Austan Goolsbee, Professor of Economics at the University of Chicago Booth School of Business joins the On the Move panel to discuss the latest updates on an updated stimulus package.
ADAM SHAPIRO: Let's invite into the stream Austan Goolsbee. He's professor of economics at the University of Chicago Booth School of Business as well as a former chairman of the Council of Economic Advisors under President Obama. Good to have you back, Austan.
AUSTAN GOOLSBEE: Yeah, thanks--
ADAM SHAPIRO: I'm curious.
AUSTAN GOOLSBEE: --for having me.
ADAM SHAPIRO: You've been in the middle of this kind of political back and forth. We had Secretary Mnuchin from the Treasury Department on the phone with Nancy Pelosi yesterday, and it-- sources are saying they were moving closer to a deal. Do you believe those sources who say that, or do you think what Rick was saying, that Pelosi is not negotiating in good faith?
AUSTAN GOOLSBEE: Well, look. I don't know. I wasn't in the room where it happened, as they say. It did seem like from the leaked positions that the Democrats in the House and Secretary Mnuchin were getting pretty close, you know. They were within spitting distance of something that would be a bipartisan deal. I don't know.
The worst-- I feel the worst for Steve Mnuchin. I mean, if you were this guy, he's sent out to go negotiate. They're doing the negotiations, and then-- I don't know if they need to, you know, get the president off decaf and take his phone away or what, but I mean, nuking the negotiations over a rescue-and-relief bill was really ominous. And it wasn't just the statement that the president said, we're going to wait till after the election. It was the adding the lines about and if-- and when I am re-elected then you'll get your money. I mean, that was-- that was really a barely veiled threat that if I'm not re-elected you're all going to get it and I'm going to find you.
So I hope that the president's allies are coming back to him and saying the economy is really going to need some rescue and relief if we can't get control of the spread of this virus, which we haven't. And if we don't get that rescue and relief, I think the economy is absolutely going to stall out.
JULIE HYMAN: Well, Austin, it seems like somebody got to him, right, because then he came out and tweeted contradictory things and said yes, we do need stimulus and I would sign it right now if you came to an agreement. I mean, at a certain point-- you know, you've been in Washington so you know how these things work. At a certain point, can people just ignore him and [INAUDIBLE] negotiations?
AUSTAN GOOLSBEE: I don't know. I've never seen anything like this in Washington.
JULIE HYMAN: You know, he's not gonna lock Mnuchin in his office.
AUSTAN GOOLSBEE: I see exactly what you're saying. It's kind of like the Cuban Missile Crisis where there was the famous-- they got a first telegram from Moscow, and then a second telegram came that was super belligerent. And they said, let's just ignore this one and go back and pretend like we never got it.
I think there is a-- that's what I mean. Get the phone out of the man's hand. I mean, he's been in the hospital. He is on medication. He should not be tweeting out things that are going to blow up our economic recovery, and his own team knows that. I don't even know that these contradictory tweets, now coming back saying, well, I want to give money to the airline industry. I want to do this. I don't know that that's helping either because it's just putting a huge question mark on the entire process. You had the chief of staff today, Meadows, saying that all the negotiations are off. So I don't know where they stand or that he can tweet whatever he wants. But if they're not actually negotiating, there's not going to be a bill.
RICK NEWMAN: Hey, Austan, let's go to the economics of it. Let's go past election day and say, we-- I mean, we probably will get something before the end of the year or shortly thereafter that's at least a trillion dollars I think. So let's say we have-- let's say that does materialize at some point. Is that enough, and what is your outlook given that for the economy in 2021? When is it going to feel like we're getting back to normal?
AUSTAN GOOLSBEE: (GROANING) It's super important questions, at least three of them. A, I'm not totally sure if the president were to lose the election, are you sure he would not veto the bill? I mean, that's kind of what my-- the vibe I got from the tweet last night was--
RICK NEWMAN: Well if he did-- if he did that then we probably would still get something once he's gone in early '21.
AUSTAN GOOLSBEE: Yeah, but OK. So maybe as you went into 2021. I think the CARES Act, as massive as it was, kind of established the run rate of how much does it cost to keep the economy on life support. And it's in the trillions. I mean, I don't-- I think these bills are if it's $1 trillion, that will only last for a few months. I mean, we've got to get control of the virus before we'll go back to anything like normal. That's the bad news.
The good news is there are economies around the world with-- even without a vaccine they have gotten control of the spread of the virus, and they didn't have nearly the labor market negatives that we've had so far. And they have been able to somewhat start turning their economies around. So maybe for most of the sectors, not that in-- you know, face-to-face sectors where they really are hinging on we've got to have a vaccine. But for everything besides that, maybe it could get back to normal with some rescue and relief by next year if we get control on the spread.
RICK NEWMAN: Let me ask you about all the spending. Obviously, we're seeing a surge in annual deficits. I know that it's smarter to do the spending in the short term and worry about the deficits later, but what level of debt actually where it starts to worry you?
AUSTAN GOOLSBEE: For the US government, nothing like this starts to worry me. I mean, we start from a debt-to-GDP ratio below almost all other advanced economies, and they-- those other advanced economies have higher income tax rates than ours, already have 20% VATs that we don't have. And I feel like if you look at the Bush tax cuts, the Trump tax cuts, the wars in Iraq and Afghanistan, the stimulus and the CARES Act, the argument that the US faces an intense fiscal crisis like it were Greece or something, I just don't think the evidence is there because our debt capacity is higher than anywhere that we remotely are.
The problem of debt and deficits is not about fiscal crisis. It is about is it fair that people born in 1955 are going to pay so much lower taxes over their life as a share of income than kids that are going to be born in 2025? And we should think about those generational kind of things, but if the argument is going to be that Republican senators who literally just voted for a $2 trillion unpaid-for tax cut are going to say, ah, we need to care about the deficit. I just don't think that's going to fly this time in the way that it did the last time.
- And, Austan, I really appreciate that you have such a multifaceted vantage point, right, because as we said in the intro, you are also a professor, so you have your pulse of what's happening perhaps on campuses. Can you give us a sense of how your students are feeling? How you think about the reopening when it comes to universities and colleges around the country?
AUSTAN GOOLSBEE: I think most places it's kind of a bummer, you know. And I'm a parent with a kid in college, and the kids-- they want to get back to school. But for the professors who are older, it's a substantially scarier proposition. I think where there's still so much we need to learn about the disease and its spread and how contagious are people of different ages, it pains me that the really younger kids are not able to go back to school. And I do-- I was on the Board of Education for the city of Chicago.
This issue of the digital divide, that there are low-income students who do not have broadband at home and are not able to keep up with the lessons. They're trying to sneak in and get on the WiFi at Starbucks so that they can do their homework, that's messed up. We've got to get control of this virus because if we can't get our students back in school, the long-run damage I fear is going to be substantially worse even than this short-run damage, which seems pretty bad.
ADAM SHAPIRO: All right. Austan Goolsbee is a professor of economics at the University of Chicago Booth School of Business. He's also a former chairman of the Council of Economic Advisors. It's always good to hear from you, Austan.
AUSTAN GOOLSBEE: Great to see you.
ADAM SHAPIRO: Take care.