Transcript: EJ Antoni Decodes the Trump Economy and the ‘Big, Beautiful Bill’ Controversy

So that’s a stark contrast. A decline of 4% and increase of 1%. I mean, it really is amazing what a difference an administration can make.

JAN JEKIELEK: And so what accounts for that? I mean, what accounts for both those changes?

The Inflation Turnaround

EJ ANTONI: The biggest change has been the slowdown in inflation. Prices are not rising anywhere near as fast as they did under Biden. In fact, prices right now under Trump are growing at an annualized rate of less than 2%, which is phenomenal. It’s about 1.4%, which is less than the 1.8% that they averaged from about mid-2009 until the end of 2020. That was essentially the end of the Great Recession all the way until Biden took office.

So that averaged. It was an annualized 1.8%. Conversely, Biden takes office his first 18 months. Inflation is an annualized 8.6%. That’s terrible. And then for the last 30 months of his term, which was the bulk of it, inflation was well over 3%, was over 3 and a half percent at an annualized rate.

So you contrast that with what is happening under Trump. Inflation has been not only cut in half from that latter portion of the Biden administration, but it’s running even slower than it did in the economic expansion before Biden took office. So really tremendous news on that front.

We’ve seen a lot of consumer staples. Not only has inflation slowed down where the price is rising, but not as fast as before. Some of these things, the price is actually going down. Eggs is a good example. Gasoline is a good example. There are other staples as well. But what we see when we look at the entire landscape, we say, okay, some things have risen a little bit, some things have fallen a little bit in terms of price. But on average, there’s been almost no change. There’s been only a very slight increase, which is great news, considering Biden handed Trump an economy with inflation running at an annualized rate of over 5% from December to January, and Trump has managed to cut that by about 80%. It’s terrific.

Energy’s Role in Price Reduction

Much of it has to do with energy, the fact that energy production is helping drive down prices so much. And it’s not just domestically, but it’s also foreign suppliers as well, in part because nations like Saudi Arabia realize if they don’t become the marginal producer, in other words, if they don’t step up and produce more today, then we’ll do it. So they’d rather have the production than us.

But whatever the case, it’s forcing down energy prices around the world, which has been tremendous for the American consumer, because energy affects the price of everything we do and everything we buy. So if you bring down that input, if you will, into other goods and services throughout the economy, then you see prices everywhere start to go down as well. And sure enough, that’s what we’re seeing today.

JAN JEKIELEK: So a couple of quick things come to mind. First of all, that huge increase in inflation had to do with massive spending around Covid. So some of that actually came still from the Trump administration, didn’t it?

Understanding the 2020 Money Supply Dynamics

EJ ANTONI: So this is a really, really interesting kind of phenomenon that happens there. What we saw in 2020 was the government printing trillions and trillions of dollars, but most of it didn’t get spent. In fact, interestingly, a lot of the money that got handed out to folks, they didn’t go out and spend it.

First of all, it was hard to find anything to spend money on. Right? You couldn’t get cars. There were all kinds of things. There were shortages everywhere. There are all kinds of things that you couldn’t get. People, for the first time since the global financial crisis started paying down their credit card balances en masse. So much so that the interest people were paying on those credit cards just plummeted. And between the decline in the balances and then also the decrease in interest rates, the financing charges went to almost nothing.

So what that did was it put actually downward pressure on the money supply, because as you borrow money, that actually creates money. Lending actually creates money. And when you pay back those loans, it extinguishes the money.

JAN JEKIELEK: Can you just explain that a little bit more to me, like how that works?

How Fractional Reserve Banking Creates Money

EJ ANTONI: Sure, sure. We use what’s called fractional reserve banking. This is the whole reason that you can get bank runs. It’s because when you put a dollar on deposit in the bank, the banker turns around and loans out that money as quick as he can and to more than one person. And so what ends up happening is you get multiple claims on the same dollar. You’re walking around thinking, “I own the dollar that’s in my bank account.” And you do, but it’s already been handed out to a bunch of other people in the form of loans.

And so if you go and you put a dollar into the banking system, it ends up creating about $10. It’s the original dollar plus about nine additional dollars. Because the money gets lent out, not all of it. Some of it has to get kept on reserve just in case you do go and ask for your money back. But let’s say 90 cents on the dollar gets lent out to somebody else. Well, he spends that money, and then whoever receives that money that he spent, they go and put it on deposit in their bank, and 90% of that or 81 cents, gets lent out.

Well, this cycle continues and you end up with a situation where again, the $1 that you put on deposit in the bank ended up creating $10 in the banking system. And when the Fed creates money, it works the exact same way. This is why it’s so problematic. When the Federal Reserve creates a dollar for the government to spend, the government spends it, it goes through the banking system and ends up creating $10. So to give the government a little bit of money to spend, you end up creating a lot of inflation.

The 2020-2021 Spending Paradox

Conversely, in 2020, because of this very weird confluence of events, people were paying down debt, not taking on debt, and that resulted in a reduction in the money supply, not an increase. And a lot of the money that the Fed created for the government to spend, they basically kept in what you might call kind of a rainy day fund, they kept it in their cash account at the New York Federal Reserve.

This is part of why, when we look at the amount of the debt increase under Trump, it’s a little misleading. A trillion dollars of that increase was literally just cash that the treasury left sitting in the bank. Because they weren’t sure in April of 2021, what were tax receipts going to look like? They thought that tax receipts might be terrible because nobody’s working in 2020 now. It turns out tax receipts were fine and they didn’t need that money.

So the correct move by the Biden administration would have been to simply take all the cash sitting in the bank and retire that extra trillion dollars in debt. Instead, they turned around and spent it. So a big reason why you don’t see literally any inflation in 2020 is the fact that the Fed creates all of this money. And then whether you’re a consumer or the government, you just keep a lot of that cash on the sidelines. You’re not actually using it. It’s not really flowing through the economy.

Fast forward to 2021. The economy is opening back up. People are feeling more confident. They go out and they start spending all that money that the government’s been handing them in 2020. And then in 2021, whether it’s ARPA or a couple of the other bills they passed, they gave people even more money that the Fed printed out of nothing. And so at the precise time we should have taken our foot off the gas and put it on the brake, we just stomped all the way on the gas. And so what could have been essentially a non inflationary episode turned into the worst inflationary episode in four decades.

JAN JEKIELEK: That’s absolutely fascinating. I hadn’t heard that analysis before.

The Egg Price Crisis: Policy vs. Disease

JAN JEKIELEK: Talk about a specific product. This was a big deal a few months ago. Eggs. Okay. And so do you have a sense of what caused the price increase in eggs ultimately? Because there were actually different theories about what that was and how that got actually contained.

EJ ANTONI: Sure. So the avian flu definitely plays a big part in that. But we had even worse bouts of avian flu and other diseases. We had even worse bouts previous to this and we never saw this huge increase in the price of eggs. So what did change? The government’s response changed.

And what we saw at the very end of the Biden administration was this just crazy policy. It’s the only appropriate word I can think for it. This crazy policy where we were literally paying farmers more to cull their flocks of egg laying hens than the farmer could get if he allowed the hens to produce eggs and then brought those eggs to market. So of course it was a no brainer for the farmer to go and cull their flocks.

And what was really crazy was we even applied this policy in cases where the birds had already gotten the disease and then recovered from it and so they were fine. Whatever happened to herd immunity and trusting the science? Right. And instead we just went ahead with this very ill advised policy that resulted in millions upon millions of egg laying hens being killed, whether there was even a cause to kill them or not.

Well, if you kill the producers of eggs, what’s going to happen to eggs? You’re going to get less of them and as they become more scarce, the price goes up. And so all we had to do was to get the price of eggs back down was simply reverse that policy. And sure enough, as we did in the months that followed, we saw the population of egg laying hens go through the roof and the supply of eggs has likewise come back, which has helped put downward pressure on prices.

JAN JEKIELEK: It’s so astonishing how powerful. Well, I was going to say perverse incentives are.

EJ ANTONI: Sure, sure.

JAN JEKIELEK: Incentives period are, I guess. Well, the third question is when it comes to oil prices or energy prices in general, what is the impact of this Iran, Israel war that’s happening now on those ways. Has there been a significant change at this point? I mean, we’re just in the beginnings of it as we’re taping.

Oil Market Volatility and Global Production Capacity

EJ ANTONI: The oil markets have been very volatile and we saw initially futures go through the roof, the futures markets, and they’ve since come back down and then they turn negative on the day. So it’s very, very unclear which direction they’re going to go. A lot of that has to do with the fact that speculators just don’t know the extent of damages on the ground. Not just right now, but a week from now, what is the damage on the ground going to look like?

And I think it’s going to take actually a whole heck of a lot of damage in Iran and to the Iranian infrastructure before you’re going to see a significant impact on global production. Not just Iranian production, obviously that can take a hit. But when we look around the world, a lot of these oil producing countries, whether it’s the Saudis, the Russians, whether it’s us here in America you have countries in South America to a lesser extent. But whatever the case, around the world you have a lot of different countries where they are not actually producing at their maximum.

There is excess capacity there where we could pump more, we could certainly drill more, but we can, even with existing wells, we can pump more and we can ship more. You’re not looking at pipelines that are at maximum capacity. The big pipeline up in Alaska, for example, that has fallen so low in capacity that they’re not sure how much longer they can keep it open. Because if they’re not flowing, they need enough pressure. Exactly. And they need enough heat. If that cools down enough, if the pipeline isn’t full enough, the Arctic air cools it down, it basically turns to sludge and it’s difficult to move it through that pipeline, at least in a cost effective way.

So what I’m getting at, Jan, is that there’s just tons of excess supply or excess capacity for bringing new supply online around the world. And unless Iran were to, I mean, just have their oil infrastructure and production completely wiped out, it’s hard to imagine a scenario where the rest of the world can’t make up for whatever deficit is incurred because of this conflict.

JAN JEKIELEK: What strikes me, if I’m not mistaken, it’s something almost just south of 80% of their oil is actually bought by China, since it’s sanctioned now, what is the impact of that? Because I’m assuming the capacity will be severely degraded.

EJ ANTONI: But with a commodity like oil, it’s really, really difficult for those sanctions to be 100% effective. There’s absolutely nothing that stops somebody like China from buying all of that oil and then just reselling it somewhere else. So again, it’s very, very difficult. This is part of the problem with Russia, for example, all of the oil sanctions on Russia and why they were completely ineffective. It was the fact that you had countries, ironically in the southeastern Pacific, who were buying all of this Russian oil and then selling it. And all of a sudden, Chinese imports of oil from Indonesia were something like 4 or 5 or 600% beyond Indonesia’s capacity. So it was obvious what was happening. Indonesia had to have been getting the oil from somewhere else to then resell it to the Chinese Communist Party.

The Challenge of Transshipment

JAN JEKIELEK: So you raise kind of one of my favorite topics right now of late, and that’s the concept of transshipment. And so it’s really interesting what happened with oil. So when I was at the White House, when these various tariff regimes on different countries are announced, and it very quickly occurred to me as I was looking at these tables that from the little that I knew, that the countries that seemed to be getting the highest, on average, not 100%, but on average that were getting the highest tariffs were the China transshipment countries.

For example, in Vietnam, you would set up a warehouse and you would bring your goods in from China that had a high tariff already from the previous Trump administration, and then you would just sell them as, you know, outside of the tariff regime. And then, of course, actually, there’s all sorts of. Since Russia was sanctioned in various ways, all sorts of countries near Russia all of a sudden are importing really large amounts of goods from different places. So transshipment is just a big thing. And it struck me that this tariff regime saw that as important. And I’m curious what your thoughts are here.

EJ ANTONI: Well, I think this is part of the reason why Trump goes after Canada the way he does. So many people have said, “Why is he going after our friendly neighbors to the north?” And the reason for that is simply because they actually commit a whole host of violations of USMCA. They allow China to abuse that trade agreement. China dumps products into Canada. It gets repackaged, relabeled, and reshipped into the United States. And because of that, not only does it avoid the Chinese tariff, but it gets preferential treatment under the U.S. Mexico Canada trade agreement.

So things like that are really, really problematic for this administration, aside from the fact that Canada does things like put these crazy quota regimes on American dairy products, on American automotive products, automotive parts, et cetera. But I think a lot of what we saw on Liberation Day was, it wasn’t so much a focus on individual trade abuses. It was just looking at trade deficits, which I have to say I’m not a fan of.

And I appreciate the fact that since then, the administration seems to be, I think, re-evaluating that approach where they’re not so concerned about “Do we run a trade deficit with this country or not?” Specifically a trade deficit in products as opposed to services. Less of a focus on that and more of a focus on, “We need to counter the Chinese Communist Party, number one, their number one adversary.” And we need to go after, no matter who it is, friend or foe, we need to go after trade abuses. And that could be, you know, China checks a lot of these boxes. It could be dumping products, subsidized products. It could be currency manipulation and destructive monetary policy. It could be utilizing slave labor. It could be abusing country of origin provisions and the transshipments that you’re talking about a whole host of different things.

Dealing with Communist China

JAN JEKIELEK: So there is some kind of a deal, from what we’ve heard, with Communist China as we speak. I mean, the question I keep asking myself, is it possible to even have a deal in your opinion? I mean, I guess my experience of 25 years of watching China tells me that it’s impossible to have a good faith agreement with the Chinese Communist Party. But you know what, what do you make of this deal?

EJ ANTONI: Two things. The first is that because we don’t have any details yet on it, any real specifics, it’s difficult to see how it’s different from the status quo. I want to withhold judgment on it from that standpoint. That’s not to say there isn’t anything different, just I just haven’t seen those details yet. So we’ll wait and see. Hopefully it’s an improvement over the status quo and not simply the status quo or, heaven forbid, making things worse.

To your point, though, on how we can’t trust the CCP, if you look at all of the agreements and all of the deals from the first Trump administration, China followed through on precisely none of them, not a single one. And because of COVID we saw a lot of waivers and things. Because getting supply chains normalized was the only priority. But as soon as 2021 came around and supply chains did normalize, and we have a couple different ways to measure that, but it’s clear by the end of 2021 that things were fine. Supply chains were actually in better shape then than they were in 2019. But what we saw was the Biden administration that had no interest whatsoever in actually going after the CCP for any of these violations. And the Biden administration did nothing to enforce any of the deals that were already on the books.

The Rare Earth Metals Challenge

JAN JEKIELEK: So let’s talk about samarium, this rare earth metal that’s used primarily in defense, it’s a bizarre thing that the only place that one could get it would be from Communist China. How do you think about that?

EJ ANTONI: There’s a couple of things. One is simply cost effectiveness. Rare earths, it’s an odd nomenclature, because they’re not actually that rare. Some rare earths are more common or just as common as elements that we would never call rare. Something like copper. You have rare earths, quote, unquote, that are about as common as copper is. The difference is copper, when you find it, it’s very concentrated. Iron ore, when you find it, tends to be concentrated aluminum. Same thing. So the difficulty with rare earths is that when we do find them, they are very diffuse. You know, you can have this huge deposit and only a tiny percentage of it is actually the rare earths themselves. They tend to be mixed in with other things. So when we go to…

JAN JEKIELEK: So it helps to not have environmental guidelines that you have to follow, for example.

EJ ANTONI: That’s a huge constraint, Jan. Absolutely huge. But even when you go to a country like Russia, it can be much, much more cost effective there, even if you have some of those environmental regulations in place. And a lot of that just has to do with the economies of scale. So I think part of the difficulty is China and the US right now are dependent on each other. Not in a healthy way, because, again, we’re adversaries in a similar way that we were dependent on the Soviet Union for titanium at one point. And that was not a healthy relationship.

But it is similar to what you might call what the psychologists would call a codependent relationship. That’s not a good thing. The ways in which those two people are dependent on each other. And we are in a lot of ways like that with China still. So it’s going to take time to decouple. Even if you don’t want to decouple, it’s going to take time just to scale back that relationship. There’s no quick answer. There’s no easy fix for it.

EU Trade Relations and Cooperation

JAN JEKIELEK: You know, one of the things I was giving a talk in Poland recently and they were asking about, you know, the sort of the threat of the EU tariffs, which were considerable. I suspect that if, you know, the EU actually also tariffs Chinese goods so it doesn’t open up the flood. You know, basically, as the US tariffs came up, all these goods were flooding into the EU and other markets because they’re this kind of one trick pony. The export economy is kind of all they have left right now, actually. I’d love to get you to comment on that, too. But my suggestion was, well, if they kind of cooperate with Trump’s plan to be able to have leverage using this fact that they probably go a long way to having their own problems resolved.

EJ ANTONI: It’s interesting what we’ve seen where China is already taking steps. I mean, literally, as soon as the tariffs were announced, China immediately began taking steps to try to circumvent them. They began devaluing their currency at a torrid pace where the offshore yuan just kept hitting record low after record low against the dollar. They were taking products that previously was getting dumped in the US and they’re dumping it in the EU, which of course, is angering the EU because it puts their suppliers out of business. Shocking how all of a sudden, now the people in the EU are finally waking up to what a problem this is. It was fine when it was happening here, but not there.

So the impact of the tariffs on China is not going to be as bad as I think a lot of people say, because, again, they have lots of different maneuvers that they can use, at least in the short term, to get around those tariffs or to minimize that negative impact. It is definitely having an impact on the EU, though. It is definitely having a negative impact there, whether it’s because China’s now dumping in the EU or because the EU is going to have a more difficult time getting their products into the United States. And I think it’s amazing how so much of this could simply go away if the EU would get rid of all their trade barriers they have in place. But they don’t want to do that.

JAN JEKIELEK: Trade barriers with whom?

EJ ANTONI: With us. With the United States. And there’s lots of different trade barriers that they have. People think it’s all tariffs. It’s all tariffs in part because that’s what President Trump just won’t stop hammering. “Tariffs, tariffs all day tariffs.” There are a lot of other problems in international trade that we find. You know, Europe is infamous for using these value added taxes, which in and of themselves, I’m not saying they’re bad, but the problem is they are structured like a tariff. You know, it functions almost identical to if you slapped American imports with the tariff.

They have all kinds of labeling restrictions where there’s nothing wrong with an American product. It might be exactly the same, more or less, as the European product, but because of this one regulation, essentially it blocks the American product from competing in the European market.

JAN JEKIELEK: I think Trump, at least this is my view. Trump uses the term tariff to kind of approximate all trade barriers. I don’t know if that’s what you think, but that’s what I kind of assumed from the beginning.

The Mirror Approach to Tariffs

EJ ANTONI: Yeah, when the president is talking about putting these tariffs on other countries, this is what Liberation Day was supposed to be. We’re going to take all of these tariff and non-tariff barriers that other nations impose on us and it’s basically going to be like holding up a mirror to them and saying, “See what you do to us, we’re going to do it to you.”

What is the effective tariff rate, which is surprisingly hard to calculate, of all tariff and non-tariff barriers that other countries are imposing on you and then you impose a tariff rate on them that’s equal to that. Unfortunately, that’s not what we saw on Liberation Day.

They took that big beautiful book that Jamison Greer and all his team put together that went through in tremendous detail all of these tariff and non-tariff barriers of other countries and they essentially threw that out and just used this crazy formula where we said, “Okay, we’re going to use the portion of the trade deficit in products that we have with a country as a ratio to the overall trade that we have with them.”

In other words, let’s say we have a random number here, $50 billion trade deficit in terms of products with Switzerland. But the overall trade that we have with Switzerland is $100 billion. Well, 50 over 100 is 50%. So now we’re going to slap them with a 50% tariff. That’s not a good way to calculate these things.

Unfortunately, that is what they did at the time. Again, it looks like the administration is reevaluating all that and is kind of taking a second look to reprioritize going after China and really go after trade abusers as opposed to just having a trade deficit with a country.

Trade Deficits and Reserve Currency Status

JAN JEKIELEK: I remember I interviewed former USTR Robert Lighthizer and when I was reading his book, I remember I told him the one thing that I got from reading your book is that you deeply believe that if there’s a sustained trade imbalance over time, then someone’s gaming the system and that’s wrong. And eventually you should kind of come back to some equilibrium. It sounds like you don’t agree with that view.

EJ ANTONI: Well, it depends on why the trade deficit is there. For example, you can’t get rid of the trade deficit entirely so long as you’re the world’s reserve currency. Because by definition, if I’m the U.S. and you’re another country, I’m buying a bunch of stuff from you, I’m handing you dollars.

Now if there’s no reserve currency, what do you do with all those dollars? Well, you send them right back to me and you buy stuff from me and it ends up equaling out. So there’s no… Why on earth would you keep worthless pieces of paper? It makes no sense.

But if you’re going to hold that as a reserve, maybe your central bank will keep it as a reserve for loans, for other currency. Maybe you use it as international exchange. So you want to hold dollars just so that you can trade freely with other nations because you know every other nation is going to accept those dollars. Guess what? Now all of a sudden, some of the dollars I send your way, you’re not sending back to me.

JAN JEKIELEK: You have another purpose for that.

EJ ANTONI: Exactly. So now by definition, you’re not going to have balanced trade anymore. And that’s part of what we’ve had for literally decades. It has been an added cost on our manufacturing sector. There’s no doubt about it.

The Real Culprits Behind Manufacturing Decline

That’s not to say it’s the primary… not just the reserve currency, but trade in general is not the primary thing that has been killing American manufacturing. It’s excessive taxation, it’s excessive regulation. And you can tell that in part, not just by doing the math, although I’m happy to do that.

But if you just look at where has manufacturing really gotten crushed in this country? It’s Pittsburgh, it’s Detroit, it’s Chicago, it’s blue state America. Essentially what we call the Rust Belt today. That used to be the industrial belt. The Rust Belt is in almost exclusively Democrat controlled cities and states. Historically, at least, they were Democrat controlled.

Conversely, where is manufacturing coming back today? Texas, Tennessee, the Carolinas? I just bought a new vehicle and it was made in San Antonio, Texas. And it’s not because there’s nobody available to work in Detroit, but it’s because the public policies in Detroit have killed that city and made it almost impossible to manufacture things there.

JAN JEKIELEK: Well, there was this mania, I forget exactly what years, but there was a kind of a mania to move. Everyone had to move everything to China.

The Regulatory Cost Crisis

EJ ANTONI: And a lot of that had to do with the fact that at the same time we were building up the regulatory state in this country, they got rid of anything and everything. So when we look at, let’s just say the average American manufacturing worker makes like $50,000 or $60,000 a year. If you look at how much the manufacturer, the employer has to pay in terms of the regulatory compliance cost, it averages out to like $50,000 per worker per year. You’ve doubled the cost to employ an American in manufacturing.

Conversely, what’s China doing? Well, they don’t have that regulatory cost and they subsidize the industry. So you have added cost here and you have, I should say artificially higher costs here and artificially low costs over there. So the result is this obvious move to China.

Now you can address things like the subsidies through tariffs. You can’t address the regulatory state that way. So this is where it has to be, I think kind of a both and approach. You need the carrot, but you also need the stick. The stick is clearly the tariffs. But the carrot is saying to manufacturers, “We will create in this country the most business friendly environment you’ve ever seen.”

If you reshore manufacturing, we will reduce your taxes, we will reduce that regulatory burden. We will make it cost effective for you to employ Americans and make stuff in America.

Regulatory Reform Success Stories

JAN JEKIELEK: So I heard recently that they, since the Trump 45 administration, they’ve increased the rule that if you want to add any regulations, you have to knock an even greater number off kind of to justify adding a single one.

EJ ANTONI: Absolutely.

JAN JEKIELEK: Is this an approach that makes sense?

EJ ANTONI: I think so. I recently had dinner with the Secretary of the Interior, Doug Burgum and he was explaining how one of the things they’ve been able to do is part of the permitting process used to take over two years. Just regulation. I’m not talking about it takes two years to do a geological survey or it takes two years to actually drill the well. I mean just the regulatory paperwork would take two years to process. And they’ve cut it down to be a little more than two weeks. That’s tremendous. I mean what a shot in the arm to the American energy industry that is.

And this is where I think it helps to look at regulation as a tax. But unlike regular taxes which are a tax on economic activity, regulations are a tax on economic activity that never got to happen. That was stillborn, if you will. Because what we essentially do is we tell people, “Look, if you want to go down this route, we’re going to impose this huge penalty on you.”

And so what do a lot of people decide to do? Well, we’re just not going to do that. It’s not worth it. The regulation makes it too expensive. So much of what the Biden administration did, not just in energy but especially in energy that was harmful to this country was putting regulations in place that made it impossible to conduct all of this economic activity. In other words, they banned things through regulation instead of banning them through legislation.

Manufacturing Revival Indicators

JAN JEKIELEK: So a huge promise of this administration is the rebuilding of manufacturing. Are there any indicators this early on that this is happening?

EJ ANTONI: It depends on where in the manufacturing sector we want to look. So in certain instances, you do see that expansion. In other instances you don’t, you actually see a contraction. Some of that has to do with the way, unfortunately, the way the tariffs have been structured right now is that they include manufacturing inputs.

So if a manufacturer here in the United States, let’s say an automotive company, they’re buying car parts from abroad that aren’t made here in the United States, those car parts from abroad are getting taxed. Now the American manufacturer has to pay more for it. And when they sell their car, either domestically or abroad, they have to sell it for a higher price, or alternatively, they have to eat the tariff. In other words, it just cuts into their margin. And so that has been detrimental to some of our American manufacturers, which is not good.

Border Adjustment Tax Alternative

This is part of the reason why instead of a tariff, we would much rather see something like a border adjustment tax, where you are, for example, only going to tax imports, not tax exports. And it functions a little bit like a value added tax in that it prevents something that crosses a border multiple times from getting taxed every time it crosses that border.

Which, sticking with the automotive example, that’s currently what happens under these tariffs. So if you might have, let’s say iron ore and aluminum come out of the ground in Mexico, the ore gets shipped here to the United States to be processed, turned into ingots that gets sent back to Mexico to be turned into sheet steel or sheet aluminum that gets sent back here to the United States to be turned into things like car doors. And then it gets sent back to Mexico for the final assembly, where the car is then shipped here to the United States.

Well, with these tariffs, every time something crosses a border, it gets taxed, and it gets taxed for the full value, including the portion of the value that had previously been taxed. So ironically, you might end up, because the final assembly was done in Mexico, you might end up with a total tariff on this car. Once you include all the constituent parts, that exceeds the tariff on a car coming from a place like China, which is clearly not what we want.

So a border adjustment tax only taxes imports, it doesn’t tax exports, and it only taxes the increased value. So let’s say that sheet metal that gets sent across the border and then turned into a car door and then it gets sent back, you don’t tax the full value of the car door, you subtract out the cost of the sheet metal. So you’re really only taxing the additional value that the Mexican manufacturer put on, transforming it from sheet steel into an actual product.

JAN JEKIELEK: Well, but it’s, I mean in a way it’s like a fine tuned tariff or something like that.

The Benefits of Economic Interconnectedness

EJ ANTONI: Right. And that’s really what you need when you have so globalized an economy, where we are so interconnected on all these different countries. And historically that’s been a good thing. By the way, globalism gets a bad rap. And it should insofar as we don’t want the global elites dictating to us how we live our lives. We want to determine that here in the United States we want to be a self determining people. That’s what every nation should be. And that’s where globalism goes wrong.

Globalism is, I think, right insofar as it produces tremendous efficiency gains. And when you get economies so intertwined like that, it actually has social benefits, not the least of which is you don’t go to war. A big reason why Operation Barbarossa, where Hitler invaded the Soviet Union, why that ultimately happened was the breakdown in trade between the two countries. Because before that the Soviets and the Nazis were each other’s biggest trading partners.

There were a lot of people in Britain, for example, who did not want to ally with the Soviets. Because before that alliance, the bombs that were being dropped on London had their origin in the Soviet Union. So it’s interesting how if we look back at history, you don’t really find any instances where very, very tightly knit trading partners ever go to war with each other. Almost always it’s either these nations don’t have good trade relations or the trade relations that they did have were breaking down before a war broke out.

JAN JEKIELEK: Well, so that to your point, or you have this decades long abusive relationship like the China US relationship.

China: The Number One Trade Abuser

EJ ANTONI: Absolutely right. And again, what we see there, China is the number one abuser when it comes to international trade. They conduct all kinds of… again, it doesn’t matter if it’s currency manipulation, the use of slave labor, the intellectual property theft. No one abuses that more than they do. And all of these things undermine American manufacturing and the American worker.

Let’s not forget, when you reduce the demand for American products abroad, you reduce the demand for the work that makes that product that results in fewer Americans employed and slower wage growth.

JAN JEKIELEK: Well, this is interesting. I mean, you’re telling me, you’re kind of suggesting to me that you like these interconnected relationships even with adversaries economically, because that can actually reduce the likelihood of war. And it strikes me that those have to be done very carefully.

China Trade Relations and Economic Reality

EJ ANTONI: Sure, absolutely. Especially when you look at China, what we see is not a healthy trading relationship because of all those different trade abuses that they’ve been conducting. We just literally for not just decades, but generations haven’t had a president who was willing to step in and say, “This isn’t fair, this isn’t right. This is unlawful in some instances,” like things like IP theft.

So I think we need to take, and President Trump is already doing this, we need to continue to take a long, hard look at the relationship with China and see what does it look like to normalize that relationship. What does it look like to decouple?

JAN JEKIELEK: The thing is that China under the CCP has been decoupling, but very much on its own terms in a way that’s favorable and while still using the trade relationship for its own benefit. Do you think this decoupling is something that can happen?

EJ ANTONI: It can. It would take a very, very long time and I’m not sure it would be the best outcome because again, having no trade at all with a nation like China means they have nothing to lose in the case of something like a war. That’s not the situation you want. You want an instance where they have more to lose than you do.

That’s part of the reason why they have come to the table when it comes to trade negotiations. In a long drawn out trade war, the nation with the deficit does not lose the most. And that’s us. It’s the big exporter China that has the most to lose.

Going back to something you had hinted on earlier, their economy is not in good shape today. Their manufacturing sector has been in recession probably for a while, but it’s gotten so bad that the official data produced by the CCP can no longer hide it.

It’s amazing how if we want to get accurate numbers or as close to accurate as we can on Chinese economic data, we have to do things like look at all of the stuff China is exporting to other nations. In other words, look at all these nations around the world and see what they’re reporting in terms of purchases of those Chinese exports, how much are they importing from China? Add all of that up and try to get an estimate because you can’t trust the figure that China is putting out.

How is it, for example, year after year, for a very long period, China grew at 7% per year, every year, because they announced it beforehand. “We intend next year we plan on growing at 7%.” Sure enough, we grew at 7%. Mission accomplished, and we’re going to do it next year. And they did, year after year after year. And then you look at this and you say that seems implausible to say the least. And then as you start digging into the numbers, sure enough you find that things don’t quite add up.

China’s Economic Challenges

JAN JEKIELEK: Why don’t you tell me from your vantage point the reality of the Chinese economy right now where these problems lie.

EJ ANTONI: They’re increasingly encountering population, just demographic issues, where shockingly, they somehow didn’t realize that things like the one child policy would drastically reduce population growth. And as often happens with central planning, the right hand doesn’t know what the left hand is doing.

So you had people thinking you were going to have this massive population boom and this massive influx out of agriculture and into urbanization. In other words, people moving from rural areas into cities. I mean, China literally built whole cities and there’s no one to live in them yet. This infrastructure is literally falling apart.

They have a real estate, both residential and commercial real estate crisis right now. The government is essentially just buying debt out of the private sector to try to keep things afloat. They’re buying stocks to try to keep equity prices afloat. They’re in very, very rough shape.

And the only thing that really keeps them going, as you said, this massive export market, that they have this huge portion of their economy. As we and the EU and these other nations continue buying from China, it’s continuing to keep that churn going. But absent that, I think the whole house of cards falls apart now. I mean, there are other issues that China is running into as well, whether it’s energy markets or other things, but population has been a huge, huge problem for them.

JAN JEKIELEK: It’s so interesting that you mean your view, you think population is the biggest issue. So it’s like the self-inflicted wound, as is often the case, I suppose.

EJ ANTONI: Whether or not it’s the biggest issue, that’s a tough one to answer. There are other big contenders, like the complete and total lack of freedom that people have in China, the fact that they can’t be self determining, the fact that so much is dictated to them and that results in a tremendous waste of resources because the government there is not allowing the private sector to dictate capital should flow here or here. People’s work should go here or there. It results in a lot of waste.

You also see a lack of accountability. Some of that has to do with their faulty legal system. Some of it also just has to do with again, this top down central planning where contractors don’t really have anyone to hold them accountable.

Thank goodness in some instances that these cities are completely unoccupied because there’s been a tremendous amount of footage that has been leaked out of the country of things like a skyscraper just toppling over because the contractor who did the concrete did a very shoddy job, shall we say. Very similar to the kinds of things we saw in the Soviet Union where it became even within the Soviet Union, it wasn’t just western propaganda. Even within the Soviet Union, the Soviet people themselves were incredibly disheartened with the quality of work that was done and the quality of products that you could buy because nobody had any incentive to ensure that quality.

The “Big Beautiful Bill” Debate

JAN JEKIELEK: Fascinating. Let’s come back to the United States and you know we have a “big beautiful bill” here in the US that’s being worked on both in the House. There’s rescissions at the moment that are being proposed and are being debated and then there’s questions about what the Senate will do. Give me a picture of where things stand, and of course there’s a ton of criticism of this bill, but the administration and many members of Congress are determined to get it passed. So where do things stand?

EJ ANTONI: So right now we’re waiting on the Senate to make whatever changes they want. It’s clear it’s not going to pass as is through the Senate. So the question just becomes is the Senate going to make just a little bit of change or are they going to make a lot of change to the bill? I’m thinking they might make quite a few changes. It’s not as if they’re going to scrap it and rewrite the whole thing, but I think some pretty substantive changes for a couple of reasons. One, the massive increase in the state, local or SALT tax deduction. That state and local tax deduction has certain constituencies in the House.

JAN JEKIELEK: Can I jump in? Why don’t, for the benefit of those who are not in the know, what is this bill?

EJ ANTONI: Oh sure. So this is essentially what we call reconciliation bill. And it’s basically trying to finance the government for a decent period of time. And it looks at a 10 year budget window simply because those are the rules. We use a 10 year budget window. And because it’s reconciliation, it’s not regular order. It can pass through both houses with a simple majority. So you don’t have to worry about that 60 vote filibuster in the Senate.

But it comes with a lot of caveats. For example, we can’t be making changes to discretionary spending. We can only be looking at mandatory spending. If you do change spending, if you do change taxes, it has to be neutral over that 10 year budget window that we mentioned. So it’s pretty constrained.

And this is where when guys like Elon Musk get very angry, the bill doesn’t cut enough. He’s got a point. But you also need to understand there’s a lot of spending that’s off limits in this bill. You can’t cut it no matter how much you want to. That has to be done either through regular order or the rescissions packages which we can get to.

So again, reconciliation is difficult because you’re very limited in what you can do and in the things you can touch. And there’s a lot of stuff that’s off limits. Again, the upside is simple majority in both houses is all you need. And unfortunately, because of the gridlock we’ve had for oh goodness, not just years, maybe a couple decades now, there really have been very few things that have gotten through, passed through regular order in Congress. What we have typically seen are these continuing resolution bills or the reconciliation process because again, it’s just too hard to get that 60 vote majority in the Senate.

JAN JEKIELEK: So now give me a picture of where things stand.

The State and Local Tax Deduction Debate

EJ ANTONI: So going back to this SALT, the state and local tax deduction, the House put a big increase in it. Before, there technically was no cap, although the alternative minimum tax essentially captured everybody after a certain income. But what the Tax Cuts and Jobs Act did is it capped that deduction at $10,000. In other words, you can only deduct $10,000 of your state and local tax payments from your federal tax liability.

What the House would do is greatly increase that. In the Senate, however, there’s no real constituency for that. In other words, if you’re a Republican in upstate New York, your constituents face a relatively high tax rate because the taxes are just terrible in New York State, even if they’re not as bad as in New York City. Let’s say a very blue area. So even the red districts, though, are stuck paying this very high tax rate.

Well, their wealthy constituents would like to see that state and local tax deduction increased because it means they can write off more of their New York state taxes on their federal tax return. But when you start talking about the Senate, you’re talking about people who are elected statewide. There are no Republican senators from a place like New York or Illinois or California or New Jersey. In other words, these different blue states that have red districts here and there, that’s not a consideration in the Senate.

It has been in the House because the margin is so tight in the House. The majority is very small for Republicans in the House, so they need those different representatives on board. But in the Senate, no one really cares. At least on the Republican side, no one cares about something like the SALT deduction.

Manufacturing and Expensing Provisions

There are a few other things, like the expensing provision. This is where we talked about trying to bring manufacturing back. If you build a factory here in the US in 2025, you should be able to deduct the entire expense of that this year, as opposed to you only get to deduct a very small portion and then over the next 29 years, you have to deduct the rest of it on future tax returns.

Well, what if you’re not here in 29 years? What if inflation brings down the value of this asset so much that the tax deduction isn’t really worth anything at that point? There’s a lot of problems with that kind of expensing. And it’s part of the reason why you should be able to expense the asset today, not the least of which is because you had to pay for it today.

What the House bill would do is make that expensing provision—that full expensing, rather—it only gives you that provision for a couple of years and then it goes away again. That’s no way to run a tax code. That’s no way to run an economy. This is arguably the most pro-growth provision in the entire bill, and it’s temporary. That’s not good.

Senate Opportunities for Improvement

So the Senate could make that permanent again. They could cap that SALT deduction—reduce the cap, I should say. I’d love to see them get rid of it entirely. I understand that’s not realistic right now. They could make more cuts as well, and I understand they’re limited in the kinds of things in the budget that they can cut.

But there’s no reason why the whole Green New Deal subsidies on solar and wind should continue for a couple more years and shouldn’t get phased out until 2029. That’s inexcusable. Trump won’t even be president at that point. To put that in context, those things can and should end immediately. There’s no reason to prolong that. And it would save taxpayers hundreds of billions of dollars.

So there are a lot of different ways in which they could cut more spending. They could provide even more tax relief, which would be great. They could tweak the tariff scheme, essentially, bring that in-house, bring it back to Congress really where it belongs, and say, “Okay, this 10% across the board universal tariff, we’re going to get rid of that and make it a 10% border adjustment tax that we were talking about earlier.”

Border Adjustment Tax Benefits

One of the biggest benefits from that is because, remember, this is all happening in the reconciliation process. If you make that a tax in statute as opposed to something that’s at the whim of the executive, once it’s in statute, you can use it as a revenue generator, which means in that 10-year budget window, we get to count 10 years worth of this border adjustment tax, the import duties, and what do we do with all that money? We can use it to reduce income taxes here at home, which is great.

I mean, think about it. Whose navy is it that patrols the world’s sea lanes, that facilitates international trade? It’s us. Why are American taxpayers the only one footing that bill? I think it actually makes economic, political and social sense to put some of that tax burden on the rest of the world, since they’re the ones benefiting from it. It’s not just us, even though we’re the only ones currently footing the bill.

The Debt Challenge

JAN JEKIELEK: One of the things we haven’t talked about is the debt. And it’s unsustainable. It’s a huge problem. The big criticism of this bill basically is that it’s not helping deal with the debt in a meaningful way. The other side is that you’re cutting government spending in a very real sense, you are actually cutting the economy as well. It might not be the most efficient economy or the most sustainable economy, but yet you are actually cutting it.

So does this bill somehow help make America more prosperous to be able to deal with this debt down the line? I’m trying to understand the logic because I think everyone would agree that the debt needs to be dealt with. It’s just some people are saying, “Hey, unless you deal with it now, you’re not fulfilling what we expect, what we need.”

The Debt Crisis and Economic Reality

EJ ANTONI: If you don’t take the debt question first, if you don’t deal with the debt, it’ll deal with you. That’s what we’ve had for the last four years with inflation. Inflation has been the way by which the government has been paying for all of these unfunded liabilities. They’ve been taking it from you through the hidden tax of inflation.

So I agree, if you don’t get the debt under control, things will only get worse. To kind of put the debt in perspective here, we’re already paying about $1.2 trillion a year to service the debt. That’s just the interest on it. It’s at $36.2 trillion right now.

But that’s because the debt ceiling is in effect and has been since the start of the year. As soon as that debt ceiling is lifted, the treasury is going to have to borrow hundreds of billions of dollars literally in a single day in order to replenish the Treasury’s cash account that they have at the New York Federal Reserve, which has been running down. It’ll probably run dry sometime in July, maybe like July 28th or 29th, looking at the latest numbers.

So they need to replenish that. They’ll have to borrow easily over $500 billion to do that. They also have to reverse all of the extraordinary measures that they’ve taken. So when the treasury is in these tight situations, what they do is any money that doesn’t have to go out the door, they don’t let that money go out. For example, if there’s a trust fund that the government is supposed to be paying into, like Social Security, they can put all those payments on pause and then just use them to pay daily bills that are coming due. All of that has to be undone, which again is hundreds of billions of dollars.

The Exponential Debt Spiral

So what I’m getting at here, Jan, is the fact that by August, maybe September, let’s say September, the debt’s going to be $38 trillion. Meanwhile, yields are pushing 5% on the debt. Not just the short term, the bills, but also the long term debt. The bonds, the 20 and the 30 year bonds are both getting close to or at 5%.

You look at 5% of $38 trillion and pretty soon you’re going to be pushing about $2 trillion in interest costs just to service the debt. So now all of a sudden you’re in this downward spiral, if you will, where you are borrowing not only to pay today’s bills, but you’re also having to borrow to pay today’s interest. And so the debt grows at an exponential rate.

And investors see this and say, “You’re not going to be able to pay this debt back. I want an even higher yield on Treasuries in order to provide me a cushion for when this eventually goes bust.” And there’s a default, either an explicit default or an implicit one through inflation. And that only accelerates that downward spiral.

Why We Can’t Simply Grow Our Way Out

So, absolutely, the debt has to get dealt with sooner or later. The way you deal with it is twofold. Some people have said, “Well, we just have to grow our way out of it.” Right? You can’t. It’s too big. Go back to 2019. I would have given you a different answer. Yes, I think you could have grown your way out of that. You can’t today. It’s too big. You can’t simply grow your way out of the problem.

What’s happened is federal finance is actually remarkably similar to family finance. What’s happened today is kind of like a family that has gone so deeply into debt, their interest bills every month on credit cards, on their mortgage, etcetera, now exceeds their ability to pay. And now they’re at a point where they’re having to, let’s say, get new credit cards to do balance transfers to try to cover the interest because they can’t make the finance charges.

What does the family do? Well, two things. As Dave Ramsey says, you got to get a bigger shovel to dig yourself out of the mess. In other words, you need more income. That’s the economic growth. But the other thing is you need some austerity. You have to start cutting expenses. You just have to. You have to start reducing government spending.

Now, fortunately, we’re seeing both of those, which is great news, because if all we saw was growth, you’d need like 7% annual growth year after year. In order to outgrow this mess, you’re not going to get 7% growth per annum. You’re just not. Even Reagan, as great as he was, he managed, I think it was like 12% growth for a year and a half for 18 months. But then growth went back to much more sustainable levels. You know, 3%, 4%, whatever the case may be, you’re not going to get 7% growth out of this.

Trump’s Economic Policies and Early Results

What have we seen so far under Trump? We’ve seen a lot of policies that will push growth higher. That’s great. Especially on the deregulatory front. Phenomenal news there on the spending side, in the first quarter of this year, government purchases, when we look at the GDP report, government purchases actually went down.

So that what you were saying earlier, and this gets to your other question on something like the size of the economy. If we reduce government spending, don’t we shrink the economy? On paper, we do, but that’s just because of how we measure the economy. We take consumption and add it to investment, add it to our net export position, which is exports minus imports. And then we also add government purchases, what we usually call government spending, although that’s technically a broader category because it would include things like welfare transfers.

But just looking at what government itself purchases that went down in the first quarter for the first time in years. That’s great. That’s exactly what we need. But it shows up in the statistics as a reduction in GDP.

So under Biden, what happened? We continuously saw the government spending lots of money it didn’t have, so it was borrowing, and it made the GDP number look bigger and bigger and bigger. So it looked great on paper. But if we actually look at the things that matter, how is the average American doing? What is the typical American household? What’s their financial situation look like? All of those statistics went downhill.

I mean, by almost any measure, in 2022, we were in a recession again. The average American’s personal financial situation deteriorated that year, but the official statistics said the economy kept growing.

Real Purchasing Power Under Different Administrations

One of the things I really like to look at is what can the average American’s weekly paycheck buy? This is something we’ve talked about this before, right. Under Biden, not just the size of the paycheck, but what it could buy went down. And that happened because prices were rising faster than income significantly.

So, you know, almost 20% wage growth under Biden was not enough to keep up with how fast prices rose. And so the average, what the average American could buy with their weekly paycheck shrunk about 4% from when Biden took office until when he left.

Conversely, under Trump, what the average American’s weekly paycheck can buy is now up, I think about 1.3%, given the latest numbers. But that has happened in four months. I mean, that’s tremendous. What a reversal of economic fortunes for Americans. And it’s because we have reversed the economic policies of Washington.

The “Big Beautiful Bill” Assessment

Now, does the kind of getting back to that other question you had, does the big beautiful bill, does it do that? It helps. It does not go far enough. Again, I hope the Senate can make improvements. But even if they do make improvements. I think we will need further action, both on part of the executive and on the part of the legislature. We will need further action to improve things further.

But what the big, beautiful bill does is although the debt will still go up, it goes up at a slower rate. So this is why you’ll hear people from the administration saying this cuts spending. Okay. It cuts the increase in spending, which is why people on the left will say this bill increases spending. Yes, but it increases it at a slower rate.

So you can see how there’s a little bit of spin going on, I think, in either instance. But at the end of the day, the probably the most important takeaway, and I think the most honest assessment is that the bill is a step in the right direction. It doesn’t go far enough, but it’s better than the alternative of doing nothing.

If we live in a world where it’s this kind of, this binary choice, do we pass the bill or do we just stick with the status quo? Passing the bill is definitely the right choice, because if you don’t, you have a $4.5 trillion tax increase on the American people, of which almost all of it, $4 trillion out of the $4.5 trillion, is going to fall in the middle class.

JAN JEKIELEK: I do believe I saw Steve Miller. Stephen Miller talking about how, you know, this bill also addresses many of the promises of the Trump campaign.

Border Security and Social Safety Net Reform

EJ ANTONI: Sure, absolutely. Yeah. For example, it’s going to provide more funds to build the border wall to finish that project. Now, I think that has caused some. That has raised some red flags for people, including people like myself, who are, frankly, border hawks. But the issue is just that when we look at the money that’s being allocated for that, and we look at what was asked, it far exceeds what was asked.

In other words, where’s the money going? You’re allocating way more to build the border wall than is necessary. That seems wasteful. Shouldn’t we take another look at that? But whatever the case, it has money for border security. That’s good.

It’s going to take over a million illegal aliens off of Medicaid. That’s phenomenal. I mean, anything we can do to really tighten up the disaster that is our social safety net in this country is a great thing, especially when it means getting illegitimate beneficiaries out of the system.

It reminds me of what went on with Doge, where they found all these people in Social Security, you know, a million millions of people who are so old they couldn’t possibly be alive anymore. You know, People in excess of 120 years old. Every time you remove an illegitimate beneficiary from the Social Security system, you prolong the solvency of the trust fund, which ensures that legitimate beneficiaries will continue to get their check for a longer period of time.

You know, these common sense measures like getting illegal aliens off of government assistance is phenomenal news. The last thing we want is people to be able to break our laws, get into our country from an unsecured border, and then live off the taxpayer dime.

Second Order Effects of Policy

JAN JEKIELEK: I think one of the maybe problems we’ve had is we don’t look at second order effects of policies like, for example, you can say to yourself, well, it’s a compassionate thing to let people through that, you know, needed for economic reason or, you know, actually much more serious reasons in some cases. But that obviously has this other impact that, for example, makes the social safety net insolvent or more insolvent and.

EJ ANTONI: Right, right.

JAN JEKIELEK: Has that, have you given that thought? This is just what strikes me listening.

The Hidden Costs of Illegal Immigration

EJ ANTONI: Sure, sure. Yes. Especially in the context of illegal immigration because so often we see these different, it could be academics, it could be think tanks, all kinds of groups. We’ll put out these estimates of the different dollar benefit that we get from having all these migrants here. Right.

And sure enough, they’re always half baked analyses where they love looking at the benefit side of the equation and never the cost side. In other words, they say, “look at all the people who come to this country and work here and all the good that they do.” What about all the people who come to this country and don’t work, who live off the dole?

I mean, this was one of the biggest abuses of the Biden administration where you have a lot of programs, Jan, that although the federal government pays for them, so they’re paid at the federal level. That’s where the funds come from. They’re administered down at the state level. And although it’s illegal for California to be handing out Social Security numbers, for crying out loud, to illegal aliens and enrolling them in all kinds of welfare programs, they’ve done it anyway. And the Biden administration just turned a blind eye to the whole thing. It’s finally getting cracked down now under the Trump administration.

But if you ignore the social safety net costs, illegal immigration looks like a winner. And then what about the fact that these people are driving on roads and not paying for them? Their kids are in school systems that they’re not paying for, they’re going to hospitals for health care, that they’re also not paying for. In other words, they impose costs all over the economy and they don’t actually pay for these things. And once you calculate all of those losses and you compare them to the benefits, that’s when you finally get a legitimate and a realistic cost benefit analysis when it comes to illegal immigration.

Impact on American Workers

Another cost, not the least of all our costs, is how so many Americans get that first rung on the ladder of success kind of cut out from underneath them so that they can’t climb that ladder because of illegal aliens. In other words, these floods of low skill or unskilled labor into this country greatly reduce the wage rate of entry level jobs.

You know, look, some economists get very mad at me when I say this, but at the end of the day, the labor market is a market. It’s in the name, for crying out loud. Right. The labor market, it abides by the rules of supply and demand like every other market does. If you greatly increase the supply, that puts downward pressure on prices. Well, what’s the price in the labor market? Well, we just call that wages. It’s the price of your labor.

So if you have this huge influx of low skill or unskilled labor, then the market for low and unskilled labor, which would be entry level jobs essentially. Right. Which we all had them at some point. That’s why they’re called entry level. It’s where we all start in our careers. All of a sudden those jobs become so deeply unattractive to Americans that a lot of them never even bother.

Especially when you’ve seen the expansion of welfare that we’ve had the last several years. Not just in terms of the amount of welfare you can get, but also who is eligible for it. It’s been an expansion in both directions. It’s not just greatly increased costs for taxpayer, but again it has caused millions of Americans to just give up and leave the labor market. It’s been really tragic.

The Post-COVID Labor Market Exodus

When COVID hit and the economy shut down for I guess it was March and April or April and May, there were two months essentially of 2020 where the number of people not in the labor force just exploded, went to new highs and then it almost immediately started coming back down as state by state. It took in some cases over a year. But state by state slowly reopened their economy and things more or less got back to normal. As the demand for labor went up, people came back into the labor force.

Except something like 5 or 6 million American men, able bodied American men never came back in.

JAN JEKIELEK: Right.

EJ ANTONI: They’re just sitting on the sidelines And a lot of that has to do with the huge increase in foreign competition in terms of labor that we’ve seen.

JAN JEKIELEK: That’s very interesting because I’ve heard different reasons verbalizing. So you think the biggest, the biggest contributor to that reality is simply that there’s this huge downward pressure on wages.

EJ ANTONI: When we look at entry level jobs specifically. Yes. Yeah. Now, as you start moving up in terms of skill set, immigration becomes less and less of a factor because the illegal immigrants, specifically, not the legal immigrants, but the illegal aliens that are here when they come across the border, as President Trump famously said, “they’re not sending their best folks.” They’re not bringing in people who have doctorate degrees. These are people who will either do, again, low skill or no skill labor or they’re going to get on government assistance.

Final Thoughts on Economic Indicators

JAN JEKIELEK: You know, this has been a fascinating conversation. Any final thoughts as we finish?

EJ ANTONI: I think one thing, Jan, going back to something you had said earlier on how this reduction in government spending. Right. Makes it look like the economy is shrinking. I care much less about these official numbers as I do about the American families standard of living and their cost of living. Right. I want the standard of living to go up, the cost of living to go down. Those are the things that I looked at very closely under Biden and those are the same things I will continue to look very closely at under Trump because that is what really I think matters to people.

Sure enough, right before the election, I think it was the September jobs report from 2024. In the household survey, the number of people who said that they were employed in government exploded in a single month by 700,000. So instead of the unemployment rate going up that month, it went down because more people were employed. But they were all employed by the government, doing nothing productive, adding nothing to the economy. They weren’t actually producing anything that people could use in terms of a product or a service. But it made the official number look good. All the while, the American people became poorer.

And I would encourage, actually I would encourage your viewers and your listeners to do the, and your readership to do the same thing. Don’t pay so much attention to what the government is telling you. The official numbers say pay more attention to your personal pocketbook because at the end of the day, that’s what really matters.

JAN JEKIELEK: Well, E.J. Antoni, it’s such a pleasure to have had you on.

EJ ANTONI: It’d be my pleasure. And thank you for having me today.

JAN JEKIELEK: Thank you all for joining E.J. Antoni and me on this episode of American Thought Leaders. I’m your host, Jan Jekielek.

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