David Western, Glenn Hubbard, Larry Summers discussed on Bloomberg Wall Street Week
Bluebird. Wall Street Week. What's the state of corporate governance deficit is really issue Use. Economy continues to send mixed signals financial stories that sheep are world Fed action to calm concerns over dollar liquidity, encouraging China data 500 wealthiest people in the world through the eyes of the most influential voices. Larry Summers, the former Treasury secretary. Stubborn studio. Kevin Johnson, SEC chairman. Jay Clayton Bloomberg Wall Street with David Western from Bloomberg Radio. Every which way and up. Markets continue to push against Cove in 19 anxieties and tech leads the way this is Bluebird Wall Street Week. I'm David Western, Nowhere to go. That's what the markets have seemed to reflect this week as concerns about a resurgent Corona virus were overcome by a general sense of optimism that and a good deal of liquidity burning a hole in the pockets of investors. For many, it seemed there truly wass no alternative. But how do we know when irrational exuberance has unduly escalated asset values? Which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade. That was Fed chair Alan Greenspan back in 1996 during the lead up to the tech bubble. Well, we may not have a tech bubble this time, but we certainly have a tech surge, which is helping drive the stock market overall up in the middle of a recession. Glenn Hubbard of the Columbia Business School, lead the Council of Economic Advisers under President George W. Bush. And he has his own perspective on whether what we're seeing today is a new version of irrational exuberance. Well, there may be David, but it's it's not clear The jobless claims numbers are good news, but there's still 32.9 million people on some sort of unemployment benefit. That's 20% of the creek over labor Force. That's not good. So why's the stock market? Hi. I expect there's a few factors one. The value stocks, of course, is the whole future. And so you're relatively optimistic about a recovery. Most of the future is still fine Send in the feds. Interventions have pushed down the discount labor stopped in risk spreads. And third. Sometimes we forget the stock market's not the economy. It's dominated by some very large firms, some of which have market power, so the stock market may have irrational exuberance. But it's it's not obvious. Even if the stock market's high doesn't mean the economy's fine. Is it possible? We'll have a second wave here on the unemployment? I don't wish that toe happen. But we had United Airlines say they're after left 36,000 people just today we have boots say 4000 people. We've got well, Spargo saying they're gonna have to lay off 1000 people. Is it possible is getting the second half of the year cos you're saying How can we have this be sustainable In the long term, we have to win O r staffs. It is. They've been pretty reasons, familiar economics supply and demand. So on the supply side, it may be that there's just not enough activity. In other words, the people have decided not to return the traditional activities that slows hiring and re hiring. It was on the demand side. We could have business failures as a result in credit market problems, so policy really is to provide insurance against this kind of out there is the virus itself May rear its ugly head it young, which puts a lot of focus on vaccines on bearer and Glenn, One of the subject that you've raised time and again is the demand issue with there might even be demand destruction. Is there anything that we could do in a further round the stimulus or otherwise? What's the best plan to try to make sure we shore up the demand side was the supply side of the economy. It's great wish any used to things insurance and interconnectedness and buy insurance in providing insurance that we don't fall out of bed in the economy by interconnectedness, realizing how businesses are interconnected, so Insurance. I would continue support or unemployment insurance, but not with the $600 additional benefit, which I think may have discouraged people, some people going backto work. There are ways to use triggers of state level unemployment and replacement rates provide some extra benefit. Just not quite $600. We also need to give on states they don't make up lost revenue to help support community colleges that are going to be critical in rebuilding and retraining people. Will need to continue support for small, a midsize businesses so things like the Reserves Main Street lending facility. We need finally more support for work, what I and others have called a pandemic earned income tax. Take us through that, because where I think we're basically familiar with an earned income tax credit. How is a pandemic earned in town tax credit? Different What you want to support low wage work and give people reasons to go backto work from my way of thinking. The earning of tax credit is already a strong mechanism for encouraging low wage work to make it more generous. Pandemic, We could increase its size significantly. Reposed in a recent beast, doubling it. But also making it of the old childless workers. That is something that would really provide a boost so low wage work when we need it, and probably a bridge to future policy, definitely in endemic Member. Unlike in the care, Zack, We're now on base for the economy's reopen. Our goal is to help connect people back to work and not out of your minds. You also mentioned the unemployment insurance support that we had this flat $600 payment. Some people are saying that that might have actually encouraged. I run into some people not to go back to work because they could make more money by being unemployed. You have come up with a proposal with Jason Furman, another former director of the Council Economic Advisors on a different administration, where you would sort of feather that down entire state by state into unemployment. Yes. In two ways, David, one would be to make it as a replacement rate of wages. You're not going to get figures as high as $600 but you'd still get extra unemployment insurance. Second, he had off the unemployment rate in the states that will be triggers. If an individual state had a very high employment unemployment rate. These additional funds would be there. They wouldn't phase out as the unemployment rate goes down, that there's a couple of things that enables you to have a program. It's from Buster. Whatever the shape of the recovery, we don't know, sitting here today, whether it's of each day Or some other shape recovery but also avoids having to bring the Congress back to take action. Every time we learned something about the crisis, it puts the unemployment insurance expansion. More trigger program link to the economy Enough colt that was Wall Street with contributor Glenn Hubbard coming up. We hear from two of the governor's hit worst bike over 19..