Dr. Adam Posen (3:04)

Tim, I think that's the right question. And I would not say it necessarily needs to be tied to Israel recognition in the Abraham Accords, but it needs to be tied to something of that caliber. So maybe it's something about how they're relating to Iran or something about the Saudi mutual guarantees with Pakistan, some sort of agreement on how the Saudis will influence Pakistan. Or maybe it's about the investment which the Saudis have indicated they're willing to do in rebuilding Gaza and dealing with what will be refugee issues there. All I'm saying is that it has to be something substantial. But I also think you want the F35s, of course, are a big carrot, but you also want to think of it in terms of the relationship. And this is what is key, whether it's UK or Saudi or Japan.

Carol Massar (3:55)

Adam, you talk about relationships and I think about something that came up questioning by reporters of the President and MbS while at the White House and that is about kind of the relationship that the Trump Organization has with Saudi Arabia on business deals. And we have a story in the Bloomberg about the Trump Organization planning a luxury resort in the Maldives with a Saudi Arabian partner. It's just one case. I'm just curious. You've watched, you've talked about, you've analyzed different administrations. This kind of what seems to be a mixing melding. I know the president answered the question. He said I have nothing to do with family business. But. But how do you see this?

Dr. Adam Posen (4:37)

No, I appreciate your asking that, Carol, and I don't want to be mean, but it doesn't matter whether the president literally in the narrow sense has nothing to do with it or not. We had laws and more importantly we had norms and we had expectations from the press, from the public, from the markets that the US did not deal in family enrichment. When you're in public office, let alone when you're the president, you must some of your viewers might remember the John Adams miniseries in which John Adams alienated both his daughter and his son in law or one of his sons and his son in law because he wouldn't advance them while he was in the White House. And what matters is this very strong perception which is obvious in Qatar, in the United Arab Emirates and Saudi. But even with the gold that was offered just the other day to the President, there is this perception that you link things. Now I don't want to overdramatize this. There are a lot of countries in the world, including Saudi, including Turkey, including China, where this kind of ties go on between the leaders, families and chosen friends and foreign policy and other governments. It's not good, it's not fair, it's wasteful and distortionary, but it's also not the end of the world. Businesses and investors can proceed, but for the US this is going back to your original question. This is a huge step change. We've, we've not seen anything like this, at least since Teddy Roosevelt, meaning 120 years.

Carol Massar (6:15)

So just to be fair, because we certainly get feedback from our audience and to say that the President says I'm not involved though, you know, and we've had, you know, any president that walks into the White House, Republican or Democrat, you know, certainly has allegiances to industries or so on.

Dr. Adam Posen (6:32)

So I agree, I agree. It's never going to absolute. And we all know the stories of people going back to Jimmy Carter's brother selling beer, that there's always relatives who try to profit on these things. But the. So again, this isn't about ascribing malevolent intent, but you want to have a system in place where people expect and feel, particularly investors, but also average citizens expect and feel that this is an exception, not the rule that you occasionally have the rogue family member, but that on the one hand, policy choices are not being driven and being perceived as driven by these things. And on the other hand, that economic choices are being made on a commercial basis. And that's why no matter how many times people of different parties and different administrations or appointments fail on this front, you want to have a system of scrutiny and rules and presumptions that discourages our elected officials from being so overt about it. I think to be fair, you know, the Trump administration and the sons of President Trump and Secretary Ludnick and the Middle east negotiator guy and all these people, you know, they're being very open. And I think that in one sense does matter, like they are with crypto. But in another sense, that doesn't solve the problem because then the perception is still people are being favored, decisions are being made on a bad basis. You have to offer gold crowns or hotel deals to make things happen.

Carol Massar (8:20)

And transparency doesn't necessarily negate actions. Right?

Dr. Adam Posen (8:25)

Yeah. Well said.

Tim (8:27)

Dr. Posen, you said it's not the end of the world if we're in a situation such as this or in a society such as this.

Dr. Adam Posen (8:34)

But it's not the end of the world.

Tim (8:36)

But I'm wondering if there are potentially long term economic repercussions that happen in societies that don't necessarily have the same rules in place. If we can look to history or modern history to get an understanding of what the implications of that could be in the US in your view?

Dr. Adam Posen (8:53)

Oh, I think they're enormous. I think then, because it's the US which as I've argued, Tim, has been the linchpin of the rules based, law based system of economies Since World War II, it has repercussions around the world because it means the US is not only enforcing the norms against this kind of corruption or perceived corruption or tied political choice making. It means that the US is setting an example that you can get away with that and other people should get away with it. And it breaks down the regimes and the operating principles we have to deter these things. So when I say it's not the end of the world, I don't mean to suggest it's not very harmful. It will reduce the returns on capital. It will reduce the ability of average people and normal businesses to get access to opportunities. It will divide the world. It will increase instability in investment markets. It will war, waste public money. It's bad in a lot of ways. I just merely want to be very clear that though it's unusual for the US in the last hundred plus years to behave this way, in our long ago history and in other countries around the world, this has taken place. And that there have been much smaller, much less overt examples of this by your previous U.S. administration.

Carol Massar (10:16)

Well, and you know, just thinking about all you've just said, Dr. Posen, and then kind of squaring that with the recent government shutdown and the domestic issues that kind of came to the forefront, you know, the one in eight Americans who are on some kind of food assistance or food stamps, you know, the amount of Americans that are just struggling to put food on their table, a roof over their head, I want to bring it down then with so much focus on global issues. And some would say when you're president, you have to look beyond the US borders as well as within the US borders. But having said that, what is it that you know is maybe being ignored in your view domestically? That's really got to be addressed.

Dr. Adam Posen (11:03)

Ken, you're asking very profound questions. I'll just say that in an enlightened administration, the reason you get involved in the rest of the world is because it ultimately is to, if you set up a rest of the world that feels safer and less corrupt and more stable and less subject to disease and refugee flows and wars, that's ultimately to the benefit of the average American and if you have open and free commerce on a rules based basis that raises American opportunities and American citizens purchasing power. So I agree with you. There's a question of how you prioritize. And this goes to the point with Saudi, I'm not sure that that should be the biggest priority of an American administration right now. It's fine. You can walk and chew gum. It can be one of the things. So when you say what's in the domestic front, I think the removal of health care support subsidies and access to Medicaid and to all these Obamacare related things is going to materially affect the health and well being of millions of human beings in the US and that is bad economically, but it's bad in human terms. I think the reduction of options through the anti migration policies, through other policies that make it so more people, mostly women in late middle age, have to stay home to be caregivers to elders and to children and disabled people is materially bad for humans and is a huge pressure on people. And I think the combination of anti migration policy attacks on the Fed, tariffs, deal making, some of which looks corrupt, all adds to a more inflationary environment which reduces real incomes for people. So there's a whole bunch of things on the domestic front, but I just want to say that it's not about choosing the global versus domestic, it's about choosing the self interested versus the public welfare.

Carol Massar (13:15)

I think we need to leave it there. I gotta say sometimes I'm in awe of our guests and I certainly am on this Tuesday. Dr. Posen, thank you so much. Really appreciate all we could.

Dr. Adam Posen (13:25)

Thank you for having me.

Carol Massar (13:26)

Same here. Thank you for joining us. Dr. Adam Posen, President of the Peterson Institute for International Economics.

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