Atlanta Fed President Bostic on our “less-than economy”
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Nearly seven months into the COVID-19 pandemic, the U.S. economy is facing unprecedented challenges. The economic consequences have been felt the hardest by Black and brown communities — a pressing issue at ongoing protests against police brutality and systemic racism. But with congressional aid stalled, and an election just weeks away, we’re focusing on the tools of the Federal Reserve.
Raphael Bostic is the president and CEO of the Federal Reserve Bank of Atlanta. He spoke with “Marketplace” host Kai Ryssdal back in June after he wrote an essay urging an end to the “unjust and destructive practices” that contribute to inequality. They caught up today to discuss how the Fed can alleviate those hit the hardest by the pandemic. The following is an edited transcript of their conversation.
Kai Ryssdal: So, it’s been going on four months since we had you on in June. And I guess I’ll give you the easy question first: What are you seeing in this economy that’s different, changed, good, bad? How’s it looking?
“Disparities are getting wider”
Raphael Bostic: Well, I think things are going pretty much the same way that they were before, maybe with a little more clarity. So when thinking about the economy, what our team has really thought about describing it as is a less-than economy, where there are parts of the economy that are doing quite well and are in full swing, things like the Amazons and the Home Depots. But then you have a lot of other parts of the economy that are struggling — the restaurants, hotels, small businesses, people living in minority, lower-income and immigrant communities. All those places are struggling. And that’s become clearer to me and to our team in the conversations we’re having and some of the surveys we’re doing. And it suggests that there really is a split going on, and disparities are getting wider.
Ryssdal: OK, so let’s talk about what to do about it. And I will spare you the almost obligatory fiscal policy question, Congress and the White House, because we know what the Fed thinks about that, that you and Federal Reserve Chair Jerome Powell and many others have been clear that fiscal policymakers need to step up. I want to ask you, though, about the Federal Reserve, because much has been talked about the last number of months on what you, as the central bank, can do about this inequality you just described? And I guess the question is, you know, central bankers talk about the dual mandate, right, we got to worry about inflation, and we got to worry about jobs. But I saw an interview with you the other day that you did with, I guess, The Wall Street Journal, a number of weeks ago, and you said, you know, we need to start getting creative about how we’re approaching this problem. And I wonder what you have in mind?
A more “muscular” bully pulpit
Bostic: Yeah, so we actually are being creative, I think, in a couple of ways. So one is we’ve done sort of a more energized outreach to some of these communities that are struggling. And I’ve actually spent more time talking to local leaders about the challenges and try to link them up with expertise that we have in-house to help them design strategies to move forward in things like affordable housing, or preserving small businesses, or even how you think about connecting workers to training programs to get them repositioned. I’ve tried to be more muscular in terms of using my bully pulpit, to focus attention and really try to have employers and policymakers think differently about what they might be able to do to make a difference.
Ryssdal: Interesting phrase, trying to be more muscular. But look, and I say this with all respect, talking about a problem is all well and good, but when the tools the Fed has are monetary policy and lending facilities that are designed to support corporations and larger businesses, what do I do if I read the headline that says, “Oh, Jay Powell says the economy is terrible, and we’re working on inequality”? I mean, what do I do with that?
Bostic: Well, with all due respect, I actually think we do some other things as well. So you know, one of the things that has been conventional wisdom for Fed policy has been when unemployment gets too low, overheating is imminent. And so, we should act preemptively and proactively to stop that. And we’ve really changed our framework and strategy to say, “We’re going to let evidence show that inflation is starting to get out of control before we can take that stop. And my hope is that, and my expectation is that that will lead to more people getting jobs and getting more stably attached to the economy.
Ryssdal: Well, let’s talk about those target populations for a minute. And I want to bring you back to the reason we had you on the broadcast back in June, the essay you wrote about systemic racism in this economy, and what a drag and what an anchor it is for everybody, and that Black Americans in this economy are suffering disproportionately. In the four months since you wrote that essay, it’s gotten a lot of press. And I wonder if you think it’s gotten a lot of traction.
Racial justice and finance
Bostic: I actually do think it’s gotten a lot of traction. You know, it’s been a really heartening experience to put that out and see so many people reach out to me and folks that I know and say, “That really triggered a new conversation for us. And it’s got us thinking differently about our role in the economy and our role in trying to overcome some of these barriers.” And as an example, just, what, about 10 days ago, we had a conference with the Bendheim Center for Finance at Princeton, where we talked about racial justice and finance from an academic perspective, to have researchers and people who are really trying to understand how economies work, think differently, and I think more accurately, about the role that race plays in what people can do and how we think about risk and opportunities. So that’s a new conversation, and that came right out of the essay. So I’m really grateful for that. And I’m looking forward to more opportunities to create those new linkages.
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