We've been speaking with top economists to
understand what's next for the US economy as we
battle the coronavirus pandemic and the economic
fallout. Today, I'm speaking with Danielle
DiMartino Booth. She's an economic consultant and
an author. Danielle, thanks so much for meeting
with us. What is your boldest idea for how to
stimulate the economy?
There are things that we know that we can do.
We know that that that in the oil industry, for
example, the energy sector has been absolutely
decimated. The job losses have been
unprecedented. As bad as 2019 was 2020 has been
worse. But we also know that a lot of the workers
in these industries are highly skilled and that
these skills can be transferred.
So what I've never quite understood, and I'm
talking about never quite understood for the past
12 years, is why if engineers around America have
identified all of this, the improvements we need
to our infrastructure, that it hasn't been a slam
dunk bipartisan initiative immediately when the
coronaviruses hit I said, this is it, it's the
Black Swan, it's finally coming.
We're going to put all these out of work workers
back to work and the politicians will tell you.
But that's a long term plan.
And I would counter by saying the coronavirus so
far is looking like it's going to be long term in
terms of the amount of uncertainty that's going
to be sitting on top of this economy.
Let's put Americans back to work, who we've
already identified as having the appropriate
skills to do so and move forward.
Do you see that this as an opportunity where we
can address racial inequality and talk to me a
little bit about the economics behind that.
We have left multiple generations of Americans
behind through the public education system that
has completely fallen apart.
I'm aging myself, but when I was in high school,
we had something called shop.
And Shop was a place that mostly younger boys
could go and pick up vocational trades.
Today, those younger boys are the electricians
and the plumbers. We spend a lot of our money on
because there are too few of them.
It's not a long term job skill training that
you're talking about, but it's recasting the net
a little bit back in time and making sure that we
bring to vocational training that's been missing.
Bring more of that back, because as a population,
we're not necessarily shrinking.
Our demographics are better than that of other
countries. We're living longer, which means we're
going to need skilled people for a lot longer.
And we know for a fact that one out of every 10
employees worldwide was employed in travel and
tourism, countless more in retail, countless more
in restaurants. We know that there will be
permanent closures, meaning you've got a
wonderful rich pool of potential employees to
retrain and rebuild out the workforce in a way
that we don't have to talk about.
What we've been talking about prior to six months
ago, the job skills shortage in the United
States. It was an endless thing that went on for
years and years and years. We don't have to do
that again. We can fix it.
How do you see education changing in the face of
the virus pandemic?
It's fine to have artistic children and arts a
wonderful thing, but if you want to safeguard
your children's future security, you want to make
sure that they're able to have a skill that is
going to see them through.
We always talk about is this stock recession
proof? You know what, is this job, Is this
profession recession proof?
And that's how parents should approach education
on the front end as opposed to the back end,
which right now somewhere in the world is giving
my 16 year old, my oldest child shivers because
that's how we're going to approach looking for a
college for him.
Lucky guy. So there is no way a formal way to
help take care of your child until they go to
pre-K or K, so what do you do?
How should the government solve that?
I take off my economists hat from time to time and
I put on my education reformer hat from time to
time because I think that the two are intertwined
and I think that income inequality has become a
very economic issue grounded in a lack of
education. There's a simple solution for making
sure that young children are shepherded into the
pre-K process.
If a woman is paid six weeks after she has a
child, if there's some kind of a government
program that covers her and that after six or
eight weeks, she's able to return to her job
instead of child care being so cost prohibitive
that she has to drop out of the workforce until
which time her child is old enough to go to
public school. That is where poverty begins.
If you find a way to care for children right from
a very right from the time maternity leave ends,
if you cover child care, the mother never falls
out of the workforce.
The income does not subside.
And the mother's ability to see the work ethic
and the import of that is going to be translated
to her child, who is picked up by the public
education system, which starts.
pre-K, by the way, not in kindergarten, which
starts at pre-K, and you do end up breaking the
back of the cycle of poverty in this country, you
keep moms in the workforce, you fix the hardest
thing there is to fix about education in America.
What is the role and job of the Federal Reserve?
And then we can move into do you think that
they're accomplishing that role?
The role of the Federal Reserve should be to
ensure that a dollar that you were paid in your
paycheck holds its value.
Not that there is a two percent inflation target
such that in 50 years your dollar's worthless.
But the Fed has lost its way.
It has lost its understanding of its very own
primary mandate of minimizing inflation.
The Fed is almost also supposed to maximize
employment. And sadly enough, the Fed has also
failed at this mandate.
If you look at what has been done in the post
pandemic era, the largest companies have been
able to tack on more debt than ever before,
thanks to the Federal Reserve's programs, none of
which require companies maintain payrolls,
maintain headcount.
The only thing Fed policy is done post covid-19
is give very bad insolvent over leveraged
companies more leverage such that when the
eventual day of reckoning comes and the time is
and it is time to file for Chapter 11.
We're seeing what we're increasingly seeing today,
which is rather than a restructuring which retain
some portion of the of the of the workforce for
company ABC, you're seeing companies go directly
to liquidation because they have so much debt
that any value has been absolutely eviscerated.
I would not mind seeing a return to frugality.
It goes against the strictures of the Federal
Reserve and the fact that the Federal Reserve
keeps interest rates at artificially low levels
and constantly encourages households,
corporations and Uncle Sam to borrow.
But that doesn't make it any different if you've
actually experienced what it feels like to have
your budget not make ends meet because of the
shock of the coronavirus.
And if that puts us on a better place longer
term, so be it.
I love that. Why does the national debt matter
from a policy standpoint and should Congress be
focused on it right now, especially when they're
trying to pass another stimulus bill?
What Congress needs to have done and needs to do
in the name of possibly increasing the national
debt is to have correctly crafted and targeted
stimulus. And from that point on, it needs to
understand that job skills training,
infrastructure spending, things that bring work
back into the U.S.
economy are going to a heck of a lot more than
any kind of universal basic income program that
not only increases the US debt with very little
to show for it, but this is the time to say if we
are going to take our debt from twenty five to 50
trillion dollars, that is when U.S.
sovereignty begins to become at risk because
other countries see that we've run up so much
debt that we're no longer beholden to anybody
else but the kindness of strangers.
And at that point, you start to have real
discussions about the sanctity of the US dollar
reserve currency status.
In Europe, They've made a concerted effort to give
out the unemployment money through the companies
in the US. We got it directly from the
government. Which approach is better and why?
The way that this is being approached is possibly
going to come back and haunt Europe if the demand
does not follow because you're keeping people in
positions that ultimately might not exist in the
end. So what it ends up being effectively,
because if you look at some of these programs,
there are 80, 90 percent reimbursement rates of
their current salaries.
So their lifestyles haven't changed at all.
And I'm not saying that's good, bad or in
between, but if the same person ends up being out
of work at the end of that period, then they're
going to they're going to have had several years
of their skills atrophy as opposed to being a
little bit more productive, looking to what
they're going to do in their next life.
What am I going to be when I grow up the next
time, which I think a lot of people in the United
States and I've certainly been on my soapbox
saying it, you have to you have to start thinking
about how am I going to reinvent myself if, let's
say, retail is forever going to be more remote or
online. Are there industries that you see that
will not bounce back from this?
Or what do you think is the most resilient, like
the inverse too/ Well, I think the inverse is
going to be any kind of a health care kind of a
company that is that is going to push us into the
next whatever the next generation of delivering
health care is going to look like.
Whoever is whoever was already there is in the
catbird seat because they've got the quote
unquote, first mover advantage.
I think that security is also going to be
something that is bigger and bigger, especially
as tensions grow between and among different
countries in this world.
If I speak to CEOs across America, if there's one
thing that I'm hearing from them, it's that they
have discovered that a certain portion of their
workforce is equally productive, if not more
productive, working from home, and that has
implications for office buildings.
But much more importantly, again, because so many
jobs have been created in travel and tourism in
the last decade, there is a very good chance that
a lot of business travel is gone for good.
Are city's dead or will they come back?
This will be longer lasting.
The amount of building of high rise apartments,
of luxury apartments, of office space, of hotels
that is going to act as a major drag on a lot of
these cities not to be disparaging of history.
I was in New York on 9/11, but this is not going
to be as quick of an episode for cities.
There's going to be a much longer period of
rebuilding. But I tell you, just as soon as they
let Texans back into New York, I'll be there.
Is COVID the end of globalization and maybe can we
talk a little bit about supply chain and
resiliency? I do see certain industries as coming
closer to home going forward.
And there will be a sense of of regret.
There has been a lot that's been destroyed
because covid data was not released in the
aftermath of it initially hitting Wuhan.
That's something that is undeniable.
It's not some conspiracy theorist, but a lot of
countries possibly were shut down to a greater
degree than what they needed to be.
But again, they were flying blind without the
assistance of the Chinese data.
So there is going to be economic resentment.
There's going to be economic hardship in the
aftermath of that. And I think that that is much
more powerful than what happened all through 2019
with the trade war. What we're not necessarily
seeing, though, is relocation of the supply chain
that much closer to home.
We're seeing countries like Vietnam, Malaysia,
other Eastern Asian countries that are going to
be beneficiaries. And I would say that that is
going to be a very a great area for investing for
the next generation of long term investors,
because there will be growth there.
And I think there would be more of an impetus,
more enthusiasm for making sure that a lot of our
closer manufacturing ties are between Canada, the
United States and Mexico as we look forward.
But as far as bringing all the jobs home, it's
not going to happen. What will the labor force
look like if the U.S.
shuts down immigration?
If you shut down immigration, your lowest income
earners are going to be the most affected because
they're going to be outside of our country and
not picking our crops.
And these are just anecdotes that that came from
farmers from California to the cotton fields of
the south. And it's these are patterns that have
existed for generations, plural.
The flip side of it is we know that the United
States needs education reform, that we need to
bring STEM education back in our public school
systems, but that this takes some time to do so
if we're to completely close our borders to to to
students who want to come into our even high
schools, even into some of our universities, then
I think we'll be cutting off our nose despite our
face. Because if you want to look across the
corporate landscape of CEOs and CFOs, many of
them are students who came to the United States
to study and stayed and today run some some
companies in America that employ hundreds of
thousands of employees.
And what good would it have done our economy to
have closed our borders to them?
So I think we need to be extremely thoughtful
about the way we approach immigration in America.
And I am the product of immigrants, hardworking
immigrants who made their way live the American
dream. And I'm proud to say that I am.
And I think that that is, is and should remain a
tradition in this country.
What do you think is President Trump's economic
legacy for just his first term, regardless of who
wins this fall? What will people remember him
most by? I think that his legacy of making it
easier to work in America is something that
should never be discounted by what history writes
about him. And at a much more important level,
you always have to know who your friends and your
enemies are. And I think that the average
American has learned more than they ever thought
they would about how much China has encroached
upon US sovereignty and U.S.
national security and the weaknesses that have
emerged because we've been too and trusting of
the Chinese is a factor of time and how important
it possibly will be to make sure that we build
out our own 5G network.
As a result, he has cast quite the light on
China. Tariffs were completely boneheaded.
The wrong way to go. Any economist would tell you
that. But again, that's not what you're asking.
You're asking about his legacy and his legacy, I
think is one of no politician, at least over the
next 10 or 20 years, being able to take away the
spotlight that has been shown on our frenemies,
if you will, in China.