On with Kara Swisher - Larry Summers on the Politics & Economics of Envy

Episode Date: April 20, 2023

We turn to economist and former Treasury Secretary, Lawrence Summers, to help us make sense of inflation, Silicon Valley Bank and what Biden should do next. Also on the agenda: why Summers believes in a politics and economics of opportunity — “not of envy.” Plus, why he thinks America needs more people like Jeff Bezos and Bill Gates. Questions? Comments? Email us at [e-mail] or find us on Twitter @karaswisher and @nayeema Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Ready, set, grow. Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca It's on! Not kidding. And the lawsuits are not over yet. This is On with Kara Swisher and I'm Kara Swisher. And I'm Naima Raza. If only Rupert Murdoch was paying out of his own pocket. Shareholders. Of course, who are going to be pretty pissed. So that's another set of lawsuits headed his way. Actually, there's already one claim submitted by shareholders accusing Fox of a breach in their fiduciary duties.

I would say so. I think they've got plenty of proof. They can just, you know, ask Dominion for some documents and everything. We are not lawyers, must escape. Must say, allegedly. But yes, Fox has settled the defamation suit brought by Dominion to the tune of $787.5 million. They did. They did. Yeah. They've managed to skirt the question of whether the network spread those statements that were deemed to be false by the court and acknowledged to be false by Fox in their statement with malice or with flagrant disregard for the truth. They didn't have to apologize on the air, which was a possibility. But you know, all this data is out there about what they did, all these emails, all these texts.

It's very clear they were liars. And what they said on the air was different. So I think the damage was done in that regard, and it was going to get worse, especially on the stand. A source close to the matter said to me that they will not be required to make an on-air apology, but they view the $787.5 million as the accountability they needed. And that matters for the company in addition to all the revelations that showed Fox for what they really are. Yeah. You know, it was really hard for Dominion not to take this deal. It's worth 10 times the company. This is nearly eight times their expected 2022 revenues.

We don't know what their actual revenues are. But this idea that, you know, money is accountability, Dominion's lawyer had also said on the record that money is accountability, and we got that today from Fox. Do you think money is accountability? Yes, I do. Yes, this is a lot of money, and it's not over yet.

There's Smartmatic with Fox. There's all these lawsuits against Rudy Giuliani and Sidney Powell and Mike Lindell who are part of this. There's shareholder lawsuits. It's not going to end. This is going to be billions of dollars for Fox. The questions will be what happens if it's a $2.7 billion lawsuit for Smartmatic and how this negotiation changes the game for everybody else. Because all of a sudden- Everyone's getting paid off. Yeah, it's like Smartmatic is going to think, well, you're going to pay us off.

And also, if you're Dominion, you don't need to settle with Sidney Powell or Giuliani, maybe, if you have this money in the bank. Yeah, they're going to pound them into the ground, and deservedly so. The others will probably declare bankruptcy, but Fox has the money to pay it. This is money they could have used on a lot of other things. And in their coverage to come, they obviously can't be sloppy like this. They've got to either do better emails

or actually cover the news without this kind of behavior. But the emails revert. But the emails. That's right. But the emails revert. I think the. Yeah, that's right. But the emails revert. I think the best tweet was Bill Gruskin, who said, Logan Roy would have gotten this under 600 million. Waste our Royco on the cruise line. See, I have an alternate conspiracy theory that Logan Roy took his life in the aircraft bathroom because he didn't want to go beg and plead with

the Gojo deal. So anyways, we'll be discussing the Dominion lawsuit more in depth on our episode on Monday, so stay tuned for that. And in a moment, we're going to get to our guest today, famed economist Larry Summers. But there's another story that's been brewing this week, which is Florida Governor Ron DeSantis and his year-long battle with, or grudge against, use whatever word you want to use, but with Disney. Great tantrum. Toddler rage. Tiny short man's tantrum.

This started over a year ago when DeSantis first proposed the Don't Say Gay bill. And then CEO Bob Chapek was very slow to condemn the bill, then came around to condemn it. And the Florida governor was very, very angry and has been kind of trying to rein in Disney. He tried to take over the board in Disney's district. Disney had an unrun around them where they basically stripped the power from the committee before DeSantis got his loyalists in. But this committee still has control of roads and other infrastructure. Disney keeps outplaying him.

Bob Iger is now the CEO, a very experienced CEO, been very clear and very firm, and essentially did a workaround on the stuff that Ron DeSantis is trying to do. And then he's continuing to do it. And now he's evaluating kind of how to use that power. He announced new measures that would include changes to safety inspections, reevaluating the value of Disney World for tax purposes, and developing land around the park. And he had some, it seemed like, purposefully incendiary ideas of what could be put around this park.

Let's hear a clip. Oh, but come to think of it, now people are like, well, what should we do with this land? And so, you know, it's like, okay, kids, I mean, people have said, you know, maybe have another, maybe create a state park, maybe try to do more amusement parks. Someone even said, like, maybe you need another state prison. Who knows? I mean, I just think that the possibilities are endless. You know who he's like? Let me just say, I'm just listening to him. They used to say that a lot of Republicans were irritated by Elizabeth Warren, Senator Elizabeth Warren. And they'd say, oh, she sounds like my ex-wife. One of them said that. He sounds like everybody's ex-husband, right? That's what he sounds like. Oh, that guy. Like, oh, I can't stand listening to him anymore.

He sounds like everybody's ex-husband they're thrilled to have gotten rid of. That's what he is to me. You know, he's just irritating. And he's irritating in every way. He's charmless. It's like ridiculous. And you know, I think Bob Iger's handled it. It's just the difference between them. You call Bob Iger the Kashmir Prince. What would you call Ron DeSantis? Oh, he's just the polyester. Polyester fired court jester. Polyester clown. He really is. He's the polyester clown. He's a clown and not a funny one. To threaten to put a state prison next to a park or put another park next to a park, it's just, he's just junior varsity.

It's not even junior varsity. Intramural. Intramural, I think, is the word you're looking for. It was interesting because Chris Christie tonight gave an interview actually at Semaphore, and he said, this is not what Republicans are, anti-business. Christie is famous for his own about faces.

I mean, I'm not surprised. With DeSantis, he's trying to be anti-woke. Not anti-business, but anti-woke. And this crusade, you know, his calculus, he's playing in a different theater. It's true. He's now trying to outright Trump, and he's playing on a national stage. I think if you want Trump, you get Trump. Like, that's who you pick.

Go with the original. Why would you like the short, unpleasant version of him? You know what I mean? And I hate to say that, but Trump at least has some entertaining qualities. And this guy is just not Trump. And, you know, it's sort of, it's weird that he's doing this. And he needs to go, he's decided instead of to differentiate himself from Trump, he's going to tack farther than Trump on the other side and

hope that pays off. I think it makes him look dumb. And I think it's anti-business and they cannot be anti-business. Republicans cannot be anti-business. Part of what you're saying is that he's going against the economic incentives here. And I think that this has become the politics of the country, particularly in the last 10 years, is this kind of this conflation of our economic ambitions with identity issues, with this. But it's very topical for the interview we have today, which is Larry Summers. He's someone who has had a storied career as an economist. He was chief economist at the World Bank in the early 90s before becoming Clinton's treasury

secretary at the tail end of that administration, and then President Obama's chair for the National Economic Council. He's now a professor at the Kennedy School at Harvard, my alma mater. But he's also intensely powerful. And he's intensely controversial. He was up for the Fed chair job in 2013. And he was like, he's someone who earned the ire of progressives after the 2008 financial crisis. Yeah, I think, you know, he's just, you know, there's famous economists and he's the famousest, right? Every era has one, whether it's, you know,

Milton Friedman, et cetera, over the years. And so I think he's just, he makes big calls and he's a big personality. He may hew too closely to corporate people, but that's the way it is. That's the way with a lot of these people. And then some, you know, Robert Reich was not. So you have very different kind of economists. By the way, I think there's a lot of nuance, like the Overton window has shifted. And I think in

economics, that's true too. I mean, this is a Keynesian economist. So he is for macroeconomic activism and kind of, I think the Summers doctrine is like microeconomic laissez-faire and macroeconomic big intervention. When this Collation Reduction Act was going through, he was complaining about the fact that we still have these carried interest provisions for private equity funds. So the idea that he's really, I think people see him- Yeah, he can surprise you sometimes. I think it's hard. I think everyone gets put in these things. I mean, his advisor, his doctoral advisor was Martin Feldstein. So that's a whole other person. And so, you know, we've had several economists on this show.

We had Mariana Mazzucato and we had Nouriel Roubini, very different in their attitudes. And this is, economists are like this. They're sort of the celebrities of economics, I guess. You know what I mean? He's the biggest. Celebrity nerds, Cara. He's the celebrity economist of this era, of this particular era. And they change from era to era. And very powerful. He's reportedly on economist of this era, of this particular era, and they changed

from era to era. And very powerful. He's reportedly on the phone with Biden every couple months. And when folks like Mark Warner needed to get the Inflation Reduction Act passed, Larry Summers picked up the phone and called Joe Manchin and had some sway with him reportedly. So he's extremely powerful, and I'm very excited to hear you talk about where we go in this current economic moment. Yeah, definitely. So let's take a quick break. We'll be back with the interview with Larry Summers. Fox Creative.

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Learn more about how to protect yourself at vox.com slash Zelle. And when using digital payment platforms, remember to only send money to people you know and trust. All right, let's start with everyone's favorite topic, inflation. As everyone knows, you called it. Jay Powell got it wrong about a week ago. You said the Fed had to, quote, engage in serious soul searching. What did you mean by that and how much faith do you have in Powell's ability to steer this economy? I think the Fed made a big mistake in not

recognizing the inflation threat going back to 2021, and they stuck with the error for much too long. When an institution makes a serious mistake with respect to its core mission, it needs to reflect, was it an intellectual issue? Was it an issue of particular people? Was it an issue of culture and lack of diversity? And I think they need to do that with respect to the inflation error. In some ways, they compounded that error by not acting on SVB soon enough and allowing that to become a problem that had to be declared a broad systemic problem. So I think they need to reflect on what may be an excessive tendency to complacent groupthink within the Fed. I've got huge respect for the individuals involved, but I do think that after errors

of this magnitude, institutional reflection is appropriate, much like the military does after a failed military action, or much like is done at an airline by the FAA after an air safety failure. Does it ever happen in that way, looking at the errors they made and doing a real serious... I think there hasn't been enough of that at the Fed over the years. At the IMF, for example, which in some ways is a global central bank, after they have financial crisis, with respect to very large loans to Argentina that proved to have been unwarranted. They have written really very thoughtful reports trying to learn and distill the lessons of those episodes. What about Janet Yellen? She also got it wrong. First, she said there was no inflation. Then she said it was transitory. What's your assessment of her? And you did mention the Silicon Valley Bank, SVB, and you're linking them together

with this inflation situation, I think. Well, I think SVB and inflation are linked in two ways. are linked in two ways. One is they're just both big problems that got missed. And the other is that if we had dealt more promptly with inflation, we wouldn't have had the kind of dramatic spike in interest rates that we had that then led to the difficulties at SVB. Janet was my teacher in graduate school. I've got great respect for her. I don't think she was I think that she's probably been as optimistic as anybody in Washington this week about the economic future. And I'm not sure that a harder landing than she expects isn't what's likely. But look, it's much easier to make observations from the cheap seats than it is to be in the job. And sitting with the responsibility of speaking on economic issues for the president, that affects what one is able to say and assess.

Right. They've got to toe the administration's line, basically, is what you're saying. But do you think she realized it privately and didn't say it publicly? You know, I have a longstanding policy that I don't speak to public officials' motives. I don't speculate on what they were or were not doing internally. And I just try to focus my observations on the economic issues. On what you can see. How high do you think the Fed will have to raise rates in order to actually tame inflation? And how long will they have to keep it at that rate? No one knows. And in a way, I think the mistake that they have

tended to make is making overly confident pronouncements and forecasts, which turn out to be wrong, and then undermine their credibility. I think the Fed probably needs to learn the lesson of the Delphi oracles. The Delphi oracles understood that they were human, that they didn't know the future, and they therefore kept their pronouncements a bit vague and oracular. No dot plots for Delphi, and I'm not sure dot plots laying out specific scenarios are the right mode of communication for the Fed. I certainly think we're a substantial part of the way through, a large part of the way through the necessary tightening. If there were not a credit crunch and a banking set of issues, I would feel that the Fed needed to engage in three, perhaps a little more than that, more tightenings.

Given that we have this credit crunch coming from the banking side that's doing some of the work of interest rate increases, it's possible that we'll have had enough after May. But that's a judgment we're just going to have to hang on every economic statistic. Probably one of the reasons they want to seem confident is in order to hold on to their status as oracles. They probably think Americans do better with definitiveness, although that didn't really work for COVID either if they didn't know and then turned out to be wrong. it either if they didn't know and then turned out to be wrong. I think you maintain confidence best by measuring your pronouncements with your degree of knowledge. And there's an ever-present temptation to provide confidence in the immediate run by providing specificity and firm, clear statements.

But it's a very short-run bit of candy because when the statements turn out to be wrong, as they inevitably will, your credibility is undermined. Right. 2% inflation, for those who don't know, has been the stated goal of the Fed. Will 3% or even higher become the new normal? I hope not. I think that the idea of price stability, people aren't thinking about inflation all the time, is something that's immensely important to helping the economy function. I think when you have inflation, people like you and I are better able to protect

ourselves from it than the vast majority of Americans. So I would prefer to see us remain a low inflation economy. And that's certainly been Jay Powell's repeated commitment over the last year. And it seems to me we have enough doubts about public institutions in our country without this much-repeated goal by a very important institution being abandoned. So you got into a spicy debate with Jon Stewart over inflation. Let's play the clip. There's a huge corporate profit aspect to it. There's a huge supply chain aspect to it. But our method for controlling it seems really much more focused on wages and employment. There's certain sicknesses you can have where there's a drug and it has side effects. And

everybody hates the side effects. And no doctor wants their patient to suffer the side effects. But if you don't address the sickness, you're going to have a bigger problem down the road. Leaving aside the discussion of how to cure the illness, corporate problems have been near record highs for a while now. Is that partially to blame for the disease from your perspective? I don't think so. I think that the right way to understand it is that business hotels make more money during the week than they do on weekends because there's more demand. Resorts do better

on weekends than they do during weekdays because there's more demand. We pushed demand way up, and the consequence of pushing demand way up was that when demand equaled supply, prices were much higher, and that led to higher profits. I don't think having price controls would have been a very good strategy. It just would have created shortages and all kinds of evasion. If you pump up demand beyond capacity, what you're going to get is rising prices. And yes, that is going to show up in higher profits, but there's no good way to reduce the profits and reduce prices while keeping the economy functioning. The last time we had the idea in a major way that we could combat inflation by containing prices directly was when Richard Nixon had that idea in 1971. And it did, in a certain sense, work in the short run.

And it did, in a certain sense, work in the short run. It won him the 1972 presidential election by a very wide margin. But the ultimate consequences were pretty catastrophic for the economy. I mean, but you understand why people see these corporate profits and feel like it's good for them, even though everybody else suffers. I do. And that's why one of the things I've worked very hard on is a range of proposals, including the corporate minimum tax that was just put into place in the IRA to make sure that we're fully taxing corporations and so recycling profits back for the benefit of ordinary citizens. That's why I focused a lot of my work on the various

uses of information technology around strengthening the IRS, because I think it's sort of beyond belief that the computers we use to check on the tax integrity of the wealthiest people in our country use COBOL as their programming language. So I'm all for doing things that work, but I think we need to be practical. You're sounding very progressive there, but do you think that the progressives get it wrong in that focusing in on corporate profits? Do you think they're ignorant of a larger issue? I think they are onto a legitimate source of unhappiness, but I don't think they have practical proposals. And when they raise ideas like the government should punish people for gouging, I think they're proposing things that probably ultimately won't be very effective and are likely to do very substantial damage to incentives for innovation. I guess it

comes down in some ways to a basic judgment. Does one think that America has too many people like Jeff Bezos and Bill Gates and Steve Jobs and Sergey Brin? Or does one think it would be even better if we had more people who created world-leading institutions like the ones those people created? And I think the answer is that I wish we had more hugely successful entrepreneurs creating world-leading institutions that produce transformative new opportunities for consumers. I think we do need to work harder than we do to make sure that they pay their fair share in taxes. I think of myself as very progressive, but I believe in a politics and an economics of opportunity, Cara, rather than a politics and economics of envy. And I think that's the distinction that we have to draw.

And when I hear people who are always framing it in terms of their indignation about the success of others, I see it too much in those cases as being a matter of envy. Okay. All right. So you tweeted that inflation is unsustainable unless, quote, the economy turns down fairly hard. Give me your best and worst case scenario, because the Fed is forecasting a mild recession, and they expect it'll start later this year. Give your best and worst case scenario

of intensity, length, and what is needed to get to either of those things. I think we've got to be realistic. We don't know what the future is going to hold, and we don't know the exact effects of the instruments that we're using. The Fed's job is a little bit like one's task when one is in an old hotel. In an old hotel, there's a lag between the time you turn the faucet in the shower and the time the temperature of the water changes. And it's very hard to avoid scalding yourself or freezing yourself as you adjust and nothing happens, and then you keep adjusting. I think the Fed's challenge is a little bit like that. If we're very fortunate, we will find our way to a landing. The more likely outcome, it seems to me, is that some combination of the delayed impacts of the monetary policies we've engaged in, the need to make sure that we're not providing too much

liquidity in the economy at a time when money has been losing its value quite rapidly, that all of that leads to a downturn. And it's very hard to hit the brake hard in a completely controlled way. And so the economy goes into recession, not the kind of recession we saw during the financial crisis or after COVID, but the kind of recession where the unemployment rate gets up to somewhere near six, where there's a period of several quarters where the GDP is actually declining, where corporate profits decline. We've had more than a dozen of them since the Second World War. We very much want not to have them, but it's not that it's the end of the world if we do. I think that what would be a terrible mistake would be to be so squeamish about the possibility of recession that we allowed a high rate of inflation to become built into expectations, because then ultimately,

it's like what happens when you ignore any illness. The treatment that's necessary when you've put it off much too long tends to be much more painful, difficult, and with lower prospects of success. So the Biden administration disagrees, White House spokesperson Karine Jean-Pierre said, recent economic indicators not consistent with recession or even pre-recession. Is that smart politically, pretending you're not sick? Or are they saying that publicly and thinking something else privately?

Economic success depends on confidence. And when you're in public life, it's always tempting to try to infuse confidence into the situation, because if you're not optimistic, who will be? On the other hand, I think one always has to think as a public official about not just how one's words sound today, but how they may sound three or six months hence. And I've been surprised by how optimistic the Biden administration and its various spokespeople have chosen to be. And I think they've cost themselves some real credibility with consistent optimistic forecasts. And there may come a time when the truth is optimistic and it's going to be really important for them to be credible, but they're not going to be completely credible because they're

always optimistic. But again, I don't sit where they sit with all the pressures that they're facing. So I use the words, I've been surprised, rather than make confident statements that they've been making a mistake. Okay. So if you're buying or heading into the election, would you rather have high inflation or recession? I would rather have neither. Okay. And I think in both cases, it probably depends less on the level than the rate of change. That is, a weak economy that is

growing is probably better than a strong economy that is contracting. A more elevated rate of inflation that is clearly coming down is probably better than a lower rate of inflation that is in the process of rising. There's an old political observation, Cara, that 100% of the people pay rising prices and only 6% of the people are unemployed. And so inflation is particularly salient. And I think there's some logic to that, particularly with respect to middle-class voters who are very much swing voters in an election like the one we're going to have. Biden has also had the most ambitious industrial policy you've seen in America in multiple generations. He's pushing for reshoring, made in America, green energy loans, subsidies for chips. You're one of the standard bearers of neoliberal free market capitalism, but you also

helped him get his big infrastructure bill, the Inflation Reduction Act, over the line. How come? Have you had an ideological conversion? I don't think so. And I didn't really completely recognize in myself that litany of adjectives that you offered. Neoliberal free market capitalism. I think that government has long had an important role. You know, you go back to Abraham Lincoln and the Transcontinental Railroad, and you go back to the land-grant colleges, you go back to DARPA and the internet.

So I thought that basically supporting the dissemination of clean green technologies was the right thing to do. And that's why I urged Senator Manchin and others to support the IRA. I am worried when these programs are not just about particular objectives, like helping to fight climate change or promoting resilience, but become more general wish lists. So I think we should have supported the semiconductor industry in ways that focused on semiconductors and let the companies figure out whether childcare was an important aspect of their recruitment strategy or not. I think that we should not be engaged in telling people where their electric cars that they are going to get a tax credit for need to be produced.

I think we set back the cause of promoting our industry when we impose various requirements that wages be high. I think when we restrict technology, we need to make sure that there's a strong general national security rationale for it, rather than just a desire to help American companies or American workers vis-a-vis foreign workers and foreign companies. You know, one way I like to say it is that I think the best generals are the ones who hate war the most, but recognize that it sometimes needs to be fought. And I think something similar is true about industrial policy advocates. The best ones know that it's sometimes necessary, but really like markets better.

like markets better. And frankly, I think we have too much enthusiasm for the idea in the current moment where people just like any rationale for the government getting involved in planning, directing, managing every aspect of the economy. We'll be back in a minute. The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts.

Published by Capital Client Group, Inc. All right, now that I'm going to have a lightning round, so very quick answers. How do you think the Biden administration handled the Silicon Valley bank debacle? It seemed like you thought not so well. Overall, they got the right decision. Some of the details could have been handled better. Such as? Such as why are the bondholders of the holding company getting paid off in a significant way?

And it certainly could have been caught much earlier, and it would have been much less painful if it had been caught earlier. Staying on SVB, you said progressives were right to blame Trump's 2018 partial repeal of Dodd-Frank for the SVB collapse. Expand on that. What the world needed was more regulation of regional banks, not less. And the Trump administration, supported by its designate on the Fed with responsibility for regulation, Randy Quarles, were always working to reduce the regulation of banks when things should have been moving in the other way.

Would it have mattered? I'm not sure it would have, but it's better to be moving in the right direction. Okay. Break down the culpability, the percentage culpability of the crisis between bank leadership, legislators, regulators, and Silicon Valley tech VCs and startups, if you had to stack rank the problem of the crisis? All of the above. Bank management, number one. Supervisors and regulators, number two. The broad framework, number three. Tech companies and their venture capitalists, number four. So what role do you think their Twitter fear-mongering played in the crisis and putting pressure on the government or creating fear? I think this would have been a one-week run rather than a two-day run without the Twitter.

That institution was fundamentally insolvent. And fundamentally insolvent institutions need to be resolved. And when they're fairly big institutions, that can't take place without sending shockwaves that then affect financial stability more generally. So it would have happened no matter what? I don't think it's right to blame this on social media. There's plenty to worry about with social media, but not this. Okay. During the Silicon Valley fiasco, you were on TV calling for the government to step in.

You said, I don't think it's time for moral hazard lectures. I agree, but nonetheless, when is the right time for moral hazard lectures? Right time to fix the roof is when the sun is shining, not when it's raining. The right time to debate the structure of the fire department is not during the fire, but is after the fire has been put out. So I think we've got a lot of thinking we should be doing now about the financial system, about what kinds of buffers banks are required to have. In general, Cara, I think the philosophy we need is one of not trying to make everybody smart, but instead trying to make the system safe for when people are stupid. You know, if you look at auto accidents in our country, we were making no progress really in the 50s and 60s when we had a driver's ed paradigm for reducing automobile accidents. And when we moved to a seatbelts, guardrails, safer windshields, and the like

paradigm, that's when we started to make real progress. And I think some similar idea needs to apply with respect to financial regulation. Okay. Mohamed El-Aryan is warning that Silicon Valley bank-led crisis could lead to more cautious lending from banks and therefore stagflation. You've already mentioned a credit crunch. How likely is stagflation from your point of view? I think it's a real risk from here. And I think there's stag and there's flation

and there's stagflation. When I say that I think a soft landing is unlikely, that's a statement that I think it's very likely that we'll get at least one of stag or flation. And given where inflation is right now and given the downwards pressures on the economy, I certainly think stagflation is a meaningful risk right now. And given the downwards pressures on the economy, I certainly think stagflation is a meaningful risk right now. And it's probably a risk that's underpriced in the markets. Okay. I'm going to stay with tech. You've been involved in crypto for a relatively long time. You advised the digital currency group over six years, but scrubbed them from your website

not long after the DOJ opened an early stage investigations into the company. Crypto is notoriously full of grifters and fraudsters. Do you regret embracing the industry in general? Or do you think, what's your assessment of the sector now? Many people have gotten burned in this area. almost anything in its early stage, whether it's the automobile industry, whether it's the application of electricity, whether it's the internet, there are a lot of drifters and grifters who are in it. And that's certainly true of crypto. And there were drifters and grifters in the early stages of innovation. And I think the question is how this will all play out. I think government

has made more errors of being too slow to regulate than it has of being too rapid to regulate. I think a substantial fraction of what people have been excited about will shake out. Do I regret having put myself in positions where I didn't have fiduciary responsibility, but did provide some advice and had an opportunity to have at least a second row seat and learn about what was going on. No, I think I probably would have made those decisions if I had it to do over again. over again. Do I have an assessment with respect to any particular entity? No, I'm not in a position, don't have the knowledge to judge any particular entity. I would be quite surprised if there wasn't some residue from all of this innovation that proved to be quite important. And I would be even more surprised if there wasn't a very large amount of shaking out. But that's always the way it is in market economies with new technologies.

Yeah. I mean, you did provide, you and many others provided chains of credibility to these companies. Would you still do it again? Because in bringing you in, that's why they brought you in, because it's Larry Summers. I don't know. I certainly, I've had a policy, policy, Kara, that I never engage in public advocacy on the part of any company I have an involvement with. And I never contact public officials on the part of any company that I'm involved with. And I say to them that if what they want is such wisdom and experience as I'm able to provide without any fiduciary responsibility, that I'm sometimes prepared to offer. But I at least try to always present myself as not in a position of warranting or vouching for any institution where I don't take on work as an employee or as a fiduciary of some kind. Okay. I just have a few more questions. There's been a lot of pushback on ESG investing right now from the right,

led by Silicon Valley folks like Peter Thiel and Vivek Ramaswamy. Is the criticism valid or is it culture wars 201? I'm not with the zealots on either side of this. I wouldn't have divested from fossil fuels as the head of a major institution. But I think that part of what makes our system great is that different people make a range of different choices. And I think Peter Thiel and Vivek are free to invest their money as they see fit. I'm not sure they should be quite as angry at others who choose to make investment choices on a different basis. Pluralism, it seems to me, has a lot to recommend

it. Yeah, anger is their brand, just so you know. All right, the last few things I'm going to ask about the debt ceiling. Biden and the Democrats are heading into a fight with Kevin McCarthy and Matt Gaetz over the debt ceiling. They seem to think that the country might be in default or seem to be willing to do so. Describe what the consequences would be of this. Republicans seem to be focused on work requirements for Medicaid and SNAP benefits. How would you make a deal if you were Biden to prevent default? I think there's some things you just have to not negotiate about. My kids sometimes spend more money than I wish they did. And we discuss whether they're going to pay or whether I'm going to pay,

but we don't discuss whether the family should default to the visa organization. And that's how I feel here. I don't think the idea of defaulting on the debt associated with spending we've already done should be on the table. And I think we do need more serious bipartisan discussion about containing the rate at which the government is borrowing going forward. But I think linkage between the two is really very unhelpful. So what would you do at this point if you had a magic wand to prevent this default? Obviously, it would be disastrous, correct? I think that in a democracy, fear does the work of reason.

I think you need to not prematurely negotiate. I think eventually reason will prevail, but it will require a bit more alarm than we have now. I think the administration's playing this about right. So who do you think will blink first, Biden or McCarthy? I'm not sure that I would accept that characterization. I think we're likely to have a successful agreement, and I'd be surprised if it came with extensive fiscal measures. I hope we'll get both, but I hope we'll get them unlinked rather than linked, because I think it would be a terrible precedent. Look, taking hostages and kidnapping people and demanding ransom in the form of change, is the wrong thing to do, even if what you want from your hostage-taking

has some reason and logic in it. And this debt ceiling thing is a kind of kidnapping and hostage taking. Okay, I have two more questions. Will you be the next vice chair? Well, I'm very happily ensconced as a professor who tries to participate in the public debates by engaging in dialogues with people like you. Would you want to be? That's what I really enjoy at this stage. Would you want the job? I was very satisfied by all the experiences that I've had in Washington. And I think right now trying to think about in more fundamental ways about the problem and speaking in the relatively free ways that one can speak when you're only speaking for yourself

is what I will find most satisfying and impactful. So when you view your role and your legacy in the political world, now, if you don't hold office, what do you think it is? I think it's always best to let other people judge one's legacy. I've tried to think clearly about problems, to speak candidly about problems, and to point the way towards how to make the best progress with respect to the many challenges we face. But if you were asked to serve as Fed chairman, would you do it?

Tara, I think we've exhausted this particular line of questioning. Okay, Larry, I really appreciate it. I'm just teasing you. I know you're not answering it. But I really appreciate your answers and the time that you've spent with us. Good. I appreciate it. See, as your producer, I don't think you exhausted that line of questioning, Kara.

He didn't want to answer it. He was not going to answer it. It was not fair. He's so happily ensconced as a professor who takes phone calls with the president. He would run barefoot down 95 if he got the offer. Come on. You know, I think one of the appeals of Larry Summers, I'd forgotten this, is how he uses these metaphors that really make the world intelligible. And some economists can do that.

I think Paul Krugman is another person who does that. But like, he talked about hotels, hostage taking, his kids and his credit cards. And it's all very grokkable. Yeah, he's been at this for a while and in lots of different settings. And, you know, he's the ear for all these people like we talked about. So, yeah. He basically said the Biden administration is kind of the boy who called wolf. Like you're telling everybody it's going to be fine, it's going to be fine. And then when it's actually going to be fine, no one believes you. Right. Yeah. I appreciate his point about

showing what you don't know, but I also think when you're government, it's very, and in this political environment, it's very hard to say what you don't know, right? Yeah, it is. It is. And I think, you know, certainty is a really difficult issue. And I think that's what he was sort of insinuating about Jerome Powell is that he should have just come clean. It's a hard thing to do when you have so much pressure. And he did talk about the pressure that's on a lot of these government officials to get it right. And they can't really be negative either because that sends everyone into a tizzy. and they can't really be negative either because that sends everyone into a tizzy.

In the old world, people wouldn't really get, the Fed was less politicized, but now everyone's attacking Jerome Powell, Trump, DeSantis. There's also social media keeps us knowing what the economy's doing. And then there's all these digital coins, like Bitcoin and things like that. It's just, there's all kinds of things that are confusing.

And people didn't think about it as much. They just didn't. My grandfather, I used to say, what can you tell me about the stock market? He goes, it'll either go up or it'll go down. That was his entire economic lesson to Kara Swisher. He did very well for himself. Rarely does it just stay the same. It's like, it'll go up or it'll go down.

I don't know what to tell you. Two quick questions on that. Because one, he kind of disagreed with your take on Twitter and Silicon Valley Bank. He said that it didn't make much of a difference. Were you swayed by him? I don't think it made a difference. I just think it creates the kind of thing we don't need. I think it probably freaked out a lot of startups, you know what I mean? And it made people feel bad. And it made, you know, even Kevin Systrom, we interviewed him, was nervous that day, because, you know, you read everything and you go crazy. He was kind of saying it helps drive you to the logical conclusion you're going to get to anyways, right? I guess. I just think they don't help. They don't help the situation. Panic is

never a good reaction to most things. Other question on tech, crypto. Did you find his answer was satisfying? I appreciate that you pushed back on him because he said, you know, I don't really assess these things. I'm not standing in as a credit. Oh, well, that's what you'd say if you had a failure, wouldn't it be? Someday. Like, how can you go wrong if you say, well, it didn't work this time, but someday. I would agree with him actually on that in reality. I think crypto is, it was too hyped and it's too pilloried. So. Yeah. But I think all these people with reputations have like assumed reputational risk by getting into it. He shouldn't have done that.

And it's one thing if you're like Eva Longoria from Desperate Housewives. It's another thing if you're Larry Summers. There's a different expectation, I think. Well, it's probably of interest in him intellectually. It's probably super interesting. By far the spiciest thing that he said through that interview was talking about the politics of envy.

Yeah, that was great. That to me was the highlight of the idea of it. And I think he's right. I think he's 100% right. I think that's the episode headline, Larry Summers on the politics of it and the economics of envy. But he fancies himself very progressive and he- Don't be mad at rich people for being rich.

Love them. They need more love. Well, he said we need more rich people, actually. Does America have too many people like Bill Gates and Jeff Bezos, or do we need more? You know what? We do need more rich people, and we need better rich people, because the rich people we have right now are jackasses. So we need better rich people. Yeah, I don't think the dichotomy exists. And he is saying, like, we need more rich people, and also we need those rich people to pay their taxes. And he's long back to stronger IRS. I think that's faithful of him. But it started

to make sense to me when he talked about the idea that people want government to get involved in every planning direction, managing every aspect of the economy, which I hear is kind of like the Ezra Klein argument on everything bagel liberalism. We're not only do we want the CHIPS Act, but we want to say on the CHIPS Act, how many people you should employ, what kind of diversity there should be. And he doesn't want that. He wants a cleaner industrial policy. Right.

That is true. I agree with him. I think the government should be setting big goals like space and helping that and doing research and not getting into the planning of any, the deep planning. It's giving people a chance to be economic and do things in their economic interests. Ultimately, what he was advocating for, you and I are both students of government, but he was advocating for a lot of postmortems, which I think is really smart.

Yeah, they do need to find out what they did there in SVB, and they need to find out what they did with raising interest rates. It's always helpful. I agree with him on that too. Oh my God, I agree so much with him. I agree too. It's like kind of how do you get rid of group thinking?

I love the military analogy. Do you want to stop fighting the war to think about what's going wrong? Or do you want to complete the war and then look back and say, how can you avoid the next one? Although we're pretty terrible at doing that. Anyways, we should do our own postmortem. But in their interim, Cara, you read the credits, please. Okay. Today's show was produced by Naeem Araza, Blake Nishik, Kristen Castro-Rossell,

and Megan Burney. Special thanks to Kate Gallagher. Our engineers are Fernando Arruda and Rick Kwan, and our theme music is by Trackademics. If you're already following the show, you get an apology from Fox News. If not, just kidding. They don't apologize for anything ever, and they're going to do something worse next time. Go wherever you listen to podcasts. Search for On with Kara Swisher and hit follow. Thanks for listening to On with Kara Swisher from New York Magazine, the Vox Media Podcast Network and us. We'll be back on Monday with more. Do you feel like your leads never lead anywhere and you're making content that no one sees and it takes forever to build a campaign well that's why we built HubSpot it's an AI powered customer platform that builds

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