1 00:00:02,480 --> 00:00:08,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news with a big focus 2 00:00:08,640 --> 00:00:11,320 Speaker 1: on the government shutdown and the economy. Who better to 3 00:00:11,320 --> 00:00:14,200 Speaker 1: talk to than Paul Krugman. Nobel Laureate joins us right 4 00:00:14,240 --> 00:00:17,319 Speaker 1: now here on the Close and Hot, Professor Krugman, I 5 00:00:17,320 --> 00:00:19,759 Speaker 1: do want to start off first with the shutdown. I 6 00:00:19,840 --> 00:00:22,599 Speaker 1: mean I was told heading into the shutdown, the shutdowns 7 00:00:22,600 --> 00:00:25,279 Speaker 1: don't necessarily matter. They don't matter for the economy, they 8 00:00:25,280 --> 00:00:28,320 Speaker 1: don't necessarily matter for the stock market. As somebody who 9 00:00:28,400 --> 00:00:32,320 Speaker 1: spent you know, quite an onerous time trying to get 10 00:00:32,360 --> 00:00:36,760 Speaker 1: back home over this weekend on an airplane, I can 11 00:00:37,400 --> 00:00:39,600 Speaker 1: assure you it does matter. Is there any way to 12 00:00:39,640 --> 00:00:42,800 Speaker 1: sort of quantify what the potential impact is of a 13 00:00:42,840 --> 00:00:45,440 Speaker 1: forty one day in counting government shutdown? 14 00:00:46,040 --> 00:00:48,640 Speaker 2: It's really hard to pin down. We can talk about 15 00:00:48,680 --> 00:00:51,199 Speaker 2: the impact on spending and talk about laid off at 16 00:00:51,240 --> 00:00:54,760 Speaker 2: our own employees and you know what, the money they 17 00:00:54,760 --> 00:00:59,960 Speaker 2: don't spend, but nobody has ever really tried to quantify 18 00:01:00,000 --> 00:01:02,280 Speaker 2: as far as I know, the effects of air traffic 19 00:01:02,280 --> 00:01:05,120 Speaker 2: control delays. I mean, what we're learning is that actually 20 00:01:05,160 --> 00:01:07,040 Speaker 2: we kind of need a functioning government to have a 21 00:01:07,080 --> 00:01:11,399 Speaker 2: functioning economy. This wasn't long enough to really do a 22 00:01:11,400 --> 00:01:13,319 Speaker 2: lot of damage, but it was enough to show us, 23 00:01:13,520 --> 00:01:16,759 Speaker 2: you know, a six month shutdown would have been really, 24 00:01:16,800 --> 00:01:21,960 Speaker 2: really bad. So it's significant. It's bigger than the standard 25 00:01:21,959 --> 00:01:24,320 Speaker 2: of macroeconomic analysis would suggest. 26 00:01:24,840 --> 00:01:26,720 Speaker 1: I am curious though about just kind of the state 27 00:01:26,720 --> 00:01:29,240 Speaker 1: of the economy heading into this shutdown, the idea that 28 00:01:29,319 --> 00:01:31,520 Speaker 1: even if we do strike a deal over the next 29 00:01:31,520 --> 00:01:33,600 Speaker 1: couple of days, it could take a couple of weeks 30 00:01:33,640 --> 00:01:37,759 Speaker 1: to get back to anything resembling normalcy. When you look 31 00:01:37,760 --> 00:01:40,040 Speaker 1: at the state of the economy prior to the shutdown, 32 00:01:40,520 --> 00:01:43,520 Speaker 1: how fragile, if at all, did you see it to be. 33 00:01:44,520 --> 00:01:47,600 Speaker 2: Well, there's two things I would say. First, you know, 34 00:01:47,680 --> 00:01:51,680 Speaker 2: the shutdown, at least the chosen issue involved health insurance, 35 00:01:52,440 --> 00:01:56,120 Speaker 2: involved the enhanced benefits which are turning into a you know, 36 00:01:56,160 --> 00:01:59,800 Speaker 2: which are going away on the Affordable Care Act, and 37 00:02:00,120 --> 00:02:04,760 Speaker 2: Democrats caved on that. So twenty two million Americans who 38 00:02:04,800 --> 00:02:09,520 Speaker 2: have subsidized Obamacare insurance are about to see or in 39 00:02:09,520 --> 00:02:12,680 Speaker 2: the process of seeing gigantic increases in their health insurance 40 00:02:12,680 --> 00:02:15,600 Speaker 2: premiums an average one hundred and fourteen percent according to 41 00:02:15,880 --> 00:02:20,639 Speaker 2: Kaiser Family Foundation. And that is happening. That's happening despite 42 00:02:20,840 --> 00:02:23,360 Speaker 2: the fact that the shutdown is over. So that's a 43 00:02:23,400 --> 00:02:25,800 Speaker 2: pretty big factor. That's a pretty big hit, certainly to 44 00:02:25,800 --> 00:02:29,120 Speaker 2: the finances of a lot of families and probably some 45 00:02:29,240 --> 00:02:32,080 Speaker 2: knock on effects on the economy as a whole. The 46 00:02:32,160 --> 00:02:35,640 Speaker 2: other thing you see is that people are really really 47 00:02:35,680 --> 00:02:38,840 Speaker 2: down on the economy. I mean, we were we talked 48 00:02:38,880 --> 00:02:43,520 Speaker 2: about a Vibe session under Biden, but the Vibe session now, 49 00:02:43,560 --> 00:02:46,760 Speaker 2: I mean, the economy ain't as great as Trump claims, 50 00:02:47,040 --> 00:02:50,760 Speaker 2: Grocery praises are not in fact way down, but people 51 00:02:50,800 --> 00:02:55,120 Speaker 2: are really really negative. The basically we have the worst 52 00:02:55,320 --> 00:03:00,839 Speaker 2: consumer sentiment about current economic conditions basically ever, worse than 53 00:03:01,040 --> 00:03:04,400 Speaker 2: not just worse than those you know, twenty and twenty 54 00:03:04,480 --> 00:03:07,120 Speaker 2: twenty two when we had nine percent inflation, but worse 55 00:03:07,160 --> 00:03:10,120 Speaker 2: than the aftermath of the financial crisis, worse than the 56 00:03:10,120 --> 00:03:14,000 Speaker 2: stagflation of nineteen eighty. People are really really down on 57 00:03:14,000 --> 00:03:16,160 Speaker 2: this economy, and I have to say, I don't think 58 00:03:16,200 --> 00:03:18,600 Speaker 2: that the way this drama has been playing out is 59 00:03:18,639 --> 00:03:23,160 Speaker 2: going to change that. If anything, they we're likely to see. 60 00:03:23,240 --> 00:03:25,480 Speaker 2: You know, I was just hearing the tail end of viewer. 61 00:03:25,720 --> 00:03:29,040 Speaker 2: What you're saying. Ordinary eight people, people who are not 62 00:03:29,200 --> 00:03:33,680 Speaker 2: getting in on the stock market, are hurting and feeling 63 00:03:33,720 --> 00:03:35,000 Speaker 2: extremely stressed. 64 00:03:35,640 --> 00:03:37,960 Speaker 3: Well, Paul, it's interesting that, you know, coming out of 65 00:03:37,960 --> 00:03:40,119 Speaker 3: this shutdown, one of the consequences is that we're going 66 00:03:40,160 --> 00:03:43,600 Speaker 3: to get economic data figures to actually put some numbers 67 00:03:43,600 --> 00:03:46,760 Speaker 3: to this economy's performance. But you think about some of 68 00:03:46,800 --> 00:03:49,360 Speaker 3: the reports that have been delayed at least two employment 69 00:03:49,400 --> 00:03:54,240 Speaker 3: reports CPI PC as well, it's unlikely that the BLS 70 00:03:54,440 --> 00:03:57,040 Speaker 3: has been able to collect and actually process the data 71 00:03:57,400 --> 00:03:59,840 Speaker 3: for some of these reports. And with that in mind, 72 00:04:00,000 --> 00:04:03,040 Speaker 3: I wonder, you know, what kind of quality we can 73 00:04:03,120 --> 00:04:06,000 Speaker 3: expect in terms of trying to put some context around 74 00:04:06,040 --> 00:04:06,680 Speaker 3: these vibes. 75 00:04:07,440 --> 00:04:09,440 Speaker 2: Yeah, we're kind of a ghost month, it appears on 76 00:04:09,760 --> 00:04:11,880 Speaker 2: labor market data. There will simply be a month that 77 00:04:12,800 --> 00:04:14,720 Speaker 2: we know, you know, anything could have happened in there. 78 00:04:14,760 --> 00:04:17,320 Speaker 2: The BLS will never be able to catch up on 79 00:04:17,400 --> 00:04:21,160 Speaker 2: that loss data. And we do worry a lot. I mean, 80 00:04:21,279 --> 00:04:26,160 Speaker 2: there's been a problem with declining response rates and understaffed 81 00:04:26,200 --> 00:04:30,440 Speaker 2: BLS even before, so the data quality is going to 82 00:04:30,440 --> 00:04:34,040 Speaker 2: be a real issue. And you know, we're all looking 83 00:04:34,080 --> 00:04:39,960 Speaker 2: at the soft data, the private surveys, all of which 84 00:04:40,120 --> 00:04:42,080 Speaker 2: none of which says that the economy is falling off 85 00:04:42,120 --> 00:04:44,120 Speaker 2: a cliff, but a lot of which is at least 86 00:04:44,160 --> 00:04:47,480 Speaker 2: a little bit alarming. And I'm particularly struck. I've been 87 00:04:47,520 --> 00:04:53,359 Speaker 2: looking at conference Board on our jobs plentiful or are 88 00:04:53,400 --> 00:04:56,600 Speaker 2: they hard to get? And that number has fallen off 89 00:04:56,600 --> 00:04:59,799 Speaker 2: a cliff. People feel really really bad about job prospects 90 00:04:59,880 --> 00:05:04,200 Speaker 2: right now in ways that the BLS numbers weren't showing before, 91 00:05:04,640 --> 00:05:07,320 Speaker 2: but does suggest a kind of frozen labor market in 92 00:05:07,360 --> 00:05:09,760 Speaker 2: which people, you know, if you're new to the if 93 00:05:09,760 --> 00:05:12,680 Speaker 2: you're young just getting in, or if you've been laid off, 94 00:05:13,600 --> 00:05:16,760 Speaker 2: it's a really tough world out there. So this is 95 00:05:16,800 --> 00:05:20,240 Speaker 2: going to be I mean, don't it doesn't look like 96 00:05:20,920 --> 00:05:24,360 Speaker 2: you know, it doesn't look like like September two thousand 97 00:05:24,360 --> 00:05:26,560 Speaker 2: and eight with everything falling off a cliff, But it 98 00:05:26,600 --> 00:05:30,080 Speaker 2: does kind of feel like this is a starting to 99 00:05:30,120 --> 00:05:32,279 Speaker 2: feel like a tough economy. And as I said, people, 100 00:05:32,520 --> 00:05:35,800 Speaker 2: ordinary people are extremely pessimistic about the state of affairs. 101 00:05:35,839 --> 00:05:37,760 Speaker 3: Well, probably only have about a minute left with you. 102 00:05:37,839 --> 00:05:40,520 Speaker 3: But to that point, we saw a social media post 103 00:05:40,520 --> 00:05:43,039 Speaker 3: from the President this morning saying that all money left 104 00:05:43,080 --> 00:05:45,920 Speaker 3: over from the two thousand dollars payments made to low 105 00:05:45,960 --> 00:05:50,560 Speaker 3: and middle income USA citizens from the massive tariff income 106 00:05:50,600 --> 00:05:54,120 Speaker 3: pouring into the country will be substantial. The point being 107 00:05:54,240 --> 00:05:58,719 Speaker 3: that we are discussing these one time payments two thousand dollars, 108 00:05:58,760 --> 00:06:01,600 Speaker 3: these dividends checks if you will, Do you think that 109 00:06:01,600 --> 00:06:03,880 Speaker 3: that's a good idea, Now. 110 00:06:03,800 --> 00:06:05,799 Speaker 2: It's a terrible idea. I mean, we have an enormous 111 00:06:05,839 --> 00:06:08,680 Speaker 2: budget deficit, the TERRFF for revenue, which is, by the way, 112 00:06:08,720 --> 00:06:12,560 Speaker 2: coming in substantially below what Trump administration officials said it 113 00:06:12,560 --> 00:06:14,359 Speaker 2: was going to be. It's substantial, but it's not what 114 00:06:14,400 --> 00:06:17,000 Speaker 2: they said. It just makes a small debt in the 115 00:06:17,120 --> 00:06:20,279 Speaker 2: enormous deficit. The fundamental fact is that the US is 116 00:06:20,839 --> 00:06:24,280 Speaker 2: US government is spending in ways that you know, I've 117 00:06:24,320 --> 00:06:28,160 Speaker 2: been a long terim dove in terms of concerns about 118 00:06:28,200 --> 00:06:30,400 Speaker 2: federal debt, and I don't think we're facing a crisis 119 00:06:30,440 --> 00:06:33,080 Speaker 2: any kind of tune. But we are certainly running a 120 00:06:33,400 --> 00:06:36,239 Speaker 2: given the absence of a national emergency, given the absence 121 00:06:36,240 --> 00:06:38,919 Speaker 2: of a pandemic or a war, to be running deficits 122 00:06:38,920 --> 00:06:41,960 Speaker 2: this large is just irresponsible. And the idea that hey, 123 00:06:41,960 --> 00:06:44,400 Speaker 2: We're going to take one source of revenue and use 124 00:06:44,440 --> 00:06:47,840 Speaker 2: it to hand out money when we're meanwhile going ever 125 00:06:47,920 --> 00:06:51,160 Speaker 2: deeper into federal debt. That's deeply irresponsible. 126 00:06:51,520 --> 00:06:53,440 Speaker 3: All right, Paul, got to leave it. They're really great 127 00:06:53,480 --> 00:06:55,440 Speaker 3: to get some time with you. That is Nobel Prize 128 00:06:55,440 --> 00:07:00,040 Speaker 3: winning economist Paul Krugman, Distinguished Professor of Economics at the 129 00:07:00,120 --> 00:07:03,440 Speaker 3: University University of New York, also the author of The 130 00:07:03,480 --> 00:07:06,440 Speaker 3: Sun sub Stack Crewman wants Out.