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Art Laffer: This is a huge success for America - YouTube
Channel: Fox Business
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joining us now we're going to have some
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fun here we have art laffer former
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reagan economic advisor and presidential
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medal of freedom recipient and author of
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taxes have consequences
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and kevin hassett former council of
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economic advisors chair
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and author of the century's most
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important book at least so far it's
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called the drift get this stopping
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america's slide to socialism my favorite
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book
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gentlemen welcome on a friday um art
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laffer i go to you
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i see the stock market breathing a sigh
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of relief that joe mentioned they're
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taking the over on mansion as i am and
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there aren't going to be any more tax
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hikes this whole reconciliation bill is
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dead in the water in fact we're not
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going to get a trillion dollars of
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spending we're not going to get a
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trillion dollars of taxes on successful
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individuals on small businesses on large
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corporations it's just my thought
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it's a supply side thought
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interpretation of the stock market but
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what do you think about that idea
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well well i am so excited that he's not
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going to do it but very seriously he's
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been keeping me on pins and needles for
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so long larry i'm exhausted but i'm
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really pleased with the way he's come
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out and that's just not the way i mean
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this it did this man this mansion thing
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is a huge success for america uh and for
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the democrats by the way and the
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republicans it's great for everyone and
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schumer should just pull the thing and
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biden should just give up and let's get
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going and getting america strong again
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joe manchin uh blessed his heart has a
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certain hamlet quality to him i will
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agree with that oh it doesn't
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happen it does i think it was hamlet but
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it scares me
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i mean i just worry
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kevin are you going to take the over on
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mansion or are you still on pins and
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needles as arthur is
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well well you remember from working with
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me in the white house larry that i'm
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kind of a neurotic guy right and so i
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tend to worry about what might go wrong
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and and
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and the fact is that so i was up on the
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hill meeting with senior republicans
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today and they're still worried and and
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the other thing to keep in mind is that
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there's gonna be like a lull in
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inflation in the next report because gas
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prices are going down a lot and so the
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top line cpi next time is probably going
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to be like a 0.3 or a 0.4 and so manchin
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might point at that and use it as an
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excuse to sign off on the tax hikes the
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thing the final thing to say is that we
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are clearly in a recession you know i've
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been saying it for months but it's clear
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with the industrial production and the
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negative gdp now and the fact that we're
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joe manchin away from having tax hikes
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in a recession just shows how
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economically illiterate and destructive
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these people are i just can't believe
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like everybody could look at the data
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and say geez it's not a good time for a
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tax hike and yet we're joe manchin away
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from having a really really destructive
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economic policy at exactly the worst
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time well that's the point i understand
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that um
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i probably have more confidence in him
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than than some other people do i know
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him pretty well but i acknowledge the
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the risk but kevin i i don't think you
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know the core inflation rate is actually
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creeping up excluding food and energy
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and you've got things like that the
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cleveland federal reserve tracker where
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they take the top eight percent and the
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bottom eight percent out and that uh you
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know the rest of the eighty percent the
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bulk of prices are rising now seven
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percent in other words i think the
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weight of the evidence is still going to
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be pretty bad and anyway you know what
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i think joe manchin knows exactly what
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he's doing he knows that schumer wants
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the august recess to begin august 5th
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and you're not going to get any of these
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numbers until the week after and the
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week after that i might be wrong lord
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knows i could easily be wrong but i
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don't think so arthur do you think we
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are in a recession yourself kevin does i
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think we're at least in the front end uh
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what say you
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well the definition of a recession is
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two quarters down that's the traditional
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definition now they all have all this
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add-on stuff but bottom line we've had
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the first quarter was way down and the
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estimates of this quarter that's already
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closed by the way it's down way down too
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so yes we're in the ritz of a recession
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and it started quite a while ago larry i
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mean the downturn started in december of
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last year and it's been going and we've
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now got two quarters down which i would
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say is traditionally the definition of
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recession but i want to ask both of you
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kristin cinema i haven't heard anyone
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mention her i thought she was really
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opposed to the tax increases as well i
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think she is i don't know what kevin
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thinks i think she is she's taken over
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in fact
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people were talking about that today on
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the hill uh about how she's also uh
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someone who's not so it's not just
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manchester united
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she's more reliable on the taxes i think
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than perhaps joe is all right i mean i
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think you know joe is so it's not just
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joe it's not just joe
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there may be some closet people too good
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and there may be a rump uh a rump caucus
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in the house although in the democratic
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party but i wouldn't count on that but
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can i um just on this point about
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recession gentlemen um
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if joe biden were here he would say two
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things kevin hassett he would say number
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one look at all this job creation
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how can these crazy republicans think
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we're in a recession and number two
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as he did say and he's still saying in
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saudi arabia or wherever he may be at
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this particular moment
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you know this inflation problem is all
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behind us in fact i think he used the
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word transitory again i hadn't heard
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that word in a while i missed it so much
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but he would say look at all this job
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creation and uh this inflation is
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yesterday's news kevin hassett
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right and but right after that he would
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say repeat the line right
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so the problem with that with what joe
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biden is saying is the transitory
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transitory has been it's been going on
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for a long time uh transitory right but
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but but you know our art taught us both
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a long time ago to study history uh and
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uh one of the things i think the laver
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curve obviously came from studying
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actual data and history and of course a
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little bit of theory but but the point
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is if you look at it you know this idea
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that the labor market is strong and so
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it can't really be recession or the wall
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street journal there was this really
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silly article about how it's going to be
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a different kind of recession because
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the labor market's strong if you go back
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and look at the start of just about
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every recession initial claims for
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unemployment insurance were at about 250
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steady at 250. and then they got worse
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but 250 is basically what you look for
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in the labor market for a recession
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signal and and initial claims in the
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last six weeks have gone from 200 to
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244. and so the initial claims are
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actually looking exactly like a
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recession signal as well and so we know
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that inflation's not uh transitory and
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we also know that the labor market is
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now starting to signal recession along
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with every other piece of data
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um arthur in your honor we have your
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chart
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uh which i saw in the um unleashed
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prosperity bulletin today of the fed's
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balance sheet all the cash that bought
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the bonds and really uh when you look at
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that thing they're still close to nine
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trillion dollars they haven't really
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brought
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any of that excess cash down now my the
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reason i'm raising that is
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while i know gasoline prices will bring
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down the uh top-line cpi next month the
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fact is how certain can we be
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that the monetary part of the inflation
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which is the biggest part i think or
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anyway is over
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how i mean they hadn't really done
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anything they're just starting to let a
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few things run off they still own all
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those mortgages and they still own all
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those treasuries so what's up with that
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yeah well let me if i can just comment
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on a couple of things last month's uh
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labor report you know the two 375 000
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jobs establishment survey if you look at
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the household survey which is also a
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component of that it was down 300 000 so
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we have very conflicting evidence with
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regard to the labor market and to to to
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kevin's point of the of the next monthly
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number being down fairly substantially
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do remember there's a number being
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dropped off the index as well 12 months
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ago and that number is very low as well
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so we're starting with a period where
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the numbers being dropped off the
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measure are very low which gives it a
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real upward bias and i can i i can quote
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kevin here where he said you really have
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to look at the rate of change and i look
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at the four
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uh the the quarterly rate of change of
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inflation and the yearly and the
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quarterly is always above the yearly
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which is a sign of increasing inflation
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not declining or capping or topping out
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inflation
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so um in terms of your own chart we can
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put it back up on the full screen don't
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you think they got more work to do on
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that side i mean
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it's not so much pegging interest rates
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they got to get rid of the excess cash
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it's the excess cash that they use to
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buy all the bonds from the deficit
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spending of the unnecessary democratic
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rescue package that's the principal
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cause of the inflation
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or one of them
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it's kid it's scary it's very scary i
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mean it's gone up fourfold larry i mean
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not just 10 7 9
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it's gone up 300 percent increase and
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that's huge i mean it's just enormous
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and i i don't know what they can do
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about this it's already out what can
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they do they've got to let interest
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rates stop trying to control interest
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rates and let interest rates seek their
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own level and only in this way larry can
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they have money tight enough so that
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with tight money and
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tax cuts we can have an increase in the
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supply of goods and services and a
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reduction in the quantity of money and
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those two together are the only way i
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know of of topping out on inflation and
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bringing it down it just doesn't happen
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otherwise kevin um give you the last
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word last 30 seconds
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how long is this going to take the fed's
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inflation target is 2
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they are nowheres near it and even if
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gasoline prices bring the top-line cpi
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down next month they're still not going
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to be anywhere near how long is this
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going to take kevin
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we're not going to be below 5 until say
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2025 okay this is what's inflation gets
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out of the bag like this that it's
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really hard to bring down you can do it
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as art said as you've said with supply
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side policies but we've got the sort of
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opposite right they're threatening tax
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hikes and we're we're not going to get
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supply side policies until after 2024
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election i would guess and so therefore
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the fed's going to work on its own and
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it's not and it's going to go way too
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slow you know you know the history of
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inflation is it goes down when the
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interest rate is higher than the
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inflation rate and look at what the
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inflation rate is right now and so they
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got a lot of work to do and they're not
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going to do it and so inflation is going
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to stay high i um
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i tend to agree with you buddy i don't
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think that's uh these financial markets
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have that yet discounted to be perfectly
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honest so that's food for thought for
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the next segment arthur laffer fabulous
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kevin hassett fabulous you both have a
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great weekend thanks for helping us on a
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friday
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