1 00:00:02,066 --> 00:00:04,933 JUDY WOODRUFF: As the economic fallout from the coronavirus outbreak continues, businesses 2 00:00:04,933 --> 00:00:09,266 across the county are being crippled by closings and layoffs. 3 00:00:09,266 --> 00:00:14,266 The number of Americans filing for unemployment benefits surged last week to a 2.5-year high. 4 00:00:16,733 --> 00:00:21,300 For a look at how this economic downturn compares to others, Paul Solman sat down with Harvard 5 00:00:23,200 --> 00:00:26,633 University economist Ken Rogoff. His book "This Time Is Different" examines the history 6 00:00:28,066 --> 00:00:29,933 of financial crises. 7 00:00:29,933 --> 00:00:32,600 It's part of our regular series, Making Sense. 8 00:00:32,600 --> 00:00:35,033 PAUL SOLMAN: Is this time different? 9 00:00:35,033 --> 00:00:37,466 KENNETH ROGOFF, Economist, Harvard University: Well, this is something extraordinary we're 10 00:00:37,466 --> 00:00:39,533 facing. 11 00:00:39,533 --> 00:00:42,633 It is really hard to think of a historical parallel. I have talked about this with my 12 00:00:42,633 --> 00:00:47,600 co-author, Carmen Reinhart, and we have to go back to 1918-1919, the Spanish influenza 13 00:00:49,666 --> 00:00:54,033 epidemic, which killed, you know, millions and millions of people, to think of something 14 00:00:54,800 --> 00:00:56,900 like this worldwide. 15 00:00:56,900 --> 00:01:00,466 And it's not exactly the same. It was after World War I, when things were pretty bad already. 16 00:01:00,466 --> 00:01:01,633 PAUL SOLMAN: Is this a war? 17 00:01:01,633 --> 00:01:03,666 KENNETH ROGOFF: I think so. 18 00:01:03,666 --> 00:01:07,800 I really feel like it's an alien invasion. We're being occupied. We're hiding in our 19 00:01:09,700 --> 00:01:14,233 houses. We're told not to leave. We're having a sudden stop in economic activity. We are 20 00:01:16,266 --> 00:01:20,166 going to see a recession, at least in the short term, the likes of which we have not 21 00:01:21,333 --> 00:01:23,333 seen at least going back to World War II. 22 00:01:23,333 --> 00:01:27,300 PAUL SOLMAN: In terms of the U.S. economy, the global economy, how bad could it get? 23 00:01:27,300 --> 00:01:32,066 KENNETH ROGOFF: Well, we don't know how long we're going to be in lockdown. When will there 24 00:01:32,066 --> 00:01:35,833 be antivirals? How soon will there be a vaccine? 25 00:01:35,833 --> 00:01:40,866 We just don't know how the crisis will unfold. We're still in the war, and until we come 26 00:01:40,866 --> 00:01:43,000 out the other end, it's hard to know. 27 00:01:43,000 --> 00:01:47,500 But I think what we do know is, the short-term drop in output and quite possibly in employment 28 00:01:50,466 --> 00:01:52,566 could be worse than 2008. 29 00:01:52,566 --> 00:01:56,100 PAUL SOLMAN: Is there any chance that we won't come out of it in a year or two? 30 00:01:56,100 --> 00:02:01,066 KENNETH ROGOFF: If the virus can be conquered, and we can reach a stable situation, I'm very 31 00:02:02,433 --> 00:02:04,466 optimistic that we will be able to do that. 32 00:02:04,466 --> 00:02:08,833 But it will be different for different countries. Italy's in trouble. I mean, they have big 33 00:02:08,833 --> 00:02:13,833 pension problems, big debt problems, growth problems going into this. Emerging markets 34 00:02:15,833 --> 00:02:20,333 are in trouble. We're actually already seeing emerging markets start to fold under the weight 35 00:02:20,900 --> 00:02:22,966 of this. 36 00:02:22,966 --> 00:02:25,500 I don't know where China will be. That's a big question mark. I mean, everybody thinks 37 00:02:25,500 --> 00:02:29,833 China did great, China's conquered this. Not their economy. If they're lucky, getting people 38 00:02:31,900 --> 00:02:35,033 back to work in the manufacturing sector, but who's going to buy the stuff once they 39 00:02:35,033 --> 00:02:37,633 start manufacturing? The rest of the world's in recession. 40 00:02:37,633 --> 00:02:41,600 PAUL SOLMAN: Are Congress, the president and the Fed responding appropriately? 41 00:02:41,600 --> 00:02:46,133 KENNETH ROGOFF: Let's say they're moving forcefully in the right direction. 42 00:02:46,133 --> 00:02:51,133 I think their response here to protect the healthy part of the economy needs to be just 43 00:02:51,633 --> 00:02:53,166 massive. 44 00:02:53,166 --> 00:02:55,266 PAUL SOLMAN: More massive than what they're doing now? 45 00:02:55,266 --> 00:02:58,733 KENNETH ROGOFF: Oh -- oh, $1 trillion is just a starter package on what's going to end up 46 00:02:59,500 --> 00:03:01,633 needing to be done here. 47 00:03:01,633 --> 00:03:05,666 If you're shutting down a $23 trillion economy for two months or three months, the expenses 48 00:03:07,733 --> 00:03:12,733 are just massive, workers losing their jobs, businesses going out of business. You can't 49 00:03:13,600 --> 00:03:15,666 allow that to happen too far. 50 00:03:15,666 --> 00:03:19,933 So, no, I think we will see many further packages of different types, not all like this one. 51 00:03:21,966 --> 00:03:25,100 PAUL SOLMAN: Bailing out the airlines, for example, the hotel industry, restaurants? 52 00:03:25,100 --> 00:03:28,200 KENNETH ROGOFF: So, one of the tough things in this -- and I don't know how to make that 53 00:03:28,200 --> 00:03:31,800 judgment -- is how much, who to bail out. 54 00:03:31,800 --> 00:03:36,800 But, certainly, the hospitality industry, to some extent the airlines, they're bystanders 55 00:03:38,766 --> 00:03:42,466 here. They didn't create this. They weren't flying too many routes and about to go bankrupt. 56 00:03:42,466 --> 00:03:47,466 So, I think you have to -- first, really importantly, the health care sector. 57 00:03:49,400 --> 00:03:52,666 We have to go in a military, wartime stance, if necessary taking over parts of the private 58 00:03:55,633 --> 00:04:00,600 sector for production of mass of respirators, building up facilities. That will calm people 59 00:04:02,933 --> 00:04:05,500 down. That will help things pass. 60 00:04:05,500 --> 00:04:10,500 Then you have to help the directly affected people and sectors. And then the kind of bailout 61 00:04:12,500 --> 00:04:15,166 that they're talking about with sending checks to individuals, that's to protect the healthy 62 00:04:15,166 --> 00:04:17,300 parts of the economy. 63 00:04:17,300 --> 00:04:21,633 All of these things need to be done. And the Fed has to come in and the Treasury to provide 64 00:04:23,633 --> 00:04:26,433 loans to corporates, to businesses, so they don't go bankrupt, so that we have businesses 65 00:04:26,433 --> 00:04:28,366 when we come out of this. 66 00:04:28,366 --> 00:04:32,433 PAUL SOLMAN: You are someone who's worried about governments taking on too much debt. 67 00:04:32,433 --> 00:04:34,333 That's now not a consideration anymore? 68 00:04:34,333 --> 00:04:36,366 KENNETH ROGOFF: No, absolutely not. 69 00:04:36,366 --> 00:04:40,566 I mean, there's never been a concern about our government's defaulting. The concern is 70 00:04:40,566 --> 00:04:45,566 being able to borrow massively when you need to. That's the whole point of saving for a 71 00:04:47,466 --> 00:04:50,133 rainy day. When it rains, you want to really open up the floodgates. 72 00:04:50,133 --> 00:04:55,133 And, here, I just -- there's no limit. We're in a war. You have to win the war. I would 73 00:04:57,633 --> 00:05:00,600 have no problem with the government debt magically going up $5 trillion in the blink of an eye, 74 00:05:03,000 --> 00:05:06,033 if we could get out of this in two or three months healthily. 75 00:05:06,033 --> 00:05:10,500 This is an emergency. You're not worrying about your credit standing right away. I don't 76 00:05:10,500 --> 00:05:13,900 think that's going to a problem. And you know what? If we have inflation at the end of this, 77 00:05:13,900 --> 00:05:18,833 so what, if that is what we needed to do to win this war. We're trying to protect the 78 00:05:18,833 --> 00:05:22,333 American people, protect our interests, protect the future. 79 00:05:22,333 --> 00:05:27,333 This is really -- think like World War II, World War I. It's this -- tiny little viruses 80 00:05:29,266 --> 00:05:33,300 invading us, but you know, make no mistake, this is like a war, an alien invasion. 81 00:05:34,966 --> 00:05:37,033 JUDY WOODRUFF: Sobering. 82 00:05:37,033 --> 00:05:40,733 Once again, that was Paul Solman talking to Harvard economist Ken Rogoff.