Day six of the government shutdown with no movement over the weekend. Our next guest says if negotiations continue to go nowhere, then perhaps layoffs will begin. Joining us now, White House National Economic Council Director Kevin Hassett. Kevin, always good to see you.
You too, Joe. Where are we? I don't believe this goes much longer. I could be wrong, but it's pretty clear that the Democrats don't have a winning hand here and they're going to slough off another five near term. I just worry more about what happens after we reopen the government and Republicans fold and bend and wimp out because they're worried about the midterms on Obama on these subsidies.
Right. You know, I don't think that's going to happen. I think people will negotiate, but the bottom line is right now we just want a clean continuing resolution. And any government worker that loses their job because of riffs after another failed attempt to negotiate is going to be really there because the Democrats are being intransigent. And don't forget, Joe, that this is the third time since President Trump was in office that they've decided to shut the government down. So they've got Trump derangement syndrome. They don't really know how to govern when he's at the White House and they're just flailing about. And this is really the worst of the three. They have absolutely no leverage whatsoever. And one would expect that they would come to the table soon, but they keep not doing it. You know, today the Senate opens its gavel I think around 3:00. I expect there'll be a team of people in the Oval with the president hoping that we're going to get the government to stop being shut down. But if not, then I would guess that that team in the Oval is going to start taking sharp measures. The 1.5 trillion that they'd like to add during a reconciliation during a CR, a continuing resolution, that's not obviously going to happen. So they really want these Obamacare subsidies from co they want those extended.
I just want to go over and maybe you can come up with what the Republican plan is. So back before Obamacare, Republicans didn't want to talk about healthcare. That left a huge opening for Obama. 2010 came up with this what is really a mandate subsidy mess. I'm quoting Kimberly Strassel which almost got repealed by a couple of physicians who led the way, Tom Price and Tom Coburn, but it didn't. She says that spurred a return to the dark ages ever since 2017, where Republicans haven't done anything to try and fix the problem. So these bump ups that we're going to see have nothing to do with the expiration of these COVID super subsidies. It totally has to do because Obamacare is a flawed system that isn't working. And yet, I guarantee you, watch your colleagues in some of the red states wimp out and decide that we're going to pretend that we care and we're going to renew these subsidies.
Right. Well, you know, the bottom line is that we made some progress with the previous bill and a lot of people share your opinion about Obamacare. You know, most of the people who are getting insurance in Obamacare are just being put on Medicaid at sometimes four times the poverty limit. And so the thing to remember is that these high subsidies that are expiring are expiring because the Democrats passed a bill saying they should expire then because the emergency over COVID is over. So Democrats themselves said that we should take them away and now they're just trying to use them as a political cudgel to try to score some points and just they did it. They did it because it was too expensive to do it for longer. It's the same reason that the Republicans passed temporary tax cuts that you just made permanent. It's because of the way it was scored with the OMB. It would have been too expensive to say they were going to do it otherwise. It's not that they wanted it to end. It's that they couldn't afford to pay for it. But I mean there are budgets and budget constraints in government and if it was free they would have done it forever but they stopped it when they did.
But it's the same thing with the tax temporary and that was just made. This is both parties do this. They play with the numbers because they know they hope these things will be permanent but they can't afford to pay for it at the time. So they make them temporary and assume that it's going to be too hard for anybody to ever take them back. Tax cuts included. They put four times people with income four times the poverty level on Medicaid and said they were doing so because of an emergency and the emergency is over. And so I understand your point, Becky, but I think that in the end they had to stop these subsidies because the subsidies made no sense. And now maybe if they open the government up then maybe somebody on the Hill is going to want to negotiate, well maybe we should do this or that to the subsidies. But that's not where we are right now because they want to give the health insurance to illegal aliens. They want to keep this sort of massive expansion that they did during an emergency. They're holding American workers and American government services hostage and it's just not right.
When do you think GDP or the economy starts to be affected? Because it takes a while, doesn't it? What do you think? Is it a month? How long does it take?
You know, my friends over at the Council of Economic Advisors gave me a report at the end of the week that said that it costs the US GDP about 15 billion dollars a week for a shutdown, or about a tenth of a percent of GDP. And so if the shutdown continues for a long time, then there are going to be a lot of things that don't happen and it will show up in the GDP number. Now, the good news is that the economy is booming. We've got GDP now at 3.8%. We've got retail sales year-over-year up 6%. We've got a capital spending boom. We've got deals like the ones that you've been talking about this morning happening left and right. And so there's a lot of good news out there and I think the government shutdown in the end is just going to be a footnote in history. But the Democrats need to come to the table, get the government open, and then if they want to negotiate over something, they can.
We just had, I don't know if you were listening, but a guy named Mike Novogratz, a huge Democrat, but he has loved because of Bitcoin and crypto, he loves easy money. He said that out of all the dovish possible heads for the next Fed, he said you'd be the most dovish of all. And he said you're gonna get the job, Kevin. And well, he said that Trump will give it to the person who's most dovish and he wants that because his crypto will go up, I guess. But he said you were the most dovish. Do you see yourself as the most dovish of all the candidates, Kevin?
You know, in every job I do if it's here or anywhere else I'm a data dependent kind of guy and the bottom line is I've got the best job in the world being director of the NEC and so speculation about the Fed is just not something that I'm interested in doing right now.
Is the Fed flying more blind now than they normally are? Hard to imagine.
It's always data. You know, there are data items that aren't coming out. We didn't get the jobs numbers last week, but again, the jobs numbers have been revising so much that it's hard to extract a signal from the first print. And so I think yes, the Fed would like to have more data. Yes, the Democrats need to open up the government so that we get the data that we need so that we're making policy decisions based on the data. But I do wonder about the quality of the data lately, which is something that we've been talking about on your show.
Do you think inflation the print when it does finally come is, are we back to, are we at 3% at this point do you think on the most go?
I think we're below. If you look at the GDP deflator which is kind of one measure of the macroeconomic measure of inflation, I know the Fed uses other ones like PCE, but it was 2.1% and so inflation by any measure has come down by maybe about 50% since President Trump took office. It's headed in the right direction. More importantly, we're having a productivity boom that's unlike anything we've seen since the '90s. And when there's a big productivity boom like that, then that means that you could have growth without inflation. And that's our main expectation right now.
If you really had to just be very forthcoming, does the president want to do DOGE? I really want you to nail this one, Kevin. Does the president want to do DOGE type cuts to the federal workforce or is it always a threat just to bring Democrats to the bargaining table to reopen the government? And I guess Russ Vought, what is Russ Vought? Is the president holding back Russ Vought who really would love to do it either way? What's really going on?
Look, we've from the beginning, from the time that Elon came, have had an objective of making government more efficient, of taking away positions that were no-show positions and so on. And government employment, the latest numbers I'm seeing is down by more than 200,000. And so, for sure, we're going to continue to want to make government more efficient. But right now, this particular moment is about keeping the government open. And if the Democrats refuse to keep the government open, then perhaps the efforts we've been making to make government more efficient will even accelerate because of the extra legal authorities we have because they haven't appropriated the funds.
