A Sea Change in Economic Policy

Claudia Sahm (Senior Fellow, Jain Family Institute) joins Richard K. Green (Director, USC Lusk Center for Real Estate) to outline the changes in economic policy as the Federal Reserve and Congress have reacted to the COVID-19 pandemic. Sahm, who was inside the Federal Reserve during the Great Recession and recovery, has since devised the Sahm Rule Recession Indicator to help policymakers and economists determine the start of a recession based on unemployment rates.

Sahm points out that economic policy has new goals, new tools are being considered, and change will come with growing pains. As for new goals, Sahm sees interest in concepts like full employment, reducing inequality, and acknowledging racism as harbingers of a new school of thought, and one that is less skittish about inflation as the Fed works to build momentum in economic downturns. The new tools and approaches like the child benefit cash transfers in the latest stimulus package display a shift towards providing direct aid, rather than commonly used tax incentives or other targeted programs. Sahm also acknowledges that change means pain while data catches up to policy for the simple reason that some benefits or programs have never before been attempted in the US.

More: https://lusk.usc.edu/perspectives