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• 00:00This is this is the really the end of the period when you could point backwards on on the data. You know, the president can’t be responsible for the January data, but the quarter as a whole, it really is in the Trump administration. It’s a noticeable weakening in the economy. I think if you toss out all the the the trade related factors that Mike, when he went through, you’ve got an underlying growth rate of something like one and a half down from two and a half in the fourth quarter, 2.4. That’s troubling because it’s when we turn the corner into April that we see the impact of Liberation Day and that and the array of tariffs that went on and off. We’ll get our first impact. A read on that in the official data on Friday. But we saw the ADP employment report today and that came in very soft 62,000 jobs, some weakness in places you wouldn’t expect, education and health. So I think Friday’s jobs report can be a very important read on the economy. It’ll tell us a lot more as we hear further references to the R word here and some suggesting we may already be in a recession. Douglas, it’s great to have you back. We heard from Peter Navarro this morning. As you might have heard me mention, this was the best negative print for GDP I’ve ever seen, if you feel that way to. Well, you know, every now and then I yell at the TV. I don’t feel that way at all. You know, this was this was a bad report. And I don’t think there’s any way you can sugarcoat it. Among the things that were really troubling was the very soft household spending, particularly on goods, durable goods. You would have thought that people and you know, we heard a lot of actors about this year thought that people would be buying ahead of the tariffs to get to get those things in their houses before they hit. That’s a really weak number. And so I think you if you look at that and the fact that outside of what’s clearly a tariff related surge in equipment investment, the core of the economy really didn’t look good in the first quarter. And as Mike Micky mentioned, the PC core price index was up to 3.5%. That’s a bad combination. Rising inflation, softening economy. Nobody should think this is a good print. Well. So then it becomes a question of any kind of correction or what could pull us out from the downward trajectory. Douglas And the White House would argue, as we heard, evidenced in the Cabinet meeting earlier, that the tax cuts coming down the pike, the renewal of the 2017 cuts, the other so that Trump would like to implement are going to be somewhat of a salve here. And I wonder, assuming that the president can get everything he wants on tax policy, which still remains a question is Congress works on that. To what extent you do expect it will be some kind of offsetting factor? Well, let’s think about what’s in the in the bill. I mean, number one, that’s an extension of current tax law. I don’t think anyone expects the sunset. So we’re not going to get any juice out of that. That’s just more of the same. There are the business expenses on R & D and equipment investment, interest deductibility. Those are modestly positive, but I don’t think they are earthshaking. And then there are the array of campaign promises No tax on tips, no tax on overtime, salt cap, the things that that the president wants to have at least some modest ball toward to fulfill his, you know, his campaign promises. Those aren’t changes either. So from an economic point of view, the tax bill is not a big boost to growth. I mean, it’s something we got in 2017. It’s already in the economy. So I think the real issue here is does the president come to reality on what he’s done with the tariff policy? You know, if you think having a sunset and a $425 billion tax increase next year is a bad idea. That’s what he did on Liberation Day. And so I think some rethinking of the burden that he has placed on American businesses consumers is really in order. And it’s hitting the small businesses the hardest. They’re the ones who are cash constrained. They’re the ones who are going to pull back on their CapEx the quickest. And I’m concerned about that outlook. Yeah. Interesting. You know, we could talk about the baseline until we’re blue in the face here, Douglas. But are we talking about likely an enormous deficit spend here? We’re looking at the potential for Medicaid cuts one day. And Donald Trump last night says and by the way, he’s been consistent on don’t touch Medicaid. That’s been a different conversation on the Hill. Last night, he said Republicans will increase Medicaid spending. How are we going to pay for that? I don’t think there’s a plan to pay for it. They don’t plan to pay for defense spending increases. They don’t plan to pay for border spending increases. So I think the best case scenario one could could map out would be one where we didn’t make the current already bad fiscal outlook worse. But most likely it will be worse. Maybe not dramatically worse, but certainly worse than they inherited. And that means that beginning next year, which is an election year now, not much will happen. We have to at some point get serious about the deficit. And there’s no seriousness right now. And I don’t think anything in this bill is going to address it at all. Well, and when we consider the deficit, that’s why we keep having to borrow and borrow and borrow in the Treasury’s debt ceiling of how much it can issue goes higher and higher. We heard from the Treasury secretary that IRS revenue has been up. Douglas, as we await an update from the Treasury on when exactly the extent will be, when are you anticipating it and how important will that be to the movement of legislation in Congress if it’s earlier in the summer than is previously or is currently anticipated? We’ve mentioned this before. When I was on and I’m quite worried about the fact that they’re counting on the reconciliation bill to raise the debt limit. There’s no guarantee those timetables line up. It’s going to be hard to get to. Yes, in the House, hard to get the House and the Senate and even harder to get the two houses to agree on a single piece of legislation. That might not happen before an August tax date, in which case they’ll have to break out and do the debt limit by itself. We saw the bond market react on that in the week after Liberation Day. We saw the vote, the long end of the yield curve go up. And and this is not the time to have some sort of misstep in raising the debt limit. They need to do it in a timely fashion, not scare international capital markets to secure the the funding future of the Treasury. And that may not be able to happen on the timetable of reconciliation. So there should be a plan B out there somewhere. Plan B out there. You must get that. That tends your antennas go up when the date is approaching here. Douglass If that has to be handled separately and Republicans make a deal with Democrats. Putting your politics hat on for a moment, does that change the nuances of the reconciliation debate, or are these going to be two completely separate exercises? One will involve Democrats, the other will not. If they have to do the debt limit, they will need Democrats in both the House and the Senate, and that will be expensive. Democrats will want some things that Republicans aren’t planning to do in reconciliation, that we’re going to want an extension of health insurance, tax credits. They’re going to want a bigger child credit. They’re going to want a lot. And so what loses is, is the fiscal outlook. You get to raise the debt limit and solve the immediate problem, but you make the longer term problem harder. And and I don’t know what that does in reconciliation. It may empower them to say, okay, well, we might as well just blow it all out. This year. We already spend a lot of money, which is the wrong reaction to have, but we’ve seen it before. So I think that dynamics actually a very dangerous one from a fiscal policy point of view. Hmm. Well, and when we consider the shape of all of this policy, what role, realistically, Douglas, is the parliamentarian going to play? And is there anything you’re skeptical about actually getting through that review, knowing that for Republicans to be able to pull this off, they have to use this reconciliation process and John Thune wants to stick to or at least was indicating previously, wants to stick to whatever the parliamentarian rules. Yes, he did say that. And I think that’s the right call. It really limits the scope. I mean, we’ve heard we’ve heard things like putting all of the competition policy in the Department of Justice and getting rid of the FTC. You can’t do that in reconciliation. There’s a lot of regulatory reform they’d like to do that seems unlikely to make it through in regulation, energy policy. You can do clean energy tax credits in or out, but you can’t really do big policy making. So I think it would narrow the scope of that one big, beautiful bill considerably. And they if they want to make those policies real, they’re going to have to do some more legislating after the reconciliation bill. Where are you on the timelines here? Douglas The Speaker still seems to think Memorial Day is realistic. Scott Best is pointing us to the 4th of July. Are either reasonable? I’ve been thinking Thanksgiving all along, so I’m skeptical. I mean, my my observation is that the house can be done by July 4th in the Senate can be done by July 4th, but I don’t think they can agree by July 4th. They have yet to settle any differences, as you mentioned at the outset. They haven’t even figured out which baseline to use. We’ve got a current policy baseline in the Senate, current law baseline in the House. They were discussing that in December. So at some point someone has to force decisions to be made. That should be the president, in my view. But they haven’t. And so they’ve let this process drift along on two separate tracks for all practical purposes. Well, and when we consider practicality here, Douglas, we heard the president last night at his rally in Michigan talking about Republicans in Congress, actually that may need to be voted out because of the way in which they sometimes act against the rest of the party. I think we know that the tapes he’s referring to, I’m not sure if Tom Massie and Chip Roy’s ears perked up at that, but I do wonder what you expect to see from some of these hard line conservatives who want deep spending cuts. You want to see these offsets and may not be able to see them in the kind of size and scale, realistically that they’d hope. You know, a reconciliation bill is an act of disappointment for everybody. It’s not going to have anyone’s desired mix. You’re always compromising and always trying to fit it into the box that you’ve created from the budgetary point of view. And and the reality is failure is not an option. So in the end, after all of the posturing and the speeches which will take us to Thanksgiving, in my view, they are going to, you know, lock arms and vote yes. And I think that’s the outcome that everyone should expect. Spending time with Douglas Holtz-Eakin of the American Action Forum, as we also keep an eye on the White House here. President Trump is holding an extended cabinet meeting here, opening up his next hundred days at the White House. And they’ve been going around the room as he takes some questions from reporters. We’ll put an ear on what he’s saying. DOUGLAS The next 100 days will be occupied more by Trump tax cuts or tariff talk, because I do feel like we’re getting a bit of a transition here in the language that we’re hearing from the president. Well, I think that he’s going to try to point to the the tax bill as the sort of economic rescue plan. You know, this week report, I just don’t think the substance is as outstanding as as the as the rhetoric is. I mean, to not do it is a disaster. So let’s be clear. They have to do the extension, but it’s not going to do much beyond, as I said, current policy. So it’s not going to do much for the economy. So I think the right thing is to, you know, get it done in a in as quick a fashion as possible. And that would require, I think, a little more leadership out of the White House. Also feature the deregulation, which all the pieces are in place to do a lot of deregulation, as he did in his first time in office. And so I would feature that and I would negotiate however many trade deals you need to get rid of the reciprocal tariffs that’s just too much and dangerous and then start thinking hard about what to do with the 10% universal tariff. That’s that to me is the one he has a hard time walking away from. It’s his idea. He’s not going. I mean, he made a mistake. There’s no one to negotiate with. And so, you know, there may be a need for Congress to rescue him from himself and have them take away the authority to do that. I just think if the economy really weakens in the second quarter, you’re going to see Congress start to think real hard about doing that.