Wall Street Week
Powell’s Catch-22 | The Fed Decision, IRS cutbacks, Ireland’s Corporate Tax
May 9, 2025
Lawrence H. Summers, a Harvard economist and former Treasury Secretary, joins economist Kenneth Rogoff to explore the delicate balance of U.S. monetary policy amidst inflation and unemployment risks. They discuss the ramifications of Trump's policies on the IRS and the challenges posed by recent budget cuts. Summers delves into Ireland's low corporate tax strategy, which attracts U.S. companies, while examining how tariffs could impact this dynamic and what it means for American jobs and corporate tax behavior.
36:18
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Quick takeaways
- The interplay between rising tariffs and economic growth is critical, as increased tariffs may lead to higher inflation and job losses.
- Significant IRS funding cuts hinder tax collection efficiency, potentially increasing the national deficit and reducing taxpayer compliance over time.
Deep dives
Economic Impact of Tariffs and Fed Policies
The discussion highlights the interplay between tariffs and economic growth, with a focus on how such policies can lead to higher inflation and unemployment. The imposition of increased tariffs is anticipated to push consumer prices higher, which in turn may slow economic growth and adversely affect job markets. Experts, including Larry Summers, express concerns over whether the Federal Reserve can effectively manage these dual challenges of rising prices and job losses. The general consensus suggests that as the Fed navigates this complex landscape, a careful balance is crucial to mitigate potential economic downturns.
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