--:-- [Theme music fades out]
--:-- John Bickley: Welcome to Morning Wire. I'm John Bickley, editor-in-chief of The Daily Wire, and I'm here with Georgia Howe. It's December 14th, and this is a special Saturday edition.
--:-- Georgia Howe: Thanks for joining us, John.
--:-- John Bickley: Today, we're going to talk about the state of the economy and how it's shaping up for 2025. Joining us now is Heritage Research Fellow E.J. Antony. E.J., thanks for coming on.
--:-- E.J. Antony: Thank you for having me.
--:-- John Bickley: We recently had an interesting statement from President Biden at a speech at the Brookings Institution. He says that he's handed Trump the strongest economy ever. Here's the moment.
--:-- [Clip of President Biden's speech plays]
--:-- John Bickley: Don't take my word for it. Here's how Time Magazine and other commentators describe the economy.
--:-- [Clip of Time Magazine article plays]
--:-- John Bickley: President-elect Trump is receiving the strongest economy in modern history, which is the envy of the world.
--:-- Georgia Howe: As we've documented here, the priority issue for voters this election was the economy. Obviously, there's lots of concerns about the state of the economy because of inflation. Do you agree with President Biden that this is the greatest economy ever?
--:-- E.J. Antony: Well, I would love to know by what metric he is using to determine that this is the greatest economy ever. I mean, look at inflation, for example. He is handing President Trump an economy with a higher inflation rate than it ever was at any point during Trump's first term.
--:-- John Bickley: So this idea that somehow the economy is firing on all cylinders, I'm sorry, I just don't see the evidence for that. You know, there are fewer native-born Americans with jobs today than there were in 2019, five years ago before the pandemic.
--:-- E.J. Antony: Again, by what metric are we using to say that the economy is better now than it ever has been before? What's better now than it ever has been before is government employment. The number of people employed by the government, over 23 million. Government is growing at an exponential rate.
--:-- Georgia Howe: Quick follow-up to that. You mentioned that the number of native-born Americans with jobs has actually shrunk in the last four years. We heard some talking points during the campaign about that, immigrants being the only ones that actually benefited from the increase of jobs over the Biden administration. Is that correct?
--:-- E.J. Antony: Sure, there have been some native-born Americans, for example, that have found work over the last several years. But on net, meaning if you consider the number of Americans who have also lost jobs, that exceeds the gains. So the number there is negative.
--:-- John Bickley: That means that all of the net job creation we have seen over the last five years has gone to foreign-born workers. So what's really sad is that the Biden administration has effectively turned the American labor market into a kind of temp agency for foreigners and for government bureaucrats because we've seen a disproportionate amount of job growth in the government sector.
--:-- E.J. Antony: We've seen the economy actually lose full-time jobs, not gain them. So we're gaining only part-time jobs. And again, if you look at the demographics, the only people who are gaining jobs on net are foreign-born workers.
--:-- Georgia Howe: Now, as we said, inflation has been the leading economic headwind over the last few years. It still remains elevated. What is the latest on inflation?
--:-- E.J. Antony: The latest on inflation, unfortunately, is that it is re-accelerating. And some of that has to do with the fact that the Biden administration continues to spend money we don't have. The Federal Reserve, in an act that I think is election interference, took their foot off the brake and stomped back on the gas by cutting interest rates right before the election.
--:-- John Bickley: These are all things that are going to contribute to higher prices. And we're only feeling some of the effect right now. Most of that inflationary impulse, though, is really going to play itself out in 2025. And frankly, I think they're handing Trump a bit of a ticking time bomb when it comes to inflation.
--:-- E.J. Antony: And, you know, we have this notion that's fueled by the media and by Federal Reserve officials that we've been trending towards this target inflation rate of 2% per year. But that's simply not true. We haven't been trending there. We've been trending to about 3%. And we actually arrived there quite some time ago, and we have been stuck there at about 3%. And there's no sign that we're going any lower anytime soon.
--:-- Georgia Howe: You're projecting that in 2025, things could get actually worse. Can you unpack that more for us?
--:-- E.J. Antony: Well, unfortunately, when the government does a bad action, we don't feel all of the bad effects right away. It's very similar to if you drink too much, you get that buzz first, but then the hangover only comes the next morning. And we see the exact same thing with a lot of government overspending.
--:-- John Bickley: Initially, we didn't get to 9% inflation right away at the start of the Biden administration. We got there about a year and a half into his term. And the reason for that was that it takes time for all this government spending to slosh its way through the financial system. But eventually it does work its way through and it ends up creating higher prices for consumers. That's what we're seeing play out yet again as the Biden administration not only continues the runaway spending. But now, again, we have this what I would think is election interference on the part of the Fed cutting interest rates hard and fast right before the election to, I think, try to produce a certain outcome, which they obviously didn't get, but which will nonetheless produce some very bad effects for the American consumer next year.
--:-- E.J. Antony: Now, on the other side of the equation, you have President Trump with a very pro-America energy policy that should help reduce prices. Because if you increase the supply of energy, you'll reduce the price. And when you reduce the price of energy, you reduce prices throughout the economy since everything uses energy, all kinds of goods and services.
--:-- Georgia Howe: So you have one thing from the Fed that's going to help push up prices. You have another thing coming out of this administration that will help push down prices. Which of those is going to win out at the end of the day is unclear.
--:-- E.J. Antony: So obviously, energy is a priority for him. That's the first thing that he always mentions when he's talking about solutions. What else can he do? A deregulation would have a tremendous impact. And we actually saw that during the first Trump administration.
--:-- John Bickley: There was an interesting gathering where he asked several hundred business leaders from everything from small to large businesses, what did you love most about my first term? By the way, you got to appreciate how the president always phrases these things. What did you love most about me?
--:-- E.J. Antony: But he gave them a choice. What was better, the tax cuts or the deregulation? Every single one of them said it was the deregulation. That provided much more benefit. And it not only provides benefits to those business leaders and to those businesses, but also to the broader economy.
--:-- Georgia Howe: The reason being that when the government taxes you, they take money from you, but that money is going to get spent somewhere else. So it may be less efficient, but it's not a complete subtraction from the economy. Regulation, however, is exactly that. It is a complete subtraction. It represents a loss of economic activity that's not being transferred from one person to another. It just vanishes.
--:-- E.J. Antony: And so that deregulation can have a tremendous impact on increasing economic activity on increasing profits for businesses and on increasing take-home pay for workers. Again, all of which we saw during the first Trump administration, and it looks like they're really willing to go whole hog during their second term. So that's a reason to be very, very bullish.
--:-- Georgia Howe: Are there particular industries where deregulation will have an immediate impact?
--:-- E.J. Antony: Manufacturing is a big one. People don't realize that there is a tremendous regulatory burden on the manufacturing sector in this country. And it's a key reason why so much of our manufacturing has been shifted overseas, why there has been so much corporate inversion of our heavy industry.
--:-- John Bickley: For a typical manufacturing worker, let's say they're making about $50,000 a year, it's not uncommon for the regulatory burden attached to that worker that the factory owner, let's say, is effectively paying, that that regulatory burden would be $60,000. In other words, it's even more than the person's wages.
--:-- E.J. Antony: Now, you throw on a benefits package, let's say, of another $40,000 or $50,000 for that worker, and all of a sudden, what looks like a $50,000 worker to the rest of the world is actually about $150,000 in terms of total compensation costs for that factory owner.
--:-- Georgia Howe: Conversely, you can send that job overseas and avoid most of that regulatory burden, avoid a lot of that benefits package, let's say. And you throw on top of that the fact that we tax manufactured goods at a lower rate when they come in from overseas than when they're made here at home. And all of a sudden, it's a no-brainer to send those jobs overseas.
--:-- E.J. Antony: So again, getting rid of that regulatory burden would be a tremendous boon for the American economy and for the American worker.
--:-- John Bickley: Trump is also going to impose some tariffs, or at least is threatening to do that for overseas production. So do those things go hand in hand, deregulation plus the negative incentive of tariffs to bring more production into the U.S.?
--:-- E.J. Antony: I think so. It's very much a carrot and stick approach at the same time. We're not only going to provide you an incentive to move back, we're going to provide you a disincentive to stay overseas. Or if you're already here, a disincentive to then move overseas.
--:-- Georgia Howe: I think that's a great idea. And look, we have seen this play out in the past. In recent history, they did it during the first Trump administration, but we saw it in more distant history as well. And it produced exactly the same results.
--:-- E.J. Antony: We forget that during America's golden age, when we saw our fastest rates of sustained economic growth, we didn't even have an income tax. The federal government fueled itself entirely, basically, based on tariff revenue.
--:-- John Bickley: And so this idea that somehow increasing tariffs or relatively high rates of taxes on imported goods is somehow going to crash the economy or cause runaway inflation, I'm sorry, nothing could be further from the truth.
--:-- E.J. Antony: Again, America's golden age had exactly those circumstances, high tariffs, except we didn't have high inflation. We actually had slight deflation during that period of about a tenth of a percent per year. So, again, there was no runaway inflation. There was no widespread unemployment. It really was America's golden age, and I think it's a key component to repeating that economic success.
--:-- Georgia Howe: Now, the Kamala Harris campaign repeatedly said that Trump is going to impose a tax on imported goods, characterizing the tariffs as a direct tax on the American people. Was that a fair assessment of how the tariffs actually play out in real life?
--:-- E.J. Antony: No, it wasn't, and it really demonstrates her complete economic illiteracy and also her ignorance of history. Again, just recent history, because under the first Trump administration, every dollar that was imposed of tariffs, only about 19 cents out of each of those dollars was actually paid for by American consumers.
--:-- John Bickley: The other 81 cents about was paid for by overseas producers like Chinese steel producers, for example.
--:-- E.J. Antony: The reason being is that if they tried to pass the full cost of the tariff on to American consumers and American businesses in the form of higher prices then American consumers and businesses would simply choose an alternative that would at that point have been cheaper. So maybe that was importing from another country like Sweden and getting our steel from there. Or maybe it was getting our steel from domestic producers here at home, whatever the case may be.
--:-- Georgia Howe: So you have to always keep in mind what we like to call tax incidents, which tells us not who is actually literally paying the tax, but who is actually paying the tax. In other words, just because a Chinese company is writing the check to the treasury doesn't mean that they're ultimately the ones bearing the cost.
--:-- E.J. Antony: Now, in this case, they were. Again, it was about 81 cents on the dollar that they actually had to pay. But that's just one example of what would happen if we continue this policy. Now, that stands in stark contrast to domestic taxes, like the income tax or like a sales tax, where no matter where the tax incidence is, either on the seller or the buyer, it's still falling on an American.
--:-- John Bickley: And so the difference between tariffs here and any of those strictly domestic taxes is that the tariffs are essentially causing foreigners to help pay America's tax liability instead of putting the entire burden on the American people.
--:-- Georgia Howe: A question that's related to this. We just had a social media post from Trump in which he announced a new possible policy. I want to read this post to you and get your reaction.
--:-- E.J. Antony: Any person or company investing $1 billion or more in the United States of America will receive fully expedited approvals and permits, including, but in no way limited to, all environmental approvals. Get ready to rock. This is from Trump.
--:-- John Bickley: What do you think about this proposal?
--:-- E.J. Antony: I love it. I can't tell you how much I love it. People don't understand the amount of red tape, especially from these different government three-letter agencies like the EPA, that throw up roadblocks anywhere and everywhere and make all kinds of productive economic activity simply unviable because the regulatory burden is so tremendous.
--:-- Georgia Howe: But again, if you can get rid of that, then all of a sudden you get rid of the deadweight loss and you can create an economic resurgence. It's difficult to overestimate just how many projects there are in this country, or I should say that there could be in this country, but for the regulations that get in the way of entrepreneurs and people who actually want to serve their fellow man.
--:-- E.J. Antony: Because at the end of the day, that's how you make money in this country. You provide a good or service that people want, and in exchange, they're willing to pay you for it. But when government is going to throw on this tremendous regulatory burden, it makes it impossible for people to do that.
--:-- John Bickley: Elon Musk gave a couple of really good examples lately with his SpaceX program, where the EPA and different other agencies threw up all these roadblocks, like making him conduct an ocean survey to try to determine whether or not if one of his rockets fell out of the sky, it might happen to land on a shark in the ocean.
--:-- E.J. Antony: I mean, it sounds ridiculous, but those are the kinds of things that organizations like the EPA are forcing businesses to do. And if you're a small business, you can't afford to do those things. So you don't exist.
--:-- Georgia Howe: We're rapidly heading into 2025. Are you generally optimistic or pessimistic about the economy going into this new year?
--:-- E.J. Antony: I'm optimistic, but largely only because of the people that are going to be at the helm. The ship of state is going to go through some very, very turbulent waters in the year ahead. We have a lot of what I would call ticking time bombs within the economy. You know, we talked about inflation resurging. That's one of them.
--:-- John Bickley: The commercial real estate market is on very, very shaky territory. And that means that the small banking sector, which provides all of the commercial real estate loans, they're also looking at a lot of trouble coming down the pike.
--:-- E.J. Antony: So again, we're facing a lot of economic headwinds, let me put it that way. But I have a lot of confidence in leadership that they're going to be able to get us through.
--:-- Georgia Howe: Great stuff. Thank you so much for talking with us.
--:-- E.J. Antony: My pleasure. Thank you for having me.
--:-- John Bickley: That was Heritage Foundation's E.J. Antony, and this has been a Saturday edition of Morning Wire.
--:-- Georgia Howe: Thanks for listening.
