Our Economy: Optimism, Pessimism, and Reality Check
David Rubenstein and Mortimer B. Zuckerman discuss the economy.
Our Economy: Optimism, Pessimism, and Reality Check
THE ASPEN INSTITUTE
ASPEN IDEAS FESTIVAL 2012
OUR ECONOMY: OPTIMISM, PESSIMISM,
AND REALITY CHECK
1000 N Third Street,
Tuesday, July 3, 2012
LIST OF PARTICIPANTS
Co-Founder and Co-CEO of The Carlyle Group
Chief Counsel to the U.S. Senate Judiciary
Committee's Subcommittee on Constitutional
Amendments from 1975 to 1976
MORTIMER B. ZUCKERMAN
Owner, Chairman, and Editor-in-chief of
U.S. News & World Report,
Owner and Publisher, New York Daily News
* * * * *
P R O C E E D I N G S
MR. MOTLEY: Good morning, as you take your
seats. My name is Eric Motley, and I'd like to welcome
you to one of our last sessions of the Ideas Festival.
I'm very brief with introductions as we have to
extraordinary individuals on stage. But I would like to
ask you if you would cut off your cell phones and mobile
devices because we're recording. At the end of the
session, there'll be Q&A and there will be mikes roaming
Mortimer Zuckerman is with U.S. News and World
Report, and most of you know him. And for those of you
who think that David Rubenstein is a historian who
specializes in the Declaration of Independence and the
Emancipation Proclamation, he knows something about the
economy as well. We have two great speakers. We had a
moderator, but they're so good, they don't even need a
moderator. They'll moderate themselves.
MR. RUBEBSTEIN: Thank you very much. Actually
no moderator thought they could get a word in between the
two of us, so nobody wanted to moderate.
MR. RUBEBSTEIN: Before we start, I've just been
curious, how many people here think the U.S. economy is
heading into a recession? Okay. How many people here
think that the U.S. government has some plan to fix that
problem? Okay. How many people think your taxes are going
up next year? How many think your employer is going to
make up that difference with higher income?
MR. RUBEBSTEIN: How many of you think that you
represent the 1 percent? How many people here in this
audience are from the 99 percent, anybody? Wow, okay.
And how many people here think you're actually going to
learn something about the economy today?
MR. RUBEBSTEIN: Wow, we have a -- so Mort, you
have been very deeply involved in a lot of economic
issues. You run one of the largest real estate companies
in the United States. Are you optimistic about the
economy or pessimistic as we see it today?
MR. ZUCKERMAN: Well, most people today define
the difference between an optimist and a pessimist in the
following way. An optimist thinks this is the best of all
possible worlds and a pessimist fears he may be right.
MR. ZUCKERMAN: I'm in the pessimistic column.
And I think we're in not just a recession, we're in my
judgment a modern-day depression in terms of how I would
define it because of all the very, very serious numbers
that affect. For example, people on food stamps, where
that number has gone up from something like 10 million to
25 million, or people who are on disability have gone up
from 5 million to 10 million, never mind the number of
people who are unemployed.
And what's more? I think this is going to
continue for a while. So if I may I will tell you a story
that reflects that. A priest in Normandy, France, went to
confess. And the tradition in the French church is that
the priest confesses to the Archbishop. And he goes to
the Archbishop and says, look, I've had this on my -- this
is just last year, he says, I've had this on my conscience
for many, many years. He says, well, what is it? Must be
He says, during World War II, he said, we were
under instructions from your office not to do anything
that might in any way persuade the Germans that we were on
the wrong side because they would destroy the churches.
But this young woman came to my church seeking asylum, and
she was just such a vivacious woman I just couldn't turn
her away. So I brought her into the basement of the
church and gave her food, clothing, medicine, whatever it
was to get her through the difficult time.
And this went on for quite a while. And then I
just don't know quite how to explain this, but we were
spending so much time together, and several years later,
we had an affair. Oh my goodness, says the Archbishop,
that's a violation of the most important vow that you make
as a priest, he says. But look, he said, you were
involved -- you had a humanitarian impulse and you were
thrown together under these difficult circumstances. So I
think perhaps we can mitigate your penitence. Well, he
says, I haven't told you the entire story. He says, well,
what else could there be? He said, I haven't told you the
war is over yet.
MR. ZUCKERMAN: Well, I don't think this
recession is over yet. I think it is a very serious one.
We have had the most stimulative fiscal and monetary
policy in the history of this country and we are still in
a very, very weak economy that seems to me to be getting
weaker. I could give you a whole series of statistics
that would support that conclusion, and at some point I
think we should discuss some of those statistics. So I am
for that reason not only a pessimist, but a worried
MR. RUBEBSTEIN: To give you my perspective, it
is that the truth is we define recessions as two
consecutive quarters of negative growth. In my view that
definition is very much outdated because while we
technically got out of the recession three years ago we
never really emerged from it. And as a result of that
very deep recession, the deepest recession since the Great
Depression, we have four lingering economic problems that
we didn't really solve in the recession. And they are
going to be with us for years.
Those problems are debt. We now have, as
everybody knows, $15.8 trillion of federal debt, and $60
trillion of unfunded social security Medicare liabilities.
Enormous amount of debt. And the consumer debt is still
very high. We have today in this country 350 percent of
GDP in debt, government debt and consumer debt. And that
has not changed since we went into the recession. We had
about 350 percent then. We have 350 percent now. We
changed it a little bit more government debt into consumer
debt, but we have way too much debt.
Second problem we haven't solved is the
unemployment rate. We have theoretically an 8.1 percent,
8.2 percent unemployment rate. The real unemployment rate
is 14.4 percent. It's the marginally attached rate
because we count unemployment in this country by people
who are looking for jobs in the last 4 weeks. If you stop
looking you're not counted. If you count those people who
really want jobs, it's about 14.5 percent unemployment.
We have 12.7 million people unemployed. And the truth is
people in this audience are probably not affected by it.
If you are a white male with a college degree or
a graduate degree, your chance of being unemployed is
about 1 percent to 2 percent. If you are a black teenager
in the United States, your chance of being unemployed is
about 65 percent; 65 percent in some urban areas, overall
about 35 percent for black teenage unemployment. So
unemployment is very high and it's not getting better
The third problem that came about from the
recession is the enormous problem we have with growth.
Normally, after a recession you should grow to get your
unemployment back to where it should be, at 6 percent to 7
percent. We've been growing at 1 percent to 2 percent.
This year we thought we might be growing at 3.5 percent.
We're going to probably grow at little bit less than 2
percent, maybe this quarter 1 percent. So economic growth
is the most important thing to getting tax revenues and in
getting people back to work and we still have very, very
And last is the income disparity. It is getting
worse, not better. One percent, the upper 1 percent of
wealth -- of people who have wealth in the United States
has 40 percent. In other words, the upper 1 percent, the
so-called 1 percent control 40 percent of the wealth in
the United States. The upper 1 percent, and that is up
over the last 25 years from 30-some percent. It used to
be, about 25 years ago, 30-some percent was controlled by
the upper 1 percent; now it's 40 percent.
The upper 1 percent now gets 25 percent of the
income. It used to be, about 25 years ago, about 7
percent to 8 percent of the income. So the income
disparity is getting much worse than it has been. And in
terms of the unemployment rate, it is so bad now that not
since the Great Depression have we had 8 percent
unemployment for as long as we've had.
So these problems that I've mentioned, the debt,
the growth rate, the unemployment and income disparity are
serious problems, and honestly nothing is going to change
between now and the time of the election because
Washington has concluded that there's nothing that it can
do. The fed has nothing left in its arsenal. The
Congress will do nothing to make any changes. So the
economy that you see today is the economy you're going to
see in November. It may get slightly worse. We see some
decline in our numbers in terms of economic growth, but
it's not going to be that much different than it is today.
Unfortunately, Congress is not prepared to do
anything until the next year. In other words, there had
been a perception that the lame duck Congress will deal
with some of these issues. Right now our perception of
Washington is nothing will get done in the lame duck.
We'll probably extend all the tax cuts that are going to
expire for 6 or 9 months, but it won't really have any
enormous stimulative effect. It will take care of the
problems of going into a deeper recession or a deeper
economic decline. But unfortunately, what we see today is
what you're going to see for the next couple of months in
MR. ZUCKERMAN: Yes, let me supplement some of
those statistics that David has put forth. There was a
government report that came out just a couple of months
ago that indicated that the net worth of the average
American family from 2007 to 2010 went down by 39 percent.
All of the accumulated net worths since 1992 was wiped
out. Two decades of an accumulation of net worth.
Now most of that was due to housing. Housing
has continued to go down since 2010. So if anything, that
problem has exacerbated. So you have, a) a huge decline
in net worth. Secondly, as far as the consumer
confidence, which reflects a whole range of things
including net worth and including some of the statistics
that David mentioned, consumer confidence today, given
where we are in this so-called recovery from a recession,
we normally have had it in the 3 years into a recovery a
cumulative GDP growth of about 15.2 percent.
What we've had so far is about 6 percent. So
it's a huge, huge slowdown in terms of the recovery, as I
said, notwithstanding the most stimulative fiscal and
monetary policy in our history. And what you have is a
consumer confidence level that is today 13 points below
the average low of every previous recession we've had
since the end of World War II. We've had 11 of them, I
might add, and this is by far the worst recession. And as
I say, if you add to the unemployment numbers, the number
of people who have completely left the labor force, just
they've given up, you have another -- you'd have an
unemployment rate in effect above 20 percent.
And this is something that we have not been able
to do very much about through normal fiscal and monetary
policies that everybody would've thought would've had much
more of an effect. This is a very, very serious time.
There was -- I forget who it was who when was asked
whether -- when somebody told her, did you hear that
Calvin Coolidge had died, she said, well how can they tell.
MR. ZUCKERMAN: Well, when you look at the
economy and you say is there a recovery, people have to
say, well, how can you tell. There is no visible recovery
other than the fact that it's not going down even more.
Although even today, and I have this here from the Wall
Street Journal, for the first time the Institute for
Supply Management which reflects manufacturing has gone
into negative territory for the first time and
manufacturing orders have gone down below the 50 mark even
more than the latest numbers have.
So we may be now beginning to experience the
decline in manufacturing, which was one of the very strong
or stronger elements of our so-called recovery simply
because of all that's going on in Europe and in China, et
cetera et cetera. So we are looking at some very
difficult times. And we're in an unprecedented kind of
economic condition and therefore one that is
unpredictable. So nobody really can quite tell you where
this is heading.
MR. RUBEBSTEIN: Now, everybody always remembers
analogies or things relating to our favorite subject, sex.
And people may remember out of this session Mort's joke
about sex maybe more than anything else we say about
numbers. So I want to give my own sex analogy. And here
is what it is in terms of -- in the context of the economy.
I -- you all know -- heard of panda bears.
Panda bears are -- there are only 1,600 in the world; 300
in captivity and 1,300 in the wild. And there are so few
of them in part because they can only live in certain
places, then can only eat certain things. But one of the
problems they have is they can only mate for 2 hours one
day a year. The female goes into estrous for 2 hours one
day a year. So the male has to show up at exactly the
right time. And they're a little inexperienced because
they don't have that much practice. They only do it 2
hours a day for -- so it's not like you can say, not
tonight, honey; it's not this year, honey, if the female
is not ready.
So the truth is when they get together and they
did the -- recently at the National Zoo they got together,
they didn't really know what to do. The parts didn't go
in the right places and so forth. And in China, to deal
with this problem, they show them movies about what
they're supposed to do. They show pandas -- but the
panda's eyesight is not that good. So they -- so the
point really is that the pandas know what they're supposed
to do, but they don't really know how to do it. And
that's the problem with our economy.
MR. RUBEBSTEIN: The government knows what it's
supposed do, but it doesn't know how to do it. And one of
the real problems is we've got complete dysfunction in
Washington right now. The system we have is a great check
and balances system. The founding fathers are wonderful
in setting it up, and I think it's better than a
parliamentary system. But right now the democrats are not
talking to republicans. They don't even socialize with
each other. And right now nobody in Washington really
feels any need to do anything because the republicans in
the Congress say, we've been waiting for so many years to
get rid of Obama. We've got him now where we want him.
Three months to go, why do anything?
And the democrats are basically saying much the
same thing. We don't want to let the republicans take any
credit for something that might get done. And really they
don't have any ability to get anything done right now
through the Congress. Nothing is going to get done. We
have to change the dysfunction. Otherwise what's going to
happen to us is what happened to other countries around
The United States has been the biggest economy
in the world since 1870. And we've been the dominant
economy in the world really since World War II. But the
emerging markets have emerged. And in the year 2014, the
emerging markets total GDP will surpass that of the
We have all grown up in a time when the United
States was the dominant economy, and we have the lifestyle
that reflected that. Our children and grandchildren are
not going to live in that world. China, in our lifetime
will be the biggest economy in the world. And the United
States will probably be the second or third biggest by the
end of the century. Unless we can get our economic
activity moving again, unless we can be productive again,
unless we can make people work the way they should be able
to work and make our economy much more efficient, we are
going to be watching the emerging markets truly emerge.
And it's an unfortunate situation. We don't
want to let happen to us what happened to Britain and
other countries that led the world and the economy in
previous centuries. But it's going to slowly happen now.
Because our population is so big and because our economy
is so big, we're not going to be Britain. But we are not
going to have the lifestyle that we once had.
In 1950, we were the highest per capita net
income in the world. Now we are about 7 or 8 and we're
sinking. And so while China is getting wealthier, and
Brazil and India are getting wealthier, we're actually
going down. And we have to do something about it. Right
now I don't think anybody in Washington is really focused
on it. But unless we begin over the next 5 years or so to
take a serious look at what we have to do to make our
economy competitive in the 21st century, we're not going
to be in very good shape.
Europe is living in the 19th century. Europe
has no chance of getting into the 21st century. We're
living in the 20th century. We have a chance of getting
into the 21st century. Asia is in the 21st century. If
we're going to catch up, we have to do many more things
than we're doing now. It's unfortunate because we have
the brain power, we have the will, we have the innovative
spirit in our country. But right now the parts are not
working. We know what we need to do, but like the pandas
we can't get it to go to work.
MR. ZUCKERMAN: Now, following up on David's
approach of asking you questions, I'd like to put the
following question to you? How many of you thought you
would learn more about sex than about economics when you
MR. RUBEBSTEIN: How many of you want to know
more about sex and economics?
MR. ZUCKERMAN: Well, I do think, as David was
implying, when you go through various levels of what the
statistics tell you about the economy as distinct from
what your emotions tell you -- I mean, both David and I
have had a wonderful experience in terms of getting
involved and engaged in the economy. And there's no
reason for us to be anything other than optimistic in that
sense. Yet, when you look at what's going on in the
economy, it's very hard to see where we're going to begin
to come out of where we are now which is in my judgment a
weakening of the economy, and we don't know where this is
going to go.
And there's very little that the government can
do that will change this particular pattern, and that's
what makes me very worried. There's people talking about
this economy as if it's going to change. We talked about
the unemployment number, which is, as David said, closer
to 15 percent than it is the 8 percent. But there's
another huge number of people who have left the labor
force permanently, and they are not counted.
There are different measures of unemployment.
One is called U3, where they measure people who have
actively applied for a job in the last 4 weeks. That
means you have to apply for a job, to -- have gone for an
interview, to whatever it takes, okay. That number
theoretically is 8.2 percent. But if you then take the
people who have actively applied for a job in the last 6
months and the people who are what they call involuntary
part-time workers -- these are people who want to work
full-time but their company says to them, sorry, we're
only going to employ on a part-time basis, which, by the
way, means they don't have to pay for your benefits, no
health care benefits, no retirement benefits -- that
number is, as David says, 14.5 percent, 14.8 percent.
And yet then you add the millions of people and
it's somewhere estimated above 8 million. You're talking
about a huge number of people who are either unemployed,
underemployed or have given up looking for a job. Now, we
have had 40 plus weeks in which the headline unemployment
number is over 8 percent, which is unprecedented. But
what we also have to think about now is you are looking at
a period in which people are losing their job skills.
We've had almost 50 percent of the people who
are unemployed have been unemployed for longer than 6
months. That's why this second category is a much more
relevant number because you don't apply for a job every
four weeks if you've been out of a job for 6-plus months.
So we are looking at an extraordinarily weak
economy that in some ways is disguised by what the press
picks up as the headline unemployment number. And what
you are also looking at is very little -- you have 150,000
people who enter the labor force every month. So when we,
as we have in the last couple of months, created 79,000
jobs or 87,000 jobs, that isn't even enough to take into
account the new people coming into the labor market.
And finally, there is another thing that is
really important. Roughly 50 percent of the jobs that we
have created in the last several jobs are part-time jobs.
And this is a very serious issue because that is a
deliberate policy on the part of many companies for the
simple reason they are not responsible for the health care
and the retirement benefits. And this is a very serious
issue for a lot of people.
There were three -- two studies, well, there
were three, but two studies, one from UCLA and one from
the University of Chicago, of the effects of what they
called "regulatory insecurity" or political insecurity
most of which reflected the health care bill that was
passed several years ago and now confirmed recently by the
Supreme Court. And they estimated between 2 million and
2.5 million jobs were literally not created as a result of
the uncertainty created by this amongst other policies.
So we have to be very careful because business
confidence is at a very, very low level. The consumer
confidence is at a very low level. The confidence in the
government is at a very low level. And the problem is
that nobody knows how this sort of combination of
different negative forces can join together in something
that could be quite dangerous.
And we're not under the woods in the world, as
David points out. China is having a real decline for the
first time. Europe -- the European economy reminds me of
the man who jumped off a 30-story building, and as he went
by the 6th floor he yelled, don't worry, nothing's
MR. ZUCKERMAN: I don't see how they get out of
it. They are trying to fix just the financial side. But
the fundamental economics of most of those countries are
really in terrible shape and they are dropping very, very
seriously. So all of this, when this comes together,
could come together in a very, very bad way.
MR. RUBEBSTEIN: Right. In terms of the --
typically, in the United States, we've had roughly 67
percent of people who are of working age actually working.
So the labor force would have 67 percent of the -- people
who have -- men and women of the working age working. Now
that percentage is going down and we're closer to 60
percent. And the reason is a lot of people have given up
looking for work.
Since 2007, 35 percent of the people who --
since 2007, people who have given up looking for work, 35
percent of them are people who would like to work but they
just can't find it, 65 percent are baby boomers, and there
are some in this room, baby boomers who have concluded
that just life will be easier just to retire.
And so people are retiring earlier. And the
result of this is, and baby boomer is the biggest part of
our population, we have fewer people in the workforce.
And as a result our GDP is not -- it's going to be harder
and harder to grow the GDP at the level we want.
Typically, after a recession, 33 months after a recession,
and we're now 33 months after the last recession ended,
typically you have increased your GDP by a certain amount.
Typically you have gone up total about 10 percent.
So 33 months after a recession is over,
typically the GDP of the United States has gone up by 10
percent from where it was at the end of that recession.
Now we're only up about 6.5 percent. So our GDP hasn't
gone very much up compared to where it should be. And in
part that's because people have dropped out of the
workforce. There's not as many workers in the workforce.
And it's a problem we have to deal with.
We don't look as bad as Europe. And let me
explain why that's maybe a blessing in disguise, but only
for a brief period of time. Europe has imploded a bit.
It turns out that the euro doesn't really work unless you
have real -- a complete government and a political system
that really surrounds the currency. So enormous amount of
attention in recent months has been focused on Europe.
But Europe will eventually come up with some
patchwork solution. And when it does, Europe will limp
along at 1 percent or 2 percent growth, maybe Greece will
get out of the euro, but eventually Europe will kind of
muddle along. But because so many people have been
focused on Europe, many people haven't focused on our
problems in the United States. After Europe comes up with
some solutions in a month or two, the world would begin to
focus on the United States again.
And the United States, our economy, as I
mentioned for the reasons we talked about earlier, Mort
and I did, we have some very low-growth years ahead of us.
We have very high unemployment ahead of us. We have debt
problems we haven't been able to solve. The only reason
we are better than Europe right now, and our debt ratio is
really the same as the worst countries in Europe, is that
we can print dollars.
Now this is interesting. We can print currency
and people will buy it. One of the best things that's
happened to us is that people around the world have to buy
our dollars or they feel there's no other safe place that
they can get repaid. So interestingly, since our debt was
downgraded, we've actually found interest rates gone down
in terms of U.S. debt.
The Chinese have nothing to do. They own $1.1
trillion of our debt. They are going to keep buying
roughly that kind of percentage even though the interest
rates would go down. At some point, somebody is going to
wake up and say, wait a second. I don't want to buy the
U.S. debt at very low interest rates. I want higher
interest rate. And when the Chinese and the Saudis and
the Japanese want that higher interest rate, we're going
to have a much bigger budget problem than we have today.
We've been fortunate that people feel they have
to buy dollars, the Euro has kind of gone down, and so
there's no other currency that people and governments can
put their money in. At some point we're going to pay the
price. We're not going to have this low interest rate for
ever. It's a situation we have to deal with.
I wish we had people in Washington that were
concerned about it, but honestly there's been a tidal wave
of change in Washington. When Simpson-Bowles was set up,
people worried about the debt because of the debt numbers
I'd mentioned before. And the debt numbers, to put it in
context, when Bill Clinton left office, we had roughly
$5.7 trillion of federal debt.
When George W. Bush left office, he added $5
trillion more. So had about $10.7 trillion. Barack Obama
has added about $5.1 trillion more. So we have about
$15.8 trillion. So we've been adding this debt steadily
and there's no prospect of paying it off. Under Bill
Clinton we did have some budget surpluses, and at one
point there was a concern that we would get rid of federal
debt and there'd be no federal debt against which
corporate debt could be measured. We don't have that
MR. RUBEBSTEIN: So we've got this enormous
debt. And there's only three ways of solving this debt
problem. One is you have to cut entitlements and spending
and increase taxes, not very pleasant, nobody likes that,
and we'll kick that down the road. Two, you can inflate.
Have your way out of it a bit. I worked in the Carter
White House and I got inflations of 19 percent. Very hard
to do that. I could go back into government and get
MR. RUBEBSTEIN: I'm willing to try. I'm
willing to help my country. But that might not be the
solution nice people prefer. And even 19 percent
inflation wouldn't solve that problem. And third, you can
go for a bailout. But who is going to bailout the United
States? The IMF? The World Bank? There's not enough
money. And, of course, you can default on your debt. But
that's not a realistic solution. The only solution is to
cut spending and to increase the taxes. And we're going
to have to recognize that there is no other solution for
us. I hope we can buy some time over the next couple of
years before we have economic calamity.
What I was concerned about was when the super
committee in Congress met. And you may remember, they
were supposed to deal with the sequestration issues and so
forth. What happened? They couldn't come up with an
answer. They came away and said, we don't have any
answer; we're just not going to come up with a solution.
What happened? Well, the bond market didn't
collapse, the stock market didn't collapse, the dollar
didn't collapse. And as result most members of Congress
said, what's the problem, we can keep adding debt because
the Chinese will keep buying it at low interest rates.
That's a mistake. At some point we won't be able to sell
our debt at these low interest rates and in some point
Congress has to pay the price and deal with these problems.
So right now Congress has a view that the
greatest problem is economic growth, and maybe they're
right, and not deficit reduction. So there's been a sea
change in Washington. It used to be when Simpson-Bowles
was set up everybody wanted to worry about the debt
reduction problems. Now there's virtually no interest in
Washington relating to that. The interest in Washington
is how do we keep growth going. And I suspect therefore
we'll keep going.
All the tax cuts and other things that people
have gotten used to are probably going to be kicked down
the road. And at some point we'll pay the price, but it
may be 9 months or 12 months or 2 years from now. But at
some point somebody is going to say, I'm not buying this
debt anymore, I'm not going to roll over U.S. debt, and
then we're going to have serious problem.
MR. ZUCKERMAN: Let me just supplement one thing
that David said, which was how slow and weak this recovery
has been. We have had 11 recessions since the end of
World War II. The average period of time that it takes to
get back to the level of employment that we had at the
start of the recession -- for those 11 recessions is 25
months. Here we are almost 50 months into this recession,
and we are still roughly 4.5 million jobs lower than what
it was when we started.
This is the slowest recovery in terms of jobs
that we've had by far since the end of World War II. And
this is not -- it's no really improving very much.
Consumer spending is weak, business spending is weak,
government spending is, shall we say, not productive even
though there's a lot of deficit spending. And if it
weren't for that, we would really -- the only thing you
could say about government spending is that it has helped
us not really just crash through some kind of bottom, but
the idea now as we look at the economy was declining
business confidence, declining consumer confidence, very
weak numbers across the board.
Where do we go from here without the ability at
this stage of the game for the government to do anything
given the political paralysis that we're in? And we're
going to see. We don't know what's going to happen in the
election, but both parties really -- they remind me of the
story of -- that you don't go to a doctor whose office
plants have died.
MR. ZUCKERMAN: We're in a situation where we
have a government on both levels where the programs just
aren't working. And we are a country that is absolutely
desperate for the kind of leadership that's going to get
us out of the problems that we're in.
MR. RUBEBSTEIN: I agree with that. And I --
have we sufficiently depressed everybody? Is there
anybody here that's not depressed?
MR. ZUCKERMAN: Yeah.
MR. RUBEBSTEIN: All right, we're sorry. Maybe
we'll spend some time on maybe some good news if we can
find some. And what are the solutions? And we'll get to
questions in a moment. In terms of solutions, what was
going to happen. And one thing I would like to point --
talk about relating to what Mort said in terms of
leadership, whatever you think about John Roberts and the
decision in the Supreme Court recently, I think you would
have to agree that it was a bit of courage for a man to go
against his instincts and probably his brethren and to do
something that he thought would be in the end better for
the country. And maybe while he didn't like the health
care bill, he thought having some political leadership and
doing something that was against his maybe instincts was a
good thing. I personally think that John Roberts showed a
lot of courage and a lot of leadership.
MR. RUBEBSTEIN: I just hope that our political
leaders would take a lesson from that and say, okay, the
most important thing is not getting reelected. The most
important thing is making the country better. And I don't
really care about getting reelected as much.
MR. RUBEBSTEIN: You know, it's interesting. I
meet with members of Congress all the time, and I meet
with former members of Congress all the time. And what I
get out of them is this, most members of Congress are
definitely afraid of not getting reelected. They spend
enormous amounts of time begging for money, and no doubt
from people here and your friends, and money -- you get
How many people here have not received a call
from a member of Congress or senator recently about money?
Anybody? Very, very rare. But when I meet with former
members of Congress, they are thrilled that they're not in
Congress anymore. I keep telling them, don't worry about
getting reelected because there is life after Congress,
you'll be fine. But they're obsessed with getting
reelected and they don't want to show any leadership. If
we could have some leadership, not unlike John Roberts, I
think it would be a good idea.
Let me give you one idea that I think is a
solution to the problem but it's not going to solve all
the problems we have. There's one idea that I'd like you
to think about. It's not a perfect solution, it can deal
with one aspect of it, and that's the inability of our
country to increase taxes at a level that's fair and a
level that will increase government involvement in certain
things, but also incent the business world to make
investments and also to cut some of the entitlement
spending that we can't afford.
We had the Simpson-Bowles Commission, and the
president of the United States, I think, made a mistake in
not even meeting with them. He didn't even take the
material and say, thank you for your job, well done. He
was afraid that it was so controversial that he didn't
want to be seen and associated with it, leave aside
whether that was right or wrong.
Simpson-Bowles therefore never got very far.
What I would like to do is to have a system that is not
unlike congressional salary increases. When we want to
increase salaries for members of Congress, what we used to
do was we had members of Congress vote for it. And it was
politically difficult. So they created a commission, and
the commission now says here's what the appropriate salary
increase is; it goes into effect unless members of
Congress vote to overturn it. How many votes do you think
there are to overturn that commission recommendation?
The same thing is true in military base
closings. When we want to close a military base, the
members of Congress don't vote for it anymore. The
commission recommends it, goes into effect unless congress
votes to overturn it. They never vote to overturn it. We
need a Simpson-Bowles-like commission, representative of
the appropriate kind of people, and let its impact -- its
recommendations go into effect unless Congress votes to
That's the only way we're going to get something
done because Congress doesn't have the courage in my view
right now to vote for the kind of things they know we need
to do. If we had a voice in Congress, it would pay us,
but nobody really wants to go through a voice vote.
MR. ZUCKERMAN: That was a call from David's
congressman. I just want you to know that.
MR. RUBEBSTEIN: Okay, right. Okay, so Mort, I
think you have a solution. What would you do to kind of
make the situation better?
MR. ZUCKERMAN: Listen, I think this whole issue
of leadership is central. And I have to say, this is a
country that always responds primarily to presidential
leadership. And that I think is still not working in this
country. The Simpson-Bowles Commission was one of the
most frustrating, and frankly disgraceful periods of
American political leadership. The president never met
with him, Alan Simpson and Erskine Bowles, who are two of
the most sensible people, this was a commission which the
president setup, he got the support, the political
support, from within the commission, from both parties,
and yet it was never even taken up, not even met with.
And Alan Simpson, whom -- I will tell you is a
wonderful and very amusing man. I just was at a talk that
he gave recently, and he was given a very elaborate
introduction. And he got up, he said, you know of all the
thousands of introductions I've ever had, this was the
most recent. So --
MR. ZUCKERMAN: But he then launched into a --
if you know him, and Erskine Bowles, they are not partisan
people. And he was launched into really a statement of
great dismay over the inability to deal with this. Now
what is going on now is that these are folks who are
literally developing legislation that they hope to be able
to submit to the Congress after the election in the hope
that between the end of election period and the end of the
Congress, which is not going to be too long, they may be
able to get some of this legislation through. And a
number of us had been meeting with all of these different
people who are hoping that that will take place.
But there are several other things that I would
like to suggest which are more long term in nature. Look,
the most important part of our economy today is the high
tech economy. The agricultural economy was decimated by
the whole emergence of, shall we say, the manufacturing
automation in the 1930's. There were 67 million people in
agriculture who were never able to come back into that
field because they were replaced by tractors, and et
cetera, et cetera.
We have the same problem today in manufacturing.
There were 67 million people in the manufacturing world,
blue-collar workers, who will never come back to work
again in that field in part because of the automation of
our manufacturing and in part because of the international
competition. The one area where we have a growing economy
is in what we loosely call the high tech world.
Now, we are not producing enough either
engineers or scientists, whatever you want to call them,
to really staff this. And one of the things that we do,
we used to have something called H1B visas. These are
visas given to foreign graduate students in the hard
sciences who are in American universities. We had 195,000
of those. It was reduced to 65,000 when the dot-com
bubble burst in the 2001 and 2002 because at that point
was had a surplus of engineers.
Now we have a shortage of engineers. These are
people who want to work in this country. Instead we train
them, they take our education and they work for companies
in countries that compete with us. So the least we could
do is to get this group of people back to the number of
195,000 we had in the year 2000. You cannot get neither
the administration nor the Congress to do that. They seem
to be paralyzed.
I'll give you another thing this is something
that we should be doing in an era of very low interest
rates over the long term, which is to dramatically improve
our infrastructure spending. Infrastructure is a huge
part of our economy.
MR. ZUCKERMAN: And we could finance that today.
We would have to introduce this with expedited
environmental approval so that there is no way of just
blocking these things, which a lot of groups tend to do.
And I don't mean this as disrespect for the environmental
concerns. It's just that we have other interests that
have to be taken into account.
This is a job multiplier. That is to say if you
invest a dollar in infrastructure, in terms of other
economic benefits through employment and other things,
you'll get back say $2 to $2.5. Unlike just giving money
frankly to the public service unions, which is what half
of the stimulus program did through the sort of the
charade, that it was going to state and local governments.
Not that I want to reduce the number of police or firemen.
Nobody wants that. But you've got to find a way to
stimulate this economy, and it's got to be done in a way
that just doesn't serve the political interests of one
party or another.
So these are three things that I would do; the
H1B visas, the infrastructure program, and frankly, as was
indicated, we just have got to redo our tax code and
broaden the tax code. You could lower the rates,
eliminate a lot of particular benefits that frankly aren't
deserved but that are obtained through frankly political
contributions that the congress is so interested in and
therefore they help these grease away for these very
special tax benefits. So these are things that can be
done and should be done. It would have a major impact.
But it's going to take political leadership in all of
these levels to get something done.
MR. RUBEBSTEIN: Before we go to questions. Let
me try to cheer you up a little bit.
MR. ZUCKERMAN: Go ahead.
MR. RUBERSTEIN: We still are the largest
economy in the world, and for the next 20 years or so we
will be the largest in terms of total GDP. China will not
catch up for another 20 years or so. Our per capita net
income will not be as high as it once was, the highest in
the world, but of developed countries, large developed
countries, we will be number one. We're number 7 overall.
But Abu Dhabi or Qatar probably are not that relevant. So
we still have our very high per capita net income.
We have an education system at the university
level that is the envy of the world. Everybody in the
world wants to have a degree from one of these great
American universities, and that's something -- while those
universities have some financial challenges, we really
should take great pride in the ability of these
universities to turn out people who are creative, hard
working, very smart, and going to build our economy into
Third, or fourth, we have the most innovative
economy in the world. The great technological innovations
that Mort has talked about are really occurring in this
country. Facebook and Apple and Amazon, they were started
in France, or they weren't stated in China. They were
stated here. And the kind of innovative economy that we
have in Silicon Valley and other parts of the world really
is something that we can take enormous pride in.
We also have a work ethic in this country that
is very, very high. It's much higher than in many other
parts of the world. While there is some concerns about
some people's work ethics and so forth, the truth is
overall the economy is benefited by the work ethic that we
have. If the people can find the jobs, they want these
jobs. There are some views that some people in Europe
maybe don't really want to work as hard as people here.
But people here do want to work hard.
And last, we have a political system, while it
has a lot of problems, it is very stable. We don't have
to worry about military coups. We don't have to worry
about the things that some other countries have to worry
about. And we do have a dollar that is going, to be in
our life time and the life time of everybody in this room,
and is going to be the reserve currency of the world and
that will be a great thing for our country. I wish it
were a stronger dollar in some ways. I wish we could do
other things with our currency, but right now we have all
these things in our favor.
We just have to make sure we can find ways to
get our political system to work and to get some political
leadership and to make sure everybody has to give --
contribute a bit. Right now everybody doesn't feel like
they are being asked to contribute. If our political
leaders would say I want you to sacrifice, I want you to
do something that's not in your economic interest, we
would be better off.
Very few political leaders now say to the people
who are their constituents I want you to sacrifice, I want
you to work harder, I want you to pay a little bit more, I
want you to be taxed a little bit more. People are afraid
of saying to their constituents they have to sacrifice. I
think the American people are willing to sacrifice if we
have leadership that will ask them to do so, but nobody is
asking us to do so.
So what we really want is leadership I think
that is asking us to make the kind of sacrifices that I
think are necessary. Hopefully that will get done. And
the other good things I just mentioned will enable our
economy to be one that all of us can be proud of and our
children and grand children will lifestyles as good as the
ones that we've had. So we'll take questions or --?
MR. ZUCKERMAN: Sure. I want to ask a question,
okay. How many people here think David Rubenstein should
run for Congress at one level or another?
MR. RUBENSTEIN: I can't afford the pay cut, but
how many people here --
MR. RUBENSTEIN: Before we do that, how many
people here think Mitt Romney would be the next president
of the United States? Okay. How many people here think
Barack Obama will be? Wow. Okay, how many people have
shifted their views on Barack Obama since he was first
elected? Anybody? Anybody shifted their views on Mitt
Romney? How many people think Mort Zuckerman should run
for president of the United States?
MR. RUBENSTEIN: Okay. Well, we've got a little
MR. ZUCKERMAN: No, I think when this country is
ready for its first Canadian-born Jewish president, I'm
MR. RUBENSTEIN: Well, if we get any Jewish
president, it would be good, but okay.
MR. RUBENSTEIN: But probably that Jewish
president's last name isn't going to be Zuckerman or
Rubenstein. It's going to be more something like
Stanislavski (phonetic) or --
MR. RUBENSTEIN: Okay, so questions. Ma'am,
right here. Well, I guess -- well, here. You're next.
Could you just stand up so people would hear you or see
SPEAKER: Hi, I want you to address the validity
of the statement. There is an economic principle that
says you want your producing class, the people essentially
between 18 and 65, your workers, to outweigh your
dependents, people too young, too old to work. Right now
our baby boomers are retiring, leaving the workforce, and
it's also happening in Italy where they have sort of the
high death rate going down.
MR. ZUCKERMAN: Yes, okay.
SPEAKER: And China has --
MR. ZUCKERMAN: Right, I understand. Your
SPEAKER: My question is do you see in 30 years
when China's population is aging and America's population
is younger that the growth will go and China will begin to
MR. ZUCKERMAN: We didn't discuss demographics,
but let me just get to this. When the Social Security
system was set up in the United States, it first paid
benefits in 1940. At that time in 1940, there were 33
workers for every retiree. Today there are 3.3 workers
for every retiree. In the year 2025, there will be two
workers for every retiree. Obviously, a system that's not
Our population is aging. It's good to be
getting older, and increasingly, I think it's a good thing
that you can live when you're longer, but I think we have
to recognize our average population is about 37 in this
country. In Europe, it's about 41; Japan, it's about 45.
So we have some demographic issues. China is not much
younger than us because of the one-child policy.
What we have to recognize is that our population
ages. We have not enough workers to support the
retirement system that we built in. When we set up Social
Security, the average age of people in the United States
was 60. So we said you can retire at 65. Well, not too
many people got to collect benefits because they weren't
living that long. Now the average age is about 81 or 82
and we can't afford this system. So we've got, because of
our demographics, we are going to have to change it
dramatically in future years. Retire later, and collect,
I think, fewer benefits. Mort?
MR. ZUCKERMAN: Yeah, there are 79 million baby
boomers from World War II who are just beginning to retire
at 65 to 1945. And you see where we are. We have no way
of supporting them within the context of our Social
Security system and undoubtedly in our health system. And
the question is how do we deal with this.
Now, in 1983, Ronald Reagan, President Reagan,
and Tip O'Neill, the speaker of the House, a Democrat,
between the two of them in a very quiet way worked out a
saving of the Social Security system, which had at that
point about $25 billion in the trust fund. It now, I
might add, as a result of the work that they did in which
they increased the so-called Social Security
contributions, which some people call Social Security
taxes, okay, they increased that dramatically. They also
reduced some of the benefits by extending the age at which
you receive some of these benefits.
Now, this was a bipartisan effort that was done
quietly as Reagan and Tip O'Neill, both agreed, we are
both going to get the blame and will both get the credit.
But the country was the savior because today we have $2.8
trillion in the Social Security trust fund. This is an
example of where bipartisan activity can really make a
huge difference in dealing with some of these issues. I
might add we have had 40 increases in Social Security
taxes since it was first introduced in the 1930s.
So when governments, when they have leadership,
when you have leadership between the Congress and the
White House, you can really make things happen. Today,
that relationship between the Congress and the White House
is virtually nonexistent. And I will -- I mean, there are
so many -- I don't know if somebody saw this, there was a
front page story in the New York Times, for example, that
Barack Obama and Mitch McConnell had not had a single oneon-
one meeting in the first 18 months he was in office,
which is almost unprecedented. It's almost impossible to
understand. I could give you more examples of that where
there's virtually no dialogue between the executive branch
and the congressional, the legislative branch.
MR. RUBENSTEIN: Mort, you had more one-onmeetings
with Barack Obama than Mitch McConnell, right?
MR. ZUCKERMAN: Yeah, absolutely. I mean, the
whole thing is just mysterious to me. And I will give you
another example. I gave a talk on the economy not too
long ago, within the last couple of months, to one of the
major legislative committees in the Congress. And as you
probably have gathered, I'm almost as pessimistic as David
or slightly more pessimistic, but not by much.
And I explained why and then I answered
questions and then I was meeting with the leaders of this
committee. One was a Republican, now, the chairman, and
one was a Democrat, formerly the chairman, and I said how
do you work with the White House. They said, we don't.
What do you mean you don't? He said, in the 3-1/2-plus
years we have not had any contact with the White House
leadership at all; no telephone calls, no visits, nothing.
That's just almost unimaginable. That is not
the way that you're going to get things done because
whether you like it or not, as Bill Dailey would
say, "Politics is also about personal relationships," and
you have to do it. And if anybody reads the Robert Caro
book on Lyndon Johnson, you will find out if somebody --
there is somebody who understood how the Congress works.
He came out the Congress in fairness, but somebody who has
been a governor, somebody like -- generally understands
that part of it. We are missing that totally and we've
got to find some way of getting the two bodies to work
together because otherwise it's going to make it much,
much more difficult. That's one of the more disappointing
features of what has gone on the last 3-1/2 years.
MR. RUBENSTEIN: Question here. Right here,
MR. DEBS: Thank you. John Debs, Colorado.
With all due respect, gentlemen, David, why is Carlyle
raising money and investing if you're this pessimistic
more? Why aren't you selling all your real estate
properties if you're this pessimistic?
MR. RUBENSTEIN: A good question. Well, the
MR. ZUCKERMAN: Well, wait a minute. One of
those two is a good question.
MR. RUBENSTEIN: You know, the truth is people --
when economies are not in good shape, that means that
prices may go down and therefore to invest may be a good
thing to do. You know, when you invest things, you want a
low price and you want to be able to improve it and
hopefully the economies will get better. So when we
invest money, we try to do it at times when the economic
cycle is down.
Also, you know, firms like ours are investing
all over the world and some parts of the world are doing
well. So it's not just the question of investing only in
the United States. But it's a fair point. If the
economies continue to go this way, no matter how good you
are as an investor, at some point you won't be able to
exit at the kind of prices you want. So ultimately
economies have to improve and you have to find some way to
improve the company and make sure it takes advantage of
the economy ultimately improving.
Right now, some economies in the world are
better than the United States. Nobody in the world right
now is doing great. Everybody is slightly going down. I
wouldn't say we're going to a global recession. But we're
in an obviously a global slow growth period and I hope we
can get out of it soon. But right now even China, as Mort
said, is growing at a lower rate than it has in the last
30 years or so. India is growing at a lower rate. Brazil
is growing at a lower rate. So no country in the world
right now is doing spectacularly well. Hopefully the time
will get better.
Mort, you might want to say why you're not
selling all your buildings?
MR. ZUCKERMAN: Well, actually the time to buy
and the time to sell is a question of timing. We did sell
a lot of buildings, but in 2006, 2007 and 2008, when there
was a bubble in commercial real estate as there was in
residential real estate, I wrote an editorial about the
residential market in 2006, and I came to the conclusion
that it was an unsustainable bubble and then looked at the
commercial market and came to the conclusion that that was
an unsustainable bubble. So we decided to sell.
The assets we have now are frankly doing very
well in this market and we believe they will continue to
do well. So we are not selling, in fact, we're buying.
And one of the reasons why we're buying is because
interest rates are the lowest I've ever seen in my career.
I mean, my company just borrowed a huge amount of money at
interest rates that were just unprecedented and it changes
all the calculations. And so in fact we are interested in
selling. We are interested in buying. And if you happen
to know of any good buildings, please call me.
MR. RUBENSTEIN: Okay, other questions. How
about this side? Right here. Gentleman right here on
this side. He gets the mic right there.
MR. HAMRA: Hi, wonderful presentation and most
amusing. Greg Hamra from Miami, work with a company
called Everblue, dropping all my stuff. It has been said
that infinite growth on a finite planet, anybody who
believes in an infinite growth on a finite planet is
either mad or an economist.
I know there are a lot of moving parts; water
security, energy security, competition for natural
resources. Do you see a way out of this mess while
keeping an eye on not jeopardizing our biosphere because
we're discussing, you know, that's sort of a big elephant
in the room that I don't hear discussed a lot of time when
we're discussing economics.
MR. RUBENSTEIN: It's a very fair point. When I
was born in 1949, some people here may be around that time
as well, some people much younger I can see, there were 2
billion, 2 billion people on the face of the year. Today,
there are 7 billion. By the time I'm projected to die,
hopefully 20 years or so, there will be 9 billion people
on the face of the earth.
So obviously we're consuming much more resources
and producing more carbon and so forth. So it's a serious
problem. I don't think we're going to solve that in this
panel right now, but I do think we have to take --
recognize the fact that we're using much more resources
than we did before when we had 2 billion people, and the
last century, less than a billion people in the 1800s.
So I do think that we have to be more concerned
about energy and global warming and those kinds of issues,
but I do think that energy, just as an aside, energy will
turn out to be one of the great areas in which to invest
around the world. Not just alternative energy. We will
go to alternative energy. But alterative energy is now
only about 7 percent of the energy in the United States.
The truth is God created oil and gas and it's
the most efficient form of energy that we've ever seen.
I've often wondered whether if God had not created oil and
gas on the face of the earth, whether civilization would
be further ahead or further behind because we would've
come up with other means to produce energy for ourselves.
I don't know the answer to that. But as long as
we have another 100 or 200 years of oil and gas, we will
consume it because it's so efficient. We just have to do
it more environmentally sensitive ways. But because of
new fracking, other techniques, the world is going to be
in a surplus of oil and gas for a while, prices will
probably come down.
And actually for the first time in decades, we
are now exporting petroleum products more than we're
importing. We're exporting more than we're importing,
which is a big change. It's helpful to our economy, but
it's a much more complicated issue about global warming
and so forth. I can't address all those issues right now.
MR. ZUCKERMAN: Yeah, when I was born in 1962 --
MR. RUBENSTEIN: It's very good to hear.
MR. ZUCKERMAN: I actually -- I think, I have to
say, I think consistent with what David was saying, we
actually have come a long way in terms of being concerned
as at least as this country and many other countries with
environmental issues. There has to be a balance.
I do think, again, to underscore what David
said, this whole issue of developing natural gas through
this fracking process has changed the amount of energy
that we are importing from 60 percent down to 47 percent
the last time I looked and it's going to go down to the
point where we're going to become not only net exporters
at a certain level now, but much larger over time and that
is a fairly clean cut way of, never perfect, of developing
energy to support this country's economy.
And I will say another thing about that, okay.
It also will reduce, shall we say, the role of certain
other countries in parts of the Middle East and their
influence on the world and the policies of the world,
which I personally happen to welcome.
MR. ZUCKERMAN: So don't get me wrong. There's
always a cost and a benefit that are involved in almost
any kind of energy policy. But the benefits in my
judgment are so dramatic both in terms of our domestic
economy and the international standing that I think we
ought to do whatever we can to increase our domestic
supply. It is going to happen.
Nevertheless, having said all of that, I mean, I
do think that there -- in that sense, there is an example,
a reason to be very optimistic about the U.S. economy. I
think we can become completely energy independent within a
very short order of time that was completely unanticipated
in the last -- until the last few years. And that I think
is a major thing.
I do think we have to do something very serious
about our fiscal side because we are deferring the cost of
all of this debt we are accumulating on to the next
generation or the generation after that. It is actually
immoral to do that. We've got to find a way to address
that issue because sooner or later there is going to be
some moment, as David was suggesting, where people are
going to say we're just not going to buy their debt. And
then we're going to have a crisis that we won't be able to
control. You know, life is never perfect, you know. I
always used to say when a woman told me she was perfect, I
said I was practiced. But anyway that's a whole other
MR. ZUCKERMAN: I do think that there is a
serious, serious issue here that we have to address and I
really hope this country finds a way to address it.
MR. RUBENSTEIN: Other questions. Right here,
the gentleman here. How much time we have for this?
SPEAKER: Ten minutes.
MR. RUBENSTEIN: Ten minutes, okay.
MR. PODDER: My name is Robert Podder
(phonetic). I live in a suburb of Dallas and we are -- my
television set only works one way and we're pleased -- my
wife and I watch Mort every week on McLaughlin Group and
you do a great job. But I came in -- that's my first
comment. My second comment is that I came into this room
with a question and that question was what would you do if
you were king of the United States? And I want to
compliment the two of you because you told us the answer,
and we didn't have to ask that question. I'd say it was a
job well done.
MR. ZUCKERMAN: Well, I would abdicate it for
MR. RUBENSTEIN: We had one King David once.
Another one, you know, that's not --
MR. RUBENSTEIN: Okay, so, yes, ma'am.
MS. BURKIN: Hi, Amanda Burkin (phonetic), and
I'm from Washington, D.C.
MR. ZUCKERMAN: Washington, D.C.
MS. BURKIN: Yes.
MR. ZUCKERMAN: That's where the real world
MS. BURKIN: Not.
MR. ZUCKERMAN: Right.
MS. BURKIN: Both of you talked about
unemployment and the loss of net worth. My question goes
to African Americans and Hispanics who have experiences
unemployment in far greater numbers; 15 percent for
African-Americans, 13 for Hispanics. African-American
youths are especially hard hit. Wondering if you all have
recommendations on how to get these communities going
again. It's particularly important because as we all
know, in about 20 years they will be in the majority along
with Asians and other minorities. Thank you.
MR. ZUCKERMAN: Well, I'll take a crack at that.
There are many levels at which you have to address this
problem, but if you're thinking about where the minority
communities will be a generation from now, to my mind the
single most important thing we can do is to really focus
in on public education. We have to -- we know there are
things that can be done to improve public education.
Again, there are bureaucratic barriers to that. There's
not the kind of political will that we once seemed to have
had except in individual communities. It is the single
most important thing I think we can do.
The second thing is we have to, again, and there
is a need for this, is to understand that a lot of these
people from the minority communities do not have high
levels of technical skills. A lot of them are not as well
educated as the rest of the population. So therefore the
kinds of jobs that they need and should have, seems to me,
have to be thought of when we develop national programs.
That's one of the reasons why I'm so absolutely
so strongly committed to this national infrastructure bank
where you would have the ability to dramatically increase
that spending, which we all know we need and which if we
do now will be much less costly than if we do it 20 years
from now, never mind all the economic benefits that we
will gain from it.
So I think there are things that can be done.
But it is not something that is going to be an easy
solution. We have made progress. We haven't made enough
progress. We're just going to have to devote more
resources to the things that count not just for these
communities, but frankly for the country at large.
Otherwise it will not have the political support to
proceed with them.
MR. RUBENSTEIN: I would just add that in D.C.,
for example, about 30 percent of people who go into D.C.
Public Schools do not graduate. I mean, only -- it's a
very low percentage that actually go on to graduate. And
the system is not getting better. It's getting worse. I
think education -- this is something, I'd just add a point.
Recently there's been a current of thought that
education, college education, isn't such a great thing.
You should go work and you can do better off and you'll
have a better income if you don't actually go to college
and colleges isn't as important. I think it's a very
destructive view. If you -- there's no doubt that the
better educated you are, the better you're going to do in
And we should encourage people in the minority
community to go to college, get trained, educated because
they are going to have a much better economic life if they
do so. And right now we have a big problem that many
people are dropping out not just in Washington, D.C., but
around the country, minorities particularly, very high
dropout rate. We've got to address that problem
We haven't done a very good job with it for
sure. And as you suggest, the unemployment rate now for
blacks in the United States is roughly 13.5 percent. So
the white unemployment rate is about 7 percent, Hispanics
about 11 percent, Asians about 5 percent, Jewish is
probably 0 percent, but --
MR. RUBENSTEIN: So black unemployment is a big
problem and black high school dropout rate is an even
bigger problem right now. We don't have any great
solutions that I come up at the moment, but it's something
we have to address for sure.
Yes, right here. Grace, right?
MS. BENDER: Okay. Grace Bender, also from
Washington, D.C. You both talked about the debt our
children and grand children will have. But there's a huge
number of students who take loans for college and that's
putting a heavy debt on them and they can't find jobs. So
how -- you know, you encourage them to go to college, but
they can't get jobs and then they have debt. So what
would you recommend?
MR. RUBENSTEIN: Well, I tell parents all the
time you're going to get to know your kids pretty well
when you -- when they graduate from college because they
are going to come back and live with you.
MR. RUBENSTEIN: It is a problem. But, you
know, it's a short term problem. Right now people are
taking debt to get through college and the unemployment
situation isn't great, but the alternative is to not go to
college and to really have a lesser chance. So it is a
problem right now, but people should not all of a sudden
conclude that they shouldn't go to college or get some
kind of graduate degree education.
Yes, a debt burden is considerable and we have
to find other ways to put off the need to repay the debt
for a while, but it is a larger and larger part of our
debt burden in the United States. In fact the biggest
part of increasing debt in the United States is actually
student loans percentage wise because people are borrowing
enormous amount of money to pay for colleges.
Other question? Right here. Yes, ma'am.
MS. DEBLER: Clara Debler from New York City. I
also might add that I'm first generation Hispanic
immigrant, so I will always be optimistic about the United
States. My question, gentlemen, is you've been outlining
public sector solutions. What would you continue to add
to private sector solutions? What can business do to
enhance growth in the United States and what industries do
you think hold the most promise, you know, for growth?
MR. RUBENSTEIN: Well, I'll start first.
There's no doubt that business can do more than it has
done. This says the United States has about $2 trillion
of cash on the balance sheet. Many companies are afraid
of investing in the United States now because of taxes,
regulations or uncertainty. And what we've seen over the
last couple of months and it's going to go for the next
couple of months, because people don't know who is the
next president of the United States is going to be, many
corporate leaders are saying, well, why don't I wait and
see what the next government is going to do, who are they
going to be? I can wait. I've waited a while. I'll wait
So I wish corporations would begin to actually
spend some of their cash and invest in the United States
more than they have done and I wish that they would do
much more to facilitate their employees getting education
while they are working, kind of, other kinds of programs,
for-profit education programs and things like that. But
the corporations can do much more.
My general perception is many business leaders
in the United States feel that the government is not
listening to them, is completely antithetical to their
interests and therefore have given up and want to put more
of their money outside of the United States than the
United States. And we need to have a much more
cooperative attitude in my view between the government and
the business community because right now the business
community is turning deaf ears to what the government is
saying and they are looking abroad to invest.
MR. ZUCKERMAN: Right. Even I couldn't have
said it better.
MR. ZUCKERMAN: No, I agree with that
completely. I mean, look, I do think that there is a
different obligation or a sense of responsibility between
the public sector and the private sector. Education
frankly is something that is predominantly in the public
sector, and rightly so. And it's not just college
education. It is primary school, secondary school. This
is one of the major functions of government.
And one of the things that distresses me is
that, as we accumulate the kind of debt that we are
accumulating at the government levels, not just at the
federal level, but at the state and local level,
governments are getting increasingly paralyzed. And
frankly one of the reasons that that is happening is that
the expenses of the employees, the public service
employees, is just a hugely growing expense and usually
it's growing in terms of the retirement benefits and the
health care benefits that these public service employees
get that are not even available on anywhere near the same
numbers in the private sector.
And that comes out of the very simple fact that
politicians want to get reelected and therefore they are
on the other side of the table from the public service
unions and they sort of want to gain their support in one
form or another. So if it were up to me, I would make all
public service compensation determined by an independent
commission and not by the people who they might or might
not vote against. I think you would get --
MR. ZUCKERMAN: I think you would free up a lot
of resources that should go particularly at state and
local levels to education, which I think is the single
most important obligation of state and local governments.
MR. RUBENSTEIN: What about the solution of
annexing your former country, Canada?
MR. RUBENSTEIN: If we could get all that energy
and combine those two, as we tried many years ago, would
that solve our problems?
MR. ZUCKERMAN: I think it would. It certainly
wouldn't solve the problem for Canada, but I do take your
MR. RUBENSTEIN: So we are at our closing
minutes. Mort, would you like to make a closing statement?
MR. ZUCKERMAN: Yeah, I mean, I sort of again
want to echo something that David said. I mean, I have
every reason to be optimistic about this country. I think
it does have an enormous range of unbelievable talents --
talents in its people, talents in its basic philosophy of
government, talents in its educational system. It doesn't
mean that we have done as well as we should. We have to
find a way to address the problems.
It is -- we have developed somehow rather, and
particularly at the national level, a polarization of our
political system that almost paralyzes us from doing
anything that has to be done. At some point somehow
whether there's going to be a breakthrough and there will
be some kind of leadership that coalesces in the Congress
and in the executive branch where they know how to work
together and solve these problems. That's the way it's
been done in the past.
It will look as if it's much more difficult
today, but I do believe that here you will get into the
issue of personalities and I think where you get somebody
who knows how to work on both sides of the aisle, both in
the Congress and in the executive branch, and we can solve
a lot of these problems because we do have the talent to
do it and we do have the history where we have done it. I
just hope we reinvigorate that history.
MR. RUBENSTEIN: So let me conclude by thanking
all of you for coming to the Aspen Ideas Festival. I
think it's a wonderful gathering of people. I've learned
a lot myself here and I've met a lot of good people and
interesting people, and I hope you all felt it was a
useful part of your time to come here and that it was
worth the effort and money and energy you put into it.
And I also would like to conclude with this.
Tomorrow is the Fourth of July, which is the day that we
kind of mark how great it is and how lucky we are to be
Americans. And let me just quote from one part of the
Declaration of Independence that was signed on July the
"We hold these truths to be self evident that
all men are created equal, that they're endowed by their
Creator with certain unalienable rights, that among these
are life, liberty and the pursuit of happiness." I hope
you all will pursue some happiness today and on the Fourth
of July and remember why it's great to be an American.
* * * * *
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