The following is a transcript of an interview with Gary Cohn, former director of the U.S. National Economic Council, on “Face the Nation with Margaret Brennan” that aired on Sept. 15, 2024.

MARGARET BRENNAN: Welcome back to Face the Nation. We’re joined now by the Vice Chairman of IBM, Gary Cohn, who also served as former President Trump’s top economic adviser in the White House. Good to have you back here. It’s expected to be a very big week, with the Federal Reserve expected to cut interest rates because inflation does appear to be moderating. How big of a cut do you expect? And what will this mean for prices, particularly for housing, which is such a big part of inflation.

GARY COHN: So Margaret, let me take one quick step back. The Federal Reserve has a dual mandate. They have a dual mandate of stable prices, which means they fight inflation, and they have a second mandate, which is full employment. For the last four years, they’ve been fighting the stable prices mandate. They’ve had to bring inflation down. We got inflation as high as 9.1%. We’ve seen the Fed raise interest rates from zero to five plus percent. That has effectively dropped inflation back to two and a half percent. We’re now to the point where the other side of the dual mandate is kicking in. We’re now starting to see unemployment tick up. We’re now over 4% unemployment, so the Fed is going to start cutting interest rates. We all believe about 25 basis points this week, and maybe about 100 basis points or 1% between now and the end of the year. What the Federal Reserve has control over is they have control over the very short term overnight interest rate. They don’t control longer dated maturities or longer dated yields. When people take out a mortgage, they’re borrowing money, sometimes for up to 30 years. Those rates are not affected by what the Federal Reserve does. Unfortunately, I think that those rates have already priced in what the Federal Reserve is going to do, so I do not see a major impact to the mortgage market or credit card financing or anything else by the Fed starting to drop rates this week.

MARGARET BRENNAN: That’s interesting because we saw that the Federal Reserve of New York cited the highest credit card delinquency rate in over a decade, around 9.1% of credit card balances turned delinquent over the past year. That suggests consumers are under pressure. 

GARY COHN: Consumers are under enormous pressure. So remember, we all came out of COVID with the consumers in the best balance sheets we had seen in our lifetimes. We had put enormous amount of stimulus into consumers’ balance sheets. When the economy reopened, consumers did what we really know how to do well in the United States is not only spend what they have in their account, they use all the capacity on their credit cards. People went out and spent, they took vacations. We saw that they spent a lot of money on their houses, and they went out and got their credit cards fully charged up. They assumed that the economy was gonna stay strong. They assumed that job growth was gonna- gonna stay steady. They assumed that they would continue to be able to maintain that lifestyle. We’re starting to see softness in the economy, softness in the job market. We’re seeing it’s harder and harder to get a job, and so we’re starting to see it in delinquencies in credit cards. That’s exactly where we would start to see the softness in the economy and people are- are- are going to continue to have trouble getting a job that pays more than the last job. We just got done with a cycle, and we see this in economic data, we just got done with a cycle where a lot of people were- were quitting their job. People only quit their job when they believe they can get a job at a higher price point.

MARGARET BRENNAN: Well, this is going to be the economy the next president inherits. You just heard JD Vance, the senator, say here that Donald Trump wants to end all taxes on overtime, no income tax, no payroll tax, wants to end the tax on tips and Social Security. That’s going to add somewhere between four and six trillion to the deficit over the next ten years. Does this math add up to you?

GARY COHN: So Margaret, look, I think every elected politician would like to say no one has to pay taxes on anything and I think every American citizen would like not to pay taxes. 

MARGARET BRENNAN:  Sure, why not?

GARY COHN: I mean, why not? That would be a perfect utopian world where we didn’t have to pay taxes. I don’t think there’s a reality in that. Remember, at the end of the day, the government has a budgetary process. It’s a very intricate budgetary process where we take in revenue. The biggest revenue creator we have in the government is taxes, taxation on individuals, taxation on corporations. They take in that revenue and then they spend it. They spend it for the goods and services that we as citizens expect them to provide for us. Today, the biggest single expense that we have in the federal government at $3 billion a day is interest on the debt. The second biggest expense we have is our military. Our military costs us $2 billion a day. Then, you start working your way down into all the social services and products that every citizen of this country wants. If we’re not paying taxes into the system, how do we pay for the interest on debt? How do we defend our country? How do we give out the social services that citizens of this country expect the federal government to be delivering to them?

MARGARET BRENNAN: And that’s why I asked the senator whether fiscally conservative Republicans would ever vote for what the Trump ticket is proposing here and the response was that the government would take in money from tariffs and Senator Vance said that’s not just on foreign-made goods, but goods made by companies who produce overseas. That seems to open up punishments for American companies too. What is he signaling here? What do you think this means?

GARY COHN: I’m not 100% what he means, but let’s take a step back and look at tariffs. Because I think we all talk about tariffs, and I think we need to understand tariffs. First of all, I think tariffs is an important instrument for any president to have. It’s a- it’s a very influential instrument that they have when they’re dealing with any foreign government. The way tariffs are used effectively, and I support this, is when a country is producing a product substantially below where we can produce it in this country because they have a competitive advantage. So in China, they do not pay for capital. Most of the companies are government or state-owned entities, so therefore their cost of capital is zero. They do not pay living wages to their employees, so therefore their cost of labor is substantially lower than us. They don’t have environmental controls, so they can pollute all they want. So their ability to produce a product is substantially different than that in the United States. China produces an electric vehicle. Let’s call it a $20,000 a car. We produce pretty decent electric vehicles. Ford and GM produce them in the $30,000 a car range. It seems completely reasonable for me, if the U.S. government wants to tariff, and they should tariff the Chinese electric vehicle up to a price equal to, and I would say, even higher than the U.S. vehicle because we–

MARGARET BRENNAN: The Biden administration is doing that. 

GARY COHN: We want to protect those jobs in America. We should not allow them to use their unfair advantage to- to disadvantage American workers. On the flip side, we import many products that we do not produce in this country. Those products are in high demand, and we need them. A lot of them are pharmaceuticals, many other products that we expect to have on our shelves when we go in the store. If we start tariffing those products, we will have inflation. To the extent that we want to produce those products in this country, we should start out on a very methodical path to do that. And I think we just saw the way that can be done pretty- pretty reasonably. The CHIPS Act, which was passed a year ago, was a piece of government legislation that says we will give chips manufacturers money to build foundries in the United States so we can build chips here, and then we- we can become self-sufficient on chip manufacturing. Then you know what we can do? Then we can tariff foreign chips from flooding our market at a discount price, but until we have the capacity to build them ourselves, putting a tariff on those chips would just be debilitating to our economy.

MARGARET BRENNAN: Right. It’s more complicated, in other words, than- than what we’re hearing on the campaign trail. Taxes are going to go up, as you’ve talked about on this program before, December 31, 2025. The new president and the Congress are going to have to come to an agreement on this. You were the architect of those tax cuts that Donald Trump says he wants to extend. How do you expect Congress and the White House to work out where we’re going to end up?

GARY COHN: So taxes on the personal side change on December 31, 2025–

MARGARET BRENNAN: Individual tax rate. 

GARY COHN: The individual tax rate, the corporate tax rate- rate is permanent.

MARGARET BRENNAN: Although both campaigns want to change it.

GARY COHN: Yeah, well, whenever you start down the path of doing tax legislation, everything’s on the table.  You know, so- so I would assume that they will look at both corporate and individual tax rates. Taxes are- are- are very complicated, but as you’ve pointed out, to change the tax law, it’s a legislative process in this country. You need the House and the Senate and the White House to agree. I think the composition of the- the House and the Senate are going to be very important to what final tax legislation looks like, and I do think there is growing and growing opposition in both the House and the Senate, and I would say on both sides of the aisle for a large deficit tax plan.

MARGARET BRENNAN: All these plans being proposed by the Harris campaign and the Trump campaign come with tremendous price tags. What I think you just said is that Congress would not agree to sign off on any of them. Is that right?

GARY COHN:  Yes, what I’m saying is the tax plans as proposed right now, spend a lot of money, bring- don’t bring in that much money. So therefore, the net effect of that is we increase the United States deficit. I don’t think there is a lot of appetite in the Congress to do that. We have grown our deficit quite substantially over the last four or five years, some of that because of the pandemic, and- and that’s when the government should be building a deficit. They should be building a deficit when there’s a pandemic, because that is their central role is to- to maintain the stability of the country. In better times when we’ve got substantial economic growth, we should be trying to pay down that deficit to put ourselves in a better position. We’re now in one of those better times, or at least not a bad time, and so I don’t believe that Congress has a large appetite to pass a tax plan on either side that has a huge deficit component to it. 

MARGARET BRENNAN: Gary Cohn, more to talk about with you, but we’ve got to leave it there for today. Good to have you back. We’ll be right back.