罗格夫：美国需经济冲击才能迫使财政改革

Welcome back to Bloomberg Money. I'm Scarlet Fu, my partner in crime, Tom Keene, not here in New York, but in Jackson Hole, Wyoming where he's standing by with Ken Rogoff, Harvard professor of economics and former chief economist over at the IMF. Tom, I'll hand it over to you. Thank you. This is my conversation of this Jackson Hole without question as professor Rogoff will be speaking to the assembled at lunch here, in about an hour.

Of course, the book last year is a required read. Bramow's son actually even read the book, moving royalties up, our dollar, your problem. And the new edition of our dollar, your problem is there's a Rogoff wedding coming up here as well. Is it our dollar, your problem? How are you and missus Rogoff holding up? We're holding up so far. It's just a week away. Our daughter's getting married, but trying to control the budget just like the US dollar.

To control the budget. Let's do that right now here at Jackson Hole. Ken, I think what's so important here is there was another time and place. You have an op ed in the Feet from a couple years ago. Here's the photo, folks. Bill Clinton, Al Gore, there was a time where this is a a photo right from Ken Rogoff's op ed. How did we screw this up? How did we get to the will of 1999 to the irresponsibility of 2026? Super short answer.

We've had a couple of catastrophes, the global financial crisis and the pandemic. But I think a larger issue, which has been a big topic at this symposium for years and years, was a near religious conviction among academic economists in the journals that interest rates were gonna go down and down and down. So who cares how much debt you owe? You'll never have to pay interest on it. And I think that's dominated the political landscape.

The interest rates have reversed, but Washington hasn't, and a lot of academics hasn't. The Bessent angle and in your project syndicate essay in the last seventy two hours, I'll say, you go right after, secretary Bessent. Glenn Hubbard at Columbia has a respect for the idea. You can do supply side, but you may not grow with it. There's a certitude that we will grow our way out of this predicament with a sup a pseudo supply side exercise.

Is there any evidence we can do that? We might, but let's start with the fact we're infinitely rich at the moment. Even if we grew really slowly, we ought to be able to pay our bills. So telling us we're gonna get much richer in the future, that will bring in some further tax revenues, but demands on expenditures, old age expenditures. And then there are a lot of technical issues around that. Interest rates will probably go up if there's fast growth.

Labor share is falling. That's all over the place. Capital's harder to tax than labor. So I I think what there are many other reasons interest rates are going up. How about the war in Iran? How about populism, not just in The US, all over the world? Have you been asked to be on a task force? No. I I wasn't. Mac, you got those shorts too. I I think the world of Kevin Walsh, but I'm just as grateful that I'm not on one of the Oh, that was so smooth, folks.

Did you see how Ken Rogoff did that? Ken, let let's talk seriously. We had Jack Lew on Bloomberg money's about retirement, Social Security, and all that. And the former treasury secretary said day one, after the presidential election, we need a panel. We need to get something done about Social Security. You've gotta be a natural selection for that panel. What's the first task to get our entitlement program straightened around?

Honestly, I think it's gonna be very difficult to do till we have a crisis that convinces voters something has to happen. They're not convinced. Now some economists are finally coming around to the view that maybe it wasn't the free lunch they said it was, that maybe someday we'll get inflation, financial repression, but it's not the dominant political position. I think if you try to run-in 2028 on I'm gonna fix Social Security in any more than a passing phrase.

Silence in the rooms. Yeah. The people's eyes glaze over. I think it's gonna take that's why my book predict at the end of it, predicts, you know, at some point, this will end in a crisis of some sort to catalyze the change, which will be painful. Ken, the rain here is killing my glasses. I'm fogging up like, like no tomorrow. We're gonna fog up with higher yields. You've nailed the vector towards a higher yield. What ten year yield or even thirty year bond do you perceive to be that point of crisis for the American public?

Well, I mean, it's the debt level, the level we're at already is difficult. The crisis comes when a shock happens and you're not resilient. The Iran war was a mini shock, really, compared to what could happen. But over the next five years, it could be Right. A, you know, cyber war. It could be, you know, some kind of artificial intelligence thing, most likely China and Taiwan. But a war kind of shock, that's the scenario that pushes up interest rates.

Right. And that makes it hard to the Fed can't just cut interest rates if the market's pushing them up. The government can't just print money if the market's pushing them up. And I I think in our environment, that's a big risk. The charm of this time is different, Reinhard and Rogoff, as you combine you conflate together responsibly public and private investment. So right now, if we conflate together 40,000,000,000,000 plus private this, private that with Wall Street's new addiction, private equity, and private credit, are we doing it this time is different path right now?

Well, look. I mean, of course, there's gonna be some kind of spectacular collapse in AI at some point, which doesn't mean you should take your money out of AI. Schiller and Greenspan famously predicted Right. The collapse of the stock market when I was at around 4,000, then it went to 8,000. And they were right, and then it went to 6,000. It collapsed, but timing was terrible. And I think that's difficult. But the US government, needs to take steps.

There'll be much smaller and easier steps if you do it sooner. I don't see any signs of that happening. You and I grew up under the shadow of Barbara b Connan. He's the one folks that told Nixon, here's the door. Watch your hurry. There used to be a normal process here of, say, Barbara Connan, house ways and means. Where does congress fit in to the crisis that you see coming? Well, you know, at the moment, they're kind of sidelined and paralyzed.

Yes. But there are many people in congress on both sides of the aisle who are aware of this. But, again, you know, it's hard to catalyze action. By the way, we're talking about The United States. We could go to The UK. We could go to France. Look what happened to Macron when he tried to raise the coming up right now. Get murdered. Right. You know? And so, it's the same thing all over the world. Jason from Cambridge emails in and says, Tom, you trashed me with Act 10.

To Ken Rogoff, the question of the, the afternoon here, Scarlet, is there great inflation at Harvard economics? Well, we have a new policy coming in place to try to deal with that. But, you know, absolutely, there was. I will say when I came to Harvard, I learned from complaints from the dean that I was one of the easiest graders. I didn't change a thing. And then over twenty years, I find out from some of the kids, you're the hardest grader at Harvard.

So that tells me I've told you're brutal. You're ruthless. I mean I'm not trying to be. I'm trying to be fair and, you know, reasonably honest. Brutal and ruthless, Ken Rogoff. Thank you so much.