Podcast Summary: Bloomberg Talks – NEC Director Kevin Hassett Talks the Economy

Date: November 19, 2025
Host: Anna Wong (Bloomberg Economics)
Guest: Kevin Hassett, Director, National Economic Council (NEC), former White House economist

Episode Overview

This episode features Anna Wong in conversation with Kevin Hassett about the current state of US trade policy, the effects and mechanisms of tariffs, implications for the economy, and broader themes such as productivity booms, artificial intelligence, labor dynamics, fiscal policy, and the role of the Federal Reserve. The episode covers Hassett’s experience at the Fed during the 1990s productivity boom, his views on current economic puzzles, and addresses speculation about his potential candidacy as the next Fed chair.

Key Discussion Points and Insights

1. The Logic and Effects of US Tariff Policy

[00:19 - 05:52]

• Approach to Tariffs: Hassett describes the administration’s data-driven method to setting tariffs, taking into account product elasticities to minimize domestic harm.

  • "What we did is we actually went through all the different tariff classes... figured out the relative elasticities and then maximized or minimized the potential harm." (Hassett, 00:50)

• Trade Deficit and Foreign Policy: Persistent US trade deficits are seen as a function of trading partners “dumping” goods for domestic political stability (notably China).

  • "One of the reasons why the US has a really persistent trade deficit is that we have a few trading partners... to create jobs and dump product into the US..." (Hassett, 01:36)

• Inelastic Supply and Inflation: Tariffs on countries with inelastic supply (like China) force them to cut prices, resulting in minimal inflation impact.

  • "For the countries that have big persistent trade deficits with us... they've ended up having to cut their import prices so much that there's very little visible effect on inflation here." (Hassett, 02:25)

• Tariff Schedule and Endgame: The current administration's approach is case-by-case, based on ongoing negotiations.

  • "President Trump... will decide what the endgame is. He’ll look at the deals... Some countries, there's still work to be done." (Hassett, 03:18)

2. Tariffs, Income, and Fiscal Policy

[04:02 - 06:29]

• Policy Drift: Shift from algorithmic tariffs to a “border-adjusted business cash flow tax” and reliance on expanded export subsidies.

  • "What we'll be converging to is something like a border-adjusted business cash flow tax." (Hassett, 04:07)
  • "It's a few hundred billion already this year, and it's not causing a lot of harm. GDP now is at 4%." (Hassett, 04:31)

• Tariff Burden Debate: Anna Wong mentions estimates that most tariffs are absorbed by exporters, with a smaller share impacting US consumers; Hassett emphasizes the high growth and low inflation outcomes.

  • "I think that the Wall Street folks... were saying we’re going to have stagflation... I think... they were not the best models." (Hassett, 06:34)

3. Tariffs, Deflation, and Unemployment

[07:11 - 10:15]

• Historical Perspective: Anna references a San Francisco Fed paper finding tariffs to be historically deflationary (by reducing aggregate demand) and raising unemployment.

  • Hassett pushes back on using 100-year data as relevant today due to radically different economic structure and mobility.
  • "It’s quite a mistake to look at 100 years of history to learn about today's situation... it’s not going to apply." (Hassett, 08:29)

• Onshoring Boost: Tariff-driven onshoring and capital spending booms are credited for recent gains in real wages—recovering ground lost under previous administration.

4. Productivity Boom and Labor Market Dynamics

[11:15 - 17:13]

• Productivity Parallels: Hassett compares today’s AI-driven productivity surge to the 1990s IT boom under Alan Greenspan.

  • "Greenspan had an intuition that the computer was going to revolutionize the economy... I think that it’s one of the great moves of Federal Reserve history..." (Hassett, 11:30 & 12:38)

• AI as a Productivity Driver: There's early evidence of an AI-related productivity boom. Anna notes the polarizing reception of AI’s impact among economists and public.

  • "With this AI boom, we’re already seeing it in the data. Probably the benchmark revision is going to revise it up." (Hassett, 13:21)

• Employment Puzzle: Despite strong GDP growth (3-4%) and productivity, job and labor share growth is lagging, possibly tied to AI and reduced immigration:

  • "You could do a lot in trade, but the 85% of the economy, mostly IT and services, getting massive productivity change will overwhelm trade effects." (Hassett, 14:46)

• Immigration and Workforce: The break-even jobs number has dropped due to lower illegal immigration, affecting labor market health.

5. Historical Fed Decisions and Measuring Productivity

[17:33 - 25:25]

• Fed 1990s Anecdotes: Hassett shares inside stories from the 1990s on how the Fed measured productivity and navigated data limitations, including the infamous hedonics adjustment for computers:

  • "The computer price was dropping at about 16 to 20% at an annual rate... real GDP was getting a real big kick from the deflator..." (Hassett, 21:10)

• Committee Dynamics: Greenspan’s ability to read alternative data and persuade skeptical staff is highlighted.

• Forecasting: Describes process of Fed staff forecasting segments of GDP, aggregation methods, and bottom-up decision-making.

6. Inflation Expectations and Fiscal Outlook

[28:26 - 39:17]

• Inflation Expectations: Hassett is skeptical that inflation expectations are firmly anchored, citing recent surges and policy credibility issues.

  • "We lost control of inflation in recent memory... People would be right to worry." (Hassett, 29:12)

• Fiscal Deficit and Tariffs: Details administration’s efforts to reduce the deficit (down $390 billion calendar year), attributing improvement equally to higher tax revenue, tariffs, and spending restraint.

• Affordability and Stimulus Checks: Discusses tradeoffs of delivering direct aid vs. risking inflation, referencing past stimulus and the potential for rebating tariff revenue.

• Interest Payments & Debt: Acknowledges challenge of rising debt service, expresses confidence in further fiscal progress “if growth and productivity booms persist”.

7. Federal Reserve Independence and Transparency

[39:26 - 48:27]

• Fed Chair Candidacy: Anna raises speculation on Hassett as leading candidate for Fed Chair.

• Independence: Strong assertion of commitment to central bank independence, regardless of prior political roles.

  • “[Independence] is important and that commitment will be made whoever the President chooses, over and over again...” (Hassett, 48:02).

• Transparency: Supports more robust Fed modeling, scenario-sharing, and openness about analytical methods, especially embracing time series and machine learning models in policy analysis.

  • "Look at everything and then see what works." (Hassett, 47:39)

Notable Quotes & Memorable Moments

| Timestamp | Quote | Speaker | |-----------|-------|---------| | 01:36 | "One of the reasons why the US has a really persistent trade deficit is that we have a few trading partners... to create jobs and dump product into the US..." | Hassett | | 04:07 | "What we'll be converging to is something like a border-adjusted business cash flow tax." | Hassett | | 08:29 | "It’s quite a mistake to look at 100 years of history to learn about today's situation... it’s not going to apply." | Hassett | | 12:38 | "There’s like evidence in peer-reviewed papers... showing big AI gains... we also see it in productivity." | Hassett | | 14:46 | “You could do a lot in trade... but the 85% of the economy, mostly IT and services, getting massive productivity change will overwhelm trade effects.” | Hassett | | 21:10 | “The computer price was dropping at about 16 to 20% at an annual rate... real GDP was getting a big kick from the deflator…” | Hassett | | 29:12 | "We lost control of inflation in recent memory... people would be right to worry." | Hassett | | 38:15 | "The productivity boom is a real necessary piece... you're looking at pretty good growth accounting right now." | Hassett | | 46:44 | "If you look at the Economic Report of the President... we ran horse races with models... I think the Fed hasn't done a good job of helping people do that." | Hassett | | 48:02 | “[Independence] is important and that commitment will be made... over and over again during Senate confirmation.” | Hassett |

Important Segments (Timestamps)

• 00:19: Introduction to tariff logic and trade deficit rationale
• 03:16: Assessment of current and future tariff schedules, negotiation strategy
• 07:11: Anna’s review of research on tariffs’ deflationary effects
• 11:15: Productivity boom parallels between 1990s IT and current AI advances
• 19:29: Anecdote on BEA’s hedonics adjustment for productivity measurement
• 29:12: Discussion of inflation expectations and fiscal credibility
• 33:30: Fiscal deficit details, tariff revenue impact, and direct aid policies
• 39:26: Discussion of Fed independence, skepticism about staff communication
• 44:57: Call for more model-based transparency and openness at the Fed
• 48:02: Hassett’s commitment to preserving Fed independence if confirmed

Final Thoughts

This episode offers a rich, nuanced look at how trade, fiscal, and productivity dynamics intersect in the US economy. Kevin Hassett provides a strong defense of the current tariff regime’s economic rationale and highlights the outsized influence of technological change on growth forecasts and labor dynamics. The discussion further illuminates debates over Fed independence and transparency, with Hassett’s own experience as both an insider and a possible Fed chair nominee adding a unique perspective.