A Raven’s-eye view on interest rates, jobs, and the U.S. economy

Sponsored by AICPA Member Insurance Programs

A Baltimore-based economist joined the Journal of Accountancy podcast to discuss interest rates, labor market trends, artificial intelligence, and other forces shaping the U.S. economy. Anirban Basu, Ph.D., scheduled to speak at both the National Tax Conference in November and the Construction & Real Estate Conference in December, explains why the economic outlook is more nuanced than many headlines suggest and what business leaders should be watching in the months ahead.

What you’ll learn from this episode:

• Why interest rates remain one of the biggest economic storylines, according to Basu.
• How AI is affecting jobs, productivity, and professional services.
• What labor market data say about layoffs and employment.
• Why simple narratives often miss the complexity of the U.S. economy.
• How Basu prepares to connect with conference audiences.
• The meaning behind his phrase “play like a Raven.”

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: One of the keynote speakers for both the National Tax Conference in November and the Construction & Real Estate Conference in December is our guest on this episode of the Journal of Accountancy podcast. You’ll hear the conversation with Dr. Anirban Basu right after this sponsor message.

[Sponsor message]

Amato: This is Neil Amato with the JofA. I’m happy to welcome Anirban Basu to the show. He is the founder of Sage Policy Group. And, as I mentioned in the introduction, is speaking at the AICPA’s National Tax Conference in Washington and its Construction and Real Estate Conference in Nashville, Tenn. Anirban, you’re known as an economist with a sense of humor. So the floor is yours. Welcome to the podcast.

Anirban Basu: Thank you, Neil. A privilege to be here and of course, privileged to speak at the AICPA conference in November. Really looking forward to it.

Amato: Great. And we as an organization are looking forward to having you speak. Tell me first a little bit about yourself. What led you to form Sage Policy Group, an economic and policy consulting firm now more than 20 years ago?

Basu: Well, I’m an economist. Please hold any further applause.

I started out as a university researcher. I’m out of Baltimore, Md., and I’d always wanted to start my own business, work for myself, but I had no confidence in myself when I first started a business. So in 2002, I had a partner. And partnerships are like marriages. They often don’t work out. And this one didn’t. Lawsuit, lawsuit, and I can’t say how the lawsuit settled. I can say that shortly after settlement, I bought a nice place for my wife and I in Deep Creek Lake, Maryland. But nonetheless, I was out of work. So this time I decided I’m going to start a business, but on my own, no partner. Let’s see what happens.

So I formed Sage Policy Group, Inc., at that time. And we’ve had a nice run for 22 years. You know, we’re now one of the most successful economic consultancies in the country. It’s a niche genre, right? This kind of form of business. Not that many economic consultancies around, but we have been pretty successful. A staff of 11 people, and we have clients across the country. And sometimes we get clients from other parts of the world, but typically within the United States. And one of the things that we do a lot of is public speaking and hence the appearance with AICPA in November. And again, as I say, I’m looking forward to it.

Amato: That’s great. Thank you for that introduction. The title of your session at the conference is First Brood. Tell me more about that title and how it perhaps relates to tax practitioners in late 2026.

Basu: Well, I want to talk about the economy, of course. First Brood is a play on a 1982 film starring Sylvester Stallone called First Blood. This is a movie that introduced the character of John Rambo. Ultimately, there’d be five Rambo films, the last one showing up in 2019 called Last Blood. And my presentation is a Sylvester Stallone-themed economic presentation.

I talk about obviously all kinds of things — inflation, interest rates, the labor market, gross domestic product, you name it. But all of these things would tend to impact tax professionals in the following way. People want to understand first why they’re being taxed the way they are, but that of course has a lot to do with how they’re engaging the economy. They also want to understand how and why their tax payments are changing over time, which has to do a lot with their personal economy, but also again, their personal economy relates to the overall economy. Whether they are employed, how much of a wage increase they enjoyed, how many deductions they might get depends in some sense on their behavior.

And so I’m going to try to relate the macro economy to what clients are experiencing, clients of tax accountants, and why they’re asking the kinds of questions that they are, and also how we can think about regime changes to come, meaning that when you’re in a country with a $40 trillion national debt, there are going to be changes to the tax code in the future. And at some point in the future, we might see some hefty tax increases as it turns out, whether income taxes or other forms of taxation. We might see a federal sales tax at some point. I suspect we will.

And so how do we position enterprises, how do you position household heads for the changes that might occur going forward? And that’s one of the things I want to talk about as well at the conference, not just what’s going on right now, but what might occur over the next five to 10 years.

Amato: You’ve touched on some of the trends, some of the topics that definitely are top of mind for professionals in and out of tax. You know, some of those things are obvious these days — inflation, gas prices, concern among workers about AI. Are there other trends that those professionals should be following?

Basu: You’ve named a few, actually. Young people in particular, including young white-collar professionals in particular, especially them, are concerned about AI. There’s a group out of Chicago called Challenger, Gray & Christmas that monitors layoffs attributable to artificial intelligence. And the series starts in 2023. And that makes sense because it was in November of 2022 that OpenAI launched ChatGPT. And so all of a sudden this becomes commercialized. Hardly any layoffs in 2023 attributable to artificial intelligence. By 2026, the current year, massive increase in layoffs attributed to artificial intelligence. AI also creates jobs for construction firms, etc. But the point is, it’s a risk. So that certainly is one of them. It also is a source of productivity enhancement. We can talk about that perhaps as we go through this podcast.

But the other thing I would focus on is obviously interest rates, interest rates, interest rates. I mean, we’re looking at multi-decade highs in interest rates. We’re looking at a 30-year fixed mortgage rate, as I’m speaking to you, above 7%. So there’s certain parts of the economy that are really interest rate-sensitive: real estate, construction. And a lot of tax accountants, or just accountants generally, that I’ll be speaking to, work with people in those segments.

People in those segments are sometimes quite concerned about the future because projects are not penciling from a pro forma perspective. The other thing is you’ve got higher interest rates. That’s actually good for a segment of the population. Banks that can make loans at higher interest rates obviously love the net interest income, but individual household heads, once again, retirees who are on fixed incomes, who want to generate returns safely, now they can invest in a 10-year Treasury yielding meaningfully over 5% as of this interview. So lots of things to talk about here, lots of things about which to be concerned.

I will say this. One of the greatest things happening in the U.S. economy right now is just a paucity of layoffs overall. So we can talk about AI, but if you look at initial claims for unemployment insurance, those are at multi-decade lows, as it turns out. We just had a number come out recently saying that during a certain week, you only had 197,000 claims for initial unemployment insurance. That’s incredibly low. So it’s maybe hard to find a job for certain people, but if you have a job, the risk of being laid off is actually quite low right now.

Amato: So on the topic of AI, but not necessarily related to how AI might affect job changes, job losses, is the accuracy concern of AI. One of the news items that happened the week of this recording was the AICPA announcing formation of a group that includes former IRS commissioner Danny Werfel on responsible use of AI in tax administration and tax practice. That has to be accurate. And I guess you’d say the concerns are legitimate about just AI not always being accurate.

Basu: Oh yeah, we understand it hallucinates. And you can imagine the temptation of a white-collar professional, whether economist or accountant, to let AI do a lot of the work, right? Because it can do the work. It’s remarkable. I mean, I use it myself in my economic research as a fact checker. I’ll pump in reports that I’ve written and say, what do you think about this, artificial intelligence? What do you think about this, Claude AI? Have I made the right assumptions? Have I used the right discount rate?

And sometimes AI will come out and say, no, you did not make the right assumptions. There’s no rational basis to assume that this person’s wage would have increased this much had they lived, that kind of thing, if I’m calculating damages, for instance. Or, your discount rate is in real terms, it needs to be in nominal terms. And AI is remarkable.

So it’s actually helped me a lot in the quality of my reports, you know, fact checking, checking my assumptions, that kind of thing. And I suspect that many accountants are using it for that purpose as well. But it can’t be allowed to do the work for us. Ultimately, it has to be our output, because it does hallucinate, it does make errors.

And so we have to use it as a tool. We can’t just use it as the end product creator, whether in the form of tax returns — not yet at least, in my mind. But I tell you, what I’m seeing over the last year or so is just enormous progress in terms of its capability and its accuracy. And other people may have had different experiences. And obviously, you’re going to hear a lot of stories because you’ve got hundreds of millions of AI users now in the world. But my goodness, it should make all of us very productive over time, which is great for those of us who are already ensconced in the industry. But for people seeking to enter the industry, the mathematics might work a bit differently.

Amato: Related to the economy and taxes, what do you think are common misconceptions out there, and how can tax practitioners better communicate about those?

Basu: Look, so much of this is political, right? Often people will come up to me after presentations and ask me questions, right? Well, what do you think about this? What do you think about that? And I can tell immediately in the form of their question whether they’re a conservative or a progressive or something in between. Because the lens through which we view the economy is very much shaped by our politics. A lot of misconceptions come from that. Well, the other side of the aisle is trying to do this, and there are a bunch of socialists and they don’t believe in private property and so on and so forth. And then, the other side will say, well, my goodness, there’s so much corporate greed and corruption and blah, blah, blah. And corporations don’t help people at all.

And so that’s a misconception, right? Because I think Eli Lilly, which is an amazing American company, does a lot for people in terms of the therapies it creates, that kind of thing. Moderna, out of Cambridge, Mass., and so many others.

And so we’ve got to be factual about this. There is a center here. There are points upon which we can agree. So a couple of misconceptions that I hear is the economy is terrible. Well, it depends on who you are. For a lot of households, the economy is not great, right? They’re just being eaten up by inflation. They are delinquent on their credit card debt, perhaps, on their student loan debt, on their auto loan debt. We’re going to have three million auto repossessions this year in America. So there are people in America who are struggling. There’s no question.

But the overall economy, my goodness, is one of the finest performers in the advanced world. This year, the U.S. economy is set to grow, I don’t know, in the range of 2 to 2.3% in real terms, being inflation-adjusted terms. And you’ve got a record stock market. So it’s also creating a ton of wealth. And America, of course, is at the front end of biotechnology, artificial intelligence, defense technology, so on and so forth, software development. And so there’s a lot to say positively about the U.S. economy.

We’re also the leading producer of oil in the world. We’re the leading producer of natural gas in the world. It’s remarkable, the assets that we have. At the same time, we’ve got a $40 trillion national debt. We’re facing insolvency in the next few years of Social Security and Medicare trust funds. So there’s good and bad. And so anyone that has said, the economy is terrible, that’s just not sufficiently nuanced. If somebody says, well, the economy is great, well, that also is not sufficiently nuanced.

Amato: Yeah, so it’s somewhere in the center. There’s definitely good, there’s definitely bad. When you go to a conference as a keynote speaker, what do you look forward to?

Basu: Being done. For the whole thing to end.

Amato: [Laughter]

Basu: No, I’m being honest. You know, it is nerve-wracking to be a public speaker. And it’s, of course, the moments just immediately before walking on stage that are particularly unnerving. I want to do a great job for the audience. I don’t want to mess it up. I certainly don’t want to say something that’s incorrect. I don’t want to misstate the unemployment rate or where the S&P 500 is sitting at any moment in time or the price of Bitcoin. I mean, I want to be accurate.

I want to be able to be quite fluent in my articulation. I don’t want to stumble over words too often in my presentation. I want to have a good pace. I don’t want to speak too quickly, though, as you can tell, I have a tendency to speak too quickly. I want to, and this is very important, fit within the time I’m allotted. There’s so much to talk about right now economically.

I mean, we could talk for a day about tariffs. We could talk a day about Federal Reserve policymaking. We could talk about another day about the national debt. I want to talk about all of these things in one presentation. And then not to mention the industries and their performance: manufacturing, construction, health services, financial services, etc. So there’s a lot to get through.

One of my concerns is will I go on too long? Will the people organizing the conference be waving their hands frantically in the back to tell me to end, just get off the stage, what are you doing? So all these things are happening out there, and I dread that. And so my finest moment is when I walk off the stage, I’m done, and it feels really good. And then I say to myself often, this is a horrible way to make a living, but it’s what I do.

Amato: You mentioned the nerves before you go on stage. How do you calm them? Is there any advice for public speakers out there or do you just have to muddle through?

Basu: No, there’s some advice. Look, you’re nervous because you want to do a great job. And people say, how can you be nervous? You speak 200 times a year. Yeah, but I’m still nervous before every presentation and getting in front of that audience. I want to have a quick start, right? I mean, just start the presentation off well and gain some momentum.

So I utter a handful of words before every presentation just to psych myself up. And those words are “play like a Raven.” I’m a Baltimore Ravens fan. The Ravens have won two Super Bowls. The teams with Ray Lewis and Ed Reed, Terrell Suggs, others, simply fabulous, Joe Flacco’s amazing run to Super Bowl 47, that kind of thing.

Play like a Raven, which to me means doesn’t matter if the room is too hot, if your technology is not perfect, the studio is too small, the audience is noisy, they’re still serving lunch. It does not matter. You go out there and you play hard and you win and you speak well. I’m not tackling anyone. I’m not throwing passes, obviously. I’m kicking a field goal, but I’m trying to do something well for my audience.

And so I want to play like a Raven. Focus on the moment, concentrate, don’t let anything distract one from the mission of trying to impart as much information to the audience as possible within the allotted time. And then, you know, one of the other things I love is when I get a chance to engage in Q&A, questions and answers, because what I am nervous about among a lot of things is irrelevance. And I want to be relevant to my audience. And often we economists start to be irrelevant to people’s lives. So I want to be relevant. And during that Q&A session, I know I’m being relevant because they’re asking me questions and they care about the answers.

Amato: “Play like a Raven” — definitely something I’ll remember from this conversation. I think another key to being an excellent keynote speaker is leaving the right amount of time for that Q&A at the end. I’m sure you’ll do that because it sounds like it’s something that you really prioritize and like.

Anirban Basu, thank you very much for being on the JofA podcast. Again, look forward to having you as a speaker at two upcoming AICPA conferences, National Tax in November and Construction & Real Estate in December.

Basu: I’ll do my best. I always do.