Let's address that big number that came out on Friday five and twenty eight thousand new jobs. Also revision up in June and by
the way wages up at a rate of 5.2 percent year over year. President Biden came said this shows that his economic policy is
working. What did you make of those numbers. I think it's more mixed. I celebrate all the extra jobs and
that's surely a good thing to see. But my principal concern is you know David has been that we've got an overheated economy and
that if you overheat the economy longer and longer you get more and more inflation and bigger and bigger problems down the road.
And everything in this number says to me overheating. Not yet under control. Not our path to being under control. So I was
actually not gratified by these numbers but my concern was actually magnified. So what message does this send to the Fed do
you think. Look I don't think the Fed has the thread right now.
As I said on this show last week I think the idea that we're at the neutral rate we're near the neutral rate is not a defensible
concept. And now when we're seeing wage inflation unambiguously after this no accelerating after this number after the ECI after
the Atlanta Fed we have by every reasonable measure of core inflation
inflation running somewhere plus or minus 5 percent. That is more than it was when Richard Nixon put price controls in place.
That is not acceptable by any dimension. And if we don't act on it and act strongly on it and that means raising real interest
rates significantly then we're just setting the stage for stagflation. Here's what I'm very worried about because we've
seen the movie before. I'm worried and I was interested to see that Paul Krugman who's hardly agreed with me in general on
these things expressed exactly this concern today. I'm worried that we're gonna see some good news on. Non
core inflation on commodities. On what's happened in gasoline for example. And we're going to see a bit of economic slowing
and that's going to lead the Fed to think that things are under control. But in fact underlying inflation is going to be still
completely unacceptable. Things are going to go up and down in terms of non core inflation. And if we've got a labor market
that's red hot that's only going to mean constant or even accelerating inflation. And we're going to have a situation like
we did in the 1970s where we perpetuated inflation by not doing enough to contain it. The doctor tells you to take all your
medicine if you take only some of your medicine you're going to get the illness back. The bacteria are going to be resistant and
it is going to be worse. And that is the risk that I believe we are running in this situation. On the path that the Fed is
predicting and on the path that the market is expecting. Another big piece of news this week came from that Inflation Reduction
Act which you talked about last week on the program saying you were glad to see the bill. It's been adjusted in some ways to
accommodate particularly Senator Cinema from Arizona. But as of right now it looks like it may well pass the Senate this weekend
and maybe be enacted next week. So what do you make of the bill as it looks now the package as much as we understand it.
This is really positive news. This is good news on health care. This is good news on the environment and energy. This is good
news on tax reform. This is going to make our economy better while at the same time reducing the budget deficit and
contributing albeit in a small way to a reduction in inflation. But it is a beginning a very important beginning not an end. We
still have huge international tax loopholes that are driving businesses abroad. We still shockingly and this is something
that really disappointed me and I was sorry with the judgment that Senator Cinema came to. We still have carried interest
loophole that is allowing many of the wealthiest Americans to pay taxes at a much lower rate than the people who clean their
floors by getting capital gains on what is really earned income. And it is just wrong. And it makes me worry about our politics
that it has lasted as long as it has. But look that's for another day. For today it's to celebrate that this is a good and
important bill that is moving the country forward. And I think it's a tribute to the perseverance of Manny the perseverance in
negotiating and negotiating and negotiating of Senator Schumer of Senator Manchin who many people have raised questions about
and who I don't agree about on everything but who has stuck with some basic views he had about the importance of not adding to
inflation for a year. And contrary to what many people said was prepared to reach a deal if it was the right deal and stayed at
the table. And above all I think it reflects the fact that President Biden laid out an agenda pointed to things that he
thought were very important recognize that not everything he's started with was going to happen but the some things needed to
happen. And for him for Secretary Yellen for chief of staff claim for any C director Brian D who played a big role in all of
this. I think this is a very substantial victory. And the fact that it took a long time coming shouldn't blind anybody to the
fact that it's something very important. Larry addressed one specific issue that's come up in this scoring as it's called the
Joint Committee on Taxation which is bipartisan came out and said that in fact fair one of the tax burden would fall. People
make 400000 hours or less. I understand what that is. It's saying if the corporations are paying more tax some of that is
going to go to the employees and the regular consumers. What do you make of that argument. Is it true.
I don't think it's very good economics. I think that the corporate share owners and other capitalists pay the vast
majority of corporate taxes in general and I think that's even more true with respect to corporate subsidies and loopholes and
its corporate subsidies and loopholes that we're going after. As a consequence of this I think the vast vast majority of
Americans are happy to see the tax rate on companies like Amazon go up and they're not worried that that means an increase in
their taxes. They'd much rather see us when we need tax revenue as we do now. Go after companies that year after year after year
are reporting billions of dollars of profits to their shareholders and still not paying taxes at a rate of even 15
percent. And that is all that this bill goes after high profits to shareholders. No taxes. That's the right thing to do. So
finally and briefly if we can Larry tell me does it change your view about whether Washington works. Because if you look at
actually what this Congress has done some good bipartisan some of it not. It's got an awful lot done with a 50 50 Senate and a
narrow majority in the House and a fair one bipartisan like the infrastructure bill like the CHIPS Act.
I think it does. David I've said it on your show before the great
the great thing about America is its capacity its resilience its capacity for self denying prophecy. Everybody predicts that our
system is going to collapse that nothing's going to work that we're not going to be able to do anything that we're not going
to meet our challenges. And that generates sufficient alarm that ultimately we do step up. Now we've got a long long way to go.
But I feel better about the fiscal side of what our country is doing today than I did a week ago or a month ago or frankly a
year ago. And I think that that's something that all of us should take some satisfaction from. I'm not sure everybody is
though. Is there communications failure. Look I think when you have a process that's as messy as this one
when you have as much transparency as today's news stories filed every two hours social media tweets it's just
hard. You know great surgeons accomplish remarkable things. But if people had to see the surgery it would all feel pretty grim
and awful. And it's a bit like that with legislation like this. So I'm not sure we are there and I'm not sure we will
get there. But I think that ultimately it's going to be the results that matter. And we're going to have less climate
change. We're going to have America more as a process. Millions of people who are worried about their bills for health care now
have them assured and people are going to go to the drugstore and they're going to get lower prices. I think ultimately it's
results not process that matter.