Experts explain what’s really happening in the U.S. economy

1. 0:00 – 4:40

   Why Americans hate the economy

   1. ALAnnie Lowrey0:00

      Can you imagine if Ford came out and they were like, "You know, the car is gonna be great, but we're gonna kill a bunch of your kids." Right?

   2. KSKara Swisher0:07

      Right. [laughs]

   3. ALAnnie Lowrey0:07

      Like, everybody would be like-

   4. KSKara Swisher0:08

      Yeah. [laughs]

   5. ALAnnie Lowrey0:08

      ... "What are you talking about?" They'd be like, "Some of your children will die horribly. We're so sorry, but it'll still be worth it." That people are now, they're like, "Don't do this to us."

   6. SPSpeaker0:18

      It is on.

   7. KSKara Swisher0:19

      [upbeat music] Hi, everyone. Today, we have a panel of experts talking about the state of the U.S. economy. Annie Lowrey is a staff writer at The Atlantic and author of Give People Money. Catherine Rampell is an MSNBC Now contributor and the economics editor for The Bulwark, and Claudia Sahm is the chief economist at New Century Advisors and the founder of Sahm Consulting. It's an important conversation, something that affects everybody's life, so stick around. Annie, Catherine, and Claudia, thanks for coming on "On."

   8. ALAnnie Lowrey0:53

      Thank you for having me.

   9. CRCatherine Rampell0:54

      Yeah, great to be here.

   10. KSKara Swisher0:55

       Yeah. So before we get to the data, let's start about how Americans are feeling about the economy now. A new Washington Post/Ipsos poll found that people are generally pessimistic, pessimistic with one in five saying they think the economy will improve in the next year. That's not very good. Um, what do you, each of you, just overall, what do you think the biggest factor driving economic pessimism is right now? Catherine, Annie, and then Claudia.

   11. CRCatherine Rampell1:18

       Um, I think people have kind of been soured on the economy for years at this point, and in some ways that makes sense, and in some ways that do seem out of whack with the data. They make sense in the, um, m- by, by which I mean, like, prices have been elevated. Um, wages have not been... Well, depending on how, which m-measure you use, have not been keeping up, um, particularly since the Iran war started. But, you know, obviously the elevated prices, elevated inflation predate that. Uh, we've been dealing with above trend, above target rather, inflation for over six years at this point. So there are a lot of things to be cranky about. That said, um, the degree of crankiness does seem a little bit outsized relative to the, um, [lip smack] uh, amount of crisis, if, if crisis is a quanti- quantifiable term, uh, in the economy. But I, I would say it's a, it's a combination of high inflation, kind of stagnant economy, and frankly, um, a lot of political disgust that sort of ends up as referred pain towards the economy.

   12. KSKara Swisher2:30

       Economic disgust. All right. Annie?

   13. ALAnnie Lowrey2:32

       Yeah, absolutely. Look, I think Catherine is completely right. There's a lot to not like about this economy. Um, even relatively high income families that are making in the low six figures, uh, families which, you know, we don't generally worry about them a lot versus a family that's making $40,000 a year, are really squeezed by price pressures. That said, I think that basically the consumer sentiment and the economic sentiment numbers are no longer exactly reflecting just economic and consumer sentiment. I think that they have to do with our mali- media and political environment. And so I think that those numbers essentially are not exactly telling you a lot about real economic conditions versus 20 years ago. But I think that the sense that we are in a declining democracy, that we have complete lack of trust in institutions and one another, some horrible hangover from the trauma of COVID and everything that came out of it, and also the media environment that we're in, uh, where the media itself has gotten more negative, and also people are getting their news now from short for- form video, from, uh, these sources that I think can really color your perception of what you should have and what you do have. Um, I think that those numbers now, we should think of them as a more generalized sentiment number, not, like, how much money do I have in my bank account? And we could see gains in the economy, and they would show up in the numbers, or depressions in the economy, and they would show up. They've just become a different measure in my mind.

   14. KSKara Swisher4:01

       But we should include more measures. Um-

   15. ALAnnie Lowrey4:03

       Yeah

   16. KSKara Swisher4:03

       ... Claudia?

   17. SPSpeaker4:05

       So I would add one more thing to the mix in terms of the uncertainty, the insecurity that people feel. So a few years ago, you know, inflation had come down some from its pandemic highs, and unemployment rate was low. And so I'm an economist, I was looking at all this data, and it really looked like things were at least improving, not great all around, but improving. And yet these consumer sentiment measures were still really negative. And I, you know, was trying to talk to people and be like, "Help me put the pieces together." And one woman pointed out to me, she's like, "You know, on paper, we do look better than we were a few years ago, like coming out of the pandemic." But she's like,

2. 4:40 – 7:34

   Why inflation still feels so painful

   1. SPSpeaker4:40

      "I don't feel it, because it feels like the next shoe could drop."

   2. KSKara Swisher4:43

      Right.

   3. SPSpeaker4:43

      And it all falls apart.

   4. KSKara Swisher4:45

      Whether it's AI or whatever it happens to be.

   5. SPSpeaker4:46

      Right. And I think that I really trace a lot of this back to the pandemic, which was a huge out of nowhere-

   6. KSKara Swisher4:52

      Mm-hmm

   7. SPSpeaker4:52

      ... just upended people's lives. And frankly, between policy decisions and other ev- it just feels like we're in this rolling mess of uncertainty, and that, I think, weighs on people. And also, as they try to navigate, like, you know, prices go up, or there's tariffs, or there's this and the job, like, it takes a lot of effort-

   8. KSKara Swisher5:12

      Mm-hmm

   9. SPSpeaker5:12

      ... to go do the bargain shopping, to go do-

   10. KSKara Swisher5:15

       Yeah

   11. SPSpeaker5:15

       ... you know, try to figure out the way to deal with this. Do you go get a new job? Do you not? Like-

   12. KSKara Swisher5:19

       Mm-hmm

   13. SPSpeaker5:19

       ... and that is like, it's like a tax on people. They don't pay it necessarily directly, but it just weighs on them. So I, I-

   14. KSKara Swisher5:24

       Weighs on them

   15. SPSpeaker5:25

       ... come to understand, like, as Olga said, like, those measures are picking up more than economics. Um, but I, but I think it is relevant still to policy.

   16. KSKara Swisher5:33

       So it's more, more of a vibe thing, like, in that way. So recent Labor Department data show that inflation did cool in June. The brief Iran war ceasefire gave Americans a break on gas prices. That's not expected to be the case this month. Catherine, after several years of rising consumer prices, are Americans just more price sensitive, or how is it showing up in spending behavior when it comes to persistently high food prices? I, I might... I have noticed them. I've never noticed food prices and, and I... You see them everywhere you go, and you don't know why particularly.

   17. CRCatherine Rampell6:02

       Yeah. Yeah, I mean, I think that there is some cognitive dissonance in all of this, which is one of the underlying themes that we've been talking about.

   18. KSKara Swisher6:06

       Mm-hmm.

   19. CRCatherine Rampell6:07

       Which is that prices are high, people are cranky, but people are still spending. And I know Annie's written quite a bit about this as well. Um, and so- People are, like, mad that they're having to spend more money, but they're still spending the money as opposed to pulling back on their spending in response to those higher prices. But I think to Claudia's point about that mental tax, that is something that I have been hearing from consumers for a while. So, like, they're spending money, but they have to think more about each decision that they make. It's not like you go to the grocery store and you just have your list, and you go down the aisles and you get the peanut butter and you get the eggs and whatever. Like, maybe you're not gonna get the fancy peanut butter this time. Maybe you have to, like, price, you know, price compare and you're gonna get the private label peanut butter. And so people are spending, um, but ev- there's more exertion that goes into every choice that they make, and that is exhausting. Um, and as, but as long as people continue to have jobs, and unemployment is still relatively low by historical terms, um, that means that they are able to keep spending.

   20. ALAnnie Lowrey7:14

       One of the weird things about what Catherine mentioned is that by some measures people are less price sensitive. They are emotionally, their feeling is more price sensitive. But, uh, say that we have, like, a coupon and we get 50% off, it doesn't have the effect that it might have had 20 years ago. But I really think of, you know, the past six, seven years

3. 7:34 – 10:16

   The housing affordability crisis

   1. ALAnnie Lowrey7:34

      as basically being an experiment telling us how much do people hate inflation, and they really hate it. And we had not had a big economy-wide test of this in a really long time. We weren't quite sure, right? It's a very different economy than the last time than we had this kind of, like, runaway prices. Plus, what's worse now is the price of housing, of childcare, you know, they're nuts, and people just despise it. They hate it.

   2. KSKara Swisher8:01

      Right. So you wrote about the great affordability crisis back-

   3. ALAnnie Lowrey8:04

      Yeah

   4. KSKara Swisher8:04

      ... in February of 2020, and you noted the price of housing represented the most acute part of the crisis. It's been six years, the US housing market still feels broken. There's more, um, uh, sellers than buyers at this point. The new Minneapolis Fed Research found that only 53% of American adults own homes they live in. They're not buying, and at the same time, the market seems very flat for a lot of people I've talked to. So what's the, what is the underlining problem of probably people's biggest cost that they would pay for?

   5. ALAnnie Lowrey8:32

      Far and away, housing. Even if you are a person who is paying in your mortgage or in rent an amount that an economist would say you're doing okay, you still might not be happy, and it might not be har- easy to see that because, like, let's say that you're paying an amount you can afford, $1,800 in rent or something like that, but you're still living with roommates, or you're living in a neighborhood that you don't like, or you're putting off, you know, proposing to your partner. Um, that's not gonna show up except in a sentiment figure, and I think that's part of what we're seeing. But the housing, there's not an easy answer here. Some places are really building, but I think the truth is that, you know, the housing market is in a really tough place, and it's going to be for a long time.

   6. KSKara Swisher9:14

      Mm-hmm.

   7. ALAnnie Lowrey9:14

      And I think if we saw interest rates come down, which would help with affordability and help with building-

   8. KSKara Swisher9:19

      Mm-hmm

   9. ALAnnie Lowrey9:19

      ... we have so much pent-up demand that you might not see prices fall, which is a really-

   10. KSKara Swisher9:23

       Right

   11. ALAnnie Lowrey9:23

       ... tough thing.

   12. KSKara Swisher9:24

       Right. So but y- the 21st Century Road to Housing Act became a law earlier this month, it's a package of provisions aimed at increasing the housing supply and making homes more affordable. What does that actually accomplish?

   13. ALAnnie Lowrey9:36

       I don't think it's a- going to accomplish a tremendous amount. Look, I think that there's not a lot of federal policy on the table that can affect this because overwhelmingly this is a local concern, and so we can incentivize local places to allow more construction, but you still have a lot of homeowners who say, "Hey, I don't want that giant thing in my neighborhood." You're still going through the more than 10,000 US jurisdictions that are in control of this and asking them to go one by one. I think actually the best policies that we've seen have been state and local, so California, for instance, has had a number of policies to induce building. But still, right, like, timber is really expensive. Labor is really expensive.

4. 10:16 – 19:54

   The Federal Reserve and interest rates

   1. ALAnnie Lowrey10:16

      This isn't a situation that we got into quickly, right? Really, I think the roots go back to the housing crisis, uh, before, before the bubble popped. It's not something we're gonna get out of fast either.

   2. KSKara Swisher10:27

      Mm-hmm. So of course, job, job, uh, uh, the job of keeping prices and inflation is under control belongs to the Federal Reserve, and it has a new chairman, Kevin Warsh. Uh, we're now taping this on the day before the July meeting, and it'll come out the day after. But let's zoom out. Claudia, I know you've ex- expressed some skepticism about Warsh, in particular how he sometimes uses standard economic language in non-standard ways. What do you make of him so far and, and his efforts to, I assume, get inflation in check so that he can lower those, uh, those rates that, uh, Annie talked about?

   3. SPSpeaker11:00

      It's really too soon to have a firm opinion on Kevin Warsh. I mean, that's also partly by his design. He's been-

   4. KSKara Swisher11:07

      Mm-hmm

   5. SPSpeaker11:07

      ... pretty quiet about-

   6. KSKara Swisher11:08

      Yeah

   7. SPSpeaker11:08

      ... uh, his views on the economy, his views on what should be done. Uh, he's made very clear we're gonna have price stability, he's gonna get inflation down. But, but as we talked about with housing, you have a problem that it took years to build. It's gonna take some time to bring it back to, uh, to be fixed. And inflation has been running higher than what the Fed puts as its target of 2% for-

   8. KSKara Swisher11:28

      Mm

   9. SPSpeaker11:28

      ... several years now. So it's not gonna turn on a dime with a new person in charge. Uh, I think, you know, the Fed is really aware of the inflation problem. Thankfully, we are at a moment right now where the labor market, if nothing else, appears very stable. So the Fed can kind of focus its attention on inflation. But it still has a tough decision to make. Should we step in and raise interest rates? 'Cause that's creating more costs for people. And if you don't need to do that to get inflation down, well, then maybe you should hold off and stay on the sidelines. So, so it's hard to tell where, where the Fed is headed at this moment, a- and that's really gonna be the, the judgment in the end on, on Warsh's leadership is can the Fed deliver on getting inflation down?

   10. KSKara Swisher12:08

       And, and Trump doesn't want interest rates to rise, so there's political pressure.

   11. CRCatherine Rampell12:12

       Yeah, I mean, I think, I think that's the big- big challenge for the Fed right now. Like, it's, it's always hard to be a, a Fed official and try to, like, make sense of all of the data-

   12. KSKara Swisher12:21

       Mm-hmm

   13. CRCatherine Rampell12:21

       ... some of which is conflicting. It's especially hard when, like, you have some messiness in the data today, but it's especially, especially hard when you have Donald Trump basically trying to screw up your job-

   14. KSKara Swisher12:34

       Mm-hmm, mm-hmm

   15. CRCatherine Rampell12:34

       ... uh, which is what has been happening, right? That Donald Trump does not understand or has-- is unwilling to learn that the Fed, in order to be effective, needs to be politically independent. Because if people don't believe that the Fed is independent, if they believe that politicians are in control of the money supply and are just, like, willing to print money whenever, um, then they don't believe that inflation can ever get under control. It becomes sort of like a self-fulfilling prophecy, and Donald Trump, by very loudly leaning on the Fed, saying that he wants, um, you know, his new man at, uh, the Eccles Building to, uh, to, to cut interest rates, actually undermines their ability to cut interest rates in a way.

   16. KSKara Swisher13:15

       May I ask, Claudia, is he his man, do you think, from what you can tell?

   17. SPSpeaker13:20

       Well, the president chose Kevin Warsh to be the Fed chair.

   18. KSKara Swisher13:22

       Well, he chose Jerome, Jerome Powell.

   19. SPSpeaker13:24

       Right, and I'm sure from lots of conversations. So I, I take that as there was some alignment, that the president saw in Kevin Warsh someone he wanted to have at the Fed. Do I think that he's taking orders directly from the president? No, I don't. But that, you know-- But he has an alignment, a- and, and we'll see. And I think one thing that's been unfortunate to what Catherine's talking about, there's some discussion of, "Well, the Warsh Fed, they need to raise rates just to prove he's independent." It's like, "No, we should not be doing monetary policy to, like, satisfy some political statement."

   20. KSKara Swisher13:55

       Right. Either way.

   21. SPSpeaker13:55

       Either direction.

   22. KSKara Swisher13:56

       Either direction.

   23. SPSpeaker13:56

       Yeah.

   24. KSKara Swisher13:56

       Right, either direction. So every episode we get a question from an outside expert. Here's yours.

   25. SPSpeaker14:01

       Hi, Kara. Hi, panel. I'm Mariana Mazzucato. I'm a professor at University College London, currently in Italy. I am Italian. Look at the amazing Italian countryside there. So my question to you is the following: You're talking about the state of the economy, housing, cost of living. So I've written, uh, quite a few books, uh, the recent one called "The Common Good Economy," on how it's actually impossible to solve any problem with the current way we think about government. It's just, you know, at best fixing a market failure, always reactive, too little, too late. And I'm just wondering, from your own experiences, maybe the cities you live in, where you've seen government of any type, you know, city level, regional level, national level, global level, actually get stuff done and do it through objectives. You know, there's so many different ways to do capitalism, and if you look at Vienna, if you look at Copenhagen, how they do housing and social housing is so different from American cities. But I think it is important to give people hope that there's different ways of doing things, and by looking actually at some positive examples where the way that we governed went after the source of the problem instead of, you know, the symptom at the end. Thanks.

   26. KSKara Swisher15:17

       So Catherine, you go first, and then Annie and Claudia.

   27. CRCatherine Rampell15:20

       Um, I will talk about something that's actually not where I live but that I've reported on before. So there is this sort of pilot program, I don't even know if you could call it a pilot since it's been around for a little while now, that started in Flint, Michigan, to give cash to pregnant moms, um, basically to address poverty, um, and the various ancillary consequences of poverty at the source, that basically the idea was that they were prescribing cash, um, as a way to deal with a number of public health issues. Um, it's called Rx Kids. And so this started in Flint, Michigan. It turns out that it, you know, based on the data that they have available, where they were giving cash to everyone, um, everyone who, uh, you know, once they-- everyone within the city limits who, o-once they were pregnant, they were eligible, and they continued to be eligible, I believe, for a year postpartum. I'm trying to remember the exact details. Anyway, that they determined that it ha- it resulted in much better, um, outcomes in terms of, um, you know, uh, higher birth weights and lower maternal, uh, depression rates, things like that. So I, I'm-- This is top of mind for me, I think, because I got a press release today saying that they are expanding it to, um, part of Ohio. So that's an interesting one.

   28. KSKara Swisher16:37

       Annie?

   29. ALAnnie Lowrey16:38

       Yeah. I think this is such a fascinating question, and I love that it was posed by the person that it was posed for. I'm such a big fan of her work. And, um, one thing that I think about-- So, uh, you know, in the last 10 years, I think the most amazing governmental innovation that I can think of was in Project Warp Speed, right? We got a COVID vaccine far faster than we expected. It saved a ton of lives, and, uh, the material good that I did, it did, I think, was really significant. Um, but it didn't build trust in government, right?

   30. KSKara Swisher17:11

       Mm-hmm.
5. 19:54 – 30:05

   Trump's tariffs and the cost of uncertainty

   1. KSKara Swisher19:54

      described it as Trump's economic abuse. Are, are they more prepared, given all these hijinks that he's attempting to impose more of them on them?

   2. CRCatherine Rampell20:02

      Uh, they being the administration?

   3. KSKara Swisher20:03

      The businesses.

   4. CRCatherine Rampell20:04

      The businesses?

   5. KSKara Swisher20:04

      The businesses.

   6. CRCatherine Rampell20:04

      No. Uh, you know, it's just like we were talking before about how it is a tax on consumers to have to deal with inflation, it is absolutely a tax on businesses to have to deal with, you know, basically having to watch a mo- have, to have someone full-time monitoring Trump's Twitter feed or his Trump su- uh, Trump, uh, Truth Social feed rather, uh, because that's how policy is being made. It's not being made through the normal Administrative Procedure Act processes. It's being made by Trump's itchy Twitter finger, and as a result, businesses are having to devote a lot of time, a lot of resources, a lot of labor on calibrating, like, "Do we send the shipment now? Do we keep it on the boat? Do we keep it on at the dock? Do we keep it at the port? Do we, do we try to put it in this warehouse?" You know, it's like the... It's just such a tremendous inefficient waste of time and resources, not just the actual cost of the tariffs, but it's, like, managing all of these logistics that they did not have to think about before. And, and not only managing that, but, like, managing relationships with the administration, right? Th- this is the reason why, um, corrupt governments, non-democratic governments tend to have, in general, worse economic outcomes because, uh, businesses have to spend a lot of time, like, figuring out d- you know, figuring out how to, like, appease the authoritarian rather than what makes the most business sense.

   7. KSKara Swisher21:25

      So the economy obviously dealing with the war in Iran, the affordability crisis, inflation we talked about. Annie, what are the short-term and long-term consequences of Trump continuing his borderline obsession with tariffs?

   8. ALAnnie Lowrey21:37

      This is bad. This is really bad. And I think that in some ways, uh, when the original large tariffs got pulled back, people stopped paying attention, but businesses did not, right? Especially small businesses, right? Like, a Ford or a Google probably has hundreds of lawyers dealing with this stuff, or they can bring in legal counsel. If you're, like, a four-person business, you're not gonna be able to do that. You could be bankrupted, right? And we actually saw that happen. And so I think it's one of these things. Like, it's, it's just why, and I think he'll just continue doing it for as long as he's in office. He really cares about it sincerely. He does not care about a lot of policy sincerely. This he cares about sincerely.

   9. KSKara Swisher22:16

      This is, he does.

   10. ALAnnie Lowrey22:17

       Yeah.

   11. KSKara Swisher22:17

       But y- you... To quantify the strain on the economy of these compounding sources is also difficult-

   12. ALAnnie Lowrey22:23

       Very hard

   13. KSKara Swisher22:23

       ... 'cause it's very hard to do. So Defense Secretary Pete Hegseth told lawmakers last week that he estimated the Iran war to cost $37.5 billion. In just the past few days, the war has escalated, and oil prices have shot back up. So far, the U.S. economy has been pretty resilient. Claudia, at what point will Americans feel the broad impact of the war beyond food and gas prices, and what are the potential economic consequences of yet another extended war in the Middle East?

   14. SPSpeaker22:50

       So as the, as the conflict, uh, drags on, it, it has effects on energy, food. It can potentially seep into a lot of other goods and services. I mean, energy is really a cost that isn't a lot of what we are spend our money on, so a lot of it depends on how long the conflict lasts and how bad it gets, right, in terms of the disruptions, uh, in, like, the Strait of Hormuz in the Middle East. So it's all pointing in the wrong direction. It's, you know, without knowing how long it lasts, how bad it gets, it's hard to quantify, impossible to quantify what the effects would be, um, on people, but it, it goes in the direction of cost. And it's just, the war in the Middle East is another example of the administration pushing forward policies that unleash a whole set of costs on the economy, just like the tariffs unleashed a whole set of costs on the economy. And that is really, we can see that in the inflation data. The broad-based increase in the price level over the last year and a half really does tie to some policies.

   15. KSKara Swisher23:45

       Tariffs, yeah.

   16. SPSpeaker23:45

       They may be justified in other, like, outcomes, but, like, immediate, they are costs. And another thing you see from the administration, they really don't recognize that they're creating those costs.

   17. KSKara Swisher23:56

       Mm-hmm.

   18. SPSpeaker23:56

       Right? With tariffs, they're still like foreigners are paying them.

   19. KSKara Swisher23:58

       Right, right.

   20. SPSpeaker23:58

       Like, there is really good data to say foreigners are not paying them. We are.

   21. KSKara Swisher24:01

       No. W- w- yes. They've been corrected many times. They've been corrected many times on that topic, and even someone who does know, Scott Bessent, pretends otherwise, which is, I think that's what they do on a lot of issues. So let's, um, it feels like the economy is kind of a factor in, though, uh, T- Trump's erratic decision-making, the TACO, as it came to be known. Um, when could that shift, where they just assume erratic decision-making, correct, on some level? Any of you.

   22. ALAnnie Lowrey24:30

       I think that they absolutely already do. I think that if you are talking about finan- financiers in Wall Street, uh, they have proven remarkably adept at making money off of not a rising boat, uh, rising tide lifting all boats, but chaos, right? So you have people that are algorithmically trade- trading off of, you know, Truth Social posts. I think that there is a fair amount of, right, just kind of like guessing where he's going. Trump has always been quite suggestible to the people that he's talking to, and so I think that that has become another source of kind of like betting around this. And I'd note that there's a lot of things coming down the pike for the Trump administration that I think is gonna prove really hard, biggest one of which is, in my mind, the Medicaid cuts.

   23. KSKara Swisher25:12

       Mm-hmm. Well, as they're say- in terms of people seeing effects.

   24. ALAnnie Lowrey25:15

       Yes.

   25. KSKara Swisher25:16

       So-

   26. ALAnnie Lowrey25:16

       In terms of people literally losing their insurance and literally not-

   27. KSKara Swisher25:19

       Mm-hmm

   28. ALAnnie Lowrey25:19

       ... being able to afford-

   29. KSKara Swisher25:20

       Well-

   30. ALAnnie Lowrey25:20

       ... cancer treatment
6. 30:05 – 36:34

   Immigration, jobs, and the labor market

   1. CRCatherine Rampell30:05

      and maybe that'll just show up in, in shortages. Um, you know, people not being able to get the, the groceries that they need or not able to get the healthcare, um-

   2. KSKara Swisher30:13

      Healthcare-

   3. CRCatherine Rampell30:13

      And, and-

   4. KSKara Swisher30:13

      ... help they need.

   5. CRCatherine Rampell30:14

      Yeah, exactly.

   6. KSKara Swisher30:15

      Yeah, 'cause those are two professions, two areas that really do depend on these people. Support for this show comes from ElevenLabs. We all know what it feels like to waste time sitting on the phone with customer service. Nobody is having a good time on either end of the line. Well, ElevenLabs says they have a solution, Eleven Agents. They say it's not a chatbot, it's not a phone tree, it's not some demo that falls apart the second the real customer asks a real question. It can look up your account, process your request, and escalate intelligently. The voice sounds like a human. The response time feels immediate with low latency performance, and it runs 24/7 in over 30 languages. If you run a business with any kind of customer operation, support, sales, or onboarding, you can start with a demo at elevenlabs.io/kara. See what Eleven Agents can do for your specific workflows. Guided rollout capacity is limited each quarter, so if you want to be one of the first companies with a customer experience that people actually talk about in a good way, now is the time. Elevenlabs.io/kara. E-L-E-V-E-N-L-A-B-S.io/kara, K-A-R-A. So let's end by looking at how AI investment is affecting workers, companies, and the economy as a whole. A growing number of companies, including Cisco, IBM, Salesforce, and Uber, are citing AI as a contributing factor to layoffs, although now they're, that's unclear. At the same time, a 2025 MIT study found that despite an estimated $30 to $40 billion in enterprise spending on generative AI, 95% of organizations saw no measurable return, something Scott and I have been talking about for a long time. Um, uh, uh, Claudia, to what extent are companies engaging in so-called AI washing using tech to justify layoffs, and what evidence actually does it tell us about its impact on the employment so far? T- talk to me about this. What evidence, uh, is there of real impact?

   7. SPSpeaker32:11

      Right. Well, any, any time a company does a mass layoff, I mean, they're gonna try to package it, explain it in a way that will, will go over well with investors, right? So I wouldn't... I do think there's an aspect of AI may have enabled some of these companies to reduce their headcount, but there were probably a lot of other reasons, like they overhired during the pandemic when they thought, you know, everyone was going online forever. And, you know, so there were probably a whole host of reasons, and they put forward the one that investors might be most positive about. Like, "Oh, you're using the technology." So I think that's happen- but I also would say that's probably not a new phenomenon, right? So, and that's why as a co- you don't wanna just take the companies at their word. You wanna go look and see, can we make sense of it in the data? Do all the pieces fit together? And frankly, what has been really challenging, you know, this is a, this is a relatively new technology. There's a lot of experimentation going out there. The data, it's, it's tricky to catch up with it. And you have really good studies sometimes using the same data that'll just define exposure to AI a little differently, or they might set up the comparisons a little differently and come to opposite conclusions on how this is affecting, how AI is affecting employment. So I think it's just more that, like, we're at a stage where you can't draw a firm conclusion because there's just a lot of experiments running in real time. And maybe some of those companies making the announcements, maybe for them, they actually are doing the layoffs because of AI, but that is not the broad-

   8. KSKara Swisher33:35

      Mm-hmm

   9. SPSpeaker33:35

      ... sense right now, and I would absolutely agree. Um, automating away human beings is very difficult.

   10. KSKara Swisher33:42

       Mm-hmm.

   11. SPSpeaker33:42

       Right? Like, with all the tasks that, that we do, but-

   12. KSKara Swisher33:44

       Correct. Yeah. Yeah, there aren't, there isn't much effect as there are. Um, but the stock market has been on a tear in the past few years, fueled in part by this AI boom. Pretty much con- that's what is fueling it. It's been, uh, made a lot of people feel rich. Bloomberg's Stacy-Vanek Smith recently wrote about the wealth effect, which some economists estimate has accounted for roughly a third of consumer spending growth since the pandemic. It's rich people buying things. They're feeling good about themselves. Um, again, Scott talks about this a lot. But Alphabet and Tesla's earnings and concerns about growing AI spending helped ri- wipe out roughly $890 billion of the combined market value of the Magnificent Seven, these companies focused on AI. Together, these companies account for about one-third of the S&P's 500's total value, which is astonishing. Um, Catherine, can stock prices continue to support consumer spending in the broader... Can rich people feeling a little less rich? And, you know, SpaceX is down, um, Tesla's down. All the c- all the companies are pretty much down, except for Apple, by the way.

   13. CRCatherine Rampell34:44

       I mean, if I knew the answer to that question, I would be a very-

   14. KSKara Swisher34:47

       Yeah

   15. CRCatherine Rampell34:47

       ... rich woman, and I would probably keep the information to myself.

   16. KSKara Swisher34:49

       Yeah.

   17. CRCatherine Rampell34:49

       I do not know the answer to that question. I will say that one thing that is troubling, that is, like, another one of these lurking risks under the hood, is that so much of the market is driven by just this very small handful of stocks.

   18. KSKara Swisher35:05

       Just a couple, yeah.

   19. CRCatherine Rampell35:06

       Right? That i- in, in terms of market capitalization, in terms of investment, in terms of revenues, it's just like they are the whole story. And so that's concerning, particularly given fragility elsewhere in the economy. If we've kind of put, like, all of our eggs in this one basket, and then that, I don't know what the rest of this metaphor would be, the basket explodes, then, you know, a lot of this other fragility could become a lot more visible. Um, all of these other things we've been talking about, all of these other things, all these other factors that have been battering the economy, i- in many cases, unforced errors. Um, like we've... One of the themes of all of this is, like, there's a lot of, you know, precarity. There's a lot of insecurity, but there's also a lot of resilience. But is it resil- ... sense or is it just that, like, there is this one part of the economy that's propping everything up-

   20. KSKara Swisher35:56

       Right, right

   21. CRCatherine Rampell35:56

       ... and if it ceases to continue doing so, what happens to all of these other problems-

   22. KSKara Swisher36:01

       Right

   23. CRCatherine Rampell36:01

       ... that we've been talking about-

   24. KSKara Swisher36:02

       Right. Yeah

   25. CRCatherine Rampell36:02

       ... particularly since we have, uh, really erratic policymaking that is making it harder to stabilize the rest of the economy.

   26. KSKara Swisher36:09

       Right. I know you feel bad that Elon's not a trillionaire anymore, but move-

   27. CRCatherine Rampell36:12

       I, I feel very sad about that

   28. KSKara Swisher36:14

       ... sad about that. [chuckles] So Annie, you recently described the AI economy as, quote, "A trillion-dollar Ouroboros of buying and selling investment and equity staking all happening between San Francisco and San Jose." Uh, that's a snake eating its tail for people who don't know. Um, what i- what-- Talk about the concentration of capital. Tell us about the durability of the AI boom because it really

7. 36:34 – 39:04

   Is AI actually replacing workers?

   1. KSKara Swisher36:34

      is, like seven co- It feels a little to me like when I was covering AOL in the early days, and it was the same $2,000 going around. In this case, it's $2 trillion or two, $200 billion. Talk about this.

   2. ALAnnie Lowrey36:46

      So I think there are a bunch of things to give us some hope that this is gonna be kind of okay. So one is that a lot of the companies doing the borrowing and the buying and the selling here, they really are profitable. Google is really profitable. Like, actually. That's not, uh, fake. And a lot of the money going into this is actually cash. It's not borrowing, or at least it used to be. Um-

   3. KSKara Swisher37:06

      Well, they're borrowing. They recently tried to borrow

   4. ALAnnie Lowrey37:07

      ... now they are borrowing, right?

   5. KSKara Swisher37:09

      Right. Why not?

   6. ALAnnie Lowrey37:09

      And so when there's two really, really big things that I'm s- concerned about, first is the circularity, right? This is all a very circular economy that they are all buying and selling. They are all interconnected with each other and becoming even more interwoven. So say, for whatever reason, we need way fewer chips. All of a sudden you have, you know, a huge decline in the price of one of these companies, but that means that they can't pay their debts to the other. The second is that the AI build-out has been so expensive that these companies are going into debt. So they are issuing corporate bonds, and they are borrowing enormous sums, not from the traditional banking system, but from the shadow banking system, non-banking lenders. Those deals are structured to be off of their traditional balance sheets. If you're not starting to get worried, uh, the deals are very, very opaque, right? We don't have a lot of insight into who is lending what for whom, but we have reason to believe that institutional investors, so people taking your pension or your index funds, are really helping this out. So if we don't have that visibility in, and we have a huge amount of money that is being staked on a very circular economy that is making a bet that the returns on AI are not just gonna come in but are gonna come in on a schedule that it will allow them to pay their bets off, maybe it works out, maybe it doesn't, and the entire, like, all economic growth right now is predicated on this one bet that, you know, very interestingly, your average person has nothing to do with. They are not investing in it. They, uh, the way in which they are being touched by this is mostly through, you know, if they have a, a retirement fund.

   7. KSKara Swisher38:48

      401 [k] . So, so if we're headed for an AI bubble collapse, how vu- Claudia, how vulnerable is the broader market, and who will be impacted?

   8. SPSpeaker38:56

      An AI bubble collapse at this point would be very damaging, right? 'Cause it has... You're talking about in financial markets, there's

8. 39:04 – 48:13

   Is the AI economy a bubble?

   1. SPSpeaker39:04

      a lot of wealth tied up in terms of the AI, uh, spend. In, in the, in the, quote-unquote, "real economy," we can see a lot of capital investment that's happening. I mean, real, like durable goods are being bought to put in place, and I mean, that's very exciting to build up our physical capital. We can be very productive, but that is certainly, uh, in, in the, you know, kinda real economy, the AI has build out is very much import- Not doing it all, but it is important. And then the other piece that we kinda hinted at and touched on a little bit is it is a, a positive overlay, right? Especially in financial markets and businesses, AI is the technology of the future. It's gonna be transformative. It's gonna be profitable. That's been a real, like, positive message, a positive vibe that has counteracted a lot of, like, negative things, like we have a war in the Middle East and we ha- And I do worry too that taking some of that positive overlay away could just amplify the collapse.

   2. KSKara Swisher40:00

      Mm-hmm. Are w- Are either of you, uh, uh, Annie or, uh, Catherine, worried about a, a, a bubble bursting here in the stock market?

   3. CRCatherine Rampell40:10

      Yeah, I mean, I'm, I'm worried. Uh, look, I, I think it's very easy to see the negatives of all of this, certainly including all of this investment that's been going into, um, these new data centers, um, and, and, you know, all of the competition because a lot of the AI investing companies are, like, assuming that it's a winner-take-all market. And so if, like, somebody actually wins, does everybody else just suddenly pull out? And what does that... What, what kind of knock-on effects does that lead to, um, for those firms and for those that depend on them because of all of the circular, um, you know, dependencies that Annie was referring to? So I'm definitely concerned about all of that. I do think it's important to, uh, sit a little bit longer with a point that Claudia made, that there will potentially be some positives. It's easy to see, like, which jobs disappear as a result of a big disruptive new technology. It's harder to imagine what jobs do come about. And I don't wanna sound Pollyanna-ish, but I, I, I j- just wanna, like, temper a little bit of the doom and gloom about how lots of people are gonna lose their jobs, and that may be, they, that may well be the case. We are seeing that, particularly in certain companies. You know, maybe it's AI wa- AI washing, and maybe it's not. But there will be jobs that are created. There will be people who are made more productive, and we don't know exactly where those benefits will fall. And, um, you know, I, I am hopeful- That we will end up seeing lots of opportunities created by all of this, in addition to some dislocation, and, and that, um, you know, we really just need to work on, I think, beefing up the safety net so that those who are in that difficult transition are helped out and are, and are able-

   4. SPSpeaker41:57

      In some fashion

   5. CRCatherine Rampell41:57

      ... in some fashion, right? I mean, I think we've-

   6. SPSpeaker41:59

      Mm-hmm

   7. CRCatherine Rampell41:59

      ... we've done a poor job in the past at-

   8. SPSpeaker42:02

      Always

   9. CRCatherine Rampell42:02

      ... helping people transition-

   10. SPSpeaker42:03

       Yeah

   11. CRCatherine Rampell42:03

       ... when their jobs are displaced because of, whether it's because of-

   12. SPSpeaker42:06

       Yeah

   13. CRCatherine Rampell42:06

       ... globalization.

   14. SPSpeaker42:07

       NAFTA.

   15. CRCatherine Rampell42:07

       Yes.

   16. SPSpeaker42:07

       Yeah. NAFTA.

   17. CRCatherine Rampell42:08

       Whether globalization or automation or anything else. But I do think that there are a lot of opportunities, and what we should be thinking about from a policy perspective is how to make sure that those opportunities are available to as wide of a, um, a swath-

   18. SPSpeaker42:21

       Group of people as possible

   19. CRCatherine Rampell42:21

       ... of the population as possible, and that we help the people who are hurt.

   20. SPSpeaker42:25

       Annie?

   21. ALAnnie Lowrey42:26

       Yeah, absolutely. Um, I think that the thing that I am concerned about, um, beyond just a stock market correction, which would be painful for all of the reasons that Claudia and Catherine identified, and it does mean that, you know, a lot of people, right, like there's always ancillary people that had nothing to do with it, and they are going to be hurt. Um, the other thing I'm somewhat concerned about is that this is taking place, again, outside of the traditional lending system. So I've had the question of like, are regulators on top of this? Are they? The non-bank institutions should be, but this is new and it's unusual, and these deals are strange. So again, I'm not worried about like an Apple or a Google. Even with huge losses, they're gonna be fine, but like what about like the smaller little guts of the system that we don't know?

   22. SPSpeaker43:11

       Mm-hmm.

   23. ALAnnie Lowrey43:11

       Are we really keeping-

   24. SPSpeaker43:12

       Mm-hmm

   25. ALAnnie Lowrey43:12

       ... a good eye on that?

   26. SPSpeaker43:14

       Mm-hmm.

   27. ALAnnie Lowrey43:14

       I don't have a great answer. I'm trying to figure out the answer to that. But to Catherine's point, I think one of the interesting thing is we think about the jobs created by AI. We think, "Oh, it should just be software engineers or something," and it's like no, actually, when the whole economy gets wealthier, you get all kinds of new jobs that are created by AI in some strange way but are not like literally tied to it. So I do think that that's positive, and there are other really positive things happening in the economy, right? Like, you know, we have cool things happening with energy.

   28. SPSpeaker43:44

       Yes.

   29. ALAnnie Lowrey43:44

       And I think that-

   30. SPSpeaker43:45

       Mm-hmm
9. 48:13 – 52:06

   The biggest risks facing America

   1. SPSpeaker48:13

      you know, really under strain. So you think we have discontent right now. Talk about the discontent when Social Security falls apart, right? Like that is-- And we are not that far from that program really coming into, uh, conflict. So I'd say a lot of the trends we're talking about, they are, they're pointed to actually get worse, which is going to have some big conversations in the political economy space about, well, how do we fix these problems? Because people are not gonna be happy if they're just left to fall apart those kind of programs.

   2. KSKara Swisher48:41

      And for themselves. Right. Absolutely. Anyway, on that happy note, um, what one thing is positive that you see about the economy, and what very, in the very short, and what thing you worry about the most? Catherine, you do it first, then Annie, then Claudia.

   3. CRCatherine Rampell48:56

      I think there's some, like, uh, I don't know if this is about the economy or the political economy-

   4. KSKara Swisher49:00

      Mm-hmm

   5. CRCatherine Rampell49:00

      ... but I think that people are starting to recognize the things that really matter about the economy that they may have taken for granted. And that means some of our institutions that help make the economy run, that means immigrants who bring, um, new, new life, new skills, new energies, uh, to the economy, and the importance of community. So all of those things I, I feel like that there is a renewed appreciation, um, for, you know, these are partly about democracy, and these are partly about thriving civil society, but these are also partly about understanding how well our econ- what our economy needs to function, that we need rule of law, that we need trust.

   6. KSKara Swisher49:39

      And, and your biggest worry?

   7. CRCatherine Rampell49:40

      My biggest worry, um, [lip smack] uh, I guess my biggest worry is the dissolution of the safety net-

   8. KSKara Swisher49:48

      Right

   9. CRCatherine Rampell49:48

      ... which, you know, is, is one of the things we've been hammering on this whole discussion.

   10. KSKara Swisher49:50

       Which leads to the anger part.

   11. CRCatherine Rampell49:52

       Yes.

   12. KSKara Swisher49:52

       Uh, Annie?

   13. ALAnnie Lowrey49:53

       Yeah. I'm really, really excited about the new cancer medications, GLP-1s, which are really improving a lot of people's lives. There's new biologics. There's new treatments for previously intractable conditions like cystic fibrosis, which is so exciting. I am terrified that we are pulling away the basic scientific funding that has made a lot of this possible. Um, so, you know, GLP-1s came in part from research on the Gila monster, and this is precisely the sort of stuff that, uh, now, uh, DOGE and the Trump administration wants to cut, right, when we're at this moment that, you know, because of CRISPR and other things that I do not understand, uh, we seem like we might be able to actually really improve people's lives.

   14. KSKara Swisher50:34

       That's right, and save costs.

   15. ALAnnie Lowrey50:35

       Yeah, exactly, and I wish that everybody had access to the medications. You know, these are really expensive. I wish everybody had access to the medications they need.

   16. KSKara Swisher50:42

       Mm-hmm. Good. Uh, Claudia?

   17. SPSpeaker50:45

       Right. So mine is with the low hire, low fire labor market. First, the positive, the low fire. Layoff rates in aggregate are very low. So if you're a worker who has a job and really likes your job, it's a good job, like, this, this is, this is a good labor market. The flip side, the thing that does concern me is the hiring rates are, are really unusually low for a labor market that overall looks pretty good. And so this is an incredibly tough labor market for people coming into the labor market for the first time, trying to, you know, get back in the labor market, or are stuck in a bad job. So, like, I do worry-

   18. KSKara Swisher51:18

       Hmm

   19. SPSpeaker51:18

       ... about that half of it. Like, the hiring rates need to come up.

   20. KSKara Swisher51:22

       Okay. All right. Thank you guys so much. I know we covered a lot of stuff. We were trying to get to a lot of stuff, but I really appreciate it. Thanks.

   21. CRCatherine Rampell51:27

       I gotta run. Thank you.

   22. KSKara Swisher51:28

       Okay, bye.

   23. CRCatherine Rampell51:29

       Bye.

   24. KSKara Swisher51:29

       [upbeat music] Today's show was produced by Michelle Aloi, Katherine Milsop, Megan Bernie, Madeline Lapland-Dooby, and Kalyn Lynch. Nishat Kurwa is Vox Media's executive producer of podcasts. Special thanks to Corinne Ruff, Rosemarie Hoh, Dave Shaw, and Julia Sharpe Levine. Our theme music is by Trackademics. If you're already following the show, you've figured out the best way to do capitalism. If not, you're in an economic doom loop. Thanks for watching. See you on Monday. [upbeat music]

Episode duration: 52:06