As unemployment benefits for millions of U.S. workers expired on Labor Day, with many states suffering the worst surge of the pandemic, economist Joseph Stiglitz says it’s “disturbing” federal aid was allowed to lapse. “This is going to feed into the problems posed by the Delta variant.” Stiglitz also talks about whether Federal Reserve Chair Jerome Powell should stay in the job, saying he has done a “reasonable job” during the pandemic but has a tendency “to side with Wall Street and engage in deregulation.”
AMY GOODMAN: Unemployment benefits for millions of U.S. workers expired on Labor Day, after President Biden declined to press the Democratic-led Congress to extend assistance, even as many states suffer their worst surge of the pandemic. An estimated 9.3 million jobless workers lost benefits, along with 26 million members of their households who relied on the income. The cutoff of aid came after the Labor Department reported the U.S. economy added just 235,000 jobs in August, a significant slowdown due largely to the spread of the Delta coronavirus variant. The unemployment rate for African Americans rose six-tenths of a percentage point in August to 8.8%.
For more, we’re joined by Joseph Stiglitz, Nobel Prize-winning economist, Columbia University professor, former chair of the Council of Economic Advisers.
We want to discuss a number of issues, from vaccine equity to the Federal Reserve Board, but first let’s begin with these unemployment benefits ending. Joe Stiglitz, the significance of this?
JOSEPH STIGLITZ: Well, this is extraordinarily disturbing. You know, we should have passed a law that said so long as the unemployment rate remained elevated, in particular places it’s very, very serious, and — we should have continued those unemployment benefits. The numbers, three-fourths of those on unemployment are going to see their benefits cut or, most of those, eliminated. And we aren’t back to, really, normal. So, this is going to feed into the problems posed by the Delta variant, because that itself has slowed the economy down. As you mentioned, the unemployment — the employment numbers were not that good the last month. And now on top of that, we’re going to have the problem of insufficiency of aggregate demand, because these people who are going to lose their benefits won’t be able to spend.
JUAN GONZÁLEZ: But, Joe Stiglitz, what do you say to those — there have been lots of media reports in recent weeks and many Republicans, like Senator Ted Cruz, saying that employers are not able to find employees because people are preferring to stay on unemployment rather than get jobs. What’s your response to this point of view?
JOSEPH STIGLITZ: Yeah. Well, actually, this is an area where we’ve been able to get real data in real time, because we’ve done, you might say, an experiment, because different states have reduced their benefits, cut off their benefits — a large number of conservative states have already done that — so we’ve been able to see what happens to employment when you cut off benefits. Do people rush back to get jobs? And were those states that cut off those benefits — did that solve their problem of a labor shortage? Answer: unambiguously, no.
It’s clear the reason that people aren’t going back to work is, one, they don’t want to get the disease, and our workplace is often a place where people do get the disease. Secondly, we don’t have adequate child care. And that means, with schools being shut down, opened up, shut down, they don’t want to leave their children alone. And one of the important provisions of President Biden’s program that’s in the reconciliation bill is actually to address that issue. You might say it’s a real supply-side issue that will help the labor supply. But cutting off unemployment benefits has a minuscule effect, estimating something like 7% of those who get cut off from benefits actually wound up with jobs.
JUAN GONZÁLEZ: And, Joseph Stiglitz, I’d like to turn to another topic: the Federal Reserve Board. President Biden will soon have to decide on the new chair for the Federal Reserve Board. There have been some congressmembers, progressive members of Congress, like Alexandria Ocasio-Cortez, Rashida Tlaib, Ayanna Pressley, who are calling for Biden to replace the current chair, Jerome Powell, for neglecting to take on the climate crisis and weakening financial regulations. Would like to get your perspective on this, and especially not just on the issue of Powell’s track record on climate change, but also the fact that he’s continuing to pursue this cheap money policy that allows corporations and Wall Street to get money at low interest rates and then, of course, invest it in the stock market and continue to drive the stock market up, rather than real production or capital expenditures. Your sense of whether Jerome Powell deserves to stay?
JOSEPH STIGLITZ: Well, this is one of the really difficult decisions, because no one wants to disturb the economy as we’re in the process of healing the economy. And it was a kind of decision that I was involved in more than 20 years ago when Alan Greenspan came up for reappointment under President Clinton.
Now, Powell has done a — you might say, a reasonable job in responding to the pandemic. He’s not gone the way, you might say, a hard money person would, worried about inflation. But that’s a low bar. Almost anybody reasonable would have taken the kinds of measures that the Federal Reserve took.
The hard questions on the macroeconomic side are: What happens when we get starting to recover? How soon do you increase interest rates? [inaudible] are you about inflation? How do you see that trade-off? And one of the things that we know is that the only time that we bring into the labor market minorities, disadvantaged people, and the only time we get wage compression is when we have a really tight labor market. And to me, it’s worth risking a little inflation in order to address some of the grave inequalities in our society. And I wonder whether he will be the right person in that critical moment.
Moreover, one of the critical issues, going forward, is: Are we going to have another financial crisis like we had back in 2008? Memories are short, and a lot of people think that’s ancient history, but it’s not. It can come back again. And that’s where his proclivity to side with Wall Street and engage in deregulation is very troublesome. The Dodd-Frank bill did not adequately deal with reregulating the financial system and, since then, the [inaudible] regulations we’ve had.
What we really need is strengthening regulations to deal with encouraging capital to move, as you said, into productive activities and dealing with the real risk not only of the financial excessive risk-taking that we saw in 2008, but a new set of risks that are on the horizon, and those are the climate risks. He says those are issues that Congress ought to deal with. But they are issues of financial stability. We have a repricing of fossil fuel assets, other assets that are going to be affected by climate change. It will make what happened with the subprime mortgage market look like a picnic. And what that did to our financial system is an important lesson why we have to include climate risk in any stress testing.