February 20, 2025 • 12 mins
Harvard Professor, Jason Furman discusses the uncertainty for the economy and the impact of tariffs on the GDP. He is joined by Bloomberg's Tom Keene and Paul Sweeney.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:06):
Jason Furman has committed himself to policy. There are a
few others equivalent to him, both Republican and Democrat. He's
associated with democratic politics, but he's I think been ecumenical
to use the word that Professor Furman uses a lot, Paul.
One of the key things with Jason Furman is he
was voted most handsome freshman on his dorm at Harvard.
(00:28):
He beat out his roommate just by a little bit.
That would have been Matt Damon from a few years ago. Jason,
thank you so much for joining us this morning. You're
in X ten and you have to teach ambiguity, microeconomic ambiguity,
and I can go this way and that. What I
didn't hear from the Secretary of Treasury is a risk
(00:51):
of a real or nominal GDP slowdown. With all the
policy upset the nation faces right now, do you see
that we could have a lessening of real GDP or
the animal spirit of nominal GDP.
Speaker 1 (01:07):
Yeah, well, right now, the level of uncertainty is just
incredibly high.
Speaker 3 (01:13):
That is definitely a minus for the economy.
Speaker 1 (01:16):
I don't know how big a minus it is, and
a lot of it depends on how the uncertainty ends
up getting resolved around things like tariffs, or whether it
gets resolved. It may be that every month there's a
new threat, it gets withdrawn, a new threat that gets made.
That makes it hard to do planning on a global basis.
And that's the success of American corporations, is their their
(01:40):
global reach.
Speaker 2 (01:41):
Well, help us with the equation then, because everybody focuses
on consumption, we do the FED parlor game. I was
amazed we did not know the independence of the FED here.
We'll talk about that in a moment with Professor Firman.
Speaker 4 (01:53):
But ignore Jason.
Speaker 2 (01:54):
As you know, is the eye and the equation. Business investments.
You look at CPI and analyze it. How do you
analyze business investment right now in America?
Speaker 1 (02:07):
Yeah, so consumer spending is the majority of GDP, but
investment is the majority of fluctuations in GDP because it's
much more volatile, and right now, investors' business investment is
grappling with continued high interest rates, which are likely to
stay that way, with an appreciated dollar which is likely
(02:30):
to stay that way, with uncertainty about global trade, which
is likely to stay that way.
Speaker 3 (02:37):
On the other side of the ledger, there may.
Speaker 1 (02:39):
Be some reductions in investment in regulations that will matter
more in targeted sectors like energy than it does generically
across the board. So a lot of cross currents right now,
but from policy they're a little bit more minus than
plus on that part of GDP that is most critical
(02:59):
to business fluctuations.
Speaker 5 (03:01):
Professor of the Federal Reserve is obviously focusing on inflation,
and inflation was a big, big issue in the recent
presidential election. Certainly, are you concerned that inflation in some
of the policies that Trump administration is talking about, whether
it's tariffs or changes in immigration policy, could fuel another
(03:21):
round of inflation.
Speaker 1 (03:24):
I think it's certainly possible. But let's define what we
mean by another round of inflation. Right now, I believe
underlying inflation is around two and a half percent, and
the tariffs that have been done to date on China
and steel will probably add about a tenth of a
percentage point to that.
Speaker 2 (03:43):
If you do.
Speaker 1 (03:43):
Another big set of tariffs, maybe it adds three four
tenths of a percent to that. Now you might be
at three percent inflation. That's a big deal for the FED.
That means they're not cutting rates. It might mean, depending
on their theory about whether or not to look through
the price levels change, that rate increases are back on
the table, But that isn't necessarily a huge thing that
(04:06):
consumers take note of. I don't know how much humans
notice the difference between two and a half and three
percent inflation, but the FED certainly does.
Speaker 5 (04:16):
Professor you and I and I think much of our
audience grew up with this whole concept of internationalism globalization.
Is that still a thing these days or is kind
of everybody just kind of trying to enshore friendshore everything
these days.
Speaker 1 (04:34):
Look, I'm unapologetic in my enthusiasm for globalization. It's done
enormous things for American consumers, American producers, the strength of
the United States. There's no question that politically it's on
its back heel right now. But it is such an
incredibly powerful force that to me, it's much more like
(04:55):
a dandelion that will grow no matter what the conditions
are than it is like a f orchid that needs
to be watered in just the right way. And look,
there's been some feedback in the system. If we had
tried to put twenty five percent tariffs on Canada and Mexico,
who would have been horrible for the US auto industry.
I think that might be part of why it didn't happen,
(05:16):
and part of why I hope it doesn't happen.
Speaker 2 (05:19):
Jason Furman with US folks on your community across the nation,
good morning, I'm Bloomberg Surveillance and on YouTube. Thank you
for letting us be in your living rooms, your offices
as well, even some people in their cars watching.
Speaker 4 (05:30):
Sure, I don't know.
Speaker 2 (05:31):
I'm not sure about that, Jason. I got to go
back to where we are. I want you to take
a bigger picture here, like look at the Washington Post,
look at the cacophony of Bloomberg opinion, et cetera. I
got Treasury secretaries. I mean, I know, you go back
to Albert Gallatin, forget about that. I got Robert Rubin
and a guy named Summers who used to sign your paycheck.
(05:51):
I got Jack lou I got James Baker and company.
Speaker 4 (05:56):
I mean, the Treasury secretary is at the.
Speaker 2 (05:58):
Fulcrum of our executive, legislative, and frankly judicial branch of
making it work within our financial system. Are we at
risk now that that financial system is run out of
the Oval Office. Do we have a Treasury secretary who's
so diminished that he really can't affect Furman like policy?
Speaker 3 (06:22):
I hope not.
Speaker 1 (06:25):
Scott Descent is a smart guy, he's a talented guy.
If this policy making were delegated to him, I wouldn't
agree with all of it, but I wouldn't worry fundamentally
about being in deeply unsafe hands. But yeah, the tariff
calls are being made out of the Oval Office, the
calls about the FED are being made out of the
(06:46):
Oval Office. He's he Scott Descent one moment saying, you know,
we're comfortable with the FED because we're focused on getting
down the tenure, which is a great thing to say,
absolutely makes sense. And then the next moment you see
Donald Trump commenting on the FED funds.
Speaker 4 (06:59):
Right see, okay, we're going to rip up the script
right now.
Speaker 2 (07:03):
We could do this for the future vice chairman or
chairman of the fact.
Speaker 4 (07:07):
Could you see Governor Furman? Come on, let's cut to
the Chase Jason.
Speaker 2 (07:11):
Right now, we're beginning to see the percolation. I don't
want to make editorialize your folks of FED independence.
Speaker 4 (07:17):
We go back to McChesney Martin.
Speaker 2 (07:19):
We go back to LBJ where he took He took
McChesney Merrin's years and picked him up like the dog
back then. Jason Ferban, is this fed at risk of
its independence?
Speaker 3 (07:31):
Look, I'm nervous so far. I'm a little bit reassured.
Speaker 1 (07:34):
They had a sweeping executive order about independent agencies and
presidential control, and they explicitly included an exception for monetary
policy and for the FOMC. It's also hard for them
to do anything about it because he only gets two
appointments over the next four years. I hope the courts
would not let him fire to powel with no reason.
(07:56):
But you know, but I'm nervous. To me, it's a
it's a tailorant. It's not the most likely scenario. But
this is the best economic institution we have, So you know,
a two percent chance something happens to it, we should
be we should we should be concerned.
Speaker 2 (08:10):
In your ute, you had to carry water from the
executive branch over to Capitol Hill. How do you frame
in your head that the legislative branch, when they choose
to rebuts a unilateral Trump policy. Do you see this
as given committees like I think of arm services in Putin.
Speaker 4 (08:30):
I'm making this up, folks, stay with me.
Speaker 2 (08:32):
But Jason, the basic idea is, what's the Firman mechanism
about the legislative branch responds to this moment in our history.
Speaker 1 (08:43):
Look, when your party's in power, you're frustrated by checks
and balances, You're like, why can't we do everything we
want to do?
Speaker 3 (08:51):
Then when the other parties in power, you're like, hey,
I appreciate these a bit.
Speaker 1 (08:54):
I don't want them to be able to do every
single radical idea that they want to do.
Speaker 4 (09:00):
And you know, I.
Speaker 1 (09:02):
Think you're going to see maybe less checks and balances
than I might like coming from Congress, but still a
decent amount of them. And some of that inertia is bad.
It means we're not going to get done things we
should get done. But a lot of that inertia is
the inherent conservatism of the American system, where you don't
make large, radical, dramatic changes because conservatives themselves, since Burke,
(09:26):
have understood that that's a recipe for all sorts of problems.
Speaker 5 (09:32):
Jason, as you sit back here and you look at
some of the economic trends, economic data, points coming out here.
What is the biggest economic concern for you for this
US economy.
Speaker 1 (09:43):
I just have the conventional one, which is this stubborn,
persistent inflation and two and a half percent underlying inflation.
If it's down three tenths, we're golden. If it's up
three tenths, we're in a certain amount of hurt. And
everything else is humming along basically just fine, assuming we
don't have very disruptive policies.
Speaker 2 (10:06):
Thank you so much for your interest across the nation.
Today on YouTube, we are commercial free in this hour
a conversation with the Treasury Secretary with her Anne Marie Horden.
We're honored to bring a Jason Furman from Harvard University.
Wendy Schiller will join us from Bown University. In a moment,
never in the history of media has there been a
joint conversation Harvard than Brown. We're not asking either of
(10:30):
them about the hockey game, the hotit exams. Furman asked
tickets you should see where they are. One more question
please to Professor Furman, Paul Sweeney.
Speaker 5 (10:38):
Professor X ten Principles of economics, How do you frame
out in the tariffs units? What do you talk about
in the about terriffs? How do you teach that? What's
your thoughts there?
Speaker 3 (10:50):
Look, I'm nervous about that. I'm doing that in about
a month.
Speaker 1 (10:53):
I'm going to do it the same way that i've
tom and I will come up that same way that
I learned it decades ago. But it's going to sound
like a rebuttal to Donald Trump. Every single sentence is
going to sound like the only reason I'm saying it
is because I want to contradict him, when the only
reason I'm saying it is that's what's been in the
textbooks for a long time, And it's been in textbooks
(11:13):
for a long time for very very good reasons, some
of which are even a grounded in things like accounting identities,
which I'm one hundred percent sure or true, and not
every comment President Trump makes respects them.
Speaker 2 (11:25):
Do you have a magnitude tip point on percent of terroriffs?
Just ad Hoc. I'm talking Krugman Furman here. Bring over
is like Glenn Hubbard even at Columbia, Jason Furman, is
there a percentage tip point where a blended rate of
two three percent comes up?
Speaker 4 (11:41):
And it's oops, Where's that number matters?
Speaker 5 (11:44):
A lot?
Speaker 4 (11:45):
Who they're on.
Speaker 1 (11:46):
Canada and Mexico matter, are just so much more than
any other country. You do ten percent tariffs even on
the two of them, and an awful lot of the
way US business is conducted, US employment happens, it gets disrupted,
frankly to the benefit of a number of other countries.
Speaker 4 (12:03):
Jason, thank you so much for your generous time this morning.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:06):
Jason Furman has committed himself to policy. There are a
few others equivalent to him, both Republican and Democrat. He's
associated with democratic politics, but he's I think been ecumenical
to use the word that Professor Furman uses a lot, Paul.
One of the key things with Jason Furman is he
was voted most handsome freshman on his dorm at Harvard.
(00:28):
He beat out his roommate just by a little bit.
That would have been Matt Damon from a few years ago. Jason,
thank you so much for joining us this morning. You're
in X ten and you have to teach ambiguity, microeconomic ambiguity,
and I can go this way and that. What I
didn't hear from the Secretary of Treasury is a risk
(00:51):
of a real or nominal GDP slowdown. With all the
policy upset the nation faces right now, do you see
that we could have a lessening of real GDP or
the animal spirit of nominal GDP.
Speaker 1 (01:07):
Yeah, well, right now, the level of uncertainty is just
incredibly high.
Speaker 3 (01:13):
That is definitely a minus for the economy.
Speaker 1 (01:16):
I don't know how big a minus it is, and
a lot of it depends on how the uncertainty ends
up getting resolved around things like tariffs, or whether it
gets resolved. It may be that every month there's a
new threat, it gets withdrawn, a new threat that gets made.
That makes it hard to do planning on a global basis.
And that's the success of American corporations, is their their
(01:40):
global reach.
Speaker 2 (01:41):
Well, help us with the equation then, because everybody focuses
on consumption, we do the FED parlor game. I was
amazed we did not know the independence of the FED here.
We'll talk about that in a moment with Professor Firman.
Speaker 4 (01:53):
But ignore Jason.
Speaker 2 (01:54):
As you know, is the eye and the equation. Business investments.
You look at CPI and analyze it. How do you
analyze business investment right now in America?
Speaker 1 (02:07):
Yeah, so consumer spending is the majority of GDP, but
investment is the majority of fluctuations in GDP because it's
much more volatile, and right now, investors' business investment is
grappling with continued high interest rates, which are likely to
stay that way, with an appreciated dollar which is likely
(02:30):
to stay that way, with uncertainty about global trade, which
is likely to stay that way.
Speaker 3 (02:37):
On the other side of the ledger, there may.
Speaker 1 (02:39):
Be some reductions in investment in regulations that will matter
more in targeted sectors like energy than it does generically
across the board. So a lot of cross currents right now,
but from policy they're a little bit more minus than
plus on that part of GDP that is most critical
(02:59):
to business fluctuations.
Speaker 5 (03:01):
Professor of the Federal Reserve is obviously focusing on inflation,
and inflation was a big, big issue in the recent
presidential election. Certainly, are you concerned that inflation in some
of the policies that Trump administration is talking about, whether
it's tariffs or changes in immigration policy, could fuel another
(03:21):
round of inflation.
Speaker 1 (03:24):
I think it's certainly possible. But let's define what we
mean by another round of inflation. Right now, I believe
underlying inflation is around two and a half percent, and
the tariffs that have been done to date on China
and steel will probably add about a tenth of a
percentage point to that.
Speaker 2 (03:43):
If you do.
Speaker 1 (03:43):
Another big set of tariffs, maybe it adds three four
tenths of a percent to that. Now you might be
at three percent inflation. That's a big deal for the FED.
That means they're not cutting rates. It might mean, depending
on their theory about whether or not to look through
the price levels change, that rate increases are back on
the table, But that isn't necessarily a huge thing that
(04:06):
consumers take note of. I don't know how much humans
notice the difference between two and a half and three
percent inflation, but the FED certainly does.
Speaker 5 (04:16):
Professor you and I and I think much of our
audience grew up with this whole concept of internationalism globalization.
Is that still a thing these days or is kind
of everybody just kind of trying to enshore friendshore everything
these days.
Speaker 1 (04:34):
Look, I'm unapologetic in my enthusiasm for globalization. It's done
enormous things for American consumers, American producers, the strength of
the United States. There's no question that politically it's on
its back heel right now. But it is such an
incredibly powerful force that to me, it's much more like
(04:55):
a dandelion that will grow no matter what the conditions
are than it is like a f orchid that needs
to be watered in just the right way. And look,
there's been some feedback in the system. If we had
tried to put twenty five percent tariffs on Canada and Mexico,
who would have been horrible for the US auto industry.
I think that might be part of why it didn't happen,
(05:16):
and part of why I hope it doesn't happen.
Speaker 2 (05:19):
Jason Furman with US folks on your community across the nation,
good morning, I'm Bloomberg Surveillance and on YouTube. Thank you
for letting us be in your living rooms, your offices
as well, even some people in their cars watching.
Speaker 4 (05:30):
Sure, I don't know.
Speaker 2 (05:31):
I'm not sure about that, Jason. I got to go
back to where we are. I want you to take
a bigger picture here, like look at the Washington Post,
look at the cacophony of Bloomberg opinion, et cetera. I
got Treasury secretaries. I mean, I know, you go back
to Albert Gallatin, forget about that. I got Robert Rubin
and a guy named Summers who used to sign your paycheck.
(05:51):
I got Jack lou I got James Baker and company.
Speaker 4 (05:56):
I mean, the Treasury secretary is at the.
Speaker 2 (05:58):
Fulcrum of our executive, legislative, and frankly judicial branch of
making it work within our financial system. Are we at
risk now that that financial system is run out of
the Oval Office. Do we have a Treasury secretary who's
so diminished that he really can't affect Furman like policy?
Speaker 3 (06:22):
I hope not.
Speaker 1 (06:25):
Scott Descent is a smart guy, he's a talented guy.
If this policy making were delegated to him, I wouldn't
agree with all of it, but I wouldn't worry fundamentally
about being in deeply unsafe hands. But yeah, the tariff
calls are being made out of the Oval Office, the
calls about the FED are being made out of the
(06:46):
Oval Office. He's he Scott Descent one moment saying, you know,
we're comfortable with the FED because we're focused on getting
down the tenure, which is a great thing to say,
absolutely makes sense. And then the next moment you see
Donald Trump commenting on the FED funds.
Speaker 4 (06:59):
Right see, okay, we're going to rip up the script
right now.
Speaker 2 (07:03):
We could do this for the future vice chairman or
chairman of the fact.
Speaker 4 (07:07):
Could you see Governor Furman? Come on, let's cut to
the Chase Jason.
Speaker 2 (07:11):
Right now, we're beginning to see the percolation. I don't
want to make editorialize your folks of FED independence.
Speaker 4 (07:17):
We go back to McChesney Martin.
Speaker 2 (07:19):
We go back to LBJ where he took He took
McChesney Merrin's years and picked him up like the dog
back then. Jason Ferban, is this fed at risk of
its independence?
Speaker 3 (07:31):
Look, I'm nervous so far. I'm a little bit reassured.
Speaker 1 (07:34):
They had a sweeping executive order about independent agencies and
presidential control, and they explicitly included an exception for monetary
policy and for the FOMC. It's also hard for them
to do anything about it because he only gets two
appointments over the next four years. I hope the courts
would not let him fire to powel with no reason.
(07:56):
But you know, but I'm nervous. To me, it's a
it's a tailorant. It's not the most likely scenario. But
this is the best economic institution we have, So you know,
a two percent chance something happens to it, we should
be we should we should be concerned.
Speaker 2 (08:10):
In your ute, you had to carry water from the
executive branch over to Capitol Hill. How do you frame
in your head that the legislative branch, when they choose
to rebuts a unilateral Trump policy. Do you see this
as given committees like I think of arm services in Putin.
Speaker 4 (08:30):
I'm making this up, folks, stay with me.
Speaker 2 (08:32):
But Jason, the basic idea is, what's the Firman mechanism
about the legislative branch responds to this moment in our history.
Speaker 1 (08:43):
Look, when your party's in power, you're frustrated by checks
and balances, You're like, why can't we do everything we
want to do?
Speaker 3 (08:51):
Then when the other parties in power, you're like, hey,
I appreciate these a bit.
Speaker 1 (08:54):
I don't want them to be able to do every
single radical idea that they want to do.
Speaker 4 (09:00):
And you know, I.
Speaker 1 (09:02):
Think you're going to see maybe less checks and balances
than I might like coming from Congress, but still a
decent amount of them. And some of that inertia is bad.
It means we're not going to get done things we
should get done. But a lot of that inertia is
the inherent conservatism of the American system, where you don't
make large, radical, dramatic changes because conservatives themselves, since Burke,
(09:26):
have understood that that's a recipe for all sorts of problems.
Speaker 5 (09:32):
Jason, as you sit back here and you look at
some of the economic trends, economic data, points coming out here.
What is the biggest economic concern for you for this
US economy.
Speaker 1 (09:43):
I just have the conventional one, which is this stubborn,
persistent inflation and two and a half percent underlying inflation.
If it's down three tenths, we're golden. If it's up
three tenths, we're in a certain amount of hurt. And
everything else is humming along basically just fine, assuming we
don't have very disruptive policies.
Speaker 2 (10:06):
Thank you so much for your interest across the nation.
Today on YouTube, we are commercial free in this hour
a conversation with the Treasury Secretary with her Anne Marie Horden.
We're honored to bring a Jason Furman from Harvard University.
Wendy Schiller will join us from Bown University. In a moment,
never in the history of media has there been a
joint conversation Harvard than Brown. We're not asking either of
(10:30):
them about the hockey game, the hotit exams. Furman asked
tickets you should see where they are. One more question
please to Professor Furman, Paul Sweeney.
Speaker 5 (10:38):
Professor X ten Principles of economics, How do you frame
out in the tariffs units? What do you talk about
in the about terriffs? How do you teach that? What's
your thoughts there?
Speaker 3 (10:50):
Look, I'm nervous about that. I'm doing that in about
a month.
Speaker 1 (10:53):
I'm going to do it the same way that i've
tom and I will come up that same way that
I learned it decades ago. But it's going to sound
like a rebuttal to Donald Trump. Every single sentence is
going to sound like the only reason I'm saying it
is because I want to contradict him, when the only
reason I'm saying it is that's what's been in the
textbooks for a long time, And it's been in textbooks
(11:13):
for a long time for very very good reasons, some
of which are even a grounded in things like accounting identities,
which I'm one hundred percent sure or true, and not
every comment President Trump makes respects them.
Speaker 2 (11:25):
Do you have a magnitude tip point on percent of terroriffs?
Just ad Hoc. I'm talking Krugman Furman here. Bring over
is like Glenn Hubbard even at Columbia, Jason Furman, is
there a percentage tip point where a blended rate of
two three percent comes up?
Speaker 4 (11:41):
And it's oops, Where's that number matters?
Speaker 5 (11:44):
A lot?
Speaker 4 (11:45):
Who they're on.
Speaker 1 (11:46):
Canada and Mexico matter, are just so much more than
any other country. You do ten percent tariffs even on
the two of them, and an awful lot of the
way US business is conducted, US employment happens, it gets disrupted,
frankly to the benefit of a number of other countries.
Speaker 4 (12:03):
Jason, thank you so much for your generous time this morning.
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