San Francisco Fed President John Williams February 2017 Speech

http://www.frbsf.org/our-district/press/presidents-speeches/williams-speeches/2017/february/keeping-recovery-sustainable-essential-role-of-independent-fed/

Our goal is to attain a goldilocks economy

“Our goal is to attain what I like to call a “Goldilocks economy”—an economy that doesn’t run too hot or too cold. We want the porridge to be just right. Of course, it’s not always easy to achieve that just-right economy. Financial booms and busts such as the dot-com and housing bubbles of the past few decades can cause economic swings despite our efforts to contain them. But carefully designed monetary policy can help smooth out those fluctuations and protect families from economic turmoil.”

A rate increase is very much on the table for serious consideration

“In December, the FOMC nudged rates up and projected that we’d likely raise interest rates gradually in 2017. Specifically, the median projection was for three increases this year.3 We stood pat after our meeting a month ago, but we’ll meet again in March to assess whether the time is right to raise rates further. In my view, a rate increase is very much on the table for serious consideration at our March meeting. I’ve been publicly supportive of a gradual increase in rates, and I am confident that the economy will continue to grow at a healthy pace even as we raise rates. The aim is to keep the economic expansion on a sound footing—not too hot, not too cold—that can be sustained for as long as possible. The last thing we want is to undermine the hard-won gains we’ve made since the dark days of the recession.”

Bill Dudley CNN Interview Feb 2017 Notes

http://money.cnn.com/2017/02/28/news/economy/new-york-fed-dudley-interview-transcript/

I think the case for monetary tightening has become a lot more compelling

“I think it means what it says. It doesn’t say it’s a week, a month, a couple months. Fairly soon means in the relatively near future. I think the key thing in terms of thinking about monetary policy is — what are we basically communicating to people in the markets? We’ve basically been saying that if the economy continues on the trajectory that it’s on, slightly above-trend growth, gradually rising inflation, we’re going to continue to remove monetary policy accommodation. So let’s look at what we’ve actually gotten. It seems to me that most of the data we’ve seen over the last couple months is very much consistent with the economy continuing to grow at an above-trend pace, job gains remain pretty sturdy, inflation has actually drifted up a little bit as energy prices have increased. So we’re very much on the trajectory that we said — that we thought we’d be on and we said if we were on that trajectory we’re going to gradually remove accommodation. What else have we seen? We’ve also seen things that should make us even more confident that this is going to continue in the future. After the election we’ve seen very large increases in household and business confidence, we’ve seen very buoyant financial markets — the stock market is up, credit spreads are narrow. And we have the expectation that fiscal policy will probably move in a more stimulative direction. So, put it all together, I think the case for monetary policy tightening has become a lot more compelling.”

Risks are tilting to the upside

“Well, it’s hard to actually put it into your forecast yet because we don’t know what it is, how big it is or when it’s actually going to hit the economy. But we do know that fiscal policy is going to move in a more stimulative direction. So what that says to me is that the risks to the outlook are now starting to tilt to the upside. So while I haven’t really built it into my GDP forecast, when I think about the balance of risks — up or down in terms of economic activity — I think the fiscal side tends to push things — the risks to the upside.”

No question that the animal spirits have been unleashed

“Well, there’s no question that animal spirits have been unleashed a bit post the election. Stock market is up a lot. Household and business confidence have increased significantly. There’s a survey of small businesses that showed a very large increase in December and sustained that increase in January. So, there’s no question that sentiment has improved quite markedly post the election.”

Slow and gradual seems the right way to proceed

“I think it’s very clear you don’t want to keep monetary policy too accommodative for too long. This is something that Chair Yellen talked about in her testimony. Because if you do, then you’re going to have to hit the brakes really hard later, move up rates very sharply and that could actually cause the next recession. So slow and gradual seems to me the right way to proceed, moving monetary policy relatively early to make sure the economy doesn’t overheat and that can actually allow you to sustain the economic expansion.”

Fed Governor Brainard March 2017 Speech Notes

THe economy is at a transition

“The economy appears to be at a transition. We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing, and risks to the outlook are as close to balanced as they have been in some time. Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path.1

The focus is turning to balance sheet

“As normalization of the federal funds rate gets further under way, monetary policy too is approaching a transition, prompting increased focus on the balance sheet. How the federal funds rate and the balance sheet should be adjusted individually and in combination depends on the degree to which they are substitutes, their relative precision, and the degree to which their effects on the economy are well understood.”

We are closing in on full employment

“Here at home, the economy is at a transition. The past few months have seen continued progress in the labor market. Monthly gains in payroll employment have maintained a pace sufficient to continue eroding labor market slack, and wage growth appears to be moving higher on balance. Compensation per hour in the business sector, the most comprehensive measure of wages, increased at a 3 percent pace the past two years, noticeably above the pace earlier in the recovery. We appear to be closing in on full employment. The unemployment rate–after remaining relatively flat from the third quarter of 2015 to the third quarter of 2016–fell 1/4 percentage point last quarter to 4-3/4 percent

There are upside risks to demand

“Recent months have seen an increase in the upside risks to domestic demand. Sentiment has increased along with equity prices, which are up around 10 percent since October. Increased optimism could lead to faster growth in consumption and business investment, although the spending data, thus far, do not suggest a noticeable acceleration. Some of the increase in sentiment and changes in asset prices could be tied to expectations of more expansive fiscal policy, another upside risk.”

Decision to rely on increases in fed funds serves an important purpose

‘In December 2015, the Committee indicated that it would continue to reinvest principal payments until normalization of the level of the federal funds rate is “well under way.”2 The decision to rely solely on the federal funds rate to remove accommodation initially until normalization is well under way serves an important purpose, in my view.3 With asymmetry in the scope for conventional monetary policy to respond to shocks, there is a benefit to enabling the federal funds rate to rise more quickly than would be possible with a shrinking balance sheet and sooner reach a level that allows for significant reductions if economic conditions deteriorate”

There are two policy options for the balance sheet use it as a tool or subordinate it

“Once the short-term rate is comfortably distant from its effective lower bound, there are broadly two types of policy strategies that could be contemplated. Many central banks around the world may contemplate similar choices in the coming years, while the Bank of Japan has already grappled with these issues in the past.5 One type of “complementarity” strategy might actively deploy the balance sheet as an independent second tool, complementary to the short-term rate. Under this strategy, both tools would be actively used to help achieve the Committee’s goals. This strategy would seek to take advantage of the ways in which the balance sheet might affect certain aspects of the economy or financial markets differently than the short-term rate. Any differences in effects might derive from the fact that the balance sheet more directly, though not necessarily more precisely, affects term premiums on longer-term securities, while the short-term rate more directly affects money-market rates. Although it may be tempting, in theory, to operate with the balance sheet as a complementary, additional tool to the federal funds rate, we have virtually no experience with how such an approach would work in practice away from the effective lower bound. For that reason, one might instead prefer a “subordination” strategy that would prioritize the federal funds rate as the sole active tool away from the effective lower bound, effectively subordinating the balance sheet. Once federal funds normalization meets the test of being well under way, triggering an end to the current reinvestment policy, the balance sheet would be set on autopilot, shrinking in a gradual, predictable way until a “new normal” has been reached, and then increasing in line with trend increases in the demand for currency thereafter.6 Under this strategy, the balance sheet might be used as an active tool only if adverse shocks push the economy back to the effective lower bound”

We should focus on the rate policy tool

“The case for the subordination strategy is straightforward and compelling. This strategy recognizes that the two policy tools are broadly similar in the ways they affect the economy by indirectly changing the level of interest rates used to finance purchases by households and businesses. These interest rate changes also have effects on asset prices, and thereby on household wealth, as well as on the exchange value of the dollar and, thereby, on net exports and core import prices.7 However, relative to balance sheet policies, the influence of the short-term rate is far better understood and extensively tested: There have been several decades and many business cycles over which to measure and analyze how the federal funds rate affects financial markets and real activity. In contrast, experience using the balance sheet as an active tool has been very limited and largely confined to a highly unusual period around the Global Financial Crisis, when short-term interest rates were constrained by the zero lower bound. Predictability, parsimony, precision, and clarity of communications all would seem to argue in favor of focusing policy on a single active tool that is most familiar. In short, it makes sense to focus policy on the tool whose effects are better understood by both policymakers and the public in circumstances where the tools are largely substitutes for one another.

The balance sheet will likely be considerably smaller than it is today

“Assuming that a subordination strategy is adopted, and the balance sheet is set to shrink passively and predictably once reinvestment ceases or is phased out, there is some uncertainty around the size of the balance sheet when it returns to normal, which the Committee has described as “no larger than necessary for the efficient and effective implementation of monetary policy.” There are good reasons to expect a normalized balance sheet to be considerably smaller than its current size but larger than its pre-crisis level. Most obviously, trend growth in the demand for currency gradually pushes up the size of the balance sheet over time, but there are also other reasons to expect the post-crisis new normal to be larger than pre-crisis levels. The structural demand for reserves may be considerably larger now than prior to the financial crisis because of a number of changes, including new regulations that favor safe liquid assets and changes in financial institutions’ attitudes toward risk”

Trump Feb 16, 2017 Press Conference

Stock market has hit record numbers

“The stock market has hit record numbers, as you know, and there’s been a tremendous surge of optimism in the business world, which means something different than it used to. Now it means it’s good for jobs. Very different. Plants and factories are already starting to move back into the United States, big league, Ford, General Motors.”

Expedite approval for permits

“We directed the elimination of regulations that undermine manufacturing and called for expedited approval of the permits needed for America and American infrastructure, meaning plants, equipment, roads, bridges, factories. People take 10, 15, 20 years to get disapproved for a factory. They go in for a permit, it’s many, many years, and at the end of the process, they spend tens of millions of dollars on nonsense, and at the end of the process, they are rejected. They may be rejected with me, but it’s going to be a quick rejection. Not going to take years, but, mostly, it’s acceptance. We want plants and factories built. We want the jobs. We don’t want the jobs going to other countries.”

Mandating buy American steel for pipeline construction

“We’ve also taken steps to begin construction of the Keystone pipeline and Dakota Access pipelines, thousands and thousands of jobs, and put new buy American measures in place to require American steel for American pipelines. In other words, they build a pipeline in this country and we use the powers of the government to make that pipeline happen, we want them to use American steel. And they are willing to do that, but nobody ever asked before I came along”

Fair trade not free trade

“Now look, fair trade. Not free. Fair. If a country is taking advantage of us, we’re not going to let that happen anymore. You know, every country takes advantage of us, almost. I may be able to find a couple that don’t, but for the most part, that would be a tough job for me to do. Jobs have already started to surge. Since my election, Ford announced it will abandon its plans to build a new factory in Mexico, and will instead invest $700 million in Michigan, creating many, many jobs. Fiat Chrysler announced it will invest $1 billion in Ohio and Michigan creating 2,000 new american jobs.”

Companies are building plants in the US

“Intel just announced that it will move ahead with a new plant in Arizona that probably was never going to move ahead with. And that will result in at least 10,000 American jobs. Wal-mart announced it will create 10,000 jobs in the United States just this year because of our various plans and initiatives. They’ll be many, many more, many more. These are a few that we’re naming.”

The big stuff starts next week

“there’s never been a presidency that’s done so much in such a short period of time, and we haven’t even started the big work that starts early next week. Some very big things are going to be announced next week.”

I’ve never seen more dishonest media than the political media

“I’ll tell you something. I’ll be honest. I sort of enjoy this back and forth, and I guess I have all my life, but never seen more dishonest media than frankly the political media. I thought the financial media was much better and more honest, but I will say that I never get phone calls from the media.”

I’m not ranting I’m just telling you you’re dishonest

“But I’m having a good time. Tomorrow, they will say, Donald Trump rants and raves at the press. I’m not ranting and raving. I’m telling you you’re dishonest people, but I’m not ranting and raving. I love this. I’m having a good time doing it, but tomorrow’s headlines are going to be Donald Trump, rants and rants. I’m not ranting.”

Tax reform would be easier but for statutory reasons we have to do healthcare first

“Tax reform’s going to happen fairly quickly. We are doing Obamacare, we are in the final stages. We should be submitting the initial plan in March, early March. I would say. And we have to, as you know, statutorily and for reasons of budget. We have to go first. Frankly, the tax would be easier, in my opinion, but for statutory reasons and for budgetary reasons, we have to submit the health care sooner, so well submitting health care sometime in mid-March, and after that, we’re going to come up, and we’re doing very well on tax reform, yes.”

DACA is a very difficult subject, we’re going to deal with it with heart

“We’re going to show great heart. DACA a very difficult subject for me. To me, it’s one of the most difficult subjects. You have incredible kids, in many cases, not all cases. In some of the cases, they are gang members and drug dealers, too. But you have some absolutely incredible kids. I would say mostly. They were brought here in such a way — it’s a very, very tough subject. We are going to deal with DACA with heart. I have to deal with a lot of politicians, don’t forget, and I have to convince them what I’m saying is right. I appreciate your understanding on that, but the DACA situation is a very, very — it’s a very difficult thing for me because, you know, I love these kids. I love kids. I have kids. And grandkids.”

Donald Trump ABC News Interview 1.25.17

Trump loves Dow 20,000

“The Dow on top of it just hit 20,000. First time in history. I’m very proud of it. And now we have to go up up up. We don’t want it to just stay there. That’s gonna be the challenge, but its gone up a lot since I won. Don’t forget when I won people thought maybe it will go down, but the business world doesn’t think that. The business world knows me, they don’t think that. And it was a steady climb and now we just hit a record and a number that’s never been hit before, so I was very honored.”

Commerce Secretary Confirmation Hearing January 2017 Notes

(All caps from transcript)

An important function of the Commerce department is purposing spectrum

“ANOTHER VERY VERY IMPORTANT FUNCTION OF COURSE IS SPECTRUM. WE NEED MORE SPECTRUM IN THE PRIVATE SECTOR. I WILL TRY MY BEST TO HELP CONVINCE THOSE GOVERNMENT AGENCIES THAT HAVE SPECTRUM AND DON’T REALLY NEED TO IT PERMIT IT TO BE COMMERCIALIZED. THAT MAY WELL BE A HELP TO EXTENDING BROADBAND TO MORE RURAL COMMUNITIES AND OTHER SEGMENTS THAT ARE UNDERSERVED RIGHT NOW”

I’d like to address the trade deficit in fishing

” ONE OF THE THINGS I’D LIKE TO TRY TO HELP CORRECT IS WE BELIEVE IT OR NOT, HAVE A TRADE DEFICIT IN FISHING OF SOME 11$11 BILLION A YEAR. GIVEN THE ENORMITY OF OUR COASTLINES AND ENORMITY OF FRESH WATER, I WOULD LIKE TO TRY TO FIGURE OUT HOW WE CAN BECOME MUCH MORE SELF-SUFFICIENT IN FISHING AND PERHAPS EVEN A NET EXPORTER OF FISHING.”

I’m pro sensible trade

” I AM NOT ANTI-TRADE, I AM PRO TRADE BUT I’M PRO SENSIBLE TRADE, NOT PRO TRADE THAT IS TO THE DISADVANTAGE OF THE AMERICAN WORKER AND THE AMERICAN MANUFACTURING COMMUNITY. I THINK WE SHOULD PROVIDE ACCESS TO OUR MARKET TO THOSE COUNTRYIES WHO PLAY FAIR, PLAY BY THE RULES AND GIVE EVERYBODY A FAIR CHANCE TO COMPETE. THOSE WHO DO NOT SHOULD NOT GET AWAY WITH IT, THEY SHOULD BE PUNISHED AND SEVERELY. I THINK THAT WE CANNOT AFFORD TRADE THAT IS INHERENTLY BAD FOR AMERICAN WORKERS AND FOR AMERICAN BUSINESSES”

China is the most protectionist country

” CHINA IS THE MOST PROTECTION PROTECTIONIST COUNTRY OF VERY LARGE COUNTRYIES. THEY HAVE BOTH VERY HIGH TARIFF BARRIERS AND VERY HIGH NON-TARIFF TRADE BARRIERS TO COMMERCE. SO THEY TALK MUCH MORE ABOUT FREE TRADE THAN THEY ACTUALLY PRACTICE. WE WOULD LIKE TO LEVELLIZE THAT PLAYING FIELD AND BRING THE REALITYIES A BIT CLOSER TO THE RHETORIC.”

The Jones Act is useful in continuing US Ship Building

“THE JONES ACT IS A FACT. I’VE BEEN LIVING WITH IT. I’VE NEVER VOICED ANY OPPOSITION TO IT. IT’S JUST NOT RELEVANT TO WHAT WE’VE BEEN DOING. BUT THE JONES ACT HAS BEEN USEFUL IN CONTINUEING U.S. SHIP BUILD BUILDING. I THINK WITHOUT THE JONES ACT YOU’D HAVE EVEN LESS U.S. SHIP BUILDING THAN YOU HAVE NOW BECAUSE OF THE REQUIREMENT THAT THE INTRACOASTAL ACTIVITIES THE JONES ACT QUALIFIED VESSELS AND JONES ACT QUALIFIED CREWS.”

We’re fortunate to be dealing with infrastructure in a low rate environment

” I THINK WE’RE FORTUNATE TO BE COMING TO GRIPS WITH INFRASTRUCTURE IN A RELATIVELY LOW INTEREST RATE ENVIRONMENT BECAUSE THAT WILL FACILITATE GETTING A LOT OF PROJECTS DONE THAT COULD NOT BE DONE IN A LOWER INTEREST RATE ENVIRONMENT BECAUSE THERE WOULD BE A CROWDING OUT EFFECT.”

We need to impose duties on Chinese steel

“AS YOU CAN APPRECIATE, I HAVE A GREATER FAMILIARITY WITH MINING THAN MOST PEOPLE UP FOR THIS POSITION. THE FUNDMENTAMENTAL PROBLEM WITH THE STEEL INDUSTRY IS OVERCAPACITY PARTICULARLY IN CHINA. CHINA HAS 1 BILLION TONS OF CAPACITY. THAT’S HALF OF THE WORLD’S CAPACITY. THEY NEED SOMETHING LIKE 700 MILLION TONS DOMESTICALLY. THEY’RE ACTUALLY PRODUCING 800 MILLION TONS AND PUTTING 100 MILLION TONS OUT INTO THE WORLD MARKETS. OFTEN AT DUMPING PRICES. SO I THINK ONE OF THE THINGS WHERE WE NEED DO VERY CAREFUL ATTENTION TO MORE TARIFF ACTIVITY IS THE ANTI-DUMPING REQUIREMENTS THAT WE SHOULD IMPOSE ON THE STEEL INDUSTRY AND ON THE ALUMINUM INDUSTRY AS WELL. THAT’S A VERY BIG ISSUE. AND UNFORTUNATELY UNTIL FAIRLY RECENTLY, EUROPE WAS EVEN MORE RETICENT TO IMPOSE COUNTERVAILING DUTIES THAN WE ARE, BUT FINALLY THEY SEEM TO BE FEELING THE PINCH OF IT AND THEY’RE STARTING TO COME AROUND”

Foreigners are avoiding paying duties by setting up shell companies

“ONE OF THE THINGS THAT HORRIFIED ME IS I STUDIED ABOUT ENFORCEMENT IS THERE ARE LITERALLY BILLIONS OF DOLLARS OF COUNTERVAILING DUTIES THAT ARE NEVER COLLECTED BECAUSE THE FOREIGNERS SET UP LITTLE SHELL COMPANIES HERE, WE IMPOSE A DUTY, THERE’S NOBODY HOME WHEN WE COME TIME TO COLLECT. I THINK THAT KIND OF THING HAS TO BE FIXED. THERE’S NOT MUCH POINT GOING THROUGH A MULTIYEAR TRADE CASE IF THEN — IN CASE YOU WIN YOU DON’T EVEN COLLECT THE COUNTERVAILING DUTIES. THAT DOESN’T CHANGE ANYBODY’S BEHAVIOR AND IT’S A LOSS OF REVENUE TO THE FEDERAL GOVERNMENT.”

Regulation, energy policy, trade policy and infrastructure

“I THINK — I WROTE AN EDITORIAL WITH PETER NAVARRO THAT OUTLINED FOUR PLANKS TO THE ECONOMIC POLICY. ONE WAS REGULATORY REFORM. I’M NOT AGAINST ALL REGULATIONS, OBVIOUSLY, BUT I DO THINK THAT PENDULUM, PERHAPS, HAS SWUNG A BIT FURTHER THAN IT SHOULD. AND I BELIEVE THE PRESIDENT WILL ROLL BACK SOME OF THE REGULATIONS. I DON’T KNOW WHICH ONES BUT I THINK HE’LL ROLL BACK SOME. THAT’S ONE OF THE MOST FREQUENT COMPLAINTS I HEAR FROM THE BUSINESS COMMUNITY IS ABOUT OVERREGULATION. SECOND IS THE ENERGY POLICY. BOTH MAKING US CLOSER TO BEING ENERGY SELF-SUFFICIENT BECAUSE WE STILL ARE A NET IMPORTER OF ENERGY AND HOWEVER YOU LOOK AT IT, THAT’S A DRAIN ON THE ECONOMY. THIRD IS WHAT WE’VE BEEN TALKING ABOUT BEFORE, HELPING OUR BALANCE OF TRADE, PARTICULARLY BY INCREASING THE EXPORTS. I THINK IF WE COMBINE EACH OF THOSE AND JUST GET A FRACTION OF A PERCENT MORE GROWTH FROM EACH, WE’LL GET TO THE KINDS OF NUMBERS THAT YOU WERE TALKING ABOUT. AND LAST, OF COURSE, BEING THE INFRASTRUCTURE. WE DESPERATELY NEED INFRASTRUCTURE, NOT ONLY BECAUSE OF THE DIRECT JOBS IT CREATES, BUT INEFFICIENT AND ARCHAIC INFRASTRUCTURE IS, ITSELF, A DRAIN ON THE ECONOMY.”

Tariffs are a negotiating tool

“I THINK TARIFFS PLAY A ROLE BOTH AS A NEGOTIATING TOOL, AND IF NECESSARY, TO PUNISH OFFENDER ER ERS WHO DON’T PLAY BY THE RULES.”

Broadband is an essential part of infrastructure spending

” I THINK BROADBAND IS AN ESSENTIAL PART. BROADBAND IS, TO A VERY LARGE DEGREE, A PATH TO THE FUTURE. AND I THINK, THEREFORE, IT’S A VERY ESSENTIAL COMPONENT OF ECONOMIC POLICY ALL TOGETHER INCLUDING THE INFRASTRUCTURE COMPONENT.”

Need to balance technology and jobs

“I THINK MORE RESEARCH AND DEVELOPMENT, MORE ENCOURAGEMENT OF TECHNOLOGICAL BREAKTHROUGH, IS CLEARLY AN IMPORTANT THING, BUT AT THE SAME TIME, WE NEED TO PROTECT OUR EXISTING INDUSTRIES BECAUSE THEY REALLY ARE VERY MUCH LABOR INTENSIVE. AND I THINK WE ALSO ARE GOING TO HAVE TO COPE WITH THE CHALLENGE THAT COMBINED WITH THE OPPORTUNITY OF SOME OF THE TECHNOLOGICAL ADVANCES. FOR EXAMPLE, DRIVERLESS CARS ARE PROBABLY A VERY GOOD THING. THEY SEEM TO BE, IN ANY EVENT, AN INEVITABLE THING, BUT THAT PRESUMABLY WILL ALSO LEAD TO DRIVERLESS TRUCKS. WELL, THERE’S SOMETHING LIKE 3 MILLION AMERICAN ADULTS WHO DEPEND ON OVER-THE-ROAD TRUCKS FOR THEIR LIVELIHOOD AND IT’S A PRETTY GOOD LIVELIHOOD. THEN YOU ALSO HAVE THE SHORTER TRIP DRIVERS AS WELL. SO I THINK WHAT WE HAVE TO DO IS TO FIGURE OUT HOW TO MAKE SURE WE GET THE BENEFITS OF THE IMPROVED TECHNOLOGY AND YET COPE WITH THE DISLOCATION THAT IT INEVITABLY WILL PRODUCE IN CERTAIN OF THE INDUSTRIES. SO I THINK THAT’S GOING TO BE A REAL BALANCING ACT.”

Exports are the best way to deal with the trade deficit

“AS I HAVE SAID QUITE OFTEN PUBLICLY I THINK THE BEST WAY TO DEAL WITH THE TRADE DEFICIT IS INCREASED EXPORTS. I THINK THAT’S THE NUMBER ONE PRIORITY. THE NUMBER TWO IS TO GET COMPANIES LIKE THAT TO BUILD THEIR FACTORIES HERE SO THAT WORKERS DO HAVE NOT ONLY CONTINUED EMPLOYMENT BUT ENHANCED EMPLOYMENT. I THINK WITH THE RIGHT POLICIES WE CAN ACCOMPLISH THAT.”

We need more apprenticeship programs especially in STEM

” I THINK IT’S AN ESSENTIAL THING. THOSE ARE SOME OF THE INDUSTRIES OF THE FUTURE. I THINK WHAT WE WILL NEED TO DO IS FIND PEOPLE WHO HAVE THE TECHNOLOGICAL CAPABILITIES. ONE OF THE PROBLEMS IS OUR EDUCATIONAL SYSTEM IS STINTING UNSTEMMED SCIENCE, TECHNOLOGY, ENGINEERING AND MATH COURSES. WE ARE ALSO STINTING ON VOCATIONAL TRAINING. SO ONE OF THE PROBLEMS IS THERE’S A LACK IN SOME OF THE MINORITY COMMUNITIES OF THE CAPABILITIES TO DO THAT. THAT’S A VERY SERIOUS PROBLEM WE CAN HOPE TO COPE WITH SOME OF THAT WITH APPRENTICESHIP PROGRAMS. WE ARE THE WORST ON HAVING APPRENTICESHIP PROGRAMS. WE ARE ALSO THE WORST ON HAVING VOCATIONAL TRAINING.”

Need systems that talk to each other

“I’M A VERY BIG PROPONENT OF CLOUD. WE’VE USED IT A LOT IN PRIVATE SECTOR. AND AS NAR AS WE CAN TELL IT IS NOT ONLY MORE EFFICIENT, IT IS PROBABLY ALSO MORE SECURE FOR LOTS OF VERY COMPLICATED TECHNICAL REASONS. I THINK IT’S A VERY IMPORTANT THING FOR GOVERNMENT TO DO. AND ALSO TO HAVE SYSTEMS THAT TALK TO EACH OTHER. THERE’S AN AWFUL LOT OF SILOING BOTH WITHIN COMMERCE AND OUTSIDE OF COMMERCE. AND I THINK THAT IS NOT A VERY SATISFACTORY END RESULT. WE NEED TO ALL BE ON SIMILAR QUALITY AND EFFICIENCY OF COMMUNICATION”

We’ve gone a little permit nutsy

“THE PERMITTING IS AN ISSUE. I THINK IT’S ONE OF THE REASONS WHY THERE WEREN’T SO MANY SHOVEL-READY PROJECTS WHEN PRESIDENT OBAMA GOT MONEY FOR INFRASTRUCTURE. AND THE PERMITTING ISN’T JUST ON BIG PROJECTS. IN SOME PARTS OF THIS COUNTRY IF YOU WANT TO PUT A PORT-A-POTTY ON A WELL SITE YOU HAVE TO GO GET A PERMIT AND IT TAKES WEEKS TO DO THAT. THAT’S NOT EVEN DRILLING A HOLE IN THE GROUND. IT’S NOT INVASIVE. IT’S NOT ANYTHING. I THINK WE’RE GONE A LITTLE PERMIT NUTSY.”

Treasury Secretary Confirmation Hearing January 2017 Notes

(All caps because of transcript)

Concerned about the growing gap between taxes owed and collected

“I HAVE BEEN A CHIEF ARCHITECT OF HIS ECONOMIC PLAN. WE BELIEVE THE MOST CRITICAL ISSUE IS CREATING ECONOMIC GROWTH AND PASSING TAX REFORM IS A MAJOR COMPONENT OF THAT. OUR TAX REFORM PLAN, WE BELIEVE THE TAXABLE OCCASION AND FEWER DEDUCTIONS ARE CRITICAL. YOU MENTIONED THE TAX GAP AND THAT IS SOMETHING I HAVE BEEN READING ABOUT AND STUDYING AND SOMETHING I AM INTERESTED IN. I WAS PARTICULARLY SURPRISED THAT IN LOOKING AT THE IRS NUMBERS, THE IRS HEADCOUNT HAS GONE DOWN DRAMATICALLY, ALMOST 30% OVER THE LAST NUMBER OF YEARS. I DO NOT THINK THERE IS ANY OTHER GOVERNMENT AGENCY THAT HAS GONE DOWN 30% AND ESPECIALLY FOR AN AGENCY THAT COLLECTS REVENUES , THIS IS SOMETHING I AM CONCERNED ABOUT. PERHAPS THE IRS JUST STARTED WITH WAY TOO MANY PEOPLE BUT I AM CONCERNED ABOUT THE STAFFING OF THE IRS, IT IS AN IMPORTANT PART OF FIXING THE TAX GAP AND I AM VERY CONCERNED ABOUT THE LACK OF FIRST-RATE TECHNOLOGY AT THE IRS”

I am concerned that regulation is killing community banks

” I BELIEVE IN PROPER REGULATIONS. BEFORE I HAD THE OPPORTUNITY TO PUT IN A BID FOR INDYMAC BANK, I HAD TO BE ISSUED A CHARGER, AND — CHARGER AND I WORKED — CHARTER, AND I WAS A BIG FAN OF YOU MERGING THE OTS AND THE OCC AND GETTING RID OF ANOTHER REGULAR FREE AGENCY BUT AT THE TIME I WORKED WITH THE OTS AND THE FED AND THE REGULATORS EXPLAINED TO ME AT THE TIME AND I TOLD HIM I UNDERSTOOD THE RESPONSIBILITY OF BEING GIVEN A BANKING CHARTER, I TOOK IT VERY SERIOUSLY. I MUST SAY THAT I ENJOYED WORKING WITH A VERY, VERY SMART REGULATORS. I HAVE TREMENDOUS RESPECT FOR THEM. IN ONE OF THE FEW THINGS THAT THE WALL STREET JOURNAL ACTUALLY WROTE NICE ABOUT ME, THEY MADE A COMMENT THAT I TOLD EVERYBODY WE HAD TO TREAT THE REGULATORS LIKE OUR BEST CLIENTS WHICH I BELIEVE , THE REGULATORS AND THE RELATIONSHIPS WITHIN AND FOLLOWING THE REGULATIONS, NOTHING WAS MORE IMPORTANT, GIVEN THE TRUST THEY HAD PUT IN US. I WITNESSED FIRSTHAND, HAVING SAID THAT, MULTIPLE REGULATORS. THE OCC AND FDIC AND CONSUMER PROTECTION BUREAU, THE FEDERAL RESERVE, AND IN CERTAIN CASES THERE WAS OVERLAPPING REGULATION. MY BIGGEST CONCERN AND I FULLY SUPPORT REGULATION FOR BANKS WITH FDIC INSURANCE BUT MY BIGGEST CONCERN IS THAT THIS REGULATION IS KILLING IMMUNITY BANKS, WE ARE LOSING BIG COMMUNITY BANKING BUSINESS AT LOSING THE ABILITY FOR SMALL AND MEDIUM-SIZED BANKS TO MAKE GOOD LOANS TO SMALL AND MEDIUM-SIZED BUSINESSES IN THE COMMUNITY WHERE THEY UNDERSTAND THE CREDIT RISKS BETTER THAN ANYBODY ELSE”

I would like to examine the effect of the Volcker rule on liquidity

“I WILL, SENATOR, AND LET ME COMMENT ON THE FOCAL RULE — FOCAL RULE — THE CONCEPT OF PROPRIETARY TRADING DOES NOT BELONG WITH BANKS WITH — THE FEDERAL RESERVE PUT OUT ITS OWN REPORT THAT THAT RULE HAS COMPLETELY LIMITED LIQUIDITY IN MANY MARKETS AND THE FEDERAL RESERVE IS CONCERNED THAT THE INTERPRETATION OF THE VOLCKER RULE DOES NOT ALLOW BANKS TO CREATE ENOUGH LIQUIDITY FOR CUSTOMERS. THAT IS SOMETHING I WOULD ABSOLUTELY WANT TO LOOK AT.”

Need better technology at the IRS

“I THINK ONE OF THE BIG ISSUES IS AROUND THE IRS IS TECHNOLOGY AND I WOULD USE MY EXPERTISE IN TECHNOLOGY TO MAKE SURE THAT WE BRING THE IRS UP TO DATE WHICH IS A FUNCTION OF — I UNDERSTAND OLD EMAIL SYSTEMS, OLD PRIVACY SYSTEMS, WE ABSOLUTELY NEED TO MAKE SURE — IN THIS WORLD OF CYBER SECURITY AND IT BEING SUCH A BIG ISSUE, WE NEED TO PROTECT AMERICAN TAXPAYER INFORMATION AND THERE SHOULD BE SIMPLE WAYS THAT THE IRS CAN INTERACT WITH THE AMERICAN TAXPAYER.”

Let’s bring down tax rates for businesses so that they can bring money back

” THE FACT THAT WE HAVE COMPANIES LIKE APPLE THAT HAVE HUNDREDS OF BILLIONS OF DOLLARS OFFSHORE BECAUSE OF THE DIFFERENTIAL IN TAX RATES AND THEY ARE BEING PENALIZED TO BRING BACK MONEY, ONE OF THE THINGS I THINK — WE ALL AGREE ON AND I HAVE TALKED TO THE PRESIDENT-ELECT AND HE BELIEVES WE CAN BRING TRILLIONS OF DOLLARS BACK ON SHORE SO THAT THAT MONEY IS INVESTED IN AMERICAN BUSINESSES AND CREATING JOBS. I LOOK FORWARD TO WORKING WITH YOU AND YOUR OFFICE ON TAX REFORM AND BRINGING DOWN BUSINESS RATES FOR BIG BUSINESSES AND SMALL BUSINESSES AND MAKING AMERICA BUSINESS THE MOST COMPETITIVE IN THE WORLD SO THAT WE ARE NOT SHIPPING JOBS OVERSEAS AND MONEY OVERSEAS.”

He wants free and fair trade

” THE PRESIDENT-ELECT IS INTERESTED IN FREE AND FAIR TRADE. THIS IS NOT ABOUT LIMITING IMPORTS IT IS ABOUT GROWING EXPORTS AS MUCH AS WE CAN. YOU COMMENTED ON INTELLECTUAL PROPERTY, ONE OF THE PROBLEMS IN TRADE AGREEMENTS IS AMERICAN INTELLECTUAL PROPERTY IS NOT BEING KEPT, BEING TAKEN IN FOREIGN COUNTRIES. NAFTA, THE PRESIDENT-ELECT INTERESTED IN RENEGOTIATING NAFTA SO WE CAN KEEP MORE JOBS HERE. HE PICKED UP THE PHONE AND CALLED MANY CEOS, I CANNOT REMEMBER THE LAST TIME A PRESIDENT OR PRESIDENT-ELECT DID THAT AND WORK FOR THE AMERICAN WORKERS.”

Growth is the top priority

“THE SORT — SHORT ANSWER IS I HAVE SAID PUBLICLY AND BELIEVE THAT WE SHOULD BE ABLE TO GET 3%-4% SUSTAINED GDP. I THINK THAT IS IMPORTANT AND I THINK THAT AS A COUNTRY, THE MOST IMPORTANT ISSUE WE HAVE IS ECONOMIC GROWTH, THAT WHATEVER ISSUES WE HAVE AS REPUBLICANS OR DEMOCRATS, I THINK WE CAN AGREE THAT WITH MORE GROWTH, IT IS A LOT EASIER TO SOLVE THESE ISSUES AND WE SHOULD ALL BE FOCUSED ON THINGS THAT HELP GROW THE ECONOMY. IN 1984, WE HAD 7% AND IN 1998 WE HAD 5% AND IN 2005 WE HAD 3%. THAT WAS THE LAST TIME WE HAD APPROPRIATE GROWTH RATES. I SHARE THE PRESIDENT-ELECT’S CONCERN OF LOW GROWTH. OUR NUMBER ONE PRIORITY FROM MY STANDPOINT IS ECONOMIC GROWTH AND I CAN ASSURE YOU I WILL WORK TIRELESSLY IF I AM CONFIRMED TO CREATE GROWTH IN THE ECONOMY AND CREATE PRO GROWTH PROGRAMS AND I COMMIT TO WORK WITH ALL OF YOU ON THAT. I BELIEVE THE TAX REFORM WILL BE OUR FIRST AND MOST IMPORTANT PART OF THAT.”

We believe in appropriate regulation

” I WILL TELL YOU THAT BOTH MYSELF AND THE PRESIDENT-ELECT BELIEVE IN APPROPRIATE REGULATION. NOT JUST IN FINANCIAL SERVICES, THERE IS EXCESS REGULATION INHIBITING JOBS, IN GROWTH, HURTING THE AMERICAN WORKERS”

Trump’s strong dollar comment was a short term comment

” LET ME COMMENT ON THAT BECAUSE I THINK THE U.S. CURRENCY HAS BEEN THE MOST ATTRACTIVE CURRENCY TO BE IN FOR LONG PERIODS OF TIME. I THINK IT IS IMPORTANT AND I THINK YOU SEE THAT NOW MORE THAN EVER THE CURRENCY IS VERY STRONG AND WHAT YOU SEE IS PEOPLE FROM ALL OVER THE WORLD WANTING TO INVEST IN THE U.S. CURRENCY. I THINK WHEN THE PRESIDENT-ELECT MADE A COMMENT ON THE U.S. CURRENCY, IT WAS NOT MEANT TO BE A LONG-TERM COMMENT. IT WAS MEANT TO BE THAT PERHAPS IN THE SHORT TERM, THE STRENGTH IN THE CURRENCY AS A RESULT OF FREE MARKETS AND PEOPLE WANTING TO INVEST HERE MAY HAVE HAD NEGATIVE IMPACTS ON OUR ABILITY IN TRADE, BUT I AGREE WITH YOU, THE LONG-TERM STRENGTH OVER LONG PERIODS OF TIME IS IMPORTANT AND THAT IS A REFLECTION OF — I BELIEVE WE HAVE THE MOST ATTRACTIVE INVESTMENT ENVIRONMENT IN THE WORLD AND WE JUST HAVE TO PROTECT OUR U.S. COMPANIES SO THEY ARE NOT FORCED ABROAD”

We should not be in the business of bailing out big banks

“WE SHOULD NOT BE IN THE BUSINESS OF AILING OUT — BAILING OUT BIG BANKS AND I 100% AGREE WITH YOU THAT I SHARE CONCERNS ON TITLE 2. I THINK WE NEED TO LOOK AT THE BANKRUPTCY CODE AND WHAT WE CAN DO AS AN ALTERNATIVE”

The US Debt needs to be honored

“THE PRESIDENT-ELECT HAS MADE IT PERFECTLY CLEAR THAT HONORING THE U.S. DEBT IS THE MOST IMPORTANT THING. I HOPE THAT WHEN WE GET TO THE POINT IF I AM CONFIRMED THAT WE HAVE TO HAVE THE DEBT CEILING — THAT WE WILL NOT GO THROUGH ANOTHER ONE OF THESE ISSUES BECAUSE THERE ARE CERTAIN THINGS THAT I WOULD HAVE THE POWER TO POSTPONE THIS. I FIRMLY BELIEVE THE U.S. HAS THE OBLIGATION TO HONOR:

I Would like us to raise the debt ceiling sooner rather than later

“LET ME BE CLEAR, I WOULD LIKE US TO RAISE THE DEBT CEILING SOONER RATHER THAN LATER”

I will be the one taking the lead on tax reform

” THINK IT IS IMPORTANT THAT PRESIDENT TRUMP HAS A PROGROWTH ECONOMIC TAX PLAN AND WE ARE SENSITIVE TO THE COST OF THE PLAN. YESTERDAY I DID HAVE THE OPPORTUNITY TO MEET WITH SENATOR WYDEN AND WE TALKED ABOUT THE PROCESS FOR TAX REFORM. I WILL BE THE PERSON FROM THE ADMINISTRATION TAKING THE LEAD ON THAT AND I WOULD LOOK FORWARD TO WORKING WITH THE HOUSE AND THE SENATE, BOTH REPUBLICANS AND DEMOCRATS TO MOVE FORWARD ON TAX LEGISLATION”

We have a tax system that incentivizes capital to be kept abroad

” I THINK WE HAVE A LOT OF CAPITAL IN THE UNITED STATES NOW , BUT WE HAVE A BUSINESS TAX SYSTEM THAT IS INCENTING U.S. COMPANIES KEEPING THE CAPITAL OF BROAD. THE OTHER THING WE WANT TO INCENT IS THAT MONEY COMES BACK TO THE UNITED STATES NOW AS WELL AS GOING FORWARD AND THAT MONEY CAN BE DEPLOYED TO CREATE NEW BUSINESS HERE AND CREATE JOBS AND THAT WE STOP THINGS LIKE INVERSION BECAUSE IT MAKES ECONOMIC SENSE FOR U.S. COMPANIES”

Fannie and Freddie play an important role

“LET ME BE CLEAR THAT I DID MAKE COMMENTS ABOUT THIS. MY COMMENTS WERE NEVER THAT THERE SHOULD BE RECAP AND RELEASE. I HAVE BEEN AROUND THE MORTGAGE INDUSTRY FOR 30 YEARS AND I HAVE SEEN THIS FOR A LONG PERIOD OF TIME. THIS IS AN AREA I BELIEVE I HAVE EXPERTISE IN. FOR VERY LONG PERIODS OF TIME I THINK FANNIE AND FREDDIE HAVE BEEN WELL RUN WITHOUT CREATING RISK TO THE GOVERNMENT AND THEY PLAYED AN IMPORTANT ROLE — I KNOW YOU ARE RUNNING OUT…I BELIEVE THESE ARE VERY IMPORTANT ENTITIES FOR LIQUIDITY FOR THEWHAT I HAVE COMMITTED TO IS THAT I WILL WORK WITH BOTH THE DEMOCRATS AND REPUBLICANS. WHAT I HAVE SAID AND BELIEVE, WE NEED HOUSING REFORM. WE SHOULD UNJUSTLY FANNIE AND FREDDIE AS IS OR THE NEXT FOUR OR EIGHT YEARS UNDER GOVERNMENT CONTROL WITHOUT A FIX. I BELIEVE WE CAN FIND A BIPARTISAN FIX FOR THESE. ON THE ONE HAND, WE DON’T END UP WITH A GIANT BAILOUT. ON THE OTHER HAND, WE DON’T RUN THE RISK OF COMPLETELY LIMITING HOUSING FINANCE.”

The overall goal is to simplify personal taxes

“I THINK THE OVERALL GOAL, AS WE HAVE THE OPPORTUNITY TO DISCUSS — AND THANK YOU FOR MEETING WITH ME — IS TO SIMPLIFY PERSONAL TAXES, DELIVER A MIDDLE INCOME TAX-CUT, MAKE U.S. TAXES COMPETITIVE WITH THE REST OF THE WORLD SO THAT WE CAN COMPETE EFFECTIVELY AND AGGRESSIVELY AND CREATE MORE JOBS. THIS IS ALL ABOUT CREATING BETTER ECONOMICS AND MORE JOBS FOR THE AMERICAN PUBLIC. I AM VERY CONCERNED ABOUT THE NUMBER OF JOBS THAT HAVE BEEN LOST, THE DECREASE IN MANUFACTURING, THE NUMBER OF PEOPLE THAT HAVE LEFT THE WORKFORCE. THESE ARE ALL VERY CONCERNING ISSUES”

Need to have better tech at the IRS

” I THINK THERE IS SOME EXTERNAL TECHNOLOGY, WE NEED TO HAVE INTERNAL EXPERTISE IN THE IRS TO MANAGE OUR OWN TECHNOLOGY SYSTEMS. IN THIS DAY AND AGE, LIKE ANY OTHER ENTITY, WE NEED TO HAVE GOOD CUSTOMER SERVICE. IF PEOPLE ARE PAYING TAXES, THEY HAVE THE RIGHT TO GET THE INFORMATION, THEY HAVE THE RIGHT TO UNDERSTAND THEIR INFORMATION. I THINK THAT WE SHOULD BE ABLE TO INTERACT ELECTRONICALLY, SECURELY, KEEP PEOPLE’S INFORMATION SAFE. I CAN GO ON AND LOOK UP MY REAL ESTATE TAX BILLS IN CALIFORNIA AND SEE MY INFORMATION THERE. I DON’T SEE WHY WE DON’T HAVE GOOD SYSTEMS THAT PEOPLE WHO PAY TAXES CAN SEE THEIR INFORMATION SECURELY ONLINE. SO I LOOK FORWARD TO WORKING WITH YOU, AND I ALSO THINK THAT WE SHOULD BE MONITORING CUSTOMER SATISFACTION, LIKE ANYTHING ELSE WE SHOULD UNDERSTAND WHAT THE TAXPAYERS THINK OF THE SERVICE WE PROVIDE THEM.”

I don’t support going back to glass steagall as is

” I DO NOT SUPPORT GOING BACK TO IT AS IS. PERHAPS WE NEED A 20 CENTURY GLASS-STEAGALL, BUT NO, I DO NOT SUPPORT GOING BACK AS TO TAKING A VERY OLD LAW AND SAYING WE SHOULD ADHERE TO IT AS IS”

The average american worker has gone nowhere

“THE AVERAGE AMERICAN WORKER HAS GONE NOWHERE, AND PRESIDENT-ELECT IS COMMITTED, AS AM I, AS HIS ECONOMIC ADVISOR, TO WORK FOR THE AMERICAN PEOPLE AND GROY THE AMERICAN ECONOMY SO — GROW THE AMERICAN ECONOMY SO THE AVERAGE AMERICAN WORKER DOES BETTER AND THAT’S WHY I’VE BEEN WILLING TO SELL ALL MY INVESTMENTS, OK. I’VE BEEN WILLING TO GIVE UP MY BUSINESSES. MY DESIRE IS TO WORK FOR THE AMERICAN PEOPLE TO CREATE A BETTER ECONOMY AND I UNDERSTAND THAT”

Concerned about the retiree issue in this country

“I THINK PENSIONS ARE A VERY IMPORTANT ISSUE, AND I’D BE HAPPY TO WORK WITH YOUR OFFICE ANOTHER TIME, OK. I THINK THE PEOPLE WHO HAVE EARNED PENSIONS ABSOLUTELY DESERVE TO HAVE THOSE PENSIONS MAINTAINED AND BE SAFE. AND I’M VERY CONCERNED ABOUT THE RETIREE ISSUE IN THIS COUNTRY,”

No border tax

“HE’S NOT SUGGESTING A BORDER TAX. WHAT HE’S SUGGESTED IS THAT FOR CERTAIN COMPANIES THAT MOVE JOBS, OK, THAT THERE MAY BE REPERCUSSIONS TO THAT. HE’S NOT SUGGESTED IN ANY WAY AN ACROSS-THE-BOARD 35% BORDER TAX. AND IF ANYTHING, QUITE THE CONTRARY, AS YOU SAID, HE HAS CONCERNS ABOUT THINGS THAT IMPACT THE PRICE OF GASOLINE AND”

He hasn’t referred to a border tax

“AGAIN, I THINK WHEN HE’S REFERRED TO A BORDER TAX, OK, HE’S REFERRED TO A SMALL NUMBER OF COMPANIES THAT HAVE MOVED THEIR JOBS OR ARE MOVING THEIR JOBS, PUTTING PRODUCTS BACK INTO THE UNITED STATES AND TAXING THEM. SO HE’S IN NO WAY CONTEMPLATED A BROAD 35% BORDER TAX THAT COULDN’T BE FURTHER FROM ANYTHING THAT HE’D POSSIBLY CONSIDER”

We cannot eliminate access to capital for the housing market

“I AM AN EXPERT IN FANNIE MAE AND FREDDIE MAC. IT WOULD BE ONE OF MY PRIORITIES TO WORK WITH YOU. WE NEED HOUSING REFORM AND A SOLUTION. THE STATUS QUO IS NOT ACCEPTABLE OF JUST LEAVING THEM THERE. THERE ARE TWO EXTREMES ON THIS AND IT IS SOMETHING I LOOK FORWARD TO SINTTING DOWN AND TALKING WITH YOU. ONE, WE DON’T PUT THE TAXPAYERS AT RISK AND TWO, WE DON’T ELIMINATE CAPITAL FOR THE HOUSING MARKET. I’M VERY CONCERNED THAT MIDDLE OF INCOME PEOPLE WHO NEED MORTGAGE LOANS HAVE ACCESS TO THE CAPITAL.”

Our tax reform should not increase the size of the deficit and middle income families should not be asked to pay more

” I THINK WE ALL WOULD ACKNOWLEDGE THAT OUR INCOME TAX RATES ON GLOBAL COMPETITION PUTS THE U.S. AT A DISADVANTAGE. IT IS SOMETHING WE NEED TO DEAL WITH. WE ALSO RECOGNIZE THAT FROM A BUSINESS TAX POINT OF VIEW, IT IS NOT JUST A CORPORATE RATE, IT IS ALSO THE INDIVIDUAL RIGHTATE. I WANT TO TALK ABOUT TWO STANDARDS THAT I HOPE WILL JUDGE THE REVIEW OF TAX REFORM SO WE CAN HAVE A SIMPLIFIED TAX STRUCTURE, ONE THAT IS FAIRER TO THE AMERICAN PEOPLE. I WOULD HOPE THAT YOU WOULD AGREE THAT WE DO NOT WANT TAX REFORM TO INCREASE THE SIZE OF THE FEDERAL DEFICIT…THE SECOND IS THAT TAX REFORM SHOULD BE AT LEAST PROGRESSIVE AS OUR CURRENT TAX CODE. THAT IS, MIDDLE INCOME FAMILIES SHOULD NOT BE ASKED TO PAY MORE IN REGARDS… I SHARE YOUR CONCERNS ON THE FIRST THE FIRST ONE, AGAIN, WE DO BELIEVE IN DYNAMIC SCORING WITH THE APPROPRIATE GROWTH. WE WANT TO MAKE YOUR THAT TAX REFORM DOESN’T INCREASE THE SIZE OF THE DEFICIT. IN REGARDS TO THE SECOND ISSUE COME AS I HAVE SAID IN MY DISCUSSIONS WITH THE PRESIDENT-ELECT, HE IS VERY INTERESTED IN AS PROVIDING A MIDDLE INCOME TAX CUT THAT IS HIS PARTY.”

Not as close on the obamacare discussion

“I AGREE WITH YOU. I’M NOT AS CLOSE TO THE WHOLE OBAMACARE DISCUSSION RIGHT NOW, BUT I WILL DEFINITELY FOLLOW UP WITH YOU ON THAT.”

I see tax and trade policies as two different things

” THERE ARE TWO DIFFERENT ISSUES. THERE ARE TRADE POLICIES AND TAX POLICIES. I SEE THE TRADE POLICIES AS DOING THINGS THAT ARE BENEFICIAL FOR THE AMERICAN WORKER AND AMERICAN COMPANIES, AND I SEE THE TAX POLICIES AS THINGS THAT INCENTIVIZE BUSINESSES TO BE COMPETITIVE HERE”

Fed Chair Janet Yellen January 2017 Speech Notes

We are non partisan and base our decisions on factual evidence

“Perhaps because of our shared origins in the Progressive Era, a period of reform in American life, we hold certain values in common. According to your website, the club is nonpartisan and dedicated to the impartial discussion of issues important to your community and the nation. At the Fed, we too are nonpartisan and focused squarely on the public interest. We strive to conduct our deliberations impartially and base our decisions on factual evidence and objective analysis.”

Based on “research and decades of experience” 2% inflation is price stability

“Does price stability mean having no inflation whatsoever? Again, the answer is no. By “price stability,” we mean a level of inflation that is low and stable enough that it doesn’t need to figure prominently into people’s and businesses’ economic decisions. Based on research and decades of experience, we define that level as 2 percent a year–an inflation objective similar to that adopted by most other major central banks.1 Individual prices, of course, move up and down by more than 2 percent all the time. Such movements are essential to a well-functioning economy. They allow supply and demand to adjust for various goods and services. By “inflation,” we mean price changes as a whole for all of the various goods and services that households consume.”

We think the economy is close to meeting our objectives

“In a nutshell, the Fed’s goal is to promote financial conditions conducive to maximum employment and price stability. And I have offered broad-brush definitions of each of those objectives. So where is the economy now, in relationship to them? The short answer is, we think it’s close. The economy has come a long way since the financial crisis. As you know, the crisis marked the start of a very deep recession. It destroyed nearly 9 million jobs, and it’s been a long, slow slog to recover from it. ”

We expect to increase fed funds a few times per year

“Now, many of you would love to know exactly when the next rate increase is coming and how high rates will rise. The simple truth is, I can’t tell you because it will depend on how the economy actually evolves over coming months. The economy is vast and vastly complex, and its path can take surprising twists and turns. What I can tell you is what we expect–along with a very large caveat that our interest rate expectations will change as our outlook for the economy changes. That said, as of last month, I and most of my colleagues–the other members of the Fed Board in Washington and the presidents of the 12 regional Federal Reserve Banks–were expecting to increase our federal funds rate target a few times a year until, by the end of 2019, it is close to our estimate of its longer-run neutral rate of 3 percent.”

Our foot is still on the gas pedal

“The term “neutral rate” requires some explaining. It is the rate that, once the economy has reached our objectives, will keep the economy on an even keel. It is neither pressing on the gas pedal to make the car go faster nor easing off so much that the car slows down. Right now our foot is still pressing on the gas pedal, though, as I noted, we have eased back a bit. Our foot remains on the pedal in part because we want to make sure the economic expansion remains strong enough to withstand an unexpected shock, given that we don’t have much room to cut interest rates. In addition, inflation is still running below our 2 percent objective, and, by some measures, there may still be some room for progress in the job market. ”

Slow productivity growth helps explain why we don’t think dramatic increases are necessary

“The factors I have just discussed are the usual sort that central bankers consider as economies move through a recovery. But a longer-term trend–slow productivity growth–helps explain why we don’t think dramatic interest rate increases are required to move our federal funds rate target back to neutral.”

Economists do not fully understand the causes of the productivity slowdown

“Economists do not fully understand the causes of the productivity slowdown. Some emphasize that technological progress and its diffusion throughout the economy seem to be slower over the past decade or so. Others look at college graduation rates, which have flattened out after rising rapidly in previous generations. And still others focus on a dramatic slowing in the creation of new businesses, which are often more innovative than established firms. While each of these factors has likely played a role in slowing productivity growth, the extent to which they will continue to do so is an open question.2”

We are not trying to help one group over the other savers vs. borrowers

“You might be thinking, what does this discussion of rather esoteric concepts such as the neutral rate mean to me? If you are a borrower, it means that, although the interest rates you pay on, say, your auto loan or mortgage or credit card likely will creep higher, they probably will not increase dramatically. Likewise, if you are a saver, the rates you earn could inch higher after a while, but probably not by a lot. For some years, I’ve heard from savers who want higher rates, and now I’m beginning to hear from borrowers who want lower rates. I can’t emphasize strongly enough, though, that we are not trying to help one of those groups at the expense of the other. We’re focused very much on that dual mandate I keep mentioning.”

Fed Governor Brainard January 2017 Speech

Fiscal policy has attracted the attention of inflation watchers

“Among the many factors that can affect the aggregate economy and, by extension, monetary policy, a possible shift in fiscal policy has attracted the attention of both economic forecasters and financial markets of late. Among forecasters surveyed by Blue Chip Economic Indicators, for 2017, 44 percent indicated that they had raised their forecast of inflation and 47 percent had raised their forecast of gross domestic product (GDP) growth because of the recent U.S. election results, although on average forecast changes were modest. Markets have also reacted, and many have interpreted these changes as reflecting expectations of more expansionary fiscal policy in the coming years than previously expected.”

It matters whether fiscal deficits increase aggregate supply

“In this regard, it matters importantly whether increased fiscal deficits predominantly raise aggregate demand or also expand the supply potential of the economy more broadly. Changes in fiscal policy that raise the level or growth rate of productivity or that induce greater labor force participation and higher levels of skill and education in the workforce raise the nation’s productive capacity and result in more sustainable increases in output and living standards.”

The trajectory of federal debt to GDP can also influence the effects of fiscal policy

” the trajectory of federal government debt relative to GDP and views regarding the debt’s sustainability can also influence the effects of fiscal policy. Research suggests that increases in the debt-to-GDP ratio cause long-term interest rates to rise.11 All else being equal, higher long-term interest rates reduce spending on interest-sensitive goods, possibly damping the direct effect of fiscal expansion on economic activity.”

Full employment is within reach

“With any future change in fiscal policy quite uncertain, monetary policy will be guided by the current state of the economy, the underlying momentum of economic activity and inflation, the level of the neutral rate, and the balance of macroeconomic risks. In recent quarters, the data have painted a consistent picture of a resilient and gently improving U.S. economy. Following a year in which the unemployment rate remained stable while labor force participation increased, we have seen in the past quarter a further reduction in the unemployment rate. Overall, I am pleased to see that full employment is within reach and could prove sustainable with the right policy mix.”

I have been encouraged by gradual progress toward our inflation target

“Following a long period of stubbornly below-target inflation, I have been encouraged by recent signs of gradual progress toward our inflation target, as the effects of earlier dollar appreciation and oil price declines appear to be waning. Over the 12-month period ending in November, core personal consumption expenditures prices increased 1.6 percent. This rate is still noticeably below 2 percent, but it is up 1/4 percentage point from a year earlier.”

If fiscal policy leads to a more rapid elimination of slack policy adjustment would be undertaken more rapidly

” if fiscal policy changes lead to a more rapid elimination of slack, policy adjustment would, all else being equal, likely be more rapid than otherwise, with the conditions the FOMC has set for a cessation of reinvestments of principal payments on existing securities holdings being met sooner than they otherwise would have been.”

The appropriate level of fed funds depends on the neutral rate

“When the economy eventually returns to full employment and 2 percent inflation, the appropriate level of the federal funds rate will depend on the level of the neutral rate, which is expected to move up only modestly in coming years from its current low level.14 On the one hand, if progress on employment and inflation occurs more quickly than I anticipate, foreign risks recede, and the fiscal impulse rises, the neutral rate might rise more rapidly”

Secretary of State Confirmation Hearing 2017

(Note: all caps from transcript)

“AMERICAN LEADERSHIP MUST NOT ONLY BE RENEWED. IT MUST BE ASSERTED.”

” IT IS AN HONOR TO APPEAR BEFORE YOU TODAY AS PRESIDENT-ELECT TRUMP’S NOMINEE FOR SECRETARY OF STATE AND SEEK THE APPROVAL OF THIS COMMITTEE AND THE FULL SENATE FOR MY CONFIRMATION. WE FACE CONSIDERABLE THREATS IN THIS EVOLVING NEW ENVIRONMENT. CHINA EMERGED AS AN ECONOMIC POWER IN GLOBAL TRADE AND OUR INTERACTIONS HAVE BEEN BOTH FRIENDLY AND ADVERSARIAL. WHILE RUSSIA SEEKS RESPECT AND RELEVANCE ON THE GLOBAL STAGE ITS RECENT ACTIVITIES HAVE DISREGARDED AMERICA’S INTEREST. RADICAL ISLAM IS NOT A NEW IDEOLOGY, BUT IT IS HATEFUL, DEADLY AND AN ILLEGITIMATE EXPRESSION OF THE ISLAMIC FAITH. ADVERSARIES LIKE IRAN AND NORTH KOREA POSE GRAVE THREATS TO THE WORLD BECAUSE OF THEIR REFUSAL TO CONFORM TO INTERNATIONAL NORMS. AS WE CONFRONT REALITIES HOW SHOULD AMERICA RESPOND? MY ANSWER IS SIMPLE. TO ACHIEVE THE STABILITY THAT’S FOUNDATIONAL TO PEACE AND SECURITY IN THE 21st CENTURY. AMERICAN LEADERSHIP MUST NOT ONLY BE RENEWED. IT MUST BE ASSERTED. WE HAVE MANY ADVANTAGES ON WHICH TO BUILD. OUR ALLIANCES ARE DURABLE AND OUR ALLIES ARE LOOKING FOR RETURN OF LEADERSHIP.”

Must display a commitment to personal liberty

” WE MUST CONTINUE TO DISPLAY A COMMITMENT TO PERSONAL LIBERTY, HUMAN DIGNITY AND PRINCIPLED ACTION IN FOREIGN POLICY. QUITE SIMPLY, WE ARE THE ONLY GLOBAL SUPER POWER WITH THE MEANS AND THE MORAL COMPASS CAPABLE OF SHAPING THE WORLD FOR GOOD. IF WE DO NOT LEAD WE RISK PLUNGING THE WORLD DEEPER INTO CONFUSION AND DANGER. ”

We must acknowledge the realities about China, but need to see the positives as well

“WE SHOULD ALSO ACKNOWLEDGE THE REALITIES ABOUT CHINA. CHINA’S ISLAND BUILDING IN THE SOUTH CHINA SEA IS AN ILLEGAL TAKING OF DISPUTED AREAS WITHOUT REGARD FOR INTERNATIONAL NORMS. CHINA’S ECONOMIC AND TRADE PRACTICES HAVEN’T ALWAYS FOLLOWED COMMITMENTS TO GLOBAL AGREEMENTS. IT STEALS OUR INTELLECTUAL PROPERTY AND IS AGGRESSIVE AND EXPANSIONIST IN THE DIGITAL REALM. IT HAS NOT BEEN A RELIABLE PARTNER IN USING ITS FULL INFLUENCE TO CURB NORTH KOREA. CHINA HAS PROVEN A WILLINGNESS TO ACT WITH ABANDON IN THE PURE SUIT OF ITS OWN GOALS WHICH AT TIMES PUT IT IN CONFLICT WITH AMERICAN INTERESTS…BUT WE NEED TO SEE THE POSITIVE DIMENSIONS IN OUR RELATIONSHIP WITH CHINA AS WELL. THE ECONOMIC WELL-BEING OF THE TWO NATIONS IS DEEPLY INTERTWINED. CHINA HAS BEEN A VALUABLE ALLY IN CURTAILING CERTAIN ELEMENTS OF RADICAL ISLAM. WE SHOULD NOT LET DISAGREEMENTS OVER OTHER ISSUES EXCLUDE AREAS FOR PRODUCTIVE PARTNERSHIP. ”

Recommended response to Crimea

” I WOULD HAVE RECOMMENDED THAT THE UKRAINE TAKE ALL OF ITS MILITARY ASSETS AVAILABLE, PUT THEM ON THE EASTERN BORDER, PROVIDE ASSETS WITH DEFENSIVE WEAPONS THAT ARE NECESSARY JUST TO DEFEND THEMSELVES, ANNOUNCE THAT THE U.S. IS GOING TO PROVIDE THEM INTELLIGENCE AND THAT EITHER NATO OR U.S. WILL PROVIDE AIR SURVEILLANCE OVER THE BORDER TO MONITOR MOVEMENTS…YES, SIR. I THINK WHAT RUSSIAN LEADERSHIP WOULD HAVE UNDERSTOOD IS A POWERFUL RESPONSE THAT INDICATED, YES, YOU TOOK CRIMEA, BUT THIS STOPS HERE.”

The Russians are tactical and strategic in their thinking

“IN MY EXPERIENCE OF BOTH DEALING WITH RUSSIA AND REPRESENTATIVES OF RUSSIAN GOVERNMENT AND RUSSIAN ENTITIES AND THEN AS MY — THE LENGTH OF TIME I HAVE SPENT IN RUSSIA AS AN OBSERVER, MY EXPERIENCE WITH THE RUSSIANS ARE THAT THEY ARE CALCULATING. THEY ARE VERY STRATEGIC IN THEIR THINKING AND THEY DEVELOP A PLAN…I HAVE FOUND THE RUSSIANS TO BE VERY STRATEGIC IN THEIR THINKING. VERY TACTICAL. THEY GENERALLY HAVE A VERY CLEAR PLAN THEY HAVE LAID BEFORE THEM. SO IN TERMS OF WHEN I MAKE THE STATEMENT THEY ARE NOT UNPREDICTABLE, IF ONE IS ABLE TO STEP BACK AND UNDERSTAND WHAT THEIR LONG-TERM MOTIVATION IS AND YOU SEE THAT THEY ARE GOING TO CHART A COURSE IT’S AN UNDERSTANDING OF HOW ARE THEY LIKELY TO CARRY THE PLAN OUT? AND WHERE ARE ALL OF THE ELEMENTS OF THAT PLAN THAT ARE ON THE TABLE AND IN MY VIEW THE LEADERSHIP OF RUSSIA HAS A PLAN. IT IS A GEOGRAPHIC PLAN THAT’S IN FRONT OF THEM. THEY ARE TAKING ACTION TO IMPLEMENT THAT PLAN. THEY ARE MAKING THE NEXT STEP BASED ON THE RESPONSE. IN THAT REGARD THEY ARE NOT UNPREDICTABLE. IF RUSSIA DOESN’T RECEIVE AN ADEQUATE RESPONSE TO AN ACTION THEY WILL EXECUTE THE NEXT STEP OF THE PLAN.”

More than anything Russia wants to re-establish its role in the global world order

“RUSSIA, MORE THAN ANYTHING, WANTS TO RE-ESTABLISH ITS ROLE IN THE GLOBAL WORLD ORDER. THEY HAVE A VIEW THAT FOLLOWING THE BREAK-UP OF THE SOVIET UNION, THEY WERE MISTREATED IN SOME RESPECTS IN THE TRANSITION PERIOD. THEY BELIEVE THEY DESERVE A RIGHTFUL ROLE IN THE GLOBAL WORLD ORDER BECAUSE THEY ARE A NUCLEAR POWER. AND THEY ARE SEARCHING AS TO HOW TO ESTABLISH THAT. AND FOR MOST OF THE PAST 20-PLUS YEARS SINCE THE DEMISE OF THE SOVIET UNION THEY WERE NOT IN A POSITION TO ASSERT THAT. THEY HAVE SPENT ALL OF THESE YEARS DEVELOPING THE CAPABILITY TO DO THAT. I THINK THAT’S NOW WHAT WE ARE WITNESSING IS AN ASSERTION ON THEIR PART IN ORDER TO FORCE A CONVERSATION ABOUT WHAT IS RUSSIA’S ROLE IN THE GLOBAL WORLD ORDER. SO THE STEPS BEING TAKEN ARE SIMPLY TO MAKE THE POINT THAT RUSSIA IS HERE, RUSSIA MATTERS, AND WE ARE A FORCE TO BE DEALT WITH. THAT IS A FAIRLY PREDICTABLE COURSE OF ACTION THEY ARE TAKING. I THINK THE IMPORTANT CONVERSATION THAT WE HAVE TO HAVE WITH THEM IS DOES RUSSIA WANT TO NOW AND FOREVER BE AN ADVERSARY OF THE UNITED STATES. DO YOU WANT THIS TO GET WORSE OR DOES RUSSIA DESIRE A DIFFERENT RELATIONSHIP? WE ARE NOT LIKELY TO EVER BE FRIENDS. I THINK AS OTHERS NOTED OUR VALUE SYSTEMS ARE STARKLY DIFFERENT. WE DO NOT HOLD THE SAME VALUES. BUT I ALSO KNOW THE RUSSIAN PEOPLE BECAUSE OF HAVING SPENT SO MANY YEARS IN RUSSIA. THERE IS SCOPE TO DEFINE A DIFFERENT RELATIONSHIP THAT CAN BRING DOWN THE TEMPERATURE AROUND THE CONFLICTS WE HAVE TODAY AND I THINK SECRETARY GATES ALLUDED TO AND SECRETARY NUNN ALLUDED TO IN THEIR OPENING REMARKS, DIALOGUE IS CRITICAL SO THESE THINGS DO NOT SPIN OUT OF CONTROL. REMARKS, THAT DIALOGUE IS CRITICAL SO THAT THESE THINGS DO NOT SPIN OUT OF CONTROL. WE NEED TO MOVE RUSHSIA FROM BEING AN ADVERSARY TO PARTNER AND IN OTHER ISSUES, A ADVERSARY, AND NOT UNLIKE THE COMMENTS ON CHINA. AT TIMES CHINA IS FRIENDLY, AD AT TIMES THAW ARE AN ADVERSARY, BUT WITH RUSSIA, ENGAGEMENT IS NECESSARY IN ORDER TO DEFINE WHAT IS THAT RELATIONSHIP GO TGING TO BE, AND THEN WE WILL KNOW HOW TO CHART OUR OWN PLAN OF ACTION TO RESPOND TO THAT.”

Sometimes friends are adversaries

” I TEND TO THINK IN THREE CATEGORIES. FRIENDS, AND THEY ARE OUR PARTNERS AND THEY ARE OUR ADVERSARIES, AND AT TIMES, CERTAIN THAT OUR FRIENDS ARE PARTNERS FROM TIME TO TIME ON SPECIFIC ACTION, AND ADVERSARIES FROM TIME TO TIME CAN BE PARTNERS, BUT ON OTHER ISSUES, WE ARE JUST NOT GOING TO AGREE AND WE REMAIN ADVERSARIES, AND ADVERSARY AT THE IDEOLOGICAL LEVEL IS ONE THING, AND ADVERSARY AT THE DIRECT CONFLICT LEVEL, THAT IS VERY DIFFERENT.”