It's hard not to be enthusiastic about this macro economy, says Harvard's Jason Furman

Former President Trump and Vice President Harris continue to push their economic agendas on the campaign trail as the election quickly approaches. Joining us right now is Jason Furman. He served as the Chairman of the Council of Economic Advisors under President Obama. He is now a professor at Harvard's Kennedy School of Government. And Kevin Hassett, who served as Chairman of the Council of Economic Advisors under President Trump, who is now a Distinguished Visiting Fellow at Stanford's Hoover Institution. And gentlemen, welcome to both of you. We are just a couple of weeks away from the election. The economy is front and center. It's listed as one of the top issues for just about every voter out there. The perception between what people in the economics world look at the economy versus what the voters think has been pretty wide. So let me ask you each what you think of the economy right now, how you would grade it. And Jason, I'll start with you. It's pretty amazing. You don't see another advanced economy like this. We'll probably get something like a three percent growth rate in the data next for the last quarter. That follows three percent the quarter before inflations come down, the unemployment rates come down the last two months. So it's hard not to be enthusiastic about this macro economy. Now, as a lot of causes, I'm not saying this is all Biden by any stretch, but it's quite good. Kevin, how would you grade the economy? Yeah, you know, I've been very much surprised on the upside since the middle of last summer. It was Jason and I were emailing back and forth that he was sort of better about the beginning of the fall than I was. He thought that the Fed moved too much and I didn't. But but I think that Jason's right, that the economy is showing strength. And I think that the previous segment with Joe highlighted one of the key contributing factors. You know, the last GDP release we had had equipment investment up about 10 percent. You know, if you look at cyclical indicators, equipment investment is one of the main ones that tends to go up a lot of booms and down a lot of busts. And for it to be going up 10 percent, a lot of that is all this invidious stuff, the A.I. investment. But with capital spending going up that much and GDP now running in the threes, we're looking at a relatively strong economy, at least in the business sector. And yet the voters seem to disagree. Polling at CBS done earlier this month showed that six out of 10 Americans actually rated this economy as either fairly bad or very bad. Only one in 10 said that it was very good. Why do you think that is? And we'll go ahead and start with Jason again. Yeah, look, I mean, we had a lot of inflation. That inflation was quite bad. It got households into a deep hole in terms of prices, outstripping wages. Now it's the opposite. Wages are outstripping prices. People are digging themselves out of that hole. But I get I get why they feel that way. And it's compounded by the fact that you always get when there's inflation, people credit themselves for their wage gains. They blame the government for the price increases. And they don't see the two as lit, something that economists call money illusion. So it's some combination of reality, money illusion and then things that probably have nothing to do with the economy that people are reacting to. Well, how does this play out in the economy? And Kevin, maybe you can tackle in the election. Maybe you could tackle that side of things. If people aren't feeling like they have done well under this economy, what happens in two weeks? Sure. Well, the history of it is there's a fellow named Ray Fair at Yale that's written a lot of papers on this. I think they're actually pretty good papers, Jason. I've never talked to you about them, but I find his stuff pretty reliable. And generally, his evidence is that with the economy strong, it's good for incumbents. And so I would say that if the strong top line data that we're seeing overwhelm the negative effects of inflation and feeling like you're paying too much for gas and so on, then that on that would be a positive for Democrats. The one thing I can say, however, is that it not only matters like what's happening to prices, but which prices. And one of the things about this cycle is that, you know, the things that people have to buy, especially if you're a family with kids, those are some of the things that have gone up the most in price. And that makes it so that the inflation is a good deal more painful because you can't substitute to something else. And so I think that the negative from inflation and the consumption shock associated with it is probably going to neutralize the positive from the three percent growth that we're seeing. Jason, how about you? This reflect negatively on Kamala Harris. What does she do? Look, I mean, the truth is, no matter how good the economy is, I wouldn't say you should base your vote on how good the economy is. As Kevin said, this has to do with things like developments in artificial intelligence. It has to do with the Fed, has to do with luck. The important questions are, you know, what do things look like going forward and what are the plans of the two? And, you know, I have argued that I think that Donald Trump's plans are riskier. They're riskier in terms of what could happen on trade, what could happen on immigration, what could happen to the Fed and fiscal policy, where just about every analysis I've seen has shown larger deficits under his plan. So I think it's this contrast going forward that is the most important, not looking at what's happened to growth or inflation in the past. You guys tend to agree on a lot of things, but I know you disagree on which candidate you're supporting. So, Kevin, if Jason is convinced that it's better on trade, immigration, Fed and fiscal analysis, what do you say back? Right. Well, you know, I disagree, of course, but but I think that the risk analysis for Vice President Harris really depends on whether she really has changed her mind about banning fracking and offshore drilling and all the rest that I think that she had those positions just a few months ago and has now sort of gone run towards the middle for the general election. And the point, I think, is that if she wins, then probably the Democrats control Congress. And if that's true, then what's she going to do when AOC leads a charge to ban fracking or to have the Green New Deal or to stack the Supreme Court, some of the things she supported in the past. And so so I think that the risk analysis doesn't break as clearly as Jason might suggest. Jason, how do you respond to that? Just ideas that if Kamala Harris has a Democratic Congress backing her, because there are breakdowns. Is this going to be a red red red wave, a blue wave? Is it going to be Kamala Harris with the Republican Congress? Is it going to be Donald Trump with a Democratic Congress risk risking out all of that? When we talk to people on Wall Street, most of them say as long as it's not a red wave or a blue wave, they'd be OK with it. How do you feel about those things? Yeah, first of all, I think divided government, either which way, can actually be deficit increasing, where each party trades their priorities for the other priorities. You know, Republicans get defense increases. Democrats get non-defense increases. Republicans get business tax cuts. Democrats get tax cuts for children. So I'm not sure that Wall Street is right about divided government when it comes to our fiscal situation. But to go back to what Kevin said on let's say fracking, for example, I'm not worried about that in the slightest. That was a position she took four years ago. She hasn't taken it at all when she's in the White House. If she wins, she's going to be running for reelection in four years and going to need to win Pennsylvania. If she has 50 votes in the Senate, at least one of them is going to dissent from fracking. I'm not, you know, she's talked about all the energy strategy, all the risks I'm worried about with her. Some of the more extreme statements she made four or five years ago. I don't know if she meant them then. I don't know what's in her heart now. I know what her incentives and constraints are. No way that will happen. One thing, Judd Gregg, the former senator and governor, has pointed out that he thinks one of the biggest issues is retaining the filibuster as it stands. He thinks if that falls, that that is a significantly important thing that actually changes our entire frame of government and how we work. What would you think about that? But I would say just in response to what Jason just said, that that for me is the biggest risk. If you go back and look like if we didn't have Joe Manchin and Christian Sinema, then we would have lost the filibuster. And now we don't have them. And so is the question is, is that if the Democrats control the Senate, is there somebody after that that's going to step up and take care of it or not? And I think it's a serious risk, because I think if you had the filibuster start to stack the Supreme Court, then you've seen what's happened in Mexico. And I think it could be something like that happens here as well.