Odd Lots - Rep. Ayanna Pressley On How The Fed Can Fight Racial Inequality

Episode Date: August 20, 2020

In the United States, Black Americans have experienced persistently higher levels of unemployment than their White counterparts. While the Fed has focused on aggregate unemployment levels, racial disparities has historically not been a major focus. On this episode, our guest says it should be. Massachusetts Representative Ayanna Pressley argues that monetary policy can and should be a tool of ending racial inequality. She discusses the history of this idea, and how it can work in practice. Pressley also talked to us about progressive economic policies for the future.See omnystudio.com/listener for privacy information.

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And I'm Tracy Allaway. Tracy, one of the really sort of tragic or frustrating aspects of this current crisis that I think about a lot is how good, arguably, the economic situation was for the labor market right on the eve of the crisis, a multi-decade-old. lows in unemployment rate. Wages had just started to pick up, basically right before this hit, a lot of things that people had wanted to see for a long time started to seem like they were materializing. Yeah, by a lot of measures, I guess we were at, well, nearly at full employment, but I'm not sure it's tragic, maybe ironic, I guess. You wouldn't have wanted to go into the crisis with the economy already fragile, right? True. That's well put. But I do think, there was just a lot of frustration at, you know, how slow it was. So we had the, you know,

we had the crisis in 2008, 2009. And then it just took years and years and years to get back to something that, you know, economists would have called full employment. Yeah. I think that's right. And I think you pointed out before that the danger with sudden increases in mass unemployment is that it does really take a long time to normalize that. It takes a long time to train people for new jobs. And meanwhile, the economy loses that expertise, loses that additional output, and it's just a bad situation. Right. I think there is this view that if, you know, as we embark on this recovery, if it takes similarly long to return to something resembling normal, that'd be unacceptable. I think that's why there's probably a lot of rethinking about the role of monetary policy and the role of fiscal policy

in accelerating this recession, because the length of time of recovery. last time was pretty unacceptable, not good. Yeah. Yeah, it's that. And to me, it's also the nature of the current crisis. This is basically, in some ways, a government mandated economic crisis. People need to stay home in order to stop the spread of the coronavirus. You don't really have a choice when it comes to shutting down your business. And so I think people are looking to the government more than they might be otherwise and asking for help with that. Right. Another aspect, and another sort of disappointing factor is that prior to the crisis, for a long time, there's been this big gap between black and white unemployment rates. You look at the headline

unemployment rate. The unemployment rate for whites is below that. The unemployment rate for black Americans has been significantly above that. That was starting to compress prior to the crisis. And then once again, it looks like the status quo is that, you know, we just suffered another major setback on that gap. Yeah. I've seen a number of statistics on. this, not only for racial inequality, but it's showing up in men versus women as well. The female unemployment rate is a lot higher right now than the male unemployment rate. So it feels like the crisis is accelerating a lot of the inequality trends that we saw in previous years. Right. So there are a lot of different issues for the Federal Reserve and other policymakers to think

about as they embark on accelerating this recovery. I want to bring in our guest very excited to talk to her. We're going to be speaking with Congresswoman Ayanna Presley. She represents the 7th district in Massachusetts, and she's among other things, the recent co-author of a op-ed at CNBC, about the need for the Fed to focus specifically and think more about the black unemployment rate, talking about how monetary policy in the past has contributed to inequality along race. And so we think of monetary policy as being this sort of neutral thing, or we think of monetary policy as just affecting the economy in general and the need for other policies to address race-specific issues, but perhaps there is more that the Fed could do. So without further ado, I want to bring in

Congresswoman Presley. Thank you very much for joining us. Good to be with you. Thank you for your interest. Absolutely. So to start off, in your view, racial inequality in this country has numerous causes, but when it comes to monetary policy and the Federal Reserve, how in your view has monetary policy contributed to the gap between the success of whites in the labor market and the success of blacks and other non-white minorities? Sure. Well, first, let me just acknowledge that we find ourselves in a moment of national reckoning on racial justice. And every institution needs to address this role in perpetuating systemic racism and what it can do to be a part of the solution. And the Fed should be no exception

in that regard. You know, perhaps Donald Trump does not want to acknowledge the contributions of John Lewis and what I would consider our other founding fathers. But they've given us the blueprint on this. You know, Dr. Martin Luther King Jr. spoke about the fact that when black Americans are unemployed, it's considered a social problem. But when white Americans are unemployed, it's considered a depression. That's what he said in 1968 in addressing the Memphis sanitation workers. And of course, he also went on in that same speech

to say, what does it profit a man to sit at an integrated lunch counter if he cannot even afford to purchase a hamburger? And while we're speaking about the Kings, Coretta Scott King in 1976, led over 25,000 protesters to the Atlanta Federal Reserve Bank, where she declared that outside of Congress,

the Federal Reserve has perhaps more power to correct our economic ills than any other agency or institution. And so I recently authored this op-ed, laying out three steps that the Fed could take to center racial equity in its response. And they have to respond, you know, not only because it is the federal government's role in a period of unprecedented hurt, managing a crisis within a crisis, but they have a responsibility. Only the federal government can meet the scale and scope of this crisis and play a role in ensuring an equitable economic recovery. And so the three things that we've laid out is that the Fed must expand and modify the terms of its municipal liquid facility

to ensure that big corporations aren't getting a better deal than our community. And secondly, and this is what Coretta Scott King was organizing around, the Fed must comply with the Humphrey Hawkins Act. this provision that requires efforts to reduce unemployment disparities by directly targeting the black unemployment rate, which is really a much better indicator of the country's true economic health that will also prevent misguided action like raising interest rates too soon. You know, the feds have prioritized price stability and low inflation over full employment. And then finally, the Federal Reserve must not stand in the way of a federal jobs guarantee.

This is a really fascinating topic and you lay it out very clearly. I guess my first question is, what would you say to critics who will automatically respond with, well, this isn't the Fed's role? And why should the Fed, you know, it's a group of unelected officials, lots of people describe them as economists sitting in an ivory tower. Why should they be the ones to take this on? Yeah, because they're the only ones that can, the federal government were the only ones, that can play the sort of role necessary to meet the scale and scope of this crisis and it's unprecedented hurt. And I'm going to bring into the room another civil rights leader because I've been doing a great deal of reading and looking for fortifying and, you know,

inspiration and direction at this moment. And Reverend William Barber, you know, said that we find ourselves in the midst of a reckoning, which requires a third reconstruction. And I think that that reconstruction does mean everything from health care to ensuring that every individual that is able to work is working and also housing. You know, adults and policy makers don't make mistakes. They make choices. And poverty is a policy choice. In the midst of this national reckoning, this is the time for a reconstructing and to be bold and will have to be in order to meet the scale and scope of the hurt. managing this crisis within a crisis, both a public health crisis and the economic hardship that it's rod. And of course, the crisis of black unemployment did not begin with this pandemic. It's only been

exacerbated. I mean, I represent one of the most diverse, vibrant dynamic districts in the country, a seat previously held by John F. Kennedy himself, one of the most progressive seats in the country, and one of the most unequal. And the Commonwealth of Massachusetts also has the highest unemployment rate in the country at 17.4%. I want to go back to something you said that I thought was really interesting, and you said, not only should the Fed target black unemployment directly, you said you also thought it was probably the best proxy that we could have for the state of the economy. Why do you think it's the best proxy? And also just sort of flesh it out a little bit in terms of how sort of

specifically looking at the black unemployment rate could be incorporated into the Fed's mandate, or just the Fed's thinking in general. Well, I'll just say, The bottom line for me is we can't afford to deny the Federal Reserve's role here as a potential equalizer. But we also have to confront the fact that they've been an exacerbator of racial and economic inequality. And so again, this is the tipping point in the moment when we confront that pass while we also chart a new path.

And so rooting out systemic racism and inequity in our economy can't happen without a key piece of that system. And it just, it requires a government-wide approach. that has to include the Federal Reserve. And just picking up on my earlier comments regarding the Humphrey Hawkins Act, again, that provision requires the Fed to reduce disparities in unemployment between marginalized groups. And so at this moment, it really is about exacting every, every lever, every tool available to you. And they've not done that. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moscow here to tell you about our new

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latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. You mentioned this idea of a reconstruction in response to a great reckoning. I'm curious, how do policymakers such as yourself, balance the need to respond quickly to what is quite a serious economic situation with the need potentially to design or use the crisis as a jumping off point to redesign big picture ideas like how the Fed works, like how the federal government should be funding states and municipalities. How do you balance those two things? I think in this moment it's not a matter of or. It's a matter of and. And so I seek to do both because the moment demands that I do both.

And I think I'm emboldened in that advocacy and in that legislating because we have a mandate from the people. There's a decisive mandate from the people of this country to move with the strength of conviction, to be bold in our legislative responses to address. the inequities and disparities and the racial injustices that not only persist, but were created by policy. A public sentiment around issues like a federal jobs guarantee and Medicare for all and affirming housing as a human right has only grown. Do you think that the left or progressives have underappreciated the role of monetary policy or the Federal Reserve in advancing priorities during the Obama administration, there are

long periods where seats on the FOMC were left unfilled. It wasn't a priority to replace departing members. Should this be more, do you think there is a lack of awareness in terms of what monetary policy can do on the left? Yes. And that's exactly why I wrote the op-ed, you know, acknowledging that I do have this platform and I want to be an effective steward of it, especially in this moment. It's one of the reasons why I was so excited to serve on the Financial Services Committee to address these issues specifically. And, you know, I think the role of the Federal Reserve for some maybe only really came into view on the left in the role that it played in stabilizing the world economy in 2008. More people started to think about it in that way,

but, you know, again, I'm appreciative of the opportunity to serve on the Financial Services Committee so that I can lift up the role that it can play. And it really should go without saying that all of this, you know, that I'm looking for them to do must be in addition to the Fed, acknowledging their abysmal record on diversity and that can't just fall on the back of the only Black Federal Reserve Bank president and Raphael Bostick to name it and to call it out. So I'm also trying to provide some backup there.

I wanted to talk a little bit about what, going on in D.C. right at this moment. So I think we have the second round of potential stimulus relief currently log jammed in the Senate. I should just mention that we're recording this on, let's see, August 5th, so things could change. So looking back at the original CARES Act, how was that able to get bipartisan support and what has changed between then and now? Why is it so difficult to get a second relief package off the ground? Well, this Democratic majority house has been able to move, you know, something like four relief packages. And they were bipartisan.

And I think a lot of that had to do with public outcry and sentiment, which is why we need people to continue to be vigilant in their advocacy in that regard. You know, it's very frustrating. I, you know, daily feel that we are besieged by dog whistles and, and, you know, and tropes and sort of a cruelty and a callousness that proves that many people serving are completely removed and disconnected from the hardship and the hurt that their constituents are experiencing. In terms of what priorities are, I mean, what do you think are this sort of absolute must-haves in this bill? Yeah, well, I mean, 30 million people are still unemployed. And as I said, the Commonwealth of Massachusetts has the highest unemployment rate in the nation. And so yet this

Senate GOP, they want to cut unemployment benefits and they want to once again exclude our immigrant neighbors from the economic stimulus checks. And they're forcing K through 12 schools to reopen. It's shameful. It's reckless and it's just cruel. And so I think we have to extend unemployment benefits, not cut them. We need reoccurring economic stimulus payments for everyone. We need to extend the eviction moratoriums. We need to keep. cancel rent and mortgage payments. We're on the precipice of an eviction tsunami. We're talking about the disproportionate impact

on marginalized groups. You know, we find ourselves, what is this? Early in the month of August, by August 1, 30% of Americans said that they would not be able to pay their rent for the month. That's 30% of Americans, 46% of black Americans said they would not be able to pay their rent. So economic time stops,

but financial time does not. And even in the worst downturns, people's bills will always still be due. And it's just really past time that the Senate acts and that they move with the urgency that reflects that. Economic time stops, but financial time does not, is a really good way of putting it. But just on that note and going back to the idea of debt forgiveness, how would that work exactly? Because a lot of critics of that proposal would immediately point to the fact that, you know, landlords, as much as many people dislike them, also require income. And if they're not getting payments from their renters that has knock on effects to the financial

system. It could lead to losses for banks and things like that. How would you deal with that? Yeah. I mean, the point is, though, people are hurting. They need real relief now. And again, just I could have too many examples to enumerate in terms of the disconnect and the cruelty and the calcences of this administration. One of the other issues that I've continued to push in terms of a robust to economic recovery is the cancelling of student debt. This Department of Education garnished wages and benefits 54,000 borrowers in the midst of a pandemic. People are hurting. They need real relief now. And might I also add that our greatest wealth as a nation is the health of our people. So the reason why these other choices are being made is to prioritize and then the best interest

of the public health. And so that has to be the priority right now. And if that means that we are paying people to stay home, then that's what that means, because we have to stay off the rate of transmission and we have to get this pandemic under control. That's number one. There's no economy without workers or consumers. And so our greatest wealth as a nation is the health of its people. This is Tom Keene, inviting you to join us for the Bloomberg Surveillance Podcast. It's about making you smarter every business day. I'm Paul Sweeney. We bring you complete coverage of the U.S. market open. We cover stocks, bonds, commodities, even crypto, all the information you need to excel. And I'm Alexis Christophers. Bloomberg Surveillance also brings you the analysis behind the

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Bloomberg Surveillance, Essential Listening, each and every business day. I want to look forward a little bit. I know you just have a few more minutes. You know, suppose thinking about long-term economic agenda. And suppose Biden were to win the White House. and Democrats were to control both houses of Congress as is possible thinking about where economic policy should go. I'm looking at Biden's racial economic equity plan on his website. And the first two things. One is something about, first bullet points about public-private investments. The next one is

opportunity zones and reforming them. And I'm curious, do you think these are smart tools, or would your vision for what racial economic equity, would it look different from this? I just think that it needs to be bolder and it's about guaranteeing those most basic human rights, which certainly is not a radical notion. But a lack of political will and leadership and I think a deficit of empathy and urgency has us where we are. And so, you know, I think we do need a federal jobs guarantee. I think we need Medicare for all. Housing, affirming the right to housing. So housing justice, and then on the economic justice front, a federal jobs guarantee. And when it comes to health care,

justice, Medicare for all. In addition to all the other things, I continue to fight for modernizing the Community Reinvestment Act, you know, the fact that 98% of financial institutions continue to pass the CRA exams, but the practice of redlining persists. The Fair Housing Act, which they seek to, you know, undermine and roll back those protections. canceling student debt, which I see is a racial justice issue because black students borrow more than any other borrower and default more. And that has everything to do with policies, which have obstructed black families' ability to equitably build generational wealth. And that is also, you know, one way to your question, tries around cancellation and people's negative characterizations of that. That's also one way to jumpstart the economy.

The average borrower is saddled with about $30,000 worth of student loan debt. And so by canceling that, then those funds can be used in other ways to jumpstart and to invest in our economy. So those are some of my priorities. So I have one more question just leading off from that. Why do you think so many people seem to be instinctively opposed to bailouts and instinctively opposed to policies, that on the surface would appear to be good for everyone and for the overall economy. And how do you overcome that obstacle? Sure. Maybe we've been, we're so used to the way things have been done for so long that

perhaps it's a greater expectation and people are just used to corporations being beheld out and not the American people and our families and the American worker and our communities. You know, but again, this is the moment. to be disruptive and we need to build something new that is intentional about equity and justice. Reiterating my earlier point in terms of the mandate from the people, I mean, the reason why people still continue to protest, to demonstrate, to mobilize, to organize.

Yes, the tipping point was about the fact that we had been in the midst of a pandemic besieged by these images of unarmed black Americans being brutalized and murdered by police, but that's not the only reason why people are in the streets. And the reason that movement is one that is multi-generational and multiracial, there's unrest in the streets because there's unrest in the lives of Americans. And that has everything to do with the role that policy is played

in creating these inequities and these disparities, and in particular these racial injustices. And so this is the reckoning. And that's why the movement has not waned. It is a sustained one. And I was speaking earlier about Coretta Scott King and Dr. King and, you know, they gave us the blueprint. It is to organize.

It is to mobilize and it is to legislate. That's what all that marching was about. So, you know, you can't say Black Lives Matter and affirm that in this moment of culture shift, but then not see that reflected in our laws and in our budgets. Those are the only receipts that matter in this moment. So if Black Lives Matter, we need to lead like it and we need to legislate like it and we need to act like it.

And that includes the Fed. Congresswoman, I did one last question. You mentioned the Fed because I wanted to bring it back there, looking again at Biden's platform. He mentions also having the Fed focus more on racial economic gaps. Do you feel that Powell gets this? There's going to be a lot of questions at some point in the theoretical Biden administration about whether he should be reappointed.

In your communications, conversations, do you feel that Powell understands this and would it make sense to reappoint it? As recently, I've been disappointed. I'm not sure that he understands the gravity of the impact of the lack of action by the Fed and fully appreciates the power that they have and the role that they can play and addressing these racial injustices, and in particular, black unemployment, and the racial wealth gap. Congressman Presley, thank you so much for your time, incredibly important

topic and I appreciate you coming up. Thank you. Thank you so much. Tracy, I feel like so many of these conversations keeps coming back to the question of can we really go back to the status quo after this? Yeah, I think that's right. And I think the way the Congresswoman put it, the idea of a reckoning that will now lead to a reconstruction, that's a good way of thinking about it. It seems pretty clear that policymakers have a mandate to do something different. now. I guess the question is, how do they do it under time pressure and how do they actually construct it and maintain that momentum? Yeah, absolutely. I thought it was also really important and really interesting her continued citation of the Humphrey Hawkins Act because people have

this idea that's like, okay, target full employment or target maximum employment and price stability without really realizing, well, and then full employment gets redefined as just sort of like, oh, this is like what a model says employment should be before inflation takes off. And as we saw during, you know, the post-crisis era, whether it was the Fed starting high grades, I think, in 2015, you know, they really have no idea. And that's not even an insult per se to the Fed. It's like, these are really hard things. And so the idea of taking full employment more seriously and not hiking rates just because some model says, oh, you know, pretty soon inflation might pick up to 2.1% if we don't, I think is going to be one of the big changes. And we already see that with, you know, some of the commentary out of the Fed about not trying to preemptively fight inflation this time. But if you, you know, looking back at that experience, looking back at the cyclical asset. of the black, white unemployment gap, perhaps this time around actually taking full employment

and or getting the unemployment rate down to as low as possible, it seems like it might be taken more seriously this time. Yeah, I think it would. One thing that we didn't really discuss, though, is the role of the Fed on asset prices. And if you think that, you know, low interest rates are going to boost asset prices in general. But if you agree to that, then the vast majority of financial assets, you know, are held by rich people who are generally well off, lots of white people. And I guess there's a question around financial inclusion there as well. Like, how do you get more people to participate in a financialized economy? Yeah. No, I mean, I think that's, I thought you had a really good question about the sort of public

cynicism around bailouts. And, you know, these are all slightly different things when the word bailout gets used. You know, some people think, you know, stimulus. and bailout and cutting rates, et cetera. But there is just a lot of cynicism towards the potential for policy to make things better for the public. And I feel like, you know, every time the Fed does something, people point to exactly that. And they're like, well, not everyone has assets in the stock market. Not everyone benefits from a booming housing market, particularly in cities or particularly

in places where a lot of people are renting and not, um, not participating in that upside. And so I do think that, you know, obviously monetary policy, interest rate policy is a role to play. But as the congresswoman pointed out, it's really a sort of, it's a crisis and it's an issue that needs to be addressed at all different levels of government for it to work. To me, it almost gets to these big philosophical questions, like whether people care more about absolute gains versus relative gains, because you can argue that every, everyone will benefit in some way from whatever policy. But I guess in reality, if people see their neighbor, for instance, benefit more on a relative

basis, I guess people still get angry. That feels like the essence of the problem to me, like whether or not you believe relative gains are more important or absolute gains. But again, big questions. Yeah, big questions and potentially a moment of us. big change, but we'll have to see it. Yeah. It'll be really interesting to have similar conversations, hopefully not exactly the same, but more conversations on this topic next year and see how much has actually like shaken out in terms of change. Yeah, absolutely. Okay. All right. Well,

this has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. And I'm Joe Wise. You can follow me on Twitter at the stalwart. And follow our guest on Twitter, Congresswoman Ayanna Presley. Her handle is at Iona Presley. Follow our producer on Twitter, Laura Carlson at Laura M. Carlson. Follow the Bloomberg head of podcasts. Francesca Levy at Francesca Today.

And check out all of our podcasts under the handle at podcast. Thanks for listening. On April 4th, 2023, around 2 in the morning, A man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16.