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There’s ‘light at the end of the tunnel’ for a stimulus deal: Fmr. Chair of the Council of Econ. Advisers

President-elect Biden has named his coronavirus task force as he looks to make the fight against COVID-19 a priority. Professor of Economics at the University of Chicago Booth School of Business and Former Chairman of the Council of Economic Advisers under Obama Austan Goolsbee joins Yahoo Finance Live to discuss.

Video Transcript

ZACK GUZMAN: Want to shift gears, though, over to what we're seeing play out under a new administration. We've been talking about the effectiveness of the Pfizer vaccine coming in stronger than expected. But there's a key variable we're going to be discussing later on in the show when it comes to how many Americans will actually want to get that vaccine when it becomes ready should it get FDA approval.

Obviously we're going to be operating with that decision here in a new administration beginning in January. But want to highlight what we heard from President-elect Joe Biden and his veep, Kamala Harris, over the weekend in their first speeches. An interesting picture being painted by them talking about unity here and the possibilities in the next four years. Take a listen.

JOE BIDEN: Let us be the nation that we know we can be a nation united, a nation strengthened, a nation healed-- the United States of America.

KAMALA HARRIS: But while I may be the first woman in this office, I will not be the last--

[CHEERING AND APPLAUSE]

[HONKING]

--because every little girl watching tonight sees that this is a country of possibilities.

ZACK GUZMAN: So there's the message coming from that new administration here. And a lot of their focus has been on handling the coronavirus pandemic here, announcing a new task force, as well, being one of their big first pushes here. So to break that down for us is our next guest here. Austan Goolsbee is professor of Economics at the University of Chicago Booth School of Business and former chairman of the Council of Economic Advisors under President Obama.

Professor Goolsbee, appreciate you coming back on here to chat with us. I mean, when we look at this, it's not as if a lot of the struggles the country's going through right now are just going to disappear with the new administration. But it sounds like they are laser focused and really restoring that faith in America's process and handling of the pandemic at hand here. What's your take right now on where we're headed and how that transition process is in? I know you were a part of Obama's transition there. How important is that going to be as we move forward?

AUSTAN GOOLSBEE: I think it's pretty important. You know, this issue about the vaccine kind of adds a new wrinkle to it. But I've been saying for months the virus is the boss. And on the economy, the best way to get the economy back to where we were before is to get control of the spread of this virus. If we could get a vaccine, that would be a tremendous leap forward for us.

Even until we get a vaccine or if something were to go wrong with that vaccine, we can still get control of the spread of the virus through public health measures. And I was heartened by to see the members of this task force that President-elect Biden put forward there, they're not especially partisan people. They're scientists. They're doctors. They're-- they're exactly the kind of people that you need to give confidence that we're going to take this serious and we're going to get control of it because, as I say, that controlling the medical side is critical to the economic growth that we need.

AKIKO FUJITA: Having said that, there is still a two-month lag here before the Biden administration actually goes into office. And we've heard from a lot of these public health officials who have said these next few months is really when this virus is going to peak. So having said that, we've got the announcement from this new Biden administration about who the public health officials that will be in charge will be. How do you think they manage the situation over the next few months when they're not necessarily in charge and the Trump administration may not necessarily want to play ball?

AUSTAN GOOLSBEE: Yeah, you raise a critically important issue. And that is if you look in the history of the United States at least on economic crises, many of these big crises happened during the transition from one administration to the next administration. That happened in 2008. That happened in 1932. And if there's a big difference of opinion of what should be done or what the approach is, that can spiral out of control, especially with an infectious disease.

And my understanding is that the people in the government now whose job it is to declare the transition and to open up the transition money so that the incoming administration can plan that they, thus far, refused to acknowledge that Joe Biden was the winner. And so they're not putting the transition resources forward.

I hope that they revisit that decision in the coming days because this is really important. Like you say, the virus is spreading at record levels right now. We don't have a vaccine for a bit. So we've got to get that transition stood up.

ZACK GUZMAN: Yeah, that's kind of-- I mean, if I'm an investor watching this all play out, that would be my biggest fear and where we're at right now, because you think about how long it's going to take to really get a handle on this, it's going to be some time. The vaccine's well off in terms of being widely distributed when we listen to health experts there.

So, I mean, we're still not going to have clarity it looks like on who controls the Senate until January when we get those runoff elections in Georgia. I'm curious to get your take on how much, I guess, the emphasis here to get a stimulus bill-- a relief bill on the coronavirus front-- is getting pushed back here into next year if you think about how much uncertainty now exists there in government.

AUSTAN GOOLSBEE: Yeah, you know, it's kind of funny. The announcement about the vaccine could actually go either way. I mean, I know conventional wisdom has been, well, we've still got to find this out about the Senate. We still going to wait for the new administration. So maybe some kind of rescue and relief package would be delayed.

I think if you knew that this isn't going to be a perpetual rescue that there is light at the end of the tunnel. I actually think that might raise the chance that could do a deal right now. They say, OK, well, fine. We're just talking about five months let's say. Then let's agree, and let's do some relief for five months.

I think to some component of the Senate was let's call it bailout fatigue. And the thought that this might go for years, and we just have to keep coming up with more rescue and relief money, they were kind of choking on that. So I think it actually could put their butts in the seats to have more of a discussion, if you will, on this negotiation.

AKIKO FUJITA: Also, what about the other legislative priorities that's Biden campaigned on? You've heard the argument from the other side that Joe Biden doesn't have the big mandate going in because the country is so divided right now. When you look at something like his tax policies, for example, the rollback of the Trump taxes, is that pretty much shelved right now until we know? I mean, I guess there's always the possibility that those two Senate seats in Georgia could go to the Democrats. But it certainly doesn't look optimistic right now.

AUSTAN GOOLSBEE: Well, look, I'm just a policy guy. You know, in a way, you're asking me about political advice of who has what votes. I mean, I think let's-- let's wait now for a couple of-- it maybe it'll be a week or so before we get the final results in. It certainly doesn't seem like a narrow victory that President Biden is going to come forward with. You might have more than 300 electoral votes and win the popular vote by 5, 6, or even 7 million.

That's not a massive landslide, but that's not a squeaker. So I think the question of what will be the mandate will somewhat be determined issue by issue. On taxes, I would just point out that the American people overwhelmingly agree with Vice President Biden, now President-elect Biden's plan that high income people and large corporations should pay a more of a fair share. And I think the fact that we have a president of the United States who's a billionaire who paid $700 or something in taxes, that is a sign of a system that is desperately in need of reform.

ZACK GUZMAN: One of the big question marks we've been trying to tease out here is how much of the rally we've seen post-election day. It was tied to maybe some investors hoping that, you know, locked government here-- gridlock might actually prevent Joe Biden from instituting some of those tax changes. But we'll see how that plays out.

One question I had for you, though, lastly when we talk about this recovery and what could happen. We were just talking with our last guest about this potential pull-forward that we've seen in a lot of the demand here and how people may have shifted away from services and travel into maybe home furnishings in lockdown.

But my big question to you. And this is one I've been asking a lot of our market and economists guests here. How much might be lost when we think about that, I guess, demand here entering the holiday season since that's not one that you get a do over for? You can't buy Christmas presents in February or January. So talk to me about that. If we don't get a stimulus a relief bill here, how much the American consumer might still be dented when we move into holiday season?

AUSTAN GOOLSBEE: Yeah, it's an interesting idea that is and is a theory I guess I'd say that would change the composition of consumer spending. But obviously from the macro perspective, what matters is the total amount of consumer spending. And since so much of the US economy is driven by service sector industries, including health care, leisure and entertainment, hospitality, restaurants-- a whole bunch of stuff like that-- it could be a blow to certain types of things that you couldn't buy a Christmas present or that you didn't want to go out to the store. But I kind of think the overall impact on the economy is massively positive if people get the sense that right around the corner, we're going to be back to something like normal.