WEBVTT - Jason Furman, Harvard Professor Talks Bidenomics

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Jason Furman has committed himself to policy. There are a

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<v Speaker 2>few others equivalent to him, both Republican and Democrat. He's

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<v Speaker 2>associated with democratic politics, but he's I think been ecumenical

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<v Speaker 2>to use the word that Professor Furman uses a lot, Paul.

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<v Speaker 2>One of the key things with Jason Furman is he

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<v Speaker 2>was voted most handsome freshman on his dorm at Harvard.

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<v Speaker 2>He beat out his roommate just by a little bit.

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<v Speaker 2>That would have been Matt Damon from a few years ago. Jason,

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<v Speaker 2>thank you so much for joining us this morning. You're

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<v Speaker 2>in X ten and you have to teach ambiguity, microeconomic ambiguity,

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<v Speaker 2>and I can go this way and that. What I

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<v Speaker 2>didn't hear from the Secretary of Treasury is a risk

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<v Speaker 2>of a real or nominal GDP slowdown. With all the

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<v Speaker 2>policy upset the nation faces right now, do you see

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<v Speaker 2>that we could have a lessening of real GDP or

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<v Speaker 2>the animal spirit of nominal GDP.

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<v Speaker 1>Yeah, well, right now, the level of uncertainty is just

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<v Speaker 1>incredibly high.

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<v Speaker 3>That is definitely a minus for the economy.

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<v Speaker 1>I don't know how big a minus it is, and

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<v Speaker 1>a lot of it depends on how the uncertainty ends

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<v Speaker 1>up getting resolved around things like tariffs, or whether it

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<v Speaker 1>gets resolved. It may be that every month there's a

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<v Speaker 1>new threat, it gets withdrawn, a new threat that gets made.

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<v Speaker 1>That makes it hard to do planning on a global basis.

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<v Speaker 1>And that's the success of American corporations, is their their

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<v Speaker 1>global reach.

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<v Speaker 2>Well, help us with the equation then, because everybody focuses

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<v Speaker 2>on consumption, we do the FED parlor game. I was

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<v Speaker 2>amazed we did not know the independence of the FED here.

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<v Speaker 2>We'll talk about that in a moment with Professor Firman.

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<v Speaker 4>But ignore Jason.

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<v Speaker 2>As you know, is the eye and the equation. Business investments.

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<v Speaker 2>You look at CPI and analyze it. How do you

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<v Speaker 2>analyze business investment right now in America?

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<v Speaker 1>Yeah, so consumer spending is the majority of GDP, but

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<v Speaker 1>investment is the majority of fluctuations in GDP because it's

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<v Speaker 1>much more volatile, and right now, investors' business investment is

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<v Speaker 1>grappling with continued high interest rates, which are likely to

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<v Speaker 1>stay that way, with an appreciated dollar which is likely

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<v Speaker 1>to stay that way, with uncertainty about global trade, which

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<v Speaker 1>is likely to stay that way.

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<v Speaker 3>On the other side of the ledger, there may.

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<v Speaker 1>Be some reductions in investment in regulations that will matter

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<v Speaker 1>more in targeted sectors like energy than it does generically

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<v Speaker 1>across the board. So a lot of cross currents right now,

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<v Speaker 1>but from policy they're a little bit more minus than

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<v Speaker 1>plus on that part of GDP that is most critical

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<v Speaker 1>to business fluctuations.

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<v Speaker 5>Professor of the Federal Reserve is obviously focusing on inflation,

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<v Speaker 5>and inflation was a big, big issue in the recent

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<v Speaker 5>presidential election. Certainly, are you concerned that inflation in some

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<v Speaker 5>of the policies that Trump administration is talking about, whether

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<v Speaker 5>it's tariffs or changes in immigration policy, could fuel another

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<v Speaker 5>round of inflation.

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<v Speaker 1>I think it's certainly possible. But let's define what we

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<v Speaker 1>mean by another round of inflation. Right now, I believe

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<v Speaker 1>underlying inflation is around two and a half percent, and

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<v Speaker 1>the tariffs that have been done to date on China

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<v Speaker 1>and steel will probably add about a tenth of a

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<v Speaker 1>percentage point to that.

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<v Speaker 2>If you do.

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<v Speaker 1>Another big set of tariffs, maybe it adds three four

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<v Speaker 1>tenths of a percent to that. Now you might be

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<v Speaker 1>at three percent inflation. That's a big deal for the FED.

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<v Speaker 1>That means they're not cutting rates. It might mean, depending

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<v Speaker 1>on their theory about whether or not to look through

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<v Speaker 1>the price levels change, that rate increases are back on

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<v Speaker 1>the table, But that isn't necessarily a huge thing that

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<v Speaker 1>consumers take note of. I don't know how much humans

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<v Speaker 1>notice the difference between two and a half and three

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<v Speaker 1>percent inflation, but the FED certainly does.

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<v Speaker 5>Professor you and I and I think much of our

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<v Speaker 5>audience grew up with this whole concept of internationalism globalization.

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<v Speaker 5>Is that still a thing these days or is kind

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<v Speaker 5>of everybody just kind of trying to enshore friendshore everything

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<v Speaker 5>these days.

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<v Speaker 1>Look, I'm unapologetic in my enthusiasm for globalization. It's done

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<v Speaker 1>enormous things for American consumers, American producers, the strength of

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<v Speaker 1>the United States. There's no question that politically it's on

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<v Speaker 1>its back heel right now. But it is such an

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<v Speaker 1>incredibly powerful force that to me, it's much more like

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<v Speaker 1>a dandelion that will grow no matter what the conditions

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<v Speaker 1>are than it is like a f orchid that needs

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<v Speaker 1>to be watered in just the right way. And look,

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<v Speaker 1>there's been some feedback in the system. If we had

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<v Speaker 1>tried to put twenty five percent tariffs on Canada and Mexico,

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<v Speaker 1>who would have been horrible for the US auto industry.

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<v Speaker 1>I think that might be part of why it didn't happen,

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<v Speaker 1>and part of why I hope it doesn't happen.

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<v Speaker 2>Jason Furman with US folks on your community across the nation,

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<v Speaker 2>good morning, I'm Bloomberg Surveillance and on YouTube. Thank you

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<v Speaker 2>for letting us be in your living rooms, your offices

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<v Speaker 2>as well, even some people in their cars watching.

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<v Speaker 4>Sure, I don't know.

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<v Speaker 2>I'm not sure about that, Jason. I got to go

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<v Speaker 2>back to where we are. I want you to take

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<v Speaker 2>a bigger picture here, like look at the Washington Post,

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<v Speaker 2>look at the cacophony of Bloomberg opinion, et cetera. I

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<v Speaker 2>got Treasury secretaries. I mean, I know, you go back

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<v Speaker 2>to Albert Gallatin, forget about that. I got Robert Rubin

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<v Speaker 2>and a guy named Summers who used to sign your paycheck.

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<v Speaker 2>I got Jack lou I got James Baker and company.

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<v Speaker 4>I mean, the Treasury secretary is at the.

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<v Speaker 2>Fulcrum of our executive, legislative, and frankly judicial branch of

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<v Speaker 2>making it work within our financial system. Are we at

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<v Speaker 2>risk now that that financial system is run out of

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<v Speaker 2>the Oval Office. Do we have a Treasury secretary who's

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<v Speaker 2>so diminished that he really can't affect Furman like policy?

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<v Speaker 3>I hope not.

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<v Speaker 1>Scott Descent is a smart guy, he's a talented guy.

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<v Speaker 1>If this policy making were delegated to him, I wouldn't

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<v Speaker 1>agree with all of it, but I wouldn't worry fundamentally

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<v Speaker 1>about being in deeply unsafe hands. But yeah, the tariff

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<v Speaker 1>calls are being made out of the Oval Office, the

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<v Speaker 1>calls about the FED are being made out of the

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<v Speaker 1>Oval Office. He's he Scott Descent one moment saying, you know,

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<v Speaker 1>we're comfortable with the FED because we're focused on getting

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<v Speaker 1>down the tenure, which is a great thing to say,

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<v Speaker 1>absolutely makes sense. And then the next moment you see

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<v Speaker 1>Donald Trump commenting on the FED funds.

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<v Speaker 4>Right see, okay, we're going to rip up the script

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<v Speaker 4>right now.

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<v Speaker 2>We could do this for the future vice chairman or

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<v Speaker 2>chairman of the fact.

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<v Speaker 4>Could you see Governor Furman? Come on, let's cut to

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<v Speaker 4>the Chase Jason.

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<v Speaker 2>Right now, we're beginning to see the percolation. I don't

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<v Speaker 2>want to make editorialize your folks of FED independence.

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<v Speaker 4>We go back to McChesney Martin.

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<v Speaker 2>We go back to LBJ where he took He took

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<v Speaker 2>McChesney Merrin's years and picked him up like the dog

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<v Speaker 2>back then. Jason Ferban, is this fed at risk of

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<v Speaker 2>its independence?

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<v Speaker 3>Look, I'm nervous so far. I'm a little bit reassured.

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<v Speaker 1>They had a sweeping executive order about independent agencies and

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<v Speaker 1>presidential control, and they explicitly included an exception for monetary

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<v Speaker 1>policy and for the FOMC. It's also hard for them

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<v Speaker 1>to do anything about it because he only gets two

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<v Speaker 1>appointments over the next four years. I hope the courts

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<v Speaker 1>would not let him fire to powel with no reason.

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<v Speaker 1>But you know, but I'm nervous. To me, it's a

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<v Speaker 1>it's a tailorant. It's not the most likely scenario. But

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<v Speaker 1>this is the best economic institution we have, So you know,

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<v Speaker 1>a two percent chance something happens to it, we should

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<v Speaker 1>be we should we should be concerned.

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<v Speaker 2>In your ute, you had to carry water from the

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<v Speaker 2>executive branch over to Capitol Hill. How do you frame

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<v Speaker 2>in your head that the legislative branch, when they choose

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<v Speaker 2>to rebuts a unilateral Trump policy. Do you see this

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<v Speaker 2>as given committees like I think of arm services in Putin.

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<v Speaker 4>I'm making this up, folks, stay with me.

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<v Speaker 2>But Jason, the basic idea is, what's the Firman mechanism

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<v Speaker 2>about the legislative branch responds to this moment in our history.

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<v Speaker 1>Look, when your party's in power, you're frustrated by checks

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<v Speaker 1>and balances, You're like, why can't we do everything we

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<v Speaker 1>want to do?

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<v Speaker 3>Then when the other parties in power, you're like, hey,

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<v Speaker 3>I appreciate these a bit.

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<v Speaker 1>I don't want them to be able to do every

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<v Speaker 1>single radical idea that they want to do.

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<v Speaker 4>And you know, I.

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<v Speaker 1>Think you're going to see maybe less checks and balances

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<v Speaker 1>than I might like coming from Congress, but still a

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<v Speaker 1>decent amount of them. And some of that inertia is bad.

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<v Speaker 1>It means we're not going to get done things we

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<v Speaker 1>should get done. But a lot of that inertia is

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<v Speaker 1>the inherent conservatism of the American system, where you don't

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<v Speaker 1>make large, radical, dramatic changes because conservatives themselves, since Burke,

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<v Speaker 1>have understood that that's a recipe for all sorts of problems.

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<v Speaker 5>Jason, as you sit back here and you look at

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<v Speaker 5>some of the economic trends, economic data, points coming out here.

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<v Speaker 5>What is the biggest economic concern for you for this

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<v Speaker 5>US economy.

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<v Speaker 1>I just have the conventional one, which is this stubborn,

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<v Speaker 1>persistent inflation and two and a half percent underlying inflation.

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<v Speaker 1>If it's down three tenths, we're golden. If it's up

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<v Speaker 1>three tenths, we're in a certain amount of hurt. And

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<v Speaker 1>everything else is humming along basically just fine, assuming we

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<v Speaker 1>don't have very disruptive policies.

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<v Speaker 2>Thank you so much for your interest across the nation.

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<v Speaker 2>Today on YouTube, we are commercial free in this hour

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<v Speaker 2>a conversation with the Treasury Secretary with her Anne Marie Horden.

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<v Speaker 2>We're honored to bring a Jason Furman from Harvard University.

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<v Speaker 2>Wendy Schiller will join us from Bown University. In a moment,

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<v Speaker 2>never in the history of media has there been a

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<v Speaker 2>joint conversation Harvard than Brown. We're not asking either of

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<v Speaker 2>them about the hockey game, the hotit exams. Furman asked

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<v Speaker 2>tickets you should see where they are. One more question

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<v Speaker 2>please to Professor Furman, Paul Sweeney.

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<v Speaker 5>Professor X ten Principles of economics, How do you frame

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<v Speaker 5>out in the tariffs units? What do you talk about

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<v Speaker 5>in the about terriffs? How do you teach that? What's

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<v Speaker 5>your thoughts there?

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<v Speaker 3>Look, I'm nervous about that. I'm doing that in about

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<v Speaker 3>a month.

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<v Speaker 1>I'm going to do it the same way that i've

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<v Speaker 1>tom and I will come up that same way that

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<v Speaker 1>I learned it decades ago. But it's going to sound

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<v Speaker 1>like a rebuttal to Donald Trump. Every single sentence is

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<v Speaker 1>going to sound like the only reason I'm saying it

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<v Speaker 1>is because I want to contradict him, when the only

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<v Speaker 1>reason I'm saying it is that's what's been in the

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<v Speaker 1>textbooks for a long time, And it's been in textbooks

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<v Speaker 1>for a long time for very very good reasons, some

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<v Speaker 1>of which are even a grounded in things like accounting identities,

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<v Speaker 1>which I'm one hundred percent sure or true, and not

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<v Speaker 1>every comment President Trump makes respects them.

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<v Speaker 2>Do you have a magnitude tip point on percent of terroriffs?

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<v Speaker 2>Just ad Hoc. I'm talking Krugman Furman here. Bring over

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<v Speaker 2>is like Glenn Hubbard even at Columbia, Jason Furman, is

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<v Speaker 2>there a percentage tip point where a blended rate of

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<v Speaker 2>two three percent comes up?

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<v Speaker 4>And it's oops, Where's that number matters?

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<v Speaker 5>A lot?

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<v Speaker 4>Who they're on.

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<v Speaker 1>Canada and Mexico matter, are just so much more than

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<v Speaker 1>any other country. You do ten percent tariffs even on

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<v Speaker 1>the two of them, and an awful lot of the

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<v Speaker 1>way US business is conducted, US employment happens, it gets disrupted,

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<v Speaker 1>frankly to the benefit of a number of other countries.

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<v Speaker 4>Jason, thank you so much for your generous time this morning.