WELCOME TO "KENTUCKY TONIGHT."

OOH THIS Halloween I'M RENEE SH.

THANK YOU FOA JOINING us.

OUR TOPIC TONIGHT: UNPOLICE STATION AND THE ECONOMY WHICH SOME THINK IS A LITTLE sc AMERICANS ARE ALREADY VOTING IN MANY PLACES EIGHT DAYS BEFORE ELECTION DAY, AND ACCORDING TO MOST POLLS, THE ECONOMY IS THE TOP ISSUE FOR PEOPLE AFTER MORE THAN A YEAR OF HIGHER PRICES FO FOOD, GAS, ENERGY, HOUSING AND TONIGHT WE ASK A PANEL OF ECONOMISTS WHAT'S CAUSING THIS INFLATION TO CONTINUE, WHAT SHOULD WE EXPECT IN THE 2023 AN BEYOND, AND ARE WE ON THE VERGE OF A RECESSION?

IS ON TO DISCUSS THIS AND GET s ANSWERS, WE ARE JOINED IN OUR LEXINGTON STUDIO BY: JANET HARRAH, SENIOR DIRECTOR OF THE CENTER FOR ECONOMIC DEVELOPMENT AND ANALYSIS AT NORTHERN KENTUCKY UNIVERSITY.

CHARLES AULL, EXECUTIVE DIRECTOR OF THE KENTUCKY CHAMBER CENTER FOR POLYGAMIST AND RESEARCH.

JASE JASON BAILEY, EXECUTIVE DIRECTOR OF THE KENTUCKY CENTER FOR ECONOMIC POLICY.

AND JOHN GAREN, BB&T professor EMERITUS OF THE CONNECTION ECONOMICS AT THE GATTON COLLEGE OF BUSINESS AND ECONOMICS AT TH UNIVERSITY KENTUCKY.

WE WANT TO HEAR FROM YOU.

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WELCOME TO ALL OF OUR GUESTS NONE OF WHOM ARE DECKED OUT IN ORANGE AND BLACK BUT WE'RE GLAD YOU HAVE TO ON THIS TRICK-OR-TREATINGY NIGHT WHICH WE PROMISE MORE TREATS THAN TRICKS.

WHEN WE TALK ABOUT THE ECONOMY, THOUGH, WE'LL START WITH YOU, PROFESSOR GAREN, THAT PEOPLE ARE KIND OF FRIGHTENED BY WHAT THEY'RE SEEING, RIGHT, AND THEY'RE LOOKING AROUND THINKING, OKAY WEEK I'M PAYING MORE FOR GAS, HOUSING, EVERYTHING HAS GONE UP.

HOW LONG DO YOU THINK -- OR LET'S FIRST START OFF BY ASKING WHAT ARE THE CAUSES FOR THIS LEVEL OF INFLATION?

AND HOW MUCH WORSE COULD IT GET?

>> WELL, I THINK THE BASICS OF INFLATION ARE THAT THE PHRASE WE LIKE TO SAY IS MORE AND MORE MONEY CHASING FEWER GOODS, AND SO AS THERE'S MORE AND MORE CURRENCY IN ITS ECONOMY AND THE SAME AMOUNT OF GOODS, YOUR PRICES ARE GOING TO GO UP.

AND SO I THINK IN 2021 THERE WAS A PRETTY RAPID EXPANSION OF THE MONEY SUPPLY THAT THE FED ENGAGED IN, AND PART OF THIS WAS IT LOOKS LIKE IT IS PURCHASING THE DEBT FROM THE TREASURY.

IN OTHER WORDS, THERE WAS A LOT OF FISCAL, EXPANSION RI FISCAL POLICY IN 2021 AND MORE TO COME.

AND THE FED IS BASICALLY PRINTING DOLLARS TO BUY THAT DEBT AND INJECTING DOLLARS INTO THE ECONOMY.

SO THAT'S A BIG CAUSE, WHEN YOU GET MORE AND MORE MONEY, AGAIN, CHASING THE SAME AMOUNT OF GOODS.

AND I THINK A SECOND ISSUE IS THE REGULATORY POLICY THAT WE'VE HAD IN THE LAST YEAR AND A HALF THAT PARTICULARLY ENERGY, THAT IT'S REDUCED THE AMOUNT OF ENERGY AVAILABLE TO CONSUMERS AND AT A HIGHER COST, AND MAY MAKES PRODUCTION GENERALLY MORE COSTLY, AND SO THE GROWTH IN THE ECONOMY HAS BEEN SLOWED AND WE'VE SEEN THAT IN THE LAST COUPLE OF QUARTERS ALTHOUGH NOT THE MOST RECENTLY ONE.

WE HAVE SEEN A SLOW REDUCTION IN THE AMOUNT OF GOODS AND SERVICES PRODUCED IN ECONOMY.

SO YOU'VE GOT MORE AND MORE MONEY CHASING FEWER GOODS, AND SO WOULD YOU HAVE GOT THIS INFLATION.

AND AS YOU SAY, IT'S COPY OF LEFT PEOPLE IN A VERY ROUGH SPOT BECAUSE TO THIS -- AT THIS POINT WAGE HAVE NOT BEEN KEEPING UP WITH INFLATION, AND NOR HAVE RETURNS TO CAPITAL WEEKS, SO NEITHER OWNERS OF CAPITAL NOR WORKERS ARE KEEPING UP WITH INFLATION TYPICALLY, SO ANOTHER REAL PROBLEMATIC.

>> I WANT TO CAN YOU CAN BE JASON BAILEY, ARE THERE REASONS FOR INFLATION THAT YOU SEE THAT MR. GAREN DIDN'T PROVIDE FORSOME.

>> YEAH, HE NEVER MENTIONED THE WORD PANDEMIC.

WE'VE GONE THROUGH A GLOBAL PANDEMIC THE LAST FEW YEARS WHICH HAS CREATED A LOT OF CHAOS IN THE PRODUCTION SIDE OF THE ECONOMY, SO WE HAD WHOLE INDUSTRIES SHUT DOWN, WE HAD SPORADIC OPENINGS AND CLOSING.

THE THE AUTO INDUSTRY JUST QUIT PRODUCING BECAUSE IT HAD DIDN'T KNOW WHAT DEMAND WOULD BE WHEN WE SAW THE COLLAPSE FROM THE -- FROM THE PANDEMIC.

WE'VE ALSO SEEN A WAR IN UKRAINE THAT HAS GREATLY RESTRICTED BOTH ENERGY MARKETS AS WELL AS MARKETS FOR FOOD AND OTHER PRODUCTION.

AND IT'S AM CONTRACTBLED, SCRAMBLED THE TYPES OF CONSUMPTION THAT PEOPLE HAD SO PEOPLE WERE BUYING LESS SERVICES AND MORE GOODS, AND SO THAT IS REALLY WHAT SPURRED THE INFLATION.

NOW, CONGRESS STEPPED IN AND PROVIDED AID TO PEOPLE.

THAT APPROVED ESSENTIAL TO PREVENTING SEVERE HARDSHIP.

BUT OTHER COUNTRIES DIDN'T PROVIDE THE KIND OF AID THAT WE DID IN THE UNITED STATES, AND THEY STILL HAD THE SAME INFLATION.

SO INFLATION IS A GLOBAL PROBLEM THAT'S SPURRED AS A RESULT OF THE PANDEMIC.

AND WE'RE STILL DEALING WITH THAT.

IT APPEARS THAT INFLATION MAY BE PEAKING.

WE'RE SEEING SOME -- AS MOST FOLKS THOUGHT, THINGS START TO COME BACK.

THE PRESSURES ON THE SUPPLY CHAIN ARE DECREASING.

WE'RE SEEING RENT START TO COME DOWN, NOT IN THE OFFICIAL INFLATION NUMBER BUT OTHERWISE.

WAGES ARE NOT ACCELERATING.

AND SO THERE'S SOME GOOD NEWS BUT IT'S -- IT WILL PROBABLY TAKE A BIT LONGER FOR IT TO COME DOWN.

BUT WITH THE FEDERAL RESERVE AGGRESSIVELY RAISING INTEREST RATES, THERE'S A REAL CONCERN THAT WILL PUSH THE ECONOMY INTO A RECESSION.

ACTUALLY THE GOAL OF THAT IS TO INCREASE UNEMPLOYMENT.

THAT CAN BE MUCH WORSE THAN INFLATION BECAUSE PEOPLE WILL LOSE THEIR JOBS, WAGES WILL GO BACK TO BEING STAGNANT AGAIN, AND WE RISK PERMANENT HARM TO THE ECONOMY.

>> I WANT TO COME BACK TO THAT POINT IN A MINUTE BUT I WANT TO GO TO YOU, PROFESSOR HARA.

UH FOR BEING HERE FOR THE FIRST TIME THE H. ON "KENTUCKY TONIGHT."

WELCOME.

I WANT TO GET TO ONE OF THE POINTS MR. BAILEY MADE WE HEARD THE FORMER -- SACKI WA INFLATION WAS A FLEXIBLE ISSUE AND TO THAT DEMOCRATS PRESIDENT COULDN'T DO MUCH TO CHANGE THAT REALITY.

DO I BELIEVE AS MR.

BAIL JUST SURMISED THATTIZES A GLOBAL ISSUE AND IT'S NOT JUST THE UNITED STATES FEELING THE PINCH.

IT IS AN INTERNATIONAL PROBLEM?

>> IT IS A GLOBAL ISSUE.

YOU COULD SAY THAT SOME OF OUR FISCAL POLICILES PERHAPS EXACERBATED IT, MADE INFLATION WORSE THAN IT WOULD HAVE BEEN.

IT'S ALSO EASY TO POINT OUT THAT THE UNITED STATES TENDS TO EXPORT OUR INFLATION TO THE REST OF THE WORLD AS THE DOLLAR HAS BECOME MUCH STRONGER.

WE NOW ARE AT PARITY WITH EUROPE, THAT WE'RE EXPORTING A LOT OF THAT INFLATION AWAY.

WHEN YOU LOOK AT THE LAST GDP NUMBERS FOR THIRD QUARTER, BUT REALLY INCREASED OUR GDP WAS YOU ARE EXPORTS BE WITH PARTICULARLY OF OIL AND OTHER ENERGY PRODUCTS.

SO YES, YOU COULD LOOK AT FISCAL POLICY AND PERHAPS DONE IT BETTER, BUT I DON'T THAT IT WAS GOING TO BE AVOID NO MATTER WHO WAS IN OFFICE, REPUBLICAN OR DEMOCRAT.

>> SO TO GET TO THE POINT ABOUT THE FEDERAL STIMULUS DOLLARS, ARPA, THOSE TYPES OF THINGS AND YOU HAD MENTIONED WHEN WE WERE INTERVIEWED YOU FOR OUR 6:30 PROGRAM E. KENTUCKYY DID I GO LAST WEEK THAT THAT WAS ALSO A FACTOR IN OUR INFLATIONARY RATES RIGHT NOW.

EXPLAIN MORE ABOUT THAT.

>> ABSOLUTELY IT.

STARTED WITH TRUMP WITH THE CARES ACT AND IT'S GONE RIGHT ON THROUGH THE BIDEN ADMINISTRATION WITH THE AMERICAN RESCUE PLAN, THE INFLATION REDUCTION ACT, STUDENT DEBT LOAN FORGIVENESS.

ALL OF THOSE ARE INJECTING MORE MONEY INTO THE SYSTEM, CHASING THOSE FEWER GOODS THAT JOHN TALKED ABOUT.

SO WE'RE PUTTING MONEY -- THE GOVERNMENT IS PUTTING MONEY INTO THE SYSTEM AS THE FEDERAL RESERVE IS TRYING TO RAISE INTEREST RATES TO GET THE DEMAND TO GO DOWN.

SO RIGHT NOW THE FISCAL POLICY AND THE MONETARY POLICY AREN'T REALLY WORKING TEG VERY WELL.

-- TOGETHER VERY WELL.

>> I WANT TO GO TO YOU.

THANK YOU, MR. AULL, FOR BEING HERE AGAIN.

I THINK YOU AND MR. BAILEY WERE ON THE LAST TIME TOGETHER FAWNING THIS EXACT SAME TOPIC AND WE THREW IN SPECIFICALLY GAS PRICES BECAUSE IN THE SUMMER PEOPLE WERE REALLY ON EDGE ABOUT THAT, BUT THEY STILL ARE ON EDGE, RIGHT?

SO IF YOU WANT TO PROVIDE ANOTHER REASON FOR WHY YOU THINK WE'RE SEEING THESE RATES AND WHAT CONGRESS OR THE PRESIDENT SHOULD BE DOING THAT THEY'RE NOT DOING.

>> I THINK IT'S A REALLY ODD ECONOMIC MOMENT BECAUSE I THINK IF YOU LOOK A OTHER PERIODS OF THE UNITED STATES ECONOMIC RESISTER, A LOFTY THOSE ECONOMIES OR THOSE ECONOMIC MOMENTS NOT BE ABLE TO WITHSTAND THE SHEER AMOUNT OF RATE INCREASES WE'VE SEEN FROM THE FEDERAL RESERVE.

WE'RE EXPECTING ANOTHER ONE TO HAPPEN THIS WEEK, WHICH WILL BE -- >> THURSDAY, RIGHT?

>> A FAIRLY LAN RATE INCREASE.

ORDINARILY I THINK WE WOULD START TO SEE MORE SIGNS OF AN ECONOMY THAT IS BEGINNING TO CONTRACT, BUT WE'RE NOT GETTING A WHOLE LOT OF THAT DATA THAT'S SUGGESTIVE OF AN ECONOMIC THAT'S SHOWING -- ECONOMY THAT'S SLOWING DOWN.

WEIR SILL SEEING JOB GROWTH, UNEMPLOYMENT IS VERY LOW.

WE CAN ALSO LOOK A DATA SO JUST JOB OPENINGS.

THEY ARE REALLY, REALLY HIGH.

THEY WENT DOWN FROM JULY TO AUGUST BUT THEY'RE STILL EXTREMELY NI HIGH IN KENTUCKY WE'RE ABOUT 160,000 WHICH IS MUCH, MUCH HIGHER THAN I THINK WHAT YOU HAVE SEEN IN THE PAST.

SO I THINK A FEW DIFFERENT THINGS ARE GOING ON, BUT ONE OF THE ISSUES I THINK WE REALLY NODE TO HIT ON IS CONSUMER DEMAND IS STILL VERY, VERY HIGH.

COMING OUT OF THE PANDEMIC WE DID PUMP IN QUITE A BIT OF FISCAL SURPLUS ALL OF WHICH I THINK IS WORTH DEBATING, ESPECIALLY LOOKING IN HINDSIGHT.

I THINK AT THE TIME THAT A LOT OF THE FISCAL STIMULUS WAS OCCURRING AND A LOT OF THE TIMES THE VOTES WERE TAKING PLACE, IT'S PRETTY UNDERSTANDABLE TO VOTE IN FAVOR OF THAT BECAUSE WE WERE IN SUCH ODD TIMES AND UNCERTAIN TIMES.

NOW, THINK A LOT OF THE AMOUNTS, PARTICULARLY WITH THE AMERICAN RESCUE PLAN ACT, WAS A LITTLE BIT MORE THAN IT PROBABLY SHOULD HAVE BEEN.

I THINK YOU PROBABLY COULD HAVE CUT THAT AMOUNT IN HAVE AH 1.9 TRILLION TO MAYBE A LITTLE LESS THAN $1 TRILLION AND I THINK THAT WOULD HAVE HAD LESS OF AN INFLATIONARY IMPACT HAD THEY DONE IT THAT WAY.

BUT IF YOU ALSO LOOK A THINGS SUCH ASS AND SAVINGS, SO THROUGHOUT THE COURSE OF THE PANDEMIC AMERICANS SAVED ABOUT 2.

$2TRILLION ABOVE BASELINE.

STILL HAVE AROUND $1.5 TRILLION OF THAT TO GO, AND AS THOSE DOLLARS CONTINUE TO BE SPENT, THAT'S GOING TO CONTINUE ADDING INFLATION.

AND THE OTHER THING WE HAVEN'T TALKED ABOUT IS WE'VE HAD MORE NOT REALLY FISCAL STIMULUS BUT WE HAVE HAD MORE FEDERAL SPENDING IN THE LAST COUPLE OF YEARS WITH THE CHIPS ACT WHICH IS A REALLY GREAT PIECE LEGISLATION.

>> CHIPS ACT IS?

>> THAT WAS THE PIECE OF LEGISLATION FOCUSED ON INCREASING THE PRODUCTION, PARTICULARLY OF SEMICONDUCTOR AND OTHER FORMS OF TECHNOLOGY.

BUT THERE'S OTHER TYPES OF SPENDING.

THAT ARE STILL CIRCULATING THEIR WAY THROUGH IF SYSTEM.

EVEN THE ARPA, THE AMERICAN RESCUE PLAN ACT, THAT SPENDING IS STILL TRICKLING OUT.

THAT'S ONE OF THE REASONS WHY I WOULD ARGUE THAT INFLATION I THINK IT WILL COME DOWN, BUT I WOULD ANTICIPATE THAT IT WILL CONTINUE TO BE HIGH FOR POTENTIALLY A LONG TIME BECAUSE THERE'S SO MUCH MONEY THAT'S GOING TO HAVE TO WORK ITS WAY THROUGH THE SYSTEM BEFORE WE CAN START TO SEE THINGS SLOW DOWN.

>> AS YOU MENTIONED, THE FEDERAL RESERVE IS MOST LIKELY GOING TO RAISE INTEREST RATES BY THREE-QUARTERS OF A PERCENTAGE BOYNTON ON WEDNESDAY, THE FOURTH STATE EUROPE L. SUPER SIZED HIKE.

THEN THEY'RE EXPECTED TO DO IT AGAIN.

THEN YOU HAVE PROBABLY POSSIBLY NEW MEMBERS ON THE VOTING BOARD SOME FEBRUARY WHICH MAY NOT BE AS HAWKISH AS THE ONES WHO VOTED FOR ALL THE INCREASES.

SO FEDERAL INTEREST RATES WERE THE KEY WE SHOULD ALREADY BE THERE BY NOW.

>> THERE'S A DELAY.

THIS IS PART OF THE PROBLEM.

WHEN THEY RAISE INTEREST RATES, IT TAKES TIME FOR THAT TO WORK ITS WAY THROUGH THE SYSTEM TO GET TO INFLATION.

SO THEY'RE SORT OF SHOOTING DARTS IN THE DARK, THROWING DARTS IN DARK, HOWEVER YOU WANT TO SAY AND HOPING IT WILL WORK OUT.

THE TRACK RECORD HERE, THOUGH, IS NOT GOOD, AND WE HAVEN'T HAD THIS RAPID INCREASE IN INTEREST RATES SINCE THE EARLY 1980S AND THE RESULT OF THAT INFLATION BUSTING INTEREST RATE INCREASE WITH AN INCREDIBLY HIGH UNEMPLOYMENT.

SO IT'S VERY DANGEROUS.

AND WHAT CONGRESS DID THIS TIME WITH THE AMERICAN RESCUE PLAN ACT AND OTHER -- THE CARES ACT, ET CETERA, IN TERMS OF RELIEF, I'LL VERY CONCERNED THAT THERE WON'T BE THAT WILLINGNESS IF WE GET A RECESSION NEXT YEAR WITH THE YEAR AFTER THAT, FOR CONGRESS TO DO ANYTHING, AND IF THAT SORT OF SITUATION HAPPENS, WE ARE IN A RECESSION, THEN WE RISK GETTING STUCK AT SORT OF A LOW EQUILIBRIUM WHERE WE HAVE HIGH UNEMPLOYMENT, COULD STILL HAVE HIGH INFLATION AND IT CONTINUES TO GO ON.

THIS BOUT OF INFLATION IS A LOT DIFFERENT THAN WHAT WE'VE SEEN IN THE PAST, AND ONE OF THE THING WE HAVEN'T MENTIONED I THINK IS VERY IMPORTANT IS THAT ABOUT 40% OF THE PRICE INCREASES HAVE SHOWN UP IN CORPORATE PROFITS.

SO WE HAVE A -- THE LAST TIME WE HAVE INFLATION THIS HIGH BEEN WAS ABOUT 40 YEARS AGO.

WE HAVE AN ECONOMY HE'S THAT'S MUCH MORE CONCENTRATED.

THERE ARE MANY GREATER MONOPOLIES.

WORKER POWER IS WAY DOWN, ABOUT ONE IN FOUR WORKERS THE IN '70s WAS IN A UNION.

IT'S ABOUT 6% NOW.

SO CORPORATIONS ARE ABLE TO TAKE ADVANTAGE OF THIS BOUT OF INFLATION TO RAISE PRICES AND KEEP THEM IN PROFITS, AND THAT IS -- THAT HAS TO BE PART OF THE SOLUTION.

AND RAISING INTEREST RATES IS NOT GOING TO BE THE WAY THAT YOU DO THAT.

YOU HAVE TO LOOK MORE SPECIFICALLY AT PARTICULAR INDUSTRIES, EXAMINE WHAT'S HAPPENING.

WE KNOW THAT IF IN THEIR SHAREHOLDER REPORTS, LARGE CORPORATIONS ARE TALKING ABOUT HOW THAT THEY ARE PASSING ON THESE COSTS AND EATING UP THE PROFITS.

I THINK TODAY WAS ANNOUNCED THAT IS THE BIG OIL COMPANIES HAVE MADE $100 BILLION IN PROFITS FOR THE LAST TWO QUARTERS.

THAT'S MORE THAN THEY MADE ALL LAST YEAR.

THEY'RE BUYING BACK THEIR STOCKS TO JACK UP THE -- THE BONUSES OF THEIR CEOS.

THEY'RE A BIG DIVIDENDS.

AND SO THAT IS A VERY UNIQUE SITUATION IN THIS FORM -- IN THIS TYPE OF INFLATION.

IT ALSO MEANS THAT WAGES, AS ALL OF US I THINK HAVE MENTIONED, HAVE NOT BEEN GOING UP VERY MUCH, SO WORKERS ARE HURT THAT MUCH MORE, BUT IF WE JUST RAISE INRATES, THAT'S TAKING A SLEDGEHAMMER TO THE SITUATION.

IT'S GOING SLOW THE ECONOMY INTO RECESSION AND FIRST TIME HOE LOSE THEIR JOBS ARE GOING TO BE THE WEEKS CONSTRUCTION WORKERS WHO BUILD HOUSES THAT ARE NO LONGER GOING TO BE BUILT, AND THE FIRST PEOPLE WHO ARE LAID OFF ARE THE LAST HIRED s EVER, SO THAT'S GOING TO BE LOW INCOME WORKERS, WORKERS COLOR, PEOPLE WITH DISABILITIES, PEOPLE WITH A CRIMINAL RECORD.

THAT'S THE FOLKS THAT ARE GOING TO BE HURT WORSE IF AND WHEN WE HAVE A RECESSION.

SO I'M VERY CURIOUS TO TALK ABOUT THE FED PUSHING HARD AND NOT TAKING A MORE SURGICAL APPROACH TO THE PROBLEM WHICH INVOLVES AGAIN LOOKING AT CORPORATE PRICE GOUGING.

>> SO I WANT TO GO GO TO TO YOU, PROFESSOR GATOR ON ALL THOSE POINTS.

IS THED THE MOVING TOO FAST TOO FAR?

THEN WE'LL DELVE INTO THE OTHER POINTS MR. BAILEY JUST MADE.

>> I THINK THE FED HAS TO DO SOMETHING.

IT OVERSHOT IN 2021 WEEKS FANNED MONEY TO BUY TOO QUICKLY.

IT WAS BUYING THE DEBT THAT THE USUAL GOVERNMENT WAS ISSUING.

THIS WAS THE EXPANSIONARY FISCAL POLICY WHICH I THINK WAS ILL-ADVISED ET BECAUSE IN 2021 THE ECONOMY WAS RECOVERING REALLY RAPIDLY FROM THE SHUTS DOWN OF THE PREVIOUS YEAR.

JOBS WERE AVAILABLE.

WAGES WERE GROWING.

ALL THIS RELIEF REALLY WAS NOT -- WAS NOT NECESSARY AT THE TIME.

BUT IT PASSED.

A LOT OF POLITICAL PRESSURE TO DO SOMETHING AND THE FED ACCOMMODATED THAT BY EXPANDING THE MONEY DESPITE REALLY OVEREXPAND UPPED.

AND SO AGAIN YOU'VE GOT MORE MONEY CHASING THE SAME NUMBER OF GOODS, AND AS WAS MENTIONED HERE BY SEVERAL FOLKS THAT IT TAKES A WHILE FOR THAT TO GET INTO THE ECONOMY.

AND SO IT DOESN'T HAPPEN OVERNIGHT BUT IT IS HAPPENING NOW.

AND SO THERE REALLY ISN'T MUCH OPTION OTHER THAN TO TRY TO REEL IT BACK IN BECAUSE LIVING WITH HIGH RATES OF INFLATION, AS WE'VE EXPERIENCED IN THE 1970S AND OTHER PEOPLE HAVE EXPERIENCED AROUND THE WORLD, IS A BAD OUTCOME.

>> ARE THERE OTHER TOOLS, ALTERNATIVES TO RAISING RATES THAT WOULD HELP REIN IN INFLATION?

>> FUNDAMENTALLY THAT'S' METHOD TO REDUCE SUPPLY OF MONEY INTO THE ECONOMY.

THERE'S OTHER METHODS.

DIRECT SALES OF THE SECURITIES THAT THE FED HOLDS.

BUT FUNDAMENTALLY THEY'RE GOING TO EFFECT RATES TO SOME DEGREE IN THE SHORT TERM, AND SO, YEAH, THE FED NEEDS TO I THINK REIN IN ITS MONETARY EXCESS.

>> RIGHT.

SO YOU BELIEVE THEY'RE DOING THE RIGHT THING BY POLAND RAISING INTEREST RATES ON WEDNESDAY AND PERHAPS AGAIN BEFORE THE END OF THE YEAR.

>> WELL, I THINK, YES, AND I THINK WE NEED TO KEEP TRACK OF THE EFFECT THAT IT'S HAVING, ALTHOUGH UNFORTUNATELY THE EFFECTS ARE GOING TO BE SEEN IN THE FUTURE.

>> RIGHT, THEY'RE LAGGING.

>> THEY ARE LANG RIGHT NOW WHAT EFFECT THEY'RE GOING TO HAVE.

NOW, FORTUNATELY THE UNEMPLOYMENT RATE HAS BEEN VERY, VERY LOW, AND EVEN THOUGH THERE ARE FOLKS THAT ARE HAVING A ROUGH TIME KEEPING UP WITH PRICES, THANKFULLY THE UNEMPLOYMENT RATE HAS STAYED LOW, AND WHEN THAT STARTS TO JACK UP, I THINK THAT'S WHEN THERE'S MUCH MORE CONCERN ABOUT A SERIOUS RECESSION.

NOW, RIGHT NOW I THINK WE'RE KIND OF IN A SLOWDOWN AND THAT MAY CONTINUE.

AND HOPEFULLY IT WON'T GET REAL SERIOUS SUCH THAT THE UNEMPLOYMENT RATE GOES UP BY VERY MUCH.

>> DO YOU THINK A RECESSION IS INEVITABLE?

>> I THINK WE'RE IN FOR A SLOWDOWN.

NOW -- >> WHAT'S THE DIFFERENCE BETWEEN A SLOWDOWN AND A RECESSION?

>> SLOWER THAN -- I DON'T KNOW WHAT THE -- >> IS THERE A TECHNICAL DIFFERENCE?

>> NOT REALLY.

BUT I THINK THE ECONOMY IS GOING TO SLOW.

WE'RE NOT GOING TO HAVE GDP GROW VERY RAPID NEXT YEAR, AND THE UNEMPLOYMENT RATE WILL GO UP A LITTLE BIT.

HOPEFULLY NOT MUCH.

BUT AGAIN, A LOT DEPENDS ON THE FEDERAL RESERVE ACTIONS, AND ALSO SOME OF IT DEPENDS ON WHAT'S GOING TO HAPPEN ON THE SUPPLY SIDE THAT WILL, AFTER THE ELECTION, WILL THERE BE A LIFTING IN SOME OF THESE RESTRICTIONS ON THE SUPPLY OF ENERGY THAT WILL ENABLE MORE GOODS TO BE PRODUCED AND MORE HIRING.

>> I WAP TO GO -- CHARLES.

HAVE YOU PIPE IN HERE.

WHAT DO YOU THINK.

>> >> SURE.

I MEAN, JUST STARTING WITH THE FEDERAL RESERVE AND SORT OF THE ROLE OF WHAT THE FEDERAL RESERVE DOES AND HOW IT WORKS, THE MONETARY POLICY IS FIRMLY WITHIN THE DOMAIN OF FEDERAL RESERVE.

DIDN'T DOMAIN OF THE FEDERAL RESERVE.

THAT IS ONE OF THE CORE REASONS FOR ITS EXISTING, AND I THINK ONE OF THE THINGS WE HAVE TO REMEMBER ABOUT THE FEDERAL RESERVE IS IT'S ACTUALLY A FAIRLY NIMBLE, FAR MORE NIMBLE THAN CONGRESS IS.

CONGRESS PASSES A LAW TO, SAY, REDUCE TAXES OR LOWER TAXES.

IT'S VERY HARD FOR THEM TO STEP BACK AND REVERSE THAT TYPE POLICY.

THE FEDERAL RESERVE CAN MOVE FAIRLY QUICKLY TO REDUCE RATES JUST AS QUICKLY AS THEY CAN TO INCREASE RATES SO I THINK WE NEED TO APPRECIATE THAT NIMBLENESS WHEN WE THINK ABOUT HOW THE FEDERAL RESERVE IS ADDRESSING THIS ISSUE.

JASON MAKES A GOOD POINT IN SAYING THERE IS A SIGNIFICANT DELAY IN TERMS OF HOW WE SEE THE IMPACT OF RATE INCREASES IT.

JAWS TAKES A LITTLE BIT OF TIME.

BUT ARE ONE OF THE THINGS I THINK WE NEED TO REMEMBER IS THAT AS SOON AS WE START SEEING SUGGESTIONS THAT THAT SLOWDOWN, HE IS DESCRIBING ONCE THAT KICKS IN THEY CAN QUICKLY AND START REDUCING RATES WITH THE HOPE THAT THAT WILL START MOVING THING IN THE DIRECTION WE WANT THEM TO SEE.

I DO WANT TO COMMENT ON JASON'S REMARK ABOUT THE ROLE OF CORPORATE PROFITS IN THE INFLATION ISSUE.

THIS HAD IS AN ARGUMENT THAT COMES UP TRADITIONALLY ANY TIME WE DO SEE PERIODS OF RELATIVELY HIGH INFLATION.

WE SAW THIS IN THE '70s.

WE HAVE SEEN IT BEFORE.

IN FACT, IT POLLS VERY WELL IT.

RESONATES WITH VOTERS BUT VOTERS BET FRUSTRATED WITH THIS.

I DO THINK, THOUGH, THAT BY AND LARGE ECONOMISTS DON'T AGREE WITH THAT VIEW ON THE WHOLE.

SO TO POINT OUT A COUPLE EXAMPLES, JANET INN, THE CURRENT TREASURE SECRETARY DISMISS THIS HAD ARGUMENT.

JASON FURMAN THE FORMER TOP ECONOMIST 69 OBAMA WHITE HOUSE HAS ADAMANTLY DISMISS THAT HAD ARGUMENT.

A POLL CONDUCTED BY THE UNIVERSITY OF ECONOMY CHI OF ECONOMISTS ASKING HEM TO WHAT EXTENT CORPORATE PROFIT CHASING IS CAUSING INFLATION, ONLY 10% AGREE WITH THAT NOTION WHEREAS 80% DISAGREE WITH THAT NOTION.

SO I THINK IT'S ONE OF THOSE THINGS WHERE WE'RE TRYING TO BRING IN AN ISSUE OR BRING IN A CONCEPT TO AN ISSUE THAT IS FAIRLY WELL UNDERSTOOD.

AS WE'VE ALREADY BEEN TALKING ABOUT IN TERMS OF INFLATION, WE KNOW WHAT CAUSES INFLATION.

TOO MUCH MONEY CHASING TOO LITTLE SUPPLY AND THERE'S ALL SORTS OF DUPLEX.

TIS FEED INTO THAT BUT TO BRING IN THIS MOTION O.

NEXT THAT CORPORATE PROFITS ARE DRIVING THAT BUT IN A LOT OF WAYS IT WILL BE SOMEWHAT DANGEROUS BECAUSE OF THE TYPES POLICY PROPOSALS THAT COME OUT OF THOSE, AND SPECIFICALLY I'M TALKING ABOUT THINGS LIKE PRICE CONTROLS.

PRICE CONTROLS CAN WREAK ABSOLUTE HAVOC WHEN IT COMES TO THE SUPPLY OF GOODS, AND SO I THINK WE NEED TO BE VERY, VERY CAREFUL WITH THAT.

AND IN TERMS OF IDEAS AROUND, SAY, MONOPOLIZATION OR OTHER TYPES OF TRUST-RELATED ISSUES, CAUSING INFLATION, I WOULD JUST POINT OR IT A MARKET LIKE THE USED CAR MARKET, THERE IS NO CENTRALIZATION IN THAT MARKET WHATSOEVER, YET SOME OF THE HIGHEST INFLATION THAT WE'RE SEEING IS WITHIN THE USED CAR MARKET.

AND SO I DON'T THINK THERE'S SOME SORT OF USED CARMON MONOPOLY THAT'S POTENTIALLY PRICE GOUGING, AND YOU CAN LOOK AT THIS IN MULTIPLE OTHER DIFFERENT TYPES OF SECTORS.

I WOULD CAUTION AGAINST LEANING TOO HARD INTO THAT NOTION THAT CORPORATE PROFIT CHASING IS DRIVING UP INFLATION.

>> I'LL LET JASON BEFORE MS. HARRAH.

>> THESE ARE FACTS.

THE FEDERAL BANK IN NEW YORK INTO IT.

40% HAS GONE TO CORPORATE PROFITS.

THE TYPICAL NUMBER IS 11%.

SO WHAT WE'RE TALKING ABOUT IS A VERY UNIQUE SITUATION.

WE HAVEN'T HAD INFLATION OF ANY MEANINGFUL LEVEL IN THIS COUNTRY SINCE THE '70s.

THIS IS COMING AT A MUCH DIFFERENT TIME, AND THIS IS ON THE HEELS -- AGAIN, INFLATION WAS SPURRED BY DISASTER, A PANDEMIC.

WE KNOW WHAT HAPPENS WHEN DISASTERS HIT.

WE KNOW THAT HERE IN KENTUCKY OUR ATTORNEY GENERAL DANIEL CAMERON HAS ENFORCED PRICE GOUGING LAWS AROUND THE TORNADOES IN WESTERN KENTUCKY, HE'S DONE IT AROUND BABY FORMULA WHEN THERE WAS PRICE GOUGING AROUND THAT.

HE DOES IT AROUND GASOLINE ALL THE TIME.

AND IT HAPPENS WHEN DISASTERS HIT.

THAT'S WHAT'S HAPPENED IN THIS SITUATION.

A PANDEMIC STARTED THIS, AND CORPORATIONS, ESPECIALLY IN SECTORS, THE ONES THAT HAD THE BIGGEST INCREASES IN BEGINNING, ENERGY, FOOD, ET CETERA, ARE VERY CONCENTRATED.

THERE ARE TWO OR THREE OR FOUR CORPORATIONS THAT CONTROL A LARGE CHAIR OF THE MARKET, AND THEY WERE ABLE TO TAKE ADVANTAGE OF THE PANDEMIC AND THE PRICES WERE GOING UP BECAUSE OF LEGITIMATE SUPPLY CONSTRAINTS TO INCREASE THEM BEYOND THAT, BEYOND WHERE THEY WOULD OTHERWISE BE.

AND ALL YOU HAVE TO DO IS LISTEN TO THEM.

THEY GO ON THEIR SHAREHOLDER CALLS AND BRAG ABOUT IT.

THEY TALK ABOUT IT ALL THE TIME BUT WE DON'T HAVE ANY FEDERAL LOU LAW TO ENFORCE PRICE GOUGE AND THAT'S WHY THERE HAVE BEEN BILLS INTRODUCED IN CONGRESS TO SAY WHEN THERE ARE SITUATIONS LIKE THIS, A DISASTER OR A MARKET TRANS WEEKS CONGRESS SHUTS DOWN BE ABLE TO GO IN, SUBPOENA DOCUMENTS, FIND OUT THE DECISIONS THAT WERE MADE, AND SPECIAL IN CRITICAL SECTORS THAT ARE -- ESPECIALLY IN CRITICAL SECTORS THAT ARE LIKE FOOD AND ENERGY, AND STEP IN IN A TARGETED WAY, IN A STRATEGIC WAY AND LIMIT IT.

UNTIL YOU CAN GET TO THE LONGER-TERM SOLUTIONS WHICH ARE SUPPLY SIDE.

SO, FOR EXAMPLE, GAS.

WE NEED TO GET OFF OF RELIANCE ON THE OIL, BIG OIL, AND THE INFLATION REDUCTION ACT THAT PASSED CONGRESS THIS YEAR IS A GREAT STEP FORWARD.

IT WILL TAKE TIME, BUT IT WILL MOVE US TOWARD RENEWABLE ENERGY AND AWAY FROM RELIANCE ON THE BIG OIL COMPANIES.

SO THERE NEEDS TO BE LONGER-TERM SUPPLY SIDE SOLUTIONS TO SOME OF THESE SECTORS, BUT IN THE SHORT TERM I THINK ADDRESSING PRICE GOUGING JUST LIKE WE DO AT THE STATE LEVEL THROUGH OUR ATTORNEY GENERAL CAN MAKE A LOT OF SENSE.

>> SO PROFESSOR HARRAH, I WANT TO COME TO YOU AND ASK YOU ABOUT PRICE CONTROLS.

WE KNOW THAT LARGELY ECONOMISTS AREN'T IN FAVOR THAT OF BUT I WANT TO ASK YOU IF SUCH ARE THE CONDITIONS THAT MR. BAILEY LAID OUT, PANDEMIC, OTHERWISE, DOES IT MAKES SENSE TO HAVE SOME KIND OF TITLE CENTERED PRICE CONTROLS?

TIGHTLY CENTER.

THIS QUESTION CAME IN.

CAN SOMEONE PLEASE EXPLAIN THE RESTRICTIONS ON ENERGY AND THEN ANSWER THE QUESTION WITH THESE RESTRICTIONS, WHY ARE ENERGY, ESPECIALLY OIL COMPANIES, HAVING SUCH HUGE QUARTERLY PROFITS?

>> SO AGAIN, GOING BACK TO ECON 101, WE HAVE CONSTRAINED THE SUPPLY OF OIL AND OTHER ENERGY PRODUCTS.

THE DEMAND HAS NOT GONE DOWN AS THE ECONOMY HAS RECOVERED FROM THE PANDEMIC.

IN FACT, IT'S CONTINUED TO INCREASE.

THE DEMAND FOR OIL AND OTHER ENERGY HAS INCREASED AS THE SUPPLY HAS BEEN CONSTRAINED.

THAT'S GOING TO INCREASE THE PRICE.

THAT'S THE WAY YOU MOD I.

RATE DEMAND, IS MY INCREASING THE PRICE, AND THE PEOPLE THAT ARE EFFIN BECOMING FROM THOSE PRICE INCREASES ARE CORPORATE RIGHT-OF-WAYS.

DO WANT TO PUSH BACK A LITTLE BIT ON JASON -- I THINK IT'S IMPORTANT TO REMEMBER IT'S NO ACROSS BOARD.

THERE ARE COMPANIES THAT ARE MAKING WHAT SOME PEOPLE WOULD CALL WINDFALL PROFITS, BUT FOR EVERY COMPANY LIKE THE ENERGY COMPANIES YOU HAVE A COMPANY BIKE TARGET WHOSE PROFITS ARE DOWN 90% IN THE SECOND QUARTER SO IT'S NO ACROSS THE BOARD AND IT'S CERTAINLY NOT ACROSS THE BOARD FOR SMALL COMPANIES.

SMALL COMPANIES ARE REALLY STRUGGLING TO MAKE A PROFIT IN THIS ENVIRONMENT.

SO I DON'T WANT TO TREAT TREAT IT LIKE ALL BUSINESSES ARE EXPERIENCING THE SAME THING RIGHT NOW.

BUT I THINK YOU'RE ALSO GETTING A LOT OF PUSHBACK THE ON ENERGY POLICIES WORLDWIDE WHEN WE LOOK A WHAT'S HAPPENING IN GERMANY.

THEY ARE IN THE PROCESS RYAN OF DEMOLISHING A WIND FARM TO EXPAND THEIR COAL MINING OPERATIONS IN GERMANY IN ORDER TO MAKE SURE THEY HAVE ENOUGH FUEL THIS WINTER AND INTO NEXT YEAR AND INTO 2024.

YES, I THINK THERE'S A CONSENSUS THAT WE WANT TO GET OFF OF FOSSIL FUELS, BUT I ALSO THINK THERE'S SOME REALIZATION COMING THAT WE'RE TRYING TO DO IT TOO MUCH TOO FAST AND THAT OUR MARKET JUST NOT KEEPING UP WITH DEMAND FOR ENERGY, AND THEREFORE WE'RE HAVING THESE SOARING PRICES.

>> SO TO THE OTHER QUESTION THAT I ASKED ABOUT, PRICE CONTROLS, IS THERE ANY ENVIRONMENT IN WHICH YOU WOULD SUPPORT THAT TARGETED CONTROLLING OF PRICE?

IN ENERGY SECTOR OR -- >> EVERY TIME WE'VE TRIED IT, IT'S NOT -- OUTCOMES HAVE NOT BEEN GOOD FOR CONSUMERS OR CORPORATIONS.

SO WOULD I SAY NO.

>> ANY OTHER COMMENT?

>> I WOULD SAY HERE HERE TO THAT.

IT'S -- I THINK IT'S INCREDIBLY DANGEROUS TO TRY TO TURN LOOSE CONGRESS ON TRYING TO FIGURE OUT WHO IS.

>> CHAING TOO MUCH FOR VARIOUS GOODS AND SERVICES.

CHARGING TOO MUCH FOR VARIOUS GOODS AND SERVICES.

IT'S A POLITICAL NIGHTMARE.

ONE OF THE CULPRITS WE NIGHT UNCOMFORTABLY HAVE TO TURN TO IS PEOPLE SELLING THEIR HOUSES, AS HOUSING PRICES HAVE GONE WAY UP AND THERE'S PLENTY OF PEOPLE WHO CAUGHT BOUGHT THEIR HOUSES AT A MUCH LOWER PRICE AND ARE SELLING IT AT A MUCH HIGHER PRICE.

>> BUT GOOD LUCK FINDING ANOTHER HOUSE TO MOVE INTO.

>> ARE YOU GOING TO SAY YOUR MAMA IS A PRICE GOUGEER?

I DON'T THINK WE NEED TO TURN CONGRESS LOOSE ON THAT TYPE OF THING.

I THINK WE NEED A COMPETITIVE ECONOMY TO DEAL WITH PRICING.

>> BACK TO ENERGY CLIMATE CHANGE.

BUT LAUREN HOWLEY FROM BRIE A SAID HOW MUCH OF YOUR INFLATION CAN BE DIRECTLY RELATED TO CLIMATE CHANGE AND THE RESULTING CROP FAILURESSOME.

>> IT'S A CONTRIBUTOR.

OBVIOUSLY THE PANDEMIC ITSELF IS RELATED TO CHANGING -- OR MANY PEOPLE, I GUESS, WHO LOOK AT THE ORIGINS OF THE PANDEMIC LOOK AT THE CLIMATEIC CONDITIONS THAT CHANGED IN THAT PART OF THE WORLD AND IS HELPING SPUR MOFF OF THESE SORT OF VIRUSES, SO SINCE THAT ITSELF WAS THE CAUSE OF THE INFLATION AND THE WORLDWIDE RECESSION AND PUBLIC HEALTH DISASTER THAT WE'RE STILL DEALING, WITH OBVIOUSLY IT HAD A DIRECT EFFECT.

BUT WE'VE ALSO SEEN -- YOU KNOW, WE HAVE GLOBALIZED THE ECONOMY OVER MANY ACTUALLY CENTURIES NOW, A COUPLE CENTURIES, AND IT'S CREATED -- WE'VE DONE THAT AT THE SAME TIME THAT CLIMATE IS INTERRUPTING AND DISRUPTING INCREASINGLY THESE SORT OF SUPPLY CHAINS, SO WE SEE A LOT MORE FLOODING, WE SEE A LOT MORE FIRES AND OTHER CLIMATE-RELATED DISASTERS THAT ARE DIRECTLY IMPINGING ON THE ABILITY TO SHIP GOODS AROUND THE WORLD.

AND THAT HAS PLAYED A ROLE ALL ALONG DURING THE PANDEMIC IN SORT OF THESE BOTTLENECKS THAT WE HAVE SEEN AND WILL CONTINUE TO DO SO.

>> I THINK THESE VERY SPECULATIVE.

I THINK THERE'S A LOT OF STUDIES ON THIS, IN FACT -- >> SPECULATIVE HAD.

>> -- A DIFFERENT TOPIC REALLY ON THE EFFECT OF CLIMATE CHANGE BUT A WHOLE BUNCH OF STUDIES ARE LOOKING ON THE INCIDENCE OF NATURAL DISASTERS OVER THE COURSE OF THE LAST 50 OR 100 YEARS AND TRYING TO RELATE IT TO CARBON, AND THERE'S LOTS OF PEOPLE WHO HAVE CLAIMED THAT THEY FOUND A RELATIONSHIP, THERE'S LOTS OF PEOPLE THAT CLAIM THAT THERE HASN'T BEEN.

BUT I THINK IN TERMS OF TODAY'S SITUATION, I THINK I DON'T KNOW OF ANY CAREFUL -- ANY CAREFUL STUDY HAS TRIED TO LOOK AT CROP FAILURES OR WHATEVER AND HOW THAT HAS AFFECTED INFLATION.

I THINK THE BIGGEST EFFECT HAS BEEN EXPANSION OF THE MONETARY POLICY, NOT ONLY IN THE UNITED STATES BUT VIRTUALLY EVERY OTHER COUNTRY IN THE WORLD HAS ENGAGED IN THIS TO FUND EXPANSIONARY FISCAL POLICY, AND WE HAVE HAD SOME SUPPLY ISSUES, PARTLY RECOVERING FROM THE SUPPLY CHAIN DISRUPTIONS BUT ALSO WE'VE HAD A LOT OF COUNTRIES, AS JANET MENTIONED HERE, SORT OF STEPPING THE NECK BOOT ON THE NECK OF THE FOSSIL FUEL INDUSTRY AND CAUSING LESS OF A SUPPLY.

I THINK YOU LOOK AT MONEY, HOW MUCH MONEY IS CIRCULATING AND HOW MANY GOODS AND SERVICES IT'S CHASING ARE THE BASIC ANSWERS TO WHAT'S GOING ON WITH INFLATION.

>> THE BIG OIL COMPANIES IN $50 BILLION IN STOCK BUYBACKS IN THE LAST SIX MONTHS 97 THROTTLED BACK PRODUCTION FROM WHAT THEY COULD PROVIDE SO THEY ARE NOT MEETING THE FULL DEMAND BECAUSE THEY CAN MAXIMIZE THEIR PROFITS, AND ARE THERE A FEW OF THEM, FOUR OR FIVE, THAT CONTROL A HUGE PORTION OF THE MARKET.

THAT'S A KEY PART OF THIS STORY.

AND THAT'S WHY WE NEED TO OVER TIME WEAN OUR RELIANCE ON THEM.

BUT THE IDEA THAT WE'RE NOT -- THAT THE DROUGHTS, THE FLOODS, WILDFIRES THAT ARE SEEN AROUND THE WORLD, WHICH HAVE ALL GONE UP AS THE CLIMATE HAS -- AS THE TEMPERATURE HAS RISEN, THE IDEA THAT THAT IS NOT A REAL FACTOR IS SORT OF PUTTING YOUR HEAD IN THE SAND.

>> WELL, I THINK THERE'S PLENTY OF STUDIES ON THAT, JASON, THAT WOULD SAY OTHERWISE, AND SO I THINK WE CAN DEBATE THAT MAYBE ON ANOTHER PANEL BECAUSE IT'S A SOMEWHAT DIFFERENT TOPIC.

>> IT'S NOT A DIFFERENT TOPIC BECAUSE IF WE'RE TALKING ABOUT CREATING A MORE RESILIENT ECONOMY BOTH IN THE UNITED STATES AND AROUND THE WORLD, AND TO DO THAT WE HAVE TO RECOGNIZED THAT WE HAVE ALREADY -- WE'RE DECADES INTO A PERIOD OF OF MO CHAOTIC CLIMATIC CONDITIONS, AND SO THE KIND OF SUPPLY CHAINS THAT WE HAVE CREATED THAT ARE GLOBAL, WE'RE NOT NECESSARILY BUILT -- WERE NOT NECESSARILY BUILT TO WITHSTAND NIECE SORT OF PRESSURES.

WE HAVE CONCENTRATED PRODUCTION IN A FEW LARGE COMPANIES OR A FEW FACILITIES THAT PRODUCE, FOR EXAMPLE, WITH SEMI CONDUCTORS, A PRODUCT THAT IS RELIED ON GLOBALLY, AND SO WE HAVE TO FIGURE OUT -- WE HAVE TO EXPECT THAT THESE SORT OF CEDARS GOING TO BE MORE COMMON -- DISASTERS ARE GOING TO BE MORE COMMON.

WE'VE SEEN THAT IN KENTUCKY.

AND WE HAVE TO PLAN AROUND IT, AND CHA MEANS THINKING DIFFERENTLY ABOUT HOW OUR SUPPLY CHAINS ARE CONSTRUCTED.

>> I WANT TO JUMP IN.

I AM I'M NOTE A CLIMATOLOGIST.

I'M NOTE GOING TO TALK ABOUT IT.

IS THIS GLOBAL WARMING?

THAT'S OUTSIDE OF MY AREA OF EXPERTISE.

BUT YOU MENTIONED ABOUT ENERGY AND FOOD PRICES.

AND I THINK IT'S IMPORTANT TO UNDERSTAND ENERGY AND FOOD PRICES GO TOGETHER BECAUSE ENERGY IS A BIG INPUT INTO AGRICULTURAL PRODUCTION.

AND WE CAN'T NOT TALK ABOUT THE IMPACT OF THE WAR BETWEEN RUSSIA AND THE UKRAINE.

THAT HAS HAD A ROUGE IMPACT ON THE HUGE IMPACTS ON THE DISTRIBUTION OF GRAINS WORLDWIDE WHICH IS FUELING PRICE INCREASES AND FOOD ACROSS THE EPP GLOBE.

IT'S ALSO HAD A LARGE IMPACT ON THE NITRATE INDUSTRY WHICH IS THIS MAJOR INPUT FOR FERTILIZER.

SO WE HAVE PRODUCTION YIELDS THAT ARE DOWN ACROSS THE GLOBE, SO I WOULD EXPECT TO SEE FOOD PRICES ARE GOING TO COTTON CONTINUE TO GO UP IRRESPECTIVE OF WHAT THE FEDERAL RESERVE BECAUSE BECAUSE THE FEDERAL RESERVE ONLY AFFECTING THE DEMAND SIDE.

THEY'RE NOT REALLY AFFECTING THE SUPPLY SIDE, PARTICULARLY OF FOOD BECAUSE THAT FOOD'S ALREADY BEEN GROWN.

IT'S ALREADY BEEN HARVEST PD WHATEVER FOOD EV WE'RE GOING TO HAVE IN THE NEXT 12 MONTHS WE PRETTY MUCH HAVE IN STORE.

SO I WOULD EXPECT FOOD INFLATION TO CONTINUE TO ARE FOR AT LEAST THE NEXT 12, 18 MONTHS IRRESPECTIVE OF WHAT THE FEDERAL RESERVE DISCUSS.

>> A QUESTION FROM A VIEWER.

DOES IMMIGRATION PLAY A ROLE IN INFLATION?

DOES AN INFLUX OF IMMIGRANTS COMING INTO THE COUNTRY PROVIDE MORE CONSUMERS WHICH IN TURN PROVIDES MORE DEMAND FOR GOODS AND SERVICES?

>> I'LL JUMP IN ON THAT ONE.

NO, I ACTUALLY THINK IMMIGRATION CAN BE SOMETHING THAT CAN BE HELPFUL AND IN ALLEVIATING SOME OF THE INFLATIONARY CONCERNS HA WE HAVE SOMETHING WE HAVEN'T TALKED ABOUT IS THE ROLE OF LABOR MARKET SHORTAGES AND HOW THAT CAN DRIVE INFLATION IN A VARIETY OF DIFFERENT INSTANCES.

ONE OF THE PROBLEMS THAT I DO THINK KENTUCKY AND THE UNITED STATES AS A WHOLE HAS HAD FOR SEVERAL YEARS IS DECLINING LEVELS OF IMMIGRATION INFLOWS INTO THE UNITED STATES, AND THOSE ARE THINGS THAT ACTUALLY CAN BE VERY HELPFUL IN A LOT OF WAYS IN ADDRESSING SOME OF THE INFLATIONARY PRESSURES THAT WE SEE AS A WHOLE BECAUSE, AGAIN, THAT LABOR MARKET SHORTAGE, THAT'S NOT GOING TO BE A MASSIVE DRIVER OF WHAT WE'RE SEEING INPOLICE STATION.

I STILL THINK CONSUMER DEMAND AND TOO MUCH MONEY CYCLING INTO THE PROBLEM IS THE HEART OF THE PROBLEM.

ON THE OTHER SIDE OF THAT I DO THINK EXCESSIVE LABOR MARKET TIGHTNESS IS PART OF THIS ISSUE, AND ALLOWING FOR MORE IMMIGRATION, PARTICULARLY AMONG HIGH SKILLED IMMIGRANTS WHERE WE NEED A LOT OF HIGH SKILL WORKERS IN KENTUCKY, THAT'S ONE THOSE THINGS I THINK COULD BE VERY HELPFUL NOT ONLY IN ADDRESSING ISSUES RELATED TONIGHT INFLATION BUT DIFFERENT EMPLOYERS WOULD HIGHLY WELCOME THIS AS WELL AS THEY'RE STILL STRUGGLING TO FIND WORKERS IN THIS INCREDIBLY TIGHT LABOR MARKET.

>> SO SOME TYPE OF MEANS TESTING FOR IMMIGRATION.

WHEN YOU SAY HIGHLY SKILLED, NOT JUST OUT WHOLESALE IMMIGRATION BUT -- >> WE DO THAT IS ON TO SOME EXTENT ALREADY IN TERMS OUR IMMIGRATION SYSTEM IN TERMS OF HOW PEOPLE ARE ALLOWED TO COME IN AND WORK, BUT BROADLY ALLOWING FOR INCREASED LEVEL IMMIGRATION INTO THE COUNTRY, THAT WOULD BE A POSITIVE ECONOMIC THING FOR SURE.

>> PROFESSOR GAREN, DO YOU SEE THAT IT WAY, THAT IMMIGRATION WOULD BE A POSITIVE IN HELPING TO REDUCE INFLATION?

>> WELL, I THINK YOU POTENTIALLY CAN BRING BOTH MORE DEMAND AND MORE SUPPLY.

THERE'S MORE PEOPLE WHO WANT TO BUY GOODS AND SERVICES BUT THERE'S MORE PEOPLE WHO ARE PRODUCING GOODS AND SERVICES.

AND HONESTLY I DON'T THINK THAT'S REALLY A BIG FACTOR ONE WAY OR THE OTHER.

I THINK AGAIN IT GOES BACK TO WHAT CHARLES JUST MENTIONED AND JANET AS WELL, THAT IT'S REALLY ABOUT SUPPLY OF MONEY AND THE PRODUCTION OF GOODS AND SERVICES, AND SO I DON'T THINK THAT'S REALLY A BIG FACTOR.

>> MR. BAILEY, HOW DO I SEE IT?

DO I THINK IMMIGRATION CAN OFFSETSOME.

>> I DON'T THINK IT'S A BIG FACTOR ESPECIALLY IN THE SHORT TERM.

I THINK WE -- I THINK THERE IS AN EXTENT TO WHICH THE IMMIGRANTS WHO ARE IN THIS COUNTRY NOW WHO ARE WORKING HERE WHO CONTRIBUTE THE TO ECONOMY AND DO NOT HAVE THE RIGHTS THAT OTHER AMERICANS DO DEPRESSES WAGES OVERALL, AND THAT'S MORE OF THE PROBLEM I THINK WE CAN DEAL WITH.

AGAIN, WE'RE NOT SEEING -- I THINK THOSE WHO WOULD SAY OPEN THE DOOR TO A LOT MORE IMMIGRATION, THAT THAT WOULD HELP WITH INFLATION ARE ARGUING THAT WAGE ARE GOING UP TOO HIGH.

WAGES ARE NOT GOING UP TOO HIGH RIGHT NOW.

WAGES AREN'T KEEPING UP WITH INFLATION, IN FACT, FOR THE TYPICAL WORKER, AND THAT'S PART OF THE PROBLEM WITH THE DISTRIBUTION OF THIS INFLATION.

SO I DON'T THINK IT WOULD BE A -- IT WOULD BE A REAL SOLUTION.

I THINK THAT THE -- ONE THING I WANT TO GET BACK TO AS WELL IS THAT WE'RE TALKING ABOUT ALL THIS DEMAND IN THE ECONOMY.

DEMAND -- CONSUMPTION EXPENDITURES IS ABOUT BACK TO WHERE IT WOULD HAVE BEEN PRE-PANDEMIC IF YOU CONTINUE THAT TRENDLINE.

SO WE ARE NOT SPENDING ANY MORE THAN WE WOULD HAVE IF THE ECONOMY HAD JUST CONTINUED TO GROW FROM 2019.

WHAT'S HAPPENED IS THE MARKET, THE SUPPLY IS CONSTRAINED BY THE PANDEMIC.

IT'S BEEN SHUFFLED IN DIFFERENT WAYS.

IT'S BEEN CHAOTIC.

PRODUCTION STOPPED FOR THINGS THAT IT SHOULDN'T HAVE STOPPED FOR.

PORTS GOT BACKED UP.

AND THOSE ARE THE THINGS WE HAVE BEEN WORKING THROUGH.

AND AGAIN, THE EXTENT TO WHICH IN SOME SECTORS A FEW LARGE CORPORATIONS HAVE TAKEN ADVANTAGE OF THAT SITUATION TO INCREASE PRICES EVEN MORE, THAT'S WHAT'S CONTRIBUTED TO THE PROBLEM THAT WE HAVE NOW.

AND SO DEPRESSING DEMAND MEANS LAYING OFF WORKERS, AND THAT'S UNFORTUNATELY WHERE WE SEEM TO BE HEADED WITH FEDERAL RESERVE INCREASE, BUT IN ITSELF DEMAND IS NOT AT THIS POINT MORE THAN IT WOULD HAVE BEEN OTHERWISE.

IT'S JUST THAT SUPPLY CONTINUES TO BE CONSTRAINED.

>> ULTIMATELY GDP IS A MEASURES OF SUPPLY OF THE TOTAL VALUE OF GOODS AND SERVICES PRODUCED BY THE U.S. ECONOMY.

AND IT HAS GROWN, SOMEWHAT SLOWLY THE LAST TWO QUARTERS, AND IF YOU LOOK AT THE TRENDLINE FROM LATE 2019 AND EARLY 2020, PRE-PANDEMIC, AND JUST SORT OF THE TRENDLINE, IT'S UP SLIGHTLY BELOW THAT TRENDLINE.

SO THERE ARE SOME RESTRICTIONS IN -- AND AGAIN, IT'S SORT OF BEGINNING TO TREND DOWN HERE, ALTHOUGH MAYBE THIS LAST QUARTER IS IN CONTRAST TO THAT.

BUT -- SO PRODUCTION HAS INCREASED AND RECOVERED ALMOST TO TREND WHAT IT WAS IN 2020, EARLY 2020, BUT NOT QUITE.

SO THAT'S A FACTOR IN INFLATION BECAUSE, AGAIN, IT'S WHAT WE SAID, THAT TWO OF THE -- AND WE'RE TRYING TO CONVINCE JASON TO COME ALONG WITH US HERE.

MAYBE WE'LL GET THERE AT THE END OF THE HOUR.

IT'S BASICALLY MONEY SUPPLY AND GOODS AND SERVICES PRODUCED.

>> GO AHEAD.

>> I WAS GOING TO SAY A COUPLE AREAS WHERE WE HAVE STARTED TO SEE SLOWING IS IN THE HOUSING MARKET.

THE DEMAND FOR HOUSING HAS STARTED TO SLOW SUBSTANTIALLY.

PRICES HAVEN'T COME DOWN YET AND THAT'S MAINLY THE RESULT OF CONSTRAINED SUPPLY.

AGAIN WE DON'T BUILD ENOUGH HOUSES TO KEEP UP WITH DEMAND BUT THE PRICE INCREASES HAVE SLOWED DRAMATICALLY, AS HAVE THE NUMBER OF OFFERS ON NEW HOMES.

IT'S BECOME -- IT WAS A BUYER'S MARKET.

NOW IT'S TURNING INTO -- AS IT WAS A SELL AREAS MARKET.

NOW IT'S BECOMING A BUYER'S MARKET.

>> WELL, WITH THE INTEREST RATES WHAT THEY ARE I'M NOT SHOW SURE.

>> IT IS AND THAT'S ONE AREA WHERE THE FED'S ACTIONS ARE SHOWING UP.

THE HOUSING STARTS HAVE DROPPED.

BUT THIS IS PART OF THE PROBLEM WITH RELYING ON THE FEDERAL RESERVE TO SOLVE THIS, IS HOUSING IS ONE OF THE BIG CONTRIBUTORS TO THE CURRENT INFLATION.

THE REASON CURRENT BEING INFLATION THAT WE HAVE BUT NOW WE'RE REDUCING THE SUPPLY OF HOUSING.

RIGHT?

IF WE TALK ABOUT SUPPLY AND DEMAND AND WE WAP TO BRING DOWN THE PRICE OF HOUSING, WE NEED MORE HOUSING, NOT LESS, BUT WE'RE GETTING READY TO STOP PRODUCING HOUSES.

SO THIS IS ONE OF REASONS WHY IT'S THING WOULD APPROACH.

WE SEED A SUPPLY SIDE APPROACH TO HOUSING.

WE NEED TO BUILD MORE AFFORDABLE HOUSES FOR PEOPLE.

AND YOU CAN SEE THEY'REWHERE HERE IN LEXINGTON.

IT'S A HUGE PROBLEM.

BUT THE FEDERAL RESERVE RAISING INTEREST RATES IS GOING TO DO THE EXACT OPPOSITE.

IT'S GOING TO CUT OFF THE SUPPLY.

SO IT'S NOT THE BEST SOLUTION.

IN FACT, IT'S THE MOST DAMAGING SOLUTION.

WE NEED TO BE LOOKING AT FEDERAL POLICIES TO INVEST HOUSING CONSTRUCTION MUNICIPAL HOUSING INVESTMENTS, THING THAT WE HAVEN'T DONE FOR DECADES THAT HAVE CREATED THIS UNAFFORDABLE HOUSING SITUATION.

>> SO WE GAWK HOME OWNERSHIP BUT WE DON'T TALK ABOUT THOSE WHO ARE RENT FINANCING PRESENTLY COSTS HAVE ALSO SKYROCKETED.

>> THE RENTERS WAY UP.

AND STOPPING THE PRODUCTION OF RENTAL HOUSING OR ANY KIND OF HOUSING IS NOT GOING TO HELP WITH THAT.

>> YOU KNOW, THE INCREASE IN I.

THE PRICE OF HOUSING IS AN ASPECT OF INFLATION.

WHEN YOU HAVE MORE AND MORE MONEY CHASING FEWER GOODS, ONE OF THOSE GOODS OUT THERE IS HOUSING, AND SO THE PRICE OF HOUSING IS GOING TO TO GO UP WHEN INFLATION GOES UP.

IN FACT IT MIGHT BE GO UP EVEN MORE BECAUSE PEOPLE MAY WANT TO TILT THEIR PURCHASES TOWARD HOUSING THINKING IT MIGHT BE A HEDGE AGAINST INFLATION.

SO THE REASON HOUSING PRICES HAVE GONE UP, THE BIG REASON IS BECAUSE OF THE INFLATIONARY PRESSURES FROM THE FED, MOSTLY FROM THE FED, AND SO HOW TO RELIEVE THOSE PRESSURES IS WE'VE GOT TO UNDO THE INFLATIONARY PRESSURES, AND THAT'S KIND OF TOUGH, AND IT'S -- IT'S NOT A PLEASANT THING, BUT THE INFLATIONARY PRESSURES ARE NOT PLEASANT, EITHER.

>> WHAT ABOUT LOOKING A TARIFFS?

WOULD THAT HELP AT ALL, REDUCING TARIFFS?

>> NO.

I MEAN, THE TRUMP ADMINISTRATORS PUT IN PLACE SOME TARIFFS.

THERE WAS AN INFLATION THEN.

SO YOU CAN'T SORT OF CORRELATE THE INCREASED INFLATION WE HAVE HAD REASONABLE WITH THOSE SPECIFIC TARIFFS.

I DON'T THINK IT WOULD HAVE MUCH IMPACT FAULT.

-- IMPACT AT ALL.

WE NEED TO RETHINK THE WAY IN WHICH WE BERE INTERRELATE WITH OTHER COUNTRIES BUT I ACTUALLY THINK THAT'S GOING TO RESULT IN US RESHORING MORE PRODUCTION THAT WE PUT IN MORE DISTANT PLACES AS A RESULT OF THINGS LIKE PANDEMICS, WHICH WE CAN EXPECT MORE OF AND OTHER NATURAL DISASTERS AS OPPOSED TO JUST CONTINUING TO FOLLOW THE MODEL WE'VE FOLLOWED FOR DECADE NOW, WHICH REALLY CREATES A LOT OF FRAGILITY IN TERMS OF THE WAY IN WHICH WE'RE CONNECTED GLOBALLY.

>> I THINK TARIFFS ARE PROBABLY A FAIRLY SMALL PART OF THE EQUATION IN TERMS OF INFLATION.

AND THE PRICE OF INTERNATIONAL GOODS.

AND GENERALLY HIGHER TARIFFS CUT OFF THE SUPPLY OF -- WHAT?

-- MORE EFFICIENT PRO DEUCES DUDES GOODS FROM OVERSEAS SO GENERALLY THAT'S A BAD IDEA TO RAISE TARIFFS BECAUSE IT TENDS TO HAVE AN UPPARRED PRESSURE AND INCREASES THE PRICE OF GOODS.

>> FIRST OF ALL, IN GENERAL JUST IN TEMPLES CORE POLICY PREFERENCES, REDUCING TARIFFS WE WOULD ARGUE IS ALWAYS A GOOD THING, HAVING ACCESS TO GLOBAL MARKETS A VERY PART OF GROWING OUR ECONOMY AS A WHOLE, BUT IN GENERAL I DO THINK IT'S IMPORTANT TO RECOGNIZED THAT THERE IS SOME CONNECTION, I WOULD ARGUE, BETWEEN THE IMPOSITION OR THE RAISING OF TARIFFS THAT WE HAVE SEEN OVER THE PAST FEW YEARS AND SOME OF THE SUPPLY CHAIN DISRUPTIONS THAT WE HAVE ALSO COME OUT OF THAT BECAUSE AS WE'VE IMPOSED SOME OF THESE TARIFFS THAT HAS CALMED COMPANIES TO WORK AROUND THOSE THE BEST THEY CAN BECAUSE THEY'RE TRYING TO GET THEIR GOODS INTO OTHER MARKETS AND OTHER MARKETS ARE TRYING TO GET THEIR GOODS OVER YEAR HERE, AND SO I DO THINK THAT CONTRIBUTED A LITTLE BIT TO SOME OF THE SUPPLY CHAIN DISRUPTION, NOT ON THE SAME SCALE AS, SAY, A WAR IN UKRAINE HAS BUT I DO THINK THAT HAS BEEN A FACTOR.

ON THE WHOLE, THOUGH, I THINK TARIFF POLICY, PRETRADE POLICY IN GENERAL IS NOT GOING TO TO HAVE A MASSIVE IMPACT ON INFLATIONARY ISSUES THAT WE'RE TALKING ABOUT RIGHT NOW BECAUSE AGAIN I DON'T THINK IT GETS BACK TO THAT CORE PROBLEM THAT WE'VE BEEN TALKING ABOUT, WHICH IS AGAIN I THINK EXCESS MONEY SUPPLY, EXCESS FISCAL SURPLUS.

>> ANY OTHER COMMENT ON THAT BEFORE WE TALK ABOUT JOBS?

SO THE JOBS REPORT IS EXPECTED TO COME YOU THE AT THE END OF THIS WEEK TWO DAYS AFTER THE FED DOES ITS BUSINESS.

SO I WANT TO GO TO YOU, MS. HARRAH, BECAUSE YOU EXPLAINED VERY WELL THAT THE FED LIKE A LITTLE UPWARD NICK IN THE UNEMPLOYMENT RATE.

EXPLAIN WHY THAT IS SEENS AN ATTRACTIVE PROPOSITION TO THEM.

>> THEY BASICALLY SAID THEY ARE GOING TO RAISE INTEREST RATES UNTIL PEOPLE.

AS PEOPLE LOSE THEIR JOBS THE DEMAND FOR GOODS AND SERVICES WILL GO DOWN.

IT'S A VERY BLUNT INSTRUMENT TO BRING DOWN INFLATION WHEN YOU'RE TALKING ABOUT RAISING INTEREST RATES.

SO WE'VE ALREADY STARTED TO SEE A SLOWING IN THE JOBS REPORTS THE LAST COUPLE OF MONTHS.

WE HAVEN'T SEEN DECLINES BUT WE'VE SEEN THE RATE OF GROWTH HAS SLOWED SUBSTANTIALLY, AND AT SOME POINT I THINK WE'LL SEE IT'S GOING TO START TO PLATEAU AND WE WILL SEE AN UPTICK IN THE UNEMPLOYMENT RATE.

THAT'S A SHORT-TERM ISSUE.

THE LONG-TERM ISSUE IS GOING TO BE WE AREN'T AREN'T GOING TO HAVE ENOUGH LABOR FORCE IN KENTUCKY OR OUR LABOR FORCE IS QUESTIONING GOING TO CONTINUE TO GROW MORE SLOWLY IN THE AND IN THE LONG-TERM NOT HAVING THE WORKFORCE IS OUR BIGGEST CHALLENGE IN KENTUCKY.

>> FOR THE FEDS WHAT IS THE DESIRED LEVEL OF THE JOBLESS RATED THAT THEY SAY REALLY DOES HELP COMBAT INFLATION?

>> THEY HAVEN'T SAID WHAT THEY WANT THAT RATE TO BE.

WHAT THEY STATE IS THEY WANT TO HAVE A 2% INFLATION RATE.

SO INFLATION IS OVER 8%.

TO GET TO 2% AFTER THEY'VE RAISINGED IT AS RAPIDLY AS THEY HAVE, I THINK WE WOULD ALL AGREE THEY NEED TODAY RAISE RATES TO BRING DOWN INFLATION.

WHETHER OR NOT THEY'RE GOING TOO FAR TOO FAST REMAINS TO BE SEEN.

I DON'T THINK THEY'RE GOING TO GET THE SOFT LANDING THEY'RE HOPING FOR.

>> AND IT'S A LOT EASIER FOR THEM TO DESTROY JOBS THAN IT IS TO CREATE BECAUSE LOWERING THE INTEREST RATE BACK DOWN, IF THE ECONOMY IS GREED, IS NOT GOING TO HAVE A VERY POWERFUL IMPACT, AND IF CONGRESS IS GOING TO BE UNWILLING TO STEP IN AND PROVIDE AN ADDITIONAL STIMULUS AND -- WHICH IS LIKELY, AND WE HAVE ANTIANTIQUATED STEAMS TO PROVIDE AUTOMATIC STIMULUS LIKE UNEMPLOYMENT INSURANCE IN KENTUCKY WHICH WE'RE RELYING ON A 50-YEAR-OLD COMPUTER SYSTEM TO PROCESS BENEFITS AND THE LEGISLATURE IS ACTUALLY CHANGED SO PEOPLE ARE GOING TO HAVE 12 WEEKS OF UNEMPLOYMENT STARTING IN JANUARY, WHICH KOBE HERE THE TIME WHERE WE HIT'S RECESSION, WE'RE AT RISK OF SORT OF LONGER-TERM PERMANENT SCARRING DISMAYS WHAT HAPPENED AT THE GREAT RECESSION.

THEY ACTUALLY PASSED A STIMULUS BILL.

IT WAS JUST WAY TOO SMALL TO DEAL WITH THE SCALE OF THE PROBLEM, AND WE HAD A DECADE OF VERY SLOW ECONOMIC GROWTH, STAGNATE WAGES, AND THIS TIME WE DID MUCH BETTER.

WE PROVIDE THROUGH THE AMERICAN RESCUE PLAN, AC AND OTHERS, CARES ACT, WE PUT MONEY INTO THE ECONOMY, PUT MINE INTO PEOPLE'S HANDS THAT THEY SPENT AND WE HAD THE FASTEST JOB RECOVERY THAT WE EVER HAD FROM ANY RECESSION.

UNFORTUNATELY BECAUSE OF THE PANDEMIC, WE HAVE ALSO SEEN INFLATION RESULT.

BUT THAT CAME FROM THE PANDEMIC AND HAS HAPPENED AROUND THE WORLD, NOT JUST IN THIS COUNTRY.

SO IT'S GOING TO BE VERY HARD OR PRETTY MUCH IMPOSSIBLE FOR THE FED TO BACK OUT WHAT IT'S DOING, AND EVERYBODY'S GOING TO GET HURT BY THIS.

CERTAIN PEOPLE WILL BE HURT WORSE.

LOW WAGE WORKERS.

THE BLACK UNEMPLOYMENT RATE GOES UP TWO POINTS FOR EVERY POINT THE WHITE UNEMPLOYMENT RATE GOES UP IN THIS COUNTRY.

SO SOME PEOPLE WILL BE HURT A LOT, BUT ALL WORKERS WILL BE HURT TO THE EXTENT THAT IF THE UNEMPLOYMENT IS UP, WAGES WON'T KEEP GROWING LIKE THEY DO IN A TIGHT LABOR MARKET, AND THERE'S THE POTENTIAL THAT WE CREATE LONG-TERM ECONOMIC DAMAGE FROM A RECESSION.

SO I THINK THERE'S A LOT TO BE CONCERNED ABOUT.

>> RENEE, I THINK SOME CONTEXT IS VERY IMPORTANT IN THIS CONVERSATION.

U.S. UNEMPLOYMENT ROUGHLY 3.

5%, KENTUCKY UNEMPLOYMENT RATE 3.8%.

WE HAVE NEVER SINCE 1976 WITH THE BUREAU OF LABOR STATISTICS FIRST START TRIANGLE CAN TRIANGLE UNEMPLOYMENT RATES WITH KENTUCKY HAS NEVER HAD A RATE THAT LOW.

IT'S A REMARKABLY LOW RATE OF UNEMPLOYMENT.

EVEN IF IT WAS TO GO UP A FULL PERCENTAGE POINT WE'D BE AT 4.8% WHICH IS LOWER THAN IT WILL HAVE BEEN FOR THE MAJORITY OF 21st CENTURY.

WE CAN EVEN GO 2 PERCENTAGE POINT UP TO 5.8% AND I THINK YOU WILL STILL FIND IT'S FAIR AMOUNT ROUGHLY IN LINE WITH WHERE WE WERE IN MOST OF THE DECADE OF THE 21st CENTURY.

SO I DON'T WANT UNEMPLOYMENT TO GO UP.

NO ONE ON THIS PANEL DOES.

BUT I DO THINK WE NEED TO MODERATE A LITTLE BIT OF THE DOOM AND GLOOM IN IN TYPE OF SITUATION BECAUSE THE ECONOMY HAS BEEN RUNNING SO, SO HOT THAT A SLIGHT COOLDOWN WILL SIMPLY -- COULD POTENTIALLY LOOK LIKE A FAIRLY MORE RECOGNIZEDDABLE ECONOMY THAN WHAT WE'VE SEEN IN THE PAST.

SO I DEFINITELY DON'T THINK THAT A HARD LANDING OR A SOFT LANDING, WHATEVER WE'RE GOING TO CALL IT, IT HAD MAY NOT LOUK WHAT WE'RE ENVISIONING IN OUR HEAD BE A 2007, 2008 RECESSION, IN FACT I WOULD ARGUE IT WILL NOT LOOK LIKE THAT BECAUSE OF THE STRUCTURAL IMBALANCES.

I DO WANT TO GO BACK TO A POINT JANET BROUGHT UP WHICH IS KENTUCKY'S CONTINUING CHALLENGES WITH ITS LABOR MARKETS, SOMETHING THE CHAMBER IS GOING TO BE TALKING ABOUT WILL A LOT MORE IN THE NEXT COUPLE OF MONTHS IS THE TACT FACT THAT KENTUCKY'S OVERALL WORKFORCE LEVEL HAVE GROWN ROUGHLY 2% IN THE PAST 20 YEARS.

AND YOU CAN COMPARE THAT TO OTHER COUNTRIES LIKE -- OTHER COUNTRIES -- OTHER STATES, TEXAS, NORTH CAROLINA, FLORIDA 1 UTAH, THAT HAVE SEEN MUCH, MUCH LARGER GROWTH IN THEIR WORKFORCE LEVELS.

KENTUCKY HAS US KIND OF JUST HOVERED RIGHT AROUND 2 MILLION FOR ABOUT 20 YEARS.

AND WE NEED TO DO SOMETHING TO START UPTICKING THAT TOTAL WORKFORCE LEVEL.

OTHERWISE, WHEN YOU START THINKING ABOUT BIG INVESTMENTS THAT ARE COMING INTO THE STATE LIKE THE FORD PLANT, FOR EXAMPLE, FINDING THE 5,000 WORKERS, THAT'S GOING TO BE A REALLY, REALLY DIFFICULT THING, AND ONE OF THE THINGS THAT WE'RE DEEPLY CONCERNED ABOUT IS STATE NEEDS TO HAVE A COHESIVE AND COHERENT PLAN TO GROW ITS WORKFORCE, AND I THINK WE NEED TO GROW IT REALLY QUICKLY IF WE'RE GOING TO START FILLING THOSE JOBS, AND I THINK THAT'S ONE OF THOSE THINGS, TOO, THAT CAN FUEL A LOT OF THE ECONOMIC GROWTH THAT CAN KIND CARRY OUR WAY THROUGH A POTENTIAL DOWNTURN IN THE ECONOMY.

>> THE KENTUCKY GENERAL ASSEMBLY DID THAT, DIDN'T THEY?

THEY ADDRESSED PUBLIC ASSISTANCE BENEFITS AND UNEMPLOYMENT BENEFITS.

HAVEN'T HER ALREADY DONE THAT AND WHAT ELSE IS LEFT TO DO?

>> A TREMENDOUS AMOUNT MORE.

ONE OF THE THING WE'VE BEEN POINTING OUT IN THOROUGH OUR ANALYSIS OF KENTUCKY'S WORKFORCE CHALLENGES IS THAT IT IS A TRULY MULTI-FACETS ISSUE AND THERE IS NO ONE STOP SOLUTION FOR THOSE CHALLENGES.

THINKING ABOUT THINGS SUCH AS UNEMPLOYMENT AND PUBLIC BENEFITS BENEFITS IS PART OF THE PUS PELL IMMIGRATION IS ANOTHER PART OF THE PUS PELL OTHER FACTORS SUCH'S REMOVING BARRIERS TO WORK THAT EVERYDAY KENTUCKIANS FACE SUCH AS ACCESSING CHILD CARE, FINDING A JOB WHEN YOU HAVE A CRIMINAL RECORD, OVERCOMING A SUBSTANCE USE DISORDER, THOSE ARE REALLY SERIOUS BARE JERKS ONE OF THE REPORTS WE ACTUALLY HAVE COMING OUT THROUGH THE CHAMBER CENTER FOR POL AND RESEARCH IS LOOKING SPECIFICALLY AT THE ROLE OF SUBSTANCE ABUSE AND HOW THAT IS VENTION WORKFORCE LEVELS BECAUSE ONE OF THE THINGS WE KNOW FLOUT THE COURSE OF THE PANDEMIC IS THAT THERE'S BEEN A SIGNIFICANT UPTICK IN RATES OF ADDICTION, RATES OF SUBSTANCE USE, AND WE HAVE SEEN THAT MOST GRIMLY IN OVERDOSE DEATH WAS BUT THERE'S ALWAYS ALSO BEEN A LOT OF RESEARCH THESE COMING OUT OVER THE LAST SEVERAL YEARS LOOKING SPECIFIC LATE HOW SUBSTANCE USE DISORDER SUPPRESSES LABOR FORCE PARTICIPATION, AND IN KENTUCKY THAT'S A REALLY BIG ISSUE, AND SO IN ADDITION TO DEALING WITH SOME OF THE THINGS THAT THE GENERAL ASSEMBLY RIGHTEDFULLY ADDRESSED DURING THE 2022 SESSION, WE GOT TO GO AFTER SOME OF THOSE A BIG BIR BARRIERS TO WORK TO ALLOW MORE KENTUCKIANS TO PARTICIPATE IN THE WORKFORCE.

OTHERWISE I AM NOT SURE HOW WE'RE GOING TO FILL ALL THESE JOBS THAT HAVE BEEN COMING IN OVER THE PAST 20 YEARS.

THE GOVERNOR'S OFFICE ROUGH ESTIMATE FROM WHAT WE'VE BEEN ABLE TO GET TOGETHER ROUGHLY 30,000 JOBS IN INDUCED INVESTMENT.

THAT'S A LOT OF JOBS THAT WE'RE GOING TO FILL AND WE ALREADY HAVE 160,000 OPEN AS OF AUGUST.

>> MAYBE A DIFFERENT DIRECTION, CRIMINAL JUSTICE REFORM PERHAPS.

FELONIES.

>> ABSOLUTELY.

>> YOUR CASE HAS POUT A REPORT ABOUT THE NUMBER OF FELONIES AT A TIME THAT ALLEGEDLY WE WERE LOOKING TO DECRIMINALIZING LOW LEVEL DRUG OFFENSES THAT ARE ACTUALLY MORE CLASS D FELONIES THAN THERE WERE BEFORE THE REFORMS TOOK LACE IN 2011.

>> WE'RE PASSING ABOUT TEN TIMES AS MANY BILLS THAT INCREASE CRIMINAL PENALTIES AS WE ARE BILLS THAT DECREASE.

WHEN WE TALK ABOUT THE UNEMPLOYMENT RATE BEING SO THROW LOW THERE ARE 100,000 PEOPLE LOOKING -- THAT DOESN'T THERE YOU THE 30,000 PEOPLE IN JAIL IN KENTUCKY, 30 TO 40,000.

WE HAVE A LOT OF PEOPLE WHO BECAUSE OF POLICY CHOICES WE HAVE MADE MR.

SITUATIONS THAT KEEP THEM IN POVERTY, KEEP THEM SORT OF STUCK IN THESE SITUATIONS.

WE KNOW THERE'S PLENTY RESEARCH WHEN YOU CAUGHT OFF PEOPLE'S ACCESS TO THINGS LIKE UNEMPLOYMENT BENEFITS YOU INCREASE SUBSTANCE ABUSE PROBLEMS, AND HE'S WHAT THE LEGISLATURE IS DOING BY CUTTING OFF THEIR BENEFITS AFTER 12 WEEKS STARTING IN JANUARY.

SO, YOU KNOW, I THINK IF YOU LOOK A KENTUCKY'S POPULATION, THE BIGGEST PROBLEM WE HAVE IS THAT WE DIE ABOUT FIVE YEARS EARLIER THAN THOSE STATES THAT HAVE THE HIGH QUALITY OF LIFE.

THOSE ARE STATES THAT INVEST IN THINGS LIKE EDUCATION.

THEY INVEST IN INFRASTRUCTURE.

THEY INVEST IN HEALTH CARE.

THEY HAVE PROGRESSIVE INCOME TAXES SO TO THAT THEY HAVE ADEQUATE REVENUES TO MAKE THOSE SORTS OF THINGS.

SO THOSE OF THE SORT OF THINGS WE NEED TO LOOK AT.

WE NEED TO KEEP PEOPLE HEALTHY AND ALIVE.

WE NEED TO MAKE IT SO THAT PEOPLE CAN AFFORD TO HAVE CHILDREN, AND THAT MEANS HAVING A DECENT WAGE.

WE HAVE A LOT OF PEOPLE EMPLOYED IN KENTUCKY BUT THEY'RE EMPLOYED AT POVERTY WAGES.

AND THE EMPLOYERS THAT SAY THEY HAVE TROUBLE FINDING WORKERS ARE THE ONES THAT DON'T PAY THEM A LIVING WAGE OR PROVIDE THE ADEQUATE BENEFITS PEOPLE NEED TO LIVE ON, AND SO THEY SEE A LOT OF HIGH TURNOVER.

IN THE LAST COUPLE YEARS YOU HAVE SEEN A LOT OF PEOPLE LEAVE THOSE JOBS AND GET BETTER JOBS BECAUSE IT'S THE FIRST TIME IN A LONG TIME WHERE THEY HAVE BEEN -- WE HAVE SEEN WAGE GROWTH, BUT WE NEED TO LEARN FROM THAT AND WE NEED TO CREATE THE POLICIES AND SUPPORTS THAT THEY NEED TO ENSURE THAT MORE OF THE JOCKS THAT WE HAVE ARE GOOD JOBS.

>> JOBS.

>> THE CHILD CARE PIECE KOBE SOMETHING THAT THIS SIDE OF THE TABLE CAN AGREE WITH YOU ON, HOW WE PROP UP THE CHILD CARE SYSTEM THAT'S IN A CRISIS NOT JUST IN KENTUCKY BUT ACROSS THE NATION.

>> IT'S A KEY ELEMENT.

ONE OF THE THING WE HAVE SEEN IN SOME REASON RESEARCH IS THE DECLOONEY OF DUAL INCOME HOUSEHOLDS, AND LACK OF ACCESS TO HIGH QUALITY CHILD CARE, AFFORDABLE CHILD CARE, THAT'S GOING TO BE A BIG DRIVER OF WHY WE'RE SEEING LESS DOERS IN HOUSEHOLDS AND IT'S ELT ABSOLUTELY ONE OF THOSE BARRIERS THAT NEEDS TO BE ADDRESSED.

>> I THINK WE'RE REFERRING TO SECOND CHANCE EMPLOYMENT.

THAT'S AN IMPORTANT THING.

BUT INTERESTINGLY IF WE GO WALK TO 2019, WHAT WE HAD I WAS LOW I GUESS INFLATIONARY ENVIRONMENT.

THIS HAD THERE HAD BEEN A T. CAUGHT, PERSONAL AND CORPORATE.

ECONOMY WAS GROWING STRONG.

UNEMPLOYMENT RATE WENT TO RECORD LOWS.

AND GDP GROWTH WAS PRETTY STRONG.

AND REAL WAGE GROWTH AFTER INFLATION WAGE GROWTH WAS POSITIVE, ESPECIALLY FOR THE LOW-INCOME END OF THE SPECTRUM.

SO THIS IS A GREAT BENEFIT TO FOLKS WHO NEED A SECOND CHANCE, WHO MAYBE DON'T HAVE THE GREATEST SKILLING SET.

THEY GET AN OPPORTUNITY.

SO HAVING -- TOWERING A LOW INFLATIONARY ENVIRONMENT WHERE WE HAVE THE -- WE DON'T HAVE ONEROUS REGULATION SO THAT ENTREPRENEURS CAN GROW THEIR BUSINESSES AND GIVE AN OPPORTUNITY, AND IT'S PROFITABLE FOR THEM TO GIVE OPPORTUNITIES TO FOLKS WHO HAVEN'T HAD THE GREATEST OPPORTUNITIES, AND WE SAW THIS PRE-PANDEMIC.

SO THAT'S THE KIND OF POLICY ENVIRONMENT I THINK THAT IF WE CAN REPLICATE, GET RID OF THIS INFLATION AND GET BACK TO THAT, THAT WE WILL SEE GROWTH IN WAGES AND MORE OPPORTUNITIES FOR FOLKS TO LOWER END OF THE INCOME SPECTRUM.

>> WE'LL HAVE TO LEAVE IT THERE.

THIS HAS BEEN A REALLY TERRIFIC CONVERSATION.

THANK YOU ALL VERY MUCH.

I HOPE THAT OUR AUDIENCE LENDERS QUITE A BIT TONIGHT, AND WE HOPE THAT WE SEE YOU NEXT MONDAY NIGHT.

WE'RE GOING TO PREVIEW THE NOVEMBER 8th ELECTION.

BE JOIN USE EACH WEEK NIGHT FOR "KENTUCKY EDITION" WHEN WE BREAK DOWN ISSUES LIKE THIS ONE AND ALSO BILL BRYANT IS A TEAM OF WORKING JOURNALISTS DISCUSS THE NEWS OF THE WEEK FRIDAY ON RIGHT HERE ON KET.

I'M RENEE SHAW.

THANK YOU SO MUCH FOR WATCHING.

SEE YOU TOMORROW NIGHT FOR "KENTUCKY EDITION" AT 6:30.

MAP