1 00:00:00,200 --> 00:00:03,680 Speaker 1: So I'd read this report that Toyota was down in 2 00:00:03,800 --> 00:00:07,600 Speaker 1: its earnings and they were changing their projections and really 3 00:00:07,960 --> 00:00:11,480 Speaker 1: their whole outlook, and it's because of tariffs. But everything 4 00:00:12,000 --> 00:00:13,720 Speaker 1: you heard over the last couple of weeks is that 5 00:00:13,760 --> 00:00:18,040 Speaker 1: tariffs are not having an effect because GDP GROSSMUSI product 6 00:00:18,079 --> 00:00:20,440 Speaker 1: is a three percent and you take a look at 7 00:00:20,480 --> 00:00:23,240 Speaker 1: the market, and the market is in this incredible spot. 8 00:00:23,320 --> 00:00:26,599 Speaker 1: And then I see some things from EJ and Toni, 9 00:00:26,840 --> 00:00:29,360 Speaker 1: the chief economist at the Heritage Foundation, and I say, 10 00:00:30,520 --> 00:00:34,000 Speaker 1: I'm not I like that the economy is. 11 00:00:33,920 --> 00:00:35,320 Speaker 2: Doing better than I thought it was doing. 12 00:00:36,120 --> 00:00:38,440 Speaker 1: But I can't get anybody to sell me on the 13 00:00:38,479 --> 00:00:41,960 Speaker 1: idea that everything is great. All right, We already talked 14 00:00:41,960 --> 00:00:46,040 Speaker 1: about the divide between Wall Street and Midwest Main Street. 15 00:00:46,120 --> 00:00:47,960 Speaker 2: That much is absolutely. 16 00:00:47,360 --> 00:00:51,280 Speaker 1: True, But what about the divide between what I see 17 00:00:52,200 --> 00:00:56,080 Speaker 1: and what I know? Tony Kats Tony Katz today, good 18 00:00:56,160 --> 00:00:59,200 Speaker 1: to be with you. EJ and Toni joins us right 19 00:00:59,240 --> 00:01:03,680 Speaker 1: now is the chief economists at the Heritage Foundation Heritage 20 00:01:03,760 --> 00:01:08,720 Speaker 1: dot org. And I want to kind of reverse the 21 00:01:08,760 --> 00:01:12,600 Speaker 1: conversation here by going over some things that you tweeted 22 00:01:12,600 --> 00:01:16,880 Speaker 1: that made me say, okay, is this proving my own thesis, 23 00:01:16,920 --> 00:01:21,120 Speaker 1: my own philosophy, that what I'm told versus what I 24 00:01:21,200 --> 00:01:25,039 Speaker 1: see doesn't jive. That things are better than we thought 25 00:01:25,080 --> 00:01:27,960 Speaker 1: they would be. But maybe things aren't great, or does 26 00:01:28,000 --> 00:01:30,840 Speaker 1: this mean things are excellent? There comes a moment where 27 00:01:30,840 --> 00:01:33,120 Speaker 1: it's too many numbers. Let me get into what I 28 00:01:33,200 --> 00:01:37,640 Speaker 1: mean here, EJ. You posted this. You started with this 29 00:01:37,800 --> 00:01:42,679 Speaker 1: post right here, and you said, can we just fire 30 00:01:43,360 --> 00:01:45,640 Speaker 1: the Board of Governors at this point? 31 00:01:45,840 --> 00:01:48,760 Speaker 2: And I thought that was a really kind of fascinating 32 00:01:48,800 --> 00:01:49,440 Speaker 2: thing to say. 33 00:01:50,160 --> 00:01:55,400 Speaker 1: This is remittance remittances due to the US Treasury in 34 00:01:55,520 --> 00:01:58,560 Speaker 1: millions of dollars, and it is basically starting in twenty 35 00:01:58,640 --> 00:02:01,600 Speaker 1: twenty three, a straight lined what the heck am I 36 00:02:01,640 --> 00:02:02,280 Speaker 1: looking at here? 37 00:02:03,800 --> 00:02:07,800 Speaker 3: Well, Tony, these are essentially all of the monies that the. 38 00:02:07,800 --> 00:02:09,920 Speaker 2: FED should have been paying. 39 00:02:09,840 --> 00:02:12,200 Speaker 3: To the Treasury. A lot of people are surprised to 40 00:02:12,280 --> 00:02:15,320 Speaker 3: learn this, but the FED actually turns a small profit 41 00:02:15,400 --> 00:02:19,080 Speaker 3: because of the nature of its operations. All of those profits, however, 42 00:02:19,160 --> 00:02:22,440 Speaker 3: once it clears its operating expenses, have to be turned 43 00:02:22,520 --> 00:02:25,400 Speaker 3: over to the Treasury. It's not as if the FED, 44 00:02:25,440 --> 00:02:27,680 Speaker 3: even though it is a private corporation, It's not as 45 00:02:27,720 --> 00:02:31,600 Speaker 3: if the FED gets to keep those profits. However, beginning 46 00:02:31,680 --> 00:02:35,959 Speaker 3: in September of twenty twenty two, the FED stopped having 47 00:02:36,000 --> 00:02:40,280 Speaker 3: any profits at all and it started piling up losses. Now, 48 00:02:40,360 --> 00:02:43,079 Speaker 3: unlike with profits where it has to hand it over 49 00:02:43,120 --> 00:02:45,440 Speaker 3: to the treasury, if the FED has a loss, it 50 00:02:45,560 --> 00:02:49,000 Speaker 3: isn't owed money from the treasury. Instead, the FED just 51 00:02:49,360 --> 00:02:52,120 Speaker 3: keeps mounting losses more and more and more on its 52 00:02:52,160 --> 00:02:55,720 Speaker 3: balance sheet until it stops losing money. And then as 53 00:02:55,760 --> 00:03:01,160 Speaker 3: it starts earning profits again, it essentially down the losses, 54 00:03:01,320 --> 00:03:04,400 Speaker 3: if you will. And then finally, once they're gone and 55 00:03:04,440 --> 00:03:07,720 Speaker 3: it's still earning money, the FED will resume making payments 56 00:03:07,919 --> 00:03:10,400 Speaker 3: to the Treasury. And that might happen for a week 57 00:03:10,480 --> 00:03:12,840 Speaker 3: or two. Right, that's not uncommon during the course of 58 00:03:12,880 --> 00:03:15,560 Speaker 3: the Fed' one hundred plus year history. But what has 59 00:03:15,680 --> 00:03:19,920 Speaker 3: never happened before is to have sustained losses of this nature. 60 00:03:20,040 --> 00:03:23,919 Speaker 3: And it is all due to complete and total monetary 61 00:03:24,000 --> 00:03:27,480 Speaker 3: mismanagement at the FED. And it is all the more 62 00:03:27,560 --> 00:03:31,400 Speaker 3: reason why not just Powell, but frankly the entire board 63 00:03:31,440 --> 00:03:33,720 Speaker 3: of governors, all of them need to go. 64 00:03:34,800 --> 00:03:38,880 Speaker 1: So I guess we start with asking a basic question, 65 00:03:40,160 --> 00:03:42,600 Speaker 1: how does this happen? 66 00:03:44,160 --> 00:03:44,400 Speaker 2: Great? 67 00:03:44,520 --> 00:03:47,000 Speaker 3: Great question, how do the people with a money printer 68 00:03:47,200 --> 00:03:51,400 Speaker 3: somehow lose money, right, That's where we're at today. So basically, 69 00:03:52,080 --> 00:03:56,040 Speaker 3: the FED has both interests that it's receiving an interest 70 00:03:56,360 --> 00:03:59,320 Speaker 3: that it's paying, kind of like a bank. And in 71 00:03:59,360 --> 00:04:02,000 Speaker 3: the same way that we had a regional bank crisis 72 00:04:02,040 --> 00:04:04,400 Speaker 3: back in the spring of twenty twenty three, including the 73 00:04:04,520 --> 00:04:08,520 Speaker 3: second largest bank failure in American history, the FED put 74 00:04:08,600 --> 00:04:11,600 Speaker 3: itself into the exact same situation it put the banking 75 00:04:11,640 --> 00:04:15,160 Speaker 3: system in general, where it loaded up its own balance 76 00:04:15,160 --> 00:04:19,279 Speaker 3: sheet with very low interest rate assets. Whether those were 77 00:04:19,320 --> 00:04:23,400 Speaker 3: mortgage backed securities, whether those were treasury bonds, whatever the 78 00:04:23,400 --> 00:04:26,080 Speaker 3: case may be, these were things that paid very very 79 00:04:26,120 --> 00:04:30,480 Speaker 3: low interest rates, maybe two or three percent. Then as 80 00:04:30,520 --> 00:04:34,360 Speaker 3: interest rates rose, which was because of the FED, then 81 00:04:34,600 --> 00:04:38,240 Speaker 3: interest rates on liabilities, things that the FED is paying 82 00:04:38,279 --> 00:04:41,600 Speaker 3: out every day went up dramatically. They went up from 83 00:04:41,640 --> 00:04:44,440 Speaker 3: a fraction of a percent to over five percent in 84 00:04:44,480 --> 00:04:48,200 Speaker 3: some instances. So now the FED and again many banks 85 00:04:48,200 --> 00:04:51,760 Speaker 3: like Silicon Valley Bank were and are in a position 86 00:04:52,240 --> 00:04:56,760 Speaker 3: of paying four or five percent on liabilities while only 87 00:04:56,800 --> 00:05:00,839 Speaker 3: earning two or three percent on assets. Obviously, that's a 88 00:05:00,880 --> 00:05:04,280 Speaker 3: path to insolvency. It's negative cash flow. And if you're 89 00:05:04,320 --> 00:05:07,640 Speaker 3: a bank, sure enough, that can turn into bankruptcy. If 90 00:05:07,680 --> 00:05:09,640 Speaker 3: you're the FED, of course, you can just print the 91 00:05:09,720 --> 00:05:14,200 Speaker 3: money and create inflation and accrue these massive assets, hundreds 92 00:05:14,240 --> 00:05:16,839 Speaker 3: of billions of dollars worth. And you know, to be clear, 93 00:05:17,320 --> 00:05:20,960 Speaker 3: this this is not without impact here. It has impact 94 00:05:21,000 --> 00:05:24,000 Speaker 3: in terms of the Fed's ability to conduct monetary policy. 95 00:05:24,000 --> 00:05:27,320 Speaker 3: It also has an impact on taxpayers, tony, because every 96 00:05:27,360 --> 00:05:29,800 Speaker 3: dime that the FED is not sending to the treasury 97 00:05:30,120 --> 00:05:32,599 Speaker 3: adds to the deficit and ultimately has to be made 98 00:05:32,640 --> 00:05:35,839 Speaker 3: up for by taxpayers. This is and these are not 99 00:05:35,920 --> 00:05:39,600 Speaker 3: trivial amounts here. This is hundreds of billions of dollars. 100 00:05:39,680 --> 00:05:41,880 Speaker 3: Let's get in payments that have not gone to the 101 00:05:41,920 --> 00:05:44,240 Speaker 3: treasury since the fall of twenty twenty two. 102 00:05:44,320 --> 00:05:46,360 Speaker 1: And let's get into this because I was looking at 103 00:05:46,400 --> 00:05:49,200 Speaker 1: these these posts you put on Twitter x and I'm like, 104 00:05:50,080 --> 00:05:53,040 Speaker 1: you're outlining a scandal as far as I'm concerned. Talking 105 00:05:53,040 --> 00:05:56,800 Speaker 1: to EJ Antonia, the Heritage Foundation, Heritage dot org. 106 00:05:57,480 --> 00:05:59,600 Speaker 2: Here's the here's the second one right here. 107 00:06:00,240 --> 00:06:03,240 Speaker 1: This is the source of the Board of Governors of 108 00:06:03,279 --> 00:06:04,520 Speaker 1: the Federal Reserve System. 109 00:06:05,480 --> 00:06:08,279 Speaker 2: Daily interest payments in millions of dollars. 110 00:06:08,560 --> 00:06:11,000 Speaker 1: So you've got an area in green which is smaller, 111 00:06:11,000 --> 00:06:13,440 Speaker 1: and an area in gray, and it looks. 112 00:06:13,200 --> 00:06:16,600 Speaker 2: Like a mountain behind a hill. That's what it looks like. 113 00:06:16,920 --> 00:06:20,560 Speaker 1: The green is reverse repurchase agreements and the gray is 114 00:06:20,720 --> 00:06:25,040 Speaker 1: interest on the reserves. And I at that moment realized 115 00:06:25,040 --> 00:06:27,520 Speaker 1: why I drink bourbon? I have no idea what I'm 116 00:06:27,560 --> 00:06:32,320 Speaker 1: looking at here. So you're discussing this issue that we're having, 117 00:06:32,600 --> 00:06:34,360 Speaker 1: how does this chart now apply to it? 118 00:06:35,360 --> 00:06:38,480 Speaker 3: So these are the two big expenses, Tony, that the 119 00:06:38,480 --> 00:06:41,800 Speaker 3: FED is facing, and it need not have them at all. 120 00:06:42,120 --> 00:06:44,960 Speaker 3: This was a complete mistake by the FED to go 121 00:06:45,040 --> 00:06:48,200 Speaker 3: down both of these roads. In the case of interest 122 00:06:48,279 --> 00:06:51,320 Speaker 3: on reserves, that was a policy they started in March 123 00:06:51,360 --> 00:06:53,520 Speaker 3: of twenty twenty, in the midst of all the chaos 124 00:06:53,560 --> 00:06:56,760 Speaker 3: that was breaking because of COVID, the FED quietly made 125 00:06:56,839 --> 00:07:00,800 Speaker 3: this change where instead of banks being required to keep 126 00:07:00,839 --> 00:07:03,080 Speaker 3: money at the FED, in other words, they have to 127 00:07:03,160 --> 00:07:08,040 Speaker 3: keep a certain percentage of their cash parked at the 128 00:07:08,080 --> 00:07:13,240 Speaker 3: FED what they call reserves, that was simply removed. Banks 129 00:07:13,280 --> 00:07:16,720 Speaker 3: don't have to keep anything in reserve. Theoretically, if you 130 00:07:16,800 --> 00:07:20,400 Speaker 3: go today and you put a dollar on deposit at 131 00:07:20,440 --> 00:07:23,160 Speaker 3: a bank, they can turn around and lend out the 132 00:07:23,360 --> 00:07:26,960 Speaker 3: entirety of that dollar. They'll still tell you that your 133 00:07:27,000 --> 00:07:29,680 Speaker 3: dollar is there on deposit and you can come get 134 00:07:29,680 --> 00:07:32,360 Speaker 3: it any time you want, but the reality is they 135 00:07:32,360 --> 00:07:35,680 Speaker 3: can lend out the entirety all one hundred cents of 136 00:07:35,720 --> 00:07:38,080 Speaker 3: that dollar, whereas previously they would have been limited to 137 00:07:38,120 --> 00:07:41,000 Speaker 3: say ninety cents or eighty cents or seventy five cents, 138 00:07:41,000 --> 00:07:44,280 Speaker 3: depending on the time period. So, whatever the case, the 139 00:07:44,320 --> 00:07:47,560 Speaker 3: only way that the FED now entices banks to keep 140 00:07:47,600 --> 00:07:50,800 Speaker 3: money parked at the FED is by paying them interest 141 00:07:50,880 --> 00:07:55,200 Speaker 3: on it. They're also using something called reverse repurchase agreements, 142 00:07:55,320 --> 00:07:58,720 Speaker 3: which are essentially short term loans to the FED that 143 00:07:58,800 --> 00:08:01,640 Speaker 3: the FED is using that as another mechanism to soak 144 00:08:01,720 --> 00:08:05,720 Speaker 3: up excess liquidity, And they're paying interest to financial institutions 145 00:08:05,800 --> 00:08:07,160 Speaker 3: using both of these mechanisms. 146 00:08:07,320 --> 00:08:09,160 Speaker 2: So now work with me here. 147 00:08:10,040 --> 00:08:14,560 Speaker 1: We're paying insane amounts of interest via the FED, or 148 00:08:14,600 --> 00:08:18,040 Speaker 1: I should say the Fed is paying insane amount of 149 00:08:18,080 --> 00:08:22,760 Speaker 1: interest and we're not. The FED is not paying back 150 00:08:22,800 --> 00:08:24,680 Speaker 1: the Treasury the way it's supposed. 151 00:08:24,280 --> 00:08:28,200 Speaker 3: To exactly, so instead of making payments to the Treasury 152 00:08:28,200 --> 00:08:31,080 Speaker 3: on behalf of taxpayers, the FED is making payments to 153 00:08:31,160 --> 00:08:34,080 Speaker 3: Wall Street to the tune of four hundred and fifty 154 00:08:34,160 --> 00:08:37,439 Speaker 3: billion dollars or million dollars a day. Again, it's over 155 00:08:37,559 --> 00:08:42,439 Speaker 3: four hundred and fifty million dollars every day. And actually 156 00:08:42,480 --> 00:08:45,040 Speaker 3: part of the scandal here tony is the fact that 157 00:08:45,120 --> 00:08:48,800 Speaker 3: if you look at something like the reverse repurchase agreement marketplace, 158 00:08:49,280 --> 00:08:52,880 Speaker 3: more than three quarters of those payments don't even go 159 00:08:53,000 --> 00:08:57,840 Speaker 3: to American firms. They're foreign financial institutions. And we don't 160 00:08:57,840 --> 00:09:01,240 Speaker 3: even know how much of the trist On reserve payments 161 00:09:01,280 --> 00:09:06,199 Speaker 3: are going to foreign institutions directly or indirectly, because that 162 00:09:06,240 --> 00:09:09,079 Speaker 3: information is not disclosed by the FED. So I mean, 163 00:09:09,120 --> 00:09:12,120 Speaker 3: it is an absolute scandal that the FED has basically 164 00:09:12,160 --> 00:09:15,440 Speaker 3: turned the monetary system now into a way to give 165 00:09:15,800 --> 00:09:19,839 Speaker 3: free money to these different financial firms, many of whom 166 00:09:19,960 --> 00:09:21,480 Speaker 3: aren't even American. 167 00:09:22,240 --> 00:09:25,160 Speaker 1: So that in and of itself is a national security concern, 168 00:09:25,320 --> 00:09:29,360 Speaker 1: which I would expect and want to hear President Trump 169 00:09:29,520 --> 00:09:32,760 Speaker 1: and others talk about. But I want to talk about 170 00:09:33,080 --> 00:09:35,839 Speaker 1: where the actual effect is on Americans. 171 00:09:35,920 --> 00:09:36,120 Speaker 3: Right. 172 00:09:36,720 --> 00:09:39,760 Speaker 1: We understand that this is ugly, We understand that this 173 00:09:39,880 --> 00:09:43,480 Speaker 1: could very well. We would consider this without saying knowing 174 00:09:43,600 --> 00:09:46,079 Speaker 1: being able to cite any statute. 175 00:09:46,080 --> 00:09:48,480 Speaker 2: This is criminal, is what we would say. 176 00:09:49,320 --> 00:09:52,959 Speaker 1: But explain to me how this affects everyday Americans and 177 00:09:53,040 --> 00:09:56,360 Speaker 1: our investments, whether it be four one K, our basic 178 00:09:56,480 --> 00:09:58,000 Speaker 1: Vanguard fund, whatever the case may be. 179 00:09:59,320 --> 00:10:02,280 Speaker 3: Well, remember, every time the FED makes one of these payments, 180 00:10:02,280 --> 00:10:05,120 Speaker 3: every time it sends money out the door, where is 181 00:10:05,160 --> 00:10:08,960 Speaker 3: that money coming from. It's literally just creating it. This 182 00:10:09,000 --> 00:10:12,680 Speaker 3: is an inflationary pressure that the FED continues to pump 183 00:10:13,040 --> 00:10:15,320 Speaker 3: into the economy. And so to counter it, what have 184 00:10:15,400 --> 00:10:18,760 Speaker 3: they done. They've hiked interest rates. And granted those are 185 00:10:18,760 --> 00:10:20,560 Speaker 3: short term rates, I get it, but they have an 186 00:10:20,559 --> 00:10:24,000 Speaker 3: effect on longer term rates as well. Part of the 187 00:10:24,040 --> 00:10:28,640 Speaker 3: reason why credit is so expensive for consumers for businesses 188 00:10:29,120 --> 00:10:34,840 Speaker 3: is because the FED continues allocating capital away from Main 189 00:10:34,920 --> 00:10:38,120 Speaker 3: Street and to Wall Street, and frankly to K Street 190 00:10:38,200 --> 00:10:41,960 Speaker 3: in DC. In other words, they're helping to finance government 191 00:10:42,200 --> 00:10:46,000 Speaker 3: instead of allowing the market to finance Main Street. It's 192 00:10:46,000 --> 00:10:49,000 Speaker 3: not an exaggeration. The FED is a big reason why 193 00:10:49,040 --> 00:10:52,319 Speaker 3: you are paying more when you try to get a mortgage. 194 00:10:52,320 --> 00:10:54,680 Speaker 3: Why the interest rate is higher while you're paying more 195 00:10:54,760 --> 00:10:57,920 Speaker 3: on a car payment, on the interest on your credit cards, 196 00:10:57,960 --> 00:11:01,480 Speaker 3: those monthly finance charges, I mean you name it, student loans. 197 00:11:02,000 --> 00:11:04,720 Speaker 3: The list just goes on and on, all these different 198 00:11:04,760 --> 00:11:07,439 Speaker 3: forms of financing. And that's just the consumer in then 199 00:11:07,480 --> 00:11:10,959 Speaker 3: you have obviously the business end too, a business trying 200 00:11:11,000 --> 00:11:15,040 Speaker 3: to get credit to finance its inventory every single month, right, 201 00:11:15,080 --> 00:11:18,280 Speaker 3: A lot of businesses have to finance the inventory they buy, 202 00:11:18,480 --> 00:11:21,000 Speaker 3: and then as they sell off that inventory over the month, 203 00:11:21,080 --> 00:11:24,439 Speaker 3: they from the revenue they pay down what they owe 204 00:11:24,760 --> 00:11:28,040 Speaker 3: on those loans. All of that is more expensive. Credit 205 00:11:28,160 --> 00:11:31,360 Speaker 3: is more scarce and more expensive because of the FED 206 00:11:31,400 --> 00:11:35,679 Speaker 3: today and because it continues again to allocate capital away 207 00:11:35,720 --> 00:11:37,840 Speaker 3: from Main Street and to Wall Street. 208 00:11:38,360 --> 00:11:39,360 Speaker 2: Talking to you, EJ. 209 00:11:39,520 --> 00:11:43,080 Speaker 1: Antony, Chief economists at the Heritage Foundation Heritage dot org, 210 00:11:43,800 --> 00:11:46,840 Speaker 1: your post was just fire everybody on the Board of Governors. 211 00:11:46,960 --> 00:11:48,160 Speaker 1: This the Wall Street Journal. 212 00:11:48,600 --> 00:11:51,960 Speaker 2: Trump will nominate economic advisor Stephen Moran. Is it Moran 213 00:11:52,080 --> 00:11:52,559 Speaker 2: or Myron? 214 00:11:53,679 --> 00:11:55,360 Speaker 3: That's a good question. I think it's Moran. 215 00:11:55,559 --> 00:11:58,040 Speaker 2: I think I too. I've yeah, and we'll leave. 216 00:11:57,960 --> 00:12:00,000 Speaker 1: It there, and we're not trying to disrespect. We've got 217 00:12:00,720 --> 00:12:03,560 Speaker 1: to the FED vacancy. You've got somebody leaving the Federal Reserve, 218 00:12:03,600 --> 00:12:06,840 Speaker 1: one of the governors leaving, and so you've got Moran, 219 00:12:06,920 --> 00:12:08,559 Speaker 1: who is the head of the White House Council of 220 00:12:08,600 --> 00:12:12,720 Speaker 1: Economic Advisors, who Trump is saying should take over here. 221 00:12:13,120 --> 00:12:18,480 Speaker 1: And this is quite clearly a step towards putting more 222 00:12:18,520 --> 00:12:23,040 Speaker 1: pressure on Jerome Powell to walk away. And maybe this 223 00:12:23,120 --> 00:12:27,120 Speaker 1: is an early indicator of who it is Trump wants 224 00:12:27,800 --> 00:12:31,600 Speaker 1: to run the Federal Reserve. I don't know much about 225 00:12:32,040 --> 00:12:37,319 Speaker 1: the man, But is this pick an indication of where 226 00:12:37,559 --> 00:12:40,200 Speaker 1: the Board of Governors might go and applying pressure to 227 00:12:40,240 --> 00:12:42,920 Speaker 1: Powell or maybe making the changes you want them to 228 00:12:42,920 --> 00:12:46,280 Speaker 1: make regarding these interest payments and the insanity of this 229 00:12:47,000 --> 00:12:47,920 Speaker 1: financial system. 230 00:12:49,720 --> 00:12:53,280 Speaker 3: Well, I'm not sure. Unfortunately, Tony, I think this was 231 00:12:53,320 --> 00:12:57,719 Speaker 3: basically just the safe pick. Basically what happened here is 232 00:12:57,800 --> 00:13:01,720 Speaker 3: because one of the members of the board resigned, Trump 233 00:13:01,840 --> 00:13:05,160 Speaker 3: picked somebody to fill the vacancy for the rest of 234 00:13:05,200 --> 00:13:07,720 Speaker 3: the year, so, you know, essentially just for the next 235 00:13:08,040 --> 00:13:10,880 Speaker 3: several months, and then in twenty twenty six he's going 236 00:13:10,920 --> 00:13:13,800 Speaker 3: to have to name somebody else as well as in 237 00:13:13,840 --> 00:13:16,440 Speaker 3: May of twenty twenty six he'll have to name someone 238 00:13:16,520 --> 00:13:20,359 Speaker 3: as FED chair. So this doesn't really tell us necessarily 239 00:13:20,640 --> 00:13:24,680 Speaker 3: which direction the next member and the next chair are 240 00:13:24,720 --> 00:13:27,480 Speaker 3: going to go in terms of which direction they'll try 241 00:13:27,520 --> 00:13:29,960 Speaker 3: to take the FED and what kind of reforms they'll 242 00:13:30,000 --> 00:13:31,840 Speaker 3: try to put in place. I think what the President 243 00:13:31,880 --> 00:13:35,720 Speaker 3: did here was pick somebody who they knew was safe again, 244 00:13:35,920 --> 00:13:40,200 Speaker 3: who wouldn't make any any kind of catastrophic mistakes over 245 00:13:40,240 --> 00:13:43,079 Speaker 3: the next few months. That's not to disparage the man, right, 246 00:13:43,120 --> 00:13:46,160 Speaker 3: I'm not trying to diminish him or anything like that. 247 00:13:46,200 --> 00:13:50,000 Speaker 3: I'm just saying that this was a safe person to 248 00:13:50,000 --> 00:13:52,760 Speaker 3: put in while the vetting process is still going on 249 00:13:53,160 --> 00:13:56,120 Speaker 3: for a longer term pick. So until that is done, 250 00:13:56,360 --> 00:14:00,240 Speaker 3: and until we actually have some names again for the 251 00:14:00,320 --> 00:14:03,680 Speaker 3: chair and for the board vacancy, then we'll have a 252 00:14:03,679 --> 00:14:06,360 Speaker 3: better sense of which direction the FED is going to go. 253 00:14:06,440 --> 00:14:09,120 Speaker 3: But you know, so far, a lot of the names 254 00:14:09,160 --> 00:14:13,560 Speaker 3: I've heard, like Kevin Walsh, for example, he really, I 255 00:14:13,559 --> 00:14:16,680 Speaker 3: think understands the kinds of reforms that do need to 256 00:14:16,679 --> 00:14:18,960 Speaker 3: be put in place and the kinds of mistakes that 257 00:14:19,000 --> 00:14:21,520 Speaker 3: have been made at the FED since the beginning of 258 00:14:21,520 --> 00:14:24,680 Speaker 3: twenty twenty and how to reverse them. More importantly, we. 259 00:14:24,760 --> 00:14:27,720 Speaker 1: Got more of this conversation coming up, specifically the story 260 00:14:27,720 --> 00:14:31,360 Speaker 1: about Toyota. Are the tariffs about to be pushed to 261 00:14:31,680 --> 00:14:35,720 Speaker 1: us and does that change everything for Midwest Main Street 262 00:14:36,240 --> 00:14:39,120 Speaker 1: while having no effect on Wall Street. Keep it here 263 00:14:39,360 --> 00:14:42,360 Speaker 1: more with Eja Antni chief Economists the Heritage Foundation. 264 00:14:42,600 --> 00:14:43,440 Speaker 2: I'm Tony Katz. 265 00:14:43,560 --> 00:14:53,080 Speaker 1: This is Tony Kats today. So it seems that the 266 00:14:53,080 --> 00:14:55,880 Speaker 1: Federal Reserve really are a bunch of fools. And certainly 267 00:14:55,880 --> 00:14:58,320 Speaker 1: when you take a look at the interest payments being 268 00:14:58,360 --> 00:15:02,760 Speaker 1: made and how they're engaged jing the idea of money 269 00:15:02,760 --> 00:15:05,440 Speaker 1: in general, a lot of people are making money in 270 00:15:05,480 --> 00:15:08,800 Speaker 1: an A and US and if it's foreign nations, we've 271 00:15:08,840 --> 00:15:09,760 Speaker 1: got a real problem. 272 00:15:09,800 --> 00:15:12,880 Speaker 2: Tony Katz, Tony Kats today, Good to be with you. 273 00:15:13,040 --> 00:15:17,840 Speaker 1: This as EJ and Tony economists chief economist that the 274 00:15:17,840 --> 00:15:21,880 Speaker 1: Heritage Foundation is walking through this. This is the scandal 275 00:15:22,680 --> 00:15:28,120 Speaker 1: like real world class USDA choice. How does America get 276 00:15:28,120 --> 00:15:32,520 Speaker 1: through this scandal? But put U pin in it? I 277 00:15:32,560 --> 00:15:34,680 Speaker 1: can't believe I just said that because I needed to 278 00:15:34,720 --> 00:15:38,000 Speaker 1: get to this part two conversation with EJ and Tony 279 00:15:38,600 --> 00:15:42,040 Speaker 1: about tariffs, what we're about to be spending or are 280 00:15:42,080 --> 00:15:45,720 Speaker 1: we not? And the story about Toyota. I want to 281 00:15:45,760 --> 00:15:50,200 Speaker 1: now take it to where I started this conversation about 282 00:15:50,320 --> 00:15:53,400 Speaker 1: where this economy is. Do we think this is all 283 00:15:53,440 --> 00:15:55,800 Speaker 1: moving in a good direction? 284 00:15:56,000 --> 00:15:57,680 Speaker 2: Should we be excited about this? 285 00:15:58,240 --> 00:16:02,360 Speaker 1: And this brought a conversation Toyota, which has changed its 286 00:16:02,360 --> 00:16:07,800 Speaker 1: guidance for the rest of the year, slashing their guidance. 287 00:16:08,200 --> 00:16:10,640 Speaker 1: They say they're going to have a give or take 288 00:16:10,760 --> 00:16:12,600 Speaker 1: a ten billion. 289 00:16:12,160 --> 00:16:14,640 Speaker 2: Dollar tariff hit. 290 00:16:15,440 --> 00:16:18,760 Speaker 1: And this leads to the conversation of we see the 291 00:16:18,800 --> 00:16:21,480 Speaker 1: tariffs in place the revenue being taken in, which is 292 00:16:21,600 --> 00:16:24,160 Speaker 1: tax dollars, yet we see a GDP. 293 00:16:23,840 --> 00:16:26,920 Speaker 2: At three percent, and these things don't seem to jive. 294 00:16:27,400 --> 00:16:30,480 Speaker 1: Maybe it's because companies are absorbing the tariffs as opposed 295 00:16:30,520 --> 00:16:34,680 Speaker 1: to passing them along and that can't last forever. This 296 00:16:34,760 --> 00:16:38,560 Speaker 1: story of Toyota taking the basically ten billion dollar tariff 297 00:16:38,640 --> 00:16:42,760 Speaker 1: hit slashing their guidance, Is this, in your view without 298 00:16:42,800 --> 00:16:45,560 Speaker 1: having any expertise on what Toyota is doing, but as 299 00:16:45,600 --> 00:16:49,520 Speaker 1: a concept, is this, in your view the start of 300 00:16:49,600 --> 00:16:53,440 Speaker 1: a chain of dominoes regarding tariff costs being moved on 301 00:16:53,480 --> 00:16:57,280 Speaker 1: to the consumer or is every case an isolated case? 302 00:16:58,600 --> 00:17:01,320 Speaker 3: Well, tonya, I'd say it's not true, Toyota. The data 303 00:17:01,320 --> 00:17:04,160 Speaker 3: have kind of flipped just in the last really ten 304 00:17:04,320 --> 00:17:06,920 Speaker 3: fourteen day, probably fourteen days, so let's say the last 305 00:17:06,920 --> 00:17:09,960 Speaker 3: two weeks, we are for the first time this year 306 00:17:10,600 --> 00:17:13,640 Speaker 3: getting a lot more data saying that these costs are 307 00:17:13,720 --> 00:17:16,360 Speaker 3: going to get passed on to consumers, whereas previously that's 308 00:17:16,359 --> 00:17:18,920 Speaker 3: not at all what the data was indicating, and so 309 00:17:18,920 --> 00:17:21,600 Speaker 3: so many of the of the pundits who said, oh, 310 00:17:21,640 --> 00:17:24,240 Speaker 3: Americans are going to pay for all this blah blah blah, 311 00:17:24,280 --> 00:17:27,320 Speaker 3: the data just didn't indicate that at all. In fact, 312 00:17:27,320 --> 00:17:30,240 Speaker 3: what they indicated was that businesses, whether it's the exporter 313 00:17:30,760 --> 00:17:33,399 Speaker 3: or maybe it's the importer, or even like the wholesaler, 314 00:17:33,680 --> 00:17:36,600 Speaker 3: businesses were all content to just eat the cost. Now, 315 00:17:36,960 --> 00:17:39,680 Speaker 3: my theory behind that is that a lot of these 316 00:17:39,720 --> 00:17:43,359 Speaker 3: firms were thinking these are one time cost increases and 317 00:17:43,400 --> 00:17:45,840 Speaker 3: then the trade deals are going to negotiate them all away, 318 00:17:46,280 --> 00:17:49,240 Speaker 3: so we'll eat the cost in order to not lose 319 00:17:49,280 --> 00:17:51,359 Speaker 3: market share. Right, we don't want to have a big, 320 00:17:51,600 --> 00:17:54,520 Speaker 3: big price fluctuation passed on to consumers because then we 321 00:17:54,600 --> 00:17:58,400 Speaker 3: might lose some people. However, as it becomes clearer that 322 00:17:58,600 --> 00:18:02,320 Speaker 3: these tariffs probably aren't going away, more and more businesses 323 00:18:02,359 --> 00:18:05,320 Speaker 3: do seem content to pass the cost on to consumers. Now, 324 00:18:05,320 --> 00:18:08,720 Speaker 3: that doesn't mean everything's going to get more expensive. Imports 325 00:18:08,760 --> 00:18:12,080 Speaker 3: are actually a relatively small part of the American economy. 326 00:18:12,080 --> 00:18:15,320 Speaker 3: We are compared to most other nations around the world, 327 00:18:15,320 --> 00:18:19,040 Speaker 3: we have very very little of our economy that's import related, 328 00:18:19,359 --> 00:18:21,440 Speaker 3: and in fact, half of what we import we just 329 00:18:21,480 --> 00:18:25,320 Speaker 3: turn around and resell. So we buy Canadian oil, for example, 330 00:18:25,440 --> 00:18:27,560 Speaker 3: crude oil, and then we refine it and we sell 331 00:18:27,600 --> 00:18:30,080 Speaker 3: the gasoline right back to the Canadians. So most of 332 00:18:30,119 --> 00:18:32,080 Speaker 3: that doesn't even you know, doesn't even stay here and 333 00:18:32,080 --> 00:18:34,800 Speaker 3: won't affect consumer prices in the US. But again, we 334 00:18:34,920 --> 00:18:37,919 Speaker 3: are seeing for the first time data that's indicating that 335 00:18:38,040 --> 00:18:40,439 Speaker 3: some of these higher import costs are going to be 336 00:18:40,480 --> 00:18:44,240 Speaker 3: passed on to consumers. Now, how does this jive with 337 00:18:44,600 --> 00:18:48,040 Speaker 3: the broader economy. One of the things to point out here, Tony, 338 00:18:48,119 --> 00:18:50,320 Speaker 3: is the fact that just earlier this morning, there was 339 00:18:50,359 --> 00:18:54,720 Speaker 3: a report out that apparently the rates with Toyota are 340 00:18:54,760 --> 00:18:58,040 Speaker 3: going to now be renegotiated. In other words, we're going 341 00:18:58,040 --> 00:19:01,880 Speaker 3: to probably see a lower rate apply to Japanese automobiles 342 00:19:02,760 --> 00:19:06,000 Speaker 3: than what is currently being speculated. So, I mean, this 343 00:19:06,119 --> 00:19:08,600 Speaker 3: is it's chaotic to say the least. Right, everything is 344 00:19:08,680 --> 00:19:10,960 Speaker 3: up in the air. Unfortunately, this is part of the 345 00:19:11,640 --> 00:19:15,959 Speaker 3: nature of negotiations, especially something as complex and complicated and 346 00:19:16,000 --> 00:19:20,200 Speaker 3: frankly convoluted as the international trading system. So I think 347 00:19:20,240 --> 00:19:24,880 Speaker 3: we're probably stuck with that, with that lack of guidance 348 00:19:24,920 --> 00:19:28,080 Speaker 3: for a while now, which means companies forward guidance is 349 00:19:28,200 --> 00:19:29,800 Speaker 3: likely to keep changing. 350 00:19:30,560 --> 00:19:34,199 Speaker 1: But again, just like we ask about what's going on 351 00:19:34,320 --> 00:19:39,120 Speaker 1: with the FED, how does this affect us? Certainly, if 352 00:19:39,119 --> 00:19:42,760 Speaker 1: the tariff gets passed along, the good is more expensive 353 00:19:42,760 --> 00:19:45,600 Speaker 1: to us. We understand that basic concept the tariffs are 354 00:19:45,600 --> 00:19:48,919 Speaker 1: tax is unquestionable as a tactic to try and get 355 00:19:48,960 --> 00:19:51,440 Speaker 1: a petal trade deal. That's one thing. But President Trump 356 00:19:51,480 --> 00:19:53,720 Speaker 1: has proven in these trade deals that the tariffs will remain, 357 00:19:54,080 --> 00:19:57,520 Speaker 1: which means all of these goods are more expensive. And 358 00:19:57,680 --> 00:19:59,760 Speaker 1: these goods, while it might not make up much of 359 00:20:00,119 --> 00:20:04,160 Speaker 1: what we have in total, are import conversation in terms 360 00:20:04,200 --> 00:20:06,480 Speaker 1: of imports we take in the US, it still does 361 00:20:06,520 --> 00:20:09,560 Speaker 1: affect the things that are imported. So the fact that 362 00:20:09,600 --> 00:20:12,600 Speaker 1: it's a smaller, it's not a great percentage compared to 363 00:20:12,600 --> 00:20:15,480 Speaker 1: other nations, is inconsequential to whether or not we actually 364 00:20:15,560 --> 00:20:19,400 Speaker 1: pay more for the good. The question is how does 365 00:20:19,520 --> 00:20:24,080 Speaker 1: this now play in the conversation of Wall Street versus 366 00:20:24,160 --> 00:20:27,320 Speaker 1: Midwest Main Street? Because I can do basic math with 367 00:20:27,400 --> 00:20:30,360 Speaker 1: the EJ, which is, if things cost me more, they 368 00:20:30,400 --> 00:20:32,600 Speaker 1: cost me more, and so it costs more to get 369 00:20:32,600 --> 00:20:35,080 Speaker 1: the raw good to create the good that I then sell, 370 00:20:35,280 --> 00:20:37,719 Speaker 1: whether it costs to me more to get the finished 371 00:20:37,720 --> 00:20:39,720 Speaker 1: good that I then utilize for my family, my business, 372 00:20:39,800 --> 00:20:43,360 Speaker 1: whatever I am paying more. Wall Street may not have 373 00:20:43,520 --> 00:20:47,160 Speaker 1: those concerns, but certainly it should be concerned if people 374 00:20:47,240 --> 00:20:50,600 Speaker 1: can't follow their investment strategies because they're paying more for 375 00:20:50,680 --> 00:20:54,840 Speaker 1: other things. What's the divide here in what we're seeing 376 00:20:54,880 --> 00:20:58,000 Speaker 1: and what you're talking about between Wall Street and Midwest 377 00:20:58,040 --> 00:20:58,520 Speaker 1: main Street? 378 00:21:00,040 --> 00:21:02,280 Speaker 3: Great, great question. I mean, the big thing that Wall 379 00:21:02,280 --> 00:21:06,280 Speaker 3: Street is concerned about essentially is corporate bottom line, right, 380 00:21:06,320 --> 00:21:08,159 Speaker 3: In other words, our corporation is going to have to 381 00:21:08,160 --> 00:21:10,200 Speaker 3: eat these costs or are they going to be able 382 00:21:10,520 --> 00:21:13,520 Speaker 3: to pass them along to consumers? And even if the 383 00:21:13,560 --> 00:21:17,239 Speaker 3: corporation can't pass the cost on to consumers, is the 384 00:21:17,280 --> 00:21:21,080 Speaker 3: corporation let's say, I'm sorry, Let's say the corporation rather 385 00:21:21,200 --> 00:21:23,840 Speaker 3: can pass the cost on to consumers, but now because 386 00:21:23,880 --> 00:21:26,760 Speaker 3: of higher prices, they do less business and so their 387 00:21:26,800 --> 00:21:30,720 Speaker 3: bottom line goes down that way, just because a corporation 388 00:21:31,000 --> 00:21:34,000 Speaker 3: is able to pass on costs, does not mean that 389 00:21:34,040 --> 00:21:37,640 Speaker 3: its bottom line will be unaffected. So Wall Street obviously 390 00:21:37,680 --> 00:21:41,119 Speaker 3: is concerned from that standpoint and is going to change 391 00:21:41,160 --> 00:21:43,639 Speaker 3: who it thinks are the winners and losers in terms 392 00:21:43,640 --> 00:21:45,919 Speaker 3: of investments, based on who it thinks are going to 393 00:21:45,920 --> 00:21:48,960 Speaker 3: be the winners and losers in terms of tariffs. I 394 00:21:49,000 --> 00:21:53,040 Speaker 3: will say, though, part of the difficulty here in figuring out, okay, 395 00:21:53,080 --> 00:21:55,280 Speaker 3: what is the impact to Main Street In other words, 396 00:21:55,520 --> 00:21:58,440 Speaker 3: are you actually going to see prices go up? Part 397 00:21:58,480 --> 00:22:00,800 Speaker 3: of the difficulty, Tony is the fact that at the 398 00:22:00,800 --> 00:22:03,280 Speaker 3: same time we have this upward pressure on prices because 399 00:22:03,280 --> 00:22:07,359 Speaker 3: of tariffs, you have downward pressure on prices because of deregulation, 400 00:22:07,880 --> 00:22:11,600 Speaker 3: and because of provisions in the tax bill like bringing 401 00:22:11,640 --> 00:22:14,159 Speaker 3: back full expensing. For example, that's going to be a 402 00:22:14,240 --> 00:22:17,359 Speaker 3: huge tax cut that's going to save literally over one 403 00:22:17,440 --> 00:22:20,640 Speaker 3: hundred billion dollars just in its first year. Probably well 404 00:22:20,640 --> 00:22:24,520 Speaker 3: that's going to offset one hundred billion dollars in tariff revenue. 405 00:22:24,680 --> 00:22:25,879 Speaker 2: So again it. 406 00:22:26,320 --> 00:22:29,399 Speaker 3: Remains to be seen which of these effects is going 407 00:22:29,440 --> 00:22:32,720 Speaker 3: to outweigh the other, in other words, which magnitude is greater. 408 00:22:33,080 --> 00:22:35,679 Speaker 3: So at this point, even though we are seeing in 409 00:22:35,720 --> 00:22:38,639 Speaker 3: the data business is saying yep, we're finally having to 410 00:22:38,640 --> 00:22:41,800 Speaker 3: pass this along. We're still not sure if that means 411 00:22:41,880 --> 00:22:44,400 Speaker 3: the consumer is going to pay more or if those 412 00:22:44,480 --> 00:22:47,560 Speaker 3: price increases will be offset by price decreases elsewhere. 413 00:22:47,680 --> 00:22:51,840 Speaker 2: Do people visualize it like that? I get your argument. 414 00:22:52,320 --> 00:22:54,840 Speaker 1: If the one big beautiful bill allows you to have 415 00:22:54,880 --> 00:22:58,399 Speaker 1: one hundred percent expensing, you're like hot digity and you 416 00:22:58,480 --> 00:23:01,240 Speaker 1: might be doing some more buying because you allowed yourself 417 00:23:01,240 --> 00:23:04,119 Speaker 1: to do the expensing out of it, and maybe what 418 00:23:04,160 --> 00:23:08,040 Speaker 1: you spent on a tariff side is even dwarfed by 419 00:23:08,080 --> 00:23:10,959 Speaker 1: what you were being able to expense out. People can 420 00:23:11,080 --> 00:23:14,879 Speaker 1: understand that very very base concept of I'm able to 421 00:23:14,920 --> 00:23:18,320 Speaker 1: expense these things, But do they equate the two in 422 00:23:18,400 --> 00:23:20,879 Speaker 1: their heads? Do they really go on some level of 423 00:23:20,920 --> 00:23:25,520 Speaker 1: spending binge as I just described it, when they know 424 00:23:25,600 --> 00:23:28,440 Speaker 1: what they're buying still costs more. They can still feel 425 00:23:28,480 --> 00:23:32,200 Speaker 1: it every single day, every time they buy everything. 426 00:23:33,480 --> 00:23:35,680 Speaker 3: So, Tony, I think it's worth it to go back 427 00:23:35,720 --> 00:23:40,639 Speaker 3: to the first Trump administration and the Biden administration to 428 00:23:40,720 --> 00:23:43,720 Speaker 3: use examples here. In the case of the Bid administration, 429 00:23:44,040 --> 00:23:46,560 Speaker 3: people's the average American, at least, not everybody, but the 430 00:23:46,600 --> 00:23:50,399 Speaker 3: average American's weekly paycheck exploded. I mean, wages were up 431 00:23:50,440 --> 00:23:54,240 Speaker 3: like twenty percent in four years. That's a phenomenal rate 432 00:23:54,280 --> 00:23:58,320 Speaker 3: of increase. But what the Americans could actually buy with 433 00:23:58,400 --> 00:24:01,840 Speaker 3: their weekly paychecks didn't go up, went down pretty substantially. 434 00:24:01,880 --> 00:24:05,600 Speaker 3: After four years, it was down four percent. So that 435 00:24:05,880 --> 00:24:08,800 Speaker 3: is what Americans really care about, not even necessarily how 436 00:24:08,880 --> 00:24:11,320 Speaker 3: much money do I make? What can I do with 437 00:24:11,440 --> 00:24:14,000 Speaker 3: the money I'm making? What can I buy with that 438 00:24:14,040 --> 00:24:18,960 Speaker 3: weekly paycheck. Conversely, under the first Trump administration, sure some 439 00:24:19,000 --> 00:24:23,080 Speaker 3: of the administration's policies actually increased prices, like the steel tariffs, 440 00:24:23,119 --> 00:24:27,200 Speaker 3: for example, but that was much more than offset by 441 00:24:27,240 --> 00:24:30,520 Speaker 3: the regulatory reform, by the huge tax reform that was 442 00:24:30,560 --> 00:24:34,000 Speaker 3: the TCJA in the end of twenty seventeen, And so 443 00:24:34,600 --> 00:24:37,879 Speaker 3: even though people in some instances paid more for things, 444 00:24:38,200 --> 00:24:41,520 Speaker 3: other things cost less. Right, we had energy, massive increase 445 00:24:41,520 --> 00:24:45,400 Speaker 3: in energy production that brought down a lot of prices. Again, 446 00:24:45,440 --> 00:24:49,080 Speaker 3: you had competing effects here, people's paychecks were getting bigger. 447 00:24:49,200 --> 00:24:52,159 Speaker 3: Inflation wasn't even an issue. So at the end of 448 00:24:52,240 --> 00:24:55,840 Speaker 3: the day, people were much much better off because of 449 00:24:55,920 --> 00:24:59,080 Speaker 3: the net effect of those policies, even if not every 450 00:24:59,119 --> 00:25:02,040 Speaker 3: single one of them had a positive effect. My guess 451 00:25:02,119 --> 00:25:04,480 Speaker 3: is that's what we're going to see this time around 452 00:25:04,520 --> 00:25:06,960 Speaker 3: as well. The reason I say it's a guess, though, 453 00:25:07,080 --> 00:25:09,840 Speaker 3: is because the scope of the tariffs right now are 454 00:25:10,000 --> 00:25:13,320 Speaker 3: so much larger than they were in the first Trump administration. 455 00:25:13,520 --> 00:25:17,000 Speaker 1: So now I ask you for your opinion, and you 456 00:25:17,000 --> 00:25:20,159 Speaker 1: shouldn't ask economists for their opinions. 457 00:25:19,960 --> 00:25:23,000 Speaker 2: It's wrong, it's rude. But here I am talking to EJ. 458 00:25:23,119 --> 00:25:26,840 Speaker 1: An Tony, chief economists at the Heritage Foundation Heritage dot org. 459 00:25:27,760 --> 00:25:31,560 Speaker 1: You're crystal balling this thing, right. You're looking into the future. 460 00:25:32,080 --> 00:25:34,520 Speaker 1: The conversation we just had about the FED, the conversation 461 00:25:34,600 --> 00:25:36,320 Speaker 1: we're having about Midwest main Street. 462 00:25:37,040 --> 00:25:40,040 Speaker 2: You look a year from now, do you like what 463 00:25:40,080 --> 00:25:40,560 Speaker 2: you see? 464 00:25:42,400 --> 00:25:46,280 Speaker 3: I do largely from an investment standpoint, and a lot 465 00:25:46,280 --> 00:25:49,240 Speaker 3: of people hear investment and they think, okay, that's Wall Street, 466 00:25:49,280 --> 00:25:54,000 Speaker 3: not main Street. No, no, No, investment is entirely main Street. 467 00:25:54,080 --> 00:25:57,159 Speaker 3: The vast majority of Americans, for example, own the S 468 00:25:57,200 --> 00:26:00,280 Speaker 3: and P five hundred because a lot of them a cause, 469 00:26:00,280 --> 00:26:02,439 Speaker 3: even if they're not let's say, day trading stock, they 470 00:26:02,440 --> 00:26:06,159 Speaker 3: don't have like a one of those self managed brokerage accounts. 471 00:26:06,520 --> 00:26:09,639 Speaker 3: Everyone's almost everybody's got a four to one K or 472 00:26:09,680 --> 00:26:13,439 Speaker 3: a pension plan or some kind of retirement savings that 473 00:26:13,560 --> 00:26:15,440 Speaker 3: essentially have the S and P five hundred in it. 474 00:26:15,520 --> 00:26:18,520 Speaker 3: So when we talk about a big stock index like that, 475 00:26:18,640 --> 00:26:22,480 Speaker 3: a very diversified stock index, that is main Street. And 476 00:26:22,520 --> 00:26:25,520 Speaker 3: so when we talk about investment in those companies, again, 477 00:26:25,560 --> 00:26:30,959 Speaker 3: that's main Street. Also what is investment. Investment means building factories, 478 00:26:31,320 --> 00:26:34,760 Speaker 3: it means more plants and equipment, it means training people 479 00:26:34,760 --> 00:26:37,760 Speaker 3: on software and developing software. These are all activities that 480 00:26:37,880 --> 00:26:41,400 Speaker 3: are done on Main Street. And it is that kind 481 00:26:41,440 --> 00:26:44,360 Speaker 3: of investment something. It's a category we like to call 482 00:26:44,480 --> 00:26:48,800 Speaker 3: fixed private investment. That is where you get long run 483 00:26:48,840 --> 00:26:52,280 Speaker 3: economic growth. When that goes down, long run economic growth suffers. 484 00:26:52,320 --> 00:26:56,400 Speaker 3: Sure enough, when different provisions of the original tax cuts 485 00:26:56,400 --> 00:27:01,720 Speaker 3: and jobs expired under the Biden administry and it hurt investment, 486 00:27:01,840 --> 00:27:05,560 Speaker 3: you then saw economic growth slow pretty substantially. And so 487 00:27:05,800 --> 00:27:09,320 Speaker 3: as we now have all these different provisions in place 488 00:27:09,520 --> 00:27:13,639 Speaker 3: which are going to increase investment, that will increase productivity, 489 00:27:13,840 --> 00:27:17,360 Speaker 3: it will increase economic activity, it will increase wage growth. 490 00:27:17,760 --> 00:27:20,199 Speaker 3: All of these things are very very positive, not just 491 00:27:20,280 --> 00:27:24,800 Speaker 3: for today, but for the long run economic prospects of 492 00:27:24,840 --> 00:27:28,199 Speaker 3: the country. And you're seeing not only domestic investment already 493 00:27:28,240 --> 00:27:31,679 Speaker 3: get started because of the tax law that was just passed, 494 00:27:31,880 --> 00:27:35,800 Speaker 3: but you're also seeing foreign investment pour into the country 495 00:27:35,800 --> 00:27:38,720 Speaker 3: as well as a result of the different trade negotiation. 496 00:27:38,960 --> 00:27:42,160 Speaker 3: So the very short answer to your question, Tony, after 497 00:27:42,200 --> 00:27:45,399 Speaker 3: that rambling is to say, yes, a year from now, 498 00:27:45,640 --> 00:27:49,880 Speaker 3: I am very very bullish because of the investment outlook 499 00:27:50,119 --> 00:27:51,240 Speaker 3: on the US economy. 500 00:27:51,440 --> 00:27:53,600 Speaker 2: In ain't rambling when you can explain your position. 501 00:27:53,760 --> 00:27:58,399 Speaker 1: EJ and Tony chief Economist the Heritage Foundation real. EJ 502 00:27:58,720 --> 00:28:01,520 Speaker 1: and Tony there on the Twitter X. You should follow him. 503 00:28:01,840 --> 00:28:04,679 Speaker 1: Do that immediately. More coming up on Tony Katz. This 504 00:28:04,760 --> 00:28:05,720 Speaker 1: is Tony Katz today.