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Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning, everyone. What just happened here with the Debt Ceiling Agreement and all these new jobs? If you took a news holiday this weekend, you might have missed these two things. While economists expected that less than 200,000 new jobs would be created in May, the actual number came out on Friday, and it was more than 340,000. That's great for all those employed people, questionable for getting inflation as low as is best. Politically, it adds to President Biden's reelection campaign message, that his policies are helping to create more jobs than any other president in history. We'll fact-check that, but the Republicans will try to dismiss that even if it's true and hammer on the inflation.

The Debt Ceiling bill, well, if you missed it, it finally got agreed to by both parties and passed in both houses of Congress and Biden signed it on Saturday. Crisis barely averted because the treasury secretary had predicted a default would happen today, June 5th, if they didn't get it done, but a whole bunch of conservatives and a whole bunch of progressives, including most of New York City's congressional delegation voted no. We'll explain why and how it might affect you. What actually happened politically? Well, it's no small thing, at least symbolically, that Biden chose to give the first Oval Office address of his entire presidency on Friday night to emphasize the gravity and enormity of what just happened and to take a victory lap. A central message in that Oval Office address that this is a perfect example of how he achieves success and serves the American people.

President Biden: When I ran for President, I was told the days of bipartisanship were over, and that Democrats and Republicans can no longer work together, but I refused to believe that because America can never give into that way of thinking.

Brian Lehrer: Yes. He said that Friday night on television when not a lot of people are watching, but still it was Oval Office, all the gravity of that, and all of that. If he's a both-sides president, then he said this about his adversaries.

President Biden: He and I, we and our teams, we were able to get along, get things done. We were straightforward with one another, completely honest with one another, and respectful with one another. Both sides operated in good faith.

Brian Lehrer: "Good faith," says Biden about Kevin McCarthy, the House speaker, and his team. "Yes, we did it together, bipartisan, gracious," but also on message for his reelection, we should say. It was not the same message being delivered by his negotiating adversary, House Speaker Kevin McCarthy. Here he is.

House Speaker Kevin McCarthy: I had to be an optimist that every day I woke up and said, "Maybe today the president would change his mind. Maybe today he'd want to put the country first. Maybe today he'd want to meet," but he never did, not until our entire conference passed the bill.

Brian Lehrer: "Not we, not all of us, we forced his hand." The news of the weekend, a big Debt Ceiling bill with fans, detractors, and campaign talking points for both sides, and a lot of new jobs with the good and bad of what that means these days. Let's try to make sense of it with Rachel Siegel, economics reporter for The Washington Post. She's one of six reporters on a really in-depth, blow-by-blow article out now called, You Don't Have Another Option: Inside the Biden-McCarthy Debt Ceiling Deal. Rachel, thanks for coming on. Welcome to WNYC.

Rachel Siegel: Hi. Thank you so much for having me.

Brian Lehrer: The headline quote, You don't have another option. It was Kevin McCarthy who said that to the Biden team at one point. What was the context for that, and why do you think-- I know you probably don't write the headlines, but why do you think that one got pulled out?

Rachel Siegel: I think that that quote really represented so much of what unfolded over the last month. It was a quote pulled from one specific exchange, as you mentioned, between House Speaker Kevin McCarthy and the Biden administration, but it also symbolized their negotiations swerved, stopped, progressed, inched forward, moved back over the course of these really chaotic, intense weeks. For a long time, the Biden administration refused to negotiate with Republicans, particularly House Republicans, over their demands regarding the Debt Ceiling, and that ultimately led to an enormous clash that just saw things get closer and closer and closer to this really intense deadline.

It ultimately boiled down to the need for both sides to come together to make concessions in order to find some sort of middle ground, but for a long time, things were really on the terms set by House Republicans, which I think gets boiled down to that quote that you just read from Kevin McCarthy.

Brian Lehrer: Part of the context for the Biden-McCarthy negotiations, as described in your article, is that the two men had no working relationship going into these talks. We played the clip of Biden being gracious on Friday night after it was all done, but your 10-page-long article goes through many of the tensions and breakdowns along the way. How close do you think either side came to deciding that default was actually a better option than the compromises they would have to make?

Rachel Siegel: Democrats said repeatedly that Republicans were essentially okay with forcing a default, that they, in the words of Kevin McCarthy, would say, "You don't have another option. Either go with our plan, which the House GOP passed earlier this spring, or there is this risk of default looming over all of us." In the end, we had all party leadership from the House and the Senate agreeing that default was not an option, but when we were reporting this, it was often hard to square those two ideas, where on the one hand, you would have politician saying, "We absolutely will not default," but then not necessarily being able to describe the path to avoiding that. Again, these were negotiations with [inaudible 00:06:30] high stakes that ultimately boiled down to an agreement brokered by two people who, as you mentioned, had no previous working relationship.

The Senate was really sidelined from these negotiations. Hakeem Jeffries, the top Democrat in the House was also not a part of the final deal. You ultimately had President Biden and Kevin McCarthy needing to be the ones to green-light and okay something that had been hashed out between a very small team of negotiators [inaudible 00:07:00] two leaders in order to avoid a catastrophe.

Brian Lehrer: Where was the Senate? If the Republican House passed a version of a bill that was their negotiation starting point, why didn't the Democratic Senate?

Rachel Siegel: The Senate really was completely missing from these negotiations, and I think I have a lot of the same questions that you just did. Really, from the beginning, it appeared that Mitch McConnell did not want to get involved, that he saw this as something that needed to be settled between House Speaker Kevin McCarthy and President Biden. We certainly saw a lot of hand-wringing from senators after the fact, who liked to grumble about what went in the final deal, who tried to get certain amendments on the floor even though they weren't going to pass. There was plenty of frustrations on the Senate side once they had time to criticize a deal that they didn't have any part in, but this was really something that [inaudible 00:08:00] McCarthy wanted to be left to him and President Biden to hash out.

This was an enormous test of Speaker McCarthy's speakership, of his hold over the Republican Party, and it's really remarkable that in the end, that's what he got and what he wanted.

Brian Lehrer: We'll talk as we go, of course, about the content of the bill and what Americans will get hurt or help in the short-term and potentially in the long-term. Tomorrow, by the way, listeners, we'll do a whole separate segment on a climate story of the week, which we do on Tuesdays on the show, on the climate policy changes wrought by the Debt Ceiling bill. That's tomorrow. We'll talk about student loans coming up. We'll talk about Medicaid, Social Security, Medicare, food stamps in this conversation coming up with Rachel Siegel, economics correspondent for The Washington Post. We'll talk about those new jobs numbers, and the implications for working, for inflation, and things like that as we go.

Before we get to any of that, just to stay on the politics of the Debt Ceiling agreement for probably just one more question because your article is so illuminating on how it got done in this deep dive that you and your colleagues took, who got them to yes because your article describes some of the negotiating by Biden's and McCarthy's surrogates who built a negotiating relationship when Biden and McCarthy really just remain distant from each other.

Rachel Siegel: Biden and McCarthy were certainly the public faces of this agreement. They would meet in the Oval Office and each come before a podium or issue statements after the fact, often spinning things as having been much more positive than they were in the room, but for weeks, in the meantime, there was a small pool of essentially their emissaries who-- I was part of the pool of reporters following them up and down the halls of Capitol Hill, huddling in meeting rooms late at night, over the weekend, talking over the phone, huddling on the side of celebrations at the White House that had nothing to do with the Debt Ceiling. It really just boiled down to a handful of people. On the House GOP side, you had Patrick McHenry, who is a congressman from North Carolina. He chairs the House Financial Services Committee but otherwise fell into these negotiations by virtue of his relationship with McCarthy. Right alongside him was Garret Graves, who was a congressman with no official leadership titles, but a very close ally of McCarthy. He's a congressman from Louisiana. On the Democratic side, the White House emissaries were Shalanda Young, who is the head of the Office of Management and Budget.

She's seen as a real budget guru, both within the White House and in her long history on Capitol Hill. You also had Steve Ricchetti who was a very close Biden confidant and has been essential and often really seen as one of the few people who can speak for Biden in negotiating these major legislative packages. You had Louisa Terrell, who was another very close Biden adviser on domestic issues. They obviously all had stabs of their own, helping get this negotiation across the finish line. It's really remarkable that this not only massive piece of legislation, but everything that it took to get there was in the hands of these five people and ultimately signed off by their bosses.

Brian Lehrer: Some of them were from the same part of Louisiana and others of them had relationships in other ways that allowed them to turn down the temperature. If I take one thing from that part of your article, it's that personalities really do matter and relationships that would seem not necessarily part of the professional deal of being members of Congress, but more on the personal side of ways they could relate to each other, actually matter to the outcome of policy.

Rachel Siegel: Absolutely. It was a funny theme between the negotiations between Shalanda Young and Garret Graves that they had an element of this shared background. As you mentioned, Garret Graves represents the district where Shalanda Young is from. They would often tease each other over who had the best gumbo recipe. That was one of the first things I heard them say, and trying to deflect the press corps that was asking them questions going down the hall. They said that they were just chatting about their gumbo recipe. After the deal was finished, Garret Graves was talking to some reporters and even mentioned that he works out at the gym where Shalonda Young's dad also works out and that that would sometimes be an outlet for him to poke fun at the person on the other end of the table.

I think that they would all agree that that was something that allowed them to come together. That oftentimes, negotiations stopped altogether, you had people outright rejecting proposals that the other side wanted, but it did seem that there was enough of a rapport between the two sides and that ended up making a big difference.

Brian Lehrer: Listeners, any questions or comments you have about the Debt Ceiling deal economics or Debt Ceiling deal politics? Welcome here. 212-433-WNYC. Also, a special invitation for anyone who will now have to start repaying federal student loans, which we're going to get to what part that played in the Debt Ceiling deal, and it's probably going to happen anyway. As the pandemic pause will expire under this agreement, what will the end of the pause mean for you, and how you adjust your finances? On that or on the Debt Ceiling deal itself or the jobs report. 212-433-WNYC, 212-433-9692. For Washington Post economics reporter Rachel Siegel, 212-433-9692. You can also text your comment or question to that number.

Rachel, on the actual content of the bill, your article describes it as not achieving dramatic lasting changes to the nation's souring financial health. Let me ask you about the premise of that statement. Are we in a state of souring national financial health?

Rachel Siegel: Well, that depends who you ask. I think that maybe me as a reporter, it's hard to answer that question, but it certainly speaks to what the two sides wanted to come out of this Debt Ceiling deal. Republicans had really framed negotiations or a lack of them as revolving around a systemic lasting consequential shift in the nation's this fiscal trajectory. They wanted to slash the debt through this deal. They wanted to cut spending. They really wanted this deal not only to be the launching point for that but to show it in the numbers. There was one point when reporters were talking to negotiators on the House GOP side where they essentially said, "What Democrats can get out of this deal, they will get a deal over the debt ceiling. What we will get is a systemic new trajectory in terms of the way this country's finances are set up."

Now, that was something that Democrats did not agree with at all. They would say that the final deal managed to avoid or get around such sweeping demands that the House GOP was making along those lines. What they got, in the end, is interesting. Both sides were content. Kevin McCarthy said that the cuts that they did end up getting signaled what would be lasting change to come, but just from the numbers, the plan actually does very little to balance the budget. The ultimate agreement would cut spending by $1.5 trillion over the next 10 years. That's according to estimates that we got from the government last week. That's obviously an enormous number, but it's actually just a dent in terms of the 30 trillion or so debt that the country has now.

Brian Lehrer: Yes. Those numbers make the average person's head spin, right?

Rachel Siegel: Yes.

Brian Lehrer: As you report, in early April, McCarthy put forward a sweeping plan unveiling legislation that would raise the Debt Ceiling into next year, while slashing more than $3 trillion in spending over the next decade. It aimed to wipe out Biden's program to cancel student debts, clawback money meant to help the government pursue tax cheats, and revoke planned investments in climate change. It sought to impose new work requirements for poor Americans who receive health insurance and nutrition assistance from the government. They got some relatively small pieces, I think it's fair to say of that. They've got some of it. Part of what they didn't get, as you were just describing, again, in these mind-numbing numbers in the trillions, the amount of debt reduction that they want. Yet one of President Biden's political claims, is that he has reduced the debt more than many other presidents.

Can you fact-check that for us? What actually does happen to the national debt, or the annual deficits because its deficit each year that adds up to the total national debt? What's actually changed here?

Rachel Siegel: What's actually changed is that there is that minor cut. There is this cut that will amount to about 1.5 trillion over the next 10 years. The deficit reduction for 2024 is expected to be about 70 billion. That's an addition to 4.4 billion in deficit reduction for the rest of 2023. There are also some side deals that I think factor into the way various political leaders can make claims about what is in this bill. In that way, Speaker McCarthy and President Biden would agree that this bill does amount to cutting spending in a way that they both argue, is healthy for the country's long-term trajectory. What it doesn't do is significantly take care of the country's debt problem or mark any major shift. President Biden's line can be accurate depending on how you look at it.

I think sometimes we do have to fact-check the White House's claims over numbers that on their own are a little bit out of whack in the present day, whether it's an inflation number or a jobs report number, numbers that just have to have a lot of context around them. Both parties ultimately came away by saying that this was going to be a bill that would get the country on a more lasting financial footing, even if by just a little bit. Then they would go on to tell the various things tucked in the bill that spoke to each of their own policy priorities.

Brian Lehrer: Would it be accurate to say, really setting up a future conversation because we're not going to take a deep dive into this right now, that the real drivers of the debt are Social Security and Medicare, and whether they solve that eventually, by taxing more wealthy people a little bit more to close that gap or by reducing the benefits in some way, that's for a future Congress and it's also something that economists disagree over whether we're even on a dangerous trajectory, with the debt being caused by Social Security and Medicare, or whether it's really okay?

Rachel Siegel: Yes, Social Security and Medicare had been an enormous source of contention or focus of these negotiations when it came to funding levels. Social Security and Medicare make up some of the largest parts of the budget, along with other funding for domestic programs. McCarthy had been pushing for substantial cuts to these programs because he saw that as a way to bring down federal spending while increasing funding for the Military and Veterans Affairs. What ultimately came down was at the White House agreed to an inflation-adjusted reduction in direct spending on these kinds of programs. Spending on those programs would fall by about $1 billion from this year to next and rise by about 1% in 2025, but ultimately, there were not going to be significant changes that either amounted to a major part of this bill or as you said, this would ultimately become a problem for [crosstalk]

Brian Lehrer: Just to be clear, for the listeners, when you say McCarthy wanted big cuts in those programs, you're not talking about Social Security and Medicare, you're talking about other domestic programs, right?

Rachel Siegel: That's right.

Brian Lehrer: All right. Before we go to a student loan caller, Carolyn Teaneck, I see you, you're going to be the first call, your article does note that the deal includes the end of the pandemic pause on federal student loan repayments, but it says that pause was expected to expire anyway. When is this expiration date for the pause, and who needs to start getting ready to pay again?

Rachel Siegel: Yes. Student loan repayments have been on hold since March 2020. The agreement would ultimately or does now require some 43 million Americans to resume payments starting in September, which is just a bit--

Brian Lehrer: That's a lot of the Americans.

Rachel Siegel: Earlier than when it would be expected to expire anyway.

Brian Lehrer: September. That's a lot of people having to start paying back loans that they hadn't been paying since March of 2020 when the pandemic began, 43 million people. It shows the extent of student debt in this country too, right? That's not even all the student debt. These are federal student loans, and there are other student loans that haven't been affected by the pause.

Rachel Siegel: That's right.

Brian Lehrer: Carolyn Teaneck, you're on WNYC. Hi, Carol.

Carolyn Teaneck: Well, thank you, Brian. Brian, I graduated during the pandemic, graduate school in June. I was actually one of the featured folks on your program that day for folks who were not going to be able to march.

Brian Lehrer: Ah, in your graduation ceremonies. Yes, go ahead.

Carolyn Teaneck: Yes. I got a job and I got a good job. The pause has enabled me to save significantly, so much so that I had an emergency during this time that I was able to deal with without having to use a credit card or take out loans. I have been able to rebuild my savings, and I have that magic number everybody talks about, "You should have three months of savings in the event of a disaster." The pause in the student loans has made the difference in my life. I do work in nonprofits, and I will when the program starts, again, be in a program where if I pay for 10 years, I qualify to have the bulk of that loan paid off, but us 43 million people have really had a breather that is going to impact us come September.

The other thing I wanted to mention is that there's been so much talk about inflation and the impact on the debt and everything else.

What we're not hearing about is the massive profits that are being reported by corporations and businesses right now, and how that impacts on the debt as well because you also brought up the fact that we have this incredible jobs report. Most people want to work and they want to have meaningful work that allows them to live a meaningful life. That doesn't mean a three-car garage, it means knowing that you've got three months of emergency funds in the bank and that you've got a good job to go to, but we see these profits that are driving inflation and only expanding inequality because you have executives making so much and working folks not making a lot. I think all of that is tied together, and something that you just mentioned again, how are we going to deal with Medicare and Social Security, a broken tax structure that allows people and corporations with the most money to pay the least in taxes?

It's not that it's a grand conspiracy, but it's a didactic that impacts every part of our life.

Brian Lehrer: Carol, let me go and get some thoughts on your thoughts from our guest, but thank you very much for that. Carolyn Teaneck folks, tying it all together with her relatively new graduate degree, her three months of savings, thanks to the pandemic pause in student loan repayments, and speaking at very least for those 43 million people, as she says, who are going to have to start paying back those federal student loans in September. Rachel Siegel from the Washington Post, there was so much in Carol's call, but what were you thinking as she talked there, that you would like to react to?

Rachel Siegel: Well, first of all, thank you so much for calling in and for sharing that. I think that your story so perfectly encapsulated how all of these economic issues are so intertwined, that when we were up on the Hill, trying to decipher what was going into this Debt Ceiling deal, that it can be very easy, and I think, especially for politicians to consider these negotiations as being in somewhat of a vacuum, to think about deals that are brokered on Capitol Hill as staying there without tracing how the impacts of those policies were going to be felt by people like you or people who are considering how to make ends meet up against inflation, or find a job that works for their current situation. These are all things that tied together. The Debt Ceiling deal will have an impact on inflation. It will have an impact on the jobs report in some way or another, including in ways that we might not know yet.

Student loan repayments will affect what people are able to spend, how they're able to budget for emergencies or set money aside for emergencies. I think these are all really important reminders, as any of us are writing about policy coming out of Washington, not just to focus on those heads spinning numbers, or the drama surrounding politicians trying to broker a deal but to ask how those policies are then going to trickle down and how we can follow that progress.

Brian Lehrer: Let me ask you before we go to a break and start talking more about the job numbers and less about the Debt Ceiling agreement, although a little more about the Debt Ceiling agreement. Fact-check a talking point I keep hearing from Republicans that I guess we'll hear into next year, about Biden's Student Loan Pause. In the first place, they say it's driving the debt, and they say that it's plumbers and steelworkers subsidizing the student loans of rich doctors and lawyers. Can you fact-check that because I know we're going to hear that over and over again in 2024?

Rachel Siegel: Yes. I think that is another difficult one that is the point that is teased apart or ripped apart by different sides of the political spectrum. The student loan repayments are estimated to cost the government about $5 billion a month in lost revenue. That figure alone wouldn't be enough to hold up the argument that it drives the debt. As for the argument that it's taking money away from one pool and putting it towards the other, I also don't necessarily think that that's one that has sweeping impacts for the consequences of where the economy is headed. It might be one that is a little bit more micro and affects how people feel about the economy if they feel that they are not getting a fair shake as their neighbor or someone who they know or someone who works in a different industry.

It is certainly become a political flashpoint over how government funds should be spent or not spent that I think will continue to be one that is talked about, especially going into the 2024 election.

Brian Lehrer: I guess whether there should have been more of a means test to who gets their student loans paused or forgiven?

Rachel Siegel: Sure. That could be one point. That often boils down to political decision-making over what funds go where. This was something that we saw come up with work requirements in the Debt Ceiling deal. There was a lot of focus on Republicans wanting there to be stricter work requirements for certain federal programs, including food stamps. Democrats were arguing that that was something that really had no place in the Debt Ceiling deal. We didn't quite see the same level of focus around student loans play out in this Debt Ceiling negotiation, but we've certainly seen it in other major legislative processes here in Washington.

Brian Lehrer: Of course, the two things are different, the Student Loan Pause that was in effect because of the pandemic and the Student Loan Forgiveness for some people that Biden also ordered that does have some means-testing for how much forgiveness different people will get. Of course Democrats say, "Look, this is not an unequalizer, this is in a very big way, an economic equalizer. It has implications for racial economic equity. It has implications for class economic equity." Just the opposite of what the Republicans are saying about plumbers subsidizing doctors and lawyers. Though it's a sample of one, we certainly heard Carol's call about somebody with what sounds like very ordinary finances being held by the Student Loan Pause.

We'll continue in a minute with Rachel Siegel Washington Post economics reporter on the Debt Ceiling agreement and the very surprising made-jobs numbers, and your economy and student loan repayment pause or forgiveness calls. 212-433-WNYC, 212-433-9692. Stay with us.

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Joe Biden: No one got everything they wanted, but the American people got what they needed.

House Speaker Kevin McCarthy: I wanted to make history. I wanted to do something no other Congress has done, that we would literally turn the ship, that for the first time in quite some time, we'd spend less than we spent the year before. Tonight, we all made history.

Joe Biden: We're protecting important priorities from Social Security to Medicare, to Medicaid, to veterans, to our transformational investments in infrastructure and clean energy.

Brian Lehrer: Kevin McCarthy and Joe Biden spinning the Debt Ceiling deal their ways as we continue with Rachel Siegel, Washington Post economics reporter, on the Debt Ceiling agreement and the very surprising made-jobs numbers, and your economy and student loan repayment calls, 212-433-WNYC, 433-9692. Rachel, I just want to put a pin in the food stamps aspect of the deal because I think this is important to a lot of listeners personally, and it can be confusing. My understanding from your reporting is that it increases work requirements for childless prime working-age single adults, but it actually increases food stamps spending overall and covers more people. Do you have details on who the new recipients would be?

Rachel Siegel: Yes, it's amazing that this cork actually made it so that there would be more recipients. To break it down a bit, veterans, people who are unhoused and young adults who recently left foster care will be exempt from new SNAP work requirements. Veterans, people who are unhoused, and adults ages 18 to 24 who were previously in foster care, will be newly exempt from the work requirements. For the first time, Americans who are homeless would not need to meet work requirements to qualify for SNAP benefits. That includes people who are unsheltered, living in shelters, or temporarily living in someone else's home. That's according to the HUD secretary. As a result, the Congressional Budget Office expects that many more people, an additional 78,000 per month on average will qualify for SNAP benefits between 2025 and 2030. That will cost a bit extra, but as you mentioned, significantly expands the number of people who are eligible.

Brian Lehrer: Rosie in Brooklyn, you're on WNYC. Hi Rosie.

Rosie: Hi there. How are you?

Brian Lehrer: Good. How are you?

Rosie: Good. Thanks. I just wanted to make a comment on the Student Loan Forgiveness. I feel like Democrats are giving away the 2024 election by not bringing this to fruition because a lot of young people voted for Biden with the only hope for him was to actually enact Student Loan Forgiveness in some capacity.

Brian Lehrer: Well, he did enact it in some capacity. Are you saying the $10,000 forgiveness plus the $20,000 forgiveness for people who had Pell Grants, which is kind of a means test that's lower income people is not substantial enough to get those young voters back in the booth?

Rosie: I think it's substantial enough if it actually happens. I filled out the application for it as a Pell recipient and it's been maybe eight or nine months and it still does feel like it's up in the air. It doesn't feel like it's written in stone at all to me, and I think it's on a lot of other people's minds from the people that I'm talking to. We feel like it's a promise that's hanging in the air and not guaranteed at this point.

Brian Lehrer: Yes. Rosie, thank you very much. I don't know if you've reported on the state of the Student Loan Forgiveness program Rachel, but it's up in the air because it's stuck in the courts, right? Republicans are challenging it.

Rachel Siegel: Yes, that's right. Just to pick up a point that Rosie just mentioned, I think this is a really key example of how these negotiations are going to play out over the course of the 2024 election. We already have candidates who are out on the campaign trail. Democrats secured a big win in this deal by kicking the next Debt Ceiling negotiation until after 2024. That doesn't mean that the decisions made in the meantime will not come to bear on that election, whether it's for President Biden or members of the house GOP, and I just appreciate you raising that point.

Brian Lehrer: Yes. We will see what happens in court with that. To the political point that the caller Rosie was making, Biden might get credit for trying to enact it and people might want to vote for him for that, even as it's tied up in court, if it's not resolved by then or people might see it as too small and not effective enough to bypass all of that legal challenge. I don't know what could have bypassed the legal challenge, but maybe people will see it as too small and, "By the way, we don't have this in our pockets," and be dissuaded from turning out again. That remains to be seen, but I think those are some of the parameters. The Friday jobs numbers for the month of May, the prediction from economists was 190,000 jobs. It came in so much more than that. More like 340,000. Who missed what?

Rachel Siegel: I think this is going to be another example of estimates that just turned out to be completely wrong really ever since the pandemic began more than three years ago now. It's just remarkable that with this jobs report or others that came before it, that the job market just continues to be absolutely growing like gangbusters. Forecasters missed this one. They may have been over-fixated on recent layoffs in the tech industry or just this broader expectation that eventually the job market does have to slow down. They saw the absolute opposite employers posted, as you mentioned, 339,000 jobs in May. That is doing quite a bit to further put off fears of a recession or an economic downturn that people expected to be around the corner.

Brian Lehrer: Any sectors of the economy worth pointing out that had particular growth?

Rachel Siegel: We've seen quite a bit of growth recently in service industries that are continuing to hire, whether that's tourism, hospitality, restaurants, a lot of businesses that are still very desperate to hire, that are trying to find their footing in these strange times in the years after the pandemic, and are doing really everything they can to bring people back into their restaurants, back into their hotels, back into their bars. Whether that's through higher pay or other deals, other benefits, to try and bring people back into jobs that many haven't necessarily flocked back to, we're really continuing to see that strength.

Brian Lehrer: Is this good news or bad news?

Rachel Siegel: It's certainly good news if you are someone who is looking for a job, if you are looking maybe for a better job than the one that you have now. A really hot, tight labor market is good for workers. It allows them not only to go and find an opening, but maybe find an opening that is a better fit for them, that pays a little bit more per hour or gives flexibility to work from home certain days or to work part-time. That is the good news. The less good news, which is hard to say, is that a cooling job market is one of the things that conventionally has to happen in order for the economy to cool down. Why does the economy have to cool down? Because that is what will ultimately get inflation under control. Officials at the Federal Reserve are trying very hard to do their part.

They're getting interest rates up to quite historic highs in order to make it more expensive to borrow or invest or get a mortgage or buy a car. That's pretty much the toolkit at their disposal. They cannot tell people to stop going out to look for jobs or to stop taking a new job. These are things that have to come into better balance in order to get the economy on more stable footing, and it's just not something that we've seen turn yet in the job market.

Brian Lehrer: I heard one report that said wages of lower income workers are actually going up faster than inflation on average so far this year. The balance is actually working in the favor of the workers, even with this 5% inflation rate. Does your reporting indicate that?

Rachel Siegel: Yes, that's right. I think that's one of the ways that it can be difficult to say higher wages are a "bad thing." It's certainly a good thing if you are someone who is receiving that wage, and maybe it gives you more room in your budget, it gives you the ability to overcome inflation and have a little bit left over. Those higher wages are also something that we tend to see can be persistent drivers of inflation, if not controlled sooner. These are all things that have to come into a better balance, hopefully over time, hopefully, without causing a shock, either to that individual employee or to the economy as a whole. It's just absolutely remarkable what we saw in May and in the months before it that that growth in the job market and in wages is really just not showing signs of turning around even with how hard the Fed is pushing to slow the economy.

Brian Lehrer: It raises another question. I think it begs another question. We've talked about this on the show for month after month now, but here it is, again, with these May numbers. All these jobs, even as inflation has been coming down for many months in a row, though it's still challenging, we hide around a 5% annual rate. Any new thoughts on how much employment is actually even related to inflation and how much people need to be thrown out of work to tame inflation, or how much that's proving to be a myth for this current round of inflation over the last couple of years?

Rachel Siegel: I think that that will be one of the enormous questions that will have to be answered by economists, by reporters, by politicians when there is perhaps a little bit more room for hindsight. You're absolutely right. There has been this growing criticism of this conventional econ101 thinking that the economy, in order to slow down, cannot have a job market that is so hot. That you have to be able to press down on employment to get inflation under control. That had been the model that really governed a lot of economic thinking and policymaking for a long time. You have a lot of people who are pointing at just what is happening right now and saying, "Well, that clearly is not bearing out. How can you argue that this type of strong job market is one that has to suffer in order to get inflation under control?"

Inflation has already fallen quite markedly from the peak that it was at last summer. As you mentioned, it is not near normal levels, but if policymakers can manage to get inflation to continue ticking down, if supply chains can improve, if the economic effects of Russia's invasion of Ukraine can fall further and further into the rearview mirror, if all of that can happen while the job market just continues to absolutely blossom, then that would be a very good thing for workers and really a test of this economic thinking that had governed so much of where we are now.

Brian Lehrer: The big drivers of inflation right now you've reported are housing and cars. Those are the biggest two things that people take out loans for. If interest rates keep going up to tame inflation, it also actually creates inflation for a lot of individual Americans on the biggest expenses in their lives, usually housing, and for many people cars. That's another conundrum.

Rachel Siegel: It's another conundrum. The big category that I would add specifically to that is rent. We are really just not seeing a turnaround in rent costs that would be essential to bringing down overall inflation. As you mentioned, high borrowing costs can make a real difference in deterring people from buying new homes, buying new cars, even thinking about buying new homes and buying new cars. Those types of home price increases, this really hot housing market that has trickled down to higher rents is something that we have not seen reverse yet. Unfortunately, that will be quite key not only to getting overall inflation under control but to getting people's individual baskets of good under control. Rent is an enormous driver of what many people spend a very large share of their budgets on, and they are unlikely to see significant relief until rent prices come down too.

Brian Lehrer: Can I get you to fact-check one more Debt Ceiling agreement thing before you go? You reported in your article on the negotiations that for weeks, Biden had hammered Republicans for targeting their spending cuts predominantly at federal programs to combat poverty, arguing that their calls for austerity threatened to harm the neediest families. We see that they're going to probably harm some who are going to lose their food stamps if they're non-working adults who can't satisfy the work requirement, childless adults. The article says rather the president said the GOP should be open to finding savings through new revenue, including tax increases, which Republicans historically and overwhelmingly oppose. They talked about the costly tax cut adopted under Trump five years ago with respect to its implications for the deficit.

Then you have a one-word quote of McCarthy that we can't say on the radio ball-blank. Fact-check that for us. McCarthy says revenue has increased since the overhaul because tax cuts drive economic growth, which drives federal revenue. The Democrats would say boldly to that. Fact-check it.

Rachel Siegel: I'm sorry to say that's a tough one for me. I certainly think of the specific exchange that you were describing. A lot of my experience covering the Debt Ceiling on the Hill over the last couple of weeks, as one that just showed how absolutely at odds-- I don't mean to be avoiding the question, but I think it illustrates how absolutely at odds the two sides saw these negotiations for so long. Spending and revenue issues were such an enormous point of contention and really the crux of these negotiations for weeks. We had the negotiating teams tell us that the other parts that we've discussed, such as student loans, such as work requirements, not that they were secondary, but that the real focus of needing to come to an agreement revolved around the exact type of issues that you're just describing.

I think I'm having trouble fact-checking it because it just seemed to sweep up such vast not only negotiations within this specific deal, but years of economic policymaking that ultimately kept the two sides apart for quite a long time.

Brian Lehrer: Well, then let me throw another one at you that may have as complicated an answer. Pentagon spending, which got exempted from the freeze on other kinds of what's called discretionary spending. Certainly, you look at this country's military spending, which is what? Over $700 billion a year, and you go, "Does the Pentagon really need more money than it gets today when housing assistance in this housing market that you were just describing gets frozen?" How much of a driver of the debt is the Pentagon?

Rachel Siegel: Military and defense spending, generally speaking, does make up a large share of these budget and deficit questions. Military and defense spending ended up being one of the areas that the Senate, in particular, Senate Republicans were quite upset about when the final deal was released and when it came time for the Senate to vote on it. There have been a lot of calls from senators to revisit that specific slice of spending and make sure that there will be future opportunities to revisit questions around defense and military spending. In the end, still, this deal wasn't necessarily going to signal massive shifts in one way or the other, but it might be something that we see revisited by Congress when the Senate has a little bit more control.

Brian Lehrer: Rachel Siegel, economics reporter for The Washington Post. Thank you so much for joining us and taking this deep dive.

Rachel Siegel: Thank you. I really appreciate you having me.

 

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