Heather Boushey on Rebounding From Covid & Biden's Economic Policies

Barry speaks with Heather Boushey, a member of the White House Council of Economic Advisers under President Joe Biden. She is also a senior fellow at the Harvard Kennedy School. In this episode, they discuss the economic rebound from the COVID-19 pandemic, Biden's economic policy, and economic equality in the US. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 2:48Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Heather Boucher. She is a senior research fellow at the Harvard Kennedy School, working on the Reimagining the Economy Project. Previously, she co-founded the Washington Center for Equitable Growth in 2013. She has been an economist for the Joint Economic Committee of the U.S. Congress and on the Council of Economic Advisers for President Biden. She became chief economist to the President's Invest in America Cabinet. Politico twice named her one of the top 50 thinkers, doers,

• 3:31Barry Ritholtz?

  and visionaries transforming American politics. Her most recent book is Unbound: How Economic Inequality Constricts Our Economy and What We Can Do About It. Heather Boushey, welcome to Bloomberg.

• 3:45Speaker 05

  Thank you. It's a real pleasure to be here with you today.

• 3:48Barry Ritholtz?

  Well, it's a pleasure to have you here. Let's start a little bit with your background. BA in economics from Hampshire College, then a PhD from the New School, also in economics. What was the original career plan?

• 4:00Speaker 05

  Ooh, well, I actually wanted to be an economist and run a think tank someday and get to do things like this. I grew up in the Pacific Northwest in a place called Muckelteel, Washington.

• 4:14Barry Ritholtz?

  Seattle, near Seattle?

• 4:15Speaker 05

  Near Seattle, it's north. It's right next to Everett, Washington. My dad worked at the big Everett Boeing plant where when I was a kid, they made the 747s. When I was a kid, it was the largest landmass building in the world. It's now been overtaken by the Tesla Gigafactory. And in the early 80s, you know, I lived in a community with a bunch of cul-de-sacs. All new houses had basically been built for the workers and, you know, for the families of Boeing. And in the early 80s, every kid at my bus stop had one or two parents that were pink-sliped. They'd been laid off. It's the early 80s, what I know now to be the Volcker Recession. And at the time, I was really just struck by how much power this company had over my life

• 5:00Speaker 05

  and the lives of my friends. And, you know, I was really good at math. And over time, I realized that economics was the field that was supposed to have answers to questions like, how is it that, you know, you can have that economic security that I as a kid wanted and wanted for my family?

• 5:17Barry Ritholtz?

  So formative years as a kid, watching what the company, town, how it progressed when layoffs came, is that what led your focus to the intersection of economic growth and inequality?

• 5:30Speaker 05

  Probably. I think the question that I have asked my entire career is what creates that opportunity for economic security for America's middle class? How do you make America's middle class grow and thrive? And what stands in the way? And so I've spent a lot of time thinking about government policy, thinking about, you know, how we can encourage firms to create those good middle-class jobs, what government needs to do when those jobs aren't available or when those jobs don't provide childcare or unemployment benefits, or whatever it is that families need.

• 6:01Barry Ritholtz?

  So it's such a partisan era these days. When you were working...

• 6:07Barry Ritholtz?

  On the, as an economist for the Joint Economic Committee of US Congress, was it that partisan or was there some cooperation? Hey, we all have the same goals. We just differ in our means of getting there. What was it? What years were that? What was it like when you worked there?

• 6:22Speaker 05

  So I was there in 2008, 2007 into 2008. And so it was, you know, the financial crisis and there was not a lot of partisan happiness, you know, in that, in those years on the Hill. I will say over my career, I've testified over three dozen times for Congress. And the, you know, early on in my career, I felt like people on both sides of the aisle were much more polite, much more cognizant of the fact that, you know, as someone who's a researcher and you show up and you've, you've spent all week preparing this testimony and you're ready to ask questions, but you're doing this, you're volunteering your time. You're not being subpoenaed. You're just there to share information. And people on both sides of the aisle would generally be respectful of that.

• 7:06Speaker 05

  And I definitely have noted over time that people on the other side of the aisle now are, are, are less likely to be polite to me when I'm testifying. I mean, I haven't testified in a number of years, but I've seen that over my career. So that partisanship has really drilled down into how we treat experts and people who are volunteering, people who are just sharing information. And that, you know, is just one of the many indications in our society of how partisan it is.

• 7:31Barry Ritholtz?

  So a lot of us and them, a lot of tribalism. Let's talk about when you were on the Council of Economic Advisers in the last administration. What sort of work did you do? What was that like?

• 7:44Speaker 05

  Well, it was very exciting. I joined Joe Biden during his campaign. In March of 2020, I started advising him and-

• 7:54Barry Ritholtz?

  Strictly economic and policy analysis?

• 7:57Speaker 05

  Strictly economic and, you know, what do we do about COVID? And what do we do about the economic recovery? And how do we think about the economic agenda? I had advised Hillary Clinton as an economic advisor. I was the chief economist for her transition in 2016. So I had some experience in that role when I started helping the Biden campaign. But after he was elected, you know, he announced his econ team. It was the second group of announced hires that he made. And, you know, immediately- We were announced in early December and the first question that we had to deal with was what do we do about COVID? What do we do about the recession? How do we get people back to school and work? How do we make sure everyone is safe but can get the economy back on track?

• 8:42Speaker 05

  And the president had said throughout the campaign that he didn't want to just build back from the pandemic, but that he wanted to build back better and had this really robust economic agenda. And so when we started out at the Council of Economic Advisers, we were thinking a lot about, well, will there be a new variant to the virus? What will that mean for the economy? How does that affect global supply chains? How does school reopenings affect labor supplies? So a bunch of questions we were thinking about there. And then we also did a lot of work thinking about, well, what do all these pieces of Build Back Better mean? How do we craft a set of economic policies that can support and grow America's middle class? That's Joe Biden's North Star.

• 9:26Speaker 05

  It's what he wanted his economic agenda to really focus on. How do we do that? How do we help people understand how all the pieces of that agenda fit together? So that's a lot of what we did. And quite frankly, a lot of what the Council of Economic Advisers does is help people understand the data. So anytime there's an economic data release, we were there writing a memo for the president, getting on television, talking to folks on the radio and podcasters, like this is what those numbers mean. This is how to explain the economy and what's going on around us.

• 10:01Barry Ritholtz?

  So we'll hold off on the current administration for a while. I want to talk about, let's talk about COVID for a minute. So here we are, we're recording this at the end of the summer in 2025. You started mapping out a plan for COVID just about five years ago. Here we are, it's five years later. Something seemed to have worked out well, something's not as much. We still see lots and lots of people not returning to office. There are a lot of people who've been dislocated. The pandemic very much revealed a lot of stress fractures in society, but give yourself a grade. What did you do well in the response to the pandemic?

• 10:45Barry Ritholtz?

  And where do you wish policy had been more robust or more successful?

• 10:50Speaker 05

  What a great question.

• 10:53Speaker 05

  I think first off, you have to remember that when Joe Biden took office, you know, Americans didn't have access to the vaccine yet. And so the very first thing that we had to do was to get those shots in arms. The vaccine was available, it was ready to go, but had to make sure that it was distributed and distributed as quickly as possible and that people got those two rounds of shots so that, you know, we could get things, you know, start to get people back in school and work and all the different things. And you also have to remember that what a bizarre start to a presidency.

• 11:26Barry Ritholtz?

  For sure.

• 11:26Speaker 05

  Like, we were remote, right? You had all of these workers who, you know, were telecommuting. You didn't have, you didn't have any inauguration parties. There were no, you know, you didn't have any of the normal trappings of a new administration. And you had all these people coming in who, we had to do all of that while also dealing with the pandemic internally and then making sure that the president, the senior advisors and the cabinet officials themselves didn't get sick. So, you know, when I look back, those first few months were so courageous and incredible. And, you know, I look at what my colleagues across the administration did to get those shots in arms, to get schools reopened, to get, you know, all the support that folks needed.

• 12:09Speaker 05

  And on top of that, to have passed this really important historic legislation, the American Rescue Plan, that gave all of the support to communities all across the country to make sure that there were enough resources to weather any future variants that we could imagine over the, you know, the next, you know, couple of years.

• 12:26Barry Ritholtz?

  I vividly recall getting my first shot at the Javits Center in Manhattan.

• 12:33Speaker 05

  Wow.

• 12:33Barry Ritholtz?

  Which was crazy because it was set up with military precision. I don't know if it was the Army or the National Guard, but there were literally military troops just running it like it was a military operation, incredibly effective and incredibly efficient. They must have processed tens of thousands of people a day. That was like, oh, so someone's on top of this. It felt like someone really had been very proactive and had thought this through.

• 13:01Speaker 05

  Well, and that is what, that is what folks were spending all of their time, you know, initially, let's, let's make that happen. But then after that, you still had all of this recovery. And I think, if you think back to before Biden took office, you know, to 2020, when the pandemic was happening, and we were talking about what it meant to shut the economy down. And there were some economists, I always tried to be very careful in my language about this, that, you know, what kind of recession we were having, right? You know, you saw, you know, at the beginning of the pandemic, things shut down, unemployment spikes. And it was like, well, but unemployment was spiking because we, we needed people to take that step back, right? And that's a different kind of recession. And as you noted, it uncovered all of these fragilities.

• 13:45Speaker 05

  You know, over the preceding decades, we have allowed, we've enabled private actors to create these very complex global supply chains, really focused on just-in-time production and not building in resiliency or, you know, duplicity, like having, you know, multiple suppliers for a single good. No, let's make sure that it's, it's the most efficient, but not thinking about what happens when stuff goes wrong. And, you know, so our first couple of years in the White House were all about, oh, there's another thing that doesn't work anymore. There's another thing where, after the pandemic, businesses couldn't just not get back up on their feet. And so a lot of the resources for the American Rescue Plan were about helping small businesses,

• 14:27Speaker 05

  communities, schools, all these different entities get back up on their feet. And as we were uncovering, and it really did feel like a, not a whack-a-mole, because we weren't whacking things down, but like a, you know, a pop-up of all of these different challenges that emerged, you were realizing, I mean, I came, I come out of that experience understanding how important it is to have competent, dedicated public servants who are getting up every day, saying, that is a problem we need to solve. That's one we maybe don't need to solve, but these are things that can affect American lives, American communities, American health, save to the economy. And just how important that leadership is.

• 15:08Speaker 05

  So in terms of lessons learned, I think the pandemic really showed that you need good governance because in an emergency, that's what's gonna, that is what's gonna make the difference. And so the military precision of getting shots in arms, that, you know, thinking through all the different pieces of the policy, I think a lot about how we saved so many small businesses in America, particularly care businesses, childcare centers, long-term care facilities, gave them an infusion of funds to help them keep going through the pandemic. And that meant that other people could then get back to work. You talk about, you know, people not necessarily all coming back to office. We have seen that as a trend in the labor market. For some families, that may be really helpful for addressing their care challenges.

• 15:50Speaker 05

  But one of the things that really helped millions of people get back to work was the federal government stepping in and helping them deal with their care crisis because their childcare center wasn't open. And, oh, well, we can solve that problem that helps that employee come to, you know, Bloomberg every day. So those are, those were really big. I think, I, because I know you'll, you'll ask about it next, so I just want to get to this. Of course, you know, one of the challenges was that that period led to the highest inflation that we've seen in the United States since the 1970s. You know, inflation, anybody under the age of 40 had never seen that kind of inflation.

• 16:25Barry Ritholtz?

  Before we get to inflation, because I, I think people don't understand, you either had to choose high inflation or, or high persistent unemployment. And, and as unpleasant a choice that is, I, I think most people would prefer high inflation to not having a job. And so that was the Sophie's Choice that was made. And by the way, it wasn't any one thing. It was lots and lots of things, including, you know, the biggest fiscal stimulus since World War II under the previous president, the first President Trump term. But then there were a lot of other factors, including legislation on the Biden administration.

• 17:09Barry Ritholtz?

  What I want to ask about is Getting the shots out, that was a huge gain. Making sure that a lot of the economy began to reopen was important. But with the benefit of hindsight, what do you think were missed opportunities? What didn't get a high score? What communication failures were there that could have been handled better? And again, a lot of this is 2020 hindsight.

• 17:36Speaker 05

  It's a lot of, I think that helping people understand the role that the fragility of supply chains played in the challenges of getting goods to their local supermarket or their local store that was affecting inflation. I don't think we did a good enough job helping people understand all the things that the pandemic had uncovered, right? So, and I want to step back just one, because one thing that always struck me at the beginning of the pandemic, and we were all like, what is this going to look like? And, you know, I had heard, of course, about the flu, the Spanish flu, like sort of back in my mind.

• 18:18Speaker 05

  I had never read anything about, you know, what that had happened in, you know, in the teen, back in the 19 teens, 1918. And, you know, one thing, though, that I had learned during the pandemic was that that huge pandemic had happened, and then it was like, nobody wrote about it. You know, this, the Spanish flu, it was like, oh, this thing, this thing happened, and then it just, it was like, people wanted to forget it. And I feel that there was a little bit, as we were going through the pandemic, people were so traumatized that the idea that it was uncovering how our economic system was so fragile, also got a little bit, I feel like people kind of wanted to paper over that and just move past it, just everyone to get back to normal, without kind of wanting

• 19:01Speaker 05

  to stop and say, actually, the way that we're doing American business just isn't working. And I think a lot about like semiconductors, for example. You know, I think we all learned a lot about semiconductors during the pandemic, because all of a sudden, we couldn't get them, right? The global semiconductor shortage affected every, you know, all of us, right? A factory closes in Malaysia or in Taiwan, and then all of a sudden, you can't buy something, or prices are going up. So that, how we talk about that and how we communicate that, I think was something that was really hard to do amidst the health crisis. And so if I were to, you know, kind of wave a magic wand and go back in time, I think I would try to, I would want to figure

• 19:45Speaker 05

  out how we could spend more time helping people understand those fragilities that we were uncovering, which was hard because people were so wrapped up in the consequences of it, which was high prices that they were seeing at the store and which were being blamed on the simplest explanation, which was obviously government spent too much. That kind of fits into our, our everyday narratives. When yet, when you uncovered it, it was like, no, actually it was because of the fragility of these supply chains and the decisions that all of these businesses have been making for decades. And we need to hold them accountable. We need to ask businesses to be more resilient. And that's going to require rethinking our economy. That's a big structural change that, you know, the Biden administration really started to push. But how people understood that, and did we do a good enough job talking

• 20:29Speaker 05

  about that? I, I think that's something that I wish we had done better.

• 20:32Barry Ritholtz?

  Let's do, talk about another communication issue, which is the pushback to vaccines. And I was always kind of surprised by not just the Trump administration, but by Trump himself, who deserves a lot of credit for Operation Warp Speed. And yet, of all the things he takes credit for, he kind of let that slide. Could we have communicated better that, hey, we didn't just create these vaccines overnight. This has been 10 years in the making, and it's safer, especially for people at risk over, pick a number, 50, 60, 70, than not having it? I'm curious as to your thoughts about communication around that. There've

• 21:17Barry Ritholtz?

  been a lot of pushback about closing schools. And as it turns out, kids are fairly safe relative to COVID. It doesn't seem to have the same impact on them. Should we have, should we have left schools open? Should we have tried different things, communicated? How do you, how do you look at those two areas?

• 21:34Speaker 05

  Well, I think fundamental to those questions are

• 21:40Speaker 05

  We hadn't had a pandemic in a long time.

• 21:42Barry Ritholtz?

  Century.

• 21:43Speaker 05

  Right. We, um, we didn't know how bad it would get. And you had this, this, we were, we were in a moment where already, um, America had become a lower trust environment, right? People, um, had less trust in government than they had, you know, decades before, less trust in business, less trust in experts. So you're already kind of walking into a situation where you're trying to explain to people what the health risk is. And you, you have to really, um, did we, did, did everybody do a good enough job thinking about what the trust, how much trust the listener was going to have from the get-go? The problem is, is that you don't know how it's going to turn out. So you want to make sure that you are, um, protecting people to the best

• 22:26Speaker 05

  of your ability, but you don't have all the answers. And so, you know, but saying to people, well, we suggest that you do this, but maybe we don't know if that's going to work. That doesn't go over very well as a, you know, in a, in a public health crisis. So I think part of, um, part of the, the, the way that we've seen, you know, the vaccines and the school closures and all these things play out is that that has further eroded the trust that people have in the institutions around them, even as we know that it saved, you know, millions of, millions of lives and millions of dollars in healthcare costs because people didn't get sick and, you know, all the rest for people to, you know, be able to get the vaccine. And so that was a, was that a problem we could have fixed

• 23:10Speaker 05

  amidst the pandemic? Or is this something that we should be kind of taking a step back and saying, huh, maybe we should have been focusing, um, uh, years ago on why is it that, that trust was eroding? And that leads to something that I really want us to really focus on in our conversation today is that really toxic role that inequality has played in our economy and our society, which we know is connected to this failure of people to trust and particularly to trust experts, to, to, um, to trust that people are acting in their best interest. So Operation Warp Speed, it's incredible achievement of the Trump administration, but yet pushed aside because communities all of a sudden became, uh,

• 23:56Speaker 05

  I mean, I can't speak for how those communities felt, but they became fearful and distrustful. Schools closing, and you hear, you still continue to hear that debate on both sides. Some people still frustrated that their schools were open, and some people saying, oh, they closed for too long, and there's been health, you know, learning, not health losses, but learning losses among children. These are really important questions, and we should spend time dissecting what we know now, but we didn't know, we didn't have all the answers at the beginning.

• 24:23Barry Ritholtz?

  Last question before we get to wealth and income inequality. How did, in total, the United States do relative to other modern democracies? How well do we do compared to other countries?

• 24:37Speaker 05

  Well, I'll focus on the stats that, when you ask that question, I can see clear list, clear list in my head, so I can see a couple of charts. So, number one, you know, we, early on, had very high death rates relative to other countries, you know, as a proportion of our population, so we, we were able to, to turn that around. When you look at the economic data, the United States had one of the strongest economic recoveries coming, you know, coming out of the pandemic relative to our economic competitors in the other advanced economies on virtually any metric. So, yes, the United States saw high prices, we saw inflation go up, but the prices didn't

• 25:20Speaker 05

  go up as high as they did in some other advanced economies, and then our prices started coming down and, you know, looked quite good. We saw stronger economic growth, we've seen stronger employment. So, when you look at our ability to take this health crisis, to be able to get it under control enough so that people could get back to work, so businesses could get back up on their feet, so the kids could get back up and, you know, back to school, and then have your economy

• 25:49Speaker 05

  Get back on track. I mean, even The Economist, and I can't remember exactly what the cover was, the exact words were, but it was one of those, you know, like, wow, even The Economist has said, you know, we really knocked it out of the park in terms of the economic performance of the United States coming out of what could have been a very deep and long recession, kind of like what we saw after the global financial crisis. And, you know, we-

• 26:16Barry Ritholtz?

  Difference being huge amount of fiscal stimulus versus almost no fiscal stimulus-

• 26:19Speaker 05

  Well, and Operation Warp Speed and getting shots in arms and all the things that we did to contain the pandemic.

• 26:25Barry Ritholtz?

  So you talk about the mortality rate, and I've seen other people point to a lower vaccination rate. I'm curious if some of the European criticism of the United States response was, and I've heard some of this from other corners of various partisan arguments, lot of pre-existing conditions, the United States entered the pandemic with not an especially healthy population. How much truth is in that claim?

• 27:00Speaker 05

  Well, I'm not a health expert, but certainly we know that the United States population, you know, does have higher death rates from a lot of, you know, preventable-

• 27:14Barry Ritholtz?

  Diabetes, obesity, go down the whole list, heart disease.

• 27:17Speaker 05

  So certainly that, it doesn't surprise me that people are saying that about, you know, how we entered the pandemic. And then we know, of course, that, you know, some of the after effects of, you know, long COVID and, you know, how that affects people, particularly around some of these health issues is important.

• 27:33Barry Ritholtz?

  Coming up, we continue our conversation with Heather Boushey, senior research fellow at the Harvard Kennedy School, discussing the impact of wealth and economic inequality on growth. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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• 28:32Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume, so writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

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  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at chatgpt.com.

• 29:57Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Heather Bouchet. She is a senior fellow at the Harvard Kennedy School. Previously, she was an economist for the Joint Economic Committee of US Congress and chief economist to the presidents of Invest in America's Cabinet. So let's talk a little bit about wealth and income inequality. And the first question is, what is the impact of this on sustainable growth? Does wealth and income inequality create a drag to faster, more widespread growth?

• 30:36Speaker 05

  That is such a fantastic question. And I feel like it's a little bit of a leading question, because, as you know, I wrote a book on how economic inequality constricts our economy and what we can do about it. And a number of the scholars that I've looked to over time actually just got the Nobel Prize last year in 2024, Doron Asomoglu and Simon Johnson and James Robinson, for their work looking at how institutions affect long-term growth. And I start there because part of what economic inequality does, part of what wealth concentration does, is it destroys the institutions that foster broadly shared growth.

• 31:15Barry Ritholtz?

  Explain what you mean by that, because, you know, we've had wealth inequality during the Gilded Age. We have certainly in the 90s, 2000s and beyond, increasing wealth inequality, primarily due to publicly traded equity and a lot of concentrated ownership. How does that destroy institutions?

• 31:34Speaker 05

  Well, think of it this way. So, one of the things that the United States was an early leader in was making sure that kids had access to free public education, something that US communities started to do early on. They used, they raised taxes to do this. And we were a global leader in the early primary school movement. And that's a really important foundational institution for economic growth. Because we know that talent and entrepreneurship and skill, not, you know, skills can be learned, but all of these things are, they're normally distributed. They affect a, they're distributed across a population, right?

• 32:18Speaker 05

  It isn't just rich children who have access to the best schools that have the best ideas or are the most talented in everything, right? And so if you have a society where you are making sure that children across different income groups, across different racial groups, and you know, both girls and boys have access to learning and skill building, then your society is going to benefit from them being able to find the right fit as they go through life. They're going to find the right role, "Oh, I'm really good at this," or "I'm really good at that." They'll have those opportunities and our economy, our society, will benefit from that, those productivity gains. Very famous economic study by Raj Chetty and his colleagues, many years ago now, but

• 33:01Speaker 05

  they had data on third graders here in New York City. And they were able to match this data on the third graders and their test scores on math and English, but we're just going to focus on math. And they were able to then match those third graders to their parents' income and to their future income and whether or not they ever applied for a patent. It's just one measure of, like, it's not, it's not the end of it, but just one measure of some kind of, you know, success in the world. And what they found was that the children who did the best in third grade on these standardized math tests, those kids were more likely to grow up and get a patent. Totally makes sense.

• 33:45Speaker 05

  But when you looked at those children by the income group that their parents were in, by their race, by their gender, you saw something very strange happen. When you just looked at the top kids in terms of the math scores, so this group that was most likely to go on and get a patent. The children in that group who came from the richest families, who were boys or were white, were far more likely than the children from lower income families than girls or were black children to grow up and get a patent. So what that tells you is that our economy, our society, has been denied all of this, these new ideas, these new things we could be buying or new ways that our world could be changing, because those children who were highly talented

• 34:30Speaker 05

  didn't have that opportunity across their life. So what helps a low income child get that education that gives them that opportunity? Well, it is, it's having a good public school system and good public universities and that are affordable, that give that kid an opportunity. Having equal opportunity laws that allow, you know, girls and people of color to have those opportunities. That hinges on having institutions that are fair and that are enforcing anti discrimination laws. And so that is just one, that's just one pathway through which inequality or, you know, equity or lack thereof affects our, our potential for economic growth, affects the kind of growth that we have.

• 35:13Barry Ritholtz?

  I want to, I want to push back on that slightly in that, so is this an inequality issue? Or is this a, hey, we have pretty mediocre public schools, especially in cities, and that leads to exaggerating or amplifying the, some inequalities that are already in existence? Like, is this a tax issue? Is this a competency and expertise issue? Like, why are suburban schools in wealthy suburbs so much better reputations and higher acceptance rates at IVs and all the other usual measures of success?

• 35:58Barry Ritholtz?

  Is it strictly money? Or is it, some of it was just a flight of experts to, to higher pay? I guess which comes back to my, how do we explain, hey, the kids are in school, they're just not really learning a whole lot?

• 36:12Speaker 05

  Well, I mean, there's so many, there's so many directions we could take that question.

• 36:18Speaker 05

  Whether or not you are funding those public institutions that enable a wide range of people to have access to opportunity, that's that's sort of the first part of that answer, right? Are they properly resourced? Well, the answer, of course, we know is that they haven't been. And there's there's a lot of things happening, but two that are really fundamental. Number one, in the United States, public schools are primarily financed by local property taxes, which is inherently unequal, right? That means that people that are living in communities with wealthier homes have higher tax bases, and so those those school districts have more resources, which is exactly the opposite of what you should be doing to, you know, create more equity, more opportunity.

• 37:00Barry Ritholtz?

  Isn't there a chicken and egg situation there in that, like, I'm just thinking of all the bedroom communities 30 minutes outside of Manhattan, they became a destination suburbia because, hey, it was it was quieter, it was cleaner, it was neater, and as it became more and more desirable, the schools started doing better. Like, you've created, we've created a situation where, of course, these wealthy suburban school districts are going to do better. That's why people pay higher home prices and higher taxes in those districts, because they want a higher quality public school.

• 37:45Barry Ritholtz?

  How do you, how do you deal with underfunded urban schools when people are voting with their feet and their tax dollars?

• 37:56Speaker 05

  Well, I mean, so the the obvious answer is we should be thinking about how we are financing public schools, right? Should we be, should it all be about local? I mean, this is, and this is a local issue, obviously, it's different in different places. That's, that is an answer. But when you then zoom up to the federal level... And you think about the question of whether or not we are properly resourcing the institutions that we need. The answer is, of course, we've seen a half-century now of primarily Republicans selling the American people on the idea that if we lower taxes, particularly on the rich, that's going to benefit them and their communities. And of course, that's not what we've seen. Trickle-down economics hasn't worked. It hasn't delivered stronger growth overall.

• 38:41Speaker 05

  And what it's done is starved our government of the resources that it needs to then address some of these inequities, you know, at the federal level or, you know, or, you know, potentially at the state level, depending on.

• 38:53Barry Ritholtz?

  So ultimately, it's a tax question of...

• 38:56Speaker 05

  And it's a question, though, of why have we decided to starve government in order to give money back to the richest in our society? So you can see, you know, time and again, these massive tax packages, the most egregious, of course, being the one that passed this year that Donald Trump signed.

• 39:14Barry Ritholtz?

  Is this one really more egregious than the 2017 Tax and Jobs Act?

• 39:19Speaker 05

  It is difficult.

• 39:20Barry Ritholtz?

  Because I hear the exact same complaints, and it's, you know, what is it? It's eight years later?

• 39:26Speaker 05

  It is... There is no justification for the kinds of tax cuts that we've just given to the richest people in our society while gutting Medicaid, denying families and children and new parents access to health care, which will make it that much harder for our society to thrive, you know, for decades to come. People are going to be sicker, they're not going to have access to health care, they're going to go into bankruptcy, all of the hospitals are going to close. So the damage that we are doing to communities because of that tax legislation is truly phenomenally awful.

• 40:04Barry Ritholtz?

  So let's explore that in a minute, because you talked about trickle-down, and I think that's so long ago, I don't know if people voted for that. The thing that's been the big...

• 40:15Speaker 05

  Well, he did, he did say, I mean, let's be clear, President Trump did tell people during his campaign that he would not cut Medicaid.

• 40:22Barry Ritholtz?

  That's true.

• 40:23Speaker 05

  So he did tell people he would raise tariffs, but he did not, he said he would not cut Medicaid, and he did that. That is one of the first things that he did.

• 40:30Barry Ritholtz?

  Here's the thing that, that is the big surprise to me, is that we're seeing the impact of the tax package. Falling in a surprising way on a lot of red states, farmers, rural communities. There have been a number of stories about rural hospitals are closing left and right. There are going to be people that are going to have to drive three, four, or five hours if to have a baby delivered, and if there's a heart attack, I got some bad news. You ain't going to make that.

• 40:59Speaker 05

  Well, the baby may not make it either. I mean, to the hospital.

• 41:01Barry Ritholtz?

  To the hospital, for sure. So, so the question is, and I don't have an answer for this. Are people just voting tribally? They're voting for what their party affiliation is? Because it doesn't seem like a lot of people realize, and this is true on both sides of the aisle, but it's especially true, given what we've seen in some of the redder parts of the country, and I keep coming back to all these rural hospitals closing. Are people just not voting in their own interest? Are there other factors driving this? And I know you're not a political economist, and that's not your focus.

• 41:43Speaker 05

  But I think that people, is my personal view, that people are voting for somebody that they believe is on their side. And when you take the long view and you look at the US economy, what you see is a half century of rising economic inequality. The top pulling further and further apart from the rest, the middle class being squeezed, harder to go from being low income into that secure economic middle. A rise in economic concentration, and by that meaning, in, you know, across industries in the United States, there are fewer and fewer businesses. You talk of hospitals, there's been massive consolidation in the hospital sector, right? So, in many communities already, there might have been a number of hospitals, but they're

• 42:28Speaker 05

  all owned by the same company, right? Which creates lower wages for the workers, the nurses and the doctors that work, and the janitors that work at those hospitals, creates that, what we as economists would call a monopoly labor market. And we know that they're, they're less likely to be resilient in situations like this. So, these are longstanding brewing crises that this most recent legislation has then just sort of lit the match under and said, well, we're not going to, we're not going to give those communities the money they need for these hospitals. But it is on top of this rising economic inequality that I think has made so many people.

• 43:09Speaker 05

  Unclear of who's on their side and for some reason they believed that Trump was. He goes out there and he says he's on your side, but his actions really haven't been. And I think that's what's so, it's so hard and frustrating to watch. But I think the truth of that, the truth in there that we need to be very thoughtful about is if you want people to vote for you, if you want people to vote for people that are actually going to support and grow America's middle class, how are we showing that? How are we demonstrating that actually our goal isn't just more elites making more money, but is actually making sure that communities thrive, that there are good jobs, that there is the kinds of institutions, you know, good schools and healthcare and all the things

• 43:52Speaker 05

  that communities need, are we actually delivering that?

• 43:56Barry Ritholtz?

  So if we look at the 2010s, the post-financial crisis era, not a lot of fiscal stimulus, almost all monetary policy, quantitative easing, zero interest rate policy, rates were super low, inflation was under 2%. We look at the post-pandemic era, the 2020s, they've been pretty much all fiscally driven. We had CARES Act 1 and 2 under President Trump, CARES Act 3 under President Biden, the infrastructure bill, the semiconductor bill, the Build Back Better bill, the most recent big beautiful bill and all the tax cuts there.

• 44:37Barry Ritholtz?

  The 2020s really feels like it's fiscally driven, whereas the previous, I don't know, 15, 20 years was all monetary. What does that do to the issue of wealth and income inequality? In the entire 2010s and 2020s, stocks, bonds, real estate, businesses, all seem to have done pretty well. Doesn't matter if it's monetary or fiscal. If you own, if you own capital-based assets, any sort of stimulus seems to work.

• 45:12Speaker 05

  Well, it's a really interesting question. I think it, to my mind, the answer goes back a little bit to something I said earlier about the importance of having good leadership. Fiscal policy requires that you actually have people that are thinking about what is it that you want government to do? What is government spending money on? How are we thinking about setting rules of the road for businesses so that they are encouraged to behave in ways that's going to benefit communities, not strip them of their value or, you know, create bad jobs or, you know, create negative implications for the environment? And monetary policy, on the other hand, is very hands-off. It's, you know, we set the interest rate, there is financial regulation, of course, and that's a big piece of it,

• 45:57Speaker 05

  but often when we're talking about addressing the business cycle, it is about the, you know, the interest rate policy. And I think what you've seen, especially post-global financial crisis, has been a sense that that hands-off policy, and again, I would kind of put that a little bit in my brain, that goes into the trickle-down mentality, that markets, we're kind of going to take our hands off because we believe that markets are perfect, so if we get out of the way, then everything will just work out hunky-dory. And that hasn't, that hasn't worked out. It certainly did not work out in the recovery post-global financial crisis, which, you know, left Americans languishing in high unemployment, you know, massive labor market scarring for so many young people that never really found that good start, you know, the, the loss of wealth for millions of Americans.

• 46:41Speaker 05

  And it took so long for us to, to work, to work its way through the system. The fiscal policy option allows policymakers to step in and be more active and to say, actually, this is what we, this is the direction we need to go. So the bipartisan infrastructure law that, you know, invested money in communities in every part of America in creating roads and bridges, that standard infrastructure, but also, you know, taking steps to bring broadband to every family, taking steps to make sure that schools, they wanted to put in electric school buses to reduce the pollution and the noise for kids riding that school bus every day, that they had resources to do that. So infrastructure, as we traditionally

• 47:23Speaker 05

  thought about it, and, you know, these new forms of infrastructure that are really important. Government really stepping in and saying, hey, there are certain sectors that we need as a country to be investing in. High technology, like semiconductors, clean energy, that these are the industries of the future, that we want America to be and we need American businesses to be competitive in. That was why we were making those investments. And we believe that if we encourage businesses in the right way, that can create good jobs and economic security for communities all across the country. So that active policy that is saying, here's what really matters to us as a society, I think is a part of this trend, because we can all see with our own eyes that 50 years

• 48:08Speaker 05

  of saying, well, let markets take it, you know, that we don't really need to intervene, has left too many Main Streets devastated, has left too many families without economic security, and hasn't delivered the kind of economy that Americans want, need, and deserve.

• 48:25Barry Ritholtz?

  Coming up, we continue our conversation with Heather Boucher, senior research fellow at the Harvard Kennedy School, discussing what we can do to help narrow the gap between the haves and the have-nots. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

• 48:51Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 49:33Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 50:16Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Heather Boucher. She was the economist for the Joint Economic Committee of U.S. Congress, as well as a member of the Council of Economic Advisers under President Biden. She's currently Senior Research Fellow at the Harvard Kennedy School. So we've been talking about how the past forty or fifty years has seen both wealth inequality expand and income inequality. So much dates back to the eighties and nineties, which the younger folks may not really remember.

• 50:57Barry Ritholtz?

  I want to, I want to start by asking you about unintended consequences. And I have a recollection of legislation passed under the Clinton administration that said, hey, you can't pay your CEOs tens of millions of dollars. It just seems ridiculous. Instead, we're going to cap the pay and allow you to pay them in stock and stock options. And as the stock market has gone higher and higher over the past, you know, thirty years, it seems like a well-intentioned attempt to reduce wealth inequality helped create more.

• 51:37Barry Ritholtz?

  How can we respond to those sorts of things when it seems the private sector is clever enough to kind of figure its way around whatever legislative challenges are put in their, their way?

• 51:54Speaker 05

  Always vigilant, right?

• 51:56Barry Ritholtz?

  Right.

• 51:56Speaker 05

  I mean, I think that it starts by, I mean, it starts with taxation, right? So. What we have done over decades is lower tax rates at the top. We've made it.

• 52:10Barry Ritholtz?

  For corporate, corporations or for individuals?

• 52:13Speaker 05

  Both.

• 52:14Barry Ritholtz?

  Corporations as a percentage of total tax paid and the actual corporate tax rate, they both seem to have drifted down over the past few decades.

• 52:22Speaker 05

  All of the above. And we've done that while not doing the things that we need to do to fix the transfer of wealth across generations. So we haven't imposed the kinds of inheriting taxes that I think would be really important to make sure that that wealth isn't calcified over time in families. And that has been, that has really made it so much easier for those who were, who worked really hard, did good, not having to give back through, you know, not having to pay those taxes on their highest income. But it also has allowed wealth to calcify. You know, there's this really important book that came out a number of years ago that I feel like we don't talk about anymore by Thomas Piketty called Capital in the 21st Century.

• 53:07Barry Ritholtz?

  Huge. That book was headlines for weeks.

• 53:10Speaker 05

  It was for weeks, for weeks. And, you know, one of the things that really was so important about that book was the way that he showed through all of this data, the way that income, high income inequality calcifies into high wealth inequality. And that once wealth becomes congealed, right, once a smaller and smaller number of people have access to that, it becomes very difficult to unpack that, to share that, and for society as a whole to benefit from it.

• 53:40Barry Ritholtz?

  So let me push back a little bit and say, hey, we have 50% estate tax. And the way you could get around that is by donating it to a philanthropy, a foundation, what have you. Yeah, there are various trusts and things you could set up to avoid paying some of the taxes, but the taxman gets his due eventually. We're not like the UK that has this escance, gentrified.

• 54:08Barry Ritholtz?

  Nobility, still, the the upper class there is, you know, just generations of landowners. Are or isn't the United States different from other countries?

• 54:20Speaker 05

  But we have so.

• 54:21Barry Ritholtz?

  Do we have landed gentry here the way the UK does?

• 54:24Speaker 05

  I would, I mean, so first off, on the data, we have so much higher economic inequality than our European, um, other European countries. And we don't see the kind of movement across income groups.

• 54:39Barry Ritholtz?

  We used to, we used to have pretty good post World War II economic mobility was pretty high in the United States.

• 54:44Speaker 05

  Right, so if you were born in the 1940s, your your chance of out earning your parents was about 90%.

• 54:51Barry Ritholtz?

  Right.

• 54:52Speaker 05

  But if you're born in the 1980s, yeah, only one in two of us.

• 54:55Barry Ritholtz?

  Really?

• 54:56Speaker 05

  Has grown up to outearn um, their parents. So that's, that is a remarkable shift, a remarkable constraint on upward mobility over time. And it is because you've seen this high, these high incomes calcify into wealth inequality that's sticky. Right, you talked, we talked earlier about people moving into, you know, wealthier con, um, enclaves, you know, with, you know, better schools. Well, that is a way of, um, you know, it's one way that it works its way through society, that those kids will have more opportunities, that you, you, you are able to keep that wealth in, in that family. Um, and then you don't see those economic benefits kind of flowing throughout your society and and you don't see that economic opportunity flowing through.

• 55:38Barry Ritholtz?

  So we talked a little bit about, um, uh, what the pandemic revealed with fragile supply chains and how, uh, many crucial things like just, um, the masks and gowns and gloves that aren't made in the United States. Um, what, what's the genesis of this? How, how much of this can we blame on Walmart? And how much of this can we blame on just, hey, uh, technology and transportation allowed manufacturing to go to the lowest cost provider?

• 56:13Speaker 05

  That's a big question with a lot of answers, but I think there's a few really important points there, right? So, once you had the capacity for an idea to happen in one place, the innovation, the engineers, the plants happen in one place, and the production of something to happen someplace else, because, you know, you could send those plans via the internet or, you know, to a different place. It made it possible for us, for companies all across the United States, around the world, to outsource that production. And we did that at a time when we were making those rules easier, right? We had decades of trade agreements that made it easier for firms to have overseas production,

• 56:58Speaker 05

  to become multinational companies. We wanted to trade, we wanted to have more trade, we believed that would make us safer, it would, you know, you're not gonna go to war with somebody if you're trading with them, right? You're, you're gonna create these, these positive benefits for our geopolitics. And yet, what we've seen is that what that's done is it's really stripped production from the ideas and the innovation, and so have left the United States with, kind of assuming that we could be the ideas people, but that the, the production of things could happen in places where wages were lower and where we didn't have to worry about messy things like the environmental consequences. So you took the hard stuff out of all the things that we make and use, and yet you outsourced

• 57:43Speaker 05

  that. And that's left our economy very fragile, because as it turns out, when things get rough, when there's a pandemic, and, you know, I'm spending a lot of time these days thinking about, well, one of the, the crises coming down the, down the pipeline at us is climate change and the energy transition that that will require, that's gonna create these ongoing challenges for our economies and our societies. If you have this global production... Where's the resiliency? What is that going to do? Are you going to be? Are we literally going to be safe as a nation? Let alone the economic consequences that we've seen for decades. It's that that kind of global production system has hollowed out American communities.

• 58:25Speaker 05

  And I'm not saying that it was caused by policy, but it was facilitated. There was this very important role for technology, but we didn't step in and sort of say, not enough policymakers stepped in and said, hey, this might not be, this might not be good for us. We may want to make sure that we have the capacity to make the most important things. Because if you can't make them, then you're going to be vulnerable in a geopolitical sense. And now we're kind of, quite frankly, stuck behind the eight ball a little bit, where some of the most important things, we don't have the capacity to make. And again, we saw that in the pandemic with the simple things with the masks. We also saw that with the ventilators, where we couldn't get enough of those. And we saw that, another example that I've thought a lot about recently, I talked to

• 59:08Speaker 05

  a lot of people when I was in Cambridge this year, drones, which, you know, the, all of, you know, virtually all of those are made in China. So when China started partnering with Russia, that made it hard for the Ukrainians to get the drone parts and to get the drones they need to fight their war. That's a, that, that was a technology problem that very quickly became a very important national security issue. And are we, are we getting ahead of those kinds of questions?

• 59:34Barry Ritholtz?

  So Nassim Taleb wrote a book called Anti-Fragile, all about resiliency and how to make sure that you're, you're not merely relying on just one element, that you're diversified and broadly exposed. How can government policy drive that? If, if it's in the shareholders' interest to reduce costs a maximum amount, increase profits, maximum amount, who's responsible for creating this anti-fragility? How does government build resilience into the economy?

• 1:00:17Speaker 05

  Well, there's, it's a tough question, but there are some tools. I mean, so first off, you have to define it. And what do you mean by resiliency? Is that you want to have domestic production, production with, you know, in the, during the Biden years, we called it friend shoring or, you know, production within allies that you feel really comfortable with. But fundamentally, it comes down to, do you have various options? If there's a, if something happens with this part of your supply chain, are there other ways that you can get what you need? We live in a continent spanning economy and, you know, with, you know, 330, 340 million people, there is a lot of opportunity to create resiliency domestically. But we also, there's a lot of benefits to global trade. So how do we think about making rules that encourage that?

• 1:01:01Speaker 05

  And the thing in the nut of this is, is that that's going to be a little bit costlier in the short term. But what are the costs over the long term? What are the costs during a crisis? How much money did the federal government had to spend during the pandemic to help companies get over their supply chain challenges? How much extra money did Americans pay because firms were able to charge higher prices than even perhaps they needed to because of the crisis? So there are, and, and, and we know that there will be future crises coming. So it's government's job to make sure that we're, you know, protecting the welfare of the nation. This certainly needs to be a part of the question. So what are all the tools in our toolbox?

• 1:01:42Speaker 05

  So maybe some of those tools are about how we think about our trade policy, how we think about our antitrust policy. Maybe we're using procurement policy, but there's a wider range of tools that government should be using. So it, I wouldn't get too wrapped up in the one solution, but that this is the question that we need to be asking ourselves.

• 1:02:00Barry Ritholtz?

  So I was fascinated by some research you did. Uh, at, at the time, there was this concept that highly educated women were dropping out of the labor force because of the motherhood movement. I think. The news media picked that up and ran with it. Turns out the data really didn't support it. Tell us about your research into what was going on with the shecession that people had been talking about.

• 1:02:29Speaker 05

  Well, this comes up time and again where you see, and it's happening now, actually. And it happened in the early 2000s. You'll see these moments where women, their labor supply goes down or they don't recover from a recession. And people start saying, oh, well, it's definitely because women don't want to be in the labor market. They'd prefer to not be working. And so this is good or this is women's preferences. And then when you start scratching the surface and you look at the data, you see that actually it tends to be more about demand side issues, that those jobs weren't available or they weren't providing the supports that families need to deal with care issues.

• 1:03:11Speaker 05

  So that was the research that I did on opting out in the early 2000s. And I've been hearing a lot about this more recently with what's happened post pandemic and is a lot of businesses are demanding return to office. But with the paring back of the American Rescue Plan and the inability of the Biden administration to get all of the care pieces of our agenda across the finish line. Senator Manchin stopped the investments in home health care for the aged. He stopped those investments that we wanted to do for childcare. So a lot of those businesses have really struggled in the past couple of years. You're now seeing that have an effect on women's labor force participation.

• 1:03:53Speaker 05

  And people are again talking about this as voluntary, when I think we need to really be looking, what kinds of supports are we making sure that families can address their care issues and still participate in the labor market?

• 1:04:04Barry Ritholtz?

  Thank you, Heather, for being so generous with your time. We have been speaking with Heather Boushey, senior research fellow at the Harvard Kennedy School. And her most recent book, Unbound: How Economic Inequality Constricts Our Economy and What We Can Do About That. If you enjoy this conversation, well, be sure and check. Any of the previous 550 we've done over the past 11 years. You can find those at iTunes, Spotify, Bloomberg YouTube, or wherever you find your favorite podcast. Check out my new book, How Not to Invest: The Ideas, Numbers, and Behavior That Destroy Wealth and How to Avoid Them, How Not to Invest at your favorite bookstore.

• 1:04:47Barry Ritholtz?

  I would be remiss if I did not thank our crack team that helps put these conversations together each week. Alexis Noriega and Anna Luke are my producers. Sean Russo is my researcher. Justin Milner is my audio engineer. Sage Baumann is the head of podcasts at Bloomberg. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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