Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. The US
Speaker 1: economy continues to send mixed signals, the financial stories that
Speaker 1: keep our world fed, action to con concerns over dollar liquidity,
Speaker 1: and encouraging China data. The five hundred wealthiest people in
Speaker 1: the world. Through the eyes of the most influential voices
Speaker 1: Larry Summers, the former Treasury Secretary, star Ward CEO, Kevin Johnson,
Speaker 1: sec Chairman J Clayton. Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. The issue is joined. Republicans lay
Speaker 1: out a very different view of where we're headed, but
Speaker 1: equity markets will They just seemed to keep on climbing
Speaker 1: no matter what they hear. This is a special election
Speaker 1: edition of Wall Street Week. I'm David Weston. President Trump
Speaker 1: began rolling back Obama era regulations early in his administration
Speaker 1: when he took the United States out of the Paris
Speaker 1: Climate Accord. In order to fulfill my solemn duty to
Speaker 1: protect America and its citizens, the United States will withdraw
Speaker 1: from the Paris Climate a Court. The Trump administration also
Speaker 1: lowered US vehicle emission standards, saying it would save automakers
Speaker 1: one billion dollars in compliance costs. But just last week,
Speaker 1: California finalized its own fuel efficiency agreements with five automakers
Speaker 1: that are more closely in line with the Obama era standards.
Speaker 1: The Trump administration has placed big emphasis on increasing use
Speaker 1: and production of fossil fuels. Republicans and Democrats are far
Speaker 1: apart on their climate policies, but Dan Briette, Secretary of Energy,
Speaker 1: says it is possible to have a bipartisan energy plan.
Speaker 1: Sure you can. I mean, natural gas is a very
Speaker 1: clean source, and we're developing technologies here at the at
Speaker 1: the U. S. Department of Energy to make it even cleaner.
Speaker 1: We're also developing technologies to make you know, carbon intense
Speaker 1: fuels like coal, even cleaner. And of course we always
Speaker 1: you know, have had nuclear power for the last seventy years,
Speaker 1: which is entirely emissions free. So I mean, you can
Speaker 1: do both. You can have a renewal generation base and
Speaker 1: you can have an emissions free baseload generation available to you.
Speaker 1: Said to choose to do it, and I think that's
Speaker 1: what the fundamental problem is in places like California, they've
Speaker 1: relied too heavily or focused too heavily on renewable power
Speaker 1: like wind and solar, at the exclusion of some of
Speaker 1: this baseload power which you absolutely need in today's world
Speaker 1: to ensure that you have the energy you need when
Speaker 1: you need it. Prisoner Trump's administration has done a fair
Speaker 1: amount and trying to really, as I say, reinforce energy
Speaker 1: independence of United States, relying in part and significant partner
Speaker 1: fossil fuels. What's left to be done if he's elected
Speaker 1: for a second term, what's on your agenda, Well, we
Speaker 1: need to continue to build out infrastructure. So you know,
Speaker 1: as you and I have discussed in the past, we
Speaker 1: have done a great job in America of increasing our production,
Speaker 1: making ourselves energy independent, relying on new technologies, are new
Speaker 1: work technologies like horizontal frack, horizontal drilling and fracking to
Speaker 1: allow us to increase production of of these resources here
Speaker 1: in the States. Our challenge today is actually getting the
Speaker 1: product to market. It's building out pipeline infrastructure to get
Speaker 1: it to the oceans, to get it to the coastlines.
Speaker 1: It's building export facilities so that we can make this
Speaker 1: oil and gas available to the rest of the world,
Speaker 1: because they're going to continue to use these types of
Speaker 1: fuels for the foreseeable future, perhaps as many as forty
Speaker 1: to fifty years out. And I think it's important that
Speaker 1: as we do this, we maintain our posture in the
Speaker 1: world as the number one producer of oil and gas.
Speaker 1: And the reason we'd like to do that is because
Speaker 1: it gives us four policy options. The whole notion that
Speaker 1: we are able to, you know, for instance, of Secretary
Speaker 1: of State traveling to Sudan to perhaps normalize relations between
Speaker 1: Sudan and Israel, to work on deals like the U
Speaker 1: a E And Israel. Those things couldn't have happened forty
Speaker 1: years ago because we would have been afraid of the
Speaker 1: reaction in the Middle East, and perhaps we would have
Speaker 1: endangered our national security by putting our oil supply at risk.
Speaker 1: We were entirely dependent upon them. The fact that we
Speaker 1: are independent today allows us to pursue these types of
Speaker 1: foreign policy options. Energy is important in our society for
Speaker 1: all sorts of reasons, but it also is the source
Speaker 1: of a lot of employment. There are a lot of
Speaker 1: jobs in the energy industry. And one place where the
Speaker 1: repolis of the Democrats seem to be two ships passing
Speaker 1: the night is how we're going to create more jobs.
Speaker 1: We heard uh for Vice President Biden say he's going
Speaker 1: to create millions and more jobs by going to green energy.
Speaker 1: We heard Republicans criticize his positis for saying, you're gonna
Speaker 1: lose a lot of jobs, Which is it, aren't we
Speaker 1: adding more jobs and renewables right now that we're adding
Speaker 1: in traditional energy? Yeah? Well, I can't really comment on
Speaker 1: Mr Biden's comments. As part of the campaign, I'm prohibited
Speaker 1: from doing that, so I'll stay away from that. But
Speaker 1: what I will comment on is that, you know, when
Speaker 1: we look at the technologies that have put us at
Speaker 1: the top of the world in terms of energy production,
Speaker 1: hydraulic fraction we just mentioned, you know, the US Chamber
Speaker 1: of Commerce tells me that if we were to do
Speaker 1: away with that technology, we would lose approximately nineteen million
Speaker 1: jobs over the next few years. And you know, it's
Speaker 1: not a question of retraining those people and putting them
Speaker 1: into renewable technologies. Certainly you can do that, and people
Speaker 1: may be forced to do that if you if you
Speaker 1: if you do away with this technology. But the challenge
Speaker 1: with that, David, is that the salaries, according to the
Speaker 1: unions that we have talked to, the salaries in the
Speaker 1: oil and gas business are about twice what we're seeing
Speaker 1: in the renewable energy space. So it's one thing to
Speaker 1: suggest that you might retrain people and put them into
Speaker 1: a new role, which are also giving them a fifty
Speaker 1: percent pay cut according to these Unionsas just briefly here
Speaker 1: at the end, give us something of the investment you're
Speaker 1: making a new technology of the Department Energy, Well, it's enormous.
Speaker 1: I mean, we're across the board. We spend about sixteen
Speaker 1: billion dollars a year just in basic science, basic research
Speaker 1: that leads to these technologies that we just discussed. I'm
Speaker 1: very excited about what's just over the horizon with regard
Speaker 1: to advanced nuclear reactors. I think we're right on the
Speaker 1: cusp of not only smaller reactors, higher density energy sources
Speaker 1: for America that will be connected to micro grids in
Speaker 1: some cases. We're also excited about moving perhaps even beyond
Speaker 1: fision energy nuclear energy as we know it today, to
Speaker 1: fusion energy. So it's a very exciting world that we're
Speaker 1: about to face. Is there a real process with the
Speaker 1: fusion energy people and talking about that forever? That's true, Yeah,
Speaker 1: they have been, but we've made real progress. We've turned
Speaker 1: around some of the management issues around a large facility
Speaker 1: in France known as the Eater Facility. But we also
Speaker 1: have private sector companies here in the United States who
Speaker 1: have made tremendous advances, General Atomic, several others out in California.
Speaker 1: They're doing a great job. That was Secretary of Energy
Speaker 1: Dan Briett. Coming up. President Trump is running on his
Speaker 1: record of talking tough on trade. We talked with Secretary
Speaker 1: of Commerce Wilburg Ross on what the President has accomplished
Speaker 1: so far. That's next on walstret Week on Bloomberg. This
Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: As a candidate in two thousand sixteen, President Trump promised
Speaker 1: to make trade deals that would be fair to American
Speaker 1: workers and businesses. Over the past three years, he raised
Speaker 1: harrifs on imports, renegotiated a trade deal with Canada, Mexico,
Speaker 1: and broke in a Phase one deal with China. In
Speaker 1: spite of some of the progress on the trade deal,
Speaker 1: US exports to China fell by nearly eight percent from
Speaker 1: and China continues to fall short of its promises to
Speaker 1: buy US goods. The US trade deficit narrowed slightly in
Speaker 1: June as global lockdown restrictions from COVID nineteen East, but
Speaker 1: the recovery is expected to be uneven. We asked Secretary
Speaker 1: of Commerce Wilburt Ross what President Trump has accomplished on
Speaker 1: his trade agenda so far. Well, in terms of China,
Speaker 1: a lot has been accomplished. On the enforcement side, we
Speaker 1: really have been enforcing quite vigorously. You're familiar with the
Speaker 1: actions we've taken on wild Way, You're familiar with the
Speaker 1: actions that we've taken on ZTE, two major telecom companies.
Speaker 1: Most recently, we've been working very hard are on the
Speaker 1: semiconductive part of things, because while China does have technology,
Speaker 1: we still have the best software design and the best
Speaker 1: fabrication equipment for semiconductors, so we're trying to avoid them
Speaker 1: taking unfair advantage of our technology. Technology is really important
Speaker 1: because while protecting things like steel and aluminum help take
Speaker 1: care of today's world, technology is tomorrow's world, So that's
Speaker 1: a big deal. Very recently, we put on the entity
Speaker 1: list of five hundred companies since two thousand and seventeen.
Speaker 1: Awful lot of those are Chinese companies, and that's because
Speaker 1: they are the ones that seem to be doing the
Speaker 1: most to violate sanctions, to violate human rights, and most
Speaker 1: recently also to create problems in Hong Kong. So that's
Speaker 1: been a big, big series. And then of course you
Speaker 1: have the tariffs, the Section three Old one tariffs that
Speaker 1: USTR imposed on China. So the cumulative effect of ball
Speaker 1: this is enormously greater than the long term camulative effect
Speaker 1: of everything that had been done pre Trump, Mr Secretary,
Speaker 1: As you think about a second for your term for
Speaker 1: President Trump, there's a lot of concern that we may
Speaker 1: be entering into what some people call a tech cold
Speaker 1: war with China. Do you believe at the end of
Speaker 1: four years with President Trump still in office, we would
Speaker 1: be more disengaged with China when it comes to technology. Well,
Speaker 1: first of all, in the Cold War and technology started
Speaker 1: long before President Trump. It wasn't only under President Trump
Speaker 1: that the Chinese was stealing intellectual property. Wasn't only under
Speaker 1: President it in Trump that the Chinese were requiring joint
Speaker 1: ventures and lo and behold, the joint venture partners required
Speaker 1: technology transfers. So this abuse of technology, which you've called
Speaker 1: the technology cold War, really had its origins many years
Speaker 1: before the differences. President Trump is mounting the ramparts and
Speaker 1: starting to defend US against the technology war. Then he's
Speaker 1: doing it with the whole variety of measures that I've
Speaker 1: described before. But he's doing it also in another way
Speaker 1: in terms of the big initiative that was just announced
Speaker 1: about a billion dollars for further artificial intelligence research and
Speaker 1: quantum computing research. Those are two of the most significant
Speaker 1: technological advances yet to come, and so putting money here
Speaker 1: helping our companies go further is a very good thing.
Speaker 1: So there are two edges to what we're doing. The
Speaker 1: one is clamping down on their abuses, and the other
Speaker 1: is fostering US technology we've been helping to propagate in
Speaker 1: the Congress Senator Cornyn's legislation relating to semiconductor funding so
Speaker 1: that we can bring more fabs back to the US.
Speaker 1: I hope the Congress will go along with that when
Speaker 1: they go back into session, and if they do, that
Speaker 1: will be a very very good thing for America. Secretary
Speaker 1: was one of the things that we have heard a
Speaker 1: good deal out of out of the Trump administration is
Speaker 1: the fact that the coronavirus originated in China. There is
Speaker 1: a lot of concern that they were not forthcoming and
Speaker 1: disclosing what happened, a lot of blame and finger point.
Speaker 1: Let's be frank, is there any serious contemplation of possible
Speaker 1: sanctions against China coming out of the coronavirus and how
Speaker 1: they handle it seen sanctions for the Trunk Administration in
Speaker 1: other situations. We believe that they did not handle the
Speaker 1: coronavirus very well. Nobody knows right now whether the original
Speaker 1: outburst was something deliberate, was it leakage from a laboratory
Speaker 1: that was inadvertent, or how it exactly started. But what
Speaker 1: we do know is that at the same time as
Speaker 1: they blocked air travel from Wuhan to Beijing, Shanghai and
Speaker 1: other big Chinese cities, they didn't block travel to the US,
Speaker 1: to Europe and to Africa. That was a deliberate decision,
Speaker 1: and obviously that contributed mightily to the spread of coronavirus
Speaker 1: to the United States. Second, they've not been very forthcoming
Speaker 1: to our health authorities about what was actually going on
Speaker 1: over there, and in fact, designed to stand it. They've
Speaker 1: now prohibited their virologists from doing joint papers with American
Speaker 1: virologists trying to sort through coronavirus, So those are not
Speaker 1: very helpful things. There's those some severe question as to
Speaker 1: how forthcoming they were in their relations with the w
Speaker 1: t O. So there's a lot to worry about in
Speaker 1: their handling of coronavirus. But be that as it may,
Speaker 1: it's pretty clear on a national basis, and incidents of
Speaker 1: new cases is coming down quite a bit. Had been
Speaker 1: up around seventy six thousand on a seven day average.
Speaker 1: Now it's down into forty thousand, so it's still too many,
Speaker 1: but direction of change is a very good one. Plus
Speaker 1: every day we're having announcements about a potential cure, every
Speaker 1: day we're having announcements about a potential vaccine. We're going
Speaker 1: to get there and want to get there pretty quickly.
Speaker 1: We will get this ugly monster under control. And the
Speaker 1: decisive action taken by the President both cutting off travel
Speaker 1: to China early on despite the objections of Nancy Pelosi
Speaker 1: and Joe Biden, was a very wise thing. That was
Speaker 1: U s Commerce Secretary Wilburt Ross coming up. The US
Speaker 1: healthcare system is facing its biggest test from COVID nineteen.
Speaker 1: We talked with Ken Langon, chairman of the n y
Speaker 1: U Langon Medical Center about what the pandemic says about
Speaker 1: our health care system. That's next on Wall Street Week
Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. COVID nineteen is shining a light
Speaker 1: on the state of healthcare in the United States. President
Speaker 1: Trump has made no secret of what he thinks of
Speaker 1: the Affordable Care Act. We have to repeal and replace Obamacare.
Speaker 1: We can repeal it, but the best is repeal and
Speaker 1: replace and let's get going. President Trump's Jobs and Tax
Speaker 1: Cuts Active seventeen scrapped the c A individual mandate, but
Speaker 1: his request for the Supreme Court to strike down the
Speaker 1: entire law is still pending. Healthcare spending grew four point
Speaker 1: six two eighteen, reaching three point six trillion dollars. Healthcare
Speaker 1: expenditures as a share of the nation's GDP has been
Speaker 1: growing steadily as tax revenue as a share of GDP
Speaker 1: comes down. We asked Ken Langne, chair of the board
Speaker 1: of Trustees of n y U Land Gone and co
Speaker 1: founder of home Depot, what COVID nineteen taught us about
Speaker 1: US healthcare. The virus to me is rapidly receding an
Speaker 1: impact and importance. For example, the results in New York
Speaker 1: City hospitals are dramatically lower than they were back in April.
Speaker 1: We whether it's heard immunity, whether it's compliance or not,
Speaker 1: if you wear a mask, everybody wore a mask, the
Speaker 1: problem would go away, because that's the easiest way to
Speaker 1: convey inflections. So I am very optimistic about how we're
Speaker 1: learning to deal with it. For example, one of the
Speaker 1: things we learned about an m y U was we
Speaker 1: had patients who have IT lying prone, lying on their bellies,
Speaker 1: and believe it or not, it had a significant effect
Speaker 1: on their dependence on a ventilator, which if you don't
Speaker 1: have to put somebody in the ventilator, God, please don't.
Speaker 1: I think we've addressed the issue of supply of PPE successfully,
Speaker 1: and I think the pharmaceutical industry, by the way, deserves
Speaker 1: a lot of credit the effort they've all made collectively,
Speaker 1: not with a profit motive. Uh. I believe, based upon
Speaker 1: hearing people smarter than me, that will have at least
Speaker 1: one successful vaccine by Christmas, and maybe more, maybe more,
Speaker 1: maybe multiples are one. Uh. I think there's there's there's
Speaker 1: the anybody therapy, which looks very promising and that could
Speaker 1: be now. That doesn't prevent you from getting it, but
Speaker 1: God forbid, if you get it, it's going to be
Speaker 1: very helpful in treating you. And and if you haven't
Speaker 1: had it, it might give you an immunity for a
Speaker 1: couple of months of the vaccine obviously is meant to
Speaker 1: have a longer duration as with any issue. I think
Speaker 1: the President made some good decisions. I think he made
Speaker 1: some unwise decisions. The good decision was jumping on it
Speaker 1: right away regarding flights in from China. I wish she
Speaker 1: had a different stand on mask because I said earlier,
Speaker 1: but mass to me a very critical part of the defense. Again,
Speaker 1: it's a pandemic, so I wish that he had embraced
Speaker 1: masks sooner and more enthusiastically. I would feel better if
Speaker 1: he had a little higher regard for the pharmaceutical industry.
Speaker 1: Not let me say this to you, David, and I
Speaker 1: want to warn you when I in a spirit offul disclosure,
Speaker 1: I am a very major investment in healthcare industry, in
Speaker 1: a number of companies, my biggest position in the industry
Speaker 1: being Eli Lily. I give the industry straight aged for
Speaker 1: pulling together in the last four months and doing what
Speaker 1: they could to help the country out of this more
Speaker 1: ask uh. I think the effort they're all making now
Speaker 1: on a vaccine, it's very good, and I think the motive,
Speaker 1: thank god, it is not their bottom line, but alleviate
Speaker 1: the tragedy that it's had on humanity around the world.
Speaker 1: And that's that's the name one of the redeeming features
Speaker 1: of the pharmaceuticals. So I would He's done a lot
Speaker 1: of great things, and I wish he had done his
Speaker 1: his passion for this hydrochloric quam for me. Uh, I'm not.
Speaker 1: I don't think it was merrited. I don't think it's
Speaker 1: I don't even like the drug that they thought it
Speaker 1: would be. It has purposes, it's been around a long time,
Speaker 1: and it's effective for different conditions that it might help
Speaker 1: a few people through the through the infection of COVID.
Speaker 1: But so what I'm saying is I liked some of
Speaker 1: the things he did. I like the fact that because
Speaker 1: they were they were arguing with each other in the
Speaker 1: last couple of weeks, that he issued an executive order
Speaker 1: to help out. I'm I'm thrilled with his compassion and
Speaker 1: a sensitivity to the health care delivery system we have
Speaker 1: in America. Because n y U we lost in one
Speaker 1: month million dollars. There were hospitals in New York that
Speaker 1: lost even more than we did. And thank god they
Speaker 1: got that first bill through and nominally it's alone. Uh,
Speaker 1: if it is a loan, we have to play it back.
Speaker 1: That means we lost five of a million because don't
Speaker 1: forget in that period of time we stopped doing everything
Speaker 1: except dealing with COVID patients. We will overwhelmed the number
Speaker 1: of people that came in, so we had nothing. We
Speaker 1: could do nothing but focus on dealing for the epidemic
Speaker 1: of the pandemic. So that's the best dancer I can
Speaker 1: give it. That was Ken Lane Gone Home Depot, co
Speaker 1: founder and chairman of the n y U Land Gone
Speaker 1: Medical Center. Coming up, we wrap up the week with
Speaker 1: our special contributor Larry Summers. This is Wall Street Week
Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio to take us through the economy
Speaker 1: under President Trump. We convene now our virtual round table
Speaker 1: contributors Larry Summers, who served under President Clinton as treasure
Speaker 1: Secretary and then as the Director of the National Economic
Speaker 1: Council under President Obama and Glenn Hubbard, who served as
Speaker 1: Chairman of the Council of Economic Advisors under President George W. Bush.
Speaker 1: So let me start since we're telling a candidate for
Speaker 1: President Trump on the Republican side, Glen, let me start
Speaker 1: with you. When you hear the plans that were being
Speaker 1: told for the second four years, will they get us
Speaker 1: that full employment? The President Trump that really promised. Well.
Speaker 1: I think conventions are obviously great theater. The President was
Speaker 1: pointing back to the pre COVID world, and he could
Speaker 1: point to some good successes. He did have success with
Speaker 1: the economy. Unemployment was very low, market valuations were very high.
Speaker 1: GDP growth was solid. I think he could well point
Speaker 1: to the Tax Cut and Jobs Act, and he could
Speaker 1: point to his regulatory agenda, having said that there's uncertainty
Speaker 1: about trade policy, and what missing was missing to me
Speaker 1: was a sense more of the future. He talks about
Speaker 1: make America great again, to see make America flourish again,
Speaker 1: what would it take to get every American to participate
Speaker 1: and prosper. I think their ideas there on the Republican side,
Speaker 1: but I wish more of them had been at the
Speaker 1: geop convention. So Larry, let me bring you in on
Speaker 1: the other side of this, as it were, is what
Speaker 1: you heard from foreign Vice President Biden going against the
Speaker 1: full employment either when he's talking about something a three
Speaker 1: point eight trillion dollars in new taxes. Is that what
Speaker 1: this economy needs right now? This economy needs a serious
Speaker 1: program of public investment. And some part of that public
Speaker 1: investment program will pay for itself. And some part of
Speaker 1: that public investment program is rational to finance with debt,
Speaker 1: but some part of that public investment program probably should
Speaker 1: be paid for with tax increases, especially when those taxes
Speaker 1: increases would make the economy fairer and would also make
Speaker 1: the economy more efficient. We don't serve any useful purpose
Speaker 1: by failing to elect billion dollars a year, most of
Speaker 1: it from the highest income people, because we don't do
Speaker 1: a competent job of enforcing the tax law. We could
Speaker 1: move towards fixing that and raise a trillion dollars over
Speaker 1: the next decade from high income people and close tax shelters.
Speaker 1: At the same time, we've got a variety of loopholes
Speaker 1: and special breaks that divert resources into inefficient uses and
Speaker 1: cost the government a ton of revenue. The famous carried
Speaker 1: interest provision is one example. UH. In that regard, those
Speaker 1: are candidates for rational tax reform that at the same
Speaker 1: time would finance government doing what it UH needs to do.
Speaker 1: I'm for that. I think there are people who have
Speaker 1: the idea that, caused by envy, we should have tax
Speaker 1: increases in order to tear down the rich. I think
Speaker 1: that would be a mistake. There are people who have
Speaker 1: the idea that we should have tax increases for the
Speaker 1: sake of having tax increases, or just as a device
Speaker 1: for reducing the deficit. I think that's a mistake. But
Speaker 1: should we pay for some portion over time of the
Speaker 1: huge public investment we need? Yes, I think uh we should.
Speaker 1: And I think that's the spirit in which Vice President
Speaker 1: Biden has talked about tax increases. And so Glenn, what
Speaker 1: about it year from Larry that it's a matter of
Speaker 1: public investment, which really is what we need right now.
Speaker 1: On the Republican side, for President Trump, we said let's
Speaker 1: cut the cattital gains tax. Well, private investment is that
Speaker 1: the most efficient way really of getting investment? Where is
Speaker 1: Larry right? Well? I think public investment is very important.
Speaker 1: We need a strong infrastructure program, not just physical but
Speaker 1: also technological. We're seeing that play out before our very eyes.
Speaker 1: It's hard to disagree with Larry on issues like avoiding
Speaker 1: tax avoidance. Of course we should do that. Having said that,
Speaker 1: is Vice President Biden serious about a large tax increase
Speaker 1: on business and business owners in a recession or an
Speaker 1: incipient recovery. We've got very large proposed increases in the
Speaker 1: corporation tax and individual tax rates, and the most radical
Speaker 1: expansion of the payroll tax. Not to be used for
Speaker 1: seal security, but do you be used for other purposes?
Speaker 1: So the Biden plan may have been developed at a
Speaker 1: time and a place, but we're not at that time
Speaker 1: in that place. So while I don't disagree with Larry,
Speaker 1: it's not really the Biden plan. Okay, so fairly quickly,
Speaker 1: Larry sort of more or less yes or no? Do
Speaker 1: you think Vice President Biden is serious about that three
Speaker 1: point a trillion dollar tax increase? I think Vice President
Speaker 1: Biden is serious about a major increase in public investment
Speaker 1: and paying for an important part of it, though not
Speaker 1: necessarily all of it, and I think that's the right
Speaker 1: thing to do. I do not think that it's anybody's
Speaker 1: intention to impose a may your new set of austerity
Speaker 1: on the current economy. Glenn and I may have a disagreement.
Speaker 1: Uh the business community before the Trump tax cuts thought
Speaker 1: it would be fantastic if the corporate tax rate were
Speaker 1: cut to. In fact it was cut to. There were
Speaker 1: a set of tax cuts proposed for non corporate businesses
Speaker 1: that nobody was even asking for. I think we should
Speaker 1: repeal and replace some of that and use the revenues
Speaker 1: to push the economy forward for everyone. And I think
Speaker 1: that is the right thing to do, and that's the
Speaker 1: spirit of the of the Biden plan. As I understand, Larry,
Speaker 1: I think you get old victory lap this week, because
Speaker 1: over five years ago you wrote in the Financial Times
Speaker 1: and I'll quote it, the FED could inject much needed
Speaker 1: confidence in the economy today and minimize future risks by
Speaker 1: announcing and following a strategy of not raising rates until
Speaker 1: it sees the whites of inflations eyes now as best
Speaker 1: I understand. That's sore. Know what j Pal said this week,
Speaker 1: isn't it? I think it's more or less exactly what
Speaker 1: he said. I think he said two important things. He
Speaker 1: made clear that the two percent figure was a two
Speaker 1: sided target, and after a decade of being below two percent,
Speaker 1: it would be okay with him if we were above
Speaker 1: two percent for a while and we weren't being religious
Speaker 1: about two percent as the ceiling. That's what I and
Speaker 1: many others have been advocating for a long time. And
Speaker 1: he also said that he was gonna reject what has
Speaker 1: been a FED staff preoccupation for a long time, the
Speaker 1: Phillips curve idea that we should stop the party before
Speaker 1: it gets started by raising rates when it looks like
Speaker 1: the economy is going to be really strong and unemployment
Speaker 1: is going to be low, and wages are gonna rise fast,
Speaker 1: and the last last people to be hired are gonna
Speaker 1: be hired, and employers are going to be reaching for
Speaker 1: less guild workers and those with some blot on their backgrounds. UH,
Speaker 1: that we're not gonna cut off economies growth when those
Speaker 1: kinds of things happen until we actually see inflation materialized.
Speaker 1: And I think those are too welcome, welcome and frankly
Speaker 1: overdue changes in UH perspective from the fat there are
Speaker 1: things that I've been calling for for half a dozen years,
Speaker 1: UH in recognition of the fact that our economy's basic
Speaker 1: problem isn't an inflationary gap. It's a deflationary gap where
Speaker 1: savings succeeds investment, and that pushes interest rates too far down,
Speaker 1: causes UH money to flow into liquid assets that then
Speaker 1: get inflated and caused bubbles, and UH risks too much
Speaker 1: sluggishness in the economy. So I think the FED has
Speaker 1: moved to substantial distance in the right direction. I think
Speaker 1: they've still got some way to go UH in terms
Speaker 1: of recognizing the limits of what they're able to do
Speaker 1: and putting the right kind of pressure on other policies
Speaker 1: to push demand forward. Well, let's talk about those limits exactly, Gland.
Speaker 1: Let's assume you agree with Larry essentially more or less
Speaker 1: better late than never. But at the same time, is
Speaker 1: this the cure for what ails us right now? Because
Speaker 1: this doesn't get rid of the coronavirus, it doesn't get
Speaker 1: increased productivity, it doesn't get growth going necessarily, does it.
Speaker 1: I think it's a it's a good step. I too
Speaker 1: have called for average inflation targeting for some time, but
Speaker 1: it's not a free launch. I mean, it does give
Speaker 1: the FED room to let the economy run hot. It's
Speaker 1: a good thing. It gives room for interest rates and
Speaker 1: you curve to steepen that too, would be a good
Speaker 1: thing in the present environment. However, it may cause misallocation
Speaker 1: in capital markets relative to say, a fiscal policy response,
Speaker 1: and it isn't going to cure the coronavirus for supply side.
Speaker 1: So yes, we can say good job to the FED
Speaker 1: for the Jackson Whole announcement, but I don't think it's
Speaker 1: time for the FED at least to be taking a
Speaker 1: victory lap. I think Washington needs to focus on fiscal policy.
Speaker 1: Share Powell's doing his part, but it's only a part.
Speaker 1: Is there another danger, Larry actually which we met called
Speaker 1: mission creep bar from the military, and I think in
Speaker 1: Vietnam is there mission creep here? Because as you read
Speaker 1: what j. Pow had to say, he was talking about
Speaker 1: all sorts of things like really fixing inequalities and income
Speaker 1: and a wayes addressing problems with municipalities. Is that something
Speaker 1: really the FED is competent to do. I think Glenn
Speaker 1: and I are again in violent agreement. Uh, what the
Speaker 1: Fed did is necessary, it is a long way from
Speaker 1: sufficient to address America's economic challenges. Because the FED, frankly,
Speaker 1: has been more successful and more competent in the last
Speaker 1: few years. The other parts of the government, there's a
Speaker 1: tendency to turn to the FED to solve every problem.
Speaker 1: I don't think the FED can fix the environment and
Speaker 1: make America green. I don't think the FED is the
Speaker 1: right instrument for dealing with struggling municipalities. I don't think
Speaker 1: the FED is the right instrument for addressing racial inequality.
Speaker 1: So I think the feds new emphasis on a strong economy,
Speaker 1: it's move away from a single minded UH focus on
Speaker 1: preempting inflation, is overdue and appropriate. But I don't think
Speaker 1: we should turn ourselves into an economy run by the FED.
Speaker 1: Are many thanks right now? So Larry Summers of Harvard
Speaker 1: and Glenn Hubbard of Colombia, and both of them are
Speaker 1: contributors to Wall Street Week for this virtual round table.
Speaker 1: And that does it for this edition of Wall Street Week.
Speaker 1: I'm David Weston. This is Bloomberg. See next week. M HM.