Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. The US
Speaker 1: economy continues to send mixed signals. The financial stories that
Speaker 1: cheap our world fed action to con concerns over dollar
Speaker 1: liquidity and encouraging China data. The five hundred wealthiest people
Speaker 1: in the World. Through the eyes of the most influential
Speaker 1: voices Larry Summers, the former Treasury Secretary, star Ward CEO,
Speaker 1: Kevin Johnson sec Chairman j Clayton. Bloomberg wool Street Week
Speaker 1: with David Weston from Bloomberg Radio. Winter comes to Texas,
Speaker 1: but the markets look past higher oil prices and keep
Speaker 1: their focus on earnings and interest rates and getting back
Speaker 1: to business. This is Bloomberg Wall Street Week. I'm David Weston.
Speaker 1: Different experts have different views on what caused the Texas
Speaker 1: power crisis and what needs to be done about it.
Speaker 1: The Secretary of Energy under President Trump, Dan Briette, says,
Speaker 1: the fundamental problem is moving too far and too fast
Speaker 1: toward renewable energy. There is a fundamental flaw in our
Speaker 1: policy inow system here in the United States. Obviously, the
Speaker 1: weather is having an effect on the energy grid, but
Speaker 1: it's important for us to remember that the weather is
Speaker 1: not the actual cause of the rolling blackouts that we're
Speaker 1: seeing across Texas and other parts of the United States.
Speaker 1: You know, it used to be, David, in the in
Speaker 1: years past, we built the utility systems in America to
Speaker 1: provide energy when people needed it when they needed it,
Speaker 1: like right now. And what we've done is we've moved
Speaker 1: away from that. That's what I just described is known
Speaker 1: as baseload power. We've moved away from that to a
Speaker 1: more intermittent and frankly sometimes less reliable form of energy
Speaker 1: in the sense of wind and solar. And when people
Speaker 1: may need the energy like they do today, the wind
Speaker 1: may not be there and the solar may not be there.
Speaker 1: So what we've done is we've moved away from that
Speaker 1: that energy security that we used to have here in
Speaker 1: the United States. And further, David, we've exacerbated the problem
Speaker 1: by in some cases making the baseload power. And what
Speaker 1: I'm speaking to are the pipelines and natural gas pipelines
Speaker 1: dependent upon this intermittent form of energy. So when those
Speaker 1: windmills didn't blow in West Texas, that means the compressors
Speaker 1: on those pipelines didn't work, and that natural gas perhaps
Speaker 1: didn't reach those natural gas utilities in other parts of Texas.
Speaker 1: So we've got to address this very squarely and have
Speaker 1: a very honest conversation about renewable energy in America. Until
Speaker 1: we can reach the point that we have grid scale
Speaker 1: storage and battery technologies that allows us to rely on
Speaker 1: this energy, it's important that we not we not put
Speaker 1: ourselves into situation where we're dependent upon it. Well, and Dan,
Speaker 1: that was gonna be a question how much of this
Speaker 1: is a storage problem. If we had the storage problem fixed,
Speaker 1: would it take care of things like solar and wind, Well,
Speaker 1: it would, David that that's really the challenge, you know,
Speaker 1: Um Today, renewable energy does not have the ability to
Speaker 1: provide what we refer to as grid scale storage or
Speaker 1: seven storage. So in that sense, it is dependent upon
Speaker 1: natural gas, nuclear and coal in certain instances to provide
Speaker 1: that backup power. But if you've made the backup power
Speaker 1: also dependent upon the renewable power, you've got a real challenge.
Speaker 1: And that's what we're seeing in Texas today. So to
Speaker 1: what extent is this irrevocable in the sense that coal
Speaker 1: has become increasingly inefficient, monetarily, economically not so feasible. So
Speaker 1: we have to move away from coal. And if we
Speaker 1: move at coal, where are we going. Well, I think
Speaker 1: we are going to eventually end up, you know, with
Speaker 1: very clean forms of energy. It will be things like
Speaker 1: fusion nuclear fusion technologies, smaller nuclear technologies that have zero
Speaker 1: carbon emissions. We're gonna see a lot more solar energy,
Speaker 1: a lot more wind energy. That's the transition that the
Speaker 1: world is moving toward. The challenges. If we moved there
Speaker 1: today without baseload power, we're going to continue to see
Speaker 1: the problems that we're seeing today in Texas. Again, I'll
Speaker 1: state the point, it's not the weather that's the problem,
Speaker 1: it's the policy that's the problem. And what about the grid,
Speaker 1: because I also have heard in the last four hours
Speaker 1: some talk about the Texas grid being different from some others,
Speaker 1: that it's more independent, that it's not is easy to
Speaker 1: transfer power from Texas outside of Texas to surrounding states.
Speaker 1: Is that true? That is true? Texas is run the
Speaker 1: regulator there is known as ar COOT, that's the grid
Speaker 1: manager within Texas. And yes, they are somewhat isolated from
Speaker 1: the rest of the country. There are instances. For instance,
Speaker 1: during the hurricane season in Louisiana where we were, I
Speaker 1: issued an emergency order to allow electricity to move from
Speaker 1: Texas to Louisiana to help the good folks in Louisiana
Speaker 1: recover from the hurricane. But those are those are are
Speaker 1: are unique events. By and large, the COOT system, the
Speaker 1: Texas system is independent from the rest of the country.
Speaker 1: Is it possible in a short term basis to redeploy
Speaker 1: some of the energy? And the things that I've learned
Speaker 1: because of this crisis is the extent to which Texas
Speaker 1: and particularly reply and relies by natural gas as opposed
Speaker 1: to fuel oil for their heating system. Is it possible
Speaker 1: to redirect some of the natural gas that otherwise we'll
Speaker 1: be going to len G facilities to be exported. Yes,
Speaker 1: you can. The question is, you know, can you get
Speaker 1: those pipelines? Can you get that infrastructure permitted in the
Speaker 1: United States? Intrust A pipelines in Texas have been somewhat
Speaker 1: easier to permit than other places around the country. We
Speaker 1: had a unique problem up in the Northeast where we
Speaker 1: couldn't get natural gas out of the Marcellus shale in Pennsylvania.
Speaker 1: An enormous resource for the country. We couldn't get it
Speaker 1: to the Northeast, which wanted it desperately, because the state
Speaker 1: of New York would not permit a pipeline to allow
Speaker 1: that gas to travel through its state. It's those types
Speaker 1: of challenges, David, that we face today in America. It's
Speaker 1: not just America, I think, Mr Secretary, we see problems
Speaker 1: in Japan, we see problems in Europe because of extreme
Speaker 1: weather right now and the effect way it affects energy
Speaker 1: and the power grid. What can we do to anticipate
Speaker 1: extreme weather because it doesn't seem to be going away
Speaker 1: anytime soon. Well, I think it goes back to what
Speaker 1: I said earlier, David. You know, we used to build
Speaker 1: utility systems in America with security in mind and have
Speaker 1: it provide energy when people wanted it. I liken this
Speaker 1: to a national defense. You build an army to protect
Speaker 1: your people when the enemy attacks. So what you want
Speaker 1: to do is provide a utility system that provides energy
Speaker 1: when people want it and need it. What we have
Speaker 1: today in America is exactly the opposite. When people really
Speaker 1: need the energy, our response is to tell them to
Speaker 1: turn the heat off, turn the lights off. That's exactly
Speaker 1: the wrong approach the energy policy, in your opinion, Might
Speaker 1: this phenomenon we're watching right now in Texas and through
Speaker 1: much of central United States? Might it affect at least
Speaker 1: the timetable of the Biden Administration's plan to go to
Speaker 1: clean energy. Well, I hope it does. I hope that
Speaker 1: there are some lessons that are taken from these types
Speaker 1: of events, and it's such as Texas. We saw the
Speaker 1: same thing in California last year as well. Look, I
Speaker 1: think everybody has the same goal here. Everybody wants clean air,
Speaker 1: everybody wants clean water. The question is how do you
Speaker 1: do it? And that's an important conversation for the Biden
Speaker 1: administration to consider. That was Dan Riette, former Secretary of Energy,
Speaker 1: coming up what the freeze deep in the heart of
Speaker 1: Texas may tell us or not about the move to
Speaker 1: clean energy from Eric Tune of Breakthrough Energy Ventures. That's
Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg
Speaker 1: Will Street Week with David Weston from Bloomberg Radio. A
Speaker 1: snow storm and brutal cold hit an unprepared energy system
Speaker 1: and left nearly five million customers in Texas, North Dakota,
Speaker 1: Arkansas Louisiana and Mississippi in the dark. Power companies in
Speaker 1: affected states had to resort to rolling power blackouts to
Speaker 1: save their networks from collapsing, leaving households and businesses without
Speaker 1: power and heat. What is our priority for UH for
Speaker 1: keeping the lights on and the heat on. Really do
Speaker 1: need to have a very broad mix of power generating sources.
Speaker 1: That's Ellen Walled, Senior fellow of the Atlantic Council. In
Speaker 1: recent years, power grids have come to rely more on
Speaker 1: wind and solar power to meet increasing electricity demands. But
Speaker 1: the alternative energy sources can sometimes vary with the weather.
Speaker 1: And this weather was severe enough to hit both wind
Speaker 1: and gas fire generation in Texas, and there wasn't enough
Speaker 1: reserve power to keep the lights on, or the heat
Speaker 1: or even the water in some places. Here's Ken Molis,
Speaker 1: the founder and chairman of Molus Company. You cannot force
Speaker 1: a government mandate on certain things that aren't ready to
Speaker 1: supply the basic needs of people. To make things worse,
Speaker 1: the winter storm crippled US oil and gas production, reducing
Speaker 1: it by more than a third in the Permian Basin.
Speaker 1: Major producer Occidental told customers it would be forced to
Speaker 1: curtail oil deliveries, while chevrons shut some wells in the region.
Speaker 1: More than twenty refineries were disrupted by the polar blast,
Speaker 1: sending gasoline futures surging. This is a timely reminded for
Speaker 1: a wake up called really in saying that, yeah, we
Speaker 1: absolutely need fossil fuel in the mix, it's about how
Speaker 1: we get in greener. That's Amrita sent chief oil analysts
Speaker 1: at Energy Aspects. Temperatures in Texas were low enough to
Speaker 1: freeze oil and gas liquids in pipelines laid on the ground.
Speaker 1: Just as the cold caused demand to jump. Liquefied natural
Speaker 1: gas terminals were shut down to reduce their power and
Speaker 1: gas demand in response to emergency declarations. Here's Jim Right,
Speaker 1: Texas Railroad Commissioner. As we hear in Texas have said
Speaker 1: that renewable energy has priority on our grid. We've discouraged
Speaker 1: the people coming in and building car plants that run
Speaker 1: off of natural gas, which is more of a reliable
Speaker 1: source than than as everyone knows when and uh sun is.
Speaker 1: This energy crisis is severe, but not new. Almost a
Speaker 1: fifth of the power capacity in Texas failed in February
Speaker 1: two eleven during another cold snap, and California suffered blackouts
Speaker 1: during a heatwave last August, not to mention multiple wildfires
Speaker 1: that in recent years have been linked to its power grids.
Speaker 1: Here's Paul Sanky, lead analyst at Sankey Research in The
Speaker 1: situation for me is very reminiscent of park in Katrina,
Speaker 1: where if you recall on the Monday after Katrina, that
Speaker 1: was sort of an attitude that, uh, this hasn't been
Speaker 1: that big a deal, and then over the course of
Speaker 1: the following week it's suddenly emerged as a as a
Speaker 1: horrendous disaster. But others say that it is wrong to
Speaker 1: blame the problems in Texas this week on wind and
Speaker 1: so or energy. There's a more fundamental issue of energy reliability.
Speaker 1: According to Eric Tune, he's managing director of Breakthrough Energy Ventures,
Speaker 1: we should instead focus on the underlying weakness of the
Speaker 1: Texas approach to its energy policy. Fundamentally, what you need
Speaker 1: to achieve reliability and electric grid, which is what we're
Speaker 1: trying to do here, is some combination of electricity storage
Speaker 1: and electricity transmission, and those two things sort of play
Speaker 1: off against each other. If you had infinite storage, if
Speaker 1: you could store all the energy you wanted at times
Speaker 1: of surplus, so that you had it at times of need,
Speaker 1: you wouldn't need any transmission. If you had infinite transmission,
Speaker 1: so at times of surplus you could ship your electricity
Speaker 1: to places that didn't have as much, and at times
Speaker 1: of need you could report it from other places. Then
Speaker 1: you wouldn't need any storage. So those two things you
Speaker 1: need some combination of storage and transmission to achieve reliability.
Speaker 1: And electric grid has a very specific set of problems.
Speaker 1: First of all, at the transmission level, Texas has a
Speaker 1: grid is limited to the state of Texas or cott
Speaker 1: is unique among electric grids and that it's only for
Speaker 1: the state of Texas, so they have very limited transmission.
Speaker 1: And then they have virtually no storage. Unlike other states,
Speaker 1: Texas doesn't store um natural gas. They basically take it
Speaker 1: straight out of the ground and put it into the pipeline.
Speaker 1: They don't store energy that's produced by winds at times
Speaker 1: of surplus, so it's available at at at times of need.
Speaker 1: And so what happened here is everything went down simultaneously
Speaker 1: and fundamentally the problem was water freezes. Water freezing is
Speaker 1: what caused the turbines to stop. Water freezing is what
Speaker 1: stopped natural gas coming out of the ground because natural
Speaker 1: grass comes out of the ground with with hydrocarbons and
Speaker 1: with water that froze up. Water freezing is the problem.
Speaker 1: That what caused the nuclear reactor to go down, right,
Speaker 1: That was that was a cooling line. So fundamentally here
Speaker 1: the problem is water freezes. That's an unusual event in
Speaker 1: Texas that had ramifications for generation across the board. Across
Speaker 1: the board, renewables, natural gas, even nuclear and with no
Speaker 1: storage and very limited transmission, reliability goes away. So that's
Speaker 1: fundamentally what happened. Water freezes, and it has impaired some
Speaker 1: of the turbines. Although a lot of turbines down there
Speaker 1: is I understanding. At the same time, you can winterize
Speaker 1: those things, can't you. I have read that some of
Speaker 1: the Northern States and Canada do a better job than
Speaker 1: Texas is doing. You absolutely can't. I mean they run Look,
Speaker 1: they run turbines three sixty five days a year in Greenland,
Speaker 1: and Greenland is certainly colder than Texas is today, you know.
Speaker 1: But but here you you you pay money to build
Speaker 1: reliability into those generating assets, and you can decide whether
Speaker 1: I want, you know, a grid that's nine reliable and
Speaker 1: it's going to go down once every ten years, or
Speaker 1: I can you know, build one that's nine percent reliable
Speaker 1: and it's going to go down once every hundred years,
Speaker 1: or ninety nine point nine that goes down, you know,
Speaker 1: once every thousand years. And that costs money, and and
Speaker 1: and that's a decision that a society has to make
Speaker 1: about how much it's prepared to pay for that reliability. Well,
Speaker 1: and that raises a question in my mind a least
Speaker 1: whether this is a technology issue, a climate issue, or
Speaker 1: a business model issue. Is in fact the case that
Speaker 1: Texas largely has decided to run their system way to
Speaker 1: maximize profits, which means you don't spend as much in
Speaker 1: overproducing having excess capacity and storage. I would say that
Speaker 1: that the business model is a significant part of the problem.
Speaker 1: Texas also doesn't have capacity markets. Um. Electricity markets are
Speaker 1: very complicated things. You you have markets where you pay
Speaker 1: people to produce electricity, but you also have forward looking
Speaker 1: markets that pay people for capacity. Texas has not used
Speaker 1: capacity markets in the past, and I think it's something
Speaker 1: that they they want to look at, especially if they're
Speaker 1: going to keep an isolated grid ERIC over the longer term.
Speaker 1: We're moving towards renewables. It's pretty clear across the country,
Speaker 1: and the Biden administration wants to move us there faster.
Speaker 1: Does the Texas experience tell us anything about how fast
Speaker 1: we can and should move, and particularly when it comes
Speaker 1: to storage, because as I understand, there remains some real
Speaker 1: issues with storage from renewables. Well, you know, I think
Speaker 1: that that we have to think about reliability, you know,
Speaker 1: as as we move to an era of electrify everything,
Speaker 1: and that's absolutely where we're going. The size of the
Speaker 1: grid is going to grow, so you have to think
Speaker 1: about what new generating assets that you're gonna put on
Speaker 1: to supply that power. That was Eric Tune of Breakthrough
Speaker 1: Energy Ventures, the organization Bill Gates founded to invest in
Speaker 1: sustainable energy. Michael R. Bloomberg, founder and majority owner of
Speaker 1: our parent company, is an investor in b EV. Coming up,
Speaker 1: the President Biden insists he wants the federal minimum wage
Speaker 1: raised to fifteen dollars an hour. But will it cost
Speaker 1: more jobs when we still have almost ten million people
Speaker 1: out of work because of the pandemic. We ask economics
Speaker 1: professor A renderjitz Dubai of U mass Amherst. That's next
Speaker 1: down Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David from Bloombird Radio. The federal minimum
Speaker 1: wage has been seven dollars and cents an hour since
Speaker 1: July of two thousand nine, and Democrats have been calling
Speaker 1: for a national increase, even as twenty states couldn't wait
Speaker 1: and raise their minimum wage on January one. But will
Speaker 1: some employers hire less people if they have to pay
Speaker 1: them more? Economics professor or Renderjit Dubai of UMSS Amherst
Speaker 1: has become a leading expert on the subject, and he
Speaker 1: has his doubts. So a little over a year ago
Speaker 1: I conducted a major review of the evidence for the
Speaker 1: UK Treasury about what minimum wages do to jobs. Overall,
Speaker 1: the most up to date body of research, in my opinion,
Speaker 1: points to a relatively limited effect of minimum wages on
Speaker 1: jobs in US, in UK and other developed economies. At
Speaker 1: the same time, it's significantly increases wages earnings at the bottom,
Speaker 1: so overall, I think that ends up lifting people out
Speaker 1: of poverty and being a relatively good thing. So the
Speaker 1: Congression on Budget Office has done more than one study
Speaker 1: on this, and I've read at least the summaries of
Speaker 1: them that concludes that on the one hand, what you
Speaker 1: said is exactly right. You raise a lot of people
Speaker 1: out of poverty. On the other hand, you lose jobs.
Speaker 1: Last estimal myself was like one point three million or
Speaker 1: one point formula if you go to fifteen dollars an
Speaker 1: hour minium, which across the entire country. Yeah, so I
Speaker 1: think it's you know, it's sometimes it's hard to interpret
Speaker 1: what that one point four million means. The top line numbers,
Speaker 1: that is it big, it's strong. The way they think
Speaker 1: about it is this the CPO analysis suggests there will
Speaker 1: be job loss one point four million fewer jobs um.
Speaker 1: At the same time, wage games are far larger than that,
Speaker 1: and so as a result, it ends up lifting people
Speaker 1: out of poverty and actually increasing earnings overall for working people.
Speaker 1: Having said that, let me also say that I actually
Speaker 1: think the several analysis is more pessimistic than what I found.
Speaker 1: Um In my review, I used a somewhat broader set
Speaker 1: of evidence, and I also paid close attention to some
Speaker 1: particular data points. And here's a you know, going a
Speaker 1: little bit into the weeds here. But the CBO analysis
Speaker 1: really basically they uses eleven studies and um, what the
Speaker 1: problem is that some of those studies that there's a
Speaker 1: few studies that find really large job losses, and one
Speaker 1: of those is this study from University Washington that looked
Speaker 1: at Seattle minimum wage. It just turns out that that
Speaker 1: that that study actually was um one where they found
Speaker 1: really large job loss, but then it turned out that
Speaker 1: it was actually almost certainly incorrect. In fact of subsequent
Speaker 1: analysis by the same authors found job loss that was
Speaker 1: one tenth as large from the same minimum wage increase,
Speaker 1: and that was not included in the CBO report. I
Speaker 1: can go more into the weeds, but I will say
Speaker 1: that overall, I think that one point for milion is
Speaker 1: you know, almost certainly too large of a job loss.
Speaker 1: But the overall tenor is that I think minimum wage
Speaker 1: increases raise wages. There may be some just fewer jobs.
Speaker 1: On the other hand, there's a lot of other waves
Speaker 1: that actually the economy absorbs the minimum wage increase. What
Speaker 1: about a differential effect on larger businesses or medium business
Speaker 1: as opposed to small businesses. One of the things we
Speaker 1: hear is it might be affordable for some companies, but
Speaker 1: when you get to the really small businesses which are
Speaker 1: hurting right now during this pandemic, they can't afford it.
Speaker 1: So I think there's some evidence that the minimum wage
Speaker 1: increase does lead to reallocation from lower productivity to higher
Speaker 1: productivity firms. Right, So that means that you may have
Speaker 1: some more employer and more workers working at larger businesses
Speaker 1: than smaller businesses. That's a possible cost. On the other hand,
Speaker 1: one could also see that as a possible benefit, that
Speaker 1: you're actually allocating workers to more productive enterprises. Now we
Speaker 1: hear from some executives like the CEO of Walmart, who
Speaker 1: says fifteen dollars an hour it makes good sense in
Speaker 1: some parts of the country, but not across the country
Speaker 1: because the cost of living very so much across the country.
Speaker 1: How do you respond to that, Well, that's interesting because
Speaker 1: Walmart has a minimum wage. It's eleven dollars an hour.
Speaker 1: It actually is the same in all states. And so
Speaker 1: that's an interesting point because they actually chose the national
Speaker 1: minimum wage, which was voluntary but was binding exactly the
Speaker 1: same way. Same is true for Target, which is a
Speaker 1: fifteen dollar minimum wage exactly the same across all states
Speaker 1: in the United States. Same is true with Amazon, a
Speaker 1: fifteen dollar minimum wage. The same across every state. So
Speaker 1: I think they're Look, they're they're different pros and cons
Speaker 1: for having a set wage. Here's the way I think
Speaker 1: about it, that the federal minimum wage is the floor.
Speaker 1: Beyond that. Thirty states currently have minimum wages that exceed that. Okay,
Speaker 1: forty plus cities have minimum wages that exceed that. My
Speaker 1: guess is that's going to keep continue to be the
Speaker 1: case in the future as well. So the question becomes,
Speaker 1: then for us, what floor should we have at the
Speaker 1: national level? Right? I want to squeeze just one more
Speaker 1: in here, and that's the earned income tax Credit, because
Speaker 1: some people say, if the goal is to bring people
Speaker 1: out of poverty, a better way to do it is
Speaker 1: the earned income tax credit, because that's a tax on
Speaker 1: all Americans, not just people who employ other Americans. Yeah,
Speaker 1: so I think earned income tax credit is a great
Speaker 1: policy that should be expanded. I'm glad to see there's
Speaker 1: proposals out there. Here's the thing. I think the earned
Speaker 1: income tax credit and the minimum wager compliments. They work
Speaker 1: well together, not substitutes. Here's a simple reason why their
Speaker 1: income tax credit actually does a good thing. It encourages
Speaker 1: people to work. But when more people are looking for jobs.
Speaker 1: It tends to push wages down somewhat. A minimum wage
Speaker 1: can stop. That isn't the way they can play well together.
Speaker 1: That was economics professor Aaron Dubai of U Mask Camp.
Speaker 1: Coming up, we wrap up the week with our special
Speaker 1: contributor Larry Summers. This is Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Will Street Week with David Weston from
Speaker 1: Bloomberg Radio. We cannot end a week on Wall Street
Speaker 1: without turning to our special contributor, Larry Summers of Harvard. So, Larry,
Speaker 1: welcome back. You've been outspoken on this program and elsewhere
Speaker 1: saying that you have some concern about the one point
Speaker 1: nine trillion dollar stimulus package, that it might overheat the economy.
Speaker 1: From what you're seeing, are you more concerned or less
Speaker 1: concerned than you were before? Probably a bit more concerned.
Speaker 1: The Atlanta Fed this morning UH said that it's now
Speaker 1: cast for first quarter g T is nine and a
Speaker 1: half percent of growth in an annualized great. That's higher
Speaker 1: than most other observers. I guess it's too high, but
Speaker 1: it does say that there's likely to be substantial spending,
Speaker 1: substantial growth and purchasing power. I think there are a
Speaker 1: lot of reasons for it. But bond else have backed
Speaker 1: up considerably in the last several weeks. You've got a
Speaker 1: treasury ten your treasury in UH the one point three range.
Speaker 1: I think there's a growing UH sense of concern. I
Speaker 1: don't think that the data in the last three weeks
Speaker 1: should change anybody's mind profoundly. If you thought you shouldn't
Speaker 1: be worried three weeks ago, I don't think there's been
Speaker 1: data that would UH convince you. But as someone who's
Speaker 1: concerned about UH overheating risks someone who's concerned that if
Speaker 1: we do all this transfer payment, we're not going to
Speaker 1: have room for the public investment to expand the economy's
Speaker 1: capacity we need. Certainly the data flow has been broadly
Speaker 1: consistent UH with my concern. Well, let me pick up
Speaker 1: on that, because I think some people may have not
Speaker 1: fully understood, as you say, you haven't that we don't
Speaker 1: need a lot of support for the economy. And even
Speaker 1: though't you just spent a lot of money, in fact
Speaker 1: you've said, really given interest rates, it makes sense, But
Speaker 1: it's a question of what the money is going for.
Speaker 1: Is it for consumer spending or is it for investing
Speaker 1: in the economy, and let's connect that with jobs, because
Speaker 1: j pology know has been very concerned about jobs, has
Speaker 1: even talked about federal jobs program. What do we need
Speaker 1: to get jobs? Because we're still almost a ten million
Speaker 1: people unemployed today who had jobs before the pandemic. So
Speaker 1: you raised a couple of very important issues there, Uh, David,
Speaker 1: I'd rather see us UH investing money that expands the
Speaker 1: economy's UH capacity than simply making transfer payments. What's remarkable
Speaker 1: is that the advocates of this program, like Paul Krugman,
Speaker 1: when you put to them that it may overheat the economy,
Speaker 1: they say, no, no, it won't. People will save the money,
Speaker 1: and people will use it to pay down debt. And
Speaker 1: I can't imagine a lower priority use of federal resources
Speaker 1: than improving consumers balance sheets, rather than repairing the country's infrastructure,
Speaker 1: making tests available for people to be UH vaccinated, starting
Speaker 1: investments in a green economy, doing things for pre child education.
Speaker 1: So the defense of the program that claims that what
Speaker 1: it's gonna do is begin a process of consumer balance
Speaker 1: sheet repair at a moment when, by the way, consumer
Speaker 1: credit is extremely strong, I just don't relate to that
Speaker 1: as a central concern as well. God knows, David, job
Speaker 1: creation is really crucial, and we've got to have job creation.
Speaker 1: But I think it's much better that we put the
Speaker 1: emphasis on the task that need to be accomplished and
Speaker 1: then figure out how to put the unemployed workers to
Speaker 1: work accomplishing those tasks. Then we frame the problem in
Speaker 1: terms of make work jobs. And that's why framing it
Speaker 1: in terms of a job guarantee seems to me to
Speaker 1: be uh so problematic. So I I believe it's hugely
Speaker 1: important that we work on preparing people to be ready
Speaker 1: for work, that we work on supporting employment in the
Speaker 1: sectors that employ men without who have not made enormous
Speaker 1: cognitive investments where they work with their hands, repairing uh
Speaker 1: the infrastructure, installing energy efficient systems of insulation, and solar
Speaker 1: collectors in homes. There are plenty of asks that are
Speaker 1: vitally important that we can make public investments in, but
Speaker 1: we give up all of that if we put the
Speaker 1: focus on transfer payments. We also don't help employment any
Speaker 1: when we pay people more to not work than they
Speaker 1: were making to work. And what we are going to
Speaker 1: legislate is an unemployment insurance program that for the substantial
Speaker 1: majority of its recipients, is going to give them significantly
Speaker 1: more money when they don't have to commute to work,
Speaker 1: when they have all the time to take care of
Speaker 1: their kids, to do what they need to do. Because
Speaker 1: they are not working, they are going to get significantly
Speaker 1: more take home pay than they did for working. And
Speaker 1: that's just not a pro employment policy. Lay. One of
Speaker 1: the things that struck me this week was the CDC
Speaker 1: coming out with numbers showing that the life expectancy of
Speaker 1: the average American has gone down by full year and
Speaker 1: disproportionately according to race and ethnicity. What do you make
Speaker 1: of that? Is there a larger story there or is
Speaker 1: it just the one off of the pandemic. Look. Life
Speaker 1: expectancy is formed from eight specific death rates at each age,
Speaker 1: and they obviously went up this year because of COVID,
Speaker 1: and they obviously went up more for people who were
Speaker 1: more disadvantaged in groups that were more disadvantaged. So this
Speaker 1: year's statistic is driven by COVID. The digital performance of
Speaker 1: life expectancy in the United States, and particularly the life
Speaker 1: expectancy of less educated men that's driven by opiates, that's
Speaker 1: driven by substance addiction, that's driven by as uh angerst
Speaker 1: Eton and in case put it by despair, and that
Speaker 1: speaks to a very broad social challenge that we need
Speaker 1: to address. You know, I find it ironic and pathetic
Speaker 1: that the progressive wing of the Democratic Party, people like
Speaker 1: Senator Warren and Senator Sanders, are all excited to give
Speaker 1: fifty dollars or more of debt relief two young people
Speaker 1: who are working at Wall Street investment banks making six
Speaker 1: digit sums of money, rather than focusing on the needs
Speaker 1: of the high school dropouts, the needs of those who
Speaker 1: are graduating from high school but not going on to
Speaker 1: college and need US specific training. And so I hope
Speaker 1: that progressives will disconnect from the elite concerns of id
Speaker 1: elite college graduates, of those with graduate degrees and focus
Speaker 1: on the people they should be representing, on the people
Speaker 1: who have been left behind. So let's wrap up the
Speaker 1: week here with a quick round of Summer says. Let's
Speaker 1: start with the Texas energy crisis. We've all been watching it.
Speaker 1: It really it's been awful. What's happened to those people
Speaker 1: down there? Do you think that that crisis will speed
Speaker 1: up or slow down President Biden's quest for green energy
Speaker 1: not much either way. Maybe it will encourage some more
Speaker 1: renewable UH investment. On the other hand, solar power wouldn't
Speaker 1: have been working that well in Texas this month. When
Speaker 1: do you think the FED will raise interest rates sooner
Speaker 1: than they think and sooner than the market things. I'd
Speaker 1: expect great hikes to be underway by the end well
Speaker 1: underway by the end of well. It's hands be forced
Speaker 1: essentially by inflation. I think a combination of inflation and
Speaker 1: perhaps an overheating economy and UH fiscal policy the on fire.
Speaker 1: Particularly if we actually UH build back better and look
Speaker 1: returning to more normal interest rates could be okay, but
Speaker 1: it's going to be a very challenging transition. And I
Speaker 1: must say it doesn't seem to me from the fed's comments,
Speaker 1: which are all on the side of resisting deflation, all
Speaker 1: on the side of promoting social equality. I think the
Speaker 1: FED is not recognizing the era that they're headed into,
Speaker 1: where they're going to face the kinds of challenges that
Speaker 1: the FED faced in the nineteen seventies. The FED failed
Speaker 1: in the nineteen seventies, and I think if the FED
Speaker 1: wants to not fail, they're gonna have to start recognizing
Speaker 1: the reality of those challenges, and that's going to mean
Speaker 1: a significant change in their tone. Okay, thank you so
Speaker 1: much to our special contributor to Wall Street Week, his
Speaker 1: Larry Summers of Harvard. Only one more thought, how do
Speaker 1: you kiss a baby virtually? If you're not sick of
Speaker 1: zoom and FaceTime and all those virtual ways of meeting,
Speaker 1: you just haven't been paying attention the lighting that's never
Speaker 1: quite right, being muted when you don't want to be,
Speaker 1: and praying that you're muted when you think you are.
Speaker 1: And what is with all those elaborate virtual backdrops we see?
Speaker 1: But if you think you're struggling with our new virtual world,
Speaker 1: pity the poor politicians. Their life's blood is pressing the
Speaker 1: flesh and looking your right in the eye and getting
Speaker 1: a feel of the room. Just about none of that
Speaker 1: is happening these days, even as New York moves towards
Speaker 1: choosing its next leader in the fall, which means there's
Speaker 1: a large number of contenders roaming the five boroughs day
Speaker 1: and night without leaving their living rooms or their dens,
Speaker 1: or their closets or wherever. The good news is they
Speaker 1: never need to go anywhere. The bad news is, they
Speaker 1: really have no excuse to miss a gathering anywhere in
Speaker 1: the city, no matter how small. So this November, the
Speaker 1: voters of New York City will get to choose their leader,
Speaker 1: a leader they hope will lead a city badly in
Speaker 1: need of recovery. But it's not the first time this
Speaker 1: city has had to come back when some have counted
Speaker 1: it out. And as Westmore of robin Hood Foundation says,
Speaker 1: you don't want to bet against New York. That does it.
Speaker 1: For this episode of Wall Street Week, I'm David Weston.
Speaker 1: This is Bloomberg. See you next week.