Speaker 1: Bloomberg Audio Studios, podcasts, radio news, long agoing far away.
Speaker 1: A wonderful person who was a great supporter of mine
Speaker 1: in the early years at stan Freeburg was Fred Burston
Speaker 1: and he was at the Peterson what became the Peterson Institute.
Speaker 1: The toughest job was to pick up from Fred, and
Speaker 1: that is what Adam Posen has done with grace. To
Speaker 1: say the least. The only one working harder than Adam
Speaker 1: Posen at the Peterson Institute is Chad Bone, who hasn't
Speaker 1: a day off since time began. As we look at
Speaker 1: this trade mess, we're in bonus round. Adam Posen is
Speaker 1: expert on the German political economic experiment. Doctor Posen, thank
Speaker 1: you so much for joining us today. If Doug err
Speaker 1: went up at Dartmouth was to rewrite his history of
Speaker 1: the tariffs and all, what would Doug Irwin? What would
Speaker 1: Adam Posen be writing right now?
Speaker 2: Thanks Tom for having me back. And everyone should read
Speaker 2: Chad Bound and Doug Irwin's new piece and Foreign Affairs
Speaker 2: that just came out on tariffs. Doug has made the
Speaker 2: point repeatedly their charts on THEEPIE website that this is
Speaker 2: historically unprecedented. You really have to go back one hundred years,
Speaker 2: ninety plus years to Smooth Hollie to see anything like
Speaker 2: this in terms of the size scope of tariffs. But
Speaker 2: even more so, this is much more uncertain. As he's
Speaker 2: pointed out Chad, Mary Lovely and I in various ways,
Speaker 2: this is an exercise of discretionary presidential power. I'll leave
Speaker 2: aside the constitutionality or the issues of politics, but just
Speaker 2: from an economic point of view, in the past, when
Speaker 2: there have been large moves of tariffs, it's mostly been
Speaker 2: in the US because Congress has authorized them. This is
Speaker 2: being done day to day or as justin Wolfer's joked
Speaker 2: intra day changes on presidential whim, and that creates even
Speaker 2: more uncertainty. Take them what Doug would say, We're in
Speaker 2: new territory and at ain't pretty.
Speaker 1: Professor Erwin joining us from Dartmouth will do that on
Speaker 1: Friday here in Bloomberg Surveillance. Doctor Posen, as simple as
Speaker 1: I can. Krugman with his Nobel speech would look at
Speaker 1: the microeconomics of the moment and it'd be a lot
Speaker 1: of fancy Adam Posen talk. Forget about it. What's the
Speaker 1: dead weight loss for our audience right now? Our audience
Speaker 1: in Winnipeg, our audience in Wisconsin. What's the dead weight
Speaker 1: loss given all of.
Speaker 2: This on the order of one thousand plus dollars a
Speaker 2: year for the average household, higher for lower income households.
Speaker 2: And that doesn't include the hits to retirement funds or
Speaker 2: the going forward the lower opportunities because investments getting chilled.
Speaker 2: Direct hit is on the order of one thousand dollars
Speaker 2: per household. You could argue if the tariffs get stick
Speaker 2: or if they put on the across the board tariffs,
Speaker 2: it gets closer to fifteen hundred to two thousand dollars
Speaker 2: a household.
Speaker 3: Adam, I'm hearing the recession word more and more over
Speaker 3: the last several weeks. Is that in your cactus anywhere?
Speaker 2: So? I've been saying for a while, the hell did.
Speaker 2: I was expecting a large boom and then fed induced
Speaker 2: bust under Trump. But I always held out that this
Speaker 2: was a radical enough program that it was bimodal, meaning
Speaker 2: again simple talk, it wasn't going to end up in
Speaker 2: the middle. It was going to be one of two outcomes.
Speaker 2: I had the recession probability only at like fifteen plus percent,
Speaker 2: so no different than anybody in a normal time. But
Speaker 2: what I kept saying, and this may have been a hedge,
Speaker 2: but it turns out to be reality, was if Trump
Speaker 2: administration overdid it on tariffs, on migration, on fiscal follies,
Speaker 2: that that would swap us into the tariff around the
Speaker 2: xused me into the recession camp. I've up my recession
Speaker 2: subjective probability to thirty percent. I still think it's more
Speaker 2: likely than not we get a boom bust. But you
Speaker 2: throw in the geopolitical shock, which is enormous and which
Speaker 2: really changes the game for Europe and for everybody. And
Speaker 2: then you throw in the fact that Doge shutting down
Speaker 2: environment education in USAID. I may not like, but I
Speaker 2: expected that throwing a miasma of similar uncertainty overall government contracting,
Speaker 2: all government workforce has huge effects. So, yeah, the recession
Speaker 2: risk has gone way up.
Speaker 3: From some of President Trump's policy people, We're starting to
Speaker 3: hear more and more discussion that what the President is
Speaker 3: aiming to do is to kind of reshape the US
Speaker 3: economy to bring more manufacturing back to the US, and
Speaker 3: some folks are concerned that that's kind of counter intuitive
Speaker 3: to what we've experienced over the last fifty sixty seventy
Speaker 3: years of more of a globalization and and at least
Speaker 3: in the US economy, focus on the services part of
Speaker 3: the economy. How do you view this potential pology policy
Speaker 3: shift for the US.
Speaker 2: I view it as a very mistaken policy shift for
Speaker 2: two reasons. First, in line with what you said, increasing
Speaker 2: manufacturing employment or literal production within US borders isn't necessarily
Speaker 2: a good thing. If they want to force Americans to
Speaker 2: do rare earth's mining or production of generic pharmaceuticals, those
Speaker 2: are steps backward for US workers, and so you would
Speaker 2: either have to vastly overpay, which then makes it totally
Speaker 2: uncompetitive internationally and totally in inflation for the domestic household,
Speaker 2: or you're just subjecting American workers to bad jobs that
Speaker 2: were too well endowed and skilled to do. The second reason, though,
Speaker 2: is it's just not going to work. My colleague Robert Lawrence,
Speaker 2: who's at Harvard and Peterson Institute, had a book out
Speaker 2: fall called Behind the Curve, which I think established brilliantly
Speaker 2: that even if you fantasize about going back to nineteen
Speaker 2: fifty eight and a bunch of guys getting to be
Speaker 2: big bread owners, breadwinners, for their families with no education,
Speaker 2: which there's reasons you might like that. It's just not
Speaker 2: going to happen because the total taste of the world
Speaker 2: and the movement of technology for that globalization has made
Speaker 2: it impossible to create large numbers of manufacturing jobs of
Speaker 2: that sort. So it's a bad goal and it's not
Speaker 2: going to work.
Speaker 1: We continue with Adam posing the Peterson Institute again. Doug
Speaker 1: Irwin with us on Friday from Dartmouth. Breek Krona coming
Speaker 1: up as well from Wellington. Good morning across the nation.
Speaker 1: Good Morning ninety two to nine FM in Boston, and
Speaker 1: I'm down to ninety nine one FM in Washington, DC
Speaker 1: as well. Adam. We got a good amount of time here.
Speaker 1: I want to slip this in. I think it's so important.
Speaker 1: Robert Zelik is somebody that I think more than anyone,
Speaker 1: takes our international economics and our sense of constructive globalization
Speaker 1: and folds it into American business. He's been on fire recently.
Speaker 1: What's the message you've taken from one of our trade giants.
Speaker 2: I agree Robert is Bob Zelek is here out of
Speaker 2: me and is a statesperson of the longtime ideal for
Speaker 2: the US and he integrates diplomacy, history, security economics like nobody.
Speaker 1: Okay, here's a sentence, and here's a sentence. The zero
Speaker 1: sum logic reverts back to a view in the nineteenth
Speaker 1: and eighteenth centuries called mercantilism. Is that's from Zelek? Is
Speaker 1: that where we are this morning?
Speaker 2: Yeah, that is where we are. I mean when you
Speaker 2: listen to the president, President Trump give the rant he
Speaker 2: gave yesterday about Canada was very unfair. You EU is
Speaker 2: terribly unfair, on and on an on again. I don't
Speaker 2: presume the tok psychology, but as a matter of economic facts,
Speaker 2: it's just a completely self polluted view. It's not true
Speaker 2: on the facts, but it only makes sense if you
Speaker 2: have the mercantilist blinders on, which means you see trade
Speaker 2: as negative some not even zero sum. And you see,
Speaker 2: again going back to the previous comment that only making
Speaker 2: physical stuff matters, and this is just not true. You
Speaker 2: can make national security arguments and Bob would allow for
Speaker 2: this too. That specifically referspect to China or given industry
Speaker 2: like semiconductors. You don't want to have too much concentration
Speaker 2: risk dependence on a particular thing. Even there though you
Speaker 2: don't want to be putting up barriers around, so you're
Speaker 2: dependent on some American company that happens to be a
Speaker 2: friend of the president's and is overly protected, too big
Speaker 2: to fail and makes plains to drop out of the
Speaker 2: spy or semiconductors don't really work right, So you know,
Speaker 2: this is a huge step backward. Where I think Bob
Speaker 2: is much more articulate than I'm being is the international
Speaker 2: systemic part of this, right, There is a feedback loop
Speaker 2: for the US, and this is what I think Trump
Speaker 2: and his and Bessentin has it. Whether they know it
Speaker 2: or not, whether they think it's a means to an
Speaker 2: end or not, I don't know, but they're ignoring that.
Speaker 2: The US, as I argued in Foreign Affairs a few
Speaker 2: years ago, was chairman of the club and therefore got
Speaker 2: to set the rules, got to self deal, got to
Speaker 2: determine who was members, but it had to behave within
Speaker 2: some reasonable set of rules and provide the club some benefits.
Speaker 2: And once the US just says I'm a member and
Speaker 2: a member who may even leave the club, the club
Speaker 2: goes on without you.
Speaker 1: YouTube live chat, thank you out on YouTube. Huge audience
Speaker 1: this morning. Paul Sweeney, Tom you need a beard like
Speaker 1: Adam posts.
Speaker 3: Oh there, I mean there it is.
Speaker 1: Adam's not shaven until the red sox in first place.
Speaker 1: We'll see when that happens.
Speaker 2: Continual, sustainably in first place.
Speaker 3: Sustainably in first place. Hey, Adam, I think most Americans
Speaker 3: would agree that this US government, federal government is bloated,
Speaker 3: it's bureaucratic, wh's red tape, all that good stuff. Is Doge.
Speaker 3: The way to address that.
Speaker 2: Not so far. I mean, Paul, You're right, most Americans
Speaker 2: would agree, and there's certainly a point there. I think
Speaker 2: what I tried to say to people before Doge got
Speaker 2: started was the issue with government isn't so much waste fraud.
Speaker 2: It's that because of politics, every task has seventeen key
Speaker 2: performance indicators, has seventeen different constituencies, and then gets funded
Speaker 2: to seventy five eighty percent of what it needs to do.
Speaker 2: That at best, and so what you needed to do.
Speaker 2: And this is the place where I think an outside
Speaker 2: government reform effort could have been good is saying, let's prioritize,
Speaker 2: not let the accumulation through the years of individual, little
Speaker 2: congressional or special interest moves determine our budget. Determine our priorities.
Speaker 2: So again, I'm not in favor of getting rid of education,
Speaker 2: and I'm totally against getting rid of USAID. But in
Speaker 2: a sense, as a process, if they had just come
Speaker 2: in and said we're taking out this whole department and
Speaker 2: we're doing this instead, that's okay as a process. It's
Speaker 2: not okay to create terror across the workforce. It's not
Speaker 2: okay to make government contractors not get paid for stuff
Speaker 2: they've already done and not know what they're going to get.
Speaker 2: It's not okay to blow up whole ecosystems just because
Speaker 2: they're in government. And most of all, if you did
Speaker 2: it by priorities, things like energy grid, nuclear power experts,
Speaker 2: air traffic control, and NIH directly into World R and D,
Speaker 2: those things would have been spared because they're directly helpful
Speaker 2: to the economy.
Speaker 1: Adam, I got to do an audible here before we
Speaker 1: let you go. And you know, we all know in
Speaker 1: academics that you are expert on Germany. Let's go back
Speaker 1: to June in nineteen sixty three, when time stop. President
Speaker 1: Obama reducts JFK's unbelievable speech in the heart of the
Speaker 1: Cold War, want ready for my German Paul I nailed it,
Speaker 1: not even close. Oh I got a D minus there,
Speaker 1: But the professor got hockey tickets, so it worked out.
Speaker 1: Adam Posen, you are expert on this. Is this a
Speaker 1: Germany in this new Germany with Conrad at an hour
Speaker 1: and Villi Brandt, would they recognize it?
Speaker 2: They'd have trouble, and that's a good thing. They would
Speaker 2: have trouble imagining a Germany that pursues security without being
Speaker 2: totally reliant on the US. They would have trouble imagining
Speaker 2: a Germany that does use it fiscal capabilities more more
Speaker 2: than not. And they would have trouble with the Germany
Speaker 2: that explicitly is going to rearm. But I think it's
Speaker 2: the right move for Germany. I mean, you've seen the
Speaker 2: meme on Twitter Tom that Chancellor Chancellor Merits incoming. Chancellor
Speaker 2: Merits is shown with the big smartest face, and then
Speaker 2: the blurb is when you realize you can borrow just
Speaker 2: like any other European country. You know, this is genuine progress.
Speaker 2: It's sad that it took the threat to NATO and
Speaker 2: the threat from Russia in the US to make it happen,
Speaker 2: But I think this is a genuine leap board as
Speaker 2: opposed to previous Chancellor Schultz. Site and benda changed, changing time.
Speaker 2: This is the real one right now.
Speaker 1: Generous conversation, Thank you so much. Folks. Look at Chad
Speaker 1: Boone and the rest at Peterson Institute for terrific thought
Speaker 1: provoking essays in the chaos of where we are now.