Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: Steven Mind the chaff of the White House Council of
Speaker 2: Economic Advisors joined just now for more. Steven, welcome back
Speaker 2: to the program, my friend. Let's talk about the President's
Speaker 2: message for House Republicans a little bit late to this morning.
Speaker 2: What's top of mind?
Speaker 1: Good morning, Thanks for having us. Well, what's top of
Speaker 1: mind is the Council of Economic Advisors just published a
Speaker 1: paper it's available on our website talking about all the
Speaker 1: good stuff this tax bill is going to do. It's
Speaker 1: going to boost GDP relatives not passing the bill by
Speaker 1: about four point two to five point two percent. It's
Speaker 1: going to create seven million jobs, and it's going to
Speaker 1: boost take on pay for a typical family of four
Speaker 1: by eight to thirteen thousand dollars. So these are really
Speaker 1: big effects relatives not passing the bill. It's imperative that
Speaker 1: we get this bill over the line.
Speaker 3: Steve, though, when I'm talking to individuals in Congress and
Speaker 3: then reading your white paper, you have a fifteen percent
Speaker 3: corporate tax rate in your white paper right now that's
Speaker 3: not being discussed in Congress. Do you think the President
Speaker 3: is going to bring that issue forward today?
Speaker 1: You know, I can't I can't prejudge the apple of
Speaker 1: exactly what these talks will do, but that fifteen percent
Speaker 1: corporate rate on domestic manufacturing will help at the margin,
Speaker 1: But it's not the it's not the core of the
Speaker 1: proposal that you know, were those numbers that I gave
Speaker 1: you will be pretty similar. If that doesn't make it
Speaker 1: into the final version, maybe it'll be a hair lower.
Speaker 1: But you have to keep in mind there's a lot
Speaker 1: of stuff going into this bill, and any single one
Speaker 1: of these, any single one of these measures isn't enough
Speaker 1: to sort of, you know, change those numbers a lot.
Speaker 1: Because all these measures to combine together to improve the
Speaker 1: investment opportunities in America, to encourage firms to invest, encourage
Speaker 1: firms to bind to invest, new equipment, new factories, all
Speaker 1: the stuff.
Speaker 3: There's a ton that's going into this bill, and that
Speaker 3: is why it's even so challenging for Speaker Johnson to
Speaker 3: get all these different factions on board. Something else you
Speaker 3: don't have in your paper, though, is what's going on
Speaker 3: in salt. Do you expect the salt cap to raise, say,
Speaker 3: thirty K forty K?
Speaker 1: Yeah, so I do expect there to be salt relief.
Speaker 1: The President has expressed support for this, and I think
Speaker 1: the President will deliver salt relief to American House. I
Speaker 1: don't know exactly what the number will shake out, And
Speaker 1: as you know, this is how negotiations happen. One side
Speaker 1: says what it wants, the other side says what it wants.
Speaker 1: And the President is one of the best negotiators in history,
Speaker 1: and he's shown over a career spanning decades that he
Speaker 1: can forge hundreds of deals, and I think he'll forge
Speaker 1: another one right in front of us. Now.
Speaker 4: There is a good element in this that you're focusing
Speaker 4: on growth, and I do think that that is important.
Speaker 4: You can't cut too much.
Speaker 2: You have to offer some sweeteners to.
Speaker 4: Keep growth going, to keep the revenue side of things going.
Speaker 4: I do wonder, though, how much of a constraint to
Speaker 4: debt side really is, given the fact that looks like
Speaker 4: things are getting a little yippie again in the bond market.
Speaker 1: Thanks so, I'm so glad you mentioned that, because the
Speaker 1: truth is that we do have a plan for deficit
Speaker 1: reduction and we will deliver lower deficits. It just happens
Speaker 1: that some of those things fall outside of the scoring process.
Speaker 1: How CBO scores the bill because of the rules that
Speaker 1: Congress gave it. And so, for example, we're going to
Speaker 1: get better growth as a result of this bill, as
Speaker 1: a result of deregulation, as a result of the trade
Speaker 1: deals we're negotiating. We get growth to three percent. That
Speaker 1: generates four trillion dollars additional revenues over the ten year
Speaker 1: win budget window above the CBO baseline. That doesn't go
Speaker 1: into the scoring process because CBO doesn't account for improvements
Speaker 1: and economic growth. We're going to bring in hundreds of
Speaker 1: billions of dollars of revenue through tariffs, right, that's another
Speaker 1: point off the deficit. We're going to bring interest rates
Speaker 1: down through expanding the supply side of the economy, through
Speaker 1: a more effective tax rates, through deregulation, through pushing the
Speaker 1: supply side out to meet the demand side. We get
Speaker 1: interest rates back to where they were pre COVID. That's
Speaker 1: another point off the deficit. And then there's cuts to waste, fraud,
Speaker 1: and abuse, some of which are in the bill, some
Speaker 1: of which are being accomplished by those that's another fifty
Speaker 1: two hundred basis points off the deficit. Worth of GDP.
Speaker 1: So I just gave you three to four percent of
Speaker 1: GDP off the deficit. None of it falls into the
Speaker 1: scoring system that the CBO is doing part of, Yet
Speaker 1: the conversation is for some reason dominated by CBO.
Speaker 4: Well, part of the reason why it's not being scored
Speaker 4: is because there are a lot of contingencies before you
Speaker 4: get to all of these realities. And I'll just pick
Speaker 4: out once, since we were talking about the bond market,
Speaker 4: the idea that yields go down as you increase the
Speaker 4: supply side of the economy, there's a pretty bumpy path
Speaker 4: to get there. Do you have enough faith in that
Speaker 4: that you ignore USGG three thirty year index GP, that
Speaker 4: you ignore the thirty year yield, you ignore the ten
Speaker 4: year yield in the mere term, and just have faith
Speaker 4: that longer term it will work out.
Speaker 1: Yeah. So, look, you know, we're still dealing with the
Speaker 1: lingering pressure, the lingering inflation pressures due to President Biden's
Speaker 1: reckless fiscal policies. But we are bringing those inflation pressures
Speaker 1: down through pushing out the suffice side of the economy.
Speaker 1: We've had now three inflation reports in a row below expectations.
Speaker 1: Core inflation on an annual basis is running the lowest
Speaker 1: level since March of twenty twenty one, and as we
Speaker 1: continue to control inflation, it will provide scope for interest
Speaker 1: rates to come down. I have no doubt about that.
Speaker 3: Well, Steve, you know, the American people are concerned about
Speaker 3: prices going up, the latest being Subaru. They're going to
Speaker 3: be increasing their vehicle prices citing quote market conditions aka
Speaker 3: concerns about what's going on with trade and tariffs. How
Speaker 3: can you say you're delivering on inflation when actually companies
Speaker 3: are warning that prices are going higher.
Speaker 1: Yeah. So look, you know, imports only fourteen percent of
Speaker 1: the economy. The ability of the ability of those types
Speaker 1: of things to really move the needle on inflation are limited.
Speaker 1: And what we saw in the tariffs in twenty eighteen
Speaker 1: twenty nineteen was zero macroeconomic evidence of inflation. What we've
Speaker 1: seen so far since the tariffs have been and don't forget,
Speaker 1: we've been introducing tariffs since day one of this administration,
Speaker 1: and what we've seen as tariffs have started to come
Speaker 1: up has been no real meaningful macroeconomic effect and inflation.
Speaker 1: And so while there can be volatility in the short run,
Speaker 1: I do believe that US importers have flexibility, but where
Speaker 1: they get stuff from, they can make stuff at home,
Speaker 1: they can import from other countries that treat us better,
Speaker 1: that right trade deals with us as opposed to countries
Speaker 1: that treat us worse, and that flexibility gives them leverage.
Speaker 1: That leverage allows them to force the burden of the
Speaker 1: tariffs on the other party on other countries. Now, in
Speaker 1: the fullness of time, that will happen. But in the
Speaker 1: short run, can there be volatility in prices in economic
Speaker 1: activity just as there were in financial markets, Yeah, it
Speaker 1: can happen. But over time we have the leverage and
Speaker 1: that will allow us to force the burden of the
Speaker 1: tariffs onto other countries.
Speaker 3: When you think about tariffs, do you think they're going
Speaker 3: to be revenue raising or do you think that we're
Speaker 3: going to get deals so the revenue raising won't be
Speaker 3: as high? And do you have a number within the
Speaker 3: White House that you're discussing which how much you want
Speaker 3: to get in terms of revenue raises to offset this
Speaker 3: tax bill?
Speaker 1: Sure? So, First of all, what we've seen with some
Speaker 1: of the deals we've made so far is that there's
Speaker 1: still a ten percent tariff in place, and in the
Speaker 1: case of China, the other there's other tariffs too, the
Speaker 1: fentanyl tariffs, the tariffs from the first term as well,
Speaker 1: And so even if we strike deals, odds are will
Speaker 1: still be collecting some tariff revenue. But even if we
Speaker 1: end up bringing those tariff rates below or down to zero,
Speaker 1: you know, that means more economic activity. If we're writing
Speaker 1: deals because we're succeeding in opening foreign markets to our exports,
Speaker 1: allowing American firms to sell into foreign markets the way
Speaker 1: we allow foreign firms to sell into our market, that
Speaker 1: means more economic activity here because of more exports. And
Speaker 1: if there's more economic activity, more exports coming out of
Speaker 1: America going to foreign markets, that's more income that gets
Speaker 1: taxed at the personal level, at the corporate level, and
Speaker 1: that's lots more revenue too. So either way you slice it,
Speaker 1: we get revenue from tariffs or wet revenue from higher
Speaker 1: GDP because we're selling more to other countries.
Speaker 2: Sounds like win win, Stephen. Let's hyper ends up that way.
Speaker 2: Stephen Marin there the White House Council of Economic Advisors
Speaker 2: Chair