1 00:00:02,400 --> 00:00:08,320 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. John Paulson of Paulson 2 00:00:08,360 --> 00:00:11,559 Speaker 1: and Co. And of course an informal economic advisor to 3 00:00:11,800 --> 00:00:15,440 Speaker 1: former President Trump and a large donor to the Trump 4 00:00:15,520 --> 00:00:19,600 Speaker 1: campaign as well. And John, thank you for joining because 5 00:00:19,640 --> 00:00:21,439 Speaker 1: you are actually one of the people to ask a 6 00:00:21,520 --> 00:00:24,720 Speaker 1: question to the former president at this Economic Club of 7 00:00:24,920 --> 00:00:28,000 Speaker 1: New York event, and you asked about the deficit. Yes, 8 00:00:28,080 --> 00:00:32,120 Speaker 1: he proposed not only making his twenty seventeen tax cuts permanent, 9 00:00:32,479 --> 00:00:37,000 Speaker 1: he also proposed lowering those corporate taxes to fifteen percent. 10 00:00:37,440 --> 00:00:41,040 Speaker 1: In this scenario, how concerned are you about the US deficit? 11 00:00:41,520 --> 00:00:46,280 Speaker 2: I'm not that concerned because the reduction in corporate taxes 12 00:00:46,760 --> 00:00:50,360 Speaker 2: was just for a segment of the corporate population, and 13 00:00:50,400 --> 00:00:57,200 Speaker 2: it concern those that are involved in US manufacturing overall. Currently, 14 00:00:57,280 --> 00:01:01,240 Speaker 2: we have about a two trillion dollar deficit under the 15 00:01:01,280 --> 00:01:05,880 Speaker 2: current administration. So President Trump feels confident that could be 16 00:01:05,959 --> 00:01:13,560 Speaker 2: reduced several ways. One is through the revenue earned from tariffs, 17 00:01:14,000 --> 00:01:19,400 Speaker 2: which could be substantial. Two is by cutting wasteful spending. 18 00:01:20,000 --> 00:01:24,240 Speaker 2: The most important item he alluded to was the Green 19 00:01:24,319 --> 00:01:27,520 Speaker 2: New Deal, which over time adds up to somewhere around 20 00:01:27,560 --> 00:01:32,120 Speaker 2: a trillion in spending, and the third is not providing 21 00:01:32,520 --> 00:01:40,080 Speaker 2: federal benefits to illegal immigrants. So net, these revenue generation 22 00:01:40,800 --> 00:01:47,480 Speaker 2: and savings will offset any minor adjustments to the tax code. 23 00:01:47,640 --> 00:01:50,120 Speaker 1: But the way that it worked out in the past, right, 24 00:01:50,240 --> 00:01:53,120 Speaker 1: you have the Committee for a Responsible Federal Budget, You 25 00:01:53,160 --> 00:01:56,200 Speaker 1: have the Tax Foundation, the Congressional Budget Office all saying 26 00:01:56,240 --> 00:01:58,520 Speaker 1: that the Trump tax cuts would actually cost more than 27 00:01:58,560 --> 00:02:02,840 Speaker 1: ten point five dollars over a decade, which means that 28 00:02:02,960 --> 00:02:06,560 Speaker 1: all of the tax cuts proposed really don't add up 29 00:02:06,800 --> 00:02:10,120 Speaker 1: to really filling in the hole from the tariffs that 30 00:02:10,160 --> 00:02:11,440 Speaker 1: he recommends. Yeah. 31 00:02:11,480 --> 00:02:14,480 Speaker 2: I haven't seen those particular studies. I really don't know 32 00:02:14,520 --> 00:02:15,400 Speaker 2: what they're referring to. 33 00:02:16,080 --> 00:02:18,200 Speaker 1: So at the end of the day, as well, how 34 00:02:18,200 --> 00:02:21,239 Speaker 1: do you think that he could really gather the American populace, 35 00:02:21,320 --> 00:02:24,200 Speaker 1: the American worker that has become so important in this 36 00:02:24,320 --> 00:02:29,160 Speaker 1: election cycle with a recommendation of cutting taxes on corporations 37 00:02:29,720 --> 00:02:31,960 Speaker 1: rather than helping out the American worker. 38 00:02:32,080 --> 00:02:34,960 Speaker 2: Yeah, I don't think he said he would cut taxes 39 00:02:35,440 --> 00:02:39,800 Speaker 2: generally against corporations. He's not raising taxes. What he wants 40 00:02:39,880 --> 00:02:44,240 Speaker 2: to do is make his previous tax policy permanent and 41 00:02:44,320 --> 00:02:48,400 Speaker 2: leave the basic corporate tax rate at twenty one percent. 42 00:02:49,160 --> 00:02:54,400 Speaker 2: The tax cuts that he proposed target the Americans that 43 00:02:54,440 --> 00:02:57,800 Speaker 2: would need it most. One is well known now no 44 00:02:57,960 --> 00:03:01,240 Speaker 2: tax on tips, which would be a great benefit to 45 00:03:01,320 --> 00:03:05,440 Speaker 2: service workers and allowed them to keep more of their income. Second, 46 00:03:05,680 --> 00:03:10,360 Speaker 2: was not taxing social Security benefits. So many people rely 47 00:03:10,520 --> 00:03:14,240 Speaker 2: on Social Security benefits for most of their income, so 48 00:03:14,280 --> 00:03:17,000 Speaker 2: that could be a very significant help in the after 49 00:03:17,080 --> 00:03:18,680 Speaker 2: tax earnings of recipients. 50 00:03:18,919 --> 00:03:20,960 Speaker 1: Let's take a step back and also ask just a 51 00:03:20,960 --> 00:03:23,280 Speaker 1: broader question here. You have obviously been a very large 52 00:03:23,400 --> 00:03:26,640 Speaker 1: supporter of the former president in this cycle. What underpins 53 00:03:26,680 --> 00:03:27,480 Speaker 1: your faith in him? 54 00:03:28,360 --> 00:03:33,359 Speaker 2: Well, first of all, his policies which under his administration 55 00:03:33,440 --> 00:03:37,880 Speaker 2: were very successful. While people or these studies referred to 56 00:03:37,920 --> 00:03:42,720 Speaker 2: are concerned about potential inflation or deficits, under his four years, 57 00:03:43,120 --> 00:03:46,680 Speaker 2: the average annual inflation was only one point nine percent, 58 00:03:47,200 --> 00:03:50,800 Speaker 2: interest rates were very low, and oil prices were very low, 59 00:03:51,200 --> 00:03:56,680 Speaker 2: and real wages for the average worker increased. Under the 60 00:03:56,720 --> 00:04:03,360 Speaker 2: Biden administration, which is supposed to be for the average worker, 61 00:04:03,840 --> 00:04:09,440 Speaker 2: real wages declined because inflation was so high, interest rates 62 00:04:09,440 --> 00:04:13,000 Speaker 2: are much higher, and oil prices are much higher. So 63 00:04:13,040 --> 00:04:16,160 Speaker 2: when you look at the benefits four years under Trump 64 00:04:16,680 --> 00:04:20,080 Speaker 2: or four years under Biden. The average American has done 65 00:04:20,160 --> 00:04:21,920 Speaker 2: much better under Trump. 66 00:04:22,160 --> 00:04:24,680 Speaker 1: I do have a question about the energy policy as well, 67 00:04:24,720 --> 00:04:27,720 Speaker 1: because he did say today that oil production will increase 68 00:04:28,040 --> 00:04:31,800 Speaker 1: he said fourfold if he takes office again. But the 69 00:04:31,920 --> 00:04:35,719 Speaker 1: US is already producing more oil than ever, and the 70 00:04:35,760 --> 00:04:39,760 Speaker 1: surplus oil could end up being sold overseas, and it's 71 00:04:39,920 --> 00:04:42,599 Speaker 1: very unlikely that companies will drill more at this point 72 00:04:42,600 --> 00:04:45,240 Speaker 1: in time. Why spend so much money on this policy? 73 00:04:45,640 --> 00:04:49,120 Speaker 2: I don't think Trump would be spending money. He said 74 00:04:49,200 --> 00:04:53,960 Speaker 2: that he would release federal lands for more drilling, that 75 00:04:54,120 --> 00:04:58,800 Speaker 2: he would reduce regulations and reduce the current moratorium on 76 00:04:59,000 --> 00:05:04,279 Speaker 2: permitting new LNG facilities, So that would be a boon 77 00:05:04,440 --> 00:05:07,840 Speaker 2: to US production and a boom for US export. So 78 00:05:08,240 --> 00:05:11,440 Speaker 2: exporting energy is very positive for our economy. 79 00:05:12,120 --> 00:05:14,960 Speaker 1: I would love for you to also hone in here 80 00:05:15,120 --> 00:05:17,040 Speaker 1: on some of the commentary that was made this week. 81 00:05:17,240 --> 00:05:20,280 Speaker 1: You may have seen the Goldman Sachs analysts had said 82 00:05:20,279 --> 00:05:22,880 Speaker 1: that economic output could take a hit under a future 83 00:05:22,880 --> 00:05:26,599 Speaker 1: Trump administration. They said, and I'm quoting their report, that 84 00:05:26,640 --> 00:05:29,760 Speaker 1: the hit to growth from tariffs and tighter immigration policy 85 00:05:30,200 --> 00:05:33,680 Speaker 1: would outweigh the positive fiscal impulse. What do you say 86 00:05:33,680 --> 00:05:35,000 Speaker 1: to them, I think the. 87 00:05:36,480 --> 00:05:42,880 Speaker 2: Immigration policy is a negative for our economy. If you 88 00:05:42,920 --> 00:05:46,479 Speaker 2: look at New York City, we have hundreds of thousands 89 00:05:46,520 --> 00:05:52,800 Speaker 2: of immigrants which are costing the economy valuable resources that 90 00:05:53,240 --> 00:05:56,960 Speaker 2: existing taxpayers are paying for. So we have to provide 91 00:05:58,279 --> 00:06:02,200 Speaker 2: healthcare benefits, housing benas of it's food benefits, and these 92 00:06:02,240 --> 00:06:05,719 Speaker 2: workers aren't allowed to work. So I don't think the 93 00:06:05,760 --> 00:06:10,159 Speaker 2: illegal immigration has been a benefit to American workers. It 94 00:06:10,240 --> 00:06:14,000 Speaker 2: increased the supply of cheap labor, which held down wage 95 00:06:14,040 --> 00:06:15,960 Speaker 2: growth for American citizens. 96 00:06:16,279 --> 00:06:19,080 Speaker 1: The wage growth has been part of the inflationary story, 97 00:06:19,120 --> 00:06:19,520 Speaker 1: has it not. 98 00:06:22,520 --> 00:06:26,800 Speaker 2: Wage growth has been grown less than inflation. That's why 99 00:06:26,920 --> 00:06:28,440 Speaker 2: real wages have declined. 100 00:06:29,760 --> 00:06:33,240 Speaker 1: I also want to talk about interest rates, because at 101 00:06:33,240 --> 00:06:35,600 Speaker 1: the end of the day, there has been a lot 102 00:06:35,640 --> 00:06:38,200 Speaker 1: of concern on Wall Street about what a Trump administration 103 00:06:38,240 --> 00:06:41,040 Speaker 1: would mean when it comes to the Federal Reserve. There was, 104 00:06:41,080 --> 00:06:43,159 Speaker 1: of course, that Wall Street Journal report a number of 105 00:06:43,200 --> 00:06:46,480 Speaker 1: months ago that question whether the Federal Reserve would remain independent, 106 00:06:46,880 --> 00:06:49,760 Speaker 1: And then we also had the former president commenting in 107 00:06:49,800 --> 00:06:52,039 Speaker 1: an interview with Bloomberg as well, saying that the president 108 00:06:52,080 --> 00:06:55,680 Speaker 1: can certainly be talking about interest rates because he has 109 00:06:55,760 --> 00:06:58,400 Speaker 1: good instincts. That doesn't mean he's calling the shot, but 110 00:06:58,440 --> 00:07:00,200 Speaker 1: it does mean he should have a right to talk 111 00:07:00,240 --> 00:07:03,920 Speaker 1: about it like anyone else. Do you share that concern 112 00:07:04,400 --> 00:07:07,280 Speaker 1: that he could potentially damage the reputation of the Federal 113 00:07:07,320 --> 00:07:09,680 Speaker 1: Reserve as an independent organization. 114 00:07:10,160 --> 00:07:12,320 Speaker 2: No, I don't share that concern. I think it is 115 00:07:12,400 --> 00:07:15,240 Speaker 2: important for the President and the White House and the 116 00:07:15,280 --> 00:07:21,360 Speaker 2: Treasurer Secretary to comment on economic policy, including interest rate policy, 117 00:07:21,680 --> 00:07:24,520 Speaker 2: but ultimately the decision is up to the FED. But 118 00:07:24,600 --> 00:07:29,720 Speaker 2: it's important for the Fed to hear other viewpoints and 119 00:07:29,760 --> 00:07:33,440 Speaker 2: to make sure the Fed policies then sync with overall 120 00:07:33,480 --> 00:07:34,440 Speaker 2: physcal policy. 121 00:07:34,680 --> 00:07:37,000 Speaker 1: To that end, what do you believe should happen with 122 00:07:37,120 --> 00:07:38,400 Speaker 1: interest rate policy through the end of the WORL. 123 00:07:38,480 --> 00:07:41,840 Speaker 2: Well, when you look at inflation now is somewhere around 124 00:07:41,920 --> 00:07:45,800 Speaker 2: three percent, interest rates are five percent, so real interest 125 00:07:45,920 --> 00:07:48,920 Speaker 2: rates are too high. So the Fed I think, waited 126 00:07:48,960 --> 00:07:51,800 Speaker 2: too long to bring interest rates down. So I think 127 00:07:52,000 --> 00:07:55,480 Speaker 2: that likely course of action is going forward is the 128 00:07:55,560 --> 00:07:57,880 Speaker 2: Fed will start to cut interest rates. 129 00:07:57,920 --> 00:07:59,960 Speaker 1: What should they be by the end of twenty twenty five. 130 00:08:00,800 --> 00:08:03,680 Speaker 2: It's difficult to predict, but my best estimate would be 131 00:08:03,720 --> 00:08:06,600 Speaker 2: around three percent, perhaps two and a half percent. 132 00:08:07,080 --> 00:08:09,240 Speaker 1: And what would that mean in terms of ripple effects 133 00:08:09,280 --> 00:08:10,200 Speaker 1: across the economy. 134 00:08:10,200 --> 00:08:13,120 Speaker 2: Well, it's generally beneficial. The major cost when you get 135 00:08:13,120 --> 00:08:16,360 Speaker 2: a mortgage is the interest rates. So if mortgage, if 136 00:08:16,600 --> 00:08:21,080 Speaker 2: the cost of mortgages come down, the cost of buying 137 00:08:21,080 --> 00:08:24,320 Speaker 2: a home would also come down, and that makes a 138 00:08:24,480 --> 00:08:29,080 Speaker 2: housing affordability go up, and you know that would spur 139 00:08:29,640 --> 00:08:31,040 Speaker 2: a new housing development. 140 00:08:31,440 --> 00:08:35,040 Speaker 1: So another thing that the former president had tried to 141 00:08:35,080 --> 00:08:39,040 Speaker 1: do in office the last time around was privatized Danny Freddy, 142 00:08:39,600 --> 00:08:41,160 Speaker 1: is that something you think you would be able to 143 00:08:41,200 --> 00:08:44,040 Speaker 1: accomplish or as talking about accomplishing in a potential next term. 144 00:08:44,080 --> 00:08:47,080 Speaker 2: I think it makes sense. The intention of the Conservative 145 00:08:47,120 --> 00:08:53,640 Speaker 2: ship was to temporarily put Fanny and Freddy in conservativeship 146 00:08:53,720 --> 00:08:58,040 Speaker 2: while they built up their capital. Initially, all the earnings 147 00:08:58,040 --> 00:09:01,480 Speaker 2: of Fanny and Freddy were swept out by the government, 148 00:09:01,960 --> 00:09:06,840 Speaker 2: but after Steve Manuchin left office he no longer allowed 149 00:09:06,840 --> 00:09:12,720 Speaker 2: that policy, and the GSS have been rebuilding capitals. The 150 00:09:12,800 --> 00:09:16,520 Speaker 2: narrative position that where they're fairly well capitalized, which would 151 00:09:16,520 --> 00:09:18,400 Speaker 2: make privatization logical. 152 00:09:18,920 --> 00:09:21,200 Speaker 1: I do have to ask you the one thing that 153 00:09:21,240 --> 00:09:24,520 Speaker 1: he mentioned you very directly about also in the course 154 00:09:24,520 --> 00:09:27,640 Speaker 1: of his speech today, which was that there's an idea 155 00:09:27,840 --> 00:09:32,320 Speaker 1: about an American sovereign wealth fund. How realistic is that 156 00:09:32,559 --> 00:09:35,840 Speaker 1: idea and how much have you built out that idea 157 00:09:35,880 --> 00:09:36,800 Speaker 1: with the former president. 158 00:09:37,120 --> 00:09:40,839 Speaker 2: Well, we haven't flushed it out, but clearly savings within 159 00:09:40,880 --> 00:09:44,360 Speaker 2: a country or a measure of a country's strength. So 160 00:09:44,400 --> 00:09:48,320 Speaker 2: you have countries like Norway, the Middle least to the 161 00:09:48,360 --> 00:09:51,600 Speaker 2: Asian countries a very large sovereign wealth funds, and I 162 00:09:51,640 --> 00:09:53,960 Speaker 2: think that's a good model to follow. So you have 163 00:09:54,040 --> 00:09:57,000 Speaker 2: to start somewhere. So I think the idea of a 164 00:09:57,080 --> 00:10:00,760 Speaker 2: sovereign wealth fund for American savings it's a good one. 165 00:10:01,160 --> 00:10:04,400 Speaker 1: Who else is involved in a kind of conversation. 166 00:10:04,080 --> 00:10:07,360 Speaker 2: Like that, We haven't discussed it in detail at this point. 167 00:10:07,920 --> 00:10:10,240 Speaker 1: And how big could it be at the onset? 168 00:10:10,640 --> 00:10:13,679 Speaker 2: Well, you know, you look at the Norwegian fund, it's 169 00:10:13,720 --> 00:10:17,800 Speaker 2: over a trillion dollars, well over a trillion. Saudi Arabia 170 00:10:17,960 --> 00:10:21,520 Speaker 2: has very large funds, Abu Dhabi has large funds. So 171 00:10:21,520 --> 00:10:24,360 Speaker 2: it'll be great to see America join this party. And 172 00:10:24,440 --> 00:10:26,920 Speaker 2: instead of having dead had savings. 173 00:10:26,559 --> 00:10:28,440 Speaker 1: Of a trillion dollar sovereign well fund. 174 00:10:28,800 --> 00:10:33,040 Speaker 2: Well would be over time larger than any existing funds. 175 00:10:33,600 --> 00:10:35,480 Speaker 1: John we thank you so much for your time today. 176 00:10:35,480 --> 00:10:37,480 Speaker 1: I know it's a very busy day off the heels 177 00:10:37,559 --> 00:10:41,120 Speaker 1: really of that former President Trump's speech today at the 178 00:10:41,200 --> 00:10:43,160 Speaker 1: Economic Club of New York. We thank you, thank you 179 00:10:43,280 --> 00:10:43,680 Speaker 1: very much.