1 00:00:00,120 --> 00:00:03,440 Speaker 1: Wall Street wee Coast David Weston. He spoke with Paul Krugman, 2 00:00:03,600 --> 00:00:06,800 Speaker 1: Nobel Laureate in economics, and David got his take on 3 00:00:06,840 --> 00:00:09,719 Speaker 1: the state of the US economy. We are in an 4 00:00:09,800 --> 00:00:14,760 Speaker 1: extraordinarily good immediate position. I've been arguing with people who say, 5 00:00:14,920 --> 00:00:17,400 Speaker 1: you know, this is a Goldilock's economy, and that's wrong. 6 00:00:17,520 --> 00:00:21,040 Speaker 1: Goldilocks found a parties that was neither too hot nor 7 00:00:21,079 --> 00:00:23,520 Speaker 1: too cold. We've got an economy that's hot where you 8 00:00:23,560 --> 00:00:26,200 Speaker 1: wanted to be hot, like in GDP growth, and cold 9 00:00:26,200 --> 00:00:28,680 Speaker 1: where you wanted to be cold on inflation. So this 10 00:00:28,760 --> 00:00:32,720 Speaker 1: is you know right now is this is always the 11 00:00:32,760 --> 00:00:37,440 Speaker 1: best short run economy we've had since the nineteen nineties. 12 00:00:39,760 --> 00:00:42,519 Speaker 1: So what we need for the next four years is 13 00:00:43,240 --> 00:00:44,680 Speaker 1: to be thinking about the long run. 14 00:00:45,280 --> 00:00:47,560 Speaker 2: Do we need to at least start to think about 15 00:00:47,600 --> 00:00:50,720 Speaker 2: the deficit and the debt that's accumulating because right now, 16 00:00:50,760 --> 00:00:52,640 Speaker 2: as you look at Donald Trump and Joe Biden, the 17 00:00:52,640 --> 00:00:55,960 Speaker 2: two leading candidates, neither one seems to be willing to 18 00:00:55,960 --> 00:00:58,240 Speaker 2: address that. By the way, this week, Congress did do 19 00:00:58,320 --> 00:01:01,560 Speaker 2: something on taxation which was actually actually it was negative 20 00:01:01,600 --> 00:01:04,320 Speaker 2: in terms of deficit. So do we need to address 21 00:01:04,360 --> 00:01:05,920 Speaker 2: that question. And if so, when. 22 00:01:07,680 --> 00:01:11,360 Speaker 1: You know I'm not a complete deficits never matter guy, 23 00:01:12,680 --> 00:01:16,200 Speaker 1: But I'm not. It still doesn't look like a first 24 00:01:16,280 --> 00:01:19,160 Speaker 1: rank issue despite the you know, the enormous numbers, but 25 00:01:19,200 --> 00:01:24,720 Speaker 1: you know, everything about America is enormous, and particularly there 26 00:01:24,760 --> 00:01:28,520 Speaker 1: is a lot of the sustainability of debt depends a 27 00:01:28,560 --> 00:01:33,200 Speaker 1: lot on comparison between interest rates and the economy's growth rate. 28 00:01:33,760 --> 00:01:36,119 Speaker 1: And right now what we have is interest rates seem 29 00:01:36,200 --> 00:01:40,240 Speaker 1: to be coming down. Growth seems to you know, productivity 30 00:01:40,280 --> 00:01:43,960 Speaker 1: growth is looking really good. There are high hopes for AI, 31 00:01:44,160 --> 00:01:47,600 Speaker 1: all of which means that despite that huge size of 32 00:01:47,640 --> 00:01:51,200 Speaker 1: those raw debt numbers, I actually don't think that there's 33 00:01:51,240 --> 00:01:55,840 Speaker 1: any urgency. You know, yeah, someday, But if you want 34 00:01:55,880 --> 00:01:58,040 Speaker 1: to ask, you know, given the range of things that 35 00:01:58,040 --> 00:02:01,880 Speaker 1: can politically be done, we actually just did this something 36 00:02:01,960 --> 00:02:04,120 Speaker 1: quite good. I mean, I don't care about the business 37 00:02:04,160 --> 00:02:06,600 Speaker 1: tax cuts part of it, but we were actually helping 38 00:02:07,160 --> 00:02:10,760 Speaker 1: poor families with kids, and those sorts of things are 39 00:02:10,800 --> 00:02:13,520 Speaker 1: a lot more important than the deficit. Right now. 40 00:02:14,320 --> 00:02:16,400 Speaker 2: History, we're told does not repeat itself, but it does 41 00:02:16,480 --> 00:02:19,120 Speaker 2: rhyme sometimes. Is there a rhyme with nineteen ninety three, 42 00:02:19,200 --> 00:02:20,680 Speaker 2: Because if you go back to nineteen ninety three. You 43 00:02:20,680 --> 00:02:23,440 Speaker 2: talked to Bob Rubin about what happened with President Clinton. 44 00:02:23,720 --> 00:02:25,760 Speaker 2: It's thought that we got a lot of growth out 45 00:02:25,800 --> 00:02:28,160 Speaker 2: of the nineties in part because we both increased some 46 00:02:28,240 --> 00:02:31,239 Speaker 2: taxes and cut some spending. Is there a similar opportunity 47 00:02:31,240 --> 00:02:32,960 Speaker 2: here for pro growth policies. 48 00:02:34,160 --> 00:02:36,440 Speaker 1: I'm a great admirer of Bob Ruben, but I don't 49 00:02:36,480 --> 00:02:40,239 Speaker 1: believe that story for a minute. It's just not what 50 00:02:41,040 --> 00:02:44,640 Speaker 1: looks like actually happened in the nineties. What actually happened 51 00:02:44,880 --> 00:02:48,280 Speaker 1: in the nineties was that businesses finally figured out what 52 00:02:48,360 --> 00:02:52,120 Speaker 1: to do with these computer things, and we got a 53 00:02:52,160 --> 00:02:55,320 Speaker 1: decade of good productivity growth because we finally figured out 54 00:02:55,360 --> 00:02:58,919 Speaker 1: how to make productive use of it. And I actually 55 00:02:58,960 --> 00:03:03,400 Speaker 1: don't think that uh Clinton administration policies made much difference 56 00:03:03,400 --> 00:03:05,919 Speaker 1: one we or the other. So I just don't buy 57 00:03:05,960 --> 00:03:09,440 Speaker 1: that it's just uh And we may be approaching another 58 00:03:09,440 --> 00:03:12,320 Speaker 1: moment like that. Again, the recent productivity numbers are really 59 00:03:12,560 --> 00:03:16,760 Speaker 1: quite good. AI maybe it's either going to destroy us 60 00:03:16,840 --> 00:03:20,320 Speaker 1: or all or possibly give us another another decade of 61 00:03:20,320 --> 00:03:23,960 Speaker 1: good productivity growth. So no, I just don't think that 62 00:03:24,040 --> 00:03:29,000 Speaker 1: whole responsible fiscal policy was responsible for the roaring nineties. 63 00:03:29,919 --> 00:03:33,120 Speaker 1: It's it's a lovely narrative. I don't think there's anything 64 00:03:33,160 --> 00:03:33,840 Speaker 1: to support it. 65 00:03:34,200 --> 00:03:37,760 Speaker 2: So let's turn to the economic approaches, overall approaches of again, 66 00:03:37,840 --> 00:03:40,000 Speaker 2: let's talk about Joe Biden and Donald Trump, the two 67 00:03:40,080 --> 00:03:42,840 Speaker 2: leading candidates right now. How different are they approaches we 68 00:03:42,880 --> 00:03:44,760 Speaker 2: had We had Glenn Hubbard actually, and he said his 69 00:03:44,880 --> 00:03:47,000 Speaker 2: concern was they were too much alike as a populist 70 00:03:47,320 --> 00:03:49,400 Speaker 2: notion such as protectionism. 71 00:03:49,800 --> 00:03:54,560 Speaker 1: Okay, I know I think a lot about protectionism. It's 72 00:03:54,680 --> 00:03:57,760 Speaker 1: you know, that's what my life is built on. Is 73 00:03:57,800 --> 00:04:01,520 Speaker 1: that kind of stuff, and in general overrated as an issue. 74 00:04:01,600 --> 00:04:04,000 Speaker 1: Now you can do damage, and some of what Trump 75 00:04:04,080 --> 00:04:09,800 Speaker 1: is talking about now could actually do significant damage. It 76 00:04:09,840 --> 00:04:14,760 Speaker 1: this way, the very much Biden is what in Europe 77 00:04:14,800 --> 00:04:18,200 Speaker 1: you'd call a social democrat, is definitely about a stronger 78 00:04:18,279 --> 00:04:23,719 Speaker 1: social safety net, higher taxes on toping comes. He actually 79 00:04:23,760 --> 00:04:26,719 Speaker 1: did quite a lot more than people realize already in 80 00:04:26,760 --> 00:04:30,880 Speaker 1: that direction, despite having a minimal majority in Congress for 81 00:04:30,960 --> 00:04:35,479 Speaker 1: two years and nothing at all since we've had substantial 82 00:04:35,600 --> 00:04:38,600 Speaker 1: enhancement of Obama Care, We've had a lot of investment 83 00:04:38,640 --> 00:04:44,480 Speaker 1: in children and families and of course infrastructure. Finally, after 84 00:04:44,920 --> 00:04:47,280 Speaker 1: infrastructure being two weeks away for four years, all of 85 00:04:47,320 --> 00:04:50,599 Speaker 1: a sudden, now we actually have it. And Trump is 86 00:04:50,640 --> 00:04:54,600 Speaker 1: not Trump for the most part, except for his protectionism. 87 00:04:54,640 --> 00:05:01,760 Speaker 1: Trump is very much a standard tax cutting let's not 88 00:05:01,839 --> 00:05:05,240 Speaker 1: spend money on people Republicans. So no, they're they're very, 89 00:05:05,360 --> 00:05:09,520 Speaker 1: very different in terms of likely impact on families in America. 90 00:05:10,000 --> 00:05:12,400 Speaker 2: And what about effect on the economy. And you mentioned 91 00:05:12,440 --> 00:05:16,680 Speaker 2: the tariff issue before President Trump. Former President Trump has 92 00:05:16,720 --> 00:05:19,400 Speaker 2: said that he would favor a ten percent across the board, 93 00:05:19,640 --> 00:05:22,760 Speaker 2: not just China, across the board tariff and important and 94 00:05:22,920 --> 00:05:26,080 Speaker 2: actually Joel Litthheyser is advisors section, maybe we increase that 95 00:05:26,120 --> 00:05:29,000 Speaker 2: to eliminate trade deficit. What would that do to the 96 00:05:29,040 --> 00:05:30,320 Speaker 2: growth of the American economy? 97 00:05:31,080 --> 00:05:35,840 Speaker 1: Okay, Now, dirty little secret of international trade economics is 98 00:05:35,880 --> 00:05:41,839 Speaker 1: that moderate tariff rates do not, at least according to 99 00:05:41,839 --> 00:05:44,040 Speaker 1: our models and as far as we can tell in practice, 100 00:05:44,320 --> 00:05:50,680 Speaker 1: don't have huge growth effects. They distort consumption and production choices, 101 00:05:50,800 --> 00:05:55,320 Speaker 1: They do some damage, but to get really big numbers 102 00:05:55,360 --> 00:05:58,680 Speaker 1: you have to get well beyond ten percent. So now, 103 00:05:59,200 --> 00:06:01,640 Speaker 1: of course, if if the goal is to eliminate the 104 00:06:01,680 --> 00:06:05,760 Speaker 1: trade deficit, Lightheader is going to have a surprise because 105 00:06:06,800 --> 00:06:11,239 Speaker 1: tariffs don't eliminate trade deficits unless they get so high 106 00:06:11,240 --> 00:06:15,400 Speaker 1: as to basically make trade impossible, So we would be 107 00:06:15,440 --> 00:06:20,680 Speaker 1: talking about much much higher tariff rates potentially. What worries 108 00:06:20,800 --> 00:06:23,240 Speaker 1: me is not I mean, I think there are a 109 00:06:23,279 --> 00:06:26,080 Speaker 1: lot of really negative consequences if the US does a 110 00:06:26,120 --> 00:06:29,000 Speaker 1: ten percent tariff, but they have they're sort of geopolitical 111 00:06:29,040 --> 00:06:30,839 Speaker 1: more than anything else. They would mean that the United 112 00:06:30,880 --> 00:06:33,880 Speaker 1: States is basically saying, well, we're opting out of our 113 00:06:33,960 --> 00:06:37,280 Speaker 1: role as a leader of the global economy, which would 114 00:06:37,279 --> 00:06:39,440 Speaker 1: have a lot of bad effects in terms of the 115 00:06:39,480 --> 00:06:42,640 Speaker 1: economic impact. I mean, I'm hearing talk about, well, let's 116 00:06:42,680 --> 00:06:46,760 Speaker 1: have sixty percent terroriffs on imports from China, and you know, 117 00:06:46,880 --> 00:06:51,839 Speaker 1: tariff roughly speaking, the adverse effects of a tariff are 118 00:06:51,880 --> 00:06:54,840 Speaker 1: proportionals something like the square of the tariff rates, So 119 00:06:54,880 --> 00:06:57,719 Speaker 1: as sixty percent tariff, as you know, thirty thirty six 120 00:06:57,760 --> 00:07:00,359 Speaker 1: percent times as bad as a ten percent tariff. So 121 00:07:00,400 --> 00:07:02,480 Speaker 1: if we start to get into those kinds of tariffs, yeah, 122 00:07:02,520 --> 00:07:05,680 Speaker 1: then we're actually talking about significant negative impacts.