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Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in

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Speaker 1: local communities, economies and a sustainable future. That's the power

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Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated

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Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and

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Speaker 1: of course, on the Bloomberg Classic book. An immediate classic

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Speaker 1: in September of Catherine Man's is a Trade Deficit, Sustainable Change,

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Speaker 1: The Dialogue on International Economics and a dr Man joins

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Speaker 1: us down from our studios in Washington. She is a

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Speaker 1: chief economist for the O E. C D in Paris. Catherine,

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Speaker 1: it seems like we've come so far from your classic book.

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Speaker 1: Help us now with the border tax. Peter Navarro suggests

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Speaker 1: it can work for America. Neile Robini with a spirited

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Speaker 1: defense of not doing the border tax, which should it be? So?

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Speaker 1: I think when we look at the border tax, we

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Speaker 1: have to remember that when you put on an import

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Speaker 1: searcharge at cascades through the supply chain and ends up

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Speaker 1: being an export tax. And so whatever you think that

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Speaker 1: you're going to be doing, the implication for exports is

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Speaker 1: going to be greater, uh, in terms of creating a

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Speaker 1: cost for exports than than perhaps you're aware of. And

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Speaker 1: the additional aspect about the border tax says a lot

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Speaker 1: of discussion about whether or not the dollar will adjustin

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Speaker 1: and whiteball out the whole effect. And the answer there

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Speaker 1: again is not very likely, because it's like which dollar

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Speaker 1: is it? The dollar again the pace, So it's is

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Speaker 1: that the dollar against the euro and so um, it's

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Speaker 1: too facile to say, oh, well, the dollar will adjust.

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Speaker 1: So it's going to end up being more costly. It's

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Speaker 1: going to end up being costly to exports, and in

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Speaker 1: the end, it will not achieve the objective that the

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Speaker 1: that they have in mind. The singular distinction here Dr

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Speaker 1: Man is model building. Dr Navarro works are simplistic bilateral

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Speaker 1: static models. Professor Rubini and Krueger formally with the I M.

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Speaker 1: F and Krueger among others noticing a modern process system

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Speaker 1: of industry which leads to complexity. Is the Navarro Trump

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Speaker 1: model just dated and too simple? Well, we've never believed

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Speaker 1: that looking at bilateral trade deficits was was what you

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Speaker 1: should be examining when understanding the impact of trade on

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Speaker 1: a country. Uh, it's the overall deficit that is an issue,

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Speaker 1: or maybe not an issue, but certainly not on a

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Speaker 1: bilateral basis. And again, sort of a blanket border tax adjustment,

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Speaker 1: he's going to have a much more negative effect on

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Speaker 1: exports than you would think. We did some calculations that

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Speaker 1: suggests that a ten percent import tax would actually cause

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Speaker 1: a fift decline in US exports. So it's a more

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Speaker 1: than one to one cost for for the exporters. And

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Speaker 1: again that's not the objective of the tax. Tell me here,

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Speaker 1: Lord King, if you were the differential between border dynamics

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Speaker 1: of a large exporting country like Germany, the struggles of

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Speaker 1: the United Kingdom and Brexit, and the oddity of a

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Speaker 1: dominant American system. These are all unique trading nations, aren't they.

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Speaker 1: You can't use one analysis. I think that's right, But

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Speaker 1: I also think that we should recognize that over a

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Speaker 1: long period of time, we've all benefited from the opportunity

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Speaker 1: to trade with each other. After all, why would we

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Speaker 1: want to put impediments in place to top individuals and

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Speaker 1: businesses trading with each other across borders. We don't do

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Speaker 1: it within borders, we shouldn't necessarily do it across borders,

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Speaker 1: and I think that you know Katherine's right that there

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Speaker 1: are real costs here to interfering with the natural way

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Speaker 1: in which trade would otherwise operate. I think the initial

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Speaker 1: proposal for a tax reform had some merit behind it,

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Speaker 1: but I think what's very unfortunate is to combine a

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Speaker 1: proposal for corporate tax reform with a quite separate proposal

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Speaker 1: for the border tax adjustment. And I think that is

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Speaker 1: a separate issue altogether. One of the big challenges, I

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Speaker 1: think in the modern world is to see how far

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Speaker 1: we as large countries are prepared to subject ourselves to

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Speaker 1: rules of the game which we would like to impose

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Speaker 1: on other countries, but in return to get them for

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Speaker 1: accepting it, we need to impose it on ourselves. And

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Speaker 1: I think this is where the issue of the border

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Speaker 1: tax is likely to end up with a rather unfortunate

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Speaker 1: argument in the World Trade Organization um DR Man. In

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Speaker 1: your always c D forecast released today, you say the

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Speaker 1: global economy may not be strong enough to withstand risks

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Speaker 1: from increased trade barriers. But you also talk about the

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Speaker 1: overblown stock market and potential currency volatility. So you're raising forecasts,

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Speaker 1: but you're warning of the risks if it goes badly wrong.

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Speaker 1: Do we risk seeing a recession or because you're looking

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Speaker 1: at two to three growth, we um, we can't fall

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Speaker 1: in a recession. So I think what we're what we're

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Speaker 1: talking about is we've got an improvement in growth three

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Speaker 1: point six by for the global economy. But um, that's

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Speaker 1: really flying very low. And when you're flying low and

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Speaker 1: you get a down draft from the financial system through

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Speaker 1: a couple of different channels, um or through changes in

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Speaker 1: expectations for trade coming through the trade channel, you can

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Speaker 1: wipe away all of that games that we have in

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Speaker 1: in growth over that time period. So um, we're not

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Speaker 1: talking a recession, but we are talking about a continuation,

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Speaker 1: potentially a continuation of the low growth chapter we've had

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Speaker 1: in the last five years. And we've seen the consequences

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Speaker 1: of that, both economically in terms of rising inequality, but

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Speaker 1: also politically in terms of uh, you know, disruption and populism.

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Speaker 1: So um, when you're flying low, you don't want to,

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Speaker 1: you know, take a chance on down drafts, especially when

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Speaker 1: they're self inflicted, but so lurking. This goes back to

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Speaker 1: the fact that if you if you want everyone to

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Speaker 1: play by the rules, and you can't expect other people

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Speaker 1: to play by the rules that you don't play by.

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Speaker 1: So it would mean that some kind of you know,

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Speaker 1: if we do have increased protectionism which actually solidifies and

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Speaker 1: crystallizes the swift, there would be a pretty swift response

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Speaker 1: to it. Yes, and I think the mean Catherine's right

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Speaker 1: to point to the concern that we should all have

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Speaker 1: about continuing slow growth. So before the financial crisis, the

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Speaker 1: world economy group by more than four percent more often

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Speaker 1: than not. Since the immediate bounce back from the crisis

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Speaker 1: in two thousand and nine, world economy has not grown

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Speaker 1: above four in the single year, and no one is

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Speaker 1: forecasting that it will in the next few years. So

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Speaker 1: this is a period of slow growth which is below

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Speaker 1: our ability to grow, and we could grow faster, and

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Speaker 1: we will need to do so if we're going to

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Speaker 1: be able to employ all the resources that are available.

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Speaker 1: This is wonderful. Let's continue this conversation, doctor man. I

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Speaker 1: think of Jacob Weiner power versus plenty. Are we simply

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Speaker 1: rationalizing a new neo mercantilism. Are we dealing with a

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Speaker 1: zero sum mercantile society of power versus plenty? So there's

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Speaker 1: no zero sum here. I think that's one of the

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Speaker 1: things that we have to remember that trade is not

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Speaker 1: a zero sum exercise. Trade expands the pie. What we

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Speaker 1: haven't done is deal with the fact that distribution of

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Speaker 1: the pie has been unequal, and we've ignored that for

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Speaker 1: a long period of time. We've been able where we've

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Speaker 1: like rationalized ignoring it because the pie was growing rapidly

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Speaker 1: prior to the financial crisis. Since then, you know, the

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Speaker 1: pie hasn't grown so fast. The distributional consequences have become

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Speaker 1: much much clearer, and so we have to get on

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Speaker 1: board with doing the right things on the domestic side.

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Speaker 1: It means that trade policy is complemented by a whole

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Speaker 1: range of domestic policies that we've chosen not to do.

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Speaker 1: And in fact, to the extent that we have taken

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Speaker 1: away uh fiscal mechanisms for redistribution over the last four years,

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Speaker 1: we have made the distribution situation worse. Help me here,

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Speaker 1: Lord King, or the place of the United Kingdom in

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Speaker 1: this new debate of power versus plenty. How does the

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Speaker 1: Nation of the East India Trading Company, how do they

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Speaker 1: establish a place within the new power of Trump politics

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Speaker 1: versus the plenty we all desire. Well, the United Kingdom

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Speaker 1: is the fifth biggest economy in the world, so it's

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Speaker 1: it's got plenty of size and weight in the world economy,

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Speaker 1: but it ain't. What we've seen in recent years is

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Speaker 1: that having plenty, that is, being a large economy doesn't

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Speaker 1: necessarily give you the power that you would want. We're

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Speaker 1: all in this together. And China, for example, that everyone

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Speaker 1: thought was an economy growing at extraordinary rates that would

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Speaker 1: just continue could not maintain its its growth rate because

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Speaker 1: of lack of demand from the rest of the world.

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Speaker 1: Unless we find a way to get out of our

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Speaker 1: problems through some sort of cooperation to rebalance our economies together,

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Speaker 1: then I suspect that we're going to see a continuation

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Speaker 1: of slow growth for the United Kingdom. What that means

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Speaker 1: is that we need to accept the fall in sterling

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Speaker 1: as a necessary part of the readjustment of the British

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Speaker 1: economy and then see resources move from consumption to exports

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Speaker 1: and investment. The doctor man, given what moving King has

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Speaker 1: just said, do you see the possibility of some kind

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Speaker 1: of plazo cord or a way of all nations to

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Speaker 1: come together to find an agreement where everyone benefits, or

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Speaker 1: it will be a race to who fixes productivity first.

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Speaker 1: That means will be on top well the race to

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Speaker 1: I mean we can we can work this out together.

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Speaker 1: We know that productivity is enhanced by trade. We also

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Speaker 1: know the productivity is enhanced by investment, and both of

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Speaker 1: those can be facilitated by the right sort of fiscal policies,

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Speaker 1: where we're talking about both taxes and transfers as well

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Speaker 1: as the structural elements that are associated with that. Now,

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Speaker 1: one of the things that we can do collectively in

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Speaker 1: addition to following trade policies that makes sense for everyone

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Speaker 1: is to engage in collective fiscal actions. And again we're

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Speaker 1: not necessarily talking about spending on roads and bridges. Some

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Speaker 1: countries need to spend more on education, as indeed Philip

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Speaker 1: Henderman is doing in the case of the UK, and

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Speaker 1: some countries need to spend more on R and D.

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Speaker 1: So these are ways in which each country follows its

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Speaker 1: own path appropriate to its own situation on the fiscal side,

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Speaker 1: but it becomes a collective action. Each country benefits more

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Speaker 1: because they do it together, and so following through on

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Speaker 1: open trade policies, following through wide collective fiscal policies is

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Speaker 1: a strategy to get us back to that four or

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Speaker 1: more growth rate, which will allow productivity enhancements to increase

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Speaker 1: and will allow us to redistribute better as well. Dr Man,

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Speaker 1: thank you so much for joining us in the spirited conversation.

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Speaker 1: Catherine Man of Brandeis and of course of the O E.

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Speaker 1: C D in Paris. What's a great pleasure out to

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Speaker 1: welcome from our bureau in London, Lord Mervin King, Governor

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Speaker 1: of the Bank of England from two thousand three to

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Speaker 1: two thousand thirteen and the author of the End of Alchemy,

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Speaker 1: Money Banking and the Future of the Global ECOME. I

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Speaker 1: had occasion to talk to him when the book was

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Speaker 1: first published in hardcover, Lord King. It's wonderful to speak

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Speaker 1: with you again on this day that it's out in paperback,

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Speaker 1: and fair to say the world looks a lot different

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Speaker 1: than it did in early March when we last spoke.

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Speaker 1: In some ways it does. Good morning to you all.

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Speaker 1: It looks different in terms of Brexit and the election

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Speaker 1: of President Trump. It doesn't actually look very different in

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Speaker 1: terms of the outlook for the world economy. Tell me

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Speaker 1: a bit about how how you wonder about revising this

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Speaker 1: in light of that the book has a new preface. Here,

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Speaker 1: just begin to tell me how you begin to process

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Speaker 1: all that's happened with that Brexit vote in the aftermath. Well,

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Speaker 1: the first thing I point out in the new preface

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Speaker 1: is that actually the main themes I drew out of

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Speaker 1: in the book are still holding today. That is, we

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Speaker 1: are still concerned about the fate of the financial sector

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Speaker 1: and whether we have the right kind of regulation of

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Speaker 1: the banking system. And secondly, we are still concerned, as

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Speaker 1: the o e c d points out in its report

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Speaker 1: this morning, that the world economy is growing more slowly

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Speaker 1: than it should and these are the big underlying problems

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Speaker 1: that we face. Of course, since then, when the book

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Speaker 1: came out, the political concern has focused very much towards

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Speaker 1: both Brexit in Europe and the election of President Trump

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Speaker 1: in the United States. But I'm not sure whether these

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Speaker 1: are the main issues that are likely to affect the

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Speaker 1: evolution of our economies over the next few years. I

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Speaker 1: think there's a great political excitement, but a lot less

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Speaker 1: in terms of economic substance. Let's talk a bit about

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Speaker 1: the budget. You expect a budget tomorrow from from the

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Speaker 1: chancellor there in London. How much of the government's collective

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Speaker 1: psychic space is consumed with Brexit right now? You have

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Speaker 1: a government here that's trying to do a lot more

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Speaker 1: in terms of social programs and the like, all the

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Speaker 1: while pushing forward towards the triggering of Article fifty. How

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Speaker 1: much psychic space is that taking up? Well, I think

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Speaker 1: it's a very good phrase, actually, psychic space, and it's

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Speaker 1: taking up almost all the energy of all our political

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Speaker 1: parties here, I think, to the detriment of discussion about

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Speaker 1: the longer run economic challenges facing the UK. I think

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Speaker 1: the impact of Brexit on our economic fortunes has been exaggerated,

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Speaker 1: and I think that the issues involved have also been

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Speaker 1: misinterpreted in terms of being primarily about a complex negotiation,

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Speaker 1: as opposed to the UK taking to see visions that

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Speaker 1: result from the referendum in terms of saying we are

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Speaker 1: going to leave the European Union. So I think you're

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Speaker 1: right that the psychic space has been dominated by Brexit

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Speaker 1: and the political ramifications of it. After all, it led

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Speaker 1: to the resignation of a Prime Minister, the attempt to

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Speaker 1: de seat the leader of the opposition. Two other political

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Speaker 1: leaders went. It's dominated politics, but it shouldn't dominate the

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Speaker 1: discussion of the economic outlook for the UK. I look

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Speaker 1: at the debate that's been going on in the UK

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Speaker 1: since that vote, and it seems more robust, perhaps healthier

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Speaker 1: than it was going into the vote itself. Is that

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Speaker 1: because it's just not time limited? Would you agree that

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Speaker 1: my observation is is accurate that it seems like the

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Speaker 1: debate over the future of of of the UK's role

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Speaker 1: in the European Union with the European Union has taken

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Speaker 1: on a different shape since that vote took place. I

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Speaker 1: think that's true. I think a lot of people during

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Speaker 1: the referendum campaign on both sides, were exaggerating the immediate

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Speaker 1: implications of a vote to leave, and obviously what we've

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Speaker 1: seen since it's almost no impact at all. The two

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Speaker 1: reasons for that one is that in the short run,

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Speaker 1: nothing really has happened. We're still in the European Union,

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Speaker 1: there's no change to our trading arrangements, so it would

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Speaker 1: have been peculiar. I think if we've seen any significant

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Speaker 1: short run impact. But the second observation I'd make is

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Speaker 1: that it's not at all obvious to me that the

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Speaker 1: long run impact of Brexit will be anything like as

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Speaker 1: severe as some people have been arguing. Again on either side,

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Speaker 1: It's not going to be the restoration of UK's economic fortunes,

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Speaker 1: nor is it going to be the end of the

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Speaker 1: world for the UK economy. People want to trade with

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Speaker 1: each other and they will carry on doing that. What

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Speaker 1: you think how surprised if you burned by the economic

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Speaker 1: reaction to that vote from last summer. Did did you

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Speaker 1: think at the time that the consequences could be more

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Speaker 1: severe than they have played out to be. Uh? No,

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Speaker 1: And I think that during the campaign that some of

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Speaker 1: those people who argued that we should vote to stay

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Speaker 1: in threatened the rest of us with the the words

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Speaker 1: that if we were to vote to leave, then would

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Speaker 1: see higher interest rates at lower level for sterling, lower

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Speaker 1: house prices, and frankly, my reaction was, that's exactly what

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Speaker 1: the policy authorities have been trying to achieve for the

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Speaker 1: past three years, and the British people managed to achieve

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Speaker 1: it in one day, whereas the authorities had failed to

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Speaker 1: achieve it. Britain needed a lower level for sterling given

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Speaker 1: the size of its current account deficit. We needed to

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Speaker 1: rebalance our economy by getting back to a more normal

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Speaker 1: level of interest rates, and we needed to do something

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Speaker 1: to take out the artward pressure on house prices. Now,

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Speaker 1: if Brexit has led to that, then that's so far

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Speaker 1: rather a good thing. But as I say, I don't

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Speaker 1: think the long run consequences of Brexit will be anything

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Speaker 1: like as severe as many people are currently arguing. Help

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Speaker 1: us here in the US understand the role of the

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Speaker 1: House of Lords and all of this. We saw the

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Speaker 1: rejection of what treason may put forward. The Prime Minister

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Speaker 1: put forward a couple of days ago, what role is

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Speaker 1: the House of Lords playing here in this process? Well,

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Speaker 1: the after the Supreme Court ruling in January, which meant

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Speaker 1: that in order to invoke Article fifty, Parliament had to

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Speaker 1: vote for that emotion. To invoke Article fifty, that has

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Speaker 1: to be supported both by the Commons and the Lords,

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Speaker 1: and the Comments of voted very clearly to invoke Article

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Speaker 1: fifty and a simple piece of legislation. Some members of

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Speaker 1: the House of Lords wanted to attach amendments to that

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Speaker 1: to limit the conditions under which the Prime Minister could

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Speaker 1: make that invocation. Um now. If if the House of

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Speaker 1: Lords continues to do that, then it could actually defer

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Speaker 1: the ability of the government to invoke Article fifty by

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Speaker 1: a year. But my expectation would be that when we

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Speaker 1: get in another week or so to the final stages

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Speaker 1: in which the Commons and House of Lords iterate between themselves,

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Speaker 1: then actually the Labor party in the House of Lords

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Speaker 1: may well back down and decide that actually it would

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Speaker 1: make more sense to support the motions coming out of

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Speaker 1: the House of Homes, and the household Lords would then

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Speaker 1: end up supporting it. The Government could then invoke Article fifty.

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Speaker 1: Failing that, I think there could be quite a serious

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Speaker 1: political fallout, both for the House of Lords and also

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Speaker 1: for the opposition. Irvin King with us for a few

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Speaker 1: more minutes here this morning, Lord King. We have been

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Speaker 1: advantaged by the perspective of Lord Desai of the London

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Speaker 1: School of Economics. He's written a book Hubrists on humility

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Speaker 1: and what is needed after a great financial crisis. You

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Speaker 1: lived the financial crisis. I think of Northern Rock and

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Speaker 1: your acclaimed speech in Scotland of years ago. Are we

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Speaker 1: humble enough now or are we already back to the

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Speaker 1: giddiness for getting the lessons learned of two thousand and

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Speaker 1: eight and nine, when I think in one dimension we

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Speaker 1: did a little more humility, which is that the economics

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Speaker 1: profession thought that it had solved the problems of macroeconomic management.

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Speaker 1: And I think we saw from the results of the

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Speaker 1: financial crisis that we had not. That we did experience

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Speaker 1: of significant downturn in the world economy, which has persisted

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Speaker 1: and we haven't got back to normal rates of growth.

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Speaker 1: So I think we do need a little more humility

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Speaker 1: in thinking through whether or not we actually understand how

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Speaker 1: the world economy operates. And part of my book is

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Speaker 1: to explain what we need to do to put those

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Speaker 1: that that way of thinking right. And I think there

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Speaker 1: are lessons there for central banks and other economic commentators

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Speaker 1: whose conventional models not only failed to help us understand

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Speaker 1: the nature of the financial crisis, but actually have failed

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Speaker 1: to explain and predict the slow growth rates that we've

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Speaker 1: seen since. Pretty quickly here, and I know you've survived

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Speaker 1: an hour with Tom Keen. Thank you very much, very

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Speaker 1: so generous with your time. We have a debate here

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Speaker 1: in the US about the future of the Fed Reserve.

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Speaker 1: We're going to see a lot of personnel changes there

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Speaker 1: when you when you look at the FED, when you

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Speaker 1: look at other central banks, how much of an existential

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Speaker 1: dilemma are they facing right now? It seems like is

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Speaker 1: going to face whether or not it has a PhD

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Speaker 1: economist to prices, bankers, etcetera. Where are we in terms

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Speaker 1: of central banks? Broadly? So, I think that the biggest

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Speaker 1: threat to central banks is the expectation that it should

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Speaker 1: be responsible for the fortunes of the economy, when in

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Speaker 1: fact he can have any a limited impact in the

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Speaker 1: short run in boosting growth. And secondly that it mustn't.

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Speaker 1: It's very important that central banks do not take upon

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Speaker 1: themselves more responsibilities than they can in fact discharge. And

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Speaker 1: I was worried in recent years that central banks have

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Speaker 1: got themselves into the position of saying that we are

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Speaker 1: the only game in town, and they're not. We're gonna

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Speaker 1: have to leave it their lord kingdom. So so that

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Speaker 1: we could go on on and on. I can't say

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Speaker 1: enough about the end of Alchemy. Look for it now

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Speaker 1: out in paperback the movie memorial Did Brought You by

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Speaker 1: Bank of America Mary Lynch, dedicated to bringing our clients

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Speaker 1: insights solutions to meet the challenges of a transforming world.

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Speaker 1: Smith Incorporated, Member s I p C joining us now

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Speaker 1: from our Bloomberg studios in Washington. Catherine Man of the

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Speaker 1: O E C D. David I was talking earlier with

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Speaker 1: Dr Man about trade, and I guess the simple question

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Speaker 1: right now is where is trade growth in the world

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Speaker 1: When you sum it up at O E C D.

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Speaker 1: Is there any recovery in trade? Yeah? Square that for

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Speaker 1: me if you would, Katherine Man, we see the populist

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Speaker 1: anger toward lack of interest in multilateral trade deals. Where

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Speaker 1: where are we seeing movement when it comes to trade. Well,

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Speaker 1: it's good to be with all of you. Um, so

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Speaker 1: we are we have seen a rebound in trade growth

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Speaker 1: from a very very low rate of growth in now

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Speaker 1: the rebound it actually doesn't take us very far back

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Speaker 1: to what would have been a normal UM kind of

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Speaker 1: pace of change. So um, it's it's broad based um

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Speaker 1: throughout the global value chains. So I mean that's good

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Speaker 1: news in the sense that that growth and trade is

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Speaker 1: it plays a very important role in in supporting productivity growth, UH,

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Speaker 1: supporting open markets and expanding opportunities for producers as well

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Speaker 1: as varieties for consumers. So we do like to see

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Speaker 1: that increase, but um, you know it's it's uh. As

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Speaker 1: I say, compared to where growth of trade was prior

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Speaker 1: to the financial crisis, we're really not anywhere near back

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Speaker 1: to that o e c D saying global growth set

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Speaker 1: to pick up modestly but remains too slow. You write

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Speaker 1: about making use of fiscal space. How much has the

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Speaker 1: clarion call from the OECD changed when it comes to

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Speaker 1: policy in terms of what you'd like to see governments

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Speaker 1: do more of. Well, I think we have seen a

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Speaker 1: definite change in the vocabulary in the sense that, um,

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Speaker 1: we see what we've recommended when we talk about fiscal spaces.

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Speaker 1: Where's a window of opportunity provided by the central banks

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Speaker 1: low interest rates, opportunity for sovereigns to borrow at very

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Speaker 1: low interest rates in some case, of course, negative interest rates,

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Speaker 1: and so for all of the uh, you know what

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Speaker 1: the government's need to do. Uh, this is an opportune

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Speaker 1: time to do the financing for it. But when we

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Speaker 1: talk about what governments should do, there has been a

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Speaker 1: tendency to focus on the on the vocabulary of hard infrastructure,

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Speaker 1: of the roads and bridges, and certainly that's the right

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Speaker 1: thing to do for some countries, but for other countries,

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Speaker 1: the focus is on soft infrastructure, and these are things

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Speaker 1: related to childcare R and D, tax credits UH and

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Speaker 1: things that we would normally call structural UH, and they've

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Speaker 1: fallen into vocabulary of structural. Now, what we've done is

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Speaker 1: advocate when governments think about what they're doing is to

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Speaker 1: marry fiscal and structural because they are part of the

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Speaker 1: same package. And so doing the right thing for your

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Speaker 1: economy when it's a combination of demand side and a

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Speaker 1: supply side, the structural features supply side um emphasis this

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Speaker 1: is something that provides boost in the short run and

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Speaker 1: improvement in the economy's capacity to grow in the longer term.

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Speaker 1: So when we change that vocabulary, governments that perhaps aren't

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Speaker 1: necessarily interested in deficit financing, they change the way they

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Speaker 1: think about it and say, well, if we're talking about

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Speaker 1: supply side, well maybe maybe we'll do that. Maybe we'll

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Speaker 1: do that. You mentioned window of possibility, and I think

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Speaker 1: of economists like yourself in a in a dark room

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Speaker 1: sort of trying to find your way ring, trying to

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Speaker 1: find that window. When it comes to what fiscal policy

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Speaker 1: is going to look like. How difficult is it to

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Speaker 1: forecast right now, say in the US, when it comes

435
00:24:42,680 --> 00:24:44,560
Speaker 1: to to thinking about what the contours of a physical

436
00:24:44,560 --> 00:24:48,240
Speaker 1: package might look like. Well, in terms of what we've

437
00:24:48,280 --> 00:24:53,159
Speaker 1: incorporated into our projections, we've been working with the blueprint

438
00:24:53,680 --> 00:24:57,520
Speaker 1: UH and then looking at how that changes, UH, you know,

439
00:24:57,600 --> 00:25:01,199
Speaker 1: with with some of the political dynamics. So you know,

440
00:25:01,400 --> 00:25:05,919
Speaker 1: we've changed some of the timing of UM, the implications

441
00:25:06,000 --> 00:25:08,639
Speaker 1: for some of the infrastructure suggestions and some of the

442
00:25:08,640 --> 00:25:13,320
Speaker 1: tax suggestions UH into UH further off into twenty eighteen

443
00:25:14,320 --> 00:25:17,800
Speaker 1: UH in comparison to our November outlook. So the timing,

444
00:25:18,119 --> 00:25:21,080
Speaker 1: of course is a question mark. Actually what is going

445
00:25:21,119 --> 00:25:24,439
Speaker 1: to be implemented is also a question mark. But what

446
00:25:24,600 --> 00:25:28,120
Speaker 1: I think what we've shown in our in our projections

447
00:25:28,640 --> 00:25:32,520
Speaker 1: is the important role that fiscal initiatives can play in

448
00:25:33,000 --> 00:25:36,320
Speaker 1: driving an improvement in the overall economic outlook for the

449
00:25:36,320 --> 00:25:40,480
Speaker 1: global economy. We've also shown the extent to which Europe

450
00:25:41,160 --> 00:25:45,159
Speaker 1: has not really gotten on board with this UH potential

451
00:25:45,240 --> 00:25:48,359
Speaker 1: use of fiscal space. There is more rooms of fiscal

452
00:25:48,400 --> 00:25:51,320
Speaker 1: space in Europe than UH, than many of the governments

453
00:25:51,359 --> 00:25:55,120
Speaker 1: there think. We have pointed out which governments can move

454
00:25:55,440 --> 00:25:58,480
Speaker 1: a little bit more in the direction of doing um,

455
00:25:58,560 --> 00:26:01,199
Speaker 1: you know, fiscal initiatives. As I say, this marriage of

456
00:26:01,280 --> 00:26:04,440
Speaker 1: sort of traditional fiscal spending but then focusing on the

457
00:26:04,480 --> 00:26:09,040
Speaker 1: structural elements and putting that together would create an environment

458
00:26:09,080 --> 00:26:12,200
Speaker 1: of more robust growth than even that we've seen already.

459
00:26:12,720 --> 00:26:16,480
Speaker 1: So uh, when we think about the possibilities for for

460
00:26:16,640 --> 00:26:20,760
Speaker 1: the global economy, we see modest growth, but something that

461
00:26:20,760 --> 00:26:22,720
Speaker 1: that could be better if the government's got on board.

462
00:26:23,000 --> 00:26:24,960
Speaker 1: Thank you so much for your time today. I'm Bloomberg

463
00:26:25,080 --> 00:26:28,159
Speaker 1: Radio and Bloomberg Television. Catherine Man of the O E.

464
00:26:28,280 --> 00:26:30,200
Speaker 1: C D. I really can't say enough. It was a

465
00:26:30,280 --> 00:26:45,919
Speaker 1: magic moment with Mervyn King and Catherinman. Earlier, David a

466
00:26:45,960 --> 00:26:49,200
Speaker 1: special guest. Yeah, he was the Governor Vermond from two

467
00:26:49,200 --> 00:26:50,879
Speaker 1: thousand and three, of course, ran for president, then went

468
00:26:50,880 --> 00:26:53,400
Speaker 1: on to chair the Democratic at National Committee. Now he's

469
00:26:53,400 --> 00:26:56,720
Speaker 1: with Denton's Howard Dean joins us now former Governor Dr

470
00:26:56,800 --> 00:26:58,600
Speaker 1: Howard Dean. It's great to have you here as we

471
00:26:58,680 --> 00:27:01,800
Speaker 1: get a look at the American Health Care Act. As

472
00:27:01,800 --> 00:27:05,000
Speaker 1: Republicans are calling here a new proposal here to change

473
00:27:05,160 --> 00:27:09,399
Speaker 1: the Affordable Care Act, introducing a refundable age based tax credit.

474
00:27:09,960 --> 00:27:12,200
Speaker 1: The theory there to help it by help people buy insurance,

475
00:27:12,280 --> 00:27:14,920
Speaker 1: ends the requirement to have coverage, and would eventually eliminate

476
00:27:15,359 --> 00:27:18,240
Speaker 1: many taxes used to fund the two thousand ten law,

477
00:27:18,240 --> 00:27:20,520
Speaker 1: the Affordable Care Act, Governor Dean, let me ask you

478
00:27:20,600 --> 00:27:22,440
Speaker 1: first for your reaction here. Is there anything in this

479
00:27:22,800 --> 00:27:26,080
Speaker 1: legislation that's paltable to you and your Democratic Party? Well,

480
00:27:26,119 --> 00:27:28,040
Speaker 1: first of all, thank you guys for having me on.

481
00:27:28,200 --> 00:27:29,879
Speaker 1: I listened to you on Serious X them and I

482
00:27:29,960 --> 00:27:37,360
Speaker 1: think you're great about that. I'm gonna I'm gonna start

483
00:27:37,440 --> 00:27:43,480
Speaker 1: running for anything. I'm gonna start crying. Continue. Look, UM,

484
00:27:43,880 --> 00:27:45,880
Speaker 1: this isn't I don't think this is a great way

485
00:27:45,880 --> 00:27:49,679
Speaker 1: to do this. UM. I at the time was not

486
00:27:49,800 --> 00:27:52,080
Speaker 1: a huge supporter of Obamacare because I think they got

487
00:27:52,080 --> 00:27:53,680
Speaker 1: a lot of things wrong. Well, there is one thing

488
00:27:53,720 --> 00:27:56,399
Speaker 1: I would do. I'd get rid of the individual mandate,

489
00:27:56,400 --> 00:28:00,800
Speaker 1: which they did do. Um, because all that is is

490
00:28:00,840 --> 00:28:03,639
Speaker 1: an aggravation in theory you needed for the insurance market.

491
00:28:03,640 --> 00:28:05,119
Speaker 1: But in we did up most of the stuff in

492
00:28:05,119 --> 00:28:09,040
Speaker 1: Obamacare about twenty years ago when I was governor, and um,

493
00:28:09,119 --> 00:28:11,360
Speaker 1: in practical we didn't have an individual manding. You've never

494
00:28:11,400 --> 00:28:14,560
Speaker 1: passed them like that in Vermdern in northern New England. UM.

495
00:28:14,600 --> 00:28:17,120
Speaker 1: And the truth is most people do the responsible thing

496
00:28:17,119 --> 00:28:20,160
Speaker 1: without being told, and you can fix it so that

497
00:28:21,640 --> 00:28:24,000
Speaker 1: you don't have the problems in the insurance market that

498
00:28:24,000 --> 00:28:27,879
Speaker 1: they thought were the were the problem. The rest of

499
00:28:27,880 --> 00:28:30,400
Speaker 1: it I think is pretty bad. First of all, it'll

500
00:28:30,440 --> 00:28:33,720
Speaker 1: be fifteen million less people with health insurance by the

501
00:28:33,800 --> 00:28:37,439
Speaker 1: time two thousand twenty rolls around because UH of what

502
00:28:37,520 --> 00:28:40,480
Speaker 1: they've done to the Medicaid proportions. The Medicaid expansion is

503
00:28:40,480 --> 00:28:43,840
Speaker 1: actually the most effective part of the health insurance system

504
00:28:43,880 --> 00:28:49,760
Speaker 1: as it was when we expanded our system. That the

505
00:28:49,800 --> 00:28:53,760
Speaker 1: refundable tax credit UH takes money from UH the old

506
00:28:53,800 --> 00:28:56,200
Speaker 1: and makes it easier for the young. Although the age

507
00:28:56,200 --> 00:29:00,440
Speaker 1: relations actual age related tables I haven't really seen. Problem is,

508
00:29:00,480 --> 00:29:03,000
Speaker 1: of course they're ramming this through in the same way

509
00:29:03,040 --> 00:29:05,280
Speaker 1: they complained about the Democrats renaming it who. They don't

510
00:29:05,320 --> 00:29:08,040
Speaker 1: even have a CBO score on this, which is really

511
00:29:08,040 --> 00:29:10,840
Speaker 1: pretty outrageous. I mean, it's just a blatant political movement,

512
00:29:10,880 --> 00:29:14,320
Speaker 1: has nothing to do with economics, because who the CBO has,

513
00:29:14,400 --> 00:29:16,840
Speaker 1: The Congressional Budget Office haven't, hasn't even said with this

514
00:29:16,920 --> 00:29:19,840
Speaker 1: is going to cost us. So I think the whole

515
00:29:19,840 --> 00:29:23,880
Speaker 1: thing is pretty bad from beginning to end, except for

516
00:29:23,880 --> 00:29:25,760
Speaker 1: getting rid of the individual mandate, which I never thought

517
00:29:25,800 --> 00:29:28,080
Speaker 1: was necessary in the first place. I've mentioned you're with

518
00:29:28,160 --> 00:29:30,080
Speaker 1: Denton's now, and I imagine that part of your role

519
00:29:30,080 --> 00:29:32,200
Speaker 1: there is working with businesses who are wondering what this

520
00:29:32,280 --> 00:29:34,960
Speaker 1: regulatory environment looks like. What do you tell them about

521
00:29:34,960 --> 00:29:37,880
Speaker 1: where we're headed, What are businesses worried about? What are

522
00:29:37,880 --> 00:29:40,120
Speaker 1: your clients asking you about? And do you think that

523
00:29:40,160 --> 00:29:42,240
Speaker 1: we're going to see some sort of reconfiguration of the

524
00:29:42,280 --> 00:29:47,080
Speaker 1: healthcare law? Unfortunately not to kind of reconsiderate figuration of

525
00:29:47,120 --> 00:29:50,400
Speaker 1: the healthcare law. We need. What we tell our businesses

526
00:29:51,120 --> 00:29:53,240
Speaker 1: are clients in general, and I want to we have

527
00:29:53,240 --> 00:29:54,800
Speaker 1: we look, we have it. And this is the largest

528
00:29:54,880 --> 00:29:56,840
Speaker 1: law firm in the world, so we have a huge

529
00:29:56,880 --> 00:30:02,360
Speaker 1: healthcare team that stretches from Oakland to Beijing. UM, so

530
00:30:02,440 --> 00:30:06,160
Speaker 1: I want to speak for everybody at healthcare team. Basically,

531
00:30:06,200 --> 00:30:09,360
Speaker 1: what we tell, particularly our domestic clients, is you need

532
00:30:09,400 --> 00:30:12,160
Speaker 1: to get into a system where fee for service medicine

533
00:30:12,280 --> 00:30:15,560
Speaker 1: has gone, has disappears. The real truth about health care

534
00:30:15,600 --> 00:30:17,360
Speaker 1: is you're never going to control the costs as long

535
00:30:17,400 --> 00:30:21,240
Speaker 1: as the economic incentives, and economic incentives are incredibly powerful

536
00:30:21,280 --> 00:30:24,080
Speaker 1: and they work as long as the economics are incentives

537
00:30:24,120 --> 00:30:27,200
Speaker 1: are to get people like former physician to spend to

538
00:30:27,320 --> 00:30:29,800
Speaker 1: do as much stuff as we can, We're gonna keep

539
00:30:29,800 --> 00:30:31,840
Speaker 1: doing it. And that is why healthcare costs are going

540
00:30:31,840 --> 00:30:34,360
Speaker 1: out of control, because we all get paid for doing

541
00:30:34,360 --> 00:30:36,520
Speaker 1: as many procedures and keeping you as long as we

542
00:30:36,560 --> 00:30:38,600
Speaker 1: can in the I see you. Let me let me

543
00:30:38,680 --> 00:30:42,320
Speaker 1: reset here, David with with the idea that some of

544
00:30:42,320 --> 00:30:45,720
Speaker 1: our audience may not know that Dr Dean wandered out

545
00:30:45,720 --> 00:30:49,480
Speaker 1: of St. George's School, lost in Newport, Rhode Island, move

546
00:30:49,600 --> 00:30:53,600
Speaker 1: far deep southwest to Yale University, and then darkened the

547
00:30:53,600 --> 00:30:57,360
Speaker 1: door of the Albert Einstein College of Medicine, which which

548
00:30:57,600 --> 00:31:01,640
Speaker 1: was hugely prestigious still is, but hugely prestigious at the time.

549
00:31:01,880 --> 00:31:05,360
Speaker 1: This is a guy that's actually done medicine. What a

550
00:31:05,480 --> 00:31:09,600
Speaker 1: novel idea. Where's the common ground Dr Dean that you

551
00:31:09,720 --> 00:31:12,920
Speaker 1: have with Dr Paul? I mean you're both doctors. Where's

552
00:31:12,960 --> 00:31:16,680
Speaker 1: the common ground for physicians and nurses in this debate?

553
00:31:17,720 --> 00:31:19,960
Speaker 1: I don't know that there is any um although I

554
00:31:20,000 --> 00:31:22,400
Speaker 1: don't know I know what Ran is against, but I

555
00:31:22,400 --> 00:31:25,200
Speaker 1: don't really know what he's for, so I can't. I

556
00:31:25,200 --> 00:31:27,000
Speaker 1: don't want to get in a debate with him, especially

557
00:31:27,040 --> 00:31:30,920
Speaker 1: in absentia. Um. Look, what we want is as much

558
00:31:31,080 --> 00:31:33,720
Speaker 1: decision making capacity in the hands of the patients and

559
00:31:33,760 --> 00:31:36,280
Speaker 1: the physicians and the nurses as you can possibly have.

560
00:31:36,960 --> 00:31:40,320
Speaker 1: First of all, however, most people, including a lot of doctors,

561
00:31:40,320 --> 00:31:43,880
Speaker 1: don't really understand how their health care system works. Hs as,

562
00:31:43,920 --> 00:31:47,680
Speaker 1: for example, are fine for small items. A thousand dollar

563
00:31:47,880 --> 00:31:50,040
Speaker 1: h s A is a good idea. People will make

564
00:31:50,040 --> 00:31:52,280
Speaker 1: decisions about whether they should go to the doctor for

565
00:31:52,320 --> 00:31:54,720
Speaker 1: a cold or maybe wait and see if it doesn't

566
00:31:54,720 --> 00:31:57,440
Speaker 1: go away by itself. The problem is the really big

567
00:31:57,480 --> 00:32:00,160
Speaker 1: ticket items in medicine that are driving the cost. Or

568
00:32:00,160 --> 00:32:02,360
Speaker 1: whether you should have an MRI, I, whether you should

569
00:32:02,400 --> 00:32:04,720
Speaker 1: spend a hundred and fifty thousand dollars on an ecological

570
00:32:04,800 --> 00:32:08,840
Speaker 1: drug or two dollars. Those decisions are not made by patients,

571
00:32:09,320 --> 00:32:12,280
Speaker 1: uh well, because they're all an emotional extremists when their

572
00:32:12,320 --> 00:32:15,840
Speaker 1: care gets that expensive. So that is why I tell people,

573
00:32:15,880 --> 00:32:21,200
Speaker 1: including our our our drug company clients, we're all better

574
00:32:21,280 --> 00:32:23,160
Speaker 1: off if you get rid of the see for service system.

575
00:32:23,200 --> 00:32:25,840
Speaker 1: Have a lump sum for each patient per year and

576
00:32:25,880 --> 00:32:28,560
Speaker 1: then let the medical establish and live under that lump. Sum,

577
00:32:28,600 --> 00:32:30,160
Speaker 1: are there going to be some people who cheat? Yes,

578
00:32:30,200 --> 00:32:32,520
Speaker 1: there are people who cheat under the current system. You'll

579
00:32:32,520 --> 00:32:34,760
Speaker 1: get a health care system because it will pay doctors

580
00:32:34,760 --> 00:32:38,400
Speaker 1: and hospitals to keep you healthy instead of hoping that

581
00:32:38,440 --> 00:32:40,680
Speaker 1: you need an MRI I or end up in the

582
00:32:40,680 --> 00:32:43,640
Speaker 1: i C, which is where their revenue source is. You know, well,

583
00:32:44,000 --> 00:32:47,040
Speaker 1: how much political capital Democrats expended on getting this law

584
00:32:47,680 --> 00:32:50,600
Speaker 1: through when they did. When you look at the Democratic

585
00:32:50,640 --> 00:32:53,600
Speaker 1: Party today, how much cohesion is there, how much commitment

586
00:32:53,680 --> 00:32:55,600
Speaker 1: is there to protecting this law that they spent so

587
00:32:55,640 --> 00:32:59,280
Speaker 1: much energy, so much political capital on. Well, look, look's

588
00:32:59,280 --> 00:33:03,280
Speaker 1: just be about this, if I may. This was a mess. Um,

589
00:33:03,280 --> 00:33:07,600
Speaker 1: this was done not very well. Uh. There was a

590
00:33:07,600 --> 00:33:10,040
Speaker 1: lot of people who a lot of academics who didn't

591
00:33:10,080 --> 00:33:12,320
Speaker 1: really understand what the hell they were doing. The bill

592
00:33:12,400 --> 00:33:14,719
Speaker 1: was essentially written by the insurance industry in the Senate.

593
00:33:16,080 --> 00:33:19,920
Speaker 1: The politics of it was awful. Um, So I don't

594
00:33:19,920 --> 00:33:22,960
Speaker 1: hold up Obamacare is the perfect way to fix healthcare.

595
00:33:23,440 --> 00:33:26,600
Speaker 1: But it did do a couple of really important things,

596
00:33:26,600 --> 00:33:28,720
Speaker 1: some one of the two of which are preserved in

597
00:33:29,000 --> 00:33:32,200
Speaker 1: the Trump Care proposal, as it will become known if

598
00:33:32,240 --> 00:33:35,600
Speaker 1: it passes this way. One is it recognizes the pre

599
00:33:35,680 --> 00:33:39,640
Speaker 1: existing conditions. Uh. Should not be a reason to disqualify somebody.

600
00:33:39,640 --> 00:33:42,160
Speaker 1: Now there's some funny business they've done in this proposal,

601
00:33:42,160 --> 00:33:44,480
Speaker 1: which is not good, but it's they didn't throw the

602
00:33:44,520 --> 00:33:48,240
Speaker 1: whole thing out. Uh. Two is it lets the young

603
00:33:48,360 --> 00:33:51,480
Speaker 1: kids stay on their young people up to stay on

604
00:33:51,520 --> 00:33:54,680
Speaker 1: the health insurance. That's very helpful. Uh, And that was

605
00:33:54,720 --> 00:33:57,520
Speaker 1: a good thing, but this could have been I favored

606
00:33:57,720 --> 00:34:00,040
Speaker 1: a public option. I really truly believe that people, what

607
00:34:00,120 --> 00:34:02,080
Speaker 1: I mean, you're really going to have options in health

608
00:34:02,080 --> 00:34:04,680
Speaker 1: insurance signing up for Medicare at an early age to

609
00:34:04,720 --> 00:34:06,480
Speaker 1: be one, right, I mean in a little bit that

610
00:34:06,520 --> 00:34:08,080
Speaker 1: I've read of it. And then folks are waiting to

611
00:34:08,080 --> 00:34:12,400
Speaker 1: see the financial analysis of the Trump Care or whatever speaker,

612
00:34:12,480 --> 00:34:14,719
Speaker 1: Ryan Care, whatever you want to call it. Is the

613
00:34:14,800 --> 00:34:19,240
Speaker 1: basic idea of tax credits. How how valuable are text

614
00:34:19,320 --> 00:34:23,920
Speaker 1: credits to fifty of America that's basically financially flat on

615
00:34:23,920 --> 00:34:28,319
Speaker 1: their back. They've got zero value, don't they. Well yeah,

616
00:34:28,640 --> 00:34:30,759
Speaker 1: now they say it's a refundable tax credit, but that

617
00:34:30,840 --> 00:34:32,719
Speaker 1: you know, if you're not paying any tax because you're

618
00:34:32,760 --> 00:34:35,840
Speaker 1: not making exactly. And you know Bett Romney used to

619
00:34:35,880 --> 00:34:38,720
Speaker 1: complain that percent of the people in America didn't pay taxes.

620
00:34:38,760 --> 00:34:40,560
Speaker 1: Well that isn't true. Of course, they pay a lot

621
00:34:40,600 --> 00:34:43,360
Speaker 1: of taxes in Medicare and Social Security taxes, but a

622
00:34:43,360 --> 00:34:44,919
Speaker 1: lot of people don't pay a lot of income taxes.

623
00:34:44,960 --> 00:34:47,880
Speaker 1: They don't make enough money to pay income tax. A

624
00:34:48,000 --> 00:34:50,480
Speaker 1: refundable tax credit is not going to be helpful, particularly

625
00:34:50,520 --> 00:34:54,760
Speaker 1: to people like that. Yeah, just lastly here, I'm curious

626
00:34:55,040 --> 00:34:57,120
Speaker 1: you were the one the pioneer of the fifty state strategy.

627
00:34:57,160 --> 00:34:58,800
Speaker 1: You're looking forward here when you look forward at the

628
00:34:58,800 --> 00:35:01,719
Speaker 1: Democratic Party where it's did good? Question? What what what

629
00:35:01,800 --> 00:35:04,000
Speaker 1: states weren't part of that fifty states last time around?

630
00:35:04,000 --> 00:35:05,279
Speaker 1: And how are you going to get them on board

631
00:35:05,920 --> 00:35:09,279
Speaker 1: seconds help us to the future of the Democratic Party. Look,

632
00:35:09,360 --> 00:35:12,399
Speaker 1: we need a complete and total reset. We obviously need

633
00:35:12,440 --> 00:35:16,560
Speaker 1: to reinstitute competition in all fifty states. But things have

634
00:35:16,680 --> 00:35:18,440
Speaker 1: changed a lot in the eight years since I was

635
00:35:18,680 --> 00:35:22,080
Speaker 1: chair um and what we really need to do is

636
00:35:22,120 --> 00:35:24,480
Speaker 1: have a strategy for getting young people to identify with

637
00:35:24,520 --> 00:35:26,399
Speaker 1: our party. They all vote for us all the time,

638
00:35:26,440 --> 00:35:29,359
Speaker 1: but they don't consider themselves Democrats because they don't like institutions,

639
00:35:29,760 --> 00:35:31,400
Speaker 1: and I think we have gotten out a way to

640
00:35:31,760 --> 00:35:33,600
Speaker 1: bring them and they're doing it on their own. We

641
00:35:33,640 --> 00:35:35,839
Speaker 1: need to organize that and that's going to be a hall.

642
00:35:36,320 --> 00:35:38,440
Speaker 1: Dr Dean, thank you so much for listening to us

643
00:35:38,440 --> 00:35:42,080
Speaker 1: on Serious and next time Channel one, we'd love we'd

644
00:35:42,080 --> 00:35:44,200
Speaker 1: love to see you darken the door for studios. I

645
00:35:44,200 --> 00:35:46,080
Speaker 1: need to check up anyway, so I could kill two

646
00:35:46,120 --> 00:35:49,080
Speaker 1: birds with one so on. Howard Dean is a Democrat.

647
00:35:57,520 --> 00:36:01,359
Speaker 1: Thanks for listening to the Bloomberg Surveillance Podcas asked subscribe

648
00:36:01,680 --> 00:36:06,440
Speaker 1: and listen to interviews on iTunes, SoundCloud, or whichever podcast

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