The Economy: Where We Are NPR's Scott Simon talks to Washington Post economics columnist Steven Pearlstein about the state of the economy ahead of the midterm elections.

The Economy: Where We Are

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President Trump has said time and time again...


PRESIDENT DONALD TRUMP: We're the greatest economy in the world.

It's said now that our economy is the strongest it's ever been.

On track to hit the highest annual average growth rate in over 13 years.

SIMON: With midterm elections just days away, in which the economy is always an issue, we're going to turn now to Steve Pearlstein, economics columnist for The Washington Post and author of the new book "Can American Capitalism Survive?" Steve, thanks so much for being with us.

STEVEN PEARLSTEIN: Thanks for having me.

SIMON: In October, the report that came out on Friday says U.S. employers added 250,000 jobs. The unemployment rate remains at a near 50-year low. Isn't the president entitled to boast that the economy is in great shape?

PEARLSTEIN: Well, it's in great shape. Whether it's in great shape because of him is a dubitable proposition. He was in good shape when he became president even though he ran on a platform that it was a basket case. But there are two things that he has done that have affected the economy to a not insignificant degree at the moment. One of those things is a negative, which is his trade policy, which has hurt certain exports, even though it has also created a few jobs in industries like steel. But the bigger thing that he has done is, with the Republican Congress, he's passed a huge tax cut that was unpaid for. That is, we have to borrow the money that we're no longer collecting in taxes. And that has been - it's sort of like mainlining sugar into the bloodstream. It's a huge sugar high. It's not sustainable.

SIMON: The stock market has been dipping, diving and rising. What does that tell you?

PEARLSTEIN: That tells you that the stock market, which is forward-looking, knows that we're in a bit of a bubble. We're in a - we're certainly in an asset bubble - that is, stocks, bonds, real estate. And that that's going to burst because cheap money, which the central banks of the world, including our own, had flooded the economy with in the financial system, cheap money is going away. And so all those asset values will go down. The price of the things you buy with that borrowed money goes down. But it's also a signal that we know we're at the top of an economic peak.

SIMON: More jobs have been created. Do more Americans need more than one job just to get by?

PEARLSTEIN: Some do, but we're at full employment. And so when economists look at this and they say, well, we're creating 250,000 jobs, what that tells us is that the cost of employment is going to go up, and that is wages. And when wages go up, it's good for all of us who work. But employers will then say, well, if it's going to cost that much, maybe at the margin they're not going to do the hiring. Maybe they'll replace a worker with a machine, or maybe they just won't add a worker at all.

SIMON: From a strictly political point of view, though, this is a good economy to take into a midterm election, isn't it?

PEARLSTEIN: It is. But I would say to you that Hillary Clinton from the Democratic Party took a good economy into the presidential election and, well, it didn't do her as much good as she thought it was going to do.

SIMON: As you look at the economic horizon, what gives you some pause?

PEARLSTEIN: Well, what gives you pause is that the economy right now is overheated in part because of this tax cut sugar high. And it will come back down to reality. That sugar high only lasts so long. We also see a stock market that is overpriced and real estate that's overpriced and interest rates that are going to rise. And all of those put together suggest that the economy is going to slow.

SIMON: Steven Pearlstein of The Washington Post - his upcoming book, "Can American Capitalism Survive? Why Greed Is Not Good, Opportunity Is Not Equal, And Fairness Won't Make Us Poor" - thanks very much for being with us.

PEARLSTEIN: Thanks for having me.

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