Bloomberg Audio Studios, podcasts, radio news. John Paulson of Paulson and Co. And of course an informal economic advisor to former President Trump and a large donor to the Trump campaign as well. And John, thank you for joining because you are actually one of the people to ask a question to the former president at this Economic Club of
New York event, and you asked about the deficit. Yes, he proposed not only making his twenty seventeen tax cuts permanent, he also proposed lowering those corporate taxes to fifteen percent. In this scenario, how concerned are you about the US deficit?
I'm not that concerned because the reduction in corporate taxes was just for a segment of the corporate population, and it concern those that are involved in US manufacturing overall. Currently, we have about a two trillion dollar deficit under the current administration. So President Trump feels confident that could be reduced several ways. One is through the revenue earned from tariffs, which could be substantial. Two is by cutting wasteful spending.
The most important item he alluded to was the Green New Deal, which over time adds up to somewhere around a trillion in spending, and the third is not providing federal benefits to illegal immigrants. So net, these revenue generation and savings will offset any minor adjustments to the tax code.
But the way that it worked out in the past, right, you have the Committee for a Responsible Federal Budget, You have the Tax Foundation, the Congressional Budget Office all saying that the Trump tax cuts would actually cost more than ten point five dollars over a decade, which means that all of the tax cuts proposed really don't add up to really filling in the hole from the tariffs that he recommends. Yeah.
I haven't seen those particular studies. I really don't know what they're referring to.
So at the end of the day, as well, how do you think that he could really gather the American populace, the American worker that has become so important in this election cycle with a recommendation of cutting taxes on corporations rather than helping out the American worker.
Yeah, I don't think he said he would cut taxes generally against corporations. He's not raising taxes. What he wants to do is make his previous tax policy permanent and leave the basic corporate tax rate at twenty one percent. The tax cuts that he proposed target the Americans that would need it most. One is well known now no tax on tips, which would be a great benefit to service workers and allowed them to keep more of their income. Second,
was not taxing social Security benefits. So many people rely on Social Security benefits for most of their income, so that could be a very significant help in the after tax earnings of recipients.
Let's take a step back and also ask just a broader question here. You have obviously been a very large supporter of the former president in this cycle. What underpins your faith in him?
Well, first of all, his policies which under his administration were very successful. While people or these studies referred to are concerned about potential inflation or deficits, under his four years, the average annual inflation was only one point nine percent, interest rates were very low, and oil prices were very low,
and real wages for the average worker increased. Under the Biden administration, which is supposed to be for the average worker, real wages declined because inflation was so high, interest rates are much higher, and oil prices are much higher. So when you look at the benefits four years under Trump or four years under Biden. The average American has done much better under Trump.
I do have a question about the energy policy as well, because he did say today that oil production will increase he said fourfold if he takes office again. But the US is already producing more oil than ever, and the surplus oil could end up being sold overseas, and it's very unlikely that companies will drill more at this point in time. Why spend so much money on this policy?
I don't think Trump would be spending money. He said that he would release federal lands for more drilling, that he would reduce regulations and reduce the current moratorium on permitting new LNG facilities, So that would be a boon to US production and a boom for US export. So exporting energy is very positive for our economy.
I would love for you to also hone in here on some of the commentary that was made this week. You may have seen the Goldman Sachs analysts had said that economic output could take a hit under a future Trump administration. They said, and I'm quoting their report, that the hit to growth from tariffs and tighter immigration policy would outweigh the positive fiscal impulse. What do you say to them, I think the.
Immigration policy is a negative for our economy. If you look at New York City, we have hundreds of thousands of immigrants which are costing the economy valuable resources that existing taxpayers are paying for. So we have to provide healthcare benefits, housing benas of it's food benefits, and these workers aren't allowed to work. So I don't think the
illegal immigration has been a benefit to American workers. It increased the supply of cheap labor, which held down wage growth for American citizens.
The wage growth has been part of the inflationary story, has it not.
Wage growth has been grown less than inflation. That's why real wages have declined.
I also want to talk about interest rates, because at the end of the day, there has been a lot of concern on Wall Street about what a Trump administration
would mean when it comes to the Federal Reserve. There was, of course, that Wall Street Journal report a number of months ago that question whether the Federal Reserve would remain independent, And then we also had the former president commenting in an interview with Bloomberg as well, saying that the president can certainly be talking about interest rates because he has good instincts. That doesn't mean he's calling the shot, but it does mean he should have a right to talk
about it like anyone else. Do you share that concern that he could potentially damage the reputation of the Federal Reserve as an independent organization.
No, I don't share that concern. I think it is important for the President and the White House and the Treasurer Secretary to comment on economic policy, including interest rate policy, but ultimately the decision is up to the FED. But it's important for the Fed to hear other viewpoints and to make sure the Fed policies then sync with overall physcal policy.
To that end, what do you believe should happen with interest rate policy through the end of the WORL.
Well, when you look at inflation now is somewhere around three percent, interest rates are five percent, so real interest rates are too high. So the Fed I think, waited too long to bring interest rates down. So I think that likely course of action is going forward is the Fed will start to cut interest rates.
What should they be by the end of twenty twenty five.
It's difficult to predict, but my best estimate would be around three percent, perhaps two and a half percent.
And what would that mean in terms of ripple effects across the economy.
Well, it's generally beneficial. The major cost when you get a mortgage is the interest rates. So if mortgage, if the cost of mortgages come down, the cost of buying a home would also come down, and that makes a housing affordability go up, and you know that would spur a new housing development.
So another thing that the former president had tried to do in office the last time around was privatized Danny Freddy, is that something you think you would be able to accomplish or as talking about accomplishing in a potential next term.
I think it makes sense. The intention of the Conservative ship was to temporarily put Fanny and Freddy in conservativeship while they built up their capital. Initially, all the earnings of Fanny and Freddy were swept out by the government, but after Steve Manuchin left office he no longer allowed that policy, and the GSS have been rebuilding capitals. The narrative position that where they're fairly well capitalized, which would make privatization logical.
I do have to ask you the one thing that he mentioned you very directly about also in the course of his speech today, which was that there's an idea about an American sovereign wealth fund. How realistic is that idea and how much have you built out that idea with the former president.
Well, we haven't flushed it out, but clearly savings within a country or a measure of a country's strength. So you have countries like Norway, the Middle least to the Asian countries a very large sovereign wealth funds, and I think that's a good model to follow. So you have to start somewhere. So I think the idea of a sovereign wealth fund for American savings it's a good one.
Who else is involved in a kind of conversation.
Like that, We haven't discussed it in detail at this point.
And how big could it be at the onset?
Well, you know, you look at the Norwegian fund, it's over a trillion dollars, well over a trillion. Saudi Arabia has very large funds, Abu Dhabi has large funds. So it'll be great to see America join this party. And instead of having dead had savings.
Of a trillion dollar sovereign well fund.
Well would be over time larger than any existing funds.
John we thank you so much for your time today. I know it's a very busy day off the heels really of that former President Trump's speech today at the Economic Club of New York. We thank you, thank you very much.