WEBVTT - White House NEC Director Kevin Hassett Talks Trump-Warsh Talks

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Let's continue the conversation. We want to welcome to our

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<v Speaker 2>global TV and radio audiences. I'm Danny Berger alongside Michael McKee.

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<v Speaker 2>US employers unexpectedly cut twenty three thousand jobs in July,

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<v Speaker 2>following a downward revision to May and June figures. Let's

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<v Speaker 2>bring in White House National Economic Council Director Kevin Hassett. Director,

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<v Speaker 2>has it great to see you this morning, And I

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<v Speaker 2>know you've been saying post in reaction to this surprise

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<v Speaker 2>loss and jobs that you're mostly looking at the unemployment

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<v Speaker 2>figure and it fell. However, as Mike just pointed out,

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<v Speaker 2>labor force participation also fell, which is the reason that occurred.

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<v Speaker 2>So looking at the figures in the state of this

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<v Speaker 2>jobs market, are there any areas at all that you

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<v Speaker 2>are concerned about?

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<v Speaker 3>Right?

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<v Speaker 1>Well, first of all, you know, I've been talking about

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<v Speaker 1>these numbers with Mike for how many years Mike twenty

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<v Speaker 1>years and so like, he really does raise some the points.

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<v Speaker 1>And the thing that I would say is that because

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<v Speaker 1>of our border policy, and because of deportations and the

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<v Speaker 1>retirement of the baby boomers, then labor force participation is

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<v Speaker 1>kind of on a downward trajectory, which means that the

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<v Speaker 1>break even jobs number, that is that the job's number

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<v Speaker 1>you need so the unemployment rate doesn't go up, has

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<v Speaker 1>gone from maybe one hundred and twenty hundreds thirty thousand

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<v Speaker 1>a few years ago to maybe about forty thousand now.

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<v Speaker 1>And so what it means is that what the market

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<v Speaker 1>is used to look at, oh, it's like a normal

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<v Speaker 1>tread the water kind of job's number if it's around

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<v Speaker 1>one hundred, is no longer true. If you get a

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<v Speaker 1>number like one hundred, that that's really like a great

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<v Speaker 1>number and it should make the unemployment rate go way down.

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<v Speaker 1>And so that's like the technical big picture. Digging into

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<v Speaker 1>the numbers, there are some things that really jump out

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<v Speaker 1>at me. That it was like private sector job creation

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<v Speaker 1>was right about at the break even positive number. It

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<v Speaker 1>was government employment that went down a lot, about fifty

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<v Speaker 1>something thousand. And the other thing is that we see

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<v Speaker 1>in the hospitality sector, you know, the end of the

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<v Speaker 1>world cup is really clearly of the data too. If

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<v Speaker 1>you exclude those two things, you had about one hundred

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<v Speaker 1>thousand number, and that's consistent with all the other indicators,

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<v Speaker 1>like the purchasing managers being really high unemployment, insurance claims

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<v Speaker 1>being about the lowest they've been since World War Two,

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<v Speaker 1>all these other indicators suggested, you know, the market was

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<v Speaker 1>right what it expected around one hundred. And given that

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<v Speaker 1>there's just a minor correction that gives you about one hundred,

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<v Speaker 1>I think suggests that's what.

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<v Speaker 3>The truth will be.

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<v Speaker 1>But we need to see, you know, future numbers before

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<v Speaker 1>we can make.

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<v Speaker 3>A final judgment. And that's why it's.

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<v Speaker 1>Great to have a person like Mic around to help

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<v Speaker 1>us think about it.

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<v Speaker 2>I agree, Kevin, for what it's wort, I absolutely agree.

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<v Speaker 4>Well, predictions are hard, especially about the future. As Jogi

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<v Speaker 4>Berra said, we're both economists. Let's get wonky here. The

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<v Speaker 4>possible growth potential growth for the United States or any

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<v Speaker 4>country based on the size of the labor force, whether

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<v Speaker 4>it keeps growing and productivity. And you're taking credit now

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<v Speaker 4>for the size of the labor force essentially going down

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<v Speaker 4>because of the immigration policies of the administration. So is

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<v Speaker 4>that a good thing for the economy overall?

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<v Speaker 1>Yeah, I mean what's going on right now is if

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<v Speaker 1>we do the old potential GDP calculations, then you add

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<v Speaker 1>productivity plus capital deepening plus you know, labor force participation

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<v Speaker 1>or labour's contribution. I think that one of the things

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<v Speaker 1>you see in productivity is that it's probably running north

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<v Speaker 1>of two and a half percent. Capital spending probably adds

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<v Speaker 1>at least one percent to that. So before you get

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<v Speaker 1>to the labor story, you're looking at a three three

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<v Speaker 1>and a half percent GDP number, And I think the

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<v Speaker 1>labor story is still going to be positive. I just

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<v Speaker 1>think that it's not going to be as positive as

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<v Speaker 1>it typically has. If you go back over forty years,

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<v Speaker 1>the labor story adds about like one or one and

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<v Speaker 1>a half percent every.

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<v Speaker 3>Year to GDP.

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<v Speaker 1>I think now it's likely to be about.

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<v Speaker 3>A half of that or a third of that.

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<v Speaker 1>Essentially that by the way, you mentioned the hourly earnings.

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<v Speaker 1>If you look at the weekly earnings actually up relative

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<v Speaker 1>to inflation quite a bit, about one thousand dollars overall

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<v Speaker 1>for all Americans, about three thousand dollars for manufacturing workers,

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<v Speaker 1>four thousand dollars for construction workers. And so there is

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<v Speaker 1>something going on too where people are something at hours

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<v Speaker 1>that's going on that's offsetting the participation.

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<v Speaker 4>President watching in the Oval office is just saying, you

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<v Speaker 4>got your point in Kevin, good job about that.

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<v Speaker 1>I don't know if he's watching, but I'll find out.

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<v Speaker 3>I can tell you.

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<v Speaker 4>People we've talked to so far today are basically saying

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<v Speaker 4>this is a non event, even with the negative number

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<v Speaker 4>for the FED, because it shows the labor market is

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<v Speaker 4>stable if nothing else, and they can focus on inflation.

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<v Speaker 4>I'm wondering, though, why the President is saying things like

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<v Speaker 4>Kevin has to can do what he needs to do.

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<v Speaker 4>The labor market was stable under j Powell, and the

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<v Speaker 4>President was really mad at him all the time.

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<v Speaker 3>Why is he giving.

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<v Speaker 4>Kevin or so much more runway even though conditions haven't

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<v Speaker 4>changed all that much.

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<v Speaker 1>Right, Well, I could say that the president, you know,

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<v Speaker 1>there have been some news stories that the president's talking

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<v Speaker 1>to Kevin Warreshould. Of course he is, you know, and

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<v Speaker 1>he talked to Jay Powell too. But the other thing

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<v Speaker 1>is that that Kevin warreshold the President have a very

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<v Speaker 1>close long term relationship from New York City, from Florida,

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<v Speaker 1>and they talk about the economy all the time. And

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<v Speaker 1>I talked to Kevin as well as does Scott Besson,

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<v Speaker 1>and so that's like not really news. And the fact

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<v Speaker 1>is that there's somebody at the FED now that the

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<v Speaker 1>President is one hundred percent sure is going to do

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<v Speaker 1>what's right based on the numbers and not play partisan games.

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<v Speaker 1>And you know heard me mention some of the partisan

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<v Speaker 1>games that I could think.

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<v Speaker 2>I just wanted apologies for jumping, I just wanted to

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<v Speaker 2>pick up all this one of the conversations because you

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<v Speaker 2>mentioned about the economy. Are they talking about monetary policy

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<v Speaker 2>as well as are just like broad economic advice.

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<v Speaker 1>I've not been listening to the conversations, but I'm sure

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<v Speaker 1>that the President doesn't say, hey, you got to do

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<v Speaker 1>this or that to interest rates.

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<v Speaker 3>He respects you well.

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<v Speaker 2>Given that line of communication is open, I wonder if

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<v Speaker 2>we could do a little bit of scenario analysis. Let's

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<v Speaker 2>say that this FED does hike. There was an e

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<v Speaker 2>f T report saying that perhaps the chair worsh might

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<v Speaker 2>hike if the data continues as it is for September.

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<v Speaker 2>What do you think the president's conversation would be like

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<v Speaker 2>with FED share warh should that happen.

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<v Speaker 1>The President is going to respect the independence of the FED.

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<v Speaker 1>I'm highly confident, and when it's very very natural for

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<v Speaker 1>the President to do something like say, hey, you know,

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<v Speaker 1>Chairman worsh, what do you think about today's job number?

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<v Speaker 1>And that's a very normal thing for him to do.

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<v Speaker 1>But I think that's the way you should think about

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<v Speaker 1>the balance of the conversations.

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<v Speaker 4>Forgive me for asking this, but I've been dying to

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<v Speaker 4>ask you this question since you brought this up last Friday.

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<v Speaker 4>You said that the biggest danger to the economy is

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<v Speaker 4>that socialist communist Democrats actually have a big victory in November.

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<v Speaker 4>What is socialism in your mind?

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<v Speaker 1>Well, well, you know Mike that I, as cechair, wrote

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<v Speaker 1>a chapter about it in the Economic Report of the President.

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<v Speaker 1>Was widely criticized because people said, oh, there's no way

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<v Speaker 1>the Democrats are socialists. I didn't say democrat anywhere in

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<v Speaker 1>the report, said here's the risk of socialism. But then

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<v Speaker 1>I wrote a book, The Drift Stopping America Slide to Socialism,

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<v Speaker 1>because I believe socialism. We are sliding towards socialism through

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<v Speaker 1>that party. And so socialism is when the government owns

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<v Speaker 1>the capital and then hands it out to people.

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<v Speaker 3>Is a very simple definition.

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<v Speaker 1>And so let's just say, hypothetically, the government decides to

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<v Speaker 1>have grocery stores where it sets the prices and tells

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<v Speaker 1>people like when they can get in and get the

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<v Speaker 1>cheap stuff. The history of this is that the grocery

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<v Speaker 1>stores end up being empty. Prices don't matter because there's

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<v Speaker 1>nothing to buy, and over time, socialism leads to public disorder,

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<v Speaker 1>and you see it in Venezuela, you see it in

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<v Speaker 1>Cuba and so on, and so it's a terrible path

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<v Speaker 1>to go. But I think that what people underappreciate is

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<v Speaker 1>that the policies they've been advocated by Democrats since President

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<v Speaker 1>Trump took office, where hey, you could have wealth taxes,

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<v Speaker 1>you could have really high taxes on income.

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<v Speaker 3>You could really high taxes on capital.

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<v Speaker 1>Game, they've been basically sliding forwards socialism for a long time.

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<v Speaker 1>And so while the new people are a lot more

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<v Speaker 1>charismatic than the people of the Senate, I think the

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<v Speaker 1>policies that they're advocating better care for all, you know, like,

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<v Speaker 1>come on, Hillary Clinton's self care policy was.

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<v Speaker 3>About that, right, and so that I think that that's the.

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<v Speaker 1>Uncomfortable thing that Democrats have to come to terms with,

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<v Speaker 1>is that these socialists are actually advocating things that Democrats

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<v Speaker 1>have advocated for a long time.

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<v Speaker 4>Well, if government ownership of means of production is part

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<v Speaker 4>of the definition there, then the Trump administration has taken

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<v Speaker 4>shares in Intel, MP Materials, Trilogy Metals, Lithium Americas, and

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<v Speaker 4>they've got the golden share in US steel. Why is

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<v Speaker 4>that not socialism?

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<v Speaker 1>Yeah, because it's not control. So, for example, the Norwegians

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<v Speaker 1>have a sovereign wealth fund. They own maybe about three

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<v Speaker 1>or four percent of US equities. That's not socialism. They're

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<v Speaker 1>not going in and telling the management to do and

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<v Speaker 1>so on. And so I think that one of the

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<v Speaker 1>things that President Trump and Howard not to give noticed

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<v Speaker 1>is that in the end, the US would be way

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<v Speaker 1>better off if we have something like a soferg wealth fund.

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<v Speaker 1>Then we're certainly putting up firewalls to make sure that.

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<v Speaker 3>Zabi can't come in and micro manage less firms. We

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<v Speaker 3>just heard from Rick Reader of Black Rock, you know, well.

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<v Speaker 4>We need to see something on the fiscal side to

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<v Speaker 4>try to get the economy moving in companies spending. Again,

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<v Speaker 4>does the President have any plans to propose something like

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<v Speaker 4>that or are we kind of stuck until after the

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<v Speaker 4>midterms and or if the Democrats take control of one

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<v Speaker 4>of the houses, we're stuck for two years.

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<v Speaker 1>You know, I think that Rick's call for, you know,

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<v Speaker 1>some kind of stimulus package, I guess I haven't seen

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<v Speaker 1>what he said. Feels completely inconsistent with all the data

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<v Speaker 1>I'm seeing right now, and so I'd have to see

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<v Speaker 1>what Rick was saying. But right now there are You know,

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<v Speaker 1>obviously we're watching closely the welfare of the American people,

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<v Speaker 1>but we haven't had meetings where we talk about a stimulus.

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<v Speaker 2>Film director Hassett. You know, it's often that great leaders

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<v Speaker 2>need to be ones who surround themselves with people who

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<v Speaker 2>can deliver them hard truths. And it's a strange time

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<v Speaker 2>in this economy. Many things are changing, be it AI

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<v Speaker 2>or impact of higher oil prices. I wonder what those

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<v Speaker 2>conversations are, like. How often are you coming to the

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<v Speaker 2>president and delivering him advice that's maybe hard to take

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<v Speaker 2>that parts of this economy maybe need various efforts. How

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<v Speaker 2>often are you having those difficult conversations?

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<v Speaker 1>You know, I obviously can't talk about specific conversations with

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<v Speaker 1>the President.

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<v Speaker 3>I was in the Oval with them last night.

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<v Speaker 1>We talked about a wide range of issues, and he

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<v Speaker 1>doesn't really have much.

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<v Speaker 3>Patience for yes men, and so.

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<v Speaker 1>When you go into a meeting of the Oval, what

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<v Speaker 1>the guy can say is that you cover a wide

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<v Speaker 1>range of topics and a wide range of opinions.

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<v Speaker 4>Always all right, what do we think is going to

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<v Speaker 4>happen now with Iran? And the reason I asked that

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<v Speaker 4>is because everybody also that we have talked to says that, boy,

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<v Speaker 4>it would sure do a lot if we got that

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<v Speaker 4>war over with and prices came down for energy.

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<v Speaker 1>Well, again, I'm not involved in the negotiations with the Iranians.

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<v Speaker 1>I don't have any insight. That's not you know, it's

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<v Speaker 1>stronger than yours on.

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<v Speaker 3>The specifics of the negotiations.

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<v Speaker 1>I could say that we've done an enormously good job

0:11:18.800 --> 0:11:23.920
<v Speaker 1>stabilizing global energy markets despite this disruption, by doing things

0:11:24.200 --> 0:11:29.480
<v Speaker 1>like increasing production through pipelines, getting the Jones actwave so

0:11:29.520 --> 0:11:33.160
<v Speaker 1>that American energy can move to the coast. And that's

0:11:33.200 --> 0:11:35.880
<v Speaker 1>one reason why while energy prices are higher than we

0:11:35.880 --> 0:11:37.920
<v Speaker 1>would like, they didn't go nearly as high as a

0:11:37.920 --> 0:11:40.000
<v Speaker 1>lot of the people on your shows were saying. Right,

0:11:40.000 --> 0:11:41.720
<v Speaker 1>people were saying we're going to be stuck at one

0:11:41.760 --> 0:11:44.040
<v Speaker 1>hundred and fifty dollars oil just a few months ago.

0:11:44.360 --> 0:11:45.920
<v Speaker 1>And so I think what that means is that all

0:11:45.920 --> 0:11:49.360
<v Speaker 1>of these steps that we've taken increasing energy production, especially

0:11:49.400 --> 0:11:53.120
<v Speaker 1>in the US, means that when this is resolved, then

0:11:53.160 --> 0:11:55.120
<v Speaker 1>prices are going to drop a lot. And I think

0:11:55.160 --> 0:11:58.360
<v Speaker 1>that that is something that's being priced into futures markets,

0:11:58.440 --> 0:12:02.680
<v Speaker 1>and it's actually affecting this today because if you know

0:12:02.720 --> 0:12:05.959
<v Speaker 1>bioil today somewhere, then it usually takes about two months

0:12:05.960 --> 0:12:08.360
<v Speaker 1>to be shipped, and so the you know, it really

0:12:08.400 --> 0:12:10.360
<v Speaker 1>puts a downward pressure on prices today.

0:12:10.920 --> 0:12:13.480
<v Speaker 4>Now I got to put you on this spot again

0:12:13.760 --> 0:12:16.840
<v Speaker 4>one more time here in an area that you do follow,

0:12:16.960 --> 0:12:20.520
<v Speaker 4>and that is the budget for the United States. The

0:12:20.520 --> 0:12:23.120
<v Speaker 4>President's budget would add a lot more to the debt.

0:12:23.200 --> 0:12:25.400
<v Speaker 4>That means more bonds have to be sold. And we

0:12:25.400 --> 0:12:27.800
<v Speaker 4>were just talking with a lot of people this morning

0:12:27.840 --> 0:12:30.720
<v Speaker 4>about how much private debt is coming to the markets,

0:12:30.800 --> 0:12:34.680
<v Speaker 4>especially from the AI sector. How much do you worry

0:12:34.720 --> 0:12:39.120
<v Speaker 4>about interest rates going up and the country having to

0:12:39.160 --> 0:12:41.880
<v Speaker 4>pay a lot more because there's a lot of demand

0:12:42.440 --> 0:12:45.120
<v Speaker 4>for bonds right now, a lot of demands I sell

0:12:45.200 --> 0:12:46.679
<v Speaker 4>them rather well.

0:12:46.720 --> 0:12:50.120
<v Speaker 1>I mean, the point is that what the President's done

0:12:50.240 --> 0:12:54.079
<v Speaker 1>is he's put out of budget that gets the deficit

0:12:54.120 --> 0:12:57.280
<v Speaker 1>to GDP down to almost nothing over a ten year window.

0:12:57.520 --> 0:13:00.960
<v Speaker 1>We've taken significant steps to achieve those by for example,

0:13:01.200 --> 0:13:03.440
<v Speaker 1>reducing federal employment by more than three.

0:13:03.360 --> 0:13:04.440
<v Speaker 3>Hundred thousand workers.

0:13:04.720 --> 0:13:07.240
<v Speaker 1>And I just got a briefing on the Vice President's

0:13:07.480 --> 0:13:12.440
<v Speaker 1>fraud Task Force yesterday. The way do you see, there's

0:13:12.440 --> 0:13:14.599
<v Speaker 1>going to be tens and tens of billions of dollars

0:13:14.640 --> 0:13:17.080
<v Speaker 1>just in a year. So multiply that by ten to

0:13:17.080 --> 0:13:20.520
<v Speaker 1>get the deficit effect of a fraud that we've stopped

0:13:20.880 --> 0:13:23.080
<v Speaker 1>that the Vice Presiden's team is stopping. And so we're

0:13:23.120 --> 0:13:26.080
<v Speaker 1>one hundred percent focused on the deficit of the log RUD.

0:13:26.160 --> 0:13:27.200
<v Speaker 3>But we also at.

0:13:27.080 --> 0:13:30.240
<v Speaker 1>Times when we spend less money on international organizations, we

0:13:30.280 --> 0:13:33.080
<v Speaker 1>can spend more money on the defense things that keep

0:13:33.160 --> 0:13:36.200
<v Speaker 1>us safe. And so we're changing things you know, within

0:13:36.200 --> 0:13:39.520
<v Speaker 1>the bundle. But we're definitely shooting for lower deficit over time.

0:13:39.880 --> 0:13:43.199
<v Speaker 2>Just combining these two ideas, Director Hasset, of taking action

0:13:43.760 --> 0:13:46.200
<v Speaker 2>and what you were mentioning before with higher oil prices.

0:13:46.200 --> 0:13:48.320
<v Speaker 2>This is a president who has signaled out big oil,

0:13:48.360 --> 0:13:52.319
<v Speaker 2>both Excellon and Chevron specifically amid this ongoing crisis. What

0:13:52.440 --> 0:13:55.200
<v Speaker 2>steps is this White House going to do in order

0:13:55.200 --> 0:13:57.440
<v Speaker 2>to act on the idea that big oil is contributing

0:13:57.480 --> 0:13:59.400
<v Speaker 2>to the inflation we're seeing in higher prices?

0:14:00.360 --> 0:14:03.840
<v Speaker 1>Well, I think that, you know, big oil is heavily

0:14:03.880 --> 0:14:04.920
<v Speaker 1>concentrated in the US.

0:14:04.920 --> 0:14:06.080
<v Speaker 3>It's something to keep an eye on.

0:14:06.800 --> 0:14:10.560
<v Speaker 1>But the bottom line is the global energy price story

0:14:10.679 --> 0:14:13.280
<v Speaker 1>is a positive one compared to what people thought, and

0:14:13.400 --> 0:14:16.079
<v Speaker 1>I think that the things that made it positive are

0:14:16.080 --> 0:14:19.240
<v Speaker 1>going to make prices drop very very quickly once they stem.

0:14:19.040 --> 0:14:21.440
<v Speaker 2>Sir Director has when you say too concentrated, they're just

0:14:21.440 --> 0:14:23.720
<v Speaker 2>too big. Is it kind of an anti trust issue

0:14:23.760 --> 0:14:24.040
<v Speaker 2>you think?

0:14:25.680 --> 0:14:27.840
<v Speaker 1>You know, as an economist, you could look at something

0:14:27.840 --> 0:14:29.760
<v Speaker 1>like the herfindal in decks and just think about, like,

0:14:29.800 --> 0:14:32.000
<v Speaker 1>what share of the market.

0:14:32.160 --> 0:14:33.480
<v Speaker 3>Does any business have?

0:14:33.880 --> 0:14:36.840
<v Speaker 1>And that's something that you know is a source of

0:14:36.880 --> 0:14:40.360
<v Speaker 1>investigation for people at the FDC and the Justice Department.

0:14:40.400 --> 0:14:43.000
<v Speaker 1>That's not something that's within the purview of the DC.

0:14:43.400 --> 0:14:45.600
<v Speaker 2>Understood, Kevin, thank you very much for your time this morning.

0:14:45.680 --> 0:14:48.960
<v Speaker 2>That's the White House National Economic Council Director Kevin Hasset