April 11, 2025 • 47 mins
This week, former Treasury Secretary Lawrence H. Summers examines tariffs through a historical lens and poses hypotheticals for the current administration. And, how will the US pull off creating a sovereign wealth fund? Plus, we take a look at TikTok and whether it's a threat to national security. Later, we dive into our nation’s air traffic control system...is it safe?
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Episode Transcript
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Speaker 1 (00:12):
This is Wall Street Week. I'm David Weston bringing you
stories of capitalism. This week, we take a look at
the Trump administration's creativity in finding the cash for that
sovereign wealth fund the President wants so badly, plus national
security rubs up against economic policy and the art of
the deal in the saga of TikTok and getting the
(00:34):
planes to run on time, the state of the US
air traffic control system, and rival competing solutions for how
to make it better. But we start with President Trump's
big tariff announcement.
Speaker 2 (00:46):
My fellow Americans, this is Liberation.
Speaker 1 (00:49):
Day and what it may mean for the US economy.
Our special contributor Larry Summers of Harvard tells us the story.
Speaker 3 (00:58):
I think that we basically have a moment when we're
discussing whether the existing system of global economic integration, where
products are produced in supply chains across multiple countries, is
(01:20):
going to be something we're going to preserve with all
the efficiencies, all the benefits to consumers, all the increase
in their purchasing power that has brought, or.
Speaker 2 (01:33):
Whether we're going to try to turn the clock back
to where it was before the Second World War. And
if we turn it back.
Speaker 3 (01:44):
I think that's going to be enormously costly for the
United States and for the world economy.
Speaker 2 (01:51):
I think people may not just because there's always.
Speaker 3 (01:55):
A clamor about something, appreciate just how sweeping the proposals
the United States has made are. The United States has
traditionally been the world's leading advocate of open markets, to
keep our alliances together, to help the best American companies
(02:19):
and workers be able to export, to help American consumers
buy goods at low costs. We're talking now about the
United States imposing by far the highest tariffs of any
reasonable sized economy in the world. We're talking about the
(02:39):
United States having tariffs that are well above the level
of the Smooth Hawley tariffs that made the depression great.
And markets are processing that, and they're seeing.
Speaker 2 (02:55):
A big.
Speaker 3 (02:59):
Set of problems, a big set of reductions in economic
activity ahead.
Speaker 2 (03:05):
And the stock market.
Speaker 3 (03:07):
Only measures a very small fraction of the losses to
the economy from policies of this kind. There are also
big losses to workers, to consumers, and that's spread more broadly.
So we're going to make very important choices in the
(03:28):
weeks ahead. I hope we make them wisely, which will
involve back in off of the policies that have been announced.
Speaker 1 (03:40):
And that's what happened on Wednesday when President Trump announced
the ninety day suspension of most of the tariffs, with
the notable exception of China. You referred to history a
couple times before the World War Two, Smooth Holly, back
in nineteen thirty Does history give us any guidance about
where we might go? For example, Richard Nixon, who's president,
did take us off the gold standard, and there was
(04:01):
a fairly abrupt change in global economics as a result
of what President Nixon did. Have we had this sort
of abrupt departure from what has been before an economic
policy before.
Speaker 3 (04:12):
This is a much more abrupt change than when Richard
Nixon took us off the gold standard. Then there were
ten percent tariffs and those were just the Those were
the policy. Now the ten percent tariffs are treated as
some kind of base. The efforts of the United States
(04:37):
in the aftermath of what President Nixon did were to
cooperate with other countries, not to coerce other countries. So
I don't know that there really is a historical precedent
for what's being done now. And marcuts are speaking with
(05:00):
incredible clarity. Sometimes markets are hard to interpret, but this
is not one of those times.
Speaker 1 (05:07):
You have handled your fair share of crises, both of
the Treasure Department and Secretary, but also in the White
House during the Great Financial Crisis. From your experience, if
you were back in the White House or Treasure Department,
what would you be looking at as perhaps the next
shoe to drop? What would you be most concerned about
right now?
Speaker 3 (05:24):
I'd be I would have one concern if I was
in the White House or in the Treasury, and that
was my boss, the President of the United States.
Speaker 2 (05:35):
The main shoe that will drop or will not drop.
Speaker 3 (05:40):
Is the next thing the President says and the next.
Speaker 2 (05:44):
Order that he gives.
Speaker 3 (05:46):
And so I would be telling his political advisors that
this had nothing to do with what was being said
in other countries, this had nothing important to do with
business executives' actions in the United States, that if the
president was on this course, there would not be confidence,
(06:09):
and if the President signaled a willingness to adjust his course,
there would be.
Speaker 2 (06:15):
Confidence and show.
Speaker 3 (06:17):
The sole preoccupation that I would have if I were
in the government, would be with what the President was saying,
and frankly, As I've said before, David, there are a
very limited number of issues, and it has to be
(06:41):
immensely significant. That makes it the right and moral thing
for a senior official to resign because he is not
comfortable with the direction that the president is setting. And
the president is titled to have advisors who believe in
(07:03):
his policies, and individuals are entitled to follow their conscience,
and so there are moments when the right thing to
do is for a senior official to resign. When Elliott
Richardson resigned when given what he found to be an
unacceptable order from Richard Nixon, that was such an example.
(07:28):
When Cyrus Vance resigned because he didn't support what the
Carter administration was doing in Iran.
Speaker 2 (07:37):
That was an example.
Speaker 3 (07:40):
When a number of officials in President Clinton's administration were
not able to support his welfare reform bill, they chose
to resign.
Speaker 2 (07:54):
Frankly, if I were in an.
Speaker 3 (07:56):
Administration that we're pursuing policies as dangerous as these, I
would be thinking very carefully about whether I had the
ability to influence policies in a positive direction, or whether.
Speaker 2 (08:13):
The right thing for me to do is to resign.
Speaker 1 (08:16):
So, Larry, you and I have talked in the past
about the question whether, in fact various people into enemies
will absorb the increased terriffs so it won't actually to
a largerie fall in the consumer. What do you make
of the arguments that producers intermediaries may well absorb a
lot of the pain.
Speaker 3 (08:34):
I think they're unquestionably wrong. Economists have studied very carefully
the experience of the previous Trump tariff increases. For example,
they looked at washing machines that were tariffed versus dryers
that were not tarffed. They used a variety of different methodologies.
(08:58):
Essentially all the study concluded that prices go up with tariffs.
I've had the opportunity now to speak with senior executives
at a range of major retailers.
Speaker 2 (09:13):
That is certainly their view.
Speaker 3 (09:15):
I suspect when you start getting earnings calls and business
leaders are asked, will they absorb tariffs, will they be
able to push tariffs back on to their suppliers, or
do they expect tariffs to raise consumer prices? I suspect
they will acknowledge that the dominant effect will be on
(09:40):
consumer prices. And the important thing for people to understand
is that this moment is very different than the previous.
Speaker 2 (09:51):
Trump tariff moment.
Speaker 3 (09:52):
It comes at a moment when we already have some
inflation psychology, It comes at a moment when the economy
is pretty close to full employment. And most importantly, these
tariffs are more than ten times as large as the
tariffs that were put in place in twenty eighteen, and
therefore there's far less room for them to be absorbed
(10:16):
in the traditional margin of distributors or suppliers. So I
think it's fundamentally dishonest to make any claim that these
tariffs are going to do anything other than be passed
on in the form of higher.
Speaker 2 (10:35):
Prices coming up.
Speaker 1 (10:38):
President Trump wants a sovereign wealth fun of his very own,
but to get there, he's going to have to come
up with some cold, hard cash. We suggest where he
might look for it. This is a story about creative solutions.
(11:01):
What happens when a country wants a sovereign wealth fund
but doesn't have ready cash to put into it. The
Trump administration is willing to get creative to answer that question,
and our colleague Michael McKee brings us the story.
Speaker 2 (11:15):
We are going to monetize the asset side of the
US balance sheet for the American people.
Speaker 4 (11:21):
President Trump's executive order for a US sovereign wealth fund
will require the country to raise trillions of dollars and fast.
The biggest sovereign wealth fund in the world is Norway's
worth one point eight trillion. It's run by Nikolai Tangan.
Speaker 5 (11:35):
We have invested in nine thousand companies around the world.
We own one and a half percent of all the
equities in the world. I think you need money to
set it up. I don't think it makes sense to
borrow money to set it up.
Speaker 6 (11:45):
It's mostly countries that run a surplus, that have access
cash to spend, that don't need to deficit finance or
debt issue to finance their deficits.
Speaker 4 (11:55):
MC Command is the head of US rate strategy at
Bank of America.
Speaker 6 (12:00):
And the US does not meet any of those categories,
so it would be fairly non traditional across the countries
who are utilizing sovereign wealth funds today.
Speaker 4 (12:09):
Former tech investment banker from Morgan Stanley Michael Grimes is
tasked with setting up the new sovereign wealth fund. One
of the administration's suggestions to raise the money needed is
by monetizing the country's balance sheet. So what is on
that balance sheet?
Speaker 6 (12:25):
Well, the Treasury Secretary has talked about this certainly said
that they do. The current administration does want to try
and monetize the balance sheet to use all available financial resources. However,
we struggle to understand exactly what would want to be
monetized on the balance sheet.
Speaker 4 (12:42):
As of the fiscal year ending September twenty twenty four,
the US balance sheet shows total assets of five point
six trillion dollars coming from cash, property, investments, and inventory.
Also on that balance sheet two hundred metric tons of
gold valued at about seven hundred and sixty five billion dollars.
Speaker 6 (13:02):
So there is a relationship between the Treasury and FED
that has set the price of gold essentially nine times
lower than where the market is today, and there is
discussion out there about the possibility of remarking gold to
current value to then generate additional resources that the government
could utilize. Seems pretty easy and clean in one respect. However,
(13:26):
we believe it's going to be a bit more complicated
in practice. Current law suggests that Congress actually sets the
statutory rate on gold, So Congress would have to be
the ones who decide to accept a remarking of gold,
and we are not sure that Congress would necessarily want
to do that in order to allow the government to
have more resources that essentially don't need to be paid
(13:50):
for with deficits or higher treasury issuance that would free
up It would essentially create money to be spent in
the economy, almost in ways similar to QE, and in
an environment with still elevated inflation and some signs that
inflation expectations are ticking up, we are not so sure
Congress would want to move in that direction. Now, if
(14:11):
they choose not to monetize gold on the government's balance sheet,
then if you look at what other assets could be monetized,
they generally take you mostly to land, property, and other
natural resources.
Speaker 4 (14:26):
Plus, if you're talking about remarking gold, the technical way
of getting that money to the treasury.
Speaker 2 (14:32):
Goes through the Federal Reserve.
Speaker 4 (14:34):
You raise the risk of the FED seeing being seen
as politicized, and you raise the risk possibly of inflation.
Speaker 6 (14:41):
Absolutely, it would essentially impact the Fed's balance sheet in
very similar ways to how QE impacts the Fed's balance sheet. However,
in contrast to QE, you would have the asset that's changing,
not be securities holdings on the asset side of the
Fed's balance sheet, but you would have it be gold
that is increasing. And then if gold does increase, then
(15:04):
other liabilities on the Fed's balat sheet would naturally need
to grow. Those would presumably be commercial bank reserves, cash
that commercial banks hold, or cash in money markets in
the overnight reverse repo facility. Either way, it essentially grows
the size of the Fed's balance sheet. It grows the
money supply, and then that does mean that there are
greater risks that it could stoke inflation. It certainly gives
(15:26):
the government more resources to go out and spend on
whatever it might want to spend on, or to help
finance the deficit if there's lower revenue growth due to
a reduction in taxes. So yes, it runs the risk
of being inflationary, and we doubt that the FED would
be terribly comfortable with that, given where inflation is today
and where some measures of inflation expectations are going.
Speaker 4 (15:48):
President Trump has another idea to monetize the ballot sheet.
He's suggesting the government can sell off its federal buildings
and properties which fall under property, plant and equipment, coming
in at around one trillion dollars on the balance sheet.
Speaker 6 (16:03):
We could see a case where they might sell some
government buildings that are not being utilized, especially with some
of the other changes taking place in federal employment right now,
But it's hard for us to envision what else could
be monetized beyond that. Might they sell land that the
military is using, possibly, but presumably the military is using
that for good reason. Could they sell other natural resources
(16:25):
or treasures like the Statue of Liberty? I hope not,
but that is a theoretical possibility. So we're just not
really certain what else they would sell. But if you're
not going to remark gold, then there are very few
other options, we think, for them to monetize the asset
side of the government's balance sheet outside of maybe selling
(16:46):
some buildings.
Speaker 4 (16:47):
Is there a reason we would necessarily want to run
a sovereign wealth fund to do these kind of investments
instead of just doing the investments, say through the International
Development Bank or something like that. They've been taught for
years about an infrastructure bank that.
Speaker 6 (17:02):
Sort of thing, sure, or doing them through Congress having
Congress appropriate funds for these types of purposes. Why would
you utilize a sovereign wealth fund for that well, presumably
because it gives the individuals who are overseeing the sovereign
wealth fund more flexibility as to where investments can be made,
and presumably it would be done in a way that
(17:22):
does not require as much congressional authorization or potentially oversight.
So it's just a more degrees of flexibility I think
for those who would be overseeing that fund.
Speaker 4 (17:33):
Salar Garamoni is a professor at Penn State University who's
done some research on what a US sovereign wealth fund
would mean for the US. Well, the sovereign wealth funds
we hear about all have wealth. They come from locations
where there is mineral wealth or something that adds to
the treasury. The US has a big deficit. We don't
(17:53):
have sovereign wealth at this point.
Speaker 7 (17:56):
Yeah, it's interesting. There have been very very few, if
in fact, there may not have been any sovereign wealth
funds that were not created by some sort of a surplus.
And as you just noted, we have a deficit and
we have a national debt and no surplus. There might
be creative ways to gather assets and put it into
(18:19):
the portfolio of a sovereign wealth fund. But again I
would venture out and underline that work creative. So it
may not be intuitive, but I think there are ways.
Speaker 4 (18:31):
One major challenge that stands in the way of a
US sovereign wealth fund is the issue of the national debt,
which runs thirty six trillion dollars deep.
Speaker 7 (18:40):
One of the concerns about the proposed US Sovereign Wealth
Fund is that is it the most efficient way to
address the specific reasons for the creation of the sovereign
wealth fund. For instance, if the reason is to be
infrastructure spending, Congress has already allocated billions of dollars toward
(19:00):
trillions of dollars in fact, toward infrastructure spending. So yeah,
there is a concern that creating a brand new bureaucracy
to answer whatever the question might be, whether it's potential
social security shortfalls down the road, whether it's infrastructure projects,
would it make sense to divert the attention from paying
(19:22):
for those specific projects and going through a brand new
bureaucracy to address those issues.
Speaker 4 (19:29):
But there might be some benefits to a potential US
Sovereign Wealth fund.
Speaker 7 (19:33):
Ideally, if the long term interests financial interests of the
United States is the primary concern and not so much
driving geopolitical interests, and that can have legitimacy too. Infrastructure
projects potentially addressing potential shortcomings of social security and so
(19:54):
on could potentially be looked at a legitimate usage of
the Solemn Law Fund. However, there could also be the
possibility that the Solemn Wealth Fund's primary purpose it's not
so much the long term financial interests and the financial
outcomes of the fund itself, but being in line with
some other national interests, whether it's related to foreign policy
(20:18):
or whatever else.
Speaker 2 (20:20):
The case might be.
Speaker 4 (20:21):
Where could a fund like that invest, Would it work
to have it invest in the US, or would it
need to go overseas to avoid conflicts of interest.
Speaker 7 (20:30):
There are Solemn well funds that are created with specific
legal mandates of asset allocation strategies and even the asset
classes in which they can invest. Norwegian legal mandate, for instance,
for the Norwegian Solemn Well Fund is as specific as
saying that no more than five percent of the fund's
(20:52):
assets can be invested in asset class X, and there
are also percentages specifically these around areas of geography. So
ideally there should be a legal mandate transparently discussed that
limits that puts at least constraints on what the solemn
(21:13):
wealth fund can invest in. Ideally, a good solemn wealth
fund would be diversified across geographies, across asset classes, across
even etterteral asset managers, which is something that many solemn
wealth funds employ.
Speaker 4 (21:31):
The idea of a sovereign wealth fund is not new
to the twenty US states that have sovereign wealth funds,
including Alaska.
Speaker 8 (21:39):
It's a way for Alaskans to store their non renewable resource,
especially oil, mining, minerals, etc. So in nineteen seventy six,
the state legislature sent to the people of Alaska a
constitution resolution to constitutionalize the concept of a permanent fund
in our constitution, and that was successful. Fund was born
(22:00):
in seventy six. Nineteen eighty the Permanent Fund Dividend came
into being. This is all as a result of oil
that was discovered in Alaska and some really really smart
people that had a lot of foresight. The fear was
that we would spend all of our oil money and
we wouldn't have anything for future generations. What the permanent
Fund does is it captures the woryalties of oil and
(22:22):
minerals and puts them into a constitutionally protected fund. That
fund is called the CORPUS. It is invested into equities, private,
public equities, real estate, et cetera. And the idea is
to continually grow the fund so that over time we
will have we will have a fund that can help
future generations of Alaskans at the same time paying out
(22:45):
a dividend every year to Cerne Alaskans. About six hundred
and forty thousand Alaskans would receive a dividend this coming year.
Speaker 4 (22:51):
Just because it's a good idea for his state, that
doesn't mean Governor Dudley V sees a similar path forward
for the federal Sovereign Wealth Fund.
Speaker 8 (22:59):
I don't know if it makes sense to borrow money
to put into the fund, but I think what the
federal government can do is something similar with you know
what Alaska has done, and that is royalties on federal lands,
whether it's oil, whether it's gas, possibly timber mining. Any
income that's produced on federal lands could actually have some
of that go into a permanitive fund and grow a
(23:19):
permit fund, just like Alaska has. So, especially when you're
looking at non renewable resources oil and gas, it may
make sense and there is a lot of federal land.
There are a lot of offshore leases, on shore leases potentially,
and so you know, it is something to think about.
We're proud of the Permanive Fund because once again we
know that we have saved a considerable amount of money
(23:39):
for future generations.
Speaker 1 (23:41):
Coming up, the strange twisted tale of TikTok and President
Trump's version of the art of the deal national security style.
That's next on Wall Street Week. This is a story
(24:02):
where let's make a deal meets national security. TikTok has
been something of a pinata, caught between its appeal to
some one hundred and seventy million Americans and the US
government that has founded a national security risk. The question
is whether President Trump's deal making skills can reconcile the two.
Richard has A's centerview partner, spent over twenty years as
(24:23):
head of the Council of Foreign Relations and has seen
his fair share of wheeling and dealing over national security.
What is the intersection between national security in one hand
and commercial transactions such as TikTok on the other.
Speaker 9 (24:37):
Well, TikTok's a special one in part because of the
data that could be captured and transferred. Also the content.
I'm always struck by the difference between TikTok China and
TikTok America. Let me just say, TikTok America is the
equivalent of drinking several cans of soda to day and
eating an awful lot of candy, whereas TikTok China is
much more spinach and educational. Plus is the potential obviously
(25:00):
for political bias and the rest. So I think that's
influence of security, both in the data transfer way potentially
as well as in the content way, and I think
it makes the larger point than in many cases, economic
transactions do have a national security dimension, whether it's direct
or indirectly.
Speaker 1 (25:18):
Given that dimension of national security in normal commercial transactions,
where should the line be, I mean, how far should
the government go and really interfering with commerce.
Speaker 9 (25:29):
It's a good question. It's hard to give you a
rule of thumb that's in every instance, but one auto
at least assess the national security implications. That's why, for example,
you have Syphius, the Committee on Foreign Investment in the
United States that looks at when you have incoming, say investment,
does that give this party access to something that could
give them therefore data or information or technologies that either
(25:52):
could give them a competitive advantage or even a strategic advantage.
I think that's a legitimate screen to have export controls,
or a second legitimate scree before we ship something overseas,
we want to say, again, is this giving someone a
competitive advantage? Could they take this technology, which almost all
technology is dual use, and use it either for internal
repression or could something that's meant for say a civilian airliner,
(26:15):
end up in the cockpit of a military fighter and
so forth. So I think the idea of asking those
questions is healthy. Probably also David, in this day and age,
it's not just security, but against foreign challenge, because of COVID,
because of natural disasters. At times, we've got to ask questions,
what do we need to either have domestically produced home shoring,
(26:37):
near shoring, friend shoring, when we put together supply change
of critical materials, and so forth. So I think we
again we need to ask to what degree are we
comfortable leaving ourselves somewhat vulnerable or open to the vicissitudes
of what other governments might do, or just simply what
may happen out there.
Speaker 1 (26:55):
The specific national security concerns surrounding TikTok range from the
data les from users in the US to the very
heart of its secret sauce its algorithm. Jennifer Huddleston is
a Senior Fellow of Tech Policy at the Cato Institute.
Speaker 10 (27:10):
When we look at some of the concerns around the
TikTok algorithm, for example, is this actually about TikTok, or
actually about TikTok's tice to China, or is this about
the way that we see young people using social media
more generally that may be causing some discomfort from older generations.
What the national security interest is is actually a bit
of a debate. One of the things that has been
(27:32):
pointed to are questions around the data and particularly how
it relates to a Chinese national security law, and concerns
that in a way that the Chinese government could lean
on TikTok's parent company, that could lean on TikTok and
Singapore that could lean on TikTok us, that could force
the data on the American users to be given to
(27:55):
the Chinese Communist Party. But we've also heard it concerns
expressed more or around the TikTok algorithm or around the
specific speech on TikTok that some policymakers are considering to
be propaganda. And the question here then that is raised
is how do we balance potential concerns about national security,
(28:15):
particularly related to the data elements, with concerns around free speech,
Because it's important to remember that not only are we
talking about TikTok and TikTok's expression rights, we're talking about
the expression rights of the millions of American users.
Speaker 1 (28:31):
If those are the potential national security interests the data
and the algorithm, can we in the United States protect
those national security interests if Byiteden still has any control,
any ownership at all, of the algorithm or the data.
Speaker 10 (28:45):
This has been one of the important elements of the debate.
Are there less restrictive means that could address the potential
national security concerns while not having as significant of an
impact on the speech, particularly of the American US of
this platform. So some of the things that have been
proposed include things like banning TikTok from government devices. This
(29:07):
is something we've seen done at both a state and
federal level that has largely been upheld to ensure that
that data perhaps is more secure. There's also been conversations
around what was called Project Texas, where TikTok offered to
localize the American data on Oracle servers in Texas and
allow the US government additional oversight over that data. The
(29:29):
other question about the data is is this data actually
any Is this a particular risk when it comes to
TikTok's data. Much of this data is already available on
the market from data brokers. We've also seen that the
Chinese have engaged in numerous hacks to obtain American data.
So is the risk of TikTok any bigger than the
(29:49):
data privacy or data security risk out there more generally?
And is this something that instead of talking about TikTok,
we should be talking about data security and data privacy
more broadly.
Speaker 1 (30:00):
The focus is very much on the administration of President
Trump right now. But the statute came from Congress. Does
the Congressional statute have a threshold ownership that if you
get it down to a certain number, a certain percentage,
then it's okay.
Speaker 10 (30:15):
So there are percentages in the Congressional Statute. But I
think what's more interesting is this question of what does
a qualified divestiture look like? Because the law from Congress
is very vague on what would actually have to be divested.
Are we talking about TikTok's brand, Are we talking about
TikTok's algorithm? Are we talking about the data itself? Because
(30:36):
this national security concern has also been rather vague.
Speaker 1 (30:39):
Does the president have the ability to extend seventy five days?
The statute had an initial extension, but I don't remember
a second extension, So this has.
Speaker 10 (30:48):
Been a really good question. Because the statute had a
ninety day extension. There were also actions from the Department
of Justice and a letter sent to some of the
American companies that could have been subject to the penalties.
That seems to have been around the potential non enforcement
of those penalties, ensuring that the app was still available
to the Americans who have used it for expression. But
(31:11):
as you mentioned, we've seen this done by executive order
and executive order kind of like hitting the snooze button
again and again, which doesn't actually get to that underlying
question and those underlying issues that are so important to
this debate. Regardless of what happens to TikTok, at the
heart of this law is the question of how do
we balance potential national security concerns with the speech rights
(31:33):
of millions of Americans, particularly on a popular social media app.
But more generally, what sort of authority do we allow
the executive to have to intervene into the app store market,
to intervene potentially into the speech rights of millions of Americans.
Even if this continues to be done by executive order,
even if TikTok lives to see the day, we haven't
(31:55):
necessarily settled that important debate.
Speaker 9 (31:57):
There is, in principle a deal. Clearly by the way
President Trump wants a deal for whatever set of reasons.
I tend not to be in the business of ascribing motives,
but he is clearly anxious to have a deal. He
keeps kicking down the stream, down the road, the deadline here,
But I would just say, whatever the details are at
the end of the day. In terms of data and content,
(32:17):
I would also love to see reciprocity, though if we
do end up with control over both data and content
then we don't need it. Then essentially we set up
a parallel situation with China.
Speaker 1 (32:29):
Though everyone is focused on the effect of the ban
on TikTok, the statute itself is directed not at TikTok
but at US companies. Including access to the social media
site over their products.
Speaker 10 (32:41):
I think it's important to also remember when we're talking
about this particular law, that the burden of the law
actually falls on American companies. The law says that TikTok
must divest from its parent company by dance or it
otherwise bans the distribution, maintenance, or updating of the app.
That means those that are actually facing penalties are not
TikTok itself, but our companies like Apple and Google, who
(33:05):
if they continued to host the app, would be the
ones that would potentially be facing penalties that have up
to a five year statute of limitations that could extend
beyond this current administration.
Speaker 1 (33:15):
And the TikTok case raises some big questions about reciprocity,
both in the way that China treats US social media
companies and in what other countries might do to regulate
US companies.
Speaker 9 (33:27):
It's not like we American social media companies have accessed
to China in terms of asking them to transfer data
or allowing us to control content. So this is incredibly
one side.
Speaker 1 (33:37):
You raise the reciprocity issue going back and forth between
US and China. Are we opening up the door potentially
to other countries saying way a second, we don't want
you to own the data, the algorithm when you're coming
into our country.
Speaker 9 (33:49):
Quite possibly, And I think the fact that the United
States has been adopting a more nationalist position, more unilateralist
position on tariffs and many other aspects of policy on
America first approach, the Europeans clearly do not feel special
to say the least. So yes, I think we have
to expect that we're going to move into a world now,
(34:11):
we're moving towards a world where alliances and partnerships count
for less, and others are going to treat us more
at arm's length and set up the kind of rules
of visa v the United States that we're increasingly setting
up Visa VI.
Speaker 1 (34:24):
Them coming up. We've all been caught in those maddening
flight delays. Is there any way we can save all
of us some of that time and aggravation. We bring
you several possible alternatives. Next on Wall Street Week, this
(34:51):
is a story about kicking the can down the road.
Big changes in big systems are never easy, and when
it comes to the way we met manage our airspace,
one thing is certain. The system is understrained and has
long needed and overhaul, but for the past thirty years
it has been easier to kick that can down the road.
Speaker 5 (35:12):
Global tech outages linked to Microsoft and CrowdStrike causing widespread
business disruptions.
Speaker 11 (35:17):
Thousands of flights being delayed or canceled. I mean this
is an industry that has had a lot of post
COVID issues and a lot of issues with investing into
this exact type of infrastructure.
Speaker 1 (35:27):
In twenty twenty four, airlines reported four hundred and thirty
seven tarmac delays of more than three hours on domestic flights,
up from two hundred and eighty nine in twenty twenty three.
Of all flights last year, more than five percent were
delayed because of national aviation system issues. Safety, of course,
is the top priority in regulating flights, and sadly this
(35:49):
year airline safety has been in the news too often.
A passenger play and has collided with a military helicopter
midair in Washington, DC.
Speaker 11 (35:58):
You know that sixty four were on that American Airlines
commercial flight and three were on that US Army Blackhawk helicopter.
Speaker 1 (36:06):
But despite some recent incidents, flying within the United States
is remarkably safe. Elaine Chow was the Transportation Secretary under
President Trump during his first term.
Speaker 11 (36:17):
Well, I think it's important for people to know that
we have literally the safest system in the world and
that the United States is still considered basically the gold standard,
but clearly technology changes and maintenance and repairs need to
keep up.
Speaker 1 (36:34):
Edward Bollen agree is that the system is safe, but
that we need to make some investments. He's the head
of the association representing the private business side of the
aviation industry.
Speaker 12 (36:45):
We know definitively that is the safest, the most efficient,
the largest, and the most diverse air transportation system in
the world by a lot. But we need to be
investing in the people, the facility, and the equipment to
make sure that we are able to continue to respond
(37:06):
in a dynamic way.
Speaker 1 (37:08):
Federal air traffic control in the US began in nineteen
forty one, and computer technology was added to radars in
the nineteen sixties thanks to IBM. In February nineteen eighty two,
the FAA released its first comprehensive plan for improving ATC services.
This system has been in place for some time now.
(37:28):
Was it built for this much load and how much
more loaders are going to be in the future.
Speaker 11 (37:32):
Well, I think the load is going to continue because
air travel has become democratized ever since nineteen seventy eight
with the deregulatory aspects of air traffic, passenger traffic, and
so it's almost as each is to go on an
airplane as it would be to let's say, a bus,
and so more and more people are going and now
we have over billion passengers, and they're accessing the system
(37:55):
that clearly was not prepared for even a fraction of
the current volume.
Speaker 1 (38:01):
According to the FAA's preliminary data, there were sixteen point
eight million flights in the nation's airspace in twenty twenty four,
an increase of about five hundred thousand from twenty twenty three.
Speaker 11 (38:13):
It's making air travel much more difficult for the consumer.
How many of us can say within a month that
we have never been caught in a delay or some
kind of cancellation, And this is despite the best efforts
of air traffic controllers and of airlines who want to
fly frequently so that they can provide a steady service
(38:34):
to their passengers.
Speaker 1 (38:36):
It's more than just the inconvenience of all those delays.
The government has taken a hard look at the existing
air traffic control system and found it to be unsustainable.
Speaker 13 (38:47):
I faded this risk assessment to understand of the existing systems,
which ones are unsustainable, which ones might be potentially unsustainable
and need investments to modernize them. Many of these systems
are each and face long standing challenges.
Speaker 1 (39:02):
Heather Kraus is the managing director of Physical Infrastructure at
the GAO, which produced a report on the overall state
of the air traffic control system in the United States
in March. She testified before Congress about its findings.
Speaker 13 (39:17):
So around seventeen we found to be somewhat concerning in
terms of the timelines that they have, as well as
four of those systems not having baselines, so not knowing
when those systems will be delivered. So important that FA
focuses on what are the most critical systems, how are
they going to mitigate risks in the meantime as they
are working through the modernization efforts and then delivering on
(39:40):
those modernization plans.
Speaker 1 (39:43):
Washington has been talking about updating the system for at
least forty years. It's commonly referred to as next gen
short for next generation.
Speaker 13 (39:52):
So in terms of next gen it's already being deployed
in the National Airspace system, and so the ways that
it's improving operation is through various phases of flight and
really through kind of some key areas. So improvements in communications,
so for example, communications between pilots and controllers and digitizing
(40:13):
some of those communications. Navigation improvements to create more efficient
routes for airplanes to travel from their arrival to destination,
which leads to efficiency benefits as well as fuel savings.
There's things also automations, so there's new automation tools being
added to the system to support the air traffic controllers
(40:34):
management again of the efficient and safe operation of the
national airspace system, as well as surveillance, so having better
situational awareness and ability to more accurately track where aircrafts
are at. All of those efforts kind of come together,
and the real goal of next Gen is to kind
of get to what's called trajectory based operations. What that
(40:55):
is is really additional data and tools for the controllers
to better manage and sequence flights from arrival to departure.
So again controllers they're managing flights with you know, altitude, longitude,
and latitude, and these tools offer the additional kind of
considering time as another element of managing the flight, so
(41:16):
controllers would have an ability to know where and at
what time aircraft are at key points in a route,
taking into consideration conditions and other things even before an
aircraft takes off.
Speaker 1 (41:29):
The long runway for modernizing our air traffic control system
is a real problem as technology continues to evolve.
Speaker 11 (41:37):
By the time that the air traffic controllers can get
a new piece of equipment, it's about seven or eight
years old. It's not as modern as there should be.
It took forever for the air traffic control system to
have a GPS system.
Speaker 1 (41:50):
If everyone agrees that the air traffic control system needs
to move to the next generation, why has it taken
four decades to get to where we need to be.
First of all, it is complex and requires great care
to make sure we get it right.
Speaker 12 (42:06):
The systems themselves have to be certified, and that means
they have to have a degree of redundancy and resilience
that is different than what you would see in a
lot of off the shelf technologies. It's got to be integrated,
it's got to be certified. So that's part of it.
Speaker 1 (42:25):
That's part of it. But far from the only part.
What about the controllers who run the system. There's general
consensus about their being outstanding professionals.
Speaker 11 (42:35):
It's a tribute to the men and women of the
air traffic control that they can keep the system kind
of safe and maintained with their expertise.
Speaker 12 (42:46):
Our air traffic controllers are outstanding. They go through a
very rigorous training process and it takes years.
Speaker 1 (42:55):
But as good as the controllers are, we need more
of them. We're air traffic controllers in the United States
in twenty twenty four than in twenty eleven.
Speaker 12 (43:05):
We need to make sure that we are getting enough
that are being put into place. Currently we're not where
we need to be. We're anywhere from twenty to twenty
five percent behind where we would like to be.
Speaker 11 (43:19):
Some people are saying we should increase the age of
air traffic controllers. Right now, they're maxed out at fifty
six years old. You know, at fifty six these days,
we're in much better health than what we used to
be a generation ago, and so for those that want
to work beyond fifty six, we should be able to
allow them to have that option, and currently they don't.
Speaker 1 (43:42):
Even more than the need for more air traffic controllers.
Is the need to expedite the procurement process for getting
them the equipment that they need and get it to
them faster.
Speaker 12 (43:53):
The procurement is a challenging We get money that needs
to be spent on an annual basis. We'd like to
see that be more multi year so that we can
have more money upfront and be able to carry that
through in a multi year process.
Speaker 1 (44:11):
Secretary Chow agrees that it takes far too long to
get the latest equipment purchased and deployed, but that it's
more than just streamlining things. The problem may be in
the very structure of the system.
Speaker 11 (44:24):
In twenty seventeen, there was an effort under the first
Trump administration to reorganize the structure of the air traffic
control and basically it would take the air traffic control.
It's not privatizing it because it's being put into a
nonprofit organization, but rather I call it liberating the FAA
(44:45):
and the air traffic Control, basically liberating the air traffic
control from FA and even more succinctly, the federal government,
so that air traffic control, like many others structured like
this around the world, would be their own entity. They
would have their own nonprofit status, they would have their
(45:07):
own board of directors, but more importantly, they would use
their own funding of resources and be able to use
it for long term planning.
Speaker 1 (45:18):
As you look around the world, has anyone done this?
Can we go to school in any other country in
the way they've.
Speaker 2 (45:23):
Handled this well.
Speaker 11 (45:24):
Canada is a primary example, Great Britain, Australia. There are
many other countries who have taken air traffic control out
of the government process and put it separately in its
own nonprofit organization. And by doing that it allows this
nonprofit air traffic control system to plan ahead, have control
(45:48):
over one hundred percent of its budget, and be able
to purchase equipment at a very timely rate and very
efficiently as well.
Speaker 1 (45:58):
Not everyone agrees with Secretary about splitting the safety responsibilities
from the day to day operations and taking the latter
out of the government altogether.
Speaker 12 (46:08):
What we want to do is make sure the United
States stays the world leader. We can do that by
looking at what they're doing in other countries and what
has candidly not worked well. So when we look at
countries around the world like Canada, the United Kingdom, Australia,
New Zealand that have privatized their air traffic control system,
(46:30):
we see a number of challenges in terms of their
air traffic controllers, their technology, their delays, and most importantly,
safety issues.
Speaker 1 (46:41):
Whatever the changes, no one seems to doubt that they
need to come and need to come sooner rather than
later for the sake of the airline business, the convenience
of all of us flying, and ultimately to make sure
the US maintains its safety record.
Speaker 12 (46:56):
It is key at all of the different parts of
the aviation system have really come together and sending a
message to Capitol Hill about what we can do to
advance our air transportation system. It's not enough to be
the safest and the most efficient, the largest, and the
most diverse in the world.
Speaker 13 (47:16):
It is still safe to fly. That said, continued reliance
on aging systems does diminish the margin of safety and
adds additional stress to the national airspace system, which is
really why it's important that FAA improve the management and
oversight of its modernization efforts.
Speaker 1 (47:36):
That does it for us. Here at Wall Street Week,
I'm David Weston. This is Bloomberg. See you next week
for more stories of capitalism.
This is Wall Street Week. I'm David Weston bringing you
stories of capitalism. This week, we take a look at
the Trump administration's creativity in finding the cash for that
sovereign wealth fund the President wants so badly, plus national
security rubs up against economic policy and the art of
the deal in the saga of TikTok and getting the
(00:34):
planes to run on time, the state of the US
air traffic control system, and rival competing solutions for how
to make it better. But we start with President Trump's
big tariff announcement.
Speaker 2 (00:46):
My fellow Americans, this is Liberation.
Speaker 1 (00:49):
Day and what it may mean for the US economy.
Our special contributor Larry Summers of Harvard tells us the story.
Speaker 3 (00:58):
I think that we basically have a moment when we're
discussing whether the existing system of global economic integration, where
products are produced in supply chains across multiple countries, is
(01:20):
going to be something we're going to preserve with all
the efficiencies, all the benefits to consumers, all the increase
in their purchasing power that has brought, or.
Speaker 2 (01:33):
Whether we're going to try to turn the clock back
to where it was before the Second World War. And
if we turn it back.
Speaker 3 (01:44):
I think that's going to be enormously costly for the
United States and for the world economy.
Speaker 2 (01:51):
I think people may not just because there's always.
Speaker 3 (01:55):
A clamor about something, appreciate just how sweeping the proposals
the United States has made are. The United States has
traditionally been the world's leading advocate of open markets, to
keep our alliances together, to help the best American companies
(02:19):
and workers be able to export, to help American consumers
buy goods at low costs. We're talking now about the
United States imposing by far the highest tariffs of any
reasonable sized economy in the world. We're talking about the
(02:39):
United States having tariffs that are well above the level
of the Smooth Hawley tariffs that made the depression great.
And markets are processing that, and they're seeing.
Speaker 2 (02:55):
A big.
Speaker 3 (02:59):
Set of problems, a big set of reductions in economic
activity ahead.
Speaker 2 (03:05):
And the stock market.
Speaker 3 (03:07):
Only measures a very small fraction of the losses to
the economy from policies of this kind. There are also
big losses to workers, to consumers, and that's spread more broadly.
So we're going to make very important choices in the
(03:28):
weeks ahead. I hope we make them wisely, which will
involve back in off of the policies that have been announced.
Speaker 1 (03:40):
And that's what happened on Wednesday when President Trump announced
the ninety day suspension of most of the tariffs, with
the notable exception of China. You referred to history a
couple times before the World War Two, Smooth Holly, back
in nineteen thirty Does history give us any guidance about
where we might go? For example, Richard Nixon, who's president,
did take us off the gold standard, and there was
(04:01):
a fairly abrupt change in global economics as a result
of what President Nixon did. Have we had this sort
of abrupt departure from what has been before an economic
policy before.
Speaker 3 (04:12):
This is a much more abrupt change than when Richard
Nixon took us off the gold standard. Then there were
ten percent tariffs and those were just the Those were
the policy. Now the ten percent tariffs are treated as
some kind of base. The efforts of the United States
(04:37):
in the aftermath of what President Nixon did were to
cooperate with other countries, not to coerce other countries. So
I don't know that there really is a historical precedent
for what's being done now. And marcuts are speaking with
(05:00):
incredible clarity. Sometimes markets are hard to interpret, but this
is not one of those times.
Speaker 1 (05:07):
You have handled your fair share of crises, both of
the Treasure Department and Secretary, but also in the White
House during the Great Financial Crisis. From your experience, if
you were back in the White House or Treasure Department,
what would you be looking at as perhaps the next
shoe to drop? What would you be most concerned about
right now?
Speaker 3 (05:24):
I'd be I would have one concern if I was
in the White House or in the Treasury, and that
was my boss, the President of the United States.
Speaker 2 (05:35):
The main shoe that will drop or will not drop.
Speaker 3 (05:40):
Is the next thing the President says and the next.
Speaker 2 (05:44):
Order that he gives.
Speaker 3 (05:46):
And so I would be telling his political advisors that
this had nothing to do with what was being said
in other countries, this had nothing important to do with
business executives' actions in the United States, that if the
president was on this course, there would not be confidence,
(06:09):
and if the President signaled a willingness to adjust his course,
there would be.
Speaker 2 (06:15):
Confidence and show.
Speaker 3 (06:17):
The sole preoccupation that I would have if I were
in the government, would be with what the President was saying,
and frankly, As I've said before, David, there are a
very limited number of issues, and it has to be
(06:41):
immensely significant. That makes it the right and moral thing
for a senior official to resign because he is not
comfortable with the direction that the president is setting. And
the president is titled to have advisors who believe in
(07:03):
his policies, and individuals are entitled to follow their conscience,
and so there are moments when the right thing to
do is for a senior official to resign. When Elliott
Richardson resigned when given what he found to be an
unacceptable order from Richard Nixon, that was such an example.
(07:28):
When Cyrus Vance resigned because he didn't support what the
Carter administration was doing in Iran.
Speaker 2 (07:37):
That was an example.
Speaker 3 (07:40):
When a number of officials in President Clinton's administration were
not able to support his welfare reform bill, they chose
to resign.
Speaker 2 (07:54):
Frankly, if I were in an.
Speaker 3 (07:56):
Administration that we're pursuing policies as dangerous as these, I
would be thinking very carefully about whether I had the
ability to influence policies in a positive direction, or whether.
Speaker 2 (08:13):
The right thing for me to do is to resign.
Speaker 1 (08:16):
So, Larry, you and I have talked in the past
about the question whether, in fact various people into enemies
will absorb the increased terriffs so it won't actually to
a largerie fall in the consumer. What do you make
of the arguments that producers intermediaries may well absorb a
lot of the pain.
Speaker 3 (08:34):
I think they're unquestionably wrong. Economists have studied very carefully
the experience of the previous Trump tariff increases. For example,
they looked at washing machines that were tariffed versus dryers
that were not tarffed. They used a variety of different methodologies.
(08:58):
Essentially all the study concluded that prices go up with tariffs.
I've had the opportunity now to speak with senior executives
at a range of major retailers.
Speaker 2 (09:13):
That is certainly their view.
Speaker 3 (09:15):
I suspect when you start getting earnings calls and business
leaders are asked, will they absorb tariffs, will they be
able to push tariffs back on to their suppliers, or
do they expect tariffs to raise consumer prices? I suspect
they will acknowledge that the dominant effect will be on
(09:40):
consumer prices. And the important thing for people to understand
is that this moment is very different than the previous.
Speaker 2 (09:51):
Trump tariff moment.
Speaker 3 (09:52):
It comes at a moment when we already have some
inflation psychology, It comes at a moment when the economy
is pretty close to full employment. And most importantly, these
tariffs are more than ten times as large as the
tariffs that were put in place in twenty eighteen, and
therefore there's far less room for them to be absorbed
(10:16):
in the traditional margin of distributors or suppliers. So I
think it's fundamentally dishonest to make any claim that these
tariffs are going to do anything other than be passed
on in the form of higher.
Speaker 2 (10:35):
Prices coming up.
Speaker 1 (10:38):
President Trump wants a sovereign wealth fun of his very own,
but to get there, he's going to have to come
up with some cold, hard cash. We suggest where he
might look for it. This is a story about creative solutions.
(11:01):
What happens when a country wants a sovereign wealth fund
but doesn't have ready cash to put into it. The
Trump administration is willing to get creative to answer that question,
and our colleague Michael McKee brings us the story.
Speaker 2 (11:15):
We are going to monetize the asset side of the
US balance sheet for the American people.
Speaker 4 (11:21):
President Trump's executive order for a US sovereign wealth fund
will require the country to raise trillions of dollars and fast.
The biggest sovereign wealth fund in the world is Norway's
worth one point eight trillion. It's run by Nikolai Tangan.
Speaker 5 (11:35):
We have invested in nine thousand companies around the world.
We own one and a half percent of all the
equities in the world. I think you need money to
set it up. I don't think it makes sense to
borrow money to set it up.
Speaker 6 (11:45):
It's mostly countries that run a surplus, that have access
cash to spend, that don't need to deficit finance or
debt issue to finance their deficits.
Speaker 4 (11:55):
MC Command is the head of US rate strategy at
Bank of America.
Speaker 6 (12:00):
And the US does not meet any of those categories,
so it would be fairly non traditional across the countries
who are utilizing sovereign wealth funds today.
Speaker 4 (12:09):
Former tech investment banker from Morgan Stanley Michael Grimes is
tasked with setting up the new sovereign wealth fund. One
of the administration's suggestions to raise the money needed is
by monetizing the country's balance sheet. So what is on
that balance sheet?
Speaker 6 (12:25):
Well, the Treasury Secretary has talked about this certainly said
that they do. The current administration does want to try
and monetize the balance sheet to use all available financial resources. However,
we struggle to understand exactly what would want to be
monetized on the balance sheet.
Speaker 4 (12:42):
As of the fiscal year ending September twenty twenty four,
the US balance sheet shows total assets of five point
six trillion dollars coming from cash, property, investments, and inventory.
Also on that balance sheet two hundred metric tons of
gold valued at about seven hundred and sixty five billion dollars.
Speaker 6 (13:02):
So there is a relationship between the Treasury and FED
that has set the price of gold essentially nine times
lower than where the market is today, and there is
discussion out there about the possibility of remarking gold to
current value to then generate additional resources that the government
could utilize. Seems pretty easy and clean in one respect. However,
(13:26):
we believe it's going to be a bit more complicated
in practice. Current law suggests that Congress actually sets the
statutory rate on gold, So Congress would have to be
the ones who decide to accept a remarking of gold,
and we are not sure that Congress would necessarily want
to do that in order to allow the government to
have more resources that essentially don't need to be paid
(13:50):
for with deficits or higher treasury issuance that would free
up It would essentially create money to be spent in
the economy, almost in ways similar to QE, and in
an environment with still elevated inflation and some signs that
inflation expectations are ticking up, we are not so sure
Congress would want to move in that direction. Now, if
(14:11):
they choose not to monetize gold on the government's balance sheet,
then if you look at what other assets could be monetized,
they generally take you mostly to land, property, and other
natural resources.
Speaker 4 (14:26):
Plus, if you're talking about remarking gold, the technical way
of getting that money to the treasury.
Speaker 2 (14:32):
Goes through the Federal Reserve.
Speaker 4 (14:34):
You raise the risk of the FED seeing being seen
as politicized, and you raise the risk possibly of inflation.
Speaker 6 (14:41):
Absolutely, it would essentially impact the Fed's balance sheet in
very similar ways to how QE impacts the Fed's balance sheet. However,
in contrast to QE, you would have the asset that's changing,
not be securities holdings on the asset side of the
Fed's balance sheet, but you would have it be gold
that is increasing. And then if gold does increase, then
(15:04):
other liabilities on the Fed's balat sheet would naturally need
to grow. Those would presumably be commercial bank reserves, cash
that commercial banks hold, or cash in money markets in
the overnight reverse repo facility. Either way, it essentially grows
the size of the Fed's balance sheet. It grows the
money supply, and then that does mean that there are
greater risks that it could stoke inflation. It certainly gives
(15:26):
the government more resources to go out and spend on
whatever it might want to spend on, or to help
finance the deficit if there's lower revenue growth due to
a reduction in taxes. So yes, it runs the risk
of being inflationary, and we doubt that the FED would
be terribly comfortable with that, given where inflation is today
and where some measures of inflation expectations are going.
Speaker 4 (15:48):
President Trump has another idea to monetize the ballot sheet.
He's suggesting the government can sell off its federal buildings
and properties which fall under property, plant and equipment, coming
in at around one trillion dollars on the balance sheet.
Speaker 6 (16:03):
We could see a case where they might sell some
government buildings that are not being utilized, especially with some
of the other changes taking place in federal employment right now,
But it's hard for us to envision what else could
be monetized beyond that. Might they sell land that the
military is using, possibly, but presumably the military is using
that for good reason. Could they sell other natural resources
(16:25):
or treasures like the Statue of Liberty? I hope not,
but that is a theoretical possibility. So we're just not
really certain what else they would sell. But if you're
not going to remark gold, then there are very few
other options, we think, for them to monetize the asset
side of the government's balance sheet outside of maybe selling
(16:46):
some buildings.
Speaker 4 (16:47):
Is there a reason we would necessarily want to run
a sovereign wealth fund to do these kind of investments
instead of just doing the investments, say through the International
Development Bank or something like that. They've been taught for
years about an infrastructure bank that.
Speaker 6 (17:02):
Sort of thing, sure, or doing them through Congress having
Congress appropriate funds for these types of purposes. Why would
you utilize a sovereign wealth fund for that well, presumably
because it gives the individuals who are overseeing the sovereign
wealth fund more flexibility as to where investments can be made,
and presumably it would be done in a way that
(17:22):
does not require as much congressional authorization or potentially oversight.
So it's just a more degrees of flexibility I think
for those who would be overseeing that fund.
Speaker 4 (17:33):
Salar Garamoni is a professor at Penn State University who's
done some research on what a US sovereign wealth fund
would mean for the US. Well, the sovereign wealth funds
we hear about all have wealth. They come from locations
where there is mineral wealth or something that adds to
the treasury. The US has a big deficit. We don't
(17:53):
have sovereign wealth at this point.
Speaker 7 (17:56):
Yeah, it's interesting. There have been very very few, if
in fact, there may not have been any sovereign wealth
funds that were not created by some sort of a surplus.
And as you just noted, we have a deficit and
we have a national debt and no surplus. There might
be creative ways to gather assets and put it into
(18:19):
the portfolio of a sovereign wealth fund. But again I
would venture out and underline that work creative. So it
may not be intuitive, but I think there are ways.
Speaker 4 (18:31):
One major challenge that stands in the way of a
US sovereign wealth fund is the issue of the national debt,
which runs thirty six trillion dollars deep.
Speaker 7 (18:40):
One of the concerns about the proposed US Sovereign Wealth
Fund is that is it the most efficient way to
address the specific reasons for the creation of the sovereign
wealth fund. For instance, if the reason is to be
infrastructure spending, Congress has already allocated billions of dollars toward
(19:00):
trillions of dollars in fact, toward infrastructure spending. So yeah,
there is a concern that creating a brand new bureaucracy
to answer whatever the question might be, whether it's potential
social security shortfalls down the road, whether it's infrastructure projects,
would it make sense to divert the attention from paying
(19:22):
for those specific projects and going through a brand new
bureaucracy to address those issues.
Speaker 4 (19:29):
But there might be some benefits to a potential US
Sovereign Wealth fund.
Speaker 7 (19:33):
Ideally, if the long term interests financial interests of the
United States is the primary concern and not so much
driving geopolitical interests, and that can have legitimacy too. Infrastructure
projects potentially addressing potential shortcomings of social security and so
(19:54):
on could potentially be looked at a legitimate usage of
the Solemn Law Fund. However, there could also be the
possibility that the Solemn Wealth Fund's primary purpose it's not
so much the long term financial interests and the financial
outcomes of the fund itself, but being in line with
some other national interests, whether it's related to foreign policy
(20:18):
or whatever else.
Speaker 2 (20:20):
The case might be.
Speaker 4 (20:21):
Where could a fund like that invest, Would it work
to have it invest in the US, or would it
need to go overseas to avoid conflicts of interest.
Speaker 7 (20:30):
There are Solemn well funds that are created with specific
legal mandates of asset allocation strategies and even the asset
classes in which they can invest. Norwegian legal mandate, for instance,
for the Norwegian Solemn Well Fund is as specific as
saying that no more than five percent of the fund's
(20:52):
assets can be invested in asset class X, and there
are also percentages specifically these around areas of geography. So
ideally there should be a legal mandate transparently discussed that
limits that puts at least constraints on what the solemn
(21:13):
wealth fund can invest in. Ideally, a good solemn wealth
fund would be diversified across geographies, across asset classes, across
even etterteral asset managers, which is something that many solemn
wealth funds employ.
Speaker 4 (21:31):
The idea of a sovereign wealth fund is not new
to the twenty US states that have sovereign wealth funds,
including Alaska.
Speaker 8 (21:39):
It's a way for Alaskans to store their non renewable resource,
especially oil, mining, minerals, etc. So in nineteen seventy six,
the state legislature sent to the people of Alaska a
constitution resolution to constitutionalize the concept of a permanent fund
in our constitution, and that was successful. Fund was born
(22:00):
in seventy six. Nineteen eighty the Permanent Fund Dividend came
into being. This is all as a result of oil
that was discovered in Alaska and some really really smart
people that had a lot of foresight. The fear was
that we would spend all of our oil money and
we wouldn't have anything for future generations. What the permanent
Fund does is it captures the woryalties of oil and
(22:22):
minerals and puts them into a constitutionally protected fund. That
fund is called the CORPUS. It is invested into equities, private,
public equities, real estate, et cetera. And the idea is
to continually grow the fund so that over time we
will have we will have a fund that can help
future generations of Alaskans at the same time paying out
(22:45):
a dividend every year to Cerne Alaskans. About six hundred
and forty thousand Alaskans would receive a dividend this coming year.
Speaker 4 (22:51):
Just because it's a good idea for his state, that
doesn't mean Governor Dudley V sees a similar path forward
for the federal Sovereign Wealth Fund.
Speaker 8 (22:59):
I don't know if it makes sense to borrow money
to put into the fund, but I think what the
federal government can do is something similar with you know
what Alaska has done, and that is royalties on federal lands,
whether it's oil, whether it's gas, possibly timber mining. Any
income that's produced on federal lands could actually have some
of that go into a permanitive fund and grow a
(23:19):
permit fund, just like Alaska has. So, especially when you're
looking at non renewable resources oil and gas, it may
make sense and there is a lot of federal land.
There are a lot of offshore leases, on shore leases potentially,
and so you know, it is something to think about.
We're proud of the Permanive Fund because once again we
know that we have saved a considerable amount of money
(23:39):
for future generations.
Speaker 1 (23:41):
Coming up, the strange twisted tale of TikTok and President
Trump's version of the art of the deal national security style.
That's next on Wall Street Week. This is a story
(24:02):
where let's make a deal meets national security. TikTok has
been something of a pinata, caught between its appeal to
some one hundred and seventy million Americans and the US
government that has founded a national security risk. The question
is whether President Trump's deal making skills can reconcile the two.
Richard has A's centerview partner, spent over twenty years as
(24:23):
head of the Council of Foreign Relations and has seen
his fair share of wheeling and dealing over national security.
What is the intersection between national security in one hand
and commercial transactions such as TikTok on the other.
Speaker 9 (24:37):
Well, TikTok's a special one in part because of the
data that could be captured and transferred. Also the content.
I'm always struck by the difference between TikTok China and
TikTok America. Let me just say, TikTok America is the
equivalent of drinking several cans of soda to day and
eating an awful lot of candy, whereas TikTok China is
much more spinach and educational. Plus is the potential obviously
(25:00):
for political bias and the rest. So I think that's
influence of security, both in the data transfer way potentially
as well as in the content way, and I think
it makes the larger point than in many cases, economic
transactions do have a national security dimension, whether it's direct
or indirectly.
Speaker 1 (25:18):
Given that dimension of national security in normal commercial transactions,
where should the line be, I mean, how far should
the government go and really interfering with commerce.
Speaker 9 (25:29):
It's a good question. It's hard to give you a
rule of thumb that's in every instance, but one auto
at least assess the national security implications. That's why, for example,
you have Syphius, the Committee on Foreign Investment in the
United States that looks at when you have incoming, say investment,
does that give this party access to something that could
give them therefore data or information or technologies that either
(25:52):
could give them a competitive advantage or even a strategic advantage.
I think that's a legitimate screen to have export controls,
or a second legitimate scree before we ship something overseas,
we want to say, again, is this giving someone a
competitive advantage? Could they take this technology, which almost all
technology is dual use, and use it either for internal
repression or could something that's meant for say a civilian airliner,
(26:15):
end up in the cockpit of a military fighter and
so forth. So I think the idea of asking those
questions is healthy. Probably also David, in this day and age,
it's not just security, but against foreign challenge, because of COVID,
because of natural disasters. At times, we've got to ask questions,
what do we need to either have domestically produced home shoring,
(26:37):
near shoring, friend shoring, when we put together supply change
of critical materials, and so forth. So I think we
again we need to ask to what degree are we
comfortable leaving ourselves somewhat vulnerable or open to the vicissitudes
of what other governments might do, or just simply what
may happen out there.
Speaker 1 (26:55):
The specific national security concerns surrounding TikTok range from the
data les from users in the US to the very
heart of its secret sauce its algorithm. Jennifer Huddleston is
a Senior Fellow of Tech Policy at the Cato Institute.
Speaker 10 (27:10):
When we look at some of the concerns around the
TikTok algorithm, for example, is this actually about TikTok, or
actually about TikTok's tice to China, or is this about
the way that we see young people using social media
more generally that may be causing some discomfort from older generations.
What the national security interest is is actually a bit
of a debate. One of the things that has been
(27:32):
pointed to are questions around the data and particularly how
it relates to a Chinese national security law, and concerns
that in a way that the Chinese government could lean
on TikTok's parent company, that could lean on TikTok and
Singapore that could lean on TikTok us, that could force
the data on the American users to be given to
(27:55):
the Chinese Communist Party. But we've also heard it concerns
expressed more or around the TikTok algorithm or around the
specific speech on TikTok that some policymakers are considering to
be propaganda. And the question here then that is raised
is how do we balance potential concerns about national security,
(28:15):
particularly related to the data elements, with concerns around free speech,
Because it's important to remember that not only are we
talking about TikTok and TikTok's expression rights, we're talking about
the expression rights of the millions of American users.
Speaker 1 (28:31):
If those are the potential national security interests the data
and the algorithm, can we in the United States protect
those national security interests if Byiteden still has any control,
any ownership at all, of the algorithm or the data.
Speaker 10 (28:45):
This has been one of the important elements of the debate.
Are there less restrictive means that could address the potential
national security concerns while not having as significant of an
impact on the speech, particularly of the American US of
this platform. So some of the things that have been
proposed include things like banning TikTok from government devices. This
(29:07):
is something we've seen done at both a state and
federal level that has largely been upheld to ensure that
that data perhaps is more secure. There's also been conversations
around what was called Project Texas, where TikTok offered to
localize the American data on Oracle servers in Texas and
allow the US government additional oversight over that data. The
(29:29):
other question about the data is is this data actually
any Is this a particular risk when it comes to
TikTok's data. Much of this data is already available on
the market from data brokers. We've also seen that the
Chinese have engaged in numerous hacks to obtain American data.
So is the risk of TikTok any bigger than the
(29:49):
data privacy or data security risk out there more generally?
And is this something that instead of talking about TikTok,
we should be talking about data security and data privacy
more broadly.
Speaker 1 (30:00):
The focus is very much on the administration of President
Trump right now. But the statute came from Congress. Does
the Congressional statute have a threshold ownership that if you
get it down to a certain number, a certain percentage,
then it's okay.
Speaker 10 (30:15):
So there are percentages in the Congressional Statute. But I
think what's more interesting is this question of what does
a qualified divestiture look like? Because the law from Congress
is very vague on what would actually have to be divested.
Are we talking about TikTok's brand, Are we talking about
TikTok's algorithm? Are we talking about the data itself? Because
(30:36):
this national security concern has also been rather vague.
Speaker 1 (30:39):
Does the president have the ability to extend seventy five days?
The statute had an initial extension, but I don't remember
a second extension, So this has.
Speaker 10 (30:48):
Been a really good question. Because the statute had a
ninety day extension. There were also actions from the Department
of Justice and a letter sent to some of the
American companies that could have been subject to the penalties.
That seems to have been around the potential non enforcement
of those penalties, ensuring that the app was still available
to the Americans who have used it for expression. But
(31:11):
as you mentioned, we've seen this done by executive order
and executive order kind of like hitting the snooze button
again and again, which doesn't actually get to that underlying
question and those underlying issues that are so important to
this debate. Regardless of what happens to TikTok, at the
heart of this law is the question of how do
we balance potential national security concerns with the speech rights
(31:33):
of millions of Americans, particularly on a popular social media app.
But more generally, what sort of authority do we allow
the executive to have to intervene into the app store market,
to intervene potentially into the speech rights of millions of Americans.
Even if this continues to be done by executive order,
even if TikTok lives to see the day, we haven't
(31:55):
necessarily settled that important debate.
Speaker 9 (31:57):
There is, in principle a deal. Clearly by the way
President Trump wants a deal for whatever set of reasons.
I tend not to be in the business of ascribing motives,
but he is clearly anxious to have a deal. He
keeps kicking down the stream, down the road, the deadline here,
But I would just say, whatever the details are at
the end of the day. In terms of data and content,
(32:17):
I would also love to see reciprocity, though if we
do end up with control over both data and content
then we don't need it. Then essentially we set up
a parallel situation with China.
Speaker 1 (32:29):
Though everyone is focused on the effect of the ban
on TikTok, the statute itself is directed not at TikTok
but at US companies. Including access to the social media
site over their products.
Speaker 10 (32:41):
I think it's important to also remember when we're talking
about this particular law, that the burden of the law
actually falls on American companies. The law says that TikTok
must divest from its parent company by dance or it
otherwise bans the distribution, maintenance, or updating of the app.
That means those that are actually facing penalties are not
TikTok itself, but our companies like Apple and Google, who
(33:05):
if they continued to host the app, would be the
ones that would potentially be facing penalties that have up
to a five year statute of limitations that could extend
beyond this current administration.
Speaker 1 (33:15):
And the TikTok case raises some big questions about reciprocity,
both in the way that China treats US social media
companies and in what other countries might do to regulate
US companies.
Speaker 9 (33:27):
It's not like we American social media companies have accessed
to China in terms of asking them to transfer data
or allowing us to control content. So this is incredibly
one side.
Speaker 1 (33:37):
You raise the reciprocity issue going back and forth between
US and China. Are we opening up the door potentially
to other countries saying way a second, we don't want
you to own the data, the algorithm when you're coming
into our country.
Speaker 9 (33:49):
Quite possibly, And I think the fact that the United
States has been adopting a more nationalist position, more unilateralist
position on tariffs and many other aspects of policy on
America first approach, the Europeans clearly do not feel special
to say the least. So yes, I think we have
to expect that we're going to move into a world now,
(34:11):
we're moving towards a world where alliances and partnerships count
for less, and others are going to treat us more
at arm's length and set up the kind of rules
of visa v the United States that we're increasingly setting
up Visa VI.
Speaker 1 (34:24):
Them coming up. We've all been caught in those maddening
flight delays. Is there any way we can save all
of us some of that time and aggravation. We bring
you several possible alternatives. Next on Wall Street Week, this
(34:51):
is a story about kicking the can down the road.
Big changes in big systems are never easy, and when
it comes to the way we met manage our airspace,
one thing is certain. The system is understrained and has
long needed and overhaul, but for the past thirty years
it has been easier to kick that can down the road.
Speaker 5 (35:12):
Global tech outages linked to Microsoft and CrowdStrike causing widespread
business disruptions.
Speaker 11 (35:17):
Thousands of flights being delayed or canceled. I mean this
is an industry that has had a lot of post
COVID issues and a lot of issues with investing into
this exact type of infrastructure.
Speaker 1 (35:27):
In twenty twenty four, airlines reported four hundred and thirty
seven tarmac delays of more than three hours on domestic flights,
up from two hundred and eighty nine in twenty twenty three.
Of all flights last year, more than five percent were
delayed because of national aviation system issues. Safety, of course,
is the top priority in regulating flights, and sadly this
(35:49):
year airline safety has been in the news too often.
A passenger play and has collided with a military helicopter
midair in Washington, DC.
Speaker 11 (35:58):
You know that sixty four were on that American Airlines
commercial flight and three were on that US Army Blackhawk helicopter.
Speaker 1 (36:06):
But despite some recent incidents, flying within the United States
is remarkably safe. Elaine Chow was the Transportation Secretary under
President Trump during his first term.
Speaker 11 (36:17):
Well, I think it's important for people to know that
we have literally the safest system in the world and
that the United States is still considered basically the gold standard,
but clearly technology changes and maintenance and repairs need to
keep up.
Speaker 1 (36:34):
Edward Bollen agree is that the system is safe, but
that we need to make some investments. He's the head
of the association representing the private business side of the
aviation industry.
Speaker 12 (36:45):
We know definitively that is the safest, the most efficient,
the largest, and the most diverse air transportation system in
the world by a lot. But we need to be
investing in the people, the facility, and the equipment to
make sure that we are able to continue to respond
(37:06):
in a dynamic way.
Speaker 1 (37:08):
Federal air traffic control in the US began in nineteen
forty one, and computer technology was added to radars in
the nineteen sixties thanks to IBM. In February nineteen eighty two,
the FAA released its first comprehensive plan for improving ATC services.
This system has been in place for some time now.
(37:28):
Was it built for this much load and how much
more loaders are going to be in the future.
Speaker 11 (37:32):
Well, I think the load is going to continue because
air travel has become democratized ever since nineteen seventy eight
with the deregulatory aspects of air traffic, passenger traffic, and
so it's almost as each is to go on an
airplane as it would be to let's say, a bus,
and so more and more people are going and now
we have over billion passengers, and they're accessing the system
(37:55):
that clearly was not prepared for even a fraction of
the current volume.
Speaker 1 (38:01):
According to the FAA's preliminary data, there were sixteen point
eight million flights in the nation's airspace in twenty twenty four,
an increase of about five hundred thousand from twenty twenty three.
Speaker 11 (38:13):
It's making air travel much more difficult for the consumer.
How many of us can say within a month that
we have never been caught in a delay or some
kind of cancellation, And this is despite the best efforts
of air traffic controllers and of airlines who want to
fly frequently so that they can provide a steady service
(38:34):
to their passengers.
Speaker 1 (38:36):
It's more than just the inconvenience of all those delays.
The government has taken a hard look at the existing
air traffic control system and found it to be unsustainable.
Speaker 13 (38:47):
I faded this risk assessment to understand of the existing systems,
which ones are unsustainable, which ones might be potentially unsustainable
and need investments to modernize them. Many of these systems
are each and face long standing challenges.
Speaker 1 (39:02):
Heather Kraus is the managing director of Physical Infrastructure at
the GAO, which produced a report on the overall state
of the air traffic control system in the United States
in March. She testified before Congress about its findings.
Speaker 13 (39:17):
So around seventeen we found to be somewhat concerning in
terms of the timelines that they have, as well as
four of those systems not having baselines, so not knowing
when those systems will be delivered. So important that FA
focuses on what are the most critical systems, how are
they going to mitigate risks in the meantime as they
are working through the modernization efforts and then delivering on
(39:40):
those modernization plans.
Speaker 1 (39:43):
Washington has been talking about updating the system for at
least forty years. It's commonly referred to as next gen
short for next generation.
Speaker 13 (39:52):
So in terms of next gen it's already being deployed
in the National Airspace system, and so the ways that
it's improving operation is through various phases of flight and
really through kind of some key areas. So improvements in communications,
so for example, communications between pilots and controllers and digitizing
(40:13):
some of those communications. Navigation improvements to create more efficient
routes for airplanes to travel from their arrival to destination,
which leads to efficiency benefits as well as fuel savings.
There's things also automations, so there's new automation tools being
added to the system to support the air traffic controllers
(40:34):
management again of the efficient and safe operation of the
national airspace system, as well as surveillance, so having better
situational awareness and ability to more accurately track where aircrafts
are at. All of those efforts kind of come together,
and the real goal of next Gen is to kind
of get to what's called trajectory based operations. What that
(40:55):
is is really additional data and tools for the controllers
to better manage and sequence flights from arrival to departure.
So again controllers they're managing flights with you know, altitude, longitude,
and latitude, and these tools offer the additional kind of
considering time as another element of managing the flight, so
(41:16):
controllers would have an ability to know where and at
what time aircraft are at key points in a route,
taking into consideration conditions and other things even before an
aircraft takes off.
Speaker 1 (41:29):
The long runway for modernizing our air traffic control system
is a real problem as technology continues to evolve.
Speaker 11 (41:37):
By the time that the air traffic controllers can get
a new piece of equipment, it's about seven or eight
years old. It's not as modern as there should be.
It took forever for the air traffic control system to
have a GPS system.
Speaker 1 (41:50):
If everyone agrees that the air traffic control system needs
to move to the next generation, why has it taken
four decades to get to where we need to be.
First of all, it is complex and requires great care
to make sure we get it right.
Speaker 12 (42:06):
The systems themselves have to be certified, and that means
they have to have a degree of redundancy and resilience
that is different than what you would see in a
lot of off the shelf technologies. It's got to be integrated,
it's got to be certified. So that's part of it.
Speaker 1 (42:25):
That's part of it. But far from the only part.
What about the controllers who run the system. There's general
consensus about their being outstanding professionals.
Speaker 11 (42:35):
It's a tribute to the men and women of the
air traffic control that they can keep the system kind
of safe and maintained with their expertise.
Speaker 12 (42:46):
Our air traffic controllers are outstanding. They go through a
very rigorous training process and it takes years.
Speaker 1 (42:55):
But as good as the controllers are, we need more
of them. We're air traffic controllers in the United States
in twenty twenty four than in twenty eleven.
Speaker 12 (43:05):
We need to make sure that we are getting enough
that are being put into place. Currently we're not where
we need to be. We're anywhere from twenty to twenty
five percent behind where we would like to be.
Speaker 11 (43:19):
Some people are saying we should increase the age of
air traffic controllers. Right now, they're maxed out at fifty
six years old. You know, at fifty six these days,
we're in much better health than what we used to
be a generation ago, and so for those that want
to work beyond fifty six, we should be able to
allow them to have that option, and currently they don't.
Speaker 1 (43:42):
Even more than the need for more air traffic controllers.
Is the need to expedite the procurement process for getting
them the equipment that they need and get it to
them faster.
Speaker 12 (43:53):
The procurement is a challenging We get money that needs
to be spent on an annual basis. We'd like to
see that be more multi year so that we can
have more money upfront and be able to carry that
through in a multi year process.
Speaker 1 (44:11):
Secretary Chow agrees that it takes far too long to
get the latest equipment purchased and deployed, but that it's
more than just streamlining things. The problem may be in
the very structure of the system.
Speaker 11 (44:24):
In twenty seventeen, there was an effort under the first
Trump administration to reorganize the structure of the air traffic
control and basically it would take the air traffic control.
It's not privatizing it because it's being put into a
nonprofit organization, but rather I call it liberating the FAA
(44:45):
and the air traffic Control, basically liberating the air traffic
control from FA and even more succinctly, the federal government,
so that air traffic control, like many others structured like
this around the world, would be their own entity. They
would have their own nonprofit status, they would have their
(45:07):
own board of directors, but more importantly, they would use
their own funding of resources and be able to use
it for long term planning.
Speaker 1 (45:18):
As you look around the world, has anyone done this?
Can we go to school in any other country in
the way they've.
Speaker 2 (45:23):
Handled this well.
Speaker 11 (45:24):
Canada is a primary example, Great Britain, Australia. There are
many other countries who have taken air traffic control out
of the government process and put it separately in its
own nonprofit organization. And by doing that it allows this
nonprofit air traffic control system to plan ahead, have control
(45:48):
over one hundred percent of its budget, and be able
to purchase equipment at a very timely rate and very
efficiently as well.
Speaker 1 (45:58):
Not everyone agrees with Secretary about splitting the safety responsibilities
from the day to day operations and taking the latter
out of the government altogether.
Speaker 12 (46:08):
What we want to do is make sure the United
States stays the world leader. We can do that by
looking at what they're doing in other countries and what
has candidly not worked well. So when we look at
countries around the world like Canada, the United Kingdom, Australia,
New Zealand that have privatized their air traffic control system,
(46:30):
we see a number of challenges in terms of their
air traffic controllers, their technology, their delays, and most importantly,
safety issues.
Speaker 1 (46:41):
Whatever the changes, no one seems to doubt that they
need to come and need to come sooner rather than
later for the sake of the airline business, the convenience
of all of us flying, and ultimately to make sure
the US maintains its safety record.
Speaker 12 (46:56):
It is key at all of the different parts of
the aviation system have really come together and sending a
message to Capitol Hill about what we can do to
advance our air transportation system. It's not enough to be
the safest and the most efficient, the largest, and the
most diverse in the world.
Speaker 13 (47:16):
It is still safe to fly. That said, continued reliance
on aging systems does diminish the margin of safety and
adds additional stress to the national airspace system, which is
really why it's important that FAA improve the management and
oversight of its modernization efforts.
Speaker 1 (47:36):
That does it for us. Here at Wall Street Week,
I'm David Weston. This is Bloomberg. See you next week
for more stories of capitalism.
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