Jim Bullard is the former president of the Federal Reserve Bank of St. Louis. He's one of the nation's foremost economists and respected scholar leaders. In August of 2023, he became the inaugural dean of the Mitch Daniels School of Business, reimagined at Purdue University. We're going to talk a little bit about why he took on that challenge and what the Mitch Daniels School is and why it is so special. He has, in his 15-year tenure as the president of the Federal Reserve Bank of St. Louis, made him the longest serving Federal Reserve Bank president in history. He's part of the Federal Open Market Committee. He earns significant praise and accolades for his long-standing leadership and innovative thinking, helping to guide the direction of US monetary policy, which we also know influences global monetary dynamics and policy. Recognized as one of the 10 most influential economists of the world, and we are lucky to have an opportunity to interact with him. We did get that chance a couple years ago. He was born in Wisconsin, grew up in Minnesota, earned his Bachelor's in Economics and Quantitative Methods and Information Systems at St. Cloud State University in Minnesota. He received his Doctorate in Economics from Indiana University in Bloomington. A true Midwesterner. And I want to thank you, Jim, for being here with us. I know you've got a lot of demands on your time, and we really appreciate you spending some of that time with us. Welcome.
It's great to be here. I'm looking forward to the discussion. Should be great.
Awesome. I'm gonna introduce Eric in a moment, but I just wanted to open up with just a few questions for you before we get into the real meat and the nitty-gritty of the actual topic here. Maybe you just tell us a little bit about you. You made this transition from the public sector of the Federal Reserve and you join the reimagined Mitch Daniels School of Business. I thought maybe if you could just share a few highlights about what attracted you to this opportunity, what are the strengths, what's unique about the program, why did you choose Purdue?
Yeah, I mean, Purdue is one of the premier technical universities in the US. The engineering school on campus, which is very much the biggest, is ranked number four in the nation. So it's MIT, Stanford, Berkeley, and Purdue. But Purdue is much bigger than all of those. Purdue will turn out more engineers this year than anyone in the country. So the idea is to grow the business school, which has been here for a while and is good, but grow the business school to a larger size and intersect more effectively with engineering and with our science group, which is also very good. And so by doing that, we're going to create a distinctive brand around the Daniels School, somewhat different from some of the other business schools around the country. And we certainly have many dimensions on which we're doing this. We've also got a freedom and capitalism component. We've got the econ department here in the business school, which is different from some of the other business schools. So lots to like and lots of good things going on.
Great. I mean, if you don't mind just building on that a little bit, you've got a great business school, you've got a huge scale in engineering, this third leg of technology. What about those three legs allow you to differentiate the program from others? And I guess a question for me is, is it more about that these three things or the capabilities at Purdue allow you to differentiate yourself, or is it that these are things that leaders of the future need? Is it more kind of supply driven?
Oh no, it's absolutely a vision of what the future of business is. And what the last 25 years has been, I've said technology ate the business world quite a while ago, but that's going to just accelerate even more going forward. And I think there was a time in business school education where you teach people that you're just going to produce something and this is all about managing that process or getting the financing behind that process. But these days, I think it's become very clear that if you don't know the technology, you can't really run the business. So you need people that know the technology and know the business, and so you need both dimensions. That's been around for a while, and other business schools probably say they can do that, but we have a lot more credibility on that than most. And I think this will enable us to push forward our integrated business engineering program, integrated business and science program, and including computer science. We got major gifts from the Lilly Foundation here now, close to the top 10 in market capitalization in the country. So we've got a lot of support and a lot of enthusiasm. So it's really been fun so far.
Amazing. Yeah, so many places we could go with that. I'd love to explore kind of what this future of work might be and what the future needs are, but I want to step back. I want to let you and Eric Goldstein have a conversation. Eric is the chief growth officer of TIAA. He's responsible for working with senior management there to shape the creation and execution of TIAA's corporate strategy and development efforts. Before TIAA, he spent 20 years at JPMorgan as managing director and head of their North American Insurance Mergers and Acquisitions practice. Before JPMorgan, he was a consultant at McKinsey in the firm's financial institutions practice. He has a JD from Yale Law School and his undergrad degree from Harvard University. He's been a longtime member of the Outthinker Chief Strategy Officer Network. His father was a very well-known renowned economist as well. And we're excited to have you, Eric, join us here. And I am going to disappear and let you guys have a conversation, and I'll come back towards the top of the hour. Thank you.
Well, thank you. I feel really privileged to be able to play this role here with Jim. We're very lucky to have you, Jim. So look, I thought what we want to do for this group is paint a picture of the current economic and political moment we find ourselves in, which is a pretty fascinating one. And I think we can do that by covering three areas. One is your view of where we are in this macroeconomic moment, the US in relation to the world. Then we can add the political context. Obviously, we have a new administration starting any day now with a very well, I would say, an agenda that has been spoken about, particularly around tariffs and immigration and taxes. So we'll talk about that, add that on to the economic moment we're in. And then finally, I think, add the context that any political administration inherits a monetary and fiscal situation that they can't avoid. And so we'll add that on top of it. And collectively, I think when we go through all that, there will be a really good picture for this group on where we are and where we're likely to go. So with that, why don't we just dive in, Jim? Just ask an open-ended question. So where do you think we are macroeconomically here in the US in relation to the rest of the world? How would you describe it starting with this new administration?
Yeah, I mean, I think the new administration is starting with very good initial conditions for the economy. So let me describe that a little bit. You know, if you track the economy every day over the last three years or so, you know that since the summer of 2022 when the Fed started really raising rates a lot, there have been predictions of imminent recession in the US, most recently in the July time frame this past year. None of that happened. The last 10 quarters of growth rates have all been over 2%, except for one quarter. And there really hasn't been anything even close to recession during this last 10 quarters. So that's two and a half years of above-trend growth in the US. And now you've got a new administration coming in which is probably more business-friendly, more growth-oriented, and wants to implement policies to even build on the 2% plus growth that we've had. So we'll see if they can be successful or not, but they're basically in a very good starting position. The labor market also has done very well. Again, there was a little bit of concern just this past year, but that turned out to go away in the data that came out in October, November, December, and the most recent jobs report. So you've got unemployment very close to what many people think is the natural rate of unemployment for the US, low to mid 4% range. You've got continued economic growth on the labor market. You've got other indicators of labor market performance which are also doing very well. So even if you don't want to just look at the unemployment rate, you can look at many other things, job creation and many others, and you'll get a very good picture of the labor market. So that's good. You've got inflation. Inflation has been the main story for the Federal Reserve over the last two and a half years. It's been an amazing policy experiment and a successful one that brought inflation down. On CPI, headline inflation was at over 9% on a year-over-year basis. Now, after yesterday's report, it's running in the low 3% range. So 600 basis points on inflation reduction without having a recession. That is one of the most successful monetary policy moves that we've seen in the whole post-war era. And I think what's happening today is that you're seeing interest rates realign to a steady-state growth scenario or an above-trend growth scenario. And what I mean by that is you've had this inverted yield curve over the last two years because you had this prediction sitting out there that the US would soon go into recession. None of that happened, and now people are giving up on that with the new administration coming in. So now you've got an upward-sloping yield curve, and I think there may be a steeper yield curve ahead. Some of that will come from the short end going down a little bit more as inflation continues to recede, and some of that is because the long end of the curve probably needs to trade in the four and a half to 5% range or even a little above that even in normal times. So given this constellation of data, I think that's a lot of what's happening here is that bond markets are reorganizing their thinking about what the prospects are for the US economy and what the prospects are for inflation, and that's all taking place on a daily basis. So maybe I'll stop there and not go on too long about this.
So I have two questions come out of that. One is, so where do we sit in relation to the rest of the world? Like, how does the rest of the world think about us and how we're doing relative to them? And how does Europe and China doing affect all of this?
Yeah, I think there's a lot of talk about American exceptionalism. I've never really known what this phrase was talking about, but at least in this context, you can give it pretty clear meaning. The US is growing, for a big successful economy, is growing pretty rapidly. Europe is having much more difficulty, in Germany in particular. If you check the FT today, they're asking what's wrong in Germany. They'll have two years in a row of contraction now, and they're the engine for European growth. They've got some success elsewhere, Spain, but basically Europe is not looking very good from a growth perspective. Their inflation situation is under better control, so they've got a lower interest rate environment that's putting downward pressure on the euro, upward pressure on the dollar. So you've got the strong dollar situation. For Japan, that means a weaker yen and a stronger dollar. But I think it's pretty clear that the Japanese feel that 160 is too far on yen-dollar, so I think they've gotten more hawkish as the yen has weakened to these extraordinarily low levels. And then China, I think, is having trouble, but you should keep in mind that's still an economy growing faster than the US. The fastest might be India over the next couple of years, but faster than we are, but not as much as before, and certainly with a lot of clouds on the horizon there. You know, many types of problems that need addressing. My general feeling on China is that they're headed for a middle-income trap, and we can talk about that in more detail. So given that constellation, people are saying the US looks really good. I would say one other thing that you should keep in mind, you all know this, but the rest of the world's not doing that well. A lot of our corporations are driving a lot of their profits from the rest of the world, so it's not all good news. You'd really rather have everyone humming, moving on all cylinders, and we don't have that situation. So the global situation is a little bit weaker. That would be a minus for the US outlook, even though I gave a lot of bullish factors here.
Excellent. Okay, we could talk about the global economy for the rest of this conversation, but a good starting point where we are. Let's talk about the most obvious thing. We have a new administration starting in a couple days. That administration has lots of goals, as you pointed out, a lot of it around growth, lowering taxes, deregulation, but also a lot of it comes into conflict with other goals like lowering inflation. So it's interesting no matter what happens. So why don't we talk about that? Why don't we talk about what you see as the goals? What really are the goals? Obviously there's a lot of talk, but what you think really are the goals of the new administration when it comes to the most important things as it affects the economy, and what realistically you think will get done, and how will that affect the economy?
Yeah, I mean, I really do think the overall goal is economic growth. And the first Trump administration did have success on this dimension. I argued at the time that the lowering of the corporate tax rate, which was accomplished in the bill passed in late 2017, did exactly that. A lot of that was anticipated as that bill moved through the Congress and was eventually approved. But the US corporate tax rate had gotten out of line internationally because a lot of the other countries had made adjustments and we hadn't made any adjustments. So even the Obama administration had proposals to lower the corporate tax rate, but they didn't want to go as far. And then when the Republicans came to power, they were able to push it down quite a bit. So that does revalue the US corporate sector up, and you certainly saw that during that period. Now what's happening here is that you can only play that trick again if you're going to go down to an even lower level of the corporate tax rate, which I wouldn't rule out entirely, but I don't think this Congress will be able to do that. And what they're talking about is really extending the other parts of the tax cuts that were implemented previously. That's not going to be that stimulative. That's just maintaining the existing law the way it is. And there could be a big lift just to get that to happen, to get those reauthorized. So I don't have quite as much of the policy that has to go through the Congress won't pack as much of a punch as it did last time around, because I really think it was the corporate tax issue that was the biggest one. So one thing, I think a lot of people have talked about tariffs. Let me push back against the idea that tariffs would be inflationary. I don't think that's a good model of inflation. If you study monetary economics for 30 years, you could read all these books and you wouldn't see tariffs even mentioned. So it's just not a good way to think about where inflation is coming from. Inflation is up to the central bank, and the central bank has to have an interest rate policy reacting appropriately to current developments in the economy. If you do get any impact out of tariffs, it would be a one-time impact, and usually the central bank would look through a one-time impact on the price level as opposed to ongoing changes in the price level, which is what inflation is. So I don't think you're going to get an inflationary impact, and you certainly didn't in 2018-2019, which is the last time we had a sort of ramped-up trade war, especially with China. And we could talk more about tariffs, but I just think the whole narrative that the main driver or a main driver of inflation, I don't think that's the right way to think about it.
But what do you think realistically they want to do with tariffs on day one, and what do you think the economic effect is then if it's about using tariffs to get other countries to do what you want them to do?
And it can be, frankly, a good weapon. I think here's one thing for this group. Who's protectionist? Is Trump protectionist, or are the other countries protectionist? I mean, average tariffs are higher for the euro area than they are for the US. Why aren't the same? Tariffs are much higher for China than they are for the US. Why? Look at India, it's a notoriously protectionist economy, much higher tariffs. So why isn't the rest of the world as low as the US? And as soon as you start talking about this issue, all of a sudden you get labeled as a protectionist. I don't think that's what's going on. I think you're trying to get them to come around to the idea that they should compete on a level playing field internationally. And if they're not going to do it, then maybe the US should have the same level of tariffs as these other major blocs have. I think it's a perfectly fine thing to think about and work. The US agenda was always, because the interwar period had tremendously high tariffs, so once you got after the war, the idea was to bring that down and expand world trade. But the US went down faster than all the other countries, and now you're 75-80 years after the war. Maybe it's time to revisit this and think about what would be a realistic tariff structure now that everyone's had time to adjust post-World War II. So I'll maybe stop there for now.
So we talked about taxes, we talked about tariffs. What about immigration? And you talked about labor markets. What do you think?
