C-SPAN's Washington Journal, a live forum involving you to discuss the latest issues in government, politics, and public policy from Washington DC and across the country.
Coming up Thursday morning, George Mason University's Benjamin Klutze discusses efforts to bridge the political divide in the U.S., including his role in producing the documentary Undivide Us.
And then Alexander Hefner, host of Bloomberg's Breaking Bread and PBS's The Open Mind, talks about his series featuring conversations with politicians in an attempt to forge political unity and civility.
C-SPAN's Washington Journal.
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Welcome back to Washington Journal.
We're joined now to talk about the economic outlook by Mark Zandi.
He's chief economist for Moody's Analytics.
Mark Zandi, welcome to the program.
Thanks, Mimi.
Good to be with you.
So you said this earlier this fall that the economy right now is, quote, among the best performing economies in my 35 plus years as an economist.
Explain that.
Yeah, well, you can see from my hairline, I've been at this for a long time, 35 years.
And I'm hard-pressed to come up with a time when the economy has been performing better.
I mean, just look at the statistics, creating a lot of jobs across lots of different industries.
I've been doing that since the pandemic.
Unemployment is low, just over 4%.
It's low across every demographic group from age, ethnicity, educational attainment, you pick it, and coast to coast, everywhere in the country.
The one blemish had been inflation, the rate of growth in the prices for goods and services, but that's moderated.
And now the Federal Reserve is cutting interest rates as a result.
The stock market's at a record high.
Seems like it's hitting one almost every day.
And if you're one of the two-thirds of Americans that own your own home, you're enjoying record high housing values.
Now, Mimi, you know, I have this metaphor in my mind that the economy is this big elephant.
And right now I'm talking about the entirety of the elephant.
Obviously, depending on which part of the elephant you touch, you can get a different picture.
And, you know, I do think higher income households are doing fabulously well.
I don't think it's hyperbole to say they're doing about as well as they ever have.
Middle-income households are doing okay.
Not fantastic, not great, not bad, kind of typical.
Folks in the bottom third, they are struggling with the previously high inflation.
And they don't have much savings.
They don't have much in their checking account.
So there are distinctions to be made here, but broadly, the economy is doing fabulously well.
So as you said, the economy is doing fabulously well, but I want to show you some exit polls from the election.
And this is from CBS News.
67% of voters described the state of the economy as bad.
45% said their own financial situation is worse than four years ago.
30% said it was the same.
Only 24% say better.
53% said inflation was a moderate hardship, and 27% said it was severe.
So how do you explain that, especially that top nine-line number of 67% said the economy is bad?
Oh, yeah, there's this big disconnect between the happy talk you're hearing from economists like me and these surveys.
I mean, I think it's a bunch of stuff, but I think at the top of the list of things is the previously high inflation.
And so if you go back two, three years ago, prices were rising for groceries, for rent, for gasoline, the direct result of the disruptions created by the pandemic and the Russian war in Ukraine.
And even though those prices are no longer rising to any significant degree, gas prices are down, rents haven't moved in two years, grocery prices are flat over the past year.
They're still up 20, 25% from where they were two, three, four years ago.
And that's what people remember.
It's like, you know, I talked to a lot of people in my work and, you know, asked the same question, how you doing financially?
And I am getting the same kind of answer.
And it turns out, at least for my anecdotes, that everyone's got one food item that they buy on a regular basis that they use as a litmus test for how things are going.
Ramen noodles or kombucha tea.
I don't drink that, but kombucha tea, pound of sugar, baby formula.
So I think that's what has people really irked.
It's really the high inflation.
The other thing I'll just call out very quickly is I think people, our politics are fractured.
You know, people are very heated about their political perspective and they're looking at the economy through their political prism.
So, you know, for example, the University of Michigan runs a survey every month.
You know, how you feeling?
And they just released their most recent results.
And the day, just right after the election, the Republicans that responded to the survey went from being very pessimistic about the economy to much more optimistic.
And the Democrats, just the opposite.
So we're all looking at the world through our own political prism and it's influencing how we think about things.
I want to ask you a little bit more about the causes of inflation regarding increased spending during the pandemic.
Right, right.
I'll let you catch a glass of water.
I'll riff here a little bit.
But I think you're referring to the American Rescue Plan.
That's the COVID relief plan that was passed early on in the Biden administration.
And there's been a lot of conversation, discussion, debate about how important that has been to the inflation that ensued.
And I do think if you go back to 2021, it was passed in March of 2021.
If you go back to that summer and fall, inflation did pick up and largely because of the demand created by the benefits that were provided through the American Rescue Plan, those stimulus checks, for example, unemployment insurance.
You know, obviously we're coming out of the pandemic and there was a lot of uncertainty, didn't know how that was going to play out.
And that relief plan was designed to be big to help in case things turned out to be worse than they actually turned out to be.
But I'll have to say, Mimi, you know, that inflation at that time was hard to remember back, but that was deemed to be good inflation because we had been through a period since the financial crisis over a decade of inflation that was below the Federal Reserve's target.
The Fed was uncomfortable with how low inflation was.
We can talk about why, but they were.
And so they wanted inflation that was higher to compensate.
And here they got it.
The real problem with the inflation came a bit later when Russia invaded Ukraine at the start of 2022.
And that's when oil prices and natural gas prices, food, agricultural prices jumped.
And that's when inflation became a real problem.
But, you know, the American Rescue Plan, that spending tax bill to help the economy through the COVID, it did result in inflation.
But at that time, again, it was deemed to be good inflation.
That was desirable.
It wasn't undesirable.
So what do you think of the Fed's handling, though, of the interest rates?
Do you think that they lowered them too much?
Do you think that the easing up on the interest rates has been too slow?
How would you rate that?
Well, it's hard to be critical of the Federal Reserve.
I mean, just think about all the things they're responding to, the pandemic, the Russian war, fiscal policy, a lot of stuff going on.
Hard to calibrate interest rates and monetary policy to get that right.
And in hindsight, the Fed was probably certainly too slow to begin normalizing interest rates coming out of the pandemic.
They kept the federal funds rate, that's the interest rate they control, at zero all the way into 2022.
And that was certainly a hindsight of mistake.
I was a bit fearful.
Of course, they jacked up interest rates in 2020 and 23 to cool things off, and they succeeded.
And I was, if we go, if I had this conversation with you six months ago, nine months ago, before they started cutting interest rates, I would have said, you know, I think maybe they're waiting too long here.
They're running the risk that they push the economy underwater into recession.
But I don't feel that way now.
They're cutting interest rates.
They're normalizing rates.
And I think they're right on track.
I want to ask about tariffs because the president has announced, the president-elect, I should say, has announced that he would impose tariffs.
And the BBC News says that China and Mexico are warning against about a trade war after Trump vows to hike those tariffs.
What was your reaction to that?
I guess this has been talked about a lot on the campaign about tariffs and their impact on the economy.
Well, I'm not a fan of broad-based tariffs.
I mean, I understand strategic tariffs, you know, very targeted specific countries, specific products to make a point and to further trade negotiations and get everyone to play fair, particularly China.
So I get that, but I don't get broad-based tariffs across the board here.
And that's why President Trump was talking about on the campaign trail and what he announced that he was going to do yesterday or the night before yesterday about big tariffs on imports from Mexico, Canada, and China.
Those are our three biggest sources of imports.
And the fundamental reason is that it just raises the cost of living.
We all have to pay a lot more for the stuff that's being imported.
Everything from food, we import a lot of groceries to furniture to cars to clothing, a lot of stuff.
It's a tax increase, particularly hard on lower middle-income households because they devote a larger share of their budget on those kind of items.
And I'm very skeptical that those kind of tariffs and the threat of tariffs, and there's a lot of talk that what President-elect Trump was talking about the night before yesterday was a negotiating ploy.
I find that somewhat disconcerting as well, because at the end of the day, I don't think that works.
It's not going to achieve the goals that he's setting out to achieve.
And it creates a lot of drama and chaos and tumult around the globe.
And it makes it just very difficult to do business.
And I think it's bad for business the longer that goes on.
So we can talk about it some more.
But Mimi, I think bottom line, that's not an economic policy that I think lands us in a good place.
And if you'd like to join our conversation with Mark Zandi, he's chief economist for Moody's Analytics.
If you've got a question about the economy, you can go ahead and call us.
The numbers are on your screen.
Here is President-elect Trump from October talking about tariffs.
it is if by the the higher the tariff the more likely it is to have them come into the higher the tariff the more you're going to put on the value of that piece those goods the higher people are going to have to pay in shops Ready?
The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States so it doesn't have to pay the tariff.
That would take many, many years.
In fact, I'll tell you, you know, there's another theory is that the tariff, you make it so high, so horrible, so obnoxious that they'll come right away.
When I do the 10%, 10% is really, first of all, 10% when you collect it is hundreds of billions of dollars.
The numbers that you're talking about, all reducing our deficit.
But really, so there's two ways of looking at a tariff.
You can do it as a money-making instrument, or you can do it as something to get the companies.
Now, if you want the companies to come in, the tariff has to be a lot higher than 10% because 10% is not enough.
They're not going to do it for 10%.
But you make a 50% tariff, they're going to come in.
Mark, your reaction to that as far as keeping manufacturing jobs in the United States as a result of those tariffs.
Yeah, I remember that interview.
That was with the Bloomberg editor-in-chief in the Economic Club of Chicago.
I highly recommend folks to go listen to that.
You can YouTube it or find it on the web.
Really fascinating interview because the president-elect also name-called who he's going to raise tariffs on.
Although in that, he didn't mention Canada.
He mentioned Mexico and China.
Yeah, I just think that's not what's going to happen here.
You know, I do think that businesses don't make big investment decisions and move factories and other activity into the United States because of tariffs, even if they're large, because they don't believe and don't think those tariffs are going to remain in place in the future.
They don't know what those tariffs are going to be.
Are they going to be 10%?
Are they going to be 20%?
Are they going to be 60%?
The president talked about, elect talked about 100%, 2,000%.
I'm an economist, but I also run a business and I know that if I'm going to make an investment decision, I have to put it down in a spreadsheet and I have to calculate a return on investment.
And I have to put numbers in the spreadsheet.
And if I don't know what those numbers are because of all the uncertainty that's been created here, and I can't put the number in the spreadsheet, can't calculate return on investment, I don't invest.
I'm just not going to do it.
So I don't think that's going to happen.
The other thing I point out is other countries aren't going to stand still.
Just go back to the tariffs imposed in President Trump's first term.
China responded.
Most of the tariffs in that round of trade war was with what we put on the Chinese.
They responded in kind, so-called tit-for-tat.
And that did a lot of damage.
I mean, remember the farmers, the U.S. farmers got crushed because China stopped buying agricultural products produced during the United States.
Farmers were flat on their back.
And actually, President Trump had to start cutting checks, direct checks to the farmers to help them through that period to compensate for that.
So no, I don't think we are going to see any significant investment.
And overall, global investment is going to be lower because of the uncertainty created by just the drama and the chaos created by all of this.
So I really don't think that you're going to see any significant, meaningful increase in investment in the United States because of these broad-based high tariffs.
All right, let's talk to callers.
Bruce is in Summitville, Indiana, Independent Line.
Hi, Bruce.
Hello.
Go ahead.
Yeah, I have a question on the tariffs.
Mark is saying that the tariffs is going to cause reaction from other countries.
And tariffs have been put on our products for years and years.
That's one way to me, the Japanese were able to bring in All their cars and got such a foothold in the United States.
Also, China, companies that go in there, from what I've read, they're required to give up information on manufacturing and stuff like that.
So I don't think that happens in the United States.
But if everybody else is doing it to us, how come it's such a bad idea?
Mark Xandi, go ahead.
Yeah, they're not.
I mean, obviously, the world's a big place.
A lot of countries, a lot of trade policies.
I mean, you know, if you go to Europe, for example, the Europeans really have no tariffs.
Their effective tariff rate is pretty close to zero and has been for quite some time now.
Now, in the case of China, I agree with you that that's a very problematic relationship.
And I don't think the Chinese have played fair in trade and other economic relationships.
And so there, that goes back to my point earlier about what I would call strategic tariffs, tariffs that are very targeted.
So, for example, President Biden imposed tariffs on $18 billion worth of imports from China not long ago, things like EVs and solar panels and some other various other manufactured product.
And that's 18 billion.
So, in the grand scheme of things, that's very small, but it's sending a very strong signal to the Chinese that, you know, look, you got to play by the rules.
So, I'm not saying tariffs, there isn't a role for tariffs.
I just don't think there's a role for broad-based tariffs across the board.
Here's the other thing: Canada and Mexico, they don't impose tariffs on our goods.
We have a free trade agreement with them, the so-called USMCA, which actually was negotiated, renegotiated by President Trump in his first term.
And that creates a free trade zone.
So, there is no tariffs.
And those are our two biggest sources of trade, the Canadians and the Mexicans.
So, some countries impose tariffs, some countries don't play fair.
And I think the use of strategic tariffs makes a lot of sense, but most countries do.
And our biggest trading partners absolutely don't charge tariffs.
So, we're in a free trade zone.
So, I don't think we should be pushing them with the threat of 25% tariffs, which is happened here over the last couple of days.
Audrey's calling from Sumter, South Carolina, Democrat.
Good morning.
Good morning.
Mr. Zandy, my concern is the Ukraine wall over there with Russia.
Being that they are considered the breadbasket of the world, they say, how is their economy going to affect our economy?
Or, you know, if Russia was to retain them or either conquer them, and how would that affect our economy there?
Well, thank you for the question.
Well, the Russian invasion of Ukraine back in 2020, early 2022, did a lot of economic damage, hurt us badly.
It caused prices for oil, natural gas.
You mentioned agricultural prices.
They all jumped because those commodities are produced in Russia and Ukraine.
And of course, Ukraine was economy highly disrupted, has been highly disrupted by the war, and Russia has been impacted by sanctions.
And in fact, if you go back in June of 2022, the cost of a gallon of regular unleaded hit an all-time high of $5 nationwide.
And that's because of the Russian war.
And a big part of the surge in agricultural prices, you know, the higher grocery prices we're all paying is because of the disruptions to agriculture in Ukraine and Russia.
It turns out, and this is something that I learned as a result of the invasion, Russia produces a lot of fertilizer that goes around the world and is important to the growing crops in many other parts of the world.
And because of the war, that caused fertilizer prices to rise and thus the price of crops.
And that raised the cost of the groceries that we're buying in our stores.
So the war in Ukraine really did have a significant impact.
The other thing I'll call out in that regard, this is a little bit more technical, but because of the jump in inflation in that period, because of Russia's invasion in Ukraine, that along with the inflation caused by the pandemic disruptions, the supply chain disruptions and supply disruptions to the job market, that caused people's expectations of future inflation to jump, which got into demands for wages and prices.
And you might have heard this phrase called the wage price spiral.
That's something that very disconcerting to the Federal Reserve Board and the key reason why they started to jack up interest rates aggressively in that period.
So bottom line, I know that's a lot to digest, but the bottom line is to your point, the Russian invasion of Ukraine and the ongoing conflict there is a significant contributor to the higher inflation that we've suffered since the invasion occurred.
We've got a question for you on X from Ajika who says, what about the debt?
The stock market keeps hitting records while we hear about the debt destroying the country.
And I'll just show the U.S. debt clock.
You can see that at usdeblock.org, showing the U.S. national debt at just over $36 trillion.
Yeah, I view this as a problem, a significant problem.
You know, our deficit, that's the difference between what the government, federal government takes in revenue, tax revenue, tariff revenue, all sources of revenue, and what they spend, what the government spends on, everything from Social Security, Medicare, Medicaid to NASA, is almost $2 trillion a year, which adds up to about 6% of the nation's GDP.
And that's an economy, as I said earlier, that's about as good as it gets.
I mean, it's an exceptional economy.
6% is just out of bounds.
I mean, in a kind of a well-functioning typical good economy and fiscal situation, you don't want a deficit to GDP of over 2%.
So 6% is crazy.
And it's adding to our debt load, the amount of debt outstanding is rising very rapidly.
So, you know, I do view this as a really serious problem.
And I do think any tax spending policy that's made going forward really has to be, at the very least, has to be paid for.
I mean, I think it's going to be very difficult to actually cut the deficits in debt, but let's not add to the deficit in debt.
So any thinking around cutting taxes, as President Trump has talked about on the campaign trail, has to be married with other tax increases elsewhere or spending restraint or something to make it all add up.
Otherwise, the deficit in debt will continue to rise.
And ultimately, that'll be a weight on the economy that will be very difficult to bear.
We'll see much higher interest rates, mortgage rates will be higher, auto loan rates will be higher, credit card interest rates will be higher.
It'll be very, very difficult for the typical American to buy a car or to buy a home.
So I think this is an issue that's front and center, and we really need to take that on board when thinking about tax and spending policy here going forward.
On the line for independence, Michael in Will County, Illinois, you're next.
Yeah, Mimi, keep your finger off of the button so that I can develop my two questions for Mr. Zandy.
Now, as an economist, I understand that 70% of our economy, at least 70%, is based on consumer spending.
And this relates to the inflation.
I disagree totally with your analysis.
Unemployment insurance only replaces about 30% of your income, even with the added payments that they were giving.
It never came up to the level for most people of their income.
So this and this $1,800 or so that they gave us in three payments during the COVID.
How could that possibly fuel the level of inflation that we have?
It's impossible.
It doesn't make sense.
It's the tax cuts that put the money in the rich.
And secondly, regarding Medicare and Medicaid and all this, it's the price gouging on the part of the pharmaceutical companies, the insurance companies, the hospitals, and the doctors that get us to a situation where we pay two and a half times what the next country does for covering their health care costs.
It's just all bogus.
And I don't think you're doing any service to us, Mr. Zandy, by foeing these propaganda lines.
Okay, Michael, let's give him a chance to respond, okay?
Well, you know, I appreciate the question.
It sounds like you're taking umbrage with my point about the American Rescue Plan and the impact that had on inflation back when it was passed in 2021.
Let me just say, I don't think the American Rescue Plan and the impact on the demand that resulted because of the stimulus checks, because of the UI, the renal assistance, and all the other support contributed to the inflation that we're experiencing now.
Or, you know, it was really only about the inflation that was back in 2021.
By 2022, I think it goes right back to the Russian war in Ukraine and the ongoing effects of the pandemic.
So I'm not sure we argue we're disagreeing here to any significant degree.
I don't think that that was a big deal.
I do, you know, there are many causes of the high inflation.
And I don't mean to sound like, you know, I don't want to be dogmatic and say it's this one or that one.
There are a lot of contributing factors.
There's a long list of factors.
I would just put at the top of the list, you know, the disruptions caused by the pandemic and Russian war.
Towards the bottom of the list, I put the American Rescue Plan.
And kind of all the way to the bottom of the list is this idea of price gouging.
That I'm very skeptical of.
I just don't see it.
Maybe certain industries, food processing, meat packing, certain companies, you can come up with anecdotes, you always can.
But in a broad-based kind of price gouging, meaning that businesses just took advantage and jacked up prices when supply was constrained by the pandemic or the Russian war.
And Mark Sandy, he also made the point of price gouging, though, for the entitlement spending.
So for Medicare and Medicaid, that hospitals, doctors are just price gouging the patients.
Yeah, I don't know.
It's hard.
I mean, what I look at to try to gauge that is the profitability and profit margins of the businesses that are in those industries.
And, you know, they're doing well, but not to the point where you say, oh, these guys are taking advantage.
The other thing is that having said that, though, I do think there's a lot of reforms we need to make in the medical care system to make it more cost-efficient and get the price increases down in healthcare.
And some things done in the Biden administration do that.
I mean, the ability now, as part of the Inflation Reduction Act, that was another piece of legislation passed in the Biden administration.
It did provide the federal government the ability to negotiate drug prices for certain drugs.
And that has seemingly worked.
It's brought those drug prices back in line, back down.
So I agree with that.
But broad-based kind of price gouging, I'm hard-pressed to see that.
On the Republican line, Nate and Franklin, Indiana.
Good morning.
Yes.
Yeah, I had a couple of questions.
First of all, with these tariffs, you're giving a lot of power to one person to create winners and losers in the largest economy in the world, and not only the U.S., but in the whole world.
It seems that that would lend itself to corruption with creating winners and losers based on whatever favors that you might get.
And also, my second question is: who decides who gets exemptions?
And is that done by the president?
And I will wait on your answers on that.
Thank you.
Yeah, no, you make a great point that I think is not kind of well understood.
You know, implementing tariffs, certainly broad-based tariffs, is incredibly messy.
I mean, go take a look at the list of products that have tariffs on them right now.
It's just a blizzard of different products in different countries.
And you're right.
If you go back to the tariffs imposed in President Trump's first term, there was a lot of pushback by businesses saying, hey, look, if you put tariffs on this, it's a national security issue for whatever reason.
Or if you impose tariffs on that, it's going to severely disrupt my business, hurt my business.
So exemptions were provided.
They were adjudicated by a group of government officials in the administration, and they took a look at what the petitioner said, what the businesses said about the tariffs and how much damage they were going to do, and made decisions around that.
You can lower the tariff or you can eliminate the tariff with this country over this period.
Very complicated kind of process and certainly not transparent, very opaque.
And to your point, that does open up the possibility that you're picking winners and losers here.
And I don't think that's where we want to be.
That's not consistent with a well-functioning market economy, certainly not over any extended period of time.
So I think that's a real issue, a real problem.
And it adds to the kind of the uncertainty that I was describing earlier.
Again, a business person needs certainty.
They need to be able to calculate a number, put it in a spreadsheet, calculate a return on investment.
And if you have all these exemptions and it's not transparent why and where and when, you just can't put the number in the spreadsheet.
So I do think this is a very serious, significant problem and likely going to be a problem if we do have broad-based tariffs going forward here.
JB is in Hot Springs National Park, Arkansas, line for Democrats.
JB, are you on vacation?
No, no, I live here.
Okay.
Go right ahead.
Yeah, I was going to ask Mark.
You know, you can't turn on a financial program anymore without hearing about Bitcoin.
I don't pretend to understand it.
They try to explain it as a blockchain or something, but uh I noticed this morning it's uh hovering around $92,000 a coin.
I was just wondering, um, not that I'm gonna buy one, but if if you did buy one, where would the money go when you buy a Bitcoin?
Who who gets the money for that?
That's my question.
Yeah, yeah.
Well, you're you're buying the Bitcoin from someone who owns the Bitcoin.
So, uh, you know, there's uh the Bitcoins are manufactured.
There's a algorithm, a process for doing it.
You've got so-called miners that, you know, running the algorithms, creating the Bitcoin, and they get the Bitcoin and then you buy it, and then it's traded.
You know, it's just like any other, I hesitate to use the word the asset, but you know, a stock or a bond.
So you got the owner and a potential buyer, and they transact.
And so you can go on an exchange.
There's different exchanges.
You know, just like if you want to buy a stock, you can go.
I'm just making this up.
You can go to Schwab or TD and you can sign up for an account and you can put cash in the account and then you can use that cash to go buy a stock.
There's exchanges that do that for crypto, Bitcoin being one of the crypto.
So, you know, I'll mention Coinbase, for example, because that's the one I know.
You can go do the same thing.
So the same principle, same, you know, same general process.
Mickey in Los Angeles, California, Independent Line, you're on with Mark Zandi.
Thank you for taking my call.
Good morning.
I always enjoy it when Mr. Zandi is on your show.
I have a couple of things.
One is that the tariffs that Donald Trump has proposed, Mr. Zandi touched on this.
He renegotiated NAFTA to USMCA.
Now, I don't understand what is the issue with the trade agreement that he himself negotiated.
And the other thing is that a lot of these illegal migrants into the U.S. over the course of the last four years or so have been mainly from El Salvador, Guatemala, and Venezuela, where there is economic hardship.
Many illegal migrants living in the U.S. who were Mexican have actually ended up going back to Mexico because the economy in Mexico is good.
These factories, U.S. factories that are now set up there for decades, so they're going back.
So this will have a negative impact.
You will cause those same Mexicans to want to come to U.S. for economic opportunity.
So this doesn't make sense to me.
The other thing, I'm in the import business, and I was hurt a lot when China imposed when Trump imposed tariffs on China.
I import area rugs.
So the area rug tariffs went from zero to 35%.
It was impossible for me to continue.
I had to shift production to another country.
It's still an import.
They're not making rayon rugs in the United States that I was taking any jobs away from them.
And then I have friends who have done extremely well in the last four years.
They're very wealthy.
They voted for Trump.
And I also know people, some of my employees, who didn't do too well the last four years, and they voted for Trump.
So I don't understand this disconnect.
And why did the Democrats not have a message about the good economy of the last four years?
Thank you for taking my call.
Go ahead, Mark.
Yeah, well, thank you for all that.
There's a lot to unpack.
I mean, back to the USMCA.
That's the free trade deal that President Trump renegotiated.
As you pointed out, that was originally NAFTA, North American Free Trade Agreement, became USMCA under President Trump.
And, you know, I don't know that President Trump has an issue with that.
Maybe there's some tweaks there that need to be done.
It was going to have a refresh anyway here in 2026.
So I think some things around the edges might be adjusted to make the thing, make the agreement work better.
I think generally I don't know that President Trump's imposing tariffs with regard to trying to create leverage around the USMCA.
Maybe on the margin, but I don't know if that's the big reason.
He called out, President Trump did call out the reasons for the tariffs on Canada and Mexico being the illegal drug trade and immigration.
And, you know, obviously addressing those issues is critically important to the nation.
I mean, those are very laudable goals.
I just don't think we're going to make any progress on achieving those goals through tariffs.
I don't think that means that Canada or Mexico are going to try any harder to address these issues.
And you make some good points about what problem are we actually trying to solve here.
We have seen a very significant decline in illegal immigration across the southern border over the past year, in part because of executive order that President Biden put in back in the summer around asylum seekers, but also in part because the Mexicans have also tried to control the number of immigrants coming from, as you pointed out, other parts of Latin and South America up through Mexico into the U.S.
It's not really Mexicans that are coming into the U.S.
It's other Latin and South American countries where the immigrants are coming from.
And I'm really hard pressed to see what role Canada plays in illegal immigration, immigrants coming across the northern border.
I'm not sure in illegal drug trade.
So this just goes to a broader point.
Using trade policy or the threat of tariffs to achieve these other goals, while these are good goals, I just don't think they're going to be effective and are going to create other problems, other unintended consequences that are going to be counterproductive.
And regarding plans for mass deportation, how reliant is the U.S. economy on undocumented immigrant labor?
Very, very, Mimi.
But how do we know that if they're undocumented and this is all kind of under the table?
Well, we can see it in the employment statistics.
There are surveys that the Bureau of Labor Statistics does to try to gauge how many folks are foreign born or native born.
And we have some sense of how many of those are legal and how many are illegal.
It's not easy.
It's difficult.
But what we do know is this, that the economy is at full employment, right?
The unemployment rate is 4%.
It's been there for two years.
And the Federal Reserve has been working really hard to get it at 4%.
So 4% is the bogey.
We're there.
That's the full employment economy.
And that's with all those immigrants that are on the job and working.
And if you, in that full employment economy, you ask those workers to leave and force them to leave or even make life so difficult that they self-deport, then the economy is not going to have enough workers and not enough people in those jobs that they're in now right now.
And we know that those workers, and by the way, the numbers are quite large.
I mean, the undocumented, unauthorized is last estimate done a couple of years ago was 11 million.
So therefore, it's much higher than that today.
They work in construction trade.
So, you know, we have a very severe shortage of affordable housing, both for rent and home ownership.
We need to build more homes.
But about a third of all the workers in the construction trades are foreign-born.
Not all illegal, but some are.
And if we ask them to leave, we're not going to be able to build those homes to address that shortage, which means a higher cost of living.
We've got to pay more in rent.
Our house prices are going to be higher and more unaffordable.
It's going to make it harder for first-time embarrassers to get into a home.
Agriculture, another obvious area where we're going to have an issue.
manufacturing, transportation, distribution, leisure hospitality, retailing, child care, elder care, you know, all the healthcare, all these things, industries rely very heavily on immigration.
Now, now, Mimi, you know, I don't think there's any way to run a railroad.
I mean, I think our immigration system really needs reform.
And by the way, we got pretty close to a pretty good reform bill back last summer.
It got kiboshed in the political process.
But we need immigrants, but we need to make sure that the immigrants that are coming into our country are the ones that have the skills that we need.
Now, we need skills across the board, low skill, middle skill, high skill.
We need all of the above, but we need to make that rational.
So I'm not arguing that.
I'm just saying it would be very counterproductive, very disruptive, inflationary if at this point in time we ask a lot of immigrants to leave and force a lot of immigrants to leave the country.
On the Republican line in Vineland, New Jersey, Gerald, good morning.
Good morning.
I'm wondering what Mark Zandy, what kind of policies he would implement to bring industry back to the United States.
Obviously, we'll need heavy industry to build infrastructure and the such and the like.
And I'm not hearing anything of how he would build our industry.
Thank you.
Yeah, it's a great question.
I really like the tax subsidies that were provided in the CHIPS Act and the Inflation Reduction Act for, in the case of the CHIPS Act, for the name makes it clear, the chip industry, the semiconductor industry, that piece of legislation provides tax breaks to global chip companies to come here into the United States.
And that is working fabulously well.
I mean, if you look at the number of chip facilities that are going up, they're now coming to fruition.
They're going online.
TSMC, which is a Taiwanese, major Taiwanese chip producer, largest on the planet, just opened up a plant, one of the most sophisticated chip producing production facilities in the world in Phoenix.
So that's been highly successful.
In the Inflation Reduction Act, also tremendous amount of subsidy, tax subsidy to help the transition from moving from fossil fuel to clean energy, both in terms of investment and production.
And that's working beautifully.
The infrastructure law that was the so-called bipartisan infrastructure law that was passed back a couple of three years ago provides tremendous amount of money and support to build out our infrastructure, which brings many that, you know, if you build a road or a bridge or an electric grid or a broadband, that requires a ton of manufactured product that a lot of that's not produced here.
So we've been fortunate as a nation that we could use carrots, you know, tax subsidies to get manufacturers to come here to the United States and start to produce.
I'm going to give you one statistic.
I haven't used any statistics here except for 4% unemployment rate, just to give you a sense of this.
If you go back before the infrastructure law, which was passed in 2022, the 10 years prior to that, the amount spent by manufacturers on facilities, factories was about $75 billion per annum, give or take, one year a little higher, one year a little lower.
Last I looked in the month of September, the spending on facilities, manufacturing facilities, $230 billion.
It's $230 billion.
So we are seeing a massive amount of investment.
A lot of that's coming from those tax subsidies.
One other thing that's driving all this, and that is AI, artificial intelligence, and data centers.
Data centers are basically large facilities to hold these computers that do all these calculations for artificial intelligence.
They're going up everywhere in the United States of America right now.
And that's driving a lot of economic activity.
So manufacturing is coming back.
It's come back in a very significant way.
And I think we've made a lot of progress, certainly over the last several years.
All right.
We're going to fit in one more call, Robert, in Lake Jackson, Texas, Independent.
Good morning to my fellow Americans.
And Mimi, are you okay?
Because you had us worry for a moment you were going to fall out for me.
I know.
I was, Robert.
Thank you for your concern.
All right.
All right.
My question to Mr. Zandy then.
All right.
Well, that's a relief thing.
What did the tariffs, slapping prohibitive tariffs on import goods do when Trump could subsidize 3D printers and have one put in every home so that everyone could figure Americans become their own manufacturer and just give Americans a universal basic income to offset the cost of these tariffs?
Oh, that's an interesting idea.
The 3D printer, you know, I don't really, it's a great technology, and I'm sure it's already having enormous benefit.
I don't know that that's a viable policy at this point in time.
But, you know, actually, maybe in this way, there was this, when I was a young economist, there was this fella, Toffler, who wrote a book about the future and technology.
And I highly recommend it.
A very cool book and got a lot of it right.
And he talked about 3D printing back 20, 30 years ago and having a 3D printer in everybody's home.
So I don't know how far-fetched that is, but that certainly would be a benefit to Americans.
And that might solve a lot of our economic issues.
But that's the other thing I just say.
I think the American economy is an amazing thing if we just let it go and don't impede it.
It's just an incredible success story in large part because we do invent new technologies to solve problems and it makes our lives better.
So just as long as we can, we can argue, we can debate the merits of this and that and everything else.
But as long as we remember to let this American economy operate, we'll be just fine.
All right.
That's Mark Zandi, chief economist for Moody's Analytics.
You can find his work at economy.com.
Mark, thanks as always for being on the program.
Thank you, Mimi.
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