EARNED PUBLIC DISTRUST.
JOINING ME RIGHT NOW IS FORMER
WHITE HOUSE COUNCIL OF ECONOMIC
ADVISORS CHAIRMAN AND UNIVERSITY
OF CHICAGO ECONOMIST, THOMAS
PHILIPSON.
THANK YOU FOR BEING HERE.
IT’S NOT JUST THAT OP-ED IN THE
JOURNAL THIS MORNING, THERE’S AN
OP-ED FROM KARL ROVE AND TITLE
OF HIS PIECE IS BIDEN HAS NO
PLAN TO FIGHT INFLATION.
THE PRESIDENT HAD HIS OP-ED IN
THE JOURNAL THE OTHER DAY, IT
WAS A LOT OF TALK BUT NO REAL
PLAN.
SO WHAT IS THE PLAN TO GET
PRICES DOWN IN YOUR VIEW?
>> YEAH, GETTING THE WHITE HOUSE
TO FIGHT INFLATION AT THIS POINT
IS LIKE HAVING AN ARSONIST
TRYING TO STOP A FIRE.
I THINK THE WHITE HOUSE
ANNOUNCED IT’S ALMOST TRYING TO
INCREASE INFLATION.
HE KEEPS TALKING ABOUT A COUPLE
OF THINGS.
ONE IS MAKING THINGS MORE
AFFORDABLE FOR PEOPLE AND THE
WAY HE’S GOING TO DO THAT IS
THROUGH DEMAND SUBSIDIES,
WHETHER IT’S CHILD CARE, HOUSING
OR STUDENT LOANS.
BUT THOSE SUBSIDIES PRESUMABLY
RAISE PRICE AS OPPOSED TO GOING
AFTER SUPPLY AND THE MONEY
SUPPLY WHICH IS A BIG CAUSE OF
THIS.
THE OP-ED IN THE WALL STREET JOURNAL POINTS OUT THE
JOURNAL POINTS OUT THE
GLARING ISSUE WITH THE KINSEIAN
ECONOMISTS WHICH BELIEVE THE
GOVERNMENT CAN TIME THE BUSINESS
CYCLE AND THIS IS GROUNDHOG DAY
AGAIN WHERE THE GOVERNMENT CAN’T
TIME BUSINESS.
IT’S LIKE FORECASTING A WEDDING
ON A SUNNY DAY MANY IT’S TOO
HARD TO DO.
YOU CAN’T FORECAST THE WEATHER,
YOU CAN’T FORECAST THE ECONOMY
VERY WELL, EVEN THE PRIVATE
SECTOR ON THE STREET DOES A
HORRIBLE JOB FORECASTING THE
ECONOMY, LET ALONE BUREAUCRATS
HAVE LESS OF AN INCENTIVE TO GET
IT RIGHT.
MARIA: WHAT DO YOU THINK IS
HAPPENING IN CHINA RIGHT NOW,
THOMAS?
SHANGHAI IS APPARENTLY
ATTEMPTING TO RETURN TO NORMAL
AFTER CHINA LIFTED THE TWO MONTH
LONG COVID LOCKDOWN.
THIS HAS HAD REVERBERATIONS
ACROSS THE WORLD.
DO YOU BUY IT THAT SHANGHAI IS
SLOWLY BUT SURELY OPENING UP AND
IS THAT GOING TO IMPACT OIL?
>> YEAH, IT’S GOING TO IMPACT
OIL AND IT SEEMS LIKE THEY’RE
OPENING UP.
THERE’S A LOT OF PEOPLE IN CHINA
OBVIOUSLY WHEN THEY DO ANYTHING
SO IT’S GOING TO RAISE DEMAND.
AT THE SAME TIME AS EUROPE IS
GETTING VERY SERIOUS ON SHUTTING
OF OUT RUSSIA OUT OF SUPPLY.
BOTH FORCES OBVIOUSLY BEING THE
TWO REASONS WE’RE NOW SEEING 120
OIL, ROUGHLY.
WE’RE ALMOST BACK TO 2008.
WE’RE CLIMBING UP TO 2008 WHERE
WE WERE IN THE PEAK OF THE 14
140s WITH OIL THE WHITE HOUSE
SAYS IT’S NOT EXPENSIVE ENOUGH.
THEY WANT TO PUT IS IN MORE
EXPENSIVE ENERGY, WHICH IS GREEN
ENERGY.
THE MARKET HAS NOT ADOPTED GREEN
ENERGY AND WON’T DO IT UNTIL THE
INNOVATION BRINGS DOWN THE COST.
MARIA: YEAH.
AND REBECCA HEINRICHS, JUMP IN
HERE.
I KNOW THAT YOU FEEL THAT IT’S
BEEN THE LOCKDOWN THAT HAS BEEN
MOST IMPACTFUL, NEGATIVELY
IMPACTFUL FOR THE U.S. ECONOMY.
>> NO, THAT’S RIGHT.
EVERY TIME YOU HEAR PRESIDENT
BIDEN, HE’S GOING TO DO THIS
TOUR SUPPOSEDLY TO CONVINCE
AMERICANS THE ECONOMY ISN’T THAT
BAD AND WILL POINT TO THINGS
THAT WERE OUT OF HIS CONTROL
THAT MADE THE ECONOMY PINCH WHEN
IT DID, HE’S GOING TO POINT TO
COVID.
WHAT HE MEANS IT’S THE
LOCKDOWNS, ESPECIALLY IN THE
SHANGHAI SITUATION IT’S THE
LOCKDOWN THAT’S CRUSHING THE
ECONOMY.
IT’S NOT THE CORONAVIRUS THAT’S
RESPONSIBLE FOR THIS.
WE KNOW THAT WITH THE SCIENCE
THE LOCKDOWNS AREN’T AFFECTING
THEM THE WAY THEY WANT TO DO TO
PREVENT ILLNESS.
REMEMBER WHEN GOVERNMENTS SAY
THIS, IT’S THE INHUMANE AND
COUNTER PRODUCTIVE LOCKDOWNS
THAT CRUSHED THE ECONOMY.
MARIA: THAT’S THE ISSUE HERE.
THIS IS ABOUT POLICY.
WE’RE TALKING ABOUT INFLATION AS
A RESULT OF BAD POLICY.
WE’RE TALKING ABOUT AN ECONOMY
THAT IS IN THE POSITION IT IS
BECAUSE OF BAD POLICY.
DO YOU THINK THE U.S. IS HEADED
FOR A HE RECESSION RIGHT NOW?
>> WELL, I THINK THE Q1 NUMBERS
THAT CAME OUT EARLIER ON THE
FIRST QUARTER WAS A LITTLE BIT
WRITTEN OFF BECAUSE OF THE TRADE
DEFICIT NUMBERS DRAGGING IT
DOWN.
WHEN YOU THINK ABOUT WHAT THE
WHITE HOUSE IS DOING, THEY’RE
STIMULATING DEMAND, DOMESTIC
DEMAND QUITE A BIT AND THEY’RE
ATTACKING DOMESTIC SUPPLY.
IF YOU START BUYING FROM ABROAD
AND HAVE A TRADE DEFICIT, THAT’S
A NATURAL CONSEQUENCE ON THAT
KIND OF POLICY.
SO I DON’T THINK Q1 WAS AS
INNOCENT AS PEOPLE THINK AND WE
MIGHT BE IN A RECESSION
OBVIOUSLY TWO QUARTERS OF
NEGATIVE GROWTH AND IT DEPENDS A
LITTLE BIT HE’S WHAT’S GOING TO
HAPPEN NOW, IT’S GOING TO BE A
LOT OF EYES ON THE EMPLOYMENT
NUMBERS, COMING OUT THE PRIVATE
TODAY AND THE GOVERNMENT
TOMORROW AND EMPLOYMENT
TYPICALLY LAGS OUTPUT REDUCTION
SO IT’S GOING TO BE A LOT OF
HYPE IF THOSE NUMBERS DO NOT
LOOK GOOD.
CURRENTLY ECONOMISTS THINK IT’S
ABOUT 28% CHANCE, IN AN AVERAGE
YEAR IT’S 14% CHANCE OF A
RECESSION SO IT’S DOUBLE WHAT
THE AVERAGE YEAR HAS TO BRING.
MARIA: AND BRIAN MOYNIHAN
RECENTLY TOLD US THAT THE
CONSUMER IS VERY STRONG, THE CEO
OF BANK OF AMERICA, AND
YESTERDAY JAMIE DIMON FROM JP
MORGAN SAID THAT CONSUMERS STILL
HAVE ABOUT SIX TO NINE MONTHS OF
SPENDING POWER IN THE BANK BUT
THEY ARE DRAWING ON THAT.
WE SAW THAT JUST THIS WEEK WITH
THE SAVINGS RATE PLUMMETING.
THOMAS, THANK YOU VERY MUCH FOR
YOUR INSIGHTS ON ALL OF THAT.
WE’LL KEEP WATCHING IT.