Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Jason Furman has committed himself to policy. There are a
Speaker 2: few others equivalent to him, both Republican and Democrat. He's
Speaker 2: associated with democratic politics, but he's I think been ecumenical
Speaker 2: to use the word that Professor Furman uses a lot, Paul.
Speaker 2: One of the key things with Jason Furman is he
Speaker 2: was voted most handsome freshman on his dorm at Harvard.
Speaker 2: He beat out his roommate just by a little bit.
Speaker 2: That would have been Matt Damon from a few years ago. Jason,
Speaker 2: thank you so much for joining us this morning. You're
Speaker 2: in X ten and you have to teach ambiguity, microeconomic ambiguity,
Speaker 2: and I can go this way and that. What I
Speaker 2: didn't hear from the Secretary of Treasury is a risk
Speaker 2: of a real or nominal GDP slowdown. With all the
Speaker 2: policy upset the nation faces right now, do you see
Speaker 2: that we could have a lessening of real GDP or
Speaker 2: the animal spirit of nominal GDP.
Speaker 1: Yeah, well, right now, the level of uncertainty is just
Speaker 1: incredibly high.
Speaker 3: That is definitely a minus for the economy.
Speaker 1: I don't know how big a minus it is, and
Speaker 1: a lot of it depends on how the uncertainty ends
Speaker 1: up getting resolved around things like tariffs, or whether it
Speaker 1: gets resolved. It may be that every month there's a
Speaker 1: new threat, it gets withdrawn, a new threat that gets made.
Speaker 1: That makes it hard to do planning on a global basis.
Speaker 1: And that's the success of American corporations, is their their
Speaker 1: global reach.
Speaker 2: Well, help us with the equation then, because everybody focuses
Speaker 2: on consumption, we do the FED parlor game. I was
Speaker 2: amazed we did not know the independence of the FED here.
Speaker 2: We'll talk about that in a moment with Professor Firman.
Speaker 4: But ignore Jason.
Speaker 2: As you know, is the eye and the equation. Business investments.
Speaker 2: You look at CPI and analyze it. How do you
Speaker 2: analyze business investment right now in America?
Speaker 1: Yeah, so consumer spending is the majority of GDP, but
Speaker 1: investment is the majority of fluctuations in GDP because it's
Speaker 1: much more volatile, and right now, investors' business investment is
Speaker 1: grappling with continued high interest rates, which are likely to
Speaker 1: stay that way, with an appreciated dollar which is likely
Speaker 1: to stay that way, with uncertainty about global trade, which
Speaker 1: is likely to stay that way.
Speaker 3: On the other side of the ledger, there may.
Speaker 1: Be some reductions in investment in regulations that will matter
Speaker 1: more in targeted sectors like energy than it does generically
Speaker 1: across the board. So a lot of cross currents right now,
Speaker 1: but from policy they're a little bit more minus than
Speaker 1: plus on that part of GDP that is most critical
Speaker 1: to business fluctuations.
Speaker 5: Professor of the Federal Reserve is obviously focusing on inflation,
Speaker 5: and inflation was a big, big issue in the recent
Speaker 5: presidential election. Certainly, are you concerned that inflation in some
Speaker 5: of the policies that Trump administration is talking about, whether
Speaker 5: it's tariffs or changes in immigration policy, could fuel another
Speaker 5: round of inflation.
Speaker 1: I think it's certainly possible. But let's define what we
Speaker 1: mean by another round of inflation. Right now, I believe
Speaker 1: underlying inflation is around two and a half percent, and
Speaker 1: the tariffs that have been done to date on China
Speaker 1: and steel will probably add about a tenth of a
Speaker 1: percentage point to that.
Speaker 2: If you do.
Speaker 1: Another big set of tariffs, maybe it adds three four
Speaker 1: tenths of a percent to that. Now you might be
Speaker 1: at three percent inflation. That's a big deal for the FED.
Speaker 1: That means they're not cutting rates. It might mean, depending
Speaker 1: on their theory about whether or not to look through
Speaker 1: the price levels change, that rate increases are back on
Speaker 1: the table, But that isn't necessarily a huge thing that
Speaker 1: consumers take note of. I don't know how much humans
Speaker 1: notice the difference between two and a half and three
Speaker 1: percent inflation, but the FED certainly does.
Speaker 5: Professor you and I and I think much of our
Speaker 5: audience grew up with this whole concept of internationalism globalization.
Speaker 5: Is that still a thing these days or is kind
Speaker 5: of everybody just kind of trying to enshore friendshore everything
Speaker 5: these days.
Speaker 1: Look, I'm unapologetic in my enthusiasm for globalization. It's done
Speaker 1: enormous things for American consumers, American producers, the strength of
Speaker 1: the United States. There's no question that politically it's on
Speaker 1: its back heel right now. But it is such an
Speaker 1: incredibly powerful force that to me, it's much more like
Speaker 1: a dandelion that will grow no matter what the conditions
Speaker 1: are than it is like a f orchid that needs
Speaker 1: to be watered in just the right way. And look,
Speaker 1: there's been some feedback in the system. If we had
Speaker 1: tried to put twenty five percent tariffs on Canada and Mexico,
Speaker 1: who would have been horrible for the US auto industry.
Speaker 1: I think that might be part of why it didn't happen,
Speaker 1: and part of why I hope it doesn't happen.
Speaker 2: Jason Furman with US folks on your community across the nation,
Speaker 2: good morning, I'm Bloomberg Surveillance and on YouTube. Thank you
Speaker 2: for letting us be in your living rooms, your offices
Speaker 2: as well, even some people in their cars watching.
Speaker 4: Sure, I don't know.
Speaker 2: I'm not sure about that, Jason. I got to go
Speaker 2: back to where we are. I want you to take
Speaker 2: a bigger picture here, like look at the Washington Post,
Speaker 2: look at the cacophony of Bloomberg opinion, et cetera. I
Speaker 2: got Treasury secretaries. I mean, I know, you go back
Speaker 2: to Albert Gallatin, forget about that. I got Robert Rubin
Speaker 2: and a guy named Summers who used to sign your paycheck.
Speaker 2: I got Jack lou I got James Baker and company.
Speaker 4: I mean, the Treasury secretary is at the.
Speaker 2: Fulcrum of our executive, legislative, and frankly judicial branch of
Speaker 2: making it work within our financial system. Are we at
Speaker 2: risk now that that financial system is run out of
Speaker 2: the Oval Office. Do we have a Treasury secretary who's
Speaker 2: so diminished that he really can't affect Furman like policy?
Speaker 3: I hope not.
Speaker 1: Scott Descent is a smart guy, he's a talented guy.
Speaker 1: If this policy making were delegated to him, I wouldn't
Speaker 1: agree with all of it, but I wouldn't worry fundamentally
Speaker 1: about being in deeply unsafe hands. But yeah, the tariff
Speaker 1: calls are being made out of the Oval Office, the
Speaker 1: calls about the FED are being made out of the
Speaker 1: Oval Office. He's he Scott Descent one moment saying, you know,
Speaker 1: we're comfortable with the FED because we're focused on getting
Speaker 1: down the tenure, which is a great thing to say,
Speaker 1: absolutely makes sense. And then the next moment you see
Speaker 1: Donald Trump commenting on the FED funds.
Speaker 4: Right see, okay, we're going to rip up the script
Speaker 4: right now.
Speaker 2: We could do this for the future vice chairman or
Speaker 2: chairman of the fact.
Speaker 4: Could you see Governor Furman? Come on, let's cut to
Speaker 4: the Chase Jason.
Speaker 2: Right now, we're beginning to see the percolation. I don't
Speaker 2: want to make editorialize your folks of FED independence.
Speaker 4: We go back to McChesney Martin.
Speaker 2: We go back to LBJ where he took He took
Speaker 2: McChesney Merrin's years and picked him up like the dog
Speaker 2: back then. Jason Ferban, is this fed at risk of
Speaker 2: its independence?
Speaker 3: Look, I'm nervous so far. I'm a little bit reassured.
Speaker 1: They had a sweeping executive order about independent agencies and
Speaker 1: presidential control, and they explicitly included an exception for monetary
Speaker 1: policy and for the FOMC. It's also hard for them
Speaker 1: to do anything about it because he only gets two
Speaker 1: appointments over the next four years. I hope the courts
Speaker 1: would not let him fire to powel with no reason.
Speaker 1: But you know, but I'm nervous. To me, it's a
Speaker 1: it's a tailorant. It's not the most likely scenario. But
Speaker 1: this is the best economic institution we have, So you know,
Speaker 1: a two percent chance something happens to it, we should
Speaker 1: be we should we should be concerned.
Speaker 2: In your ute, you had to carry water from the
Speaker 2: executive branch over to Capitol Hill. How do you frame
Speaker 2: in your head that the legislative branch, when they choose
Speaker 2: to rebuts a unilateral Trump policy. Do you see this
Speaker 2: as given committees like I think of arm services in Putin.
Speaker 4: I'm making this up, folks, stay with me.
Speaker 2: But Jason, the basic idea is, what's the Firman mechanism
Speaker 2: about the legislative branch responds to this moment in our history.
Speaker 1: Look, when your party's in power, you're frustrated by checks
Speaker 1: and balances, You're like, why can't we do everything we
Speaker 1: want to do?
Speaker 3: Then when the other parties in power, you're like, hey,
Speaker 3: I appreciate these a bit.
Speaker 1: I don't want them to be able to do every
Speaker 1: single radical idea that they want to do.
Speaker 4: And you know, I.
Speaker 1: Think you're going to see maybe less checks and balances
Speaker 1: than I might like coming from Congress, but still a
Speaker 1: decent amount of them. And some of that inertia is bad.
Speaker 1: It means we're not going to get done things we
Speaker 1: should get done. But a lot of that inertia is
Speaker 1: the inherent conservatism of the American system, where you don't
Speaker 1: make large, radical, dramatic changes because conservatives themselves, since Burke,
Speaker 1: have understood that that's a recipe for all sorts of problems.
Speaker 5: Jason, as you sit back here and you look at
Speaker 5: some of the economic trends, economic data, points coming out here.
Speaker 5: What is the biggest economic concern for you for this
Speaker 5: US economy.
Speaker 1: I just have the conventional one, which is this stubborn,
Speaker 1: persistent inflation and two and a half percent underlying inflation.
Speaker 1: If it's down three tenths, we're golden. If it's up
Speaker 1: three tenths, we're in a certain amount of hurt. And
Speaker 1: everything else is humming along basically just fine, assuming we
Speaker 1: don't have very disruptive policies.
Speaker 2: Thank you so much for your interest across the nation.
Speaker 2: Today on YouTube, we are commercial free in this hour
Speaker 2: a conversation with the Treasury Secretary with her Anne Marie Horden.
Speaker 2: We're honored to bring a Jason Furman from Harvard University.
Speaker 2: Wendy Schiller will join us from Bown University. In a moment,
Speaker 2: never in the history of media has there been a
Speaker 2: joint conversation Harvard than Brown. We're not asking either of
Speaker 2: them about the hockey game, the hotit exams. Furman asked
Speaker 2: tickets you should see where they are. One more question
Speaker 2: please to Professor Furman, Paul Sweeney.
Speaker 5: Professor X ten Principles of economics, How do you frame
Speaker 5: out in the tariffs units? What do you talk about
Speaker 5: in the about terriffs? How do you teach that? What's
Speaker 5: your thoughts there?
Speaker 3: Look, I'm nervous about that. I'm doing that in about
Speaker 3: a month.
Speaker 1: I'm going to do it the same way that i've
Speaker 1: tom and I will come up that same way that
Speaker 1: I learned it decades ago. But it's going to sound
Speaker 1: like a rebuttal to Donald Trump. Every single sentence is
Speaker 1: going to sound like the only reason I'm saying it
Speaker 1: is because I want to contradict him, when the only
Speaker 1: reason I'm saying it is that's what's been in the
Speaker 1: textbooks for a long time, And it's been in textbooks
Speaker 1: for a long time for very very good reasons, some
Speaker 1: of which are even a grounded in things like accounting identities,
Speaker 1: which I'm one hundred percent sure or true, and not
Speaker 1: every comment President Trump makes respects them.
Speaker 2: Do you have a magnitude tip point on percent of terroriffs?
Speaker 2: Just ad Hoc. I'm talking Krugman Furman here. Bring over
Speaker 2: is like Glenn Hubbard even at Columbia, Jason Furman, is
Speaker 2: there a percentage tip point where a blended rate of
Speaker 2: two three percent comes up?
Speaker 4: And it's oops, Where's that number matters?
Speaker 5: A lot?
Speaker 4: Who they're on.
Speaker 1: Canada and Mexico matter, are just so much more than
Speaker 1: any other country. You do ten percent tariffs even on
Speaker 1: the two of them, and an awful lot of the
Speaker 1: way US business is conducted, US employment happens, it gets disrupted,
Speaker 1: frankly to the benefit of a number of other countries.
Speaker 4: Jason, thank you so much for your generous time this morning.