[Music] America is home to 33 million small businesses the Beating Heart of communities across the country and prove that the American dream is still alive this is a show about those dreamers and doers and the communities they serve their real life stories their struggles and successes their Grit determination and passion and the people who fight to keep their American Dream alive I'm Alfredo Ortiz I'm elae Parker and it's time for another episode of Main Street matters America's small business megaphone hi and welcome to another episode of Main Street matters America's small business megaphone I'm elae Parker the president of the job creators Network Foundation and I'm Jordan Bruno vice president of job creators Network please subscribe to the show at Salem podcast network.com or wherever you get your podcast from today we are thrilled to be rejoined by EJ and Tony EJ is a research fellow at the Heritage foundation's Grover M Herman center for the federal budget his research focuses on Federal and monetary policy and he joins us today to break down how bad a Harris wals Administration could be for small businesses and the economy overall EJ thanks for thanks for joining us oh Lane thank you for having me again well uh there is no shortage of things to talk about so hopefully you've got a couple hours with us um but one of the top things that um everybody talks about obviously is inflation and while we've seen it moderate um you know I saw a bunch of tweets by uh the har the Biden Harris Administration this weekend claiming that it inflation is now under uh 3% and kind of claiming uh victory there and and I kind of thought to myself gosh that's kind of like the arsonist firefighter don't you think I mean raise inflation to the highest highest levels and then claim you know kind of Victory when it when that your policies are solving it you're you're basically having to do things to solve it yourself so kind of walk our audience through the inflation um and and what led us to sort of the Heights and what's keeping it elevated oh certainly I mean in a word uh spending right specifically government spending is what has caused all of this runaway inflation uh you know there's a reason why we did not have such horrific inflation for 40 years it's because we never had these blowout budgets and this runaway government spending like we do today and and this by the way is is part of the reason why the whole narrative around price gouging causing inflation or Supply chains causing inflation it it just doesn't even make any sense did corporations magically become greedy for the first time in in 40 years or at least more so than they did for the last 40 years uh you know and Supply chains if if that is really such a contributor to inflation then now that Supply chains are just as good as they were before the pandemic there's two different indexes we have that show that by the way uh why haven't costs come down not only should inflation have come down the rate of increase but the actual cost themselves should have come down and they haven't uh you know going back to to businesses business can't cause inflation because what what's essentially happening is the cost that they face are simply being passed on to Consumers again we have data from the Biden Harris Administration that shows this where the price indexes faced by producers or businesses have risen exactly the same amount as the price indexes faced by consumers so on a percentage basis it's identical and again the reason for that is because it's not the businesses that are causing inflation it's not the consumer that's causing inflation it's government spending because when the government spends in this case trillions of dollars they don't have they go to the Federal Reserve to get them to print the money in order to finance those trillions of dollars in in runaway government spending and the result of that is a devaluation of the dollar we've seen our currency lose uh about a fifth of its value in less than four years that's that's pretty terrible it's not the worst thing we've ever seen in this country but it's up there it's pretty darn terrible and as we have seen that spending come down where we don't have quite as many of the ridiculously sized uh spending bills as we did for the first couple years of this Administration the result has been less inflation you having a divided Congress has been a huge huge help here because it's just too difficult for either side to get across a lot of to get across the Finish Line a lot of the spending that they would both like and we should point out you know this is not strictly a uh you know a Democrat problem here where we have had a lot of Republicans who have gone along with these runaway spending bills uh we have a lot of Republicans who have their own pet projects that they want to fund so just because one side might be worse than the other does not mean the other side are a bunch of saints one thing I think is really important Elaine to point out though is the fact that uh there was an economist uh from the University of Chicago who recently did an analysis on all of the spending we've seen under the Biden Harris Administration and what he found was basically about half of the inflation is due to the spending that got across the Finish Line because kamla Harris was the tiebreaking vote in the Senate on those different pieces of legislation so by no means can we say this is a Biden problem this is a Biden Harris problem and going back to your analogy to to conclude here about the the arsonist playing firefighter at this point everything has burned down that was previously on fire the house is gone except now we have a firefighter so-called firefighter who says I'm going to fix inflation and their solution is to throw gasoline on it they're going to try to douse the Flames put them out with gasoline instead of water here what I mean by that is she wants to spend trillions more and so does waltz by the way in other words they want to do all of the things that got us into this mess in the first place as a way to fix the problem um you know speaking of gasoline um you know we we've sort of looked at it as um the The Reckless government spending and all of those bills that have led to the inflation but also the anti-energy policies I mean it's just sort of common sense to think you know even if you don't have any kind of economic background if the price of gas goes up which means it's going to cost more to truck things in to Get It ultimately to the shelf that it would cause inflation as well and we've seen such um an anti-energy policies coming out of the Biden Administration I mean from day one they canceled the Keystone pipe line and has really hamstrung the entire energy industry since then that's that's a great great point and this is a this is a very very good example Lane of how you don't have to uh simply devalue the dollar in order to cause prices to rise it might not be strictly inflation from an academic standpoint where we say inflation is a monetary phenomenon as opposed to just anything that increases costs uh however you still have to you still have to uh take is true the the fact that all of these cost increases no matter where they come from are getting passed on to Consumers you fuel which you brought up is such a great great point because it is used not only as a fuel in terms of uh providing heat let's say where you'll have home heating oil which is essentially the exact same thing as as diesel fuel uh but on top of that you are also increasing the cost to transport anything and everything and the other thing is that even Services which you may say all right when I go to the grocery store I get it I grab a carton of milk off the shelf uh that carton of milk got there on a truck what about Services how how do fuel costs increase the cost of services that doesn't really make any sense you know when when I go to a tax accountant let's say the tax accountant isn't having to transport anything he's sitting behind his computer that's true except that tax accountant is paying for goods throughout the economy in other words he or she is facing higher costs and he or she will pass on those higher costs that higher cost of living to his or her customers and so it it really does a number anywhere and everywhere throughout the economy when we when we get these higher fuel costs EJ uh can you describe like Comm is finally coming out with our economic platform how would you describe it as an economist and and what would its impact have be on um ordinary Americans oh great question Jordan uh you know unfortunately it's more of the same again again if if you're going to do more of the same expect more of the same the problem here is that I think would actually be even worse in other words it's it's a doubling down in terms of the public policies so it's even more spending taxing and regulating I mean this whole idea of taxing unrealized gains is absolutely nuts there there's just no other word for it I mean no no other word that's polite at least it's it is such a a uh impossible uh it is so impossible to square that Circle I guess you would have to say because how on Earth do you possibly evaluate these uh these equities or these assets that are constantly fluctuating in value I mean not just day by day but second by second you know you can you can sit in front of your computer all day and watch the the ticker for the Dow Jones for example I mean you're really going to tell me that you're just going to pick some arbitrary date and time you know a point in time here and you're going to say okay this is when we are evaluating all of your assets it it just makes absolutely no sense and there's no plan in that for uh what happens if you take a loss you get a tax credit you get a tax refund how are we going to work that into the into the system I mean these people have not through thought through their proposals they're simply trying to get any amount of money from anyone anywhere they can throughout this throughout this economy and you know but let's let's put the tax aside for a second just look at the regulatory front I mean again the regulations from this Administration have cost literally tens of thousands of dollars per family in this country you are paying that much more in regulatory costs than you were just four years ago and now Harrison Waltz want to do even more they want to not just keep Pace with uh or I should say keep that regulatory Pace but they want to accelerate it so they want even more of this green New Deal nonsense for example and one of the reasons why uh regulation is so devastating to the economy as opposed to taxing and spending which is problematic already but if the government taxes you they take a dollar from you and then they give it to somebody else and that person goes out and spends it yes there are inefficiencies in that but the money is still going back into the economy with regulation that doesn't happen the economic activity literally just goes away because it's no longer profitable for anybody to do it and so it is truly a dead weight loss on the economy h uh the Legacy Media is trying to position Harris as a middle class tax cutter uh just reading it on every single um old old mainstream media publication this weekend uh how how are they getting how is she getting away with um framing herself as a middle class tax cutter and uh what would her what would what would her polic her tax policies actually be to them due to the middle class well I suppose she's getting away with it because she has so many siop fants in the media who are willing to just carry water for her I mean look Jordan you can look at her record in the senate for example she didn't she never met a a tax increase she didn't like let's let's put it that way and now what is she advocating for ending the Trump tax reform that would cause middle class tax taxes to go up not down on top of that the only group who would actually get a windfall from seeing the Trump tax reform expire would essentially be the Democrat donor class it would be high income individuals in high tax states well guess what that means almost entirely blue States and those high-income individuals are also the group from which the Democrats get most of their money now there's nothing wrong with with rich people donating money to politics let's be clear that happens on both sides of the aisle we have freedom of speech and and you should be able to donate you know whatever you want to candidates I'm not opposed to that at all I'm simply pointing out the hypocrisy here of these folks because the numbers don't line up with the with their narrative essentially they say that they want higher taxes on the wealthy their policies would do the opposite they say they want lower taxes on the middle class again their policies would do the opposite let me just uh ask one more question on the uh on the point you just made about the wealthy donors in blue States and that the tax cuts and jobs act if it expires would really benefit them can you dig a Little Deeper on that one is is that mostly to do with the um salt absolutely elae that that's the primary driver here so one of the things things that happened in the Trump tax reform and this is part of the reason why I like calling it The a tax reform not simply a tax cut because it really wasn't a a strict tax cut in you know by many definitions so what they did was they Capp the deduction for state and local taxes or salt as you said and what that meant was that you you can't simply transfer the tax burden of of high income individuals in these high tax states onto the general taxpayer you are you are essentially telling people look you're living in an area with high taxes you're making a lot of money you have to pay those taxes you don't get to to uh essentially use this as a loophole in order to increase the federal tax burden for your fellow Americans particularly those in low tax states and so by capping that at $10,000 you have people in New York City who previously would have owed literally millions of dollars to State and local governments who now pay much less than that and again if you get rid of this tax reform the result of that is going to be a windfall to those individuals and it's it's not a 100,000 or 200,000 it's literally millions of dollars per person um I want to switch gears with you on uh jobs um every month uh you know the Biden Administration takes a big Victory lap on um jobs and then there's a a revision the next month down on the previous month and gets no headlines and they continue with this sort of exaggerated narrative that the labor market is extremely strong massive revision just a few weeks ago um I believe it was through the 12 months from April through April of 2023 through March or March of 2023 through April of 2024 um over 800,000 jobs tell us what that means in real terms well essentially when you add up both of the types of revisions you were just talking about the annual Benchmark that covers that 12-month period but then also the the uh revisions for each individual month where you get an initial number and then the next two months you get revisions all of those downward revisions combined you lost about 1.2 million jobs over that 12-month period in other words you just wiped out about a third of all the job gains that we thought we had during that during that one-year span again you can't tell us that this is a robust economy you can't tell us that this is somehow a strong labor market uh when all of the numbers are are essentially just garbage and you know I I don't want to um how do I put this Elaine I don't want to say that there's anything um nefarious going on at the Bureau of Labor Statistics simply because I have no evidence of that to be clear I actually even know a few folks uh at BLS and you know they they've given me no indication that there is any again anything nefarious going on how however just because you didn't make a a sin of um of commission doesn't mean you haven't committed a a sin of omission and I think that's what's going on here what I mean by that is there are serious problems in the the models and the methodologies at BLS serious ones and that has been evident since the spring of 2022 so this is not a new phenomenon that this didn't simply pop up out of nowhere and I think the Scandal here is the fact that despite a lot of evidence for those problems nothing has been done at BLS to solve any of them and to be clear I'm not at BLS so as a as a third-party Observer I have enough information at my fingertips to see that there's clearly something wrong the folks inside should have even more information and it should be even more evident to them that there are problems again with their with their models with their methodologies the the assumptions that you made in in 2019 for example about certain aspects of the economy in order to build these models they don't hold true anymore in this post-pandemic world of arts and again the fact that nothing has been done to address these problems that first started popping up over two years ago that's a scandal and the BLS uh needs to answer to Congress and they should give Congress an explanation and frankly give the American people an explanation think of all the decision makers who use this data and who need it to be accurate and delivered in a timely manner I mean it's everyone from the individual investor to the Federal Reserve trying to set interest rates well the the I mean explain it there's there's the two surveys and you've got the establishment survey and the household survey what's the difference between the two of them and where are they just picking the survey they like best each month so essentially you have uh one survey that just asks questions of businesses and then another one that ask questions of households and and the Divergence between those two they usually move you know in not quite in lock step but they Trend very tightly together the Divergence between the two that we have today is truly unprecedented where when we ask households how many people in your household are actually employed you know that number hasn't been going up it's actually been going down lately and so you have this huge gap of literally millions uh where we pull businesses and they we keep asking them how many people do you have on payroll and that number keeps going up there there's a few different reasons for why one of which is the fact that if I go out and I get a second job or even a third job because you know my cost of living is up so much I'm having troubl making ends meet Etc every time I go out and I get another job it gets counted as another payroll and so when you have this explosion in in multiple job holders it's causing those numbers to rise now there's there's a few other statistical problems that you know are are kind of in the a bit in the weeds but suffice to say that the the Divergence between these two has never happened to this extent before it is clearly um evidence of a problem and again the fact that nothing has been done to address it or to figure out which of these two surveys should we really be paying attention to that's a scandal now which is the number that we actually get each month that would be the establishment survey so when they say 100,000 jobs were added that's how much the number of payrolls increased in the economy over the last month conversely when we hear aaine about an unemployment rate of 4.0 or 4.3 4.8% whatever the case may be that comes from the household survey where we ask people all right how many of of how many people in this household are in the labor force how many people in this household are unemployed un are employed or unemployed Etc yeah um EJ so commas kept a lid on a lot of economic policies seems like for a couple of reasons um one to just ride this wave of media generated enthus iasm and another maybe to hide her far-left uh past and her her her real socialist um leanings um there are some reports that she's going to come out with some more economic policies um what do you expect to see from her um over the next few weeks um policy-wise I would expect to see a lot of promises probably none of which will actually be followed through on I mean this is this is very typical of of politicians I think in general but one of the really interesting things right now Jordan in this particular moment in modern American political history is the fact that you are facing two candidates who have both essentially you know done the job or at least both held executive office and so the American people don't actually really need to listen to what this person is promising or what that person is promising you can just simply ask what have they each done during their time in office that's part of the reason why you know frankly this whole narrative doesn't make a lot of sense that we keep hearing uh from the from the Walts Camp which is on day one we will do X Y and Z to solve all of our current problems day one was three and a half years ago what have you been doing in the meantime right and and so again you can ask yourself under which Administration Trump or Biden Harris did my standard of living go up under which did it go down under which Administration did credit card debt explode and under which Administration was I actually able to pay down some of my debt under which Administration was housing affordable and under which Administration is it the most unaffordable it has been ever by some metrics and and what recommendations would you have for conservatives um trying to contend against the big government Santa Claus policies of the left I mean when we're up against free uh to uh like bailing out medical bills bailing out student debt um increasing welfare uh increasing child tax credit to $6,000 um all these far left is big government policies um we don't want to sound like Scrooge um but how do we make an articulate case against uh these big government policies um to get people to our side that's a great question you I don't think you can win against Santa Claus quite frankly there's a reason why he is still the mascot for Christmas to this day right you you can't win against Santa Claus and so I think what you need to do is convince people that the other side are not actually Santa Claus they are not giving you anything they are taking from you with one hand to give to you with the other of course you know while their hands are behind their back they take off a little bit you off the top for themselves and and their cronies on K Street here in Washington so I I think we need to help people understand look when the federal government promises to give you something they're making that promise to everybody else too and so is is everyone paying for your free stuff yeah that's true but you're paying for everybody else's too and this is why every time we have a new government program and we have more government spending why it doesn't eliminate poverty it doesn't cause everybody standard of living to go up you know if if these crazy ideas like well let's just give everybody free cash if that actually worked then every third world country in the world would just simply do that because it's an easy way out of poverty but that's not how the world Works EJ um the FED has been very aggressive at trying to bring down inflation the rate of inflation and and now that we have hit under 3% on inflation and in addition to that huge revision that we just talked about on the jobs of over 800,000 jobs um which frankly I he seemed a little surprised on that one at the meeting at the press conference um and did indicate that it may that the labor market may be weaker than thought um what are your thoughts on a rate cut uh coming before the election well I think unfortunately this Federal Reserve has proven themselves to be very very political you know they they are not politically independent they are not data dependent uh it it's sad but it's the reality of the situation and we should acknowledge it as such and and then move on from there uh unfortunately we are we are so close to the election I think it's pretty clear that any rate cut uh is going to have the impact of causing things like Equity markets to reinl yes it is a bubble and and yes it has been you know deflating inflating as the FED has has made different moves this year but it would be a last shot in the arm I would think before right before the election which is not a good look for the fed the other thing is that if you cut rates in September it's not going to be long enough to have any kind of of real impact before the election in terms of the average consumer's credit card rates or the average consumer's uh mortgage rates you for for businesses the loans that businesses are are trying to get as well whether it's you know to build a a new Factory or whether it's just something like they need credit for for their monthly inventory purchases um so the other thing that I think was really really important to remember Lane is the fact that the FED can't actually do anything for the labor market certainly not in the long term we have this Keynesian notion that you know the FED can reduce rates and yeah that's going to cause some inflation but it helps people get jobs you know you may have a temporary short-term effect where you do have an A positive uh a positive effect on economic activity and that can mean more hiring but at the end of the day the FED printing money the fed devaluing the dollar is not what's going to create jobs again certainly not in the long term but I guarantee you it is definitely going to give us inflation the the um mortgage rates have been uh really high obviously as a result of interest rates going up um it hasn't really dampened the cost of housing which is usually you see that difference so housing really hasn't come down a lot if we see the mortgage two two questions if we see the mortgage rates come down and or we see a Camala Harris give away $25,000 in down payments what do you what do you think is GNA happen in real terms here well when when we see things Alaine like the these demand side subsidies like you just mentioned where we're just going to give a a potential home buyer tens of thousands of dollars you know the seller smells blood in the water when you do that and they cause they and they will then sell the house for more money so far from making homes more affordable you make them less affordable look we've been down down this road literally for decades with student loans and in fact the Federal Reserve has actually done some very interesting analysis on this where they found that yes every time you increase not just student loans but grants uh you know whether it's a direct payment doesn't or financing option doesn't matter the more money you put at the fingertips of these young kids trying to go to college the more colleges will increase tuition and fees it's that simple it's not rocket science and unfortunately if we keep doing that with housing we already have plenty of Demands side subsidies if we add to them if we keep doing this you're going to continue to increase costs now in in terms of you know what kind of effect will rate Cuts have unless we're going to get a couple hundred basis points of cuts it's probably not even going to put a dent in the housing Market part of the reason right now is that we have seen a recoupling between interest rates and home prices in other words as home or excuse me as uh interest rates come down people now can borrow more and keep their monthly mortgage payment the same that has historically been the case that's why home prices and interest rates tend to move in opposite directions and have literally for for decades it's been a very tight uh relationship very tight inverse relationship the problem today is the fact that we' have had so much inflation that the cost to home builders to actually create these homes and bring them to Market is at a record high it has never been higher and so the home builders can't afford to reduce their prices the prices at which they are actually selling these homes because they'll lose money so that that's the new uh the new home side what about the existing home or used home side the the problem there is that you have all of these people who in 2020 and even into 2021 were able to get mortgages at two or 3% or at least finance an existing mortgage at 2 to 3% those folks now have golden handcuffs if they sell their home they will lose that mortgage and the result of that is they now need to get a mortgage at seven or eight% sometimes more in certain markets that means you can afford much less house and so you have to sell your home at this huge premium so that you have this massive down payment to put towards the next home and that means you can borrow much less and the interest rate doesn't bite as hard in other words you can keep your monthly mortgage payment you know very manageable this is all Happening by the way with the backdrop of this runaway inflation that has caused the cost of living besides housing to Simply explode and So a family for example having to pay 50% of their take-home pay towards a monthly mortgage payment that would be bad enough in regular times but today it's happening at a time when families don't have 50% of their budget left they don't have anything left at the end of the month by the time you you get through food Transportation costs Insurance rent Etc there's nothing left and they're going into debt which is why credit card debt is now at a record high today it's why things like auto loans the defaults and delinquencies on that type of debt are skyrocketing today at the fastest pace of increase since the Great Recession so it's not it's not as if we can simply cut rates here and it's magically going to cause the housing market to to unfreeze to Tha I wish it were the case but it's not very interesting yeah that's I haven't heard that analysis that's really thought-provoking uh EJ where can our listeners go to uh learn more about your work uh best place to find me is on Twitter or X you know whatever we call it these days but the handle there isre EJ and Tony excellent excellent well EJ thanks so much for taking the time to join us again on Main Street matters America's small business megaphone thank you all for taking the time to tune in and listen Main Street matters is part of the Salem podcast Network new episodes debut every Wednesday and Friday you can subscribe to the show at Salem podcast network.com or wherever you get your pod podcast from and we'll be back soon