Transcript
David Pakman (0:00)
All right.
Unknown Co-Host (0:07)
Welcome to the show, everybody. Today's show almost was very, very late. When I was preparing for the show this morning, I was fed a video of Lara Trump covering, singing Tom Petty's song, Won't Back Down. It was so nauseating and I felt so unwell that the entire show almost had to be pushed back. But miraculously, I am here. We are here. And there is going to be a heavy focus on the economy in today's show because we are now building up a picture of where this economy is going. And it's, it is a political story, but we really just start with the facts. And it's not, oh, everyone's now unemployed and the economy is objectively terrible. But we now have four, five, maybe six important indicators that this economy is going very much in the wrong direction. Inflation is now up. Trump said it would be down. It's up. Layoffs have hit the highest level since COVID times. Manufacturing saw its largest decline in years. And we have an environment that isn't extraordinary economically and it signals potential problems. So let's take each of these issues one at a time, starting with today's inflation report. And then I know a lot of you have been to me saying, David, can we even trust inflation numbers at this point? And I'm going to get to that because that has never been an area of focus for me. We can't trust the cbo, we can't trust the bls. That's not been the case for me during Republican presidents, nor during Democratic presidents. So I want to come back to that. But let's start with inflation. Inflation is up. We got July 2025 numbers today. Tariffs are making things more expensive. This was completely predictable. We have two measures, core inflation and cpi, which is the Consumer Price Index. Core inflation is up 0.3% over the last month. In June, it was up 0.2%. So that 0.3% increase in July is the largest single month inflation increase in six months. This now pushes year over year inflation for the 12 month period ending in July from rather up to 3.1%. The desirable range for inflation is 2 to 3%. I'll explain why in a moment. Core inflation is now up year over year. 3.1. Inflation is elevated by point one, but elevated. We then have CPI, the consumer price index. That is up 2.7% year over year. Not crazy high, but remember Trump said prices were going to come down every day that inflation is greater than zero, prices are going up. Very basic math, arithmetic. The Fed like CPI at 2%. So being at 2.7 when the Fed says we want 2 means that the consumer price index is 35% higher, higher than the number that the Federal Reserve considers ideal. So let's now contextualize this. Tell me if this is useful, by the way, if this isn't, you know, if you just want me to play Stephen Miller gaff reels instead, let me know. But I think that understanding how our economy works is critical. So tell me if you think that understanding these things is an important thing. First of all, stocks opened way up this morning. This inflation news is bad news. It shows that the tariffs are raising prices. Why would, as of this moment the dow be up 400 points? Why would the Nasdaq, as Trump calls it, be up over 100 points? If this is bad news, why are stocks up? Well, I'll explain that. The stock market is a futures market in a sense where traders and investors are making trades based based on their expectation of what's going to come in the future. Their expectation of what's going to come in the future now includes a reduction to the federal funds rate, which juices the stock market. What do I mean by that? Because inflation came in hotter than expected, because prices are increasing when Trump said that he would decrease them, traders and investors believe the Fed will meet and lower interest rates. Because of the expectation that the Fed will lower interest rates, the stock market is up as of this moment. So that's the explanation there. Let's now go to why do we want any inflation at all? And I apologize to those who have heard me explain this before, a lot of people don't understand this. A lot of people say, well, cheaper stuff is better, so why don't we want cheaper prices to go down? Like obviously we get why high inflation is bad, but don't we want deflation? We don't in the traditional understanding of macroeconomics, and you can dispute that understanding. But in that framework, which is at least nominally applied in many economic analyses, 2 to 3% inflation is enough that it would encourage people to buy stuff. Not now, because if you wait, it'll get more expensive. Right? That's the, the whole idea of stimulating economic activity is if you have 2 1/2% inflation, you would be incentivized to buy stuff now, which keeps people employed, which keeps them earning money, which then they go out and spend in the economy. That is where economic growth comes from in a way you can't decouple mild or what we would call reasonable inflation, desirable inflation from economic growth. If you accept standard macroeconomics you recognize that growth is derived from price increases to a degree at 2 to 3% being the ideal amount. Really high inflation, we intuitively, intuitively understand, isn't good because if things get too expensive too quickly, faster than your wage growth, you can't afford stuff. If you can't afford stuff, you don't buy it. The companies that sell that stuff then go, we've got no customers, we've got to lay off our employees. And it's a sort of economic doom loop. But why is deflation bad? Deflation is bad because if prices are coming down in absolute terms, if eggs are going to cost less next month than they buy, actually, eggs may not be a good example because you could delay purchasing eggs. But the idea is if you can wait to buy stuff because it's going to be cheaper, you wouldn't buy it right now. If you don't buy it right now, that's bad for companies that are selling stuff, and it creates that same deflationary spiral. So that's why we say a little bit of inflation is good. It generates economic growth. The political question, and we're going to get in a moment to numbers that we can trust versus ones that we can't and the other elements of the economy. What is Donald Trump going to do right now? Because certainly the tariff policy is a driver here in increasing prices. And politically there is a really difficult off ramp for Trump just because of his personality. So we're going to get back to that. But what is Donald Trump going to do? All right, can we trust economic data today? Now, before you go, wait a second, David. You're the guy that always says we can trust the data. That's right. That's right. For decades, decades. You didn't have to like the numbers, but you could trust them. Inflation, unemployment, wage growth. The Bureau of Labor Statistics would put out its reports and partizans would fight over what the numbers meant. But nobody credible was saying, the bureau is just making up jobs numbers. You would, you would occasionally hear from Republicans when a Democrat had good numbers, or you would occasionally hear from Republicans when a Republican had bad numbers. But in the sort of serious adult space that we try to occupy, we didn't question the validity of the numbers. When George W. Bush got a good or a bad jobs number, we trusted it. When Obama got a good or bad jobs number, we trusted it. Whether it was Carter or Reagan or Bush 1 or Clinton or whoever. The Bureau of Labor Statistics and some of these other economic reporting agencies and, and others like the Congressional Budget Office, they were boring, they were dependable, they were apolitical. And markets relied on the data and reporting. The Fed relied on it to make decisions. Social Security checks were based on it. The economy ran more smoothly and the data was credible. We have a unique situation, and this is not partisan. This is not about Democrats and Republicans. This is about the Orange Man. President Trump, as he once referred to himself. Trump fired the head of the Bureau of Labor Statistics after she put out a jobs report that he just didn't like. It was inconvenient politically. There was no wrongdoing. The numbers weren't flattering to Trump. And Trump has accused the agency of manipulating data. The same claim that the far right will trot out any time a report doesn't go their way. If inflation's too high, those numbers are fake. If jobs are too low, those numbers are fake. And I've always said in the past, wrong. The numbers are reliable because the people producing them are not political hacks. You don't have Stephen Miller, Peter Navarro and Laura Loomer doing these reports. You've got economists, statisticians, and career civil servants. Things are now changing and we have to consider this question of the trustworthiness of the numbers. Trump is trying to turn economic reporting into a partizan loyalty test. The budget cuts are forcing the Bureau of Labor Statistics to collect less data. This is also critically important. We just got this inflation report. It's not a great report. It puts core inflation above 3%, desirable, is between 2 and 3 jobs numbers aren't good, etc. But we have learned that they are no longer gathering all of the inflation data that they once were. Some cities are not now being considered as part of the inflation report. They are relying more on what are called imputed numbers, estimates from other locations that may or may not be similar. What's inflation in Nashville? Well, we might not gather that. We'll just take the number from Dallas and sort of apply it to Nashville. Is that a good idea? Most economists say that it is not. This is not a technical problem. This affects inflation data and this affects jobs data. These are the two most important numbers, in a sense, in the economy. When you are less precise with that data, you have more volatility, more political spin, and policy based on those numbers is inherently less reliable. These numbers also are used to decide Social Security benefits. The cost of living increase of Social Security is based off of these numbers. If these numbers aren't reliable, then we're going to have a problem with our Social Security benefits. The Federal Reserve uses these numbers. To decide are we going to lower interest rates, raise interest rates, or keep them the same? Those decisions can have trillion dollar impacts in global economies. They're the baseline for every serious conversation about the economy. And again, historically, this was not partisan. You could trust the numbers under Reagan, you could trust the numbers under Bush 1, you could trust them under Bush 2, and Clinton and Obama. If you hated the president, you could still believe the numbers. Even in Trump's first term, that was still true. But this is now different because he's firing career officials for producing numbers that he just doesn't like, and he's starving these agencies of resources and he's telling supporters the data is rigged unless it makes me look good. And this is how authoritarians operate. We've seen what they do with regard to media, we've seen what they do with regard to militarization of law enforcement. We're seeing all of these different areas. And another one that authoritarians do is they take neutral statistics reporting agencies, and they make them political weapons. So now that we have the new CPI report and now that we have the new inflation numbers, they're not great. They're not great, but are they even reliable or is the inflation situation even worse? I am now for the first time ever, and I did this during Bush, and I did this during Trump's first term. I never brought this up. We now have to ask, can we trust these numbers? And if the answer is maybe not, we're sort of in uncharted territory here. The numbers we're getting aren't good. And it's a reasonable question to say, well, are the numbers actually far worse? Let's take a look now at the layoff data. The Trump economy just hit a milestone, and this is not the kind of milestone that you brag about on a campaign trail. This is not the kind of milestone you brag about if you are the President of the United States. In July, layoffs, meaning the number of people whose jobs were eliminated reached their highest level of in five years. Think about that timeline that makes the July layoff numbers the worst since those early days of COVID More than 62,000 people were told in July, thanks for your service. Clean out your desk. Don't let the door hit you on the way out. That is a 29% increase from June. It is 140% higher than the July layoff numbers of last year. We often because there's seasonality to employment, sometimes we like to say, how does this year's number compare to a year ago rather than to last month. 75% higher than at this time last year. 6% higher than the entire layoff total for all of 2024. We've already seen more layoffs in the first seven months of this year than we saw in all of 2024. And the last time that January to July was this bad was when the economy was in a COVID lockdown and layoffs were, you know, in the millions. 1.8 million or something like that over that period. What is the biggest driver of this? Trump's Doge, which has been on this firing spree. 300000 federal jobs have been wiped out this year alone. In addition to that, we are seeing manufacturing jobs decline thanks to Donald Trump's tariffs. And, and these are not the people being fired by the federal government. We're talking about folks who process benefits. We're talking about food inspectors, workplace inspectors for health and safety, people keeping airports running and ensuring functions of government. And so the people that loved Doge are saying, this doesn't matter. We're getting rid of people. Uh, we're getting rid of jobs that never really should have existed in the first place. But the downstream effects are huge. Health care providers are losing funding, nonprofits are losing grants. All of these entities employ people. And so you've got this ripple effect, sort of like if you drop a big stone in the water and then it ripples out very, very far from where you drop the stone, and it'll start hollowing out your economy, it'll start hollowing out sectors. If you look at the private sector, because this is not just about government jobs. Tech and telecom are cutting workers. They see automation, they see cloud infrastructure that requires just fewer people. It's just technological unemployment, in a sense. You've got retail slashing jobs. Prices are going up, so consumers are buying less. This is a result of Trump's tariffs. And then you look just kind of nominally finance transportation, which is one of the biggest employment sectors in the country, business, service firms, these were really growing over recent years. They're reversing. And then I do think it's worth mentioning AI. This doesn't really directly have to do with Trump. 10,000 layoffs last month are believed to be tied to AI. Another 10,000 this year linked more broadly to automation. So this is not just one type of job. Tariffs are making things more expensive. And we are, for now, still seeing unemployment in the fours. But it doesn't take that much to push unemployment to 4.8, then to 5.2. And all of a sudden now you no longer have full employment. So it's always a question of are we going to see the trend reverse? If this trend keeps up, we're going to see the biggest year for job cuts since pandemic shutdowns. And it'll be happening under the guy who said, I'm going to bring back jobs. I understand how to do it, I understand who to tariff. It's all going to be great. It's looking like it could be a bloodbath if things don't reverse. I'm going to keep you updated on it. I hope you'll get my daily free audio podcast on Spotify or Apple Podcasts. We'll take a quick break and be right back. Making a good first impression matters, whether you're walking into a meeting or you're just going about your day and when you're trying to look sharp, Harry's makes it simple. Our sponsor, Harry's, makes high quality shaving and grooming products that just show up right at your door. No overpriced markup from the big brands. I love the feel of the weighted handle on Harry's razors. It's easy to grip, it's nicely designed and it just looks good on the counter. The shave is smooth, the blades stay sharp. They're foaming. Shave gel leaves my skin feeling amazing. They also have great body wash and deodorant products. Really solid quality, just nice scents. More affordable than what you find in most stores. So whether you are already loyal to a grooming routine or you're just looking to upgrade from whatever you grabbed off the shelf, Harry's makes it really, really easy and you don't spend a fortune. Right now you can get a Harry's trial set for $8 plus you'll get a free gift. Go to harry's.com/pacman. The link is in the description There was a time when public education meant learning math, science, history. But now we are seeing Bible verses in biology class, we're seeing 10 commandments on the wall, religious chaplains taking the place of trained counselors, and it's all funded by taxpayer money through voucher programs that are sending public dollars to private religious schools. This is part of a broader effort to inject religion into public education. I'm against that and it often is coming at the expense of real academic standards and the well being of the students. Now our sponsor, the Freedom from Religion foundation, is fighting back. FFRF defends constitutional principles, takes legal action when schools cross the line, and protects students from religious coercion in public classrooms. If you believe in facts in protecting education and keeping religion out of public schools. I can tell you this is an organization very much worth supporting. To get involved, go to ffrf.org school or text David to 511-511- Message and Data Rates may apply. The link is in the description. The David Pakman show is of course an audience supported program. If you enjoy the show, I would love for you to add yourself to the ranks of our supporters. The best and most direct way to do it is get a membership on my website. Join pacman.com you can also support on Substack certainly become a free subscriber. It costs nothing, but it makes Substack more likely to recommend our newsletter to other people. Substack also has a paid option which you can check out@substack.david pakman.com Donald Trump just took one of the most authoritarian swings of his presidency. We talked about it yesterday. Seizing control of Washington, DC's police department, ordering hundreds of National Guard troops into the Capitol. Turns out it's not only up to Nancy Pelosi. As Trump said in 2021, when the National Guard goes to D.C. trump bypassed city elected leaders. He declared it a public safety emergency. He handed control of the police to Attorney General Pam Bondi. And of course, the numbers don't support it. When you look at violent crime in D.C. it was down 35% last year. It's down another 26% this year. Crime for decades has overall been coming down. There have been blips, there have been spikes in certain types of crime at periods of time, in certain locations at periods of time. But the big picture is that crime continues to decline. It declines under Democrats, it declines under Republicans, presidents. That is because a lot of it doesn't have anything to do with them. But the city's attorney general is saying what Trump is doing is against the law. Under the D.C. home Rule Act, Trump has something that he doesn't have in most states, which is the authority over the D.C. national Guard. There's no governor of D.C. therefore, the authority falls to the President Donald Trump. He can deploy troops without gubernatorial approval, like he did, by the way, in California, without Gavin Newsom's approval. But that is where the word revolt now comes in. The Guard is not a MAGA army. Many serve in overwhelmingly blue states, and of course, D.C. itself is overwhelmingly Democratic voting. Most National Guard are trained for disaster relief, humanitarian aid. They are not trained primarily in patrolling American streets on presidential orders. And in fact, it's a really big deal to deploy troops to do domestic Law enforcement, you're not supposed to do it. It's against the law based on the Posse Comitatus Act. So the question now is whether National Guards. Because remember, we're talking about states. The question is whether state National Guards are going to revolt against Donald Trump. Because rumors are that a lot of National Guards men and women are not happy with what is going on. They correctly don't believe that they are being utilized in the way that they are supposed to be. And so a revolt wouldn't really look like armed defiance. I'm not talking about National Guard troops saying, here's my rifle and I'm pointing it at Trump, proverbially right at the Trump administration and saying, I'm not going to do it. The way it would look is units dragging their feet to do what Donald Trump directs them to do, or dragging their feet in general just to make a point. Commanders sort of quietly shifting troops into non law enforcement roles. Whistleblowers leaking that there is dissent in the ranks and that morale is low. And the idea here, of course, is if Donald Trump tries to apply the L. A and now DC Method or tactic to Chicago. He talked about other cities of Philadelphia, New York. I don't even remember the full list Trump gave me gave yesterday. The pushback has the potential to become a national revolt of the National Guard. Now, meanwhile, the streets of D.C. have erupted. Protests broke out yesterday. Within hours of the announcement, there were hundreds of people rallying outside of the White House. And the mood from what we've heard, including from people like Samantha Davis of Free DC Is that nobody, the protesters and even many in the Guard don't believe that what Trump is doing has anything to do with crime. And in fact, you look at the data, crime is down, crimes down in D.C. crimes down nationally. This is about control and this is about power. Authoritarians aren't super concerned with crime and public safety. Authoritarians are very concerned with control and power. And the optics of deploying these armored vehicles near the Capitol and homeless encampments are going to be bulldozed. And it's a crime emergency, we are told. Of course, the emergency doesn't exist. This is how authoritarians operate. Now, we've talked about some of the parallels. In 1968 at the DNC in Chicago, National Guard and police cracked down hard on protesters. And there was a political firestorm over it. In 1970 in Kent, state Guard troops were deployed under political pressure and they killed four for unarmed students. And it really was a turning point in public opinion. And then there were repeated Domestic deployments by Nixon against anti war protesters that also had some of the same sort of like turning them against our own citizens kind of optics. So what's the lesson from history? The lesson is when you turn the Guard into a political force, you erode the nonpartisan image that the National Guard is supposed to have, and you can trigger a legitimacy crisis that could last much, much longer than the presidency. But there's also a political risk analysis that needs to be done, because Trump's second term playbook is about just raw executive power and saying to courts, I dare you to stop me, and saying to governors, I dare you to stop me. And saying to media, I dare you to stop me from, you know, banning whoever or whatever the case may be. We are going to have to see if Guard members resist or if protests escalate and the narrative flips. Does Trump lose control? Does he lose control of the streets? But then does he lose control of the troops that he wants to bring in to try to control the streets? And the danger is, you know, in a sense, the National Guard is a trusted institution. It's not about rah, rah military, but it's when you understand the point of the National Guard and what they do and the fact that a lot of these folks are folks. I forget if it's one weekend a month and two weeks a year or whatever it is. These are people who are, who are actually saying, I have a job, I have families. In many cases, I have my main thing, but I want to do something extra and I want to be ready if we do have a humanitarian situation, natural disaster, etc. If Trump politicizes that, obviously he's going to alienate the left, but I believe he will alienate almost all moderates and even some Republicans, even parts of the military establishment are going to say, this goes too far. And so Trump squeezing as hard as he can, and it looks like the Guard may slip from his grasp. Remember, authoritarians love doing things to generate protests to then justify deploying military. If the military you're trying to deploy goes, we're not down with any of this, overtly or implicitly. It could be a real problem for Donald Trump. And that's where we are right now. Donald Trump stunned, stunned, stunned people in the White House press briefing room when he waxed poetic about washing sidewalks. Washing the sidewalks. It's really important to understand that this is sort of a. It's nostalgia porn, in a sense. And Republicans engage in nostalgia porn. We've got to go back to the good old days and Often they talk about the 50s, 1950s. Sometimes it sounds like they're talking more about the 1850s. This is Trump with the latest nostalgia porn during yesterday's press briefing where he took questions.