CNBC Digital Video: Mayor Pete Buttigieg Sits Down With CNBC Editor At Large John Harwood
WHEN: Friday, April 12th
ValueWalk's Raul Panganiban with Maurits Pot, Founder and CEO of Dawn Global. Before this he was Partner at Kingsway Capital, a frontier market specialist with over 2 billion AUM. In the interview, we discuss his approach to investing and why investors should look into frontier and emerging markets. Q2 2021 hedge fund letters, conferences and Read More
In the sprawling 2020 Democratic field, Pete Buttigieg may be the unlikeliest serious contender of all. He’s just 37 years old. He’s the mayor of South Bend, Indiana, a city of barely more than 100,000 people. If elected, he would become the youngest president in American history, and the first to be openly gay. Yet Buttigieg has a remarkably broad range of experiences and talents. After graduating from Harvard, he became a Rhodes scholar. He advised major businesses as a McKinsey & Co. management consultant. He won the mayoralty at age 29 and then, while serving, was deployed as a naval intelligence reserve officer to Afghanistan. He speaks seven languages and has performed Gershwin’s “Rhapsody in Blue” on piano with the South Bend Symphony. Even while officially just “exploring” a Democratic nomination bid, Buttigieg has ridden his millennial appeal past more experienced rivals in some polls and in fundraising. The $7 million he raised in the first quarter of 2019 exceeded the totals of Sens. Elizabeth Warren, Amy Klobuchar and Cory Booker. As he prepares to formally announce on Sunday, Buttigieg sat down on Monday with CNBC Editor at Large John Harwood at a veterans service organization in Las Vegas to discuss his approach to economic change. A partial transcript from Speakeasy with John Harwood featuring Mayor Pete Buttigieg follows.
To listen to the Pete Buttigieg extended interview, subscribe to the Speakeasy with John Harwood podcast on Apple Podcasts or wherever else you listen.
John Harwood: What’s right about American capitalism?
Pete Buttigieg: Well, American capitalism is one of the most productive forces ever known to man, and there’s so much that this country has been able to unlock, especially in the last century, in terms of technology, in terms of prosperity. Now where it goes wrong is when it’s only being experienced in certain parts of the country or by certain kinds of people, and I think it goes to show just how important for capitalism to work that it be backed by all of the other pieces that business alone can’t solve. But when it’s working right, there’s nothing like it. It’s extraordinary. You think about the changes that have happened, the advancements in health, in communications in every field that had been led by our country. What frightens me is it’s no longer obvious that our country will lead the most important advancements of humankind in the 21st century. Not unless we do some things differently.
John Harwood: Is that because you think the system is in some way rigged?
Pete Buttigieg: Yeah. It’s pretty typical human behavior for people to try to make sure the rules work to their benefit. That’s why the U.S. is based on the idea of a robust legal system and constraints on the excesses of anybody, especially concentrated wealth. And yet we’re at this moment where concentrated wealth has begun to turn into concentrated power. More than begun. It’s well underway. The thing that makes capitalism capitalism is competition. But as you have more and more corporate agglomerations of power, you’re going to see less and less competition.
John Harwood: But is that the reason why you think we have expanding income inequality?
Pete Buttigieg: I think it’s a vicious cycle. The economy is not some creature that just lumbers along on its own. It’s an interaction between private sector and public sector. And public sector policies, for basically as long as I’ve been alive, have been skewed in a direction that’s increasing inequality. And a lot of this is the consequence of what you might call the Reagan consensus. There was a period where even Democrats seemed to operate in this framework that assumes that the only thing you’d ever do with a tax is cut it. That those tax cuts were assumed to pay for themselves. The empirical collapse of that supply side consensus, I think, is one of the defining moments of this period that we’re living through.
John Harwood: But why do you ascribe it to the Reagan consensus as opposed to technological change, globalization, movement of capital?
Pete Buttigieg: Well, all of these forces interact. But none of these forces automatically have to make our society more unequal. If anything, globalization was supposed to create more equality among nations certainly. And more opportunity for –
John Harwood: Well actually it has created more equality in the world. It’s taken millions of people out of poverty.
Pete Buttigieg: Sure, it’s lifted so many out of poverty. And by the way, there are ways that it can work for us at home, too. But again, we’re seeing a concentration of wealth and power that skews things in the opposite direction. The fundamental truth is, it turns out a rising tide does not lift all boats. Not on its own. Especially if some of the boats are sort of tethered to the ocean floor. And that’s the kind of pattern that we’ve been on.
John Harwood: So how do you fix what’s wrong without slowing down or harming what’s right?
Pete Buttigieg: Well, first of all, we’ve got to define what success looks like. Is success just the number, the GDP? Or is success that more Americans are prospering? When you have that definition, it tells you that you have to rate these kind of exchanges between distribution and growth a little more evenly.
John Harwood: So there’s an efficiency-equity trade off, and you’re willing to make it?
Pete Buttigieg: There may be, yeah. I mean, look, it’s great to say that it’s all win/wins, and to some extent it is. I actually think an economy that’s more equitable also tends to grow better. But if there’s a win/lose equation, we shouldn’t shy away from that. We shouldn’t pretend that all of this stuff can be done — that you can make everybody better off while making nobody worse off. The reality is there are some people who are not paying their share. There are some corporations that are not contributing the way that they should. Until we recalibrate that, until we invest in things like education and infrastructure and health, investments that do in fact pay for themselves overall, but some people may have to pay more than others. Because some people frankly are getting a bit of a free ride on the productive energy of this country and this economy. That is going to take real choice.
John Harwood: Now, one thing that surprised me that you said in an interview the other day was that first of all, political change comes first. That is the set of issues, Supreme Court, filibuster, electoral college, because that is necessary to achieve policy changes that you need. But when you identified the most important policy change, it was climate, not the economy. Explain why that’s the priority.
Pete Buttigieg: Because I think climate is the biggest economic issue of our time, too. What kind of economy are we going to have if cities are becoming less and less inhabitable, if we’re experiencing crop failures and heightening natural disasters? The problem with climate is it wrecks our chance at economic security as well as physical security. One reason you see traditionally conservative sectors like the military and like the business community way ahead of, for example, conservative politicians in this country on the issue of climate, is that the market, too, is beginning to recognize the stakes of failing to act and simply accepting what will eventually will be trillions of dollars in damage. It’s not the planet as an abstraction that’s going to be harmed. It’s people. It’s us. It’s our economies, it’s our societies, it’s our communities. That’s why this is such an urgent issue.
John Harwood: You think we need to raise a lot more money for the government. What are the things that strike you as the most achievable and desirable?
Pete Buttigieg: I think we certainly need to consider a higher marginal tax rate for top income earners. Maybe it doesn’t have to be as high as it was historically, but we should at least admit that when it was higher, the American economy was growing pretty well. We should consider a wealth tax. I think it makes sense. I think one of the things that’s appealing about it is it’s not very distortionary compared to an income tax, and that’s important. The least distortionary tax probably is the estate tax, because you’re dead. So another thing we should think about turning to a more equitable use of the estate tax for the biggest and wealthiest estates. I’m interested also — if we can find the right way to implement it and the devil’s in the details — on a financial transactions tax. Because you see preposterous levels of wealth sometimes being created around these millisecond differences in financial transactions that nobody can explain to us whether it adds any actual real value to the economy.
John Harwood: Even McKinsey can’t explain whether that adds real value?
Pete Buttigieg: Even McKinsey, as far as I know. Look, the downside of any tax is it can disincentivize economic activity. So let’s start by taxing the economic activity whose value is hardest to prove.
John Harwood: Warren’s wealth tax would raise something on the order of $2.7 trillion over 10 years. Is that the order of magnitude you’re talking about?
Pete Buttigieg: Probably. I mean, look, we had something on the order of a trillion dollars robbed from the Treasury through the Trump tax cuts on the wealthiest. So even just getting us closer to being able to cover the deficit, with the services Americans count on today, is going to take us filling in a gap of that size. If we want to do more — if we want to have better infrastructure, which we absolutely need; if we want to deal with climate change, which is no longer optional; if we want to actually deliver on health care; if we want to continue to grow as the kind of country that can actually lead the world — then you can’t get something for nothing.
John Harwood: Can you do everything that you think needs to be done while hitting only the wealthy? Or is there no rational plan for dealing with our fiscal challenges, as well as our economic challenges, that doesn’t also hit the middle class?
Pete Buttigieg: If we’re going to collect revenue from the middle class, then we have to be certain that it is going to be reinvested and returned to the middle class in a way that makes us in the middle class better off. So as a middle class taxpayer, I don’t mind paying a certain amount in if it’s going to come back to me in the form of health care, if it’s going to come back to me in the form of education for my kids, if it’s going to come back to me in the form of a better road to get me to my job.
John Harwood: How powerful is a racial consideration when you think about the scale of things that need to be done for the entire country?
Pete Buttigieg: We know that if we target inequality in this country, much of which arose not by accident but by deliberate racist policies, and they can perhaps be reversed with intentional anti-racist policies, that we’re benefiting the entire society. We all do better when we all do better, as Senator [Paul] Wellstone said. We need to consider, first of all, that it’s the right thing to do. Secondly, that this is not a favor to somebody, this is a restoration of a theft. And third, that if we get it right, you don’t have to be somebody who is on the wrong side of a racial inequity to be better off for living in a country that did something about it.
John Harwood: Jamie Dimon recently put out a letter to J.P. Morgan that said, “The social needs of too many citizens have not been met.” But he also says the tax cut that was enacted late 2017 was “the irreducible minimum of what we needed to turn our economy around.” What would you say to him?
Pete Buttigieg: The big problem in this country was not that it was too difficult to be wealthy. It just isn’t the big problem in our country right now. It’s not what led to the political instability we’re seeing. It’s not what’s leading to diminished life expectancy, or the prospect of my generation is going to be the first in history to be worse off economically than our parents. What we could’ve done, especially if we were going to create a trillion-dollar deficit, is make the kinds of investments in infrastructure and education and health that would have made this whole country better off. I also think that, no matter how educated or intelligent some of the people working in these industries are, I fear that they can quickly get out of touch with the reality on the ground. If you don’t understand just how much anger there is in, for example, my part of the industrial Midwest — where it can be used in a very cynical political way to direct it against immigrants, or trade writ large, or against your fellow American, or even against Democrats, just because folks are mad and it’s got to go somewhere — you’re going to continue to see these destabilizing political outcomes like what we’re living through right now.
John Harwood: Others who say that the kinds of things you’re talking about would be destructive of capitalism, that it’s a war on the wealthy, that it would bring socialism to the United States. How do you respond to arguments like that?
Pete Buttigieg: The crazy thing about arguments like that is how uncoupled they are from evidence. We don’t just speculate on what happens in a Western society that delivers health care to everybody, or that has more social mobility or that invests at a higher rate in infrastructure or education. We know exactly what happens. What happens is you’re better off. The American dream is slipping away. You’re much more likely to experience that if you’re a kid in Denmark right now than if you’re in America. And while people can think up all kinds of excuses why something that worked in other societies hasn’t worked here, the reality is, when we’ve tried it here in our history, it’s also served us pretty well.
John Harwood: When it comes to cultural conservatives, you have said that progressives need to be mindful of the distance they have to travel, and sensitive to that. Do you think progressives also need to be mindful of the distance that some in business have to travel, when they think ‘hey, they’re coming after me?’
Pete Buttigieg: I think a lot of this is tonal. Look, the one thing I learned in the business community, and even more as a mayor engaging the business community, is that while we’d like to think of businesses as the most numbers-driven kind of discipline in America, in my experience it’s one of the most emotional. So what’s really important is that people not feel that they’re being attacked — or at least they understand that if we’re attacking a certain way of doing things, or a certain system, that this is not motivated by just angsty hatred. It’s being motivated by serious and legitimate concerns about where we’re headed.
John Harwood: We have seen in the last 10 to 15 years astonishing change in terms of cultural attitudes on issues like same sex marriage. Do you have any degree of expectation that we’re going to see very fast changes of opinion on things like economic issues?
Pete Buttigieg: I think there is a tectonic change in economic policy. You can see it by the fact that the Republican Party experienced a hostile takeover on the part of, basically, economic populists. This is not just another four-year cycle. This is not just another election, and I don’t just mean because of the character, or personality of the president. I believe we’re living through one of those moments just as when the New Deal consensus gave way to the Reagan consensus. We’re living through the end of a 30- or 40-year era that defined American politics and helps to explain how Democrats as well as Republicans behaved in office. We’re at the dawn of a new one. We’ve got to make sure we have an account of economic change, as well as social and political structures to handle that change, especially in the new machine age with automation transforming our relationship to the workforce. We’ve got to have answers that go a lot further than just saying “the current guy’s rotten and we ought to vote him out.”
Buttigieg On Being A Gay Candidate In The 2020 Field
John Harwood: When Barack Obama ran in 2008 to be the first African American president, he chose not to emphasize that fact because he thought it would be counterproductive. Other people celebrated that, he did not emphasize that. Are you going to approach this race with the same attitude about potentially becoming the first gay president?
Pete Buttigieg: When Chasten and I started dating, and eventually got married in South Bend, we weren’t exactly sure how the idea of the first-ever male first gentlemen, let alone a same-sex one, would be received in town. And pretty quickly, we just hit on the idea of expecting to be treated like any other couple. We’d act like any other couple, we’d hope people would treat us that way. And for the most part that’s what people did. Look, being gay is part of who I am, and it’s part of my story, and it has shaped me in some important ways. It’s also just part of my story. It’s not all of who I am. And what I hope to do is turn to that story if it helps people understand how I might be able to relate to others with radically different experiences, but certain things in common. But I’m not running to be president for any one group. If I thought of myself just in terms of identity lines, it’d be a pretty lonely place, because I’m the only Maltese-American Episcopalian gay veteran that I know. If we get identity right, then it can actually be a source of solidarity with people whose identity is completely different. I think divisive identity politics is exactly what’s being practiced by the White House today, and it’s using race to divide us within, for example, the middle and working class. We’ve got to turn the page from that.
Buttigieg On Experience As Mayor Of A Small City
John Harwood: You’re 37 years old. You’re a mayor of a small town. It would be a very large jump to become president. It’s a large jump for anybody to become president. I understand your experience argument, but is there something about the fact that you were elected with 10,000 votes as mayor that makes you less inherently prepared than say, Mike Pence, who got a million votes to get elected governor of Indiana? Does the difference in scale become a difference in kind?
Pete Buttigieg: I think there is no better preparation than the pressure cooker of being a mayor in a strong-mayor system of a diverse, largely low-income and complex city. And not just in terms of length, that I have more years of executive experience than the vice president for example, but in terms of being that near to the ground, and at the same time that constantly visible. Look, the office of the presidency ought to humble anyone. Its demands are such that I don’t think anyone who hasn’t already held it can actually fathom what it is like to be there. And so, there’s something very audacious about anybody looking at that office and thinking they belong there. But we all look at this office with a certain level of experience that we have. And in many ways, I actually think it’s precisely because my community, the one I serve, is not one of the biggest cities, that I think I have a better sense of what it’s like to be from the kinds of communities that have felt left out in our country, and in some ways have lost touch with my party — places whether they be rural, or industrial, that have that common quality of young people growing up with that message that success means you have to get out. Thankfully for me, I realized that success actually meant going home. And I think it’s a powerful antidote to the message that this president is preaching, that the only way to our hearts in a part of the country like ours is through resentment, through promises that can’t be kept, to turn the clock back to a past that was never as great as advertised anyway. There’s a lot of power in that. And so, I think it’s precisely because of the kind of community that I serve, that I represent a different kind of voice, preaching perhaps similar values to many of my Democratic competitors, but doing it with a different vocabulary. I treat that as an asset — a feature, not a bug — of this whole project.
Buttigieg On President Trump
John Harwood: Yesterday, the Homeland Security secretary resigned abruptly. This morning, we learned that the director of the Secret Service has been fired by the president. We have an acting White House chief of staff, an acting Defense secretary, acting Interior secretary. Do you feel anything different about this moment? Do you feel that the government itself is in a state of crisis?
Pete Buttigieg: I think the government’s been in some kind of crisis ever since this president arrived. Not just when you have a vacancy, but frankly sometimes when you have an appointee who is hostile to the mission of the agency that she or he is heading up. In the case of DHS, that’s a little bit different. Many of the concerns around DHS are not so much about the personnel but about the policies. And when you talk about family separation, or just the unpreparedness for some of the issues at the border, that’s a concern. But one thing we are seeing more and more is, Americans need our government to work. We can have an argument over how big it ought to be or how small it ought to be, what functions it ought to take on. But fundamentally, I’d be run out of town on a rail if I couldn’t run a government. And what we’re seeing in Washington — it’s hard to sink a ship, but they seem to be doing their best. And these vacancies are going to be more and more of a problem. So I think for those of us who are opposed to this administration’s policies, it’s kind of a choose-your-poison thing. I don’t know what’s worse: them being well staffed and pursuing policies that are destructive, or them being hamstrung by the ability to do much at all, because there are so many key positions that are vacant.