No Need for the Fed to Panic, Coronado Says

of Economic Advisors under President Reagan. Marty, always great to have you with us on the program. Good morning to use sir, Good morning, happy to be here, Looking forward to talking to you about payrolls in just a moment. Want to begin with China and the prospect of a deal. We now have some decent transparency of what the United States would like from the Chinese. Let's talk about how realistic it is that this administration will get those things. Unfortunately,

it's the wrong thing to be focusing on. Uh, It's something that the public can understand. It's something that President Trump can sell as our goal two hundred billion dollars. It's a big number. It would cut our bilateral trade deficit in half, and it really doesn't matter. What really is important is that the Chinese have been taken technology from American firms by requiring them to have joint ventures with Chinese firms. If they want to do business in China.

That's against w t O rules and that is what we should be focusing on when we negotiate with the Chinese. So the administration is also focusing on that, as you know, professor, they aren't demanding that the Chinese changed this removal of restrictions on foreign ownership of companies. Also the technology transfer as well. Is your message that they're asking for too much. They should be focusing on just that and not the overall trade balance would be much better if they've focused

on that. I mean that got brought into the discussion late in the game. Um, the original thing was about cutting the bilateral trade imbalance. And if the Chinese managed to do that and we say, great, you've given us what we wanted, will have missed the opportunity to deal with the serious problem, which is the technology transfer. Let's talk about the time horizon for all of this. They usually needs to be a credible threat at the other end of any negotiation. If we don't negotiate a better deal,

this is what happens. And on the table at the moment is a proposal for a set of tariffs and considerations for another proposal of a set of tariffs against the Chinese. The Chinese themselves, Professor, have their own proposals on how they would respond. So we've got everything set up that way. Do you have any idea, any clarity at the moment on what the time horizon is to negotiate this deal with the prospect of tariffs at the other end of it, Well, I think tariffs are important.

I think restrictions on what the Chinese can do in the United States, their ability to invest here, to buy US companies, all of those things that the Chinese would like to be able to do, we can say you can only do those things if you get in compliance with w t O rules that you had accepted, and that means allowing American companies to invest to sell in China without having to have a a Chinese partner. Professor, I have been stunned by the US centric coverage of

these meetings and frankly, of this debate. Are we not talking about the Chinese view? On this because we don't know what the Chinese view is. Is there something unique to dealing with a totalitarian regime a dominant communist party there where we do a different dialogue just because they're Chinese. Well, the Chinese have said about this technology transfer that they're not doing anything illegal. They're violating w t O rules.

They're not requiring American firms to transfer technology. If American firms, on the other hand, want to do business in China, well that's the price they have to pay. That is exactly a conventrary to w t O rules. But we have a president who doesn't want to respect a multilateral w t O structure. But this is a clear rule

that the Chinese are violating. That's hurting us, and we ought to use the fact that they had signed on to that behavior in the time that we have with you, Professor Feldsteine, We need to go back to another time and place. I guess ever Dirkson would be a good place to start. Where was a billionaire A billionaire Martin Feldstein's reaction to a guns and butter certitude everyone's happy with a trillion dollar deficits, Well I'm not happy. Well, expand on that, please so we used to have not

too long ago. Ten years ago, we had a national debt which was a less than fifty percent of our GDP around now it's about double that. And it's heading to a hundred perspectors going in the wrong direction, sure is. And and if we are actually heading, by the official statistics Congressional Budget Office statistics to a hundred percent by the end of the decade, the reality will be worse than that. In the distinction here in folks, this is

really important. I'm going to let Professor Feldstone shows ability. We model it against a Japanese experience where their culture and ethos is totally different than this complex economy of the United States. We can't compare and contrast plus a hundred and deficits with Japan can wait, not at all. We cannot do that because the Japanese don't the Japanese are able to finance their deficits internally. The Japanese households

are buying that debt um we sell. We trade in the global economy, and John this naivete which the professor describes beautifully, I think as much the same as with the United Kingdom. Americans want to compare and contrast with the United Kingdom, and they're just not the same economies. So my question, professor, should we really worry about this one trillion dollar deficit? It's of g d P. You're saying the debt dynamics are different to Japan. Our listeners

would agree with you. That's in the data, it's in the facts. But still, this is the most liquid bond market on the planet, some of the most in demand debt on the planet. Why would the treasury markets suddenly dry up in terms of demand. No, they're not going to dry up, but the interest rates are going to

be higher. So if at the end of ten years we're looking at a hundred to a hundred and pent debt to GDP, that's going to mean that interest on the government debt is the largest thing the government is spending money on, and it's gonna mean that there's going to be pressure for long term interest rates to rise, real long term interest rates to rise, and that is

going to be very unhealthy for equity prices. Professor, we could probably have a long conversation about how effective markets hours a discounted mechanism, but all this information is out there, and traceries yield less than three on a US tenure. It's heartly dramatic, is it. It's amazing that it is so low. But it is moving up, and I think it will continue to move up. If you look back over the last six months or so, it's moved up, both in real terms and in nominal terms. Professor, thank

you so much. Martin Feldstein joining us with Harvard University, of course of National Bureau of Economic Research. He's a former chairman of the President's Council of Economic Advisors. Back to Job's day, and we do that always with Alan Krueger of Princeton University, the former chairman of the President's Council of Economic Advisors. Allen, I know John wants to get more granular about the report. Let me go more at a higher elevation, and that is the effective technology

on this labor economy. We don't have a clue, do we. Well. I think the effective technology has been profound if you look over the past several decades, far more important for what's happened in manufacturing than international trade. Um the fact that we've become much more productive in manufacturing. But our listeners feel that technology is their enemy when it comes to jobs and waiting growth right. Well, technology can be

very disruptive in some industries. It's been extremely disruptive, like music. Finally, I think in the music industry they're getting their arms around how to take advantage of the technology. Not Spotify. They got crushed this week, but that's a separate story. But at least Latify is helping to generate more revenue for for the whole industry. UM. So, I think technology obviously can be disruptive. The question is how can we make transition to make technology work best for the most

people in society. How can we do that? Well, I think it starts with education, and our education system hasn't kept up. And the irony is technology gives us tremendous opportunity and education UH to use technology to help improve teaching, and we haven't taken full advantage of technology and education yet, and our workforces is falling behind in terms of skills compared to the rest of the world. I want to take the opportunity to to shift towards the Wall Street

side of the conversation, Alan, if you don't mind. Um, the story so far this year has been really, really mixed and quite radically different. Payrolls reports through so far. January we had the wage growth surprise. February we had just this monster payrolls report with three six pounsand jobs at it, and March was completely opposite at one oh three. Is it getting difficult? It's going to read on what's happening in the jobs market, in the labor market in

the United States right now? The numbers are noisy, that they've always been noisy, and from just three or four months, it's hard to say that the sampling variability or non sampling variability is increased. But John, if you if you look at some of the other indicators like unemployment, insurance claims, or the KNAVE survey or the manufacturing surveys, the underlying job growth, underlying labor market looks like it's solid, continuing to improve, and it looks like we may end up

with a three handle unemployment. Unemployment that is you point out, Alan, and I think many people might have missed. It's been really, really stable at four point one percent for quite a while, and many people are waiting for it to drop even lower. What's going on there? You know, it's been a remarkable run of four point one percent six months in a row.

The sampling error on the unemployment rate is substantial. It takes about a two tense of a percentage point movement in the unemployment rate for the buer of labor statistics to say that it was a meaningful change. So the fact that has just been sitting at four point one,

it has been a remarkable coincidence. Martin Feldstone today, who I would suggest has a different economic thesis than you UH, suggested that the FED really needs to focus on the employed part of the economy and that we are fully employed. You see that claims clearly. How do we address the huge body of America that's struggling. I hear it. I get it, John, and I get it every day in the emails from people. Is there a social requirement for

the FED and for fiscal authorities to address that? I think it's the responsibility of government economic policymakers to address it, and the FED is part of that network. Now, the Fed's tools are more limited than what Congress can do. Congress has done some things to help that segment of the workforce. UH. The Affordable Care Act has helped to bring millions more people UH under health insurance coverage, which has been been beneficial for low income workers. UM, I

think it's important that we build on that progress. Unfortunately, we're moving in the opposite direction with many decisions of the current administration. But just as one narrow example, and we've spoken to Sunder Deportment and others of ohio about opiated Most most people in Washington, I think can't spell opioid. I mean they're just running from it from what you know, not Republican Democrat. But we're basically spinning our wheels on what is what is a medical, social and economic issue.

How do we affect a policy on opioid that is bipartisan and begins to address it. You know, I think this shows enormous failure of the current administration. They appointed Chris Christie to chair commission, which mostly made sensible recommendations. The administration hasn't followed through. So UM, I think that there's been tremendous neglect when it comes to the opioid crisis. I can tell you, Tom, I've done some research, as you know, on how the opioid crisis intersected the decliin

in labor force participation. And I've never received such heartfelt responses from the public. But the folks this is important. Alan Krueger shows up and he's got a bunch of fancy titles and he pontificates about what we're going to see at a thirty. What you need to know is it was card In. Krueger and a guy named Daton have actually done John the grunt work on what people are really doing with their lives. It's called like micro research, and somebody's got to go out and do it, including

the Laureate Angus Deton. We've tolked about your research before, but for our listeners that haven't heard it, um, just give us a synopsis, Professor, of what you have learned about the outpiold crisis and what it really means for the labor market at the moment, Well, almost half of the prime age men who are out of the labor force are taking pain medication regularly. Half and that's a remarkable figure that comes from Bureau of Labor statistic surveys.

We don't know what type of pain medication. So one of the things I did was a follow up survey and I asked, and two thirds of those individuals are taking prescription medication. And I have to believe there's a lot of underreporting as Well, then I looked across the country and I found that areas where prescription opioid medication

UH increase the most is the greatest. We've seen the biggest decline in labor force participation, and my estimates suggests that around a third of the decline in labor force participation over the last fifteen years can be accounted for by the spread of opioid medication. What should remedy Well, first of all, I think we need uh to uh

make sure the medical profession doesn't overprescribe. And I think a lot of the responsibility falls on doctors who and pharmaceutical companies who pushed the medication unnecessarily, probably for good intentions, but the unintended consequences have been tremendous. UM. So I think that is should be the first line of defense. Then, we have a large number of people who are addicted

to the medication, and we need better treatment facilities for them. UM. We need to treat it like a mental health problem, not like not like a crime. UH. And we think we vastly need to increase our mental health services for these individuals. Up to the job's day UH today, are we fully employed? I think we're pretty close to the textbook definition of full employment. Now, full employment doesn't mean

that you can't continue to see job growth. Uh. Full employment doesn't mean that, um, the expansion has come to an end. But by the textbook definition of the unemployment rate solo that most people can find a job we're searching in a in a in a reasonable period of time, that the remaining unemployment is what we call frictional. Uh. In the aggregate. That's probably true for some populations. However,

I think unemployment still remains much too high. Amazing. It's an amazing John This conversation off of Bloomberg surveillance seventy nine years ago, just extraordinary. It's phenomenal research as well from the professor. And if you want to find it, where can we find it? Professor? For our listeners that would like to have a read, well, I had much of it posted on my web page at www dot

Krueger that Princeton Daddy do you there we go? Mr Plug? Now, I just thought, you know, I just thought for our listeners that might want to read the whole thing, um for the professor could plug his west are they going to see this? Also at the web page of the Real yield with John Ferrel. They might hear a little bit about it at one pm Eastern time on ploom

Bag TV. You're welcome to link, and I think you'd like to plug some king Professor Ran Krueger, Princeton University professor and of course the former chairman of President Barack Obama's Council of Economic Advisors. Let's continue that dialogue with Julia Coronado with her work and a wonderful call on

a more substued potential g d P as well. There's that that unemployment rate Dr Coronado, that is the efficient unemployment rate NEIL Data over Renaissance Macro drives for the analysis and says, look, under four percent unemployment rate, wage growth is basically nowhere. Is the new NEIGHRU, like the new potential g d P a small number. I think it's hard not to conclude that NEHRU is lower given

the wage performance. And yes, we had a strong e c I, but it's strong relative to where it's been not in historical terms, right, it's still below three percent, and so I think it's hard to look at this. Yes, the labor market is strong, but it's just not generating a lot of wager inflationary pressures, no need for the FED to panic. In fact, from the set itself looked at um because of better educated population and an older population,

NEHRU is probably lower. Those factors lower the equilibrium unemployment rate. So good news, but no panic for them. Okay, So the potential GDP number, like the efficient GDP number, is politically unacceptable the politicians because they want more spirit, they want more and all that is there a politically acceptable unemployment rate, I mean, is three point nine percent unemployment and Eisenhower like statistic? Is that good for Donald Trump?

Is that good for Nancy Pelosi? Look, it's good for everybody, right, I mean, it is very good news that the labor market is strong. It's very good news that it's now you know, a seller's market if you will, that that people finally do have good job prospects. They're changing jobs. The quits rate has recovered, So there's a lot of indicators saying it's a healthy, healthy job market. Um. Politically, you know, anybody can grab that and run with it. Um.

But I think for the economy it's great news. For the feed, it's great news. I think the fact that the unemployment rate drop does keep them marching higher on interest rates, but again sort of in the gradual pace that they've got planned out. So, um, I think it is kind of a sweet sweet spot right now. You know, we're it's a sweet spot right now. And the three point nine number is I'm sorry, Julie, to me, it's historically extraordinary in a yearly basis, it's back thee. We'll

get the monthly granularity. Our team are Brendan Murray and our team in Washington will do that. But when you see Dr Coronado a three point nine statistic, particularly with your Texas background, that's that's a stunning statement. Shouldn't everybody stand up and celebrate today? Yes, absolutely, we should stand up and sell bread. I mean, I think again, Yes, it's great, great news that finally, after a very frustratingly

halting recovery, we're kind of humming along. Um. And as Jim Glasman said, the fact that hiring has flowed a bit, it's still a healthy pace. There's nothing there that worries them. Um. So this is definitely a good news report. I mean, within this, Juliet, and I guess we can backtrack to wage growth as well. Get Neil dotta with a smart two sentence. Uh no, you know, the the idea of

wage growth where it is, that's not acceptable. I mean, great, John Tucker to are biased because we live in three zip codes of Upstate, you know't you know, if we're making triple you're making, John, we still wouldn't be enough wage growth. But but with that said, Julius, two point two point six percent, two point six percent, it just doesn't get it done, does it. No, No, it doesn't because I mean, let's let's peel out inflation. In plation

is starting to run close to the target. That's what point. Uh, you know, real wage growth. That's not a lot of purchasing power to sustain the economy. So I do think we want to see that number climb higher. I think policymakers will want to see that number climb higher. So that is a very good reason to you know, let this economy keep running. Juliet Coronado, thank you so much. From ten unemployment down to three point nine percent unemployment. Uh,

that is fine. Just thrilled to have her with this. Dr Coronado of course, with years of good work and helping that with the program she is with macro policy perspectives as well. We have been honored this morning by the attendance of Martin Feldstein of Harvard, Alan Krueger from Princeton, James Lasting with us, Julia Cordado another Worthies. We continue strong out of the plant of Ned Gramblich in the

University of Michigan. We are thrilled to bring you Betsy Stevenson, Yes, with the Console Economic Advisors who study under Greg Banko at Harvard. But far more importantly, she's actually dark in the halls of the Department of Labor. Betsy Stevenson with us from the University of Michigan. Betsy, what was it like the first day at the Department of Labor? I mean, people moufie, people on Wall Street talk about it as a dark, evil empire. What's it really like? I think

the Department of Labor is a fantastic place. I mean, today we're celebrating one terrific aspect, which is the Bureau of Labor Statistics, which gathers all the data that we use. And you know, we sometimes take that for granted, but you you know, do you think back to the depression, when we weren't measuring unemployment. Politicians were arguing about how many people wanted jobs who couldn't find jobs, what unemployment was.

We didn't have any idea. Um terrific is that we can count on the beer of labor statistics to tell us what's happening in the economy. Wall Street certainly relies on it. Within this is three point nine percent unemployment. And the partition is a without question fully employed America that's in the models of your textbooks years ago at Wellesley. Fine, the reality is there's a whole nother America out there. How do we reattach the America of yellings slack in

the economy to the fully employed America. So here's what I think is the difficulty. And in modern times shall we say, which is that we in our textbooks we're thinking about the unemployment, the pool of the people who are unemployed as the only potential people who could take jobs. So if the business wants to hire, the with people they can hire are among the unemployed. But it turns out there's lots of people who don't get counted as

unemployed because they're not looking for jobs. And we see lots and lots of people moving from what we call not in the labor force people not looking for jobs, that aren't indicating that they're willing to work straight into jobs as business is higher, and the puzzle for us is to try to figure out how many people who aren't working would work if the right job came along, and would move into those jobs. That's what when we talk about the flack in the labor market, we're wondering

about those people who aren't working. Are they willing to go into the labor market. And what we've seen in recent years is that the relationship between um who's willing to be hired in the employment rate is not the same as it used to be. We're doing a lot more poland people straight out of labor. Betsy Stevenson, University of Michigan with this vote, the Jerald Ford School of Public Policy, Betsy, you've got an arduous public Paul three

zero course at Michigan Microeconomics for public policy. This is a legendary, folks course where people actually have to go micro instead of macro bladder. That's what Betsy Stevenson is known for. What's the micro economics of our lousy wage growth? Um? Yeah, that's a great question. So the micro economics is getting

into why aren't workers demanding more? Right? We know there's a lot of jobs out there, and so one of the ways in which workers get the power to negotiate higher wages is to go look for another job and to threaten to leave if they don't get one, if they if they don't get raised. And so it's it's up to workers too um to try to put in that you know, real credible threat, which is willingness to walk away. And the question is why aren't they willing

to do that? Well, lives are more complicated today. People have families. It's not as easy for one person to say, you know, I'm sick of this job. I'm going to look for another job. Maybe that job's got a two hour commute. Can you set that in with your family life? Is your spouse willing to move for your job? What

about your spouse's job? So I think there's these complications in workers lives that might make it a little bit difficult for them to do what our models predict, which is to threaten to vote with their feet by walking out the door if they don't get a raise. And employers seem to be taking advantage of that. And now, folks, we go nowhere where we would like to go, but we're gonna do it with Betsy Stevenson, who is in

America the definitive student of economics in our family. You wrote a paper in two thousand and eight with a guy from Australia called how should we think about the taxpayer consequences of divorce? What did Betsy Stevenson think about the alimony treatment in the new tax bill? A select group of our Bloomberg surveillance listeners would like to know. Um, so, I'm embarrassed to say that that was something I didn't

pay attention to. Okay, well, they're going to change the rules on alimony in the tax treatment on alimony, and this goes back to the concept in Washington of divorce, which is always across American history, always been a fraud. In interesting consequence, you wrote the definitive paper with Justin Wolfers, how should we think about taxpayer consequences of divorce? Granted it was a decade ago, but everybody remembers the paper. Betsy, what what? What are the tax consequences of divorce in

this nation? Um? Well, I think what we were trying to point out is that it isn't as easy for it isn't easy for taxpayers to think about what are the consequences for divorce. So one of the things that's happened is making it easier for people to get divorced is one of the things that encouraged women to stay

attached to the labor force. If you're less about whether you're gonna stay in your marriage, then you want to know that you're gonna be able to support yourself outside of your marriage, and that we saw that movement um in the seventies and the eighties. As we change divorce laws, put you women into the labor force. So as the threat of divorce grows, labor force participation of women grows, which actually means that there's more women pay more taxes.

Because you don't pay taxes when you're doing home production, when you're at home raising your kids and uh cleaning your house and cooking your meals, we don't tax you on the value you're providing your family. If you get a job and you go to work and you pay somebody else to do all of those taxks, not only do you get have to pay taxes on what you earn, but then the person you're paying to do the things you used to do. They're also now earning dollars that

they're paying taxes on. So that, UM, that's one way in which we sort of intuitively think you might not intuitively realize that, um, that divorce can generate more tax dollars. But of course there's other consequences of it as well, UM, related to how kids do and what kind of certain

that might put on taxpayers to provide services. I then there, I mean, I think there's this natural issue, which is, as families split apart, how should we think about you know, what people's true UM means are right, what's their ability to provide? And then there's and then how should we think about them sharing income as you will through say alimony payments or child support payments. UM, how should we

think about that from a tax consequence? And as they said, I was not aware that the regent taxil, the regent taxil has so many things to imitnuck little things in um that. But it doesn't surprise me that, you know, politicians might want to rethink how we UM assessed that kind of income sharing based on when I've got in my mail, people are rethinking good And it's a sport

to say the least, this has been wonderful. Betsy Stevenson, thank you so much with the gerald Ford Policy of Public Policy School at the University of Michigan on this job's day of three unemployment and extraordinary statistic and also with her expertise on public policy and particularly path breaking research and the family as well. Now for the Trump administration's views on the jobs report, we joined now on flimback television and on radio by Kevin Hassett, the head

the Council of Economic Advisors. Chairman Kevin, always great to get your insight on hand with the labor market. Let's just begin with that stunning unemployment figure, a three handle, Kevin. I think a lot of people trying to wonder whether we're at full employment or not. What's the administration's view, Well, I think they're getting down to three point nine is really astonishing because what it means is that we now have the longest labor expansion, continuous labor expansion on record.

And I think that a lot of the reason why that's happened is that we came in and we deregulated at the beginning of last year, and then we had this big tax cut, and so a lot of times recoveries start to run out of a steam at the end, but we just you know, put more steam in right at the end. And and one metric of that, by the way, that I think is most interesting is that since the president was elected, nine thousand people have re

entered the labor force and gotten a job. And so we've been able to continue to grow the economy at a very healthy pace because people are coming back. People who were discouraged because they couldn't find a job because of Obama's economy have been reconnected to society and that's really good news. So that you know, that's really the smoothing through the ups and downs. The headline of the jobs report, I think is the really surprising increase in

labor force participation over the last year year and a half. Tavin. For a lot of economists on the straight they look at the headline numbers and they say, an economy a labor market that is a full employment, a labor market is really tight, and they're full. Surely inflation pressia must be coming at the other end. And Kevin, the administration, led by yourself, really really looking for a supply side response.

Why are you so convinced will get that supply side response, What do you see in the dates and key water that gives you the optimism, Sure, we see it in the data already. So so both in Q four there was a big spike in capital spending U and that was in part because people wanted to get some stuff in before year end because of the tax cuts, because they could expense it back to September at a higher

rate if they spent it last year. And so we're a little worried that capital spending might level off in the first quarters, but it went up from there, and so the capital spending boom that we said would happen is happening. We're also seeing it in wages. You know, we now have more than six million people that have gotten raises that their employers said were because of the tax cuts. And if you look at the employment cost Index, then over the last three months it increased one percent.

You know, if we had you know, another three quarters like that, that'd be four percent for the year. And that's the highest rate we've seen at least since two

thousand six. Going before two thousand six, it's hard to make comparisons because they changed the data a little bit, it's a lot of good is in the labor market right now, there is, and some people pointing out to make they'll over the last month or so, in the last several months, that there are some signs of some bottlenecks appearing, labor supply shortages as well as let's say backlogs at factories in terms of orders and whether they

can really get things out supply side constraints. Do you don't see that, Kevin, Yeah, that's that's a normal thing in the cycle that with the unemployment gets unemployment rate gets low, then what will happen will be it'll be hard to find workers. And at that point, what firms tend to do is invest heavily in capital in order

to increase the productivity of the workers they have. And so, if you think about it, the tax cut was timed perfectly because right at the moment when firms need to invest in capital to make their own workers more productive because it's getting a little bit harder to find people, Uh, then we gave them a tax cut the stimulated capital spending.

And so I think that that's why you know, you've seen everybody, the I m F, even the the CBO, they've jacked their forecasts up for this year to around three which is what we said last fall would happen after the tax cut, right, And it's happening because the capital spending boom, it's in the data. The wage growth,

you know, that's in the data too. And the reason we've been able to continue to grow is there are those nud people that it sort of you know, everybody gave up on before President Trump was elected, who have been reconnected to society and found a jar. So, Kevin, where the private forecasters aren't with you, it's not. They're pretty much in line with you. You guys looking for something with a free handle. The median estimate in our

Blomberg survey the high twos. It's most of the street, the consensus see the economy rolling gover not drastically, not dramatically, but certainly the trend's gonna go the other way. Why do you think that's not the case? And and my second point really on the issue if there's been late cycle or not, a lot of people say this isn't the right time to do a fiscal stimulus because if exactly what's about to happen, the economy is set to go into a bit of a downturn, You're you're really

good questions so that they actually tied together neatly. So the point is that late in the cycle, if you were to pass a big demand stimulus like the cash for Clunkers program by the President Obama, then that big demand stimulus could heat up the economy and cars inflation to get out of control. But if you have a supply side stimulan US, then you increase supply, and an increase in supply can even put downward pressure on prices.

And so if you want to sustain recovery late in the cycle, what you need is a capital spending boom to push up supply and keep the upward pressure on prices low. And that's exactly what we're seeing in the data, and as a real debate as to whether that's going

to continue. And Kevin, outside of that debate, there's a debate about the contribution of trade to overall g d P. I think for some economists, by definition, if we get some fiscal stimulus, demands going to go up, and therefore the trade deficit is naturally gonna widen, and you're gonna get a negative contribution from trade. And that's something you guys don't want. So can you reconcile the trade effort to get the trade deficit down with the GDP effort

to get growth up to three and beyond? Oh sure, you know. And and President Trump and the team are all on the same page on this. And if you look at the Economic Report of the President, which was written by a guy who some have called the globalist right, that that it very clearly enunciates the president's agenda, which is to just get reciprocity, to make it so that countries around the world lower their tariffs to the US level. And so the you know, China, there's talks over there

right now. They have a terraf on Urados, We have a two and a half percent terraf on their their artists. If we can get reciprocity in our trade deals, if we can improve them, then over time US exports should skyrocket. And that's really the objective of our trade post, so Kevin, and it's good for us, and it's good for them too, because removing the trade barriers around the world will increase global growth and welfare. I know, the team is on

the way back from Beijing. There's only so much you can say about the results of the negotiations we've seen here at Bloomberg in a in a copy of the document that you guys are presented to Beijing of the demands on the U. S. Sun And they've already been talked about in quite a detailed way. What I'm trying to gage from the administration. We've had great transparency on what you want. I'm trying to understand still, the time frame,

the time horizon. There's a credible threat with proposed tariffs at the other end, how much longer do we have to see negotiations take place for before that credible threat is actually imposed and becomes policy. You know, I have nothing to say about timing right now. You know, the team's flying back, and before the team left, they communicated that decisions about what happens next would be made in Washington, not in Beijing. And I think that that's out of

of course respect for the Constitution. But I'm sure that everybody wants to come back and get down in a room with everybody who's back here in Washington and talk it through. And so I'm sure there'll be more news for you guys soon, and Kevin and I'm sure you'll be on screen, or someone from the delegation, perhaps a Lonry Cardillo will come on the program and talk about the update, and I'd really look forward to that. I guess always at your disposal of my officers right over there,

and I'd love that Kevin as well. I guess my final question to you is whether the trade issue is separate from the foreign policy effort, because the President has blended the two and quite clearly pressure on China is generating some foreign policy results. So can we blend the two issues together? Do you take a softer stance on China on trade because they're generating results on the foreign policy side for you? Right? Well, you know, I'm not

a foreign policy expert. I'm an economist, but there is a foreign policy angle to to everything. And if you look at the reports that the economical for the president the focused on China, you know, there are lots of episodes of China stealing our intellectual property and you know, not really respecting the rule of law internationally. And I guess that's an economic issue at a foreign policy issue, and that's the kind of thing that's on the table. And then I'm sure that our team has talked about

with them Hi, Kevin. Really appreciate Tom. It's always great to catch up with you. And for the White has to give us there insight off the Pyrose Friday something very valuable on this program, the Chairman of the Council of Economic Advices. Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide.

I'm Bloomberg Radio EWO