Last Thursday, I spoke at a breakfast presentation on the economy during a conference for business leaders here in town. After more than 500 public speaking engagements in the past two+ decades, many here in the Birmingham area, I suspect I am something of dependable go-to for organizers looking to fill 30-45 minutes on an agenda.
Regardless, I had fun, as I typically do at such functions. After all, I get to have an opinion in public, which isn’t always the case in private.
Now, one of the things I found particularly fascinating about the event was the overall level of “bullishness” of those in attendance. My co-presenter, the head of the local Federal Reserve branch, was also surprised by it. And for the record, he is a great guy.
Make no bones about it. It seems that business owners and executives in central Alabama are pretty positive about the health of their companies and overall economic conditions. With each glowing survey result the conference leaders put on the screen, the more I wondered what was in the coffee.
Don’t get me wrong. I am not forecasting doom and gloom. No. To me, let’s just say the future looks like a pretty standard ham & cheese on white bread. To the group, it looks like a “croque monsieur,” maybe even a “croque madame.”
During the Q&A, we got a number of very good questions. The first was what I thought about the administration’s proposed 50-year mortgage. Would that help the housing market? I explained in my view that such a thing would serve to boost demand. Unfortunately, the problem with residential real estate seems to be the lack of supply. As such, the increase in demand would likely drive-up home prices. This would offset at least some of the monthly savings that a 50-year note would provide over a standard 30-year one.
Another one was, not surprisingly, the impact I/we thought corporate America’s enormous investment in AI would ultimately have on the labor markets. My friend provided a couple of different insights.
The first was that businesses will likely “blame” AI for what would ordinarily be relatively normal business cycle job cuts. After all, it has to appear as though they are getting a return on their investment. The second one was that Gross Domestic Product (GDP) is essentially Job Growth + Labor Productivity. If AI makes workers more productive, the economy will be able to generate the same level of output with fewer workers.
Mine was more of a history lesson. Prior to the Industrial Revolution, the vast majority of people worked on farms. Improvements to agricultural technology put a lot of people out of work. A lot of them moved into towns and/or cities and found work in factories and all other sorts of trades which didn’t previously exist.
The same happened in the post-Industrial economy. Folks left the mills and workshops to toil in hospitals, high-rise office buildings, restaurants and bank branches. The only reason why this time would be different is IF there is a limit to human ingenuity, which I don’t think there is.
As a result, AI would likely help create new jobs and industries to replace the ones it helped kill.
Finally, one person asked us whether or not the tax revenue the administration’s tariffs was generating was ultimately good for the economy, since it potentially could help to shrink the deficit. Trust me. My friend from the Fed didn’t want to touch that political football. So, I took a stab at it.
I explained that the government’s massive deficit, having grown substantially in both absolute and relative terms, suggests Washington doesn’t use leverage wisely. As such, it must not be a very efficient generator of wealth, and, therefore, economic activity. Otherwise, given the amount the Treasury has borrowed, our economy would be much, much larger than it is.
As a result, the more the government taxes the private sector, the more slowly the economy will grow. This is due to the transfer of productive capital from a more efficient system to a less efficient one. It isn’t rocket science.
To support this contention, consider this:
- The Bureau of Economic Analysis (BEA) estimates the U.S. economy was $21.540 trillion in size at the end of 2019.
- At the end of the 2nd quarter of 2025, it estimates Gross Domestic Product was $30.486 trillion. Obviously, that is an increase of $8.946 trillion.
That sounds pretty good, doesn’t it? Unfortunately, the Treasury’s accumulated debt has mushroomed over that same time period from $23.202 trillion to, get this, $38.121 trillion (as of November 2025). That works out to $14.920 trillion.
It is enough to make one wonder what happen to the other $6 trillion, doesn’t it? I mean, a trillion here and a trillion there, and it starts to add up to some real money.
Not surprisingly, our comments which emphasized the role of private enterprise and innovation resonated with the room full of business executives, who appreciated our generally pro-business comments and answers. However, that still doesn’t explain why they were all so bullish.
Or does it?
I have thought about this and come to the following conclusion. IF your worldview assumes the economy and society are zero-sum games, the future is finite. However, IF your worldview assumes they are potentially infinite and ever-growing, it is infinite. The former doesn’t really allow for expansiveness, creativity and inequality of outcome. How could it possibly? As a result, it doesn’t reward risk. The latter is the complete opposite.
And let’s face it, risk is a lot more exhilarating, even scarier, than the lack thereof. Further, have you ever heard anything about being paid for the amount of risk you are willing to take? That makes sense, doesn’t it?
Now, riddle me this one, and we can agree to disagree if it comes to that. Who is more risk-averse? Those that want the government to take greater control over the economy or those who want the government to butt out as much as possible?
I suspect most of you would choose the former. Am I right? If so, that group should expect a lower rate of return, in aggregate. And if that is the case, they should expect less expansiveness, less creativity and greater equality of outcome. This would, in turn, make both the economy and society more finite and, therefore, zero-sum games.
Frankly, I am not so sure that is for me. In fact, I know it isn’t. What’s more, it certainly isn’t for that group to whom I spoke this past Thursday morning. They were/are risk takers, and risk takers, almost by definition, find life exhilarating.
So, is it any surprise they are more bullish than your average bear?
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
John Norris
Chief Economist/Chief Investment Officer, Oakworth Asset Management
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