Stephen Moore Is Bullish on America. Is He Right To Be?
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if we can get these trade deals done if we can get the tax cut done those two things if they happen in the next three to six months we're going to see the biggest boom you ever saw you're going to see the stock market go through the roof you're going to see the united states sucking capital in from the rest of the world i'm bullish

I'm Stephanie Flanders, Head of Government and Economics at Bloomberg. Welcome to Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, what on earth is going to happen next. This week we're stepping back from the string of trade deals, pauses and all-round events of the past week or so to ask, where are we in Donald Trump's grand strategy for the US economy? What comes next?

We've had a kind of trade peace breakout between the US and China just this weekend, which in turn has produced a kind of recovery in the US stock market. Of course, there's plenty of unanswered questions about this 90-day pause in the very high tariffs that both countries had imposed on each other, US and China. And we had that other 90-day pause, won't last that much longer, on the tariffs imposed on everyone else. But for now, we're forgetting about

or at least the world seems to be, and it's on to the next big thing, which is tax cuts. Hours after that US-China truce was announced, House Republicans in Congress released a multi-trillion dollar draft tax bill containing many of Donald Trump's campaign tax pledges, things like no taxes on tips and overtime pay and new tax breaks for car buyers and seniors. MUSIC

Also, crucially, that bill makes permanent the lower individual tax rates that were passed in Trump's first term in 2017. Well, we recorded this conversation on Tuesday morning US time, just as people in Washington were still getting to grips with the detail of that big bill. But we had exactly the right guests to help us put all of this in context.

Josh Wingrove, senior reporter for Bloomberg's White House team, who can tell us something of the mood in Washington, in Congress and the West Wing. And Stephen Moore, economist and the author most recently of the book The Trump Economic Miracle and the Plan to Unleash Prosperity Again. Among other things, Stephen has advised Donald Trump's 2016 presidential campaign and he's now serving as a senior fellow in economics at the Heritage Foundation. ♪

Stephen, thank you very much for doing this. I know it's a very busy week. So if you just sort of step back on these first few months, how do you think he's doing? Well,

Well, I like most of what Trump has done. I'm a big fan of the tax cut. In fact, Larry Kudlow and I wrote the very first version of the Trump tax cut back in 2016 when he first started running for president. And of course, in the weeks and maybe months ahead, we're going to try to finalize making that tax cut permanent and making other changes. So I'm a big fan of that. I like what he's doing, potentially saving a trillion dollars in deregulation costs.

I like the fact that he's promoting pro-American energy policy that uses our oil, our gas, our coal, our nuclear power, everything we've got. So I'm very supportive of most things Trump has done. As you know, I'm a kind of old-fashioned Milton Friedman free trader, so I'm not a big fan of tariffs. But if Trump can pull this off and can get other countries to reduce their tariffs, which is his objective...

And that would be a very positive thing for growth and for trade. But boy, it's been a bumpy road.

We will get onto some of the tax side of things and maybe deregulation. But because you had raised publicly some concerns about the economic impact of those tariffs, how are you reading the last few weeks, do you think, or the last few days? Do you think there has been a real change of approach from the administration? You know, we're having a deal where certainly the Chinese feel they got everything that they wanted in that initial negotiation with Scott Besson. Or is it too soon to say?

Maybe a little too soon to say, but the last couple of weeks have been enormously successful for Trump. We've had, as you know, we've had a major, major comeback in our stock market. So that's been good. A lot of people lost a lot of money in March and April, and May has been a pretty good month. You know, you never know with Trump whether this was the grand design. He's a very good negotiator. He's a very clever guy. He's always underestimated by his

political opposition. So I think that, for example, when he said, well, we're going to put 125% tariffs on China, and then when he said, well, maybe we'll go down in the press said, oh, there he is, he's retreating. But that may have been part of the plan all along is to start with a very high number and bring it down as a negotiating tactic.

I do believe that the UK deal between the US and the UK was a great deal for both sides of the Atlantic. And I think if this China thing can be consummated, I don't know where exactly it is in its negotiating phase, then I think you're getting a domino effect. And I think you'll get a lot of other countries knocking on the door and saying, let's make a deal. And that's exactly what Trump has always wanted to see.

As you point out, the markets have certainly responded well in the last week or so. The line is this trade war was all the ninth series of Dallas. It was all while Bobby Ewing was in the shower. But as Josh was reminding me as we were speaking earlier, I mean, the effective tariff rate that we're left with even now at these kind of ceasefire levels is very similar or higher to the Smoot-Hawley level. Even that UK trade

trade deal, quote unquote, leaves trade between the two countries kind of in many ways less open than it was before Donald Trump came to office. Our own economists think that the tariffs in place now, even if they stay at these lower levels, would mean over time a 70% fall in Chinese exports to the US. Are we underestimating how much damage could still be done by these tariffs?

Boy, that's a good question. It's a tough question to answer because I do think there may be a little bit of irrational exuberance here. The market so much wanted to see a deal and an end to this turbulence that maybe they're reading too much. I don't know if they are or not, but it's certainly a possibility. I do think there's still going to be a lot of

turbulence in the months to come as we start to try to hopefully finalize these things. But I also think that the Trump administration was a little bit taken aback by how negatively the international markets responded to the tariff wars, and therefore they strategically tried to cut these deals as a way to stop the turbulence. They're not stupid. They

They realized that you had a falling dollar, you had a falling stock market. You had a lot of factories in the U.S. which were only running at 50% capacity because they couldn't get the inputs and the raw materials they needed to produce their products. Hopefully the worst of the turbulence is over. I'm still hopeful that at the end of the day, which would be in the next, say, six months, that we're going to see freer and fairer trade. In other words, I do think that the

These other nations, the Europeans, the Koreans, India, Japan, are going to have to lower their tariffs. And Trump is kind of flexing our muscle as a way to force these countries to do that.

Josh, you were nodding when we were talking about irrational exuberance. I think Trump has shifted the conversation a lot here, right? So even when he's retreating back to levels that when he said the campaign were eye-popping to people, he talked about 10% global tariffs and maybe a 60% tariff on China in the campaign. He's sort of generally in the ballpark of that. So I think I would just say a couple points. Steve, I'm sure, would agree with the first one. Trump loves tariffs.

some people are trying to parse the logic and strategy, and there might be some, but the guy just likes them. He talks about them both as a revenue tool. He talks about them as an incentive to push things back. And when business groups who've been very silent comparatively throughout the process of this come to him and say, our factories in the American heartland cannot get their inputs right now because of these things. They just don't seem particularly responsive, at least publicly, to those concerns. So he likes...

tariffs. And the other thing that I would mention is like, there's more to come still right now as we've got these outstanding 232 investigations, we're expecting those tariffs. Speak of like, you know, exuberance when he exempted so many consumer goods, particularly in China, from that China tariff, including, you know, I feel like the electronics, electronics, right?

The stated reason for that is because he plans to hit them with a different tariff, which seems like it'll be 25%, if only because that's what every other sectoral tariff has been, which of course is higher than the current 10% pause level on China. So it's a break, but he's planning on hitting these industries with that semiconductor tariff, a lumber tariff, copper tariff still to come. These things are still coming down the pipe here. And so I think that people who are looking at this as the sort of

level set moment. Secretary Besson, of course, talked about 10% as a floor. He's also talked about those April 2nd numbers as a ceiling if people don't deescalate. But there's other stuff to come in other streams and the overall effective tariff rate is probably going to go up, not down from where it is today.

Well, I'm getting dizzy from all these numbers you're throwing up. All these different things. And actually, there's a serious point here, though. And you're quite right. Trump has a different view of tariffs than, say, a free trader like I do. What he wants to do, and I think there is something to this as an American, which is that for the first hundred years of our country or more, we did not have an income tax.

And we made a big mistake in 1916, we adopted an income tax. I think that was one of our greatest mistakes as a nation. And what Trump is saying is wouldn't it be better if our tax system was through tariffs, not taxes?

Income taxing. And he's right. Yes, that would be better. Income taxes have very negative effects on the economy, much more so than tariffs do. And so what he wants to do is he wants to reduce the taxes that are imposed on things that are made in Michigan or Maine or Montana and increase the taxes on things that are made in China or Japan and Korea.

And as an American, yeah, that seems to make a lot of sense. Why would we punish our own producers? Why not put a higher tax on the things that are coming into the country? And Trump is also right, by the way, that for the first 125 years of our country, that's essentially how we taxed.

Now, that being said, one of the things I object to about the Trump strategy is exactly kind of embedded in your question. You mentioned 10 different tariff rates, and I don't like this idea of picking winners and losers. If we're going to have a tariff policy, let's just have a 15% across-the-board tariff, import tariff. Anytime something comes in the United States, you're going to pay a tax on it. I don't like this idea of saying, okay, well, we like this industry. We're going to pick that.

Protect that industry. And by the way, if you get a meeting in the White House, we could lower your tariff for you. I don't think that's the way a tax system should work. Steve, you just touched on it. And of course, the suspicion is that one of the reasons that he not only likes tariffs, which are

changeable by executive action and not only by Congress, but specifically these very variable country by country tariffs, even company by company in some cases, in effect, is the power that it gives Donald Trump to be doing these favors for people and doing deals. I mean, knowing him as you do, is that a big part of what he likes about this strategy? I can't really answer that, but I will say this, that I don't think it's a good way to make policy.

Let's say that Kamala Harris had won the election. And let's say she said, "Oh, you know, we have to worry about climate change. So we're gonna put all these tariffs. I'm just gonna unilaterally declare an emergency and we're gonna have tariffs on this, that, the other thing." Well, the Republicans would be going crazy. "Oh, she's a dictator. She can't just impose this tax."

Look, our Constitution is very clear. Taxes start in the House of Representatives. That's in our Constitution. And so what Congress has done is essentially delegated this so-called emergency powers to the president. And I don't think that's good for our system of government. I think that they should be approved by Congress. It's just a matter of accountability. I'd probably a minority of my party on that because Trump is a very powerful president and the party does what he wants, but I'm not so sure in the long run that's a good way to make tax policy.

You're not alone entirely in your party on that, right? Including Chuck Grassley and other Republican senators have lent their name to a bill reclaiming some of this tariff power. Trump has really pushed the limits or tested them, shall we say, on like what a president can do unilaterally on tariffs.

By the way, I think there is a little hint in his strategy here because he's using IEPA to do a lot of these across the board country tariffs. Trade lawyers say that that is flimsier than other ways, like the 232 tariffs or the 301 tariffs. Those are more bulletproof. And those are the ones he's using for the sectoral tariffs on steel cars, that kind of thing. Stephen, I

And I know you want to come in, but just in case people didn't know, so that's the International Emergency Economic Powers Act, which lets the president impose tariffs in times of economic emergency. So he's citing an emergency relating to the trade deficit.

Let me just say one thing in response to that, both of your questions, which is that to defend Trump on this for a moment, and again, I'm not a big fan of the tariff policy, but it is true. I mean, when Trump ran for president, he went around the country saying tariff is my favorite word. And if you elect me, I'm going to put these tariffs on. And guess what? Middle class, blue collar America kind of liked that idea. They are concerned about the factories leaving and the jobs leaving.

One of my concerns is, you know, with the terror strategy is are we chasing the jobs of the 20th century, not the jobs of the 21st century? Because let's face it, in 10 years, there won't be factory jobs. Everything will be done by robots. So, you know, I want to make sure that we have an economy that's retrofitted for, you know, the 2020s and 2030s, not for the 1920s and 1930s.

Let's get on to the tax bill, because of course, journalists, we're also kind of turning our eyes to the next big thing, you know, US-China trade war all over, at least for a couple of months. So now we're focused on the tax bill that we saw come through late on Monday this week. And it has a lot of the things that Donald Trump campaigned on, not just making those individual tax cuts that you mentioned, Steve, permanent, but some of the other measures like limitless

eliminating some of the taxes on tips and other things using some fairly creative or at least non-standard accounting it supposedly adds to the deficit 3.7 trillion dollars over 10 years i know you're a fan of doing many of those things but you're also a fan of smaller government and lower deficits so i just wonder how you're feeling about that big beautiful bill

Well, first of all, it's this just so your audience understands. Failure is not an option here because if this does not get done by December 31st,

you know, we're facing the biggest tax increase in American history. Every middle-class family would pay more. Every small business would pay more taxes. A lot of our corporations would pay more. So they have to get this done. And most of the tax bill is really just extending what's already in law. And so now you're right. There are other things that Trump wants to add to that, that no tax on tips, which is actually from a fiscal point of view, pretty irrelevant. You don't raise a lot of money taxing tips anyway.

But, you know, not taxes. You may find you lose a lot of money when everyone decides their entire income. Everybody's going to be a tipped employee because taxes do affect people's behavior. But one of the ones that I think is most important is the 15% tax rate.

for businesses. You know, he wants to cut our corporate tax rate to 15%, which I think would be enormously beneficial from a strategic point of view. So I'm a big fan of this bill. I don't believe the numbers that you cited. I mean, I know those are the right numbers, but I don't believe that it's going to cost money. And I know that because the same people forecast is going to lose three trillion or whatever the number is. These are the same people who said when we passed the tax bill in 2017, you know, that it would cost several trillion dollars. And we now know just from a lookup

back that they were wrong by about 1.5 trillion because our tax estimators always overestimate the revenue losses from cutting tax rates and they always overestimate the revenues that are going to gain by raising taxes because they use a kind of static analysis that doesn't take into account you know when you cut taxes good things happen for the economy

Josh, I know you were also looking at some of the details of this bill and also, I guess, as a sign of the kind of relative influence of the president over his party.

Well, the fact that it's one big, beautiful bill is itself a sign of the influence of the party because, you know, going back a couple of months, Republicans were divided on that, namely the House and the Senate were divided on that. So Jason Smith, the Ways and Means chairman, has come out with this bill that does maintain several of Trump's priorities, including taxation of tips, Social Security, one on auto loan interest deductibility, which is one that Trump loves, which allows you to write off the interest payments on your car if you buy an American-made car.

So that's in there. What isn't in there, interestingly, is the very thing Steve mentioned that Trump has been calling for, the 15% corporate tax rate on American manufacturers down from the current 21%. Trump had talked about that. He'd also talked about

lowering the 21 to 20, regardless of whether you manufacture in the U.S. Instead, they're doing a 100 percent depreciation, which is essentially a big carrot on a stick to build new factories in America. Manufacturers groups seem jazzed about that. You know, they'll take it. They don't seem too concerned about the lack of the corporate tax rate, but they are having to pick and choose. And remember, as we sit here, the U.S. budget deficit is hovering at

a shade under $2 trillion annually, something like $21 trillion over the 10-year budget window. And when we talk about $3.7 trillion, that's over that 10 years for the people that might be listening to us outside of the US. And so, you know, we're talking about a quite wide budget gap over the coming decade. Now, Trump wants to narrow that through the deregulation that Steve mentioned. He wants to narrow that, of course, with tariff revenue.

But you've still got a significant, significant budget shortfall. And of course, that's why Secretary Besson is watching that 10-year to try to see how markets are going to be digesting all of this. Which has not come down. It has come down a bit if you measure back to January 20th when Trump took office, but it has been rising pretty steadily here for a while. There are concerns clearly in the bond market about the US direction right now. Steve, you mentioned that the numbers will turn out to be better than expected. But if you look at

Really, on any assumptions, the US debt relative to GDP is looking pretty unsustainable. I mean, the line keeps going up no matter what you make, you know, almost any assumption you would make, not least because of the higher cost of money that we have now, even if it doesn't go up so much from here. Well.

Well, there's no doubt about it that our national debt is a clear and present danger, no question about it. And you're also right that we're vulnerable to an interest rate shock. As the world's biggest borrower, every time interest rates go up, our borrowing expenses go up. But I'm a growth hawk. What I care most about that's the overriding factor that drives all these numbers is jobs, economic growth, and prosperity. And so what I've told the president, I've told the Speaker of the House and Republicans,

Anything that makes the economy grow faster, do it. Do it, do it, do it. Anything that makes the economy grow slower is going to make our debt situation worse. So I want Republicans to be focused on one thing, getting the economic growth rate, which has been hovering at about 1.5, 1.6 percent, get it back to the three to three and a half percent growth rate, which is our America's

you know, normal growth rate. And if you do that, if you get that economic growth rate and that productivity up,

Then guess what? That debt that you're talking about is a share of our economy. It doesn't go up from, you know, currently a hundred percent of GDP to 200% of GDP. It actually starts to fall. So growth is everything. We have a president who's hyper-focused on growing the economy, bringing jobs back home, making our economy as efficient as possible through things like deregulation. We're going to produce a lot more oil, gas, and coal so we can be the number one producer of energy in the world.

And all of those things I think are good for growth, good for jobs, and will make our deficit situation less hazardous in the future. Okay, but if you think of just the balance of policies and where the emphasis has been in the last

few months. Do you feel like there has been enough focus on growth? A lot of the growth rate that you talked about just now came from immigration, came from the tax cuts that we're just making permanent. As you pointed out, there's no change of policy. So it's just keeping things as they are, which doesn't necessarily give you an extra burst. And also from some of the trade that has happened back and forth between Mexico and Canada and other things, some of these industries that are now going to be disrupted by the tariffs. So if you think about deregulation, has there been

Enough focus on that. As I said earlier, I really do believe if we can get these trade deals done, if we can get the tax cut done, those two things, if they happen in the next three to six months, and you heard it first here on your show on Bloomberg, we're going to see the biggest boom you ever saw. You're going to see the stock market go through the roof. You're going to see the United States sucking capital in from the rest of the world as happened like in the Reagan era. So I'm

I'm bullish. I'm bullish on America right now. Those are the two big ifs, though. If we can get the trade deals done and if we can get the tax cut done, those are the two highest priorities for Trump, and I wouldn't bet against him.

You have always been someone who was focused on the business agenda and the agenda for growth, and you just talked about it here. The judgments that investors have made, even as the S&P has gone back up in the last few weeks, is the dollar is still weaker and that other markets are actually doing better because they think fundamentally the US is going to go backwards with these policies that are trying to take them out of a globally integrated economy. Do you not worry that when the dust settles...

you might be okay, but you're still going to be a step back from where you would have been because of this effort to pull you out of an integrated global economy.

I do worry about that. And I think actually one of the things that some of my friends in the Trump administration don't fully appreciate is one of the things that's made the American economy so strong over the last 40 years since, you know, the dawning of the Reagan era is that we are incredibly globally integrated. And, you know, I think a lot of people don't appreciate that.

why it is that the factories here are being harmed by the terrorists. Because actually, this was supposed to bring jobs back to the United States. And in fact, instead, the factories have had to lay off workers because we, you know, as I talked to one manufacturer, he said, look, we get our steel from Japan, we get our copper from Vietnam, we get our

parts from Mexico. We got our lumber from Canada. So we are incredibly globally integrated. It makes our economy very efficient and we don't want to lose that edge. And that's why we got to get these trade deals done in a way that benefits America, but also benefits global growth. And I can't guarantee it,

But I think over the next three to six months, we're going to see a lot of improvement in the trade turmoil that right now is dominating the markets. Stephen, we will remember that in a few months' time. Thank you very much for joining us. And when I'm right, I want you to help me back on the show. We will, any time.

Josh, having interviewed him a million years ago, he's always very enthusiastic and bullish, which makes for a good interview. But when you're talking to people in and around the White House and on the Hill, are people feeling that bullish now that you've got some of these trade deals underway? I think Republicans have exhaled a little bit, but the bullish thing is, I think, a step too far yet because the deals that we've seen have been pretty modest. Some cans have been kicked down the road. And of course, big deals hang

hang in the air. Steve talked about Japan and South Korea. Those are really two big tests because the UK deal had way few thornier issues than those ones will. And, you know, it's difficult to see how a fundamental deal comes together if Trump wants to, for instance, keep a 25% auto tariff on two crucial sectors for those two economies. And so I think right now the Republican

complaints about this have quieted. The sort of subtle momentum towards a bill to recapture some of the tariff power in Congress has abated. And the focus is on getting this tax bill passed. Besant talks about it, the Treasury Secretary, about three legs of the stool, right? Not only tariffs, but the tax cuts and the deregulation.

They're really racing to get these tax cuts done by July 4th, by the way, right? So we had Liberation Day on April 2nd. We're going to celebrate Independence Day, allegedly, by signing a big tax cut package here. They're sort of just biting their tongue and holding their breath in a lot of cases that this is all going to work out. But clearly there's unease. And I should not leave any suggestion that I'm saying that some revolt is

is coming. President Trump continues to have very strong support in his party. People are not speaking out emphatically against him. You get sort of comments about tariffs here and there. But right now, he's sort of full steam ahead. Well, I guess we will see. I will certainly be checking in with you. And maybe we should check in with Stephen Moore in a few months time, see if his bullish predictions have turned out. But Josh Wingo, thanks very much. Thank you for having me.

Thanks for listening to Trumponomics from Bloomberg. It was hosted by me, Stephanie Flanders, and I was joined by Bloomberg's Josh Wingrove and the Heritage Foundation's Stephen Moore.

Trumponomics is produced by Sam Asadi and Moses Andam with help from Chris Martlew, Tala Amadi and Amy Keene. Sound design is by Robert Williams and special thanks to Jared Ruderman. Brendan Francis Newnham is our executive producer. To help others find the show, please rate and review it highly wherever you find your podcasts.

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