1 00:00:22,039 --> 00:00:27,399 Speaker 1: And Hi, how are you Happy Friday to you? Welcome 2 00:00:27,679 --> 00:00:31,839 to the Big Podcast on this twenty second day of August, 3 00:00:32,119 --> 00:00:34,640 year of Our Lord twenty twenty five. My name is 4 00:00:34,679 --> 00:00:38,600 Tom Sullivan. So this we get started today. Since we 5 00:00:38,759 --> 00:00:43,759 last left you, the state legislature in California has been 6 00:00:43,799 --> 00:00:50,039 busy working on trying to get the laws passed that 7 00:00:50,079 --> 00:00:54,119 they need in order to get a ballot measure for 8 00:00:54,200 --> 00:00:58,679 the people of California in November to vote on whether 9 00:00:58,920 --> 00:01:03,320 or not they want to allow the politicians to once 10 00:01:03,359 --> 00:01:08,280 again draw the congressional district lines or let the which 11 00:01:08,319 --> 00:01:11,319 they took away from them back fifteen years ago. And 12 00:01:11,359 --> 00:01:17,200 they created an independent commission. Not only is it even 13 00:01:17,359 --> 00:01:21,040 Stephen Republican Democrat, but in addition to that, the members 14 00:01:21,079 --> 00:01:24,799 of that commission cannot run for public office for ten years. 15 00:01:25,200 --> 00:01:28,400 They really wanted an independent commission. Everybody has their bias, 16 00:01:29,159 --> 00:01:31,439 but the commission has drawn the lines and it still 17 00:01:31,439 --> 00:01:36,079 hasn't hurt Democrats. I mean, the Democrats still dominate the 18 00:01:36,200 --> 00:01:39,760 legislature and the governor's office. They have for a long time. 19 00:01:40,680 --> 00:01:44,879 But Governor Knewsom if after this was passed by the 20 00:01:45,000 --> 00:01:51,159 legislature in Sacramento, they what they've done is they now 21 00:01:51,200 --> 00:01:57,000 have triggered a special November election to redraw the congressional 22 00:01:57,000 --> 00:02:01,799 districts for the US House map. They're not saying who 23 00:02:02,079 --> 00:02:07,760 came up with these new maps. Nobody will Nobody. Katie Porter, 24 00:02:07,840 --> 00:02:11,400 who's kind of in the lead for the governorship for now, 25 00:02:12,319 --> 00:02:14,719 they asked her about it earlier today, Jesus, I don't know. 26 00:02:15,479 --> 00:02:17,439 Everybody's looking to go I don't know. I don't know 27 00:02:17,439 --> 00:02:20,599 who do were the maps? Why can't they take credit 28 00:02:20,639 --> 00:02:22,919 for it? They're trying to make it so that they 29 00:02:22,919 --> 00:02:27,120 can get five more Democrat seats that will offset or 30 00:02:27,159 --> 00:02:30,599 as they call it, neutralized Texas, and both of them 31 00:02:30,759 --> 00:02:33,120 still have to get the voters in those districts to 32 00:02:33,199 --> 00:02:36,879 vote the way that these parties want. So there's still 33 00:02:37,319 --> 00:02:41,120 a lot of work to be done there. But it 34 00:02:41,159 --> 00:02:44,759 was it wasn't a surprise that the California Legislature, which 35 00:02:44,840 --> 00:02:48,560 is good again controlled by the Democrats, would pass these 36 00:02:48,560 --> 00:02:50,560 bills to put it up on the ballot for the 37 00:02:51,080 --> 00:02:57,000 voters they still have. I mean, right now, sixty four 38 00:02:57,080 --> 00:03:00,599 percent in the latest poll of California votvoter said no, 39 00:03:00,680 --> 00:03:02,879 we don't want to give it back to politicians. To 40 00:03:02,960 --> 00:03:06,039 draw the lines, so they still have to run a 41 00:03:06,080 --> 00:03:08,960 campaign to try to convince Californians to vote for giving 42 00:03:09,000 --> 00:03:12,479 the drawing of the lines back to the politicians. The 43 00:03:14,360 --> 00:03:17,800 cost of it, nobody knows what the cost will be. 44 00:03:18,400 --> 00:03:21,599 The last special election they had a few years back, 45 00:03:22,120 --> 00:03:24,800 it cost them two hundred and fifty million dollars. Now 46 00:03:24,840 --> 00:03:28,240 this is a stake that's having financial problems, but they're 47 00:03:28,280 --> 00:03:30,919 willing to spend two hundred and fifty million dollars because 48 00:03:31,000 --> 00:03:34,919 it's about them. It's not about spending two hundred and 49 00:03:34,960 --> 00:03:40,039 fifty million for the voter, for the citizens, No, of 50 00:03:40,080 --> 00:03:44,319 course not. So it's all up to making sure that 51 00:03:44,360 --> 00:03:46,599 they're trying to protict themselves, so they'll spend your tax 52 00:03:46,639 --> 00:03:52,759 dollars on themselves. But Newsom's been weird. He's trying to 53 00:03:53,400 --> 00:03:56,080 He did the I don't know does he still have 54 00:03:56,120 --> 00:04:01,479 his podcast going. Probably does. But he made news when 55 00:04:01,520 --> 00:04:03,919 he first launched it because he had Steve Bannon on 56 00:04:04,879 --> 00:04:10,159 and he had some other conservative Republicans on his podcast, 57 00:04:10,719 --> 00:04:14,960 and he was trying to pretend he even had Remember 58 00:04:15,000 --> 00:04:21,000 he went on with a debate with Governor DeSantis of 59 00:04:21,040 --> 00:04:24,920 Florida on Hannity Show and I thought, oh my gosh, 60 00:04:24,959 --> 00:04:27,399 what's he doing. Well? He was trying to pretend like 61 00:04:27,480 --> 00:04:30,639 he was mister even Steve in middle of the road. 62 00:04:30,279 --> 00:04:33,759 He's don't hold anything. I guess, well, that hasn't worked. 63 00:04:34,319 --> 00:04:37,439 So now he's pulling out a card and it's very 64 00:04:37,439 --> 00:04:44,240 obvious that he's sending out tweets mocking President Trump using 65 00:04:44,399 --> 00:04:49,160 the same kind of language that President Trump uses, and 66 00:04:50,600 --> 00:04:53,800 it doesn't seem to work for anybody who's tried it. 67 00:04:53,839 --> 00:04:58,160 Remember when Trump was running in twenty sixteen, what was it, 68 00:04:58,160 --> 00:05:00,959 It was something like sixteen or seven seventeen. I think 69 00:05:01,279 --> 00:05:06,079 Republicans are running and they all tried to copy Trump 70 00:05:06,879 --> 00:05:09,519 and all of them failed, and he rolled over the 71 00:05:09,560 --> 00:05:12,399 whole group and became the nominee and became the president. 72 00:05:13,560 --> 00:05:17,800 It's been done number of times people tried to outdo Trump, 73 00:05:18,319 --> 00:05:21,040 try to out trump Trump, and you can't do it, 74 00:05:21,920 --> 00:05:24,800 you just can't. But Newsom is the latest to try that. 75 00:05:25,959 --> 00:05:30,079 I'm just looking at his tweets. He says, the power 76 00:05:30,120 --> 00:05:32,920 of California will have The people of California will have 77 00:05:32,959 --> 00:05:36,120 the power to push back against Texas and any other 78 00:05:36,160 --> 00:05:40,759 state that obeys Donald Trump's demand to rig the next election. 79 00:05:40,879 --> 00:05:46,079 See here's a little Trump language. Here's another one. California 80 00:05:46,160 --> 00:05:49,639 is countering Trump's attempt to rig the twenty twenty six 81 00:05:49,720 --> 00:05:53,879 election and redistrict this way out of accountability in states 82 00:05:53,959 --> 00:05:57,519 like Texas. We're fighting fire with fire, giving the power 83 00:05:57,560 --> 00:06:00,360 to the people to fight back and demand nation wide 84 00:06:00,399 --> 00:06:05,439 independent redistricting. No, you're done. You're taking the power away 85 00:06:05,439 --> 00:06:09,000 from the people. Here's another one from him. This is 86 00:06:09,160 --> 00:06:16,680 radical rigging of a midterm election, destroying, vandalizing this democracy, 87 00:06:17,279 --> 00:06:21,199 the rule of law. Right now, we're walking down a 88 00:06:21,360 --> 00:06:25,639 demand different path. We're fighting fire with fire. We're going 89 00:06:25,720 --> 00:06:30,879 to punch those sobs in the mouth. From Gavin Newstem 90 00:06:30,879 --> 00:06:36,959 trying to talk tough, what's this one? This confirms what 91 00:06:37,000 --> 00:06:39,560 we already know. California's effort to put new maps before 92 00:06:39,600 --> 00:06:44,000 the people to make the final decision is entirely legal. 93 00:06:44,120 --> 00:06:48,279 Why won't Texas let their people have a say. Well, essentially, 94 00:06:48,360 --> 00:06:51,319 California is doing the same thing they're going. They're trying 95 00:06:51,319 --> 00:06:54,879 to get around the people. I don't know, very northern 96 00:06:54,920 --> 00:06:57,800 California is very red. I don't know how they're going 97 00:06:57,839 --> 00:07:01,759 to try to turn that into blue. But good luck 98 00:07:01,800 --> 00:07:03,800 to them on all of that. I don't think. I 99 00:07:03,839 --> 00:07:06,720 don't think it'll work. They'll spend a couple hundred million 100 00:07:06,759 --> 00:07:11,600 dollars of your tax dollars for you in California, and 101 00:07:11,680 --> 00:07:14,680 I'm not sure it's going to be successful. I hope 102 00:07:14,680 --> 00:07:16,519 it's not. I don't want to give I hope they 103 00:07:16,519 --> 00:07:19,800 don't give the power back to the politicians. So we 104 00:07:19,839 --> 00:07:23,319 move on. Today is also a big day in Jackson Hole, Wyoming, 105 00:07:23,839 --> 00:07:28,800 the annual conference of the Federal Reserve. I think it's 106 00:07:28,800 --> 00:07:32,680 the Federal Reserve District of Kansas City hosts it, even 107 00:07:32,720 --> 00:07:37,040 though it's in Wyoming, but it's the annual Federal Reserve. 108 00:07:38,600 --> 00:07:41,959 I don't know, boondoggle that goes on every year. The 109 00:07:42,000 --> 00:07:45,800 Fed chairman comes and speaks, and so Jay Powell a 110 00:07:45,839 --> 00:07:48,040 lot of pressure on him to drop interest rates and 111 00:07:48,079 --> 00:07:51,360 everybody talking about what's he going to do. So we'll 112 00:07:52,560 --> 00:07:56,199 see what that's all about as the day progresses. One 113 00:07:56,240 --> 00:07:58,079 of the people that I wanted to talk to, and 114 00:07:58,120 --> 00:08:00,000 this is going to be a little bit different because 115 00:08:02,639 --> 00:08:06,519 I'm just a huge fan of doctor Art Laugher. Art 116 00:08:06,600 --> 00:08:10,199 Laugher is the is the guy who created the Laugher curve. 117 00:08:10,360 --> 00:08:16,920 The laugh for curve was the basis of Reagan's economic policies, 118 00:08:17,000 --> 00:08:22,759 and Art Laffer was a young guy on Ronald Reagan's 119 00:08:22,839 --> 00:08:28,079 economic advisory team. Laugher had a lot to do with Reaganomics, 120 00:08:28,879 --> 00:08:35,320 and what the laughter curve is is basically a sweet spot, 121 00:08:35,360 --> 00:08:38,879 trying to find a sweet spot for not too much tax, 122 00:08:39,039 --> 00:08:41,480 not too little tax, get it just right so that 123 00:08:41,559 --> 00:08:45,759 everybody wins. So I called up Art the other day 124 00:08:46,000 --> 00:08:50,080 and had a wonderful conversation with him, and I wanted 125 00:08:50,120 --> 00:08:54,480 to play that for you here today. Here's doctor Art Laugher. So, Art, 126 00:08:55,000 --> 00:08:57,600 it's been a while since we've talked, but over the 127 00:08:57,679 --> 00:09:00,919 years we've popped up in front of each other, going 128 00:09:00,960 --> 00:09:05,320 all the way back to nineteen eighty six in California. 129 00:09:05,440 --> 00:09:07,639 I was in the media, you were running for the Senate. 130 00:09:07,679 --> 00:09:12,279 We met then and we've been in contact ever since. 131 00:09:12,320 --> 00:09:15,240 And I just wanted to catch up with you because 132 00:09:15,240 --> 00:09:17,559 we haven't talked it in a little while. But you 133 00:09:17,639 --> 00:09:19,720 did something. I mean, I don't know what's wrong with me. 134 00:09:19,799 --> 00:09:24,519 I moved from California to New York. What was I thinking? 135 00:09:24,799 --> 00:09:31,519 But you moved to Nashville. In Nashville, no Tennessee income tax, 136 00:09:32,399 --> 00:09:36,240 very prosperous, town. I mean, the population there has been booming, 137 00:09:37,159 --> 00:09:40,440 and I thought, well, maybe you made the right choices. 138 00:09:40,559 --> 00:09:44,039 Nashville still the hot spot that it was when you 139 00:09:44,120 --> 00:09:44,519 moved there. 140 00:09:44,679 --> 00:09:47,440 Speaker 2: Nashville is in Nashville starting to lose it, by the way, 141 00:09:47,559 --> 00:09:53,200 very quickly, unfortunately, but because it's been too successful. Property 142 00:09:53,240 --> 00:09:56,799 taxes they increased them three years ago by forty percent, 143 00:09:56,799 --> 00:09:59,000 and then this year they increased them another forty percent. 144 00:09:59,440 --> 00:10:04,759 Population growth in nashville's negative. You know, building there was 145 00:10:04,799 --> 00:10:08,639 a big building that was sold I think four years 146 00:10:08,679 --> 00:10:10,679 ago for one hundred and fifty five million. This year 147 00:10:10,720 --> 00:10:13,360 got forty million when it was resold. You know, it 148 00:10:13,440 --> 00:10:19,440 was First Third Bank. You know, there's a huge drop 149 00:10:19,519 --> 00:10:22,679 in Nashville, which is too bad. I mean, it's going 150 00:10:22,720 --> 00:10:27,159 to continue on for a while. But Nashville property values, 151 00:10:27,279 --> 00:10:31,759 Nashville property taxes, property values are following. Property taxes are rising, 152 00:10:32,440 --> 00:10:35,840 and it's going to become Memphis shortly unless we do 153 00:10:35,960 --> 00:10:36,559 something about it. 154 00:10:37,320 --> 00:10:40,519 Speaker 1: Well that's a shame to hear because I thought it 155 00:10:40,679 --> 00:10:43,559 was quite the darling. But you're telling me everything's reverse. 156 00:10:44,000 --> 00:10:45,759 Speaker 2: It happens everywhere, it always does. 157 00:10:46,200 --> 00:10:49,360 Speaker 1: What's what's the matter with these big cities? I mean, 158 00:10:49,480 --> 00:10:52,200 as Nashville was a nice southern town and now it's 159 00:10:52,200 --> 00:10:56,960 a big city and they they tax the upper income people. 160 00:10:57,000 --> 00:10:59,519 Then the upper income people move out and leave the 161 00:10:59,519 --> 00:11:02,799 people that really don't pay any taxes but need lots 162 00:11:02,799 --> 00:11:07,000 of services. And it starts, it starts killing the big cities. 163 00:11:07,279 --> 00:11:11,000 Speaker 2: Yep, now that's right. You know the inner city top 164 00:11:11,559 --> 00:11:15,000 politics is pretty left wing and they make it really tough. 165 00:11:15,159 --> 00:11:18,519 Speaker 1: So there you are. That's what these politicians are. They 166 00:11:19,799 --> 00:11:23,639 can't seem to help themselves about getting more revenue from 167 00:11:23,639 --> 00:11:25,519 the citizen for their pocketbook. 168 00:11:26,440 --> 00:11:29,200 Speaker 2: No, they can't. No, they cannot help themselves. I don't 169 00:11:29,240 --> 00:11:31,879 give a damn if you get super free market fun. 170 00:11:32,000 --> 00:11:34,519 Hi at Milton Friedman and all the others in there. 171 00:11:34,799 --> 00:11:37,639 They'll raise taxes if they get the revenue. They don't 172 00:11:37,679 --> 00:11:38,639 have any principles. 173 00:11:38,639 --> 00:11:42,080 Speaker 1: What's over Well, you made your famous young economist the 174 00:11:42,120 --> 00:11:45,639 White House for the Laffer curve, and correct me if 175 00:11:45,679 --> 00:11:49,279 I don't have this right. But in the laugh of curve, basically, 176 00:11:49,360 --> 00:11:53,919 the taxes should be somewhere between zero percent and one 177 00:11:54,000 --> 00:11:59,360 hundred percent, and the job is to find the sweet 178 00:11:59,399 --> 00:12:04,799 spot of the maximum amount that the government can receive 179 00:12:04,879 --> 00:12:07,360 and the minimum amount that people have to pay. 180 00:12:07,720 --> 00:12:10,360 Speaker 2: Yeah, that's correct. I mean it's not you don't want 181 00:12:10,360 --> 00:12:13,039 to maximize tax revenues for government, that's not what our 182 00:12:13,120 --> 00:12:16,320 job is. But you surely want to have it below 183 00:12:16,360 --> 00:12:20,840 the maximizing rates because you want to create prosperity, economic growth, 184 00:12:21,120 --> 00:12:24,879 all that. And it's way lower than people think it is. 185 00:12:24,960 --> 00:12:26,480 That optimals tax rate. 186 00:12:27,200 --> 00:12:30,639 Speaker 1: Somebody told me years ago that the perfect spot was 187 00:12:30,679 --> 00:12:35,360 somewhere around a tax rate of eighteen percent. Is that right? 188 00:12:36,879 --> 00:12:40,399 Speaker 2: There is no magic number for that. But with property taxes, 189 00:12:40,879 --> 00:12:46,120 property tax rates pay for themselves for anything over one 190 00:12:46,200 --> 00:12:49,919 percent property tax rate, I mean, you know that's where 191 00:12:49,919 --> 00:12:53,440 it is on property tax. On income taxes, it's probably 192 00:12:53,480 --> 00:12:57,200 in the fifteen to twenty percent range, you know. And 193 00:12:57,279 --> 00:12:59,440 for sales taxes, who knows. 194 00:13:00,000 --> 00:13:02,799 Speaker 1: So what you're telling me is there's no one perfect number, 195 00:13:02,840 --> 00:13:03,679 no sweet spot. 196 00:13:04,159 --> 00:13:06,000 Speaker 2: Well, it depends on what it is, depends on what 197 00:13:06,039 --> 00:13:08,639 it is, and depends on how many other taxes there are, 198 00:13:08,679 --> 00:13:11,279 and you know all that other stuff. All that matters. 199 00:13:11,320 --> 00:13:15,080 But you know, anything over twenty percent income taxes get 200 00:13:15,159 --> 00:13:19,120 suspicious right away, and sales taxes anything over five or 201 00:13:19,639 --> 00:13:23,240 eight percent gets real suspicious right away. All of a 202 00:13:23,240 --> 00:13:26,200 sudden you paid for people to do transactions away from 203 00:13:26,200 --> 00:13:30,679 the tax register. Yeah, the underground economy and the people 204 00:13:30,720 --> 00:13:34,360 doing business not reporting their income. It's just you know, 205 00:13:34,480 --> 00:13:37,320 and you can see it in California. You know, the 206 00:13:37,360 --> 00:13:40,559 revenues start tumbling, people start leaving, and once you get 207 00:13:40,559 --> 00:13:43,320 people leaving, rich people leaving, you've got you've got a problem. 208 00:13:43,879 --> 00:13:47,879 Speaker 1: Yeah, it seems like how cities and states have lost 209 00:13:47,879 --> 00:13:51,840 their tax base. Weren't you speaking of that area. Weren't 210 00:13:51,840 --> 00:13:55,559 you born in the Smokestack area? You were a Cleveland 211 00:13:55,840 --> 00:13:57,559 native if I read right somewhere. 212 00:13:58,159 --> 00:14:00,759 Speaker 2: Oh see, I was born in Young Sound and raised 213 00:14:00,759 --> 00:14:04,519 in Cleveland. Yet you're completely correct. How did you remember 214 00:14:04,559 --> 00:14:07,159 that I smell bad or something? Just joking? 215 00:14:09,080 --> 00:14:12,480 Speaker 1: No, I read your wiki. I think it was talking 216 00:14:12,480 --> 00:14:15,360 about you're a native person of Cleveland. I had a 217 00:14:15,399 --> 00:14:20,039 friend that was from Cleveland, grew up, went to school, 218 00:14:20,200 --> 00:14:25,399 got married, started a family, and couldn't take the oppressive 219 00:14:25,759 --> 00:14:29,080 taxes and the lack of government services. He was one 220 00:14:29,120 --> 00:14:32,159 of those. Oh this is probably twenty years ago. He 221 00:14:32,240 --> 00:14:33,919 was one of those that fled to Texas. 222 00:14:34,080 --> 00:14:35,960 Speaker 2: Yeah, I left too. I left too. I left in 223 00:14:36,039 --> 00:14:39,320 nineteen fifty eight and never came back, went to college, 224 00:14:39,320 --> 00:14:42,840 and just that was it. Oh well, I really loved Cleveland, 225 00:14:42,840 --> 00:14:44,679 by the way, I mean because of family. I mean, 226 00:14:44,919 --> 00:14:47,399 every one of my family's been there for generations. But 227 00:14:47,679 --> 00:14:50,159 you know, that's the way it goes. They throve people 228 00:14:50,200 --> 00:14:50,759 like me out. 229 00:14:51,120 --> 00:14:54,720 Speaker 1: What happened? What was it that turned the economy sour 230 00:14:55,320 --> 00:14:57,759 in the Cleveland area. 231 00:14:57,360 --> 00:14:59,679 Speaker 2: Some nineteen seventy six I think it was seventy six 232 00:15:00,120 --> 00:15:02,879 in the income tax in Ohio. And from then on 233 00:15:03,000 --> 00:15:05,360 it's been straight down. Ye know, it's just been a tragedy. 234 00:15:05,720 --> 00:15:09,720 Speaker 1: Let's talk about the big conference going on at Jackson 235 00:15:09,759 --> 00:15:14,840 Hole for the FED, their annual event. Jay Powell's under 236 00:15:14,879 --> 00:15:17,120 a lot of pressure. He's going to give the speech. 237 00:15:17,519 --> 00:15:20,000 I don't know how he's going to be received. But 238 00:15:20,720 --> 00:15:23,639 what do you make of the pressure that Jay Powell 239 00:15:23,679 --> 00:15:24,039 is under. 240 00:15:24,320 --> 00:15:26,759 Speaker 2: He is under a lot of pressure, and unfortunately he's 241 00:15:26,799 --> 00:15:29,879 responding badly to it. I mean, you know, he seems 242 00:15:29,919 --> 00:15:32,000 like a very nice guy. I don't know him, but 243 00:15:32,039 --> 00:15:33,960 he seems like a very nice guy. But he's totally 244 00:15:34,000 --> 00:15:37,639 unqualified for the position he's in. You know, he is 245 00:15:37,679 --> 00:15:40,399 he's not a I mean, it's not just that he's 246 00:15:40,440 --> 00:15:43,120 not a trained economist. Most of them aren't qualified either. 247 00:15:44,000 --> 00:15:46,759 And this guy then now has set his feet in 248 00:15:46,799 --> 00:15:49,159 the ground. He will not leave unless fire, you know, 249 00:15:49,240 --> 00:15:52,399 and all that. And he's just ruining a reputation and 250 00:15:53,120 --> 00:15:57,200 and and a career by just opposing Trump at every 251 00:15:57,240 --> 00:15:59,840 point he can. And Trump's going to win this one too, 252 00:16:00,600 --> 00:16:03,639 and he's going to leave. And Powells already lost a 253 00:16:03,720 --> 00:16:07,320 huge amount of his reputation. And he never was very good. 254 00:16:07,360 --> 00:16:10,840 He's not an Alan Greenspan, he's not a McChesney Martin. 255 00:16:10,879 --> 00:16:13,200 He's not a Paul voter. He's not He just doesn't 256 00:16:13,279 --> 00:16:16,240 understand this stuff, but a lot of people don't. But 257 00:16:16,320 --> 00:16:18,679 he should have just said, Okay, I'm out of here. 258 00:16:18,759 --> 00:16:21,360 You can replace me. But he didn't. He wanted to 259 00:16:21,360 --> 00:16:25,000 fight Trump, as so often happens, and it makes no sense. 260 00:16:25,440 --> 00:16:28,840 Speaker 1: I was talking to Larry Lindsay, who, of course, you know, 261 00:16:28,960 --> 00:16:32,639 he was on the Federal Reserve many years ago. But 262 00:16:33,360 --> 00:16:36,080 I just am impressed by him as an economist, and 263 00:16:36,240 --> 00:16:39,639 he was telling me that when he was on the Fed, 264 00:16:40,080 --> 00:16:43,120 it was the Federal Open Market Committee. The twelve members 265 00:16:43,120 --> 00:16:46,000 that vote were a combination of some bankers and some 266 00:16:46,120 --> 00:16:50,519 business people and some economists and just a variety of 267 00:16:50,639 --> 00:16:54,960 smart people that were there to vote on FED policy. 268 00:16:55,519 --> 00:16:59,440 But he said that since then they have decided that 269 00:16:59,720 --> 00:17:02,879 every one of the members of the Federal Open Market 270 00:17:02,919 --> 00:17:06,480 Committee must be economist and they must be from one 271 00:17:06,519 --> 00:17:11,440 of four elite business schools. And that surprised me. 272 00:17:12,200 --> 00:17:14,119 Speaker 2: Larry's a good guy. Larry's a good guy. 273 00:17:14,000 --> 00:17:17,319 Speaker 1: Smart guy. So it seems like the problem is that 274 00:17:17,400 --> 00:17:21,359 you've got twelve people with all the same background and 275 00:17:21,440 --> 00:17:24,559 the same education, so there's no diversity of opinion. 276 00:17:25,039 --> 00:17:27,279 Speaker 2: Well, it is a problem, but that's not the real problem. 277 00:17:27,319 --> 00:17:27,519 Speaker 1: You know. 278 00:17:27,599 --> 00:17:30,680 Speaker 2: The way you run monetary policy is doing a price 279 00:17:30,720 --> 00:17:33,519 reap rule. Do you care how much what the quantity 280 00:17:33,559 --> 00:17:36,920 of money is? Not? Really, no, no one does. Do 281 00:17:36,920 --> 00:17:38,160 you care what prices are? 282 00:17:38,640 --> 00:17:40,960 Speaker 1: Of course, now you got my attention. 283 00:17:41,119 --> 00:17:44,400 Speaker 2: Of course you do. If you have a price function, 284 00:17:45,039 --> 00:17:48,000 you want to have a price rule for monetary policy. 285 00:17:48,640 --> 00:17:53,000 Very simply, monetary policy should be run to stabilize prices. 286 00:17:53,039 --> 00:17:56,440 And this is exactly what Paul Volker did, what McChesney 287 00:17:56,480 --> 00:18:01,440 Martin did, what Alan Greenspeed did. Is they when prices 288 00:18:01,519 --> 00:18:04,880 started rising in the marketplace, they would sell bonds in 289 00:18:04,920 --> 00:18:08,160 the open market and take down the monetary base until 290 00:18:08,200 --> 00:18:11,720 those prices stop rising. If they were falling too rapidly, 291 00:18:12,039 --> 00:18:14,400 they would buy bonds in the open market, increase in 292 00:18:14,440 --> 00:18:17,720 the monetary base until they stopped falling. In this way, 293 00:18:17,759 --> 00:18:21,559 they stabilized the price level. Now, they used an indicator 294 00:18:21,640 --> 00:18:24,920 back then, which was the spot commodity pricing. Next, that's 295 00:18:24,960 --> 00:18:27,240 what Paul Wolker did. I wrote this up in the 296 00:18:27,279 --> 00:18:31,000 Wall Street Journal in nineteen eighty two of a long 297 00:18:31,039 --> 00:18:33,720 session I spent with Paul. But that's the way the 298 00:18:33,759 --> 00:18:36,160 thing was operated. It's just like the gold standard was 299 00:18:36,200 --> 00:18:39,200 operated under Britain, or the gold standard was operated in 300 00:18:39,240 --> 00:18:44,839 the US before nineteen thirteen, and it stabilized prices beautifully. 301 00:18:45,759 --> 00:18:48,119 Then these guys come in there, the monitors come in there, 302 00:18:48,119 --> 00:18:49,920 and the Canathians come in there, and they don't know 303 00:18:50,000 --> 00:18:52,400 a price roll. And so what they do is they 304 00:18:52,440 --> 00:18:55,240 expand that monetary base to where we have the inflation 305 00:18:56,440 --> 00:18:59,880 of the Joe Biden era. I mean, this guy doesn't 306 00:19:00,279 --> 00:19:05,440 economic growth doesn't cause inflation. Hell, how does having two 307 00:19:05,519 --> 00:19:09,400 more people working cause inflation? It makes no sense. So 308 00:19:09,519 --> 00:19:11,559 that's where we are in the policy, and these guys 309 00:19:11,559 --> 00:19:15,519 don't get it, and they're running monetary policy badly, and 310 00:19:15,880 --> 00:19:17,200 the consequences are clear. 311 00:19:17,680 --> 00:19:20,680 Speaker 1: Well, monetary policy is one thing to run, But what 312 00:19:20,799 --> 00:19:24,039 about running the budget for your remodel of your office 313 00:19:24,039 --> 00:19:26,920 building the better Reserve? What is it a billion and 314 00:19:26,960 --> 00:19:29,880 a half or something. They're way over budget by hundreds 315 00:19:29,920 --> 00:19:33,279 of millions of dollars. I mean that's not a good look. 316 00:19:33,680 --> 00:19:36,279 Speaker 2: Well, that's you know, that just shows the That just 317 00:19:36,319 --> 00:19:41,759 shows the the the the k internally on personal stuff. 318 00:19:42,599 --> 00:19:46,200 I mean, you know that should not happen anywhere. You shouldn't. 319 00:19:46,480 --> 00:19:49,359 You shouldn't have the fanciest desk in the world by 320 00:19:49,400 --> 00:19:53,599 the Post Office director. I mean, you know, and these 321 00:19:53,599 --> 00:19:57,240 guys just they can't stop themselves. They just didn't. 322 00:19:57,960 --> 00:20:01,279 Speaker 1: Yeah, you want your pilot to have some gray hair, 323 00:20:01,319 --> 00:20:03,000 looks like they've been doing it for a while, and 324 00:20:03,160 --> 00:20:06,759 or responsible. And you want your that the leader of 325 00:20:06,839 --> 00:20:10,039 the Federal Reserve and the Federal Open Market Committee to 326 00:20:10,039 --> 00:20:13,960 look like they're financially well, maybe a little frugal, at 327 00:20:14,039 --> 00:20:17,839 least have some financial management of their own finances. 328 00:20:18,119 --> 00:20:21,000 Speaker 2: Yeah, and to be and to be and to be understated, 329 00:20:21,079 --> 00:20:23,759 not overstated. You don't want to don't want them to 330 00:20:23,759 --> 00:20:27,960 wear pink suits and flying hovercrafts. You know, you don't 331 00:20:28,000 --> 00:20:32,079 want them to be show ponies. You want them to 332 00:20:32,119 --> 00:20:35,599 be you know, want them to be mature gravitas stage 333 00:20:36,119 --> 00:20:39,359 and you know Powell has that look. But God, this 334 00:20:39,519 --> 00:20:43,240 building thing three point one? What is it? Billion? You know, 335 00:20:43,319 --> 00:20:46,559 that's that's a lot of money. I mean, you know, God, 336 00:20:46,880 --> 00:20:47,599 and for nothing? 337 00:20:48,000 --> 00:20:51,599 Speaker 1: What do you make art of the annual event at 338 00:20:51,680 --> 00:20:55,720 Jackson Hole, Wyoming for the Federal Reserve? Is this something 339 00:20:55,839 --> 00:20:58,000 that you pay close attention to? 340 00:20:58,880 --> 00:21:01,440 Speaker 2: No, I don't. I don't take it seriously. I've never gone, 341 00:21:01,480 --> 00:21:04,640 and myself, I don't take it seriously. Just a bunch 342 00:21:04,640 --> 00:21:07,359 of people getting together pass some little gas that sipping 343 00:21:07,440 --> 00:21:10,680 coffee and smoking cigarette and they do it in a 344 00:21:10,720 --> 00:21:14,039 lovely place where they can chase girls. Who knows what 345 00:21:14,119 --> 00:21:17,000 the hell these people do, But there's nothing serious coming 346 00:21:17,039 --> 00:21:18,000 out of those meetings. 347 00:21:18,319 --> 00:21:20,799 Speaker 1: Well, from afar, it looks like it's a pretty nice boondog, 348 00:21:21,079 --> 00:21:25,279 especially August in Washington, d C. The swamp. I mean, 349 00:21:25,319 --> 00:21:27,799 somebody figured out, so let's get out of here and 350 00:21:27,880 --> 00:21:30,880 go to Wyoming and have a nice August. 351 00:21:31,319 --> 00:21:34,160 Speaker 2: Yeah. Well, and Jackson Hole is cooler. You know, it's 352 00:21:34,200 --> 00:21:36,319 a fairly I mean nice place. You can spend a 353 00:21:36,319 --> 00:21:38,359 lot of money. You have a lot of business people there, 354 00:21:38,720 --> 00:21:40,920 you can get hookups and all sorts of stuff. And 355 00:21:41,200 --> 00:21:44,960 it's like the World Forum, you know, in Davos, and 356 00:21:45,039 --> 00:21:48,279 it's the same damn thing. It's just you know, and 357 00:21:48,799 --> 00:21:50,680 it's a waste of money and a waste of time. 358 00:21:50,720 --> 00:21:53,160 But they get to hang around with each other, and 359 00:21:53,200 --> 00:21:57,519 it's it's sad because yeah, and if you look at 360 00:21:57,559 --> 00:22:01,200 the number of economists employed at the I think it's 361 00:22:01,200 --> 00:22:04,960 something like three hundred PhDd economists of the FED. Hell, 362 00:22:05,400 --> 00:22:09,039 I could run fifty countries with twenty economists all the way. 363 00:22:09,240 --> 00:22:12,279 Not just I mean, what are these people doing. They're 364 00:22:12,359 --> 00:22:16,000 just there's just there's just creep all over the place, 365 00:22:16,240 --> 00:22:20,039 expansion of factor, you know, creep, and it's it's just, 366 00:22:20,799 --> 00:22:23,119 you know, it's because there is no discipline on these people. 367 00:22:23,519 --> 00:22:26,200 There will be discipline shortly. Trump will put it in 368 00:22:26,240 --> 00:22:28,079 and he'p they'll get them disciplined. 369 00:22:28,319 --> 00:22:32,519 Speaker 1: Well, this particular FED was clearly too late, as Donald 370 00:22:32,559 --> 00:22:35,880 Trump calls J. Powell, but they weren't too late on 371 00:22:36,279 --> 00:22:40,240 boosting and raising interest rates when inflation started to take 372 00:22:40,279 --> 00:22:44,640 off back in twenty twenty one, and even Janet Yellen, 373 00:22:44,680 --> 00:22:48,599 who was the Treasury Secretary at the time former FED chairman, 374 00:22:49,000 --> 00:22:53,079 said that inflation was transitory. They missed it totally. 375 00:22:53,200 --> 00:22:57,000 Speaker 2: Even within the Yeah, even within their faulty model of 376 00:22:57,039 --> 00:22:59,880 how they do monetary policy, which Janet Yellen doesn't have 377 00:23:00,200 --> 00:23:04,200 stand either. Even within that framework, they were wrong. So, 378 00:23:04,279 --> 00:23:06,200 I mean, it's wrong on top of the wrong, on 379 00:23:06,240 --> 00:23:08,599 top of the wrong. And you know what we should 380 00:23:08,640 --> 00:23:12,039 do is go back to a monetary standard where we 381 00:23:12,079 --> 00:23:14,839 have monetary policy, fix the price level and that's it, 382 00:23:15,599 --> 00:23:18,400 and just have stable prices for the next century. I mean, 383 00:23:18,680 --> 00:23:21,119 they go up and down, but you want to make 384 00:23:21,160 --> 00:23:26,359 sure there's no systematic systemic inflation. And they've got systematic 385 00:23:26,680 --> 00:23:27,839 inflation right now. 386 00:23:28,759 --> 00:23:33,160 Speaker 1: So Art, let's talk tariffs, because tariffs have a very 387 00:23:33,200 --> 00:23:40,880 bad history. Prices go up, production shortages, product shortages, labor loses. 388 00:23:42,200 --> 00:23:44,720 But is it inflation area and that seems to be 389 00:23:45,640 --> 00:23:48,200 there's no consensus on that in the economic world. 390 00:23:48,799 --> 00:23:53,599 Speaker 2: Yeah, that's true. Well, that's true, but it doesn't cause inflation. 391 00:23:53,720 --> 00:23:56,680 That's not what is that issue. We had a huge 392 00:23:56,720 --> 00:23:59,400 increase in tariffs with the Smooth Holly tariff in nineteen 393 00:23:59,400 --> 00:24:02,640 twenty nine nineteen thirty was signed into law in June, 394 00:24:03,079 --> 00:24:07,400 and prices fell. Like Matt. The problem with tariffs as 395 00:24:07,440 --> 00:24:10,720 they caused an economy to stumble and to fall and 396 00:24:10,759 --> 00:24:15,480 to go into into recession. We had tariffs put on 397 00:24:15,519 --> 00:24:17,640 when I was in the White House from nineteen seventy 398 00:24:17,680 --> 00:24:20,680 to seventy two. You know, you had the Camp David 399 00:24:20,720 --> 00:24:23,000 thing with Nixon who put on a ten percent import 400 00:24:23,119 --> 00:24:26,880 surcharge and then had the job development credit that excluded 401 00:24:27,279 --> 00:24:31,400 foreign made capital from getting the development credits. So you know, 402 00:24:31,480 --> 00:24:35,359 and inflation went down, not up, but the economy crept out, 403 00:24:35,440 --> 00:24:39,400 It just did badly. The problem with tariffs is they 404 00:24:39,480 --> 00:24:42,799 hurt the economy, the real economy. That's the real problem. 405 00:24:43,480 --> 00:24:46,480 And if you look at it, you know right now 406 00:24:46,680 --> 00:24:50,839 tariffs are very our attacks on a very small portion 407 00:24:50,920 --> 00:24:55,559 of total input in the US. I mean, imported goods 408 00:24:55,559 --> 00:24:59,039 are about ten percent of GDP. It's a tax on 409 00:24:59,599 --> 00:25:04,160 usually on extremely important products, things that we don't produce here. 410 00:25:04,240 --> 00:25:08,039 So therefore it's bad that way. The gains from trade, 411 00:25:08,119 --> 00:25:12,079 the Ricardian and the Alexander gains from trade are renowned 412 00:25:12,519 --> 00:25:15,759 and go back to literature on them, goes back centuries literally, 413 00:25:16,240 --> 00:25:19,880 So tariffs are in general a very bad way of 414 00:25:20,759 --> 00:25:25,160 controlling the economy that now Trump is using these tariffs 415 00:25:26,119 --> 00:25:31,319 very effectively to negotiate other things. He had five deals 416 00:25:31,359 --> 00:25:34,559 he did in his first term, one with Japan, one 417 00:25:34,599 --> 00:25:39,160 with South Korea, Brazil, and one with Columbia, and of 418 00:25:39,160 --> 00:25:42,359 course USMCA was the fifth one, which is a big deal. 419 00:25:43,200 --> 00:25:46,240 And in all of those cases he reduced tariffs. Is 420 00:25:46,319 --> 00:25:50,400 the final stage. He threatened higher tariffs, and then when 421 00:25:50,599 --> 00:25:53,240 push came to shav he lowered tariffs and we got 422 00:25:53,279 --> 00:25:57,000 great deals. So I am expecting Trump to use tariffs 423 00:25:57,039 --> 00:25:59,440 in the same way, whether it be with the Ukraine 424 00:25:59,559 --> 00:26:03,440 Russian whether it be with China and Taiwan, whether it 425 00:26:03,519 --> 00:26:07,079 be with the Gaza, whatever. He's going to use tariffs 426 00:26:07,079 --> 00:26:11,319 to negotiate other things like peace and also to ultimately 427 00:26:11,359 --> 00:26:14,599 bring down tariff barriers. That's my story. I'm going to 428 00:26:14,640 --> 00:26:17,599 stick to it. I've had a number of conversations with 429 00:26:17,680 --> 00:26:20,799 the President about this, and I'm still very much of 430 00:26:20,839 --> 00:26:24,519 the view that ultimately Donald Trump is a free trader. 431 00:26:25,160 --> 00:26:27,960 That's where he's going to come out. And so I'm 432 00:26:28,000 --> 00:26:30,880 not I mean, I'm scared to death about it. I'm 433 00:26:30,920 --> 00:26:33,960 nervous as all hell, and I could never negotiate this stuff. 434 00:26:34,640 --> 00:26:36,400 But he's done a good job. Yeah. 435 00:26:36,480 --> 00:26:40,480 Speaker 1: Donald Trump definitely likes to take risks, no question about it. 436 00:26:40,799 --> 00:26:44,640 Speaker 2: Yeah, that's him he is, and it works. I mean, 437 00:26:44,680 --> 00:26:46,880 look at what he's doing with Russia and Ukraine. It's 438 00:26:47,000 --> 00:26:51,440 amazing company. It's amazing. He's done five other peace deals 439 00:26:51,480 --> 00:26:56,880 already in office. You know, he did India, Pakistan, he 440 00:26:56,920 --> 00:26:59,640 did two of them in Africa. What the hell is this? 441 00:27:00,880 --> 00:27:03,079 I mean, he's as good as Reagan on this stuff. 442 00:27:03,319 --> 00:27:07,000 You know, remember when Reagan bombed Libya and Kadafi's tent, 443 00:27:07,160 --> 00:27:10,079 and you know, Reagan then threatened a round with you 444 00:27:10,119 --> 00:27:12,319 know when when he took the oaths of office, they 445 00:27:12,319 --> 00:27:15,200 sent back the hostages. You know, Trump has done the 446 00:27:15,240 --> 00:27:19,079 bombing of a rod here, he to stop the nuclear facilities. 447 00:27:19,359 --> 00:27:23,640 He is doing an amazingly wonderful job. You may not 448 00:27:23,839 --> 00:27:26,400 like him, but you know, being president is not being 449 00:27:26,400 --> 00:27:29,200 a popularity condes. Is doing the right thing, and this 450 00:27:29,279 --> 00:27:31,920 guy's just doing it all the time the right way. 451 00:27:32,319 --> 00:27:37,319 I'm really impressed by all the things Trump's doing. Yeah, 452 00:27:37,519 --> 00:27:39,440 I still grouse about him from time to time. He 453 00:27:39,480 --> 00:27:43,160 says stuff sometimes it drives me nuts. But he is 454 00:27:43,920 --> 00:27:48,279 doing a lot of things, accomplishing a lot of things exactly. No, no, 455 00:27:48,519 --> 00:27:51,519 And I can understand people not like you. He's a bully, 456 00:27:52,119 --> 00:27:54,119 he is a believe, he's a CEO. He tells you 457 00:27:54,200 --> 00:27:56,720 what to do, he doesn't ask you, and you know 458 00:27:56,759 --> 00:27:59,720 all that stuff. But damned if he doesn't get stuff done. 459 00:28:00,480 --> 00:28:02,079 And I love the stuff done. 460 00:28:02,279 --> 00:28:03,640 Speaker 1: I don't know how this is going to work out. 461 00:28:03,799 --> 00:28:07,519 I hope he's successful. But you know, during the last 462 00:28:07,599 --> 00:28:12,759 four years, Biden and Kamala did they lift one finger 463 00:28:12,880 --> 00:28:18,240 towards peace. Nothing, Never tried to pull the parties together 464 00:28:18,279 --> 00:28:19,759 to see if they can put an end to the war. 465 00:28:20,279 --> 00:28:22,440 And I don't know if Trump's going to be successful, 466 00:28:22,480 --> 00:28:26,279 but it looks he's He's making more progress in a 467 00:28:26,319 --> 00:28:28,640 couple of weeks than they made in four years. 468 00:28:28,880 --> 00:28:32,039 Speaker 2: I know, I couldn't. I couldn't imagine how Kamalin and 469 00:28:32,160 --> 00:28:34,759 Joe didn't solve it. They worked so hard at it. 470 00:28:35,119 --> 00:28:40,279 Not what crazy people and Gavin newsom out there in California. 471 00:28:40,519 --> 00:28:43,799 Oh my lord, And what's what's happening with mom? Donnie? 472 00:28:44,480 --> 00:28:48,680 You've got him coming in shortly? Whoa thank God for 473 00:28:48,839 --> 00:28:51,319 thank God for Trump? And you know, if Kamala a 474 00:28:51,400 --> 00:28:54,559 Harris had won, I think we'd be in real trouble today. 475 00:28:54,680 --> 00:28:57,359 It would be a much worst world. We've got a 476 00:28:57,400 --> 00:28:59,759 great shot at prosperity in the next three and a 477 00:28:59,799 --> 00:29:02,839 half years, four years, God knows how long this thin 478 00:29:02,880 --> 00:29:04,720 could last. I'm really excited. 479 00:29:05,400 --> 00:29:09,000 Speaker 1: Well I am too, Art, and I am such a 480 00:29:09,039 --> 00:29:12,920 fan of you because you're so right. So I hope 481 00:29:12,920 --> 00:29:16,680 you are definitely right and we will have lots of 482 00:29:16,680 --> 00:29:20,519 prosperity ahead. Thanks for taking the time for us today, 483 00:29:20,640 --> 00:29:23,680 and I hope you can carve out some time for 484 00:29:23,759 --> 00:29:27,200 us in the future as well. But it's absolutely fun 485 00:29:27,400 --> 00:29:30,839 talking to you, doctor Art Laffer. Thank you so much. 486 00:29:32,720 --> 00:29:35,880 So that's it for today. This is a little different format, 487 00:29:35,920 --> 00:29:39,200 interview format, if you will. We're recording this long before 488 00:29:39,200 --> 00:29:42,880 the market closes on this Friday, so have yourself a 489 00:29:42,920 --> 00:29:45,960 wonderful weekend. We'll be back on Monday. Hope to see 490 00:29:45,960 --> 00:30:07,519 you then.