Bloomberg Talks
00:02:16 · S0, Kevin Hassett, S2
[00:02:16] S0: Are going up. [00:02:17] S1: But in the aggregate, if you're an economist and you're honest about the data, you look at the things like what's the bottom line, what's happening to aggregate consumption. It's up a trillion dollars since President Trump took office, and that's after adjusting for inflation. Now, you say, aren't you doing the same thing that Biden did? No, let's make it clear. Biden did something that was dishonest and illogical. He was saying the economy's great when we had 20% inflation, real incomes were dropping about $ 3, 000 per family. He was saying the economy is great, and the economy wasn't. We're saying that the economy is great, and the economy is. It's a big difference. [00:02:48] S0: What is your response, though, Director Hassett, to the Fed chair saying that inflation is elevated, but then a lot of people, you said so yourself, that it's just a blip. How do you square those two? Because it's not just a blip. [00:03:00] S1: Well, we'll see. We'll see. So again, if the October number comes in at the Cleveland Fed's forecast, then we'll have August and July and June and October all running with inflation at about 2%. And if that's true, then the September number will be viewed as a blip. But if October comes out really high, then I think the Fed would probably appropriately add. [00:03:23] S2: Director Hassett, again, you know, this sort of idea that inflation isn't a problem. You've seen sentiment survey after sentiment survey of consumers really feeling it and being concerned that, yes, inflation has slowed.
00:03:23 · S2, Kevin Hassett
[00:03:23] S2: Director Hassett, again, you know, this sort of idea that inflation isn't a problem. You've seen sentiment survey after sentiment survey of consumers really feeling it and being concerned that, yes, inflation has slowed. [00:03:35] S1: You're misrepresenting what I said. I'm not saying that inflation isn't a problem. Okay, well, if it still is a problem. Incomes are growing faster than inflation. Real consumption is up. Real consumption cannot be up if people aren't better off. [00:03:48] S2: Director Hassett, though, we have seen personal income growth. [00:03:51] S1: So you're looking only at one part of the equation. You're looking at just the prices. What about the incomes? [00:03:55] S2: Let's talk about it then. Personal income growth, wages and salary are slowing. They're currently below the rate of inflation right now. Consumer spending holds up in those circumstances. [00:04:04] S1: For the last couple of months. [00:04:05] S2: Okay, so that is a blip, too.
00:04:05 · S2, Kevin Hassett
[00:04:05] S2: Okay, so that is a blip, too. [00:04:06] S1: It was actually the October. No, I mean, again, where does consumption come from? Consumption comes from confidence that people aren't going to lose their jobs. We've got initial claims the lowest they've ever been. It comes from salary increases that people get. We've got, you know, we just got the updated Steve Moore numbers on what's going to happen with census and the census data when we get the census are going to say that real incomes are up about $ 2, 500 by the end of this year. That's consistent with the consumption data. So banks are telling us that people are not running runaway debt, that they're consuming optimistically. And again, with real consumption in the GDP number up a trillion dollars, that's like the whole picture. You're just talking about the price picture, but there's the income and the confidence picture as well. [00:04:53] S2: Director Hassett, what is it then that's contributing to a short-term inflation blip, and what gives you the confidence that it will fade away? [00:04:58] S1: Energy prices, of course. Energy prices have been up. because President Trump took bold action to not let the Iranians have a nuclear weapon and shudder to think what would have happened if they had. And the threats that they were making to our negotiators before this action began were really chilling. And so the president had to take action. And I think that really any patriotic president would have taken the same action if given the intel that he had.
00:04:58 · Kevin Hassett, S2
[00:04:58] S1: Energy prices, of course. Energy prices have been up. because President Trump took bold action to not let the Iranians have a nuclear weapon and shudder to think what would have happened if they had. And the threats that they were making to our negotiators before this action began were really chilling. And so the president had to take action. And I think that really any patriotic president would have taken the same action if given the intel that he had. [00:05:24] S2: The reports do suggest that potentially post-election, that this is a president who will continue to take action and take action in Iran. Should we anticipate then that this blip does continue for some time if, again, reports suggest that more action and potentially an increase in the warfare there in the Middle East might continue post-midterms? Director Hassett.
00:05:24 · S2, Kevin Hassett, S0
[00:05:24] S2: The reports do suggest that potentially post-election, that this is a president who will continue to take action and take action in Iran. Should we anticipate then that this blip does continue for some time if, again, reports suggest that more action and potentially an increase in the warfare there in the Middle East might continue post-midterms? Director Hassett. [00:05:46] S1: You know, I can't forecast what's going to happen to the war. I'm just a dichotomist. But what I can say is that the U.S. Navy has done a fantastic job at helping ships get through the straits. The Gulf countries are building backup pipelines to go around so that the Iranians continue to cause trouble, that it'll matter less and less. U.S. refineries are trying to increase capacity. We have plenty of crude, not enough refined product. And the Europeans, we just did a negotiation. The Europeans are releasing some of their strategic reserves of refined products. And so we're doing everything we can to minimize the disruption. And I think that the new infrastructure that's being built in the Middle East is going to make it hard for the Iranians to hold the world hostage again anytime soon. [00:06:30] S0: Director Hassett, let's go to the Fed, because yesterday the Federal Reserve held rates steady, and among those who dissented in favor of a hike is Governor Lisa Cook. So she directly opposed the administration's preferred direction for monetary policy. In your view, how can the White House defend the Fed's independence while pursuing the removal of Cook?
00:06:30 · S0, Kevin Hassett, S2
[00:06:30] S0: Director Hassett, let's go to the Fed, because yesterday the Federal Reserve held rates steady, and among those who dissented in favor of a hike is Governor Lisa Cook. So she directly opposed the administration's preferred direction for monetary policy. In your view, how can the White House defend the Fed's independence while pursuing the removal of Cook? [00:06:48] S1: Well, as you know, I'm part of a commission that has been carefully crafted after with reference to the Supreme Court ruling that is providing a report to the president on this matter. And so, therefore, at this time, I'm not able to comment on it. [00:07:01] S2: I do just wonder if you can't comment on that specifically. If sort of the approach has changed, though, if we could talk about overall approach, because I know you and I have talked before, Director Hassett, about this being a matter for law enforcement. Just the existence of this very council, does that mean that the White House and how they're viewing this matter has slightly changed?