MICHEL MARTIN, HOST:
Economists have been warning that President Trump's trade policy could lead to a recession. The administration's decision to pause most tariffs for 90 days and solid job market numbers tamped down those fears for a time, but now those fears have returned. Moody's downgraded the U.S. credit rating last week, and Congress is in the midst of budget negotiations that could add trillions to the national debt over the next decade. This has led to a sell-off of U.S. bonds, long considered a safe investment.
So what does all this mean about the state of the economy? We're going to ask economist Jason Furman. He is a professor at Harvard, and he served as chair of the Council of Economic Advisers in the Obama administration. Good morning, Professor Furman. Thanks for joining us.
JASON FURMAN: Thanks for having me.
MARTIN: So let's start with your sense of the health of the U.S. economy right now. What indicators are you looking at?
FURMAN: You know, so far, the real data, when you look at how many jobs there are, how much people are spending - that's quite good. When you look at people's plans and the plans that businesses have for the future, that's really quite bad.
MARTIN: So let me just ask you, sort of - we've been talking about the budget negotiations in Congress. And, of course, we've been covering the president's, you know, trade policy all along. So how much of the current uncertainty in the economy is a result of the president's trade policy, specifically tariffs? And then, of course, I want to ask you about those budget negotiations, as well, so take the trade policy first.
FURMAN: Yeah. So we have had uncertainty, and economists have different ways of measuring it, at basically record levels - higher than during the financial crisis, higher than during COVID. That's come down some, but it remains very high. That's been almost entirely about trade. And last week, President Trump said that within a few weeks, he's going to reannounce the higher, so-called reciprocal tariffs. People were very hopeful we'd reach a lot of trade deals. We did reach a deal with the U.K., but deals with every other country have so far proved elusive.
MARTIN: And what about the budget negotiations in Congress? How are economists viewing those?
FURMAN: You know, to me, the worry there is more medium- and long-term. And that's really quite serious, so I don't want to belittle it. But things like this tend not to push you into recession in the way that the wild swings in tariff rates really risked a recession, especially if we had kept the higher tariff rates on. What things like this, adding trillions of dollars to the debt, do is they raise interest rates. They raise mortgage rates. They slow economic growth. But all of that plays out, generally, historically, over a longer timescale.
MARTIN: So based on what we've just been talking about, how concerned are you about the risks of a possible recession? And if you can, if you feel comfortable with this, what would your timeline be for that analysis?
FURMAN: So, you know, recession is a binary thing. You either have one or you don't. I like to think of the economy more on a continuum. So, you know, if your temperature is 99.4 degrees, you probably have to go to school or work, but you're probably feeling pretty lousy. And that - looks like we're on the equivalent of something more like that, maybe something like a 1% growth rate this year. That's not a full-blown recession. That's not a historic crisis that we'll remember. But that's basically every family having, you know, something like $2,000 less because of the combination of all of these. Moreover, coming out of it, we never fully get that back unless the trade policy returns to normal and we start to get our debt under control. So that just compounds over time. All that said, huge amount of uncertainty around what I just said.
MARTIN: So, you know, before we let you go, look, obviously, how you look at all this depends on your situation - right? - if you're close to retirement, if you're trying to get a job or maybe try to get a better job or if you're trying to buy a house. So it's very hard for you to give kind of one-size-fits-all advice. But do you have some general words of wisdom for people who are worried about the economy right now, both in the near term and in maybe, say, the medium term?
FURMAN: Right. I mean, some things will affect everyone. You know, if you buy coffee, bananas, tea, just about anything, that's going to go up in price. When it comes to your retirement, you know, we've seen the stock market go up and down, depending on what the president does. And when it comes to jobs, for most people, their jobs should be OK. But asking more certainty from the government would give everyone more certainty.
MARTIN: That is Jason Furman. He's an economist and professor at Harvard. He also served as chair of the Council of Economic Advisers in the Obama administration. Professor Furman, thank you so much for your time and these insights.
FURMAN: Thanks for having me. Transcript provided by NPR, Copyright NPR.
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