Episode Transcript
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Speaker 1 (00:01):
Man, Every Christmas, everybody.
Speaker 2 (00:04):
It's Lupiro, your host for this morning on Life Happens Radio,
and we're very happy to be here on this December
twenty first, the shortest day of the year, so we
have bright sunshine right now, but it's not gonna last
very long.
Speaker 1 (00:17):
It's gonna get a little dark, and it's going to
get a little cold.
Speaker 2 (00:20):
We have the coldest time of the year, and baby,
it's cold outside, Zach. I don't think you can even
play that song on the radio anymore. But anyway, we're
here and we're happy to celebrate with you Christmas, Honikah Kwanza,
whatever your religion or not religion, but it's a good
time of year to kind of take stock of where
(00:40):
we are and look at the next.
Speaker 1 (00:42):
Year and what's coming in twenty twenty five.
Speaker 2 (00:45):
And for that, we have a special guest today and
I'm going to get right into it. I'm going to
talk a little bit about the holiday traditions, but we're
going to start with Hugh Johnson, and Hugh is an
economic advisor. His company is Hugh Johnson Economics, and I've
had the pleasure of knowing you for a number of years,
going back to first Albany Corporation when he was there
(01:07):
and throughout his career.
Speaker 1 (01:09):
And with that, good morning.
Speaker 3 (01:11):
Hugh, Good morning Lou. Nice to be with you, and.
Speaker 2 (01:14):
It's great to have you. We of course had an
intergenerational estate planning conference post election back in November, so
I got a little foreshadowing of what we're going to
talk about today. But the economic forecast, and we've already
hit a little speed bump, haven't we, with the raid
cut that came in the announcement that they're not going
(01:34):
to have a whole lot more and the market reacted negatively.
So let's maybe pick up right there with current events.
The most recent FED meeting, they did cut the rates,
but the forecast wasn't as promising as many had hoped.
Speaker 3 (01:50):
That's very correct most of us that have been expecting
that they not only would reduce interst rates at this meeting,
but they'd also two interstrates four times in twenty and
twenty five, one time each quarter. And when we look
carefully at some of the wording of the sort of
(02:11):
the summary of their projections, the projections of the members
of the committee, it indicated that they would not reduce
interst rates four times in twenty twenty five, but it's
likely to come out to be just two reductions in
twenty twenty five. So that was a little bit of
a first of all surprise and obviously a disappointment. The
(02:33):
markets reacted when you saw the Dow Jones Industrial average,
as you mentioned lou being down a thousand points in
one day. That's a fairly significant reaction. Fortunately, it did
make up or come back a little bit yesterday, but
nevertheless that was a fairly severe reaction.
Speaker 1 (02:52):
And so you know, we.
Speaker 2 (02:53):
Have talked about this. We talked about it at the Intergender.
For those that don't know, we do an annual conference
and it's for advisors primarily, but we did have some
clients actually attend this year, and we cover topics like economics,
and Hugh gave his presentation which led off the day,
and then we covered wealth planning, investments of state planning,
(03:15):
tax planning, the impact of all of this on everyone's
pocketbook and taxes. And that's a day that you can
see on film because we did record the day and
it's on our website, so if anyone would like to
go in and see all of the various presentations from
the Intergen, it is at pyrolaw dot com and you
can see it there in the resources tab. And it
(03:37):
was a great day. And looking at the election, there
are so many unknown still. The cabinet appointments, everyone is
scrutinizing and scrutinizing. But the philosophy of this government, I
don't know it's clear yet. What are you reading in
the tea leaves.
Speaker 3 (03:55):
Just as you say, it's not at all clear. There's
a lot of policy changes. First of all is obviously
the change that we're going to have a new administration.
There's some significant policy changes that have been discussed, particularly
during the run up to the election. The immigration is
probably at the top of that list, but also whether
(04:17):
we're going to have an extension of the tax cuts
of twenty seventeen beyond their sunset of twenty twenty five.
That would extend those tax cuts, and I might add
not only would extend the tax cuts, but increase the
size of the federal budget deficit. So that's probably the
(04:39):
second thing. And the third thing, which is getting a
lot of attention now, as you well know, is teriffs.
The proposal is there a number of proposals with regard
to TIFFs, specific tariffs against say Mexico, Canada, and China.
And also what we call a baseline universal we'll call
(05:03):
it tariff policy, where we'll be raising tariffs against all
countries that export goods and services to the US. So
those are three very significant issues, and those are significant
issues that will very much affect the outcome for the
economy and importantly inflation in twenty twenty five and twenty six.
Speaker 2 (05:26):
Yeah, there's a lot to unpack there, so I'm going
to break them down for our listeners and for those
that don't know. The tax cuts that were passed now
eight years ago or seven years ago could not be
done on a permanent basis.
Speaker 1 (05:42):
Because of the way they were passed.
Speaker 2 (05:44):
They had to have a timeline, and so some of
the tax cuts were permanent, including the corporate tax rate.
So on the corporate side, you that tax cut which
went from a twenty eight percent rate to a twenty
one percent rate. That is a permanent tax cut. And
do you think that they would cut the corporate tax
rate further.
Speaker 3 (06:05):
That's a big question. Obviously, it's been proposed to cut
it from twenty one percent, possibly to fifteen percent. The
problem is is that the Republicans and I might add,
Trump as well have talked about their concern about the
federal budget deficit. So if you reduce the federal the
(06:25):
corporate tax rate from twenty one percent to fifteen percent,
that's going to impede or reduce the level of revenues
at the federal level and increase the size of the deficit.
And that's going to require some other things, such as
we'll say, spending cuts. So it's not going to be
easy to move from twenty one percent to fifteen percent.
(06:46):
And if I were a betting man, I would say
that that's not going to be a part of what
we see is when we talk about changes in and
twenty twenty twenty five. However, the extension of the two
thousand and seventeen Tax Cut and Jobs Act is a
(07:07):
very strong possibility, and that loan will increase the size
of the federal budget deficit by three trillion dollars over
the next ten years, as well as increase increase the
interest payments by four hundred and sixty seven billion. Those
are estimates that come from the Congressional Budget Office. So
(07:30):
a very significant impact on what we'll we'll call finances
at the federal level, A very significant increase in the
size of the deficit, which has to be financed by
borrowing from domestic investors as well as foreign investors, which
might not be easy to do in a year when
(07:51):
you're increasing tariffs on those very same investors.
Speaker 1 (07:56):
So when you look.
Speaker 2 (07:56):
At immigration, tax cuts, tariffs, and you can add a
few more to that, you know, education policy, health policy, Medicare,
social security, how are they.
Speaker 1 (08:07):
Going to play into this?
Speaker 2 (08:09):
But just to take those three, the current federal debt
is thirty six trillion dollars and that's the number that
is just mind numbing and no one really even thinks
it's a real number. It's just something you read about.
But the interest payment view on that, which you mentioned,
is almost one point two trillion dollars a year today,
(08:33):
and that's the third as I understand it, the third
largest expenditure that the federal government has, behind social security
and medicare. And understand it is just overtaking defense spending.
So we're spending more on interest than we are on
defense going forward, And how do we get to the
point where we have a balanced budget, which hadn't happened
(08:54):
since nineteen ninety seven ninety eight.
Speaker 3 (08:58):
The way you get there is really simple, and that
is you've got to raise revenues somehow, and you've got
to really avoid trying to impact revenues in a negative way.
And obviously, if you start to reduce corporate tax rates
or some of the other tax rates that we've been
talking about, or at least the Trump administration has been
(09:20):
talking about. Remember they talk about they talk about taxes
on over time, they talk about taxes on social Security
being eliminated, they talk about taxes of all sorts being eliminated.
You're going to impact revenues and that's not going to
get you closer to what we'll call a balanced budget,
(09:41):
which is a long ways away right now. And then,
of course, not only that, we've got to do something
about the spending side of the equation. This is a
very serious problem. And to the extent that we do
not we have higher deficits, we spend more on as
you mentioned, on interest rates at the federal level than
(10:02):
we do we're pretty close to it, than we do
on defense. That presents a significant problem, and that means
they're going to have to be cuts in different places.
I hate to say it, but obviously, and nobody wants
to get anywhere near this, but that might mean that
there's some serious cuts maybe coming on things that are
(10:22):
important to us, such as Social Security, Medicare and Medicaid
and other discretionary spending at the federal level. So something's
got to give. And obviously a lot more prudent fiscal
policy is an easy way to say, it would certainly help.
We've really got to either increase revenues in one way
(10:44):
or another or reduce spending in one way or another
in order to get back to the kinds of levels that,
as you mentioned, we had in nineteen ninety seven and
nineteen ninety eight. One, believe it or not, hard is
this to say we had a mudge at surplus at
the federal level.
Speaker 1 (11:03):
Yeah, that was, And believe it or not, it was
a Democratic president.
Speaker 2 (11:07):
It happened to be Bill Clinton, that's right. He at
the time worked with Nut Gingrich and Congress and they
actually cut expenses. I mean, they cut Medicare. And nobody
really thinks of Bill Clinton as having been the guy
that cut Medicare, but he cut nine billion dollars out
of the Medicare budget and they raised revenues at the
same time. I was at last week, I flew down
(11:29):
to Washington and I am I am an independent, registered independent,
once a Republican, now an independent, and I'm looking at
this from a lens of how do we get practical
solutions and how do we get off the bipolar government
that we have. So I joined a group called No
Labels about ten or twelve years ago, and this was
(11:51):
the National No Labels Conference. And at that conference I
ran into someone I had met ten years ago named
David Walker. And David Walker happened to be the Controller
General of the United States who I had on this
program ten years ago, and he was the accountant for
the country when they actually balanced the budget. So David
testified in Congress last week for three hours about how
(12:12):
they can rein back in the spending and raised revenue
to match to get back to where we're And just
the interest rate, the devastating effect of the snowballing interest rate.
Even without a deficit in a current year, you're paying
more and more towards that interest So looking at all
(12:32):
of these factors, we're going to come back after short break, Hugh,
and I want to tackle immigration because that is the
hot button that was one of the issues that drove
the election. Toward President Trump, and it's something that certainly
President Biden and Kamala Harris did not handle well. So
let's talk about that and the impact and not so
much the political side of it, but what's the impact
(12:54):
of immigration on American commerce, business and the ability to
hire employees.
Speaker 1 (13:00):
We're gonna take a short break.
Speaker 2 (13:01):
I'm on with Hugh Johnson Live talking about the economics
of America for twenty twenty five. I'm Lupiro, your host.
We'll be right back after this short break. Welcome back
to life Happens. I'm Lupiro on with Hugh Johnson. And
(13:23):
Hugh this is something that is going to be talked
about forever, and that is the ability of the government.
And now we just got off of another cliff where
the government was going to shut down and they had
to pass an emergency measure by midnight, and they did
so they got it, got that done, but kind of
unraveling all of the issues that drove the election, and
(13:44):
that's going to drive they are going to drive public
policy and American public policy going forward.
Speaker 1 (13:49):
Immigration is something.
Speaker 2 (13:50):
That we all agree is a big problem. But the
speakers that I heard down in Washington, and this is
Republicans who are on the border and Democrats. Legal immigration
is very, very different than illegal immigration. And I don't
think you anybody disagrees with taking criminals who are putting
(14:10):
us at risk and getting them out of the country.
But I don't think a lot of people think about
the impact of legal immigration on employment and on business.
Just talk a little bit about how that fuels the
growth and the GDP growth that we need to keep
the economy going forward.
Speaker 3 (14:28):
It's extremely important keep in mind that when we talk
about gross domestic product, which is our scoreboard for the economy,
we're really talking about the growth of the labor force
or employment number one, and secondly, the productivity of that
labor force. If we have the labor force increasing and
(14:50):
we have productivity getting better, that the odds are that
will show up in the gross domestic product numbers, which
tell me that the economy is expanding. And of course
that the economy is expanding, the odds or probability of
getting higher revenues at the federal level in the form
of tax revenues gets better and better. The problem is
(15:13):
the course is what's being proposed is the limitations on
the amount of immigration number one and in addition to
that the deportation of those immigrants that perhaps are here illegally.
Those numbers are pretty high and pretty staggering. For example,
the number of we'll call it legal immigrants each year
(15:36):
averages about one million. They don't all come and go
to work, a lot of them don't go to work,
but nevertheless, a million is a big number. And then
if you ask yourself, well, how many people do we
add to non farm payroll employment each year in this country,
that number is also around a million. So obviously, if
(15:58):
there's deportation, or if there's just simply limitations on the
number of legal immigrants that we allow into the country
each year, you're going to hurt the levels of employment,
and that means you're going to hurt the economy. And
it's really simple arithmetic. I estimate, and I might add
there are others that are good able economists that estimate
(16:22):
that that number of one million legal immigrants per year
might go down under some of the proposed plans that
are being suggested by the next administration, might go down
to something in the order of seven hundred and fifty thousand.
So just simply looking at those numbers, it says you
(16:42):
have limitations on immigration. You have lower immigration, you have
lower employment lumbers in other words, non farm payroll employment.
That means you're probably going to have you're going to
hurt the economy. And we're talking about an economy which
is only expanding two percent per year in twenty twenty five,
twenty six. With my fingers crussed, and so you really
(17:05):
have an impact on the economy. And how this all
pans out, how it's how we respond to the lower immigration,
how we get that done, is really going to be important.
I happen to believe that it's going to be done,
primarily as you suggest that it's going to be those
(17:27):
that have been violators of the law, that are illegal
immigrants will be deported, and I think it's probably going
to stop, hopefully stop right there. And that doesn't even
get into some of the very complex issues like dreamers,
which is another part of a very very complex problem, and.
Speaker 2 (17:47):
The exemption for people born in the United States. There's
an automatic citizenship that they want to take away, which
other countries do have, but we've had it as part
of our policy for a very long time. So if
you're born here, you get to stay here, and that's
kind of an important way to grow the economy as
(18:08):
well as young people get educated here and become Americans
and grow into the workforce.
Speaker 3 (18:14):
They not only grow into the workforce, Lou as you've suggested,
but they in many instances, and we've got many instances
where they not only grow into the workforce, but become
leaders in the workforce and can be a lot of
the sort of progress we've made with individual companies can
be traced to people that have immigrated from other parts
(18:38):
of the world and have made a significant contribution. We've
been fighting this battle quite frankly, I've been fighting this
battle for many, many years now. This is not new
trying to find ways to increase the limits that are
now placed on the number of immigrants that are allowed
to have green cards, aren't allowed to immigrate to the US,
(19:01):
many of whom, as I say, have been leaders that
have been a part of growing our US economy. So
this is a real hot issue. But I'll tell you
it's a difficult issue given the fact we've taken such
a long time in trying to solve it. We an
solved it yet, but maybe now it'll come to a
head and we'll at a minimum increase the number of
(19:24):
immigrants that are allowed to obtain citizenship in the US,
because they're an important part of what's made this country
this country that it is.
Speaker 2 (19:34):
And you mentioned farms in the farm economy, that's not
even included in that number. But this probably has the
most devastating effect. If you think of where all of
our produce comes from, a lot of it comes from
states like California, and a lot of the labor in
California comes from immigrants.
Speaker 1 (19:51):
And I mean there's talk of, you know, the.
Speaker 2 (19:54):
Immigrants coming in and taking our jobs away, But are
my kids going to go pick lettuce?
Speaker 1 (20:00):
You know?
Speaker 2 (20:00):
Is that something that the American children are going to
be taking those jobs on? Where do we fill that?
How do we get to the places like home health care?
How many people want to be a home health aid
and there is an enormous shortage of home health aids.
That's something near and dear to our firm and me
(20:20):
because when people need care at home, they need people
that can provide that care, and where do you find them.
There's a forty percent shortage of New York State right
now of home health workers.
Speaker 1 (20:31):
Where do we find these people?
Speaker 3 (20:32):
You it's a very big issue and you can obviously
see how just raising these numbers, especially in the agricultural
sector of our economy, tells you just how complex this
issue is. It's not subject to an easy answer, and
so that's why I think that the ambitious plans that
(20:54):
have been proposed or were proposed during the election process
to see that. I don't believe you're going to see that.
You'll see some deportation of those that have violated the law,
but I think it's probably going to stop there or
really have a problem. We'll do things like rebuild the wall,
not rebuild the wall, but maybe extend the wall, tighter
(21:18):
immigration in immigration regulations. I'm sure that will reduce immigration some,
but I don't think they're going to be as grand
as perhaps was suggested in the election. It's just not
an easy problem to solve.
Speaker 2 (21:36):
Well, go back a few years. My law firm does
a lot of corporate law. We do a lot of
business law, and I represent a number of restaurant tours
and ICE was very active during a period about six
years ago, and they were sweeping through restaurants and taking
the workers out of the restaurants. And I had clients
(21:59):
whose restaurants shut down because they could not they could
not find a dishwasher, they could not find servers, they
could not find the people that they needed to run
the kitchen.
Speaker 1 (22:09):
And that was a real thing six years ago. Do
you think we get back to that.
Speaker 3 (22:15):
I'm just crossing my fingers saying I certainly hope not.
I mean, you know, I've heard a lot of discussion
about this. I've talked to some lawyers who have been
involved in immigration, and they explained to me how complex
simply getting folks to immigrate from say Canada to the US,
how complex it is, how many difficult hurdles that they
(22:37):
have to they have to go through in order to
try to get that stuff done. Are we going to
go back to that, Lou I certainly, I certainly hope not.
And that's why you've got to watch public policy and
let your voice be heard if there is a way
you can do that. I just think that trying to
curtail immigration, maybe there's some curtailment of immigration that's justified
(23:02):
or called for, as we saw in the outcome of
the election, but certainly not as significant or as sweeping
as has been suggested by some. So I'm crossing my figure.
That's one of those public policy changes. That makes the
risks as we approach twenty twenty five and twenty six
so significant, so different and so significant.
Speaker 2 (23:24):
And the visa plans in the United States are also inadequate.
I know First Albany used to bring a number of
people over on visas to work for First Albany Corporation,
and a lot of companies in America would like to
do that.
Speaker 1 (23:36):
But visas are also.
Speaker 3 (23:37):
Very restrictive, very restrictive, and that's where the outcry has
been for many, many years. I made a graduation speech
at Union College maybe fifteen to twenty years ago, and
I talked about visas, and I talked about the need
for each of the graduating students to talk to their
(23:58):
congress person and try to get the limitations on visus.
What does it be one visus? I'm trying to remember
the exact terminology, but we try to get the limitations
on those visas increased from a very small or low
roughly two three, four hundred thousand, to increase the levels
(24:18):
where we could really open up our borders. Few people
that are really qualified.
Speaker 2 (24:23):
We got a break for the news, We're going to
come back. We'll go pick back up with a little immigration.
I want to get into the tax policy and the tariffs.
We are lucky today we got a little Christmas present early.
We have Hugh Johnson on. We're gonna be back right
after the news.
Speaker 3 (24:48):
I wish you were married, and indeed we did.
Speaker 1 (24:51):
Welcome back.
Speaker 2 (24:53):
You're listening to Life Happens. I am lu Piro, your
host for this Morning On with Hugh Johnson and Hugh.
You're coming to us from.
Speaker 1 (24:58):
Maine, No Vermont, Vermont, I'm sorry.
Speaker 3 (25:03):
From Vermont's okay?
Speaker 1 (25:04):
So is that where you spend your holiday.
Speaker 3 (25:07):
I spend a lot of time up here in Vermont. Yeah,
just to try to get away from cities and enjoy
the outdoors. And it's just a very very nice place.
Vermont's a wonderful place if you want to relive a
fairly relaxed life. But don't forget. I keep coming back
to Albany because there's a lot going on in Albany,
(25:28):
a lot going on with your firm, and it's great
to be involved in it.
Speaker 2 (25:32):
So well, it's great that you share your time with
us every year on Life Happens, and we hope we
can continue the tradition.
Speaker 1 (25:39):
Do you have a Christmas tradition in your family.
Speaker 3 (25:42):
No, we don't have a real tradition other than we
gather around the tree and try to do the best
we can with a nice warm fire and maybe a
football game or two, but not too many of them,
and then of course discuss and talk about all the
kinds of things that are going on in this world
of ours. And I might add those discussions that are
a little more let's say, shall we say, animated than
they've been in the past.
Speaker 2 (26:03):
Yeah, polarized, animated, You can use a lot of different
terms to frame those conversations. My family is a family
of immigrants. We came from Italy and Poland my grandparents,
so I'm third generation, a second generation, I guess my
children are third generation, but they brought with them the
Italian tradition from We were from the Naples area of Italy.
(26:27):
Of the seven fishes, and that's the traditional Italian Christmas
Eve dinner, and tonight we're gonna have six of the
seven fishes. We couldn't get the seventh, but at my
house we have about forty of my family on the
Piero side coming over and we're gonna celebrate tonight. The
a little before Christmas eve. But we're gonna get everybody
together tonight and do the Italian tradition of the Seven
(26:51):
Fishes dinner and sing some carols and you know, see
the family that we don't see every year. So it's
going to be a good occasion for us. But we're
talking about immigration and the country. The productivity of this
country hue peaked at a point in time when immigrant
labor was really driving the force.
Speaker 1 (27:12):
So just talk a little bit about historically how.
Speaker 2 (27:15):
Immigration has shaped the United States and how we have
grown through that immigrant labor.
Speaker 3 (27:21):
Well, it's a very big part of the US success
has been traceable too. As I mentioned before, the growth
of the economy. We look at the gross domestic product numbers,
and again I mentioned that that was our scoreboard for
the economy, but that's kind of an abstract number. What
(27:42):
it really is is a function of the levels of
the labor force employment, and then the productivity of that
labor force. And since a significant percentage of that total
labor force and number of people that are employed has
been historical from immigrants, a lot of the success or
(28:03):
the growth of the US economy. And remember the US
economy is really out distancing. Maybe that's too strong a word,
but distancing all the other countries in the world. And
it's done primarily because of that equation between again employment
and productivity, and that's largely traceable to people that are
(28:24):
coming into this country from other parts of the world.
So we really need to really need to be thankful
to people from other parts of the world who have
made it all, made it all happen, they become an
extraordinarily important and very productive part of our economy. And
hopefully with some of the technology advances that we've been
talking about in twenty twenty three and twenty four, artificial
(28:47):
intelligence being at the top of the list, with some
of those productivity enhancements, we'll see these folks that are
from other parts of the world as well as domestic
folks as all of us to have become more product active.
We'll see productivity increase and the US will continue to
be the really successful economy that it always has been.
(29:07):
We're big leaders in artificial intelligence. Hopefully we maintain that lead.
Speaker 2 (29:12):
Yeah, absolutely, and there are a lot of copycat countries
around the world that don't have the innovation or the
educational system that we have. So let's hope that we
can keep the educational system strong, our undergrads, our graduate students,
and the feeders which public and private schools both feed
into the college level and then beyond. So that is
(29:34):
what builds that workforce. And so hopefully all of those
things can keep going in the way they're going. And
I mentioned no Labels you and it's an organization that
I believe strongly, and it's a nonpartisan organization, not even bipartisan,
nonpartisan organization that is really based upon ideas. And we
had a thirty different legislator, senators, congress people speak during
(29:57):
the days that we had down in Washington, and there
were two from the Texas border districts. One was Vincente Gonzalez,
a Democrat, the other was Tony Gonzalez, a Republican, and
their districts are adjoining on the border of Mexico.
Speaker 1 (30:12):
And they both talked.
Speaker 2 (30:13):
About legal immigration being so important and they both know
that we have a border crisis and an issue that
we have to stop that flow that is unregulated, but
we need to have the mechanisms to regulate and to
bring people in legally. And I think that was the
message that I took away, and no labels. If anyone's
interested you can find them at no Labels dot org.
(30:35):
And the conference was amazing and I'll talk a little
bit more about it when we get to social security topic.
Senator Bill Cassidy has a plan to try to save
social Security, which is necessary.
Speaker 1 (30:46):
But I want to turn to the tax topic.
Speaker 2 (30:50):
We do tax planning in our firm, and we've been
doing it for many, many years, and income tax, capital
gains tax. Everyone's income tax rate went down with this
tax cut from thirty nine point six if you're at
the top brackets to thirty seven. And what we're going
to see is that if its sunsets goes back to
thirty nine point six at that top bracket, but how
(31:11):
many people are in the top brackets? Standard deductions went up,
So we look at it from income tax, capital gains
tax really hasn't been touched in many years. And then
we have a state and gift tax, and this is
one that we deal with which doesn't produce significant revenue
relative to the income tax. But it's a social policy issue.
(31:32):
Do you let people simply accumulate? Now how many billionaire
sew do we have today in this country? And is
it sound social policy to simply let wealth accumulate, because
as we know, it does, once you have it, it grows.
Speaker 3 (31:50):
I think this is a subject lie which you're probably,
if not the most competent, certainly one of the most
competent sessionals in the Albany and Beyond area in understanding
and being able to give advice much more so than myself. Obviously,
(32:10):
the gift tax and a state tax extension of those
reductions is something me at my age as well, as
I am watching that very carefully and making plans accordingly
and waiting to see what the outcome is going to be.
My guess is that the extension of the twenty seventeen
(32:35):
Tax Cuts and Jobs Act will be passed. It's going
to be a very high priority of the Trump administration.
And maybe it's wishful thinking on my part, but I
think it will be extended beyond the sunset of twenty
and twenty five. But you know, there is a difference
between and you're right, the levels the levels of net worth.
(33:01):
Once you've got a very high net worth and you
invest in the kinds of financial markets we've been having,
which are really been very excellent and I might say
about as excellent as we could ever hope for that,
you can not only maintain that age that wealth, which
can also obviously the gap or the difference between your
(33:25):
wealth or the wealth of those that are been more
fortunate and those that are less fortunate, tends to widen.
And that's one of the big issues right now. How
are we going to deal with that, the differentiation. I mean,
that's something which I leave to people that are professionals,
such as yourself. I don't know what the answer is,
(33:45):
but I'm pretty sure we need to do something to
help some of those people that again make less than
four hundred thousand dollars a year and are less well
off and need some help.
Speaker 2 (33:56):
Yeah, you go back to the Gilded age when we
had family that control the good portion of the wealth
in America, and we are regressing to that, to where
there is less opportunity because there's less capital in the markets,
because it's accumulating in certain families, and the number of
billionaires just keeps going up and up and up, and
(34:17):
the opportunities on the lower end to simply buy a home,
to be able to afford a home, to pay the mortgage.
Those things are things that from a social policy perspective
have been looked at but have not been resonating with anyone.
So hopefully we'll get a good bipartisan approach to the
(34:38):
ability to create opportunity. Really is the lower fifty percent
of working Americans.
Speaker 3 (34:46):
Yeah, And you know what you've seen really developed in
twenty twenty three and twenty four is the growth of
the let's call it the effectiveness of unions and workers.
You know, we had obviously a very high inflation or
inflation prices let's put it that way, went up significantly,
(35:10):
as much as nine percent in twenty twenty two, a
very significant number. And we also saw some developing tightness
in the labor markets there were the unemployment rate was
quite low, and so a lot of workers and I
might say unions combined have gotten together and have their
their effectiveness or power has increased largely in response to
(35:35):
that big gap that you and I are talking about.
For example, we had thirty three work stoppages in twenty
twenty four. That's the most since two thousand. We had
you'll remember the thirty thirty thirty three thousand workers that
went back to work at Boeing, but they had thirty
(35:55):
eight percent wage increases. You know about the you know
about the dock workers, for example, which are still and
a lot of the power, a lot of the shift
towards more influenced by unions and individual workers, is largely
in reflection of, or at least in part, a reflection
(36:16):
of what you're talking about, which is this very significant
gap and the need for those that are at the
lower end or towards the lower end, the need need
to be helped in some way. That's really that has
not happened in isolation. It's been in response to underlying
economic conditions, including inflation, labor market conditions in twenty twenty
(36:39):
three and twenty four.
Speaker 2 (36:41):
Yeah, I grew up in a middle class household. My
dad worked for the State of New York. My mom
didn't work. He had a good salary, He was able
to send his children to college, and they were able
to buy a house and pay the mortgage. And back
then they had a thirty year mortgage and a mortgage
burning party where you would celebrate this that you had
paid off your house.
Speaker 1 (37:01):
And that's how the middle class grew.
Speaker 2 (37:04):
And it grew kind of day by day, work hour
by work hour, building some equity in a home, building
the ability to grow and have your family get to
the next level and to be educated beyond the previous generation,
and tax policy does play into that. Sure, it's something
that does need to be looked at. I haven't heard
(37:26):
a lot of good solutions or suggestions in this, so
it needs to be looked at from a real practical
standpoint because the thing that you mentioned earlier, the debt
and the deficit. This is one of the key components
of that. So how do we get a sound revenue
base for the country to be able to pay for
(37:47):
the things that we need and that we're obligated for.
And the two biggest programs for you are social Security
and Medicare. And when you look at discretionary spending like
defense and other discretionary items versus mandatory spending on Medicare, Medicaid,
and Social Security, it's a startling percentage that is just
(38:10):
fixed obligations of the federal government.
Speaker 3 (38:13):
Well, what you're saying, lou is pointing in the direction
of it would be nice to be talking about spending reductions,
but nobody wants to do that or trying to avoid it.
We talked about the third rail of politics, and that
certainly is it. So that's a real that's a real issue.
(38:34):
So you're pointing in the direction of, perhaps tax increase
is a restoration of the twenty seventeen or pre thout
twenty seventeen tax rates and some of the other details
of what existed prior to twenty seventeen. And that's not
easy to get through, especially with a Republican administration. And
(38:56):
I'm not a Republican, I'm not a Democrat, I like
thank you, am an independent. But you're seem to be
getting and moving in the direction of maybe at the
upper end we need to be have a tax policy
which is going to try to close that gap and
increase revenues and hopefully avoid some of the problems that
(39:18):
we're facing with Medicare and Social Security.
Speaker 2 (39:22):
Yeah, one of the proposals that I've heard is for
twenty three percent sales tax nationally, which which is one
of the most regressive taxes that you can have, right,
and that's again going backwards, and that's just hurting the
massive people. And just to put in perspective for our listeners,
what the federal current a state tax policy is every
(39:44):
individual in twenty twenty five can give away fourteen million
dollars without paying any estate tax, and they used to
frame this, and when George W. Bush was president, he
fremed it as the death tax, almost like the death
star in Star Wars. The death tax teen million dollar exemption.
Husband and wife automatically qualify for double that or twenty
eight million dollars, So a family can pass twenty eight
(40:07):
million dollars onto the kids without paying a penny of
a state tax. Is that enough? Some people think not.
The estate tax was actually repealed in twenty ten by
George W.
Speaker 1 (40:19):
Bush.
Speaker 2 (40:19):
Billionaires died without paying any tax. George Steinberner was one.
Is that where we want to go back to, So
rational tax policy has to be part of this conversation.
Speaker 1 (40:30):
And when CEOs Hugh make thousands of times what their
average worker makes, is that equitable?
Speaker 3 (40:38):
Now? I think we both understand that it's not equitable.
And that's why I think what you're suggesting or implying
is that that we're probably going to see some possibly
see And this is so hard politically. Increase in taxes,
especially now, but increase in taxes for those, let's say,
(40:59):
to make it easy making over four hundred thousand dollars
per year, That would be my guess. And I also
would just point out, as I think you well know that.
I don't believe there's been any decline in the estate
tax exemption, however, and that just indicates and you mentioned
(41:21):
fifteen percent, and that's a pretty big number. And yeah,
it might have some appeal to maybe let that go
back backwards, but it politically, it just never has happened.
So I don't think that's where we're going to get.
There's going to be anything done or room at least,
like I guess I'm saying, speaking personally, I don't think
(41:45):
that might happen. But I do think there's a real
chance that we'll get at least a possibility of an
increase in tax rates at the higher levels and not
at those making under four hundred thousand or something along
that line. Maybe politically we can get that through. We'll see.
Speaker 1 (42:04):
Yeah, I think we need to.
Speaker 2 (42:06):
We need a conversation about the debt, the deficit, spending,
and taxation. They all go together, and no one really
looks at that big picture. I do want I want
to cover our tariff topic. I do need to take
one more short break when we come back. We're going
to talk about tariffs. What are they really and what
could they mean to you and our economy. We're on
(42:27):
with Hugh Johnson Live on a Saturday morning here, coming
up on the Christmas and Hanukkah holidays, and we'll.
Speaker 1 (42:34):
Be right back after this short break.
Speaker 2 (42:50):
Well, that's a good one to and Don thank you
for that. Zach, welcome back. I'm Lou Piro, your host
for this morning on with you Johnson. We're talking about economics,
the economy of the United States coming up in twenty
twenty five.
Speaker 1 (43:01):
What can we look forward to.
Speaker 2 (43:03):
We've talked about immigration, We've talked about taxation. We're going
to touch on tariffs. I do want to mention a
proposal that was laid out at the No Labels conference
last week queue by Bill Cassidy, a Republican Senator from Louisiana,
and that was to start an investment fund because the
government can only invest in fixed income, so the government
(43:23):
hasn't had the ride that we've had for the last
several years where you have the S and p up
and I love what you said at our conference, only
forty one percent over the last two years.
Speaker 1 (43:36):
But the government can't do that.
Speaker 2 (43:37):
And he's proposing to have a managed investment fund and
to put money into that fund and put it in
a lock box and don't touch it for fifty years,
borrow the money you need to fund social Security, and
then have the investment fund pay the debt.
Speaker 1 (43:50):
What do you think of that.
Speaker 3 (43:52):
We've talked about this for maybe I don't mean to
demean it, but we've talked about it's been an attractive
alternative idea. Clearly, the trust fund is not being managed
well by professional managers that understand the financial markets, and
if it was, they wouldn't have one hundred percent of
(44:15):
it invested in treasuries where the returns are going to be.
I don't want to say less, I'd say significantly less
in my judgment, over the next number of years, the
returns from equities will be significantly higher, and certainly treasuries
and fixed income securities in general, the difference being nine
(44:36):
percent inequities and long term average annual rates of return
and say four percent four and a half percent from
fixed income securities. So it doesn't take much to figure
out that the returns would be higher. And the problems
that we're having with the size of those trust funds
being able to meet their obligations is largely well in
(45:00):
part function of the fact that it's been so poorly
invested in. The obvious solution, or the solution that is
beckoning us, is that we have some effective money managers
managing in a sort of equity investments in other words,
probably ETFs of some sort, but at any rate, that
(45:21):
the results would be better and that we'd be able
to hopefully come a little bit closer to fully funding
the liabilities of the trust fund. I mean, we've been
talking about this loop for a long time. Those that
are really experts really understand this issue, and it's gotten
nowhere because nobody wants to take the level of risk
(45:43):
that's associated with the volatility of the equity markets with
funds that are there and earmarked for those people that
are don't understand the investment process and don't want to
take that level of risk. I love the eye idea,
and that's great that a politician stands up and advocates
(46:03):
the idea, but unfortunately it's going to go nowhere. And
that's and that's the whole problem. That that is the solution,
but that's not a solution which we're going to really
we're going to really follow. So well, we heard from
Senator I apologize, but that's okay. I wish it was.
Speaker 2 (46:22):
Senator Cassidy has the ear of the administration and he
has the majority, so.
Speaker 1 (46:27):
We'll see what what can come of it.
Speaker 2 (46:28):
I think at this point, at this moment in time,
this is probably one of our best opportunities to reform
this entitlement, the Social security entitlement. I think there are
other things that can be done very rationally to reform
both Medicare, Medicaid and social Security. We can't ignore the problem.
We have to reform entitlements. It has to be the
(46:50):
other side.
Speaker 1 (46:50):
Of the equation.
Speaker 3 (46:51):
No, I couldn't agree more. We have to do it.
And the question is really who will we have the
political courage to make the changes that we have to make.
I'm just very very doubtful.
Speaker 2 (47:07):
All Right, we have about three minutes left to you,
and I just want you to give me your take
on the tariff proposals, what it means and what it
would mean for our economy.
Speaker 3 (47:15):
Yeah, the terraff proposals are it depends on what we're
talking about. It we're talking about specific, specific teriff increases
on specific products such as now being proposed to be
levied against Mexico, Canada and again specific products specific countries.
(47:35):
And China. Then we're talking about something which is being
used I am told by folks that have been are
involved in the process as a negotiating position that that's
not a part of So let's call it permanent tariff policy.
When we're talking about baseline universal tariffs of ten to
(47:56):
twenty percent on all imports from all countries, and we're
talking about policy in that case, we're not talking about
negotiating position. We're talking about tariff policy. And that will
have a very negative impact on both the level of
economic activity because there'll be a lot of gamesmanship let's
(48:18):
just say, fewer imports and less economic activity in the US.
It will hurt the economy. But much more importantly is
that it will cause some upward pressure on prices and
give the Federal Reserve a real headache. That is, they've
been making progress and reducing the levels of inflation down
to the two and a half to three percent level,
(48:41):
and a lot of that will go away and they'll
have to raise interest rates. This is not good stuff,
and I keep reminding people, and I hesitate to say this,
lou but I keep reminding people to go back and
review what happened in nineteen thirty one, we had the
smooth Holly terraffs which led to the depression, along with
(49:04):
other things that they had in nineteen thirty, to include
anti immigration and anti foreign government involvement, the conditions that
existed in nineteen thirty. If you want a repeat of
something that heads in that direction, then just do a
universal ten to twenty percent teriffs. That would be a
(49:24):
real problem for the US, and it bothers me. I
don't want to scare anybody. I'm just telling you that
I've reviewed or looked at or looked at carefully history,
and I've looked carefully at the Hoover administration in nineteen
thirty and I don't like what I see, and I
don't like the comparisons. I'm crossing my fingers and hoping
(49:46):
that's not going to be the outcome. That we just
see teriffs and specific products, specific countries, and they're done
for primarily for negotiating purposes and not as tariff policy.
Speaker 2 (49:58):
Okay, we have an and I am in full agreement
with you. We have thirty seconds left. Interest rates is
something that all of our listeners are very concerned about.
The FED had their meeting. What do you see in
terms of inflation and interest rates in twenty twenty five
thirty seconds or less.
Speaker 3 (50:16):
Yeah, it's a great question. Two interest rates reductions by
the Federal Reserve. I hope that they come one in
March and one in June. That implies statistically that longer
term interest rates is measured by the yield, and a
ten year Treasury will come down from the current level
of four point five ZHO toward four point zero zero
(50:37):
in twenty twenty six. And so we have I think
if you have Federal Reserve policy following through as I've
suggested or implied, that means that we're going to be
looking at interest rates coming down, but not significantly. And obviously,
if you have interest rates coming down, that's good news
for the equity markets, even though the equity markets or
(51:00):
the stock market might be a little bit pricey or overvalued.
Now as we move towards twenty twenty six, and Hugh, that's.
Speaker 1 (51:08):
Going to be our that's going to be our last word.
We're out. Thank you so much, thanks for listening. Happy holidays,
Man, Every Christmas, everybody.
Speaker 2 (00:04):
It's Lupiro, your host for this morning on Life Happens Radio,
and we're very happy to be here on this December
twenty first, the shortest day of the year, so we
have bright sunshine right now, but it's not gonna last
very long.
Speaker 1 (00:17):
It's gonna get a little dark, and it's going to
get a little cold.
Speaker 2 (00:20):
We have the coldest time of the year, and baby,
it's cold outside, Zach. I don't think you can even
play that song on the radio anymore. But anyway, we're
here and we're happy to celebrate with you Christmas, Honikah Kwanza,
whatever your religion or not religion, but it's a good
time of year to kind of take stock of where
(00:40):
we are and look at the next.
Speaker 1 (00:42):
Year and what's coming in twenty twenty five.
Speaker 2 (00:45):
And for that, we have a special guest today and
I'm going to get right into it. I'm going to
talk a little bit about the holiday traditions, but we're
going to start with Hugh Johnson, and Hugh is an
economic advisor. His company is Hugh Johnson Economics, and I've
had the pleasure of knowing you for a number of years,
going back to first Albany Corporation when he was there
(01:07):
and throughout his career.
Speaker 1 (01:09):
And with that, good morning.
Speaker 3 (01:11):
Hugh, Good morning Lou. Nice to be with you, and.
Speaker 2 (01:14):
It's great to have you. We of course had an
intergenerational estate planning conference post election back in November, so
I got a little foreshadowing of what we're going to
talk about today. But the economic forecast, and we've already
hit a little speed bump, haven't we, with the raid
cut that came in the announcement that they're not going
(01:34):
to have a whole lot more and the market reacted negatively.
So let's maybe pick up right there with current events.
The most recent FED meeting, they did cut the rates,
but the forecast wasn't as promising as many had hoped.
Speaker 3 (01:50):
That's very correct most of us that have been expecting
that they not only would reduce interst rates at this meeting,
but they'd also two interstrates four times in twenty and
twenty five, one time each quarter. And when we look
carefully at some of the wording of the sort of
(02:11):
the summary of their projections, the projections of the members
of the committee, it indicated that they would not reduce
interst rates four times in twenty twenty five, but it's
likely to come out to be just two reductions in
twenty twenty five. So that was a little bit of
a first of all surprise and obviously a disappointment. The
(02:33):
markets reacted when you saw the Dow Jones Industrial average,
as you mentioned lou being down a thousand points in
one day. That's a fairly significant reaction. Fortunately, it did
make up or come back a little bit yesterday, but
nevertheless that was a fairly severe reaction.
Speaker 1 (02:52):
And so you know, we.
Speaker 2 (02:53):
Have talked about this. We talked about it at the Intergender.
For those that don't know, we do an annual conference
and it's for advisors primarily, but we did have some
clients actually attend this year, and we cover topics like economics,
and Hugh gave his presentation which led off the day,
and then we covered wealth planning, investments of state planning,
(03:15):
tax planning, the impact of all of this on everyone's
pocketbook and taxes. And that's a day that you can
see on film because we did record the day and
it's on our website, so if anyone would like to
go in and see all of the various presentations from
the Intergen, it is at pyrolaw dot com and you
can see it there in the resources tab. And it
(03:37):
was a great day. And looking at the election, there
are so many unknown still. The cabinet appointments, everyone is
scrutinizing and scrutinizing. But the philosophy of this government, I
don't know it's clear yet. What are you reading in
the tea leaves.
Speaker 3 (03:55):
Just as you say, it's not at all clear. There's
a lot of policy changes. First of all is obviously
the change that we're going to have a new administration.
There's some significant policy changes that have been discussed, particularly
during the run up to the election. The immigration is
probably at the top of that list, but also whether
(04:17):
we're going to have an extension of the tax cuts
of twenty seventeen beyond their sunset of twenty twenty five.
That would extend those tax cuts, and I might add
not only would extend the tax cuts, but increase the
size of the federal budget deficit. So that's probably the
(04:39):
second thing. And the third thing, which is getting a
lot of attention now, as you well know, is teriffs.
The proposal is there a number of proposals with regard
to TIFFs, specific tariffs against say Mexico, Canada, and China.
And also what we call a baseline universal we'll call
(05:03):
it tariff policy, where we'll be raising tariffs against all
countries that export goods and services to the US. So
those are three very significant issues, and those are significant
issues that will very much affect the outcome for the
economy and importantly inflation in twenty twenty five and twenty six.
Speaker 2 (05:26):
Yeah, there's a lot to unpack there, so I'm going
to break them down for our listeners and for those
that don't know. The tax cuts that were passed now
eight years ago or seven years ago could not be
done on a permanent basis.
Speaker 1 (05:42):
Because of the way they were passed.
Speaker 2 (05:44):
They had to have a timeline, and so some of
the tax cuts were permanent, including the corporate tax rate.
So on the corporate side, you that tax cut which
went from a twenty eight percent rate to a twenty
one percent rate. That is a permanent tax cut. And
do you think that they would cut the corporate tax
rate further.
Speaker 3 (06:05):
That's a big question. Obviously, it's been proposed to cut
it from twenty one percent, possibly to fifteen percent. The
problem is is that the Republicans and I might add,
Trump as well have talked about their concern about the
federal budget deficit. So if you reduce the federal the
(06:25):
corporate tax rate from twenty one percent to fifteen percent,
that's going to impede or reduce the level of revenues
at the federal level and increase the size of the deficit.
And that's going to require some other things, such as
we'll say, spending cuts. So it's not going to be
easy to move from twenty one percent to fifteen percent.
(06:46):
And if I were a betting man, I would say
that that's not going to be a part of what
we see is when we talk about changes in and
twenty twenty twenty five. However, the extension of the two
thousand and seventeen Tax Cut and Jobs Act is a
(07:07):
very strong possibility, and that loan will increase the size
of the federal budget deficit by three trillion dollars over
the next ten years, as well as increase increase the
interest payments by four hundred and sixty seven billion. Those
are estimates that come from the Congressional Budget Office. So
(07:30):
a very significant impact on what we'll we'll call finances
at the federal level, A very significant increase in the
size of the deficit, which has to be financed by
borrowing from domestic investors as well as foreign investors, which
might not be easy to do in a year when
(07:51):
you're increasing tariffs on those very same investors.
Speaker 1 (07:56):
So when you look.
Speaker 2 (07:56):
At immigration, tax cuts, tariffs, and you can add a
few more to that, you know, education policy, health policy, Medicare,
social security, how are they.
Speaker 1 (08:07):
Going to play into this?
Speaker 2 (08:09):
But just to take those three, the current federal debt
is thirty six trillion dollars and that's the number that
is just mind numbing and no one really even thinks
it's a real number. It's just something you read about.
But the interest payment view on that, which you mentioned,
is almost one point two trillion dollars a year today,
(08:33):
and that's the third as I understand it, the third
largest expenditure that the federal government has, behind social security
and medicare. And understand it is just overtaking defense spending.
So we're spending more on interest than we are on
defense going forward, And how do we get to the
point where we have a balanced budget, which hadn't happened
(08:54):
since nineteen ninety seven ninety eight.
Speaker 3 (08:58):
The way you get there is really simple, and that
is you've got to raise revenues somehow, and you've got
to really avoid trying to impact revenues in a negative way.
And obviously, if you start to reduce corporate tax rates
or some of the other tax rates that we've been
talking about, or at least the Trump administration has been
(09:20):
talking about. Remember they talk about they talk about taxes
on over time, they talk about taxes on social Security
being eliminated, they talk about taxes of all sorts being eliminated.
You're going to impact revenues and that's not going to
get you closer to what we'll call a balanced budget,
(09:41):
which is a long ways away right now. And then,
of course, not only that, we've got to do something
about the spending side of the equation. This is a
very serious problem. And to the extent that we do
not we have higher deficits, we spend more on as
you mentioned, on interest rates at the federal level than
(10:02):
we do we're pretty close to it, than we do
on defense. That presents a significant problem, and that means
they're going to have to be cuts in different places.
I hate to say it, but obviously, and nobody wants
to get anywhere near this, but that might mean that
there's some serious cuts maybe coming on things that are
(10:22):
important to us, such as Social Security, Medicare and Medicaid
and other discretionary spending at the federal level. So something's
got to give. And obviously a lot more prudent fiscal
policy is an easy way to say, it would certainly help.
We've really got to either increase revenues in one way
(10:44):
or another or reduce spending in one way or another
in order to get back to the kinds of levels that,
as you mentioned, we had in nineteen ninety seven and
nineteen ninety eight. One, believe it or not, hard is
this to say we had a mudge at surplus at
the federal level.
Speaker 1 (11:03):
Yeah, that was, And believe it or not, it was
a Democratic president.
Speaker 2 (11:07):
It happened to be Bill Clinton, that's right. He at
the time worked with Nut Gingrich and Congress and they
actually cut expenses. I mean, they cut Medicare. And nobody
really thinks of Bill Clinton as having been the guy
that cut Medicare, but he cut nine billion dollars out
of the Medicare budget and they raised revenues at the
same time. I was at last week, I flew down
(11:29):
to Washington and I am I am an independent, registered independent,
once a Republican, now an independent, and I'm looking at
this from a lens of how do we get practical
solutions and how do we get off the bipolar government
that we have. So I joined a group called No
Labels about ten or twelve years ago, and this was
(11:51):
the National No Labels Conference. And at that conference I
ran into someone I had met ten years ago named
David Walker. And David Walker happened to be the Controller
General of the United States who I had on this
program ten years ago, and he was the accountant for
the country when they actually balanced the budget. So David
testified in Congress last week for three hours about how
(12:12):
they can rein back in the spending and raised revenue
to match to get back to where we're And just
the interest rate, the devastating effect of the snowballing interest rate.
Even without a deficit in a current year, you're paying
more and more towards that interest So looking at all
(12:32):
of these factors, we're going to come back after short break, Hugh,
and I want to tackle immigration because that is the
hot button that was one of the issues that drove
the election. Toward President Trump, and it's something that certainly
President Biden and Kamala Harris did not handle well. So
let's talk about that and the impact and not so
much the political side of it, but what's the impact
(12:54):
of immigration on American commerce, business and the ability to
hire employees.
Speaker 1 (13:00):
We're gonna take a short break.
Speaker 2 (13:01):
I'm on with Hugh Johnson Live talking about the economics
of America for twenty twenty five. I'm Lupiro, your host.
We'll be right back after this short break. Welcome back
to life Happens. I'm Lupiro on with Hugh Johnson. And
(13:23):
Hugh this is something that is going to be talked
about forever, and that is the ability of the government.
And now we just got off of another cliff where
the government was going to shut down and they had
to pass an emergency measure by midnight, and they did
so they got it, got that done, but kind of
unraveling all of the issues that drove the election, and
(13:44):
that's going to drive they are going to drive public
policy and American public policy going forward.
Speaker 1 (13:49):
Immigration is something.
Speaker 2 (13:50):
That we all agree is a big problem. But the
speakers that I heard down in Washington, and this is
Republicans who are on the border and Democrats. Legal immigration
is very, very different than illegal immigration. And I don't
think you anybody disagrees with taking criminals who are putting
(14:10):
us at risk and getting them out of the country.
But I don't think a lot of people think about
the impact of legal immigration on employment and on business.
Just talk a little bit about how that fuels the
growth and the GDP growth that we need to keep
the economy going forward.
Speaker 3 (14:28):
It's extremely important keep in mind that when we talk
about gross domestic product, which is our scoreboard for the economy,
we're really talking about the growth of the labor force
or employment number one, and secondly, the productivity of that
labor force. If we have the labor force increasing and
(14:50):
we have productivity getting better, that the odds are that
will show up in the gross domestic product numbers, which
tell me that the economy is expanding. And of course
that the economy is expanding, the odds or probability of
getting higher revenues at the federal level in the form
of tax revenues gets better and better. The problem is
(15:13):
the course is what's being proposed is the limitations on
the amount of immigration number one and in addition to
that the deportation of those immigrants that perhaps are here illegally.
Those numbers are pretty high and pretty staggering. For example,
the number of we'll call it legal immigrants each year
(15:36):
averages about one million. They don't all come and go
to work, a lot of them don't go to work,
but nevertheless, a million is a big number. And then
if you ask yourself, well, how many people do we
add to non farm payroll employment each year in this country,
that number is also around a million. So obviously, if
(15:58):
there's deportation, or if there's just simply limitations on the
number of legal immigrants that we allow into the country
each year, you're going to hurt the levels of employment,
and that means you're going to hurt the economy. And
it's really simple arithmetic. I estimate, and I might add
there are others that are good able economists that estimate
(16:22):
that that number of one million legal immigrants per year
might go down under some of the proposed plans that
are being suggested by the next administration, might go down
to something in the order of seven hundred and fifty thousand.
So just simply looking at those numbers, it says you
(16:42):
have limitations on immigration. You have lower immigration, you have
lower employment lumbers in other words, non farm payroll employment.
That means you're probably going to have you're going to
hurt the economy. And we're talking about an economy which
is only expanding two percent per year in twenty twenty five,
twenty six. With my fingers crussed, and so you really
(17:05):
have an impact on the economy. And how this all
pans out, how it's how we respond to the lower immigration,
how we get that done, is really going to be important.
I happen to believe that it's going to be done,
primarily as you suggest that it's going to be those
(17:27):
that have been violators of the law, that are illegal
immigrants will be deported, and I think it's probably going
to stop, hopefully stop right there. And that doesn't even
get into some of the very complex issues like dreamers,
which is another part of a very very complex problem, and.
Speaker 2 (17:47):
The exemption for people born in the United States. There's
an automatic citizenship that they want to take away, which
other countries do have, but we've had it as part
of our policy for a very long time. So if
you're born here, you get to stay here, and that's
kind of an important way to grow the economy as
(18:08):
well as young people get educated here and become Americans
and grow into the workforce.
Speaker 3 (18:14):
They not only grow into the workforce, Lou as you've suggested,
but they in many instances, and we've got many instances
where they not only grow into the workforce, but become
leaders in the workforce and can be a lot of
the sort of progress we've made with individual companies can
be traced to people that have immigrated from other parts
(18:38):
of the world and have made a significant contribution. We've
been fighting this battle quite frankly, I've been fighting this
battle for many, many years now. This is not new
trying to find ways to increase the limits that are
now placed on the number of immigrants that are allowed
to have green cards, aren't allowed to immigrate to the US,
(19:01):
many of whom, as I say, have been leaders that
have been a part of growing our US economy. So
this is a real hot issue. But I'll tell you
it's a difficult issue given the fact we've taken such
a long time in trying to solve it. We an
solved it yet, but maybe now it'll come to a
head and we'll at a minimum increase the number of
(19:24):
immigrants that are allowed to obtain citizenship in the US,
because they're an important part of what's made this country
this country that it is.
Speaker 2 (19:34):
And you mentioned farms in the farm economy, that's not
even included in that number. But this probably has the
most devastating effect. If you think of where all of
our produce comes from, a lot of it comes from
states like California, and a lot of the labor in
California comes from immigrants.
Speaker 1 (19:51):
And I mean there's talk of, you know, the.
Speaker 2 (19:54):
Immigrants coming in and taking our jobs away, But are
my kids going to go pick lettuce?
Speaker 1 (20:00):
You know?
Speaker 2 (20:00):
Is that something that the American children are going to
be taking those jobs on? Where do we fill that?
How do we get to the places like home health care?
How many people want to be a home health aid
and there is an enormous shortage of home health aids.
That's something near and dear to our firm and me
(20:20):
because when people need care at home, they need people
that can provide that care, and where do you find them.
There's a forty percent shortage of New York State right
now of home health workers.
Speaker 1 (20:31):
Where do we find these people?
Speaker 3 (20:32):
You it's a very big issue and you can obviously
see how just raising these numbers, especially in the agricultural
sector of our economy, tells you just how complex this
issue is. It's not subject to an easy answer, and
so that's why I think that the ambitious plans that
(20:54):
have been proposed or were proposed during the election process
to see that. I don't believe you're going to see that.
You'll see some deportation of those that have violated the law,
but I think it's probably going to stop there or
really have a problem. We'll do things like rebuild the wall,
not rebuild the wall, but maybe extend the wall, tighter
(21:18):
immigration in immigration regulations. I'm sure that will reduce immigration some,
but I don't think they're going to be as grand
as perhaps was suggested in the election. It's just not
an easy problem to solve.
Speaker 2 (21:36):
Well, go back a few years. My law firm does
a lot of corporate law. We do a lot of
business law, and I represent a number of restaurant tours
and ICE was very active during a period about six
years ago, and they were sweeping through restaurants and taking
the workers out of the restaurants. And I had clients
(21:59):
whose restaurants shut down because they could not they could
not find a dishwasher, they could not find servers, they
could not find the people that they needed to run
the kitchen.
Speaker 1 (22:09):
And that was a real thing six years ago. Do
you think we get back to that.
Speaker 3 (22:15):
I'm just crossing my fingers saying I certainly hope not.
I mean, you know, I've heard a lot of discussion
about this. I've talked to some lawyers who have been
involved in immigration, and they explained to me how complex
simply getting folks to immigrate from say Canada to the US,
how complex it is, how many difficult hurdles that they
(22:37):
have to they have to go through in order to
try to get that stuff done. Are we going to
go back to that, Lou I certainly, I certainly hope not.
And that's why you've got to watch public policy and
let your voice be heard if there is a way
you can do that. I just think that trying to
curtail immigration, maybe there's some curtailment of immigration that's justified
(23:02):
or called for, as we saw in the outcome of
the election, but certainly not as significant or as sweeping
as has been suggested by some. So I'm crossing my figure.
That's one of those public policy changes. That makes the
risks as we approach twenty twenty five and twenty six
so significant, so different and so significant.
Speaker 2 (23:24):
And the visa plans in the United States are also inadequate.
I know First Albany used to bring a number of
people over on visas to work for First Albany Corporation,
and a lot of companies in America would like to
do that.
Speaker 1 (23:36):
But visas are also.
Speaker 3 (23:37):
Very restrictive, very restrictive, and that's where the outcry has
been for many, many years. I made a graduation speech
at Union College maybe fifteen to twenty years ago, and
I talked about visas, and I talked about the need
for each of the graduating students to talk to their
(23:58):
congress person and try to get the limitations on visus.
What does it be one visus? I'm trying to remember
the exact terminology, but we try to get the limitations
on those visas increased from a very small or low
roughly two three, four hundred thousand, to increase the levels
(24:18):
where we could really open up our borders. Few people
that are really qualified.
Speaker 2 (24:23):
We got a break for the news, We're going to
come back. We'll go pick back up with a little immigration.
I want to get into the tax policy and the tariffs.
We are lucky today we got a little Christmas present early.
We have Hugh Johnson on. We're gonna be back right
after the news.
Speaker 3 (24:48):
I wish you were married, and indeed we did.
Speaker 1 (24:51):
Welcome back.
Speaker 2 (24:53):
You're listening to Life Happens. I am lu Piro, your
host for this Morning On with Hugh Johnson and Hugh.
You're coming to us from.
Speaker 1 (24:58):
Maine, No Vermont, Vermont, I'm sorry.
Speaker 3 (25:03):
From Vermont's okay?
Speaker 1 (25:04):
So is that where you spend your holiday.
Speaker 3 (25:07):
I spend a lot of time up here in Vermont. Yeah,
just to try to get away from cities and enjoy
the outdoors. And it's just a very very nice place.
Vermont's a wonderful place if you want to relive a
fairly relaxed life. But don't forget. I keep coming back
to Albany because there's a lot going on in Albany,
(25:28):
a lot going on with your firm, and it's great
to be involved in it.
Speaker 2 (25:32):
So well, it's great that you share your time with
us every year on Life Happens, and we hope we
can continue the tradition.
Speaker 1 (25:39):
Do you have a Christmas tradition in your family.
Speaker 3 (25:42):
No, we don't have a real tradition other than we
gather around the tree and try to do the best
we can with a nice warm fire and maybe a
football game or two, but not too many of them,
and then of course discuss and talk about all the
kinds of things that are going on in this world
of ours. And I might add those discussions that are
a little more let's say, shall we say, animated than
they've been in the past.
Speaker 2 (26:03):
Yeah, polarized, animated, You can use a lot of different
terms to frame those conversations. My family is a family
of immigrants. We came from Italy and Poland my grandparents,
so I'm third generation, a second generation, I guess my
children are third generation, but they brought with them the
Italian tradition from We were from the Naples area of Italy.
(26:27):
Of the seven fishes, and that's the traditional Italian Christmas
Eve dinner, and tonight we're gonna have six of the
seven fishes. We couldn't get the seventh, but at my
house we have about forty of my family on the
Piero side coming over and we're gonna celebrate tonight. The
a little before Christmas eve. But we're gonna get everybody
together tonight and do the Italian tradition of the Seven
(26:51):
Fishes dinner and sing some carols and you know, see
the family that we don't see every year. So it's
going to be a good occasion for us. But we're
talking about immigration and the country. The productivity of this
country hue peaked at a point in time when immigrant
labor was really driving the force.
Speaker 1 (27:12):
So just talk a little bit about historically how.
Speaker 2 (27:15):
Immigration has shaped the United States and how we have
grown through that immigrant labor.
Speaker 3 (27:21):
Well, it's a very big part of the US success
has been traceable too. As I mentioned before, the growth
of the economy. We look at the gross domestic product numbers,
and again I mentioned that that was our scoreboard for
the economy, but that's kind of an abstract number. What
(27:42):
it really is is a function of the levels of
the labor force employment, and then the productivity of that
labor force. And since a significant percentage of that total
labor force and number of people that are employed has
been historical from immigrants, a lot of the success or
(28:03):
the growth of the US economy. And remember the US
economy is really out distancing. Maybe that's too strong a word,
but distancing all the other countries in the world. And
it's done primarily because of that equation between again employment
and productivity, and that's largely traceable to people that are
(28:24):
coming into this country from other parts of the world.
So we really need to really need to be thankful
to people from other parts of the world who have
made it all, made it all happen, they become an
extraordinarily important and very productive part of our economy. And
hopefully with some of the technology advances that we've been
talking about in twenty twenty three and twenty four, artificial
(28:47):
intelligence being at the top of the list, with some
of those productivity enhancements, we'll see these folks that are
from other parts of the world as well as domestic
folks as all of us to have become more product active.
We'll see productivity increase and the US will continue to
be the really successful economy that it always has been.
(29:07):
We're big leaders in artificial intelligence. Hopefully we maintain that lead.
Speaker 2 (29:12):
Yeah, absolutely, and there are a lot of copycat countries
around the world that don't have the innovation or the
educational system that we have. So let's hope that we
can keep the educational system strong, our undergrads, our graduate students,
and the feeders which public and private schools both feed
into the college level and then beyond. So that is
(29:34):
what builds that workforce. And so hopefully all of those
things can keep going in the way they're going. And
I mentioned no Labels you and it's an organization that
I believe strongly, and it's a nonpartisan organization, not even bipartisan,
nonpartisan organization that is really based upon ideas. And we
had a thirty different legislator, senators, congress people speak during
(29:57):
the days that we had down in Washington, and there
were two from the Texas border districts. One was Vincente Gonzalez,
a Democrat, the other was Tony Gonzalez, a Republican, and
their districts are adjoining on the border of Mexico.
Speaker 1 (30:12):
And they both talked.
Speaker 2 (30:13):
About legal immigration being so important and they both know
that we have a border crisis and an issue that
we have to stop that flow that is unregulated, but
we need to have the mechanisms to regulate and to
bring people in legally. And I think that was the
message that I took away, and no labels. If anyone's
interested you can find them at no Labels dot org.
(30:35):
And the conference was amazing and I'll talk a little
bit more about it when we get to social security topic.
Senator Bill Cassidy has a plan to try to save
social Security, which is necessary.
Speaker 1 (30:46):
But I want to turn to the tax topic.
Speaker 2 (30:50):
We do tax planning in our firm, and we've been
doing it for many, many years, and income tax, capital
gains tax. Everyone's income tax rate went down with this
tax cut from thirty nine point six if you're at
the top brackets to thirty seven. And what we're going
to see is that if its sunsets goes back to
thirty nine point six at that top bracket, but how
(31:11):
many people are in the top brackets? Standard deductions went up,
So we look at it from income tax, capital gains
tax really hasn't been touched in many years. And then
we have a state and gift tax, and this is
one that we deal with which doesn't produce significant revenue
relative to the income tax. But it's a social policy issue.
(31:32):
Do you let people simply accumulate? Now how many billionaire
sew do we have today in this country? And is
it sound social policy to simply let wealth accumulate, because
as we know, it does, once you have it, it grows.
Speaker 3 (31:50):
I think this is a subject lie which you're probably,
if not the most competent, certainly one of the most
competent sessionals in the Albany and Beyond area in understanding
and being able to give advice much more so than myself. Obviously,
(32:10):
the gift tax and a state tax extension of those
reductions is something me at my age as well, as
I am watching that very carefully and making plans accordingly
and waiting to see what the outcome is going to be.
My guess is that the extension of the twenty seventeen
(32:35):
Tax Cuts and Jobs Act will be passed. It's going
to be a very high priority of the Trump administration.
And maybe it's wishful thinking on my part, but I
think it will be extended beyond the sunset of twenty
and twenty five. But you know, there is a difference
between and you're right, the levels the levels of net worth.
(33:01):
Once you've got a very high net worth and you
invest in the kinds of financial markets we've been having,
which are really been very excellent and I might say
about as excellent as we could ever hope for that,
you can not only maintain that age that wealth, which
can also obviously the gap or the difference between your
(33:25):
wealth or the wealth of those that are been more
fortunate and those that are less fortunate, tends to widen.
And that's one of the big issues right now. How
are we going to deal with that, the differentiation. I mean,
that's something which I leave to people that are professionals,
such as yourself. I don't know what the answer is,
(33:45):
but I'm pretty sure we need to do something to
help some of those people that again make less than
four hundred thousand dollars a year and are less well
off and need some help.
Speaker 2 (33:56):
Yeah, you go back to the Gilded age when we
had family that control the good portion of the wealth
in America, and we are regressing to that, to where
there is less opportunity because there's less capital in the markets,
because it's accumulating in certain families, and the number of
billionaires just keeps going up and up and up, and
(34:17):
the opportunities on the lower end to simply buy a home,
to be able to afford a home, to pay the mortgage.
Those things are things that from a social policy perspective
have been looked at but have not been resonating with anyone.
So hopefully we'll get a good bipartisan approach to the
(34:38):
ability to create opportunity. Really is the lower fifty percent
of working Americans.
Speaker 3 (34:46):
Yeah, And you know what you've seen really developed in
twenty twenty three and twenty four is the growth of
the let's call it the effectiveness of unions and workers.
You know, we had obviously a very high inflation or
inflation prices let's put it that way, went up significantly,
(35:10):
as much as nine percent in twenty twenty two, a
very significant number. And we also saw some developing tightness
in the labor markets there were the unemployment rate was
quite low, and so a lot of workers and I
might say unions combined have gotten together and have their
their effectiveness or power has increased largely in response to
(35:35):
that big gap that you and I are talking about.
For example, we had thirty three work stoppages in twenty
twenty four. That's the most since two thousand. We had
you'll remember the thirty thirty thirty three thousand workers that
went back to work at Boeing, but they had thirty
(35:55):
eight percent wage increases. You know about the you know
about the dock workers, for example, which are still and
a lot of the power, a lot of the shift
towards more influenced by unions and individual workers, is largely
in reflection of, or at least in part, a reflection
(36:16):
of what you're talking about, which is this very significant
gap and the need for those that are at the
lower end or towards the lower end, the need need
to be helped in some way. That's really that has
not happened in isolation. It's been in response to underlying
economic conditions, including inflation, labor market conditions in twenty twenty
(36:39):
three and twenty four.
Speaker 2 (36:41):
Yeah, I grew up in a middle class household. My
dad worked for the State of New York. My mom
didn't work. He had a good salary, He was able
to send his children to college, and they were able
to buy a house and pay the mortgage. And back
then they had a thirty year mortgage and a mortgage
burning party where you would celebrate this that you had
paid off your house.
Speaker 1 (37:01):
And that's how the middle class grew.
Speaker 2 (37:04):
And it grew kind of day by day, work hour
by work hour, building some equity in a home, building
the ability to grow and have your family get to
the next level and to be educated beyond the previous generation,
and tax policy does play into that. Sure, it's something
that does need to be looked at. I haven't heard
(37:26):
a lot of good solutions or suggestions in this, so
it needs to be looked at from a real practical
standpoint because the thing that you mentioned earlier, the debt
and the deficit. This is one of the key components
of that. So how do we get a sound revenue
base for the country to be able to pay for
(37:47):
the things that we need and that we're obligated for.
And the two biggest programs for you are social Security
and Medicare. And when you look at discretionary spending like
defense and other discretionary items versus mandatory spending on Medicare, Medicaid,
and Social Security, it's a startling percentage that is just
(38:10):
fixed obligations of the federal government.
Speaker 3 (38:13):
Well, what you're saying, lou is pointing in the direction
of it would be nice to be talking about spending reductions,
but nobody wants to do that or trying to avoid it.
We talked about the third rail of politics, and that
certainly is it. So that's a real that's a real issue.
(38:34):
So you're pointing in the direction of, perhaps tax increase
is a restoration of the twenty seventeen or pre thout
twenty seventeen tax rates and some of the other details
of what existed prior to twenty seventeen. And that's not
easy to get through, especially with a Republican administration. And
(38:56):
I'm not a Republican, I'm not a Democrat, I like
thank you, am an independent. But you're seem to be
getting and moving in the direction of maybe at the
upper end we need to be have a tax policy
which is going to try to close that gap and
increase revenues and hopefully avoid some of the problems that
(39:18):
we're facing with Medicare and Social Security.
Speaker 2 (39:22):
Yeah, one of the proposals that I've heard is for
twenty three percent sales tax nationally, which which is one
of the most regressive taxes that you can have, right,
and that's again going backwards, and that's just hurting the
massive people. And just to put in perspective for our listeners,
what the federal current a state tax policy is every
(39:44):
individual in twenty twenty five can give away fourteen million
dollars without paying any estate tax, and they used to
frame this, and when George W. Bush was president, he
fremed it as the death tax, almost like the death
star in Star Wars. The death tax teen million dollar exemption.
Husband and wife automatically qualify for double that or twenty
eight million dollars, So a family can pass twenty eight
(40:07):
million dollars onto the kids without paying a penny of
a state tax. Is that enough? Some people think not.
The estate tax was actually repealed in twenty ten by
George W.
Speaker 1 (40:19):
Bush.
Speaker 2 (40:19):
Billionaires died without paying any tax. George Steinberner was one.
Is that where we want to go back to, So
rational tax policy has to be part of this conversation.
Speaker 1 (40:30):
And when CEOs Hugh make thousands of times what their
average worker makes, is that equitable?
Speaker 3 (40:38):
Now? I think we both understand that it's not equitable.
And that's why I think what you're suggesting or implying
is that that we're probably going to see some possibly
see And this is so hard politically. Increase in taxes,
especially now, but increase in taxes for those, let's say,
(40:59):
to make it easy making over four hundred thousand dollars
per year, That would be my guess. And I also
would just point out, as I think you well know that.
I don't believe there's been any decline in the estate
tax exemption, however, and that just indicates and you mentioned
(41:21):
fifteen percent, and that's a pretty big number. And yeah,
it might have some appeal to maybe let that go
back backwards, but it politically, it just never has happened.
So I don't think that's where we're going to get.
There's going to be anything done or room at least,
like I guess I'm saying, speaking personally, I don't think
(41:45):
that might happen. But I do think there's a real
chance that we'll get at least a possibility of an
increase in tax rates at the higher levels and not
at those making under four hundred thousand or something along
that line. Maybe politically we can get that through. We'll see.
Speaker 1 (42:04):
Yeah, I think we need to.
Speaker 2 (42:06):
We need a conversation about the debt, the deficit, spending,
and taxation. They all go together, and no one really
looks at that big picture. I do want I want
to cover our tariff topic. I do need to take
one more short break when we come back. We're going
to talk about tariffs. What are they really and what
could they mean to you and our economy. We're on
(42:27):
with Hugh Johnson Live on a Saturday morning here, coming
up on the Christmas and Hanukkah holidays, and we'll.
Speaker 1 (42:34):
Be right back after this short break.
Speaker 2 (42:50):
Well, that's a good one to and Don thank you
for that. Zach, welcome back. I'm Lou Piro, your host
for this morning on with you Johnson. We're talking about economics,
the economy of the United States coming up in twenty
twenty five.
Speaker 1 (43:01):
What can we look forward to.
Speaker 2 (43:03):
We've talked about immigration, We've talked about taxation. We're going
to touch on tariffs. I do want to mention a
proposal that was laid out at the No Labels conference
last week queue by Bill Cassidy, a Republican Senator from Louisiana,
and that was to start an investment fund because the
government can only invest in fixed income, so the government
(43:23):
hasn't had the ride that we've had for the last
several years where you have the S and p up
and I love what you said at our conference, only
forty one percent over the last two years.
Speaker 1 (43:36):
But the government can't do that.
Speaker 2 (43:37):
And he's proposing to have a managed investment fund and
to put money into that fund and put it in
a lock box and don't touch it for fifty years,
borrow the money you need to fund social Security, and
then have the investment fund pay the debt.
Speaker 1 (43:50):
What do you think of that.
Speaker 3 (43:52):
We've talked about this for maybe I don't mean to
demean it, but we've talked about it's been an attractive
alternative idea. Clearly, the trust fund is not being managed
well by professional managers that understand the financial markets, and
if it was, they wouldn't have one hundred percent of
(44:15):
it invested in treasuries where the returns are going to be.
I don't want to say less, I'd say significantly less
in my judgment, over the next number of years, the
returns from equities will be significantly higher, and certainly treasuries
and fixed income securities in general, the difference being nine
(44:36):
percent inequities and long term average annual rates of return
and say four percent four and a half percent from
fixed income securities. So it doesn't take much to figure
out that the returns would be higher. And the problems
that we're having with the size of those trust funds
being able to meet their obligations is largely well in
(45:00):
part function of the fact that it's been so poorly
invested in. The obvious solution, or the solution that is
beckoning us, is that we have some effective money managers
managing in a sort of equity investments in other words,
probably ETFs of some sort, but at any rate, that
(45:21):
the results would be better and that we'd be able
to hopefully come a little bit closer to fully funding
the liabilities of the trust fund. I mean, we've been
talking about this loop for a long time. Those that
are really experts really understand this issue, and it's gotten
nowhere because nobody wants to take the level of risk
(45:43):
that's associated with the volatility of the equity markets with
funds that are there and earmarked for those people that
are don't understand the investment process and don't want to
take that level of risk. I love the eye idea,
and that's great that a politician stands up and advocates
(46:03):
the idea, but unfortunately it's going to go nowhere. And
that's and that's the whole problem. That that is the solution,
but that's not a solution which we're going to really
we're going to really follow. So well, we heard from
Senator I apologize, but that's okay. I wish it was.
Speaker 2 (46:22):
Senator Cassidy has the ear of the administration and he
has the majority, so.
Speaker 1 (46:27):
We'll see what what can come of it.
Speaker 2 (46:28):
I think at this point, at this moment in time,
this is probably one of our best opportunities to reform
this entitlement, the Social security entitlement. I think there are
other things that can be done very rationally to reform
both Medicare, Medicaid and social Security. We can't ignore the problem.
We have to reform entitlements. It has to be the
(46:50):
other side.
Speaker 1 (46:50):
Of the equation.
Speaker 3 (46:51):
No, I couldn't agree more. We have to do it.
And the question is really who will we have the
political courage to make the changes that we have to make.
I'm just very very doubtful.
Speaker 2 (47:07):
All Right, we have about three minutes left to you,
and I just want you to give me your take
on the tariff proposals, what it means and what it
would mean for our economy.
Speaker 3 (47:15):
Yeah, the terraff proposals are it depends on what we're
talking about. It we're talking about specific, specific teriff increases
on specific products such as now being proposed to be
levied against Mexico, Canada and again specific products specific countries.
(47:35):
And China. Then we're talking about something which is being
used I am told by folks that have been are
involved in the process as a negotiating position that that's
not a part of So let's call it permanent tariff policy.
When we're talking about baseline universal tariffs of ten to
(47:56):
twenty percent on all imports from all countries, and we're
talking about policy in that case, we're not talking about
negotiating position. We're talking about tariff policy. And that will
have a very negative impact on both the level of
economic activity because there'll be a lot of gamesmanship let's
(48:18):
just say, fewer imports and less economic activity in the US.
It will hurt the economy. But much more importantly is
that it will cause some upward pressure on prices and
give the Federal Reserve a real headache. That is, they've
been making progress and reducing the levels of inflation down
to the two and a half to three percent level,
(48:41):
and a lot of that will go away and they'll
have to raise interest rates. This is not good stuff,
and I keep reminding people, and I hesitate to say this,
lou but I keep reminding people to go back and
review what happened in nineteen thirty one, we had the
smooth Holly terraffs which led to the depression, along with
(49:04):
other things that they had in nineteen thirty, to include
anti immigration and anti foreign government involvement, the conditions that
existed in nineteen thirty. If you want a repeat of
something that heads in that direction, then just do a
universal ten to twenty percent teriffs. That would be a
(49:24):
real problem for the US, and it bothers me. I
don't want to scare anybody. I'm just telling you that
I've reviewed or looked at or looked at carefully history,
and I've looked carefully at the Hoover administration in nineteen
thirty and I don't like what I see, and I
don't like the comparisons. I'm crossing my fingers and hoping
(49:46):
that's not going to be the outcome. That we just
see teriffs and specific products, specific countries, and they're done
for primarily for negotiating purposes and not as tariff policy.
Speaker 2 (49:58):
Okay, we have an and I am in full agreement
with you. We have thirty seconds left. Interest rates is
something that all of our listeners are very concerned about.
The FED had their meeting. What do you see in
terms of inflation and interest rates in twenty twenty five
thirty seconds or less.
Speaker 3 (50:16):
Yeah, it's a great question. Two interest rates reductions by
the Federal Reserve. I hope that they come one in
March and one in June. That implies statistically that longer
term interest rates is measured by the yield, and a
ten year Treasury will come down from the current level
of four point five ZHO toward four point zero zero
(50:37):
in twenty twenty six. And so we have I think
if you have Federal Reserve policy following through as I've
suggested or implied, that means that we're going to be
looking at interest rates coming down, but not significantly. And obviously,
if you have interest rates coming down, that's good news
for the equity markets, even though the equity markets or
(51:00):
the stock market might be a little bit pricey or overvalued.
Now as we move towards twenty twenty six, and Hugh, that's.
Speaker 1 (51:08):
Going to be our that's going to be our last word.
We're out. Thank you so much, thanks for listening. Happy holidays,
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