1 00:00:03,200 --> 00:00:06,600 Speaker 1: Global business news twenty four hours a day. It's Bloomberg 2 00:00:06,640 --> 00:00:09,719 Speaker 1: dot Com the radio plus Globo lact and on your radio. 3 00:00:09,960 --> 00:00:14,280 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters. 4 00:00:14,320 --> 00:00:17,520 Speaker 1: I'm Charlie Pellet. Stocks are lower and a little change 5 00:00:17,640 --> 00:00:20,599 Speaker 1: to the SMP five hundred index down four points, now 6 00:00:20,640 --> 00:00:24,360 Speaker 1: at eight holding close to a record, down two tens 7 00:00:24,360 --> 00:00:27,440 Speaker 1: of one percent, and has stackdown sixteen, a drop of 8 00:00:27,760 --> 00:00:31,320 Speaker 1: three tenths of one percent down. Industrials down thirty four, 9 00:00:31,400 --> 00:00:34,240 Speaker 1: a drop of two tents up one percent, the tenure 10 00:00:34,280 --> 00:00:37,440 Speaker 1: up to thirty seconds yield one point five seven percent, 11 00:00:37,840 --> 00:00:40,680 Speaker 1: Gold down three ten, the ounce to thirteen thirty six, 12 00:00:40,800 --> 00:00:43,199 Speaker 1: the drop there of two tens of one percent, and 13 00:00:43,240 --> 00:00:46,519 Speaker 1: crude oil West Texas Intermediate up one o two a 14 00:00:46,560 --> 00:00:49,880 Speaker 1: barrel to eighty two. That is a gain of two 15 00:00:50,000 --> 00:00:54,000 Speaker 1: point four percent. I'm Charlie Pallett, and that's a Bloomberg 16 00:00:54,040 --> 00:00:59,720 Speaker 1: Business flash you're listening to taking start with Kathleen Nates 17 00:00:59,800 --> 00:01:03,840 Speaker 1: and Influx on bloom Bird Radio. Speaking to more than 18 00:01:03,880 --> 00:01:07,240 Speaker 1: a thousand people at an event hosted by the Detroit 19 00:01:07,440 --> 00:01:14,600 Speaker 1: Economic Club, Donald Trump, Republican nominee for president, spoke about taxes, 20 00:01:14,959 --> 00:01:19,600 Speaker 1: government regulation as well as trade policy. Here to tell 21 00:01:19,680 --> 00:01:22,760 Speaker 1: us more is David Malpass. He is the economist and 22 00:01:22,800 --> 00:01:26,600 Speaker 1: also the founder of n SIEMA Global And David Malpass 23 00:01:27,440 --> 00:01:31,720 Speaker 1: is a now a member of the Trump economic team 24 00:01:31,800 --> 00:01:33,480 Speaker 1: and he's here to tell us more. David, thank you 25 00:01:33,560 --> 00:01:36,320 Speaker 1: very much for being with us. Him happy to be on. 26 00:01:36,800 --> 00:01:40,640 Speaker 1: Kathleen gets better, Okay, everybody will, It's not nothing serious. 27 00:01:40,640 --> 00:01:44,160 Speaker 1: Everything's good. UM, tell tell us a little bit about 28 00:01:44,640 --> 00:01:49,160 Speaker 1: Donald Trump's economic plan, and let's begin, if we can, 29 00:01:49,280 --> 00:01:55,720 Speaker 1: with taxes, because um, he's now aligned the income brackets 30 00:01:55,760 --> 00:01:58,120 Speaker 1: with the plan that was proposed by Paul Ryan. That's 31 00:01:58,120 --> 00:02:01,760 Speaker 1: different than his previous plan. Is that correct? That's right 32 00:02:01,800 --> 00:02:05,240 Speaker 1: as far as the brackets, but recognized the concept of 33 00:02:05,280 --> 00:02:09,760 Speaker 1: the tax reform is to have a big change in policy, 34 00:02:09,960 --> 00:02:13,840 Speaker 1: to simplify the code and to have the business taxes 35 00:02:13,880 --> 00:02:16,679 Speaker 1: lower so that there's more investment. You know, the economy 36 00:02:16,720 --> 00:02:20,200 Speaker 1: has been really under investing. So this is aimed at 37 00:02:20,240 --> 00:02:25,400 Speaker 1: getting more growth, unleashing the economy. UM, So the focus 38 00:02:25,440 --> 00:02:28,600 Speaker 1: on the exact tax brackets. Recognized, This is all going 39 00:02:28,639 --> 00:02:31,960 Speaker 1: to go through Congress, UH in a linked the process. 40 00:02:32,639 --> 00:02:35,440 Speaker 1: I worked on the s Tax Act, and it takes 41 00:02:35,480 --> 00:02:39,600 Speaker 1: a long time to get Congress oriented, get everybody working 42 00:02:39,639 --> 00:02:43,239 Speaker 1: together and cut a deal. Now he's also proposed excluding 43 00:02:43,360 --> 00:02:47,480 Speaker 1: childcare expenses from taxation, as well as ending the estate tax, 44 00:02:47,919 --> 00:02:51,960 Speaker 1: the carried interest deduction, and cutting taxes across the board. 45 00:02:52,000 --> 00:02:56,480 Speaker 1: Is that all accurate? That's that's correct. Now the carried 46 00:02:56,520 --> 00:02:59,480 Speaker 1: interest goes the opposite direction of the estate tax and 47 00:02:59,520 --> 00:03:03,240 Speaker 1: the and the childcare credit. Just just as a note, 48 00:03:03,560 --> 00:03:07,120 Speaker 1: but but where how are we going to fund We 49 00:03:07,120 --> 00:03:09,680 Speaker 1: didn't get any details about how all these cuts would 50 00:03:09,680 --> 00:03:13,320 Speaker 1: be funded. And one thing he said to you know 51 00:03:13,360 --> 00:03:15,840 Speaker 1: that we've left out is that tim present rate on 52 00:03:15,960 --> 00:03:19,040 Speaker 1: money repatriated to the US, corporations have a lot of 53 00:03:19,120 --> 00:03:22,239 Speaker 1: cash abroad and so that brings in some but that 54 00:03:23,000 --> 00:03:26,280 Speaker 1: the focus of this is to have more growth within 55 00:03:26,360 --> 00:03:30,480 Speaker 1: the economy. When Reagan did the Reagan tax cut in 56 00:03:30,560 --> 00:03:33,560 Speaker 1: eighty six, there were there was lots of criticism that 57 00:03:33,680 --> 00:03:36,360 Speaker 1: it wouldn't work because it was it was too big, 58 00:03:36,440 --> 00:03:39,760 Speaker 1: and it was scored as a revenue loser. But what 59 00:03:39,960 --> 00:03:43,160 Speaker 1: happened was the economy bigger, more people came into the 60 00:03:43,280 --> 00:03:46,680 Speaker 1: labor force, and it worked really well. So I'm happy 61 00:03:46,800 --> 00:03:51,000 Speaker 1: with the way this, uh, this was presented and delivered 62 00:03:51,080 --> 00:03:54,400 Speaker 1: and received by the Detroit Economic Club that you know, 63 00:03:54,480 --> 00:03:56,960 Speaker 1: there was a lot of clapping as he talked about 64 00:03:57,080 --> 00:04:03,480 Speaker 1: changing policy. Just so we understand. The Tax Policy Center 65 00:04:04,800 --> 00:04:07,720 Speaker 1: has concluded this having to do with the middle class 66 00:04:07,880 --> 00:04:10,600 Speaker 1: and tax cuts, says that the largest benefits in dolarant 67 00:04:10,640 --> 00:04:14,920 Speaker 1: percentage terms would go to the highest income households. Is 68 00:04:15,000 --> 00:04:21,000 Speaker 1: that you at odds with the Tax Policy Centers analysis? Right? Yes, 69 00:04:21,120 --> 00:04:24,920 Speaker 1: I am. And here's why. When you grow the economy, 70 00:04:25,040 --> 00:04:28,280 Speaker 1: what you'll do is bring in people uh into the 71 00:04:28,560 --> 00:04:31,680 Speaker 1: into the labor force that are getting excluded now. So 72 00:04:31,960 --> 00:04:36,880 Speaker 1: the the biggest beneficiaries of a bigger economy are going 73 00:04:36,960 --> 00:04:42,200 Speaker 1: to be uh, people that young people, minorities, people that 74 00:04:42,560 --> 00:04:46,920 Speaker 1: have become discouraged with the with labor conditions, maybe people 75 00:04:47,000 --> 00:04:51,240 Speaker 1: with lower skills. Uh. They're gonna benefit hugely from this 76 00:04:51,480 --> 00:04:54,640 Speaker 1: kind of a change. And so economists are gonna, you know, 77 00:04:54,760 --> 00:04:57,520 Speaker 1: try to do a kind of a static analysis of saying, 78 00:04:57,880 --> 00:05:01,880 Speaker 1: if we apply these tax rates to the historical uh 79 00:05:02,240 --> 00:05:05,320 Speaker 1: kind of economy that we've had, it will it will 80 00:05:05,400 --> 00:05:08,960 Speaker 1: benefit a certain group. I really reject that as a 81 00:05:09,320 --> 00:05:12,640 Speaker 1: as a tech technique. I don't think it's valid or 82 00:05:12,920 --> 00:05:15,920 Speaker 1: that you could do it accurately, all right, but then 83 00:05:16,040 --> 00:05:19,719 Speaker 1: what would be the alternative process by which you would 84 00:05:19,720 --> 00:05:24,200 Speaker 1: analyze it other than desire or belief. I think the 85 00:05:24,279 --> 00:05:28,480 Speaker 1: best metric is real median income. So what we know 86 00:05:28,680 --> 00:05:30,920 Speaker 1: is over the last seven years it's been going down, 87 00:05:31,120 --> 00:05:33,680 Speaker 1: which is remarkable. I don't think we've ever had that 88 00:05:33,920 --> 00:05:38,520 Speaker 1: during a recovery. So what we're doing now is arguably 89 00:05:39,080 --> 00:05:43,720 Speaker 1: the wrong policy because growth is so slow one over 90 00:05:43,800 --> 00:05:47,480 Speaker 1: the last year, and the real median income keeps going down. 91 00:05:48,000 --> 00:05:50,960 Speaker 1: That's the that's the you know to to define that 92 00:05:51,200 --> 00:05:54,920 Speaker 1: for people. That means you've inflation adjusted to middle the 93 00:05:55,080 --> 00:06:00,160 Speaker 1: fiftieth percentile of the curve, and usually that goes up 94 00:06:00,279 --> 00:06:03,760 Speaker 1: in an expansion. That's the whole point of economic growth, 95 00:06:04,120 --> 00:06:07,760 Speaker 1: and we're not getting it. So my view is that 96 00:06:08,200 --> 00:06:14,000 Speaker 1: this tax cut will will cause a big or begin 97 00:06:14,120 --> 00:06:16,920 Speaker 1: to cause a big increase in the real median income. 98 00:06:17,400 --> 00:06:20,719 Speaker 1: That's what happened in the nineteen eighties, that happened after 99 00:06:20,880 --> 00:06:25,000 Speaker 1: Bush's Bush forty three's tax cut in two thousand three 100 00:06:25,040 --> 00:06:28,880 Speaker 1: as well. Is it possible that the addition of technology 101 00:06:29,120 --> 00:06:32,559 Speaker 1: at such a breakneck pace is one of the things 102 00:06:32,720 --> 00:06:36,960 Speaker 1: that has changed the disposition of wage growth. You know 103 00:06:37,080 --> 00:06:41,320 Speaker 1: it's possible, and people have all these theories about about 104 00:06:41,440 --> 00:06:44,520 Speaker 1: their being secular stagnation or that robots are going to 105 00:06:44,600 --> 00:06:48,440 Speaker 1: take over. My view is that the policies, the macro policies, 106 00:06:48,680 --> 00:06:51,160 Speaker 1: are the wrong ones that are in place right now, 107 00:06:51,680 --> 00:06:54,920 Speaker 1: and so it's too early to count the US economy out. 108 00:06:55,200 --> 00:06:58,640 Speaker 1: In fact, we shouldn't. But why would I'm just why 109 00:06:58,880 --> 00:07:02,520 Speaker 1: why would you a lie on that kind of assessment 110 00:07:02,640 --> 00:07:07,400 Speaker 1: for this issue but not rely on the same assessment 111 00:07:07,839 --> 00:07:13,400 Speaker 1: for the issue of creating jobs in the United States 112 00:07:13,880 --> 00:07:17,680 Speaker 1: or for many of the other UH concepts having to 113 00:07:17,800 --> 00:07:20,120 Speaker 1: do with how do you pay for all these tax cuts? 114 00:07:20,320 --> 00:07:22,560 Speaker 1: You say that you're just going to grow the economy. 115 00:07:23,000 --> 00:07:25,800 Speaker 1: I think people get it, but it's like you're using 116 00:07:26,200 --> 00:07:29,360 Speaker 1: one set of analysis tools for one thing and another 117 00:07:29,440 --> 00:07:33,800 Speaker 1: to understand the tax implications of cutting rates for people 118 00:07:33,880 --> 00:07:39,680 Speaker 1: and companies. I'm sorry, I so I I missed the 119 00:07:39,800 --> 00:07:43,080 Speaker 1: question that I think growth will cause more people to 120 00:07:43,160 --> 00:07:47,320 Speaker 1: come into the labor force and will partially address the 121 00:07:47,480 --> 00:07:51,280 Speaker 1: technology concerned that that you were mentioning. So what's the 122 00:07:51,400 --> 00:07:53,440 Speaker 1: question again, Well, just the idea that you know the 123 00:07:53,520 --> 00:07:57,160 Speaker 1: analysis you're using on the one hand to look at 124 00:07:57,880 --> 00:08:02,640 Speaker 1: job and wage stagnation and over the last however many years, 125 00:08:03,440 --> 00:08:08,040 Speaker 1: is different than the analytical tools that you're using to 126 00:08:08,200 --> 00:08:13,880 Speaker 1: assess the implications of deficits because of tax reductions. No, 127 00:08:14,200 --> 00:08:16,840 Speaker 1: I would propose using the same metrics. So over the 128 00:08:16,960 --> 00:08:19,840 Speaker 1: last seven years, the real median income has gone down 129 00:08:20,000 --> 00:08:23,120 Speaker 1: by two thousand dollars. Normally it goes up in a 130 00:08:23,360 --> 00:08:26,960 Speaker 1: in a recovery or an expansion. So I think it 131 00:08:27,000 --> 00:08:30,680 Speaker 1: would be entirely appropriate and we should. Uh, if this 132 00:08:31,040 --> 00:08:34,280 Speaker 1: tax cut were implemented, you would want to measure it 133 00:08:34,480 --> 00:08:38,040 Speaker 1: in terms of real median income, meaning does the average 134 00:08:38,080 --> 00:08:41,600 Speaker 1: person feel that they're getting more wages and getting ahead 135 00:08:41,640 --> 00:08:47,560 Speaker 1: of inflation? And that happened dramatically in the nineties, then again, uh, 136 00:08:48,000 --> 00:08:52,680 Speaker 1: less dramatically in the two thousand's, and so so it's 137 00:08:52,720 --> 00:08:55,040 Speaker 1: going to be it would be a major change in 138 00:08:55,240 --> 00:09:01,400 Speaker 1: policy aimed at increasing living standards. Do you buy this 139 00:09:01,600 --> 00:09:06,880 Speaker 1: notion that the that the government's employment figures are manipulated? Uh? 140 00:09:07,240 --> 00:09:10,640 Speaker 1: You know, the word manipulated is harsh. What I think 141 00:09:10,800 --> 00:09:13,240 Speaker 1: is that lots of people aren't being counted in the 142 00:09:13,360 --> 00:09:17,040 Speaker 1: labor force, so that tends to hold down the unemployment rate. 143 00:09:17,360 --> 00:09:21,920 Speaker 1: So the true labor environment isn't as good as what's 144 00:09:21,960 --> 00:09:25,319 Speaker 1: reflected in the four point nine percent unemployment rate. So 145 00:09:25,760 --> 00:09:30,199 Speaker 1: I don't use the term manipulated. Uh, But what we 146 00:09:30,320 --> 00:09:33,079 Speaker 1: can say is we have a system that doesn't fully 147 00:09:33,160 --> 00:09:36,440 Speaker 1: count people that are getting left out. All right, Well, 148 00:09:36,480 --> 00:09:38,599 Speaker 1: what I didn't want to leave out one topic. I 149 00:09:38,679 --> 00:09:40,240 Speaker 1: know you've had a lot of a lot of thought 150 00:09:40,320 --> 00:09:45,480 Speaker 1: on this, UM eliminating the US debt. I believe that 151 00:09:45,640 --> 00:09:48,839 Speaker 1: Donald Trump has said this could be done in eight years. 152 00:09:49,080 --> 00:09:52,400 Speaker 1: Do you buy that? No, not so much. But what 153 00:09:52,760 --> 00:09:54,920 Speaker 1: what the goal I think needs to be is to 154 00:09:55,040 --> 00:09:58,760 Speaker 1: have stronger finances for the for the country. UM. Right now, 155 00:09:58,880 --> 00:10:01,680 Speaker 1: we're in this desperate addition where the debt is going 156 00:10:01,800 --> 00:10:05,040 Speaker 1: up so fast and you know CBO projection is a 157 00:10:05,240 --> 00:10:08,680 Speaker 1: trip on average over the next ten years under current policy, 158 00:10:09,080 --> 00:10:11,960 Speaker 1: the national debt would go up a trillion dollars every year, 159 00:10:12,440 --> 00:10:16,640 Speaker 1: so it's completely out of control. So stabilizing the debt 160 00:10:16,720 --> 00:10:19,680 Speaker 1: to GDP ratio would be would be a first step. 161 00:10:20,080 --> 00:10:23,920 Speaker 1: And then what I've advocated is bringing that down, meaning 162 00:10:24,080 --> 00:10:27,000 Speaker 1: debt relative to the size of the economy should be 163 00:10:27,120 --> 00:10:32,760 Speaker 1: brought down substantially. You know, I've advocated, uh, rewriting the 164 00:10:32,920 --> 00:10:36,600 Speaker 1: debt limit so that it restrains some of that out 165 00:10:36,640 --> 00:10:39,600 Speaker 1: of control spending that's coming out of Washington. I want 166 00:10:39,640 --> 00:10:43,520 Speaker 1: to thank you very much. David Malpass, very insightful economist. 167 00:10:43,600 --> 00:10:47,360 Speaker 1: He's also the founder of n SEEMA Global. David Malpass 168 00:10:47,760 --> 00:10:49,480 Speaker 1: a veteran of the Reagan as well as the second 169 00:10:49,520 --> 00:10:53,280 Speaker 1: Bush administration, and he has been named to Donald Trump's 170 00:10:53,400 --> 00:10:58,840 Speaker 1: new economic team. Donald Trump making those proposals about reducing 171 00:10:58,920 --> 00:11:02,040 Speaker 1: the number of come tax brackets from seven to three 172 00:11:02,120 --> 00:11:06,240 Speaker 1: and other economic issues in a speech in Detroit at 173 00:11:06,280 --> 00:11:10,080 Speaker 1: the Detroit Economic Club. This is taking Stock. I'm Pim Fox, 174 00:11:10,240 --> 00:11:11,599 Speaker 1: and this is Bloomberg.