1 00:00:00,120 --> 00:00:03,480 Speaker 1: Hi, This is new because of the coronavirus. I am 2 00:00:03,480 --> 00:00:06,960 Speaker 1: currently staying at home in Rome, where my wife serves 3 00:00:06,960 --> 00:00:09,800 Speaker 1: as the United States Ambassador of the Holy See. She's 4 00:00:09,920 --> 00:00:12,880 Speaker 1: leading the embassy in dealing with all the different changes 5 00:00:12,880 --> 00:00:16,440 Speaker 1: being brought about by the pandemic. To bring you this 6 00:00:16,520 --> 00:00:19,919 Speaker 1: episode this week, I'm recording from my home, so you 7 00:00:20,040 --> 00:00:25,840 Speaker 1: may notice a difference in audio quality on this episode 8 00:00:25,880 --> 00:00:29,080 Speaker 1: of News World. The financial recovery of America amid the 9 00:00:29,120 --> 00:00:33,800 Speaker 1: coronavirus pandemic is such a uniquely challenging issue. I am 10 00:00:33,840 --> 00:00:37,400 Speaker 1: devoting the next two episodes of this podcast to providing 11 00:00:37,520 --> 00:00:41,360 Speaker 1: contact and understanding about what every American needs to know 12 00:00:41,840 --> 00:00:45,720 Speaker 1: about restarting the economy and what needs to happen next. 13 00:00:46,720 --> 00:00:49,680 Speaker 1: On Friday, March twenty seven, the United States sent it 14 00:00:49,720 --> 00:00:54,400 Speaker 1: past the two point two trillion Miller Coronavirus Aid Relief 15 00:00:54,440 --> 00:00:58,480 Speaker 1: and Economic Security Act, or the CARES Act, and President 16 00:00:58,480 --> 00:01:03,120 Speaker 1: Trump signed it into The care ZAT provides financial assistance 17 00:01:03,160 --> 00:01:06,520 Speaker 1: and relief to small businesses in the form of Small 18 00:01:06,560 --> 00:01:11,400 Speaker 1: Business Administration forgivable loans, to individuals and families, and to 19 00:01:11,520 --> 00:01:13,800 Speaker 1: some of the industries that have been affected by the 20 00:01:13,920 --> 00:01:18,560 Speaker 1: nationwidespread of the virus like airlines and hotels. As the 21 00:01:18,600 --> 00:01:22,119 Speaker 1: unemployment numbers soar to almost ten million, are we headed 22 00:01:22,160 --> 00:01:26,040 Speaker 1: for a recession or the next great depression? Or is 23 00:01:26,080 --> 00:01:29,119 Speaker 1: this simply a v shaped procession which we will pull 24 00:01:29,120 --> 00:01:31,760 Speaker 1: ourselves out of as soon as we overcome the health 25 00:01:31,800 --> 00:01:35,840 Speaker 1: crisis we are facing. And what can we learn from 26 00:01:35,840 --> 00:01:38,640 Speaker 1: the countries who are already on the road to recovery, 27 00:01:38,959 --> 00:01:43,320 Speaker 1: both from the virus and with their economies. In Part one, 28 00:01:43,800 --> 00:01:47,319 Speaker 1: I'll talk with James Grant all through the Forgotten Depression 29 00:01:47,680 --> 00:01:52,040 Speaker 1: nineteen twenty one, the crash that cured itself, and doctor 30 00:01:52,160 --> 00:01:56,600 Speaker 1: Arthur Laugher, president of Laugher Associates and a longtime economic 31 00:01:56,640 --> 00:02:00,920 Speaker 1: advisor to presidential administrations since Dill in nineteen seventies, will 32 00:02:00,920 --> 00:02:03,480 Speaker 1: give us his point of view of how to invest 33 00:02:03,520 --> 00:02:06,960 Speaker 1: a deal with the current economic crisis. In Part two, 34 00:02:07,360 --> 00:02:11,200 Speaker 1: I will be joined by Miss Yuki Tatsuni, Senior Fellow 35 00:02:11,200 --> 00:02:14,240 Speaker 1: and co Director of the East Asia Program and Director 36 00:02:14,240 --> 00:02:18,080 Speaker 1: of the Japan Program at the Stimpson Center. We'll discuss 37 00:02:18,080 --> 00:02:21,600 Speaker 1: the lessons we can learn from Japan, South Korea, Singapore, 38 00:02:21,720 --> 00:02:26,600 Speaker 1: Hong Kong and Taiwan and their economic recovery post coronavirus. 39 00:02:36,680 --> 00:02:39,640 Speaker 1: James Grant is the author of The Forgotten Depression nineteen 40 00:02:39,680 --> 00:02:43,600 Speaker 1: twenty one, The Crash that Cured Itself. I'm pleased to 41 00:02:43,639 --> 00:02:47,919 Speaker 1: welcome him as my guest. So I'm fascinated both by 42 00:02:47,960 --> 00:02:50,680 Speaker 1: your book and then the way you framed the book. 43 00:02:51,360 --> 00:02:55,600 Speaker 1: What led you to write about the Depression of nineteen 44 00:02:55,600 --> 00:02:58,600 Speaker 1: twenty twenty one. I took up this topic in the 45 00:02:58,720 --> 00:03:02,400 Speaker 1: wake of our called Great Recession of two thousand and seven, 46 00:03:03,160 --> 00:03:07,720 Speaker 1: and during our own slump. The talk of historical precedents 47 00:03:07,840 --> 00:03:12,959 Speaker 1: was exclusively about the depression of nineteen thirties, and Ben Brnocki, 48 00:03:13,000 --> 00:03:17,480 Speaker 1: the FED Chairman, was especially keen on drawing that analogy. 49 00:03:17,600 --> 00:03:20,359 Speaker 1: That seemed to me that people were missing an example 50 00:03:21,040 --> 00:03:25,280 Speaker 1: of a deep recession, indeed a depression that was short lived, 51 00:03:26,200 --> 00:03:29,280 Speaker 1: and that perhaps was short lived on account of what 52 00:03:29,320 --> 00:03:32,560 Speaker 1: the government did not do instead of what the government did. 53 00:03:33,400 --> 00:03:36,120 Speaker 1: And that's what led me to the topic. The whole 54 00:03:36,120 --> 00:03:40,240 Speaker 1: cycle of panics tended to be very fast. They were 55 00:03:40,320 --> 00:03:43,720 Speaker 1: very brutal, but they were much quicker to get over 56 00:03:43,800 --> 00:03:48,160 Speaker 1: as a general rule than the Great Depression was. Had 57 00:03:48,200 --> 00:03:52,040 Speaker 1: you just run across the nineteen twenty twenty one depression 58 00:03:52,080 --> 00:03:54,560 Speaker 1: as part of your studies there, as part of your 59 00:03:55,000 --> 00:03:58,400 Speaker 1: work on looking at interest rates like I can't recall 60 00:03:58,480 --> 00:04:00,520 Speaker 1: how it came to my attention, but what I did 61 00:04:00,680 --> 00:04:04,920 Speaker 1: note was the speed and the ferocity of the event 62 00:04:05,120 --> 00:04:10,080 Speaker 1: in contrast to the long experience that we subsequently suffered, 63 00:04:10,480 --> 00:04:13,280 Speaker 1: not least in the aftermath of two thousand and eight 64 00:04:13,280 --> 00:04:18,000 Speaker 1: and nine. Those ten years were years of statistical prosperity, 65 00:04:18,080 --> 00:04:22,479 Speaker 1: but deeply lack of the characteristic American dynamism that we 66 00:04:22,560 --> 00:04:25,680 Speaker 1: all cherish. And I put this down in some part, 67 00:04:25,760 --> 00:04:29,440 Speaker 1: perhaps a large part, to the government's well intended but 68 00:04:29,600 --> 00:04:33,800 Speaker 1: in effective efforts to medicate us out of the slump 69 00:04:33,920 --> 00:04:37,760 Speaker 1: that all we call out all too vividly. Obviously, for 70 00:04:37,880 --> 00:04:41,159 Speaker 1: phase one, they just have to get through fighting the virus. 71 00:04:41,800 --> 00:04:44,960 Speaker 1: Most Americans are not prepared to make a trade increased 72 00:04:45,040 --> 00:04:49,200 Speaker 1: risk from the virus in order to get the economy 73 00:04:49,240 --> 00:04:52,640 Speaker 1: moving sooner. But there will be a morning I suspect 74 00:04:52,960 --> 00:04:56,400 Speaker 1: by June when we will have defeated the virus, and 75 00:04:56,440 --> 00:04:58,480 Speaker 1: at that point, people is something I realized that there 76 00:04:58,360 --> 00:05:01,280 Speaker 1: are a lot of people unemployed. The challenge Trump now 77 00:05:01,680 --> 00:05:04,640 Speaker 1: is he's going to go from commander in chief of 78 00:05:04,760 --> 00:05:08,360 Speaker 1: Public health to the commander in chief of the economy, 79 00:05:08,720 --> 00:05:11,159 Speaker 1: and he can hardly run for reelection as a jobs 80 00:05:11,200 --> 00:05:14,640 Speaker 1: president if there are no jobs. He has a big challenge. 81 00:05:14,680 --> 00:05:17,839 Speaker 1: I think, to shift gears and try to figure out 82 00:05:18,080 --> 00:05:21,080 Speaker 1: how to make this a V shaped experience. Given what 83 00:05:21,200 --> 00:05:23,880 Speaker 1: you learn as you went through studying for the nineteen 84 00:05:23,880 --> 00:05:27,200 Speaker 1: twenty twenty one experience, what advice would you give him 85 00:05:28,279 --> 00:05:32,960 Speaker 1: to do exactly one hundred and eighty degrees what they 86 00:05:33,040 --> 00:05:37,279 Speaker 1: are now not doing. The speed with which the government 87 00:05:37,320 --> 00:05:41,760 Speaker 1: has affected a virtual leveraged acquisition of the American economy 88 00:05:42,120 --> 00:05:46,560 Speaker 1: is remarkable. The Federal Reserve has come to utterly dominate 89 00:05:46,560 --> 00:05:49,839 Speaker 1: American finance and the ways it never had before. In fact, 90 00:05:50,000 --> 00:05:53,360 Speaker 1: in ways that almost no one had imagined it could 91 00:05:53,400 --> 00:05:57,919 Speaker 1: do before. It has moved to intervene in markets for 92 00:05:58,040 --> 00:06:02,560 Speaker 1: commercial paper, for money market mutual funds, for high grade bonds, 93 00:06:02,560 --> 00:06:07,720 Speaker 1: for municipal securities, of course, for treasury securities, commercial real 94 00:06:07,839 --> 00:06:11,920 Speaker 1: estate backed mortgod securities. The SET has expanded its balance 95 00:06:11,960 --> 00:06:14,039 Speaker 1: sheet by half a trillion dollars I think in the 96 00:06:14,080 --> 00:06:18,480 Speaker 1: past week. It's just stunning. So the SET is going 97 00:06:18,520 --> 00:06:21,320 Speaker 1: to more or less get into the commercial lending business 98 00:06:21,400 --> 00:06:24,520 Speaker 1: as well. In the past ten years we had work 99 00:06:24,600 --> 00:06:29,880 Speaker 1: to mend and fortify our financial system under the government 100 00:06:30,000 --> 00:06:34,920 Speaker 1: ordered cessation of commerce. The financial system suddenly became dysfunctional 101 00:06:35,640 --> 00:06:37,760 Speaker 1: in the face of the arrival of the virus. What 102 00:06:37,880 --> 00:06:44,080 Speaker 1: preceded was a decade of heavy lending and borrowing, especially 103 00:06:44,240 --> 00:06:49,360 Speaker 1: in American business. The ratio of corporate debt to GDP 104 00:06:49,480 --> 00:06:52,240 Speaker 1: as at a high. There has been a great expansion 105 00:06:52,400 --> 00:06:57,080 Speaker 1: of credit in business of taking public companies private, it's 106 00:06:57,080 --> 00:07:03,560 Speaker 1: called private equity. This debt its weakened the corporate immune system, 107 00:07:03,680 --> 00:07:06,680 Speaker 1: so that when trouble did strike, companies are much less 108 00:07:06,720 --> 00:07:11,760 Speaker 1: able to respond to it in constructive ways. We arrived 109 00:07:11,760 --> 00:07:14,960 Speaker 1: at this state of affairs in a much weakened position, 110 00:07:15,000 --> 00:07:18,520 Speaker 1: I say, was the direct result of FED reserve policy 111 00:07:18,760 --> 00:07:22,960 Speaker 1: to suppress interest rates and as a matter of public policy, 112 00:07:23,000 --> 00:07:27,040 Speaker 1: to raise up the prices of common stocks and fill 113 00:07:27,160 --> 00:07:29,520 Speaker 1: everyone's four oh one k. That was the plan starting 114 00:07:29,520 --> 00:07:33,640 Speaker 1: in twenty ten. So all this was exactly what did 115 00:07:33,720 --> 00:07:38,560 Speaker 1: not occur during the lays a fair portion of the 116 00:07:38,640 --> 00:07:41,160 Speaker 1: late teens in early twenties, sort of the Harding administration. 117 00:07:41,800 --> 00:07:44,040 Speaker 1: So you ask, how do we get a v shaped recovery. Well, 118 00:07:44,520 --> 00:07:47,960 Speaker 1: I'm not sure that the administration is proceeding along those lines. 119 00:07:49,240 --> 00:07:52,360 Speaker 1: Would you pull back the FED in that sense? I 120 00:07:52,400 --> 00:07:54,360 Speaker 1: think it's too late for this. We live in a 121 00:07:54,440 --> 00:07:58,880 Speaker 1: time of de facto modern monetary theory. MMT is a 122 00:07:58,920 --> 00:08:01,520 Speaker 1: film named Alba learn Or, an economist, very clever and 123 00:08:01,720 --> 00:08:05,480 Speaker 1: very lucid economist who wrote in the nineteen forties and fifties. 124 00:08:06,160 --> 00:08:09,280 Speaker 1: And what Ava Learners said was that the government ought 125 00:08:09,320 --> 00:08:12,840 Speaker 1: to print money and to spend that money, and to 126 00:08:12,960 --> 00:08:17,280 Speaker 1: run deficits without a thought of so called sound finance 127 00:08:17,800 --> 00:08:21,040 Speaker 1: until there was an inflation problem. And this is in 128 00:08:21,080 --> 00:08:25,480 Speaker 1: fact become the de facto policy of the Republican Party 129 00:08:26,520 --> 00:08:28,720 Speaker 1: and certainly of the President, who says, so let us 130 00:08:28,720 --> 00:08:32,240 Speaker 1: have zero interest rates, let us be as aggressive as 131 00:08:32,240 --> 00:08:34,839 Speaker 1: the Europeans have been. In fact, we need negative interest rates. 132 00:08:35,559 --> 00:08:39,319 Speaker 1: So the policy from on high has been to borrow 133 00:08:39,480 --> 00:08:43,920 Speaker 1: and lend and spend without let or hindrance, because says 134 00:08:43,920 --> 00:08:47,280 Speaker 1: the President, there is no inflation. Of course there's inflation. 135 00:08:47,320 --> 00:08:50,080 Speaker 1: It takes different forms as inflation of financial assets, which 136 00:08:50,080 --> 00:08:56,079 Speaker 1: assets are not being deflated. If this sounds unconstructive, it 137 00:08:56,160 --> 00:08:58,800 Speaker 1: is because I think that we're on the wrong track, 138 00:08:58,960 --> 00:09:01,600 Speaker 1: and I think that is going to take a while 139 00:09:01,840 --> 00:09:04,320 Speaker 1: to get on the right track. We seem to have 140 00:09:04,320 --> 00:09:07,960 Speaker 1: had an ability to float an astonishing amount of debt, 141 00:09:09,080 --> 00:09:12,240 Speaker 1: which I would have thought would have led to dramatically 142 00:09:12,320 --> 00:09:16,520 Speaker 1: higher interest rates, and yet people would seem to keep 143 00:09:16,520 --> 00:09:20,200 Speaker 1: buying our paper. Does that surprise you? When the fat 144 00:09:20,320 --> 00:09:23,040 Speaker 1: is in there buying a half a trillion dollars a week, 145 00:09:23,080 --> 00:09:26,600 Speaker 1: that tends to support the market. But beyond that, there 146 00:09:26,800 --> 00:09:32,160 Speaker 1: is still an abiding faith in the institution of the 147 00:09:32,200 --> 00:09:35,719 Speaker 1: Federal Reserve and in the institution of our paper or 148 00:09:35,800 --> 00:09:39,839 Speaker 1: digital currency. I don't share that faith, but that's not 149 00:09:40,040 --> 00:09:44,520 Speaker 1: the relevant point. The world does. Consider that the government 150 00:09:44,600 --> 00:09:48,559 Speaker 1: is worn for ten years at something like six tenths 151 00:09:48,600 --> 00:09:52,079 Speaker 1: of one percent, when the rate of inflation is running well, 152 00:09:52,160 --> 00:09:54,120 Speaker 1: whatever it's going to run next month, we don't know, 153 00:09:54,200 --> 00:09:56,120 Speaker 1: but it hasn't running it about two percent for a 154 00:09:56,120 --> 00:10:01,200 Speaker 1: long time as we measure it, and the financial markets, 155 00:10:01,400 --> 00:10:06,360 Speaker 1: in perhaps their wisdom, are projecting no inflation over the 156 00:10:06,400 --> 00:10:12,360 Speaker 1: next ten years and beyond, notwithstanding a two trillion plus 157 00:10:12,760 --> 00:10:15,560 Speaker 1: fiscal program with talk of another two trillion to come, 158 00:10:16,559 --> 00:10:24,480 Speaker 1: and with unprecedented and seemingly incredible central bank interventions, which 159 00:10:24,520 --> 00:10:28,079 Speaker 1: interventions take the form of the simple printing of money. 160 00:10:28,200 --> 00:10:32,520 Speaker 1: This would seem to be a formula for utter mass 161 00:10:32,600 --> 00:10:36,960 Speaker 1: debasement of the purchasing power, especially when the apparatus of 162 00:10:37,040 --> 00:10:41,280 Speaker 1: globalization is now under rate suspicion. I mean, do we 163 00:10:41,360 --> 00:10:44,640 Speaker 1: have the same cheap labor overseas that we used to have, 164 00:10:44,800 --> 00:10:48,120 Speaker 1: Given the proclivity of the Chinese Communist government to say no, 165 00:10:48,240 --> 00:10:51,280 Speaker 1: you shall not export wherever you're exported from our country. 166 00:10:51,520 --> 00:10:54,839 Speaker 1: It seems to be that the pillars of disinflation of 167 00:10:54,880 --> 00:10:58,959 Speaker 1: the prior ten, fifteen, twenty years are being torn down 168 00:10:59,040 --> 00:11:02,920 Speaker 1: just as the government is undertaking this vast expansion of 169 00:11:03,360 --> 00:11:07,840 Speaker 1: new purchasing power. So there is much less supply and 170 00:11:08,040 --> 00:11:12,160 Speaker 1: thanks to these infusions of dollar bills perspectively, much greater demand. 171 00:11:12,400 --> 00:11:15,640 Speaker 1: That would seem to be a formula for more inflation, 172 00:11:15,720 --> 00:11:21,240 Speaker 1: not less. And yet governments worldwide are floating stupendous qualities 173 00:11:21,280 --> 00:11:24,400 Speaker 1: of debt at negligible interest rates. It is a moment 174 00:11:24,679 --> 00:11:28,800 Speaker 1: of marble. From the point of economic history. I find 175 00:11:28,800 --> 00:11:34,040 Speaker 1: it very hard to understand the formula by which we're 176 00:11:34,080 --> 00:11:36,600 Speaker 1: currently operating, not just the US, but the whole planet. 177 00:11:36,600 --> 00:11:41,080 Speaker 1: In a sense, this should be leading to very substantial inflation, 178 00:11:41,080 --> 00:11:44,560 Speaker 1: I would think, well it might. So the question that 179 00:11:44,640 --> 00:11:47,360 Speaker 1: people might wonder about the relevance of the depression of 180 00:11:47,480 --> 00:11:49,840 Speaker 1: nineteen twenty twenty one to the present day was so 181 00:11:49,880 --> 00:11:53,000 Speaker 1: long ago, you know, how possibly could this matter? Well, 182 00:11:53,320 --> 00:11:56,720 Speaker 1: that depression eighteen months between the times that things began 183 00:11:56,800 --> 00:12:00,160 Speaker 1: to get bad and the time that things began to 184 00:12:00,200 --> 00:12:05,480 Speaker 1: get better. The success of that was owing to the 185 00:12:05,640 --> 00:12:09,480 Speaker 1: free play of the price mechanism. So there was a 186 00:12:09,559 --> 00:12:12,839 Speaker 1: huge decline in prices. Commodity prices were down forty percent, 187 00:12:12,960 --> 00:12:17,840 Speaker 1: the stock market down almost fifty percent, Wages plummeted, and 188 00:12:17,920 --> 00:12:22,720 Speaker 1: all these things happened without interference. But because things began 189 00:12:22,760 --> 00:12:26,079 Speaker 1: to get cheaper, because wages and prices fell together, companies 190 00:12:26,160 --> 00:12:31,120 Speaker 1: could reorganize their production at lower levels both the prices 191 00:12:31,200 --> 00:12:36,880 Speaker 1: and costs, and generate a new start at a profit. 192 00:12:37,559 --> 00:12:41,240 Speaker 1: And what happens when prices fall but wages do not 193 00:12:41,320 --> 00:12:43,960 Speaker 1: fall is what happened in the thirties, which is profit 194 00:12:44,000 --> 00:12:49,760 Speaker 1: margins collapse and mass unemployment ensuits. So the early twenties 195 00:12:49,800 --> 00:12:55,000 Speaker 1: to me, were a textbook example of the wondrous success 196 00:12:55,000 --> 00:12:59,679 Speaker 1: of the unmanaged interplay of individuals doing business in a 197 00:12:59,760 --> 00:13:03,680 Speaker 1: free market. Everyone going out and doing what he or 198 00:13:03,880 --> 00:13:06,960 Speaker 1: she does for a living in the government saying you 199 00:13:07,040 --> 00:13:09,600 Speaker 1: do that and we will find that the interplay of 200 00:13:09,880 --> 00:13:12,600 Speaker 1: supply and demand is going to get us where we 201 00:13:12,640 --> 00:13:16,079 Speaker 1: want to go. But what we see today is something 202 00:13:16,160 --> 00:13:18,600 Speaker 1: round the opposite. There's a name for this now, of course, 203 00:13:18,640 --> 00:13:22,800 Speaker 1: that's the zombie company. And these ultra low interest rates 204 00:13:22,800 --> 00:13:27,520 Speaker 1: and very easy money have sustained corporations that might otherwise 205 00:13:27,600 --> 00:13:31,320 Speaker 1: have had to meet their maker. The very low cost 206 00:13:31,440 --> 00:13:36,480 Speaker 1: of capital is a source of distortions, and one of 207 00:13:36,480 --> 00:13:41,360 Speaker 1: those distortions is the companies that ought to make way 208 00:13:41,880 --> 00:13:44,880 Speaker 1: for new people and new ideas. Those companies remain in place, 209 00:13:45,840 --> 00:13:49,880 Speaker 1: and it introduces an element of molasses into our formerly 210 00:13:49,960 --> 00:13:53,679 Speaker 1: fast flowing economic life. Isn't this, in a sense an 211 00:13:53,720 --> 00:13:57,640 Speaker 1: anti saving environment. Interest rates are supposed to be the 212 00:13:57,720 --> 00:14:02,000 Speaker 1: reward for savings over impulse consumption is a moral element, 213 00:14:02,400 --> 00:14:06,400 Speaker 1: and a very strong moral element, I say, in the 214 00:14:06,400 --> 00:14:12,680 Speaker 1: destruction of our conventional financial norms and morays. So what 215 00:14:12,920 --> 00:14:16,439 Speaker 1: this easy and cheap credit has done is to drive 216 00:14:16,520 --> 00:14:20,040 Speaker 1: people into a coursepecle of investments. And in the past 217 00:14:20,120 --> 00:14:22,960 Speaker 1: ten days or so on this country, they have brought 218 00:14:23,120 --> 00:14:28,480 Speaker 1: the virtual absorption of the American financial sector by the 219 00:14:28,640 --> 00:14:32,240 Speaker 1: Federal Reserve. In that sense, we may be in more 220 00:14:32,240 --> 00:14:34,480 Speaker 1: of a new world than we will was. It's going 221 00:14:34,560 --> 00:14:36,760 Speaker 1: to take people a while to absorb the moment and 222 00:14:36,800 --> 00:14:40,280 Speaker 1: the significance of this. When you're dealing with a two trillion, 223 00:14:41,320 --> 00:14:45,160 Speaker 1: two hundred billion dollar package. Isn't going to take us 224 00:14:45,160 --> 00:14:48,120 Speaker 1: a well just to sort it out. Yes, these numbers 225 00:14:48,240 --> 00:14:51,440 Speaker 1: sound big, and they are big, but they are much 226 00:14:51,480 --> 00:14:53,800 Speaker 1: smaller than the amount of money that people were getting 227 00:14:53,800 --> 00:14:56,720 Speaker 1: by going to work in the morning. And I think 228 00:14:56,760 --> 00:14:59,920 Speaker 1: one of the critical agenda items for the Republican Party 229 00:15:00,280 --> 00:15:05,240 Speaker 1: must be the way out of the de facto nationalization 230 00:15:05,320 --> 00:15:08,240 Speaker 1: of finance that we have entered. Yeah, I think a 231 00:15:08,280 --> 00:15:12,520 Speaker 1: lot of people are trying to understand what happened. All 232 00:15:12,560 --> 00:15:15,680 Speaker 1: this stuff gets written, much of it without any public hearings, 233 00:15:15,680 --> 00:15:19,400 Speaker 1: without any public involvement, and then you suddenly look up 234 00:15:19,400 --> 00:15:23,440 Speaker 1: and here's this massive flood. We're back in nineteen nineteen. 235 00:15:23,480 --> 00:15:25,680 Speaker 1: Woodrow Wilson said, you know, we're gonna have to have 236 00:15:25,720 --> 00:15:29,960 Speaker 1: socialism just a fact, And within a year and a 237 00:15:30,000 --> 00:15:33,400 Speaker 1: half or so there was Warren G. Harding rolling it 238 00:15:33,520 --> 00:15:37,880 Speaker 1: all back and implementing what we had recently come to 239 00:15:38,160 --> 00:15:44,200 Speaker 1: regard as customary Republican financial policies, balanced budget and individual 240 00:15:44,520 --> 00:15:49,800 Speaker 1: initiative and sound money. Nothing says these changes are permanent, 241 00:15:50,160 --> 00:15:54,400 Speaker 1: my hunches. You think of this as a detour rather 242 00:15:54,440 --> 00:15:57,880 Speaker 1: than a change, as the detour brought on by panic 243 00:15:57,920 --> 00:16:01,200 Speaker 1: over the virus and the need to close down the country, 244 00:16:01,240 --> 00:16:03,840 Speaker 1: and therefore the need to have sort of a relief 245 00:16:03,840 --> 00:16:06,640 Speaker 1: act just to get through the initial closing. Then the 246 00:16:06,720 --> 00:16:11,440 Speaker 1: question becomes what would the right policies be coming out 247 00:16:11,440 --> 00:16:13,520 Speaker 1: of this after we've done with the virus, which I 248 00:16:13,600 --> 00:16:16,320 Speaker 1: think will happen by June or July. And the goal 249 00:16:16,360 --> 00:16:19,200 Speaker 1: would be, I think, to get back to a Trump 250 00:16:19,320 --> 00:16:25,120 Speaker 1: position of recognizing that in fact you want entrepreneurs and 251 00:16:25,280 --> 00:16:29,160 Speaker 1: free markets and risk taking to reappear, and you want 252 00:16:29,160 --> 00:16:32,080 Speaker 1: to get the government bureaucracies out of the way. I 253 00:16:32,120 --> 00:16:35,360 Speaker 1: would add to that that the rate of interest ought 254 00:16:35,440 --> 00:16:39,880 Speaker 1: to be among those things that are liberated from government control. 255 00:16:40,200 --> 00:16:43,560 Speaker 1: And this is a worm of trouble that has got 256 00:16:43,600 --> 00:16:46,440 Speaker 1: into the inners of our finances. All of us who 257 00:16:46,520 --> 00:16:48,040 Speaker 1: deal in finance are living in a kind of a 258 00:16:48,040 --> 00:16:51,040 Speaker 1: hall of mirrors. You can't be sure of true values 259 00:16:51,080 --> 00:16:53,920 Speaker 1: because they are based upon false interest rates. Listen. I 260 00:16:53,920 --> 00:16:56,560 Speaker 1: want to thank you. This has been very helpful and 261 00:16:56,560 --> 00:16:59,200 Speaker 1: I think your book is a remarkable book. If we 262 00:16:59,240 --> 00:17:03,160 Speaker 1: want a v eight economic environment, we have to follow 263 00:17:03,160 --> 00:17:05,640 Speaker 1: the principles of work, and if we don't, we should 264 00:17:05,680 --> 00:17:10,960 Speaker 1: expect to repeat the Bush Obama long, slow, painful recovery. Well, 265 00:17:11,040 --> 00:17:13,199 Speaker 1: thank you, mister speaker. Great to spend tide with you. 266 00:17:14,119 --> 00:17:16,240 Speaker 1: When we come back, I'll be joined by a well 267 00:17:16,280 --> 00:17:27,240 Speaker 1: known economist, doctor Arthur Laugher, and stay tuned. At the 268 00:17:27,320 --> 00:17:30,080 Speaker 1: end of this episode, I'll give you an audio sneak 269 00:17:30,160 --> 00:17:40,480 Speaker 1: peek of my new novel, Shakedown. Doctor Arthur Laugher is 270 00:17:40,520 --> 00:17:44,000 Speaker 1: the president of Laugher Associates and a long time economic 271 00:17:44,040 --> 00:17:48,359 Speaker 1: advisor to presidential administrations since the early nineteen seventies. I'm 272 00:17:48,400 --> 00:17:52,200 Speaker 1: pleased to welcome him as my guest. The next big 273 00:17:52,240 --> 00:17:54,920 Speaker 1: crisis is going to be once we begin to get 274 00:17:54,960 --> 00:17:57,399 Speaker 1: the virus under control, people are going to realize we 275 00:17:57,440 --> 00:18:00,200 Speaker 1: have a real rebuilding job to do. And I don't 276 00:18:00,200 --> 00:18:04,959 Speaker 1: know of anybody who has contributed more to a basic 277 00:18:05,119 --> 00:18:10,240 Speaker 1: understanding of the rollo of taxes and economic growth. It 278 00:18:10,320 --> 00:18:13,760 Speaker 1: was your development of the Laffer curve, and at least 279 00:18:13,760 --> 00:18:18,920 Speaker 1: in historic memory, you're sitting down, I think, with Jack 280 00:18:19,040 --> 00:18:22,560 Speaker 1: Kemp and drawing it on a napkin and showing him 281 00:18:22,560 --> 00:18:26,440 Speaker 1: how it works. You're a uniquely famous economist. How did 282 00:18:26,480 --> 00:18:30,439 Speaker 1: you come up with developing the Laffer curve and what 283 00:18:30,600 --> 00:18:33,200 Speaker 1: were the insights that led you to them? I was 284 00:18:33,240 --> 00:18:35,119 Speaker 1: in the Nixon White House when I came back to 285 00:18:35,160 --> 00:18:38,959 Speaker 1: the University of Chicago. I'm fairly mathematical. All my articles 286 00:18:38,960 --> 00:18:42,119 Speaker 1: are sort of mathematical, and their tax rates and tax 287 00:18:42,200 --> 00:18:45,280 Speaker 1: rates effect incentives. When you tax the product, you raise 288 00:18:45,400 --> 00:18:48,760 Speaker 1: the cost to the buyer of that product, and you 289 00:18:48,800 --> 00:18:53,080 Speaker 1: lower the price that the supplier receives. A tax drives 290 00:18:53,080 --> 00:18:56,280 Speaker 1: a wedge between the price paid and the price received 291 00:18:56,320 --> 00:18:59,600 Speaker 1: for a product, and as such, tax will always reduce 292 00:18:59,640 --> 00:19:02,639 Speaker 1: the of a product. And when I was doing the 293 00:19:02,680 --> 00:19:05,439 Speaker 1: math and the classes, I tried to give anecdotes to 294 00:19:05,480 --> 00:19:08,560 Speaker 1: explain it in intuitive terms. I have all these sort 295 00:19:08,600 --> 00:19:12,120 Speaker 1: of stories and analogies and examples, in one of which 296 00:19:12,200 --> 00:19:14,560 Speaker 1: was the laugh Or curve, which I said that when 297 00:19:14,560 --> 00:19:17,800 Speaker 1: you raise taxes, two things happen. Number one, you do 298 00:19:17,880 --> 00:19:21,439 Speaker 1: collect more revenue per dollar of tax base. That's true. 299 00:19:21,920 --> 00:19:24,800 Speaker 1: But when you raise taxes, you also reduce the volume 300 00:19:24,960 --> 00:19:28,560 Speaker 1: of the product. And these two effects always work in 301 00:19:28,600 --> 00:19:32,360 Speaker 1: the opposite direction. And sometimes when you raise tax rates, 302 00:19:32,359 --> 00:19:35,119 Speaker 1: you collect more revenues because the loss in the tax 303 00:19:35,160 --> 00:19:38,159 Speaker 1: base is less proportionately than the increase in the tax 304 00:19:38,560 --> 00:19:42,240 Speaker 1: and sometimes you actually lose revenues because the increase in 305 00:19:42,280 --> 00:19:45,600 Speaker 1: the revenues per dollar of tax base are less than 306 00:19:45,720 --> 00:19:48,720 Speaker 1: the reduction in the tax base itself. And if you 307 00:19:48,840 --> 00:19:52,479 Speaker 1: do these relationship at zero taxes, obviously you're not going 308 00:19:52,520 --> 00:19:55,520 Speaker 1: to collect any tax revenues. And also at one hundred 309 00:19:55,520 --> 00:19:58,399 Speaker 1: percent tax rates, because there's no incentive for anyone to 310 00:19:58,400 --> 00:20:01,160 Speaker 1: produce anything, you're also going to like no tax revenues. 311 00:20:01,160 --> 00:20:04,960 Speaker 1: And if you start dropping the rate from one donned down, 312 00:20:05,280 --> 00:20:07,639 Speaker 1: you'll start collecting more revenues. If you start raising it 313 00:20:07,680 --> 00:20:10,439 Speaker 1: from zero percent on up. And it's a nice shaped 314 00:20:10,520 --> 00:20:14,280 Speaker 1: curve if all the demand and supply factors are continuous 315 00:20:14,280 --> 00:20:16,720 Speaker 1: in everything, and you get this lovely little curve which 316 00:20:16,760 --> 00:20:20,080 Speaker 1: is a great little pedagogic device that you can explain 317 00:20:20,160 --> 00:20:23,040 Speaker 1: to a congressman or a senator in about thirty seconds 318 00:20:23,119 --> 00:20:25,800 Speaker 1: and they can use it for months. And in theory, 319 00:20:26,680 --> 00:20:29,080 Speaker 1: there's an optimal point on the laugh for a curve 320 00:20:29,520 --> 00:20:33,560 Speaker 1: where you actually get the maximum economic growth and the 321 00:20:33,640 --> 00:20:36,639 Speaker 1: maximum revenue. And when you go above that point, you 322 00:20:36,680 --> 00:20:41,120 Speaker 1: start losing both economic growth and revenue. What's the ideal 323 00:20:41,480 --> 00:20:45,680 Speaker 1: tax rate that optimizes both the economy and the government. 324 00:20:45,920 --> 00:20:48,000 Speaker 1: Whenever you raise tax rates throughout the whole range, you 325 00:20:48,040 --> 00:20:51,120 Speaker 1: reduce growth. There is a point there that you get 326 00:20:51,119 --> 00:20:54,320 Speaker 1: maximal revenues, but that is not the optimal tax rate. 327 00:20:54,320 --> 00:20:56,000 Speaker 1: Your tax rate should be a lot lower than that. 328 00:20:56,280 --> 00:20:59,040 Speaker 1: I mean, all taxes are bad news, but some are 329 00:20:59,040 --> 00:21:01,439 Speaker 1: worse than others. What you want to do is you 330 00:21:01,480 --> 00:21:05,280 Speaker 1: want to collect your taxes in the least damaging fashion, 331 00:21:05,960 --> 00:21:07,800 Speaker 1: all right, So you do the least damage for the 332 00:21:07,840 --> 00:21:11,600 Speaker 1: total amount of tax revenues you collect. On the spending side, 333 00:21:11,960 --> 00:21:14,160 Speaker 1: obviously you want to spend the money in the most 334 00:21:14,200 --> 00:21:17,800 Speaker 1: beneficial fashion possible. All right, That's what you want to 335 00:21:17,800 --> 00:21:20,440 Speaker 1: do in spending and least damaging on taxes. And then 336 00:21:20,440 --> 00:21:23,040 Speaker 1: what you want to do is when the damage done 337 00:21:23,119 --> 00:21:26,679 Speaker 1: by the last dollar of taxes collected is a little 338 00:21:26,680 --> 00:21:31,320 Speaker 1: bit less then the benefit done by the last dollar spent, 339 00:21:31,840 --> 00:21:36,520 Speaker 1: you stop. Already that's the optimal level for government. Any 340 00:21:36,560 --> 00:21:40,359 Speaker 1: government smaller than that should be increased, and any government 341 00:21:40,440 --> 00:21:43,760 Speaker 1: larger than that should be declined. Like everything else in society, 342 00:21:44,160 --> 00:21:47,080 Speaker 1: there's an optimal balance of where government should be and 343 00:21:47,119 --> 00:21:49,159 Speaker 1: it has to do with the value of the spending. 344 00:21:49,280 --> 00:21:51,920 Speaker 1: Is what the tax rate effects on growth are, and 345 00:21:52,000 --> 00:21:54,600 Speaker 1: that's where it comes out, where the balance is between 346 00:21:54,640 --> 00:21:57,480 Speaker 1: the damage done by the last dollar taxes collected is 347 00:21:57,520 --> 00:21:59,399 Speaker 1: a little bit less than the benefit done by the 348 00:21:59,480 --> 00:22:04,280 Speaker 1: last dollar of money spent by the government. Next, why 349 00:22:04,440 --> 00:22:07,560 Speaker 1: some aspects of the care Stimilus package may harm our 350 00:22:07,560 --> 00:22:15,840 Speaker 1: economic recovery. And at the end of this episode, I'll 351 00:22:15,840 --> 00:22:18,760 Speaker 1: give you an audio sneak peak of chapter one of 352 00:22:18,840 --> 00:22:23,119 Speaker 1: my new novel Shakedown, available now at English three sixty 353 00:22:23,240 --> 00:22:35,520 Speaker 1: dot com slash Shakedown. As you look at the sheer 354 00:22:35,640 --> 00:22:38,760 Speaker 1: volume of cash that could being poured into the system, 355 00:22:39,040 --> 00:22:42,200 Speaker 1: what I'm really concerned about is, once we get passed 356 00:22:42,920 --> 00:22:47,399 Speaker 1: defeating the virus, what do we do to optimize getting 357 00:22:47,440 --> 00:22:51,360 Speaker 1: back to real economic growth. I've been very struck with 358 00:22:51,480 --> 00:22:55,080 Speaker 1: Grant's book on the depression of nineteen twenty twenty one 359 00:22:55,720 --> 00:22:57,960 Speaker 1: and the degree to which it was a v shaped 360 00:22:58,800 --> 00:23:02,400 Speaker 1: depression in which things and straight down pretty frighteningly turned 361 00:23:02,440 --> 00:23:05,240 Speaker 1: the corner went straight back up and in a sense 362 00:23:05,280 --> 00:23:09,920 Speaker 1: it's in the Trump and the country need that kind 363 00:23:09,960 --> 00:23:12,200 Speaker 1: of a response where we've slammed on the brakes. We've 364 00:23:12,240 --> 00:23:16,040 Speaker 1: stopped so we can beat this virus. But sometimes the 365 00:23:16,160 --> 00:23:19,400 Speaker 1: summer we had to restart the machine. And what would 366 00:23:19,480 --> 00:23:22,760 Speaker 1: use is what are the things you'd recommend for Americans 367 00:23:22,800 --> 00:23:24,680 Speaker 1: to get back to work and the economy to get 368 00:23:24,720 --> 00:23:27,800 Speaker 1: back to work. When we went into this pandemic with 369 00:23:27,880 --> 00:23:31,440 Speaker 1: a coronavirus, we had probably as good an economy as 370 00:23:31,480 --> 00:23:35,640 Speaker 1: we've ever had this president, the longest prosperity period ever. 371 00:23:35,720 --> 00:23:39,240 Speaker 1: The tax bill was wonderful, and then the coronavirus hit, 372 00:23:39,840 --> 00:23:44,439 Speaker 1: and unfortunately this administration and Congress, both Senate and House, 373 00:23:44,800 --> 00:23:47,840 Speaker 1: have decided to do the Cares Act, which pay people 374 00:23:47,920 --> 00:23:50,840 Speaker 1: not to work, give free money to people, and that 375 00:23:51,000 --> 00:23:54,240 Speaker 1: bill and the two point two trillion included in that 376 00:23:54,280 --> 00:23:58,440 Speaker 1: bill has done enormous damage to the economy. So once 377 00:23:58,480 --> 00:24:02,160 Speaker 1: the pandemic has gone, the economy will not come back 378 00:24:02,160 --> 00:24:06,160 Speaker 1: to where it was. This has demonstibly damaged the economy 379 00:24:06,200 --> 00:24:08,960 Speaker 1: for a long time to come. Now, what can you 380 00:24:09,000 --> 00:24:11,560 Speaker 1: do to offset it? I'm telling you the answer is 381 00:24:11,600 --> 00:24:14,800 Speaker 1: not an infrastructure bill for another two trillion dollars. It's not. 382 00:24:15,640 --> 00:24:17,840 Speaker 1: What you need to do is get an efficient tax 383 00:24:17,920 --> 00:24:20,760 Speaker 1: code and reduce government spending. What you want is a 384 00:24:20,800 --> 00:24:23,760 Speaker 1: low rate, broad based flat tax and get rid of 385 00:24:23,800 --> 00:24:27,080 Speaker 1: all federal taxes. And if two flat rate taxes, one 386 00:24:27,119 --> 00:24:29,800 Speaker 1: on business net sales, it's a value added tax with 387 00:24:29,880 --> 00:24:33,440 Speaker 1: no exemptions, no exemptions, no exclusions. And what you want 388 00:24:33,600 --> 00:24:36,399 Speaker 1: is a low rate, broad based income tax again with 389 00:24:36,480 --> 00:24:39,760 Speaker 1: no deductions, no exemptions, no exclusions. And you want to 390 00:24:39,760 --> 00:24:43,280 Speaker 1: have those two taxes collecting virtually all of your revenues 391 00:24:43,760 --> 00:24:48,080 Speaker 1: with nothing else. Are you suggesting that sometime this summer 392 00:24:48,960 --> 00:24:52,360 Speaker 1: the president should try to move that kind of dramatic 393 00:24:52,400 --> 00:24:56,399 Speaker 1: tax reform. Yes, the policies that were in existence before 394 00:24:56,440 --> 00:25:00,760 Speaker 1: the pandemic occurred, we're leading to the most prosper economy ever. 395 00:25:01,320 --> 00:25:04,359 Speaker 1: They have now changed all the economics, so it won't 396 00:25:04,359 --> 00:25:06,679 Speaker 1: come back to where it was because the policies in 397 00:25:06,760 --> 00:25:09,320 Speaker 1: place are not the same as the ones that were 398 00:25:09,359 --> 00:25:13,520 Speaker 1: in place before the pandemic started. I've been through these 399 00:25:13,880 --> 00:25:17,160 Speaker 1: crises all my life. I was in the Nixon White 400 00:25:17,200 --> 00:25:20,320 Speaker 1: House in nineteen seventy seventy one seventy two. Was George 401 00:25:20,320 --> 00:25:23,520 Speaker 1: Schultz's right hand person. I was the highest ranking economist 402 00:25:23,520 --> 00:25:26,000 Speaker 1: in the White House at that time, and we did 403 00:25:26,000 --> 00:25:29,080 Speaker 1: the Camp David thing, which did incountable damage to the 404 00:25:29,160 --> 00:25:32,160 Speaker 1: US economy. Then I was in the White House also 405 00:25:32,240 --> 00:25:36,359 Speaker 1: when the Watergate occurred as administration and total panic made 406 00:25:36,520 --> 00:25:41,760 Speaker 1: very bad decisions at that time. Whenever governments make decisions 407 00:25:41,760 --> 00:25:46,960 Speaker 1: when they're either panicked or drunk, the consequences are rarely attractive. 408 00:25:47,480 --> 00:25:50,520 Speaker 1: And Nixon was a classic case of panic decisions that 409 00:25:50,720 --> 00:25:53,359 Speaker 1: really hurt the economy in the country a lot. And 410 00:25:53,400 --> 00:25:56,600 Speaker 1: then you look at Jerry Ford's whip inflation now, which 411 00:25:56,640 --> 00:26:00,679 Speaker 1: was another panicked response by President Ford, which did huge damage. 412 00:26:00,680 --> 00:26:03,680 Speaker 1: In fact, it was with Dick Cheney, my classmate Yale, 413 00:26:04,080 --> 00:26:06,679 Speaker 1: and Don Rumseld, who I did the curve for on 414 00:26:06,720 --> 00:26:09,320 Speaker 1: the napkin if you're remembered, we did it in the 415 00:26:09,359 --> 00:26:14,880 Speaker 1: Washington Hotel. All around Ford's problems, Jimmy Carter, he did 416 00:26:14,920 --> 00:26:17,360 Speaker 1: all of the National Energy Plan, was in a panicked 417 00:26:17,400 --> 00:26:20,639 Speaker 1: response to a crisis of embargo. You look at the 418 00:26:20,680 --> 00:26:23,520 Speaker 1: panic decisions he made on trying to free the hostages 419 00:26:23,800 --> 00:26:27,800 Speaker 1: in Tehran, both of which were tragic failures. And then 420 00:26:27,880 --> 00:26:30,639 Speaker 1: you got Ronald Reagan. He had two crises which I 421 00:26:30,680 --> 00:26:34,119 Speaker 1: was very personally involved with on the inside. The first 422 00:26:34,119 --> 00:26:37,240 Speaker 1: one was because we're our tax bill in nineteen eighty 423 00:26:37,240 --> 00:26:41,200 Speaker 1: one phased in tax cuts. We created a very deep procession, 424 00:26:41,560 --> 00:26:44,639 Speaker 1: the worse since the Great Depression, because everyone knew the 425 00:26:44,680 --> 00:26:46,560 Speaker 1: tax rates in nineteen eighty three were going to be 426 00:26:46,600 --> 00:26:50,000 Speaker 1: a lot lower, so they postponed their income toll. Nineteen 427 00:26:50,080 --> 00:26:52,600 Speaker 1: eighty three and eighty one eighty two was a very 428 00:26:52,640 --> 00:26:55,159 Speaker 1: bad year. Unemployment went up as high as ten percent, 429 00:26:55,720 --> 00:26:58,520 Speaker 1: and everyone wanted President Reagan to get rid of the 430 00:26:58,520 --> 00:27:00,760 Speaker 1: third year of the tax cut. What I call the 431 00:27:00,800 --> 00:27:05,359 Speaker 1: four anti Reagans Baker, Darmond, Bush, and Dole try to 432 00:27:05,359 --> 00:27:07,199 Speaker 1: do it. I mean, there were very few of us 433 00:27:07,240 --> 00:27:09,080 Speaker 1: on the side who wanted to keep the task cut 434 00:27:09,119 --> 00:27:12,280 Speaker 1: in at that time. Of course, as you know, Reagan said, 435 00:27:12,359 --> 00:27:15,280 Speaker 1: I wasn't elected to raise your taxes. He kept it in. 436 00:27:15,880 --> 00:27:19,240 Speaker 1: From January first, nineteen eighty three through June of nineteen 437 00:27:19,320 --> 00:27:24,240 Speaker 1: eighty four, US real GDP grew by twelve percent. Newt 438 00:27:24,320 --> 00:27:27,560 Speaker 1: that's at an eight percent per annum compound rate. Most 439 00:27:27,640 --> 00:27:30,840 Speaker 1: wonderful recovery of her. That's your v shape. Then we 440 00:27:30,880 --> 00:27:33,440 Speaker 1: had the crisis in nineteen eighty seven. I remember being 441 00:27:33,440 --> 00:27:36,320 Speaker 1: with him then, and everyone wanted him to do all 442 00:27:36,400 --> 00:27:39,119 Speaker 1: sorts of crazy stuff they wanted to have done in 443 00:27:39,160 --> 00:27:42,159 Speaker 1: the present. Said he was humorous. I don't know if 444 00:27:42,200 --> 00:27:44,040 Speaker 1: he was men it to be humorous. He said, don't 445 00:27:44,080 --> 00:27:48,080 Speaker 1: just stand there, undo something, and of course the crisis 446 00:27:48,080 --> 00:27:51,920 Speaker 1: just disappeared. We have had many financial crises over time, 447 00:27:52,240 --> 00:27:54,600 Speaker 1: and every time the government steps in and tries to 448 00:27:54,640 --> 00:27:57,600 Speaker 1: solve it, they make it worse. And so this case 449 00:27:57,760 --> 00:28:00,280 Speaker 1: is exactly the same. They are clearly in a Hannock 450 00:28:00,359 --> 00:28:03,240 Speaker 1: mode and making very big mistakes. So now come out 451 00:28:03,240 --> 00:28:06,679 Speaker 1: of that. We have added two point two trillion in 452 00:28:06,760 --> 00:28:10,080 Speaker 1: spending with the Cares Act, none of it pro growth, 453 00:28:10,160 --> 00:28:12,480 Speaker 1: none of it pro growth new We're going to add 454 00:28:12,520 --> 00:28:15,920 Speaker 1: an infrastructure bill, that's the fourth bill there, which is 455 00:28:15,960 --> 00:28:19,640 Speaker 1: another two trillion. We have a trillion of deficit as 456 00:28:19,640 --> 00:28:22,040 Speaker 1: it is, and the GDP is going to go down. 457 00:28:22,720 --> 00:28:25,919 Speaker 1: If you take that five trillion of additional spending in 458 00:28:25,960 --> 00:28:29,400 Speaker 1: there over a GDP which maybe is twenty trillion, that's 459 00:28:29,440 --> 00:28:33,679 Speaker 1: twenty five percent of GDP in additional debt from eighty 460 00:28:33,720 --> 00:28:36,400 Speaker 1: two percent to one hundred and seven percent as debt 461 00:28:36,440 --> 00:28:39,320 Speaker 1: share of GDP. This puts US in the league with 462 00:28:39,400 --> 00:28:43,760 Speaker 1: Italy and Japan. We have a real serious problem going forward. 463 00:28:44,280 --> 00:28:46,360 Speaker 1: And that serious problem is not just going to cure 464 00:28:46,360 --> 00:28:50,360 Speaker 1: itself because coronavirus has gone. Now We've got an economic 465 00:28:50,400 --> 00:28:54,560 Speaker 1: problem on top of the medical problem, and that's why 466 00:28:54,600 --> 00:28:56,760 Speaker 1: we need to have a radical change in our tax 467 00:28:56,840 --> 00:29:00,640 Speaker 1: codes and our spending policies to prepare for that long 468 00:29:00,760 --> 00:29:03,520 Speaker 1: term economic growth. Otherwise the US economy is going to 469 00:29:03,560 --> 00:29:06,120 Speaker 1: falter for a long period of time. I don't mean 470 00:29:06,120 --> 00:29:08,640 Speaker 1: to be negative, but this is a time when we 471 00:29:08,720 --> 00:29:12,800 Speaker 1: now need clear thinking. I think it's very important that 472 00:29:12,840 --> 00:29:15,480 Speaker 1: those of us who are committed to real economic growth 473 00:29:16,160 --> 00:29:19,160 Speaker 1: speak out over the next sixty days and try to 474 00:29:19,280 --> 00:29:22,280 Speaker 1: establish a baseline which, much like Reagan, I think the 475 00:29:22,320 --> 00:29:25,200 Speaker 1: Trump's instincts will be to be in favor of it. 476 00:29:25,760 --> 00:29:29,040 Speaker 1: He does understand it, and he does understand it intuitively. 477 00:29:29,120 --> 00:29:32,600 Speaker 1: The trouble is, like so many presidencies, surrounded by a 478 00:29:32,640 --> 00:29:36,080 Speaker 1: group of people who are trying to push their agendas. 479 00:29:36,720 --> 00:29:39,600 Speaker 1: The one we suggested was a waiver of the payroll 480 00:29:39,680 --> 00:29:42,440 Speaker 1: tax till the end of the year, which would have 481 00:29:42,520 --> 00:29:46,720 Speaker 1: increased the returns to keeping and retaining employees by seven 482 00:29:46,720 --> 00:29:49,840 Speaker 1: point sixty four percent, which would have done a great 483 00:29:49,920 --> 00:29:52,360 Speaker 1: job of bouncing the economy back, but that's not what 484 00:29:52,400 --> 00:29:55,240 Speaker 1: they chose to do, and it has done immense damage 485 00:29:55,240 --> 00:29:59,520 Speaker 1: to the economy. We're going to get to a point, 486 00:29:59,560 --> 00:30:03,240 Speaker 1: I think where thirty to sixty days now it'll be 487 00:30:03,280 --> 00:30:08,560 Speaker 1: obvious that this is not going to be adequate. And 488 00:30:08,600 --> 00:30:13,560 Speaker 1: at that point, would you, for example, propose the same 489 00:30:14,400 --> 00:30:18,720 Speaker 1: tax holiday for the payroll tax, except extended into the 490 00:30:18,760 --> 00:30:21,800 Speaker 1: first six months of next year. Sure? I mean, look 491 00:30:21,800 --> 00:30:25,440 Speaker 1: at there are two things you have, government spending and taxes. 492 00:30:26,080 --> 00:30:29,840 Speaker 1: Government spending is taxation. I mean, if you can imagine 493 00:30:29,840 --> 00:30:33,400 Speaker 1: a two person economy, farmer A and farmer B. If 494 00:30:33,440 --> 00:30:36,680 Speaker 1: farmer B gets unemployment benefits, who do you think pays 495 00:30:36,760 --> 00:30:41,800 Speaker 1: for them? It's farmer A. Government doesn't create resources. New 496 00:30:41,880 --> 00:30:46,400 Speaker 1: government redistributes resources. And all of this spending is taking 497 00:30:46,480 --> 00:30:49,760 Speaker 1: resources away from those who produced it and giving it 498 00:30:49,800 --> 00:30:52,560 Speaker 1: to those who don't produce it, who consume it. And 499 00:30:52,720 --> 00:30:56,080 Speaker 1: that's a taxes that Milton Freeman's line always the government 500 00:30:56,120 --> 00:30:59,760 Speaker 1: spending is taxation. What you want to make sure you're 501 00:31:00,000 --> 00:31:04,440 Speaker 1: don't do. Don't pay people not to work and tax 502 00:31:04,520 --> 00:31:08,000 Speaker 1: people if they do work. That's a guarantee for high 503 00:31:08,080 --> 00:31:12,080 Speaker 1: unemployment and low productivity and low growth. We've already put 504 00:31:12,120 --> 00:31:15,240 Speaker 1: in the plan to pay people who don't work. That's done. 505 00:31:15,320 --> 00:31:17,600 Speaker 1: That two point trillion is past. It's done. It's called 506 00:31:17,600 --> 00:31:20,120 Speaker 1: the Cares Act. Now what we need to do is 507 00:31:20,120 --> 00:31:22,400 Speaker 1: if we want to try to reverse it, is try 508 00:31:22,440 --> 00:31:25,840 Speaker 1: to reduce taxes on those who do work. And that's 509 00:31:25,880 --> 00:31:28,360 Speaker 1: what I would suggest. In The payroll tax has a 510 00:31:28,400 --> 00:31:32,680 Speaker 1: couple of really lovely traits. It's very broad based, so 511 00:31:32,840 --> 00:31:35,160 Speaker 1: everyone gets the tax that it's not just a few 512 00:31:35,240 --> 00:31:38,320 Speaker 1: like capital gains taxes or other things like that. It 513 00:31:38,360 --> 00:31:41,160 Speaker 1: has a great deal of incentive effect for it, and 514 00:31:41,360 --> 00:31:44,400 Speaker 1: it works for both small businesses as well as large 515 00:31:44,440 --> 00:31:49,640 Speaker 1: businesses and small producers, low income producers, and high income producers. 516 00:31:50,040 --> 00:31:52,800 Speaker 1: It has a scoring of about in the next seven months, 517 00:31:52,840 --> 00:31:55,600 Speaker 1: it would score about minus seven hundred and fifty billion 518 00:31:56,240 --> 00:31:59,040 Speaker 1: something like that, And that's just the static score. If 519 00:31:59,080 --> 00:32:01,280 Speaker 1: you put that in, that would give us the best 520 00:32:01,360 --> 00:32:04,520 Speaker 1: chance to come back quickly I can think of. Now, 521 00:32:04,880 --> 00:32:06,680 Speaker 1: then we want to go to the full reform of 522 00:32:06,680 --> 00:32:09,320 Speaker 1: this thing. But there's no way of wishing back the 523 00:32:09,520 --> 00:32:12,560 Speaker 1: Cares Act. It's done, and that's going to do a 524 00:32:12,600 --> 00:32:18,720 Speaker 1: lot of damage to have a positive next step, which 525 00:32:18,760 --> 00:32:22,640 Speaker 1: is why I like the idea of off setting the 526 00:32:22,680 --> 00:32:25,640 Speaker 1: bike attacks, because I think those of us who want growth, 527 00:32:26,120 --> 00:32:28,480 Speaker 1: the pressure to do something else is going to come up. 528 00:32:28,920 --> 00:32:31,400 Speaker 1: And if we're just no, if we just scream no, 529 00:32:31,880 --> 00:32:34,840 Speaker 1: that won't get us anywhere. But as you just said, 530 00:32:35,320 --> 00:32:38,640 Speaker 1: if they make permanent a lot of the regulatory reforms 531 00:32:38,680 --> 00:32:42,120 Speaker 1: that they've now put in as an emergency, and they 532 00:32:42,160 --> 00:32:45,360 Speaker 1: combine that with the right kind of tax cuts, you 533 00:32:45,400 --> 00:32:48,880 Speaker 1: do create an environment where you could imagine the economy 534 00:32:48,920 --> 00:32:52,440 Speaker 1: would in fact come roaring back pretty rapidly. Well, it 535 00:32:52,440 --> 00:32:54,800 Speaker 1: would come partially back. New It's never going to come 536 00:32:54,840 --> 00:32:57,440 Speaker 1: back to where it was. It's just not it's not 537 00:32:57,480 --> 00:32:59,880 Speaker 1: going to come back quickly. It will come back partway. 538 00:33:00,080 --> 00:33:03,040 Speaker 1: But no one should be deluded into thinking that this 539 00:33:03,280 --> 00:33:05,960 Speaker 1: CARES Act won't hurt growth for a long time, just 540 00:33:06,080 --> 00:33:10,000 Speaker 1: the way Obama's stimulus package in two thousand and nine 541 00:33:10,080 --> 00:33:13,280 Speaker 1: hurt the economy. W's stimulus package in two thousand and 542 00:33:13,320 --> 00:33:16,440 Speaker 1: eight hurt the economy. That's why we had the longest 543 00:33:16,520 --> 00:33:20,200 Speaker 1: worst recovery in US history. Now it did recover, but 544 00:33:20,320 --> 00:33:23,120 Speaker 1: instead of recovering in one year like Reagan's did it 545 00:33:23,160 --> 00:33:26,120 Speaker 1: took eight years or nine years because of their policies. 546 00:33:26,160 --> 00:33:29,640 Speaker 1: But if you stipulate that you are not going to 547 00:33:31,240 --> 00:33:35,680 Speaker 1: be able to undo the Cares Act, it's a fact. Yes. 548 00:33:36,400 --> 00:33:42,160 Speaker 1: Then is there anything in addition to the Fight Attacks 549 00:33:42,200 --> 00:33:46,560 Speaker 1: holiday which would give us the extra excitement and the 550 00:33:46,600 --> 00:33:50,040 Speaker 1: extra energy in the entrepreneurial sector to begin to get 551 00:33:50,120 --> 00:33:54,400 Speaker 1: closer to a Reagan like recovery than an Obama like recovery. 552 00:33:54,840 --> 00:33:56,640 Speaker 1: I mean, there are a lot of little things that 553 00:33:56,680 --> 00:33:58,840 Speaker 1: could be done, like they had Transparency Act, which I 554 00:33:58,880 --> 00:34:00,960 Speaker 1: was very involved with the press and on as well. 555 00:34:01,360 --> 00:34:03,400 Speaker 1: There are a lot of other deregulations which he's been 556 00:34:03,440 --> 00:34:07,880 Speaker 1: spectacular on. Free or trade is also very important in this. 557 00:34:08,360 --> 00:34:11,600 Speaker 1: But of major macro policies, I can't think of anything 558 00:34:12,120 --> 00:34:14,920 Speaker 1: that would have a stimulative effect that would allow the 559 00:34:14,920 --> 00:34:18,160 Speaker 1: government to do something to try to offset the damage 560 00:34:18,200 --> 00:34:21,160 Speaker 1: already done by the Cares Act, And that would be 561 00:34:21,200 --> 00:34:23,359 Speaker 1: waiving the payroll tax for as far as the eye 562 00:34:23,400 --> 00:34:25,920 Speaker 1: can see to bring people back. You want to make 563 00:34:25,920 --> 00:34:29,320 Speaker 1: it have a terminal date new because if people realize 564 00:34:29,680 --> 00:34:31,680 Speaker 1: that the payroll tax is going to come back at 565 00:34:31,760 --> 00:34:34,600 Speaker 1: some time, they will try to push as much production 566 00:34:34,600 --> 00:34:38,280 Speaker 1: as they possibly can into the economy during that period 567 00:34:38,320 --> 00:34:40,839 Speaker 1: of the payroll tax low, so it'll really jack up 568 00:34:40,880 --> 00:34:44,120 Speaker 1: the quickness of the growth rate. And that will work, 569 00:34:44,239 --> 00:34:46,879 Speaker 1: and that will work very nicely. There are two things 570 00:34:46,920 --> 00:34:48,719 Speaker 1: they can do. They can increase spending, which would be 571 00:34:48,760 --> 00:34:50,759 Speaker 1: the wrong thing. What they should do is what we 572 00:34:50,840 --> 00:34:53,920 Speaker 1: did in World War One. In World War two, what 573 00:34:54,040 --> 00:34:56,120 Speaker 1: we did is we cut non defense spending in the 574 00:34:56,200 --> 00:34:59,560 Speaker 1: US by huge amounts to be able to afford the war, 575 00:34:59,640 --> 00:35:03,920 Speaker 1: which was a very positive policy. To get stimulation. You know, 576 00:35:03,960 --> 00:35:06,560 Speaker 1: we pay a lot of people not to work, and 577 00:35:06,640 --> 00:35:08,799 Speaker 1: I'm not saying they don't deserve it, but you know, 578 00:35:09,719 --> 00:35:12,799 Speaker 1: there's no compassion in giving away other people's money Newton, 579 00:35:13,360 --> 00:35:16,160 Speaker 1: and that's not a compassion. What we need to do 580 00:35:16,200 --> 00:35:20,279 Speaker 1: is cut government spending dramatically, and cutting the payroll tax 581 00:35:20,520 --> 00:35:23,920 Speaker 1: the way I suggested would bring that economy back maybe 582 00:35:23,920 --> 00:35:27,680 Speaker 1: to the levels we were before the coronavirus. But you'd 583 00:35:27,719 --> 00:35:31,759 Speaker 1: have to have a profound reduction in government to do that. Yes, 584 00:35:31,880 --> 00:35:34,000 Speaker 1: look at the size of it. Look what those people 585 00:35:34,040 --> 00:35:36,520 Speaker 1: put inside the bill, just in the Christmas tree stuff. 586 00:35:37,480 --> 00:35:41,200 Speaker 1: I mean, it's ridiculous what they do. My personal favorite 587 00:35:41,719 --> 00:35:45,720 Speaker 1: is twenty five million dollars to the Kennedy Center, which 588 00:35:45,760 --> 00:35:53,000 Speaker 1: promptly laid off the National Symphony Orchestra. No. I assume 589 00:35:53,080 --> 00:35:56,640 Speaker 1: all the administrators were doing fine, but the actual artists 590 00:35:56,680 --> 00:35:59,359 Speaker 1: were not. The money is paid to people who were 591 00:35:59,400 --> 00:36:01,279 Speaker 1: laid off. By paying them more than they got when 592 00:36:01,280 --> 00:36:05,840 Speaker 1: they worked, gave these people the window to fire lots 593 00:36:05,840 --> 00:36:09,680 Speaker 1: of people. Far from even creating jobs, it didn't create them. 594 00:36:09,880 --> 00:36:12,919 Speaker 1: It cost huge amounts of jobs because these guys could 595 00:36:12,920 --> 00:36:15,239 Speaker 1: get rid of their workers, they could furlough them, and 596 00:36:15,320 --> 00:36:17,600 Speaker 1: the workers would get more pay not working than they 597 00:36:17,600 --> 00:36:21,319 Speaker 1: would working. And that's exactly what's happening. And as you say, 598 00:36:21,440 --> 00:36:25,400 Speaker 1: the Kennedy Center did exactly that. It took its money, 599 00:36:25,440 --> 00:36:28,960 Speaker 1: it's twenty five million, and then it fired everyone. And 600 00:36:29,040 --> 00:36:31,359 Speaker 1: that's what a lot of businesses are doing. These are 601 00:36:31,480 --> 00:36:35,600 Speaker 1: unintended consequences. There is no time in life where free 602 00:36:35,600 --> 00:36:38,400 Speaker 1: markets are more important for the health of the economy 603 00:36:38,680 --> 00:36:42,200 Speaker 1: than during a crisis. A crisis is when we need 604 00:36:42,280 --> 00:36:45,640 Speaker 1: free markets the most, and that's when government always destroys 605 00:36:45,719 --> 00:36:48,840 Speaker 1: free markets the most. And now we're living within another one. 606 00:36:49,080 --> 00:36:52,800 Speaker 1: I think the question now is the really deep immediate 607 00:36:52,920 --> 00:36:57,200 Speaker 1: panic will start to fade. I think in May and June, 608 00:36:57,520 --> 00:36:59,600 Speaker 1: and at that point you'll be able to have a 609 00:36:59,680 --> 00:37:02,680 Speaker 1: rush conversation about where do we go from here. If 610 00:37:02,680 --> 00:37:04,239 Speaker 1: you go to the flat task, you can have a 611 00:37:04,280 --> 00:37:07,719 Speaker 1: tax amassy, which will raise enormous amounts of revenue to 612 00:37:07,800 --> 00:37:09,919 Speaker 1: run down that debt. You can sell all the gold 613 00:37:09,920 --> 00:37:12,759 Speaker 1: and silver and Fort Knox which was confiscated by Roosevelt 614 00:37:12,960 --> 00:37:16,160 Speaker 1: in nineteen thirty three. They're all sorts of things that 615 00:37:16,200 --> 00:37:18,319 Speaker 1: can be done to do that, but now they have 616 00:37:18,400 --> 00:37:20,799 Speaker 1: to be really radical and have to be done with 617 00:37:20,920 --> 00:37:25,040 Speaker 1: green eye shades, a clear vision, and do it calmly. 618 00:37:25,320 --> 00:37:28,560 Speaker 1: You know, when all around you are panicked, put your 619 00:37:28,560 --> 00:37:30,719 Speaker 1: hands over your ears, shut your eyes and scream. I'm 620 00:37:30,719 --> 00:37:34,080 Speaker 1: not listening, because tomorrow they won't be panicked, and we 621 00:37:34,160 --> 00:37:37,600 Speaker 1: need to do it in a cool, collected, calm way. Well, 622 00:37:37,600 --> 00:37:40,319 Speaker 1: and I think you can make the case that we 623 00:37:40,400 --> 00:37:45,160 Speaker 1: now have a double whammy between the damage done by 624 00:37:45,200 --> 00:37:49,040 Speaker 1: the virus and the damage done by big government, and 625 00:37:49,120 --> 00:37:51,840 Speaker 1: so we have to have a program bold enough that 626 00:37:51,960 --> 00:37:54,799 Speaker 1: we get back to real world. For a long time 627 00:37:54,840 --> 00:37:58,200 Speaker 1: you've been advising how to grow the economy, and hopefully 628 00:37:58,239 --> 00:38:00,120 Speaker 1: we'll be able to build a couple of proposals that 629 00:38:00,160 --> 00:38:02,799 Speaker 1: are big enough and exciting enough that it will move 630 00:38:02,880 --> 00:38:05,319 Speaker 1: us back to beginning to recover from where we are now. 631 00:38:05,360 --> 00:38:09,279 Speaker 1: So I think this conversation is a real part of that, 632 00:38:09,360 --> 00:38:12,680 Speaker 1: and I really appreciate you taking the time. Thank you. 633 00:38:17,360 --> 00:38:20,720 Speaker 1: Thank you to my guests James Grant and doctor Arthur Laugher. 634 00:38:21,239 --> 00:38:23,719 Speaker 1: You can read more about the plan for US economic 635 00:38:23,760 --> 00:38:29,279 Speaker 1: recovery on our show page at newtsworld dot com. Newtsworld 636 00:38:29,360 --> 00:38:33,840 Speaker 1: is produced by Gingwish three sixty and iHeartMedia. Our executive 637 00:38:33,840 --> 00:38:37,120 Speaker 1: producer is Debbie Myers and our producer is Darnsey Slap. 638 00:38:37,960 --> 00:38:40,680 Speaker 1: The artwork for the show was created by Steve Penny 639 00:38:41,560 --> 00:38:45,480 Speaker 1: Special thanks the team at Gingwish three sixty. Please email 640 00:38:45,560 --> 00:38:49,839 Speaker 1: me with your comments at newt at newtsworld dot com. 641 00:38:49,960 --> 00:38:52,279 Speaker 1: If you've been enjoying Newtsworld, I hope you'll go to 642 00:38:52,320 --> 00:38:55,560 Speaker 1: Apple Podcast and both rate us with five stars and 643 00:38:55,680 --> 00:38:58,359 Speaker 1: give us a review so others can learn what it's 644 00:38:58,360 --> 00:39:04,319 Speaker 1: all about. On the next episode of Knutsworld, what can 645 00:39:04,400 --> 00:39:06,440 Speaker 1: we learn from the countries who are already on the 646 00:39:06,480 --> 00:39:10,560 Speaker 1: road to recovery, both from the virus and with their economies. 647 00:39:11,120 --> 00:39:15,680 Speaker 1: We'll discuss the lessons from Japan, South Korea, Singapore, Hong 648 00:39:15,760 --> 00:39:29,280 Speaker 1: Kong and Taiwan. I'm new English. This is Newtsworld. Thanks 649 00:39:29,280 --> 00:39:33,040 Speaker 1: for listening to Newtsworld, and now a special sneak peek 650 00:39:33,080 --> 00:39:37,160 Speaker 1: of minute novel shake Down. Here is chapter one. The 651 00:39:37,239 --> 00:39:41,360 Speaker 1: old man bent down, tried but couldn't slip the envelope 652 00:39:41,440 --> 00:39:45,920 Speaker 1: under his neighbor's door, checked the empty hallway, turned and 653 00:39:46,000 --> 00:39:49,760 Speaker 1: began walking toward the floor's elevator while pulling a pistol 654 00:39:49,800 --> 00:39:53,479 Speaker 1: from under his jacket, pressed the call button and took 655 00:39:53,480 --> 00:39:57,920 Speaker 1: a deep breath to calmb his nerves. Ding he tightened 656 00:39:57,920 --> 00:40:02,120 Speaker 1: his index finger in the handgun's trigger, anticipating the opening doors. 657 00:40:03,000 --> 00:40:08,000 Speaker 1: Sucked in another calming breath. No one was inside, tucked 658 00:40:08,040 --> 00:40:12,040 Speaker 1: his handgun between his belt and watermelon belly, stepped inside. 659 00:40:13,160 --> 00:40:16,719 Speaker 1: The building's lobby was empty. The security guard had gone 660 00:40:16,719 --> 00:40:19,640 Speaker 1: home at ten p m. The condo board didn't believe 661 00:40:19,680 --> 00:40:23,600 Speaker 1: it necessary to have him stay longer. Their Rosland, Virginia 662 00:40:23,600 --> 00:40:27,759 Speaker 1: neighborhood was relatively crime free. The man walked to a 663 00:40:27,800 --> 00:40:31,439 Speaker 1: wall of mail boxes directly across from the elevator, ran 664 00:40:31,480 --> 00:40:34,680 Speaker 1: a finger along the tenant's mail boxes, stopping at the 665 00:40:34,760 --> 00:40:38,840 Speaker 1: second box in the third column his neighbors. He inserted 666 00:40:38,840 --> 00:40:41,920 Speaker 1: the envelope into it. From his jacket, he drew a 667 00:40:42,000 --> 00:40:46,319 Speaker 1: second envelope, which he dropped in the outgoing mail. Behind him. 668 00:40:46,920 --> 00:40:50,120 Speaker 1: The sound of laughter a couple entering the building through 669 00:40:50,120 --> 00:40:53,360 Speaker 1: its double glass doors. The man at the mail boxes 670 00:40:53,400 --> 00:40:57,440 Speaker 1: noticed that the woman was younger, giggling holding her mail 671 00:40:57,480 --> 00:41:02,000 Speaker 1: companion's arm. Her loud chat her and wobbly walked suggested 672 00:41:02,080 --> 00:41:05,640 Speaker 1: she was drunk a Saturday night date, perhaps a one 673 00:41:05,760 --> 00:41:09,359 Speaker 1: night stand. The condo building was across the Potomac River 674 00:41:09,719 --> 00:41:14,120 Speaker 1: from the nation's capital, an inexpensive uber ride from popular 675 00:41:14,160 --> 00:41:19,800 Speaker 1: Georgetown pick up bars. The approaching couple appeared harmless. Still, 676 00:41:20,520 --> 00:41:22,920 Speaker 1: the man returned to the elevator and pushed the call button, 677 00:41:23,200 --> 00:41:26,400 Speaker 1: hoping to board and depart before they reached him. The 678 00:41:26,480 --> 00:41:30,480 Speaker 1: couple quickened their pace. The old man reached inside his jacket, 679 00:41:30,960 --> 00:41:34,400 Speaker 1: resting his hand on his pistol. He noticed that she 680 00:41:34,600 --> 00:41:38,160 Speaker 1: was wearing a gray wool stocking cap and scarf. He 681 00:41:38,280 --> 00:41:41,760 Speaker 1: wore a red Washington National's baseball cap, and the collar 682 00:41:42,080 --> 00:41:45,239 Speaker 1: of his dark blue coat was turned up, difficult to 683 00:41:45,280 --> 00:41:51,600 Speaker 1: see faces. The elevator doors opened, the woman straightened lunged forward, 684 00:41:51,960 --> 00:41:55,080 Speaker 1: grabbed the old man's left arm. At the same moment, 685 00:41:55,320 --> 00:41:58,480 Speaker 1: her mail accomplice slipped in front of him a blade. 686 00:41:58,520 --> 00:42:01,560 Speaker 1: Before the old man could draw his and gun directly 687 00:42:01,600 --> 00:42:06,520 Speaker 1: into his heart. One thrust, one twist, No time to 688 00:42:06,560 --> 00:42:10,680 Speaker 1: cry out, who would hear? The woman steadied him, pushed 689 00:42:10,719 --> 00:42:13,960 Speaker 1: the man's body forward. He hit the elevator floor hard, 690 00:42:14,360 --> 00:42:16,480 Speaker 1: face first, its doors shut.