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Speaker 1: Bloomberg Benchmark is brought to you by Stage Summit, the

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Speaker 1: world's largest gathering of small and medium businesses, featuring Sir

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Speaker 1: Richard Branson July in Chicago. Register with promo code business

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Speaker 1: at stage summit dot com for just It's July. Today

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Speaker 1: also happens to be exactly six months since Donald Trump

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Speaker 1: took office as forty president of the United States of America. Hello,

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Speaker 1: and welcome back to the Bloomberg Benchmark podcast. It's July.

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Speaker 1: I'm Scott landman and economics editor at Bloomberg News in Washington,

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Speaker 1: and I'm Kate Smith, an editor here with Bloomberg in

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Speaker 1: New York. This week, with the Republican Convention going on

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Speaker 1: in Cleveland and Donald Trump close with Hillary Clinton in

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Speaker 1: the polls, we've decided to ask the question what would

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Speaker 1: the U. S economy look like if Trump were elected president?

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Speaker 1: And it's a great question. In fact, it's such a

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Speaker 1: good question that we don't want to just sit here

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Speaker 1: and speculate about what could it be like. No, this

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Speaker 1: is going to be a first for us. We are

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Speaker 1: actually going to take the Bloomberg time Machine one year

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Speaker 1: into the future to July and listen to our show

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Speaker 1: about how things have gone during Trump's first six months

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Speaker 1: as president. Are you ready, Kate? I am all right,

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Speaker 1: here we go. Hello and welcome back to the Bloomberg

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Speaker 1: Benchmark Podcast. It's July. I'm Scott Lanman, and economics editor

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Speaker 1: at Bloomberg News in Washington, and I'm Kate Smith, an

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Speaker 1: editor with Bloomberg News in New York. So, Kate, what's

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Speaker 1: new on the Pokemon beat. Well, things have just kept

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Speaker 1: getting more and more interesting since I took over the

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Speaker 1: Pokemon desk back last fall. So now there are one

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Speaker 1: point five billion people playing the game worldwide, and Nintendo's

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Speaker 1: market value passed Apple two months ago to become number

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Speaker 1: one in the world. So the Group of twenty has

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Speaker 1: actually add a Pokemon as an official agenda topic for

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Speaker 1: next month's meeting of the Finance ministers in Germany, and

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Speaker 1: there's even talk that policymakers planned to urge Nintendo to

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Speaker 1: step up its development of Pokemon updates to stimulate global growth.

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Speaker 1: It's just fascinating, unbelievable. I can't believe it's been one

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Speaker 1: year since this phenomenon took hold and began changing the

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Speaker 1: way we go about our daily lives and work. Here

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Speaker 1: has really changed since Bloomberg limited our Pokemon playing to

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Speaker 1: only one hour a day in the office. It's really tough.

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Speaker 1: It is tough. But to be honest, you know, in

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Speaker 1: you know, speaking to other people, we're the lucky ones

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Speaker 1: have heard that a lot of employers have actually limited

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Speaker 1: it to thirty minutes of play a day. But you

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Speaker 1: know what, anyway, we're here to talk about something way

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Speaker 1: more interesting than Pokemon somehow. Today also happens to be

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Speaker 1: exactly six months since Donald Trump took office as forty

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Speaker 1: president of the United States of America. That's right, and

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Speaker 1: joining us to talk about it all is Neil Datta,

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Speaker 1: head of US economics at Renaissance Macro Research. Neil, thanks

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Speaker 1: for being here today, Thanks for having me, all right.

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Speaker 1: So it's an interesting time so far. In a lot

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Speaker 1: of Trump's critics were talking about how he would sink

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Speaker 1: the economy, but like most of his predecessors, he's taken

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Speaker 1: a more pragmatic stance to achieve some of his goals. Uh,

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Speaker 1: immigration is slowing down due to new restrictions, and there's

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Speaker 1: some uncertainty over how the rollback of Obamacare is going

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Speaker 1: to play out in Congress, and there's some international tension

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Speaker 1: over trade as we expected, but President Trump has used

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Speaker 1: fiscal policy to add some juice to the economy, and

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Speaker 1: with bond yields rising, the Fed has raised interest rates

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Speaker 1: for a third time since December. Neil, how surprised are

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Speaker 1: you by how things have gone so far? Well, you know,

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Speaker 1: I guess I'm not that surprised. Um, going into the year,

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Speaker 1: you kind of have to assume that you know, you're

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Speaker 1: knowing you didn't want to think that Trump was gonna

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Speaker 1: want to get in there and do a bad job. So, UM,

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Speaker 1: my sense is that you have stronger fiscal policy that's

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Speaker 1: pressuring inflation higher. And you know, I think given that

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Speaker 1: the economy had some momentum going into this year, the

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Speaker 1: feed is not really um accelerating their path just yet.

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Speaker 1: And you know, my sense is that you know, you

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Speaker 1: have stronger fiscal policy, um out of the Trump administration.

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Speaker 1: You have more restrictive immigration that's putting up with pressure

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Speaker 1: on inflation. So I think that would be what I

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Speaker 1: would expect economically, um, coming out of a Trump administration.

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Speaker 1: So one issue that a lot of people overlooked a

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Speaker 1: year ago was when Trump said that quote, we have

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Speaker 1: to rebuild the infrastructure in our country. So now he's

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Speaker 1: really followed up on that through working with Congress to

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Speaker 1: pass a hundred billion dollar plan to kick start roads, bridges,

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Speaker 1: and real projects all around the country and really encouraging

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Speaker 1: states and cities to take similar action by taking advantage

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Speaker 1: of low interest rates through municipal bonds and of course

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Speaker 1: those for our listeners who don't know, are the vehicles

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Speaker 1: in which state and local governments can issue debt to

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Speaker 1: spur the economy and start infrastructure projects. He's also signed

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Speaker 1: a defensive re author zation bill that increases spending by

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Speaker 1: ten So how much is this going to actually help

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Speaker 1: the economy? Well, I guess it will help the economy somewhat.

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Speaker 1: The question is that the extent to which you know

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Speaker 1: he's willing to offset that what cuts down the road. Um,

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Speaker 1: you know, there is a lot of debate about how

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Speaker 1: much of a multiplier you'll get from fiscal policy. I

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Speaker 1: do think, you know, given how low interest rates still are,

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Speaker 1: there's probably very minimal cost to going this route, and

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Speaker 1: so I think it's probably a good thing, you know,

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Speaker 1: for the economy, have stronger fiscal policy and you don't

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Speaker 1: really have much of a monetary offset, and you know,

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Speaker 1: if you look at where the bond market is has been,

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Speaker 1: it's you know, you can make a very strong case

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Speaker 1: that it's screaming for fiscal stimulus. You know, a hundred

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Speaker 1: million dollars on roads and bridges isn't really a big deal. Um,

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Speaker 1: you know, actually we miss boke there. It should be

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Speaker 1: a hundred billion. Yeah, I mean I again, I think,

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Speaker 1: you know, one of the one of the points that

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Speaker 1: I would make about all this is that when people

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Speaker 1: think about for structure, they think about roads and bridges,

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Speaker 1: like you just mentioned. You know, these sort of ribbon

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Speaker 1: cutting ceremonies where politicians get in front of a red

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Speaker 1: tape with a big scissor and a hard hat or

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Speaker 1: something like that. And and it's not immediately clear to

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Speaker 1: me that we actually need to be spending money on

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Speaker 1: roads and bridges, right, I mean, if you look at

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Speaker 1: transportation spending, highway and street spending as a share of GDP,

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Speaker 1: it's pretty much higher now than it was on average

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Speaker 1: from two thousand two to two thousand and seven. There

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Speaker 1: are other areas of infrastructure, you know, that are actually

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Speaker 1: less sexy, that probably have more need for spending, you know,

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Speaker 1: things like um, you know, government hospital and health facilities.

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Speaker 1: Given the fact that we have veterans coming or you know,

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Speaker 1: UM veterans coming back from overseas war fighting, UM water

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Speaker 1: supply things like pipe fixtures and so forth, we're not

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Speaker 1: We're under resting there. It seems to me if you

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Speaker 1: look at the data, UM, so you know, roads and

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Speaker 1: bridges are nice. UM. Trump has mentioned LaGuardia Airport, you know,

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Speaker 1: every other week, and it shouldn't be noted that LaGuardia

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Speaker 1: is already getting an infrastructure revamp. UM. But you know,

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Speaker 1: the thing that I would just say is that the

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Speaker 1: net effect of all of this is inflationary. I mean,

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Speaker 1: if you're an investor and you want to play for

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Speaker 1: you know, an aggressive fiscal policy stance coupled with restrictive

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Speaker 1: immigration laws and anti trade and anti trade agenda, I

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Speaker 1: would be UM buying tips and selling treasuries. I want

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Speaker 1: to jump in quickly. You mentioned the infrastructure question. I

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Speaker 1: want to pose a question for you. Before I took

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Speaker 1: over the Pokemon beat, I was a municipal bond reporter,

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Speaker 1: and one thing that was really interesting was that even

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Speaker 1: though you had you know, generational lows for interest rates,

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Speaker 1: you saw a huge contraction of the municipal market. Of course,

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Speaker 1: you know, for listeners who don't know what the municmal

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Speaker 1: market is, this is the vehicle in which states and

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Speaker 1: cities finance, road, bridge, all sorts of infrastructure projects. So

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Speaker 1: even though rates were at lows, even though you saw

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Speaker 1: all these incentives going on to build these things, states

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Speaker 1: and cities still didn't want to do it. So, I mean,

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Speaker 1: I guess, Neil Scott, what do you guys think of that?

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Speaker 1: I mean, what's going on now that we think that's

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Speaker 1: actually going to stimulate something that you know obviously couldn't

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Speaker 1: happen to three or four years ago. I think one

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Speaker 1: issue politically is that you're seeing I mean, basically monetary

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Speaker 1: policy doesn't have as much scope to stimulate as it

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Speaker 1: did four or five years ago, and so there's an

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Speaker 1: additional burden, I guess, or growing burden on fiscal authorities

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Speaker 1: to kind of move the needle on the economy. You know,

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Speaker 1: you're seeing that clearly in in Japan, You're seeing it

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Speaker 1: to some extent in Europe. You've already seen it in

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Speaker 1: our neighbors to the north and Canada, where they've announced

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Speaker 1: a more aggressive fiscal package with the new government under

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Speaker 1: Trudeau coming in this year, and so I think that's

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Speaker 1: part of the reason why you're seeing it is because, um,

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Speaker 1: you know, typically when we think of sort of cyclical

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Speaker 1: demand stabilization, we tend to think of monetary policy. But um,

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Speaker 1: you know, given that monetary policy is basically you know,

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Speaker 1: I mean at its end, Um, there's more of a

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Speaker 1: sort of there's an increasing pressure on fiscal authorities to

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Speaker 1: do something. And on top of that, it seems like

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Speaker 1: a perfect opportunity because if you look at, um, you know,

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Speaker 1: what's sort of on the top of of most people's minds. Um,

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Speaker 1: you know, four years ago, Um, you know that I

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Speaker 1: would argue that the budget deficit and debt was high

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Speaker 1: on the minds of a lot of Americans. Today it's

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Speaker 1: near the bottom if you look at in terms of,

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Speaker 1: you know what, what issues people care about the most. Um,

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Speaker 1: So the political pressure of reducing the budget deficit isn't

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Speaker 1: a strong today or as pervasive today as it was

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Speaker 1: five years ago. And so you know, I think for

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Speaker 1: all these factors, you're seeing more of a push. And

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Speaker 1: you have a new government coming in they're gonna want

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Speaker 1: to do something. Given given the US election sort of

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Speaker 1: cycle and the legislative calendar and this sort of you know,

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Speaker 1: twenty four hour news cycle, and I mean basically the

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Speaker 1: window for a new government to get something downe feels

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Speaker 1: like it gets shorter and shorter with each new government. Yeah,

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Speaker 1: central banks are certainly welcoming this push on fiscal policy,

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Speaker 1: especially FED Chair Janet Yellen. But as we all know,

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Speaker 1: she's not going to be around much longer. Uh, we're

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Speaker 1: going to take a break right now, and we'll talk

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Speaker 1: more about that right after this message. Ullinberg Benchmark is

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Speaker 1: brought to you by Stage Summit, the world's largest gathering

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Speaker 1: of small and medium businesses, featuring Sir Richard Branson July Chicago,

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Speaker 1: registered with promo code business at stage summit dot com.

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Speaker 1: For just as we were just saying, Neil and Kate

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Speaker 1: were six months away now from another momentous date, January

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Speaker 1: thirty one, that's going to be Janet Yellen's last day

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Speaker 1: as Chair of the Federal Reserve. Speculation is growing in

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Speaker 1: Washington about who President Trump will pick to lead the

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Speaker 1: Central Bank. What will be the main challenges for the

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Speaker 1: next FED chair. Well, my view is that the next

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Speaker 1: FED chair's biggest problem is going to be higher inflation. Right.

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Speaker 1: I mean, for years now, we've been talking about low inflation,

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Speaker 1: low inflation, deflation risks, the FED running out of ammunition,

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Speaker 1: and the FED continually bending to uh, you know, the

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Speaker 1: lower sort of implied rate path that has been put

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Speaker 1: out by the market. And you know, I think given

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Speaker 1: the confluence of factors that we're assuming here, which is

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Speaker 1: a stronger fiscal policy, anti trade, anti immigration, those are

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Speaker 1: inflationary policies. I mean, if the biggest secular force for

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Speaker 1: disinflation in the last twenty five years has been the

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Speaker 1: opening up of the global economy, what does the push

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Speaker 1: to protectionism mean. I think it's pretty obvious. So this

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Speaker 1: is something that that's going to have to deal with,

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Speaker 1: and I would argue that, you know, in some respects,

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Speaker 1: you coul can make an argument that Yelling should actually stay. UM.

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Speaker 1: If I were actually advising UM the president on who

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Speaker 1: who denominate, I'd argue for her to stay because a

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Speaker 1: lot of the folks that have been coming up the

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Speaker 1: ranks don't even know what high inflation is. They have

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Speaker 1: no idea about how to respond in a rising inflationary environment.

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Speaker 1: So much of what's been going on right now is

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Speaker 1: trying to come up with innovative ways of combating disinflation.

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Speaker 1: So um to me, that would be the issue for

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Speaker 1: the Central Bank at least. I mean. Also one of

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Speaker 1: the largest you know items that has happened in coming

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Speaker 1: from Washington this year has also been the Transpacific Partnership,

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Speaker 1: which has died. So Trump formally notified Mexico and Canada

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Speaker 1: that he wants to renegotiate NAPTIS so he can, in

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Speaker 1: his own words, of course, bring jobs back to America.

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Speaker 1: And trade with China has really started to plunge after

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Speaker 1: Trump announced that teriff on all Chinese goods. China's retaliated

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Speaker 1: with similar levies and US exports, and the Chinese are

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Speaker 1: also very unhappy with being labeled as currency manipulators. I've

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Speaker 1: canceled the strategic and economic dialogue that took place over

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Speaker 1: the at last eight years, although Trump said he wasn't

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Speaker 1: unplanning on doing it anyway. So, Scott Neil, is this

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Speaker 1: debt negative for the US in the world? I mean,

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Speaker 1: I think so, you know, I think it's uh. I

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Speaker 1: mean again, I mean, you know, now you're you're we're

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Speaker 1: sort of talking about a different situation, and it would

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Speaker 1: be it's not clear to me exactly how the feder

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Speaker 1: would respond. I mean, you're you know, you're talking about

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Speaker 1: collapse in global trade brought about by political events that

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Speaker 1: would have repercussions to US growth, which the FED may

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Speaker 1: have to actually use policy in front of. So you know, look,

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Speaker 1: I mean there's a couple of things here. I think first,

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Speaker 1: globalization in the main is is a good thing. I mean,

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Speaker 1: but I mean what I mean by that is, you know,

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Speaker 1: the opening up of markets, trading, this sort of specialization

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Speaker 1: that you see across economies. UM. You know, I think

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Speaker 1: those rules, UM, you know that that still applies. At

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Speaker 1: the same time, it should also be noted that there's

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Speaker 1: no law that says trade has to grow at some

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Speaker 1: sort of exponential rate relative to GDP. I mean, you're

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Speaker 1: already starting to see a slowing and global trade. Um.

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Speaker 1: That's pretty much been the case since A lot of

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Speaker 1: that has to do with the fact that, you know,

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Speaker 1: there hasn't been a big policy UM announcement, right, I mean,

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Speaker 1: so much of the I mean, if you know, in

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Speaker 1: the nineties and even early you know, to mid two

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Speaker 1: thousand's a very reliable rule of thumb that we would

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Speaker 1: use is that for every one unit increase in global production,

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Speaker 1: trade would row by two units. Today the relationship is

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Speaker 1: one for one. And um, you know, a lot of

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Speaker 1: that has to do with the sort of the fact

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Speaker 1: that we haven't had a big we sort of we

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Speaker 1: had the one time opening up at the global economy

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Speaker 1: and the games that have been sort of exhausted. You've

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Speaker 1: had a lot of emerging markets going to different sort

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Speaker 1: of growth strategies and that's put pressure on trade again.

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Speaker 1: You've had you've had sort of in sourcing back to

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Speaker 1: the home market given the depreciation in the dollar that

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Speaker 1: we've seen. So so while I think, you know, sort

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Speaker 1: of a protectionist stances is a bad thing, I would

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Speaker 1: just say that, you know, trade activity has not been

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Speaker 1: as elastic as it used to be. Um. So again,

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Speaker 1: this could be just a case of politicians kind of

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Speaker 1: top ticking the trade of the trade story. Yeah, and

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Speaker 1: the IMF has really been on the case, just sounding

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Speaker 1: the alarm about possible to decline in global treat growth

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Speaker 1: this year. They they just issued their revised forecast for

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Speaker 1: twenty seventeen and um, they're talking about how growth is

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Speaker 1: going to be flat for a third year, still one

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Speaker 1: of the lowest rates since the global financial crisis, So

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Speaker 1: this trade tension really isn't helping that that much in

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Speaker 1: terms of global growth. You know, the situation might be

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Speaker 1: slightly different in America where we're getting that boost from

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Speaker 1: fiscal policy. But you know, Christine Leguard, she's just been really,

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Speaker 1: really vocal in every appearance I've seen her lately talking

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Speaker 1: about this and you know, venturing into the political in

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Speaker 1: some ways. Neil, I want to jump in and ask

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Speaker 1: you one question. We've been kind of talking about this

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Speaker 1: a little bit high level about what we do with

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Speaker 1: fiscal policy and monetary policy in regards to kind of

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Speaker 1: more protectionist stance on trading. But how about for the

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Speaker 1: average American? I mean, are we going to start to

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Speaker 1: see the price of goods rising? You know the iPhones

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Speaker 1: that you know, we're so ubiquitous throughout all of America

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Speaker 1: really and across all incomes. Really everyone has an iPhone? Right, Um?

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Speaker 1: I mean, are we going to start to see that,

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Speaker 1: you know, kind of the quality of life and consumerism

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Speaker 1: that we've kind of gotten so used to. Are we

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Speaker 1: going to see a clamp on that if we indeed

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Speaker 1: go through with all of these protections theories? I mean,

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Speaker 1: I I would think so I would think. So, I mean,

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Speaker 1: let's look at what's we're gonna have to go back

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Speaker 1: to flip phones. Well, I don't think that that would.

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Speaker 1: We would see like a you know, an arrest in

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Speaker 1: terms of the technological advancement, but in terms of the

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Speaker 1: price for goods, it would go up. I mean, think

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Speaker 1: about it, right, I mean, I mean, the the issue,

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Speaker 1: the bigger issue here is that the benefits of trade

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Speaker 1: are widespread, the costs are centralized. It's very easy for

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Speaker 1: a politician to get in front of a bunch of

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Speaker 1: steel workers and say I saved their jobs. What's unseen

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Speaker 1: is the fact that, you know, the prices for your

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Speaker 1: cars may be higher. You know, I'm not the first

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Speaker 1: person to say something like that. I mean, you know,

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Speaker 1: to me, it's pretty obvious. Look at look at the

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Speaker 1: inflation data that we've seen. Even in the last few years,

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Speaker 1: apparel prices, for example, had been falling year after year

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Speaker 1: after year after year. More recently that's basically stopped. I mean,

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Speaker 1: apparel prices have stopped falling. And I think again it

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Speaker 1: goes back to our earlier discussion about we're no longer

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Speaker 1: seeing a widening out of the global trade um story

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Speaker 1: so this whole idea about the world is flat, Well,

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Speaker 1: the world is no longer flattening, I guess, is what

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Speaker 1: you could say. And some of the policies that are

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Speaker 1: being um advocated would actually go in the opposite direction.

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Speaker 1: I think it's definitely possible that that you get an

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Speaker 1: inflationary response over time if economies become more inward, and

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Speaker 1: I think that that brings costs to the very people

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Speaker 1: that that think they're going to be helped by more protectionism,

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Speaker 1: And a lot of the research that I've seen are

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Speaker 1: shown that protectionism actually hurts those at the lower rent.

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Speaker 1: That's right. You've seen these prices rising, and it's not

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Speaker 1: clear if the jobs are going to come back or

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Speaker 1: if the wages are actually going to rise to support

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Speaker 1: with that. But anyway, UM, well, we'll leave it there.

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Speaker 1: It's been a fascinating six months so far. Surely the

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Speaker 1: next three and a half years at least will be

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Speaker 1: even more interesting. Neil, thanks so much for joining us today.

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Speaker 1: Thank you. Wow, that was really cool. Yeah. I can't

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Speaker 1: believe how crazy Pokemon gets in the future, and I

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Speaker 1: can't believe I'm going to be the editor of the

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Speaker 1: Pokemon Beat. I know what did you think of how

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Speaker 1: things turn out a year from now. You know what,

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Speaker 1: I don't think it's I don't think the world is

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Speaker 1: going to end, which is which is a net plus, right.

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Speaker 1: It seems a little bit more levelheaded than maybe everyone's

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Speaker 1: screaming about what do you think? I don't know? I mean,

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Speaker 1: you know, this is definitely a lot better than I

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Speaker 1: thought things were turned out. After having a coup of

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Speaker 1: all this craziness over the last few months and seeing

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Speaker 1: how the election campaigns have turned out, you know, we

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Speaker 1: can only hope that this is our one of our

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Speaker 1: best case scenarios right here. I hope so, I certainly

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Speaker 1: hope so Benchmark We'll be back next week, and until then,

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Speaker 1: you can find us on the Bloomberg terminal at Bloomberg

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Speaker 1: dot com, as well as on iTunes, pocketcasts, and Stitcher.

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Speaker 1: And while you're there, take a minute to rate and

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Speaker 1: review the show. Some more listeners can find us and

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Speaker 1: let us know what you thought of the show. You

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Speaker 1: can talk to us and follow us on Twitter. You

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Speaker 1: can find Scott at Scott Landman, and you can find

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Speaker 1: me at by Kate Smith. I'll see you next week.

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