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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Inflation is plummeting, incomes are rising fast, the roaring economy

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Speaker 2: is roaring like never before. We are doing really well.

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Speaker 3: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,

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Speaker 3: and this is trump Oenomics, the podcast that looks at

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Speaker 3: the economic world of Donald Trump, how he's already shaped

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Speaker 3: the global economy and what on earth is going to

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Speaker 3: happen next. And we're recording this on Wednesday morning, Washington Time,

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Speaker 3: not long after President Donald Trump delivered a nearly two

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Speaker 3: hour State of the Union speech where he addressed one

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Speaker 3: of his biggest audiences at what, in polling terms, may

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Speaker 3: be the lowest point yet of his second term. In

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Speaker 3: his speech, he returned again and again to the same

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Speaker 3: message on the economy. Everything is going great and there

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Speaker 3: is a lot that's going right with the US economy,

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Speaker 3: certainly more than most economists would have expected. On the

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Speaker 3: day the President unleashed his so called reciprocal tariffs last April,

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Speaker 3: growth and productivity in the US were both a lot

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Speaker 3: higher than any other G seven economy. And this despite

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Speaker 3: those tariffs, which, as it happens, the Supreme Court overturned

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Speaker 3: last Friday.

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Speaker 2: One of the primary reasons for our countries studying economic

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Speaker 2: turnaround were tariffs. I used these tariffs took in hundreds

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Speaker 2: of billions of dollars to make great deals for our country,

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Speaker 2: both economically and on a national security basis.

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Speaker 3: He's going to work very hard, he said, to fill

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Speaker 3: the whole left by those tariffs and continue to punish

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Speaker 3: trading partners for what he considers to be very unfair practices.

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Speaker 3: But in the meantime, we are plunged globally into more

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Speaker 3: run certainty about exactly what the trade barriers are around

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Speaker 3: the US economy, and a lot more talking about one

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Speaker 3: of the president's least popular policies. The combination of that

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Speaker 3: State of the Union and the Supreme Court judgment felt

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Speaker 3: like a good time to take stock what those two

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Speaker 3: things together mean for the President, and specifically what they

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Speaker 3: mean for his economic offer as his party goes into

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Speaker 3: the midterms in the fall. Does he have an answer

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Speaker 3: to the affordability question? Or will a strong economy and

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Speaker 3: potentially new leadership at the Federal Reserve mean he doesn't

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Speaker 3: really need one. Josh Green is national correspondent at Bloomberg BusinessWeek,

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Speaker 3: author of the New York Times bestseller Devil's Bargain, Steve Bannon,

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Speaker 3: Donald Trump, and the National Uprising. Josh, Great to have

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Speaker 3: you back. Great to be with you. And Anna Wong,

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Speaker 3: a frequent participant on this show, chief US economist for

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Speaker 3: Bloomberg Economics. Before that, she worked at the Federal Reserve,

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Speaker 3: US Treasury and Donald Trump's White House Council of Economic

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Speaker 3: Advisors during his first term. Great to be here. I'm

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Speaker 3: kind of interested from both of you for your sort

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Speaker 3: of top line thoughts on the actual state of the economy.

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Speaker 3: Does he have a solid story to sell voters about

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Speaker 3: the economic achievements of the first year in office? And

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Speaker 3: I guess the second part of that is where the

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Speaker 3: voters are likely to listen to that message. Josh, you

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Speaker 3: did sit through that State of the Union. There's a

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Speaker 3: lot of focus on what he might say about affordability,

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Speaker 3: the state of the economy. You know, I hear your pain.

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Speaker 3: How do you think he did.

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Speaker 1: The good news from a White House standpoint is they

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Speaker 1: wanted him to focus on economic issues and the economy,

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Speaker 1: and for the most part, he did so. I think

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Speaker 1: the trouble with Trump's speech was that the address he

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Speaker 1: gave sounded like something you'd hear from a president with

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Speaker 1: eighty percent approval ratings. But Trump is mired in the

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Speaker 1: high thirties, and instead of of empathizing with the many

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Speaker 1: voters who tell polsters that they're struggling, they're upset about

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Speaker 1: the economy, about tariffs, about the cost of living, Trump

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Speaker 1: basically gave a two hour celebration of his own presidency.

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Speaker 1: He said it's a golden age and that the country

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Speaker 1: is bigger, richer, stronger than ever before. So if you're

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Speaker 1: somebody who was listening hoping that things were going to

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Speaker 1: turn around, that Trump might pivot in a new direction,

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Speaker 1: might refocus his presidency around issues of affordability, I'm not

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Speaker 1: sure that you came away feeling much better than you

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Speaker 1: did going into the night.

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Speaker 3: One pushback on that. There has been the criticism of him,

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Speaker 3: that he's too gloomy about the state of the US,

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Speaker 3: and that he has this kind of apocalyptic tone to

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Speaker 3: him sometimes, whereas he was sort of sounding like some

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Speaker 3: past presidents, at least in parts of the speech, being

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Speaker 3: kind of uplifted about America. We can do anything together.

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Speaker 3: You don't think that that positivity sells well with voters

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Speaker 3: it has traditionally with America.

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Speaker 1: The way I think about it is that presidents, especially

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Speaker 1: in State of the Union, addresses what they generally try

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Speaker 1: to do Republicans and Democrats is to balance optimism with empathy.

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Speaker 1: Bill Clinton's famous line I Feel your Pain was an

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Speaker 1: effort to say to Americans, I understand everybody isn't thrilled.

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Speaker 1: Everything's not perfect, but I have your concerns in mind,

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Speaker 1: and I'm working to make things better for you. Trump, fundamentally,

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Speaker 1: I think, rejects nuance and prefers to speak instead and

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Speaker 1: sweeping absolutes, and the absolutes we heard last night, I

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Speaker 1: wrote some of them down as he got going. Nobody

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Speaker 1: can believe what they're watching. We're winning so much that

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Speaker 1: we really don't know what to do about it. If

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Speaker 1: you're a Trump die hard, if you're doing great, maybe

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Speaker 1: your AI company is booming, I think this speech probably resonated.

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Speaker 1: But if you're somebody who isn't doing so well, who's anxious,

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Speaker 1: who's struggling economically, again, I think it's a speech that

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Speaker 1: would land in a way that would suggest maybe this

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Speaker 1: president doesn't understand what I'm going through here. Doesn't sound

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Speaker 1: like somebody who's about to solve my problems. And that

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Speaker 1: was really the worry that a lot of Republicans and

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Speaker 1: a lot of Republicans strategist said to me. It's great

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Speaker 1: to have him focused on the economy, but we need

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Speaker 1: to make clear he needs to make clear that he's

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Speaker 1: going to hammer away on issues of affordability, and that

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Speaker 1: really didn't come out in the speech last night at all.

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Speaker 3: I think the idea that President Trump is not a

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Speaker 3: great one for nuances is one of the more understated

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Speaker 3: comments of his podcast. But Anna, is practically your job

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Speaker 3: description to put the nuance back in from your perspective,

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Speaker 3: that sort of two sided thing that I put at

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Speaker 3: the beginning of the actual state of the economy. What's

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Speaker 3: the actual story he has to sell and how do

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Speaker 3: you think he's done in terms of selling it to voters.

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Speaker 4: I think he's in the same rabbit hole as the

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Speaker 4: Biden administration in the last year, you know, in twenty

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Speaker 4: twenty four, which is that they're trying very hard to

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Speaker 4: message some developments in the numbers, because you know, in

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Speaker 4: inflation numbers, we have seen some progress. President Trump rattled

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Speaker 4: off a list of things that had seen slowing inflation.

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Speaker 4: I fact checked it. It's true. Eggs has plummeted forty

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Speaker 4: eight percent in the last year, fruits, chicken, rents, and

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Speaker 4: overall grocery bills have slowed in their inflation compared to

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Speaker 4: the average during the Biden administration. But I think that's

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Speaker 4: not the question that he needs to address in a

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Speaker 4: State of Union speech. He wants to, you know, message

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Speaker 4: those numbers out to his voters. But voters based on

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Speaker 4: how they feel and when they go to the grocery

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Speaker 4: shop and see that beef prices is now twenty two

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Speaker 4: percent higher, they just don't feel that inflation is coming down,

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Speaker 4: even though the numbers is saying that they are. The

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Speaker 4: second thing that's really different in this economy compared to

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Speaker 4: the Biden economy is real income. So real income growth

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Speaker 4: during the four years of Biden was about two point

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Speaker 4: nine percent every year, and in the first year of

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Speaker 4: Trump we had seen it grows zero zero point two percent.

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Speaker 4: And disposable income, real disposable income it grew zero point

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Speaker 4: nine percent last year versus one point nine percent and

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Speaker 4: on average in the four years Biden. So while in

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Speaker 4: the Biden administration you have high inflation, but you also

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Speaker 4: have higher real income growth. In the current administration, you

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Speaker 4: definitely could feel the slow down of the labor market

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Speaker 4: and then increasing sense of job in security, perhaps due

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Speaker 4: to a combination of AI and also just you know,

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Speaker 4: Doge tariffs. All that is causing job growth to be slowing.

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Speaker 4: So I think the vibes are just not great, and

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Speaker 4: a speech that just focuses on the numbers rather than

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Speaker 4: the experiences of people is not going to win many hearts.

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Speaker 3: You've captured it in the sense of there's the higher prices.

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Speaker 3: Eggs had risen a lot, and they were probably inevitably

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Speaker 3: going to go down, but on a lot of things

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Speaker 3: they had risen a lot in the Biden years and

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Speaker 3: then have not come down. Even though we've obviously seen inflation,

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Speaker 3: the rate of increase of prices go down, and then

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Speaker 3: we did a big thing on affordability in the last

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Speaker 3: few days, and even since President Trump took office, you

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Speaker 3: have seen a bigg increase in some key areas. I

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Speaker 3: think it's home insurance, utilities, electricity. You highlighted beef. So

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Speaker 3: there are things that are moving in the right direction,

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Speaker 3: and other things that have just continued to be expensive

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Speaker 3: from a consumer's standpoint, without any action by the administration, Anna,

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Speaker 3: do you see prospect for any of that looking better

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Speaker 3: in the next six months. I noticed recently that you'd

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Speaker 3: written a piece which sort of suggested you had been

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Speaker 3: quite bullish coming into the start of this year, a

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Speaker 3: number of pieces coming into place, and then some of

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Speaker 3: those assumptions now being challenged.

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Speaker 4: I would say that the more they do, the worst

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Speaker 4: it will get, because the kind of things they are

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Speaker 4: putting forth are populist policy that tends to have unintended

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Speaker 4: consequences and backfire. The whole thing about credit card cap

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Speaker 4: that likely is going to lead to increased credit and

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Speaker 4: availability for the lower to mid income, so hurting the

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Speaker 4: people precisely that they're trying to help. And then there's

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Speaker 4: also the banning institutional investors from investing in homes that

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Speaker 4: academic research on the impact of that was also clear

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Speaker 4: it's going to reduce the supply of housing. And also

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Speaker 4: the appointment of a new FED chair who, on the

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Speaker 4: face of it, just does not seem any more doubvish

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Speaker 4: than j. Powell, the current one, And if anything, the

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Speaker 4: new FED chair nominee injected more monetary policy uncertainty and

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Speaker 4: perhaps did his part in raising some kind of equity

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Speaker 4: premium after that announcement, which I think was a contributing

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Speaker 4: factor to the selloff in the markets. So and note

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Speaker 4: that the stock was the one strong pillar of the

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Speaker 4: Trump economy, and that was propping up the economy, and

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Speaker 4: that one looks kind of shaky in twenty twenty six already.

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Speaker 3: Although we should say that we're not in the business

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Speaker 3: of offering stock market advice on this show. God help us,

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Speaker 3: but Josh, we should at least touch on the other

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Speaker 3: big event of the last week, the tariff judgment, because

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Speaker 3: I guess the most striking thing for many in response

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Speaker 3: to that not entirely surprising Supreme Court ruling that he

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Speaker 3: hadn't the right to impose about at least half of

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Speaker 3: the tariffs that he'd imposed last year. I guess the

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Speaker 3: surprise was how determined he was to immediately bring the

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Speaker 3: tariffs back, despite the fact that they're not very popular.

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Speaker 3: So I just wonder our administration officials kind of frustrated

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Speaker 3: that he's doubling down on this unpopular policy. Resigned. Where

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Speaker 3: do you think he stands on that?

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Speaker 1: Certainly the resign and I think this falls under Anna's

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Speaker 1: line that the more he does the worse it gets.

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Speaker 1: Instituting a kind of slapdash ten percent now fifteen percent

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Speaker 1: tariff regime to cobble back what the Supreme Court struck

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Speaker 1: down is not something that is going to help cost

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Speaker 1: of living issues, affordability. It's clear in every poll I've

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Speaker 1: seen that he is deeply underwater on the issue of tariffs.

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Speaker 1: Most Democrats, most independent voters, and a lot of Republican

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Speaker 1: voters opposed to tariffs. They don't like, they don't like

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Speaker 1: going into the election.

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Speaker 3: Actually, it was the least popular even among his voters,

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Speaker 3: it was the least popular.

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Speaker 1: That's right, And there's almost a certainty this is going

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Speaker 1: to cause, you know, continued disruption in the six months

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Speaker 1: between now and the election. So this isn't something that

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Speaker 1: I think is going to encourage a lot of Republican

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Speaker 1: lawmakers to think things are going to get better now

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Speaker 1: he's found the right message. I think instead it's more

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Speaker 1: of the same. And one of the things that we

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Speaker 1: know about Trump, that everybody around him knows about Trump

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Speaker 1: is that Trump really truly does believe in tariffs, thinks

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Speaker 1: they're the key to his economic policy, and views the

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Speaker 1: issue in black and white. Winter loss terms, Trump can

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Speaker 1: never acknowledge when he's lost, whether it's an election or

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Speaker 1: a Supreme Court decision. So what you heard last night

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Speaker 1: was that he was going to turn right back around

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Speaker 1: and institute a new set of tariffs in order to

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Speaker 1: his mind, regain the upper hand on an issue that

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Speaker 1: he cares about.

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Speaker 2: But the good news is that almost all countries and

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Speaker 2: corporations want to keep the deal that they already made,

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Speaker 2: right Scott, knowing that the legal power that I as

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Speaker 2: President have to make a new deal could be far

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Speaker 2: worse for them, and therefore they will continue to work

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Speaker 2: along the same successful path that we had negotiated before

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Speaker 2: the Supreme Court's unfortunate involvement.

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Speaker 3: And Anna, when you think about the economic impact, I mean,

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Speaker 3: there's a lot of different things going on here, because

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Speaker 3: you've got a potential hole in the balance sheet that

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Speaker 3: was about one hundred and forty billion dollars worth of

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Speaker 3: tariff's cut down, some of it replaced potentially by this

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Speaker 3: new blanket policy. And there's this question of maybe having

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Speaker 3: to provide the refunds when the government is already borrowing

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Speaker 3: quite a lot, though the government administration has resisted that

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Speaker 3: idea so far. On the other hand, if you ended

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Speaker 3: up just with the ten percent, it would be a

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Speaker 3: simpler regime than we had before. So that could be

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Speaker 3: beneficial for businesses. They might even find it easier to pay.

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Speaker 3: On the other hand, we know it's not going to

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Speaker 3: stay simple because there are lots of negotiations underway. So

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Speaker 3: sort of net, how do you think about the impact

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Speaker 3: of that ruling on the economy?

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Speaker 4: So I mentioned that if the administration doesn't do anything,

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Speaker 4: the economy was going to boom this year. Why one

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Speaker 4: of the key factor was that trade policy uncertainty has

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Speaker 4: been coming down sharply and that maximum drag from last

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Speaker 4: year has already happened.

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Speaker 3: And you know, and to be clear, it was the

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Speaker 3: uncertainty that you thought was most costly. Yes, you haven't

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Speaker 3: seen big spike in inflation as a result or anything else.

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Speaker 3: It's just the sheer uncertainty for businesses.

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Speaker 4: And then exactly, and when we were going through earning

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Speaker 4: transcripts of you know, the during the earning season for

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Speaker 4: the fourth quarter and third quarter, we noticed that a

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Speaker 4: lot of firms already have put in place plans to

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Speaker 4: respond to this these tariffs, mostly by cost efficiency savings

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Speaker 4: such as not hiring or diversifying supply chain and also automation.

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Speaker 4: So part of the AI story of how firms across

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Speaker 4: various sectors are adopting automation is a response to these

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Speaker 4: increasing costs from tariffs and from labor. So suddenly, you know,

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Speaker 4: it puts in doubt whether these tariffs will remain in

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Speaker 4: place because even though the administration is going to use

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Speaker 4: one twenty two, it's just a stop gap measure it

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Speaker 4: and the Congress has also expressed that they are not

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Speaker 4: likely to have enough votes to put these tariff permanently

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Speaker 4: in place. So then what do firms do? I mean,

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Speaker 4: they already a lot of them have already made decisions,

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Speaker 4: investment decisions and also on diversifying the supply chains and

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Speaker 4: automation in response to the past tariffs. So I think

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Speaker 4: that just injected some kind of more decision uncertainty from

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Speaker 4: firms perspective. It's unclear whether it's net positive or negative.

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Speaker 3: You're literally scratching your head as you say that embodiment

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Speaker 3: of a head scratcher.

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Speaker 4: Yes, because when you think about that one hundred and

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Speaker 4: forty billion or to one hundred and seventy billion potential refund,

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Speaker 4: So is this adding to the expected cash holding of firms,

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Speaker 4: meaning that well, sadley, they're gonna plow all those expected

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Speaker 4: cash flow into investment. Is this gonna even fuel this

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Speaker 4: investment boom and generating more inflation? That would be the

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Speaker 4: opposite of what you think that by lowering tariffs you

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Speaker 4: would actually reduce inflation. No, it's actually the other whereound.

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Speaker 4: On the other hand, you know, if he has threatened

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Speaker 4: that he will raise the global tariff by fifteen percent,

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Speaker 4: and according to our trade team's calculation, that will bring

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Speaker 4: the effective US teriff freight to twelve point one pretty close,

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Speaker 4: not far off, yeah, yeah, not far off from the

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Speaker 4: previous one. But what that didn't reveal is the compositional

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Speaker 4: shift of the tariffs. You see, so the flat tariff

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Speaker 4: will benefit China and the ones who received a very

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Speaker 4: higher rate under the reciprocal terraf regime. So firms have

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Speaker 4: made decisions diversifying supply chains in response to the reciprocal

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Speaker 4: the composition of the reciprocal tariffs, So when you now

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Speaker 4: have a flat tariff, that also changes your supply to calculations.

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Speaker 3: And I will struck by and he's obviously you know

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Speaker 3: him quite well. But this whole debate about refunds about

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Speaker 3: the burden of town tariffs is not necessarily one that

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Speaker 3: the administration wants to get into. And I noticed that

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Speaker 3: the National Economic Council Director Kevin Hassett has condemned a

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Speaker 3: New York Federal Reserve study that showed that US companies

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Speaker 3: were bearing most of the tariff burden. I think you

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Speaker 3: had said, we've discussed that in the past, you would

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Speaker 3: more or less say that, but he said it's an

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Speaker 3: embarrassment and the people associated with it should be disciplined.

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Speaker 3: What did you think when you saw that?

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Speaker 4: Well, when I heard that, I thought, has got a

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Speaker 4: bit emotional. You know, it's a bit odd because that

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Speaker 4: study was so well circulated in the mainstream, and also

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Speaker 4: a lot of people have similar finding, and the techniques

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Speaker 4: behind it is not that controversial, and you know, Kevin

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Speaker 4: has it just credit. Did later on apologized, and he

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Speaker 4: did say that he got a bit emotional. And I

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Speaker 4: think the reason why it was an emotional issue he

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Speaker 4: had that instinct was because this particular set of authors

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Speaker 4: from New York Fed also came out charging out the

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Speaker 4: gate in twenty eighteen with a very similar study and

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Speaker 4: dominated the kind of like the mainstream, the oxygen of

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Speaker 4: the mainstream discussion of the burden of tariff back then,

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Speaker 4: so it was like a kind of like an eight

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Speaker 4: to nine year thing.

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Speaker 3: And the issue, I.

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Speaker 5: Think that the issue, even though I said that that

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Speaker 5: the finding of that piece, to me is not controversial

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Speaker 5: because when we looked at impro prices, we also have

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Speaker 5: come to the same conclusion. But I think the issue,

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Speaker 5: the bones the administration have to pick with that piece

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Speaker 5: is that it just focused on one thing, the price,

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Speaker 5: when the burden of terrorists could be born in a

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Speaker 5: variety of ways. For example, from China's perspective, Chinese exporters

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Speaker 5: are seeing a hit in sales in quantities. Did the

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Speaker 5: study compute whether you know, in fact China is selling

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Speaker 5: less on that dimension? Are they also considering how US

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Speaker 5: exporters have read you see for a higher price, so

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Speaker 5: you has actually experienced a positive terms of trade shock

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Speaker 5: last year where the export prices was rising faster than

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Speaker 5: import prices. So there are a lot of things that

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Speaker 5: that paper didn't consider, which to the administration seemed very

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Speaker 5: one sided. So that's why they got very emotional about it.

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Speaker 3: Josh. The politics of this is interesting, right because you've

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Speaker 3: had I think the Democrats are said to be quite

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Speaker 3: excited about the possibility of running with this sort of

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Speaker 3: refund Americans should get their money back kind of line.

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Speaker 3: It certainly is unhelpful to have lots of discussion about

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Speaker 3: who's paid the price of tariffs and whether or not

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Speaker 3: they should get their money back. What's the level of

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Speaker 3: nervousness around that in the administration? Do you think?

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Speaker 1: I think there's a lot of nervousness. Trump's claim is

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Speaker 1: that tariffs aren't taxes, that it's this wonderful windfall for

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Speaker 1: the American people, and Democrats are essentially calling this bluff

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Speaker 1: and saying, all right, if it's a windfall, give all

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Speaker 1: this money back, where's the money. Note thing that stood

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Speaker 1: out about the address to me last night was that

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Speaker 1: in the past Trump has promised a number of goodies

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Speaker 1: to American voters, whether it was a ten percent cap

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Speaker 1: on credit card interest or two thousand dollars refund checks.

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Speaker 1: I didn't hear any of that last night. I don't

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Speaker 1: believe you mentioned credit card interest at all. And so

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Speaker 1: this would be another case of voters having their expectations raised,

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Speaker 1: in this case by Democratic politicians that they've got some

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Speaker 1: money coming in and then if that money doesn't show up,

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Speaker 1: is it doesn't seem like it's gonna I wouldn't bet

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Speaker 1: on it anyway.

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Speaker 3: With Teriffrey film basically said you can find us for it.

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Speaker 1: Yeah, with the two thousand dollars check, that's going to

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Speaker 1: add to voter frustration and disappointment. And I think that's

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Speaker 1: the real political risk that Republicans in the White House

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Speaker 1: are worrying about. They have a hard enough job as

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Speaker 1: it is convincing Americans that the economy is actually in

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Speaker 1: a pretty good shape. They even have some facts on

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Speaker 1: their side. And if you look at polls of public sentiment,

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Speaker 1: of consumer sentiment of how voters feel about Trump tariffs

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Speaker 1: in the economy, they're terrible. The numbers are in the toilet,

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Speaker 1: disappointing voters on maybe getting a new stimmy check is

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Speaker 1: only going to make things tougher for Republicans in November.

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Speaker 3: But there is a bit of money coming to voters

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Speaker 3: as a result of a big, beautiful bill. And I

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Speaker 3: guess one question still with Josh, I wonder do they

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Speaker 3: feel they need new proposals, new legislation to talk about

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Speaker 3: or is there a possibility they could just talk more

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Speaker 3: convincingly about the stuff that's actually coming down the track,

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Speaker 3: including some money in people's pockets from the tax bill

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Speaker 3: last year.

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Speaker 1: Yeah, I think, being realistic, most Republicans would be thrilled

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Speaker 1: if Trump simply focused on stuff that he's already delivered,

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Speaker 1: described it accurately, and hammered away at that message over

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Speaker 1: the next six months. I mean. The trouble is that

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Speaker 1: Trump is serially prone to hyperbole an exaggeration, and we

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Speaker 1: had all sorts of examples of this. Last night he

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Speaker 1: boasted about dollar ninety nine gas prices.

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Speaker 3: I noticed that Lackney once again, CNN.

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Speaker 1: Did a study they called gas Buddy, my favorite gas app,

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Speaker 1: and found that of the nation's one hundred and fifty

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Speaker 1: thousand gas stations, eight were offering gas at one nine

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Speaker 1: nine yesterday.

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Speaker 3: And that's very presumably.

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Speaker 1: I think a bigger issue, though, is, for instance, Trump

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Speaker 1: claimed last night that he had eliminated tax on Social

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Speaker 1: Security for seniors as part of his one big, Beautiful bill.

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Speaker 1: That simply isn't true. What he did was an act

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Speaker 1: a temporary six thousand dollars deduction for people over age

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Speaker 1: sixty five. So when you're constantly raising people's expectations and

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Speaker 1: getting excited about policies that don't exist and that they

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Speaker 1: can't take advantage of. Again, I think it just increases

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Speaker 1: this frustration that Trump is talking a good game and

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Speaker 1: yet people aren't seeing it in their own lives, in

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Speaker 1: their own pocketbooks. And that's always a danger for Republicans

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Speaker 1: heading into an election year.

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Speaker 3: And Anna, you said at the start that some of

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Speaker 3: the things that the President has talked about limits credit

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Speaker 3: card interest, some of the sort of showier proposals, you

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Speaker 3: didn't think they would be effective. But what about this

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Speaker 3: idea that there is just things coming down the track,

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Speaker 3: which if he does a good enough job drawing attention

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Speaker 3: to them and describing them, that will get people to

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Speaker 3: a better place. Improve this in the vibes as you discussed.

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Speaker 3: I mean, whether it's the delayed impact of the big

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Speaker 3: beautiful bill or potentially a pre election tax cup from

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Speaker 3: the new head of the Federal Reserve.

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Speaker 4: Yeah, I think the biggest piece of positive development that

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Speaker 4: the administration could count on is the you know, the

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Speaker 4: tax refund that many people will get in during this

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Speaker 4: tax season. I think Scott Beasant, the Treasury Secretary, has

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Speaker 4: been a very effective messager for that. I believe he

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Speaker 4: mentioned a figure of around one thousand dollars on average

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Speaker 4: of tax refund that people are going to see. The

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Speaker 4: administration previously had floated this idea of rebating some of

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Speaker 4: those tariff wind falls to consumers, and I think now

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00:25:06,400 --> 00:25:11,000
Speaker 4: they're recasting that to as a tax refund. So I

439
00:25:11,040 --> 00:25:15,200
Speaker 4: think after April we can see whether the best economic

440
00:25:15,240 --> 00:25:17,480
Speaker 4: news they could have, which is the tax refund going

441
00:25:17,520 --> 00:25:22,000
Speaker 4: into people's pocket, will help them improve the numbers into

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Speaker 4: the midterms.

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00:25:22,960 --> 00:25:25,080
Speaker 3: And just the state of the economy. I've seen some

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00:25:25,840 --> 00:25:28,840
Speaker 3: discussion around despite the fact that, as you said, he's

445
00:25:28,920 --> 00:25:32,360
Speaker 3: not a sort of straightforward dove, he has made an

446
00:25:32,400 --> 00:25:35,840
Speaker 3: argument that AI and other things allow interest rates to

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00:25:35,880 --> 00:25:39,320
Speaker 3: be lower, reduce the non inflationary or raise the non

448
00:25:39,320 --> 00:25:42,360
Speaker 3: inflationary potential growth rate for the US. Do you think

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00:25:42,400 --> 00:25:45,040
Speaker 3: that's a sort of very high profile thing that could

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Speaker 3: happen in the lead up to the election.

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00:25:47,720 --> 00:25:50,679
Speaker 4: Well, I think that they're in thinking about whether a

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Speaker 4: warsh is a Dove or hawk. That discussion has been

453
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Speaker 4: way too simplified. Just because he has promised to cut

454
00:25:57,880 --> 00:26:02,840
Speaker 4: short term interest rate, doesn't that his effect his tenure

455
00:26:02,960 --> 00:26:05,720
Speaker 4: will lower the long term interest rate, which is really

456
00:26:05,800 --> 00:26:07,720
Speaker 4: what runs the US economy.

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Speaker 3: Anyone who wants to hear more analysis of Kevin Walsh's

458
00:26:11,920 --> 00:26:14,440
Speaker 3: views of the balance sheet, what kind of fed chair

459
00:26:14,440 --> 00:26:16,040
Speaker 3: he might be, you should go back a couple of

460
00:26:16,040 --> 00:26:18,560
Speaker 3: weeks to an excellent discussion I have with Krishna Guha

461
00:26:18,680 --> 00:26:21,359
Speaker 3: a couple of weeks ago, just a wild card for

462
00:26:21,480 --> 00:26:23,960
Speaker 3: both of you. Before we finished, there were some who

463
00:26:24,000 --> 00:26:28,320
Speaker 3: said even just sounding like he was almost making fun

464
00:26:28,359 --> 00:26:32,720
Speaker 3: of the affordability word was a dangerous thing for the

465
00:26:32,720 --> 00:26:34,000
Speaker 3: president to do. Last night.

466
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Speaker 2: Now the same people in this chamber who voted for

467
00:26:36,880 --> 00:26:42,560
Speaker 2: those disasters suddenly use the word affordability a word they

468
00:26:42,720 --> 00:26:45,439
Speaker 2: just used it. Somebody gave it to him.

469
00:26:45,600 --> 00:26:47,800
Speaker 3: Again, goes to this point that Josh made of not

470
00:26:47,920 --> 00:26:52,000
Speaker 3: hearing voter's pain. But there are also some who say,

471
00:26:52,040 --> 00:26:53,600
Speaker 3: in six months time, we're not going to be talking

472
00:26:53,640 --> 00:26:55,280
Speaker 3: about this, We're just going to be talking about AI

473
00:26:55,400 --> 00:26:59,240
Speaker 3: because of the pace of change that we're seeing and

474
00:26:59,359 --> 00:27:03,280
Speaker 3: the program in these tools that everyone is talking about,

475
00:27:03,520 --> 00:27:05,920
Speaker 3: particularly this week. But in the last few weeks, there's

476
00:27:06,160 --> 00:27:11,080
Speaker 3: people vibe coding working out that large chunks of the

477
00:27:11,119 --> 00:27:14,639
Speaker 3: business models of American companies might be at least up

478
00:27:14,680 --> 00:27:17,520
Speaker 3: in the air as a result of AI. Josh the president.

479
00:27:18,040 --> 00:27:20,560
Speaker 3: The only real comment he made about AI was reassuring

480
00:27:20,560 --> 00:27:23,960
Speaker 3: people it wasn't going to increase their electricity bills, which

481
00:27:24,200 --> 00:27:26,160
Speaker 3: may or may not turn out to be the case.

482
00:27:26,200 --> 00:27:27,560
Speaker 3: But do you think in the end this is still

483
00:27:27,600 --> 00:27:30,840
Speaker 3: going to be this will be an affordability midterms or

484
00:27:30,880 --> 00:27:33,320
Speaker 3: will it be much more about AI once we get there.

485
00:27:33,880 --> 00:27:39,760
Speaker 1: Yeah, unless the advance of AI somehow produces lower consumer costs.

486
00:27:39,880 --> 00:27:43,120
Speaker 1: I don't see how the election could be about anything

487
00:27:43,240 --> 00:27:47,120
Speaker 1: but affordability in the economy. That's usually what elections are about.

488
00:27:47,320 --> 00:27:50,800
Speaker 1: It is far, in a way, the most important issue

489
00:27:50,880 --> 00:27:53,479
Speaker 1: in the minds of voters in every poll that I

490
00:27:53,520 --> 00:27:56,320
Speaker 1: have seen over the last six months. It would take

491
00:27:56,400 --> 00:28:00,960
Speaker 1: something striking in radical, in positive to a degree that

492
00:28:01,000 --> 00:28:04,919
Speaker 1: Trump himself might struggle to celebrate. I think to switch

493
00:28:05,000 --> 00:28:08,480
Speaker 1: the American electorate off of the affordability track and on

494
00:28:08,560 --> 00:28:11,280
Speaker 1: to something else that would make things better for Trump

495
00:28:11,280 --> 00:28:14,080
Speaker 1: and Republicans in November. But who knows. We've got nine

496
00:28:14,080 --> 00:28:15,680
Speaker 1: months between now an election day.

497
00:28:16,359 --> 00:28:18,640
Speaker 3: Certainly all things it's going to be better, right.

498
00:28:18,760 --> 00:28:19,879
Speaker 1: We don't know if it's going to better. I mean,

499
00:28:19,920 --> 00:28:22,080
Speaker 1: Trump also hited at war with Iran last night, So

500
00:28:22,119 --> 00:28:24,199
Speaker 1: maybe it'll be worse. But the truth is we've got

501
00:28:24,280 --> 00:28:26,240
Speaker 1: nine months to go, we don't quite know. But my

502
00:28:26,640 --> 00:28:29,800
Speaker 1: money would still be on affordability being the primary issue

503
00:28:29,800 --> 00:28:30,840
Speaker 1: in the November elections.

504
00:28:31,480 --> 00:28:34,520
Speaker 3: Anna, you're not a political analyst, because we've already got

505
00:28:34,600 --> 00:28:37,560
Speaker 3: quite a lot of those, but you did begin by

506
00:28:37,680 --> 00:28:40,200
Speaker 3: highlighting the kind of disconnect between the state of the

507
00:28:40,240 --> 00:28:44,080
Speaker 3: economy and the state of the public mood. Do you

508
00:28:44,120 --> 00:28:46,960
Speaker 3: think that AI could end up changing that for better

509
00:28:47,040 --> 00:28:49,239
Speaker 3: or worse or are we going to be focused on

510
00:28:49,280 --> 00:28:51,920
Speaker 3: those pocketbook issues between now and they're worse.

511
00:28:52,520 --> 00:28:56,959
Speaker 4: AI is going to hit the labor market faster before

512
00:28:57,000 --> 00:29:01,120
Speaker 4: it hits the inflation improved affordability. So first AI is

513
00:29:01,160 --> 00:29:04,600
Speaker 4: going to make everyone feel more insecure about the job,

514
00:29:05,120 --> 00:29:09,920
Speaker 4: including myself. And then as people feel more insecure about

515
00:29:09,920 --> 00:29:13,440
Speaker 4: their job and we see nominal wage growth start declining,

516
00:29:13,720 --> 00:29:16,640
Speaker 4: then you're going to see the disinflationary impact in a

517
00:29:16,680 --> 00:29:20,080
Speaker 4: short term, but certainly before the midterm. It will be

518
00:29:20,120 --> 00:29:23,640
Speaker 4: the job market that would be the more determinant issue

519
00:29:23,880 --> 00:29:24,880
Speaker 4: in voter's mind.

520
00:29:25,480 --> 00:29:28,800
Speaker 3: And it is we're all right to wonder about our jobs,

521
00:29:28,800 --> 00:29:32,200
Speaker 3: and Anna, yes, I'm constantly testing you relative to Gemini

522
00:29:32,320 --> 00:29:35,640
Speaker 3: or chet GPT or our own internal tool. I told

523
00:29:35,680 --> 00:29:37,239
Speaker 3: you when we were sitting in a conference the other

524
00:29:37,320 --> 00:29:39,000
Speaker 3: day and you were speaking, there was someone next to

525
00:29:39,040 --> 00:29:41,960
Speaker 3: me who was feeding the same questions that the audience

526
00:29:42,040 --> 00:29:45,719
Speaker 3: was giving to you into chet GPT and comparing the answers,

527
00:29:45,720 --> 00:29:49,120
Speaker 3: which I found unnerving, to say the least. Josh Anna,

528
00:29:49,240 --> 00:29:51,960
Speaker 3: thank you very much, Thank you happy to be here.

529
00:29:59,040 --> 00:30:01,959
Speaker 3: Thanks for listening to Economics from Bloomberg. It was hosted

530
00:30:01,960 --> 00:30:04,440
Speaker 3: by me Stephanie Flanders, and I was joined this week

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00:30:04,440 --> 00:30:08,760
Speaker 3: by Josh Green, national correspondent at Bloomberg BusinessWeek, and Anna Wong,

532
00:30:09,360 --> 00:30:13,520
Speaker 3: the chief US economist for Bloomberg Economics. Trumponomics was produced

533
00:30:13,520 --> 00:30:16,520
Speaker 3: by Samasadi and Moses and Am with help from Amy

534
00:30:16,600 --> 00:30:20,520
Speaker 3: Keene and special thanks in Washington to Rachel Lewis Kriskey.

535
00:30:21,440 --> 00:30:24,800
Speaker 3: Sound design was by Blake Maples and Kelly Gary. And

536
00:30:24,920 --> 00:30:28,120
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