Unum GroupLarry J. Merlo, CVS HealthAlex Molinaroli, Johnson
Controls Inc.Steve Mollenkopf,
Qualcomm Inc.Deanna M. Mulligan,
Guardian Life InsuranceCo. of America
Oscar Munoz, UnitedAirlines
Rupert Murdoch, ExecutiveChairman, 21st CenturyFox and News Corp
Eileen K. Murray, Co-CEO,Bridgewater Associates
Pierre Nanterme, AccentureChristopher J. Nassetta,
HiltonC.L. Max Nikias, President,
University of SouthernCalifornia
Indra K. Nooyi, PepsiCo Inc.Gary A. Norcross, FISJohn H. Noseworthy,
Mayo ClinicJames Park, FitbitChristina Paxson, President,
Brown UniversityPaul Perreault,
CSL BehringStefano Pessina, Walgreens
Boots AllianceDouglas L. Peterson, S&P
GlobalC. Michael Petters,
Huntington IngallsIndustries Inc.
Nicholas T. Pinchuk,Snap-on Inc.
Anne R. Pramaggiore,Commonwealth Edison
Anthony Pratt, ExecutiveChairman, Visy Industries
J. Joel Quadracci, Quad/Graphics
Thomas J. Quinlan III, LSCCommunications Inc.
Solange Maria PintoRibeiro, Neoenergia
Timothy M. Ring, C. R.Bard Inc.
Carlos Rodriguez,Automatic DataProcessing Inc.
Virginia Rometty,International BusinessMachines
Panu Henrik Routila,Konecranes
Mitchell E. Rudin, Mack-Cali Realty Corp.
Gisbert Rühl, Kloeckner &Co. SE
Michael Sabia, Caisse dedépôt et placement duQuébec
Faiza Saeed, DeputyPresiding Partner,Cravath, Swaine & Moore
Anthony Scaramucci,Founder, Co-ManagingPartner, SkybridgeCapital
David T. Seaton,Fluor Corp.
Jahja Setiaatmadja,President Director, PTBank Central Asia Tbk
Gregg M. Sherrill, TennecoKeith Skeoch, Standard LifeFrederick W. Smith, FedExGary B. Smith, Ciena Corp.Sir Martin S. Sorrell, Group
Chief Executive,WPP PLC
K.R. Sridhar, Bloom EnergyPaula Steiner, Health Care
Service Corp.Todd A. Stevens, California
Resources Corp.Jeff Storey, Level 3
Communications Inc.Anthony R. Tersigni,
AscensionRobert Thomson,
News CorpPaul A. Tufano,
AmeriHealth CaritasFamily of Companies
Ronald N. Tutor, TutorPerini Corp.
N.V. Tyagarajan,Genpact Ltd.
Bernard J. Tyson, KaiserPermanente
Tien Tzuo, ZuoraErez Vigodman, Teva
PharmaceuticalIndustries Ltd.
Timothy R. Wallace, TrinityIndustries Inc.
Mark Weinberger, EYDion J. Weisler, HP Inc.Harold L. Yoh III, Day &
ZimmermannYang Yuanqing, Lenovo
PARTICIPATING GUESTSGuruduth Banavar, Vice
President and ChiefScience Officer, CognitiveComputing, InternationalBusiness Machines
Derek Belch, Founder andCEO, STRIVR Labs Inc.
Preet Bharara,U.S. Attorney, SouthernDistrict of New York
Kevin Brady, Chairman,House Ways and MeansCommittee; U.S. Repre-sentative (R., Texas)
Kellyanne Conway, SeniorAdviser, PresidentialTransition Team; Cam-paign Manager, Donald J,Trump for President
David Cote, Chairman andCEO, Honeywell
Tom Cotton, U.S. Senator(R., Ark.)
Susan Desmond-Hellmann,CEO, Bill and MelindaGates Foundation
Thomas Frieden, Director,Centers for Disease Con-trol and Prevention, U.S.Department of Healthand Human Services
Rudolph Giuliani, ViceChairman, PresidentialTransition Team; formerMayor of New York City
John Graham, Professor ofFinance, Fuqua School ofBusiness, Duke University
Oliver Hart, 2016 NobelPrize in EconomicSciences Recipient;Professor of Economics,Harvard University
Daniel Kahneman, 2002Nobel Prize in EconomicSciences Recipient;Emeritus Professor,Princeton University
Andrew McAfee,Co-Director, Initiative onthe Digital Economy,Massachusetts Instituteof Technology
Adm. Michael S. Rogers,Commander, U.S. CyberCommand; Director,National Security Agency
Stephen A. Schwarzman,Chairman, CEO andCo-Founder, BlackstoneGroup
Gene Sperling, formerDirector, NationalEconomic Council
Daniel K. Tarullo, FederalReserve Board ofGovernors
Elizabeth Warren,U.S. Senator (D., Mass.)
Stephen Wolfram, CEO,Wolfram Research
VOICES FROM THE CONFERENCE
“What hindsight does is it blinds us to the un-certainty with which we live. That is, we alwaysexaggerate how much certainty there is. Becauseafter the fact, everything is explained. Everythingis obvious. And the presence of hindsight in a waymitigates against the careful design of decisionmaking under conditions of uncertainty.”
Daniel Kahneman, Recipient of the 2002 NobelPrize in Economic Sciences; Emeritus Professor,Princeton University
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Rudolph Giuliani has had anextensive career, but he is per-haps best known for leadingNew York City to recovery af-ter the terrorist attacks ofSept. 11, 2001. Now he’s aprominent member of Presi-dent-elect Donald Trump’stransition team and emergedafter the election as one of thetop contenders for the post ofsecretary of state.
The Wall Street Journal’sGerard Baker spoke with Mr.Giuliani about Mr. Trump’s po-sitions and plans. What fol-lows are edited excerpts of theconversation.
On the tableMR. BAKER: Give us your senseof what the immediate agendais for the Trump presidency.MR. GIULIANI: You’re going tosee very much the policies hetalked about.
I analogize this election towhen Andrew Jackson de-feated what was the almostemerging nobility of America.The American people had hadenough of this elite, we neededsomebody who represented us.That’s what happened here.The people revolted againstthe elite that was trying toforce on them policies theydidn’t agree with or didn’t ad-dress what they were con-cerned about.
Trump has to deliver on se-curing the borders. He has tolower taxes on everybody, soeverybody gets a little bitmore money in their pocket.And he has to lower the corpo-rate tax, which could be one ofthe biggest things he can do toignite our economy.
He has to work on repatria-tion of money. You do that,and you’re going to see aneconomy that’s growing atnumbers where we can sustaina lot of the other things thatwe have to do.
On trade, part of it could bethe rhetoric of a campaign.Part of it can be the misinter-pretation of the media. You’renot talking about a man who’sagainst free trade. You’re talk-ing about a man who’s againstunfair deals.
MR. BAKER: The two first ap-pointments for the administra-tion were Reince Priebus andSteve Bannon. Bannon is anaggressive populist flame-thrower. Reince Priebus is amuch more traditional conser-vative Republican. Who’s goingto win that fight?
MR. GIULIANI: Donald Trump.Donald Trump is an extraordi-narily smart man. Exposinghim to different viewpoints isthe very best thing we can do.It’s exactly what Obama didn’tdo, although he said he wasgoing to do it.
MR. BAKER: Let me talk aboutSteve Bannon. There has beena lot of concern about some ofthe things that he’s associatedwith. He has been accused ofracism. He has been accused ofanti-Semitism.MR. GIULIANI: I haven’t seenany of that in Steve. I’ve seen avery smart, very bright man,very worldly man. I also thinksomething happens to youwhen the election’s over. It’snot that you change your posi-tions. But you begin to realize,“I’ve got to bring in more peo-ple. I’ve got to broaden my ho-rizons.” I don’t think that justhappens to the president. Ithink that happens to the chiefof staff, the policy adviser, thecommunications director, sec-retary of defense, attorneygeneral, secretary of state.When you’re out there justcriticizing, it’s one thing.When you actually get on theinside, there’s a certain weightof responsibility for the Ameri-can people that is on yourshoulders. Steve Bannon is thekind of guy who gets that.
MR. BAKER: That change youtalk about, have you seen thatin Donald Trump in the lastweek?MR. GIULIANI: From the mo-ment he went to see BarackObama, the way in which theydealt with each other, the wayin which he’s conducting him-self, his attempt to try, as besthe can, to bring America to-gether. All these protests, Ithink they’re going to go away.They’re just going to happenfor a while, because some peo-ple are disappointed, andthey’re angry. A little bit is So-ros funded and driven. But Ithink that’s going to go away.And what we’re going to findis a much more worldly andexpansive president than weever realized we were electing.
Taking on business?MR. BAKER: Is this going to bean administration that is goingto take on big business issues?Are big mergers going to beopposed by the Trump admin-istration?MR. GIULIANI: I won’t be attor-
ney general. So I won’t have todecide. I don’t know who’s go-ing to be attorney general.
I think you’ll see a conser-vative approach to antitrustlaw. If it’s predatory pricing,where there are alternatives,you’ll probably see a challengeto it. If it’s a situation in whichthere’s no alternative but alarge conglomerate, I thinkyou’ll see the Justice Depart-ment passing on that.
The last thing in the worldyou’re going to see is an anti-business administration. Don-ald Trump realizes that he gotelected, to a very large extent,on something he said in somany speeches: “Jobs, jobs,jobs.” So being pro-business isbeing pro-jobs.
That doesn’t mean therewon’t be a necessary level ofregulation. But one thing thatPresident-elect Trump told me,he said, “One of the things Ilearned over running for presi-dent, when I began, I thoughtthe biggest concern that busi-nesses had was taxes. It’s truethey are concerned abouttaxes. But they tell me theirbiggest concern is regulation.I’m going to cut those damnregulations in half.”
The Clinton questionMR. BAKER: During the cam-paign, President-elect Trumpsaid that he would appoint aspecial prosecutor to investi-gate and possibly prosecuteHillary Clinton. Is he going to?MR. GIULIANI: That’s a decisionhe should make when he ap-points an attorney general.The attorney general shouldsit down and study it and givehim a very reasoned balance oftwo things. One is the ideathat we don’t want to becomea country where we have polit-ical vindictiveness after anelection. Number two, wedon’t want to be a country ofunequal protection of the law.
If the attorney general de-cides that they’re not that farbeyond the pale, maybe wejust put it behind us. If the at-torney general decides thatthey have to be investigated,then it shouldn’t be DonaldTrump’s attorney general, itshould be an independentcounsel who investigates it.
MR. BAKER: President-electTrump said the Iran deal thatPresident Obama struck was adisaster. What would you doabout that?MR. GIULIANI: The presidenthas a lot of options. BecausePresident Obama didn’t dowhat he should’ve done underthe Constitution. He should’vesubmitted that to the UnitedStates Senate. The next presi-dent can disavow it as a mat-ter of law. Either he should, orhe should use that power torenegotiate it.
What Is onTrump’sImmediateAgendaRudolph Giuliani says it’s borders, corporatetaxes, repatriation and trade
Richard Gelfond, IMAXEli Gelman, AmdocsPat Gelsinger, VMware Inc.Seifi Ghasemi, Air Products
& Chemicals Inc.Daniel S. Glaser, Marsh &
McLennan Cos.Alex Gorsky, Johnson &
Johnson Services Inc.Robert Greifeld, Nasdaq Inc.C.P. Gurnani, Tech
MahindraJames Hagedorn, Scotts
Miracle-Gro Co.Gregory J. Hayes, United
Technologies Corp.Tom Hayes, President,
Tyson Foods Inc.James B. Hebenstreit,
Bartlett & Co.Lance Hockridge, Aurizon
Holdings Ltd.David Holmberg, Highmark
HealthLisa Hook, Neustar Inc.Mark S. Hoplamazian,
Hyatt Hotels Corp.Donald L. Jernigan,
Adventist Health System
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Changemaking is the newliteracy, so education needsto prepare students tobe changemakers.Henry De S ioGlobal Cha ir for Framework Change at Ashoka
Anne -Mar ie SlaughterPres ident and CEO of New Amer ica
Imagine a world in whichwe genuinely believemenand women are equal: asbreadwinners and caregivers.
We cannot see America’sbrightest future as inevitable. Onthe contrary, wemust do our partto build the ‘more perfect union’envisioned in our Constitution.Muhtar KentCha irman and CEO of The Coca-Cola Company
R4 | Tuesday, November 22, 2016 THEWALL STREET JOURNAL.
JOURNAL REPORT | CEO COUNCIL
What happens to the Demo-cratic Party in the wake ofDonald Trump’s victory?
To get insights, The WallStreet Journal’s Gerald Seibspoke with Sen. Elizabeth War-ren. Here are edited excerptsof their discussion.
Change in the air?MR. SEIB: A couple of days af-ter the election, you said, “Ifwe learn nothing else from thepast two years of electioneer-ing, we should hear the mes-sage loud and clear that theAmerican people want Wash-ington to change. It was clearin the Democratic primaries. Itwas clear in the Republicanprimaries. It was clear in thecampaign and it was clear onElection Day.” How do Demo-crats show that they heardthat message?SEN. WARREN: The interestingquestion is going to be bothhalves. How are the Democratsgoing to show it, and how isDonald Trump going to showthat he actually heard thatmessage? That’s the messagehe ran on. What Donald Trump
is doing is putting together atransition team that is full oflobbyists—the kind of peoplethat he ran against. [Vice Pres-ident-elect Mike Pence hassince ordered the removal ofall lobbyists from the transi-tion team.]
The clearest point thatcomes out of this election isthat the American people donot want Wall Street to runtheir government. They do notwant corporate executives tobe the ones who are calling theshots in Washington.
Look at the polling fromthis, that about three-quartersof all Americans do believethat the game is rigged. Theybelieve it is rigged in favor ofthe people in this room andthat it is rigged against themand their families and theirchildren. And they want to seechange.
They want to see that con-nection between Wall Streetand giant corporations and ourgovernment broken. They wantthat not to happen anymore.They want a government thatruns for the people. That’s
what I think this election isabout.
MR. SEIB: So how do the twoparties show that? What doDemocrats do? What does theTrump team do that it’s notdoing now in your opinion?SEN. WARREN: Well, it doesn’tstart by hiring a bunch of lob-byists to run the transition. Itdoesn’t start by floating namesof people who’ve run gianthedge funds, or been part ofthat, to be able to run theTreasury. Or people who comefrom industry to be able to runthe regulatory agencies.
The American people un-derstand about the revolvingdoor. They’re really sick of it.
He did not win on MitchMcConnell, Paul Ryan, busi-ness as usual, what can we doto help the giant corporationsin America.
The K Street lobbyists areabsolutely out there, salivat-ing. They say, “This is our bigchance. We’re going to get toslash regulations. Look for atax cut for those at the top.”That is not what the people
who elected Donald Trump arethinking.
MR. SEIB: Is there a placewhere populists in the Demo-cratic Party and a Trump ad-ministration could come to-gether?SEN. WARREN: This just keepsgoing back to, what is DonaldTrump going to do? He’s nowgiven us the first tangible signof his vision of how to run aTrump presidency. And a bigpart of that are lobbyists andWashington insiders.
And let’s face it. There wasa lot during the election of thetoxic stew of bigotry and at-tacks on Americans all acrossthis country. Donald Trumpstarted his campaign with anattack on Mexican-Americansand then he rode the escalatordown. He did attacks onwomen, on African-Americans,on Muslims, on immigrants. Hedid attacks on people with dis-abilities. Everybody who didn’tlook like the people whoshowed up at his rallies.
There were a lot of peoplewho were attracted to that.But there were a lot of peoplewho were not and yet votedfor Donald Trump. They said,“We want somebody who’s go-ing to shake it up.”
Here I am with the businessleaders of America, and I justwant to underline somethingthat every one of you know.
Bigotry is bad for business.Bigotry is not what your
employees expect. Bigotry isnot what your customers ex-pect. And if that’s the directionthat this administration goes,that creates a real problem foreverybody.
The change in sidesMR. SEIB: But as you suggest,there are millions of peoplewho voted for Donald Trumpnot for those reasons. Most ofthose people used to be Demo-crats. How did your party losethem? Why were they Trumpvoters?SEN. WARREN: I think thatDonald Trump made the prom-ise to shake things up. Hemade the argument over andover and over that the Demo-crats were too close to WallStreet and too close to bigbusiness. That was the core ofhis economic argument, thattoo many insiders were callingthe shots. That too many mul-tinational corporations wererunning the trade deals. Thattoo many people who’d alreadymade it big were using thetools of government to workfor themselves and not towork for anyone else.
I want to be clear. I thinkHillary Clinton ran on verymuch the same argument, Ijust think Donald Trump madeit aggressively. But the pointis, you can’t miss this about
the election. Whether theydrove it effectively or whetherthey drove it less effectively, itwas driving the message thatWashington needs to work forthe little guy. That Washingtonneeds to work for the familieswho’ve been left behind. ThatWashington doesn’t need towork for those at the top any-more. And this is so importantgoing forward because it raisesthis question about what doesthe economic agenda look like.
Setting the agendaMR. SEIB: Well, let’s talk aboutthat. What should the eco-nomic agenda look like, in youropinion?SEN. WARREN: I think there’s nomandate out there for MitchMcConnell and for Paul Ryan. Ithink there is no mandate rightnow to cut regulations and say,“I know, let’s just turn a bunchof Wall Street banks loose andsee what they will do. Let’s notremember what happened in2008 and the run-up to 2008.”I think the appetite for thatamong the American people iszero.
Whether people were votingfor Hillary Clinton or whetherthey were voting for DonaldTrump, they weren’t voting forMitch McConnell and PaulRyan’s deregulatory mix—letguys do whatever they want todo, let giant corporations dowhatever they want to do.
‘I just want tounderlinesomething thatevery one ofyou know.Bigotry is badfor business.’
VOICES FROM THE CONFERENCE
“You’ve had almost no productivity [growth] inthe United States over the last X years. Part ofthe reason, I think, is so much money has beendiverted into regulatory uses—without any resultfrom it, from a productivity point of view. So Ithink productivity’s going to go up. Overall eco-nomic activity’s going to go up. And I think thebusiness community is going to look infinitely bet-ter at the end of a two- to four-year run than theyhave for quite a long time.”
Stephen A. Schwarzman, Chairman, CEO andCo-Founder, Blackstone Group
Every successful presiden-tial campaign has an archi-tect. For Donald Trump, it wascampaign manager KellyanneConway, now a special adviserto the Trump transition team.Ms. Conway discussed thecampaign and Mr. Trump’snew challenges with GeraldSeib, Washington bureau chiefof The Wall Street Journal.Edited excerpts follow.
Election’s messageMR. SEIB: What was the mes-sage from voters on electionnight?MS. CONWAY: That there ismore of them than us. Every-thing that Donald Trump saidabout the populist uprising,and people really just wantingfairness and an opportunityand a voice, ended up beingtrue. We can talk about it be-ing an anti-elitist election.That has some merit. But atits very core, people were talk-ing about security. Securityfrom terrorism, national secu-rity, health-care security, eco-nomic security. Donald Trumpwas going to states like Penn-sylvania and New Hampshire
and Ohio talking about opioiduse. That’s a kind of insecuritythat was fairly new to ourcommunities.
People were also talkingabout everyday affordability.I’ve been a vocal and longtimecritic of Republican politicianswho run around talking aboutjob creation. About 7% of thecountry are job creators orfancy themselves as entrepre-neurs. There’s another 7% thatare the job seekers, the unem-ployed.
But the vast majority ofhouseholds are neither jobcreators nor job seekers. Theyare job holders. And DonaldTrump gave voice to the jobholders, the people in thiscountry who say, “Gosh, whenmy grandfather had a job oryour grandfather had a job, itwas enough to support thewhole family. We have two,three jobs in the household.And we’re white knuckled atthe end of each month.”
People were also talkingabout fairness. I think HillaryClinton’s campaign was aboutequality. And we cherishequality. It’s enshrined in our
Constitution and our otherlaws. But most people weretalking about fairness, whichis different. Fairness is aboutequality of opportunity, notequality of outcomes. Andwhen you listen to peopleclosely, what really under-girded their views toward edu-cation reform, immigrationpolicy and tax reform, whenthey’re talking about lettingSyrian refugees in by 550%,they’re really talking aboutwhat is fair.
Donald Trump put issues onthe map that no one was giv-ing voice to, like trade and il-legal immigration. But he ar-ticulated it through aneconomic lens, so that wewere no longer only asking,what is fair to the illegal im-migrant? All of a sudden, wewere asking, what’s fair to theAmerican worker? What’s fairto ask employers to do?
Healing divisionsMR. SEIB: He tapped into ananger in the country, and itproduced a somewhat divisivecampaign—an angry cam-paign. What can be done now
to heal those divisions?MS. CONWAY: Really, many ofthem [the voters] were legiti-mately fearful and legitimatelyfrustrated that they can’t paythe bills, that they just can’tget ahead. There’s nothing elsethey can do. They have a job.They live a good life. They paytheir taxes. They pay theirdues. They play by the rules.And yet, they always feel likethey’re in the quicksand of ev-eryday affordability.
President-elect Trump saidwhen he was elected, “I will bethe president of all Americans,even those who did not sup-port me.” He’s expressed re-gret for any pain he’s caused,particularly if it was done withwords. And he did not intendto do that.
MR. SEIB: Does President-electTrump feel a need to reach outto the country in a more for-mal way to try to bring peopletogether? Before the Inaugura-tion, the obvious point atwhich this traditionally oc-curs?MS. CONWAY: It has been dis-cussed. And I think you seeearly signs of it. He and Mrs.Trump coming here to Wash-ington less than 36 hours afterbeing elected to meet withPresident Obama and FirstLady Michelle Obama was soincredibly important. I think
that’s the earliest and best andbrightest sign that you haveabout President-elect DonaldTrump wanting to address theentire country as one.
Work with Republicans?MR. SEIB: Does he work withRepublicans in Congress?MS. CONWAY: He’s been veryclear about his 100-day plan.Anybody can pull it up andyou can see what he’s talkingabout. It’s very specific.
He’s already off to a verygood start of working withHouse Speaker Paul Ryan. I’vewitnessed some of those calls.He had a great meeting herelast week, as did Vice Presi-dent-elect Mike Pence, withSpeaker Ryan. And they goway back.
They’ll have to find a wayto knit together what was al-ready being worked on andcould never really be signedinto law, because they had aDemocratic president in Presi-dent Obama.
But the excuse of dividedgovernment is over. Americansgave a Republican president aRepublican House and a Re-publican Senate and majorityRepublican governors, 69 ofthe 99 state legislative cham-bers. If they [Democrats] loseone or two more, they’relower than the threshold thatyou need to defeat a constitu-
tional amendment.
MR. SEIB: What would you sayto the CEOs in this room asthey try to figure out what theTrump version of the Republi-can Party stands for on the is-sues that concern them?MS. CONWAY: He doesn’t sayall trade deals are bad. He’smade very clear he believesNafta was a bad deal for theAmerican worker. He doesn’tsay he won’t have trade deals.He just is pointing out thatsome of them have not workedfor the people they were in-tended to benefit. In his 100-day plan, he wants China to bedeclared a currency manipula-tor. Having said that, he spokewith the leader of China today.It was fine.
But in any event, he’s madevery clear that Washingtonhas wanted, for 30 years atleast, somebody who owesnothing to anybody in Wash-ington to come here and justclean out the rot from the in-side out.
MR. SEIB: When you campaignpledging to drain the swamp,and then you arrive at theswamp, how can you workwith the swamp?MS. CONWAY: You can. A, he’snot part of the swamp. But B,no one got rich off of his cam-paign, trust me.
TheMessage at the Core of the ElectionAccording to campaign manager KellyanneConway, it was all about security
‘He’s been veryclear about his100-day plan.’
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The Election’s MessageFor the DemocratsElizabethWarren says both parties have tounderstand that voters think the system is rigged
VOICES FROM THE CONFERENCE
“The reason the country lives as well as it doesand has the standard of living it does is becauseof business.“Now, I’m not a complete antiregulation guy. I
do think you need certain regulations to maintaina certain common denominator. But at the end ofthe day, we’re the reason the country is so innova-tive and the standard of living is so good. Yet thatmessage started getting lost long ago. And Iwouldn’t be surprised if you track it back to mygeneration in the ‘60s, if you really started to lookat when did people look at business differently.”
David Cote, Chairman and CEO, Honeywell
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Expectations that the Fed-eral Reserve will raise interestrates at its December policymeeting have grown recently,fueled by the reaction in finan-cial markets to DonaldTrump’s victory in the U.S.presidential election.
Neil King, global economicseditor at The Wall Street Jour-nal, sat down with Fed gover-nor Daniel Tarullo to discussthe postelection landscape andwhat it might mean for theeconomy and monetary policy.
Edited excerpts follow.
Noticeable shiftMR. KING: What is just yourbasic sense of the strength ofthe U.S. economy?MR. TARULLO: We’ve had anunusual recovery from whatwas obviously a very unusualrecession, one driven by a fi-nancial crisis, rather than bythe normal pattern of inflationmoving up and the Fed hittingthe brakes. And during thatperiod, we’ve never had whatpeople call the Nike recovery,where there is a very steep
upward trajectory.Instead, growth has been
modestly above trend forsome time. My perspective fora couple of years now hadbeen that there was moreroom to run. There was moreslack in the labor market.There was more utility in get-ting demand strengthened byhaving incomes up and morepeople having jobs. And weweren’t really close to our in-flation target and hadn’t beenfor some time. But over thelast three or four months, I’veseen changes in that pattern.
Core inflation is up some.After a long period of rela-tively little wage growth, atleast one of the measures hasshown some upward move-ment. And we’ve seen the ac-tual labor-force participationrate approach, and by somemeasures maybe even slightlyexceed, the expected trend oflabor-force participation.
All of that has suggested tome that we’re in a somewhatdifferent situation than Ithought we were six or eight
or 10 or 12 months ago. And sonow, I think the discussion ofwhen is the appropriate timeto raise rates to prevent theeconomy from overheating toomuch is more on the tablethan it may have been before.
That said, there are somegrounds for caution. We stillhave fewer tools to respond ifa recession were to come fromsome external source than wedo ability to control inflation.There is still some slack in thelabor market, although not asmuch as before. We obviouslydon’t want to be pushing onthe brakes harder than weneed to in order to continuethe trend of moderate growth.
MR. KING: One of the Fed’smandates is maximum em-ployment. The unemploymentrate is now at 4.9%. Whatwould you consider to be max-imum employment? How lowmight that number go?MR. TARULLO: Well, that’s actu-ally the point. I don’t think weknow in real time what thenatural employment rate is
The EconomicViewOf a FedGovernorDaniel Tarullo says the data suggests that it istime to talk about when to raise rates
right now.The unemployment rate has
been around 5%, give or take,for over a year now, duringwhich time we’ve been creat-ing at least twice—and insome months three or moretimes—as many jobs as areneeded to deal with new en-trants into the labor forcewithout pushing up inflation.
That suggested to me thatthere was a good bit of slackin the labor market, somethingI think in retrospect hasproven to be true.
Suppose in 2015 or even2014 in anticipation of full em-ployment at around 5%, wehad taken several interest-ratemoves. I think almost surely,we would have given up someof the benefits of that job cre-ation, which has benefitedthose who didn’t profit asmuch from the early part ofthe expansion. That includeslower-income workers, Afri-can-Americans, Hispanics andothers that traditionally havehigher unemployment rates.We would have lost some-thing.
So I think the real answer iswe don’t know. And that’s whyI’ve taken the position weshould proceed pragmatically,look at the data on inflationand look and see what’s goingon in labor markets. And then,at an appropriate moment,take the next step and then sit
back and say, “OK, what im-pact has that had?”
Impact, not expectationMR. KING: The new administra-tion is talking about a sort ofRepublican version of stimulusthat would include tax cuts,repatriation of corporate prof-its, some kind of burst in in-frastructure spending and pos-sibly other spending, without ahuge amount of concern, atleast in the short term, for thedebt. How might that changethe Fed’s outlook?MR. TARULLO: Fiscal policy isone of the important back-ground considerations inthinking about the appropriatemonetary policy to achieve thedual mandate of maximumemployment and price stabil-ity. So we obviously are sensi-tive to the impact that fiscalpolicy has.
But I want to emphasize, itis to the impact. It isn’t to anexpectation. Let’s give the newadministration time to actu-ally get its program and forCongress to decide what it’sgoing to do. And then the Fedwill react appropriately to theimpact of that in the economy.
MR. KING: You voted for therate increase last December.The anticipation now is thatthere will be one next month.To what extent can you outlinewhat you see rate policy as
being, not just in December butthrough next year?MR. TARULLO: Well, I can onlyspeak for myself here, and Idon’t want to comment on anyparticular meeting. I think theimportant issue is actually theone that your question identi-fies, which is what is the pol-icy? And as I said, I think thepolicy now ought to be one inwhich we respond to the in-coming data.
At this juncture, I think it’sprobably more likely that thenext response would be atightening rather than moreaccommodation. And thengiven the trajectory that we’vebeen on for some time now, Ithink at that juncture, wewatch carefully to see whatthe impact of that presumedrate increase would be. Re-member, monetary policy op-erates with a lag.
MR. KING: There was a lot oftalk about Dodd-Frank duringthe campaign. And there’s nowsome presumption that the Re-publican majority will go afterit in some fashion. Do youhave concerns about it beingdismantled?MR. TARULLO: Just like withfiscal policy, I don’t want tospeculate as to what may hap-pen. Obviously, if changes aremade, we will implementfaithfully whatever changesthe Congress makes.
‘We’re in a somewhatdifferent situationthan I thought wewere six or eight or10 or 12 months ago.’
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VOICES FROM THE CONFERENCE
“Superior performance by some CEOs early onhad completely reverted to the mean within about10 years. So whatever superior performance atleast on average was gone after 10 years. Thatsuggests 7 to 10 years might be a time frame thateven initially successful CEOs maybe should beevaluated carefully by the board.”
John Graham, Professor of Finance,Fuqua School of Business, Duke University
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R6 | Tuesday, November 22, 2016 THEWALL STREET JOURNAL.
years as well, then having thefreedom to get the help youonly get now at work is prettycritical.
MR. GIGOT: You want to repealthe ACA, I assume?REP. BRADY: Repeal the man-dates, the taxes, the directives.There are in the ACA federalagencies, bureaucrats andcommissions essentially in be-tween you and your doctor.That’s one of the drivers ofwhy this thing can’t simply betweaked. You have to startover in a big way.
But I also think it’s impor-tant to retain some of theitems that we think havestrong public support. Lettingkids stay on their health-careplan till 26. Pre-existing ill-nesses, making sure there’s nota lifetime cap because if youhappen to have a child or yougot a very costly disease earlyin life, you’ll bust throughthose early.
MR. GIGOT: Would your goal ul-timately be to create an indi-vidual marketplace that allowsa seamless movement fromemployer-sponsored care andequalizes a tax treatment be-tween employers and individu-als?REP. BRADY: Yes. It’s really im-portant to keep employer-sponsored health care. But weneed individuals to be able totake it with them.
Or for those who aren’tworking for the company thatoffers, you know, grade-Ahealth care, we’ve got to beable to give people the free-dom to pick a plan that’s right
for them, to take it with themthroughout their lifetime. Andwe think that’s the moststreamlined, conservative ap-proach.
MR. GIGOT: Is Medicaid goingback to the states?REP. BRADY: Yes. It has to, be-cause the costs at the statelevel are unsustainable. WhenPresident Obama essentiallysaid, “Look, the solution toyour big problem is to makeyour problem bigger, do moreMedicaid for more people at ahigher cost,” he exacerbatedthe problem. We have to fixand create 21st-century healthcare.
Giving states the flexibilityto design it for their state iscritical.
MR. GIGOT: Is Medicare reformon the table with the premium-support plan House Republi-cans have passed before?REP. BRADY: Medicare’s not the800-pound gorilla in the bud-get, it’s the 8,000-pound go-rilla. You won’t save it by justcutting benefits. You’ve got toredesign it.
The trade issueMR. GIGOT: The president-electhas proposed putting tariffs ongoods from American compa-nies if they move operationsoverseas and then try to sellthose goods back into theUnited States. Do you supportthat kind of a policy?REP. BRADY: If the presidentwants to grow the economy,and he sincerely does, you’vegot to get the tax code right,you’ve got to get balanced reg-
ulation right. But we needmore customers around theworld.
So you need to get traderight, as well. It’s critically im-portant that he give us achance to make the case.
So, strictly enforce thesetrade agreements that are crit-ically important to turn one-way trade into the U.S. intotwo-way trade. I hope that myadvice would be not to with-draw from the TPP, not towithdraw from Nafta. Take theopportunity to make thoseagreements better.
I hope he takes the broaderview, and on tariffs like thatthat drive up costs, essentiallypunish America for anothercountry’s behaviors, I hope hetakes a good, thoughtful ap-proach to all that.
MR. GIGOT: You mentioned TPP.But that seems to be dead.Would you concede that?REP. BRADY: No. I’d say it’s onhold. For a critical reason.
It’s not enough, as youknow, to simply buy American.We have to sell American allthroughout the world. ThatAsia-Pacific region will holdhalf of all the middle-class cus-tomers on the planet by theend of the decade. We want tobe in there. And if we with-draw from that field, our econ-omy suffers.
So, I’m hopeful the newpresident gives us a chance tomake the case to keep what’sgood in trade and creates jobs,and fix what’s perceived to bebad. And there’s plenty of thatarea for him to tackle with hisskills.
On the campaign trail, Don-ald Trump made sweepingstatements about his plans forAmerican business. How doRepublican lawmakers assessthe situation?
The Wall Street Journal’sPaul Gigot spoke with TexasRepublican Kevin Brady, chair-man of the House Ways andMeans Committee, who willoversee issues such as tradeand taxes. Here are edited ex-cerpts of the discussion.
What’s on tapMR. GIGOT: Is it fair to say thatyour top two priorities nextyear are tax reform and re-placing the Affordable CareAct?REP. BRADY: This new presi-dent is making economicgrowth the pillar of his presi-dency. And both of those playkey roles in it.
MR. GIGOT: Are you willing to
separate corporate-tax reformfrom individual-tax reform?REP. BRADY: I would adviseagainst doing that because wewant to grow. We have twooverall arching goals in tax re-form. We want a tax code notdesigned merely to wringmoney from you, which is theone we have today. A tax codeactually built for growth, de-signed to grow wages, jobs inthe U.S. economy. And ourother goal is to leapfrog Amer-ica from dead last among ourglobal competitors back in thelead, and keep us there goingforward.
MR. GIGOT: Donald Trump hasproposed a corporate-tax rateof 15%. Your proposal is 20%.Can you get to 15%?REP. BRADY: I think we can findcommon ground on the rate.
The design of where we’reat today costs us jobs andgrowth.
We want the business rateto bring those earnings back toAmerica to be zero. We wantto level the playing field tomake sure made-in-Americaproducts and new technologiescan compete and win here andabroad.
The ACA questionMR. GIGOT: Let’s move on tohealth care, which is also yourportfolio.REP. BRADY: I think it’s impor-tant that every American hasthe freedom to buy the healthcare they need, and to take itwith them throughout theirlifetime without bringing innew taxes.
We have to unlock the cur-rent tax break you get at workto be able to carry that health-care plan with you from job tojob, state to state.
We would argue if thehealth-care plan works rightfor you into your retirement
TheHouseGOP’sEconomic PrioritiesKevin Brady, chairman of the House Ways andMeans, talks taxes, ACA, Medicare and trade
‘Medicare’s not the800-pound gorilla inthe budget, it’s the8,000-pound gorilla.’
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VOICES FROM THE CONFERENCE
“There is a movie that just came out this lastweekend called ‘Arrival’ that I happened to workon as a science adviser. And it’s about communi-cating. I was realizing that the problem of commu-nicating with extraterrestrials is bizarrely similar tothe problem of communicating intentions to AIs.“An AI is an example of an alien intelligence, so
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Many Republicans lookedaskance at Donald Trumpwhen he emerged victoriousfrom the GOP primaries. Someopenly opposed him even afterhe became their party’s presi-dential nominee. Where doesthat leave the party now thatMr. Trump is president-elect?
Sen. Tom Cotton (R., Ark.),discussed the state of the Re-publican Party with KimberleyStrassel, editorial board mem-ber of The Wall Street Journal.Edited excerpts follow.
Now and 2006MS. STRASSEL: What are thebig differences between to-day’s Republican party andthe one 10 years ago? In isola-tion from Donald Trump.SEN. COTTON: Our party, boththe grass roots and in Congressnow, is much more of a pro-market party, rather than a pro-business party. We’re focusedon the operation of markets
and the free-enterprise system.We celebrate businesses thatsucceed. But we recognize thatin a market-based system,we’re not there to put our fin-ger on the scale for this or thatbusiness or industry.
We’ve gone back to a realfocus, too, on the Constitution.I’m not talking primarily aboutindividual liberties, I’m talkingabout the structure of ourgovernment, the need to reinin executive agencies, and theneed to restore structural bal-ance between Washington andthe state governments.
MS. STRASSEL: Do you thinkDonald Trump is changing theparty, or is he a response tochanged voters out there?SEN. COTTON: He’s both. Mostsuccessful presidential candi-dates are both. They some-times see things that are true,that too many politicians, toomany elites in culture and
business and media and theacademy, miss. Presidentialcandidates who succeed dotake their parties in differentdirections as well.
Out in places like Arkansas,Indiana and Wisconsin, Iowa,Pennsylvania, there are a lotof people who feel ill-servedby Washington, D.C. They feelill-served by some of the poli-cies that have either been im-plemented under the Obamaadministration, like Obama-care, or some of the policiesthat you got a bipartisan—butin my opinion, wrong—con-sensus on, like immigration.
Donald Trump was speak-ing to their very practical con-cerns. He went into economi-cally distressed areas and said,“I’m going to bring jobs backto you,” and Hillary Clinton,she’d say, “I’m going to bringyou more Obamacare andmass immigration.” It’s notsurprising what the results of
FromPro-BusinessToPro-MarketsTom Cotton says the GOP is not the party it was10 years ago—thanks, in part, to Donald Trump
that election were.
Trade prospectsMS. STRASSEL: How will Con-gress work with Donald Trumpon trade, given what he hassaid, pulling out of Nafta andabandoning, in general, whathas long been an Americanpro-trade agenda?SEN. COTTON: I’ll leave the de-tails of trade policy to DonaldTrump. But sometimes the ex-pressions in the media of hisopposition to trade are over-stated. To my knowledge, Don-ald Trump has never said thathe’s opposed to trade. Hethinks a lot of our trade dealshave been bad for the U.S. Andif you compare some of thepromises that were made, inthe last 15, 25 years aboutthese trade deals, he’s got acase to make there.
MS. STRASSEL: In what way?SEN. COTTON: If you listen topoliticians who were sellingthose deals and you comparethe results, there’s simply amismatch between the rheto-ric and the results. That’s onereason why so many people aredisappointed with politicians inWashington, because they con-sistently do overpromise andunderdeliver. The day afterBritish citizens voted to leavethe European Union, DonaldTrump was in Scotland, where
he has a golf course, celebrat-ing the Brexit vote. And he saidthat day that we need to have afree-trade deal with Great Brit-ain, which tells me he’s not op-posed to trade deals, he wantsbetter trade deals.
MS. STRASSEL: Will U.S. tradepolicy feature more country-by-country deals—and a distinc-tion between developed coun-tries and developing countries?SEN. COTTON: Yeah. Bilateraldeals are easier to negotiatethan multilateral ones. DonaldTrump, I think, will probablypursue some of them.
MS. STRASSEL: Where do Don-ald Trump and Republicansagree or disagree on immigra-tion? What are the prospectsfor a comprehensive immigra-tion reform?SEN. COTTON: Comprehensiveimmigration reform is a Wash-ington code word for mass im-migration and amnesty. So theprospects for that are very low.
MS. STRASSEL: What are theprospects for real reform toour immigration system?SEN. COTTON: I hope that we’lladdress this very early, and ina sweeping fashion.
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‘Comprehensiveimmigration reformis a Washingtoncode word for massimmigration andamnesty.’
3%
Work to DoHow Americans surveyed just before the presidential election viewedthe Republican Party
Overall opinion of the Republican Party
How united the Republican Party is in its views on issues and visionfor the future
THEWALL STREET JOURNAL.
Source: Pew Research Center survey of 2,583 adults in the U.S. (first question) and1,070 registered voters within that group (second question),conducted by telephone Oct. 20-25, 2016
Mostlyunited
Mostlydivided
Don’t know/didn't answer
Veryfavorable
Mostlyfavorable
Mostlyunfavorable
Veryunfavorable
Can't rate/didn't answer
10% 31% 33% 23% 5%
17% 80%
VOICES FROM THE CONFERENCE
“One of the examples that I really love about AIis going beyond question answering and saying,‘Listen, if I have a position or an idea, can a Wat-son-like system give me the pros and cons of theidea?’ You know, ‘Do I have to go into this mar-ket? Do I have to make an acquisition? Do I haveto worry about the economy when there is a cer-tain set of parameters, maybe immigration, maybetax laws, maybe whatever?’“If the machine could give you the pros and
cons that you, as the decision maker, can considerand make the final decision much more informed,
in a faster way, probably taking more sources of knowledge into account, Ithink that’s fundamentally better than what we have today.”
Guruduth Banavar, Chief Science Officer, Cognitive Computing, IBM
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Exactly.. .
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Infectious-disease out-breaks not only have the po-tential to destabilize societies,they pose a threat to interna-tional economies, as well.What should public-health of-ficials and businesses be doingto prepare?
Physicians Thomas Frieden,the head of the Centers forDisease Control and Preven-tion, and Susan Desmond-Hell-mann, chief executive of theBill and Melinda Gates Foun-dation, sat down with WallStreet Journal Assistant Man-aging Editor Laura Landro todiscuss this issue. Edited ex-cerpts follow.
‘Contagion’ scenarioMS. LANDRO: I don’t know howmany of you have seen themovie “Contagion.” How closeare we to a scenario like that?Something that can’t be con-tained?DR. FRIEDEN: Every year on av-erage we identify one new
pathogen. And every day onaverage, we at CDC start anew investigation that coulddetect a new pathogen.
But frankly, pandemic influ-enza is what worries us most.
Bill Gates has said there arereally only two things thatcould kill 10 million peoplearound the world. Nuclear warand a biological event, eitherintentional or natural. It hashappened before—in 1918 and1919, 50 million to 100 millionpeople were killed. Even the1957 influenza pandemic,which most people haven’theard of, cost 3% of theworld’s gross domestic prod-uct. Even SARS, a relativelysmall outbreak, cost about $30billion. We don’t know whenthe next one will come, whereit will come from or what itwill be. But we’re certain therewill be a next one.
MS. LANDRO: How does theGates Foundation see this in
terms of the danger to theworld? The idea that businesswill be disrupted, there will beall sorts of social unrest?DR. DESMOND-HELLMANN:What we learned from Ebola isthat there are a couple thingsthat are underutilized and notready. One is governance. Whomakes the call when thingshappen? The second thing ishaving the right tools, whichis why global health research-and-development is a big fo-cus of our foundation.
And the last thing is, eventhough the world is worriedabout something really superscary like in “Contagion,” weall saw last summer howsomething like Zika, whichwasn’t thought to be a bigthreat, actually is a particularthreat for women who can getpregnant because it causes acatastrophic birth defect.
From a business standpoint,everyone in this room proba-bly had young people who
Thomas Frieden and Susan Desmond-Hellmanon being ready for a global health threat
For a look inside the Demo-cratic Party and its economicpolicies as it ponders whathappens next, Gerard Baker,editor in chief of The WallStreet Journal, interviewedGene Sperling, economic policyadviser to Hillary Clinton’scampaign, and a former direc-tor of the National EconomicCouncil. Edited excerpts follow.
MR. BAKER: Elizabeth Warrenhad a very tough, very popu-list Democratic message. Isthat where the DemocraticParty is now headed?MR. SPERLING: She is very pas-sionate. But I don’t know thatthere was that significant of apolicy difference between herand Hillary Clinton.
MR. BAKER: But Hillary wasseen as Wall Street’s friend.Nobody really thinks that Hil-lary Clinton would govern likeElizabeth Warren, do they?MR. SPERLING: She has had abit of a populist streak. Ithink, though, she is some-body who does focus verymuch on what you can actuallyget done, and that was attrac-tive to a lot of people.
What you’re seeing in theworld, whether it’s the Brexit,or here, is an increasing beliefthat the powers of globaliza-tion, automation, politics, fi-nance are having a greater im-pact hollowing out thanstrengthening middle classes.And when that happens, peoplestart to lose faith that thatgrowth is in everyone’s interest.
I imagine you could con-vince some people that maybetrade flows have, in someways, had a positive impact onGDP. But when they look atwhether it’s benefiting all ofus, they say, “Oh, those are ne-gotiated by big companies andelites,” and the fact is, certain
communities spiral down.
MR. BAKER: Isn’t that theTrump message now? You maynot agree with his solutions, butthis is what he spoke to, isn’tit? What he heard out there inthe electorate? Why weren’t theDemocrats able to do that?MR. SPERLING: Trump did dowell, to a degree, in expressingthat degree of, kind of, outrage.Some of it—“I’m going to slap a45% tariff, I’m going to pullout”—probably would havehurt those very workers.
Now, maybe what you couldsay is, we were too serious. Wehad very aggressive tradeplans. Plans to deny China mar-ket economy status, to starttaking cases ourselves, as op-posed to industry doing it. Shehad a very tough trade posi-tion, and she truly believes it.As a senator, she felt that up-state New York got hurt badlyby unfair China trade practices.
It was hard to breakthrough. But there is a differ-ence. And this is where Demo-crats and progressives have anadvantage in policy: We’re notjust saying, “Oh, that’s a badtrade deal. We’re going to geta better trade deal.” We arethe ones who are thinking,“What can we actually do toreinvest in communities toprevent communities from adownward spiral?”
Perhaps this was a momentwhere having a fuller strategydid not do as well as just ex-pressing the outrage. This isone of the places where Iwould tell Democrats and pro-gressives, improve the policiesand improve the message. Istill believe that because we’rewilling to try to use govern-ment in a way that can stillempower people, help theirlives, in the long run we’re go-ing to do better with those
policies and message.
MR. BAKER: Where does yourstrand, what we used to thinkof as New Democrats, thatcentrist strand of the Demo-cratic Party, where does thatgo now?MR. SPERLING: My fixed star ishaving an economy that helpspoor and working families livea life of dignity. That allowspeople to rise.
The reason I am againstTPP [the Trans-Pacific Part-nership trade deal] now, andwhy I’m so much more skepti-cal on trade, is I just do notbelieve that until we as acountry look out for every-body, that we can do thesepolicies where we say, “Hey,this is going to be slightlygood for our efficiency, butrandom communities, randommanufacturing workers are go-ing to be devastated, and wejust aren’t going to do any-thing about it.”
More robust dynamism inthe economy is going to comefrom having more people thinkthere is a stronger compactfor them. And I don’t thinkthat’s just about the sharingeconomy. I think that’s a moredeep issue in our economy.
MR. BAKER: One of the thingsthat last Tuesday underlined ishow disastrous the last eightyears have been for the Demo-cratic Party. You’re in a worseposition now than you’ve beenfor a generation.MR. SPERLING: Barack Obamacoming into a terrible finan-cial crisis was no doubt amixed blessing. It does helpyou get re-elected. But itmakes it hard to completelymeet the expectations of peo-ple when you’re overcomingthe worst recession and crisissince the Great Depression.
A Hillary Clinton AdviserLooks Back—and AheadGene Sperling is optimistic for the long run
and prevent them where pos-sible. And for each of thosethree aspects of global healthsecurity, institutions need tobe strengthened and toolsneed [to be developed].
Everyone should have heardabout something called theJoint External Evaluation.
If you want to know if acountry is ready to deal withan emergency from the healthsector, currently there’s noway to really do that. So whatwe’ve done over the past fewyears is get a global consensuson an accountable, indepen-dent, objective and transpar-ent public rating of all coun-tries that agree to do it.
It holds the country ac-countable. It also holds theworld accountable. If a poorcountry isn’t ready, we’re allat more risk. Let’s channel ourassistance to close those gaps,because a blind spot anywhereis a vulnerability everywhere.
Biggest killerMS. LANDRO: Dr. Frieden, youdid a public-health piece forthe New England Journal ofMedicine recently in which yousaid tobacco was still the larg-est cause of underlying diseasein the world.DR. FRIEDEN: Tobacco use con-tinues to kill millions of peo-ple globally—in fact, morethan infectious diseases com-bined. And it can be stopped.If you look at countries andcommunities that have takentobacco prevention seriously,they’ve been able to drasti-cally reduce tobacco use.
Mike Bloomberg and hisfoundation, along with theGates Foundation, worked tocome up with a very concrete
set of policies to help coun-tries drive down smokingrates.
In New York City, we wereable to help 400,000 peoplequit smoking in just a fewyears, saving over 100,000lives and extending life expec-tancy by three years over justa few years.DR. DESMOND-HELLMANN: It isa profoundly positive inter-vention. The other interven-tion we’ve invested in is nutri-tion. Globally, we see bothovernutrition and undernutri-tion and poor nutrition. Verysimple things like exclusivebreast-feeding for six months,making sure pregnant womenhave access to good nutrition,understanding micronutrientsand what’s needed—thesekinds of global health inter-ventions are incredibly cost-effective. That magic time ofyour first 1,000 days from con-ception isn’t just importantfor your stature, it’s importantfor your cognitive develop-ment. These are the kinds ofthings that emerging coun-tries—and businesses workingin those countries—are ex-tremely interested in. Becausethat is your future workforceand your future consumers.DR. FRIEDEN: And this is veryrelevant to health-care costs.A nonsmoker costs drasticallyless to care for than a smoker.An ex-smoker costs at least$1,000 less to care for eachyear than a smoker. In the U.S.today, there are 10 millionfewer smokers than therewere in 2009. And if you thinkof the payoff, how muchhigher our health-care costswould be if that weren’t thecase, it’s quite substantial.
were going to travel on busi-ness who were concernedabout their risk should they ortheir partner become preg-nant. So understanding thesenew pathogens, understandingwhat we need to do from agovernance standpoint, andhaving tools, starting with di-agnostics so we can spot newpathogens, are a big focus.
MS. LANDRO: What are thecomponents of a global-healthsecurity agenda?DR. FRIEDEN: We have to findthings better, stop them faster
Preparing for anOutbreak
‘My fixed star is havingan economy that helpspoor and working familieslive a life of dignity.’
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Susan Desmond-Hellman and Thomas Frieden
TheWall Street Journal would like to thank the 2016 sponsors for
their generous support of the CEO Council annual meeting.
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integrity, who are honest, whowant to do the right thing.
MS. BLUMENSTEIN: Would yoube interested in a position inthe Trump administration?MR. BHARARA: I was going toput in for secretary of state.
MS. BLUMENSTEIN: That mightbe taken. But seriously, yourinterests, could they bealigned?MR. BHARARA: I do my job. Ilove my job. It’s the best job Iever had. And it’s probably thebest job I will ever have. And Iserve at the pleasure of thepresident. That’s true of Presi-dent Obama. That will be trueof President Trump. And ifand when a president decidesthat they want to replace me,I’ll ride off into the sunset.
I don’t get paid to serve thepresident. I get paid to servethe public and what I think isin the interest of justice, nomatter who the president is.
Part of the election, on bothsides, was about whether sys-tems are rigged. And I can tellyou, from cases we havebrought, there’s a lot that’srigged on the Street and inpolitics. And the people in myoffice, in an apolitical way,spend day after day after daydoing those kinds of cases.
I would like to think thatthe level of aggressiveness inlaw enforcement will remainthe same, when you’re talkingabout things like keeping themarkets fair and governmenthonest. I don’t foresee any de-parture from that, unless I’mmissing something big.
As U.S. Attorney for theSouthern District of New York,a big part of Preet Bharara’sjob is keeping companies hon-est—and he’s made a name forhimself with very high-profileprosecutions. The Wall StreetJournal’s Rebecca Blumensteinspoke with Mr. Bharara aboutthe role of CEOs in setting cor-porate ethics, his own style ofprosecution and his possiblefuture under Donald Trump.Here are edited excerpts of thediscussion.
Setting the toneMS. BLUMENSTEIN: Given thatpart of your job involves pros-ecuting companies and occa-sionally CEOs, what are youdoing talking to a room full of
CEOs?MR. BHARARA: I have come toreally love the sound of ner-vous laughter.
MS. BLUMENSTEIN: You talk alot about the importance ofculture in companies. Why is itso important?MR. BHARARA: In addition tobeing the chief federal law-en-forcement officer in Manhat-tan, I’m sort of the CEO of myinstitution. I have to make de-cisions, every day, about howwe allocate our resources, whowe promote, what our priori-ties are. For my office to suc-ceed and to do well, I have tocare about culture a lot. NoCEO worth his or her saltwould think otherwise.
MS. BLUMENSTEIN: Every com-pany has rules, all sorts ofbest practices. What is a spe-cific role of a CEO?MR. BHARARA: It’s a cliché foreveryone in the room to talkabout tone at the top. Andthere’s a reason some thingsare clichés. They matter.
You need to have a compli-ance department. But you alsoneed a charter for the place,so that people understand notjust that you’re supposed tofollow these particular rulesbecause the CFPB or the FTCor whoever cares about them.
When a new employeecomes in does someone say,“You should understand, apartfrom the regulations and thecompliance policy, we don’tlie. We don’t cheat. We don’tsteal. If you do, you’re out.”
Prosecutorial reachMS. BLUMENSTEIN: You facedcriticism for overreaching onsome insider-trading casesand also a sense of prosecut-ing some of them in the media.MR. BHARARA: The vast major-ity of insider-trading cases webrought have resulted in con-victions, and those convictionswere upheld on appeal.There’s a small subset of caseswe argued that the appealscourt in New York got wrong.
MS. BLUMENSTEIN: What abouttrying cases in the press?MR. BHARARA: One first re-
sponsibility is to make surethat anybody you charge getsa fair trial. I have never spo-ken anywhere outside of thefour corners of the complaintor the indictment.
But when you have a spateof problems, for example, ifyou have a gang problem inNewburgh, New York, whichwe have had, I talk about it.When you have a prescription-pill problem that is killingmore people than traffic acci-dents and guns these days,and more people are ODingfrom prescription pills and dy-ing than from cocaine and, Ithink, heroin combined, thenyou talk about that problem.
When you have assembly-men and senators in my homestate of New York going toprison at an alarming rate,then you talk about the prob-lem. Because part of the job isnot just to hold people ac-countable. It’s also to deter, toraise public awareness.
I get invited to speak togroups like this but also todoctor and business studentsbecause people have some in-terest in knowing how wethink about prosecution, whatwe think the problems are,and how maybe the good peo-ple can help to solve thoseproblems. I speak at everybusiness school around. AndI’ve been doing it for a num-ber of years.
I go to Harvard BusinessSchool. Every February, forfive or six years running, Ispeak to the first-year class. Isit in on the day when theytalk about insider trading.
Then we talk more broadlyabout ethics and integrity andhow they should think aboutconducting themselves toavoid problems. And I say,“Look, I’m here. It’s not just ascared-straight program forwhite-collar people,” althoughit’s a little bit that. “And I’mnot just directing my words tothe ears of the two or three ofyou at Harvard BusinessSchool who, statisticallyspeaking, are likely to commitserious securities fraud, al-though I know who you are.”
It’s more to direct mywords to the ears of the vastmajority of people who have
Keeping Corporate Executives HonestPreet Bharara says there is a reason everyone talks about settingthe right tone at the top. It’s because it makes a difference.
I think it is totally unrealis-tic to expect the private sectorto withstand the onslaught ofactivity that is being directedagainst them by nation-statesand other actors.
Likewise, I don’t think it’srealistic to say, “Well, the gov-ernment’s going to do this.”The challenge with the gov-ernment doing it is if youwant me to defend something,I can’t do it from the outside.It’s like fighting with one handtied behind your back. It’s notrealistic, and it doesn’t gener-ally lead to positive outcomes.
Addressing WikiLeaksMS. BLUMENSTEIN: I have toask about WikiLeaks. You toldNPR in August, “These emailswere clearly leaked for a rea-son, and they were leaked, Ibelieve, to achieve an effect.”What can you tell us?ADM. ROGERS: There’s an on-going investigation. I’m justnot getting into the specifics.I still think there shouldn’t beany doubt in anybody’s mind.This was not something donecasually. This was not some-thing done by chance. Thiswas not a target that was se-lected purely arbitrarily. Thiswas a conscious effort by a na-tion-state to attempt toachieve a specific effect.
Cyberattacks represent anexpanding and perilous frontline for companies and thegovernment. What do we doabout a borderless war thathas impacted business acrossthe world and even a presiden-tial campaign?
The Wall Street Journal’sRebecca Blumenstein spokewith Adm. Michael S. Rogers,head of the National SecurityAgency and commander of theU.S. Cyber Command. Here areedited excerpts of the discus-sion.
Cause for concernMS. BLUMENSTEIN: How wor-ried should CEOs be about thestate of cybersecurity?ADM. ROGERS: Do we have achallenge here that requiresattention? Yes. Is there a rolefor CEOs to play in this? Yes.You don’t want your network-security team deciding unilat-erally what’s important. Youas the leader need to set thattone. I do that in my own or-ganization.
MS. BLUMENSTEIN: What cango wrong? It was now twoyears ago when the Sony hackhappened. What can we learn?ADM. ROGERS: I thought thepositives were great collabora-tion between a private com-pany—they knew they weredealing with something. Theyfelt they needed to reach outto the government.
They could have sat thereand said to themselves, “Wereally need to minimize this.Let’s not really confront thispublicly.” They were very upfront when they approached
the government.And we’re going, “Look, if
you want us to provide valueand insight to you, then theonly way this is going to workis if we get full access to yournetwork and your data. It’s theonly way we can really gener-ate the level of insight that Ithink you expect from us. I re-alize that that may make youuncomfortable. You’re openingyour structure. You’re openingyour networks. You’re openingyour data. You have to becomfortable with that.”
They came back to us andsaid, “We’re comfortable withthat. What we ask you to do isinform us of what you’re doingwhile you’re doing it. And youstick to that.”
MS. BLUMENSTEIN: But therewere things that went wrong.It took a long time for them todetect this, right?ADM. ROGERS: It doesn’tmatterif it’s a commercial network, ifit’s a government network.
Networks that I have beenaccountable for defending, wegenerally find there’s a signifi-cant time lag for most organi-zations between discovery ofactivity and the actual timethe adversary initially pene-trated the network.
Who’s attacking?MS. BLUMENSTEIN: How con-cerned should we be aboutstate actors?ADM. ROGERS: Probably 60% to65% of the total activity wesee of concern is criminal. It’snot nation-states. Criminal ac-tivity includes theft of intel-lectual property. You also see
nation-states doing this. Butyou see criminal groups pene-trating networks to steal in-formation that they think theycan sell to someone.
At the same time, you alsohave nation-states who youfind are engaged in actions de-signed to penetrate the net-works within the commercialsector.
You also find individualsand groups who are broughttogether for specific purposesunder a specific ideology orfocus. They’ll harness that in-terest to a specific outcome.“Hey, let’s do the following be-cause we’re all united by theidea we don’t like this particu-lar policy.” We have seenAnonymous engage in activi-ties against nation-states,companies, individuals.
I don’t want it to get to thepoint where it takes some sig-nificant calamity to drive us tothe conclusion that we’ve gotto do something different thanwhat we’re doing now. The ul-timate solution in my mind ishow do you bring this public-private partnership?
The agreement I alwaysreach with whoever we’reworking with is: I will not usethe data we gain for anythingother than the exact purpose Icommunicate to you.
Traditionally as a nation,we have very much differenti-ated between what is the roleof the government, and whatis the role of the private sec-tor.
Cyber does not recognizethese arbitrary lines that wehave drawn. It doesn’t recog-nize geography.
On theFront LinesOf aBorderlessWarMichael Rogers says to combat cyberattacks,the key is a public-private partnership
‘Probably 60% to 65%of the total activity wesee of concern iscriminal. It’s notnation-states.’
RALP
HALS
WANG/D
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‘Part of the job is notjust to hold peopleaccountable. It’s alsoto deter, to raisepublic awareness.’
PAULMORS
E/DOW
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(2)
Source: (ISC)2 and KPMG survey, conducted online and in person in March 2016, of 54cyber executives who identified themselves as U.S. federal senior managers or contractorswith cybersecurity responsibility in government. The online survey request was distributedto personnel from defense, civilian and intelligence agencies and government contractorsand consultants. THEWALL STREET JOURNAL.
Agency WorriesA survey of executives involved in cybersecurity at federalgovernment agencies found doubts about the agencies' preparedness.
My agency is fully aware ofwhere our key assets are
My agency struggles tounderstand how cyber attackerscould potentially breach ournetworks and access our data.
What are the top threefactors that hinder youragency’s ability to advancecybersecurity efforts?
Lack of funding65%
48%Absence of accountability
48%Lack of understanding
44%Lack of expertise
30%
Lack of time
22%
Lack of training
22%
Lack of interest
20%
Other
2%
Lack of information
Strongly agree AgreeDisagree Strongly disagree
44%
15%10%
31%
46%
13%10%
31%
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