The financial situation of the US government could worsen if President-elect Donald Trump implements the fiscal policies he has promised. According to one analysis, this by credit rating agency Moody’s. It is the last of America’s three major lenders to maintain its top rating, but it is reviewing that determination.

“Marketplace Morning Report” host David Brancaccio spoke with Jason Furman, a professor at Harvard and former chairman of the White House Council of Economic Advisers under President Obama, to discuss the growing risk to the financial health of the United States. Below is an edited transcript of their speech.

David Brancaccio: What about the credit rating agency’s opinion that the fiscal health of the federal government could suffer if the president-elect takes his word for many of these policies?

Jason Furman: This is absolutely true. President Trump basically announced every week that: a new area of ​​income that will not be subject to tax. When you add them all up, promises worth more than 10 trillion dollars emerge. If Congress is willing to pass it, it would mean a huge increase in the budget deficit.

Brancaccio: I think voters are sometimes cynical or say: “Well, everyone’s making promises.” What you’re saying is that there are some economists who hope these are promises and not actual policy.

Furman: I don’t think there are some economists there. I think probably the vast majority of them are. My Republican friends in the economics profession thought, first, that it was too expensive, and second, that they were very poorly designed. They are literally pimping out one after another.

Brancaccio: Fiscal policy has real effects on people at the kitchen table, because if you’re borrowing more, that can push market interest rates even higher, for starters.

Furman: I mean, the difficult thing about fiscal policy is that direct impact is always good. But this is paid for by higher inflation, higher interest rates, and eventually perhaps higher taxes or spending cuts. And it’s all indirect but at a time like this There is already a high budget deficit — can cause an even bigger problem any of the direct benefits.

Brancaccio: We’re also talking about inflation, which many voters identify as their biggest source of anger. President-elect He was quite clear about his intention to increase tariffsespecially with regard to China – but other countries, including Mexico, may also happen. Tariffs are considered by many to be taxes and can themselves be inflationary.

Furman: Again, this is a campaign where it campaigns on a very, very broad set of tariffs, 10% or 20% in every country in the world. Australia And New Zealandthey are punished because I’m not quite sure what happened. If he did what he said – and that’s a big “if” – the result would be that the price of the things people buy would go up considerably, resulting in a reduction in people’s after-tax income. And yes, it will show up in the statistics as higher inflation.

Brancaccio: Clearly many Democrats hope the president-elect won’t do what he promises, but I remember a prominent Republican and supporter of the man who will be the next president saying: “Tariffs and his promises are a bargaining chip.” I don’t think the new administration will actually increase tariffs because maybe we won’t need them in the end.

Furman: Yes, there are some countries where a certain amount of bargaining makes sense. Definitely China. We have all kinds of economic problems with China, all kinds of problems with the way they treat us. We need to negotiate with China. All in all, though, it’s a very strange kind of bargain. I mean, that brings us back to Australia and New Zealand. What did they do to the United States? What are we trying to get from them in exchange for not imposing tariffs on them? When you negotiate, you need to have a goal. I can see China’s goals. Frankly, I don’t see those for the vast majority of countries in the world that currently have 1%, 2%, 3%, 4% tariffs against the United States.

Brancaccio: Professor Furman, I wanted to ask you something as soon as the exit polls are available after Election Day. Nearly 45% of voters said they felt they were worse off now than they were four years ago. Four years ago, a lot was going on. There was a change of management, but of course quarantines, epidemic And these incentive payments – both under Trump administration And later in the Biden administrationthree tours that put money in the pockets of many Americans. And these Americans felt flushed despite the pandemic. So do you think that explains any idea that people are worse off right now? I wanted to say, We do not have these incentive payments.?

Furman: Yes, I think that’s part of it. Let’s compare 2012, when Obama is running for reelection with an 8% unemployment rate, to 2024, when Harris is effectively running for reelection with a 4% unemployment rate. In many ways, The economy was much better this time The difference is, I think people were never that grateful for the economic recovery because they were pretty economically insulated from the recession. This is the first recession in our history where people’s incomes were actually higher rather than lower than in normal times. There were quite a few jobs available in late 2020 and throughout 2021but many people preferred not to buy them. And I think you don’t get as much credit for business growth when people know that a job will eventually be found for them, and you don’t get as much credit for profiting from something when you protect them from economic harm. from him in the first place. And it’s a painful irony, because although I think the response to this has gone too far, if we did everything right, we would protect people, and then they wouldn’t feel the normal relief they feel when they start digging a hole. It’s a really deep hole.

Brancaccio: Do you stand by both Trump and Biden’s decisions to distribute stimulus checks?

Furman: In 2020, the world was falling apart. I think we need to do everything possible to hold this together, and that’s why I think these stimulus checks make sense. As of March 2021, the economy was recovering really quickly. There were many jobs available. Households had an unusual amount of money in their checking accounts from last year. I think these last round of stimulus checks were completely unnecessary.