Fmr. Treasury Secretary Asseses Biden’s Stimulus Plan

CHRISTIANE AMANPOUR: Now, as the new administration tackles a whole raft of challenges, as we’ve mentioned, senior cabinet secretaries are now getting to work, of course. And today as the first full day in office for the new treasury secretary, Janet Yellen. She was the first woman to hold this office. Yellen who was also the first woman to head the federal reserve was sworn in by Kamala Harris, of course, the first female vice president. A lot of presidents there. So, what will here in-tray look like? Jack Lew was an economic adviser to President Obama after the 2008 crash and he was treasury secretary from 2013 to 2017. And here he is talking to our Hari Sreenivasan about President Biden’s massive stimulus plan and the economic challenges ahead.

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HARI SREENIVASAN: Christiane, thanks. Secretary Lew, what is the economy, the state of it that Joe Biden is inheriting post pandemic?

JACK LEW, FORMER U.S. TREADY SECRETARY: Well, Hari, the economy post pandemic is in pretty rough shape. We have lost significant amount of the GDP. We have 10-plus million people out of work. And as we are talking, we still don’t know exactly when health conditions will allow the economy to get back to normal. I think it’s important to remember that even before the pandemic while economic growth had been going on, I’m proud to say, for 10 years, seven years of which we were running the economy, we still had deep problems in terms of disparities, in terms of opportunity, wealth, income. So, I think you have to look at the post pandemic economy as how do we get out of the health crisis, how do we have enough stimulus and growth initiatives so that economic growth can get back to a good sustainable level, and how do we deal with some of the underlying problems that candidly existed before the pandemic and were worsened by it? But last, to really feel relief. We’re going to (INAUDIBLE) at the bottom and the lower middle.

SREENIVASAN: So, if those shortcomings were laid bare, I mean, how deep do we have to dig to root out the cause of this and try to create a more functioning and equitable society?

LEW: Look, I think that we can have a deep dive into the problems that pre-existed. The solutions are sometimes more obvious than the original source of the problem. You know, you look at what is keeping people from having the opportunities that they need. Some of it is pretty obvious. People need skills, people need to have a living wage, people need to have child care so that if you have two earners in the house, both can go to work and the kids can be safe. So, I think that one can unpack the causes and put off dealing with some of the real problems or you can dive into the problems and let people debate the causes. I am more about solving the problems myself. You know, I think you look at things like infrastructure. If you are coming out of the deep recession, you know that infrastructure spending is going to create good middle-class jobs. We also know that if you are looking in the economy that is woefully behind and updating our traditional infrastructure and our 21st century infrastructure, then we’re going to build a better foundation for growth. So, a lot of the steps forward seem to me to be a lot more obvious than the underlying problems and also things on which people from different perspectives should be able to agree.

SREENIVASAN: The president is proposing another $1.9 trillion plan, that would get us somewhere in the ball park of $3, $3.5 trillion that we have already spent. I mean, you actually argued for this kind of spending even as of September. I mean, where does it end?

LEW: I think that the risk today, you know, as it was in September is doing too little and not for long enough rather than doing too much for too long. What do I mean by that? We know that the tail of economic pain is going to be long. You know, it’s going to take quite a while for job growth and income growth and restoration of lost economic growth to get back to where it was before the pandemic, if we get back to the trajectory for what was possible before. So, what does that mean to me? It means, in the period of close to zero interest rates, this is precisely the moment that we ought to be spending what it takes to keep the economy from just lingering in a state of subpar growth with all of the human pain that it entails. If you don’t extend unemployment insurance beyond the moment when the health crisis breaks, that means tens the of millions of people are going to be denied what they need to support their families while the economy is getting fully back up so that they can go back to work. If — a lot of these things will have to go on for a bit longer. I think the political will to do enough here is not going to exceed the economic need. On the other side of it, I continue to believe that there has to be a switch that you throw at the appropriate moment and say, we’re out of emergency response, we are done with the economic recovery program, the long-term agenda, we have to pay for what we do. And actually, as a candidate, that is what the President Biden said as well and we have yet to see the details of his long-term program, but he said that he’s going to pay for his long-term program.

SREENIVASAN: Are there metrics that would tell you when to throw that switch? I mean, you know, people, I think, are concerned that is this $1.9 trillion going to be the last one? Is this going to be enough? Are we going to have to do this for another year? And if you were Janet Yellen, if you were Joe Biden, who are going to be looking at the data, what are the top two or three metrics that are going to allow you to say, all right, we’re turning this down?

LEW: Well, I think if the advice that people like myself and Secretary Yellen were giving policymakers months ago had been followed, we wouldn’t need to do it again because people like us were saying that you needed to do more then, partially to create the certainty that would allow for investment and economic activity to get back to normal and to — and reduce the likelihood of human suffering I think the metrics, you know, are what does normal look like? We know what the unemployment rate was before the pandemic. My own view is that we ought to be getting close to that zone before we say we are out of the woods. You look back to 2009, 2010, 2011, we threw the switch too quickly not because we in the Obama administration chose to. We threw the switch because the political winds changed. You know, we had a Tea Party election, it was impossible to get Congress to go along with more than, you know, incremental things at the end of 2010, and we went into reverse. We put immediate spending reductions in place when what the economy really needed was long-term revenues and longer-term entitlement kinds of policies. So, we did what the political system would bear and not what people like myself thought was the right package. I think that slowed the recovery. You know, if you look at the trajectory of the recovery, it was pretty sustained in — from 2011 on, but the rate of growth was not what it would have been if we had maintained, you know, support for state and local governments, spending on immediate needs. I think that the challenge coming out of this economic crisis is don’t make that mistake again, you know. But also, when you get to the point where you see that the crisis is over and you are starting to feel like things are normal, find a pathway to have a serious discussion both about how do we pay for the things we need and ultimately — not for quite a while, but ultimately, what do you do about the massive amount of debt that’s been built up. I am not one of those and say debt doesn’t matter. I think that we can’t spend the way that we are spending now infinitely. I think if you look at the risk of stopping too soon versus the risk of maybe going on a little too long, I would err on the side of more or not less for now, but then I’d be alert to when it’s time to switch gears.

SREENIVASAN: You know, the political situation that you are describing in 2010, the logjam there seems relatively innocent compared to the razor thin margin that Joe Biden has even in the Senate. How does he get this done?

LEW: Well, remember, we saw the majorities change in the middle of the Obama administration. So, we went from having a Democratic to a Republican majority, and we had to deal with the House that where the Republican majority was very much dominated by the Tea Party. What does that mean? It means that we saw crises over potential default on the debt. Well, that did not help with recovery. What that did was to send shockwaves through the domestic and the global economy raising the question of would the United States do something completely beyond reason, you know. That was why we ended up adopting the spending reductions, it was to avoid those kinds of much more dire consequences, you know, which, you know, I think that we did the right thing, but, you know, I will never take credit for throwing the brakes on at that moment. You know, I think, you know, the deficit reduction overall was not bad thing, the timing was wrong. When we then had government shutdowns, it was a taste of the kind of disfunction that makes, you know, investment and hiring decisions, you know, just more difficult because of the uneasiness it comes with the lack of confidence that there’s a stable hand at the till (ph). I think what we have right now is, you know, a slim majority, you know, President Biden is trying to reach across the aisle and find a way to put bipartisan majorities together. I hope he succeeds. I think that would be a good thing for the country. Both the administration and the White House are reserving the right to do things at least for the budget with the simple majority which could be done with 50 senators plus Vice President Harris. You know, we’ll have to see where that goes over the next couple of weeks.

SREENIVASAN: I also want to ask a little bit about what seems to be kind of our disconnect with our perceptions. I mean, when you look at the statistics, I mean, you mentioned unemployment at 6.7 percent, it’s even worse up in the 9s if you are black or Latino. You’ve got 14 million renters who can’t make rent right now, you’ve got 400,000 small businesses that have closed during this, and all of this is happening at a time when our stock market seems to be at near record highs. I mean, if you had stock during COVID, this wasn’t bad — particularly bad for you. Yet, here are all these different indicators of suffering in the United States, and how does that not play out in these more visible indicators that are signals of America’s strength?

LEW: Yes. It is a real issue. First, you know, I think that anyone who thinks that the day-to-day or minute-to-minute movement of the stock markets reflect the kind of inner health of the economy is making the mistake, markets, you know, are an accurate judge of sentiment at the moment, but they don’t necessarily tell you, you know, where things are going or what is going on. You know, the reality is that with zero interest rates, you know, the evaluation of the risk and investment, you know, is not exactly the same as it is when interest rates are, you know, at a high level. So, I think you’re seeing, you know, kind of the equity values reflect the monetary policies that we’ve needed in order to get the economy of the United States around and the world to get through this crisis, but that is not surprisingly different from what is going on. The reason you had zero interest rates was because of the economic damage. The pain that you are talking about reflects where the burden of the economic damage falls most heavily. It is why when you asked how much we need to spend during this crisis, you know, if we take renters for example, if we come out of the crisis and some large percentage of the 10 million renters in the United States, more than 10 million I believe, who are not able to pay their rent end up being evicted, think about what happens when a family is evicted. It is not just a bad day. It is a dramatic change in the direction of the life of that family. It can take years, it can take decades to get back on track. You know, we are doing eviction moratoriums in bite-sized pieces. I’m pleased that the new administration extended it for quite a few months. But in December, we extended it for one month. And why was it extended for one month? It was extended so that right as Joe Biden took the oath of office, we didn’t see millions of people thrown out of their homes. Well, that a big economic problem. It is a problem for the families. It is a problem for the landlords. It is a problem for the banks that hold the notes. We need to be having a conversation and I’m pleased that in the package that President Biden proposed, there is a substantial amount of rental assistance so that we don’t end up with those families going off of the cliff when the eviction moratoriums end. But the stock market doesn’t reflect that. You know, these are — you could say they’re micro fix, but I think you roll up the impact, you know, a country with the deep division and deep inequity, it’s not the people at the top who get evicted, it’s the people at the bottom, in the bottom or the middle that get evicted. And all of the social divisions we have will only get worse if we don’t deal with that.

SREENIVASAN: Right now, the staggering number is somewhere around 11 million who are unemployed. Today, President Biden is rolling out several executive orders around climate action. And how does investing climate infrastructure or a green revolution of sorts help the middle and lower income who’ve been disproportionately impacted by COVID?

LEW: So, obviously, what helps the people in the middle and the lower down is creating, you know, good paying jobs in either construction, manufacturing, the things, you know, that their skills are most likely to lead them into good salaries with. You know, if you are looking at something like electric cars, between the manufacturing of the cars, the construction charging stations on our highways and in our communities, those are things, if we want to have an electric car fleet we need to have, it also creates jobs. You look at the internet access issues that have not been equal, though I said it’s been a little more equal than other things because it is just not there for anyone some days, building, you know, the kind of pipelines and extending service for highspeed internet has good construction and installation jobs. Now, some of these jobs require training. You know, the line, people who go up and put fiber optic cable in place or down and put them in place need to be trained. We should be training people to do the jobs that we need in the economy, and some of them don’t require years of training. You know, I think that we look at say our community colleges, they are extremely good at helping people with basic skills, develop specialized skills so that they can go and do work like that. And you need a comprehensive approach where what you are spending money on invests in the future, and we invest in the people who need the skills to do that work. You know, I’m an optimist, I think we can do that. When I was secretary, one of the statistics that I looked at carefully was the job opening and labor turnover report, the JOLT report. And the stunning thing about it was — and I don’t think this is true today, but at that time, it was roughly the same number of open jobs and the same number of people looking for work. And what that told me was we had a mismatch. We had people who didn’t have jobs, who needed skills and employers who needed people with the skill. Well, we should be able to fix that problem.

SREENIVASAN: Secretary Lew, thanks so much for joining us.

LEW: Great to be with you, Hari. Stay well.