Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So we want to get more on that now and
Speaker 2: turn to our Bloomberg Texas Bureau chief Julie Fine, who
Speaker 2: is in Dallas with the former Dallas Fed President Robert Kaplan. Julie,
Speaker 2: thank you so much, Robert, thank you so much for
Speaker 2: being with us. I want to start with the Fed
Speaker 2: lowering their benchmark interest rates a quarter point. Is this
Speaker 2: the right decision? They did it for the third consecutive time.
Speaker 1: Yeah.
Speaker 3: I think this was a tough decision, and I expected
Speaker 3: to be a tough one with a lot of debate.
Speaker 3: But so they're down now at four and a quarter
Speaker 3: four and a half percent. I don't think they can
Speaker 3: go lower than this until they seem more demonstrable improvement
Speaker 3: and inflation. And so a lot of the discussion after
Speaker 3: the meeting was about the fact that they're on pause
Speaker 3: and maybe the number of rate cut next. You'll great
Speaker 3: cuts next, You'll be a little lower than people expected.
Speaker 1: But I think that's appropriate given where we are. Well.
Speaker 2: The FAT also signaling as you're referring to two interest
Speaker 2: rates cuts next year, what do you think of that?
Speaker 2: How does that really affect the economic outlook?
Speaker 3: So what those what this is called the Summary of
Speaker 3: economic projections each of us around when it was at
Speaker 3: the FED. Submit this and the only caution I'd give
Speaker 3: it has the shelf life. I used to joke around
Speaker 3: as the same as a cart and a milk, meaning
Speaker 3: it's my best guess now what we're going to do
Speaker 3: next year. I reserve the right to change my mind
Speaker 3: a week from now. And the reason I think in
Speaker 3: this case I wouldn't put too much stock on it
Speaker 3: either way. We're about to have a whole range of
Speaker 3: structural changes with the new administration, and so I think
Speaker 3: it's their best guess now. They're uncommitted about when next
Speaker 3: year they'll do the two cuts. But will it be
Speaker 3: too It could be less, it could be more. It
Speaker 3: depends on how events unfold.
Speaker 2: Yeah, you refer to some of the policies that President
Speaker 2: Trump has talked about. How do you think those will
Speaker 2: affect inflation and will affect the economy? These are big,
Speaker 2: sweeping changes this new administration is talking about.
Speaker 3: So even before we get to those, I think in
Speaker 3: inflation is a little bit stalled. And again we're running
Speaker 3: historically high deficits and fiscal spending right now is at
Speaker 3: historic levels with these special programs like Inflation Reduction Act
Speaker 3: and Infrastructure Act. So now we're going to get to
Speaker 3: four or five big structural changes. One is we're going
Speaker 3: to have a regulatory review economy wide with the purpose
Speaker 3: of improving intention of improving productivity. You're going to have
Speaker 3: an effort to lower the energy prices, improve pipelines, permit pipelines, refineries,
Speaker 3: get more drilling to help low modern income families afford
Speaker 3: energy costs.
Speaker 1: You're also going to have an.
Speaker 3: Effort to stand down I think some of these big
Speaker 3: government spending programs and then doze to try to actually
Speaker 3: cut government spending. It's going to be very challenging. Probably
Speaker 3: you can't do it in size without looking at some
Speaker 3: sensitive areas like entitlements. And then the other two ones
Speaker 3: that have been talked about tariffs. You're going to have
Speaker 3: either threatened tariffs or actual tariffs. And one comment I've
Speaker 3: made it's one thing, if you have tariffs on China,
Speaker 3: you're going to need to leave a corridor open in
Speaker 3: North America for reshoring.
Speaker 1: And we don't know.
Speaker 3: Whether they're going to put high tariffs on Mexico which
Speaker 3: would undermine that. And then the last big thing is
Speaker 3: you're going to seal the border. You're going to reduce
Speaker 3: obviously undocumented immigration, and you're going to deport certain types
Speaker 3: of immigrants that are here illegally. We don't know yet
Speaker 3: how far that will go, but that's a big deal
Speaker 3: because it will affect workforce growth, and we need workforce growth.
Speaker 3: So this is a puzzle those four or five pieces,
Speaker 3: and we don't know yet exactly how the puzzle will unfold.
Speaker 2: Okay, let's talk a little bit about the tariffs. You
Speaker 2: and I sit here. We are in the state of Texas.
Speaker 1: We know a.
Speaker 2: Lot about trade here and how important it is to
Speaker 2: the economy. President Trump has said he is a business president.
Speaker 2: He's had a lot of business support. Does he risk
Speaker 2: losing that if these tariffs affect businesses here in Texas
Speaker 2: and around the country.
Speaker 3: So, businesses in Texas and nationwide are very encouraged by
Speaker 3: the fact we're going to get a more pro business.
Speaker 3: They're hoping favorable regulatory environment, maybe improvements in tax policy
Speaker 3: on tariffs. Though most CEOs I talk with, and Texas
Speaker 3: is the largest exporting state in the country, as you've mentioned,
Speaker 3: they're nervous about domiciling more manufacturing capacity here if they
Speaker 3: can't reashore parts of it to Mexico because the costs
Speaker 3: are higher here Mexico costs are lower. So I think
Speaker 3: he's going to have the support of business leaders, but
Speaker 3: the issue will be what actions do they take and
Speaker 3: are they more cautious So verbal support for sure, actions
Speaker 3: that follow through on creating more domestic capacity. Think it
Speaker 3: depends how he does the tariffs.
Speaker 2: Let's turn to Washington. Now, Congress has not come to
Speaker 2: an agreement on a cr President Trump is against the
Speaker 2: one on the table, and he actually told NBC News
Speaker 2: that he believes that debt ceiling should be abolished. When
Speaker 2: you talk about money in the economy, how will this
Speaker 2: affect everything?
Speaker 3: So this approximate issue of the debt ceiling, we have
Speaker 3: a saga at least once a year where we have
Speaker 3: I would call it a manufactured crisis sometimes where I'm
Speaker 3: not going to extend the dead ceiling nless you agree
Speaker 3: to this, and there's a standoff, And ironically it's sometimes
Speaker 3: a distraction from the bigger issue in that debt to
Speaker 3: GDP has gone from seventy percent pre COVID to over
Speaker 3: one hundred percent. We're running a historically high deficit the year,
Speaker 3: the treasury is struggling to sell the ten year and
Speaker 3: thirty year treasuries.
Speaker 1: People are reluctant to buy.
Speaker 3: We've got to reduce our debt, and so I could
Speaker 3: see where the incoming president is saying, I don't want
Speaker 3: to deal with this these mini crisis all the time.
Speaker 3: We have a bigger issue, which is we've got to
Speaker 3: reduce spending. And so we're hopeful that they resolve this
Speaker 3: crisis and continue the government operating. But if foreshadows a
Speaker 3: much bigger debate and action in the first six months
Speaker 3: the next year, can we actually bend the curve of
Speaker 3: debt to GDP reduce these deficits. I think we're in
Speaker 3: an area where that's a very important part of economic policy.
Speaker 2: Before I let you go, we have to talk about Texas.
Speaker 2: You're here vice president now, of course at Goldman Sachs.
Speaker 2: What do you think the ceiling is on the business
Speaker 2: economy here? I mean, you have a new headquarters, we've
Speaker 2: broken ground down the street here, So what do you
Speaker 2: expect the tech sis miracle to continue to look like?
Speaker 3: So at Goldman, obviously we're very optimistic about the state
Speaker 3: of Texas. But the story of Texas over the last
Speaker 3: fifteen years has been immigration. Of migration, I should say,
Speaker 3: of people and firms to the state, pro business environment,
Speaker 3: central location, favorable tax policy, and this is why Dallas
Speaker 3: and Houston and Austin are three of the fastest growing
Speaker 3: cities in the United States.
Speaker 1: So I think those trends will continue.
Speaker 3: Will We're building Dallas as a hub with several thousand
Speaker 3: people already here, but will operate globally from Dallas. This
Speaker 3: will be one of the large offices within Goldman Sachs.
Speaker 3: We will operate globally. We'll have a number of business
Speaker 3: units here. We already do and we're very optimistic about
Speaker 3: the business prospects though operating from Texas for the state
Speaker 3: and from operating here to serve the country and operate globally.
Speaker 2: Rob Kaplin, thanks i' much sure being with us