218. Trump’s Wars Have Just Broken the Global Economy

13:14Anthony Scaramucci:I'm taking a cut of the profits by the way.

13:16Katty Kay:Please please if you can help me sell the books you can have all the profits although all the profits actually are going to a charity but but here's the point that I want to make that's very very important I put it in All the Wrong Moves you want to solve the deficit crisis I don't want to be overly simplistic but just hear me out for a second. If I can grow the economy faster than the governmental spending, what will end up happening in 15 years, Caddy, the GDP will catch up. And so you're sitting here right now. The United States as a nation is at 125 % of its national debt to its GDP. Okay.

13:52Katty Kay:And that is a dangerous light. That's a light blaring. On September the 2nd, we celebrated the 81st anniversary of the armistice with Japan. USS Missouri and Tokyo Bay signing the peace deal or the surrender. At that moment, we were 106 % of the GDP. The warning light was on, but we had an intact industrial base, perhaps the only intact industrial base left on earth. And we had a baby boom and rates at that time were primed near 2%. So we had this explosive economic growth. Ladies and gentlemen, we never paid back the debt from World War II. But what we did do is we grew the economy so fast. Again, think about a household.

14:37Katty Kay:If I have$3 million of debt, but I'm making$25 million a year, I can manage the debt. And so I say in that book, and I say here to you and everybody listening, this is a totally solvable problem, but the rhetoric is not going to solve the problem. If percent says we can grow our way out of it, worse says we can grow our way out of it, they're right. But you have to slow down the spending. Okay. And in 1990, Dick Dorman, who was the chief budget officer for, he was the OMB director for George Herbert Walker Bush, he came up with this legislation called PAYGO. And I write about it in the book. Bill Clinton adhered to it.

15:16Katty Kay:Okay. And so if you wanted a tax cut, that's fine. You had to find something in the budget to cut. You wanted to increase social services or defense spending. no problem you had to raise taxes and this was a guardrail system uh that dick gaphardt accepted george robert walker bush accepted and believe it or not bill clinton accepted it and if you may remember this because we're old enough to remember in march of 1993 clinton pushed through the largest tax increase in history we had to get al gore out of the naval observatory like oj in the bronco i can remember him on cnn in the car driving up to the capital to make the deciding vote no Republicans voted on the tax increase, but Clinton got it right.

15:57Katty Kay:And so these guys are not saying what needs to be said. Okay. Now we can debate the AI, whether the AI is going to be it or not. I don't really care, Katty. I'm telling you about the neuroplasticity and the dynamism of the American economy and the lunatics that you and I live with in America, entrepreneurs, risk takers, innovators large capital market systems so if you develop something like fracking the money flows into it if you just sell develop something in biotech there's a venture team money will flow into it ai you saw you know claude anthropic just got a 65 billion dollar injection of capital at a 970 billion dollar valuation so the country can do this but it doesn't have the right leadership to do it.

16:46Katty Kay:And so that's the quagmire that we're in. And they're growing the debt caddy. I can tell you right now, the train is not stopping because the debt is growing faster than the GDP. And this is why somebody like Ray Dalio, a friend of mine in the hedge fund industry would say, hey guys, you're going to hit a point where the world is going to lose confidence in us and our ability to repay the debt. And I think that's the stuff that people have to really look at. And that's why we had some turmoil at the G20 this week.

17:15Anthony Scaramucci:Right. And that, I mean, that debt has been growing and particularly actually has grown more under Republican presidents, whatever Republicans say about being fiscal hawks. It has grown more under this century. It has grown more under Republicans than it has under Democrats. And I think that is why it's interesting to see what Xi Jinping is doing, going to Kyrgyzstan, going to Cairo. He's in Cairo at the moment and he is sending a signal. And I think he's sending a signal directly to the White House ahead of his meeting with President Trump in three weeks time. He is sending a signal, look, I have allies now.

17:49Anthony Scaramucci:And I think the interesting thing about what China is doing, particularly in somewhere like Africa, is that China used to be the country that paid for roads and paid for railways and paid for TV stations. And that's how over the last 20 years, it's expanded its influence across Africa. Now, what it's saying is something different. Now it's saying actually, it's political influence that China is exuding and that soft power that China is projecting around the world. And I think it is the chaos of all the things that you've just spoken about and the underlying problems of America and America's economy that is allowing Xi this opportunity.

18:26Anthony Scaramucci:And I don't know what you think, but I mean, maybe it's easy for Xi. He hasn't got a war fighting exposure in the region to defend. So it's kind of easier to look stable when you're not the one that's going to be dragged into the next conflict. But it feels to me like she is going around the world deliberately ahead of this meeting with Donald Trump in order to send a message to the White House.

18:49Katty Kay:I think that that's correct. But I got to ask you a question. And I want you to I want to frame it as a middle power, or somebody that is in the in the situation of Egyptian president, or somebody in Africa, you want help from America, you want help from China, tell me about China's soft power relative to America. You know, I mean, are you accepting that? Because I think there's an issue there. I think the Americans under Trump, I totally agree, completely inconsistent, completely off the rails, very unreliable. But remember something about China, nobody really wants to live in China. Do people still want to come to America as hard as it is with the ice sentiment and all the other things going on in America?

19:33It's still seen differently than China.

19:36Katty Kay:If I'm wrong about that, push back. No. Because I think China has a problem selling the soft power. They have no problem saying, here's the loan, here's the Belt and Road, here's everything you need. You see what I mean?

19:49Anthony Scaramucci:This is a problem entirely of the White House's own making. And a lot of lot of countries around Africa had already woken up to the fact that these Chinese loans came with a lot of downside. That yes, they got their roads and yes, they got their railways. And without all the rules and the governance issues that the United States used to impose around corruption and good governance and democracy, they didn't have to have any human rights. The Chinese didn't impose any of that. They just gave them the money. But now as those loans are coming due, they are finding that the price is pretty high and there had been a certain amount of dissatisfaction with that Chinese intervention.

20:29Anthony Scaramucci:If it had not been, I think, for the Trump administration, the shutting of USAID, which has had catastrophe, whatever Donald Trump and Elon Musk say about this, according to the Lancet magazine, some 600 ,000 people have died across Africa because of the cutting of USAID. I think actually America was poised because of the growing dissatisfaction with China to be in a better position with its soft power. But business leaders I spoke to again at this conference in New York this week, they were saying from other countries, look, we don't see America coming back. And yeah, you're right. People do still want to come here comparative to China, but not in the way that they wanted to come here two years ago or 10 years ago.

21:12So the decline is real in the perceptions about America around the world.

21:17Anthony Scaramucci:We know that we've seen all the polling on this. We hear it anecdotally. We see the Canadians not coming across the border to spend money in the American economy. So I don't think the comparison is, do people want to go to China more than they want to go to America? No, that's not the comparison. The comparison is, do people want to come to America in the way that they did pre-Trump and pre this explosion of populism? And I think that's, add to that all of the, you know, the bigger problems about debt and accountability.

21:43Katty Kay:You would have been so good on Wall Street. You could have been a Wall Street bond trader. You could have been a Wall Street economist. I mean, you could have missed your calling here, Katty.

21:54Anthony Scaramucci:Now I'm just selling your books. There you go. That's my main mission in life at the moment.

22:00Katty Kay:Trust me, I need help on that because I've been sheepish about the promotion. But I'll just say this to everybody. I tried to write a book that would explain what happened in a fun way, and you'd learn something about history. But I just want to say this. I know we got to go to a break, but I want you to think about this for a second and react to it, okay? The Chinese have a$1.2 trillion surplus. Their property bust, because they overbuilt these cities, their property bust has caused a consumption crisis in the country and they have some deflation going on because that's what happens when property prices collapse, okay?

22:35Katty Kay:So they have to figure out a way to export the deflation to survive. and one of the cures is consumption caddy but beijing does not like highly you know if you're living too high on the hog in beijing they put you in a reformation camp yeah right so they're they're in a box caddy tell me how you get out of that box if you're beijing understanding the

22:57Anthony Scaramucci:culture that i'm describing no i think they are in a box and they've clearly got a huge debt crisis and they have a youth unemployment crisis which could come back to hurt them and they need to grow. I mean, they've got the same problems in some ways and a very large aging population. They have some of the same problems that America has. If they choose the right policies, they can implement them. However, China could implement a 20 year investment program for, I don't know, technology, AI or biotech, which actually it's doing anyway, and it can implement it. The US Congress can't implement a 20-day program on anything because they can't agree on anything.

23:38Anthony Scaramucci:So we have a structural problem comparatively.

23:40Katty Kay:And that would be the speech, right? If you could get up there and say, hey, listen, I met with the Democrats and I met with the Republicans and here is the 15-year plan. And by the way, all of our ankles are tied together. We can't do anything other than follow this spending protocol because I'm telling you in the next 15 years, we're going to have a right-sizing of our deficit. Can that happen in the U.S. right now?

24:04Anthony Scaramucci:Donald Trump is going to be speaking in Texas next week, so send him the notes for that speech, and let's see if he listens to you. Okay, we're going to take a break and talk about youth versus experience. Anthony or I are on the youth side of this equation.

24:20Katty Kay:This podcast is supported by Anthropic, the public benefit corporation behind Claude. Everyone's got a hard question about AI. Your job, your kids, where it's going. Anthropic was built to surface those questions and share what it finds along the way. Because there's hope in hard questions. Ask yours at claude.ai slash Spotify and keep thinking. That's claude.ai slash Spotify.

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25:53Katty Kay:Welcome back to The Rest is Politics US with me, Anthony Scaramucci and Caddy Kay. Caddy, Caddy, you're younger than me, as I have pointed out many times on this show. But we've got a couple of people here, octogenarians that are older than us, and they are still kicking ass, Caddy. Okay, incumbent Senator Ed Markey, age 80, beat Seth Moulton, age 47. And I think this is pretty interesting that he was able to pull that off. There were also two other Massachusetts representatives in their 70s that fended off younger primary opponents, Caddy. And so what do you think that this says about where America is today?

26:32Katty Kay:And I've suggested to people that we're in an anti-incumbency environment, but the data doesn't say that, right? Because, you know, these incumbents have a 95 % re-election rate. So what does it say?

26:44Anthony Scaramucci:So I think it's race by race. I think there is a general anti-incumbency and you see that in some poll in the University of Massachusetts did a poll that showed that voters do want younger leaders. But there's a caveat to that. They want younger leaders who also are progressive. And I think you have to take the Massachusetts case and Ed Markey as a slightly separate case from perhaps some other races. Ed Markey, 80, yes, but has a long progressive record on things like housing, on green energy. He was a big supporter of climate change initiatives, education. So he's seen as a kind of Bernie Sanders almost like figure.

27:22Anthony Scaramucci:And look how much younger voters love Bernie Sanders because he is a tried and true progressive and always has been. He's authentic to that, right? He hasn't changed his message. And if you compare somebody like Ed Markey to Janet Mills, who was the Democrat who was running for the Senate seat in Maine, who is 79, I think she is. She's getting up there towards 80. And there, there was a real anti-incumbency desire for a generational shift. It's why they went after Graham Plattner and that all exploded. But it was because Janet Mills came across as a traditional, boring, poll-driven establishment politician.

28:02Anthony Scaramucci:And younger voters didn't see her as a progressive. So I wonder if this is not just an age thing. And I do think there is a kind of anti-incumbency desire for change. There was another poll from Reuters saying that 62 % of Democrats say it's time to change the older leadership of the party. But it's also about progressivism. If you are a progressive in this environment, I think you have a better chance in the Democratic Party, at least, of being nominated for the candidacy. But I think what's interesting, Anthony, and I know you wanted to make this link with John Cornyn, who is the senator from Texas, who was thrown out largely by Donald Trump in favor of Ken Paxton.

28:40Anthony Scaramucci:Yes, Ken Paxton is younger. But was that an anti-incumbency thing or was that a Trump thing?

28:45Katty Kay:Well, yeah, the point I wanted to make is that I see Mark and Cornyn similarly, meaning if Cornyn was running against Tallarico, I think he could beat Tallarico. He's a popular senator in the Republican Party. He's been there for three decades, and his seniority in the Senate would also have helped him in that race. So yes, Paxson's younger than him, not that much younger than him, younger enough, but I think it's going to be very difficult for the non-incumbent Paxson to beat Tallarico. And Katni, just look at these numbers, okay? Tallarico is crushing him on the fundraising. He's like almost five to one on the fundraising.

29:27Katty Kay:So much so that Trump is descending into the area. And this is the greatest stuff. I love this more than you could possibly imagine. Trump has something like a combined$800 million in these two PACs that he's been raising money for. They're begging him. They're begging him to let some of that money out. Is he going to do that, Katty? You think he's going to give any money to Paxton?

29:49Anthony Scaramucci:This week has been amazing because, yeah, you're right. Tallarico has more money in the bank than Paxton does. The Republicans are realizing they've got to spend money in Texas. It's an expensive market. It's got a lot of different advertising markets all across the state, big cities where you've got to pay for money. You've got John Thune, the Senate majority leader, going on television saying, we've got to spend money in Texas. You've got Ted Cruz, the other senator from Texas, saying, I'm very worried about Texas. That's his words. The left is energized. They hate Donald Trump. They're pissed off.

30:21Anthony Scaramucci:On the right, he says, we're demoralized, we're angry, we're fighting with each other. And if the normies stay home, we're going to have a terrible election. Also saying we're going to have to spend a lot of money. Karl Rove also saying, look, Paxton's a terrible candidate. I was told that this week by a political scientist down in San Antonio. Everyone in Texas is saying Paxton is a terrible candidate. He's not fundraising. He's lazy. He's going off for July 4th weekend, as Karl Rove said on Fox News, with his latest girlfriend, and he's not raising the money. So they're talking. You think there's not a direct line there to Trump?

30:57Anthony Scaramucci:You've got these senior Republican figures talk about kind of alarm bells ringing, saying, Trump, this is your problem. Pottery barn rule. You broke it. You got rid of Paxton. You got rid of Cornyn. You fix it. And by the way, we know you have the money and you're sitting on the money to fix it but trump doesn't like spending money on other people anthony it's his money he thinks this is his money he made it off his name he doesn't want to spend it on somebody

31:22Katty Kay:else no question right yeah this is why all these guys i think they're going to succeed trump with his help just not going to happen but the funny part is he did squeak out a million and a half dollars caddy on a few ads and guess what they were all about him did you see the ads he's sauntering around i'm the man i'm you know the republican party's nothing without me uh it was nothing on any of the other candidates it was just like a message they vote like i am on the ballot because i'm the most important person in the civilization you know the the one thing i want to i want to ask you about because i always talk about the money in america and follow the money is like what's interesting here is markey delivered okay he had the money relative to molten okay and so the incumbents you can open up the purse strings cornyn as an incumbent would have had a much easier time raising the money tallarico's at about 72 million paxton's like at around 16 million and so what's also interesting is if you're young like you you said earlier and you're progressive and you're a little bit hip guess what happens you can get progressive money and you can get a lot of these small donors that will light you up through social media instagram Facebook, etc.

32:34Katty Kay:And that's something that Trump frankly did in 2016.

32:38Anthony Scaramucci:He was super successful at it.

32:39Katty Kay:Super successful at it.

32:40Anthony Scaramucci:But Tallarico has also been interesting because he's been up with the rich donors too, right? He's been up in New England over the summer holidays, schmoozing with all of the wealthy donors. And the thing I think that is worrying why you've got all of these senior Republicans coming out this week, first of all, watching the polls, because a couple of the big organizations like the Cook Political Report, this week shifted Texas from lean Republican to toss up. So they're watching those numbers. They are concerned about it. And so they're trying to get Trump and it's Trump has sole sign off on this money is what I'm told.

33:13Anthony Scaramucci:He is the one that's going to decide whether that money is spent or not. So they're talking directly to him. And the problem, I think, for for them and for Trump, even if he decides to spend the money, is Tanarika has just been dominating the airwaves. I've been looking at some of his ads. They're good. His ads are good. Ken Paxton, there's some weird incident where Ken Paxton was at an airport. And you know how you have those bins and you send them through security? Somebody left a super expensive pen that their wife had given them in one of the bins. And there's airport security footage of Ken Paxton rummaging through the bins and taking the pen away.

33:52Anthony Scaramucci:So Tallarico comes out saying he's going to steal your money. He's going to steal your inheritance. He's going to steal your children's future. He's even going to steal your pen. So Tallarico has been out there with pretty clever ads all through the summer. And I don't know, Anthony, we are now September the 3rd. We're recording this. There's not much longer left. If Trump decided to open the floodgates of that PAC money to these struggling Republican candidates, isn't it a little late for him when the opposition candidates have already been defining themselves?

34:24Katty Kay:It's such a good question. So obviously, I don't know the answer to that. But I do think Trump may have to open the floodgate on faxing, because if you listen to Thune, he's literally on his knees on Fox News saying, hey, if we lose Texas, that's it, you're giving me an ass kicking up in Maine, Ohio, and Michigan. Okay, so you started a tariff war, you're on the two inch line, you could assign the deal, everybody could have had a congratulatory ceremony, but now you're in a tariff war. All those tariffs are kicking in on September the 8th, and so you've weakened me in Ohio, Maine, and Michigan, and I'm super weak in Texas.

35:00Katty Kay:Hey, Mr. President, you got to get down to Texas and help this guy. Now, weirdly, Trump may do that. He's not going to spend$100 million or anything like that, but could he go down to Texas and start campaigning with Paxson? And I'm still not ruling out Paxson because I know how the machinery works in these parties. You know, they'll get to turn out the vote mechanisms that they know how to do once they're running the machine the way they run the machine. So Tallarico's ahead. He's got the money. The Kelsey markets have it a lot more narrow than you would look at if you just looked at the money and you just looked at the messaging.

35:33Anthony Scaramucci:I think you're right that Trump will do it. We're going to see him down in Texas next week for this Trumperpalooza. And I think that is all about trying to save Paxton because up against his avariciousness on not wanting to spend his money from his pack on anybody else is the embarrassment factor. Because I don't think Texas is a blue state. The people I'm talking to are saying this is not about Texas becoming a democratic state. This is purely about Paxton being a terrible candidate. And Trump doesn't want the embarrassment of Texas flipping because of him.

36:04Katty Kay:Or the investigation threat, Katty, too.

36:06Anthony Scaramucci:Yeah, or the investigation threat of the Senate.

36:08Katty Kay:He's going to try to make$20 to$30 billion in the next two years. It's going to be a lot easier for him if the Republicans are controlling the Senate. And so remember, this will be a money grab for Trump as well. He'll look at everything and say, I better help this guy. I don't want to lose the Senate. And so another reason why I think there's going to get a deal done. Again, I could be wrong. Despite the rhetoric, the bellicose of the rhetoric and all the nonsense that Howard Lutnick said on TV yesterday regarding Canada, I still think he's going to get a deal done. And I think Trump is going to blink on this.

36:39Anthony Scaramucci:A deal done on Canada, you mean?

36:40Katty Kay:Yes, or a deal done on Canada because he doesn't want to lose the Senate. And he's putting himself in harm's way. And the number one thing for Trump is moolah. He loses the Senate. It's going to mean less money for him in his pocket.

36:53Anthony Scaramucci:That's an interesting point because we've been saying, and actually I think it's worth us clarifying this. We've been saying over the last six months that Trump doesn't care about the midterms. And a lot of Trump's policies would lead you to believe he doesn't care about the midterms. He's certainly not helping Republicans. With the war in Iran, I think that is where Karl Rove is right and Ted Cruz is right. Normie Republicans are very unhappy about the war in Iran. It was never explained. It's going on way too long. They don't like the gas prices, but they just don't like it. So he's not doing things.

37:25Anthony Scaramucci:The trade war with Canada is another one. He's not doing things that help Republicans. And we've been saying he doesn't really care about the midterms. And do you think it's that he doesn't care about the midterms or he doesn't care about the House or he doesn't care about the Senate?

37:37Katty Kay:Let me rephrase it. He doesn't care about anybody but himself. And he was making the assumption that he was going to keep the Senate and he could possibly lose the House. And if he'd lost the House, it'd be a couple of investigations, not that big of a deal. So let me clarify, he doesn't care about the midterms unless they impact him and they impact his wallet. And what would impact him and his wallet is if they flipped over. The Cal C markets, again, over 60 % that the Republicans are going to lose the House and the Senate. Now, if you'd asked me that on inauguration day, the 20th of January, 2025, Trump wasn't thinking that at all, which is why he was indifferent to it.

38:20Katty Kay:But I do think now he's looking at it. you say hey this is going to cost me money because if they control both chambers uh it's going to be non-stop legal fights non-stop investigations all of his buddies are going to go on the barbecue right all those buddies are going to get grilled by those guys and he doesn't care about his buddies but his buddies are helping him make money caddy that's the thing he cares the most about which is

38:45Anthony Scaramucci:why perhaps one last point on texas commissioners in tarrant county which is that big fast growing County in Fort Worth approved a plan this week that would lead to 92 fewer election day polling locations compared to the 2022 midterms. That's about a 30 % reduction. So they're going to try and win however they can.

39:04Katty Kay:Also remember the Save America thing. If you're a woman and you got married, you got to go through a whole nightmare to prove your name. And so that's one of the ways they try to knock out women from running, right? That's why the Republicans want Save America. It's under the cause of proving that you're an American citizen, but they're really trying to knock women out of voting. That's one of the big things they're trying to do.

39:25Anthony Scaramucci:Yeah. And there are a whole bunch of states for which the driving licenses as well won't count as sufficient ID when you're trying to vote. Talking of the midterms, Anthony and I are coming on tour around the states. We would love to see you come and join us. We'll be talking about midterms and how they're impacting your area, your members of Congress, your senators, your races. So go to the rest is politicsus.com to get tickets. They're selling fast, but we've got some left, so come and join us. We'd love to see you there. Bye, guys. See you next week.

39:53Katty Kay:Thank you, guys. See you next week.

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