WEBVTT - Bloomberg Wall Street Week - March 29th, 2024 0:00:00.240 --> 0:00:02.440 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 I mean may not have an overall recession. We're having 0:00:04.400 --> 0:00:06.840 a rolling recession. To conye, roll looks pretty strongly is 0:00:06.840 --> 0:00:09.440 when it comes to jobs. The financial stories that shape 0:00:09.440 --> 0:00:12.840 our work. Three major regional bank failures send shockwaves through 0:00:12.880 --> 0:00:14.960 the banking system. We're all trying to figure out what 0:00:15.040 --> 0:00:17.000 to make of 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 Dow Doctor Paul Krugman, Ryan moynihan, a Bank of America, 0:00:22.520 --> 0:00:25.360 deebro Lair of the Paulson Institute, Len Hubbard of the 0:00:25.360 --> 0:00:26.240 Columbia Business. 0:00:26.000 --> 0:00:30.120 School, Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.280 --> 0:00:32.919 This week, Jillian Tet at The Financial Times on investing 0:00:32.960 --> 0:00:34.200 in geopolitical risk. 0:00:34.720 --> 0:00:36.760 In some ways, what we're seeing right now is about 0:00:36.800 --> 0:00:37.400 to the future. 0:00:37.680 --> 0:00:40.919 Josh Bolton of the Business Roundtable on what American CEOs 0:00:41.000 --> 0:00:42.559 want in their next president. 0:00:42.760 --> 0:00:45.559 The CEOs of the Business round Table are very concerned 0:00:45.600 --> 0:00:48.400 about the fiscal situation of the United States. 0:00:48.760 --> 0:00:52.159 And economist Melissa Carney on the fight over standardized tests 0:00:52.240 --> 0:00:53.520 at the American universities. 0:00:53.800 --> 0:00:57.600 Students submitted sat or ACT scores are very highly predictive 0:00:57.680 --> 0:01:06.800 of their academic performance when they get to college. 0:01:12.959 --> 0:01:15.640 But we start with Larry Fink of Blackrock and his 0:01:15.760 --> 0:01:18.800 annual letter to investors focus this year on what he 0:01:18.880 --> 0:01:22.080 calls a retirement crisis in the United States and around 0:01:22.080 --> 0:01:24.759 the world, which is what Larry is hearing about more 0:01:24.840 --> 0:01:26.960 and more from Blackrock clients. 0:01:27.600 --> 0:01:30.240 My letters are a reflection of my conversation with clients, 0:01:30.240 --> 0:01:33.679 So it is, and so over the past year I 0:01:33.760 --> 0:01:37.160 heard more and more conversation about retirement or retirement crisis 0:01:37.440 --> 0:01:40.440 from many parts of the world, from middle class developing 0:01:40.440 --> 0:01:45.440 countries to developed countries. The acute problem here in the 0:01:45.560 --> 0:01:48.280 United States is that we have still fifty seven million 0:01:48.320 --> 0:01:52.320 Americans who don't have any savings or any retirement plan. 0:01:52.720 --> 0:01:56.640 So his security is a fantastic foundation for retirement. But 0:01:56.720 --> 0:01:59.520 if that's how you have when you retire, you're going 0:01:59.560 --> 0:02:03.960 to be living in poverty, below the poverty line, because 0:02:04.000 --> 0:02:06.600 it just is it's supplemental, but it's not meant to 0:02:06.640 --> 0:02:09.040 be the totality of what you have in a retirement. 0:02:09.520 --> 0:02:12.720 And the whole concept that we're aging, we're you know, 0:02:12.880 --> 0:02:15.360 we're all living longer. And I think one of the 0:02:15.360 --> 0:02:18.119 big narratives I had to reflect in twenty twenty three 0:02:18.400 --> 0:02:21.519 was the miracles of medicine. When we talk about the 0:02:21.600 --> 0:02:25.560 drugs like a zumpec and all the different weight loss drugs, 0:02:26.080 --> 0:02:29.919 how that is extending life. It's conquering kidney disease and 0:02:30.000 --> 0:02:34.120 liver disease and heart disease and joint disease. And then 0:02:34.160 --> 0:02:39.840 there are new medicines now for dementia that extends life. 0:02:40.120 --> 0:02:44.520 So if you think about the miracles of technology and 0:02:44.560 --> 0:02:48.440 how it transforms our lives and extends our life, there 0:02:48.480 --> 0:02:51.200 is not a dialogue in America or most places about 0:02:51.400 --> 0:02:56.200 can't we afford that longevity and our entire retirement system 0:02:56.320 --> 0:03:00.680 was based on statistics that were created fifty years ago, 0:03:01.080 --> 0:03:04.799 whereby most Americans retired between sixty and sixty two then, 0:03:05.120 --> 0:03:09.960 but most Americans then passed away at sixty seven. And today, 0:03:10.320 --> 0:03:15.880 statistically a couple sixty years old in good health one 0:03:15.919 --> 0:03:18.880 of them is going to live over ninety. And so 0:03:19.880 --> 0:03:22.639 the other question is should we re evaluate how we 0:03:22.720 --> 0:03:26.079 work and how long we work because we all need 0:03:26.120 --> 0:03:30.000 purpose in life, and in most people get fine purpose 0:03:30.040 --> 0:03:34.399 obviously maybe with their grandchildren, their children, their community. Many 0:03:34.400 --> 0:03:38.360 people find purpose in their jobs, and the thought of 0:03:38.520 --> 0:03:41.400 retiring at sixty with thirty more years or a thirty 0:03:41.480 --> 0:03:45.560 year year life in front of you. We need to 0:03:45.600 --> 0:03:47.880 have a dialogue. We need to have a conversation. And 0:03:48.120 --> 0:03:50.840 you know, I'm an optimist. I am very optimistic about 0:03:50.840 --> 0:03:54.720 the long term vitality of our markets. I'm bullish on capitalism. 0:03:55.440 --> 0:03:58.000 The reason I'm bullish is when I read the newspapers 0:03:58.000 --> 0:04:02.400 every morning and listen to Bloom in other news organizations, 0:04:02.600 --> 0:04:04.520 it's full of scary things. 0:04:04.600 --> 0:04:05.920 We talk about the problems. 0:04:06.240 --> 0:04:09.640 We talk about all the problems less, but we solve 0:04:09.760 --> 0:04:13.600 problems through conversation. And the one area where we have 0:04:13.760 --> 0:04:17.280 no conversation is is the affordability of retirement. 0:04:17.520 --> 0:04:19.360 Should we be changing the rules so we can put 0:04:19.360 --> 0:04:22.080 our four to one case our iris into private markets. 0:04:23.520 --> 0:04:27.120 I believe there are some great areas of private markets 0:04:27.120 --> 0:04:30.760 that are going to be great investments for retirement, and 0:04:31.120 --> 0:04:37.120 I would channel that more towards infrastructure because infrastructure has 0:04:37.160 --> 0:04:42.600 a long maturity. It has a higher coupon, but it 0:04:42.640 --> 0:04:46.080 has a lower profile of returns and what I would 0:04:46.080 --> 0:04:49.240 say other areas of the private markets, so it has 0:04:49.400 --> 0:04:53.760 more a good corridor of returns but higher probabilities of 0:04:54.120 --> 0:04:56.960 meeting those returns, and so yes, we need to be 0:04:57.080 --> 0:05:00.320 relooking at how we think about investing, whether that is 0:05:00.320 --> 0:05:04.040 going to be in private equity or infrastructure. I do 0:05:04.120 --> 0:05:07.520 believe we need to be putting more long dated assets 0:05:07.600 --> 0:05:11.320 into retirement and so that you could so that you 0:05:11.320 --> 0:05:14.680 could meet the returns that you need to have the 0:05:14.680 --> 0:05:19.080 pool of money that you require during retirement. 0:05:19.279 --> 0:05:21.120 In your letter, you talk a lot about the success 0:05:21.120 --> 0:05:23.479 of the capital markets, although they've accomplished. At the same time, 0:05:23.600 --> 0:05:27.359 you do mention the problem with particularly US debt. You 0:05:27.400 --> 0:05:29.440 think it's more urgent than anytime. I think you said 0:05:29.560 --> 0:05:32.960 you can remember in your lifetime. Put those two things together. 0:05:33.400 --> 0:05:36.480 To what extent has the success of the capital markets 0:05:36.480 --> 0:05:39.360 come specifically because we've taken more debt on the public 0:05:39.400 --> 0:05:42.440 balance sheet. We've shifted debt from private balance sheets to 0:05:42.480 --> 0:05:43.920 public balance sheets, no question. 0:05:45.000 --> 0:05:48.560 Let's just use a statistic, and I think when I 0:05:48.640 --> 0:05:52.960 talk about this statistic, I get frightened. In the year 0:05:53.000 --> 0:05:57.679 two thousand, the US deficit was eight trillion dollars. Today 0:05:57.720 --> 0:06:01.920 it's thirty four trillion dollars. So twenty three years later, 0:06:03.200 --> 0:06:08.240 we increased our deficit by twenty six trillion dollars. So 0:06:08.560 --> 0:06:12.039 for the first two hundred and thirty odd forty years, 0:06:12.400 --> 0:06:15.279 we increased our deficit the eight trillion, and in the 0:06:15.360 --> 0:06:19.280 last twenty three years we went we increased it by 0:06:19.279 --> 0:06:22.960 twenty six trillion dollars. I think that speaks volumes of 0:06:23.000 --> 0:06:26.080 what's happening in our in our in our country today. 0:06:26.720 --> 0:06:30.560 The problem with these type of deficits is and now 0:06:30.600 --> 0:06:35.520 with and I believe higher interest rates for longer, the 0:06:35.560 --> 0:06:38.720 cost of financing our deficits are going to erode more 0:06:38.760 --> 0:06:43.080 and more of our of our disposable income as a country. 0:06:43.760 --> 0:06:47.080 And I do believe there we're getting to a point 0:06:47.120 --> 0:06:50.359 where our public debt is going to start up, crowding 0:06:50.360 --> 0:06:53.119 out private capital, and we're going to have structurally higher 0:06:53.200 --> 0:06:53.880 interest rates. 0:06:54.360 --> 0:06:57.839 That was black Rocks Larry think if growth is the goal, 0:06:58.120 --> 0:07:01.080 one of the most effective policy tools forgetting us there, 0:07:01.320 --> 0:07:04.360 is it public investment? Is it private investment? Trade policy? 0:07:04.400 --> 0:07:08.359 Tax policy. Glenn Hubbard advised President George W. Bush on 0:07:08.440 --> 0:07:11.000 these questions as chair of the Consul of Economic Advisors. 0:07:11.080 --> 0:07:13.520 He is now dean emeritus at the Columbia Business School 0:07:13.680 --> 0:07:16.280 and author, most recently of The Wall and the Bridge. 0:07:16.280 --> 0:07:18.160 So welcome back, Glenn. Always great to have you here, 0:07:18.560 --> 0:07:20.440 So let's talk about growth. Because everybody talks about it, 0:07:20.440 --> 0:07:22.720 I'm not sure anybody does anything about it. But if 0:07:22.760 --> 0:07:24.559 that is our goal that we want to get to growth, 0:07:24.880 --> 0:07:26.680 what drives that the most? From your point of view 0:07:26.680 --> 0:07:28.040 as a matter of policy. 0:07:28.000 --> 0:07:30.720 Well, to me, that's the biggest question in economic policy data, 0:07:30.800 --> 0:07:34.000 and I think growth is super important for our living standards, 0:07:34.040 --> 0:07:37.320 for ability to do anything. There are policies that work, 0:07:37.360 --> 0:07:39.720 but we also have to remember to get social support 0:07:39.760 --> 0:07:42.840 for those policies. A lot of economists line up policies 0:07:42.840 --> 0:07:45.840 and all the angles that you listed, all correctly, but 0:07:45.960 --> 0:07:48.280 without thinking about social support. We need to do both. 0:07:48.720 --> 0:07:52.200 So we've had the bide adminstration now which has tended 0:07:52.200 --> 0:07:56.080 to favor to some extent public investment. We have in 0:07:56.120 --> 0:07:59.560 the Inflation Reduction Act, we have it in the Infrastructure Act. 0:07:59.600 --> 0:08:02.280 What is the role of public investment in order to 0:08:02.280 --> 0:08:03.040 get growth going? 0:08:03.320 --> 0:08:05.880 Well, public investment can play a big role in growth, 0:08:05.880 --> 0:08:07.880 but I don't think it's the type that we're seeing 0:08:07.920 --> 0:08:11.040 in the present industrial policy. I think of it as 0:08:11.360 --> 0:08:15.800 could we invest more in basic research for ideas in general, 0:08:15.920 --> 0:08:20.280 for technology, for climate change mitigation, whatever you want, could 0:08:20.320 --> 0:08:23.800 we put applied research centers around the country. Could we 0:08:23.880 --> 0:08:26.240 do more in defense where we know we're going to 0:08:26.320 --> 0:08:29.560 have to build up and use defense research spillovers in 0:08:29.600 --> 0:08:32.280 the private sector. All of those make sense to me. 0:08:32.640 --> 0:08:34.640 The Inflation Reduction Act less. 0:08:34.640 --> 0:08:36.920 So when it comes to industrial policy, what did the 0:08:36.920 --> 0:08:39.200 Trump administration do the first Trump administration? There may be 0:08:39.240 --> 0:08:39.880 another one. 0:08:40.080 --> 0:08:43.880 Well, Interestingly, one very successful piece of industrial policy in 0:08:43.920 --> 0:08:48.760 the first Trump administration was Operation Warp Speed. Because there 0:08:48.840 --> 0:08:52.640 you have the government in essentially a public private partnership 0:08:52.720 --> 0:08:57.120 guaranteeing demand, expediting things. That strikes me as this kind 0:08:57.120 --> 0:09:00.440 of holistic approach that I'm mentioning. It's a smaller case, 0:09:00.840 --> 0:09:02.280 but a very important one. 0:09:02.440 --> 0:09:03.040 I think it's a. 0:09:03.000 --> 0:09:06.640 Mistake to use the sort of big spending industrial policy 0:09:06.920 --> 0:09:10.000 as opposed to that kind of partnership or research support. 0:09:10.440 --> 0:09:12.920 Some might say that President Trump when he was there 0:09:13.160 --> 0:09:15.720 used big spending in the form of tax cuts, because 0:09:15.720 --> 0:09:18.440 that is a form of expenditure, after all, Was that 0:09:18.520 --> 0:09:21.120 effective in getting private investment? Because I've read very mixed 0:09:21.120 --> 0:09:21.720 things about that. 0:09:22.240 --> 0:09:24.000 Well, I think it is. I mean, most of the 0:09:24.040 --> 0:09:26.920 scholarship I've seen on the Tax Cut in Jobs Act 0:09:26.960 --> 0:09:30.320 of twenty seventeen that you're referring to does indicate quite 0:09:30.360 --> 0:09:35.280 substantial increases investment. Why is it mixed? Because remember, at 0:09:35.320 --> 0:09:38.440 the same time, we also had a protectionist policy tilt 0:09:38.440 --> 0:09:42.520 that's very anti investment and anti growth. But the pure 0:09:42.559 --> 0:09:45.360 effects of the tax cut were there. And I would 0:09:45.440 --> 0:09:48.360 think that the next Congress and the next president, whoever's 0:09:48.440 --> 0:09:50.400 in those various chairs, are going to have to figure 0:09:50.400 --> 0:09:52.920 out what to do about the Tax Cut and Jobs 0:09:52.960 --> 0:09:55.080 Act because many of its provisions are expiring. 0:09:55.280 --> 0:09:58.199 Well, you took us to trade pretty quickly. What about trade? 0:09:58.200 --> 0:10:00.560 What is the role of trade policy and and growth? 0:10:01.040 --> 0:10:04.479 Well, unfortunately, this is one where both of our candidates 0:10:04.520 --> 0:10:08.120 are offering a fairly protection US trade policy to the country. 0:10:08.360 --> 0:10:12.360 We need openness and markets. We need markets for American exports. 0:10:12.400 --> 0:10:15.440 We need to be open here to other goods and 0:10:15.520 --> 0:10:19.120 services unless there's a national security interest. But we also 0:10:19.160 --> 0:10:21.160 have to bring everybody along. And I would hope that 0:10:21.240 --> 0:10:25.320 either a President Biden or a President Trump would realize 0:10:25.320 --> 0:10:28.400 that and pose real world policies, not just tariffs. 0:10:28.679 --> 0:10:32.000 We recently had another distinguished economists here, Paul Romer, who 0:10:32.040 --> 0:10:33.839 had an approach to trade that was a bit different 0:10:33.840 --> 0:10:36.439 from what I'd heard before, which is basically be protectionist 0:10:36.440 --> 0:10:38.800 when it comes to goods, importing of goods, but not 0:10:38.920 --> 0:10:42.080 when it comes to capital and ideas. Essentially, you say, 0:10:42.240 --> 0:10:45.000 come build it here, train our workers up, and we 0:10:45.120 --> 0:10:47.480 keep our jobs where we don't lose them to China, 0:10:47.480 --> 0:10:49.880 as many people think we did around two thousand. Well, 0:10:49.880 --> 0:10:50.280 but this is. 0:10:50.280 --> 0:10:52.960 What's curious about some of the president debates. We are 0:10:53.160 --> 0:10:56.199 having foreign investment in the United States and the jobs here, 0:10:56.400 --> 0:11:01.559 Yet we're questioning Nippon Steel and US steeltioning foreign automakers 0:11:01.600 --> 0:11:04.840 being in the United States. Why we're hiring people here. 0:11:04.840 --> 0:11:07.920 We're building things here. So I agree, Glenn. 0:11:07.960 --> 0:11:10.720 What about this so called crowding out phenomenon. 0:11:10.280 --> 0:11:13.320 Well, it's certainly a factor. I think the bigger issue 0:11:13.360 --> 0:11:16.720 for deficits in debt is the future tax burdens that 0:11:16.760 --> 0:11:20.840 they imply. In a global capital market, interest rates themselves 0:11:20.920 --> 0:11:22.920 don't have to go up that much in response to 0:11:23.080 --> 0:11:25.600 US borrowing. That said, we have to pay it back, 0:11:26.080 --> 0:11:28.880 and business people understand that. You and I understand that 0:11:28.920 --> 0:11:31.839 as individuals, those are our future tax burdens. So it's 0:11:31.880 --> 0:11:36.680 definitely a problem. In a good economy, we're running mammoth 0:11:36.760 --> 0:11:40.720 deficits the most recent Congressional Budget Office report says it's 0:11:40.760 --> 0:11:42.000 just going to get worse. 0:11:42.880 --> 0:11:44.960 We need to change. So let me beef specific here, 0:11:45.040 --> 0:11:47.320 put a target on this. We had Larry Fink issue 0:11:47.360 --> 0:11:51.760 his annual Chairman's letter, a long chairman's that's right, but 0:11:51.800 --> 0:11:53.439 we read every word of it, and one of the 0:11:53.440 --> 0:11:54.599 things he said is the thing we need to do 0:11:54.640 --> 0:11:56.440 on the deficit is grow our way out of it. 0:11:56.480 --> 0:11:58.280 He was saying we need to grow at three percent 0:11:58.400 --> 0:12:00.760 real growth, three percent real growth in order to go 0:12:00.840 --> 0:12:04.079 to the deficit. Is that realistic? We can get closed? 0:12:04.080 --> 0:12:07.160 So a lot depends on what you assume about productivity, 0:12:07.240 --> 0:12:10.760 growth's response to artificial intelligence. So I think it might 0:12:10.880 --> 0:12:14.000 be possible. Technically, you can't grow your way out of 0:12:14.040 --> 0:12:18.400 the deficit. Our entitlement programs are linked into the real economy. 0:12:18.440 --> 0:12:22.200 But I certainly agree with mister Fink that yes, growth 0:12:22.280 --> 0:12:24.520 is the number one thing that we could do, and 0:12:24.559 --> 0:12:26.400 there are a set of policies we've talked about some 0:12:26.440 --> 0:12:27.959 of those that would push us in that direction. 0:12:29.760 --> 0:12:33.319 Coming up, geopolitics loom larger in investor's minds than they 0:12:33.320 --> 0:12:35.719 have four years. We talked with Jillian Tett at the 0:12:35.760 --> 0:12:39.559 Financial Times about investing in a troubled world, and. 0:12:39.720 --> 0:12:43.760 Entire generation was weird on the idea that if it's 0:12:43.800 --> 0:12:45.480 not in a model or in the balance sheet, it 0:12:45.480 --> 0:12:46.120 doesn't matter. 0:12:47.000 --> 0:12:49.239 That's next on Wall Street Week on Bloomberg. 0:12:50.360 --> 0:12:54.600 This is Bloomberg Wall Street Week with David Weston from 0:12:54.720 --> 0:12:56.160 Bloomberg Radio. 0:13:00.880 --> 0:13:03.680 This is Wall Streetweek. I'm David Weston. Investors are facing 0:13:03.679 --> 0:13:07.360 a sharp rise in political and geopolitical uncertainty, and yet 0:13:07.400 --> 0:13:10.719 markets seem to be assuming everything's just fine. To take 0:13:10.800 --> 0:13:13.800 us through this apparent disconnect, Welcome back now, Jillian Ted, 0:13:14.080 --> 0:13:16.400 columnist and member of the editorial board of The Financial 0:13:16.440 --> 0:13:19.560 Times and provost of King's College, Cambridge. Jill, great to 0:13:19.559 --> 0:13:20.360 have you back with us. 0:13:20.400 --> 0:13:23.640 Great to be here, particularly these crazy weird times exactly. 0:13:23.760 --> 0:13:26.199 And you wrote a column just recently actually about TikTok, 0:13:26.200 --> 0:13:28.120 and you think it's about TikTok and social media, but 0:13:28.160 --> 0:13:31.280 it went beyond that to talk about how capricious governments, 0:13:31.280 --> 0:13:33.360 certainly China but also the United States are and how 0:13:33.400 --> 0:13:36.079 investors have to sort of accommodate that absolutely. 0:13:36.200 --> 0:13:38.080 I mean, what I was really trying to talk about 0:13:38.120 --> 0:13:40.960 in the TikTok column was the fact that we have 0:13:41.080 --> 0:13:44.280 this paradox in markets. On the one hand, you have 0:13:44.440 --> 0:13:47.320 market soaring on the back of a pretty good short 0:13:47.400 --> 0:13:50.440 term economic outlook, a lot of relief about the so 0:13:50.520 --> 0:13:53.560 called soft landing and excitement about the idea the Third 0:13:53.600 --> 0:13:56.720 World cut rates later this year. But at the same 0:13:56.760 --> 0:14:00.600 time we have really quite unprecedented levels of medium to 0:14:00.679 --> 0:14:06.160 long term geopolitical risk and domestic political risk, and TikTok 0:14:06.240 --> 0:14:08.720 is one example of that in a fairly extreme form, 0:14:08.800 --> 0:14:11.480 because until a couple of years ago, there were a 0:14:11.480 --> 0:14:15.120 lot of big private capital players who assumed this was 0:14:15.160 --> 0:14:17.480 going to be one of the hothest things in the 0:14:17.600 --> 0:14:21.640 tech landscape. People were talking about it potentially being the 0:14:21.680 --> 0:14:25.960 most lucrative and profit generating trade that they've seen for 0:14:26.040 --> 0:14:29.240 a long time. But of course now we know that 0:14:29.480 --> 0:14:34.680 Washington is considering forcing TikTok to essentially be banned if 0:14:34.720 --> 0:14:39.880 byke dances parent doesn't sell off TikTok to an outside player, 0:14:40.720 --> 0:14:43.520 And so suddenly geopolitical risk has come in and spot 0:14:43.600 --> 0:14:46.680 the party. And that's a metaphor for what's happening or 0:14:46.720 --> 0:14:50.160 what could happen in many many asset classes and in 0:14:50.200 --> 0:14:53.680 relation to many types of securities going forward. And my 0:14:53.760 --> 0:14:57.280 concern is that investors are simply not realizing the magnitude 0:14:57.280 --> 0:14:57.760 of that risk. 0:14:58.120 --> 0:15:00.360 Julie, we all know you for your work at Financial Times, 0:15:00.360 --> 0:15:03.480 how you've covered international finance for many, many years. At 0:15:03.480 --> 0:15:04.720 the same time, I want to go back to your 0:15:04.720 --> 0:15:06.520 original training because I love to talk to you as 0:15:06.520 --> 0:15:09.760 a social anthropologist. That's where you have your PhD. Apply 0:15:09.880 --> 0:15:12.960 that if you can to investors, what are they missing here? 0:15:13.040 --> 0:15:15.800 Is it because they're wishing themselves to success and just saying, 0:15:15.880 --> 0:15:18.760 let's make believe there aren't these problems. Is it because 0:15:18.800 --> 0:15:22.080 it's just too difficult to try to discount this geopolitical 0:15:22.160 --> 0:15:23.560 risk in China or the United States? 0:15:23.800 --> 0:15:25.480 I think the key thing in Bester is are missing 0:15:25.520 --> 0:15:27.400 right now? Is that if you look back at the 0:15:27.400 --> 0:15:30.840 second half of the twentieth century, that was an era when 0:15:30.840 --> 0:15:33.680 we saw the rise of all kinds of intellectual tools 0:15:34.000 --> 0:15:38.000 that were very useful for navigating the world, like balance sheets, 0:15:38.520 --> 0:15:42.680 like economic models, like opinion polls, and all of those 0:15:42.840 --> 0:15:46.520 rows on the back of the computer revolution and the 0:15:46.560 --> 0:15:49.840 fact that it became possible to crunch huge amounts of 0:15:49.960 --> 0:15:54.280 data for the first time on a large scale. Now, 0:15:54.440 --> 0:15:56.640 the problem with all of those tools is that although 0:15:56.640 --> 0:16:00.080 they're incredibly useful, they're only as good as what you 0:16:00.120 --> 0:16:03.160 put into your model, onto your balance sheet, onto your 0:16:03.160 --> 0:16:08.040 opinion poll, and what you leave out can sometimes matter enormously. 0:16:08.800 --> 0:16:11.320 And the story of the last few years is that 0:16:11.640 --> 0:16:13.960 what has been left out, what has been a footnote 0:16:13.960 --> 0:16:17.440 in the balance sheet, or an externality to the economic model, 0:16:17.600 --> 0:16:23.400 like medical risk, like environmental issues like social upheaval, like 0:16:23.760 --> 0:16:28.560 rapid tech change, or now domestic politics and geopolitics, those 0:16:28.640 --> 0:16:31.880 issues that were not included in those fancy computerized models 0:16:32.160 --> 0:16:35.640 are suddenly becoming the model in a sense, their most important. 0:16:36.400 --> 0:16:40.920 And from a cultural perspective, an entire generation was reared 0:16:41.040 --> 0:16:43.480 on the idea that if it's not in the model 0:16:43.560 --> 0:16:46.600 or in the balance sheet, it doesn't matter. And now 0:16:46.720 --> 0:16:50.000 they're waking up and realizing with the shock that's wrong. 0:16:50.680 --> 0:16:53.400 That was no surprise to the people who were investing 0:16:53.680 --> 0:16:58.120 before the eras of model making and balance sheet fine tuning, 0:16:58.560 --> 0:17:01.640 but it is a surprise now because of this cultural pattern. 0:17:02.360 --> 0:17:03.840 Jenny, I want to pick up on one thing you 0:17:03.880 --> 0:17:06.840 refer to as political risk as we face election here 0:17:06.840 --> 0:17:08.640 in United States, serre elections around the world, but we've 0:17:08.680 --> 0:17:11.399 tend to focus on the presidential one here, and is 0:17:11.400 --> 0:17:14.320 there a new element of uncertainty in misinformation because I 0:17:14.359 --> 0:17:16.440 know you've done a lot of work on that subject. 0:17:16.640 --> 0:17:18.720 There is, by the way, which may tests back into TikTok, 0:17:18.720 --> 0:17:20.480 because that's some of the objections about TikTok. 0:17:20.920 --> 0:17:24.560 Absolutely, the issue of misinformation is a classic issue which 0:17:24.600 --> 0:17:27.919 was not appearing on the economist model or even frankly 0:17:27.960 --> 0:17:32.119 on many politicians or political models in the past, and 0:17:32.160 --> 0:17:34.600 the issue cuts both ways. On the one hand, there 0:17:34.680 --> 0:17:38.280 really is a very real risk that AI and other 0:17:38.359 --> 0:17:41.760 types of tech digital technologies will end up manipulating or 0:17:41.800 --> 0:17:45.080 meddling with the whole voting process in a way that 0:17:45.480 --> 0:17:50.520 discredits potentially the outcome in November. The other risk, though, 0:17:50.600 --> 0:17:53.920 for investors, is that fear of that causes some very 0:17:54.000 --> 0:17:58.920 unpredictable and potentially capricious reactions from Washington that could potentially 0:17:58.960 --> 0:18:01.760 hurt the tech sector. And what we see in the 0:18:01.840 --> 0:18:04.879 last year or two is a tech sector boom dramatically 0:18:05.320 --> 0:18:09.840 on the idea that these extraordinary technological breakthroughs around AI 0:18:10.240 --> 0:18:13.520 would keep generating more and more profits and enable American 0:18:13.560 --> 0:18:17.360 business to boom. That may be the case, but anyone 0:18:17.400 --> 0:18:19.800 investing in tech today has to think about the ways 0:18:20.119 --> 0:18:23.920 that the growing politicization of tech could essentially upend their 0:18:23.960 --> 0:18:27.480 models and projections for the future as well. And yes, 0:18:27.760 --> 0:18:31.960 TikTok Byte Dance is an extreme case, but it's certainly 0:18:32.000 --> 0:18:34.400 not the only one at the moment that's out there 0:18:34.640 --> 0:18:36.360 that investors need to think about. 0:18:36.560 --> 0:18:39.040 Jillian's always such a great treat to heavy on Wall Street. Wee, 0:18:39.080 --> 0:18:42.880 there's Jillian Tech of the Financial Times and King's College, Cambridge. 0:18:43.240 --> 0:18:46.240 As we move closer to the presidential election in November, 0:18:46.320 --> 0:18:49.280 Global Wall Street focused on what the differing economic policies 0:18:49.320 --> 0:18:51.960 of the two front runners, President Joe Biden and former 0:18:52.000 --> 0:18:54.920 President Donald Trump could mean for business. For his views, 0:18:54.960 --> 0:18:57.800 we welcome back now Josh Bolton. He's president and CEO 0:18:57.880 --> 0:19:00.679 of the Business Roundtable and former chiefs staff to President 0:19:00.760 --> 0:19:03.159 George W. Bush. So, Josh, welcome back. Good to have you. 0:19:03.320 --> 0:19:06.160 Before we get into what November might mean for business, 0:19:06.400 --> 0:19:07.919 let's talk about where we are right now. I know 0:19:08.119 --> 0:19:10.840 quarterly you do a survey of your CEOs. Who are 0:19:10.880 --> 0:19:13.199 your members? Where do your CEOs think we are as 0:19:13.240 --> 0:19:14.320 an economy right now? 0:19:14.680 --> 0:19:18.040 David, thanks for having me back. Our CEOs are in 0:19:18.080 --> 0:19:21.760 a pretty comfortable place. Every quarter, we ask them about 0:19:21.800 --> 0:19:26.080 their expectations for sales over the coming six months and 0:19:26.160 --> 0:19:29.480 their plans for capex and hiring over that same period, 0:19:30.760 --> 0:19:37.000 and we combine the results into a headline index that 0:19:37.400 --> 0:19:42.000 is basically a pretty good barometer of CEO sentiment, and 0:19:42.480 --> 0:19:46.840 the CEOs in the Business Roundtable their sentiment for the 0:19:46.880 --> 0:19:50.800 coming six months is pretty good. For the first time 0:19:51.200 --> 0:19:56.720 since the third quarter of twenty twenty two, that headline 0:19:56.760 --> 0:20:02.720 index is above its historic app ridge. So it's not exuberant, 0:20:02.760 --> 0:20:08.600 it's not going gangbusters as far as our CEOs are concerned. 0:20:09.760 --> 0:20:13.800 But they see things as in pretty good shape for 0:20:14.000 --> 0:20:21.800 the coming six months based on economic fundamentals. And it 0:20:21.920 --> 0:20:24.600 seems to me, David, that the one thing that might 0:20:25.440 --> 0:20:29.280 throw them off of that optimistic outlook is something that 0:20:29.359 --> 0:20:33.560 happens in something dramatic that happens in our politics or 0:20:33.600 --> 0:20:34.720 our geopolitics. 0:20:35.160 --> 0:20:37.880 So let's talk about that specific because as I say, 0:20:37.920 --> 0:20:40.560 you had experience in the White House, you know whereof 0:20:40.640 --> 0:20:42.760 you speak, how much of a difference does it make 0:20:42.800 --> 0:20:45.120 who is in the White House? No matter who it is, 0:20:45.359 --> 0:20:48.239 can the president really affect the economy substantially. 0:20:48.240 --> 0:20:52.480 Well from the standpoint of our businesses enormously, and in 0:20:52.520 --> 0:20:59.119 particular during periods when the tax code is open for renegotiation, 0:20:59.680 --> 0:21:03.800 when there are potential trade deals on the table that 0:21:04.440 --> 0:21:07.520 might or might not happen depending on who's in charge. 0:21:09.000 --> 0:21:14.439 The regulatory environment is dramatically influenced by who's in the 0:21:14.480 --> 0:21:18.920 White House. So all of those things can really affect 0:21:20.560 --> 0:21:24.840 the business outlook from the standpoint of our country's biggest corporations. 0:21:25.240 --> 0:21:27.880 Let's take those three that you've mentioned, starting with taxes 0:21:28.359 --> 0:21:30.520 and the difference as we perceive it right now between 0:21:30.560 --> 0:21:33.120 the two front runners, Donald Trump and Joe Biden. Joe 0:21:33.160 --> 0:21:35.360 Biden has said he wants to increase taxes and specifically 0:21:35.400 --> 0:21:38.639 on corporations. Presumably President Trump would want to renew the 0:21:38.680 --> 0:21:42.600 so called tax cuts, the Trump tax cuts. So how 0:21:42.600 --> 0:21:46.200 does business perceive the alternative between these two individuals. 0:21:46.440 --> 0:21:51.359 Well, business very much welcomed the tax cuts that passed 0:21:51.400 --> 0:21:54.840 in twenty seventeen. They had a lot to do with 0:21:55.119 --> 0:21:58.800 the prosperity that we enjoyed before the pandemic and that 0:21:58.880 --> 0:22:04.720 we enjoy now. Is a reasonable tax environment. Prior to 0:22:04.760 --> 0:22:09.320 twenty seventeen, the United States was among the highest tax 0:22:09.560 --> 0:22:17.040