1 00:00:00,080 --> 00:00:13,800 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,760 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Professor 5 00:00:28,760 --> 00:00:31,040 Speaker 1: Bowder with us right now, Villain Bowder of City Group, 6 00:00:31,480 --> 00:00:35,680 Speaker 1: and of course our chief economist, Villain. The emotion of 7 00:00:35,760 --> 00:00:38,479 Speaker 1: last week of all sorts of people saying this is 8 00:00:38,560 --> 00:00:42,040 Speaker 1: tax legislation for the donor class, Martin Feldstein of Harvard 9 00:00:42,080 --> 00:00:45,200 Speaker 1: really pushed back against that. He feels there's some real 10 00:00:45,280 --> 00:00:49,479 Speaker 1: benefits to what's been proposed so far. Do you study 11 00:00:49,760 --> 00:00:52,880 Speaker 1: or is it in the textbooks this idea of trickle 12 00:00:53,000 --> 00:00:58,440 Speaker 1: down economics. Is it a valid economic thing that it's 13 00:00:58,440 --> 00:01:02,320 Speaker 1: gonna trickle down and create jobs for America? Well, there 14 00:01:02,360 --> 00:01:08,759 Speaker 1: are uh tax measures, especially corporate tax measures, that if 15 00:01:08,800 --> 00:01:13,520 Speaker 1: properly implemented, would boost capital expenditure and so boost jobs 16 00:01:13,560 --> 00:01:19,600 Speaker 1: and real wages. Unfortunately, this particular set of actions, the 17 00:01:19,680 --> 00:01:22,680 Speaker 1: cut in the corporate tax, in a world in which 18 00:01:22,680 --> 00:01:28,479 Speaker 1: you're also moving towards full expensing of capital expenditure. Economic 19 00:01:28,520 --> 00:01:31,520 Speaker 1: Charity tells you that the corporate tax cut itself is 20 00:01:31,640 --> 00:01:37,440 Speaker 1: pure distributions, will have zero impact on investment, capital, intensity 21 00:01:37,440 --> 00:01:42,480 Speaker 1: of production, and real wages. The move towards completing the 22 00:01:42,600 --> 00:01:48,000 Speaker 1: full expension program that will boost capital expenditure, but the 23 00:01:48,040 --> 00:01:52,520 Speaker 1: tax cut itself is of no significance from the point 24 00:01:52,640 --> 00:01:56,520 Speaker 1: of view of of boosting boosting capital expenditure. There are 25 00:01:56,560 --> 00:02:00,880 Speaker 1: other measures of course personal income tax uh cuts, but 26 00:02:01,040 --> 00:02:07,040 Speaker 1: also painful things like the reduction or abolition of of salt. 27 00:02:08,000 --> 00:02:11,720 Speaker 1: So it is a very mixed package. I would you 28 00:02:12,000 --> 00:02:15,200 Speaker 1: not give it particularly high marks. Tell them, do you 29 00:02:15,240 --> 00:02:18,640 Speaker 1: see a US labor market as anyone there full employment? No, 30 00:02:18,840 --> 00:02:23,920 Speaker 1: not yet, simply because the labor force participation rate, even 31 00:02:24,000 --> 00:02:28,360 Speaker 1: age adjusted, uh you know, has still got quite a 32 00:02:28,360 --> 00:02:33,480 Speaker 1: bit further to go. And remember the historical age corrections 33 00:02:33,480 --> 00:02:36,919 Speaker 1: for labor force participation that we made are getting out 34 00:02:36,960 --> 00:02:40,520 Speaker 1: of date. Look at Japan, where of course an extreme 35 00:02:40,560 --> 00:02:43,920 Speaker 1: demographic situation, but were the old now working into their 36 00:02:43,960 --> 00:02:48,280 Speaker 1: seventies and so I think that is still significant slack 37 00:02:48,560 --> 00:02:51,560 Speaker 1: in the in the labor market. So I wouldn't expect 38 00:02:51,680 --> 00:02:57,600 Speaker 1: any uh no material up at pressure on your labor 39 00:02:57,600 --> 00:02:59,760 Speaker 1: because over the next civilian we spent the last few 40 00:02:59,840 --> 00:03:02,560 Speaker 1: years trying to work out where the nyery rate actually 41 00:03:02,680 --> 00:03:05,720 Speaker 1: is unemployment. Some people thought it was in the force. 42 00:03:05,919 --> 00:03:07,840 Speaker 1: They thought it was in the face before that, and 43 00:03:07,880 --> 00:03:11,000 Speaker 1: now I think and it's in the threes. Where is it? Well, 44 00:03:11,200 --> 00:03:14,440 Speaker 1: I have absolutely no idea. All I know is that 45 00:03:14,480 --> 00:03:17,720 Speaker 1: the unemployment metric you're losing you're looking at, since it 46 00:03:17,800 --> 00:03:22,200 Speaker 1: doesn't control for labor force participation, activity and activity, is 47 00:03:22,280 --> 00:03:25,280 Speaker 1: really completely un informative. So let's look at you six 48 00:03:25,360 --> 00:03:29,280 Speaker 1: or some broader measures, uh, that allow for the fact 49 00:03:29,320 --> 00:03:33,519 Speaker 1: that a lot of marginal, detached or even seriously detached 50 00:03:33,639 --> 00:03:37,840 Speaker 1: workers can be reabsorbed dragged back into the labor force 51 00:03:38,200 --> 00:03:41,200 Speaker 1: within This is the debate of six months ago, which 52 00:03:41,280 --> 00:03:44,880 Speaker 1: is many economists will suggest we've seen a nice transference 53 00:03:45,280 --> 00:03:49,600 Speaker 1: of part time labor over to full time jobs. A 54 00:03:49,640 --> 00:03:51,760 Speaker 1: lot of people say that, John and I get a 55 00:03:51,800 --> 00:03:55,280 Speaker 1: lot of mail that says, uh, maybe not. Is it 56 00:03:55,480 --> 00:03:59,360 Speaker 1: part time America? Still No, there have been has been 57 00:03:59,360 --> 00:04:02,040 Speaker 1: an increase in full time jobs as well. I don't 58 00:04:02,080 --> 00:04:04,360 Speaker 1: think there has been a huge reduction in part time jobs, 59 00:04:04,400 --> 00:04:07,520 Speaker 1: but there has been no movement of people from no 60 00:04:07,680 --> 00:04:09,920 Speaker 1: work into part time work. And for part time work 61 00:04:09,920 --> 00:04:14,520 Speaker 1: and the full time works. Undoubtedly the labor market is improving, 62 00:04:14,760 --> 00:04:17,719 Speaker 1: but of course a lot of these margin detached workers 63 00:04:17,720 --> 00:04:19,960 Speaker 1: that are now working full time or just re entered 64 00:04:19,960 --> 00:04:23,360 Speaker 1: the labor force have low productivity, and so that's why 65 00:04:23,360 --> 00:04:29,160 Speaker 1: the productivity data are rather disappointing. Who should be Vice 66 00:04:29,240 --> 00:04:32,560 Speaker 1: Chairman of the Fed? Just one final question, Stan Fisher, 67 00:04:32,640 --> 00:04:36,200 Speaker 1: that's such a informed job. Do you have a name 68 00:04:36,279 --> 00:04:40,400 Speaker 1: that you think fits with Chairman Powell? Well, it better 69 00:04:40,440 --> 00:04:46,360 Speaker 1: be a first rate applied monetary economist, right, because at 70 00:04:46,400 --> 00:04:49,000 Speaker 1: the moment between calls and power we have two lawyers, 71 00:04:49,880 --> 00:04:52,000 Speaker 1: you know, on the on the on the board of 72 00:04:52,000 --> 00:04:57,240 Speaker 1: that China that they could have seen his face as 73 00:04:57,279 --> 00:05:00,280 Speaker 1: he said it, and that borries me when it comes to, uh, 74 00:05:00,560 --> 00:05:05,360 Speaker 1: you know, monetary and financial disruption. Okay, So I don't know. Okay, 75 00:05:05,600 --> 00:05:09,520 Speaker 1: Just anybody with i Q and triple digits and good 76 00:05:09,560 --> 00:05:12,640 Speaker 1: training in economics. One final question, John, Why do the 77 00:05:12,680 --> 00:05:15,120 Speaker 1: Orange place so well in the World Cup where the 78 00:05:15,160 --> 00:05:17,640 Speaker 1: English can't get it together? I don't know, but they're 79 00:05:17,680 --> 00:05:22,280 Speaker 1: not in the World Cup this year? We should you 80 00:05:22,400 --> 00:05:25,680 Speaker 1: talking to Villain about that? What happened? Villain? Uh? Well, 81 00:05:25,760 --> 00:05:28,440 Speaker 1: the Netherlands, the whole is much less than the sum 82 00:05:28,520 --> 00:05:30,880 Speaker 1: of the parts. You have a team. You have a 83 00:05:31,000 --> 00:05:36,600 Speaker 1: team of prima donnas who together. It's shocking, it is. Well, 84 00:05:36,640 --> 00:05:38,120 Speaker 1: we'll have to have you back for that one in 85 00:05:38,160 --> 00:05:40,480 Speaker 1: the World Cup. Villain Poutter, thank you so much. If 86 00:05:40,520 --> 00:05:42,480 Speaker 1: I maybe won't come back because I brought that up 87 00:06:02,200 --> 00:06:05,880 Speaker 1: September seven of two thousand seventeen, one of the three 88 00:06:05,960 --> 00:06:09,159 Speaker 1: or four most important papers of the year for America, 89 00:06:09,560 --> 00:06:13,080 Speaker 1: for our politicians in Washington and certainly for a part 90 00:06:13,080 --> 00:06:15,839 Speaker 1: of America, flat on their back. Alan Kruger of Princeton 91 00:06:16,320 --> 00:06:19,839 Speaker 1: on the opioid heroin epidemic and what it means for 92 00:06:19,960 --> 00:06:23,960 Speaker 1: labor what's the heart of your redo of your important 93 00:06:23,960 --> 00:06:29,040 Speaker 1: two thousand sixteen research, Well, I followed up on men 94 00:06:29,080 --> 00:06:31,200 Speaker 1: who are out of the labor force. I asked them 95 00:06:31,320 --> 00:06:33,920 Speaker 1: if they took pain medication, what type of pain medication 96 00:06:33,960 --> 00:06:38,160 Speaker 1: they took, And the numbers are just shocking. Tom Um. 97 00:06:38,240 --> 00:06:40,960 Speaker 1: If you look at manage to fifty four who are 98 00:06:40,960 --> 00:06:44,320 Speaker 1: not working, not looking for work, about half of them 99 00:06:44,600 --> 00:06:47,280 Speaker 1: take pain medication on any given day. And then if 100 00:06:47,320 --> 00:06:51,200 Speaker 1: I asked is it prescription medication? A third of them 101 00:06:51,240 --> 00:06:54,719 Speaker 1: say yes, Uh, they took prescription pain medication on the 102 00:06:54,720 --> 00:06:57,200 Speaker 1: previous day, and I have to think there's under reporting. 103 00:06:57,839 --> 00:07:01,400 Speaker 1: So this is a problem that's run into are labor 104 00:07:01,440 --> 00:07:04,320 Speaker 1: force problems you have said in the Oval office amid 105 00:07:04,360 --> 00:07:09,200 Speaker 1: tough decisions. The two reigning theologies on opioid heroin is 106 00:07:09,480 --> 00:07:12,600 Speaker 1: grow up, stop taking the pills, go get a job, 107 00:07:12,920 --> 00:07:15,440 Speaker 1: and the other side is woe is me. This is 108 00:07:15,480 --> 00:07:19,720 Speaker 1: a horrific medical disaster. Let's spend a jillion dollars. The 109 00:07:19,800 --> 00:07:23,880 Speaker 1: reality is different. What's the Kruger reality to solve this 110 00:07:23,920 --> 00:07:26,880 Speaker 1: American problem? First of all, I think the problem started 111 00:07:26,880 --> 00:07:30,280 Speaker 1: because of our medical practices, and slowly we're getting a 112 00:07:30,320 --> 00:07:33,920 Speaker 1: handle on that, but too slowly. The US prescribes far 113 00:07:34,000 --> 00:07:36,800 Speaker 1: more opioid medication than the rest of the world. Americans 114 00:07:36,800 --> 00:07:41,640 Speaker 1: consume eight of opioid drugs um and make up five 115 00:07:41,680 --> 00:07:44,240 Speaker 1: percent of the world's population, So there's something totally out 116 00:07:44,240 --> 00:07:48,600 Speaker 1: of balance here. Um. The substance is very addictive. I 117 00:07:48,680 --> 00:07:51,360 Speaker 1: found that when I looked at individuals over time, if 118 00:07:51,360 --> 00:07:54,760 Speaker 1: they were taking pay medication in one year, they were 119 00:07:54,760 --> 00:07:57,920 Speaker 1: taking again the next year, They're gonna have difficulty passing 120 00:07:57,920 --> 00:08:01,280 Speaker 1: a drug test to get a job. Sixty two point 121 00:08:01,320 --> 00:08:05,239 Speaker 1: seven percent is the participation rate in this country, Alan, 122 00:08:05,320 --> 00:08:09,360 Speaker 1: fold your work into that sixty two point seven How 123 00:08:09,440 --> 00:08:12,800 Speaker 1: much of that is the opord crisis. Well, we're down 124 00:08:13,000 --> 00:08:16,400 Speaker 1: from sixty six point seven percent over the last four years. 125 00:08:16,480 --> 00:08:19,600 Speaker 1: We're down about four percentage points and looking at both 126 00:08:19,640 --> 00:08:23,960 Speaker 1: men and women, uhent of that drop looks like it 127 00:08:24,000 --> 00:08:27,240 Speaker 1: could be attributed to the oilferation of opioid medication, the 128 00:08:27,240 --> 00:08:30,200 Speaker 1: biggest killer of under fifties. That's what you've told me before. 129 00:08:30,520 --> 00:08:33,720 Speaker 1: The numbers are, Jeff shocking. Uh. Probably close to fifty 130 00:08:34,080 --> 00:08:38,600 Speaker 1: people a year are dying of overdoses. Uh. The Council 131 00:08:38,640 --> 00:08:42,920 Speaker 1: of Economic Advisors made an estimate that the loss of life, 132 00:08:43,320 --> 00:08:45,640 Speaker 1: the cost of the loss of life due to the 133 00:08:45,720 --> 00:08:49,240 Speaker 1: opioid epidemic is close to half a trillion dollars a year. Yeah, Alan, 134 00:08:49,280 --> 00:08:52,199 Speaker 1: I can't say enough how many people I've seen who 135 00:08:52,200 --> 00:08:55,440 Speaker 1: have read this research and commented on it positively, But 136 00:08:55,559 --> 00:08:58,680 Speaker 1: that's not enough. Is this resonating with anyone in government? 137 00:08:58,679 --> 00:09:00,440 Speaker 1: Has anyone picked up the phone and given you a 138 00:09:00,480 --> 00:09:02,320 Speaker 1: cold and try to do what he chants to you 139 00:09:02,360 --> 00:09:04,720 Speaker 1: about the research you've done. I have to say I've 140 00:09:04,760 --> 00:09:08,200 Speaker 1: been disappointed that um I have not been contacted by 141 00:09:08,440 --> 00:09:12,280 Speaker 1: the current administration on this work. The proposals that the 142 00:09:12,360 --> 00:09:15,040 Speaker 1: Christie Commission came out with, I think we're mostly sensible. 143 00:09:15,400 --> 00:09:17,640 Speaker 1: I haven't seen any follow through by the administration, and 144 00:09:17,679 --> 00:09:20,319 Speaker 1: I think it's important that they follow up their words 145 00:09:20,320 --> 00:09:22,880 Speaker 1: with actions. So what should the first action look like? 146 00:09:22,960 --> 00:09:24,840 Speaker 1: What should the first step be on it? Give me 147 00:09:24,880 --> 00:09:28,400 Speaker 1: a series of steps and a timeline to really address 148 00:09:28,600 --> 00:09:31,760 Speaker 1: what is a crisis in this country. Well, you know, 149 00:09:31,800 --> 00:09:34,160 Speaker 1: I think the easiest and it's not very costly, steps 150 00:09:34,200 --> 00:09:37,360 Speaker 1: are to get our hands around medical practices and to 151 00:09:37,440 --> 00:09:39,800 Speaker 1: have restrictions on how many pills can be prescribed, to 152 00:09:39,880 --> 00:09:44,240 Speaker 1: cross check across different providers that patients are not shopping 153 00:09:44,240 --> 00:09:47,360 Speaker 1: around when the supply is limited. I think we need 154 00:09:47,400 --> 00:09:51,400 Speaker 1: to greatly increase the treatment centers. Uh, to wean people 155 00:09:51,440 --> 00:09:57,720 Speaker 1: off of their addiction. Um. Uh. There's some other things 156 00:09:57,720 --> 00:10:00,440 Speaker 1: that we can experiment with some countries who have say zones. 157 00:10:00,559 --> 00:10:02,920 Speaker 1: This is something that Admiral winifeld in a really moving 158 00:10:03,000 --> 00:10:06,400 Speaker 1: article in the latest issue of The Atlantic stunning stunning. 159 00:10:06,600 --> 00:10:09,280 Speaker 1: Um And uh, you know, I think there are lots 160 00:10:09,320 --> 00:10:11,199 Speaker 1: of things that we we should explore, and there's some 161 00:10:11,240 --> 00:10:12,679 Speaker 1: things where I think we have pretty good evidence that 162 00:10:12,720 --> 00:10:17,600 Speaker 1: they work help with this administration. Clearly, you served under 163 00:10:17,640 --> 00:10:20,000 Speaker 1: President Obama, and I think most of our people would 164 00:10:20,000 --> 00:10:22,839 Speaker 1: think you're just to the right of you know, Lenin 165 00:10:23,000 --> 00:10:25,679 Speaker 1: or or you know, name your name, your commune. I mean, 166 00:10:26,160 --> 00:10:29,199 Speaker 1: that's the tone that you get out of Kruger Economics 167 00:10:29,240 --> 00:10:32,280 Speaker 1: and you and I know that's not the reality. How 168 00:10:32,320 --> 00:10:36,240 Speaker 1: can Kevin Hasset, how can David mal Pass take this 169 00:10:36,360 --> 00:10:41,520 Speaker 1: administration to a better outcome for all Americans two years 170 00:10:41,520 --> 00:10:44,280 Speaker 1: out with two terms six years out? What do the 171 00:10:44,360 --> 00:10:47,840 Speaker 1: economists need to do to to make for a better 172 00:10:47,920 --> 00:10:51,120 Speaker 1: Trump Economics? Well, I think they got off on the 173 00:10:51,160 --> 00:10:53,960 Speaker 1: wrong foot because the whole economics team I think lost 174 00:10:53,960 --> 00:10:56,120 Speaker 1: credibility the way that they talk about the economy, the 175 00:10:56,160 --> 00:10:58,960 Speaker 1: way that they misrepresented the current tax cut. But that 176 00:10:59,080 --> 00:11:02,600 Speaker 1: aside um. The type of report that Kevin Hasset's Council 177 00:11:02,600 --> 00:11:04,440 Speaker 1: of Economic Advisors put out, I think it was a 178 00:11:04,440 --> 00:11:07,720 Speaker 1: good step. I think they're planning to do more work 179 00:11:07,760 --> 00:11:10,720 Speaker 1: in this area. I think that will be helpful. But frankly, 180 00:11:10,840 --> 00:11:13,240 Speaker 1: I think it's not up to the economists here. I 181 00:11:13,240 --> 00:11:15,439 Speaker 1: think it's up to the agencies like h HS and 182 00:11:15,480 --> 00:11:19,360 Speaker 1: the Department of Labor, UH to have concrete plans. Um, 183 00:11:19,400 --> 00:11:22,599 Speaker 1: it's up to mc mulvaney to step up and to 184 00:11:22,679 --> 00:11:25,680 Speaker 1: see this is partly a budget issue. Um, we can't 185 00:11:25,720 --> 00:11:28,240 Speaker 1: just say we don't have any money left because we 186 00:11:28,320 --> 00:11:32,360 Speaker 1: make choices. We're making choices now to reduce revenues. So 187 00:11:32,480 --> 00:11:35,000 Speaker 1: that's a choice. Professor Kruger, the response to your critics 188 00:11:35,040 --> 00:11:39,439 Speaker 1: would be that we're in Reagan years. We had debt 189 00:11:39,559 --> 00:11:42,400 Speaker 1: to GDP and now it's a hundred you know, or 190 00:11:42,440 --> 00:11:46,199 Speaker 1: whatever the working numbers are. It's not six, is it. 191 00:11:47,200 --> 00:11:49,320 Speaker 1: That's that's absolutely right. But if you look at the 192 00:11:49,360 --> 00:11:51,920 Speaker 1: human costs, you look at the economic cost of this epidemic, 193 00:11:51,960 --> 00:11:53,760 Speaker 1: this is going to be money that's very well spent 194 00:11:53,880 --> 00:11:56,320 Speaker 1: and it's not money that's gonna add in any meaningful 195 00:11:56,320 --> 00:11:57,960 Speaker 1: way to the death. And they talk about the deadload, 196 00:11:58,000 --> 00:12:00,160 Speaker 1: the debtloads, and the trillions. What kind of numb are 197 00:12:00,160 --> 00:12:03,160 Speaker 1: we talking about that would need to be put together 198 00:12:03,200 --> 00:12:06,320 Speaker 1: to address this issue? Allen, a hundred billion, tens of billions? 199 00:12:06,360 --> 00:12:08,040 Speaker 1: What kind of numbs are you talking about? I think 200 00:12:08,080 --> 00:12:10,760 Speaker 1: you're probably talking about tens of billions of dollars. Any 201 00:12:10,800 --> 00:12:14,679 Speaker 1: realistic government response that could be managed and and of 202 00:12:14,679 --> 00:12:16,640 Speaker 1: course it's not only the federal government, it's also the 203 00:12:16,640 --> 00:12:19,120 Speaker 1: state governments and local governments. Do you feel that this 204 00:12:19,160 --> 00:12:22,720 Speaker 1: has become a left right issue, a Democrat Republican issue, 205 00:12:22,880 --> 00:12:26,920 Speaker 1: or is there an audience there in d C that says, actually, 206 00:12:26,960 --> 00:12:29,160 Speaker 1: it's for all of us to act. I think this 207 00:12:29,240 --> 00:12:33,319 Speaker 1: is an American issue, and um uh, the openated epidemic, 208 00:12:33,480 --> 00:12:35,720 Speaker 1: it's widespread. It's not just hitting the rust belt. You 209 00:12:35,760 --> 00:12:38,559 Speaker 1: look at the map, it's not just the rust belt. 210 00:12:38,880 --> 00:12:41,200 Speaker 1: Of course, West Virginia has had extremely hard, but so 211 00:12:41,320 --> 00:12:44,800 Speaker 1: is Western Nevada. So I think this is a problem 212 00:12:44,800 --> 00:12:47,320 Speaker 1: that cuts across different groups, that cuts across America. And 213 00:12:47,320 --> 00:12:50,000 Speaker 1: I think our our our government has failed us in 214 00:12:50,080 --> 00:12:52,120 Speaker 1: terms of respond and given the scope of the crisis. 215 00:12:52,120 --> 00:12:55,280 Speaker 1: But a sequence of governments has found this country alan 216 00:12:55,360 --> 00:12:57,840 Speaker 1: the previous government found this country in terms of addressing 217 00:12:57,840 --> 00:13:00,160 Speaker 1: this crisis. This crisis didn't just a rise in twenties. Hav' 218 00:13:00,200 --> 00:13:02,840 Speaker 1: teamed with President Tonald Trump. It seems like the previous 219 00:13:02,880 --> 00:13:06,120 Speaker 1: government didn't do enough either. Why have a sequence of 220 00:13:06,200 --> 00:13:09,520 Speaker 1: governments failed to address this issue? Well, I think it 221 00:13:09,559 --> 00:13:11,920 Speaker 1: took a while to recognize the scope of the problem 222 00:13:12,520 --> 00:13:16,680 Speaker 1: or economic or and health indicators lagged too much. But 223 00:13:16,760 --> 00:13:19,720 Speaker 1: also if you look at the previous administration, the amount 224 00:13:19,760 --> 00:13:25,000 Speaker 1: of opioid being prescribed have declined every year from fifteen, 225 00:13:25,040 --> 00:13:26,800 Speaker 1: which is the latest year for which we have data. 226 00:13:27,080 --> 00:13:28,560 Speaker 1: So I think it's a bit unfair to say the 227 00:13:28,559 --> 00:13:31,800 Speaker 1: previous administration didn't didn't act, and it was starting to 228 00:13:31,840 --> 00:13:34,040 Speaker 1: get some results. But I think we do need to 229 00:13:34,040 --> 00:13:38,199 Speaker 1: respond much more vigorously. Professor Randan Krueger, Princeton University, Economics Professor, 230 00:13:38,280 --> 00:13:40,880 Speaker 1: just some phenomenal work. And Alan, as always, I get 231 00:13:40,920 --> 00:13:42,880 Speaker 1: to do the juvenile stuff with you as we count 232 00:13:42,920 --> 00:13:45,520 Speaker 1: down to pay rolls thirty four minutes away. What are 233 00:13:45,520 --> 00:13:48,280 Speaker 1: you looking for from the jobs report, Allen, Well, Number one, 234 00:13:48,280 --> 00:13:49,920 Speaker 1: I'm gonna look to see if there's a bounce back 235 00:13:49,960 --> 00:13:53,320 Speaker 1: in labor force. Last month, labor force participation rate felt 236 00:13:53,320 --> 00:13:55,640 Speaker 1: by four tenths of a percentage point. There were a 237 00:13:55,640 --> 00:13:59,319 Speaker 1: million more people not participating in the labor force last 238 00:13:59,320 --> 00:14:01,920 Speaker 1: month than the month before. I suspect some of that 239 00:14:02,000 --> 00:14:04,880 Speaker 1: is a statistical blip, so that'll be important to look at. Then, 240 00:14:04,880 --> 00:14:07,240 Speaker 1: of course, you look at the top line, the peril 241 00:14:07,360 --> 00:14:10,800 Speaker 1: jobs number, unemployment right wage growth, the top beline tom 242 00:14:10,960 --> 00:14:15,240 Speaker 1: set to print near close to and what's quickly here, 243 00:14:15,520 --> 00:14:18,240 Speaker 1: Professor Krueger, the run rate we're hearing from economists, the 244 00:14:18,240 --> 00:14:21,840 Speaker 1: appropriate rate, it's almost now under a hundred thousand. I mean, 245 00:14:22,280 --> 00:14:26,360 Speaker 1: these are phenomenal numbers given the other dynamics of the economy, 246 00:14:26,400 --> 00:14:28,800 Speaker 1: isn't it well? Job growth has slowed, you know, over 247 00:14:28,840 --> 00:14:32,480 Speaker 1: the last year it has slowed, and I think we'll 248 00:14:32,520 --> 00:14:35,960 Speaker 1: probably seeing it edging down towards a hundred thousand, assuming 249 00:14:36,000 --> 00:14:39,160 Speaker 1: that the economy continues to expand the way it has been, 250 00:14:39,560 --> 00:14:42,720 Speaker 1: and that's enough for the unemployment right to be stable. Okay, 251 00:14:42,800 --> 00:14:44,680 Speaker 1: let's leave it there. Allen Krueger, thank you so much. 252 00:14:44,680 --> 00:14:48,240 Speaker 1: It's job stick with Princeton University, and uh much to 253 00:14:48,280 --> 00:14:50,280 Speaker 1: talk about again. We'll try to get out on Twitter 254 00:14:50,320 --> 00:15:05,240 Speaker 1: in the news crush her. Jim Glassman with us right now, 255 00:15:05,320 --> 00:15:08,200 Speaker 1: John Ferrell, Jim Glasman of course, JP Morgan Chase is 256 00:15:08,280 --> 00:15:13,000 Speaker 1: commercial banking head economists. Jim the story on the median estimate? 257 00:15:13,040 --> 00:15:15,600 Speaker 1: Can we carry on printing two hundred k after two 258 00:15:15,760 --> 00:15:19,600 Speaker 1: d K after two hundred k? Right right now? We 259 00:15:19,600 --> 00:15:21,520 Speaker 1: still have some catch up to do from clean up 260 00:15:21,640 --> 00:15:23,760 Speaker 1: from the hurricane, so I wouldn't be surprised if we 261 00:15:23,760 --> 00:15:26,840 Speaker 1: have a little bit above that this time. But honestly, uh, 262 00:15:26,920 --> 00:15:30,560 Speaker 1: the the economy is approaching full employment, we would expect 263 00:15:31,200 --> 00:15:33,560 Speaker 1: that the trending job growth is gonna be slowing down 264 00:15:33,600 --> 00:15:38,120 Speaker 1: some somewhere between seventy five a month. That's what the 265 00:15:38,160 --> 00:15:40,920 Speaker 1: working age population. That's how fast the working age population 266 00:15:41,000 --> 00:15:43,240 Speaker 1: is growing. So I don't think we're going to see 267 00:15:43,240 --> 00:15:45,120 Speaker 1: these kinds of numbers that my guess is in the 268 00:15:45,120 --> 00:15:46,720 Speaker 1: coming year we're going to see a s gradual of 269 00:15:46,720 --> 00:15:49,360 Speaker 1: deceleration gym. In eleven minutes time, this job report is 270 00:15:49,360 --> 00:15:51,240 Speaker 1: going to drop. People will jump on the headline number, 271 00:15:51,960 --> 00:15:53,800 Speaker 1: they'll spend a split second to see if it beat 272 00:15:53,920 --> 00:15:56,040 Speaker 1: or missed. Then they'll work their way down and they're 273 00:15:56,080 --> 00:15:58,840 Speaker 1: going to zoom in on wage growth month on month, 274 00:15:58,840 --> 00:16:02,280 Speaker 1: the estimate zero points the previous month, just zero. Year 275 00:16:02,320 --> 00:16:04,840 Speaker 1: on year, the estimates two point seven the previous month 276 00:16:05,000 --> 00:16:07,360 Speaker 1: two point four. Are we going to see any kind 277 00:16:07,360 --> 00:16:09,920 Speaker 1: of improvement around these numbers in the months to come? 278 00:16:10,960 --> 00:16:13,280 Speaker 1: I think so, And I don't know why we wouldn't 279 00:16:13,280 --> 00:16:15,400 Speaker 1: be saying my guesses we're going to see this thing 280 00:16:15,440 --> 00:16:19,000 Speaker 1: working its way towards three level, because everywhere you look, 281 00:16:19,000 --> 00:16:21,040 Speaker 1: people have a hard time finding there and they claim 282 00:16:21,080 --> 00:16:23,480 Speaker 1: they're having to pay up to get people, So you 283 00:16:23,480 --> 00:16:25,600 Speaker 1: would think that would start showing up in these trends. 284 00:16:26,000 --> 00:16:30,040 Speaker 1: Jim Glassman. The arch failures someone suggestive central banks is 285 00:16:30,040 --> 00:16:35,360 Speaker 1: they're trying to uh solve social issues? Are they way behind? 286 00:16:35,640 --> 00:16:38,320 Speaker 1: If you look at the part of America that's employed 287 00:16:38,320 --> 00:16:43,040 Speaker 1: in dynamic doing so well. Neil Data over at Macro 288 00:16:43,920 --> 00:16:47,600 Speaker 1: Renaissance Advisers mentions that n f I B numbers are 289 00:16:47,640 --> 00:16:50,800 Speaker 1: so buoyant. Is the FED farther behind than we think 290 00:16:50,840 --> 00:16:53,680 Speaker 1: they are? You know, I think the country maybe the 291 00:16:54,720 --> 00:16:58,560 Speaker 1: best thing that central banks can do is support get 292 00:16:58,680 --> 00:17:01,600 Speaker 1: get the economy moving back to full employment. They don't 293 00:17:01,640 --> 00:17:03,640 Speaker 1: the tools they have really can't solve a lot of 294 00:17:03,640 --> 00:17:05,560 Speaker 1: these social issues. But the thing they can do, and 295 00:17:05,600 --> 00:17:09,640 Speaker 1: the thing we asked them to do, is to encourage 296 00:17:09,880 --> 00:17:12,600 Speaker 1: when economy stumbles, helped get back to full employment by 297 00:17:12,680 --> 00:17:14,800 Speaker 1: keeping it their space low. So I think that that 298 00:17:14,920 --> 00:17:16,719 Speaker 1: is that is about the best you can do if 299 00:17:16,760 --> 00:17:18,760 Speaker 1: you're a central bank. The rent of it really has 300 00:17:18,840 --> 00:17:21,399 Speaker 1: to come through other kinds of actions, and hopefully as 301 00:17:21,400 --> 00:17:24,200 Speaker 1: the economy stays at full employment, we're going to see 302 00:17:24,240 --> 00:17:26,320 Speaker 1: more of the wealth spread and inward into some of 303 00:17:26,320 --> 00:17:30,080 Speaker 1: the rural communities. The mass of the labor economies centers 304 00:17:30,080 --> 00:17:34,040 Speaker 1: around the labor force. What does the labor force and 305 00:17:34,080 --> 00:17:39,000 Speaker 1: what's it looked like early December two thousand seventeen. It's 306 00:17:39,080 --> 00:17:41,879 Speaker 1: slowed down dramatically. So and then the reason is because 307 00:17:41,920 --> 00:17:46,080 Speaker 1: it's something we've known about for good seventy years. Right 308 00:17:46,119 --> 00:17:49,119 Speaker 1: the Baby boom generation is retiring, and so you've got 309 00:17:49,480 --> 00:17:51,840 Speaker 1: twenty million people over the last ten years who are 310 00:17:51,880 --> 00:17:54,479 Speaker 1: moving into retirement. So that's why the labor force has 311 00:17:54,520 --> 00:17:57,000 Speaker 1: slowed down so much. And the only way you can 312 00:17:57,320 --> 00:18:01,440 Speaker 1: offset that is if we had more immigration, which doesn't 313 00:18:01,440 --> 00:18:04,240 Speaker 1: seem real likely right now. Jim, we had a fascinating 314 00:18:04,240 --> 00:18:08,280 Speaker 1: conversation about fifteen twenty minutes ago about the participation rate, 315 00:18:08,720 --> 00:18:11,840 Speaker 1: the participation rate in the oakioid crisis with Alan Cruged 316 00:18:11,840 --> 00:18:15,040 Speaker 1: of Princeton University. As you look at that number sixty 317 00:18:15,040 --> 00:18:19,200 Speaker 1: two point, what does that rate mean to you? What's 318 00:18:19,240 --> 00:18:22,760 Speaker 1: the explanation behind it? Well, there two things going on, right. 319 00:18:22,800 --> 00:18:26,520 Speaker 1: One is the demographics. As people start moving to retirement, 320 00:18:26,760 --> 00:18:29,879 Speaker 1: that participation rate drops dramatically. And the and that's and 321 00:18:29,920 --> 00:18:32,440 Speaker 1: the FED thinks that that is the dominant driver in 322 00:18:32,560 --> 00:18:35,399 Speaker 1: why the labor force participation rate has come down. The 323 00:18:35,440 --> 00:18:39,760 Speaker 1: problem is there's also some cyclical character to that, which 324 00:18:39,800 --> 00:18:42,600 Speaker 1: is when the economy was doing poorly and people couldn't 325 00:18:42,640 --> 00:18:45,680 Speaker 1: find jobs, they gave up and they drop out. That's 326 00:18:45,720 --> 00:18:49,320 Speaker 1: really a story about the young people. That's beginning to reverse. 327 00:18:49,440 --> 00:18:51,159 Speaker 1: But you know, and there's a little bit more to go. 328 00:18:51,280 --> 00:18:54,040 Speaker 1: But I think the dominant driver of why the labor 329 00:18:54,040 --> 00:18:56,879 Speaker 1: force participation rate to come down is because the the 330 00:18:56,920 --> 00:18:59,840 Speaker 1: working age population has been aging and it's not being 331 00:19:00,040 --> 00:19:03,439 Speaker 1: offset by an acceleration and immigration, which in the past 332 00:19:03,920 --> 00:19:08,120 Speaker 1: was often the the offset to demographics. This is why 333 00:19:08,119 --> 00:19:10,680 Speaker 1: we in the US are not used to talking about demographics, 334 00:19:10,680 --> 00:19:14,040 Speaker 1: because our economy is relatively open. So when we're strong 335 00:19:14,240 --> 00:19:16,320 Speaker 1: and there's a need for jobs, you tend to see 336 00:19:16,320 --> 00:19:19,080 Speaker 1: people pouring in the payrolls report it seven minutes away. 337 00:19:19,080 --> 00:19:21,200 Speaker 1: We're catching up with James Glassman of JP Mork and 338 00:19:21,320 --> 00:19:23,720 Speaker 1: Chase James. Just to wrap things up. The one thing 339 00:19:23,720 --> 00:19:27,919 Speaker 1: you're looking for in seven minutes time, I'm looking for 340 00:19:29,040 --> 00:19:31,560 Speaker 1: ongoing gains in payrolls that I think that's the main 341 00:19:31,640 --> 00:19:34,200 Speaker 1: story for me. Wages I assume are going to catch 342 00:19:34,280 --> 00:19:36,880 Speaker 1: up to the reality and we're going to see better 343 00:19:36,880 --> 00:19:39,239 Speaker 1: trends there. But honestly, I think I've seen enough from 344 00:19:39,280 --> 00:19:42,800 Speaker 1: the jobless claims trends. It's pretty good. We're humming along 345 00:19:42,840 --> 00:19:44,679 Speaker 1: pretty well, and I think that makes the case for 346 00:19:44,720 --> 00:19:48,280 Speaker 1: the FED next week. We did unit unit labor costs 347 00:19:48,280 --> 00:19:50,880 Speaker 1: and productivity a few days ago. That did that give 348 00:19:50,920 --> 00:19:54,040 Speaker 1: you pause? Not really, you know, I thought that the 349 00:19:54,119 --> 00:19:56,720 Speaker 1: productivity numbers are so volatile. They're all based on what 350 00:19:57,359 --> 00:19:59,920 Speaker 1: you come from the VPS, So honestly, I care about 351 00:20:00,000 --> 00:20:02,160 Speaker 1: that story over a ten year period. But the short 352 00:20:02,240 --> 00:20:05,800 Speaker 1: term swings are as good as the productivity numbers are 353 00:20:05,840 --> 00:20:10,040 Speaker 1: as good as the GDP estimates, and they're very volatile. Okay, Well, 354 00:20:10,119 --> 00:20:12,760 Speaker 1: Jim Glassman with us this morning with JP Morgan, and 355 00:20:12,840 --> 00:20:15,480 Speaker 1: maybe we'll touch with him after the Jobless after the 356 00:20:15,560 --> 00:20:17,399 Speaker 1: numbers come out, and then Bill Gross will join us 357 00:20:17,400 --> 00:20:20,400 Speaker 1: from Janice Henderson as well. We're thrilled to have Dr Glassman, 358 00:20:20,520 --> 00:20:41,720 Speaker 1: Mr Gross with us and now joining us on Bloomberg Radio, 359 00:20:41,720 --> 00:20:44,800 Speaker 1: on Bloomberg Television worldwide. We're thrilled to bring you William 360 00:20:44,800 --> 00:20:47,720 Speaker 1: Gross of Janice Henderson. He has a modest interest in 361 00:20:47,720 --> 00:20:50,400 Speaker 1: the bottom market, and of course in the nation's economy, 362 00:20:50,760 --> 00:20:53,679 Speaker 1: and this job's report as well. Bill Gross, let me 363 00:20:53,840 --> 00:20:58,800 Speaker 1: begin this report by partitioning good job numbers way above 364 00:20:58,920 --> 00:21:03,040 Speaker 1: what potential g D you would suggest, big two thousand numbers. 365 00:21:03,080 --> 00:21:07,199 Speaker 1: But wage growth just isn't there. Do you have a 366 00:21:07,359 --> 00:21:13,880 Speaker 1: why why we're not seeing better wage growth in America? Well, 367 00:21:13,920 --> 00:21:16,639 Speaker 1: I think there's some hidden labor out there. You know, 368 00:21:16,720 --> 00:21:20,159 Speaker 1: that participation rate is down significantly for where it was 369 00:21:21,320 --> 00:21:23,640 Speaker 1: four or five six years ago, and so that's part 370 00:21:23,640 --> 00:21:26,040 Speaker 1: of the answer, Um, And the other part has to 371 00:21:26,119 --> 00:21:31,960 Speaker 1: do with continued globalization technology which displaces labor and keeps 372 00:21:32,000 --> 00:21:36,760 Speaker 1: the price of labor down relative to robotization, etcetera. So 373 00:21:36,800 --> 00:21:39,280 Speaker 1: there are a number of structural forces they think that 374 00:21:40,040 --> 00:21:43,840 Speaker 1: they keep wages down, and there will probably keep wages down. 375 00:21:43,840 --> 00:21:46,320 Speaker 1: It doesn't fit with the Beds model. The Fens model 376 00:21:46,440 --> 00:21:49,880 Speaker 1: is cyclically based and has no consideration, in my opinion, 377 00:21:49,880 --> 00:21:52,960 Speaker 1: of any structural factors. And so that's that's your real 378 00:21:53,040 --> 00:21:56,080 Speaker 1: question to me, And I suppose my answer is structural 379 00:21:56,119 --> 00:21:59,520 Speaker 1: as opposed to cyclical numbers. Then, Bill, between the cyclical 380 00:21:59,640 --> 00:22:01,639 Speaker 1: the in the flow of the market, folks, and the 381 00:22:01,720 --> 00:22:05,919 Speaker 1: structural longer deeper issues. Let's go to your criticism of 382 00:22:06,000 --> 00:22:10,320 Speaker 1: this FED. Can you take FED policy in the distortions 383 00:22:10,320 --> 00:22:13,080 Speaker 1: in the bill grows world of fixed income? Can you 384 00:22:13,160 --> 00:22:18,000 Speaker 1: bring them over to labor dynamics. Did those decisions and 385 00:22:18,119 --> 00:22:24,479 Speaker 1: the oddities and fixed income do they affect job growth? Well? 386 00:22:24,480 --> 00:22:26,199 Speaker 1: I think they do. I'm not so sure that the 387 00:22:26,240 --> 00:22:29,040 Speaker 1: FED factors at end, and perhaps they're making the right 388 00:22:29,040 --> 00:22:32,280 Speaker 1: decisions for the wrong reasons. In my opinion, I do 389 00:22:32,400 --> 00:22:36,080 Speaker 1: think that they're raising interest rates gradually. I do think 390 00:22:36,119 --> 00:22:39,320 Speaker 1: it was a good decision to stop quantitative easing and 391 00:22:39,359 --> 00:22:42,960 Speaker 1: now to minorly reduce the balance sheet, although it doesn't 392 00:22:43,000 --> 00:22:45,440 Speaker 1: make much of a difference, and so I think the 393 00:22:45,520 --> 00:22:49,200 Speaker 1: gradual increase of rates to perhaps as high as two 394 00:22:49,240 --> 00:22:54,240 Speaker 1: percent nominally that's another fifty or sevento um. You know, 395 00:22:54,280 --> 00:22:58,320 Speaker 1: it's probably the right decision. But the real benchmark for 396 00:22:58,400 --> 00:23:01,880 Speaker 1: the FED, come my way with packing, as aside from 397 00:23:02,040 --> 00:23:06,080 Speaker 1: from wages, is really the neutral FED funds rate, the 398 00:23:06,080 --> 00:23:09,440 Speaker 1: neutral real FED funds rate. And I think if inflation 399 00:23:10,080 --> 00:23:14,680 Speaker 1: stays at under two percent, uh, the federal state under 400 00:23:14,720 --> 00:23:18,119 Speaker 1: two percent bill Jonathan here two's tens at fifty seven 401 00:23:18,119 --> 00:23:21,359 Speaker 1: basis points. Is there anything in this dat up or 402 00:23:21,400 --> 00:23:23,760 Speaker 1: any dates arounse to in the United States that it's 403 00:23:23,760 --> 00:23:26,880 Speaker 1: going to change the direction of where this shield curve 404 00:23:26,920 --> 00:23:31,520 Speaker 1: is going. Well, I think so to to the extent 405 00:23:31,600 --> 00:23:33,800 Speaker 1: the quantitative easing in other countries. And this is a 406 00:23:33,840 --> 00:23:36,000 Speaker 1: way off, Jonathan. You know, it's a few months off 407 00:23:36,080 --> 00:23:38,919 Speaker 1: for the ECB, and we don't know to the extent 408 00:23:39,000 --> 00:23:40,639 Speaker 1: that they're gonna cut it back. I don't think the 409 00:23:40,760 --> 00:23:43,679 Speaker 1: bo j will ever, uh, you know, cut bath air 410 00:23:43,800 --> 00:23:45,800 Speaker 1: quantity to be easy to just have to keep going 411 00:23:45,960 --> 00:23:49,680 Speaker 1: until the road ends. But to extent the quantitative easiness 412 00:23:49,680 --> 00:23:53,320 Speaker 1: about fives and tens and lower their tenure levels to 413 00:23:54,040 --> 00:23:58,960 Speaker 1: artificial levels. Certainly, then U S treasuries are artificially low 414 00:23:59,000 --> 00:24:02,320 Speaker 1: on the tenures side. Then it produces a flat yield curve. 415 00:24:02,359 --> 00:24:05,000 Speaker 1: I think the important and consideration again is where short 416 00:24:05,119 --> 00:24:08,040 Speaker 1: rates are when curves of flattened in the past over 417 00:24:08,080 --> 00:24:11,399 Speaker 1: the past three four or five recessions, that a flat 418 00:24:11,440 --> 00:24:14,000 Speaker 1: yield curve indicates it's really been you know, a fed 419 00:24:14,119 --> 00:24:18,199 Speaker 1: that's tightened significantly and tightened perhaps too much, certainly in 420 00:24:18,240 --> 00:24:21,080 Speaker 1: two thousand and five, to produce a great recession. And 421 00:24:21,160 --> 00:24:24,920 Speaker 1: so i'd watch short rates. I think two percent at 422 00:24:24,920 --> 00:24:27,560 Speaker 1: the moment is the goal and where they should stop 423 00:24:27,640 --> 00:24:30,800 Speaker 1: until we get some inflation and until we get some 424 00:24:30,920 --> 00:24:33,320 Speaker 1: wage growth. That might be what they should do, Bill, 425 00:24:33,440 --> 00:24:36,040 Speaker 1: but it probably isn't what they're gonna do. UM. So, 426 00:24:36,240 --> 00:24:38,120 Speaker 1: as an investor, as you put money to work through 427 00:24:38,160 --> 00:24:42,560 Speaker 1: next year, how are you positioning on the yield curve? Well, 428 00:24:42,600 --> 00:24:46,280 Speaker 1: I think actually there will be and my my position 429 00:24:46,320 --> 00:24:48,760 Speaker 1: in the yield curve is that rates don't change much. 430 00:24:48,800 --> 00:24:51,320 Speaker 1: I've talked on this program with you and Tom. You 431 00:24:51,359 --> 00:24:54,879 Speaker 1: know about two and the tenure being a very significant 432 00:24:54,920 --> 00:24:58,400 Speaker 1: benchmark UM that's not been broken yet. It doesn't look 433 00:24:58,440 --> 00:25:01,160 Speaker 1: like it's going to be broken today, but it would 434 00:25:01,160 --> 00:25:05,200 Speaker 1: be broken if, yes, wages increase at a faster pace 435 00:25:05,280 --> 00:25:07,480 Speaker 1: than two point four percent, if we got to eight 436 00:25:07,480 --> 00:25:10,760 Speaker 1: to nine three zero, and we got inflation closer to 437 00:25:10,920 --> 00:25:14,600 Speaker 1: three than certainly the tenure goes up. And I don't 438 00:25:14,600 --> 00:25:16,720 Speaker 1: see that yet. But we don't see that today, Bill Groce. 439 00:25:16,720 --> 00:25:20,120 Speaker 1: The analysis, the questioning of our new chairman, Jerome Powell, 440 00:25:20,480 --> 00:25:23,119 Speaker 1: has been one of not a three deviation shock, not 441 00:25:23,240 --> 00:25:26,280 Speaker 1: a four standard deviation shock. When you look at the 442 00:25:26,320 --> 00:25:29,760 Speaker 1: mix of fixed income now, the distortions a negative zero 443 00:25:29,840 --> 00:25:33,239 Speaker 1: two year zero in Italy, where Swiss yields are just 444 00:25:33,280 --> 00:25:37,040 Speaker 1: as one example of the oddities of the bill gross world. 445 00:25:37,480 --> 00:25:40,359 Speaker 1: Do you need to tell Chairman Powell that the real 446 00:25:40,480 --> 00:25:45,199 Speaker 1: risk here is instabilities and outright jump conditions as we 447 00:25:45,240 --> 00:25:51,720 Speaker 1: try to get into quantitative tightening. Well, that's the Minsky proposition, 448 00:25:51,760 --> 00:25:54,920 Speaker 1: and I'm a devotee of Minsky, and so I would 449 00:25:54,960 --> 00:25:57,000 Speaker 1: agree with you to some extent. Tom. I would also 450 00:25:57,080 --> 00:26:01,280 Speaker 1: say that it's a little bit different these days. Bank regulation, 451 00:26:02,000 --> 00:26:05,199 Speaker 1: despite now going the other way, has tightened things up 452 00:26:05,200 --> 00:26:08,119 Speaker 1: and more in better shape. But there are negatives to 453 00:26:08,200 --> 00:26:10,600 Speaker 1: this a low interest rate world. I've talked about it 454 00:26:10,680 --> 00:26:14,040 Speaker 1: for several years. Um, you know, it affects savers, not 455 00:26:14,240 --> 00:26:17,360 Speaker 1: just institutions in terms of pension funds and insurance companies, 456 00:26:17,400 --> 00:26:21,439 Speaker 1: but small savers and ultimately the savings liability, which is 457 00:26:21,600 --> 00:26:25,760 Speaker 1: enormous going forward for small savers. And I'm talking about education, 458 00:26:25,800 --> 00:26:28,399 Speaker 1: I'm talking about retirement. You know, to the extent that 459 00:26:28,440 --> 00:26:31,280 Speaker 1: interest rates stay low, they can't meet their objectives and 460 00:26:31,320 --> 00:26:34,880 Speaker 1: so things start to happen. They happen gradually, they happen slowly. 461 00:26:35,119 --> 00:26:38,920 Speaker 1: I think they're currently happening slowly. But the Fed probably 462 00:26:39,000 --> 00:26:42,600 Speaker 1: doesn't recognize it, but at some point they have to renormalize, 463 00:26:42,600 --> 00:26:46,159 Speaker 1: and the question becomes, what's the rate that renormalizes. I 464 00:26:46,200 --> 00:26:49,000 Speaker 1: think it's closer to two than where we are. Now, 465 00:26:49,520 --> 00:26:52,040 Speaker 1: what's so critical here, Bill, And I guess it goes 466 00:26:52,080 --> 00:26:55,399 Speaker 1: to a Minsky moment. Is in this great unwinding and 467 00:26:55,480 --> 00:26:59,680 Speaker 1: this great unraveling, there's still financial repression. We've got to 468 00:26:59,760 --> 00:27:04,080 Speaker 1: te ex act which is clearly a donor class act. 469 00:27:04,560 --> 00:27:11,960 Speaker 1: Will that extend? Will that prolong our financial repression? Well? 470 00:27:12,000 --> 00:27:15,040 Speaker 1: I think there's elements that that probably will, but of 471 00:27:15,080 --> 00:27:18,880 Speaker 1: course it depends upon the Central Bank's reaction to it. Uh, 472 00:27:19,040 --> 00:27:21,359 Speaker 1: you know, to the extent that taxes and the brunt 473 00:27:21,400 --> 00:27:24,080 Speaker 1: of it is basically a lower corporate tax rate and 474 00:27:24,119 --> 00:27:28,480 Speaker 1: a deficit of one trillion plus dollars over the next 475 00:27:28,920 --> 00:27:32,760 Speaker 1: five to ten years. Then ultimately that leads to higher 476 00:27:32,760 --> 00:27:36,000 Speaker 1: inflation and at least the higher nominal GDP growth to 477 00:27:36,040 --> 00:27:39,080 Speaker 1: the extent that the FED follows that up. And I suppose, 478 00:27:39,520 --> 00:27:42,120 Speaker 1: you know, savers are benefited, but it still doesn't benefit 479 00:27:42,480 --> 00:27:45,240 Speaker 1: from the standpoint of real interest rates, because it's real 480 00:27:45,280 --> 00:27:48,879 Speaker 1: interest rates that adds to their kitty, so to speak, 481 00:27:48,920 --> 00:27:52,280 Speaker 1: in terms of retirement in savings. So I think financial 482 00:27:52,320 --> 00:27:55,440 Speaker 1: repression has been with us. It was with us for 483 00:27:55,440 --> 00:27:58,640 Speaker 1: forty years since World War Two till the Vulcar era, 484 00:27:58,960 --> 00:28:01,359 Speaker 1: and I think it will contain you for another five 485 00:28:01,880 --> 00:28:05,040 Speaker 1: fifteen years. They're the ones. Savers are the ones that 486 00:28:05,080 --> 00:28:08,560 Speaker 1: are paying the price. Bloomberg Television, thanks for being with 487 00:28:08,640 --> 00:28:12,360 Speaker 1: us today as well. Here with Bill Gross of Janie 488 00:28:12,480 --> 00:28:31,800 Speaker 1: Anderson as well. We're gonna go to our John Pharaoh 489 00:28:32,160 --> 00:28:35,240 Speaker 1: in the market opening television of course with Bloomberg Surveillance. 490 00:28:35,680 --> 00:28:41,520 Speaker 1: Here with Gary Kohn and National Economic Council Director for 491 00:28:41,600 --> 00:28:44,320 Speaker 1: the Trump administration's views on the job's report. I'm police 492 00:28:44,360 --> 00:28:46,560 Speaker 1: to say we now joined on Bloomberg Television and on 493 00:28:46,600 --> 00:28:49,600 Speaker 1: Bloomberg Radio from the White House by Gary Khan, National 494 00:28:49,640 --> 00:28:54,000 Speaker 1: Economic Council Director, Gary decent jobs numbers. Once again, I 495 00:28:54,000 --> 00:28:55,880 Speaker 1: think the obsession on the street at the moment not 496 00:28:55,920 --> 00:28:58,520 Speaker 1: the jobs report, but the tax bill that's going to 497 00:28:58,600 --> 00:29:01,280 Speaker 1: go through Congress. You said to me only about a 498 00:29:01,280 --> 00:29:05,040 Speaker 1: month ago that corporate tax rate was a red line. 499 00:29:05,520 --> 00:29:07,280 Speaker 1: It doesn't look like a red line now the President 500 00:29:07,320 --> 00:29:09,680 Speaker 1: suggested it could go to twenty two. Is it still 501 00:29:09,720 --> 00:29:13,240 Speaker 1: a red line? Well, Jonathan, thanks for having me here here. 502 00:29:13,320 --> 00:29:16,280 Speaker 1: Here's what we know. We know that we passed two bills, 503 00:29:16,360 --> 00:29:19,040 Speaker 1: one in the House, one in the Senate. They both 504 00:29:19,080 --> 00:29:22,760 Speaker 1: had a corporate tax rate in them. We know we're 505 00:29:22,800 --> 00:29:25,800 Speaker 1: in conference right now, and the conference between the House 506 00:29:25,800 --> 00:29:28,840 Speaker 1: and the Senate, they're supposed to conference the differences between 507 00:29:28,840 --> 00:29:31,320 Speaker 1: the two bills. That's what we know. It sounds like 508 00:29:31,320 --> 00:29:34,640 Speaker 1: we're so, what's the message that you're giving to them 509 00:29:34,840 --> 00:29:38,040 Speaker 1: the Gary you saying that is negotiable now because the 510 00:29:38,080 --> 00:29:42,080 Speaker 1: President suggesting it is. Look, John, they were were in 511 00:29:42,080 --> 00:29:44,960 Speaker 1: the process where we've taken two bills, one by the House, 512 00:29:45,040 --> 00:29:48,600 Speaker 1: one by the Senate. They've both written their independent bills 513 00:29:48,840 --> 00:29:51,720 Speaker 1: and we're trying to bring them together into one bill 514 00:29:52,120 --> 00:29:54,360 Speaker 1: that will be revoted on by both the House and 515 00:29:54,400 --> 00:29:57,400 Speaker 1: the Senate. The committees need to agree on what that 516 00:29:57,520 --> 00:29:59,960 Speaker 1: final bill is gonna look like and what exactly is 517 00:30:00,040 --> 00:30:02,640 Speaker 1: in there. What they're supposed to just take their differences 518 00:30:03,360 --> 00:30:06,040 Speaker 1: and merge them together and agree on the differences. That's 519 00:30:06,080 --> 00:30:08,560 Speaker 1: the process that's going on. A lot of that is 520 00:30:08,600 --> 00:30:11,240 Speaker 1: going to happen this weekend. Hopefully by the time we 521 00:30:11,320 --> 00:30:13,080 Speaker 1: get back to work on Monday, or you get back 522 00:30:13,080 --> 00:30:18,000 Speaker 1: to work on Monday. We're working all weekend. You know that. Good? Good, 523 00:30:18,040 --> 00:30:20,360 Speaker 1: I know that. I know that. Um, Well, we'll have 524 00:30:20,400 --> 00:30:23,560 Speaker 1: a pretty final tax bill here and we'll know, we'll 525 00:30:23,560 --> 00:30:25,960 Speaker 1: know where we're gonna be. There are a couple moving 526 00:30:26,000 --> 00:30:28,120 Speaker 1: parts up in the air, and we've got to get 527 00:30:28,120 --> 00:30:31,040 Speaker 1: to agreement between both chambers, and we've got to deliver 528 00:30:31,160 --> 00:30:33,560 Speaker 1: votes and votes chambers. And you know, there's a lot 529 00:30:33,560 --> 00:30:36,040 Speaker 1: of progress being made. Gary, I know you're gonna get 530 00:30:36,040 --> 00:30:37,920 Speaker 1: super frustrated with me, but you still haven't answer the 531 00:30:38,000 --> 00:30:42,720 Speaker 1: question red line for the White House. Look, the President 532 00:30:42,760 --> 00:30:47,760 Speaker 1: talked ab both bills have in them. That's where we are. 533 00:30:47,960 --> 00:30:50,200 Speaker 1: That's where the bills are. That's what that's what's in 534 00:30:50,240 --> 00:30:53,520 Speaker 1: the conference committee. Both bills. There's a conversation at the 535 00:30:53,560 --> 00:30:56,640 Speaker 1: moment about expanding the ten thousand dollar property deduction caps 536 00:30:56,720 --> 00:31:00,080 Speaker 1: include stay income tax deductions. Um, it's set to be 537 00:31:00,160 --> 00:31:03,520 Speaker 1: on the table. Does the White House support that? Gary? 538 00:31:04,160 --> 00:31:06,840 Speaker 1: What I think is on the table is the House 539 00:31:06,920 --> 00:31:09,840 Speaker 1: is concerned about their assault members. There's about seventies salt 540 00:31:10,000 --> 00:31:13,480 Speaker 1: state members in the House. We are very concerned about them. 541 00:31:13,680 --> 00:31:17,240 Speaker 1: No one really wants tax increases here, and what they're 542 00:31:17,240 --> 00:31:19,320 Speaker 1: trying to do is they're trying to say, look, maybe 543 00:31:19,320 --> 00:31:22,440 Speaker 1: we should expand the ten thousand dollar deduction not to 544 00:31:22,520 --> 00:31:25,880 Speaker 1: just include real estate taxes, but to also include income taxes. 545 00:31:25,960 --> 00:31:27,960 Speaker 1: The White House is fine with that. If that's where 546 00:31:27,960 --> 00:31:30,600 Speaker 1: the conferences go and the conference community goes, we're fine 547 00:31:30,600 --> 00:31:33,000 Speaker 1: to support that. Would you say increasing the corporate rights 548 00:31:33,040 --> 00:31:37,640 Speaker 1: to accommodate those kind of moves is something and welcome. Look, 549 00:31:37,680 --> 00:31:41,160 Speaker 1: we're the conferences are working this out among themselves to 550 00:31:41,280 --> 00:31:43,480 Speaker 1: come up with a bill that can get support in 551 00:31:43,600 --> 00:31:46,000 Speaker 1: both the House and the Senate. We've told you that 552 00:31:46,080 --> 00:31:48,840 Speaker 1: the whole time, that the White House is involved, and 553 00:31:48,920 --> 00:31:51,840 Speaker 1: we're quite actively involved. But ultimately, the tax bill is 554 00:31:51,840 --> 00:31:53,600 Speaker 1: written by the House and the Senate and we've got 555 00:31:53,640 --> 00:31:55,920 Speaker 1: to get it voted on by both chambers. Well, Gary, 556 00:31:56,000 --> 00:31:57,719 Speaker 1: something that popped up in the last week or so, 557 00:31:57,800 --> 00:32:00,320 Speaker 1: and it moved Marcus to a certain extent, was people 558 00:32:00,360 --> 00:32:02,960 Speaker 1: finding out that the the A M T rate was 559 00:32:03,040 --> 00:32:07,240 Speaker 1: still in there. Um, would you like to see that repealed? Look, 560 00:32:07,320 --> 00:32:10,120 Speaker 1: that's that's one of the areas where there's a difference 561 00:32:10,160 --> 00:32:13,360 Speaker 1: between the two bills. Um. There, that's one of the 562 00:32:13,400 --> 00:32:16,440 Speaker 1: issues where the conferences are working because there is a difference. 563 00:32:16,760 --> 00:32:18,240 Speaker 1: We would love to get rid of the a m 564 00:32:18,280 --> 00:32:21,040 Speaker 1: T rate because we don't want people to do their 565 00:32:21,080 --> 00:32:23,560 Speaker 1: taxes twice and pay the higher up. Where one of 566 00:32:23,560 --> 00:32:28,200 Speaker 1: our core principles was to simplify the tax system, a 567 00:32:28,400 --> 00:32:32,000 Speaker 1: m T makes the system much more complicated. So yes, 568 00:32:32,080 --> 00:32:34,320 Speaker 1: we would love to have a simple system where people 569 00:32:34,320 --> 00:32:36,560 Speaker 1: can do their taxes, as the President said, on a 570 00:32:36,640 --> 00:32:38,840 Speaker 1: on a postcard or a simple sheet of paper. A 571 00:32:38,960 --> 00:32:41,720 Speaker 1: MT does complicate the system. Gary, let's talk about the 572 00:32:41,760 --> 00:32:45,120 Speaker 1: jobs report, shall we? The average jobs report coming in 573 00:32:45,200 --> 00:32:48,400 Speaker 1: and around two today to eight. We've got used to this, 574 00:32:48,440 --> 00:32:51,680 Speaker 1: but wage groud is still disappointing. You have said before 575 00:32:52,160 --> 00:32:55,560 Speaker 1: that this this administration driving some of the payrollers games. 576 00:32:55,760 --> 00:32:58,800 Speaker 1: Do you also accept responsibility for the wage ground story 577 00:32:58,800 --> 00:33:01,320 Speaker 1: as well? That isn't proving and the white people wanted 578 00:33:01,360 --> 00:33:04,680 Speaker 1: to we do. We do. We accept that, and that's 579 00:33:04,680 --> 00:33:08,480 Speaker 1: why we need tax reform. We've been saying this consistently 580 00:33:08,920 --> 00:33:11,680 Speaker 1: that that that we need tax reform. We need to 581 00:33:11,720 --> 00:33:14,680 Speaker 1: allow workers in this country to a keep more of 582 00:33:14,720 --> 00:33:18,040 Speaker 1: what they earn. But more importantly, we need to be 583 00:33:18,080 --> 00:33:21,920 Speaker 1: able to to drive more wages to our hard working 584 00:33:22,240 --> 00:33:25,720 Speaker 1: citizens of this country. And we very firmly believe the 585 00:33:25,760 --> 00:33:29,440 Speaker 1: tax reform will drive to wage growth. You've seen reports 586 00:33:29,480 --> 00:33:32,240 Speaker 1: out from the c A and other people that we 587 00:33:32,280 --> 00:33:36,640 Speaker 1: believe this tax reform plan will drive will real wage 588 00:33:36,640 --> 00:33:39,160 Speaker 1: growth in this country. Hey, Gary, I love having you 589 00:33:39,200 --> 00:33:41,760 Speaker 1: in the position you're in because you really understand financial 590 00:33:41,760 --> 00:33:43,640 Speaker 1: markets as well. So I can tolt you about what's 591 00:33:43,640 --> 00:33:46,560 Speaker 1: happening with the two is ten spread and treasuries with 592 00:33:46,560 --> 00:33:49,320 Speaker 1: south the sixty basis points. For some people, that's the 593 00:33:49,320 --> 00:33:51,800 Speaker 1: market costing. A vote against your administration is saying we 594 00:33:51,840 --> 00:33:54,200 Speaker 1: don't believe you're gonna do this. What you rate on 595 00:33:54,240 --> 00:33:57,959 Speaker 1: the bond market. Look, I I think the bond market 596 00:33:58,080 --> 00:34:00,760 Speaker 1: right now is is a function of a lot of 597 00:34:00,760 --> 00:34:05,520 Speaker 1: stability in the economy, growth in the economy, lack of 598 00:34:05,640 --> 00:34:09,400 Speaker 1: wages as you said, and lack of inflation in the system. 599 00:34:09,520 --> 00:34:12,439 Speaker 1: Same thing we've been looking at for a relatively long 600 00:34:12,520 --> 00:34:15,400 Speaker 1: period of time here. We want to break this trend 601 00:34:15,560 --> 00:34:18,840 Speaker 1: of low wages in the system, and we're confident that 602 00:34:18,880 --> 00:34:21,120 Speaker 1: we can do that. So, Gary, as we move away 603 00:34:21,160 --> 00:34:25,719 Speaker 1: from tax cuts and tax overhaul, once that's completed, do 604 00:34:25,719 --> 00:34:28,080 Speaker 1: you think we can get infrastructure spending back on the 605 00:34:28,160 --> 00:34:31,560 Speaker 1: table again? Is that something you want to drive Yes, absolutely, 606 00:34:31,960 --> 00:34:34,120 Speaker 1: as we as we get into the new year, you 607 00:34:34,160 --> 00:34:36,759 Speaker 1: know there's gonna be two major initiatives being driven. It's 608 00:34:36,760 --> 00:34:40,000 Speaker 1: gonna be welfare reform and infrastructure will be working on 609 00:34:40,080 --> 00:34:43,640 Speaker 1: them both together. Our infrastructure plan is is quite intricate 610 00:34:43,680 --> 00:34:47,560 Speaker 1: and quite expansive. The President is really behind the infrastructure plan, 611 00:34:47,680 --> 00:34:49,479 Speaker 1: is spending a lot of time with us right now 612 00:34:49,800 --> 00:34:52,360 Speaker 1: to go through the plan and and and really understand it. 613 00:34:52,360 --> 00:34:55,040 Speaker 1: And he's driving us quite aggressively to get out there 614 00:34:55,080 --> 00:34:58,000 Speaker 1: with an aggressive infrastructure plan. Gary hates to us for 615 00:34:58,000 --> 00:35:00,520 Speaker 1: a timeline because if we experienced throughout this year that 616 00:35:00,600 --> 00:35:03,799 Speaker 1: timeline attacks has just sort of drifted through seen. But 617 00:35:03,960 --> 00:35:05,719 Speaker 1: for you, when do you think that can be accomplished 618 00:35:05,719 --> 00:35:08,319 Speaker 1: next year? Look, we're gonna start right after the first 619 00:35:08,440 --> 00:35:10,799 Speaker 1: year on infrastructure and as as quickly as we can 620 00:35:10,800 --> 00:35:13,640 Speaker 1: get it through the process. Infrastructure tends to be a 621 00:35:13,680 --> 00:35:16,400 Speaker 1: slower process. There's about six or seven committees in the 622 00:35:16,400 --> 00:35:19,880 Speaker 1: House that have jurisdiction over infrastructure. But the thing that 623 00:35:19,920 --> 00:35:21,880 Speaker 1: we can do that will have the most impact, and 624 00:35:21,960 --> 00:35:25,640 Speaker 1: we do control a lot of this, is the approval processes. 625 00:35:26,120 --> 00:35:28,920 Speaker 1: We need to speed up the approval process for infrastructure. 626 00:35:28,960 --> 00:35:31,759 Speaker 1: There is money in the system to build infrastructure. We 627 00:35:31,800 --> 00:35:34,839 Speaker 1: need to get the approvals sped up so that money 628 00:35:34,920 --> 00:35:37,000 Speaker 1: can be spent. Gary, guess what I'm gonna watch you 629 00:35:37,040 --> 00:35:40,879 Speaker 1: next about markets? Bitcoin? Is the White House watching what's 630 00:35:40,920 --> 00:35:43,720 Speaker 1: happening with bitcoin? And what do you think him? Right now? Gary? 631 00:35:43,800 --> 00:35:45,760 Speaker 1: Is this a serious risk? Is it's something you worried about? 632 00:35:46,880 --> 00:35:50,040 Speaker 1: We're we're watching it. Of course we're watching it right now. 633 00:35:50,080 --> 00:35:53,280 Speaker 1: We don't think it's a serious risk, but clearly we're watching. 634 00:35:53,360 --> 00:35:55,120 Speaker 1: Is it something you want to act on? No, Gary, 635 00:35:55,400 --> 00:35:57,080 Speaker 1: the I R S is it's something that they should 636 00:35:57,080 --> 00:35:58,600 Speaker 1: be looking at it. Is it's something you think needs 637 00:35:58,640 --> 00:36:02,560 Speaker 1: to be regulated? Well as you know, I think that 638 00:36:03,280 --> 00:36:05,279 Speaker 1: you know. The the cfccs have proved a couple of 639 00:36:05,280 --> 00:36:08,359 Speaker 1: futures contracts. Will see what effect that has. It will 640 00:36:08,400 --> 00:36:10,839 Speaker 1: allow people the ability to short it. There's never been 641 00:36:11,120 --> 00:36:15,759 Speaker 1: a transparent market, uh in bitcoin. We'll see what goes 642 00:36:15,800 --> 00:36:18,600 Speaker 1: on here. It's an evolving market. We've we've watched this 643 00:36:18,840 --> 00:36:22,239 Speaker 1: happened before as markets have evolved. Hi, Gary, thank you 644 00:36:22,320 --> 00:36:25,800 Speaker 1: very much. Gary Kin, white House National Economic Council Director, 645 00:36:26,040 --> 00:36:29,600 Speaker 1: joining us from John Farrell of Bloomberg Surveillance in the 646 00:36:29,719 --> 00:36:33,000 Speaker 1: Open on Bloomberg Television. That was I thought a interview 647 00:36:33,040 --> 00:36:43,680 Speaker 1: of great velocity. Thanks for listening to the Bloomberg Surveillance podcast. 648 00:36:44,040 --> 00:36:49,000 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 649 00:36:49,160 --> 00:36:53,440 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 650 00:36:53,560 --> 00:36:57,440 Speaker 1: Keane before the podcast. You can always catch us worldwide. 651 00:36:57,880 --> 00:37:01,960 Speaker 1: I'm Bloomberg Radio a