>>>
>>> >>> ALL RIGHT A WARM WELCOME
BACK.
BACK. SECOND QUARTER GDP GROWTH IS
IMPRESSIVE.
IMPRESSIVE. 4.1%.
4.1%. NOW, THERE ARE SEVERAL ONE-TIME
FANG
FANG FACTORS.
FACTORS. I WANT TO TAKE A LOOK WHY
QUARTERLY FIGURES ALONE HAVE TO
BE LOOKED AT IN CONTEXT.
IT’S MUCH MORE COMPLICATED THAN
THIS.
THIS. I KNOW SOME OF YOU ARE GOING TO
GET ANGRY I PUT SUCH A SHORT
DESCRIPTION.
DESCRIPTION. BASICALLY THE TOTAL VALUE OF
EVERYTHING PRODUCED BY EVERYBODY
AND EVERY COMPANY IN THE
COUNTRY.
COUNTRY. IT’S A BIG SCORECARD OF THE
COUNTRY’S ECONOMY.
COUNTRY’S ECONOMY. NOW WE HAVE SEEN HIGH RATES LIKE
THIS BEFORE, IN FACT WE’VE SEEN
HIGHER QUART EARLY
HIGHER QUARTERLY GROWTH RATES.
IT REACHED 4 TIMES DID YOURING D
OH -- THE ANNUAL GDP GROWTH RATE
NEVER BROKE 3% UNDER PRESIDENT
OBAMA.
OBAMA. I TEND TO LIKE TO LOOK AT THIS
ONE A LITTLE MORE.
LAST TIME WE SAW THAT KIND OF
GROWTH WAS DURING THE BUSH
ADMINISTRATION, 3.3%.
ADMINISTRATION, 3.3%. BACK IN 2005.
RIGHT NOW, FEDERAL RESERVE
OFFICIALS FORECAST GDP TO BE UP
BY 2.8% COMPARED TO LAST YEAR,
FOR ALL OF 2018.
THEN TO TAIL OFF TO 2.4% IN
2019.
2019. AND 2% IN 2020.
I HAVE SEEN NUMBERS THAT ARE
HIGHER ESTIMATES FOR THIS YEAR
THAN 2.8%.
THAN 2.8%. I’M GOING TO CALL IT 3 FOR
ARGUMENT’S SAKE.
ARGUMENT’S SAKE. THAT’S PROBABLY A NUMBER YOU
SHOULD BE THINKING ABOUT.
BOOST WAS FED IN PART BY
SPENDING FROM CONSUMERS AND
BUSINESSES AND A RUSH FROM
FARMERS GETTING THEIR SOY BEAN
EXPORTS INTO THE GLOBAL MARKET
AHEAD OF NEW TARIFFS.
FOR THOSE OF YOU ASKING IF THE
4.1% RATE CAN SUSTAIN ITSELF
THROUGH THE REST OF THE YEAR,
THAT IS AN OPEN QUESTION.
JOINING ME IS KEVIN HASSET.
HE IS THE CHAIRMAN AND A GOOD
FRIEND OF MINE AND CONSERVATIVE.
BUT I ALSO KNOW LIBERAL
ECONOMISTS.
ECONOMISTS. JARED BERNSTEIN WHO IS A FRIEND
OF YOURS AS WELL IS STANDING BY
I’M GOING TO TALK TO HIM
AFTERWARD.
AFTERWARD. DANGER IS YOU HAVE SOMEBODY
SMARTER THAN ME LISTENING TO THE
CONVERSATION.
CONVERSATION. YOU CAN NORMALLY WALK --
>> LET ME ASK YOU THIS.
BACK -- THE REASON JARED IS
SIGNIFICANT IN THE CONVERSATION
IS BACK DURING THE OBAMA
ADMINISTRATION THEY WOULD
TRUMPET REPORTS ON JOB CREATION
OR THE EFFECT OF STIMULUS AND I
WOULD TO DO THEM EXACTLY WHAT
I’M DOING TO YOU.
I 0 WOULD QUESTION THEM AND
PERHAPS SAY THEY ARE ROSIER THAN
THEY THINK.
THEY THINK. JARED HAS INVITED ME TO THE
WHITE HOUSE AND MAKE YOUR CASE.
IN THIS PARTICULAR CASE, 4.1%
SOLID GROWTH, BUT AS I NOTED,
SOME OF IT WAS FUELLED BY
FARMERS GETTING RID OF SOY
BEANS.
BEANS. SO, DO YOU LOOK AT 4.1% AND
THINK THAT IS SUSTAINABLE OR
SHOULD WE TALK ABOUT 2.83%?
>> I THINK YOU’RE RIGHT TO GET A
LITTLE BIT ANXIOUS ABOUT
FOCUSING ON ONLY ONE NUMBER.
AND I GOT TO ALSO ADD THAT JARED
HAS OVER THE YEARS TAKEN A LOT
OF GUFF FROM CONSERVATIVES ABOUT
THE FIRST FORECAST HE DID ABOUT
WHAT THE ECONOMY WOULD BE IF WE
PASSED THE STIMULUS AND A THINK
A LOT OF THAT CRITICISM WAS
UNFAIR BECAUSE THEY HAD TO
CLOSE, AS I DID, BEFORE THEY GOT
A WHOLE BUNCH OF REALLY BAD
DATA.
DATA. FOR SURE THEY WOULD HAVE CHAINED
THE
THE CHANGED THE NUMBERS IF THEY HAD
THE DATA.
THE DATA. I THINK THAT’S UNFAIR.
FOR ME, THOUGH, THINKING ABOUT
WHAT I’M DOING NOW HERE AT THE
WHITE HOUSE, THAT WHEN I TOOK
THE JOB, THE PRESIDENT BASICALLY
SAID, KEVIN, DON’T SPIN THE
AMERICAN PEOPLE.
AMERICAN PEOPLE. PICK THE MODELS YOU THINK ARE
BEST AND GO OUT AND BELIEVE WHAT
YOU’RE SAYING IS TRUE ABOUT WHAT
IT’S GOING TO DO TO THE ECONOMY.
YOU NO HE THAT’S WHAT I’VE BEEN
DOING.
DOING. LAST FALL I SAID ON THE SHOW
THAT IF WE PASSED THE TAX CUT
THAT OUR FORECAST WOULD BECOME
TRUE, GROWTH THIS YEAR OF 3.1%.
NO THE RIDICULOUS, NOT ABOVE 4
BUT 3.1.
BUT 3.1. IF THE AVERAGE FOR THE TWO
NUMBERS, 3.1.
NUMBERS, 3.1. >> FAIR ENOUGH.
I’M TOTALLY FINE.
>> GOOD GUESS.
>> I’M FINE WITH THE FED’S
FORECAST.
FORECAST. MAYBE IT WILL BE 3 OR 3.1.
I GUESS THE CONCERN I HAVE IS
HOW TO MAKE THIS MAKE SENSE FOR
THE AMERICAN PEOPLE BECAUSE WHEN
THE PRESIDENT RAN FOR OFFICE --
YOU WEREN’T INVOLVED AT THE
TIME.
TIME. HERE’S WHAT HE SAID.
>> WE’RE BRINGING IT FROM 1% UP
TO 4%, AND I ACTUALLY THINK WE
CAN GO HIGHER THAN 4%.
I THINK YOU CAN GO TO 5% OR 6%.
>> RIGHT.
>> RIGHT. >> THAT’S MY PROBLEM.
BECAUSE WE’RE NOT ACTUALLY
TALKING ABOUT ANNUAL GDP GROWTH
OF 4%, 5%, OR 6%.
YOU AND I HAD THIS CONVERSATION.
I THINK I ONCE PROMISED TO WEAR
A DRESS FOR A WEEK IF CERTAIN
PROVE
PROVE PREDICTIONS CAME THROUGH.
I SAID I WOULD GROW AN AFRO.
>> IN A WOULD BE FUN.
>> IT WOULD BE FUN TO HAVE 4, 5
OR 6%.
OR 6%. THAT’S NOT REALLY A REASONABLE
EXPEKS TAGS.
EXPEKS TAGS. >> I THINK YOU COULD HAVE A
CRAFTER
CRAFTER QUARTER LIKE THAT.
CAPITAL SPENDING BOOM IS
CONTINUING.
CONTINUING. BUT SECOND, A REDUCTION IN
INVENTORIES TOOK ABOUT A PERCENT
OFF THE GDP NUMBER.
IF WE HAD NORMAL INVENTORIES,
THEN IT WOULD HAVE BEEN A 5%
NUMBER LIKE THE PRESIDENT SAID.
AND AS YOU KNOW, IF YOU LIKE
HAVE FIRMS RUNNING DOWN THEIR
INVENTORIES IN ONE QUARTER,
THAT’S PRETTY OPTIMISTIC FOR THE
SECOND HALF OF THE YEAR.
I THINK THAT HAVING 3.1 OVER THE
FIRST HALF OF THE YEAR AND
HAVING THE SECOND QUARTER BE
ABOVE 4 WITH A SORT OF MINUS 1%
FROM INVENTORIES MEANS THE CEA
IS STILL REALLY COMFORTABLE THAT
3.1 IS A CONSERVATIVE ESTIMATE.
>> YOUR GROUP, THE COUNSEL --
>> YES.
>> YES. >> THE PRESIDENT, INTERESTINGLY,
HAS CHIMED IN IN THE LAST COUPLE
WEEKS ABOUT INTEREST RATES.
APPARENTLY WARNING THE FED TO BE
CAREFUL ABOUT THE INCREASE.
>> ARE YOU COMFORTABLE WITH THE
PRESIDENT CHIMING IN?
>> 100% RESPECT THE INDEPENDENCE
OF THE FED.
PRESIDENT DOES DO.
I THINK THAT THE INDEPENDENCE
ABSOLUTELY 100% HAS TO BE
RESPECTED HE RELIGION OUTLY.
IT
IT -- RELIGIOUSLY.
-- RELIGIOUSLY. I GOT CRITICIZED BECAUSE I WAS
ON STAGE AND I SAID SOMETHING
ABOUT I’M NOT SURE THERE IS A
NATURAL RATE OF UNEMPLOYMENT.
IF YOU HAVE A NATURAL RATE AND
IT CHANGES, HOW NATURAL IS THAT.
AFTER I SAID THAT ON STAGE,
BEDROOMA
BEDROOMA STORY WZ ONE THAT I’M ATTACKING
THE FED.
THE FED. I THINK THAT KIND OF
CONVERSATION SHOULD BE
PERMITTED.
PERMITTED. BUT IN THE END THEY HAVE TO MAKE
THE CALL AND WITHOUT POLITICAL
INFLUENCE.
INFLUENCE. >> I HAVE OFTEN SAID THAT THE
PRESIDENT GETS TOO MUCH CREDIT
AND TOO MUCH BLAME IN SOME
CASES.
CASES. ANY PRESIDENT, FOR JOBS AND
SOMETIMES FOR ECONOMIC GROWTH.
BUT, THE PRESIDENT -- HE
DESERVES CREDIT WHERE DUE, BUT
IF THIS SLOWDOWN GETS TRIGGERED
BY A TRADE WAR, DOES THE
PRESIDENT HAVE TO TAKE
RESPONSIBILITY FOR THAT?
>> THE PRESIDENT HAD SAID
FOREVER -- YOU AND I HAVE TALKED
ABOUT IT -- THAT HE WANT THE
BETTER TRADE DEALS.
IF P YOU LOOK AT ALL THE
POSITIVE MOVE M WITH THE EU THIS
WEEK YOU CAN SEE HIS STRATEGY OF
BEING TOUGH AND HAVING CREDIBLE
THREATS AND INVITING PEOPLE TO
THE TABLE IT WORKING.
I THINK AS YOU MENTIONED, THE
TREAD DEFICIT DROPPED IN THE
SECOND QUARTER.
SECOND QUARTER. SOME WAS ANTICIPATORY, BUT ALSO
PARTLY WE’RE OPEN FOR BUSINESS.
WE’VE BECOME AN ATTRACTIVE TACT
CLIMATE.
CLIMATE. PEOPLE ARE MAYBE WORRIED ABOUT
THE POLICY IN THE FUTURE AND
MOVING THEIR PRODUCTION HOME IN
HAVEN’T OF SOMETHING THEY MIGHT
BE ANXIOUS ABOUT.
>> THE ONE -- THE ONE RESULT
THAT’S PROBLEMATIC IS WAGE
EARNERS ARE NOT EARNING MORE
MONEY.
MONEY. HOURLY WAGES ARE NOT IMPROVING,
WE DO HAVE A LITTLE BIT OF
INTEREST RATES GOING UP, OIL
PRAISES GOING UP.
HOW DO WE FIX THAT?
>> THAT’S SOMETHING WE’RE
WORKING REALLY HARD ON.
I’M GOING TO PRETTY SOON ABOUT
TO GO OFF TO TOKYO FOR A WEEK
BUT WHEN I COME BACK I’LL
PRESENT NEW ANALYSIS TO LOOK AT
HOW THE STAMPEDE OF WORKERS HAS
INCREASED THE POOL OF LOW
SKILLED WORKERS AND THAT HAS
LOWERED THE AVERAGE WAGE.
EVEN THOUGH THERE IS WAGE PICK
UP.
UP. ONE OF THE WAY YOU CAN SEE, LOOK
AT THE GDP RELEASE TODAY AND
LOOK WHAT HAPPENED TO GROSS
DOMESTIC INCOME.
DOMESTIC INCOME. INCOME WAS REALLY, REALLY
REVISED UP LOAFEROVER THE LAST F
YEARS SO MUCH SO THAT THE
SAVINGS RATE ALMOST DOUBLED.
A LOT ARE STARTING TOCK TO BE FI
I THINK IF YOU ACCOUNT FOR
CHANGES AND ALSO ACCOUNT FOR THE
NEW DATA WE’RE FINDING THAT
SHOWS SKY ROCKETING INCOMES THAT
THE STORY’S GOING TO BE BETTER.
FINAL THOUGHT.
FINAL THOUGHT. IN THE END, THE WAGE GROWTH FROM
CAPITAL SPENDING IS A MEDIUM
TERM FOR NOW.
SOMETHING YOU SHOULD SEE OVER 3
TO 5 YEARS AS I’VE REATER RATED
BACK TO THE FALL.
>> >> THANK FOR ALL YOUR STUFF.
ALL RIGHT.
ALL RIGHT. JOINING ME NOW AS PROMISED JARED
BURNSTEIN.
BURNSTEIN. I SHOULD SAY THAT I FIRST GOT TO
KNOW JARED BECAUSE WE HAD AN
ARGUMENT ABOUT MY
CHARACTERIZATION OF THINGS THAT
YOU AND THE OBAMA ADMINISTRATION
WERE SAYING AND YOU INVITED ME
TO SIT IN AND DISCUS THAT WITH
YOU.
YOU. JUST SO VIEWERS UNDERSTAND I’M
AN EQUAL OPPORTUNITY CRITIC OF
ADMINISTRATIONS PROVIDING ROSY
NARRATIVES ABOUT THE ECONOMY.
HELP US UNDERSTAND WHAT WE’RE
LOOKING AT.
LOOKING AT. PRESIDENT ARGUES THAT, AS DID
KEVIN, THAT TAX CUTTING AND
REGULATION CUTTING IS DELIVERING
RESULTS.
RESULTS. 0 DO YOU AGREE?
>> I DON’T AGREE WITH THAT LAST
PART.
PART. IF YOU ACTUALLY LOOK INTO THE
GUTS OF THE REPORT, YOU DON’T
SEE MUCH FROM THE TAX CUTS IN
THE SENSE THAT I THINK KEVIN WAS
TRYING TO STRESS.
THIS IDEA OF THAT IT’S REALLY
INCREASING THE INVESTMENT, OR
THE ECONOMY’S CAPITAL, THAT WILL
IT USE TO GENERATE MORE GROWTH.
THERE’S
THERE’S THERE’S A LITTLE BIT OF THAT BUT
THAT’S NOT THE BIG STORY.
I THINK WHERE SOME OF THE
SPENDING IS HELPING IS WE’RE IN
A STIMULUS SENSE.
JUICING GDP GROWTH THIS QUARTER,
PROBABLY THIS YEAR, AND NEXT
YEAR AS WELL.
AND THEN, UNLESS CONGRESS PUTS
MORPHOUS CAL
MORPHOUS CAL MORE FISCAL STIMULUS--EVEN A 3%
GROWTH RATE, IS PROBABLY A MUCH
TOO OPTIMISTIC.
TOO OPTIMISTIC. I THINK THE UNDERLYING TREND
RIGHT NOW, THAT’S REALLY
IMPORTANT TO TRY TO PULL IT OUT
IS ABOUT 2.5%.
THAT’S A GOOD STEADY GDP GROWTH
RATE.
RATE. I DON’T THINK THERE’S ANYTHING
IN THE REPORT TO LEAD YOU TO
WORRY ABOUT GETTING OVERHEATING
THAT THE FED WOULD HAVE TO REACT
TO.
TO. I DO THINK THE ONE PROBLEM AND
YOU TALKED ABOUT IT -- I
DISAGREED WITH THIS PART OF
KEVIN’S WRAP WAS THE WAGE PART.
I DON’T THINK YOU’RE GOING TO
MAKE THE REAL WAGE STAGNATION GO
AWAY BY KIND OF LOOKING AT THE
WORKERS WHO ARE ENTERING THE
WORK FORCE AND DIFFERENT
QUALITIES.
QUALITIES. >> YEAH.
>> YEAH. THIS IS FUNDAMENTALLY, ALL OF
THIS ECONOMIC MEM DOUGH JUMBO
YOU AND I ENJOY, WHAT IT COMES
DOWN TO AND WHAT I’M GOING TO
GET TWEETS ABOUT IS I HAVEN’T
HAD THE RAISE.
I’M WORKING TWO JOBS.
IT’S A WEIRD SITUATION TO BE IN
WHERE WE HAVE 4% UNEMPLOYMENT, 4
IN FRONT OF GDP GROWTH, AND YET
WE’VE GOT THE ENTRACTABLE
PROBLEM OF WORKERS WHO ARE NOT
SEEING WHAT THEY LOOK AT IN THE
STOCK MARKET, WHAT THEY LOOK AT
IN GDP GROWTH.
HOW DO WE FIX THAT?
>> WELL THERE’S A WORD FOR THAT
CALLED ECONOMIC INEQUALITY.
IT CERTAINLY PREDATED KEVIN HAS
HASSETT AND THE DONALD TRUMP
ADMINISTRATION.
ADMINISTRATION. THAT’S EXACTLY THE RIGHT
QUESTION.
QUESTION. IT HAS TO DO WITH THE BARGAINING
POWER OF MIDDLE AND LOW WAGE
WORKERS.
WORKERS. THAT’S A LONG-TERM EROSION.
IT HAS TO DO WITH DIMINISHED
UNION POWER, MORE RECENTLY WITH
COURT DECISIONS THAT REALLY TILT
AGAINST WORKERS, AND THEIR
ABILITY TO CLAIM THEIR FAIR
SHARE OF THE GROWTH.
IT HAS TO DO WITH THE INCREASED
POWER OF FINANCE.
I THINK IT DOES HAVE TO DO WITH
THE FACT WE’VE RUN LARGE TRADE
DEFICITS FOR MANY YEARS.
THAT’S HURT OUR MANUFACTURERS.
THERE’S A LOT OF ECONOMIC POLICY
ARCHITECTURE THAT’S ERODED THE
CONNECTION BETWEEN GDP GROWTH
AND MIDDLE CLASS PAYCHECKS.
>> YES.
>> YES. WHICH IS ALSO WHAT YOU COULD SAY
ABOUT THE STOCK MARKET.
PEOPLE USED TO THINK IF IT’S UP
THE WAY IT’S BEEN --
>> ONE MORE COMMENT HERE.
AND I THINK THAT WHAT’S SO KEY
ABOUT THIS IS TO UNDERSTAND GDP
GROWTH IN CONTEXT.
WE LIKE THAT 4% NUMBER EVEN IF
IT’S JUST A BLIP AND NOT
SUSTAINABLE.
SUSTAINABLE. WE EVEN LIKE THE 2.5% TREND
GROWTH RE BUT LET’S NOT OVER
OVERINTERPRET GDP TO BE MORE
THAN IT IS.