The history behind the Fed’s Humphrey-Hawkins hearing

Make Me Smart March 6, 2023 Transcript

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Kimberly Adams 

Right. Okay, let us do the thing. Alright, let’s do the thing. Oh my, Drew Jostad wasting no time. Welcome everyone to another week here at make me smart where we make today make sense. I’m Kimberly Adams.

Kai Ryssdal 

I’m Kai Ryssdal. We’re only mildly disheveled today, you’d never know it though. Trained audio professionals. Thanks for joining us on a Monday we’re gonna dive into the news fix, then we’ll do a story or two, maybe that makes us smile, and then we will get out of your way. Okay, I’ll go first just because I got a bunch of them. Alright, you’re ready? Okay. So I know it’s four links in the rundown. But really, it’s only it’s only one and a half little observations here. So number one, from the pages of the New York Times today, all the news that’s fit to print, the biggest “duhhh” headline in the history of headlines, “Republican votes help Washington pile up debt.” Look…

Kimberly Adams 

Tax Cuts and Jobs Act.

Kai Ryssdal 

It’s killing me. It’s killing me. So look, the President is dropping his budget this week. That’s why this headline, I think is in the paper. That’s why this articles in the paper by by Jim Tankersley, who we should hasten to point out reporters do not write their own headlines. And Tankersley is talking about the amount of public debt that we have, which has been piled up by Republican and Democratic Congresses and administrations. That’s it. I just want to be sure everybody understands this: that when you hear speaker McCarthy and when you hear Lena McConnell, and when you hear other leading figures in the GOP say it’s always the Democrats who want to spend American taxpayers money, the facts don’t bear that out. And I just want everybody to know that. That’s all. That’s it. That’s my little rant. I just… It bugs me.

Kimberly Adams 

Well and it’s it’s not exactly balanced either in recent history, in terms of who has contributed to the debt. It is actually a little bit more on the Republican side.

Kai Ryssdal 

A lot more. It’s overwhelmingly more. The last two Republican presidents have accumulated an enormous share of the outstanding debt of the America, the United States. It’s not even close. And we are talking over 240 something years.

Kimberly Adams 

Yeah, I was. I just remember, you know, we did so much cover to the Tax Cuts and Jobs Act, and you did that hour long, special. And I remember we’re going through it and we’re like, “this is gonna cost so much so much money.” And they kept being like, “Oh, it’s gonna stimulate the economy. And this is all gonna come back.” And every economist was like, “No, it’s not.” And it didn’t, and it didn’t. What’s this other one?

Kai Ryssdal 

Item number two, for which I have three links in the rundown. And that’s really just to explain to Kimberly, what’s going on, as opposed to those of you listening to this, who don’t really need to know how many items I have in the run down. So Jay Powell is going to Capitol Hill Tuesday and Wednesday to deliver what is known as the Humphrey-Hawkins testimony. It’s testimony required by the Humphrey-Hawkins act of 1978, which I’ll get to in a minute, that requires the Federal Reserve Chair, go up to Congress twice a year, and update them on the current status of the economy and the Federal Reserve’s policies to help that economy grow and develop. The reason I bring it up is because until about 10 days ago, I had not understood or known a really interesting part of the history of the Humphrey-Hawkins act. So the Humphrey-Hawkins Act is technically known as the “Full Employment and Balanced Growth act of 1978.” And when we talk about in terms of the Federal Reserve today, it’s almost always in the context of this law, the Humphrey-Hawkins Act, the Full Employment and Balanced Growth act of 1978 is where the idea of the Fed’s dual mandate comes from. That is to say stable prices and maximum employment. You hear Fed reporters, you hear Federal Reserve officials, you hear sometimes Congress people talk about the Fed’s dual mandate. What’s really interesting about this, historically are two facts. Number one, Coretta Scott King was instrumental in getting this act passed and I did an interview about two weeks ago with a professor of history at UCLA in which we talked about the Civil Rights Act as an economic movement. And he told me, pointed out to me. that it was Coretta Scott King after her husband was murdered, who helped to transition the Civil Rights Movement to a more explicit, as the Civil Rights Movement was, in fact, becoming more political right in the 1960s and 70s. She kept it the focus on the economic part of it, and she’s the one who helped the two members of Congress, Augustus Hawkins and Hubert Humphrey in the Senate and the House and Senate, respectively, get this act through Congress. And I think that is just an amazing little piece of historical interest. That Coretta Scott King, help this act become law. And I just think that’s really cool. Now, so that’s item number one. Item number two, is that… What? That was item number 2, so this is like 2.5. Alright, so this is 2.5. Okay, sorry. Item number 2.5 is this: we talk about the the Humphrey-Hawkins Act as mandating stable prices, and maximum employment. Read the title of the bill people: Full Employment and Balanced Growth Act of 1978. Nowhere does it say “Full Employment and Stable Prices Act of 1978.” The emphasis of Congress in the early 70s, as they were talking about this act, and in 1978, when it passed, was full employment. And you’re going to hear a lot, especially from progressive members of Congress the next two days, about the Federal Reserve hiking interest rates too fast, in order to promote stable prices, at the expense of the labor market. Right? And thus, not upholding the actual premise of this act, full employment. I just, it’s really interesting. History is cool. That’s what I got.

Kimberly Adams 

This is even more fascinating, when you consider a lot of the reporting we’ve been doing over the years about what full employment has actually meant, in practice, where even when unemployment in the United States is air quotes low, we still have black unemployment persistently double what white unemployment is. And so to hear that Coretta Scott King was so instrumental in getting this done with the emphasis on full employment, and to be in a place now where to this day, full employment is still not inclusive of full employment of black Americans is wow. Wow, wow, wow, wow, wow. Okay..

Kai Ryssdal 

Go ahead. Yes.

Kimberly Adams 

I’m gonna be sitting with that one for a while. Mine is a Washington Post story, I kind of was like a twofer on the Washington Post today. But it gets back to something that we were talking about a couple of weeks ago in the deep dive about, you know, sort of industrial policy, and how the United States under the Biden administration is being much more intentional about… you know, we talked sort of about the Made in America slice of this, right? The idea that more of these items that are important for the growth of our economy, need to be made in the United States, and the Biden administration is pushing for all this stuff to be made in the US and what that means for global trade. And for you know, how growth works in the United States. The Washington Post has a very interesting story about what this shift in the Biden administration strategy actually represents in terms of the role of the federal government in the economy more broadly. Because for decades, we have had this sort of implicit idea that the free market, that capitalism, is the best way to shape where America is going to experience growth. If you know, factories are in decline, it’s bad, maybe we’ll do some retraining. But for the most part, we got to just let it go, because that’s what you know, the economy is doing and that’s what the free market says “we’re gonna just like let it run” and not too many backstops to it. But now we have the federal government in a very intentional way, deciding what sectors of the economy need to grow, and investing heavily in those sectors with the intense goal of saying “this is where our economy needs to be.” In a way that’s much more intentional than in previous administrations. So that looks like building out the EV charging infrastructure, and the CHIPS act and all of this investment in green energy. Whereas before, maybe you might, you know, encourage businesses to, you know, hire more workers or, you know, give a little tax credit or something like that to try to incentivize businesses to do it. Whereas now the Biden administration is like, “No, you have to do this, and you have to do it here and you have to do it this way with these qualifications, and we’re only going to, you know, give this money or we’re going to give preference to companies that aren’t doing stock buybacks. And if you want some of this chips, money, you have to have childcare on site, or help your people have child care.” This is just a lot bigger of a role of the federal government and shaping how the economy grows than we’ve seen in recent history. And this piece kind of laid it out in a very interesting way.

Kai Ryssdal 

Yeah, it’s there was a lot of talk in the beginning of the Biden administration about how he was going to change the way the government interacts with this economy. And now you’re seeing it you know, two, little more than two plus years later, you’ve seen it happen. It’s, it’s it’s a big deal, actually. It’s a big deal.

Kimberly Adams 

Yeah. Yeah. Okay. All right. Smiles.

Kai Ryssdal 

Drew? Alright mine’s quick. It comes with a very brief family anecdote. When I was a little kid and my dad would go back to Europe on business, he would always bring back some kind of candy bar, and more often than not, it was Toblerone because they were fun to eat, they had the triangles and you broke it off and this and that, and it was just fun. And also yummy chocolate. Well, as Kimberly knows cuz she talked about this on the radio show today while she was doing my job while I did some other stuff. Toblerone is outsourcing some of its manufacturing and thus, it has fallen afoul of Swiss laws mandating Swissness. That is to say, sufficiently being of the Swiss identity to be able to use Swiss icons in its marketing, specifically the Matterhorn on the Toblerone, Toblerone Toblerone box. So now.. Yeah, now Toblerone is going to have to take the Matterhorn off because it’s moving some of its manufacturing to like Bratislava in Slovakia. So it’s a global economy. We only live in it. That’s all I’m saying.

Kimberly Adams 

I have to tell you how many times I had to say Toblerone before the show today and I, Shean our director, I was like “Sean, you have to help me because my brain wants to say Tobelrone, and it’s Toblerone and I don’t know why my brain does not want to put the B before the L there.” And it’s Toblerone. And I wanted to say, Tobelrone for some reason. I don’t know it just feels right…

Kai Ryssdal 

That’s pretty funny. Anyway it’s a cute little story. Cute little story. Yeah.

Kimberly Adams 

Speaking of family anecdotes, I went on a nice long hike with my uncle this weekend. And he was very excitedly telling me about all of these new baby chickens he recently bought. Because there was a terrible incident were some animal gotten to his backyard and it was just a massacre, and he lost a lot of his animals. But he has now replaced them. And he got all these chicks. And he was showing me pictures, and he’s very excited, he’s very happy. And so then I see this story in the Washington Post also today about how because egg prices have gotten to be so high, a lot of new people are trying to get into chicken farming, or into backyard chicken raising. And so little baby chicks are like selling out everywhere, there’s lines at the Tractor Supply. And, you know, some people aren’t quite ready for the level of extcrement involved in raising chickens. And it reminds me of kind of early in the pandemic. Well, we’re still in the pandemic… early in the days of the pandemic when people were like, “Oh, well, since I’m going to be home, I’m going to just do a little mini homestead in my backyard.” And there were like a rush on like fancy chicken coops and stuff like that. But anyway, it’s a cute story. There are many puns in it, and it entertained me and made me smile. So that’s what I’ve got.

Kai Ryssdal 

That’s all you want is to be entretained.

Kimberly Adams 

Sometimes that’s all you need on a Monday. Just a little lightness.

Kai Ryssdal 

We are done. On this Monday we’re done. We will be back tomorrow with our Tuesday show. Single topic, longer interview. This week, we’re talking with food historian Anna Zeide about her new book “US History in 15 Foods.” We’re gonna talk about foods like spam and green bean casserole which I loved when I was a kid but now somehow repulses me by the way. What all that has… I don’t know what I don’t know how to explain that. Anyway has to do with major moments in our country’s history and our economy just you know for something a little different on the pod.

Kimberly Adams 

Yeah, cuz we want to get get it light sometimes on these deep dives. Until then, you can keep sending us your emails and voice messages. You can reach us at 508-U-B-SMART. You can also email us words or voice memo at [email protected]

Kai Ryssdal 

Make Me Smart is produced by Courtney Bergsieker. Today’s program was engineered by Drew Jostad. Ellen Rolfes writes our newsletter. Our intern is Antonio Barreras.

Kimberly Adams 

Marissa Cabrera is our acting senior producer. Bridget Bodnar is the director of podcasts. And Francesca Levy is the executive director of Digital. Have you ever had chickens?

Kai Ryssdal 

No, no, ma’am. No, ma’am.

Kimberly Adams 

Not my jam either. I don’t like eggs actually.