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As we turn out to an important conversation. I've said it more than once today, we are throwing the best of Bloomberg at this election coverage, and of course that includes our colleague, Bloomberg's Wall Street Week anchor David Weston, who joins us now for a special conversation with Larry Summers, the former US Treasury Secretary and Wall Street Week contributor.
David.
Yeah, Joe, Thank you very much, Chris. That is the very best of Bloomberg is Larry Summers, who's our special contributor in Wall Street and of course belong identic with Harvard. We're on the edge of the Harvard campus right here in Cambridge. Larry, thank you so much for joining us.
Good to be with you.
It's election day, Election night. What's done your mind?
I'm nervous and watching like everybody else. No one knows what's going to happen, and it's foolish to try to predict. I'm struck that Kamala Harris, I think, has had a very good week. Her at the Lincoln Memorial was a very different thing than Donald Trump at Madison Square Garden, the vibes are pretty clearly moving one way. Women have turned out on an epic scale. I'm told the exit polls are saying democracies the primary issue. So I have a feeling that there may be a fair sized turn
in her direction. But look, we'll know the answer in a few hours, and no one can really know, so we'll just have to We'll just have to see. But who's ever the next president? They are going to have quite a difficult and challenging inbox on the economy.
Well, that's what I want to talk about, because time will tell. We'll see how much time it is is required to tell, but we'll know sooner or later whether it's Donald Trump, oconwall Aris, whoever it is. When they walk into the Oval office, what in terms of economics will they have on their desk?
Look, the positive thing they're going to have is that the American economy has been epically strong in a structural sense throughout the twenty five century. We've grown far more rapidly than Europe, far more rapidly than Japan. China is really having a lot of trouble. The American economy and American companies capacity to deal with technology is really quite extraordinary and is a huge source of strength for our country.
And that is an enormous asset. And we're going to talk about all the problems, but I'd rather be playing the hand of the United States than the hand of any other country. That said, just because things are going your way doesn't mean there aren't huge challenges. We have a huge national security challenge in a way we have not since the end of the Cold War.
The combined axis of.
China, Russia, Iran, North Korea is at to our long run security interests the likes of which we have not seen probably in two generations. And the best way to respond to that is with economic strength, and that starts from a painful question, how long can the world's greatest debt or remain the world's greatest power. And we do not have a national debt and deficit situation that is
currently on a sustainable basis. There is no way that you can debate whether we go three years, whether we go five years, whether we go one year, whether we go fifteen years.
But there is no argument that the.
Current path is likely to be sustainable. And that means that we need some very difficult adjustments. Those adjustments are not going to come given the security environment from cutting national defense. I think it's politically extremely difficult. And in a world where the top social security benefit is for an individual forty or forty five thousand dollars, I don't think it's especially attractive to think about cutting social security
benefits as a response. So we are going to need to raise revenue as a country, and that's why the most important thing that the President of the United States is going to deal with on the economy in twenty twenty five is going to be the tax system, and is going to be all those provisions that Donald Trump put in place that are scheduled to expire, and how we deal with it, and whether we're able to raise revenue on a substantial scale to start putting the deficit on a healthy path.
That's probably going.
To be the most important issue for the new president. Beyond that, they've got to keep things going in a way that maintains confidence. I'm hugely troubled by what Candidate Trump has said about he's going to advise and guide the Federal Reserve system. We've had a lot of history with presidents telling the Fed what to do, and none of it is happy. In the end, it leads to higher interest rates because the Fed doesn't listen that much, and so short rates don't change, and the market does listen,
and so long rates go up. I've been disturbed by things I've heard about trashing the dollar and.
Hoping that the dollar goes down.
There's a lot of restiveness out there with respect to the dollar. I don't think there's a viable alternative to the dollar as the world's reserve currency, and I think we're going to maintain that competitive advantage. But gosh, we can't maintain it if our goal becomes to reduce the value of the dollar. So doing something about the deficit, being macroeconomically responsible.
And then here's the big thing.
Being a country that can get things done. We used to be a country that could build highways. It costs three times as much now per mile of highways as it did foury or fifty years ago, even after controlling for inflation. Projects that we used to do quickly now take huge, long periods of time. We have got to be a country again that can get things done. That means looking at excesses of regulation. That also means making
sure that there's a predictable environment for business. So I hope the new president is going to focus on these questions of making it possible to do things quickly. Look, we've got a huge revolution coming, David, in terms of what artificial intelligence can do, what it can do to support workers to increase their productivity.
But that's going to require energy.
It's going to require immense amounts of electricity, and that electricity is going to have to be transmitted from one place to another. And we're going to have to be a country that can build transmission lines, that can actually take decisions and in the length of time it took to fight World War Two three and a half years,
actually build transmission transmission lines. So that set of issues around being able to get things done is I think really going to be crucial for who's ever the next time president.
So let me go back to some of those very important points and start with the debt and the deficit. It does strike me that you think that is really an important thing to address, and yet neither of these two candidates, whoever ends up being president, really has come up with a plan for dealing with that. To be sure, the analysis suggests that a Kamala Harris's president would dig the hole a little less fast, but it would still be digging a hole. She'd still extend some of the
Trump tax cuts. So does the next president, whoever it is, whichever candidate is, do they have the support of the American people to make some of those tough decisions that you talk about, particularly with the Congress that may be resisting.
Support the American people depends on how they're led, And it's going to be an important part of the task of the next president to educate the public, to identify crucial challenges not just to our prosperity but to our security, and get people to support the actions that are next necessary. No, David, I don't think that consensus has been built during the presidential campaign, but I hope it will be built over time, and sooner or later, I don't know which it is.
There are people who think it's really very imminent. They might be right, I'm not sure. Sooner or later, the bond market's going to do some of the educating, and when interest rates spike, that will be a moment that will change many people's views, many people's sense of urgency
around these deficit issues. And so my guess is that we're going to probably be in a situation where, once again, in a democracy, fear does the work of reason, and so we'll get a moment when the interest rates spike and that will drive more constructive action.
It would be better if we could.
Prevent it and solve the problem before the problem makes itself manifest.
But that's not going to be easy.
And we have had some rumblings in the guilt markets with respect to some of the fiscal steps taking over the UK that might indicate may be a little bit shaky here. How do you position yourself to deal with that fear that you talk about when in fact a crisis comes. If there's a debt crisis.
I think you need to start by emphasizing that our debt is unsustainable, that an important part of the national strategy has to be making it sustainable. That some of making it sustainable is accelerating the rate of economic growth, because the faster you're growing, the more debt you can afford, and the more tax revenue the government takes. But you can't solve the whole problem just by accelerating growth, and so people are going to have to accept that there
are changes that are going to be necessary. My own instinct is that most of those are going to need to be on the revenue side, and there's plenty of room for raising revenue. You look at the tremendous sums of money they are passed in estates that almost completely avoid a state taxation, and there's something important to do there. I think President Trump made a serious and the Congress made a serious policy error when they cut the corporate tax rate all the way down to twenty one percent.
That's less than the Business Roundtable was asking for at that time. I think we should be reversing some of those taxing tax cuts.
There's room to.
Raise revenue from and that's where it should start from those at the very top of the income just But I think ultimately we may need.
To do more than that.
We may need to raise revenues to finance social security and medicare more fully, given that the burdens of those programs are going up as people live longer and a larger fraction of our population is aged.
One of the things that has been in this campaign is growth, and to some extent the extent of which regulation, excessive regulation, may be impeding the growth.
That we otherwise would have.
Kamala Harris has not been outspoken about deregulation at all, whereas Donald Trump has. Is she going to change a position if she becomes president.
I'm not going to speak for anybody except myself. Look, I don't think the right way to frame this is regulation or no regulation. I think the right way to frame this is smart regulation. And I think we've had a lot of regulation that hasn't been smart, that has chilled things in quite dangerous.
Ways. I think that we are less energy secure than.
We would be if we'd had more appropriate regulatory policies. I think with this huge surge and electricity demand that we're going to have, we have to find ways of reducing regulation so that we can cite power plants and so that we can transmit electricity more effectively than we can. There are real issues about monopoly. There are important issues about monopoly, and we need to have strong enforcement of
the antitrust law. But do we really need for more than half of the fortune five hundred by value to be subject to anti trust investigation?
I doubt it.
At a time when American companies, particularly in the technology area, are involved in existential struggles with companies in the rest of the world, sometimes the job of our government should be to support our national champions rather than to try to break our national champions apart. So I think there are things we really do need to look at in the regulatory area at the same time.
At the same time, there.
Are areas where there are new technologies coming forward where we don't have any regulatory framework at all, and we need to put in place an appropriate regulatory framework. Not because most businesses are bad. Most businesses want to do the right thing. But the problem when you don't have regulation is that the bad actors are able to cut prices, are able to cut product quality, or able to sell dangerous products and make it hard for the good.
Actors to compete.
So we need pro market smart regulation, and that's the way the debate should be framed, not the sterile debate about more or less.
Larry, it's great to be with here in Cambridge. Thank you so much for joining us.
And that is Larry, some of yourself Harvard former of course Secretary of the Treasury,