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Jason Furman has committed himself to policy. There are a few others equivalent to him, both Republican and Democrat. He's associated with democratic politics, but he's I think been ecumenical to use the word that Professor Furman uses a lot, Paul. One of the key things with Jason Furman is he was voted most handsome freshman on his dorm at Harvard. He beat out his roommate just by a little bit. That would have been Matt Damon from a few years ago. Jason,
thank you so much for joining us this morning. You're in X ten and you have to teach ambiguity, microeconomic ambiguity, and I can go this way and that. What I didn't hear from the Secretary of Treasury is a risk of a real or nominal GDP slowdown. With all the policy upset the nation faces right now, do you see that we could have a lessening of real GDP or the animal spirit of nominal GDP.
Yeah, well, right now, the level of uncertainty is just incredibly high.
That is definitely a minus for the economy.
I don't know how big a minus it is, and a lot of it depends on how the uncertainty ends up getting resolved around things like tariffs, or whether it gets resolved. It may be that every month there's a new threat, it gets withdrawn, a new threat that gets made. That makes it hard to do planning on a global basis. And that's the success of American corporations, is their their global reach.
Well, help us with the equation then, because everybody focuses on consumption, we do the FED parlor game. I was amazed we did not know the independence of the FED here. We'll talk about that in a moment with Professor Firman.
But ignore Jason.
As you know, is the eye and the equation. Business investments. You look at CPI and analyze it. How do you analyze business investment right now in America?
Yeah, so consumer spending is the majority of GDP, but investment is the majority of fluctuations in GDP because it's much more volatile, and right now, investors' business investment is grappling with continued high interest rates, which are likely to stay that way, with an appreciated dollar which is likely to stay that way, with uncertainty about global trade, which is likely to stay that way.
On the other side of the ledger, there may.
Be some reductions in investment in regulations that will matter more in targeted sectors like energy than it does generically across the board. So a lot of cross currents right now, but from policy they're a little bit more minus than plus on that part of GDP that is most critical to business fluctuations.
Professor of the Federal Reserve is obviously focusing on inflation, and inflation was a big, big issue in the recent presidential election. Certainly, are you concerned that inflation in some of the policies that Trump administration is talking about, whether it's tariffs or changes in immigration policy, could fuel another round of inflation.
I think it's certainly possible. But let's define what we mean by another round of inflation. Right now, I believe underlying inflation is around two and a half percent, and the tariffs that have been done to date on China and steel will probably add about a tenth of a percentage point to that.
If you do.
Another big set of tariffs, maybe it adds three four tenths of a percent to that. Now you might be at three percent inflation. That's a big deal for the FED. That means they're not cutting rates. It might mean, depending on their theory about whether or not to look through the price levels change, that rate increases are back on the table, But that isn't necessarily a huge thing that
consumers take note of. I don't know how much humans notice the difference between two and a half and three percent inflation, but the FED certainly does.
Professor you and I and I think much of our audience grew up with this whole concept of internationalism globalization. Is that still a thing these days or is kind of everybody just kind of trying to enshore friendshore everything these days.
Look, I'm unapologetic in my enthusiasm for globalization. It's done enormous things for American consumers, American producers, the strength of the United States. There's no question that politically it's on its back heel right now. But it is such an incredibly powerful force that to me, it's much more like a dandelion that will grow no matter what the conditions are than it is like a f orchid that needs to be watered in just the right way. And look,
there's been some feedback in the system. If we had tried to put twenty five percent tariffs on Canada and Mexico, who would have been horrible for the US auto industry. I think that might be part of why it didn't happen, and part of why I hope it doesn't happen.
Jason Furman with US folks on your community across the nation, good morning, I'm Bloomberg Surveillance and on YouTube. Thank you for letting us be in your living rooms, your offices as well, even some people in their cars watching.
Sure, I don't know.
I'm not sure about that, Jason. I got to go back to where we are. I want you to take a bigger picture here, like look at the Washington Post, look at the cacophony of Bloomberg opinion, et cetera. I got Treasury secretaries. I mean, I know, you go back to Albert Gallatin, forget about that. I got Robert Rubin and a guy named Summers who used to sign your paycheck. I got Jack lou I got James Baker and company.
I mean, the Treasury secretary is at the.
Fulcrum of our executive, legislative, and frankly judicial branch of making it work within our financial system. Are we at risk now that that financial system is run out of the Oval Office. Do we have a Treasury secretary who's so diminished that he really can't affect Furman like policy?
I hope not.
Scott Descent is a smart guy, he's a talented guy. If this policy making were delegated to him, I wouldn't agree with all of it, but I wouldn't worry fundamentally about being in deeply unsafe hands. But yeah, the tariff calls are being made out of the Oval Office, the calls about the FED are being made out of the Oval Office. He's he Scott Descent one moment saying, you know, we're comfortable with the FED because we're focused on getting down the tenure, which is a great thing to say,
absolutely makes sense. And then the next moment you see Donald Trump commenting on the FED funds.
Right see, okay, we're going to rip up the script right now.
We could do this for the future vice chairman or chairman of the fact.
Could you see Governor Furman? Come on, let's cut to the Chase Jason.
Right now, we're beginning to see the percolation. I don't want to make editorialize your folks of FED independence.
We go back to McChesney Martin.
We go back to LBJ where he took He took McChesney Merrin's years and picked him up like the dog back then. Jason Ferban, is this fed at risk of its independence?
Look, I'm nervous so far. I'm a little bit reassured.
They had a sweeping executive order about independent agencies and presidential control, and they explicitly included an exception for monetary policy and for the FOMC. It's also hard for them to do anything about it because he only gets two appointments over the next four years. I hope the courts would not let him fire to powel with no reason. But you know, but I'm nervous. To me, it's a
it's a tailorant. It's not the most likely scenario. But this is the best economic institution we have, So you know, a two percent chance something happens to it, we should be we should we should be concerned.
In your ute, you had to carry water from the executive branch over to Capitol Hill. How do you frame in your head that the legislative branch, when they choose to rebuts a unilateral Trump policy. Do you see this as given committees like I think of arm services in Putin.
I'm making this up, folks, stay with me.
But Jason, the basic idea is, what's the Firman mechanism about the legislative branch responds to this moment in our history.
Look, when your party's in power, you're frustrated by checks and balances, You're like, why can't we do everything we want to do?
Then when the other parties in power, you're like, hey, I appreciate these a bit.
I don't want them to be able to do every single radical idea that they want to do.
And you know, I.
Think you're going to see maybe less checks and balances than I might like coming from Congress, but still a decent amount of them. And some of that inertia is bad. It means we're not going to get done things we should get done. But a lot of that inertia is the inherent conservatism of the American system, where you don't make large, radical, dramatic changes because conservatives themselves, since Burke, have understood that that's a recipe for all sorts of problems.
Jason, as you sit back here and you look at some of the economic trends, economic data, points coming out here. What is the biggest economic concern for you for this US economy.
I just have the conventional one, which is this stubborn, persistent inflation and two and a half percent underlying inflation. If it's down three tenths, we're golden. If it's up three tenths, we're in a certain amount of hurt. And everything else is humming along basically just fine, assuming we don't have very disruptive policies.
Thank you so much for your interest across the nation. Today on YouTube, we are commercial free in this hour a conversation with the Treasury Secretary with her Anne Marie Horden. We're honored to bring a Jason Furman from Harvard University. Wendy Schiller will join us from Bown University. In a moment, never in the history of media has there been a joint conversation Harvard than Brown. We're not asking either of them about the hockey game, the hotit exams. Furman asked
tickets you should see where they are. One more question please to Professor Furman, Paul Sweeney.
Professor X ten Principles of economics, How do you frame out in the tariffs units? What do you talk about in the about terriffs? How do you teach that? What's your thoughts there?
Look, I'm nervous about that. I'm doing that in about a month.
I'm going to do it the same way that i've tom and I will come up that same way that I learned it decades ago. But it's going to sound
like a rebuttal to Donald Trump. Every single sentence is going to sound like the only reason I'm saying it is because I want to contradict him, when the only reason I'm saying it is that's what's been in the textbooks for a long time, And it's been in textbooks for a long time for very very good reasons, some of which are even a grounded in things like accounting identities, which I'm one hundred percent sure or true, and not every comment President Trump makes respects them.
Do you have a magnitude tip point on percent of terroriffs? Just ad Hoc. I'm talking Krugman Furman here. Bring over is like Glenn Hubbard even at Columbia, Jason Furman, is there a percentage tip point where a blended rate of two three percent comes up?
And it's oops, Where's that number matters?
A lot?
Who they're on.
Canada and Mexico matter, are just so much more than any other country. You do ten percent tariffs even on the two of them, and an awful lot of the way US business is conducted, US employment happens, it gets disrupted, frankly to the benefit of a number of other countries.
Jason, thank you so much for your generous time this morning.