We welcome Jason Furman, Aetna Professor of the Practice of Economic Policy jointly at Harvard Kennedy School to discuss what could potentially be a catastrophic default of the national debt. We'll get into President Biden's economic policies, inflation, and recession over the next 12-18 months. Jason came to play with some humor, positivity, and a great stat.
We welcome Jason Furman, Aetna Professor of the Practice of Economic Policy jointly at Harvard Kennedy School to discuss what could potentially be a catastrophic default of the national debt. We'll get into President Biden's economic policies, inflation, and recession over the next 12-18 months. Jason came to play with some humor, positivity, and a great stat.
Full episode transcript
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Follow Mark Zandi @MarkZandi, Cris deRitis @MiddleWayEcon, and Marisa DiNatale on LinkedIn for additional insight
Mark Zandi: Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by my trustee co-host, Cris deRitis. Hey Chris.
Cris deRitis: Hey Mark. How are you doing?
Mark Zandi: We're missing Marisa, just something came up. Unfortunately we'll miss our humor, but good to have you. Not sure about your humor.
Cris deRitis: Yeah, sort of second class.
Mark Zandi: Yeah, but we'll make due. How was your week?
Cris deRitis: Good.
Mark Zandi: Yeah.
Cris deRitis: Abbreviated week, but it's good.
Mark Zandi: Abbreviated? Why was it abbreviated?
Cris deRitis: Martin Luther King Day on Monday.
Mark Zandi: Oh, was that this week? Boy, that seems like a long time ago to me. I traveled to New York and D.C. this week.
Cris deRitis: Oh, okay.
Mark Zandi: Yeah.
Cris deRitis: You didn't stop by?
Mark Zandi: Actually, I did. I stopped by my home in Pennsylvania just to make sure everything was nailed down tight. I did notice all my plants are distressed, so got to do something about that. I did notice that... I was down in the financial district at Moody's HQ, 7 World Trade. I will have to say very, very quiet. This was a Tuesday and not a lot of activity down there. Then I go to DC and I'd have to say it was pretty quiet, at least where I was, around a lot of the government buildings. I don't know, just doesn't feel people are coming back.
Cris deRitis: Marking down your forecast, I take it.
Mark Zandi: No, I took that into account. That was already baked into the forecast. That's what I totally expected. Although, I did hear the mayor of DC is now... I think they're going to require federal government employees to come back, if not full-time, pretty close because he wants those office buildings filled.
Cris deRitis: Right. Yeah, it's either/or. Either go back or give us the space.
Mark Zandi: Give us the space. Yeah. That's a lot of space. Anyway, we've got a guest, Jason Furman. Jason, good to see you.
Jason Furman: Good to see you.
Mark Zandi: Thank you for joining us. Everyone knows you, but just to introduce you, Jason is a professor at Harvard University. You've got a long career. Jason, you probably don't remember this, but I think the first time we met was you were working on the John Kerry campaign for president, I believe.
Jason Furman: I remember then. I think you were doing some analysis. Was it of our health plan and its economic impact on some of our different plans?
Mark Zandi: Yeah, I think that's what it was. Yeah, I remember it's the first time I met you, and I think it was the first time I met Gene Sperling too, because you guys were working closely on that campaign.
Jason Furman: Yep.
Mark Zandi: Yeah. You've gone on and done many things in many administrations. Do you want to just give us a little bit of your personal history. I think people would find that fascinating.
Jason Furman: Yeah. First of all, it's great to be on here. I was always really... I loved math and physics, but I also loved the real world and the political debates and the stuff that was happening around me. For me, economics was a really good way to combine those two. You could think in a logical, rigorous, numerical way, but [inaudible 00:03:33] at something maybe even more interesting than quirks and leptons, but the incredibly complex thing that is the billions of people interacting to make the global economy and the biggest questions of poverty, growth, everything else. I thought I was going to be a pure academic. I went straight from college to PhD program. Then I went just for a year, I thought originally, to work in Washington at the Council of Economic Advisers under President Clinton. I discovered I really liked not just the theory, but the practice and the being engaged in things.
In some ways it was almost more challenging because economists can often figure out the right answer, but often the world doesn't want to do the right answer. Then you need to figure out the second best or the third best, or how to repackage it or how to persuade people that it's the right answer, discovered I really liked all of that space, so I ended up spending a couple of years in Washington, going back, finishing my PhD. I won't go through the whole bio. Ended up in the Obama administration for eight years. When that left, came back to Harvard. I'm just having a great time here at the university, teaching, learning, writing, and talking to you, Mark.
Mark Zandi: Well, it's good to have you and you're certainly understating all the things you've done in your wonderful career. Ultimately in the Obama administration became chair of the Council of Economic Advisors. Is that right?
Jason Furman: Yeah, and that's where I had worked in the '90s under President Clinton, and I went back to head it. It's just such an amazing, wonderful place because it's a group of economists. They're really thinking about economics, but they're not doing it completely detached from reality. They're sitting basically right in the White House complex and input into every decision. It was such a honor and privilege to lead that group and take advantage of the fact that every time I was with a group of political people, I knew more economics than any of them. Then I'd go back to our amazing economic team and try to figure out how to make their work relevant and fit in to what was needed by the political people.
Mark Zandi: Was Ceci part of the council?
Jason Furman: Ceci was a member of CEA at the beginning of the Obama administration. I was at the National Economic Council, which is a little bit more political and strategic.
Mark Zandi: Oh, that's right. You were NSC before you were CEA.
Jason Furman: Yeah, I was at NSC. She was at CEA. She was there, I think, probably about two years, and then made her big return as chair of the council under President Biden.
Mark Zandi: Sure. Do you miss being in the White House? Do you miss that?
Jason Furman: Certainly, I look at the issue of the debt limit, and I don't miss it in the slightest.
Mark Zandi: We'll come back to that.
Jason Furman: I'm now like, "Oh yeah, I'd really love to be solving this completely artificial, manmade problem that has no intellectual content." No, there are days, I miss it a little bit. First of all, I had a great beginning, middle, and end experience there. We came in the door with the financial crisis. We left with the economy in much better shape, not perfect shape, and I wish it had grown faster and all of that, but much, much better shape than we came in. I don't think I could ever reproduce that experience. Also, I continue to be engaged in public policy. I'm not in government, but I speak to people in government. I write things that hopefully they read. I go on podcasts like this. I have enough day-to-day in the flow of things. In fact, I probably have more day-to-day in the flow of things than I'd like to have.
Mark Zandi: Well, thanks again for coming on. I think of you as someone who has a very large intellectual palette, that you are able to speak to, provide a lot of insight and be very thoughtful on lots of different subjects. I'm going to take advantage of that and try to talk about a lot of different issues that are bugging me, bugging our listeners and I'm sure policymakers as well. No particular order of importance here, but most immediately, top of mind, you brought it up is the debt limit. I should say we also played this statistics game, I mentioned that to you. At some point here in the next hour or so, we'll come back to that game. I'll explain it and we'll play it.
First up, let's talk about the debt limit. You told us of what you thought of the debt limit, but what do you really think about the debt limit? What concerns me a bit here because I've followed a number of debt limit battles now over the years. I guess over the decades. This one feels different to me somehow. It just feels like there's a non-zero probability that lawmakers, Congress and administration can't get it together in time and there is a breach of the debt limit. It's not zero probability, which is pretty scary. What is your perspective on the limit and the prospects that they may actually breach it?
Jason Furman: Yeah, as most of the listeners know, we've already hit the debt limit, but the government is taking extraordinary measures. They say that will last until June. A lot of uncertainty. I think people think maybe there'd be a month or two more than that, but at some point, those extraordinary measures run out and either the debt limit gets raised or the government defaults. When I say defaults, it could default on the debt or it could default on all sorts of other obligations and payments it makes. Whatever it is, it's a default and a default would be a terrible thing. Arguments in favor of this is eventually going to get solved. Number one. A lot of Republicans realize this is not in their interest to cause some crisis, and it's worked out badly for them in the past.
Number two, there are 218 votes in the house to raise the debt limit, and there are 50 votes in the Senate to raise the debt limit that is already there. The big obstacle though, is those 218 votes in the house are basically 212 Democrats and a handful of Republicans. They don't get to vote on the debt limit unless Speaker McCarthy says they can vote on the debt limit. Can he be in a position where he can bring something to the floor? It's mostly Democrats carrying it. Maybe he gets half of his caucus if he's lucky and have his speakership survive. I'm not sure he can. I'm not entirely sure how they're going to get their act together, the House Republicans to allow this to move forward. That was a long version of, I'm much more scared than I have been in the past. I think they'll probably get this done, but if my doctor told me I was probably going to live and only a 10 or 15% chance of dying this year, I wouldn't be so thrilled.
Mark Zandi: Yeah, great point. Hey, Chris, do you feel the same way about the prospects for debt limit breach?
Cris deRitis: Yeah, I feel like we always feel this way to some extent in the early days, right? Back in 2011 to, it got scary that we were also going to cross the line. Yeah, it definitely looks as though the risks are elevated at this point.
Mark Zandi: Yeah. Two things make me particularly... Well, a few things make me particularly nervous. One is just obviously the chaotic nature of the House process of selecting Kevin McCarthy as speaker. That was pretty chaotic. As we have learned subsequently, he was able to become speaker because he agreed to basically make a battle out of the debt limit with a number of the Republicans he needed to vote for him. That's one thing that makes me really nervous. Second thing is that we've been down this road a number of times and when I say markets investors, stock investors, bond investors, it feels like they think they know this movie and they know the ending. They're just not going to react or respond thinking that lawmakers are going to sign on the dotted line in time. By so doing, markets don't send any signals to lawmakers that, "Hey, you guys, you got to pass a piece of legislation to solve this problem before it becomes a problem." Lawmakers take the wrong message from all this.
Then the third thing is just listening to lawmakers over the years, it just feels like there's more and more lawmakers mostly on the Republican side that say, "You know, this isn't a big deal. There's ways around it. We can navigate through it. Don't listen to those guys like Zandi and Furman and deRitis saying it's going to be a disaster if we breach the debt limit. We can prioritize the debt." Just because of these things, it just feels like we have a much greater chance of going over the cliff here. Does that make sense? Is there a way around this? What do you think of prioritization? Maybe you can explain what that means and what you think of that as a way around this passing a piece of legislation.
Jason Furman: Yeah, Mark, I really agree with that last point. One thing we had going for us in 2011 is Senator McConnell, Speaker Boehner, they didn't have a doubt in their mind that this needed to be done. They knew there was no alternative. They knew it needed to be raised. My guess is Speaker McCarthy knows that too, but an awful lot of his people don't. There's much more talk now than there was at this stage in 2011 of, "Surely there's some way around this." The leading candidate, the Republicans tend to put forward is prioritization. That's the idea, that you would decide what payments to make and you could pay bondholders, you could pay interest, but maybe you could even pay social security benefits, but you just wouldn't pay schools and hospitals and veterans or something like that. There's technical questions as to whether the government computer system can even handle and implement prioritization.
It's never been done before. They might not actually be able to do it, but even if they did do it, there's both a direct macro effect of a lot of money being not going into the economy. Then there is just chaos in our health system, our education system for our veterans. Markets could very well treat it as a default and meltdown. Then there's the preferred solutions that some on the democratic side, not that many more on Twitter than in the US Congress, think you can mint a platinum coin and you just create a coin. You say it's worth a trillion dollars. you bring it to the Fed. You ask the Fed to give you a trillion dollars. That would just be an unprecedented politicization of the Fed. It would insert them right into the middle of a contentious political debate. Legality is very uncertain. I'm not sure markets would be much more happy with that than they would be with prioritization. That platinum coin and its other relations, which I just said, I think there's a constituency on Twitter and not really outside of it. That's not an option either.
Mark Zandi: Yeah, it seems on prioritization, this doesn't make sense. You make a great point about the fact that it's going to create an economic problem pretty quickly because the government has a deficit. If they can't finance the deficit, that means there's going to be a cut in spending and there's going to be immediate impacts on the economy because things aren't going to happen. Things aren't going to get done, and that'll add up pretty quickly. Then on the prioritization... The thing I can't get my mind around is even if you paid the bondholders, the bondholders are going to think, "How long's that going to last?" Right? I'm a Chinese bondholder, I'm a Japanese bondholder, I'm a British bondholder for prudence's sake. Are you going to pay me before you pay the military, the social security recipient, even the electric bill? Really? I just don't see them sticking around for very long at all, given the political pressure that they won't get paid. I just don't see it.
Jason Furman: Yep. I agree.
Mark Zandi: Okay, there's a few other ideas out there around getting around the debt limit, at least for a period of time. You mentioned there's the prioritization and you mentioned the platinum coin, by the way, the other problem I see with the platinum coin is, doesn't that muck with the DNA our political system, the checks and balances? That means the next president can come along and mint a $5 trillion coin and do whatever he or she wants to do and not need Congress to do it. Doesn't make sense.
Jason Furman: Oh yeah. I think it's disastrous. Clearly Congress never intended to give the White House the authority to make trillion dollar coins and do what it wanted with it.
Mark Zandi: Exactly. How about this, the 14th Amendment? In the 14th Amendment to the Constitution, there's a section, I believe it's section four, where if you read the language, it feels like the President could call upon that to say that, "I'm going to tell the Treasury to continue to issue debt and pay our bills because not doing so would be unconstitutional. It would violate the sanctity of US federal debt." Does that sound like a viable option?
Jason Furman: Right. Look, the problem is the law is contradictory. Congress passed laws that said, "Spend this money and collect these taxes." Then it passed another law that said, "Don't borrow above this." Those two laws collide against each other. Which law is binding is an open question. If you had to do something crazy, I would do the 14th Amendment way before I would mint a coin, write a trillion dollars on it, and march over to the Fed. It still just has tons and tons of uncertainty about is it legal? Is it what Congress intended? What will the Supreme Court say? What will bondholders do if the Supreme Court schedules a hearing on it? It's just a set of unnecessary damage that we would incur by taking that path as well. I really think the cleanest... Really the only option here is to raise the debt limit that was the view of pretty much every treasury secretary from at least the 1980s when this first became an issue through today.
Mark Zandi: Yeah. Hey, Chris, are there any other ideas out there that you've heard around that might get us around the debt limit, at least for a period of time? Anything else you've heard?
Cris deRitis: There's talk of other Fed interventions that could take place. Again, I think that would be disastrous not only in the short term, but you have to think about the long-term consequences here, right. If we do any of these things, the bond investor is going to put that into their calculus going forward. Even if it's only a few basis points more on our debt in the future, that all adds up so quickly.
Jason Furman: I think that's the irony here, right?
Mark Zandi: Yeah.
Jason Furman: The stated goal of the people using this as a weapon is that they want to bring the debt down. Five basis points more on our debt is a lot of new government spending. Fifty basis points on our debt would be a new $100 billion a year government program just to satiate the desire of people for this stunt. It really could end up counterproductive economically as well as politically.
Mark Zandi: Yeah, real dark irony. The same folks... They're willing to breach the debt limit to address our fiscal problems. By breaching the debt limit will wreck our fiscal situation. It just doesn't make any sense whatsoever. I wanted to throw out one other idea, and I'm probably going to botch the explanation, but this is interesting. One of our financial economists through this across the transom, and that is, have the treasury issue premium bonds. Right now they issue bonds at par... Issue it at a premium. Let's take a seven-year Treasury. I think it you got 35 billion coming up here that's due, and they would issue a new set of seven-year Treasuries to raise 35 billion at par. The par interest rate is, I don't know what it is, 3%, let's say. Let's say sell the bond now at 5% or 6% or 7%. You could actually raise 38, 39, 40 billion and lower the debt that's outstanding by three or four billion dollars. Have you heard that?
Jason Furman: That's a new idea that's out there. I hadn't heard that back in 2011 when I was working on the debt limit myself. There's some question about how the statute defines the amount of debt and whether it would see through the financial shenanigans that basically is. There's some different tax treatment that you would get if you issued a bond in that manner. We have really smoothly and functioning Treasury auctions. They worked really well. I don't know why we'd want to change them.
Mark Zandi: To muck all that up. That's the other thing. All these ideas, ultimately they don't work. They're not going to work. There's so many, I'm sure, unintended consequences of all of them that we can't even contemplate until you've committed this gracious error. Okay, very good. Any-
Cris deRitis: Let's think of all the lawsuits for any of these ideas, right? Immediately.
Mark Zandi: Yeah. It'll be complete chaos. Here's the other thing that makes me really uncomfortable is there's no good time for this, but the timing of this couldn't be worse, right? There's a widespread expectation of recession this year, and if you ask people when the recession can occur, it's about the time that we're going to be coming down the brass tasks here on the debt limit. It's just really very unfortunate the whole thing.
Jason Furman: Definitely is.
Mark Zandi: Yeah. Well, let's move on. I did want to continue to talk about policy a little bit here and talk about the Biden Administration's economic policies year-to-date. They've been in office now for two years, and it feels like when it was all said and done, it was a pretty productive two years. A lot of economic policy got through the legislative process, beginning with the American Rescue Plan back in March 21. Then they got the Bipartisan Infrastructure legislation through Congress. There was the CHIPS Act, that's to try to incent more chip production here in the United States, given what we learned during the pandemic and our exposure to Taiwanese chip producers, and of course, goes to the tensions with China. Then finally the Inflation Reduction Act, which was largely about climate change and climate risk. Can I ask broadly, taking all these things together, what do you think about the legislative effort here? What does it mean for the economy near and long term?
Jason Furman: Yeah, so they got more done than I expected and more of what they got done was bipartisan than I expected. I think that is much more good than bad, but I think there's a mixture of the two. If I had to say the things that I am most excited about on the legislative side, I think the investments in infrastructure and climate change are really, really good. I think the chips investments, something there is needed. In some sense it's too soon to tell how good it is because it's not self-executing. It depends on what they do with the money and how effectively they use it. I think they have a good team. I have some high hopes for it. The jury won't be out until we see how the money gets used. On the other side of the ledger. Mark, you and I may differ on this, I think the American Rescue Plan was much larger than it needed to be, given what we knew about the economy at the time, given where it was, and certainly in retrospect, a much, much larger than it needed to be.
I think that's contributed to the inflation we've had and may have made it harder to come back and get more money for families because they did well on what was originally called the American Jobs Plan, which was all about infrastructure and climate. They didn't do well on what was originally called the American Families Plan. Things like the child tax credit ended up bizarrely less popular after the American Rescue plan rather than more. Then, if you look outside the fiscal area, a renewed emphasis on competition and you see it in all sorts of things. Most recently banning non-competes in labor markets, making hearing aids available over the counter, taking a more aggressive posture. I think by and large, that's been a really good thing. Then on the non fiscal negative side of ledger, I think there's been way too much of a continuation and even expansion of trade wars of Buy American and other things that are just going to make it more expensive to meet the goals that they have.
I don't think are going to do very much for jobs and are already leading to retaliation and foreign policy problems. All in, it's a good record. I don't think President Obama was perfect. I don't think anyone's perfect, but there's some good, bad and ugly, but more good.
Mark Zandi: All right. Am I wrong? But if you take those four pieces of legislation, obviously, the first one, the American Rescue Plan that was not paid for, that was all deficit finance. We'll come back to that in a second in the context of what you said about inflation. The other three pieces of legislation... My memory's getting a little blurred, but they were mostly paid for, weren't they? Or largely paid?
Jason Furman: No. Infrastructure was much less paid, was mostly not paid for, and some of the paid for were pretty phony. I think Chips, I don't even think they pretended to pay for chips. I might be wrong. The Inflation Reduction Act, which was for climate, that was completely paid for. I think, frankly, is going to reduce the deficit more than it does.
Mark Zandi: Yeah, actually I think in that case, if you look at the 10-year budget horizon, it's paid for. If you look at it a longer run, assuming the tax increases that were implemented as part of the pay-for’s remain in place under that assumption, which is a reasonable assumption, it actually reduces the deficit for the longer...
Jason Furman: Yeah, exactly. That's a growing amount of deficit reduction. Some people like Larry Summers and Natasha Sarin have argued that their tax enforcement's going to bring in a lot more money, that the scorekeepers were too conservative, and if they're right, then it's even more deficit reduction than CBO thought.
Mark Zandi: Right. Let's go back to the ARP, the American Rescue Plan, because that's obviously been very controversial in all kinds of political circles. The one thing I found very surprising was that the ARP put a lot of cash into people's pockets and it resulted in a significant increase in saving. A lot of that ended up and still is in people's checking and deposit accounts. The way people have spent that money has been very judicious. It's actually been interestingly pretty well calibrated. With the inflation in reduction in purchasing power, we've seen households draw down those savings in the cash sitting in their deposit accounts to supplement their purchase power to maintain their spending, the overall spending that they're doing. The spending hasn't been with abandoned, it's like the people out there spending with abandoned. It's just enough to keep the economy out of recession and moving forward. Have you been surprised by that? The way people have managed the cash they received on the ARP. It's not just ARP, they received a lot of cash under CARES and the other pieces of legislation that were passed during the pandemic.
Jason Furman: Yeah, I think we didn't have any idea about what to expect about how people would spend the money. I think I have a less anodyne view of it than you do, Mark. If you take the American Rescue Plan plus the earlier legislation, the CARES Act, and then there was legislation in December 2020. The three of those together were 25% of GDP in fiscal support for the economy. That was legislated within a 12-month period of time and a lot of that money spent out within an 18-month period of time, so 25% of GDP. Then the question is, what multiplier do you use? You often have multipliers, I think of .7 to 1.3, [inaudible 00:29:25] something like that. The multiplier in this was clearly much lower because of that judiciousness. Let's say the multiplier in the first year was 0.2, that's 5% of GDP.
We might have needed that in the first year, but that also meant people had a lot more money. The multiplier in the second year .2, I don't think that's a crazy high multiplier. That's 5% of GDP. The problem is, at some point people are spending money above and beyond what we could produce. Moreover, a lot of that money got spent on goods, not services. We always knew that we could not get back to potential instantly, that it would take some time to get the economy back together. I think we were in a world where people wanted to spend five plus percent more than normal. The economy could not make 5% more than normal and that increased spending went more into prices than into output. I think the sort of last dollars, the marginal dollar of that legislation did very little for output and a lot for prices.
Now, it continues to... Go to today. Look at where consumption is right now. Consumer spending is about two and a half percent above what the CBO forecast it would be in their last forecast before the pandemic. Real disposable income is about a point below what it was expected to be. People are still spending way above what you'd think given their incomes. This is casting a long shadow. In some ways that's good. It means that the Russian invasion and the oil price increase and the monetary policy hikes didn't drive us into a recession in 2022. In other respects, it's I think why inflation has been so stubborn.
Mark Zandi: One argument for overdoing it, and I would agree, if you do the arithmetic, go back to March 2021, that two trillion felt like it was overdoing it. Actually we did a lot of analysis around the part of the package that provided money to state local governments. It ended up being 500 billion, I think the two trillion went to state local governments, either through public education or just grants, basically to state and local governments that they're still using. It felt large relative to our estimate of what impact it was going to have on state and local government budgets to a significant degree.
Jason Furman: I should say, by the way, in mid 2020, you had the lowest estimate of the needs of state and local government of pretty much anyone out there.
Mark Zandi: Yeah, that's right.
Jason Furman: Yours were much more accurate and ahead of the curve, certainly relative to mine. Now by March 2021, I had converted to you. I understood their needs were nowhere near that. It took me about six months more than it took you to figure that.
Mark Zandi: Well, you're giving me credit and I'm not sure I deserve it, but I'll take it anyway. I think it's actually about the team, Dan White and Bernard Yaros, those folks, they do that careful analysis, but thank you. The reason I bring that up is because the argument was, "Look, in March 2021, there was still a lot of uncertainty around the pandemic." Yeah, we had the vaccines. They were starting to get rolled out, but we had no idea exactly how this was going to play out. There were a lot of nervousness around this and policy 101, and maybe I shouldn't say that because you write the book policy one... We write the books on policy, but this is the way I frame it. Policy 101, if there's a lot of uncertainty, you want to overdo it because you don't know how things are going to play out, particularly in a political context, because you've got political constraints on what you can actually accomplish. The concern might be that you have, as they say, one bite at the apple, and you're not sure if you could get a second or third bite at the apple if you actually needed it. Given that, does that make it more sensible that the Biden Administration went for a big package on the American Rescue Plan?
Jason Furman: Look, first of all, I think the error of too large is better than the error of too small. I'd rather have made their mistake than the mistake that policymakers made in 2009 and 2010. I think it was mostly Congress's fault, not the president's fault, but regardless of whose fault it was, that's where we ended up. I agree with that. I think you want to err on the side of too much, but that is not an operationalizable principle. I think we both would agree that 200 trillion would've been too much. Just because you want some insurance isn't licensed for an unlimited amount.
You said the state and local wasn't well-founded. The $2,000 checks, that wasn't the nerds on the Biden economic team that came up with that idea. That was Donald Trump made that number up on the fly in December, and then for political reasons, Nancy Pelosi and then President-elect Biden converged to it. The whole thing didn't really come together in an overly economically informed way. You could look at the output gap at the time, and it was clearly shrinking. It wasn't much more than, I think, 3% of GDP and shrinking. This was about 10% of GDP. I think it was overkill based on what was understood at the time. As I said, political system never gets things perfect. I'd rather have overkill than underkill, but I think we can strive to Goldilocks next time around.
Mark Zandi: Got it. Hey, Chris, you've heard this conversation.
Cris deRitis: Yeah.
Mark Zandi: You want to weigh in?
Jason Furman: Who's right? Who's right?
Mark Zandi: Well, I'm very nervous about asking him this. Who is right? By the way. I am your boss. I'm just saying...
Jason Furman: Yeah, it is compensation season too.
Mark Zandi: Oh yeah, that's true. That's a good point. Yeah, that's a good point. Yeah, all right. No, Chris always disagrees with me, constantly disagrees with me, which is great because the [inaudible 00:35:35].
Cris deRitis: I will agree that, at a minimum, I think things could have been structured differently, right? The $2,000 number, where did that come from? Well, in theory, they could have been structured differently. I think an error or a problem that we still face is, well, you talked about infrastructure, but I think our government infrastructure is still lacking in terms of being able to target these funds more effectively, right? We could have enhanced UI benefits for unemployment insurance benefits, for example, but our systems really don't let us do that in a very efficient manner. I agree that the amount was too much for the American Rescue Plan, but even a lower amount could have been targeted much more effectively to... If the idea is we want to support people, there's lots of uncertainty with the pandemic, we could have certainly structured things to make sure that the money went to best use cases or where it was needed the most. That I see as a continuing issue that we haven't addressed at all.
Mark Zandi: Right.
Jason Furman: Yeah, you're totally right about that. It's just depressing. With unemployment insurance in 2020, they wanted to do something where everyone got say 95% of what they used to make. To do that, you need to program a computer to multiply what's your salary? Multiply it by 0.95, send you a check. The computer couldn't multiply.
Mark Zandi: Yeah, right.
Jason Furman: The computer could add, so they could say, "What's your unemployment benefit? Let's add $600 to it." For some people that ended up being twice their old salary, and for some people it was less than 95% and no one wanted to do that, but we had no choice as to how to structure it. Next recession we go into, it's not going to be any different. We're just going to be saying the exact same thing.
Mark Zandi: Doesn't lend a whole lot of confidence around their idea of prioritizing [inaudible 00:37:29] payments, does it?
Jason Furman: Oh, right. I think they're using some decades old computer system. There's only a few people left in the country that know how to do.
Mark Zandi: Good luck with that.
Jason Furman: Same thing with prioritization, that operates off a computer system and there's just not a lot of people know how to do it. Now, maybe ChatGPT could figure it out.
Mark Zandi: Right.
Jason Furman: Ask it how to prioritize and send out the checks. Other than ChatGPT... Yeah I don't know.
Mark Zandi: Well, I want to move forward. I want to do three things in the time remaining. One, I want to talk about inflation now today, and then second, maybe we do the statistics game and then third, come back and talk about recession and recession because that's just top of mind.
Jason Furman: Yep.
Mark Zandi: Everybody's talking about recession. On the inflation front, let me ask it this way. How are you feeling about inflation? How are you feeling about it?
Jason Furman: I am feeling better than I was a few months ago. I always thought that the inflation rate was going to come down. In fact, at every point in the last two years, I've expected lower inflation. I just haven't expected it to fall as much as other people were expecting it to fall. It's not shocking that goods inflation is moderating so much. It's not shocking that housing inflation is likely to moderate pretty soon in what we're seeing in the spot rates. I think some of the services outside housing are probably falling a bit more than I expected them to. I think that is, broadly speaking, a good sign. That being said, you look at wage growth, it's still about two points above what it was prior to the pandemic. I just don't think we're going to be able to get all the way down to 2% inflation, maybe not even below 3% inflation given where we are in the economy right now. Progress, but still more to do or a difficult choice about whether to accept a higher inflation rate going forward.
Mark Zandi: The thing that's still concerning is around wage growth and what that means for prices for various types of services and industries that are very labor intensive. The other stuff feels like that's coming in reasonably well on the good side and I think recent weakness in rent suggests that the cost of housing services is going to start to come in here pretty quickly as well. That's where your concern is most significant.
Jason Furman: Yeah. Look, I think broadly you can think about inflation bottom up. Let's go through five sectors of the economy.
Mark Zandi: Yeah.
Jason Furman: When you go through that, you feel pretty good about it, especially because a really positive shoe in terms of rent has not dropped yet in terms of the CPI. Now, I don't think goods prices are going to continue to fall at the pace they've fallen either. Some of the good news is transitory, but there's more good news to come. Then you do a macro top-down perspective. There you look at openings that are higher than they've been at any point prior to the pandemic, that in the last couple months have stayed very high. You look at workers quitting higher than any time prior to the pandemic. Again, that aspect of the labor market hasn't eased. You look at wage growth and there were some numbers showing some slowing at the end of the year. We'll see what the Employment Cost Index shows at the end of the month.
Even with some slowing, I just don't think over a three-year period of time, you can have wages grow at four and a half percent a year and have inflation at 2% a year, or at least I don't think it's likely. That macro perspective is what keeps me nervous and thinking we're still pretty far from victory.
Mark Zandi: Let me try something out on you in terms of wage growth, because I agree that feels like the real issue here ultimately, to go to the last mile and get inflation back down to the Feds target. We probably can get CPI inflation three, three and a half percent with everything else, but unless wage growth moderates, we're not getting down to two, two and a half percent, which would be consistent with Feds target on CPI. It's really where the concern and the focus is. Could it be the case that wage growth jumped, accelerated in significant part because of a jump in inflation expectations, which occurred, if you look at the data around the time the Russians invaded Ukraine and oil prices and gasoline prices jumped. The gasoline particularly, it's central to people's thinking about inflation.
That's how they form their expectations and really that's what matters most in terms of their thinking about their own finances. When gasoline prices took off, and in fact, they got as high as $5 a gallon, a record high by June 2022, that inflation expectations jumped in and worker said to their employers, "Hey, look, you got to pay me more to compensate." And employers said, "Fine." They understood. Now with gas prices back, oil prices have moderated, gas prices have come back in. We're at three buck 25, 3 buck 50, and something around that.
Inflation expectations feel like they're coming back in. They're already back in for bond investors, but for consumers, if you look at New York Fed or University of Michigan or whatever they're coming back in. It does feel consistent with that wage growth, at least on average hourly earnings, we'll see on the Employment Cost Index, as you say, that's coming in. It's not really about the slack in the labor market. Maybe we're a little bit beyond full employment, but not a whole lot. It's really about these inflation expectations and that as they come in, wage growth will moderate even without a very significant weakening in the labor market and an increase in unemployment. Does that resonate at all with you?
Jason Furman: I think that may be a piece of it. I think that also falls under the heading of things that I call possibilism, not probabilism. Everything is possibly true, but you don't want to only think of the happy stories that are possible. You want to think about what's most probable. On labor market tightness, 3.5% unemployment. That's what it was before the pandemic. Now, we don't know what was going to happen, absent the pandemic in 2020 and 2021, nominal wage growth was picking up. There's a little bit of inflationary pressure. Might we have discovered that 3.5% unemployment was inflationary, we might have, but I'm not that worried about the unemployment rate. What I am worried about is the ratio of job openings to unemployed and the quits. That to me are better predictors of inflation than unemployment and they're really off the charts high compared to anything we saw before the pandemic.
I think there is a lot of evidence of tightness. Wages were growing quickly in 2021 also before the Russian invasion. Now maybe that was a transitory pandemic thing. Maybe 2022 is a transitory Russian invasion thing. At some point you want Occam's razor. If you have four different stories in a row, maybe there's one simple story for all of it, which is a tight labor market. Then in terms of expectations, you do raise a really important and unsettled question. Expectations are like the ether of inflation forecasting. We have all these measures, but we don't know which of the matters. Is it short run? Is it long run? Is it consumers? Is it businesses? Is it markets? Is it your forecast Mark?
What are the expectations that matter? Short-run expectations are much higher than long-run expectations. I think they probably matter more. When people say expectations are anchored, "Well, what do you think is going to happen over the next year. What's going to actually affect wages and prices?" The short run have come down as gasoline prices have come down but I think they're still point and a half above where they were prior to the pandemic. If you have the numbers at your fingertips and want to correct.
Mark Zandi: One year ahead on New York Fed is four [inaudible 00:45:34]
Jason Furman: That was like two and a half before the pandemic?
Mark Zandi: Yeah, something like that.
Jason Furman: Yeah. Anyway, it's still pretty high.
Mark Zandi: It's coming in pretty fast. I think it's six or something. It's coming in pretty fast. Nonetheless, you're right. It's not in all the way.
Jason Furman: Yeah. I think maybe this will help us by half a point. It'll help us get towards three, but I don't see how it helps us get to two, two and a half.
Mark Zandi: Got it. Well, hopefully, I didn't take someone's statistic when I said the 4% near term inflation expectation. Let's go to the game, the statistics game. Yeah, this is a lot of fun.
Jason Furman: I've been up all night studying.
Mark Zandi: Everyone's level sets. The game is we all put forward a statistic. The rest of the gang tries to figure it out through questions and clues, reasoning. The best question is one that's not so easy, we get it immediately and not so hard, we never get it. Bonus, if it's relevant to the topic at hand. Of course, we're got a lot of topics on the table here. I think we're good. With that, Chris, I'm going to turn to you first and see what your statistic is.
Cris deRitis: All right. You've complained over the last couple weeks, my statistics were too easy, so I'm going to-
Mark Zandi: Really?
Cris deRitis: Yeah.
Mark Zandi: [inaudible 00:46:46] complaining.
Cris deRitis: Minus 179,000, negative 179.
Mark Zandi: Minus 179. Is it a [inaudible 00:46:57]
Jason Furman: Animal, vegetable, or mineral?
Mark Zandi: That's a good question. Statistically came out this week?
Cris deRitis: It did.
Mark Zandi: Is it housing related?
Cris deRitis: It is housing related.
Jason Furman: Oh, housing. I don't have a chance against Mark.
Mark Zandi: Well, it's not existing home sales that came out this morning, is it?
Cris deRitis: No, that would be...
Mark Zandi: Because I didn't have a chance to look at that. Okay. Is that the decline in single family housing starts or permits?
Cris deRitis: Both.
Mark Zandi: Both.
Cris deRitis: It's related to both single family housing starts and permits.
Mark Zandi: Oh, but it's not the monthly decline.
Cris deRitis: I'll give it to you. I'll give you the cow bell. It's the difference between them.
Mark Zandi: The difference between who?
Cris deRitis: Starts and permits... I'm sorry. It's the difference between permits and start.
Mark Zandi: I'm not following.
Jason Furman: Wow, that's hardcore.
Mark Zandi: Yeah.
Cris deRitis: Permits are below starts.
Mark Zandi: Oh, okay. That is really hardcore. Oh my gosh. You're saying the actual permits minus the actual starts?
Cris deRitis: Yes.
Mark Zandi: Okay.
Cris deRitis: Yeah, because if I threw out 7 or 30,000, you'd get it right away.
Mark Zandi: That's a good point.
Cris deRitis: Got to mix it up.
Mark Zandi: I like that though. Very good. It's different.
Cris deRitis: It happens time to time, but it does suggest that there is weakness going forward, right?
Mark Zandi: Right.
Cris deRitis: Permits to follow.
Mark Zandi: You're right. That's a great statistic actually, because usually permits are above starts and signaling we're going to get more starts and you're saying now permits are below starts.
Cris deRitis: Below starts, right.
Mark Zandi: I see.
Cris deRitis: The builders are using the permits they already had to put up some additional start. Even starts on an absolute basis are low, but it's still feeding the pipeline, but looking ahead with permits falling faster would suggest even more weakness.
Mark Zandi: Right. Have you noticed, and this may, Jason, go to some of your concern about the labor market. There's been no decline in construction employment whatsoever.
Jason Furman: Yeah.
Mark Zandi: If we're going to see any weakening in the labor market, you would think it would be the most interest rate sensitive sector of the economy. That does make me a little nervous.
Jason Furman: Well, the output is collapsing there, but...
Mark Zandi: On the single family side?
Jason Furman: On the residential side, yeah.
Mark Zandi: On the multi-family side is booming. Right?
Jason Furman: I'm just looking at residential contribution to GDP. I think it was minus 1.5. I think that's where it's tracking for Q4. That's as big a decline as we've seen since the financial crisis.
Mark Zandi: Yeah.
Cris deRitis: But even on the single family, completions are still-
Mark Zandi: Still elevated
Cris deRitis: ... holding up because we have so much in the pipeline, right?
Mark Zandi: Yeah. That does make me a little nervous. Okay. That's very good. Jason, do you want to go next or do you want me to go?
Jason Furman: Sure. Why not? 1.5% and if decimal places help you, it's 1.4949%.
Mark Zandi: Oh, really? That's cool.
Jason Furman: Rounds to 1.5%.
Mark Zandi: Indeed. It does, 1.5%.
Cris deRitis: And it's positive, right?
Jason Furman: It's positive.
Cris deRitis: Okay.
Jason Furman: Yeah, I'm a positive person.
Cris deRitis: Yeah.
Jason Furman: I'm not negative like you.
Mark Zandi: Yeah, is it a statistic that came out recently, or is it not that kind of a statistic? It's like...
Jason Furman: You'd have to calculate it.
Mark Zandi: You have to calculate it.
Jason Furman: You'd have to use recent data among other things.
Mark Zandi: This week? Is it related to inflation? Wages?
Jason Furman: I think it's related to everything.
Mark Zandi: Oh, I see.
Cris deRitis: Macro.
Mark Zandi: You said it like the meaning of life or something. The 1.5... yeah.
Jason Furman: That is as close to the meaning of life as you get with economic data. Yeah. I think [inaudible 00:50:47]
Mark Zandi: Oh my gosh.
Cris deRitis: Wow.
Mark Zandi: Oh, this is really intriguing. Any idea? One half percent, I'm just going to throw, just to continue the conversation, that's my sense of underlying productivity growth. Is that...
Jason Furman: That is productivity growth over the pandemic period has been 1.4949% annual rate. Meaning of life.
Cris deRitis: Wow. You're the [inaudible 00:51:11]
Mark Zandi: It's the meaning of life.
Cris deRitis: Impressive.
Mark Zandi: That is the meaning of life. I'm going to stop and pause for a moment. I want everyone to soak that in. Did you see how I did that, Chris?
Jason Furman: That's great.
Cris deRitis: Very nice. Very nice.
Mark Zandi: Hey, did you know though, Jason, that if you take productivity growth in the three years leading up to the pandemic, it was 1.5%.
Cris deRitis: Oh, yeah. We are right on track. It is amazing.
Mark Zandi: It's amazing, right? Of course, it'd be nice to get more than 1.5%, but is there any chance of that? What do you think?
Jason Furman: We don't know. Well, is there any chance of that? The answer to any question, is there any chance, is yes. How much of a chance is there? I wouldn't build my plans around that. I'd build my plans around 1.5.
Mark Zandi: Yeah.
Jason Furman: I still think with a certain amount of COVID swirling around, a certain amount of hardening against it, I'm pessimistic on work from home [inaudible 00:52:15] utterly bias.
Mark Zandi: Are you? Interesting. A bias?
Jason Furman: A lot of evidence that goes a lot of different ways on that. Yeah, I think I'd be happy if we had 1.5. It's more likely to be below than above, but who knows?
Mark Zandi: Yeah, I'm counting on ChatGPT. I'm just saying. Yep. We actually contracted with, we, meaning the economics unit at Moody's with open AI for ChatGPT. We are experimenting with AI a lot of different ways. Very interesting.
Jason Furman: For all of my experience with ChatGPT have been to see random things in sonnet form, which have not been productivity enhancing.
Mark Zandi: Right. Well, I'm sure for you, it's creating work, right? Because your students...
Jason Furman: Yeah. Oh, I just got the interim report of the committee here for how to change the way we do assignments based on ChatGPT.
Mark Zandi: Exactly. Right. Wow. That's going to change education significantly.
Jason Furman: Yep.
Mark Zandi: I got one for you.
Cris deRitis: Sam's coming back.
Mark Zandi: You're ready?
Cris deRitis: Yeah.
Mark Zandi: Nine hundred and twenty six thousand.
Cris deRitis: Multifamily starts. Is that?
Mark Zandi: Nope. Starts? No, that's 500,000.
Jason Furman: Is this housing labor.
Mark Zandi: It is housing related, because we got a lot of housing statistics.
Cris deRitis: It's your favorite. They're under construction.
Mark Zandi: It's under construction.
Jason Furman: Okay.
Mark Zandi: Yeah, that was easy for Chris. This is a really important statistic, Jason. There are 926,000 multi-family units under construction going to completion. That is a record high by orders of magnitude and it keeps going up. It goes to just the boom in multi-family related to the very high rents and high prices for multi-family property. I bring this up because this is critical to inflation, right? We're going to get a boatload of supply here. It's already happening. Demand is actually a bit depressed for rental units because of the very high rents, because of the surge rents this time last year coming out of the lockdowns. We're going to see vacancies. Vacancy rates are already starting to move higher in multi-family and rents are going to remain very weak here, which is really important with regard to particularly CPI inflation where consumer prices are third of that measure is related to housing costs. I view that as a very important statistic with regard to inflation going forward. Okay. That was great. That was very good because I feel pretty proud of myself.
Jason Furman: You should.
Mark Zandi: The meaning of life.
Jason Furman: Good job.
Mark Zandi: Get the meaning of life and you're right. That is as close as it gets to the meaning of life in economics. Okay. Let's end the conversation with the discussion around recession. I know, Jason, you and I have been participating in this poll that Goldman Sachs has been putting together, and I get to see what you think about this [inaudible 00:55:24]
Jason Furman: I think it is your cousin putting together.
Mark Zandi: It's my cousin. Yeah, exactly. My cousin putting together. She runs the investment management group or the private wealth management group at Goldman Sachs. Last I looked or last I saw, I think you're around 50-50 for a recession in the next year. Is that about right?
Jason Furman: I'm at sort of 40-45. I think I might have forwarded it since I put that down with them. I think it's really going to be a battle of everything the Fed can affect in the economy with housing being chief among it versus consumers. Consumers, I think still have a lot of potential in them, certainly in the first half of the year. I'm getting more nervous about whether consumers can maintain their spending in the second half of the year. It's far from inevitable, but there are just a lot of things swirling around in our economy, plus the tail risk of the debt limit, some escalation in Europe, et cetera. If you wanted to talk me a bit lower than that, I don't know that I'd fight you that hard, but it's definitely higher than the normal baseline 15% that you'd have in a normal year.
Mark Zandi: On average, we have a recession every seven years or so?
Jason Furman: Yeah.
Mark Zandi: Something like that, so 15% is the number baseline. Your sense is 40-45%.
Jason Furman: Forty, forty-five. That's what I think. I think it's elevated, but I think it is way far from inevitable.
Mark Zandi: Right. You're actually well outside the consensus. The consensus would put it closer to two-third probability over the next [inaudible 00:57:09]
Jason Furman: Yeah, I think that's way too pessimistic. I think they're underestimating. I think a decent amount of the monetary impact has actually already been felt. The tightening in financial conditions really happened in the first half of 2022. I think there's lags, but I don't think they're quite as huge as some think. Consumer balance sheets going into this and are in much better shape than they are at similar cycles elsewhere. I think we'll get some relief from the rest of the world, China reopening and the like. All this inevitable recession talk, at least inevitable this year seems to me overly pessimistic. I thought it was overly pessimistic when people were saying that last year, and we ended the year. It looks like we ended the year on pretty strong growth. We'll find out.
Mark Zandi: I think if we extend the horizon here another year, say 2024, your probabilities at that point, they do go above 50%?
Jason Furman: Oh, they definitely go above 50%. First of all, you have more time, so 30% would be your baseline for two years. My belief that there's a decent amount of inertia in inflation is that the Fed may slow down its hikes. They may pause, but if we don't have a recession this year, then I think almost certainly we're going to have inflation that's above 3% more likely rising than falling. There'll be maybe another round of rate increases or whatever else. I think we're going to have a hard time escaping two years without one.
Mark Zandi: Okay, just to summarize, to make sure I have it clear. You're saying, "Look, we got enough juice here, momentum consumers, to keep the economy moving forward in 2023." The economy's not going to slow sufficiently enough to get unemployment and labor market conditions to a place where inflation actually comes back into the Fed's target all the way, and the Fed says, "Oh my gosh, I got to raise some rates more." The terminal rate isn't what markets think. It's not 5% and actually markets have rates coming back down later this year. It could be five and a half or six. Ultimately that pushes [inaudible 00:59:07]
Jason Furman: If you told me there's no recession this year, then I would expect the rate would get to 6%.
Mark Zandi: Six percent. Okay.
Jason Furman: Now, the market expectation, of course, averages across the probability of a lot of different events, including a recession, but no recession, I think rates go to six and I think we have a recession the year after.
Mark Zandi: Oh, interesting. Can I just ask, just to make a concrete, the probability for 2024 would be 60-65%, something like that?
Jason Furman: The cumulative over two years.
Mark Zandi: Yeah. Got it. Okay. Chris is the bear of the group, although he's gotten a little less bearish recently. What were you, 68% probability?
Jason Furman: Two-thirds.
Mark Zandi: Oh, you're two-thirds probability in 2023. What are you today?
Cris deRitis: We extended it to early 2024.
Mark Zandi: All right. Early 2024. Okay. Where are you now?
Cris deRitis: I'm sticking with two-thirds.
Mark Zandi: What do you think of Jason's scenario where rates have to go higher and the recession actually is not in 2023, it's in 2024.
Cris deRitis: Yeah. I am increasingly pushing out my timing. Yeah, I do agree with that. There is certainly a lot of inertia still. Very hard to get a recession in the next quarter or two, right? We'd have to be hit with some other shock. But as we get into Q3, Q4, and into Q1 of next year, then I think we have a lot of vulnerability there.
Mark Zandi: Yeah. Hey, can I ask, something else that's bothering me related to this issue. Going back to the labor market, is it possible that-
Jason Furman: Yes.
Mark Zandi: Yes. I know. How do I say this? I don't have that problem. Is this highly probable or reasonably probable that we have no significant increase in overall layoffs, but the labor market weakens sufficiently to get wage growth down, just simply because businesses say, "I'm not hiring anymore." People leave, they quit. I'm just not going to do it. I'm just not going to fill those open positions and I'm not going to create more of those.
Jason Furman: I think the best case for that is that job openings just rose so much more than we can quite understand or explain. What goes up maybe comes down. There was a certain amount of what looks like non-linearity in the inflation and labor market process where just small changes led to really large changes. Small changes in labor market led to a large change in inflation. Maybe that can happen in reverse. I definitely think that is the more plausible probably, Mark, than your expectation story. I think the most plausible story is that the labor market weakens in the form of openings falling quite a lot while unemployment rises only a little bit. We haven't really seen that happen before, but we've also never seen things move this rapidly towards higher openings in the past either.
Mark Zandi: I'll have to say, I've been just so surprised by the low layoffs. You saw UI claims this week? There were 190,000 people claim. A four-week moving average were at 200K. That's about as low as it gets. Typical would be 250, recession would be 300.
Jason Furman: Oh, labor market is just stunning.
Mark Zandi: Stunning. It's just stunning. All these tech workers losing their jobs, it feels like they're getting jobs right away.
Jason Furman: They're all finding jobs again. I know [inaudible 01:02:42] I don't want to say that, but it seems like a lot of them, tech workers, lay-off are finding jobs.
Mark Zandi: In fact, it's a great thing for the rest of the business, right? People couldn't find tech workers. Every company needs tech workers, right? Here we are. Pretty amazing. Okay, just to round out the conversation, I'm still at 50-50 for 2023, although I would say 2024 does feel like it might be higher than 50-50 to me for the reasons you articulate. I think we're going to title this conversation, what was that phrase you used about...?
Jason Furman: Possibilism and probabilism?
Mark Zandi: Yes, possibilism and... Everyone write that down. Possibilism versus probabilism because that definitely is going to be the title of this particular podcast.
Jason Furman: Excellent.
Cris deRitis: Sets a title of your next paper coming.
Mark Zandi: You better trademark that because he takes people's [inaudible 01:03:41]
Jason Furman: I've been planning to write it up for the Wall Street Journal. Maybe you've got me to.
Mark Zandi: Yeah, there you go.
Jason Furman: This might be the working through those thought.
Mark Zandi: Yeah. Hey, Jason, this is a great conversation. Thanks so much for participating.
Jason Furman: Oh, that's a lot of fun.
Mark Zandi: Thank you so much and I hope I'm right. That's all I'm saying.
Cris deRitis: I hope you're right too [inaudible 01:04:00].
Jason Furman: Everything, all the time.
Mark Zandi: Anyway, appreciate that. Dear listener, thank you for tuning in. I should say just a reminder, if you have questions that you'd like us to address, because I think next week we don't have a guest and we'll take some listener questions. If you have questions you'd like us to address, so fire away. You know how to get to us, Twitter, LinkedIn, our websites helpeconomy@moody's.com. Anything you want to do, just fire away and we'll answer those questions. With that, we'll call it a podcast. Take care, everyone.