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Is Powell and the Fed losing credibility? · The Financial Exchange Show

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Speaker 2: Finishing up the week.
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Speaker 3: Here on the Financial Exchange is Chuck, Mike, and Tucker
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with you, and we're gonna kick things off today. Talking
1:20
about Jay Powell's comments from yesterday afternoon he was giving
1:25
a speech in Dallas. I believe it was at three
1:28
pm Eastern that that speech kicked off. And the quote
1:33
right here from him is pretty simple. The economy is
1:36
not sending any signals that we need to be in
1:38
a hurry to lower rates. The strength we are currently
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seeing in the economy gives us the ability to approach
1:43
our decisions carefully. Mike, you were me first, you tell me, uh,
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go ahead. It sounds like you're locked and loaded there, Chuck,
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I got something to say here. I know, I know
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Festivus isn't for another month and a half, but I
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got a whole lot of problems with Jay Powell here.
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And I say, this is someone who's been pretty pretty
2:03
darn complimentary of Jay Powell over the last twelve months.
2:07
But here's the thing, man, you cut by fifty basis points. Second, going, yeah,
2:12
you cut by fifty basis points less than two months ago,
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and you were, you know, talking about, hey, we need
2:19
to move quickly in order to make sure that you know,
2:22
the economy doesn't worse than.
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Speaker 2: YadA YadA, Mike.
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Speaker 3: You talk to any economist or any person who you
2:28
know understands interest rates out there. Does a half percentage
2:32
point cut typically do enough to stop a recession in
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its tracks?
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Speaker 4: No?
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Speaker 3: No, Typically, during recessions you see the FED cut anywhere
2:41
from like three to four percent. And it's only after
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that and after the recession runs its course, that you
2:47
start to see your recovery. So what bothers me here
2:50
is two months ago, Jay Powell and the Fed were like, hey,
2:54
we've got a real problem. Like we went from no
2:56
rate cuts to a half percent because we're really concerned
2:59
about where the economy is. And less than two months later,
3:03
less than sixty days later, it's, well, we think we
3:08
can just you know, we don't need to do too
3:09
much now. And this to me, what it speaks to
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in my humble opinion as someone who hasn't worked at
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the FED admittedly, and you know, some of my thoughts
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on what the Fed should do at different times are
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unorthodox to say the least and probably downright wrong to
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say the most. But man, if you're going from hey,
3:33
you know, almost red alert in September to gee, I
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don't know if we really need to do that much
3:40
in November.
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Speaker 4: You have no long term vision.
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Speaker 3: It really strikes me that there is either a lack
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of vision, as you note, or you're just.
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Speaker 2: Looking at the wrong things.
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Speaker 3: And why should we trust what you're saying about the
3:56
economy now because it could be different in two months
3:58
and what like, why should we believe what you are saying?
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Speaker 4: Yeah, the economy. I can't really think of a scenario
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other than the two month time period between February of
4:12
twenty twenty and April of twenty twenty where there could
4:16
be such a massive divergence in these signals that the
4:19
economy is sending, because yesterday, quote, the economy is not
4:23
sending any signals that we need to be in a
4:25
hurry to lower rates. You felt the exact opposite two
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months ago, jury to lower them. You hurried to lower
4:33
rates by cutting rates by fifty basis points, and granted
4:39
your language at the time was you know, we don't
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think this is extreme, but you did something that's abnormal
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two months ago. What has changed. And I'm with you there,
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and I think that unfortunately, this is not an outlier
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for this Federal Reserve. They have pretty consistently, i think,
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been way too beholden to the most recent data coming
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out rather than having a longer term outlook of what
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they think is happening with this economy.
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Speaker 2: Right, And this is the thing.
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Speaker 3: The economy does not move in a straight line, and
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it doesn't sit still. It's never something where like you
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get this sense in hearing J. Powell talk, and this
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probably isn't his intention, but you get the sense that
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he's like, yeah, we just want to, you know, keep
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the economy where it is. And it's like, dude, you
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can't just keep the economy where it is. It doesn't
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work like that. It's it's constantly evolving because millions of
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human beings are making decisions based on the information they
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have available to them, and that information is changing based
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on the decisions that humans made the day before. So
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the economy is never in the exact same place that
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it was a day ago, two days ago, a week ago,
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or two months ago. And sometimes you just need to like,
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here's the thing. The other thing that's bothersome on this
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almost a year ago. Beginning of this year, ten months
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inflation starts ticking up a little bit, and J.
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Speaker 2: Powell rightly at the time, might I add.
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Speaker 3: I'll give them credit where credits due, said, you know what,
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I think we need to look through this recent inflation uptick.
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I don't think it's real, and we just need to
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be patient and we think this will pass. And you
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know what happened, Michael Wyes, I just I just went
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full Michael there with you, so you know, I'm I'm.
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Speaker 4: No Charles, tell me what happened.
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Speaker 1: Here.
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Speaker 3: Here's what happened, Michael and Thomas. It was exactly as
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he expected. Hey, we can look through this because it's
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just a short term ripple and we don't need to
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pay attention to it. So the part that's most bothers
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some is we saw earlier this year that the Fed said,
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you know what, we're not going to be swayed by
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little variations from month to month, and now twice apparently
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in the second half of the it's been oh, gee,
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this is the economy's we got to throw some you know,
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throw another log on it. And then now it's well,
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maybe we should pull the logs off for not doing
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any more logs.
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Speaker 4: I'll tell you he's he's really giving Donald Trump some
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ammunition here as we head into twenty twenty five. And
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I hate to say it, because I think by and
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large his actions are justifiable.
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Speaker 2: Right.
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Speaker 4: What he's actually done this year, I think is reasonable
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and justifiable. But the way in which his opinion on
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the economy seems to shift month to month is problematic.
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And to set it up here, the argument that you
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are going to get from Donald Trump as president of
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the United States come twenty twenty five, to me is
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really obvious.
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Speaker 2: You J.
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Speaker 4: Powell, leading the Federal Reserve cut interest rates by seventy
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five basis points leading right up to the election. I
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get elected, and you say the economy is not sending
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any signals that we need to be in a hurry
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to lower rates. And the second I'm taking off as
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you stop cutting rates. We don't know that that's what
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he's going to do. They might still come down next year,
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but if it follows the way that Powell signaled yesterday,
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that could be the path in which case Donald Trump's
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going to rip him apart based on this, again, based
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on what I think is very confusing language, not actions.
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Language coming from the Federal Reserve right now.
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Speaker 2: He might not be able to fire J.
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Speaker 3: Powell, but he can probably make it to you know,
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uncomfortable enough to the point where Jay's like, do I
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really want to do this for the rest of the year.
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Speaker 4: I actually think that he will. I think he is
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for all of J. Powell's faults. I think that he
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is so staunchly immovable on the political influence piece that
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even if he's getting torn to shreds, I think he's
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going to do everything in his power to remain there.
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Not because he desperately wants to cling to power, but
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because he desperately wants the Federal Reserve to maintain its independence.
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So I respect to that part of the job that
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he does and the way he's speaking, But man, it
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is setting up for a cage match come early twenty
9:10
twenty five between these two, and I just don't think
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Ja Peal is doing himself any favors. And you know,
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we're not the first ones to critique him on this.
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There has been much written. Who keeps writing former PIMCO
9:23
guy in Bloomberg, Muhammadelarian just keeps I think kind of
9:28
hitting the nail on the head here, which is you
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can't just keep changing your opinion month after month based
9:35
on one data point about the economy, and that is
9:38
a little bit of what you're getting right now.
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Speaker 3: And again, what makes it so baffling to me is
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earlier this year he did what he needed to do,
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right yep, Q one inflation looks a little bit hotter. No,
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I don't need to raise rates, and that was the
9:54
right move because it was I'm going to look through
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what I'm seeing in this data because it's not enough
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to concern me.
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Speaker 2: And the the problem with Powell is that.
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Speaker 3: This, this having to walk back on what he has
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said is kind of a feature, not a bug, of
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his tenure. I mean, look, we can go all the
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way back to twenty eighteen when he was in there
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with Donald Trump during his first term. The end of
10:19
twenty eighteen, Remember the S and P five hundred is
10:21
in the process of falling twenty percent into the year
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end in twenty eighteen, and J. Powell asked about the
10:28
FED hiking rates and reducing its balance sheet, says, yep,
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we're on autopilot.
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Speaker 2: On that.
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Speaker 3: The Fed never hiked again and stopped its bond buying
10:37
or stopped its bond pro runoff immediately after the S
10:42
and P five hundred fell twenty percent, and Steve Mnusian,
10:45
who was Treasury Secretary at the time, came out on
10:47
Christmas Eve was like, Hey, there are no plumbing problems
10:50
in the financial system, and everyone's kind of like, what
10:52
do you mean?
10:53
Speaker 2: No one thought there were. And j Powell never raised interest.
10:57
Speaker 3: Rates again in that cycle, and he never let another
11:01
bond run off the balance sheet. They just reinvested the proceeds.
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So we've seen this a few times where Powell's been
11:08
forced to make these pivots because.
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Speaker 2: It's it's just not.
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Speaker 3: He he gets out over his skis when he talks.
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And again, it's kind of a feature, not a bug,
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Like you can know he's doing it when he's when
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he's doing it and be like, Okay, this is gonna
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be something he might have to walk back, but gosh,
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it really just kind of gets back to the whole
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thing that we've been talking about, which is sometimes it's
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better to just.
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Speaker 2: Do your job in the background and not talk so much.
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Speaker 4: Yeah, I would contrast this with Janet Yellen, and to
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be fair to drum Powell, he has faced a much
11:41
more challenging set of circumstances than Janet Yellen did during
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her tenure.
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Speaker 3: Right, Janet was press one button, Okay, keep raids low
11:49
and buy more bonds because the economy's garbage.
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Speaker 4: And so perhaps if she had been thrust so much
11:54
into the into the you know, into the public, she
11:57
would have made some of these same mistakes too. But
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I think back in she is a far less compelling speaker,
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but she was pretty darn careful about what she said.
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And I'm just not I just don't see that from
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from J. Powell recently.
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Speaker 3: Now, the real question that we're gonna need to ask
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here on this is, look, what is the height of
12:15
the next FED chair going to be?
12:17
Speaker 2: Ah?
12:17
Speaker 3: Yes, very important, great historical chart here Paul Vulker known
12:21
as tall Paul Paul was, And I only have them
12:24
in uh, in metric numbers for some reason, so I
12:28
don't know, it's just the chart that I have here.
12:30
It's all in metrics.
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Speaker 2: Okay.
12:32
Speaker 3: No, here we got we got the Imperial system. So
12:37
Paul Vulker was six foot nine. Interest rates at the
12:40
time the median tenure yield eleven point twenty nine. Alan
12:43
greenspan the next FED chair afterwards, Alan Greenspan was six
12:46
feet tall. Median interest rates six point one percent on
12:49
the tenure. Ben Bernake comes into office. Ben starting to
12:52
get a little bit shorter. He's five to nine. What
12:54
happens to the median yield on the tenure during his tenure?
12:57
Three point three six? Jenny Allen comes into office. Yellen
13:01
is in office, and Yellen is h five to three.
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She's a shrimp like me. I'm not five to three,
13:07
but i'm you know, the male equim. Basically, listen, when
13:11
I wear my my lifts, I'm taller than that.
13:13
Speaker 2: Michael Okay.
13:15
Speaker 3: So Jenny Yellen's five to three medium ten year yield
13:18
two point twenty seven. What happens when, uh, when Jay
13:23
Powell comes in? Jay's five eleven rates have moved up,
13:26
So the questions he's five to eleven six three. He
13:30
projects taller because of the purple tie. The real question
13:34
for President elect Trump is going to be six higher.
13:38
What is the height of the next FED chair?
13:40
Speaker 4: He's got short?
13:42
Speaker 2: You know, are you who you?
13:44
Speaker 3: If you really want rates low, you're bringing Danny DeVito in.
13:52
Speaker 4: It makes for much more entertaining press conferences.
13:55
Speaker 2: You know, it's Frank Reynolds.
13:58
Speaker 3: Danny DeVito as Frank Renolds be fantastic. In any case,
14:03
let's take a quick break here. When we come back,
14:04
we'll talk about the retail sales data that we saw
14:07
this morning.
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15:11
Speaker 2: Mike.
15:11
Speaker 3: We got retail sales data at eight thirty this morning.
15:14
It came in with a headline number of point four
15:17
percent month over month.
15:19
Speaker 4: UH.
15:19
Speaker 3: The core number excluding motor vehicles and gas stations came
15:24
in at point one percent. The the car side is
15:28
something that you just kind of throw out because it
15:30
can be skewed by you know, manufacturer incentives and deals
15:33
and things on a monthly basis. So generally most people
15:36
kind of toss that when you do that point one percent. Mike,
15:40
what was the inflation rate for UH for the month.
15:43
Speaker 4: Point three on core? Point two?
15:46
Speaker 3: UH is a negative real retail sales number two of
15:50
the last three, now, okay, outside of September, which was
15:54
revised up. You've got two out of the last three
15:57
retail sales numbers coming in kind of with you know,
16:01
not a you know, a thud, but just kind of well.
16:06
Speaker 2: I guess that is what it is.
16:07
Speaker 3: And so, you know, while the headline number was good, again,
16:12
you can't count on Americans buying cars at that rate
16:15
on a month in, month out basis, And so if
16:18
you look under the hood, if you'll see what I
16:20
did there, a lot of the underlying stuff is just
16:23
not great. Furniture and home furnishing stores continuing to see declines,
16:27
Electronics to applying stores with a little bit of a boost,
16:29
but still down two point three percent year over year.
16:32
So you say, okay, are they gonna, you know, just
16:34
grow a couple percent in perpetuity now?
16:36
Speaker 2: Probably not.
16:37
Speaker 3: Building material and garden supply stores point five percent, Food
16:41
and beverage stores point one, Health and personal care down
16:44
one point one, Clothing stores down point two, Sporting goods,
16:48
hobby and musical instrument and bookstores down one point one,
16:51
General merchandise stores point two. Miscellaneous store retailers. Remember that's
16:55
where we saw the big bump convenience stores heading into
16:59
the hurricanes that down one point six percent.
17:02
Speaker 2: Non store retailers point three.
17:04
Speaker 3: Food services and drinking places bounced back after people emerged
17:07
from said hurricanes with the point seven but again you
17:10
can't expect that to continue given that the twelve month
17:13
number there is four point three percent growth, So kind
17:16
of a meh retail report.
17:18
Speaker 2: It's fine, but not great, and not.
17:22
Speaker 3: Something that is indicative of a broad based, you know,
17:26
consumer driving this thing forward at the pace they did
17:30
in the third quarter.
17:31
Speaker 4: I was asked this morning by mac daniel if it
17:34
tells us anything about the holiday shopping season. My feeling
17:38
was probably not. When you take a look at the series,
17:41
it's somewhat volatile. You can have big upswings and downswings
17:44
and anyone in any one month. It also didn't indicate
17:48
to me that we are in the midst of a recession.
17:50
That's the other piece. You can sometimes glean from big
17:53
drops in retail sales. This is not that. Does it
17:56
tell you anything you chuck think about, you know, shopping
17:59
in November and December, because I would argue, we just
18:01
don't know yet.
18:03
Speaker 3: No, I wouldn't be surprised if November and December coming hot, though,
18:06
And the reason why. Anecdotally, I've talked to a few
18:09
people who are concerned about the potential for tariff implementation
18:13
in twenty twenty five, and they're saying, gee, you know,
18:16
I might buy that TV I've been looking at, you know,
18:18
this year instead of waiting a little bit longer because
18:21
I'm nervous about the price going up. Now I'm not
18:23
saying the price will go up, but I'm just saying
18:27
this is what I'm hearing anecdotally, and so I wouldn't
18:30
be surprised if in some of those you know, big
18:32
ticket items electronics and appliance stores, maybe you see an
18:35
uptick on something like that as a result of people
18:39
altering behavior trying to get ahead of a potential teriff implement.
18:42
Speaker 4: I would also say, just generally, we saw a bunch
18:45
of retail paralysis, at least discussed by some people and
18:49
executives ahead of the election. That's behind us.
18:51
Speaker 1: Now.
18:52
Speaker 4: I recognize there's half of the country that hates the results,
18:54
half the country that loves the results. But in either case,
18:57
shopping can be that therapy that was pushed off for
18:59
a peer of time, and that may come to swing
19:02
back in in November and December. Not to mention, prices
19:06
are just reasonable this year, right, You've got appliances, you've
19:10
got electronics that are again continuing that pre COVID trend
19:12
of getting cheaper, and we're not seeing that same price
19:15
shock on a lot of those items that we did
19:17
of the last few holiday shopping years.
19:19
Speaker 3: So that's what we saw in retail sales data this morning.
19:23
Speaker 2: Quick break here.
19:24
Speaker 3: When we come back, We've got Wall Street Watch, and
19:27
then it stop grocery prices when we return.
19:40
Speaker 1: Like us on Facebook and follow us on Twitter at
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TFE show. Breaking business news is always first right here
19:47
on the Financial Exchange Radio Network. Time now for Wall
19:53
Street Watch. A complete look at what's moving market so
19:56
far today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: The markets are in sell off mode to close out
20:02
the week as investors react to new remarks from Freed
20:05
chairman Jerome Powell regarding the pace of interest rate cuts.
20:08
Wall Street's also digesting retail sales data from October, where
20:13
sales climb zero point four percent last month, slightly better
20:17
than expectations of zero point three percent. Right now, the
20:21
Dow is down by two thirds of a percent, or
20:23
two hundred and seventy one points, SMP five hundred is
20:26
down sixty five points, just over one percent, and the
20:29
Nasdaq down three hundred and forty five points or one
20:33
and three quarters percent. Russell two thousand is down three
20:37
quarters of a percent. Ten Your Treasury yield is up
20:39
by five basis points a four point four to seven percent,
20:43
and crude oiled down by nearly two thirds of a percent,
20:46
rating at sixty eight dollars in twenty eight cents a barrel.
20:50
Domino's Pizza shares jumping by nearly two percent after Warren
20:53
Buffett's Berkshire Hathaway disclosed it had built a new steak
20:57
in the pizza chain, buying more than one zo point
21:00
two million shares, or an investment of about five hundred
21:03
and fifty million dollars. Berkshire also said it sold shares
21:08
of Alta Beauty, sending shares an Alta down by two percent. Meanwhile,
21:12
shares an Ali Baba down by two percent after the
21:15
Chinese e commerce giant posted better than expected quarterly earnings. However,
21:19
its sales disappointed as the company continues to grapple with
21:22
weaker consumer spending in China elsewhere. Pallanteer stock jumping by
21:27
six percent after the tech company said it would move
21:30
its listing to the NASDAQ from the New York Stock
21:33
Exchange and expects to be eligible for the NASDAQ one
21:36
hundred index and shares and Applied Materials down by eight
21:40
percent after the semiconductor equipment company reported a weaker than
21:44
expected sales outlook. I'm Tucker Silva and that's Wall Street.
21:49
Speaker 2: Watch Mike.
21:50
Speaker 3: It sure sounds like Berkshire Hathaways, you know, getting a
21:52
little bit.
21:53
Speaker 4: Unhealthier Domino's and DQ I'm ready for that tie up. Well,
21:58
and they moved away from that fruit company. Yeah, they're
22:02
still doubling down on Fruit of the Loom though.
22:04
Speaker 3: Oh well, as long as they got that then uh yeah,
22:06
we should be good. Let's talk a little bit about
22:09
grocery prices, you know, speaking of food piece in the
22:12
Boston Globe it's titled food prices worried most voters, but
22:15
Trump's plans likely won't lower their grocery bills. And it
22:20
gets at the fact that, look, ultimately, when you talk
22:23
about the cost of food, you're generally talking about two
22:29
real costs that go into them, the cost of labor
22:32
and the cost of fertilizer. Those are the two big
22:35
things that you are effectively spending on when you're talking
22:39
about food. Even if you're talking about like beef, prices
22:42
still boils down to fertilizer costs, because you're fertilizing in
22:45
order to grow the food to feed the cows.
22:46
Speaker 2: Like, it's just you know, the way it ends up working.
22:50
Speaker 3: So I think that when we look at this, it's
22:54
something where we first have to look at a where
22:56
does food actually come from in the US. And the
23:00
data in this piece is that as of twenty twenty one,
23:02
the US imported sixty percent of its fresh fruit, thirty
23:05
eight percent of its fresh vegetables, and ten percent of
23:07
its beef. So fruits and veggies heavily imported. So I think,
23:12
in looking at it, if you're trying to figure out, hey,
23:14
what's the mechanism for, you know, lowering these costs, there's
23:19
generally not much at the top down level that you
23:22
can do in order to get them down, unless you're
23:25
talking about, you know, significant subsidies, which I don't think
23:28
anyone in their right mind is saying, hey, let's throw
23:30
a bunch of farm subsidies out there in order to
23:33
get food prices down.
23:34
Speaker 4: Yeah. I'm just trying to think about this. So I
23:36
guess if you import that much, a strong dollar will
23:38
get you cheaper food and also kill any of the
23:40
manufacturing goals you have. Yeah, It's it's like everything has
23:45
a trade off, it does.
23:48
Speaker 3: It's something where there are no easy answers on this,
23:53
And ultimately I think that when we look at you know,
23:58
the path that food prices typically end up taking. It's again,
24:04
they can be volable because of you know, random things
24:07
that are completely outside of the government's control. Look at
24:10
the price that we're seeing on eggs right now, that
24:12
are you know, spiking again because of a bird flu situation.
24:15
Speaker 4: Right just in terms of where prices for groceries are.
24:20
Obviously the government tracks this data and publishes it according
24:23
to the Consumer Price Index Food at Home, which would
24:26
be primarily grocery prices. Here, the prices today compared to
24:31
twenty nineteen levels are twenty seven point one percent higher
24:37
than October of twenty nineteen. So just to frame that out,
24:40
like you know, we all know inflation's up, it feels
24:42
like twenty twenty five percent. Grocery prices in particular have
24:45
been called out as high inflation items, and you're correct
24:48
if you're feeling that way. It's twenty seven point one
24:51
percent higher now than five years ago. Quite frankly, I
24:56
don't think I've heard a single policy on the campaign
25:00
trail from either Trump or Harris that would genuinely bring
25:04
down grocery prices, And I think anything that's been talked
25:06
about there has been silly because Honestly, there isn't.
25:11
Speaker 3: If there were a magic wand that the president could
25:14
use to drop grocery prices, don't you think Joe Biden
25:17
would have tried to waive that wand at some point
25:20
in the last for three years.
25:21
Speaker 4: Yeah, one would think.
25:21
Speaker 3: So he's not just sitting there like, well, I could
25:25
push this button in lower grocery prices, but you know what,
25:28
screw it, Let's do the inflation.
25:30
Speaker 4: The questions that I have would be, you know, does
25:32
the Albertson's Kroger deal get scrutinized as heavily under the
25:36
Trump administration. I know it's already kind of worked through
25:38
the courts, so that one might not be or where
25:40
is that one? I think it's I think it's with
25:42
the courts right now.
25:43
Speaker 2: So with the courts.
25:44
Speaker 3: The piece that's going to be interesting on anti trust
25:47
is you know who actually gets along really well with
25:49
Lena Khan?
25:51
Speaker 4: Who is that?
25:52
Speaker 2: Jd Vance?
25:53
Speaker 3: Oh?
25:53
Speaker 4: Yeah, he's kind of complimented her a couple of times,
25:55
isn't it.
25:56
Speaker 3: Yeah, it's actually kind of interesting in terms of where
26:00
the DOJ goes on the anti trust side of things.
26:03
And I'm not saying that he'll and like that the
26:06
Trump administration will inherently keep Lena Khan around. But the
26:13
the idea that the Trump administration is going to become
26:16
just a rubber stamp for you know, larger mergers to
26:20
be allowed to go through, I think is something that's possible.
26:23
But we do have to be aware that there is
26:27
there is a substantial portion of the Republican Party, even
26:31
within you know, the Senate and the House, that has
26:35
actually wanted a little bit more activity on the anti
26:38
trust side of things as well. Josh Holly from Missouri
26:41
is another one who's kind of in the same boat.
26:43
So I'm not saying that.
26:45
Speaker 2: Lena CON's going to end up sticking around, but.
26:50
Speaker 3: I don't know that it's necessarily as much of a
26:52
rubber stamp as as initially it's been expected to be.
26:56
Speaker 4: We'll kind of have to see where things go at,
26:59
you know. In Yeah, I do think it's sector bisector, right.
27:02
I think there's been clearly some signals that in the
27:05
financial services area, in the energy area, Yeah, there may
27:09
be a more transactions in areas like groceries, in areas
27:14
like technology. Yeah, I think there's a lot more questions.
27:17
I think there's a fair bit more questions as to
27:19
how the Justice Department would treat a company like Google,
27:21
who's already been declared to monopoly by the Biden administration
27:25
Justice Department. Is somebody going to reverse that or try
27:27
and challenge that in the Trump administration?
27:29
Speaker 3: I have my doubts, right, I mean, even just think
27:32
about it from a political perspective. If if the Trump
27:36
administration reverses it, Who's who's like happy about that and
27:40
sharing that ruling aside from Google?
27:43
Speaker 4: You know, not many exactly, So I.
27:46
Speaker 3: Don't know what the the reason is for them to
27:49
necessarily abandon that case or you know, some of the
27:53
other ones that might be out there at the moment.
27:56
Let's take a quick break here. When we come back,
27:59
talk a little bit about Social Security and also the
28:03
Department of Government Efficiency. Hey, where can it actually maybe
28:07
do a little bit of good in trying to weed
28:09
out some of the excess spending in government.
28:12
Speaker 2: We'll talk about that when we return.
28:15
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28:49
Speaker 3: All right, michaelet's take a look at social Security. There
28:52
is a piece in the New York Times said, what
28:55
will happen to Social Security after Trump takes office? And
29:01
do we think there are going to be any changes
29:03
actually implemented to social Security during the upcoming term?
29:09
Speaker 4: The only one that I can possibly imagine will be
29:12
this web GPO conversation that's already moving its way through Congress.
29:16
If that gets delayed and does not pass under the
29:19
Biden administration, I could see its passing under the Trump administration.
29:23
This is, for your information, the winfall elimination provision and
29:26
the government pension offset, where currently if you receive certain
29:30
government pensions, you get a reduction in Social Security. But
29:35
I think your real question is, do I think that,
29:38
for instance, Donald Trump's campaign pledge to cut or eliminate
29:42
taxes on social Security will go through? Or do you
29:45
think any actual solutions to fixing social Security will go through?
29:48
My answer would be almost definitely not.
29:52
Speaker 3: It's it's been quite a while since we've had any
29:56
meaningful changes legislated into Social Security. The Social Security Administration
30:01
has done a couple of things here and there. We're
30:02
back in the twenty tens that they had, you know,
30:05
removed some of the strategies that families could use for
30:08
claiming it that used to be you know, interesting to people.
30:12
But from a legislative perspective, there just hasn't been anything
30:16
in what forty two years, thirty eight years somewhere in
30:20
that ballpark, like mid nineteen eighties is the last time
30:22
it's been touched. So to say, yes, there's gonna be
30:26
something that's legislated for Social Security, you know in the
30:29
upcoming administration.
30:32
Speaker 2: It's it's a big one, right.
30:35
Speaker 4: And you know the other part that I think is
30:37
a little bit of scare tactic stuff here, like everyone
30:42
that this web GPO bill that's moving its way through
30:45
right not receiving a whole lot of criticism out there,
30:48
and this is not something being pushed by the Donald
30:50
Trump administration. And yet you know, nonetheless, I hear everybody like, oh, yeah,
30:54
we definitely need to do this for our beneficiaries. And
30:56
I think that we can have an honest conversation about this.
30:59
But every single conversation we have about social security has
31:03
to do with how we can get beneficiaries more money,
31:06
rather than a genuine conversation about a fund that is
31:09
going belly up in eight years, Like I just don't
31:13
really understand it. And the same thing is happening with
31:16
the the weapon GPO debate. You know, I think it's
31:21
a reasonable debate to have as to whether or not
31:23
those pensioners should be entitled to more social security benefits.
31:27
But instead of having a realistic debate about how we're
31:31
then going to pay for that, it's merely give them
31:34
the money and yeah, we'll go, you know, we'll go
31:37
bust three months earlier or is it six months earlier,
31:40
I don't really recall. In any case, it's not a
31:43
It's not a good way to run any sort of
31:45
government program.
31:47
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32:49
Speaker 2: Micha.
32:49
Speaker 3: Let's talk a little bit about this Department of Government
32:54
efficiency that Elon Muskin Vivic Ramaswami are going to be
32:58
running again. It's something where I think there actually are
33:04
look that anyone who looks at the US government knows, hey,
33:08
there's there's some.
33:09
Speaker 2: Fat that you can get rid of. Is it two
33:11
trillion a year.
33:12
Speaker 3: Probably not, because that means that you have to get
33:14
rid of every discretionary spending dollar that you're spending and
33:17
then cut money from either DD, Medicare, Social Security, or
33:21
paying interest on the government debt in order to get
33:24
to two trillion dollars a year.
33:25
Speaker 2: So you're not gonna get that.
33:28
Speaker 3: I think where I'm a little bit disheartened about this
33:32
is that the stuff that's being talked about in terms
33:35
of cuts is not stuff that serious people discuss as
33:40
you know, a way to meaningfully improve government efficiency.
33:44
Speaker 4: What examples do you have here?
33:46
Speaker 3: I have a tweet from Elon Musk that he retweeted
33:50
today actually yesterday now sorry, and it's from so he
33:55
retweeted this. It's from the America Pack that he also runs,
33:59
and it's titled the Waste of twenty twenty three and
34:02
it lists maybe like twenty different items on it that
34:05
are nine hundred billion dollars in taxpayer waste and basically saying, look,
34:09
this is you know, money that we can go after, Mike,
34:11
do you know what number makes up about seventy percent
34:14
of that nine hundred billion on this list?
34:16
Speaker 4: No?
34:17
Speaker 3: Tell me interest on the national debt? How are you
34:20
gonna do that if you don't pay the interest on
34:22
the national debt. It's not called efficiency, it's called default.
34:26
Speaker 4: How is that even brought up as a really like
34:29
this is why I don't think this is like serious,
34:31
a serious effort other things.
34:35
Speaker 3: Okay, there's three different items titled how to ruin Expensive
34:38
Military Equipment Part one, two, and three, and it talks
34:41
about you know, engines, transmissions, and tank trends. And when
34:44
you actually dig down, it's like, yeah, like the Pentagon
34:46
spent two hundred million dollars basically blowing up or like
34:50
running these things in high stress situations to try to
34:53
find out where their limits are so they can improve
34:56
the tanks for the military. Sure, that's waste. That's called
35:01
like trying to improve the tank so that your soldiers
35:04
don't get killed.
35:04
Speaker 4: Yep.
35:05
Speaker 3: So again, I think that we can look at and
35:08
be like, hey, there's too many bureaucrats that we need
35:10
to cut red tape.
35:11
Speaker 2: But the stuff that is being talked.
35:13
Speaker 3: About is purely to try to generate outrage as opposed
35:17
to actually improving efficiency.
35:19
Speaker 4: Yeah, I think that's likely. What you will see is,
35:23
you know, I think that this is going to be
35:24
a department that is designed to make headlines, right, You'll
35:30
get you'll get people reporting or or or you know,
35:35
ratting out on a department to the government and look
35:37
how inefficient this is and this this will call attention
35:40
to that, and you'll have some lawmaker go after it
35:43
and pass the law saying, yeah, we're going to defund
35:45
this this program because look how stupid and inefficient and
35:48
silly it is. And that'll make some headlines, it'll make
35:52
Elon Musk happy, but ultimately it will do nothing to
35:56
actually control government spending.
35:57
Speaker 2: And here's the thing.
35:58
Speaker 3: If like, I'm a big believer that if you really
36:02
want a lever to pull to try to manage inflation
36:05
and and you know, create a situation where inflation is
36:09
lower reducing annual deficits, is it like if you can
36:14
go from running a six point one percent annual deficit
36:17
to running one that's you know, close to three or
36:19
four percent. I'm highly convinced that you can, you know,
36:23
make inflation something that you don't have to worry about
36:27
in this economy. But this is it, This is not
36:32
where the meat is. In my opinion. You can't just
36:35
be like, well, stop paying interest on the national debt,
36:38
like okay, good, good lucky.
36:42
Speaker 2: Good luck with that.
36:44
Speaker 4: Yeah, and stuff keeps getting written about this group as
36:48
though is going to be in fact pactful. And these
36:51
these you know, the one from Bloomberg today from this
36:55
is not bad piece from Tyler Cowen, like, oh, they
36:58
could really go after the Yes in my backyard movement
37:02
And totally.
37:03
Speaker 3: Tyler Cowen's a smart dude, But this isn't what they're
37:05
talking about, right, Like, yeah.
37:06
Speaker 4: They could go after you know, regulations when it comes
37:09
to zoning across the country, but they're not going to
37:11
do that. That's not even on the table. They could
37:14
go under the system of clinical trials for drugs. And
37:18
by the way, I know nothing about this, but it
37:20
seems to me like you gotta be really careful about
37:23
how you adjust how we do clinical trials in this country.
37:25
I'm sure there's problems with it, but I'm not sure
37:28
that these two individuals are going to be qualified to
37:31
assess all of that. But no, that's not what we're
37:34
talking about here. That's not the government spending waste that
37:37
anybody is focused on. Those are regulations that I tend
37:41
to agree we should look at in a totally but
37:44
that's not the focus of any of this, and that's
37:46
the problem totally.
37:47
Speaker 3: And there's there's also just a great quote that I
37:50
always come back to in terms of, you know, trying
37:52
to you know, move forward, which is, hey, if you
37:55
if you come across like an old fence while you're
37:57
walking around, spend a little bit time think about why
38:00
that fence was put up. Like, you might not know
38:03
what its purpose is now, but there might be a
38:07
historical reason. And so you just need to make sure that, hey,
38:10
we're not taking down a fence that's there for an
38:13
important reason. That's all I'm saying. Let's take a quick
38:17
break here. We got hour two coming up in just
38:20
a little bit.