March 13, 2021 • 41 mins
This week, Ursual Burns, the former Xerox CEO and first black woman to lead a Fortune 500 company discussed the gap between companies' rhetoric and results on International Women's Day. Tim Duy, SGH Macro Advisors economist, University of Oregon professor, and Bloomberg Opinion Columnist, joined to talk about the inflation debate ahead of next week's Federal Reserve rate decision. Liz Pancotti, Employ America senior advisor, broke down the economic impact of President Biden's $1.9 trillion stimulus package. Then Declan Kelly, chairman, CEO and co-founder of the global consulting firm Teneo, joined to discuss corporate America's reaction to the passage of Biden's stimulus package.
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Speaker 1 (00:08):
Welcome to What You Missed This Week? I'm Joe Wisenthal.
This podcast has some of our favorite interviews from the
Daily Market Clothes show that I co anchor along with
Romaine Bostick and Caroline Hyde. What Do You miss It's
the perfect way to kick off your weekend. This week
started with International Women's Day on Monday, which lots of
big name brands and companies have embraced in the last
(00:28):
few years, but some have criticized the day as one
of corporate platitudes and empty rhetoric, which does not translate
into concrete change with more women represented on corporate boards
or in the c suite. We spoke about it with
Ursula Burns, the former CEO of Xerox, was the first
black woman to lead a Fortune five hundred company. We
started by asking her why there is still such a
(00:49):
large gap between rhetoric and results. Well, Uh, to be really, frank,
I think it's will mum. This is not you know,
We've going around the around the band, around the fact
that there are not there, that the talent is not there,
that um, which we've proven I think over and over again,
(01:09):
that's not true. We can, industry can and should be
able to find um executive women who can take the
seats in boardrooms and in the C suite and executive suite.
And it has gotten better, that's for sure, but it's
still at a snail's pace. So this is this, it's
(01:31):
at the point where you know, I've I've been known
to speak against quotas and I've recently changed my tune
pretty dramatically and said I'm all four quotas now because
at the end of the day, we keep asking for
people to do the right thing. We keep imploring. You know,
we have an International Women's Day every year, and we
look at the numbers. They're still small. Whole segments of
(01:53):
the economy have very little two or no female leadership,
female governance, um infrastructure, and it doesn't seem to it
doesn't seem to change. So I think what we have
seen is if you put in place a rule, a
law that says you have to do it, you know, surprise, surprise,
the women start coming out of the woodwork per se.
So I think we're at the point now where you
(02:15):
just have to we have to stop taking excuses and
start moving. By the way, I will say, what one
more thing, women, white women are making progress here, women
of color are not if you look at the number
women of color are not, So we still have a
race issue. We have a gender issue for sure, and
then you layer on top of it that we have
a race issue women of color, so gender and race
(02:36):
together literally are left out of the discussion totally. And
if you're in a C suite or the executive suite,
it's better than if you you know, we we you
just reporting on the impact of this massive change. Unemployment
has really impacted women throughout the economy worst than anyone else,
and women of color significant. So across the board, we're
(02:59):
at the going where we can no longer um, we
can no longer listen to excuses. We have to start
to make moves. So talk about their trajectory of of
women in particularly in the big corporate America here, I mean,
we have seen some progress. We've seen a bigger bench
being built up at a lot of organizations EGO, Point
to City Group and a lot of other big banks
(03:19):
out there that once you get you know, sort of
a step below CEO CFO, there's a pretty big bench
of potential CEO candidates down the road. When you talk
about the trajectory we have a woman's career and the
idea that it could be derailed because of personal choices,
whether it's a child rearing or marriage or whatever. How
do you is that still sort of a valid excuse
(03:40):
that companies use to try to say, Okay, this is
why we don't have enough women in the pipeline. They
don't use it publicly, that's for sure. If they're smart,
they would never say it. But we know for a
fact that that clearly is one of the factors. Still
they would never say it anymore. I mean, it's it's
an unacceptable um conversation to say that, you know, because
you've chosen, you've made a personal choice of being married,
(04:02):
men do the same thing, or personal choice of having
a child, thank god, or if the world would end
that we're going to actually penalize you for these two things.
So they don't do that anymore. But we can see,
just following as you say, the trajectory of a woman's career,
there are stock points where you plateau for a long time.
Childbearing and rearing age is one of these plateau points
(04:23):
where you just sit still for a while. So even
if you don't think you're doing a company out there
whatever company you are. It is in the facts showing
up that we do operate on women differently than we
operate on men when they have to make some of
these quote unquote lifestyle or personal choices, which are kind
(04:43):
of an insane statement. Like I said, if you want
to recreate the world, we actually gonna penalize you for
doing that is not a really good thing. I think
that we've made progress. I don't want to be a
you know, ah, you know, stuck in the stuck in
the mud person. We've made a lot of progress. When
I was a CEO, we had like, well or thirteen
women CEOs. Now we're in the thirties. That's good, but
(05:05):
that actually years and years and years to get half
of the population represented at five percent of the of
the seats is not or six percent of the seats
is really not acceptable. We have to make moves every
school that it can happen. Right when states or governments
say you have to do it, things start happening. Look
(05:27):
at California and to that end, you know you're trying
to do it with corporates leading Poor Diversity Action Alliance,
which is focused on race, but we're talking diversity in
all its guys is right now, and clearly women of
color are the most hurt. Is that sort of carat
and stick that you're deploying with the board diversity actually
learned working? Or do you need regulatory change? Do you
(05:49):
need legal change like we've seen in California brought in
across the U S sanity the rest of the world.
I'm not saying London or the UK is any better here.
I think that we need all of the sticks in
the fire to to nudge this um historic structure. This
historic structure. Men, particularly white men, have this fined. They picked,
(06:13):
they say the rules, they actually judge. They control this structure.
So we need a large amount of um disruptors to
have this structure changed. One is things like the board
diversity action a lines. The more diversion board is, the
more likely it is that it will stay diverse and
become more diverse. So if you have an African American
(06:35):
on the board, the more likely it is that you'll
have a woman on the board, and so and so
on and so on and so on, and more likely
it is you'll have Hispanic. So we need that, we
do need. I think we're at the point now where
we have states and the NASDAC and governments structures saying
no more, we can't wait for you to kind of
make up your mind to do it. So we're gonna
(06:56):
start putting in place quotas rule that say if you
don't mean this, you can't do that. I didn't think
I would ever get to the point where I say
yes to this, But I'm at the point now where
it's been forever and we're still waiting. So I think
it's at the point. And we've seen that the performance
doesn't go down. Women's CEOs do as well as men's CEOs.
(07:17):
You know, diverse companies do better than non diverse companies.
Diverse leadership teams do better. So there's no longer a
discussion about it's not a really good idea. We can't
really find the people. There's all kinds of things that
used to kind of hang out there. They no longer
are valid. Right now, some companies are figuring out ways
to do it, and the people who don't figure out
(07:37):
ways to do it will have to be told to
do it. And I said, that's what I think is
going to come if we don't, if we don't start
to take, you know, control of our own futures. Here
companies take control of their own futures. Are the legal
regulatory ideas that you've seen put forth that codify in
a good way what you'd like to see. Is there
anything that any politician or regulators uh written down you say, Okay,
(08:01):
this this makes sense. This looks like a good framework
for doing this. I think one of the thing that
it's it's still new and it hasn't quite been done.
But I think I like the idea that if you're
going to go if you're going to go public um
and want to be listed on NASDAC and go public
or want to be listed on NaSTA, that you have
to have a diverse board. This is this gives impetus
(08:24):
to start thinking about it when you're a baby company,
right when you're a young company before your I p O.
So I think things like that make it really good.
That's one that I would absolutely I'm all for a
second States and the country, the UK and California and
I'm sure other places around the world. That's say we're
gonna give you a certain amount of time, how many
years is it gonna be? Were gonna give you two years?
(08:46):
You have to diversify your board in two years, go
do it. So I think that this idea of quotas,
and I don't like it to be called quotas, but
I call it direction. This idea that you direct a
company to do things is the best way. I haven't
done everything else we've seen. It's it's a fitness start.
Some people go for it, some people don't. And I
(09:08):
think that right now we're at the point, as I said,
where we've been waiting for a long time on you
know I was. I became CEO in two thousand and nine,
two thousand and nine, and we're now in two thousand
and twenty one and we're still having this discussion. Yeah,
I'm curious here about sort of the sort of industry
(09:28):
breakdown of where we're seeing gains being made. Uh. In
our introduction to you, we had a chart on the
screen showing how there were certain industries that had uh
no female leadership at all, while there was a kind
of a concentration and utilities and other sort of sectors.
I'm curious if you can try to kind of distill
for us why we're seeing sort of women funneled into
certain industries like that, but maybe not necessarily in some
(09:50):
of the I guess the more sort of us sexier
lack for lack of a better word, industries like uh
in the social media space and communication services. I think
you said the word right. It's set see here. I
mean people, the people who govern and run these companies.
Many of them are young companies, which is a little disappointing, UM,
(10:10):
A little disappointing. They they are not they haven't brought
into the game yet. A lot of these companies are
I call them like locker room companies, right, you know,
they kind of all hang out together. They have locker
room kind of mentalities and actions. I know, I'm gonna
get a lot of email for this, but and breaking
into that locker room mentality, even when you are a
(10:34):
you know, billion, multi billion, in some case trillion dollar
company UM is very difficult and I am very difficult
for women, and it's very difficult for themselves to actually
think that they're doing anything wrong. The old, you know,
long standing companies, they've been through wars, they've been beat up,
they've been and they are not UM sitting on the
(10:55):
top of the mountain at They haven't always been sitting
on the top of the mountain. They actually take put
an advice the the newer companies are are. It's very
it's very concerning and very disappointing that the biggest tech companies,
the largest tech companies are the worst performers in diversity
in both gender and race. And you would say to yourself,
(11:18):
this is it's supposed to democratize information, society everything, give
access to more, and what we're seeing is a structure
of fortress being built around these companies where they're very
few people that not only women and people of color,
but even men who don't kind of fit into that
that genre of a guy they are not allowed in.
(11:38):
I just don't think it's it's by the way, I
think it's dangerous for the company. Is definitely dangerous for
the nation and the nations right, and it's obviously not
serving the general relation very well. I think we have
to make progress here no more. It will give us
some time. Yeah, so maybe you're sally advocating quotes to
(11:59):
a Senate then, but I'm interested in your own journey
because as a lot of these new companies have really
great benefits. They give a lot of time off for
women having children and parents parentally, if not just women,
but men, people adopting people. Oh, there are support networks there.
What is it that you did the malon allowed you
to have a family still rise through the ranks. Can
(12:21):
you be prescriptive in that way or is it impossible? No? No,
I think let's I want to back up to uh,
the reason why women don't progress it is not because
they don't have No, it's not because they have children.
I mean that's this is this is a choice by
the structures today to differentiate the judgment system, the success system.
(12:42):
They've narrowed it to fit their liking and their processes. Only.
There is no indication, no evidence that for by having
a child you become less useful or or less executive type,
not at all. So I had a child, I happen
to have two children. My had happened to have a
really nice husband who was old enough to after a
(13:03):
while to retire. My journey was I had a great
company in this area, A great company that was not
as concerned about how I looked. They were more concerned
about what I did and how I did it. Now, I,
like I said all the time, I happened to look
out to be in the best company for diversity. At
(13:26):
least I think in the world at the time. Not
every company can say that, right. So right now, we
have tried to teach them. We've tried to give them
hints and tips. Get some diversity on your board, get
some diversity in your c suite. How about hiring more
at the entry level. How about looking at what happens
in the middle, mid layer. All of this over the
last twenty years. These conversations have been happening over the
(13:49):
last twenty to twenty five years, and we have made
very little progress. This is not because women are not trying.
It's not because we have babies, it's not because we
don't have childcare. It is because the structure today is
not motivated to change it, plain and simple. That's the
only reason why I say I'm starting to say, maybe
(14:09):
quotas work, right, Maybe maybe quotas is what you have
to do. Because if you're told that you can't operate
in my state unless you have a representative representation of
the population, that's reasonable. Guess what will happen. They'll get
the representation and el see if the business still runs
just fine. And once you get numbers. I think that
you guys know this, But Joe or Carolina ro Man.
(14:30):
You know this, Once you get numbers right, the fly
wheel effect takes on. If you're the only one, it's
very difficult. Even if you're one of you know, five
out of a hundred is very difficult. Once you get numbers,
the fly will affect, takes takes case and change happens.
And so I think tech companies, but also banking industrials,
(14:54):
you name it, have to keep focusing on this. Right now,
some of the older industries, banking industrials are making progress
of women. They are, like I said, still stuck in
the mud when it comes to women of color and
people of color. But I'll take women right now for
you know, for now, tech companies are not making progress anywhere.
We have to absolutely put a fire underneath them and say,
(15:17):
you know, keep do it or we're going to force
you to do it. Another thing I will say one
another thing. I will say, we are real, we are people,
We are active citizens. We should be. We can make
decisions about where we want to actually buy. We we
want to use our commerce strength. I have made it
a point there are two companies that I will buy
(15:38):
nothing from because there if you look at their board
of directors and their leadership structure. They literally have zero
people of color, and they have some board members that
are women, and zero women in the leadership team, zero
anyone in the leadership team. And said for white men.
Fortunately one of them is not a US company. But
I think we we as responsible citizens, have to actually
(16:01):
start to put some pressure on these companies as well.
If you're not willing to have me participate in your success,
I'm contributing to your success. But if you don't want
me to participate actively and how your company is governed,
I should go somewhere else. That's what you're telling me,
and that's what I will do with my money as well. Firstly,
we just have a moment left. I want to just
(16:22):
go back to this concept of the flywheel and bringing
more people in. And one of the things that we've
seen in this crisis is of course this huge gap
open up unemployment rates between why it's between people of
color and so forth. One of the things that we
hear from say the FED or yelling these days is
this important like let's grow the economy really fast and
for a long time and more sustainably so that everybody
(16:44):
comes back in, so that we don't start slowing it
down just when white unemployment drops. How powerful of an
idea or concept is that to you in terms of
establishing that base, bringing in more employment, of just making
sure that GDP growth growth mains robust for a long time.
It is foundational, foundational to the way that I think
(17:07):
and to I think what we need in in this
country we are we have already we started gutting out
the middle right, we literally tore it out. What unfortunately
we're doing now, or what has happened now, is that
we are literally destroying the lower as well. They are unemployed,
are significantly underemployed. We have dislocated we I mean, the
(17:31):
people have been dislocated. We have to do something to
re engage them and have to be active participants in
the economy. This We can't just keep giving them stimulus checks.
By the way, we have to do that too, but
that's not going to get them going. Literally, millions and
millions of people women are large number of them women
people of color, but also Middle American white guys who
(17:53):
literally are underemployed or unemployed. As we come out of
this recession that never really happened as a right, we
have the Wall Street um unbelievable success and the main
street disaster here. We have to bring main Street back
up to participate or else. I just don't understand how
how the nation stays together. You cannot have this much
(18:14):
just disruption. I live in New York City and in London,
and I will tell you. You You walk up and down
the streets. You see people on the streets now who
you would never see before their stuff on. We have
to engage. We have to go back to and I
think Gillan is absolutely right. We have to engage people
into work. We have to engage people into participation, participation
(18:35):
in growing this the world again, but this country very specifically.
If we don't shame one up, shame one us. This week,
President Biden signed one point nine trillion dollar COVID relief
bill that he campaigned on into law. This birth of
fiscal stimulus into the economy has put the inflation tobate
front and center ahead of the Federate decision next week.
(18:57):
For some market walkers and Republican lawmakers arguing the package
will overheat the economy, we got some perspective on it
from Tim Dewey. Tim is an economist that s g
H macro advisors, a professor at the University of Oregon
as well as a Bloomberg Opinion calumnist. We started by
asking Tim if he's expecting a disciplined, consistent message from
the dot plot and the Central Bank statement about waiting
(19:18):
a long time before the first grade hype. I expect
that we're discipline consistent view is still going to hold.
There's obviously a chance that someone decides to increase their
their rate forecast for three, but I don't think it
would be enough to more than one participant. I would
(19:38):
likely do that. I think that that we're going to
get the same story we've been hearing, both from the
statement and from UH Chair Paul in the press conference.
So Tim, a lot of the talk, at least a
lot of the fear of inflation rearing its head, seems
to put up against an argument that had been made
long before we got to this point, the idea that
(19:59):
that there are sort of structural forces out there, technological
forces out there that have sort of created disinflation or
at least kept inflation at bay. Is there any sense
here that that narrative has changed at all. No, I
think it's far too early to think that that basic
narrative has changed, and we think about it in terms
of a flat folds curve. Right, is that the idea
(20:19):
here is that we can push unemployment to very low
levels before we'd see inflationary pressures emerge, and those inflationary
pressures will then actually only emerged slowly. So under those circumstances,
the FED is really focused on although the employement, and
we are well away from full employment, and so the
Fed is I think serious about being patient with with
(20:44):
with interest rate policy as long as they can possibly be.
It feels as though the market is we're seeing it
now already pricing in inflection and inflation expectations hitting at
two seven when you're looking at the break even to
a large extent, how much do they need to keep
on just guiding the market that we're gonna see eye
(21:05):
popping inflation numbers. But it's transitory. It doesn't matter because
at the moment the market seems to just be continuing
to push it further. No, this is a this is
a really great question. I mean, we know that markets
are increasingly pricing in rate heights for three and then
even edging into UH and and the FED has been
fairly resoluted saying, well, we don't expect that to happen now.
(21:28):
The FIT can't prove right now that they're not going
to hid rate hikes, hike rates in two or even.
What they can do is keep pushing on their message
even if inflation numbers start to hit rise here. And
I think that that's where the test will come sooner
than expect. It is if you know, we start to
(21:48):
see these expectedly stronger inflation numbers coming the months ahead,
and the fens well, we're not worried about that. Let's
see where we are in here. Uh, then I think
we will be the test. Well, let me ask you
a questions. So the message that we've gotten from the
FED is that the rising rates represents a stronger economy.
They're not worried about it. And sort of theoretically that
(22:09):
makes sense, and it's a bed on. At some point
they will raise rates, but because the economy is so strong.
But do the rising rates right now at some point
threatened to tighten financial conditions such that in order to
get to that destination that we know they want to
get to, they actually have to um push back on
it in some way. Is there a point where it
becomes sort of mechanically a problem. Well, I think that
(22:32):
that would be a yes. Is that there is theoretically
a point where you can imagine that rates becomes the
financial conditions tight And I think that's where you really
need to be thinking about. It. Is not so much
that longer rates are rising up, but something happens to uh,
you know, tighten financial conditions noticeably and and and what
(22:53):
I mean is probably something outside of of of the
expected growth in the US economy. So this would be
something like personally a basic misunderstanding of of of monetary
policy going forward, or some kind of financial accident. Uh.
Those are the kinds of circumstances where I could see
the FED wanting to be much more forceful shoot back
(23:14):
against the rise and long term meals or or or
expectations of earlier than expected tinking. Otherwise, I think that
that's gonna try and to sort of just reiterate their
message as as patiently as they can. Yeah, well, he
seems like he's been patient so far as far as
Powell goes, I am curious. So I mean he's made
(23:34):
it clear too that the focus uh is sort of
laser uh focus right now on the job market, on
labor force participation. Uh. And the idea though that it
could take us a while before we get back to
pre pandemic levels of employment. When you look at that
tim and you look at that goal, here should investors
sort of, I guess, pay a little bit less attention,
(23:55):
I guess to some of the inflationary signs and pay
more attention to what's going on in the labor market. Well,
that's that's the way I've been freeming it is. Yes,
we should be watching inflation because it could I mean,
it could get quote unquote out of hand and out
of hand here is probably you know three rather than
you know or whatever your worst fears could be. Uh,
(24:15):
And it could be something that then this starts to
ton more inflation expectations, and we should look at that
at least, But we don't expect that to happen. But
we should really be focused on is how quickly the
labor market recovers. The labor market recovers more quickly than
the fet is more likely to see inflationary pressures. Is
something that could be that could evolve into something higher
(24:38):
than they're looking for. But if this labor market is
very slow to recover, then then they're gonna be less
concerned about the inflation numbers going forward. So I'm traditionally
for for a while now focus more on um uh
you know, the stat state of the labor market per se.
Uh yeah, yeah, what data though, Tim, are you looking
(25:01):
at for the labor data and you're looking at more
fast high frequency data? Are you? Are you analyzing NFP?
I mean, what are the telltale signs that you're going
to get a quick recovery or we're going to see
actually more longer term scarring in the labor market. So
for me, what I'm really looking at is how quickly
we can get the employment of popular population ratio OP.
So it's some issue of getting unemployment down and getting
(25:24):
people back into labor force. And hopefully later this year,
if we can open the economy, if we can open schools,
if we can open daycares more and more more fully,
then we're gonna be able to get that labor part
participation numbers up. And that's what I would be looking for,
not just any narrow sector improvement, but broad based improvement.
So the Fund's gonna be watching, you know, the the
(25:45):
employment of population ratios, and not just the population whole,
but of sub groups within the population. I do think
that the genuinely um genuinely desires that is to be
a broad based recovery and doesn't think we can have
that until we get really everybody participating in the labor market.
So this is why i'm I think I take the
(26:08):
FETE and it's it's it's word when it says it
wants to be patient before timing up on policy, particularly
rate heights. Then we broke down what exactly made it
into the final version of President biden stimulus package and
its economic impact with Liz Pancatti, a senior advisor at
(26:29):
Employee America. We started by asking Liz which part of
the one point nine trillion dollar relief bill will have
the most powerful impact. I think it's a combination. I mean,
I think the package was developed as a package rather
than kind of ad hoc stimulus here and there, and
so I think you know, of of the three most
impactful things, unemployment has been extended or topped off unemployment
(26:51):
benefits and extended unemployment benefits have been extended out to
labor Day to the beginning of September, so those that
three dollar a week payment will be extended out to
their and workers UM will receive up to twenty nine
additional weeks of unemployment insurance UH. And then on the
non jobless work of front or on the other front, UH,
(27:12):
checks will be sent to every adult and child in
households making under seventy five thousand for individuals and under
a hundred and fifty thousand for couples. UH. And then
and then most notably, I think that the thing that's
been on the top lines of a lot of people's
analysis is the child tax credit expansion. And so that's
been increased to thirty six hundred dollars for children under
(27:32):
six and three thousand dollars for children over six, and UH,
you know, analysis suggest that that alone will cut child
poverty in half. But UM as as a whole package,
income for the bottom twenty percent of Americans will be
increased by and for the top of Americans by only
one percent. And so I think, you know, the package
(27:53):
will certainly target aid where it's needed. So this bill
does seem to be a little bit more targeted towards UH, middle,
middle class and working class people in a way that
maybe that first or that that that Care Is Act
necessarily wasn't. I am curious that a lot of the
failures that we saw with the Cares Act came more
because of the implementation rather than what was in the
(28:13):
bill itself. And I'm curious as to whether we have
any sense here as to how this gets carried out,
how this gets implemented and we avoid some of the
same mistakes we made last time. I think that's right.
I think the Biden administration has focused on giving aid
primarily to people. And you know, there's some business aid
in the in the bill, but UM, I think over
half of the money will be directly given to American
(28:35):
people rather than you know, corporations and businesses, etcetera. UM
to that note, I think on the implementation side, the
child tax Credit, namely is one big change. And so
typically the child tax credit is paid out to families
every April UH in tax season once a year. And
now the House and Senate have passed a bill or
the Senate will UH the household has it tomorrow morning,
(28:57):
but they've passed it to have the r S cut
that check periodically too families. And we are understanding is
that the administration will direct that came it to be monthly. UM.
Given the implementation of that we expect to start in July,
and so they have quite a few months, especially after
we get through the rush of tax season, for the
I R S to work through the implementation of that.
(29:19):
But you know, we certainly could see hiccups there, though,
I think they are really prioritizing getting that money out
the door in an efficient manner. On the checks front,
getting the checks are pretty easy nowadays. Uh so, you know,
the December bill sent out six checks and the vast
majority of those were in folks bank accounts or mailboxes
within three weeks. On the unemployment insurance front, there's you know,
(29:39):
broader issues I think in our UI system, and this
does actually direct money to the Department of Labor to
assist with that. On the implementation side of those things,
I think there will still be hiccups. And you know,
extending those benefits and getting money out the door to
jobless worker is just that there have been for the
past twelve months. I mean, quite amazing if it does
indeed cut child pulity in half, as you say, I'm
(30:02):
interested in the efficacy as they will deem it. You know,
many felt that perhaps the stimulus checks in particular were
just saved rather than spent. Is that is that what
you want to see some savings so that people do
protect themselves or when they do suddenly have to meet
you know, the rent is no longer on hold and
then they are perhaps forced out of where they're living.
(30:23):
Or do you want to see it being plowed back
into the economy to ensure that we get this flywheel
motion and everyone then hopefully sees all boats rise. I
think it really is going to depend on family financial situations.
You know, we know that black families on average have
much less liquid wealth and white families, and so to
have you know, a beef up and savings for those
families would be really impactful and certainly have an effect
(30:45):
on you know, financial stability for families who have been
left behind and in you know, previous recessions and in
our labor market in general. But on the other hand,
you know, you want folks, as soon as we've all
got you know, shots in our arms, to go get
on planes and take the cage sins and you know,
have that more discretionary spending. I suspect that we might
see we might see short term savings where you know,
(31:06):
people are saying, well, I'm going to get a vaccine
in two months, so I expect to spend that money
in two months. Um, But I don't think, you know,
we we have seen high savings rates of these. I
think on the long term savings front, we're not going
to see long term savings. You are going to see
an injection of those kind of pent up funds into
our economy over the next twelve months. Is as places
start to reopen, we can travel again, all those good things. Liz,
(31:29):
how much do you see an opportunity to make some
of this stuff permanent, particularly the child tax credit. People
might find that to be a very big benefit in
their lives and uh, make things much easier childcare and
so forth. What do you expect in terms of the
fight to sort of establish some of these things as
a permanent benefit, you know, on the child tax credit front,
I would hope that there's not a big fight there.
(31:49):
You know, Republicans on the other side of the aisle
have you know, said that they're supportive of families, working
families and children, and so you know, politically opposing that
I think would be quite deficult, though we've seen them.
Do you know other things in that realm Um, I'd
say that on the tax On the tax credit front,
for any of you know the child tax credit, there
(32:09):
are a number of other tax credits. UM repealing those
pulling them back is difficult. There was also an a
c A. The healthcare UM marketplace subsidy put in place
for two years so that subsidies, sorry, premiums can't be
more than eight point five percent of your income. I
think it'd be pretty tough to claw that back and
make health insurance premiums rise. And so for those two
(32:31):
things especially, I think those will be the two things
that we see stick around, even though they're only in
the bill for a year or two. UM. That fight
certainly won't be easy, given the constraints of the Senate
and the filibuster. UM. So I do think Democrats haven't
cut out for them. But I think that is a
real priority for the Biden administration, and they you know,
will work across the aisle to get those two things
(32:51):
implemented on a long term basis. Meanwhile, President Biden's stimulus
bill passed on a party line vote without a single
Republican vote in Congress. But the COVID relief package did.
Gardner a lot of support from the corporate sector. A
couple of weeks ago, senior executives from more than a
hundred and fifty companies back the legislation and a letter
(33:14):
to congressional leaders urging them to act. The list included
leaders from across industries, including the CEOs of Goldman, Sacts, Blackstone, Google,
and A T and T. So, now that the bill
is law, we got some more perspective on how the
corporate world is reacting. We spoke with Declan Kelly, the chairman,
CEO and co founder of the global consulting firm to NaIO.
We started by asking Declin if his clients are enthusiastic
(33:36):
about what the stimuluts can do for the company. Yeah,
thank you for having me. I think that is even
itself an understandment. I think the CEOs have been very
vociferous and their support for the bill. I think over
a hundred and fifty of them actually signed a joint
editor of the administration and to the President number of
weeks ago. I think it's pretty obvious the market's reaction
(33:58):
is what we all expected it to be once this
was passed. This amount of stimulus going into the economy,
and this amount of job creation and support for the
various different efforts around the vaccine sort to speak for themselves,
allied with you know, already low interest rates and plenty
of other capital available for investment, generally from the private sector.
I think most CEOs that we work within TONAIO have
(34:20):
been expecting this for the last several weeks and are
relieved the day is final a year. The CEO is
the corporations who work with declan, the people on the
phone to day and day out. Are they optimistic in
general as one unfolds, Yes, I would say they're extraordinarily optimistic,
you know. I think a few months ago they expected
(34:41):
that one would be a story of two halves, if
you will. First half would be you know, getting the
vaccine distributed and administered, and the second half would be
a graduate recovery into a more normalized economic environment. I
would say that has been delayed a little by the
distribution issues that we've seen, but they're not that bad,
I suppose in general, especially in the United States relative
(35:02):
to the rest of the world. But you know, you're
seeing very very positive indicators around earnings, around guidance. I
think consumer confidence is getting higher. I saw a recent
data that showed that of CEOs and the Fortune were
very optimistic about the year ahead. We're looking at five
point six percent global growth projected by the o e
(35:22):
c D one six and a half percent for the
United States, which is the highest number of Sight four.
So you know, from that perspective, I think confidence is
really really high, and probably with some level of justification
given everything we see going into the economy. Well, on
that note of confidence in I mean, we're talking about
a lot of the cash going to the public, to
(35:42):
individual people out there. Uh, Corporate balance sheets at least
in a lot of sectors are pretty flush right now,
and there's a lot of speculation amongst investors about how
that money could be put to use, whether it's increasing
capex spending, whether it's M and A activity, or simply
it's something like you know, share buybacks or diver thens. Yeah,
I mean, I think it's fair to say that a
(36:03):
large percentage of CEOs and the Fortune five hundred are
really looking at their capital allocation strategy in general, in
light of all the things you've mentioned, and given the
fact that the markets are where they are, I still
think there's a significant disconnect between the stock market and
what I call the real economy, and Tonato has written
extensively on this when we still have close to temper
(36:24):
center on employment in general when you look at the
real numbers underlying, but in general, most companies are looking
at significant capex and significant consolidation certain sectors because there's
more cash flowing into those sectors. I think you're going
to see a lot more of that activity in the
second half of the year. I still think it's a
real sort of lagging indicator, but I think the M
(36:45):
and A will increase much more significantly as we head
into two because we still do have some bumps in
the roles that we need to to overcome. But I
definitely see confidence coming back in and I definitely see
larger deals happening in the second for the year for sure. Declan,
let me ask you a question that maybe a little
more on the philosophical front um. You mentioned this belief
(37:06):
that this stimulus is expected to be very good for
the economy, but what about just the idea that government
spending and government involvement in Uh. Yeah, essentially applying to
corporate in the private sector with cash during periods of
downturns can be positive because I feel like perhaps in
the past CEOs may not have been so welcoming of it,
or maybe they would have feared inflation or the implications
(37:28):
for taxes or so called crowding out. Do you think
that there is a change maybe that started with CARES
or sometime prior to that, and how corporate executives think
about the potential for fiscal policy fiscal activism to accelerate
and help rebound the economy. You know, it's a really
interesting question because you know, we can look politically at
(37:49):
the United States and several other countries around the world
and see deep polarization almost fifty fifty split. Yet there
is this congregation around the middle economically in terms of
a lot of the efforts to inject stimulus into the
economy in the United States, within other places around the
world and other democracies, especially in Europe, so you're seeing
a lot more centrism in that respect, in terms of
people coalescing around the need for investment. So yes, First
(38:13):
of all, most CEOs are very flexible, nimble, and realistic,
knowing that from one administration to another you need to
be able to pivot depending on what you see. But
bear in mind one differentiating aspect, which is the pandemic.
We haven't been through a pandemic before like this and
living memory, and so a lot of those rules go
out the window when you're faced with what we've been
faced with economically, and I think what you're seeing from
(38:35):
a lot of corporations in the United States and then
frankly globally, is that a lot of those sort of
geopolitical considerations and whether or not your Republican or a
Democrat really go out the window when people see that
you need the injection of stimulus. In this builds about
three fifty to four hundred billion for expenditure in major
capital cities around major cities excuse me, around the United
(38:56):
States and major state capitals in large urban areas. And
I think that's pivoting to an eventual second bill, which
will be around the infrastructure area. And you know, we've
seen in America, not just post World War Two, but
in other periods right back to the Industrial Revolution, that
when America invest in itself and put itself back to
work in investing in infrastructure, it has a positive impact
(39:17):
on the economy. I think you're going to see both
parties or less around that in the weeks and months ahead.
Decline let's stay on this philosophical idea, because it's not
just been a health crisis, it's been an economic crisis,
also been a social crisis. And as we sort of
head towards what quote unquote might be some sort of
new normal, what does CEOs saying and thinking about their
(39:39):
new role within this as we hopefully end the pandemic.
I know that you've been teaming up with Global Citizen,
for example, thinking about how we can look at this
one more global perspective and become a more I mean,
dare I said, just society. Do you see an equal
recovery out of this? Well, thank you for mentioning the
Global Citizen interine our partnership. We the last week launched it.
(40:01):
It's called a Recovery Plan for the World, with us
the vander Land the President of the European Commission, and
Dr Ted Ross from the World Health Organization and also
Secretary Carry and a lot of other artists like Hugh
Jackman and Billy Eilish and cold Play and Usher and
many others got involved. And my role in that is
to get the corporate sector to support it, and we've
(40:21):
had people like Cisco and Coca Cola and Delta and
Rising and weight Watchers and Procter and Gamble and many others.
Google get involved, So we are confident we're going to
get a lot more companies involved. But to the philosophical question,
you know, I think brought to an end fifty years
of a focus on shareholder capitalism and the stark realism
(40:42):
from all CEOs that they need to spend a lot
more time focused on e s g. At climate change,
diversity and inclusion and all those things. And I think
we're at a point where that is not going to change.
And you're going to see a lot of proxy reports
this this year reflecting that, You're going to see a
lot of the larger institutions above and beyond the lock
Rocks have been very vociferous, of course, voting with and
(41:03):
against those companies who don't get the memo, so to speak.
So yes, I think that's here to stay, and yes,
I think society will benefit as a result, and I think,
you know, we're looking at that being the new reality
and the new difference as we call it in Tonato
going forward. And that's it for what you missed this week.
If you like the show, make sure to subscribe and
(41:24):
rate us an Apple podcast, or wherever you listen to podcast.
You can catch our show every weekday from three thirty
to five pm on Bloomberg TV and from four to
five pm on Twitter. Thanks for listening and have a
great week.
Welcome to What You Missed This Week? I'm Joe Wisenthal.
This podcast has some of our favorite interviews from the
Daily Market Clothes show that I co anchor along with
Romaine Bostick and Caroline Hyde. What Do You miss It's
the perfect way to kick off your weekend. This week
started with International Women's Day on Monday, which lots of
big name brands and companies have embraced in the last
(00:28):
few years, but some have criticized the day as one
of corporate platitudes and empty rhetoric, which does not translate
into concrete change with more women represented on corporate boards
or in the c suite. We spoke about it with
Ursula Burns, the former CEO of Xerox, was the first
black woman to lead a Fortune five hundred company. We
started by asking her why there is still such a
(00:49):
large gap between rhetoric and results. Well, Uh, to be really, frank,
I think it's will mum. This is not you know,
We've going around the around the band, around the fact
that there are not there, that the talent is not there,
that um, which we've proven I think over and over again,
(01:09):
that's not true. We can, industry can and should be
able to find um executive women who can take the
seats in boardrooms and in the C suite and executive suite.
And it has gotten better, that's for sure, but it's
still at a snail's pace. So this is this, it's
(01:31):
at the point where you know, I've I've been known
to speak against quotas and I've recently changed my tune
pretty dramatically and said I'm all four quotas now because
at the end of the day, we keep asking for
people to do the right thing. We keep imploring. You know,
we have an International Women's Day every year, and we
look at the numbers. They're still small. Whole segments of
(01:53):
the economy have very little two or no female leadership,
female governance, um infrastructure, and it doesn't seem to it
doesn't seem to change. So I think what we have
seen is if you put in place a rule, a
law that says you have to do it, you know, surprise, surprise,
the women start coming out of the woodwork per se.
So I think we're at the point now where you
(02:15):
just have to we have to stop taking excuses and
start moving. By the way, I will say, what one
more thing, women, white women are making progress here, women
of color are not if you look at the number
women of color are not, So we still have a
race issue. We have a gender issue for sure, and
then you layer on top of it that we have
a race issue women of color, so gender and race
(02:36):
together literally are left out of the discussion totally. And
if you're in a C suite or the executive suite,
it's better than if you you know, we we you
just reporting on the impact of this massive change. Unemployment
has really impacted women throughout the economy worst than anyone else,
and women of color significant. So across the board, we're
(02:59):
at the going where we can no longer um, we
can no longer listen to excuses. We have to start
to make moves. So talk about their trajectory of of
women in particularly in the big corporate America here, I mean,
we have seen some progress. We've seen a bigger bench
being built up at a lot of organizations EGO, Point
to City Group and a lot of other big banks
(03:19):
out there that once you get you know, sort of
a step below CEO CFO, there's a pretty big bench
of potential CEO candidates down the road. When you talk
about the trajectory we have a woman's career and the
idea that it could be derailed because of personal choices,
whether it's a child rearing or marriage or whatever. How
do you is that still sort of a valid excuse
(03:40):
that companies use to try to say, Okay, this is
why we don't have enough women in the pipeline. They
don't use it publicly, that's for sure. If they're smart,
they would never say it. But we know for a
fact that that clearly is one of the factors. Still
they would never say it anymore. I mean, it's it's
an unacceptable um conversation to say that, you know, because
you've chosen, you've made a personal choice of being married,
(04:02):
men do the same thing, or personal choice of having
a child, thank god, or if the world would end
that we're going to actually penalize you for these two things.
So they don't do that anymore. But we can see,
just following as you say, the trajectory of a woman's career,
there are stock points where you plateau for a long time.
Childbearing and rearing age is one of these plateau points
(04:23):
where you just sit still for a while. So even
if you don't think you're doing a company out there
whatever company you are. It is in the facts showing
up that we do operate on women differently than we
operate on men when they have to make some of
these quote unquote lifestyle or personal choices, which are kind
(04:43):
of an insane statement. Like I said, if you want
to recreate the world, we actually gonna penalize you for
doing that is not a really good thing. I think
that we've made progress. I don't want to be a
you know, ah, you know, stuck in the stuck in
the mud person. We've made a lot of progress. When
I was a CEO, we had like, well or thirteen
women CEOs. Now we're in the thirties. That's good, but
(05:05):
that actually years and years and years to get half
of the population represented at five percent of the of
the seats is not or six percent of the seats
is really not acceptable. We have to make moves every
school that it can happen. Right when states or governments
say you have to do it, things start happening. Look
(05:27):
at California and to that end, you know you're trying
to do it with corporates leading Poor Diversity Action Alliance,
which is focused on race, but we're talking diversity in
all its guys is right now, and clearly women of
color are the most hurt. Is that sort of carat
and stick that you're deploying with the board diversity actually
learned working? Or do you need regulatory change? Do you
(05:49):
need legal change like we've seen in California brought in
across the U S sanity the rest of the world.
I'm not saying London or the UK is any better here.
I think that we need all of the sticks in
the fire to to nudge this um historic structure. This
historic structure. Men, particularly white men, have this fined. They picked,
(06:13):
they say the rules, they actually judge. They control this structure.
So we need a large amount of um disruptors to
have this structure changed. One is things like the board
diversity action a lines. The more diversion board is, the
more likely it is that it will stay diverse and
become more diverse. So if you have an African American
(06:35):
on the board, the more likely it is that you'll
have a woman on the board, and so and so
on and so on and so on, and more likely
it is you'll have Hispanic. So we need that, we
do need. I think we're at the point now where
we have states and the NASDAC and governments structures saying
no more, we can't wait for you to kind of
make up your mind to do it. So we're gonna
(06:56):
start putting in place quotas rule that say if you
don't mean this, you can't do that. I didn't think
I would ever get to the point where I say
yes to this, But I'm at the point now where
it's been forever and we're still waiting. So I think
it's at the point. And we've seen that the performance
doesn't go down. Women's CEOs do as well as men's CEOs.
(07:17):
You know, diverse companies do better than non diverse companies.
Diverse leadership teams do better. So there's no longer a
discussion about it's not a really good idea. We can't
really find the people. There's all kinds of things that
used to kind of hang out there. They no longer
are valid. Right now, some companies are figuring out ways
to do it, and the people who don't figure out
(07:37):
ways to do it will have to be told to
do it. And I said, that's what I think is
going to come if we don't, if we don't start
to take, you know, control of our own futures. Here
companies take control of their own futures. Are the legal
regulatory ideas that you've seen put forth that codify in
a good way what you'd like to see. Is there
anything that any politician or regulators uh written down you say, Okay,
(08:01):
this this makes sense. This looks like a good framework
for doing this. I think one of the thing that
it's it's still new and it hasn't quite been done.
But I think I like the idea that if you're
going to go if you're going to go public um
and want to be listed on NASDAC and go public
or want to be listed on NaSTA, that you have
to have a diverse board. This is this gives impetus
(08:24):
to start thinking about it when you're a baby company,
right when you're a young company before your I p O.
So I think things like that make it really good.
That's one that I would absolutely I'm all for a
second States and the country, the UK and California and
I'm sure other places around the world. That's say we're
gonna give you a certain amount of time, how many
years is it gonna be? Were gonna give you two years?
(08:46):
You have to diversify your board in two years, go
do it. So I think that this idea of quotas,
and I don't like it to be called quotas, but
I call it direction. This idea that you direct a
company to do things is the best way. I haven't
done everything else we've seen. It's it's a fitness start.
Some people go for it, some people don't. And I
(09:08):
think that right now we're at the point, as I said,
where we've been waiting for a long time on you
know I was. I became CEO in two thousand and nine,
two thousand and nine, and we're now in two thousand
and twenty one and we're still having this discussion. Yeah,
I'm curious here about sort of the sort of industry
(09:28):
breakdown of where we're seeing gains being made. Uh. In
our introduction to you, we had a chart on the
screen showing how there were certain industries that had uh
no female leadership at all, while there was a kind
of a concentration and utilities and other sort of sectors.
I'm curious if you can try to kind of distill
for us why we're seeing sort of women funneled into
certain industries like that, but maybe not necessarily in some
(09:50):
of the I guess the more sort of us sexier
lack for lack of a better word, industries like uh
in the social media space and communication services. I think
you said the word right. It's set see here. I
mean people, the people who govern and run these companies.
Many of them are young companies, which is a little disappointing, UM,
(10:10):
A little disappointing. They they are not they haven't brought
into the game yet. A lot of these companies are
I call them like locker room companies, right, you know,
they kind of all hang out together. They have locker
room kind of mentalities and actions. I know, I'm gonna
get a lot of email for this, but and breaking
into that locker room mentality, even when you are a
(10:34):
you know, billion, multi billion, in some case trillion dollar
company UM is very difficult and I am very difficult
for women, and it's very difficult for themselves to actually
think that they're doing anything wrong. The old, you know,
long standing companies, they've been through wars, they've been beat up,
they've been and they are not UM sitting on the
(10:55):
top of the mountain at They haven't always been sitting
on the top of the mountain. They actually take put
an advice the the newer companies are are. It's very
it's very concerning and very disappointing that the biggest tech companies,
the largest tech companies are the worst performers in diversity
in both gender and race. And you would say to yourself,
(11:18):
this is it's supposed to democratize information, society everything, give
access to more, and what we're seeing is a structure
of fortress being built around these companies where they're very
few people that not only women and people of color,
but even men who don't kind of fit into that
that genre of a guy they are not allowed in.
(11:38):
I just don't think it's it's by the way, I
think it's dangerous for the company. Is definitely dangerous for
the nation and the nations right, and it's obviously not
serving the general relation very well. I think we have
to make progress here no more. It will give us
some time. Yeah, so maybe you're sally advocating quotes to
(11:59):
a Senate then, but I'm interested in your own journey
because as a lot of these new companies have really
great benefits. They give a lot of time off for
women having children and parents parentally, if not just women,
but men, people adopting people. Oh, there are support networks there.
What is it that you did the malon allowed you
to have a family still rise through the ranks. Can
(12:21):
you be prescriptive in that way or is it impossible? No? No,
I think let's I want to back up to uh,
the reason why women don't progress it is not because
they don't have No, it's not because they have children.
I mean that's this is this is a choice by
the structures today to differentiate the judgment system, the success system.
(12:42):
They've narrowed it to fit their liking and their processes. Only.
There is no indication, no evidence that for by having
a child you become less useful or or less executive type,
not at all. So I had a child, I happen
to have two children. My had happened to have a
really nice husband who was old enough to after a
(13:03):
while to retire. My journey was I had a great
company in this area, A great company that was not
as concerned about how I looked. They were more concerned
about what I did and how I did it. Now, I,
like I said all the time, I happened to look
out to be in the best company for diversity. At
(13:26):
least I think in the world at the time. Not
every company can say that, right. So right now, we
have tried to teach them. We've tried to give them
hints and tips. Get some diversity on your board, get
some diversity in your c suite. How about hiring more
at the entry level. How about looking at what happens
in the middle, mid layer. All of this over the
last twenty years. These conversations have been happening over the
(13:49):
last twenty to twenty five years, and we have made
very little progress. This is not because women are not trying.
It's not because we have babies, it's not because we
don't have childcare. It is because the structure today is
not motivated to change it, plain and simple. That's the
only reason why I say I'm starting to say, maybe
(14:09):
quotas work, right, Maybe maybe quotas is what you have
to do. Because if you're told that you can't operate
in my state unless you have a representative representation of
the population, that's reasonable. Guess what will happen. They'll get
the representation and el see if the business still runs
just fine. And once you get numbers. I think that
you guys know this, But Joe or Carolina ro Man.
(14:30):
You know this, Once you get numbers right, the fly
wheel effect takes on. If you're the only one, it's
very difficult. Even if you're one of you know, five
out of a hundred is very difficult. Once you get numbers,
the fly will affect, takes takes case and change happens.
And so I think tech companies, but also banking industrials,
(14:54):
you name it, have to keep focusing on this. Right now,
some of the older industries, banking industrials are making progress
of women. They are, like I said, still stuck in
the mud when it comes to women of color and
people of color. But I'll take women right now for
you know, for now, tech companies are not making progress anywhere.
We have to absolutely put a fire underneath them and say,
(15:17):
you know, keep do it or we're going to force
you to do it. Another thing I will say one
another thing. I will say, we are real, we are people,
We are active citizens. We should be. We can make
decisions about where we want to actually buy. We we
want to use our commerce strength. I have made it
a point there are two companies that I will buy
(15:38):
nothing from because there if you look at their board
of directors and their leadership structure. They literally have zero
people of color, and they have some board members that
are women, and zero women in the leadership team, zero
anyone in the leadership team. And said for white men.
Fortunately one of them is not a US company. But
I think we we as responsible citizens, have to actually
(16:01):
start to put some pressure on these companies as well.
If you're not willing to have me participate in your success,
I'm contributing to your success. But if you don't want
me to participate actively and how your company is governed,
I should go somewhere else. That's what you're telling me,
and that's what I will do with my money as well. Firstly,
we just have a moment left. I want to just
(16:22):
go back to this concept of the flywheel and bringing
more people in. And one of the things that we've
seen in this crisis is of course this huge gap
open up unemployment rates between why it's between people of
color and so forth. One of the things that we
hear from say the FED or yelling these days is
this important like let's grow the economy really fast and
for a long time and more sustainably so that everybody
(16:44):
comes back in, so that we don't start slowing it
down just when white unemployment drops. How powerful of an
idea or concept is that to you in terms of
establishing that base, bringing in more employment, of just making
sure that GDP growth growth mains robust for a long time.
It is foundational, foundational to the way that I think
(17:07):
and to I think what we need in in this
country we are we have already we started gutting out
the middle right, we literally tore it out. What unfortunately
we're doing now, or what has happened now, is that
we are literally destroying the lower as well. They are unemployed,
are significantly underemployed. We have dislocated we I mean, the
(17:31):
people have been dislocated. We have to do something to
re engage them and have to be active participants in
the economy. This We can't just keep giving them stimulus checks.
By the way, we have to do that too, but
that's not going to get them going. Literally, millions and
millions of people women are large number of them women
people of color, but also Middle American white guys who
(17:53):
literally are underemployed or unemployed. As we come out of
this recession that never really happened as a right, we
have the Wall Street um unbelievable success and the main
street disaster here. We have to bring main Street back
up to participate or else. I just don't understand how
how the nation stays together. You cannot have this much
(18:14):
just disruption. I live in New York City and in London,
and I will tell you. You You walk up and down
the streets. You see people on the streets now who
you would never see before their stuff on. We have
to engage. We have to go back to and I
think Gillan is absolutely right. We have to engage people
into work. We have to engage people into participation, participation
(18:35):
in growing this the world again, but this country very specifically.
If we don't shame one up, shame one us. This week,
President Biden signed one point nine trillion dollar COVID relief
bill that he campaigned on into law. This birth of
fiscal stimulus into the economy has put the inflation tobate
front and center ahead of the Federate decision next week.
(18:57):
For some market walkers and Republican lawmakers arguing the package
will overheat the economy, we got some perspective on it
from Tim Dewey. Tim is an economist that s g
H macro advisors, a professor at the University of Oregon
as well as a Bloomberg Opinion calumnist. We started by
asking Tim if he's expecting a disciplined, consistent message from
the dot plot and the Central Bank statement about waiting
(19:18):
a long time before the first grade hype. I expect
that we're discipline consistent view is still going to hold.
There's obviously a chance that someone decides to increase their
their rate forecast for three, but I don't think it
would be enough to more than one participant. I would
(19:38):
likely do that. I think that that we're going to
get the same story we've been hearing, both from the
statement and from UH Chair Paul in the press conference.
So Tim, a lot of the talk, at least a
lot of the fear of inflation rearing its head, seems
to put up against an argument that had been made
long before we got to this point, the idea that
(19:59):
that there are sort of structural forces out there, technological
forces out there that have sort of created disinflation or
at least kept inflation at bay. Is there any sense
here that that narrative has changed at all. No, I
think it's far too early to think that that basic
narrative has changed, and we think about it in terms
of a flat folds curve. Right, is that the idea
(20:19):
here is that we can push unemployment to very low
levels before we'd see inflationary pressures emerge, and those inflationary
pressures will then actually only emerged slowly. So under those circumstances,
the FED is really focused on although the employement, and
we are well away from full employment, and so the
Fed is I think serious about being patient with with
(20:44):
with interest rate policy as long as they can possibly be.
It feels as though the market is we're seeing it
now already pricing in inflection and inflation expectations hitting at
two seven when you're looking at the break even to
a large extent, how much do they need to keep
on just guiding the market that we're gonna see eye
(21:05):
popping inflation numbers. But it's transitory. It doesn't matter because
at the moment the market seems to just be continuing
to push it further. No, this is a this is
a really great question. I mean, we know that markets
are increasingly pricing in rate heights for three and then
even edging into UH and and the FED has been
fairly resoluted saying, well, we don't expect that to happen now.
(21:28):
The FIT can't prove right now that they're not going
to hid rate hikes, hike rates in two or even.
What they can do is keep pushing on their message
even if inflation numbers start to hit rise here. And
I think that that's where the test will come sooner
than expect. It is if you know, we start to
(21:48):
see these expectedly stronger inflation numbers coming the months ahead,
and the fens well, we're not worried about that. Let's
see where we are in here. Uh, then I think
we will be the test. Well, let me ask you
a questions. So the message that we've gotten from the
FED is that the rising rates represents a stronger economy.
They're not worried about it. And sort of theoretically that
(22:09):
makes sense, and it's a bed on. At some point
they will raise rates, but because the economy is so strong.
But do the rising rates right now at some point
threatened to tighten financial conditions such that in order to
get to that destination that we know they want to
get to, they actually have to um push back on
it in some way. Is there a point where it
becomes sort of mechanically a problem. Well, I think that
(22:32):
that would be a yes. Is that there is theoretically
a point where you can imagine that rates becomes the
financial conditions tight And I think that's where you really
need to be thinking about. It. Is not so much
that longer rates are rising up, but something happens to uh,
you know, tighten financial conditions noticeably and and and what
(22:53):
I mean is probably something outside of of of the
expected growth in the US economy. So this would be
something like personally a basic misunderstanding of of of monetary
policy going forward, or some kind of financial accident. Uh.
Those are the kinds of circumstances where I could see
the FED wanting to be much more forceful shoot back
(23:14):
against the rise and long term meals or or or
expectations of earlier than expected tinking. Otherwise, I think that
that's gonna try and to sort of just reiterate their
message as as patiently as they can. Yeah, well, he
seems like he's been patient so far as far as
Powell goes, I am curious. So I mean he's made
(23:34):
it clear too that the focus uh is sort of
laser uh focus right now on the job market, on
labor force participation. Uh. And the idea though that it
could take us a while before we get back to
pre pandemic levels of employment. When you look at that
tim and you look at that goal, here should investors
sort of, I guess, pay a little bit less attention,
(23:55):
I guess to some of the inflationary signs and pay
more attention to what's going on in the labor market. Well,
that's that's the way I've been freeming it is. Yes,
we should be watching inflation because it could I mean,
it could get quote unquote out of hand and out
of hand here is probably you know three rather than
you know or whatever your worst fears could be. Uh,
(24:15):
And it could be something that then this starts to
ton more inflation expectations, and we should look at that
at least, But we don't expect that to happen. But
we should really be focused on is how quickly the
labor market recovers. The labor market recovers more quickly than
the fet is more likely to see inflationary pressures. Is
something that could be that could evolve into something higher
(24:38):
than they're looking for. But if this labor market is
very slow to recover, then then they're gonna be less
concerned about the inflation numbers going forward. So I'm traditionally
for for a while now focus more on um uh
you know, the stat state of the labor market per se.
Uh yeah, yeah, what data though, Tim, are you looking
(25:01):
at for the labor data and you're looking at more
fast high frequency data? Are you? Are you analyzing NFP?
I mean, what are the telltale signs that you're going
to get a quick recovery or we're going to see
actually more longer term scarring in the labor market. So
for me, what I'm really looking at is how quickly
we can get the employment of popular population ratio OP.
So it's some issue of getting unemployment down and getting
(25:24):
people back into labor force. And hopefully later this year,
if we can open the economy, if we can open schools,
if we can open daycares more and more more fully,
then we're gonna be able to get that labor part
participation numbers up. And that's what I would be looking for,
not just any narrow sector improvement, but broad based improvement.
So the Fund's gonna be watching, you know, the the
(25:45):
employment of population ratios, and not just the population whole,
but of sub groups within the population. I do think
that the genuinely um genuinely desires that is to be
a broad based recovery and doesn't think we can have
that until we get really everybody participating in the labor market.
So this is why i'm I think I take the
(26:08):
FETE and it's it's it's word when it says it
wants to be patient before timing up on policy, particularly
rate heights. Then we broke down what exactly made it
into the final version of President biden stimulus package and
its economic impact with Liz Pancatti, a senior advisor at
(26:29):
Employee America. We started by asking Liz which part of
the one point nine trillion dollar relief bill will have
the most powerful impact. I think it's a combination. I mean,
I think the package was developed as a package rather
than kind of ad hoc stimulus here and there, and
so I think you know, of of the three most
impactful things, unemployment has been extended or topped off unemployment
(26:51):
benefits and extended unemployment benefits have been extended out to
labor Day to the beginning of September, so those that
three dollar a week payment will be extended out to
their and workers UM will receive up to twenty nine
additional weeks of unemployment insurance UH. And then on the
non jobless work of front or on the other front, UH,
(27:12):
checks will be sent to every adult and child in
households making under seventy five thousand for individuals and under
a hundred and fifty thousand for couples. UH. And then
and then most notably, I think that the thing that's
been on the top lines of a lot of people's
analysis is the child tax credit expansion. And so that's
been increased to thirty six hundred dollars for children under
(27:32):
six and three thousand dollars for children over six, and UH,
you know, analysis suggest that that alone will cut child
poverty in half. But UM as as a whole package,
income for the bottom twenty percent of Americans will be
increased by and for the top of Americans by only
one percent. And so I think, you know, the package
(27:53):
will certainly target aid where it's needed. So this bill
does seem to be a little bit more targeted towards UH, middle,
middle class and working class people in a way that
maybe that first or that that that Care Is Act
necessarily wasn't. I am curious that a lot of the
failures that we saw with the Cares Act came more
because of the implementation rather than what was in the
(28:13):
bill itself. And I'm curious as to whether we have
any sense here as to how this gets carried out,
how this gets implemented and we avoid some of the
same mistakes we made last time. I think that's right.
I think the Biden administration has focused on giving aid
primarily to people. And you know, there's some business aid
in the in the bill, but UM, I think over
half of the money will be directly given to American
(28:35):
people rather than you know, corporations and businesses, etcetera. UM
to that note, I think on the implementation side, the
child tax Credit, namely is one big change. And so
typically the child tax credit is paid out to families
every April UH in tax season once a year. And
now the House and Senate have passed a bill or
the Senate will UH the household has it tomorrow morning,
(28:57):
but they've passed it to have the r S cut
that check periodically too families. And we are understanding is
that the administration will direct that came it to be monthly. UM.
Given the implementation of that we expect to start in July,
and so they have quite a few months, especially after
we get through the rush of tax season, for the
I R S to work through the implementation of that.
(29:19):
But you know, we certainly could see hiccups there, though,
I think they are really prioritizing getting that money out
the door in an efficient manner. On the checks front,
getting the checks are pretty easy nowadays. Uh so, you know,
the December bill sent out six checks and the vast
majority of those were in folks bank accounts or mailboxes
within three weeks. On the unemployment insurance front, there's you know,
(29:39):
broader issues I think in our UI system, and this
does actually direct money to the Department of Labor to
assist with that. On the implementation side of those things,
I think there will still be hiccups. And you know,
extending those benefits and getting money out the door to
jobless worker is just that there have been for the
past twelve months. I mean, quite amazing if it does
indeed cut child pulity in half, as you say, I'm
(30:02):
interested in the efficacy as they will deem it. You know,
many felt that perhaps the stimulus checks in particular were
just saved rather than spent. Is that is that what
you want to see some savings so that people do
protect themselves or when they do suddenly have to meet
you know, the rent is no longer on hold and
then they are perhaps forced out of where they're living.
(30:23):
Or do you want to see it being plowed back
into the economy to ensure that we get this flywheel
motion and everyone then hopefully sees all boats rise. I
think it really is going to depend on family financial situations.
You know, we know that black families on average have
much less liquid wealth and white families, and so to
have you know, a beef up and savings for those
families would be really impactful and certainly have an effect
(30:45):
on you know, financial stability for families who have been
left behind and in you know, previous recessions and in
our labor market in general. But on the other hand,
you know, you want folks, as soon as we've all
got you know, shots in our arms, to go get
on planes and take the cage sins and you know,
have that more discretionary spending. I suspect that we might
see we might see short term savings where you know,
(31:06):
people are saying, well, I'm going to get a vaccine
in two months, so I expect to spend that money
in two months. Um, But I don't think, you know,
we we have seen high savings rates of these. I
think on the long term savings front, we're not going
to see long term savings. You are going to see
an injection of those kind of pent up funds into
our economy over the next twelve months. Is as places
start to reopen, we can travel again, all those good things. Liz,
(31:29):
how much do you see an opportunity to make some
of this stuff permanent, particularly the child tax credit. People
might find that to be a very big benefit in
their lives and uh, make things much easier childcare and
so forth. What do you expect in terms of the
fight to sort of establish some of these things as
a permanent benefit, you know, on the child tax credit front,
I would hope that there's not a big fight there.
(31:49):
You know, Republicans on the other side of the aisle
have you know, said that they're supportive of families, working
families and children, and so you know, politically opposing that
I think would be quite deficult, though we've seen them.
Do you know other things in that realm Um, I'd
say that on the tax On the tax credit front,
for any of you know the child tax credit, there
(32:09):
are a number of other tax credits. UM repealing those
pulling them back is difficult. There was also an a
c A. The healthcare UM marketplace subsidy put in place
for two years so that subsidies, sorry, premiums can't be
more than eight point five percent of your income. I
think it'd be pretty tough to claw that back and
make health insurance premiums rise. And so for those two
(32:31):
things especially, I think those will be the two things
that we see stick around, even though they're only in
the bill for a year or two. UM. That fight
certainly won't be easy, given the constraints of the Senate
and the filibuster. UM. So I do think Democrats haven't
cut out for them. But I think that is a
real priority for the Biden administration, and they you know,
will work across the aisle to get those two things
(32:51):
implemented on a long term basis. Meanwhile, President Biden's stimulus
bill passed on a party line vote without a single
Republican vote in Congress. But the COVID relief package did.
Gardner a lot of support from the corporate sector. A
couple of weeks ago, senior executives from more than a
hundred and fifty companies back the legislation and a letter
(33:14):
to congressional leaders urging them to act. The list included
leaders from across industries, including the CEOs of Goldman, Sacts, Blackstone, Google,
and A T and T. So, now that the bill
is law, we got some more perspective on how the
corporate world is reacting. We spoke with Declan Kelly, the chairman,
CEO and co founder of the global consulting firm to NaIO.
We started by asking Declin if his clients are enthusiastic
(33:36):
about what the stimuluts can do for the company. Yeah,
thank you for having me. I think that is even
itself an understandment. I think the CEOs have been very
vociferous and their support for the bill. I think over
a hundred and fifty of them actually signed a joint
editor of the administration and to the President number of
weeks ago. I think it's pretty obvious the market's reaction
(33:58):
is what we all expected it to be once this
was passed. This amount of stimulus going into the economy,
and this amount of job creation and support for the
various different efforts around the vaccine sort to speak for themselves,
allied with you know, already low interest rates and plenty
of other capital available for investment, generally from the private sector.
I think most CEOs that we work within TONAIO have
(34:20):
been expecting this for the last several weeks and are
relieved the day is final a year. The CEO is
the corporations who work with declan, the people on the
phone to day and day out. Are they optimistic in
general as one unfolds, Yes, I would say they're extraordinarily optimistic,
you know. I think a few months ago they expected
(34:41):
that one would be a story of two halves, if
you will. First half would be you know, getting the
vaccine distributed and administered, and the second half would be
a graduate recovery into a more normalized economic environment. I
would say that has been delayed a little by the
distribution issues that we've seen, but they're not that bad,
I suppose in general, especially in the United States relative
(35:02):
to the rest of the world. But you know, you're
seeing very very positive indicators around earnings, around guidance. I
think consumer confidence is getting higher. I saw a recent
data that showed that of CEOs and the Fortune were
very optimistic about the year ahead. We're looking at five
point six percent global growth projected by the o e
(35:22):
c D one six and a half percent for the
United States, which is the highest number of Sight four.
So you know, from that perspective, I think confidence is
really really high, and probably with some level of justification
given everything we see going into the economy. Well, on
that note of confidence in I mean, we're talking about
a lot of the cash going to the public, to
(35:42):
individual people out there. Uh, Corporate balance sheets at least
in a lot of sectors are pretty flush right now,
and there's a lot of speculation amongst investors about how
that money could be put to use, whether it's increasing
capex spending, whether it's M and A activity, or simply
it's something like you know, share buybacks or diver thens. Yeah,
I mean, I think it's fair to say that a
(36:03):
large percentage of CEOs and the Fortune five hundred are
really looking at their capital allocation strategy in general, in
light of all the things you've mentioned, and given the
fact that the markets are where they are, I still
think there's a significant disconnect between the stock market and
what I call the real economy, and Tonato has written
extensively on this when we still have close to temper
(36:24):
center on employment in general when you look at the
real numbers underlying, but in general, most companies are looking
at significant capex and significant consolidation certain sectors because there's
more cash flowing into those sectors. I think you're going
to see a lot more of that activity in the
second half of the year. I still think it's a
real sort of lagging indicator, but I think the M
(36:45):
and A will increase much more significantly as we head
into two because we still do have some bumps in
the roles that we need to to overcome. But I
definitely see confidence coming back in and I definitely see
larger deals happening in the second for the year for sure. Declan,
let me ask you a question that maybe a little
more on the philosophical front um. You mentioned this belief
(37:06):
that this stimulus is expected to be very good for
the economy, but what about just the idea that government
spending and government involvement in Uh. Yeah, essentially applying to
corporate in the private sector with cash during periods of
downturns can be positive because I feel like perhaps in
the past CEOs may not have been so welcoming of it,
or maybe they would have feared inflation or the implications
(37:28):
for taxes or so called crowding out. Do you think
that there is a change maybe that started with CARES
or sometime prior to that, and how corporate executives think
about the potential for fiscal policy fiscal activism to accelerate
and help rebound the economy. You know, it's a really
interesting question because you know, we can look politically at
(37:49):
the United States and several other countries around the world
and see deep polarization almost fifty fifty split. Yet there
is this congregation around the middle economically in terms of
a lot of the efforts to inject stimulus into the
economy in the United States, within other places around the
world and other democracies, especially in Europe, so you're seeing
a lot more centrism in that respect, in terms of
people coalescing around the need for investment. So yes, First
(38:13):
of all, most CEOs are very flexible, nimble, and realistic,
knowing that from one administration to another you need to
be able to pivot depending on what you see. But
bear in mind one differentiating aspect, which is the pandemic.
We haven't been through a pandemic before like this and
living memory, and so a lot of those rules go
out the window when you're faced with what we've been
faced with economically, and I think what you're seeing from
(38:35):
a lot of corporations in the United States and then
frankly globally, is that a lot of those sort of
geopolitical considerations and whether or not your Republican or a
Democrat really go out the window when people see that
you need the injection of stimulus. In this builds about
three fifty to four hundred billion for expenditure in major
capital cities around major cities excuse me, around the United
(38:56):
States and major state capitals in large urban areas. And
I think that's pivoting to an eventual second bill, which
will be around the infrastructure area. And you know, we've
seen in America, not just post World War Two, but
in other periods right back to the Industrial Revolution, that
when America invest in itself and put itself back to
work in investing in infrastructure, it has a positive impact
(39:17):
on the economy. I think you're going to see both
parties or less around that in the weeks and months ahead.
Decline let's stay on this philosophical idea, because it's not
just been a health crisis, it's been an economic crisis,
also been a social crisis. And as we sort of
head towards what quote unquote might be some sort of
new normal, what does CEOs saying and thinking about their
(39:39):
new role within this as we hopefully end the pandemic.
I know that you've been teaming up with Global Citizen,
for example, thinking about how we can look at this
one more global perspective and become a more I mean,
dare I said, just society. Do you see an equal
recovery out of this? Well, thank you for mentioning the
Global Citizen interine our partnership. We the last week launched it.
(40:01):
It's called a Recovery Plan for the World, with us
the vander Land the President of the European Commission, and
Dr Ted Ross from the World Health Organization and also
Secretary Carry and a lot of other artists like Hugh
Jackman and Billy Eilish and cold Play and Usher and
many others got involved. And my role in that is
to get the corporate sector to support it, and we've
(40:21):
had people like Cisco and Coca Cola and Delta and
Rising and weight Watchers and Procter and Gamble and many others.
Google get involved, So we are confident we're going to
get a lot more companies involved. But to the philosophical question,
you know, I think brought to an end fifty years
of a focus on shareholder capitalism and the stark realism
(40:42):
from all CEOs that they need to spend a lot
more time focused on e s g. At climate change,
diversity and inclusion and all those things. And I think
we're at a point where that is not going to change.
And you're going to see a lot of proxy reports
this this year reflecting that, You're going to see a
lot of the larger institutions above and beyond the lock
Rocks have been very vociferous, of course, voting with and
(41:03):
against those companies who don't get the memo, so to speak.
So yes, I think that's here to stay, and yes,
I think society will benefit as a result, and I think,
you know, we're looking at that being the new reality
and the new difference as we call it in Tonato
going forward. And that's it for what you missed this week.
If you like the show, make sure to subscribe and
(41:24):
rate us an Apple podcast, or wherever you listen to podcast.
You can catch our show every weekday from three thirty
to five pm on Bloomberg TV and from four to
five pm on Twitter. Thanks for listening and have a
great week.
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