Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Inflation is plummeting, incomes are rising fast, the roaring economy
Speaker 2: is roaring like never before. We are doing really well.
Speaker 3: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
Speaker 3: and this is trump Oenomics, the podcast that looks at
Speaker 3: the economic world of Donald Trump, how he's already shaped
Speaker 3: the global economy and what on earth is going to
Speaker 3: happen next. And we're recording this on Wednesday morning, Washington Time,
Speaker 3: not long after President Donald Trump delivered a nearly two
Speaker 3: hour State of the Union speech where he addressed one
Speaker 3: of his biggest audiences at what, in polling terms, may
Speaker 3: be the lowest point yet of his second term. In
Speaker 3: his speech, he returned again and again to the same
Speaker 3: message on the economy. Everything is going great and there
Speaker 3: is a lot that's going right with the US economy,
Speaker 3: certainly more than most economists would have expected. On the
Speaker 3: day the President unleashed his so called reciprocal tariffs last April,
Speaker 3: growth and productivity in the US were both a lot
Speaker 3: higher than any other G seven economy. And this despite
Speaker 3: those tariffs, which, as it happens, the Supreme Court overturned
Speaker 3: last Friday.
Speaker 2: One of the primary reasons for our countries studying economic
Speaker 2: turnaround were tariffs. I used these tariffs took in hundreds
Speaker 2: of billions of dollars to make great deals for our country,
Speaker 2: both economically and on a national security basis.
Speaker 3: He's going to work very hard, he said, to fill
Speaker 3: the whole left by those tariffs and continue to punish
Speaker 3: trading partners for what he considers to be very unfair practices.
Speaker 3: But in the meantime, we are plunged globally into more
Speaker 3: run certainty about exactly what the trade barriers are around
Speaker 3: the US economy, and a lot more talking about one
Speaker 3: of the president's least popular policies. The combination of that
Speaker 3: State of the Union and the Supreme Court judgment felt
Speaker 3: like a good time to take stock what those two
Speaker 3: things together mean for the President, and specifically what they
Speaker 3: mean for his economic offer as his party goes into
Speaker 3: the midterms in the fall. Does he have an answer
Speaker 3: to the affordability question? Or will a strong economy and
Speaker 3: potentially new leadership at the Federal Reserve mean he doesn't
Speaker 3: really need one. Josh Green is national correspondent at Bloomberg BusinessWeek,
Speaker 3: author of the New York Times bestseller Devil's Bargain, Steve Bannon,
Speaker 3: Donald Trump, and the National Uprising. Josh, Great to have
Speaker 3: you back. Great to be with you. And Anna Wong,
Speaker 3: a frequent participant on this show, chief US economist for
Speaker 3: Bloomberg Economics. Before that, she worked at the Federal Reserve,
Speaker 3: US Treasury and Donald Trump's White House Council of Economic
Speaker 3: Advisors during his first term. Great to be here. I'm
Speaker 3: kind of interested from both of you for your sort
Speaker 3: of top line thoughts on the actual state of the economy.
Speaker 3: Does he have a solid story to sell voters about
Speaker 3: the economic achievements of the first year in office? And
Speaker 3: I guess the second part of that is where the
Speaker 3: voters are likely to listen to that message. Josh, you
Speaker 3: did sit through that State of the Union. There's a
Speaker 3: lot of focus on what he might say about affordability,
Speaker 3: the state of the economy. You know, I hear your pain.
Speaker 3: How do you think he did.
Speaker 1: The good news from a White House standpoint is they
Speaker 1: wanted him to focus on economic issues and the economy,
Speaker 1: and for the most part, he did so. I think
Speaker 1: the trouble with Trump's speech was that the address he
Speaker 1: gave sounded like something you'd hear from a president with
Speaker 1: eighty percent approval ratings. But Trump is mired in the
Speaker 1: high thirties, and instead of of empathizing with the many
Speaker 1: voters who tell polsters that they're struggling, they're upset about
Speaker 1: the economy, about tariffs, about the cost of living, Trump
Speaker 1: basically gave a two hour celebration of his own presidency.
Speaker 1: He said it's a golden age and that the country
Speaker 1: is bigger, richer, stronger than ever before. So if you're
Speaker 1: somebody who was listening hoping that things were going to
Speaker 1: turn around, that Trump might pivot in a new direction,
Speaker 1: might refocus his presidency around issues of affordability, I'm not
Speaker 1: sure that you came away feeling much better than you
Speaker 1: did going into the night.
Speaker 3: One pushback on that. There has been the criticism of him,
Speaker 3: that he's too gloomy about the state of the US,
Speaker 3: and that he has this kind of apocalyptic tone to
Speaker 3: him sometimes, whereas he was sort of sounding like some
Speaker 3: past presidents, at least in parts of the speech, being
Speaker 3: kind of uplifted about America. We can do anything together.
Speaker 3: You don't think that that positivity sells well with voters
Speaker 3: it has traditionally with America.
Speaker 1: The way I think about it is that presidents, especially
Speaker 1: in State of the Union, addresses what they generally try
Speaker 1: to do Republicans and Democrats is to balance optimism with empathy.
Speaker 1: Bill Clinton's famous line I Feel your Pain was an
Speaker 1: effort to say to Americans, I understand everybody isn't thrilled.
Speaker 1: Everything's not perfect, but I have your concerns in mind,
Speaker 1: and I'm working to make things better for you. Trump, fundamentally,
Speaker 1: I think, rejects nuance and prefers to speak instead and
Speaker 1: sweeping absolutes, and the absolutes we heard last night, I
Speaker 1: wrote some of them down as he got going. Nobody
Speaker 1: can believe what they're watching. We're winning so much that
Speaker 1: we really don't know what to do about it. If
Speaker 1: you're a Trump die hard, if you're doing great, maybe
Speaker 1: your AI company is booming, I think this speech probably resonated.
Speaker 1: But if you're somebody who isn't doing so well, who's anxious,
Speaker 1: who's struggling economically, again, I think it's a speech that
Speaker 1: would land in a way that would suggest maybe this
Speaker 1: president doesn't understand what I'm going through here. Doesn't sound
Speaker 1: like somebody who's about to solve my problems. And that
Speaker 1: was really the worry that a lot of Republicans and
Speaker 1: a lot of Republicans strategist said to me. It's great
Speaker 1: to have him focused on the economy, but we need
Speaker 1: to make clear he needs to make clear that he's
Speaker 1: going to hammer away on issues of affordability, and that
Speaker 1: really didn't come out in the speech last night at all.
Speaker 3: I think the idea that President Trump is not a
Speaker 3: great one for nuances is one of the more understated
Speaker 3: comments of his podcast. But Anna, is practically your job
Speaker 3: description to put the nuance back in from your perspective,
Speaker 3: that sort of two sided thing that I put at
Speaker 3: the beginning of the actual state of the economy. What's
Speaker 3: the actual story he has to sell and how do
Speaker 3: you think he's done in terms of selling it to voters.
Speaker 4: I think he's in the same rabbit hole as the
Speaker 4: Biden administration in the last year, you know, in twenty
Speaker 4: twenty four, which is that they're trying very hard to
Speaker 4: message some developments in the numbers, because you know, in
Speaker 4: inflation numbers, we have seen some progress. President Trump rattled
Speaker 4: off a list of things that had seen slowing inflation.
Speaker 4: I fact checked it. It's true. Eggs has plummeted forty
Speaker 4: eight percent in the last year, fruits, chicken, rents, and
Speaker 4: overall grocery bills have slowed in their inflation compared to
Speaker 4: the average during the Biden administration. But I think that's
Speaker 4: not the question that he needs to address in a
Speaker 4: State of Union speech. He wants to, you know, message
Speaker 4: those numbers out to his voters. But voters based on
Speaker 4: how they feel and when they go to the grocery
Speaker 4: shop and see that beef prices is now twenty two
Speaker 4: percent higher, they just don't feel that inflation is coming down,
Speaker 4: even though the numbers is saying that they are. The
Speaker 4: second thing that's really different in this economy compared to
Speaker 4: the Biden economy is real income. So real income growth
Speaker 4: during the four years of Biden was about two point
Speaker 4: nine percent every year, and in the first year of
Speaker 4: Trump we had seen it grows zero zero point two percent.
Speaker 4: And disposable income, real disposable income it grew zero point
Speaker 4: nine percent last year versus one point nine percent and
Speaker 4: on average in the four years Biden. So while in
Speaker 4: the Biden administration you have high inflation, but you also
Speaker 4: have higher real income growth. In the current administration, you
Speaker 4: definitely could feel the slow down of the labor market
Speaker 4: and then increasing sense of job in security, perhaps due
Speaker 4: to a combination of AI and also just you know,
Speaker 4: Doge tariffs. All that is causing job growth to be slowing.
Speaker 4: So I think the vibes are just not great, and
Speaker 4: a speech that just focuses on the numbers rather than
Speaker 4: the experiences of people is not going to win many hearts.
Speaker 3: You've captured it in the sense of there's the higher prices.
Speaker 3: Eggs had risen a lot, and they were probably inevitably
Speaker 3: going to go down, but on a lot of things
Speaker 3: they had risen a lot in the Biden years and
Speaker 3: then have not come down. Even though we've obviously seen inflation,
Speaker 3: the rate of increase of prices go down, and then
Speaker 3: we did a big thing on affordability in the last
Speaker 3: few days, and even since President Trump took office, you
Speaker 3: have seen a bigg increase in some key areas. I
Speaker 3: think it's home insurance, utilities, electricity. You highlighted beef. So
Speaker 3: there are things that are moving in the right direction,
Speaker 3: and other things that have just continued to be expensive
Speaker 3: from a consumer's standpoint, without any action by the administration, Anna,
Speaker 3: do you see prospect for any of that looking better
Speaker 3: in the next six months. I noticed recently that you'd
Speaker 3: written a piece which sort of suggested you had been
Speaker 3: quite bullish coming into the start of this year, a
Speaker 3: number of pieces coming into place, and then some of
Speaker 3: those assumptions now being challenged.
Speaker 4: I would say that the more they do, the worst
Speaker 4: it will get, because the kind of things they are
Speaker 4: putting forth are populist policy that tends to have unintended
Speaker 4: consequences and backfire. The whole thing about credit card cap
Speaker 4: that likely is going to lead to increased credit and
Speaker 4: availability for the lower to mid income, so hurting the
Speaker 4: people precisely that they're trying to help. And then there's
Speaker 4: also the banning institutional investors from investing in homes that
Speaker 4: academic research on the impact of that was also clear
Speaker 4: it's going to reduce the supply of housing. And also
Speaker 4: the appointment of a new FED chair who, on the
Speaker 4: face of it, just does not seem any more doubvish
Speaker 4: than j. Powell, the current one, And if anything, the
Speaker 4: new FED chair nominee injected more monetary policy uncertainty and
Speaker 4: perhaps did his part in raising some kind of equity
Speaker 4: premium after that announcement, which I think was a contributing
Speaker 4: factor to the selloff in the markets. So and note
Speaker 4: that the stock was the one strong pillar of the
Speaker 4: Trump economy, and that was propping up the economy, and
Speaker 4: that one looks kind of shaky in twenty twenty six already.
Speaker 3: Although we should say that we're not in the business
Speaker 3: of offering stock market advice on this show. God help us,
Speaker 3: but Josh, we should at least touch on the other
Speaker 3: big event of the last week, the tariff judgment, because
Speaker 3: I guess the most striking thing for many in response
Speaker 3: to that not entirely surprising Supreme Court ruling that he
Speaker 3: hadn't the right to impose about at least half of
Speaker 3: the tariffs that he'd imposed last year. I guess the
Speaker 3: surprise was how determined he was to immediately bring the
Speaker 3: tariffs back, despite the fact that they're not very popular.
Speaker 3: So I just wonder our administration officials kind of frustrated
Speaker 3: that he's doubling down on this unpopular policy. Resigned. Where
Speaker 3: do you think he stands on that?
Speaker 1: Certainly the resign and I think this falls under Anna's
Speaker 1: line that the more he does the worse it gets.
Speaker 1: Instituting a kind of slapdash ten percent now fifteen percent
Speaker 1: tariff regime to cobble back what the Supreme Court struck
Speaker 1: down is not something that is going to help cost
Speaker 1: of living issues, affordability. It's clear in every poll I've
Speaker 1: seen that he is deeply underwater on the issue of tariffs.
Speaker 1: Most Democrats, most independent voters, and a lot of Republican
Speaker 1: voters opposed to tariffs. They don't like, they don't like
Speaker 1: going into the election.
Speaker 3: Actually, it was the least popular even among his voters,
Speaker 3: it was the least popular.
Speaker 1: That's right, And there's almost a certainty this is going
Speaker 1: to cause, you know, continued disruption in the six months
Speaker 1: between now and the election. So this isn't something that
Speaker 1: I think is going to encourage a lot of Republican
Speaker 1: lawmakers to think things are going to get better now
Speaker 1: he's found the right message. I think instead it's more
Speaker 1: of the same. And one of the things that we
Speaker 1: know about Trump, that everybody around him knows about Trump
Speaker 1: is that Trump really truly does believe in tariffs, thinks
Speaker 1: they're the key to his economic policy, and views the
Speaker 1: issue in black and white. Winter loss terms, Trump can
Speaker 1: never acknowledge when he's lost, whether it's an election or
Speaker 1: a Supreme Court decision. So what you heard last night
Speaker 1: was that he was going to turn right back around
Speaker 1: and institute a new set of tariffs in order to
Speaker 1: his mind, regain the upper hand on an issue that
Speaker 1: he cares about.
Speaker 2: But the good news is that almost all countries and
Speaker 2: corporations want to keep the deal that they already made,
Speaker 2: right Scott, knowing that the legal power that I as
Speaker 2: President have to make a new deal could be far
Speaker 2: worse for them, and therefore they will continue to work
Speaker 2: along the same successful path that we had negotiated before
Speaker 2: the Supreme Court's unfortunate involvement.
Speaker 3: And Anna, when you think about the economic impact, I mean,
Speaker 3: there's a lot of different things going on here, because
Speaker 3: you've got a potential hole in the balance sheet that
Speaker 3: was about one hundred and forty billion dollars worth of
Speaker 3: tariff's cut down, some of it replaced potentially by this
Speaker 3: new blanket policy. And there's this question of maybe having
Speaker 3: to provide the refunds when the government is already borrowing
Speaker 3: quite a lot, though the government administration has resisted that
Speaker 3: idea so far. On the other hand, if you ended
Speaker 3: up just with the ten percent, it would be a
Speaker 3: simpler regime than we had before. So that could be
Speaker 3: beneficial for businesses. They might even find it easier to pay.
Speaker 3: On the other hand, we know it's not going to
Speaker 3: stay simple because there are lots of negotiations underway. So
Speaker 3: sort of net, how do you think about the impact
Speaker 3: of that ruling on the economy?
Speaker 4: So I mentioned that if the administration doesn't do anything,
Speaker 4: the economy was going to boom this year. Why one
Speaker 4: of the key factor was that trade policy uncertainty has
Speaker 4: been coming down sharply and that maximum drag from last
Speaker 4: year has already happened.
Speaker 3: And you know, and to be clear, it was the
Speaker 3: uncertainty that you thought was most costly. Yes, you haven't
Speaker 3: seen big spike in inflation as a result or anything else.
Speaker 3: It's just the sheer uncertainty for businesses.
Speaker 4: And then exactly, and when we were going through earning
Speaker 4: transcripts of you know, the during the earning season for
Speaker 4: the fourth quarter and third quarter, we noticed that a
Speaker 4: lot of firms already have put in place plans to
Speaker 4: respond to this these tariffs, mostly by cost efficiency savings
Speaker 4: such as not hiring or diversifying supply chain and also automation.
Speaker 4: So part of the AI story of how firms across
Speaker 4: various sectors are adopting automation is a response to these
Speaker 4: increasing costs from tariffs and from labor. So suddenly, you know,
Speaker 4: it puts in doubt whether these tariffs will remain in
Speaker 4: place because even though the administration is going to use
Speaker 4: one twenty two, it's just a stop gap measure it
Speaker 4: and the Congress has also expressed that they are not
Speaker 4: likely to have enough votes to put these tariff permanently
Speaker 4: in place. So then what do firms do? I mean,
Speaker 4: they already a lot of them have already made decisions,
Speaker 4: investment decisions and also on diversifying the supply chains and
Speaker 4: automation in response to the past tariffs. So I think
Speaker 4: that just injected some kind of more decision uncertainty from
Speaker 4: firms perspective. It's unclear whether it's net positive or negative.
Speaker 3: You're literally scratching your head as you say that embodiment
Speaker 3: of a head scratcher.
Speaker 4: Yes, because when you think about that one hundred and
Speaker 4: forty billion or to one hundred and seventy billion potential refund,
Speaker 4: So is this adding to the expected cash holding of firms,
Speaker 4: meaning that well, sadley, they're gonna plow all those expected
Speaker 4: cash flow into investment. Is this gonna even fuel this
Speaker 4: investment boom and generating more inflation? That would be the
Speaker 4: opposite of what you think that by lowering tariffs you
Speaker 4: would actually reduce inflation. No, it's actually the other whereound.
Speaker 4: On the other hand, you know, if he has threatened
Speaker 4: that he will raise the global tariff by fifteen percent,
Speaker 4: and according to our trade team's calculation, that will bring
Speaker 4: the effective US teriff freight to twelve point one pretty close,
Speaker 4: not far off, yeah, yeah, not far off from the
Speaker 4: previous one. But what that didn't reveal is the compositional
Speaker 4: shift of the tariffs. You see, so the flat tariff
Speaker 4: will benefit China and the ones who received a very
Speaker 4: higher rate under the reciprocal terraf regime. So firms have
Speaker 4: made decisions diversifying supply chains in response to the reciprocal
Speaker 4: the composition of the reciprocal tariffs, So when you now
Speaker 4: have a flat tariff, that also changes your supply to calculations.
Speaker 3: And I will struck by and he's obviously you know
Speaker 3: him quite well. But this whole debate about refunds about
Speaker 3: the burden of town tariffs is not necessarily one that
Speaker 3: the administration wants to get into. And I noticed that
Speaker 3: the National Economic Council Director Kevin Hassett has condemned a
Speaker 3: New York Federal Reserve study that showed that US companies
Speaker 3: were bearing most of the tariff burden. I think you
Speaker 3: had said, we've discussed that in the past, you would
Speaker 3: more or less say that, but he said it's an
Speaker 3: embarrassment and the people associated with it should be disciplined.
Speaker 3: What did you think when you saw that?
Speaker 4: Well, when I heard that, I thought, has got a
Speaker 4: bit emotional. You know, it's a bit odd because that
Speaker 4: study was so well circulated in the mainstream, and also
Speaker 4: a lot of people have similar finding, and the techniques
Speaker 4: behind it is not that controversial, and you know, Kevin
Speaker 4: has it just credit. Did later on apologized, and he
Speaker 4: did say that he got a bit emotional. And I
Speaker 4: think the reason why it was an emotional issue he
Speaker 4: had that instinct was because this particular set of authors
Speaker 4: from New York Fed also came out charging out the
Speaker 4: gate in twenty eighteen with a very similar study and
Speaker 4: dominated the kind of like the mainstream, the oxygen of
Speaker 4: the mainstream discussion of the burden of tariff back then,
Speaker 4: so it was like a kind of like an eight
Speaker 4: to nine year thing.
Speaker 3: And the issue, I.
Speaker 5: Think that the issue, even though I said that that
Speaker 5: the finding of that piece, to me is not controversial
Speaker 5: because when we looked at impro prices, we also have
Speaker 5: come to the same conclusion. But I think the issue,
Speaker 5: the bones the administration have to pick with that piece
Speaker 5: is that it just focused on one thing, the price,
Speaker 5: when the burden of terrorists could be born in a
Speaker 5: variety of ways. For example, from China's perspective, Chinese exporters
Speaker 5: are seeing a hit in sales in quantities. Did the
Speaker 5: study compute whether you know, in fact China is selling
Speaker 5: less on that dimension? Are they also considering how US
Speaker 5: exporters have read you see for a higher price, so
Speaker 5: you has actually experienced a positive terms of trade shock
Speaker 5: last year where the export prices was rising faster than
Speaker 5: import prices. So there are a lot of things that
Speaker 5: that paper didn't consider, which to the administration seemed very
Speaker 5: one sided. So that's why they got very emotional about it.
Speaker 3: Josh. The politics of this is interesting, right because you've
Speaker 3: had I think the Democrats are said to be quite
Speaker 3: excited about the possibility of running with this sort of
Speaker 3: refund Americans should get their money back kind of line.
Speaker 3: It certainly is unhelpful to have lots of discussion about
Speaker 3: who's paid the price of tariffs and whether or not
Speaker 3: they should get their money back. What's the level of
Speaker 3: nervousness around that in the administration? Do you think?
Speaker 1: I think there's a lot of nervousness. Trump's claim is
Speaker 1: that tariffs aren't taxes, that it's this wonderful windfall for
Speaker 1: the American people, and Democrats are essentially calling this bluff
Speaker 1: and saying, all right, if it's a windfall, give all
Speaker 1: this money back, where's the money. Note thing that stood
Speaker 1: out about the address to me last night was that
Speaker 1: in the past Trump has promised a number of goodies
Speaker 1: to American voters, whether it was a ten percent cap
Speaker 1: on credit card interest or two thousand dollars refund checks.
Speaker 1: I didn't hear any of that last night. I don't
Speaker 1: believe you mentioned credit card interest at all. And so
Speaker 1: this would be another case of voters having their expectations raised,
Speaker 1: in this case by Democratic politicians that they've got some
Speaker 1: money coming in and then if that money doesn't show up,
Speaker 1: is it doesn't seem like it's gonna I wouldn't bet
Speaker 1: on it anyway.
Speaker 3: With Teriffrey film basically said you can find us for it.
Speaker 1: Yeah, with the two thousand dollars check, that's going to
Speaker 1: add to voter frustration and disappointment. And I think that's
Speaker 1: the real political risk that Republicans in the White House
Speaker 1: are worrying about. They have a hard enough job as
Speaker 1: it is convincing Americans that the economy is actually in
Speaker 1: a pretty good shape. They even have some facts on
Speaker 1: their side. And if you look at polls of public sentiment,
Speaker 1: of consumer sentiment of how voters feel about Trump tariffs
Speaker 1: in the economy, they're terrible. The numbers are in the toilet,
Speaker 1: disappointing voters on maybe getting a new stimmy check is
Speaker 1: only going to make things tougher for Republicans in November.
Speaker 3: But there is a bit of money coming to voters
Speaker 3: as a result of a big, beautiful bill. And I
Speaker 3: guess one question still with Josh, I wonder do they
Speaker 3: feel they need new proposals, new legislation to talk about
Speaker 3: or is there a possibility they could just talk more
Speaker 3: convincingly about the stuff that's actually coming down the track,
Speaker 3: including some money in people's pockets from the tax bill
Speaker 3: last year.
Speaker 1: Yeah, I think, being realistic, most Republicans would be thrilled
Speaker 1: if Trump simply focused on stuff that he's already delivered,
Speaker 1: described it accurately, and hammered away at that message over
Speaker 1: the next six months. I mean. The trouble is that
Speaker 1: Trump is serially prone to hyperbole an exaggeration, and we
Speaker 1: had all sorts of examples of this. Last night he
Speaker 1: boasted about dollar ninety nine gas prices.
Speaker 3: I noticed that Lackney once again, CNN.
Speaker 1: Did a study they called gas Buddy, my favorite gas app,
Speaker 1: and found that of the nation's one hundred and fifty
Speaker 1: thousand gas stations, eight were offering gas at one nine
Speaker 1: nine yesterday.
Speaker 3: And that's very presumably.
Speaker 1: I think a bigger issue, though, is, for instance, Trump
Speaker 1: claimed last night that he had eliminated tax on Social
Speaker 1: Security for seniors as part of his one big, Beautiful bill.
Speaker 1: That simply isn't true. What he did was an act
Speaker 1: a temporary six thousand dollars deduction for people over age
Speaker 1: sixty five. So when you're constantly raising people's expectations and
Speaker 1: getting excited about policies that don't exist and that they
Speaker 1: can't take advantage of. Again, I think it just increases
Speaker 1: this frustration that Trump is talking a good game and
Speaker 1: yet people aren't seeing it in their own lives, in
Speaker 1: their own pocketbooks. And that's always a danger for Republicans
Speaker 1: heading into an election year.
Speaker 3: And Anna, you said at the start that some of
Speaker 3: the things that the President has talked about limits credit
Speaker 3: card interest, some of the sort of showier proposals, you
Speaker 3: didn't think they would be effective. But what about this
Speaker 3: idea that there is just things coming down the track,
Speaker 3: which if he does a good enough job drawing attention
Speaker 3: to them and describing them, that will get people to
Speaker 3: a better place. Improve this in the vibes as you discussed.
Speaker 3: I mean, whether it's the delayed impact of the big
Speaker 3: beautiful bill or potentially a pre election tax cup from
Speaker 3: the new head of the Federal Reserve.
Speaker 4: Yeah, I think the biggest piece of positive development that
Speaker 4: the administration could count on is the you know, the
Speaker 4: tax refund that many people will get in during this
Speaker 4: tax season. I think Scott Beasant, the Treasury Secretary, has
Speaker 4: been a very effective messager for that. I believe he
Speaker 4: mentioned a figure of around one thousand dollars on average
Speaker 4: of tax refund that people are going to see. The
Speaker 4: administration previously had floated this idea of rebating some of
Speaker 4: those tariff wind falls to consumers, and I think now
Speaker 4: they're recasting that to as a tax refund. So I
Speaker 4: think after April we can see whether the best economic
Speaker 4: news they could have, which is the tax refund going
Speaker 4: into people's pocket, will help them improve the numbers into
Speaker 4: the midterms.
Speaker 3: And just the state of the economy. I've seen some
Speaker 3: discussion around despite the fact that, as you said, he's
Speaker 3: not a sort of straightforward dove, he has made an
Speaker 3: argument that AI and other things allow interest rates to
Speaker 3: be lower, reduce the non inflationary or raise the non
Speaker 3: inflationary potential growth rate for the US. Do you think
Speaker 3: that's a sort of very high profile thing that could
Speaker 3: happen in the lead up to the election.
Speaker 4: Well, I think that they're in thinking about whether a
Speaker 4: warsh is a Dove or hawk. That discussion has been
Speaker 4: way too simplified. Just because he has promised to cut
Speaker 4: short term interest rate, doesn't that his effect his tenure
Speaker 4: will lower the long term interest rate, which is really
Speaker 4: what runs the US economy.
Speaker 3: Anyone who wants to hear more analysis of Kevin Walsh's
Speaker 3: views of the balance sheet, what kind of fed chair
Speaker 3: he might be, you should go back a couple of
Speaker 3: weeks to an excellent discussion I have with Krishna Guha
Speaker 3: a couple of weeks ago, just a wild card for
Speaker 3: both of you. Before we finished, there were some who
Speaker 3: said even just sounding like he was almost making fun
Speaker 3: of the affordability word was a dangerous thing for the
Speaker 3: president to do. Last night.
Speaker 2: Now the same people in this chamber who voted for
Speaker 2: those disasters suddenly use the word affordability a word they
Speaker 2: just used it. Somebody gave it to him.
Speaker 3: Again, goes to this point that Josh made of not
Speaker 3: hearing voter's pain. But there are also some who say,
Speaker 3: in six months time, we're not going to be talking
Speaker 3: about this, We're just going to be talking about AI
Speaker 3: because of the pace of change that we're seeing and
Speaker 3: the program in these tools that everyone is talking about,
Speaker 3: particularly this week. But in the last few weeks, there's
Speaker 3: people vibe coding working out that large chunks of the
Speaker 3: business models of American companies might be at least up
Speaker 3: in the air as a result of AI. Josh the president.
Speaker 3: The only real comment he made about AI was reassuring
Speaker 3: people it wasn't going to increase their electricity bills, which
Speaker 3: may or may not turn out to be the case.
Speaker 3: But do you think in the end this is still
Speaker 3: going to be this will be an affordability midterms or
Speaker 3: will it be much more about AI once we get there.
Speaker 1: Yeah, unless the advance of AI somehow produces lower consumer costs.
Speaker 1: I don't see how the election could be about anything
Speaker 1: but affordability in the economy. That's usually what elections are about.
Speaker 1: It is far, in a way, the most important issue
Speaker 1: in the minds of voters in every poll that I
Speaker 1: have seen over the last six months. It would take
Speaker 1: something striking in radical, in positive to a degree that
Speaker 1: Trump himself might struggle to celebrate. I think to switch
Speaker 1: the American electorate off of the affordability track and on
Speaker 1: to something else that would make things better for Trump
Speaker 1: and Republicans in November. But who knows. We've got nine
Speaker 1: months between now an election day.
Speaker 3: Certainly all things it's going to be better, right.
Speaker 1: We don't know if it's going to better. I mean,
Speaker 1: Trump also hited at war with Iran last night, So
Speaker 1: maybe it'll be worse. But the truth is we've got
Speaker 1: nine months to go, we don't quite know. But my
Speaker 1: money would still be on affordability being the primary issue
Speaker 1: in the November elections.
Speaker 3: Anna, you're not a political analyst, because we've already got
Speaker 3: quite a lot of those, but you did begin by
Speaker 3: highlighting the kind of disconnect between the state of the
Speaker 3: economy and the state of the public mood. Do you
Speaker 3: think that AI could end up changing that for better
Speaker 3: or worse or are we going to be focused on
Speaker 3: those pocketbook issues between now and they're worse.
Speaker 4: AI is going to hit the labor market faster before
Speaker 4: it hits the inflation improved affordability. So first AI is
Speaker 4: going to make everyone feel more insecure about the job,
Speaker 4: including myself. And then as people feel more insecure about
Speaker 4: their job and we see nominal wage growth start declining,
Speaker 4: then you're going to see the disinflationary impact in a
Speaker 4: short term, but certainly before the midterm. It will be
Speaker 4: the job market that would be the more determinant issue
Speaker 4: in voter's mind.
Speaker 3: And it is we're all right to wonder about our jobs,
Speaker 3: and Anna, yes, I'm constantly testing you relative to Gemini
Speaker 3: or chet GPT or our own internal tool. I told
Speaker 3: you when we were sitting in a conference the other
Speaker 3: day and you were speaking, there was someone next to
Speaker 3: me who was feeding the same questions that the audience
Speaker 3: was giving to you into chet GPT and comparing the answers,
Speaker 3: which I found unnerving, to say the least. Josh Anna,
Speaker 3: thank you very much, Thank you happy to be here.
Speaker 3: Thanks for listening to Economics from Bloomberg. It was hosted
Speaker 3: by me Stephanie Flanders, and I was joined this week
Speaker 3: by Josh Green, national correspondent at Bloomberg BusinessWeek, and Anna Wong,
Speaker 3: the chief US economist for Bloomberg Economics. Trumponomics was produced
Speaker 3: by Samasadi and Moses and Am with help from Amy
Speaker 3: Keene and special thanks in Washington to Rachel Lewis Kriskey.
Speaker 3: Sound design was by Blake Maples and Kelly Gary. And
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