Moody's Talks - Inside Economics - Going Bananas over Affordability

Episode Date: November 15, 2025

The Inside Economics team records a rare Saturday podcast. They consider the fallout from the just-ended government shutdown on the broader economy and the economic data.  It’s not good, but it ended just before it did serious damage. The team also takes up the Trump administration’s pivot to addressing affordability, including scaling back tariffs, most important for the group, those on pasta and bananas.  And they introduce a new regular segment of the podcast – listener questions.  So, keep them coming.Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Marissa Dina Talley, Chris DeReedies. Hi, guys. Hey, Mark. Hi, Mark. Welcome back to the U.S. of A. Yeah, it's been a long week.

I was in Europe this past weekend, and that's why we're recording on a Saturday. Today is Saturday, November 15th. You know, obviously we record mostly, I don't, have we ever missed on a Friday? We have, I think. We have. We've done a couple Saturdays before, I think. Right. But I flew back yesterday, and I was pretty zonkered when I got off the plane. I'll tell you, though, it was one of, you know, it's a long plane ride back. I came back from Brussels and my seat's plug didn't work. So I only had two and a half out. Yeah, I don't know.

They tried to reset it. They couldn't reset it. So I only had like two and a half, three hours of time to work. So I watched two movies. Nice. You know, one was really just weird with the Joaquin. It's a Joaquin? Joaquin Phoenix?

Phoenix? Could that be? No, I think maybe, yeah, it was about this sheriff in New Mexico. It was just weird. It was just really weird. Do you know what the name of it was? It was the name of the town, enchilada, I want to say, but it wasn't enchilada. The other one was my son wanted me to watch, and I was, like, resisting, but here I had, I had, you know, what was I going to do, you know, because my bags were so full, I couldn't take any books or anything. I didn't have anything to read. So 28 weeks later, you know, it's a zombie movie. Yeah, that's a great movie.

I know. I know it was good. I really enjoyed it. Yeah, I really liked it. You know, I thought, I mean, I'm not a zombie movie fan, but I thought that, Matt, Matt, do you watch those kind of movies? Oh, I don't have. Matt's collier is joining us as well.

You know, obviously, our Moody's colleagues who joins us often. Do you, did you, have you seen that movie? Yeah, but I don't look for much more, it's like pandemic adjacent, right? I mean, there's a lot that's like kind of familiar about that. So I don't have much of an appetite for that kind of content. Yeah, right. I do recommend it if you're at all, you know, like science fiction or if you're okay, was slightly okay with zombie movies.

This one's a pretty good zombie. Anyway, yeah, I came back from Europe. You know what I found most interesting about, and in Europe, I met a lot of folks in the financial system. banking system, high-flying fintech companies. Also, a lot of government officials, particularly on the continent. And the one thing I came away with that was surprising was how relatively upbeat the Europeans were about the economy. Yeah. I mean, generally, I go to Europe. I come back depressed. This time I came back from Europe and I felt pretty good. And, you know, they were kind of patting themselves on the back in the way they handled the Trump tariffs.

know, that they, they did not retaliate, and the fallout so far on the economy from their perspective has been pretty modest. So they feel pretty good about that. So I found that interesting. I did kind of warn them that I didn't think the trade war was over. You know, we talk a bit, you know, remember there was those trade deals, the so-called deals? There was a commitment by Europe and UK and other countries to invest in the U.S. And not just business as usual investment, like incremental new investment. It's like a lot of money. Like I think in the case of Europe, it's like 600 billion euro or something like that

over a short period of time. And I said, and I asked them, well, where's that money going to come from, right? I mean, the governments there are no fiscal space. Maybe the Germans have a bit, but that's it. and you can't compel governments can't compel companies private companies do that so everyone kind of just shrugged and said you know it's not going to happen and then and i guess uh i think the warning there is i don't think president trump's going to forget those investments i think he's coming back so uh but uh that's that's something for another day but they were they were pretty

upbeat about things um you know at least compared to their expectations but anyway here we are And I guess the big news this week was the end of the federal government shutdown, the longest in history, I think 40-odd days. I thought Matt, maybe you can begin and give us a sense of what's the state of play now. I think government has reopened, but what's next? Do you have a sense of that? So speaking about the kind of macro effects of what's happening, we'll talk more about the logistics and when's all this economic data that hasn't been coming out going to come out. I think that's this group's, you know, towards the top of the list in terms of things we're focused on. In terms of, you know, the hit to the economy, what's the kind of post-mortem

of 42, 43-day government shutdown? Our expectation is that we do see some modest declines in real GDP that's going to be concentrated in this quarter. But kind of consistent with our broader theory is a lot of this stuff comes right back once the government reopens. So these federal workers that weren't paid, they're going to get paychecks, that's going to see, that's going to lead some catch-up. So by the first quarter, we see most of what can be recovered, be recovered, and GDP kind of returned to our trend growth, or where we thought it would be a couple months ago, to the extent that things can't be recovered. So the canceled flights that never happened, those vacations or those business trips, that is a hit, but generally

one we consider to be marginal. But there are sort of certainly different headaches and things to untangle, as I said, we'll get to specifically with government data and what that's going to look like over the next couple weeks. Okay. I know Justin, our colleague, Justin Begley, has done a lot of work here. I know you're a careful reader of his work. Do you recall what he's estimating the impact will be in Q4 on real GDP growth? I mean, do you have a sense of it?

I mean, my recollection, it's, you know, 5, 6, 7, 10th of percent of GDP off of Q4. that you get back in Q1 of next year and the net is basically a wash almost by Q2 of next year. Does that sound right? That's, I know it's less than a percent is the number I have in my head. I don't know that he's explicitly said that now

or written that or modeled that since the government has actually reopened and we know, you know, how long the shutdown was. But that's the ballpark I have, yeah. Okay, okay, good. So at the end of the day, from a macroeconomic perspective,

obviously a lot of hardship on the folks involved in government and military but from a macro economic perspective, not good, but, you know, not that big a deal at the end of the day. Is that a fair characterization? Yeah, which is kind of how these episodes get described at the onset. I mean, just over the past few years, unfortunately, a relatively recurring conversation that this isn't good, but it's not a cataclysm. And I guess if it, you know, we got right to the point where it could turn out to be a big deal, right?

I mean, the air traffic was now starting to just starting to be disrupted to a meaningful degree. And now it seemed like that was going to ramp up. The disruptions were going to ramp up pretty quickly. And then we were entering into, you know, the holiday season, Christmas, excuse me, Thanksgiving, and then Christmas and the holiday shopping season, which is critical to a lot of retailers. So it felt like we were kind of right on the cusp of this lasted another week or two and do real damage. But because it ended when it did, no arm, no foul, I guess, at the end of the day. But I guess the other thing to point out is this is a work in progress, isn't it?

I mean, they just, the Congress just kicked the can down the road here till, what, Chris, to the end of January. Is that right? January 30th. Yeah, that was going to be my point. You know, good for now, but, you know, is it over? I don't know. Yeah, I don't know. Politically doesn't feel like they're good, they want to go down. I mean, they made the, I think everyone made the point here, you know, so not sure. And some funding would be full. So it would be a, if it, if we're right back here in Jackson, it would be a partial shutdown on like a full, right? Yeah, because some of the veterans administration didn't, like military infrastructure spending, ag, I'm not sure what else, got appropriations for the year or something. Yeah.

Snap is through September. Oh, snap. Okay. That's because that's part of the Department of Ag, I think. Yeah. Yeah. Okay. All right.

Okay. Mercer, anything else to add on that, on the economic consequences? I guess just one more government shutdown. down for the record books for the record books yeah i mean did damage to the economic data which we're going to turn to next but on the macro side any anything else to add no it seems like people will be made whole at least federal workers will be and there was this you know there was a disruption to federal programs head start snap but it'll come back i mean there were reports that there were people taking out loans and, you know, having to bridge that gap. So some short-term pain

there for sure. But macroeconomically, it seems like not that huge of a deal in terms of GDP growth. So. Okay. All right. Let's talk about the economic data. That definitely got mangled here. Give us a sense of that, you know, what's happened and where we're headed here. Yeah. So, you know, the last data points we had on the labor market. were mostly from August, right? So the shutdown happened October 1. The employment data for the month of September would have come out then that week.

We didn't get that. But it was mostly collected and put in a format to be released. So the BLS announced yesterday that they're going to release the jobs data for September next Thursday. So next week. So we'll have a jobs. Thursday. And we're recording a podcast that day. So we will talk about- Is Dante going to

do? Does Dante know about this? Is he, we need to get Dante? Oh, okay. Dante's on. I think so. I think so. Okay. I think we have Alan Blinder too on that. And we'll have Alan Blinder, right. Professor from Princeton, a former vice chair of the Fed. Okay. Okay, well, good. So we'll get the September data. We're all set for that. Yeah. For September. Two months ago. October is, so the White House came out last week or this week and said there's going to be no data for October. I don't know if that's true.

I mean, there is a possibility we could get payroll data for October. I think it is highly unlikely we'll get CPI or household data because that's. That's collected during a very specific time in-person. Payroll data is a little different because companies can transmit that automatically, right? They have payroll records. They don't have to recall something. They can pull up their payroll records for that week that's being asked about. And it's usually done in an automated way through the Internet.

That unemployment rate comes from the household survey. Census Bureau employees call. up households and ask them about their activities during a specific week of the month. So it seems unlikely that they're going to do that retroactively. There would be a big possibility for this so-called recall bias where people don't remember their specific activities. You know, if I ask you, Mark, how many hours did you work during the week of October 15th? If I ask you that right now, do you remember? I don't even know where I was October. There you go. So probably unlikely we're going to get that.

And then for the consumer price index, you have people going out to stores physically to shop for a list of specific items during that week of the month. So that obviously, that ship has sailed, right? So I think there's going to be a lack of data for the month of October. And I haven't seen anything on other things like retail sales or stuff that the BEA collects. haven't seen anything on their website yet. The BLS does have on the front page of their website if you're interested. They have a link right at the top that says we're going to update this site with release dates as we figure them out. And right now, the only thing there is the September jobs data for next Thursday. So we'll have to wait and see. Yeah, it's going to go, October is going

to go down in history as having no history, I think. Yeah, it'll be a question mark. And then for November, we should get data. I think that'll be fine. Whether it comes out as scheduled during the first week of December, that's a question. It may not, but I think we will, I think we will get data. The question is, will we get data in time for the next Federal Reserve meeting? The FOMC meeting will be December 9th and 10th. Hopefully they have data for November going into that meeting. Okay. So we're going to get September data, September jobs data next this coming Thursday. We're probably not going to get all of the October jobs data, maybe payroll, but not household. Maybe. Yeah. Maybe. And we will likely get the November, we will almost certainly get the November data, but that survey was supposed to be done this week. That's right. it certainly didn't, so it's going to be a week late, at least a week late. Yep.

You know, which might mean the release of the data is a week late, right? Right, right. Okay. Okay, so in terms of the numbers themselves, for the September jobs numbers, what do you think based on the private sector data we look at the ADP data from the payroll processing firm ADP or the Revello Labs data, what do you think the September job number is going to be? So both September and October look similar if you average ADP and Revelyo, right? They look to be around zero, essentially.

So, yeah, and they track BLS. They have tracked BLS this year pretty well. So that's what I would expect. I would expect either a small positive or a small negative, something that's essentially zero in it looks like in both of those months. The one thing that could complicate things a little bit is the deferred resignations by the federal government. We talked about this last podcast, right? Because that's going to hit in October, isn't it, when those folks come off deferred resignation or actually off the payrolls of the federal government. So that feels like that October number could be weaker as a result of that.

mean, an actual outright, meaningful decline in overall jobs. Does that sound right? Yeah, that's true. So Revelyo said there were about 22,000 federal, 22,000 total government jobs lost in the month of October, which is basically what they said in September, too. They said 21,000. So it was kind of the same. So you didn't see much of a difference in their estimate of federal government or total government

in those two months, I don't know really what to make of that. So maybe... I think we learned when we interviewed their chief economist, Lisa Simon, said it's very lagged, right? Because they're scraping LinkedIn. And so it takes time for people to change their LinkedIn profile. So, you know, my guess is that's what's going on. That we'll see some pretty big downward revisions consistent with... That's true. They do revise their data. Right. They do revise their data. So I would expect... Yeah, my sense is, the September norm might come in a slightly positive based on ADP Revelyo, and then October meaningfully negative because of government.

It would have been negative even abstracting from government, but with the federal government loss is pretty big. And that brings us to November, and I don't feel like, it doesn't feel like anything is going to change, right, Matt? I mean, you've been looking at the UI claims and the warn notices and other things, any sense that the labor market is turning up again. I don't sense that. No, you could say that there's very little that suggests things are falling off a cliff,

but whatever the past three months has been, it seems like it's been more of that. They're just looking, isolated look at UI claims. More notices of the legal obligation firms have when they're announcing layoffs or planning layoffs over a certain threshold. That rose in October, but it's a pretty noisy series. We do get jumps like that. You start to see a sustained climb. then I think that's the kind of thing

we would look at to say. There's a lot more people without a job or they'll be soon looking for a job, but right now it's been much of the same. Okay. So we'd expect the November job numbers, at least at this point, based on what information we have

to be kind of flat too in terms of overall job growth. Right. Yeah, we're early. I mean, the big thing for forecasting us is that reference week that we alluded to earlier. It's to say, okay,

October's reference week or month one's reference week versus month two. reference week did we see in those particular months or those particular weeks from one month at the next that we see a jump we don't know what the reference weeks are right now so we don't know the best comparison and we're also not there yet in general so we usually we'd start to get a good sense about november job growth uh another week or so yeah okay but i mean cutting cutting through all the ups and downs and all around and there's a lot of ups and downs and

all around it just feels like the job market is at best flat you know going nowhere fast which suggests said unemployment might be ticking a little bit higher here. You know, there's no labor supply and that's limiting the ability of the economy to generate jobs, but even abstracting from that or accounting for that does feel like we're at a place where the unemployment rate will continue to notch higher. That'd be my sense. You agree, disagree, Matt? That's tough to argue. I mean, there's no signs of hiring. The other big important statistics around inflation, CPI, PPI, any sense there, Matt, as to what's going to happen? And no, I mean, had a ton.

So we got the September CPI because of, you know, legal obligations to adjust social security and other safety, other social programs. So BLS, during the shutdown, BLS staff was rushed back to work just to do that. There's no indication that they also worked on PPI data, so the producer price index for September. my gut, my expectation would be that that just isn't going to exist because it wasn't prioritized. We don't have September producer price data and October, I'm even more confident that we're not going to get that and that we're not going to get consumer price index data for the reasons Marissa described earlier. Okay. All right.

I want to do three more things in the podcast. Number one is, and I'm saying this because I don't know where we want to go next. Number one, well, cars the statistics game. We're going to do the stats game. And I actually have a pretty good stat, I think. So I think. Number two, I want to take the listener questions. And we're going to make this a regular feature of our podcast going forward,

at least taking one listener question, you know, every podcast, maybe more, if we get a lot of them. And Marissa, where should, and we're soliciting, you. So we want you to, you know, fire away and bring questions to us. Marissa, where should folks email us with their questions? So there's two email addresses they can use. They can either do Help Economy at Moody's.com or they can do Inside Economics at Moody's.com. Okay. Help Economy at Moody's.com and Inside Economics at Moody's.com. So we have a lot. So I think it'll be a nice

feature if we take one per podcast. Right. Yeah. I think you're right. I think you're right. So I want to do I want to do that. And then I want to talk about the other, what I consider to be important economic development this week. And it's the kind of the pivot by the Trump administration around affordability. You know, that obviously played a key, the question of affordability played a key role in the election results that, that happened just a week ago or two weeks ago. excuse me and the clearly the president has taken notice of that and is now focused on affordability

and a lot of things coming out of the White House regarding that so I want to talk about that and just to put you on notice and I this isn't something I alerted you to but I may ask what single policy step could be taken to address the question of affordability in a reasonable amount of time next year or two. And I'm going to immediately take tariffs, elimination of tariffs. I knew.

Because everyone was going to go there, just eliminate those tariffs. That would go a long way. And actually, the president's doing that, isn't he, on some food items I hear? Because that's the obvious way to get prices back down. But other than that. So where should we go first, Marissa? Should we go to the game, the listener questions, or should we talk about President Trump's pivot on affordability?

We do the game because I suspect that some people may have a statistic that could tee up the affordability discussion. I could be wrong, but... Yeah, good one. Do you want to leave the listener question to the end? Yeah. Yeah, why don't we do that? Okay, let's play the game. The game is we each put forward a stat.

The rest of the group tries to figure that out with clues, questions, deductive reasoning. The best stats, one that's not so easy that we get it right away, one that's not so hard that we never get it. And if it's apropos to the topic at hand, all the better, I have come under a bit of criticism as that my stats are too easy. Really? Who said that? I've heard it from a couple people.

So I got to up my game here, I think, a little bit. But anyway, Marissa, you're first. You're always first. What's your stat? $2,000. $2,000. Is that a potential policy suggestion? Yes.

Is that the tax cut that the president has talked about? The tariff rebate. It is. It is. It is. It is. Yeah. Stimulus check.

Oh, okay. Well, that, isn't that what I was saying? Yeah. Sure. Oh, okay. I think we're all looking at a good idea. I'm just saying it's a good idea. Yeah, yeah, yeah.

Okay, go ahead. Yeah. Yeah. Yeah. Yeah. President Trump has floated the idea of giving, I believe, everybody, right, regardless of income? Chris, no? I thought it was, I thought it was targeted, lower income.

I think it was targeted. Yeah, you mentioned some threshold, yeah. Okay. Well, some people. Yeah, nonetheless. A $2,000 basically stimulus check early next year, that is. a rebate from the tariff revenue that's been raised so far through this year to help offset some of the damage that the tariffs have done.

Yeah, well, what do you think of that idea? How about we just don't have tariffs instead of cutting everybody a check? Right, right. Tax on the one hand, give us back. And get and then give it back, yeah. I mean, like, why exactly? And, you know, a lot of the part of the hyping up the tariffs from the beginning was, oh, this is going to raise all this federal revenue

and it's going to offset some of our deficit. But then if we're just giving it back to people, clearly it's not doing that, right? Right, right. Okay. Yeah, so that was one of the ideas floated by the president to address affordability. $2,000 buck check. Chris, Matt, are you guys fan of that?

that's fan of that the proposal? Anybody have a fan of that proposal? Does that make sense to anybody? Yeah. It doesn't make sense. I think it. Um, luckily, I guess it does. But yeah. Sure. I guess. I mean, again, you're just taxing people and then you're handing, handing it back to them. So. Right. And if it is targeted, then that's better than being not targeted, I guess, because we do know that tariffs disproportionately hurt. lower income households because they spend more of their disposable income on goods, and that is what we are taxing through tariffs is goods, not services, higher income households spend more of their money on services. And a lot of the tariffs so far have raised prices on things like clothing, food, groceries, right, stuff that, again, lower income households spend more of their monthly income pie on.

So it's better if it's targeted than not, I suppose. Matt, what's your statistic? 7.8%. 8%. A labor market stat? No, it does not. Is it a stat that was released in the past week? No.

By a private sector entity? No. Is it financial market related? No. Is it inflation related? Price related. Yes, it is. Inflation related.

Is it in, is it from the consumer price index in September? Yes. Oh. Is it a food item? Yes, it is. Coffee. No. Very close.

Beef, very close. Very close as well. In the same line of thinking, Marissa was in a moment ago. Eggs. No. No. It was some food product, some food product, uh, bananas

there it is Marissa was all over that bananas yes it's the change from February so from February to September bananas are up 7.8%

we will probably talk in a moment about more specifically the affordability policies being put forward or rumored to be put forward don't make a lot

of bananas here they're exposed to tariffs prices are rising and it's I love banana I need bananas I have a banana every day. Did you know that?

Did I ever tell you that? I didn't know that. You did say that you eat yogurt and bananas every morning. Then I eat blueberries every morning. Marissa. You got to keep up. So it's yogurt and blueberries. Which you rinse is three times, I believe.

Yeah. I think it was fine. Five. I met five. I have blueberries every morning with my favorite cereal. And then at lunch I have a bunch of stuff, but that includes bananas. Yes. But I've gotten, here's the thing on bananas. I'm very particular about the, you know, the ripness of the banana, the kind of color, the shape, which has gotten to a real, become a real problem, you know, because as far to find the right banana, got to be patient. Well, I think, don't you just buy like an unripe banana and then wait until it becomes exactly what you want it to be?

Timing it every single day is not easy. Let me tell you. Inventory. It's like avocados. It's like avocados, right? They're not ripe. They're overripe. Exactly.

You have a very short time horizon on an avocado. You have to get in there right away. That's a good point. Anyway, there are some bananas domestically produced, which I did not think. I thought there was no banana production in the United States, but there are some. Where do they come from? Yeah, where they come from? I looked at it for coffee, too.

So Hawaii, Florida, and Puerto Rico, some combination I could be wrong about one. But those three are like the only. But it's a very, very small share. I guess they're happy about the tariffs, I guess. I guess so. Well, they're about to be unhappy. Yeah. Sorry.

Chris, you're up. What's your stat? Mine's personal? 107%. 107% and it's personal. It's related to our conversation from earlier. It's related to Europe. The gains in your crypto account since January.

No, unfortunately. Oh, did you see what happened to crypto this week? I did. Under $100,000, right? Really? Bitcoin's below $100K? I missed that. I was traveling too much.

So some favorite thing that comes from Italy? Oh, you are on it. Oh, pasta. Parmesan cheese. Pasta, you got it. What about pasta? I didn't say pasta, but I'll take it. Matt said pasta.

Oh, Matt said pasta. Okay. What's 107%? Does it depend on what kind of pasta? I mean, isn't it spaghetti versus panini or panet, pane? It all depends on the sauce. It all depends on the sauce, Mark. Every pasta is associated with specific sauce.

It's not the shape of the pasta that matters. To me, it does. Oh, it definitely matters. It definitely matters. The shape matters, whether it's grooved or not smooth, matters. It's a whole art and science. Sure. More than the

107%. What's that? Is it harder to do than picking the right kind of banana? I guess I think it probably is. More variables. No,

I think the banana or an avocado, that's really tough. Yeah. You know that in the site. It's still a guessing game. Right. Right. Science is not crack now.

What's up a 107%? Is that the tariff on Italian import to pasta? Yes. Scheduled to go down into effect January 1st. Right. So, you know, back to your point about Europeans being happy, they got away with 15%, 15%. The story's not over yet. I think there's still more script to be written here. That's the proposed tariff on Italian imported pasta. There is a, that includes tariff plus a charge or an allegation of dumping. So that's the proposal. So they're still trying to negotiate it. It's the headlines in Italy. So I just feel that there's, There's going to be more of these types of negotiations still going on with Europe. So I wouldn't, I wouldn't, you know, throw the party. Coast is not clear.

What? So is, I haven't had the, I don't want to use a pun. I haven't had the, but like I haven't looked, the stomach to look into what the new justification was. And that was not, that was truly not an intended fund, but the, um, you have a week. Is that what the store? I just, I think I might. You can't like zombie movies, you know, you know, what the heck? Yeah.

Gotta suck it up. Yeah. Is that what it is? Is that what the justification's been? Is it, it's a dumping? Because Maloney and Trump are relatively cordial relative to other moral leaders. So is that what they're saying? Yeah, that's, that's been in the in the news. Like, oh, well, why is, why, why is Italy getting singled out? What's going on here? I thought Maloney, George Maloney, the prime minister has a very close working relationship with, with President Trump. But that's the allegation, right? So it's 15% tariff and then the different. is the allegation of dumping. Okay. Pasta, really? It's better than a national security emergency. I mean, that would be too much. Yeah, right.

It's a significant export. Let's put that one. Oh, my gosh. So, and do you, like, eat imported Italian pasta, Chris? I mean, you don't like eat, like, I'll make a, I'll make a lot for the check-go. The Checo pasta is the best pasta you can eat. Oh. You can get.

I must be missing. Come from a boots so. Oh, really? Okay. That's good to know. That's good at. Franco just put up a thumbs up. Franco.

There you go. There you are. If Franco said, Franco do it too. He's an engineer. He's our engineer. All right. That's a really good one. Well, so you're saying that hasn't happened yet, but it's set to happen.

It's set to happen January 1st. So, you know, these things are still ongoing. That's the situation is fluid. Yeah. you would think in President Trump's looking for something to improve affordability, that would be it, to not put a tariff on pasta, I would think. But, okay. Well, their argument is that, you know, there's domestic pasta, certainly.

Yeah. But you put a tariff on this one. It's not as good. You told me it's not as good as the time. It's not as good. It's not as good. And, of course, the other thing, the other fallacy is you put a tariff on the imported good. The domestic goods are going to raise their prices.

as well, right? Why wouldn't they? Yeah. So. Yeah. Well, I said, geez, he's terrorists. Okay. $3.8. $3.0.8.

Gas. Gas prices. I'm still too easy. That was too easy. I got to do better than that. Okay. I picked that because you know what the price of gas was exactly a year ago? 307. 8 cents. 8 cents. So, you know, if the president's looking for something to tout, maybe he is touting this, I don't know, just gas prices are, you know, the interesting thing about gas prices, because I didn't realize this until I was looking at it for this, they've been hovering around $3, you know, for, you know, all the way back to like, right before the financial crisis, you know, they go up and they go down, you know, they've been as low as two when we're in the middle of the pandemic and no one was driving. got as high as $5 a gallon when the Russians invaded Ukraine and global energy supply markets got completely upended. But the average, you know, you cut through it's exactly $3, you know? So it's just amazing, like, you know, gas is cheap, really. And on an after inflation basis,

really cheap. The real price of gas has fallen quite dramatically, you know, pretty amazing. Pretty amazing. So that's the one place where affordability is kind of held up okay. Everything else, affordability is pretty punk, which gets to President Trump's, you know, focus now on affordability. And we talked about the $2,000 stimulus tech. We talked about the reduction of tariffs on certain imported products, food items in particular because, of course, Americans are focused on the cost of groceries. He's also made, Chris, some proposals around housing affordability, right? You want to articulate what those are and what you think about them? Yeah, a 50-year mortgage is the idea being floated here, right? So extend the term of your mortgage that will lower the monthly payment, potentially. I say potentially because even though, although you may extend the term, that doesn't mean that the interest rate is going to remain the same as a 30-year fixed rate mortgage. So if you create this new set of mortgages, which are non-standard, right? They're actually, they actually,

do not qualify as a qualified mortgage, which was a rule introduced after the Dodd-Frank Act. So you have Fannie and Freddie unable to actually purchase these mortgages unless they make some rule change, which they probably could. But even if they did, it's certainly a less liquid, a much smaller type of instrument than the 30-year or the 15-year mortgage, right? So the interest rate on these loans may actually be quite substantially higher than what it would be for a 30-year fixed-rate mortgage so that that payment may actually not be all that different, maybe a little bit lower than the 30-year. The real issue I see with this proposal is that if you extend the termout to 50 years,

yeah, you might give a little bit in terms of a reduction in the monthly payment, but now the borrower is not building up equity at anywhere near the rate that they would with a 30-year mortgage. So at the end of the day, they're going to end up paying perhaps double the interest that they would otherwise. So I don't see this as a great deal for the borrower. We tried this experiment back 2004, 2005. Did we?

When I was at Fannie Mae, we were buying 40-year fixed-rate mortgages. The idea there, again, was to try to lower the payment. You know, it was a niche product there. The rationale was this was going to be really a product geared towards people with really stable employment. long-term employees. So think about teachers or, I don't know, other civil work, government workers, right, try to give them a product that could help to lower the payment without taking out a lot of risk. It never really took off because I think to a large degree doesn't allow the borrower to build up much equity. So I don't see this as a solution, right? I don't think it's going to really take off here either, given some of the challenges. that we face even in terms of the structure of the loans. We're probably not going to go into mortgage-backed securities, right? So the liquidity is going to be much more reduced relative to our standard type of products.

And at the end of the day, this is a demand-side solution, right? The problem I see in the housing market is not that loans are necessarily too expensive, right? We can argue about the mortgage rate. But there is credit available, right? And if you offer this product, if it is successful, what it does is perhaps increase the demand even more, right? So now you have even more upper pressure on house prices. So I don't see this as a solution. We have a supply side problem.

And that's that at the end of the day is what we need to tackle. Yeah, I don't really see much of a difference between a 50-year mortgage and being a renter at the end of the day. Yeah. Right? Yeah. I mean, it's not helping improve the ability. to become a homeowner or the benefits of being a homeowner. Benefits of being a homeowner is you build equity.

Here you can't build any equity. So you're just, you know, I'm not sure the difference. We have interest only loans. We've had those for a long time. We had them already, right? Yeah. Well, you know, you want to go down that route? It's really then a gamble on house price appreciation, right?

The thing about, as you, I think you were alluding to, that one of the issues with these interests only more, or a 50-year mortgage where you're not really building equity is there's a lot of risk in that, right? Because if things don't stick to script, you lose your job, you have no equity, much more likely you're going to lose that home to falter. Yeah, because you can't build equity. Yeah. Okay. There was also some conversation, you know, I was traveling, so I couldn't pay real close attention to it.

Also around assumable. It's so called Assumable on mortgages. Yes, there was some conversation. I don't know how advanced these talks are, right? There are some mortgages in the U.S. that are assumable from the FHFA, sorry, from the FHA and I believe also the E loans as well, right? So the idea here is you can actually have someone else take over your mortgage, right? You sell your house along with the mortgage, essentially, and someone else just picks up the payments at the lower interest rate or at your current. interest rate, right? So the idea here is where you're in this locked in environment. People don't want to give up a loan or it's very expensive for someone to take out a new loan. So can you pass this on? So it's an idea. It's been, this again is an idea that's been floated around before. The issue, an issue with this is that kind of, it does change the rules of the game, if you will, in terms of our mortgage-backed securities market. So investors are prices.

mortgages or mortgage-backed securities under the idea that the loans are not assumable if now you all of a sudden you were to change that that would certainly throw some chaos into the market and lead to new pricing actually again you could have an effect where now the investor has to pay up suggest they go back and change existing mortgages right you're saying that I think that would be ultimate chaos right I just don't even know how they can do it right you're talking about new mortgages but even there there'd be chaos you know that's right because I think that would be I think there's, yeah.

So it would be packaged as a different kind of mortgage from the outset, is what you're saying. It would be packaged and price differently as well. And that when you reprice it now, the investor's going to say, oh, well, this is a longer-term asset. It's not going to, you know, this loan is going to stick around for a longer time. Therefore, I need to hire a yield. So it's going to offset some of the potential benefits here as well. And how would that work in terms of? of extending credit to a person. So if I'm buying someone else's mortgage and I'm a different

kind of borrower credit-wise, how does that work? Yeah, so you have to qualify, right? So it's complicated. You have to qualify at that lower mortgage rate, assuming it's a lower rate. Yeah, you have to have a similar type of credit profile or, you know, that you could, so you have to, Yes, you have to qualify that similar type of profile. And on top of that, of course, the amount that you pay for your home is still going to be largely insufficient, right? That tail end of the mortgage, if you will, is not sufficient to pay for the total price. So you're going to have to take on another mortgage, most likely, to make it a second mortgage or, right? So it does add some complications here.

And that new mortgage is not going to be, right, at that lower rate. it's going to be more of a blended rate at the end of the day. So again, another demand side solution to a supply side problem. So I don't see this as really getting the crux of the issue. And it adds a lot of complication here. We really need to rethink the whole system. I guess the same kind of concern with portable mortgages, right? Yeah, that's where you take, you can keep your mortgage and transfer it to a new property, right?

So that's a similar type of issue in terms. Right. The need for additional additional funds, right? So another more, a second mortgage on top of that and how does it qualify? It's just we'd have to rethink it's certainly not going to impact the mortgage market in any time in the near

future. I mean, no. Yeah, it's not going to help this year, next year, the year after, you know, so. No, if we want to go down this route, it's an interesting policy question, but it's we're talking a real substantial change to how we finance homes in the United States.

So, you know, that's a, that's not something that's going to deal with the affordability that we have now. And probably by the time we actually implemented something like that, some of the affordability issues we have are going to subside given changes in demographics. I think it'd take years to make these types of changes. Yeah, got it. Did the president come forward with any other proposals to address affordability? I think there was some arrangement with some drug pharmaceutical companies around Ozympic or GLP drugs, something like that.

But other than that, was there anything else that he came forward with? I know they put a bunch of stuff up on the way. The Trump administration put stuff up on the White House website about inflation coming down using DoorDash or something. You know, right. I guess their own attempt at using alternative data sources. That's right. Is that right? The cost of a door-dashed breakfast has come down.

I guess you can do that, right. Oh, it hasn't really? Okay. According to DoorDash, if you order a very odd breakfast that consists of an avocado, a banana, an egg sandwich. It sounds like my kind of breakfast. It does. Yeah, it actually is like your breakfast. If you were to door-dash your breakfast.

What's so odd about that? An avocado and a banana? For breakfast? Who eats an egg sandwich and then an entire avocado for breakfast? Nope. Here comes the mail. Yeah, right. Here comes the mail.

Yes, who? Who does? Who does that? If you do. Yeah. And why you do. All right. All right.

Well, we're making fun, but, you know, it does highlight it's pretty hard to come up with fiscal policy steps that can change the trajectory of prices. and inflation and improve affordability in a meaningful, reasonable, meaningful, meaningfully short period of time. But let's take a crack at it. Let me throw it back at you. You can't say lower tariffs. You can say anything else. If you could pick one policy step that you take, and I know there's all kinds of caveats

and how much does it cost and this and that and everything else. But abstraction from all that, it can be, you know, it doesn't have to be game changing. It could be something on the margin. that would make a difference within, like, say, the next year or two in terms of inflation, prices, affordability, what would that be? I know that I should have probably warned you. I was going to ask you this before the podcast so you could think about it, but here I am. Matt, do you have one? And you don't have to have one. You can say I don't have one, but I do. too opinionated to pass up. The diversifying energy supplies just more solar, more wind,

that's going to keep prices down for everything. It's lower demand for oil. I mean, you're going and that's, you know, not just for households, that's lower input costs for businesses. It's broad strokes I'm talking about here, but those are the kinds of things that find their way to everyday Americans'

household budgets. What would be the policy step? get out of the way of permitting as much as possible. Don't stop wind farm in Rhode Island. Just keep things easily to, I mean, to make, get out of the way and let things be built as easily as possible and have us, you know, whether it's environmental reviews that are slowing things down, whatever the case may be, I would try to get those projects more easily completed.

Well, I guess the cost of electricity is like front and center here, right, because the data center did be. Yeah, and only going to get worse, right? It's probably going to get worse. the Trump administration on this front has focused on nuclear energy I mean obviously that takes a bit of time to kind of get that up and running

but what do you think about that helping to foster more nuclear power consistent with all you think and carbon-free I mean that's calls in the same line of thinking yeah I those were all steps in the right direction but I don't think it's a zero sum I think we should be investing

and I mean costs have come down dramatically all above all above energy policy I'll see. Okay. Right. Yeah. Okay. Marissa, do you have one? So at the federal level, so I think the biggest, the biggest thing that could be done would be to improve housing affordability. I don't think these things we've talked about will do that, right? These different kinds of GSE-backed mortgages will do that. At the local level, reducing some of the red tape around building would be helpful, particularly in states that are densely populated. and have a lot of regulation around building would help. At the federal level, I do think one of the biggest things that could be done, which you just mentioned, is being done, is negotiating with pharmaceutical companies to lower drug prices.

You know, President Biden started doing that, right? With insulin prices, the price of insulin for some of the big drug makers, President Trump is doing that around some of these weight loss and diabetes drugs. I think that would be incredibly meaningful, particularly given the demographics we're facing in this country with a lot more people that are going to be taking some of these long-term prescription drugs. I'm fully behind that. You said housing because that's the number one item in people's budget, right? Right. But I think the federal government is pretty limited in what it can do.

I think that has to come more at the local level. going back to permitting, zoning, that kind of stuff, said at the local level. Yeah, although, you know, you guys have some proposals around tax policy regarding housing, right, that to kind of get the housing market moving. Yeah. Maybe that was, that's where Chris is going to go. I'm not sure. Yeah. Yeah.

Okay. Okay. That's good. So you're focusing on housing affordability and then also on the cost of pharmaceuticals, cost of drugs. Yeah. Chris, where would you go? Would you go to the proposal on capital gains, housing capital gains? I would.

I would. Certainly, again, to reiterate Mercer's point, a lot of the bottlenecks when it comes to housing supply really at the local level, right? So the federal government doesn't have as much control there. There are some regulations that home builders tell me would ease life, something around electrical transformers, for example. there are a few things that the federal government could change and ease in terms of helping builders put up more homes at more cost-effectively. But in terms of something more immediate, right, we've written a study around capital gains taxes and how the current capital gains tax policy, the exclusions that we have that were set back in 1997, could be locking in certainly some of the longer-term homeowners.

And so some of the supply of housing that could be coming on. line, say for a larger family or even for first-time home buyers is not making it to market, given the really disincentive that these longer-term homebuyers have to go ahead and list their homes, even if they very much would like to move into a smaller property or maybe in an assisted living facility, it's just prohibitive for them to sell their home and face a big capital gains tax bill and move. So instead, they remain put, pass their home onto their errors on a stepped-up tax basis. So that capital gains tax doesn't get paid anyway, right, at the end of the day.

So our proposal is to index capital gains to inflation. That would essentially double the exclusions and that should at least get some movement going when it comes to housing supply. Yeah, good one. Largely because you and I came up with it. Mostly you. Yeah. Good proposal.

Anything else that back in the recesses of your mind, you, like, dust off and say, hey, we should think about this or that. Anything else? Chris, outside of the housing, looking beyond housing to other costs that households are facing? Just curious, I'm just, you know, I'm extracting everything that can from you. Yeah, I got housing on the mind, but. Yeah, no, no worries.

I just thought, you know, maybe you had some, another thing you could, that you'd throw go into the mix. How about reducing, can I say, can I say reduce import taxes? Is that, there you go. Yeah, okay. Fair enough. Yeah, that's just so obvious, right, isn't it? Just get rid of those tariffs. All right. I mean, I didn't say tariffs. Yeah, yeah, I know, I know. This is, it's going to feel unfair, but I'd say, how about rational immigration reform? Yeah. You know? Yeah. I mean, come on. I mean, I don't know that makes a huge deal long run. nothing makes a huge deal wrong run with regard to inflation. That goes back to monetary policy and setting interest rates right. But in the short run, you know, obviously the fact that

we have significant labor supply issues and some key industries that are critical to the cost of things that people need, you know, construction trades, the immigrants are a key part of the workforce there or agriculture going back to food or child care or elder care or you know, very, very costly for people, and that's key. Hospitality, retailing, you know, all these industries rely very heavily on immigrants and if we just had a rational policy there and not spook people, scare people, and cause the labor forces to decline, just kind of keep that moving forward. We'd be in a much better place, I think, pretty quickly.

So from a macro, that feels like I said more of a macro kind of solution. It's less micro, but, you know, from a macro perspective, I think that that would be a slam dunk. right, if we could do that, you know, that would be the best way to improve growth and way on inflation is to have, have more immigrants, but all with the right kinds of skills that we need. You know, this, other than that, I don't think there's any game-changing, there is no game-changing thing here. It's very hard, you know, to come up with policies that are going to move the dial on the cost of anything in a short period of time. That's not an easy problem to solve for fiscal policy makers. Just can't do it. Unless you have giveaways, you know, deficit finance

tax cuts or deficit finance whatever to try to, you know, make it easier for people to afford whatever they're buying. Okay. Well, oh, by the way, while we're at it, Chris, what do you think of rent control. I mean, that's kind of kind of the fore. I mean, does that make any sense to you as a way to improve housing affordability? It does not, just as you mentioned. You kind of benefit a few people in the, in the short term, but you do real damage in the long, over the longer horizon, right? As builders react or developers react, I'll say, well, I'm not going to build if I'm not going to get a return here. I'm going to do something else or move. So I think anything related like price controls, rent controls, price caps, all that stuff.

Yeah, that's right. Yeah, I think what we've concluded has to be a supply side. Has to be supply side, right? Whether it's immigration, more workers or, you know, expanding the housing stock, housing supply or, you know, removing these import taxes or what have you. There's no demand side solution here. I guess the other way you get inflation down is just raise interest rates, crush the economy. You could do that.

But boring that. Okay. All right. Okay. Anything else on that before we go on to the listener of questions? For question? No? Okay.

Okay. So this is a new feature. We are, because we are getting so many great questions on a regular basis. We are now going to each podcast take at least one question, see how it goes, maybe more than that, depending on. you know, the questions that you pull forward. And we are getting a lot of great comments, a lot of great questions. Mercia's been monitoring them.

So Marissa, what's the question of the week? So it's actually a question I had last week when we were talking about the deferred resignations, right? We just talked about the fact that when Doge came in at the beginning of the year, in order to reduce the federal workforce, they basically offered to people, hey, we will pay you through September 30th, but after that your job will be gone. The alternative to that is that you can come in to the office now, perhaps, or

we'll eliminate your job right now if you don't do that, right? So we know that a lot of a lot of federal workers took this deferred resignation. I've seen estimates of about 100,000 people doing this across a variety of agencies. So I asked on the last podcast if there were any federal workers out there who have taken this. And we were talking about it in the context of unemployment and unemployment insurance claims and wondering whether these people could perhaps file for UI. So we did get a response from somebody who works for a federal agency. I'm not going to mention the listener's name or the agency that they work for.

But he was saying that, no, they could not file for unemployment insurance because this was seen as a voluntary resignation. And of course, you know, you can't get UI if you voluntarily quit or leave your job. It has to be a layoff. And also, I believe you also cannot get UI if you are fired. You're not supposed to get it if you're fired for performance issues either,

although I think that's kind of difficult to prove and document. So that's why we haven't seen a large increase in UI claims in federal programs. And the listener wrote back and said that because this was such an extended time period and people had a long time to prepare for this, most of the people and his agency did one of two things. They either retired completely if they were near retirement age or most of them found other jobs elsewhere, either other federal jobs or in the private sector. So we're not seeing a huge impact on unemployment from these deferred resignations. Oh, cool. So this is a question that we posed last week and we were speculating and you just answered the question. Yeah, that's right, right.

What impact, deferred resignations that the federal for federal government workers had on U.I, why haven't we seen in the U.I claims? And that's the answer. You can't file for U.I if it's a voluntary, if you're leaving your employment voluntarily. Yeah. And I think the other side of that coin is that we know there's a lot of downstream impacts on the private sector because there are even, More than the larger than the federal workforce is the private workforce that contract with the federal government, right? Where people are contractors, maybe they work for a consulting company or some other company that has a federal contract. A lot of those people have lost jobs and those people

could file for UI because presumably they're just being laid off by these private sector companies, right? They're not getting this deferred. I mean, maybe some of them are. I don't know. But they're not they're not getting the structured, deferred resignation program under Doge. They're just getting laid off from their jobs. That is why we do see, we have seen a spike in UI claims in D.C., Maryland, Virginia, kind of the greater D.C. Metro area, right? But those presumably are private sector workers whose work is being affected by this downstream. Hmm. Okay.

Is that true for anyone who receives severance? Is what true? If someone, if they're let go, if they're receiving severance. Yeah. Can they not offer you I after the severance is complete? Yes, or the UI will be reduced by a percentage of what they're receiving. I mean, I think the other thing to keep in mind is we've seen a structural downshift in people filing for unemployment insurance that goes back decades because the so-called replacement. rate. So that's the share of your salary that unemployment insurance payments are covering

has gotten lower and lower, right? Like a lot of these are not indexed to inflation or wages, or if they are, it's done so on an irregular kind of erratic basis every five, ten years or something. So the amount you're receiving often just for many people may not even be worth it to file for. And yeah, if you're receiving, even if you're, we talk about this a lot when we talk about tech and Wall Street layoffs, right? These people often get very generous severance packages. So getting a couple hundred bucks a month from the unemployment insurance system while you're getting, you know, most of your salary from these high paying jobs just isn't an option. That's a good point. Matt, have you looked into that? I mean, is there like this structural

bias lower on UI claims? I mean, they have not pushed up, so no alarm bells are going off, but maybe we shouldn't take as much solace in this than we are. And that would be perfect state level analysis where that replacement rate just in New York, has it really, you know, where it's peanuts compared to somewhere, you know, a lower cost state. No, I'm not familiar, but that's a great thing I look into. We should investigate that, particularly in the context, is the kind of layoffs that might be coming if they're related to AI, if they're going to hurt, you know, legal and other professional services, you may not see people filing. Or at least they, it takes a while for them to file, you know, they, because it's, it's not enough to make a difference if they, early on. But that's a good one. We did a big, I don't know if you remember this. We did a big study. I was maybe five or ten years into my career with Moody's. We did a big study on state level. unemployment insurance claims where we modeled various scenarios of what could happen around different changes in the economy or if I think one of the scenarios we did was if you did raise

this replacement rate, how would that affect UI filings? So we can we can dig that up and look at it. It would be interesting to see. It was a great study. Yeah. Yeah, it was a very good study. Yeah, I think that would be useful in the context of what's going on. Yeah. I mean, again, if we're just taking too much solace from the fact that UI claims is not pushed up just because of this structural kind of weight on the filing of claims. And the kind of the idiosyncratic environment we're in where it's affecting people who are not or less likely to file for UI because it means less to them. Yeah. Okay. All right. Well, this is a Saturday. I don't want to take too much

of your time, more of your time. So I think unless you say otherwise, we'll call this a podcast. Matt, any objections to that? I know you got a lot going on over there. Good. No objections here. Yeah. Marissa, Chris, all good. We're set. No, let's keep going. Oh, yeah. Miss you. Missed you all week. Actually, Bruce and I had to chat a little bit. We have a webinar. Maybe I should tell me because Oh, yeah. And Matt's got to stay too. Maybe Chris, you should stay. I don't know. Uh, We're going to talk about our, we have a webinar on data quality coming up Monday morning that we're going to record and we just need to get our ducks in a row for that. So we're going to call this a, I think we should call this a podcast. I think it was a really good one.

And the beginning of a new feature on Inside Economics with listener questions. And with that, we are going to, dear listener, we're going to call this a podcast. Talk to you next week. Take care now. Thank you.