Justin Wolfers & Alex Gibney

Molly Jong-Fast (0:00)

Hello, and welcome to Fast Politics. I'm Molly Jong-Fast. We have a great show for you today. Later in the show, I'll talk to Alex Gibney about his new documentary, Musk, and why big tech doesn't want you to see it. But first we have Platypus Economics, Justin Wolfers, to talk about why Trump is overstepping in elections and why that may ruin the economy.

Welcome, welcome, Justin Wolfers.

Justin Wolfers (0:29)

Hey, Molly. G'day.

Molly Jong-Fast (0:31)

Economy is both good and bad, working and not working. Explain to us the state of our economy is precarious?

Justin Wolfers (0:43)

It's such a hard conversation, Molly.

Normally, when journalists ask me about the state of the economy, they're saying GDP is up, unemployment is flat, inflation is a bit high, and they're talking about the today.

I think that's the wrong way to think about the Trump economy.

Most, the things that worry me most, that keep me up at night, things that are going to grow like a slow burning cancer, destroying a beautiful living organism. What is America's position in the world? Are we a trusted partner? Do we believe in the rule of law anymore? Are contracts enforced and enforceable? Do we want businesses competing in markets, each trying to produce a better product at a lower price, or are we moving towards businesses competing at Mar-a-Lago, each competing for favors from the White House? What is our fiscal position, and what are the longer run implications of that? I even have moments, and I don't want to be melodramatic, but I've heard lots of friends of mine, serious friends say they're deeply worried about potential interference with the next election. The day we become not a democracy is the day we lose the power to kick out bad politicians. Yeah. And the day that bad politicians can cement their power, that's an enormously important economic question. I worry about the competence of the folks running our institutions. I see signs of things frame. I don't know how quickly, how dramatically, and I can't quite figure out the scale. Am I a bedwetting liberal who screams about everything, or is this a once in a lifetime attack? I'm increasingly thinking the latter, but I always want to be checking myself and making sure I'm thinking about it right.

Molly Jong-Fast (2:48)

So, one of the things that in that answer that I see as something to sort of pull out is the dollar, the value of the dollar when it comes to debt, when it comes to being the reserve currency.

And the Fed unanimously decided to raise rates, including Trump's guy, handsome Kevin, Kevin Warsh, put in there to lower rates by Donald Trump, right? Donald Trump thought, this is our guy, he's going to lower rates, lowering rates are going to drive up the stock market, which is in Donald Trump's plan, really.

In Donald Trump's mind, the stock market is the economy. So, that was what he wanted. Instead, Kevin Warsh voted, and they all unanimously voted to raise rates. So clearly, they saw something that is important here, that maybe we don't. So explain to us what they saw.

Justin Wolfers (3:46)

Right. So after a normal Fed decision, what would happen is nerds like me would meet over coffee or beer. And we'd be like, I think it should be a quarter point higher. I think it should be a quarter point lower. And we can obsess about fractions of a percentage point of an interest rate. We should, by the way, because it affects hundreds of millions of people. But that's not the right conversation to be having right now. And that's the point I think you were just somewhat implicitly making, which is, there's a deeper question, which is, is the institution holding? Is it serving the American people's interest or is it serving the president's narrow political interest and hewing to his idiosyncrasies? And what we saw, so I could debate whether rates should go up a quarter point or not. But what's probably more important is we saw unanimity, which includes Federal Reserve governors and presidents appointed by Obama, Biden, and Trump, and actually several appointed by Trump. And they all uniformly said, our view is if you look at the data, it suggests that we should be raising rates. The most important part of that sentence is we looked at the data. Matt. So that's the institution holding.

That's why I breathed a little easier last week. We're not all the way there yet.

Remember, there's another Fed decision, and it's coming October 28th, just a few days before the midterm elections. By one view, the case for raising rates remains fairly strong. Inflation is too high. Unemployment is relatively low and stable. They've just taken the first step on this path. That's handsome Kevin, in fact, has said, I haven't put my foot on the brake yet. I'm just taking my foot off the accelerator, and it's certainly a good time to take your foot off the accelerator. So by one view, we really should be looking at a second rate hike in October. By another view, the last few data reports have suggested inflation is not quite as bad as we feared. Unemployment is looking pretty good.