CEA's Miran Says Tariffs Won't Have Lasting Impact on US Inflation

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00:00There's a ton that's going into this bill, and that is why it's even so challenging for Speaker

00:05Johnson to get all these different factions on board. Something else you don't have in your

00:09paper, though, is what's going on in salt. Do you expect the salt cap to raise, say, 30K, 40K?

00:18Yeah, so I do expect there to be salt relief. The president has expressed support for this,

00:22and I think the president will deliver salt relief to American households.

00:25I don't know exactly what the number will shake out. And as you know, this is how negotiations

00:29happen. One side says what it wants. The other side says what it wants. And the president is one

00:33of the best negotiators in history, and he's shown over a career spanning decades that he can forge

00:37hundreds of deals. And I think he'll forge another one right in front of us now.

00:42There is a good element in this that you're focusing on growth, and I do think that that

00:46is important. You can't cut too much. You have to offer some sweeteners to keep growth going,

00:50to keep the revenue side of things going. I do wonder, though, how much of a constraint the debt

00:55side really is, given the fact that it looks like things are getting a little yippy again

00:59in the bond market?

01:01Thanks. So I'm so glad you mentioned that, because the truth is that we do have a plan

01:05for deficit reduction, and we will deliver lower deficits. It just happens that some of those

01:10things fall outside of the scoring process, how CBO scores the bill, because of the rules that

01:14Congress gave it. And so, for example, we're going to get better growth as a result of this bill,

01:18as a result of deregulation, as a result of the trade deals we're negotiating.

01:21We get growth to 3%. That generates $4 trillion additional revenues over the 10-year budget

01:26window above the CBO baseline. That doesn't go into the scoring process, because CBO doesn't

01:31account for improvements in economic growth. We're going to bring in hundreds of billions

01:35of dollars of revenue through tariffs, right? That's another point off the deficit.

01:39We're going to bring interest rates down through expanding the supply side of the economy,

01:42through more effective tax rates, through deregulation, through pushing the supply side out to

01:47meet the demand side. We get interest rates back to where they were pre-COVID.

01:50That's another point off the deficit. And then there's cuts to waste, fraud, and abuse,

01:54some of which are in the bill, some of which are being accomplished by Doge. That's another

01:5750 to 100 basis points off the deficit worth of GDP. So I just gave you 3 to 4% of GDP off the

02:03deficit. None of it falls into the scoring system that the CBO is doing. And yet the conversation

02:08is, for some reason, dominated by CBO.

02:10Well, part of the reason why it's not being scored is because there are a lot of contingencies before you

02:15get to all of these realities. And I'll just pick out one, since we were talking about the bond market,

02:18the idea that yields go down as you increase the supply side of the economy. There's a pretty

02:23bumpy path to get there. Do you have enough faith in that, that you ignore USGG 30-year

02:30index and GP, that you ignore the 30-year yield, you ignore the 10-year yield in the near term,

02:35and just have faith that longer term it'll work out?

02:38Yeah. So look, you know, we're still dealing with the lingering inflation pressures due to

02:44President Biden's reckless fiscal policies. But we are bringing those inflation pressures down

02:48through pushing out the supply side of the economy. We've had now three inflation reports in a row,

02:53below expectations. Core inflation on an annual basis is running the lowest level since March of

02:572021. And as we continue to control inflation, it will provide scope for interest rates to come

03:02down. I have no doubt about that. Well, Steve, you know, the American people are concerned about

03:07prices going up, the latest being Subaru. They're going to be increasing their vehicle prices,

03:11citing, quote, market conditions, aka concerns about what's going on with trade and tariffs.

03:16How can you say you're delivering on inflation when actually companies are warning that prices are

03:21going higher? Yeah. So look, you know, imports are only 14 percent of the economy. The ability of

03:27the ability of those types of things to really move the needle on inflation are limited. And what we

03:32saw in the tariffs in 2018, 2019 was zero macroeconomic evidence of inflation. What we've seen so far

03:38since the tariffs have been. And don't forget, we've been introducing tariffs since day one of this

03:42administration. And what we've seen as tariffs have have started to come up has been no real meaningful

03:47macroeconomic effect on inflation. And so while there can be volatility in the short run, I do believe

03:52that U.S. importers have flexibility about where they get stuff from. They can make stuff at home. They can import

03:57from other countries that treat us better, that rate trade deals with us as opposed to countries

04:00that treat us worse. And that flexibility gives them leverage. That leverage allows them to force

04:05the burden of the tariffs on the other party, on other countries. Now, in the fullness of time,

04:09that'll happen. But in the short run, can there be volatility in prices and economic activity just as

04:14there were in financial markets? Yeah, it can happen. But over time, we have the leverage and that'll

04:19allow us to force the burden of the tariffs onto other countries. When you think about tariffs, do you

04:22think they're going to be revenue raising or do you think that we're going to get deals so the revenue

04:26raising won't be as high? And do you have a number within the White House that you're discussing with

04:31how much you want to get in terms of revenue raises to offset this tax bill? Sure. So first of all,

04:38what we've seen with some of the deals we've made so far is that there's still a 10 percent tariff in

04:42place. And in the case of China, there's other there's other tariffs to the fentanyl tariffs,

04:46the tariffs from the first term as well. And so even if we strike deals, odds are we'll still be

04:50collecting some some tariff revenue. But even if we end up bringing those tariff rates below or down to

04:55zero, you know, that means more economic activity. If we're writing deals because we're succeeding in

05:02opening foreign markets to our exports, allowing American firms to sell into foreign markets the way

05:07we allow foreign firms to sell into our market, that means more economic activity here because of

05:11more exports. And if there's more economic activity, more exports coming out of America,

05:15going to foreign markets, that's more income that gets taxed at the personal level, at the corporate

05:20level. And that's lots more revenue, too. So either way you slice it, we get revenue from tariffs or we

05:24get revenue from higher GDP because we're selling more to other countries.

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