WEBVTT - Former US Treasury Secretary Lawrence H. Summers Talks Trump Tariffs, DOGE, Threats to the Dollar 0:00:02.520 --> 0:00:07.080 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.320 --> 0:00:10.680 Larry Summers, the former US Treasury Secretary and Harvard University 0:00:10.680 --> 0:00:13.360 president emeritus, who is here with us on Bloomberg TV 0:00:13.560 --> 0:00:16.520 and Radio. Mister Secretary, it's great to have you, and 0:00:16.560 --> 0:00:18.400 thanks very much for your patients with us as we 0:00:18.440 --> 0:00:21.640 work through all of this news. Obviously, and you've spoken 0:00:21.640 --> 0:00:23.880 about this at length with our colleague David Weston. There 0:00:23.920 --> 0:00:26.840 is economic impact of tariffs to consider, but what about 0:00:26.840 --> 0:00:29.639 the potential economic toll when it comes to business investment 0:00:29.720 --> 0:00:32.280 and activity on the part of consumers of just a 0:00:32.360 --> 0:00:36.479 lack of certainty around what these policies actually look like. 0:00:36.600 --> 0:00:39.239 Is implementing them and pulling them back just as damaging 0:00:39.240 --> 0:00:42.160 potentially as leaving them intact. 0:00:43.760 --> 0:00:44.920 Look, it's all there. 0:00:47.000 --> 0:00:52.640 These tariffs are a self inflicted supply shock wound higher prices, 0:00:53.880 --> 0:00:58.520 less competitiveness because businesses are having to pay more for 0:00:59.000 --> 0:01:05.080 all their inputs, and because they have to pay higher prices, 0:01:05.480 --> 0:01:09.560 less purchasing power for consumers, which means fewer jobs down 0:01:09.640 --> 0:01:12.959 the road. So these are like an oil price shock. 0:01:13.400 --> 0:01:16.640 They're just all bad for the economy, and they're probably 0:01:16.760 --> 0:01:19.280 like it, and they probably were like an oil price 0:01:19.319 --> 0:01:22.360 shock of forty dollars a barrel in terms of what 0:01:22.520 --> 0:01:25.720 was being done to Mexico and Canada. And now with 0:01:25.800 --> 0:01:28.800 these changes, maybe it's only twenty five or thirty dollars 0:01:29.920 --> 0:01:36.000 a barrel, but it's still clear big and bad. That's 0:01:36.120 --> 0:01:39.440 why before they started saying they were going to take 0:01:39.480 --> 0:01:43.400 the tariffs off, almost two trillion dollars of stock market 0:01:43.400 --> 0:01:47.120 wealth had been destroyed in a matter of two days. 0:01:48.200 --> 0:01:53.560 Now nobody knows quite what's going to happen, But why 0:01:53.560 --> 0:01:57.200 would you make an important investment decision amidst all of 0:01:57.240 --> 0:02:00.960 this uncertainty if you were thinking about buying a new 0:02:01.040 --> 0:02:05.680 car or buying a new house. When you wait, and 0:02:05.720 --> 0:02:10.160 when everybody waits, the economy slows down. And that's why 0:02:10.200 --> 0:02:14.919 the risk of recession, which everybody thought was extremely unlikely 0:02:15.040 --> 0:02:19.320 on January twentieth, is now seen by many many people 0:02:19.800 --> 0:02:25.160 as a real and serious risk for some time this year. 0:02:25.760 --> 0:02:31.919 So I think we're doing real damage to the economy. 0:02:32.720 --> 0:02:35.679 It's not just a short run thing. 0:02:36.960 --> 0:02:41.880 Inflation expectations for the long term, for five or ten years, 0:02:42.400 --> 0:02:47.239 are higher than they've been in a very long time. 0:02:47.440 --> 0:02:49.080 According to the Michigan Survey. 0:02:49.680 --> 0:02:53.320 You know, I heard the President talk about a little disturbance, 0:02:53.440 --> 0:02:58.239 and I heard the Senator talk about that, a little 0:02:58.280 --> 0:03:02.280 disturbance that will work through and then it will be good. 0:03:03.040 --> 0:03:06.639 You know what that sounds like. It sounds like transittory inflation. 0:03:07.800 --> 0:03:11.160 Transitory inflation didn't work out very well for the people 0:03:11.160 --> 0:03:16.200 who use that term in twenty twenty one and twenty 0:03:16.240 --> 0:03:18.560 twenty two. It didn't work out very well for the 0:03:18.600 --> 0:03:21.639 Biden administration, it didn't work out very well for the Fed. 0:03:22.240 --> 0:03:24.920 And I don't think talking about it how inflation is 0:03:24.960 --> 0:03:28.280 transfittory is going to work out very well for the 0:03:28.320 --> 0:03:33.760 Trump administration either. So I hope they'll respond to the 0:03:33.800 --> 0:03:38.360 market signals and they'll find a way to save face 0:03:39.120 --> 0:03:44.840 and they'll back off all of this stuff. That would 0:03:44.840 --> 0:03:47.840 be what would be best. 0:03:47.680 --> 0:03:48.560 For the country. 0:03:49.040 --> 0:03:55.000 But I really do worry about the sense that we're 0:03:55.120 --> 0:04:00.760 becoming President calls this CEO calls that she so that 0:04:01.080 --> 0:04:04.520 we're becoming a bit of a crony capitalism. 0:04:05.320 --> 0:04:06.280 Kind of country. 0:04:06.320 --> 0:04:10.000 When you see that the Doze seems to be talking 0:04:10.040 --> 0:04:16.480 about recontracting things towards the Starlink company. When you see 0:04:16.520 --> 0:04:22.360 that law firms that represented parties adverse to the president 0:04:22.880 --> 0:04:29.599 are having all their clients penalized across the administration. This 0:04:29.839 --> 0:04:36.039 is the Argentine way, not the American way, and I 0:04:36.040 --> 0:04:39.719 think there's a substantial risk that it will have costs. 0:04:39.800 --> 0:04:44.720 And what's really sad to me about all this is 0:04:45.440 --> 0:04:49.520 there's a lot of truth in things that the President's 0:04:49.640 --> 0:04:54.560 trying to do. There is waste in the way the 0:04:54.560 --> 0:04:59.039 federal government does technology in it should be fixed by 0:04:59.240 --> 0:05:01.279 people with more expertise than. 0:05:01.800 --> 0:05:04.720 Long term government employees. 0:05:05.120 --> 0:05:09.040 There have been huge problems in the way we have 0:05:09.839 --> 0:05:16.800 protected our borders. We've emphasized too much things other than 0:05:16.839 --> 0:05:23.880 excellence in hiring workers for too long. We've had too 0:05:23.920 --> 0:05:30.240 much regulation that has slowed things down too much and 0:05:30.360 --> 0:05:36.360 made it expensive to build things. Sometimes other countries have 0:05:36.400 --> 0:05:40.360 taken advantage of the United States, and so there are 0:05:40.640 --> 0:05:46.520 impulses here that are right. But if you do things 0:05:47.360 --> 0:05:56.599 too impulsively, too quickly, too carelessly, and with too many 0:05:56.640 --> 0:05:59.760 conflicts of interest where the people who are advising you 0:05:59.800 --> 0:06:04.320 are also the people who are profiting from you, then 0:06:04.400 --> 0:06:09.080 I think you're taking big risks with our economic system. 0:06:10.360 --> 0:06:13.080 Well, so, mister Secretary, you just said a lot that 0:06:13.120 --> 0:06:16.280 we can unpack her. When it comes to tariffs, we 0:06:16.360 --> 0:06:19.560 read you what will be the economic impact of the DOGE, 0:06:19.600 --> 0:06:22.680 because that's bringing an enormous amount of confusion as well. 0:06:22.760 --> 0:06:25.920 Hesitancy to hire is the headline on the ADP Jobs 0:06:25.960 --> 0:06:28.599 report today. Elon Musk is on Capitol Hill meeting with 0:06:28.880 --> 0:06:31.160 members of the House and Senate right now, presumably to 0:06:31.200 --> 0:06:33.760 connect the dots between what the DOGE is finding in 0:06:33.800 --> 0:06:37.800 some form of legislation that will be leading its way 0:06:37.920 --> 0:06:41.640 to a budget. But the fog that's coming from DOGE, 0:06:41.680 --> 0:06:43.919 with the wall of receipts, some of the claims that 0:06:43.960 --> 0:06:45.800 have not turned out to be true. The gutting of 0:06:45.800 --> 0:06:50.120 the IRS means what for our economy. 0:06:51.120 --> 0:06:52.240 I think it means. 0:06:53.440 --> 0:07:00.320 More chaos, higher prices, probably next to no progress on 0:07:00.360 --> 0:07:06.719 the government deficit. Look, the irsh needs more workers, not fewer. 0:07:07.520 --> 0:07:10.520 In one recent three year period, there were one hundred 0:07:10.560 --> 0:07:14.520 people who had incomes over ten million dollars who didn't 0:07:14.560 --> 0:07:18.320 even get their returns audited in any way when they 0:07:18.320 --> 0:07:21.800 didn't file any return at all. 0:07:21.960 --> 0:07:24.560 So, yeah, we got to work on the IRS. 0:07:25.360 --> 0:07:29.320 But when we go cutting the air traffic safety systems, 0:07:30.040 --> 0:07:34.040 when we go slashing thousands of people whose job it 0:07:34.080 --> 0:07:39.040 is to enforce the tax law, and to man the helplines, 0:07:39.640 --> 0:07:43.880 and we do it on an impulse and a few 0:07:43.880 --> 0:07:51.400 hours study by a person with no past experience in government. See, 0:07:51.440 --> 0:07:55.800 I think that's dangerous. And that's the American. 0:07:55.360 --> 0:07:55.800 Part of it. 0:07:55.840 --> 0:07:59.920 For the economy, that's probably what's most important to Americans. 0:08:00.680 --> 0:08:04.600 I have to say that when I read that the 0:08:04.720 --> 0:08:08.800 United States has, for decades since President Bush, who was 0:08:08.840 --> 0:08:14.040 certainly no fiery liberal, put in place program to build 0:08:14.080 --> 0:08:17.800 goodwill for the United States by providing medicines for AIDS 0:08:17.840 --> 0:08:21.480 and other diseases that has saved millions of. 0:08:21.480 --> 0:08:24.680 Lives, saved more than a million lives per year. 0:08:25.600 --> 0:08:29.000 When I see that medicine from that program has just 0:08:29.080 --> 0:08:36.360 been ruthlessly cut off despite congressional approval, with no protection 0:08:37.120 --> 0:08:41.320 or careful thought, and that people are dying because the 0:08:41.400 --> 0:08:44.600 United States just decided to go do a bunch of 0:08:45.200 --> 0:08:48.479 experiments like it was a business being. 0:08:48.280 --> 0:08:50.640 Restructured, that scares me. 0:08:51.440 --> 0:08:55.160 So I think this is going to be pretty serious 0:08:55.200 --> 0:09:00.120 for our economy. And look, President Trump is someone who 0:09:00.120 --> 0:09:04.200 has in the past, at least always when the stock 0:09:04.280 --> 0:09:05.440 market went up. 0:09:05.679 --> 0:09:08.319 He was always linking it to what he did. 0:09:09.280 --> 0:09:12.199 And we couldn't have had clearer evidence over the last 0:09:12.240 --> 0:09:17.080 couple days that when he's pursuing the policies about which 0:09:17.080 --> 0:09:22.920 he's enthusiastic, the market is plummeting, and when he's reversing course, 0:09:23.720 --> 0:09:27.400 the market is rallying. And I hope that'll be a 0:09:27.520 --> 0:09:30.560 lesson on many aspects of the broad approach. 0:09:32.000 --> 0:09:35.760 Well, it also is creating an interesting split screen, mister Secretary, 0:09:35.800 --> 0:09:38.520 because as we have the conversation here about the rattling 0:09:38.600 --> 0:09:41.439 of US equity markets, everything you just talked about in 0:09:41.520 --> 0:09:44.720 terms of what potentially could be happening in the US economy, 0:09:44.760 --> 0:09:47.360 you are seeing a flood of capital into Europe, as 0:09:47.400 --> 0:09:49.600 Germany is now signaling they're going to have whatever it 0:09:49.679 --> 0:09:53.880 takes approach to increase spending. We've seen a flood into 0:09:53.880 --> 0:09:57.840 European equities, obviously massive action in the boon market today. 0:09:57.960 --> 0:10:05.640 Is this the end, potentially of US exceptionalism. 0:10:06.600 --> 0:10:11.320 I think it would be premature to say, on the 0:10:11.360 --> 0:10:14.280 basis of anything that happened in a few days or 0:10:14.320 --> 0:10:17.000 even a few weeks, that it was the end of 0:10:17.600 --> 0:10:23.439 US exceptionalism. But I will say this, I think the 0:10:23.480 --> 0:10:26.000 broad approach we are taking to the rest of the 0:10:26.040 --> 0:10:33.040 world represents the biggest threat to the US dollars role 0:10:33.920 --> 0:10:40.160 as the central currency in the world economy that we've 0:10:40.240 --> 0:10:44.960 had in the last five decades, And if I were 0:10:45.040 --> 0:10:50.040 still sitting at the Treasury Department, I would be terrified 0:10:50.800 --> 0:10:57.120 about the consequences of the kind of rhetoric that the 0:10:57.200 --> 0:11:01.240 President is engaging in vis a vis other countries. I 0:11:01.280 --> 0:11:07.080 would be alarmed by the way in which China and 0:11:07.200 --> 0:11:13.200 Europe were trapped being magnets for capital as people rushed 0:11:13.200 --> 0:11:19.200 out of dollars, were increasingly aliging with each other because 0:11:19.240 --> 0:11:26.880 they had both been alienated from us, And knowing that 0:11:27.000 --> 0:11:31.160 I was going to have trillions and trillions of dollars 0:11:31.200 --> 0:11:35.160 that I had to place, and that I was part 0:11:35.200 --> 0:11:40.199 of an administration that was going to raise substantially the 0:11:40.240 --> 0:11:44.080 scale of the national debt with these new ideas like 0:11:44.240 --> 0:11:49.559 not taxing over time or not taxing tips, and extending 0:11:49.600 --> 0:11:51.440 the tax cuts for. 0:11:52.720 --> 0:11:55.160 Businesses and businesses. 0:11:54.600 --> 0:11:57.560 In the wealthy in a massive way, so that we 0:11:57.559 --> 0:12:00.960 were looking at budget deficits that could easy exceed two 0:12:00.960 --> 0:12:02.200 trillion dollars a year. 0:12:03.040 --> 0:12:03.880 I had to plant. 0:12:04.080 --> 0:12:08.840 I had to place all that debt. When the President 0:12:09.120 --> 0:12:14.400 was calling out and yelling and complaining about all the 0:12:14.440 --> 0:12:20.720 countries that were traditionally the biggest buyers of the debt, 0:12:20.800 --> 0:12:23.959 and the President was saying that anything was legal as 0:12:23.960 --> 0:12:26.600 long as it was working for the survival of the country, 0:12:26.640 --> 0:12:28.320 and he wanted. 0:12:28.320 --> 0:12:28.959 To do it. 0:12:30.160 --> 0:12:33.840 I'd be hugely alarmed about the role of the dollar 0:12:35.160 --> 0:12:40.840 in our system, and I'd be doing everything I could 0:12:41.400 --> 0:12:47.319 to try to persuade the President to change course. In fairness, 0:12:47.320 --> 0:12:49.480 I wouldn't be doing it publicly. I'd be doing it 0:12:49.600 --> 0:12:54.640 behind closed doors. But we have a Treasury Secretary whose 0:12:55.120 --> 0:12:58.080 principal comment on the President has been to suggest that 0:12:58.120 --> 0:12:58.760 he should. 0:12:58.520 --> 0:13:02.480 Win a Nobel prize for his appeasement to President Putin. 0:13:03.320 --> 0:13:07.120 So I think we have a really serious set of 0:13:07.160 --> 0:13:12.000 issues that may loom. There's time to change There's time 0:13:12.080 --> 0:13:19.199 to change course. There's time to eliminate these kinds of tariffs. 0:13:19.240 --> 0:13:24.520 There's time to try to draw on the expertise in 0:13:24.559 --> 0:13:31.640 the DOGE in more responsible ways. And if that happens, 0:13:32.720 --> 0:13:36.880 I think things could work out well. But gosh, we're 0:13:37.320 --> 0:13:45.440 looking at some risks and uncertainties of a kind we 0:13:45.640 --> 0:13:50.520 haven't seen before. You know, Wall Street, as you know 0:13:51.120 --> 0:13:53.480 better than I because you report on it all the time. 0:13:53.920 --> 0:13:58.120 Has this thing the vics so called fear gauge. It 0:13:58.160 --> 0:14:01.360 went up by almost fifty percent, and in a matter 0:14:01.400 --> 0:14:04.200 of a couple of days because of the things that 0:14:04.720 --> 0:14:07.160 were being said. 0:14:07.920 --> 0:14:11.079 So I just hope that. 0:14:12.400 --> 0:14:18.040 We can all take a deep breath, that we can 0:14:18.120 --> 0:14:24.160 recognize that there are plenty of real problems that need 0:14:24.160 --> 0:14:27.320 to be addressed, and that the President in his campaign 0:14:27.440 --> 0:14:32.240 identified some important directions in which our country and its 0:14:32.280 --> 0:14:35.640 economy could be made better. But God, the way we're 0:14:35.680 --> 0:14:39.800 going about it is something that seems very scary to me. 0:14:41.440 --> 0:14:45.000 That VIX is down today but still holding above twenty two. Larry, 0:14:45.040 --> 0:14:46.600 it's really great to have you with us here on 0:14:46.640 --> 0:14:49.040 balance of power. We do appreciate the conversation. The former 0:14:49.160 --> 0:14:52.040 US Treasury Secretary of Larry Summers, of course, Harvard University 0:14:52.320 --> 0:14:55.920 President emeritus, with his insights on tariffs, tax cuts, and 0:14:55.960 --> 0:14:59.120 a lot more today in a live conversation on Bloomberg 0:14:59.160 --> 0:14:59.880 TV and Radio.