Hi, I'm Molly John Fast and this is Fast Politics, where we discussed the top political headlines with some of today's best minds and Republican Jefferson Griffin has conceded the North Carolina as Supreme Court race to Justice Riggsay, finally, we have such a great show for you today. MSNBC's The Weeknight host Michael Steele stops by to talk about
Republican dysfunction. Then we'll talk to entrepreneur Chris Hughes about his new book, Market Crafters, The one hundred years Struggle to shape the American economy.
But first the news Somali, there's a war between Jerome Powell and Donald J. Trump, and Jerome Powell has chosen to keep rates on hold because of Donald Trump's tariff shock. What are you thinking about this?
So Donald Trump doesn't quite understand a lot of stuff. He understands that if you lower interest rates, the stocks go up.
That's all he understands.
He doesn't understand why you raise interest rates. He doesn't understand. Like when he was president the last time, he would just spend much of his time like tweeting you got a lower rates because he knew it would pump up stocks. And look, Trump's whole thing is to just sort of puff up everything, the economy, the numbers, the sort of juice things. Now here is the problem. We are still
an economy reeling from inflation. So if Jerome Pale lowers interest rates, what's going to happen is that inflation's going to go up. The reason you raise interest rates is because it slows inflation. So what Trump wants to do, Trump really really really wants to fire Jerome Powell and put in someone who will do whatever he wants. But he does not have the presidential power to do that,
so he would be breaking the law. And I think it's important because Trump is always sort of musing about doing things that are really illegal, like running for a third term, and I think it's important we take him seriously and really explain this. But he can't fire Jerome Powell. So even when he says like and luckily for you, I'm not going to fire him, you don't have the power to, buddy. But Jerome Pal it would be malpractice right now because these tariffs are going to be very inflationary.
So if you lowered interest rates, Trump thinks it.
Would juice the economy.
But what it would really actually do is juice the inflationary stuff, and we would have even more inflationary problems. There's a real scenario where we are sort of heading into stagslation. Things get more expensive, and we're in a recession, and that's all because of this stupid tariff crap. So I don't think that you know this is what it is. Whatever it's stupid, Trump's going to be furious.
And Palell had a.
Really good quote, which which is the level of tariff increases and now so far are significantly larger than anticipated.
Duh.
The same is likely to be true of the economic effects, which will include higher inflation and slower growth. Right, higher inflation and slower growth, those are the two things you need. When those two things get really bad, that's stagflation. And that's where we're careening to unless Donald Trump can make ninety deals in the next two weeks or whatever, however much time he has left.
So another feature of the Trump presidency is the grifting ed I've become personally obsessed with understanding meme coins in the culture around them, because I find it funny. But seven hundred and sixty four thousand Americans lost money on Trump meme coins, well, only fifty eight profited. That's what we call a rug pull in that business. And that's insane.
Like so many things in Trump world, this is a Ponzi scheme Trump launched. Meant, by the way, Jimmy Carter had to put his peanut farm in a blind trust. Two million accounts have purchased the Trump coin. By the way, what even is it? It's just nothing, right, it's just a it's nothing.
It's like you're buying into an idea, which Navault Perrari would argue that we're all doing that with currency. But this is just the stupidest version of it.
Like most of our society, meme coins based on Internet jokes or fast moving cultural trends. I mean, so here are the people who made money on meme coin, his friend, I.
Mean, I don't know.
We don't know because we don't really have the reporting yet.
This is such an unregulated space. They did even more deregulation to make it so that they could get away with more of this bullshit.
Right, So we don't know, but it seems pretty sketchy.
You could say that. So we have a Trump budget and there are medicaid cuts. Were really shocked to hear this. We never would have seen them doing this. But the CBO has just scored it, and it's not looking good for the people of America.
Some Democrats are saying, and I actually think this is pretty smart messaging that this is the largest transfer of wealth. I think Burscher said it to us on the podcast. Largest transfer of wealth from poor peoples of rich people is the Trump budget. The analysis requested by Democrats says that.
Per capita caps for.
Medicaid expansion population would save two hundred and twenty five billion in federal spending and result in one point five million more uninsured people by twenty thirty four. Blocking provider taxes could save six hundred and sixty eight billion and lead to three point nine million losing coverage.
So here's the idea.
Medicaid pays for nursing homes, pays for rural hospitals, pays for the pediatricians who see the poor kids. In a lot of states. You cut all of this, here's what happens. The nursing homes close, the rural hospitals close, there is no pediatrician to see your kid. So if Republicans can't prevent elections, which they may try. It will be the single you know, they will never win another election if they do this, because you will see your hospital close,
your nursing home close. Why is why is Grandma coming home to live with us? Because there's no nursing home. It's closed, right? Why is great Uncle Milton living on the street because the nursing home is closed.
Because they cut medicaid.
I mean, that's what this looks like in real time, and it means like you're not driving forty miles to a hospital, You're driving one hundred and forty miles to a hospital. So these are real things that people in Red states are going to see. And in some ways this is just indulge me for another minute because.
It's my fucking podcast. Exe's my friend.
The brilliance of Obamacare, the brilliance of it and medicated space was that I remember when I was a kid, we had people who weren't insured and those people went to emergency.
Rooms for treatment.
I was one of them.
Yeah, they had no choices.
And what we did with Obamacare and this is really honestly like, we gave people medicine and now I'm telling you the Medicaid expansion you know, some states have rejected it because they're you know, Republicans, but largely the states that have it, like Andy Buscher who we talked to, like this has been a game changer.
Right.
There are hospitals where there were no hospitals, so Republicans would have to get rid of these hospitals. And I'm just not convinced that they want to take the poison on this.
And what we see in the Houses, they're bullying a lot of members to pass this so that they can fundraise off this, saying that the Senate will strike it down. Don't worry, guys, You'll be fine. And they're trying to get some of the more wavery Republicans on board with it that way.
Good luck team. Yeah.
I'll just say this mine, if my in laws were forced to come to live with me, I voted lifelong Democrat all my life. That would change real fast, That's all I'm saying. If they forced that, I'd be some real borsch belt humor for you all.
Okay, bomb bomb never follow a dog up.
A judge's blocked Trump's dismantling of three different agencies, which yet again, let's just thank god for the courts. I think. I never thought I'd be saying it's.
So good they wanted to By the way, I just want to say the three ones they wanted to get rid of, Okay, the Institute of Museum and Library Sciences.
First of all, it is like you, how many people work in that? You know?
It's point zero zero zero zero zero one percent of the Pentagon, right, I mean it's like ten people. The Institute of Museum and Library Sciences. They wanted to kill that. The Minority Business Development Agency obvious reasons because they're not interested in that. And the Federal Mediation Services, which, by the way, I'm just gonna tell you, mediation is like a way to save money versus you know, lawsuits, you know, and I'm sure this is about workers' rights. But the
point is they tried to close it. Like yet again, we're seeing the Trump world just absolutely lose it in the courts, as they should, as they will continue on as they deserve. Michael Steele is the co host of The Weeknight along with Slomone, Sanders Townsend, and Alicia Menendez. It airs Mondays from seven to nine pm and Tuesdays through Fridays from seven to eight pm on MSNBC.
Welcome to Path Politicists.
Michael Steele, Okay, what's up.
I'm so excited that I get to have I get to have you, Alicia and Simone on my podcast to promote your show. But like, here's the trick. I actually would have you on anyway to talk about politics. So it's like there are occasionally are times when what I want to talk about and doing something that is sort of what is needed or wanted coincide, but almost never.
So I'm very excited about this and I'm extremely happy to have you here, and I'm gonna I think we should start by talking about the hundred days of I told you so? Do you remember what you wrote on a piece of paper on election night at three o'clock in the morning to make no okay, so eight o'clock in the morning, I am to say that I am like I have never I'm out of my body. I'm so upset, I am like watching myself. We are on the set and I look over at you and I'm.
Like, holy, what are we gonna do?
And you write down at a piece of paper, We're gonna at least won't be able to say we told them so.
Yeah, it is true. I was having a conversation. We actually just came up on our show last night, and so one of the guests that made the comment about you know, you know, we don't want to necessarily be it saying I told you something like hello, I've forgotten that I actually written that down on paper, but it's true. I don't know why we can't say I told you so, I'm sorry. I give you every warning in the world. If I say to you, look, get out of the building.
It's on fire. Get out of the building. It's on fire, and then you don't get out of the building, and bad things happened to you. Yeah, I'm going to tell you I told you so. I'm sorry. I'm that guy. I'm not just warning you to just to be a pain in the butt or to be to have trumped derangements syndrome that crazy. I'm warning you because he's warning us, right.
And I think that's a really good point because we saw so many times on the trail where he would say, you know, people would say, well, you don't read mean you're gonna hunt your political enemies, and you'd say, no, no.
I mean that, Yeah, that's right.
You were like very high up in the Republican Party structure, and I think you were a chair of the R andCA.
Yeah, I did that for a little bit something like that.
Yeah, And so what I think that, I mean, there was a moment when all of this stopped making sense, when they were just like, we're going to give up on trying to be the sort of cut taxes and be you know, a little less for people, but still you know, ultimately not so different. I mean, the two parties were very were much more similar than they were different until Trump came along.
I'd agree that there were, but it's interesting you could see the evolution that was occurring to both and where that was really sort of one of those moments was when you had the emergence of the Tea Party and Occupy Wall Street. They were two sides of the same coin. Interesting making the same case against Wall Street, making the
same case about government intrusion, et cetera. That then crystallized, Occupy Wall Street sort of went off into crazy land with a whole lot of other stuff, so that collapsed. Tea Party held over and then but then eventually collapsed and morphed into something else, which then leveled up. By
the time you get to twenty sixteen Trump. But then when you get into that election, what did you see happening during the course of that primary was the emergence of the Donald Trump you know, Bernie Sanders voter, that sort of progressive, you know, hard right conservative kind of coming together. And I met my first Bernie Sanders Donald
Trump voters at the Democratic Convention in twenty sixteen. In twenty sixteen, when all the drama was going on with Hillary and not of that at that they didn't, you know, and Bernie, Bernie made the case. I still contind had he started that race earlier, or he had an extra month, he likely could have been the nominee, would have been the nominee of the Democratic Party, because that's where the
momentum was going. Very much as we saw with Donald Trump, the same thing was beginning to happen on the left. So you do have these the two parties have always kind of been molly in this sort of race with each other, and along the way they dabble in some policy or they you know, they you know, have an opinion or an ideological spap, but they they find a way to get get to the point where they can
get some things done that piece is not broken. And the work that the Congress, for example, used to do has stopped. It has stopped for a while. And so what you now have, interesting enough, is the two parties shifting and taking on the opposite position, where Democrats today in many cases sound like old line Republicans and Republicans sound like they just you know what, crazy.
No, I'm going to ask you a question just for Jesse, because he's listening, or maybe he's gone to get a coffee. U think Bernie would have won.
I look, I just look at the trend lines in that election. I mean the momentum he had, the momentum that was the big part of how a lot of a lot of Democrats felt that the party put their finger on the scales for Hitdle, that the energy on the ground was for Hillary, I mean for Bernie, and that still is true. I mean, hell, he just got thirty thousand plus people to come out. Who else in politics is talking to thirty thousand people in the stadium right now?
You know. I just want to add one thing about Bernie being out there right now, which I think is important, is that, first of all two things, one is that he's doing it not because he's running for president. He's doing it for the good of American democracy, which is, you know, like this is not the most fun thing, and you know, I mean, it's good whatever, but he really is doing it for the greater good, which I
think is an important data point. And then also it is Charles Schumer who is sort of sending these people out there and giving them the blessing to do it, because otherwise they wouldn't be doing it. I mean, maybe Bernie. I still think Bernie is largely has been pretty much, you know, So I do think when we criticize Schumer, that is an important that he does. He has he does have senators out there doing the stuff that they're supposed to be doing.
Chris Murphy does he, I mean, I supposed if you want to give it to him, give it to him. My issues with leadership, with the leadership of Chuck Schumer is not that he can send a senator out to hold a rally. How do you use the rules of the United States Senate to protect your interest? Right?
And the master of the Senate stuff, right, I.
Mean, you've gotten pulped at every turn post, especially when it comes to judicial appointments and the fact that the Democrats of the Senate capitulated and voted for in some cases or allowed the vote to go forward in all cases with the with the highly incompetent not ready for anything close to prime time nominees for various positions in our government. And there was no fight. Yeah, I mean case.
So now you want to send people out into a rally, okay, But the rally was should have been before you got to this point. And so that's where I have a problem with the leadership is that, yes, you have the title, but you don't have the political instincts to know how to use the title right.
And there are there are all sorts of weird Senate things you can do to come up the works. We've seen Mitch McConnell do them. We saw Harry Reid do them. That that stuff Schumer.
Has not filled it with.
I do want to talk for a minute about the cr because in the there was a year prior budget reversal for the District of Columbia. Now they need this money and and poor Mary al Bowser is trying to kind of get it through and now Republicans, the far right plank is giving her trouble again, which.
I think that could have been an easy one that Democrats could have.
It should have been an easy one for the Democrats in my view, irrespective of what you think about the District of Columbia, there's seven hundred thousand plus people who live there. I'm a native Washingtonian. My dad still lives in our family home in the city. And the fact that you would have Republicans who who fundamentally have a slightly, no,
just a full on racist view of the city. They still think it's chocolate city, you know, from back in the day of Marion Barry and and the street thug life that sort of pervaded in some parts of the city, all of that that every urban community went through in the eighties and the nineties, in the early two thousands for example, that they just have this sort of pejorative view of the city, a city that they barely know because they barely spend any time in it, and it's
just a federal property that they think they can do whatever they want. But they're real people who live There was no vote in the United States Congress that have
fought desperately for home rule. I very much remember when home rule was passed and I worked on as a young college student on the first Amendment to the Constitution to give DC voting rights in nineteen seventy eight, and to hear these people now sort of jerk around with their money, largely these senators and members from Congress, mostly members from Congress from places that are smaller than the District of Columbia. It's offensive. Racial undertones are well documented,
and it's unfortunate. And so you would hope that there'll be some friends out there who could fight for this city. To strip a billion dollars out of the budget, how the hell you think they're going to run their police and fire, how the hell you think they're going to run the school system and provide the services to the extent that your dumb ass still live in the city, and you're going to be calling up the mayor saying,
why aren't you picking up the trash? Well, because you took a billion dollars out of the budget, right, and because I'm not the governor of this of the state of the District of Columbia. I'm a mayor and I've got to make this stuff work. And when you cut my money, I can't make it work the way you want it to work. So everybody kind of thinks the things you just cut and everything will continue to run. Not just run, not just run, Molly, but run better.
Yeah, you know, we're starting to see Republicans are trying to pass the bill. They're now calling it this budget. They're calling it the one big Beautiful Bell.
Because that's what Donald Trump calls it. So you know when you're yeah, it's.
Gonna you know, when you're traveling in the Gulf of America and in this one big beautiful bill, they need to pay for these tax cuts. Right.
The whole game here, doge, Everything is to pay for tax cuts.
It's to pay for the tax cuts that already happened and the tax cuts that are coming. And the idea here is that these tax cuts, by the way, the new ones, I don't know, you know, the old ones. People are gonna be like, where's my tax cut? No, we just extended the other ones, right, I mean, we're not even you know, but even say the new ones come. The problem is, now Elon had all these ideas he was going to cut all this stuff.
It turns out it's a lot harder than it looks.
It is a lot harder than it looks because when you rob from Peter to pay Paul, you realize, hell, I gotta go and rob Paul to pay Pete. It's all Look, it's a finite amount of mine. Period. It's a bud Like any budget, there's a fine item if there's only so much that goes in and there's an amount that goes out, and you're always constantly trying to figure out the balance of those. And so when you say, as the president of the United States that you want
a trillion dollar defense budget, okay, when does that come? Okay, Peter? Yeah, you know, Paul wants a trillion dollar defense budget. Guess what, I gotta grab a little bit from you to get there. And that's the way this works. So you know, if you stop and think about it, the only time in our modern lifetime we've done seen the balancing the budget
was during Clinton's period. Clinton period in newk Enguage in the House, and there was this sense of trying to work towards some level of common goals, and they decided what those goals were, and they put in motion the steps necessary to do that. And while lot they balanced
the budget, there were compromises. There were things that Democrats weren't happy about Republicans weren't happy about, but they ultimately resulted in a number of years of not just balance budgets, but surpluses money that was then subsequently returned to the public in some form. And so that's that's governing. That's not what we're doing now. We're trying to placate a particular class of people by giving them unfettered access to
cash and wealth. And for a lot of people that is, like you just said, they're sitting here thinking that they're going to get a tax cut. Well, you didn't get a tax cut the last time, and the only thing they want to do is extend those tax cuts now, which means you still don't get a tax cut. And so that's the hard, cruel reality. And it's eight hundred and eighty billion dollars that's got to be made up somewhere.
And do you think that's going to come from. It's coming from that school lunch program that you live that you need in your little Mississippi district, comes from that after school program that you need in your Alabama district. Yeah, And the communities that are often hurt the most are the ones clamoring the loudest for the thing that will hurt them the most. And that's fundamentally because I don't
think they appreciate or understand just how they're impacted. I talked to one guy who got excited by the fact that he saw fifty dollars more in his paycheck every two weeks from the last tax cut, and I say, well, that's nice, because you know that guy over there, he got a thousand. So there you are.
Why are people having such a hard time standing up to Trump? Why is everyone so scared of him? And I'm going to give you one example. Janet Mills, Governor Mayne says, I'll see you in court on you know the five trans kid athletes in Maine. Maybe there are ten, Probably there are two or one. She goes to court, she wins. So why is why is everyone so scared of Trump?
Because they're punks. They're punks. Bullies see them, bullies pick them out. At the beginning of the school year, the bully often walks the playground the first day or two of school to size up, size up what's in the yard. And Donald Trump has, over the four years that he was waiting in the wings, sized up the yard and has made promises to a number of these folks who think they're actually going to get something right. Others he wants to make an example of, and he knows who
he can make an example of. And the rest just look there and tremble and say there, but for the grace of eye God goes I. You know, I don't want I don't want that to happen to me. And my question is why not? What do you think is going to happen to you? Do you think that if you give Donald Trump a billion dollars worth of pro bono work, that he's not going to ask you to represent so very unsavory characters that got in trouble because
of him. That's the pro bono work. It ain't It ain't doing what you did with the Legal Aid Society, dumas. It is exactly what Donald Trump wants you to do. And now they're coming to realize that, Molly. They're like, oh suddenly, now, oh so you mean we got to represent who? Yes, Donald Trump has a list of people that you need to take care of. Some of them maybe January sixth, or some of them may be former officials from his last administration. Whatever, I thank yourself, beholden
to the thug. You're going to get caught up in thug things, and so I don't understand the fear, because there are more examples of people standing up and winning to your very point than there are people cow towing and capitulating and winning.
True. Michael Steele, thank you, thank you, thank you.
Chris Hughes is an entrepreneur and author of Market Chapters one hundred year Struggle to Shape the American Economy.
Welcome to Fast.
Politics, Chris, thanks for having me.
You're an economic historian and you have this book, Market Crafters, which I want you to talk about.
What is a market crafter.
It's a policy maker who's guiding and harnessing a market towards some political goal. So that could be making Americans richer, making them safer, making their financial lives more stable. Their Republicans, they're Democrats. And I track a lot of these cases from the past to try to pull out lessons for today. How are we going to build back on the other side of the chaos and insanity of Trump's economic policy.
Give me a counterintuitive example of someone who is in the book.
I kept focusing on counterintuitive examples that at one point a colleague who had read through parts of the manuscript said, Okay, you've got to get some more like bread and butter vanilla people. So a lot of the characters are libertarians. Actually, One that might be well known to some is a Bill Simon, who was a bond trader on Wall Street and a pretty gruff one, as they tended to be
in the nineteen sixties and nineteen seventies. And he goes in auditions for a job with Richard Nixon in nineteen seventy two after Nixon wins reelection, and he thinks he's interviewing to become HUDs secretary, and in reality, George Schultz
wants him to be Deputy Secretary of the Treasury. So he brings in this libertarian and they park maybe the hardest set of problems on his desk, which is how do you respond to rapidly escalating oil prices, which gets much worse when the oil embargo happens in the fall
of nineteen seventy three after the Yan Kapoor War. So this libertarian who came in thinking that government was mostly not the answer, all of a sudden it has a mission stabilize oil prices in shore that there are not gas lines, and you know, in that period it was really important to make sure there was enough home heating oil in New England for that winter so that nobody froze to death. So all of a sudden, this guy becomes a market crafter. He makes very precise decisions around allocations.
He sets price controlled, he creates quotas for usage, and creates a whole federal administration to a stockpile oil and gas to make sure that we don't chew through what we have too quickly. And it was hard for me to write because the guy is sort of an asshole, like he's not a nice guy in his letters. But he was successful. He actually helped heap down the cost of gasoline to a pretty modest level, particularly when it compared to what happened where doubled in Western Europe. Now
later in the decade, ironically it's a disaster. That's when the gas lines that we all remember is in nineteen seventy nine and the next gas I'm shocked. But he had laid a framework for an effective market craft, despite his liber tarian politics.
So we're in the middle of a kind of crisis not so different than the gas crisis in a way. Right, president doesn't understand mass decides to enact broad tariffs, totally unfocused. What it does is it screeches the economy to a halt. It reverses growth. So talk to me about what you think the president for this is and what you've seen sort of historically, how this kind of self perpetuated crisis could get thought through.
Now, I went on a daily show on Monday and John Stewart called Trump a market crasher instead of a market crafter, which I thought was very clever, as John Stewart can be. And so now I think I'm going to use that term. I mean Trump is bludgeoning the American economy. I mean the uncertainty alone from the impulsiveness is causing us to likely high into recession. You know, just this morning, aren't we in it?
Because of the now we're oh, it's got to be two quarters, right of negative.
Growth, exactly quarters of negative growth. But the point is is the economy is right now is contracting. Consumers are less confident than they have been in five years, which you know was literally this the pandemic spring, when we were all locked up in our houses at the very beginning inflation expectations are up, investor uncertainty is up, and there's a lot of questions around whether investors are going to flee American assets and dollar denominated assets across the board.
So this is a big self inflicted problem. The question is is, first off, how we're going to get through it for the next couple of years, and then how we're going to rebuild on the other side. I'm afraid it is going to get worse before it gets better. I think there will be a recession and we'll see how deep it goes. But Democrats and progressives are going to need to be able to say, hey, we understand the economic challenges that are in front of us. Right now.
It's high costs, housing, groceries, care. Eventually it's going to be jobs increasingly, and we have a plan to bring down those costs and create the jobs that Americans want to see. And Americans, you know, they're wary of that after Bidenomics. But in my view, that plan is going
to have to involve market crafting. It's going to have to say these are the industries of the future me to the jobs that we need, and these are the costs that need to be stabilized, and we got to use all of the tools that we have to make the economy work for everyday people, not just investors and the people who do the best.
So dollar flight, let's talk about dollar flight. There is a real anxiety. The reason people have said that Trump stopped the tariffs was because of the bond market. Because the bond market usually the stock market goes down, the bond market goes up, right, because the money goes from stocks to bombs. This time the money didn't go to bonds, which meant that perhaps there was dollar flight, or that
there is the possibility of dollar flight. So I want you to explain to our listeners what that is, what that means, and if there's a historical president for it.
Yeah. I think there are three ingredients that are creating a perfect storm. The first is the tariffs and the instability that Trump is introduced with them. The second is the threat to fire J. Powell and potentially other members of the Board of Governors at the Federal Reserve, which if followed through, could make monetary policy really a political project, which could mean chronic inflation as many countries have seen.
And then the third issue is the existing size of the budget deficit, and what the Republicans plan to do in this tax bill. And I think the third is the least talked about and maybe the most important. Last year, the budget deficit was seven percent of GDP. That's very
high for a healthy economy. And if the Republicans pass the spending package that they're talking about, the size of that is the tax cut from the first Trump term plus all of the COVID stimulus spending, plus the Biden infrastructure bill in this one bill, further running up the deficit and giving international investors anxiety. Can the United States actually make good on its commitment to pay the coupon
on its outstanding debt? And so as people see that happening, they are rightly seeking for safer assets in the global system. And that could be gold, that could be European military companies, the bonds, yeah, exactly, European bonds from Germany, for instance,
are attractive to a lot of investors. That can create a real flight from the dollar, significantly weaking it and making it much more expensive for us to have the kind of fiscal policy make the kind of investments that we want to make as a country.
Exactly.
It will also mean that our debt will be significantly more expensive to service. Explain what sort of downstream consequences of more expensive debt are.
The federal government in any given year has a meaningful portion of the budget that goes to pay off the debt. But it's just like with a household if the rate on your credit card goes up, even if the balance is still the same, you've got to pay more every single month from your income to just keep servicing the debt.
So the concern is that all of this excess fiscal spending will either cause meaningful inflation, which means that interest rates will have to be higher for longer, making it more expensive for government to borrow, or that we head into an extended period of stagflation when inflation is high and unemployment is low and the central Bank doesn't have isn't able to it's normal tools to get us out of it, to do the basic sort of pinsy and
macroeconomic smoothing that should happen in coordination to central Bank and the Congress. So that's the concern. I think it's been a concern for a few years. Of ten years ago, it wasn't so much of a concern because interest rates had been low for so long. Now they're higher and could in theory go even higher, and so investors are rightly you watching that with anxiety and concern.
So we had the dollar flight, and we have this problem with the debt. Stagflation is a word we don't talk about very much because it's so scary.
I was born in nineteen seventy eight.
So stagflation when I was a baby, that was like a big issue. I make everyone on this podcast explain what stagflation is, so I think that people who listen to this know that things get more expensive. But you're also in a recession, so there's just no way out. Talk to me about what Vulgar did and why that is.
Sorry, I'm a real nerd here when it comes to this kind of stuff.
I've come to the right place because I have a whole chapter on the Vulgar Shock, and I tell the story of this woman on Nancy Teeters, who is the first female governor of the Federal Reserve, who served with Vulcar and became the sort of person the symbolic contrast to a lot of the Vulgar Shock. So her story begins decades before, but she becomes a fed governor. In
the late nineteen seventies, inflation's very high. Paul Vulker, who had been the president of New York Fed, becomes the Chair of the Federal Reserve, appointed by Carter, who wants someone to finally get inflation under control. Vulker comes into the building. He's just a few weeks in. They're doing some marginal rate hikes, and the markets balk. They think
that he's not going to be strong enough. So he decides to effectively tear up the rule book that the FED has abided by since its beginning and throw out to kind of mandate for order literally well managed stable money markets, and say we're not going to target interest rates at all. We're going to do something different, get reserve targeting. The details of it don't really matter. The point is we're going to use a different framework to really really constrict the money supply. And so it's like
a train screeching to a halt. It throws the entire economy into the deep freeze, and you had the worst recession in the United States since the Great Depression between nineteen eighty one and nineteen eighty three, purposefully cost by the monetary policy of the Vulcar fed now Nancy Teeters.
Initially she votes for it, even though her politics are left she generally favors looser monetary policy, but she goes along with it, believing that they have to do something dramatic and rates might be able to go up quickly,
but they'll be able to come down quickly. But then a little bit over a year later, she begins making these really principal dissents, which are thoughtfully considered and clear that they should stop using this experimental methodology for monetary policy, move back to something that creates orderly and stable markets, and step down from these high interest rates gradually rather than just holding on to them. And so if you look back, most historians and economists see the Volker shock
as broadly a good intervention because it's squelched inflation. But they also I think that the recession didn't have to last as long as it did, and it didn't have to be as deposited, and Teeters offered a third way,
a more modest route forward. And so I think her story is really important because if we're going to head into another period like that, there are going to be some people who want to pair a Paul Volker, and we need some of these templates from history to help us see how to do this in a way that is more practical.
I take I'm sorry to do this too. The COVID response was a response to the two thousand and eight financial crisis.
Well, the size of it definitely was Biden and the crew were very clear that they'd rather go big than go too small, because after the Great Financial Crisis there was a consensus that it was too modest. It was too modest. I think that they were right to err on the side of being more robust. It was a
lot of money, It was a lot of spending. In retrospect, it probably could have been a little bit a smaller, but I think directionally it meant that we had the fastest recovery in terms of jobs than we've had from any recession, and the inflation that came afterward was not
caused by that spending. I mean, the best economic analysis by centrist economists like Ben Bernanke and Alleviate Mancha and people like that say that of the nine percent peak inflation, at most two percent of it was caused by excess spending on the demand side. The rest of it was called by all those supply chain bottlenecks, and this rapid shift in consumer demand from away from services towards goods, towards lumber, towards cars, towards all those things that we remember.
So I think that not just the COVID stimulus, but a lot of the bids economic agenda was actually right on point, and in the domain of politics. Because of the rapid escalation of inflation, Democrats got flowered. Biden and teams should have been paying attention to that more. They should have spoken to that as a real issue earlier and not done this thing that says like, oh, well, jobs are good and wages are going up, so don't worry too much about the inflation like this was incredibly
tone deaf and wrong. And it's also still true that the core pieces of Bidenomics investment in clean energy, investment in semiconductor construction here here at home for national security reasons, the bipars and infrastructure law, the COVID student these things were good pieces of policy that helped a lot of people in the immediate aftermath of their passage and continue to today. So I think we have to be more precise when we talk about all this stuff.
Yeah, I think that's right. And I also think that Chips and Science is clearly Trump when he wants to onshore manufacturing. What he wants to do is chips and science, right, What he wants to do is build in the United States.
Yeah, I mean, the Chips Act started and Trump won the idea. The germ of the idea was from Keith Krack, the Undersecretary of Economic Affairs at the State Department, and some folks on the hill in Congress, and it got a lot of traction. There were, you know, advanced discussions, which meant that the wheels had increased. And so when the Biden folks came in, I mean they significantly experided its size, its scope, and rethought the structure to it.
And it was a bipartisan piece of legislation that a lot of Republicans voted for. And even now, you know, Trump says he's against it. I think that's just like he's against anything that happened in the Biden years. But there are many congressional Republicans who I believe in it because it's creating jobs in their districts, and not to mention the national security implications of what it means for us to be back in the business of building and creating these advanced chips.
Very very interesting. Thank you, Chris.
Yeah, thanks for having me.
No Mo.
Jesse Cannon Bi jug Fast We know around these parts Pritzker fan club, Governor Pritzker and Illinois. Just he's really leading the way on how to fight back against this administration. And I really like this that he's going to sign the first nation executive order protecting autism data.
Yeah, because honestly, fuck RFK Junior.
Can we say that, Yes, that's legal to say.
He's our moment of fuck.
Great, Good for Pritzker yet again, this is becoming the Pritzker fan podcast. Good for him, that's correct. Don't let r of K Junior get anyone's data. And you know, by the way it is, it's worth wondering why this administration is so hot for data, right, why they're constantly fighting to get our data. It's just something interesting to think about. But yes, RFK Junior, you are once again our moment of fuck. Right.
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