WEBVTT - French Election Isn't a Big Short-Term Risk, Blanchard Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:26.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.440 --> 0:00:29.920 I'm Tom Keene with David Gura. Daily we bring you 0:00:29.960 --> 0:00:34.800 insight from the best of economics, finance, investment, and international relations. 0:00:35.240 --> 0:00:40.760 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:40.800 --> 0:00:47.920 and of course, on the Bloomberg Jason Furman, he's Senior 0:00:47.920 --> 0:00:50.600 Fellow with the Peterson Institute for International Economics, the former 0:00:50.680 --> 0:00:53.479 chairman of the White House Council of Economic Advisors, and 0:00:53.800 --> 0:00:55.560 as of last week, he's professor with the Practice of 0:00:55.600 --> 0:00:58.080 Economic Policy at the Harvard Kennedy School. He's in our 0:00:58.120 --> 0:01:01.240 nine nine one studios with Tom in Washington, a DC. 0:01:01.400 --> 0:01:03.000 Great to have you with us, Jason, and congrats on 0:01:03.120 --> 0:01:06.520 making your home Eric return to to Harvard. Thanks so much. 0:01:07.360 --> 0:01:09.080 Let me let me start by asking you about what 0:01:09.120 --> 0:01:11.400 we heard from the Treasury Secretary yesterday. He was speaking 0:01:11.400 --> 0:01:13.880 in an i F event yesterday was asked quite a 0:01:13.880 --> 0:01:16.479 bit about the prospects for tax reform, where things stand, 0:01:16.480 --> 0:01:19.640 where things are are headed and uh, the speech, the 0:01:19.680 --> 0:01:21.880 comments were suffused with optimism. This is going to happen 0:01:22.440 --> 0:01:24.399 here in the not too distant future. What's your sense 0:01:24.440 --> 0:01:27.280 of of what's happening. What are the holdups towards getting uh, 0:01:27.480 --> 0:01:29.520 some indication of what tax from looks like to this 0:01:29.520 --> 0:01:33.920 Trump administration. The hold up is the administration hasn't told 0:01:34.040 --> 0:01:38.040 us what it's in favor of it. First I thought 0:01:38.040 --> 0:01:40.440 they were going to let Congress write the plan. That 0:01:40.440 --> 0:01:44.000 wouldn't be such a terrible thing. The House Republican blueprint 0:01:44.040 --> 0:01:47.400 from last year actually had a lot of good, thoughtful 0:01:47.440 --> 0:01:49.560 ideas and it had some problems too, but had a 0:01:49.560 --> 0:01:51.480 lot of thoughtful ideas and a lot of thought went 0:01:51.520 --> 0:01:54.080 into it. Um, the administration said they don't want to 0:01:54.080 --> 0:01:56.080 go that route. They want to put out their own plan, 0:01:56.800 --> 0:01:59.520 but we haven't heard what it is. What we heard 0:01:59.600 --> 0:02:02.680 yesterday though, was concerning which is that they want a 0:02:02.720 --> 0:02:07.800 net tax cut rather than a genuine revenue neutral tax reform. 0:02:07.840 --> 0:02:10.600 And I don't think, um, a tax cut is something 0:02:10.639 --> 0:02:14.440 that you could get bipartisan support for, and without bipartisan support, 0:02:14.480 --> 0:02:17.040 I don't think you can really do the types of 0:02:17.080 --> 0:02:19.760 reforms we need to do UM to make our tax 0:02:19.760 --> 0:02:22.720 code more efficient and more competitive. You've been in Washington while, 0:02:22.760 --> 0:02:24.680 so let me get some inside from you into into 0:02:24.720 --> 0:02:27.280 this process. A lot of people saying it's it's overly 0:02:27.320 --> 0:02:29.880 ambitious to think you could get tax reform done quickly. 0:02:29.880 --> 0:02:32.240 These type of things take a very long time. But 0:02:32.240 --> 0:02:34.440 when you're dealing with something like this, the longer rout 0:02:34.480 --> 0:02:36.679 plays out, does it become more complicated as you get 0:02:36.680 --> 0:02:38.880 more people to fighting over what goes in and what 0:02:39.040 --> 0:02:41.959 comes out? There's an interplay. At some point. You don't 0:02:41.960 --> 0:02:44.680 want the fish lying on the dock too long because 0:02:44.720 --> 0:02:47.200 it just starts to starts to smell um. But it 0:02:47.240 --> 0:02:49.640 takes a while to figure out how to get to 0:02:49.680 --> 0:02:51.760 that point, and then you strike and try to move 0:02:52.360 --> 0:02:55.880 as quickly as possible. The last time we did tax reform, 0:02:55.919 --> 0:02:59.280 the Treasury put out a two volume, really comprehensive study 0:02:59.639 --> 0:03:04.359 in nine teen eight four. Congress spent the next two years. 0:03:05.000 --> 0:03:08.920 They made it worse. They added all sorts of transition rules, giveaways, 0:03:08.919 --> 0:03:10.840 took out some of the good things UM. But what 0:03:10.919 --> 0:03:13.760 came out of it was still a lot better than UM. 0:03:14.240 --> 0:03:17.640 The law ex empty and that was a too year process. 0:03:17.639 --> 0:03:20.160 I mean, part of this is even just technically complicated. 0:03:20.160 --> 0:03:24.079 People talk about, you know, border adjustment or ending interest deductions. 0:03:24.440 --> 0:03:27.040 Those are really tricky things to figure out the details. 0:03:27.120 --> 0:03:30.119 You need proposals out there so people can discuss and 0:03:30.240 --> 0:03:32.240 work on that, and they're just not right now. You've 0:03:32.240 --> 0:03:34.520 been in the White House working on policy in concert 0:03:34.600 --> 0:03:37.520 with with the Congress. What's your sense of what that 0:03:37.560 --> 0:03:40.360 relationship is like today? In other words, do you get 0:03:40.400 --> 0:03:42.400 the sense here that when it comes to taxi form, 0:03:42.400 --> 0:03:46.040 Republicans in Congress are working in concert with the White House? 0:03:46.080 --> 0:03:47.800 Who are we seeing sort of a parallel track here? 0:03:49.440 --> 0:03:53.160 You're seeing, um, a bit of a parallel track. Um, 0:03:53.200 --> 0:03:55.920 in fact, three different tracks. Um. You have the House, 0:03:56.000 --> 0:03:59.680 which is in favor of border adjustment. You have the 0:03:59.680 --> 0:04:03.280 White House, which up until recently hadn't decided allough now 0:04:03.320 --> 0:04:05.520 maybe it seems like they're against it. And then you 0:04:05.560 --> 0:04:09.480 have the Senate, which is opposed to anything. Um, the 0:04:09.520 --> 0:04:12.360 houses in favor of and these three tracks I'm talking 0:04:12.360 --> 0:04:16.440 about right now, all three of them are Republican tracks. So, um, 0:04:16.480 --> 0:04:20.000 you know, really the hope we have would be to 0:04:20.040 --> 0:04:22.719 get on the same page, and that page should be 0:04:22.720 --> 0:04:26.000 revenue neutral. It should be distribution neutral. That still leaves 0:04:26.040 --> 0:04:28.279 a lot of room for a nine six style tax 0:04:28.320 --> 0:04:30.480 or form of lower tax rates that would help our economy. 0:04:31.080 --> 0:04:32.960 Jason Furman with us. He's a former chairman of the 0:04:33.000 --> 0:04:35.839 President's Council of Economic Advisors. I was bragging about you 0:04:36.360 --> 0:04:40.680 in TV about the public good for Republicans, Democrats, for 0:04:40.760 --> 0:04:46.200 the politically disaffected. On the state of the nation's labor force. 0:04:46.640 --> 0:04:49.560 It's international economics here and we're doing steel tariffs and 0:04:49.640 --> 0:04:53.680 the rest. What was the key surprise for you and 0:04:53.760 --> 0:04:57.760 your August team when you did look at labor participation 0:04:57.880 --> 0:05:00.719 in the this mystery of our unemploy What was the 0:05:00.800 --> 0:05:04.279 thing that jumped out at you? That the problem dates 0:05:04.279 --> 0:05:07.360 back a lot further than most people realize. It's not 0:05:07.480 --> 0:05:10.920 just this recession and recovery. Give me helpe me, Martin 0:05:11.000 --> 0:05:17.880 van Buren. Um goes back to and the problem has 0:05:17.880 --> 0:05:21.200 been the problem has been growing since the nineties. It's 0:05:21.240 --> 0:05:24.360 been growing steadling. When I met you, you were talking 0:05:24.360 --> 0:05:28.640 about Hans Solo, which is a lovely monograph from the fifties. Frankly, 0:05:29.040 --> 0:05:33.359 from our Growthiness and our Study of Growthiness of nineteen 0:05:33.400 --> 0:05:36.200 fifty seven and fifty eight. Can we use those same 0:05:36.279 --> 0:05:38.440 theories now or do you guys have to come up 0:05:38.480 --> 0:05:42.200 with a new regime of theory to get people employed 0:05:42.320 --> 0:05:46.479 in America. I think some of those classic growth models 0:05:46.480 --> 0:05:52.599 from the nineteen fifties help us understand and diagnose the problem. 0:05:52.640 --> 0:05:54.880 And one of the problems we have right now is 0:05:54.960 --> 0:05:58.440 very low productivity growth. Part of that is low total 0:05:58.560 --> 0:06:03.000 factor product activity, which is a measure of innovation in 0:06:03.040 --> 0:06:05.240 a way of thinking about it um and trying to 0:06:05.279 --> 0:06:08.159 understand what we can do better there um. If we don't, 0:06:08.320 --> 0:06:10.480 we don't have faster productivity growth, We're not going to 0:06:10.560 --> 0:06:13.240 be able to have faster wage growth. And that's why 0:06:13.279 --> 0:06:16.200 the business tax reform we're talking about, for example, is 0:06:16.320 --> 0:06:19.800 one of the important ingredients in getting our productivity growth up. 0:06:20.200 --> 0:06:23.120 Are we getting any better at measuring productivity? Tom knows. 0:06:23.120 --> 0:06:25.360 I was talking with Steve Balmer, former CEO of Microsoft 0:06:25.360 --> 0:06:27.720 earlier this week. He's very into data in his new 0:06:27.720 --> 0:06:30.880 Waking website looking out data, but but he's also been 0:06:30.920 --> 0:06:34.279 thinking about how we measure productivity with technology in specific, 0:06:34.279 --> 0:06:36.400 Are we getting any better at doing it? I don't 0:06:36.400 --> 0:06:39.640 think we're getting any better at doing it, but I'm 0:06:39.680 --> 0:06:41.919 not as convinced as a lot of people are that 0:06:41.960 --> 0:06:44.320 we're getting a whole lot worse at doing it. Either 0:06:44.360 --> 0:06:47.240 there's a lot we were missing ten years ago, twenty 0:06:47.320 --> 0:06:50.120 years ago, thirty years ago. UM. I think the productivity 0:06:50.160 --> 0:06:52.680 slow down is real, and I think it's because the 0:06:52.720 --> 0:06:58.400 innovation we're seeing is concentrated in a relatively narrow slice 0:06:58.400 --> 0:07:01.039 of our economy, and average, over the economy as a whole, 0:07:01.080 --> 0:07:05.520 which includes construction and um you know, education and all 0:07:05.560 --> 0:07:08.520 sorts of things, on average, you're not seeing the type 0:07:08.560 --> 0:07:11.000 of productivity growth we'd like to see. The person whos 0:07:11.040 --> 0:07:13.600 named your successor, Kevin has it's gonna head up the 0:07:13.600 --> 0:07:16.520 Council of Economic Advisors now in his administration. Give us 0:07:16.560 --> 0:07:19.480 a sense of of how the council works. Will he 0:07:19.560 --> 0:07:22.320 set an objective and agenda for the council? Does it 0:07:22.360 --> 0:07:25.400 tell us about the president's economic agenda? What what's the 0:07:25.520 --> 0:07:27.800 what's what's the role of that person in this administration 0:07:27.800 --> 0:07:29.520 going to be um At first of all, I want 0:07:29.520 --> 0:07:31.320 to say Kevin Hassett is a great pick, and I 0:07:31.360 --> 0:07:35.320 would love to see him UM confirmed by the Senate 0:07:35.360 --> 0:07:38.960 for that position because the role of c e A 0:07:39.400 --> 0:07:43.280 UM it has both an internal role, and there's a 0:07:43.400 --> 0:07:46.640 large truth to compower. Components of that UM C e 0:07:46.760 --> 0:07:49.760 A are PhD trained economists. They tend to be much 0:07:49.840 --> 0:07:53.440 less political. They're much less into defending the talking points 0:07:53.800 --> 0:07:56.120 UM and more into figuring out, you know what the 0:07:56.120 --> 0:07:58.840 truth is now. Kevin has a different perspective than me 0:07:58.960 --> 0:08:03.600 on some issues. I think, UM, he has two large 0:08:03.600 --> 0:08:05.680 a notion of what a corporate tax cut to do 0:08:05.760 --> 0:08:08.360 for the economy, for example, UM. But those are honest 0:08:08.560 --> 0:08:12.560 UM debates between economists, and I think I'll feel a 0:08:12.560 --> 0:08:15.080 whole lot better if I know there's an economist sitting 0:08:15.120 --> 0:08:17.960 there making those arguments. When when you look at the 0:08:18.040 --> 0:08:20.280 numbers that can come out, it all wraps up in 0:08:20.360 --> 0:08:22.560 fiscal policy. One of the themes of these I MF 0:08:22.680 --> 0:08:26.280 meetings has been a lot more discussion here of UH 0:08:26.360 --> 0:08:30.240 fiscal policy is a good solution for growth and society? 0:08:30.720 --> 0:08:34.480 What kind of republican policy do we need? And that 0:08:34.640 --> 0:08:38.120 you mentioned Eisenhower earlier, there's a history here of different 0:08:38.200 --> 0:08:41.880 kinds of republican policy. What is the best practice of 0:08:41.960 --> 0:08:47.360 republican fiscal economics? The best practice to deal with our 0:08:47.600 --> 0:08:51.320 medium and long run deficit problem would be something along 0:08:51.440 --> 0:08:54.000 lines of the type idea of both Simpson Hadden. They 0:08:54.040 --> 0:08:56.680 had two principles. One is you need to do both 0:08:56.800 --> 0:09:01.560 revenue and spending. Number two, you couldn't do it at 0:09:01.559 --> 0:09:05.080 the expense of low income program Why can't we? And 0:09:05.720 --> 0:09:08.560 you know because you haven't. You have an approach right 0:09:08.600 --> 0:09:12.160 now that violates both of those. It rather than raising revenue, 0:09:12.200 --> 0:09:17.360 it cuts revenue, and rather than dealing with entitlements, it 0:09:17.480 --> 0:09:19.839 just cuts low income programs. So it violates both of 0:09:19.880 --> 0:09:24.360 the Bull Simpson principles. And that's not a basis for 0:09:24.400 --> 0:09:28.960 bipartisan agreement. In fact, the history of Republicans reigning in 0:09:29.000 --> 0:09:32.199 the medium and long term deficit through entitlement savings on 0:09:32.240 --> 0:09:35.559 their own is nil. There is none of it. The 0:09:35.600 --> 0:09:37.959 only way to do it is bipartisan. The only way 0:09:37.960 --> 0:09:41.679 to these things. Bipartisan has put revenue and spending both 0:09:41.720 --> 0:09:44.200 on the table. Jason Firmer, thanks for time to I appreciate. 0:09:44.240 --> 0:09:46.360 That's Jason firm and Senior fellow at the Peterson Institute 0:09:46.360 --> 0:09:50.040 for International Economics, Professor the Practice of Economic Policy at 0:09:50.040 --> 0:09:53.000 the Harvard Kennedy School up in Cambridge. You start, when 0:09:53.040 --> 0:09:57.240 does that start this semester? I'll be moving up there. 0:09:57.320 --> 0:09:59.280 This summer terrific. Look forward to talk to you again. 0:09:59.320 --> 0:10:01.720 So Jason from anjoin us our Bloomberg ninety nine studios. 0:10:14.040 --> 0:10:17.800 We're talking international economics. Olivia Blanchard among others will join 0:10:17.880 --> 0:10:20.560 us at a moment, but right now we touch on that. 0:10:21.080 --> 0:10:26.120 But digress to this Washington. Her Washington. She is Alice Rivlin, 0:10:26.400 --> 0:10:29.520 who just flat out invented what we do on modern 0:10:29.760 --> 0:10:34.080 fiscal policy at the Congressional Budget Office UH provided public 0:10:34.120 --> 0:10:37.120 service as vice chairman of the Federal Reserve System as well. 0:10:37.240 --> 0:10:39.600 Dr Rivlin, wonderful to see you. You and I were 0:10:39.640 --> 0:10:43.319 reminiscing about the value of Ben's Chili Bowl on you 0:10:43.559 --> 0:10:46.599 Street from a few from a few years ago. You 0:10:46.640 --> 0:10:48.320 used to go up there, your kids went to school 0:10:48.559 --> 0:10:52.439 with Ben's kids, etcetera, etcetera. This Washington is so different 0:10:52.480 --> 0:10:56.839 from when Ben's Chili Bowl was becoming iconic. Does anybody 0:10:56.840 --> 0:10:59.480 of the elite down here, including the President United States? 0:10:59.760 --> 0:11:03.040 Did I understand that a society has to get along 0:11:03.320 --> 0:11:08.280 and find a common ground? Unfortunately, I think not at 0:11:08.280 --> 0:11:10.960 the moment. There are plenty of people who do understand that, 0:11:11.320 --> 0:11:15.880 but our political system is so polarized and our parties 0:11:15.960 --> 0:11:19.240 are so angry at each other that we're just not 0:11:19.360 --> 0:11:22.200 getting anything done. You and I talked of Tip O'Neill 0:11:22.320 --> 0:11:26.080 in in uh President Reagan earlier. Let's take it to 0:11:26.120 --> 0:11:31.559 the legislative branch in itself. Olympia, Snow or Hatch could 0:11:31.559 --> 0:11:36.160 provide conversation with the respected senator from Massachusetts, whether it 0:11:36.200 --> 0:11:39.640 was Ed Brooke or Ted Kennedy. How do we get 0:11:39.679 --> 0:11:43.360 back to them to what you knew? Well, I think 0:11:43.360 --> 0:11:47.400 it's gonna take both leadership and public pressure. If you 0:11:47.480 --> 0:11:51.480 read the polls, you know that the public is just 0:11:51.640 --> 0:11:56.400 put out with the Congress and their lack of getting 0:11:56.400 --> 0:12:01.080 anything done in the Congress rates very low it always has, 0:12:01.200 --> 0:12:04.760 but UH much lower now. And there is real public 0:12:04.920 --> 0:12:09.920 anger about the bridlock and about the polarization, but it's 0:12:10.000 --> 0:12:12.920 very hard to break through. Dr Rivelin a few months back, 0:12:12.960 --> 0:12:15.800 we were talking about a return to regular order on 0:12:15.880 --> 0:12:19.120 Capitol Here, we're gonna have a regular budget process once 0:12:19.480 --> 0:12:24.280 once again. Was our optimism misplaced? Yes? I think that 0:12:24.720 --> 0:12:27.960 the best we can hope for right now, UH is 0:12:28.200 --> 0:12:31.560 not closing down the government. That's a pretty low threshold, 0:12:31.600 --> 0:12:34.680 but it's important not to do that. I think the 0:12:34.920 --> 0:12:41.040 Congress will essentially for the moment, ignore the President's very 0:12:41.160 --> 0:12:46.320 drastic budget proposal that cuts deeply into domestic spending and 0:12:46.400 --> 0:12:51.599 adds to defense. Uh, they will pass a continuing resolution, 0:12:51.760 --> 0:12:55.880 or rather an omnibus appropriations bill that pretty much keeps 0:12:55.960 --> 0:12:59.520 things where they are and adds some to the defense 0:12:59.600 --> 0:13:03.480 budget in the Special Overseas Account. I hope I'm not 0:13:03.520 --> 0:13:05.199 telling tales out of school here. The last time I 0:13:05.200 --> 0:13:06.880 spoke with you down and Watchington during a break, you 0:13:06.920 --> 0:13:08.680 said to me, we spend too much time focusing on 0:13:08.760 --> 0:13:11.720 monetary policy and too little time talking about the Fed's 0:13:11.800 --> 0:13:14.600 role when it comes to regulation. Here. We are almost 0:13:14.640 --> 0:13:17.600 a hundred days into this administration, and I wonder what 0:13:17.640 --> 0:13:21.000 we know about how the FED is approaching regulation, how 0:13:21.040 --> 0:13:22.560 the how the White House would like to see the 0:13:22.559 --> 0:13:25.480 FED approach regulation, What shape the the f sock, the 0:13:25.520 --> 0:13:28.200 Financial Stability Oversight Council is going to take here under 0:13:28.240 --> 0:13:32.880 President Trump. Well, I don't think we know very much. Actually. Uh. 0:13:32.960 --> 0:13:37.240 There's been talk about repealing Dodd Frank and things like that, 0:13:37.280 --> 0:13:40.120 but I don't think that's going to happen. We haven't 0:13:40.160 --> 0:13:44.880 had many clues as to where the administration is going 0:13:45.320 --> 0:13:48.600 on financial regulation. I think what they ought to do 0:13:49.520 --> 0:13:53.760 is keep the reforms of Dodd Frank which have mainly 0:13:53.880 --> 0:13:58.640 strengthened the financial system and made us less vulnerable. Uh, 0:13:58.679 --> 0:14:02.760 they could ease up on the regulations on smaller financial 0:14:02.800 --> 0:14:08.280 institutions which are arguably over the top. Within our budget 0:14:08.600 --> 0:14:10.960 is our military. I believe this week we lost an 0:14:11.000 --> 0:14:14.280 aircraft carrier. We thought it was up in the Northern Pacific. Yeah, 0:14:14.320 --> 0:14:15.960 we didn't know which way it was going. You know 0:14:16.040 --> 0:14:19.000 which way it was. It was going very quickly here. 0:14:19.320 --> 0:14:21.280 Uh do we do we have a control of our 0:14:21.320 --> 0:14:25.000 Pentagon budget? Do we do we know where the marginal billion? 0:14:25.200 --> 0:14:27.080 In honor of Mr Dirkson? Do we know where the 0:14:27.120 --> 0:14:30.640 marginal billion or trillion is going? Oh? Yes? I think so. 0:14:31.920 --> 0:14:36.200 It's the processes, the processes in uh control. And I 0:14:36.200 --> 0:14:39.320 think we now have a strong leadership in the Defense 0:14:39.320 --> 0:14:42.920 Department in general. Madison. Okay, Alice Land, thank you so 0:14:43.000 --> 0:14:45.920 much for joining us today for starting thank you your day. 0:14:46.160 --> 0:14:48.560 Whether she's a former vice chair of the funder Reserve 0:14:48.600 --> 0:14:52.600 System and of interest in a calming influence on my 0:14:52.720 --> 0:15:07.680 worries about the budget. David Gurr in New York, I'm 0:15:07.680 --> 0:15:13.200 Tom Keene and Washington A studios in Washington on I Street, 0:15:13.240 --> 0:15:15.680 I think, David, I'm on I Street, New York, and 0:15:16.000 --> 0:15:18.720 it's confusing at my hotels on H Street and I'm 0:15:18.800 --> 0:15:22.480 on Ice Street and g H yeah, it's and I 0:15:22.760 --> 0:15:24.920 What's cool, folks, is from our office you can look 0:15:24.960 --> 0:15:27.960 down New York Avenue and see the Church of Abraham Lincoln. 0:15:28.280 --> 0:15:31.920 That is way Bloomberg surveillance this morning in New York. 0:15:31.960 --> 0:15:35.920 In Washington, joining us now, Um, David Gurr, why don't 0:15:35.960 --> 0:15:38.800 you bring in Governor Frankel. I think I've I've talked 0:15:38.800 --> 0:15:41.000 to him this morning. Why don't you bring in the 0:15:41.200 --> 0:15:43.680 esteem Jacob Frank. Yes, he's the chairman of JP Morgan 0:15:43.760 --> 0:15:46.040 Chase International, Chairman of the board of trustees the Group 0:15:46.040 --> 0:15:48.600 of thirty. Of course, former governor of the Bank of Israel. 0:15:48.680 --> 0:15:50.600 Jacob Frankel joining us on our phone lines. Great to 0:15:50.640 --> 0:15:53.120 speak with you, and let me start by by asking 0:15:53.160 --> 0:15:56.040 you about the agenda for the meetings in Washington today 0:15:56.080 --> 0:15:59.240 tomorrow through through the weekend. Here to what degree is 0:15:59.240 --> 0:16:02.440 is what's happening in the US overshadowing a larger conversation 0:16:02.480 --> 0:16:05.520 about global growth in the global economy. Imagine there's a 0:16:05.560 --> 0:16:08.920 lot of curiosity about what's going on, what's being discussed 0:16:08.960 --> 0:16:10.720 in the White Building just a few blocks away from 0:16:10.720 --> 0:16:14.080 my left headquarters. Good morning. Well, of course there is 0:16:14.120 --> 0:16:18.160 a great interest, but the United States is not just 0:16:18.440 --> 0:16:23.080 another country. It is the major country, and therefore needless 0:16:23.080 --> 0:16:26.480 who say there is a great focus on the US, 0:16:26.520 --> 0:16:29.600 but there is also a great focus on the inter 0:16:29.720 --> 0:16:33.920 relationships between the US and the rest of the world. 0:16:34.000 --> 0:16:37.560 And in this context the subject of protection isn't comes up, 0:16:37.680 --> 0:16:40.560 and a lot of people are concerned and are worried. 0:16:41.280 --> 0:16:44.920 There is a discussion, of course, what is happening now 0:16:45.240 --> 0:16:50.280 literally as we speak, both in Terris in terms of 0:16:50.360 --> 0:16:54.440 the election, what will happen very shortly in the United 0:16:54.520 --> 0:16:58.800 Kingdom with the elections. So there is a situation here 0:16:59.000 --> 0:17:04.960 that the pot see structure is still in a form 0:17:05.160 --> 0:17:09.680 formative stage. We cannot now analyze what is the effects 0:17:09.720 --> 0:17:14.600 of the policies because the policies themselves are still undefined. 0:17:15.000 --> 0:17:18.399 In the United States, a lot of curiosity is about 0:17:18.880 --> 0:17:24.399 the budget and about the deregulations, because the fact of 0:17:24.440 --> 0:17:28.960 the matter is that in order to carry out some 0:17:29.200 --> 0:17:35.320 of the agenda that the new administration set for itself, 0:17:35.760 --> 0:17:39.440 one needs to have the means to finance it. The 0:17:39.640 --> 0:17:45.280 fact that the health scales the Obamacare revision has not 0:17:45.480 --> 0:17:50.080 gone through yet from the fundamental issue of the budget 0:17:50.280 --> 0:17:55.280 means that there is less resources to finance or to 0:17:55.520 --> 0:17:59.480 cover the cost of the tax reform. And this has 0:17:59.560 --> 0:18:04.880 been a major major elements that created optimism in the market, 0:18:05.000 --> 0:18:11.440 both the tax reform deregulations and fiscal expenditures in areas 0:18:11.480 --> 0:18:16.119 that are growth producers like infrastructure. These are the areas 0:18:16.160 --> 0:18:20.159 everyone from the US still speaks about these areas, and 0:18:20.240 --> 0:18:22.679 everyone from the rest of the world is saying, and 0:18:22.720 --> 0:18:25.840 what about our links to the US, and hence the 0:18:25.880 --> 0:18:29.560 protectionism and open markets out there. I must say that 0:18:29.720 --> 0:18:33.720 in the corridors, whereas in the past the subjects were 0:18:33.840 --> 0:18:38.320 always about about the financial markets and about the economic 0:18:38.400 --> 0:18:42.919 uncertainty DOSMOS spilled, this time is very different. The i 0:18:43.119 --> 0:18:46.760 m F has produced the World Economic Outlook document in 0:18:46.760 --> 0:18:51.600 which the revisions of growth are upwards, not downworlds in 0:18:51.640 --> 0:18:55.600 which all major regions of the world are growing positively 0:18:55.960 --> 0:18:59.919 not negatively. So this means that the sources of answer 0:19:00.000 --> 0:19:04.600 open are now shifted to the geopolitics rather than the 0:19:04.720 --> 0:19:09.000 chief finance. And of course North Korea is an important 0:19:09.040 --> 0:19:12.720 subject everywhere that you walk. But what is the focus 0:19:12.800 --> 0:19:17.360 of these international meetings. In our modern guilded age, it's 0:19:17.400 --> 0:19:21.879 widely presumed that the gains of our growth, and the 0:19:22.000 --> 0:19:26.359 gains from our better growth are going to the technology 0:19:26.480 --> 0:19:31.000 the elites of society. How do we distribute those gains 0:19:31.040 --> 0:19:35.080 soon to a greater part of the public. You are 0:19:35.160 --> 0:19:40.199 absolutely right. Indeed, twenty five years ago, when I was 0:19:40.800 --> 0:19:43.560 in charge of the production of the World Economic Outlook, 0:19:43.960 --> 0:19:48.440 the discussion was about growth. Later on it shifted to 0:19:48.960 --> 0:19:54.640 sustainable growth, and subsequently it has shifted towards inclusive growth. 0:19:54.920 --> 0:19:57.920 People understand that growth, to say, is not good enough, 0:19:58.320 --> 0:20:00.840 and it's not good enough because it is not sustainable, 0:20:00.920 --> 0:20:04.560 and it is not sustainable if it is not inclusive. So, therefore, 0:20:05.200 --> 0:20:09.440 the recognition that it is important that the benefits from growth, 0:20:09.840 --> 0:20:13.240 and the benefits from trade and the benefits from good 0:20:13.280 --> 0:20:18.080 measures are spread throughout society is an integral part of 0:20:18.240 --> 0:20:22.240 the economic discussion and this requires, of course, when you 0:20:22.320 --> 0:20:26.879 make changes the trade adjustment a systems, it has to 0:20:27.000 --> 0:20:29.760 be budgeted and it has the fault to be part 0:20:29.800 --> 0:20:35.160 of the priorities. This means that the education system must 0:20:35.240 --> 0:20:38.960 be reflecting the fact that in the modern world what 0:20:39.240 --> 0:20:43.520 one needs to give our young students is not knowledge 0:20:43.600 --> 0:20:48.080 but the case because knowledge becomes obsolete, but the capability 0:20:48.280 --> 0:20:53.919 of learning, of learning in changes circumstances. There it's a 0:20:54.080 --> 0:20:59.040 very different setting where innovation becomes important, but where one 0:20:59.119 --> 0:21:02.920 needs to recommend that the greatest enemy. Sure, we don't 0:21:02.960 --> 0:21:06.560 want to have a situation in which technological progress becomes 0:21:06.560 --> 0:21:10.800 the villain, but it must become the hope. And the 0:21:10.880 --> 0:21:14.920 way in which it is sustainable hope is that we 0:21:15.320 --> 0:21:18.919 pay clear attention not only in lip service but in 0:21:19.040 --> 0:21:24.159 budgets to deal with those who need to go through adjustment. 0:21:24.200 --> 0:21:26.480 It's out of the society, Dr Frank, I want to 0:21:26.480 --> 0:21:28.320 return to the corridors of the I m F and 0:21:28.359 --> 0:21:30.639 the World Bank in Foggy Bottom if I could. And 0:21:30.640 --> 0:21:33.640 I wonder how much anxiety you're picking up on there 0:21:33.680 --> 0:21:37.159 about multilateralism in the future of multilateralism, of course. A 0:21:37.240 --> 0:21:39.840 Secretary of the Treasury, Stephen Manuchon, was on stage yesterday 0:21:39.840 --> 0:21:42.960 with Mark Weinberger, the chairman and CEO of e Y 0:21:43.040 --> 0:21:46.320 formerly Ernst and Young. This weekend, the Treasury sector will 0:21:46.320 --> 0:21:49.040 be on stage with Madame Legarde for a conversation I 0:21:49.119 --> 0:21:53.280 expect that the contours of that conversation will be different. 0:21:53.440 --> 0:21:56.320 Is her job there to make a case for anumber 0:21:56.320 --> 0:21:58.359 the issues that you were just discussing, make the case 0:21:58.400 --> 0:22:00.800 for the importance of that can see it importance of 0:22:00.840 --> 0:22:04.440 the I m F and the World Bank. Absolutely. Christina 0:22:04.480 --> 0:22:09.040 god is the best spoken spoke person for the vilsus 0:22:09.119 --> 0:22:12.560 of globalization, for the fact that if you have an 0:22:12.720 --> 0:22:20.840 interconnected world, you must create the institutions that facilitate this interconnectedness, 0:22:21.000 --> 0:22:25.640 that the globalization is an asset rather than a liability, 0:22:26.200 --> 0:22:30.879 and that in order to make globalization and a success 0:22:31.000 --> 0:22:33.800 easy that you make you must pay attention to it. Yes, 0:22:34.000 --> 0:22:37.359 so the international organizations out there, Remember how did it 0:22:37.400 --> 0:22:40.080 all start? It all started at the end of the 0:22:40.119 --> 0:22:46.480 Second World War. Well, countries were dispersed, they were antagonistic, 0:22:46.680 --> 0:22:50.200 they were separated from each other, and it was understood 0:22:50.480 --> 0:22:55.479 that in order to promote economic prosperity, you must allow 0:22:55.560 --> 0:22:59.520 the interaction between the countries, which, in addition to providing 0:22:59.680 --> 0:23:04.359 better economic basis, it will also provide the fundamental security 0:23:04.440 --> 0:23:08.520 against hostilities, because everyone will extend to lose if you 0:23:08.640 --> 0:23:12.880 break a very well functioning system. Hence, the world back 0:23:12.920 --> 0:23:16.000 and the i MS were created in the Breton Woods Organization. 0:23:16.400 --> 0:23:20.440 Then people realize that you order to be successful countries 0:23:20.480 --> 0:23:23.800 that are engaged in production, which to have the capability 0:23:23.840 --> 0:23:26.800 of selling those products in the world, and the benefits 0:23:26.840 --> 0:23:31.480 will be shared through trade. Hence the World Trade Organization 0:23:31.640 --> 0:23:34.760 was created and trade agreements were there. It is all 0:23:35.359 --> 0:23:40.200 not the products of people looking for organizations and bureaucracy, 0:23:40.680 --> 0:23:45.040 but whether people looking for mechanisms by which their astivations 0:23:45.160 --> 0:23:49.240 can be translated into reality. You can you can invent 0:23:49.320 --> 0:23:51.879 the best cut in the world. If you don't have 0:23:51.960 --> 0:23:56.359 good rows, the cut will not reflect the greatness. So 0:23:56.520 --> 0:24:00.000 this is all interconnected. Yes, christ Agout is the perfect 0:24:00.040 --> 0:24:03.920 in the champion today to bring it about well. Jacob Frankl, 0:24:04.040 --> 0:24:06.080 thank you so much, as always for your perspective on 0:24:06.080 --> 0:24:09.760 Bloomberg Television in Bloomberg Radio this morning. He is chairman 0:24:09.800 --> 0:24:12.560 of JP Morgan International, the former governor of the Bank 0:24:12.600 --> 0:24:16.639 of Israel, and of course his research decades ago at 0:24:16.640 --> 0:24:26.280 the University of Chicago still speaks today. Brought to you 0:24:26.359 --> 0:24:30.040 by Bank of America Mary Lynch, dedicated to bringing our 0:24:30.040 --> 0:24:33.639