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There are certainly lots of
questions about the economy and
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economic policy right now. Our
guest in today's podcast
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interview spent a decade working
on economic policy within the
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Federal Reserve System and as
President of the Philadelphia
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Fed. But Pat Harker has penned a
piece for the new Knowledge at
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Wharton column titled "Vantage
Point." It'll have Wharton
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professors discussing various
topics on a monthly basis. That
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article is now available to be
read. And a pleasure to be
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welcoming back to the show Pat
Harker, to <i>This Week In</i>
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<i>Business</i>. Pat, great to talk to
you again. How are you, sir?
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Good to see you, Dan.
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What was it that
spurred your kind of literary
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juices to do a column like this?
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You know, when you're in the Fed, you're
very limited in what you can say. You
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never cross the boundary to
fiscal policy. It's really— you
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take fiscal policy as given and
you do the best you can on the
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monetary policy side. But I was
freed from that constraint after
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I left on June 30 of 2025, six
months ago. So there are things
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I feel very strongly about, in
terms of the institution itself
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and what it can do and what it
can't do, and what the real
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issues in the economy are.
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Bottom line is 25 basis points
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up or down is not going to make
or break the economy. We have
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deeper issues that we need to
address. I wasn't able to talk
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about those before. I am now.
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Right, and so this first article
that you're writing is titled,
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"When Monetary Policy is Asked to
Do Too Much." Kind of give us a
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framework as to why that tends
to be the case at times.
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So I think it's fundamentally
that many of our institutions
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right now, at least Americans
perceive them as dysfunctional.
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That they're not achieving what
we've asked them to do. Like
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Congress has not passed the
budget in regular order in
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decades. So we start with
that. And so people are
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frustrated. They're frustrated
that the economy is not where
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they want it to be, so they look
to the Fed to try to solve those
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problems. But the Fed doesn't
really have the tools to solve
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the fundamental problems the
economy has. That's what I'm
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really worried about. Because
when you have people believe you
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can do more than you can
actually do, you always
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disappoint. And when you
disappoint, people start to turn
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on you. And what I want to do is
make sure this institution is protected.
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Are there specific instances you
can give us where monetary
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policy is being asked to do one
thing, but it really can't?
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Oh, yeah, sure. I mean in terms
of— let's take the labor market.
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Yes, the Fed has a dual mandate,
right? In terms of inflation,
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stable prices and 2% target,
they've decided that means
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stable prices, and maximum
employment. Maximum employment
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is an elusive concept, in that
you don't actually know what it
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is. I mean, inflation we can
measure. Maximum employment is a
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little tougher. But the reality
is, monetary policy is not going
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to do a whole lot on employment.
The employment issues are much
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deeper in our economy than just
25, 50 basis points
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up or down.
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You talk about
opportunity and growth, and kind
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of the connection that those two
elements have, which is
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interesting, because if you talk
to a lot of people, I think they
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feel like they're not
necessarily experiencing maybe
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the opportunity that they would
want to. And, as you said, even
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with the kind of mythical idea
of whether or not we're at full
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employment or not.
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Yeah. So take the "opportunity"
word. When I was back at the
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Philly Fed, we launched
something called The Opportunity
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Mobility Explorer. And we really
tried to look at jobs across
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America. And it's a database all
across America, where these are
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jobs that pay above median
wages. That is good, solid
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middle class wages, where you
don't need a four-year college
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degree. And so there's an
example of where there's
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opportunities there. I mean,
take, for example, a data
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center. Building a data center,
a large data center, a
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hyperscaler data center. And its
peak, they need about 1400
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electricians working in that
facility, and equivalent number
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of plumbers and carpenters and
so forth. We need those skilled
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trades. We are woefully shy.
We're right now, the estimate
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I've seen is about half a
million tradespeople shy in
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America, and it's going to get
worse. So there are
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opportunities there, but we need
to invest in training programs.
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We need to invest in kind of
fundamentals of the labor market
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to get people ready. On top of
that, AI is coming. We need to
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retrain an entire generation
plus educate the next
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generation. So we've— some co-
authors and I have put down
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some thoughts on that too, about
recreating the land grant
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concept that Abraham Lincoln
signed in 1862, for a digital age.
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So how would that actually go
about working then?
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Oh, in terms of the digital land
grants? - Yeah.
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Yeah. So go back
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to 1862. In the middle of the Civil
War, Lincoln saw as really
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important to launch the land
grant model where, literally,
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states were given grants of land
to create universities that
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would teach agriculture and
mechanical arts. That is the
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technology of the day. Okay,
fast forward to today. What is
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land? It's cyber land. It's
digital land. We need to
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recreate that concept of the
federal government seeding
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investment along with the
private sector in a whole new
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generation of educational
programs at all levels,
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community college to PhD.
Everywhere. Because we need
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those skilled workers for this
to work, for this AI revolution
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to actually pay off.
- Right.
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Well, and I find it interesting.
A lot of people have talked
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about how education in general
is going to need to develop and
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grow as we move throughout the
years. And this is one of the
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components of it. Even with how—
I think, how digital is believed
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that it's going to continue to
develop and change. You start
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with the core processes and
build from there. And you can
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continue to, you know, have
people, you know, improving
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their education component, so
they can be at the front line of
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a lot of these jobs.
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Yeah, I mean— and it's going to
be industry by industry, because
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for this to pay off, a
particular industry is going to
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figure out— like health care.
How can they use these AI tools
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most effectively? And
we're going to see that across
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every single industry. And it's
not going to be one size fits
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all. The answer is going to be
different, and we need people
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that understand those
industries, understand those
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jobs, and they can tinker with
the AI. They can tinker with the
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technology. I'm a big fan of
tinkerers, because tinkerers
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make things work.
- Right.
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Exactly. You make a statement at
the end of your article that I'd
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like to read for all the people
listening and watching us, and
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get your— get your comments to
expand it. "What we lack is not
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economic insight, it is
political follow through.
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Monetary policy can create the
conditions for stability. It
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cannot, on its own, secure the
nation's economic future."
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Yep. A brilliant guy wrote that,
I guess, Dan.
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Well, I mean, expand upon
that. Because— and you touched
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on a little bit, that— that
Congress has not done, in terms
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of a budget, a good enough job
for decades to be able to pass,
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you know, an annual budget on
time. And it's, you know,
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it's more than just what we see
on Capitol Hill. But there are
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so many other elements to it.
- Yeah.
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So think about the situation
we've put ourselves in in terms
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of our fiscal health. And you
can just look at the work from
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our colleagues at the Penn
Wharton Budget Model. You know,
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we are crowding out all kinds of
investment. Necessary investment
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in infrastructure, education and
so forth, because we are
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unwilling to address the
fundamental issue that we're
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spending too much money given
the revenue we're bringing in.
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And so again, the Penn Wharton
Budget Model people have
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practical ways of dealing with
this, but we need the political
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will to want to solve it,
because this is not going to get
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better. It's going to get worse,
and we're going to continue to crowd out
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the productive investments we
need to make in the economy.
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It's a great article, and as we
mentioned, it's now up on the
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Knowledge at Wharton website.
Let me ask you first, before you
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leave, in doing these articles,
what do you hope you think
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you're going to be able to bring
on all of these different topics
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that you'll be writing about?
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So I hope we can start to bring
people together, to spur
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conversation and to spur action.
I'm a very action-oriented
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person. So I want not just to
talk about this. I actually want
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people to roll up their sleeves
and do something about it. And
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that's what I'm really trying to
prod. I'm trying to prod people
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to take action to solve these
problems.
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Pat, always great to talk.
Thanks very much.
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Take care.
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Thank you. Patrick Harker, who's a
Professor of Operations,
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Information and Decisions here
at the Wharton School.
