- Good evening, everyone. Thank you so much for joining us. I know you're in for a treat with the two guests we have tonight. And I'm delighted to introduce them both first, Sarah Bloom Raskin class of '83. Sarah, as so many of you know, served from 2014 to 2017 as the Deputy Secretary of the U.S. Department of the Treasury, making her the highest ranking woman in history to serve in the Treasury Department. Sarah provided innovative policy solutions to some extraordinarily vexing problems, but also in an effort to advance prosperity, fairness and resiliency throughout the American economy. After years of public service as a financial regulator, Sarah is currently a visiting professor of the Practice of Law at the Duke University School of Law, where she's also a distinguished fellow at the Duke Law's Global Financial Markets Center, and a senior fellow at the Duke Center on Risk. I've already told you that Sarah is a graduate of the class of '83. She is the parent of two Amherst graduates and is now a trustee of the College and a very, very helpful and supportive one. At Amherst she majored in Economics was inducted into Phi Beta Kappa and graduated magna cum laude. She's also a graduate of Harvard Law. Sara, welcome, and thank you so much for being here. Ron Lieber is a member of Amherst College's class of 1993. He majored in American Studies at Amherst and was first published in the New York Times, Op-Ed page as an undergraduate, which is amazing, and which seems to have launched a flourishing career in financial journalism with a dedicated focus, as you will probably know from his writing on practicality and also on kindness. Ron now writes the, "Your Money" column for the New York Times, featuring personal finance stories and personal finance advice. He's the author of several books, including the 2015 New York Times and Wall Street Journal bestseller, "The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money." His newest book, "The Price You Pay for College: An Entirely New Roadmap for the Biggest Financial Decision Your Family Will Ever Make" It will be out in January, 2021, so very soon. Ron welcome, I appreciate both of you taking the time to be here and look forward to the wisdom you're going to share with us on financial resiliency at many different levels. Over to you.
- Thank you, President Martin. This is a thrill, thanks to all of you out there in Zoom land, who are here to join us. I can't see your faces right now and neither can Sarah, but I can imagine them. I can imagine them 30 years ago, and I can imagine them today from some of our Zoom reunion calls and it's so nice to have you here. I just wanna remind you that we'll be recording this event so other people can see it later. And with that, we will jump right into it, and there will be time for questions and answers around 40 minutes past the hour. But with that, I would like to turn it over to Sarah and let's start here. I think we're gonna start macro and go micro and since you've had your hands on the levers of power and also policy, we wanted to start with you. And let's begin, I think for clarifying, for the folks who are watching, what do we mean when we talk about resiliency? Resiliency of what or resiliency of who?
- Right, okay, so first of all, let me thank President Martin for that wonderful introduction. And of course, the chance to talk to Ron Lieber now this of course has been a kind of, sort of secret wish of mine because I am this avid reader of the Ron Lieber, "Your Money" columns. But what I really have always seen in Ron's columns is this kind of secret sneer, right? So he takes us through the step-by-step that you need to get answers to some of these really vexing consumer financial issues. And of course this isn't an easy time and it's never been an easy time for consumers to navigate our financial system. And so you turn to Ron Lieber because Ron will explain it and he'll explain it in with great detail. And in that kind of Amherst clear communication style that we all learned so well, but there is this secret sneer to what he's saying, because it is absolutely frustrating in so many instances to maneuver and choreograph and get through this system. It's really often innavigable and so I've always been struck by how Ron approaches these questions. And that really leads us to this discussion tonight, which goes to the question of resilience and what I mean by that, and what I think we're gonna look at is this idea that there are particular contextual features that permit people to experience more or less resiliency from financial shocks. Now we know that we have had two financial shocks in our lifetimes. I really never thought after the financial crisis, that there would be one quite so soon on the heels of the last, and of course this is extraordinarily painful for our country. And it has dimensions that are of course, related to health and wellbeing. But from my perspective, I look at it from the perspective of the economy and how essential it is to understand how people are thriving. So we've now had two, we've had two crises and it's given us a chance to see really, what is at stake when there is a shock and how people in particular, how households recover from it. And so, I can't imagine really a better guide to this than talking to Ron Lieber, because of course he knows how you navigate this system. But I thought what we would do is we would start with a couple of, kind of a couple of big points on what this looks like from the perspective of resiliency. And again, it's the idea of how do you bounce back? How do you cope with a shock, particularly, of a financial nature and how do you get through it? And we've seen again a lot because we've experienced the financial crisis and now we're experiencing this pandemic crisis. So I think I'll start with one, Ron, that I think is one generality that I would draw from now having seen two crises. And it's this, it's that it's cheaper to prepare for risks than to pay for them once they happen. Now, again, I'm talking about this from the government perspective. I think we have entered now, a set of circumstances that is in part due to a lack of preparation. And we have spent a lot of money responding to this crisis. The government has pushed out an unprecedented amount of fiscal support, upwards of $2 trillion. Okay, that was pretty huge. And on the monetary policy side, you've seen the Feds spending upwards of $7 trillion already. So this has been expensive, very expensive to deal with. And it's going to have consequences, not directly because of maybe the amount, but because of the ways in which this fiscal and monetary support has been delivered. So I think it's a legitimate question to ask ourselves what would have happened had there been a better preparation by the fiscal authorities that would have essentially helped mitigate the depth and duration of what we are dealing with right now? So, this turned out to be a theme that essentially came into play during the financial crisis as well, where a financial crisis hit. And you could also argue that there was in essence, a lack of good preparation in a different form than what we're dealing with now, but still a lack of good preparation on the part of government to actually help mitigate, not just the onset and the fact that the risk happened, but the ability to help households bounce back, help them navigate it. And so that it wasn't quite, it wouldn't be quite as long and deep and painful as it was. And what this one is turning out to look, it looks similar.
- Sure, so the second
- Does that make sense, Ron?
- Makes sense to me. The second biggest idea you wanted to share was that this notion that that actions that are taken during any given crisis depend on the ideas that are laying around. Now, I'm basically just dying to hear what ideas were lying around in 2008, 2009 that you know about, or that you heard about, or that you participated in tossing into the pile, that actually were used. And were there any that should've been used that were not and ditto, right now? Right, I mean, there are probably some ideas of yours that are still lying around that did or did not get used. So can you take us on the inside and tell us about those which piles are access in that crisis?
- Sure, so, yeah, now, it's a great question and it turns out that, when you, and this is fixed into this idea of not being super prepared, right. So when you're not prepared or optimally prepared, you're going to have to rely on mechanisms that have existed before. Okay, so let's look for example at the pandemic okay, so at on the monetary policy side, and this is gonna get like kind of weedy, but, it's interesting because during the financial crisis, the Fed engaged in something called quantitative easing, which was this new technique and it was new then. It was a new set of tools, in which the Fed actually goes into markets and purchases in massive amounts of quantity, treasury bonds, treasury securities, and mortgage-backed securities. And it was new, it was a new technique used in the financial crisis, right? And by the way, it has consequences, which we can talk about, but then you've got like the onset of the pandemic. And while this use of quantitative easing during the financial crisis was considered kind of new and unorthodox, the pandemic comes around, the Fed finds itself kind of limited in terms of different tools and decides at that moment to go big and to essentially pick up one of the tools that was lying around, which was this quantitative easing set of tools, and immediately very early in the pandemic. And you'll remember this, Ron, I mean, the Fed engages in this massive amount of stimulus buying, essentially, doing something during the course of the financial crisis took really years to unfold. But essentially, when it came to the pandemic, did it right away. That's an example of a tool that was lying around, but here's one that's closer to home, I think, and this has to do with the notion of those direct stimulus payments. So we'll all remember that when the pandemic hit Congress in the CARES Act, indicated that there would be these $1,200 checks that would get written to everybody. And so these checks got written and sure enough, it was going to be clear that for a huge amount of people would not be enough that it would get you through a certain amount, a certain period of time, but it wouldn't get you kind of over a certain, some utility bills that would come due, some rent, some mortgage payments, it would get you, you know, kind of far, but then it would stop. There were discussions of ideas at the time that that $1,200 stimulus payment was discussed which would have been a more efficient way of getting that $1,200 payment delivered. So it turns out that the $1,200 payment went out and it went out with all kinds of conditions so that people who have a lot of debts would have that check partially what's called garnished, right there would be amount set off against it. Okay, well, if you know about this, if you know that the garnishment is possible, you think, wouldn't there be a better way to get this out the door besides writing a check isn't there another technique, but that's what was lying around, the technique of sending, writing a check and sending it out the door. You can imagine that there could have been better tools, faster tools, more expeditious tools. So, you pick, when you're dealing with a crisis, you see what's there, you have to act quickly and you use what's there, even if it's not great. The unemployment insurance is another example, right? I mean, query as to whether our unemployment insurance system is really that robust right now, a lot of states have not kept it up, it's become really difficult to maneuver. And yet that's the system that got deployed, it was the system that was there. So there's a lot of these examples of things that are just there and get used, but they might not be the best.
- Right, now, the third point you had wanted to make was this notion that Main Street gets served I'm sorry, the Wall Street gets served before Main Street. I really liked this one because from my perspective, my job in part is to sort of write the explainers when Main Street does finally get served. And last time around, there wasn't actually that much to say, there were these sort of trickles of mortgage relief programs that were nearly impossible to navigate and the mortgage servicers made it all exponentially worse by losing all sorts of documentation and driving people bananas. This time, at least, right away, or with the passage of the CARES Act, there were three or four pretty decent sized elements that were going to affect a lot of middle income Americans and help them at least for a period of time. So it did feel to me like Main Street did get served a lot more quickly this time. But did you feel like Wall Street still got served first this time around?
- Well, it's really, it is a great observation, Ron, of course you remember those days in the financial crisis where it was an explicit theory, right? Like if you save the financial sector, you'll save the household. So deal with the financial sector and then the household, you'll in essence deal with the foreclosures and the local household effects. And as you point out, there were problems and real flaws in that kind of approach. So I think you're right, during the financial crisis, you had a sense, certainly, that the financial sector was being helped before households were being helped so next comes to pandemic, right? So now we have another crisis and I think you're right, that there's a sense, like, wait a minute, we're gonna, let's move these both, let's move pieces together. Let's take care of households, small businesses and at the same time that we deal essentially, with what's happening in terms of market dysfunction. And so, in essence, I think the attitude going in was that there could be a simultaneous set of recoveries underway if these tools were used. What happened in fact was, and this is, I think in waves inevitable, but the Fed came in much quicker than Congress did. So the monetary policy piece got addressed quite quickly while the CARES Act, which did come out quickly was slower and then implementation on the CARES Act was slower. So the Fed was able to be,
- Very nimble.
- Yeah, very nimble and actually get assistance out the door to markets. Now, the Fed works through financial markets and because it works through financial markets, it meant that market stability was going to be obtained prior to say business and household stability. And we did set in place and maybe this is just inevitable, and there's no way to correct this, but we did have, in essence, what is now looking like the stages for a two-speed recovery, right? Where asset holders, people who participate in institutions that participate in markets get their assistance quite quickly, because the Fed has been able to move in a more nimble way and households and small businesses, and even medium-sized businesses or firms that don't have deep capital markets portfolios struggle a little longer. And of course, we know that the Fed has been able to keep its assistance going while the fiscal side has expired. We're in a situation where the stimulus hasn't been followed by another package. So in essence, now we're starting to see people really up against their rent deadlines and their mortgage deadlines and we see lines at food banks. I mean, we're seeing much greater levels of insecurity and challenge now at the household level, because there hasn't been that concomitant match of fiscal policy to what has continued to be a Fed monetary policy response. So you do have, I think now, even this potential to speed recovery.
- Right, so I'm gonna talk about a couple of things that fall out of that, right? So when we talk about, who are we talking about when we talk about resilience, on the more troubled side, I wanna talk about women, and I wanna talk about children. This recession hasn't been like other recessions in that women in the labor market have suffered disproportionately. The jobs that were lost in April when 20.5 million went poof, right, 55% of those were women, women of color were faring worse. And then we flash forward, a couple of months you start to see permanent reductions in the labor force, so that's not just layoffs. Those are also people who have stopped looking for work altogether. So who are those people? 1.2 million people, ages 20, and over who left the work force between August and September, 800,000 of them were women, which is just incredible, right? Now, some of has to do with long-standing factors like the gender wage gap. If you're in a two income household, that's heterosexual more often than not particularly if you're older, the men are gonna be earning more than the women. So it's easier to justify, the female partner dropping out, it's also, women were disproportionately represented in industries that took a really big hit, like hospitality and leisure. But the other thing that happened here that was completely unique, right, is that all of the sudden all of these children were home and many of them needed supervising. And our nations ragged at best childcare infrastructure, on its best days, came off the rails almost altogether. So there's an explanation for it. But when you think about medium and long-term resiliency, for women in particular, and also the kids who are out of school, you have to wonder. When the economy recovers and those women want to get back into the workplace, will they be able to step back in right where they were before? What's gonna happen to their retirement savings? If they've been out of 401 for a year? none of this feels very good to me, am I reading it right?
- You're reading it exactly right, I'm afraid Ron, some people have been able to go back to work. So there has been a return to jobs, but this return is not at all compensating for the people who can't go back. So this is what the economists, what we learned in our econ or intro econ course, this becomes long term unemployment, and this is actually a real drag on the economy. And it turns out that you're right, that it's women who are going to make up the ranks of that longterm unemployment, which is going to actually affect our ability as a country to prosper. I mean, it has personal dimensions too, in the sense that a lot of women who want to get back in the workplace are going to have a harder time when they eventually want to, because there will be that gap and there'll be a sense that they have been, that they've stepped out and that they don't have the skills necessary to come in at the level that they left at. So, there's that, and then there's also just this notion of what you lose when you, in terms of benefits. You talked about the 401 , but a lot of times, if you detach from the workplace in a long-term way, you're actually detaching from some of the benefits, like health insurance in particular, that is integral to a family's ability to prosper. So if in essence, you have lost your health insurance as well, because, the mom, say, has had to step back in terms of her work. You have a real hit to the entire family's welfare and the entire family's ability to actually move ahead. So you're exactly right and this is, you can even parse it further down than women, it's also women of color, there are complete, we went into this with racial disparities, I mean, there's clear racial wealth gaps. Those gaps are going to widen as we see them right now happening. So that's going to really affect the ability of our country to prosper, I think.
- Yeah, so why will those racial wealth gaps widen? Well it's because of who owns the assets and this was gonna be our fifth point, right? The people who own the assets own a lot of assets. And when you break that down and sort of stock market terms, you learn the following, 84% of stocks owned by U.S. households, so these are not the stocks that are owned by Amazon, Dauman and other institutions, but 84% of the stocks that are owned by us households are held by the wealthiest 10% of Americans. And the wealthiest 1% has roughly 40 or 50% of all equities. So, Sarah, you and I talked in our prep for this, about the K-shaped economy. Those folks, when markets go up are going to do quite well and somewhat mysteriously, the market has held up quite well. Now, Sarah, I don't know how many thousands of times you've heard the phrase, "don't fight the Fed," right? That's just a fancy way of saying when the government is throwing everything it possibly can at preserving the financial markets, there's at least a decent chance that stocks are not gonna go into the toilet and stay there. And so it goes this time, but the thing that's sort of shocking about what's happened most recently is this, if you look at the S&P 500, which is the collection of the 500 most valuable stocks in the United States of America, all of the gains in that index that have resulted this year, come from just five stocks, Microsoft, Apple, Amazon, Alphabet/Google and Facebook, which is incredible, right. And so, we pat ourselves on the back and the president wants to be rewarded for the fact that the stock market has held up. But you know, this market that we're talking about that has done reasonably well, or maybe very well, you could argue under the circumstance. What we're really talking about when we talk about the market are a handful of technology companies. And, if you wanna talk about K-shape recovery, here's another set of numbers to think about, Jeff Bezos, his stock holdings, he's got 876,000 people who work for him. With the amount that his stock holdings have risen just since the pandemic started, he could give $105,000 to every single one of those 876,000 employees. Now, I am happy for him, I'm happy for those employees, I am happy the stock market is down 50%. But is that really the way things ought to work, Sarah? Cause I haven't worked on the inside, I've only worked on the outside, but are you satisfied with that result when it comes to markets and resilience?
- So I think you put your finger right on it, Ron. I mean the markets have been, I think, resilient to use this phrase of resilience primarily, because they've gotten extraordinary assistance via the Fed. I mean, the Fed has come in, in a very big way and we talked about this at the beginning, right? Where the Fed used all the tools that it used in the financial crisis. It used them like on steroids when it came to the pandemic and the Fed continues to use them. So it's, still there is massive amounts of support and this support is, as you said, it's certainly, it's helping, I would argue is helping keep markets buoyed across the board. I mean, it essentially provides a floor beneath which prices aren't gonna drop. So asset prices are really holding strong, even though there's another economy out there where people are struggling, where we're in the midst of a pandemic where people are unemployed, where in essence, small businesses, one out of every four small businesses has had to shutter its doors, where we continue to have racial and wealth inequalities, where we have in essence recognition of structural racism that has emerged. And it's something now that we have to, that we should be reckoning with. So you see these issues out there that are completely disconnected from markets and people are astounded as to how we can be having these kinds of two sets of Americas here. And I think that you're exactly right, that the support given to markets is one that is I would argue due to the Fed. And the Fed being there, now, the Fed isn't even just doing quantitative easing, in terms of purchasing up, treasuries and mortgage backed securities, they're doing something new now, they're actually engaging in this same kind of guarantee, so to speak for corporate bonds. So you've got corporate bond issuance now that has this floor beneath which prices can't fall. Look, we want markets to be strong. That is, that is foundational, but we do have to think about the consequences. You think about the consequences for competition and you point out some of these mega, these giants of firms that essentially, are controlling a lot of the of market behavior, which is gonna have ramifications on prices and consumer protections and worker protections, and the structure of competition matters. And that structure is actually affected I would argue by what is happening here in terms of these massive monetary policy interventions and we have to look at that. I've always thought that income and wealth inequality too, is something that gets exacerbated through quantitative easing and we're doing it right now in a massive way. Again, with this massive amount of monetary policy support, there will be, and people are not, nothing empirically has been finalized yet, but people are lining up saying, "there's a consequence here." We are exacerbating income and wealth inequality with this level of support so there's quite a bit of consequence here and a lot that I think is gonna have to get thought through.
- And amidst all of this, the systems, the infrastructure undergirding the markets. have held up reasonably well. We haven't had any flash crashes or blackouts, Wall Street or on trading systems, have no during this crisis, but you and I promised that we were gonna sort of tip our cap to other infrastructure. And what you have said to me about that, was that underfunded public services will indeed crack when they are stressed by new demands. And so how do you think that manifested itself this time?
- So one place it manifested itself Ron was in the Paycheck Protection Program. So like go back in time and think about this mechanism, which was the mechanism by which Congress said, "let's, we have got to do something about holding on to this small businesses and keeping small businesses from failing and keeping them from having to lay off people." And so this so-called PPP was legislated and it was designed to work through the small business administration. Okay, so the small business administration, well we look at the small business administration and we say "people on the inside will, hey, I mean, now there's a website that crashes every 20 minutes. I mean, that website is like notorious, and this was pre-pandemic that was just a website. That was, it just would crash all the time it was almost, a tagline to a joke. So here comes the pandemic and here comes the design of a program, the PPP, and here comes a comes legislation saying, "and it will be implemented through the small business administration." What, I mean, think of the number of people who, as small business owners who have to work through, if everybody's doing this online, right? So if the system crashed, prior to huge demand, you put demands on a system that are unprecedented and they're gonna crack, that's what I'm talking about. I mean, you have to maintain your systems okay, because there are gonna be moments. And by the way, this is realistic, there've been two big moments in our own lives where we've seen crises and the need for government to deliver and the systems by which they deliver have to be maintained, you have to invest in them. And when I talk about that, I mean not just the IT Systems, but the people, the people who are working these systems, who you want to be devoted and completely focused on making these systems work. So there's a lot here that has to get invested in, in good times, I would say, and you're gonna get cut back, you cut back to the bone, some of these on some of these agencies, and it's times like this, that you pay the consequences.
- Yeah, and the thing that I wanna say about this is that where's the constituency for this? I can understand that, like poor people, or unemployed people, low-income people don't have much lobbying power. And so, I guess it makes a certain amount of sense that particularly in states where they're more likely to wanna shove people off the unemployment roles and get them back into the workforce, that they would purposefully underfund maintenance of their state unemployment sort of sign up websites. And I'm still getting emails from people who have to call hundreds and hundreds of times, but at least that's sort of explainable, even if it's not satisfying. But when you think about what went on and what goes on with the IRS and the underfunding, and the collection of our very revenues to fund the nation. You would think that that would be a bipartisan issue, particularly, because it's been proven again and again. If you invest in collections and I would argue overall infrastructure, you're more likely to get more money in those investments, pay off five fold, six fold, seven fold. And yet, I spent so much time after the passage of the CARES Act, answering questions for people who couldn't figure out where their check was, why they were getting a paper check, did they have to direct deposit? Why, the IRS's website wouldn't work and pity the poor people at the IRS, they had to call back 72-year-olds who were the only, among the only 312 people in America who knew how to program this or that system that was put together in the '60s and I mean that's not what an advanced nation does. Alright, we're getting towards Q&A here, but I wanna ask you quickly about this notion of yours, that some consumers don't spend those checks that they got. those $1,200 checks. At least they'll save them, or perhaps they'll share them and in any event that's all for the good. So there's no downside to those economic support payments at all?
- Yeah, well, it's interesting because I think speed was of the essence. So they had to get out the door. Now, optimally, what you would do is you would perhaps means test your checks so that you phase them into a situation where the amounts are greater for people who have greater need, and the amounts are smaller for people who have less need. Okay, but when you do that, you're adding a level of complexity. And what we've been talking about here is how this complexity actually can have costs associated with it because you don't get the payments out quickly and you could do a formula that has actually, that has to get implemented and it's very hard for people to figure out how to implement. So I think for the first check, I was fine with the first check, it's gonna probably be the last check, but it was fine that it was a $1,200 check and it was in essence too much for some people and not enough for others. Okay, speed was of the essence, if the checks had become more, targeted better, I think that would have been optimal. But I think that targeting would've taken time and if we put ourselves back into the frame of the CARES Act, remember the idea was in the early pandemic was to give people some kind of bridge payments so that when their rent came due and their utilities were due and they had to buy their masks and buy food and get their household in order, that they'd have something. And so, I'm not troubled by $1,200 being too much for some people it's fine, it was really fine. And yes, ideally we would have a federal government that could monitor exactly how much people need and send the right amount. We don't have that, we've never had that, we haven't invested in it. And so essentially, it's not gonna happen. So that's my very kind of pragmatic view and people will like to maybe talk about the waste inherent in that. I think that the amounts pale in comparison to some of the other very big amounts that were given out in, I would argue an unjustified way.
- Okay, I don't wanna end before we go to Q&A, without just saying a couple of words about the resiliency of our fundraising systems here in America, our charitable systems, since you mentioned that in point 8 Sarah, I've been amazed at the ingenuity that has emerged in terms of people using digital infrastructure to get money to needy people as quickly as possible. I wrote a column about it a couple of years ago, organizations like Modest Needs and GiveDirectly that have done really incredible work. And of course, we should tip our cap to the resiliency of the higher education industry, or at least our Alma mater. President Martin, a deep bow to you, as we all watch with amazement and hear reports from the children of our classmates, about how well things have gone there so far. Amherst has stayed out of the headlines except when it involves cornering the market on circus tents to put up on various quads so that people can have a class outside. The fact that you were the first college president or university president in the Wall Street Journal being quoted about tents, I think speaks well to our collective ingenuity and our overall resilience. So we're gonna go to the questions, it looks like we have a bunch up already. Sarah, do you see them on your screen in front of you?
- I don't, but that's okay, I can try them on the fly. Maybe here comes one.
- I'm just pulling up the screen now. Well, I pulled that up is there anything else that you wanted to ask me?
- Oh, well, Ron, I mean, we shouldn't be,
- I have questions about Fed
- I'd like to know I mean, kind of what, yeah. I mean, really your work on the resilience of higher education, what are you seeing is going to be one of the lasting effects of the ability of families to be able to afford a quality education? What are you seeing in that regard?
- Well, it depends on where you are in the market, right. There are a large handful of institutions, several dozen you could call it that have so much market power that they don't have to do any discounting, except for people who can't afford to pay. In other words through need-based financial aid, Amherst as a model. And then you sort of take a step down and even places like Ithaca College, which is an excellent undergraduate institution, announced three digit number of layoffs in the last couple of weeks. Ithaca had not been on my bingo card for massive layoffs, and then you go down maybe a step further to Ohio Wesleyan. One of the liberal arts colleges in Ohio that is constantly slugging it out for students, it's a very competitive market there. And they made an announcement a couple of weeks before Ithaca that they were gonna have to cut a bunch of departments. And then you see the public university systems that I would argue have not really been acting in good faith in terms of the promises that they made when they welcomed everybody back about their ability to keep people safe and keep track of who was getting sick and figure out what to do with them when they did. And I just wished there could have been more honesty about what was really going on, which was for most of these institutions, we need the money. If we don't get the money, we're gonna have to fire a bunch of faculty and a bunch of staff, that will change these places into different institutions than the ones that you went to and we're hoping to send your kids to. And so we're gonna take a calculated risk that when large handfuls of kids get sick, because they will party and they will get sick, but they're not going to infect and kill their professors. And that they're not gonna infect and kill people in their community. And I just wish we'd been honest about the fact that was going on, and the fact that we weren't means that there may be a sort of a growing crisis of faith in these institutions. The market may be mad, may no longer have as much trust in many of these higher education institutions. But on the other hand, people are dying to go back. People are, people, just, the undergraduates want nothing more to be back at the institution so much so that at schools that are not in session, people are paying for off-campus housing anyway, just so they can be close. So, I'm a long-term ball on the value of a residential undergraduate education. And the fact that we now see that as a rite of passage and have for decades now. And I don't expect it to be sort of radically disrupted, but I think the less selective you are, the more trouble you tend to run into. And I'm trying to pull our Q&A document up here, I'm gonna see if I can get it from our Zoom screen.
- I see them actually, the question is, yeah.
- Can you read them?
- Yeah, so we've got one here, which is, these are all great questions, like you would love. This is just so Amherst. "Who in society is bearing the brunt of these crises? How do we help those who have been affected most?" Thank you, Tom, class of '70. So I'll start with that, Ron. I mean, to me, the people who are bearing the brunt of these crises are working people and households. That's actually how I see it, that's how I saw it in the last financial crisis where it was homeowners and people who had lost jobs and how do we help them? What I think is we need to have a set of economic policies that puts working people really at the heart of these sets of responses. So that's how I would answer that, what do you think Ron?
- Well, I guess I'm hopeful that once we're out of an election year, regardless of who's in charge, regardless of who wins the election, I'm hopeful that we'll see more of a policy response and more action from our elected representatives. I mean, it pains me that it sure seems like the impact on election day had something to do maybe a little more than something to do with the negotiations around a second stimulus package. It doesn't seem to me like there's much doubt that we really needed one and probably needed another really big one. And I guess I'm sort of pinning my hopes there because I hope that that package too will be channeled towards the people who need it most, which are the people who have lower incomes and the people who are not in the stock market. Okay, I do see.
- Okay, you go for it.
- Sure, "What is your advice for a recent Amherst graduate who had their job delayed and then recently rescinded," their job offer I assume. that's an anonymous question,
- Yeah, have you been seeing that, Ron? I hadn't yet imagined that this was going to become a phenomenon, I'm really sorry to be getting that.
- Yeah, I mean, it is always the case in recessions, or it has been traditionally. It is this time too, that the college graduates do much better, their unemployment rates are lower, but that is no comfort for somebody who is in this spot. And it is also true that there are studies that have been done that show that people who do graduate into a recession, even if they do have a job, suffer in all sorts of personal finance, microeconomic measures that can sometimes last a lifetime, but I don't feel like anybody should feel consigned to that at the age of 22. And one of the things that you are purchasing when you attend a place like Amherst, I ran into somebody when I was reporting my book who was not an Amherst grad, but went someplace similar. And he said, the thing that was so amazing to me about my undergraduate experience is that I met the kinds of people that I never could have imagined existing in the world. And that is how I feel about my Amherst classmates. And so to the person who is in that spot, I would say, reach out to all of the people who you could not have imagined existing in the world. Those are the people in your class who are like that in the class above you, in the class above that. And there's a reason why Amherst Magazine exists and it's not just to get us all, to sort of remind ourselves of how great the place was and open our pocketbooks. It is a directory for awesomeness. And so you can go in there and find anybody and go on the Amherst website and just send them a note or call them up and say, "Hey, can I have 15 minutes of your time? Do you have a project that you're looking to assign on a freelance basis? Do you know anybody who is interested in the same things that I am, from your class, who you think I should talk to?" Right, so, use us, please, I'm actually somewhat surprised at how infrequently, I hear from Amherst graduates and so, the lines are open. The lines open for your side?
- Ooh, yeah, and I love, I actually, I love it when I hear from Amherst grads and students, particularly those that want to do something kind of bigger than themselves. I mean, I love, obviously I love public service and love having talented people want to devote their extraordinary education and set of experiences to doing something for the common good, I love that. And so, yeah, I welcome it as well. You gave a great answer, Ron. Do we have time for another one? Cause I like this question, there's a question about "what tail end financial risks are being overlooked or underestimated?" Great question, and gives me really a chance to talk about one that is way, way, way on my mind, which is of course climate risk. So essentially this idea that we are nearing a tipping point regarding, this is an existential risk that really goes to the heart of our ability to thrive as an economy and as a society. So I think that this, the way we grapple with climate actually has to also go to the, it has to be connected very closely to economic policy. That's a new idea I wanna say, certainly, in the U.S. you haven't seen climate really up until recently figure prominently in how we go about thinking about how to prosper, and you would think it's integrally related, but I have to say in the U.S. and part of this has to do with climate denial in the last several years, which I think has hurt us from the perspective of getting prepared and being able to start addressing what is really an imminent risk. And, I should go on to say that it's an imminent risk, but it also provides huge opportunity. It's actually a very exciting kind of way in which we can think about building an economy that is gonna be sustainable and stronger and create great jobs and have a sense of mission. And so I'm actually, I kind of see this as, it is a tail risk, I would say probably more than a tail risk at this moment, but it's gonna get addressed and it creates, I would say huge opportunity.
- Yeah, so my long tail risk concern is, it's become unfashionable to worry about at least at the Federal level, but I do worry about the sort of trillion with a 'T' trillions of dollars in underfunded pensions at the state level. And to a lesser extent, the sort of healthcare liabilities that are there, and it gets to a question that David Hewitt class of '83 asks, "whether we've got any comment on the resilience of the states that are finding themselves in financial stress because of their own decline in revenues and the dispute that's going on in Washington about how much money, which state should gather and under what circumstances. And I guess I'm sort of short to medium term bullish on the state situation. I feel like one way or another, there's going to be an agreement. I'll be at one after election day most likely, that will allow the state's to limp along, but I have no real vision for how these states, particularly my home state of Illinois, but there are others like it, dig out from their long-term pension obligations. Taxes can only go up so much and many of these state constitutions don't allow you to just, stiff pensionable and that's, doing so, would not be a particularly moral stance either. So I guess I worry more about the state's longterm Sarah have you looked at that?
- No, you're exactly right. And hello David Hewitt. David was in my class. Okay, it's so great to get your question. So interest rates too, are contributing to exactly the problem that Ron alludes to, because interest rates being so low and being so low for a long period of time actually adds to the stress of those pension liabilities 'cause of course, those pensions are confined to be earning income in a certain way, because they have to, in essence, have that money on hand for pension holders. It's, this is an issue that existed pre-pandemic. And it's one that we're gonna have to, we're gonna have to figure out how to navigate in a low interest rate environment. So, yeah, David you've hit on an important financial stressor here, and states of course, they have other stressors that have come through the pandemic, primarily a lot of think about, think about teachers and firefighters and police officers. All of these people are actually state employees and the amount of assistance that has gone to the states to help support those workers has been lacking for sure. So, yeah, that's another aspect of what is missing in this response?
- So the last question we are gonna take for tonight is from Arlene who's a parent in the class of '23. And I'm gonna use my license as a co-moderator, co-presenter here to add my own question to it. She wants to know "how we should prepare for financial resilience in the months to come" and I'm gonna redirect this to Sarah saying, "given that I think many people in the audience tonight are hoping that you will be downgrading to a government salary as of February or March. how are you personally preparing for financial resilience?"
- Careful Ron, no, that's not part of discussion. So, it's a great question Arlene, about how to prepare for financial resilience. And, in essence, we have such a heterogeneity in our country, so many different families with different situations, with different patterns, work with different child care responsibilities, elder care responsibilities. I mean, families I think are really struggling now. And I say that in, from the highest income levels to the lowest income levels, that there is just a sense that our quality of life is eroding and I would say creating quite a bit of anxiety. There is no simple answer for how to prepare for financial resilience and I'm not a kind of guru really on financial literacy or on exactly like what has to, how you best maneuver through these systems. I mean, that's what Ron can do and can do really well, which has helped us figure out how we navigate the system for our families and for ourselves and for our loved ones. It is very hard. I do have ideas for how government can actually, be prepared to help us be as strong as we can be as households and as business owners and as participants, even in the markets and how we create the conditions for an equitable economy and society and how we start to erase what I think are significant racial issues, how we begin to address major risks like climate and how we in essence, get the government apparatus in a place where it can really help us be more resilient. How it can actually help households be stronger and have better prospects for opportunity and prospects to actually, be better off. And so I think that there's a great role for government in terms of encouraging inclusive, prosperity. And that's, I look at it from the perspective of setting our policy apparatus correctly so that we can, induce the best results that are again, inclusive and sustainable. And in essence, reach every corner of our country so that's how I look at it. What do you think Ron?
- May there continue to be people in senior positions in government who can make it so. President Martin, I think on that note, we will send it back to you for the send-off.
- I cannot thank the two of you enough. What a fascinating conversation and set of responses by two remarkable people. Thank you so much. I wanna make sure that everyone who's attending, mark your calendar. The next event is November 17th, it's part of the provost series on Anti-Black Racism in the United States. And we will have Elizabeth Hinton who is an Associate Professor of history and African-American studies at Yale, also professor in the Law School at Yale. Speaking about, the title of her talk is 'From the War on Poverty to the War on Crime.' So please join us November 17th it's at 5:00 PM. And to let me thank Ron and Sarah again, I could listen to you for much longer and would like to, so maybe you would both agree to do this again at some point
- Happily.
- There's a lot of fun.
- And to the audience, thank you for joining and goodnight.
- Thank you everyone, good night.
- Thank you all.