:00:00. > :00:15.Hello, from New York. Jobs are being created, unemployment is low and
:00:16. > :00:22.wages are rising slightly. So everything is rosy? Why then in this
:00:23. > :00:29.presidential election year are photos so angry? -- voters. We
:00:30. > :00:54.examine the state of the US economy. Welcome to the programme. In only a
:00:55. > :01:01.few months America will have a new president. The race has been bitter
:01:02. > :01:06.and highlighted dissatisfaction that has caught many in the establishment
:01:07. > :01:15.by surprise. Yet if you look at the statistics the economy has recovered
:01:16. > :01:16.from the 2008-2009 financial crisis, yet people, instead of feeling
:01:17. > :01:40.flush, feel bust. I do think that the changes in
:01:41. > :01:45.manufacturing in America over the last 20 years have left some areas
:01:46. > :01:49.of the country severely depressed. I am concerned as a patriot and a
:01:50. > :01:53.former soldier, I worried about the direction of the country. But to a
:01:54. > :02:00.degree we are powerless to do much about it. People are doing their
:02:01. > :02:06.best to make it. I work at a hospital that is closing down, so I
:02:07. > :02:09.am looking for a job. I feel like you don't have any control over
:02:10. > :02:20.who's doing what, who is pulling the strings. I am just the guy. --
:02:21. > :02:23.little guy. This is one of the paradoxes of the current climate,
:02:24. > :02:26.suggesting the wounds inflicted by the financial crisis run deeper than
:02:27. > :02:32.many thought. And it helps explain some of the economic populism
:02:33. > :02:41.espoused by Donald Trump and which has resonated with voters. What is
:02:42. > :02:45.the true state of the US economy? To discuss it I am joined by two
:02:46. > :02:50.respected economists who served in the past two administrations. The
:02:51. > :02:54.Dean of Columbia business School and under the presidency of George Bush
:02:55. > :02:58.a member of the Council of economic advisers, and a professor of comic
:02:59. > :03:06.and public affairs at Winston and former chairman of the President
:03:07. > :03:10.Obama Council of economic advisers. We have seen from the statistics
:03:11. > :03:15.that the economy is recovering. Certainly more so than in other
:03:16. > :03:19.developing countries. Yet people do not feel it. A question for both of
:03:20. > :03:23.you, but starting with you, going, what is the current health of the
:03:24. > :03:27.economy? It has recovered in some significant
:03:28. > :03:38.measure from the financial crisis but the rate of growth is sluggish
:03:39. > :03:42.by historical standards the -- and at the same time there are
:03:43. > :03:46.structural problems, the decline in the labour force participation
:03:47. > :03:50.worries many. As well as a feeling that Washington does not work.
:03:51. > :03:54.Policies to move the economy forward are not getting enacted. That
:03:55. > :04:01.contributes to the fear and malaise of voters even though the recovery
:04:02. > :04:09.is real. Do you agree with the diagnosis? I agree with what Glenn
:04:10. > :04:12.said. It is a puzzle to me that populism is on the rise whilst the
:04:13. > :04:17.economy is substantially stronger than four years ago when the
:04:18. > :04:21.president was facing real election. I think there is an element of
:04:22. > :04:25.people now feeling secure enough to look back and say, how did we allow
:04:26. > :04:31.this crisis to happen? Having fixed these problems, how come people have
:04:32. > :04:36.not been punished for the actions that led to the worst economic
:04:37. > :04:40.crisis of our lifetimes? So in some sense the fact that the economy is
:04:41. > :04:44.doing better makes people feel on stronger ground to complain, to ask
:04:45. > :04:49.some of the deep questions about how this happened and how we prevent it
:04:50. > :04:54.again. But if you look at the followers of Donald Trump,
:04:55. > :05:00.particularly blue-collar workers, they don't feel the economy is
:05:01. > :05:06.getting stronger. The decline in manufacturing jobs has taken place
:05:07. > :05:13.for a long time. We have seen a recovery in manufacturing. So partly
:05:14. > :05:18.what that reflects his 30 years of rising income inequality, declining
:05:19. > :05:21.participation for men, and for quite some time, declining opportunities
:05:22. > :05:27.in those sectors, and change is difficult. That has been going on
:05:28. > :05:32.for quite some time. If I may jump in, it is the long-time is
:05:33. > :05:36.important. The economy and the whole is much better off from trade
:05:37. > :05:41.agreements and immigration but there are individuals in particular who
:05:42. > :05:44.may not be. As an economy we have not pursued policies particularly
:05:45. > :05:50.related to supporting work which helps those individuals, and that is
:05:51. > :05:54.the pain we are seeing. It sounds like you are talking about rising
:05:55. > :06:00.inequality. Something which predates the financial crisis but was perhaps
:06:01. > :06:04.highlighted by it. I don't think of it is inequality per se, although it
:06:05. > :06:09.can manifest itself that way. I think it is a declining opportunity
:06:10. > :06:14.for work for many people as a result of the world in which we live, be
:06:15. > :06:20.that training or education or direct support for work. What would you
:06:21. > :06:26.like to see to face the problem? Major infrastructure investment. Our
:06:27. > :06:33.infrastructure in the US is very much in need of improvement. Drive
:06:34. > :06:38.on the road, and everybody pays the pothole tax. I just had to replace a
:06:39. > :06:43.bumper, for example. We need to repair bridges, we need at least one
:06:44. > :06:47.more tunnel into New York City, our airports are often embarrassing
:06:48. > :06:52.compared to the best in the world, the electrical grid, you can go on
:06:53. > :06:56.and on. So there is quite a bit we can do to invest in infrastructure
:06:57. > :07:01.which would get people back to work today, dividing well-paid jobs, and
:07:02. > :07:07.also improving productivity and competitiveness in the future. Do
:07:08. > :07:11.you agree? I agree but I think it is only part of the strategy, we need
:07:12. > :07:15.to radically change the expectation of people and households for the
:07:16. > :07:21.future. And we need radical as Miss tax reform. The United States must
:07:22. > :07:24.be a place in which the want to invest that means having a tax
:07:25. > :07:31.system which does it. And before supporting work, we have programmes
:07:32. > :07:36.we think of as work support which are more to do with family support
:07:37. > :07:40.than work. If we are serious about work in the recovery we need to
:07:41. > :07:46.spend more money. Do you think that is where the money should be spent,
:07:47. > :07:49.or elsewhere? It is an important place to spend it but we need to use
:07:50. > :07:55.lots of instruments to strengthen the bargaining power of low-wage
:07:56. > :07:59.workers. Unions are very weak in the US. Our economy works better when
:08:00. > :08:03.workers have a voice, it is good for the country on the whole. The
:08:04. > :08:08.minimal wage in the US is well below the UK or Germany, where they have
:08:09. > :08:12.just implemented minimum wage for the first time in their history. So
:08:13. > :08:15.it is one thing to support opportunity and wages and income of
:08:16. > :08:21.low and moderate income people, but we need to use a whole set tools.
:08:22. > :08:26.Each set of tools has its own drawbacks and strengths, and I think
:08:27. > :08:31.we do better if we use a broad set. But I also agree with cooling
:08:32. > :08:36.completely, on corporate tax, our system is the worst of all worlds.
:08:37. > :08:42.We have a very high statutory rate. We have a large loopholes. We don't
:08:43. > :08:45.raise much money. We discourage US investment. So I think there is a
:08:46. > :08:51.lot of room for improvement. President Obama has taken steps to
:08:52. > :08:56.try to address... On the corporate front, we have seen tax inversion, a
:08:57. > :09:00.company relocating its headquarters overseas to take advantage of lower
:09:01. > :09:09.tax rates. Do you support the steps taken by the US Treasury so far? I
:09:10. > :09:14.don't. I think it is going after a manifestation but not the underlying
:09:15. > :09:20.problem. In versions will continue in a new form. The statutory US rate
:09:21. > :09:23.is so high. And because we have a corporate tax system, as Alan
:09:24. > :09:28.correctly says, that is riddled with problems. If we had a very low
:09:29. > :09:32.marginal tax rate in the US and the tax base, we would see much
:09:33. > :09:35.different action. I wish the Treasury had the courage to push
:09:36. > :09:41.that rather than going after inversions. There is an opportunity
:09:42. > :09:45.for the next president, the next Congress, to do what Glenn suggests.
:09:46. > :09:55.To lower the corporate tax rate and reduce some of the tax expenditure,
:09:56. > :10:01.some of the preferences, and that will help to reduce corporate
:10:02. > :10:05.inversions. And that does present an opportunity at the beginning for the
:10:06. > :10:08.next administration. Hopefully we will be able to get a lock on the
:10:09. > :10:13.beginning of the next administration. Given where we are
:10:14. > :10:17.now with gridlock in Congress I can see why Treasury is taking the
:10:18. > :10:21.action it is. One of the reasons what we are talking about is so
:10:22. > :10:25.important is the best thing for low-wage workers is the economy
:10:26. > :10:35.running hot. We have depended on the Federal Reserve to do so but policy
:10:36. > :10:40.does -- monetary policy does not have much capacity, changes from the
:10:41. > :10:46.president could help. It seems you are advocating the trickle-down
:10:47. > :10:51.effect, a rising tide lifts all boats. After 1982's recession the
:10:52. > :10:57.recovery was much stronger, this seems weaker. So does that approach
:10:58. > :11:00.still hold? Yes, the best thing for anybody in the economy is to have
:11:01. > :11:06.the economy grow faster. The question is, how? The President
:11:07. > :11:09.Obama administration pointed out that faster productivity and growth
:11:10. > :11:14.is a far better tonic for middle income wages than just going back to
:11:15. > :11:21.old income distribution. Final word, do you agree? I think growth is
:11:22. > :11:25.extremely important. Necessarily, but not sufficient. We had a long
:11:26. > :11:29.period of growth which was not shared with the middle-class. Almost
:11:30. > :11:35.all of the games went to the very top. The very top of the top. So it
:11:36. > :11:39.is important we pursue a strategy leading to stronger growth, and it
:11:40. > :11:43.is also important we take action to have more inclusive growth, and that
:11:44. > :11:46.growth is sustainable. Those are the three key elements to an economy
:11:47. > :11:53.that will create a thriving middle-class. Thank you both for
:11:54. > :11:57.now. Later in the programme, we discuss if the economic system is
:11:58. > :12:03.rigged. A sentiment prominent in this election cycle. But in our
:12:04. > :12:06.talking point we cross the Atlantic to Ireland where our comedy
:12:07. > :12:11.consultant shows it is not just Americans who are unhappy at their
:12:12. > :12:16.financial situation. I am at a very special event in
:12:17. > :12:20.Dublin Castle. In a few moments the American vice president will speak.
:12:21. > :12:25.He is an island, obviously, to look up his Irish roots. But he will also
:12:26. > :12:29.give a speech on the special relationship between Ireland and the
:12:30. > :12:37.United States. And given what has happened with Brexit we need all the
:12:38. > :12:41.friendships we can get. The longer I am here the more I
:12:42. > :12:48.wonder, why did my relatives of leave?
:12:49. > :12:53.We have shared a lot, Ireland and America. Even a financial crisis.
:12:54. > :12:58.But there is still a legacy of a huge amount of suspicion on both
:12:59. > :13:04.sides of the Atlantic of big money, big finance, corporatism, and
:13:05. > :13:10.capitalism. Why? The growing recognition after 2008-2009, not
:13:11. > :13:16.only that the bailout benefited, seemed to benefit the wealthy at the
:13:17. > :13:22.expense of the many, but the last few years of a common policy had
:13:23. > :13:25.benefited the wealthy. Our economy changes from week to
:13:26. > :13:30.week. We thought everything would be OK. But the EU would save us, we
:13:31. > :13:37.were all in it together, on the road to progress. Now, everything is
:13:38. > :13:42.uncertain again. President Obama was re-elected in 2012 with unemployment
:13:43. > :13:54.at its highest level for any re-elected president since Franklin
:13:55. > :13:57.D ruse of elk -- Roosevelt in 1940. Since 2012 the economy has recovered
:13:58. > :14:01.but the fruits have been very poorly distributed.
:14:02. > :14:07.Are there examples from history we can look at? Reagan was elected when
:14:08. > :14:14.the economy was suffering from a phenomenon known as stagflation. The
:14:15. > :14:18.broader trends of financial eyes Asian, which were in existence in
:14:19. > :14:22.the 1970s and accelerated in the 1980s and are still with us today,
:14:23. > :14:32.that is the fundamental source of income inequality. -- financial eyes
:14:33. > :14:37.. We thought things were getting better, now we are not so sure
:14:38. > :14:40.again. Who knows what future vice president of the United States,
:14:41. > :14:45.hopefully with Irish roots, who knows what they will come and tell
:14:46. > :14:53.us? Remember, you can see a lot more of
:14:54. > :14:59.those of short films on our website. Gentlemen, obviously there in
:15:00. > :15:04.America we have seen a huge rise of economic populist. Do you think that
:15:05. > :15:07.what we have seen in this election cycle, ultimately will help the
:15:08. > :15:13.economy, force is used to be addressed? In the end it could be
:15:14. > :15:18.healthy, it could cause a national discussion about how our economy is
:15:19. > :15:26.failing for large segment of the population. Or it could lead to more
:15:27. > :15:29.crony capitalism. Donald Trump said he would approve the keystone
:15:30. > :15:33.pipeline but he would extract is on the profits from the Canadian
:15:34. > :15:38.company, which is an example of crony capitalism. So I worry it
:15:39. > :15:43.would lead to extremes. That we would move away from some key
:15:44. > :15:47.aspects of our country, that have made us great, such as welcoming
:15:48. > :15:51.immigrants. If you are going to build a wall and say to the rest of
:15:52. > :15:55.the world, we are closed to immigrants, who go back to the
:15:56. > :15:59.history of the US, one of the reasons we have been so successful
:16:00. > :16:01.and had such a strong economy is because we have welcomed the best
:16:02. > :16:06.and the brightest throughout the world. That has led to dynamism
:16:07. > :16:13.within the economy. So I worry that we could end up stepping backwards.
:16:14. > :16:18.I see you are nodding your head. The way I see it is that populism is a
:16:19. > :16:21.healthy fire at the moment, and sometimes fires can burn out of
:16:22. > :16:29.control, and that is a concern. The reason it is good at the moment is
:16:30. > :16:32.it is forcing a conversation about trade where people can have
:16:33. > :16:39.reasonable differences of opinion. I also hope that the US proceeds as an
:16:40. > :16:44.open, global power. But to have the discussion by Fiat, as opposed to
:16:45. > :16:49.for real, it is unfortunate. So I think the populism is positive, but
:16:50. > :16:52.I do worry about it burning out of control. Many of the promises we
:16:53. > :16:58.hear on the campaign Trail is, can they even be delivered? And if not,
:16:59. > :17:06.what is the danger? The short answer is they are not. And the longer
:17:07. > :17:10.answer is, it was always thus. I am concerned to hear, from the left,
:17:11. > :17:14.concerns that we will expand the Social Security programme, which is
:17:15. > :17:23.already a fiscal problem for the country. I am concerned by Donald
:17:24. > :17:28.Trump's having a tax plan with a $10 trillion revenue cost. Neither plan
:17:29. > :17:33.seems to move us forward. The candidates must at least talk about
:17:34. > :17:37.the issues of concern for them, but then we impose a reasonable
:17:38. > :17:41.discipline of mathematics. People can agree about economics, but
:17:42. > :17:46.surely not arithmetic. Is there a case that more financial education
:17:47. > :17:51.is required? That economist and policy makers like yourself have not
:17:52. > :17:55.done a good enough job communicating to the public? Absolutely, whether
:17:56. > :17:59.it is about individual investments, preparation for retirement, we know
:18:00. > :18:01.that many Americans are woefully underprepared in the allocation of
:18:02. > :18:06.wealth, and the way that we have public discourse about the
:18:07. > :18:10.programmes such as Social Security and medical care, we need to do a
:18:11. > :18:14.much better job. You were recently an economic adviser to President
:18:15. > :18:21.Obama. Did you discuss how to draw people closer to economic policy?
:18:22. > :18:25.What was the thinking? Absolutely. The president set up a commission on
:18:26. > :18:29.the financial capabilities of the population. And one of the reasons
:18:30. > :18:34.for the fiduciary rule, which is now requiring people to give investment
:18:35. > :18:39.advice, with the interests of the client in mind, as opposed to
:18:40. > :18:43.maximising their own income, and it is also important that we have a
:18:44. > :18:47.system which protects people. A system that protects people from
:18:48. > :18:50.dangerous products, dangerous toasters, in the same way we now
:18:51. > :18:53.have the consumer financial protection board to help protect
:18:54. > :19:01.people from financial fraud and shenanigans. I saw somewhere that
:19:02. > :19:10.roughly half of all American adults do not have enough financial power
:19:11. > :19:14.to put away $400 for an emergency. So we can talk about savings but in
:19:15. > :19:19.that context it is easy to see what is fuelling populism on the campaign
:19:20. > :19:22.trail. That is partly a reflection of global economic trends that have
:19:23. > :19:29.taken place, stagnation in incomes, real incomes, at the bottom. I worry
:19:30. > :19:35.we are in something of an inequality trap. The fact that inequality has
:19:36. > :19:38.increased so much in the US that the people at the bottom start with so
:19:39. > :19:43.many disadvantages it will be harder for them to ever have upward
:19:44. > :19:49.mobility. So the challenges are much greater than they were, say, 20, 30
:19:50. > :19:53.years ago, when inequality was just beginning to rise. But it is one of
:19:54. > :19:56.the reasons why I think that it is important that people have habits of
:19:57. > :20:02.putting money aside for an emergency, because if they do not
:20:03. > :20:06.the consequences could be severe. Foreclosure, bankruptcy, high credit
:20:07. > :20:11.card interest rates, and so on. So I think it is very important that the
:20:12. > :20:20.public do follow good financial habits. Please jump in. We need to
:20:21. > :20:23.focus on opportunity. The truth is mobility has not gone down, but the
:20:24. > :20:29.flip side is it has not improved either. We are not the economy of
:20:30. > :20:34.immediate escalators, or vice versa. To change that we need to focus on
:20:35. > :20:39.access to education, opportunity, to really think about that, we have had
:20:40. > :20:43.times in our nation's history, whether it is the time of President
:20:44. > :20:48.Lincoln, or the GI Bill, in modern times, we need to really think about
:20:49. > :20:52.that, and saving, because there are plenty of examples from the rest of
:20:53. > :20:56.the world. Australia's superannuation scheme comes to mind.
:20:57. > :21:01.We could build savings for people, we just have not focused. The Bernie
:21:02. > :21:07.Sanders promise of free tuition is a way of addressing problems like too
:21:08. > :21:18.much of student debt. College being free is a silly girl. It is already
:21:19. > :21:22.free for most Lincoln -- a silly goal, already free for most
:21:23. > :21:27.low-income students. We need to think hard about whether college is
:21:28. > :21:34.a bargain. Is the American dream still relevant today? Still
:21:35. > :21:38.applicable? It absolutely is. The idea of dynamism, wanting to be an
:21:39. > :21:44.economy that generates the classical good life of continuous improvement,
:21:45. > :21:49.innovation, growth and well-being, it is very much alive. Frustrated,
:21:50. > :21:56.but very much alive. Is it attainable? Very much so, but not
:21:57. > :22:00.with the policies we are doing now. If you look around the world there
:22:01. > :22:04.is no other country's problems I would trade hours for, they can all
:22:05. > :22:09.be solved. But it is the case that the consequences of the apparent
:22:10. > :22:13.situation matter more today than they did before. So for those who
:22:14. > :22:18.are ambitious and work hard and are talented there is still upward
:22:19. > :22:23.mobility, but not enough. So we need to do more to support that aspect of
:22:24. > :22:28.our economy, because if not we are throwing away an extremely important
:22:29. > :22:32.resource. We will have more of a labour shortage economy because of
:22:33. > :22:36.the demographics, an older population with slow growth, so we
:22:37. > :22:42.need to take advantage of all of our human resources. It will be a longer
:22:43. > :22:45.run problem if we don't invest enough, particularly in children who
:22:46. > :22:50.are born into less fortunate circumstances. So more work to be
:22:51. > :22:57.done but an optimistic note to end on. Glenn Hubbard, Alan Krueger,
:22:58. > :23:03.thank you. Next week we are back in New York to
:23:04. > :23:05.examine the rise of the robots and what it means for your job
:23:06. > :23:28.prospects. For now, it is goodbye. The weather has not been ideal.
:23:29. > :23:29.Sunshine