Original Broadcaster Captioning (Enhanced). Treat it as a searchable index of what was broadcast, not a quotation record.
00:00:00ALSO AT TEN, THE SENATE WILL CONVENE AND WILL VOTE ON
00:00:03ADVANCING A MEASURE TO ESTABLISH A NATIONAL FRAMEWORK FOR DIGITAL
00:00:06ASSETS ON C-SPAN. THREE AT 9 A.M., FBI DIRECTOR KASH PATEL IS
00:00:10ON CAPITOL HILL TO TESTIFY
00:00:12BEFORE THE SENATE JUDICIARY
00:00:14COMMITTEE ABOUT LAW ENFORCEMENT, OPERATIONS AND PRIORITIES. AND
00:00:17AT 3 P.M., FORMER SPEAKER OF THE HOUSE KEVIN MCCARTHY'S OFFICIAL
00:00:21PORTRAIT WILL BE UNVEILED IN STATUARY HALL WITH REMARKS BY
00:00:24SPEAKER MIKE JOHNSON. FORMER DEMOCRATIC LEADER STENY HOYER
00:00:28AND OTHERS. YOU CAN ALSO WATCH LIVE COVERAGE OF THESE EVENTS ON
00:00:31C-SPAN. NOW, OUR FREE MOBILE
00:00:34APP, OR ONLINE AT C-SPAN .ORG.
00:00:41>> THE ROAD TO THE CAPITOL >> [MUSIC] >> RUNS THROUGH AMERICA'S BATTLEGROUND STATES, AND C-SPAN
00:00:45IS THERE. OUR CAMERAS ARE ON THE
00:00:47GROUND FOLLOWING THE CAMPAIGNS WHERE THE TOUGHEST RACES WILL
00:00:50DECIDE THE BALANCE OF POWER IN CONGRESS. WE'RE THE ONLY
00:00:54NATIONAL TELEVISION NETWORK PROVIDING THIS LEVEL OF UNFILTERED ACCESS TO THE
00:00:58CANDIDATES, THE VOTERS, AND THE
00:00:59ISSUES SHAPING CAMPAIGN 2026. NO
00:01:02COMMENTATORS TELLING YOU WHAT TO THINK. NO. PARTIZAN SPIN THE
00:01:06ROAD TO THE CAPITOL. ONLY ON C-SPAN.
00:01:10>> JOINING US FOR A DISCUSSION ON THE U.S. ECONOMY, RYAN YOUNG
00:01:13OF THE COMPETITIVE ENTERPRISE INSTITUTE. HE SERVES AS THEIR
00:01:15SENIOR ECONOMIST. GOOD MORNING
00:01:17TO YOU. >> GOOD MORNING. >> ONE OF THE REASONS WE INVITED
00:01:21YOU >> ON WAS TO TALK ABOUT INFLATION. AND ONE OF THE DATA
00:01:24POINTS THAT CAME OUT LAST WEEK WAS SOMETHING CALLED THE
00:01:28CONSUMER PRICE INDEX. HOW'S THE BEST WAY TO UNDERSTAND THAT? IN
00:01:30LAYMAN'S TERMS.
00:01:32>> THE WAY THEY CALCULATE THAT
00:01:35CPI IS TO TAKE A BASKET OF GOODS. PEOPLE TEND TO SPEND THIS
00:01:38MUCH OF THEIR BUDGET ON GROCERIES, THIS MUCH ON HOUSING
00:01:42AND TRANSPORTATION AND SO ON.
00:01:45AND WHAT THE DATA COLLECTORS DO IS THEY ASSEMBLE ALL OF THAT
00:01:49CHECK PRICES EVERY MONTH ON EACH OF THOSE DIFFERENT PRICES AROUND
00:01:52THE ECONOMY, AND THEY COME UP WITH A NUMBER TO SEE HOW MUCH
00:01:55PRICES OVERALL ARE GOING UP.
00:01:58>> AND SO WHEN YOU TAKE ALL THOSE FACTORS INTO EFFECT, WE
00:02:02SEE THE LATEST NUMBER AT 3.4%. THAT'S A NUMBER. BUT WHAT DOES
00:02:05IT 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
00:02:12UP A LOT FASTER THAN WE WANT THEM TO. THE FEDERAL RESERVE HAS
00:02:15A TARGET OF 2% GROWTH FOR
00:02:18INFLATION, AND WE'RE AT 3.4. BUT
00:02:21WHEN YOU DIG A LITTLE BIT DEEPER INTO THAT BASKET OF GOODS,
00:02:24THINGS ARE MOSTLY ON TARGET, EXCEPT FOR ENERGY. AND MOST OF
00:02:28THAT IS BECAUSE OF IRAN. AND THAT'S NOT SOMETHING THAT THE
00:02:31FEDERAL RESERVE CAN CONTROL,
00:02:32THAT'S CAUSING GAS PRICES, AND ESPECIALLY HEATING OIL PRICES.
00:02:36WITH WINTER NOW ON THE WAY TO GO
00:02:38UP MUCH, MUCH FASTER THAN OTHER PRICES.
00:02:41>> AND SO THAT CONTROL FROM THE FEDERAL RESERVE STRICTLY RELIES
00:02:45ON WHAT THEY'RE GOING TO DO WITH RATES THEMSELVES. WHAT DOES. SO WHEN YOU SEE THAT DATA,
00:02:48WHAT DOES IT MEAN FOR KEVIN WARSH AS HE MAKES THIS DECISION
00:02:51ABOUT WHAT TO DO WITH RATES?
00:02:53>> IT MAKES IT MORE LIKELY THAT
00:02:56AN INTEREST RATE INCREASE IS ON THE WAY. WHEN THE FEDERAL
00:03:00RESERVE WANTS TO TAME INFLATION, THEY RAISE INTEREST RATES,
00:03:03BECAUSE THAT SLOWS DOWN JUST A LITTLE BIT. HOW MUCH MONEY
00:03:06CIRCULATES THROUGH THE ECONOMY. SO RAISE RATES IF YOU WANT TO
00:03:09CONTROL INFLATION. BUT IF THE ECONOMY IS IN TROUBLE, YOU CUT
00:03:12RATES TO STIMULATE. THAT'S THE GENERAL THINKING AROUND THE
00:03:16FEDERAL RESERVE. >> AND SO YOU SAID THAT. TO WHAT
00:03:19DEGREE DO YOU THINK THAT'S LIKELY? AND WHAT FACTORS
00:03:23DETERMINE IF HE GOES THAT ROUTE? >> IT'S NOT CERTAIN THAT
00:03:26THEY'RE GOING TO RAISE INTEREST RATES TO TRY TO FIGHT INFLATION.
00:03:28BUT I THINK IT'S VERY LIKELY
00:03:32BETTING MARKETS HAVE IT AT ABOUT 87% CHANCE THAT ON WEDNESDAY
00:03:35THEY'RE GOING TO ANNOUNCE A RATE INCREASE. AND THE REASON
00:03:38THEY CAN DO THAT IS BECAUSE
00:03:41WHILE INFLATION IS TOO HIGH, THE
00:03:44TRADE OFF OF RAISING AN INTEREST RATE IS THAT YOU DO RISK SLOWING
00:03:48DOWN THE ECONOMY A LITTLE BIT, AT LEAST IN THE SHORT RUN. AND
00:03:52THE CPI AND THE OTHER INFLATION INDICATORS ARE NOT THE ONLY THING THE FED KEEPS AN EYE ON.
00:03:55THEY ALSO KEEP AN EYE ON THE EMPLOYMENT RATE, HOW FAST THE
00:03:59ECONOMY IS GROWING. AND WHILE THE ECONOMY IS NOT IN STELLAR
00:04:02SHAPE, UNEMPLOYMENT IS AT 4.1%.
00:04:06ANYTHING UNDER FIVE IS PRETTY GOOD. THE ECONOMY ISN'T GROWING
00:04:09GANGBUSTERS, BUT AT LEAST IT IS GROWING. WE'RE NOT IN A
00:04:12RECESSION, SO THAT GIVES THE FED A LITTLE BIT OF ROOM TO TRY TO
00:04:15FIGHT INFLATION. EVEN IF THAT DOES SLOW DOWN THE ECONOMY JUST
00:04:18A LITTLE BIT, THERE'S SOME ROOM TO SPARE. SO I THINK IT'S VERY
00:04:21LIKELY THEY DO RAISE RATES ON WEDNESDAY. >> AND YOU MENTIONED THE
00:04:24UNEMPLOYMENT RATE 162,000 JOBS
00:04:30ADDED LAST LAST MONTH, 4.1%. SO THAT'S A BUFFER, SO TO SPEAK. >> YEAH. THAT'S A REALLY GOOD
00:04:33WAY TO PUT IT. THE FED HAS A
00:04:37VERY TOUGH BALANCE TO STRIKE. IF THEY RAISE RATES THERE'S A TRADE
00:04:41OFF. IF THEY CUT RATES THERE'S A TRADE OFF. NO MATTER WHAT THEY
00:04:44DO THERE IS A TRADE OFF. SO IT'S NICE THAT THEY HAVE THAT
00:04:47BUFFER IN ORDER TO RAISE RATES. BECAUSE WE HAVE BEEN WE'VE HAD
00:04:50ABOVE TARGET INFLATION FOR MORE THAN FIVE YEARS IN A ROW. AND
00:04:54OVER THE LONG RUN, INFLATION COULD BE A LOT MORE DESTRUCTIVE
00:04:57THAN A RECESSION THAT LASTS,
00:04:58SAY, 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
00:05:05CONSUMER? YOU AND ME?
00:05:07>> FOR A LOT OF PEOPLE, THEY
00:05:10MIGHT SEE SLIGHT INCREASES IN THEIR CREDIT CARD INTEREST RATE.
00:05:13IF YOU'RE IN THE HOUSING MARKET, YOU MIGHT BE PAYING A
00:05:15HIGHER MORTGAGE. IF YOU ALREADY OWN YOUR HOME AND YOU'RE ON A
00:05:19FIXED RATE MORTGAGE, IT DOESN'T AFFECT YOU. UM, STUDENT LOANS,
00:05:23CAR PAYMENTS, THOSE SORTS OF THINGS CAN GO UP SLIGHTLY
00:05:26BECAUSE ALTHOUGH THE FEDERAL RESERVE DOES NOT CONTROL THOSE
00:05:29INTEREST RATES, THE ONE INTEREST
00:05:31RATE THEY DO CONTROL
00:05:47GAIN. SO PEOPLE BENEFIT IN THE LONG RUN?
00:05:49IS THAT THE PHILOSOPHY?
00:05:52AND PROBABLY SIMPLIFYING IT GREATLY, BUT GO AHEAD.
00:05:54GUEST: THAT IS THE GIST OF IT. THERE IS ALWAYS MORE TO THE
00:05:58STORY. INFLATION RIGHT NOW IS IN DECENT SHAPE. 2.4%.
00:06:02WHICH IS MORE THAN THE 2% TARGET.
00:06:04BUT NOT LIKE IT WAS DURING COVID
00:06:08WHEN THINGS WERE AT 9%. MOST OF THE ABOVE INFLATION
00:06:11PRICE INCREASES ARE FROM ENERGY PRICES BECAUSE OF IRAN AND ALSO
00:06:14TARIFFS AND BECAUSE OF WHAT IS
00:06:16GOING ON RIGHT NOW WITH CANADA.
00:06:20THE FEDERAL RESERVE CAN'T CONTROL THOSE THINGS. BUT IT CAN CONTROL A LITTLE BIT, SOME OF THE UNDERLYING
00:06:23CONDITIONS.
00:06:26TRYING TO TREAT THOSE BEST I CAN. HOST: THIS IS RYAN YOUNG.
00:06:29IF YOU WANT TO ASK ABOUT THE ECONOMY OR INFLATION RATES HE
00:06:33TALKED ABOUT OR OTHER MATTERS, CALL ON THE PHONE LINES.
00:06:37(202)748-8000 FOR DEMOCRATS. REPUBLICANS, (202)748-8001.
00:06:40INDEPENDENTS, (202)748-8002.
00:06:44IF YOU WANT TO SHARE YOUR THOUGHTS VIA TEXT, THAT IS
00:06:47(202)748-8003.
00:06:51MR. YOUNG, THE COMPETITIVE ENTERPRISE INSTITUTE, HOW DO YOU DESCRIBE IT?
00:06:55AND PHILOSOPHICALLY, WHEN YOU WOULD HAVE THESE DISCUSSIONS ABOUT INTEREST RATES AND THE
00:06:58LIKE.
00:07:00GUEST: WE ARE A THINK TANK BASED
00:07:03IN SEAT -- DC BUT I MYSELF LIVE IN THE CHICAGO AREA.
00:07:06WE FOCUS ON THINGS LIKE ECONOMIC FREEDOM AND ECONOMIC
00:07:10OPPORTUNITY. AND WE GENERALLY DON'T FAVOR
00:07:13HIGHER OR LOWER INTEREST RATES.
00:07:16I VIEW MONETARY POLICY IS A MATCHING GAME. IF YOU WANT STABLE, PREDICTABLE
00:07:19PRICES, SAY THE REAL ECONOMY
00:07:22GROWS BY 10% AND THE FED WANTS
00:07:24TO GROW THE MONEY SUPPLY ALSO BY
00:07:2710%, IT CAN DO THAT WITH INTEREST RATES AND WITH OTHER
00:07:30MEANS AS WELL. WE WANT STABLE, PREDICTABLE PRICES THAT PEOPLE CAN PLAN
00:07:33AROUND.
00:07:35THAT IS OUR MAIN GOAL. A STABLE ENVIRONMENT.
00:07:39HOST: ON THE DISCUSSION OF THE FEDERAL RESERVE, MR. YOUNG, ON
00:07:43THE SUNDAY SHOWS YESTERDAY, ONE OF THE THINGS TALKED ABOUT WAS THE POTENTIAL OF THE RATE HIKE
00:07:46AND I WANT TO PLAY A LITTLE BIT
00:07:47OF WHAT HE HAD TO SAY WHEN ASKED
00:07:50ABOUT IT ON CNN.
00:07:54>> PRESIDENT TRUMP AND I ACTUALLY THINK THAT THERE IS A
00:07:56REASON RIGHT NOW TO RAISE RATES
00:07:59AND WE ARE WILLING TO MAKE THE POLICY DISCUSSION PUBLIC.
00:08:02FOR EXAMPLE, JAKE, WHAT I'M
00:08:04SEEING IS, IF YOU LOOK AT THE PREVIOUS THREE MONTHS, THAN THE
00:08:08AVERAGE TOPLINE INFLATION NUMBER WAS ABOUT EIGHT.
00:08:11THAT WAS IN PART BECAUSE OF THE SURGE IN OIL PRICES DURING THE
00:08:14ISSUE IN THE GULF. OVER THE LAST THREE MONTHS,
00:08:18INFLATION ANNUALIZED IS ABOUT 1%. AND SO WHAT IS HAPPENING IS THE
00:08:22INFLATION PROGRESS WILL BE MADE
00:08:26BECAUSE OF POLICIES AND IS REALLY PHYSICAL IN THE DATA.
00:08:30YOU TAKE THAT. AND ADD TO THE FACT THAT WHEN I WORKED FOR ALAN GREENSPAN, ONE
00:08:33OF THE THINGS HE EMPHASIZED WAS THAT IT IS PRETTY IMPORTANT FOR
00:08:36THE FED TO LEAVE THINK -- TO LEAVE THINGS ALONE AHEAD OF THE ELECTION.
00:08:39IT HAS ONLY BEEN A COUPLE TIMES SINCE 2013 WHERE THE FED MADE A
00:08:43MOVE BECAUSE THEY WANTED TO
00:08:46PRESERVE THEIR INDEPENDENCE. BUT IF KEVIN AND THE COMMITTEE DECIDE -- WHATEVER THEY DECIDE,
00:08:50WE WILL 100% SUPPORT THEM.
00:08:54AND WE ARE GRATEFUL FOR A DEMOCRACY WHERE WE CAN SAY WITH
00:08:55OUR VIEW OF THE DATA.
00:09:01HOST: MR. YOUNG, THAT IS THE ARGUMENT HE MAKES.
00:09:04WHAT DO YOU MAKE OF IT? GUEST: THERE ARE TWO THREATS TO
00:09:08UNPACK. ONE IS THAT THE PRESIDENT NEARLY ALWAYS FAVORS LOWER INTEREST
00:09:11RATES. THAT MEANS STIMULUS. HE IS A STIMULUS MINDED KIND OF GUY.
00:09:15NOT AS CONCERNED ABOUT THE TRADE OFF OF THAT WHICH IS HIGHER
00:09:19INFLATION. THE SECOND THREAT IS THE
00:09:20ELECTION.
00:09:24KEVIN HASSETT WAS CONCERNED THAT IF THE FED MAKES A MOVE ON INTEREST RATES NOW, IT COULD AFFECT THE ECONOMY BEFORE THE
00:09:28ELECTION. IT TURNS OUT THAT IS NOT THE CASE.
00:09:31ANYTHING THE FED DOES NOW WILL TAKE SIX MONTHS, A YEAR OR EVEN
00:09:34LONGER FOR IT TO PERCOLATE
00:09:37THROUGH THE ECONOMY.
00:09:41THE WAY INTEREST RATES BECAUSE MONEY TO EITHER SPEED UP OR SLOW
00:09:43DOWN AS OPPOSED TO THE ECONOMY
00:09:47TAKES A LONG TIME TO WORK ITS WAY FROM WASHINGTON TO THE
00:09:51FINANCIAL SYSTEM, THEIR BOND AND OTHER FINANCIAL MARKETS.
00:09:54SO THE WINDOW FOR THE FED POTENTIALLY POLITICIZING ITS
00:09:56INTEREST DECISIONS PAST SEVERAL MONTHS AGO.
00:09:59ANYTHING THEY DO NOW ISN'T REALLY GOING TO SHOW UP IN THE ECONOMY UNTIL PROBABLY NEXT
00:10:03SPRING.
00:10:05HOST: HE SAID AT THE END THAT THE PRESIDENT AND THE WHITE
00:10:08HOUSE WOULD BE OKAY IF RATES WERE TO RISE.
00:10:10HOW MUCH DO YOU BUY THAT?
00:10:15GUEST: VERY KIND OF HIM TO SAY. THE FEDERAL RESERVE IS SUPPOSED
00:10:18TO BE AN INDEPENDENT INSTITUTION WITHOUT INPUT FROM THE PRESIDENT
00:10:21OR OTHER POLITICAL ACTORS. THERE IS A ROLE FOR OVERSIGHT
00:10:25CERTAINLY BUT CONGRESS PROVIDES THAT. TRADITIONALLY, PRESIDENTS HAVE
00:10:28LEFT THE FED A FREE HAND TO OPERATE MONETARY POLICY AS IT
00:10:32PLEASES. AND THE REASON FOR THAT IS BECAUSE EVERYWHERE YOU DO HAVE
00:10:35EXTENSIVE POLITICAL INTERFERENCE
00:10:37IN CENTRAL BANKS, YOU GET
00:10:39INFLATIONARY BASKET CASES LIKE
00:10:44ARGENTINA OR ZIMBABWE. PLACES LIKE TURKEY RIGHT NOW ARE
00:10:46DEALING WITH 20-30% INFLATION.
00:10:49OURS IS TOO HIGH AT 2.4, FOR THE CORE RATE.
00:10:53THAT GIVES YOU AN IDEA OF HOW DESTRUCTIVE POLITICAL INTERFERENCE IS.
00:10:57SO WHILE IT IS VERY KIND OF
00:11:00MR. HASSETT TO SAY THE PRESIDENT WILL BE OKAY WITH WHATEVER THE FEDERAL RESERVE DECIDES ON
00:11:04WEDNESDAY, THEY FRANKLY SHOULD
00:11:08NOT EVEN BE WEIGHING IN.
00:11:09HOST.
00:11:12IN MISSOURI, THIS IS THE REPUBLICAN LINE.
00:11:14JAMIE JOINSIN MISSOURI, REPUBLI,
00:11:18JAMIE JOINS US. YOU ARE ON WITH OUR GUEST. GOOD MORNING.
00:11:20CALLER: I DON'T GET IT.
00:11:25AMERICANS ARE STRUGGLING. OUR DOLLAR IS DEVALUED, SO WE
00:11:29CANNOT AFFORD GAS, SO WE HAVE TO INCREASE THE RATE. I CALL BS.
00:11:34I THINK THE FED IS PLAYING AGAIN, AND THE WHOLE THING IS PLAYING A GAME.
00:11:40PLEASE EXPLAIN TO ME LIKE I AM A KINDERGARTNER, BECAUSE ONE PLUS
00:11:44ONE DOES NOT EQUAL TWO HERE. LET'S RAISE EVERYTHING BECAUSE EVERYTHING IS RAISED.
00:11:50THE BANKS WILL BENEFIT BUT NOT THE PEOPLE. HOW DOES THIS WORK?
00:11:53GUEST: WELL, THE FEDERAL RESERVE
00:12:01IS NOT BECAUSE GAS PRICES. GAS PRICES ARE UP BECAUSE OF IRAN.
00:12:04EARLIER THIS YEAR, THE NATIONWIDE AVERAGE FOR GAS
00:12:06PRICES WAS $2.98 A GALLON, THE
00:12:11PUTTING ON WHERE YOU LIVE, IT MIGHT HAVE BEEN HIGHER OR LOWER.
00:12:14$2.98 NATIONWIDE. IT IS NOW AROUND FOUR DOLLARS,
00:12:18AND THAT IS ENTIRELY BECAUSE OF IRAN.
00:12:22THE FEDERAL RESERVE CAN CONTROL SOME THINGS GET A CANNOT CONTROL ALL THINGS.
00:12:25WHAT IT IS TRYING TO DO IS BRING INFLATION BACK DOWN, SO THAT
00:12:28WEIGHT GROCERY PRICES WILL STOP
00:12:31INCREASING AS FAST, GAS PRICES WILL STOP INCREASING AS FAST,
00:12:34AND, FRANKLY, A LOT OF THE PROBLEMS WE ARE SEEING WITH CAR
00:12:38PRICES, HOUSING PRICES, AND
00:12:42GROCERY PRICES, ARE ALSO DUE TO TARIFFS.
00:12:44LUMBER AND STEEL TERRORISTS CAN ADD THOUSANDS OF DOLLARS TO THE
00:12:47PRICE OF A NEW HOME -- STEEL
00:12:51TARIFFS CAN ADD THOUSANDS OF DOLLARS TO THE PRICE OF A NEW
00:12:55HOME, TO THE PRICE OF A NEW CAR.
00:12:59THE FEDERAL RESERVE'S ACTIONS TEND TO BE A LOT MORE GENTLER
00:13:01AND MORE LONG RUN, AND I DO NOT SEE HOW BANKS WOULD BENEFIT TOO
00:13:05MUCH FROM INTEREST RATE ADJUSTMENTS.
00:13:08HOST: IN IOWA, JILL, LINE FOR DEMOCRATS.
00:13:12HI. CALLER: HI.
00:13:15THE WORDS YOU ARE USING OUR "STABLE AND PREDICABLE," AND
00:13:19WHICH OF THOSE TWO WORDS WOULD YOU APPLY TO DONALD TRUMP?
00:13:23[LAUGHTER]
00:13:24GUEST: I WOULD SAY NEITHER, AND
00:13:28IT IS IMPORTANT TO INSULATE THE
00:13:32FEDERAL RESERVE FROM POLITICAL INTERFERENCE, TO BIND WITH A RULE.
00:13:35RIGHT NOW, EVERY SIX WEEKS WHEN
00:13:40THEY NEED TO MAKE INTEREST RATE DECISIONS, THEY ARE WINGING IT.
00:13:46THE 12-MEMBER COMMITTEE CAN MAKES ANY DECISION THEY WANT. I SPOKE EARLIER WHERE IF YOU
00:13:51WANT STABLE PRICES, EXTEND THE
00:13:52WILL GROWTH, EXTEND THE FED BY A
00:13:57MATCHING 10%.
00:13:59THE BEST WAY TO HAVE THAT KIND OF STABILITY AND PREDICTABILITY
00:14:01IS TO HAVE THE FED FOLLOW A POLICY, WHERE THEY ARE REQUIRED TO DO THAT.
00:14:05YOU COULD DO THAT WITH AN INTEREST RATE RULE OR WITH A
00:14:08MONEY SUPPLY TARGETING RULE OR WITH ANY OTHER RULE.
00:14:12EACH HAS THEIR PLUSES AND
00:14:20MINUSES. 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
00:14:24MORE PREDICTABLE, BUT I CAN ALSO GIVE THEM SOME MORE AMMUNITION
00:14:27WITH THE PRESIDENT, WHEN HE COMES KNOCKING ON THE DOOR,
00:14:30ASKING FOR LOWER INTEREST RATES, THEY CAN JUST SAY, I'M SORRY, SIR, I CANNOT DO THAT.
00:14:34WE CANNOT CUT RATES THE WAY
00:14:38YOU WANT US TO.
00:14:38HOST: RYAN YOUNG, YOU SPOKE TO
00:14:46THE FEDERAL RESERVE'S GOAL OF 2%. WHAT IS MAGIC ABOUT THAT NUMBER? WHY THAT NUMBER? GUEST: INHERENTLY, THERE IS
00:14:50NOTHING MAGICAL ABOUT IT. I THINK IT IS A LEGACY OF THE GREAT DEPRESSION, WHICH WAS
00:14:54CAUSED BY DEFLATION.
00:14:54THE MONEY SUPPLY WHEN THE
00:15:01DEPRESSION HIT ACTUALLY SHRANK BY ONE THIRD.
00:15:02WHEN YOU SHRINK THE MONEY SUPPLY
00:15:06BY ONE-THIRD, YOU WILL GET DEFLATION. THE REAL NUMBERS OF GOODS
00:15:10PRODUCED AND THE DOLLARS TO MATCH THEM THAT WAY MISMATCHED,
00:15:14SO YOU GOT NEARLY DOUBLE DIGIT DEFLATION.
00:15:16AND, WELL, WE KNOW HOW BAD THE
00:15:20GREAT DEPRESSION WAS.
00:15:21SO AS A WAY TO BIAS THE
00:15:25SYSTEM AGAINST ANOTHER GREAT DEPRESSION, THE FED HAS A BIAS OF 2%.
00:15:28THERE IS SOME DEBATE OF WHETHER THAT IS GOOD OR NOT, BUT THAT IS WHAT THEY ARE THINKING OF.
00:15:32HOST: WE'VE HEARD FEDERAL RESERVE MEMBERS SAY THEY ARE NOT
00:15:35INFLUENCED BY POLITICS.
00:15:39IN YOUR EXPERIENCE AND LOOKING AT THE RESERVE, IS THAT TRUE? GUEST: IT IS NOT TRUE.
00:15:42THEY ARE INFLUENCED BY POLITICS,
00:15:45SAME AS EVERY OTHER AGENCY IN
00:15:49GOVERNMENT. I DO THINK THE FEDERAL RESERVE HAS A BETTER TRACK RECORD OF
00:15:51STAYING POLITICALLY
00:15:55INDEPENDENT AND FOLLOWING THE DATA INSTEAD OF FOLLOWING THE PRESIDENT OR CONGRESS, BUT NOBODY IS PERFECT ABOUT IT.
00:15:59I DO NOT EXPECT PERFECTION FROM THIS BAD PIT ALTHOUGH I HAVE TO
00:16:03SAY, I LIKE WHAT I'M SEEING SO FAR OUT OF THE NEW CHAIRMAN, KEVIN WARSH.
00:16:07THERE WAS NEVER A QUESTION OF
00:16:08HIM BEING QUALIFIED.
00:16:12HE WAS PREVIOUSLY THE YOUNGEST PERSON ON THE BED POSING BOARD
00:16:16OF GOVERNORS. THE QUESTION IS, WILL HE BE HIS OWN MAN, OR WILL HE BE THE
00:16:18PRESIDENT'S MAN.
00:16:23SO FAR, HE IS BEING HIS OWN MAN. WE WILL FIND OUT MORE ABOUT
00:16:26THAT, ESPECIALLY AS THE WHITE HOUSE IS MAKING NOISE ABOUT CUTTING RATES.
00:16:30IF THEY RAISE RATES, IT MIGHT NOT JUST BE ABOUT THE DATA, IT
00:16:33MIGHT ALSO BE HIM MAKING A
00:16:37POLITICAL STATEMENT ABOUT HIM BEING INDEPENDENT. HOST: WHAT HAVE YOU SEEN SO FAR
00:16:42THAT SUGGESTS HE HAS HIS OWN MAN?
00:16:46GUEST:GUEST: HE IS CHOOSING TO PRIORITIZE FIGHTING INFLATION
00:16:48OVER OTHER CONSIDERATIONS.
00:16:52THE VET HAS TO BALANCE TWO MISSIONS, ONE IS FIGHTING INFLATION, THE OTHER IS FIGHTING UNEMPLOYMENT.
00:16:55ONE MAKES DECISIONS TO RAISE OR LOWER INTEREST RATES, IT CANNOT
00:16:58DO BOTH OF THOSE THINGS AT ONCE, BECAUSE THEY CONTRADICT EACH OTHER.
00:17:02THEY HAVE TO CHOOSE ONE OR THEY HAVE TO CHOOSE THE OTHER, AND
00:17:05WARS HAS BEEN VERY UPFRONT ABOUT
00:17:08, LIKE RIGHT NOW, HE CHOOSES
00:17:11INFLATION, AND HE HAS BEEN STICKING TO IT SO FAR. BECAUSE OF THE LAG TIME AND,
00:17:14FRANKLY, BECAUSE THE FED HAS NOT
00:17:16BEEN VERY BOLD ABOUT IT,
00:17:19THAT HAS NOT QUITE SHOWN UP IN THE DATA YET.
00:17:23SO FAR, EARLY SIGNS ARE ENCOURAGING. HOST: LET'S HEAR FROM JIM IN THE DATA. HI, JIM.
00:17:27CALLER: YES, GOOD MORNING.
00:17:31IT IS NICE TO HAVE SOMEONE TALK ABOUT NUMBERS IN A PEOPLE UNDERSTAND.
00:17:36EARLIER TODAY, WE HAD TWO WOMEN WHO CALLED IN WHO WERE TALKING
00:17:40ABOUT THE TAX COLLECTION,
00:17:44CORPORATIONS HAVING GONE DOWN A GREAT DEAL OVER THE PAST YEAR.
00:17:51THIS IS WHAT STRUCK ME ABOUT IT, AND THIS IS WHAT I THINK YOUR
00:17:54GUEST IS AN EXPERT ON NUMBERS, CAN ENLIGHTEN ME A LITTLE BIT.
00:18:00I WAS SURPRISED AT WHAT I
00:18:00THOUGHT WAS A VERY SMALL NUMBER,
00:18:07THE TAX AMOUNT OF CORPORATIONS.
00:18:09I'VE NEVER REALLY LISTENED TO ANYBODY ANSWER THIS QUESTION BEFORE.
00:18:14HOW MANY DOLLARS DO WE COLLECT
00:18:15FROM CORPORATIONS VERSUS FEDERAL
00:18:20TAX DOLLARS THAT ARE COLLECTED FROM INDIVIDUALS?
00:18:22FOR EXAMPLE, FOR EVERY DOLLAR OF
00:18:27CORPORATE DOLLARS, ARE WE COLLECTING, SAY, $.50 FROM AN
00:18:31INDIVIDUAL, OR IS IT THE REVERSE? CAN YOU JUST ENLIGHTEN ME ABOUT THIS?
00:18:36HOW MUCH OF THE FEDERAL INCOME TAX BURDEN, IN TERMS OF DOLLARS,
00:18:39NOT PERCENTAGES OR AMOUNTS, FOR
00:18:43SMALL BUSINESSES AND THAT KIND OF THING.
00:18:45FORTUNE 500 TYPE CORPORATIONS,
00:18:50HOW MUCH TAX DOLLARS DID THEY PAY LAST YEAR VERSUS HOW MANY
00:18:54TAX DOLLARS TO PEOPLE LIKE MYSELF AND YOU PAY, WHEN WE
00:18:58FILLED OUT OUR 1040'S? THAT'S MY QUESTION.
00:19:01HOST: HIM, THANKS A LOT.
00:19:03GUEST: YEAH. THE QUESTION.
00:19:07THE ANSWER IS CORPORATE TAX REVENUES ARE ABOUT $450 BILLION,
00:19:11SO I JUST LESS THAN HALF A TRILLION DOLLARS.
00:19:14INCOME TAX REVENUE IS AROUND $5 TRILLION PER YEAR, GIVE OR TAKE.
00:19:20SO THERE'S A LOT GOING ON THERE.
00:19:23ONE THING ECONOMISTS TRY TO REMIND PEOPLE ABOUT HIS
00:19:26CORPORATE TAXES GET PASSED ON.
00:19:27COMPANIES PASS ON THE COST, JUST LIKE AN AMERICAN COMPANY LIKE
00:19:31FORD OR GM MIGHT PAY A TARIFF ON
00:19:36STEEL THEY IMPORT, THEN THEY PASS THAT ONTO YOU, THE CAR BUYER, COMPANIES PASS ON THE
00:19:42COSTS SO FORD OR GM, HOWEVER MUCH THEY PAY IN
00:19:45CORPORATE TAX, THEN THEY
00:19:49IN PASS THAT ON TO THE CUSTOMER.
00:19:53IT IS NOT STICKING IT TO CORPORATIONS, IT IS TO OURSELVES.
00:19:58WE HAVE TO FIGURE OUT WAS OF OF
00:20:01CORPORATE TAX AS OPPOSED TO INDIVIDUAL TAX, SHOULD WE RELY
00:20:04ON ONE SOLELY OR THE OTHER? IN THE END OF IS INDIVIDUAL
00:20:08PEOPLE LIKE YOU AND ME WHO PAY CORPORATE TAX.
00:20:11BUT ABOUT HALF $1 TRILLION IN THAT COMPARED TO $5 TRILLION IN
00:20:15INDIVIDUAL TAXES. HOST: MR. YOUNG, WHEN THE ONE
00:20:18BIG BEAUTIFUL BILL WAS PASSED, THEY PROMISED 20%, GAVE THEM
00:20:22SOME INCENTIVES FOR, YOU KNOW, DEPRECIATION AND THINGS LIKE THAT.
00:20:25THE ADMINISTRATIONS AS ULTIMATELY THIS WOULD BE GOOD
00:20:27FOR COMPANIES AND ULTIMATELY GOOD FOR PEOPLE.
00:20:31WHEN YOU SEE THOSE THINGS HAPPEN NOW, CONSIDERING THE TIME IT HAS
00:20:34BEEN SINCE IT WAS PASSED, IS THERE EVIDENCE OF THAT? GUEST: NOT MUCH.
00:20:39ONE REASON IS THE POLICY CHANGES WERE PRETTY SMALL, AND THE OTHER
00:20:43IS, COMPARED TO OTHER COUNTRIES, THE U.S. ACTUALLY HAS A VERY
00:20:47HIGH CORPORATE TAX RATE.
00:20:49THE EU AVERAGE, FOR EXAMPLE, IS
00:20:52LOWER THAN OURS, IRELAND ESPECIALLY. THERE ARE LOTS OF OTHER PLACES
00:20:56AROUND THE WORLD WITH MUCH LOWER CORPORATE INCOME TAXES.
00:20:59SO, IN A WAY, I CERTAINLY HAVE
00:21:03OVERALL SEEN UNFAVORABLE OPINIONS OF THE ONE BIG BEAUTIFUL BILL ACT, BUT THE
00:21:06CORPORATE TAX PROVISIONS THAT HELP TO BRING IT ROUGHLY IN LINE
00:21:10WITH THE REST OF THE WALL, ALTHOUGH U.S. CORPORATE TAX BASE IS STILL ON THE HIGH SIDE.
00:21:13HOST: COMPETITIVE ENTERPRISE
00:21:19INSTITUTE'S RYAN YOUNG FOR THIS CONVERSATION. WILLIAM JOINS US FROM NEW JERSEY. HELLO.
00:21:22CALLER: HOW ARE YOU DOING?
00:21:26YOUR GUEST SEEMS TO KNOW A LOT.
00:21:32THEY KEEP SAYING THE PRICE OF
00:21:37OIL IS TIED TO THE WAR. DO WE IMPORT OIL ANYMORE?
00:21:40EXACTLY HOW MUCH DO WE IMPORT? BECAUSE I HAVE HEARD IT'S BEEN
00:21:44VERY LITTLE SINCE BILL CLINTON. SO IF WE ARE NOT IMPORTING OIL,
00:21:49HOW DOES THIS OIL IN OTHER PLACES AFFECT US?
00:21:53THE PRICE OF OIL.
00:21:54GUEST: THAT IS A GOOD QUESTION,
00:21:58AND I HAVE COLLEAGUES WHO KNOW A LOT MORE ABOUT ENERGY MARKETS THAN I DO.
00:22:03BROAD BRUSH, YOU ARE RIGHT, THE
00:22:04U.S. EXPORTS MORE OIL THAN WE
00:22:08IMPORT, BUT BECAUSE OF REGIONAL CONSIDERATIONS, SHIPPING COSTS,
00:22:11AND OTHERS, WE STILL IMPORT SOME WILL.
00:22:13AND PLACES LIKE NEW ENGLAND
00:22:17DURING THE WINTER ESPECIALLY DEPEND VERY HEAVILY ON IMPORTS, BECAUSE THE PIPELINE
00:22:20INFRASTRUCTURE IS NOT THERE. THERE'S AN OLD TINY MARITIME
00:22:25SHIPPING LAW FROM 1920 THAT MAKES IT VERY DIFFICULT TO GET HEATING OIL.
00:22:29UP TO NEW ENGLAND DURING THE WINTER. SO THERE ARE ALL KINDS OF
00:22:32CONSIDERATIONS LIKE THAT THAT
00:22:34MEANS WE DO HAVE TO IMPORT SOME WELCOME EVEN IF WE DO PRODUCE
00:22:38ENOUGH TO BE SELF-SUFFICIENT. MARKETS ARE KIND OF WEIRD THAT
00:22:41WAY COULD WHEN YOU HAVE A CATASTROPHIC EVENT LIKE WHAT IS HAPPENING IN IRAN, WHERE ALL OF
00:22:45A SUDDEN, 20% OF THE WORLD'S OIL
00:22:49SUPPLY IS CONSTRICTED, THE U.S. USES HARDLY ANY OF THE OIL THAT IS COMING OUT OF THE STRAIT OF
00:22:53HORMUZ. PLACES LIKE CHINA AND INDIA ARE
00:22:56THE BIGGEST CUSTOMERS, AS WELL AS OTHER PARTS OF ASIA AND AFRICA.
00:23:00THE PROBLEM IS THAT WHEN YOU HAVE THAT KIND OF 20%
00:23:03STRANGULATION ON OIL MARKETS,
00:23:07THOSE PEOPLE HAVE TO GO SCRAMBLING FOR OTHER OIL.
00:23:09THAT INTERFERES WITH WHAT WE ARE TRYING TO IMPORT AS WELL.
00:23:12SO EACH PART OF THE WORLD INFLUENCES WHAT IS GOING ON IN
00:23:15OTHER PARTS OF THE WORLD, SO
00:23:19EVEN IF WE ARE NOT IMPORTING ANYTHING DIRECTLY FROM IRAN, WHAT IS GOING ON THERE WILL
00:23:23STILL AFFECT U.S. OIL MARKETS, REGARDLESS OF WHAT IS GOING ON
00:23:25WITH IMPORTS AND EXPORTS. THERE'S A LOT GOING ON, BUT I
00:23:29HOPE THAT HELPS CLEAR IT UP A LITTLE BIT. HOST: ADAM IN MARYLAND, INDEPENDENT LINE.
00:23:32CALLER: HEY. THANK YOU FOR TAKING MY CALL.
00:23:37WHAT I WANT TO SAY IS, AT THE END OF THE DAY, THAT THAT IS A
00:23:40SECONDARY MECHANISM OF ACTION ON THE ECONOMY. THE PRIMARY DRIVERS ARE TAXES,
00:23:45SPENDING, FOREIGN POLICY, ECONOMIC AND TRADE POLICY, YOU
00:23:48KNOW, WHEN THE REST OF THE
00:23:51GOVERNMENT IS NOT NECESSARILY
00:23:53DOING ITS JOB, WHY DO AMERICANS
00:23:57THINK THAT THE FED IS SOME SORT
00:23:58OF, YOU KNOW, MAGICIAN THAT
00:24:02MAGICALLY FIX IS WHAT EVERYBODY ELSE IS MESSING UP?
00:24:05I DON'T SEE THAT IT WORKS THAT WAY, AND I DON'T UNDERSTAND WHY
00:24:08PEOPLE DO NOT SEE THAT THE FED HAS LIMITED CAPACITY.
00:24:09GUEST: THAT'S ANOTHER VERY GOOD QUESTION.
00:24:13I WOULD ARGUE THAT THE PRIMARY DRIVER OF THE ECONOMY IS NOT GOING ON IN WASHINGTON, I WOULD
00:24:17ARGUE IT IS WHAT IS GOING ON ALL AROUND THE COUNTRY AND ALL
00:24:20AROUND THE WORLD. ENTREPRENEURS ARE THE DRIVING FORCE OF THE ECONOMY, THE IDEAS
00:24:23THEY COME UP WITH, NEW WAYS TO
00:24:25MAKE BETTER PRODUCTS,
00:24:30NEW PROCESSES TO ADAPT TO CHANGING CONDITIONS. WHAT IS GOING ON IN WASHINGTON
00:24:34POLICY WHITES CAN AFFECT THAT
00:24:35PRIMARY DRIVER -- POLICY-WISE IN
00:24:44AFFECT THAT PRIMARY DRIVER, BUT THEY CANNOT CONTROL EVERYTHING.
00:24:47IF YOU LOOK AT THE COVID INFLATION, FOR EXAMPLE, WE HAD
00:24:50THE 2% INFLATION TARGET, AND BACK THEN, INFLATION GOT AS HIGH
00:24:54AS 9%, MORE THAN QUADRUPLE THE TARGET.
00:24:57WELL, YEAH, THE FED STIMULATED
00:25:01THE ECONOMY, ROUGHLY QUADRUPLE THE RATE OF MONEY SUPPLY
00:25:05CREATION, SO IT MAKES SENSE TO BLAME THE FAT, EXCEPT, THAT WAS
00:25:07ALSO THE SAME PERIOD WHEN WE HAD
00:25:11ALL KINDS OF TRILLION DOLLARS IN SPENDING BILLS BEING PASSED BY
00:25:15BOTH THE TRUMP ADMINISTRATION --
00:25:18THE FIRST TRUMP ADMINISTRATION AND THE BIDEN ADMINISTRATION. WHEN THE GOVERNMENT RACKS OF THAT KIND OF DEBT, THE FEDERAL
00:25:22RESERVE HAS BEEN THE FINANCE IT. SO IS IT A PHYSICAL PROBLEM,
00:25:25WITH CONGRESS SPENDING
00:25:30DECISIONS? IS IT A THE FEDERAL RESERVE PROBLEM WITH THE MONETARY POLICY THEY CONDUCT?
00:25:34OR IS IT A LITTLE BIT OF BOTH? THERE'S AN ENDLESS TUSSLE BETWEEN THE TREASURY DEPARTMENT
00:25:38AND THE FEDERAL RESERVE. IS A LOT OF COLORFUL HISTORY
00:25:41WITH BIG PERSONALITIES AND EVEN A FORMAL ACCORD THAT WAS SIGNED
00:25:44BACK AS FAR AS 1951.
00:25:48IT'S ONE OF THOSE SITUATIONS WHERE EVERYTHING IS ENTANGLED. YOU HAVE ENTREPRENEURS DRIVING
00:25:52THE ECONOMY FORWARD AND DOING ALL THEY CAN. . YOU HAVE POLICYMAKERS IN
00:25:56WASHINGTON TRYING TO REGULATE AND DIRECT THINGS. AND THEN, OF COURSE, YOU HAVE
00:26:00THE TUSSLE BETWEEN THE FEDERAL RESERVE AND THE TREASURY
00:26:04DEPARTMENT ABOUT FINANCING THAT, TRYING TO MANAGE THE INFLATION RATE AND EVERYTHING ELSE THAT IS GOING ON. IT IS A LOT.
00:26:08HOST: MR. YOUNG, THERE IS A
00:26:13COVID-RELATED QUESTION FROM SAM IN ROME, GEORGIA, ASKING YOU TO
00:26:16EXPAND ON THE EFFECTS ANNULUS CHECKS HAD WHEN THEY WERE
00:26:21DELIVERED DURING COVID, AND HOW THAT MIGHT RELATE TO THE PROMISE
00:26:24BY THE PRESIDENT OF $5,000 IF REPUBLICANS WIN THE MIDTERMS.
00:26:27GUEST: THE QUESTION. I BELIEVE THERE WAS A $1200
00:26:30COVID CHECK.
00:26:34THOSE ENDED UP NOT HAVING AS MUCH OF AN EFFECT AS PEOPLE
00:26:37THOUGHT THEY WOULD COME UP BECAUSE INSTEAD OF SPENDING THOSE CHECKS RIGHT AWAY, WHICH
00:26:40WOULD HAVE CAUSED A WHOLE LOT OF
00:26:44INFLATION, PEOPLE ENDED UP SAVING A LOT OF THEM. THEY HAD SOME INFLATIONARY EFFECTS BUT NOT AS MUCH AS
00:26:47PEOPLE WOULD HAVE THOUGHT.
00:26:50NOW, COMPARE THAT TO THE $5,000
00:26:54CHECK THAT THE PRESIDENT JUST PROPOSED, IF THE ELECTION GOES THE WAY HE WANTS IT TO.
00:27:01LEAVE ASIDE THE APPEARANCE OF IMPROPRIETY. [LAUGHTER]
00:27:04I WILL LET THE LAWYERS TO SPEAK TO THE LEGALITY OR ILLEGALITY OF THAT.
00:27:08THAT IS NOT SOMETHING I'M KNOWLEDGEABLE ABOUT. I AM KNOWLEDGEABLE THAT THAT
00:27:13WOULD BE MORE THAN $1 TRILLION OF NEW SPENDING IN ONE FELL SWOOP.
00:27:18FOR A BIT OF CONTEXT, THE FEDERAL BUDGET WAS ON THE ORDER
00:27:22OF $7 TRILLION, AND WE JUST PASSED $40 TRILLION OF DEBT.
00:27:26THAT $40 TRILLION TO 2.5
00:27:28CENTURIES TO BUILD UP TO, AND HERE WE ARE ADDING ANOTHER $1
00:27:32TRILLION TO IT, IF THE PRESIDENT GOES THROUGH WITH THAT PLAN, IN
00:27:35ONE FELL SWOOP.
00:27:37YOU THINK THE FEDERAL RESERVE'S
00:27:40JOB IS TOUGH NOW. IF THEY HAVE TO SOMEHOW HELP
00:27:44FINANCE A FRESH ROUND OF TRILLION DOLLARS SPENDING,
00:27:48INFLATION IS GOING TO GO RIGHT BACK UP, AND NO ONE IS GOING TO BE HAPPY ABOUT THAT.
00:27:51HOST: MR. YOUNG, I'M CURIOUS,
00:27:54WHEN IT COMES TO LONG-TERM A FLEX ON INFLATION, YOU MENTIONED TARIFFS.
00:28:00-- LONG-TERM EFFECTS ON INFLATION, YOU MENTIONED TARIFFS.
00:28:05WHEN IT COMES TO THE BACK AND FORTH BETWEEN THE U.S. AND CANADA, HOW MUCH OF AN EFFECT
00:28:08DOES THAT HAVE? GUEST: WE ARE TALKING ABOUT $20
00:28:12BILLION OR SO OF GOODS AFFECTED OUT OF A $30 TRILLION ECONOMY ON THE U.S. SIDE.
00:28:17A LOT OF THE DAMAGE WILL BE TO SPECIFIC INDUSTRIES AND SPECIFIC
00:28:21PRODUCTS, BUT ALSO TO OUR
00:28:24FRIENDSHIP WITH PERHAPS THE STRONGEST ALLY THAT WE HAVE IN THE WORLD, AND THAT IS A VERY
00:28:28SERIOUS MATTER.
00:28:31SO, THE FACT THAT THE INFLATIONARY DAMAGE WILL BE
00:28:34SMALL, AND TO BE CLEAR, TARIFFS
00:28:35DO NOT BECAUSE PROPER
00:28:39INFLATION, BECAUSE WE DO NOT INCREASE THE NUMBER OF DOLLARS
00:28:41THAT EXIST OR HOW FAST THEY
00:28:46MOVE, 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
00:28:51ALSO NOT GOING TO BE HUGE ECONOMICALLY, IF YOU DON'T LIVE
00:28:54IN THE STATE OF MICHIGAN OR IN THE UPPER MIDWEST.
00:28:57HOST:HOST: LET'S HEAR FROM MICHIGAN, THEN, INDEPENDENT LINE. JOHN, HELLO.
00:29:01CALLER: HELLO, PEDRO.
00:29:06I WOULD JUST LIKE TO ASK HIM HOW THE SMALL BUSINESSES ARE BEING
00:29:09AFFECTED, BANKRUPTCY-WISE,
00:29:14THE ONES THAT HAVE ALREADY GOT UNDER AND THE ONES THAT ARE IN TROUBLE.
00:29:17I LIVE A LAKE ERIE HERE, SOUTH OF DETROIT.
00:29:21THANK YOU. GUEST: YEAH. THAT'S A GOOD QUESTION.
00:29:26ABOUT 90% OF JOBS CREATED ARE USUALLY OUT OF THE SMALL
00:29:30BUSINESS LEVEL, AND GIVEN HOW THE LABOR MARKET IS DOING WITH
00:29:33FULL IMPLEMENT AT 4.1%, YOU COULD DIG INTO THOSE
00:29:37UNEMPLOYMENT NUMBERS, BUT
00:29:39OVERALL, THE LABOR MARKET IS
00:29:43DEALING WITH A LOT BECAUSE OF SMALL BUSINESSES.
00:29:44TARIFFS, UNFORTUNATELY, DO STACK THE DECK AGAINST SMALL
00:29:50BUSINESSES, FOR EXAMPLE, IF YOU ARE A LARGER COMPANY LIKE A
00:29:52TARGET OR AN AMAZON, YOU
00:30:00CAN 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
00:30:04YOU ARE A ONE-MAN SHOP IN A
00:30:05SMALL DOWNTOWN, YOU PROBABLY DO
00:30:09NOT HAVE THE RESOURCES TO APPLY FOR REFUNDS AND DIFFERENT
00:30:13PORTALS THAT U.S. CUSTOMS HAS BEEN THAT THE BUILT-IN
00:30:18DISADVANTAGE FOR SMALL BUSINESSES.
00:30:21SMALL BUSINESSES WILL BE UNLIKELY TO WEATHER THE HIGH IMPORT COSTS.
00:30:24U.S. PAYS ABOUT DOUBLE THE WORLD
00:30:26PRICE FOR STEEL AND ALUMINUM.
00:30:29IF YOU ARE A SMALL MANUFACTURING
00:30:33COMPANY, AND IF YOU'RE IMPORT COST DOUBLED, YOU ARE GOING TO
00:30:37HAVE TO RAISE RISES, AND THAT
00:30:40WILL MAKE YOUR CUSTOMERS MORE LIKELY TO TURN TO OTHER SUPPLIERS INSTEAD, SO THAT IS TOUGH.
00:30:45DOING AWAY WITH TARIFFS WOULD BE A HUGE PRO-SMALL BUSINESS MOVE
00:30:48IN PARTICULAR. HOST: WE TALKED ABOUT THE AUGUST
00:30:52JOBS REPORT AND THE NUMBER OF JOBS GAINED. WHAT DID IT TELL US ABOUT THE
00:30:56WAGES? GUEST: WAGES ARE NOT KEEPING UP
00:30:59WITH INFLATION, AND THAT IS A
00:31:02TOUGH ONE, BECAUSE WE ARE
00:31:03LOOKING AT 3.1 PERCENT WAGE
00:31:06GROWTH OVER THE LAST YEAR VERSUS 3.4% CPI GROWTH.
00:31:10THE DIFFERENCE IS ABOUT .33 PERCENT. IF YOU TAKE AWAY WHAT HAS BEEN
00:31:14HAPPENING IN IRAN AND WITH
00:31:16TARIFFS, THAT CPI RATE WOULD BE WELL BELOW WHAT WAGES ARE DOING.
00:31:20IF IT WEREN'T FOR THOSE POLICY CHOICES, WAGES WOULD BE GROWING
00:31:24FASTER THAN INFLATION, AND
00:31:29PEOPLE'S PAYCHECKS IN REAL TERMS WOULD BE GROWING, AS WOULD THEIR
00:31:31PURCHASING POWER.
00:31:35SO IT IS A TOUGH SITUATION RIGHT NOW, AND THE FACT THAT IT IS AFFORDABLE MAKES IT ACTUALLY MORE PAINFUL.
00:31:38HOST: THIS IS DOLORES FROM LOUISIANA, REPUBLICAN LINE. GOOD MORNING.
00:31:42THANKS FOR CALLING. CALLER: THANK YOU FOR TAKING MY CALL.
00:31:47OF COURSE, I AM FROM LOUISIANA.
00:31:51I AM IN MY 80'S.
00:31:56I BELIEVE THAT WE HAVE ALWAYS
00:31:59BEEN A LARGE PART OF FURNISHING
00:32:01OIL AND GAS TO THE NATION, AND
00:32:07EVEN NOW, TO THE WORLD.
00:32:10I THINK THE PRESIDENT HAS BEEN
00:32:14VERY WISE IN SAYING THAT WE NEED
00:32:19TO "DRILL BABY DRILL."
00:32:23THIS IS SO IMPORTANT, AND EVERY
00:32:27STATE THAT HAS OIL AND GAS SHOULD BE SUPPORTING THIS.
00:32:32THE MORE THAT WE CAN DRILL, THE
00:32:37BETTER OFF THE WHOLE WORLD IS GOING TO BE.
00:32:40AND I ALSO HAVE A NEW NAME FOR
00:32:44THE PRESIDENT TO CONSIDER.
00:32:49IF YOU ADD ONE LETTER TO THE
00:32:51DEMOCRATS, DEMO -- AND ADD "N,"
00:33:01YOU GET THE DEMONCRATS.
00:33:08I LIKE THE DUMB-O-CRATS,
00:33:15BUT I ALSO LIKE MY DEMON-CRATS.
00:33:18THESE LOW REPUBLICANS, WHO GO
00:33:23ALONG WITH THE DEMOCRATS, I CALL
00:33:23THEM THE REPUBLICRATS.
00:33:27GUEST: GOOD QUESTION. THE BEST THING WE CAN DO IN THE
00:33:31SHORT RUN FOR GETTING ENERGY PRICES DOWN AND INCREASING
00:33:34SUPPLY IS, FRANKLY, GETTING OUT OF IRAN AND FINDING A WAY TO WRAP THAT UP.
00:33:39HERE AT HOME, THERE ARE A LOT OF OBSTACLES TO GETTING TO THE
00:33:44INTERVIEWEE RESOURCE -- THE
00:33:45ENERGY RESOURCES, NOT JUST OIL,
00:33:48BUT THE ENERGY RESOURCES WE HAVE. GETTING A PERMIT FOR A NEW
00:33:52PROJECT CAN TAKE YEARS.
00:33:54AND, FRANKLY, WITH THE UNSTABLE POLICY ENVIRONMENT WE HAVE, THAT
00:33:57THEY -- THAT IS A
00:34:02DISINCENTIVE FOR FOREIGN COMPANIES TO INVEST IN THE
00:34:05U.S. YOU ARE NOT GOING TO BUILD AN ELABORATE SUPPLY CHAIN IF COSTS
00:34:09ARE GOING TO CHANGE OVERNIGHT OR IF THERE IS A POLITICAL CHANGE IN YOUR SECTOR THAT MEANS YOU
00:34:13CANNOT DO WHAT YOU HAD PLANNED TO DO.
00:34:15SO WHILE ENERGY EXPLORATION AND
00:34:19UNLEASHING NEW CAPACITY IS A PRIVATE SECTOR PROJECT, IT
00:34:22DEPENDS A LOT ON, FRANKLY,
00:34:25RESTRAINT IN WASHINGTON,
00:34:29OFFERING A STABLE ENVIRONMENT WHERE THINGS ARE NOT GOING TO CHANGE ON A DIME, AND ALSO MAKING PERMITTING EASIER.
00:34:34THIS IS SOMETHING THAT THE OBAMA
00:34:37ADMINISTRATION EXPRESSED
00:34:39INTEREST TO COME AS WELL AS REPUBLICAN ADMINISTRATIONS, SO HOPEFULLY THERE IS SOME
00:34:43BIPARTISAN MOVEMENT ON PERMITTING. THAT WILL HELP NOT JUST ENERGY
00:34:46MARKETS BUT ALSO MAKE HOUSING MORE AFFORDABLE AND ALL KINDS OF OTHER PRODUCTS THAT PEOPLE
00:34:50DEPEND ON. HOST: IN THE SPIRIT OF PLANS AND
00:34:53WHAT THE GOVERNMENT IS DOING, WE HAVE SEEN THE TREASURY SECRETARY
00:34:56BUYBACK GOVERNMENT DEBT.
00:34:59WHAT IS THE PURPOSE OF THIS, AND HOW EFFECTIVE IS IT?
00:35:01GUEST: WELL, THAT IS LIKE
00:35:05PUTTING A BAND-AID ON A VERY, VERY SERIOUS WOUND.
00:35:11INTEREST RATES ON LONG-TERM DEBTS, YOU HAVE 10-YEAR AND
00:35:1430-YEAR TREASURY BONDS THAT HAVE
00:35:15BEEN GOING UP AND UP AND UP.
00:35:20THAT IS A CONCERN FOR TWO REASONS. ONE, IT MAKES NATIONAL DEBT MORE EXPENSIVE TO PAY BACK. TWO, THE REASON INTEREST RATES
00:35:23ARE GOING UP IS BECAUSE PEOPLE ARE GETTING SCARED ABOUT U.S. GOVERNMENT'S FINANCIAL SITUATION.
00:35:29$40 TRILLION IN DEBT IS SERIOUS.
00:35:32AND IF THE GOVERNMENT WANTS TO ENTICE PEOPLE TO BUY 10 YEAR AND
00:35:3530-YOUR BONDS, PEOPLE ARE NOT
00:35:38QUITE AS CONFIDENT NOW THAT THEY WILL GET THEIR MONEY BACK, SO.
00:35:43THE GOVERNMENT HAS TO OFFER A
00:35:45HIGHER INTEREST RATE, AND IT'S A
00:35:48LOT RISKIER THAN IT WAS A FEW YEARS AGO.
00:35:55SO WITH BUYBACKS, 4 BILLION DOLLARS, $6 BILLION ON $40
00:35:59TRILLION, NOT GOING TO DO MUCH,
00:36:00BUT IT IS ALSO NOT TREATING THE
00:36:03ROOT PROBLEM, WHICH IS TOO MUCH DEBT.
00:36:06THE GOVERNMENT NEEDS TO SERIOUSLY TACKLE ENTITLEMENT
00:36:09REFORM, NAMELY SOCIAL SECURITY AND MEDICARE. I DON'T KNOW WHAT THOSE CHANGES ARE GOING TO LOOK LIKE, BUT SOME
00:36:13CHANGES HAVE TO BE MADE.
00:36:16PAST POLITICIANS HAVE MADE
00:36:17PROMISES THEY CANNOT KEEP, AND
00:36:21THE 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
00:36:25ADMINISTRATION. AND THAT'S WHY INTEREST RATES ARE CREEPING UP.
00:36:29THE GOVERNMENT HAS SIGNALED IT IS NOT SERIOUS ABOUT THE ROOT CAUSE OF TOO MUCH DEFICIT
00:36:34SPENDING, AND THAT IS AN ATTEMPT
00:36:37TO GOOSE INTEREST RATES FOR A DAY OR TWO WITH SMALL BOND
00:36:40BUYBACKS, NOT ONLY IS GOING TO FAIL TO MOVE INTEREST RATES ARE
00:36:43MORE THAN A DAY OR TWO, IT ALSO
00:36:47SHOWS THAT THE ADMINISTRATION IS UNSERIOUS ABOUT THE ROOT PROBLEM, WHICH IN THE LONG RUN
00:36:50CAN ACTUALLY MOVE INTEREST RATES HIGHER. A LITTLE BIT OF A PARADOX THERE,
00:36:54BUT MAINLY, WASHINGTON IS TO GET DOWN TO BUSINESS AND GET ITS FISCAL HOUSE IN ORDER.
00:36:57HOST: LET'S HEAR FROM SHEILA.
00:37:00SHE IS IN OHIO, DEMOCRAT LINE.
00:37:02CALLER: I WANT TO EXPLAIN HOW
00:37:06THE AMERICAN PEOPLE ARE PAYING THE TRUCK'S ILLEGAL TARIFF --
00:37:09TRUMP'S ILLEGAL TARIFFS TWICE.
00:37:15SUPREME COURT CHIEF JUSTICE JOHN ROBERTS FOUND THE TARIFFS ARE ILLEGAL. HE ORDERED REFUNDS TO
00:37:19BUSINESSES. SO WHEN YOU BUY A PRODUCT AT
00:37:22AMAZON, WE PAID THE TARIFF THE FIRST TIME.
00:37:25UNFORTUNATELY, AMAZON, THEY WERE
00:37:28GOING TO EXPLAIN HOW IT WORKED. I BUY AN ITEM FOR $100.
00:37:33IF THERE IS A 30% TARIFF, THAT
00:37:35MEANS I PAID $100 PLUS $30, AND
00:37:40ALSO I PAY A STATE TAX ON THAT WHOLE THING.
00:37:42AMAZON IS GOING TO CALL OUT THESE NUMBERS TO PEOPLE
00:37:46SEPARATELY, BUT TRUMP, YOU KNOW,
00:37:48THREATENED THEM AND SAID, NO, AND AMAZON FELL IN LINE.
00:37:53IT IS NOT CLEAR TO PEOPLE TO ATTAIN THOSE TARIFFS.
00:37:58SO WHEN WE BUY THE PRODUCTS, WE PAY THE TARIFFS.
00:38:01NUMBER TWO, WE PAY THE TARIFFS
00:38:04THE SECOND TIME ON THE SAME GOODS BECAUSE OF THE COURT-ORDERED REFUND.
00:38:08100 BILLION DOLLARS WITH A B HAS ALREADY BEEN PAID BY US
00:38:11TAXPAYERS, WITH MUCH MORE TO COME, SO WE ARE NOT PAYING THE
00:38:14TARIFFS ONCE, WHEN THEY ARE
00:38:18COURT-ORDERED TO BE REFUNDED, WE ARE PAYING IT TWICE!
00:38:22I MEAN, IT IS OUTRAGEOUS! PEOPLE, WAKE UP!
00:38:25HOST: SHEILA, THANK YOU.
00:38:29WE WILL LET OUR GUESTS RESPOND TO THAT. GUEST: YEAH.
00:38:34TARIFFS ARE JUST BLATANTLY UNFAIR POLICY.
00:38:36YOU DID POINT OUT THAT WHEN SOME RETAILERS TRY TO SPECIFY TARIFF
00:38:40COSTS, THEY DID GET SOME POLITICAL PRESSURE FROM THE ADMINISTRATION. I THINK YOU AND I HAVE A
00:38:45SIMILARLY LOW OPINION OF THAT
00:38:49ACTION. OTHER RETAILERS ARE MORE EXPLICIT ABOUT ITEMIZING THEIR TARIFF COSTS THAT THEY HAVE TO PASS ON.
00:38:52AND, OF COURSE, SOME PEOPLE ARE GETTING REFUNDS, SOME PEOPLE ARE
00:38:56NOT. EVERY COMPANY IS DIFFERENT.
00:38:59THERE IS LITIGATION THAT COULD DRIVE ON FOR YEARS REGARDING THIS. IT IS A MESS, AND, OF COURSE,
00:39:03WHEN THE SUPREME COURT STRUCK
00:39:07DOWN THOSE EMERGENCY TARIFFS,
00:39:10THEY IMMEDIATELY REENACTED SAM
00:39:13E TARIFFS WITH ANOTHER
00:39:16STATUTE THAT GOT STRUCK DOWN.
00:39:24I PREDICT WHACK A MOLE, AND IT WILL COST YOU AND ME HUNDREDS OF MILLIONS OF DOLLARS UNTIL
00:39:28SOMEONE DOES SOMETHING ABOUT THE PROJECT -- THE PROBLEM.
00:39:30HOST: IF YOU'RE INTERESTED IN
00:39:33MORE FROM OUR G