1 00:00:02,520 --> 00:00:07,080 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,320 --> 00:00:10,680 Speaker 2: Larry Summers, the former US Treasury Secretary and Harvard University 3 00:00:10,680 --> 00:00:13,360 Speaker 2: president emeritus, who is here with us on Bloomberg TV 4 00:00:13,560 --> 00:00:16,520 Speaker 2: and Radio. Mister Secretary, it's great to have you, and 5 00:00:16,560 --> 00:00:18,400 Speaker 2: thanks very much for your patients with us as we 6 00:00:18,440 --> 00:00:21,640 Speaker 2: work through all of this news. Obviously, and you've spoken 7 00:00:21,640 --> 00:00:23,880 Speaker 2: about this at length with our colleague David Weston. There 8 00:00:23,920 --> 00:00:26,840 Speaker 2: is economic impact of tariffs to consider, but what about 9 00:00:26,840 --> 00:00:29,639 Speaker 2: the potential economic toll when it comes to business investment 10 00:00:29,720 --> 00:00:32,280 Speaker 2: and activity on the part of consumers of just a 11 00:00:32,360 --> 00:00:36,479 Speaker 2: lack of certainty around what these policies actually look like. 12 00:00:36,600 --> 00:00:39,239 Speaker 2: Is implementing them and pulling them back just as damaging 13 00:00:39,240 --> 00:00:42,160 Speaker 2: potentially as leaving them intact. 14 00:00:43,760 --> 00:00:44,920 Speaker 1: Look, it's all there. 15 00:00:47,000 --> 00:00:52,640 Speaker 3: These tariffs are a self inflicted supply shock wound higher prices, 16 00:00:53,880 --> 00:00:58,520 Speaker 3: less competitiveness because businesses are having to pay more for 17 00:00:59,000 --> 00:01:05,080 Speaker 3: all their inputs, and because they have to pay higher prices, 18 00:01:05,480 --> 00:01:09,560 Speaker 3: less purchasing power for consumers, which means fewer jobs down 19 00:01:09,640 --> 00:01:12,959 Speaker 3: the road. So these are like an oil price shock. 20 00:01:13,400 --> 00:01:16,640 Speaker 3: They're just all bad for the economy, and they're probably 21 00:01:16,760 --> 00:01:19,280 Speaker 3: like it, and they probably were like an oil price 22 00:01:19,319 --> 00:01:22,360 Speaker 3: shock of forty dollars a barrel in terms of what 23 00:01:22,520 --> 00:01:25,720 Speaker 3: was being done to Mexico and Canada. And now with 24 00:01:25,800 --> 00:01:28,800 Speaker 3: these changes, maybe it's only twenty five or thirty dollars 25 00:01:29,920 --> 00:01:36,000 Speaker 3: a barrel, but it's still clear big and bad. That's 26 00:01:36,120 --> 00:01:39,440 Speaker 3: why before they started saying they were going to take 27 00:01:39,480 --> 00:01:43,400 Speaker 3: the tariffs off, almost two trillion dollars of stock market 28 00:01:43,400 --> 00:01:47,120 Speaker 3: wealth had been destroyed in a matter of two days. 29 00:01:48,200 --> 00:01:53,560 Speaker 3: Now nobody knows quite what's going to happen, But why 30 00:01:53,560 --> 00:01:57,200 Speaker 3: would you make an important investment decision amidst all of 31 00:01:57,240 --> 00:02:00,960 Speaker 3: this uncertainty if you were thinking about buying a new 32 00:02:01,040 --> 00:02:05,680 Speaker 3: car or buying a new house. When you wait, and 33 00:02:05,720 --> 00:02:10,160 Speaker 3: when everybody waits, the economy slows down. And that's why 34 00:02:10,200 --> 00:02:14,919 Speaker 3: the risk of recession, which everybody thought was extremely unlikely 35 00:02:15,040 --> 00:02:19,320 Speaker 3: on January twentieth, is now seen by many many people 36 00:02:19,800 --> 00:02:25,160 Speaker 3: as a real and serious risk for some time this year. 37 00:02:25,760 --> 00:02:31,919 Speaker 3: So I think we're doing real damage to the economy. 38 00:02:32,720 --> 00:02:35,679 Speaker 1: It's not just a short run thing. 39 00:02:36,960 --> 00:02:41,880 Speaker 3: Inflation expectations for the long term, for five or ten years, 40 00:02:42,400 --> 00:02:47,239 Speaker 3: are higher than they've been in a very long time. 41 00:02:47,440 --> 00:02:49,080 Speaker 1: According to the Michigan Survey. 42 00:02:49,680 --> 00:02:53,320 Speaker 3: You know, I heard the President talk about a little disturbance, 43 00:02:53,440 --> 00:02:58,239 Speaker 3: and I heard the Senator talk about that, a little 44 00:02:58,280 --> 00:03:02,280 Speaker 3: disturbance that will work through and then it will be good. 45 00:03:03,040 --> 00:03:06,639 Speaker 3: You know what that sounds like. It sounds like transittory inflation. 46 00:03:07,800 --> 00:03:11,160 Speaker 3: Transitory inflation didn't work out very well for the people 47 00:03:11,160 --> 00:03:16,200 Speaker 3: who use that term in twenty twenty one and twenty 48 00:03:16,240 --> 00:03:18,560 Speaker 3: twenty two. It didn't work out very well for the 49 00:03:18,600 --> 00:03:21,639 Speaker 3: Biden administration, it didn't work out very well for the Fed. 50 00:03:22,240 --> 00:03:24,920 Speaker 3: And I don't think talking about it how inflation is 51 00:03:24,960 --> 00:03:28,280 Speaker 3: transfittory is going to work out very well for the 52 00:03:28,320 --> 00:03:33,760 Speaker 3: Trump administration either. So I hope they'll respond to the 53 00:03:33,800 --> 00:03:38,360 Speaker 3: market signals and they'll find a way to save face 54 00:03:39,120 --> 00:03:44,840 Speaker 3: and they'll back off all of this stuff. That would 55 00:03:44,840 --> 00:03:47,840 Speaker 3: be what would be best. 56 00:03:47,680 --> 00:03:48,560 Speaker 1: For the country. 57 00:03:49,040 --> 00:03:55,000 Speaker 3: But I really do worry about the sense that we're 58 00:03:55,120 --> 00:04:00,760 Speaker 3: becoming President calls this CEO calls that she so that 59 00:04:01,080 --> 00:04:04,520 Speaker 3: we're becoming a bit of a crony capitalism. 60 00:04:05,320 --> 00:04:06,280 Speaker 1: Kind of country. 61 00:04:06,320 --> 00:04:10,000 Speaker 3: When you see that the Doze seems to be talking 62 00:04:10,040 --> 00:04:16,480 Speaker 3: about recontracting things towards the Starlink company. When you see 63 00:04:16,520 --> 00:04:22,360 Speaker 3: that law firms that represented parties adverse to the president 64 00:04:22,880 --> 00:04:29,599 Speaker 3: are having all their clients penalized across the administration. This 65 00:04:29,839 --> 00:04:36,039 Speaker 3: is the Argentine way, not the American way, and I 66 00:04:36,040 --> 00:04:39,719 Speaker 3: think there's a substantial risk that it will have costs. 67 00:04:39,800 --> 00:04:44,720 Speaker 3: And what's really sad to me about all this is 68 00:04:45,440 --> 00:04:49,520 Speaker 3: there's a lot of truth in things that the President's 69 00:04:49,640 --> 00:04:54,560 Speaker 3: trying to do. There is waste in the way the 70 00:04:54,560 --> 00:04:59,039 Speaker 3: federal government does technology in it should be fixed by 71 00:04:59,240 --> 00:05:01,279 Speaker 3: people with more expertise than. 72 00:05:01,800 --> 00:05:04,720 Speaker 1: Long term government employees. 73 00:05:05,120 --> 00:05:09,040 Speaker 3: There have been huge problems in the way we have 74 00:05:09,839 --> 00:05:16,800 Speaker 3: protected our borders. We've emphasized too much things other than 75 00:05:16,839 --> 00:05:23,880 Speaker 3: excellence in hiring workers for too long. We've had too 76 00:05:23,920 --> 00:05:30,240 Speaker 3: much regulation that has slowed things down too much and 77 00:05:30,360 --> 00:05:36,360 Speaker 3: made it expensive to build things. Sometimes other countries have 78 00:05:36,400 --> 00:05:40,360 Speaker 3: taken advantage of the United States, and so there are 79 00:05:40,640 --> 00:05:46,520 Speaker 3: impulses here that are right. But if you do things 80 00:05:47,360 --> 00:05:56,599 Speaker 3: too impulsively, too quickly, too carelessly, and with too many 81 00:05:56,640 --> 00:05:59,760 Speaker 3: conflicts of interest where the people who are advising you 82 00:05:59,800 --> 00:06:04,320 Speaker 3: are also the people who are profiting from you, then 83 00:06:04,400 --> 00:06:09,080 Speaker 3: I think you're taking big risks with our economic system. 84 00:06:10,360 --> 00:06:13,080 Speaker 4: Well, so, mister Secretary, you just said a lot that 85 00:06:13,120 --> 00:06:16,280 Speaker 4: we can unpack her. When it comes to tariffs, we 86 00:06:16,360 --> 00:06:19,560 Speaker 4: read you what will be the economic impact of the DOGE, 87 00:06:19,600 --> 00:06:22,680 Speaker 4: because that's bringing an enormous amount of confusion as well. 88 00:06:22,760 --> 00:06:25,920 Speaker 4: Hesitancy to hire is the headline on the ADP Jobs 89 00:06:25,960 --> 00:06:28,599 Speaker 4: report today. Elon Musk is on Capitol Hill meeting with 90 00:06:28,880 --> 00:06:31,160 Speaker 4: members of the House and Senate right now, presumably to 91 00:06:31,200 --> 00:06:33,760 Speaker 4: connect the dots between what the DOGE is finding in 92 00:06:33,800 --> 00:06:37,800 Speaker 4: some form of legislation that will be leading its way 93 00:06:37,920 --> 00:06:41,640 Speaker 4: to a budget. But the fog that's coming from DOGE, 94 00:06:41,680 --> 00:06:43,919 Speaker 4: with the wall of receipts, some of the claims that 95 00:06:43,960 --> 00:06:45,800 Speaker 4: have not turned out to be true. The gutting of 96 00:06:45,800 --> 00:06:50,120 Speaker 4: the IRS means what for our economy. 97 00:06:51,120 --> 00:06:52,240 Speaker 1: I think it means. 98 00:06:53,440 --> 00:07:00,320 Speaker 3: More chaos, higher prices, probably next to no progress on 99 00:07:00,360 --> 00:07:06,719 Speaker 3: the government deficit. Look, the irsh needs more workers, not fewer. 100 00:07:07,520 --> 00:07:10,520 Speaker 3: In one recent three year period, there were one hundred 101 00:07:10,560 --> 00:07:14,520 Speaker 3: people who had incomes over ten million dollars who didn't 102 00:07:14,560 --> 00:07:18,320 Speaker 3: even get their returns audited in any way when they 103 00:07:18,320 --> 00:07:21,800 Speaker 3: didn't file any return at all. 104 00:07:21,960 --> 00:07:24,560 Speaker 1: So, yeah, we got to work on the IRS. 105 00:07:25,360 --> 00:07:29,320 Speaker 3: But when we go cutting the air traffic safety systems, 106 00:07:30,040 --> 00:07:34,040 Speaker 3: when we go slashing thousands of people whose job it 107 00:07:34,080 --> 00:07:39,040 Speaker 3: is to enforce the tax law, and to man the helplines, 108 00:07:39,640 --> 00:07:43,880 Speaker 3: and we do it on an impulse and a few 109 00:07:43,880 --> 00:07:51,400 Speaker 3: hours study by a person with no past experience in government. See, 110 00:07:51,440 --> 00:07:55,800 Speaker 3: I think that's dangerous. And that's the American. 111 00:07:55,360 --> 00:07:55,800 Speaker 1: Part of it. 112 00:07:55,840 --> 00:07:59,920 Speaker 3: For the economy, that's probably what's most important to Americans. 113 00:08:00,680 --> 00:08:04,600 Speaker 3: I have to say that when I read that the 114 00:08:04,720 --> 00:08:08,800 Speaker 3: United States has, for decades since President Bush, who was 115 00:08:08,840 --> 00:08:14,040 Speaker 3: certainly no fiery liberal, put in place program to build 116 00:08:14,080 --> 00:08:17,800 Speaker 3: goodwill for the United States by providing medicines for AIDS 117 00:08:17,840 --> 00:08:21,480 Speaker 3: and other diseases that has saved millions of. 118 00:08:21,480 --> 00:08:24,680 Speaker 1: Lives, saved more than a million lives per year. 119 00:08:25,600 --> 00:08:29,000 Speaker 3: When I see that medicine from that program has just 120 00:08:29,080 --> 00:08:36,360 Speaker 3: been ruthlessly cut off despite congressional approval, with no protection 121 00:08:37,120 --> 00:08:41,320 Speaker 3: or careful thought, and that people are dying because the 122 00:08:41,400 --> 00:08:44,600 Speaker 3: United States just decided to go do a bunch of 123 00:08:45,200 --> 00:08:48,479 Speaker 3: experiments like it was a business being. 124 00:08:48,280 --> 00:08:50,640 Speaker 1: Restructured, that scares me. 125 00:08:51,440 --> 00:08:55,160 Speaker 3: So I think this is going to be pretty serious 126 00:08:55,200 --> 00:09:00,120 Speaker 3: for our economy. And look, President Trump is someone who 127 00:09:00,120 --> 00:09:04,200 Speaker 3: has in the past, at least always when the stock 128 00:09:04,280 --> 00:09:05,440 Speaker 3: market went up. 129 00:09:05,679 --> 00:09:08,319 Speaker 1: He was always linking it to what he did. 130 00:09:09,280 --> 00:09:12,199 Speaker 3: And we couldn't have had clearer evidence over the last 131 00:09:12,240 --> 00:09:17,080 Speaker 3: couple days that when he's pursuing the policies about which 132 00:09:17,080 --> 00:09:22,920 Speaker 3: he's enthusiastic, the market is plummeting, and when he's reversing course, 133 00:09:23,720 --> 00:09:27,400 Speaker 3: the market is rallying. And I hope that'll be a 134 00:09:27,520 --> 00:09:30,560 Speaker 3: lesson on many aspects of the broad approach. 135 00:09:32,000 --> 00:09:35,760 Speaker 2: Well, it also is creating an interesting split screen, mister Secretary, 136 00:09:35,800 --> 00:09:38,520 Speaker 2: because as we have the conversation here about the rattling 137 00:09:38,600 --> 00:09:41,439 Speaker 2: of US equity markets, everything you just talked about in 138 00:09:41,520 --> 00:09:44,720 Speaker 2: terms of what potentially could be happening in the US economy, 139 00:09:44,760 --> 00:09:47,360 Speaker 2: you are seeing a flood of capital into Europe, as 140 00:09:47,400 --> 00:09:49,600 Speaker 2: Germany is now signaling they're going to have whatever it 141 00:09:49,679 --> 00:09:53,880 Speaker 2: takes approach to increase spending. We've seen a flood into 142 00:09:53,880 --> 00:09:57,840 Speaker 2: European equities, obviously massive action in the boon market today. 143 00:09:57,960 --> 00:10:05,640 Speaker 2: Is this the end, potentially of US exceptionalism. 144 00:10:06,600 --> 00:10:11,320 Speaker 3: I think it would be premature to say, on the 145 00:10:11,360 --> 00:10:14,280 Speaker 3: basis of anything that happened in a few days or 146 00:10:14,320 --> 00:10:17,000 Speaker 3: even a few weeks, that it was the end of 147 00:10:17,600 --> 00:10:23,439 Speaker 3: US exceptionalism. But I will say this, I think the 148 00:10:23,480 --> 00:10:26,000 Speaker 3: broad approach we are taking to the rest of the 149 00:10:26,040 --> 00:10:33,040 Speaker 3: world represents the biggest threat to the US dollars role 150 00:10:33,920 --> 00:10:40,160 Speaker 3: as the central currency in the world economy that we've 151 00:10:40,240 --> 00:10:44,960 Speaker 3: had in the last five decades, And if I were 152 00:10:45,040 --> 00:10:50,040 Speaker 3: still sitting at the Treasury Department, I would be terrified 153 00:10:50,800 --> 00:10:57,120 Speaker 3: about the consequences of the kind of rhetoric that the 154 00:10:57,200 --> 00:11:01,240 Speaker 3: President is engaging in vis a vis other countries. I 155 00:11:01,280 --> 00:11:07,080 Speaker 3: would be alarmed by the way in which China and 156 00:11:07,200 --> 00:11:13,200 Speaker 3: Europe were trapped being magnets for capital as people rushed 157 00:11:13,200 --> 00:11:19,200 Speaker 3: out of dollars, were increasingly aliging with each other because 158 00:11:19,240 --> 00:11:26,880 Speaker 3: they had both been alienated from us, And knowing that 159 00:11:27,000 --> 00:11:31,160 Speaker 3: I was going to have trillions and trillions of dollars 160 00:11:31,200 --> 00:11:35,160 Speaker 3: that I had to place, and that I was part 161 00:11:35,200 --> 00:11:40,199 Speaker 3: of an administration that was going to raise substantially the 162 00:11:40,240 --> 00:11:44,080 Speaker 3: scale of the national debt with these new ideas like 163 00:11:44,240 --> 00:11:49,559 Speaker 3: not taxing over time or not taxing tips, and extending 164 00:11:49,600 --> 00:11:51,440 Speaker 3: the tax cuts for. 165 00:11:52,720 --> 00:11:55,160 Speaker 1: Businesses and businesses. 166 00:11:54,600 --> 00:11:57,560 Speaker 3: In the wealthy in a massive way, so that we 167 00:11:57,559 --> 00:12:00,960 Speaker 3: were looking at budget deficits that could easy exceed two 168 00:12:00,960 --> 00:12:02,200 Speaker 3: trillion dollars a year. 169 00:12:03,040 --> 00:12:03,880 Speaker 1: I had to plant. 170 00:12:04,080 --> 00:12:08,840 Speaker 3: I had to place all that debt. When the President 171 00:12:09,120 --> 00:12:14,400 Speaker 3: was calling out and yelling and complaining about all the 172 00:12:14,440 --> 00:12:20,720 Speaker 3: countries that were traditionally the biggest buyers of the debt, 173 00:12:20,800 --> 00:12:23,959 Speaker 3: and the President was saying that anything was legal as 174 00:12:23,960 --> 00:12:26,600 Speaker 3: long as it was working for the survival of the country, 175 00:12:26,640 --> 00:12:28,320 Speaker 3: and he wanted. 176 00:12:28,320 --> 00:12:28,959 Speaker 1: To do it. 177 00:12:30,160 --> 00:12:33,840 Speaker 3: I'd be hugely alarmed about the role of the dollar 178 00:12:35,160 --> 00:12:40,840 Speaker 3: in our system, and I'd be doing everything I could 179 00:12:41,400 --> 00:12:47,319 Speaker 3: to try to persuade the President to change course. In fairness, 180 00:12:47,320 --> 00:12:49,480 Speaker 3: I wouldn't be doing it publicly. I'd be doing it 181 00:12:49,600 --> 00:12:54,640 Speaker 3: behind closed doors. But we have a Treasury Secretary whose 182 00:12:55,120 --> 00:12:58,080 Speaker 3: principal comment on the President has been to suggest that 183 00:12:58,120 --> 00:12:58,760 Speaker 3: he should. 184 00:12:58,520 --> 00:13:02,480 Speaker 1: Win a Nobel prize for his appeasement to President Putin. 185 00:13:03,320 --> 00:13:07,120 Speaker 3: So I think we have a really serious set of 186 00:13:07,160 --> 00:13:12,000 Speaker 3: issues that may loom. There's time to change There's time 187 00:13:12,080 --> 00:13:19,199 Speaker 3: to change course. There's time to eliminate these kinds of tariffs. 188 00:13:19,240 --> 00:13:24,520 Speaker 3: There's time to try to draw on the expertise in 189 00:13:24,559 --> 00:13:31,640 Speaker 3: the DOGE in more responsible ways. And if that happens, 190 00:13:32,720 --> 00:13:36,880 Speaker 3: I think things could work out well. But gosh, we're 191 00:13:37,320 --> 00:13:45,440 Speaker 3: looking at some risks and uncertainties of a kind we 192 00:13:45,640 --> 00:13:50,520 Speaker 3: haven't seen before. You know, Wall Street, as you know 193 00:13:51,120 --> 00:13:53,480 Speaker 3: better than I because you report on it all the time. 194 00:13:53,920 --> 00:13:58,120 Speaker 3: Has this thing the vics so called fear gauge. It 195 00:13:58,160 --> 00:14:01,360 Speaker 3: went up by almost fifty percent, and in a matter 196 00:14:01,400 --> 00:14:04,200 Speaker 3: of a couple of days because of the things that 197 00:14:04,720 --> 00:14:07,160 Speaker 3: were being said. 198 00:14:07,920 --> 00:14:11,079 Speaker 1: So I just hope that. 199 00:14:12,400 --> 00:14:18,040 Speaker 3: We can all take a deep breath, that we can 200 00:14:18,120 --> 00:14:24,160 Speaker 3: recognize that there are plenty of real problems that need 201 00:14:24,160 --> 00:14:27,320 Speaker 3: to be addressed, and that the President in his campaign 202 00:14:27,440 --> 00:14:32,240 Speaker 3: identified some important directions in which our country and its 203 00:14:32,280 --> 00:14:35,640 Speaker 3: economy could be made better. But God, the way we're 204 00:14:35,680 --> 00:14:39,800 Speaker 3: going about it is something that seems very scary to me. 205 00:14:41,440 --> 00:14:45,000 Speaker 4: That VIX is down today but still holding above twenty two. Larry, 206 00:14:45,040 --> 00:14:46,600 Speaker 4: it's really great to have you with us here on 207 00:14:46,640 --> 00:14:49,040 Speaker 4: balance of power. We do appreciate the conversation. The former 208 00:14:49,160 --> 00:14:52,040 Speaker 4: US Treasury Secretary of Larry Summers, of course, Harvard University 209 00:14:52,320 --> 00:14:55,920 Speaker 4: President emeritus, with his insights on tariffs, tax cuts, and 210 00:14:55,960 --> 00:14:59,120 Speaker 4: a lot more today in a live conversation on Bloomberg 211 00:14:59,160 --> 00:14:59,880 Speaker 4: TV and Radio.