mean, we wouldn't be having this interview today, in a large part, a different one, hopefully, but not this one if it had been something different. And my views are if the Fed had done a better job preventing this crisis from emerging and react. And it's not that, at least, it's response could have much more focused on restoring aggregate demand where it should have been. Okay, well, let's move on to some more Federal Reserve discussion, since I'm just mentioning that, you have a piece titled, *The Federal Reserve is Still Wrecking America.* Oh, wow. Ryan, how is the Fed still wrecking America?

The Federal Reserve’s Mistakes and Shortfalls

Cooper: Well, we've talked previously about how they had inadequate stimulus. Hesitant, never really willing to go all in to try to knock the economy up above stall speed. Well, once they wound down the stimulus, not doing any more quantitative easing, then they started to just raise rates way too quickly. Because it seemed as though unemployment was getting down to, I forget what it was in December 2015, five and a half percent or something like that down, to 4.3 now, and they've been raising rates and raising them little bit more. And the unemployment rate has kept coming down. But the problem with this style of thinking is, they're trying to get ahead of inflation. The reasoning is, you got to take away the punch bowl before the party really gets going because otherwise you have accelerating inflation and return to the 1970s.

Cooper: And that seems like, number one, completely ludicrous that you would even be able to get inflation up to 4%. I think it's highly questionable. But the bigger problem is that you don't know where the bottom is regarding unemployment, regarding the unemployment to population ratio. You look at the number of people, prime working age Americans, the percentage of those people with a job is only just barely gotten to the absolute bottom of the last recession I believe, in the early 2000s.

Cooper: And so looking at that measure, and then measurement of discouraged workers and so forth, you think, "Well, maybe there's room for another two, three million jobs, four million. You don't know for sure, where you're going to hit the bottom, where you're reaching capacity constraints, and then you start to see that inflation tick up. And I think that the responsible thing to do, is to do what Alan Greenspan did in the late '90s, which is just say, "We'll see how far we can get." And it turned out that he got unemployment down to 4% for the whole of the year 2000. And there was no inflation at all. And in fact it didn't even have to knock the economy down to prevent it, just the .com bubble burst, and that took care of it in a bad way.

Cooper: But after a disaster of this consequence, when we're still possibly, $500 billion below the maximum GDP that we might possibly have had, to be raising interest rates now, is I think just catastrophically irresponsible, especially when you look at they're supposed to hit 2%, the PCE deflator less energy and food or whatever it is, their target, they have not hit the target for five consecutive years. They have been below 2%. And a 2% target, you would think, would mean you would be above 2%, as much as you would be below 2%. But instead, they've been acting as if 2% is the ceiling, and they're just trying to keep inflation as low as possible, which is contrary to the Fed's mandate that they should also prioritize employment. But there's been some kind of despair over the last... It was like I've written that same article about 20 or 30 times. And it never seemed to have any effect at all. They're not reading my takes, I don't understand.

Beckworth: There's been a number of books. I mean, I agree, if you're going to set a target, it needs to be a symmetric target. It needs to-

Cooper: Yeah.

Beckworth: ... be something where you on average, miss above as many times as you miss below, and it's not been that and the Fed actually has amended the language to its goals, at the beginning of the year they write their goals. And in 2016, I think they changed this to the monetary policy goals. And it actually says they have a symmetric target. But they have yet to overshoot it. I mean you want to hit 2% on average. They're not willing to overshoot. The IMF did their assessment of the US. So IMF every year, not every year, but they go, I'm not sure how often, IMF will go out and assess each country, do an article for report. And in that report for the US, it says, "You should try overshooting for once."

Cooper: Yeah.

Beckworth: And the Fed said, "No, we're not going to do that." And Janet Yellen was asked once in an FOMC press meeting, if they would do that, and she said, "No, we're not going to do that. We're not going to risk going back to the 1970s." So I do think there is this... My take is, I'm sure some of our listeners are tired of hearing this, but my take is it's a generational thing at the Fed. That the older, baby boomer generation, who experience the 1970s will do anything to avoid that.

Beckworth: Now again, I want to be clear, what my vision is, is still long run price stability, but it's based on symmetric. If 2% is what the body politic decides upon, okay. It's democracy, we settle on that, but it better be a symmetric on that. Don't say one thing and do another. And in fact, it was really refreshing, Neel Kashkari, who's the Minneapolis Federal Reserve Bank President, he acknowledged. He said, "Hey, you know what? If we set a 2% target, and we're not hitting it, this is what you call a systematic error. It's a bias."

Cooper: Yeah.

Beckworth: And again, maybe it's unconscious, because it's just this aversion to inflation, but they are systematically doing whatever it is that causes inflation to undershoot. It's one thing to say one year, "Oh, it was the oil prices caused it," or some kind of supply side shock, but it's been this way since, in fact, since 2009, June 2009, when the recovery began, headline, PCE as well as Core is averaging around one and a half percent. So that's a systematic pattern. I mean I'm sympathetic to that, that thought that you have as well.

Cooper: And you look at the 1970s, what was happening then? The baby boom generation was entering labor force and women were entering the labor force. So the biggest generation in history, and both genders at the same time, all flooding in. Back then you had real high unionization with the cost of living contracts. And all that was just a recipe for inflation. You would think, "Yeah, this is going to be a high pressure economy right here." But now it's like, smaller generation, nobody has... Wage growth has been flat for years. The idea that if they did, delayed their rate increase... It seems like they tend to think that if you just let your fingers off the neck of the economy for half a second, suddenly inflation's going to shoot up 12%. Like, what are you talking about, man? It's just nonsense.

Beckworth: Well, I would add, I mean... So you're taking a very cost push view of inflation in 1970s-

Cooper: Yeah.

Beckworth: ... very-

Cooper: ... well, partly.

Beckworth: Partly, it's the supply side-

Cooper: Yeah.

Beckworth: ... movements. And I definitely think there was those oil price shocks, those things were important. But I definitely think the Fed and fiscal policy had a role to play as well.

Cooper: Sure.

Beckworth: But I think we both agree, there's just not a commitment, a desire to-

Cooper: No

Beckworth: ... to get 2% symmetric inflation target. All right, well, time we have lap, I want to move on to something slightly different but still macroeconomic focus, since this Macro Musings, and you have an interesting article titled, *Why America is About to Start Freaking Out About Babies.* All right, so tell me that. I want to go home and tell my wife. Because I want to have another child, she says no. So tell me why she might start freaking out about having babies.

The Causes of Declining Fertility

Cooper: Well, I don't know if it's individuals per se-

Beckworth: Okay.

Cooper: ... but it's just that I think that America is going to be very soon in a situation like South Korea or Germany, where the birth rate is down to 1.3, 1.0. I think in South Korea it's below one. And that raises the prospect of a sort of demographic death spiral. You would think, a steady state population is a reasonable goal. And that's too, depending on immigration, I suppose, birth rate of about two, 2.1 to account for deaths and so forth. And we, America for a long time has been unusually high, due to mostly immigration. Immigrants, a big proportion of American immigrants are from Mexico or Latin America, they tend to have more kids. And also you had a huge level of teen pregnancy. And that's sort of keeping our average up. But both of those things have been going down lately. Immigration is down. The immigrant fertility rate is down and teen pregnancies are way down.

Cooper: And the thing about America and children is that we provide almost nothing to families in terms of paid leave, maternity grant, child allowance. And in particularly that phase, my sister just had her second child and that phase between birth and kindergarten is really difficult these days. When both parents are expected to work, you generally don't have any paid leave. And most, I forget the percentage, but it's not many people have access to even the 12 weeks from the Family Medical Leave Act, which is unpaid, depending on your employer, your employer might give you some paid leave.

Cooper: And so it just becomes extremely difficult to have children. And you look at, what do less generous welfare states like that tend to have fewer children. And you could end up with... Somebody has to produce the next generation if there's going to be an America in 100 years, and I think that that there's going to be a real collapse and then people are going to start worrying about, oh millennials. Millennials won't won't breed. Or something else we can blame them for.

Beckworth: So, I mean, the big issue here, the demographic death spiral. So tell our listeners, why is that important? I mean, what type of programs that face challenges, why should someone my age worry when I become 80 that there won't as many people around?

Cooper: Yeah, I mean, back in the day left, leftie environmentalists used to really flip out about overpopulation. And that definitely is a worry, especially in places like Nigeria which have a very, very high birth rate and obviously not enough resources or wealth to really feed the, especially the crazy predictions of like 750 million people in 30 years. But well, overpopulation certainly can be a problem, if population growth is too high, under-population would be a problem too.

Cooper: I think basically, just because any sort of rapid change, like that becomes really difficult. And probably the biggest initial problem is that if you have, especially a very sudden fall in your birth rate, a generation down the line you'll have this massively top-heavy demographic distribution, where not very many workers are trying to pay for the retirements of a huge number of elderly people, what's happening in Japan right now. And that creates tremendous social strain.

Cooper: And then after that, then you have trouble maintaining infrastructure. You could have deserted cities. If you've built a society for a particular number of people, you don't want a huge increase instantaneously, or a huge decrease instantaneously. I mean, what is one of the biggest problems with Detroit? Population loss. They built a massive city to deal with, I forget, a million and a half people, and then half of them left over 30 years and it was a crisis that they couldn't deal with then and still can't deal with. Just selling whole city blocks for dollar a piece. And so you want at least a steady state, I think is a fair thing to state.

Beckworth: Yeah.

Cooper: And too low can be as bad as too high.

Beckworth: So it would affect a number of things. I mean, on a practical level, at the individual level, Social Security might become less certain, right?

Cooper: Yeah, exactly.

Beckworth: But you mentioned other things like infrastructure. I mean, just paying for the services and stuff that depend upon a young generation working to... I mean even if it's personal, like you take care of your parents, well, if there's not enough kids to take care of the parents, in general, there's going to be a strain. You mentioned the lack of generous welfare policies or support policies in the US for parents, but they have those in Europe and they still have a problem, don't they?

Cooper: They do in some. It depends, like France is doing pretty well, Sweden's doing pretty well. I think it's, Ireland is also doing pretty... Ireland is-

Beckworth: So there are-

Cooper: ... ridiculously. I think I may be going over my skis with the data here, but I think it's fair to say the more generous the welfare state, the more children you have.

Beckworth: Oh, okay.

Cooper: I think the experience from France is that they have consultants, they bring people from South Korea, all their policymakers are flipping out, because the country's not going to exist in 50 years. But they just say, "Don't condition things on marriage." That's their big thing. Don't try to coerce people into having the proper social arrangement. Just like, "If you have a kid, here's your glut of resources to keep you and your kid."

Beckworth: So they're having enough. Their birth rate's high enough to keep the population steady.

Cooper: Yeah, I think France's is like 2.1, 2.2. And they might... Them and Ireland, maybe are the only ones I think that are at a replacement. And then they just barely.

Beckworth: So I had this impression, maybe it's wrong, that one of the reasons you see the social tensions in France between the immigrant Muslim population and the French, is because they need those immigrants to keep the labor force going. But you're suggesting that maybe they're addressing this through higher fertility rates as well.

Cooper: I don't know France that well, I-

Beckworth: I don't either. So I'm just throwing things out here.

Cooper: I think that there's definitely, in France that classic welfare resentment. Where, it's like, "Well, all our tax dollars are going to support the immigrants who aren't doing anything," regardless of reality of what the immigrants are actually doing. Probably almost all of them are working like anybody else. And that's a challenge. But I think that what America is going to see is that if you don't have anything at all, birth rate is going to just plummet. Because we have this anomalous situation that was sort of keeping us above where we probably... Where a European country would have been. And we're going to snap back to reality is my prediction. I could be wrong. Maybe people will just gut it out and experience the... My sister says she's going to pay $120,000 in childcare over the course of just getting her two kids through kindergarten, because she and her husband have to work. And that's a lot of money.

Beckworth: Yeah, it is indeed.

Cooper: And a lot of people don't have that money.

Beckworth: It's interesting, Denmark is having demographic problems. I mean, again, I don't know much about it, but I do know, it's enough of a problem. They've created some promotional videos that encourage procreation. And they're surprisingly racy. I mean, they tell couples... This one video showed a mother trying to encourage her son to get out and meet women. And what environments you best meet women. And I mean, it's really shocking that the government's going to this extent to promote procreation in Denmark.

Beckworth: Look, I want to go to one last paper you written, I've got a few minutes left. And this is one about climate change. And the title of your article was *Why Childlessness Can't Stave Off Climate Apocalypse.* So tell us about that article. What are you articulating there?

Declining Fertility and Climate Change

Cooper: Well, there's this, I think, a holdover from the 1970s worry about overpopulation, that the reason we have climate change is because there are too many people. And so the way that we can solve climate change is by not having children or having fewer children. And I think that if you just dig into the sort of mechanics there, that's just a ridiculous notion. Because look at how much carbon dioxide, other greenhouse gases these societies produce. Even if you stopped all births tomorrow, that still would not be anywhere close to as aggressive enough as an emissions decline as you would need to prevent the worst climate change outcomes that the scientists tell us. Like, "Here's the good emissions trajectory that you should have, we should be cutting by this percent a year," even the total dystopia, Children of Men, no more children, that would not be anywhere close to what you need.

Cooper: And so, what you need to do is reconfigure the society around, like lower emissions. And I guess, the biggest disagreement I have is that, why do you do any sort of environmental policy? I think the one reason is to provide for the next generation of people-

Beckworth: Right.

Cooper: ... so that they can enjoy it. And I think, so long as you're... As I said, before, overpopulation certainly can be a problem. It's not like the earth has a completely unlimited carrying capacity. But it's just at this point, the structure of our resource use is way more important than trying to reduce the total number of people. If we got down to France's carbon dioxide output, that would cut our emissions by two thirds, because they use all nuclear power. But just, the arithmetic doesn't work. And so, what needs to happen, I think is you do your climate policy, you get the economy on a zero carbon footing or whatever. And then you continue to produce people that can go to Grand Canyon or whatever, the next time and continue to push society forward and explore further reaches of outer space, or whatever. Don't just commit... There's people who actually say, "We need to commit species suicide to save the planet."

Beckworth: Yeah, you're right-

Cooper: Come on.

Beckworth: ... it's absurd. I actually came across your work first I think, related to this, because I was driving and listening to NPR and this piece came on, I think you responded to, where this... I mean, they interviewed this guy, they took him seriously. He's going to have your kids and he wants all of us to have your kids. And I just wanted to hit the break and say, "What?" For the points you raise, but some additional ones. And the big one that he, to me, completely ignores, is that some future child might be the solution to climate change, right?

Beckworth: It's our ultimate resource, is our creativity, our brains, and Alex Tabarrok has this great TED talk about China and India, as they get richer and grow, think of all the people who are living in subsistence. They're living hand-to-mouth. And they might be geniuses who are living hand-to-mouth and just give them that chance to escape that poverty, and who knows what they'll create? Flying cars to solutions for climate change. I mean...

Beckworth: But if we clamp that, that growth, we're going to miss out on potential people who... You got to have so many people to have an Einstein, Einstein's not going to be every child born. You got to have a certain number of people born. So I think my big critique, and building upon yours, is that approach completely ignores the best resource we have, and that is a well-educated person who has the opportunity to think and solve big problems.

Cooper: Ramanujan, remember the-

Beckworth: Yes.

Cooper: ... Indian mathematician.

Beckworth: The Indian mathematician who was self-taught. So think, there's many other potential mathematicians out there who are barely surviving and they could be-

Cooper: Yeah. Lived and died pushing a plow, in a rice patty or something.

Beckworth: What's it like? 1.3 billion Indians out there. There's got to be some Einstein, some folks who can solve many problems. And to pushback against that possibility to me seems very naive. Okay. Well, on that note, we're out of time. Our guest today has been Ryan Cooper. Ryan, thank you so much for being a guest in the show.

Cooper: Thanks for having me.