Tariffs & Tactics: Trump’s Bigger Economic Game

Uh, it's a timely conversation because we get right into the weeds on tariffs. But we also talk a little bit about AI and one or two other topics that I think you're going to find particularly fascinating. So what I would say is sit back and let us share our conversation with Arthur with you. Key points you're going to want to pay attention though as you sit back and listen. Tariff, impact, Uh, what's the impact on inflation? What sectors are potentially in the crosshairs? You don't hear a lot about this next one, but what could go right from tariffs? And finally, an update on what elections in Europe could mean for policy and the macro economy.    

[00:01:13] Lindsey Bell: Welcome back everybody. We are so excited to have Arthur Laffer here today, of Laffer Tengler. And he is going to talk to us today about tariffs. It's a hot topic that's been on top of everybody's minds. It's just been a flurry of news headlines. It's really

kind of hard to keep track of exactly what is happening when it comes to tariffs, what it means for the economy, what it means for businesses and what it means for the consumer. So Arthur, I actually thought that we would just start from the very beginning because there's been a lot of talk about why president Trump he's, you know, self described as the tariff man, but why is he so focused on implementing these tariffs? From your vantage point, is the primary goal industry protection, is it reshoring businesses, maybe onshoring businesses from overseas? Is it tax revenue? We've heard that. Is it a negotiating tactic for immigration policy, or other policy? What, what is his primary focus or goal?

[00:02:15] Arthur Laffer: I think really, my belief is that it's fairness. Um, there was a quote about Trudeau saying they were there having conversation more recently about dairy tariffs, and it's true, Canada imposes like a 300 percent tariff on U. S. Dairy products. Um, so, you know, look at we're the 800 gorilla when it comes to global trade. And we give a lot of people deals that they don't give us, uh, Europe, it's cars, you know, candidates, dairy. So it's all over the place. I think that really what we're talking about here is overall lowering. He wants to lower tariffs. U S companies can be much more competitive globally if these countries stop protecting all their industries and. And there's lots of reasons why countries do that, pretty much at the detriment of the consumer and the producers that use those inputs. But, I think a lot of times we get the short end of the stick because we're the biggest country. Um,

[00:03:12] Lindsey Bell: now?

[00:03:12] Chris Versace: you, are you in favor of these tariffs? I don't want to mince words because I, I'm just trying to understand, like on the one hand. I I think everybody would like a fair and level playing field, right? No, no question about that. Best, best companies position wins, that sort of thing. But at the same time, you know, there's a lot of disruption, a lot of uncertainty that we're only now starting to see in some of the economic data, whether it was, you know, S& P's flash February PMI, some of the, the University of Michigan, their consumer, uh, inflation expectations index that shot up or as we're taping it today, the conference board's latest data that, you know, just totally fell through the floor. Um, and really says that folks are worried.

[00:03:55] Arthur Laffer: yeah. No, I hate tariffs. Tariffs are bad. Cross, unequivocally, tariff is nothing but a tax. it distorts economic incentives. It distorts economic behavior. It clearly lowers GDP in a macro sense. Now in the micro sense, some people are going to get, get the end, you know, the, say the sharp end of the stick. So if you're in a protected industry, all you have to do is know U. S. history, and we'll talk about, we can talk about steel, because you looked at the recent attempted acquisition by Japan, Japanese Steel, U. S. Steel, go back to the whole Lee Iacocca stuff and the Chrysler, you know, auto industry completely protected by basically tariffs that committed it. like Germany, by the way, ironically, that protected U. S. industry and to their detriment, they didn't reinvest, they didn't innovate, and then when we took the tariffs down, what happened? They got crushed. Um, which was good for the consumer,

[00:04:50] Lindsey Bell: it is. The auto industry, I think, is a really interesting one, too. I love that example that you give, too, because when you look at the tariffs that, uh, you know, we have to pay on European cars, then they don't have to pay on our car. It's, it's, it's astronomical.

[00:05:04] Arthur Laffer: and Europeans pay it. Because it keeps their prices higher, too. So, by protecting industry, it means that Europe, the cars in Europe are much higher than they would be. And you wonder why. You know, I think the funniest thing, you go to Europe, what's the one thing Americans don't see in Europe? Pickup trucks, SUVs, why? It's all because of tariffs, regulations, and taxes. And a tariff is just a tax. I mean, that's really, in the truest sense, and it distorts economic activities to the detriment of consumers and producers.

[00:05:32] Lindsey Bell: So you're starting to see, so Chris talked through some of the, some of the things that we're seeing, especially in sentiment surveys, but you even saw it in some of the regional manufacturing surveys that people are concerned about the, you know, the manufacturing business in the, in the future, maybe not the near term.

I think they're still optimistic in the months ahead, but in the, uh, little bit of a medium to longer term, they're becoming nervous. Consumers are concerned about what tariffs mean for them. And that might simply be because they're in a more precarious position now. Um, as I've talked about it, um, versus where they were in 2017, 2018, when the first round of tariff went in.

Um, as you said, uh, in anticipation of absorbing some of, some of those higher prices. Um, so I guess the question really is, uh, how does this impact inflation and pricing power and things like that?

[00:06:23] Arthur Laffer: I mean, it definitely biases inflation to the upside, for sure. I mean, unequivocally, it makes industries not respond well. It increases prices at both the producer level. You saw PPI. It wasn't just CPI that shot up this last month. It was PPI, too. So every one of these things gets actually put in place. Either people are trying to front end, you know, try to increase their warehouse full of steel and aluminum.

Any product, anything that's going to get taxed. I read an article recently about how countries that are going to be hit with the tariffs, increased tariffs, are trying to find ways to shift their inventories to countries that aren't going to get hit with the tariffs, i. e. try to avoid it like Russia's been doing with oil and selling to India to avoid the tariffs and all the restrictions on trade. So there's lots of ways and depending on how traded, this is more macro term, how traded the good or service is that we're talking about and whether they can on shore it in the U S which obviously Trump would love, anybody loves that because that means us jobs, right? Um, And in fact, you know, look at the number of car manufacturers that are in the U S I mean, there's a huge Mercedes plant down in Alabama, right near university, Alabama, um, Tennessee.

I'm in Nashville, Tennessee. We have tons of car manufacturing now in the South in general, but yeah, I mean, it causes all these dislocations, the short term effects are going to be inflationary. If the. If the tariffs actually go through and depending on how long they actually stay in place.

[00:07:49] Chris Versace: So, Art, do you think that means, like, when we saw that February Flash, uh, P. P. I. P. M. I. Report. Sorry from S. And P. Global. I was surprised to see the upturn in manufacturing, right? Services contracted. Uh, do you think perhaps the manufacturing data benefited from some pull forward and activity because of what you're talking about?

And, and should we expect some of that as we get more February data? So the economy might look better than it really is.

[00:08:18] Arthur Laffer: Yeah, it's, it's, it's amazing, you know, as we've gotten more advanced digitally, you see that when you have changes and say any kind of macro policy, you, the questions you want to ask yourself is what does it do to the timing, location, composition of production? And so if you know a tax increase is coming next month, What do you do? You try to accelerate activity now. You try to accelerate economic activity now at the lower tax rate, whether it's a regulatory tax or straight up, you know, income tax, whatever it is. We see consumers and businesses timing these things with more and more accuracy and faster and faster speed as time's gone on.

I mean, you can see people defer income into next year, they think the tax cuts are coming or accelerating depreciation in a higher tax year and businesses do it too. So absolutely. Yeah,

[00:09:06] Chris Versace: I just remember from my early days when I was, uh, working at Salomon Brothers and then DLJ and the machinery capital goods industry, like whenever we saw regulatory mandates come in for like breaking technology or something like that for, um, you know, those big class eight heavy duty trucks, you know, you would see orders just like pile up.

And then all of a sudden, as soon as the mandate date would pass, they would fall right, disappear, fall apart.

[00:09:34] Arthur Laffer: Yeah. It's just, it's all timing. And, you know, remember most of these numbers are either quarterly or monthly, but quarterly is typical macro numbers. So yeah, you see people front ended or they'll defer it the opposite. So if you're a consumer and you think, uh, Trump's going to actually get a tax cut through hopefully by before the end of the year, If you can shift income from December 31st to January 1st, you do it.

So you do start cutting deals to get people to delay, you know, to increase, to defer your income, increase expenses into 25 and shove your income. If you can do it one day and then after tax rate of return is huge,

[00:10:11] Chris Versace: So, so I, I hesitate to pull out the crystal ball, but if, if that's the case and, you know, we're seeing some pull forward on the manufacturing side and the timing for these Canadian and Mexican tariffs, March 4th, we'll see if it happens or not, I'm starting to get a little worried about the second quarter GDP number.

[00:10:33] Arthur Laffer: you should. Um,

[00:10:35] Lindsey Bell: you're,

[00:10:35] Arthur Laffer: and.

[00:10:36] Lindsey Bell: you're seeing, I was just gonna say, you're seeing the economic surprise of the city economic surprise index. It's at the lowest level since September. So, um, the beats from an economic perspective are getting narrower and narrower. We had a good earning season, and we heard some of the domestic companies, like, most recently, Walmart and Home Depot.

They talk about the significant amount of goods that they get that are that are local here in the US. And I know there's been a lot of, you know, the, the Trump 1. 0 administration caused a lot of these companies to move around, um, where they, like you, like you just talked about, Arthur, move around where they're sourcing goods from and or even reshore it.

Um, so that's certainly, um, having, having an impact. But, I I think what's interesting is is the rise in prices that we're already seeing ahdead of the tariffs too. Like you said on the PPI side. I know commodities more recently have have risen. Um, but also inflation is is is starting

to rise too, and I know there's specific components within that.

Um, like, are we set for inflation, like CPI over 3%? Like, is that reality? Like,

[00:11:47] Arthur Laffer: Sure. I mean,

[00:11:48] Lindsey Bell: I know it's a near term thing, like you said, tariffs are like a one time thing. Once you cycle it, you're good.

[00:11:54] Arthur Laffer: yeah, but so the hard, the hardest part is there, there's, there's a lot of hard parts here, but on the, from a macro standpoint, the first question you have to ask yourself is, okay, so these prices start moving around because of the tariffs or any, it doesn't really matter any reason. So the first thing you have to do is, alright, what are the substitution effects? You know, so if. Let's say, let's say we do steel, we do petroleum and let's say we do chips. Like, so we're talking about everything that's in a car, right?

Or aluminum, aluminum steel chips and petroleum. We did that. That basically is a hundred percent of what's in a car. Um, price goes up. Okay, the consumer has a choice.

They have to make choices as to do they buy a cheaper car? Do they buy a more expensive car? What can they afford? So you start seeing all these substitution effects. Do they start buying bicycles? I mean, you know motorcycle sales go up and car sales come down. The first thing you have to do is okay So what is this? What are these substitution effects based upon the changes in price? That's going to occur and um, and how elastic or inelastic are the supply chains, you know, so You know, um You looked at when we had that oil at 200 bucks a barrel, right? And you looked at all these cities and stuff that would go out and buy natural gas buses. Right? Oil collapses in price. You, you own the bus. So the inelasticity of the, you know, the demand side versus supply side is really something you have to watch as well. So, yeah, I think you get short term inflationary pops. You're, I think you're already starting to see it as producers go, oh boy, I better grab as much cheap steel as I can.

It runs up steel prices in advance of what they think is going to happen.

[00:13:32] Chris Versace: So we follow that logic, or let me just ask you from a investor perspective. Not, not to name names, you know, specific companies or anything, but generally speaking, if we're seeing these inflation expectations rise and they could go even further, right? Once these other rounds of tariffs go into effect, maybe there's reciprocal tariffs, what have you, do you see more like the warehouse clubs, your Costco's, your BJ's benefiting or your, um, discount retailers, you know, your TJX, your Ross stores, do you see them positioned better than say Macy's Nordstrom's those types of, you know, Full price retailers.

[00:14:10] Arthur Laffer: Absolutely. I think you're already seeing like a Walmart, you know, Nancy, my partner, Nancy Tengler was just on, um, we did our, we did a live cast yesterday. We should talk about Walmart, how, you know, January is always a struggle, a struggle for them earnings wise and sales wise, but it's every year, but yes, they've actually, well, they should dominate.

If you have better pricing power, the consumer is going to move towards you as prices go up. Sure. Every day, all the time.

[00:14:36] Chris Versace: I

also think they're benefiting from the fact that, you know, I guess some people know this, not everybody knows this. They are the largest grocer in the U S

[00:14:44] Arthur Laffer: didn't know that.

[00:14:46] Lindsey Bell: Yeah, well, I think they're benefiting from a trade down of the higher end consumers going to the Walmart. So my question is, Arthur, and like, not that I'm asking you again to predict the future, but we're in this environment. Inflation is going up. The consumer is, is becoming much more price sensitive than they were, um, even four or five years ago, right?

And you got interest rates that are likely to remain higher for longer because of the inflation situation. The jobs environment has been, has been pretty decent. Um, could tariffs be the tipping point from an economic growth perspective? Like what we're talking about, we're starting to see a little bit of a slowdown because people are concerned.

There's caution among businesses and individuals. Um, can we make it through this or is this Kind of a bigger risk than it was in Trump at 1.0 I guess.

[00:15:40] Arthur Laffer: Um, you know, I I guess here's my belief. And I'll tell you why my belief is the way it is. Um for and it's a couple reasons. Back in Trump 1.0 there was a discussion, um, uh with Trudeau, again Trudeau, who is thankfully on his way out. I think he's been a horrible Prime Minister and

Canada has suffered because of it, um, but, uh, there was a discussion I think between Trump and Trudeau about tariffs, there was some issues with that, and, uh, The conversation went something along the lines of, well, you know, we're going to do this, but on Trump and Trudeau says, I'm like, well, you know, we can, we can negotiate this. Um, we'll impose that. And Trump, he said, but youknow, we really don't like tariffs is what Trudeau kind of indicated. And Trump said, great, let's get rid of all tariffs between the two countries. Let's just, you know, hash it out. And Trudeau's like, whoa whoa whoa whoa whoa whoa,

You know, let's stop the crazy talk.

Um, and it's really, I think the driving force would be my opinion that Trump really doesn't want tariffs or if he does, he wants very low. If you look at global trade, I mean, we are being taken advantage of, we've done, I think, deals that were not in the best interest of U. S. manufacturing or consumers, by the way, we've talked about a couple, and trade, when you get into the weeds on tariffs and how crazy specific they are, it's like the U.

K. and I think in the, in the E. U. had this whole issue on tariff on, chocolate of high milk content. That UK couldn't call chocolate chocolate, they had to call it chocolate of high milk content because of European producers in Brussels, they use less milk. I mean, it's crazy how, if anybody looks into how specific some of these tariffs get with regard to product composition.

I mean, it's insane.

[00:17:25] Chris Versace: That's ridiculous. The,

[00:17:27] Arthur Laffer: It is,

[00:17:27] Chris Versace: uh,

[00:17:28] Arthur Laffer: but I don't think he really, I think he actually is trying to negotiate tariffs down so that U. S. producers and consumers, but more like manufacturing, has a much fairer playing field to European cars or Canadian dairy, just to name a few.

[00:17:45] Chris Versace: Yeah, I think ultimately his goal is to maybe it is fair trade, but I think a selfish perspective, he wants to say that he is responsible for a strong economy, a roaring stock market and these other things. And I have to just always question this. You know, the bluster, right? The art of the deal, so to speak, keep your enemies off balance, you know, all these things that he's, you know, touted in the past that we're doing them here.

And I always kind of, you know, if you're running a private company, fine, do whatever you want to do to your company. It's just a little different to drag the country, right? Kind of all the way through this, even though you might have some in your mind, higher purpose for doing it.

[00:18:28] Arthur Laffer: Yeah. And I think that there's a lot of issues. Um, I think we've kind of said that. But the great news is that you look at the new chance, hopefully the new chancellor of Germany is going to be, uh, Merz of the, uh, CDU or the Christian Democrats. And, you know, he got a little verbal spat with Trump yesterday.

And, uh, And was talking about, you know, they're not going to be bullied. They're not going to let America, you know, uh, interference in their elections because the whole Musk thing with AFD, but realistically, he started talking about trade. Now, Trump has a huge advantage over Europe on trade. One, he's a single guy and they're a big bureaucracy.

So Merz doesn't have the final say on trade as it regards to the EU. They have to get all of these cats in a room. You know, I mean, cats literally not like, you know, I'm groovy. Um, these guys have to get together and they all have very competing interests. So to get them to agree on reciprocal tariffs and stuff like that, it is literally like herding cats. You got one guy that can beat them up and pick them off individually. They can't do that to him. Plus they sell much more to us than we do to them. So he has a huge advantage over Europe and negotiating, reducing tariffs than they do with us. Same thing goes with Canada and Mexico. They sell a lot more to us than we do to them. It's much more dangerous for them to play this game with us and try to do reciprocal tariffs than it is for us to do it. Um, so I think his goal really is to lower overall tariffs, which, by the way, would be a tax reduction and which would actually increase U. S. G. D. P. So I don't believe he really wants a trade war.

I don't really believe he wants higher tariffs. In the US or anywhere, I think he's trying to get global tariffs down, especially with regard to US producers, uh, and manufacturing because it's in the US best interest and I think it'll actually raise GDP. Unfortunately, going to the battle is going to be ugly,

[00:20:24] Chris Versace: Well, I was just going to say, you know, I, I, I see where you're taking us and I, and I hope you're right.

[00:20:29] Arthur Laffer: so

[00:20:30] Chris Versace: just that, you know, when we reflect on some of the data that we talked about a few minutes ago, we know what's coming ahead of us with more February data, potentially March data. It's, it's going to be a slog to get there.

[00:20:43] Arthur Laffer: it'll take, if we can get it done sooner, sorry Lindsey it'll, it'll just get the pain over and the volatility over in GDP as it shows in the numbers, but If he's right, and if I'm right, and I hope I am, then what'll happen is you'll have the trend for GDP go up later in the year.

[00:21:00] Lindsey Bell: Yeah I think you took the words right out of my mouth I was just going to say it just means volatility is going to be a mainstay of the market at least in the near term until we get through this tariff spat. And I guess too, if you think about, um, even the way things have gone with Canada and Mexico and the pause and things like that, it does seem like potentially Trump is trying to make a decent deal.

So, and you know, we, we sit here when we think about the markets, it's always like, Looking around the corners. What's like the worst thing that's going to happen? What's the shoe that's going to drop? You know why it's why I asked you the question is this is the tariff thing That's the one thing that's going to finally bring that recession.

We've been waiting two years for Is that what's going to bring it about but the reality is is we don't spend enough time Either either talking about what could go, right? What if tariffs are reduced significantly? what if gdp is pushed up and then never forget, you know it's like over the last several weeks, we got, I think I saw a headline today that the mag seven is entering into contract correction territory. So people aren't even talking about that, the AI revolution and the trade and the potential benefits from a productivity persepctive, which we've seen kind of filter through. And I know, Arthur, that's you and Nancy have been focused

on productivity, too. So I don't know what else could go right.

It's fans that the tariff situation. What are you optimistic about? Yeah,

[00:22:22] Arthur Laffer: like real tech, like normal tax cuts, you know, you've got the, what is it? The bill 1. 0 or I don't know. He said he'd take it two bills. He'll take tax cuts any way he can. So making the first Trump tax cuts permanent, also bringing down the corporate rate, the personal tax rate, flattening the, the actually the slope of the progressivity of personal income taxes in the U.

S. Uh, you know, Making depreciation a hundred percent the first year. I mean, these are, these are really good things for stocks and the economy. If you can get them pushed through. Um,

[00:22:55] Lindsey Bell: What about from a spending perspective? You know, you more tax cuts. Like, how do we offset that doge? What's doge? Is that a make a fly higher or what?

[00:23:05] Chris Versace: Well, Lindsey I'm waiting for my 5, 000 doge check. What about you?

[00:23:09] Lindsey Bell: Your dividend check. That

[00:23:11] Chris Versace: Well, I mean, look, I'll, I'll

[00:23:13] Lindsey Bell: inflationary.

[00:23:14] Chris Versace: hijack the conversation just for a second and say, Art or Lindsey to the extent you can explain to me how I get a check from savings, I'd love to know it. Because every time I go to Harris Teeter, they always say, oh, congratulations, you saved X.

And I said, no, I didn't. I didn't spend X.

[00:23:31] Arthur Laffer: that's right.

[00:23:34] Lindsey Bell: It's all, it's all mindset, Chris.

[00:23:38] Arthur Laffer: Yeah,

[00:23:38] Lindsey Bell: It's like when gasoline prices go down, you have more money in your wallet. thing.

[00:23:44] Arthur Laffer: which honestly, if there's something I'm really bullish about, um, from a tax and a spending perspective, it's energy, U. S. energy. We should dominate U. S. energy, I mean, across the board. Um, and I'm hoping that this whole AI explosion across globally, but more as it starts to permeate more of the economy, that what we do is we start seeing utilities becoming a growth area. I think everybody knows that infrastructure and energy infrastructure stinks everywhere, not just here.

[00:24:12] Chris Versace: I mean, look, you, you just had, who was it? Uh, Dominion Power Duke Energy just upsized their five year capital spending programs. You're seeing Texas open its armed nuclear power. You know, there's, there, there's a lot of stuff that's happening. And I think, you know, you're right that we could very well see, um, let's just call it energy, uh, and particularly utilities be a growth area.

And that would be, that would blow so many minds. I mean, it would be funny.

[00:24:42] Arthur Laffer: I think about when AI starts permeating, like, actual robotics, where you actually get robotics, something other than vacuuming your floor. You get actual, real utility, um, and efficiency out of the robotics sector. I mean, all you have to do is look at Japan. it was a funny story. A friend of mine went to Japan we're talking about, you know, uh, immigration and aging workforce, and he went to the all Nippon Airways hotel and he said, you know, usually in the U S you'd see a certain groups of people that are in that service side of the industry and hotels and accommodations. And he said, he walked into a hotel room and it was like an 85 year old Japanese woman cleaning this room. And he's just like, you know, my gosh, like that's, who's cleaning rooms at. In Japan, start looking at robotics and taking care of people like that stuff actually could be done very easily as AI permeates, it'll get better and better and better.

[00:25:32] Chris Versace: Well think, think of that and, um, fast food restaurants, right? I, I read a story that there's one in, maybe more than one by now in Japan where there's, uh, one person working in the entire quote restaurant. And it's an IT guy, You, you go in and you order your food on the, on the, uh, tablet, it rolls off a conveyor belt, all prepackaged, no people.

[00:25:58] Arthur Laffer: And he's an engineer. That's right. And

[00:26:01] Chris Versace: it's crazy, but on the other hand, you know, you sit back and you see, at least in this country where, you know, some wages are going, you look to California, you know, in the need to push productivity, I could see us, you know, maybe not getting there 100%, seeing a lot more robotics and smart technology come into coming into the fast food restaurant industry here.

[00:26:24] Arthur Laffer: AI is getting a lot cheaper, a lot cheaper as it starts to move down.

[00:26:29] Chris Versace: So where do you think we are in the AI adoption curve? And I asked this because, you know, like I collect a lot of, you know, data points, right? And you're seeing like Chipotle is using their avocado AI to help. Um, it's a silly name, to help hire people, right? We're seeing Amazon, Walmart, McDonald's is talking about it.

Carvana. Booking.com. And you know, on the one hand, you know, other surveys from CIOs are like, Oh, we're increasing our spending on AI driving productivity. have to just sit back and be like, okay, everybody's saying it. they just saying it? And we're kind of, you know, still in the early stages.

Are we starting to move to like, you know, the third inning, maybe the cusp of the fourth inning. What do you think?

[00:27:15] Arthur Laffer: AI, I think we're in the first inning. I think,

[00:27:17] Chris Versace: early still early days. Okay.

[00:27:20] Arthur Laffer: mean, I think now it's, it's, these are large language models and this is not my area of expertise, but I mean, I love tech. I've been obviously my whole life, but from a, from an efficiency standpoint, it's great. It'll increase output, which is kind of what Doge is doing, by the way. Uh, Elon Musk, federal government. I mean, you hear these crazy stories about retiring social security benefits and taking paper files and printing them out and take them into like abandoned minds through an elevator shaft. I mean, you're just like, who's doing, what are they doing? It takes six months. Or what, like from a private sector perspective, you're like, they're using floppy disks somewhere. Like they still make floppy disks. first question I had. I'm like. And it's not even a museum, someone's actually manufacturing floppy disks for a government agency. Are you joking? Um, my phone's more powerful than whatever computer uses a floppy disk. So, yeah, I mean, I think we're in the early stages and it's going to start, you know, you're going to see chip costs collapse as they start to move it from these huge data centers into robots.

You don't need a full, like, semi autonomous AI to vacuum your floor or clean a hotel room. You don't, or flip burgers.

[00:28:28] Chris Versace: Well, my, my long term prediction on AI is a lot like, uh, the internet and I, what I, what I mean by that is I remember sitting there when Netscape was first available, right? you would go, for example, to like gap. com, right? Because at that time, everybody had khakis and you would go to that website it was a picture. Could you do anything? No. Could you order anything? Absolutely not. You know, all these other things, uh, you know, that we take for granted today. So, I, I think that if we, you know, use that as a comparison, and, and the time frame might be faster, much faster. You know, the things that we'll wind up doing with AI will really surprise us. like today we can stream, you know, mobile payments and all the things that we do on, you know, this thing.

[00:29:18] Lindsey Bell: What's totally true. You see it in productivity. Maybe I'll just make this the final point, too, because it's been such a robust conversation. Is that, you know, in the, you know, 1990 to 2000 decade productivity was 2. 2 percent on average annualized in the second half of that decade. 95 to 2000 was 2. 7%. So as the internet PCs, all that started to take off, but it was really in the 2000 to 2010s decade, the productivity was 2. 7%. That was like where things like, once we got through the kinks of the beginning of things, things started to take off, you know,

[00:29:57] Chris Versace: You,

[00:29:57] Lindsey Bell: slowed down in the 2010s.

[00:29:59] Chris Versace: you, you may not remember this, Lindsey uh, but I bet Art does when I say that when I was at Salomon Brothers or DLJ, uh, you had to go request documents from the library that they would have to print and send to you if you needed to get something signed, you used a bike messenger to send it. None of this, none of this PDF email stuff.

[00:30:21] Lindsey Bell: No, I did experience some of that, believe it or not.

[00:30:25] Chris Versace: I'm just giving you the benefit of the doubt, Lindsey

[00:30:28] Lindsey Bell: Alright Arthur, what else is on your mind? Anything else we didn't cover that you want to get off your chest before we close down this session? Um. it's been a really great robust conversation, like I said, but if you have the final word

[00:30:40] Arthur Laffer: Um, I guess the only thing i'm watching is really, it is I watch a lot of elections. I'm macro top down. So my, my view of the world, unlike my partner, Nancy, she understands stocks and I can mouth off about some things, but that's about all it is is mouthing off. I'm not a fundemental guy by any stretch of the imagination, but I watch a lot of political economics.

Because. The joke I, I, I do sometimes is, if you ever meet a macro person and they tell you they're apolitical, they're actually one of two things. They're a liar or they're stupid. Macro is nothing but political. And it's not political in the sense of parties, per se. It's you know, politics is how policy

Gets enacted and changed. So if you're not focused on the politics, you have a hard time reading what the policy mix is going to look like coming, you know, and then that's all, that's all macro. It's everything's capital letters, right? I'm watching these elections and particularly in Europe as it pertains to kind of the U. S.

and where the trends are going. Uh, we have elections over the weekend in Germany where the AFD is now the second largest party. They're going to rebalance up. They'll probably have about 20, I think about 24 percent of the Bundestag going to get cut out of government. So you're going to basically disenfranchise.

In Germany, I'm just using a really quick example, in five Germans voted for the AFD. They're not going to have a voice in government the way it looks like. And you know, when you have these coalitions try to put together a majority, it's always lowest common denominator because you're having to negotiate with minority parties to get a consensus going right. at France, Le Pen's party. She should be the majority. She, they totally pushed her out. It's same thing in Portugal, I mean, it's everywhere. Uh, you look at Nigel Farage's, you know, reform party. It used to be the UKIP. I mean, the numbers are looking huge. I mean, Keir Starmer, that guy should be like building a bomb shelter.

They're going to, he's going to get taken out completely. And so are the Tories too. So you look at the electorate globally. It looks pretty upset and it's moving to the right What's interesting is it's not necessarily what, these aren't Reagan Republicans or as you know, like I grew up in, as I call him the real president.

Although I, I tend to like a lot of Trump's policies on the economic side. but these are anti immigration, they're trying to get their countries protected. They're having, they're struggling with a lot of the same issues that we are. But it's interesting as I look across the globe, I see this. Everywhere. you see the old order trying to disenfranchise and keep these right wing parties out by either vilifying them, calling them outright Nazis in Germany. same thing with Le Pen in France. Uh, you got Hungary, Orban. Uh, I'm not saying these are all great people and they have all great policies, but you can see the electorate pushing that direction. Um, and it's global

[00:33:33] Lindsey Bell: Yeah, and

[00:33:33] Arthur Laffer: look at,

[00:33:35] Lindsey Bell: I think it also is a reflection to of the change, the changing times from a technology perspective, but also from a consumer perspective across the globe too, um, you know, what we've seen over the last several years from a wage and job and, um, worker shortage perspective. I think it all probably plays a part across many parts of the globe.

Not the whole world, but

[00:33:57] Arthur Laffer: but what does it mean for policies? Cause policies are probably going to be changing quite a bit. So that's why I really care about this stuff. It's what does it mean for a policy mix? Cause these people have very different platforms than the governments have been in place for a long time.

[00:34:11] Lindsey Bell: right,

right.

[00:34:12] Arthur Laffer: Watch that.

[00:34:12] Lindsey Bell: Well, we're gonna have to have you come back on to like give us the, uh, the nitty gritty of it, uh, as, as different elections occur.

[00:34:22] Arthur Laffer: They're coming.

[00:34:22] Lindsey Bell: thank you so much for your time, Arthur. This was such a

[00:34:25] Arthur Laffer: you.

[00:34:26] Lindsey Bell: We really enjoyed

[00:34:26] Chris Versace: Awesome.

[00:34:27] Lindsey Bell: you.

[00:34:27] Chris Versace: Absolutely awesome. Thank you. 

great conversation with Art Laffer. Now I have to say, I've never met him, never spoken with him. Uh, I will, uh, certainly do so in the future. But. I believe you know him a little bit. Didn't he even interview with you, interview you at some point?

[00:34:51] Lindsey Bell: Yeah. He and his partner, Nancy Tengler, they do a little Spaces on Twitter and LinkedIn every week. And I saw I was a guest on there, so that's how I got to meet. Arthur Laffer, but I'm friendly with Nancy. And so she's always spoke so highly of him. She calls him the more outgoing one out of the two of them.

And she's pretty outgoing if you ask me. Um, but you can tell through our conversation, he's got a good personality. Um, so it was good to have him on our show and be able to ask him the questions.

[00:35:20] Chris Versace: and, and, and to be fair to him, he's a, he's a handsome man. I, I'm comfortable enough to say that. And I just say that because you said he's got a good personality, right? So, you know,

[00:35:30] Lindsey Bell: what? He looks good in that blazer. Maybe you should wear a

[00:35:33] Chris Versace: Uh, you know, you are 100 percent correct. Now, now that we're, uh, you know, flirting with video, I might have to get spiffed up.

Lindsay, we'll see. But, um, what, just reflecting back on our conversation with Art, what was the one kind of takeaway that really jumped out at you?

[00:35:50] Lindsey Bell: You know, what, what caught me is because something that we don't ever really talk about is that what could go right from

[00:35:56] Chris Versace: Oh, Lindsay, why did you have to say that? You are stealing my thunder.

[00:36:00] Lindsey Bell: Well, you know, it's, it just stood out, right? We're always, we're worried about what's the worst possible outcome. What's going to take us into the recession? What's going to be the tipping point? Obviously we talked about all that he was like, well, what if Trump actually can reduce tariffs that boosts GDP?

I mean, that was like mind blown, right?

[00:36:20] Chris Versace: yeah, no, I, agree with you. And I think that in the new cycle that we're seeing about, you know, tariffs responses, you know, or, you know, what's going on in terms of, um, cost reduction efforts in Washington and the federal government people. Being laid off or what have you that, you know, we, we kind of get caught up in, Oh boy, this is, this is not good for the economy, but you know, perhaps we need to step back and ask that question, right?

What if things go right Trump is able to negotiate lower overall tariffs? he's able to deliver on tax cuts boy. What could that mean? it's an easy trap to fall into the uh, you know negative nancy debbie downer, you know Whatever you want to call it, but I I think you're right a a healthy dose of Optimism. Maybe that should be part of our part of our thought process.

[00:37:21] Lindsey Bell: Yeah, are we just too pessimistic on this show? Do we need to bring the sunshine?

[00:37:25] Chris Versace: Uh, you know, I try generally speaking to be half glass full, right? Because, uh, you know, gotta be honest with you. I've spoken with with more than a few half glass empty folks. They are no fun. So let's try to be fun. What do you say?

[00:37:40] Lindsey Bell: I agree. I think we're both glass half full, but we gotta, you know, we're paid to worry, right?

[00:37:46] Chris Versace: It's so true. So true.

[00:37:48] Lindsey Bell: we're stock people, we're equity people, equity people are optimists. Fixed income people are the Debbie Downers

[00:37:55] Chris Versace: Yeah, no, no, you're right. You're right. Because you know, in when you're doing your homework and you're trying to figure out where a stock could go, to be mindful of the risk, but you got to, you know, capitalize on the opportunity. So I'm, I agree with you, Lindsay Bell. I knew we were, I somehow knew this was going to happen, but we need to, we need to, to your point earlier when we were talking, uh, off camera, Lindsay, we need to argue more.

We need to spice it up a little. So let's try and figure out some way to do that. Um, You know, maybe I'll just start disagreeing with you just for the heck of it. We'll see.

[00:38:26] Lindsey Bell: Okay.

[00:38:27] Chris Versace: anyway, anyway, um, that's our episode, uh, for this week, folks. Thanks for listening. Um, you know, again, if you need anything from me between now and the next episode, march on over to, uh, the Street Pro portfolio.

And Lindsay, remind folks, you've got a new location, a new gig. Where can they find your stuff?

[00:38:45] Lindsey Bell: Yeah. Check me out at clearnomics. com or, you know, as usual, I'm on LinkedIn, uh, putting some of my market thoughts out there on a real time basis.

[00:38:55] Chris Versace: All right. That's today's episode, folks. Thanks for listening. We'll be back soon.