(bright music) - [Presenter] This is a production of PBS Charlotte.

- This week on "Unspun," tariffs, trade wars, and budget cuts.

The president says he's protecting our jobs, promoting our products, and putting an end to wasteful spending.

But how will Trump's economic policies affect Wall Street and Main Street?

We'll talk about it with my former State Budget Director, Art Pope.

Plus, I'll count down the top five political truths about tariffs.

(bright upbeat music) In today's America, welcome to the spin game.

Believe me, I know, I'm Pat McCrory.

When I was governor and mayor, I played the spin game, I was played by the spin game.

But aren't we all done being spun?

Let's take the spin out of the world we're in.

Here, on "Unspun."

(bright upbeat music continues) Good evening.

I'm Pat McCrory, and welcome to "Unspun," the show that tells you what politicians are thinking, but not saying.

In the first few months of the new Trump administration, the stock market reached an all-time high, and Wall Street was feeling pretty good about itself.

About a White House reversing four years of inflation and government regulation.

But then came the Trump tariffs.

- The trade war between the US and dozens of countries escalated yet again today.

- According to "New York Times" analysis, these tariffs could affect 40% of all US imports, including everything from avocados, to lumber, to car parts, to oil.

- The S&P 500 is now down more than 10% from its record high set less than a month ago.

- As President Trump has created this chaos, not just here in Canada, and US, and and Mexico, but around the world right now.

- Here at home, Trump's critics, and even some of his supporters, say tariff chaos translates into lower stock prices, hurting our 401(k) plans and higher consumer prices with a trade war making everything cost more.

- But tariffs are exactly what the President promised to the voters who elected him.

Trump also promised to work with Elon Musk on big budget cuts, and a war on government spending that's ending federal programs and laying off federal workers.

Yeah, (chuckles) we all want politicians to keep their promise, to be honest, to tell the truth.

But now, we're finding out that sometimes, the truth hurts.

We only like budget cuts as long as you're not cutting our pet projects.

Then it's hands off.

And the tariffs that sounded great during the campaign now look a little terrifying, depending on what you're buying.

Joining us now to talk more about Trump's economic program, is my former State Budget Director in Raleigh, Art Pope.

Before joining my administration, Art was special counsel to Governor Jim Martin, and served four terms in the North Carolina General Assembly.

Art's also a successful CEO in the private sector, and Co-Founder of the John Locke Foundation, which advocates for lowering taxes and encouraging free markets.

Art, you're a guy I go to for guidance on big-budget issues, and thanks for joining us here on "Unspun."

- Well, thank you, I'm glad to share my thoughts and my experience in history.

- Well, we're watching budget issues both in Washington and in Raleigh at this point in time.

What are some of the barriers that you saw as a budget director in trying to cut government waste and cost?

- Well, first, one of the advantages to give context, is that North Carolina, and all states, have a balanced budget requirement in our constitution.

So, we have no choice, but to balance the budget.

And that imposes a good discipline.

However, there are always demands for more spending.

So, everyone believes in the program that they benefit from, that the legislators voted for.

And of course the department, the agency heads, even if they're experienced business people or conservatives, tend to want more spending to accomplish their goals.

So, you have to do realistic limits to it, and that is starting on the challenge.

- And we even- - So, the first- - We have legislators, for example, even conservative legislature, like you and I both consider ourselves conservatives, they sometimes talk about wanting to cut waste, but then when it impacts their district, they'll fight you.

- They will, and it's beyond just the legislature.

So, there's a theory called public choice, started by Dr. James Buchanan, who won the Nobel Laureate in Economics for it.

That one aspect of it, is when you have a, the cost of a program benefits special interest, narrow-interest group, they have the incentive, the rational incentive to spend tens of thousands, hundreds of thousands, millions of dollars on lawyers, and lobbyists, and campaign contributions to try and influence the legislature and the executive branch to spend money on their programs.

And there's nothing nefarious about this, and democracy, they have the right to do that.

The problem is that for the average citizen, the average consumer, the cost is broadly spread.

So, if you increase the sales tax by one penny, 1%, then each consumer is paying, you know, one or 2 cents more for $1, $2 purchase.

And that's not significant money to them.

If you pass regulations to increase the cost on consumer goods or raises the cost of your electrical bill, that is spread over 12 months.

And again, you may only be paying a couple of dollars more.

So, the citizens don't have a rational incentive to spend a lot of money to counter the lawyers and lobbyists, so the narrow interest group.

Again, narrow interest could be an environmental group, a business group, anyone.

- And there are many interest groups (chuckles) involved.

- Yes.

And the dynamic is always to spend more money.

And for legislators, it's very common for legislator, I'll vote for your program spending increase if you'll vote for my program's spending increase.

Very rarely, 'cause I was a former legislator as well, do you hear, well, I'll agree to cut on my program if you'll agree to cut on your program.

So, those are the basic dynamics and democracy in a legislative system.

And it needs to be addressed starting with the governor, who prepares the budget and recommends the budget, to impose discipline on the agencies and citing the constitutional cap that the spending has to meet revenue, revenue has to meet spending.

We cannot have annual borrowing deficit spending on day-to-day operation of the government like we have the national level.

- Now, there's a new dynamic, and maybe it's not a new dynamic, but it's becoming much more visible.

And these are what we call NGOs, non-government organizations.

And they're everywhere, not just in the federal government, which Donald Trump is recognized, but they're also involved in state government and even local government.

In fact, you're on the board of an NGO, I think it's a type of NGO right now.

And even you have said, I wanna see some audits of these NGOs.

But they're tough to control right now.

And who has oversight of these NGOs?

- Yeah.

Well, first I'm a big practitioner and believer in philanthropy.

Voluntarily giving your money to charities, including public policy, education, and humanitarian relief.

But with the NGOs, NGO stands for non-governmental organization.

They usually get some seed money from voluntary, private donations, but they then use that money to turn around and lobby the legislature, and the governor, to receive state funding or federal funding.

And it gets to be a growing part of the budget.

When they're spending private money, usually, the donors will keep an eye on the expenditures.

But when they're spending the government money, very often, they don't have any direct accountability.

So, that is a challenge.

And yes, I'm serving on the board of directors of a group called NCInnovation.

Great lofty goals, received $500 million.

But I'm having a hard time as a board member holding them accountable, trying to make them have disclosures and be transparent to the public in the legislature, in the executive branch is funding them.

- And this message can be repeated over and over again in every state and in the federal government, as President Trump has seen, where the NGOs become so powerful, they hold onto this information as much as possible at times.

And as you as a board member are having difficulty getting the information.

- As a board member, having a hard time getting information, and even the legislature, which provided the funding, has a hard time getting the information.

- All right, there's- - And it's even worse at the federal level, 'cause we're essentially borrowing money from future generations to give to non-government entities.

And when we can't even meet our own spending for core government services such as Social Security, the courts public protection, public safety.

So, yes, it is a challenge.

- There's another big issue regarding, President Trump says, to help solve the budget, he wants to implement tariffs, whether it be in Mexico, or Canada, or China, or maybe even Europe.

And he says this will help balance the budget.

From the republic perspective, they used to be more free market anti-tariff.

Where is the conflict from a policy standpoint and a political standpoint on this very tough issue of tariffs?

- Well, first of all, in order to reduce the deficit at the national level and balance budget at state level, reducing taxes actually increases economic growth.

We have to have the economy grow faster than the spending growth if we're ever gonna balance the budget.

And reducing taxes can increase economic growth.

That was shown in your administration and the legislature in 2013, which passed tax cuts across the board, individual income tax, corporate income tax.

And we also slowed down the increase in government spending.

So, North Carolina record budget surpluses for years in a row.

Likewise, at the national level, the target-jobs tax cuts in 2017 reduced rates, but generated more corporate revenue than ever, more corporate income tax revenue- - So, where do tariffs- - (indistinct) the past year.

- So, where do tariffs stand?

- The problem is spending.

Yeah, well, I'll get to that.

So, the problem is spending increase even faster.

Now, tariffs are a tax.

When you increase taxes, you decrease economic activity, from the consumer on up to the business and corporation.

So, a tariff tax levies the tax on the goods that American citizens, consumers choose to buy.

And it will make life more expensive, and then reduce jobs for those companies that have to pay the tariffs rather than investing in jobs.

So, tariffs will raise some revenue directly, but then it reduces economic activities, which reduces revenue in the long term.

So, it's counterproductive.

Also, the tariff taxes can even begin to offset the deficit spending of the budget.

We have deficit spending of almost 1.8 trillion a year.

And tariffs, no matter where you set them, are not gonna raise $1.8 trillion to match the deficit.

- So, Art, if you were the man in charge as governor or president right now, in the remaining 30 seconds, what are the two things you would do?

30 seconds, what would you do?

- Lower government spending.

And you can do that by decreasing the amount of increases, not absolute cuts.

But yes, you should go back and cut discretionary spending in particular, including to nonprofits that aren't serving a core government purpose.

And then maintain lower taxes across the board in order to grow the economy in the long run.

And to let that stronger economy grow government revenue faster than government spending.

- Art Pope, a man who's had to do it many times as a legislator, as a private-sector business person, and as budget director for the State of North Carolina, it's been an honor to have you on "Unspun."

- Thank you, it's an honor to serve the state.

- Next up, PBS Charlotte's Jeff Sonier takes "Unspun" on the street to find out what you think about tariffs, trade wars, and budget cuts.

- Yeah, Charlotte's a financial town, so we're asking financial questions this week.

Starting with, what do you think about the president teaming up with Elon Musk for all those budget cuts and government layoffs?

(upbeat music) - Not saying it's necessarily necessary, but it's always good to kind of like get fresh perspective.

So, I mean, if there's stuff that we're wasting money on, it is kind of better to make cuts where it's necessary and put the money to something else.

- While I'm very supportive of making the government more efficient, it feels like it is very random.

And so, I have really concerns about the way it's been implemented.

- They're just like firing employees left and right.

So, yeah, I don't- - You're not comfortable- - No.

- With that happening- - No, no.

- As quickly as it's happening either.

- Exactly, it makes no sense.

- I think that surely, there could be some room for cleanup, but definitely just a different approach.

- [Jeff] You think there's better places to cut than where they're cutting right now?

- Correct, correct.

- [Jeff] On the tariffs, that's another thing that a lot of people have mixed emotions about.

President says it'll create jobs, other people say it'll cause higher prices.

What do you think?

- I'm honestly concerned about higher prices.

It's a bit much.

Adding 25% tariffs, I think is what he said, just insane, way too much, way too much.

- If we're paying for it, don't know if it'll actually help, but if it's bringing in more money, why not?

- If you justify that by saying that it's gonna increase jobs in this country, it's gonna take a period of time for companies to either amp up their production here, or create factories or services to do that.

So, for me, these tariffs feel like they're just gonna increase the cost of goods and services.

- I do think it might jeopardize our relationships with other countries, first of all.

Second of all, yeah, it's gonna raise prices.

Our grocery prices, or everything prices are so high that after this, I mean, I dunno.

(upbeat music continues) - Yeah, a lot of the folks we're talking with here in Charlotte, less concerned about the politics of budget cuts and tariffs and more concerned about how all that's gonna affect their own walls.

Pat?

- That's some interesting feedback, Jeff.

So, what do you think about the issue?

Email us your thoughts on Trump's economic plan to unspun@wtvi.org.

(bright upbeat music) (numbers whooshing) Tonight on our "Unspun Countdown," the top five political truths about tariffs that calls contradictions in business and politics.

Let's go to number five.

Number five, tariffs are an indirect tax.

Absolutely, tariffs are an indirect tax.

Now, some of it might be paid for by China, or by the retail store, they might swallow some of the costs.

but the fact is most of the costs will be transferred to the consumer, thus raising the prices.

Number four, tariffs will actually help reduce the deficit, because that money goes into the United States Treasury.

And that helps reduce a huge deficit, so in the future, president Trump will say, I bounced the budget without increasing taxes.

Okay, I did tariffs, but I didn't increase taxes.

A great political maneuver if it works.

Number three, tariffs protect special interest in all countries.

The fact of the matter, is all countries have been implementing tariffs for generations.

Europe has one of the highest tariffs.

Have you ever asked the question, why do you don't see American cars in Europe?

That's because the tariffs are so large on American products in Europe.

That's why President Trump is initiating tariffs for fairness.

Number two, US tariffs protect defense, and they do raise prices.

The fact of the matter, is one of the strongest arguments for tariffs is that if all manufacturing goods are made overseas, including those manufacturing goods, especially, steel and aluminum that make defensive weapons, then we're at the mercy of foreign countries in time of war.

Very interesting.

But it does the raise the prices and cause inflation, including for defense projects.

And number one, the GOP and Democrats have switched sides.

This is absolutely amazing.

Something that the media has ignored.

In the past, the Democrats were for tariffs, and the Republicans were against all tariffs.

Now, it's reversed.

For what reason?

It might have to do with presidential politics.

(bright upbeat music) PBS Charlotte's Jeff Sonier joins me now for "Unspun 1-on-1."

- I was paying close attention to your top five.

- Don't point to me.

(Jeff and Pat laughing) - I was paying close attention to the top five.

And I wanna follow up (chuckling) on one of the things you mentioned during the "Top 5," the switcheroo between Democrats and Republicans on tariffs.

Is that something that's been happening over time, or is that just strictly a Trump thing?

- It's happened in the last five years.

- Hmm?

- It's just amazing.

Because the Freedom Caucus, the member of the House, Republicans in the House are very conservative when it comes to tariffs, because they were supported by a group called The Club for Growth that gave them tons of money.

Their number one issue of the Club for Growth, is no tariffs.

- Hmm?

- In fact, it's almost an oath you have to take in order to get Club for Growth Super PAC money, you will not support tariffs.

Well, now all of a sudden, Trump is supporting tariffs, and you see silence from the Freedom Caucus.

The conservative Freedom Caucus members are saying nothing.

They're caught in a bind.

But they have a choice, who do I go with?

The money from the Club for Growth, Super PAC, or do I go with Trump?

They're going with Trump.

And the Democrats are in a unique position, because the Democrats have always been for tariffs to protect the unions.

Because the unions lost a lot of their manufacturing jobs, primarily in the Midwest, and by the way, here in North Carolina in furniture jobs to China, and Vietnam, and India, and other things.

So, they've always been in favor of tariffs, and now all of a sudden, they're going, well, we can't be for tariffs, Trump is for tariffs.

So, there's a little hypocrisy, in what we call in referee terms, swallowing the whistle.

(Jeff and Pat laughing) - I can make good call kind of a thing.

- Yeah, you just pretend it's not happening and go with it.

- Yeah.

You know, when Mike Pence was on the show, he talked about how federal tariffs and trade wars trickle down to the States when he was a governor, when you were a governor.

- Yeah.

- In North Carolina, what are the industries that we're gonna see suffer because of tariffs?

And are there any that might see growth, or positive benefits to tariffs?

- That's a great question.

The ones that might see positive in growth might be, for example, Nucor, here in Charlotte, they're a steel company.

- Right.

- If you put a large tariff on China Steel, that helps Nucor.

Charlotte Pipe and Foundry, a privately held company here in Charlotte, big plants throughout North Carolina, they make their own steel pipes.

Their competition is often China.

And so, those tariffs might help those two companies and the people who work for those companies.

Regarding the negative side, retailers are gonna get killed.

Retailers who want lower prices, lower-price products, that's why we shop at Target and other things.

Their stock is going down because they're gonna have to raise their prices, and they'll feel their earnings will be impacted by that.

And also, possibly farmers.

Because farmers do a lot of foreign trade.

Although some countries like Canada don't allow all-farm products in Canada.

But North Carolina products, a lot of 'em go to China, and China might stop 'em.

And that could have a major negative impact on North Carolina farmers.

So, there's a cause and effect on everything, and it's not always equal.

- Hmm.

The interview with Art Pope, I kind of see a similarity between his role back when you were governor and Elon Musk's role now in the presidential administration.

Outsider, got a lot of private-sector experience coming in looking for the hidden money, the payroll, the people who aren't on the payroll but are still getting paid, you know, the budgets that are transferred from one side to the other.

How important is having a guy like Musk or Pope in the administration when you're looking to cut waste?

- That's a great question.

First of all, Art never wore a T-shirt in the governor's office.

(Jeff and Pat laughing) - No ball caps, right?

- That's the big controversy now, what do you wear in the Oval Office?

Art is a lawyer, brilliant, and he's also got a brilliant financial mind.

Not to downgrade any legislature, but his aptitude is higher in those areas.

- [Jeff] Right.

- Plus, Art didn't mind stepping on kind of the landmines of, don't touch that because it's too politically sensitive.

Art didn't care, and neither does Musk, because they're not looking for a future political job.

They're pretty comfortable politically.

That's the good news.

The bad news is, Art Pope, for example, knew where some of the hidden money was because he was on the Board of Governors in the past.

And when he approached like UNC, who he's a big financial supporter of, and go, I know where your money is.

It stepped on a lot of toes, especially in the university system.

- But you see their expertise from the private sector, is it transferable to the public sector?

If you can run a lean business, does that mean you can run a lean government?

- I think about 80% of it is.

20% is not because we're not always looking for a profit.

And the fact of the matter is, we have special interest.

Our constituents are the voters.

And the voters are sometimes different than customers.

(Jeff and Pat laughing) - That's a good point.

(laughing) Hey, let's talk about the stock market.

The stock market's kind of a scoreboard in a lot of ways, you know, for consumers.

You know, the prices go up and go down, but a lot of folks are watching what's happening in the stock market.

Can you talk about how that could potentially torpedo some of what the Trump White House is trying to do, or maybe bolster what the Trump White House is trying to do?

- Well, this is another area where politicians can be hypocrites, when using one statistic for their good and then ignoring it when it looks bad.

- Right.

- President Trump, in the past, in his first term, used the stock market as a major barometer on how well he was doing.

And I remember always going, gosh, there are things in the stock market that you have no control over, why are you doing that?

Well, now, all of a sudden, because of the tariffs, the stock market took a, almost a 10% dive.

- [Jeff] Mm-hmm.

- It's back to where it is now when he was first elected.

And all of a sudden, he is going, ooh, I better be careful about that.

And say, well, the stock market's not important.

Both parties have a habit of selecting those economic indicators that show them in favor.

And they're willing to re-pivot at a moment's notice, both Republicans and Democrats.

And President Trump is not an exception to that.

- Last question.

We saw how the Biden administration paid the price for higher prices because of inflation and high spending.

Now, we've got Trump potentially raising prices through tariffs.

He's not running for reelection, so who pays the political price if these tariffs do have that effect of raising prices, you know, for consumers?

- Well, in the next congressional election, that will be the next real, you know, right now the Republicans barely edge the majority in the House of Representatives.

But come two years from now, or a year and a half from now, those swing states could go back to the Democrats and flip the House.

And that could change all the dynamics and all the power that Trump has at this point in time.

So, they'll be looking at the economic indicators very closely as the two-year elections for Congress get closer and closer to that date.

- It sounds like something that we'll be looking at also in future shows as we see the effect of these tariffs and the trade wars.

- Again, that's where the politicians will be very selective in what economic indicators they'll be selling to the public to make the public feel good about either opposing Trump or being for Trump.

- Yep, we're outta time for "1-on-1."

Thanks, governor.

- Thank you.

(bright music) Okay.

Well, it's time for a pop quiz.

Yes-or-no answers, just three easy questions.

Okay, the first question.

Should we balance the budget?

Well, yes.

Should we lower taxes?

Absolutely.

Should we cut waste and fraud?

I'm all for it.

But the next three questions aren't so easy.

What if it means changing Medicare?

No way.

Or changing Medicaid.

Are you kidding?

Or changing Social Security.

I'll never vote for you again.

Yep, welcome to the world of a no pain, no gain, just-complain politics.

We're all hypocrites when it comes to cutting budgets, just like the politicians we elect who promise to make the hard decisions, but never do because we really don't want them to.

Here's the truth.

We don't want to hear Social Security, Medicare, and Medicaid are the three major entitlement programs that are the major cause of today's $1 trillion deficits.

They're the programs that experts say could bankrupt future generations.

So, why do you think both Biden and Trump pledge not to touch those programs in the last election?

Are you kidding?

We know why.

And why do we spend so much of our time talking, instead, about tariffs, and trade wars, and government layoffs?

We're arguing about solutions that have very little impact in solving our budget problems, while agreeing not to talk about what actually could solve our biggest budget problem.

If we don't fix the budget, we won't solve our other problems either.

From trade, to foreign aid, inflation, immigration, job creation, they're all related to a complex economic system that we've made a mess of.

No pain, no gain.

Just complain.

(chuckles) Politics won't solve anything, but, hey, it still wins elections.

Give the voters what they want, right?

Just as long as you don't take away anything they want.

That's the reality as I see it.

I hope you'll come back next week as we tell you what politicians are thinking, but not saying right here on "Unspun."

Goodnight, folks.

(bright upbeat music) (bright music) - [Presenter] A production of PBS Charlotte.