Speaker 1: Bloomberg Audio Studios, podcasts, radio news. John Paulson of Paulson
Speaker 1: and Co. And of course an informal economic advisor to
Speaker 1: former President Trump and a large donor to the Trump
Speaker 1: campaign as well. And John, thank you for joining because
Speaker 1: you are actually one of the people to ask a
Speaker 1: question to the former president at this Economic Club of
Speaker 1: New York event, and you asked about the deficit. Yes,
Speaker 1: he proposed not only making his twenty seventeen tax cuts permanent,
Speaker 1: he also proposed lowering those corporate taxes to fifteen percent.
Speaker 1: In this scenario, how concerned are you about the US deficit?
Speaker 2: I'm not that concerned because the reduction in corporate taxes
Speaker 2: was just for a segment of the corporate population, and
Speaker 2: it concern those that are involved in US manufacturing overall. Currently,
Speaker 2: we have about a two trillion dollar deficit under the
Speaker 2: current administration. So President Trump feels confident that could be
Speaker 2: reduced several ways. One is through the revenue earned from tariffs,
Speaker 2: which could be substantial. Two is by cutting wasteful spending.
Speaker 2: The most important item he alluded to was the Green
Speaker 2: New Deal, which over time adds up to somewhere around
Speaker 2: a trillion in spending, and the third is not providing
Speaker 2: federal benefits to illegal immigrants. So net, these revenue generation
Speaker 2: and savings will offset any minor adjustments to the tax code.
Speaker 1: But the way that it worked out in the past, right,
Speaker 1: you have the Committee for a Responsible Federal Budget, You
Speaker 1: have the Tax Foundation, the Congressional Budget Office all saying
Speaker 1: that the Trump tax cuts would actually cost more than
Speaker 1: ten point five dollars over a decade, which means that
Speaker 1: all of the tax cuts proposed really don't add up
Speaker 1: to really filling in the hole from the tariffs that
Speaker 1: he recommends. Yeah.
Speaker 2: I haven't seen those particular studies. I really don't know
Speaker 2: what they're referring to.
Speaker 1: So at the end of the day, as well, how
Speaker 1: do you think that he could really gather the American populace,
Speaker 1: the American worker that has become so important in this
Speaker 1: election cycle with a recommendation of cutting taxes on corporations
Speaker 1: rather than helping out the American worker.
Speaker 2: Yeah, I don't think he said he would cut taxes
Speaker 2: generally against corporations. He's not raising taxes. What he wants
Speaker 2: to do is make his previous tax policy permanent and
Speaker 2: leave the basic corporate tax rate at twenty one percent.
Speaker 2: The tax cuts that he proposed target the Americans that
Speaker 2: would need it most. One is well known now no
Speaker 2: tax on tips, which would be a great benefit to
Speaker 2: service workers and allowed them to keep more of their income. Second,
Speaker 2: was not taxing social Security benefits. So many people rely
Speaker 2: on Social Security benefits for most of their income, so
Speaker 2: that could be a very significant help in the after
Speaker 2: tax earnings of recipients.
Speaker 1: Let's take a step back and also ask just a
Speaker 1: broader question here. You have obviously been a very large
Speaker 1: supporter of the former president in this cycle. What underpins
Speaker 1: your faith in him?
Speaker 2: Well, first of all, his policies which under his administration
Speaker 2: were very successful. While people or these studies referred to
Speaker 2: are concerned about potential inflation or deficits, under his four years,
Speaker 2: the average annual inflation was only one point nine percent,
Speaker 2: interest rates were very low, and oil prices were very low,
Speaker 2: and real wages for the average worker increased. Under the
Speaker 2: Biden administration, which is supposed to be for the average worker,
Speaker 2: real wages declined because inflation was so high, interest rates
Speaker 2: are much higher, and oil prices are much higher. So
Speaker 2: when you look at the benefits four years under Trump
Speaker 2: or four years under Biden. The average American has done
Speaker 2: much better under Trump.
Speaker 1: I do have a question about the energy policy as well,
Speaker 1: because he did say today that oil production will increase
Speaker 1: he said fourfold if he takes office again. But the
Speaker 1: US is already producing more oil than ever, and the
Speaker 1: surplus oil could end up being sold overseas, and it's
Speaker 1: very unlikely that companies will drill more at this point
Speaker 1: in time. Why spend so much money on this policy?
Speaker 2: I don't think Trump would be spending money. He said
Speaker 2: that he would release federal lands for more drilling, that
Speaker 2: he would reduce regulations and reduce the current moratorium on
Speaker 2: permitting new LNG facilities, So that would be a boon
Speaker 2: to US production and a boom for US export. So
Speaker 2: exporting energy is very positive for our economy.
Speaker 1: I would love for you to also hone in here
Speaker 1: on some of the commentary that was made this week.
Speaker 1: You may have seen the Goldman Sachs analysts had said
Speaker 1: that economic output could take a hit under a future
Speaker 1: Trump administration. They said, and I'm quoting their report, that
Speaker 1: the hit to growth from tariffs and tighter immigration policy
Speaker 1: would outweigh the positive fiscal impulse. What do you say
Speaker 1: to them, I think the.
Speaker 2: Immigration policy is a negative for our economy. If you
Speaker 2: look at New York City, we have hundreds of thousands
Speaker 2: of immigrants which are costing the economy valuable resources that
Speaker 2: existing taxpayers are paying for. So we have to provide
Speaker 2: healthcare benefits, housing benas of it's food benefits, and these
Speaker 2: workers aren't allowed to work. So I don't think the
Speaker 2: illegal immigration has been a benefit to American workers. It
Speaker 2: increased the supply of cheap labor, which held down wage
Speaker 2: growth for American citizens.
Speaker 1: The wage growth has been part of the inflationary story,
Speaker 1: has it not.
Speaker 2: Wage growth has been grown less than inflation. That's why
Speaker 2: real wages have declined.
Speaker 1: I also want to talk about interest rates, because at
Speaker 1: the end of the day, there has been a lot
Speaker 1: of concern on Wall Street about what a Trump administration
Speaker 1: would mean when it comes to the Federal Reserve. There was,
Speaker 1: of course, that Wall Street Journal report a number of
Speaker 1: months ago that question whether the Federal Reserve would remain independent,
Speaker 1: And then we also had the former president commenting in
Speaker 1: an interview with Bloomberg as well, saying that the president
Speaker 1: can certainly be talking about interest rates because he has
Speaker 1: good instincts. That doesn't mean he's calling the shot, but
Speaker 1: it does mean he should have a right to talk
Speaker 1: about it like anyone else. Do you share that concern
Speaker 1: that he could potentially damage the reputation of the Federal
Speaker 1: Reserve as an independent organization.
Speaker 2: No, I don't share that concern. I think it is
Speaker 2: important for the President and the White House and the
Speaker 2: Treasurer Secretary to comment on economic policy, including interest rate policy,
Speaker 2: but ultimately the decision is up to the FED. But
Speaker 2: it's important for the Fed to hear other viewpoints and
Speaker 2: to make sure the Fed policies then sync with overall
Speaker 2: physcal policy.
Speaker 1: To that end, what do you believe should happen with
Speaker 1: interest rate policy through the end of the WORL.
Speaker 2: Well, when you look at inflation now is somewhere around
Speaker 2: three percent, interest rates are five percent, so real interest
Speaker 2: rates are too high. So the Fed I think, waited
Speaker 2: too long to bring interest rates down. So I think
Speaker 2: that likely course of action is going forward is the
Speaker 2: Fed will start to cut interest rates.
Speaker 1: What should they be by the end of twenty twenty five.
Speaker 2: It's difficult to predict, but my best estimate would be
Speaker 2: around three percent, perhaps two and a half percent.
Speaker 1: And what would that mean in terms of ripple effects
Speaker 1: across the economy.
Speaker 2: Well, it's generally beneficial. The major cost when you get
Speaker 2: a mortgage is the interest rates. So if mortgage, if
Speaker 2: the cost of mortgages come down, the cost of buying
Speaker 2: a home would also come down, and that makes a
Speaker 2: housing affordability go up, and you know that would spur
Speaker 2: a new housing development.
Speaker 1: So another thing that the former president had tried to
Speaker 1: do in office the last time around was privatized Danny Freddy,
Speaker 1: is that something you think you would be able to
Speaker 1: accomplish or as talking about accomplishing in a potential next term.
Speaker 2: I think it makes sense. The intention of the Conservative
Speaker 2: ship was to temporarily put Fanny and Freddy in conservativeship
Speaker 2: while they built up their capital. Initially, all the earnings
Speaker 2: of Fanny and Freddy were swept out by the government,
Speaker 2: but after Steve Manuchin left office he no longer allowed
Speaker 2: that policy, and the GSS have been rebuilding capitals. The
Speaker 2: narrative position that where they're fairly well capitalized, which would
Speaker 2: make privatization logical.
Speaker 1: I do have to ask you the one thing that
Speaker 1: he mentioned you very directly about also in the course
Speaker 1: of his speech today, which was that there's an idea
Speaker 1: about an American sovereign wealth fund. How realistic is that
Speaker 1: idea and how much have you built out that idea
Speaker 1: with the former president.
Speaker 2: Well, we haven't flushed it out, but clearly savings within
Speaker 2: a country or a measure of a country's strength. So
Speaker 2: you have countries like Norway, the Middle least to the
Speaker 2: Asian countries a very large sovereign wealth funds, and I
Speaker 2: think that's a good model to follow. So you have
Speaker 2: to start somewhere. So I think the idea of a
Speaker 2: sovereign wealth fund for American savings it's a good one.
Speaker 1: Who else is involved in a kind of conversation.
Speaker 2: Like that, We haven't discussed it in detail at this point.
Speaker 1: And how big could it be at the onset?
Speaker 2: Well, you know, you look at the Norwegian fund, it's
Speaker 2: over a trillion dollars, well over a trillion. Saudi Arabia
Speaker 2: has very large funds, Abu Dhabi has large funds. So
Speaker 2: it'll be great to see America join this party. And
Speaker 2: instead of having dead had savings.
Speaker 1: Of a trillion dollar sovereign well fund.
Speaker 2: Well would be over time larger than any existing funds.
Speaker 1: John we thank you so much for your time today.
Speaker 1: I know it's a very busy day off the heels
Speaker 1: really of that former President Trump's speech today at the
Speaker 1: Economic Club of New York. We thank you, thank you
Speaker 1: very much.