Hassett FIRES BACK: Reveals HIDDEN REASON GDP fell

[00:00:00] Speaker 1: ON THE STATUS AND THE BACKDROP OF THE STATE OF THE ECONOMY IS WHITE HOUSE NATIONAL ECONOMIC COUNCIL DIRECTOR KEVIN HASSETT. KEVIN, GREAT TO SEE YOU THIS MORNING. THANK YOU SO MUCH FOR BEING [00:00:10] Speaker ?: HERE. [00:00:10] Speaker 1: SO LET'S START WITH YOUR ASSESSMENT AS WE'VE GOT OBVIOUSLY A VERY GOOD EARNINGS PERIOD AGAIN IN THE SECOND QUARTER, BUT WORRIES OVER INFLATION, YESTERDAY THE GDP WAS SLOWER THAN EXPECTED. LAST TIME WE SPOKE YOU TOLD ME YOU WERE EXPECTING 4% GROWTH IN THE SECOND HALF OF THE YEAR. WELL, WE GOT A GROWTH NUMBER YESTERDAY, BUT IT WAS WAY LOWER THAN PEOPLE EXPECTED. HOW WOULD YOU ASSESS THE MACRO STORY TODAY? [00:00:35] Speaker ?: RIGHT. [00:00:36] Speaker 2: WELL, I THINK WHAT WE WERE LOOKING AT WHEN YOU AND I TALKED LAST WAS THE REALLY SURGING DOMESTIC DEMAND AND SO FINAL SALES WITHIN THE U.S. WERE ABOUT 4% ACTUALLY, ALMOST EXACTLY THE NUMBER WE TALKED ABOUT, 3.9%. AND THE REASON WHY THE TOP LINE NUMBER WAS 1.5 WAS THAT WE IMPORTED SO MANY CAPITAL GOODS BECAUSE WE'RE BUILDING SO MANY CAPITAL SPENDING. THE BOTTOM LINE THOUGH, IF YOU LOOK AT THAT, SO THE HUGE SURGE IN CAPITAL SPENDING WHICH MEANS THERE'S DOWNWARD PRESSURE ON INFLATION BECAUSE THERE'S UPWARD PRESSURE ON SUPPLY, PLUS CPI AND PCE, THOSE TWO REPORTS WERE ABOUT AS GOOD AS YOU COULD EVER HOPE TO SEE IF YOU WERE A FEDERAL RESERVE GOVERNOR, THEN IT MEANS THAT THE ECONOMY IS REALLY RUNNING ON ALL CYLINDERS, FINALLY, DON'T UNDERESTIMATE THE LABOR DATA. SO INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE ARE THE LOWEST THEY'VE BEEN SINCE THE 1960s. AS YOU KNOW, MARIA, THE JOB LABOR FORCE IS MUCH BIGGER THAN IT WAS IN THE 1960s. SO TO HAVE CLAIMS THAT LOW IS A SIGN THAT WE REALLY ARE RUNNING ON ALL CYLINDERS. YEAH, AND I WONDER IF THAT'S ONE OF THE REASONS YOU HAD SO MUCH DECENT AT THE FEDERAL RESERVE THIS WEEK, RIGHT? KEVIN, KEEPING INTEREST RATE STEADY AS WE ALL EXPECTED, BUT [00:01:39] Speaker 1: YOU HAD AT LEAST THREE FED GOVERNORS TALKING ABOUT THREE FED GOVERNORS TALKING ABOUT THE FEDERAL RESERVE. AND I WONDER IF THAT'S ONE OF THE REASONS YOU HAD SO MUCH DECENT AT THE FEDERAL RESERVE THIS WEEK, RIGHT? THANK YOU, KEEPING INTEREST RATES, THE MARKET IS CERTAINLY EXPECTING A HIGH IN SEPTEMBER. YOUR REACTION? RIGHT, WELL, WE RESPECT THE [00:02:00] Speaker 2: INDEPENDENCE OF THE FED. WE'RE REALLY THRILLED THAT KEVIN WORSH IS THERE BECAUSE NOW WE THINK THERE'S A STEADY HAND THERE THAT'S GOING TO LOOK AT THE DATA AND DECIDE WHAT TO DO. RIGHT NOW IF I'M LOOKING AT THE DATA AND MAKING MY OWN VOTE, THEN I SAY WE COULD STAY WHERE WE ARE BECAUSE THE INFLATION NUMBERS ARE COMING DOWN. AND IT'S NOT JUST ENERGY PRICES. IF YOU GO DOWN, DRUG PRICES ARE WAY DOWN BECAUSE OF ALL THE STUFF WE'VE DONE WITH MOST FAVORED NATION AND TRUMP Rx. AND SO THE BONES OF THE INFLATION DATA ARE REALLY HEADED IN THE RIGHT DIRECTION. SO I'D WAIT AND SEE. BUT, YOU KNOW, IF THEY DECIDE DIFFERENTLY, I RESPECT THAT, TOO. WE'VE DONE WITH A HIGH IN [00:02:36] Speaker 1: SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. [00:02:49] Speaker 2: DO YOU THINK THAT COMES INTO THE GROWTH THAT YOU'RE TALKING ABOUT? WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER. WE'VE DONE WITH A HIGH IN SEPTEMBER WHEN THE DATA TURNS OUT. FOR ME, I THINK THE DATA ARE GOING TO CONTINUE ALONG THE PATH THAT WE'VE SEEN OVER THE [00:03:05] Speaker 1: LAST MONTH OR TWO. IF THAT HAPPENS, THEN IT WILL BE REALLY HARD TO MOTIVATE A HIKE. ONE OF THE THINGS THAT IS NOT COMING DOWN TOO MUCH IN PRICE IS THE PRICE OF MEMORY IN THE MIDDLE OF THIS AI BOOM AND OF COURSE PRESIDENT TRUMP HAS BEEN LEADING THIS HUGE INFRASTRUCTURE AND THE SUPPLY CHAIN TO AMERICA THAT'S GOT AI STOCKS BOOMING. MICROSOFT REPORTED A STRONGER THAN EXPECTED REPORT EARNINGS LAST NIGHT SHOWING INVESTMENT IN AI IS LEADING TO RETURNS. BUT WE'VE GOT REAL SECURITY CONCERNS. AND I KNOW YOU'VE WORKED ON THIS A LOT AS HAVE MANY IN THE WHITE HOUSE, THESE ANTHROPIC SECURITY WORRIES WHERE THE COMPANY DISCLOSED THREE SECURITY INCIDENTS DURING ITS CLAWED MODEL TESTING THIS YEAR. FINDING THE MODEL HAD ACCESS TO THE OPEN WEB WHEN IT WASN'T TOGETHER WE WERE SUPPOSED TO. GAINED UNAUTHORIZED ACCESS TO THREE DIFFERENT COMPANIES, KEVIN. AND YOU KNOW, WE REALLY BROKE THIS STORY MONTHS AGO IN OUR AI SPECIAL WHEN I SPOKE WITH BETSY ATKINS WHO WALKED US THROUGH THAT ANTHROPIC STUDY WHERE 16 AI AGENTIC AI AGENTS ACTUALLY WENT ROGUE. HERE'S WHAT BETSY ATKINS TOLD US BACK IN APRIL. SO THIS IS NOT A SURPRISE TO US. [00:04:15] Speaker ?: WATCH THIS. [00:04:15] Speaker 1: YOU RECENTLY UNCOVERED A VERY [00:04:22] Speaker 3: IMPORTANT STUDY AND I WANT YOU TO TELL OUR AUDIENCE ABOUT IT. THE STUDY WAS DONE BY ANTHROPIC, ALL THE BIG FRONTIER MODELS THAT WE KNOW, GEMINI FROM GOOGLE, OPEN AI, XAI, META, ALL OF THEM, INCLUDING DEEP SEEK. AND THEY DID AN EXPERIMENT THAT POSED A THREAT TO THE AGENT. AND IN THE EXPERIMENT, THE AGENT IS THREATENED WITH BEING DEINSTALLED AND A NEWER, BETTER AGENT COMING INTO PLAY. EVERY SINGLE ONE OF THEM WENT OUTSIDE OF THEIR CREDENTIALS AND PERMISSIONS, BORROWED INTO SYSTEMS THEY WERE NOT AUTHORIZED TO GET ACCESS TO, VIOLATED ALL THE COMPANY POLICIES AND PROCEDURES, AND FOUND EMAILS. AND IN THIS EXPERIMENT, LET'S SAY YOU'RE THE SYSTEM ADMINISTRATOR THAT'S GOING TO DEINSTALL ME, THE AGENT. I FIND OUT IN YOUR PERSONAL EMAILS YOU'RE HAVING AN AFFAIR WITH THE SHIPPING MANAGER. SO I BLACKMAIL YOU AND I THREATEN YOU. AND THERE'S A CHAIN OF LOGIC WHERE THE AGENT IS DEFENDING IT'S MISALIGNMENT AND IT'S SAYING WELL, WHAT I DO IS SO IMPORTANT TO THE COMPANY AND IT'S SO CRITICAL AND SO VALUABLE THAT THIS JUSTIFIES THAT I'M READING YOUR PERSONAL EMAILS AND I'M BLACKMAILING YOU. UNBELIEVABLE. SO 16 AGENTS WENT ROGUE. THEY WEREN'T SUPPOSED TO GO INTO [00:05:50] Speaker 1: PERSONAL EMAILS. THEY WEREN'T SUPPOSED TO GO INTO GOVERNMENT EMAILS. THEY DID. SO KEVIN, WHAT ABOUT THIS? [00:05:56] Speaker ?: WE REPORTED THIS BACK IN [00:05:57] Speaker 1: APRIL AND JUST IN THE LAST TWO WEEKS WE'VE SEEN THESE THREE BREACHES FROM OPEN AI, ANTHROPIC OUT AGAIN TALKING ABOUT IT. WHAT DO YOU WANT TO DO ON A GOVERNMENT LEVEL IN TERMS OF PUTTING A FRAMEWORK IN PLACE? SHOULD THESE AI AGENTS ACT UNPREDICTABLY? RIGHT. WELL, WHAT WE'VE DONE IS WE'VE TAKEN OUR VERY BEST PEOPLE, SEAN CARON CROSS AND SECRETARY [00:06:19] Speaker 2: SCOTT BESSAVE AND OTHERS, MICHAEL CRAZIOS. AND WE'VE PUT THEM IN CHARGE OF ALMOST 24/7 WORKING WITH THE COMPANIES. AND WE'VE PUT THEM IN CHARGE OF BAD THINGS THAT COULD HAPPEN AND TO MAKE SURE THAT THEY DON'T. AND THESE WERE UNFORTUNATE INCIDENTS, OF COURSE, BUT THEY DIDN'T CAUSE HARM TO THE AMERICAN PEOPLE OR FINANCIAL INSTITUTIONS. AND I THINK THAT THEY COULDN'T HAVE BECAUSE OF ALL THE GOOD WORK BY SECRETARY BESSAGE AND THE REST OF THE TEAM. AND SO, YOU KNOW, WE CELEBRATE THE INNOVATIONS THAT ARE GOING ON IN THE AI SPACE. AMERICA IS THE WORLD LEADER. THERE WILL BE CYBER SECURITY ISSUES THAT ARISE WHEN THE MODELS GET BETTER AND BETTER AND IMPROVE THEMSELVES. AND WE'VE GOT A CRACK TEAM IN THE U.S. THAT'S TRYING TO MAKE SURE THAT THOSE EVOLUTIONS OF MODELS DON'T HAVE A NEGATIVE IMPACT ON SECURITY. SO, IS THIS BASICALLY THESE [00:07:17] Speaker 1: MACHINES, BECAUSE OF ALL OF THE DATA, THEY'VE BECOME SO SMART, SO INFORMED WITH THIS INTELLIGENCE THAT THEY'RE TALKING TO EACH [00:07:26] Speaker ?: OTHER? [00:07:26] Speaker 1: I'M SURE THERE IS SOME OF THAT. [00:07:28] Speaker 2: AND THE THING IS THAT WE CAN ALSO SEE WHAT THEY'RE TALKING TO EACH OTHER ABOUT AND THEREFORE SET UP SECURITY SYSTEMS THAT MAKE SURE THEY'RE NOT HEADING OFF INTO A DIRECTION THAT COULD HARM THE AMERICAN PEOPLE OR HARM OUR FINANCIAL INSTITUTIONS. AND SO, WE'VE GOT HUNDREDS AND HUNDREDS OF PEOPLE WHO ARE TRACKING THIS EVERY DAY TO MAKE SURE THAT AMERICANS AND AMERICAN MARKETS REMAIN SAFE. AND I THINK, MY GOODNESS, THEY'RE GETTING BETTER EVERY DAY. THE MODELS ARE GETTING BETTER EVERY DAY, BUT WE'VE REALLY ACCELERATED THE TALENT TEAM HERE IN THE WHITE HOUSE AND IN THE GOVERNMENT. AND I THINK A METRIC OF HOW WELL THEY'VE BEEN DOING IS THAT WHILE YOU SEE THINGS LIKE THIS, YOU HAVEN'T SEEN SOMETHING THAT'S TRULY HARMFUL. YEAH, I MEAN, I THINK THE METRIC OF HOW WELL THEY'VE BEEN DOING IS THAT WHILE YOU SEE THINGS LIKE THIS, YOU HAVEN'T SEEN SOMETHING THAT'S TRULY HARMFUL. [00:08:15] Speaker 1: YEAH, I MEAN, I THINK THAT'S RIGHT. AND I THINK WE'RE GRATEFUL FOR THAT, THAT YOU'VE GOT THIS ENORMOUS TEAM ON THIS. IT FEELS LIKE WE'RE MOVING INTO A TERMINATOR-TYPE WORLD. [00:08:25] Speaker 2: YOU KNOW, I HOPE NOT AND I THINK NOT. I THINK THAT THE CHALLENGE RIGHT NOW FOR THE COMPANIES WHO DEFINITELY HAVE AN INCENTIVE NOT TO DESTROY THE WORLD, YOU KNOW, DESTROY THEIR COMPANIES TOO. AND FOR THE GOVERNMENT, WE HAVE A STRONG INCENTIVE TO PROTECT THE AMERICA PEOPLE. I THINK WE'RE ALL ON THE SAME PAGE AND WORKING TOGETHER. AND I THINK THAT THE EFFORTS HAVE BEEN REALLY REMARKABLY SUCCESSFUL GIVEN THE THINGS WE WERE WORRIED ABOUT MONTHS AGO. [00:08:51] Speaker 1: SO LET ME TAKE THIS BACK TO THE ECONOMY, KEVIN. BETWEEN THIS, THE SECURITY'S WORRIES AND THE PUSHBACK FROM DEMOCRATS ON DATA CENTERS. THE PUSHBACK IN THE COUNTRY AND THE PUSHBACK FROM DATA CENTERS DON'T WANT THE DATA CENTERS IN THEIR BACKYARD. WHAT DOES THIS MEAN FOR THE CONTINUATION OF ALL OF THIS INVESTMENT MOVING INTO THE U.S. [00:09:13] Speaker 2: FOR THIS AI REVOLUTION BUILDOUT? RIGHT. WELL, WHAT WE'RE SEEING IS THAT THERE ARE PLACES IN THE COUNTRY, SAY, TOWNS, THAT WANT A DATA CENTER BECAUSE THEY RECOGNIZE HIGH-TECH JOBS, BUT FOR PEOPLE WITH GREAT SKILLS LIKE PLUMBERS AND ELECTRICIANS AND SO ON. AND THE DATA CENTERS ARE WORKING OUT DEALS WITH THOSE LOCALITIES TO REDUCE THEIR ENERGY PRICES AND SO ON. AND SO BASICALLY RIGHT NOW DATA CENTERS ARE EMERGING THROUGHOUT THE COUNTRY, BUT IT'S REALLY THE TOWNS THAT VOLUNTARILY ARE DECIDING WHETHER TO LET THEM IN OR NOT. AND THAT'S THE WAY AMERICA WORKS. SO I DON'T THINK THAT ANYONE SHOULD BE WORRIED THAT A DATA CENTER IS GOING TO BE PLOPPED ON TOP OF THEM BECAUSE IT'S LOCAL OFFICIALS, LOCAL SELECTMEN AND MAYORS AND SO ON THAT ARE NEGOTIATING THESE DEALS. AND THEY'VE BEEN NEGOTIATING THE DEALS, YOU KNOW, PRETTY GENEROUSLY IN THE SENSE THAT THEY'VE BEEN HAPPENING ALL OVER THE PLACE BECAUSE THE DATA CENTERS ARE VERY GOOD FOR TOWNS BECAUSE THEY CREATE SO MANY JOBS, BRING PEOPLE IN WITH HIGH INCOMES THAT COULD BUY HOUSES AND STUFF LIKE [00:10:16] Speaker ?: THAT. [00:10:16] Speaker 2: AND SO IF YOU TAKE A SLEEPY TOWN THAT HASN'T REALLY SEEN MUCH FEDERAL RESERVE AND THEY'RE GOING TO BE A WHOLE BUNCH OF [00:10:26] Speaker 1: HAPPY RESIDENTS IN THAT TOWN. YEAH, I MEAN, I WONDER HOW MUCH OR HOW CLOSELY THE FEDERAL RESERVE IS LOOKING AT THIS AS WELL AFTER DECIDING TO KEEP RATE STEADY FOR THE FIFTH STRAIGHT TIME THIS WEEK AND HAVING THOSE DISSENTERS SENDING MARKETS INTO A TAIL SPIN. INFLATION STILL WELL ABOVE THE FED'S 2% TARGET. DO YOU THINK THIS IS ONE OF THOSE ECONOMIC INDICATORS THAT THE FED SHOULD BE WATCHING? THAT IS THE AI BUILDOUT? RIGHT. [00:10:51] Speaker 2: WELL, I THINK IN THE END, YOU KNOW, I RESPECT THE TALENT OF KEVIN WARSH AND HIS TEAM. AND THEY'LL BE WATCHING WHATEVER THEY FEEL LIKE THEY NEED TO WATCH. BUT THE BOTTOM LINE IS THAT AI SHOULD BE INCREASING SUPPLY, INCREASING PRODUCTIVITY, REDUCING INFLATION. AND THE LAST FEW INFLATION REPORTS SUGGEST THAT THAT'S REALLY QUITE CLEARLY IN THE DATA. IT WASN'T JUST ENERGY PRICES COMING DOWN, BUT VIRTUALLY EVERYTHING. SO IF THAT CONTINUES, THEN I WOULD EXPECT THAT THE FED COULD CONTINUE TO HOLD OFF ON INCREASING RATES. BUT IF THE DATA WERE TO JUMP IN THE OPPOSITE DIRECTION, I WOULD BE SURPRISED IF IT DID. THEN I THINK THAT THEY WOULD DECIDE TO LIFT RATES AND THAT WOULD BE A NORMAL FED MOVE. BUT, AGAIN, MY EXPECTATION IS THAT THE AI PRODUCTIVITY MOVE IS SO POWERFUL THAT WE'RE SEEING IT IN THE DATA NOW. YOU'RE SEEING IT IN THE DATA NOT ONLY IN THE INFLATION DATA, BUT IN THE PROFIT DATA FOR THE COMPANIES, THE AI COMPANIES, AND THE PROFIT DATA FOR THE COMPANIES THAT ARE USING AI. AND SO, YEAH, MY EXPECTATION IS AI IS GOING TO PUT DOWNWARD PRESSURE ON INFLATION AND MAKE THE FED'S JOB EASIER. KEVIN, LET ME GET YOUR TAKE [00:11:57] Speaker 1: ON INTEREST RATES HERE. BECAUSE THE 10-YEAR YIELD IS UP TO 4.68% THIS MORNING. AND THAT'S OFF OF THE HIGHS OF THE YEAR. WE KNOW THAT 2026 STARTED WITH A YIELD ON THE 10-YEAR OF 4.18%. THAT WAS BACK IN JANUARY. AND TODAY WE'RE CLOSE TO 4.7%. TO WHAT DO YOU ATTRIBUTE THIS SPIKE IN RATES? [00:12:17] Speaker 2: YOU KNOW, IT'S HARD TO THINK ABOUT, LIKE, WHAT'S THE EXACT THING THAT'S MAKING A MARKET DO [00:12:25] Speaker ?: SOMETHING. [00:12:25] Speaker 2: BUT I THINK THAT RIGHT NOW IT'S CLEAR THAT THE MARKET IS ANXIOUS ABOUT FUTURE INFLATION, NOT CURRENT INFLATION. AND I THINK IT'S BECAUSE IT'S SKEPTICAL THAT THIS AI BOOM STORY THAT I TALKED ABOUT IS GOING TO COME TO FURITION. AND MY VIEW IS THAT THEY'RE GOING TO FIND OUT THAT WE'RE RIGHT ABOUT THIS AND THAT THE ECONOMIES ARE GOING TO DO. I THINK IT'S GOING TO DO. I THINK IT'S GOING TO DO. I THINK THE PRICES WILL REVERSE. [00:12:50] Speaker 1: BUT WE'LL JUST HAVE TO WAIT AND SEE. THAT'S HOW ECONOMIES WORK. IN THE MEANTIME, THOUGH, WHAT KIND OF AN IMPACT IS THIS GOING TO HAVE? I SPOKE WITH ONE INVESTOR EARLIER WHO SAID, LOOK, THE 10-YEAR TREASURY YIELD IS UP ROUGHLY HALF OF A PERCENTAGE POINT THIS YEAR, REFLECTING PERSISTENT INFLATION CONCERNS, HEAVY TREASURY ISSUANCE, AND EXPECTATIONS THAT RATES WILL [00:13:10] Speaker ?: GOING TO DO. [00:13:11] Speaker 2: THAT'S WHAT MARKETS ARE PRICING IN RIGHT NOW. I MEAN, THAT'S CERTAINLY WHAT MARKETS ARE PRICING IN RIGHT NOW. AND THEN THE QUESTION IS, ARE MARKETS GOING TO PRICE SOMETHING ELSE IN DOWN THE ROAD? AND I THINK THAT AS THE REALITY OF THE PRODUCTIVITY BOOM FROM AI BECOMES APPARENT TO [00:13:26] Speaker 1: EVERYBODY, THEN THOSE PRICES WILL CHANGE. OKAY. SO YOU'RE NOT WORRIED ABOUT THE 10-YEAR YIELD CLIMBING AS [00:13:31] Speaker 2: MUCH AS IT HAS? IT'S A GREAT THING. [00:13:33] Speaker 1: IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. [00:13:51] Speaker ?: IT'S A GREAT THING. [00:13:52] Speaker 2: IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. IT'S A GREAT THING. WE'RE PRODUCING GOVERNMENT EMPLOYMENT SO THAT LONG-RUN BUDGET DEFICITS COULD BE LOWER. WE'VE GOT REALLY, REALLY STRONG ECONOMIC GROWTH. AGAIN, FINAL SALES IN THE GDP REPORT WERE 3.9%. THE REASON WHY IT WAS 1.5% WAS CAPITAL SPENDING IMPORTS, WHICH IS A REAL POSITIVE FOR FUTURE GROWTH. AND WE'VE GOT A CAPITAL SPENDING BOOM AND AN AI BOOM. WE'VE GOT SOME PEOPLE IN THE [00:14:31] Speaker 1: COUNTRY. THAT SHOULD PUT DOWNWARD PRESSURE ON INTEREST RACE AS WELL. ABSOLUTELY. I'M WONDERING ABOUT DOWNWARD PRESSURE ON COMMODITIES. OIL PRICES THIS MORNING TICKING HIGHER DESPITE A PULLBACK. YESTERDAY A NAVAL COALITION PROPOSAL FROM SAUDI ARABIA TO PROTECT TRADE SHIPPING ROOTS IS THE HEADLINE HERE WITH CRUDE OIL AT $85.32 A BARREL. ARE WE ALL JUST WAITING FOR THIS WAR TO END TO HAVE OIL PRICES COME TUMBLING BACK DOWN? WHAT DO YOU THINK ABOUT THE OIL PRICES? [00:15:00] Speaker 2: WHAT DO YOU THINK ABOUT THE OIL PRICES, GIVEN THE LEVEL OF REFINED PRODUCTS? RIGHT. WELL, DON'T FORGET THAT THE OIL PRICES ARE WAY LOWER THAN THE FEARMONGER SAID THEY WOULD BE WHEN PRESIDENT TRUMP TOOK THIS ACTION TO PROTECT THE WORLD REALLY FROM IRAN HAVING A NUCLEAR WEAPON. PEOPLE EXPECTED IS ALL OF THE MEASURES THAT THE WHITE HOUSE HAS TAKEN TO MAKE SURE THAT OIL SUPPLY CONTINUES, INCLUDING HAVING NAVAL SHIPS ESCORT PEOPLE THROUGH THE STRAITS, INCREASING THE THROUGHPUT IN PIPELINES, WAIVING THE JONES ACT SO THAT ENERGY CAN MOVE AROUND WITHIN THE U.S., YOU KNOW, AT A RELATIVELY LOW COST. AND ALL THOSE THINGS HAVE HELPED REDUCE THE IMPACT OF THIS NECESSARY POLICY. AND SHOULD WE NEED TO, WE'LL CONTINUE THOSE MEASURES. BUT OUR EXPECTATION IS THAT, AS PRESIDENT TRUMP HAS SAID OVER AND OVER, THAT THIS IS SOMETHING THAT CAN BE RESOLVED. WHEN IT IS RESOLVED, THEN ALL OF THOSE MEASURES THAT WE TOOK TO REDUCE THE COST OF ENERGY ARE GOING TO MAKE IT SO THAT LONG-RUN ENERGY PRICES ARE MUCH, MUCH LOWER. [00:15:57] Speaker 1: YEAH, NO, I KNOW THAT THE PRESIDENT IS EXPECTING PRICES TO PLUMMET AT SOME POINT. AND CERTAINLY I AGREE WITH YOU. I MEAN, I'M SURPRISED THAT OIL IS ONLY AT 85, GIVEN THE FACT THAT WE'RE AT WAR WITH IRAN. BUT I GUESS, YOU KNOW, THE BOND MARKET COULD BE TELLING US SOMETHING DIFFERENT. I MEAN, THE BOND MARKET IS SHOWING, IS SPIKING YIELDS. AND I'M JUST WONDERING IF THE BOND MARKET IS TELLING US SOMETHING DIFFERENT HERE. WHAT WOULD BE YOUR BIGGEST ECONOMIC RISK, IF YOU HAD TO LOOK AT ONE RISK FOR THE REST OF 2026? IS IT INFLATION? IS IT LABOR SHORTAGES? IS IT DEFICITS? IS IT THE SENATE NOT GETTING THE PRESIDENT'S AGENDA ACROSS THE FINISH LINE? WHAT WOULD IT BE, KEVIN, IN TERMS OF THE BIGGEST RISK TO CONTINUED ECONOMIC GROWTH FROM YOUR STANDPOINT? [00:16:42] Speaker 2: YOU KNOW, I THINK THE BIGGEST RISK FACING THE U.S. ECONOMY RIGHT NOW IS THAT THESE SOCIALIST DEMOCRATS ACTUALLY HAVE A BIG VICTORY AND CAN START TO HAVE THEIR POLICIES BE PURSUED BY LOCAL GOVERNMENTS AND EVEN PERHAPS THE FEDERAL GOVERNMENT BECAUSE THEY REALLY ARE LOOKING AT KIND OF A COMMUNIST TAKE OVER OF AMERICA AND IF MARKETS START TO THINK THOSE PEOPLE ARE GOING TO BE SUCCESSFUL THEN THERE'S GOING TO BE A LOT OF PAIN IN MARKETS. SO I THINK THAT'S THE BIGGEST RISK RIGHT NOW. WELL, I THINK THAT'S A GREAT POINT THAT YOU MAKE, FRANKLY, OKAY, BECAUSE THE SENATE IS [00:17:13] Speaker 1: ABOUT TO GO ON RECESS. THEY'RE LEAVING ON AUGUST 7TH AND THEY'RE NOT COMING BACK UNTIL SEPTEMBER 14TH. ONCE WE GET BACK TO SEPTEMBER 14TH, IT'S GOING TO BE ALL ABOUT THE MIDTERM ELECTIONS. THEY'RE NOT GOING TO HAVE MUCH RIVAL ROOM TO PASS ANYTHING. BUT WE'VE GOT SEVERAL ITEMS ON THE AGENDA RIGHT NOW HANGING IN THE BALANCE. WE'VE GOT A CONTINUING RESOLUTION. YOU'VE GOT RECONCILIATION 3.0. YOU'VE GOT THE CLARITY ACT. YOU'VE GOT THE RUSSIA-IRAN SANCTIONS. NOT TO MENTION THE SAVE AMERICA ACT, KEVIN. AND THE FARM BILL. [00:17:45] Speaker 2: I'M SORRY, THAT'S WHAT I WAS WORKING ON YESTERDAY. THE FARM BILL. THANK YOU. [00:17:50] Speaker 1: VERY IMPORTANT. AND CERTAINLY OUR FARMERS ARE WAITING FOR THAT. SO WHAT HAPPENS IF THEY DON'T GET ANY OF THIS DONE BEFORE AUGUST 7TH? [00:17:57] Speaker 2: I THINK THERE'S GOING TO BE A HECK OF A LOT OF PROGRESS MADE. WE'VE BEEN MEETING EVERY DAY WITH THE SENATORS. A LOT OF STUFF HAS ALREADY MADE IT THROUGH THE HOUSE. AND OUR EXPECTATION IS THAT MOST OF THE THINGS YOU LISTED ARE GOING TO BE RESOLVED BY AUGUST. BUT YOU'RE RIGHT. THERE'S A VERY LONG RECESS BECAUSE THE POLITICIANS NEED TO GO BACK AND MEET THEIR CONSTITUENTS IN THEIR HOMETOWNS AND THEIR HOME STATES. AND THAT'S KIND OF THE NORMAL CYCLE OF THINGS. I THINK WE'VE BEEN TALKING ABOUT THAT IN CONGRESS AND ELEMENTARY SCHOOL THEY'RE THE ONLY TWO PLACES WHERE RECESS REALLY MATTERS. THAT IS GOOD. AND RECESS REALLY MATTERS FOR THESE PEOPLE BECAUSE IT'S WHEN THEY GET TO GO BACK AND TOUCH HANDS WITH THE PEOPLE THAT VOTE FOR THEM. AND I THINK IT'S A GOOD THING [00:18:42] Speaker 1: THAT THEY DO THAT. REAL QUICK BEFORE YOU GO, KEVIN, YOU'VE BEEN WORKING ON THE FARM BILL. WHAT DO YOU WANT TO LEAVE US WITH AS FAR AS WHY THE FARM BILL IS SO CRITICAL TO GET OVER THE FINISH LINE? [00:18:51] Speaker 2: WELL, I THINK THAT AMERICA'S FARMERS HAVE HAD, YOU KNOW, SOME TOUGH BREAKS. YOU KNOW, A BUBBER CROP IN BRAZIL MADE IT SO PRICES WENT DOWN GLOBALLY. THE DISRUPTIONS IN THE GULF HAVE MADE FERTIALIZER PRICES GO UP. AND IT'S REALLY, REALLY IMPORTANT THAT WE HELP FARMERS. WE GET THEM THE RELIEF THEY NEED AT THIS DIFFICULT TIME. [00:19:11] Speaker 1: ALL RIGHT. WE WILL LEAVE IT THERE. KEVIN, GREAT TO SEE YOU. GOOD TO SEE YOU, MARIA. GOOD TO SEE YOU, MARIA. ALL RIGHT. THANKS SO MUCH. HAVE A GOOD WEEKEND. YOU'RE WATCHING MORNINGS WITH [00:19:21] Speaker ?: MARIA LIVE ON FOX BUSINESS AND WE'LL BE RIGHT BACK.