Uh, tell us what the situation is.

Well, you know, it's, it's a great set of questions, Marc.

I, I think that obviously if you could avoid a global depression and being Herbert Hoover, that sounds like a good thing, but that's not where we were headed at all.

It ...

A few facts.

The president's right, of course, to think that high oil prices, all else equal, are, are not good for the economy, but I think we have to remind ourselves of a couple of very important things right now.

One, this isn't the 1970s, so the US economy is much less energy intensive than it is.

And not just here, but on so many different issues in the last, in, in recent years?

Tell us what the situation is.

Well, you know, it's a great set of questions, Mark.

I think that, obviously, if you could avoid a global depression and being Herbert Hoover, that sounds like a good thing.

But that's not where we were headed at all.

A few facts.

The president's right, of course, to think that high oil prices, all else equal, are not good for the economy.

But I think we have to remind ourselves of a couple of very important things right now.

And it seems like—do you feel like we've had the balance wrong on—not just here, but on so many different issues in the last—in recent years? Yeah.

What-

I think they understood that-- And sometimes I get that.

I look at games on TV or on the computer and I'll say, "Dang, how, how'd, why'd you swing it?" A-and then I think to myself, "I know why he swung at that pitch," 'cause that's, the, it's tough.

It's tough to hit in the big leagues.

I mean, it's tough enough to hit through the minor leagues, but when you get to the big leagues, everybody's good.

And so I think those two guys recognized how tough it is, and you have to.

And I think that's why they didn't throw guys under the bus.

When you went to see Bobby, you and I had this conversation about why you do it, and, uh, you know, can I, can I just ask you about those moments?

How does that work?

Well, the story, uh, if it's correct, is what I would call more of a long-run story.

So AI in the long run, uh, certainly has the potential to be disinflationary.

It reduces the cost, particularly in service-producing sectors.

Think about the cost of producing what lawyers do or accountants do or engineers or, dare I say, economists.

That could all be disinflationary.

The problem is that's not today, and it's not tomorrow.

Uh, what do we expect from, uh, Kevin Warsh as chair in the other parts?

What does that Congress that we saw yesterday and the Republicans, what do they look like after Trump?

Well, I think from the King's remarks, you know, good policy runs deep.

I think the King was calling for a return to openness in markets, in trade, in tolerance.

I think all those things have been a hallmark of conservatism.

I think there's also a real opportunity to pivot while President Trump is here, of course, to growth, to opportunity, and to full participation in the economy.

What do you expect from the Fed today? And then I guess just as importantly, from the new Federal Reserve, uh, Chairman, Kevin Warsh.

Well, I don't expect any change in the funds rate today.

It'll be interesting to see if there's any change in the language, uh, in the FOMC statement.

Professional economists.

Professional economists from the same set of schools with the same set of thesis advisors and not a whole lot of experience in the world.

There are, of course, some business people and some bankers who come in, but I think widening that listening aperture is important.

There's an old story that during the financial crisis, the Queen of England showed up at the London School of Economics, and she famously asked this question, why did nobody see it coming? And the answer, I think, to the Queen's question was these guys, LSE faculty members, could have been Columbia too, I'm not pointing fingers, hadn't gotten out, weren't talking to people.

So I think that's step one.

Step two is more oversight from the Congress on the Fed's mission creep.

The Fed has thankfully stopped walking back some of the non-financial, non-monetary policy things it was doing.

How do you think policy should intervene to smooth AI's disruptions? Or do you think it should?

We tend to think that the Feds should stay away from political disagreements and disagree over the merits as it

were.

That's absolutely right.

You can make a case right now in the economy for different points of view about the path of interest rates.

The fact that I have one point of view does not mean, for example, that Governor Waller's wrong, because he has a different point of view.

He has a different way of looking at the world.

I respect that.

Looking forward into 2026, which is very, very difficult, obviously, do you think there's more risks to the upside or the downside in the economy?

How do you view the Fed these days?

Well, I think there's a short run and a long run challenge.

The short run challenge is the one in the news, which is, What do you do about rates? You have inflation that's too high.

You have a job market weakening.

I think the case for a lot of rate cuts is pretty weak to the extent that their worries about employment, many of those are structural.

They're AI.

They're changes that really are beyond the Fed's purview.

But what are the impacts, do you think, on the U.S. labor force? There's a lot of consternation out there.

How do you view the Fed these days?

Well, I think there's a short-run and a long-run challenge.

The short-run challenge is the one in the news, which is, what do you do about rates? You have inflation that's too high, you have a job market weakening.

I think the case for a lot of rate cuts is pretty weak, uh, to the extent that there are worries about employment.

Many of those are structural.

They're AI, they're changes that really are beyond the Fed's purview.

So-I think the Fed's watchful waiting makes sense.

But what are the im- impacts, do you think, on the US labor force? Um, there's al- lot of consternation out there.

What about you?

Yeah, I would agree with that, Larry.

I think of it in Don Rumsfeld terms.

So I think of the known knowns and the known unknowns, and then particularly the unknown unknown tail risk that I do worry about.

For known knowns, The tariffs are obviously, if they all stick, we'll see, post-court decision, have the incentive to slow growth and lead to stagflation.

But those are not enough to cause a recession by themselves.

They may be annoying, but they're not enough to cause a recession.

And that militates here.

Glenn Hubbard of Columbia Business School on our new tariffs.

Tariffs are a tax.

Uh, they're not really inflationary.

They're one-time changes in the price level.

I wouldn't recommend them, but I, I don't think inflation is the biggest reason.

I think the reason is you're taxing and distorting supply chains.

You know, people forget two basic things.

Does he need to widen the reach of his view of potential chairman? Does he need to go beyond the comfortable Trump minions and look out to Clarida, Hubbard, and others?

Look, I think the president's got reasonable names.

He'll do what he's going to do.

I think the show that we saw yesterday and other things are harmful for the Fed and for his own goals of getting lower interest rates.

It's not obvious to me that Fed policy is too tight at the moment.

If you just look at a simple Taylor rule, and it is obvious to me, if you continue to beat up the Fed, you risk raising inflation expectations and you risk raising term premium in long rates.

And it's the long rates that count.

When you're teaching your class at Columbia, how do you talk to them about just tariffs in general? How should they be used? How are they not used well? Well,

Does he need to widen the reach of his view of potential chairmen? Does he need to go beyond the comfortable Trump minions and look out to Clarida, Hubbard, and others?

Look, I, I think the president's got reasonable names.

He'll do what he's going to do.

I think the show that we saw yesterday and other things are harmful for the Fed and for his own goals of getting lower interest rates.

It's not obvious to me that Fed policy is too tight at the moment, if you just look at a simple Taylor rule.

And it is obvious to me, if you continue to beat up the Fed, you risk raising inflation expectations and you risk raising term premium in long rates, and it's the long rates that count.

Are we at a point, like at other moments, including the seismic McChesney Martin moment in 1951, where we risk Fed independence?

I think we are at that moment.

Do tax cuts pay for themselves?

Almost never, but in general, that's not the right question to ask.

The right question to ask is, what's the bang for the buck? If I want to increase the capital stock, or if I want to increase how many businesses get formed, whatever the policy question is, how effective is the tax change in some of that?

But Glenn says when you cut taxes for corporations, that can lead to more innovation and productivity, which can accelerate growth in the longer term, because companies might end up building more factories, buying more high-tech equipment, and investing in more cutting-edge research.

If we have tax policy that's more favorable to business investment decisions that corporations or small businesses make about the goods that they buy to produce other goods, that can increase the size of capital, increase the output of businesses, and increase wages.

So that's a very favorable dynamic.

To what extent can tariffs be used to pursue America's national security goals?

They can be, it's not the only one perhaps or even the most effective.

If you think about the pure defense and national security issues with China, things like export controls, technology controls, those may be more effective.

in dealing with China as opposed to tariffs.

China has many things.

I guess I'm less concerned about who makes children's toys as I am who makes defense equipment that goes into aerospace.

And so I think we have to be careful.

How would you address this moment and take advantage of this opportunity where we are in our economy to address the real concerns of Americans who have been left behind by sort of manufacturing and globalization, technological advances? What are Glenn Hubbard's solutions?

His book, The Wall and the Bridge, set out some of his ideas about how to invest in the country and the economy.

It's a way to get cash back.

Economists for years talked about so-called agency problems in the company, that there may be too much in the way of internal finance that gets wasted.

Paying the money out stops that.

Dividends tend to be very regular.

Companies don't like changing their dividends a lot and then having to bring them back down.

So share repurchases are one way to get cash back to shareholders.

Well, if it's undervalued, why are you selling?