Twenty-Seventh Term Member Conference

BODURTHA: Well, good evening. I’m Nancy Bodurtha. I’m the vice president for meetings and membership here at the Council on Foreign Relations. And on behalf of our board of directors and our president, Richard Haass, I am delighted to be welcoming you to the twenty-seventh conference of the Stephen M. Kellen Term Program. And I am particularly delighted to be welcoming you in person this evening here to our Washington, D.C. offices. I’d also like to extend a very warm welcome to those who are joining us this evening virtually, via the magic of Zoom. I think as many of you know, this is our first Term Member Conference to be held fully in person since November of 2019. And it’s really thrilling to see an extraordinarily packed house here for this event.

Before I turn the program over to our moderator and speakers this evening, I just want to say a few words about the Term Member Program, which began fifty-two years ago in 1970. The Council had a very radical idea to experiment with admitting ten young professionals to the Council for a five-year term. Fast forward to today, there’s 750 of you. But beyond that, when you look at the ranks of the Council membership, there are many, many, many alumni of the Term Member Program. So I think those individuals who had this radical idea, it was successful. And when I think about the Term Member Conference—or, I’m sorry—the Term Member Program, it really, to me, signifies the future of this organization.

The Stephen M. Kellen Term Member Program is named in honor of Stephen Kellen, who was a long-time Council member. He was a member from 1982 until his passing in 2004. He was deeply committed to the development of the next generation of foreign policy leaders. And I would like to acknowledge and thank the Kellen family for the generosity of the Anna-Maria and Stephen Kellen Foundation in supporting the Term Member Program. In particular, I’d like to thank CFR member Andrew Gundlach, who is Mr. Kellen’s grandson. And Andrew has been absolutely instrumental in securing the ongoing support for this program and this conference.

We’re expecting over 350 term members to come and go over the next day. There are about fifty of you all who will be joining the virtual sessions. And you’re going to have opportunities to discuss a range of issues, including this evening the war in Ukraine. Tomorrow we’ll be discussing the global economy, the rising tensions between China and Taiwan, and the role of the United States in space. Which I’m curious to know if we still refer to space as the last frontier. (Laughter.)

There’s going to be lots of time to meet with one another, also opportunities to engage with Council scholars, our fellows, through the discussion groups that are happening tomorrow afternoon and tomorrow morning. So that’s opportunities to meet in smaller groups to talk about a really interesting range of regional and functional topics. There’ll also be an opportunity over lunch tomorrow to sit with an even smaller group of your peers. We’ll have tables hosted by term members who will be leading discussions, again, on a really rich range of topics.

So we hope that you’ll use this conference as an opportunity not only to learn more about the issues and challenges facing the United States and the world, but this is also an opportunity to make meaningful connections with your peers. We have provided you a tool to help in that regard. There’s an app for the conference. You should have received an email with a link to download it. If you can’t find that or are having difficulty, find somebody from the Meetings Team. Not me. Somebody else will be able to help you. I have yet to download it onto my phone.

But on addition to being able to have the conference agenda in the palm of your hand, you’ll have bios for all of the participants. There’s access to special Council content. And most importantly the app allows you to direct message other conference attendees and there’s also a chat board or discussion board that you’ll be able to post photos or information to. Whoever is organizing the afterparty, I know that it’s been broadly advertised on Slack, but if you could put the information on the—on that chat board, so that everyone knows where to go when we shut down the bars eventually this evening and turn the lights off and ask you all to leave.

While I have the mic, I also just want to make a plug for prospective term members. The next term application deadline is January 10^th. It’ll be here before we know it. But I hope that you’re thinking about friends, and colleagues, and individuals in your circles who are between the ages of thirty and thirty-six who might enjoy participating in the Term Member Conference, and might add—or, Term Member Program—and might add something to it. Including, they might at some point be a moderator or speaker at the conference.

I am here today and tomorrow. The Director of Membership Vera Ranola is around at the conference as well. If you’ve got prospective candidates that you’d like to speak with us about, or if you’re looking for guidance that you can give on how to put together a strong application package, we’d love to speak with you after the conference. Feel free to reach out or if you want to put your prospective candidates directly in touch with us, we’re always happy to have those conversations.

Finally, I just want to thank my colleagues Meaghan Fulco and Sam Dunderdale for their leadership in organizing this conference, together with the mighty Meetings Team. It really takes the Council village to put on an event such as this. I also want to thank Meghan Studer and our colleagues in events management for all that they do. They’ve been working very hard to ensure that we’ve got plenty of good food and drink this evening and tomorrow, as well as good lighting, a good sound system, and hopefully a stable Zoom connection. They are very much like the shoemaker’s elves. They’re going to be here late this evening, after we’ve all left. They’re going to be here bright and early tomorrow morning before we all arrive. So I just want to recognize the great work that they do behind the scenes.

So with that, I’m going to turn the proceedings over to our moderator, Claire Kaiser. Claire is many things. First and foremost, she is a member—a term member of the Council on Foreign Relations. She is also the head of strategy and regional director for Eurasia at McLarty Associates. She is a historian of Russia and Eurasia. And she’s an adjunct professor at Georgetown University’s Center for Eurasian, Russian, and East European Studies. So, Claire, over to you.

KAISER: Thank you, Nancy. And welcome, everyone. It’s great to be here in person for, in my case, the first time ever for a Term Member Conference. So welcome, everyone, to the opening session of the Council on Foreign Relations’ twenty-seventh Term Member Conference.

Our opening plenary is titled Russia, Ukraine, and the Future of Europe. So weighty topics, indeed, to kick us off for the conference. I’m pleased to be joined by Liana Fix, Suriya Jayanti, and Stephen Sestanovich on stage. As Nancy said, I’m Claire Kaiser and I will be presiding over today’s discussion. As you all know, the audience consists of Council term members joining us here in Washington in person, but we do have virtual participants as well. And we’ll be able to take questions from both once we kick the discussion off here with a bit of back and forth.

So the colleagues I have on stage with me are a distinguished group of scholars and practitioners for what I think is an extremely timely discussion tonight. You have their long bios already, so I’ll keep my introductions fairly brief to allow more time for discussions and, in particular, Q&A from you all.

First, we have on the far end of the stage Liana Fix, who recently joined CFR as a fellow for Europe. She is the author of A New German Power? Germany’s Role in European Russian Policy.

Next is Suriya Jayanti, who recently served as the energy chief at the U.S. embassy in Kyiv but is now the co-founder and managing director of Eney, an energy firm, as well as a nonresident senior fellow at the Atlantic Council and an energy advisor to the Department of Commerce.

Finally, to my right is Stephen Sestanovich, the George F. Kennan senior fellow for Russian and Eurasian studies here at CFR.

So Russia’s full-scale invasion of Ukraine just passed the eight-month mark, as most of us are aware. And it was around this time last year when concerns really heightened about Russia massing troops on the Ukrainian border. At that time, few predicted that Russia would pursue the military path that it did. And even fewer anticipated the success and scale, first of all, of Ukrainian resistance to the initial Russian onslaught in the early days of the war and, second, that Ukraine would be able to the launch the counteroffensive that we’ve seen in recent weeks, and that is ongoing as we speak.

The human toll of the war has been immense, with significant military and civilian losses, and an estimated fourteen million people displaced from their homes. The war has given a renewed purpose to the transatlantic and Western partnership on the one hand, at the same time that it has exacerbated a myriad of economic challenges—from food security, to inflation, and energy—around the globe.

Turning to our panelists now to kick off our discussion, I’d like to do an opening round just to see where you see the war heading over the next six to nine months, how likely is escalation, what does this mean for the European security architecture, and how in particular does the view look from Kyiv, Moscow, and European capitals? Steve, let’s kick it off with you.

SESTANOVICH: OK. Thank you, Claire. I’m going to look sort of at the—at this from the Russian perspective. You know, we’ve had eight months, as you suggested, of kind of chaotic, screwed-up Russian policy that amazed people with its sort of blundering ineptness and brutality. But it may be that there are three elements—I mean, there are three elements that I’d be watching over the next few months that are a little bit new, and we should probably pay attention to.

One is the emergence of a slightly different military strategy, which is focused on—still inept and brutal—on hitting civilian infrastructure. Trying to make life in Ukraine so horrible that, you know, eventually people will cry uncle. And also, to undermine the sustainability of the military operations. How’s that going to work? We don’t know. But watch it, because after eight months, this is a new Russian approach, and may be—may have a little more to it.

Second, more nuclear threats. These have been hard to puzzle out. There’s been a lot of talk recently about American intelligence suggesting that the Russians have—the Russian military actually had conversations about using nuclear weapons. These reports don’t actually add what you would think would be the most important question, which is what did they decide? (Laughter.) And what did they tell Putin? And did—were they discussing this because they thought it was a bad idea and they were a little worried that the boss thought it was a good idea, or the other way around? There’s been a little toning down of the nuclear talk. Putin has said, you know, it just wouldn’t make any sense. But does he mean it? Is this one going to come back?

And the third thing I’d watch for is more talk about diplomacy. Putin—(laughs)—in his charmingly understated way said last week in—when somebody asked him about diplomacy, he said: Well, our good will is well known. (Laughter.) And it may be, but that was a joke, I think, even for him. But he has said several times, you know, unconditional negotiations, you know, can be fine. You don’t have to have an agreement about the ground rules to start with. Let’s just talk. And Sergey Lavrov said the same thing again in the past couple of days. So watch this space. There’s more talk about diplomacy.

JAYANTI: Good evening and thank you for listening. I also think that there are two and a half things worth watching, although I will play the pessimist. I think it is possible that we look back six months from now, and this week—this month becomes a pivotal moment, the moment when Ukraine lost its ability to maintain its defenses. I think it’s going to be a gradual decline, but I think there are a number of things that are going on that get us there. The first, as the ambassador mentioned, are the infrastructure strikes on Ukrainian energy sector. Critical, critical assets.

There is one thermal power plant still operating, by DTEK. There is one thermal power plant operating that is publicly owned. Eighty percent of Kyiv has no water, no power, and no heating. This is going to continue. I think the Russians have found a strategy that is working, unlike more or less anything they’ve done thus far. And there is no evidence that they plan to stop. With shipments of drones and other weapons coming from North Korea and coming from Iran, the Russians should be able to continue hitting infrastructure, and then hitting the infrastructure it’s already hit, which is already happening over and over again.

The second is Putin’s longer game. As he said very expressly, the goal with creating an energy crisis was to create inflation that would then produce pressures on governments around the world that stood in opposition to him. That is happening. Yes, support for Ukraine and continuing to arm Ukraine remains strong in most places, but we are beginning to see governments fall to inflationary pressures. And between 25 and 50 percent of those inflationary pressures, depending on the country, are due to the rising price of energy and fuel inputs. So those things together may well play out to Ukraine’s disadvantage.

And as a subcategory under the second factor are the U.S. elections next week. And it may well prove that inflationary pressures, among other things, result in a change in power, which could result in a reduction of support for Ukraine. And thus far, the only things that have kept Ukraine alive are Western weapons and Ukrainian morale. With no heating, no electricity, and no water, and possibly a reduction of support from Western governments, there is a good chance that six, nine months from now Ukraine will have had to cede some territory, at very least. Thank you.

FIX: You know, obviously, I as the third one have to be more optimistic to give you—(laughter)—more optimistic. And to the first round here, and I’ll try my very best. Let’s see whether I succeed.

So my take would be that the transatlantic unity and solidarity that we’ve seen so far in this war, that we have no indication yet that this unity and transatlantic solidarity with Ukraine, is faltering. I mean, first of all, Putin escalates this war, yes, but at the same time every step that he takes towards escalation leads to the West getting closer together. And we just have today the meeting in Münster, not far away from my hometown in Germany, the G-7 meeting, where G-7 foreign ministers get together to devise the plan to continue support to Ukraine.

And it also shows how Putin, from the beginning of the war, has underestimated both Ukraine and Ukraine’s resolve, and at the same time has underestimated the resolve Europeans, which is especially interesting when it comes to Germany because Putin always praises himself for being someone who knows Germany, who speaks German, but has completely underestimated Germany’s response to this war.

What we do see, in fact, is we do see Western efforts to help Ukraine with air defense systems. Obviously, there’s a problem of production capacity here. How many air defense systems can you build and get in time to Ukraine? We do see efforts to keep Ukraine afloat financially. There’s now a rough agreement that the European Union will provide $1.5 billion euros to Ukraine every month. The other half will be provided by the United States, so that Ukraine can meet its demands of $3-4 billion—million per month, as estimated by the IMF. So that looks good at this point.

Where transatlantic unity can falter, and I see two pressures and two fault lines there. And the first one has already been mentioned, and that’s obviously the midterm elections in the United States. And not only because of reduced support by the United States, but also because we could see a dangerous return of a burden sharing debate between Europe and the United States. As of now, the U.S. spends more than the EU and its member institutions and member states combined for this war. That were the numbers from the beginning of October. Obviously, that’s always a snapshot but still, I mean, the question is valid. Why should you, as Americans, pay more for this war than the Europeans? So we need Europeans to step up in this effort to prevent a dangerous burden-sharing debate coming back.

And the second point is the resilience of Western and European economies. And obviously, it looks very bleak. The EU is heading—very likely heading towards recession. We had the energy crises that were mentioned. But at the same time, in opinion polls large parts of the European population continue to support the sanctions regime. And even for those governments, like the far-right government in Italy that we have now, it’s very difficult to break from the EU consensus. Once the EU has imposed sanctions, they stay in place. And they’ve stayed in place since 2014. And at the same time, the EU has the comfortable leverage of financial leverage towards its member states. So Italy, Hungary, those countries depend on money from Brussels. And there is leverage to continue this foreign policy on Ukraine and Russia.

Now, one last thing which I think is definitely something to watch for, is whether we will have an emerging rift about the question of the endgame in this war. We do not see this yet. Diplomacy will come back at some point, although it’s very difficult to see at the moment how Russia can be brought to a point where it’s willing to make concessions. At the moment, we see unity in European administrations and U.S. administrations that Ukraine has to be brought into the best possible position to negotiate at a later point. But if Ukraine’s lucky enough, and surprisingly manages to go further in its offensive, then all these questions might come up. What about Crimea? Should they reconquer Crimea? What about the eastern parts of Ukraine that were under Russian occupation before 2022? That is a question which is still down the line, but which might come up at some point.

So I’m more optimistic at the moment when it comes to maintaining support for Ukraine. But then the other question is, how are we able to step up support throughout the winter when Ukraine needs more support for its infrastructure, but also when Ukraine will need more support for its defenses and for needs—for instance, battle tanks, from European countries. Many European countries refuse to provide those to help Ukraine make advances in the east. So let me end with this more optimistic outlook.

KAISER: And, Liana, I might challenge your optimism here with my follow-up question here. (Laughter.) You talk about, you know, the surprising robustness and duration of transatlantic unity, which I absolutely agree with. How do you see, I guess, the shifting power dynamics within the EU among member states? I mean, I think, you know, given the, you know, direct challenges that frontline members, like Poland, are confronted with as a result of the war, you know, how do you see that perhaps shifting the balance of power within the EU, both related to the war but also the broader vision of Europe they’re after and, you know, Ukraine’s relative place in it?

FIX: Absolutely. And I think, honestly, this is the most fascinating question to observe at the moment when it comes to Europe. I know the European Union is always bowing to itself because it’s always the same technical and bureaucratic issues that are discussed, but the underlying power dynamics that we now see changing in Europe are incredibly fascinating. So we see Poland, which has become a crucial actor in the east—some argue that the center of Europe has shifted east. And just for a member of the think tank community, one piece of anecdotal evidence is that suddenly there’s so many conferences on security and foreign policy coming up in Central and Eastern Europe, which was not the case before. So this region has increased its power.

Germany has attempted to change—to have a pivot in its foreign policy, but at the moment is very much isolated. In Europe, the relations with Poland are at a very low point. There is disagreement with Macron about energy and defense issues. So despite this German ambition of having a fundamental transformation, at the moment this doesn’t look good. And Germany is criticized by many of its European neighbors. And then we have France that committed to European strategic autonomy—which means, translated, a Europe more independent from the United States—but has not invested enough in Ukraine to convince Poland and the Baltic States that it’s actually able to take on this role. And there, I think, the jury is still out how the sort of changing tectonic plates will end in Europe. But it seems to me at the moment that we see Germany and France fighting, and we see Poland benefitting from the current situation.

KAISER: Thanks, Liana.

I’d like to turn to energy now, which I think, you know, in our opening around we touched on in various ways but like to do a little bit of a deeper dive, given the centrality of energy issues to the war and to all of the issues that we’re talking about today. So, Suriya, in your opening comments you noted what Russian attacks on Ukrainian critical infrastructure, particularly in the energy sector, you know, could mean for, you know, the future of Ukraine and the duration of the war. I’d like you to elaborate on that just a little bit, how you potentially see these issues playing out in the battlefield, you know, over the coming months, but more broadly what this issue means for the Western alliance as well. Energy has been a central point of tension, I think, between the U.S. and Europe, as well as within Europe, in the sanctions debate, et cetera. So how do you see this going forward? And at the end of the day, will pressure on energy sanctions do anything to change Russian behavior, which I think is the million-dollar question here?

JAYANTI: So I think it’s impossible to overstate the role that energy has played in all of this. As a threshold matter, Russia probably would never have invaded if Nord Stream II hadn’t been completed, or at least that’s what the Ukrainians have always said. And the timing suggests they were right. And, similarly, Russia would never have invaded if it hadn’t been relatively sure that Europe’s dependence on its energy sources would keep Europe from any kind of retaliation or any kind of meaningful sanctions.

Putin was both wrong and right. He was right in the sense that he still gets paid for energy. In fact, he’s received over 2 billion euros thus far—excuse me—200 billion euros—key number missing there, a couple zeros—(laughter)—just since the start of the invasion. And over half of that is from the European Union. In fact, if you look at some of the lesser energy products that come out of Russia, LNG, 42 percent increase in LNG imports into the European Union from Russia since the start of the war. If you look at diesel, diesel’s up 22 percent. So natural gas has declined, crude oil has declined. But because the prices have spiked, Russia’s actually looking at as big a windfall profit this year as proportionally Exxon and Shell, et cetera, also are. It’s a great year to be in the hydrocarbon business. Also true for Russia.

So Putin was right in his calculations that Europe couldn’t get off his energy sources fast enough to mount a meaningful resistance. But he was wrong because there’s been a meaningful resistance. And although it’s going to take a little bit longer for it to really begin to hurt Russia’s long-term pocketbook, it certainly has started. Whether or not it will ramp up enough and fast enough to save Ukraine is an entirely separate question. So as mentioned, Putin’s long-term strategy here was to create adequate economic pressure on the Western alliance that the governments opposing him would fall.

We’ve seen some evidence of that. You look at riots in Sri Lanka, you look at protests and riots in Haiti, you look at Macron losing a parliamentary majority, you could even argue that Boris Johnson, because he couldn’t get cost of living down in the U.K., is in some part a victim not only of his own tendencies. (Laughter.) And we may well see this play out here next week, and through the presidential election cycle, as inflationary pressures result in power changes here in Washington. So Putin was right about that.

Sanctions are unprecedented at present, absolutely. And the Western alliance has been amazing. But the Western alliance is not a goal. It’s a tool. And the—it’s hard to say the tool is working if the goal is saving Ukraine, because at present Ukraine’s in really bad shape. And they’ve managed to stay pretty upbeat, but they’re looking at an over 50 percent GDP loss. They’ve lost millions and millions of jobs. They’ve lost seven million of their best and brightest who are not coming back to the country. And now they have no power, no water, and no heat. And it gets really cold in Kyiv. I don’t know if any of you have ever been there, but it’s really cold. (Laughs.) There’s a reason they’re all in fur. It’s not just oligarch chic. It’s really cold. (Laughter.) It’s also super chic, but of course morally reprehensible. (Laughter.) Am I saying all the right things? (Laughter.)

In any case, I think that energy’s going to continue playing a really important role for all of the countries that are engaging on the Ukraine issue. It’s going to play a really important role in all of the countries that are trying not to engage on the Ukraine issue or are sufficiently distant geographically that sometimes they can pretend it’s not their problem. But in the meantime, Ukraine’s own energy situation is declining rapidly. And so what Russia has been doing has been targeting specifically not just the power plants. Obviously, we’ve seen that. We’ve all heard of the Zaporizhzhia Nuclear Power Plant. Getting that taken offline was a huge coup in terms of hitting Ukraine’s generation capacity. That takes off over 20 percent of Ukraine’s electricity generation capacity.

And now you take all the thermal power plants out. Most of them are now down. And you take a couple of the reactors off at Ukraine’s South Nuclear Power Station. And you blow up a couple hydro plants and you take a couple others over. That’s before we even get to the transmission infrastructure, which is where the real damage is happening. So Ukraine is looking at ways to secure its substations. At present, very few of them haven’t been hit. And some of the ones that have been repaired have been hit again. In fact, repairmen, repair people, presumably they’re all men there, have died repairing substations that Russia has already hit, and then has struck again. So it’s clearly a fairly sophisticated strategy and it’s going to continue playing a huge role going forward. Ukraine is desperately in need of energy support, and infrastructure, and fuel, and transistors, and mobile substations. And those are hard to come by.

KAISER: I think we’ll—five minutes, OK, great—turn to you, Steve, to talk about Russia a bit more. So Putin did not get the special military operation that he thought he, you know, ordered in February. An environment of mobilization, annexation, you know, mass exodus. So it seems marital from law, pressure from hardliners to do more in Ukraine. How is the war changing Russia’s domestic political landscape? And what does the future of Putin’s Russia look like at this point? Easy question, and we can open it up to the term members.

SESTANOVICH: Wow. I want to say a word about Kyiv being cold. (Laughs.) I recall a meeting at the Foreign Ministry when the heat was off in the whole building. And we were on the top floor. And on two sides of the table you had teams of diplomats who were, with their papers in front of them, pretending to talk very calmly about various issues under consideration, while everyone in the room was stamping their feet under the table in order to keep circulation going. It was a very, very strange meeting. (Laughs.)

The future of Putin’s Russia. You know, right now I think one would have to say that although one constantly hears Russians saying, you know, the old man is kind of losing it. There’s something wrong. They really won’t say this in public. There are no signs of real bureaucratic pushback. The evening news and the morning news and every kind of news medium reflects views that are more extreme than Putin. With a little bit of adjustment that you’ve seen in the past month. A little more airtime for people who are saying, you know, why didn’t we think about this before we get started?

I would say that in—you know, the real political landscape is unchanged. But everybody is aware that—and you had Dmitry Peskov, Putin’s spokesman, commenting on this just yesterday. Everybody’s aware that Putin has to run for reelection in 2024. And the question is, can he do that, having fathered this totally unproductive, you know, calamitous enterprise that by then everybody may agree was just a big, big mistake? So there’s that kind of sentiment growing. Nobody—I mean, I don’t want to get into will it be worse, you know, with his successors. But you could imagine a scenario in which people are emboldened to say, you know, it might be good to have a new generation of leaders. I mean, some kind of transition that doesn’t seem like a revolution, but that brings new faces. We can touch on that more, if you like.

KAISER: Thanks, Stephen. I do think that’s a good point to open it up to the members here with us in Washington, and online. So please, for everyone in the room with us, ask your questions, raise your hand. And I believe there’s some microphones spread around the room for anyone who has those. And please make sure to state your name and affiliation before you ask a question.

Q: Hi. Adam Silverschotz. I run an investment fund.

Maybe two quick questions, one more foreign-facing, one more domestic-facing. The Ukraine intel chief gave a really interesting interview last week of General Budanov, where he laid out pretty bluntly plans for 2023. You know, Crimea offense in 2023. His prediction of Putin out in 2023. So just curious, very tactically, reaction, perhaps for Stephen, to that interview. War propaganda or credible case? And to your comment just now, does a, let’s say, you know, Patrushev-led Russia look different from a Putin-led Russia in any meaningful regard, with respect to Ukraine?

Then with respect to your comment on a change in congressional majority affecting, you know, support in the U.S. for the war, there’s a bunch of movement right now for, you know, an omnibus bill that would kind of take funding risk for the war off the table. So what does that bill need to contain to take all of the risk, you know, for lack of resources, for the specific things that you were talking about, what are the kind of key items that need to be in that bill? Thank you.

KAISER: Before we respond, I neglected to state a very important piece of information, that—a reminder that this meeting is on the record. So Steve and Suriya, over to you for a response. (Laughter.)

SESTANOVICH: I’ll have to start all over. (Laughter.) Look, the Ukrainian leadership, and especially the military leadership, has been extremely good at talking a game of inexorable victory. And they have done that over the past two months against a backdrop of rather impressive successes. And they want to create the impression that that is just going forward. You know, they’ve got the Russians spooked. Are they going to move on Kherson? Are they going to move against Donbas? Could it be Zaporizhzhia? And they are very, very skillful both in their public messaging, and in their ground presence and maneuvering, at creating uncertainty among the Russians.

On the question of different leadership, I’ll just throw out one tantalizing possibility for you, since you asked about Patrushev-led Russia. There are two Patrushevs in the Russian government. There’s Patrushev, Jr., whom some people are talking up as a kind of transitional figure who would represent a new generation while still continuity with the stupid old generation, which is thought to be—(laughter)—on the record, you said. (Laughter.) That would still make people feel that, you know, there hadn’t been a complete upheaval. How you get there we can talk about afterwards.

JAYANTI: To answer your second question, there’s not very much that Ukraine doesn’t need right now. And so I think everything is good that could be possibly put into a support package. And I should say, yet another support package. And particularly on that de-risks or de-politicizes ongoing support. In the energy sector in particular, Ukraine needs a couple of very specific things, in addition to very long lists of technical equipment that are circulating more or less everywhere. They need to find a way to protect their substations. And they need to find a way to move their generation capacity underground. Both of those are things that are being considered. They’re talking to the Israelis, because the Israelis have concrete domes over their substations to protect against rocket attacks. That’s a pretty simple technology. That said, these things do not sprout from the ground overnight. They take a little bit of time. And what Ukraine does not have right now, with winter here, is a lot of time on that.

So anything that could accomplish those is great. There are some discussions of bringing new nuclear technology in and putting it underground. Great idea. That’s going to involve careful coordination with Europe, because Ukraine is now in sync with the European electricity grid. But it doesn’t have the commercial—it doesn’t have commercial export authorization. And that has to do with regulating—there isn’t adequate frequency regulation on the Ukrainian grid. And obviously if you have Russia blowing things up, it’s a problem if France then loses power because of that. So there are a lot of technical things that need to get worked out. All of this takes time. And it takes money. So if nothing else, de-politicizing and thereby de-risking ongoing support is great. Whatever is in there is helpful. The Ukrainians will always tell you it’s not enough. They’re telling the truth. Whether it’s the truth from our perspective is a separate question.

KAISER: We’ll take our next question from Zoom.

OPERATOR: We will take a virtual question from Daniel Gilmer.

Q: Daniel Gilmer in the health care sector.

Thank you for opening the conference with this excellent panel. It was great to hear your thoughts on shifting power dynamics within the EU. So regarding the EU as a whole, could the panel speak to how this war impacts the role of the EU beyond a union for finance, trade, mobility, but also for protection and resilience. While EU membership for Ukraine has been noted as threatening to Putin, it is worth considering how this would be playing out if it were not for the EU, and how the strength of the union may be impacted by this war.

FIX: Yeah. I’m glad to take that question. So what we see during this war, in terms of dynamics in the European Union, is also that the Commission under Ursula von der Leyen is playing a major role in keeping EU member states together, putting forward proposals, especially for technical issues. When it comes to the question of a more geopolitical Europe, we also do see steps from the European Union. There is a defense fund which is used to help Ukraine, and where member states can get reimbursed for their Ukraine support. So the EU has just agreed to provide a training mission for Ukrainian soldiers. So we do see that the EU doesn’t only try to help in terms of economic and financial needs but that it also tries to take on, at least a little bit, of a security role, of a geopolitical role, in this conflict.

When it comes sort of looking further down the line, where potential membership of Ukraine but also of Moldova can emerge, that is a very difficult question because, obviously, making Ukraine, Moldova, and then a couple of western Balkan countries who have been waiting for their membership for a long time, a member of the European Union completely changes the dynamics of population, how many countries are there, how big is the population. So what is needed is internal EU reform, both on the question of qualified majority voting.

In which areas is it enough if the majority of EU member states is needed? In which areas does it really need agreement by all member states? And that is something which has not been figured out before Ukraine got the candidate status. And that is actually one of the reasons why Germany was so hesitant at the beginning, and France also to some extent, to give Ukraine a candidate status. Because the ideas was, well, if we give the candidate status without reforming ourselves, that will lead us down the line to a total mess in EU policymaking.

But then sort of the window of history and the weight of the window of history which opened up was heavier than sort of the bureaucratic and technical concerns, which led to this famous trip by Mario Draghi, Macron and Scholz to Kyiv, where really both Scholz and Macron were not able to stand there and to say, well, no we don’t give it EU candidate status. It was a very short-term decision that the candidate status was given to Ukraine. Some say it was taken on the train or just—(laughter)—shortly before. We had these cozy pictures of leaders meeting on the train. But again, now the really difficult questions come up of EU reform and of enlarging the EU.

I mean, there’s also a small security aspect to that, and that’s my last point, that the EU also has a solidarity clause which is modeled on Article 5 of NATO. So there is a 42.7 clause within the European Union, which then raises—which is, honestly, not taken very seriously by EU member states because there was NATO which, you know, has the real burden and has the real deterrent effect. But down the line, when it comes to the question of what kind of security guarantees can be given to Ukraine if it becomes a member. This will become an issue, the 42.7 Article in the European Union.

Q: Thank you.

KAISER: Great. Next question from Washington. All the way in the back.

Q: Hello. Can you hear me? Thank you. Rebecca Ulrich with Deloitte.

You’ve painted a pretty dire picture of the situation. And I’m curious if you could share your thoughts on what you think it will take for Ukraine, for the United States, for the West, for the private sector to win, to support Ukraine? What does winning look like, to all of you? Thanks.

JAYANTI: I think that moves us into a discussion of reconstruction to some degree, which is a very valuable discussion to have. There are a number of proposals. They aren’t quite policies yet. And it would be good if one or two of them made it that far. One is seizing Russian assets and using them to fund the reconstruction. There are problems with that. Lots of problems with that. Not least that there are corruption problems in Ukraine. And so if you put the Ukrainian government in charge of the reconstruction of itself, with all of these seized funds from around Europe, a lot of it will go missing. Then there are questions of just feasibility. And there are also questions of logistics and the practicality of doing this.

Because I’m an energy person, I have a bias. And I suspect that the energy sector will play a large role in this, that Ukraine is incredibly well-positioned to become Europe’s clean power hub. Everything there is cheaper than pretty much anywhere else in Europe. So right now, for example, the cost of electricity in much of Europe is about 200 euros per megawatt hour. And before Russian took out most of Ukraine’s generating capacity, it was 83 euros per megawatt hour in Ukraine. So there’s a lot of potential there. But these are, in many ways, forward-looking possibilities because if you can’t keep your infrastructure from getting bombed, then you can’t really start reconstruction yet.

SESTANOVICH: Let me say a word about the word “win.” Because I think we need to unpack that a little bit. Ukrainians talk about—and I was in Kyiv less than two months ago, listening to some officials say, you know, some of the earlier ideas we had for what might be acceptable settlements are just no longer feasible. So the February 24^th lines are no longer acceptable, said the defense minister. Humanity has moved past that. But that’s a little different from saying what would be a victory. I think there are different kinds of outcomes that would represent a Ukrainian military victory. Obviously retaking all the territory that they had in 2014 would be a gigantic and total victory. But pushing back to the—to the February 24^th lines would be such a defeat for Putin that I think you’d have to call that a Ukrainian victory too.

Frankly, even going back to something short of the February 24^th lines, that forced the Russians to pull back from the four new provinces that they claim to have annexed, that would just give them a little bit—leave them with a little control of a little bit more territory than they had on February 24^th, would also be a huge defeat for Putin. The question is whether that kind of defeat would create an environment in which the Russians would be prepared to—would be prepared to talk about interim solutions that didn’t give them everything that they wanted, but that nevertheless reflected their fantastic success.

And we can’t quite envision what the atmosphere would be if any of these scenarios emerged. But believe me, if they did, you would have such a kind of sense of euphoria on the part of the Ukrainians that, you know, we did it. We really—we beat the big bear. And that could create a kind of—you know, either a political environment in which it was absolutely required to go to the very end and make sure that the Russians were driven out 100 percent, or a political environment in which it became possible to talk about other formulas. And we really—I don’t think we can really judge what the political implications of that kind of change on the battlefield would be. But they’d be huge.

FIX: And perhaps just to add to that one small comment. The biggest question there, apart from whether Ukrainians would be willing to sit down instead of push Russia further, is also that with the annexation and the mobilization of Russia, it is so difficult to find leverage towards Russia which would actually bring Russia to the negotiation table. There might be different models that were thought about—sanctions relief for Russia at some point if they are willing to go for negotiations. But as Steve said, that—even coming to that point seems so difficult at the moment. And one of the reasons—and that comes back to the question of the private sector, is also that Ukraine at the moment does not have the ability to have this large-scale counter-offensive, also because it still lacks heavy weaponry.

And there, we come back to the question, what does Ukraine need for the next weeks and months, if it’s not only to maintain what it has, because after the successful offensive in September, we have not seen that kind of success in October. It has stopped. So what kind of additional weaponry does Ukraine need, talking about tanks, about further multiple rocket launchers, and so on. What does it need to come to that point where it pushes Russia far enough that Russia might be willing to negotiate? Or, in the worst case, might now, and escalate further?

KAISER: Toward the back here. Yeah, there’s someone right behind the middle row.

Q: How about now? OK. Isabella Bennett, U.S. Treasury.

With respect to the energy challenges and inflation consequences that you mentioned, what do you think the coming European energy sanctions and the oil price cap impact will be?

JAYANTI: The sanctions have been impressive, unprecedented, and, like most sanctions, don’t work. (Laughter.) Ever, in human timeframes. So I think we’re looking at a situation where absolutely in the next four years there will be a sufficient collapse of the Russian energy sector to cripple the Russian budget, absolutely. I think that Europe making the incredibly difficult decision to wean itself off, and quickly, of Russian hydrocarbons is extraordinary. And Europe should be commended for doing so. It was a pretty easy decision for the United States, because we didn’t use very much of it. Really big deal in Europe.

And whether or not it will be enough is something we will only know over the course of the next few years. Certainly, it has been European energy money that has, in pertinent part, been funding the invasion. And that’s simply a fact of life. Sixty-seven percent of Russia’s budget was from the energy sector. So obviously that’s essentially what’s paying for this. I think we’re looking at a very difficult next year energy-wise. Europe has done a very good job this year of storing up enough natural gas to survive the winter. Storages are over 90 percent everywhere in Europe. And as such, European unity has held on the subject.

But come maybe March, when those storages have been exhausted—and you can’t get them down to zero because of the physics of natural gas. Needs to be some pressure in it, or it doesn’t come out. Next year there will not be Russian gas to fill those storages with. And so whether or not that unity of sanctions and unity within Europe and the transatlantic unity holds through what will be a much worse energy crisis next year, I think reasonable people could differ on how that’s going to go. And so once those bands actually come into place and really put Europe in the position of having very few places to turn to, to replace in full Russian energy sources, I think we’ll see some knives come out, because it’s going to become a much more zero-sum game than it has been thus far. I certainly hope that the line holds

KAISER: Great. Let’s go to the front here.

Q: Thanks. Patrick Brett with Citigroup.

A question on the grain export deal. I’m not sure if we talked about that yet today. Both sort of what was going on recently with—I think in the last week, with the Russian ending it for a purported attack, I think, in Crimea. It wasn’t even clear if that happened or not. But then sort of what’s the importance also going forward of this, especially as we go through the winter? Does it matter before the next harvest? Curious your thoughts.

SESTANOVICH: Sure looked like the Russians were bluffing, didn’t it? You know, they said, we’re getting out of that. And within a few days, they were back. There is a theme that Putin has been trying out a lot in the past week, which is Russia as the leader of the global south, you know? (Laughter.) So, you know, turn the globe upside down and Russia can be in the global south. They obviously heard from a lot of grain-importing countries that this would be regarded as a crazed and inhumane act. So they backed down pretty quickly.

KAISER: All right. Any other questions? So, here.

Q: Hi. Shannon Kellman. Friends of the Global Fight Against AIDS, Tuberculosis and Malaria.

Thank you all for this. It’s been a great panel. And following up on that question a little bit, we’ve heard a lot about the humanitarian situation as it impacts low- and middle-income countries, perhaps more often than not in sub-Saharan Africa. But we haven’t talked as much about the Ukrainian humanitarian situation. I work in health policy. We’ve seen nearly 1,000 health facilities damaged or destroyed throughout this process. Probably about a fifth of those damaged beyond repair. And Ukraine even before February 24^th was suffering from the highest HIV and tuberculosis burden in Europe. Is there a tipping point at which the humanitarian situation becomes a larger part of the conversation, and perhaps a larger motivator for U.S. and European involvement in this—in the conflict?

KAISER: Anybody want to take that?

JAYANTI: Hopefully. (Laughter.) I think the humanitarian catastrophe is very real, obviously. And it’s going to get worse. I don’t think the Ukrainians have the bandwidth to be focused on it right now, when they are focused on everything else. I have friends who work in the Ukrainian medical and humanitarian sectors. And there are lots of problems that none of us have ever heard of. For example, a huge percentage of Ukrainian donated blood has contamination. So a lot of the soldier who are getting transfusions are coming out of it with hepatitis. There are a lot of things going wrong. Where do you start?

KAISER: So let’s take one more question, and then we’ll wrap. All the way in the back.

Q: Great conversation here. Tyler Godoff, Emerging Founder.

With the benefit of hindsight, looking back, one of the strategies that was discussed early on in the early days was could the U.S. implement a no-fly zone. And there was immense fear around that, that that would significantly escalate and bring the U.S. into it. But it feels like we had a life raft. We threw the life raft with holes in it. And as a result, this continues to go on. So with hindsight, is there a scenario in which the U.S. coming in with a very aggressive no-fly zone would have worked out better than what we have right now?

SESTANOVICH: You know, there are lots of what-ifs that one can play with in thinking about the outbreak and unfolding of the war. But that doesn’t strike me as one of the most plausible, because the Russians haven’t really been able to use air power in any significant fashion. It’s a little puzzling, but they haven’t—they’ve really felt constrained. When the Ukrainians today talk about needing air defense, they don’t really mean air defense against planes. They mean against various kinds of incoming missile attacks. For whatever reason, the possibility that the Russians could have used air superiority to subdue Ukraine and to make their early—well, to make their strategy work at any stage, hasn’t materialized.

It's possible that you can spin other scenarios in which the provision of different kinds of equipment, training, whatever, to the Ukrainians would have helped. But that strikes me as not a particularly crucial one, unless you know something about the military situation that I don’t.

FIX: Perhaps to add to that, I mean, this obviously also feeds into the question of nuclear escalation, that we had before, this no-fly zone. And it shows the fact that a no-fly zone was not established in Ukraine shows that nuclear deterrence has worked for Russia, because the reason why the West has not done that was, obviously, the risk of escalation between NATO and Russia. So nuclear deterrence has worked in its sort of main function of deterring the West, which was a red line for Putin to come into Ukraine. But what has now become so dangerous is that what Putin tries to do is to move from nuclear deterrence, keeping the West out, to nuclear coercion, trying to force the West to do certain things or to stop doing certain things, which makes the situation so dangerous right now.

KAISER: Well, on that note—(laughter)—

FIX: I was the optimist I thought. (Laughter.)

KAISER: All right. No, as we know, CFR likes to start and end things on time. And we almost did that. So I’ll take the opportunity to thank you all for joining today’s opening plenary, and in particular thank Liana, Suriya, and Steve for sharing their thoughts with us today.

The video and transcript of today’s event will be posted on the CFR website. And for those of you attending in Washington, we hope you can now join us for a reception here on the second floor, as well as on the eighth floor. The conference, which hopefully you will join us for tomorrow, continues with an in-person breakfast at 8:30, followed by a hybrid meeting at 9:15 on “The Rising Tide of Inflation and What Comes Next for the Global Economy.” (Applause.)

(END)

GURA: All right everybody. I’m David Gura. I’m the business reporter for NPR. Former term member. My term ended last year. But it’s great to be here with you, and great to be here with these panelists as well. I’ll introduce them quickly. I just saw the movie Tár with Kate Blanchette. And if you haven’t seen it, it begins with this kind of deliciously torturous opening scene where Adam Gopnik spends minutes introducing her and her bio, which is quite distinguished. But you get the point. So I’ll be very brief in my introduction of who’s here. (Laughter.)

Sara Eisen is an anchor at CNBC of Closing Bell. She’s a CFR term member, along with you. Tara Hariharan is the managing director of Global Macro Research at NWI Management, joining us from New York. And Jennifer Nordquist, DJ Nordquist, is executive vice president of the Economic Innovation Group. She was at the World Bank previously, and at the Council of Economic Advisers before that.

This plenary kind of centers on inflation broadly. We’re going to get there. I think it makes the most sense just to start here in Washington and spin out. I’m reminded of what Fed Chair Powell said earlier this week, that restoring price stability is good not only for the U.S. economy, but the world economy as well. So with that in mind, I think we’ll start here in Washington and kind of spin out.

And, DJ, maybe I could start with you. We have the jobs numbers out this morning. So 261,000 jobs added, the unemployment rate up to 3.7 percent. And it’s just fascinating to look at coverage of those numbers, some saying it’s a sign that the Fed’s policies are working. We’re seeing some success. Those numbers are coming down—the number of jobs coming down. Others saying it’s a sign that it isn’t working. How do you read those numbers? I draw on your experience in the CEA, and just wonder sort of when you get those numbers how you process them and sort of what you make of this very weird economy broadly, and jobs market, that we’re seeing right now.

NORDQUIST: Yeah. I mean, I guess the old Chinese expression is may you be cursed by living in interesting times. And I definitely feel like for the economy, these are some very, very interesting times. I mean, I think the unemployment report today was a little bit of a Rorschach test. I mean, you can read into it, you know, probably six different things that you could read into it. I mean, the raw jobs numbers beat expectations. So that means the Fed needs to do more work. LFPR was down, but unemployment was up. And then the household and the other survey—I mean, huge divergence. Like, a chasm between the numbers. One was down, I think, 380,000. (Laughs.) The other one was up 261(,000).

So, you know, I think it’s a little hard to read the tea leaves. Many people were focused on hours worked and also wage. Wages went down a little bit, but they’re still, I think, too high for the Fed. And I know, you know, speaking of tea leaves, you know, you had the Fed statement where initially the market seemed pretty happy about it, and then Jay Powell started talking. (Laughs.) And the markets started tanking. Kind of makes me wonder if, like, maybe they’re overcommunicating a little bit. But, yeah, so I mean I think it’s tough. I think we’re—you know, it’s a very sort of, like, two roads diverged in a wood economy.

GURA: Sara, your job—

NORDQUIST: Sorry, I didn’t answer your question about CEA, sorry. So CEA—

GURA: (Laughs.) So how would you process it? Or how what would make of—

NORDQUIST: Yeah. So CEA—

EISEN: How would you spin it?

GURA: Yeah, how would you spin it? Exactly.

NORDQUIST: Well, so first of all, I’d say, like, CEA is, like, the best job in the White House because, like, it’s sort of the think tank within the White House. And there isn’t really the need to spin stuff. It’s really very, very factual. You know, NEC—

GURA: Well spun. Well spun. (Laughter.)

NORDQUIST: NEC is more political than CEA. And the CEA is, you know, a bunch of Ph.D. economists on loan from universities. So, you know, CEA gets the numbers, usually around 4:00 or 5:00 in the afternoon, and we would get on the phone with the BLS folks and start going through, like, their data deck, and then we would recut it. You know, in the last White House we were really looking at, you know, particular demographic groups because, like, you know, the folks that have traditionally been at the bottom were starting to move up. And obviously the last administration was very focused on manufacturing jobs. So that was—that was a big focus. And, you know, we would go in and then brief the—you know, first it was Gary Cohen and then Larry Kudlow. And we would show him all the numbers, those two guys. And then they would figure out how they wanted to spin it. (Laughs.)

GURA: Very good. Very good.

Sara, day-in and day-out, you’re talking to executives. And I’d love for you to kind of offer the complement to the data that we’ve seen today. And that is, you have Amazon announcing its going to be cutting back Stripe. A lot of tech companies are at least freezing hiring. We’re talking about cuts. Can you just maybe share what you’ve been hearing from those executives about how they’re viewing both the labor market, but just the broader economic uncertainty that we’re in right now?

EISEN: Sure. And I just want to say this is a very strange position for me to be in because I’m usually the moderator role.

GURA: You can flip it on me at some point as well.

NORDQUIST: And I’m in the middle of the two.

EISEN: I’m actually very, very nervous to be a panelist. It feels like a lot more pressure. A whole new appreciation for what they do.

So it’s mixed. It depends on what industry you’re talking to, what company you’re talking to right now, whether you’re in a sweet spot. I had the Marriott CEO, Tony Capuano, on the show today. Leisure and hospitality as been a driving force of the comeback of jobs, but of course it was the worst hit during COVID. And actually that was a disappointing number today in the jobs report. But they are still hiring, and they are still giving big increases in wages. So there’s that. And then at the same time, we have news day that Amazon’s doing a hiring freeze, and Apple’s doing a hiring freeze, outside of R&D, and Coca-Cola is offering furloughs. So it depends where you sit.

I think obviously in technology that’s where the more—you’ve seen more and we hear more about the hiring freezes and the layoffs, especially in some of those companies that were sort of COVID stocks and COVID winners. Like Robinhood or Teledoc. And that’s really where the pain is. Telecom, obviously, has had, like, 100 rounds of layoffs. And then, you know, you have other parts of the economy—not just travel and leisure, but in the services side—where things are strong and where it’s remarkably resilient.

And so I think you get in some of these numbers where there’s something for everyone. The bulls on the market or, you know, the optimists on the economy will say, 261,000 jobs is a huge beat. We were expecting 190(,000). And we’re still seeing rising wages. The pessimists will say, well, wages aren’t rising as much as inflation. And so it's actually pretty downbeat. And the household number was a disaster. And unemployment rate is going up for the wrong reason, because participation is down.

So there’s something for everyone, but I think the most important thing that we’ve been focusing on in CNBC, even when we talk to executives, is the Fed. Because that’s been a whole driver of this market and financial conditions and the economy. And, you know, to bring it back to the meeting, which was so interesting this week I thought, Powell made it very clear, he’s more worried about undershooting on inflation than overshooting and crashing the economy. So I think we’re in for a lot more pain. And I think businesses are starting to feel that. And even the ones that are doing really well right now are saying: We’re not seeing any signs of weakness, but we know that the economy is turning. And we’re not stupid. And we know that, you know, in all cycles, consumer spending pulls back. It’s just been a lot more resilient.

 GURA: Tara, let me turn to you. And DJ was mentioning how the market dipped downward as Jay Powell was speaking. So I highlighted some of the points at which that happened. He said, we still have some ways to go. Interest rates will be higher than previously expected. Restoring price stability will likely require maintaining a restrictive stance of policy for some time. What did you take away from that meeting? What does it tell you about the progress, as so much the Fed sees it, toward getting inflation back to this 2 percent target, that I’m not going to say is illusive, but is very far from where we’re at right now?

HARIHARAN: Well, I have to say, as an investor, the great thing about markets nowadays is within the say day you can be right or wrong several times. (Laughter.) And within a couple of minutes of each other, as was illustrated during the—during the Fed meeting. I think, though, that Chair Powell is right. That inflation is going to be a persistent problem. And I do think that it was the fair thing to say that even if we have done so many hikes so far, and there has been a certain cumulative effect that we have to see the lagging impact of, that there is going to be more.

Simply because everything we are looking at, as a firm, and I as a researcher, suggests that even if on the margin high frequency indicators are suggesting some of the measures of inflation are ticking down—for instance, you know, supply chain pressures or even things like wages or rents—the problem is the way our U.S. CPI basket, inflation basket, is structured, it takes something like six months for some of these things to filter into the actual numbers. And since Chair Powell has made it very clear that he wants to see numbers, and he wants to see several months of numbers showing a downturn in inflation, I fear that we have some time to go before he can signal the all-clear.

GURA: DJ, pick up on that. You’ve worked with a lot of former Fed officials, including Fed chairs. And that is something that stood out, just the recognition of the fact that monetary policy is a slow-moving mechanism, and there is this huge lag, and certainly something that stood out to me at that last press conference was Fed Chair Powell’s willingness to engage with that. He really stressed the fact that this is a huge challenge for the Fed at this moment in time. Given that, how do you gauge the Fed’s efficacy thus far? And you look at sort of what’s changed. Real GDP is unchallenged. Right now, consumer spending is slowing, as we’ve discussed. Business investment’s slowing. The housing market, of course, weakening. So there are signs that things are working. How much sympathy do you have with the Fed chairman now? And sort of what are you looking at as you watch this unfold over the next few months?

NORDQUIST: Yeah. I mean, as I sort of alluded to earlier, I’m wondering if they’re overcommunicating a little bit. But I thought that yesterday was so interesting because, like, it was almost like staff wrote the statement. (Laughs.) And that, you know, Powell and the governors sort of hadn’t really read it. And then he got up there, and was, like, uh-oh. (Laughter.)

EISEN: Or maybe he saw the market reaction.

GURA: Yes.

HARIHARAN: Yes.

NORDQUIST: Sort of reminded me of, like, the 2008 crash when, like, Hank Paulson would get up there and he just kept talking and talking, and you’d watch the market returns. Keep going, stop talking! (Laughs.) So, yeah. I mean, it’s—they’re in a difficult position. And they’ve got, you know, quite frankly, a huge credibility problem because of this whole—you know, it’s just transitory, it’s transitory. I mean, for months we heard it was transitory. And, like, lo and behold—(laughs)—depends on how you define transitory. You know, so they’ve got to sort of get the mojo back, get the credibility back. And, you know, like you said, I think he’s more worried about—you know, he doesn’t want to do, like, a pause, like what happened to Volcker. And then we had a double dip. Like, you know, he’s sort of got to have the steel in his back, you know, to keep going.

And of course, the other piece of this, is we haven’t really talked about with the political system, where you have—you know, now you have members of Congress, like, writing him saying: Like, please stop! Like, you don’t need to cause all these layoffs.

GURA: Senator Warren and others.

NORDQUIST: Yeah, which is, you know, interesting since, you know, Elizabeth Warren was a big proponent of MMT, which is what we had. (Laughs.) And now we’re kind of paying the price for it. So, yeah. I mean, I feel for—I feel for them. I mean, you know, nobody wants to, you know, go to sleep every night and worry about laying off, you know, massive numbers of people. And, I mean, that really is the question. It’s, like, how do you get the genie of inflation back in the bottle? And, you know, we haven’t had inflation in this country like this in forty years. I mean, most of you guys probably weren’t alive the last time we had inflation like this. So, you know, it’s a tough tiger to paint.

GURA: Sara, with that in mind let’s talk about the pain. And I think the last question at the news conference was about whether this soft landing, as it’s called, would be attainable. And I wouldn’t say it’s the most optimistic Jay Powell that we’ve heard from there. But he began to talk about the recession. And certainly overlaid in his remarks, and in the statement itself, is this kind of boilerplate acknowledgment that we’ve seen that high prices are very difficult from all kinds of Americans. There’s sympathy from the Fed on that point. Again, drawing from what you’ve heard from businesses and executives, what are they saying about, A, the prospects of a recession and, B, what that’ll look like. And here I’ll say what I’ve heard, and you can tell me myself. There seems to be some—people are coalescing around this idea that it could be a kind of short-lived recession or one that’s a bit shallow. I wonder if that kind of jives with what you’ve heard as well, and how that’s different from what recessions we’ve seen previously.

EISEN: Well, it’s different because it’s so telegraphed. Everyone’s like the recession is coming on, you know, March 3^rd, 2023. It’s like we’re waiting and waiting and waiting for recession. So that’s different, because it doesn’t—you know, it’s usually—and what else is different and I think makes a lot of businesses and economists that we talk to more optimistic that it could be a shallower recession than previous recessions, is you just don’t have the built-up leverage in the system that we had, say, in the great financial crisis. The banking system is in relatively good shape. It’s not like—it’s not like this massive hangover. You know, consumer and household finances have been in better shape. So that’s why there’s optimism.

The pessimism—and you hear this a little bit more now from, I would say, like, the Jamie Dimons of the world. You know, famously said there’s hurricane coming. I think David Solomon, the CEO of Goldman Sachs, has been a little more bearish lately on the recession. And that’s because the Fed is going to tighten more than they expected. And when the Fed tightens more than they expect, the chances of recession go up, and a deeper recession go up at that. I thought it was really interesting. Bank of America put out a research note this morning.

You know, we get compared a lot to Europe. And it’s always like, well, thank God we’re in the U.S., because we’re in much better shape and we’re not dealing with the energy shocks. But guess what? The Fed has to tighten a lot more here than probably the ECB. By the way, you feel bad for Powell? I feel worse for Lagarde. I think that’s a tougher—they have more than 10 ½ percent inflation and no growth, and they’re about to face an energy shock. But ultimately, they will tighten less. And so Bank of America put out a note today saying the U.S. recession will be deeper than Europe, which I just thought was interesting given the resilience we’ve seen so far here.

So as it relates to recession, I think most executives we talk to expect it. I think they’re optimistic that, you know, we’ll take the pain and then on the other side there’ll be growth, and it’ll be healthier growth because it’ll be growth without inflation. But the biggest question mark is how much and how far the Fed will have to go. You know, the market expects now that we’re going to get above a 5 percent terminal or peak rate into next year, but that has moved up steadily for this entire year. And during the news conference of Fed Chair Powell, what actually tanked the market is when he said that rate, that top rate, will be higher than we expected in September now, and it will last longer, that restrictive policy. And that equals deeper recession, right? That equals more financial pain. It’s why he said that the path for a soft landing is more narrow.

But I do think one key question that I’m going to be asking is, can we get a soft landing in the employment situation? Because that has been the strongest part of the economy. And if we can do that, then it won’t feel as much like a recession, and it will feel shallower than, say, a growth recession, which we technically already went into, right, after two quarters of negative GDP. Again, depending on how you define it. (Laughter.) But it’s true, it doesn’t—with the unemployment rate, you know, below 4 percent, it doesn’t feel that way.

GURA: Doesn’t feel the same, yeah.

Tara, I said we’re going to kind of branch out to go more broad here. This is a good opportunity to do that. So we have what Sara was talking about, the remarks from the Fed chairman, and sort of how this is complemented by what’s happening certainly in Europe. And I wonder if you can contrast—yes, inflation is this global phenomenon. All these countries are dealing with it. You had the Bank of England governor yesterday kind of muting expectations for what their terminal rate is going to be. So taking a kind of a wholly different approach or I just detect a dissonance between the two central banks as they’ve talked about this.

Maybe you could just speak about the degree to which Fed policy is shaping what other central banks are doing and how aware they are of it. And then after you answer that, maybe we can talk a bit about sort of dollar strength and currencies around the world as well. But I’ll turn to you first on just sort of what other countries are making of what the Fed is doing, and how that’s influencing their policymaking as well.

HARIHARAN: It’s a great question. In fact, the irony, David, was that I think about a week ago, when people were expecting that at this Fed meeting the Fed might even start to pivot and start to sound more dovish, the tea leaves that people were reading were that other developed market central banks we starting to sound a little more dovish themselves. We have seen all along—while, in fact, ironically, the ECB has only recently started to sound a bit more hawkish about inflation. Earlier they used to say, look, this is largely energy-based inflation. It’s not something central banks can deal with. There’s only so far we’ll go. And people assumed that the neutral rate, the interest rate that Europe needed, was much lower than, for instance, the U.S.

And so—and also with the Bank of England, now that they’ve hopefully fixed their fiscal profligacy problem—though fingers crossed that they’ll have a good budget statement—the Bank of England has clearly come out and suggested that maybe they don’t need quite as high a terminal rate in order to bring down inflation to around the 2 percent mark in a couple of years. But the fascinating thing is that while everyone thought that this was all a signal of maybe some coordination, that the Fed was also going to start to sound like at least the pace of hikes would slow down, and maybe even that the terminal rate was kind of set, we got the exact opposite from Powell.

And I think an important aspect of that is—and even if I were to talk about it next, I want to preview it—the strength of the dollar. Let’s not forget that a strong dollar, while, of course, it can cause pain for the U.S. from the point of view of the fact that we are such large importers, the consumer buys so much and dollar strength is, of course, you know, good for the U.S. consumer, it’s bad for our exports because a strong dollar, of course, makes U.S. goods much more expensive for the rest of the world to buy. And this is one of the reasons we’ve been seeing a widening trade deficit. Pandemic and pandemic goods buying notwithstanding, we’ve also seen the problem where exports from the U.S. has been consistently slower than imports.

So the U.S. exports are a problem. Companies, of course, U.S. multinational companies, who earn their profits abroad and then have to bring them back to the U.S., will have to convert them from the foreign currency into dollars. And that’s going to be less. And as Sara has probably also noticed, these companies are complaining about the fact that the strong dollar is hurting their profits in dollars. But overall, a strong dollar helps bring down inflation, at least domestically here in the U.S. And that’s probably the reason why, whether it be Chair Powell, whether it be Secretary Yellen at the Treasury, we’re not hearing a lot of complaints about the strong dollar from the U.S.

Where we are hearing them is from the rest of the world who, of course, finds the dollar strength much more difficult to keep up with, especially if you—if you think about the face that their dollar debt—their dollar-denominated debt, which many of them have, becomes even more expensive to hold and to finance. And so far, the U.S. has turned a deaf ear to this concern about dollar strength. So I think the reason dollar strength is an important issue to watch is it’s going to be dependent on the Fed. And I think people are starting to read the tea leaves that, yes, while, as Sara said, the terminal rate now looks to be at 5.25 percent or so, that maybe we’re reaching the stage where this is starting to get price in, and the dollar is also reflecting this.

But we have the risk that, you know, some other currencies have not been able to keep up, which is exacerbating the dollar strength. I just want to bring in China into this discussion, because China is so important, even from an economic perspective. If the rumors we hear about China reopening and zero-COVID going away to materialize, then I think the chance of a global recession decreases considerably. Although, as it is now, China, of course, has rather depressed growth. And, as you’ve seen, because Chinese interest rates are now at a discount to U.S. interest rates, you have this issue where the Chinese currency’s also depreciating. And that’s further adding to dollar strength.

GURA: Sara, let me just get your perspective on all of this. So you’ve had a lot of central bank intervention in currency. Certainly, by the Bank of England, after we saw that botched fiscal policy. Bank of Japan as well. Talking about China and the efforts that government does to prop up certainly the offshore currency. What does that say to you about the direction of central bank policy when it comes to currencies, and just kind of the—(laughs)—maybe not appetite, but attitude toward having such a strong dollar? I know that you talked to Secretary Yellen who seemed, as Tara was saying—

EISEN: She didn’t care.

GURA: Didn’t care. (Laughs.) And I think was, in a renewed way, very happy with the market setting the value of the dollar relative to—

EISEN: So just for those of you that don’t know, my background is in foreign exchange. So this is my—

GURA: You’re an enthusiast of this, yeah.

EISEN: I am. But actually, it’s been a great way to get into business and the markets and economics, because I think it’s, like, the global litmus paper for everything. And so having that in mind, when the dollar strengthens to, you know, multidecade highs against major trading partners and currencies around the world, it’s, like, all alarm bells go off. That’s a problem. It’s a problem for financial conditions everywhere. It’s a problem especially when you talk about Asian currencies like the yen and the Chinese currency appreciating so much. It’s a way bigger problem for the rest of the world than it is for us. And that makes it a problem for us. So no matter what Secretary Yellen said—and just for the record, what she was it’s in the best interest of the U.S. to have a market value exchange rate. Translation: we’re not thinking of intervening.

But what that ultimately means is that the poor Japanese who have been intervening now in September and October, are going to be completely unsuccessful, because you can’t go up against a $5 trillion market day—$5 trillion trades every day on the foreign exchange market—you can’t go up against that and win. They will fight back. And that’s why we’re seeing the dollar-yen back above 1.50. And, you know, China intervenes as well. It was way more reserves and power. But either way, it’s problematic because, first of all, inflation—we’re making inflation worse for the rest of the world, because they all have to pay now extremely high energy prices, especially in places like Japan that imports energy, because of their weak Japanese yen.

They all have—you know, some of these countries, like Malaysia and Indonesia, have more than double-digit percentages amount of their debt to be paid in dollars. And so the more expensive that becomes, the more likely it is that they default and they have problems. I mean, I don’t think anyone’s as worried as the Asian financial crisis in 1997, because they’ve all built up stronger reserves and they have better balances. But it’s a problem. And as long as the Fed continues on this pace—I mean, it may be priced in, but I’m not sure that it necessarily makes it that the U.S. is not in a better growth and higher rate environment than the rest of the world. So I think that dollar strength is definitely something to watch. I think it’s a huge headwind for the U.S. stock market, because of the earnings headwind, but also the potential for global shocks.

So what it says to me when central banks intervene is that there’s a problem. And if the U.S. doesn’t join in in some sort of Plaza Accord, which is what we got last time around in the ’80s when they joined forces to weaken the dollar after it got so strong, then it’s going to be unsuccessful. And this problem is only going to get worse. So I know from sources that the Fed is watching this very closely. They cannot talk about this. But they are clearly watching it. It’s the fastest transmission mechanism of their monetary policy. It is not with a lag. And it has some huge potential negative spillover. I know the IMF is very worried about this as well. And everyone’s sort of, like, playing it cool now, because we handle it and there hasn’t been a big problem. But currencies, when the appreciate like this, always cause big problems.

GURA: DJ, let me just ask you, drawing from your experience at a big, multilateral institution, how you react to this notion floated, that there could be a new Plaza Accord? And I know that officials at the IMF, Gina Gopinath, dismissing that. This isn’t the moment for that. It isn’t the same as what we had in the ’80s. But is there an opportunity here for coordination? Is that something that you think might happen? How do you see an institution like the World Bank or the IMF acting? They talk an awful lot about inflation is a global problem. They’re limited in what they can do, but how do you—

NORDQUIST: So in general I would say the multilateral system is not functioning super cohesively right now. There’s this huge bifurcation. I mean, I saw it when I was there, but it was sort of under the table, where you had sort of China and Russia, you know, on one side, and the, you know, developed folks over here, and then the Africans sort of in the middle. And now that chasm is just out in the open. And at both the spring meeting and the annual meeting there was no communique, which tells you how bad things are, when they can’t even agree on, you know, verbiage about what’s wrong with the world economy and their sort of blueprint of what to do about it. And I do think the World Bank is also very, very concerned about dollar strength. I know President Malpass has talked about it. And, you know, which is interesting, when you have an American official sort of—(laughs)—pushing against U.S. interests for the global economy.

So yeah. And I mean, definitely, like, you know, a lot of these developed countries, their debt is dollar-denominated. Even Chinese BRI loans are majority dollar denominated. So, you know, we are going to have this massive, you know, debt crisis. You know, a lot of unsustainable, you know, debt levels in many developed countries. So, yeah, it’s super interesting. There was actually, on a tangential note, a really good paper in the journal of, I think it was, political economy by a University of Chicago professor, who looked at GDP—like, measures of GDP in authoritarian versus democratic countries. And he found that the authoritarian countries overall, like, overestimated their GDP by 35 percent.

So, you know, we don’t actually really know what’s going on in China. They claim it’s 3.5 percent. (Laughs.) You know, who knows. But, you know, I agree with Tara. If they do, you know, unlock the, what is it, 200 million people that are on lockdown, if they let them out that will help, you know, the global economy. And I think what’s sort of interesting is that the U.S.—we have been exporting our inflation. And China has been, when it was, you know, exporting—it was exporting its deflation. And so, you know, that should come back into play.

I did want to pick up on one thing that Tara said about U.K. fiscal profligacy. You know, we haven’t really talked about what caused inflation in the United States. And, you know, some would argue that it was U.S. fiscal profligacy. You know, we have $4 or $5 trillion floating around right now, you know, that, you know, clearly did something to the economy. And it makes the Fed’s job that much harder, where you have, you know, the monetary side of the house trying to—it’s like running to keep up, you know, with the fiscal side.

And there was also—there was an interesting article in the Economist this week talking about Hikelandia. They looked a countries and how they had actually gotten out ahead of the U.S. and Europe in terms of, you know, raising their interest rates. And that it wasn’t actually working that well. But again, that’s because the U.S. is the world’s largest economy. You have this, you know, very, very strong currency issue. And a lot of these are, you know, commodity-dependent countries. So, you know, the U.S., for better or worse, we are the world’s largest economy. What we do is going to have, you know, shockwave effects everywhere else.

EISEN: I would just say also, really quickly, that what—another big takeaway from the U.K. debacle is that the market’s in charge. And so they might not be talking about a Plaza Accord right now, and Yellen doesn’t want to intervene in the market. But until there are shocks and problems, they’re never going to say that, right? So it’s still a risk, I think.

GURA: We’re going to take questions from you and term members who are joining us remotely as well in just a moment. But let me ask you, Tara, lastly, before we go to the—we’ve gone thirty minutes without talking about Ukraine. And we should because that is certainly something that’s having a massive effect. Although we’ve talked a lot about the knock-on effects from that. But I just want to get your perspective. We talked about what’s going to happen in Europe in the coming months. And it’s that. It’s the energy crisis kind of borne out of that crisis. But then also just the uncertainty of how long it lasts and what it means. So I would just love to get your perspective on how you’re considering that element of uncertainty, that for a big variable here of this war, the effects that it’s having on Europe, and the world more broadly, and how you’re thinking about timeline, and how countries are accommodating.

HARIHARAN: Of course. So obviously case is that Russia-Ukraine is in for a frozen conflict. Much as you would like to believe that Ukraine has the upper hand right now, and that maybe some gains can be made, the problem with that issue that is Putin is only going to want to politically grind in and hold his ground. And as we saw in the term member event yesterday, the nuclear issue also looms large. So I won’t talk so much about the geopolitical aspects of that. Let me focus on energy, because—and, to a certain extent, related commodities, because of Russia’s stranglehold right now on Ukrainian wheat, which, of course, is very important for emerging markets for food supply.

I think the important way to think about energy markets is just in the simple sense of supply versus demand. And to me, both of those suggest that unfortunately energy prices, particularly oil prices but also the products like diesel and gasoline, prices are not going to come down very much any time soon. If we look at it from the demand side, clearly the United States in particular has still had relatively resilient demand, even though we’ve had gas prices go up a lot and it’s become a political issue.

And if for some reason China does reopen soon, I’m a bit skeptical. I think they’re still worried about COVID. But if they do reopen, that’s going to add easily another $10 to the price of oil, just that—just from the recovery of activity. And we also have the fact that the U.S.—the government has been drawing down its strategic petroleum reserves. And at some point, it’s going to have to restock them. Now, they’ve said that they won’t do it for another fiscal year, at least. But when they do, that’s going to be a big for the market as well.

So on the demand side, again, things are looking pretty good. And certainly on the supply side. First of all, Putin is still in charge. Even with a possible price cap, which, of course, we’re hearing more about from the G-7, that’s not going to stop the flow of oil. And if for some reason Putin decides to be completely perverse and decides to, just like he cut off the Nord Stream gas, whether or not you believe that he caused the explosion, he can do the same to oil. And very quickly oil could go into, you know, the mid-hundreds. And therefore, even if Russia’s oil sales slowed to a trickle, what they get in terms of the price will more than make up in terms of revenues.

The other point is there’s OPEC, the oil-producing cartel led primarily by the Middle Eastern countries. And they’ve also, I think, placed a floor somewhere around $85 to $90 a barrel on oil. They can—they can easily just say, we will cut production any time they believe that oil is going below a level that is suitable for their budgets. And so for those reasons, we think oil inflation is here to stay. And that is going to keep headline inflation up. Maybe the point is that central banks should be focusing more on core inflation that’s coming from services, that’s coming from non-food and non-energy issues. But the reality is there that energy inflation looks to be here to stay.

GURA: OK. Let’s take your questions. And feel free to direct them at any of the—any of the panelists. Or I can help guide it, if that’s easier. And just say your name and where you’re from. And I’ll remind you that this is on the record as well.

NORDQUIST: We’re on the record?

GURA: You’re on the record, DJ. (Laughter.)

EISEN: You’re surrounded by two journalists.

GURA: Two reporters. So, yeah. (Laughter.) Let’s go here.

Q: Thank you very much for an excellent panel. I’m Zach Witlin with the Eurasia Group and a term member at CFR.

I wanted to follow up on a point that Tara had made regarding the possibility of nuclear weapons use. This is something that the policy and analytical community is debating very intensely here in D.C. and around the world. And so my question to the panelists is, do markets understand that risk?

GURA: Tara, do you want to take a bite at that first? Go ahead.

HARIHARAN: Sure, I will. Zach, I think yours is an excellent question. And I have to say that every day on our trading floor at our hedge fund we ask, why isn’t the bond market pricing in more of a likelihood that suddenly we hear that Russia has deployed some kind of, you know, strategic nuclear weapon? It’s one of the reasons, for instance, that we are cautious even though bond yields are trending higher and higher. I would argue that, you know, if we hear about a nuclear incident, very soon what we call, you know, risk off in the financial markets will involve a very dramatic drop in yields. And so I would argue that, yes, the market is not pricing that in. It’s just been focused so much on the Fed, and Powell’s hawkish remarks about inflation. But a nuclear war is a completely, you know, different animal. In that case, of course, you know, no asset price will be spared.

GURA: Sara, I’ll turn to you. I mean, I mentioned the interview that CNBC did with Jamie Dimon. And he was so—he kept—of all of the risk that’s out there, he was so emphatic that it’s Ukraine that he’s most worried about. And he, I believe, said—this was later, at a forum in Saudi Arabia—but he said, if we’re not here in 200-300 years, it’s not going to be become of climate change. It’s going to be because of nuclear weapons. So I just wonder how much that’s a thing that you’re hearing, again, as you talk to folks. Is he the exception, is Jamie Dimon the exception talking about this? Or is it something that more people—yeah, OK.

EISEN: Yeah. And he usually is the exception talking about things. You don’t hear executives talking about the prospect of nuclear war, just like you’re not seeing it priced in the market. By the way, you’re not seeing anything priced in the market as far as, like, an invasion in Taiwan and what they would do from China, which is not a zero percent probability. I think the market, usually based on our read on it, has a very difficult time pricing in these extreme geopolitical exogeneous shocks and crises. But clearly it’s on the table. I haven’t heard any—have you heard anybody else talking about nuclear?

GURA: No. He’s the one.

NORDQUIST: I think nobody wants to think about it. It’s just so horrific. But I mean, I guess I’m going to try to be optimistic. If he drops a nuclear bomb on Ukraine, the wind patterns are going to blow all that radiation back to Russia. So my hope is somebody’s explained that to him. (Laughter.) Then again, maybe he doesn’t care, because he’ll have a bunker.

EISEN: It’s true.

GURA: It is true. I’m not an expert, though. (Laughter.) Let’s go in the back corner, to make this a challenge for the mic crowd. Sorry.

Q: Hi. My name is Alex Yergin. I’m a consultant. I really enjoyed this panel.

My question is, is there anything that legislators, both in the United States and around the world, can do either to deal with inflation in the short term, or any policies that they could put in place in the long term that might help avert a situation like this emerging in the future?

GURA: DJ, I’ll turn to you. You spent some time on Capitol Hill. You’re based here, following the legislative game.

NORDQUIST: Eons ago. Well, so it was funny. Like, I was thinking about this the other day. Like, I haven’t heard anybody really talking about the Taylor rule much. And I don’t know why. I mean, I know, you know, a lot of economists think it’s just too formulaic, or whatever. But if we had some type of—

GURA: Do you want to explain what that is quickly?

NORDQUIST: So the Taylor rule is, like, an automatic, like, if inflation starts to bump up, that then the Fed has to react immediately. And—

GURA: It would put a lot of people out of work. It would just be one mechanism. There would have to be no human experts at the Fed, yeah. (Laughter.)

NORDQUIST: Our robot overlords are here. Yeah, so, but I mean, you know, there could be some kind of a modified Taylor rule, where there were some humans sort of looking at it, But I would love to sort of see the counterfactual if there has been a Taylor rule in place right now, like, what would have happened? So, yeah. I mean, I think that that’s, you know, something that’s one possibility, I would say.

EISEN: One thing the Biden administration, according to, let’s say, the retail CEOs that I talk to—Target and that whole group—they should have removed the tariffs on Chinese goods that were put in by the Trump administration. And I think there’s been a lot of internal debate inside the administration about this. Like, do we want to not be as tough on China? Is this really going to have a material impact? And the like, I interviewed the USTR Katherine Tai last week. And she said, look, we’ve seen the research. It’s just going to have minimal effect.

I heard from all the retail CEOs afterwards, that is absolutely crazy. That it does drive up the price of consumer goods in this country. And it’s a really easy way for the Biden administration to say, see, look, we’re doing more to help fight inflation. The student—a lot of people criticize the student loan forgiveness program. It, again, just eases conditions for people, which is great, obviously. But in an inflationary period where, you know, they have to crack down—

NORDQUIST: I would argue even on the China tariffs—and let me preface that by saying, like, I’m a free marketer. Most economists are, except for one who worked in the Trump administration. Most economists would say, like, you know, a free trade agreement is—you know, it would be like one piece of—this is what my former boss Kevin Hassett used to say, like, free trade agreement would be one page. It would just say, free trade. (Laughter.) So, you know, the deal with the Chinese tariffs is, you know, I think that they don’t need to be—I mean, certainly I think U.S. consumers do pay a price. Some part—I mean, China did absorb some of those costs themselves. And, you know, I don’t think anybody really wins in, like, a tariff—you know, a trade war.

But at the same time, I just—if you think of those tariffs in particular not really as an economic question but really as more of a national security question, I think that that makes a little more sense. And I don’t think that the inflation that we’re feeling right now is from the trade war that started back in 2018. So, you know, I mean, there are—I’ve yet to—and, actually, something I tried to do when I was in the White House. I tried to hire, like, a—actually, it was a professor from West Point. I was, like, because we would come up with all of these models, but we could never figure out how to model what does national security cost, right? (Laughs.) And he couldn’t figure it out either. So, you know, there is this—that is an important piece of the economy that, like, you can’t put a price on it, exactly.

HARIHARAN: If I may just chime in two quick provocative remarks. DJ, I completely hear you. I hear you about national security. But and I also think that the tariffs so far, the consumer goods trade tariffs, are not going to make a huge difference in terms of inflation. But I do think that long term this great-power competition, you know, the export controls, they are going to make a difference, because it’s going to be quite expensive to near-shore supply chains back to the U.S. And so while this is probably something that is necessary, it is something that policymakers need to calibrate.

The other provocative thing I’m going to say, and please understand I’m a big advocate of green energy, but right now maybe just because the world does need oil, rather than asking Saudi and OPEC to produce more oil, we need to be working a bit more on incentivizing U.S. oil. And, you know, maybe setting better standards as to how that oil is produced in a better and more sustainable fashion. But given that we’re not going to be able to wean off fossil fuels immediately, I think one of—one of the gripes of the fossil fuel companies is that they have—they have felt hostility from the administration against them. Whether that’s justified or not, it’s something that needs to be worked on.

GURA: Tara, let me push back on that and just look at how these fossil fuel companies have done recently. And wonder what right they have to gripe at this point in time—(laughter)—and sort of what more incentive do they need? I mean, the profits are huge. They’re record-setting. They’re massive. What kind of incentives are we talking about here? There are salt caves to fill as we drain this petroleum reserve. But what would you suggest we need to see more of to reanimate that sector, so much as it needs it?

HARIHARAN: Well, when I say they’re griping, they’re certainly not griping about their profits. They’re griping about policy. And maybe they’re just using that as an excuse in order to be able to return more money to their shareholders. But I think the main point is, if you see since the pandemic, at one point oil prices actually went negative, when we saw the whole world shut down. And I think oil producers have, you know, become rather concerned about the uncertainty and the price volatility. So they’re basically trying to say, if the U.S. can in some way incent fossil fuel production by saying policy-wise. I guess in a sense the U.S. is doing it now, right? If you say you’re going to refill the strategic petroleum reserves from U.S. supply, that’s a good sign. I guess they wanted more of that and earlier, to put a floor under oil prices, so then they could be—they could be guaranteed of their profits.

GURA: OK. Oh, you. OK, sorry. And then you in the back, very patiently. Sorry.

NORDQUIST: I mean, you know, you mentioned, like, I mean, there was a period where, you know, oil companies were paying people to take their oil. So obviously their profits are going up now. It’s exactly, you know, what Tara was saying. And I do think—I agree with you. I mean, you know, the energy industry, that’s a long tail in terms of an investment. And, you know, the signals that they’re getting are, you know, we want to end fossil fuels. We want to end natural gas. You know, et cetera, et cetera. And so, you know, that’s why they’re returning money to their shareholders, because they’re afraid to do any of these investments. And, you know, it’s the signaling that’s quite bad.

And I would just also add that, you know, obviously we’re having this great-power competition with China. We’re now having problems again with Russia. Maybe we shouldn’t also be picking a fight with the Saudis? I know that—(laughs)—I know that we don’t agree with them on lots and lots of stuff, but, you know, that—it seems like—and I’ll paraphrase Dan Yergin—I mean, you know, this administration is like we’re begging for oil from, you know, C.A., you know, Caracas, instead of Canada, right? I mean, why are we not trying to get more oil from Canada? They’re our friends! (Laughs.)

Q: Steven Haines. I work on the China desk at Department of State.

You guys are touching on it now, I wanted to know if you could dig a little deeper into what are the domestic policy drivers of inflation, if any. The White House says COVID, Russia-Ukraine war, supply chains. Are there any domestic policies that are either adding to or alleviating inflation at all? Thanks.

GURA: So, DJ, I’ll start with you. And you mentioned a while—you mentioned the money that was flowing through the economy as the result of COVID and the policies that were passed, to that question. What else—is that the principal driver, as you see it, or—

NORDQUIST: Yeah, I mean, it’s definitely—I mean, there’s—it’s never a simple answer, right? Yes, obviously, COVID was a massive exogeneous shock that, you know, nobody could have envisioned. And, you know, that caused labor shortage. I mean, unfortunately, we were paying people to stay home for health reasons. But, you know, that’s why we’re having, like, our labor force participation rate is still, you know, no recovered. You know, but we did have a lot of stimulus. I mean, I was sort of thinking about it. It’s sort of like whack-a-mole, right? Like we have a shock, we do a stimulus, and it’s sort of, like, calms things down. But eventually it’s going to pop up elsewhere. And that’s what’s happening.

You know, I would say the initial package, you know, we had to do something to prop up the economy because it was—the government shut down the economy. So the government had to fix it in some way. You know, and then you had the December 2020 stimulus which, at that point, you know, that fourth-quarter growth, we were positive we were around 4 percent. Like, probably didn’t need it. My suspicion is it was sort of like we’re going to do it now to head off the Democrats doing it. (Laughs.) And instead, the Democrats doubled down on it, you know, in a quarter where we had 6 percent growth. And so now you have, you know, all this excess savings, which has been great. Which cushions, you know, the consumer, you know, except that actually there was a chart recently that showed, like, debt to savings all at the upper end of, like, the—you know, I think it’s the top quartile where most of that money is. So that also makes the Fed’s job harder because, you know, if it’s the top quartile, and they’re sitting on a lot of cash, they will continue to spend.

So and you also see, you know, Tara was talking about, like, there are lags in the system. So even though, for instance, like, wood prices had gone through the roof during COVID for the supply chain, like, they’ve finally come down. And I was doing a project on my house and I was, like, why is wood so expensive? And my contractor was, like, because they’re still working off the supplies from a year ago that cost that much. So it is going to take time for all these things to work their way through the economy.

GURA: Sara, I’ll turn to you. And I mean, something I hear over and over again is that this is kind of a supply-driven—we get into a supply-drive recession. It’s getting to what DJ is talking about there. And then I’m just remembering well, you and I spent some quality time at the stock exchange as all of this was unfolding. We were probably there too long, as COVID spread, but—(laughs)—

EISEN: We were there, like—

GURA: Like until the bitter end, until they closed. Until they closed the stock exchange.

EISEN: End of March. It was end of March, 2020.

GURA: Yes. And we didn’t get—

EISEN: Last two standing.

GURA: Yeah. That’s what we were. Well, I just think, as the policies run a little bit—but to the question in the back, like, where do you see the drivers domestically? And I know you’ve talked so much about how it’s—

EISEN: Well, they had clearly another shot to an economy that was on the verge of reopening and, like, huge pent-up demand.

NORDQUIST: And then kept going. (Laughs.)

EISEN: But two trillion—I mean, if you think about it, like, we were getting used to trillions. But we’ve never injected that kind of money in stimulus. So it’s, like, drunk stimulus.

NORDQUIST: Yeah. And then you had the IRA, and CHIPS, and—(laughs)—

EISEN: Yeah. Well, that’s the other thing. So the Inflation Reduction Act, like, which is just a hilarious name. (Laughter.) Because it’s the opposite, right? Like, it’s a lot of spending on great things, right, because we all want to fight climate—well, maybe we don’t all want to fight climate change. But I think a lot of the executives that I talk to are certainly in favor of that. But it also injects billions of dollars into these parts of the economy at a time where we’re fighting inflation.

So I think that there are a number of reasons. But I wouldn’t really give the Fed as pass on this either, because while the fiscal authorities were spending so much, the monetary authorities were also in, like, punchbowl mode to the extreme. Zero interest rates. Balance sheet of $9 trillion. We haven’t talked at all about the balance sheet. And they overstayed—and they overstayed their welcome in terms of as inflation was starting to rise, you know, transitory, transitory, transitory. It was defensible at the time because we saw these supply chain problems and bottlenecks. But it—like, they—that, combined with the fiscal stimulus, I think that was probably the toxic—the toxic brew.

NORDQUIST: And I would add, I think part of the issue with the Fed sticking with that punch bowl was Jay Powell’s working to get renominated. And so you had this injection of, like, a political question there. Which is, you know, that’s unfortunate. I think that that was part of the issue.

HARIHARAN: And speaking of politics, I know we haven’t brought up the midterms, but I think it’s—

GURA: Oh, yes, they’re coming up. (Laughs.)

HARIHARAN: I was hoping you would diplomatically skirt that issue. But I want to mention it from the point of view of the fiscal, because anyway now that, you know, the pandemic stimulus, the base effects are already wearing off, and most people are expecting that a Republican—a largely Republican Congress, a divided government, is going to make it a lot more difficult to do any additional spending. Even if there were a recessionary situation, we may see what we call a fiscal cliff in the U.S. coming up. And so in that case, while consumers may still have a certain degree of cushion from the excess savings that they had, we are already seeing credit card balances go up. We are seeing lower-income households having, you know, used up quite a bit of their earlier, you know, pandemic cushion. And that’s where the troubles may start, whenever the recession is.

GURA: I know this crowd is eager for its annual visit to the fiscal cliff that happens here in Washington. (Laughter.)

EISEN: And the debt limit.

NORDQUIST: Debt limit!

HARIHARAN: Yes, exactly.

GURA: Yes, debt limit. All the old favorites coming back to haunt us here in Washington. Any more questions? Yes, you.

Q: Thanks. Will Wagner. I work for Bechtel.

I’m wondering about sort of we touched on it briefly but CHIPS Act. And the Biden administration obviously is focused on building up industrial policy and reshoring supply chains, especially in strategic areas. And I wonder, in an environment where now obviously companies are focused on recession, will the incentives that the Biden administration has provided to companies to sort of reshape supply chains in these strategic areas—will they—you know, what does the panel think about whether that will work, and how that sort of interplays with the economic conditions you’ve been talking about?

GURA: Yeah, Sara, this is a tough time, right? You have companies retrenching on hiring. I imagine R&D and capex is going to follow suit. So, yeah, what’s your response to that?

EISEN: Yeah, it sort of reminds me of DJ’s answer about how national security trumps sometimes what are near-term economic cyclical issues. The CHIPS—and so I learned a lot about this. I did a panel at the Aspen Ideas Festival with Pat Gelsinger, the CEO of Intel, and Senator Rob Portman of Ohio, who was a huge champion because Intel’s first big plant was going to be built in Ohio, obviously. But what I learned is that this is a massive national security issue, needing to onshore manufacturing in this country. So from my perspective, speaking with the industry, this is one of those that trumps this, and that was actually a really successful piece of legislation that our government passed.

And that I think that the chip companies, who are extremely cyclical, and all their stocks are getting funneled and all of them are having problems in end markets, and the PC market right now is falling off a cliff and that’s really hurting them, I think that they think about this long-term. Obviously, there’s going to be a lot more capital needed. The government incentives aren’t enough. But you have some interesting deals happening. Brookfield Asset Management just did a deal with Intel to fund a chip plant, for instance, so that they can find these, like, private equity money sources and pools, which I think is there.

And I think there’s a lot of understanding of how desperately the U.S. needs this, because of the more than 90 percent of advanced chip manufacturing that happens in Taiwan, that this is something that is absolutely integral. And companies like Micron and Intel are separating it I think from the—from what they’re dealing with right now.

HARIHARAN: If I can just add to support what Sara says from the point of view of U.S. companies who are operating in China, it sounds like for the first time in many, many years U.S. companies are actually thinking of shifting quite a bit of investment out of China. This was something that we had never heard about. They had always wanted to court the Chinese market and not be on the bad side of the Chinese government. But zero-COVID has happened. The uncertainties related to that have really hurt U.S. companies’ profits in China. And so even at the cost—and especially now that the U.S. government is incentivizing in such a—in such a big way the move back, if not onshoring at least near-shoring, that’s another, you know, double-dip addition to the positivity around chips investment in the U.S.

EISEN: It gets back to the energy conversation too. It’s, like, we need certain industries for our national security. And you ask, you know, what should they be doing? These energy companies are raking in immense profits. Well, they should be incentivizing the energy companies, because that is clearly our national security. And they should be bringing the energy companies to the table to discuss how to do that, and how to do production. And instead, they’re just bashing them, trashing them, and—(inaudible)—them.

NORDQUIST: And, sorry, I just wanted to add—

GURA: Yeah.

NORDQUIST: On the, you know, the China issue. What I think is so interesting is, you know, this is a U.S. policy that’s gone back, you know, decades, where we thought if we embraced China and let them into the, you know, WTO that the taste of capitalism would make them more democratic. And unfortunately, it seems as though all they’ve done is sort of used democracy and capitalism against the democratic capitalists. And I saw this every day at the World Bank. I mean, they knew the rules better than everybody. I mean, it’s phenomenal how they used, like, these multilateral organizations to their—to their own ends. You know, I mean, every country, obviously, has a stake in it. But they were very—it was a very different mindset.

And, I mean, the CHIPS issue, going back to China and Taiwan, I mean, obviously you have this big export control announcement, which, you know, if I were China, I would actually see that as almost, like, an act of war. And it’s a little scary because, you know, I’ve talked to a lot of experts who worked at BIS. And apparently the export controls, there are a lot of holes in it. So even though, like, the media coverage was, like, this is going to end, you know, Chinese, you know, everything, and make them, you know, probably invade Taiwan sooner, in fact, there were a lot of holes in it. So it’s, like, we’ve done—we’ve put a lot of risk out there in terms of, you know, global stability for maybe not exactly what we thought we were going to do.

GURA: A quick follow up. And we haven’t talked in, like, a decade, which I feel sorry about, but when I saw DJ this morning I said, oh, you’re at the World Bank. You must have taken some great trips and boondoggles and what. And you haven’t, because it coincided with COVID. But it got me thinking about Steve Schwarzman of Blackstone was saying he had his first visitors from China to New York like a couple of weeks ago. And that’s so crazy. Here’s a guy that I associate with that country so much, he has spent so much money on the Schwarzman Scholarship Program and all that, and, like, that was his bread and butter, not putting too fine a point on it, but did a lot of business with China. I’m very curious with your background, again, at this multilateral institution, just, like, how much of a deficit that is at this moment?

We’ve talked a lot about the deteriorated relationship with China and where things stand. But just that we’ve gone through this period where there’s been, like, no travel, no business travel to China. The diplomatic relationship, from what I hear in New York secondhand, is not great. And where does that leave us, as we sort of have to sort through all of these issues? And you’re talking about the signals that these policy decisions and legislation are sending. Strikes me as gravely problematic that things are such a nadir.

NORDQUIST: Yeah. And they are. Although, I actually got along OK with my Chinese counterpart, although vehemently disagree—

GURA: Over Zoom though?

NORDQUIST: Well, initially. We actually in the boardroom—the World Bank is the same as the U.N. It’s like a horseshoe. And I actually sat right across from China.

GURA: So you had more than six feet distance, yeah.

NORDQUIST: (Laughs.) Pre-COVID. But, you know, what’s interesting about the World Bank versus the U.N. is that it’s by shareholding. And so the U.S. is the largest shareholder, sixteen nonvoting, you know, U.S. shares, you know, at the board. Sixteen percent shares. Japan is the second-largest shareholder around, you know, a little above 6 percent. And China is slightly below 6 percent, being the third-largest shareholder. And the way that they divvy up things in the Bank is, like, management jobs go to the—like, that’s why the U.S. has the presidency of the World Bank. But, you know, the number two went to a European, because the European bloc as a whole has actually about 40 percent shareholding. But China got the number three position at the Bank.

And you can do a lot of mischief—(laughs)—when you’re the number three person at the Bank. And China’s very masterful at putting its people into key positions, not just at the World Bank but in these other multilateral organizations. And they actually got the presidency of ICAO. I can’t remember, they have, like, four—you know, four different U.N. entities. The one that I think was the most problematic was the Universal Telecommunications Union. I mean, they’re—by the way, like maybe you guys know this—there are, like, 2,000 different multilateral organizations. There’s probably only fifty that are important, and maybe only ten that you’ve heard of.

Yeah. I mean, so they were trying to set the standards for, you know, 5G and all that, based at this U.N. agency. And it’s, again, because both—you know, both parties had sort of been, like, oh, well, if we give, you know, China these important positions, they’ll become more like us. And instead, they used them, you know, against us. So, yeah. No, I mean, and, you know, I feel sorry for the guy at the China desk at the State Department. You must not sleep. (Laughs.) So yeah. I mean, it’s really difficult. And it’s, you know, I don’t know what the solution is. Because it really has just come to a head. And, you know, they’ve come out publicly and said, like, they want to be the number-one economy. You know, so they’re trying to displace the U.S. dollar as the world’s reserve currency. I mean, they’ve got—they’ve got plans. (Laughs.)

HARIHARAN: And if I may just on this also—

GURA: Yeah, go ahead. Quickly, if you would, yeah.

HARIHARAN: Also just one last minute on emerging markets, given that, you know, this is a big subject at the annual meetings. Given that China is a creditor, but a rather unreliable creditor for many of the emerging markets, this is a biggest issue. Until and unless China provides, you know, debt relief and really coordinates with the multilaterals, like the World Bank, like G-20, in providing relief, I’m afraid that a lot of emerging markets also won’t really be able to get out of their pandemic doldrums.

NORDQUIST: Right. And they’re not part of the Paris club either, so.

GURA: There you go. Last question here. I know we’re short of time. Sara, let me ask you. We’re in this—this plenary is happening at a great moment because there’s been so much economic data released, when we’re looking ahead to CPI data at the end of next week. There was this question at the presser to the chairman about if inflation’s entrenched, and what he looks at for indications of that. Let me just ask you what you’ll be looking for in those numbers when we get those CPI data. Of course, this isn’t the preferred measure that the Fed uses, but what’s it going to tell us? And how should we be looking at those numbers when they come out?

EISEN: Yeah. I know that PCE is always the preferred measure, but they’ve—it feels like they’ve been targeting the CPI a lot too, because they made that major policy move from fifty basis points to seventy-five after a very hot CPI report. So within that report I’ll be looking at food prices, because that has been a persistently climbing measure. And it’s actually where we spend a bigger part of the wallet even than gas prices, even though gas prices get more political attention and maybe more psychological impact. But food prices are a huge problem. I cover a lot of the consumer staple food and beverage companies. They’re still raising prices. So those numbers continue to go up. They’re raising prices because of cost inflation. They’re raising prices to boost their profit margins.

I’ll also be watching rent, which has been extremely problematic and factors in very prominently into the overall inflation number. You know, the housing—we didn’t even talk about the housing market. It’s fallen off a cliff. It’s in recession. Mortgage applications are at the lowest since 2015. So that is one place the Fed policy is working. And home prices are starting to finally come down. But it’s pushing everybody into the rental market. And now rents are, you know, not coming down. So they need to come down because that’s, obviously, huge for the cost of living. And haven’t really seen any evidence of that.

And then just broadly in the services sectors, because that’s where the spending has migrated post-COVID, away from the goods sectors, where you are—you know, and apparel should be coming down, right? How many retailers have we talked to that are marking down products because all the flooded supply—you know, like, if you buy an air fryer now, you can get it for free practically, because everyone bought an air fryer in COVID.

NORDQUIST: Christmas!

GURA: Walk, don’t run.

EISEN: (Laughs.) And they over-ordered all the air fryers, and nobody wants an air fryer anymore. So—

GURA: They are great, I hear. I don’t have one.

EISEN: But also, you know, like comfy clothes. Really, like, discounts. Athletic apparel, discounts. So we should start to see it in those places, and electronics as well we’ve seen PCE demand. So continued disinflation there. And you look for the hot spots, which you know that the Fed is looking at on Thursday. And then we’ll continue to watch in the jobs data on wages, because clearly the jobs market is really hot. And I think that’s a big part of it.

NORDQUIST: The Fed keeps saying that they’re, you know, going to be data driven. Sort of my question is, well what we you doing before? (Laughter.)

GURA: There’s a lot of punch to be drunk, I think. Sara, thank you. DJ, thanks to you. And, Tara, thanks to you as well. Thanks to all of you for your good questions as well. And this will be available in video form on the CFR website. The transcript will be there as well. Thank you very much. (Applause.)

(END)

RUBENSTEIN: Welcome, everybody. I’m David Rubenstein. I’m the chair of the Council on Foreign Relations. And thank you all for coming. And I assume everybody here is a term member. Is that right? Right? OK. OK. How many of you were surprised when you got elected as a term member? Anybody? (Laughter.) OK.

Well, I should just tell you, when I worked in the White House under President Carter, before all of you were born—(laughter)—when we lost the election to Ronald Reagan, someone in the White House National Security Council staff said to me: You should become a term member of the Council on Foreign Relations. I said, OK, what do you? And you fill out the form. And then a couple weeks later I was told I got turned down. So, you know, can rise up to be the chairman even if you got turned down as a term member. (Laughter.) But all of you—all of you are members. And congratulations and thank you. And I hope you had a good last night and today at the Term Member conference.

The conference term members are named after Stephen Kellen, because Stephen Kellen was an active member of the Council. And his family, after Stephen Kellen passed away, decided to name the term membership program after him, because he’d been a longtime supporter of the Council. And it was his view that we ought to do much more to get young members in the Council. And so you all are very young. I see essentially no gray hair anywhere there. Usually when I’m seeing Council members, I see a lot of gray hair like mine.

But we have a very good program for you today. Let me just set it up for you and then we’ll have the program. So we wanted to talk a little bit about something very important, which is space. And all of you, obviously, have been watching some of the things that are coming back from the Webb Telescope. Mr. Webb was the NASA administrator under President Kennedy. And he was the one who worked with President Kennedy to get a man on the Moon. And it ultimately happened after President Kennedy passed away. But that was something that James Webb did. And now we’re all seeing the pictures that are coming back, which are just spectacular. And NASA has been very involved in that.

Our speaker today—we have two speakers, but let me introduce the first one, who’s a former member of the Congress and I got to know him when he was member of the Senate. Bill Nelson is from Florida. Graduate of Yale, University of Virginia Law School. He was elected—had six terms as a member of the House of Representatives. And during one of those terms, he went into space. He was on the Columbia Space Shuttle and went around the Earth ninety-eight times. And did twelve experiments, if I recall the number, medical experiments and so forth, and came down. He was only the second member—living member of Congress at the time who had ever gone into space.

Subsequently, he was elected three terms as a United States senator. And after his third term, he was appointed no long after to be the NASA administrator by President Biden. And he’s how the administrator of NASA. And in that role, he’s done a spectacular job. And he and his wife are both here. Grace is here. Grace I’ve gotten to know over the years as well. And so we’re very honored that you’ve come, Bill, and thank you very much, Grace, for coming as well.

They will have a—Bill will have a conversation in a moment. Let me just introduce the person who will do it. And then Bill will come up and give you some brief remarks. Ché Bolden is going to have a conversation with Bill Nelson. Ché is the son of a Marine. He father was in the Marines for thirty-six years. And Ché, and that is his name, Ché, is in the Marines for twenty-four years. Also a graduate of the Naval Academy. And his father was a NASA administrator as well, appointed by President Obama. And he served for eight years as the NASA administrator in the Obama administration. But more significantly, he was the pilot of the Columbia Space Shuttle when Bill Nelson was on it. So there is a connection between them. And they’ve known each other for quite some time.

So after Bill gives his opening remarks, they’ll have a conversation between the two of them. I’m sure you’ll find it quite interesting. Thank you all for coming. And I want to thank the Council for organizing this. Thanks very much.

Bill.

NELSON: So when you look out the window of a spacecraft, there’s actually an effect that occurs on a space flier. It has a label. It’s called the Overview Effect. And what you’re seeing is from a totally different perspective your home. As a politician, I looked. I became more of an environmentalist in space, because I could see all of the ecosystem at once. I could look at the rim of the Earth and see the thin film that is the atmosphere that sustains all of our lives. From the political standpoint, I looked and I didn’t see racial division. I didn’t see religious division. I didn’t see political division—something that bedevils us here as Earthlings. What I saw was we are all in it together.

And that has informed my public service for forty-two years of elected public service. I did not seek this position. As a matter of fact, I’d recommended the lady who is our deputy, Pam Melroy, Colonel Melroy, an astronaut commander. But Joe Biden, who I knew fairly well in the Senate, had other ideas. And I just say, I should not be allowed to have as much fun as I am having. (Laughter.)

But I want to take you back. I want to set the frame for you. It’s interesting that David in his comments even referred back to President Kennedy. And there are defining days in America’s story. And one of those defining days that they define change, they fill people’s hearts, they set us off in a new direction and imaginations soar. And one of those defining days was sixty years ago. And it started with seven famous words that reverberated throughout Rice Stadium as President Kennedy spoke. “We choose to go to the Moon.” He made it very clear that it was going to be quite an epoch. And he said, “We choose to go to the Moon and do other things, not because it’s easy but because it’s hard.”

He was at a time of sociological upheaval. The Vietnam War was just beginning. The 1960s and all of the difficulties in the race, the beginning of the civil rights movement. But he tapped into something with those seven words that was also a part of the fabric of this country. And it was the can-do spirit. And it’s a spirit that drives us to do what we do at NASA now, to make the impossible, possible. That space program at that point propelled us to the forefront of culture and consciousness. And now we are the stewards of that historic effort.

And what I wanted to concentrate—since this is the Council on Foreign Relations, I wanted to concentrate on the new NASA, the new components. The fact that NASA is now a powerful instrument for our United States foreign relations. You all are familiar with the term “soft power.” It’s conveyed by accomplishments made possible because of work done with likeminded partners. And what we’re doing is proving that scientific discovery strengthens democracy and strengthens diplomacy.

So let me give you some examples. Well, as David mentioned, the telescope. It’s out there, a million miles. It’s on the opposite side of the Earth from the Sun. it’s always looking at the dark of the sky, as it, along with the Earth, revolves about the Sun. And it is bringing us new discoveries. It is going to answer questions that we don’t even know what the questions are. And in just the first few frames of pictures that came in, we are seeing things that are just unbelievable. We’re seeing the clarity of the stellar nurseries, the birth of stars. We’re seeing the death of stars. We’re seeing galaxies that we’ve never seen. We’re seeing stars that we’ve never seen. We are, in fact, with this telescope, looking back and capturing light that has been traveling for 13 ½ billion years.

Now, just that concept blows my mind, because light travels at 186,000 miles per second. And it’s been traveling for 13 ½ billion years. And we know, because of a NASA scientist who got the Nobel, Dr. Hansen, the universe is 13.8 billion years. So just a few million years after the birth of the universe, we are capturing that light and starting to see the formation of a first galaxy, as those gases are swirling around. Technologically, it’s just—it’s mind-blowing. Once the French rocket, international, the Ariane 5, put it in perfect position, there 344 things. It was tube city. But they all worked. And we are getting the benefits of it. And fourteen countries have collaborated and been our partners in this telescope.

OK, let me give you another example. Just recently, no doubt if you pay any attention to the news you probably heard about hitting an asteroid. Now, maybe you were interested in that because you saw the movie Armageddon, or maybe you saw the movie Don’t Look Up. It’s a fascinating thing, by the way, as our UAPs, namely, AKA, UFOs, of which we’re all four feet into that one too—from a scientific point of view. (Laughter.) By the way, had I gone to a Halloween costume party, I would have gone as an alien. (Laughter.)

So here’s this asteroid out there. It’s about the length of football stadium. And it’s seven million miles out there, as it passes its closest point to earth. But we have launched months earlier a spacecraft that has gone 100 million miles and then zeroed in on it and hit it bullseye. The point of this was to see, since it is orbiting around a larger asteroid, and then we could look with our telescopes—and international telescopes—if in fact we moved it. We did. We slowed its orbit by 32 minutes.

Now we know we can change the orbit or trajectory of an asteroid if we found a killer asteroid on the way to Earth. And that’s important, from the standpoint of planetary defense. And we had international partners, because on that spacecraft was an Italian CubeSat, that was a camera. And as the asteroid—as our spacecraft approached the asteroid, it ejected the camera. And the camera filmed it all the way down into impact.

Give you another example. Earlier today I had met with the head of USAID, our former ambassador to the U.N., Samantha Power. And we signed a new agreement between NASA and USAID. And most people don’t know this about NASA, but we are the point of the spear on climate change. Where do you think all the data comes from? (Laughter.) It comes from our spacecraft. And even though some of those spacecraft we turn over to agencies like NOAA, the National Weather Service. Why is this important to USAID, and the projection of soft power there all of the good, with the good that we do for foreign countries and peoples that are in need?

Because we can help predict a coming storm. We can help predict upcoming droughts. We can even tell them the moisture content of soil in a farmer’s field, to suggest what that farmer should plant. We’re putting up an instrument in just another month that’s going to tell us the elevation of freshwater for the first time—lakes, rivers, streams, ponds—in Africa that in times of drought the cattle herders don’t know where to go to water their herds. That agreement was signed today. Again, another part of NASA’s international outreach.

And then, I’ll just mention one more. In just a few days, on Pad 39b at the Kennedy Space Center, we’re going to launch the largest rocket ever. More powerful, by far, than the Saturn V that took us to the Moon fifty years ago. This is a test flight. We will stress it and test it because we want to make sure that it is safe when we put four humans on the top in the spacecraft. And that is an international partnership as well. And you will see when you look at the pictures of the rocket on the pad, and it was locked down on the pad last night. It rolled out last night. There’s the NASA emblem and right underneath it is the ESA emblem, the European Space Agency. Because they provide the European service module that gives the life support systems to the spacecraft, which is the capsule which is called Orion.

And so gone are the days when space was only explored by a few nations. Space is really active now. In the past decade, we’ve seen a huge explosion of activity in space. And it’s clear that countries are understanding the opportunity that space presents. In other words, they understand space is the place. (Laughter.) In this new era of space exploration, every advancement is not an achievement just for one country, but for all of humanity. And space unites us. And NASA’s success is requiring cooperation with both longstanding and new partners. And I might mention, and I’ll reserve this until your questions, but you ought to ask us about how do we get along with the Russians, given the fact of what Putin is doing, inexcusably, in Ukraine.

So we want to go forward transparently. We want to go forward peacefully. We want to go forward exploring together. And this is a new generation. The past was the Apollo generation. This is the Artemis generation. This is a new generation of scientists, engineers, mathematicians, technicians, and astronauts. And this is going to take us to establish a new community on new cosmic horizons. So I want to close by quoting Carl Sagan’s 1980 book, Cosmos. “Exploration is our nature. We began as wanderers, and we are wanderers still. We have lingered long enough on the shores of the cosmic ocean. We are ready, at last, to set sail for the stars.” This time, we’re going to do it with our international partners. Thank you. (Applause.)

BOLDEN: Good afternoon.

AUDIENCE: Good afternoon.

BOLDEN: Thank you. Thank you. Thank you. (Laughter.)

NELSON: This is Ché. I knew him when he was a little boy. (Laughter.)

BOLDEN: This is a true statement. We’ll try to avoid some of those stories. (Laughter.) Let me do my obligatory stuff first, because otherwise, you know, someone might—I am Ché Bolden. I am the president and CEO of the Charles F. Bolden Group. It is a leadership firm focused on the global advancement of science and security. I’ll be presiding over today’s discussion. The assembly of leaders today consists of Council term members joining us here in Washington and online.

And with that, we can then get into a conversation. So I have known this gentleman since 1985. Who was born before 1985? OK. All right. I’m impressed. I’m impressed. (Laughter.) I think one of the things that left me an indelible impression way back then was the graciousness of an elected official and his fantastic family, and the way they came into the NASA family and integrated very well. And also, by the way, did not miss a vote, if memory serves correctly. Is that accurate?

NELSON: I missed a lot of votes. (Laughter.)

BOLDEN: Hmm, OK. Well, that was the story I was given. We’ll get into some questions because we could sit here and ruminate all day on the past. It’s very appropriate that you start out talking about President Kennedy’s 1962 speech because, quite frankly, if I’m being candid, that was the last time someone was able to fully articulate the beauty of space. As we start to get into what is, quote/unquote, “the final frontier,” where the commercialization of space is starting to catch up to what large governments and institutions have done, the one area that we probably can improve upon—and you’re definitely the right guy for the job, is to improve that story. And so when we think about what he said about, “we choose to go to the Moon, not because it is easy but because it is hard,” what is today’s narrative that people can get behind to understand why space exploration is so important?

NELSON: Well, I think there’s a fascination with space among particularly young people. But I find it at all ages. And particularly when you do fantastic things, and it’s an attention capturer. You can’t hit an asteroid, and move it, and that not grab somebody’s attention. Believe it or not, I’ve asked people and they didn’t know what I was talking about. I was surprised. So I think it is—it’s relevant to us today because it is part of who we are, as I tried to state in my comments. And it’s part of the international who we are. There are others that participate that are not transparent and that do it more just for their secretive purposes. We have a lot of secrets, obviously, as well, but for defense purposes. I’m talking about the civilian space program. And I think that’s what has helped. And I don’t know that this is absolutely true, but it’s close. The most recognized symbol, corporate or government symbol worldwide, is the New York Yankees logo that you see on baseball hats. The second most recognized symbol is the NASA symbol.

BOLDEN: So that symbol is emblazoned around the globe. I actually had the benefit of going to Nairobi, Kenya in the spring to a Space in Africa Conference. And the level of admiration and aspiration that was there was apparent. But one of the things that came out was translating space exploration to the needs of a citizen of any African country, same with Southeast Asia, Asia, South America, is translating the importance of what we get from space exploration into something that they understand. To date, you are one of roughly 614 people to ever go out on top of the Kármán line and to go into space. But there’s 7.9 billion other people out there. How do you think we can tap into their interest in space and, more importantly, their innovative spirit and their creativity to get them to be part of the conversation and the effort?

NELSON: Well, other than what I’ve already mentioned, what we can do is to do some very significant things. So, for example, on board the International Space Station, which by the way, to give you a concept of the size, it’s from one goalpost in a football field to the other. That’s how big the International Space Station is. And on board we are doing scientific research, for example, pharmaceutical research. The drug Keytruda, that has been a miracle drug. It’s the one that turned Jimmy Carter’s brain cancer around. He had three months to live. And look at the productive life that he still has. Keytruda was taken to the zero gravity of orbit, and they learned a new way of making it so they could make it more efficiently on the face of the Earth.

Give you another example. Stem cell research. It holds great promise for a lot of diseases. The problem is, you’ve got to have millions and millions of stem cells in the application. On Earth, you grow them and they all float down, and they clump together and a lot of them die. Take them to zero G, now they float and grow. And then they’ve got some process, maybe freezing I don’t know, that then they can bring them back into gravity and you’ve got a lot more stem cells that you can use. And that’s just two small examples with regard to cancer and disease.

Now, sooner or later, there’s going to be a breakthrough—a major breakthrough that’s there’s going to be something so that that kind of application. But in the meantime, look what I was talking about in this program with USAID. Look, that same availability of data, you can go to the farmers in the Midwest, and they can know what to plant here, and what to plant here, because we can tell them that crop is diseased, this one needs more water, put that crop there. They become more efficient. Our food production is greater. What about forest fires? We can tell you from our spacecraft—we can tell you if those trees are diseased. And if they’re diseased, they’re more susceptible to forest fires when it gets around to fire season.

So the applications of what’s happening in space are here on Earth. Now, I’ll tell you another one, and it’s in every one of your pockets right now. It is a camera on a chip in your cellphone. That camera was developed by NASA for photography from orbit. So I think we just have to tell the story.

BOLDEN: And that is one of the things that we’re all, I think, collectively trying to work on. I know your affinity for climate and discussions around the climate, but I think there are some lessons we can take from some of the climate discussions up till this point. It was somewhat farcical when those who were responsible for communicating climate change to put it into the context of the Earth. As you highlighted a little bit earlier, the Earth is pretty old. It does a good job of healing itself. And so the discussion around climate really should have been focused on something different. What you just did with respect to space is probably what the climate folks should have done. And that’s relate it to people.

So you are about to embark—I’m sorry—you’re leading an organization that is about to embark on a phenomenal effort, Artemis. Artemis is intended open the aperture on space exploration in ways that we just haven’t thought of yet. It’s going to be the first time you put a person of color, a woman, on the surface of the Moon. Why the Moon? How does that apply to the rest of humanity?

NELSON: Because this time we’re not going back to touch down and stay a few hours and come back. We’re going to back to stay. We’re going back to learn, to live, to work, to develop, to innovate, all for the idea that we are going to venture further out into the cosmos. And Mars is the target first, but we don’t really have the technology to sustain human life all the way to Mars and back at this point, because it’d take us six, eight months to get there. Because the planets would be out of alignment, you’d have to stay on the surface maybe a year, year and a half. And then come back six or eight months. We can’t sustain life like that.

But if we can develop new propulsion, get there faster. If we can suddenly learn how to grow agricultural crops, not necessarily just potatoes. (Laughter.) Some of you saw The Martian with Matt Damon. And so these are the things. And what is our destiny as a human race? Is it just to stay here or is it to venture out? Now, speaking of venturing out, in case you don’t ask me, I’m going to ask the question. Do I believe that there’s life out there? Yes. And I’ll tell you why, because the James Webb Space Telescope has taught us how big this universe is. And way about a hundred years ago, the scientist Hubble suddenly discovered that it’s not just one galaxy that we’re a part of. That there are, now we know, billions of galaxies, each with billions of stars.

Now, in something that big, that’s as big as 13.8 billion years ago light traveling, and expanding, is there the possibility that there’s another Sun, star, with planets that are similar to Earth, revolving about it, with a habitable atmosphere? We’ve already identified thousands of exoplanets. This telescope just saw one that’s a gaseous one, but we identified that there’s carbon dioxide in its atmosphere. You find a stony planet, read Earth, with carbon in the atmosphere, and suddenly you have the makings. Do I think, in billions of universes, that there is life out there? You bet I do. We’re just scratching at the surface. We’ve got a rover on Mars right now that is digging around and digging, drilling cores that we’re going to bring back in 2031, and we’re going to examine from that dry lakebed at the base of a river coming into the lake, is there any evidence in that core that tells us that there was life there millions of years ago? So I think there’s life out there.

BOLDEN: One of the ways I think that will enhance your ability as the administrator of NASA to do that is your partnerships with academia, your partnerships with the commercial sector, and those international partnerships you mentioned a little bit earlier. All of those revolve around one basic concept. And that’s the business of space. For those of you who are in the Twittersphere or on social media, you might think that there is this inflection point where commercial space is overtaking NASA as the lead for space exploration. I think that’s probably not true. However, I would like you to kind of explain to how NASA continues to lead the advancements that are happening in commercial and private space, in order to get to those objectives that you just described.

NELSON: Well, I had a hand in this when Ché’s father was the administrator of NASA. Bipartisan—and, by the way, NASA is bipartisan—Kay Bailey Hutchinson from Texas, Republican, and I, we would alternate chairman and ranking member of the Space and Science Subcommittee of the Commerce Committee. And we sponsored the bill in 2010 that set NASA off on a course that led to Ché’s question. One course is the government course, which is what the Apollo Program was. That’s what all the other programs had been up to that point. The other is a commercial course.

And that’s where we have these commercial partnerships. And they have paid off big time. For example, in the competition that we wanted for a rocket and a spacecraft to take crew and cargo to the International Space Station. And after we shut down the space shuttle, we didn’t have a way of getting there except on the Soyuz rocket. Until, successfully, SpaceX has done their Falcon 9 and their spacecraft Dragon, and now routinely transports crew and cargo. And oh, by the way, we did a deal, even as difficult as it is with Russia, we did a deal where we integrated crews. We had a couple months ago an American astronaut fly with the Russians on the Soyuz. And just a few weeks ago on SpaceX, from Pad 39a at Kennedy Space Center, a Russian lady cosmonaut was part of the crew.

Now, why? Because we both have to operate the Space Station. We built it together. They have the propulsion on the station. We have the electricity. And that’s the relationship that continues in a very professional manner. And we haven’t missed a beat ever since Putin did these dastardly things that he’s still doing in Ukraine. Will that last? Well, back in 1975, in the midst of the Cold War with the Soviet Union, an American spacecraft and a Soviet spacecraft rendezvoused and docked in space. And those two commanders, Generals Tom Stafford and General Alexey Leonov, became close, close friends. So much so that Tom adopted two Russian boys, arranged by Alexey. And they are out of college now. And Alexey died a couple of years ago, and who delivered the eulogy at the Moscow state funeral, which is a big deal for cosmonauts? General Tom Stafford. So.

BOLDEN: That is a great segue to an unscripted question. Which is: In 2011, I believe you still had a hand in this, there was some legislation that was written that prohibits you from doing certain things today. And that’s the Wolf Amendment. You can avoid this question if you’d like. However, what do you think of the Wolf Amendment? Should it be amended or repealed?

NELSON: Well, right now all the circumstances with China—and what the Wolf Amendment does is it says you can’t have any relationship with the Chinese unless I, as administrator, sign off that it is not harmful to national security. And so virtually, we’ve invited them to do things with us. The one thing that we do—have done is deconflict some of our spacecraft around Mars.

But, for example, last night the first stage of their rocket that put up their third element of their space station, which was a few days ago. They don’t reserve for enough fuel to have a controlled reentry. So this big hunk of metal is coming back into Earth. And it is so big it's not going to all burn up on the reentry through the atmosphere. Fortunately, it broke up in two pieces and fell in two different parts of the Pacific Ocean. But a previous one, also uncontrolled, we thought it was going down in Europe, and then we thought it was going down in Saudi Arabia. And fortunately, it ended up in the Indian Ocean.

What’s even worse, they wouldn’t tell us the coordinates. They wouldn’t give us the information of where it’s coming in. And that’s happened three times with that big rocket. Now, that’s when I said we’re going to go forward. In my remarks over there I said: We’re going to go forward peacefully. We’re going to go forward transparently. Well, there are some folks that don’t do that. And they’re one of them.

I’ll just tell you another example. I was at a cocktail party about six, eight months ago here. And the Chinese ambassador, the new one, found out I was there. And he made a beeline for me. And so we started talking. And I told him basically what I told you. And he said, well, what can we do? I said, I will give you a specific example. What you ought to do is you ought to share this information. But what you can do is you returned a sample from the Moon.

We returned samples from the Moon fifty years ago. We made it available to the international community. You don’t have to make it available to us. You should share it with the international community. Nothing. And that was quite a few months ago. So different strokes for different folks. (Laughter.) But it’s going to be—you know, fool me once, shame on you. I’m not going to let you fool me again. (Laughter.)

BOLDEN: Well, as many questions as I have, I think I need to go to more talented question-askers. And at this time, I would like to invite term members to join the conversation with their questions. A reminder that this hybrid meeting is on the record. So your questions will be broadcast everywhere, to include the Twittersphere. We’ll take our first question from here in D.C. I’m going to go all the way to the back. The gentleman, you, turn around. There’s a microphone for you.

Q: Good afternoon. Michael Blake. Great to see you.

And quite frankly, it’s inspiring to see a brother up there right now. Stating the obvious. And this is relevant to the question. We advise a group called National GEM Consortium to help Black and brown students get master’s and Ph.D.s in STEM. It would be helpful to hear what is the pathway to make sure that more young people of color are actually a part of what’s happening with NASA? And equally, the pipeline to make sure that more of our entrepreneurs of color can actually learn about the opportunity as well?

NELSON: Well, NASA is a good example. When we started, for example, with astronauts, they were all white males. They were all test pilots. And they all had to be a certain height, not more than, because they had to shimmy into a little space capsule. Now, particularly starting with the class of ’78, the new class of astronauts, the diversity is the watchword at NASA. So his dad, my pilot on the 24^th flight of the space shuttle, was in the class of 1980. The first women were in the class of ’78. Sally Ride was a part of that class. The first Asian Americans was part of the class. The first African American to fly in space was a part of that class. And so it is, all the way up to the present.

I’ll give you an example. Now you don’t have to be a test pilot to be an astronaut. And I dare say that I think we’re in this last class—I haven’t counted them up—but I wouldn’t be surprised if it’s not 50 percent women. And one woman, although she is a pilot, was an oil rigger. So you’re getting lots of diversity. And that is across racial lines as well. That is particularly true under Joe Biden’s instructions to all of his appointees. He wants our government to look like America. And we’ve done that, and we continue to try to do that every day at NASA. Thus far, I have appointed two center directors. It so happened that I appointed the best candidates. One was a white woman at Kennedy Space Center. And the other one is the first Black woman center director, at the Johnson Space Center. And they were the best candidates.

BOLDEN: To that end, you spoke of international partners a little bit earlier. What efforts are there to bring in some of the nontraditional, emerging countries from Africa. Where’s Ezanay (ph)? Is she around?

NELSON: Yeah. Ezanay (ph) is here. I saw her. I saw her.

BOLDEN: She’s here somewhere. Ezanay (ph) always talks about this component. There are partners on the continent, of the fifty-five or fifty-four, depending on who you talk to. How do we get them more involved?

NELSON: And, by the way, let me piggyback onto the last question. We’re making a real effort to get out to those—to recruit and to get interested and to offer grants to that have never had that at NASA. So for example, rural America. They might have been in a desert when it came to NASA paying attention to them. Those are the kind of outreaches that we’re talking about.

Now, you’re talking about outreach—

BOLDEN: To emerging countries.

NELSON: So this morning Samantha Power. So we signed this agreement. We’re trying to help USAID. We have been helping them for some period of time. But we also have a cache internationally that as a representative of the U.S. government we can get invited when other parts of the government might not, simply because of the fascination of space. And particularly where you can do something for the local people, especially if it’s a third-world nation, that you have done something by showing them where water is, or discovered a new source of water, or how better to protect and plant your crops. Something that is real-world experience for them. That’s important and we’re trying to do that.

BOLDEN: I would encourage you all to look up SERVIR. It’s the Spanish, “to serve,” SERVIR. That’s what the administrator is referring to.

The next question we’re going to take from online.

OPERATOR: We will take our next question from Benjamin Schmitt.

Q: Hi, Administrator Nelson. Thanks so much for your remarks.

I can say, as a CFR term member who’s also a cosmic microwave background researcher at the Harvard-Smithsonian Center for Astrophysics, the intersection between critical space technology and foreign affairs you outlined is really emblematic of the sort of anticipatory space diplomacy we need as a nation, working with partners and allies going forward. With respect to your references to Russia’s illegal invasion of Ukraine, at the outset of the war in February, President Biden announced sanctions and technology export controls that would both degrade the Russian space industry, “including their space program,” end quote. Can you assess how that effort is going, especially in light of mitigating continued threats by Russian officials in recent weeks that they may target commercial spacecraft over Ukraine?

NELSON: We have to make that assessment day by day. And we make that assessment so that it won’t go into their military program. But if it is a part of technology that is directly related to our civilian space program, i.e., running the space station together, then we make an exception. And we go through all the procedures and the rules of the United States government. We’re not making this decision in isolation. This runs up through the Department of Defense, through the National Security Council, of which members of the National Security Council staff are here present. And we get—we get the greenlight from all of them. But we have to make the case that this is for the civilian program and not something that’s going to bleed off into the military.

BOLDEN: Right here.

Q: Thank you so much for being here. Kate van Dam, I work at In-Q-Tel.

A lot of the commercial space ecosystem, especially in the younger start-ups on that side, are actually doing soil analysis, greenhouse gas, or even looking to push out to in-space manufacturing. How do you at NASA, especially working with a limited budget, look at passing the torch through collaborative efforts with these young start-ups that are coming up, while you explore and push the bounds of space exploration?

NELSON: We have a huge effort of outreach in STEM to try to get more and more kids involved in STEM. We’ve got some designated STEM day that’s coming up. And I just did a video today with regard to that. We had this outreach into areas of the country that otherwise would—I think we’ve spent a space grant to the University of Wyoming. You don’t typically think of areas like that—but we don’t want to miss the kids that might really be interested in that. We have a huge intern program. And they are interns, usually in college. The are paid. And the result has been, in the past, that 30 percent of our interns then end up coming to work for us. And this is with a competitive marketplace where they get paid a lot more because of their skills out in the commercial community. So I think it’s probably reasonable to think that that percentage of 30 percent’s going to increase.

The enthusiasm among young people is not only obvious, it is contagious. I went out to see the Goddard Space Center a year ago. And they assembled a bunch of the interns for me. Well, their eyes are about as big as saucers, and they’re just so enthusiastic in what they’re doing. And they had those interns working on these programs like the James Webb Space Telescope.

BOLDEN: I think we will have time for at least one, maybe two more. So I’m going to go on this side of the room, right here. Right on the aisle, right there.

Q: Thank you. Frank Broomell. I’m with Senator Gillibrand’s office.

DOD set up its new UAP office this year, named a new director. NASA announced its UAP study that I think the members were just named recently. How do you see—while those two efforts are separate, and both are grounded in sort of scientific method and that rigor—how do you see those two efforts collaborating or overlapping in any way?

NELSON: To be determined. I actually pushed this project because—in the midst of a lot of skepticism. But I thought that our being a scientific research organization, that we could look at this phenomenon—and, by the way, I’ve talked to those Navy pilots that in 2004 saw that phenomenon. They looked at it. It was there, and then suddenly it was there. And they know they saw something. Now if it’s real—and I say if, we don’t know. But if it is, I sure hope it’s not an earthly adversary. I hope it’s something else. But I wanted to look at this for NASA through the scientific lens.

And so we just announced a couple weeks ago a blue-ribbon panel of really some highly credentialed scientists. One astronaut, Scott Kelly. And they are to look at this problem and, if they need to, to employ NASA sensors, and see if they can give us some idea—and to work with the Department of Defense, who is doing the overall program that you’re talking about. Did Kirsten—did she sponsor that? By the way, I spoke to her yesterday. (Laughter.) Tell her that I love her. (Laughter.) Especially around appropriations time. (Laughter.)

BOLDEN: I am going to squeeze in one more, and then I’m going to exercise my authorities as the presider to do some rapid-fire round. So you get to ask the last question, with the sunglasses on your head. There you go.

Q: Hi. Fayrouz Saad. I’m the director of public engagement at USAID. So I’m really excited about the partnership with NASA.

So my two-and-a-half-year old has a NASA sweater. And I bring this up because it’s very clear that NASA has a brand that people recognize. And so to build off the end of your last comment about around appropriations time, how have you found that has played a role in support for NASA and its programming? Because it’s clear you guys are doing a lot of really cool work. And I think at AID we struggle with this, right? People don’t understand AID. We don’t have a brand. And it’s a lot harder to find the support for the work that we do, amongst an American audience especially.

NELSON: Well, I wish the public favorability of NASA translated into favorability from the Office of Management and Budget. (Laughter.) However, they have some people in OMB that do not like the human space program. And it’s a dogfight. And fortunately, the president supports us in what we’re trying to do. But sometimes that information doesn’t always get down to where they’re formulating the budget. And then you have to cross swords. So I wish it were as simple as you said, because of our brand that—the good thing about it is, I think on the Hill we are supported by both Rs and Ds. And so—plus, it gives me an opportunity to go back and harass some of my old buddies. But I think we get a much more favorable reception there, because of our brand, because those representatives of the people are hearing from the people. The OMB has a different role. They’ve got to be sticks in the mud. They’ve got to hold the line on the budgetary spending. And that’s where we just have to make our case.

BOLDEN: All right. We have one minute for six rapid-fire questions. Are you ready?

NELSON: Yes, sir.

BOLDEN: First one, favorite space moment across history.

NELSON: Across history?

BOLDEN: Across history.

NELSON: Well, it’s a combine between Neil stepping on the Moon. I was a lieutenant. And I was actually on leave. I’d gone beyond the iron curtain. And I got up in the middle of the night to watch it on a grainy black and white TV. And the other tie with it would be looking out the window of the spacecraft.

BOLDEN: That kind of answers the second which is, which I was going to say which was your favorite space moment from STS-61-C? Same answer?

NELSON: Other than looking out the window, the relationship with the crew, which was headed by Hoot and your dad.

BOLDEN: Number one development you hope we achieve prior to 2025?

NELSON: Twenty-five?

BOLDEN: That’s really quick. (Laughter.) We’re ambitious.

NELSON: I hope in late ’25 we are landing the first woman and the next man on the Moon.

BOLDEN: Astros or Phillies?

AUDIENCE: Phillies!

BOLDEN: Hey!

NELSON: Believe it or not, as someone who grew up playing little league, I have not watched one World Series game.

BOLDEN: OK, so a quick supplantation for that, are the Eagles going to go undefeated? (Laughter.)

NELSON: I think the Eagles are going to be in the Super Bowl.

BOLDEN: Last question. What is Bill Nelson doing post-NASA?

NELSON: Well—

BOLDEN: Grace is right there. (Laughter.)

NELSON: I don’t have an answer for that. I really don’t.

BOLDEN: OK. Well, thank you all for joining today’s hybrid meeting. And thank you very much, Administrator Nelson. It’s been an honor and a privilege on my behalf. Please note that the video and transcript of today’s meeting will be posted on the CFR website. Next, we will have a short break, followed by your afternoon breakout sessions. Thank you for your attention. (Applause.)

(END)