April 18, 2025 • 49 mins
On this episode of The Middle, Jeremy is joined by former Secretary of the Treasury Larry Summers to talk about President Trump’s tariffs and the state of the U.S. economy. Summers is also the former President of Harvard University and addresses the Trump Administration’s decision to withhold billions in funding from the university. DJ Tolliver joins as well, plus calls from around the country. #tariffs #tradewar #economy #china #canada #stockmarket #Trump #Harvard
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Speaker 1 (00:05):
Welcome to the Middle. I'm Jeremy Hobson, along with our
house DJ Tolliver and Tolliver. One of the great things
about the Middle being one hour long is that everyone
listening has an hour to not check their four O,
one K.
Speaker 2 (00:17):
That's right, America.
Speaker 3 (00:18):
You're welcome.
Speaker 1 (00:19):
Okay, you're welcome.
Speaker 2 (00:20):
Close to the laptop and vibe out.
Speaker 1 (00:22):
The stock market, of course, has had a lot of
ups and downs recently, but in the big picture, it
is down almost ten percent since Trump was elected president,
and a lot of that is about uncertainty over trade
because of the president's tariffs. There are other big economic
changes in the Trump presidency too, a crackdown on immigration,
the firing of tens of thousands of federal workers. And
(00:43):
this hour we have with us one of the most
listened to economists out there, Larry Summers, who was Treasury
secretary under Bill Clinton but has publicly criticized both parties
on the economy. He'll be taking your questions in a
moment at eight four four four Middle. That's eight four
four four six four three three five three. But first,
last week, we asked you for your thoughts on the
(01:04):
first one hundred days of Trump's presidency. Here are some
of the comments we got after the show.
Speaker 4 (01:10):
Hi.
Speaker 5 (01:11):
My name is Kelsey Winterbottom and I'm from Asheville, North Carolina.
I feel nervous, anxious, I feel worried about the economy.
I feel afraid for the safety of immigrants, and yeah,
I'm afraid for the world for what you might do.
Speaker 6 (01:29):
It's Lee from Louisiana. I'm excited. It's just remarkably pleasing
the sea that they are uncovering such fraud right in
our faith. All they worried about is trying to make
him look bad instead of thanking him for saving taxpayer money.
Speaker 4 (01:48):
Hi, my name is Lisa.
Speaker 7 (01:50):
I'm calling from Louisville, Texas.
Speaker 5 (01:53):
I am just wondering when somebody is actually going to
rise up instead.
Speaker 8 (02:00):
Up against what is happening in our country.
Speaker 9 (02:04):
Who is going to just say no?
Speaker 3 (02:08):
Wow.
Speaker 1 (02:08):
Well, thank you to everyone who called in, and you
can hear that entire episode on our podcast in partnership
with iHeart Podcasts, on the iHeart app or wherever you
listen to podcasts. So now to our topic this hour,
your thoughts about and questions on the economy for Larry Summers.
Tolliver the phone number please.
Speaker 2 (02:24):
It's eight four four four Middle that's eight four four
four six four three three five three, or you can
write to us at Listen to the Middle dot com.
You can also comment on our live stream on YouTube, TikTok, Facebook, Instagram,
and Twitch. I've got a master computer. I'm looking at
them all, okay bring.
Speaker 1 (02:39):
Joining us now is Larry Summers. He serves as the
Secretary of the Treasury under President Clinton. Was also the
president of Harvard University, where he is now Professor of Economics.
Larry Summers, Welcome to the Middle. Great to have you.
Speaker 3 (02:49):
Could you be with you, Jeremy, So, before.
Speaker 1 (02:52):
We get to the economy, let me ask you about Harvard, because,
as a lot of people have been seeing, the President
has been going after universities that he has said haven't
done enough to combat anti Semitism or DEI, or they
haven't hired enough conservatives for his liking. And Harvard this
week stood up to the administration. And now the White
House is freezing billions of dollars in federal funding for Harvard,
(03:13):
and Trump now wants the irs to take away the
tax exempt status that Harvard has. What should Harvard do?
Speaker 10 (03:22):
Harvard should avail itself of all the judicial revenues that
are open to it in response to what is blatant
illegality by the Trump administration. Look, there are plenty of
questions you can ask about lots of policies at Harvard,
but that is not a ground for the government to
(03:46):
simply start giving orders about who's going to be hired
and who's going to be fired at a university. To
do that violates all the procedures that are contained in
the various statutes like the Civil Right. Sack just violates them,
and he is very problematic on constitutional grounds because academic
(04:08):
freedom is an important component.
Speaker 3 (04:11):
Of free speech. And I can tell you as.
Speaker 10 (04:16):
Treasury Secretary, former Treasury secretary that for all of us
who worked in the Treasury Department, for all of us
who worked in the administration, we were taught from the
first hour that we arrived that meddling in the affairs
of an individual taxpayers was one of those things like
(04:36):
taking bribes, where the legalities were black and white, completely clear.
It was something that you must not do. And so
for the President of the United States and officials of
the Treasury Department reporting to Secretary Descant, to do that
(04:58):
is just on consionable and blatantly illegal. Here's what I
think is the scariest thing, if I could, Jeremy, we
went through a period in this country with Watergate. It
was traumatic, it was difficult, it was wrong. A president
was ultimately impeached. But Richard Nixon knew the difference between
(05:23):
right and wrong, and so when he was doing wrong,
he tried to hide it. Now we have an administration
that is breaking the law with impunity and visibility, because
that way more people will be intimidated and will be
(05:43):
cowed away from dissenting. That's how countries descend into dictatorship.
And I don't think he's going to succeed, because I
have great confidence in American institute. But that is what
President Trump is trying to do.
Speaker 1 (06:04):
Why do you think he's trying to do that? What
do you think this is about? At the core that
he wants control over universities in this country.
Speaker 10 (06:11):
It goes way beyond universities. I think the attack on
universities is of a piece with the attack to impeach judges.
Is of a path with the mass use of the
pardon power with respect to the people who are in
the capitol, is of a peace with telling law firms
(06:31):
that they can't do business with the federal government because
they defended one of his political adversaries. I think it's
of a piece with threatening publications. We have lack of
access to White House events if they are critical of him.
This is what authoritarians do. This is what happens when
(06:54):
a dictator takes over a democracy. We're at early stages.
I don't mean to say that this has happened in
the United States, but it's become very clear in recent
months that that is what is being attempted, and.
Speaker 3 (07:14):
I think it's very dangerous.
Speaker 10 (07:16):
You know, we're going to talk about economics, and those
issues are immensely important. But we have recessions and then
we have recoveries. We have the stock market go down
and then the stock market goes up. But threatening the
basic fabric of the rule of law, defying judicial orders,
(07:41):
just ignoring the law in the actions of the federal government.
This is something that has not happened in our country
in the last century, and if it is tolerated and
permitted and comes to be normalized, it is a very
very deep, long run threat, including a deep long run
(08:06):
threat to the economy because one of the bases of
our economy is the idea.
Speaker 3 (08:12):
That we have in an impartial rule of law.
Speaker 1 (08:16):
Let's talk about the economy, and the phones are lighting up,
so we'll get to some calls in a moment. But
there are some who think that the US is already
in a recession right now because of the tariffs. What
do you think.
Speaker 3 (08:29):
It's possible.
Speaker 10 (08:31):
We won't know until the revised version of the statistics
have come in, but there certainly are very grave grounds
for concern. And if we avoid a recession, it's not
going to be because of the tariffs. It's going to
be because the President is sufficiently rapid about backing off
(08:56):
of his original proposals in response to market pressures.
Speaker 1 (09:03):
If you were in the administration right now, it's obviously
you're not. And he said, because of all the turmoil
because of the tariffs, Larry fixed this. What would you do?
Speaker 10 (09:15):
I would say to him, mister President, I'm sorry to
say that you have closed this turmoil with your tariff
announcements and with your constant changes in policy that have
everybody highly uncertain and therefore frozen and not making new commitments,
(09:40):
whether it's purchasing a washing machine, a house or putting
in a new factory. And so, mister President, you need
to find whatever device you wish and end this. You
need to have their be a stable, non protectionist regime
(10:05):
that's not pushing American prices way up, it's not hurting
the competitiveness of businesses who can't get inputs. And you
need to show people that you recognize and have learned
the lessons of the very painful experience of the last
two weeks.
Speaker 1 (10:26):
Even if he were to do that, would there be
long term damage from what's already been done.
Speaker 10 (10:33):
Sure, people can't unremember things that have happened to them,
but I think if we were to clearly retreat, a
substantial part of the damage would pass.
Speaker 3 (10:53):
Really quite quickly.
Speaker 10 (10:55):
And so I don't think this is a case where
you should continue on a course just because you have
embarked on it. But there certainly have been costs to
the way in which we have upended our alliance with
Mexico and Canada, the way we give upended our alliance
(11:19):
with Europe.
Speaker 1 (11:20):
Yeah, we'll stand by and again our number is eight
four four four Middle that's eight four four four six
four three three five three Tolliver. We've seen some big
swings and drops in the stock market. But you know
that has happened before.
Speaker 8 (11:35):
Yeah.
Speaker 2 (11:35):
Actually, I've heard a lot of references online to Black
Monday market crash, to the Black Monday Market crash of
eighty seven because of it. So here's how I played
out on TV back then.
Speaker 11 (11:45):
Today is Black Monday, the day the Dow dropped more
than five hundred points, The day the Dow dropped more
than twenty two percent, almost double the rate of the
Black Monday that signaled the beginning of the crash of
nineteen twenty nine. But this crash of nineteen eighty seven
is not just an American experience. Around the world, stock
markets fell faster than a skydiver without a parachute.
Speaker 1 (12:08):
That metaphor, by the way, that was not Dan rather
Tolliver talk, but he would have. He would have been
tighter than a nun's buns on a tin toilet seat
in the Yukon.
Speaker 12 (12:18):
Time.
Speaker 1 (12:19):
That's a that's a real one. By the way, A
couple of the three of the biggest drops in the
stock market uh in history have happened in the last
seventeen years We've been around for them. We will be
right back with more of your calls for Larry Summers
on the Middle. This is the Middle. I'm Jeremy Hobson.
(12:39):
If you're just tuning. In the Middle is a national
call in show. We're focused on elevating voices from the
middle geographically, politically, philosophically, or maybe you just want to
meet in the middle. This hour, we're taking your questions
about the economy with former Treasury Secretary Larry Summers. Tolliver,
What is the number to call in?
Speaker 2 (12:55):
It's eight four four four Middle. That's eight four four
four six four three three five three. You can also
write to us at Listen to the Middle dot com
or on all social media.
Speaker 1 (13:04):
And let's get to the phones. Joe and Lakeland, Florida. Joe,
your question for Larry Summers.
Speaker 13 (13:09):
Hey, guys, thanks for taking my call. So I have
noticed the stock market has gone down I think twelve
percent at least. I'm my four on one k, and
it seems like the sentiment is getting away from bonds
and traditional safe haven assets.
Speaker 10 (13:23):
Now.
Speaker 13 (13:23):
I'm just curious where Larry seeds money going right now
for safe haven and if he considers bitcoins as safe
haven assets.
Speaker 1 (13:31):
Thank you, Joe, Larry Summers.
Speaker 3 (13:35):
It's difficult to know.
Speaker 10 (13:36):
I think money is flowing out of the United States
to other countries. We've had a remarkable period of exceptionalism
in the United States where the value of US stocks
relative to value stocks and the rest of the world
has gone way up, and there's been a tendency for
that to be reversed of late. No. I think the
(13:58):
available evidence, it's not definitive at this point, is that
bitcoin trades more like a risk asset, more like a
tech stock in terms of its correlations, than it does
like some kind of safe haven if you're looking for
a safe haven that moves in opposite directions. In recent months,
(14:20):
in probably years, it's been the old standby gold.
Speaker 1 (14:26):
You know, one place that a lot of people in
the last many decades have put their money is into
real estate, and we've seen the you know, interest rates
go a lot higher in recent years. Do you think
we're ever going to get back down to a time
when we see thirty year rates at three percent as
opposed to six or seven percent where they've been for
a little bit.
Speaker 10 (14:46):
Here, I've learned in economics never to say never. I
certainly never imagined through most of my lifetime that I
would ever see the kind of four and a half
percent mortgage that my my father had gotten in nineteen
sixty one. I remember very well when I bought my
(15:06):
first house, I felt extremely lucky that Harvard was prepared
to give me a nine percent mortgage, even though market
mortgages at that time were thirteen. So you never know
how things are going to fluctuate. But I would not
expect to see very low mortgage rates in the near
(15:29):
future unless we have a major economic downtern. And it's
certainly possible with everything that's going on that we will
have a major economic downturn, and if we do, the
FED will move very strongly to cut rates, and it
might well be that mortgage rates would fall, but that
would be a sign of a very troubled economy, not
(15:54):
any kind of success of economic policy. In the context
of success, I would be surprised if mortgage rates fell
below six percent.
Speaker 1 (16:07):
Telever, Hey, I.
Speaker 2 (16:08):
Have a question so Saturday Night Live to this catch
last weekend about how if you're not somebody who's a
homeowner or playing the stock market, that you don't care
about tars, you don't care about the stock market crashing.
So say you're a renter or somebody like that who
sort of isn't related to this world so much.
Speaker 1 (16:22):
What should you really be worried about?
Speaker 2 (16:24):
Is it just the price of eggs, or what.
Speaker 10 (16:28):
To be worried about the price of all the things
you buy? The Yale Budget Lab estimates that the current
program would raise prices enough to cost the average family
about five thousand dollars. So that's a pretty substantial burden
(16:50):
to worry about. And if that happens, you're gonna quite
likely get an economic downturn because if people are paying
those high prices, they're going to be able to afford
to buy less stuff. And when they're able to afford
to buy less stuff, they're going to be fewer jobs,
and the whole thing's going to multiply. I'm sore people
(17:11):
should worry about the stability and security of their jobs
as well. So I think that everybody's got a stake
in this, not just homeowners, not just those with stocks,
but all of us who are doing things and buying
(17:32):
things in the economy have a stake in the damage
that's being done.
Speaker 1 (17:38):
Let's go to Laurent, who is calling from Atlanta, Georgia. Laurent,
go ahead with your question.
Speaker 7 (17:43):
Yeah, good evening. There's been a lot of reporting on
the link between the terraffs and the loss of trust
from foreign investors in the bond market. But I'm wondering
if that loss of trust is also closely linked to
the loss of structure in our own US government a
(18:08):
Trump and his team or dismantling scientific research funding and
possibly a lot of services, and that would cause the
loss of trust from investors.
Speaker 1 (18:22):
Good question, Laurron, Larry Summers, what do you think?
Speaker 10 (18:26):
A very good question, and I think all of it
factors into markets. I think it's fair to say, however,
that since so called Liberation Day two weeks ago, there's
been much more drama in markets, much sharper declines, much
(18:50):
different pattern between the stock and bond markets than there
was before. And so the big increase in drama right
after the big tariff announcement suggests that one should probably
think of the tariff announcement as the largest factor going
over the last couple of weeks. But that does not
(19:13):
mean that you can ignore the budget deficit, slash scientific research,
raise questions about the rule of law without doing damage
to the valuation of US assets.
Speaker 1 (19:31):
Sean is calling from Dallas, Texas. Hi, Sean, go ahead.
Speaker 14 (19:36):
Yeah, Hey, so, I know, we know that the one
percent owns more than I guess the lower classpital class.
And I'm kind of concerned that the Trump tariff tax
actually it's going to affect everybody right now, the very wealthy.
You know, they own stock unless they sell it, they
don't pay taxes. And I'm just concerned about the tax
(20:00):
this tax shift, you know, basically, you know, if they
if he does get tax cuts, be Trump, then it's
going to be to the wealthy mostly. Aren't we pushing
the money the wrong way? Shouldn't we be you know,
helping the middle class, lower class as opposed to doing
(20:21):
what we're doing right now.
Speaker 1 (20:22):
I see what you're saying, Sean, that basically you have
a tax cut for that that leans towards the wealthy,
and also the tariffs which may disproportionately hurt people at
the lower end of the of the income spectrum. Larry Summers,
what do you think?
Speaker 10 (20:36):
Go on?
Speaker 3 (20:36):
I share your concern.
Speaker 10 (20:38):
That's why I've worked in democratic administrations, not in Republican administrations.
The alternative school of thought emphasizes that when you cut
high end taxes, you are encouraging entrepreneurship, You are encouraged
(21:00):
business investment, and all of that is the stuff that
creates jobs and creates a prosperity. I don't share that argument.
I would rather see us build our economy starting from
the middle class. But this is an area where economists disagree,
(21:22):
and I believe what I believe, and I believe it strongly.
But I want to distinguish it from the areas like
the Liberation Day tariff program, where there's no expert who's
not being paid or is not politically beholden to Donald Trump,
(21:44):
who sees the thing as logical and making sense. That's
the case with respect to the Liberation Day program. The
question you're asking is the debate that Democrats had with
Ronald Reagan. It's the debate that Republicans had with Bill
Clinton and Barack Obama. It's a longstanding debate. I have
(22:10):
clear and strong views on that debate. But it is
a debate that is a different thing from the economics
equivalent of saying the two plus two equals five, which
is what is bedeviling us right now.
Speaker 1 (22:28):
Dylan is calling for Minneapolis. Hi, Dylan, what's your question
for Larry Summers Hi anything?
Speaker 4 (22:34):
Thanks for thinking my call, and thanks for having secret
Sary Smson, Yeah, second Sary Summers. My question is this
you're clearly pointing out and we're all witnessing highly unorthodox
economic choices by this administration. This is not he President
Trump is leading us in ways that Republicans haven't certainly
(22:55):
Democrats haven't. This is way out of the ordinary, out
of the mainstream. As someone who's been a player in
mainstream economic policy for all these years, I want to
ask you, where is there a space for reflection and
questioning of what you all have done? Is there something
that you can point to. Have you spent anytime seeing
(23:18):
what did we do that ended us up with this
person doing these things? How did we get here? And
where is some reflection or responsibility on how did we
end up with a leader that takes us so far
out of what is the mainstream? What are your thoughts about?
Are there things you would have done differently? Are there
(23:38):
things you'd have spoken about differently, focused differently, working with
people differently than you have. I'm not saying I am
not saying Trump is your fault. I am saying do
you feel like, man, if I knew this now, I
would have done that differently then? Because I think that's necessary,
and frankly, miss Odds, and I'll throw it to you.
(23:58):
I'm really helping media doing the same thing.
Speaker 1 (24:01):
Man. Well, let's let's let Larry Summers answer your question.
We've got it, We've got it. Let's let Larry Summers
answer your question. Well.
Speaker 10 (24:09):
I think the most obvious example in this regard is
the very large stimulus that the Biden administration proposed in
twenty twenty one that led to very substantial inflation and
led to prices being twenty percent higher four years later,
(24:32):
and those higher prices were very disturbing to a large
number of voters. And I think that was a very
consequential policy error judged with the benefit of hindsight. From
my perspective, it was an error judged with the benefit
(24:53):
of foresight. I warned against it at the time and
said there was a possibility that we were going to
create the inflation problems that were reminiscent of the Vietnam
War and then nineteen seventies period. So I think that
was a substantially consequential policy judgment. And if we had
(25:17):
not had inflation, I think it's possible that the results
of the election would have been different. I think President
Trump is running a very big risk that he is
going to settle off higher prices, and that there's going
to be a political price for him to pay. I
also think that we probably have and this is something
(25:41):
that I think would be common to many in government
and to media, that while your show is called the Middle,
I'm not sure that enough attention has been paid to
the middle of the country, to the heartland of the country,
and that economic policies have been set a bit too
(26:04):
much with reference to the kinds of concerns that people
have in New York and Washington and San Francisco rather
than across the country. As an example of that, I
think democratic administrations have made a bit of a mistake.
(26:26):
They've put overwhelming emphasis on the issue of college affordability,
and that is an absolutely important issue. I'm proud of
what I did to make Harvard free for any family
with an income under now one hundred thousand dollars, but
I don't think that we thought about the very large
(26:50):
number of young Americans who don't see an academic path
through college but envisioned a different kind of career, and
how to assure opportunity, chance to flourish, chance to be
a prideful member of a community, and so I would
(27:14):
say leaving behind those for whom college educations and all
that follows are not the end all and the be
all is a second kind of ashake, and is probably
a longer standing error of the group of which I've
been a part.
Speaker 1 (27:35):
Well, we'll use your comments as an ad for the
middle where we always hear from people in the middle
of the country. Actually, we'll sneak in one more before
a quick break. Joshua is in LaVita, Colorado. Joshua, go
ahead quickly with your question for Larry Summers.
Speaker 15 (27:50):
Thanks for taking my calls in honor to pick your brain.
Doctor Summers. I have a question about the potential for
countries maybe in concert with China dumping treasury bills in maps,
now that there's been a lot of confidence and an
increase in.
Speaker 13 (28:06):
Uncertainty thanks to Trump's tariffs.
Speaker 15 (28:08):
What do you think the chances of that are and
how disasters could that be for the US dollars?
Speaker 1 (28:14):
Great question, tash R.
Speaker 10 (28:17):
I think as a risk, there's some protection in the
fact that if you sell a lot of treasuries, the
value of the treasuries you have left go way down,
so It's not a super attractive thing to do because
you're reducing the value of the ashet that you hold.
(28:39):
Or more generally, if you hold a lot of American
assets and you sell them and you make the dollar
go down, that may not work out ultimately to your benefit.
Speaker 3 (28:51):
So there's an element of mutual.
Speaker 10 (28:54):
Deterrence that is perhaps increasing, and that's I think a
pretty important factor that should be that should be considered here.
But I certainly wouldn't want to deny that there's some
(29:16):
risk of the kind you described, Tolliver.
Speaker 1 (29:19):
I know, just quickly some comments are coming in online.
Speaker 2 (29:22):
Yeah, Gordon and Kansas City says President Trump. Requiring Ivy
League schools to remove anti Semitic behavior and DEI programs
is not illegal. President Biden did the same thing by
requiring some schools to include DEI programs. DEI is not
merit based. Trump is not a dictator. He is implementing
agenda that the majority of voter support.
Speaker 3 (29:42):
Maybe you can respond to that after.
Speaker 1 (29:43):
The well, yeah, we got to take a great But
I will say, Teliver, that tariffs are something that I
learned about as a kid from Ben Stein, who was
my TV economics teacher back in the nineteen eighties.
Speaker 2 (29:54):
Was he, Now, Yeah, you're talking about this iconic scene
from Ferris Bueler's Day Off.
Speaker 16 (30:00):
An effort to alleviate the effects of the anyone Anyone
the Great Depression, passed the Anyone Anyone the Tariff Bill,
the Holly Smoot Tariff Act, which anyone raised or lowered
raised tariffs in an effort to collect more revenue for
(30:22):
the federal government.
Speaker 3 (30:24):
Did it work?
Speaker 16 (30:25):
Anyone? Anyone know the effects? It did not work, and
the United States sank deeper into the Great Depression.
Speaker 2 (30:33):
For dry Eyes, Choose Clear Eyes.
Speaker 1 (30:35):
That is one of my favorite movies, Toliver. I could
quote a lot of it right here and now, but
I won't.
Speaker 3 (30:40):
I won't do it.
Speaker 1 (30:41):
But ben Stein was also a speech writer for both
Richard Nixon and Gerald Ford in real life.
Speaker 3 (30:46):
Oh okay, Yeah.
Speaker 1 (30:49):
More of your calls coming up on the Middle. This
is the Middle. I'm Jeremy Hobson. In this hour, we're
asking you for your questions on the economy for Larry Summers.
You can call us at eight four four four Middle.
That's eight four four four six four three three five three.
You can also reach out to us at listen to
Themiddle dot com My guess is former Treasury Secretary Larry Summers,
(31:12):
and the phones are full, so let's get back to them.
And Andrew is in Duluth, Minnesota. Andrew, go ahead with
your question.
Speaker 17 (31:21):
Hi, thanks for taking my call. Mister Sommers. How can
you say that the recent price increases or inflation is
due to the Biden stimulus when it's been proven in
multiple studies that it was actually just corporate greed and
it's borne out by record corporate profits. I don't understand
how you can keep peddling this lie.
Speaker 1 (31:42):
Okay, Andrew, I will say, Larry Summers, there are people
who would say that the inflation came also from the
fact that there were supply chain problems around the world.
Is it is a contested question about what led to
the inflation, but you certainly believe that a large part
of us from that stimulus package from President Biden.
Speaker 3 (32:02):
Here's what I think.
Speaker 10 (32:04):
If you hadn't had so much money poured into the economy,
then given the constrained supply, you wouldn't have had such
large price increases. But when you had constrained supply and
then you poured a lot of money in and so
there was demand for two hundred widgets and a business
(32:28):
only had one hundred and twenty five widgets. What were
they going to do? They were going to raise their price.
And so that's I think the way to understand what
it is that happened. I don't think, with all due
respect to the caller, that the caller's view is a
(32:51):
preponderant one among people who have studied what caused this
in many many industries. I mean, take take an area
where inflation was particularly severe. Rent on houses, landlords charge
what they can get. I don't think that's greed. That's
(33:14):
the way the economy operates. Nobody can say that all
the landlords in the country, or even all the landlords
in Cincinnati, are constituted a monopoly. There's a market price,
and the market price depends upon supply and demand. And
when you pump up demand very far before there's any
(33:35):
chance for supply to respond, you're going to get a
big increase in prices. And I think that's the clearest
way to think about what it is that happened with
respect to a significant part of the inflation.
Speaker 1 (33:52):
Chris, if you're there in Nashville, Tennessee, go ahead with
your question.
Speaker 12 (33:56):
Well, Hey, thanks for taking my call, so I'm going
to conservative part of the country was raised more literal.
I'm not a fan of Trump because it's just like narcissism,
but I do think there's some merit some of the
things he's trying to do. I think his follow through
skills are poor, but I believe that some of the
(34:17):
things he's trying to do are appropriate. The question is,
is the things that they're focusing on, like doge and
reducing expenses of the federal workforce.
Speaker 7 (34:27):
It's such a.
Speaker 12 (34:28):
Small my understanding, it's such a small percentage of the
federal expenditure every year that if they really wanted to
save money and cut back, they would look at different
things like defense funding, right, things where the majority of
our money goes to, and things like that. Would that
not be more appropriate than necessarily the tariffs?
Speaker 3 (34:47):
You know?
Speaker 12 (34:48):
And if we're going to do manufacturing in the country,
who we're not going to build that many cars. We
need to build things like semiconductors, computer chips, like you know,
high textings that are going to be there, Yeah one
hundred years.
Speaker 1 (35:01):
Yeah a lot there, Chris. But let's go with what
you were talking about with making cuts. Larry Summers is
it a serious effort to cut the spending of the
federal government If you're not going after defense.
Speaker 10 (35:12):
Would be But if it was going to be serious,
you probably have to look at entitlement programs, the very
large programs, the rules of which are set and for
which there's no congressional action taken each year, as part
of considering the program's future. The caller makes an important point,
(35:36):
which is that federal payroll, even if you eliminated all
the federal workers, you probably wouldn't eliminate even one third of.
Speaker 3 (35:47):
The budget deficits.
Speaker 10 (35:49):
And so for that reason, it's a pretty it's not
That doesn't mean it's not important to look for waste.
That doesn't mean there aren't potential efficialcencies to be found.
And I think that's good and important work. But I
think to hold out the prospect that it's going to
(36:09):
eliminate or make a large dent in the budget deficit,
I don't think is right. And I think these are
areas where you have to be very careful if you
want to be prudent. I some me worked in the
Treasury Department for eight years, had responsibility for the oversight
of the Internal Revenue Service and the evidence there is
(36:33):
that what you get out in terms of tax revenue
and in terms of legitimacy has a lot to do
with what you put in. And if they carried through
with their plans to cut half the employees of the IRS,
I think they're going to be incredible losses as more
(36:53):
people try to do the audit lottery and do things
on their taxes that they know they shouldn't and hope
that they won't get caught. So the studies that I've
seen that we did that others have done say that
one more hour of IRS auditing devoted to a high
(37:14):
income taxpayer generates about three five hundred dollars in revenue.
And I can assure you we don't pay IRS auditors
anything approaching even ten percent of that three thousand, five
hundred dollars an hour. So I think that slash and
(37:38):
burn at the IRS can be very, very costly for
the country over time. And so I'm a bit worried
that some of what is taking place is not being
done in thoughtful and careful ways, in addition to the
(37:58):
fact that it's not going after the places where most
of the expenses.
Speaker 1 (38:03):
Are What about the other comment about bringing back manufacturing.
We haven't talked about that, but what are your thoughts
on the idea that these factories, even if it's in
a number of years, are going to come back to
the United States, are going to come to the United
States and people that we've even heard comments that people
who are getting fired from their jobs and the government
are going to be trained to work in factories and
(38:26):
make things that I guess we're getting from China.
Speaker 3 (38:28):
Now, I'd say three things.
Speaker 10 (38:30):
First, the best and smartest thing we've done is a
country to promote manufacturing has been the Chips Act, which
is all about manufacturing semiconductors, establishing semiconductor plants, addressing a
terrible vulnerability where ninety plus percent of the world's best semiconductors,
(38:51):
high tech most high tech are coming from Taiwan, which
is proximate to China, and unfortunately in the State of Union,
the President basically declared war on the Chips program.
Speaker 3 (39:05):
Second, there might.
Speaker 10 (39:06):
Be tariff policies that would to some extent help manufacturing,
but those would be more strategic policies than the ones
that the Trump administration is putting in. For example, one
of their major areas for tariffs is steel, and there
are sixty times as many people who work in steel
(39:28):
using industries as there are who work in the steel industry.
So on net, you're probably reducing the competitive and the
CI of American manufacturing more than you're helping the competitive
and the c of American manufacturing.
Speaker 3 (39:42):
And third thing I'd say is.
Speaker 10 (39:45):
Yeah, we should absolutely make sure that if we ever
had to fight a war we have an industrial base.
We should make sure that we're doing things not to
be vulnerable against supply cut offs from China or any
other country. But the idea that we're going to bring
(40:07):
back a huge manufacturing sector that's going to be a
large scale source of employment, I don't think that's terribly realistic.
The number everybody quotes is that eight percent of the
population is employed in manufacturing. That's a somewhat misleading number
because people think about people working on assembly lines and
(40:30):
the like, But in fact, half of that eight percent
are people who are working in marketing or accounting or
sales or what have you. And so the number of
people who are working in actual manufacturing on a factory
floor is only about one in twenty five Americans. And
(40:54):
so even if you were going to increase that number,
which I very much doubt we will. You're not talking
about something that's going to be an immense factor in
the economy.
Speaker 1 (41:06):
Let's get to Andrew, who's in Palo Alto, California. Hi, Andrew,
welcome to the middle Go.
Speaker 8 (41:11):
Ahead, hey, question, Professor Summers. President Trump seems unconstrained by
usual political controls, unlike most politicians. With this in mind,
do you think there's any economic policies that he might
do that others would have done if they didn't have
political constraints that might be helpful to the economy, Whether
(41:32):
that's pushing through Biden's a universal forbidding, a non competition,
or things in the anti trust space, or something else.
Speaker 1 (41:43):
Good question, Andrew.
Speaker 10 (41:44):
I think that we have too many regulatory barriers that
slow things down too much. In the United States. There's
a bridge cross from my office at Harvard. It's a
three hundred and sixty two foot bridge. It connects Cambridge, Massachusetts,
(42:07):
with Boston. It needed to be repaired. A lane of
traffic was closed for sixty two months, five years and
two months. To put that in perspective, it took the
United States three and a half years to win World
War Two. To put that in a different perspective, Patent
(42:28):
built a bridge ten times as long over the Rhine
in one day. To put that even in a more
dramatic perspective, Julius Caesar, with the technology of Julius Caesar's time,
built a bridge across the Rhine not three hundred feet
but three thousand feet in nine days. And those examples
(42:52):
can be multiplied. The Second Avenue subway in New York
costs twelve times as much per kilometer or per mile
as the Paris Metro did, and we don't think of
Parish as a paragon of efficiency. So I think there
are a lot of areas where we have just distributed
(43:14):
veto power promiscuously and in the process created great delays
and driven up costs very substantially. And I think that's
the kind of thing that a strong willed president with
a firm attitude towards the government bureaucracy could usefully address.
(43:37):
And so that is the area that probably comes first
to my mind as an overlap of my beliefs.
Speaker 3 (43:44):
In President Trump's natural interests.
Speaker 1 (43:47):
Well, since you brought up Boston and Cambridge, let's get
to a caller in Boston. Adam is in Boston, Massachusetts,
go ahead.
Speaker 9 (43:54):
Hello, Professor Summers. It's honestly a pleasure to how wind
up together. I was over at the Kennedy School and
I just want to be real with you. Thank you
so much for everything you've been doing. And I mean
it sincerely because it's just such a joy to see
you on CNN and all these media outlets just simply
doing a thing you honestly start are a public gift, really,
(44:17):
and I mean that. My question, sir, is in regards
to it's more macroeconomics, thinking about, you know, the World
Trade Organization, kind of how the United States had played
a major role globally. I think about things in certain phases,
you know, the gold standard transition to the petro dollars,
(44:39):
than this neoliberal order that we sort of had been
involved in and stuff. My question to you, sir, and
I'm considering and looking at some of these things, and
I don't mean to theorize such, but when this president
talks about Greenland and basically trying to it seems like
more of an enforcement of the mineral doctrine where it's
(45:00):
mostly about protecting the Western hemisphere and then sort of
releasing this releasing out of global system that I'll be
real with you. I'm only thirty one years old, but
it's been such a privilege to be involved in and
see as a kid, you know, growing up in a
post Cold war society, born in ninety four. What is
the end goal of all this, sir, with these tariffs
(45:22):
and stuff? Because he's just simply ripping us apart. But
what do you suppose he is taking us too? Because
I just can't let's.
Speaker 1 (45:29):
Mind, Adam, I think we've got it. Let's I don't
have that much time, so let's go to Larry Summers
for his answer. Thanks for the call.
Speaker 10 (45:35):
I think it's dangerous nostalgia. I think there's a kind
of myth that things were better forty years ago. I
don't think they were. I think for all kinds of Americans,
they were vastly worse forty years ago. To take just
one example that's been forgotten, it was more than forty
(45:58):
years ago. But when I was a child in school,
we did drills where we learned to kneel, wrap our
bodies up into a ball, and be under our desk
to protect ourselves in case of amputative nuclear attack. There
(46:18):
are lots of examples like that of where We've made
enormous progress as a society, but I think the President
has a kind of nostalgia for what he thinks of
as an earlier time. I was struck by an event
(46:41):
at the White House in the last few days where
they were celebrating.
Speaker 3 (46:46):
A return of coal mining.
Speaker 10 (46:49):
Now, most of us thought that the highest aspiration of
most coal miners were that their children would not have
to be coal miners and would be able to pursue
a different opportunity. And certainly, coal is toxic to human
health see black lung diseased. Coal is part of a
(47:11):
contribution to particulates and lead in the air, which raised
mortality rage, and of course it's the major contributor to
global climate change. So I would have thought the right
objective was to move past coal while supporting people who
were caught up in the transition, not to celebrate a
(47:34):
return to coal mining. So toxic nostalgia would be my
theory of the case.
Speaker 1 (47:43):
Well, it's nice that we were able to start this
hour talking about Harvard and end with a Harvard student.
That was a perfect book. ND Larry Summers, from a
Treasury secretary now at Harvard University, thank you so much
for coming on and answering all of our questions.
Speaker 3 (47:57):
It was good to be with you. Thank you very much,
and don't forget.
Speaker 1 (48:01):
The Middle is available as a podcast in partnership with
iHeart Podcasts on the iHeart Apple wherever you listen to podcasts,
and coming to your feed next week an episode of
our weekly podcast Extra One Thing Trump Did. We're going
to be talking this time about cuts to global AIDS
funding and what that will mean around the world. And
next week we'll be right back here talking about the
power of billionaires in our politics.
Speaker 2 (48:22):
As always, you can call in at eight four four
four Middle that's eight four four four six four three
three five three, or you can also reach out at
Listen to the Middle dot com. You can also sign
up for our free weekly newsletter featuring a new section
called Toleras Tidbits, which is all recipes okay for music.
Speaker 1 (48:39):
The Middle is brought to you by Lungnik Media, distributed
by Illinois Public Media in Urbana, Illinois, and produced by
Harrison Patino, Danny Alexander Samburmastas, John barth On, Akadessler, and
Brandon Condritz. Our technical director is Jason Kroft. I'm Jeremy
Hobson and I will talk to you next week.
Welcome to the Middle. I'm Jeremy Hobson, along with our
house DJ Tolliver and Tolliver. One of the great things
about the Middle being one hour long is that everyone
listening has an hour to not check their four O,
one K.
Speaker 2 (00:17):
That's right, America.
Speaker 3 (00:18):
You're welcome.
Speaker 1 (00:19):
Okay, you're welcome.
Speaker 2 (00:20):
Close to the laptop and vibe out.
Speaker 1 (00:22):
The stock market, of course, has had a lot of
ups and downs recently, but in the big picture, it
is down almost ten percent since Trump was elected president,
and a lot of that is about uncertainty over trade
because of the president's tariffs. There are other big economic
changes in the Trump presidency too, a crackdown on immigration,
the firing of tens of thousands of federal workers. And
(00:43):
this hour we have with us one of the most
listened to economists out there, Larry Summers, who was Treasury
secretary under Bill Clinton but has publicly criticized both parties
on the economy. He'll be taking your questions in a
moment at eight four four four Middle. That's eight four
four four six four three three five three. But first,
last week, we asked you for your thoughts on the
(01:04):
first one hundred days of Trump's presidency. Here are some
of the comments we got after the show.
Speaker 4 (01:10):
Hi.
Speaker 5 (01:11):
My name is Kelsey Winterbottom and I'm from Asheville, North Carolina.
I feel nervous, anxious, I feel worried about the economy.
I feel afraid for the safety of immigrants, and yeah,
I'm afraid for the world for what you might do.
Speaker 6 (01:29):
It's Lee from Louisiana. I'm excited. It's just remarkably pleasing
the sea that they are uncovering such fraud right in
our faith. All they worried about is trying to make
him look bad instead of thanking him for saving taxpayer money.
Speaker 4 (01:48):
Hi, my name is Lisa.
Speaker 7 (01:50):
I'm calling from Louisville, Texas.
Speaker 5 (01:53):
I am just wondering when somebody is actually going to
rise up instead.
Speaker 8 (02:00):
Up against what is happening in our country.
Speaker 9 (02:04):
Who is going to just say no?
Speaker 3 (02:08):
Wow.
Speaker 1 (02:08):
Well, thank you to everyone who called in, and you
can hear that entire episode on our podcast in partnership
with iHeart Podcasts, on the iHeart app or wherever you
listen to podcasts. So now to our topic this hour,
your thoughts about and questions on the economy for Larry Summers.
Tolliver the phone number please.
Speaker 2 (02:24):
It's eight four four four Middle that's eight four four
four six four three three five three, or you can
write to us at Listen to the Middle dot com.
You can also comment on our live stream on YouTube, TikTok, Facebook, Instagram,
and Twitch. I've got a master computer. I'm looking at
them all, okay bring.
Speaker 1 (02:39):
Joining us now is Larry Summers. He serves as the
Secretary of the Treasury under President Clinton. Was also the
president of Harvard University, where he is now Professor of Economics.
Larry Summers, Welcome to the Middle. Great to have you.
Speaker 3 (02:49):
Could you be with you, Jeremy, So, before.
Speaker 1 (02:52):
We get to the economy, let me ask you about Harvard, because,
as a lot of people have been seeing, the President
has been going after universities that he has said haven't
done enough to combat anti Semitism or DEI, or they
haven't hired enough conservatives for his liking. And Harvard this
week stood up to the administration. And now the White
House is freezing billions of dollars in federal funding for Harvard,
(03:13):
and Trump now wants the irs to take away the
tax exempt status that Harvard has. What should Harvard do?
Speaker 10 (03:22):
Harvard should avail itself of all the judicial revenues that
are open to it in response to what is blatant
illegality by the Trump administration. Look, there are plenty of
questions you can ask about lots of policies at Harvard,
but that is not a ground for the government to
(03:46):
simply start giving orders about who's going to be hired
and who's going to be fired at a university. To
do that violates all the procedures that are contained in
the various statutes like the Civil Right. Sack just violates them,
and he is very problematic on constitutional grounds because academic
(04:08):
freedom is an important component.
Speaker 3 (04:11):
Of free speech. And I can tell you as.
Speaker 10 (04:16):
Treasury Secretary, former Treasury secretary that for all of us
who worked in the Treasury Department, for all of us
who worked in the administration, we were taught from the
first hour that we arrived that meddling in the affairs
of an individual taxpayers was one of those things like
(04:36):
taking bribes, where the legalities were black and white, completely clear.
It was something that you must not do. And so
for the President of the United States and officials of
the Treasury Department reporting to Secretary Descant, to do that
(04:58):
is just on consionable and blatantly illegal. Here's what I
think is the scariest thing, if I could, Jeremy, we
went through a period in this country with Watergate. It
was traumatic, it was difficult, it was wrong. A president
was ultimately impeached. But Richard Nixon knew the difference between
(05:23):
right and wrong, and so when he was doing wrong,
he tried to hide it. Now we have an administration
that is breaking the law with impunity and visibility, because
that way more people will be intimidated and will be
(05:43):
cowed away from dissenting. That's how countries descend into dictatorship.
And I don't think he's going to succeed, because I
have great confidence in American institute. But that is what
President Trump is trying to do.
Speaker 1 (06:04):
Why do you think he's trying to do that? What
do you think this is about? At the core that
he wants control over universities in this country.
Speaker 10 (06:11):
It goes way beyond universities. I think the attack on
universities is of a piece with the attack to impeach judges.
Is of a path with the mass use of the
pardon power with respect to the people who are in
the capitol, is of a peace with telling law firms
(06:31):
that they can't do business with the federal government because
they defended one of his political adversaries. I think it's
of a piece with threatening publications. We have lack of
access to White House events if they are critical of him.
This is what authoritarians do. This is what happens when
(06:54):
a dictator takes over a democracy. We're at early stages.
I don't mean to say that this has happened in
the United States, but it's become very clear in recent
months that that is what is being attempted, and.
Speaker 3 (07:14):
I think it's very dangerous.
Speaker 10 (07:16):
You know, we're going to talk about economics, and those
issues are immensely important. But we have recessions and then
we have recoveries. We have the stock market go down
and then the stock market goes up. But threatening the
basic fabric of the rule of law, defying judicial orders,
(07:41):
just ignoring the law in the actions of the federal government.
This is something that has not happened in our country
in the last century, and if it is tolerated and
permitted and comes to be normalized, it is a very
very deep, long run threat, including a deep long run
(08:06):
threat to the economy because one of the bases of
our economy is the idea.
Speaker 3 (08:12):
That we have in an impartial rule of law.
Speaker 1 (08:16):
Let's talk about the economy, and the phones are lighting up,
so we'll get to some calls in a moment. But
there are some who think that the US is already
in a recession right now because of the tariffs. What
do you think.
Speaker 3 (08:29):
It's possible.
Speaker 10 (08:31):
We won't know until the revised version of the statistics
have come in, but there certainly are very grave grounds
for concern. And if we avoid a recession, it's not
going to be because of the tariffs. It's going to
be because the President is sufficiently rapid about backing off
(08:56):
of his original proposals in response to market pressures.
Speaker 1 (09:03):
If you were in the administration right now, it's obviously
you're not. And he said, because of all the turmoil
because of the tariffs, Larry fixed this. What would you do?
Speaker 10 (09:15):
I would say to him, mister President, I'm sorry to
say that you have closed this turmoil with your tariff
announcements and with your constant changes in policy that have
everybody highly uncertain and therefore frozen and not making new commitments,
(09:40):
whether it's purchasing a washing machine, a house or putting
in a new factory. And so, mister President, you need
to find whatever device you wish and end this. You
need to have their be a stable, non protectionist regime
(10:05):
that's not pushing American prices way up, it's not hurting
the competitiveness of businesses who can't get inputs. And you
need to show people that you recognize and have learned
the lessons of the very painful experience of the last
two weeks.
Speaker 1 (10:26):
Even if he were to do that, would there be
long term damage from what's already been done.
Speaker 10 (10:33):
Sure, people can't unremember things that have happened to them,
but I think if we were to clearly retreat, a
substantial part of the damage would pass.
Speaker 3 (10:53):
Really quite quickly.
Speaker 10 (10:55):
And so I don't think this is a case where
you should continue on a course just because you have
embarked on it. But there certainly have been costs to
the way in which we have upended our alliance with
Mexico and Canada, the way we give upended our alliance
(11:19):
with Europe.
Speaker 1 (11:20):
Yeah, we'll stand by and again our number is eight
four four four Middle that's eight four four four six
four three three five three Tolliver. We've seen some big
swings and drops in the stock market. But you know
that has happened before.
Speaker 8 (11:35):
Yeah.
Speaker 2 (11:35):
Actually, I've heard a lot of references online to Black
Monday market crash, to the Black Monday Market crash of
eighty seven because of it. So here's how I played
out on TV back then.
Speaker 11 (11:45):
Today is Black Monday, the day the Dow dropped more
than five hundred points, The day the Dow dropped more
than twenty two percent, almost double the rate of the
Black Monday that signaled the beginning of the crash of
nineteen twenty nine. But this crash of nineteen eighty seven
is not just an American experience. Around the world, stock
markets fell faster than a skydiver without a parachute.
Speaker 1 (12:08):
That metaphor, by the way, that was not Dan rather
Tolliver talk, but he would have. He would have been
tighter than a nun's buns on a tin toilet seat
in the Yukon.
Speaker 12 (12:18):
Time.
Speaker 1 (12:19):
That's a that's a real one. By the way, A
couple of the three of the biggest drops in the
stock market uh in history have happened in the last
seventeen years We've been around for them. We will be
right back with more of your calls for Larry Summers
on the Middle. This is the Middle. I'm Jeremy Hobson.
(12:39):
If you're just tuning. In the Middle is a national
call in show. We're focused on elevating voices from the
middle geographically, politically, philosophically, or maybe you just want to
meet in the middle. This hour, we're taking your questions
about the economy with former Treasury Secretary Larry Summers. Tolliver,
What is the number to call in?
Speaker 2 (12:55):
It's eight four four four Middle. That's eight four four
four six four three three five three. You can also
write to us at Listen to the Middle dot com
or on all social media.
Speaker 1 (13:04):
And let's get to the phones. Joe and Lakeland, Florida. Joe,
your question for Larry Summers.
Speaker 13 (13:09):
Hey, guys, thanks for taking my call. So I have
noticed the stock market has gone down I think twelve
percent at least. I'm my four on one k, and
it seems like the sentiment is getting away from bonds
and traditional safe haven assets.
Speaker 10 (13:23):
Now.
Speaker 13 (13:23):
I'm just curious where Larry seeds money going right now
for safe haven and if he considers bitcoins as safe
haven assets.
Speaker 1 (13:31):
Thank you, Joe, Larry Summers.
Speaker 3 (13:35):
It's difficult to know.
Speaker 10 (13:36):
I think money is flowing out of the United States
to other countries. We've had a remarkable period of exceptionalism
in the United States where the value of US stocks
relative to value stocks and the rest of the world
has gone way up, and there's been a tendency for
that to be reversed of late. No. I think the
(13:58):
available evidence, it's not definitive at this point, is that
bitcoin trades more like a risk asset, more like a
tech stock in terms of its correlations, than it does
like some kind of safe haven if you're looking for
a safe haven that moves in opposite directions. In recent months,
(14:20):
in probably years, it's been the old standby gold.
Speaker 1 (14:26):
You know, one place that a lot of people in
the last many decades have put their money is into
real estate, and we've seen the you know, interest rates
go a lot higher in recent years. Do you think
we're ever going to get back down to a time
when we see thirty year rates at three percent as
opposed to six or seven percent where they've been for
a little bit.
Speaker 10 (14:46):
Here, I've learned in economics never to say never. I
certainly never imagined through most of my lifetime that I
would ever see the kind of four and a half
percent mortgage that my my father had gotten in nineteen
sixty one. I remember very well when I bought my
(15:06):
first house, I felt extremely lucky that Harvard was prepared
to give me a nine percent mortgage, even though market
mortgages at that time were thirteen. So you never know
how things are going to fluctuate. But I would not
expect to see very low mortgage rates in the near
(15:29):
future unless we have a major economic downtern. And it's
certainly possible with everything that's going on that we will
have a major economic downturn, and if we do, the
FED will move very strongly to cut rates, and it
might well be that mortgage rates would fall, but that
would be a sign of a very troubled economy, not
(15:54):
any kind of success of economic policy. In the context
of success, I would be surprised if mortgage rates fell
below six percent.
Speaker 1 (16:07):
Telever, Hey, I.
Speaker 2 (16:08):
Have a question so Saturday Night Live to this catch
last weekend about how if you're not somebody who's a
homeowner or playing the stock market, that you don't care
about tars, you don't care about the stock market crashing.
So say you're a renter or somebody like that who
sort of isn't related to this world so much.
Speaker 1 (16:22):
What should you really be worried about?
Speaker 2 (16:24):
Is it just the price of eggs, or what.
Speaker 10 (16:28):
To be worried about the price of all the things
you buy? The Yale Budget Lab estimates that the current
program would raise prices enough to cost the average family
about five thousand dollars. So that's a pretty substantial burden
(16:50):
to worry about. And if that happens, you're gonna quite
likely get an economic downturn because if people are paying
those high prices, they're going to be able to afford
to buy less stuff. And when they're able to afford
to buy less stuff, they're going to be fewer jobs,
and the whole thing's going to multiply. I'm sore people
(17:11):
should worry about the stability and security of their jobs
as well. So I think that everybody's got a stake
in this, not just homeowners, not just those with stocks,
but all of us who are doing things and buying
(17:32):
things in the economy have a stake in the damage
that's being done.
Speaker 1 (17:38):
Let's go to Laurent, who is calling from Atlanta, Georgia. Laurent,
go ahead with your question.
Speaker 7 (17:43):
Yeah, good evening. There's been a lot of reporting on
the link between the terraffs and the loss of trust
from foreign investors in the bond market. But I'm wondering
if that loss of trust is also closely linked to
the loss of structure in our own US government a
(18:08):
Trump and his team or dismantling scientific research funding and
possibly a lot of services, and that would cause the
loss of trust from investors.
Speaker 1 (18:22):
Good question, Laurron, Larry Summers, what do you think?
Speaker 10 (18:26):
A very good question, and I think all of it
factors into markets. I think it's fair to say, however,
that since so called Liberation Day two weeks ago, there's
been much more drama in markets, much sharper declines, much
(18:50):
different pattern between the stock and bond markets than there
was before. And so the big increase in drama right
after the big tariff announcement suggests that one should probably
think of the tariff announcement as the largest factor going
over the last couple of weeks. But that does not
(19:13):
mean that you can ignore the budget deficit, slash scientific research,
raise questions about the rule of law without doing damage
to the valuation of US assets.
Speaker 1 (19:31):
Sean is calling from Dallas, Texas. Hi, Sean, go ahead.
Speaker 14 (19:36):
Yeah, Hey, so, I know, we know that the one
percent owns more than I guess the lower classpital class.
And I'm kind of concerned that the Trump tariff tax
actually it's going to affect everybody right now, the very wealthy.
You know, they own stock unless they sell it, they
don't pay taxes. And I'm just concerned about the tax
(20:00):
this tax shift, you know, basically, you know, if they
if he does get tax cuts, be Trump, then it's
going to be to the wealthy mostly. Aren't we pushing
the money the wrong way? Shouldn't we be you know,
helping the middle class, lower class as opposed to doing
(20:21):
what we're doing right now.
Speaker 1 (20:22):
I see what you're saying, Sean, that basically you have
a tax cut for that that leans towards the wealthy,
and also the tariffs which may disproportionately hurt people at
the lower end of the of the income spectrum. Larry Summers,
what do you think?
Speaker 10 (20:36):
Go on?
Speaker 3 (20:36):
I share your concern.
Speaker 10 (20:38):
That's why I've worked in democratic administrations, not in Republican administrations.
The alternative school of thought emphasizes that when you cut
high end taxes, you are encouraging entrepreneurship, You are encouraged
(21:00):
business investment, and all of that is the stuff that
creates jobs and creates a prosperity. I don't share that argument.
I would rather see us build our economy starting from
the middle class. But this is an area where economists disagree,
(21:22):
and I believe what I believe, and I believe it strongly.
But I want to distinguish it from the areas like
the Liberation Day tariff program, where there's no expert who's
not being paid or is not politically beholden to Donald Trump,
(21:44):
who sees the thing as logical and making sense. That's
the case with respect to the Liberation Day program. The
question you're asking is the debate that Democrats had with
Ronald Reagan. It's the debate that Republicans had with Bill
Clinton and Barack Obama. It's a longstanding debate. I have
(22:10):
clear and strong views on that debate. But it is
a debate that is a different thing from the economics
equivalent of saying the two plus two equals five, which
is what is bedeviling us right now.
Speaker 1 (22:28):
Dylan is calling for Minneapolis. Hi, Dylan, what's your question
for Larry Summers Hi anything?
Speaker 4 (22:34):
Thanks for thinking my call, and thanks for having secret
Sary Smson, Yeah, second Sary Summers. My question is this
you're clearly pointing out and we're all witnessing highly unorthodox
economic choices by this administration. This is not he President
Trump is leading us in ways that Republicans haven't certainly
(22:55):
Democrats haven't. This is way out of the ordinary, out
of the mainstream. As someone who's been a player in
mainstream economic policy for all these years, I want to
ask you, where is there a space for reflection and
questioning of what you all have done? Is there something
that you can point to. Have you spent anytime seeing
(23:18):
what did we do that ended us up with this
person doing these things? How did we get here? And
where is some reflection or responsibility on how did we
end up with a leader that takes us so far
out of what is the mainstream? What are your thoughts about?
Are there things you would have done differently? Are there
(23:38):
things you'd have spoken about differently, focused differently, working with
people differently than you have. I'm not saying I am
not saying Trump is your fault. I am saying do
you feel like, man, if I knew this now, I
would have done that differently then? Because I think that's necessary,
and frankly, miss Odds, and I'll throw it to you.
(23:58):
I'm really helping media doing the same thing.
Speaker 1 (24:01):
Man. Well, let's let's let Larry Summers answer your question.
We've got it, We've got it. Let's let Larry Summers
answer your question. Well.
Speaker 10 (24:09):
I think the most obvious example in this regard is
the very large stimulus that the Biden administration proposed in
twenty twenty one that led to very substantial inflation and
led to prices being twenty percent higher four years later,
(24:32):
and those higher prices were very disturbing to a large
number of voters. And I think that was a very
consequential policy error judged with the benefit of hindsight. From
my perspective, it was an error judged with the benefit
(24:53):
of foresight. I warned against it at the time and
said there was a possibility that we were going to
create the inflation problems that were reminiscent of the Vietnam
War and then nineteen seventies period. So I think that
was a substantially consequential policy judgment. And if we had
(25:17):
not had inflation, I think it's possible that the results
of the election would have been different. I think President
Trump is running a very big risk that he is
going to settle off higher prices, and that there's going
to be a political price for him to pay. I
also think that we probably have and this is something
(25:41):
that I think would be common to many in government
and to media, that while your show is called the Middle,
I'm not sure that enough attention has been paid to
the middle of the country, to the heartland of the country,
and that economic policies have been set a bit too
(26:04):
much with reference to the kinds of concerns that people
have in New York and Washington and San Francisco rather
than across the country. As an example of that, I
think democratic administrations have made a bit of a mistake.
(26:26):
They've put overwhelming emphasis on the issue of college affordability,
and that is an absolutely important issue. I'm proud of
what I did to make Harvard free for any family
with an income under now one hundred thousand dollars, but
I don't think that we thought about the very large
(26:50):
number of young Americans who don't see an academic path
through college but envisioned a different kind of career, and
how to assure opportunity, chance to flourish, chance to be
a prideful member of a community, and so I would
(27:14):
say leaving behind those for whom college educations and all
that follows are not the end all and the be
all is a second kind of ashake, and is probably
a longer standing error of the group of which I've
been a part.
Speaker 1 (27:35):
Well, we'll use your comments as an ad for the
middle where we always hear from people in the middle
of the country. Actually, we'll sneak in one more before
a quick break. Joshua is in LaVita, Colorado. Joshua, go
ahead quickly with your question for Larry Summers.
Speaker 15 (27:50):
Thanks for taking my calls in honor to pick your brain.
Doctor Summers. I have a question about the potential for
countries maybe in concert with China dumping treasury bills in maps,
now that there's been a lot of confidence and an
increase in.
Speaker 13 (28:06):
Uncertainty thanks to Trump's tariffs.
Speaker 15 (28:08):
What do you think the chances of that are and
how disasters could that be for the US dollars?
Speaker 1 (28:14):
Great question, tash R.
Speaker 10 (28:17):
I think as a risk, there's some protection in the
fact that if you sell a lot of treasuries, the
value of the treasuries you have left go way down,
so It's not a super attractive thing to do because
you're reducing the value of the ashet that you hold.
(28:39):
Or more generally, if you hold a lot of American
assets and you sell them and you make the dollar
go down, that may not work out ultimately to your benefit.
Speaker 3 (28:51):
So there's an element of mutual.
Speaker 10 (28:54):
Deterrence that is perhaps increasing, and that's I think a
pretty important factor that should be that should be considered here.
But I certainly wouldn't want to deny that there's some
(29:16):
risk of the kind you described, Tolliver.
Speaker 1 (29:19):
I know, just quickly some comments are coming in online.
Speaker 2 (29:22):
Yeah, Gordon and Kansas City says President Trump. Requiring Ivy
League schools to remove anti Semitic behavior and DEI programs
is not illegal. President Biden did the same thing by
requiring some schools to include DEI programs. DEI is not
merit based. Trump is not a dictator. He is implementing
agenda that the majority of voter support.
Speaker 3 (29:42):
Maybe you can respond to that after.
Speaker 1 (29:43):
The well, yeah, we got to take a great But
I will say, Teliver, that tariffs are something that I
learned about as a kid from Ben Stein, who was
my TV economics teacher back in the nineteen eighties.
Speaker 2 (29:54):
Was he, Now, Yeah, you're talking about this iconic scene
from Ferris Bueler's Day Off.
Speaker 16 (30:00):
An effort to alleviate the effects of the anyone Anyone
the Great Depression, passed the Anyone Anyone the Tariff Bill,
the Holly Smoot Tariff Act, which anyone raised or lowered
raised tariffs in an effort to collect more revenue for
(30:22):
the federal government.
Speaker 3 (30:24):
Did it work?
Speaker 16 (30:25):
Anyone? Anyone know the effects? It did not work, and
the United States sank deeper into the Great Depression.
Speaker 2 (30:33):
For dry Eyes, Choose Clear Eyes.
Speaker 1 (30:35):
That is one of my favorite movies, Toliver. I could
quote a lot of it right here and now, but
I won't.
Speaker 3 (30:40):
I won't do it.
Speaker 1 (30:41):
But ben Stein was also a speech writer for both
Richard Nixon and Gerald Ford in real life.
Speaker 3 (30:46):
Oh okay, Yeah.
Speaker 1 (30:49):
More of your calls coming up on the Middle. This
is the Middle. I'm Jeremy Hobson. In this hour, we're
asking you for your questions on the economy for Larry Summers.
You can call us at eight four four four Middle.
That's eight four four four six four three three five three.
You can also reach out to us at listen to
Themiddle dot com My guess is former Treasury Secretary Larry Summers,
(31:12):
and the phones are full, so let's get back to them.
And Andrew is in Duluth, Minnesota. Andrew, go ahead with
your question.
Speaker 17 (31:21):
Hi, thanks for taking my call. Mister Sommers. How can
you say that the recent price increases or inflation is
due to the Biden stimulus when it's been proven in
multiple studies that it was actually just corporate greed and
it's borne out by record corporate profits. I don't understand
how you can keep peddling this lie.
Speaker 1 (31:42):
Okay, Andrew, I will say, Larry Summers, there are people
who would say that the inflation came also from the
fact that there were supply chain problems around the world.
Is it is a contested question about what led to
the inflation, but you certainly believe that a large part
of us from that stimulus package from President Biden.
Speaker 3 (32:02):
Here's what I think.
Speaker 10 (32:04):
If you hadn't had so much money poured into the economy,
then given the constrained supply, you wouldn't have had such
large price increases. But when you had constrained supply and
then you poured a lot of money in and so
there was demand for two hundred widgets and a business
(32:28):
only had one hundred and twenty five widgets. What were
they going to do? They were going to raise their price.
And so that's I think the way to understand what
it is that happened. I don't think, with all due
respect to the caller, that the caller's view is a
(32:51):
preponderant one among people who have studied what caused this
in many many industries. I mean, take take an area
where inflation was particularly severe. Rent on houses, landlords charge
what they can get. I don't think that's greed. That's
(33:14):
the way the economy operates. Nobody can say that all
the landlords in the country, or even all the landlords
in Cincinnati, are constituted a monopoly. There's a market price,
and the market price depends upon supply and demand. And
when you pump up demand very far before there's any
(33:35):
chance for supply to respond, you're going to get a
big increase in prices. And I think that's the clearest
way to think about what it is that happened with
respect to a significant part of the inflation.
Speaker 1 (33:52):
Chris, if you're there in Nashville, Tennessee, go ahead with
your question.
Speaker 12 (33:56):
Well, Hey, thanks for taking my call, so I'm going
to conservative part of the country was raised more literal.
I'm not a fan of Trump because it's just like narcissism,
but I do think there's some merit some of the
things he's trying to do. I think his follow through
skills are poor, but I believe that some of the
(34:17):
things he's trying to do are appropriate. The question is,
is the things that they're focusing on, like doge and
reducing expenses of the federal workforce.
Speaker 7 (34:27):
It's such a.
Speaker 12 (34:28):
Small my understanding, it's such a small percentage of the
federal expenditure every year that if they really wanted to
save money and cut back, they would look at different
things like defense funding, right, things where the majority of
our money goes to, and things like that. Would that
not be more appropriate than necessarily the tariffs?
Speaker 3 (34:47):
You know?
Speaker 12 (34:48):
And if we're going to do manufacturing in the country,
who we're not going to build that many cars. We
need to build things like semiconductors, computer chips, like you know,
high textings that are going to be there, Yeah one
hundred years.
Speaker 1 (35:01):
Yeah a lot there, Chris. But let's go with what
you were talking about with making cuts. Larry Summers is
it a serious effort to cut the spending of the
federal government If you're not going after defense.
Speaker 10 (35:12):
Would be But if it was going to be serious,
you probably have to look at entitlement programs, the very
large programs, the rules of which are set and for
which there's no congressional action taken each year, as part
of considering the program's future. The caller makes an important point,
(35:36):
which is that federal payroll, even if you eliminated all
the federal workers, you probably wouldn't eliminate even one third of.
Speaker 3 (35:47):
The budget deficits.
Speaker 10 (35:49):
And so for that reason, it's a pretty it's not
That doesn't mean it's not important to look for waste.
That doesn't mean there aren't potential efficialcencies to be found.
And I think that's good and important work. But I
think to hold out the prospect that it's going to
(36:09):
eliminate or make a large dent in the budget deficit,
I don't think is right. And I think these are
areas where you have to be very careful if you
want to be prudent. I some me worked in the
Treasury Department for eight years, had responsibility for the oversight
of the Internal Revenue Service and the evidence there is
(36:33):
that what you get out in terms of tax revenue
and in terms of legitimacy has a lot to do
with what you put in. And if they carried through
with their plans to cut half the employees of the IRS,
I think they're going to be incredible losses as more
(36:53):
people try to do the audit lottery and do things
on their taxes that they know they shouldn't and hope
that they won't get caught. So the studies that I've
seen that we did that others have done say that
one more hour of IRS auditing devoted to a high
(37:14):
income taxpayer generates about three five hundred dollars in revenue.
And I can assure you we don't pay IRS auditors
anything approaching even ten percent of that three thousand, five
hundred dollars an hour. So I think that slash and
(37:38):
burn at the IRS can be very, very costly for
the country over time. And so I'm a bit worried
that some of what is taking place is not being
done in thoughtful and careful ways, in addition to the
(37:58):
fact that it's not going after the places where most
of the expenses.
Speaker 1 (38:03):
Are What about the other comment about bringing back manufacturing.
We haven't talked about that, but what are your thoughts
on the idea that these factories, even if it's in
a number of years, are going to come back to
the United States, are going to come to the United
States and people that we've even heard comments that people
who are getting fired from their jobs and the government
are going to be trained to work in factories and
(38:26):
make things that I guess we're getting from China.
Speaker 3 (38:28):
Now, I'd say three things.
Speaker 10 (38:30):
First, the best and smartest thing we've done is a
country to promote manufacturing has been the Chips Act, which
is all about manufacturing semiconductors, establishing semiconductor plants, addressing a
terrible vulnerability where ninety plus percent of the world's best semiconductors,
(38:51):
high tech most high tech are coming from Taiwan, which
is proximate to China, and unfortunately in the State of Union,
the President basically declared war on the Chips program.
Speaker 3 (39:05):
Second, there might.
Speaker 10 (39:06):
Be tariff policies that would to some extent help manufacturing,
but those would be more strategic policies than the ones
that the Trump administration is putting in. For example, one
of their major areas for tariffs is steel, and there
are sixty times as many people who work in steel
(39:28):
using industries as there are who work in the steel industry.
So on net, you're probably reducing the competitive and the
CI of American manufacturing more than you're helping the competitive
and the c of American manufacturing.
Speaker 3 (39:42):
And third thing I'd say is.
Speaker 10 (39:45):
Yeah, we should absolutely make sure that if we ever
had to fight a war we have an industrial base.
We should make sure that we're doing things not to
be vulnerable against supply cut offs from China or any
other country. But the idea that we're going to bring
(40:07):
back a huge manufacturing sector that's going to be a
large scale source of employment, I don't think that's terribly realistic.
The number everybody quotes is that eight percent of the
population is employed in manufacturing. That's a somewhat misleading number
because people think about people working on assembly lines and
(40:30):
the like, But in fact, half of that eight percent
are people who are working in marketing or accounting or
sales or what have you. And so the number of
people who are working in actual manufacturing on a factory
floor is only about one in twenty five Americans. And
(40:54):
so even if you were going to increase that number,
which I very much doubt we will. You're not talking
about something that's going to be an immense factor in
the economy.
Speaker 1 (41:06):
Let's get to Andrew, who's in Palo Alto, California. Hi, Andrew,
welcome to the middle Go.
Speaker 8 (41:11):
Ahead, hey, question, Professor Summers. President Trump seems unconstrained by
usual political controls, unlike most politicians. With this in mind,
do you think there's any economic policies that he might
do that others would have done if they didn't have
political constraints that might be helpful to the economy, Whether
(41:32):
that's pushing through Biden's a universal forbidding, a non competition,
or things in the anti trust space, or something else.
Speaker 1 (41:43):
Good question, Andrew.
Speaker 10 (41:44):
I think that we have too many regulatory barriers that
slow things down too much. In the United States. There's
a bridge cross from my office at Harvard. It's a
three hundred and sixty two foot bridge. It connects Cambridge, Massachusetts,
(42:07):
with Boston. It needed to be repaired. A lane of
traffic was closed for sixty two months, five years and
two months. To put that in perspective, it took the
United States three and a half years to win World
War Two. To put that in a different perspective, Patent
(42:28):
built a bridge ten times as long over the Rhine
in one day. To put that even in a more
dramatic perspective, Julius Caesar, with the technology of Julius Caesar's time,
built a bridge across the Rhine not three hundred feet
but three thousand feet in nine days. And those examples
(42:52):
can be multiplied. The Second Avenue subway in New York
costs twelve times as much per kilometer or per mile
as the Paris Metro did, and we don't think of
Parish as a paragon of efficiency. So I think there
are a lot of areas where we have just distributed
(43:14):
veto power promiscuously and in the process created great delays
and driven up costs very substantially. And I think that's
the kind of thing that a strong willed president with
a firm attitude towards the government bureaucracy could usefully address.
(43:37):
And so that is the area that probably comes first
to my mind as an overlap of my beliefs.
Speaker 3 (43:44):
In President Trump's natural interests.
Speaker 1 (43:47):
Well, since you brought up Boston and Cambridge, let's get
to a caller in Boston. Adam is in Boston, Massachusetts,
go ahead.
Speaker 9 (43:54):
Hello, Professor Summers. It's honestly a pleasure to how wind
up together. I was over at the Kennedy School and
I just want to be real with you. Thank you
so much for everything you've been doing. And I mean
it sincerely because it's just such a joy to see
you on CNN and all these media outlets just simply
doing a thing you honestly start are a public gift, really,
(44:17):
and I mean that. My question, sir, is in regards
to it's more macroeconomics, thinking about, you know, the World
Trade Organization, kind of how the United States had played
a major role globally. I think about things in certain phases,
you know, the gold standard transition to the petro dollars,
(44:39):
than this neoliberal order that we sort of had been
involved in and stuff. My question to you, sir, and
I'm considering and looking at some of these things, and
I don't mean to theorize such, but when this president
talks about Greenland and basically trying to it seems like
more of an enforcement of the mineral doctrine where it's
(45:00):
mostly about protecting the Western hemisphere and then sort of
releasing this releasing out of global system that I'll be
real with you. I'm only thirty one years old, but
it's been such a privilege to be involved in and
see as a kid, you know, growing up in a
post Cold war society, born in ninety four. What is
the end goal of all this, sir, with these tariffs
(45:22):
and stuff? Because he's just simply ripping us apart. But
what do you suppose he is taking us too? Because
I just can't let's.
Speaker 1 (45:29):
Mind, Adam, I think we've got it. Let's I don't
have that much time, so let's go to Larry Summers
for his answer. Thanks for the call.
Speaker 10 (45:35):
I think it's dangerous nostalgia. I think there's a kind
of myth that things were better forty years ago. I
don't think they were. I think for all kinds of Americans,
they were vastly worse forty years ago. To take just
one example that's been forgotten, it was more than forty
(45:58):
years ago. But when I was a child in school,
we did drills where we learned to kneel, wrap our
bodies up into a ball, and be under our desk
to protect ourselves in case of amputative nuclear attack. There
(46:18):
are lots of examples like that of where We've made
enormous progress as a society, but I think the President
has a kind of nostalgia for what he thinks of
as an earlier time. I was struck by an event
(46:41):
at the White House in the last few days where
they were celebrating.
Speaker 3 (46:46):
A return of coal mining.
Speaker 10 (46:49):
Now, most of us thought that the highest aspiration of
most coal miners were that their children would not have
to be coal miners and would be able to pursue
a different opportunity. And certainly, coal is toxic to human
health see black lung diseased. Coal is part of a
(47:11):
contribution to particulates and lead in the air, which raised
mortality rage, and of course it's the major contributor to
global climate change. So I would have thought the right
objective was to move past coal while supporting people who
were caught up in the transition, not to celebrate a
(47:34):
return to coal mining. So toxic nostalgia would be my
theory of the case.
Speaker 1 (47:43):
Well, it's nice that we were able to start this
hour talking about Harvard and end with a Harvard student.
That was a perfect book. ND Larry Summers, from a
Treasury secretary now at Harvard University, thank you so much
for coming on and answering all of our questions.
Speaker 3 (47:57):
It was good to be with you. Thank you very much,
and don't forget.
Speaker 1 (48:01):
The Middle is available as a podcast in partnership with
iHeart Podcasts on the iHeart Apple wherever you listen to podcasts,
and coming to your feed next week an episode of
our weekly podcast Extra One Thing Trump Did. We're going
to be talking this time about cuts to global AIDS
funding and what that will mean around the world. And
next week we'll be right back here talking about the
power of billionaires in our politics.
Speaker 2 (48:22):
As always, you can call in at eight four four
four Middle that's eight four four four six four three
three five three, or you can also reach out at
Listen to the Middle dot com. You can also sign
up for our free weekly newsletter featuring a new section
called Toleras Tidbits, which is all recipes okay for music.
Speaker 1 (48:39):
The Middle is brought to you by Lungnik Media, distributed
by Illinois Public Media in Urbana, Illinois, and produced by
Harrison Patino, Danny Alexander Samburmastas, John barth On, Akadessler, and
Brandon Condritz. Our technical director is Jason Kroft. I'm Jeremy
Hobson and I will talk to you next week.
Host
Jeremy Hobson
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