U.S. investment in GDP isn’t ‘sustainable’ to maintain the nation’s position in the world: Ian Bremmer

Ian Bremmer, President of Eurasia Group and GZERO Media, joins Yahoo Finance Live to discuss the outlook on the U.S. recovery, the latest economic data, and the recent string of ransomware attacks.

Video Transcript

- But we do have a lot to get to, at least when it comes to the economic recovery as well as the president's first international trip. So I just want to jump straight into it now. We've got Ian Bremmer, president of the Eurasia Group and GZERO Media here with us now. So Ian, I want to start with some of the economic data that we have gotten out today. The CPI jumping 5% in May, faster than had been expected.

Curious to know what kind of a path you see being charted here right now, at least when it comes to the economic recovery not just here at home in the United States, but also globally as we keep hearing these inflation numbers as signs that the economy right now could be on the verge of overheating?

IAN BREMMER: Well, number one, you know I'm not an economist, so I'm not going to pretend to be one on television. But it is very clear that this is a very differentiated recovery. In the United States, we are largely, at this point, looking at coronavirus pandemic in the rear-view mirror, finally, while in the developing world, we are not close to that. And as inflation fears grow, the countries that we're going to be most worried about are those that aren't going to be able to secure credit, those whose debt has been extending greatly.

We're seeing this across Latin America right now. We're seeing concerns in places like Lebanon and in Turkey, markets like Sri Lanka and the Philippines that potentially could be experiencing financial crises as a consequence of this in the next 6 to 12 months. That's what I'd be most worried about as the second-order effects of the US economy so-called overheating with a very robust rebound.

ALEXIS CHRISTOPHOROUS: Ian, duly noted that you're not an economist. But would love to get your thoughts on how the Federal Reserve might react to these reports. Look, the CPI is one piece of data, but undoubtedly, inflation is heating up. We're waiting for the Fed to pull the trigger and pull back on all that stimulus and also start to raise interest rates. Do you think that our economy can withstand less candy from the Federal Reserve candy jar right now?

IAN BREMMER: Every month that goes by, certainly, the need for a monetary stimulus seems a lot lower. I think the real question is not about the stock market. It's not about US growth. It's about the average American. We hear that from Biden in Europe right now, that you need a foreign policy that actually works for the average American. You need an economic policy that works for the average American.

And I am much more concerned about the fate of the $4 trillion, $3 trillion, increasingly, maybe $2 trillion in longer-term, broadly defined infrastructure support that would help to address a country-- the world's wealthiest, the world's most powerful, but also the most unequal of the entire G7-- that's here in the United States. And that inequality is only growing on the back of coronavirus. If you have a college degree, you did very well through the last 15 months. If you don't, you really didn't.

And it's great that we put enough money in the pockets of those that were disrupted that they were able to get through the last 15 months, but that's short term. That's not what the next 5 to 10 years are going to look like. That is the concern that I have when I look at the future of the US economy.

- So to that point, how should the United States best navigate that, this tale of two cities that we've frequently been talking about throughout this entire pandemic, and what you're highlighting right now, that some folks did incredibly well? In fact, they're better off now a year into the pandemic than they were when we started it. And considering how poorly the economy did, that's pretty incredible. But as you mentioned, we still have so many people that are financially struggling, that lost their jobs, have not been able to find a job or had to leave their jobs and have no plans on returning back to the labor market. So policy-wise, really, what does the United States need to do to continue to walk that line between not adding too much to our national debt but also helping those that are still, right now, being left behind?

IAN BREMMER: Well, I have no problem adding to our national debt if we're investing in things that will bring us a return. So for example, I like the idea of major infrastructure investment into rural broadband that will allow the average underserved American to participate more effectively in the economy, in digital learning, and what have you, for themselves and for the kids. I think that's a great idea.

I like the idea of robust pre-K child support so that the average American can both take care of their kids and work effectively, be in employment, especially because we don't have a well-functioning two parents, two kids in every household in the United States. Those are expenditures that I think would make a difference, would lead to a return for the United States long term. By the way, I like the fact that we have $250 billion heading through Congress right now that is bipartisan, both Democratic and Republican. It is being framed in terms of beating the Chinese.

But the reality is, it's investing in American science and research and development, in semiconductors and artificial intelligence, things that we truly want the United States to be investing in. They would bring a return over the long term. The fact that the US government invests at considerably lower percentage of GDP into research and development than China does is something we should, frankly, address. I don't think that's sustainable long term if we want to maintain our position in the world.

ALEXIS CHRISTOPHOROUS: Ian, what about the Biden administration's response to the string of ransomware attacks that we've been seeing in a number of different sectors here in the US? It looks like the Biden administration is trying to come up with a task force to address this. What do you think needs to be done there? What would you like to see happen?

IAN BREMMER: So far, there's been virtually nothing that's been done until last week when we saw the FBI be able to announce a success by tracking the Bitcoin wallet and securing it away from the hackers for the Colonial Pipeline, the $4 million. And if we can do that with them, who's to say we can't do it with others? So the potential to be able to disrupt some of these cyber criminals through American unilateral action on the part of the Fed, that would be certainly a great individual data point. Let's see if it's extensible.

Having said that, Biden is going to be meeting next week in Geneva with President Putin. Putin has not personally been ordering any of these ransomware attacks, but he is fully aware that there are criminal syndicates that are permitted in his country that act with reckless abandon on corporations all over the world, except in Russia and the former Soviet states. And the United States is going to have to make it clear that the Russians are going to pay a cost if they allow that to persist.

Thus far, under Obama, under Trump, and under Biden, that has not yet been the case. I will say that I'm a little bit less concerned about ransomware than others because I feel like it is a market equilibrium-seeking practice. If you are a cyber criminal, you don't want to make ransom too expensive, and you don't want to be bringing down corporations for a long period of time. You want it to be something you know they're going to pay, and it's going to be very easy to get back up and running, because you want the next corporation to trust you that if they pay that ransom, that they can do it, and they can get on with their business.

If, suddenly, you have a whole bunch of companies saying, that was too much, I don't know if this is going to work, I don't know if this can blow up my firm, what if the data ends up not being private as they promised, but it leaks anyway, well, then suddenly, the entire business model of these criminals goes poof. And they don't want to do that. So the danger is not that you have a couple of really effective almost corporations in the criminal space in Russia. The danger is what happens when this technology suddenly becomes accessible to people that don't have that level of sophistication or that have ideologies that aren't about maximizing profit. What if it was an ecoterrorist that was doing it? Then Colonial Pipeline isn't paying ransomware. Then they're just shut down, and that's the end of Colonial Pipeline. That's what I worry about.