1 00:00:02,320 --> 00:00:06,680 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:06,920 --> 00:00:10,319 Speaker 2: Jason Furman has committed himself to policy. There are a 3 00:00:10,400 --> 00:00:13,240 Speaker 2: few others equivalent to him, both Republican and Democrat. He's 4 00:00:13,240 --> 00:00:18,120 Speaker 2: associated with democratic politics, but he's I think been ecumenical 5 00:00:18,200 --> 00:00:21,200 Speaker 2: to use the word that Professor Furman uses a lot, Paul. 6 00:00:21,239 --> 00:00:23,840 Speaker 2: One of the key things with Jason Furman is he 7 00:00:23,960 --> 00:00:28,800 Speaker 2: was voted most handsome freshman on his dorm at Harvard. 8 00:00:28,840 --> 00:00:31,920 Speaker 2: He beat out his roommate just by a little bit. 9 00:00:32,000 --> 00:00:35,920 Speaker 2: That would have been Matt Damon from a few years ago. Jason, 10 00:00:35,960 --> 00:00:39,200 Speaker 2: thank you so much for joining us this morning. You're 11 00:00:39,240 --> 00:00:45,280 Speaker 2: in X ten and you have to teach ambiguity, microeconomic ambiguity, 12 00:00:45,320 --> 00:00:47,680 Speaker 2: and I can go this way and that. What I 13 00:00:47,720 --> 00:00:51,200 Speaker 2: didn't hear from the Secretary of Treasury is a risk 14 00:00:51,320 --> 00:00:55,200 Speaker 2: of a real or nominal GDP slowdown. With all the 15 00:00:55,280 --> 00:00:59,520 Speaker 2: policy upset the nation faces right now, do you see 16 00:00:59,720 --> 00:01:03,360 Speaker 2: that we could have a lessening of real GDP or 17 00:01:03,400 --> 00:01:05,720 Speaker 2: the animal spirit of nominal GDP. 18 00:01:07,800 --> 00:01:10,920 Speaker 1: Yeah, well, right now, the level of uncertainty is just 19 00:01:11,160 --> 00:01:12,480 Speaker 1: incredibly high. 20 00:01:13,040 --> 00:01:15,679 Speaker 3: That is definitely a minus for the economy. 21 00:01:16,040 --> 00:01:18,840 Speaker 1: I don't know how big a minus it is, and 22 00:01:18,920 --> 00:01:21,520 Speaker 1: a lot of it depends on how the uncertainty ends 23 00:01:21,600 --> 00:01:24,959 Speaker 1: up getting resolved around things like tariffs, or whether it 24 00:01:25,000 --> 00:01:27,800 Speaker 1: gets resolved. It may be that every month there's a 25 00:01:27,840 --> 00:01:31,679 Speaker 1: new threat, it gets withdrawn, a new threat that gets made. 26 00:01:32,319 --> 00:01:35,280 Speaker 1: That makes it hard to do planning on a global basis. 27 00:01:35,560 --> 00:01:40,560 Speaker 1: And that's the success of American corporations, is their their 28 00:01:40,560 --> 00:01:41,320 Speaker 1: global reach. 29 00:01:41,680 --> 00:01:44,640 Speaker 2: Well, help us with the equation then, because everybody focuses 30 00:01:44,720 --> 00:01:47,480 Speaker 2: on consumption, we do the FED parlor game. I was 31 00:01:47,520 --> 00:01:49,960 Speaker 2: amazed we did not know the independence of the FED here. 32 00:01:50,040 --> 00:01:53,320 Speaker 2: We'll talk about that in a moment with Professor Firman. 33 00:01:53,000 --> 00:01:54,640 Speaker 4: But ignore Jason. 34 00:01:54,640 --> 00:01:59,440 Speaker 2: As you know, is the eye and the equation. Business investments. 35 00:01:59,480 --> 00:02:02,440 Speaker 2: You look at CPI and analyze it. How do you 36 00:02:02,640 --> 00:02:06,440 Speaker 2: analyze business investment right now in America? 37 00:02:07,880 --> 00:02:11,880 Speaker 1: Yeah, so consumer spending is the majority of GDP, but 38 00:02:12,040 --> 00:02:16,320 Speaker 1: investment is the majority of fluctuations in GDP because it's 39 00:02:16,480 --> 00:02:22,840 Speaker 1: much more volatile, and right now, investors' business investment is 40 00:02:22,919 --> 00:02:25,959 Speaker 1: grappling with continued high interest rates, which are likely to 41 00:02:26,080 --> 00:02:30,200 Speaker 1: stay that way, with an appreciated dollar which is likely 42 00:02:30,240 --> 00:02:35,040 Speaker 1: to stay that way, with uncertainty about global trade, which 43 00:02:35,080 --> 00:02:36,560 Speaker 1: is likely to stay that way. 44 00:02:37,040 --> 00:02:39,160 Speaker 3: On the other side of the ledger, there may. 45 00:02:39,040 --> 00:02:43,040 Speaker 1: Be some reductions in investment in regulations that will matter 46 00:02:43,120 --> 00:02:47,960 Speaker 1: more in targeted sectors like energy than it does generically 47 00:02:48,400 --> 00:02:52,280 Speaker 1: across the board. So a lot of cross currents right now, 48 00:02:52,320 --> 00:02:55,400 Speaker 1: but from policy they're a little bit more minus than 49 00:02:55,440 --> 00:02:59,040 Speaker 1: plus on that part of GDP that is most critical 50 00:02:59,360 --> 00:03:01,280 Speaker 1: to business fluctuations. 51 00:03:01,600 --> 00:03:05,119 Speaker 5: Professor of the Federal Reserve is obviously focusing on inflation, 52 00:03:05,200 --> 00:03:08,560 Speaker 5: and inflation was a big, big issue in the recent 53 00:03:08,840 --> 00:03:13,720 Speaker 5: presidential election. Certainly, are you concerned that inflation in some 54 00:03:13,760 --> 00:03:16,400 Speaker 5: of the policies that Trump administration is talking about, whether 55 00:03:16,400 --> 00:03:21,480 Speaker 5: it's tariffs or changes in immigration policy, could fuel another 56 00:03:21,639 --> 00:03:22,600 Speaker 5: round of inflation. 57 00:03:24,720 --> 00:03:27,040 Speaker 1: I think it's certainly possible. But let's define what we 58 00:03:27,120 --> 00:03:30,200 Speaker 1: mean by another round of inflation. Right now, I believe 59 00:03:30,280 --> 00:03:34,480 Speaker 1: underlying inflation is around two and a half percent, and 60 00:03:35,400 --> 00:03:38,640 Speaker 1: the tariffs that have been done to date on China 61 00:03:38,680 --> 00:03:41,280 Speaker 1: and steel will probably add about a tenth of a 62 00:03:41,320 --> 00:03:42,400 Speaker 1: percentage point to that. 63 00:03:43,200 --> 00:03:43,720 Speaker 2: If you do. 64 00:03:43,760 --> 00:03:47,560 Speaker 1: Another big set of tariffs, maybe it adds three four 65 00:03:47,640 --> 00:03:50,160 Speaker 1: tenths of a percent to that. Now you might be 66 00:03:50,200 --> 00:03:53,640 Speaker 1: at three percent inflation. That's a big deal for the FED. 67 00:03:54,040 --> 00:03:57,200 Speaker 1: That means they're not cutting rates. It might mean, depending 68 00:03:57,240 --> 00:03:59,120 Speaker 1: on their theory about whether or not to look through 69 00:03:59,160 --> 00:04:02,520 Speaker 1: the price levels change, that rate increases are back on 70 00:04:02,560 --> 00:04:06,120 Speaker 1: the table, But that isn't necessarily a huge thing that 71 00:04:06,160 --> 00:04:09,040 Speaker 1: consumers take note of. I don't know how much humans 72 00:04:09,080 --> 00:04:11,160 Speaker 1: notice the difference between two and a half and three 73 00:04:11,200 --> 00:04:15,680 Speaker 1: percent inflation, but the FED certainly does. 74 00:04:16,680 --> 00:04:19,039 Speaker 5: Professor you and I and I think much of our 75 00:04:19,080 --> 00:04:23,960 Speaker 5: audience grew up with this whole concept of internationalism globalization. 76 00:04:24,960 --> 00:04:29,080 Speaker 5: Is that still a thing these days or is kind 77 00:04:29,080 --> 00:04:32,680 Speaker 5: of everybody just kind of trying to enshore friendshore everything 78 00:04:32,720 --> 00:04:33,279 Speaker 5: these days. 79 00:04:34,800 --> 00:04:39,480 Speaker 1: Look, I'm unapologetic in my enthusiasm for globalization. It's done 80 00:04:39,680 --> 00:04:45,680 Speaker 1: enormous things for American consumers, American producers, the strength of 81 00:04:45,800 --> 00:04:49,159 Speaker 1: the United States. There's no question that politically it's on 82 00:04:49,240 --> 00:04:52,040 Speaker 1: its back heel right now. But it is such an 83 00:04:52,080 --> 00:04:55,479 Speaker 1: incredibly powerful force that to me, it's much more like 84 00:04:55,520 --> 00:04:58,400 Speaker 1: a dandelion that will grow no matter what the conditions 85 00:04:58,440 --> 00:05:01,039 Speaker 1: are than it is like a f orchid that needs 86 00:05:01,080 --> 00:05:04,120 Speaker 1: to be watered in just the right way. And look, 87 00:05:04,160 --> 00:05:07,520 Speaker 1: there's been some feedback in the system. If we had 88 00:05:07,560 --> 00:05:10,839 Speaker 1: tried to put twenty five percent tariffs on Canada and Mexico, 89 00:05:11,120 --> 00:05:13,839 Speaker 1: who would have been horrible for the US auto industry. 90 00:05:14,120 --> 00:05:16,520 Speaker 1: I think that might be part of why it didn't happen, 91 00:05:16,800 --> 00:05:18,640 Speaker 1: and part of why I hope it doesn't happen. 92 00:05:19,440 --> 00:05:21,880 Speaker 2: Jason Furman with US folks on your community across the nation, 93 00:05:22,000 --> 00:05:25,000 Speaker 2: good morning, I'm Bloomberg Surveillance and on YouTube. Thank you 94 00:05:25,080 --> 00:05:27,880 Speaker 2: for letting us be in your living rooms, your offices 95 00:05:28,080 --> 00:05:30,120 Speaker 2: as well, even some people in their cars watching. 96 00:05:30,279 --> 00:05:31,160 Speaker 4: Sure, I don't know. 97 00:05:31,480 --> 00:05:34,680 Speaker 2: I'm not sure about that, Jason. I got to go 98 00:05:34,800 --> 00:05:36,520 Speaker 2: back to where we are. I want you to take 99 00:05:36,560 --> 00:05:38,839 Speaker 2: a bigger picture here, like look at the Washington Post, 100 00:05:39,120 --> 00:05:42,240 Speaker 2: look at the cacophony of Bloomberg opinion, et cetera. I 101 00:05:42,279 --> 00:05:45,360 Speaker 2: got Treasury secretaries. I mean, I know, you go back 102 00:05:45,400 --> 00:05:48,799 Speaker 2: to Albert Gallatin, forget about that. I got Robert Rubin 103 00:05:48,839 --> 00:05:51,360 Speaker 2: and a guy named Summers who used to sign your paycheck. 104 00:05:51,960 --> 00:05:56,160 Speaker 2: I got Jack lou I got James Baker and company. 105 00:05:56,240 --> 00:05:58,880 Speaker 4: I mean, the Treasury secretary is at the. 106 00:05:58,880 --> 00:06:05,120 Speaker 2: Fulcrum of our executive, legislative, and frankly judicial branch of 107 00:06:05,360 --> 00:06:09,240 Speaker 2: making it work within our financial system. Are we at 108 00:06:09,360 --> 00:06:12,240 Speaker 2: risk now that that financial system is run out of 109 00:06:12,279 --> 00:06:16,240 Speaker 2: the Oval Office. Do we have a Treasury secretary who's 110 00:06:16,240 --> 00:06:22,000 Speaker 2: so diminished that he really can't affect Furman like policy? 111 00:06:22,800 --> 00:06:23,400 Speaker 3: I hope not. 112 00:06:25,279 --> 00:06:28,640 Speaker 1: Scott Descent is a smart guy, he's a talented guy. 113 00:06:29,240 --> 00:06:33,000 Speaker 1: If this policy making were delegated to him, I wouldn't 114 00:06:33,000 --> 00:06:37,760 Speaker 1: agree with all of it, but I wouldn't worry fundamentally 115 00:06:38,080 --> 00:06:42,200 Speaker 1: about being in deeply unsafe hands. But yeah, the tariff 116 00:06:42,240 --> 00:06:44,479 Speaker 1: calls are being made out of the Oval Office, the 117 00:06:44,680 --> 00:06:46,360 Speaker 1: calls about the FED are being made out of the 118 00:06:46,400 --> 00:06:49,640 Speaker 1: Oval Office. He's he Scott Descent one moment saying, you know, 119 00:06:49,720 --> 00:06:52,200 Speaker 1: we're comfortable with the FED because we're focused on getting 120 00:06:52,200 --> 00:06:54,480 Speaker 1: down the tenure, which is a great thing to say, 121 00:06:55,000 --> 00:06:57,920 Speaker 1: absolutely makes sense. And then the next moment you see 122 00:06:57,960 --> 00:06:59,800 Speaker 1: Donald Trump commenting on the FED funds. 123 00:06:59,880 --> 00:07:03,560 Speaker 4: Right see, okay, we're going to rip up the script 124 00:07:03,640 --> 00:07:03,920 Speaker 4: right now. 125 00:07:03,960 --> 00:07:06,159 Speaker 2: We could do this for the future vice chairman or 126 00:07:06,200 --> 00:07:06,920 Speaker 2: chairman of the fact. 127 00:07:07,000 --> 00:07:10,560 Speaker 4: Could you see Governor Furman? Come on, let's cut to 128 00:07:10,600 --> 00:07:11,520 Speaker 4: the Chase Jason. 129 00:07:11,640 --> 00:07:14,560 Speaker 2: Right now, we're beginning to see the percolation. I don't 130 00:07:14,560 --> 00:07:17,960 Speaker 2: want to make editorialize your folks of FED independence. 131 00:07:17,960 --> 00:07:19,480 Speaker 4: We go back to McChesney Martin. 132 00:07:19,720 --> 00:07:22,680 Speaker 2: We go back to LBJ where he took He took 133 00:07:23,240 --> 00:07:25,640 Speaker 2: McChesney Merrin's years and picked him up like the dog 134 00:07:25,920 --> 00:07:28,920 Speaker 2: back then. Jason Ferban, is this fed at risk of 135 00:07:28,960 --> 00:07:29,880 Speaker 2: its independence? 136 00:07:31,040 --> 00:07:34,240 Speaker 3: Look, I'm nervous so far. I'm a little bit reassured. 137 00:07:34,280 --> 00:07:37,800 Speaker 1: They had a sweeping executive order about independent agencies and 138 00:07:37,840 --> 00:07:43,080 Speaker 1: presidential control, and they explicitly included an exception for monetary 139 00:07:43,120 --> 00:07:47,160 Speaker 1: policy and for the FOMC. It's also hard for them 140 00:07:47,160 --> 00:07:49,800 Speaker 1: to do anything about it because he only gets two 141 00:07:49,800 --> 00:07:53,560 Speaker 1: appointments over the next four years. I hope the courts 142 00:07:53,560 --> 00:07:56,120 Speaker 1: would not let him fire to powel with no reason. 143 00:07:56,800 --> 00:07:58,920 Speaker 1: But you know, but I'm nervous. To me, it's a 144 00:07:59,080 --> 00:08:02,440 Speaker 1: it's a tailorant. It's not the most likely scenario. But 145 00:08:03,240 --> 00:08:07,000 Speaker 1: this is the best economic institution we have, So you know, 146 00:08:07,000 --> 00:08:09,240 Speaker 1: a two percent chance something happens to it, we should 147 00:08:09,280 --> 00:08:10,560 Speaker 1: be we should we should be concerned. 148 00:08:10,720 --> 00:08:13,040 Speaker 2: In your ute, you had to carry water from the 149 00:08:13,080 --> 00:08:16,760 Speaker 2: executive branch over to Capitol Hill. How do you frame 150 00:08:16,840 --> 00:08:22,040 Speaker 2: in your head that the legislative branch, when they choose 151 00:08:22,080 --> 00:08:27,120 Speaker 2: to rebuts a unilateral Trump policy. Do you see this 152 00:08:27,200 --> 00:08:30,760 Speaker 2: as given committees like I think of arm services in Putin. 153 00:08:30,840 --> 00:08:32,840 Speaker 4: I'm making this up, folks, stay with me. 154 00:08:32,920 --> 00:08:37,080 Speaker 2: But Jason, the basic idea is, what's the Firman mechanism 155 00:08:37,679 --> 00:08:42,559 Speaker 2: about the legislative branch responds to this moment in our history. 156 00:08:43,960 --> 00:08:47,480 Speaker 1: Look, when your party's in power, you're frustrated by checks 157 00:08:47,480 --> 00:08:49,840 Speaker 1: and balances, You're like, why can't we do everything we 158 00:08:49,960 --> 00:08:50,439 Speaker 1: want to do? 159 00:08:51,200 --> 00:08:53,240 Speaker 3: Then when the other parties in power, you're like, hey, 160 00:08:53,600 --> 00:08:54,760 Speaker 3: I appreciate these a bit. 161 00:08:54,800 --> 00:08:56,559 Speaker 1: I don't want them to be able to do every 162 00:08:56,600 --> 00:08:59,880 Speaker 1: single radical idea that they want to do. 163 00:09:00,760 --> 00:09:02,480 Speaker 4: And you know, I. 164 00:09:02,440 --> 00:09:06,440 Speaker 1: Think you're going to see maybe less checks and balances 165 00:09:06,440 --> 00:09:10,360 Speaker 1: than I might like coming from Congress, but still a 166 00:09:10,480 --> 00:09:13,840 Speaker 1: decent amount of them. And some of that inertia is bad. 167 00:09:13,920 --> 00:09:15,720 Speaker 1: It means we're not going to get done things we 168 00:09:15,760 --> 00:09:18,240 Speaker 1: should get done. But a lot of that inertia is 169 00:09:18,280 --> 00:09:22,200 Speaker 1: the inherent conservatism of the American system, where you don't 170 00:09:22,200 --> 00:09:26,720 Speaker 1: make large, radical, dramatic changes because conservatives themselves, since Burke, 171 00:09:26,760 --> 00:09:31,839 Speaker 1: have understood that that's a recipe for all sorts of problems. 172 00:09:32,840 --> 00:09:34,760 Speaker 5: Jason, as you sit back here and you look at 173 00:09:34,760 --> 00:09:37,719 Speaker 5: some of the economic trends, economic data, points coming out here. 174 00:09:37,760 --> 00:09:41,719 Speaker 5: What is the biggest economic concern for you for this 175 00:09:42,120 --> 00:09:43,520 Speaker 5: US economy. 176 00:09:43,920 --> 00:09:46,360 Speaker 1: I just have the conventional one, which is this stubborn, 177 00:09:46,440 --> 00:09:50,160 Speaker 1: persistent inflation and two and a half percent underlying inflation. 178 00:09:50,240 --> 00:09:53,679 Speaker 1: If it's down three tenths, we're golden. If it's up 179 00:09:53,720 --> 00:09:57,680 Speaker 1: three tenths, we're in a certain amount of hurt. And 180 00:09:58,080 --> 00:10:03,880 Speaker 1: everything else is humming along basically just fine, assuming we 181 00:10:03,920 --> 00:10:06,280 Speaker 1: don't have very disruptive policies. 182 00:10:06,480 --> 00:10:08,400 Speaker 2: Thank you so much for your interest across the nation. 183 00:10:08,480 --> 00:10:11,120 Speaker 2: Today on YouTube, we are commercial free in this hour 184 00:10:11,480 --> 00:10:15,120 Speaker 2: a conversation with the Treasury Secretary with her Anne Marie Horden. 185 00:10:15,200 --> 00:10:19,040 Speaker 2: We're honored to bring a Jason Furman from Harvard University. 186 00:10:19,160 --> 00:10:22,880 Speaker 2: Wendy Schiller will join us from Bown University. In a moment, 187 00:10:23,000 --> 00:10:25,240 Speaker 2: never in the history of media has there been a 188 00:10:25,280 --> 00:10:30,720 Speaker 2: joint conversation Harvard than Brown. We're not asking either of 189 00:10:30,760 --> 00:10:33,600 Speaker 2: them about the hockey game, the hotit exams. Furman asked 190 00:10:33,600 --> 00:10:36,200 Speaker 2: tickets you should see where they are. One more question 191 00:10:36,280 --> 00:10:38,840 Speaker 2: please to Professor Furman, Paul Sweeney. 192 00:10:38,400 --> 00:10:42,360 Speaker 5: Professor X ten Principles of economics, How do you frame 193 00:10:42,400 --> 00:10:45,600 Speaker 5: out in the tariffs units? What do you talk about 194 00:10:46,040 --> 00:10:49,000 Speaker 5: in the about terriffs? How do you teach that? What's 195 00:10:49,040 --> 00:10:49,760 Speaker 5: your thoughts there? 196 00:10:50,600 --> 00:10:52,600 Speaker 3: Look, I'm nervous about that. I'm doing that in about 197 00:10:52,600 --> 00:10:52,960 Speaker 3: a month. 198 00:10:53,160 --> 00:10:54,600 Speaker 1: I'm going to do it the same way that i've 199 00:10:54,679 --> 00:10:57,040 Speaker 1: tom and I will come up that same way that 200 00:10:57,080 --> 00:11:00,120 Speaker 1: I learned it decades ago. But it's going to sound 201 00:11:00,320 --> 00:11:03,680 Speaker 1: like a rebuttal to Donald Trump. Every single sentence is 202 00:11:03,679 --> 00:11:06,040 Speaker 1: going to sound like the only reason I'm saying it 203 00:11:06,080 --> 00:11:08,640 Speaker 1: is because I want to contradict him, when the only 204 00:11:08,679 --> 00:11:10,480 Speaker 1: reason I'm saying it is that's what's been in the 205 00:11:10,480 --> 00:11:13,319 Speaker 1: textbooks for a long time, And it's been in textbooks 206 00:11:13,320 --> 00:11:16,200 Speaker 1: for a long time for very very good reasons, some 207 00:11:16,240 --> 00:11:19,440 Speaker 1: of which are even a grounded in things like accounting identities, 208 00:11:19,440 --> 00:11:22,280 Speaker 1: which I'm one hundred percent sure or true, and not 209 00:11:22,400 --> 00:11:24,760 Speaker 1: every comment President Trump makes respects them. 210 00:11:25,040 --> 00:11:28,720 Speaker 2: Do you have a magnitude tip point on percent of terroriffs? 211 00:11:28,760 --> 00:11:32,839 Speaker 2: Just ad Hoc. I'm talking Krugman Furman here. Bring over 212 00:11:33,000 --> 00:11:36,880 Speaker 2: is like Glenn Hubbard even at Columbia, Jason Furman, is 213 00:11:36,920 --> 00:11:39,719 Speaker 2: there a percentage tip point where a blended rate of 214 00:11:39,760 --> 00:11:41,440 Speaker 2: two three percent comes up? 215 00:11:41,440 --> 00:11:44,760 Speaker 4: And it's oops, Where's that number matters? 216 00:11:44,760 --> 00:11:45,000 Speaker 5: A lot? 217 00:11:45,040 --> 00:11:45,560 Speaker 4: Who they're on. 218 00:11:46,280 --> 00:11:49,000 Speaker 1: Canada and Mexico matter, are just so much more than 219 00:11:49,000 --> 00:11:52,200 Speaker 1: any other country. You do ten percent tariffs even on 220 00:11:52,240 --> 00:11:55,400 Speaker 1: the two of them, and an awful lot of the 221 00:11:55,440 --> 00:12:00,840 Speaker 1: way US business is conducted, US employment happens, it gets disrupted, 222 00:12:00,880 --> 00:12:03,720 Speaker 1: frankly to the benefit of a number of other countries. 223 00:12:03,920 --> 00:12:07,360 Speaker 4: Jason, thank you so much for your generous time this morning.