Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes Tim Stinovik on Bloomberg Radio. So I'll get
Speaker 1: right to our next guest, Paul Krugman. He is back
Speaker 1: with us. Nobel Laureate economist, New York Times columnist, City
Speaker 1: University of New York, Distinguished Professor of Economics. He's author
Speaker 1: of many many books, and his latest book now out
Speaker 1: in paper Book, arguing with zombies, economics, politics, and the
Speaker 1: fight for a better future. He is joining us on
Speaker 1: the phone in Princeton, New Jersey, and he also, by
Speaker 1: the way, tweeted out that he just got his second vaccine,
Speaker 1: COVID vaccine today. Paul, it is great to have you
Speaker 1: here back on Bloomberg. How are you. I'm a little wearie.
Speaker 1: I think there's a little bit of the second day
Speaker 1: effect of the of the vaccine. But I'm fine. Okay,
Speaker 1: So you are feeling a little bit. We've heard that
Speaker 1: from a fair amount of people, So you do feel
Speaker 1: a little something. Yeah, it's it's it's fine. It's the
Speaker 1: water is fine, jumped and we're ready. We're ready and eager.
Speaker 1: So let's talk about kind of this world where we are.
Speaker 1: We're gonna talk about your book in a moment, but
Speaker 1: I do want to ask you when you look at
Speaker 1: the US economy the impact of COVID. There are some
Speaker 1: economic reports that do feel like things are certainly getting better,
Speaker 1: labor markets still tough. How do you see the US economy?
Speaker 1: I think we still have another six months of rough
Speaker 1: times because it is very hard to do normal business
Speaker 1: when people are rightfully still afraid of of of COVID,
Speaker 1: and so we're going to be a pandemic depressed economy
Speaker 1: for well passed in the middle of this year. But
Speaker 1: I'm actually I'm quite optimistic about after that. I think
Speaker 1: we are We don't have the same kind of overhanging
Speaker 1: of excessive debts and so on that we had after
Speaker 1: the last crisis. We are apparently on the version of
Speaker 1: getting an adequate economic relief package. So I think we're
Speaker 1: going to have a probably gonna be feeling pretty optimistic
Speaker 1: by this time next year. Well, that's that's some that's
Speaker 1: some good news. Um, what about when it comes to
Speaker 1: the labor market specifically, how do we get millions of
Speaker 1: Americans who lost their job during this pandemic back to work.
Speaker 1: I think that's going to be a lot easier than
Speaker 1: people imagine. Uh, the job losses are concentrated. Uh, there
Speaker 1: are a lot of It's not all there, but a
Speaker 1: lot of the job losses are concentrated in sectors that
Speaker 1: are basically shut down because of pandemic risks. And once
Speaker 1: we have widespread vaccination. You know, this is all assuming
Speaker 1: that the variants don't get ahead of us and we
Speaker 1: lose control of the pandemic again. But once we have
Speaker 1: widespread vaccination effective herd immunity, people will start eating in
Speaker 1: restaurants again, people will start to travel again. There'll be
Speaker 1: some dislocations because we won't go back to exactly the
Speaker 1: same economy we had before. But you know, after the
Speaker 1: after the last crisis, there were many people were saying, oh,
Speaker 1: just those jobs are not coming back. Act workers don't
Speaker 1: have the right skills. They were totally wrong. It turns
Speaker 1: out that we were quite capable of getting back to
Speaker 1: full employment, and there's no ways to think that is true. Again,
Speaker 1: do you think that when we get on the other
Speaker 1: side of this that we do you you're optimistic, obviously,
Speaker 1: as you said that we do have potentially a run
Speaker 1: in the economy, a run perhaps in the financial markets
Speaker 1: just like we had after the financial crisis, which was
Speaker 1: kind of low and slow but kept on going for
Speaker 1: a long time. Well, this one looks to me like
Speaker 1: a lot faster. And there were reasons that there was
Speaker 1: a combination of reasons why it was so slow last time.
Speaker 1: One of it was that this there was this legacy
Speaker 1: of excess household debt, which is not the situation now.
Speaker 1: Another use that we had a lot of destructive disclosterity
Speaker 1: that was holding back to recovery. And uh, you know
Speaker 1: those bi elections in Georgia made all the difference. It
Speaker 1: means that this time and Democrats have learned a lesson.
Speaker 1: So now that they have, even if it's a razor
Speaker 1: the majority, they're they're not going to make that mistake again.
Speaker 1: They're going to go for a big package. And so
Speaker 1: I actually think this is gonna be a very different
Speaker 1: story if you believe some of the projections out there
Speaker 1: about growth, Uh, it's gonna be it really is Morning
Speaker 1: in America style growth that we may be looking at.
Speaker 1: We may be looking at something like you know, over
Speaker 1: a fourth quarter on fourth quarter six seven percent. This
Speaker 1: is this is looking at very very different, not at
Speaker 1: all the story you know, don't don't fight the last
Speaker 1: war on this one. Well, you know, it's interesting. So
Speaker 1: with that optimism, do you think we still need a
Speaker 1: stimulus package? And I think I know the answer to
Speaker 1: it because I know you've been supportive of it. Do
Speaker 1: you still think we need more help? Yeah? So it's
Speaker 1: not a stimulus package. It's mostly just not what it's about.
Speaker 1: It's a it's an economic rescue package. It is we
Speaker 1: have a miserable time. We won't be back to anything
Speaker 1: like full employment even with all of this stuff, until
Speaker 1: early next year. And in the meantime, mass unemployment, lots
Speaker 1: of disruption, many businesses and great and under travel stress.
Speaker 1: The state, local governments, it's very uneven, but many of
Speaker 1: them are still in deep trouble. And it's all about
Speaker 1: getting people through this. Not there, there's no it's gratuitous.
Speaker 1: We should not be having a lot of people suffering
Speaker 1: when we know that the economy is going to be
Speaker 1: coming back, when America is not poor, but a lot
Speaker 1: of individuals and a lot of businesses and some governments
Speaker 1: are very cash strapped. So this is all about getting
Speaker 1: us through. This is a bridge, is it's a bridge
Speaker 1: across a chasm. That we know is there, but we
Speaker 1: know is limited in in width. Are you optimistic about
Speaker 1: the political will to get something this large done? I mean,
Speaker 1: even as you write in your book, Paul Krugman, in
Speaker 1: century America, everything is political. This stimulus package certainly is
Speaker 1: one of those things. Yeah, it's uh, it's almost certainly.
Speaker 1: It's funny thing, the the simitly I hate calling it
Speaker 1: the stimulus package. The relief package is enormously popular, has
Speaker 1: gigantic probably approval, relatively little disapproval. Even Republicans approve of it,
Speaker 1: and it will probably not get a single Republican vote
Speaker 1: in Congress. Right, there's a serious disconnect there. Then they're disconnected.
Speaker 1: The partisanship of the professional politicians is enormous. It's absolutely
Speaker 1: if it's if it's good for America, and as a
Speaker 1: Democrat is in the White House, they're against it, and
Speaker 1: so it's going to be a party line vote. But
Speaker 1: at the moment, the Democrats, you know, Democrates, fifty senators
Speaker 1: plus Kamala Harris, they have a narrow majority in the
Speaker 1: House and they are probably going to stay unified. There
Speaker 1: may be a few things that are shaved off because
Speaker 1: the most conservative Democrats don't want them, but it's not.
Speaker 1: It's it's not going to be a modest package. It's
Speaker 1: going to be a really big thing all the same. Well,
Speaker 1: do you feel like some of those zombie ideas and
Speaker 1: zombie arguments are going to come out? Which is what
Speaker 1: you write about in your book? Uh, you know, some
Speaker 1: of those erroneous economic ideas that in particular you find
Speaker 1: the politicians kind of you know, trotting out when they
Speaker 1: need it. So I'm just curious what you're getting ready for.
Speaker 1: Oh well, with the the uh death of death fears,
Speaker 1: which sun didn't matter as long as Donald Trump was
Speaker 1: from the White House, are now back that death is
Speaker 1: an existential threat as long as there's a D after
Speaker 1: the president's name. Um, there are inflation, I mean there
Speaker 1: there is a better case for thinking that we might
Speaker 1: have some inflation now than there was last time. But
Speaker 1: the hyper inflation zombie is back in full force. And
Speaker 1: other stuff too. I mean, I think we're witnessing the
Speaker 1: birth of the new zombie. This whole thing in Texas
Speaker 1: where you have you know, the natural gas pipeline freeze
Speaker 1: and it's somehow or other windpower cost it. So that's
Speaker 1: a don't don't believe that evidence will ever change that.
Speaker 1: For ten years from now, everybody on one side of
Speaker 1: the political spectrum will know that somehow it was the
Speaker 1: windmills that caused the Great Freeze of Texas. So now
Speaker 1: the zombies. That's the thing about zombies. No matter how times,
Speaker 1: how many times you think you killed them, they just
Speaker 1: keep on shaveling along eating our brains. So I want
Speaker 1: to make sure I I get see you're not concerned
Speaker 1: about inflation with a and I'll use your term relief
Speaker 1: package of this size. No, I mean it's it is
Speaker 1: a big package. It could very well get us pretty
Speaker 1: much to full employment. But when I do the arithmetic,
Speaker 1: and when I think about the risk, it's anyone who
Speaker 1: thinks that we're going to be it's going to be
Speaker 1: nineteen seventy nine all over again, or something like that,
Speaker 1: it's the numbers just don't back there. Where this is
Speaker 1: a big package. It is so once it looks like
Speaker 1: it might actually be big enough, but it's not big
Speaker 1: enough to produce something that is actually scary inflation. Well,
Speaker 1: and it's interesting, and I have someone actually tweeting at
Speaker 1: me and they said, could you ask Paul if the
Speaker 1: FED should start buying bitcoin to pay off the national dead. Uh.
Speaker 1: I think you know. The difference between Bitcoin and game
Speaker 1: stop is that game stop has a problem that there
Speaker 1: was an actual real business I used for it, which
Speaker 1: meant that there was some kether to its value. Bitcoin,
Speaker 1: because no one actually uses it, it's purely speculative disguise.
Speaker 1: The limit. Well, what do you think ultimately happens? I mean,
Speaker 1: do you have you thought about I don't know, five
Speaker 1: years are we still talking about bitcoin? Is it now
Speaker 1: that it's through about? Is it? D like? What are
Speaker 1: your projections on how this plays out? Paul? I mean
Speaker 1: I have I have this problem, which is that the
Speaker 1: bitcoin has been around. It's hard to believe how long
Speaker 1: has been around, and it's still not actually money. People
Speaker 1: don't actually use it for any significant amount transactions. On
Speaker 1: the other hand, it just floats out there, and a
Speaker 1: lot of the things you can say about the uselessness
Speaker 1: of bitcoin can also say about gold, and gold has
Speaker 1: kept its value for you know, for five years, despite
Speaker 1: basically being a very little real world use. So maybe
Speaker 1: bitcoin just hangs in there. Uh. I don't know, it's hard,
Speaker 1: it's hard to figure. I can't quite get into the
Speaker 1: psychology but there it is. When you say hanging there,
Speaker 1: what do you what do you mean? Do you mean
Speaker 1: it becomes part of a balance sheet at corporations like
Speaker 1: Tesla said last week, like Elon Musk said, does it
Speaker 1: just hang out and continue to ride? Does it drop
Speaker 1: in value significantly? Not? Maybe out there, maybe there'll be
Speaker 1: a bitcoin at you name a price. It's completely arbitrary
Speaker 1: that maybe people will continue to hold bitcoin and say, well,
Speaker 1: bitcoin is valuable because other people think it's valuable, and
Speaker 1: it's uh, and there's never a moment of reckoning. I mean,
Speaker 1: it's I mean, there's an alternative story where one day
Speaker 1: people we have a widely coyote moment, people look down,
Speaker 1: realize there's nothing supporting it, and it just crashes to earth.
Speaker 1: But but you know that hasn't happened so far, and
Speaker 1: it's been around for a while, so maybe who knows.
Speaker 1: I mean, it's it's one of those things where I
Speaker 1: don't know that it that it's hard to make any
Speaker 1: rational argument about where the price should be. And maybe
Speaker 1: because there's no rational argument, it can be anything. One
Speaker 1: thing I did want to ask you, going back to
Speaker 1: the economy, Paul, is you know new administration but the
Speaker 1: four years of Donald Trump and his administration, what impact
Speaker 1: or lasting impact do you think that that had on
Speaker 1: the USC call to me, Well, there was a lot
Speaker 1: of wasted time, you know, we we had we spent
Speaker 1: uh whatever it was, I guess two hundred and eight
Speaker 1: weeks waiting for infrastructure weeks to actually happen, and it
Speaker 1: ever did. Um, So we didn't do any investment in
Speaker 1: the future. But I think one thing we did learn
Speaker 1: Trump uh ran really a quite stimulative fiscal policy. We
Speaker 1: it wasn't efficiently stimulative, but we did have sustained budget
Speaker 1: deficits and nothing bad happened as a result of those deficits.
Speaker 1: And we also learned that the economy could run hotter
Speaker 1: than people a lot harder than people have thought. I've
Speaker 1: looked back at the said thought four on the playlet
Speaker 1: was full employment, and so we we learned that the
Speaker 1: economy has more room to run. And that's something that
Speaker 1: somebody else, you know, something that Biden can can take
Speaker 1: advantage of that discovery and maybe actually usually the running
Speaker 1: room to actually build some infrastructure too. So it's it's
Speaker 1: it's one thing to get back to full employment, but
Speaker 1: it's it's another thing to tackle inequality in this country.
Speaker 1: And one thing that's happened and been laid bare during
Speaker 1: this pandemic has been the gap between the haves and
Speaker 1: have nots has grown, has grown even more than it
Speaker 1: was before. What is the best way to tackle inequality
Speaker 1: in the US? I think you have to do just
Speaker 1: it's you have to do a bunch of things. There's
Speaker 1: no single magic magic bullet. I mean, child child task
Speaker 1: credits can do a lot because it doesn't take a
Speaker 1: whole lot of money to vast and improve the lots
Speaker 1: of the lives of millions of children. Um minimum wage.
Speaker 1: I'm not sure we're going to get the fifteen dollars,
Speaker 1: but I'll hire minimum wage helps labor. One of the things,
Speaker 1: sort of under the radar things is that the bid
Speaker 1: administration is more pro union organizing than any administration we've
Speaker 1: had in decades, and that might make a difference in
Speaker 1: terms of enhancing workers bargaining power. And then there's other stuff.
Speaker 1: I mean, I don't know whether an Elizabeth were in
Speaker 1: wealth taxes is anywhere in their future, but you can
Speaker 1: make a start. There's certainly, um there's no one thing.
Speaker 1: What you just need is a government of Congress that
Speaker 1: that tries to improve the lot of people who are
Speaker 1: in the bottom half of the income distribution, and um,
Speaker 1: we really haven't done that at all for a long time,
Speaker 1: so we might be surprised at how well it works
Speaker 1: if we finally started doing it. Are are you concerned
Speaker 1: that a wealth tax would would drive people out of
Speaker 1: the country, would drive the wealthiest out of the country.
Speaker 1: I think it's would the mean a little bit. But
Speaker 1: you know the fact of the matter is that, let's
Speaker 1: put this way. Taxes are in New York City, which
Speaker 1: is where I spend most of my time, the tax
Speaker 1: rate on high income people in New York City is
Speaker 1: considerably higher than it is in, uh, you know, in
Speaker 1: other parts of the country. And they don't see a
Speaker 1: lot of wealthy people moving to Kansas. They're going to Miami.
Speaker 1: They're going to Miami, but some but even that, there's
Speaker 1: there's some mobility of people. But it's the idea that
Speaker 1: everybody is ready to move. There are a lot of
Speaker 1: things that matter in life more than your tax rate,
Speaker 1: and that that will continue to be true. Hey, listen,
Speaker 1: one thing I wanted to get your thoughts on, Paul,
Speaker 1: because we caught up our David Weston for this week's
Speaker 1: Wall Street Week caught up with Larry Summers, former U S.
Speaker 1: Treasury Secretary, and they talked about the stimulus plan. You know,
Speaker 1: Summers has been actually hang on for a second, because
Speaker 1: President Biden is walking to a podium. He's in Michigan.
Speaker 1: He is been touring a visor factory. Uh, and he
Speaker 1: is expected to make some comments. Looks like he's getting
Speaker 1: a little bit of an introduction by the folks that
Speaker 1: are guiding him on his tour. Do we want to
Speaker 1: go there or do we want to hold off? Guys?
Speaker 1: All right, we're gonna hold on. Let's so let's let's
Speaker 1: stay with um Paul Krugman, who's still with us. But
Speaker 1: he's been critical, and I think his concern is I
Speaker 1: was going to play some sound, but he cites used
Speaker 1: to cifically needs, concerned about people. I think you've talked
Speaker 1: about maybe people kind of shoring up their own finances,
Speaker 1: and he's concerned that that's not the best use of
Speaker 1: any kind of relief package, COVID relief package. What do
Speaker 1: you say to that? Oh, I uh. The there are
Speaker 1: different parts of the relief package, and the part that's
Speaker 1: the most popular, which is the fortune hundred dollar checks.
Speaker 1: Is also the least targeted, So some of that money
Speaker 1: will go to people who really badly need it, but
Speaker 1: a lot of the money will go to people who
Speaker 1: have been doing okay in the pandemic. Um. And if
Speaker 1: we were sure if money, I would worry about that,
Speaker 1: but we're not. The government can borrow an incredibly low
Speaker 1: interest rates. Debt is not a pressing concern. Um, Larry
Speaker 1: is I understand? I mean, Larry is, Larry is not stupid.
Speaker 1: Let's say let's say that, I mean, we actually had
Speaker 1: a debate on this at the Princeton webinar last week. Um.
Speaker 1: And it's a if people will spend a lot of that,
Speaker 1: there is some risk of overheating. But I think the
Speaker 1: the odds are that to the extent that we're giving
Speaker 1: a lot of money to people who are not urgently needed,
Speaker 1: but they're also likely to not spend it right away,
Speaker 1: So that I think it's you know, if we had
Speaker 1: unlimited time to craft a very careful proposal, and had
Speaker 1: unlimited ability to distinguish who really needed the money, then
Speaker 1: you could probably achieve what we needed with us somewhat
Speaker 1: smaller package. But that's not where we are. We need
Speaker 1: to get this thing out the door now, and so
Speaker 1: I'm okay with it. So yeah, so okay if some
Speaker 1: people save a little bit and shore up their finances.
Speaker 1: But you're thinking, you know, and I think I've we've
Speaker 1: heard this a lot that if we overshoot it, it's
Speaker 1: okay because there's a lot of people who are really
Speaker 1: hurting right now. Yeah, we've had an object lesson in
Speaker 1: from from two thousand nine about what happens if you understood,
Speaker 1: which is you don't get a second chance. That's a
Speaker 1: great but that's a great point, right we learned in
Speaker 1: the financial crisis. Yeah, well that's right. Occasionally some of us, uh,
Speaker 1: you know, the zombies keep on shamble along regardless, but
Speaker 1: some of us actually do, I hope, learn some lessons
Speaker 1: from from experience. Hey, Paul Kruegman, did you get a
Speaker 1: chance to check out yesterday's testimony from the CEO of
Speaker 1: Robin Hood and CEO of Reddit, CEO of Citadel and more.
Speaker 1: I you know, I read the accounts of it. I
Speaker 1: didn't sit through, and you know, I have to say,
Speaker 1: I just cannot get worked up about any of this.
Speaker 1: Why not, because look, we have a we have a
Speaker 1: huge problem of inequality. And I said, we have a
Speaker 1: huge problem that ordinary people are not not getting enough
Speaker 1: and are not are not don't have adequate lifestyles. Um,
Speaker 1: the way out of that is not for everybody to
Speaker 1: become a day trader. Al Right, this is not this
Speaker 1: is this is always going to be marginal. And the
Speaker 1: this whole stock trading thing that there are no good
Speaker 1: guys in this story. I mean the obviously the hedge
Speaker 1: funds are not lovable, but you know, putting a short
Speaker 1: squeeze uh on on on a hedge fund, even if
Speaker 1: it's done by a bunch of small investors, it's also
Speaker 1: not a lovable thing to be doing. And people are
Speaker 1: complaining that, you know that Robin Hood stopped trading, but
Speaker 1: the people who are blocked from buying at that point actually,
Speaker 1: in many cases were prevented from losing a lot of
Speaker 1: money because they would have been buying a game stop
Speaker 1: at ridiculous prices. So I but altogether this is like,
Speaker 1: this is like a drama that involves people and issues
Speaker 1: that I don't see why the rest of us should
Speaker 1: care about, but it does. It does raise a point,
Speaker 1: which is that regular people have access to financial markets
Speaker 1: now in a way that they have never had before
Speaker 1: with zero commission trading, and they can do what used
Speaker 1: to cost hundreds of dollars to do to make a
Speaker 1: single trade. Is that a good thing? Is it good
Speaker 1: to have that kind of access? Probably not in the end.
Speaker 1: I mean, I'm not going to say that should be
Speaker 1: denied because we can. It's a it's a free country,
Speaker 1: and if if this can be done, I don't want
Speaker 1: to be to paternalistic. But the fact that matter is
Speaker 1: that if you're an ordinary investor, you should not be
Speaker 1: doing You should not be stock picking, you should not
Speaker 1: be you don't have the resources to figure that out.
Speaker 1: And the uh, you know what what all the personal
Speaker 1: finance experts tell you buy index funds, do things that
Speaker 1: you know you should probably should be in the market some,
Speaker 1: but you should not be playing the market. And this
Speaker 1: is so making that easier for people to do is
Speaker 1: actually not a good thing. So I want to squeeze
Speaker 1: in because I know we will have to ultimately go
Speaker 1: to the president. But I want to ask you about
Speaker 1: something in your book, and you're right, you know, in
Speaker 1: terms of things that are important, the most important thing
Speaker 1: is and you say, sometimes I wonder whether I'm wasting
Speaker 1: my time talking about any other issue other than climate change.
Speaker 1: If we don't get that, right, if we don't put
Speaker 1: policies in place, nothing else matters. That's right, if if,
Speaker 1: if we really have climate change is potentially a civilization
Speaker 1: destroying fent. This is and it's you know, I don't
Speaker 1: really care about productivity as if there's no civilization to
Speaker 1: be productive in and so um so that is the
Speaker 1: most important thing. The the the technology is our friends.
Speaker 1: Renewable energy has been a miraculous story this past fifteen years,
Speaker 1: and the possibilities with actually fairly moderate policies to bring
Speaker 1: climate climate change under control are huge. So that's something
Speaker 1: that we should be very um excited about that we
Speaker 1: have to do it. And of course we have to
Speaker 1: go around and we have to be reasonable and not
Speaker 1: say somehow that windmills caused natural gas pipe plants to freeze. Right,
Speaker 1: that's you took the words right out of my mouth.
Speaker 1: I mean, we saw it happen this week with the
Speaker 1: governor of Texas. Um. I do wonder, in this political,
Speaker 1: politically charged environment, what is an effective way to get
Speaker 1: the urgency of the climate change message across Because there
Speaker 1: are a large number of people in Washington who do
Speaker 1: not think it's a priority, Well that's what that's what
Speaker 1: what may do them. And I don't know what what
Speaker 1: you can do except to try to make the case,
Speaker 1: and for those who who do have some power to
Speaker 1: do something about it, to to use the leavers they have.
Speaker 1: It's I mean, we're luckily. It turns out there was
Speaker 1: a time when finding climate change looks like a real
Speaker 1: kind of eat your spinage root connect. I think that
Speaker 1: it was going to be extremely expensive and hard, and
Speaker 1: and it looked hopeless. Now it looks like just a
Speaker 1: fairly modest financial nudges towards climate frantic technologies can actually
Speaker 1: make all the difference, and maybe, just maybe we can
Speaker 1: do that. We better hope so for the sake of
Speaker 1: the next few generations. Paul kog if you're sitting down
Speaker 1: with the president and his team or the president one
Speaker 1: on one and you said, hey, this is one economic
Speaker 1: policy you've got to get right right now, what would
Speaker 1: you say? Oh, I mean right, I mean they I'm
Speaker 1: for I guess we're not supposed to call the Green
Speaker 1: New Deal, build back better, But I think a kind
Speaker 1: of a combination of infrastructure investment with a strong climate
Speaker 1: change focus is the way to go, how we're going
Speaker 1: to do it. Good stuff, Paul Krugman, thank you so much.
Speaker 1: His book Arguing with Zombies, Economics, Politics, and the Fight
Speaker 1: for a Better Future. It is in paperback and you
Speaker 1: can find it now. Paul Krugman, of course New York
Speaker 1: Times columnist, Nobel laureate, and thank you so much for
Speaker 1: all that time. What a great conversation. Yeah, it was fantastic.