When the US will feel pain from Trump's tariffs

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When the US will feel pain from Trump's tariffs  "How long can the world's greatest debtor remain the world's greatest power?" Former Treasury secretary Larry Summers reacts to President Trump's "big, beautiful bill" on "Fareed Zakaria GPS." #CNN #News

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00:00This law made me ashamed of my country. That was the headline of a recent op-ed in the New York

00:05Times written by the former Treasury Secretary Lawrence Summers. He was responding to what he

00:10described as the cruelty of the cuts to social services contained in Donald Trump's big beautiful

00:17bill which was recently signed into law. And of course it's not the only economic policy of the

00:23Trump administration that could put a strain on the average American. Another recent one is tariffs.

00:28Joining me to talk about all this is the former Treasury Secretary, Larry Summers. Larry,

00:34welcome. Tell us, you know, tell most people who may not have been following this as carefully as

00:39you have, what is the thing that offends you most, that upsets you most about this,

00:45what has just passed? So there's numbers and there's stories, Fareed. The numbers are that

00:53this is the biggest cutback in the American social safety net relative to a baseline that we've ever

01:01had. If you look at the welfare reform bill that was passed during Bill Clinton's presidency or if

01:08you looked at what happened at the beginning of Ronald Reagan's presidency, the cutback here

01:14is a much, much larger cutback. Those are the numbers. The stories which I heard from my daughters who work in

01:25medicine in northern New Hampshire really are harrowing. There are stories of people who used to be able to

01:33get rides to the hospital for their dialysis treatments and now won't be able to. Stories of people who are

01:41facing discharge who now will have no place at all to go and hoping for a homeless shelter. Stories of

01:52people who needed the kind of intensive care that the hospital can provide but can't get it because all

02:01the rooms in the hospital are filled with patients who can't be discharged because there's no Medicaid

02:07Medicaid supported rehab facility. So it's the combination of the numbers and the human impact

02:20that have left me very troubled by this legislation. I think we can be better than this as a nation.

02:33And yet despite these cuts, Larry, it adds trillions of dollars to the debt. We are now running a deficit

02:43that is six and a half percent of GDP. What do you think, you know, where does this lead us? Are we going

02:52to be able to find markets to fund this kind of deficit spending?

02:57You've touched on what I think is a very important issue that nobody can know the answer to.

03:05How long can the world's greatest debtor remain the world's greatest power? And there are all kinds

03:12of reasons why people want to invest in the United States, why they want to invest in treasury bonds. So

03:19I'm not somebody who's got a track record of being cry wolf about the budget deficit or the accumulation of

03:29debt. But here it is, we're in good times and we're borrowing at such a heavy rate that our debt is going

03:38up much faster than our income in good times when we don't have a major emergency that we have to spend

03:46money on. And that's not something we can do forever. And it's the responsibility of those

03:54who are stewards of our country to try to put things on a more sustainable path.

04:02So, Larry, you look at the deficits, you look at the tariffs and the chaotic way in which they've

04:07been put in place. And, you know, they're now we're at very substantial tariffs, much higher than

04:12Smoot-Hawley on average, highest in a century. Why has there not been much of an effect on the economy

04:19or the stock market so far? You know, there has been, Fareed, a economist who've studied

04:26populist economic policies. And in a way, that's a description of what we're doing. You follow

04:36the short-run instincts of large numbers of people. And that means tariffs to protect jobs. That means

04:44borrowing to finance spending. That means cutting back long-term expenditures. And with the record,

04:52this has been tried a lot in Latin America, in various European countries. And the general

05:00experience is that it looks pretty good in the short-run and pretty terrible in the medium to

05:07long-run. And so when you eat your seed corn, you can eat well for a while, but then you have a problem

05:16down the road. So, yes, I think it is fair to point up that things have been less grave so far than many

05:29expected. But I think to take away a sense that all's well and that these policies are going to produce

05:40success, I think that would be very much a premature conclusion. And we all need to be watching the data

05:46very carefully going forward. Larry Summers, always a pleasure. Thank you. Thank you.

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