The Truth with Lisa Boothe: Trump Economy 2.0: Tariffs, Inflation, AI Jobs & Tax Cuts Explained
4/16/202620 mincomplete
0:00This is an iHeart Podcast.
0:02Guaranteed human. Welcome to The Truth with Lisa Booth, where we get to the heart
0:06of the issues that matter to you.
0:08Today, we're talking about all things economy.
0:11We just had tax day where we just paid a bunch of money to the
0:15federal government to go spend our money, hard -earned dollars, I guess, on leering centers
0:18across the country. But it was the first tax day since the big, beautiful bill.
0:24So we'll talk about refunds.
0:26We'll talk about the impact that that had for Americans.
0:29We're going to have this conversation with Peter St.
0:32Unge. He is a senior economist at Heritage's Roe Institute.
0:36We're going to talk about that.
0:37We'll also talk about how the war in Iran, how that's impacting cost, gas prices
0:43as well. And also, even though inflation has cooled, prices haven't gone down as much
0:49as we would like them to.
0:50So why have those prices remained so stubbornly high?
0:54We'll dig into that as well.
0:56We'll talk about AI's impact on jobs as well and wages.
1:00So a lot going on, a lot to cover.
1:03We're going to dig into all things economy with Peter St.
1:05Unge. Peter St. Unge, it's great to have you on the show.
1:13First time on, obviously, no shortage of news to cover these days, but a lot
1:17in terms of the economy.
1:19So looking forward to getting your outlook on everything.
1:21Yeah, thanks for having me on.
1:23You know, so we, looking at what we've seen from Trump 2 .0 so far,
1:29how would you assess the economy under President Trump since he took office versus, you
1:35know, what we saw under the Biden administration?
1:38So Trump 2 .0 is following the same playbook as Trump 1 .0, and it's
1:43substantially similar to the Reagan playbook, which is cut taxes, deregulate, the twist that, well,
1:51and drill, baby, drill. The twist that Trump has really put on it is a
1:56almost single -minded focus on working -class wage earners.
2:01So that, you know, with deportations, with illegals, there's a big economic angle to that,
2:08which is that illegals are not immigrating with neurosurgeons or college professors for work.
2:14In fact, they're raising the incomes for those people because the illegals didn't bring any
2:19neurosurgeons with them. So you get a shortage of neurosurgeons.
2:23You know, the whole line that illegals fix labor shortages, no, you get the exact
2:27same labor shortage, but now what you have is too many illiterate break layers, and
2:31you don't have enough neurosurgeons, schoolteachers, you know, on down the line, linemen, skilled trades.
2:38So what Trump's been doing is getting rid of the people who dragged down the
2:43wages for blue collars, and, you know, I think they've noticed that.
2:47They appreciate it. So the fly in the ointment at the moment is really what's
2:51happening with the war, which almost the entire impact of the war is oil prices.
2:57It's not actually the war itself that matters.
2:59Like, Bill Clinton bombed Iraq recreationally throughout the 90s.
3:04It has no impact on the economy.
3:05What they're spending, yes, but what really matters here is the oil prices.
3:10So those have driven all of the numbers off the charts.
3:13Inflation last month was up 0 .9%, which is annualized double digits.
3:17That's the worst of Biden inflation.
3:20Now, what we're seeing, which I think is interesting, is that companies are not raising
3:25prices in line with that.
3:26So if you look outside of energy, we do not have a spike in inflation
3:31since the war began. Essentially, companies seem to believe that the war is going to
3:36be short, and so they're not raising their prices.
3:39They don't want to alienate customers.
3:40And in fact, if you look at the stock market at this point, it's actually
3:43above, the S &P is above where it was when the war started.
3:47So even though oil markets say, you know, we're very much in the thick of
3:51the war, not at the worst of it, but it's still ongoing, oil markets are
3:55worried about the Strait of Hormuz, but stocks and business behavior, they seem to think
4:01that the war is essentially wrapped up.
4:03If that's the case, we go back to where we were before the war, which
4:06was very strong growth. You know, the left likes to talk about the weak job
4:11market. Almost all of that supposed weak job market was government layoffs and deportations.
4:18So both of those groups show up as jobs.
4:21Maybe they shouldn't, but they are counted as jobs.
4:23That was nearly the entire story in the so -called weak job market.
4:27If you look at GDP growth, productivity growth, that has been absolutely on fire.
4:32Productivity growth was, I want to say four and a half to 5%.
4:35That's one of the best numbers we've seen since the 1980s.
4:37So very strong economy. When the war wraps up, I think we're going to get
4:42right back to it. Now, is that intentional with padding the jobs numbers under the
4:46Biden administration with government employees and illegal immigrants?
4:51Yeah, I think part of it's padding.
4:53I think most of it is just that that is their base, right?
4:56The base for Democrats are government workers.
4:59Government workers contribute something like 92 % to Democrats and illegal immigrants who are the
5:05future voters, right? Those are the replacement voters.
5:08Again, something like 90 % propensity to vote Democrat.
5:11So it's a helpful bonus that, you know, admitting however many million migrants he did,
5:19expanding government spending, expanding government employees, those all pad the jobs numbers.
5:24But I think the main reason they do it is that is their base.
5:27That makes sense. You know, when you look into, like, add the tariffs into the
5:31mix, how do you see them?
5:34Obviously, you know, there will be some that say it's a tax on, you know,
5:40Americans and that those costs are passed down, other states necessary to onshore jobs and
5:45to rebuild a manufacturing base.
5:48Like, how do you read it and what's been the impact on the economy so
5:52far? Yeah, so pretty much any serious economist is going to recognize that a tariff
5:58is a tax. It's akin to a sales tax that only goes on foreign imported
6:01products. So if you want a small government, then you don't like tariffs.
6:05Having said, there are two things that Trump is doing with his tariffs that I
6:09think are really useful. One of them is putting pressure on other countries to bring
6:12down their barriers. That has absolutely been happening.
6:15He's been going through one by one negotiating with Japan, Europe, China, and getting them
6:21to reduce their trade barriers.
6:23There were a number of countries that reduced their barriers 99%.
6:27So if you're achieving that, then your tariff is actually improving things across the board.
6:32This is something that small government people should love.
6:34The other benefit or use of a tariff is to reshore production.
6:40Now, the kicker on production is that if you're going to bring factories to America,
6:45you have to lower taxes and you have to reduce the red tape, especially environmental
6:49red tape. They're not going to come here.
6:51You know, if you just put tariffs on and you don't improve the domestic business
6:55environment, then yes, you're just punishing Americans.
6:58It's a bad idea. Countries in Africa, Latin America, they've done tariffs for decades and
7:03they've failed at it because they don't improve the business environment.
7:07Trump has been laser focused on that.
7:09The big, beautiful bill, most of the cuts in that have been for small business.
7:14The corporate tax rate, the QBI pass through, accelerated depreciation.
7:20These are rocket fuel for investment, for creating jobs.
7:24Of course, he's been doing everything he can to get rid of red tape with
7:27not much help from a GOP Congress, but he has absolutely been ticking every single
7:32box to improve the business environment.
7:34If you are doing that together with these tariffs, then, I mean, we saw the
7:39results. He's got something like $4 trillion of investment lined up, incoming investment.
7:45Things like there's $100 billion chip factory out in Arizona from Taiwan Semiconductor.
7:50Those kinds of things are coming in because of the tariffs.
7:52To put that in perspective, $1 trillion of investment is worth about $1 million jobs.
7:58All right, so $4 trillion, you know, Trump's variously talked higher numbers.
8:01It could be six. It could be eight.
8:03Let the man cook on tariffs, and we could be looking at millions of jobs
8:07coming in, and those are manufacturing jobs.
8:10That's exactly the category of workers who've been suffering for 40 years because they got
8:15sold down the river in bad trade deals.
8:18You know, we would get financial or Hollywood or software or pharma, and then we
8:24would give away everything else.
8:25We would give away all the blue -collar jobs.
8:27So they're finally getting something out of this.
8:29Got to take a quick commercial break.
8:31More with Peter on the other side.
8:35Americans, we hear that, you know, inflation's cooling, inflation has cooled, but they feel like
8:41prices are just too high still.
8:43Is that just permanent now, or why haven't costs decreased more?
8:48What's behind all of that?
8:50Yeah, it's tricky. So before the war started, official inflation numbers were something like 2
8:55.4, which is pretty tame.
8:57Truflation, which is a non -government aggregator of prices, and they look at millions of
9:01prices, they said it was 0 .7 % was the inflation we were running before
9:05the war. That is about as low as it gets.
9:08In fact, you can't go negative because the Federal Reserve will intervene and start printing
9:13money because they're deathly afraid of deflation.
9:16They shouldn't be, but anyway, they are because they're a counterfeiting cartel.
9:20So they will start printing money, right?
9:23So the lesson here is even when 0 .7%, right, even when inflation was as
9:28low essentially as possible, the central bank, people were still upset about it.
9:32The reason is that voters have not accepted Biden inflation.
9:36They have not accepted that the world changed.
9:38They're not happy about it.
9:39They don't want it to have changed.
9:41And so even if you're running at 0 .7%, you know, Trump had a couple
9:46missteps early on where he was talking about how, you know, inflation's a myth.
9:50You know, this is all.
9:51No, that's not how people feel it, right?
9:53Even if you can explain to you, you're blue in the face that, you know,
9:57with a central bank, you're never going to actually get deflation.
10:00Voters aren't going to accept that.
10:01And so the best you can do is what I think Trump's been trying to
10:04do, which is just throw the kitchen sink at it.
10:07Try to bring down house prices, medical care, insurance just across the board.
10:11But voters are going to remain upset about inflation for a while here because they
10:16really don't accept what Biden did.
10:18You know, we'll see a new Fed chair here soon.
10:21What impact will that have?
10:24Kevin Marsh was interesting. Trump had a couple of candidates who were seen as easy
10:29money, meaning inflationary. And Kevin really surprised the market.
10:33So once when he was announced, gold and silver crashed, I think several percent within
10:38minutes. And when gold and silver crashed on a new Fed chair, that says that
10:42this is going to be a hard money guy, that this is going to be
10:44a guy who keeps rates relatively high.
10:47Normally, you would expect slower growth, but you would expect lower inflation from a hard
10:51money guy. iconic hard money Fed chair is Paul Volcker, the 1980s under Reagan.
10:56But what's interesting is that if you look behind that sort of instant market reaction,
11:01for about 15 years, Kevin Warsh has been talking about something that he calls Robin
11:05Hood monetary policy, which is where you lower rates for Main Street so you can
11:09get loans out the door, businesses can borrow, they can expand.
11:12So you lower rates. Now, normally that would drive inflation.
11:16But what he wants to do is to cancel that inflation by selling off, I
11:21think it's seven or nine trillion dollars that the Fed is sitting on of assets
11:25that have bought up most of it during COVID.
11:27So he wants to sell that stuff off.
11:30That's going to hurt Wall Street because Wall Street owns most of those assets, the
11:34things like treasuries. So if you sell some, it raises or it lowers the price
11:37on everything else. So his idea is lower rates to goose mom and pop, small
11:44business, Main Street, but make Wall Street pay for it.
11:47So he calls that Robin Hood monetary policy.
11:50That I don't think has changed since the war.
11:54I think Kevin Warsh, like pretty much the rest of the world, thinks that the
11:56war is going to be over pretty soon.
11:58In fact, he's given speeches where he thinks that there may be a lot more
12:01room to do that because of AI, because artificial intelligence, because AI is lowering costs
12:07so massively, in some cases, 95 percent, that there may actually be room to cut
12:13rates very, very low. This is wonderful for small business.
12:16It's wonderful for factories expanding.
12:18And he thinks that AI could soak up the inflation.
12:21How do you view AI's impacts here in the next like five, 10 years on
12:27the economy in terms of jobs, wages, et cetera?
12:31So every, you know, automation is nothing new.
12:34We've had it for thousands and thousands of years.
12:35The ancient Greeks worried about oxen pulling plows.
12:39They said we were going to have unemployed men.
12:40We'd have to start wars to get rid of them.
12:42The Middle Ages worried about water wheels and windmills.
12:45OK, automation is very old.
12:47The Industrial Revolution, of course.
12:48And the universal pattern is this.
12:49You get a short term dip in jobs because the jobs get replaced faster than
12:55the new ones get created.
12:57So you do get this period of 10 or 20 years where it can get
13:00harder to find a job, especially if you're young because you don't have experience yet.
13:04But the other end of it, after that period, so 20 years down the line,
13:10you get the exact same number of jobs, one for one replaced, and the jobs
13:15pay much, much better. So, you know, if you look at the Industrial Revolution, for
13:19example, it replaced physical jobs.
13:23Initially, all the farm laborers lost their jobs, but they then they went out and
13:28found other jobs, right? Because the automation itself made the economy much, much larger.
13:33So you got all kinds of new jobs that people couldn't even, you know, couldn't
13:36even imagine back then. So when the smoke cleared, if you look today, for example,
13:40a house painter in America makes about $200 a day.
13:45A house painter in India makes about $9 a day.
13:48And that's not even a full Industrial Revolution, right?
13:51India has electricity. Another example is babysitters.
13:54There was a study recently, babysitters nationwide make $20 to $25 an hour.
13:58That is the lowest skill job possible.
14:0116 -year -olds can do that job competently.
14:04So I think a lot of the AI doomsday, it's coming from the left.
14:09It's coming from the exact same organizations who've been peddling global warming doomsday for 40
14:14years, a World Economic Forum outfits like this.
14:17I think they want to scare people with AI because they're trying to install universal
14:21basic income so they can convert voters into government workers.
14:25But if you look at thousands of years of automation, you know, if you just
14:29think about it logically, like, you know, a fishing pole is automation, right?
14:35You could catch the fish by hand.
14:36Is it a good idea to throw away the fishing pole?
14:38No, because fishing poles make us richer.
14:40Fishing trawlers make us richer.
14:42So I think we're definitely going to have maybe a decade or two where you're
14:46going to see elevated unemployment, especially for young people.
14:48It could be two, three points elevated.
14:50They're going to have to get creative.
14:52The most important policy response is it should be very easy to start a business.
14:58It should be very low tax to start a business.
15:00It should be very easy to hire somebody.
15:02It should be as easy as ordering something on Amazon to hire somebody, the paperwork,
15:07to, you know, run your corporate compliance.
15:09These things need to be much, much easier so that that 10 -year gap in
15:15between is shorter. Maybe it's a two -year gap.
15:18So what specific jobs do you think are sort of more at risk?
15:21Well, there was a study by Brookings recently that looked at the kinds of jobs
15:25that they think are threatened.
15:26And in a word, they're cubicle jobs.
15:29So administrative, paperwork, you know, the kinds of jobs that fill the bowels of big
15:35companies, hospitals, universities, government workers, obviously.
15:39Those are the jobs that are on the firing line.
15:41I think metaphorically what's going to happen with AI, if you've ever seen the movie
15:44Office Space, that's exactly it.
15:48Okay, you have these soul -crushing cubicle jobs.
15:50Those are all going to go.
15:51And they're going to be replaced with blue -collar jobs, physical labor jobs, jobs where
15:56the value is that a human is doing it.
15:59So to give an example, 100 years ago, you could replace bartenders with vending machines.
16:04Guess what? It didn't happen.
16:05Why? Because people do not want to go to a bar and log up to
16:09a vending machine. What's the point?
16:11Right? There's a ton of jobs.
16:12They have value because they are performed by a human.
16:16Nobody wants, no matter how good the robot is, you do not want to go.
16:19watching your kids. You don't want it babysitting your pets.
16:22You don't want doggy daycare done by robots.
16:24You know, therapists, nurses, almost the entirety of health care, patient -facing health care, people
16:30do not want that done by robots.
16:31So, you know, you get a much richer society where you have an explosion in
16:36trades because, you know, if the Industrial Revolution took us from $9 a day to
16:41$200 a day, AI could take us to a lot more, right?
16:44You'd be looking at Starbucks paying $200 ,000 a year.
16:47I mean, you would get a dramatic increase in jobs that today we think of
16:52as low skill, low wage.
16:54But if the automation is coming, if it is Industrial Revolution scale, those jobs pay
16:59much better. Now, I can say from experience, every blue -collar job I've had in
17:03my life, and I had a bunch, I had them in college, I had them
17:05when I was young, I've enjoyed them much more than the cubicle jobs.
17:09So I think, frankly, when the smoke clears, future generations will wonder why the heck
17:14people were worried about cubicle jobs going, good riddance.
17:19The new jobs will pay much better.
17:21They'll be much more human.
17:23You'll actually get to interact with people.
17:24If you don't like interacting with people, then you can hand make stuff because a
17:28much richer economy sustains that as well.
17:31Yeah, it's the office space question.
17:33What exactly would you say you do here?
17:34That is exactly it. And, you know, if you take office space and you apply
17:39AI to it, you can imagine the consultant coming in, not only asking what people
17:44to do, but knowing that AI can do it for free.
17:47You know, before we go, obviously, the dreaded tax day has passed when the government
17:53steals from us. This is also the first tax day since the big, beautiful bill.
18:00How did that impact refunds for Americans?
18:04You know, how does that sort of impact the tax landscape for Americans?
18:10Yeah, so most of the impact of big, beautiful was preventing bad things from happening,
18:15right? Which is that Trump's first term tax cuts had a sunset on them in
18:19order to get them through Congress.
18:21They were going to expire.
18:22If they had expired, that would have been catastrophic for small business, for job creation.
18:27So that's the main impact of them.
18:29He did add some elements to it, though.
18:31He had the no tax on tips, on overtime, Social Security payments, which is effectively
18:37built in there as a extra deduction for the elderly.
18:40Those together, they were, you know, very popular.
18:44Democrats shocked me by fighting them, but there you go.
18:47Those collectively boosted tax refunds by about 11 percent.
18:51So it's about $3 ,500 a year per family.
18:53It's about $30 billion above last year.
18:56Trump wanted much bigger cuts, of course.
18:59Unfortunately, Republicans have a very, very thin majority.
19:02So rhinos effectively run the country, for better or worse.
19:06And they're already talking, Johnson is talking about for next year, maybe trying, or for
19:10this year, rather, trying to do a reconciliation 2 .0, where they might stick in
19:14some new pieces in there.
19:16But again, until we have a conservative majority in the House, which may not be
19:21for a while, you're unlikely to see really big tax cuts.
19:24So it might be first -time credits for homebuyers.
19:27They might do something with Social Security.
19:29They might expand that. Maybe even a payroll tax pause if oil prices pay high.
19:34But I don't think that we're going to get it.
19:36You know, we'll continue to get benefits from what was in Big Beautiful tips over
19:40time. I don't think we're going to get anything real big this year.
19:43Well, Peter St. Ange, appreciate your time.
19:45Thanks so much for breaking everything down.
19:47That was Peter St. Ange, a senior economist at the Heritage Foundation's Bro Institute.
19:52Appreciate him for making the time to come on the show.
19:54Appreciate you guys at home for listening every Tuesday and Thursday, but you can listen
19:58throughout the week. I also want to thank John Cassio, my producer, for putting the
20:01show together. Until next time.
20:06This is an iHeart Podcast.
20:09Guaranteed Human.