00:00:00
Joao Gomes: We will have a serious
economic crisis in our hands. I
00:00:02
mean, we would have— in that
scenario, we might have to
00:00:04
tighten our belt by the
equivalent of $2 trillion.
00:00:08
I mean, just think about the
spending cuts that entails
00:00:11
and what damage that would do
to the economy. Not— nothing
00:00:14
else— and nothing else. If that
was just it. So I think it's—
00:00:19
it's— it's a very scary— and I'm
an optimist by nature. I mean, I
00:00:23
continue to hope that we'll find
our way out of this. But if that
00:00:27
scenario unfolds, it is a very
scary scenario.
00:00:30
Dan Loney: And a variety
of different programs,
00:00:32
thinking like Medicare, Social
00:00:34
Security, all of these are ones
that would have to take a
00:00:37
significant haircut—
- Exactly.
00:00:38
— in order to be able to
keep them up and running.
00:00:40
A real possibility. Another possibility
is a very sharp increase in
00:00:44
taxes. Which, again— and I say,
you know, we always talk about
00:00:49
at the end of the day, to cover a
deficit of one or $2 trillion,
00:00:53
it's taxes on everyone. I mean,
it would have a substantial tax
00:00:56
increase on every single person.
It can't just be concentrated on
00:00:59
the top one or 2%. There's just
not enough revenue there. It
00:01:02
would be an adjustment that I
think— we don't want to go
00:01:06
through this. And to be fair,
that's the reason no candidate
00:01:09
right now has a huge incentive
to— to do much about it.
00:01:13
Unfortunately.
00:01:14
Just kick the can down the road.
00:01:15
- Just kick the can down the road
00:01:16
and hope the next
person will take care of it.
00:01:18
An interesting point that,
in reading your notes
00:01:21
before you went—
spoke before
00:01:23
Congress, about how the debt
could have the potential to be
00:01:26
more stubborn when you think
about, you know, where we are in
00:01:31
terms of our population. Using
that as an example, our aging
00:01:35
population could actually help
us prevent growth in the country.
00:01:39
Oh, it does, I mean, currently.
And that is, again, some— the
00:01:43
best scenario we can hope for to
get out of this is— and I think
00:01:47
it should be an obsession for
us, economists, policymakers and
00:01:50
so on, is, how can we grow our
tax base? Let's just accept that
00:01:55
Social— we have an aging
population. We want to take care
00:01:58
of them, and cutting benefits
there is going to be difficult.
00:02:00
Let's just accept that's just a
challenge. The only way out of
00:02:04
this is to have a bigger tax
base. To increase the revenues
00:02:07
for the government. The best
scenario there is to increase
00:02:10
the pie, the size of the pie.
- Right.
00:02:12
That's the best scenario we can
00:02:13
have for— so things like, you
know, more people. More people
00:02:16
in the workforce, people working
longer, more productivity, more
00:02:20
entrepreneurship, those things
should be basic priorities for
00:02:23
us. That's the— that's the one
hope that we have. And it would
00:02:26
have to still be a significant
amount of growth. Absent that,
00:02:30
the demographic pressures make
our problems incredible. Very,
00:02:34
very challenging. In the past ten
years or so— Social Security
00:02:38
Trust Fund runs out in 2033.
That's the latest that I would
00:02:41
envision this conversation
taking place. At that point, it's
00:02:44
not a conversation for bankers,
for hedge funds, for fund
00:02:46
managers. It's a conversation
for 50 million people that are
00:02:49
going to think about, what
happens to my check? - Yeah.
00:02:54
- We may have— we can have that
conversation earlier, but it
00:02:56
absolutely— I think no more than
ten years from now.
00:02:59
One of the other things, then, I guess
you also have to factor in when
00:03:03
you think about the level of
debt, is the interest in buying
00:03:06
off the debt by other countries
around the globe. - That is true.
00:03:10
And the components of some of
the relationships that we have
00:03:13
or don't have—
- Or don't have, yes.
00:03:14
— with some of these countries
00:03:15
that are used to buying the
debt, how that could factor
00:03:19
against us as well.
00:03:20
Exactly. That's a really good
point. And I think it is
00:03:22
something— talking about, America
becomes self sufficient, also
00:03:26
means becomes self sufficient in
terms of, we can fund our debt
00:03:29
ourselves. Or more. Or
increasingly more. That is
00:03:33
challenging. I mean, right now,
40% of the US debt gets sold to
00:03:38
different— ultimately placed in
the balance sheets of different
00:03:41
different— different agencies,
different countries. Becoming
00:03:44
self sufficient forces the US
consumers, the US businesses to
00:03:47
buy more of that debt— the US
banks to do it. I mean, if I
00:03:51
force you to buy paper, because
that's what I'm doing, you
00:03:53
cannot use the money to turn
around and eat, buy a house, go
00:03:57
shopping, take care of your
kids. It could be really
00:04:01
challenging. In an environment in
which we want to become a little
00:04:04
bit more close, a little more
self reliant, it will be a lot
00:04:08
more challenging to fund this
government without imposing
00:04:10
significant penalties on our
standard of living.
00:04:14
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00:04:16
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