DAVID GREENE, HOST:
President-elect Donald Trump is expected to put the economy front and center once he takes office, so which economists he brings in and who he chooses - for example, to serve as his treasury secretary - could really matter. To talk about this, we have two economists who have become our semi-regular guests over this last year. One from the right - he's actually sitting to my right. Peter Morici teaches at the University of Maryland. He's a columnist who has published in The New York Post, The Washington Times and Breitbart. Peter Morici, good morning. Thanks for coming back.
PETER MORICI: Nice to be with you.
GREENE: And to my left is Jared Bernstein. He's a former chief economist for Vice President Biden. He is author of the new book "The Reconnection Agenda: Reuniting Growth And Prosperity." Thanks for you for coming in as well.
JARED BERNSTEIN: My pleasure.
GREENE: Let's talk about possible picks for treasury secretary. The name Jamie Dimon is out there. He's maybe the best known, the head of J.P.Morgan, but, you know, certainly from the business world. What - is that the kind of pick that you guys think would work for a President Trump? Jared Bernstein, I'll start with you.
BERNSTEIN: I'm skeptical in the sense that Donald Trump obviously ran very much an anti-establishment election and at least on the surface suggested he would work against the kind of Wall Street-Washington connections that have become pervasive and problematic. If you look on the other side of the aisle, you've got Senator Warren, Bernie Sanders and even Hillary Clinton saying, we want to be very careful not to seat our administration with those whose alliances are too close to Wall Street. And the issue here, especially regarding a Trump presidency, is that these folks would probably want to take down the Dodd-Frank financial reform. That was...
GREENE: Which we should say - explain that in 10 seconds for people - a very important banking law.
BERNSTEIN: A very important law that came after the financial crisis in 2008 that was designed to provide, in my view, the adequate amount of regulation so that Wall Street wouldn't continue to blow up the economy cycle after cycle.
GREENE: But hasn't Donald Trump suggested that he - that's very much what he wants to do, to give banks more freedom and...
BERNSTEIN: Donald Trump - and it's not just - correct. And it's not just Donald Trump. It's Donald Trump and Paul Ryan and the Republicans. And now that they control the Congress and the White House, Dodd-Frank may very well go. You put some - a Wall Street banker in charge of the Treasury, the likelihood of that goes up. And the reason that's a problem is, again, because we have what I call a shampoo cycle going on - bubble, bust, repeat. And that's not the way to run an economy.
GREENE: (Laughter) That's a wonderful image. Peter Morici, someone from inside Wall Street who might, you know, clear away banking regulations - if that's what Donald Trump is looking to do - is that a good thing?
MORICI: Well, I don't know how you have someone as treasury secretary who doesn't have a deep understanding of Wall Street and what (unintelligible) it is to work there. A lot of things are said during a campaign. Dodd-Frank is not going out the window in totality, but there's a great deal of bureaucratic overreach.
The reality is the establishment on Wall Street has become Washington. Every day, over a hundred regulators go to work. They have their offices inside of Jamie Dimon's building. And they're looking over everybody's shoulder all the time to the point that it is very, very difficult for you or I to even move money from one IRA account to another without going through a compliance officer and scads of paperwork, to no - to no positive effect.
GREENE: Wall Street's overregulated you're saying.
MORICI: Well, absolutely. It didn't keep the London Whale from coming - from happening, a big trading scam at Dimon's bank. And it didn't keep Wells Fargo from creating all those false accounts. You know, people running around with clipboards doesn't necessarily give you better banking.
GREENE: But are you worried Donald Trump could go too far, clear away too many regulations...
MORICI: Oh, absolutely, but I think...
GREENE: ...And the banks could get away with murder in some ways?
MORICI: I think he can, but I don't think he's going to. If you - if you read what's been said since the election, since we, you know, sobered up on Thursday morning, you find that they're not talking about throwing the whole thing out. Nobody really wants to preside over another bubble bust. But let's face it. The banks are still big - too big to fail. We just have the Federal Reserve hassling the living hell out of them so they can't lend any money, and they don't. One of the problems we have is small banks can't lend money, and we have a shortage of small entrepreneurs as a consequence.
BERNSTEIN: So...
GREENE: Jared Bernstein, very briefly, I want to get on to another topic.
BERNSTEIN: Sure, OK. What I hear Peter saying is that we can't regulate the banks, and the banks are already causing precisely the kind of problems that...
MORICI: I didn't say that. What I said is is that...
BERNSTEIN: Hold on.
MORICI: ...You have to have an adequate amount of regulation...
BERNSTEIN: No, no.
MORICI: ...Not an excessive amount of regulation.
BERNSTEIN: OK, so wait, you spoke. Now I speak.
(LAUGHTER)
MORICI: Good, but please, don't change my words.
BERNSTEIN: So what Peter was suggesting, that the system is overregulated - in fact, that's what he said.
GREENE: Right. Is it overregulated?
BERNSTEIN: No. In fact, Peter just ticked off a number of examples of ways in which regulation doesn't go far enough - the London Whale and the Wells Fargo. Somehow - how do you look at Wells Fargo and what they did and conclude that we need less regulation? That's beyond me.
GREENE: Sounds like this will be a very important part of the debate when it comes to the treasury secretary.
MORICI: Well, one of the ways you do that is to have a structural solution, and that is to separate investment banking from commercial banking, go back to Glass-Steagall and then break up the large banks.
GREENE: Let me move on to trade. We just have a couple...
MORICI: I would be all in favor of that, that's another story for another day.
GREENE: I want to ask you both about trade. Donald Trump has suggested during the campaign that he is going to literally dismantle a lot of trade deals. Peter Morici, is this similar to what you were talking about with Dodd-Frank? He's really not going to dismantle. He's going to sort of nitpick and improve trade agreements. Or what do you think?
MORICI: Well, he's talked all along about negotiating better deals. And then the media says he wants to blow up the system. Over and over again, his words have been distorted.
GREENE: Although, he has said pretty strongly, like, you know, NAFTA's terrible. The TPP is terrible.
BERNSTEIN: Disastrous.
GREENE: I mean...
MORICI: Well - and we use that kind of hyperbole in campaigns, if you hadn't noticed, on both sides.
GREENE: And you excuse that.
MORICI: I basically try to focus as an economist. Remember, I'm not a Trump surrogate.
GREENE: Yes.
MORICI: I try to focus on what I think will actually happen.
GREENE: And what will actually happen?
MORICI: I think what will happen is they'll put pressure on China and Mexico to renegotiate China's accession agreement to the WTO and to renegotiate NAFTA in places where American industry has complaints. Of course, with NAFTA, I think that probably the Mexicans will have complaints of their own, and it'll be a very interesting enterprise.
With regard to China, the trade deficit with China is so one-way. You know, Barack Obama campaigned on the very same thing. He said he was going to do something about China. And one of the reasons we only have 2 percent growth in this recovery as compared to Ronald Reagan's 4.5 percent growth during his recovery is because of the whopping trade deficit he said he'd fix and did not.
GREENE: Is that a fair point, Jared Bernstein?
BERNSTEIN: No. I mean, I think the - what I hear Peter saying is what I hear a lot of people saying right now from the conservative side. He said Donald Trump said he'd do a lot of things that are pretty scary to an economist, but I don't really believe he'll do them. He says he'll start a trade war with China and slap 35 or 45 percent tariffs on it, but he won't really do that. He says he's going to deport all these people. He won't really do that. He has a $6 trillion tax cut and, no, don't worry. That's not going to happen. A trade war, a wall with Mexico, he's going to ignore climate change.
Everyone is now trying to - everyone on the conservative side who's now trying to say really he's not going to be that bad, and, by the way, including Trump himself - now, maybe that's true. Maybe Donald Trump, you know, campaigned on a bunch of stuff he's not going to do, but he doesn't has - he certainly doesn't have a reservoir of trust with people like myself. And let me tell you...
GREENE: But could he gain that trust? We have about 20 seconds left. I mean, if he does sort of make...
BERNSTEIN: Of course he could.
GREENE: ...Small improvements on trade deals, would you come around to support those things?
BERNSTEIN: Well, I mean, it would take a lot more than small improvements on trade deals. But no, look, I'm with Hillary Clinton and Barack Obama who say open mind. Let's hope for success. But I - neither do I have the kind of amnesia that I'm hearing from a lot of his supporters - don't worry. He's really not going to do all that nasty stuff he said he'd do.
GREENE: OK. Well, this is a conversation that is certainly going to continue, and I look forward to having you guys back on. Jared Bernstein, former chief economist for Vice President Joe Biden, and Peter Morici, a conservative columnist who teaches business at the University of Maryland, thank you both so much. Transcript provided by NPR, Copyright NPR.