Ending D.C.'s Debt Obsession

(Bloomberg) --  

Howard Schultz called it the "greatest threat domestically to the country." As the U.S. annual budget deficit creeps back towards one trillion dollars, the former Starbucks CEO, who is exploring a White House bid, has put a renewed focus on the national debt. But at least two major economists aren't so convinced. Larry Summers and Jason Furman took issue with the argument in a new piece for Foreign Affairs.

"Many remain fixated on cutting spending, especially on entitlement programs such as Social Security and Medicaid. That is a mistake," they wrote. "Politicians and policymakers should focus on urgent social problems, not deficits." Furman, the former chairman of the Council of Economic Advisers under President Barack Obama, joined "What'd You Miss This Week" with Scarlet Fu, Joe Weisenthal, Caroline Hyde and Romaine Bostick to discuss it and the changing attitudes towards debt.

This week, there were was a first on Twitter: a fight between former Goldman CEO Lloyd Blankfein and Senator Bernie Sanders from Vermont. The internet squabble broke out after Blankfein took to Twitter for the first time in almost seven months to critique a recent op-ed by the Senator and Democratic Senate Minority Leader Chuck Schumer. Their piece in the New York Times announced legislation that would limit corporate stock buybacks. Blankfein was not a fan.

Cullen Roche, founder of Orcam Financial Group, joined to discuss why he thinks the people are quick to "oversimplify" this debate around buybacks. If the legislation was passed, then companies would just adapt, according to Roche, and not in the way the two Senators intended. "I think they would just retain more of their profits," he said. "They would figure out other ways. Maybe they'd pay more dividends." Roche took issue with the bill for misunderstanding firms' motivation behind buybacks. "The main reason firms are buying back shares is those are low-risk ways of returning capital," he said. "Paying higher wages, and investing in things like R&D, those things are tough decisions."

Nell Abernathy, vice president of research and policy at the Roosevelt Institute, a left-wing think tank, made the case for curbing buybacks and said drastic changes like this were needed. "It's been about forty or fifty years of policy changes that have lead us to the current, dysfunctional high-profit low-wage, low-investment economy," she said. "It's going to take a lot of policy changes to get us back to a more functional economy."

The fallout over the death of a crypto exchange founder has been raising questions about the regulation of digital assets. When Gerald Cotten, CEO of cryptocurrency exchange QuadrigaCX, died in December of last year, the keys to the digital wallets of the exchange's customers were lost. Now hundreds of millions of dollars remain stranded, and people have been brought it to try to decrypt the keys. Peter Van Valkenburgh, director of research at Coin Center, joined to discuss the "strange" and "unfortunate" story. "What it really illustrates is that bitcoin is just like cash," he said. "Cash in your wallet, you lose your wallet. The cash is gone." Van Valkenburgh said, "that's scary but that's also a feature," and said there should be processes in place to deal with situations like this.

This week, there was a call to climate change arms on Capitol Hill. On Thursday, freshman Democratic Congresswoman Alexandria Ocasio-Cortez and Democratic Senator Ed Markey have unveiled their "Green New Deal." The policy idea has already gained traction among Democratic 2020 hopefuls, despite most people not really knowing the specifics. Now that the blueprint is out, Stephanie Kelton, a professor at Stony Brook University, joined to make the case for the policy. Kelton, who formerly served as the chief economist on the Senate budget committee and as an economic advisor to Bernie Sanders's presidential campaign in 2016, argued the bill would be pro-growth.

To contact the editor responsible for this story: Tim Andreacci at tandreacci@bloomberg.net

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