Huang: Given the time, probably we have to directly get into the discussion. Our chairman just introduced very briefly your great achievement, especially when you were at the US Treasury Department.
Bob, my first question is about the pandemic. We are here now having a conference but everybody is wearing his/her mask. I understand that the situation is more difficult in the US and in Europe. What is your take on the so-called second wave? Do we have effective vaccine so that the things could improve, or should we expect a second wave, a replay of what happened earlier this year?
Rubin: Yiping, I'll give you my view. And my view was based on discussions I've had with quite a number of people who are healthcare professionals. They are leaders in the American healthcare system which I'm obviously not, but I had the opportunity to draw on their expertise. I think we've got a tough road ahead. We're clearly getting significant numbers up in both Europe and the United States today. I don't know when there will be a vaccine.
First you have to get a vaccine. And then you have to get it widely used and widely distributed. That's probably sometime in the middle to late middle of next year. And even then, I was with a former senior health official in the United States government the other day. She said that she thought even once the vaccine is in place, it may be only 60%-70% effective. So I think we've got a long way to go, in terms of the pandemic and moving past it.
And furthermore, even after we get the vaccine effort finally in place, and after we finally pass the point which may well be more than a year from now, pass the point when the pandemic is significantly affecting our economies, a lot of the economic effects of the pandemic, I believe, because they've been so substantial and significant in both magnitude and type, I think they are going to be long lasting well beyond the adoption of a vaccine. So we're gonna be living with all these difficulties, I think we have to take extra care for quite a long time.
Huang: So, looks like the uncertainty will be with us, and we have to take extra caution for some time. Thanks. But one of the questions I guess related to that is, how is the government going to cope with the situation like this, particularly with regard to the fiscal burdens? Now, Mr. Chairman just mentioned, one of your greatest achievements during your tenure at the Treasury was to balance the budget. Obviously, you once said, President Bush Jr. quickly widened the deficit again, because of the Iraq war and so on. After the global financial crisis and after this pandemic, the US government, in fact, the governments around the world, all have a lot more debt burdens. How are we going to cope with that? And can the US actually get out of this situation by printing more US dollars as some suggest?
Rubin: I think you've got it right, Yiping. I think we face a very complicated situation. Let me focus just on the United States. Europe obviously faces similar problems, though I think in some ways they've been less responsive to doing what needed to be done in regard to the pandemic. We needed to have very rapid and very large fiscal stimulus, at least in my opinion, and that's what we did. I think we did the right thing.
We need now another major stimulus bill. I was hoping it would get done before the election. But it looks now that that's extremely unlikely. And in fact, it may not get done until after if Mr. Biden is elected, until after Mr. Biden takes office. I think his program, if you look at his program, I think he's got it about right. What he says is, we need to have another very large stimulus as quickly as possible. And I agree with that. He also said we need to invest, engage in public investment for the long term which we have unfortunately underdone for quite some time. I agree with that. And he says that we need to pay for the investment. Not the stimulus should be deficit funded, as you know, but the investment we need to pay for with increased revenues, and that should be increased taxes on a very progressive basis. And I think that's right. So I think his plan, the plan that he's laid out in the campaign at least conceptually, I don't agree with every single piece of it, but I think conceptually it's right.
At the same time. I think we do have another question, which is what should our long term fiscal policy be? In other words, yes, we should have a massive stimulus now. Yes, we should have public investment that is fully paid for with progressive taxes, and that is what he's proposing. But then, thirdly, what should our long term fiscal policy be? And there's a tremendous amount of debate about that in the United States today, including people who you know very well. We have very different views. There are those who say that we can, since interest rates are so low, and since we are the reserve currency for the world, that we can afford to have relatively high deficits for a long time, and a relatively high debt to GDP ratio.
There are others like me who say that we should do the stimulus, we should do the public investment fully paid for. But then we need to really focus on how do we get our debt trajectory? How do we get our debt to GDP ratio? How do we get our debt position over the long run down to what I consider a sounder position? And that will be a very big debate that will go on, I think, for quite some time in the United States. But I think for now, I think Biden's program is, if he gets elected president, about where we should be.
Huang: Great. So there is a question of tradeoff between fiscal spending for the short term stability, but also long term growth. That's something we all have to balance. You just mentioned the benefit, the advantage of the US dollar as the reserve currency, which buys the US a lot of time dealing with the debt problem. However, one of the things that now we're looking at and people outside of the US are thinking is, maybe the US is giving up the so called strong dollar policy which you helped to create when you were in the Treasury. Do you agree with that assessment? And what do you think will be the implications?
Rubin: No, I don't think so, Yiping. I spend a lot of my time in policy debates, policy dialogue. I think mainstream economic policy thinkers in the United States, for the most part, believe that a strong dollar has served us very well, and will continue to serve us very well. Having said that, in the shorter run, currencies, the dollar or any other currency, will fluctuate, as you well know, dependent on all kinds of variables, all kinds of factors. And in the short run, markets tend to be psychological. But I think in the long run, the dollar will reflect the fundamentals of the economy, the United States economy.
And I think in the long run, we're well positioned to have a strong economy. I know that there are some in China, at least I was told that some in China, who think that the United States is now in economic decline. I don't agree with that. I think we have very great strengths. We have the rule of law, we have a deeply embedded market economy, vast natural resources, great university systems, dynamic society and culture, and much else. We have a lot of policy challenges that we need to meet. And that requires our political system to function more effectively going forward than it has in the recent past. But I think the probabilities of that are very high. At other periods in our history, we’ve had a similar kind of malaise in our political system, and then we've had political resilience. Politics can change rapidly in America.
And I said a moment ago, we're a dynamic society. So I think the odds are very high that we will have a strong economy going forward. And if we have a strong economy going forward, I think, reflecting that, we will have a strong bell. I might add, I think China and United States both are strong economies, and will be the two leading economies in the world for a long time to come. And I think that puts a tremendous premium on the two countries. Look, maybe we'll discuss this later, but looking to develop a constructive relationship over time to get the benefits that could come from that kind of relationship.
Huang: So we shouldn’t read that too much out of short-term momentums of the FX market. And if you’re right, that certainly will have a significant implication on the exchange rate of RMB. The other thing, Bob, I’d like to press you for your insights on is that the likely outcome of the election which is coming within the next two weeks.
The interesting thing here is I read news reports and I often read reports with very different conclusions. And one set says, it’s for sure Biden is going to win. The other says Trump is definitely going to win. What is your take, Bob?
Rubin: I think one thing is almost certain that both of those things aren’t going to happen. Look, we’ll find out on November 12th. The election is November 3rd, but so far, the early voting by mail or in person represents about 40% of the total voting in 2016. So there seems to have been an enormous increase in early voting and that may suggest that we’re going to have an extraordinarily high level of turnout in this election which I think would be a very good thing.
The polls all show that Biden has a very large lead in the popular vote and that he has a good solid lead in the Electoral College. There’s a highly respected political analyst named Charlie Cook. He puts out the Cook Report. It’s the best perspective, I think. Political report in America. And I did an interview with him two days ago at the Economic Club of New York. And he said he thinks that the odds are quite high that Biden will win this. It doesn’t mean that Trump can’t win. He may win. And that we will only know once it’s all over. But I think you’ve got a high probability that Biden will win and it’s probably a pretty good probability that the Senate which is now controlled by the Republicans will come under the control of the Democrats.
Huang: Well, I understand you have regular contact with Biden’s campaign group. I personally certainly hope you’re right. We will have a change of government in the US following this election. But just following that and my final question is, if Biden wins, will we see significant changes in American policy? And in particular, if you’d like to share with us your insights about the future outlook of the Sino-US relations. Are we going to see a different world or are we going to see just continuation of what we saw last 3 to 4 years?
Rubin: I think, I am actually confident that if Biden wins, we’ll see a dramatic change in American policy in many thrusts. I’ve already mentioned that he will have immediate stimulus, a large immediate stimulus assuming for the moment that he gets the Senate and he can legislate as he sees fit. If he doesn’t get the Senate, then he’s going to have to figure out how to work with Republicans in the Senate. He can still do a lot by executive action. And my guess would be that if he doesn’t get the Senate, he will work to put together a large stimulus. I think he will pursue having very substantial, as I said a moment ago, very substantial public investment funded by tax increases that are progressive basis.
Climate change will be a very high priority for the Biden administration. He’s laid out a whole agenda for dealing with climate change that will be 180 degrees different from where we are today. We have an increase in inequality in our country. I think you have that in China as well. And I think there are a number of ways that he will try to address reducing that, well reversing the increasing inequality and get a reduction in inequality, part of it through as I said funding public investment with progressive taxes.
I think internationally, he will reach out to work with other countries. He’s built up…I’ve known him for over 30 years. Oh, gosh, 35 years at this point I guess. And he’s built that way. He relates to people and he tries to reach out and work with others. He’ll reach across the aisle to work with the Republicans in order to effectuate his policies. And he’ll reach out around the world to work with our allies and to work with all the countries that we interact with. We also have a lot of issues with respect to our social fabric and I think he will be a uniter of people as opposed to be a divider. He will bring people together. I have a very good feeling about his presidency.
I’ll tell you another thing, as long as he’s been in public office, he had very good people around, very strong people. And if you look at the people in the campaign right now, they are very strong people. They’re thoughtful. They are bright. They are balanced. They’re pragmatic. And I think you’ll see that manifested in the people he appoints and in the policies that he has as president of the United States if he gets elected, which I think is a high probability but certainly not a certainty.
Huang: Okay, well thank you very much. In fact, I remember Bob, you came to Beijing at the end of 2008. And we went to see Governor Zhou Xiaochuan and Vice-Premier Wang Qishan at the time, you told them Mr. Obama would win and you were right. So I hope this time, you’re right again.
Unfortunately, given the time, we'll probably have to end here. But I just want to summarize the five key messages that we heard from Mr. Rubin. Number one, it looks like the pandemic risk will be with us for some time, so just be patient. Number two, the fiscal situation in the US is very difficult to deal with. But hopefully, if they spend more money on long term investment supporting growth, it will be easier for the US to get out of that high debt problem. Number three, the strong US dollar is going to stay according to Bob, that will have a significant implication for the global FX market, obviously. And number four, Biden is going to win. And number 5, if he wins, the whole world will be different, and we should all be prepared for that. So you want to add something?
Rubin: Can I add one thing, Yiping? I think the only other comment I’d make is, and I said this about a year ago when your foreign minister Mr. Wang Yi was in New York. There are enormous complexities and uncertainties around the relationship with the United States and China. But I think, one thing is absolutely certain and it’s not at all complex which is that the 21st century will be enormously affected by whether the United States and China can have a constructive relationship built around climate change, economic norms, dealing effectively with nuclear weaponry, and so much else which is in our mutual self-interest, or whether we have an adversarial relationship. And I sincerely and powerfully hope that leaders in both of our countries will recognize the mutual self-interest in having a constructive relationship, while acknowledging that there will be some issues on which we will disagree.
Huang: Well, I think that’s a very good summing up a message for the two countries to work together. Bob. Thanks very much for doing this. And on behalf of the audience here, particularly Chairman Chen Yuan. I’m not sure if you can see him, he is also in the audience listening to you. Thank you very much for sharing with us your insights and hopefully you can join us in person next year. Thank you!
Rubin: I would be delighted. Thank you, Yiping. Have a good day, rather.
Huang: Bye-bye. Thank you.
