Watch CNBC's full interview with Council of Economic Advisers Chair Stephen Miran

Key Concepts

• PCE Inflation Data
• CPI (Consumer Price Index)
• Tariffs
• Imported Goods
• Domestically Produced Goods
• Core Inflation
• Tax Incidence
• Pull Forward of Goods
• One Big Beautiful Bill (OBB) - tax policy related to investment incentives
• Full Expensing
• GDP Growth
• Deficit Spending
• Deregulation
• Energy Abundance

Analysis of Inflation and Tariffs

Evidence of Declining Prices

• Steven Myron from the White House Council of Economic Advisors states that since December (tariffs began in January), overall goods prices in the PCE data have increased by 0.4%. However, prices of imported goods have decreased by 0.1% during the same period.
• This suggests tariffs have not led to significant price pressures on imported goods; rather, the opposite has occurred.
• "So not only is there no evidence that tariffs are leading to significant to significant price pressures for imported goods, but we're actually finding the opposite in the inflation data."
• Even when considering core inflation, the price increase of domestically produced goods is significantly more than imported goods, indicating no tariff-driven inflation.

Refuting Claims of Delayed Tariff Impact

• Critics have suggested that the impact of tariffs is yet to be felt. Myron argues that there is no evidence of this in either official data or high-frequency data from individual stores studied by academics.
• "We've been waiting and it's been many months now and that evidence is just not emerged. There's no sign of it in higher frequency pieces of data either."
• He draws a parallel to 2018-2019, when similar predictions of tariff-driven inflation did not materialize.
• While acknowledging the possibility of future volatility in prices, Myron states that, "there's just no evidence thus far of it happening." He compares predicting such an event to predicting a pandemic or a meteor strike.

Long-Term Expectations

• Myron maintains that, based on the principle of tax incidence, the burden of tariffs will ultimately be borne by foreign countries in the long run.
• The short-term data suggests American consumers have not experienced any adverse effects so far.

Addressing the "Pull Forward" Argument

• The "pull forward" argument suggests companies imported goods early to avoid tariffs, and once this inventory is depleted, prices will increase.
• Myron acknowledges the possibility of price volatility but reiterates the lack of current evidence supporting this theory.
• He emphasizes the difficulty of prediction and the need for economists to be humble about their forecasts.
• "All I can tell you right now is there's no evidence of it thus far. It's possible it could happen, but we just have no, there's no basis in data for saying that that's the case."

Discussion on Deficit Spending and the "One Big Beautiful Bill"

Contrasting Types of Deficit Spending

• The discussion contrasts deficit spending on "Green New Deal" initiatives with tax cuts that leave capital in the private sector.
• The argument is made that government-directed industrial policies, like those seen in China with empty apartment complexes, often fail due to the government's inability to predict consumer demands effectively.

The "One Big Beautiful Bill" Approach

• The "One Big Beautiful Bill" (OBB) focuses on a generalized incentive to investment through full expensing on new factories, equipment, and R&D.
• "What's going on in the one big beautiful bill is a generalized incentive to investment, but one that gives firms the ability to choose what they're investing in based on their knowledge of their markets."
• This approach allows firms to make investment decisions based on their market knowledge, promoting a more productive economy, better labor productivity, higher wages, lower inflation, and higher GDP growth.

Deficit Reduction Projections

• The Trump administration projects that its policies, including the tax bill, deregulation, and energy abundance, will reduce deficits by $8.5 to $11 trillion over ten years.
• This reduction is attributed to several factors:
  • GDP growth adding $4 trillion in revenue.
  • $3 trillion in revenue from tariffs.
  • $1.5 trillion in spending cuts.
  • $1.5 trillion in lower interest expenses due to reduced borrowing.
  • These factors combined contribute to the projected deficit reduction.

Synthesis/Conclusion

The interview presents a perspective from the White House Council of Economic Advisors that challenges the notion of tariffs causing inflation and promotes the idea of supply-side economics. It argues that current data does not support claims of tariff-driven price increases and that the administration's policies, particularly the OBB, will stimulate economic growth and ultimately reduce the national deficit. The emphasis on data-driven analysis and the acknowledgement of economic forecasting's inherent uncertainty are key takeaways.