How the Blue Wave Could Reshape America’s Economy

[00:00:00] Speaker 1: We start with the aftermath of the midterm elections this week and what they may mean for the policies or lack of policies on the economic issues that matter to voters. We talked with Glenn Hubbard of the Columbia Business School who served as chair of the Council of Economic Advisers under President George W. Bush. I think there are two messages and I don't think the press has [00:00:23] Glenn Hubbard: really picked up on them. The first is that voters want what works. The second is that voters want you to actually look at their problems. I think there's a view that well the Democrats won because their ideas are better. Well they may or may not be but that's not what the electorate was saying. I think the electorate is just saying give me something that works. Affordability is an example. But really we've had decades of big change in the economy. Politicians on both sides of the aisle have nodded but have not [00:00:50] Speaker 1: offered solutions. And I think voters are sick of it. So if the Democrats turn to you tomorrow and said OK what plan should we pursue in the new Congress that would address some of the affordability concerns. What would you suggest they look at. Well let me start [00:01:03] Glenn Hubbard: 30,000 feet and then lay on the plane. So 30,000 feet it ought to be about two things. One is economic growth. It's still the case growth makes everything in life easier makes us better off. But the others have a full participation economy. Don't be glib and say AI will make us better off the same way globalization would or any other technological change. Tell us how we all can participate. Going down to the landing field. How are you going to prepare people for those new jobs. Give the voters some specific ideas. And on affordability talk about electricity. Talk about permitting reform. Going to the housing market and talk about why it costs so much to build particular places. I don't think they're going to do any of that. But I think that's the thing that needs to be done. [00:01:48] Speaker 1: Do they need to address tariffs and trade because I think most Americans heard President Trump talk a lot about tariffs and associated [00:01:55] Glenn Hubbard: whether fairly or not perhaps fairly with higher prices. I do think they need to address it. But maybe not for the reason people think. It tariffs did raise prices and Americans did bear the burdens of tariffs. Everything your econ 101 professor taught you is still true. But I think what the president saw. And by the way Joe Biden saw it too. Was that the public is concerned about America's competitiveness and stand in the world. So I think anybody who says I want to renew trade. I want to reduce tariffs also has to have in mind. How am I going to help. Again more Americans come into this economy and participate in it fully. So I do think tariff reduction is what people have in mind. But only if it's married with. Well how are you really going to help me. When you talk about including more people in the pie meaningful work. In other words making sure that let's say we say AI has enormous promise for the economy. GDP can grow by a lot more productivity. Is greater. All sounds good on average. But you and I are individual people. There are other individual people that watch your show. The question in their mind is am I one of those people. So we need a policy that says everybody's going to be in the boat doesn't mean we all get the same thing. But we all are going to get changed opportunities rather than just saying well the tech sector will work it out. I think that's cold comfort for a lot of people. [00:03:14] Speaker 1: Have we ever done that. I mean there was trade adjustment assistance as I recall with the auto industry back in the 80s. Yeah. It didn't really pay it pan out. Well yes and no. So trade adjustments I have sometimes quipped that it helped four people in a chicken or something. [00:03:29] Glenn Hubbard: It came about in the 1962 trade bill because I think President Kennedy had the right intuition that you did have to help people adjust. To me it doesn't matter whether a shot comes from trade or internally you should always help people adjust. Trade adjustment assistance has worked in some areas for example wage insurance programs. So I think rather than calling a trade adjustment assistance what could we design bigger picture we've done this much larger ways. Most obvious examples land grant colleges. It's an old one. We had an agrarian economy. We wanted to make a manufacturing economy. We democratized education and did just that. The GI Bill after World War Two is another example. So I think programs as small as trade adjustment assistance aren't going to fit the bill. You would need somebody who articulates a moonshot not to build too much on President Kennedy aphorisms to make that clear to the public. [00:04:25] Speaker 1: That sounds like a big government program. I'm not sure the country is ready for that right now and I'm not sure we have the money for it. [00:04:31] Glenn Hubbard: I don't think it's a big government program. I think it's a big idea. Remember the land grant colleges were literally just land grants. It was up to others to raise the funds. I think what's necessary is to change the tune in Washington. That we do notice everybody. And we do want everybody to participate in the economy. And a shot across the bat of business leaders. You can help in this regard. Or by the way you too will face the political pressures and regulatory pressures to do so. [00:04:59] Speaker 1: One of the big issues that I think should have been an agenda. But I didn't hear me talking about is the debt and deficit because we're gonna have to pay for things sooner or later. Well let me give you a crazy optimist take because the Social Security trust funds run out in 2032. [00:05:16] Glenn Hubbard: Now those are actually meaningless accounting fictions but they matter a lot in Washington. Whoever the next president is he she Democrat Republican doesn't matter. They will face that as will currently elected senators. It's going to be on their watch. So I think we're finally the point where the public has both a right and responsibility to say David you're running for office. Tell me what you're going to do about Social Security. Is this taxes. Is it benefits. Is it whatever. So I think we will have progress there. The other thing that sadly gives me optimism is that I do think interest rates will be higher for longer. That will set up a negative fiscal loop as the government refinances its debt. [00:05:55] Speaker 1: And we will have to have a discussion of what we're going to do. We all know it's unpopular and we all know what we need to do. One of the things that was different at least in my experience about this election was that you could say capitalism was on the ballot. We had Democratic Socialists of America candidates coming forward with Socialists the validly Socialist platform. Did they make a difference. [00:06:17] Glenn Hubbard: Was it serious or was that mainly just attention. I think it's mainly attention but there's a deeper story there. I don't think most voters are even thinking of the level of do I want Adam Smith's capitalism or Karl Marx's socialism. I think what they're thinking is I want an economic system that works for everybody and we don't have one. And if somebody wants to come along and call that socialism I'll at least listen to that man or woman. So I think it's incumbent on both sides to deliver a message in the middle that says of course this economic system can work for many more people. And it has. And here's how. [00:06:50] Speaker 1: Whatever the new Congress does the definitive results of the midterm elections put to rest concerns about whether they would be accepted despite President Trump's past criticism of the process. Professor Robert Post is the former dean of the Yale Law School where he teaches a course on preserving the integrity of the electoral system. So professor there's been a lot of talk and concern about these 2026 midterm elections and whether they would go off without a hitch. In fact you teach a course on protecting the election in 2026. In retrospect did it need protection. [00:07:25] Speaker 3: Leading up to the election there were just enormous worries because we'd seen a lot of initiatives seemingly designed to undercut the election. There was the attempt to cut off mail in ballots and use the post office for that. There was the attempt to get voter rolls so they could take people off the rolls. There were the various lawsuits there endless subpoenas to election officials. So it looked at the time before the election that the Trump administration was trying to make people lose faith in the institution of the election trying to make people not trust the outcome of the election. And because the Trump administration had all the resources of the federal government which are considerable there was great fear about how far he would go. And of course when we have somebody who did January 6th that fear could go in many different directions that could be really terrible. So there was this apprehension about what would happen on November 3rd. I remember feeling that it was astonishing how happy I was that there was no crisis that people just voted and their and their votes were reported honestly and fairly as far as I could tell. [00:08:38] Speaker 1: That was amazing. And it was such a relief. Every election is about who gets elected but it's also about us who we are the people who are voting. And I wonder what you think this election tells us about some of our institutions and start with state and local government who really run and by constitution are supposed to run elections. [00:08:57] Speaker 3: What did we learn about them. Well we learned that state and local governments are enormously resilient. They were put under pressure by the federal government. And you know liberals used to grow up thinking about the federal government as the guarantor. And now we think about the state and local officials as the guarantor. And we see as the great strength of the American elections that they're run by local officials who take great pride in what they do. We're on Bloomberg and Bloomberg we focus on the economy and on business commerce. [00:09:30] Speaker 1: And obviously the democratic process is critical for governing the country first and foremost. But it also the rule of law is important for contracts for U.S. Treasuries which are promises to repay. Now what is the risk to our economy and to our markets to our businesses if in fact we really put into question the rule of law. I think that's a very deep and an accurate point. [00:09:58] Speaker 3: And in the first Trump administration I had tried to get business support to support the rule of law. And what we have seen in this administration is quite beyond anything we saw in the first Trump administration. In the first two years of the second Trump administration we have seen an executive that really doesn't care about the rule of law. It acts first and then it attempts to explain to a court later. And it has politicized the Justice Department in ways that if I were a business person I would be terrified.