Tony Katz & Dr. Matt Will on Latest Inflation & Fraud Numbers

Tony starts the final hour of the show joined with Dr. Matt Will, economist from the University of Indianapolis, to talk about the latest inflation and fraud numbers. 

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Speaker 1: Live from the Hartbeiner and the Crossroads of America.

Speaker 2: It's Tony Katz today.

Speaker 3: So if you take a look at the top line,

Speaker 3: inflation is here to stay. And I do take a

Speaker 3: look at the top line, and I say, my gosh,

Speaker 3: inflation is here to stay. As if somehow I didn't

Speaker 3: know inflation was here. But not everything is everything, Tony Katz,

Speaker 3: Tony Katz today, Good to be with you. Cor inflation

Speaker 3: an annual rate of three point three, that's actually not

Speaker 3: what's happening because it came in at point four. Wasn't

Speaker 3: that four point eight? Yet the market thought it was

Speaker 3: going to come into point five? I'm sorry, point five.

Speaker 3: Shouldn't we be saying the sky is falling? Except the

Speaker 3: report doesn't say the sky is falling. And this is

Speaker 3: where it gets kind of interesting. Doctor Mattwell joined us

Speaker 3: right now, economist at the University of Indianapolis.

Speaker 2: Four. Why we're adjusted for the month.

Speaker 3: They want to say three point eight percent for the year,

Speaker 3: but point four is four point eight because I do

Speaker 3: your math, not their math, And that was under the

Speaker 3: estimate of point five. We've got tariffs, we've got oil prices,

Speaker 3: we've got an economy in general, I don't know which

Speaker 3: one is driving this inflation. But you see this report.

Speaker 3: What is the top line telling us and where should

Speaker 3: we be looking.

Speaker 1: Well, let me start off by saying that this report

Speaker 1: is part of a bigger picture. Everything that you and

Speaker 1: I have been saying is correct. The private economy is

Speaker 1: very strong. It's stronger than the headline GDP. Let's not forget.

Speaker 1: We're going to talk about the revised GDP number that

Speaker 1: also came out today. Inflation is still a problem, and

Speaker 1: the real drags on the economy are the war. Tariffs

Speaker 1: are still there to a degree but not as much,

Speaker 1: and government driven inflationary pressures. The pressures, these are the

Speaker 1: things that are causing the problem. But it's a big picture.

Speaker 1: So let's first dive into the inflation issue. You're right

Speaker 1: the headline, you know, point four below expectations, But if

Speaker 1: you dig in, there's two core numbers. The core for

Speaker 1: the month was point two. Now you're thinking, oh, point

Speaker 1: two that's not bad. That's two point four percent. But

Speaker 1: there's another thing called market based core. And I know

Speaker 1: this is getting nerdy, but there's core and there's market

Speaker 1: based core. The market based core is what you pay.

Speaker 1: It's households, and this is the number that the FED

Speaker 1: actually looks at. What are you paying when you drive

Speaker 1: out of your card to the store to pick something up.

Speaker 1: That number was point three. That is still a hot number.

Speaker 1: And we are now seeing the flow through from the

Speaker 1: tariffs and from the war on oil prices, so it

Speaker 1: is now a pass through. We talked about that last

Speaker 1: time we spoke. So inflation is still there. If you

Speaker 1: look at the market based core, it is the highest

Speaker 1: it's been in the last twelve months. And this is

Speaker 1: what matters because this is what households are paying. So

Speaker 1: the headline it's too hot. Okay, point four is too hot,

Speaker 1: let's all admit that. But you got to look under

Speaker 1: the hood and it's the household based core that makes

Speaker 1: me the most nervous about the inflation report.

Speaker 3: So we have the highest in twelve months the base

Speaker 3: of what we're paying because the tariffs are making their

Speaker 3: way to the consumer, which is different than oil prices.

Speaker 2: Making their way to the consumer. But one would.

Speaker 3: Assume if we're paying more per gallon, and certainly now

Speaker 3: you're at seven dollars a gallon for diesel, that's what

Speaker 3: these trucks are utilizing to bring your goods to market.

Speaker 3: That cost is getting baked in as well.

Speaker 1: Yes, but I'm going to go back and be the

Speaker 1: broken record that I've been for many many months now,

Speaker 1: and that is it's government spending. The inflation is caused

Speaker 1: mostly by government spending. The tariffs are baked in, they've

Speaker 1: been in the system. They're not now causing new inflation.

Speaker 1: Oil is causing new inflation. But we remove that and

Speaker 1: we look at the core only so and what's causing

Speaker 1: the core inflation right now is government spending. And I

Speaker 1: just wish I could get to the President and say,

Speaker 1: mister Present, stop spending all this money.

Speaker 2: Where maybe politically, where are they spending?

Speaker 3: Because all I see is when we take a look

Speaker 3: at BLS Beewer of Labor statistics and jobs numbers, we've

Speaker 3: been shedding government jobs.

Speaker 2: We've been applauding the thing.

Speaker 1: I don't know where we're spending the money. Well, I

Speaker 1: do know. I didn't have that report with me right now.

Speaker 1: But if you look at the deficit this year, the

Speaker 1: deficit is going to be one of the highest we've

Speaker 1: had in history other than COVID, and next year is

Speaker 1: projected to go up another fifty percent. Now some of

Speaker 1: it's military spending. I'm a fan of that. But there's

Speaker 1: still a lot of this fraud going on. And you know,

Speaker 1: you've seen estimates from JD Vance yesterday about how much

Speaker 1: fraud is out there. And now there's a law that's

Speaker 1: been passed in California to ban you, you Tony, you,

Speaker 1: a person in the news media, from going out and

Speaker 1: identifying fraud. There's now a law in California banning you

Speaker 1: from disclosing government fraud.

Speaker 3: Pay no attention to that law, and pay no attention

Speaker 3: to the man behind the curtain. Gavin Newsome talking to

Speaker 3: doctor Matt Well, economists at the UNI University of Indianapolis.

Speaker 3: Do economists take a look at fraud spend as we've

Speaker 3: seen in Minneapolis, we've seen in California and a great

Speaker 3: all fifty states, Republican states, Democrats states. It's happening everywhere.

Speaker 3: There's a lot of grift going on in the system.

Speaker 3: Do economists have a way of labeling that and attributing

Speaker 3: that to government spend and therefore attributing that to higher

Speaker 3: inflation rates.

Speaker 1: No, it has nothing to do with inflation. It does

Speaker 1: have to do with government spending, which indirectly impacts inflation

Speaker 1: because too much government spending. But this is now where

Speaker 1: you're going to get into the politics of economics, because

Speaker 1: the people on the left, you know, the pro knesy

Speaker 1: and the pro big government people, those folks who think

Speaker 1: it's good for government to spend money because it increases GDP.

Speaker 1: They don't care about this fraud. They think it's insignificant,

Speaker 1: and in fact, they think it's good. Not the fraud. Okay,

Speaker 1: they don't think fraud's good, but they think the government

Speaker 1: spending is good. They don't care where it happens. I

Speaker 1: care where it happens. I don't want fraud because I

Speaker 1: don't want wasted money. I would rather spend that money

Speaker 1: on military defense or give it back to you, give

Speaker 1: it back to the person who you know paid the

Speaker 1: taxes to begin with. They think it impacts GDP, and

Speaker 1: we should get into the GDP because there was a

Speaker 1: revision today and this whole fraud and spending the government

Speaker 1: money is actually reducing the GDP. That's a good thing.

Speaker 1: So there's a lot of things that impact GDP. I

Speaker 1: don't would do you want to get into the GDP.

Speaker 1: I think is a very interesting story.

Speaker 3: Today we're here if we're not going to get into it.

Speaker 3: I don't even understand what we're what we're doing. Talked

Speaker 3: to doctor Matt Will economists at the University of Indianapolis.

Speaker 3: You know, we first we take a look at these

Speaker 3: inflation numbers and we realize that inflation is still here.

Speaker 3: There's a big question about what the new FED chair

Speaker 3: Kevin Walsh, is going to do. Are we going to

Speaker 3: see a rate cut that President Trump desperately wants. That

Speaker 3: would certainly be a help to the housing market as

Speaker 3: mortgage rates got back because the tenure Treasury was at

Speaker 3: four point six plus getting back to seven percent on

Speaker 3: the thirty year fix. Wants to see the rate cutt

Speaker 3: He wants to see more money changing hands, more investment

Speaker 3: taking place. The inflation doesn't say that that should happen.

Speaker 3: But you're discussing a GDP number, And this is where

Speaker 3: it does get interesting, because your argument is the GDP

Speaker 3: number proves that if President Trump will get out of

Speaker 3: his own way, it's the greatest economy the world has

Speaker 3: ever seen in the history of the world.

Speaker 1: By the way history of the world, modern history. And

Speaker 1: I do I will stand by that statement because if

Speaker 1: you look at the headline GDP. It actually was revised

Speaker 1: down today from two percent to one point six So

Speaker 1: everybody's going to think, oh, downward revision, that's bad. Well, okay,

Speaker 1: let's look under the hood. If you look at what

Speaker 1: caused the GDP to go down, one of it was

Speaker 1: government spending is lower than it has been in the past.

Speaker 1: Remember the bad model of canes is that more government

Speaker 1: spending as to GDP. So the government portion of GDP

Speaker 1: is down, that's good. And the President and I don't

Speaker 1: agree on the next one. But imports are up, just

Speaker 1: like we said would happen, and the tariffs didn't make

Speaker 1: imports go down. Imports are actually up, and imports are

Speaker 1: a drag on GDP. In fact, how much today the

Speaker 1: drag it two point six percent. So if it weren't

Speaker 1: for imports, you know, we would have a GDP and

Speaker 1: the four plus percent range.

Speaker 3: Whoao, woe and whoe and whoe and what and what

Speaker 3: walk me through that? How do imports equate to a

Speaker 3: drag on GDP?

Speaker 1: Because the way it works is GDP is a formula.

Speaker 1: It's GDP equals government spending plus consumer spending plus investments

Speaker 1: that's being private investments, which is a good part of

Speaker 1: this report. By the way, we got to get into

Speaker 1: it plus or minus net imports. So when you have imports,

Speaker 1: it drags down GDP. So when Trump put all the

Speaker 1: tariffs on at the beginning, it boosted GDP because it

Speaker 1: banned imports. But that's been baked in now, so the

Speaker 1: imports are starting to flow in again. That's pulling down GDP.

Speaker 1: It's just a formula. I'm okay with it, but I

Speaker 1: don't like that it hurts the headline. Everyone looks at

Speaker 1: the headline, and if you look at the headline, it's

Speaker 1: down two point six percent because of imports. So again

Speaker 1: I don't like the Canes model. It's not a good model,

Speaker 1: but it's the only one we have at the moment.

Speaker 1: So that's part of it. But the most important part

Speaker 1: is investments and consumer spending are through the roof, and

Speaker 1: that's what really pushed up this GDP number. Investments in

Speaker 1: the private economy.

Speaker 3: Those investments, where are they going?

Speaker 1: It's obvious. I think everyone knows AI. But this is

Speaker 1: more than an AI story. It is now broad based.

Speaker 1: In the last couple of years, you and I have

Speaker 1: talked about this that two years ago the market was up,

Speaker 1: but it was always the mag seven, the seven biggest companies.

Speaker 1: Last the year before that, it was up, but it

Speaker 1: was up mostly because of about the top one hundred.

Speaker 1: This year, I'm so happy to report this year it

Speaker 1: is broad based across the economy. We see the market

Speaker 1: going up more than just AI. AI is up, productivity

Speaker 1: is up, capital investment and up. Strong earnings. We saw

Speaker 1: incredible earnings coming out every single day from almost every company.

Speaker 1: The S and P hit records.

Speaker 2: Think about this.

Speaker 1: We're in an economy where we have a war, we

Speaker 1: have oil prices going through the roof, we have inflation,

Speaker 1: and the private economy is setting records. This is I'm

Speaker 1: going to go back to my statement that you quoted

Speaker 1: me on earlier the bottom. If the private economy is

Speaker 1: doing so well that if it weren't for the war,

Speaker 1: if it weren't for the inflation, we would be booming

Speaker 1: better than any modern day economy that we've seen. And

Speaker 1: it's broad based. I got to give you one.

Speaker 2: This is so good.

Speaker 1: So I use a thing called an LMS. It's a

Speaker 1: learning management system. It's what students use when they go

Speaker 1: online and they do their online courses or just a

Speaker 1: regular class a couple of years ago, we had to

Speaker 1: go to McGraw hill and take them all summer to

Speaker 1: put a course in place coding nerdy people writing computer programs.

Speaker 1: I did it by myself over the weekend. I used AI.

Speaker 1: I was able to deploy a course doing HTML coding,

Speaker 1: whatever the heck of that is over a weekend. AI

Speaker 1: productivity is not just in data centers. It's across the board,

Speaker 1: in everything that you do. And it's not done yet, Tony.

Speaker 1: There's more to come.

Speaker 2: By the way, HTML, hypertext markup language.

Speaker 1: Oh you're old, you're old.

Speaker 2: You're showing your age. I know things. I know things.

Speaker 3: Talking to doctor Matt Well, economists at the University of Indianapolis,

Speaker 3: the AI move and movement here we see meta right,

Speaker 3: the owners of Facebook, they're now deploying their their AI model,

Speaker 3: subscription model. It could be ten dollars a month or

Speaker 3: twenty dollars a month. And on the same day they

Speaker 3: announced the cuts of fourteen hundred people because of AI

Speaker 3: being the focus and other jobs now going by the wayside.

Speaker 3: Some could argue this is under the conversation of what

Speaker 3: they sometimes call creative destruction. And I don't know if

Speaker 3: I'm necessarily a particular fan of the term. But the

Speaker 3: AI investment is great, but people are losing their jobs.

Speaker 2: These things don't equal out.

Speaker 1: Oh come on, come on.

Speaker 2: Okay.

Speaker 1: First of all, are you not a fan of the

Speaker 1: term or.

Speaker 2: You fall the wad? Don't come on, come on me.

Speaker 3: I'm not saying that necessarily doesn't have to be this way.

Speaker 3: These things do happen. Growth happens the way it happens,

Speaker 3: and people are often caught in the middle of it,

Speaker 3: and they're gonna have to rethink. It's the way it

Speaker 3: goes in many, many cases and places. But there is

Speaker 3: a question of the economics and how it affects an

Speaker 3: economy in Toto.

Speaker 2: That's where my question is.

Speaker 1: Okay, but let me get into what you said. Joseph Schumpeter.

Speaker 1: He's the guy that developed this thing called creative destruction.

Speaker 1: Maybe you don't like the phrase, maybe I don't like

Speaker 1: the phrase, but it is one of the best things

Speaker 1: in the economy, creative instruction. And it happened when the

Speaker 1: horse and buggy was replaced by the car industry. And

Speaker 1: I've used this before and I'll use it again. I

Speaker 1: didn't invent it. It comes from the you know, the

Speaker 1: movie other people's money, if people want to go watch that.

Speaker 1: And Danny DeVito gave this talk and he talked about so,

Speaker 1: you know, we had the horse and buggy industry and

Speaker 1: it was very robusting, was very active, and then this

Speaker 1: darn you know car company came along and it destroyed

Speaker 1: all these jobs. And you know what, Thank goodness, it

Speaker 1: destroyed these jobs. And let me tell you, is AI

Speaker 1: destroying jobs that metalay people off? Yes, and that's unfortunate

Speaker 1: for the people. It's okay, And in fact, it's good

Speaker 1: for the economy for that to happen because now those

Speaker 1: people can be employed elsewhere. That's a hif separate discussion.

Speaker 1: Does a government retrain them? Do private people retrain them?

Speaker 1: Is it a faith based environment? How do we retrain

Speaker 1: these people? But we cannot have the horse and buggy

Speaker 1: industry be protected from cars. We cannot have the old

Speaker 1: industries be protected from the AI enabled industries. That is

Speaker 1: an necessary evolution of the economy. If we don't do it,

Speaker 1: we will not grow the economy, we will not employ

Speaker 1: more people, and we will have massive unemployment, lower standard

Speaker 1: of living. We must move forward with an economy and

Speaker 1: creative destruction. Think goodness, fred Smith came along and did

Speaker 1: overnight delivery. Can you imagine if we didn't have overnight delivery.

Speaker 1: We said, well, waiting on the United Postal Service to

Speaker 1: deliver something in two weeks overseas if we're lucky. Thank

Speaker 1: goodness for creative destruction. I'm a fan of it and

Speaker 1: I will defend it to my death.

Speaker 3: And as we see the investment, you see this group

Speaker 3: Snowflake and the deal with Amazon six billion dollars on

Speaker 3: that AI is the push in for consumer facing AI

Speaker 3: where we go and utilize it as you've described it

Speaker 3: like a super Google? Or is the push for AI

Speaker 3: to be a trusted partner in the creation of code management, etc.

Speaker 3: Where is the real desire from the marketplace.

Speaker 1: I'm going to give you a third option. I like

Speaker 1: your second super Google. I don't care about the second one. Yeah, okay,

Speaker 1: but really it's more what I just described to you earlier.

Speaker 1: The fact that I can deploy a course over the weekend. Now,

Speaker 1: this is designing courses. This isn't you know, AI nerdy programming.

Speaker 1: It is under the hood. I actually designed a class

Speaker 1: that students can now use over a weekend versus an

Speaker 1: entire summer. That is the productivity. I told you, maybe

Speaker 1: many many months ago, I may have mentioned an insurance

Speaker 1: company that I'm aware of. They use AI to now

Speaker 1: adjust claims. It listens into phone calls. It listens to

Speaker 1: if there's coverage. It is able to identify if you

Speaker 1: have coverage or not, make a reservation for you at

Speaker 1: a local hotel. If you last lost your house in

Speaker 1: a fire, put money into your bank account so you

Speaker 1: have living expenses because your policy provides for that. So

Speaker 1: this is adjusting a claim where there is a house fire,

Speaker 1: designing a course that students will use. The AI uses

Speaker 1: are just beginning, and it's amazing the progress that we've

Speaker 1: seen just in the last few months in what it

Speaker 1: can do.

Speaker 2: I don't say no, but man, is it creepy? I are.

Speaker 1: Let me tell you how creepy it is. Okay, first

Speaker 1: of all, the fact that you knew HTML that's a

Speaker 1: little creepy. But the fact that my AII could deploy

Speaker 1: a course that is creepy. But isn't it exciting? I mean,

Speaker 1: come on, I remember when you when we were younger,

Speaker 1: you'd wait till you got home to listen to the

Speaker 1: tape and the voice messages. Is it creepy. Now that

Speaker 1: you have a phone, and with the phone you get

Speaker 1: a message instantly, you gotta admit that was creepy thirty

Speaker 1: years ago.

Speaker 3: It's creepy now when it gives me the AI summary

Speaker 3: of the message. I don't want that at all. I

Speaker 3: have to get that. I have to get rid of that.

Speaker 3: I'll wait to listen to it. And by the way,

Speaker 3: rushing home to listen to the voicemail, it was enjoyable.

Speaker 3: Let's be clear about that. Dog Well, economist at the

Speaker 3: University of Indianapolis. I appreciate you taking the time to

Speaker 3: be with us. More is coming up on Tony Katz,

Speaker 3: and this is Tony Katz today.