WEBVTT - Bloomberg Wall Street Week - August 4th, 2023 0:00:00.240 --> 0:00:02.640 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 And we may not have an overall recession, we're having 0:00:04.400 --> 0:00:06.960 a rolling recession. To Konye Roll looks pretty strongly when 0:00:07.000 --> 0:00:07.680 it comes to jobs. 0:00:07.720 --> 0:00:09.840 The financial stories that shape our world. 0:00:09.960 --> 0:00:13.640 Three major regional bank failures send shockwaves through the banking system. 0:00:13.680 --> 0:00:15.440 We're all trying to figure out what to make of 0:00:15.600 --> 0:00:17.000 generative AI. 0:00:16.920 --> 0:00:19.320 Through the eyes of the most influential voices. 0:00:19.440 --> 0:00:22.400 Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America, 0:00:22.560 --> 0:00:25.279 deebro Lair of the Paulson Institute, well then Hubbard of 0:00:25.280 --> 0:00:26.280 the Columbia Business School. 0:00:26.280 --> 0:00:30.120 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.200 --> 0:00:33.280 This is a special addition of Wall Street Week from Aspen, Colorado, 0:00:33.360 --> 0:00:36.600 where we've come for the annual Aspen Economic Strategy Group meetings, 0:00:36.960 --> 0:00:41.479 bringing together economic experts and business leaders for a nonpartisan, 0:00:41.600 --> 0:00:44.960 detailed discussion some of the big economic issues in front 0:00:45.000 --> 0:00:45.279 of us. 0:00:57.960 --> 0:00:58.440 This year. 0:00:58.480 --> 0:01:01.560 The focus is on building a more resilient US economy, 0:01:01.720 --> 0:01:04.560 with a discussion ranging from things like the debt and deficit, 0:01:04.600 --> 0:01:07.920 to tax policy to where we're headed with artificial intelligence. 0:01:08.120 --> 0:01:10.720 We'll hear from special contributor Larry Summers of Harvard, his 0:01:10.840 --> 0:01:14.479 fellow former Treasury secretaries Hank Paulson and Tim Geidner, former 0:01:14.520 --> 0:01:18.800 Honeywell CEO Dave Cody, and regional Fed presidents Austin Goulsby 0:01:18.840 --> 0:01:22.240 of Chicago and Raphael Bostic of Atlanta. But we start 0:01:22.280 --> 0:01:25.240 with the distinguished labor economists who until recently was interpreting 0:01:25.240 --> 0:01:28.199 these numbers for President Biden. She's Cecilia Rouse. 0:01:30.280 --> 0:01:33.679 What the Department of Labor reported today was that the 0:01:34.000 --> 0:01:37.679 US economy added about one hundred and eighty seven thousand 0:01:37.760 --> 0:01:43.000 jobs last month, which is a robust number. It's the 0:01:43.120 --> 0:01:46.520 kind of number that I'm confident my callings at the 0:01:46.520 --> 0:01:51.520 Biden administration celebrated because what we've known is we had 0:01:51.560 --> 0:01:55.840 the pandemic induced recession. We saw the fastest growth out 0:01:55.840 --> 0:01:57.880 of that. But we also know that that kind of 0:01:57.960 --> 0:02:01.360 growth of three hundred thousand jobs month is not sustainable. 0:02:01.360 --> 0:02:04.800 That's not consistent with an economy that has reached its 0:02:04.920 --> 0:02:06.680 you know, whether we want to call it steady state, 0:02:06.720 --> 0:02:11.160 but it is a naturally, you know, robust economy, and 0:02:11.240 --> 0:02:15.520 so we've been looking for in anticipating and kind of 0:02:15.520 --> 0:02:19.000 a cooling last year, President Biden had an op ed 0:02:19.040 --> 0:02:21.280 it was I think a Wall Street journal anticipating this, 0:02:21.400 --> 0:02:24.040 But it's not even just about the president there, It's 0:02:24.080 --> 0:02:26.359 just that that is what we've that's what we want 0:02:26.400 --> 0:02:29.040 to see. That is what the Federal Reserve is looking for. 0:02:29.600 --> 0:02:32.840 Is a labor market that remains remarkably resilient. 0:02:32.919 --> 0:02:35.280 I will say that, so it is robust, but. 0:02:35.280 --> 0:02:40.000 Where we have the annual jobs numbers looking more consistent 0:02:40.040 --> 0:02:43.079 with just sort of typical turnover in a strong economy. 0:02:43.160 --> 0:02:46.160 As you say, remarkably resilient as a labor conduct Have 0:02:46.160 --> 0:02:48.760 you been surprised not to snap back after the pandemic 0:02:49.000 --> 0:02:51.400 but at the continued robustness, because one hundred and eighty 0:02:51.400 --> 0:02:53.359 seven thousand jobs may only be two hundred thousand, but 0:02:53.360 --> 0:02:55.280 it's a lot more than you need to have just 0:02:55.320 --> 0:02:58.440 to absorb the new additions of people to their workforce. 0:02:58.520 --> 0:03:01.000 Absolutely, and it's slightly more than you would expect us 0:03:01.080 --> 0:03:03.920 see with an unemployment rate of three point five percent, 0:03:04.639 --> 0:03:08.040 and at this stage of the economic recovery, so it 0:03:08.120 --> 0:03:11.200 has been markeably resilient. If you think about the changes 0:03:11.280 --> 0:03:14.040 in the inflation rate over the past year, inflation has 0:03:14.080 --> 0:03:17.240 come down quite a bit, and yet we've not seen 0:03:17.639 --> 0:03:21.200 much evidence of any impact on the labor market. So 0:03:22.080 --> 0:03:25.560 this for me, this goes back to the massive disruption 0:03:25.680 --> 0:03:30.560 caused by the pandemic, which affected every aspect of our 0:03:30.600 --> 0:03:34.760 economy in the US globally, and that it goes to that, 0:03:35.720 --> 0:03:38.120 you know, the disruption was on the supply side. We 0:03:38.240 --> 0:03:41.640 definitely had the robust assistance on the fiscal side, on 0:03:41.680 --> 0:03:44.200 the monetary side to ensure that we could get through 0:03:44.240 --> 0:03:48.120 the pandemic without too much disruption to our way of 0:03:48.160 --> 0:03:52.640 life and to our economic you know, our economic health, 0:03:53.240 --> 0:03:55.960 and that this is an economy that is knitting itself 0:03:55.960 --> 0:03:58.840 back together, but it has been surprisingly resilient. 0:03:59.040 --> 0:04:02.160 Wels I believe saw little bit of a reduction in 0:04:02.200 --> 0:04:05.760 the average hours worked per week. Is that potentially indication 0:04:05.880 --> 0:04:08.520 maybe the labor markets started to soften a little around 0:04:08.520 --> 0:04:08.960 the edges. 0:04:09.280 --> 0:04:12.280 So again we want to see a little bit of softening. 0:04:12.320 --> 0:04:16.080 That's what the Federal Reserve is looking for. So you know, 0:04:16.120 --> 0:04:18.799 it's important that we not focus on anyone month's numbers, 0:04:19.400 --> 0:04:22.880 but that could be a sign that a little bit 0:04:22.920 --> 0:04:25.719 of cooling here and there are unemployment insurance claims numbers 0:04:25.720 --> 0:04:29.120 remain very low, that job openings numbers remain very high, 0:04:29.240 --> 0:04:32.240 so we fundamentally have a strong labor market, with some 0:04:32.440 --> 0:04:35.800 signs that there's some cooling as we would hope to see. 0:04:35.920 --> 0:04:38.120 We've been through an extraordinary period of time for the 0:04:38.200 --> 0:04:42.039 labor market among other markets, because of the pandemic we 0:04:42.080 --> 0:04:43.920 now are coming back from that. Is it too early 0:04:44.000 --> 0:04:47.360 to ask ourselves are there structural changes we think in 0:04:47.400 --> 0:04:50.720 the labor market that may last well into the future. 0:04:51.160 --> 0:04:51.719 I think it's a. 0:04:51.680 --> 0:04:53.880 Little early to tell. I mean, we certainly hope there 0:04:53.920 --> 0:04:56.440 will be. We do know, for example, if we look 0:04:56.480 --> 0:04:59.760 at the economy more broadly, during the pandemic, we had 0:04:59.800 --> 0:05:04.479 the massive rotation of consumption of goods over services that 0:05:04.640 --> 0:05:09.000 is renormalizing, but we still see that our services consumption 0:05:09.200 --> 0:05:12.000 isn't quite back where it was before. So we would 0:05:12.040 --> 0:05:16.160 anticipate to see more employment growth there, maybe a little. 0:05:15.880 --> 0:05:17.640 Bit less in goods. 0:05:18.040 --> 0:05:20.560 So we expect to see some of those changes. You know, 0:05:20.640 --> 0:05:22.760 here at Aspen we've been having a lot of discussion 0:05:22.760 --> 0:05:27.680 about generative AI and technological change and what kinds of 0:05:27.800 --> 0:05:30.440 changes that will bring to our labor market and our economy. 0:05:30.960 --> 0:05:33.680 You mentioned the generative AI, which has been the subject 0:05:33.760 --> 0:05:35.880 of a lot of discussion here at the Aspen Economic 0:05:35.880 --> 0:05:39.640 Strategy Group, and it's early on. At the same time, 0:05:39.680 --> 0:05:41.680 one of the things we're hearing is it's coming really 0:05:41.720 --> 0:05:46.000 fast and very broadly, in a very broad sense. As 0:05:46.000 --> 0:05:48.160 a labor commist, what will you be looking at in 0:05:48.279 --> 0:05:50.720 terms of what we need to do to adjust our 0:05:50.880 --> 0:05:55.040 workforce for a world of really broad based AI. 0:05:56.000 --> 0:06:00.560 So we all embrace technology and in our economy and 0:06:00.600 --> 0:06:05.280 over history we have all benefited from changes technological changes 0:06:05.279 --> 0:06:08.000 such as this general AI. It can be disruptive in 0:06:08.040 --> 0:06:11.200 the short term, and I think the hope is that 0:06:11.279 --> 0:06:15.440 this will be more complementary with labor, meaning that this 0:06:15.560 --> 0:06:20.480 kind of technological change allows workers to work better increased productivity, 0:06:20.880 --> 0:06:23.960 as opposed being an absolute substitute for labor, so that 0:06:24.320 --> 0:06:28.520 we see firms using the technology instead of workers. So 0:06:29.240 --> 0:06:31.080 that is the challenge will be some of both. I 0:06:31.120 --> 0:06:35.520 think we hope that it'll be more complementary than substituting 0:06:35.520 --> 0:06:37.920 for labor, but that's what I think we'll be looking for. 0:06:38.880 --> 0:06:43.000 We saw numbers about what fraction of occupations, you know, 0:06:43.160 --> 0:06:45.440 in a certain fraction of the labor force, you know, 0:06:46.120 --> 0:06:49.600 these kinds of technologies are substituting for particular tasks, but 0:06:49.680 --> 0:06:51.159 not for complete jobs. 0:06:51.640 --> 0:06:52.839 That maybe where it starts. 0:06:53.440 --> 0:06:55.039 It's hard to imagine that's where it ends. 0:06:55.279 --> 0:06:57.400 Doctor Czers, thank you so much for being holo. We 0:06:57.520 --> 0:06:59.600 really appreciate it. My planning for this is a cio 0:06:59.640 --> 0:07:03.040 Rose until recently was the chair of the Consuled Economic Advisor. 0:07:03.800 --> 0:07:06.240 On Wednesday, we woke up to the unexpected news that 0:07:06.279 --> 0:07:09.560 Fitch had downgraded US sovereign debt and then learned that 0:07:09.560 --> 0:07:11.680 the Treasure we have to borrow yet more money to 0:07:11.720 --> 0:07:14.400 cover the deficit that we're running, all of which made 0:07:14.480 --> 0:07:17.240 the meetings at the Aspen Economic Strategy Group even more 0:07:17.240 --> 0:07:20.080 timely because the subject this year was building a more 0:07:20.120 --> 0:07:23.240 resilient US economy. So we met with the two chairs 0:07:23.280 --> 0:07:25.880 of the organization. They are the former Treasury secretaries, Hank 0:07:25.920 --> 0:07:28.360 Paulson and Tim Geidner, and we got their thoughts about 0:07:28.360 --> 0:07:30.720 what they're trying to do to help the US get 0:07:30.760 --> 0:07:36.200 back on the right fiscal track. Tim Geidner Hank Pulson 0:07:36.240 --> 0:07:39.200 co chairs of the Aspen Economic Strategy Group. So Hank, 0:07:39.280 --> 0:07:41.720 let me start with you. You've been at chairger a bit longer. 0:07:41.960 --> 0:07:44.560 What do you have to accomplish this week in these meetings? 0:07:44.600 --> 0:07:48.240 Well, David, when we set this up, our goal was 0:07:48.280 --> 0:07:53.400 to create a forum where we had cutting edge economic research, 0:07:53.760 --> 0:07:57.480 evidence space research, where we could discuss and debate it 0:07:57.840 --> 0:08:01.960 on a non partisan basis. And a big one of 0:08:01.960 --> 0:08:04.400 the things we really want to do is also a 0:08:04.400 --> 0:08:08.440 creative forum where we can have economic leaders get to 0:08:08.480 --> 0:08:12.400 know each other, build bonds, and do it across generations, 0:08:12.880 --> 0:08:17.760 across sectors, and across parties. And then we want this 0:08:17.960 --> 0:08:21.640 research to have a real world impact. So that's our goal. 0:08:22.400 --> 0:08:25.200 And so far over the last six years, I think 0:08:25.240 --> 0:08:28.440 the group has been coming together and I'm sort of 0:08:28.520 --> 0:08:29.640 very pleased with the way it's. 0:08:29.520 --> 0:08:33.680 Developed and tim the subject of the meetings is building 0:08:33.720 --> 0:08:36.480 fiscal resilience in the US economy. Couldn't be more timely. 0:08:36.520 --> 0:08:38.920 I want to talk about that. Even this week which 0:08:38.920 --> 0:08:40.679 they have Fitch ratings is also bought varring more of 0:08:40.679 --> 0:08:43.640 the strategy. Putting those on one side. What do we 0:08:43.679 --> 0:08:46.000 need to do to build fiscal resilience. 0:08:45.880 --> 0:08:49.480 Well, the topic is about economic resilience more broadly. Fiscal 0:08:49.480 --> 0:08:51.360 resilience is one part of those things. And you know, 0:08:51.360 --> 0:08:53.000 if you look at the economy day, it's a pretty 0:08:53.040 --> 0:08:54.599 resilient economy. You know, we've been through a lot of 0:08:54.679 --> 0:08:58.240 challenges and we look pretty strong today in a relative sense, 0:08:58.559 --> 0:09:00.680 but we have a lot of long term challenge and 0:09:00.720 --> 0:09:03.400 the fiscal channels are part of those challenges. And you know, 0:09:03.679 --> 0:09:05.640 if you think about all the things we face in 0:09:05.679 --> 0:09:07.960 this more dangerous world, and you know, a country with 0:09:08.160 --> 0:09:11.520 very high levels of poverty and huge challenges and innovation, 0:09:12.840 --> 0:09:15.199 it's important to make sure that we have people focused 0:09:15.240 --> 0:09:19.360 on research that can help inform better public policy choices 0:09:19.440 --> 0:09:21.360 at the national level and these things. And that requires 0:09:21.360 --> 0:09:24.120 bringing people together from all sorts of disciplines, all parts 0:09:24.160 --> 0:09:26.840 of the economy, both parties, trying to figure out how 0:09:26.880 --> 0:09:30.120 to build trust and knowledge help shape those outcomes. 0:09:30.160 --> 0:09:31.800 Thank clocking at the program. One of the issues we 0:09:31.840 --> 0:09:33.640 can be talked about is how much money we're spending 0:09:33.880 --> 0:09:36.760 the deficit, and that subject's been around for quite a while. 0:09:36.800 --> 0:09:39.400 You've dealt with before. What are the prospects of actually 0:09:39.400 --> 0:09:41.520 coming up with solutions that might be implemented. 0:09:41.760 --> 0:09:45.920 Well, let me tell you something. I'm an optimist. You 0:09:46.000 --> 0:09:47.800 need to be an optimist to do what we're doing. 0:09:48.280 --> 0:09:50.720 And I believe what we're doing here is a major 0:09:50.840 --> 0:09:53.280 step forward in doing this because if we can have 0:09:53.520 --> 0:09:57.280 great research and get people together across parties and come 0:09:57.360 --> 0:10:00.760 up with someprific ideas and get the facts out and 0:10:00.800 --> 0:10:05.160 think tanks to both political parties. We can make progress. Now, 0:10:05.280 --> 0:10:11.400 you're right the trajectory, our fiscal trajectory is concerning, but 0:10:11.440 --> 0:10:14.120 we are a rich country and we've got time to 0:10:14.120 --> 0:10:16.320 deal with it. But we need to do some things 0:10:17.160 --> 0:10:22.160 in the next few years to change that trajectory. And 0:10:22.360 --> 0:10:24.720 I think that's going to be very important, and to 0:10:24.800 --> 0:10:28.800 do that, it's going to take doing things on both 0:10:28.880 --> 0:10:31.760 the spending side and the revenue side. We're going to 0:10:31.800 --> 0:10:34.240 need more revenues and we're going to need to figure 0:10:34.240 --> 0:10:39.600 out how to deal with some difficult issues in areas 0:10:39.720 --> 0:10:40.560 like the entitlements. 0:10:41.960 --> 0:10:44.920 That was former Treasury Secretaries Hank Paulson and Tim Geidner. 0:10:46.720 --> 0:10:48.880 Coming up, we'll hear from our special contributor here on 0:10:48.880 --> 0:10:51.040 Wall Street Week, Larry Summers, about whether he thinks it's 0:10:51.040 --> 0:10:52.800 time for him to start joining some of the others 0:10:52.840 --> 0:10:55.440 like Bank of America economists and deciding that maybe we 0:10:55.480 --> 0:10:58.240 won't have that recession after all. That's next on Wall 0:10:58.240 --> 0:10:59.440 Street Week on Bloomberg. 0:11:01.800 --> 0:11:06.000 This is Bloomberg Wall Street Week with David Weston from 0:11:06.120 --> 0:11:08.960 Bloomberg Radio. 0:11:14.160 --> 0:11:16.040 This is Wall Street Week. I'm David Weston. We are 0:11:16.120 --> 0:11:18.640 joined here in Aspen, Colorado by our very special contributor 0:11:18.679 --> 0:11:21.080 on Wall Street Week. He's Larry Summers of Harvard. So Larry, 0:11:21.120 --> 0:11:23.160 great to be with you here in Aspen. At the 0:11:23.240 --> 0:11:25.240 end of the week, we got the jobs numbers, and 0:11:25.280 --> 0:11:26.840 they were a little light on the number of jobs 0:11:26.840 --> 0:11:28.560 one hundred and eighty seven thousand as supposed to two 0:11:28.640 --> 0:11:31.480 hundred thousand, a little heavy actually on the wage increases. 0:11:31.559 --> 0:11:32.640 What do you make of them? 0:11:33.200 --> 0:11:36.480 Look, nobody should change their minds fundamentally on the basis 0:11:36.520 --> 0:11:41.000 of these numbers. They were pretty close to expectations. As 0:11:41.040 --> 0:11:46.800 you said, economy was softer and inflation was bit stronger 0:11:46.840 --> 0:11:51.320 than expected, So that's not terrific, but again not a 0:11:51.360 --> 0:11:55.680 big deal from these numbers. Look, I think the big 0:11:55.760 --> 0:12:00.640 story here all along is we're trying and to land 0:12:00.720 --> 0:12:04.679 the plane on the runway where we're worried that the 0:12:04.720 --> 0:12:08.200 plane would crash short of the runway. That certainly does 0:12:08.280 --> 0:12:10.760 not look like it's going to happen. We've got a 0:12:10.880 --> 0:12:14.960 very strong economy and we're worried that the plane will 0:12:14.960 --> 0:12:19.280 overshoot the runway. If you look at wage inflation. It 0:12:19.400 --> 0:12:22.880 was faster for the month then for the quarter, faster 0:12:23.000 --> 0:12:26.400 for the quarter than for the year, and running for 0:12:26.480 --> 0:12:31.240 the quarter at about four point nine percent, that's not 0:12:31.520 --> 0:12:38.760 consistent with two percent underlying inflation or close. And unemployment 0:12:39.160 --> 0:12:45.360 ticked down, vacancies ticked up. We still have a tight 0:12:45.480 --> 0:12:49.080 labor market, a very tight labor market, and with one 0:12:49.160 --> 0:12:54.240 hundred and eighty seven thousand jobs created and population growing 0:12:54.360 --> 0:12:57.440 fifty to one hundred thousand a month, we have not 0:12:57.600 --> 0:13:01.160 just a tight labor market, but a tightening labor market. 0:13:01.280 --> 0:13:05.760 Now it's true, as someone will point out, that we're tightening, 0:13:06.960 --> 0:13:11.280 we're tightening relative to a tight state at a slower 0:13:11.360 --> 0:13:17.040 rate than we were before, and that's encouraging. But fundamentally, 0:13:17.160 --> 0:13:22.000 the plane is not yet on a trajectory to a 0:13:22.120 --> 0:13:25.320 soft landing within the runway. 0:13:25.360 --> 0:13:28.800 And let's continue with your analogy about the plane trajectory. 0:13:29.320 --> 0:13:30.760 Where do we need to get to to get on 0:13:30.840 --> 0:13:33.439 the right trajectory to get to two percent within some 0:13:33.480 --> 0:13:35.760 reasonable period of time. What sort of numbers do you 0:13:35.800 --> 0:13:37.720 look for, for example, in wage increases. Right now we're 0:13:37.760 --> 0:13:40.280 going about four point four percent year over year. What 0:13:40.360 --> 0:13:42.839 sorts of numbers do you look for on unemployment rate, 0:13:42.920 --> 0:13:45.199 what are the key factors in figuring that trajectory. 0:13:45.280 --> 0:13:48.480 So the part of the issue is that it's four 0:13:48.480 --> 0:13:51.680 point four year over a year, but it's four point 0:13:51.840 --> 0:13:57.240 nine quarter over a quarter, and it's probably closer to 0:13:57.320 --> 0:14:02.839 five point zero month over month, and so it's not 0:14:03.440 --> 0:14:12.559 that it is on a decelerating Pathroadly badly. Broadly, inflation 0:14:12.880 --> 0:14:18.040 is the difference between waste growth and productivity growth. And 0:14:18.559 --> 0:14:21.680 you can argue about where productivity growth is going to be. 0:14:21.920 --> 0:14:26.560 I would guess, but it's anybody's guess, somewhere between one 0:14:26.600 --> 0:14:29.920 and one and a half percent. So that would tell 0:14:30.040 --> 0:14:34.960 you that the kind of inflation we're having is ways 0:14:35.040 --> 0:14:39.680 inflation we're having is pointing to an underlying inflation rate 0:14:40.240 --> 0:14:45.360 in the three and a half range, and it may 0:14:45.400 --> 0:14:50.160 not be decelerating. Those are numbers I'll be watching closely. 0:14:50.240 --> 0:14:54.960 I'll be watching the core inflation numbers. Look, there's no 0:14:55.200 --> 0:15:01.520 necessary unemployment. Nobody wants to see any unemployment, certainly not 0:15:01.760 --> 0:15:06.480 any increase in unemployment. But what we know is that 0:15:06.880 --> 0:15:11.520 if we don't contain inflation, it sets the stage for 0:15:11.760 --> 0:15:17.160 all sorts of very serious problems elsewhere. And I don't 0:15:17.240 --> 0:15:21.080 think we can yet be confident that we're not going 0:15:21.160 --> 0:15:26.360 to see a reacceleration of inflation at some point. 0:15:26.160 --> 0:15:26.840 Down the road. 0:15:26.920 --> 0:15:30.760 And that's the thing that I'm focused on, not some 0:15:31.000 --> 0:15:37.040 precise numerical target for inflation, but whether there's a sense 0:15:37.640 --> 0:15:42.400 that this is under control. And I think we'll have 0:15:42.480 --> 0:15:45.560 to wait and see again. The numbers have come in 0:15:45.720 --> 0:15:48.680 a bit better over the last few months than I 0:15:48.720 --> 0:15:54.120 would have guessed, but I find the primitive I find 0:15:54.160 --> 0:16:00.720 the declarations of victory by some to be substantially premature. 0:16:01.120 --> 0:16:04.160 I'm glad that the FED is not among those who 0:16:04.240 --> 0:16:11.160 are declaring victory, and I find the idea that this 0:16:11.800 --> 0:16:17.120 vindicates the view of those who have been unconcerned about inflation. 0:16:16.920 --> 0:16:21.680 All along to be a bit bizarre, since what we 0:16:21.880 --> 0:16:26.400 followed was very different policies than the ones that they 0:16:26.440 --> 0:16:27.200 have been pushing. 0:16:27.880 --> 0:16:29.920 You've already said you're not so sure of fits in 0:16:29.920 --> 0:16:31.880 of a self. Is that sigid again? But is there 0:16:31.920 --> 0:16:34.720 a fundamental underlying issue. You're out here as one of 0:16:34.760 --> 0:16:37.120 the leaders of the Asthmen economic strategy, and there's a 0:16:37.120 --> 0:16:39.400 lot of discussion now about what's going on fiscally with 0:16:39.440 --> 0:16:40.080 the United States. 0:16:40.080 --> 0:16:42.920 Ook David, I have written and said that I don't 0:16:42.920 --> 0:16:48.040 think we're on a sustainable fiscal path. I think the 0:16:48.600 --> 0:16:52.720 Congressional Budget Office is pretty pessimistic. It thinks the deficit's 0:16:52.800 --> 0:16:56.440 going to be in the seven percent range once we 0:16:56.520 --> 0:16:58.320 get out eight. 0:16:58.200 --> 0:16:59.720 Or ten years. 0:17:00.400 --> 0:17:03.480 They think we're going to be reducing defense spending relative 0:17:03.520 --> 0:17:06.560 to GDP. I think that's wrong given the threats we face. 0:17:07.000 --> 0:17:09.639 They think that Treasury bill interest rates can average in 0:17:09.680 --> 0:17:12.360 the low two's. I think that's not close to right 0:17:12.680 --> 0:17:16.400 given the strains that we face. They assume, because they're 0:17:16.440 --> 0:17:19.760 required to, that all the Trump tax cuts will phase out. 0:17:20.160 --> 0:17:22.920 I don't think that's going to happen. They haven't really 0:17:22.960 --> 0:17:26.720 fully recognized that revenues are coming in well below expectation 0:17:27.800 --> 0:17:30.760 this year. I think if you do the forecast right, 0:17:30.920 --> 0:17:34.520 you're looking at a number close to ten. I don't 0:17:34.520 --> 0:17:37.240 think the United States is going to tell bondholders they're 0:17:37.240 --> 0:17:40.439 not getting money. I think the fact that we worked through, 0:17:40.520 --> 0:17:45.200 even in an incredibly toxic political environment, the debt limit 0:17:45.640 --> 0:17:49.359 settled that issue. I look at so called credit default 0:17:49.400 --> 0:17:52.840 swaps on the United States and they haven't moved, so 0:17:53.080 --> 0:17:57.680 I don't think Fitch really is contributing usefully to the 0:17:57.720 --> 0:18:02.800 debate here. I think they're sort of flailing for relevance, 0:18:02.920 --> 0:18:08.560 and in general, rating agencies have not proven very prescient. 0:18:08.680 --> 0:18:13.040 They tend to follow markets rather than lead them. But 0:18:13.160 --> 0:18:17.439 I do think for anyone who's concerned about inflation, for 0:18:17.560 --> 0:18:22.159 anybody who's concerned about our resilience as a country and 0:18:22.240 --> 0:18:26.200 as an economy. You know, we talk constantly these days 0:18:26.320 --> 0:18:30.440 about the importance of resilience. Well, if you think about 0:18:30.440 --> 0:18:34.080 a company, or you think about a household, not being 0:18:34.280 --> 0:18:38.520 leveraged to the hilt is an important part of being resilient. 0:18:39.200 --> 0:18:44.000 And I wish that aspect of resilience would preoccupy our 0:18:44.119 --> 0:18:47.679 policy makers as much as the ones that can be 0:18:47.800 --> 0:18:53.960 translated into arguments for creating some jobs in Ohio, because 0:18:54.080 --> 0:18:57.200 I think that's something that is a very very important 0:18:57.200 --> 0:18:58.359 aspect of resilience. 0:18:58.560 --> 0:19:00.960 Very great to be with you here, as Larry Summer 0:19:01.000 --> 0:19:03.440 is our very special archerer here on Wall Street Week. 0:19:05.440 --> 0:19:07.399 A good part of the money that the US is 0:19:07.440 --> 0:19:11.399 spending is on various infrastructure and clean energy project is 0:19:11.440 --> 0:19:14.400 its part really of a new industrial policy? We ask 0:19:14.480 --> 0:19:17.480 the former CEO of Honeywell, he's Dave Cody, about whether 0:19:17.560 --> 0:19:19.800 that makes sense and how it should be done. That's 0:19:19.800 --> 0:19:31.480 coming up next on Wall Street Week on Bloomberg Industrial policy. 0:19:31.720 --> 0:19:35.000 It's been credited with Japan's remarkable economic growth after World 0:19:35.040 --> 0:19:39.280 War Two, overseen by the famous, some might say infamous Meety, 0:19:39.480 --> 0:19:43.119 the Ministry of International Trade and Industry. Now the United 0:19:43.119 --> 0:19:46.240 States is trying out its own form of industrial policy, 0:19:46.480 --> 0:19:49.960 as Congress passed first the Inflation Reduction Act, including three 0:19:50.000 --> 0:19:53.080 hundred and seventy billion dollars for climate related investments. 0:19:53.640 --> 0:19:58.680 We have deep plans for longer term investments and key sectors, 0:19:58.680 --> 0:20:03.960 including standing up semiconductors, electric vehicles, electric batteries. 0:20:03.960 --> 0:20:07.080 And then another fifty two billion dollars for the US 0:20:07.240 --> 0:20:08.440 semiconductor industry. 0:20:08.640 --> 0:20:11.520 The Chips Act is a seminal act for This may 0:20:11.520 --> 0:20:16.120 be the most significant industrial policy legislation that's been put 0:20:16.160 --> 0:20:19.560 in place since World War Two in the This is huge, 0:20:19.720 --> 0:20:21.720 This is good for the industry, it's good for the 0:20:21.800 --> 0:20:25.040 United States, and Intel will be a beneficiary there. And 0:20:25.040 --> 0:20:26.840 I'm proud to have played a part in getting it 0:20:26.880 --> 0:20:28.400 across the line, all. 0:20:28.240 --> 0:20:31.560 Of which has triggered something of a subsidies competition between 0:20:31.600 --> 0:20:34.600 the United States and allies such as Canada over the 0:20:34.640 --> 0:20:36.400 IRA Yes. 0:20:36.400 --> 0:20:39.199 The IRA is something that we've had to step up 0:20:39.200 --> 0:20:42.040 to to make sure we're competitive. But we're going to 0:20:42.040 --> 0:20:45.159 be a lot more strategic about how we pick and 0:20:45.280 --> 0:20:48.080 choose the right investments. We can't just do a blanket 0:20:48.160 --> 0:20:49.520 like the US CAMP. 0:20:49.520 --> 0:20:53.480 And the European Union over chips micro chiefs. 0:20:53.560 --> 0:20:58.520 They are the backbone of Europe's industrial competitiveness in a 0:20:58.600 --> 0:21:02.679 digital world, the green and the digital transition where it 0:21:03.040 --> 0:21:09.439 requires new advanced technological solutions, and this is why we 0:21:09.520 --> 0:21:15.480 must increase Europe's own chips research developments, production capabilities. 0:21:16.080 --> 0:21:18.840 But the biggest challenge may be making sure all this 0:21:19.080 --> 0:21:22.760 money will make our economies stronger rather than simply some 0:21:23.000 --> 0:21:24.159 companies richer. 0:21:24.600 --> 0:21:27.600 The whole point of this is to increase innovation, research 0:21:27.640 --> 0:21:31.600 and development in the industry, not you know, we're not 0:21:31.640 --> 0:21:36.479 giving you taxpayer money to fluff your pillow and increase 0:21:36.520 --> 0:21:38.720 your profit and give it away to your shareholders. 0:21:38.880 --> 0:21:41.240 We're giving it to you to invest in our and dasent. 0:21:43.800 --> 0:21:46.159 Here at the Aspen Economic Strategy Group, there's been a 0:21:46.200 --> 0:21:49.480 lot of talk now about industrial policy, particularly the Inflational 0:21:49.480 --> 0:21:51.520 Reduction Act as well as the Chips and Science Act, 0:21:51.760 --> 0:21:53.879 and so we have somebody who has actually run some 0:21:54.000 --> 0:21:56.560 things in his life. He is Dave Cody is the 0:21:56.600 --> 0:21:59.560 former CEO, of course, of Honeywell, and he's now executive 0:21:59.600 --> 0:22:01.760 chairman of Virtue. So Dave, great to have you here. 0:22:02.000 --> 0:22:04.280 I always said, when it comes to industrial policy, if 0:22:04.280 --> 0:22:06.200 we're going to have it, why don't we have Dave 0:22:06.240 --> 0:22:09.639 Cody and Treasury? What do you think about the Chips 0:22:09.640 --> 0:22:11.560 of Science Act When you think about some of the 0:22:11.680 --> 0:22:13.840 big industrial policities that's coming out of Washingman Now, it's 0:22:13.880 --> 0:22:14.720 a lot of money involved. 0:22:14.880 --> 0:22:18.480 Yeah, Well, when you think about industrial policy, it tends 0:22:18.520 --> 0:22:23.920 to be kind of a secular, mobilizing ef left or right, 0:22:24.000 --> 0:22:26.520 and people are either absolutely for it or absolutely against it. 0:22:27.000 --> 0:22:29.320 But the reality is there's always been some kind of 0:22:29.320 --> 0:22:32.840 industrial policy in the country. You're going back to establishing 0:22:32.840 --> 0:22:38.440 the railroads, establishing canals, the interstate system, NASA to put 0:22:38.480 --> 0:22:40.199 somebody on the moon. I mean, there's always been that. 0:22:40.320 --> 0:22:42.879 Kind of the trick is to not let it go 0:22:42.960 --> 0:22:46.439 too far. So how do you find that kind of 0:22:46.680 --> 0:22:50.200 right spot? So I'm not completely against it, but you've 0:22:50.240 --> 0:22:52.359 got to be smart about it because it's very easy. 0:22:52.400 --> 0:22:56.600 Once politics starts to intrude, politics will triumph. Good judgment 0:22:56.640 --> 0:22:59.159 all the time, so you want to make sure you 0:22:59.160 --> 0:23:02.000 don't lose the good judgment side of it. You asked 0:23:02.040 --> 0:23:04.960