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The number one problem in the economy is that employees in the small gig sector are really struggling: Harvard Professor

Deepak Malhotra, Harvard Professor joins the Yahoo Finance Live panel to discuss the impact of a Biden presidency on big business.

Video Transcript

- Well, a higher corporate tax rate and stronger unions may not be a recipe to win over corporate America, but our next guest says President-elect Joe Biden's policies will actually lift big business. Let's bring in Deepak Malhotra. He is a professor of Business Administration at the Harvard Business School. Professor, it's good to talk to you.

You penned this letter in the run up to the election essentially calling on the top CEOs here to push back against President Trump for the four years that you talked about what the lack of leadership, as you characterized it. What do you see is priority number one as you look to a new Biden administration and what his policies are likely to mean for some of the big corporations?

DEEPAK MALHOTRA: Thanks, Akiko, for the question. Delighted to be here. I think your two questions are very related. The first priority and what it means for business are intimately tied, because as anybody looking around their neighborhood can tell, the first priority is getting the pandemic under control. There's some good news recently because of the vaccines, but the fact of the matter is the numbers are going up. They're getting to dangerous levels. Hospital capacity is at lows.

And so the first thing that the Biden administration is going to have to do is start working on the pandemic. And what's got to be coupled with that is probably a stimulus plan. And those two things are good for small business and they're good for big business. And they're good for employees and they're good for your neighborhoods, in general. And I think that's going to be priority number one. And I think that's one of the reasons big business is very relieved that there is going to be a transition.

- And Professor, I mean, when we talk about relieved about that transition, that's one thing. The big question now looming is how quickly it's going to take or how long it's going to take, rather, before you get that stimulus bill through here, because we continue to see no progress being made between Republicans and Democrats now in a lame duck situation here. So talk to me about how long Americans can actually wait for that to come through here as we continue to see economic data come in a little bit weaker than expected when you look at the retail numbers we got yesterday.

DEEPAK MALHOTRA: Yeah, Zack, you're absolutely right. I think the delay is a big part of the story right now. In September, Moody's came out with the projection as to what would happen under different scenarios after the election. And their projection was that if Biden wins the presidency and Democrats take the Senate, that is going to be the best thing for the economy, it's going to be the best thing for job growth. And one of the big reasons was they projected that the stimulus would not only pass, but it would pass early and in a large way.

It was going to be less good for the economy, according to the Moody's analysis, if it was going to be Democrats take the White House, but Republicans take hold of the Senate or keep control of the Senate. Now what's interesting right now is if a stimulus does pass during the Trump presidency, during the last two months, it's likely to be smaller than what it would be if it gets delayed and either the Democrats take the Senate after the Georgia elections or if-- when Biden just takes the presidency.

So I think what's going to really matter here are those three scenarios. Does the stimulus pass now, in which case, it'll be small, but it'll be soon? Does it get delayed, and if the Democrats take Georgia, it will be potentially larger? And if it waits until Biden becomes president, it will probably be the largest if the Dems have the Senate.

- Professor, I know you're focused on big business right now, but it does seem like there's really two narratives that are emerging. We're talking about sort of the retailers today, for example, that have seen huge success on the back of this digital acceleration. More and more people buying online, they're able to meet that demand. And then you've got the small businesses, who despite getting the PPP loans, are not able to survive as well. I'm curious how you're looking at those two narratives and what's likely to be waiting on the other end if there is this long lag on stimulus?

DEEPAK MALHOTRA: Yeah, I think the stimulus is the short term fix. The medium term fixe is dealing with the pandemic. And I think both of these are hurting small business a lot. If you look at what's gone up, if you look at the NASDAQ versus the S&P at the times when the news has been bad, you see a disconnect there for this reason. Small businesses require people to come inside, eat, come inside, buy something, come inside and browse, be out on the streets window shopping. That's what communities all over the country need. That's what small businesses need and that's what people that work in these small businesses need.

That's the number one problem right now in the economy-- is that employers and employees in the small business sector are really, really struggling. A lot of the other big businesses, either because they have an online presence or because they have the ability to weather the storm for longer, are a little bit more protected in the short run, which is why the urgency is now. I think that a Biden presidents who will make a positive difference, but there's no reason that Trump, McConnell, and Pelosi can't reach a deal even now to at least get us through the next couple of months, even if there is going to be something more done afterwards.

- Yeah, Professor, I mean your expertise is in negotiation. A lot of people were expecting that once we moved past the election, Republicans and Democrats would have been able to come together, because neither side really wanted to risk having any kind of impact on the election outcome by passing something before it. Now that we're on the either side, how surprised are you that nothing has been done, as you're noting there? There is still a lot of benefits that come from this even if it was to come under President Trump.

DEEPAK MALHOTRA: Well, I have to say I'm not too surprised that nothing is happening right now while Trump is still president, because I was one of the people who for a very long time was quite sure that he would not accept the results of the election, no matter what they were. The only question mark was would the Senate Republicans echo that narrative or would they push back against it. And it turns out that that has been adjudicated. And it turns out they're going to echo that narrative for a little while longer. As long as that is going on, I think it's just one more barrier to getting a deal done.

Now the good news is, as you said, other than what's going to happen in Georgia, there's no more elections to look forward to in the next two years. Now we know that election cycles start a lot earlier these days than they used to some decades ago, but there is a window of opportunity once the dust settles on this election. Right now, everybody is slowly trying to move Trump out of this sort of delusions of I'm going to stay in power and sort of dealing with the tantrums that are going on. But as soon as that moment is over and Trump has either-- he won't officially concede-- but when he has admitted essentially that he will not be in office after January 20, 2020, then the only question is going to be, does he see it as part of his legacy that he got a deal done on stimulus. And my guess is that he very well might.

- Certainly a lot of people hoping for that as well. Professor Deepak Malhotra joining us from the Harvard Business School. Good to talk to you today.

DEEPAK MALHOTRA: Nice talking to you too, Akiko and Zack.