Speaker 1: As we assess some of these policy proposals we're still
Speaker 1: getting from the candidates as they take their messages to
Speaker 1: the swing states, with just a handful of days to
Speaker 1: go at this point until the election.
Speaker 2: Eighteen You act like it's late in the game for
Speaker 2: this type of thing that be happening, Well, it got
Speaker 2: eighteen days.
Speaker 1: Just feel a little late in the game here, But
Speaker 1: of course it's not too late to start putting together
Speaker 1: some math on this, as we have seen a number
Speaker 1: of nonpartisan groups do, and we want to get more
Speaker 1: into the math and potential economic impact of some of
Speaker 1: these policy proposals. And turn out to Ben Harris. He's
Speaker 1: former Assistant Treasury Secretary during the Biden administration. He's now
Speaker 1: Brookings Institution Vice President and director of Economic Studies. He
Speaker 1: is here with us in our Washington, d C. Studio.
Speaker 1: Welcome to Bloomberg TV and Radio. Ben, it's good to
Speaker 1: have you.
Speaker 3: Thanks.
Speaker 1: If we could just begin with Donald Trump today suggesting
Speaker 1: he would at least consider not taxing veterans and first
Speaker 1: responders and members of the military some twenty million people.
Speaker 1: Layered on top of all of the other tax proposals
Speaker 1: he's put out there, things that would not get taxed.
Speaker 1: What is the baseline of how much needs to be
Speaker 1: tax to continue to fund the US government?
Speaker 3: So more than he's proposing.
Speaker 4: I mean, I don't have a magic number, but I
Speaker 4: mean his his approach has been to start with the
Speaker 4: TCJA extension, which costs five trillion dollars over ten years,
Speaker 4: and then to add on all of these special tax
Speaker 4: breaks that really don't have an economic justification. You know,
Speaker 4: as you just mentioned, tax breaks for wages, sorry for tips,
Speaker 4: tax breaks for particular occupations, tax breaks for people who
Speaker 4: receive social scurity benefits, which by the way, would completely
Speaker 4: undermine Social Security and Medicare finances, were already up probably
Speaker 4: close around ten trillion dollars in counting. This isn't a
Speaker 4: realistic set of proposals. They're just far too expensive to
Speaker 4: ever make it through Congress.
Speaker 2: You know, at one point, Ben, we had Republicans like
Speaker 2: Kevin Brady, pretty old fashioned Republicans sitting here at the
Speaker 2: table saying, Hey, there's going to be a real important
Speaker 2: debate here.
Speaker 5: We need to make the Trump tax cuts permanent.
Speaker 2: That was six to nine months ago, before all the
Speaker 2: other items and exemptions that we've mentioned since were rolled out.
Speaker 2: What happens to the old school responsible Republicans who were
Speaker 2: going to help usher this through on Capitol Hill.
Speaker 5: Who wake up every day to another exemption.
Speaker 4: I mean, there are fiscally responsible Republicans in Congress, but
Speaker 4: they must be pre lonely right now. I mean, I
Speaker 4: think the turning point was back in twenty seventeen when
Speaker 4: Republicans passed a one point five trillion dollar tax cut
Speaker 4: without paying for it, and that kind of opened the
Speaker 4: door for this idea that look, for certain types of priorities,
Speaker 4: it's okay to take on enormous amounts of debt.
Speaker 3: And so that's what.
Speaker 4: We saw, and that feels like where Donald Trump has
Speaker 4: left the priority. Now, what's the priority now? I think
Speaker 4: the party is winning the election, and then they'll see
Speaker 4: the composition of Congress, and then they'll come back to
Speaker 4: the drawing board. And if there's a Republican sweep, I
Speaker 4: think you can expect a wholesale extension of the TCJA
Speaker 4: with a few other Republican priorities mixed in, you know,
Speaker 4: to be fair Republicans. Though they did pass the Limit
Speaker 4: Safe Grow Act coming out of the House, which did
Speaker 4: reduce the deficit, it was basically a combination of caps
Speaker 4: on discretionary spending plus a couple of other pay fors.
Speaker 4: So it's not as though there have been no Republican
Speaker 4: priorities that have made it through a House of Congress.
Speaker 4: It just feels like if Donald Trump's can be in
Speaker 4: the White House, He's been pretty clear he's comfortable taking
Speaker 4: on trillion dollars.
Speaker 3: In new debt.
Speaker 1: Ben reminding us that it's not just tax policy that
Speaker 1: we're going to see a battle over in twenty twenty five,
Speaker 1: but we're going to have to deal with the dead
Speaker 1: sealing again, as you recall back to that deal. So
Speaker 1: there's so much to look forward to. All that to say,
Speaker 1: when we look at Kamala Harris's proposals, nonpartisan organizations have
Speaker 1: two said it will add to the deficit. Perhaps less
Speaker 1: three and a half trillion dollars is what the Committee
Speaker 1: for Responsible but Federal Budget has had to say. But
Speaker 1: Donald Trump would contend her policies will also be inflationary.
Speaker 1: Is there not some truth in that that.
Speaker 3: Her policies will be inflationary.
Speaker 1: She's subsidizing housing, it could drive up housing costs, If
Speaker 1: she's cutting taxes, all of these things could fuel inflation.
Speaker 1: And make the deficit go higher all the same.
Speaker 4: Yeah, So I think on the housing policy, it's great
Speaker 4: that you brought that up, but the twenty five thousand
Speaker 4: dollars first time Home by Our tax credit was far
Speaker 4: from the only proposal that she put forward. Sorry, she
Speaker 4: also wants to expand housing supply. I think that the
Speaker 4: first time Home by Our tax credit really only makes
Speaker 4: sense if it's done in conjunction with an expansion in
Speaker 4: the housing supply. That's not really inflationary as far as
Speaker 4: her other policies go, I mean, she is taking aim
Speaker 4: at at costs across the board. So she wants to
Speaker 4: make prescription drugs cheaper. I mean, I think that the
Speaker 4: household costs have been kind of a centerpiece of her
Speaker 4: of her policies.
Speaker 1: Price gouging she wants to go after does not.
Speaker 5: Work, so no.
Speaker 4: I mean, most states have price gouging laws on the books,
Speaker 4: and for most states they are non binding. Most Americans
Speaker 4: live in a state that has price gouging laws, and
Speaker 4: as far as I can tell, they're fairly inconsequential. So
Speaker 4: I think that's, you know, pretty far down on the
Speaker 4: list of policies that matter for the American people. But
Speaker 4: she has made prices a centerpiece of her campaign.
Speaker 2: Yeah, that's interesting because that was a that was a
Speaker 2: big rollout at the time she made it, and it's
Speaker 2: still on the backdrops and it's still on the stump speech.
Speaker 2: It's just when you start waiting priorities. I think to
Speaker 2: your point here, well, the next president of the United States,
Speaker 2: Trump or Harris have to manage a recession in their
Speaker 2: first year.
Speaker 3: That's a great question.
Speaker 4: I mean, what I can say now about the state
Speaker 4: of the macroeconomy. This is like the definition of a
Speaker 4: soft landing. I mean, it's when we go back twenty
Speaker 4: years and reflect on what the Fed has done with
Speaker 4: this current economy. I think will kind of be in
Speaker 4: awe of how wealth things turned out. I mean, we've
Speaker 4: got I mean I can just go list some of
Speaker 4: the highlights. We've got a higher share of people working
Speaker 4: primates people working that we've seen in over twenty years.
Speaker 4: We've seen inflation come down to an a level where
Speaker 4: the feed is perfectly comfortable with it. We've seen a
Speaker 4: wealth explosion in this country, almost fifty trillion dollars in
Speaker 4: wealth added over the course of the pandemic.
Speaker 3: I mean, you can kind of go on and on
Speaker 3: and on.
Speaker 4: But we have a great economy, both relatives and prior recoveries,
Speaker 4: and also relative to the rest of the developed world.
Speaker 4: So right now, when I talk to forecasters, most of
Speaker 4: them say we have about a ten to fifteen percent
Speaker 4: chance for a session in the next year, which is
Speaker 4: kind of the unconditional average in any that's not so bad.
Speaker 3: I'll take that at this point.
Speaker 1: Well, so, if all of that is how this economy
Speaker 1: is shaping up right now, does this look like an
Speaker 1: economy to you that needs easier policy or is it
Speaker 1: simply an economy that doesn't need tighter policy anymore?
Speaker 4: Are you talking about monetary policy? Yeah, well, I think
Speaker 4: that with respect to monetary policy, the FEDS at is spot.
Speaker 4: It's kind of an enviable spot right now, where it
Speaker 4: knows we're not so close to the neutral rate. The
Speaker 4: next fifty BIPs of cutting feel pretty easy, and then
Speaker 4: you start getting into the hard decisions. So markets right
Speaker 4: now I think are around a ninety percent chance of
Speaker 4: a twenty five BIPs cut in the next meeting. I
Speaker 4: would probably take the over on that as far as
Speaker 4: probabilities go, and about a seventy five percent chance we'll
Speaker 4: get two cuts between now and December. Those are easy
Speaker 4: decisions though, inflation's way down, the labor market's weakening. I
Speaker 4: think it's pretty easy to vote for a twenty five
Speaker 4: BIPs cut. But after we get past the four and
Speaker 4: a half percent for the Fed funds rate, we get
Speaker 4: closer to four, that's when the hard decisions start coming.
Speaker 2: Donald Trump was asked in the Univision town hall earlier
Speaker 2: this week what would happen to agriculture, jobs and other
Speaker 2: parts of the labor market if he followed through on
Speaker 2: what he calls mass deportation. He didn't use that term
Speaker 2: in this conversation, but he also didn't really answer the question.
Speaker 2: Do you have a sense of what would happen to
Speaker 2: the job market if you shut down the border and
Speaker 2: conducted a mass deportation of millions of migrants in the country.
Speaker 4: Yeah, So these are two different policies, So let's say
Speaker 4: up them out. So both Kamala Harris and Donald Trump
Speaker 4: want to shut down the border. Kamala Harris backs the
Speaker 4: Biden Plan, which you know, essentially puts in place a
Speaker 4: whole host.
Speaker 3: Of different policies, the Senate compromen. Yeah, exactly, So what
Speaker 3: we're really.
Speaker 4: Talking about Now, the difference between the two candidates is
Speaker 4: what would happen if we saw mass deportation on the
Speaker 4: order of something we've never even come close to seeing
Speaker 4: this country.
Speaker 3: We're talking about potentially.
Speaker 4: In immigration agents, going to schools, going to place the business,
Speaker 4: potentially checkpoints. Is really unclear how you're going to find
Speaker 4: ten million people to kick them out of the country.
Speaker 4: From an economic perspective, economists don't love kicking workers out
Speaker 4: at a time when you have worker shortages. So if
Speaker 4: you look at some of the estimates coming out of
Speaker 4: Golden if you look at estimates coming out of the
Speaker 4: Brookings Institution, non partisan estimates, you do find a hit
Speaker 4: on growth simply because we need workers and now is
Speaker 4: not the best time to kick him out.
Speaker 5: Of our So that could hasten the recession in the
Speaker 5: first year.
Speaker 4: Yeah, I think the probability of recession goes up if
Speaker 4: you're talking about sixty percent tariffs on Chinese goods and
Speaker 4: if you're kicking millions of people out of the country.
Speaker 1: Yeah, So it becomes a demographic consideration, right, The US
Speaker 1: needs immigration to maintain its workforce, definitely. All right, Ben,
Speaker 1: thanks for joining USKS for having.
Speaker 5: Me to Ben Harris back at the table.
Speaker 2: Don't be a Stranger, Brookings Institution, former Assistant Treasury Secretary
Speaker 2: in the Biden administration
Speaker 5: With his experience in view today in Washington.