WEBVTT 00:02.066 --> 00:04.933 align:left position:10% line:77% size:80% JUDY WOODRUFF: As the economic fallout from the coronavirus outbreak continues, businesses 00:04.933 --> 00:09.266 align:left position:20% line:77% size:70% across the county are being crippled by closings and layoffs. 00:09.266 --> 00:14.266 align:left position:10% line:77% size:80% The number of Americans filing for unemployment benefits surged last week to a 2.5-year high. 00:16.733 --> 00:21.300 align:left position:10% line:71% size:80% For a look at how this economic downturn compares to others, Paul Solman sat down with Harvard 00:23.200 --> 00:26.633 align:left position:10% line:77% size:80% University economist Ken Rogoff. His book "This Time Is Different" examines the history 00:28.066 --> 00:29.933 align:left position:20% line:89% size:70% of financial crises. 00:29.933 --> 00:32.600 align:left position:20% line:83% size:70% It's part of our regular series, Making Sense. 00:32.600 --> 00:35.033 align:left position:20% line:83% size:70% PAUL SOLMAN: Is this time different? 00:35.033 --> 00:37.466 align:left position:10% line:77% size:80% KENNETH ROGOFF, Economist, Harvard University: Well, this is something extraordinary we're 00:37.466 --> 00:39.533 align:left position:40% line:89% size:50% facing. 00:39.533 --> 00:42.633 align:left position:10% line:77% size:80% It is really hard to think of a historical parallel. I have talked about this with my 00:42.633 --> 00:47.600 align:left position:10% line:77% size:80% co-author, Carmen Reinhart, and we have to go back to 1918-1919, the Spanish influenza 00:49.666 --> 00:54.033 align:left position:10% line:77% size:80% epidemic, which killed, you know, millions and millions of people, to think of something 00:54.800 --> 00:56.900 align:left position:20% line:89% size:70% like this worldwide. 00:56.900 --> 01:00.466 align:left position:10% line:77% size:80% And it's not exactly the same. It was after World War I, when things were pretty bad already. 01:00.466 --> 01:01.633 align:left position:10% line:89% size:80% PAUL SOLMAN: Is this a war? 01:01.633 --> 01:03.666 align:left position:10% line:89% size:80% KENNETH ROGOFF: I think so. 01:03.666 --> 01:07.800 align:left position:10% line:77% size:80% I really feel like it's an alien invasion. We're being occupied. We're hiding in our 01:09.700 --> 01:14.233 align:left position:10% line:77% size:80% houses. We're told not to leave. We're having a sudden stop in economic activity. We are 01:16.266 --> 01:20.166 align:left position:10% line:77% size:80% going to see a recession, at least in the short term, the likes of which we have not 01:21.333 --> 01:23.333 align:left position:20% line:83% size:70% seen at least going back to World War II. 01:23.333 --> 01:27.300 align:left position:10% line:77% size:80% PAUL SOLMAN: In terms of the U.S. economy, the global economy, how bad could it get? 01:27.300 --> 01:32.066 align:left position:10% line:77% size:80% KENNETH ROGOFF: Well, we don't know how long we're going to be in lockdown. When will there 01:32.066 --> 01:35.833 align:left position:20% line:83% size:70% be antivirals? How soon will there be a vaccine? 01:35.833 --> 01:40.866 align:left position:10% line:77% size:80% We just don't know how the crisis will unfold. We're still in the war, and until we come 01:40.866 --> 01:43.000 align:left position:20% line:83% size:70% out the other end, it's hard to know. 01:43.000 --> 01:47.500 align:left position:10% line:77% size:80% But I think what we do know is, the short-term drop in output and quite possibly in employment 01:50.466 --> 01:52.566 align:left position:10% line:89% size:80% could be worse than 2008. 01:52.566 --> 01:56.100 align:left position:10% line:77% size:80% PAUL SOLMAN: Is there any chance that we won't come out of it in a year or two? 01:56.100 --> 02:01.066 align:left position:10% line:77% size:80% KENNETH ROGOFF: If the virus can be conquered, and we can reach a stable situation, I'm very 02:02.433 --> 02:04.466 align:left position:20% line:83% size:70% optimistic that we will be able to do that. 02:04.466 --> 02:08.833 align:left position:10% line:77% size:80% But it will be different for different countries. Italy's in trouble. I mean, they have big 02:08.833 --> 02:13.833 align:left position:10% line:77% size:80% pension problems, big debt problems, growth problems going into this. Emerging markets 02:15.833 --> 02:20.333 align:left position:10% line:77% size:80% are in trouble. We're actually already seeing emerging markets start to fold under the weight 02:20.900 --> 02:22.966 align:left position:40% line:89% size:50% of this. 02:22.966 --> 02:25.500 align:left position:10% line:77% size:80% I don't know where China will be. That's a big question mark. I mean, everybody thinks 02:25.500 --> 02:29.833 align:left position:10% line:71% size:80% China did great, China's conquered this. Not their economy. If they're lucky, getting people 02:31.900 --> 02:35.033 align:left position:20% line:71% size:70% back to work in the manufacturing sector, but who's going to buy the stuff once they 02:35.033 --> 02:37.633 align:left position:10% line:83% size:80% start manufacturing? The rest of the world's in recession. 02:37.633 --> 02:41.600 align:left position:10% line:77% size:80% PAUL SOLMAN: Are Congress, the president and the Fed responding appropriately? 02:41.600 --> 02:46.133 align:left position:10% line:77% size:80% KENNETH ROGOFF: Let's say they're moving forcefully in the right direction. 02:46.133 --> 02:51.133 align:left position:10% line:77% size:80% I think their response here to protect the healthy part of the economy needs to be just 02:51.633 --> 02:53.166 align:left position:40% line:89% size:50% massive. 02:53.166 --> 02:55.266 align:left position:10% line:83% size:80% PAUL SOLMAN: More massive than what they're doing now? 02:55.266 --> 02:58.733 align:left position:20% line:71% size:70% KENNETH ROGOFF: Oh -- oh, $1 trillion is just a starter package on what's going to end up 02:59.500 --> 03:01.633 align:left position:20% line:89% size:70% needing to be done here. 03:01.633 --> 03:05.666 align:left position:10% line:77% size:80% If you're shutting down a $23 trillion economy for two months or three months, the expenses 03:07.733 --> 03:12.733 align:left position:10% line:77% size:80% are just massive, workers losing their jobs, businesses going out of business. You can't 03:13.600 --> 03:15.666 align:left position:10% line:89% size:80% allow that to happen too far. 03:15.666 --> 03:19.933 align:left position:10% line:77% size:80% So, no, I think we will see many further packages of different types, not all like this one. 03:21.966 --> 03:25.100 align:left position:10% line:77% size:80% PAUL SOLMAN: Bailing out the airlines, for example, the hotel industry, restaurants? 03:25.100 --> 03:28.200 align:left position:10% line:77% size:80% KENNETH ROGOFF: So, one of the tough things in this -- and I don't know how to make that 03:28.200 --> 03:31.800 align:left position:20% line:83% size:70% judgment -- is how much, who to bail out. 03:31.800 --> 03:36.800 align:left position:10% line:77% size:80% But, certainly, the hospitality industry, to some extent the airlines, they're bystanders 03:38.766 --> 03:42.466 align:left position:10% line:77% size:80% here. They didn't create this. They weren't flying too many routes and about to go bankrupt. 03:42.466 --> 03:47.466 align:left position:10% line:77% size:80% So, I think you have to -- first, really importantly, the health care sector. 03:49.400 --> 03:52.666 align:left position:10% line:77% size:80% We have to go in a military, wartime stance, if necessary taking over parts of the private 03:55.633 --> 04:00.600 align:left position:20% line:71% size:70% sector for production of mass of respirators, building up facilities. That will calm people 04:02.933 --> 04:05.500 align:left position:20% line:83% size:70% down. That will help things pass. 04:05.500 --> 04:10.500 align:left position:20% line:71% size:70% Then you have to help the directly affected people and sectors. And then the kind of bailout 04:12.500 --> 04:15.166 align:left position:10% line:77% size:80% that they're talking about with sending checks to individuals, that's to protect the healthy 04:15.166 --> 04:17.300 align:left position:20% line:89% size:70% parts of the economy. 04:17.300 --> 04:21.633 align:left position:10% line:77% size:80% All of these things need to be done. And the Fed has to come in and the Treasury to provide 04:23.633 --> 04:26.433 align:left position:20% line:71% size:70% loans to corporates, to businesses, so they don't go bankrupt, so that we have businesses 04:26.433 --> 04:28.366 align:left position:10% line:89% size:80% when we come out of this. 04:28.366 --> 04:32.433 align:left position:10% line:77% size:80% PAUL SOLMAN: You are someone who's worried about governments taking on too much debt. 04:32.433 --> 04:34.333 align:left position:20% line:83% size:70% That's now not a consideration anymore? 04:34.333 --> 04:36.366 align:left position:20% line:83% size:70% KENNETH ROGOFF: No, absolutely not. 04:36.366 --> 04:40.566 align:left position:10% line:77% size:80% I mean, there's never been a concern about our government's defaulting. The concern is 04:40.566 --> 04:45.566 align:left position:10% line:77% size:80% being able to borrow massively when you need to. That's the whole point of saving for a 04:47.466 --> 04:50.133 align:left position:10% line:77% size:80% rainy day. When it rains, you want to really open up the floodgates. 04:50.133 --> 04:55.133 align:left position:10% line:77% size:80% And, here, I just -- there's no limit. We're in a war. You have to win the war. I would 04:57.633 --> 05:00.600 align:left position:10% line:71% size:80% have no problem with the government debt magically going up $5 trillion in the blink of an eye, 05:03.000 --> 05:06.033 align:left position:10% line:83% size:80% if we could get out of this in two or three months healthily. 05:06.033 --> 05:10.500 align:left position:10% line:77% size:80% This is an emergency. You're not worrying about your credit standing right away. I don't 05:10.500 --> 05:13.900 align:left position:10% line:77% size:80% think that's going to a problem. And you know what? If we have inflation at the end of this, 05:13.900 --> 05:18.833 align:left position:10% line:77% size:80% so what, if that is what we needed to do to win this war. We're trying to protect the 05:18.833 --> 05:22.333 align:left position:10% line:83% size:80% American people, protect our interests, protect the future. 05:22.333 --> 05:27.333 align:left position:10% line:77% size:80% This is really -- think like World War II, World War I. It's this -- tiny little viruses 05:29.266 --> 05:33.300 align:left position:10% line:77% size:80% invading us, but you know, make no mistake, this is like a war, an alien invasion. 05:34.966 --> 05:37.033 align:left position:20% line:89% size:70% JUDY WOODRUFF: Sobering. 05:37.033 --> 05:40.733 align:left position:10% line:77% size:80% Once again, that was Paul Solman talking to Harvard economist Ken Rogoff.