Kevin Hassett on AI, Tariffs, and Small Business Growth

Kevin Hassett (00:00)

And so the point is that your business, plus the latest AI, can really have a huge positive effect on your ability to compete with the big guys, with international firms and so on. The revenue growth for people who started using AI was about 100% over the last 12 months.

Gene Marks (00:18)

Yeah, I'm seeing it, too.

Announcer (00:20)

Welcome to THRIVE, a Paychex Business Podcast, your blueprint for navigating everything from people to policies to profits. And now your host, Gene Marks.

Gene Marks (00:30)

Hey, everybody, it's Gene Marks. And welcome back to another episode of the Paychex THRIVE Podcast. Thank you so much for joining us. I have a really special guest this week to talk about the economy. I welcome Kevin Hassett. He's the director of the National Economic Council. He serves as the top economic advisor and public spokesperson for the current administration in the White House. So, Kevin, first of all, thank you so much for joining us and.

Kevin Hassett (00:55)

Oh, thanks.

Gene Marks (00:56)

Before we get into the economy itself, I'd love to know just a little bit about your background. You were mentioning even before we got started that you had spent some time both at Swarthmore and at Penn, which is in my backyard. Tell us a little bit about how somebody actually gets to the position that you have achieved inside the White House.

Kevin Hassett (01:16)

Oh, shucks. Yeah. You know, happy to. You know, I was a Swarthmore undergrad. I just had my 40th anniversary. I met my wife in freshman econ class. Could you imagine?

Gene Marks (01:31)

I cannot imagine.

Kevin Hassett (01:34)

So economics can really create beautiful. She's a lawyer. I don't know. I lose every argument. But then because she was a year ahead of me at Swarthmore, she went to Penn Law School. And then I went to Penn to get my Ph.D. in economics. I kind of knew I wanted to do economics. I was very fascinated by it, really, by about my sophomore year. And then I became a professor at Columbia University. And then I took some leave to be an advisor for Alan Greenspan at the Fed back in the late 90s, when it was a really exciting time to be there, and kind of decided that being right in the front line of policy is way more interesting than being a nerdy professor at some university. And so I've also been a professor at NYU Law School of Tax. I'm mostly a tax economist, but for the most part, I've been at the Hoover Institute at Stanford or at the American Enterprise Institute doing more policy work than people do in econ departments. And, you know, I've pretty much been around every political campaign since 2000. I was the main policy advisor for John McCain on the Straight Talk Express when I was just a little kid, and I'm really thrilled and honored to serve my country. I came from a family where all, like, the people of my dad's generation were, like, serious, had really done serious service for the country. And I'm really honored to have a chance to serve my country, too. Not in the kind of really scary way they did, but that's why I keep coming back, is that I think serving your country is the highest call that you could have.

Gene Marks (03:03)

That's great. And I'm proud of you, and I respect the choice that you've made. I think, yeah, it is a great way. Everybody's life has to have some kind of a purpose, and your life certainly has. So I appreciate that, at least so far. So far. At least so far. I agree. I'm gonna ask you for some specific advice for our audience, but first I do want to cover a couple of current topics that I just, I wanted to get your thoughts on. Okay. Tariffs is the first one. As we're recording this right now, the President has announced a new round of tariffs. Obviously, we all know that, you know, his latest effort to use tariffs under the Emergency Powers Act was overturned by the Supreme Court. But, you know, as I've written about, and as we know, I mean, he has other tricks up his sleeve, and he's starting to do that now. You know, a lot of economists were very, very concerned that the President's tariffs were going to have a significantly negative impact on the economy. And yet we have seen, you know, over the past year, strong economic growth, low unemployment. You know, they don't seem to, they seem to have had a muted effect on the overall economy. And I was wondering if you can explain to our audience why you think that is.

Kevin Hassett (04:19)

Sure. You know, the idea about, like, how to think about the economics of tariff is, and, sorry to be, like, mildly professorial and starting with an example that's not real-world, it's just like a way to think about it. What happens when you put a tariff on something is analogous to what happens if you say, put a tax on something. But tariffs and taxes are different. But a little example that I would use when I was teaching tax to graduate students is that imagine you have an economist economy, and there's like an apple tree is the whole economy, and they got 100 apples, and you're selling the apples for a dollar a piece, and then the government decides that they got to have, like, a military or something, they got to spend some money on something, and so they put a 10% tax on the apples. So then what happens next? Well, the guy who has the apple tree, he could say, well, I'm going to charge $1.10 and therefore I still get my dollar and the customers are paying me the 10 cents which I pass out of the government for a tax. But if you raise the price to $1.10, then that'll reduce the demand for apples by some amount. It could be a little, could be a lot, depends on the elasticity, is the word we use. But just like if people are responsive to changes in prices, something that small businessmen know every day, like if they change a price, then it has a big effect, a little effect, and so on. But if they go to a $1.10, then the demand for apples goes down. And so then the guy with the apple trees, maybe there's only demand for 90 apples. And then the question is, this is the way I like to make it, a sort of fun thought experiment for people in a classroom. What happens to the other ten apples? Right? Like, are they going to just rot on the ground? And so with this example, what happens is that the guy with the apple tree, he gets 90 cents if he wants to sell all the apples. And the 10 cents is basically borne by the guy with the apple tree, not by the people who are buying the apples. And so, when you're thinking, now that's an extreme example because there's exactly fixed inelastic supply we call it, or supply that doesn't respond to things. And I think that the way to think about what's happened in the U.S. with the tariffs is that we've had a big trade deficit with China. Pretty much ever since they entered the WTO, it's been enormous. And it's been persistent year after year after year, regardless of what happens to exchange rates or anything else. And so basically you could think about what's the most inelastically supplied, non-responsive to prices thing in the whole wide world, just like the apple tree, it's Chinese exports to the U.S. And the reason is that President Xi maintains political stability by dumping stuff into the U.S. and creating jobs in China. And so therefore if we put a tariff on China, say, then it's very similar to what happens with the apple tree. So the consumers barely feel it. And so in fact, you've seen in the U.S. that inflation has actually gone down while we were putting really large tariffs on China and other countries. Now, not every country is going to be the same as the apple tree example. But if you wonder why it is that, like economists were saying, this could be a catastrophe, and it wasn't a catastrophe, I think that thing one, the most important thing, is that people have been dumping stuff into the U.S. for a long time. Their supply is basically inelastic. So if we put a tariff on it, that they're going to have to cut their price to maintain their sales. And that's what, that's pretty much what happened. But the second thing is that, you know, trade policy has been really, really important, but it's 15% of the economy. And so if you put, say right now we've got about a 10% tariff on everything around the world. That's where we are after the latest action, that it's like a change, a 10%, even if there is a price change, it won't be 100% because of the, there'll be somewhere between the apple tree example of the customer pays for everything, but somewhere in there, there'll be a little bit of a price change, but it's a little bit of a price change on 15% of the economy. And so that the hubbub about tariffs and the anxiety about tariffs, I think was always kind of overblown. But it doesn't mean that there aren't specific cases which, you know, we address every day, where somebody will come in and they'll be creating jobs with, you know, inputs that come from foreign countries, they have competitors or foreign competitors, and the tariff is making them less competitive and maybe potentially threatening jobs. And when we see those specific examples, then we work with the U.S. Trade representative to fix it. And so another thing that you could say about why it's been less negatively impactful than the critics thought is because when we see things that might be negatively impactful, we fix them. We fix them.

Gene Marks (09:33)

Great answer. Let's keep going. Because that is a great explanation of why the impact has been, you know, mostly muted and kind of overblown. And I appreciate that. Let me switch gears a little bit. I've been wanting to ask you this for a long time, Kevin, and it has to do with metrics and data, you know. Two years ago, like in 2024, I think the Department of Labor released it. You know, every month, everybody is like, jobs, job, job number, unemployment number for the Department of Labor, the Bureau of Labor Statistics, they announced that they had, like, overstated jobs. Remember this, by like 818,000. And then wait. And then like last year. So, that was in 2024. Then last year, in 2025, they made a similar announcement. They're like, oops, we overstated. It was like another 900,000 jobs or something. It was like almost 2 million jobs that they had overstated over the past couple years. That's the Department of Labor. Then what a lot of people don't see when GDP numbers are announced, and you know this as an economist.

Kevin Hassett (10:30)

Yeah, we're getting some on Thursday.

Gene Marks (10:32)

Right. And then of course, there's going to be revisions that will be happening for weeks after that first. Now everybody will cover the initial announcements. The revisions can be pretty significant, you know.

Kevin Hassett (10:42)

Ginormous, in fact.

Gene Marks (10:43)

Yeah. So, I guess my question to you, like, this is a Paychex-sponsored podcast, but that's by the by. When I, when people ask me about, you know, the labor environment, I tend to be like, hey, you know, I tend to look at numbers that are published every month by Paychex and they're not to be mentioned competitor who also puts out numbers on the workforce because I feel that they are more reliable to look at than what the Department of Labor is pointing out. I'm just curious to hear your thoughts as somebody who's been in this business for a long time. How do you feel about government data? Do you take it with a grain of salt, or do you take it at face value?

Kevin Hassett (11:24)

You know that I'm glad you mentioned Paychex because, you know, my job is to help policymakers understand how the economy is doing.

Gene Marks (11:35)

Right.

Kevin Hassett (11:36)

And if it's doing poorly, so you might recall that I was here managing the economic response to COVID, where there was a lot going on, to say the least. And so, the way that I do it is that I rely on the government data, which, you know, is very useful, and we'll talk about, like, why the revisions happen and so on, but also private sector data as well. And so, I for sure am keeping an eye on what's going on at Paychex. For sure have, like, the big banks will tell me how the credit card data is looking and confidential stuff. And so when you see me on TV talking about, like, what my senses of how the economy is doing, it's based both on like, careful analysis of the government data, but also because I talk to people like you who will tell me everything that's going on in Paychex. And then after you talk to 30 or 40 people, you have a pretty good picture of what you think is going on right now. And in fact, before I talk about government revisions, I'll say that one of the things, one of the pieces of government data that I like the best, both because it's timely and because it's like a real data item, is initial claims for unemployment insurance. So when somebody loses their job, then they put in a claim for unemployment insurance, and they're going to do that because they want the money. And so it's not like you've got like this big census-like survey of like, and then you try to blow it up to be population size with statistical techniques and stuff like that. This is just like how many people filed for unemployment insurance this week. And I find that that data is pretty reliable, doesn't revise. And right now it's the lowest it's been since the 60s. And so people aren't losing their jobs right now. It's so people being laid off right now. Layoffs are as low as we've seen since the 60s. And if you consider that the labor force is way bigger than it was in the 60s, that's a pretty remarkable thing. And so starting with a question with you, is that what you're seeing in the Paychex data too?

Gene Marks (13:36)

Yeah, it is actually, in fact, the Paychex data itself, and again, I don't work for Paychex, but I report on it.

Kevin Hassett (13:41)

Right, but you look at the data all the time.

Gene Marks (13:43)

I'm very familiar with it. So they have something called the Small Business Employment Watch, and that's mostly for small customers, generally 50 employees or less. They have shown consistently over the past year that hiring has remained resilient among small businesses. And remember, small businesses make up 50% of, you know, of employment in the country. So, you know, if they're, you know, resilient, that's also a big, you know, indication. They've also found that hourly wages have for the most part, been keeping up with inflation. Now, other payroll data, and again, through the not-to-be-mentioned competitor of Paychex, they also publish salary and wage, unemployment, and employment data as well. And in their data, which by the way, is real data right from their, from their systems have been showing salary increases for both job stayers and job leavers that change jobs to be significantly more, I mean, like anywhere from 4 to 7% over the past year, pay increases, you know, and when I've looked at those actual numbers, I'm like, all right, these people are keeping ahead of inflation, which tells me a lot about where, you know, why consumer spending is still, you know, remaining strong, you know, not to mention the strength of the stock market and personal wealth.

Kevin Hassett (14:58)

So, I had a table with government data, to make your point, where basically over the last couple years, then for the average worker, after adjusting for inflation, then the real wage is up about $3,000. Yeah, that's based on government data. And in the previous four years, because of the inflation spike that we had, it was about negative that. Right. And so to the extent that we're seeing, like, durable growth, very good consumption, then, you know, I think it's because of that. Now, on the data revision, I know that we got lots to talk about, so I won't go into it too deeply, but the thing that I would say is that for the jobs numbers, the issue is that you're not surveying everybody in the whole society. You're surveying some people. And the survey is kind of like, revised over time, but it might not keep up with the fact that there are people driving Ubers and things like that. And then they have to population-weight it, and then they might look backwards and sort of say, hey, you know, when we were doing that last year, we didn't account for how many Ubers there are and so, then they'll revise it and you'll get, like, a really big change. In GDP data it's even worse. Because, like, GDP is very easy to measure if we make the same thing every year. So, imagine if all we did is make, like, a Chevy Chevette, that it was the same as, like, when you and I were growing up, this nice car, Chevy Chevette. But we're still making Chevy Chevettes and if we have more GDP, it's because we got more Chevy Chevettes. But if instead, what happens is we get products that didn't exist, cars that have nav systems that are not like the old Chevy Chevette, then they have to figure out, like, well, how do you measure GDP when everything's changing? And the point is, it's just, it's an art, not a science. It really is, because you have to figure out, like, what how do I say if we, if I spend a dollar on, you know, basically a calculator, and then next year I spent a dollar on a computer, then did GDP go up? And they would say, well, it did, because computer is better than a calculator, but how much? That's why there's revisions all the time, because people will study it and have disagreements, and they'll say, hey, we were wrong about it. One of the big revisions in GDP came about because they underestimated how useful cell phones were, and they didn't really revise it until about four years ago. And so, they had understated GDP for, like, ever since cell phones existed because they treated it like a telephone rather than what a cell phone is today.

Gene Marks (17:32)

And I'm going to ask for overall comments in a second, but I had to go back to your labor statement as well about accounting for the Uber drivers and all that. I mean, the methodology that's used to track, you know, you know, employment is, it's fairly dated. You know, I don't really know many of my clients that gets surveyed by the Department of Labor, you know, and then I also think, like, Kevin, you know, like everybody has side gigs, you know, I mean, we have a record number of new business applications over the past year. We have people like you said, they're driving Ubers, they're on Etsy, they've got little Amazon stores, they're freelancers on the side. They're, you know, they're remote workers that have a full-time job and then other jobs. And I just don't get the feeling that our labor department is tracking all of that stuff. And therefore, when we hear about jobs, it's like a number from like the 19, it's like a reference to something, you know, when you and I were kids, as opposed to the. A much different economy today. Does that, does that make sense?

Kevin Hassett (18:31)

Yeah, and it's very like a positive development in the economy that's underreported, so I'm glad you mentioned it. Definitely, we see, like, traditional full-time employment, the numbers are great, but the point is if you need a little extra money because you want to do this or that, then there are lots of different ways to do it. I had my barbecue broke and I bought a new barbecue from Amazon, and it came to my house. And then a guy came over and assembled it for me, and I paid him to do it, of course, but that guy was really fun to talk to, and I couldn't, it would have taken me forever to put the thing together. But like, it's just an example of people, if they choose voluntarily that they want to do something a little extra, it's so much easier to do it than it used to be.

Gene Marks (19:20)

Yes, I agree. And that is employment. So, Kevin, what does that mean for like the rest of us running businesses? Like, let's say after all these years of public service, you decide to be an entrepreneur, you quit your job, you open up a consulting firm and you have employees and you've got overhead and you've got all the whatever running a business, you know, I mean, what you, like anybody else, want to know where the economy is going over the next six months? Should you be hiring more people? Should you be investing more? Should you be holding on to your cash? Somebody's been in this world for so long. What metrics would you be looking at if you were running your own business?

Kevin Hassett (20:00)

I guess it depends, you know, what the business is, of course. But the thing I would say that was really important for the people who are interested enough in economics that they're willing to listen to us talk this long about it. So I'm so grateful for people like that listening. Yeah, I am really grateful for it. But the thing I'm seeing in the data that's most important, and it would be something that I would do is that if I were starting a small business, is that I think that we're in the midst of an incredible renaissance in small business. And the reason is that, you know, I don't know if you play chess. I used to play chess, but there's this guy named Magnus Carlsen who's just like impossible, you know, he, like this World Chess Champion, although he resigned, but he's still the best chess player on earth. But a computer can beat him, right? Right. Like not even close. And with artificial intelligence, basically what happens is that the firms, you could either do it, you know, get your 18-year-old to help you with it if you're a small business, or maybe hire a firm to help you do it, that it's a total game changer. Because just as like a computer can look at like the chess possibilities and say, hey, we could do this instead of that, it'd be much better then whatever your small business is doing, you've got inventories, you've got workers, you've got, you know, people who are reliable will show up and people who aren't reliable will show up. And all the problems that you have to deal with that AI can make you, can improve you the way it improves. So me plus a computer can beat Magnus Carlson. Right. And so the point is that your business plus the latest AI can really have a huge positive effect on your ability to compete with the big guys, with international firms and so on. And from a different private source that I have, that one of the people who helped me think about small business has been following small business expenditure on AI. Like are they actually using one of the AIs, are they paying for tokens and things like that? And over the last year in their survey, well it's not really a survey, in their population, which is really a nice cross-section of American small businesses.

Gene Marks (22:22)

Sí.

Kevin Hassett (22:22)

The revenue growth for people who started using AI was about 100% over the last 12 months.

Gene Marks (22:27)

Yeah, I'm seeing it too.

Kevin Hassett (22:29)

And the ones who didn't, it was like about flat. And so if I were running a small business that I think about what I love to do. So, like what? I love to cook. So if I were doing a small business, maybe I would do something cooking because it's fun to cook, but then I would use AI to try to make my business as productive as possible because there's an enormous opportunity right now for people who could do it if they have a problem that's difficult to solve in any way. And I think every small business has those. Like how many, a shoe store. How many shoes, what color, which ones, you know, how do I track the trends? AI can actually tell you which shoes are selling the best in Massachusetts right now, like AI will tell you. And then you can get those and put them on your shelves.

Gene Marks (23:13)

I think that's great advice. It is a great way to monitor the economy is using those tools. And while we're on the topic of AI, I mean, obviously everybody is terrified that AI is going to take away billions and billions of jobs more than there are people on the planet. Meanwhile, again, Wall Street Journal just reported that corporate hiring has started to increase now, despite the prognostications of AI.

Kevin Hassett (23:34)

There it is, and it's even really going up for new college grads. So, there was a story a little while ago that all the college grads can't get jobs. But actually, it's been one of the best years for college grads we've ever seen.

Gene Marks (23:44)

So, my question to you is, as an economist, as somebody who is involved in economic policy, is AI figuring into your policy yet as you look forward, or is this something that it's not having an impact on your economic policy? You're approaching it the same way that you did maybe a few years ago, because it's not having that kind of an impact.

Kevin Hassett (24:08)

I think it's something we're monitoring really closely. We've got big working groups thinking about what the future holds and how to think about how AI can both make workers and firms more productive, but also make their work or replace their work. And what we do to help people, if they're in the latter group, is something it's a top priority for all of us to study that. And the thing I can say, because I think this is a very useful little thought experiment for thinking about it. That we talked about Magnus Carlson and how a computer can beat Magnus Carlson. So, you're thinking, oh, well, Magnus Carlson, maybe he's going to lose his job to the computer. But it hasn't happened, right? Magnus has still got his job and he's actually making more money. And I think part of the reason is that there's no computer that can win a chess tournament. And what do I mean by that? Well, to win a chess tournament, you gotta, like, sign up, you know, walk down to the city hall where the tournament is, and, like, look at the piece of paper on the wall that tells you, oh, you're on table four, and then go to table four and move the pieces and, you know, hit the clock.

Gene Marks (25:29)

Right.

Kevin Hassett (25:30)

And all that kind of stuff. There's no AI that could do all that. But the AI that can sort of replace the computer programmer, that's all happening kind of like within the machine. And so the question is, at some point are they going to be like, robot like AIs that could replace workers and so on. But the thing is that right now you're really, really efficient at using energy compared to an AI. And so, you are outperforming ChatGPT today, presumably by a lot because you're a smart guy and ChatGPT is getting close to you with like, half the energy it takes to run a small town. And you had a grilled cheese, right? Okay. And so I think as we think about, like, who's going to be replaced, what's going to be replaced, then there are a lot of things that aren't easy to replace. And so it's something to watch carefully. But I think that what's going to happen has always happened. Like, it used to be that there are people who are really good at, you know, horse carriages, driving them, and then the car came and those guys weren't so relevant anymore. Is that the skill sets will change, but the jobs will still, the jobs will still be there.

Gene Marks (26:44)

People find other stuff to do. I mean, I'm an accountant. Like, the tax code, when it was introduced was like 10 pages long, you know, now it's hundreds of thousands of, you know, and there are. I saw a list of job titles from 20 years ago that didn't even exist, you know, that today, that didn't exist 20 years ago, you know, like cannabis compliance manager, you know, or, you know, wellness.

Kevin Hassett (27:04)

Or typing pools. Like, I don't know if they still have.

Gene Marks (27:06)

Right. I mean, things that did exist don't exist today. But then things that exist today didn't exist, you know, even a short period of time ago.

Kevin Hassett (27:12)

But I want to, though, say that the anxiety about this is genuine. Yes, it's something that one needs to be pay attention to and be watchful for and have solutions ready when things start to change. But right now, what we're seeing is a plus because when you think about that, small businesses that have used AI have seen their revenue double over the last year, their employment's going up, which is what we're seeing in the statistics still. And so, it's definitely a medium to long-term concern about, like, how things change. And so we have to pay close attention to it and shouldn't just dismiss it out of hand.

Gene Marks (27:48)

And I can tell you this, from Philadelphia here to the White House, when you're making your policy, I don't have a single client that is thinking of replacing people with AI. They just want to use AI for the people to get more done during the day, you know, so. And I think it is going to serve those purposes of making people more productive. Final question, and I'll let you go. Alan Greenspan, former Federal Reserve Chief who recently passed away, was famous for tracking the sales of men's underwear in order to gauge the economy. Are you familiar with that story?

Kevin Hassett (28:27)

You know, I worked very closely with him. The underwear part, I never like, that was a time. But when I was there, the thing he was focused on was scrappage. Scrappage. Have you ever heard about a scrappage? So the underwear thing, you can tell me about the underwear thing, but I don't really think about the underwear thing. But scrappage is really interesting. It shows what a genius he was. He was a really close friend, really sad to see him leave. And you know, he used to come over when I was the CEA chair a couple terms ago. He used to come over and help me think about things all the time. He was still absolutely right to the end, really, really sharp. But he got this idea that scrappage would be a really important early indicator of how the economy works. Because if I have a car that I don't like anymore and I have enough money to buy a new car, then I sell it to somebody. And then if they're buying a car, then maybe they had a car that they didn't like but wasn't as good as the one they bought for me, and so they sell it to somebody. And so if when you get to the end of that chain, somebody's taken the car and taken it to the junkyard, they're scrapping the car, then that means that they felt like they had enough money so they could buy a car rather than drive the crappy old one and try to fix it. And so he found a pattern in the data that when people were scrapping cars a lot, it was a really good sign for the economy.

Gene Marks (29:50)

Interesting.

Kevin Hassett (29:51)

But that's the way he would think. That's the way he would think. He was just a wonderful thinker that way.

Gene Marks (29:55)

That is fantastic. So the underwear sales thing. And again, it's been widely reported that he would track men's underwear sales because he felt that when the economy is good, men are buying more underwear. When the economy is not so good, we tend to hold off on this purchase. That's a guy's thing. We can discuss that with the ladies later. But I guess my question to you is because it's funny, you know, and you're right, he's a brilliant guy, and he's chairman of the Fed and all of that. Kind of curious, Kevin, so you've been doing this for a number of years, do you have any economic metrics, like an offbeat kind of thing that you kind of keep an eye on that I wouldn't say it's completely changing your views about the economy, but might influence how you're thinking on where the economy is going? Anything that's offbeat?

Kevin Hassett (30:41)

I'll give you just one little thing that Greenspan taught me. So I don't have pride of authorship of this, but it's something that I really, really follow closely, and I'm probably like the only person old enough to still do this. But we just got the report on Monday of durable goods orders. It's a really interesting report. So, amongst the things, if you're following the economy like the jobs data, the GDP report, and I would say the Durable Goods Report are the three most important things, because the durable goods report is telling you what businesses are thinking because they've got like a subset of durable goods is non-defense capital goods, especially excluding aircraft because aircraft bops all around all the time. But non-defense capital goods orders and shipments in the durable goods orders data are a really, really useful indicator, both because it shows you what today's businesses, like many people listening, are thinking about, like three months from now. Because if they're ordering a cap like a new machine, they don't get it right away. It's not like you go to the Walmart and then you got it. It's like you got to call up Cincinnati Milacron and say, bring me a new machine and it'll get there in three months or four months. And so, when you see orders for non-defense capital goods, then it's a sort of glimpse, a tiny little glimpse into the future. And so it's a really useful thing to see. But the thing that Greenspan taught me was that you should not look at just orders, but look at shipments. So shipments are past orders. Right. Like, so three months ago I ordered the machine, and then today I get it. And so, the data gives you both orders and shipments. And when orders are way above shipments, it's a really good sign. It's a really, really good sign. And so, I always, I get the chart. Every time I get durable goods, I have them give me the chart of orders and shipments of non-defense capital goods. And right now, orders are way ahead ahead.

Gene Marks (32:31)

Yeah, I was going to say it's been pretty strong over the past six months.

Kevin Hassett (32:34)

Yeah. Really, really strong. In fact, I think March was the strongest month I've ever seen. Right. And I've been following these data since the 90s.

Gene Marks (32:42)

Do you think last year's tax legislation is a big part of that? Because I do.

Kevin Hassett (32:47)

Yeah. Because there's expensing.

Gene Marks (32:48)

Sí.

Kevin Hassett (32:49)

Right. And I know how important expensing is for many listeners here. And so it means you buy a machine, you get to subtract it before you pay tax, and there's even expensing for new buildings.

Gene Marks (32:59)

Correct.

Kevin Hassett (33:00)

If they're factories.

Gene Marks (33:01)

Right.

Kevin Hassett (33:02)

And so those two things, I think, are causing a huge effect.

Gene Marks (33:06)

Everyone, Kevin Hassett has been speaking with me. He is the director of the National Economic Council. He serves as a top economic advisor and public spokesperson for the current administration. Kevin, I have a thousand more questions for you, but we're out of time. And you've been so generous with it. I really appreciate it.

Kevin Hassett (33:21)

Thank you.

Gene Marks (33:22)

I want to thank you also for the great job that you are doing for the country, advising the administration on where things are going with the economy. And I'm personally bullish for the next few years for the economy, and I hope that that does happen, but.

Kevin Hassett (33:35)

Thank goodness.

Gene Marks (33:36)

Makes me feel good to hear that you're there in the White House.

Kevin Hassett (33:39)

Thank you. It's an honor to be here and say hi to everybody at Philadelphia for me.

Gene Marks (33:43)

I will do that. Thank you, everyone. You've been watching or listening to the Paychex THRIVE Podcast, and my name is Gene Marks. If you need any help or tips or advice in running your business, sign up for our Paychex Thrive newsletter. Go to paychex.com/Thrive. Thank you so much for watching or listening. We will see you again next time for our next episode. Take care. Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/ThriveTopics and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR, payroll, benefits, or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/WORX. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I'm your host Gene Marks, and thanks for joining us. Till next time, take care.

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