Latest / Success Story with Scott Clary / Diana Furchtgott-Roth - Economist, Professor & Author | Navigating Economic Realities

Transcript

Diana Furchtgott-Roth - Economist, Professor & Author | Navigating Economic Realities · Success Story with Scott Clary

• 0:00
  How were you effective over your career?
• 0:02
  How did you find that you could have the biggest impact and what did that look like?
• 0:05
  If I can work somewhere like the White House or a major cabinet agency,
• 0:10
  then you can make decisions that really help people.
• 0:14
  The decision makers inside they are very much subject to outside pressure.
• 0:20
  I think a lot of the great doctors leave countries where there is only public options.
• 0:24
  If they practice privately, then they cannot be in the public system.
• 0:28
  So you have some specialists who are practicing privately,
• 0:31
  but then normal people who want to see them can never do that.
• 0:34
  If we do not move it in the right direction, what's the reality for the average American?
• 0:38
  How is it going to impact them?
• 0:40
  Well, already the average American is seeing lower and slower wage growth because of inflation,
• 0:47
  but inflation running at 8.5%, and average wage is increasing by 5.6%.
• 0:54
  And that's just the average a lot of people and getting raises at all.
• 0:59
  Welcome to success story.
• 1:01
  I'm your host, Scott Clary.
• 1:02
  The success story podcast is part of the HubSpot podcast network.
• 1:06
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• 1:08
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• 2:21
  The first thing people hear is you.
• 2:27
  So I'll do the introduction and I'll do some post-production after.
• 2:31
  But tell me, what's your origin story?
• 2:33
  We'll talk about your background, where you came from,
• 2:36
  you have an incredible resume.
• 2:38
  But go into detail.
• 2:41
  So where did this career aspiration, the things that you've done,
• 2:46
  various universities in the government,
• 2:48
  where did this all start?
• 2:50
  How did you get excited about this?
• 2:52
  Was this a dream that you had as a little kid,
• 2:55
  or was this something that evolved over the course of your career?
• 2:59
  Right.
• 2:59
  Well, well, I've always wanted to be an economist.
• 3:02
  I've always thought that economics can help make people's lives better
• 3:07
  because you look at countries with good economic systems
• 3:11
  and people are much better off than in countries with poor economic systems.
• 3:16
  So I very naively thought that if I could help put in place a better economic system,
• 3:22
  people would be happier and better off.
• 3:26
  Little did I know that it's not the economist that put in place the good economic systems.
• 3:31
  It's the politicians and that there can be very obvious solutions to economists
• 3:37
  that politicians do not enable.
• 3:41
  So that's basically the backstory.
• 3:43
  So I set out to get degrees in economics.
• 3:46
  I have an undergraduate degree from Swarthmore College,
• 3:50
  a graduate degree from Oxford University.
• 3:53
  I came to Washington.
• 3:55
  I got a job in a consulting firm and then another consulting firm.
• 3:59
  And then someone called me from President Reagan's Council of Economic Advisors saying
• 4:04
  we've had an unexpected opening for a junior economist in the field of taxation.
• 4:11
  Could you come on board?
• 4:14
  And so I accepted and that's how I got started with a career in policy.
• 4:18
  And when you went into policy, obviously as somebody who has dreamt of being an economist
• 4:28
  from a very early age, you wanted to change things for the best.
• 4:32
  You wanted to make the U.S. one of the greatest economies in the world and you wanted
• 4:37
  to do everything to improve the lives of the average person.
• 4:40
  But when you first go into policy, you probably realize, like you mentioned,
• 4:45
  that politicians make a lot of the decisions that actually impact the work that you
• 4:49
  wanted to affect yourself.
• 4:51
  So how were you effective over your career?
• 4:53
  How did you find that you could have the biggest impact and what was what did that look like?
• 4:59
  So when you're outside the system, you think if I can work somewhere like the White House
• 5:04
  or a major cabinet agency, then you can make decisions that really help people.
• 5:12
  But then when you're inside, you're working at the Council of Economic Advisors as an economist
• 5:18
  or as chief of staff as I was, then you find out that maybe people outside have more part.
• 5:25
  But by writing an op-ed, you can have more influence than actually if you're inside making
• 5:32
  the decisions because the decision makers inside, they are very much subject to outside pressure.
• 5:41
  And what goes on outside is very important to that.
• 5:46
  So the people who speak on TV, the people who write op-eds in newspapers, they're very
• 5:52
  influential on what happens.
• 5:56
  That's interesting.
• 5:57
  And in your career, have you worked with parties that have been able to provide pressure and
• 6:07
  influence in government? Have you done that yourself?
• 6:10
  Is that something that you've taken on or is that something that you've just been almost
• 6:15
  on the receiving end up and you've worked within the confines of opinions that have shaped
• 6:21
  government that you've been part of?
• 6:23
  When I was at the American Enterprise Institute in the 1990s during President Clinton's term
• 6:29
  in office, there was Hillary Clinton's effort to have a health care system and change the
• 6:38
  health care system. And when I was at the American Enterprise Institute, I helped organize a
• 6:43
  series of monographs that shed light on what would actually happen if her proposed system
• 6:51
  were implemented. And this worked a lot towards, I think, the end of that proposal,
• 6:59
  showing that people wouldn't have any choice in their doctors, showing that costs would rise and
• 7:06
  the negative aspects of a health care system that was government-driven rather than driven by
• 7:13
  the private sector.
• 7:15
  That's very interesting. Obviously, that's very topical. And actually,
• 7:20
  because I think that it's something that is very top of mind for everyone, I have a
• 7:24
  million other things that I'd like to go into. Obviously, over the past two years, there's been a lot
• 7:30
  of a lot of items that you have a credible experience. But that particular point,
• 7:35
  can I ask and go into that just a little bit because I'm Canadian?
• 7:40
  Yeah, absolutely.
• 7:41
  And I want to understand is the system that we have in Canada, for example,
• 7:49
  it seems by a lot of people think that it works well enough. I mean, the way times are not great
• 7:55
  compared to private and whatnot. But when you look at a system like what's in Canada and probably
• 7:59
  what's in many countries in Europe, why is there not a solution that we could think through
• 8:04
  financially, fiscally, that would work in the US or maybe on the other end of the spectrum,
• 8:10
  maybe you would disagree that these other systems actually do work well and maybe taxation and
• 8:15
  whatnot has sort of gone out of, you know, it's too high because these systems have been implemented
• 8:21
  poorly. So what's your take on that? Well, the system in Canada is very interesting. It's
• 8:27
  publicly provided. There isn't a charge for it. But we find that many Canadians come to the United
• 8:33
  States for their health care. So we do find that and some Canadian politicians as I, you know,
• 8:41
  better than I do have got into trouble for coming to the United States for having COVID vaccines
• 8:48
  in advance or even some other kinds of medical procedure prior to COVID. So there does seem to be
• 8:55
  problems with that system. In the UK, there's the National Health Service. But doctors are allowed
• 9:03
  to practice privately as well as be employed by the National Health Service. So you find that they
• 9:09
  might work three days or four days a week for the National Health Service on one or two days
• 9:15
  in private practice. And there are insurance companies that pay for the procedures
• 9:24
  for private practice. So there's a system called Bupa BUPA that many people have as a form of
• 9:33
  compensation when they work in the private sector. So they seem to be able to balance both the
• 9:41
  National Health Service is a basic safety net. And yet there's an off wrap for people who need
• 9:48
  to have procedures privately. Actually, that seems to be, I think that in any argument that I've
• 9:55
  an any debate that I've ever had about health care, I think that's actually always been the
• 9:59
  the best possible solution. Almost like a private public two-tier health health system. Because
• 10:08
  I think that what happens, I don't spend a ton of time on this. I just find it incredibly
• 10:11
  fascinating topic and you spend time researching it. I think a lot of great doctors leave countries
• 10:17
  where there is only public options. And then you lose some of that talent. Like you mentioned,
• 10:21
  Canadians come down to the US for treatment. That's not uncommon because the wait times for treatment
• 10:28
  are too long or the specialists are too booked up because there's too many patients trying to see
• 10:33
  the specialist. And then you're left with, well, if you have something serious or even not serious,
• 10:38
  it's going to take you six months to to get it checked out and sometimes treat it. So that's also
• 10:43
  not a good solution when you have just pure public and people, they people, they want to make money,
• 10:49
  doctors want to make money. They come down to the US and the country loses a lot of talent and a
• 10:53
  lot of a lot of skill. But right, or else in Canada, they're allowed to practice privately. But if
• 11:00
  they practice privately, then they cannot be in the public system. So you have some specialists
• 11:05
  who are practicing privately, but then normal people who want to see them can never do that.
• 11:11
  Correct. Yes, exactly. So I didn't realize the UK did that, had their system like that. And in your
• 11:17
  in your opinion, would that be a system that would work well in the US, something along those lines?
• 11:25
  So in the US, we have a Medicare and Medicaid and these, this provides a basic safety net. And then
• 11:36
  there's the Affordable Care Act insurance, which is subsidized for people below certain income
• 11:44
  levels, a relatively high income level. So you can be earning almost $100,000 for a family of four
• 11:51
  and still get subsidies under the Affordable Care Act. But the problem with US
• 11:58
  insurance is that it's partly employer provided, which has meant that it's difficult to have
• 12:08
  competition in the supply of these insurance products. So for example, you don't hear people say,
• 12:16
  I'm losing my job, I'm going to lose my home insurance or I'm losing my job, I will be able
• 12:21
  to drive, I will get auto insurance, but you do hear them say, I'm losing my job, I will get my
• 12:29
  health insurance because it is so closely tied to the employer. So something has to be done to
• 12:35
  level that playing field, either by making that employer provided insurance taxable or by making
• 12:44
  insurance purchases outside of the employer tax deductible. And I think the second root is
• 12:52
  probably the way to go because you cannot have such a big change right now with the institution
• 12:58
  that's built up of employer provided health insurance, making that taxable right now would be
• 13:04
  too big a change. I want to, so obviously this is one major issue that should be solved for
• 13:12
  for the average American person, but obviously that's not the only issue and that actually this will,
• 13:17
  I don't want to spend too much time on healthcare because there's a lot of other incredible insights
• 13:21
  that you have around what's happened. So we look at inflation, that's an incredible topic that I
• 13:28
  think you have a lot of expertise in. We're looking at the highest inflation numbers since 1982.
• 13:36
  So, you know, you've been working as an economist for, I don't even know how long,
• 13:42
  longer probably like a long time, like a fairly long time if you were around with the Reagan
• 13:47
  administration. So you've seen everything. So what has caused this inflation? Let's simplify
• 13:54
  what the major drivers are because we hear the different causes from different politicians,
• 13:59
  different news outlets. You've been around working with the numbers, working with different
• 14:05
  different administrations. So what has caused this? There's been vast monetary accommodation from
• 14:10
  the Federal Reserve and there's been a big fiscal policy expansion in the beginning of 2021.
• 14:20
  Rates have been very low during, we saw that GDP growth was very strong at the end of
• 14:33
  at the end of 2020 and yet at the beginning of 2021 there was another two trillion dollars of
• 14:43
  stimulus put in the economy and this kind of pitched everything over the edge. People were being
• 14:50
  paid to stay home at a time that GDP growth was around six or seven percent. So consumers wanted
• 14:57
  to buy services, they wanted to buy products at the same time stimulus checks were being sent out
• 15:04
  that encouraged people to stay home, expanded unemployment insurance benefits, encouraged them to
• 15:11
  stay home. It's as though you gave everyone coupons to eat at McDonald's, everyone went to
• 15:16
  McDonald's but then yet the staff didn't show up and there wasn't enough people to produce all
• 15:23
  the hamburgers and french fries. That's a bit what it was like. So we had these major supply chain
• 15:29
  problems that drove up the prices and we have yet to recover fully from that. So the combination of
• 15:39
  a very loose fiscal policy with a lot of spending together with interest rates that were close
• 15:46
  to zero and there have been people right in 2021 in the spring, people like Mickey Levy of
• 15:54
  bear and bug capital, one of the smartest economists around was saying you got to be careful of
• 15:59
  inflation, you got to watch inflation. The same time the Fed was saying no it's transitory,
• 16:05
  it's just going to go away but it didn't go away. It was growing in nights about 8.5 percent.
• 16:12
  The producer price index is above 11 percent. So now the Fed is in a really tough spot.
• 16:19
  They don't want to have to raise interest rates too quickly during an election year. They don't
• 16:25
  want to seem to be political. On the other hand, they don't want to be left with the legacy of
• 16:31
  double digit inflation. So the question is what to do. So that's an incredible point and I
• 16:37
  understand where it's coming from but the Fed is also buying billions in treasuries and mortgage
• 16:42
  back securities. So tell me why does that make sense when they're already trying to solve the
• 16:47
  first problem that they created. This seems to be compounding the issue. That's a great question
• 16:53
  Scott while they have announced that they have stopped buying the treasuries and mortgage back
• 16:58
  securities and they're whittling back their multi trillion dollar balance sheet. So they are
• 17:05
  starting to move in the right direction. They raised interest rates by a quarter of a percent
• 17:10
  of the last meeting. Many people say they're going to be raising them by half a percentage point
• 17:16
  at the next meeting in early May. So we'll have to see what happens. They have another six
• 17:22
  opportunities to raise interest rates raising the federal fund rate this year. And we'll have to
• 17:30
  see if they do it in what's called 25 basis point increments. That's a quarter of percentage point
• 17:36
  or 50 basis point increments, which is half a percentage point. But if they do it in 25 basis point
• 17:43
  increments, at the end of the year will be left with a federal funds rate of 2.9%.
• 17:49
  Inflation is now running at 8.5%. We have never managed to get inflation down by having a
• 17:57
  federal funds rate that's lower than the inflation rate. So whatever strategy they're using is
• 18:04
  going to have to be helped by President Biden. He can actually do something also to help bring
• 18:11
  inflation down. An exerting downward pressure on energy prices and commodity prices.
• 18:18
  And he needs to be working in tandem with the federal reserve on this to bring inflation down.
• 18:25
  Now is he doing that? Is he proactively doing that right now?
• 18:30
  Well, so far he is not. He could be doing a lot to lower energy prices by expanding production
• 18:39
  in the United States. So he said that he's taking oil out of the strategic petroleum reserve.
• 18:47
  But we have the biggest strategic petroleum reserve right here under our feet. And we could be
• 18:52
  expanding oil production offshore and in different areas in order to lower the price of oil.
• 19:02
  North America is the largest natural gas and oil producing region in the world.
• 19:09
  And we should be taking advantage of that. You know, Scott, prices are set by expectations.
• 19:16
  So if the press announced that he was doing something different, then the price of oil could fall
• 19:22
  by $10 or $20 a barrel just on expectations of greater production and lower prices.
• 19:29
  But so far he has not announced that he is doing anything.
• 19:34
  Why are we not taking advantage of the resources that we have?
• 19:41
  Again, as I said in the beginning, it comes down to politics rather than economics.
• 19:46
  The president certainly knows that we need more oil production. But he's going to Venezuela.
• 19:53
  He's going to Iran. He's going to Saudi Arabia. He's asking them to produce rather than our
• 19:58
  companies here because the left wing environmentalists that form part of his base
• 20:05
  are saying that they don't want fossil fuel production here in the United States.
• 20:10
  So yes, oil is going to come out of the ground, but it's not going to come out of the ground here,
• 20:15
  which is not really going to help climate change because regulations here to produce oil
• 20:21
  are so much more stringent than anywhere else in the world. If you want to produce oil with the
• 20:27
  least amount of excess emissions, the least amount of excess pollution, this is the place to be
• 20:34
  doing it here in the United States. No, I agree. It seems almost counter-intuitive and counter-productive
• 20:42
  to claim that you're going to be more environmentally friendly by going to these countries.
• 20:48
  It's interesting what lobbying, I guess, can do. Let's talk about inflation.
• 20:55
  So let's talk about inflation numbers. Let's talk about the average American's ability to
• 21:02
  consume. If we do not tame inflation, if we do not move it in the right direction, what's the
• 21:09
  reality for the average American? How's it going to impact that? Well, already the average American
• 21:16
  is seeing lower and slower wage growth because of inflation, with inflation running at 8.5%.
• 21:26
  And average wage is increasing by 5.6%. And that's just the average. A lot of people are getting
• 21:33
  raises at all. And then people are finding that their incomes are shrinking. They still have
• 21:40
  pretty good balance sheets from the stimulus funds that they saved. But ongoing, inflation is
• 21:46
  going to be cutting into their incomes. They won't be able to buy so much. And so that is how a
• 21:54
  recession starts. We have to hope that it doesn't get to that. Help me understand, as somebody who
• 22:02
  is not heavily understanding of finance and your domain of expertise. But the recession that could
• 22:10
  come of this is it lesser or greater than what we've seen in the past. But past recessions, excuse me.
• 22:17
  Well, no one knows, Scott. In fact, we're hoping that the Fed can get inflation out of the system
• 22:23
  without a recession. But if it does it gradually now, it might be a slower, a smaller recession,
• 22:31
  smaller negative growth rate than if they left it to double digit inflation. It's always
• 22:37
  easier to attack inflation in its initial stages, especially now with the supply chain problems.
• 22:44
  If we can solve some of the supply chain problems, we might only have to deal with 4% inflation,
• 22:49
  which is only 2% points above the Fed's target, which is 2% inflation.
• 22:55
  So I talked about energy prices, how the President could help get those down. He could also reduce
• 23:01
  the price of commodities by taking off some of the tariffs. We look at steel and lumber. We still
• 23:07
  have tariffs on those from the Trump era. President Biden could get rid of those. In fact, he's got
• 23:13
  rid of so many Trump era policies. You have to ask why hasn't he got rid of the tariffs.
• 23:20
  So that's something that he could be getting rid of. He could also be looking at wage rates
• 23:28
  and the cost of infrastructure spending. We passed this trillion dollar infrastructure bill. He
• 23:34
  signed it into law in November. But a lot of the projects have to be taken, have to be undertaken
• 23:42
  with project labor agreements. That means only high priced union labor can be used.
• 23:49
  And unions are about 13% of all construction companies. 13% of all construction companies are
• 23:57
  unionized. So that's leaving out the lowest cost 87% of them. So there's no reason for the President
• 24:08
  to be just allowing union labor to be building infrastructure in the United States.
• 24:15
  Does other companies that can be doing it too? We don't have to artificially raise the price of
• 24:21
  labor. I just want to take a second and thank the HubSpot podcast never for supporting success
• 24:26
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• 25:08
  And you mentioned one thing that was interesting. So sort of two points that came out of that,
• 25:14
  Biden does not remove tariffs on certain items, but also the fact that he's that we're still
• 25:20
  mandating union labor for a lot of these jobs. The point about tariffs, why would you not
• 25:27
  remove those if that would benefit? Why would what would be the purpose as to why you wouldn't do
• 25:33
  that? It seems very obvious that it should be something that should be done if it's going to
• 25:36
  help improve the situation. Yeah, yeah, it seems very obvious, but there's a populist view that
• 25:44
  you want to protect Americans, you want to protect American workers, but now there are 11 million
• 25:48
  unfilled jobs. Anybody who wants a job can get one, but it's an element of populist protectionism,
• 25:55
  which again is more politics than economics, even though there are far more people who would
• 26:00
  benefit from lower prices on steel and lower prices on lumber. There's small groups that are very
• 26:07
  influential who basically have the say as to what happens. And I would recommend getting rid of
• 26:14
  those tariffs and lowering some of those prices of commodities. There's a lot that President
• 26:20
  Biden can do to help reduce inflation, help the Fed out. I'm curious about your opinion on
• 26:27
  on of course people, we're getting stimulus checks over the course of COVID and that allowed
• 26:34
  people to for a while not be working. What's the current state of that and how are we pushing people
• 26:40
  to go back to work so that they're not comfortable at home? Is that still a reality for some people
• 26:45
  that they aren't going back to work? The labor force participation rate, the share of Americans
• 26:53
  who participate in the labor force is about one percentage point lower than before the pandemic.
• 27:00
  And during the pandemic many people had to stay home. Kids who are home from school, you can't
• 27:06
  just go out and leave your kids at home on Zoom. So we have to hope that schools are going to
• 27:12
  come back fully that they won't all of a sudden have a Zoom day because that makes parents very
• 27:17
  uncomfortable, very uncomfortable about going back to work if they think all of a sudden that their
• 27:23
  child is going to be have a Zoom day at school. So we need to really fix the school, the school
• 27:29
  problem and make sure that schools are in person all the time. So bring stability to people,
• 27:36
  a normalcy back to people's lives. Right. Exactly. Yes. And I think that what once that happens
• 27:43
  people are going to be drawn back into the workforce, although there are people who were near
• 27:50
  retirement who find that they cannot get the jobs that they used to have and that they are unable
• 27:55
  to go back to work. There still is a prejudice against employing older workers and some of those
• 28:01
  might not return. You might take early retirement and decide to not fully participate in the workforce
• 28:07
  again. Now it's interesting. I think this is another interesting problem to solve for lots of
• 28:13
  problems to solve for. But if inflation is increasing the cost of living and employers are trying to
• 28:21
  incentivize people to come back to the office, they're going to probably have to offer higher wages
• 28:26
  to incentivize those people, which will in turn then increase the pressure on inflation if I'm not mistaken.
• 28:34
  So how do we, this seems to be almost like a like a horrible self-fulfilling prophecy,
• 28:43
  where even if we're trying to incentivize people to bring come back to work, which can be
• 28:46
  benefit by doing so, the actions that we take and the levers that we pull to do that are actually
• 28:51
  going to put more stress on the country. So is that something that you would have a suggestion
• 28:57
  as to how do we solve for that particular scenario, which would help people get back to work?
• 29:02
  It's called yes, it's called the wage price spiral and the fed raises rates. As the fed raises
• 29:13
  rates, we find that measures of labor demand and vacancies begin to moderate and then nominal
• 29:19
  and real wage pressures are likely to ease. So that works itself out as the fed raises interest
• 29:26
  rates, slowing the economy a little bit. As the cost of borrowing goes up, then companies cannot
• 29:33
  embark on some of the projects that they did before. And so that's a consequence of the fed
• 29:43
  raising rates, the demand for labor might moderate and that means that high wage increases will
• 29:51
  no longer be as apparent. It's not just wage raises, by the way, firms are offering competitive
• 29:58
  compensation packages and that also means some combination of remote or hybrid work,
• 30:05
  completely remote or remote a couple of days a week. And that has very interesting consequences
• 30:11
  also for rental prices of commercial real estate downtown or the status of public transit systems
• 30:19
  which rely on millions of people every day. So if you take half those people out because they're
• 30:24
  going to work at home, what's that going to do to your public transit system and do we really want
• 30:29
  to be putting billions of dollars into these systems that are no longer going to be 100% used
• 30:35
  to that fullest extent? That's a very interesting, it's a very interesting effect of all the changes
• 30:42
  that are going to be made. Do you have some obviously we can only forecast and look at the crystal
• 30:48
  balls so much? But if you're going to speak about some of the things that will be heavily impacted,
• 30:53
  you mentioned to there commercial real estate transportation systems with the future of work and
• 30:59
  the way that we've evolved to work from hybrid and work from home, where do you think that's going
• 31:04
  or what do you think that will affect? We've all learned how to do zoom, how to do teams,
• 31:11
  how to do these different modes and people don't want to give them up fully. Plus there's the
• 31:17
  efficiency of maybe saving an hour commute on some places more than an hour commute. So we can
• 31:26
  really see certain productivity enhancements in being able to do remote work. Plus it means that
• 31:34
  employers have access to labor all over the country in some places all over the world. So there's
• 31:42
  real, I think that there's a lot of appeal in some share of remote work. On the other hand,
• 31:50
  you do learn a lot being with colleagues at the office, you bounce ideas off them, you can work
• 31:57
  with them better if you've met them in person. So it's one thing to leave a workplace and go remote
• 32:03
  than you know everybody who's at the other end of the camera. But then as time goes on, if more
• 32:08
  people join, you haven't met those people in person, it doesn't work quite as well. So I think that
• 32:15
  what might be developing is this hybrid model where some companies choose to just bring in people
• 32:21
  a few days a week, then this provides a better compensation package for these individuals.
• 32:29
  The cost of meaning that they don't have to pay them as much.
• 32:31
  True. And the cost of living in the city may not.
• 32:34
  A job that's not right. They don't have to live in New York. They don't have to live in a major
• 32:39
  urban area either for for somebody. Right. Exactly. Yes. Yeah.
• 32:45
  And when you, you know, a lot of what a lot of what is very apparent after speaking with you,
• 32:51
  even for a short period of time, is that a lot of the logical decisions that should be made
• 32:57
  are not being made because of politics. So who are the groups that should be under scrutiny?
• 33:04
  Who are the groups that lobby politicians that people should be watching? Because everybody watches
• 33:11
  who's in office, everybody watches administration. But ultimately, there's a lot of organizations that
• 33:17
  that don't allow the person in office to operate in the most logical way. So who are the people that
• 33:24
  should be under the microscope so that we can make smarter decisions about where we spend our money,
• 33:29
  how we do business, how we interact with the world and it also internally. What's your
• 33:35
  recommendation on that? Well, I think that there's, I can give you an example from the left and
• 33:41
  and an example from the right. I mean, let's take an example from the right. One would think that
• 33:47
  with 11 million unfilled jobs, one would have a more sensible immigration policy that there are
• 33:53
  a lot of unfilled jobs. It would be easier to get legal visas for guest workers, for some engineers,
• 34:01
  for some positions that were not completely filled. But no, the anti-immigration groups
• 34:09
  wield a huge amount of power and an immigration policy such as Canada has where people get points
• 34:18
  depending on their skills and these points for different occupations are adjusted,
• 34:23
  depending on the skill mix needed. This is something we should be copying in the United States,
• 34:29
  but we're not due to political pressure. Then on the left, there's environmental groups that
• 34:36
  wield a very substantial amount of power and they say that this is because of climate change,
• 34:43
  but it doesn't really help the climate, for example, for our entire fleet to be electric.
• 34:49
  We're importing the batteries from China. We have to run the batteries off power, which is produced
• 34:55
  by fossil fuels. We're mining for minerals such as copper and lithium and cobalt. We don't have
• 35:03
  enough hope. We're driving these prices up, which by the way is also contributing to inflation.
• 35:09
  And yet GM has announced that all its cars that it sells in 2035 are going to be battery-powered
• 35:16
  electric, even though what Americans bought last year was about 5% battery-powered electric,
• 35:23
  and of those about two thirds were Tesla's. So that environmental group wields a huge amount
• 35:30
  of power. Also, one cannot tell where the funding from these groups come from. It's in China's
• 35:36
  interest to have us hooked on battery-powered cars, just the same way it's in Russia's interest
• 35:44
  to have Europe hooked on its natural gas exports. And in neither case, is it good for Europe or
• 35:51
  is it good for us? We have to be questioning as to where the funds, where the environmentalists
• 35:58
  are getting these particular funds. It's a very difficult problem to solve for because I always
• 36:06
  tell people if you want to make change and you should take action, you should vote with the
• 36:10
  corporations that you support and you invest in or you vote politically. But these are, it seems
• 36:15
  like these are far beyond the ability of the average person to influence outside of exposure
• 36:20
  op-eds, almost like a little bit of scrutiny into some of the organizations that impact government.
• 36:28
  All right, yes. We have to hope that the American people continue to behave in a sensible
• 36:35
  manner, which is buying lower-cost internal lower-cost gasoline-powered vehicles, where you don't
• 36:45
  have to wait half an hour to charge up. Or if there's someone in front of you, an hour to charge
• 36:51
  up, or two people in front of you, that's an hour and a half to charge up your vehicle.
• 36:56
  So a lot of Americans, despite the tax credits, simply are not buying the electric vehicle high.
• 37:03
  I just want to, I have like one more sort of segment that I want to go into, but before I pivot,
• 37:09
  do you have any closing thoughts on just like open the floor questions that I didn't ask? What
• 37:15
  should I have asked you about inflation or the past two years supply chain that I didn't ask
• 37:21
  that you think would be valuable to teach over to somebody?
• 37:25
  No, I think that you've covered everything. I don't think I've covered everything.
• 37:28
  You have covered everything. You might want to ask a question about tax.
• 37:32
  Taxes. Okay, so the U.S. to me is an interesting system because it's so fragmented because you
• 37:40
  have all these different states that have wildly different taxation policies. Now, let's understand,
• 37:48
  see when I look at, when I look at states that have the highest taxes, I don't feel like they're
• 37:55
  run any better than states with the lowest taxes. In fact, sometimes quite the opposite.
• 38:00
  When I look at where tax dollars go, I look at examples of countries like more socialist countries
• 38:07
  that have higher taxation and I see civic improvements and I see infrastructure improvements in Europe,
• 38:11
  for example. Some of the cities are beautifully done and you can tell a lot is reinvested,
• 38:17
  but talk to me about American tax policy. Why do we not have when we have such high taxes in certain
• 38:25
  states, the same attention to detail, the same investment and infrastructure. It seems like a lot of
• 38:30
  it goes up in smoke. We find that these states with high taxes and the highest taxes in the country
• 38:39
  are in Connecticut, New Jersey, New York City, California and we find that people are leaving these
• 38:50
  states and going to lower tax states. So there is definitely a pull from lower tax states.
• 38:57
  And we see a lot of homelessness, crime, dirt in these high tax states and areas. So they don't
• 39:08
  seem to be doing a better job and it's always interesting to look at how people are voting with their
• 39:13
  feet. But in terms of national taxes, we find that American taxes are lower than those abroad
• 39:20
  and that people are voting with their feet to come to the United States. They could be paying
• 39:25
  higher taxes in Europe with the say 20% value added tax. They could be getting free healthcare,
• 39:32
  free university, very generous pensions, but so many people want to come here to the United States.
• 39:39
  What do you think that is? What draws people? Yeah, people want equality of opportunity. They're not
• 39:45
  looking for equal. They want to have the chance to rise up and they want the chance to do well
• 39:54
  in their jobs in their careers. And what's puzzling is that President Biden right now is benefiting
• 40:00
  from President Trump's tax cuts in 2017. We have a top rate, individual rate of 37%. We have a
• 40:07
  top rate of 21%. President Biden goes out and he quite rightly brags about the number of jobs
• 40:14
  created. But it's partly due to the tax regime that he is proposing to overturn and raise
• 40:21
  corporate tax rates to 28% from 21%. And individual taxes are at the federal level up to 39.5%.
• 40:31
  So it's just very interesting to see that he is not appreciating the benefits of the low tax
• 40:39
  regime that his predecessor left. And his economy might not do so well if Congress did vote in
• 40:47
  the Thai taxes he's proposing. Now this is an election year. Congress does not generally vote
• 40:53
  for high taxes in an election year. So they won't pass. So in a sense he can have the best of both
• 40:59
  world. He can propose them knowing they won't pass. And yet he can pat himself on the back for
• 41:05
  doing some kind of proposed redistribution. But we are doing very well under these 2017
• 41:13
  taxes. And we hope that they're going to continue. And and help me understand something as well.
• 41:19
  Because it seems like when organizations are very large, they find legal ways to allow themselves
• 41:26
  out of increased taxes. So they find ways to headquarter in other countries and whatnot.
• 41:32
  So is this whole we're going to tax the rich and we're going to we're going to increase taxes
• 41:41
  for corporations. Is this all just you know trying to try to get the the base on board trying to
• 41:50
  make people that like the sound of that excited about what you're proposing?
• 41:54
  Does it actually impact significantly the people that it's supposed to affect?
• 41:59
  Well, especially since we have multinational corporations, we have multinational corporations,
• 42:05
  they produce all over the world. If they are going to face high taxes in the United States,
• 42:12
  they are they might be limited to the United States in terms of our production for the US consumer
• 42:18
  market. But they can of course go anywhere else to service their markets overseas. So yeah,
• 42:24
  the reason that taxes do not bring in as much as people expect or the congressional budget
• 42:31
  office forecast is often because corporations can make utility maximizing decisions and
• 42:38
  locate somewhere else. The EU is talking about a global tax, a global minimum tax. But one doesn't
• 42:46
  know if this is actually going to happen because there are always countries that can offer lower
• 42:52
  tax rates such as Ireland, for example, or Hungary, the deal always want to go along with the minimum
• 42:58
  tax. But the minimum tax they're talking about is 15% the tax that President Biden is proposing
• 43:04
  for corporations is 28%, so one would expect to get quite a lot of leakage from that revenue
• 43:10
  as corporations quite legally decide that there are better places to do their operations.
• 43:17
  Now the million dollar question obviously because of your experience, I would ask you if you
• 43:24
  if you were president, if you had no no lobbying groups, which levers would you pull across the
• 43:32
  all the different things that we've discussed? We've and there's a million different ways that we
• 43:35
  can solve these problems. But if you were tasked with solving these problems, what are the main
• 43:40
  things that you would look at fixing and executing on immediately that could solve for inflation?
• 43:46
  That could solve for maybe any of the items that we just touched on to be honest, what are the
• 43:53
  things that are top of mind for you that you'd like to change if you could? Well, the first thing I would
• 43:58
  do is have a policy of producing oil and gas in the United States and importing more oil from
• 44:08
  Canada. I would restart the Keystone XL pipeline so that we could have oil from Canada to be refined
• 44:14
  into gasoline. That would lower the price of oil, lower the price of gasoline. I would end the
• 44:21
  mandates for electrification. I would just say people want to buy electric cars, they can buy
• 44:28
  electric cars, but we're not going to give tax subsidies for them. We're not going to mandate
• 44:33
  that a certain share of vehicles be battery powered by a particular year. I would roll back all
• 44:42
  that. I would roll back the project labor agreements for infrastructure construction, and I would say
• 44:49
  to the states that they can use whatever labor that they want to use. For that, I would right away take
• 44:55
  off the tariffs for steel, lumber, aluminum, whatever other tariffs there would be. So there's the top
• 45:05
  three things that I would do. And now this is less of a question based in data and logic, but I'm
• 45:12
  still curious. What's your outlook for the next five years? Is it an optimistic one in regards to
• 45:20
  where we're going? Do you feel like the people that are making decisions are trying to make the right
• 45:25
  decisions or is it more pessimistic? Do you feel like do you think we're going to go into recession and
• 45:32
  have a not so great next five years? Well, I'm naturally an optimist, and I realize that I'm
• 45:37
  an optimist, so I'm the wrong person to ask this question. But the wonderful thing about the
• 45:42
  United States is that when there's a problem, when people are on their, when our politicians are
• 45:49
  on the wrong track, there's a correction. When some group gets too far to the right too far to
• 45:55
  the left, there's a correction and there are elections coming in November. Many people forecast that
• 46:02
  the Republicans are going to take the house and the Senate. So we'll be in a position of gridlock
• 46:09
  where politicians cannot do too much harm and they have to work things out and do things in the
• 46:14
  middle. And I think that's going to produce very beneficial results. So I'm very much optimistic
• 46:23
  about the United States the next five years and next 10 years, the next 15 years. I'm an immigrant
• 46:29
  from England originally, and I can just see the vast opportunities that United States gives to
• 46:36
  everybody. I love that. And generally, like your views are lower taxation, less regulation is
• 46:47
  more or less the general. Yes, yes, yes. Well, cost-efficient regulation. Yes.
• 46:52
  Understood. Okay. Perfect. Okay. Is there any other points that you wanted to touch on? I learned a
• 46:58
  lot. So I appreciate you taking the time, but I want you to just close out with any other things you
• 47:03
  wanted to go into. And then I also would love people if they want to consume more of your work.
• 47:10
  Where should they go? Social, website, other things that they should go check out.
• 47:15
  Right. Well, my website is diannafr.com. So they can read everything I've written on diannafr.com.
• 47:24
  Okay. Perfect. No, that's a great. And I'm a columnist for full. I saw that.
• 47:28
  Where you have a right about transportation and technology.
• 47:31
  Amazing. Okay. Let's do a couple rapid fire to pull out, to pull out some
• 47:36
  career insights from you. You can go as in-depth or as short and concise as a saint as you'd like.
• 47:44
  So first question, what keeps you up at night right now? What are the stressors either in at a
• 47:50
  global macro level or maybe in your own personal or professional life? What is something that troubles
• 47:56
  you? Having lived through the inflation of the 1970s and 1980s, I'm very, very concerned about
• 48:02
  inflation. And I hope that we're not going to get to the stage that we did in the early 1980s
• 48:07
  when inflation was in double digits. The first mortgage I got was 15% interest. And now people
• 48:14
  are saying, well, a high mortgage is 5%. Well, I remember when it was 15%. So we definitely do not
• 48:21
  want to go down that path again. I'm very, very concerned about inflation. I'm also very concerned
• 48:27
  about people being forced into electric vehicles and having to rely on these batteries that are
• 48:34
  imported from China. China is not our friend and we don't want to be relying on a source of energy
• 48:42
  from a foreign power. Quite irrespective of the problems with range taking half an hour to recharge
• 48:50
  or people not having battery charges in their homes. You might, if you live at a suburban house,
• 48:56
  but you don't, if you live in an apartment block and you pack your car on the street. So those are
• 49:01
  two things that I'm very concerned about. If you had to pick one challenge that you've overcome
• 49:08
  in your personal or professional life, what was that challenge? Had you overcome it? What did it
• 49:12
  teach you? So my challenge is that I don't really like schmoozing and cocktail pad is a network.
• 49:20
  But this is very important to getting ahead. So if I'm invited to an event, I would much
• 49:26
  prefer to spend the evening at home reading. But I have to force myself to go out to these
• 49:31
  parties and meet people and I mean, even people from different different administrations,
• 49:41
  cocktail party type settings. So I would encourage young people or anyone looking for a job to
• 49:46
  go out there and socialize because you get new jobs by networking. I got my job in the
• 49:52
  Reagan administration because someone I knew called me up and said, Diana, why don't you come
• 49:56
  over and do this job? I've got other jobs for the same reason. So you have to force yourself to
• 50:02
  go out and be social. I'm not a very social person and I'm not very good at cocktail party
• 50:08
  conversation. But networking is very important and I've had to force myself to do that.
• 50:14
  If you had to pick one person who's been incredibly impactful in your life,
• 50:19
  who was that person and what did they teach you? I would say, I would say probably my
• 50:26
  father who is a transportation economist and engineer and he not only was very knowledgeable
• 50:36
  about economics, but he is a very kind and gentle person. He always treated everybody the same
• 50:44
  when we came into his office. The security guard would know him. He'd know the name of the security
• 50:49
  guard, his kids, his wife, et cetera, et cetera. So I would say that he has been very impactful in my life.
• 50:57
  If you had to pick a book or a podcast, something that you've consumed that you'd recommend
• 51:03
  someone who's listening, go check out. It's very important to read for pleasure. It's a really
• 51:11
  excellent way to relax and I have very much enjoyed the works of Anthony Troller who wrote
• 51:20
  many, many books. They provide a window into the 19th century. He had a job in the post office
• 51:29
  in England, but he would write from about 4 a.m. to 9 a.m. and then he would go do his job,
• 51:35
  frequently on horseback as a post office survey. He was actually the person who invented the letter
• 51:41
  box. The red letter box that was so iconic in London and I would highly recommend his books.
• 51:50
  If you could tell your 20 year old self one thing, what would that be?
• 51:57
  I would tell my 20 year old self to finish that Oxford PhD that I left with just a little bit
• 52:06
  remaining and finish up that PhD and I think that would have made a big difference in my career
• 52:13
  instead of leaving with an end fell rather than a default.
• 52:18
  Well you haven't done too bad for yourself regardless.
• 52:22
  And last question, what does success mean to you? Well success means having a good marriage
• 52:29
  and a good family and a place to come home to at the end of the day. So you're at work, you have
• 52:35
  to fight for your beliefs, you have to stand up for different things at the office. You
• 52:43
  frequently encounter people who are not nice to you, who you have to be nice to, but then you come
• 52:48
  back and you have a family and this is a much more important than the different jobs that you've
• 52:58
  had and I started off earning a very small amount and I've had different career changes where
• 53:04
  I've had more important positions but the amount of money I've earned has not really affected my
• 53:10
  happiness. The most important decision people have is who they're going to spend their lives with,
• 53:16
  who they're going to marry, who they're going to have as a partner and I'd like to say that I've
• 53:21
  never met someone who said they had too many children. I've met people who have regretted not having
• 53:28
  children or who said they've had too few children but marriage and family are really the foundation
• 53:34
  of happiness.