America’s Blue Collar Boom & Manufacturing Renaissance

**SPEAKER_1** (0:00)
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**SPEAKER_2** (0:31)
A surge in business investment is reshaping the US economic landscape. The latest data from the Federal Reserve shows a stunning uptick in capital expenditures, one that rivals the heights of the late 90s tech boom.

**Georgia Howe** (0:43)
In this episode, we speak to Joe Lavorgna, counselor to the Treasury Secretary to help us unpack what this investment means for the economy. I'm Georgia Howe with Daily Wire executive editor John Bickley. It's Sunday, July 27th, and this is Morning Wire.

**Joe Lavorgna** (0:59)
The McDonald's snack wrap is back.

**SPEAKER_5** (1:01)
You brought it back. Ranch snack wrap.

**Joe Lavorgna** (1:04)
Spicy snack wrap.

**Georgia Howe** (1:06)
You broke the internet for a snack.

**SPEAKER_5** (1:10)
Snack wrap is back.

**SPEAKER_2** (1:15)
The following is an interview between Joe Lavorgna, counselor to the Treasury Secretary and senior editor Cabot Phillips.

**Cabot Phillips** (1:21)
Hey Joe, thanks again for coming on. Always a pleasure to have you.

**Joe Lavorgna** (1:24)
Yeah, sure, thanks for having me.

**Cabot Phillips** (1:25)
So I want to talk to you about some new numbers coming from the Federal Reserve showing a significant increase in the US production of business equipment. Now give us some context on why that is a good sign for the economy and what this means for average Americans.

**Joe Lavorgna** (1:39)
The Federal Reserve provides industrial production figures every month. And one of the details is often overlooked in the market, and that is production of business equipment. That series is an excellent proxy for what economists call CAPEX or capital spending, which essentially measures all the things that firms invest in to help produce more of the goods and services that people want. It could be computers, software, things of that sort. And what we observed in the first quarter is that the equipment production rose at a 23% rate. Not surprisingly, when we got the GDP data, we saw a 24% increase.
Really, really strong, really exciting news. We think that is a result of the one big, beautiful bill which had retroactive expensing to inauguration day. So companies getting very excited about the pro-growth policies that President Trump was putting forward, took that initiative in the first quarter, increased production of business equipment. We saw that in the GDP accounts. Importantly though, in Q2, we saw another large gain in business equipment production, up almost 11%. That is a really strong increase following a boom in the first quarter. What that means is before the one big beautiful bill became legislation, we had an almost 17% annualized increase over those two quarters of business equipment production. That is remarkable. Excluding the pandemic, that is the fastest two quarter gain since the last two quarters of 1997, during the heart of the internet boom. So what we're seeing now is businesses react in anticipation of the bill. The bill now is passed, which means that we're going to see a much higher glide path, much more growth in capital spending, which means it's going to reinforce this blue collar boom we've been seeing. This is all very consistent with what President Trump has wanted and what Secretary Besson has helped push through.

**Cabot Phillips** (3:36)
So as you mentioned, this trend actually started back in quarter one. That was before the big beautiful bill had passed, when we weren't even sure if it was going to pass. So what are some other reasons that we could be seeing this trend taking place beyond just this bill?

**Joe Lavorgna** (3:48)
Well, we certainly, I mean, it's possible that we could have seen, you know, maybe 11 percent to cue game is fantastic. Maybe it would have been even stronger if people took President Trump at his word and realized he was going to get the bill done on July 4th. The bill contains a lot of other positive pro-growth policies, such as faster permitting as it relates to energy production, the ability of energy producers to tap federal waterways and land for drilling, which is something they couldn't do under the previous administration. It's actually making it much easier to conduct business with low and stable tax rates that are now permanent. It's encouraging people to spend. And this bill also includes 100 percent expensing if you build a new plant. That wasn't the case in the first bill, so it's even better. So if you want to build things, you want foreign capital to come in, which is what's happening in large part because the tariffs have incentivized countries to come in and companies to come in to the US., well, they're going to have cheap and abundant energy. They're going to have a much friendlier regulatory backdrop. And if you're a US producer, you're going to be able to expense that factory you wouldn't have been able to do before. So really it's a reindustrialization. It's a manufacturing renaissance. It's what President Trump accurately describes as a golden era. I believe we're upon that happening, and this capex comeback is consistent with it.