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So we want to get more on that now and turn to our Bloomberg Texas Bureau chief Julie Fine, who is in Dallas with the former Dallas Fed President Robert Kaplan. Julie, thank you so much, Robert, thank you so much for being with us. I want to start with the Fed lowering their benchmark interest rates a quarter point. Is this the right decision? They did it for the third consecutive time.
Yeah.
I think this was a tough decision, and I expected to be a tough one with a lot of debate. But so they're down now at four and a quarter four and a half percent. I don't think they can go lower than this until they seem more demonstrable improvement and inflation. And so a lot of the discussion after the meeting was about the fact that they're on pause and maybe the number of rate cut next. You'll great cuts next, You'll be a little lower than people expected.
But I think that's appropriate given where we are. Well.
The FAT also signaling as you're referring to two interest rates cuts next year, what do you think of that? How does that really affect the economic outlook?
So what those what this is called the Summary of economic projections each of us around when it was at the FED. Submit this and the only caution I'd give it has the shelf life. I used to joke around as the same as a cart and a milk, meaning it's my best guess now what we're going to do next year. I reserve the right to change my mind a week from now. And the reason I think in this case I wouldn't put too much stock on it
either way. We're about to have a whole range of structural changes with the new administration, and so I think it's their best guess now. They're uncommitted about when next year they'll do the two cuts. But will it be too It could be less, it could be more. It depends on how events unfold.
Yeah, you refer to some of the policies that President Trump has talked about. How do you think those will affect inflation and will affect the economy? These are big, sweeping changes this new administration is talking about.
So even before we get to those, I think in inflation is a little bit stalled. And again we're running historically high deficits and fiscal spending right now is at historic levels with these special programs like Inflation Reduction Act and Infrastructure Act. So now we're going to get to four or five big structural changes. One is we're going to have a regulatory review economy wide with the purpose
of improving intention of improving productivity. You're going to have an effort to lower the energy prices, improve pipelines, permit pipelines, refineries, get more drilling to help low modern income families afford energy costs.
You're also going to have an.
Effort to stand down I think some of these big government spending programs and then doze to try to actually cut government spending. It's going to be very challenging. Probably you can't do it in size without looking at some sensitive areas like entitlements. And then the other two ones that have been talked about tariffs. You're going to have
either threatened tariffs or actual tariffs. And one comment I've made it's one thing, if you have tariffs on China, you're going to need to leave a corridor open in North America for reshoring.
And we don't know.
Whether they're going to put high tariffs on Mexico which would undermine that. And then the last big thing is you're going to seal the border. You're going to reduce obviously undocumented immigration, and you're going to deport certain types of immigrants that are here illegally. We don't know yet how far that will go, but that's a big deal because it will affect workforce growth, and we need workforce growth.
So this is a puzzle those four or five pieces, and we don't know yet exactly how the puzzle will unfold.
Okay, let's talk a little bit about the tariffs. You and I sit here. We are in the state of Texas.
We know a.
Lot about trade here and how important it is to the economy. President Trump has said he is a business president. He's had a lot of business support. Does he risk losing that if these tariffs affect businesses here in Texas and around the country.
So, businesses in Texas and nationwide are very encouraged by the fact we're going to get a more pro business. They're hoping favorable regulatory environment, maybe improvements in tax policy on tariffs. Though most CEOs I talk with, and Texas is the largest exporting state in the country, as you've mentioned, they're nervous about domiciling more manufacturing capacity here if they can't reashore parts of it to Mexico because the costs
are higher here Mexico costs are lower. So I think he's going to have the support of business leaders, but the issue will be what actions do they take and are they more cautious So verbal support for sure, actions that follow through on creating more domestic capacity. Think it depends how he does the tariffs.
Let's turn to Washington. Now, Congress has not come to an agreement on a cr President Trump is against the one on the table, and he actually told NBC News that he believes that debt ceiling should be abolished. When you talk about money in the economy, how will this affect everything?
So this approximate issue of the debt ceiling, we have a saga at least once a year where we have I would call it a manufactured crisis sometimes where I'm not going to extend the dead ceiling nless you agree to this, and there's a standoff, And ironically it's sometimes a distraction from the bigger issue in that debt to GDP has gone from seventy percent pre COVID to over
one hundred percent. We're running a historically high deficit the year, the treasury is struggling to sell the ten year and thirty year treasuries.
People are reluctant to buy.
We've got to reduce our debt, and so I could see where the incoming president is saying, I don't want to deal with this these mini crisis all the time. We have a bigger issue, which is we've got to reduce spending. And so we're hopeful that they resolve this crisis and continue the government operating. But if foreshadows a much bigger debate and action in the first six months the next year, can we actually bend the curve of
debt to GDP reduce these deficits. I think we're in an area where that's a very important part of economic policy.
Before I let you go, we have to talk about Texas. You're here vice president now, of course at Goldman Sachs. What do you think the ceiling is on the business economy here? I mean, you have a new headquarters, we've broken ground down the street here, So what do you expect the tech sis miracle to continue to look like?
So at Goldman, obviously we're very optimistic about the state of Texas. But the story of Texas over the last fifteen years has been immigration. Of migration, I should say, of people and firms to the state, pro business environment, central location, favorable tax policy, and this is why Dallas and Houston and Austin are three of the fastest growing cities in the United States.
So I think those trends will continue.
Will We're building Dallas as a hub with several thousand people already here, but will operate globally from Dallas. This will be one of the large offices within Goldman Sachs. We will operate globally. We'll have a number of business units here. We already do and we're very optimistic about the business prospects though operating from Texas for the state and from operating here to serve the country and operate globally.
Rob Kaplin, thanks i' much sure being with us