This GOP bill will affect borrowing costs for everyone
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In Los Angeles, I'm Kyle Rizdolf. Thursday today, May the 29th. Good as it always is to have you along, everybody. There was a time not all that long ago when economic policy was, if not actually boring, then certainly predictable. Those days, as we all know, are gone. And that gets us indirectly to the International Emergency Economic Powers Act of 1977 and the U.S. Court of International Trade.

Late yesterday, as you know, the court said President Trump does not have the powers he has claimed to impose those global tariffs of April the 2nd. This afternoon, a federal appeals court put that ruling on hold while it considers the merits. But in between those two rulings, I got Ernie Tedeschi on the phone to get a little wisdom. He's the director of economics at the Budget Lab at Yale.

48 hours ago, I would have told you that everything announced in 2025 tariff-wise would have raised $2.7 trillion over 10 years if it stayed in place. As a result of this decision, everything left that hasn't been invalidated by the courts only raises $700 billion over 10 years. Your obligatory reminder here, the tariffs are actually taxes paid overwhelmingly by American businesses and American consumers. But clearly...

The specifics of what are going to happen are still up in the air, and it's a safe bet this one winds up in the Supreme Court. The foundational question, though, remains, how do you make economic sense of things in a moment like this?

Let me ask you actually the modeling question, because, you know, you and your colleagues at the budget lab do this professionally. Every company in the world has economists on staff who do the modeling. How much does the and I'm being kind here chaos of tariff policy since April the 2nd make it hard for you and by extension, everybody else trying to figure out what to do with their company and revenue and orders and imports and all this? How much harder does it make it for you to figure out what's going to happen?

So I feel like I have the easy job here because all I do is I wait for news to come. And then if it's late at night, if it's early in the morning, I change my models and that's my job. Right before the program, I was telling a producer that the most exotic locale where I had to update my modeling was in the middle of an Uber right after President Trump made his 50 percent EU tariff announcement. Usually things are not that bad.

But I think it's concerning if you're a consumer or a business, the uncertainty has only gotten greater, not less, because now you have to wait longer to know exactly where U.S. tariff policy is going to end up. You have to wait for the courts to decide this case. You have to see what the Trump administration might pull out in terms of different tariff authorities. And that's going to lengthen the time before we get any sort of certainty on this.

We got just to sort of macroize this for a minute. We got GDP today. The update on on first quarter shrank a little less than we thought it had on a day to day basis. What are American consumers going to notice about the health of the economy and where things might be headed as a result of this decision and whatever else might happen?

So I think the first thing that they'll notice is they'll see it on the price tags. It might take a little bit more time for durable goods, things like household appliances, because retailers like to burn through their pre-tariff inventory first before they get to the tariff inventory. But look, after a couple months, if these –

invalidated tariffs come back into place, I think that you would start seeing prices on even durable goods by the time we do back to school shopping in August, for example. And consumers and businesses are going to have to make tough choices about how to substitute

with higher-priced products, with maybe lower-priced products that aren't the same quality or aren't the brand they want. You know, that's going to be pervasive. The other thing, too, is I think that there are going to be a lot of shortages, especially in the short run. So as we wait for shipping goods to come over from China, there are big delays. That's going to lead to bare stores for a lot of products. Right.

Last thing, and then I'll let you go because you almost surely have more modeling to do. Do you have sort of mid-July-ish circled in your calendar? I mean, these court cases have put stuff sort of in abeyance, but that's when the 90-day pause runs out. Yeah. So I take whatever certainty I can get. They have thrown out a July date, which I deeply appreciate that they give us dates sometimes, like April 2nd or mid-July. So I am very much...

you know, anticipating and marking that date down in my calendar. But I'm under no illusions that there could be surprises just around the corner. Tariffs could change right when we get off this interview. And that is actually the nature of the job. So, you know, we'll get you back on the phone. Ernie Tedeschi, Director of Economics at the Yale Budget Lab. Ernie, thanks a lot. I appreciate your time. Thanks so much for having me.

I don't know. I think maybe we were attempting to fade. Anyway, win some, lose some. Speaking of which, though, just as the tariff news changed what we had planned for the show today, so, too, it has affected almost every business owner in this country. So we spent some time on the phone this morning with some of our regulars to hear how they are feeling. Our first and always tariff go-to is Gretchen Blau, the customs broker we know at Logistics Plus in Erie, Pennsylvania.

We've sent out a memo internally, basically just saying, you know, we have to wait and see what's going to happen. We have people asking, where's my, you know, when am I going to get my refund? We don't know how that's going to be handled yet. It's all kind of in a holding pattern. It's all kind of wait and see a lot of unpredictability as to how things are going to play out with the timeline.

So there's nothing published in the Federal Register yet, and that's where we would get any kind of directions as to how to handle everything. The ruling looks to only apply to the IEEPA tariffs and not the 232 or the 301 tariffs. So that's causing a little bit of confusion because we've actually had people ask, well, can we go clear back to 2018 with those tariffs and...

From what I'm reading so far, no. But we look for further information to be able to clarify that more. Reginald Blau, Logistics Plus, Erie, Pennsylvania, 232-301-IEEPA. We'll make it make sense for you. When news of that original ruling broke last night, by the way, Wall Street futures took a tidy jump up by the closing bell this afternoon. Still up, just less emphatically. We'll have the details when we do the numbers. ♪

Lest you forget, given the rest of the news firehose, the GOP's big spending bill is still wending its way through Congress. $3.8 trillion is what the Congressional Budget Office says that bill is going to add to the national debt over the next decade.

And while a dollar figure that big almost feels like funny money, what Congress and the president do with our finances does seep out into the rest of the economy. Because when the government has to borrow a lot more like it's going to have to, that affects, among other things, the cost of borrowing for pretty much everyone else. Marketplace's Sabri Beneshour explains how all that works and what it'll mean if money costs more for a long time.

Remember back before the pandemic when interest rates were super low? Borrowing money at 3% and 4%.

for commercial real estate transactions or a house or something like that. Alice Frazier is president of the Bank of Charlestown in West Virginia. Well, it turns out we were all living in a dream and we've woken up. The low interest rate period was not a normal period. But after the pandemic bounced back and inflation surge, interest rates shot up. And here's what bankers like Frazier noticed when they did. There was what I would call a pause. Would-be homeowners started to think twice about that mortgage.

And on the business side, there were investments, but our borrowers were much more measured. And this is operating type companies, landscapers or manufacturers. This is generally what happens when interest rates in the economy go up. Everything that the firm or the private sector would contemplate doing gets a little bit harder to do.

Jesse Schrager is an associate professor at Columbia Business School. Higher rates haven't been fun, especially if you're trying to get a mortgage or if you're a startup trying to lure investors or a struggling restaurant chain trying to stay afloat. But so far, the economy as a whole has been strong and able to handle it. If you put it in a broad historical context, we have been higher than this before.

Steve Lively is global co-head of fixed income ETFs for BlackRock. The 10-year treasury yield is now under 5%. In the 90s, it hit almost 8%. And there are upsides to high rates. If you have savings and investment bonds or what's known as fixed income investments, you're earning more on them. For the first time in a number of years, you now have the ability to earn income in fixed income.

But the question right now is whether borrowing costs across the economy after going up a notch post-pandemic are going to go up another more unpleasant notch. Josh Hurt is a senior U.S. economist at Vanguard. And I think that really is going to come down to the key question. How are we going to manage our fiscal situation in the U.S.?

Our fiscal situation, meaning the government. How much more in debt is the federal government going to get? Because when the government borrows more and more, it makes it harder for everyone else to. You're going to have more debt competing for the same dollars as private capital. Kent Smetters is a professor at the Wharton School. When investors have the choice between lending money to the government or lending money to you...

The safer bet is the government. They're not going to lend you a mortgage at a cheap rate when they can get a high interest rate lending to the government. As the government gets more and more desperate to borrow money, it has to offer higher interest rates on its bonds. And so everyone else has to pay even higher interest rates to compete.

And sometimes they can't. Certain loans or business investments will just not happen. Right now, the competition everyone's facing from the government is looking like it will get worse. Jesse Schrager at Columbia. The U.S. is coming into this higher interest rate environment with just a staggering amount of debt outstanding that has to be refinanced at these higher rates.

It's not just the debt the U.S. is going to take out, it's the debt it has already taken out that's going to get renewed at higher rates. Depending on how things go, this is what could push up borrowing costs. Again, Kent Smetters. Unless Congress really gets its act together, there's a chance that they could continue to stay at the current level for a few years, but then go up.

And so could double-digit interest rates for mortgages be the new normal? Yes, he says. They really could. In New York, I'm Sabree Beneshour for Marketplace. Up next on today's Tariff Merry-Go-Round, April Hemmes, our farmer in north-central Iowa. Her reaction to the news? What news? There's too much news out there, dude. You know, I'm just saying. Ha ha ha!

But, you know, my reaction is let's let it play out, you know, in the courts. And I always thought it was an overreach. But, you know, I'm just a farmer out here doing my job, planting my seeds. But this game is...

changing the rules every day. And that's the frustrating part for us farmers. So especially now we're in spring and planting mode and weather, and we're worried about everything else other than tariffs because, you know, we just want to get this crop in the ground. So, you know, to have that one more thing piled on top, you know, it doesn't do any of us any good. If the tariffs just went away, it would give us peace of mind of,

You know, the countries who are buying, who are exporting to can say, OK, it's one less thing they have to worry about. April Hemes, corn and soybeans is what she grows in north central Iowa. Coming up, more people are watching YouTube at any given month than Netflix or Disney. And YouTubers, it turns out, are the next generation of studio executives. But first, let's do the numbers.

Dow Industrials up 117 today, 0.3%, 42,215. The Nasdaq picked up 74 points, about 0.4%, 19,175. The S&P 500 gained 23 points, 0.4%, 59,12.

In video we told you about yesterday, made another pile of money in Q1. Today, shares accumulated 3.25%. United Airlines and JetBlue have announced a partnership that will let them offer flights on each other's website, link up their frequent fire programs, and in a big one for the friendly skies, let United get in on JetBlue's landing slots at JFK in New York, Newark, Schmooark. United flew 1.4% higher. JetBlue descended 3.1%. You're listening to Marketplace.

In honor of Military Appreciation Month, Verizon thought of a lot of different ways we could show our appreciation, like rolling out the red carpet, giving you your own personal marching band, or throwing a bumping shindig.

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Because smarter tech skills don't just help you, they help your whole community succeed. This is Marketplace. I'm Kai Risdahl. The United States is and has been for going on a decade now the world's biggest producer of crude oil. A lot of it comes from wells in West Texas. They've been drilling oil there for a very long time, though, and thousands of wells aren't being used anymore. But they're still leaking brine and releasing millions of metric tons of methane.

It would cost billions to plug up all the old wells out there all over the country. Governments more likely than not being forced to pick up the tab. Now, though, a bill set to be signed by Texas Governor Greg Abbott looks to put more of that responsibility on oil companies. Marketplace's Elizabeth Troval has that story.

This story is about inactive wells and how they become orphan wells. Inactive wells still have companies in charge. Stacey Tarusco is with Rebellion Energy Solutions. To be an orphan well, you have to not have a

a responsible and solvent operator. They've been abandoned by companies and left to the government to plug. This happens when producers decide not to plug a well just in case, says Michael Lozano with the Permian Basin Petroleum Association. You never know when a price environment may benefit that well and may be able to exploit the resources downhole.

Companies are allowed to delay plugging wells for years, says Mark Ackerton with UC Davis. As the wells stay inactive longer and the kind of costs pile up and maybe a company accumulates more inactive wells, the company may become more at risk of going bankrupt. And that's when these costs would fall on the taxpayer.

Tom Tsang with Texas Christian University says now the new bill in Texas adds pressure on operators to make a decision. They will then have to essentially say, OK, either A, we can't increase production in this well, or B, we choose not to due to economics.

Now we're going to have to basically permanently seal it. But Virginia Palacios with the group Commission Shift says the bill, which was supported by the oil and gas industry, offers too many loopholes. Well,

What we were hoping this law would end up as would be something that would limit those plugging extensions based on time. But instead of that, now there's just different options. Still, she's hopeful the bill will hold companies more accountable. I'm Elizabeth Troval for Marketplace.

We had a Hollywood executive on the program yesterday talking about how production companies are adapting to a changing industry.

Today, more change at Dispatch about Hollywood's newest studio executives, YouTubers. And they are not filming in their bedrooms anymore. They're building actual sound stages, hiring Hollywood talent and raising millions of dollars to do it. Alex Weapon wrote about him for The Hollywood Reporter the other day. Thanks for coming on the program. Thanks for having me. For somebody who has never heard of, oh, say, Darman or Alan Chicken Chow, who are they and what?

Do they make and how big are they, I guess, is the other question. So DAR, Alan, they're YouTube creators. They create original scripted programming for YouTube, for TikTok, for other social platforms.

And they have huge followings. They have millions of fans. You know, I think a lot of people think about YouTube and TikTok as kind of a place for, you know, unscripted viral content, wacky stunts and the like. But what they're doing is they're creating real scripted shows. Alan told me that, you know, he kind of views what he's doing as what Nickelodeon used to do 20 years ago or Disney Channel. And they're kind of at the forefront of creating this new world of entertainment.

The word built is the operative phrase there, and that's why we wanted to talk to you. They are building you right now.

Actual studios with sets and sound stages, the whole deal. Why do they need that? And is that sort of a business model imperative for them now? It's become a business model imperative because, you know, Dahr told me that at any given moment, they're shooting eight different videos. It's a content factory in much the same way that the traditional Hollywood studios are content factories. And so what they found is that this old model of kind of having sets and

and locations that you can kind of use over and over again for your programming, it actually works and it translates to the creator economy. It's just a little bit different, a little more specialized to what they're doing. How do they capitalize these things or do they have outside money coming in? There's a lot of interest from outside firms. Private equity has been pouring a lot of cash into creator-driven businesses. Last year,

YouTuber group called Dude Perfect. They raised $100 million. And a lot of that is going to beef up production. You know, these companies are hiring veterans of Disney and Lionsgate and Universal, kind of traditional Hollywood studios who kind of see the writing on the wall and want to be at the forefront of this growth in the creator side of things. They are new. They're fast. They're lean, I imagine. Their overhead costs are

probably less than, say, you know, Paramount or MGM, but you start larding this stuff on there, their costs are going to rise, yeah? Yeah, well, look, Dar claims that he's able to produce content at one one-hundredth the cost of a traditional studio. Partly that's because, you know, the crews, they're not union, you know, it's a much smaller crew. He usually uses like three or four person crews, whereas, you know, a typical TV show could have dozens or hundreds of people.

They come from kind of a scrappy upbringing where they had to produce stuff in their own homes. And now they kind of bring some of that to this new creator ecosystem that they've built. You know, this is a little bit of false romanticism, but these YouTubers now, they're kind of becoming the man, if you know what I mean, right? Yeah.

Yeah, I mean, I think the days of, you know, the really big Hollywood studios that kind of, you know, really dominated the entertainment ecosystem, I do think that it's beginning to break apart a little bit. But if you look at, you know, YouTube, it is the dominant player in entertainment right now. More people are watching YouTube at any given month than Netflix or Disney. So I do think that as a platform, it's really quite mainstream. And I do think especially for people

Under 30, under 25, a lot of these creators are kind of their go-to source for entertainment in a way that maybe movies used to be or Nickelodeon shows used to be back in the day. Also, not for nothing as an audio guy, podcasts now on YouTube are like the biggest thing. I mean –

You know, podcasts are actually they're coming for morning TV. You know, used to be that you'd put on the Today Show or Good Morning America and have that on in the background when you were cooking breakfast or doing laundry. And I do think that video podcasts are kind of coming for that piece of the pie as well. What does it say about the shift in power then in Hollywood? Right. Because power follows money and money and power are intertwined and these guys are growing. What do you what do you think is happening?

So I do think that there is a paradigm shift and a power shift happening. Maybe some YouTube creators get roles in traditional TV shows or films. Maybe you're going to see more deals like the one Netflix did where they picked up some episodes of Miss Rachel's Kids Show and put it on the platform. And at the same time, I also think you're going to see deals like Amazon's deal for Mr. Beast's Beast Games where they can provide capital to allow these creators to do things that they wouldn't be able to do themselves without outside financing.

Alex Weprin at The Hollywood Reporter. Alex, thanks a bunch. Appreciate your time. Thank you. When we called Wesley Rule this morning, he owns Knoxville Fine Violins with his wife, Lauren. We actually broke the tariff news of the day to him because busy as he is running a small business, keeping up with the latest trade policy and all else that's happening in Washington is not real high on his list of things to do. But after giving it some thought, here's what he had to say.

Everything is so tumultuous right now that I'm not particularly surprised about anything at this point. I'm not even sure how important it is or how much it will affect our day-to-day business. But I suspect it probably won't affect us a lot only because our distributors have already raised prices according to the tariffs. And it's pretty rare for distributors to drop their prices.

Earlier this year, when the tariffs started coming out and things were getting a little dicey, we decided to pull out a small loan and we just purchased a bunch of our cheaper instruments at pre-tariff prices. We now have this stockpile of instruments and regardless of whether tariffs go up or they go down, we still have them and I don't have to worry about ordering anything the way I normally would.

As a business owner, you have to now spend time to sort of navigate, okay, what are these tariffs? How will it affect me? How are other people navigating these? Are other businesses taking advantage of certain things that I'm not aware of at this point? There's a lot of things that I did not have to worry about when I opened my business five years ago. Wesley Rule, he and his wife Lauren own Knoxville Fine Violins.

This final note on the way out today, I will just quote here from the press release from the Federal Reserve this morning.

At the president's invitation, Chair Powell met with the president today at the White House to discuss economic developments, including for growth, employment and inflation. Chair Powell did not discuss, it goes on, his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook. End of quote. Regular listeners to this program will.

We'll recognize the above as Powell's constant refrain. Data. We want more data. The president, according to Press Secretary Caroline Leavitt, told Powell he is making a, quote, mistake with interest rates. I mean, boring, but still fly on the wall, right? John Gordon, Noya Carr, Amanda Peacher and Stephanie Seek are the Marketplace editing staff. Amir Babawi is the managing editor. And I'm Kai Risdahl. We will see you tomorrow, everybody.

This is APM.

Can we invest our way out of the climate crisis? Five years ago, it seemed like Wall Street was working on it. Until a backlash upended everything. So there's a lot of alignment between the dark money right and the oil industry on this effort. I'm Amy Scott, host of How We Survive, a podcast from Marketplace. In this season, we investigate the rise, fall, and reincarnation of climate-conscious investing.

Listen to How We Survive wherever you get your podcasts.