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Speaker 1: This is Wall Street Week. I'm David Weston.

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Speaker 2: We're now joined by our specialist Larry Summers of Harvard's

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Speaker 2: and Larry, thank you so much for being with us.

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Speaker 2: We got those jobs numbers at the end of the

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Speaker 2: week on Friday. They were significally better than expected. There

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Speaker 2: were some down revisions for the prior month. At the

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Speaker 2: same time, IM numbers came in a little softer. What

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Speaker 2: do you make of these jobs numbers and particularly perhaps

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Speaker 2: the wage numbers, David.

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Speaker 3: Look, I think we're in the same kind of pattern

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Speaker 3: we've been in for some time. As of right now,

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Speaker 3: the economy looks pretty strong and inflation looks relatively under control,

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Speaker 3: but there's a lot going on underneath the surface, and

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Speaker 3: there are still substantial risks. I'm sticking with my three

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Speaker 3: scenarios paradigm.

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Speaker 1: Some risk of a downturn.

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Speaker 3: We still keep not seeing it at all in the

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Speaker 3: employment number. In the data on GDP, there's this big

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Speaker 3: gap between total income and total output that makes things

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Speaker 3: hard to read, and there's some worrying developments some of

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Speaker 3: the business surveys like that ism and in some of

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Speaker 3: the credit data. So I think it's possible that the

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Speaker 3: economy will go into recession in delayed response to monetary policy.

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Speaker 3: That looks less likely to me that I might have

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Speaker 3: fought some months ago. It's certainly increasingly possible that we'll

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Speaker 3: have that much valuehoed soft landing, as rare as those

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Speaker 3: have been historically, and I think there's a risk that

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Speaker 3: people are still underestimating given the very worrisome fiscal prospect

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Speaker 3: of the country, given the recent easing, quite substantial in

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Speaker 3: financial conditions, given still tight and the wage numbers again

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Speaker 3: are not running right now, today's number not running at

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Speaker 3: a rate that's consistent with the two percent inflation target,

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Speaker 3: given the uncertainties in geopolitics that could point the problems

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Speaker 3: in supply chains. My gut is still that the market

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Speaker 3: is underestimating the inflation risks in the current situation, and

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Speaker 3: therefore probably overestimating the amount of FED cutting that is

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Speaker 3: going to take place. But it's a fairly close call,

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Speaker 3: and the FED is certainly doing the right thing by

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Speaker 3: being entirely vigilant and signaling that it is very much

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Speaker 3: going to be data dependent.

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Speaker 1: Going going forward.

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Speaker 3: Right here, I do read the continued strength of the

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Speaker 3: economy in the face of what's happened to rates as

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Speaker 3: suggesting either that the neutral rate has risen substantially, or

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Speaker 3: as suggesting that the economy is less sensitive to interest

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Speaker 3: rates than.

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Speaker 1: We might have thought.

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Speaker 3: Either one of those considerations would suggest a bit less

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Speaker 3: urgency to rate cutting than many people suppose at the

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Speaker 3: current moment. But look, I think the fit is signaling

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Speaker 3: determination with respect to inflation, is signaling a willingness to

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Speaker 3: watch the data very closely, and I think that's broadly speaking,

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Speaker 3: where they should be.

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Speaker 2: Lurie, we had a major development and something that you've

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Speaker 2: talked about on this program more than once, and that

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Speaker 2: is at Harvard, where you are a tenured professor, were

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Speaker 2: president there, but more generally at college campuses, that we

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Speaker 2: saw the resignation of calledin Gay from Harvard as president.

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Speaker 2: I wonder what you make of it, now that we're

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Speaker 2: getting perhaps somewhat past the worst of the conflict, what

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Speaker 2: are the larger lessons we should learn, what can be

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Speaker 2: done in terms of reformation by the universities.

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Speaker 3: Otherwise, David, I think this is a time of testing

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Speaker 3: for universities, certainly unlike any other, certainly since the Vietnam

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Speaker 3: War period, and perhaps even going beyond that. Some of

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Speaker 3: our leading universities are under investigation both from Republicans in

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Speaker 3: the House of Representatives and from the Education Department of

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Speaker 3: the Biden demonstration Biden administration, You're seeing a degree of

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Speaker 3: divisiveness on campus I haven't seen since I first got

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Speaker 3: to the Harvard campus in nineteen seventy five. So I

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Speaker 3: think there's going to be a very profound challenge of

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Speaker 3: finding a vital center. Universities must stand up to some

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Speaker 3: of the vitriolic forces on the populace right that seem

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Speaker 3: to be in favor of everything up to book burning

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Speaker 3: in support of enforcing some very particular riskvision on universities.

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Speaker 3: At the same time, I don't think there's any question

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Speaker 3: that they have been threatened from with in by stifling

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Speaker 3: orthodoxies that have led to the cancelation of speakers, that

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Speaker 3: have led to people being discomforted discomforted by discussing issues

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Speaker 3: like crime, like education except in particular prescribed ways, and

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Speaker 3: it's going to be a challenge of university leaders to

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Speaker 3: find a way between those twin abhorrent polls. I have

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Speaker 3: to say that this goes way beyond any individual I

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Speaker 3: think universities have in many cases, including at Harvard, been

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Speaker 3: failed by their trustees. At Harvard, we call the group

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Speaker 3: the corporation, and in many ways it is their job,

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Speaker 3: above all to maintain a healthy interface between the university

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Speaker 3: and the broader society.

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Speaker 2: So, Larry, it's early going, but it looks at this

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Speaker 2: point like it's entirely possible we'll have a choice between

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Speaker 2: President Biden on the one hand former President Trump on

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Speaker 2: the other. Give us your sense from what we've seen

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Speaker 2: so far about these two people and what they would

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Speaker 2: embrace as economic policies, what difference it could mean for

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Speaker 2: our economy.

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Speaker 3: David, I think this is probably the most consequential presidential

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Speaker 3: election since the.

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Speaker 1: Second World War.

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Speaker 3: I think you have a broad sense of what President

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Speaker 3: Biden would support because you've observed what he has done

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Speaker 3: has been a Keynesian approach to economic management. He has

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Speaker 3: felt that one needs to put very substantial emphasis on

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Speaker 3: market failures, particularly in areas relating to the environment and

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Speaker 3: climate change, and in the long democratic tradition, he has

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Speaker 3: worked to do things to support those who have been

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Speaker 3: left behind. He has focused on supporting what he regards

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Speaker 3: as particularly salient job creating industries. I think there have

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Speaker 3: been excesses on industrial policy, excesses on protectionism.

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Speaker 1: There has been.

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Speaker 3: What I thought was a costly misjudgment in the extent

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Speaker 3: of the initial Physis School stimulus, but broadly President Biden

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Speaker 3: has supported what I think is a sound activist approach to.

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Speaker 1: Economic policy.

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Speaker 3: President Trump showed us what he was made of during

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Speaker 3: his four years in office, and even more clearly has

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Speaker 3: showed us what his intentions are without the superstructure of

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Speaker 3: restraint that surrounded him during his first term. He has

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Speaker 3: indicated support for removal of all kinds of legal restraints

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Speaker 3: on the power of the presidency. He has spoken of

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Speaker 3: being dictator for a day. He has spoken of severing

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Speaker 3: traditional alliances with the rest of the world, of undercutting

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Speaker 3: longstanding American approaches to international trade, to economic regulation, to

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Speaker 3: much else. I think all of this is very threatening

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Speaker 3: to the American economy in the same way that populism,

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Speaker 3: while it sometimes yields temporary and initial economic benefits it

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Speaker 3: did for Mussolini, it did for Parone in Argentina, ultimately

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Speaker 3: brings a great.

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Speaker 1: Deal crashing down around it.

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Speaker 3: And so I am very worried that we will be

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Speaker 3: a very different country that cannot rely on the rule

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Speaker 3: of law and take it for granted. As we traditionally have,

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Speaker 3: if we experience a second Trump administration, Larry, if.

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Speaker 2: We cast our minds back to November of twenty sixteen,

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Speaker 2: there were a lot of concerns about President Trump when

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Speaker 2: it became clear that he had been elected, and in fact,

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Speaker 2: you remember, the markets really went south, very dramatically initially,

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Speaker 2: but then they rebounded. And if you look basically on

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Speaker 2: the track record of the Trump presidency, just from the

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Speaker 2: point of view of investors as well as the economy,

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Speaker 2: it is not a terrible record. I think it's fair

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Speaker 2: to say. I mean, the markets did reasonably well, there

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Speaker 2: was employment created, there was a GDP growth. So is

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Speaker 2: it possible that we might overreact to the possibility of

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Speaker 2: a Trump two point zero?

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Speaker 3: You know, there's an old saying, fool me once, shame

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Speaker 3: on you. Fool me twice, shame on me. That's going

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Speaker 3: to be the way the rest of the world is

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Speaker 3: going to see it. The rest of the world, which

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Speaker 3: has had so much faith in the United States for

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Speaker 3: all their resentments and so many have been so reliant

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Speaker 3: for so long, were prepared to see a first TERMP

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Speaker 3: term as an aberration. But after ninety one indictments, after

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Speaker 3: the events of January sixth. That is not how they

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Speaker 3: will see a second term. That is not how they

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Speaker 3: will ever see America again. That will represent a loss

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Speaker 3: of the moral authority that the United States has had

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Speaker 3: since it won the Cold War, since it won the

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Speaker 3: Second World War, and that will, I think, make for

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Speaker 3: a much less stable world.

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Speaker 1: And so my plea to my friends.

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Speaker 3: In the business community is, I understand some of your

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Speaker 3: concerns about overly progressive, overly government interventionist policies of the

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Speaker 3: Biden administration. In many cases, I share some of those concerns.

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Speaker 3: But that is a very different thing than undercutting the

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Speaker 3: entire framework within which the United States and its business

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Speaker 3: community have operated for all of our lifetimes. And that's

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Speaker 3: a risk that I think we have an enormous stake

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Speaker 3: in resisting.

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Speaker 1: And I think history will.

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Speaker 3: Judge very badly those who, for the sake of a

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Speaker 3: more expedient, as they see it, corporate tax position, or

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Speaker 3: a relaxation of what they see as overly burdensome regulation,

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Speaker 3: go along with the subversion of American democracy. And that

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Speaker 3: is what is at stake in this election. I would

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Speaker 3: not be speaking in anything at all like this way.

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Speaker 3: If we were talking about an election involving Nikki Haley

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Speaker 3: and election involving Chris Christie. But I think the involvement

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Speaker 3: of ex President Trump takes all of this to an

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Speaker 3: entirely different level of concern.

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Speaker 2: Okay, Larry, thank you very much for all those thoughts.

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Speaker 2: As our special contribute here on Wall Street.

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Speaker 1: Meek.

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Speaker 2: He is Larry Summers of Harvard