tv Politics and Public Policy Today CSPAN May 31, 2016 5:42pm-7:01pm EDT
turning to monetary policy. the implications for monetary policy of these supply-side issues have been limited but they begin to matter more as we near full employment. so, for the near term my baseline expectation is that our economy will continue on its path of growth around 2%. to confirm that expectation it will be important to see a significant strengthening in growth in the second quarter after the apparent softness of the last two quarters. to support this growth narrative i also expect the ongoing healing process in labor markets to continue with strong job growth, further reductions in headline unemployment and other measures of slack and increases in wage inflation. as the economy tightens i expect inflation will continue to move over time to the committee's 2% objective. if the incoming data continues to support the expectations i would see raising the fund rate.
several factors suggest that the pace of rate increases should be gradual. including the asymmetry of the risks at zero lower bound, downside risks, and a lower long-run neutral federal funds rate and the apparently elevated sensitivity of financial conditions to monetary policy. uncertainty about the location of supply-side constraints provides another reason for gradualism. there are potential concerns with this gradual approach, however. it's possible that monetary policy could push resource utilization too high and inflation could move temporarily above target. in an era of anchored inflation expectations undershooting of the natural rate of unemployment should result in a temporary increase in the inflation rate. but running the economy above its potential growth rate for an extended period could involve significant risks.
a long period of very low interest rates could lead to excessive risk taking and over time to unsustainably high asset prices and credit growth. macroprudential and other policies are designed to reduce both the likelihood of such an outcome and the severity of the consequences if it does occur. but it is not certain that these tools would prove adequate in a financial system in which intermediation takes place outside the regulated banking sector. thus developments along these lines could ultimately present a difficult set of trade-offs for monetary policy. to wrap up for now with the support of monetary accommodation our economy has made substantial progress. my view is that a continued gradual return to more normal monetary policy settings will give us the best chance to continue to make up lost ground. thanks very much and i look forward to our discussion.
>> fabulous. >> that's me. that's me. thank you so much, jay. we obviously have a very expert audience and a lot of people waiting to ask you questions, but if i could i'd just like to pose a couple to start. towards the end of your speech you mentioned the idea of -- i'm trying to find the exact words so i don't end up saying something wrong. the apparently elevated sensitivity of financial conditions to monetary policy. that leads me to two questions.
first is, it's interesting to juxtapose that with an apparent diminished sensitivity of real investment to monetary policy. i mean, that seems to be the big uphill battle central banks have been facing for the last few years. is there -- given particularly your financial markets background, what do you think leads to this divergence between monetary policy seeming to have more effect on asset markets and less effect than in the past on investment? >> okay. so, what i was referring to there and there's so many different ways to try to -- try to relate changes in financial conditions to changes in expectations about monetary policy. but this was a statement based on one look which is to look at
the differences between expectations -- forward expectations for rates in other advanced economies and the united states and look at changes in that spread and look at the effect that would have on the dollar. and it seems that that effect has been higher than expected. so, by that particular measure, and that would explain some of the quite large move in the dollar since the middle of 2014. year asking, though, about the tension between that and really low capital investment in the face of very low interest rates. as i mentioned in my speech, you know, we look at it in sort of standard, accelerator model terms and other frameworks as well. and, you know, come pretty much to the view that low capital investment is explained largely by weak demand. businesses don't have to invest because demand is weak. it's no more complicated than that. i would say also, though, based on my, you know, long career in dealing with private sector
companies, if you put yourself in the seat of someone responsible for management of a company, you know, they see weak demand. they cut costs. they can buy back their stock, and they can make their numbers that way for a period of time. so, investment is low. but it's a way for you to make your numbers without taking a lot of risk. >> right. >> if you think about where that takes you over a period of 10 or 15 years is kind of a hallowed-out economy so it's not a great trend. we don't see a residual to explain, though, in terms of our basic framework for investment. >> great. so, secondly you raise the issue of the dollar. obviously i'm not going to ask you about any particular level or intervention, but just more broadly. we're being forcibly made aware of various other countries' concerns about the dollar, their reactions, other central banks,
to the dollar. in the same spirit as my last question, how do you think about the chatter sometimes that the federal reserve can't raise monetary policy as much as they would like -- tighten monetary policy as much as they would like because the dollar effects are so large? >> well, let me begin by echoing your point, of course, we don't have anything to do with managing the level of the dollar. >> this is about transition. >> i'm getting that ritual disclaimer out of the way in case there are treasury people here or watching. so, i think what happened is since the middle of '14 financial conditions tightened significantly. and not through the traditional channel of interest rates, so in effect we had to tighten less is what happened. it's not to say that we can't tighten policy. the point is to tighten financial conditions, not to raise interest rates, right? so, we do what we think is appropriate and i think we had the freedom to do that. but we do have to take into
consideration, you know, conditions around the world and one of many financial conditions we've got to evaluate is, of course, the level of the dollar. thank you very much. i'm now going to open it up to our audience for questions. the -- some very simple ground rules. please wait to be recognized. if you're recognized, please identify yourself, please pretend you are asking a question. if you do something that resembles a speech, i will cut you off. in practical terms, we have a traveling mike up here up front, which chris is holding, and people towards the back can feel free to stand at the standing mike. who would like to go first under that horrible threat i just issued? right here. >> so one question i had was -- >> identify yourself. >> sorry.
jonathan pingle from black rock. the arguments for caution and facing the problems of asymmetric policy response near the zero lower bound sound reasonable as sort of a justification for proceeding gradually. however, trying to understand exactly ha that means for the path forward, say, maybe one hike or two hikes this year, maybe three or four next year, or does that mean two next year? it's difficult to see out of the next two, three years how we intercept that relative to, you know, a historical hiking pattern which would have been, say, faster, or does this mean something incredibly slow? for example, just thinking about the dot plot, the median dots for 2017 have four hikes priced in. how do you reconcile that with assem tri and gradualism? i mean, is that gradual in your
view? does that incorporate the inability to respond to downside risks? i mean, how do we reconcile this gradualism with what we see in the dots? is the dots gradualism? >> or as i would put it, do the dots matter at all? >> so the dots really represent -- i'm sure you know -- individual participants' estimates of appropriate monetary policy, given and in consideration of a moti, will e forecast. so i would say that anyone's ability to forecast much beyond the next few months is really
not so great. just the standard error is around everyone's forecast are quite large. so you -- the way to think about it is not a promise, it's not a statement of an intention. it's statement of what someone would think monetary policy would be -- what would be appropriate given that motile forecast. that's the only way to think about it. if you think of it as doesn't that sound like a lot? no that doesn't sound like a lot if the forecast is realized and if other financial conditions are about as kpmtd. we had a conference about this in new york a couple of months ago. the kmejs of communicating around the dots are substantial. people do tend to take them more as promises and sort of not see the conditional ality. i'm not saying you're doing that, jonathan, but they're not without challenges. >> very nicely put. who would like to go next? please, the gentleman over there. >> thank you. my name is sanch. i'm the obara of mozambique. il wand to thank you for the opportunity and for this
illuminating presentation. in your presentation, you mentioned i would say by passing the geo application, if geo plik, political events, and i wanted to hear a bit more about the impact of politics here in the united states. this is an election year. what effect, what impact that will have on the economy? because there was quite a lot of economics in the presentation. i understood most of it but, i mean, part of it -- not most of it. i'm not an economist. but i wanted to understand the impact of the politics on the economy. >> so i'm now in my fifth year. i'm one day, frankly, into my fifth day at the fed. so this will be my third election cycle and i can say that politics plays absolutely no role whatsoever in our deliberations or in our decision. so we -- you know, the focus
inside the fed is very much not partisan politics or elections. it's very much economic fundamentals, so it can be very jarring to emerge from the fed and talk to people who think of politics -- think of economics in political terms, which i referred to earlier. honestly, it has no effect. you know, we announced a quantitative use program in 2012. we just don't think about it, and i can say empirically, i find that to be the indication, not just the rhetoric. >> please. >> my name is joe marie greasegrabber. i'm with new rules for finance. i wanted to ask you about the hollowing out of the middle class of the united states and how that syncs with your view that wages are rising and the real level of employment is going up, how are we going to
return the middle class to a demand engine? >> let me first echo that there's a on the of research that supports what you've just said, that it's really the middle-skilled jobs that have suffered. david arter at mit has done work. so have many others as well. it's been partly related to the globalization and sort of the plateauing of u.s. educational attainment compared to our competitors. it's a serious problem. it's not really in the wheelhouse of monetary policy. we have one tool, which is monetary president obama. it supports demand at the aggregate level. it doesn't support distributional policies or, you know, or policies that might provide training or might address all of the issues that you talk about. those are really matters for the elected branch of congress and
they're more the management of demand which is what we're more focused on. but it's not something we can take a role in other than by maintaining -- >> can i follow up on one piece of that. you mentioned globalization and a relatively competitiveness. i think david and other people would suggest technology has played a role. leaving that i a side, clearly part of what you describe when you're talking about monetary policy and any good banker would talk about how much you would worry that if we fall behind the curve will expectations become unanchored. does it enter your own personal views or your expectations that labor really is weak now? that for whatever variety of reasons, labory doesn't have the bargaining power, so maybe the risk of an inflationary spiral is less? or is that just not something that would come up in the discussion? >> it comes up indirectly. if you look at the relationship between slack in the economy and
price inflation and then look at the relationship between price inflation and wage inflation, both of those relationships have weakened very substantially oef the past 20 years, so to say it differently, wage inflation which has been weak no longer affects price inflation as much as it used to and price inflation is no longer as response sieve to the economy getting title. so you can be at full employment and you don't see much inflation. this is very different than the world we grew up with wage spirals and such. all of that is i think consistent with a world in which companies maybe substitute capital labor and share goes down. and it's not something we can -- i mean, it's in the numbers but it's not something i feel we can
target directly. >> great. at the back, mike, and then over there. >> hi. from voice of america. thank you for your comments. i've got sort of a flee part question. the first one is are we now seeing a coordinated effort by members of the federal reserve to signal a possible rate hike soon? the second would be how would you vote in june 15th about -- for a rate hike in june, and what do you see as the risks of not acting quickly enough? >> ok. concerted effort, no. i mean, adam will confirm that we scheduled this speech i think it was -- >> two and a half, three months ago. >> wasn't even that. it was late last year, a while back. so there was no thought at that time. it just lapse to be now, and it's -- happens to be now and
it's a coincidence. i'm the first board member to say anything about this, actually. a lot of the bank presidents have been talking and some of the other board members will be speaking next week. but no. how would i volt. the great thing is i don't have to decide until june 15. and i think you discard the opportunity to evaluate incoming information when you decide too early. so i really do legitimately and not just in theory think that there's important incoming data not just about the real economy but about the balance of risks that will come in between now and then. so i don't know. the risks of waiting are frankly not so great. this doesn't feel like an economy that's bubbling over or threatening to break into high inflation. at the same time, i think you have to balance -- really, i think the right plan, as i said, is a gradual sort of rate increases over time and you've got to balance the risks of, you know, the relatively modest risks of running the economy too hot and having to move more
sharply, perhaps causing recession, and you've got to take into account the fact that we've made tremendous progress. we're close to full employment. again, you don't want to wait doing but you don't want to be in a hurry. >> rate hike in june? >> will you please. doug and jason and then we'll go to the back. >> thanks. doug red earnings ker. jail, sort of a two-part question. you mentioned the international applications and how those weigh on your thinking. i wanted to ask you to expand on that. one thing that you didn't mention is the concept of financial stability and a broad question for you, just how do you think about financial stability concerns as they relate to monetary policy? >> on international concerns, i was rereading a paper by barry ikengreen where he talked about the history of the federal reserve.
it sort of comes in and out of focus. i think there -- here lately i think our public communications have had more than the usual amount of communications among them because of important factors. i think that's because of the position we're in. the u.s. is in position to consider removing accommodation gradually and other josh economies are not in that position. so we stand out -- i think global growth inflation are weak, so it's a time when those things are particularly important for us. in terms of financial stability, you may have seen in the last several minutes, if you don't have that much to do, you might have read the minutes and seen that we had a long discussion of monetary policy at the last meeting. i think the conventional wisdom is generally that, you know, that macro prudential and other supervisorsry regulatory tools
have against financial instability and that monetary policy is for stable prices and full employment. i think it's not easy for many, including me, to be particularly comfortable with that. the scenario is the one i mentioned in my speech, which is what if it's monetary policy that is over a long period of time, what if rates have to stay lower than we think they will for a long period of time? upward pressure on asset prices and growth and it's because of monetary policy. we don't see that today at all. the last thing i'll say is at the board and pretty much everywhere, you you have a heightened focus on issues of financial stability since the crisis, and it's a very, very deliberate focused effort to build up the core of the system. i think it's made frankly great progress and more to do on that.
>> great. jason here and we'll go to the back mike. >> jason cummins from brevin. i want to turn your attention back to your discussion of inflation expectations. which you briefly touched on. i detected, although i'll have to read the speech carefully, somewhat a greater measure of concern about risk to the iranian side inflation expectations in the speech compared to some of the other discussions i've seen recently. that certainly reflects some of the same concerns i've had about the same subject. in your mind, when you think about normalizing monetary policy, as you've described you're trying to tighten overall conditions. how do you explain to the public as you're removing accommodation, that you're still concerned about maintaining the sanctity of the no, ma'amle nal anchor when the public -- it's not clear, there's no, sir one public out there. but the surveys or what we're getting from the markets, there seems to be some concern about whether inflation expectations are as stable as they have been in the past.
it's never going to be an easy job to raise rates and get inflation to go up at the same time. we've never done that in monetary policy before in the united states. so what do you do alongside the normalization process to convince people that inflation will be going up anded the fed will be concerned about that without promising an overissue without just repeating gradualism over and over again? >> so it starts with where inflation is right now. and core inflation is at 1.5% and is probably being held down by 30 or 40 basis points, by the effects of the strong dollar and a little bit by the effects of lower oil prices. so if you add 30 or 40 basis points in, you're at 1 money 8, 1.9. pro forma in my former world of pro forma finance, it was a context. pro forma, you're not so far
from 2%. in theory all you've got to do is wait for all things held equal for inflation to return to that level. so that's why i have some comfort in moving at this time, is that i don't think on an underlying basis we're all that far. i also -- you know, we've spent time on this. the issue with inflation expectations, take -- if you take break-evens, market based, and there's a lot of decomposition of what's going on there and many make the case that it's about liquidity and not about people's expectations. i don't want to sound like i accept that at face value and -- i mean, i don't. i get that. when inflation -- when five year forward inflation expectations are down as much as they've been since the middle of 14 and stay there, i think you should be worried about that, and i think it's something to focus on.
again, i do think that inflation -- i would still say they are -- they are anchored, inflation expectations, but i would say that it's important that the public see, as you've suggested, that we are committed to returning inflation to 2% and keeping expectations anchored. >> all right. >> we have quite the lineup at the back mike. >> hi. thank you very much for being here. this is an excellent panel. >> who are you, please? >> my name is goodman. i would like to ask you a question regarding the data dependent monetary policy. so we know that the monetary -- the effects of monetary policy comes with legs. it takes time to see results after the decision. so that's why we hear that the monetary policy should be forward looking. and at the same time, we hear the members emphasizing the data dependensy every opportunity they get. so i'm just curious how the fed can achieve forward looking
monetary policy by looking at past data as they are -- their main factor in deciding, you know, the monetary policy. and also, my second question is, last year at this time we were talking about the possibility of a june rate hike and it didn't happen. the fed had to wait until december and i was just curious, what is the likelihood of having a deja vu this year and what can cause it? >> should have stuck with one question. >> do me a favor. remind me of your first question. >> how can you be data dependent and forward looking? >> ok. thank you. so as you probably know, we -- each member of the flmc, each participant, all 17 of us, gets to write down a forecast, a three-year forecast of the economy. and so -- and then write down what we think appropriate
monetary policy is to achieve that path. for the economy. so that's -- so it is very -- it is forward looking. policy is always forward looking. really. and it's dependent on incoming data, too, because that tells you the state of the economy. it confirms or doesn't confirm your expectations going forward. but policy is of course completely forward looking. in terms of what will happen, i don't have any projections for i. i've told you how i think about the problem and what i expect will be appropriate given what i expect for the economy and for risks and if it doesn't pan out, if the conditions that i've late out don't happen, then i suggest the committee could move faster or slower. >> very good. >> thank you. >> second question in the back. then we'll come to the front. >> jeremy quinn at uc berkeley. in your presentation you showed us the decline in the growth rate of potential gdp.
you also mentioned the decline in the neutral rate of interest. and so i was wondering how much of that decline in neutral rate of interest you think is linked to the decrease in the potential growth rate of gdp? >> i think they're fairly closely linked. i don't have all the potential mod ls in my head this afternoon. but i think it's almost a one for one decrease in the neutral rate from estimates of potential growth going forward. certainly close to that. >> over here, please. >> thank you, jay. i wanted to ask you -- >> identify yourself, please. >> christian gutob. i wanted to ask you about the upcoming vote and how it influences how you think in the near term about your policy choices and the benefits of making a decision at one meeting
relative to another meeting. is it your view that if the odds of a -- vote going in favor of exit were declining in markets were therefore ponding in a risk positive way in the run-up to your meeting, that would essentially allow the committee to set aside that consideration and focus only on the domestic data and so forth. or would you need to see that risk fall to an immaterial level in order to be comfortable making a policy call at next meeting in. >> let me piggyback on that question. one of the things coming out of the spring imfo bank meetings g7, g20, fed, all this was some repeated statement that breg was at systemic risk. now, don't get me wrong. i love the united kingdom probably as much or more than any other american. but i've never understood how this becomes a systemic risk. so in your view, why is that a concern? >> i would -- taking christian's
question for a second shgt i would break it into two questions, the first of which is how does the vote come out and the second is in the event of a leave vote what are the -- i think it is possible to -- we don't dush know, it's still some weeks until our decision on june 15th. it is possible that we would learn important information between now and june 15th on the first question. i don't really think it's possible we would learn much about the second question, which kind of goes to adam's point. and that is, you know, you -- i mean, there's a modal expectation maybe that there would be some presenting a factor in favor of caution about raising rates in june. >> interesting. at the back, please. >> thank you. i think from your analysis, mr. powell, there seems to be a disconnect from the real side
and the financial side so there's capital dipping and labor productivity growth. and don't you think that perhaps monetary policy might be contributing to the death of investment and to that kind of situation allowing the companies as you say to make the numbers without investment? >> i do not think that is the case.
i think that monetary policy is supporting demand in the face of, you know, still significant risk aversion and headwinds in the wake of a global historical economic event called the global financial crisis and the resulting recession. i think we're still digging our way out of that. i think it's still echoing down the years and i think it will do so for some time. so i don't really think -- i think monetary policy on net is contributing to the recovery not pulling it back. >> thank you.
natural rate of interest. i think given that, the implication that we're going to be running in the low nominal interest rate environment for quite some time if that's going to persist, is it time for a more serious reconsideration of the 2% inflation objective? >> i think in theory and in -- you know, that is a logical margin upon which to adjust. it's not at all something that we're considering at this time, and i frankly think that, you know, jerry yellin took that question on in great detail, dave you may remember in a speech i want to say late last year about inflation dynamics and came down strongly that you know when you embrace an inflation target and expectations get deeply anchored as they clearly are now the costs of trying to move that are uncertain and potentially high. so it's not something that i would be look at doing in the near term. >> it's interesting.
when i got to co-author with bernanke and -- a book on bank targeting now a while ago, then future chair bernanke signed on to passage sin the book that indicated the inflation target should be moveable, that we would expect it to move as conditions changed. now, i have sense said publicly and i won't presume to speak for any of my co-authors you know that that was a mistake on our part not from a normative sense that we were wrong but that we were foolish. we should have realized like an exchange rate target zone that once you put in the number people are very scared to get off of it. but that's obviously a very different place than what you're citing chair yellin's speech saying that it would be bad to move it inherently. i mean, i'm not trying to press
you on this. it's just very striking how ex-post the profession seems to have decided it's risky to move the inflation target where -- they were designed to be reset. >> yeah. i mean, again in her telling it and many people's telling of it, it took many, many years to get inflation expectations settled down and age anchored. when they wsht, we knew there would be a shock and inflation would go up. they would just move around. it's a very costly thing. getting then anchored was a costly thing and took a long time and moving them around is something that, you know, if you -- it kind of undoes the whole psychology of them being anchored and you have to go through the process again. i get that. but at the same time that was all done in a rate of 4% to 5% nominal federal funds rate and equilibrium. this is not that world. >> thank you. >> question here, please. thank you. i'm from goldman sachs. in the last couple of years we have seen an increase in the amount of information that the fed communicates to markets with the dots and all of the rest of the data and the s&p. and increasing the speeches and in the content of the speeches coming from fymc participants and yet if you take, for example, the reaction of the markets to the march meeting or the reaction of the markets to the minutes of the april meeting the other day and you do a couple of fancy calculations you can see that there were very large surprises from the point of view of the market reaction. so do you worry about this? and what are we collectively
missing in terms of understanding the fed's thought process and their reaction function that has changed? or is it just a fact of life? and we have to live with it? >> so i have thought about the question of are we doing too much communication and also about the difficulty of doing less, which there's not much track record of people reversing gears on that. so i think your -- my main point would be that you're still at a time of extraordinary accommodation and decisions are highly fraught and attract a lot of attention. and that's part of the issue, this would be -- the next interest rate increase will be the second one and it will be important. and it just gets a lot of attention. but i will say that the march
sep as i'm sure you're aware had two rate increases this year. i think any number of bank presidents were out saying that two rate increases and things have probably gotten a little better on balance since march, two rate increases is what the committee thought so, yes, the market was apparently surprised by the minutes but i think it was there in a way. it's not easy nor is it essential that the market understand every word that we utter. >> thank you for that. well said. >> we need to do what is right for the economy and let the chips fall within reason, we need to be doing that and not focusing too much on short-term reactions. >> please tweet that. at the back, mike please. >> jacob keir ka guard from the peterson institute. i first want to commend you for actually putting up the employment rates data in your presentation because i think if i'm not mistaken the fed mandate talks about maximizes employment, and your data clearly shows that the situation is abysmal. i mean, there is no other word
for it in my opinion. so i guess i just would like to have your comment on that. i mean, when you correctly point out that prime age employment in the united states is below that -- or participation is below that of a number of european countries, that is historically unprecedented. so how do you basically -- how do you square that with a policy outlook that suggests that you are close to meeting your employment mandate? i would suggest that you're pretty far from it. >> well, some of this is addressable on monetary policy and some is not. decline and participation by prime age males has been a trend for decades now, and, you know, the -- it is -- we can -- what we can do is support, as i suggested we should, economic activity with accommodative
monetary policy as long as inflation expectations are stable and inflation is close to target. so we can do that, and i'm pretty confident we will do that. that's not going to turn around these long-run trends. it's not. as i mentioned in my speech, there are things that need to be done on the policy side much more important things by convict frankly and maybe at the state level that we don't have responsibility for. now, we don't do fiscal policy and we don't do partisan politics so i don't want to roll out my personal suggestions here today, but there's a lot that can be done. if you look at all the marmgens of potential growth and productivity, there's a lot to do in terms of education, in terms of encouraging labor force participation rather than punishing it for those of who, for example, are receiving benefits from the government. there are things to be done with tfp, with basic research. every one of those areas has things that can be done, which is why the focus on the next
interest rate increase is just not that important compared to the long run potential growth ever the economy. that's what we ought to be talking about. >> unless you're a fed governor. >> anyone else? this is a rare opportunity. okay. you get a second shot. if everyone else wimps out, you get a second shot. >> i want to ask, when you look at the market implied path for federates going a very, very long way with a forward rates and so forth and compare that with the sort of trajectory that is envisioned bradley speaking by most participants in the sep, even allowing for some difference between the base case outloong in the sep and the risk adjusted path priced into market, it seems like the market is saying that the neutral rate is lower today than you think it
is and it's going to rise much more slowly than you expect it will rise over the coming years. that's the only way i can really make sense not of the june versus july type debate but of this broad difference going out several years. what makes you and your colleagues confident that, given the experience of the last few years where we've overforecast the recovery in the natural rate, what makes you confident that the broad sep world view is a reasonable base case as oppose to the market implied view? >> to make you feel better before you respond, i've already been hoisted on my own petard on this. when i was on the monetary policy in the banking and i kept saying you can't believe these crazy low productivity numbers, it's not like every worker in britain woke up with their left arm missing. this doesn't make any sense.
but then we get to year six or seven of real low productivity numbers and i had to start saying, well, you know, maybe it's not going to pop back up. so just to say this is genuinely hard and lesser beings like me have certainly screwed this up. so what do you think? >> so you're right, of course, there is a significant gap between the committee's most recent dot plot median expectations and between what the market is saying. i haven't looked in the last few days but i would imagine it's closed just a tiny bit. and that can be a function of a couple of things. one would be, of course, there's term premiums as you get farther away from zero, which would account for some of the difference. you also mejsed the difference between -- we're showing the mode and that's really a risk weighted mean. there seems to be for good reason -- people seem to be looking at long duration securities as a hedge against downside cases because they are very nicely correlated with
those outcomes. so you're seeing a lot of that. that explains a part of it. another part of it has to be implicitly or explicitly a lower estimation of the end point which is at the end of a cycle which is our start. so none of that is, you know, in the nature of making anyone -- making me comfortable with the difference. you know, it's hard to know. we have to do our jobs. i've got to do my job, and market has to do its job. and i'm one who is inclined to think that one should listen to what the market is trying to say, not that the market is always right but there may be something worth saying. i think those are some of the explanations and we'll just have to see. >> great. anyone else?
yes, please. >> thank you very much. my name is ken from the embassy of japan. as you know, you are talking about raising the interest rate whereas you know the bank of japan introduced negative interest rate and so ecb. and the difference is -- leading causes of the stronger dollars so my question is, to what extent, if any, do you take into consideration of monetary policies outside the u.s. and monetary to what extent dow take global economic outlook including the slowdown of the chinese economy into consideration. thank you. >> so we're charged with stable prices and maximum employment in the u.s. economy. that requires us to take into consideration all of the factors both financial and real that
would affect that. and certainly in this environment, as i mentioned earlier, that does include, you know, financial developments around the world and the fact that other major central banks are adding accommodation at this time. so all of that gets, you know -- is under consideration. i think international concerns as i mentioned are particularly high here in the last year or so. but that's simply because i think of the divergence of growth patterns really between
the u.s. and big parts of the rest of the world. so i think our -- so our job, we're not assigned with anything but stable prices and maximum employment in the united states, and ultimately that's our focus. but of course you can't do the job without engaging with awful the global factor that's you mentioned. >> well, we had a bit of an exchange about whether there's been, for whatever reason, too much communication out of the fed. but such a calm, clear, sober and informative speech certainly is the kind of communication we want to retain from the fed. so on behalf of the american public but also on behalf of the peterson institute, let me thank you very much for your time today. this was terrific. >> thanks again. >> i really appreciate it. thank you. with congress in recess programs are airing in prime time on c-span 3. look for our history features at
8:00 eastern including a vietnam war summit from the presidential library. a 50th anniversary retrospective on the conflict. authors and historians and then a conversation with ken burns. >> by the time we got four or five decades away, where the historical try angulation can take place when you can have the distance and perspective necessary not to just make a reactive response but something that's greater than the sum of its parts. >> wednesday a look at the war from the perspective of those who fought and u.s. foreign relations after the war. thursday at 8:00 p.m. eastern or reel america series looks at the hearings convened to intelligent the activities of the cia, fbi, irs and nsa. and with the national museum of african-american his ri and
culture opening in september, friday an all day conference with talks on religion, politics and culture and african-american history as american history. >> i couldn't get that out of my mind. that students were thinking u this african-american history wasn't real because there was no textbook as there was in all of the american taught in the department of history. so i decided to write a real textbook. >> for the complete schedule, go to c-span.org. >> tomorrow "the washington journal" will be in texas for the first of a two-day look at trade on the border. here's a preview.
apprehensions we've had so far in the first six months of this year are mexican nationals. folks that are coming from mexico, trying to make their entrance into the united states. we also see a number of people from central and south america. we see folks from guatemala, salvador, people as far away as brazil, china, other parts of the world. it's thought confined to one particular area, but the majority of the folks we see in laredo are from mexico. >> how do they make the trip? >> contracting with smuggling organizations or criminal organizations to finance their trip to the united states. they pay anywhere from $1500 to $50,000 depending on how far they are coming, what types of techniques they are using, whether fraudulent documents or
not and how long that trip is going to take. depending where they are coming from, they pay a significant price. of course it also depends where they go into the united states. if they are going to be smuggled and transported into the interior of the united states obviously play a little more than if you're dropped off at the international boundary. >> who is doing the smuggling? >> most of the folks doing the smuggling are criminals. folks that are dedicating their lives to smuggling aliens and/or narcotics. what folks don't understand, the people they think are just tried to do a humanitarian effort, trying to transport them or help the migrant get into the united states is actually part of a criminal enterprise whose only job is really to charge a quota or collect that price the el yen is willing to pay in order to get into the united states. then they find themselves being
exploited at every level of the transaction. whether at the recruitment level, transportation level. we see young ladies that are being raped, we see folks robbed, people kidnapped and exploited for more money once they put their hands in the lives of these smugglers. once they are transported, because they are criminal, all they want to do is get away. we see folks exposed to high-speed pursuits once they are stopped by the police, border patrol, rollover accidents, folks left in the desert because they can't walk anymore or fall ill and smugglers don't want to get caught. they abandon them in the desert. so far this year, first six months, laredo sector along
we've seen 33 deaths so far this year. seeing a number of different smuggling schemes. for example, concealment methods within passenger vehicles, concealment in commercial vehicles. we see folks trying to clone their vehicles to make it look like they belong to an industry, really isn't an industry vehicle to mask that they are smuggling into the u.s. some of the trucks you see in the background, are exploited as well to introduce narcotics and people into the united states which becomes somewhat dangerous and problematic to us. with the heat surpassing the 100 degree mark in laredo pretty soon and into the summer months, when you get a load of 25 or 30 people that are hidden in the back of these tractor-trailers
and no air conditioning and no way to get out of those tractor-trailers becomes very dangerous to us. it's important to identify that smuggling operation before we have a tragic event. so what happens is normally commodities come across international boundary and they are inspected by customs and border protection, office of field operations and they are introduced into the united states legally. once they do that they go to warehouses in which a commodity may be broken down or four or five different trucks. one truck, broken down four or five different trucks to go to distribution points throughout the country. that's just the way our economy works and our businesses are able to get products they are introducing into mexico from different parts of the world, different parts of the country in the case of the united states. well, there are plenty of opportunities in that process after he makes his entrance into the united states with that
commodity or that truck to be used in a smuggling event. so there's plenty of opportunities for either people and/or narcotics to be introduced into that commercial environment. so our checkpoints afford us the opportunity to be able to screen that traffic once again before it's leaving the actual border area and before it goes into the major highways and buy ways of the united states. >> so how are you going about screening here? what would a truck or noncommercial truck go through? >> so these trucks or passing vehicles are actually screened by border patrol agent who talks with a driver. we may look at the bill of lading, where are the commodities they are transporting and where they are transporting them from and to. but we also have an opportunity to expose them to canine units. canine units designed not just hidden narcotics but may be transported in vehicles. if there's any suspicion that arises with that border patrol agent, that vehicle can be secondary inspection area where we use 92 inspection devices to be able to look at that truck's commodity and to be able to look at that trailer and frame of that truck. we've arrested 145 people from october 31st to march 31st. it is preventive. talk about the fact most of
these folks paying $1500 to $50,000 for their smuggling event that adds up and gives you a context how much money there is to be made. >> c-span's washington journal live from u.s./mexico border for two days starting tomorrow. brandon darby managing editor for breitbart, nelly vielma discusses deportation law and of alfredo cortado. lynn brezosky will discuss trade
across the border. congressman cuella talks about how trade benefits the country. bob cash texas trade coalition and nafta critic looks at the trade deal's impact on jobs, from southern texas to mexico. washington journal live from laredo, texas, starting at 7:30 eastern on c-span. >> i think today we sort of catch up to the 20th century. we've been the invisible half of congress the last seven years. we've watched our house colleagues with interest, at least i have with interest. tv coverage of members of our colleagues in the house.
>> today communication comes out of the dark ages, we create another historic moment in the relationship between congress and technological advancements between communications with radio and television. 50 years ago our executive branch began appearing on television. today marks the first time when our legislative branch in its entirety appear on that medium of communication through which most americans get their information about what our government and our country does. >> televising represents a wise and warranted policy. broadcast media coverage recognizes the basic right and need of the citizens of our nation to know the business of their government. >> thursday, c-span marks 30th anniversary of live gavel to gavel coverage. special programming key moments
from the senate floor in the last 30 years. >> i would show to you the body of evidence from this question, do you trust william jefferson clinton. >> we have just witnessed something that has never before happened in all of senate history. a change of power during a session of congress. >> what the american people still don't understand in this bill is there's three areas in this bill that in the next five years will put the government in charge of everybody's health care. >> plus an interview with senate majority leader mitch mcconnell prosecute i'm sure i made a number of mistakes in my years but voting against having c-span televised was one of them. >> watch 30 years of the u.s. senate on television beginning thursday on c-span. to see more of our 30 years of coverage of the u.s. senate on c-pan 2, go to c-span.org.
>> the committee will come to order. we want to thank everyone for being here, especially our witnesses that have taken time away to be here with us today. we're really looking forward to their testimony. we're here to examine an exciting new phenomenon in our society. the sharing economy. this new economy goes by many names. on demand, peer to peer, online platform and collaborative. we have even heard it called the uber economy. some of you may have taken uber or lyft to get to this hearing today. the sharing economy is changing the face of american entrepreneurship and small businesses before our very eyes. the dizzying pace has presented
many new opportunities and new challenges for the millions of americans who participate in it. these new platforms have dramatically changed the ways companies provide goods and services giving their workers freedom and independence. this new generation of workers want to set their own hours and decide which jobs to take. they may work with one on demand platform or multiple. they may work alone or pool resources with others. this is the essence of economic liberty and a testament to the power of the free market. however, in their enthusiasm, these entrepreneurs are running into the buzzsaw of an outmoded tax code not designed to accommodate them. the challenges they face have gone largely unacknowledged so far. but as we are hearing from a growing chorus of entrepreneurs, these challenges present new and unnecessary obstacles for our small businesses. some of these new entrepreneurs
fail to file taxes altogether. when they do, they often pay too much. they don't know that they can deduct certain expenses or don't have the records to back up their deductions putting them at risk for an audit. unfortunately, the irs has not been part of the solution for entrepreneurs in navigating this new sharing economy. too often it's been part of the problem. it isn't working for small businesses. in many ways it's working against them. we can do better and we must do better. today, we will explore some of these problems and discuss some potential solutions with this distinguished panel we're very much looking forward to hearing from the panel today and i'd like to yield to the ranking member from new york for the purpose of her opening statement. >> thank you, mr. chairman. technology has long been a a catalyst for entrepreneurship. development of the sharing economy has created new channels
for entrepreneurs to sell goods and services. innovators are harnessing the web to create platforms, a market that allow the selling, renting and trading of everything from apartment space to transportation to artisans craft goods. the numbers strongly suggest that this new share iing economs here to stay. more than 1.5 million internet users have used task rabbit to hire people for odd jobs. as of september 2015, uber app was available in 60 countries and 300 cities worldwide and it is estimated to fulfill 1 million rides daily. one reason for this sector rapid growth may be rooted in broader economic struggles. with job growth still sluggish, enterprising americans and dislocated workers are seeking
new ways to replace revenue. others seek more flexibility and work life balance, renting out rooms and providing lifts in their car become ways for ordinary americans to experiment with entrepreneurship. while the explosive growth of this net worth has created new opportunities, the rapid rise raises questions. while workers in the shared economy and flexibility they must be protected from unscrupulous business practices. most of the businesses operating in the shared economy classify the workers as independent contractors, not employees. such a classification saves businesses money through reduced benefits and tax withholdings. businesses and courts have long struggled with trying to determine whether certain workers are employees or independent contractors.
the courts are overflowing with lawsuits over whether companies have misclassified employees and they are prevalent in the sharing economy. as always, the challenge is ensuring businesses and employees are protected without question or discouraging promising innovation. control is a critical factor to this question. if employer controls the worker, how can the worker be truly independent. with the rise of the sharing economy, this question has become harder to answer as workers are connected to consumers through online intermediaries. our current approach to answering this question seems to be at the expense of hard working americans and our nation's tax revenues. one study estimate it is cost $54 billion in underpayment of employment taxes and $15 billion
for fica and unemployment taxes. it's important that as this technological revolution, government policy space it's also important this committee fully understands what is happening in the new sharing economy and has a grasp on how we can minimize risk for employees while maximizing growth and productivity for small businesses. today's hearing will give us that opportunity. i would like to thank all of our witnesses for taking the time to be here. your perspectives will add significant volume as the committee seeks to learn more about the sharing economy. with that, mr. chairman, i yield back. >> thank you very much. if committee members have opening statements prepared, i ask they be submitted for the record. i'll explain our timing system. you get five minutes each and we'll ask questions for five minutes. there's a a lighting system on your table to assist you in
that. green light will be on for four minutes and yellow will let you know you have about a minute to wrap up. the red light will come on and we'd ask you to stop have to stop mid-sentence but if you could wrap up we'd appreciate it. i'd like to introduce our distinguished panel this morning. i'll introduce wall four of the witnesses before we get started. first witness is caroline bruckner. in that capacity, she directs a team of small business tax policy experts, economists, and researchers. shepreviously served as chief counsel from 2009 to 2014. we welcome you here this morning. our second witness, rob willey, vice president at task rabbit. connects users who want to outsource errands to anyone
willing to complete them for a fee. the committee started in -- excuse me, the company started in 2008 and currently operates in 18 cities in the u.s. as well as london. with over 15 years of experience in marking, mr. willey created marketing campaigns for several global clients including nike, cadillac and nokia. we also welcome you here this morning. our third witness will be morgan reed, executive director at a.c.t., the app association where he specializes in application development issues. in addition to testifying to the subcommittee on health and technology last year, mr. reed has also testified before the u.s. senate and has written several white papers on app development. he also serves on the advisory council of the mobile health information management systems society. and i would now like to yield to the ranking member, miss velasqu velasquez, to introduce our fourth and final witness. >> thank withdryou. mr. joe kennedy, senior fellow.
for almost three decades, he has provided legal and economic advice to senior officials in the public and private sector involving technology, competitiveness, and the social contract. mr. kennedy previously served as the chief economist for the u.s. department of commerce and the senior economist for the joint economic committee. he holds a law degree and a master degree in agricultural and applied economics from the university of minnesota and a ph.d. in economics from george washington university. welcome to the committee. thank you. >> thank you very much. miss bruckner, you're recognized for five minutes. >> thank you for the invitation to join you today to discuss the tax compliance challenges of small businesses. i'm caroline bruckner. i'm also the managing director of the cogod tax policy sector which conducts nonpartisan research on tax and compliance issues specific to small businesses and entrepreneurs.
at cogod, we're currently focused on the tax and compliance issues impacting america's latest iteration of small businessowners who are renting rooms, providing ride-sharing services, running errands and selling goods to consumers and business transaction, coordinated online. companies such as airbnb, etsy,s uber, lfyt and others. we released our information yesterday in a report called "shortchange." to shed light on these issues as congress moves forward with tax reform. haven't spent more than a year investigating these growing problems, we report on what the existing debate has yet to acknowledge. that for tax purposes, on-demand platform economy service providers and sellers are, in fact, small bausinessowners. there are millions of them working and earning income in way that are not ready identifiable by exists government research or publicly available taxpayer filing data. we argue that these issues should be considered by congress
and the irs not only because millions of american taxpayers are needlessly burdened trying to comply with an antiquated outdated tax system, but also because inaction has very real imp llications on treasury and irs' ability to fairly and efficiently collect taxes. a number of reviews included in our research are particularly relevant to today's discussion including more than 2.5 million americans are earning income as small businessowners every month. this preflekts the explosive growth but is the latest example of a 66.5% increase in alternative work a rarrangementr u.s. workers from 2005 to 2015. second, although people do cycle in and out of the on-demand platform economy, during months in which people are actively using platforms to earn income, average monthly income ranges from $533 to $314 per month.
third, by in large, individuals work less than 15 hours a week. as part of our research, we spoke with dozens of individuals currently participating in the on-demand economy and initiate add survey of the members of the national association of the self-employed. our objective was to assess whether tax compliance challenges exist even among a group of taxpayers who by their own self-selection as members are experienced self-employed small businessowners. their responses indicate a significant lack of understanding of the information available regarding self-employed tax filing obligations. specifically our survey revealed among respondents who served income with an on-demand platform economy in 2015, approximately 22% of all our responde respondents, approximately 1/3 did not know whether or not they were required to file quarterly estimated payments to the irs on on-demand income. 4 3% were unaware how much they would owe in taxes and did not set aside any money for the tax on the income.
almost half didn't know about tax deductions -- as a result, a percentage could face auditing -- cost to taxpayers can also be quantified in terms of time spent preparing returns and chasing down questions to complex tax questions from the irs. but we heard time and again from taxpayers, on demand platform companies and tax preparers that the small businesses operating in the on-demand economy generally want to be honest and pay what they owe, but that the tools and resources don't exist. indeed, more than 60% of our survey respondents who worked for an on-demand in 2015 did not receive a 1099k which likely means the irs did not, either. this is not surprising given it's entirely consistent with both the form 1099 miscellaneous
filing instructions and the statutory requirements for filing a form 1099k. the current tax administration system isn't working for a significant percentage of on-demand platform small business operators or treasury or irs. at the root of this problem is a lack of information and understanding of tax filing obligations which is compounded by an information reporting regime that results in widespread confusion and these tax challenges are only going to continue to grow to impact more and more self-employed small businessowners. our assessment of the general confusion state of play when it comes to filing taxes from the income earned was consistently reinforced by interviews with tax preparers, industry experts in our own survey. everyone is losing under the current rules. both the on-demand economy players and the irs deserve greater efficiency and less hassle. we can do better. and, again, i thank you for the opportunity to join today's discussion and for the work you do on behalf of america's small businesses. >> thank you very much.
mr. willey. >> mr. chairman, ranking member velaszquez, i'm vice president of task -- thank you for the interest of the topic that captures the legal, regulatory and public policy challenges that confronts millions of individuals, platforms like ours to improve their daily lives. founded if 2008, we set out to revolutionize everyday work. now, most of us have probably figured out one day or another we needed a time to have someone help us with yard work, fix a shelf in our house, paint a room, or possibly mow our lawns. today we recognized and realize that opportunity with new york being our largest market and london being our fastest growing market. we today have over 50,000 taxers with 5,000 active at any given time helping everyday people accomplish everyday types of tasks. now, with that said, we're looking to change the face of
the industries by consistently representing our taskers and their everyday needs. with that, we've promoted and consistently support our taskers with flexible prices, with flexible hours and flexible locations on an average of $35 an hour. this is what we call everyday work for everyday people. with that said, only 10% of our taskers work full time. overall, though, the average monthly income for taskers should triple year over year. this part-time flexible nature of our work done by our taskers is consistent with the larger platform economy. a february 2016 study by the jpmorgan chase institute found an overwhelming majority of americans who earned income as small businessowners using platforms like ours did so to supplement their incomes. with lit to no various entry, it has become an important option in a time when income volatility
continues to change individuals and families. on-demand platforms like ours provide a new earning option that is accessible to millions of americans. of course the emergence of the platform economy sparked an intense debate on the classifications of workers versus independent contractors. the current classification system was defined around a much different economic and technological era. and has been shaped mostly by decades of regulations in court cases. as a result, it fuels uncertainty about what we can or cannot do to support our taskers while preserving their flexibility, independence in accessing our platform. many platform economy participants even do not know or are not fully aware of both their tax obligations and tax benefits as a result of earning income on platforms like taskgrab zbln taskgrabit. significant numbers of taskers are facing these types of challengers. for many,