Congress has not moved 'thoughtfully' through unemployment process: Steven Rattner

Over 2.98 million Americans filed for unemployment benefits in the week ending May 9. Willett Advisors Chairman & CEO Steven Rattner joins Yahoo Finance’s On The Move to discuss the latest jobless claims and funding the new stimulus bill.

Video Transcript

ADAM SHAPIRO: We're going to talk about this Tesla situation, but also a bigger picture, which is income inequality, with Steve Rattner. He is Willett Advisors Chairman and CEO. He is also remembered by many of us as the Car Czar during the Obama administration, saving General Motors and Chrysler. It's good to see you, Steve.

And the reason I wanted to ask you about this Tesla situation is it highlights what so many Americans are facing. You said this last week-- 51% of people who have lost their jobs are in travel, leisure, and hospitality. Now we have people in higher-paying jobs, factory jobs, who are maybe coming back to work.

But they have to make a choice. In the Tesla case, if I stay home because I'm worried about this virus, I may not get unemployment benefits. What can Congress or the states do about that?

STEVEN RATTNER: Yeah, that is a-- think an unintended and unfortunate state of affairs. As you implied and stated, really, to get unemployment benefits, you need to have been laid off or have lost your job, not by quitting or by saying you don't want to go back, but because your employer doesn't want you. This is a very unusual situation. My vote would be I think states have to be flexible about this. If people genuinely feel that they are unsafe or uncomfortable working in a factory environment, or any environment, for that matter, I don't know that that should disqualify them from getting unemployment benefits.

The other point I'd make is, as you know, we are in an unusual situation in the second regard in that the supplemental, the $600 a week supplemental uninsurance, in many cases-- probably not in the case of a factory worker-- but in many cases, will bring-- will be higher than the person's earnings when they are at their other job. And so we've created a little bit of a disincentive for people to go to their jobs, as opposed to collecting unemployment insurance.

JULIE HYMAN: Steve, it's Julie Hyman here. It's good to see you. So as we look at this situation, and as places start to reopen, we have seen increasing calls for some kind of grand public works or infrastructure or moonshot kind of projects on the part of the federal government. We've talked to Mark Cuban on the program, who has talked about the possibility of something like that.

Do you think that's a good idea? And do you think it's a realistic idea, given this Congress?

STEVEN RATTNER: Well, Julie, you've given me a great promo for my next "New York Times" op Ed, which I am going to file in the next hour or so, as soon as I finish the fact-checking, saying exactly that, more or less. We need to move our stimulus, or whatever you want to call those efforts from Washington, from simply getting money out to people-- which is important and should continue. But we have to go from what I'm going to call the recovery phase to the rebuild phase.

We need to really rebuild America. And infrastructure is at the top of that list. I do want to be perhaps a little more measured than Mark Cuban might have been, in saying I don't know that this is a moonshot. I don't know if this is a game changer. But it is important.

Many of the jobs that have been lost over the last couple of months are not coming back. And so for us to get back to full employment at some point, we have to do some other initiatives. Infrastructure-- through an infrastructure bank would be at the top of my list. I think worker training and relocation assistance, things like that, for workers who have been displaced would be on my list. And we can keep going.

But I'm completely in agreement with your question.

ADAM SHAPIRO: Steve, in regards to this income inequality issue, which you said last week, quote, this is clearly an income inequality aspect to the unemployment crisis. The construction jobs will pay more than minimum wage. But the travel-leisure jobs, those jobs which may not come back, can those people get trained for positions that will help them support themselves in the next year or two? Or does Congress need to step in, whether it's raising the minimum wage or with some kind of bridge payments to these people, till we get them into jobs?

STEVEN RATTNER: Yeah, we have to be realistic about this as well. There are people who are not going to be able to get higher paying jobs. They're going to be hard to retrain. Retraining, which everybody talks about, including me, is a long process. And it doesn't always work.

So we have to have other ideas as well to help people. I think you'll see us extend the unemployment-- the eight weeks of unemployment insurance, because unemployment is going to be very high. I think we can think about ideas like wage insurance, which essentially provides people with some reimbursement for part of their wages, if they go from a higher paying job to a lower paying job. So there are ideas like that around.

All of this requires Congress. And Congress, while it's moved fast, has not moved all that thoughtfully so far. So we would need a change of mood on their part.

JULIA LA ROCHE: Hi, Steve, it's Julia La Roche. And thank you so much for joining us and sharing some of these ideas to help move the needle here. I guess when you think about income inequality and how it manifests itself, what do you think happens just looking out the next six months, 12 months, or even further? If we don't have meaningful action, meaningful ideas, how does this ultimately manifest itself?

STEVEN RATTNER: I think in the absence of good ideas that are actually implemented, more action on the part of Washington, I think we are looking at a long, painful recession, and a very-- and a relatively slow recovery. Goldman Sachs has been revising up its unemployment estimates. As you probably know, they now expect unemployment to hit 25% in this quarter, the second quarter, and decline only slowly over the next year.

You will see-- and I don't think people should be fooled by it-- you will see and read stories about a snapback, about more people staying in hotels, more people doing this or that. That will certainly happen. But I don't believe that-- I believe the economy has been so damaged by this that we will not get back to full employment, to the economy producing at its full potential, without substantial congressional action. Otherwise, we'll be mired in a very slow growth, low-wage, jobless recovery.

JARED BLIKRE: Hey, Jared Blikre here. Adam introduced you as the Car Czar under the Obama administration. You helped recapitalize two of the three major auto companies here in the US. Do you see this as a situation that could play out?

Again, we've seen stocks in various industries just get decimated. We take another leg lower, does this happen?

STEVEN RATTNER: Yeah, there's definitely an issue for the auto companies. Sales, as you know, have gone from almost $17 million down to $8 million last month. When we restructured the companies, we restructured them so at least at that point in time, they could break even at an annual sales rate in the $10 to $11 range. So we are below that at the moment, probably can get back up to that.

And the companies are, oddly enough, ironically, GM first, better positioned financially than they were the last time in terms of their balance sheets and their cash and so on. But I am hearing from people in Michigan and in the Midwest that the supplier base is really hurting here. And that was something we faced 12 years ago. A lot of them ended up going into bankruptcy and having to get restructured. I think it's possible again.

So at the moment, I don't see the need for a major government intervention like what we did in 2009. But I do think we have a need for continuing liquidity programs from the Fed and Treasury to provide capital to some of these companies that are suffering.

JULIE HYMAN: Steve, the bailout this time is happening more on another side of transportation, the airlines, of course. What do you think the government-- what lessons did you learn from the auto companies that the government really needs to keep in mind with the airlines?

STEVEN RATTNER: The government doesn't seem very interested in the lessons that we learned during the auto recovery, because what they're doing is very different from what we did, and I think incorrect. We believe that this is capitalism, that when companies fail, the shareholders and other stakeholders have to be part of the solution, and not simply get bailed out. And so when we recapitalized the companies, we put them through bankruptcy, the government took substantial amounts of equity, and ultimately recovered virtually all of its investment.

This time around, they have done a substantial amount of the rescue financing through grants, just gifts to these companies, and other parts of it as loans, but with an insufficient amount of equity associated with that. And I think-- I think that's the wrong way to proceed. I think the airlines are part of the capitalist system, and they should be treated accordingly.

ADAM SHAPIRO: Steve Rattner, we appreciate your being here, Willett Advisors Chairman and CEO, and also, of course, the Car Czar. Good to see you. Stay healthy.