"Varney and Company" is over for today but here's the Hot Money Show.
Thank you, sir.
Donald Trump says the economy is roaring and the numbers back him up. Welcome to "The Big Money Show". I'm Dagen McDowell with Lou Basensase, Brian Brenberg, Jackie Damage Less, and with us for this hour, Marcus Lemonis, host of The Fixer. IBM and Micron hosting multibillion-dollar investment in the United States.
Income is at the highest level in a decade so the confidence levels, which means something over the last 10 years, don't think they go beyond that, highest level of confidence in our economy.
According to new Treasury analysis, Donald Trump's economic policies putting the US on track to narrow the budget deficit. The president's sweeping tax cuts will change $190 billion next year for you, $1,000 for the average filer. All this despite a 22-day government shutdown. You've been out of work for three weeks and nobody notices, are you really that important and necessary?
What do you mean? You are asking if I am necessary?
I was going to pivot but you are welcome to talk about anything you would like. But you, better than anyone sitting here, have your hands and arms around the pulse of the consumer. Is the economy roaring?
No. The consumer is under a lot of pressure, households under a lot of pressure. There are parts of the economy doing better and the deficit spread is shrinking because all of the cash that's coming from tariffs is sitting on the shelf on products and offsetting some of that. The biggest debate I have is the small business confidence is at a 10-year high. I am sorry to say that is categorically false. Small business owners more concerned than they've ever been about the cost of goods coming to them, the cost of labor in this market is frightening to them. Their ability to get money from banks is tighter than it has been in a while. Doesn't mean they are running for the hills but it is not as biased as it has been in 10 years.
What needs to change then?
Interest rates need to come down. It is philosophically but categorically needs to happen and we are not talking a quarter of a point here or there but we need a full one-point reduction in the next 12 months for businesses to start roaring, for capital expenditures to start leading CEOs' desks with signatures. Until that happens, hiring is on hold, capital expenditures on hold unless you are being incentivized to do so.
Anybody jump in here, take the ball, run with it. I don't mean, I am leaning out of frame. Do a live shot to get me and Lou in the same shot. No. As I go to you, as you take the ball, you go --
I don't dispute small businesses are uncertain, feeling the pinch from tariffs, don't know what will happen. I understand the backbone of the US economy but there are bright spots as well when you have investors buying stocks, they have confidence, earnings season, corporate earnings have been robust. We haven't seen guidance that's been too protective and you've got the 10-year going under 4%, that was a pretty critical move to me. You've got investors saying we have confidence in the stock market, all the pieces of the president's plan not happening all at once will come together in a better picture that ultimately probably down the line will help that small business investor. We highlighted tax savings from the Big Beautiful Law, for tax savings as well. You have tariff revenues on the table. I know there are not enough to cure all but not insignificant. Most of all you've got other companies, countries investing in the United States, it will take a while to pay off. The consumer and gas prices, oil under $60 a barrel, positive signs the picture is starting to work.
The distinction is between investors and operators snatching time to what we are looking at in the future. If you look at the map of the US, because of AI, state-by-state 20 to 25 states are in the economic recession and the engine of this economy has always been small business. Clarity on most tariffs but we need more. If you look at job openings they are concentrated in small businesses, not finding the right labor where there is too expensive, more qualified. We need to see these policies come into effect and interest rates to have this take off but I would agree the outlook is optimistic. There is hope on the horizon and they need to take root but the question remains is there something, a risk we are not thinking about, private credit, and other geopolitical conflicts we are unaware of? That could sabotage the underpinnings.
Are you rooting for the Supreme Court to strike down the tariffs?
I am rooting for the Supreme Court and organize the cadence in which tariffs are being levied. You see manufacturers -- India, China, India, China, this place, that place, can't move your manufacturing fast enough. You have to take on product. If tariffs get struck down and this idea everyone will get a rebound check is fine, puts total chaos out there. Tariffs are not a bad thing principally, they are a bad thing when they are not predictable.
We debated whether they should be done through IEPA -- you could do them through other sections of the code where you've got to make your case over time. Would you prefer to see tariffs done that way and not through IEPA?
You don't need to find 19 loopholes to get in place, doesn't change every hour as business is forecasting cash and inventory. How are they making decisions? The biggest concern is not tariffs, you start to see CEOs and boardrooms tell people there's going to be a reduction in labor because of AI.
Glad you brought that up. A note from Goldman Sachs, according to his analysis this is the worst job market or outlook outside of a recession in 50 years. Let me just dig in a tad into this. We heard this from Kevin Hassett. Second quarter GDP growth and what is expected for the third quarter, economic growth is running almost 4% but according to Goldman Sachs, the shutdown is masking somewhat the missing data from the shutdown, what's going on with weakening labor trends. The labor outlook in surveys like manufacturing and service growth has fallen well below the mid-point of 50, consistent with employment stagnation or contraction. Household surveys are very negative and the change in unemployment has never been this bad outside recessionary periods since the University of Michigan started asking a question in 1978. What the GDP is telling you might not be correct.
We are adding an average of 35,000, 3 of the last 13 have been negative job growth, the labor market is not a great place. The question becomes is this another technological innovation like we've seen with the computer, the dot-com era, electricity that leads to some creative destruction of jobs and new job openings. Productivity gains go from 1%, 1.5%, we haven't seen that kick in yet.
That's just a bet on productivity story businesses are making. Tariffs don't affect that. Interest rates affect, companies might borrow more. I doubt it. You've got the policy environment, those are separate except I would argue if you got a lot of growth in the economy, that's how you facilitate the transition from not hiring people anymore to parts of the economy that are growing. That's where the Trump agenda matters.
