Matt Yglesias on "One Billion Americans": New Ideas to Revitalize the American Economy

Boosting population growth through increased immigration is one of many policies the US can adopt to bolster the economy and beat secular stagnation.

Matt Yglesias is the co-founder of Vox, a senior correspondent who focuses on politics and economic policy, and a returning guest to the podcast. Matt once again joins Macro Musings to discuss his new book, *One Billion Americans: The Case for Thinking Bigger.* Specifically, David and Matt talk about how to reinvigorate the economy; through enacting better housing and transportation policies, dramatically increasing immigration, reviving America’s forgotten cities, and more. Finally, they also discuss the Fed’s new average inflation targeting regime, and what kind of direction the Fed will take over the new few years.

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:  Matt, welcome back to the show.

Matt Yglesias:  I'm glad to be here.

Beckworth:  Well, it's great to have you on. You are quite the internet celebrity and a writer and contributor, and it's been great to engage with you on these issues through the years. In fact, I think our history goes back to the great glory days of blogging, right after the great financial crisis, and a lot of good times back then. But you've written now your third book, right? This is your third book you've written? Is that right?

Yglesias:  It is, yes.

Beckworth:  Okay. It's a very interesting book. I enjoyed reading it. I think it ties together a lot of the different pieces and areas you've been writing on through the years, with a common, overarching link that brings them all together. That's population or country; we'll get back to that. But before we do that, just a quick question about another area where you also happen to follow closely and that's the Fed. I promise listeners, we'll get back to Matt's book shortly. But for those who don't know, Matt is quite the Fed watcher himself. He actually covers the Fed fairly closely, and has had great things to say about it.

Beckworth:  Matt one of them, for me, more exciting developments has been the Fed's new framework, the average inflation targeting framework, which incorporates makeup policy, and it didn't go as far as I would have liked it. Because you know I would have liked nominal GDP level targeting, but I think it's a step in the right direction. I'm just wondering, what was your take on that development?

Average Inflation Targeting and a Plea for Fiscal Policy

Yglesias:  Yeah. The move to average is definitely good. That is a step in the right direction. I thought it was a missed opportunity to go further, simply because, I think the reality is that the Fed is not going to want to change frameworks a lot. There's like, two ways you could judge anything in politics. One is you can say, "Okay, this is a step in the right direction. I'm happy about it." Or you could say, "Okay, it fell short of what they should do." My read is that, we had years of argument after the financial crisis about how the Fed should do things differently.

I thought it was a missed opportunity to go further, simply because, I think the reality is that the Fed is not going to want to change frameworks a lot.

Yglesias:  Then they came out with this new framework with great fanfare. I guess, I'm a little more inclined to see the glasses half empty, given that I don't think it's likely that they're going to go update it again. I think you and I just have the exact same opinion as to what they should do. But we just had actually, in the hard shutdown months; such a potent example of how relying on the inflation calculations can actually be really problematic, precisely in a stressful economic moment. You're sitting here and you got ... It's like, my cousin is doing college half on Zoom, half in the dorms, paying full tuition.

Yglesias:  I think common sense says that's an inflationary, but I don't know. How is the BLS supposed to sort that out? It's so much more of a complicated bureaucratic process than I think people ... A lot of prestige economists are so far from the data. They just look at this stuff and they're like, "Well, you should use real quantities. We should adjust things for inflation." But you'd get in the nitty gritty and it’s like, "What does any of that mean?" Whereas we continue to count, like aggregate income and spending flows pretty well, and we could see that in the peak of the crisis, aggregate spending went down quite a lot. It rebounded nicely, which is good, but we can just track it.

Yglesias:  Do we get back on track and let people know, it's like, the prices of stuff may change, the quality of the goods may change, what is even for sale may change. The real side of the economy is so important. But it's so nuanced, and it's so complicated, that it's like, there's this tremendous value to focusing genuinely on the nominal aggregates. Then Powell has, he has exacerbated the Bernanke era tendency to serve as a kind of, almost just like, a takes guy about fiscal policy, which I don't love. I agree with the chairman's fiscal policy thoughts. I'm not that offended by it. But it doesn't strike me as really what the Fed should be doing.

Beckworth:  In terms of promoting fiscal policy through his bully pulpit, is that what you're saying?

Yglesias:  Well, because it feels to me like a ducking of responsibility. No, I mean, if you want to say, as I think Chairman Greenspan might have said, at some point in the '90s, if you want to offer an opinion that's like, "Okay. This fiscal policy decision that was just made, is going to force me to raise interest rates to prevent something terrible from happening." That's fine. But the thing that really started under Bernanke and Powell has gotten deeper into it, where you say like, "Okay, you guys need to deal with this." I agree with him that Congress should do that, but also it's like he should do his job.

Beckworth:  Right, but it makes it easier for him to do less. Like why isn't the Fed doing more QE right now for example? Why haven't they gone into negative territory with interest rates? Why haven't they explored yield curve control further? What has stopped them? Maybe you could argue one thing that has stopped them is the hope there'll be stimulus 2.0, just around the corner. In fact, I've read an article today along these very lines that because Trump last night, at least first last night, this is October 7th. Last night, October 6th, he tweeted out their accounts during the stimulus talks. Then shortly later, he said they're back on in some form. But an article came out based on that first tweet that said, "This will open the door for more aggressive QE now." I'm like, "Well, why didn't we have that before these tweets came out?"

Yglesias:  Wait, and if you want to just say factually, "Okay, we are going to stabilize nominal aggregates, and we are going to use QE to do that. If you Congress don't like QE, then we would not do as much if there was more stimulative fiscal policy. It's up to you." They are the elected people's representatives. They should decide what happens. But the Fed has a mandate. It has a framework. They should follow the framework. This was I think the older ... It was different because we were talking more about a high interest rate environment, but you would say, "Look, if you're mad, if you don't want the interest rates to be so high, make the budget deficit smaller."

Yglesias:  It's like a statement of what the mandate means, or at least what Chairman Greenspan felt the mandate meant. At the time I know, the Clinton ministration felt that he was stepping on their toes. But it seems liked a realistic account of monetary policy’s function in the economy and George H.W. Bush, I was really young. But people who were around then say ... They were very upset at the way Greenspan played that role, but he was articulating facts about the Fed's reaction function. Whereas now, I don't totally understand what Powell is saying, because as you say, then it's like, "Well, so if Congress doesn't do it, then he's going to use emergency measures.

Yglesias:  Or maybe he will maybe won't." Josh Barro did an article saying, the Fed could create some kind of special bridge facility, because state and local governments know they'll get money if Biden becomes President. It's all very, it's weird.

Beckworth:  Yeah, no, I hear you and I'm very sympathetic to you. If I had to take Chairman Powell's side, just to play devil's advocate here, maybe he's thinking or coming from the perspective that, you want fiscal policy to be first in line to respond, because they're more effective at getting transfers directly to households, or to states or something along those lines. That might be what he's thinking. But I agree with you. In general, if you're not hitting your inflation target, and I agree like you said earlier, it may be hard to know for sure where we are presently. But even if you're not hitting the income levels that exist pre-crisis, you should be doing something now not waiting for Congress to act. It is a bit of a puzzle. You're absolutely right.

Yglesias:  Yeah. It's a tough one. But we have this; I don't know ... It's a basically independent monetary policy functioning body, and the official reasons for that now feel very outdated. It's like, it's been so long, since we've worried about an excessively inflationary economy. Now, that the institution's interact with each other in this way that doesn't make a ton of sense really, because if you think about it differently ... If you think about the Fed chair as a more conventional presidential appointee, Trump did pick Chairman Powell out there. If you had, okay, it was the statement of the administration's policy that, "Look, we don't want to do more QE, we think the right way to fix the economy is more aggressive fiscal stimulus, direct transfers to households and businesses, because that'll avoid disruptions."

Yglesias:  That would be totally reasonable, as like if it was the statement of the administration's policy, who knows? It's a little unclear what the Trump administration's desires on fiscal policy are. That's its own kind of conundrum. But as an independent actor, it's a strange one. I think the persistent low interest rate environment is just challenging for a lot of people, in terms of how they ... On paper, it's good, right? If you have a worthy idea for business investment, it's easy to borrow money. That should be a good thing, right? I put solar panels on my roof. It's big upfront cost, but it was really cheap to finance. That's good. But in terms of how we think the political system should work, I think most people's intuition is that government spending should mostly be paid for with taxes.

Yglesias:  That the taxes should be efficient, that monetary policy should operate quietly in the background, without crazy new programs and weird acronyms. Just like none of that is true in a persistent, low interest rate environment. I don't know, I mean, I don't think the powers that be have fully thought it through. I was just seeing the other day how long it's been since the CBO forecast of future interest rates was undershot. 1994 was the last time. In general in life, if you ... Again, nobody's perfect. Predicting the future is really hard. But if for 25 straight years the forecast is often the same direction, there's something wrong, right?

Predicting the future is really hard. But if for 25 straight years the forecast is often the same direction, there's something wrong.

Beckworth:  Yeah, absolutely. Hey, let me ask another question about the Fed. I promise we'll get back to your book. Next year, the chair position is going to come open again. Well, 2022 I think is when his term, Powell's term expires. But the discussion surrounding it will be next year. I'm hearing talk on both sides that if Biden wins the presidency, there's some progressives that aren't happy with chair Powell and they want someone who's going to be harder on bank regulation, someone who's more aggressive on equitable issues, income inequality issues.

Beckworth:  Then people on the right, of course, may not be happy as well. Trump may not be happy as well. But what is your take? You're there in the heartbeat of the city. Is next year going to be a really interesting year with the chair nomination or should it be an easy smooth transition?

The Fed Chair Nomination

Yglesias:  There is an ongoing dispute among progressives as to whether to think of the important question in the Fed as the macro stabilization role, or the bank regulatory role. I am much more on the macro stabilization side. But a lot of people don't see it that way. To a lot of people, progressive people, their primary interest in the Fed is the Fed as bank regulator. Those people are very critical of Powell. They would really like to see him replaced by somebody who they think will be tougher on the banks. People who take a more of a labor market centric view think Powell's been fine.

Yglesias:  They did not necessarily favor firing Janet Yellen and bringing Powell in. I think from a certain partisan perspective, it's like the last two Democratic presidents reappointed their Republican appointed predecessors. There's a certain mood of just like, "Thanks for your service. We're going to put a Democrat in," which is separate. Lael Brainard, who's been on the board this whole time, starting with Obama, has often dissented from regulatory moves of the Powell Fed, but been very supportive of him on interest rate policy, she could be a plausible replacement for him that would meet everybody's needs. The Unions don't like her because of a completely unrelated dispute about trade from the early '90s. I don't know why they won't let go of that.

Lael Brainard, who's been on the board this whole time, starting with Obama, has often dissented from regulatory moves of the Powell Fed, but been very supportive of him on interest rate policy, she could be a plausible replacement for him that would meet everybody's needs.

Yglesias:  It doesn't seem important in any way. But she was Under Secretary of Treasury for international affairs in the Clinton administration. They have some beef with her. I don't endorse this at all. But so she's also a plausible candidate for treasury secretary. But I think in some ways, the union issues with her might be more severe there. Then Raphael Bostic is also in consideration at Treasury, but also potentially for a bigger Fed role, [he’s the] president of the Atlanta Fed currently. Sarah Bloom Raskin, I think is the other major Treasury contender, because she's married to a member of the House of Representatives.

Yglesias:  I think, [she] is seen as someone who would be an inappropriate Fed choice, although she has experience there too. I think that's just some of the math. Also, I don't know that your listeners will be in sympathy with this. But a Biden administration is going to have a lot of complicated diversity math to work out, in terms of its cabinet. Decisions that have nothing to do with economic policy in terms of who become Secretary of State are going to have knock on consequences for other appointments. They have some very complicated flow charts, I believe in the transition.

Beckworth:  That's interesting. It will give you plenty to write about next year. Never a dull moment that's for sure, covering the Fed as well as this transition year that may be upon us next year. Well, let's segue back into your book. Again, your book titled *One Billion Americans: The Case for Thinking Bigger.* Before we get into ... I just want to ask what motivated you to write this.

The Motivation for *One Billion Americans*

Yglesias:  I'm a generalist writer. I roam across a lot of different subjects. I don't have a single beat that that I work on, which is fine. But I sometimes try to think about, book ideas, agents would talk to me or editors would talk to me, and it wasn't that interested. But I came to see that, one topic I'm very interested in is housing policy. I feel that a lot of the high income, high cost cities in the United States have made it much too difficult to build houses, and would receive a lot of benefits from more house building, and therefore more growth in that respect.

Yglesias:  But as somebody who writes on and covers urban issue is, I came to travel to more cities that are places like Cleveland, places like Rochester, New York, places like Milwaukee, places that are a little bit down on their luck, and talk to officials there about things they are doing to try to change things around. It started occurring to me that, there are lots of specific ideas for say Rochester that are fine, but Rochester is just one of dozens of midsized former industrial cities in places with cold weather, that are suffering from these interlocking problems of population flight, tax base laws, infrastructure decay, and you couldn't actually do the best practices that experts have for each of these cities, for all of them.

Yglesias:  Because the premise in each case is that something or other you do, whether it's you get Toyota to bring their North American headquarters here, or you do something cool with infrastructure, or whatever else it is you do, the idea is like, make people want to live in Rochester again. But Rochester and Utica and Rome and Buffalo and Binghamton, just in upstate New York, are like all in this boat. Then you've got two or three cities in western Massachusetts, two cities in Connecticut, the big Midwestern cities, Detroit, St. Louis, Milwaukee, they can't all have this revival, right?

Yglesias:  It doesn't work in equilibrium basically. Then also, it would be sad if people ... It's really cool that Nashville and Austin, and some of these midsized cities are growing really fast. It wouldn't actually be better for like ... Some cranks are like, "Oh, you're ruining Austin, keep it weird.” But It's great. Lots of stuff is being built. There's tons of cool new restaurants there. It's good. I started to think like, "Well, maybe it would be better if there were just more people." I also cover immigration a little, because Donald Trump really hates immigrants, and try to look at some of this stuff.

Yglesias:  Immigration is just, it's very beneficial. I don't know if ... Bryan Caplan wrote this book, on the case for open borders, which I think is a little extreme for non-economic reasons. But he really goes through the economics of immigration. They're very impressive, and I think convincing way that it's just like, it's really good in a way most people don't appreciate.

Yglesias:  The problems are addressable with measures that are so much smaller than, like, "No, you have to live in Cuba forever." Because the benefits to the immigrants themselves are so large, that if there's a minor negative impact on somebody else, it's really easy to find win-win solutions for this. I'm sort of thinking, "Okay, it's like, we can fix all these cities problems. We can have more immigrants." I mostly interested a little bit in classic progressive stuff about the welfare state, and child poverty and this and that. But then I started hearing some of this right wing guy, Lyman Stone's research about the stuff about how people have fewer children than they say they want to have, about how his fertility graph is really growing.

Because the benefits to the immigrants themselves are so large, that if there's a minor negative impact on somebody else, it's really easy to find win-win solutions for this.

Yglesias:  That other stuff that is like, "Oh, like millennials don't want to have children anymore because of climate change." There's very little research basis for that. The main thing that people say is that they can't afford childcare. Then you can look at international estimates of the impact of paid leave programs, cash grant programs, and oftentimes those are undertaken by far right Central European governments, whose instinct is to say they don't like the idea of a welfare state, but they get into natalism, and then they wind up disappointed by the results.

Yglesias:  But if you read those results, as a person's like an American progressive person who thinks that, reducing child poverty by a third is a really good idea. Then it also turns out that the same programs that will do that lead to maybe a quarter more children per woman being born, that's an interesting kind of secondary result that people don't know about, that Democrats don't like to talk about, because only religious people think this is interesting. Then it added it up and it's like, "I don't know, it's like maybe we should just have more people."

Yglesias:  I used to cover foreign policy. It's been a long time since I covered foreign policy. But I do follow the NBA quite closely. I was really freaked out when Daryl Morey tweeted in favor of Hong Kong protesters. The league lost their China broadcast rights and everybody lost it at him. The players were like, "Well, you shouldn't say that."

Beckworth:  Yeah, that was a very disappointing episode to follow as an NBA fan for sure.

Yglesias:  Yeah, it was really weird. It was bad and then you just say, "Okay, well, I'm going to get mad at the league. They did the wrong thing." But it turns out that Hollywood studios are doing very similar things. There was this crazy story where there was a Mercedes marketing campaign, where for some reason, they decided they should quote the Dalai Lama in an ad campaign for Mercedes, which I don't know why you would do that. But they did. The Chinese government lost it. The CEO of Daimler winds up doing this groveling apology. It was just like a German story, not an American story, but appalling.

Yglesias:  And the event to which the dream of the '90s, where economic integration was supposed to spread liberal values to China that is really not worked out. Instead, the size of the Chinese market means that they are now really impacting the speech and practice of American multinational companies. It's right now very focused in entertainment industries, but you see elements of it in academia, and it will grow as they become the world's biggest market for things. The United States has been the world's biggest market. Nobody has been alive in circumstances when we weren't.

Yglesias:  Before that it was Britain, which is not the place even in the 19th century that would do that. It was a much more classical liberal kind of paradigm. There's a big issue. Politicians talk about China all the time. There's some report the other day about, how many warships we need. But it's relatively unlikely; I think that we're going to see surface naval combat. We might, but yeah, there's lots of good reasons to not have a war. But it's very likely that we will continue to have businesses that want to do business in large markets around the world, and that they will feel impacted, by the Chinese government's attitude toward things.

Yglesias:  I think there would be a real benefit to the United States in trying to remain clearly number one for the long haul. This is not a, it's not like a Council on Foreign Relations type book. If it was I would, I don't know, there would be stuff about what kind of rocket launchers we should sell to Vietnam or something like that. But the underlying basis of America’s geopolitical strength is our economy. I think it's not our military. If you try to play the USSR in the '70s game of, "We have really cool missiles, even though our economy is a shambles."

But the underlying basis of America’s geopolitical strength is our economy. I think it's not our military.

Yglesias:  That doesn't work, we know, in the long run. Trump likes to talk about China a lot, and Obama would vaguely invoke the idea of winning the 21st century. I don't even know what Biden thinks he's saying about anything. But it's both a presumption of American politics that we should be number one, but also not something anyone is focused on. What are we going to do? I wanted to write a book that just, it ties us all together; it says like, "We should set this high goal, we do with immigrants, we do it with babies, we adjust our transportation policy, we adjust the way our housing policies work." I even get a small plug-in there for raising the r star up. We could have better stabilization. It's all there. It's all there. Everything comes back to the Fed ultimately.

Beckworth:  Thank you for that that plug there, Matt. No, but it's a great book, because it is. It ties together all these different themes. It ties together the declining fertility rate in the US, immigration debates, housing issues, transportation, our engagement with China and population growth, in your case, tripling the size of the US is both the solution, but also some of the challenges we have to work through to get to that point. I was going to read your introduction. I'll let the listeners do that. But you come out very forcefully up front, talking about we should not resign ourselves to being second or third place in the world. We need to maintain our number one status.

Beckworth:  We can do that by growing our population to one billion, and in the process be forced to deal with some of these issues that we haven't. As you mentioned, most politicians would agree with this. We want to be number one, but both the right and the left really aren't clearly and carefully thinking through all the implications of their policies and how it affects that trajectory. But I guess what was surprising Matt for me, as I read the book was this framing, keeping America number one. That's not a typical framing from a progressive person. Many progressives would be squeamish if you said something like that. They might say, "Yeah, we love more immigrants. Maybe we love changing housing policy." They'd agree with all your other points. But I got to imagine you got some blowback.

Yglesias:  It's interesting, something that happens whenever you do a book. This is a pretty fast book in the scheme of things. But still it takes a long time from when you write that proposal, to when it comes out and a lot of things change. I do think the theme of anti-patriotism on the left rose a lot in salience over the past year, while I was working on this. It became more of an ideologically interesting book to some conservative people. I had a good reception on Ben Shapiro's podcast, on Glenn Beck's show, and a bit more of a challenging one for progressives.

Yglesias:  The New York Times assigned my book to an Englishman, Felix Salmon, who is, he just wants ... That was his response. He was like, "Well, these are fine ideas, but what's all this stuff about American greatness?" He just wants to tax our tea and stamp some things. You can't count foreigners. I think that's an interesting tension. If you watch Kamala Harris give a speech on the campaign trail, she'll be surrounded by little American flags.

Yglesias:  It's totally normal for progressive politicians in the United States to invoke the images and languages of American and you look at her speech at the convention, it's very different. I've covered elections in Germany and in Germany, for reasons that I think I don't need to belabor, patriotism is really quite stigmatized there. You'll see flags on government office buildings, but individual politicians do not attempt to associate themselves with the iconography of German patriotism. Whereas Joe Biden, the day before we record this podcast, he wants to deliver a speech.

Yglesias:  His house is in Wilmington, Delaware, but he goes several hours from his house to the Gettysburg battlefield, which is both within driving distance, but as a symbolically resonant point, and he gives a speech about how we are once again a house divided. He invokes Lincoln. He's standing by flags. Now we take that for granted, right? When you see him doing that, we're not like, "Oh, man, progressives are going to be mad about this."

Yglesias:  It's so normal in America. But it is true that it is a gap between where progressive practical politicians are, and where a lot of left wing intellectuals are. To write like an actual book, instead of a schlocky campaign speech that invokes these same ideas some people found troubling, but I actually think it's important. There's factual ... For one thing, the Chinese government is actually really, really bad.

Yglesias:  I think it's good to be clear about that. But I also think thematically, this is one place where I differ from say, Caplan's book on open borders. He's a libertarian, not a progressive, but I think he aligns with a lot of leftist intellectuals on this. But part of why the United States has a successful history and track record with immigration I think is that, we have a strong civic culture of patriotism. We have a lot of neutral civic symbols. We have a lot of ... I'm sure foreigners think it's silly that Americans will get into very earnest arguments about, what would Alexander Hamilton think about something. It's a little dumb, right? But we have these figures who are an agreed upon pantheon of national heroes, and we have debates about them.

Yglesias:  We talk about what Lincoln would say, and it's part of what makes America an open society. That like we can say, "These people were the fathers of our country, even though you know ..." Not just like recent… Asian, Latino people, African Americans, but people like me. I am not a literal descendant of anybody who was here in the founding period. But those people are still the founding fathers of our country. That's why your parents could be from Vietnam or Mexico or whatever. It's why we have a particular trouble around the descendants of enslaved people and of indigenous people, is tricky, because that doesn't fit as nicely into the patriotic story of most of America.

Yglesias:  But still to me, the foundation of inclusion rests on the idea that those ideals and those symbols have real value. I think that's a very traditional American idea that I'm expressing there, that has come under some question lately, but I think basically, the old thinking is correct.

The foundation of inclusion rests on the idea that those ideals and those symbols have real value. I think that's a very traditional American idea that I'm expressing there.

Beckworth:  Okay, Matt, let's move into the material in your book. I will fly by chapter one on the relative decline, just briefly highlight that China can actually never catch up to us on a per capita basis, but still be larger than us in absolute total basis, and have that influence on the world economy that might concern us. But let's move to the chapters that I think are interesting. You get into some of the issues that people have a hard time with, and that is having a billion people in America. Chapter two, you start this discussion and you talk about America being empty. Speak to that, is America really empty?

American Emptiness: The Story of Urban Centers in the U.S.

Yglesias:  There's not a lot of people in the United States. Headline conclusion here, it's like a billion Americans, it sounds like a lot, that we would have the population density of France, and we would be lower than Italy, Germany, Netherlands, UK. Asian countries are way denser than European ones. The United States is just an incredibly sparsely populated country. Then you could compare us to our friends up north, the Canadians who are even more sparsely populated. I think most questions you could ask about, well, would it be bad if we tripled the population?

Yglesias:  You could ask compare us to Canada, right? Michael Anton at one point was like, "Well, our high schools will be overcrowded." But American high schools aren't any more crowded than Canadian high schools. We just have more high schools. It's pretty obvious when you think about it, Canada is just a country where there's a vast, empty wilderness in which nothing is happening, and it's very cold. It's fine. But it doesn't accomplish anything. It's not like they all have huge houses. We have bigger houses than they do. Because houses or construction projects, schools, you build all kinds of things like that, and we're richer than them, which is good.

Yglesias:  Because nobody ... I guess they tried to have Blackberry there. But usually, if you're an ambitious Canadian person with really big ideas, you try to move to America, just like New Zealand, Australia, maybe London, because people want to do things in big markets and big cities. That's where big opportunities are. The United States just has a ton ... We're a big country, because it's physically expansive. But we have lots and lots of room. Lots of prosperous countries are much more densely populated than we are. We have plenty of space to bring more people in.

We're a big country, because it's physically expansive. But we have lots and lots of room. Lots of prosperous countries are much more densely populated than we are. We have plenty of space to bring more people in.

Beckworth:  Well, this chapter really ties together some of your other chapters about having more children to come back to cities. Just kind of tie this together. We have low density, but we're also bleeding in certain parts of the country. You mentioned some of these Midwestern cities. Detroit, I was really shocked to read in your book, its population for the city itself went from 1.85 million to 380,000. That's a huge decline. Is that just the city proper itself or the metropolitan areas as well?

Yglesias:  It's just the city proper. But what's been an interesting trend is that, we've now started to see in Detroit and in Chicago, whole metro areas have started losing people. On some level, we have World War Two and then after World War Two we have, a lot of people get cars, which is good. We have a lot of new home building, which is good. A lot of central cities lose population, because people move to the suburbs. That's fine. That's the march of progress. But then in the West Coast and in the south mostly, the central city population stabilizes. The suburbs grow, but the central city also grows.

Yglesias:  Then the big Northeastern cities like New York, DC, Boston, that started to happen. But in the smaller Northeastern cities and the Midwestern cities, the central cities have kept losing people, because national population growth rate is low. It gets very problematic when you reach a certain level. In Detroit, they literally have trouble keeping the traffic lights functioning, which is an extreme case. But you just look at Baltimore, which is a city with many problems, and they got to address them. But a ton of their budget goes to meeting pension obligations, that the larger city of the past incurred at a time when they just needed more people to do more stuff, and that's really hard.

Yglesias:  If you don't have a superstar industry like Google or Wall Street banks, and you just have this monkey on your back of, it used to be hundreds of thousands of more people living here, and now we need to pay off their debts, that's really challenging. If it was one place, you can just say, "Okay, move. It's fine." I used to have this very neoliberal view of that. But it's actually so many places, and there's so much ... I don't know what you call it, like acute fixed capital in the housing stock, the buildings, the infrastructure, and its market value has become very low, because there's not people there, right.

Yglesias:  The K in the production function, like actually decay is, because it doesn't have any economic value. It's an incredible waste at a time when we have lots of other places that are very overburdened. You can't just substitute air traffic control capacity in Detroit, for air traffic control capacity in New York.

Yglesias:  Because they're different locations. But we have all this stuff in the Midwest that is not used at anywhere near capacity. Many millions of people living there, sometimes freaking out and voting for Donald Trump and various other kinds of problems, so I do think we should take it seriously. But then the question becomes, do we have solutions that are non-destructive? Because you turn around and you look at like, "Well, okay, we'll put a tax on imported metal." That's a real thing that happened, and how does that actually help? Whereas, if we had a systematically higher rate of population growth, then places that can offer cheapness compared to the big coastal cities, and other stuff like that, they're just good places for people to live and can stabilize.

If we had a systematically higher rate of population growth, then places that can offer cheapness compared to the big coastal cities, and other stuff like that, they're just good places for people to live and can stabilize.

Beckworth:  Yeah. You mentioned how in places like Detroit that the value of the housing is declining so much, that landlords have no incentive to maintain them so people who rent they're living in homes that are increasingly run down. I remember a few years back going online and looking at homes in Detroit and thinking, "Man, those homes are so cheap." But then you realize there's no reason to move there. The work isn't there. The networks, the people aren't there. The argument you make in the book is all of these problems, or many of these problems could be solved by having a lot of immigration coming in and filling these holes, filling these cities that are bleeding.

Beckworth:  You mentioned the example of Cleveland, Cleveland is amazing city. It has the Cleveland Clinic, has a great orchestra and museums, and it would benefit immensely from people coming in and filling in and providing that tax base. You also highlight, there's this snowball effect, when people leave, it reinforces itself and more people want to leave, young people want to leave, there's less opportunity. To reverse that it's going to take mass immigration to fill these holes in the city. I think it's a very compelling point. Let's talk about some of the practical policy suggestions along those lines.

Beckworth:  You mentioned decentralized federal governments, national renewal visas and new universities. Touch on those and how they could be used to make sure people end up in Cleveland and Detroit.

Ideas for Reinvigorating America’s Forgotten Cities

Yglesias:  Yeah, so one of these ideas is something the US Conference of Mayors has come out for, that a lot of smaller Midwestern mayors have talked about, but is let cities sponsor extra visas. Right now we have a guest worker program called H1B, where a company that wants to bring people with technical skills over to work for them on a temporary basis could do that. We have a quantitative limit on how many people could come on visas like that. You need to do a lottery. You could create a second program for cities rather than companies to sponsor people with technical skills and say, "Well, you can come here."

Yglesias:  Suddenly, if you have a pool of skilled technical workers who are eligible to live in Cleveland or Detroit or whatever else, that becomes a good reason for whether it's an outsourcing… a company like Infosys or Accenture could build an office there, and the people go work there, or a big US tech company, Microsoft, or Google pull might say, "Well, we should have a satellite campus there." It provides a shot in the arm to cities that have meaningful assets in terms of social capital, civic institutions, much more attractive house prices, but just don't have opportunities.

Yglesias:  It's an opportunity for the immigrants. But once it's there, if there was offices to hire white collar people at high wages to work for market leading companies in Cleveland, some people would say, either because they’re sick of the high prices in San Francisco, or just because they have family in northern Ohio like, "Yeah, I would like to work there." It stops being a kind of like, I control myself by looking at the real estate prices. But it's not practical to suddenly, it's a real option, like, yeah, maybe I should go do this. Decentralizing the federal government, the idea here is, for the longest time Washington had this reputation as a backwater place.

Yglesias:  But it's now become actually one of the richest and one of the most expensive metro areas in the country. Which means I think we should think a little bit harder about, do we need all this white collar federal employment here? Obviously, a lot of stuff in the government does ... The State Department is in Washington for a very specific reason. But the NIH is in Bethesda sort of just because. The guys who write medical research grants, they're not rushing over to the White House. Now, obviously, there's a pandemic.

Yglesias:  Now there's a somewhat special circumstance. But most of them are like, they're trying to develop cancer drugs, right? That could be in Cleveland, which has a big healthcare cluster, where the real wage would go further, where the jobs that would be lost in this area would be quickly recouped as sort of rebound for the costs. As you talk a little bit about the idea of trying to get even the private sector to de-concentrate out of a few places.

Yglesias:  Which is a tougher one. I think in a lot of ways, it cuts against the grain of American policymaking, which tends to take a very arm's length view of things. But it's crazy to go to the Bay Area, where everybody is mad at tech companies for hiring too many people at high wages, and then to go to almost anywhere in the United States and the local elected official, ... Republicans or Democrats, they would be so happy for Apple to build a huge new corporate campus in Kansas City. But where they want to do it in Palo Alto, the city is yelling at them constantly and they're like, "Oh, you're going to have too much traffic jams."

Yglesias:  It's like if there's something the federal government can do to bust up that dysfunctional relationship between tech in the Bay Area and finance in New York, I think it would be useful.

Beckworth:  All right, let's talk about children and families now for a little bit. Immigration is one way to get the numbers up, and probably the most practical way to quickly get numbers up, because it will take a lifetime of rearing and education and lots of investment in human capital, economists would say, whereas with immigrants, they come right in. Some other countries bore the cost of investing in these people. One of the things that you highlight is, there's this tension between the two parties in terms of promoting family policies. On the right, typically, they're a little more allergic to immigrants.

Beckworth:  They love families, but they don't have policies that strongly support families. On the left, they are more open to immigrants, but then they get nervous talking about pro family policies for various reasons. Between those two, you definitely have some roadblocks to get through. But you make the compelling case for population in general, that the more people you have, the larger the markets, the greater the specialization, the more productive. Ultimately, I think in page 140 ... This is where I was looking for; this is to me the gold standard, more ideas.

Beckworth:  It's one thing to say we have bigger markets more specialization, which is true, but more people means greater probability of Einsteins being born, smart people, the distribution of intelligence, the people who are going to solve climate problems, the people are going to solve technological hurdles, you got to have them. I think ultimately, this is a question of do you look at people as stomachs or brains? If you're looking at stomachs, then you worry about the climate crisis and say, "I only have one child," but if you look at them as brains, you want to say, "Look, let's get more people in here solving climate problems through innovation," and fewer people means fewer chances of having those smart people to solve the problems.

The Importance of Children and Families

Yglesias:  Yeah. I got Paul Romer to blurb my book, and probably could have had a more explicit discussion of [inaudible] growth model in there. Because it's part of what is inspiring my thinking there. I think a lot of normal people underestimate the role of innovation and ideas broadly speaking, and driving prosperity. Even if you get it on some level, but it's like, when you invent something that is really useful, because you can copy ideas, it doesn't matter that there's a large number of people. It's not like you know, it's like, if I find a coconut tree, then if there's a lot of people, they don't get a lot of coconuts.

Yglesias:  But if I invent something awesome, then it doesn't matter. I can share it with a billion people. I can share it with an arbitrary number of people. But the more people there are, the more likely it is that somebody will invent something awesome. The per person living standards are higher in the larger group. It's a very abstract model, but it's also true. If you look at macro historical stuff, so it's like, on the indigenous population in Tasmania, was it an incredibly low level of technology compared to even main Australia. Because it's just not enough people.

Yglesias:  They're not worse people than Australian Aborigines or anybody else anywhere, but it's such a small island. It was such a low quantity of people. Frankly, just like most of us don't invent anything particularly useful over the course of our lives. There's a lot of free riding on a relatively small number of people who come up with stuff, that moves the ball forward, and also a lot of invention. This being a little bit flip about it, but a lot of innovation in practice is incremental. It's not just one guy comes down from the mountain top and it's like, "Here's how we're going to have electric lighting in our houses."

Yglesias:  There's stuff about the filaments, there's stuff about the vacuum. You need to have a lot of people around for this to actually, this iterative process to actually work. It's one reason why ... It'll be interesting to see what happens with remote work in the long run. But traditionally at least, big growing companies that want to do things, have wanted to be in major metro areas, like places where other companies are and lots of stuff is going on, because they don't really think that you can get it done in total isolation from the rest of the universe.

Traditionally at least, big growing companies that want to do things, have wanted to be in major metro areas, places where other companies are and lots of stuff is going on, because they don't really think that you can get it done in total isolation from the rest of the universe.

Beckworth:  Yeah, absolutely. Let me plug Julian Simon here. I know you've seen me tweet him a few times, maybe you're getting sick of me tweeting him. But I think he has a great point to add on to your points in the book. You make the points, more people, more specialization, therefore more learning new innovations, but also more people just, again, higher probability of someone brilliant being born, more ideas. He would take the argument to the next level and say, "Look, you have a bunch of people. There's going to be some points of scarcity, clogged roads, climate change, and you need those moments of tension, those moments of scarcity for us to innovate."

Beckworth:  That's what drives change is, when you come to these pressure points, this pain. This is I think another point that you allude to in your book is, if you had a billion people, we would be forced to make choices and to think about what tradeoffs we really want it to go down. I think we would see some of the policies we've longed for that lead us in that direction. Well, let's move on the time we have left to a few other areas in your book. I know one of the immediate push backs to this, if someone's listening who hasn't thought about these issues or if is the first time, they'll say, "What about transportation? What about traffic?" You have some good responses to that. Walk us through that.

How to Improve Transportation Policy

Yglesias:  Yeah, I love transportation policy. On some level, this whole book is a pretext to write about how we can deal with traffic jams, because it's such a sticking point on so many things. On both local politics, but also big macro politics people are like, "What?" It's going to be traffic jams. It frustrates me because economists often make a lot of bold claims for themselves. Sometimes those claims are not really correct, and they don't know the secrets to economic growth and things like that. But we really can solve traffic jams by charging for the use of roads. The theory behind that is sound in practice, where it's been tried in Singapore, in Oslo, in Stockholm, now in London.

Yglesias:  It will be coming to New York soon in modified form. It works really well If you charge people to go on the road, in proportion to demand, you can get the roads flowing at a high capacity. Of course, people don't like to pay for things. But we have a lot of taxes. It's not like we're not paying any money to our local governments. If your local government acquired a huge stack of money by eliminating traffic jams, they could then use that to have lower sales taxes or lower property taxes, or whatever else, and we'd all be very happy. Then to have really big dense cities, you need mass transit.

Yglesias:  I talk about some of the best practices in transit planning from Northern Europe and in East Asia, what we can do there? The United States is mostly a country of people who drive around. Even at a billion ... Something I wish American progressives appreciated more, because a lot of them admire aspects of the European and Asian built environment. I think rightly so. But like, Germany is six times as densely populated as the United States. Obviously, a country like that is going to have more people using public transportation. I do it the other way.

Yglesias:  It's like, if we tripled the population, we would need to import some of these European planning concepts, which I think is correct. What a lot of my progressive friends are like, "Well, we should import these European transportation planning concepts." But it's like, "Why?" It's intuitive to them. Because if you get into the headspace of “Munich is awesome,” then it makes a lot of sense. But like most Americans live in low density suburbs of cheap midsized cities. Where would they take the train? It doesn't actually make sense unless you posit some kind of large increase in the number of people who are living here, or you're just specifically talking about New York City, which is where a lot of journalists live, obviously. It gets a lot of coverage, but ...

Yglesias:  It's a very eccentric case. It's the fifth largest city in the world. The United States is not close. The other really big cities are in Japan, which has such a more dense... Put it another way, Tokyo is less of an outlier relative to other Japanese cities than New York is compared to other American cities, because Osaka and all those other cities have also big densities. America is not like that. When journalists sit around on the broken subway, trying to get from Queens to somewhere, it's very real in their lives, but has almost no relevance to mainstream American lifestyle unless the country became a lot denser.

Beckworth:  That's a good point. Going back to what I said earlier here, this is a case where necessity would lead to the innovation you need that pressure point. Right now, we don't have in some parts of America, as we mentioned, Detroit and in these Midwestern cities actually it's going the other direction. I think tied to this and complementing this, is your discussion on housing, which we don't have time to get into. But you do want to have more dense housing, near the mass transit, minimize the driving so forth. I'll let listeners take a look at that in the book.

Beckworth:  But what I do want to touch on in our last few minutes here is the secular stagnation argument. We've been waiting for this point, Matt, because I know probably you haven't discussed this the whole lot with your other interviews you've done for the book, but talk us through why population might actually be good for beating the secular stagnation dragon that's in our world right now.

Beating Secular Stagnation

Yglesias:  I was interested ... Larry Summers kicked off this modern, secular stagnation conversation a few years ago. I actually went back and looked at what Alvin Hansen had said about this, because he was the one who invented the phrase. It was interesting; Hanson's presentation of secular stagnation is almost exclusively about population growth, which Summers doesn't talk about at all. If you look at Hansen's argument, so he is looking at, he says, "Well, population growth has slowed down dramatically," which was true as of the mid-1940s. Because population growth is so low, there is less demand for physical capital. Because there's so little demand for physical capital, there's not a lot of ...

Yglesias:  You have these low interest rates. All the secular stagnation stuff that Summers talks about falls out of it. Then you read it today, knowing the history of the United States, and you're like, "Well, this is not an address you would give if you knew the baby boom was right around the corner." that's, of course, why this whole analysis was immediately forgotten by the economics world, because we really swiftly moved into a period of actually very rapid population growth, driven first by babies in the 1950s and 1960s, and then by a huge wave of immigration, particularly in the '80s and' 90s, in which there was tremendous demand for houses basically, capital, strip malls, all this stuff sprawl that exists in the United States.

Yglesias:  That's resource intensive. That has faded away, and I think is oddly missing from Summers's analysis of what it is that's going on here. If you look internationally, all the developed countries are in a little bit of a stagnation mode. But the least, the highest interest rates are in Australia, and the lowest are in Japan, and the US and Europe are in between, with Europe's interest rates lower than America's. That's exactly the rank order of population growth. Australia has what's by contemporary developed country standards, a rapidly growing population, and they consequently, they build a lot more stuff in Australia than they do in the United States.

Yglesias:  In Japan, they don't build anything. On net, they do build some things. But in particular, if you want to know all this stuff about like, "Well, why are they building all these bridges to nowhere in Japan?" Imagine if the Japanese population was growing as rapidly as the Australian population, you wouldn't be like, "Oh, what can we hire these construction workers to do?" you would hire them to build houses for people to live in. If you had an uninhabited island and you built a bridge to it, it wouldn't be a bridge to nowhere. People would go live on the island. That's classic infrastructure.

Yglesias:  We didn't say the transcontinental railroad was a train to nowhere. It was a train to the western United States. But that's because we took for granted in the 19th century that the population was growing. If you build something that worked, some somebody would go live by the train tracks, people would put farms up and they would deliver goods to market. The stagnation I think is fundamentally a population slow down issue. You can deal with it like the Summers ... I don't think I totally understand what Summers’ proposal for dealing with it is. Something like I don't know, like whatever it is, he thinks will get Democrats to make him Fed chair to be able to [inaudible] about it.

The stagnation I think is fundamentally a population slow down issue.

Yglesias:  I think a lot of people resist the conclusion that the government should just run giant open ended budget deficits. It's aesthetically troubling to people who think things should be neat and orderly. It's politically troubling to people who don't think money should be wasted. I think a lot of people, like center to center right people will say, "Oh, you progressives, well, you should be more like those nice Nordics, where they have like a broad tax base, and a lot of attention is paid to tax efficiency, and a lot of attention is also paid to the efficacy of the public services," because the idea is, loosely speaking, that in Finland, you middle class Finnish person, are going to pay for this public service, so it better be good.

Yglesias:  Whereas in America, we have a lot of Democrats will rattle off 17 things they want to do, and then you're like, "How are you going to pay for that?" It's like, "Well, tax billionaires." Or they'll say, like, "Oh, MMT. We don't need to pay for anything." It's not as wrong as people would like it to be. The interest rates really are incredibly low. But I think a lot of people correctly have the intuition that, this is not a great way to run a society. Our public spending should be on worthwhile projects, and we should think about priorities.

Yglesias:  But the only way to do that is to get back in a world, where there is meaningful private sector demand for capital. Some of that is regulatory. But a lot of it is just population, it’s like, if nobody lives here, then it's like, well what would the demand be for?

I think a lot of people correctly have the intuition that, this is not a great way to run a society. Our public spending should be on worthwhile projects, and we should think about priorities. But the only way to do that is to get back in a world, where there is meaningful private sector demand for capital.

Beckworth:  As I read that chapter, a scatter plot came to mind. You mentioned those countries; Australia has the highest interest rates of advanced economies, also highest population growth. I instantly kind of, my mind mapped that a little scatter plot, where you've had interest rates and population on one axis on the other axis, and then you would see exactly Japan in one corner, Australia in the other corner and the US and Europe on that line somewhere. In practical terms, it would end the zero lower bound challenge that the Fed faces now. It would get back to more normal monetary policy action.

Beckworth:  There's a lot of good reasons to want to have more immigrants here. They would be better off, we would be better off. There'd be a lot of more satisfaction to all the people who say they want more kids, but can't have them. There's a lot of changes that we'd have to go through but I totally endorse the message of this book is we need more Americans.

Yglesias:  I think if Jay Powell wants to make some off topic commentary, he should encourage people to buy my book, because everybody is mad all the time, that we don't have a more normal monetary policy framework. But this is the reason why. I don't know if they're doing everything perfect, but they're doing what they can in a world of very low population growth, and structurally low demand for physical capital. Maybe people won't listen, but that is the reason. If you are annoyed, that they can't just fiddle with the Fed funds rate, it's because the population isn't growing.

Everybody is mad all the time, that we don't have a more normal monetary policy framework. But this is the reason why. I don't know if they're doing everything perfect, but they're doing what they can in a world of very low population growth, and structurally low demand for physical capital.

Beckworth:  If you're one of the people also who are worried about savers being harmed by low rates, this is the answer. This is the ultimate deep answer here. Again, higher fertility rate is one part of the solution. That's going to take a long time, so higher immigration, legal immigration. In fact, one of the things you bring out in the book is, President Trump is not just pushing against illegal immigration, but legal immigration. He wants to lower it by 50%. The path we're on is not a very hopeful one in terms of population growth. If the policies we have in place continue, we're going to keep going down the wrong path.

Beckworth:  That's alarming you to think about. You can't help but think about it as you read this book and with that, I have to stop here. Our time is up. Our guest today has been Matt Yglesias. His book is called One Billion Americans: The Case for Thinking Bigger. Matt, thank you for coming on the show.

Yglesias:  Thank you.

Photo by Dominik Bindl via Getty Images

About Macro Musings

Hosted by Senior Research Fellow David Beckworth, the Macro Musings podcast pulls back the curtain on the important macroeconomic issues of the past, present, and future.