CSPAN2 — Washington Journal Ryan Young
20260915 055500 UTC
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[00:00:00] ALSO AT TEN, THE SENATE WILL CONVENE AND WILL VOTE ON
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[00:01:10] >> JOINING US FOR A DISCUSSION ON THE U.S. ECONOMY, RYAN YOUNG
[00:01:13] OF THE COMPETITIVE ENTERPRISE INSTITUTE. HE SERVES AS THEIR
[00:01:15] SENIOR ECONOMIST. GOOD MORNING
[00:01:17] TO YOU. >> GOOD MORNING. >> ONE OF THE REASONS WE INVITED
[00:01:21] YOU >> ON WAS TO TALK ABOUT INFLATION. AND ONE OF THE DATA
[00:01:24] POINTS THAT CAME OUT LAST WEEK WAS SOMETHING CALLED THE
[00:01:28] CONSUMER PRICE INDEX. HOW'S THE BEST WAY TO UNDERSTAND THAT? IN
[00:01:30] LAYMAN'S TERMS.
[00:01:32] >> THE WAY THEY CALCULATE THAT
[00:01:35] CPI IS TO TAKE A BASKET OF GOODS. PEOPLE TEND TO SPEND THIS
[00:01:38] MUCH OF THEIR BUDGET ON GROCERIES, THIS MUCH ON HOUSING
[00:01:42] AND TRANSPORTATION AND SO ON.
[00:01:45] AND WHAT THE DATA COLLECTORS DO IS THEY ASSEMBLE ALL OF THAT
[00:01:49] CHECK PRICES EVERY MONTH ON EACH OF THOSE DIFFERENT PRICES AROUND
[00:01:52] THE ECONOMY, AND THEY COME UP WITH A NUMBER TO SEE HOW MUCH
[00:01:55] PRICES OVERALL ARE GOING UP.
[00:01:58] >> AND SO WHEN YOU TAKE ALL THOSE FACTORS INTO EFFECT, WE
[00:02:02] SEE THE LATEST NUMBER AT 3.4%. THAT'S A NUMBER. BUT WHAT DOES
[00:02:05] IT TELL US ABOUT THOSE BASKETS AND THE PRICES WE'RE PAYING?
[00:02:09] >> IT TELLS US A FEW THINGS. ONE OF THEM IS THAT PRICES ARE GOING
[00:02:12] UP A LOT FASTER THAN WE WANT THEM TO. THE FEDERAL RESERVE HAS
[00:02:15] A TARGET OF 2% GROWTH FOR
[00:02:18] INFLATION, AND WE'RE AT 3.4. BUT
[00:02:21] WHEN YOU DIG A LITTLE BIT DEEPER INTO THAT BASKET OF GOODS,
[00:02:24] THINGS ARE MOSTLY ON TARGET, EXCEPT FOR ENERGY. AND MOST OF
[00:02:28] THAT IS BECAUSE OF IRAN. AND THAT'S NOT SOMETHING THAT THE
[00:02:31] FEDERAL RESERVE CAN CONTROL,
[00:02:32] THAT'S CAUSING GAS PRICES, AND ESPECIALLY HEATING OIL PRICES.
[00:02:36] WITH WINTER NOW ON THE WAY TO GO
[00:02:38] UP MUCH, MUCH FASTER THAN OTHER PRICES.
[00:02:41] >> AND SO THAT CONTROL FROM THE FEDERAL RESERVE STRICTLY RELIES
[00:02:45] ON WHAT THEY'RE GOING TO DO WITH RATES THEMSELVES. WHAT DOES. SO WHEN YOU SEE THAT DATA,
[00:02:48] WHAT DOES IT MEAN FOR KEVIN WARSH AS HE MAKES THIS DECISION
[00:02:51] ABOUT WHAT TO DO WITH RATES?
[00:02:53] >> IT MAKES IT MORE LIKELY THAT
[00:02:56] AN INTEREST RATE INCREASE IS ON THE WAY. WHEN THE FEDERAL
[00:03:00] RESERVE WANTS TO TAME INFLATION, THEY RAISE INTEREST RATES,
[00:03:03] BECAUSE THAT SLOWS DOWN JUST A LITTLE BIT. HOW MUCH MONEY
[00:03:06] CIRCULATES THROUGH THE ECONOMY. SO RAISE RATES IF YOU WANT TO
[00:03:09] CONTROL INFLATION. BUT IF THE ECONOMY IS IN TROUBLE, YOU CUT
[00:03:12] RATES TO STIMULATE. THAT'S THE GENERAL THINKING AROUND THE
[00:03:16] FEDERAL RESERVE. >> AND SO YOU SAID THAT. TO WHAT
[00:03:19] DEGREE DO YOU THINK THAT'S LIKELY? AND WHAT FACTORS
[00:03:23] DETERMINE IF HE GOES THAT ROUTE? >> IT'S NOT CERTAIN THAT
[00:03:26] THEY'RE GOING TO RAISE INTEREST RATES TO TRY TO FIGHT INFLATION.
[00:03:28] BUT I THINK IT'S VERY LIKELY
[00:03:32] BETTING MARKETS HAVE IT AT ABOUT 87% CHANCE THAT ON WEDNESDAY
[00:03:35] THEY'RE GOING TO ANNOUNCE A RATE INCREASE. AND THE REASON
[00:03:38] THEY CAN DO THAT IS BECAUSE
[00:03:41] WHILE INFLATION IS TOO HIGH, THE
[00:03:44] TRADE OFF OF RAISING AN INTEREST RATE IS THAT YOU DO RISK SLOWING
[00:03:48] DOWN THE ECONOMY A LITTLE BIT, AT LEAST IN THE SHORT RUN. AND
[00:03:52] THE CPI AND THE OTHER INFLATION INDICATORS ARE NOT THE ONLY THING THE FED KEEPS AN EYE ON.
[00:03:55] THEY ALSO KEEP AN EYE ON THE EMPLOYMENT RATE, HOW FAST THE
[00:03:59] ECONOMY IS GROWING. AND WHILE THE ECONOMY IS NOT IN STELLAR
[00:04:02] SHAPE, UNEMPLOYMENT IS AT 4.1%.
[00:04:06] ANYTHING UNDER FIVE IS PRETTY GOOD. THE ECONOMY ISN'T GROWING
[00:04:09] GANGBUSTERS, BUT AT LEAST IT IS GROWING. WE'RE NOT IN A
[00:04:12] RECESSION, SO THAT GIVES THE FED A LITTLE BIT OF ROOM TO TRY TO
[00:04:15] FIGHT INFLATION. EVEN IF THAT DOES SLOW DOWN THE ECONOMY JUST
[00:04:18] A LITTLE BIT, THERE'S SOME ROOM TO SPARE. SO I THINK IT'S VERY
[00:04:21] LIKELY THEY DO RAISE RATES ON WEDNESDAY. >> AND YOU MENTIONED THE
[00:04:24] UNEMPLOYMENT RATE 162,000 JOBS
[00:04:30] ADDED LAST LAST MONTH, 4.1%. SO THAT'S A BUFFER, SO TO SPEAK. >> YEAH. THAT'S A REALLY GOOD
[00:04:33] WAY TO PUT IT. THE FED HAS A
[00:04:37] VERY TOUGH BALANCE TO STRIKE. IF THEY RAISE RATES THERE'S A TRADE
[00:04:41] OFF. IF THEY CUT RATES THERE'S A TRADE OFF. NO MATTER WHAT THEY
[00:04:44] DO THERE IS A TRADE OFF. SO IT'S NICE THAT THEY HAVE THAT
[00:04:47] BUFFER IN ORDER TO RAISE RATES. BECAUSE WE HAVE BEEN WE'VE HAD
[00:04:50] ABOVE TARGET INFLATION FOR MORE THAN FIVE YEARS IN A ROW. AND
[00:04:54] OVER THE LONG RUN, INFLATION COULD BE A LOT MORE DESTRUCTIVE
[00:04:57] THAN A RECESSION THAT LASTS,
[00:04:58] SAY, SIX MONTHS OR A YEAR.
[00:05:02] >> SO THE FED, LET'S SAY THEY RAISE INTEREST RATES. WHAT'S THE RIPPLE EFFECT ON THE AMERICAN
[00:05:05] CONSUMER? YOU AND ME?
[00:05:07] >> FOR A LOT OF PEOPLE, THEY
[00:05:10] MIGHT SEE SLIGHT INCREASES IN THEIR CREDIT CARD INTEREST RATE.
[00:05:13] IF YOU'RE IN THE HOUSING MARKET, YOU MIGHT BE PAYING A
[00:05:15] HIGHER MORTGAGE. IF YOU ALREADY OWN YOUR HOME AND YOU'RE ON A
[00:05:19] FIXED RATE MORTGAGE, IT DOESN'T AFFECT YOU. UM, STUDENT LOANS,
[00:05:23] CAR PAYMENTS, THOSE SORTS OF THINGS CAN GO UP SLIGHTLY
[00:05:26] BECAUSE ALTHOUGH THE FEDERAL RESERVE DOES NOT CONTROL THOSE
[00:05:29] INTEREST RATES, THE ONE INTEREST
[00:05:31] RATE THEY DO CONTROL
[00:05:47] GAIN. SO PEOPLE BENEFIT IN THE LONG RUN?
[00:05:49] IS THAT THE PHILOSOPHY?
[00:05:52] AND PROBABLY SIMPLIFYING IT GREATLY, BUT GO AHEAD.
[00:05:54] GUEST: THAT IS THE GIST OF IT. THERE IS ALWAYS MORE TO THE
[00:05:58] STORY. INFLATION RIGHT NOW IS IN DECENT SHAPE. 2.4%.
[00:06:02] WHICH IS MORE THAN THE 2% TARGET.
[00:06:04] BUT NOT LIKE IT WAS DURING COVID
[00:06:08] WHEN THINGS WERE AT 9%. MOST OF THE ABOVE INFLATION
[00:06:11] PRICE INCREASES ARE FROM ENERGY PRICES BECAUSE OF IRAN AND ALSO
[00:06:14] TARIFFS AND BECAUSE OF WHAT IS
[00:06:16] GOING ON RIGHT NOW WITH CANADA.
[00:06:20] THE FEDERAL RESERVE CAN'T CONTROL THOSE THINGS. BUT IT CAN CONTROL A LITTLE BIT, SOME OF THE UNDERLYING
[00:06:23] CONDITIONS.
[00:06:26] TRYING TO TREAT THOSE BEST I CAN. HOST: THIS IS RYAN YOUNG.
[00:06:29] IF YOU WANT TO ASK ABOUT THE ECONOMY OR INFLATION RATES HE
[00:06:33] TALKED ABOUT OR OTHER MATTERS, CALL ON THE PHONE LINES.
[00:06:37] (202)748-8000 FOR DEMOCRATS. REPUBLICANS, (202)748-8001.
[00:06:40] INDEPENDENTS, (202)748-8002.
[00:06:44] IF YOU WANT TO SHARE YOUR THOUGHTS VIA TEXT, THAT IS
[00:06:47] (202)748-8003.
[00:06:51] MR. YOUNG, THE COMPETITIVE ENTERPRISE INSTITUTE, HOW DO YOU DESCRIBE IT?
[00:06:55] AND PHILOSOPHICALLY, WHEN YOU WOULD HAVE THESE DISCUSSIONS ABOUT INTEREST RATES AND THE
[00:06:58] LIKE.
[00:07:00] GUEST: WE ARE A THINK TANK BASED
[00:07:03] IN SEAT -- DC BUT I MYSELF LIVE IN THE CHICAGO AREA.
[00:07:06] WE FOCUS ON THINGS LIKE ECONOMIC FREEDOM AND ECONOMIC
[00:07:10] OPPORTUNITY. AND WE GENERALLY DON'T FAVOR
[00:07:13] HIGHER OR LOWER INTEREST RATES.
[00:07:16] I VIEW MONETARY POLICY IS A MATCHING GAME. IF YOU WANT STABLE, PREDICTABLE
[00:07:19] PRICES, SAY THE REAL ECONOMY
[00:07:22] GROWS BY 10% AND THE FED WANTS
[00:07:24] TO GROW THE MONEY SUPPLY ALSO BY
[00:07:27] 10%, IT CAN DO THAT WITH INTEREST RATES AND WITH OTHER
[00:07:30] MEANS AS WELL. WE WANT STABLE, PREDICTABLE PRICES THAT PEOPLE CAN PLAN
[00:07:33] AROUND.
[00:07:35] THAT IS OUR MAIN GOAL. A STABLE ENVIRONMENT.
[00:07:39] HOST: ON THE DISCUSSION OF THE FEDERAL RESERVE, MR. YOUNG, ON
[00:07:43] THE SUNDAY SHOWS YESTERDAY, ONE OF THE THINGS TALKED ABOUT WAS THE POTENTIAL OF THE RATE HIKE
[00:07:46] AND I WANT TO PLAY A LITTLE BIT
[00:07:47] OF WHAT HE HAD TO SAY WHEN ASKED
[00:07:50] ABOUT IT ON CNN.
[00:07:54] >> PRESIDENT TRUMP AND I ACTUALLY THINK THAT THERE IS A
[00:07:56] REASON RIGHT NOW TO RAISE RATES
[00:07:59] AND WE ARE WILLING TO MAKE THE POLICY DISCUSSION PUBLIC.
[00:08:02] FOR EXAMPLE, JAKE, WHAT I'M
[00:08:04] SEEING IS, IF YOU LOOK AT THE PREVIOUS THREE MONTHS, THAN THE
[00:08:08] AVERAGE TOPLINE INFLATION NUMBER WAS ABOUT EIGHT.
[00:08:11] THAT WAS IN PART BECAUSE OF THE SURGE IN OIL PRICES DURING THE
[00:08:14] ISSUE IN THE GULF. OVER THE LAST THREE MONTHS,
[00:08:18] INFLATION ANNUALIZED IS ABOUT 1%. AND SO WHAT IS HAPPENING IS THE
[00:08:22] INFLATION PROGRESS WILL BE MADE
[00:08:26] BECAUSE OF POLICIES AND IS REALLY PHYSICAL IN THE DATA.
[00:08:30] YOU TAKE THAT. AND ADD TO THE FACT THAT WHEN I WORKED FOR ALAN GREENSPAN, ONE
[00:08:33] OF THE THINGS HE EMPHASIZED WAS THAT IT IS PRETTY IMPORTANT FOR
[00:08:36] THE FED TO LEAVE THINK -- TO LEAVE THINGS ALONE AHEAD OF THE ELECTION.
[00:08:39] IT HAS ONLY BEEN A COUPLE TIMES SINCE 2013 WHERE THE FED MADE A
[00:08:43] MOVE BECAUSE THEY WANTED TO
[00:08:46] PRESERVE THEIR INDEPENDENCE. BUT IF KEVIN AND THE COMMITTEE DECIDE -- WHATEVER THEY DECIDE,
[00:08:50] WE WILL 100% SUPPORT THEM.
[00:08:54] AND WE ARE GRATEFUL FOR A DEMOCRACY WHERE WE CAN SAY WITH
[00:08:55] OUR VIEW OF THE DATA.
[00:09:01] HOST: MR. YOUNG, THAT IS THE ARGUMENT HE MAKES.
[00:09:04] WHAT DO YOU MAKE OF IT? GUEST: THERE ARE TWO THREATS TO
[00:09:08] UNPACK. ONE IS THAT THE PRESIDENT NEARLY ALWAYS FAVORS LOWER INTEREST
[00:09:11] RATES. THAT MEANS STIMULUS. HE IS A STIMULUS MINDED KIND OF GUY.
[00:09:15] NOT AS CONCERNED ABOUT THE TRADE OFF OF THAT WHICH IS HIGHER
[00:09:19] INFLATION. THE SECOND THREAT IS THE
[00:09:20] ELECTION.
[00:09:24] KEVIN HASSETT WAS CONCERNED THAT IF THE FED MAKES A MOVE ON INTEREST RATES NOW, IT COULD AFFECT THE ECONOMY BEFORE THE
[00:09:28] ELECTION. IT TURNS OUT THAT IS NOT THE CASE.
[00:09:31] ANYTHING THE FED DOES NOW WILL TAKE SIX MONTHS, A YEAR OR EVEN
[00:09:34] LONGER FOR IT TO PERCOLATE
[00:09:37] THROUGH THE ECONOMY.
[00:09:41] THE WAY INTEREST RATES BECAUSE MONEY TO EITHER SPEED UP OR SLOW
[00:09:43] DOWN AS OPPOSED TO THE ECONOMY
[00:09:47] TAKES A LONG TIME TO WORK ITS WAY FROM WASHINGTON TO THE
[00:09:51] FINANCIAL SYSTEM, THEIR BOND AND OTHER FINANCIAL MARKETS.
[00:09:54] SO THE WINDOW FOR THE FED POTENTIALLY POLITICIZING ITS
[00:09:56] INTEREST DECISIONS PAST SEVERAL MONTHS AGO.
[00:09:59] ANYTHING THEY DO NOW ISN'T REALLY GOING TO SHOW UP IN THE ECONOMY UNTIL PROBABLY NEXT
[00:10:03] SPRING.
[00:10:05] HOST: HE SAID AT THE END THAT THE PRESIDENT AND THE WHITE
[00:10:08] HOUSE WOULD BE OKAY IF RATES WERE TO RISE.
[00:10:10] HOW MUCH DO YOU BUY THAT?
[00:10:15] GUEST: VERY KIND OF HIM TO SAY. THE FEDERAL RESERVE IS SUPPOSED
[00:10:18] TO BE AN INDEPENDENT INSTITUTION WITHOUT INPUT FROM THE PRESIDENT
[00:10:21] OR OTHER POLITICAL ACTORS. THERE IS A ROLE FOR OVERSIGHT
[00:10:25] CERTAINLY BUT CONGRESS PROVIDES THAT. TRADITIONALLY, PRESIDENTS HAVE
[00:10:28] LEFT THE FED A FREE HAND TO OPERATE MONETARY POLICY AS IT
[00:10:32] PLEASES. AND THE REASON FOR THAT IS BECAUSE EVERYWHERE YOU DO HAVE
[00:10:35] EXTENSIVE POLITICAL INTERFERENCE
[00:10:37] IN CENTRAL BANKS, YOU GET
[00:10:39] INFLATIONARY BASKET CASES LIKE
[00:10:44] ARGENTINA OR ZIMBABWE. PLACES LIKE TURKEY RIGHT NOW ARE
[00:10:46] DEALING WITH 20-30% INFLATION.
[00:10:49] OURS IS TOO HIGH AT 2.4, FOR THE CORE RATE.
[00:10:53] THAT GIVES YOU AN IDEA OF HOW DESTRUCTIVE POLITICAL INTERFERENCE IS.
[00:10:57] SO WHILE IT IS VERY KIND OF
[00:11:00] MR. HASSETT TO SAY THE PRESIDENT WILL BE OKAY WITH WHATEVER THE FEDERAL RESERVE DECIDES ON
[00:11:04] WEDNESDAY, THEY FRANKLY SHOULD
[00:11:08] NOT EVEN BE WEIGHING IN.
[00:11:09] HOST.
[00:11:12] IN MISSOURI, THIS IS THE REPUBLICAN LINE.
[00:11:14] JAMIE JOINSIN MISSOURI, REPUBLI,
[00:11:18] JAMIE JOINS US. YOU ARE ON WITH OUR GUEST. GOOD MORNING.
[00:11:20] CALLER: I DON'T GET IT.
[00:11:25] AMERICANS ARE STRUGGLING. OUR DOLLAR IS DEVALUED, SO WE
[00:11:29] CANNOT AFFORD GAS, SO WE HAVE TO INCREASE THE RATE. I CALL BS.
[00:11:34] I THINK THE FED IS PLAYING AGAIN, AND THE WHOLE THING IS PLAYING A GAME.
[00:11:40] PLEASE EXPLAIN TO ME LIKE I AM A KINDERGARTNER, BECAUSE ONE PLUS
[00:11:44] ONE DOES NOT EQUAL TWO HERE. LET'S RAISE EVERYTHING BECAUSE EVERYTHING IS RAISED.
[00:11:50] THE BANKS WILL BENEFIT BUT NOT THE PEOPLE. HOW DOES THIS WORK?
[00:11:53] GUEST: WELL, THE FEDERAL RESERVE
[00:12:01] IS NOT BECAUSE GAS PRICES. GAS PRICES ARE UP BECAUSE OF IRAN.
[00:12:04] EARLIER THIS YEAR, THE NATIONWIDE AVERAGE FOR GAS
[00:12:06] PRICES WAS $2.98 A GALLON, THE
[00:12:11] PUTTING ON WHERE YOU LIVE, IT MIGHT HAVE BEEN HIGHER OR LOWER.
[00:12:14] $2.98 NATIONWIDE. IT IS NOW AROUND FOUR DOLLARS,
[00:12:18] AND THAT IS ENTIRELY BECAUSE OF IRAN.
[00:12:22] THE FEDERAL RESERVE CAN CONTROL SOME THINGS GET A CANNOT CONTROL ALL THINGS.
[00:12:25] WHAT IT IS TRYING TO DO IS BRING INFLATION BACK DOWN, SO THAT
[00:12:28] WEIGHT GROCERY PRICES WILL STOP
[00:12:31] INCREASING AS FAST, GAS PRICES WILL STOP INCREASING AS FAST,
[00:12:34] AND, FRANKLY, A LOT OF THE PROBLEMS WE ARE SEEING WITH CAR
[00:12:38] PRICES, HOUSING PRICES, AND
[00:12:42] GROCERY PRICES, ARE ALSO DUE TO TARIFFS.
[00:12:44] LUMBER AND STEEL TERRORISTS CAN ADD THOUSANDS OF DOLLARS TO THE
[00:12:47] PRICE OF A NEW HOME -- STEEL
[00:12:51] TARIFFS CAN ADD THOUSANDS OF DOLLARS TO THE PRICE OF A NEW
[00:12:55] HOME, TO THE PRICE OF A NEW CAR.
[00:12:59] THE FEDERAL RESERVE'S ACTIONS TEND TO BE A LOT MORE GENTLER
[00:13:01] AND MORE LONG RUN, AND I DO NOT SEE HOW BANKS WOULD BENEFIT TOO
[00:13:05] MUCH FROM INTEREST RATE ADJUSTMENTS.
[00:13:08] HOST: IN IOWA, JILL, LINE FOR DEMOCRATS.
[00:13:12] HI. CALLER: HI.
[00:13:15] THE WORDS YOU ARE USING OUR "STABLE AND PREDICABLE," AND
[00:13:19] WHICH OF THOSE TWO WORDS WOULD YOU APPLY TO DONALD TRUMP?
[00:13:23] [LAUGHTER]
[00:13:24] GUEST: I WOULD SAY NEITHER, AND
[00:13:28] IT IS IMPORTANT TO INSULATE THE
[00:13:32] FEDERAL RESERVE FROM POLITICAL INTERFERENCE, TO BIND WITH A RULE.
[00:13:35] RIGHT NOW, EVERY SIX WEEKS WHEN
[00:13:40] THEY NEED TO MAKE INTEREST RATE DECISIONS, THEY ARE WINGING IT.
[00:13:46] THE 12-MEMBER COMMITTEE CAN MAKES ANY DECISION THEY WANT. I SPOKE EARLIER WHERE IF YOU
[00:13:51] WANT STABLE PRICES, EXTEND THE
[00:13:52] WILL GROWTH, EXTEND THE FED BY A
[00:13:57] MATCHING 10%.
[00:13:59] THE BEST WAY TO HAVE THAT KIND OF STABILITY AND PREDICTABILITY
[00:14:01] IS TO HAVE THE FED FOLLOW A POLICY, WHERE THEY ARE REQUIRED TO DO THAT.
[00:14:05] YOU COULD DO THAT WITH AN INTEREST RATE RULE OR WITH A
[00:14:08] MONEY SUPPLY TARGETING RULE OR WITH ANY OTHER RULE.
[00:14:12] EACH HAS THEIR PLUSES AND
[00:14:20] MINUSES. I DON'T REALLY HAVE STRONG FEELINGS ABOUT WHICH ONE MIGHT BE BEST, BUT HAVING THAT KIND OF RULE IN PLACE NOT ONLY CAN MAKE THE FEDERAL RESERVE'S ACTIONS
[00:14:24] MORE PREDICTABLE, BUT I CAN ALSO GIVE THEM SOME MORE AMMUNITION
[00:14:27] WITH THE PRESIDENT, WHEN HE COMES KNOCKING ON THE DOOR,
[00:14:30] ASKING FOR LOWER INTEREST RATES, THEY CAN JUST SAY, I'M SORRY, SIR, I CANNOT DO THAT.
[00:14:34] WE CANNOT CUT RATES THE WAY
[00:14:38] YOU WANT US TO.
[00:14:38] HOST: RYAN YOUNG, YOU SPOKE TO
[00:14:46] THE FEDERAL RESERVE'S GOAL OF 2%. WHAT IS MAGIC ABOUT THAT NUMBER? WHY THAT NUMBER? GUEST: INHERENTLY, THERE IS
[00:14:50] NOTHING MAGICAL ABOUT IT. I THINK IT IS A LEGACY OF THE GREAT DEPRESSION, WHICH WAS
[00:14:54] CAUSED BY DEFLATION.
[00:14:54] THE MONEY SUPPLY WHEN THE
[00:15:01] DEPRESSION HIT ACTUALLY SHRANK BY ONE THIRD.
[00:15:02] WHEN YOU SHRINK THE MONEY SUPPLY
[00:15:06] BY ONE-THIRD, YOU WILL GET DEFLATION. THE REAL NUMBERS OF GOODS
[00:15:10] PRODUCED AND THE DOLLARS TO MATCH THEM THAT WAY MISMATCHED,
[00:15:14] SO YOU GOT NEARLY DOUBLE DIGIT DEFLATION.
[00:15:16] AND, WELL, WE KNOW HOW BAD THE
[00:15:20] GREAT DEPRESSION WAS.
[00:15:21] SO AS A WAY TO BIAS THE
[00:15:25] SYSTEM AGAINST ANOTHER GREAT DEPRESSION, THE FED HAS A BIAS OF 2%.
[00:15:28] THERE IS SOME DEBATE OF WHETHER THAT IS GOOD OR NOT, BUT THAT IS WHAT THEY ARE THINKING OF.
[00:15:32] HOST: WE'VE HEARD FEDERAL RESERVE MEMBERS SAY THEY ARE NOT
[00:15:35] INFLUENCED BY POLITICS.
[00:15:39] IN YOUR EXPERIENCE AND LOOKING AT THE RESERVE, IS THAT TRUE? GUEST: IT IS NOT TRUE.
[00:15:42] THEY ARE INFLUENCED BY POLITICS,
[00:15:45] SAME AS EVERY OTHER AGENCY IN
[00:15:49] GOVERNMENT. I DO THINK THE FEDERAL RESERVE HAS A BETTER TRACK RECORD OF
[00:15:51] STAYING POLITICALLY
[00:15:55] INDEPENDENT AND FOLLOWING THE DATA INSTEAD OF FOLLOWING THE PRESIDENT OR CONGRESS, BUT NOBODY IS PERFECT ABOUT IT.
[00:15:59] I DO NOT EXPECT PERFECTION FROM THIS BAD PIT ALTHOUGH I HAVE TO
[00:16:03] SAY, I LIKE WHAT I'M SEEING SO FAR OUT OF THE NEW CHAIRMAN, KEVIN WARSH.
[00:16:07] THERE WAS NEVER A QUESTION OF
[00:16:08] HIM BEING QUALIFIED.
[00:16:12] HE WAS PREVIOUSLY THE YOUNGEST PERSON ON THE BED POSING BOARD
[00:16:16] OF GOVERNORS. THE QUESTION IS, WILL HE BE HIS OWN MAN, OR WILL HE BE THE
[00:16:18] PRESIDENT'S MAN.
[00:16:23] SO FAR, HE IS BEING HIS OWN MAN. WE WILL FIND OUT MORE ABOUT
[00:16:26] THAT, ESPECIALLY AS THE WHITE HOUSE IS MAKING NOISE ABOUT CUTTING RATES.
[00:16:30] IF THEY RAISE RATES, IT MIGHT NOT JUST BE ABOUT THE DATA, IT
[00:16:33] MIGHT ALSO BE HIM MAKING A
[00:16:37] POLITICAL STATEMENT ABOUT HIM BEING INDEPENDENT. HOST: WHAT HAVE YOU SEEN SO FAR
[00:16:42] THAT SUGGESTS HE HAS HIS OWN MAN?
[00:16:46] GUEST:GUEST: HE IS CHOOSING TO PRIORITIZE FIGHTING INFLATION
[00:16:48] OVER OTHER CONSIDERATIONS.
[00:16:52] THE VET HAS TO BALANCE TWO MISSIONS, ONE IS FIGHTING INFLATION, THE OTHER IS FIGHTING UNEMPLOYMENT.
[00:16:55] ONE MAKES DECISIONS TO RAISE OR LOWER INTEREST RATES, IT CANNOT
[00:16:58] DO BOTH OF THOSE THINGS AT ONCE, BECAUSE THEY CONTRADICT EACH OTHER.
[00:17:02] THEY HAVE TO CHOOSE ONE OR THEY HAVE TO CHOOSE THE OTHER, AND
[00:17:05] WARS HAS BEEN VERY UPFRONT ABOUT
[00:17:08] , LIKE RIGHT NOW, HE CHOOSES
[00:17:11] INFLATION, AND HE HAS BEEN STICKING TO IT SO FAR. BECAUSE OF THE LAG TIME AND,
[00:17:14] FRANKLY, BECAUSE THE FED HAS NOT
[00:17:16] BEEN VERY BOLD ABOUT IT,
[00:17:19] THAT HAS NOT QUITE SHOWN UP IN THE DATA YET.
[00:17:23] SO FAR, EARLY SIGNS ARE ENCOURAGING. HOST: LET'S HEAR FROM JIM IN THE DATA. HI, JIM.
[00:17:27] CALLER: YES, GOOD MORNING.
[00:17:31] IT IS NICE TO HAVE SOMEONE TALK ABOUT NUMBERS IN A PEOPLE UNDERSTAND.
[00:17:36] EARLIER TODAY, WE HAD TWO WOMEN WHO CALLED IN WHO WERE TALKING
[00:17:40] ABOUT THE TAX COLLECTION,
[00:17:44] CORPORATIONS HAVING GONE DOWN A GREAT DEAL OVER THE PAST YEAR.
[00:17:51] THIS IS WHAT STRUCK ME ABOUT IT, AND THIS IS WHAT I THINK YOUR
[00:17:54] GUEST IS AN EXPERT ON NUMBERS, CAN ENLIGHTEN ME A LITTLE BIT.
[00:18:00] I WAS SURPRISED AT WHAT I
[00:18:00] THOUGHT WAS A VERY SMALL NUMBER,
[00:18:07] THE TAX AMOUNT OF CORPORATIONS.
[00:18:09] I'VE NEVER REALLY LISTENED TO ANYBODY ANSWER THIS QUESTION BEFORE.
[00:18:14] HOW MANY DOLLARS DO WE COLLECT
[00:18:15] FROM CORPORATIONS VERSUS FEDERAL
[00:18:20] TAX DOLLARS THAT ARE COLLECTED FROM INDIVIDUALS?
[00:18:22] FOR EXAMPLE, FOR EVERY DOLLAR OF
[00:18:27] CORPORATE DOLLARS, ARE WE COLLECTING, SAY, $.50 FROM AN
[00:18:31] INDIVIDUAL, OR IS IT THE REVERSE? CAN YOU JUST ENLIGHTEN ME ABOUT THIS?
[00:18:36] HOW MUCH OF THE FEDERAL INCOME TAX BURDEN, IN TERMS OF DOLLARS,
[00:18:39] NOT PERCENTAGES OR AMOUNTS, FOR
[00:18:43] SMALL BUSINESSES AND THAT KIND OF THING.
[00:18:45] FORTUNE 500 TYPE CORPORATIONS,
[00:18:50] HOW MUCH TAX DOLLARS DID THEY PAY LAST YEAR VERSUS HOW MANY
[00:18:54] TAX DOLLARS TO PEOPLE LIKE MYSELF AND YOU PAY, WHEN WE
[00:18:58] FILLED OUT OUR 1040'S? THAT'S MY QUESTION.
[00:19:01] HOST: HIM, THANKS A LOT.
[00:19:03] GUEST: YEAH. THE QUESTION.
[00:19:07] THE ANSWER IS CORPORATE TAX REVENUES ARE ABOUT $450 BILLION,
[00:19:11] SO I JUST LESS THAN HALF A TRILLION DOLLARS.
[00:19:14] INCOME TAX REVENUE IS AROUND $5 TRILLION PER YEAR, GIVE OR TAKE.
[00:19:20] SO THERE'S A LOT GOING ON THERE.
[00:19:23] ONE THING ECONOMISTS TRY TO REMIND PEOPLE ABOUT HIS
[00:19:26] CORPORATE TAXES GET PASSED ON.
[00:19:27] COMPANIES PASS ON THE COST, JUST LIKE AN AMERICAN COMPANY LIKE
[00:19:31] FORD OR GM MIGHT PAY A TARIFF ON
[00:19:36] STEEL THEY IMPORT, THEN THEY PASS THAT ONTO YOU, THE CAR BUYER, COMPANIES PASS ON THE
[00:19:42] COSTS SO FORD OR GM, HOWEVER MUCH THEY PAY IN
[00:19:45] CORPORATE TAX, THEN THEY
[00:19:49] IN PASS THAT ON TO THE CUSTOMER.
[00:19:53] IT IS NOT STICKING IT TO CORPORATIONS, IT IS TO OURSELVES.
[00:19:58] WE HAVE TO FIGURE OUT WAS OF OF
[00:20:01] CORPORATE TAX AS OPPOSED TO INDIVIDUAL TAX, SHOULD WE RELY
[00:20:04] ON ONE SOLELY OR THE OTHER? IN THE END OF IS INDIVIDUAL
[00:20:08] PEOPLE LIKE YOU AND ME WHO PAY CORPORATE TAX.
[00:20:11] BUT ABOUT HALF $1 TRILLION IN THAT COMPARED TO $5 TRILLION IN
[00:20:15] INDIVIDUAL TAXES. HOST: MR. YOUNG, WHEN THE ONE
[00:20:18] BIG BEAUTIFUL BILL WAS PASSED, THEY PROMISED 20%, GAVE THEM
[00:20:22] SOME INCENTIVES FOR, YOU KNOW, DEPRECIATION AND THINGS LIKE THAT.
[00:20:25] THE ADMINISTRATIONS AS ULTIMATELY THIS WOULD BE GOOD
[00:20:27] FOR COMPANIES AND ULTIMATELY GOOD FOR PEOPLE.
[00:20:31] WHEN YOU SEE THOSE THINGS HAPPEN NOW, CONSIDERING THE TIME IT HAS
[00:20:34] BEEN SINCE IT WAS PASSED, IS THERE EVIDENCE OF THAT? GUEST: NOT MUCH.
[00:20:39] ONE REASON IS THE POLICY CHANGES WERE PRETTY SMALL, AND THE OTHER
[00:20:43] IS, COMPARED TO OTHER COUNTRIES, THE U.S. ACTUALLY HAS A VERY
[00:20:47] HIGH CORPORATE TAX RATE.
[00:20:49] THE EU AVERAGE, FOR EXAMPLE, IS
[00:20:52] LOWER THAN OURS, IRELAND ESPECIALLY. THERE ARE LOTS OF OTHER PLACES
[00:20:56] AROUND THE WORLD WITH MUCH LOWER CORPORATE INCOME TAXES.
[00:20:59] SO, IN A WAY, I CERTAINLY HAVE
[00:21:03] OVERALL SEEN UNFAVORABLE OPINIONS OF THE ONE BIG BEAUTIFUL BILL ACT, BUT THE
[00:21:06] CORPORATE TAX PROVISIONS THAT HELP TO BRING IT ROUGHLY IN LINE
[00:21:10] WITH THE REST OF THE WALL, ALTHOUGH U.S. CORPORATE TAX BASE IS STILL ON THE HIGH SIDE.
[00:21:13] HOST: COMPETITIVE ENTERPRISE
[00:21:19] INSTITUTE'S RYAN YOUNG FOR THIS CONVERSATION. WILLIAM JOINS US FROM NEW JERSEY. HELLO.
[00:21:22] CALLER: HOW ARE YOU DOING?
[00:21:26] YOUR GUEST SEEMS TO KNOW A LOT.
[00:21:32] THEY KEEP SAYING THE PRICE OF
[00:21:37] OIL IS TIED TO THE WAR. DO WE IMPORT OIL ANYMORE?
[00:21:40] EXACTLY HOW MUCH DO WE IMPORT? BECAUSE I HAVE HEARD IT'S BEEN
[00:21:44] VERY LITTLE SINCE BILL CLINTON. SO IF WE ARE NOT IMPORTING OIL,
[00:21:49] HOW DOES THIS OIL IN OTHER PLACES AFFECT US?
[00:21:53] THE PRICE OF OIL.
[00:21:54] GUEST: THAT IS A GOOD QUESTION,
[00:21:58] AND I HAVE COLLEAGUES WHO KNOW A LOT MORE ABOUT ENERGY MARKETS THAN I DO.
[00:22:03] BROAD BRUSH, YOU ARE RIGHT, THE
[00:22:04] U.S. EXPORTS MORE OIL THAN WE
[00:22:08] IMPORT, BUT BECAUSE OF REGIONAL CONSIDERATIONS, SHIPPING COSTS,
[00:22:11] AND OTHERS, WE STILL IMPORT SOME WILL.
[00:22:13] AND PLACES LIKE NEW ENGLAND
[00:22:17] DURING THE WINTER ESPECIALLY DEPEND VERY HEAVILY ON IMPORTS, BECAUSE THE PIPELINE
[00:22:20] INFRASTRUCTURE IS NOT THERE. THERE'S AN OLD TINY MARITIME
[00:22:25] SHIPPING LAW FROM 1920 THAT MAKES IT VERY DIFFICULT TO GET HEATING OIL.
[00:22:29] UP TO NEW ENGLAND DURING THE WINTER. SO THERE ARE ALL KINDS OF
[00:22:32] CONSIDERATIONS LIKE THAT THAT
[00:22:34] MEANS WE DO HAVE TO IMPORT SOME WELCOME EVEN IF WE DO PRODUCE
[00:22:38] ENOUGH TO BE SELF-SUFFICIENT. MARKETS ARE KIND OF WEIRD THAT
[00:22:41] WAY COULD WHEN YOU HAVE A CATASTROPHIC EVENT LIKE WHAT IS HAPPENING IN IRAN, WHERE ALL OF
[00:22:45] A SUDDEN, 20% OF THE WORLD'S OIL
[00:22:49] SUPPLY IS CONSTRICTED, THE U.S. USES HARDLY ANY OF THE OIL THAT IS COMING OUT OF THE STRAIT OF
[00:22:53] HORMUZ. PLACES LIKE CHINA AND INDIA ARE
[00:22:56] THE BIGGEST CUSTOMERS, AS WELL AS OTHER PARTS OF ASIA AND AFRICA.
[00:23:00] THE PROBLEM IS THAT WHEN YOU HAVE THAT KIND OF 20%
[00:23:03] STRANGULATION ON OIL MARKETS,
[00:23:07] THOSE PEOPLE HAVE TO GO SCRAMBLING FOR OTHER OIL.
[00:23:09] THAT INTERFERES WITH WHAT WE ARE TRYING TO IMPORT AS WELL.
[00:23:12] SO EACH PART OF THE WORLD INFLUENCES WHAT IS GOING ON IN
[00:23:15] OTHER PARTS OF THE WORLD, SO
[00:23:19] EVEN IF WE ARE NOT IMPORTING ANYTHING DIRECTLY FROM IRAN, WHAT IS GOING ON THERE WILL
[00:23:23] STILL AFFECT U.S. OIL MARKETS, REGARDLESS OF WHAT IS GOING ON
[00:23:25] WITH IMPORTS AND EXPORTS. THERE'S A LOT GOING ON, BUT I
[00:23:29] HOPE THAT HELPS CLEAR IT UP A LITTLE BIT. HOST: ADAM IN MARYLAND, INDEPENDENT LINE.
[00:23:32] CALLER: HEY. THANK YOU FOR TAKING MY CALL.
[00:23:37] WHAT I WANT TO SAY IS, AT THE END OF THE DAY, THAT THAT IS A
[00:23:40] SECONDARY MECHANISM OF ACTION ON THE ECONOMY. THE PRIMARY DRIVERS ARE TAXES,
[00:23:45] SPENDING, FOREIGN POLICY, ECONOMIC AND TRADE POLICY, YOU
[00:23:48] KNOW, WHEN THE REST OF THE
[00:23:51] GOVERNMENT IS NOT NECESSARILY
[00:23:53] DOING ITS JOB, WHY DO AMERICANS
[00:23:57] THINK THAT THE FED IS SOME SORT
[00:23:58] OF, YOU KNOW, MAGICIAN THAT
[00:24:02] MAGICALLY FIX IS WHAT EVERYBODY ELSE IS MESSING UP?
[00:24:05] I DON'T SEE THAT IT WORKS THAT WAY, AND I DON'T UNDERSTAND WHY
[00:24:08] PEOPLE DO NOT SEE THAT THE FED HAS LIMITED CAPACITY.
[00:24:09] GUEST: THAT'S ANOTHER VERY GOOD QUESTION.
[00:24:13] I WOULD ARGUE THAT THE PRIMARY DRIVER OF THE ECONOMY IS NOT GOING ON IN WASHINGTON, I WOULD
[00:24:17] ARGUE IT IS WHAT IS GOING ON ALL AROUND THE COUNTRY AND ALL
[00:24:20] AROUND THE WORLD. ENTREPRENEURS ARE THE DRIVING FORCE OF THE ECONOMY, THE IDEAS
[00:24:23] THEY COME UP WITH, NEW WAYS TO
[00:24:25] MAKE BETTER PRODUCTS,
[00:24:30] NEW PROCESSES TO ADAPT TO CHANGING CONDITIONS. WHAT IS GOING ON IN WASHINGTON
[00:24:34] POLICY WHITES CAN AFFECT THAT
[00:24:35] PRIMARY DRIVER -- POLICY-WISE IN
[00:24:44] AFFECT THAT PRIMARY DRIVER, BUT THEY CANNOT CONTROL EVERYTHING.
[00:24:47] IF YOU LOOK AT THE COVID INFLATION, FOR EXAMPLE, WE HAD
[00:24:50] THE 2% INFLATION TARGET, AND BACK THEN, INFLATION GOT AS HIGH
[00:24:54] AS 9%, MORE THAN QUADRUPLE THE TARGET.
[00:24:57] WELL, YEAH, THE FED STIMULATED
[00:25:01] THE ECONOMY, ROUGHLY QUADRUPLE THE RATE OF MONEY SUPPLY
[00:25:05] CREATION, SO IT MAKES SENSE TO BLAME THE FAT, EXCEPT, THAT WAS
[00:25:07] ALSO THE SAME PERIOD WHEN WE HAD
[00:25:11] ALL KINDS OF TRILLION DOLLARS IN SPENDING BILLS BEING PASSED BY
[00:25:15] BOTH THE TRUMP ADMINISTRATION --
[00:25:18] THE FIRST TRUMP ADMINISTRATION AND THE BIDEN ADMINISTRATION. WHEN THE GOVERNMENT RACKS OF THAT KIND OF DEBT, THE FEDERAL
[00:25:22] RESERVE HAS BEEN THE FINANCE IT. SO IS IT A PHYSICAL PROBLEM,
[00:25:25] WITH CONGRESS SPENDING
[00:25:30] DECISIONS? IS IT A THE FEDERAL RESERVE PROBLEM WITH THE MONETARY POLICY THEY CONDUCT?
[00:25:34] OR IS IT A LITTLE BIT OF BOTH? THERE'S AN ENDLESS TUSSLE BETWEEN THE TREASURY DEPARTMENT
[00:25:38] AND THE FEDERAL RESERVE. IS A LOT OF COLORFUL HISTORY
[00:25:41] WITH BIG PERSONALITIES AND EVEN A FORMAL ACCORD THAT WAS SIGNED
[00:25:44] BACK AS FAR AS 1951.
[00:25:48] IT'S ONE OF THOSE SITUATIONS WHERE EVERYTHING IS ENTANGLED. YOU HAVE ENTREPRENEURS DRIVING
[00:25:52] THE ECONOMY FORWARD AND DOING ALL THEY CAN. . YOU HAVE POLICYMAKERS IN
[00:25:56] WASHINGTON TRYING TO REGULATE AND DIRECT THINGS. AND THEN, OF COURSE, YOU HAVE
[00:26:00] THE TUSSLE BETWEEN THE FEDERAL RESERVE AND THE TREASURY
[00:26:04] DEPARTMENT ABOUT FINANCING THAT, TRYING TO MANAGE THE INFLATION RATE AND EVERYTHING ELSE THAT IS GOING ON. IT IS A LOT.
[00:26:08] HOST: MR. YOUNG, THERE IS A
[00:26:13] COVID-RELATED QUESTION FROM SAM IN ROME, GEORGIA, ASKING YOU TO
[00:26:16] EXPAND ON THE EFFECTS ANNULUS CHECKS HAD WHEN THEY WERE
[00:26:21] DELIVERED DURING COVID, AND HOW THAT MIGHT RELATE TO THE PROMISE
[00:26:24] BY THE PRESIDENT OF $5,000 IF REPUBLICANS WIN THE MIDTERMS.
[00:26:27] GUEST: THE QUESTION. I BELIEVE THERE WAS A $1200
[00:26:30] COVID CHECK.
[00:26:34] THOSE ENDED UP NOT HAVING AS MUCH OF AN EFFECT AS PEOPLE
[00:26:37] THOUGHT THEY WOULD COME UP BECAUSE INSTEAD OF SPENDING THOSE CHECKS RIGHT AWAY, WHICH
[00:26:40] WOULD HAVE CAUSED A WHOLE LOT OF
[00:26:44] INFLATION, PEOPLE ENDED UP SAVING A LOT OF THEM. THEY HAD SOME INFLATIONARY EFFECTS BUT NOT AS MUCH AS
[00:26:47] PEOPLE WOULD HAVE THOUGHT.
[00:26:50] NOW, COMPARE THAT TO THE $5,000
[00:26:54] CHECK THAT THE PRESIDENT JUST PROPOSED, IF THE ELECTION GOES THE WAY HE WANTS IT TO.
[00:27:01] LEAVE ASIDE THE APPEARANCE OF IMPROPRIETY. [LAUGHTER]
[00:27:04] I WILL LET THE LAWYERS TO SPEAK TO THE LEGALITY OR ILLEGALITY OF THAT.
[00:27:08] THAT IS NOT SOMETHING I'M KNOWLEDGEABLE ABOUT. I AM KNOWLEDGEABLE THAT THAT
[00:27:13] WOULD BE MORE THAN $1 TRILLION OF NEW SPENDING IN ONE FELL SWOOP.
[00:27:18] FOR A BIT OF CONTEXT, THE FEDERAL BUDGET WAS ON THE ORDER
[00:27:22] OF $7 TRILLION, AND WE JUST PASSED $40 TRILLION OF DEBT.
[00:27:26] THAT $40 TRILLION TO 2.5
[00:27:28] CENTURIES TO BUILD UP TO, AND HERE WE ARE ADDING ANOTHER $1
[00:27:32] TRILLION TO IT, IF THE PRESIDENT GOES THROUGH WITH THAT PLAN, IN
[00:27:35] ONE FELL SWOOP.
[00:27:37] YOU THINK THE FEDERAL RESERVE'S
[00:27:40] JOB IS TOUGH NOW. IF THEY HAVE TO SOMEHOW HELP
[00:27:44] FINANCE A FRESH ROUND OF TRILLION DOLLARS SPENDING,
[00:27:48] INFLATION IS GOING TO GO RIGHT BACK UP, AND NO ONE IS GOING TO BE HAPPY ABOUT THAT.
[00:27:51] HOST: MR. YOUNG, I'M CURIOUS,
[00:27:54] WHEN IT COMES TO LONG-TERM A FLEX ON INFLATION, YOU MENTIONED TARIFFS.
[00:28:00] -- LONG-TERM EFFECTS ON INFLATION, YOU MENTIONED TARIFFS.
[00:28:05] WHEN IT COMES TO THE BACK AND FORTH BETWEEN THE U.S. AND CANADA, HOW MUCH OF AN EFFECT
[00:28:08] DOES THAT HAVE? GUEST: WE ARE TALKING ABOUT $20
[00:28:12] BILLION OR SO OF GOODS AFFECTED OUT OF A $30 TRILLION ECONOMY ON THE U.S. SIDE.
[00:28:17] A LOT OF THE DAMAGE WILL BE TO SPECIFIC INDUSTRIES AND SPECIFIC
[00:28:21] PRODUCTS, BUT ALSO TO OUR
[00:28:24] FRIENDSHIP WITH PERHAPS THE STRONGEST ALLY THAT WE HAVE IN THE WORLD, AND THAT IS A VERY
[00:28:28] SERIOUS MATTER.
[00:28:31] SO, THE FACT THAT THE INFLATIONARY DAMAGE WILL BE
[00:28:34] SMALL, AND TO BE CLEAR, TARIFFS
[00:28:35] DO NOT BECAUSE PROPER
[00:28:39] INFLATION, BECAUSE WE DO NOT INCREASE THE NUMBER OF DOLLARS
[00:28:41] THAT EXIST OR HOW FAST THEY
[00:28:46] MOVE, THEY JUST RAISE THE PRICES OF INDIVIDUAL GOODS, LIKE CARS OR HOUSES OR MAPLE SYRUP OR YOU NAME IT. IT IS UNFORTUNATE, BUT IT IS
[00:28:51] ALSO NOT GOING TO BE HUGE ECONOMICALLY, IF YOU DON'T LIVE
[00:28:54] IN THE STATE OF MICHIGAN OR IN THE UPPER MIDWEST.
[00:28:57] HOST:HOST: LET'S HEAR FROM MICHIGAN, THEN, INDEPENDENT LINE. JOHN, HELLO.
[00:29:01] CALLER: HELLO, PEDRO.
[00:29:06] I WOULD JUST LIKE TO ASK HIM HOW THE SMALL BUSINESSES ARE BEING
[00:29:09] AFFECTED, BANKRUPTCY-WISE,
[00:29:14] THE ONES THAT HAVE ALREADY GOT UNDER AND THE ONES THAT ARE IN TROUBLE.
[00:29:17] I LIVE A LAKE ERIE HERE, SOUTH OF DETROIT.
[00:29:21] THANK YOU. GUEST: YEAH. THAT'S A GOOD QUESTION.
[00:29:26] ABOUT 90% OF JOBS CREATED ARE USUALLY OUT OF THE SMALL
[00:29:30] BUSINESS LEVEL, AND GIVEN HOW THE LABOR MARKET IS DOING WITH
[00:29:33] FULL IMPLEMENT AT 4.1%, YOU COULD DIG INTO THOSE
[00:29:37] UNEMPLOYMENT NUMBERS, BUT
[00:29:39] OVERALL, THE LABOR MARKET IS
[00:29:43] DEALING WITH A LOT BECAUSE OF SMALL BUSINESSES.
[00:29:44] TARIFFS, UNFORTUNATELY, DO STACK THE DECK AGAINST SMALL
[00:29:50] BUSINESSES, FOR EXAMPLE, IF YOU ARE A LARGER COMPANY LIKE A
[00:29:52] TARGET OR AN AMAZON, YOU
[00:30:00] CAN AFFORD OF COMPLIANCE OFFICERS OR THE STAFF YOU NEED TO WORK WITH U.S. CUSTOM DEPARTMENT TO GET REFUNDS AND THAT SORT OF THING, WHEREAS IF
[00:30:04] YOU ARE A ONE-MAN SHOP IN A
[00:30:05] SMALL DOWNTOWN, YOU PROBABLY DO
[00:30:09] NOT HAVE THE RESOURCES TO APPLY FOR REFUNDS AND DIFFERENT
[00:30:13] PORTALS THAT U.S. CUSTOMS HAS BEEN THAT THE BUILT-IN
[00:30:18] DISADVANTAGE FOR SMALL BUSINESSES.
[00:30:21] SMALL BUSINESSES WILL BE UNLIKELY TO WEATHER THE HIGH IMPORT COSTS.
[00:30:24] U.S. PAYS ABOUT DOUBLE THE WORLD
[00:30:26] PRICE FOR STEEL AND ALUMINUM.
[00:30:29] IF YOU ARE A SMALL MANUFACTURING
[00:30:33] COMPANY, AND IF YOU'RE IMPORT COST DOUBLED, YOU ARE GOING TO
[00:30:37] HAVE TO RAISE RISES, AND THAT
[00:30:40] WILL MAKE YOUR CUSTOMERS MORE LIKELY TO TURN TO OTHER SUPPLIERS INSTEAD, SO THAT IS TOUGH.
[00:30:45] DOING AWAY WITH TARIFFS WOULD BE A HUGE PRO-SMALL BUSINESS MOVE
[00:30:48] IN PARTICULAR. HOST: WE TALKED ABOUT THE AUGUST
[00:30:52] JOBS REPORT AND THE NUMBER OF JOBS GAINED. WHAT DID IT TELL US ABOUT THE
[00:30:56] WAGES? GUEST: WAGES ARE NOT KEEPING UP
[00:30:59] WITH INFLATION, AND THAT IS A
[00:31:02] TOUGH ONE, BECAUSE WE ARE
[00:31:03] LOOKING AT 3.1 PERCENT WAGE
[00:31:06] GROWTH OVER THE LAST YEAR VERSUS 3.4% CPI GROWTH.
[00:31:10] THE DIFFERENCE IS ABOUT .33 PERCENT. IF YOU TAKE AWAY WHAT HAS BEEN
[00:31:14] HAPPENING IN IRAN AND WITH
[00:31:16] TARIFFS, THAT CPI RATE WOULD BE WELL BELOW WHAT WAGES ARE DOING.
[00:31:20] IF IT WEREN'T FOR THOSE POLICY CHOICES, WAGES WOULD BE GROWING
[00:31:24] FASTER THAN INFLATION, AND
[00:31:29] PEOPLE'S PAYCHECKS IN REAL TERMS WOULD BE GROWING, AS WOULD THEIR
[00:31:31] PURCHASING POWER.
[00:31:35] SO IT IS A TOUGH SITUATION RIGHT NOW, AND THE FACT THAT IT IS AFFORDABLE MAKES IT ACTUALLY MORE PAINFUL.
[00:31:38] HOST: THIS IS DOLORES FROM LOUISIANA, REPUBLICAN LINE. GOOD MORNING.
[00:31:42] THANKS FOR CALLING. CALLER: THANK YOU FOR TAKING MY CALL.
[00:31:47] OF COURSE, I AM FROM LOUISIANA.
[00:31:51] I AM IN MY 80'S.
[00:31:56] I BELIEVE THAT WE HAVE ALWAYS
[00:31:59] BEEN A LARGE PART OF FURNISHING
[00:32:01] OIL AND GAS TO THE NATION, AND
[00:32:07] EVEN NOW, TO THE WORLD.
[00:32:10] I THINK THE PRESIDENT HAS BEEN
[00:32:14] VERY WISE IN SAYING THAT WE NEED
[00:32:19] TO "DRILL BABY DRILL."
[00:32:23] THIS IS SO IMPORTANT, AND EVERY
[00:32:27] STATE THAT HAS OIL AND GAS SHOULD BE SUPPORTING THIS.
[00:32:32] THE MORE THAT WE CAN DRILL, THE
[00:32:37] BETTER OFF THE WHOLE WORLD IS GOING TO BE.
[00:32:40] AND I ALSO HAVE A NEW NAME FOR
[00:32:44] THE PRESIDENT TO CONSIDER.
[00:32:49] IF YOU ADD ONE LETTER TO THE
[00:32:51] DEMOCRATS, DEMO -- AND ADD "N,"
[00:33:01] YOU GET THE DEMONCRATS.
[00:33:08] I LIKE THE DUMB-O-CRATS,
[00:33:15] BUT I ALSO LIKE MY DEMON-CRATS.
[00:33:18] THESE LOW REPUBLICANS, WHO GO
[00:33:23] ALONG WITH THE DEMOCRATS, I CALL
[00:33:23] THEM THE REPUBLICRATS.
[00:33:27] GUEST: GOOD QUESTION. THE BEST THING WE CAN DO IN THE
[00:33:31] SHORT RUN FOR GETTING ENERGY PRICES DOWN AND INCREASING
[00:33:34] SUPPLY IS, FRANKLY, GETTING OUT OF IRAN AND FINDING A WAY TO WRAP THAT UP.
[00:33:39] HERE AT HOME, THERE ARE A LOT OF OBSTACLES TO GETTING TO THE
[00:33:44] INTERVIEWEE RESOURCE -- THE
[00:33:45] ENERGY RESOURCES, NOT JUST OIL,
[00:33:48] BUT THE ENERGY RESOURCES WE HAVE. GETTING A PERMIT FOR A NEW
[00:33:52] PROJECT CAN TAKE YEARS.
[00:33:54] AND, FRANKLY, WITH THE UNSTABLE POLICY ENVIRONMENT WE HAVE, THAT
[00:33:57] THEY -- THAT IS A
[00:34:02] DISINCENTIVE FOR FOREIGN COMPANIES TO INVEST IN THE
[00:34:05] U.S. YOU ARE NOT GOING TO BUILD AN ELABORATE SUPPLY CHAIN IF COSTS
[00:34:09] ARE GOING TO CHANGE OVERNIGHT OR IF THERE IS A POLITICAL CHANGE IN YOUR SECTOR THAT MEANS YOU
[00:34:13] CANNOT DO WHAT YOU HAD PLANNED TO DO.
[00:34:15] SO WHILE ENERGY EXPLORATION AND
[00:34:19] UNLEASHING NEW CAPACITY IS A PRIVATE SECTOR PROJECT, IT
[00:34:22] DEPENDS A LOT ON, FRANKLY,
[00:34:25] RESTRAINT IN WASHINGTON,
[00:34:29] OFFERING A STABLE ENVIRONMENT WHERE THINGS ARE NOT GOING TO CHANGE ON A DIME, AND ALSO MAKING PERMITTING EASIER.
[00:34:34] THIS IS SOMETHING THAT THE OBAMA
[00:34:37] ADMINISTRATION EXPRESSED
[00:34:39] INTEREST TO COME AS WELL AS REPUBLICAN ADMINISTRATIONS, SO HOPEFULLY THERE IS SOME
[00:34:43] BIPARTISAN MOVEMENT ON PERMITTING. THAT WILL HELP NOT JUST ENERGY
[00:34:46] MARKETS BUT ALSO MAKE HOUSING MORE AFFORDABLE AND ALL KINDS OF OTHER PRODUCTS THAT PEOPLE
[00:34:50] DEPEND ON. HOST: IN THE SPIRIT OF PLANS AND
[00:34:53] WHAT THE GOVERNMENT IS DOING, WE HAVE SEEN THE TREASURY SECRETARY
[00:34:56] BUYBACK GOVERNMENT DEBT.
[00:34:59] WHAT IS THE PURPOSE OF THIS, AND HOW EFFECTIVE IS IT?
[00:35:01] GUEST: WELL, THAT IS LIKE
[00:35:05] PUTTING A BAND-AID ON A VERY, VERY SERIOUS WOUND.
[00:35:11] INTEREST RATES ON LONG-TERM DEBTS, YOU HAVE 10-YEAR AND
[00:35:14] 30-YEAR TREASURY BONDS THAT HAVE
[00:35:15] BEEN GOING UP AND UP AND UP.
[00:35:20] THAT IS A CONCERN FOR TWO REASONS. ONE, IT MAKES NATIONAL DEBT MORE EXPENSIVE TO PAY BACK. TWO, THE REASON INTEREST RATES
[00:35:23] ARE GOING UP IS BECAUSE PEOPLE ARE GETTING SCARED ABOUT U.S. GOVERNMENT'S FINANCIAL SITUATION.
[00:35:29] $40 TRILLION IN DEBT IS SERIOUS.
[00:35:32] AND IF THE GOVERNMENT WANTS TO ENTICE PEOPLE TO BUY 10 YEAR AND
[00:35:35] 30-YOUR BONDS, PEOPLE ARE NOT
[00:35:38] QUITE AS CONFIDENT NOW THAT THEY WILL GET THEIR MONEY BACK, SO.
[00:35:43] THE GOVERNMENT HAS TO OFFER A
[00:35:45] HIGHER INTEREST RATE, AND IT'S A
[00:35:48] LOT RISKIER THAN IT WAS A FEW YEARS AGO.
[00:35:55] SO WITH BUYBACKS, 4 BILLION DOLLARS, $6 BILLION ON $40
[00:35:59] TRILLION, NOT GOING TO DO MUCH,
[00:36:00] BUT IT IS ALSO NOT TREATING THE
[00:36:03] ROOT PROBLEM, WHICH IS TOO MUCH DEBT.
[00:36:06] THE GOVERNMENT NEEDS TO SERIOUSLY TACKLE ENTITLEMENT
[00:36:09] REFORM, NAMELY SOCIAL SECURITY AND MEDICARE. I DON'T KNOW WHAT THOSE CHANGES ARE GOING TO LOOK LIKE, BUT SOME
[00:36:13] CHANGES HAVE TO BE MADE.
[00:36:16] PAST POLITICIANS HAVE MADE
[00:36:17] PROMISES THEY CANNOT KEEP, AND
[00:36:21] THE TRUMAN ADMINISTRATION HAS ALREADY SAID IT'S NOT GOING TO TOUCH SOCIAL SECURITY OR MEDICARE, SO IT'S GOING TO HAVE TO WAIT FOR THE NEXT
[00:36:25] ADMINISTRATION. AND THAT'S WHY INTEREST RATES ARE CREEPING UP.
[00:36:29] THE GOVERNMENT HAS SIGNALED IT IS NOT SERIOUS ABOUT THE ROOT CAUSE OF TOO MUCH DEFICIT
[00:36:34] SPENDING, AND THAT IS AN ATTEMPT
[00:36:37] TO GOOSE INTEREST RATES FOR A DAY OR TWO WITH SMALL BOND
[00:36:40] BUYBACKS, NOT ONLY IS GOING TO FAIL TO MOVE INTEREST RATES ARE
[00:36:43] MORE THAN A DAY OR TWO, IT ALSO
[00:36:47] SHOWS THAT THE ADMINISTRATION IS UNSERIOUS ABOUT THE ROOT PROBLEM, WHICH IN THE LONG RUN
[00:36:50] CAN ACTUALLY MOVE INTEREST RATES HIGHER. A LITTLE BIT OF A PARADOX THERE,
[00:36:54] BUT MAINLY, WASHINGTON IS TO GET DOWN TO BUSINESS AND GET ITS FISCAL HOUSE IN ORDER.
[00:36:57] HOST: LET'S HEAR FROM SHEILA.
[00:37:00] SHE IS IN OHIO, DEMOCRAT LINE.
[00:37:02] CALLER: I WANT TO EXPLAIN HOW
[00:37:06] THE AMERICAN PEOPLE ARE PAYING THE TRUCK'S ILLEGAL TARIFF --
[00:37:09] TRUMP'S ILLEGAL TARIFFS TWICE.
[00:37:15] SUPREME COURT CHIEF JUSTICE JOHN ROBERTS FOUND THE TARIFFS ARE ILLEGAL. HE ORDERED REFUNDS TO
[00:37:19] BUSINESSES. SO WHEN YOU BUY A PRODUCT AT
[00:37:22] AMAZON, WE PAID THE TARIFF THE FIRST TIME.
[00:37:25] UNFORTUNATELY, AMAZON, THEY WERE
[00:37:28] GOING TO EXPLAIN HOW IT WORKED. I BUY AN ITEM FOR $100.
[00:37:33] IF THERE IS A 30% TARIFF, THAT
[00:37:35] MEANS I PAID $100 PLUS $30, AND
[00:37:40] ALSO I PAY A STATE TAX ON THAT WHOLE THING.
[00:37:42] AMAZON IS GOING TO CALL OUT THESE NUMBERS TO PEOPLE
[00:37:46] SEPARATELY, BUT TRUMP, YOU KNOW,
[00:37:48] THREATENED THEM AND SAID, NO, AND AMAZON FELL IN LINE.
[00:37:53] IT IS NOT CLEAR TO PEOPLE TO ATTAIN THOSE TARIFFS.
[00:37:58] SO WHEN WE BUY THE PRODUCTS, WE PAY THE TARIFFS.
[00:38:01] NUMBER TWO, WE PAY THE TARIFFS
[00:38:04] THE SECOND TIME ON THE SAME GOODS BECAUSE OF THE COURT-ORDERED REFUND.
[00:38:08] 100 BILLION DOLLARS WITH A B HAS ALREADY BEEN PAID BY US
[00:38:11] TAXPAYERS, WITH MUCH MORE TO COME, SO WE ARE NOT PAYING THE
[00:38:14] TARIFFS ONCE, WHEN THEY ARE
[00:38:18] COURT-ORDERED TO BE REFUNDED, WE ARE PAYING IT TWICE!
[00:38:22] I MEAN, IT IS OUTRAGEOUS! PEOPLE, WAKE UP!
[00:38:25] HOST: SHEILA, THANK YOU.
[00:38:29] WE WILL LET OUR GUESTS RESPOND TO THAT. GUEST: YEAH.
[00:38:34] TARIFFS ARE JUST BLATANTLY UNFAIR POLICY.
[00:38:36] YOU DID POINT OUT THAT WHEN SOME RETAILERS TRY TO SPECIFY TARIFF
[00:38:40] COSTS, THEY DID GET SOME POLITICAL PRESSURE FROM THE ADMINISTRATION. I THINK YOU AND I HAVE A
[00:38:45] SIMILARLY LOW OPINION OF THAT
[00:38:49] ACTION. OTHER RETAILERS ARE MORE EXPLICIT ABOUT ITEMIZING THEIR TARIFF COSTS THAT THEY HAVE TO PASS ON.
[00:38:52] AND, OF COURSE, SOME PEOPLE ARE GETTING REFUNDS, SOME PEOPLE ARE
[00:38:56] NOT. EVERY COMPANY IS DIFFERENT.
[00:38:59] THERE IS LITIGATION THAT COULD DRIVE ON FOR YEARS REGARDING THIS. IT IS A MESS, AND, OF COURSE,
[00:39:03] WHEN THE SUPREME COURT STRUCK
[00:39:07] DOWN THOSE EMERGENCY TARIFFS,
[00:39:10] THEY IMMEDIATELY REENACTED SAM
[00:39:13] E TARIFFS WITH ANOTHER
[00:39:16] STATUTE THAT GOT STRUCK DOWN.
[00:39:24] I PREDICT WHACK A MOLE, AND IT WILL COST YOU AND ME HUNDREDS OF MILLIONS OF DOLLARS UNTIL
[00:39:28] SOMEONE DOES SOMETHING ABOUT THE PROJECT -- THE PROBLEM.
[00:39:30] HOST: IF YOU'RE INTERESTED IN
[00:39:33] MORE FROM OUR G