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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: So we want to get more on that now and

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Speaker 2: turn to our Bloomberg Texas Bureau chief Julie Fine, who

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Speaker 2: is in Dallas with the former Dallas Fed President Robert Kaplan. Julie,

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Speaker 2: thank you so much, Robert, thank you so much for

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Speaker 2: being with us. I want to start with the Fed

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Speaker 2: lowering their benchmark interest rates a quarter point. Is this

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Speaker 2: the right decision? They did it for the third consecutive time.

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Speaker 1: Yeah.

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Speaker 3: I think this was a tough decision, and I expected

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Speaker 3: to be a tough one with a lot of debate.

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Speaker 3: But so they're down now at four and a quarter

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Speaker 3: four and a half percent. I don't think they can

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Speaker 3: go lower than this until they seem more demonstrable improvement

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Speaker 3: and inflation. And so a lot of the discussion after

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Speaker 3: the meeting was about the fact that they're on pause

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Speaker 3: and maybe the number of rate cut next. You'll great

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Speaker 3: cuts next, You'll be a little lower than people expected.

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Speaker 1: But I think that's appropriate given where we are. Well.

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Speaker 2: The FAT also signaling as you're referring to two interest

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Speaker 2: rates cuts next year, what do you think of that?

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Speaker 2: How does that really affect the economic outlook?

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Speaker 3: So what those what this is called the Summary of

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Speaker 3: economic projections each of us around when it was at

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Speaker 3: the FED. Submit this and the only caution I'd give

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Speaker 3: it has the shelf life. I used to joke around

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Speaker 3: as the same as a cart and a milk, meaning

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Speaker 3: it's my best guess now what we're going to do

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Speaker 3: next year. I reserve the right to change my mind

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Speaker 3: a week from now. And the reason I think in

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Speaker 3: this case I wouldn't put too much stock on it

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Speaker 3: either way. We're about to have a whole range of

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Speaker 3: structural changes with the new administration, and so I think

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Speaker 3: it's their best guess now. They're uncommitted about when next

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Speaker 3: year they'll do the two cuts. But will it be

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Speaker 3: too It could be less, it could be more. It

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Speaker 3: depends on how events unfold.

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Speaker 2: Yeah, you refer to some of the policies that President

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Speaker 2: Trump has talked about. How do you think those will

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Speaker 2: affect inflation and will affect the economy? These are big,

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Speaker 2: sweeping changes this new administration is talking about.

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Speaker 3: So even before we get to those, I think in

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Speaker 3: inflation is a little bit stalled. And again we're running

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Speaker 3: historically high deficits and fiscal spending right now is at

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Speaker 3: historic levels with these special programs like Inflation Reduction Act

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Speaker 3: and Infrastructure Act. So now we're going to get to

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Speaker 3: four or five big structural changes. One is we're going

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Speaker 3: to have a regulatory review economy wide with the purpose

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Speaker 3: of improving intention of improving productivity. You're going to have

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Speaker 3: an effort to lower the energy prices, improve pipelines, permit pipelines, refineries,

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Speaker 3: get more drilling to help low modern income families afford

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Speaker 3: energy costs.

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Speaker 1: You're also going to have an.

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Speaker 3: Effort to stand down I think some of these big

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Speaker 3: government spending programs and then doze to try to actually

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Speaker 3: cut government spending. It's going to be very challenging. Probably

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Speaker 3: you can't do it in size without looking at some

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Speaker 3: sensitive areas like entitlements. And then the other two ones

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Speaker 3: that have been talked about tariffs. You're going to have

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Speaker 3: either threatened tariffs or actual tariffs. And one comment I've

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Speaker 3: made it's one thing, if you have tariffs on China,

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Speaker 3: you're going to need to leave a corridor open in

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Speaker 3: North America for reshoring.

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Speaker 1: And we don't know.

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Speaker 3: Whether they're going to put high tariffs on Mexico which

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Speaker 3: would undermine that. And then the last big thing is

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Speaker 3: you're going to seal the border. You're going to reduce

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Speaker 3: obviously undocumented immigration, and you're going to deport certain types

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Speaker 3: of immigrants that are here illegally. We don't know yet

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Speaker 3: how far that will go, but that's a big deal

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Speaker 3: because it will affect workforce growth, and we need workforce growth.

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Speaker 3: So this is a puzzle those four or five pieces,

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Speaker 3: and we don't know yet exactly how the puzzle will unfold.

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Speaker 2: Okay, let's talk a little bit about the tariffs. You

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Speaker 2: and I sit here. We are in the state of Texas.

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Speaker 1: We know a.

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Speaker 2: Lot about trade here and how important it is to

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Speaker 2: the economy. President Trump has said he is a business president.

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Speaker 2: He's had a lot of business support. Does he risk

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Speaker 2: losing that if these tariffs affect businesses here in Texas

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Speaker 2: and around the country.

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Speaker 3: So, businesses in Texas and nationwide are very encouraged by

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Speaker 3: the fact we're going to get a more pro business.

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Speaker 3: They're hoping favorable regulatory environment, maybe improvements in tax policy

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Speaker 3: on tariffs. Though most CEOs I talk with, and Texas

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Speaker 3: is the largest exporting state in the country, as you've mentioned,

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Speaker 3: they're nervous about domiciling more manufacturing capacity here if they

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Speaker 3: can't reashore parts of it to Mexico because the costs

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Speaker 3: are higher here Mexico costs are lower. So I think

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Speaker 3: he's going to have the support of business leaders, but

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Speaker 3: the issue will be what actions do they take and

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Speaker 3: are they more cautious So verbal support for sure, actions

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Speaker 3: that follow through on creating more domestic capacity. Think it

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Speaker 3: depends how he does the tariffs.

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Speaker 2: Let's turn to Washington. Now, Congress has not come to

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Speaker 2: an agreement on a cr President Trump is against the

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Speaker 2: one on the table, and he actually told NBC News

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Speaker 2: that he believes that debt ceiling should be abolished. When

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Speaker 2: you talk about money in the economy, how will this

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Speaker 2: affect everything?

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Speaker 3: So this approximate issue of the debt ceiling, we have

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Speaker 3: a saga at least once a year where we have

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Speaker 3: I would call it a manufactured crisis sometimes where I'm

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Speaker 3: not going to extend the dead ceiling nless you agree

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Speaker 3: to this, and there's a standoff, And ironically it's sometimes

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Speaker 3: a distraction from the bigger issue in that debt to

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Speaker 3: GDP has gone from seventy percent pre COVID to over

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Speaker 3: one hundred percent. We're running a historically high deficit the year,

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Speaker 3: the treasury is struggling to sell the ten year and

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Speaker 3: thirty year treasuries.

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Speaker 1: People are reluctant to buy.

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Speaker 3: We've got to reduce our debt, and so I could

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Speaker 3: see where the incoming president is saying, I don't want

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Speaker 3: to deal with this these mini crisis all the time.

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Speaker 3: We have a bigger issue, which is we've got to

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Speaker 3: reduce spending. And so we're hopeful that they resolve this

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Speaker 3: crisis and continue the government operating. But if foreshadows a

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Speaker 3: much bigger debate and action in the first six months

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Speaker 3: the next year, can we actually bend the curve of

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Speaker 3: debt to GDP reduce these deficits. I think we're in

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Speaker 3: an area where that's a very important part of economic policy.

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Speaker 2: Before I let you go, we have to talk about Texas.

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Speaker 2: You're here vice president now, of course at Goldman Sachs.

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Speaker 2: What do you think the ceiling is on the business

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Speaker 2: economy here? I mean, you have a new headquarters, we've

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Speaker 2: broken ground down the street here, So what do you

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Speaker 2: expect the tech sis miracle to continue to look like?

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Speaker 3: So at Goldman, obviously we're very optimistic about the state

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Speaker 3: of Texas. But the story of Texas over the last

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Speaker 3: fifteen years has been immigration. Of migration, I should say,

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Speaker 3: of people and firms to the state, pro business environment,

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Speaker 3: central location, favorable tax policy, and this is why Dallas

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Speaker 3: and Houston and Austin are three of the fastest growing

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Speaker 3: cities in the United States.

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Speaker 1: So I think those trends will continue.

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Speaker 3: Will We're building Dallas as a hub with several thousand

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Speaker 3: people already here, but will operate globally from Dallas. This

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Speaker 3: will be one of the large offices within Goldman Sachs.

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Speaker 3: We will operate globally. We'll have a number of business

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Speaker 3: units here. We already do and we're very optimistic about

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Speaker 3: the business prospects though operating from Texas for the state

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Speaker 3: and from operating here to serve the country and operate globally.

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Speaker 2: Rob Kaplin, thanks i' much sure being with us