Kind: captions
Language: en
In the 1980s, under Reagan's leadership,
the US economy exploded with 12% real
GDP growth in just 18 months. And the
man behind that boom, today's guest,
economist Arthur Laugher, now with
America sitting on $ 38 trillion in
debt, rising inflation, and growing
wealth inequality. Laugher's back. This
time advising Donald Trump on how to
spark a second economic revolution.
[music]
In this episode, we go deep into the
real mechanics of growth. what worked
under [music] Reagan, why Trump's first
term fell short of that same boom, and
what Laugher says must happen now to
avoid collapse. From tax cuts and
currency reform to crypto and debt
restructuring, if you care about your
financial future, the 2026 midterms, or
understanding how we fix a broken
[music] economy, this is the episode
you've been waiting for. I bring you
Arthur Lafer. You helped design the
policies that fueled Reagan's boom. So
why aren't Trump's economic policies
creating that same growth? What exactly
is missing?
>> Well, I think they will. But let me just
say that I don't share your pessimism
about the world because the systems
adapt that well the systems adapt and
change. And you know when things get way
out of control, there are always
response mechanisms that come through
the political structure. Reagan was not
an accident. John F. Kennedy was not an
accident of you know
>> so you see them as mechanistic responses
to where the economy went and that we
will always have said response.
>> Yeah. And you have these back and forth
and it's only when you get economies
that don't have automatic responses like
elections and stuff like in those
economies you can't adjust and you would
be completely correct that we're going
straight to hell in a hand basket if the
markets weren't able to readjust and
offset the damages that you see coming.
I agree.
>> But how do you how do you reconcile that
statement with the fact that every
empire ever has always collapsed due to
debt and money printing?
>> Yeah. Well, well, no, but I'll you're
talking a very different time scale on
that. You're talking hundreds of years.
Uh you're you're not talking hundreds of
years, at least I don't think today. I
mean, you had the Biden uh uh economy
there. You had the response by the Trump
economy. Uh what you're seeing with the
Trump economy is exactly as what you'd
expect. I mean, you know, that the
policies change. They don't change all
at once. They come flowing in and the
economy is responding very favorably
right now. And I expect it to continue
to respond favorably. In fact, even get
more favorable. I mean, with Reagan
starting on January 1st, 1983, now
that's almost two years into his
presidency,
uh, real GDP started to rise. The tax
cuts took effect. And from January 1st,
83 to June 30th,84, now that's just 18
months, that's just a year and a half,
US real GDP grew by 12%.
12%. That's at an 8% peranom compound
rate over a year and a half and it just
changed the whole face of the earth as
we know it. You know, I think you're
going to see very major improvements in
the economy because of the policies
you've seen and when they fully take
effect. Wow. I I
>> Let's get specific. So, what um take us
back to the Reagan conversations. You
come into office, he brings you in. Um
what are the structural problems that
you see? And then why were tax cuts the
answer?
>> Well, when we came into the office on
January 20th, 1981, all right, the prime
uh the prime interest rate was 21.5%.
Mortgages were doubled to 17 18%. Uh we
had huge unemployment. Uh we had a
highest marginal income tax rate of 70%.
Uh you know, it was collapseville. We
just come off the four stooges. Uh I say
four stooges, Johnson, Nixon, Ford, and
Carter. uh which to me was the largest
assemblage of bipartisan ignorance ever
put on planet earth. When we took
office, we found the US in the doldrums.
I mean, it just trashed. Uh we reached
into that trash heap. We pulled out this
platinum thing. We polished it a little
bit. We put it up there. It said USA,
Inc. America Enterprise. And we borrowed
lots and lots of money. And we did uh
because we had very good uses for that
money. We dropped the highest marginal
income tax rate. Now, just think of
this. from 70% which is what it was when
we took office
down to 28%. Is that a good enough drop
for you? [snorts]
>> Not spectacular.
>> We cut the corporate rate from 46%
to 34%. That's not too bad either. Uh we
went from 14 tax brackets to two tax
brackets. The two tax brackets were were
were literally 28 and 15%. That's what
we went that was it. Uh we dropped the
capital gains tax rate dramatically as
well. All of these things happened. We
strengthened the dollar. We got Paul
Vulker to strengthen the dollar. The US
just took off like a rocket ship. And
that's where I talked to you about the
real growth. Once those policies took
effect on January 20th, I mean on
January 1st, 1983, we were off to the
races. He won the election, the midterm,
the uh his second term election, 49 out
of 50 states. and I was on the executive
committee of the Reagan Bush Finance
Committee. And I'll just tell you, in
the 84 election, Fritz Manddale was not
a bad guy. He was a good guy, solid
person. Nothing wrong with him. He just
was running against Reagan. And you
know, that's a tough one for a guy like
that. Reagan about eight weeks out of
the election uh uh eight weeks out uh
asked us to withdraw our all of our
funding, all of the campaign funding
from Minnesota. uh so that Montdale
could at least win one state. Now that's
that's a different world than you see
today and the hostility and all that
sort of stuff. But that's what it was.
And we went from a huge I mean boom to
the large share of the world. There was
no wars. US the economy was back in
full. Stock market took off like mad as
you probably know. And it lasted for a
long time. It lasted all the way through
Bill Clinton. Now, uh, the one thing you
mentioned and and I want to address that
very formally with you, uh, debt.
And let me talk to you about debt a
little bit because it's really, really
important. And I'm an economist, uh, and
I want to go through that debt number.
And the way they usually structure the
debt conversation is debt is a share of
GDP is 130% of GDP. And it's rising like
mad. Oh my god. Oh my help me. I'm going
to jump off the edge of the cliff. I I
can't. My grandchildren are going to be
you. You know what the one I'm talking
about.
>> Of course,
>> those numbers are true. And [snorts]
that debt as a share of GDP is too high.
Okay. But let me put it in perspective.
First place, uh you should never look at
gross debt of a country or an individual
or anything else. You should always look
at net debt. there's a lot of debt uh
that has been issued by the federal
government that is uh that is on the
balance sheet of the federal government
and different departments and agencies
etc. So what you should do is first and
foremost uh eliminate all the
intragovernmental debt and just look at
net debt to the public to the private
sector. That's what you should do. And
if you did that you would reduce that
net debt that debt to GDP number from
130% to about 100%. And that that's a
big drop. I mean that's the first thing
you do. The second thing you do when you
look at debt uh and compare it to GDP
it's really an inappropriate comparison
when when you look at a company for
example you only compare balance sheet
items with balance sheet items income
statement items with income statement or
cash flow items there for those you
should never mix stocks with flows or
flows with stocks in any of these
comparisons. So when you look at debt to
GDP,
it it's an inappropriate measure. You
should look at debt to wealth or you
should look at debt service uh to GDP.
Both of those are appropriate members.
One is a stock to a stock and one is a
flow to a flow. If you look at debt to
net wealth, it's still too high, but
it's about 181 19% of total wealth.
That's too high. But it's not jumping
out of a window too high. It's just not.
If you look at debt service to GDP, uh
it's about 4% something like that. Death
service to GDP today, it was about 4 and
a half, 5% after Reagan, you know, was
in that range. It fell as low as 3%. But
again, it's too high, but it's not
something you get panicked about. So
when you look at it, it should be flow
to flow or stock. When a bank when you
buy a house from a bank and the bank you
want a bank loan the two questions they
ask you what's the loan the value of the
home that's a stock to a stock and can
you afford the interest payments that
those are the two questions they same
thing you should ask about the US and
both of those are too high but they're
not panic city that's not you know going
to hell in a hand basket far from it
then the real thing you want to look at
on debt if I can is debt is just a tool.
A debt is a way of getting money from
savers to investors. It's just a loan.
That's all it is. And uh it's a very
normal way of transferring assets from
net savers to net investors. Uh and it's
neither good nor bad. It's how the
proceeds are used that is important.
Now, let me let me give you the example
here. I'm going to let you borrow all
you want at 1%. and let you invest all
you want risk-f free at 12%. How much
you're going to borrow from me?
>> Uh, it depends on which one of those I
get.
>> Well, but you get 1% it costs and you
can invest it at 12% risk-f free.
>> Uh, oh, I see what you're saying. Yeah,
then
>> infinite. You're going to borrow
infinite amount. Reverse those two
numbers. I'm going to let you borrow at
12% and invest at 1%. How much you going
to do?
>> Zero.
>> Yeah. So, okay, we're getting into the
abstract here because of course in
reality,
>> no, it's going to be real.
>> Yes, it is. Okay, bring it bring it home
to reality for me.
>> Bring it home. When we came in under
Reagan, we found the US have been
trashed. The economy was in bad shape.
We had to look at Enterprise America and
we had an act ability there to borrow at
lower rates, what we considered lower
rates compared to the investment rates
there. And we borrowed lots and lots of
money. We use it to cut tax rates. We
use it to build up defense spending. We
used it to do all the wonderful stuff.
And that economy just took off like a
jack rabbit. And thank God with, you
know, when you get to people like Biden
and Obama and W and these people, they
borrowed lots and lots of money to pay
people not to work. The purposes of the
debt were very different. What you want
to do here is if you use debt properly
on a federal level, uh you can
reestablish credul in the debt market
within a couple of years. I mean, you
really can you can grow your way out of
this debt quite easily if you do the
right policies. That's all I'm saying.
It's not something that's inevitable.
It's not something that can't be handled
over the next three or four or five
years. It can be. It's just it's a it's
a problem, but not a crisis problem.
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let's get back to the show. That was
great. That's very easy to follow. Um,
however, I have what I think is the
rebuttal that can't be gotten around and
I hope you can because I have no
interest in living in the dark and
terrifying place that I am currently
occupying. Uh so here is what I see. The
humans are a certain way. We have a
nature. I've heard you talk about this.
Given that we have a nature, history is
going to um loop. It doesn't exactly
repeat. But money money abides by
something akin to physics. Humans only
have so many reactions to different
setups. And you put those two things
together and on a roughly 150 to 250
year time horizon, every empire
collapses. And they collapse for one
very simple reason, debt and money
printing. Uh we are debt and money
printing not in the way that you just
described it. We are debt and money
printing for the exact reason you just
warned us not to. So we are running
deficits precisely so that we can give
people money not to work. And the great
irony of that when you increase your
levels of debt, you radically increase
the levels of inequality because a very
small number of people let's call it 10%
understand assets and therefore 10% of
Americans own 93% of the assets and are
shielded from the inflation that's
caused by debt and money printing to pay
people not to work. And the other
people, 90% that own 7% of the assets,
they just get hammered by inflation and
they don't understand that's what's
happening. So they have this economic
force being applied to them, but all
they know is they can't make ends meet.
They're they're very anxious about
what's happening. They have to transmute
that anxiety, which does not feel good,
into anger, which does feel good. They
need someone to blame. a populist leader
will rise up and give them someone to
blame. And that's how in this moment,
despite the fact that it's basically all
the socialist policies in America that
have created this, you have a rise in a
love for socialism and a decrease in a
love for capitalism. And the only thing
historically that has pulled us back
from that ledge is a an amount of pain
that is so extreme that people finally
go, "Ah, yeah, I guess we do have to
completely restructure the system and
effectively start not over, but
>> you're hitting me with a lot of topics.
So, let me
>> The great news is I can run through it
piece by piece over and over and over.
>> We'll do it piece by piece. Let me do
the first one. inflation and the
printing too much money and all that.
Uh, prior to 1913 in this country, we
had a private money system.
It was not public. Now, the government
did do three things. It defined what a
dollar was. It's 12th of an ounce of
gold. It's 1 ounce of silver. That's a
dollar. Uh, it also did one other thing
as well. It did mint coins. If you
brought billion in to the federal
government, it got it the right purity.
It would mint the coins and charge a
commission. But so did lots of other
private sector mints all around the
country did the same thing. So there the
real thing they did prior to 1913 was
the government audited banks balance
sheets. Banks would issue their balance
sheets, their income statements and the
government would audit them and say
they're true and correct etc. At that
time banks created money. There were
bank notes that were the li liabilities
of individual banks. uh they had those
they had gold coins circulating, silver
coins circulating, money was private.
The only thing the government did was
define what a dollar was and that was
the world back then. Now some some banks
notes sold at a slight discount to other
bank notes like they did because they
were all private liabilities. Uh and
that was a system that went from 1776
until 1913 in the US. That's a what is
that 137 years there. Now, starting in
1913, we put in the Federal Reserve. The
government started to nationalize money.
We then had the Roosevelt one, the gold
confiscation of 1933,
uh, where they confiscated gold at
$20.67
an ounce. Then they devalued that. So,
they just had this huge wealth tax. We
were the only country, I think, ever
that has had our citizens prohibited
legally, criminally for holy gold. I
mean, it was just amazing. And then of
course we had the interest equalization
tax. We had the uh voluntary foreign
credit restraint program. Those were the
ones I did my dissertation on at
Stanford.
We went on up to Smithsonian and I was
in the White House in Smithsonian time.
I was George Schultz's right-hand person
when we went off gold completely and
totally. We were a freewheeling paper
currency unbacked by anything anywhere
at any time. George Schultz's comment
was, uh, we've raised the price of gold
of the gold from $35 an ounce to $42 an
ounce, but we're unwilling to buy it or
sell it at that price, which is a joke.
And now finally, government had 100%
control of money in 1972.
They did. Inflation from n [snorts] from
1776 until 1913 was
>> zero.
>> Yep.
>> Zero. Uh there were no major depressions
or anything like that. There were some
financial panics but they were over in a
matter of weeks or months. Uh there was
nothing there. Long bonds now these are
all from Jeremy Seagull and Jeremy
Schwarz who are my colleague at the
University of Chicago. Best people in
the world on long bond yields in 1776
were in the 5.5% range. By the time you
got to 1910 1912 they had gone down to
about 4 12%. Just all very stable
steady. No blah blah blah blah blah blah
blah blah none of that stuff. It was a
beautiful system. From 1913 to the
present, the price level has risen
35fold. You've had interest rates that
I'd mention went from 21% down to zero.
But ba doo. We had the biggest
depression ever. You know, this is a
classic example of the federal
government nationalizing an industry and
screwing it up. We've went from private
banking, which worked really well, to
public one, which just screwed it all
up. And the US, by the way, screwed it
up a lot less than other countries did.
We are the we are the tallest [ __ ] in
the bunch on that. Now, when it gets you
to be scared, uh I look at I look at
cryptocurrencies at being the private
sectors and gold as being the private
sector's way of circumventing government
monies and creating a money of their
own. Especially things like uh um uh uh
like uh uh Tether and these other stable
coins, they can really stabilize values.
And what I'm seeing in this world is the
private sector moving back in and
replacing the government monies and uh
which makes me very optimistic about the
long term there. Um so that's the
monetary inflation one. Now you have
redistribution. You said uh let me go to
redistribution with you and this is a
really important topic and by the way
I've written a lot on the banking system
as you know if you did my background
stuff that's my bawick and trade. Uh the
book I wrote on this one is called taxes
have consequences. It's two and a half
years old. Uh it is the complete history
of the US income tax from 1913 to the
present. Uh in this I just want to say
we have every single tax return. Uh you
know the last two months of 1913 we had
an income tax and all the way here we
know the last guy in the top 1%. We know
the first guy in the bottom 99%. We we
don't have his name but we have his tax
return. All right. We have this we see
how the first year 13 14 and 15 uh the
number of people required to file was
about 358,000 out of 62 million adults.
Just teeny tiny little group and the tax
rates went from 0% to 7%. That was it.
Little bitty little bitty. And then of
course by 1951
1617 it had gone up to 77% was the
highest marginal income tax rate. It
went up to 6.4 million people. That was
World War I. That was the pandemic then.
And then Wilson dropped it to 73% in 19
191819.
Boom on down went down as low as 25%
under Harding and Coolage. We have had
huge amounts of variation in the tax
rates on the rich. We we have we've had
enormous amounts. And we don't just
guess what happens when you raise tax
rates on the rich. Uh we know we have
every single example and let me just
summarize if I can on SIZ [ __ ] and all
these other guys you know Zupman and
Savva and all the redistric Bernie
Sanders AOC.
I can easily imagine raising tax rates
in the rich and collecting more money
and helping the poor. I can also easily
manage raising tax rates in the rich.
They hire more lawyers and accountants
deferred income specialists. they have
bad economic activity happen to them and
you actually collect less money from the
rich. Either one of those is very
possible because these guys are rich and
they can hire lawyers, accountants,
deferred income specialists, whatever.
So, we have to look at the facts rather
than feelings. Every single time we've
raised the highest tax rate on the top
1% of income earners every single time,
three things have occurred. The economy
has underperformed.
Tax revenues from the rich have gone
down. not up and the poor have been
hammered.
Every single time we've cut the highest
tax rate on the top 1% of income
earners, every single time the economy
has outperformed, tax revenues from the
rich have gone up and the poor have had
opportunities that have exceeded other
time periods by a long shot. So that's
where we are in this. So, as you can
probably guess, I'm far less afraid of
mom Donny's uh Elizabeth Warren. And
yeah, they screw up. They dumb. They
don't understand economics. They don't
know straight up from scum. But, you
know, frankly,
they sooner or later are going to be
squashed and they're going to be
replaced by a low rate flat tax. In
1944, the highest marginal income tax
rate in America was
94%.
Every dollar you earned, you were
allowed to keep 6 cents. God bless you,
son, for working hard. Today, the
highest marginal income tax rate is 37%.
We've made enormous project progress
over the years. If you look at states,
in 1976,
there was one state in the United States
that did not have a state death tax, and
that was Nevada. All right? Every other
state did. All right? Today, 38 states
have eliminated the death tax. Uh, all
of them eliminated the inventory tax.
You know, when you look at the progress
we've made, we've got now allowed people
to do discount sales. We've gotten
negotiated rates in the stock market. In
1973,
every stock traded by law had to pay 34
cents as a commission. Today, it's zero.
Trucks were deontrolled, airlines
decontrolled, all of this stuff. you
know, we are making enormous progress
coming along here and you know, I I do
see the problems you're saying and I do
think they're correct and a lot of the
response is anger, but you know, we had
a lot of anger after Nixon. I don't know
if you were aware of that. You're way
too young to understand that world, but
I was the chief economist in the White
House then. I was George Schultz's
right-hand person. If you think it's
hostile and political today, you have no
idea how bad it was under Nixon and Ford
and Jimmy Carter and all. Oh my god, it
was awful. So, this stuff is repeating,
but every time it's repeating. I I'm
telling you, it's getting better and
better and better. Yeah, we
[clears throat] make five steps forward,
then we're pushed back three steps, and
it's all true, but we're making progress
all over the place on inflation, private
money, tax rates, all of this stuff. We
are we are really making a big
difference in the world in the right
direction. We're creating a lot of new
problems too but they are soluble in the
US the way our structure is is that we
allow those s solutions to come back
into the system where other countries
really don't. You can't get a vote in
Russia for example and you have a hard
time even in Britain. You don't vote for
the prime minister. You vote for a party
that then is 100% in control. That's not
the way we do it. We do checks and
balances. Britain does not. So,
>> okay, hold on really fast before let me
say back to you what I just heard.
>> That's why we're doing this.
>> Yeah. So, I here's what I heard. Um, hey
Tom, listen. Uh, when you put this into
historical context, yes, we make these
really bad decisions, but that causes
humans to react. And so, we come back
down and then that causes people to
react and we go back up. You know, we
sort of rock back and forth. Okay. So
you have a base assumption that that
will protect us. Um unfortunately
history is on my side that what is
actually happening is that you're
getting these back and forths but they
are on a trajectory of debt just going
up up up up. So there's no denying that
you have this tack up and down for sure.
Um, but when you just look at the M2
money supply, the amount of debt that
we're taking on in terms of just the
sheer magnitude of it is so much bigger
than what we were doing in the '7s, 80s,
90s. It's like once you get the breaking
point of the 2001 dot crash, all hell
breaks loose in terms of how we treat
printing money to solve our problems.
You then compound that in the 2008 uh
financial bubble or bursting of the
housing bubble then obviously co and so
you look at this and we are in a moment
now
>> gotcha
>> where we're roughly 122% debt to GDP
you've already told me you don't think
that's the right way to look at it and
I've heard you however I will say this
when you say don't look at that I hear
the same thing I hear when people are
like oh we don't like the CPI results so
we're going to change the CPI at some
point you just need to have a metric and
so either But but help me.
>> Bear with me. Bear with me. Bear with
me.
>> I just made up that new rate. This has
been done in accounting for a thousand
years. But the way I describe
>> changing the metric by which we judge.
>> No, I'm not changing. You're using a bad
metric. And you've always been using a
bad metric. And the proper accounting
going all the way back in time is the
way I described it to you. It's the way
every company does its balance sheets
and its income statements and its cash
flows. That's the way you do it. Banks
do it that way. Always have.
>> Okay.
>> You're using a bad metric. Now you say
I'm changing it to but I'm changing it
to a good merit metric. It is a problem.
I'm not denying that but it's nothing
like the problem you're describing.
>> Okay. A bad metric.
>> You've that point is very clear. And so
now well I I haven't said that I
concede. I just said you've been very
clear.
>> Concede. I'm just the guy who knows
those metrics.
>> Sure. But the any philosophy that
somebody uses must describe the world
that I see. The world that you are
failing to describe so far is that every
counting
>> bear with me
>> numbers ev every empire Arthur has
failed for debt and money printing.
>> You know I read Rogoff too.
>> We're we're just talking about what's
actually happened. So if if you're going
to give me a metric that shows this is
actually what they did wrong so that I
can look at the American empire through
that lens, fair enough. But until I have
a metric where I can go, oh, this is why
all of these empires before us failed so
that I can look at are we making the
same mistakes or not.
>> I got you. No, I got you. It's a great
great question. And let me just answer a
little bit if if I can. I tried to give
you an answer on on that. Our system is
much more flexible than most systems
have been historically. They have not
been free market democratic economic
capitalist system. And maybe ours will
fail on that grounds as well. And I'm
not sure it won't. But when I look at
the systems today, first place the
metrics I use are just accounting
textbook me metrics. It's not like I
have edited it to rebut you. I didn't.
Uh it's been around there. It just is
useful in rebutting your 122% number.
That's all I'm you know you are right
about debt being too large. And you're
right. But the problem is is government
spending. And you know when I look at
this system today uh I don't see the end
of the earth coming. I see this system
adjusting right now. And I was trying to
describe
>> but so you've been very clear on all
that. So I want to make sure that we
differentiate between when I'm confused
and when I disagree. I am not confused
about what you say because I agree with
all of it. What I'm saying is that
>> the where we disagree is that I have a
way of explaining this that describes
the collapse of the previous empires. So
far you probably understand it far
better than I, but so far you've not
articulated what it is that caused those
empires to fall. Let me tell you your
cause. Let me let me support your
argument here. Uh in 2007, I think the
the balance sheet of the Fed was about
$850 billion, something like that. Uh it
went up as high as $9.4 trillion. Uh in
the next bunch of years, which you're
talking about M2, you were talking about
the money system in that terms. I use
the balance sheet of the Fed. You're
totally correct. You can see that 22%
inflation from Biden really clearly in
those numbers. It's just obvious. Duh. I
mean, they're those numbers have changed
dramatically and they not only have
changed on the balance sheet. Not enough
to make it great, believe me. But
they've also changed on the responses of
the market to the bad money that's been
created by the Fed and by the US
government and the nationalization. All
of these cryptocurrencies are rushing to
our defense and to our savior. Look at
Tether. I mean, Tether's hitting
marketplaces all over the world and it's
do it's doing in Turkey and central
Africa with the Masai and all these
where you can hold dollars on your phone
and you can transact. The transactions
costs have been dropped enormously and
they're growing by leaps and bounds.
What was I think it was 2014 Bitcoin
sold for 250 bucks. It's a couple
dollars higher than that now. I mean all
of these things I view that as the
private sector trying to come in and
solve your problem correctly. Those
>> agree. So what you're saying is this
empire won't collapse because that's
democratically possible for us to
replace the money.
>> Yes. Exactly. That's exactly correct.
And I think those other countries that
you've always tal mentioned there and
that's all they're all true. Your data
are correct. I I you know I know Rogue
off and those numbers are correct. The
collapse is all there. I just think that
just saying the same thing always
happens to every country is not correct.
It happens for a reason. And I think the
reasons it happened in those other
examples are not applicable today in
full. They may become applicable very
soon. And thank God I'm 85 because I
won't have to live to see a collapse in
the US. But but but the truth of the
matter is I don't think we're doing the
same problems that they did. I don't
think our debt is anywhere near the same
level those other countries you talked
about and and I think the private market
is coming in and replacing it which
really excites me. This is Jude Winsky's
book the way the world works which is a
really a classic in this area and it's
just wonderful and and I just don't see
the inevitability of the collapse just
because we're 250 years old next year.
>> Totally agree that it has nothing to do
with the timeline. Um, I think the
timeline is simply tied to the
>> duration it takes the society to
discover how much they can profit off of
debt. And once they realize, oh, wait a
second, I don't uh, as a politician, my
only job, no matter what anybody tells
you, is to gain and retain power. So, I
know I have to gain and retain power.
And what they begin to realize is uh, I
gain and retain power by promising free
things. And I can pay for those free
things by generating as much debt as I
want and printing money to cover it,
which is an invisible tax. And so it
just oh, it takes roughly 150 to 250
years for that cycle to get so far out
of control. Uh because you need these
random events, not random, but you need
these problem events to occur and to
begin to stack up. And so you get I mean
I've heard you say that no no no if you
really want to understand about
America's financial problems you need to
go back to the Great Depression. You're
one of the only people I hear talk about
that I I'll ask you to go all the way
back to 1913. For me that's where the
problem really starts because that's
where
>> that's why I did the that's why I did
the money up to 1913 because you had the
Fed and the initiation of the income
tax. 1913 is a critical year where
government came in and started screwing
everything up really badly and 1930 was
proof of the pudding.
>> Okay. So, I think just so everybody
understands why you and I can agree on
so much and still uh walk away being you
not worried and me like terminally
worried.
>> Don't get me wrong, I just not like you
were worried. I don't think it's
inevitable. I think we through the
political process can solve it and have
done so so far.
>> Okay. So, really fast because I want you
to walk us through what Trump is going
to do at a policy level to back all of
this out because I certainly from where
I'm sitting, it seems like Trump uh
listens to you. He certainly hears you
out. Whether he takes your advice or
not, we'll see over time. Uh but that is
extremely useful as we're talking to
somebody that's inside the White House
that uh understands how this works.
Okay.
I like your I like where you're coming
from. And just for the record, I'm an
economist. Trump has to look at all
sorts of stuff. When I'm with him, and I
do see him frequently, uh I try to give
him information to allow him to make
better decisions. I ask him explicitly
not to tell me what his thoughts are cuz
I don't want to be burdened with that
type of knowledge. He has a lot of other
things to consider that I never
consider. Uh, and so all I do is view
myself as someone who tries to
facilitate him making great decisions. I
think he is a great decision maker. He's
a COO. He's not the most popular guy
anywhere, but he doesn't know how to
make a decision. And he bases it, I
think, really on good stuff. Many times
using my inputs, but coming to a
different conclusion.
>> And sometimes his conclusions were a
hell of a lot better than mine were. And
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for full disclosures. The base
assumptions that I think cause us to um
share so much in common but still draw a
different conclusion are you believe
that democracy allows for a release
valve where people it has a corrective
mechanism and that the private market
has come in with will round it to
cryptocurrency in order to create a new
financial system where people can escape
the abuses of a governmentcontrolled
financial system.
>> Yes, they can. And and also on the tax
system too, just for that, I mean, I
mentioned that the tax system has gone
from 94% in 1944 to 37 today. That's
that is that is an rectification. Our
capital gains tax, I mean, we
effectively have no capital gains tax on
owner occupied homes anymore. $500,000
for every couple and a step up basis at
death. And I could go on. That's half
the capital stock of America. So, we've
made huge progress at the state level
and at the federal level on tax rates,
which to me are much more important than
tax revenues, as you know. That's I just
did my curve quickly and slid it by you,
didn't I? I got it slipped through.
>> I I know your curve very well. And it
>> you lower the rate, you collect more
money. So,
>> yeah. And look, we we will almost
certainly get to the point where we
really push into that because it's very
very important for people to understand
that. something that I have a hard time
getting people to embrace. But um first
I want to lay out what my base
assumptions are. So and we don't have to
debate them. I think there's probably
more interesting things for us to move
on to. But for the audience who's trying
to build their own worldview, I want
them to understand. So
>> uh for me, the thing that I see is
voters vote emotionally. And so
democracy can be the biggest problem as
much as it can be a salvation. So it
comes down to how voters feel not what's
actually happening. and wealth
inequality for better or worse is the
thing that drives how people feel. So
you've got a system right now as of
today because of inflation uh money
printing that wealth inequality is just
going absolute haywire which is making
people feel bad and that feeling is
going to continue to create an impulse
for politicians to give things away for
free and run an unbalanced budget. Okay.
So
>> but let's do wealth inequality just the
facts during the great depression money
wealth was much more evenly dist
distributed than uh it was in the 20s or
than it is now. Uh during World War II
wealth was much more evenly distributed
than it was now. In other words, the
only way you can get equality of wealth
or income is at zero. Do do you know the
transfer? Can I do a transfer theorem
with you? Because I I think you'll love
it.
>> Sure. if you let me do it and and
[clears throat] let me just a transfer
is when you take from one person and
give to another person what you're
saying the governments give away money
to buy off votes and stuff like that you
know that's a transfer we usually think
of a transfer system being from those
who have a little bit more to those who
have a little bit less that's the way we
usually think of it although there is
one from young to old social security
which I love by the way from tall to
short I love that one skinny to fat I
like that one too But let me do it here.
The transfer theorem with from those who
have a little bit more to those who have
a little bit less. Whenever you take
from those who have a little bit more,
you reduce their incentives to produce
and they will produce a little bit less.
Period. Whenever you give to those who
have a little bit less, you provide them
with an alternative source of income
other than working and they too will
produce a little bit less. This is just
the slutskkey equation in
macroeconomics. That's all it is. Common
sense. So the theorem here is whenever
you redistribute income, you always
reduce total income. Period. That's
math. It's not whether you're tall or
short, Harvard or MTSU, it doesn't
matter. It's just plain math. That's the
theorem. Now, the lema from this theorem
is sort of cool, and I think it's fairly
intuitive. The more you redistribute,
the greater will be the decline in total
production income.
But now the one that's delicious that I
think you will love is the limit
function of this theorem. If you were
able to redistribute income so that
everyone comes out exactly equal,
there will be no income whatsoever. And
God, I hope Bernie Sanders listens to
this show. I hope he does. Let me do
this.
>> Avid subscriber. Yeah, good. Well, let
me if I can't do the math for you on
this one. In order to get everyone to
come out exactly the same. So, you have
complete income equality. So, you have a
complete What you'd have to do is you'd
have to tax everyone who earns above the
average income 100% of the excess and
you'd have to subsidize everyone below
the average income up to the average
income. Only in that way can you make
sure that everyone comes out exactly the
same. Now, if you actually did that, if
you actually taxed everyone above the
average income, 100% of the excess, and
if you actually subsidize everyone below
the average income up to the average
income, I'll stipulate today, counselor,
we'll all be equal at zero income in the
system. That is the theorem that drives
the equality of income. Equality of
income is the stupidest concept I've
ever ever heard in my life. It's dumb.
It's awful. It's nasty. It's brutish.
It's vile. Because the dream should be
to make the poor richer, not to make the
rich poorer. The dream is to help those
who are in need, not to hurt those who
have succeeded. That's the dream in this
world. And so when I see people willing
to sacrifice all the poor and
disenfranchised people in this earth
just to make sure they get even with
that rich guy, I find myself disgusted.
That's the Larry Summers model of
economics, and he's been my arch nemesis
for 40 years now. And he [snorts] I win,
he loses.
>> You follow my
>> Well, he's he's he's pulling himself off
the chessboard for you, so I don't think
you have to.
>> And I Let me just say a little fun
[snorts] fun one for you. This is fun,
but I I'm not a mean person. I really
not I don't want anyone.
>> Don't strike me as one.
>> Well, I I don't want anyone to suffer. I
don't uh in even no matter if they're
vile or terrible, I just don't want them
to have pain either. But if but if pain
has to be come down and there has to be
here. I know the guy I want to be the
one who gets it. Larry Sage has just
done such a beautiful job and taking it
for me. He's lived on privilege all of
his life. His uncle is Paul Samus and
his other uncle and his mom's side is
Kenneth. Both Nobel laureates, famous
mathematical economists. He's parlayed
that privilege all the way up being sec
president of Harvard, secretary of the
treasury, head of the NEC, and now he's
always been a bad economist. He's always
been that, but now you find he's a bad
person as well.
>> Yeah. Yeah. Well, to to uh you reap what
you sow, I guess. All right. So, really
fast, all of that makes sense to me. Uh
this is another case of everything you
say I agree with wholeheartedly. Um the
very clever guy from what I've heard you
are
>> well that is exceedingly generous very
nice things about you that's why I'm on
the show it's a and you're living up to
your expectations I think your questions
and comments are really really
insightful and correct they're the right
questions and I hope I'm
>> I get emotional and answering them but I
hope you don't mind that but
>> I don't mind at all this is joy for me
>> you you and me both okay so the there's
one thing in all of this that I still
worry about which is um whatever the
government makes mandatory is the only
thing the average person is going to um
use. So if the government is making the
hyper it's not technically hyperinflated
but the very inflated currency the
mandatory one to pay your taxes and all
that that's the one people are going to
understand. I don't think the vast
majority of people understand crypto nor
will they embrace it unless they're
forced to. They need to because
otherwise they're getting hammered by
inflation and so going but they
understand that.
>> Yep.
>> Go ahead. Sorry.
>> Here's the thing. They don't understand
inflation. That that is a hill I will
die on. But I to your point intuitively
they know something is going wrong.
Okay. So that's one. The wealth
inequality even though that's the right
thing to point at in terms of what
drives people crazy from a there's just
a algorithm embedded in us from
evolution that makes us hate inequality.
per perfect. Uh, however, you can
distract people from that by giving them
relative growth. So, if they believe
that, oh, I'm making more money today
than I was yesterday, and buying that
car, that house, that whatever is a
little bit easier today than it was
yesterday, and I'm going to be able to
amass some amount of wealth that I'll be
able to pass on to my kids so that I
have reason to believe that their life
is going to be better than mine, and
therefore all of my sacrifices are worth
it.
>> Yeah. The second you break that, you are
in a real problem. And we have broken
that.
>> And right now, things are getting harder
and harder for people to afford. And so
that makes them go, "Wait a second. That
guy's making a whole lot more than me,
>> which they never would have worried
about or thought about if things that
they wanted were getting effectively
cheaper for them."
>> You're right. So the question becomes,
since we agree on that and we know we're
moving in the wrong direction, what
precisely is Trump going to do from a
policy perspective or more importantly,
what are you advising him to do uh to
get it moving in the other direction so
that real wages are going up, not the
nominal where it's like, yes, I'm making
more dollars.
>> Gotcha. Gotcha.
>> That one obviously I'm not saying for
you, I'm saying for the audience. Okay.
But so that the the dollars I'm making
sure are more, but in terms of what they
buy, it is less. So real wages is where
it's like, hey, the actual difference
between how much I'm making and how much
something costs has changed and I'm in a
more powerful position. Okay, how do we
get there?
>> Yeah. Well, you know, I break it into
five kingdoms of macroeconomics. If you
look at a big macroeconomics textbook,
you've got five sections in there, at
least if you're talking about the US and
developed countries. First section is
taxation. Second section is government
spending. Third section is monetary
policy, inflation, all that stuff.
Fourth section is regulations. And fifth
section is international trade. And I
sometimes add one piece through strength
which is defense security. Sometimes
when I look at those five grand
kingdoms, I look at let's say Joe Biden.
He's a loser in every single one of
them. just just across the board. Trump
in his first term uh cut personal income
taxes, cut corporate taxes, 100%
expensing, cut the death tax
dramatically in the tax cuts and jobs
act. He did a great job on taxation on
government spending and that he did the
defense stuff that was pretty good. He
reduced the rate of increase of spending
there until it came to CO and then he
blew it on the CO. But uh even when he
blew it on the co he did get the uh the
vaccine in operation warp speed by
within 10 months which is pretty
impressive by the way. They were
expecting eight or nine years there. If
you look at his monetary policy he was 1
and a half% inflation during that period
there. It that was what he had there. Uh
if you look at uh regulations he
deontrolled energy. He deontrolled
healthc care uh price transparency. I
could go right to try. He did all of
that stuff which is pretty cool on
regulation and on trade. Uh I I'd love
to talk to you about trade that take a
longer but he all the deals he did in
his first term were lowering tariff
barriers, lowering uh quotas, lowering
restrictions on trade, not increasing
them. The Japan deal, the US MCA, the
South Korea, the Brazil and the Colombia
ones were all freer trade, not less.
This term he got the tax cuts and jobs
act permanent. He got u no tax on
overtime. So all those guys, all those
firefighters in California and all the
people in Palestine, Ohio who spend 80
hours a week at at 911, you know, do all
the work and take all the risk. He
doesn't. You don't tax the living crap
out of them anymore. You're not going to
tax them for putting in 90 hours a week
at the highest rates. Interest on loans
should be taxdeductible. As long as
interest income is taxable, interest
loans should be tips.
Why in the hell should you spend a
billion dollars trying to collect a
million dollars from tips? You know,
there just some things that are just not
worth it. He did [clears throat] that as
well. What he did, he put in workfare in
there. He put in the U medical price
transparency in the big beautiful bill.
He put in a bunch of other things there
that I won't go through the details on,
but are all pretty damn good. Uh what I
see him doing on trade is trying to
negotiate to get better free trade
deals. That's my belief. He's a free
trader all the way. He just loves to
negotiate them to reduce their tariffs.
We have much lower tariffs than any of
the other major countries and he wants
them to bring theirs down and that's
exactly and the deregulation. I mean,
he's doing that really well. So, I think
in the five grand kingdoms, Trump is an
outlier doing really well on taxes,
government spending. I think he's doing
well on monetary policy on regulatory
policy and on trade policy. And I think
his use of trade to negotiate peace like
in Ukraine, uh like in China, with
Taiwan, like in the four countries in
Africa that he's done it with Pakistan
and Afghanistan, what he did in Gaza,
you know, he really knows how to
leverage those types of tools to bring
the peace down. He is very Reagan-esque
in every respect except his personal
demeanor. He is a CEO. Reagan was
softspoken, was lovely high. Reagan was
as radical a revolutionary as Trump is.
I mean, my godfather was Justin Dart,
who was head of Reagan's kitchen
cabinet. Believe me, he was Donald
Trump. He was a CEO.
Donald Trump is doing all the right
things there are to be done. And uh I
couldn't be more happy than I am about
how he's doing it. So that's my story.
I'm sticking to it. Um, let me give you
an example where I I I was wrong in some
of my advice to him. I He scared the
hell out of me on trade.
He scared me to death. And you know,
I've just seen
>> because of the tariffs.
>> Yeah. And to other, you know, this
whenever I see a president getting
involved in that stuff, I'm here's the
depression. You know, 1929 when they
passed the Smood Holly tariff in the
fourth quarter, the stock market fell by
35% when it was signed into law by
Hoover. On June 30th, 19 June uh June
30th, 19 uh 30, uh the market fell to 8
13% of its previous high unemployment
rate. It's really bad. I was there in
the White House when Nixon put in wage
and price controls, when he did the 10%
import sir charge, when he excluded
foreign made capital with a job
development credit. I was there. I
watched the country go to hell in a
hazse president guys don't know straight
up from sick and they're really bad and
you know there ain't no lesson to be
learned from the second kick of a mule
and so when I hear a president talking
about using trade I'm scared he called
me now this is true story he called me I
think in 2019 at home uh it was in the
evening early had not had my first
bourbon yet but I was preparing at
makaker mark a little bit I love it And
he said, "Arthur, I want to talk to you
about trade. I'd love to, sir." He said,
"You know, I'm a free trader. You know,
basically, I've known him for a long
time. Not well. I've known [snorts] him,
but not well. I'd never sat down, chat
with him, let alone. And I, you know, he
ran an international company, and I
believed him always to be a free trader.
I don't know of any CEO of a big company
that's not a free trader. Fred Smith,
all the rest of them are all free
traders." And I then said in addition,
anyone who imports two foreign wives has
to be a free trader. He didn't giggle by
the way there. And what he said to me
was the following. He said, you know, if
you look at the major countries in the
world, the US is the freest trade big
country. Now maybe you get the aisle of
man. You maybe get Jersey, Gernie, and
Sarkc or Monaco or maybe Hong Kong is
freer trade than we are, but we are a
really free trade. It all came about
from World War II. At the end of World
War II, we granted all of these
combatants, both hostiles and and
friendlies, uh the right to use
protectionist trade legislation to
develop their indust in infant
industries. We allowed them to do that,
but they never gave it back. And as they
grew and finally became big, they have
all these tariffs against America. We
have very little against them. That's
that's what's called reciprocity.
He said there's also another thing that
is there too as well which is called uh
uh which is uh uh called uh uh leverage.
When you look at uh these countries um
these countries uh big countries with
large markets have a lot of leverage
over little ones cuz they don't bear the
gains. They don't bear the loss of the
gains from trade nearly as much as the
other. The the point here is that
everyone's hurt in a trade war.
Everyone is no one wins in the trade war
but they don't all lose equal amounts
and little countries especially little
relative to the US lose more than we do.
So it gives us a leverage factor on
them. The the last thing is today it's
flexible. You know back in the days of
the smooth holly tariff you had to pass
legislation. It took you two three years
to get the coalition finally passed it
there. It takes equally as long to undo
it. It's just a very cumbersome
inflexible thing. today with executive
orders. He can to raise a tariff on you
today, cut a tariff on me tomorrow. He
can get a tantrum and put a tariff on
Ford in Canada, that guy who runs
Ontario, and then drop it the next week
cuz he gets cool. You know, it's
flexible. So, reciprocity, leverage, and
flexibility are new features of the
trade system. What he tried to describe
to me was these three features gives him
the ability to negotiate other countries
to lower their tariff barriers here. He
said, "I'm going to scare the bevers out
of these people, get them to come to the
table to negotiate freer trade deals
with them." That's what he said to me
literally. I'm a free trader and I've
watched what he's done and what I've
seen what he's done. He has done exactly
that. He uses international trade as a
as a negotiating tool to achieve all
sorts of global good objectives in the
system. So that's that's where I am on
Trump on trade. Uh I could
>> really fast on on that. What's the
metric that you look at to decide
whether it's net effective or net
problematic?
>> What the final results I expect to be
>> as of when like how long are you going
to give this? Yeah, but there is no
moment, you know, with with Trump. It's
like a a Kalistoga or Kanosogga wagon
coming down a mountain with rocks that
sort of with no driver, you know, it's
going to be bumpy bump. If you think the
harmony is going to be achieved next
week, think again. It's just going to be
a new issue, a new bang thing. He keeps
disrupting. He negotiates. He is a
change agent all the time. And you don't
need a change agent forever. But when
this dust settles and the smoke clears,
I think we're going to have a much freer
trade world, a much more peaceful world.
I think he's going to solve the Ukraine
Russian situation. I think he's going to
solve the China Taiwan situation. I
think he's gone long distance on solving
the Gaza Israel type of situation,
Hamas. I think he's going to do all
these other ones. Uh, and I'm watching
what he's doing and how he's doing it.
And every day in every way I'm getting a
little bit more optimistic on how he
uses these tools. He is a CEO. He is not
a [snorts] pollster in charge. He's not
a other thing. He takes these tools and
negotiates and brings them to achieve
really good results is where I come out
on trade with Trump. That's now I think
in three five years and I'm sorry I'm 85
years old because you're probably 27 or
something like that. I don't know how
old
>> 26. But yeah.
>> Okay. 26. All right. You're going to
live a long time and you can flip me off
[snorts] 10 years from now and I may not
be around, but I'm going to be around.
But I mean, the dream is that we're
honing in on the horizon effect, which
is a freer trade, more peaceful world.
The way Reagan left us after NAFTA, I
think Trump is going to leave us with
much lower tax rates. He's going to get
that tax rate below 28%. He's going to
get the corporate rate, I would guess,
1515 on all these. He's just pumping all
the time, moving us in that direction.
Bing bang on the rocks and everything in
that wagon. But I am really excited. But
it's the horizon effect I look at. And
the same one I did with Reagan.
Remember, we didn't get the 28% tax rate
until 1986.
I mean, he had been in office five plus
years before we got that. Now, we passed
that bill 97 to3, which is amazing. We
got every lib Democrat to vote for our
bill to cut the rate down to 28% to
raise the lowest rate to 15. I mean, how
did Reagan do that? He [clears throat]
did it by just working his tush off all
the Hi there. Hello. Hello. But
>> did he though or was it that he actually
was able to deliver uh tangible
prosperity? Because my concern with
Trump is that what we're seeing is
somebody who talks a Reagan game but
really is erratic. And that sort of it's
I'm all over the map. I'm using this as
a weapon and I buy into the way that you
describe it, but in terms of how it's
playing out in reality, it the tariffs
have turned into an incredible cudgel.
They've generated billions of dollars,
maybe even hundreds of billions of
dollars so far.
>> Well, you'll enjoy a piece I'm writing
in the Wall Street Journal this week
that'll come out this week. You'll enjoy
it because it's what you do with that
money. And
>> yeah, so I'll be very eager to hear if
you've got anything you want to tease us
with now, but
>> I'll tease you with it right now.
>> Right. Hey, which would you rather do?
Give money to people who don't work or
cut tax rates on people who do work?
>> Uh, I would rather cut tax rates on
people who do work.
>> That is not true. There's no way you
believe that, Arthur. You know better
than that. There are people that are
angry right now. There is a cross a
cross world study. Hold on. You've got
to hear this.
>> I'm not going to do a poll, but you go
poll number. That's if th this you know
enough people
>> when you say Arthur Malleo always yells
at me when I talk to me professor
professor I said look at remember I'm on
your side I'm I'm just pushing you a
little bit but I'm not
>> same here but
>> I know I've got I want to get [laughter]
>> if if you map socialists as people that
want to help the poor you will be
eternally confused. If you map them as
people that want to hurt the rich they
will suddenly make all the sense in the
world.
>> They do. Exactly. You're right. So, but
that means they don't want to vote for
things that are going to help the
wealthy. They don't want to vote for tax
uh cuts for people that are making
money. They want to get more money so
that they can give it to the people
something. When you started, you said
politicians all they care about is
maintaining power.
>> Mhm.
>> Now, let's take a look at what happened
when Reagan cut tax rates. He didn't
give it out in handouts. Reagan didn't
do that. He cut tax rates. He cut the
highest rate from 70% to 28%. That's not
chop liver guy. He cut the corporate
from 46 to 34. He got rid of I mean the
capital gains tax was way.
>> Didn't you say it was 12% GDP growth?
>> Yeah, it's at 12% in 18 months. We grew.
>> Trump is not giving us that.
>> No, but he is it's just starting. Reagan
was able to do that because it caused a
recession depression in the first two
years and almost all of that was just
bounce back in first part of 83. Trump
did not make the mistake of phasing in
tax cuts. He didn't make that mistake.
So therefore, you're not going to get
the huge bounce. But those growth rates
right now are 3 plus% 4% and I'm telling
you, they're going to come in four or
five%. You're going to get real serious
growth. And when that stuff starts
hitting, then you're going to start
seeing people woo dancing in the
streets, you know, tussles and tousels
all over Baton Rouge and all this stuff.
It's going to be all it's going to be a
party time in the US for a while. It'll
be the 20s. I'm guaranteed.
>> So, you really think that we're we're
going to see that kind of tangible
growth for the average?
>> Not not not 12% in in 18 months. You're
not clear. Four, five, five, six% big.
The bounceback's not going to occur. But
the rest of the Reagan period was huge,
too. We won the election in ' 84 with 49
states. I told you how I was on the
executive committee of the Reagan Bush
Finance Committee, which is fairly cool.
I was the only poor person on it. Uh,
all of us were billionaires and and and
let and I worked with Reagan really
closely. I knew Reagan very well. He'd
come over to the house for dinner. I I
I've known him forever and ever. My
godfather was his best friend. I've
always gotten my positions in life
through privilege, not through earning
them. And I love it for getting
privileges much more for fun than than
actually having to do the work. And you
look at what happened with Reagan and
you saw what Reagan could have won
president of the world. Montdale was a
great guy, but don't run against God.
You're gonna get hammered. We even were
able to get that silly guy, George
Herbert Walker Bush, elected in 88
because of the Reagan coattails. What a
loser he was. I mean, Trump is right on
that trail there. Not as dramatic, but
the down wasn't nearly as dramatic
either. When he came in, it wasn't at
12% unemployment rate. Uh Reagan had to
go up to well over 10%, I think. So I am
very much in the camp that when these or
the smoke clears and the dust settles
there, you're going to see a very
bullish economy. You're going to see a
stable currency. And it may not be the
dollar as we know it. It may be some
tether dollar or something like that.
He's going to do the inflation. The
people he's going to appoint to the Fed
are going to be really good good price
rule people like Paul Vulker. I mean,
you know, all these things are coming
together in a very cool way. And and you
know, I'm amazed at the guy given what
he's gone through, but you know, he he
doesn't ask his staff, "What should I
do?" He tells his staff what he's going
to do and what they have to do because
they keep their jobs. And that's the way
he should be. He's not a pollster in
general. He's just not. He doesn't look
at those polls, you know, if he did
scare the hell out of himself, but he
doesn't. And he's just doing the right
thing.
>> Talk to me about the Fed. I want to know
what's the right thing there. The right
thing you do is use a price fruit which
I went back and what we did prior to
1913 we defined a dollar and what you
had is the supply of money adjusted to
the price level. You know that's what
you did back before that and it did
perfectly. What you need is a price
rule. The way Vulkar did it was he
looked at spot commodity prices and if
they were rising too rapidly, he would
sell bonds in the open market, take
money out of the system, reduce the
Fed's balance sheet, and then if it was
going down too fast, he would do just
the opposite and expand the Fed's
balance sheet, and sooner or later, if
you stabilize spot commodity prices, the
price level stabilizes right along the
way. Exactly what we did from 1776 to
1913 was a price rule. it happened to be
gold and silver from 1776 to 1913 which
worked really well. Uh this time you can
just use the CPI or something else.
That's where just what Vulkar did. And
you know when Vulkar did it the
inflation rates I mean I told you it was
21 and a half% prime double digit
mortgages were 15%. He brought it down
to way down. I [snorts] mean, if you
just look at it, the inflation just
collapsed. And that's what I think the
Fed people are being looked at in terms
of doing that and structurally reforming
the entire Federal Reserve system.
There's no need to have 400 PhDs of
Larry Summers at the Fed being employed
there.
We don't need 400 PhD economists at the
Fed. Believe me when I tell you that
these people should try to get there's
been huge uh uh uh uh creep in the uh in
the functions of the Fed and it's been
ruining the system. We need to really
structurally change it and I think
that's what he's going to do
>> given that we are excited by it. You you
should be very excited by this. You're
>> that's what they're going to do.
>> I think they're going to do that. Yes. I
mean I'm look I'm great at forecasting
the past. I'm a lot less good at
forecasting the future, but I have no
choice here. I have to. And I think
that's what's going to happen. The next
Fed chairman is going to really rock and
roll and shake the foundations of the
Fed.
>> And that's very happy.
>> That is the way that you describe it in
terms of effectively um steering by
price is interesting. Uh, I'm going to
set that aside for now because I don't
my intuition is that's not where we end
up. So, when I look at the we have
fiscal dominance, so the government
spending and debt obligation is so
massive, we can't raise rates. Um, and
we are going to have to print
[clears throat] money because we don't
have Trump is not interested in
balancing the budget. So, you've got we
know we're going to be running hot right
now. We're two trillion roughly a year.
Uh so that's going to have to be printed
to make up for that. And given that and
he's screaming for Jerome Powell to
lower rates, which is from where I'm
sitting absolute insanity, that is going
to uh flood the market with even cheaper
money. You're going to get bubbles. I
think we're already in a massive AI
bubble. Uh and I think that that's only
going to get worse
>> if we lower rates. Um, so that given
that that's what Trump is signaling,
what is it that makes you think instead
of doing that, we're going to get a
Vulkar style.
>> Now, now I'm going to use inside
information with you, if you'll forgive
me. I've known Trump for a long time
>> and uh I, you know, he's been very
successful in many, many ways. comes uh
there not to that
you've got to take Trump seriously but
not literally
and I think you're taking him literally
when you sit there and say you know what
Trump does is he he's on all sorts of
sides of all issues it's but he uses the
chaos and the mayhem to be able to get
things through and to get them done.
When I look at what Trump's plan, when I
look at what he's going to do is he
wants lower inflation, he wants
inflation to be effectively zero. Does
he want the real return on capital to be
zero? No. I mean, when you look at,
let's say, the end of Clinton when the
10-year was yielding 4 plus% and it's
yielding 4 plus% right now. All right.
The composition of our four plus% right
now is probably 2.5% inflation. And then
the real yield, the tips yield is
probably one and a half, something like
that. When you had to Clinton, it was
just the reverse. What you want to do is
you want to have a very high real return
on capital, which is the tip shield, and
want you to have a very lower expected
rate of inflation. Those two rates
always move in the opposite direction.
And I [clears throat] think what we need
to have is a Fed that stabilizes the
value of the dollar so that a price
level now a dollar bill is worth today,
what it will be worth next year, 5 years
from now, 100 years from now. We need a
monetary system like the gold standard
was in from 1776 to 1913. That's what we
need and I think that's the direction
we're going to go. When I look at the
lessons of
>> how are they going to do that though?
Are they going to rep to gold?
>> Well, no. I think they're going to use a
spot commodity price index or or they
may use some of the some of the cryptos.
I mean, they're talking about all sorts
of things. Now, just conversations. I'm
not saying is a Trump or not. I don't
know. Uh but there all sorts of things
of a crypto dollar where you have a
tether for a dollar where where you know
you you guarantee it's stable. You know,
a stable coin. You can design a currency
today with crypto to guarantee it's
stable in value. You can do it and you
can do it with complete confidence of
its of its secrecy because if you read
Singh's book on codes, you can make
codes that cannot be broken and the and
the blockchain is a way of guaranteeing
that you don't have the the double
payment problem. I mean all of these
things are there and available now that
have never been around before. I mean,
the dollar bill was an amazing creation
back in in 19 what 134, whatever it was.
And and we're now at one of those right
away. And I just see market forces
bringing that in. And any government
that doesn't take advantage of that,
stupid. And if this government doesn't
do it, which I think it will do it,
you've got places like Boules uh uh uh
El Salvador, you've got places like
Malays Argentina, you've got all these
other places in the world that are all
doing it. And you know, we can't fight
this this thing of change of getting a
stable currency. You just can't. And
it's like the dollarization of the
world. Back in the day when the dollar
meant something, we had dollarization,
but we don't now. Now, they can cure the
dollar. They can or they can allow uh
alternatives to come in and provide an
alternative currency that's stable in
value.
I love that these cryptos are coming in
and challenging the dollar. I just love
it.
>> And when you say take advantage, are you
talking about building a Bitcoin
reserve?
>> Well, I don't even think you need a
reserve. No, I just think Bitcoin can do
it itself. Now, Bitcoin does not Bitcoin
is a fixed quantity or at least
supposedly a fixed quantity of
something.
When you have a fixed quantity, the
prices vary. So, Bitcoin serves
beautifully as a store of value. That's
true. But when you see something like
Tether and some of these other ones,
they have a fixed value and the
quantities vary. You have a price primal
and a quantity duel. With Bitcoin, you
you have the the quantity is fixed and
the prices move. With a stable coin, you
have the quantities move and the price
is fixed. And what we need is a stable
coin for transactions purposes. And in
that regard, we don't need to have
reserves.
You we don't need to do that. Bank of
England ran the gold standard for two
centuries without having a effectively
any reserves except for a transactions
volume of that. It just you don't need
it. You just let the quantity of the of
the entity vary. And we can do that
really well uh by making sure it's
stable in terms of goods and services.
The way you do that is you can take it
like tether in terms of dollars and then
it have it pay interest on that or allow
the currency to appreciate by the amount
of inflation. And it it ain't rocket
surgery. It can really be done quite
simply. You and I could sit here uh I'll
do the programming, you do the computer
stuff. We can make that program and just
guarantee that we have a currency that
is stable in terms of goods and services
in prices forever and ever. Amen.
Why not now? I mean, and they're doing
it. It's not back 15 years ago, there
was none of this. Now it's all over the
place. There are 55 stable coins being
and you want to have the competition
amongst these alternative cryptos. I
mean, you really do because it's great.
one does some things and another one and
they compete and get the the consumer
gains all the gains from competing
crypto stable coins and crypto value
coins. So, you see where I'm coming from
>> and you understand what I'm talking
about.
>> I do
>> and I read all the math on this stuff. I
mean,
>> you can make it completely secure and
you can make it take care of the double
payment problem. Bingo. Blockchain is
incredible. I mean, and they can do now
blockchain trades 43,000 a second and
they're going up to 200,000 a second.
Boom. I mean, it's a you remember when
you have to go to the store and put your
card in that machine and you wait, don't
pull it out yet. Beep. Okay, you pull it
out. That's just clearing it to make
sure you take care of the double
payment. You write a check. Your bank
doesn't let you use it until they clear
that check with the other guy's account.
That take five days. All of that's gone.
All of those transactions are gone. This
is a period of incredible efficiency
gains in the marketplace in
transactions. And I watch this happening
before my very eyes and I'm just blown
away. I'm 85, but I can't believe that.
I mean, the world is really I'm just
ecstatic by what the world is creating.
Oh, well.
>> Okay.
>> I know I'm going against your pessimism,
but I do like your logic. Your logic is
much better than your feelings, by the
way. Your logic is super high. You you
just want to be pessimistic. Did you
beat your little sister or something
when you were a kid? Or I'm just joking
with you.
>> The the funny thing is uh I am a
extremely optimistic person by nature.
But I have to ground I don't trust my
emotions. So I always ground it in
logic. And the problem is that when I
think up from first principles, um, I
take the exact opposite of you, which is
that the math does not justify your
optimism. I've tried to anchor us in
terms of what the difference is in the
base assumption. So you think everybody
will just migrate to crypto. I do not.
Um, because they didn't migrate to
assets. Crypto right now is best
understood as an asset. Now, the reason
that I say that,
>> no, that's that's only because
>> I know you're going to bear with me. The
reason that I say that is because the
their life is not set up to make that an
obvious thing that they understand from
the time that they're born. And so now
they have to learn about it and they
have to migrate themselves over to that
system. And I'm saying that they're busy
trying to make ends meet, trying to fall
in love, uh you know, trying to keep
their head above water. And the reality
is that they
>> that's not that's not a first
principles. That is a second principles.
You believe that people are emotionally
incapable of doing the right thing.
>> That literally is first principles. The
human mind works in a certain way.
>> I think that's
>> you're you're falling prey to man as
economic animal. And we are not.
>> I'm the Darwin. I'm the Darwin of
economics. I believe
>> perfect. Then then you will agree
wholeheartedly that humans are an
emotional creature first and foremost.
We do not think through things
logically. We are emotionbased. So
listen the the there has been a study
jump
>> off cliffs
>> you well first of all yes we do when
people get depressed enough but if you
selectively damage the area of the brain
that is responsible for generating
emotion a human being will cease to be
able to make a decision so they can tell
you why you should have fish instead of
beef and then they won't be able to when
you sit them down say do you want fish
or beef they won't be able to decide we
use emotions as the thing that propels
us in a direction uh so given at uh any
way we we could lose a lot of time
there, but 10 toes down on that first
principles.
>> Before we started, I said I had a story
for you on first principles. And let me
tell you my story on
>> emotional people.
>> I looked and I asked myself, where's the
most socialist state in the nation? And
I came to the conclusion, it has to be
Massachusetts. And I asked my what's the
what's the most socialist city in that
state? Cambridge. What's the most
socialist institution there? Harvard.
What's the most socialist moment there?
What department there? Sociology. And
what's the social most socialist moment?
And it's in the front lawn of the
sociology department at Harvard
University, Cambridge, Massachusetts,
when Bernie Sanders is giving a speech.
Elizabeth Warren is
in the front row. Everyone's going along
this stuff. So what I did, I went to my
pal. I got some pillowcases and I packed
them full of $20 bills, tied a little
dot. I went over here to Nashville BNA,
the airport, flew to Logan. I got off
there. I got an Uber. Took me right over
to Cambridge. I went right to Harvard
University. I went right to the
sociology department. I went to that
lawn where Bernie Sanders was giving his
speech. And I got one of those foldout
chairs. All these people were tearing
off their clothes, screaming, hollering,
redistribution, red tax, all this run.
Oh, Bernie's hair was flopping back and
forth. And so I stood up on this little
chair. There was a slight wind blowing.
And I opened up the pillowcases full of
$20 bills. I threw them all and they
floated over the crown in there. Within
20 seconds, every one of those $20 bills
was picked up. Every single one. They
are as capitalist incentive based as
anyone. All of their emotions went to
the wind. When one of them has a
girlfriend and the other one wants to
share that girlfriend with the first
one, uh-uh. [clears throat] They're like
all the rest of us. They live on those
incentives. It's they just like the
emotional crap of this. But when push
comes to shock, we can manipulate them
with perfectly good economics all day
long and twice on Sunday.
>> I love that story, by the way. It's
hypocrisy, by the way. Just isn't it?
>> Obviously, it is fun. So, uh again, any
theory has to describe the world that I
actually see. And the world that I
actually see is a UK that's fallen on
its face. Is uh Argentina that has
struggled for over a hundred years
because they actually embrace socialist
policies. Is a world where you had the
USSR but it fell only to be replaced
with Putin. Uh you've got China that Mao
which god I want to ask you about Mao
since your time there in the 70s. Uh Mao
killed tens of millions of people. Uh
these things actually happen. They
actually take control of people.
>> You're right. Are we are we China? the
thing. Well, we're we're getting there.
Uh
>> well, I don't think so. That that's
where we do disagree. I think that's the
real disagreement. I
>> really fast. Let me just put a bow on
that and then then we'll debate that.
So, the bow on that is that America is
uh historically from just a number of
years that humans have existed, it's a
total anomaly. Uh from the fact that uh
every empire before it has collapsed,
it's literally right on Q. We're now
marching towards 130% debt to GDP. So
you you look at all of this stuff and we
fit the historical patterns. Uh no one
before us has ever escaped and kept
doing the right thing. Everybody does
debt and money printing until they
collapse. Literally everybody. Uh more
places have lived under tyranny than
have lived under a thriving democracy.
So it's like you put it all together and
that tells me that humans are a certain
way. And from where I'm sitting, we have
an opportunity to get out of this death
spiral. But we will not get out of this
death spiral by going ah this ain't it's
all going to work itself out. So I'm
like no this isn't going to work itself
out on accident. We are going to have to
really get into this. Now the reason
that I say that
>> that's what I do. I'm an activist. I'm a
policy sh I'm not someone who sits back
and waves my hands and oh don't worry
it'll take care of itself. I'm in there
every day fighting Prop 13 all the tax
cuts. All those were my babies. I worked
on them to get them to go there. I am an
active change agent. So, I'm not someone
who just sits back and goes,
>> "No, that is for sure inarguable." Now,
I will
>> go in there and I think we're going to
get it changed in the right direction.
That's my thing. I'm working on it day
and night. Property tax limitations in
almost every state in the nation.
Getting that tax rate down to 15%
federal tax. I think I'm going to get
that uh you know 15% corporate tax. I
think I'm going to get that. I'd love to
get I mean I think we're going to get a
lot of I Trump gave me credit for price
healthcare price transparency. That's
one I really were I was chairman of the
board of the Centennial over here. I saw
how crappy the system was. So I'm an
activist and I'm a revolutionary. I'm
just not a commie. I I really believe in
using incentives. I think the commies
are cute little stupid people and they
don't know they don't know what they're
doing and they act in one way like the
picking up the $20 bills and protecting
their girlfriends and shoot this but
their behavior uh their their speeches
are just silly and I listen to AOC I
listen to this one you know there and
Bernie Sanders I dare him to debate me I
dare him I dare say or picky I've asked
all come on let's do it manuano let's go
through
They won't. And for obvious reasons,
they won't. They'll lose their shirts.
I've had about five debates on income
inequality, and each one of the other
side conceds.
Duh. I mean,
>> that's awesome. We definitely need
moreense. It's just common sense. And
then I try to go in there to policies
and you see how I explained it with
regard to a check versus lowering tax
rates. You see how I, you know, and the
numbers really do bear me out. And you
know, I've been pretty successful with
presidents, pretty successful with
Argentina, with Chile, with all those
little my students down in Chile there.
You know, those are the things I try to
do. And I think we're winning on this
one. And I think we're going to win big.
>> And you're going to be really rich.
You're going to be really happy. Do you
have kids?
>> I do not.
>> Oh, see, I've got six kids, so you can
tell what an optimist I am.
>> And what? 14 grandkids, two great
grandkids, something like that.
>> Four great grandkids. Yes. you get into
my diary, haven't you?
>> Of course. Of course.
>> But isn't it just I mean I've just never
been happier.
>> That's amazing. And I will say that
comes across and Lord knows I hope that
I am as energetic and sharp as you at
85. Uh it is thrilling to see somebody
with your experience.
>> Dick Cheney, one of my dearest friends,
classmate of mine at Yale, Dave Gurgen
just by they both co-croaked recently.
And we get all these people, Lieberman,
all all of my classmates at Yale and all
there. I if I want to talk with them
now, I have to use a Ouija board. You
know, it's a I mean, but I'm going to
live a lot longer and I'm going to
really enjoy the and we're going to have
a thing there where you're going to say,
you know, Dr. Lafer, you were right on
those issues.
>> Lord knows I hope.
>> So, uh, speaking of issues that I want
to see, uh, who is mapping this
correctly. So I think that we are
starting to make choices much like
China. We're taking positions in
companies. I think that is a very big
mistake. Um what's your read on the
Intel situation and
>> and we did we took it on what was the
one that O Biden did that one that sun
that sunlight shine one was it? Cylindra
he did it in Celindra the big government
buy out of that. Intel is just a lousy
thing that they did it in Columbus,
Ohio. They did all the buyouts and
everything. They gave them so much
money. The government did Ohio as well
as federal. All of them did Intel and
they're a loser. Uh they they fell
behind and they became dependent on
that. I don't like the government taking
positions in companies. It's very hard
for them not to given the size. I would
love to shrink government back down to
where it was in 1910. That's me. uh you
know 1910 the federal government was
about 3% of GDP
>> you know and at that time we became the
preeminent economic force on planet
earth with 3% of GDP it's a little
higher than that today I thought I'd
mention that to you just I know you
aren't aware but the government's got a
lot bigger but I think we can shrink
this quite substantially now on the
state stuff I moved to Tennessee from
California because it's the lowest tax
state in the nation since I've been here
we got rid of the death tax and gift tax
we got rid of the unearned income tax
I'm trying to get a property tax
limitation like Prop 13. You know what I
did there in California with 13? I'm
going now working with Ohio. I'm working
with Missouri. I'm working with all
these states nonstop on getting good
policies in. I think we're going to get
government to be much smaller 15, 20
years from now than it is today. That's
me. Now, I'm wrong a lot. I never try to
be wrong. I really I am wrong a lot. You
could just ask my first wife if you want
to find out how bad I can be. Uh but I
really think I'm not wrong. And I
rethink we're at a big change in the US
on bringing in free market economics
back in your problems that you describe
are true. But you know the stock market
when I told you in 1973 was by law you
had to pay 34 cents per share traded.
It's now zero. Airline deontrol was
amazing. Truck deontrol was amazing.
Energy decontrol has been amazing. You
should see the stuff that have happened
there. You know, it used to be in
America that you couldn't sell a product
that was manufactured except that these
manufacturers suggested retail price.
Discount houses were illegal. We then
got rid of Hubert Humphrey and we've now
got discount houses all the hell all
over the place. We are moving in the
right direction and we're solving social
issues with it. The bald eagle is back.
My hometown, Cleveland, Ohio, Youngstown
and Cleveland. Two crappiest places. If
God had come back to Earth in the 1950s
and Jesus come back to Earth and had
made the mistake of landing in Cleveland
to prove that he in fact were the
Christ, he wouldn't have to walk on the
water. Hell, anyone could walk on the
water. He'd have to sink in the water
back then. You know, today the water's
clean. Kyogre River's clean. Lake Arie's
got the fish. I mean, it it's amazing
the progress we're making. LA
three-stage smuggle. You couldn't go to
school. People were there all gone. The
air in the Los Angeles basin is
massively improved. I mean I could take
you through all these things. We are
still have lots of problems as you point
out very correctly. You're right. But
the blackfooted ferret is hopping
around. You know all these things. We
are making enormous progress. If you
look at the air quality in this planet,
it is improving enormously without those
stupid goofballs in the what is the
something
cord there? the quality error accord or
whatever those people are. You know,
we're doing it. We're getting there and
the markets are adjusting and really
providing this stuff and I'm just very
excited about the future as you can
tell. But I think we're solving lots of
problems and we are have still a lot to
go. You I mean debt is way too high. I
will concede that to you here. I don't
think it's rogue off high.
20 to 18% of total net wealth it is is
too high but it's not I'm going to kill
my country and especially when you see
what's happening with the currencies and
all that stuff. Well, you've heard me
lecture there. I'm I'm just trying to
infuse you with some of that lithium so
that you too can see the stars spango
banners and happiness and dancing girls
and lights and shining and
[clears throat]
[snorts]
>> you don't have to wait till you die to
have heaven.
>> You could have it here to earth. Awesome
statement. Uh let me ask in terms of
what you see going on in the stock
market today. Um what do you make of
that? To me this looks like a liquidity
I'll say problem where assets are going
skyhigh because debt is so cheap. Uh
we've printed so much money. We people
are trying to escape inflation. Uh and
so when I look at, you know, a company
like XAI, uh raising money at like 150x,
uh my heart skips a beat. Uh because
we're so detached from fundamentals. Uh
what do you see?
>> Thank you. This is the best question of
all. What what we have seen happening
over the last 20 years or so is you've
seen private equity replacing
stock market equity. and uh for good
reason. It's the regulations, it's all
the taxes, all the treatment, everything
like that. So the stock market is a
smaller share of total wealth than it
has been historically if you look at it.
And yet all of a sudden the stock market
starts really going way up. I think I
see what the stock market sees.
I think I see a very very
boisterous wonderful future and the
stock market is reflecting its
expectations of higher profits and
greater prosperity in the future and
that you know stock market doesn't tell
you what has been it tells you what it
expects to be and I think the stock
market is expecting the type of world
I'm describing to you and so therefore I
look at the stock market as reflecting
what my view of the world is rather than
telling me a bigger problem is here.
[snorts]
>> So when you look at the stock market,
you don't think business fundamentals
that's not really relevant.
>> Oh yeah.
>> This is more of a sentiment. Well, so
we've got whatever seven to 10 stocks
that have produced the entire uh
performance and those are detached from
business fundamentals certainly from
anything historic. Um not troubling.
That's just uh
>> you're using you're using historical
numbers rather than future numbers. And
that's what I think the stock if you
knew that there was going to be a huge
boom in the economy next year and that
profits were going to increase 10fold
would you sell all your stocks now or
would you buy more?
>> I'd buy more.
>> Thank you. I think that's what's
happening. Now I'm exaggerating now the
numbers
>> but that's sidest stepping the business
fundamentals question because I agree
and that's fundamental.
>> Yeah. You say the transactions costs are
going to be gone. I mean, when you go
buy things and look at all this life,
the huge huge change in productivity
that's going to come about by by get
replacing all of these transactions and
banks and clearances and all that stuff.
It's huge by having transparency and
healthcare prices.
All of these things are going to be huge
generators of productivity increase. I
think that that's me and I think the
market's reflecting that.
>> Yeah. I'll say that once again, you and
I agree on like the simple statements
and then we take away very different
conclusions. So that's all right. Agree.
I I think that AI is going to be
transformative in ways that we can't
even imagine.
>> Thank you. That's what I do too for
sure.
>> Reflected in the stock market.
>> Yeah. In in a way that
>> what is Nvidia but that
>> I was a big investor in Nvidia in the
beginning and then I got scared and I
sold it four years ago.
>> How stupid is that? But at least I held
it for a lot of P. And by the way, I'm
also just for your viewers, uh, I am not
a guy you want to follow his market
advice. If you follow my market advice,
you're going to lose a lot of money.
>> Yeah. I mean, so well, I I think that
probably points out something
fundamental which people need to
understand, which is that markets are
uh, first of all, they're gambling and
second, it is people gambling based on
emotion. Once you understand it's
gambling based on emotion by people far
more sophisticated than you, uh it
becomes very difficult to make money if
you're trying to trade. If you're just
going to buy and hold, bet on sectors
over the long run,
>> I buy that's all I do and I still lose.
[laughter]
>> Yeah, it all comes down to when you
sell. But
>> well, no. Well, I there's no money. No,
it doesn't come down to that. I start
losing the day my check clears. Yeah, I
just keep driving. I could sell it any
day and I still lose. Um, but there is
no money back guarantee with my
statements about the stock market just
for the record. But I am very optimistic
as you can tell and I am fully invested
in the market fully, fully, fully, fully
and I love it.
>> I've got all my trust funds for my
grandkids and my great grandkids and I'm
just wallowing in fun.
>> Okay. So, you and I both agree that
we've got a shot at the future being
incredible, but it's not going to happen
by accident. What should what should
individuals do? Whether that's how they
invest, how they vote,
>> give money to good politicians and get
those politicians that want to shrink
government to lower tax rates to free
enter markets, deontrol the place, g
give them and get involved politically.
People deserve the governments they get.
And if you don't take care of that
government, who does me? You know, come
on. I'm working my tush off day and
night to change government in the way
you and I see the world. You got to do
the same thing. And so to all your
viewers, get out there and get in there
and get and do the right markets. Get
the good politicians in there. Get these
guys out who are bad. It's not
Republican. It's not Democrat. It's not
liberal. It's not conservative. It's not
leftwing, rightwing. It's just good
economics. You know, I'm a Kennedy
Democrat. I'm a Reagan Republican. I'm a
Clinton Democrat. I'm a Trump
Republican. You know, I was Gary Hart's
economist when he ran for president in
88. I I was Jerry Brown's economist when
he ran in 1992. We wanted to get rid of
all taxes and put in two flat rate
taxes. The 13% flat tax, if you remember
that. I did that with him. I think Jerry
Brown was cool. I wish he'd won. It's
not party. Get your guys to get in there
and become political activists cuz it's
your future. It's your kids' future.
It's everyone's future. Get them out
there. If they aren't involved in
politics, they don't deserve to have
good results. How was that?
>> That was amazing, Arthur. Uh, I cannot
thank you enough for coming on. I can't
thank you enough for all the books that
you've written. Where can people follow
you?
>> Right through you. I, you know, there
they can find me in the internet. I have
a thing there, but I don't I don't even
do emails. I don't know how to do
emails. I have I had a flip phone until
built security people broke my flip
phone. I had to get this new one, and
I'm butt dialing everyone all the time.
I don't know what the hell to do with
this stupid thing. And uh, so there is a
thing called the Laugher Center if they
want to get involved with it. 1065 Inc.
it's called and I have a firm here in
Nashville, Laugher Associates, which is
but it's just small, just me and 10
other people, but we do all the work we
do here and we just put it on the line.
And you know, I I have made a vow that
I'd never go to work for government
because once you take a paycheck, you're
an employee.
>> And once you're an employee, you have an
oath of loyalty. You know, I worked in
the Nixon White House as I mentioned to
you in 1970 to72 and I found out what I
don't do well. I don't work for
government well, but but when I'm not
there, when I go in with Trump or with
Reagan or with any of the others, I
never took a job with any of them. And I
did get offered really nice jobs, but I
didn't take him because I want to be
independent and tell him what I think is
right. I hold his confidences, you know,
if he talks to me and stuff. I try not
to listen to what he's going to do, but
I then keep my mouth shut about it. And
I but I never operate against them in
any way, shape, or form. But when I see
my colleagues, and you know, my
colleague at Yale, classmate of mine's
married to Janet Yellen, uh I know all
of them there. I know Austin Goulby, he
has my position at the University of
Chicago. I had tenure professor there as
well. And I see them and these people, I
mean, especially, you know, ROR, I mean,
you know, ROR and Jared Bernstein and
all these guys, they will rebut
arguments they know to be true
in order to curry favors with their
political benefactors.
And I'm not willing to do that yet.
Okay? When I go in there, I talk with
him, he hears what I say. He can't fire
me. He can't hire me. He can't double my
pay. He can't have my pay. He can yell
at me, but all of that. So, you know,
it's like with you, you know, I we can
have a good firm discussion, but you
know, I'm trying to be straight with
you. You know that. And I'm trying to
give you the best and you know, you make
the decisions that you make. And
President God knows he has 10 times more
information than I do. He makes it. But
all I want to do is make sure that he
understands what I'm talking about.
Let's say in trade or in deregulation or
taxes, all that stuff. and make sure he
understands and uses that in his
calculations. I'm not going to talk
trash about him or good. I'm just going
to step aside and that's what I view my
role at in this work. Now, in state
stuff, I go in and do tax plans and do
all that stuff and campaigns and stuff
like that. And I was very involved in
the tax cuts and jobs act as you know in
the ' 86 tax act was my paper the
complete flat tax that they use. Kemp
Cast as well as Bradley Gart with that.
I really get involved in all that stuff
right down to the nitty-gritty. But I
never take a job with a politician and I
never ever ever once they pay you,
you're an employee. And [snorts] then
you got to say nice things about your
boss, even when he does it wrong. I was
with Nixon uh as George Schultz's
right-hand person when I was 29 years
old, 30.
I remember telling my mom, I said, "Mom,
you won't believe it. I just wrote a
speech for Nixon." Mom, I wrote a speech
for the president of the United States.
I mean, he loved the love. He only
changed two words. Mom, only two words
he changed. He said, "Wherever I is, he
put is not. And wherever I put is not,
he put is. But mom, it's my speech." And
I learned, you know, that that's not
where I belong is in government. I
belong outside giving really what I
consider measured correct base advice
and then I go home play with my great
Danes and my family and my kids and all
that. But you you follow me. It's really
you get you get you get you get co-opted
when you buy into being a government
official.
You do. And you're completely right.
They want power and power and power. My
job is to just blow up all this all the
positions of power until we we get to
the world that you and I really want is
a 3% of GDP government, state and local
1 and a.5% 4 and a.5% total. We have a
low rates broad-based uh property tax
that never exceeds 1% of market value.
You have an income tax or flat tax rate.
That's it. And get the hell out of the
way and let the market solve the
problems. Yeah, you're going to get
problems. Free markets have problems all
over the place. They do. But
government's even worse than free
markets when you talk about problems.
>> Ain't that the truth, Arthur? Thank you
so much for joining me today, man. I
really appreciate it.
>> Everybody at home, if you have not
already, be sure to subscribe. And until
next time, my friends, be legendary.
Take care. Peace.
>> If you like this conversation, check out
this episode to learn more.
>> The only thing that's bipartisan is
reckless spending. The Trump
administration is a lot more socialist
than what mom Donnie is proposing.
Golden share in US Steel because Donald
Trump's so good at bankrupting casinos,
he should run a steel company. Budgets
and taxes are a reflection of our
values.