Moody's Talks - Inside Economics - Robert Reich on President Trump

Episode Date: February 21, 2025

Robert Reich, UC Berkley professor and former Labor Secretary under President Clinton, joins the Inside Economics podcast to take a retrospective look at economic policies extending back to Clinton that ultimately contributed to President Trump’s election, and a prospective look at where the president is taking policy and what it means for democracy and the economy. His advice: batten down the hatches and buckle upGuest: Robert Reich, Professor at UC Berkley and former U.S. Secretary of LaborTo keep up to date with Robert Reich: https://robertreich.substack.com/To learn more about Robert Reich's nonprofit: https://www.inequalitymedia.org/ and https://www.imcivicaction.org/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 Sandy, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Chris DeRis and Marissa Dina Talley. Hi, guys. Hi, Mark. How are you? Marissa, you're back from, well, you're back from somewhere. I was in Mexico.

Yeah. Porting tequila and avocados ahead of the tariffs. Still affordable? I was scuba diving. in cosmo diving oh yeah oh yeah cosomel cosmo did you know that that's where i had my honeymoon in no i just learned that that's yeah yeah that was uh you want to guess how many years i've been married long 30 35 pretty good 40 40 on the nose oh wow okay we celebrate our 40th wedding anniversary a couple months ago yeah awesome and move to cosomel uh for our honeymoon i don't know why

Cozumel, but it's a pretty place, but we didn't scuba dive. That's what Cozumel's known for, right? It is, yeah. Yeah, there's really not much else there other than that. I mean, that's the destination for scuba diving in Mexico, so wonderful. Well, good. Well, good to have you back. And we have a guest. Bob, how are you? I am very, very well, Mark. Thank you for having me on, and it's good to see you again. It's always good to see you. Marissa and Chris, it's good to meet both of you. Wonderful. And pleasure, of course, Bob is, your professor emeritus at UC Berkeley, former Labor Secretary, lots of very storied career.

And maybe we can spend a few minutes just hearing from you about your career and, you know, the things that have influenced you and how you got to where you are. But I remember finally, it seemed like almost every summer we'd see, I'd see you in Napa at this Nancy Pelosi event. and you'd participate in that event. I don't think they're doing that anymore. At least they're not inviting me. Not since Nancy left for post. And I think the Democratic Party must rely on other events.

Certainly not with me anymore. Yeah. I'm not on the guest list either. So, yeah. But it's good to see you. And thanks for participating in the conversation today. Maybe you can, Bob. If you don't mind, just give us a sense of, you know,

I was reading your bio. I saw you, did you actually grow up in Scranton, PA? I was born in Scranton. Born in Scranton. But we got out as soon as we could. My father had a little clothing shop on Lackawanna Avenue in Scranton. And apparently it was not doing very well. So he moved the family to upstate New York, where he started another clothing shop,

which did not do well. So we, but he was tired of moving and he didn't, he had a little baby and we just settled down. So that's, that's the story, not much to it. So did you get, did you run across Joe Biden when you were in Scranton or is that, because you guys, I mean, he's a little older than you, I think, probably, isn't he? He is a little bit older. And no, but no, I didn't run Joe Biden in Scrant. You know who else has some.

Scranton background is Hillary Clinton. Really? What's that? Well, I think she's either her parents or she herself is from Scranton. I can't remember. But I do remember, you know, I dated her in college. No, no. Wait.

What? No, I did not know that. Oh, well, you were going to have to read my memoir that's coming out. Oh, absolutely. An artist with all these very secret sorted episodes that are going to make headlines. So you'll, we'll leave it at that. What? You're going to leave it at that?

Oh, because it's in your memoir. That's called a tease. That's called the tease in the business. Good marketing. And, you know, if I've got you excited, great. Well, I also introduced her to Bill. No way. Yes, I did.

They know, they say they match. in the law school library. So my introduction a few days earlier obviously did not take, but I did introduce them. But there are all kinds of, and then I did not inhale with Bill at Oxford. But that's all. That's all that's all you're going to get. I'm not going to tell you anything. Okay.

But just to connect a little bit of the dots, didn't they go to Yale law school? Was it Yale? Was it? Okay. So you were at Yale. Clarence Thomas and Bill and Hillary and I were all in the same. class at AEL Law School. Oh, I didn't, so I didn't realize.

So are you a trained lawyer that? I am, I am a lawyer and somewhat of an economic guru. Well, you definitely are the guru, an economic guru. I didn't, I didn't realize that you were, you had a legal background. Oh, so. Yes. Well, you know that I, I, I have argued Supreme Court cases. I worked for, I worked for Robert Bork.

You remember him? Oh, absolutely. Yeah. So all and economics from my backgrounds. Okay. Oh, so that's how you got to know the Clintons and began to help fashion economic policy under the Clinton administration. Well, that's right. I knew, again, I had known Bill and I met on our way to Oxford when we were both 22 years old as Rhodes Scholars.

I see. I see. So this whole thing, this whole saga goes back into the dark ages of the late 20th century. Right. And you were Labor Secretary in the early 90s. Right. What was the kind of the, I'm trying to remember back into that period, what was kind of the key most significant issues that you were working on at that time in the administration? Well, Bill had asked me, I should call him President Clinton, right? President Clinton had asked me to be his, to run the economic transition team going from the George H.W. Bush administration to the Clinton administration. And so on put together a group of people. Bill Clinton did not know them, but they included Larry Summers and Bob Rubin and Laura Tyson and others. And we, we.

We prepared his economic transition. The big surprise, it should not have come to us as a big surprise, but the George H.W. administration did not allow us to know until quite late how bad the debt was and the budget deficit was. And so I had to kind of push, you remember Dick Dorman? No, sure. Well, Dick Dorman had, you know, he had the data. and I finally got him to concede how bad the budget deficit was, and then I took that information to Bill Clinton,

and it was kind of what we obsessed about for the first, I would say, the first six months or year of the Clinton administration, how to get the budget deficit down. Instead of what, you know, in retrospect, I wish we had obsessed about, which is how to get his what we then called investments, in human capital in education and health care and infrastructure passed. But be that as it may.

This is ancient history we are recounting. No, very cool. But, you know, that was deemed to be a big success, right, when Clinton and Rubin because that was the period of bond market vigilantes. The bond market was seemingly losing its mind over those budget deficits. and President Clinton and Rubin and you, and the administration really tackled that issue. And at the end of the day, we ended up with a surplus, right?

I mean, at the last survey— At the end of the day, we balanced the budget. We ended up with a surplus. But then we had created the framing that the budget deficit was so important that it was difficult to use the surplus for anything other than to pay down. the debt. I mean, you see the trap. And this is where economics and politics meet, Mark, and you know this better than anybody. I mean, when you're talking about economics with the public, you're setting the framework for what the public thinks is important. And if you say the budget

deficit is important and we've got to get it down and you don't talk about, you know, health care or education or any other public investment or even infrastructure, then the public expects when you do if you ever do have a a budget surplus well then you've got to use it to get the debt down so let me ask you because we're here and talking about this issue i mean the debt to GDP ratio back in 1993 i think it probably was 35 percent 40 percent i mean i think the issue at that time was the interest payments as a share of GDP they they were high and that was yes yeah yes that's right was pretty low. Here we are at 100% debt to GDP,

and if you just look at the CBO, congressional budget office projections under current law or current policy, they keep on rising. Do you think that's a big deal or not? Well, I think it's troubling in the following respect, because I'm old enough to remember when the wealthy in the United States

paid a fairly high marginal tax rate. and now the way the wealthy are supporting government is not through their taxes, it's through lending the government money. And there's not been not enough discussion about that great switch that has happened over the last 40 years, 50 years actually. It's very, very fundamental. And I think it reflects on one of the major stories of the last half-sacet. century, and that is the secession of the successful, the secession of the very wealthy into their own world. That, you know, I'm not accusing anybody of doing anything bad.

This is just the way politics and economics interact. But what has happened inevitably is you get more and more and more of the budget, the budget is paid to people who hold federal. who basically are lending the government money. That's an interesting point. I guess from a Republican perspective, they would say, hey, look at revenue,

government revenue, tax revenue is a percent of GDP. You know, I think it's around 17 percent, something like that as a percent of GDP, 17 and a half percent. That's kind of sort of consistent with the long run average.

It's not definitely not higher, but it's definitely not lower. So doesn't that run count? to that perspective? I mean... But I think that the question is where the revenue is coming from. Okay. And if the revenue is coming from, you know, average taxpayers or from relatively regressive tax,

I mean, we have, if you look at total government revenue, that is, you know, state and local revenue thrown in, well, then the whole system has become vastly more regressive. that it takes government taxes, taxes take a bigger chunk, much bigger chunk out of the pockets of relatively poor, middle class, working class people than they used to because we were much more reliant on sales taxes, on property taxes, and on other forms of what are, that are regressive taxes overall. And if you compare the total government revenues, where they came from in the 1950s and 60s and early 1970s, you get a completely different picture, Mark. I mean, the wealthy we're paying much, much more into, to the government, federal, state, and local than they are today.

Got it, got it. Well, I want to come back to your memoir, and you said the memoir is coming out later this year? August 19th. August 19th. Oh, you've got a day. You've got a day. Yes, it's a big day. I mean, it's going to be national holiday. It's just been declared a national holiday. Great. Well, I can't wait. So, but we'll come back to that. But before we get there, I want to do a little bit of a historical kind of accounting. The Biden administration and economic policy in the administration and how successful or not that was. And one of the reasons why I bring this up is because I just read a piece in foreign affairs by Jason Furman. Jason is a Democrat. He was the chair of the Council of Economic Advisors under Obama.

And I don't know how you read the piece, but the way I read the piece was it was critical, you know, quite critical. I'd say even highly critical of the Biden administration's policies. And a lot of it was centered around the policy's impact on inflation and he kind of laid the inflation at the feet of the Biden administration in that policy. I was just curious, you know, what your perspective is on Biden's policies and how. successful or not they were. Well, I disagree with Jason. I think the Biden policies were extraordinarily successful in economic terms. I mean, political terms, we can have a different discussion. But, you know, Biden handed Donald Trump, Trump, too, the best economy I have witnessed, you know, in what, how many years, 50 years, certainly 40 years. And that economy, you know,

Donald Trump is going to, obviously he already has taken credit for it. He takes credit for anything he can take credit for. But, you know, on almost every, on almost every criterion, the Biden economy turned out to be a damn good economy. And Biden and the Fed, you know, I think that it was about a combination of fiscal and monetary policy, really did bring inflation down. and yet we had a soft landing, which, you know, which nobody thought we could have a soft landing. I just remember. I did.

I did. You were, Mark, congratulations. Not Chris. Tell him, Chris. You were one of the few. Everybody was worried. I mean, look at Larry Summers. I mean, Summers was kind of, you know, bonkers in terms of, you know, you've got to have,

we're going to have a terrible, terrible time. We're going to have a recession. We've got to get interest rates up to, you know, into the stratosphere. But I think that they did it really, really well. And they put economic doctrine, if you will, kind of orthodox or neo-liberal doctrine aside. And they looked at the numbers. And they, I was very impressed. I still am.

He was critical on many regards, but mainly, mostly the American. American Rescue Plan, that was the COVID relief package, $2 trillion. It was deficit finance. It was viewed as a response to the COVID pandemic. And his argument was that, you know, that was just too much, too much stimulus to the economy. That is the fundamental cause of the higher inflation. And by the way, and we're going to talk about this in just a minute, why Harris ultimately lost because of that, the fallout, the kind of the political.

fallout from the inflation that ensued. Well, we could, let's talk about that in a minute, but I just want to deal with, with Jason's arguments and also other arguments here about the Biden economy. I mean, not only do we have a soft landing, but we also had, we avoided a lot of human suffering. And let's make very clear that we had a pandemic that was the first pandemic, you know, certainly in living memory. Nobody knew how bad it was going to get. We had a lot of people unemployed.

We had a lot of people who were sick. And we had to do something very, very dramatic. Now, look at the, for example, the Obama administration, of which Jason was a member. I thought the Obama administration handled the Wall Street crisis pretty well. But if anything, they underestimated the amount of stimulus that was going to be necessary to get the economy out of that hole. It took forever, seeming for the economy to get back to where it should be. I think the Biden administration learned a lesson from that.

And that is, you know, you want to deal with, number one, the human suffering. And number two, you want to have a stimulus that's big enough to get the economy really back to where it should be. And, you know, you're always going to be playing the odds. You're always going to be airing in one direction or another. Why not err in the direction of reducing human suffering in a big way and getting the economy back in a big way? And if that means a little bit more inflation, well, that's too bad. You know, you can deal with that by, and the Fed and the Biden administration dealt with it. I thought very well, which gets us to the politics of this.

Now, I think Joe Biden suffered in ways that we all understand now from not being able to communicate terribly effectively about what he was doing and how he was doing it. One of those kind of very sad aspects of his failure to communicate was not to be able to tell people and communicate effectively that getting inflation down was different from getting the prices down. I mean, there was a lot of, particularly in terms of energy and food and housing. I mean, there's a lot of prices stayed way high. And so when Joe Biden and the Biden administration said, well, we've got inflation down, a lot of people said, well, you're on a different planet than I am. Because, you know, my prices are still very, very high. And that kind of communication problem, which, you know, dogged the Biden administration. And I think nobody knew that the economy in all the ways in which, you know, the Biden administration, and I think nobody knew that the economy in all the ways in which,

which we want an economy to be a good economy, which was terrific at the end of the Biden administration. But how do you sell it when prices are still going to be very high? Yeah, even that I excuse them, right? Because this problem of communication is not just a, you know, a Biden problem. It's across the globe. I mean, every incumbent, everywhere, got nailed by the same thing. Because this inflation was, this is one of the reasons why I think Jason's argument

this doesn't work for me on inflation. It's not an American thing. It's a global thing. It's a global thing. That's exactly right. Yeah, it was a global shock. There was a pandemic in the Russian war. It had nothing to do or really on the margin was the American Rescue Plan.

That was a side story to everything else. But everything coming across the planet had the same problem and could not communicate that either. So they all lost. Exactly. And the supply side problem, the supply, the problems in all of the ways in which the globe was dealing with with with with problems in terms of just getting supply routes and getting the entire global system back together was enormous and you're absolutely right it affected everybody but I want to just touch on one other thing we haven't talked about. There is a baseline here. We are in, and we have been in, for at least

since the 2008 financial crisis, a deep public reaction to the establishment. There is anti-establishment politics that has taken over. And I think that the financial crisis of 2008 here in the United States, and I think elsewhere around the world really did begin a new era of anti-establishment politics. And Biden, I mean, you couldn't escape this. This led in the first instance to the Tea Party movement on the right and the occupied movement on the left. And then you had Bernie Sanders who did better than anybody expected him to do in 2016. And then you had this other foolish, crazy, clownish person named Donald Trump coming in and becoming president. Nobody thought that was, you know, for Bernie Sanders and Donald Trump to become

leading figures in American politics on the left and the right in 2016 was amazing. Nobody would have predicted that. But you see that the anger, the sense of outrage, the sense of unfairness, the sense that the whole system is rigged against average working people was the baseline. And that baseline really did not change that it was there right through the Biden administration. And I think that Biden and Kamala Harris suffered in part because of that. So it's almost like, to my ear, what you're saying is that you can trace back the, the, the, the, the, the, the, shift over to Donald Trump politically all the way back to the financial crisis and the response to that crisis.

Some people would take it even further back and say, you know, it goes back to, even into the 2000s when China entered into onto the global scene and did, you know, tremendous damage to the U.S. manufacturing base and calling it out a lot of Middle America. That was the start of the kind of the underlying angst that, you know, is now expressed by this shift in our politics. But that was exacerbated by the financial crisis. I would say it goes back before then. I think it starts with the Clinton administration.

I was proud to be a part. But that's where you had NAFTA. That's where you had Chinese accession to the World Trade Organization. That's when you had basically financial deregulation, which some people would say led to the Wall Street financial crisis. That's when you planted the seeds of this. sense among Americans that the system is rigged against them. But it wasn't until the financial crisis that the coping mechanisms that a lot of families used to avoid kind of understanding or

seeing, it was like a veil came down from, you know, in front of them in 2008. But, you know, a lot of Americans, starting in the early 90s, worked harder than ever. They were working longer hours. Women went into the workforce in great numbers, not because professional women had greater opportunities available to them, because women had to work in paid work in order to keep families going. You know, you had non-college men already on a downward escalator that I remember sharply in the 1994 midterms, non-college men voted against Democrats

in big, big ways, major ways. It was sort of a precursor to vote everything else we've seen. When was that? When was that problem? I missed that. That was 1994. That was the midterms of 94. Remember that? That's when Republicans took back Congress.

Right. Nobody thought the Republicans could take back the House. They did. they took back the house. Newt Gingrich came in saying that, you know, it was a revolution. But you have to see the seeds of kind of Trumpism starting at that particular point. You know, a lot of Americans, they worked harder. They used their homes as piggy banks, as housing prices rose.

And then in 2008, that was no longer an effective. coping mechanism because, you know, you had a housing crisis and a debt crisis. And I think that that's when everybody, or not everybody, but certainly the working class of America began to say, wait a minute, there's something fundamentally rotten here. And that's how Donald Trump and Bernie Sanders, the Tea Party movement, the Occupy movement, American politics became fundamentally anti-establishment. And that's how Donald Trump, Trump rode into the White House in 2016, that's how he managed to continue to lie to people through his teeth. I mean, in ways that were just nobody expected a president to do that. And

then lie his way right through saying that the 20 election was rigged. I mean, we are still living, Mark in with that that that shameful event I mean it's still with us it's still a kind of cancer

on our political system and we can't avoid it we can't avoid it the economy can't avoid it so here we are President Trump won the election and he's fast moving on economic policy

and there's lot of moving parts here, you know, tariffs, immigration policy, we've got a lot going on in Congress regarded fiscal policy tax and spending policy, all the things that are going on with Doge and executive orders. The most recent one being around regulatory policy, bringing that back into the executive branch for approval. I mean, just a blizzard of things within the within a month of the president of Trump's inauguration into the second term. So where do we begin? How do you think about all this?

What is it? I mean, I'm just, I can't even wrap my mind around all the things that are happening here and what it all means. Where do you begin to think about this? Well, I start thinking about democracy and capitalism. I mean, you know, they are synergistic. Democracy really does rely on a capitalist system that is transparent and that works well. And capitalism relies on a democracy that is transparent and is not dominated by big money and is trusted by people.

And if you have those, if you get off track in one or both of those, then you're very much in trouble. then it's very hard to get back on. I mean, Donald Trump basically is not a small D Democrat. He doesn't really believe in small D democracy. He is a, I don't know what, you know, authoritarian. I mean, he wants to, he wants all authority to be collapsed into the executive branch. I mean, quite fundamentally against the notion that the framers of the Constitution has. that we have three co-equal branches.

I mean, he is now essentially thumbing his nose at Congress, saying I can impound whatever spending I want. He's thumbing his nose at the federal courts, saying I don't have to be bound by what you are telling me, even in terms of my impoundment of my freeze on federal funding. I can allocate money the way I want. And by the way, I can use tariff. in any way I want.

I mean, you may remember, Mark, I mean, I'm old enough to remember when Congress had actually had some authority over tariffs. But no, now he's just, I'm going to put 25% tariffs. He's just, this is wild, crazy stuff. And it's dangerous, obviously for democracy, but it's also dangerous for the economy. I think that, you know, if he actually puts 25% tariffs, you know, a lot of people I talk with and you talk with say, no, it's all a bluff. But if he does what he is saying he's going to do, it's going to wreck the American economy. It's going to wreck a big, big chunk of the global economy.

The mass deportations of 11 to 20 million people who are working here in the United States, I mean, What is that? That's also going to have enormous negative consequences. The tariffs and the mass deportations are going to cause extraordinary inflation. If you're just beginning with inflation, I mean, the price, the consequences of this are terrible. But it's also kind of undermining all sorts of institutions that we come to rely on and expect. I mean, look at the regular, putting all regulatory agencies under the administration, what happens to the Fed? What happens to the independence of the Federal Reserve?

I mean, you know, once you go down this pathway, you are, you were in a different, you know, a different universe. Okay, so, you know, there are folks that support him, right? A lot of folks. a lot in the business community, and they say, look, hey, you know, the government needs a good, hard look at. You know, there is potentially a lot of waste and potentially some fraud, and we need to look at this, you know, very, very carefully. And, you know, Doge is taking a crack at it.

Then you have folks that say, look, regulate the kind of the regulatory environment got out of hand under President Biden. And it's squelching innovation and economic growth. And, you know, it's not a bad thing to take a look, a good, hard look at the regulatory environment. And then you have folks that say, look, you know, we should have tariffs maybe, but, you know, they raise a lot of revenue and maybe we can use that to help pay for more tax cuts. I mean, so.

Mark, you can find people. There are people in the business community who will say those things. That's right. But you tell me, honestly, let's have a candid discussion right now about business leaders. You know, you know many of them. I know many of them. I know what they say in private. What they're saying in private is I don't want to take a risk of Trump wrath. I don't want to say anything that's going to get him angry with me. so I'm going to go along with everything. I mean, Jamie Diamond, for example, somebody who you know and I know who speaks very much for the American business community, who, you know, is a reasonable man and he's a Democrat.

Where is he? What is he saying? Is he standing up and saying rah-rah Trump tariffs? Is he standing up and saying, yes, this mass deportation is great? Is he saying all the health, safety, and environmental regulations, particularly environment, are bad, bad things for America? Or is he saying great? I mean, he has been remarkably quiet, as have many business leaders who don't want to come out and say what they actually believe. And this is mass intimidation.

Everybody knows these tariffs are crazy. Everybody knows that one of the existential crises for this country and the world is global warming and climate change and you've got to do something very dramatic. And the Biden administration began to do that, probably not nearly enough. And then Trump comes along and gets out of the Paris Accord again. Are you kidding me? I think this is dangerous for the economy. for the business community. I think business leaders need to have the courage of what, of their conviction. They need to stand up and they need to say that this is crazy.

So, but you can't dismiss this perspective, right? I mean, that people actually believe the alternative and they're just not saying. I, you know, I talk to the business community as well, and I do run across many, a lot of the tech guys. Look at the tech guys. You know, in, you know, in, you know, in, you know, Andresen or Bill Ackman or, you know, those folks, they are, they're quite vocal in support of Trump. So it's not just a, it's not just the business community writ large isn't against, many of them aren't against what Trump is saying and what Trump is doing. Well, Andresen and Ackman and, you know, and then and, I mean, even, you know, you know, some of the. people who are heading tech companies, you know, they, I don't know what they're looking at, frankly. I mean, you know, it may be that they're looking at different data that I'm looking

at. I mean, Mark, you and I have talked a lot over the years. We've appeared on panel discussions. You know, I respect your views. I hope you respect mine. We're not, I'm certainly not a radical. I'm not kind of out in the stratosphere. I'm just looking at data and I'm looking at history and I'm looking at institutions. And frankly, what Trump is talking about seems utterly crazy to me. Now, if Bill Ackman and Andreessen, you know, if we were all in the same room,

maybe we could have a rational discussion. I don't know. I don't know. But I do know that a lot of business leaders I talk with are candidly, frankly, quietly, intimidated. Right, right. Well, let me ask you this.

The picture you're painting is that this, the policies that are being pursued here are going to be a problem for the economy, that the economy is going to suffer from this. The capitalism broadly is going to suffer. What is it you're looking at? You know,

what kinds of things? do you look at to gauge whether that's actually going to happen or is happening and, you know, to what degree? I mean, are there certain benchmarks you're using to gauge whether that is, that those, that fallout is actually unfolding? The simplest benchmark is inflation. And closely related to that is what the Fed is doing and is the Fed really going to reduce interest rates. And you look at the, you know, the transcript of the Fed meeting, the recent Fed meeting, you know, they're concerned about tariffs. They're concerned about Trump policies. They don't want to reduce interest rates until they are much more satisfied that we're not facing inflation.

Well, that's sort of the surface criterion. And then you, you know, you look more deeply at what's happening, you know, unemployment. what are we seeing in terms of unemployment data? Are we really on the right track right now? I would say a lot of danger signs. But this is all, but this is again, is all in the immediate term. We haven't even seen the Trump tariffs yet. There are a lot of people saying to themselves and telling themselves,

oh, it's just a bluff. I don't think it's just a bluff. I think he is willing. to do things that a lot of people say no, that's totally crazy. Is he going to turn

Gaza into a resort, a Mediterranean Riviera resort? I mean, a lot of people just thought that was, they laughed when they heard that. But he seems to be serious about that.

We could talk about a lot of individual things, Mark, but if you at the entire package of fiscal policies and consolidating more and more power in the executive branch. I mean, I think one area that's kind of interesting is anti-trust policy. I honestly don't know where the administration, where the Trump administration wants to go with that because they're giving indications at the Federal Trade Commission that they want to ease up on mergers, but at the same time, I'm hearing from a lot of people in the antitrust community that at least Vance and maybe others in the administration are very serious about maintaining

strong antitrust. If that's true, good. I think there's too much market power concentrated in too few hands right now. I think that's one of the problems we have in getting prices down. So if you look at forecasts, so that's what we do for a living, you know, at Moody's, we produce put pen the paper and we produce forecasts. And we have to make, obviously, lots of assumptions about policy. What's the Fed going to do? What is President Trump actually going to do with regard to tariffs and immigration and fiscal policy and that kind of thing?

And if you look at the projections that are being made by economists that do this for a living, it, you know, they, it's kind of sort of sanguine, you know, it's the world's not going to fall apart, you know, it's growth slows. Yes, we have a more inflate, a bit more inflation, maybe unemployment picks up a little bit, but at the end of the day, we kind of navigate through, you know, no recession. And kind of the, there's a lot of elements to that kind of forecast, but one is that the Trump will respond to signals that the economy's not, cooperating. Like he did in his first term, right? He had tariffs. They did damage. It hurt the manufacturing base. The farmers got nailed. He had to actually cut checks to the farmers to compensate for the loss of exports to China. And then he ultimately relented, you know, in his way. He'll declare victory, strike a deal, great deal, and then move on. And that's kind of sort of the underlying assumption that we're all sort of using here that if things go off, start going off the rails, that he will respond. He sees the stock price, stock prices falling, he sees the economy

weakening, he starts listening to business people. They're saying, what are you doing? In private, obviously not in public. And he'll respond to that. Is that sound right to you? Well, to some extent, yes. I think that he still does look at the stock market. And if the stock market starts losing ground, he does adjust or he does, you know, kind of listen more than he does before to business community. But here's the thing that makes me particularly concerned. In his first term, he was surrounded by people who knew a lot. They knew a lot about the economy. I mean, Mnuchin was not, you know, a... Treasury Secretary. A stupid man. I mean, he was actually thought.

thoughtful. And when when Trump, you know, sees the stock market dropping, he, he consults with some of the people around him who know a lot. But he's now surrounded by people who don't know nearly as much. In fact, there are many more ideologues around him who are, what are they neolists or authoritarian? I don't know. You come up with a term. This is not business as usual. A lot of economic forecasting is based on an assumption about institutional permanence, about the future being basically like the past in terms of laws and constitutional frameworks and norms being basically like they were over the last 10 or 15 or 20 or 30 years. But can we assume that now?

one thing that keeps me up at night is thinking that we really are heading into a different universe where the norms and the institutions and the laws and constitutional frameworks that we have taken for granted are no longer there. When the Trump administration says to the federal courts, no, we are not bound by you any longer, which it is on the verge of doing, that is a signal to me that, We're on a different planet and that all of the assumptions that we use in terms of making forecasts are, well, they're just not necessarily. They're wrong or they're just based upon false premises.

Yeah. Yeah. Okay. So I'm going to put you in an awkward position. You can tell me you're not going to do this. But okay, now you have my job. You know, you're. I wouldn't want your.

Your job for a million bucks. Yeah, your chief economist of Moody's. So what does that mean? You mean, would you have a recession in your forecast? I mean, it sounds like you're saying we're headed for an economic train wreck and the economy is just not going to be able to navigate through this in a reasonably graceful way. That's what it feels like you're saying to me. Yeah.

Well, I would say I think I'd do something slightly different. I'd say assuming that the institutional frameworks of our. government and our laws and constitution and constitution remain as they have over the past uh let's say since the civil war uh here's what and and and the assign and that's kind of a 60 to 90 percent safe assumption here's where i think we're going but i want to give you a different track as well i want to give you um a a a completely different view of where we could be going if I'm wrong about that institutional framework. Because I think that there is some not insignificant danger

that we're going to be on a different track entirely as a country, as a world, a society in terms of who we are and what we're doing. I mean, throw in, I haven't even mentioned this yet, but Donald Trump siding with Putin against Ukraine. I mean, this is a, this is, this is huge. This is a 180 degree turn for the United States in terms of foreign policy. You know, Europe is no longer, you know, we're putting up big tariffs against Europe or threatening tariffs against Europe and we're saying to them, you're now, you know,

you're on your own. We're on Putin's side. Well, what does this mean in terms of in terms of the future? So if I were you, I'd say, okay, I'm going to give you my 15 or 20 percent odds of being on a different track of the United States becoming an authoritarian non-democracy, something in the order of Hungary, maybe for a while. and our laws and institutions and assumptions being completely thrown out the window. Let's take a look at that. What does that really mean over the next five or 10 or 15 years? Yeah, we actually do a lot of scenarios.

And there's a lot of dark scenarios for sure. Yeah, for sure. Let me just quickly, because we're running out of time, bring Chris and Marissa into the conversation. Chris, anything you want to push back on or tease out here with Bob? Oh, gosh, there's so much. I was intrigued by this idea. I'm looking forward to the memoir that the seeds of Trumpism were back in the really sown in the Clinton administration.

And I would even argue that perhaps this is more cyclical than that. We have these periods of wage inequality, rise of populism. You go back historically, you see that. So do you think this is just a fever that needs to break that the Trumpist wave will crest? And then there'll be a backlash and a new regime will start once again. Is that what you see from the political future? Or do you see this as something that has much more permanence going forward? This Trump movement is just going to continue.

Well, I am of the view that history does, you know, again, as the same goes. It doesn't repeat itself, but it does echo. And we are in a period of time that is similar to the gilded age of the late 19th, century, early 20th century. And, you know, that was a time when a lot of the institutions of the country were tested in terms of inequality and corruption and the robber barons running a lot of the country. And that ended not terribly happily in 1929. Could we see a repeat of that? I think that that is not a totally far-fetched.

scenario. It wouldn't be like 1929, but it could be something else, an echo of 1929. It also ended, you know, 1929 ushered in eventually the Second World War. Could we, could we be seeing something like that happen? That was a, you know, that was a huge leveling effect. I mean, you talk about getting rid of the gilded age. It really did. We didn't get rid of the gilded age until until the depression and then the Second World War. But what a horrible thing to have to expect or think about as the way we sort of get back on track. I hope that we don't have to do that. But there are very profound similarities.

Marcia, anything you want to push back on or tease out? Yeah. So, Bob, where do you think that this ends up in terms of policy on tariffs, on the budget? I mean, we haven't seen very much pushback from Congress against what President Trump has done in terms of a lot of the executive actions. We did see the Senate passing a version of a bill overnight last night without the $4 trillion of. of tax cut extensions in it. Where do you think policy, ultimately, if we look six months ahead, where do you think we actually land? Do you think there'll be pushback? Good question.

I think the Republicans are cowed. They are intimidated. Look who they just allowed into the administration. Without a peep. I mean, extraordinary. So yes, they will go along with a tax cut. They'll go along with a $4.5 trillion or $5 trillion tax cut, and how are they going to pay for it? Well, they will pay for it in part by fairly drastic cuts.

And some of those cuts, you know as well as I do. There's no place to get much out of the federal budget unless you go to Social Security, Medicare, and Medicaid. National Defense. Are they going to get it out of national defense? I doubt it. Are they going to get it out of Social Security? Not directly, maybe indirectly. Out of Medicare, maybe, again, indirectly. Medicaid, I think they're going to really make major cuts in Medicaid. So the framework here, Marissa, is you have very substantial cuts in programs that the poor and the working class really need in order to pay for

a big tax cut that disproportionately helps people who are very wealthy. And what then? Will the public understand that? Will Democrats help them understand that? Will that lead to a major

takeover by Congress of Democrats in 26? Maybe I think likely if in fact that's the scenario in terms of fiscal policy that we are going to see. Well, let's send the conversation this way, Bob. So you're obviously pretty bleak, and I get you, I hear you, a lot to be nervous about here. But paint the opposite picture for us.

How could this play out in a way that would be surprising, from your perspective to the upside. How could that, how would, is that even conceivable to you? And if it is, what would that scenario look like? Well, it would be, we've talked about pieces of this mark. One is that the stock market begins to react. Okay. The closer we get to. And by the way, this is a sidebar. I'm really curious if you've got thinking, why isn't it reacting, which is a question I get all the time. I mean, it's gone sideways here, but why isn't it reacting? Yeah. It's not reacting because people have discounted Trump's assertions as bluffs. And, you know, he has so much bluff on his side now that he can say just about anything.

And people say, well, that's just bluff. But I think that once, let's just say, and you asked me, what's my optimistic view, my optimistic, quirk-unquote view, kind of an erotic meaning of optimism, is that we get close to genuine tariffs and real mass deportations. And the stock market really starts reacting and the bond market. And Trump sees that and he's angry with the people around him who have told him to go ahead. Some of the ideologues who basically are neolists and even including Musk. And he says, no, this is crazy.

And he goes and he pulls way back. Meanwhile, the Democrats are making hay on this redistribution from the working class to the wealthy, and they are teed up to make major, major victories in 2026 in the midterms, which they do, and they take over both the House and the Senate, and basically that's the end of the Trump administration. registration. Got it. Got it. Okay. You know, I, one thing I do worry about, what you're saying, and I do agree with it, is that the one governor on economic policy under President Trump are the markets, you know, the stock market. And I constantly go back to that 10-year treasury yield. What is it doing? Because that is a real-time barometer on, you know, what investors. And that's

where the money is, you know, ultimately. I do worry we're in a bit of a hall of mirror. in that, you know, President Trump is looking at the stock market and the stock market's thinking, oh, he's going to bail us out. He's not going to do anything that hurts us, and therefore they never sell. And if there's ever a down day, they use that as an opportunity to come, investors come back in. So that's not an equilibrium, but that could. No, no. It's not equilibrium.

In fact, that's, I think it's realistic to think, you know, stock markets, barring, hate uncertainty. And we're entering a period of extraordinary. uncertainty. I mean, we haven't seen uncertainty like we are just about to enter it for many, many years since 2008. Yeah, yeah. Well, thanks so much for spending time with us. I really do appreciate it. And very kind of you. It was good to see you again. And thank you. I do want to say to the listeners, I hope you enjoyed the conversation. And we're going to call it a podcast to talk to you next week.