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Kevin Hassett · The David Rubenstein Show

• 0:02
  Speaker 1: Kevin Hassett serves as the head of the National Economic Council,
• 0:06
  Speaker 1: which coordinates economic policy making at the White House. In
• 0:09
  Speaker 1: the first Trump term, he serves the head of the
• 0:11
  Speaker 1: Council of Economic Advisors. I had a chance to sit
• 0:14
  Speaker 1: down with Kevin recently to talk about the Federal Reserve
• 0:16
  Speaker 1: economic policy and also his prospects for being the next
• 0:20
  Speaker 1: chair of the Federal Reserve Board. Let's dig right into it.
• 0:23
  Speaker 1: The government shutdown. Is it going to have any impact
• 0:26
  Speaker 1: on the GDP or not?
• 0:28
  Speaker 2: Oh, for sure, it's going to have an impact on
• 0:31
  Speaker 2: this quarter GDP. That our estimate of the White House
• 0:35
  Speaker 2: is that each week that we were shut down is
• 0:38
  Speaker 2: worth about fifteen million dollars off of GDP. I think
• 0:42
  Speaker 2: the Golden guys have added all that up and guessed
• 0:45
  Speaker 2: that is between one and one and a half percent
• 0:48
  Speaker 2: reduction in the growth rate of GDP this quarter. So
• 0:52
  Speaker 2: I was kind of feeling good about a three percent
• 0:54
  Speaker 2: quarter before the shutdown. So I guess that means that
• 0:56
  Speaker 2: you think we'd be shooting in the one and a
• 0:58
  Speaker 2: half to two range now because of.
• 1:00
  Speaker 1: The GDP growth for the year, you think will be
• 1:02
  Speaker 1: between one and a half and more.
• 1:03
  Speaker 2: Oh, no, I'm talking about the fourth quarter, yeah, for
• 1:06
  Speaker 2: the year. Yeah, then we just have to average basically ten. Yeah,
• 1:11
  Speaker 2: so it'll be two something.
• 1:13
  Speaker 1: Now, the inflation rate has been around three percent, three
• 1:16
  Speaker 1: point one percent or something like that. Do you see
• 1:18
  Speaker 1: any chance of the Federal Reserve will get it down
• 1:20
  Speaker 1: to its target rate of two percent and near future?
• 1:23
  Speaker 3: Is that on realistic?
• 1:24
  Speaker 2: What happened is that the Biden administration it got very
• 1:27
  Speaker 2: high averaged five percent, was still in the high threes
• 1:32
  Speaker 2: when we came in. And now, like if you look
• 1:34
  Speaker 2: at the latest CPI, it surprised forty eight of Bloomberg's
• 1:39
  Speaker 2: people who forecast these things. On the downside, if you
• 1:42
  Speaker 2: adjust for a refinery that shut down, then you're kind
• 1:45
  Speaker 2: of looking in the point two range. And so I
• 1:47
  Speaker 2: think the inflation isn't all the way to where you
• 1:49
  Speaker 2: want it to be, but that the momentum is pretty directional.
• 1:53
  Speaker 2: And so I think that if you add to that
• 1:56
  Speaker 2: the basic idea that the policies that were precent right
• 2:00
  Speaker 2: now are increasing supply their supply side policies, that you
• 2:05
  Speaker 2: should expect that we could have growth like we're seeing
• 2:08
  Speaker 2: without picking up Phillip's curve effects and inflation.
• 2:11
  Speaker 1: So you may have noticed the President was calling on
• 2:14
  Speaker 1: the chairman of the Federal Reserve to lower interest rates.
• 2:17
  Speaker 3: And really he did, Yes, she did, And interest rates
• 2:23
  Speaker 3: have been lowered.
• 2:23
  Speaker 1: The last time the Federal Reserve FMC Committee met, they
• 2:27
  Speaker 1: lowered by twenty five basis points. There's a wide expectation
• 2:31
  Speaker 1: that the Federal Reserve Board might lower again in December.
• 2:34
  Speaker 1: Do you have a view on whether, if they've fed
• 2:36
  Speaker 1: does lower it should be twenty five basis points or
• 2:39
  Speaker 1: fifty basis points of the president? Or do you have
• 2:41
  Speaker 1: a view on what might be better for the economy.
• 2:43
  Speaker 2: Well, you know, first want to say that I have
• 2:46
  Speaker 2: high regard for Jay Powell. I've known him for a
• 2:48
  Speaker 2: long time, have had economic conversations with him many many
• 2:52
  Speaker 2: times during the last administration. In this time too. I
• 2:55
  Speaker 2: think at times he and I have had policy disagreevance.
• 2:58
  Speaker 3: You think it's more likely to do fifty than twenty.
• 3:00
  Speaker 2: I think they're not likely to do fifty giving but
• 3:02
  Speaker 2: more likely to.
• 3:02
  Speaker 3: Do twenty five. Would that satisfy the president? You think?
• 3:05
  Speaker 2: I think that the President thinks rates can be a
• 3:07
  Speaker 2: lot lower, and I agree with him on that.
• 3:09
  Speaker 1: You are one of five people that the Secretary of
• 3:11
  Speaker 1: Treasury has on a short list to be the next
• 3:13
  Speaker 1: chairman of the FEDER.
• 3:15
  Speaker 3: Why would you want to be chairman of the feder?
• 3:18
  Speaker 3: Right now?
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  Speaker 1: You get to work with the President every day and
• 3:20
  Speaker 1: he's not criticizing you at all.
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  Speaker 3: So are you sure you want that job?
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  Speaker 2: And you know it's a thing that first of all,
• 3:32
  Speaker 2: I have to say that I, as you know, feel
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  Speaker 2: like I'm the luckiest economist alive because I have the
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  Speaker 2: best job I think an economists could possibly have if
• 3:41
  Speaker 2: you spent your life doing economic policy, unless you're a
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  Speaker 2: monetary theorist. Being Director of the National Ecademic Council is
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  Speaker 2: my dream job. And if the President asked me to
• 3:52
  Speaker 2: be fed Cher, then of course I'll do it. But
• 3:56
  Speaker 2: if I'm not Fetchaer, don't be disappointed for me, because
• 3:58
  Speaker 2: I love the job that I have right now and
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  Speaker 2: I'm so honored to be able to work with the
• 4:01
  Speaker 2: President every day.
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  Speaker 1: Do you have any view on when the President might
• 4:04
  Speaker 1: make the decision or make it public?
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  Speaker 3: Would it be this year or next year?
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  Speaker 2: That I don't have a view on when the optical
• 4:09
  Speaker 2: time for that is, and I've not discussed that with
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  Speaker 2: the President. I think that people in Washington will understand that,
• 4:18
  Speaker 2: you know, a confirmation struggle for a position that's that
• 4:22
  Speaker 2: significant can be quite difficult. And then if it goes
• 4:29
  Speaker 2: on for a really long time, which, like I said,
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  Speaker 2: we think Jay probably isn't leaving until May, then that
• 4:35
  Speaker 2: just creates like a long period of you know, confirmation
• 4:40
  Speaker 2: struggles that can be pretty ugly. And so I don't
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  Speaker 2: know what the optimal timee is, but I would guess
• 4:46
  Speaker 2: that as soon as you do it, then the sort
• 4:50
  Speaker 2: of confirmation turmoil will begin.
• 4:52
  Speaker 1: Most presidents in the last twenty five years or so
• 4:55
  Speaker 1: have supported, in secretargy of treasures, supported what it's called
• 4:58
  Speaker 1: a strong dollar policy to have the dollar be really
• 5:01
  Speaker 1: strong and never support anything that would lower it. Is
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  Speaker 1: it fair to say you do not have a strong
• 5:05
  Speaker 1: dollar policy? Are you happy where the dollar is now?
• 5:08
  Speaker 2: If you look at the dollar chart, then you know
• 5:10
  Speaker 2: it's stronger now than it was when Trump left office,
• 5:14
  Speaker 2: but it's down a little bit from its peak. And
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  Speaker 2: I think the strong dollar policy is a sound policy.
• 5:21
  Speaker 2: And I think that, you know, basically, I don't almost
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  Speaker 2: say that if I were running any country anywhere, I
• 5:29
  Speaker 2: would want the currency to be sound, because we know
• 5:32
  Speaker 2: what happens to countries when the currency isn't sound, and
• 5:34
  Speaker 2: so I think if you want to have you know,
• 5:39
  Speaker 2: an inflation take care of your deficit, then you're on
• 5:44
  Speaker 2: the road to financial crisis. And so I think that
• 5:47
  Speaker 2: one of the ways that we can maintain fiscal discipline
• 5:50
  Speaker 2: is to be really committed to a strong dollar.
• 5:53
  Speaker 1: Right now, the budget deficit has generally been the last
• 5:57
  Speaker 1: couple of years about two trillion dollars a year more like, yes,
• 6:00
  Speaker 1: more or less, we spend roughly seven trillion dollars a year.
• 6:04
  Speaker 1: We've taken roughly five trillion a year, and we generally
• 6:06
  Speaker 1: have about two trillion deficit. Maybe it's coming down now,
• 6:09
  Speaker 1: but we have about thirty eight trillion overall of debt.
• 6:13
  Speaker 1: Do you see any way that to reduce that in
• 6:15
  Speaker 1: debtedness in the next couple of years or so, we're
• 6:18
  Speaker 1: realistically we're stuck with thirty eight trillion or rising a
• 6:21
  Speaker 1: little bit over the next couple of years.
• 6:23
  Speaker 2: Right well. To reduce the debt right that, you have
• 6:25
  Speaker 2: to run a surplus. And so the question is do
• 6:27
  Speaker 2: you reduce the debt relative to the target or not,
• 6:31
  Speaker 2: And we clearly are doing that with the big reductions
• 6:33
  Speaker 2: in the deficit, right now, and so I think that
• 6:37
  Speaker 2: those will continue. And I'm also extremely bulish about growth.
• 6:41
  Speaker 2: But it's not just growth that's doing it. It's the
• 6:44
  Speaker 2: fact that we have tariff revenue and we've got a
• 6:46
  Speaker 2: lot more spending restraint than's here in the past.
• 6:49
  Speaker 1: Now on the tariffs and the big in the president's
• 6:52
  Speaker 1: tariff policy. It's really important part of his economic revenue
• 6:56
  Speaker 1: because a lot of the revenue coming into the treasury
• 6:58
  Speaker 1: the president set is from tariffs. And if the Supreme
• 7:02
  Speaker 1: Court were a rule that the president's policy using the
• 7:05
  Speaker 1: nineteen seventy seven trade legislation were not to be appropriate
• 7:09
  Speaker 1: to raise this kind of revenue, what would the administration do.
• 7:13
  Speaker 2: We're confident that we're going to win the case. What
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  Speaker 2: we're using is emergency authority, and so the first thing
• 7:18
  Speaker 2: you want to say as well, is an emergency. And
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  Speaker 2: it's an emergency I could think of for two reasons.
• 7:23
  Speaker 2: One is fentanyl and the hundreds of thousands of deaths
• 7:26
  Speaker 2: from fentanyl, and two is you know, my friend Angus
• 7:30
  Speaker 2: Eaton wrote this book with his wife and case about
• 7:33
  Speaker 2: Deaths of Despair, about how the massive trade deficits we've
• 7:36
  Speaker 2: had because China's dumping stuff everywhere and wiping out towns
• 7:40
  Speaker 2: and shutting down factories, you know, the deaths of despair.
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  Speaker 2: There's like a whole best selling book by Nobel Prizewitter
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  Speaker 2: about that. And so I think the case that both
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  Speaker 2: the sustained trade deficit because China and other countries have
• 7:55
  Speaker 2: a policy to create jobs in their own country by
• 7:58
  Speaker 2: selling stuff as cheap as possible to the less that,
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  Speaker 2: I think that the emergency case is really really solid.
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  Speaker 2: And so then the question is when the law says
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  Speaker 2: that we have the authority to regulate trade, then does
• 8:10
  Speaker 2: that mean tariffs? Since it says regulate trade but it
• 8:12
  Speaker 2: doesn't say the word tariff. And I think that that's
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  Speaker 2: a pretty dry case too, because if you're going to
• 8:17
  Speaker 2: regulate tariff, for example, this came up in the oral arguments. Well,
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  Speaker 2: one thing you could do to regulate tariffs would be
• 8:23
  Speaker 2: an embargo, and a tariff is less significant than an
• 8:27
  Speaker 2: a bargo. So if you could do it a bargo,
• 8:28
  Speaker 2: then it's really you could do a tariff, or to
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  Speaker 2: make the economist argument that you could definitely do a quota.
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  Speaker 2: No one would challenge that.
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  Speaker 1: Now, most people in your profession economics profession would say
• 8:38
  Speaker 1: that a tariff is a tax, and it's somewhat inflationary.
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  Speaker 3: Is that your view that tariffs are inflationary.
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  Speaker 2: The first thing is that if there is a price effect,
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  Speaker 2: it's not inflationary. It's a level adjust effect. So you
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  Speaker 2: have a tariff, and then that if it has a
• 8:52
  Speaker 2: price effect, it changes the price and whatever that price changes,
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  Speaker 2: that causes the inflation or deflation, whatever that happens because
• 8:59
  Speaker 2: of the price of back to the tariff, and then
• 9:01
  Speaker 2: the tariff, unless of changes, doesn't do that again. And
• 9:03
  Speaker 2: so it's not an inflationary thing. It's a level adjust thing.
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  Speaker 2: And my intuition from the beginning has been that it
• 9:10
  Speaker 2: wouldn't be inflationary because the reason we have the emergency
• 9:14
  Speaker 2: that we're talking about is that we have inelastic supply
• 9:20
  Speaker 2: of Chinese goods and other goods from all the countries
• 9:23
  Speaker 2: that are dumping stuff into the US. And so by definition,
• 9:26
  Speaker 2: if you put a tariff or attacks on inelastic supply,
• 9:31
  Speaker 2: then the inelastic supplier bears the thing.
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  Speaker 1: The theory behind tariffs, I thought, was to even out
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  Speaker 1: the trade balance and to some extent and maybe raise revenue.
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  Speaker 1: But President has imposed tariffs on countries with which we
• 9:42
  Speaker 1: have a surplus like Brazil. What's the theory behind imposing
• 9:47
  Speaker 1: a surplus or a tariff?
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  Speaker 3: I wanted something like Brazil.
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  Speaker 2: Tariff policy is very complicated and there are a lot
• 9:53
  Speaker 2: of things that we're studying carefully right now in this
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  Speaker 2: kind of space. Tariffs, if you want them to have
• 10:00
  Speaker 2: and affect the economy, you have to really really look at,
• 10:03
  Speaker 2: like how are we really collecting the tariff, and how
• 10:06
  Speaker 2: are we making sure that people aren't transhipping, people aren't
• 10:10
  Speaker 2: funneling things through subsidiaries and so on, and so I
• 10:14
  Speaker 2: think that that's part of the overall calculus.
• 10:16
  Speaker 1: If the president does not select you, are you going
• 10:19
  Speaker 1: to stay in the administration in your current position.
• 10:21
  Speaker 3: Yes, if he does.
• 10:23
  Speaker 2: Mean if he decides that's the righteous.
• 10:25
  Speaker 3: Okay, if he wants you to stay.
• 10:26
  Speaker 1: But if he does select you, then you have to
• 10:29
  Speaker 1: get ready for confirmation, and you expect that would be
• 10:33
  Speaker 1: political a bit.
• 10:34
  Speaker 2: It probably would be political. I've been through it before,
• 10:39
  Speaker 2: not that I'm counting. I think I had eighty three
• 10:40
  Speaker 2: votes last time.
• 10:41
  Speaker 1: I'm sure the president will get recommendations. But if you
• 10:44
  Speaker 1: were to recommend person for the job, in other words,
• 10:47
  Speaker 1: if the president was watching right now, he might be.
• 10:49
  Speaker 1: And you were to say, well, here's why you would
• 10:51
  Speaker 1: be qualified to be chairm of the FED, what would
• 10:53
  Speaker 1: you say?
• 10:53
  Speaker 2: I don't want to compare to others, but I would
• 10:56
  Speaker 2: say that the reason why I could be ready to
• 10:58
  Speaker 2: get to work right away is that I spent five
• 11:01
  Speaker 2: years working at the FED. I work closely with Alan
• 11:04
  Speaker 2: Greenspan at times, and have seen what's good and bad
• 11:09
  Speaker 2: about the way the FED people think, and there's a
• 11:11
  Speaker 2: lot of bad. And I think that somebody who can
• 11:14
  Speaker 2: go in and basically by view is that the staff
• 11:18
  Speaker 2: has a big effect on the decisions of the FED,
• 11:20
  Speaker 2: and this staff historically has been excessively influenced by two thoughts.
• 11:26
  Speaker 2: One thought is that Kynes was right, Canes had value,
• 11:31
  Speaker 2: but you don't have to be a Keynesian like a
• 11:34
  Speaker 2: religious Kanesian. But the second thing is that there's been
• 11:37
  Speaker 2: a lack of willingness that really started with green Span
• 11:42
  Speaker 2: to show deference and respect to the corner of the
• 11:45
  Speaker 2: macro literature that I think is really important, which is
• 11:49
  Speaker 2: conditional expectations, time series analysis, the Stock and Watson type
• 11:54
  Speaker 2: stuff for the economists here. And so if you're running
• 11:57
  Speaker 2: the FED, then having the best forecaster of the world
• 12:00
  Speaker 2: who are really building nonlinear time series models and so on,
• 12:03
  Speaker 2: would be a good investment.
• 12:04
  Speaker 1: Did President know that you worked for mid Romney, John
• 12:09
  Speaker 1: McCain and George W.
• 12:10
  Speaker 3: Bush earlier in your career?
• 12:11
  Speaker 2: Does he ever, he's seen my whole resume after.
• 12:14
  Speaker 3: Okay, so he didn't hold that against you, obviously. Yeah.
• 12:17
  Speaker 2: I guess that there have been a lot of people
• 12:21
  Speaker 2: that have come into government with worse backgrounds.
• 12:23
  Speaker 1: So that you grew up, I grew up in Massachusetts.
• 12:26
  Speaker 1: You went to Swarthmore. How did you pick Swarthmore?
• 12:28
  Speaker 2: I grew up in a small town and I didn't
• 12:30
  Speaker 2: want to go to it.
• 12:30
  Speaker 3: Well, you'd always conservative as a youth? Or were you
• 12:32
  Speaker 3: a liberal? Then?
• 12:34
  Speaker 2: You know, my mom was a kindergarten teacher in my
• 12:36
  Speaker 2: hometown who was on the Republican State Committee in Massachusetts,
• 12:40
  Speaker 2: and so all she was like the little old lady
• 12:42
  Speaker 2: that made apple pies that everybody knew in Massachusetts said,
• 12:44
  Speaker 2: and so I, yeah, I and my dad was very
• 12:47
  Speaker 2: much a Democrat who disagreed with my mom on everything,
• 12:50
  Speaker 2: and so I got the dinner table was really fun
• 12:53
  Speaker 2: and I did it.
• 12:53
  Speaker 3: Irish, say, what happened when you turned out this way?
• 12:56
  Speaker 3: Or they never said no, No, they didn't say that.
• 12:58
  Speaker 1: So you went to Swarthmore's Arthmore is I would say,
• 13:01
  Speaker 1: maybe left of center compared to some other schools. So
• 13:04
  Speaker 1: were you did you stand out there as a conservative?
• 13:07
  Speaker 2: The rumor is Nixon called it the kremlin on the crumb.
• 13:09
  Speaker 2: I think that that actually is true. But you know,
• 13:14
  Speaker 2: you know, Sophomore especially then was a place that had
• 13:18
  Speaker 2: legitimate diversity of thought. And yeah, I was one of
• 13:23
  Speaker 2: the conservatives there, but I didn't feel like I was
• 13:27
  Speaker 2: attacked for it.
• 13:28
  Speaker 1: And then you went to get your pH d at
• 13:29
  Speaker 1: University of Pennsylvania, And what did you know then that
• 13:33
  Speaker 1: you wanted to be an academic PhD economist your whole life?
• 13:36
  Speaker 3: Is that what you wanted to do when you went
• 13:37
  Speaker 3: to penn.
• 13:38
  Speaker 2: Yeah, I thought that that's what I was really enjoying
• 13:41
  Speaker 2: doing research. And then my first job was at Columbia University,
• 13:45
  Speaker 2: and I did a lot of research. When I was
• 13:46
  Speaker 2: at the FED, I did a lot of research. I'm
• 13:48
  Speaker 2: still doing research.
• 13:49
  Speaker 1: No attraction to business, private equity, hedge funds, nothing like that.
• 13:53
  Speaker 3: You weren't interested. Yeah.
• 13:55
  Speaker 2: The problem with private equity guys is they buy something,
• 13:57
  Speaker 2: then they got to wait five years and just watch it.
• 14:00
  Speaker 2: They get their carryer, right, I mean, well.
• 14:02
  Speaker 3: We can sell it sooner.
• 14:03
  Speaker 1: But okay, so you have him intempted to go to
• 14:07
  Speaker 1: Wall Street. Right, let's talk about how economic policy has
• 14:11
  Speaker 1: made in this administration. So there's a president wanted to
• 14:15
  Speaker 1: have his advisors come together and you hash out things
• 14:18
  Speaker 1: in the Oval office.
• 14:18
  Speaker 3: How do you actually make policy?
• 14:20
  Speaker 2: It depends on the gravity of the policy that there
• 14:25
  Speaker 2: are things that happen every day that you get resolved
• 14:31
  Speaker 2: by cabinet secretaries. And every now and then the cabinet
• 14:34
  Speaker 2: secretary will want to know, what do you think the
• 14:36
  Speaker 2: president would think about this? And then maybe I'll say, oh,
• 14:39
  Speaker 2: I'm pretty sure he already talked to me about this
• 14:41
  Speaker 2: six months ago. He's fine if you do it this way.
• 14:44
  Speaker 2: And so there's a lot of smaller things that because
• 14:47
  Speaker 2: they have a ginormous government, that have to be resolved
• 14:50
  Speaker 2: by the cabinet secretaries, often in consultation with the Chief
• 14:54
  Speaker 2: of Staff's office and US and a Domestic Policy Council
• 14:57
  Speaker 2: and so on. The bigger things that require presidential decisions,
• 15:03
  Speaker 2: they very often what happens is we'll have a meeting,
• 15:07
  Speaker 2: often in the Roosevelt Room, where the principals will say, well,
• 15:10
  Speaker 2: here are the options we think we should give the president,
• 15:12
  Speaker 2: and then we will sort of usually draft the people
• 15:16
  Speaker 2: who are for and against each of the things and
• 15:19
  Speaker 2: then go into the oval and discuss them with him.
• 15:21
  Speaker 2: But he always wants to have the people who support
• 15:25
  Speaker 2: the thing that he's being advised to do with the
• 15:27
  Speaker 2: people who don't, unless, obviously there's some things that everybody
• 15:30
  Speaker 2: supports so much that you just can't do that. But
• 15:31
  Speaker 2: he really likes to have lively debate in the oval,
• 15:35
  Speaker 2: and if you're not giving him enough debate, he'll he'll
• 15:39
  Speaker 2: work it out and make sure you get well.
• 15:41
  Speaker 1: You go in there, and when you debate with him,
• 15:44
  Speaker 1: does he ever say let me think about it overnight,
• 15:46
  Speaker 1: or does say he makes a decision right then and there.
• 15:48
  Speaker 2: He does say that. He does definitely says I need
• 15:51
  Speaker 2: to think about it.
• 15:52
  Speaker 1: That happens, yeah, and then afterwards the people go whisper
• 15:55
  Speaker 1: in his ear after everybody else is gone, here's what
• 15:57
  Speaker 1: you should do?
• 15:57
  Speaker 3: What does that ever happen?
• 15:59
  Speaker 2: It's a thing that that really, you know, I come
• 16:03
  Speaker 2: in Susie Wilds especially that there is a risk that
• 16:08
  Speaker 2: the most convincing person in any administration is the person
• 16:11
  Speaker 2: who talked to the president last, and then that creates,
• 16:15
  Speaker 2: you know, kind of like a you know, a competition
• 16:19
  Speaker 2: to like check his you know, sleeping schedule and decide that,
• 16:23
  Speaker 2: you know, who's the one who's going to call him
• 16:25
  Speaker 2: right before he goes to sleep. And that's something that
• 16:28
  Speaker 2: every president has to deal with, and that I think
• 16:30
  Speaker 2: that you know, this administration is dealt really well with
• 16:34
  Speaker 2: compared to previous administrations.
• 16:35
  Speaker 1: You're one of the few people working in the White
• 16:37
  Speaker 1: House now who work in the first term as well.
• 16:40
  Speaker 2: So I when people asked me if I was going
• 16:42
  Speaker 2: to come back, I had a joke about it. I
• 16:44
  Speaker 2: said that I was Trump season one, and I think
• 16:48
  Speaker 2: I'll probably be the Christmas special for your season two.
• 16:51
  Speaker 1: The Big Beautiful Bill did have everything the President pretty
• 16:55
  Speaker 1: much wanted in the legislative arena. Is there any legislative
• 16:59
  Speaker 1: a bill that president wants remainder of this term?
• 17:02
  Speaker 2: For sure, We're going to be using future reconciliations to
• 17:07
  Speaker 2: improve the American economy with better policy. We got a
• 17:10
  Speaker 2: lot of the things we wanted done then, but there
• 17:12
  Speaker 2: are a lot of other things to do. One of
• 17:14
  Speaker 2: the things that we're spending a lot of time on
• 17:17
  Speaker 2: is thinking about the state of housing in America and
• 17:21
  Speaker 2: the fact that first time home buyers have seen their
• 17:24
  Speaker 2: age go up over the last five years from like
• 17:26
  Speaker 2: thirty to forty, and so you've got to be forty
• 17:29
  Speaker 2: years old before you could buy your first house now
• 17:31
  Speaker 2: because mortgage rates went up so much over the last
• 17:34
  Speaker 2: few years that the typical monthly payment about doubled and
• 17:38
  Speaker 2: nobody can buy house.
• 17:39
  Speaker 1: The President of other day, maybe he would support a
• 17:41
  Speaker 1: fifty year mortgage. Is that going to be the policy
• 17:44
  Speaker 1: of administration.
• 17:45
  Speaker 2: I don't know if the President's decided that he wants
• 17:47
  Speaker 2: to do that. I do know that we've been having
• 17:49
  Speaker 2: meetings with principles in the White House to talk about
• 17:53
  Speaker 2: what we can do about housing. And there's a whole
• 17:55
  Speaker 2: list of possible things that haven't been fully edited. But
• 17:59
  Speaker 2: a fifty year mortgage, you could you could argue in
• 18:02
  Speaker 2: favor of it that it could reduce the monthly payment,
• 18:06
  Speaker 2: which would make it easier for people to get into
• 18:07
  Speaker 2: a home. And then the flip side is that the
• 18:12
  Speaker 2: equity that people would acquire over time would be spread
• 18:15
  Speaker 2: out over a longer time period.
• 18:17
  Speaker 1: What would you say the President would say, or you
• 18:19
  Speaker 1: would say is his greatest economic accomplishment to date? And
• 18:22
  Speaker 1: what would you say is our greatest economic challenge for
• 18:24
  Speaker 1: the remainder of the term.
• 18:25
  Speaker 2: I would say that he cares most about how well
• 18:32
  Speaker 2: Americans are doing, and in the first term, like we've
• 18:36
  Speaker 2: only been here for half a year a little more,
• 18:39
  Speaker 2: but in the first term that I can remember when
• 18:42
  Speaker 2: we were talking about the Tax Cuts and Jobs Act,
• 18:45
  Speaker 2: that I went in and I had a simulation of
• 18:47
  Speaker 2: what I thought it would do for ecommy how much
• 18:49
  Speaker 2: GDP would go up, and we had a simulation that
• 18:52
  Speaker 2: GDP growth could get back up around three which was
• 18:55
  Speaker 2: controversial at the time because everybody believed in the new
• 18:58
  Speaker 2: normal and we were only stuck in the once. And
• 19:00
  Speaker 2: then he kind of looked at me and he said,
• 19:02
  Speaker 2: I don't want to talk about GDP. Come back and
• 19:04
  Speaker 2: tell me what it means for ordinary people. And so
• 19:08
  Speaker 2: then the next day we came in and I had
• 19:12
  Speaker 2: reviewed a large labor literature on what happens to wages
• 19:16
  Speaker 2: when we have big corporate tax reductions, and I told
• 19:19
  Speaker 2: him that, well, if we passed the bill, then people's
• 19:23
  Speaker 2: wages will go up between four and eight thousand dollars
• 19:26
  Speaker 2: was the range of estimates in the literature, and then
• 19:28
  Speaker 2: he said, well, I'm going to promise for I want
• 19:30
  Speaker 2: to utter promise, but that's going to be our message
• 19:32
  Speaker 2: if you go back and look, four thousand dollars increase
• 19:35
  Speaker 2: in wages was the main storyline of Tikja as we
• 19:39
  Speaker 2: were trying to get it passed. I haven't asked him this.
• 19:42
  Speaker 2: The thing one he would say is that I was
• 19:44
  Speaker 2: able to deliver for the American people wage increases that
• 19:47
  Speaker 2: hadn't really happened for the previous twenty years. The second
• 19:51
  Speaker 2: thing that I think he would want to say. I
• 19:52
  Speaker 2: know you said pick one, but I do think that
• 19:56
  Speaker 2: he has believed in tariffs his whole life, and a
• 20:00
  Speaker 2: lot of people thought that the teriffs would come in
• 20:02
  Speaker 2: and cause a recession and cause inflation, and his intuition
• 20:06
  Speaker 2: was that they wouldn't and they haven't. And I think
• 20:09
  Speaker 2: that we've learned a lot about like how terroists fit
• 20:12
  Speaker 2: into an optimal fiscal policy because of him, and I
• 20:15
  Speaker 2: would say that that would be a great accomplishment as well.
• 20:18
  Speaker 3: The tariff policy. Is it complete now our wards?
• 20:21
  Speaker 1: Have he finished negotiating the major deals with the countries,
• 20:24
  Speaker 1: he wants to negotiating with or is it still an
• 20:26
  Speaker 1: ongoing process.
• 20:27
  Speaker 2: It's an ongoing process. It's going ongoing process. I think
• 20:30
  Speaker 2: that one of the things that people have been talking
• 20:33
  Speaker 2: about just the last few days is, you know, thinking
• 20:37
  Speaker 2: about changing tariffs for food stuffs and things. So I
• 20:41
  Speaker 2: think that they're going to be more changes, and there
• 20:44
  Speaker 2: have been really big changes. And then one of the
• 20:47
  Speaker 2: things that people forget about, like prudent policy making. I'm
• 20:51
  Speaker 2: sure that President Carter would have agreed with this point,
• 20:54
  Speaker 2: is that you do what you think is right, and
• 20:57
  Speaker 2: then you watch what happens, and then when you see
• 20:59
  Speaker 2: things that you need to adjust, you adjust them.
• 21:01
  Speaker 1: Are you worried that there's a bubble in the AI
• 21:03
  Speaker 1: valuations of certain companies and that this could come down
• 21:07
  Speaker 1: to haunt us or you think there's no bubble and
• 21:09
  Speaker 1: the AI valuations of companies are consistent with what they
• 21:13
  Speaker 1: should be.
• 21:13
  Speaker 2: So if you think about what AI is doing right now,
• 21:16
  Speaker 2: is that it's increasing the productivity of workers and firms
• 21:22
  Speaker 2: or capital and labor, and it's doing so at a
• 21:25
  Speaker 2: remarkable rate. And the firms that are helping other firms
• 21:30
  Speaker 2: use AI are making a lot of money because they're
• 21:34
  Speaker 2: helping ordinary businesses make lots of money. And so if
• 21:38
  Speaker 2: you looked at the earning season, it was the earning
• 21:40
  Speaker 2: season with the most positive surprises ever. So what that means,
• 21:44
  Speaker 2: I think, is that the AI revolution is creating a
• 21:47
  Speaker 2: huge amount of value. And now who captures the value
• 21:51
  Speaker 2: and so on? It's you know, markets will work it out.
• 21:55
  Speaker 2: But if you compare this to the computer revolution started
• 21:59
  Speaker 2: in ninety four ninety five, maybe when Navigator came out
• 22:03
  Speaker 2: was a place you really start the clock. Then economists
• 22:06
  Speaker 2: were all like, oh, well, the computer is everywhere, but
• 22:09
  Speaker 2: in the statistics, you know. And the thing about AI
• 22:13
  Speaker 2: is that it's so powerful that it's already in the statistics,
• 22:16
  Speaker 2: but that the valuation could be really really high because
• 22:19
  Speaker 2: it is increasing productivity and profitability so much, and in
• 22:24
  Speaker 2: that the fact that it's visible already. That's quite a
• 22:28
  Speaker 2: bit different than the computer's situation of the nineties.
• 22:31
  Speaker 3: If the president asked you to serve in a third
• 22:33
  Speaker 3: Trump term, would you do that?
• 22:36
  Speaker 2: I don't think there's going to be a season three.
• 22:38
  Speaker 1: Oh okay, you don't think you'd ask you Okay, So
• 22:42
  Speaker 1: final final question for you on the whole, are you
• 22:47
  Speaker 1: please with where the administration's economic policy is right now,
• 22:51
  Speaker 1: how would you make it better or do something different.
• 22:53
  Speaker 2: We're going to have more policy proposals that will improve policy.
• 22:58
  Speaker 2: I think we're focused on communicating better, so we want
• 23:01
  Speaker 2: policy better and communication to be better. But I think
• 23:04
  Speaker 2: that in the end, what matters, and this goes back
• 23:06
  Speaker 2: to a great literature started by Ray Fair at Yale University,
• 23:10
  Speaker 2: is that in the end, you can communicate all you want.
• 23:13
  Speaker 2: People are going to look at their wallets, people are
• 23:15
  Speaker 2: going to go to the grocery store, and in the end,
• 23:18
  Speaker 2: I think that that means that we got to get
• 23:20
  Speaker 2: policy right and focus on communication. But communication is more
• 23:24
  Speaker 2: of a political thing in the end. You know, if
• 23:28
  Speaker 2: we put more money in people's pockets, then they'll celebrate
• 23:32
  Speaker 2: our policies, and if we fail to do that, then
• 23:34
  Speaker 2: they'll rightly condemn them.
• 23:36
  Speaker 1: Thanks for listening to hear more of my interviews. You
• 23:39
  Speaker 1: can subscribe and download my podcast on Spotify, Apple, or
• 23:43
  Speaker 1: wherever you listen.