As the GOP and Democrats failed to reach an accord regarding stimulus relief, President Trump hopes to bypass Congress with his own stimulus plan. Pavlina Tcherneva, Associate Professor of Economics at Bard College and Author of ‘The Case for a job Guarantee,’ joins The Final Round panel to break down whether the President actually has the authorization to pass the package, and if his plan covers enough ground.

Video Transcript

MYLES UDLAND: All right, welcome back to The Final Round here on Yahoo Finance. Myles Udland with you in New York. Let's turn now to everything going on in the world of economics. Been a very, very interesting six months for fiscal policy here in the US and stands to be very interesting for several years ahead. And we're joined now by Pavlina Tcherneva, an associate professor of economics at Bard College and author of the book "The Case for a Job Guarantee.

Professor Tcherneva, thanks so much for joining the program. Let's just start with, I guess, what you make of the last six months, I guess, we've seen here in the US? The changes in what I guess I would call fiscal norms-- what politicians find acceptable relative to the areas that you've been exploring with respect to what's really possible for the United States government. Does it feel like this shift we've seen as kind of a permanent resetting of how the state thinks about its fiscal capacity?

PAVLINA TCHERNEVA: Hi, thanks for having me. Yeah, there is some shifting of consensus in the sense that, you know, for such a long time, we thought that the central banks, the Federal Reserve can provide the support that the economy needs. And I think we learned that lesson in 2008. We saw extraordinary action, both on the side-- on the fiscal side, but also on the monetary side.

And I think that there has been a general realization that well, the recovery was way too slow, despite the extraordinary Fed support. And so we now are paying attention to the fiscal side, to Congress, really, which has had traditionally, might be more power to sway the direction of the economy. And now we are resorting, of course, to Congress to provide the necessary support that the economy would require.

But to your question of how I would characterize the last six months, honestly, I would say squandered time. You know, that would be my characterization, because we-- we woke up one day and we said, OK Congress has to pass a major package. And we passed the size is a budget that we hadn't seen in recent history-- since probably World War II, 10% of GDP. And that could have provided, and I think it did provide considerable support. It could have been targeted better.

It could have bought us a lot more time. But now here we are with support expiring, without a consensus on what to do next. And then Trump realizing that there are very high political costs to inaction. And then, you know, doing this sort of plan that he proposed over the weekend.

MYLES UDLAND: Well, and you mentioned 2008, and I think-- I think most of the history of is that the-- kind of what was passed in the wake of that was inadequate by several orders of magnitude, and that there should have been perhaps more political capital spent on getting a larger package through. And I sort of hear you suggesting that we may have actually learned nothing from that history, save, for a week in March when we had Steven Mnuchin saying, we're going to get checks out fast. And they got round of checks out. And as you mentioned, they helped greatly, even if they weren't perfect.

But now, we're sort of back, I feel, like, to where we were in 2010. We're talking about, you know, not quite the debt ceiling yet, but I'm sure that's coming. And these-- these fiscal cliffs that we seem to be rolling over, because it's kind of a habit of how Congress has structured itself in the last couple of decades.

PAVLINA TCHERNEVA: Yes, I mean, you know, one of the lessons from 2008 is that the federal government can overnight appropriate very large budget to deal with the economic crisis. And that's what we did in March, as well. We-- one of the lessons, I hope, that we will get from the these two experiences is that the power of the public purse means that whenever there is a need to spend, we have the full capacity to spend. We don't depend on foreign borrower-- on foreign lenders. We don't depend on-- we didn't call any wealthy tax bears to get their tax revenue just to pass the budget that we did. That is the definition of the power of the public purse.

And so it's not just about science. It's also about direction. And so because it wasn't properly, I think, targeted in the first time in 2008, we ended up with the longest jobless recovery in our post-war history. What about now? We now know that clearly, we can pass sizable budgets. We are now talking about anywhere between another trillion to 3 trillion-- comparable number, right-- about another 10%, potentially, of GDP. Clearly, we can pass those budgets.

Where is the money going to go? What will it do? And my contention is we have got to do everything possible to avoid another protracted jobless recovery, which means let's target this spending in a much more surgical way, if you will, to number one, deal with the public health concern, Because it's the virus that's going to determine the outcomes of the economy. And number two, once that's under control, to directly create jobs for the unemployed. We can't tolerate these elevated levels of unemployment but because they are themselves the obstacle to recovery.

- Professor, I know the name of your book is "Federal Job Guarantee," and also, as far as unemployment is concerned, even though it's 10.2% for minorities, it's even higher. So when you talk about targeting that spending, how do you do that to also help minorities?

PAVLINA TCHERNEVA: Well, my proposal is really to implement a public option for jobs. You know, the guaranteed part of the title of the book is basically the certainty. That if somebody goes to an unemployment office, they can walk out with a basic job offer. And so the proposal here is that we do public service employment. There are plenty of neglected areas and plenty of work to be done. But if it is a guarantee.

That means that those folks who have the hardest time in the labor market will be the ones with assured help, with assured transitional job offer, with assured decent income. And we know what happens in the labor market, it's not really a very fair game when there are shortage of jobs. Usually, people of color, low income folks of the ones who get those jobs last, and they are the first ones to be let go.

So it is for-- for low income folks and people of color that we need to create the most stable employment conditions. So the job guarantee will be that option that provides on the job training, provides credentialing, all the other systems that we provide to the unemployed with the assurance of stable living income.

MYLES UDLAND: And then Professor, before we let you go, I just want to ask about the-- I don't know would you consider yourself part of the MMT movement-- like, I think left wing economics has certainly had a movement in the last a year or so. A lot more popular with people I'm talking to. It's certainly all over my Twitter feed. And we could go on kind of all day on that.

But when you think about the position that MMT broadly has kind of staked out within the economics community, it doesn't feel like this is now a marginalized group. It seems to me from the outside like it's gaining a lot more traction with policymakers, with aspiring lawmakers. Does it seem that way to you kind of being in the fight on a more regular basis, certainly, than I am?

PAVLINA TCHERNEVA: It certainly does. Yes, I have been working on the ideas of modern monetary theory since the '90s-- mid to late '90s. At the time, I always thought that we will be in this for the long haul. And by in this, I mean busting a couple of myths. The first one is that the federal government is somehow constrained artificially like a household in the way they spend and. So we have plenty of teachable moments that demonstrate that we've got the funding sources as we need them.

But the second-- the second myth that I hope we can bust is that the federal government is helpless in the face of unemployment. That we have to somehow accept it as a natural outcome. And that in fact, we're always going to be responsible for all of the costs of unemployment the social fallout. The government already pays those costs. And we can do things better. And we need to take a page from our New Deal experience and just create the jobs directly.

MYLES UDLAND: Yeah, we're now in an environment where the Federal Reserve chair is asked in a press conference why he's creating x amount of unemployment. And I don't think you would have heard that, certainly, during the Greenspan years. All right, Pavlina Tcherneva, associate professor at Bard College. Thanks so much for joining the program. Talk to you soon.

PAVLINA TCHERNEVA: Thank you for having me.