INSTEAD SAVE AMERICA, KILL THE
BILL.
ALL RIGHT.
WE’RE GOING TO HAVE SOME FUN
HERE.
WE NOT ONLY HAVE ONE BUT WE HAVE
TWO FORMER CHAIRS OF THE COUNCIL
OF ECONOMIC ADVISORS.
FOR EXAMPLE, WE HAVE TOMAS
PHILIPSON, FORMER CEA CHAIR.
I THINK HE IS AT THE UNIVERSITY
OF CHICAGO OUT THERE SOMEPLACE.
WE HAVE TYLER GOOD SPEED, FORMER
CEA CHAIR.
HE IS IN THE LEFT COAST AT
HOOVER INSTITUTION WHERE I HEARD
THEY HAVE NO POWER, SO HE HAS TO
GO ON SOME OTHER DEVICE.
THAT IS TOPIC FOR ANOTHER
SEGMENT, NO POWER.
DUMBEST THING I HAVE EVER SEEN.
GOOD TO SEE BOTH OF YOU, OLD
FRIENDS.
I SERVED WITH BOTH OF THESE
SUPER SMART PEOPLE.
TYLER I’M MAKING THE CASE I
GUESS YOU HEARD IT IN THE
OPENING RIFF.
I CAN’T SAY IF IT HAS PEAKED IT
IS COMING DOWN VERY MUCH.
THE TRIM MEAN INDEXES HAVE
BECOME MORE IMPORTANT RIGHT OUT
AT CLEVELAND AND DALLAS, SHOWS
INFLATION IS BROADENING, NOT
NARROWING AROUND FALLING.
WHAT IS YOUR EXPERT CEA TAKE ON
THE INFLATION STORY RIGHT NOW?
>> GOOD TO BE WITH YOU, LARRY,
THOMAS, THE SECOND TIME IN A
MONTH WE IN THE SILICON VALLEY
HAVE HAD ROLLING BLACKOUTS.
SO, LARRY, I THINK YOU’RE RIGHT
AT THE END OF THE DAY INFLATION
IS A FUNCTION OF TWO THINGS,
ABOUT INFLATION EXPECTATIONS.
IT IS ABOUT THOSE, I CALL THEM
TEMPORARY DEMAND PULL COST PUSH
PRESSURES AND EVEN AS SOME OF
THOSE START TO DISSIPATE THE
FACT THAT EXPECTATIONS HAVE
RISEN MEANS THAT THIS IS GOING
TO BE A LOT NOR INERTIA IN THE
INFLATION WE’RE SEEING.
NOT JUST THE TREND AND MEAN YOU
POINTED OUT IT IS ALSO THE
UNDERLYING INFLATION GAUGE, TRIM
MEAN MEASURE OF INFLATION, THE
WEIGHTED AND MEDIAN, STICKY CPI.
ALL OF THOSE ARE POINTING TO AN
INFLATION PROBLEM THAT IS
ACTUALLY WORSE IN RECENT MONTHS
THAN THREE TO SIX MONTHS AGO.
LARRY: TYLER, ALSO, IT JUST
OCCURS TO ME THE NEW YORK FED
SURVEY OF CONSUMER SPENDING AND
YOU KNOW, YOU LOOK OUT ONE YEAR,
IT IS NEARLY 7%.
TWO YEARS NEARLY 4%.
NO, THREE YEARS, THREE YEARS,
NEARLY 4%.
THAT IS A LONG TIME.
EVEN FIVE YEARS IT IS NEARLY 3%.
WHAT I’M SUGGESTING, TYLER IS,
THAT IS ANOTHER INDICATOR THAT
INFLATION FEARS HAVE BECOME
EMBEDDED BUT MAYBE MOST
IMPORTANTLY, TYLER, WE’LL GET
THOMAS TO WEIGH IN ON THIS, ALL
OF THAT, ALL OF THAT, PLUS THE
CPI, PLUS THE PPI, PLUS THE TRIM
MEAN, THAT’S WAY ABOVE THE FED’S
2% TARGET.
SO MY POINT IS, THERE IS NO
MIRACLE CURE FOR INFLATION.
THE MISTAKES WERE MADE A YEAR,
YEAR-AND-A-HALF AGO, MAYBE TWO
YEARS AGO.
AND IT IS GOING TO BE REALLY
DIFFICULT AND TAKE SEVERAL YEARS
TO GET OUT OF IT.
THAT IS WHAT I’M THINKING.
HOW ABOUT YOURSELF?
>> YEAH.
THE LESSON FROM THE 1970S,
SOMETIMES INFLATION CAN EVEN
SURVIVE A MILD RECESSION.
REMEMBER ARTHUR BURNS GOT
INFLATION DOWN FROM 6.4% TO
BELOW 3%.
EVEN THAT WASN’T ENOUGH TO GET
THOSE EXPECTATIONS BACK TO
ANCHOR.
I HAVE AN ACADEMIC PAPER COMING
OUT PRETTY SOON THAT LOOKS HOW
CONSUMERS DO FORECASTING
INFLATION VERSUS PROFESSIONAL
ECONOMISTS AND IT TURNS OUT
PROFESSIONAL ECONOMISTS USUALLY
DO AN OKAY JOB, BETTER THAN
CONSUMERS BUT ONCE INFLATION
GETS UP ABOVE 3, 3 1/2%,
SUDDENLY THE CONSUME REMEMBERS
ACING ALL THESE TESTS OF
FORECAST RATIONALITY BECAUSE
THEY ARE PAYING A LOT OF
ATTENTION TO PRICES.
THAT IS THE DYNAMIC THAT RINGS
OUT.
LARRY: TOMAS PHILIPSON, YOU
PROBABLY HEARD THE WHITE HOUSE
RIFF JUNE IS THE LAST BAD MONTH.
IT IS ALL HISTORY.
NOBODY CARES ABOUT THE JUNE
NUMBER COMING OUT TOMORROW,
GASOLINE PRICES COMING DOWN,
WORLD OIL PRICES COMING DOWN AND
BASICALLY YOU KNOW, APART FROM
VLADMIR PUTIN WE’RE GOING TO BE
OKAY.
WHAT DO YOU MAKE OF THAT?
>> WELL, ON THE INFLATION FRONT
I THINK YOU KNOW THE ENERGY
CRISIS WE HAVE IS KIND OF A
FOREIGN POLICY FAILURE AS
OPPOSED TO A DOMESTIC POLICY
FAILURE.
IT’S A FOREIGN POLICY FAILURE
BECAUSE TRUMP PREVENTED RUSSIA
FROM GOING INTO UKRAINE EVEN
THOUGH OBAMA AND BIDEN DIDN’T.
SO APPARENTLY FOREIGN POLICY WAS
MORE SUCCESSFUL IN PREVENTING
THAT FROM HAPPENING.
IN ADDITION TO A DOMESTIC POLICY
FAILURE OBVIOUSLY WITH THE
REGULATIONS HITTING THE ENERGY
SECTOR IN THE U.S. BUT BOTH
THOSE THINGS, U.S. COMING DOWN
AND SUPPLY, RUSSIA COMING DOWN
IN SUPPLY, IS WHY WE’RE WHERE
WE’RE AT IN THE ENERGY SECTOR.
IN TERMS OF OVERALL INFLATION I
AGREE WITH TYLER, SO IF YOU LOOK
AT THIS INFLATIONARY PERIOD
INFLATION EXPECTATIONS BY
CONSUMERS ARE MUCH MORE ACCURATE
THAN THE FED’S FORECASTERS IN
THIS INFLATIONARY TIME, THE LAST
YEAR ESSENTIALLY.
AND I THINK YOU KNOW, IT IS KIND
OF UNDERSTANDABLE, CONSUMERS ARE
VERY SORT OF PESSIMISTIC THAT
D.C. CAN FIX THIS PROBLEM.
INFLATION IS A GOVERNMENT
DISEASE ESSENTIALLY THAT ONLY
CAN BE KURD UNFORTUNATELY BY THE
GOVERNMENT EVEN THOUGH THE
GOVERNMENT IS VERY POOR AT
DIAGNOSING THE DISEASE MANY
TIMES.
SO I THINK IT’S CORRECT THAT
PEOPLE LIVING IN THE ECONOMY
THAT IS CONSUMERS AND COMPANIES,
ARE SEEING THIS A LOT SHARPER
THAN POLITICIANS OR BUREAUCRATS
NOT LIVING IN THE ECONOMY,
TRYING TO FORECAST THE PROBLEM.
LARRY: TOMAS IN THE FIGHT
AGAINST INFLATION DO YOU THINK
IT’S A GOOD IDEA TO IMPOSE
MEDICARE PRICE CONTROLS?
BY THE WAY, BEFORE YOU ANSWER
THAT?
I’M NOT GOING TO ALLOW YOU TO
TALK FOR THREE HOURS ON IT, WE
ONLY HAVE A LITTLE BIT OF TIME
YOU KNOW WHAT?
DRUG PRICES ARE ONE OF THE FEW
AREAS WHERE PRICES ARE FLAT OR
FALLING.
THEY WANT TO CONTROL THEM.
DO YOU THINK THAT IS A CLEVER
IDEA TO FIGHT INFLATION?
>> YEAH, IT IS NOT, IT IS A
NIXONIAN STRATEGY TO GO AFTER
INFLATION WITH PRICE CONTROLS.
THIS BILL IS VERY AFTER
DISASTER.
IT WILL KILL ACCORDING TO OUR
CALCULATIONS 31 TIMES THE DEATH
TOLL OF COVID OVER THE NEXT 50
YEARS PARTICULARLY IN CANCER,
WHICH IS NEGATING THE
PRESIDENT’S MOONSHOT INITIATIVE.
BUT THE MOST DRAMATIC PART OF
THIS BILL IS CALLED THE MEDICARE
NEGOTIATION BILL.
GUESS WHAT HAPPENS IF YOU DON’T
AGREE WITH MEDICARE?
YOU GET A 95% TAX ON YOUR SALES.
SO THIS IS LIKE SOMEONE GOING
SELLING THEIR HOUSE AND BUYER,
DON’T AGREE WITH THE BUYER, THE
BUYER GETS THE HOUSE.
IT IS JUST CRAZY THEY CALL THIS
NEGOTIATION.
IT IS FORCED PRICING ON THE
INDUSTRY AND IT WILL LEAD TO A
LOT OF DEATHS IN THE FUTURE
FORGOING A LOT OF INNOVATION.
LARRY: TYLER, YOU ARE OLD ENOUGH
TO REMEMBER NIXON.
TOMAS, THREW THAT OUT THERE, YOU
OKAY WITH THAT, JUST CHECKING,
YOU OLD ENOUGH TO REMEMBER WHEN
REAGAN WON THE LANDSLIDE IN
1984?
THAT WAS THE MOST TIMES
AMERICANS CAME TOGETHER ON ANY
SUBJECT.
BUT I DIGRESS.
TYLER, HOW ABOUT THE BRILLIANT
IDEA OF RAISING MARGINAL TAX
RATES ON SMALL BUSINESS
BASS-THROUGHS, LARGE
CORPORATIONS WITH A MINIMUM TAX
THAT IS BOOK VALUE MINIMUM TAX,
OVERSEAS MINIMUM TAX WHICH MAY
OR MAY NOT GET STALLED.
I HOPE IT GETS STALLED.
IF YOU THINK ALL THE TAX HIKES,
WHAT WILL THAT DO TO THE ECONOMY
AND INFLATION?
>> WE, TALK ABOUT A WAY TO
THROTTLE THE SUPPLY SIDE
POTENTIAL OF THE U.S. ECONOMY
AND YOU’RE THREATENING SMALL
BUSINESSES, SMALL AND
MEDIUM-SIZED ENTERPRISES WITH A
BIG TAX HIKE, AT THE VERY SAME
MOMENT IF YOU LOOK AT SURVEYS OF
SMALL BUSINESSES, THEY ARE
SAYING THAT THE ECONOMY, IN
TERMS OF THE RESPONSE, DO YOU
EXPECT THE ECONOMY TO EXPAND
FROM HERE?
THEY ARE ANSWERING AT THE WORST
RATE IN THE HISTORY OF THE
SURVEY.
THEY DO NOT, NO ONE EXPECTS THE
ECONOMY TO EXPAND THIS.
IS AT BELOW RECESSION LEVELS.
SIMILARLY IF YOU ASK THEM IF NOW
IS A GOOD TIME TO EXPAND YOUR
BUSINESS, IT IS AT RECESSION
LEVELS THE RESPONSE ON THAT.
THIS IS PILING AN ENORMOUS TAX
BURDEN ON TOP OF COMPANIES AT
THE VERY SAME MOMENT THEY’RE
EXPRESSING ANXIETY AT LEVELS
REALLY ONLY OBSERVED DURING
RECESSIONS.
LARRY: THINK ABOUT IT, FELLOWS,
WE GOT TO GET OUT, YOU’VE BEEN
GREAT.
YOU START RAISING UP MARGINAL
TAX RATES ON BUSINESSES, NOW I
KNOW THE LEFTIES IN THE BIDEN
ADMINISTRATION IN CONGRESS HATE
BUSINESS I GET THAT, BUT
INCENTIVE EFFECT WILL BE SO BAD.
YOU TAX SOMETHING MORE YOU WILL
GET LESS OF IT, NOT ONLY WILL
THAT DEEPEN THE RECESSION IT
WILL MAKE INFLATION WORSE.
SUPPLY SIDE TAX HIKES, I CAN’T
THINK OF ANYTHING WORSE, TOMAS.
DID YOU RECOMMEND THAT, WAS THAT
YOUR MEMO, TOMAS PHILLIPS?
>> I THINK IT WAS YOURS, LARRY,
IF I DON’T REMEMBER WRONG.
HERE IS WEIRD PART ABOUT THIS.
LARRY: LAST 20 SECOND.
>> I HAVE A LOT OF ISSUES WITH
KEYNESIANS WHO WANT TO BOOST THE
ECONOMY DURING RECESSIONS.
THIS RECONCILIATION PACKAGE NOW
IS A SURPLUS POLICY IN A FOURTH
COMING RECESSION.
THEY’RE BASICALLY COLLECTING
MORE TAXES THAN THEY’RE SPENDING
ACCORDING TO THE LATEST RUMORS
AND IF THAT’S THE CASE I DON’T
KNOW WHAT COULD JUSTIFY THAT
KIND OF POLICY.
USUALLY KEYNESIANS WANT TO HAVE
DEFICIT SPENDING WHEN YOU HAVE A
RECESSION COMING.
WE’RE ON THE VERGE OF A
RECESSION ESSENTIALLY AND HERE
WE GO WITH A SURPLUS PROGRAM
WHICH IS CRAZY IN MY OPINION.
LARRY: CRABS SY IN YOUR OPINION.
I HAD A PARTNER ONCE, CO-HOSTING
PARTNER WHO WAS TERRIBLY BRIGHT
GUY.
HE HAD A PHRASE FOR ALL OF THIS,
DUMB AS WOOD, WHAT HE USED TO
SAY.
EVER MET WOOD?
WOOD IS PRETTY DUMB.
TWO CEA CHAIRS.
THAT COULD BE TV HISTORY.