WEBVTT - Larry Summers Talks US Election

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>As we turn out to an important conversation. I've said

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<v Speaker 2>it more than once today, we are throwing the best

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<v Speaker 2>of Bloomberg at this election coverage, and of course that

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<v Speaker 2>includes our colleague, Bloomberg's Wall Street Week anchor David Weston,

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<v Speaker 2>who joins us now for a special conversation with Larry Summers,

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<v Speaker 2>the former US Treasury Secretary and Wall Street Week contributor.

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<v Speaker 3>David.

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<v Speaker 4>Yeah, Joe, Thank you very much, Chris. That is the

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<v Speaker 4>very best of Bloomberg is Larry Summers, who's our special

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<v Speaker 4>contributor in Wall Street and of course belong identic with Harvard.

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<v Speaker 4>We're on the edge of the Harvard campus right here

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<v Speaker 4>in Cambridge. Larry, thank you so much for joining us.

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<v Speaker 3>Good to be with you.

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<v Speaker 4>It's election day, Election night. What's done your mind?

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<v Speaker 1>I'm nervous and watching like everybody else. No one knows

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<v Speaker 1>what's going to happen, and it's foolish to try to predict.

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<v Speaker 1>I'm struck that Kamala Harris, I think, has had a

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<v Speaker 1>very good week. Her at the Lincoln Memorial was a

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<v Speaker 1>very different thing than Donald Trump at Madison Square Garden,

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<v Speaker 1>the vibes are pretty clearly moving one way. Women have

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<v Speaker 1>turned out on an epic scale. I'm told the exit

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<v Speaker 1>polls are saying democracies the primary issue. So I have

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<v Speaker 1>a feeling that there may be a fair sized turn

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<v Speaker 1>in her direction. But look, we'll know the answer in

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<v Speaker 1>a few hours, and no one can really know, so

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<v Speaker 1>we'll just have to We'll just have to see. But

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<v Speaker 1>who's ever the next president? They are going to have

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<v Speaker 1>quite a difficult and challenging inbox on the economy.

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<v Speaker 4>Well, that's what I want to talk about, because time

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<v Speaker 4>will tell. We'll see how much time it is is

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<v Speaker 4>required to tell, but we'll know sooner or later whether

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<v Speaker 4>it's Donald Trump, oconwall Aris, whoever it is. When they

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<v Speaker 4>walk into the Oval office, what in terms of economics

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<v Speaker 4>will they have on their desk?

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<v Speaker 1>Look, the positive thing they're going to have is that

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<v Speaker 1>the American economy has been epically strong in a structural

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<v Speaker 1>sense throughout the twenty five century. We've grown far more

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<v Speaker 1>rapidly than Europe, far more rapidly than Japan. China is

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<v Speaker 1>really having a lot of trouble. The American economy and

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<v Speaker 1>American companies capacity to deal with technology is really quite

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<v Speaker 1>extraordinary and is a huge source of strength for our country.

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<v Speaker 1>And that is an enormous asset. And we're going to

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<v Speaker 1>talk about all the problems, but I'd rather be playing

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<v Speaker 1>the hand of the United States than the hand of

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<v Speaker 1>any other country. That said, just because things are going

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<v Speaker 1>your way doesn't mean there aren't huge challenges. We have

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<v Speaker 1>a huge national security challenge in a way we have

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<v Speaker 1>not since the end of the Cold War.

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<v Speaker 3>The combined axis of.

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<v Speaker 1>China, Russia, Iran, North Korea is at to our long

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<v Speaker 1>run security interests the likes of which we have not

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<v Speaker 1>seen probably in two generations. And the best way to

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<v Speaker 1>respond to that is with economic strength, and that starts

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<v Speaker 1>from a painful question, how long can the world's greatest

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<v Speaker 1>debt or remain the world's greatest power. And we do

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<v Speaker 1>not have a national debt and deficit situation that is

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<v Speaker 1>currently on a sustainable basis. There is no way that

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<v Speaker 1>you can debate whether we go three years, whether we

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<v Speaker 1>go five years, whether we go one year, whether we

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<v Speaker 1>go fifteen years.

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<v Speaker 3>But there is no argument that the.

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<v Speaker 1>Current path is likely to be sustainable. And that means

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<v Speaker 1>that we need some very difficult adjustments. Those adjustments are

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<v Speaker 1>not going to come given the security environment from cutting

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<v Speaker 1>national defense. I think it's politically extremely difficult. And in

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<v Speaker 1>a world where the top social security benefit is for

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<v Speaker 1>an individual forty or forty five thousand dollars, I don't

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<v Speaker 1>think it's especially attractive to think about cutting social security

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<v Speaker 1>benefits as a response. So we are going to need

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<v Speaker 1>to raise revenue as a country, and that's why the

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<v Speaker 1>most important thing that the President of the United States

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<v Speaker 1>is going to deal with on the economy in twenty

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<v Speaker 1>twenty five is going to be the tax system, and

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<v Speaker 1>is going to be all those provisions that Donald Trump

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<v Speaker 1>put in place that are scheduled to expire, and how

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<v Speaker 1>we deal with it, and whether we're able to raise

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<v Speaker 1>revenue on a substantial scale to start putting the deficit

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<v Speaker 1>on a healthy path.

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<v Speaker 3>That's probably going.

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<v Speaker 1>To be the most important issue for the new president.

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<v Speaker 1>Beyond that, they've got to keep things going in a

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<v Speaker 1>way that maintains confidence. I'm hugely troubled by what Candidate

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<v Speaker 1>Trump has said about he's going to advise and guide

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<v Speaker 1>the Federal Reserve system. We've had a lot of history

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<v Speaker 1>with presidents telling the Fed what to do, and none

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<v Speaker 1>of it is happy. In the end, it leads to

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<v Speaker 1>higher interest rates because the Fed doesn't listen that much,

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<v Speaker 1>and so short rates don't change, and the market does listen,

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<v Speaker 1>and so long rates go up. I've been disturbed by

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<v Speaker 1>things I've heard about trashing the dollar and.

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<v Speaker 3>Hoping that the dollar goes down.

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<v Speaker 1>There's a lot of restiveness out there with respect to

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<v Speaker 1>the dollar. I don't think there's a viable alternative to

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<v Speaker 1>the dollar as the world's reserve currency, and I think

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<v Speaker 1>we're going to maintain that competitive advantage. But gosh, we

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<v Speaker 1>can't maintain it if our goal becomes to reduce the

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<v Speaker 1>value of the dollar. So doing something about the deficit,

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<v Speaker 1>being macroeconomically responsible.

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<v Speaker 3>And then here's the big thing.

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<v Speaker 1>Being a country that can get things done. We used

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<v Speaker 1>to be a country that could build highways. It costs

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<v Speaker 1>three times as much now per mile of highways as

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<v Speaker 1>it did foury or fifty years ago, even after controlling

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<v Speaker 1>for inflation. Projects that we used to do quickly now

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<v Speaker 1>take huge, long periods of time. We have got to

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<v Speaker 1>be a country again that can get things done. That

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<v Speaker 1>means looking at excesses of regulation. That also means making

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<v Speaker 1>sure that there's a predictable environment for business. So I

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<v Speaker 1>hope the new president is going to focus on these

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<v Speaker 1>questions of making it possible to do things quickly. Look,

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<v Speaker 1>we've got a huge revolution coming, David, in terms of

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<v Speaker 1>what artificial intelligence can do, what it can do to

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<v Speaker 1>support workers to increase their productivity.

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<v Speaker 3>But that's going to require energy.

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<v Speaker 1>It's going to require immense amounts of electricity, and that

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<v Speaker 1>electricity is going to have to be transmitted from one

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<v Speaker 1>place to another. And we're going to have to be

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<v Speaker 1>a country that can build transmission lines, that can actually

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<v Speaker 1>take decisions and in the length of time it took

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<v Speaker 1>to fight World War Two three and a half years,

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<v Speaker 1>actually build transmission transmission lines. So that set of issues

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<v Speaker 1>around being able to get things done is I think

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<v Speaker 1>really going to be crucial for who's ever the next

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<v Speaker 1>time president.

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<v Speaker 4>So let me go back to some of those very

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<v Speaker 4>important points and start with the debt and the deficit.

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<v Speaker 4>It does strike me that you think that is really

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<v Speaker 4>an important thing to address, and yet neither of these

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<v Speaker 4>two candidates, whoever ends up being president, really has come

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<v Speaker 4>up with a plan for dealing with that. To be sure,

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<v Speaker 4>the analysis suggests that a Kamala Harris's president would dig

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<v Speaker 4>the hole a little less fast, but it would still

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<v Speaker 4>be digging a hole. She'd still extend some of the

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<v Speaker 4>Trump tax cuts. So does the next president, whoever it is,

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<v Speaker 4>whichever candidate is, do they have the support of the

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<v Speaker 4>American people to make some of those tough decisions that

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<v Speaker 4>you talk about, particularly with the Congress that may be resisting.

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<v Speaker 1>Support the American people depends on how they're led, And

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<v Speaker 1>it's going to be an important part of the task

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<v Speaker 1>of the next president to educate the public, to identify

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<v Speaker 1>crucial challenges not just to our prosperity but to our security,

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<v Speaker 1>and get people to support the actions that are next necessary. No, David,

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<v Speaker 1>I don't think that consensus has been built during the

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<v Speaker 1>presidential campaign, but I hope it will be built over time,

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<v Speaker 1>and sooner or later, I don't know which it is.

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<v Speaker 1>There are people who think it's really very imminent. They

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<v Speaker 1>might be right, I'm not sure. Sooner or later, the

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<v Speaker 1>bond market's going to do some of the educating, and

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<v Speaker 1>when interest rates spike, that will be a moment that

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<v Speaker 1>will change many people's views, many people's sense of urgency

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<v Speaker 1>around these deficit issues. And so my guess is that

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<v Speaker 1>we're going to probably be in a situation where, once again,

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<v Speaker 1>in a democracy, fear does the work of reason, and

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<v Speaker 1>so we'll get a moment when the interest rates spike

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<v Speaker 1>and that will drive more constructive action.

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<v Speaker 3>It would be better if we could.

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<v Speaker 1>Prevent it and solve the problem before the problem makes

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<v Speaker 1>itself manifest.

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<v Speaker 3>But that's not going to be easy.

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<v Speaker 4>And we have had some rumblings in the guilt markets

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<v Speaker 4>with respect to some of the fiscal steps taking over

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<v Speaker 4>the UK that might indicate may be a little bit

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<v Speaker 4>shaky here. How do you position yourself to deal with

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<v Speaker 4>that fear that you talk about when in fact a

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<v Speaker 4>crisis comes. If there's a debt crisis.

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<v Speaker 1>I think you need to start by emphasizing that our

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<v Speaker 1>debt is unsustainable, that an important part of the national

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<v Speaker 1>strategy has to be making it sustainable. That some of

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<v Speaker 1>making it sustainable is accelerating the rate of economic growth,

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<v Speaker 1>because the faster you're growing, the more debt you can afford,

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<v Speaker 1>and the more tax revenue the government takes. But you

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<v Speaker 1>can't solve the whole problem just by accelerating growth, and

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<v Speaker 1>so people are going to have to accept that there

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<v Speaker 1>are changes that are going to be necessary. My own

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<v Speaker 1>instinct is that most of those are going to need

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<v Speaker 1>to be on the revenue side, and there's plenty of

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<v Speaker 1>room for raising revenue. You look at the tremendous sums

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<v Speaker 1>of money they are passed in estates that almost completely

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<v Speaker 1>avoid a state taxation, and there's something important to do there.

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<v Speaker 1>I think President Trump made a serious and the Congress

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<v Speaker 1>made a serious policy error when they cut the corporate

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<v Speaker 1>tax rate all the way down to twenty one percent.

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<v Speaker 1>That's less than the Business Roundtable was asking for at

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<v Speaker 1>that time. I think we should be reversing some of

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<v Speaker 1>those taxing tax cuts.

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<v Speaker 3>There's room to.

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<v Speaker 1>Raise revenue from and that's where it should start from

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<v Speaker 1>those at the very top of the income just But

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<v Speaker 1>I think ultimately we may need.

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<v Speaker 3>To do more than that.

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<v Speaker 1>We may need to raise revenues to finance social security

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<v Speaker 1>and medicare more fully, given that the burdens of those

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<v Speaker 1>programs are going up as people live longer and a

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<v Speaker 1>larger fraction of our population is aged.

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<v Speaker 4>One of the things that has been in this campaign

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<v Speaker 4>is growth, and to some extent the extent of which regulation,

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<v Speaker 4>excessive regulation, may be impeding the growth.

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<v Speaker 3>That we otherwise would have.

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<v Speaker 4>Kamala Harris has not been outspoken about deregulation at all,

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<v Speaker 4>whereas Donald Trump has. Is she going to change a

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<v Speaker 4>position if she becomes president.

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<v Speaker 1>I'm not going to speak for anybody except myself. Look,

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<v Speaker 1>I don't think the right way to frame this is

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<v Speaker 1>regulation or no regulation. I think the right way to

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<v Speaker 1>frame this is smart regulation. And I think we've had

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<v Speaker 1>a lot of regulation that hasn't been smart, that has

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<v Speaker 1>chilled things in quite dangerous.

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<v Speaker 3>Ways. I think that we are less energy secure than.

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<v Speaker 1>We would be if we'd had more appropriate regulatory policies.

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<v Speaker 1>I think with this huge surge and electricity demand that

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<v Speaker 1>we're going to have, we have to find ways of

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<v Speaker 1>reducing regulation so that we can cite power plants and

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<v Speaker 1>so that we can transmit electricity more effectively than we can.

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<v Speaker 1>There are real issues about monopoly. There are important issues

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<v Speaker 1>about monopoly, and we need to have strong enforcement of

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<v Speaker 1>the antitrust law. But do we really need for more

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<v Speaker 1>than half of the fortune five hundred by value to

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<v Speaker 1>be subject to anti trust investigation?

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<v Speaker 3>I doubt it.

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<v Speaker 1>At a time when American companies, particularly in the technology area,

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<v Speaker 1>are involved in existential struggles with companies in the rest

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<v Speaker 1>of the world, sometimes the job of our government should

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<v Speaker 1>be to support our national champions rather than to try

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<v Speaker 1>to break our national champions apart. So I think there

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<v Speaker 1>are things we really do need to look at in

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<v Speaker 1>the regulatory area at the same time.

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<v Speaker 3>At the same time, there.

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<v Speaker 1>Are areas where there are new technologies coming forward where

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<v Speaker 1>we don't have any regulatory framework at all, and we

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<v Speaker 1>need to put in place an appropriate regulatory framework. Not

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<v Speaker 1>because most businesses are bad. Most businesses want to do

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<v Speaker 1>the right thing. But the problem when you don't have

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<v Speaker 1>regulation is that the bad actors are able to cut prices,

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<v Speaker 1>are able to cut product quality, or able to sell

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<v Speaker 1>dangerous products and make it hard for the good.

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<v Speaker 3>Actors to compete.

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<v Speaker 1>So we need pro market smart regulation, and that's the

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<v Speaker 1>way the debate should be framed, not the sterile debate

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<v Speaker 1>about more or less.

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<v Speaker 3>Larry, it's great to be with here in Cambridge. Thank

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<v Speaker 3>you so much for joining us.

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<v Speaker 4>And that is Larry, some of yourself Harvard former of

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<v Speaker 4>course Secretary of the Treasury,