Mark Zandi — chief economist at Moody's Analytics and one of the most quoted forecasters in America — joins the Chuck Toddcast to deliver a remarkably sobering verdict on where the economy actually stands: without the $700 billion currently being poured into AI investment, the United States would already be in or close to recession. The latest CPI and PPI reports came back ugly and uglier, oil shocks from the Iran war will keep prices elevated through 2027 even if the war ended tomorrow (Zandi says don't expect $3 gas again until then), real disposable income has been flat or falling for a year, FHA mortgage delinquencies are at their highest level since the Great Recession, and the bottom 40% of earners are living genuinely paycheck to paycheck. Zandi pushes back on lazy comparisons to the 1970s — conditions were objectively worse then, with a self-reinforcing wage-price loop that took a brutal recession to break — but warns that nominating Kevin Warsh as Fed chair specifically to cut rates would risk replaying exactly that movie, and that a policy of low rates at any cost would be catastrophic.

The deeper diagnosis is brutal: employment was growing steadily and inflation was easing until Liberation Day, when both reversed simultaneously — meaning Trump's tariffs are the most obvious thing to cut, and the question of who actually benefits from them gets harder to answer every month. The mass deportation policy is costing the country roughly 0.5-0.7% of GDP growth that normal immigration would have provided, with agriculture, construction, hospitality and services taking direct hits. Zandi sees economic weakness most pronounced in the South and West, healthcare-anchored cities like Philadelphia outperforming Florida and Texas, and a national debt now exceeding GDP that's setting the conditions for a potential bond market sell-off — with global investors already being advised to diversify away from the dollar as America deglobalizes and the world quietly pulls away. His most striking observation: the fixes are all sitting on the shelf. America doesn't need new ideas to solve any of this — it needs the political will to use the ones we already have, and that will probably won't materialize until a genuine crisis forces it. By the midterms, voters will be feeling the worst of it, and while partisan media can try to spin the numbers all it wants — reality is much harder to spin. 

Timeline:

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00:00 Mark Zandi joins the Chuck ToddCast

00:45 CPI inflation and PPI inflation reports came back ugly & uglier

02:00 The through lines are ugly and going to get worse due to oil prices

02:45 Even if the war ended today, higher prices would last all year

03:15 Inflation has been accelerating under Trump, was on track under Biden

04:15 Inflation was worse during Covid combined with start of Ukraine war

07:00 Economy and stagflation were much worse in the 70s than now

07:45 Conditions different from 70s, there was a self-reinforcing loop in 70s

08:30 The only way out of 70s stagflation was a very severe recession

09:15 Kevin Warsh nominated for Fed chair to lower interest rates

10:00 If Warsh cuts interest rates, we risk a repeat of the 70s

10:45 A policy of low rates at any cost would be catastrophic

11:15 Rate cuts won’t happen since they are set by a board

11:45 Economy won’t have time to recover in time for the midterm elections

13:00 Partisan media can try to spin the economy, but reality is hard to spin

14:15 We won’t be back to $3/gallon gas until 2027 most likely

14:45 Last 3 months, the economy got a boost due to tax refunds that are fading

16:00 Real disposable income has fallen or stayed stagnant the past year

16:45 Bottom 40% earners are struggling badly, living paycheck to paycheck

17:45 FHA mortgage delinquency rates are rising, highest since great recession

19:00 Things will feel worse economically by the midterm election

20:30 Without $700B in AI investment, we’d be close to, or in a recession

22:45 Last two jobs reports better than expected, tax cuts acted as stimulus

23:30 The job market is still very weak

24:30 With normal immigration we’d grow GDP by 0.5-0.7%, and lost that

25:30 Data shows immigrants don’t take jobs native born workers have

26:30 Lack of immigrants will hit state & local government budgets hard

27:15 Agriculture, construction, hospitality and services hit hard by deportations

29:00 Air travel hasn’t fallen off due to economic conditions… yet

29:45 High end consumer spending on recreation hasn’t fallen off at all

30:45 Is the proposal to cap credit card interest rate at 10% a good idea?

31:30 Companies won’t offer credit lines to consumers without great credit scores

32:15 Trump cutting the tariffs is the most obvious solution to higher prices

33:00 Employment was increasing regularly until Liberation Day tariffs

33:30 Inflation also took off on Liberation Day

34:15 Who actually benefits from Trump’s tariffs?

35:30 Suspending gas tax would result in .10-.15c lower prices at pump

37:30 Cutting the gas tax likely won’t result in any political benefit

39:00 Economic weakness most pronounced in the south & the west

41:00 Cities with big healthcare industries having most job growth, Philly leading

42:45 Pennsylvania economy rowing faster than Florida or Texas

43:15 America’s national debt exceeds GDP, how concerned should we be?

45:30 Indicators show we having a massive debt and deficit problem

47:00 The conditions for a sell off in the bond market are in place

47:30 It’s going to take a crisis to generate political will to act on the debt

48:45 America is deglobalizing, and world pulling away from us

49:15 Investors being advised to diversify away from the dollar

50:30 The fixes to the economy are all sitting on the shelf. Don’t need new ideas

52:00 AI job displacement hasn’t hit hard yet, but could be coming soon