Catherine Rampell and Stephen Witt: Can We Avert Economic Disaster and the Robot Apocalypse?

Tim Miller (0:13)

Hello, and welcome to The Bulwark Daily. I'm your host, Tim Miller. We have a massive show today. It's a double header. We're doing economics, we're doing AI. So I don't even have time to get to my guy, Thomas Massey, bringing the articles of impeachment against Peter Bryan Hegseth. So go check out The Next Level. It's already up. We had Egger in for Sarah Longwell.

We get into impeaching Hegseth, other impeachment ideas that we have, and other political news of the day. On this show, in segment 2, I bring in the author of a New York Times column titled, This Is Really Bad, which is just squarely targeting us here at The Bulwark.

That is clickbait for me if I've ever seen that. This is really bad. It's about the AI vibe shift. And I think it's a worthwhile conversation, particularly if you're trying to make sense of the changing narrative and discussions around the AI threats. But first, she's the economics editor here at The Bulwark, author of the Receipts newsletter. And coming up on Friday, a new podcast also called Receipts. It's Catherine Rampell. What's up, Catherine?

Catherine Rampell (1:16)

Hey, thanks for having me back.

Tim Miller (1:18)

All right, welcome. The new pod is going to be in its own feed.

So people are going to have to go get that. Go sign up on Friday, make a little note for yourself right now. And we're really excited about it. What's going to be happening on the pod? Do you have any little teaser for people?

Catherine Rampell (1:33)

For this week? Well, we shall see what happens with the Fed today. We're recording this. I should let our audience know before the Fed announces what it's doing with rates. It's probably going to raise rates today on Wednesday.

And my expectation is that the president will flip out when that happens, but I don't know. But assuming that that happens, I think that will probably eat up most of the conversation for the next week. So we'll be talking about plenty of that stuff and other crypto scams and various other things happen in the world.

Tim Miller (2:07)

A lot of great economic news. We'll do a little teaser of it right now. Let's talk about the potential state of play. I mean, you said kind of what we think is the baseline expectation for the Fed.

But just kind of backing up for people, why does the Fed feel in this moment that they need to raise rates? I mean, we're going to get into the sex, but bond rates, mortgage rates are already going up for reasons unrelated to what the Fed is doing.

Stephen Witt (2:29)

Well, sort of related.

Tim Miller (2:31)

Well, yeah. What is it about what's happening in the economy that is going to lead the Fed to raising rates?

Catherine Rampell (2:36)

Well, we've had high inflation for over six years at this point. We have a new Fed chair who most of his life has been an inflation hawk, meaning that he has a bias towards raising rates higher and to deal with inflation, that's usually the prescription for dealing with inflation is higher short-term interest rates. So if you take him at his word that he deeply believes that the solution for inflation for getting stable prices, which is the Fed's responsibility, is tighter monetary policy, which he criticized his predecessors for not having. If you think that he deeply believes that, he wasn't just saying it for political reasons while there was a Democrat in the White House, that is what you should expect the Fed to do today.

And he basically said as much in a recent speech, where he kind of boxed himself into a corner, where he told markets more or less like, unless we see something, some kind of major improvement on the inflation front in the next few weeks, it's up to the Fed to deal with it.

Tim Miller (3:39)

How do you think you're balancing? I mean, at some level, inflation has been high, but it came down, it depends on which sector we're talking about. Obviously, we're seeing a ton of energy inflation, but there's some external reasons for that. But job growth is also, it's not great, it beat expectations a little bit in the last report, but how do you balance that? It's not exactly like we have a booming job market right now.

Catherine Rampell (4:02)

Yeah, well, that's basically why the Fed has held off on raising rates for a few years, despite the fact that inflation is high. Like I said, normally the prescription for dealing with high price growth is you raise interest rates, which makes it so that like money is a little bit more expensive. People don't spend as much money, they don't go out and buy as many cars and houses and whatever stuff they might put on their credit card, etc. That's the mechanism.