What Will Trump’s Economic Plan Mean for American Wallets?

>> TRUMP HAS PROMISED IT TO MAKE INCOME SORE AND MAKE THE COST OF LIVING, QUOTE, COME TUMBLING DOWN.

LIKE MANY ECONOMISTS, GLOBAL COLUMNIST ECONOMIST IS NOT CONVINCED.

THIS WILL LIKELY BRING AN ECONOMIC DOWNTURN.

SHE JOINS HARI SREENIVASAN TO TALK ABOUT THE IMPRACTICALITY'S OF THE TRUMP AGENDA.

>> THANK YOU SO MUCH FOR JOINING US.

YOU WROTE IN A RECENT COLUMN FOR AN OP-ED QUESTIONING WHETHER AMERICA HAS BECOME A DISTRESSED ASSET AND IF WE AS A COUNTRY ARE A VICTIM OF ITS OWN SUCCESS.

EXPLAIN WHAT YOU MEAN BY THAT.

>> THE SEAT WE ARE ABOUT TO GET TRUMP TOO.

ONE OF THE MANY THINGS YOU CAN SAY ABOUT TRUMP IS THAT HE IS ONE OF THE MOST TRANSACTIONAL PRESIDENTS, FINANCIAL ICE PRESIDENTS, SELF INTERESTED PRESIDENTS THAT WE HAVE EVER HAD AND WILL HAVE AGAIN.

TO ME, THAT DOVETAILS WITH SELF INTERESTED MARKETS AND SELF INTERESTED ECONOMIES.

FOR THE LAST FOUR YEARS OR SO , WITH A COUPLE OF EXCEPTIONS, I WOULD BUT THE BIDEN ADMINISTRATION AS ONE OF THE BIG EXCEPTIONS.

WE HAVE HAD ECONOMIC POLICY THAT HAS BEEN RUN I THINK IN A VERY SELFISH WAY.

IT HAS BEEN RUN ON THE CHICAGO SCHOOL OF SHAREHOLDER VALUE MODEL WHERE AS LONG AS SHARE PRICES ARE GOING UP AND CONSUMER PRICES ARE GOING DOWN, EVERYTHING IS FINE.

IF YOU HAVE TRUMP ABOUT TO INHERIT AN ECONOMY THAT WAS ACTUALLY DOING VERY, VERY WELL, BUT FOR A VARIETY OF REASONS, ONE BEING THE FELT EXPERIENCE OF THE INFLATIONARY BLIPS THAT WE SAW DURING COALBED, WHICH HAD A LOT OF PEOPLE HARD.

BUT ALSO AN IDEA THAT HE WAS ABLE TO PRESENT THAT TRICKLE- DOWN WORKS.

TAX CUTS WILL MAKE THE ECONOMY GROW EVEN FASTER.

WE ARE TAKING A STRONG ECONOMY, AN ECONOMY THAT WAS WORKING WELL.

YOU CAN LIKE BIDENOMICS OR NOT LIKE IT FROM A POLITICAL STANDPOINT, BUT THE U.S. HAD THE BEST RECOVERY OF THE POST- COVID PERIOD.

SO IT WAS WORKING.

HE IS GOING TO INFLATE THE ECONOMY EVEN MORE BY USING DEBT AND DEFICIT TO BOLSTER ASSET PRICES, TO DEREGULATE MARKETS AT A TIME WHEN THAT IS THE LAST THING WE NEED TO BE DOING FOR THE SAFETY OF THE ECONOMY.

AND I'M VERY WORRIED THAT WE ARE GOING TO GET A BIG CORRECTION.

THAT'S WHAT I MEAN BY THE U.S. AS A DISTRESSED ASSET.

MY FEELING IS IN SOME WAYS, WE ARE POLITICALLY BUYING AND AT THE TOP OF THE MARKET AND WE ARE ABOUT TO SEE A POTENTIAL DOWNTURN IN THE NEXT COUPLE OF YEARS BECAUSE OF SOME OF THE POLICIES THAT THIS PRESIDENT MAY MAKE.

>> BEFORE WE GET INTO FURTHER DEBT AND DEFICIT, AN INDICATOR RIGHT NOW THAT PEOPLE SEE ON TV ON A NIGHTLY BASIS IS THE STOCK MARKET.

AND IN THE WAKE OF THE ELECTION RESULTS, WE HAVE SEEN A METEORIC RISE IN STOCKS AND CRYPTO CURRENCIES.

WHY SHOULD WE NOT LOOK AT THAT AS THE INDICATOR OF MORE STABILITY TO COME ?

IF WHAT YOU ARE SAYING IS TRUE, WHAT WE ARE SEEING IS KIND OF A SUGAR HIGH.

>> 100%.

FIRST OF ALL, MARKETS HAVE VERY LITTLE TO DO WITH THE REAL ECONOMY.

IN FACT, OFTEN TIMES, SHARE PRICES FOR A SPECIFIC COMPANY WILL GO UP IF THEY STOP INVESTING IN THINGS LIKE RESEARCH AND DEVELOPMENT.

IF THEY LAY PEOPLE OFF.

IF THEY CUT COSTS, IF THEY OFFSHORE JOBS.

PRICE GO UP BUT IT WILL NOT ENRICH THE COMMUNITY.

IT WILL NOT DEVELOP THE NEW THINGS FROM AN INNOVATION STANDPOINT.

IT WON'T CREATE JOBS OR INCOME GROWTH.

SO STOCK MARKETS AND THE REAL ECONOMY ARE OFTEN INVERSELY CORRELATED.

IN FACT OVER THE LAST 20 OR 30 YEARS AS MARKETS HAVE BECOME A MORE AND MORE IMPORTANT PART OF HOW WE DRIVE GROWTH, AND BY THAT I MEAN ASSET GROWTH, ASSET PRICE INFLATION OF STOCKS, ET CETERA.

YOU HAVE SEEN SLOWER AND MORE VOLATILE ECONOMIC GROWTH.

FINANCIAL INSTABILITY, FINANCIAL CRISES.

YOU CAN TAKE THIS AND SAY WHEN THE STOCK MARKET IS DOING BETTER, WHEN THE REAL ECONOMY IS DOING WORSE.

WHAT I WILL SAY IS THIS.

IF YOU LOOK HISTORICALLY, WE ARE AT A PERIOD IN THIS COUNTRY WHERE WE ARE ABOUT SIX YEARS OVERDUE FOR A SLOWDOWN, IF YOU DISCOUNT THE QUICK V SHAPED DOWNTURN AND RECOVERY OF COVID WHICH WAS KIND OF A ONE-OFF EVENT.

RECESSION AND RECOVERY CYCLES HAPPEN EVERY 10 YEARS.

IT'S BEEN OVER 16 SINCE THE LAST REAL ONE.

SO NO MATTER WHO'S IN OFFICE, WE ARE PROBABLY DUE FOR SOME KIND OF A SLOWDOWN.

YOU HAVE A PRESIDENT COMING IN, TRYING TO BOLSTER THE MARKET AND CREATE MORE DEBT AND DEFICIT GROWTH AT A TIME WHEN YOU ALREADY HAVE THE POTENTIAL FOR A SLOWDOWN, THAT CREATES A RISK HE DYNAMIC.

THE TIMES WHEN YOU GET BIG STOCKMARKET CORRECTIONS, FINANCIAL CRISES AND SERIOUS DOWNTURNS.

>> WHEN YOU TALK ABOUT THE DEBT AND THE DEFICIT, THERE ARE CERTAIN POLICIES THAT THE PRESIDENT HAS PUT FORWARD.

ONE BEING A VERY FAMOUS ONE TARIFFS.

ESPECIALLY ON CHINA.

WHAT WOULD THE RIPPLE EFFECT BE IF THERE WAS A PRONOUNCEMENT FROM THE ADMINISTRATION THAT WE WERE ABLE TO IMPLEMENT LARGE- SCALE TARIFFS ACROSS THE BOARD?

HE HAS SOLD IT TO HIS SUPPORTERS AND VOTERS IS THAT THIS WILL PENALIZE OTHER COUNTRIES, MAKE THINGS MORE EXPENSIVE FOR THEM.

>> IT IS REALLY IMPORTANT TO STEP BACK AND DEFINE THE WAY TRUMP THINKS ABOUT TARIFFS AND THE WAY THE BIDEN ADMINISTRATION THOUGHT ABOUT THEM, THE WAY THAT THEY CAN BE THOUGHT ABOUT.

TRUMP IS USING A GILDED AGE APPROACH TO TARIFFS.

IT IS ABOUT PROTECTIONISM.

IT IS ABOUT DEFENSE, ABOUT PENALIZING OTHERS, USING THE CONSUMER MARKET IS KIND OF A BARGAINING CHIP.

WHICH I EXPECT HE WILL DO .

WE WILL HEAR A LOT ABOUT THAT.

IF THE COUNTRY IS NOT DOING WHAT HE WANTS, YOU MAY SEE TARIFFS PULLED OUT AS A THREAT.

THAT'S A VERY DIFFERENT WAY OF THINKING ABOUT A TARIFF THAN SAY A ONE-OFF MEASURE TO CORRECT AGAINST ANTI- COMPETITIVE PRACTICES ON THE PART OF CHINA FOR DUMPING STEEL ELECTRIC VEHICLES INTO THE MARKET.

THAT'S A WAY OF PROTECTING U.S. WORKERS.

I THINK WHAT TRUMP IS GOING TO DO IS NOT WHAT HE SAYS HE IS GOING TO DO, WHICH IS PUT 60% TARIFFS ACROSS THE BOARD AND 20% ON OTHER ALLIES BECAUSE THAT WOULD PROBABLY CRASH THE STOCK MARKET AND WEAKEN THE DOLLAR.

I THINK WHAT HE IS GOING TO DO IS USE TARIFFS AS A BARGAINING TOOL IN A VERY POLITICAL WAY TO CREATE A LOT OF UNCERTAINTY IN THE MARKET AND TO THE EXTENT THAT THEY ARE USED IN ANY BROAD- BASED WAY, BECAUSE THERE'S NO REAL INDUSTRIAL STRATEGY TO GO ALONG WITH IT, YOU WOULD PROBABLY SEE THAT AS AN INFLATIONARY TAX ON THE U.S. PEOPLE.

>> SPEAKING OF TAXES, WHAT IF THE TRUMP ADMINISTRATION IS LIKELY TO BE SUCCESSFUL AT THIS POINT IF THEY HAVE CONTROL OF CONGRESS, CONTINUES TO ROLL BACK TAXES?

WHAT DOES THAT DO TO THE BASIC BUDGET MATH OF THE COUNTRY?

>> IT IS KIND OF CLASSIC REPUBLICAN ECONOMICS, TRICKLE- DOWN ECONOMICS 101.

REAGAN IT DID THIS IN HIS SECOND TERM.

YOU ROLL BACK TAXES BUT YOU DON'T CUT SPENDING.

SO GUESS WHAT, THE DEBT AND DEFICIT GOES UP.

THE REASON SUCH A PROBLEM AT THE MOMENT, FOR STARTERS, POST- COVID, ALL COUNTRIES, RICH COUNTRIES IN PARTICULAR HAVE HAD RISING DEBT AND DEFICIT LEVELS.

THE U.S.

PARTICULARLY SO.

THIS IS COMING AT A TIME WHEN THERE HAS BEEN SOMEWHAT OF A PULLBACK FROM THE U.S. DOLLAR.

RUSSIA AND CHINA ARE BUILDING UP GOLD RESERVES.

THEY HAVE STARTED THEIR OWN FISCAL STIMULUS PROGRAM IS A WAY TO TRY TO REPATRIATE CAPITAL INTO ITS OWN COUNTRY.

THAT'S ALL ABOUT TRYING TO PULL AWAY FROM THE DOLLAR-BASED SYSTEM.

I'M NOT SAYING THAT IT'S GOING TO CHANGE ANYTIME SOON, BUT I'LL SAY THAT THE ONLY THING SAY, ZIMBABWE, RUNNING DEBT AND DEFICIT HIGHER WITHOUT ANY SENSE OF HOW IT'S GOING TO GET PAID OFF AND HAVE THAT NOT SPIRAL INTO A PANIC IS THE FACT THAT THE DOLLAR IS THE GLOBAL RESERVE CURRENCY.

IF THAT BEGINS TO CHANGE AND YOU GET MUCH HIGHER DEBT AND DEFICIT LEVELS, YOU COULD SEE BORROWERS, AS THEY HAVE, BY THE WAY, IN EVERY TREASURY ISSUANCE, FOR THE LAST FEW YEARS, STARTING TO TIPTOE AWAY FROM U.S. ASSETS.

THAT COULD RAISE BORROWING COSTS.

THAT BEGINS TO HIT NOT ONLY TRUST IN THE U.S. AS A POLITICAL ECONOMY BUT IT HURTS THE WALLETS OF AVERAGE PEOPLE.

>> LET'S TALK ABOUT THE UNDERLYING BASICS OF THE U.S. ECONOMY.

RIGHT NOW IF WE WERE TO THINK ABOUT THE STOCK MARKET.

IT'S A CLASS OF ASSETS THAT IS NOT EQUALLY DISTRIBUTED.

THE BULK OF STOCKS IN AMERICA OR REAL ESTATE IN AMERICA IS OWNED BY AN INCREDIBLY SMALL GROUP OF PEOPLE.

WHAT IS THE POLICY OF THE TRUMP OF THE TRUMP ADMINISTRATION THAT THEY HAVE MADE, WHAT DOES THAT DO TO THE AVERAGE WORKING- CLASS PERSON THAT MIGHT NOT HAVE ACCESS TO THE STOCK MARKET, VERSUS SOME BILLIONAIRE FRIENDS WHO HAVE BEEN VERY ACTIVE IN HIS CAMPAIGN?

>> I MEAN, I THINK YOU POINTED OUT A VERY ASTUTE THING.

ABOUT 85% OF ALL THE ASSET WEALTH IN THE STOCK MARKET IS OWNED BY ROUGHLY 10 TO 12 PERCENT OF THE POPULATION.

SO FOR THOSE PEOPLE, ASSET PRICE INFLATION IS GREAT SAYING I WILL CUT CORPORATE TAXES, GET RID OF ANTITRUST POLICY, THERE WILL BE A MERGERS BOOM.

IT WILL CREATE A SHORT-TERM SUGAR HIGH.

MORE STOCK GAINS.

THAT'S GOOD IF YOU OWN A LOT OF ASSETS.

BUT IF YOU'RE LIKE THE AVERAGE AMERICAN AND YOU GET MOST OF YOUR MONEY IN A PAYCHECK, IT MAY NOT NECESSARILY MEAN GOOD THINGS FOR YOU.

WHAT HAPPENS DURING BOOMS?

LAYOFFS.

THEY DON'T NEED THAT OFFICE ANYMORE.

JOBS GO AWAY.

THIS IS A TIME WHEN A.I.

IS STARTING TO MOVE FURTHER UP THE FOOD CHAIN.

WE HAVE TECH TITANS LIKE ELON MUSK POTENTIALLY COMING IN AND RIGHTSIZING THE GOVERNMENT, WHICH WILL MEAN MORE CUTS.

SO THIS AGAIN CREATES THE DICHOTOMY BETWEEN THE ASSET OWNING CLASS AND THE PEOPLE WHO REALLY MAKE THEIR MONEY IN A PAYCHECK.

I'LL ALSO SAY THAT SOME OF THE POLICIES THAT TRUMP HAS PROPOSED, LIKE NO TAX ON TIPS, ARE INCREDIBLY CYNICAL, BECAUSE ONLY THE LOWER 5% OF THE SOCIOECONOMIC LADDER EVEN MAKES MONEY IN TIPS.

MOST OF THOSE PEOPLE MAKE SO LITTLE MONEY THEY ARE NOT PAYING TAXES ALREADY.

IT'S NOT GOING TO MAKE A DIFFERENCE ON THE FEDERAL BALANCE SHEET.

WHAT WE REALLY NEED IS DECENT JOBS.

WE NEED A GUARANTEED MINIMUM WAGE.

WE NEED THINGS THAT ACTUALLY CREATE REAL SECURITY.

NOT KIND OF A FAUX MARKETING SLOGAN OF SECURITY.

>> ONE OF THE ISSUES THAT ANIMATED VOTERS SO MUCH IN AMERICA TO THE POLLS WAS IMMIGRATION.

ONE OF THE THINGS THAT PRESIDENT-ELECT TRUMP TOLD PEOPLE HE WANTS TO IMPLEMENT IS MASS DEPORTATIONS.

WHAT ARE THE ECONOMIC CONSEQUENCES?

RIGHT NOW HE HAS STACKED HIS SUGGESTED HEADS FOR HOMELAND SECURITY, BORDER CZAR, DEPUTY CHIEF OF STAFF AT THE WHITE HOUSE.

THEY ARE ALL PEOPLE WHO ARE FOCUSED ON IMMIGRATION AS THEIR TOPIC.

IF HE'S ABLE TO ROLL OUT EVEN A FRACTION OF THE INTENDED PLAN, WHAT ARE THE ECONOMIC RIPPLES THAT WE WILL HAVE TO DEAL WITH HERE?

>> LET ME GIVE YOU THE COUNTERFACTUAL FIRST, WHICH IS THE FACT THAT THERE WAS HIGHER LEVELS OF IMMIGRATION DURING THE BIDEN ADMINISTRATION, LEGAL AND ILLEGAL, FRANKLY, ACTUALLY CONTRIBUTED TO A LESSENING OF LABOR MARKET INFLATION.

SO WHAT COULD HAVE BEEN MUCH HIGHER INFLATION AT SOME OF THE LEVELS THAT YOU SAW IN CONTINENTAL EUROPE WAS LAST IN THE U.S. BECAUSE WE HAVE THIS TALENT POOL.

THAT IS HISTORICALLY TRUE FOR THE U.S. BECAUSE WE HAVE HIGHER LEVELS OF IMMIGRATION.

WE HAVE A TRENDING GDP RATE OF ABOUT 3% VERSUS ROUGHLY 2% IN EUROPE.

A LOT OF ECONOMISTS SAY IT'S DOWN TO THE LABOR MARKET OF IMMIGRATION AND MOBILITY.

IF YOU KNOCK THOSE FOLKS OUT REGARDLESS OF WHERE THEY COME FROM, YOU ARE CREATING MORE TIGHTNESS IN THE LABOR MARKET.

THAT IS POTENTIALLY GOING TO BE INFLATIONARY.

IT IS INTERESTING THAT SOME OF THESE A SWING STATE VOTERS THAT HAVE CERTAINLY TAKEN THAT A HIGHER, VOTED FOR TRUMP THINKING HE IS GOING TO LOWER IT, THEY MAY END UP SEEING THAT HE RAISES IT.

>> WHAT ABOUT PEOPLE WHO ARE COMING IN WILL HAVE SIGNIFICANT ECONOMIC INFLUENCE OVER THE ADMINISTRATION, WHETHER IT'S THE NEW TREASURY SECRETARY, ECONOMIC ADVISORS?

ONE OF PROJECT 2025 DID FROM THE HERITAGE FOUNDATION WAS A START GIVING LISTS OF PEOPLE THAT THE PRESIDENT COULD CALL ON.

BUT FOR EVERYBODY ELSE TO TAKE A LOOK AT THOSE LISTS AND SEE WHAT WAS COMING.

>> LET ME JUST SAY THERE'S KIND OF TWO BLOCKS.

THERE IS WALL STREET AND KIND OF HARD-CORE MAGA.

I THINK THOSE TWO GROUPS ARE GOING TO BE VERY MUCH IN COLLISION ABOUT POLICY DECISIONS.

IF YOU THINK ABOUT THE FOLKS THAT WOULD LIKE BROAD-BASED TARIFFS, AMERICA FIRST, A MUCH MORE PROTECTIONIST VIEW TO THE ECONOMY , THAT REQUIRES A WEAKER DOLLAR.

IT PROBABLY REQUIRES A LOWER STOCK MARKET.

THAT'S ANTI-PEDICLE TO THE WALL STREET CROWD, TO THE HEDGE FUNDERS, TO THE PEOPLE THAT ARE IN THIS AMERICAN OLIGARCHIC GROUP.

I COULD GO ON.

IMMIGRATION AGAIN, MAYBE THE MAGA FOLKS LOVE IT, BUT WALL STREET DOES NOT LOVE IT BECAUSE IT GETS INTO DOES POWELL RAISE INTEREST RATES OR ADD TO INTEREST RATES?

WHAT IS TRUMP GOING TO SAY?

THAT WILL GET POLITICIZED.

IT'S ALSO BAD FOR MARKETS.

THERE IS NOTHING THAT GLOBAL INVESTORS WANT TO SEE LESS THAN A FIGHT BETWEEN THE WHITE HOUSE AND A CENTRAL BANK.

THAT'S A CLASSIC EMERGING- MARKET CRISIS SCENARIO.

>> FINALLY I WANT TO ASK YOU KNOW, MOST PEOPLE LOOK AT THE COUNTRY'S FINANCES AND TRY TO DRAW PARALLELS TO THEIR OWN FOR RIGHT AND FOUR WRONG AND THEY SAY HERE IS HOW I AM TRYING TO BALANCE MY CHECKBOOK AT HOME.

WHERE'S THE CHECKBOOK IN THE UNITED STATES?

SOME PEOPLE MIGHT BE INTERESTED IN DECREASING DEFICITS AND SO FORTH.

BUT AS LEVERAGED AS THE UNITED STATES IS AND FINANCIAL LAST AS POLITICS HAS BECOME, WHAT ARE SOME UNINTENDED CONSEQUENCES OF ANY KIND OF EXILE GENESEE EVENT THAT MIGHT KIND OF CREATE A IN U.S. STOCKS?

WHAT DOES THAT DO TO OUR ABILITY TO PAY FOR SERVICES OR HOW GOVERNMENT FUNCTIONS ?

>> GREAT, GREAT QUESTION.

WHAT I CAN SAY IS EVEN BEFORE TRUMP WAS ELECTED, BRINGING IN A BUDGETARY PLAN THAT INDEPENDENT EXPERTS WOULD SAY IS MUCH MORE INFLATIONARY THAN WHAT WE HAVE SEEN SO FAR.

THERE WAS A SENSE THAT IF WE GOT A BIG CORRECTION IN THE STOCK MARKET, SAY 20%, THAT THAT COMBINED WITH THE LEVEL OF U.S. THAT COULD BRING ON A CURRENCY CRISIS, BUDGETARY CRISIS, BASICALLY, YOU WOULD HAVE A GOVERNMENT THAT WOULD BE UNABLE TO PAY BACK CREDITORS WITHOUT FLASHING ENTITLEMENTS OR MILITARY SPENDING.

THOSE TWO THINGS ARE GOING TO BE VERY POLITICALLY UNPALATABLE.

DOES THAT CREATE A KIND OF EMERGING-MARKET STYLE CRISIS IN THE U.S.?

THIS GETS INTO IS THE USA DISTRESSED ASSET?

IS THE U.S. ITSELF ACTING LIKE AN EMERGING MARKET?

I THINK SOME OF THESE LEVELS OF RISK SAY YES, WE ARE.

WHAT DOES THAT MEAN FOR YOUR WALLET?

FOR THE AVERAGE PERSON?

THINK ABOUT YOUR 401(K).

IMAGINE IF A CERTAIN EXPERTS WOULD SAY, THE MARKET IS CURRENTLY BETWEEN 20 AND 40% OVERVALUED.

THINK ABOUT IF THAT QUESTION HAPPENED.

THAT'S A LOT LESS MONEY IN YOUR RETIREMENT.

IT'S ALSO IMMEDIATELY AN INTERNATIONAL CREDIT EVENT THAT WOULD RAISE RATES, WITH EVERYTHING FROM HOMES TO CARS, ANYTHING MORE EXPENSIVE.

>> THANK YOU SO MUCH FOR JOINING US.

>> THANK YOU FOR HAVING ME.