Understanding Friday's Economic News
SCOTT SIMON, HOST:
The U.S. economy is doing well. The Commerce Department reported yesterday gross domestic product grew at a rate of 4.1 percent in the last quarter. That's faster than expected. And unemployment is low. President Trump takes credit.
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PRESIDENT DONALD TRUMP: America is being respected again and America is winning again because we are finally putting America first.
SIMON: We're going to talk about this with Kenneth Rogoff. He's an economist who teaches at Harvard. Professor Rogoff, thanks so much for being with us.
KENNETH ROGOFF: My pleasure.
SIMON: What does that 4.1 percent growth tell us about the U.S. economy now?
ROGOFF: Well, it's doing very well. I mean, I think it's probably not doing that well. It's been goosed up by a number of factors that are probably temporary - for example, people rushing to buy U.S. stuff before the tariff war sets in. But the economy's been doing well for a long time, and it continues to do very well. And the best guess is it will keep going.
SIMON: President Trump's tough trade policy is leading to growth?
ROGOFF: Absolutely not. I mean, I think President Trump's tough trade policies are the biggest cloud on the horizon at the moment. But they haven't really taken root yet. There's a lot of talk and back and forth. And he has slapped on some tariffs. It is hitting soybean farmers. It is hitting some manufacturers. But the trade war is not good for growth. It's bad. He touts it as a negotiating tactic. He says, well, you know, they'll start buying more of our stuff eventually. But I think right now it's something that everyone's worried about. And if growth slows down in the next few quarters, the trade war will likely be a central part of that.
SIMON: Now, let's note. Presidents take credit when economic numbers are good, and they point out that we all blame them when the numbers are bad. Mr. Trump's been in office for a year and a half. Over that time, how has the economy done compared to, let's say, the last year and a half, two years of the Obama term?
ROGOFF: Well, pretty similarly. I think it has done well. The numbers have continued to be good. But, let's face it, there was a very good and long recovery from the financial crisis under President Obama. And I think a lot of what we're experiencing today really is still the long, slow recovery from the deep financial crisis we had starting in 2009. And I think it will probably continue for a while. The truth of the matter is presidents don't have much to do with the economy. There are things presidents can do. So we had the tax cuts. We had the reform to the corporate tax law. And that's unquestionably goosing up the economy, now, maybe, adding half a percent to this 4.1 percent number. But that's temporary. That's not going to last.
SIMON: What about the president's recent criticism of the Federal Reserve for raising interest rates?
ROGOFF: Well, presidents never like it when the Federal Reserve raises interest rates. They like things - interest rates to stay low on the idea that people will borrow more, people will consume more, buy more houses. And it also drives up stock prices, which might lead people to spend more. There's been a recent tradition. It's recent - starting maybe with President Clinton in the 1990s, to sort of stay mum about the Federal Reserve. Bite your lip. Because the trouble is the Federal Reserve is pretty independent. And if you start criticizing them for raising interest rates, maybe they'll raise them more and things will be worse. I do worry about President Trump criticizing the Federal Reserve in that he might do something to undermine it.
SIMON: Kenneth Rogoff of Harvard, thanks so much for being with us.
ROGOFF: My pleasure, thank you for having me. Transcript provided by NPR, Copyright NPR.