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the chairman of the president's Council of economic advisors Jason Ferman joins
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us today to talk about climate change and the administration's policies for addressing it thank you for being here
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with us thanks for having me uh about a year ago a little more than a year ago June
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2013 uh President Obama announced his plans for addressing climate change over the second half of his
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administration um what's been happening in the ensuing 15 months and um is he is
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the administration on track with what they hope to accomplish um we've been working really hard since the president
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first announced that climate action plan and that plan has three parts which involve almost all the agencies in the
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federal government the first is to reduce the amount of carbon we emit the second is to be able to better deal with
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the changes that climate change will bring because we can slow it but we can't stop it and third is to better
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enlist the World in that effort and if you look at just the last week um you see things in a lot of those different
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areas last week we had a number of companies at the White House talking about how they could phase out their use
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of hydrocarbons increase their use of solar and this week the discussion at the United Nations will help advance that
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third prong of the climate action plan engaging with the rest of the world recently 12 States mostly coal producing
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states have sued the EPA uh claiming that the rules which I believe the administration would like to uh impose
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on uh air emissions greenhouse gas emissions uh would affect the coal fired plants in these states uh drastically
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causing some of them to close there's been protests among uh by coal miners uh
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for example um and so these are these are charges which U sort of the mirror image of that are the
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states that are feeling that this the either pollution or Andor greenhouse gases are sort of wafting over state
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lines into their territory and are trying to put a a stop to that so where where does
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this all stand I mean this is really about jobs and climate change and uh tradeoffs and that kind of thing I'm an
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economist not a lawyer so let me give you an economic perspective although I should say that the lawyers I talk to
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think this is clearly in the statute the Supreme Court um basically has said that
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in the past but um it's very much sound economic policy and it's consistent with
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what we always try to do in environmental regulation which is look at the costs and look at the benefits
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electricity is responsible for 32% of our greenhouse gas emissions that's larger than any other source of
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greenhouse gas emissions most of those emissions are coming from coal fired power plants when we look at that we
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think there's a number of things you can do to improve you could have more efficient Coal fire power plants you
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could shift to a transition fuel like natural gas you could instead build um capacity in Renewables or you could use
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um less electricity and the combination of those four tools means that we could bring our emissions down and we could
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bring them down in a very coste effective way the benefits of bringing them down are many multip of the cost
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both direct health benefits like reductions in asthma and premature death and then longer term benefits from
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mitigating some of the potentially worst impacts of climate change okay um so the
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standard argument oftentimes when you discuss environmental issues is that there has to be some kind of a trade-off
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between uh the the good effects that might come from from these kinds of things uh and the
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the negative economic effects so it's not to say there aren't economic effects
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you're saying that the that the the good that is produced outweighs it but how do
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you think about trading these things off because there would be some jobs lost or
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maybe there's jobs created somewhere else um but you know obviously U there are some winners and losers even if as
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you argue the winners might be outweighing the losers MH right so first of all I'd look at the costs and the
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benefits and here the benefits are in the range of 50 to 90 billion dollar per year and the costs are in the range of
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eight or9 billion dollar per year so it's many multiple benefit um to cost ratio I would then um you know note that
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there's a lot of ways in which this will help the economy and create jobs whether
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that's in natural gas or Renewables and you see jobs booming in those sectors of
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the economy I certainly think that preventing asthma premature death respiratory illness all of that actually
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can can help make people more productive and help the economy the IMF has a recent study that has um documented that
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and finally most importantly there's the economic costs of inaction those are
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really large and they're the more we delay the more they are we wait extra decade the costs go up about
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40% we wait extra decade and don't do as much so the temperature goes up an extra
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degree Centigrade the costs go up by the equivalent of 100 50 billion for the United States so there's a lot of cost
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um you know to inaction when uh projections are made for the growth of alternative energies a
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lot of times you see kind of simple straightforward projections um solar energy will likely increase by a certain
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amount you sort of see these straight line projections and it it strikes me a lot of times that that that doesn't take
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into consideration unexpected breakthroughs although there's maybe likely to be some
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breakthroughs even if we don't know what they're going to be by definition and
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also that you can reach a Tipping Point so some are arguing that that's what's
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that's the point that we're at now so solar energy costs per dollars per watt
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of electricity generator have been dropping something like 5 to 7% per year for 30 years almost in a predictable way
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um to the point now that it's getting very close to parity in in terms of cost
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with fossil fuels uh what's your view on on this is are we likely to see a sudden
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and dramatic increase uh in in reductions in cost that would cause people to want to use these alternate
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sources more uh and what is your growth projection for uh alternative energy use
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over the next couple of decades right so in the last few years we've seen wind um
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power produced by wind grow three-fold and solar grow um tenfold and I expect they're going to continue to grow
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rapidly um I'm not the best person to predict just how rapidly but what I can tell you
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is if we have the right public policies in place that would help and those public policies are appropriate because
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you have an externality here which is other forms of um Power produce carbon which creates a worldwide harm um
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Renewables don't and in the face of that externality policies like the production
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tax credit we have in the tax code the investment tax credit that the those two benefit wind and solar and the clean um
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Power plan for existing power plants lot of states are going to figure out how they want to adopt that rule and
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implement it and I think many of them will create incentives for Renewables so I think all of this will help provide an
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impetus to um accelerate the work on Renewables okay I would be remiss if I had the chairman of the president's
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Council of economic advisors here and didn't ask him what you see coming ahead
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for the economy so in terms of GDP growth over the next two three four quarters what what do you think is going
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to happen uh we've seen growth uh speed up in the second quarter the indications
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are good for the third quarter I'd never want to venture a quarter by quarter
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forecast but one of the things I think we have going for us and it's one that I
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hope we don't interrupt um and mess up is we've had a somewhat more predictable
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fiscal environment with less of the type of uncertainty that hurt the economy in
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the past and a more neutral fiscal policy without the types of large fiscal contractions that were helping to go
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against our growth before I think if we can continue that then there's every
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reason to believe the private sector can continue to make um you know its contributions to Growing our economy and
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bringing the unemployment rate down and on a percentage basis for GDP what kind of I don't have a particular forecast
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for you but we're still um in the phase of growth where we get extra growth by bringing our
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unemployment rate down putting more people to work and adding to our growth rate um after we're fully
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recovered then growth will only come from expanding the economy's potential which depends more on the types of
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Technologies we have at our disposal the the quality of the capital Investments we're making but still right now um
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we're we're you know in the final stages of the cyclical recovery and that will
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be boosting growth in the term there's been an interesting release of studies
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recently from the oecd organization of Economic Development World Bank the ILO International labor organization they're
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all looking at this question of wage stagnation which has been a problem in the US uh but also around the world so
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in a nutshell the idea is that a lot of companies or economies are having relatively decent productivity gains but
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those gains are not flowing much down to workers whose wages haven't increased
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much if at all uh for a very long time and that uh has not only an effect on the workers but it also has the effect
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of dragging down uh the potential of the economy if if uh people don't have enough money to spend so what's what's
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your view of that particularly in in the US what are some of the causes what could some of the solutions be for that
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well I'd love to spend an hour with you on that topic I think if you look at
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Family incomes um there have been three important things that have happened first um productivity growth matters a
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lot and it isn't as fast as it was in the 50s and 60s it's a lot faster than
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the 70s and 80s but it still hasn't uh you know it still could be faster the
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second is the big increase in inequality that we've seen since the late 1970s and the fact that a lot of the
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gains in the economy are going either to higher earners or to um the business side of The Ledger and the labor share
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of income has been falling since about 2000 and then the final issue is one that I don't think is fully appreciated
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but even against those two forces family incomes continued to rise in the 70s 80s
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and 90s and that's because there was pressure on wages but a lot more households had two earners rather than
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one as women um came into the workforce and droves now that that which was helping to compensate and offset some of
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these other ch es has stopped and women's labor force participation has basically flattened out and started to
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fall that means that we're feeling the productivity growth and the inequality
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you know even more than the ways in which it was masked in the 70s 80s and 90s um which is creating I think a very
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serious challenge for the typical fam's income and one that I think needs to be
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the central focus of Economic Policy um not one that has a onep part agenda or even a three-part agenda it's more like
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uh as many parts of an agenda as you can you can throw at the issue because it's
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a big one what what are just some of the potential tools that could be used uh to
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address this problem in your view I think we need to expand our growth rate we can do that with immigration reform
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business tax reform investing in infrastructure improving education expanding trade then I think we need to
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make sure that more of the benefits of those growth are shared across the board um the minimum wage is one particularly
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powerful tool we have to do that another one is expanding the earned income tax credit for workers um without children
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or non uh custodial parents and um you know but I think we just need to keep working on you know every aspect and you
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know I'm not one the person who says um let's just focus on distribution let's
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focus on growth I think we need to focus on both I think a lot of the instruments
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we have um working on both of them uh simultaneously thanks very much for joining us thanks for having
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me and