I’m optimistic the debt limit will be raised.

But thinking more, if talks fail, the 14th Amendment & platinum coin are not workable break glass options.

Both bad economic/financial risks (possibly even more than prioritization) & would likely be blocked by the Supreme Court.

-- Jason Furman (@jasonfurman) Fri May 19 17:57:48 +0000 2023

Replying to @jasonfurman

I’m not a lawyer but I’ve talked to a lot of them over the years. There is a good legal argument for the 14th Amendment and maybe even for the coin.

But the question is not how Justice Tribe would rule, it is how this court would rule. I have little faith in them.

-- Jason Furman (@jasonfurman) Fri May 19 17:57:49 +0000 2023

Replying to @jasonfurman

Maybe some of the conservative justices are business friendly enough that they would not want to usher in chaos. But given the process, they won’t see this as about default but instead would see it as siding with Democrats in a debate over spending limits, work requirements, etc.

-- Jason Furman (@jasonfurman) Fri May 19 17:57:49 +0000 2023

Replying to @jasonfurman

So either option would be risking failed auctions (for new debt or rollovers), markets crashing, recession & worse—in some respects would be less bad than prioritization but in other respects worse. (A failed auction would leave a huge cash crunch & even larger spending cuts.)

-- Jason Furman (@jasonfurman) Fri May 19 17:57:50 +0000 2023

Replying to @jasonfurman

And at the end of this the Supreme Court would likely send the issue back to Congress and the President. This would be after economic damage and the extra time it buys would not obviously lead to a better resolution from the Democratic perspective, and very possibly a worse one.

-- Jason Furman (@jasonfurman) Fri May 19 17:57:51 +0000 2023

Replying to @jasonfurman

P.S. There are cases where I would recommend the President go ahead with something that was reasonably likely constitutional even if I would expect the Supreme Court to rule otherwise. This is not one of those cases.

-- Jason Furman (@jasonfurman) Fri May 19 18:12:16 +0000 2023

Russia has made itself a pariah so its sanctions on me & everyone else on their latest list are pointless & irrelevant.

I would love to return to Russia when they’ve withdrawn from Ukraine & have a different government. Until then happy to be sanctioned.
https://mid.ru/ru/foreign_policy/news/1871495/

-- Jason Furman (@jasonfurman) Sat May 20 01:20:03 +0000 2023

This claim, that large employers want in work benefits so they can get away with paying low wages, gets made in the UK about tax credits/universal credit. By the left and the right. That's despite no employer EVER having raised it with me over two decades

-- Torsten Bell (@TorstenBell) Wed May 17 11:07:58 +0000 2023

Torsten Bell tweeted this while quoting the below tweet.

"[P]erhaps the primary reason the EITC enjoys such widespread support is because it functions as a generous handout to corporations. Among the loudest champions of the EITC have been multinational businesses..."

An extraordinary claim in @just_shelter's Poverty, by America.

A🧵

-- Jason Furman (@jasonfurman) Tue May 16 21:45:31 +0000 2023

"[P]erhaps the primary reason the EITC enjoys such widespread support is because it functions as a generous handout to corporations. Among the loudest champions of the EITC have been multinational businesses..."

An extraordinary claim in @just_shelter's Poverty, by America.

A🧵

-- Jason Furman (@jasonfurman) Tue May 16 21:45:31 +0000 2023

Replying to @jasonfurman

1. I have been in dozens & dozens of meetings with multinationals lobbying, the plurality of them on tax issues. I do not remember the EITC coming up a single time. What exactly is the evidence backing up the statement that multinationals have been "the loudest champions"?

-- Jason Furman (@jasonfurman) Tue May 16 21:45:32 +0000 2023

Replying to @jasonfurman

2. I find it borderline offensive to imply there is something nefarious about companies helping their workers access the EITC (and SNAP or Medicaid benefits).

Does your company help you access the (much larger) tax benefits for healthcare, retirement, childcare and more?

-- Jason Furman (@jasonfurman) Tue May 16 21:45:32 +0000 2023

Replying to @jasonfurman

More takeup of public programs is good. You can't pay your workers less simply because you help them sign up for benefits--just like my employer is not able to pay me less because it helps me access much more generous subsidies for healthcare and retirement.

-- Jason Furman (@jasonfurman) Tue May 16 21:45:32 +0000 2023

Replying to @jasonfurman

3. The economics of these subsidies coming at the expense of wages is confused. Companies are not benevolent institutions that want people to have a certain amount of money and if it comes from the government they can and do simply py them less.

-- Jason Furman (@jasonfurman) Tue May 16 21:45:33 +0000 2023

Replying to @jasonfurman

(There is a sense in which the claim is correct about the EITC. To the degree a subsidy encourages work, i.e., shifts out labor supply, then it will indeed have an economic incidence that is partly on the worker and partly on the employer. Only happens if employers hire more.)

-- Jason Furman (@jasonfurman) Tue May 16 21:45:33 +0000 2023

Replying to @jasonfurman

Why did @just_shelter argue this? I really wish I knew. Partly he seems wedded to the argument that poverty helps corporations so they want more of it, an argument that misses a huge amount (maybe more on that later). Partly it is tapping into animus against these programs.

-- Jason Furman (@jasonfurman) Tue May 16 21:45:33 +0000 2023

Replying to @jasonfurman

But regardless of the motives, it is a specific empirical claim, "Among the loudest champions of the EITC have been multinational businesses" that is falsifiable. And absent strong evidence to the contrary, I would argue falsified.

-- Jason Furman (@jasonfurman) Tue May 16 21:45:34 +0000 2023

Register now for an event on May 23 with @ojblanchard1, @jasonfurman, @benbernanke, and more -> https://brook.gs/3pwcwwP

-- Brookings Econ (@BrookingsEcon) Sun May 14 14:42:00 +0000 2023

Jason Furman Retweeted

You’ve been seeing a lot of headlines about banks over the past couple of months, and I thought it might be a good time for a Banking 101 thread, since they haven’t completely gone away. 1/

-- Victoria Guida (@vtg2) Sun May 14 16:13:52 +0000 2023

There are good faith debates about tough questions in economics.

And there are industry-funded studies that should never have any place in any debate.

Read the whole thread that this is a part of.

-- Jason Furman (@jasonfurman) Sun May 14 22:30:11 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

Replying to @ben_moll

2. Consultancy @Prognos_AG wrote a study paid for by industry lobby @vbw_bayern calculating that a gas cut-off would result in a 12.7% (!) GDP drop over the following six months.

Dated 28 June 2022, only 2 months before Nordstream 1 was shut down.

https://www.prognos.com/de/projekt/lieferausfall-russischen-gases-folgen-fuer-die-deutsche-industrie

-- Ben Moll (@ben_moll) Sun May 14 14:24:33 +0000 2023

Replying to @jasonfurman

Back in 2014 and 2015 when were putting sanctions on Russia over Crimea we had at least one prominent CEO tell us it would wreck his company and potentially the economy. (He then told his investors something very different on an earnings call.)

-- Jason Furman (@jasonfurman) Sun May 14 22:32:09 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

Replying to @ben_moll

1. @BASF CEO Martin Brudermüller said an end to Russian gas would cause "the largest economic crisis since World War II" adding "Do we knowingly want to destroy our entire economy?"

In a very good @FAZ_Wirtschaft interview w @maja_branko @MarcusTheurer
https://twitter.com/FAZ_Wirtschaft/status/1509598910976860167?s=20

-- Ben Moll (@ben_moll) Sun May 14 14:24:32 +0000 2023

Great nominations to the Federal Reserve Board.

Philip Jefferson has a broad & insightful perspective on monetary issues that will make him an excellent Vice Chair. I learned a lot about labor markets from Adriana Kugler when we worked together in the Obama administration. And… https://twitter.com/i/web/status/1657095292351844352

-- Jason Furman (@jasonfurman) Fri May 12 18:47:59 +0000 2023

Jason Furman Retweeted

Hello Twitter 👋

This is my new account, launched to coincide with mine and @baselinescene's new book #PowerAndProgress.

This is the beginning of an intellectual journey and I look forward to connecting with many of you on the broader issues at play.

-- Daron Acemoglu (@DAcemogluMIT) Fri May 12 18:01:54 +0000 2023

Jason Furman Retweeted

Philip Jefferson being resoundingly congratulated by the audience at the 2023 Hoover Monetary Policy Conference for being nominated by the President of the United States today to become the next Federal Reserve Board Vice Chair

-- Jon Hartley (@Jon_Hartley_) Sat May 13 00:42:54 +0000 2023

Core inflation in the Euro area remains way below what it is in the United States. (Note these are measured in a comparable way, so both exclude shelter, which is the reason there is such a large decline in the US number.)

-- Jason Furman (@jasonfurman) Thu May 11 16:05:18 +0000 2023

Replying to @jasonfurman

Cumulatively the euro area has still had more than 2 percentage point more core inflation.

-- Jason Furman (@jasonfurman) Thu May 11 16:05:21 +0000 2023

Replying to @jasonfurman

Headline inflation also higher in the Euro area and cumulatively is basically the same as what it was in the US.

-- Jason Furman (@jasonfurman) Thu May 11 16:05:23 +0000 2023

Replying to @jasonfurman

My interpretation:

1. US had a very very large fiscal response. Europe had a very large fiscal response.

2. On the other hand, the Euro area has stuck with somewhat looser monetary policy.

3. Both economies hit by shocks, worse for Europe given natural gas price increases.

-- Jason Furman (@jasonfurman) Thu May 11 16:05:27 +0000 2023

Replying to @jasonfurman

Most importantly: I'm much more worried about the Euro area being behind the curve on inflation than I am about the US. EA inflation has really become much more about wage-price persistence than it was. And more about core than the shocks. And fewer green shoots of progress.

-- Jason Furman (@jasonfurman) Thu May 11 16:05:27 +0000 2023

Replying to @jasonfurman

Sorry, typo, Euro area has had cumulatively LESS core inflation than the US.

-- Jason Furman (@jasonfurman) Thu May 11 16:15:31 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

Replying to @jasonfurman

Cumulatively the euro area has still had more than 2 percentage point more core inflation.

-- Jason Furman (@jasonfurman) Thu May 11 16:05:21 +0000 2023

Atlanta wage tracker out, 6.1% growth is: (1) favorable compared to what it's been lately & (2) consistent with inflation above 4% (higher than other measures of wages are suggesting).

Note the unsmoothed measure (not shown) was fell from 6.5% to 5.1%, the lowest since 2021.

-- Jason Furman (@jasonfurman) Thu May 11 16:35:35 +0000 2023

Inflation coming in high again, despite a continued slowdown in shelter growth but because of a (temporary?) rebound in goods prices. The core CPI at an annual rate:

1 month: 5.0%
3 months: 5.1%
6 months: 4.8%
12 months: 5.5%

-- Jason Furman (@jasonfurman) Wed May 10 12:54:26 +0000 2023

Replying to @jasonfurman

The favorable interpretation of the April data is that it was temporarily elevated due to an unusually large increase in goods prices--which had been flat or negative recently. A lot of this was a 4.4% (not annualized) increased in used cars and trucks.

-- Jason Furman (@jasonfurman) Wed May 10 12:56:10 +0000 2023

Replying to @jasonfurman

Housing looms large in the CPI. Shelter cost growth slowed again this month, although that was because hotel prices fell 3.4%. But even excluding that rent and owner's equivalent rent were slower than they generally have been. But more slowing likely ahead.

-- Jason Furman (@jasonfurman) Wed May 10 12:56:39 +0000 2023

Replying to @jasonfurman

"Supercore", which excludes food, energy, shelter and used cars, was up at only a 1.9% annual rate in April. That is the slowest rate since the takeoff of inflation in early 2021.

-- Jason Furman (@jasonfurman) Wed May 10 12:58:24 +0000 2023

Replying to @jasonfurman

More artisanal measures for you: taking out all rents and replacing with new rents continue to see moderation. Remember this is a bigger deal in the CPI than the PCE.

Note this is running at a 3.3% rate over the last three months.

-- Jason Furman (@jasonfurman) Wed May 10 13:01:52 +0000 2023

Replying to @jasonfurman

Or the Fed's preferred vivisection, which is core services ex shelter. This one moving sideways at 4.0% annual rate (but remember this generally averages about 1pp above the Fed's preferred target, the PCE price index).

-- Jason Furman (@jasonfurman) Wed May 10 13:01:55 +0000 2023

Replying to @jasonfurman

Finally, for those of you sick of all the slicing and dicing, here is overall inflation. Both food and energy were up in April but in general these (especially energy) have been more moderate lately.

-- Jason Furman (@jasonfurman) Wed May 10 13:05:42 +0000 2023

Replying to @jasonfurman

Note that headline inflation used to be higher than core. Now it is the reverse. This suggests the headline numbers may be transitorily better than they are likely to be.

-- Jason Furman (@jasonfurman) Wed May 10 13:05:42 +0000 2023

Replying to @jasonfurman

Here is the full set of numbers. On balance, the underlying detail is less worrisome than the continued very high headline number. A bottom-up perspective suggests some slowing of inflation from its current pace. But will "some slowing" from "very high" be enough?

-- Jason Furman (@jasonfurman) Wed May 10 13:05:43 +0000 2023

Jason Furman Retweeted

Join us for a Twitter Spaces discussion on this month's Consumer Price Index report with @jasonfurman, @davidmwessel, and @WendyEdelberg: https://twitter.com/i/spaces/1ZkKzXrBjLdJv

-- The Brookings Institution (@BrookingsInst) Wed May 10 13:07:09 +0000 2023

The Brookings Institution tweeted this while quoting the below tweet.

Inflation coming in high again, despite a continued slowdown in shelter growth but because of a (temporary?) rebound in goods prices. The core CPI at an annual rate:

1 month: 5.0%
3 months: 5.1%
6 months: 4.8%
12 months: 5.5%

-- Jason Furman (@jasonfurman) Wed May 10 12:54:26 +0000 2023

How to think about today's inflation report?

Relative to what forecasters expected yesterday it is mildly reassuring (thus the odds of a Fed hike in June went down).

Relative to what forecasters expected back in February it is terrifying (5% annual rate instead of ~3.5% rate).

-- Jason Furman (@jasonfurman) Wed May 10 13:29:36 +0000 2023

Never get too excited about 1 month's data. Especially about 1 way of slicing & dicing that data. But still, this is reason for some hope on inflation.

FWIW the annual rates for "supercore" (excl. housing & used cars):

1 month: 1.9%
3 months: 3.6%
6 months: 3.7%
12 months: 4.7%

-- Jason Furman (@jasonfurman) Wed May 10 13:55:17 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

Replying to @jasonfurman

"Supercore", which excludes food, energy, shelter and used cars, was up at only a 1.9% annual rate in April. That is the slowest rate since the takeoff of inflation in early 2021.

-- Jason Furman (@jasonfurman) Wed May 10 12:58:24 +0000 2023

Jason Furman Retweeted

If you are a fellow glutton for debt limit punishment, tune in/stream @WBUR right now to hear me and @jasonfurman discuss the issue with @cgrisales.

Given that this is a Boston station, maaybe even the earlier promised discussion of Boston sports!

-- Rohit Kumar (@rokumar1918) Wed May 10 14:13:15 +0000 2023

Replying to @jasonfurman

Reposting the table from the previous tweet in a way that is hopefully more readable.

-- Jason Furman (@jasonfurman) Wed May 10 16:18:07 +0000 2023

Underlying underlying inflation comes in at 4.0% this month, a bit of an improvement from previous months.

This is the median of 7 different measures (shown in the table) X 3 different time periods (3 months, 6 months and 12 months).

All re-meaned to match PCE inflation.

-- Jason Furman (@jasonfurman) Wed May 10 16:44:17 +0000 2023

Replying to @jasonfurman

Here is the thread I did on the CPI earlier today. https://twitter.com/jasonfurman/status/1656281542778396674?s=20

-- Jason Furman (@jasonfurman) Wed May 10 16:44:18 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

Inflation coming in high again, despite a continued slowdown in shelter growth but because of a (temporary?) rebound in goods prices. The core CPI at an annual rate:

1 month: 5.0%
3 months: 5.1%
6 months: 4.8%
12 months: 5.5%

-- Jason Furman (@jasonfurman) Wed May 10 12:54:26 +0000 2023

Replying to @jasonfurman

The new data since then is median CPI (calculated by the FRB Cleveland, not the BLS) which came in lower than last two years but still high (not surprising given the moderation in shelter). And...

-- Jason Furman (@jasonfurman) Wed May 10 16:44:18 +0000 2023

Replying to @jasonfurman

...Trimmed mean CPI which drops the outliers on both sides, also lower than the last two years but still high.

-- Jason Furman (@jasonfurman) Wed May 10 16:44:19 +0000 2023

Replying to @jasonfurman

Here are all the different measures without the re-meaning to match the PCE just in case you want them.

-- Jason Furman (@jasonfurman) Wed May 10 16:44:20 +0000 2023

Replying to @jasonfurman

Bottom line: both wage & price measures are all suggesting ~4% inflation. Some bottom-up reason to believe that could drift down. But not much bottom-up or top-down reason to believe that will fall to <3% absent further labor market cooling. https://twitter.com/jasonfurman/status/1651934640855457792?s=20

-- Jason Furman (@jasonfurman) Wed May 10 16:44:20 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

Replying to @jasonfurman

Finally here is the inflation rate a few different measures of wages are consistent with. I would go with the 4% inflation signal from ECI, is the best data. And the average hourly earnings spuriously low due to composition.

-- Jason Furman (@jasonfurman) Fri Apr 28 13:01:24 +0000 2023

Replying to @jasonfurman

Open questions:

1. Can there be "pleasant" labor market cooling (openings falling w/o unemp rising or a small increase in UR triggering a nonlinear reduction in inflation).

2. Is there enough cooling in the works from lagged rate impact & credit contraction?

Or is more needed?

-- Jason Furman (@jasonfurman) Wed May 10 16:44:21 +0000 2023

One thing largely absent from the discussion around the $1 trillion platinum coin is any consideration of inflation.

Prices have gone up a lot since the idea was first floated but somehow people still only taking about a $1T coin. Should be talking about a $1.339T coin.

-- Jason Furman (@jasonfurman) Tue May 09 19:11:28 +0000 2023

I was betting on the economists’ view that substitution would minimize pain for a cutoff of Russian oil/gas.

But had a nagging fear that their models didn’t captures real world complexities that would make it worse.

My nagging fears were unjustified.

Score one for economists.

-- Jason Furman (@jasonfurman) Wed May 10 03:12:23 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

Just released: new study showing

1. The German economy coped well with end of Russian gas supplies even avoiding recession

2. Germany would have also withstood an earlier 1 April 2022 import stop

Joint with @MSchularick @GeorgZachmann @ECON_tribute

https://www.econtribute.de/RePEc/ajk/ajkpbs/ECONtribute_PB_048_2023_EN.pdf

-- Ben Moll (@ben_moll) Tue May 09 07:30:30 +0000 2023

Interesting if true.

-- Jason Furman (@jasonfurman) Tue May 09 01:21:24 +0000 2023

Jason Furman tweeted this while quoting the below tweet.

The @sffed weather-adjusted employment change (by @wilson_daniel_j) is showing no decline in employment growth in 2023

https://www.frbsf.org/economic-research/indicators-data/weather-adjusted-employment-change/

-- Adam Shapiro (@ah_shapiro) Mon May 08 16:55:53 +0000 2023

Jason Furman Retweeted

Replying to @jeannasmialek

This is from California regulator's review of SVB oversight. It just underscores how INSANELY rapid that bank run was.

So does this chart from the Fed's stability report, also released today: https://www.federalreserve.gov/publications/financial-stability-report.htm

-- Jeanna Smialek (@jeannasmialek) Mon May 08 22:07:52 +0000 2023

You could be here with me now @JoeSquawk.

-- Jason Furman (@jasonfurman) Sun May 07 16:43:13 +0000 2023

Debt limit gimmicks, eg platinum coin, don’t have standard macro problems.

But they have an uncertain & potentially big cost: higher interest rates, falling markets & possible SCOTUS invalidation.

They are bad options. But worth studying because *might* be less bad than others.

-- Jason Furman (@jasonfurman) Mon May 08 01:31:59 +0000 2023