The year for the market, and you add in the fact that many folks are worried about the fed and whether or not the fed is going to raise rates later this month, and you get a nest investing nervous investing public as we head into Labor Day Weekend anthony who better to have than a true giant in the business world, David Rubenstein, the cofounder and coceo of the private equity powerhouse, Carlyle Group. David, thank you for joining us today. My pleasure to be here. Anthony we typically get a recession every seven years in the u. S. Economy. It seems like we havent had one in longer than seven years, and were about to head into a next president ial term. How would you advise the next president , and where do you think the economy is right now, sirsome. Just to make it clear, on average weve had them every seven years since world war ii. The last recession ended in june of 2009. The next president of the United States will have to face a couple of issues. Number one, the economy is slowing down for quite some time. We have been averaging under president obama about 2 growth, but this year well probably be less than 2 . Second, we have a need for infrastructure spending. Infrastructure spending has been way down, and we dont really have as much money for that as we should get. Third, theres really a need for tax reform. We havent had tax reform since 1986, and were way overdue for that. And we have to deal with the trade issues. So i think the next president , whoever he or she might be, has to deal with trade, infrastructure, taxes and stimulating the economy. Those are four big economic issues. Trish two different approaches weve heard on the campaign trail. Hillary clinton has previously shown her support for the transpacific trade agreement. Donald trump, on the other hand, is saying we need to renegotiation everything that weve previously had on trade front front. When you say trade needs to be dealt with, in what way do you mean . Well, i think that the tpp has to be dealt with one way or the other. Right now the congress hasnt voted on it yet, but theres an opportunity, i think the president would like to to get it approved in the lame duck session. If it doesnt, its unlikely to get approved early in the next administration because president trump, if hes president , doesnt support it, and president clinton, if shes president , doesnt seem to support it either. Anthony general petraeus was back on the show a few months ago supporting the tpp. Where do you stand . I think in the end its a states and a good thing for the world. I think it makes it clear we would be a major player in ace ya. Part of the effort is to get us to be a more important factor in asia than we would be without it. Andotherwise i think china will dominate asian trade, so it is a good thing. It has some flaws, but i think in the end its probably a better thing than not to have it. Anthony for the last 75 years, david, theres a discussion on trade in the United States starting with the Marshall Plan to where we are today. Theres been a relative unevenness to the trade agreements. The United States, through the state department and the treasury, trying to help the developing nations grow their middle class. So there has been some unevenness in trade. As an example, the chinese can ship goods and services here, but they sometimes embargo our goods and services and the same with japan. When mr. Trump says he wants to even that out, whats your reaction . After world war ii, we were in a very strong economy, but since then weve become even stronger, and our economys gigantic. Were the economic engine of the world. If all these trade agreements were so bad, how did our economy get to be so vibrant . We are the envy of the world in terms of entrepreneurial activity, in terms of our productivity, in terms of the size of our economy, so i think these trade agreements while they have some flaws and nothing is perfect, i think they have been very good trish how do you justify the fact that weve basically seen a decade of really no growth . Granted, were not in recession, but we have no growth right now, and there are a lot of people very concerned that those trade agreements may have played a part in that and that the future is looking kind of bleak because theres nothing out there, david, on the horizon where you can say or point to to say things are really going to start well, growth is lower than anybody would like. But remember, when you have a 20 trillion economy, its hard to grow that at 6 a year. Nobodys to ever done that. Our economys are large. In addition, we have fewer people in the work force. Historically, 66 of adult males and females in the work force are 62. 5 . We have people retiring at a lower age and living longer, so you have fewer people adding to the gdp. Again, growing at 5 and 6 is very difficult. I think we can do more to tim late the economy, but the days of 6 growth for the United States may be behind us. Trish oh, wow. Anthony i want to talk about middle class and working class wages which dosome to be stagnating yes, youre correct. They havent been growing. What could we do there . Theres a lot we could do. Theres no one answer. One of the problems we have is that our Education System is very flawed. We have the envy of the world in our upper, higher education. Everybody wants to go to american colleges and universities. K12 is not the envy of the world, and its now producing a system where the city i live in, washington, 25 of the people who Enter High School are not graduating. And you see that around other large cities in the United States as well. You cant have a great economic engine if large parts of your population are not greating from high school. Theyre not adding to the productivity as much as you would like. So weve got to improve our Education System. But also weve got to do much more on infrastructure. The infrastructure is collapsing in this country, and i think the jobs that could come about from that would stimulate the economy. Trish lots of interesting stuff to talk to you about today, david, so do not go anywhere. David rubenstein staying with us. So much more to get to, to discuss with you. Wall street week is going to be right back. Forget the fed, could donald trump and Hillary Clinton have the biggest impact on wall street . Why David Rubenstein says its time for everyone to take this election a little more seriously. Next on wall street week. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. 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Anthony well know on november the 8th. Were back with David Rubenstein. This is, obviously, a contentious election, but i really want to talk to you about the contention in the washington. There seems to be policies, as opposed to left and right, there seems to be policies that are right or wrong, and yet theres a fever in washington of contention. Is it worse than youve ever seen, and if it isnt, what do you think of it and how are we going to improve it to get people to work Better Together in washington . Its always tempting to say its worse than its been before because it gets peoples attention, but i tend to think it is worse than its been before because when i worked on capitol hill in the 70s, legislators wanted to work together, democrats and republicans. They socialized, and its very rare to see that now. I did start a program not long ago where i interview a great president ial historian about a matter of american history, so Doris Kerns Goodwin on lincoln, for example, and then i invite members of congress from both parties to come, and interestingly, when theres no press there, they get along. They have social interaction which they usually dont do. And i think if we had more social interaction between the members, it would be good. Right now they dont. Trish so many people keep saying this over and over again, but why is that . Let me explain. In the old days, members of Congress Actually lived there, but now many of them live in their districts, and they come tuesday to thursday, thats where the votes are. So more four days a week, theyre not there, and they dont do as many traveling abroad as they did before because its criticized, and they spend a lot of their time raising money because the name of the game is having a lot of money to get an opponent not to run against you. There isnt a lot of interchange between the two. Trish can clinton or trump change that . Hope springs eternal. And i hope that the next president , whoever he or she might be, would actually try to get members of congress to talk together, work together. It used to be if you were a good legislator, you were good at compromising. Now if you compromise, youre considered not very popular within your party. So many of them dont socialize, dont talk to each other. Its hard to believe this is going on, but right now its as bad as any time ive ever seen in washington. Anthony you mentioned Doris Kerns Goodwin, she wrote about taft and roosevelt era where there was a great income divide in the country at that time as well. What steps or measures do you think the american president can take to help close that income divide . Well, income inequality has been increasing and its as bad as any time since the 1920s. I dont think you can solve that problem overnight. Part of the problem is that the people on the lower part of the economic scale are going further and further down because theyre not educated, theyre not getting good jobs, the low minimum wage jobs are not ones that are going to make you have a productive income for your family, so i think its getting worse and worse. I think the Great Recession exacerbated the problem, and although weve come back, the people in the lower part have not come back, and they are doing worse than probably theyve ever done. Trish and you think about the feds role in all this, anthony, as well. I mean, david, they have left Interest Rates at record lows for the longest time on record. And perhaps inadvertently, helped create some of that income inequality in that the stock markets doing well. If youve got capital to invest, youre going to, youre going to see some returns from that. But anybody else is really challenged. Yes. Interest rates have been kept very low, and i think the fed would like to change that. Theyve telegraphed they would like to increase it, but they havent quite found the time to do it. I suspect the markets feel they will do it for sure this year, my own view is probably december rather than september, but who really knows. I think even in december, though, itll be a modst increase. I think its going to be a while before the fed feels comfortable going back to where with we were five or ten years ago, but it has probably fueled Wealth Creation for the people at the top but probably not the people at the bottom. Anthony sort of a question i ask most of our guests, do you think wall street or the Financial Markets that presidency or who gets elected president really matter to the markets . Well, i think the markets by indicating, they get people in washington give a lot of money to campaigns, so they must care about it. I think in the end, Business People will try to work with whatever circumstances are. Whoevers president , wall streets not just going to go home, theyre going to try and react and make money. Some candidates are thought to be better than others, but actually when you look back on it, business is more favorable to republicans, the stock market has done much better when you have an alldemocratic congress and democratic president historically. Higher gdp growth and higher stock markets, so its not clear that the republicans necessarily are better for the economy or wall street. Apt apt in the 1930s, Franklin Roosevelt said he accepted the bankers scorn and relished it, and it wasnt until the 50s that it improved. Were back there after crisis, bankers, Hedge Fund People like myself are social pariahs [laughter] when do you think that will end . Well, in the err are of political correctness, there are very few people you can criticize anymore and not be criticized yourself. Those you can are members of congress, Hedge Fund People, bankers and private equity people. Theres no doubt that people today feel that bankers alien unlawful enemy combatant the media two anthony the media too, david. [laughter] theres no doubt that bankers are unpopular, and private equity and Hedge Fund People are not going to win popularity contests, but theyre doing productive things for society, and they are helping create jobs. Were not just parasites on society as, unfortunately, some people think. Some people in washington have the view that bankers or people in private equity or hedge funds are not productive, and i think thats not fair. Trish part of thats because of the tax code. Back to some kind of tax reform that needs to happen as you stated earlier in the program. What does that mean for people like yourself . Well, im worried less about myself than what the economy would do. Right now i think that people in my situation are actually doing pretty well, so whether taxes go up for me or not, its not my main concern. My main concern as an american is to make sure the economy is doing well and the country is strong. I do think we should have tax reform, and everything should be on the table, and we should have a serious look at how to improve the tax code. Right now very few people understand it and fill out their own tax forms or tax code anthony were going to be back with more from David Rubenstein when wall street week returns. Stay with us. How did David Rubenstein become one of the most successful businessmen of all time . I got very fortunate and made more money than i probably deserve or ever expected. Its a conversation you wont hear anywhere else, next on wall street week. There are two billion people who dont have access to basic banking, but that is changing. At temenos, with the microsoft cloud, we can enable a banker to travel to the most remote locations with nothing but a phone and a tablet. Everywhere where theres a phone, you have a bank. Now a person is able to start a business, and employ somebody for the first time. The microsoft cloud helped us to bring banking to ten Million People in just two years. Its transforming our world. Anthony were back with the Carlyle Group founder, coceo, David Rubenstein. David, private equity used to be the place for people employing a lot of capital. There seems like a lot of cash on the sidelines, so where do you think the reluctance is to spend and invest right now . Prices are at alltime highs, so the average cash flowmultipls over ten times. Before the Great Recession, it was probably about 9. 5 times, so were paying higher multiples than before the Great Recession. Even though rates are lower, the cost is a little lower. Still its expensive. As a result of that, people are reluctant to put money to work. For the last five years, the private Equity Industry has returned more money to its investors than they have actually invested. Right now were returning more money than investing. I think if prices go down as the stock market kind of goes down a bit, i think that will probably happen at some point, itll be be cheaper, and well have more money invested. Right now theres about 1. 4 trillion on the sidelines which is dry powder the private Equity Industry has. I think youll see more money being invested. Trish and you think thats going to happen soon . Its hard to believe the stock market ca