Does it give you any more confidence in the Fed's independence from the president that they did the opposite of what Trump wanted yesterday?

Well, it was striking.

Everyone was looking when he appointed Kevin Walsh because Trump was making a big point of saying, well, whoever I appoint, they're going to lower rates.

And Walsh historically had been an inflation hawk, meaning he'd want high rates.

So the question was, OK, so Trump says, I'm going to appoint someone who wants low rates.

And Walsh comes in there.

And the question I think everyone had was, well, is he going to do what Trump tells him to do? Or is he going to go with whatever his actual sense is about the economy? And this indicated that, well, for now, at least it looks like he's going to go with his sense about the economy.

Can you respond to his messaging? Is this optimism true? Is it just strategic framing?

So does he think we're witnessing a bubble?

Yeah, I mean, to me, it's very hard to see how it's not a bubble.

So we have price to earnings ratios in the stock market.

They're just about the same as what we were at the peak of the tech bubble in the '90s, so around 40 to one.

And it's very hard to see a story where future profits will rise enough to make those stock prices make sense.

So it looks to me very much like we have a bubble very similar to tech bubbles 'cause you have a lot of companies with enormous market capitalizations, uh, things like SpaceX, and SpaceX loses money hand over fist, as does OpenAI, as does Anthropic, and it looks to me like everything's set up for a really big crash.

Could it hit sooner because of a backlash against data centers?

Absolutely.

Right.

That's nuts.

I mean, well, but that's kind of what we're doing in the Social Security debate that we're going, oh, you know, people want to have big cuts of Social Security.

We don't want to do that.

We're moderates.

And that's what they're doing here.

So I think it's really important not to accept their framing of the debate.

Are you worried that this AI bubble, if and when it blows or when it blows, could present yet another risk to the overall financial system?

So am I correct in identifying the fact that the richest man in the world has prevented this government from collecting taxes from the richest Americans, and that is why the debt will continue to climb?

Well, I'll try to be fair to Elon Musk.

He certainly impeded it.

So, I mean, the whole point of the money that Biden had allocated to the IRS was to make it so we can collect taxes.

The Congressional Budget Office estimates that $600 billion a year goes uncollected.

That's almost 2% GDP.

That wouldn't quite balance the budget, but a good chunk of the way towards reducing the deficit is.

So elaborate on why you think that the issue of corruption is at the heart of what threatens our economy and also may be Trump's undoing.

... that would be attributable to that stock.

Yeah.

So, so it's, it's a very concrete measure, you know.

So, uh, there, there's issues how you measure earnings.

We can come to that.

But just, you know, just taking straight up earnings they report, you know.

So, so those were at record highs.

If, if it just has to provide [laughs] enough competition that it puts downward pressure on prices, and then the big US AI concerns can't live up to the valuations, um, that, that are driving their stock prices.

Could you walk us through how you reach that number and what that means?

Yeah, so I'm comparing this to the last budget that we had under president Biden.

So at that time we're spending 860, I think it was 864 billion on the military.

So if you adjusted that for inflation, it'd be a bit over 900 billion today.

So you compare the 1.5 trillion to 900 billion, the increase is 600 billion.

And we have about 130 million households.

That's not a ballpark.

Who who bears the financial burden of what they are trying to opt for?

Um, uh, so the question in my mind is, um, why that? What, what, what, were you just getting anxiety here? Or you, you know?

Well, it was getting anxiety.

Um, give some background.

Back in the '90s, I was, you know, I was an economist.

I'm getting old.

So I was looking at the internet bubble and seeing it grow in '97, '98, '99, going, "This looks like a bubble, and looks like it'll be bad news." And, you know, of course, the bubble did burst.

And, um, there, there's a conventional view, which I'll just say I think is very badly wrong.

And, and it doesn't look like either of those things are on the horizon, but again, why don't you explain your, your thinking about it.

Um, uh, so the question in my mind is, um, why that? What, what, what, were you just getting anxiety here, or you, you know?

Well, it was getting anxiety.

Um, give some background.

Back in the '90s, I was, you know, I was an economist.

I'm getting old.

So I was looking at the internet bubble and seeing it grow in '97, '98, '99, going, "This looks like a bubble, and it looks like it'll be bad news." And, you know, of course, the bubble did burst.

And, um, there, there's a conventional view, which I'll just say I think is very badly wrong.

But again, why don't you explain your, your thinking about it?

It's exactly what he just did to our NATO allies who he's been dumping on every possible day, saying that they weren't here to support him on a war that he never justified.

I just want to go back because I don't think we should ever let this drop.

We had a deal with Iran that was preventing them from developing nuclear weapons.

And it wasn't a question of trusting them.

So we should just be 100% clear.

No one was trusting Iran.

I wouldn't trust them.

It's the lack of transparency.

for our listeners who don't know much about it?

Yeah, well, the average check is around $1,500 a month.

So it's not great, but it's the core retirement income for people.

And for a lot of people, it's most of their income.

For about 10% of beneficiaries, it's 90% or more of their income.

And for more than half of beneficiaries, it's more than half their income in retirement.

So it's a really, really big deal for older people, for retirees.

Give us your take on AARP's stance here.

So at what point do you think people will stop believing, or the press, the credulous press, stop printing these ridiculous articles about how Social Security is going to go broke.

Well, there's a strong incentive to do that.

Obviously, there's a big lobby that would like to see the programs at least cut, if not actually privatized.

There is a shortfall facing the Social Security program.

The question is how we think about it.

So you have a designated tax, a 12.4% payroll tax.

It only applies to income below a cap.

That's too prosaic.

You know, even if we aren't economists, we're not wrong to be concerned about this forced inevitability vibe, are we? It, it just doesn't sound like building a better mousetrap.

Well, I think for the most part, it's probably fair to say a lot of the people involved in AI don't know what they're doing.

Um, and, and I'm saying that in all seriousness.

So we get all these stories about AI models that you've probably heard the term, they hallucinate, they make things up.

And, uh, again, I'm not, uh, I shouldn't assign human characteristics to that.

They're not people.

But the point is that they're ill-designed models.

How, how grounded is that, and how meaningful is that in this conversation?

Was there anything in the numbers that did surprise you?

Well, important to realize it goes beyond food and fuel.

Those are the biggest drivers, but you really see it across the board.

I've been focused on medical services because that's been a main driver of inflation for decades, really.

And that did somewhat come under control with the pandemic and the immediate recovery.

But those are up 3.6% year over year.

So we're seeing it in other areas as well.

Wages, however, are not keeping up with inflation, which does not fit my understanding of how a tight labor market is supposed to work.

So, as you watch this speech, uh, from your vantage point in Oregon, Dean, um, can, what stood out for you most?

most?Well, this is kind of a greatest hit of crazy.

I mean, uh, you know, if I were one of his staffers, in all seriousness, I'd be wondering about the man's sanity.

I mean, this is utterly divorced from reality.

I mean, just starting from the word go that he inherited a mess.

Uh, no, um, he inherited a very strong economy.

That's not my assessment, that's just universal assessment.

So, Dean Baker, what exactly is he talking about? What is President Trump proposing? How is it with the Republicans in control, they have not passed one, um, uh, replacement for the Affordable Care Act in years?