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Donald Trump taking to True Social to give us a read on a phone call he had today with President Vladimir Putin of Russia. In part, the True Social post reads, we have agreed to work together very closely, including visiting each other's nations. We have also agreed to have our respective team start negotiations immediately, and he said that would
begin by calling President Zelensky of Ukraine. We confirmed that that call happened as well as the President says that President Zelensky will be meeting together with Vice President jad Vance and Secretary of State Marco Rubio on Friday in Munich. As it looks like these conversations long been promised Joe, are actually about to get underway.
Yes, indeed, Friday is a date that we're going to be looking forward to here. I'm also curious to see if either of these world leaders visit each other's countries. The idea of a state visit by Vladimir Putin is something that would reinvent the optics all over again here, Kayley,
but this is something that is moving pretty quickly. Donald Trump, we should mention is set to sign a series of executive actions starting around two thirty, about an hour from right now, and based on what we've seen the past couple of weeks, that may become an open press event.
Where we learn more about this.
But indeed, Caroline Levitt, the Press Secretary, confirming that as she held forth before reporters, that briefing is underway right now.
Yeah, and while that is ongoing, we want to get some insight into where these negotiations realistically could go. And turn to Kurt Volker, who of course was former US Special Representative for Ukraine negotiations from twenty seventeen to twenty nineteen, also served as US Ambassador to NATO. Ambassador, thank you for coming back to balance of power as it looks like these conversations are about to get underway. Is this
really go time? And what are Russia and Ukraine bringing to the table at this point?
Well, I think it is I think the fact that President Putin went ahead made that call with President Trump. Now that is kind of kicking things off. What President Trump has been doing until now is indicating that he expects Putin to end the war, so he's holding Putin accountable for that, and he's trying to create a pathway for a solution so that the war ends and doesn't come back. I think there are three elements that are consistent with what we're hearing from President Trump. That is
the idea of a ceasefire, so stopping the fighting right now. Second, deterring any future Russian aggression so that there's a permanent piece. And third, shifting the burden for securing Ukraine in the future more to the Europeans, not leaving the US out entirely, but shifting the burden more towards Europe. And I think that's what we're going to see and aim to this team of people to get started on this, and I
think they will get started right away. In fact, Rubio will be at the Munich Security Conference later this week, and I think we're having conversations about it right there.
Bessar, it's great to have you back with us on Bloomberg. We heard from the new Defense secretary earlier today, who with his comments, might make you wonder about what kind of leverage Ukraine has at this negotiating table. He called it unrealistic to get NATO membership, which was of course a major goal of Alto Rizzelenski, or returning to pre twenty fourteen borders. You know a lot about this. How unrealistic are those goals?
Well, I think we have to really listen carefully to what he said. It was a prepared statement, And about NATO membership he said not realistic. Do you get that in the course of negotiations, which means that Russia is not going to agree to that. And I don't think we should even be talking about that with Russia. It's not proper to have ATO membership the subject of negotiations with Russia. That's something for Ukraine and NATO allies to
figure out later. So it's not on the table right now, and it's not something that we should be talking to Russia about. As for US troops, he said there'd be no US ground troops, but he did not all out support for European troops that would be there, so enabling support over the horizon presence. So I think we have to wait and see how this really lays out and what kind of security assurances for Ukraine are actually agreed.
It's a delicate thing to try to get Putin to stop the war, doing so by showing that there's enough force on the table that he has to and at the same time doing it in a way that prevents us from having to actually go to war. You want to end it and then you want to deter the next war. That's the delicate balance.
Well, certainly delicate seems like the proper description here, Ambassadors. We consider that Russia is going to want to get something from these negotiations. Surely, how much is too much in terms of what the give and take will be here? That could leave the door open to Vladimir Putin thinking that he can kind of make these teriatorial claims in the future.
What Putin really wants, and he's been very explicit about it, is to eliminate Ukraine as a sovereign independent country and eliminate the idea of a Ukrainian national identity. He sees them all as Russians or that he should have control
over him. Giving up on that and accepting that Ukraine exists, that is a very very big deal, and I don't think Ukraine is going to agree that Russia owns Ukrainian territory, has successfully seized it, but I think Zelensky will agree that he's not going to be able to take it back militarily. That is going to be a long term dispute, more like what we saw with East and West Germany for forty years.
I want to ask you about the release of Mark Fogel. Pretty remarkable to watch him arrive at the White House as the snow was coming down last evening. If you were with us on Bloomberg TV or YouTube there you see the image right now with the American flag draped over his shoulders. People should know, Ambassador, this was not
just some American teacher on an exchange program. His past students included the children of William Burns, Joe Biden's CIA director, and Michael McFall, ambassador to Moscow during the Obama administration. There's writing this morning in the Wall Street Journal that the operation to detain him was an extensively coordinated trial run for future arrests planned by the Kremlin to actually
include an American embassy school. Now that this has happened and the White House has been pretty cagy about what went behind this deal. What are you hearing about the exchange that took place and what Russia got in return.
Well, it's interesting. I haven't heard very much directly. Maybe we'll get more from President Trump when he's signing these executive orders later, maybe he'll tell us a little bit more of what was behind it. But I think this is really President Vladimir Putin trying to make a gesture toward President Trump. He has seen that Trump has been
talking with Zelensky. He's heard reports of maybe we get minerals and access to some of the titanium or lithium that Ukraine has in exchange for continuing to provide weapons to Ukraine. It's hearing about security assurances for Ukraine, and I think he wanted to send a gesture to Trump to say, hey, I'm in the game here, I'm ready to negotiate. Here's a good will gester. I'll let this teacher go, because I think Putin may have been feeling a little bit left out up to that point.
Well, an incredible that it was Steve Whitkoff, who of course is serving as the envoy to the Middle East, who was dispatched to Russia to pick up Mark Vogel and take him home. Ambassador, what does that signal to you about if Witkof is going to play a greater role with Russia in addition to what he's taken on with the Middle East.
It indicates that he will. And if you saw the President Trump's truth social post about his phone call with President Putin, he named Marco Rubio, John Ratcliffs, a director, Mike Waltz, the National Security Advisor, and Witkoff as his negotiating team for dealing with Russia about Ukraine. And what's interesting there is his own Special representative for Ukraine and Russia. Keith Kellogg was not mentioned.
That is duly noted, Ambassador. It's great to have you back.
It sounds like we're going to have a lot more to talk about as we make our way forward here talks beginning Friday in Munich. Kurt folk Or, former US Special Representative for Ukraine Negotiations, former US Ambassador to NATO, thank you.
As always, you're listening to The Bloomberg Balance of Power podcast. Catch us live weekdays at noon and five pm. E's durn On Apple Cockley and Android Otto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa played Bloomberg eleven thirty.
We have some new figures from here in Washington we want to talk about because we've been waiting for these for some time. It's the budget proposal from the Republican led House of Representatives as they try to take the first steps towards ultimately one big budget reconciliation package that is intended at least to achieve all of the legislative
priorities of President Trump. A big part of that, of course, is tax cuts, but border and energy policy folded into this as well, And it was going to be a question of the dollar figures. And this proposed budget Joe would allow Congress, at least specifically the Tax Writing, Ways and Means Committee, to increase the deficit by four and a half trillion dollars over the next ten years. That
may seem like a lot. The problem is all that would really allow for is an extension of the twenty seventeen tax cuts, not all of these other ideas that we've seen, Salt cap being lifted, no tax on social security, overtime, etc. So it seems like we may still have some negotiating.
These are pretty big numbers. The debt limit, will remind you, is already at thirty six trillion dollars. You cut taxes by four and a half, as Kayley mentioned, over ten years, and the math gets to be really complicated if you want to do anything else, like no tax on tips, no tax on overtime. We're not even touching entitlements right now. And Douglas Oltzekin suddenly has a facial tick. He's back
with us on Bloomberg TV and Radio. Wanted to talk to the president of the American Action Forum because he is the former director of the Congressional Budget Office, and the CBO at some point is going to have a product to score. Douglas, what do you think of the first salvo here? Just the fact that it's even happening is news today in Washington.
Well, certainly this is the first progress we've seen both the House with this chairman's mark, they'll have the hearing tomorrow.
Market up and over in the Senate.
Senate Budget chair Lizzie Graham has done a similar effort for a small bill that will be one of two that accomplishes what the one big, beautiful House bill would accomplish, so we have a little activity on both sides of the Congress. I think the right way for people to think about what they got today is that, roughly speaking, it allows for extension of the twenty seventeen tax law that's about four point seven trillion dollars, and then they
have to pay for anything new. So if you're gonna do no tax on tips, you're gonna have to have some spending cuts. If you're gonna do no taxes in overtime, same thing, And so they can get to their bottom line numbers in that way. This resolution doesn't tell any committee how to get to their number ways means can do whatever it wants. It just gives you this sort of outline of what the numbers.
Have to be.
Well, and one of those number requirements is that at least one and a half trillion dollars in spending cuts need to take place over the next decade. Douglas looking at proms like Medicaid snap for example, And this is just what has already been outlined. So if they need to find other spending cuts elsewhere to pay for further tax cuts, what realistic buckets are they going to be able to pull from.
Well, this has been a real challenge.
Some members of the House wanted as much as two and a half or three trillion dollars to spending cuts initially. Obviously they came in much lower than that. Several members have expressed reservation on touching medicaid. The President has said Medicare and sole security are off limits. So you're down to a much smaller set of programs. So you've got the discretionary spending. No one wants to touch defense, so you're looking at non defense discretionary spending, and you're looking at.
The smaller.
Mandatory spending programs. You know, things like crop support in the Agricultural Department, modest things in the Financial Services Committee. There's really no easy place to go for a lot of money. The big programs are the money, and they're off limits.
Whether this is one bill or two, we do see the House and Senate both driving in their own directions here.
What do you make of this effort?
Here?
Will the Senate end up jamming the House? And does it matter in the end? Donald Trump doesn't seem to care.
I think this is literally a matter of how do you get to a majority in the House. In the Senate, you know, there are no style points in reconciliation. You've got to get to fifty one. In the Senate, you're going to have to get to two seventeen in the House. They have no margin for error, so they're going to add and subtract until they can get to yes. That may look like one big bill, maybe two in the end, that's really good to just come down to count in
the votes. It's the domestic policy agenda that's really what the President should care about. How many little pieces it comes in is not really too important to them. So whether they can do the border and the energy first, as the Senate would like to, then come back to tax, or do it all at once as the House is trying to, I think, is really not fundament only that important.
Well, how important is it that a debt ceiling increase is included in this package, Douglas? Because there are multiple members of the House of Representatives in the Republican conference who are reluctant to vote for any debt ceiling increase. How much harder does that make this.
I was surprised to see it in there. I'll be honest.
You know, we don't have to have a debt ceiling increase in the reconciliation process, we do have to have either an increase or a suspension of the debt ceiling by somewhere in late spring early summer. So that's a must do a piece of the activity list in Congress. So put it in here, go to the committee, see if you can get it out of the budget community. If you can't get it out of the Budget committee, then it falls out of reconciliation and they have to
try it in some other bill. So I'd say that's one to watch, but not count on being in the final product.
At the first hearing today of the House Oversight Committee's DOGE subcommittee, Douglas, the chair, Marjorie Taylor Green, says it's a topic that should be easy to be bi partisan on. That, of course is not true. And I wonder what your thought is on legislating the findings of DOGE.
It'll be interesting to see what DOSE reports on July four, twenty twenty six, which is its deadline. Thus far, I'd say what they have would report would be okay. There's some systems that need modernized. Are you going to modernize them and fund the modernization and there's a whole lot of change in the workforce that we think would be desirable, and the question is whether they think they need legislation to do that or not. Doge has transformed dramatically in
a short period of time. It was a an outside the government voluntary effort. The President had put it inside the government by assigning the executive Order that renamed the United States Digital Service, But that order gave it a
very narrow mandate. It said, martynd irons technologies go. He signed another executive Order the day ago which really laid out the Workforce Agenda and essentially codified what Elon Muskin Doge have been up to in reducing the number of people working for the federal government and cutting out whole divisions of some agencies. They now have at least his blessing to do that. It's going to be some partisan wrangling,
to be sure. One of the features of that executive order it hasn't got a lot of attention, is just like he has one regulation in ten have to go out in that executive order.
If you hire a government worker, four have to go. So it's one in four out for the government workforce.
All right, good point, Douglas Holteek and President of the American Action Forum, joining us here on Bloomberg TV and Radio. Thank you so much. And, of course, as we frequently pointed out, with the Doge, Elon Musk serving in his capacity leading the Department of Government Efficiency doing so having been not elected and not confirmed by the Senate.
That's correct.
Elon mush in the Oval Office yesterday with his son X A lot is being said about what the two of them were wearing.
But we're waiting to hear on more.
Appeals to these stoppages of the dismantling of USAID payments out.
Of FEMA and so forth. We could have more news on this today.
As Elon Musk says openly to reporters yesterday, we're moving so fast we will make mistakes.
Yeah.
He's also calling for the impeachment of judges who are at that's right, against the interests of the Doge here. So this is a story we're going to continue to follow. But there's more stories to follow here in Washington today. As we talk about Elon Musk being unconfirmed, we can add one more person to the list of confirmed people joining Donald Trump's second administration. Tulci Gabbard today getting the requisite votes in the Senate to be the next Director
of National Intelligence. And here with more is Bloomberg's Tyler Kendall. So, Tyler, just weeks ago, we weren't sure that this was going to happen, and yet fifty two to forty eight she gets it done.
Exactly one of the most controversial picks for president. And if we take a step back on how we've reached this point, you will recall she narrowly advanced out of the Senate Intelligence Committee, where she had her confirmation hearing. One of those key votes that we were watching for
was Senator Todd Young, a Republican from Indiana. I actually had the chance to catch up with him on Capitol Hill a couple weeks ago, and he was dodging questions from reporters on whether or not he could publicly back Tulci Gabbard. Ultimately, he said he received this list of
commitments from her. Notably on it, she has assured him that she will support the reauthorization of section seven oh two under the Foreign Intelligence Surveillance Act FAIZA, which we know that she had previously raised these security concerns about. But ultimately is considered to be pretty important to the national security community. So it was commitments like that, but also a rhetoric like this that I want you to take a listen to that helped to get this nomination over the finish line.
If confirmed as d and I I will do my very best to fulfill this mandate and bring leadership to the intelligence community with the laser like focus on our essential mission ensuring this safety, security, and freedom of the American people.
Now. Gabbard has also made other sort of commitments that lawmakers were looking for, including that she will not make any recommendation when it comes to the legal standing of Edward Snowden that was considered to be one of those hot topics during her confirmation hearing, after she had previously suggested that the charges against him should be dropped. But it's not just some of these positions that were controversial.
Of course, we should note Toulcie Gabbert is a former Democrat and that also kind of heightened her nomination here. Of course, though we weren't expecting any Democrats to go against it. At the end of the day, only one Republican broke and that was former Senate Majority Leader Mitch McConnell.
How about that.
I'm very curious to see how he votes on another nominee we were told might never pass, and that would be RFK Junior. He's got another important vote on the way as well.
Right, And while Mitch McConnell did vote to invoke cloture as it's known, this key procedural hurdle that he ended up passing earlier today, that basically clears the way for his nomination to pass. Although Mitch McConnell could end up vote against it, but at the end of the day it wouldn't be enough. Of course, we know that he needs a simple majority one vote whenn't put him over. He is slated for a final vote tomorrow. That is pretty early in the morning. We're expecting a seven am vote.
It just goes to show how this Senate is working very hard to try to get these nominations.
The Senate in a seventh That's what I was saying. They're gonna have to finish shoveling first, I think.
Bloomber's Tyler Kendall, thank you so much, Tyler.
We've got a lot more to cover.
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The gavel drops on a second day of testimony from the FED Chair J Powell, Chair French Hill of the House Financial Services Committee wrapping things up there and what was a multi hour affair, as we expected, a bit longer than the Senate side yesterday because there are many more members in this House committee, a FED chair who clearly sees more work to do, as we understood from very similar commentary as we heard yesterday on this CPI day. Of course, J Powell reacting to that as well. I'm
Joe Matthew alongside Kaylee Lines and Washington. Thanks for being with us on Bloomberg TV and Radio. The Wednesday edition of Ballots of Power, Kaylee and day two of testimony from j Powell on a day that he was reading on truth social from President Trump that it's time to cut interest rates. Not likely something that's going to happen until the end of the year, if at all.
Yeah, we did not get the indication from the chairman that cutting interest rates is really what the Fed is looking to do at this point, especially in light of data like today work month on month, year on year, core and headline CPI came in hot, and it's that still persistent inflationary pressure that is leaving the Fed on hold for now. And we did hear the Chairman doubling down on that as he fielded questions on a number of other things as well. It was not just about
monetary policy. Lots of fiscal policy oriented questions that the Chairman had to deal with today as Congress is working through a budget process, a.
Lot of questions about the DOGE as well, which is of course kind of top of mind everywhere right now in the nation's capital. Just a day after we saw Elon Musk holding forth in the Oval Office with the President of the United States. Elizabeth Warren was on with a balance of power last evening referred to him as co President Musk.
Yeah. Elizabeth Warren, of course, the senator from Massachusetts, also told us last night she still thinks the Fed should be cutting correct at this point. So maybe there is something that Warren and Trump do agree on, but on the subject of rates and where the appropriate level has been for the FED funds rate at given times. We did hear the Chairman in his testimony with some reflection on that.
We'll say, and I've said before that hindsight suggests it would have been good if we had tightened earlier. I don't know how much difference that would have made, but I'd be very careful with those rules.
Those rules.
Those rules in the middle of last year suggested that our policy rate was a couple hundred basis points too high, so we need to They're a starting point, not an ending point.
Is.
So for more on this, we turned to Michael McKee, Bloomberg International Economics and Policy correspondent, who was still with us here in Washington, d C. So obviously we heard a lot of the same from the Chairman today as we did yesterday, and in light of the data, he's kind of stay infirmed that even if they moved too late, they aren't eager to do too much too early.
This time a little bit of different choreography on the House side, but the message was the same that the FED is on hold. And he was asked about the CPI today and said, basically, we look at the.
PCEE, which is running a little bit lower.
And doesn't have some of the same weights of housing in particular and medical services that the CPI does, so it comes in a little bit lower.
So we're not as worried, and we're not worried because.
It was just one month and we'll see what happens in coming months. But he didn't give any ground on the idea that they're going to be thinking of cutting rates anytime again soon.
He repeated that they have no idea.
What the President is going to do, and so they can't analyze it or figure out what it means. He was specifically asked about that tweet from the President calling for lower interest rates, and he said, I don't comment on what the President says.
Well, so, but what's really going on there? The interest rates should be lowered. Donald Trump writes something which would go hand in hand with upcoming tariffs. Let's rock and roll America three exclamation points.
I know J.
Powell is a grateful dead fan, but what is he in for if he has no interest in cutting rates essentially until the end of the year. If then, when Donald Trump is already on truth social and probably on the phone as well.
Well, that's going to be an interesting question to see how far Donald Trump goes. Remember when the Fed last met and didn't cut interest rates, Trump said that was okay.
Probably what he would have done.
And Powell has the excuse, which would be hard for Trump to argue with, that they don't know what the President's going to do, so they don't know what the impact on the economy is. Once all this stuff is taking care, probably once they get through reconciliation and they move on to maybe a reconciliation too in taxes, then they might start putting pencil to paper and decide what
they're going to do. Is certainly classical economics would tell you that tariffs are inflationary, and so you go into it probably believing you have less reason to cut going forward. But this could be an ongoing process. The Fed's not going to know for quite some time. Markets will go up and down on whatever the data is, and nothing's really going to change. And we know the President's always going to want lower interest rates, But does he make a federal case out of it.
He seems awfully busy with other things right now.
Well, certainly that is true, and keeping us busy while he himself remains so. Mike to the point, though, that classic economics would tell you that tariffs are inflationary. Is there though a risk that the upside risk to inflation is outdone by a downside risk to growth if consumers are suddenly fail with higher prices and change their behavior as a result.
Well, it's interesting because Kevin Hassett was on Bloomberg TV today and made a couple of other appearances where he said the administration is looking to increase supply and decrease aggregate demand, which is essentially a recipe for recession. And when we pressed him on it, he said, no, we're not looking for a recession and that's not our plan here. Increased supply will take care of all the problems. But that hasn't worked in the past.
So the question.
Is is what are the impacts going to be. You go back to Paul Volker. That's what he did, raising rates to cut aggregate demand, and Ronald Reagan was a supply side, cutting taxes and we got two significant recessions. So it's hard to see how they can make this work, but that's their argument at the moment.
It's great to have you with us a second day in a row. Michael McKee down from the World headquarters in New York. On this second day of testimony by Chair J. Powell mentioned Kevin Hassett, of course, running the NEEC, the National Economic Council inside this new Trump white House. He indeed was on Bloomberg TV and radio earlier today. Here's what he said about inflation.
Austin Goolesby, the Chicago FED President, just gave a speech a couple of days ago saying, hey, inflation's under control. And here we see that we're looking at a three month moving average above four. Right, So that's not what the FED should be saying right now, and it's not true. But we're going to fix it with or without the FED.
With or without the FED.
As we add the voice now of Catherine Edwards's economic policy consulted with us here on balance of power. Catherine, it's great to have you back. What is that supposed to mean? And how much can the White House do on its own?
The White House can has control of its own policy, but its economic research is very clear. The independence of the FED is integral to a successful economy, and the less independence the FED has, or a central bank has over its own decision making the worst the economy.
Performs well and clearly we heard many references to FED independence over the course of these two days of testimony, Catherine. We also heard many references to fiscal policy, which, as the Chairman reiterated, is not in their purview. But as we think about the policies pursued by this administration, whether it's deficit additive, whether a tax cuts are in play, how does the FED realistically have to be thinking about this at this point?
I mean it has to think about its room to maneuver, which I think is very predictive of where rate cuts or not rate cuts will be over the next twelve months. There's a lot of uncertainty in the economy, there's a lot of weakness in the economy, and you're adding incredibly disruptive policy. So I think the economy right now has very good numbers. We're in a stable position, and I think that's where Powell wants to be, to have the room to go up or down with interest rates as prices or growth.
Dictation, Catherine.
Before President Trump kicked out the Rock and Roll America truth he posted when CPI numbers were released, Biden inflation up. Of course, we know that interest rates have been rising a bit most recently and since Donald Trump took office, we've got a ten year up today to four sixty three. Is this the last gasp of Biden inflation? And how should this White House be framing it?
I don't know.
That's a hard question to answer because I don't know if it's right to call something. I mean, politicians love to take all the credit for a good economy and none of the credit for a bad economy, and of course blame their opponents when something goes wrong. I mean it's a really you know, politicians view on the economies having their cake and eat it too. So I mean, let him have his moment. He doesn't have to be
held to his word. He doesn't dictate interest rate policy, and so he can say what he would like about this data release and its interpretation in terms of interest rate policy. But the blame game on politicians, I mean, that's a tale as old as time doesn't have any weight on what is actually going on in the economy.
Well, so as we talk about the reality of what is going on in the economy, and you're pointing to weaknesses, Catherine, and we look back at last Friday, for example, in the University of Michigan, consumer sentiment data, which dropped, inflation
expectations went up. Just how vulnerable is the consumer right now as we're talking about things like high egg prices, concerns around tariffs, and changes in the labor market, be it from deportation and migration changes to what's going on with the federal government.
You know, this inflation spike that has since receded. You know, we're hanging out at a rate that's you know, at a price rate that is a little bit higher than what the Fed would would prefer. But it's helpful to remember that when this started, we were in a gangbusters economy with a labor market that we had, you know, stronger than one that basically we had ever seen. Wages were growing at a great clip, you had an incredible amount of high we're an incredibly low unemployment rate. We're
not in that labor market now. Right now, the hiring rate in the US economy is equivalent to hiring rates that we typically see when the unemployment rate is north of eight percent. If you look at the unemployment rate, the labor market is fine. If you look at the hiring rate, the labor market is in the middle of a deep recession. Wages are not growing at the clip that they used to. The ability for a strong labor market to buffer continued price increases is simply not there.
We're in a much weaker position as a result of years of interest rate hikes. So the concern that I have is that we are simply we have a lot of households and a lot of businesses that have been holding on for better days and are not necessarily prepared to take another inflation spike, another hike and interest rates. Now I'm worried how long this kind of purgatory that the economy is in can hold in the phase of either bad economic news or bad economic decisions.
So how long then before we're hearing predictions of another recession.
I thought that that's jobs the economists to always be making predictions of recessions, and that way we're eventually proved.
Right, So when does it start, Catherine?
You know what Powell said in his last press conference is something that I've seen through the labor market data is that, you know, the problem with having a hiring rate so low is that it can accelerate an increase in unemployment. I mean, if hiring is already at levels that we typically see in recessions, it doesn't take long for a blip in layoffs to become a meteoric rise in the unemployment rate. And that was his concern. He said at the last meeting, We're very worried about the
hiring rate. It's an accelerant on an unemployment rate increase to have hiring already so low as opposed to see hiring fall from a place of strength. You know, that means that we don't necessarily have a year or two years to see a recession coming. It could happen relatively quickly with a big shock to the economy.
Well, what if one of those shocks is, for example, as we watch what's happening on Capitol Hill laps in the twenty seventeen tax cuts, if Congress cannot find its way forward on a package to make those permanent, Catherine, what would that realistically do to the economy if everyone effectively got a tax hike.
Well, the interesting thing about tax cuts is that they're not very strong economic policy in either direction because they're not targeted and they're not timely. So if I have a tax rate increase that passes through the end of twenty twenty five, that's going to hit the tax rates that people pay almost a year from now, and it's
a marginal change to any individual taxes. So I might face a half a point increase marginal rate on the taxes that I pay, but you know it's going to take a year for that to go into an effect, and that's spread out over a year's earnings. I mean, this is why tax This is why tax cuts are such ineffective economic policy, is because they're distributed throughout the economy. And of course helpful to keep in mind that the bottom fifty percent of households doesn't have that high tax
rate to begin with. So to the extent that there are acute effects of tax policy, they tend to be concentrated amongst the Americans that have the most ability to face economic problems because they are richer and wealthier. So, you know, you tell me that the step up basis is going to start having a more targeted tax of wealth upon inheritance, that's not going to affect you know,
ninety five percent of Americans. If you tell me that we're no longer allowed the estate tax is going to fall from twenty six million dollars, that's again, that's not going to affect the vast majority of Americans.
All Right, Katherine Edwards, economic policy consultant and Bloomberg opinion contributor, Thank you so much.
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