NEC's Kevin Hassett Talks US Economic Goals

SPEAKER_1 (0:02)

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Let's go over now to the Economic Club of New York, where our colleague David Westin is speaking with Kevin Hassett of the White House. Let's listen in.

Kevin Hassett (0:15)

National Academic Council, that it was created by President Bill Clinton, and my good friend, I'm sure friends, a lot of people in the room, Bob Rubin was the first person to have that job. And without naming names, I think that President Clinton thought that once you send the people out to run their cabinet agencies, that some of them might have agendas of their own that disagree with what President Clinton's agenda was. I'm not naming names, but I think I can hear names being thought.

And so he brought Bob Rubin in to make sure that the president's objectives are being pursued by cabinet agencies and to pick up the vote every day and say, what are you doing, what are you doing, what are you doing? And so it's an interesting thing. One little trivia is that sometimes people call me chairman of the National Economic Council, but I'm not the chairman. I'm the director. Do you know who the chairman is?

David Westin (1:13)

Yes, I do.

I looked up stats. Scott.

Kevin Hassett (1:20)

It's President Trump.

David Westin (1:22)

It is?

Kevin Hassett (1:23)

It is.

David Westin (1:23)

He didn't replace the chairman?

Kevin Hassett (1:25)

Well, the director runs the National Economic Council before the president, but when the National Economic Council meets, the chairman of those meetings is President Trump.

David Westin (1:33)

Oh, I see. I see.

Kevin Hassett (1:34)

And so I was chairman of the Council of Economic Advisors.

David Westin (1:37)

But who's the chairman of the Economic Advisors now? Because I looked up that today.

Kevin Hassett (1:40)

Yeah, Chris Phelan is there now. He's fantastic. And so I think that right now, we've had the sort of supply side pushes that we expected, that growth is, the GDP now is in the fives right now, and that's consistent with a lot of data that we're seeing.

David Westin (2:02)

Real or nominal?

Kevin Hassett (2:03)

Real.

In fact, at the... 88

David Westin (2:08)

What?

Kevin Hassett (2:09)

88 are nominal. Yeah, but what's the real number right now? 5, 0, 1, 4, 50 bucks. Okay.

It's good to have a guy like that.

David Westin (2:17)

What's your average of the two years?

Kevin Hassett (2:19)

You know, I think that we're looking ahead the way I think about what we're about to experience because of the capital spending boom that we've been seeing, the productivity boom that's related to AI. I know we're going to want to talk more about that. And the increase in work hours, which is really visible. So it used to be that people would want to look at average hourly wages when they're thinking about how the labor market is doing. But what we've started doing is looking at average weekly wages because all of these things, the tax stimuli that are making people work harder show up in longer work weeks.

So all those things are big supply side impetuses. The way to do sort of growth accounting from it, looking forward, is that I think that right now, our estimate for productivity growth is like about two and a half. And I think our estimate for what we're getting out of capital deepening is it's like 0.7 or 0.8. Labor supply may be about the same. So that means that the sort of base case, no disruptions from the outside world, and we'll talk about those too, that you should be cruising around four instead of three. And the biggest contributor to that is the productivity boom, which I believe that my friend Dan Oehler, or Dan Sickle and Steve Oehler at the Fed once did a paper on productivity. I don't know if you've ever read in their research on this. And they said that when there's a productivity boom, that it's never apparent to the public until after the benchmark revision, when the productivity boom is almost over. And the reason is that when there's a productivity boom, and a lot of times there are all these new things, and we don't really know how to measure them at the beginning, and then we learn how to measure them over time and stuff like that. But think about this, that we're having a productivity boom, and we're measuring it before the benchmark revision. We're seeing it in real time. So how good is the benchmark revision going to be? And so I'd say that we're really, really bullish on the momentum that we have going forward. And I'm not going to break news on what the president's plans are for this or that. This is not public, but if you go back and look at everything that we've done, even to like, so we reduced federal employment by 300 something thousand workers. That's a budget saving, if we keep it there, of about $500 billion over 10 years.