GOVERNOR SCOTT WALKER ABOUT THIS
IN SOME DETAIL A BIT LATER ON.
NOW, TO TALK ABOUT INFLATIONS,
THE ECONOMY, RECESSION, ATLANTA
GDP TRACKER MARKED DOWN ONCE
AGAIN, WE HAVE TOMAS PHILLIPSON,
FORMER CHIEF OF THE COUNCIL OF
ECONOMIC ADVISORS.
WE HAVE TYLER GOODSPEED, ANOTHER
FORMER CHIEF OF THE COUNCIL OF
ECONOMIC ADVISORS.
WE WILL HAVE CEA-NEC MEETING.
GENTLEMEN SAY LION’S PART OF
THIS DAVIS-BACON DISCUSSION FOR
GOVERNOR WALKER BUT I DO WANT TO
GO TO YOU, TOMAS, FIRST.
ON THIS RAILROAD DEAL, THEY
SAVED US A LOT OF HEARTBURN.
I’M TAKING THE POSITION, I’M
SIDING WITH THE WORKFORCE HERE.
IT IS THE GOVERNMENT THAT CREATED INFLATION.
CREATED INFLATION.
IT’S BIDEN-FLATION.
I’M SYMPATHETIC TO THIS.
I WANT TO GET YOUR TAKE.
>> THIS IS TRUE, IT IS GETTING
ENTRENCHED.
THIS IS THE ENTRENCHED
INFLATION, ONCE YOU EXPECT IT
THEY DEMAND HIGHER WAGES TO
COMPENSATE FOR I AM.
WE HAVE A LABOR MARKET PROBLEM
DESPITE THE EVERYONE SAYING THE
LABOR MARKETS ARE GREAT.
THE PROBLEM IS PRODUCTIVITY.
THE PRODUCTIVITY IS THE WORST
THIS HALF YEAR IT HAS BEEN SINCE
1947 AND WE’RE TALKING ABOUT THE
LABOR MARKET BEING REALLY GOOD
BECAUSE A FEW HUNDRED THOUSAND
PEOPLE COME INTO IT EVERY MONTH
BUT THAT IS YOU KNOW, PEANUTS
COMPARED TO THE 160 MILLION IN
THE MARKET ALREADY WHO ARE LESS
PRODUCTIVE SO THE PEOPLE COMING
IN IS ABOUT .2% OF THE PEOPLE IN
THE LABOR MARKET AND THEY ARE
BECOMING MORE PRODUCTIVE BUT THE
99.8% IN THE MARKET IS FALLING
IN PRODUCTIVITY BY 6% THIS HALF
YEAR.
THAT IS MASSIVE LOSS IN
PRODUCTIVITY.
WE HAVE A PRODUCTIVITY PROBLEM
CAUSING THE, WHICH YOU CAN TELL,
WE HAVE LOW OUTPUT AND MORE
WORKERS.
THAT IS CAUSING THIS.
AND THAT LOW PRODUCTIVITY IS
REALLY WHAT IS GOING ON HURTING
WORKERS WHETHER DURING THE UNION
AND RAILROAD OR ANYWHERE ELSE
BECAUSE THEIR COMPENSATION IS
ULTIMATELY TIED TO PRODUCTIVITY.
LARRY: TOMAS, JUST FOLLOW UP
QUICKLY BEFORE WE GET TO TYLER,
DO WE HAVE ANY IDEA OF THE
PRODUCTIVITY OF THESE RAILROAD
UNION WORKERS, ANY IDEA AT ALL?
ARE THEY GOING TO EARN THEIR PAY
INCREASE?
>> I DON’T KNOW IF, I HAVEN’T
LOOKED AT THEM SPECIFICALLY.
I KNOW IT IS THE WORST
PRODUCTIVITY WE’VE SEEN SINCE
WORLD WAR II.
SO BUT I DON’T KNOW IF THEY, IF
THEY ARE SPECIFICALLY PART OF
THAT PROBLEM.
LARRY: ALL RIGHT.
WE’LL LEAVE IT THERE.
WE LEAVE IT THERE BECAUSE WE GOT
GOVERNOR SCOTT WALKER COMING ON
LATER ON.
TYLER, UNLESS YOU HAVE ANYTHING
INCITEFUL ON THIS RAILROAD UNION
SETTLEMENT, IF I SAID ANYTHING
REALLY TERRIBLE BUT LOOK, HERE’S
A HEADLINE I WANT YOU TO REACT
TO.
OUR FRIEND, SOMETIMES, LARRY
SUMMERS, IS CALLING FOR A 1%
HIKE IN THE FED FUNDS RATE FOR
THE FED’S MEETING NEXT WEEK.
YOU AGREE OR DISAGREE WITH
SUMMERS ON THE 1%?
>> I AM INCLINED TO AGREE WITH
SUMMERS ON THAT BECAUSE LOOK,
LARRY, CONVENTIONAL WISDOM
SUGGESTS THAT IN ORDER TO
MEANINGFULLY TIGHTEN FINANCIAL
CONDITIONS TO GET INFLATION
UNDER CONTROL, YOU NEED TO RAISE
NOMINAL INTEREST RATES AT LEAST
AS MUCH AS THE CHANGE IN
INFLATION EXPECTATIONS AND WHEN
YOU LOOK AT SURVEYS OF INFLATION
EXPECTATIONS THEY HAVE RISEN BY
400 BASIS POINTS.
WE NEED TO BE HIKING BY
CUMULATIVE TOTAL OF 400 BASIS
POINTS AND WE’RE NOT THERE YET.
LARRY: NOT EVEN REMOTELY CLOSE.
TYLER, TAKE THIS, CARRY THAT
FORWARD, WHAT’S TO SAY, GIVEN
UROLOGIC YOUR LOGIC, THAT FED
RAISE ANOTHER PERCENTAGE POINT
IN NOVEMBER AND ANOTHER
PERCENTAGE POINT IN DECEMBER?
ISN’T IT GOING TO TAKE -- LOOK
HERE, THE CLEVELAND FED MEDIAN
CPI IS 6.7%, SOMETHING LIKE
THAT?
6.7%?
4% FED FUNDS RATE WILL NOT DO
IT.
YOU WILL NEED A SIX OR 7% FED
FUNDS RATE PROBABLY MINIMALLY
UNLESS SOME MIRACLE HAPPENS?
>> WELL, LOOK, LARRY, LOOK AT
THE CLEVELAND TRIMMED MEAN,
WEIGHTED MEDIAN, THEnd LYING
INFLATION GAUGE, LOOK AT CORE
CPI.
LOOK ALSO AT STICKY CPI, ALL
THESE MEASURES OF CORE OR
UNDERLYING INFLATION THEY
AVERAGE OUT TO ABOUT 7.9% AT A
SEASONALLY ADJUSTED ANNUAL RATE.
WITH 7.89% UNDERLYING INFLATION
EVEN A FED FUNDS RATE OF 4%, 5%,
EX-POST, THAT WILL BE A NEGATIVE
REAL RATE.
LARRY: YOU KNOW WHAT ELSE MAKING
IT WORSE, TOMAS, INDUSTRIAL
PRODUCTION FELL .2,
MANUFACTURING PRODUCTION PEAKED
FOUR MONTHS AGO BACK IN APRIL.
RETAIL SALES WERE ALSO ON THE
SOFT SIDE.
IN REAL TERMS, TOMAS, RETAIL
SALES WENT DOWN.
I MENTIONED EARLIER THAT THE
ATLANTA FED GDP TRACKER IS NOW
DOWN TO 0.5% FOR THE
THIRD QUARTER ESTIMATE.
THIS CYCLE FOR THE QUARTER
STARTED AT 2 1/2%.
YOU KNOW, I WAS THINKING WE
WOULD HAVE A DOUBLE-DIP
RECESSION THE FIRST HALF OF THE
YEAR NEGATIVE.
YOU MIGHT HAVE POSITIVE IN THE
THIRD QUARTER, THEN GO BACK INTO
RECESSION.
NOW LOOKS LIKE THIS WHOLE THING
MIGHT BE A RECESSION, WHAT DO
YOU THINK?
>> YEAH.
I MEAN WE HAVE A LOW OUT PUT,
HIGH PRICE PROBLEM, RIGHT?
HOW DO YOU SOLVE A LOW OUT PUT,
HIGH PRICE PROBLEM?
YOU INCREASE SUPPLY.
THAT IS WHAT I LEARNED IN
KINDERGARTEN ECONOMICS CLASS
101.
IF YOU INCREASE SUPPLY YOU
INCREASE OUTPUT AND YOU LOWER
PRICES.
THE PROBLEM IS WITH SUPPLY IS
THAT PEOPLE ARE SO UNPRODUCTIVE.
WE HAVE A LOT OF PEOPLE WORKING
BUT THEY’RE VERY UNPRODUCTIVE.
I THINK THAT IS PARTLY BECAUSE
OF COVID.
NOW PEOPLE ARE WORKING AT HOME.
BUT IT IS ALSO PARTLY THE
REGULATIONS THAT SORT OF FLOODED
THE MARKET WITH BIDEN THAT MAKES
PEOPLE A LOT MORE UNPRODUCTIVE.
BUT I THINK PRODUCTIVITY PROBLEM
IS NOT SUFFICIENTLY TALKED
ABOUT, HOW MUCH IT DRIVES THE
LOW OUT PUT.
LARRY: AND TYLER, LAST ONE HERE,
IN THIS BATTLE OF FORMER CEA
CHAIRS WE’VE GOT GOING WITH YOU
TWO, YOU’RE AGREEING FAR TOO
MUCH, BY THE WAY, TOMAS HAS
WRITTEN A PIECE SAYING SUBSIDIES
ONLY FEED INFLATION.
SUBSIDIES FEED INFLATION.
DO YOU THINK HE IS RIGHT?
FEEL FREE TO DISAGREE, TYLER, BY
THE WAY BUT DO YOU THINK HE HAS
GOT THIS RIGHT?
>> AS MUCH AS I WOULD LIKE TO
DISAGREE WITH TOMAS I AM 100%
WITH HIM ON THIS.
ALL THE SUBSIDY DOES INTRODUCE
AS WEDGE AND IT STOKES DEMAND
AND ACTUALLY FOR THOSE NOT
RECEIVING THE SUBSIDY IT MEAN AS
HIGHER PRICE.
SO SUBSIDIES ARE NOT A SOLUTION
TO HIGH INFLATION AT ALL.
THEY’RE COUNTERPRODUCTIVITY.
LARRY: TOMAS, WILL GIVE YOU THE
LAST WORD ON SOMETHING ELSE YOU
WROTE ABOUT, JOE BIDEN HAS GOT
THIS CANCER MOONSHOT.
WE ALL WANT A CANCER MOONSHOT NO
DOUBT BUT HOW ARE DRUG PRICE
CONTROLS GOING TO HELP THIS
CANCER DEVELOPMENT?
>> WELL IT IS NOT GOING TO HELP.
HE IS BASICALLY TURNING THE WAR
ON CANCER INTO A WAR ON CANCER
PATIENTS CURRENTLY BECAUSE WHAT
HAS HAPPENED THE PRICE CONTROLS
IN THE INFLATION REDUCTION ACT
WILL BASICALLY REDUCE CANCER R&D
BY NINE TIMES AS MUCH WE FOUND
IN AN EARLIER STUDY THIS YEAR,
NINE TIMES AS MUCH THE MOONSHOT
WILL INCREASE R&D.
WE’LL SEE A LOT HIGHER MORTALITY
FOR CANNER PATIENTS GOING
FORWARD.
LARRY: THAT IS A TRAGEDY, TRULY
A TRAGEDY.
FELLOWS I TRIED TO DRIVE A
WEDGE.
YOU WOULDN’T LET ME.
YOU AGREE ON EVERYTHING.
REALLY SOMETHING.
TOO MUCH INFLATION, RECESSION ON
THE WAY, SUBSIDIES ARE BAD, WE
NEED MORE PRODUCTIVITY AROUND
SHOULD HAVE FREE MARKET PRICING.
I GET IT.