What is Hungary to us or we to Hungary?

Hi, Paul Krugman here. A Saturday morning update ahead of the big election in Hungary taking place tomorrow. The eyes of the world are upon Budapest.

It’s a little odd that Hungary is so much the focus of a lot of people, myself included. It has about the same population as New Jersey, about a quarter of New Jersey’s GDP.

It’s not a big place, but it’s symbolic. It is a role model for right-wing authoritarians everywhere. It still formally has the institutions of democracy, but has for the past 16 years been a one party state — ruled by a right-wing authoritarian ethno-nationalist regime that enforces its will partly by rigging elections, partly through an extensive system of crony capitalism that rewards its friends and punishes its enemies.

In other words, it’s a MAGA kind of place. It’s what they would like to do to the United States, although with less sophistication and more brutality.

Donald Trump has been frantically trying to keep Viktor Orban in power, largely in ways that demonstrate that he really doesn’t understand how the world views him. Sending JD Vance to campaign for Orban is not helpful to Orban. It’s a boost to the opposition. Spewing frantically on Truth Social about how important it is that Orban win is, again, a gift to the Hungarian opposition.

The system is still very rigged in Hungary, but there’s pretty good reason to hope that the popular wave against Orban and Fidesz is so large that it will sweep away all of the rigging that they’ve imposed to try and keep themselves in power.

We’ll all be watching the polls eagerly tomorrow. What struck me, however, as something new is that lately, at the very end, Trump is now saying, oh, elect Orban and I will help you out economically. And just yesterday, he put up a post saying that if Orban is re-elected, that the Economic Might of the United States will come in to aid Hungary and its well-deserved prosperity and all of that.

Which is interesting because it’s an illustration of the megalomania, the delusions of grandeur that really afflict the current U.S. administration, a complete inability to have a sense of the limits of American power.

What Hungary is to us or what Hungary is to MAGA is clear, but what are we to Hungary? Look at Hungarian trade. It is a relatively open economy, which depends a lot on its role as a relatively low-cost manufacturing platform, which it has been able to maintain despite the crony capitalism and all of that.

Where does Hungary export to? Well, about 80% of its exports go to either the European Union, or Britain has a little bit on top. So essentially the democracies of Western Europe are where 80% of Hungarian exports go. How much does it export to the United States? 3.5%. Basically, Hungary, for practical purposes, does no business with the United States.

This is mostly about gravity: The “gravity equation” in international trade says among other things that trade depends very much inversely on the distance between countries. Hungary is in the middle of Europe. It’s going to inevitably do a lot of trade with Europe. And that’s even larger because the special role that Hungary has taken is that of being a a manufacturing platform for relatively low-wage pieces of the European manufacturing sector. In a way, kind of like Mexico is for North American manufacturing.

By the way, the fact that German companies in particular have invested a lot in Hungarian production is a large part of the reason that the European Union has been so derelict in trying to rein in Orbán and his destruction of democracy. But in any case, the point is that there’s just no way that the United States is going to be an important economic partner for a small country in the middle of Europe. It’s a complete misunderstanding of how big, how important, how powerful the United States is.

It is in a way kind of the economic counterpart of imagining that the United States can easily effect regime change and bludgeon Iran into submission. This is not who we are. It’s not our role. We are not big enough. We are not the sole global superpower. And in any case, being a superpower isn’t what it used to be. So all of this will be ignored by the Hungarians.

The one thing that may happen is that the clear message that Trump favors Orban may be the straw that breaks the camel’s back, maybe the final, tipping point that removes Orban from power.

I’m not counting any paprika chickens before they’re hatched. There is a kind of a nightmare here about what happens if there’s a clear attempt to simply overrule, defraud the Hungarian electorate, not just the rigging that has worked so far, but something even more extreme. And then will the Europeans ever live up to their own values, their own ideals?

I hope we don’t come to that point. But anyway, whatever is happening, one thing that’s clear is that U.S. economic partnership or lack thereof with Hungary doesn’t make a damn bit of difference.

. . .

TRANSCRIPT:
Paul Krugman in Conversation with Lisa Graves

(recorded 4/9/26)

Paul Krugman: I’m speaking today with Lisa Graves, author of an incredibly revelatory and deeply disturbing book called Without Precedent, about the Roberts Court and what it has done to America. And...hi, Lisa. Welcome on.

Lisa Graves: Paul, thank you so much for having me on. It’s an honor to be here with you. And thank you for your kind words about my book.

Krugman: I guess I was first sort of seriously alerted to what was happening at the Supreme Court in 2000, with the stolen election and all that. But I have to say, I don’t think I fully appreciated what Citizens United would do. And so why don’t you give us a little background on what has happened, the court and its role and what’s been happening to America?

Graves: Well, I really appreciate your starting with Bush v. Gore, because that in some ways is the beginning of this period. It’s a precursor in a way to what we’ve been experiencing. And that was when the US Supreme Court, in a sharply partisan decision — although not all the Republicans voted to stop the recount — five Republicans voted to stop the recount in 2000, in Florida. And the effect of that was to give George W. Bush the presidency and with it, not just the power to, in essence, make war with the consent of Congress, but also the power to remake the courts, the Supreme Court in particular.

And by the way, as part of my research for the book, I looked into what was happening at that time, and it turned out that Clarence Thomas’s wife Ginni Thomas was working for the Heritage Foundation on the predecessor to Project 2025 — basically Project 2000. And she was screening people for positions in the potential George W. Bush administration. And Clarence Thomas didn’t recuse himself from that case. By the way, that five-four decision — it would have been four-four. The count would have been allowed to proceed. And the count that actually occurred with news organizations after the fact, after Bush was sworn in, showed that Gore would have won Florida and would have become the president of the United States.

By the way, after Thomas voted to effectively make George W. Bush the president, Ginni Thomas was given a promotion as the liaison from the Heritage Foundation to the White House, and she became the highest paid non-board member of the Heritage Foundation. And so she was rewarded very well for her work and, basically, for the consequence of her husband’s decision to vote to stop that recount.

So that was really a moment where I think a lot of people didn’t understand what was happening. And because that decision happened so quickly, there were no motions for Thomas to recuse himself. It just was a very rapid, very political, partisan decision by the court. And it is really a precursor to what’s happened next, which is that George W. Bush was reelected as an incumbent, or elected anew in 2004. And there were two vacancies that came up immediately. It was for O’Connor’s seat and Rehnquist’s seat. And John Roberts got the role of chief justice, and Sam Alito got the role of associate justice.

And then to fast forward to your question about Citizens United, again, this is a 5-to-4 decision issued by the Roberts Court, where Clarence Thomas sat on that case — the fifth vote, in essence, on that case — even though a billionaire named Harlan Crowe had staked his wife Ginni Thomas with $500,000 to launch a group to take advantage of the decision to come in Citizens United, to allow these so-called C4 groups under the IRS code to spend unlimited money to influence elections. And Clarence Thomas did not recuse himself from that case, and even had the audacity to write a concurring opinion saying that disclosure of money being spent by these groups — who the sources are — would chill speech, meaning money, like the money to his wife, which he did not disclose.

And so that decision unleashed a tsunami of cash into our elections, where candidates are routinely outspent by the outside groups. And this has given a disproportionate, and extraordinarily disproportionate, power to billionaires in our society, in America, to secretly influence elections in order to get people into positions of power to advance their interests, like the huge tax breaks that Donald Trump signed into law at the behest of Charles Koch and his groups in the first term of President Trump. And again, similarly, in this second term of Donald Trump, the extension of those deeply unfair and destructive tax cuts for the richest few.

Krugman: You kind of described what Citizens United is, but let’s talk more about that. Citizens United is the birth of super PACs, right?

Graves: Yes.

Krugman: And it’s basically saying that outside players — but it ends up being largely billionaires — can put lots of money with some basically tissue-thin restrictions on what they can do, but can basically put in unlimited amounts of money to influence political campaigns.

Graves: That’s right. And so Citizens United was a decision that basically asserted that under the First Amendment, money is speech, and that outside groups that were not coordinating with the candidate — so-called independent expenditures — they could spend unlimited money, and they were not subject to the rules that the Bipartisan Campaign Reform Act, BiCRA, otherwise known as McCain-Feingold, sought to put in place to deal with this sort of what they were calling soft money — money that was outside the campaigns that was not required to be disclosed.

So Citizens United and its progeny — a case called Speech Now vs. FEC — that’s what spawned these super PACs, where you have enormous money going into PACs, political action committees. That money can be million-dollar, even $10 million checks. For the super PACs that are operating in a particular way, they have to disclose their donors. But for the C-4 groups, which are these other nonprofits, they don’t have to disclose their donors.

And so what it’s created is a situation in which, on the one hand, a billionaire can now give millions to a super PAC in a way that they could not give directly to the candidate. They couldn’t just write a check to the presidential candidate or congressional candidate. They can do it now in an unlimited amount through the super PACs. And then separately, they can give tens of millions of dollars — unlimited money — secretly to a C-4 group that runs so-called issue ads. Those are the ads that say vote for or against this person, or call them because you oppose their policy. But it’s really obviously about influencing the election, and that’s the dark money that’s being spent in our elections.

Krugman: The Times found that 300 billionaires represented 19% of all campaign financing in the 2024 cycle. But I’m not sure how they know. Are the C-4s even in there? It may be more than that, right?

Graves: It’s certainly more than that. And only under certain circumstances can you actually see some of the funding of a C-4, based on how it’s related — who’s funding it, if who’s funding it is known. So for example, if a foundation gives to a C-4, if it has the capacity through a trust or a foundation to give to a C-4, that sort of giving is required to be disclosed. But if an individual, a billionaire like Charles Koch, writes a check to the C-4, that is not disclosed. It’s only if it comes through a nonprofit entity that you can see just a glimpse of the sources of that funding.

So whenever I talk to reporters who are doing those calculations about how much money is being spent by billionaires, I always tell them that their counts are going to be extraordinarily under the actual reality, because we know that these outside groups, these C-4 groups, are spending hundreds of millions of dollars cumulatively in the election cycle, and the only people who know who’s giving to them are the groups themselves. And probably some of the candidates know who’s giving to those C-4s.

Krugman: Wow. So if we look at someone like Peter Thiel, who basically bought a Senate seat for JD Vance. I don’t actually know the number, but the numbers we see may actually be only the tip of the iceberg.

Graves: That’s correct. There are a couple of rules in states and also at the federal level for certain types of independent expenditures, or if you have what’s known as a 527 group under the IRS code, that is allowed to spend directly in elections. But even then, what you see is a shell game. So for example, the Republican State Leadership Committee, RSLC, has created a subgroup to target state Supreme Court races. And it’s the sole funder of the subgroup. So when the subgroup discloses who funds it, it’s disclosing its parent organization. So it doesn’t disclose how much of that money is from Leonard Leo, or how much of that money is from Charles Koch or Koch Industries or the oil companies that goes into the bigger pool of funds.

And so there are all these ways in which I believe that most of the money that’s being spent in our elections in America is not disclosed. It’s not disclosed under the campaign finance reports of the candidates, of the party, or the super PACs, because it’s the C-4 money that is most potent, because it’s the vehicle that allows them to hide the true funders — the biggest funders of these operations.

Krugman: If we look at issues like energy and climate policy, there’s obviously huge amounts of fossil fuel money flowing into elections, but there’s also huge amounts of money going into supporting pseudo research at think tanks, which is a kind of whole universe. And if they’re already supplying a very large part of campaign finance, then add in all of this stuff, and we really live in a political environment that’s very much determined by big money.

Graves: That’s really true, and while the C-4 spending sometimes is not described as political, it’s obviously political. It’s obviously spent around the elections to influence the outcome of the elections. And it’s often spent on ads, which is why there was a bill that was introduced by members of Congress that was called S1 in the previous Congress, which was designed to basically say, if you’re going to spend money around the elections, it really needs to be disclosed.

But as you point out, in some ways that enormous money that’s coming in around our elections is, in a way, the tip of the iceberg, because there’s this whole other structure where fossil fuel companies and fossil fuel CEOs like Charles Koch and others, are spending enormous sums year after year on these so-called think tanks — or as some people call them, “stink tanks.”

Krugman: Heh.

Graves: But really, these are entities that have been stood up over the past few decades to generate research findings that are informed basically by the funders who are funding that research, in order to assail efforts to mitigate climate change, for example.

And when you look at the nonprofit infrastructure in the United States, the United States has a thing that is known internally, in essence, by the experts as “the independent sector.” We have the private sector, the public sector meaning government, and the independent sector—and that’s the nonprofit sector. And it is an enormous part of the US economy. That’s like churches and hospitals and colleges. But a significant portion of that nonprofit spending is going into policy operations, operations that describe themselves as informing the public, as public education — not public schools, but educating the public.

And the fossil fuel industry has played a big role in funding a number of these groups that are at the forefront of basically “studies” — and I’ll use that term loosely — but studies that then are cited by some members of Congress as a basis for objecting to the reality of climate change, or objecting to government efforts to intervene and try to mitigate climate change. And so it’s a massive distortion machine. We sort of swim in a political environment, a political and social environment, which has been greatly influenced, swayed by the amount of so-called research that these groups are putting out in order to advance the industry’s interests.

And this is part of what’s known as a third-party strategy that the tobacco industry really helped pioneer in America, where they were trying to fend off efforts to regulate tobacco and its cancer-causing effects. And so they didn’t want to run ads, for example, saying “tobacco companies say tobacco is just fine” — although they did say smoking was good for you — but they put forward doctors and, you know, so-called studies saying it was safe, even though the actual independent science was showing that there were carcinogenic effects in some instances of smoking.

And so that third-party tactic is what the fossil fuel industry and its CEOs are using. They don’t think that people would believe them if they ran an ad saying, “Hey, I’m Charles Koch. Trust me, all this fossil fuel money that’s making me the 23rd richest person in the world — it’s great for everyone. The planet isn’t on fire, and we can solve everything.” You know, instead, what happens is they fund these groups that do bus tours and they lobby Congress, or they do all these influence campaigns. And the objective is to protect the industry basically at all costs.

And there was a book that was written a couple of years ago about how in Koch world, both the for-profit part of Koch Industries—which is now known as Koch—and in their nonprofit empire, carbon was job one.

Krugman: Right. And there’ve been some studies— I think by Oreskes and others—that demonstrated how among the alleged scientific papers that disputed the consensus about climate change, the percentage funded by the fossil fuel industry was basically 100. That this is an entirely manufactured thing by special interests. So you place a big emphasis on fossil fuels. Tobacco is kind of where the strategy begins. But fossil fuels are, in your view, at the root of this perversion of the U.S. system.

Graves: Well, I think it’s a key component of it. Other than, I suppose, the war industry.

Krugman: Right.

Graves: Which is related. The fossil fuel industry is the most lucrative field of business in the world. And they’ve made so much money, you know, selling fossil fuels. And there’s a real intolerance for any limit. And in fact, when you look at a lot of the groups that have been funded in the US that are part of attacks on the EPA, attacks on the power of the Environmental Protection Agency to regulate carbon, when you trace those back, you can see money from the coal industry and coal barons. You see money from the natural gas—otherwise known as the methane gas—producers, the frackers and the compressing companies for those fracking for the gas and oil industries.

And you can see within that what’s happened: a number of these big CEOs — for example, the largest seller of compressed gas compressors in the United States for these big fracking operations — they’re paid an enormous amount for running these companies. And then they create a nonprofit that then fuels groups like the Heritage Foundation, American Enterprise Institute, and these other entities that are at the forefront of trying to stop congressional efforts to regulate carbon or to mitigate climate change.

Krugman: So, I mean, we’ve seen a lot of certainly favorable tax treatment for fossil fuels forever. But still, you know, I’ve been around for a while. I remember the 70s when, in response to the oil crises, we did get price controls and windfall profits taxes. They may not have been great policy, but it’s kind of unthinkable that we would do that now. What changed, do you think? Why did the U.S. system become so much more porous to this kind of influence?

Graves: Well, I so appreciate your raising that, Paul, because the timing of that coincides with a memo that was written by a person who became a justice on the Supreme Court. It’s called the Powell memo. It was written by Lewis Powell to the Chamber of Commerce. And that was just months before Powell was nominated by Nixon to the Supreme Court. And in that memo, the Powell memo, he wrote that American businesses needed to play a greater role in American society. And I think this is a laughable assertion. He asserted in 1971 that no one had less influence on public policy in America than the American businessman. That wasn’t true then. It’s certainly not true now.

And that memo helped spawn a new generation of investment in trying to capture these levers of power. And so demi-billionaires like Richard Mellon Scaife and others rose to that call to create this apparatus to oppose government regulation. For example, Scaife helped fund some of these early think tanks in the 1970s. But another key figure in that time was Charles Koch, when he had just inherited his father’s company in the late 1960s. He was very involved in these early right-wing movements. He personally, actively objected to those price controls. He started seeding groups in the Libertarian Party, an adjacent movement, before he ultimately tried to co-opt the Republican Party and move this into the mainstream of that Republican Party agenda, you know, with the help of Reagan, who had deeply antagonistic views toward regulation.

When you look at that period, that’s when Charles Koch, as a young man, claimed that America under Nixon was basically socialist because we dared to have any price controls. And then, in response to the efforts of Congress and the White House to address the oil crisis and the challenges that America was facing in terms of the energy crisis and the like, Charles Koch actually opposed the creation of a Department of Energy for the United States of America. He objected to that. And so those are very early parts of this movement that most people don’t know happened. You know, it’s obviously before Google. It was a bit below the radar. But that helped seed decades now — the 80s, 90s, the 2000s into the present moment — where those initial investments really took hold.

And I guess the key in some ways to their success is that I always describe Charles Koch as being the deepest, longest, most enduring funder of this effort to attack the regulation of carbon and the like. And he’s been at it now for, you know, going on 50, coming up on 60 years, really.

Krugman: Right, so this is going back to the Powell memo in, like, 1970–71. So this is 55 years now. I guess what you’re saying is that the billionaires got smarter and learned to play the long game.

Graves: Yes.

Krugman: It’s the power of long-term thinking, except not on behalf of the human race.

Graves: Yeah. It’s astonishing, because you can see there’s all these different assessments of progressive funding versus so-called conservative funding, and there has not been the type of investment in this infrastructure to push these fringe ideas into the mainstream on the left. It is just not how the funding works on the left. The right has billionaires and families of billionaires and children of children — proto-billionaires, you know, multi-multimillionaires back in the day — whose families have been at this for decades now. You can see it through the foundation work they’ve done, and how the different foundations have spawned other foundations.

And so on the right you see a very deep investment in moving these fringe ideas into reality, into legally binding rules for us, including to the Supreme Court. And on the left — for example, on the Supreme Court, or in the middle to the left there — there was this effort to not capture the Supreme Court, to try to put people on the court who had a reputation for fairness, and not because they were going to be someone who was driving the law to the left. But the right has been really disciplined in this court-capture plan, along with its plan to capture these other levers of power.

Krugman: Yeah. I think to some extent unions used to be the kind of long-term strategic players such as they were on the at least moderate left. But we all know what happened to unions. Although that’s another story.

Graves: But can I add in there? Because part of what we saw was how Reagan came in with this hostility to unions, even though he’d led the Screen Actors Guild. He came in with this real effort to try to break the unions. And then that was met, ultimately, in the longer run, with big funding from these big foundations, including the Bradley Foundation, which had one of the biggest reserves in the country, and it was targeting unions to break unions, but also to break their political power, their political influence.

But when I traced this back, this so-called “right to work” movement — which is not about the right to work, but the right to break unions in these states — what you can see in the historical record is one of the early funders of that effort was Fred Koch. Charles Koch’s father, in the 1950s, was one of the big backers of this long-term campaign to limit the power of unions, the power of people to organize in unions, and also to basically try to break their political power.

Krugman: Wow. So that means these are sort of dynastic efforts. I haven’t really thought about that. But, you know, we talk about the institutions, but it’s actually also these sort of personalized dynasties, which is just amazing.

Graves: Yes, so Dick Scaife and the Mellon fortune. It’s the Mellon Banking Corporation. Andrew Mellon was Treasury Secretary under Coolidge and Hoover, and ended up basically losing his cabinet seat due to a financial scandal. So that Mellon banking fortune became basically Richard Scaife’s fortune. That’s the origin of it.

Krugman: Because back in the day, you know, pre-Citizens United, when you looked at right-wing think tanks and all of that, it turns out there was sort of Bradley or Mellon-Scaife money behind almost all of them. But now I think it’s a bigger pool.

Graves: It is a bigger pool. We have more billionaires now, or more people in that class — that 0.000001.

Krugman: Yeah, I think it’s four zeroes and a one. But I always forget.

Graves: Yeah. And it’s interesting, because I used to occasionally talk to reporters about David Koch when he was alive, and they’d say, “Oh, but he’s given so much money to the theater or to cancer research,” but they’ve given less money, in some ways at the time, to political operations, although that’s now increased. And I would say it costs a lot more money to build a building than it does to actually buy policy, unfortunately, in America.

And so what’s happened is we have this political class of super-elite, super-rich people who have extraordinary sums at their disposal. So, for example, one of the richest men in America and in the world is a guy named Jeffrey Yass. He got rich on TikTok and also on these super-fast trades on Wall Street. He’s the richest guy in Pennsylvania. When he drops $1 million, $10 million in a race — let’s just put that ballpark out — it’s a huge sum, but from the standpoint of a dollar per dollar, the ratio is the equivalent of an ordinary American buying a coffee and a bagel once a week. It’s just nothing to them.

Krugman: I think it’s less true now, but still quite true, that given how much political decisions can influence the wealth of the wealthy, the amount that is spent to influence elections is actually still a pretty small number.

Graves: Yes, it really is. I mean, when Elon Musk was dropping 100 million or 10 million a year in these different races, he has so much money. I think at one point I calculated how much he was making per minute, or how much, in theory, his net worth was per minute. And what he was dropping in the races was nothing. It was pocket change to him. Basically, it would be pocket change to an ordinary American. Their wealth is so vast. And so, interestingly, even though they’ve invested a lot of money — people like Musk and Koch — in our elections, they still, in essence, don’t over-invest. They could spend a lot more and still not have it make a dent into their holdings.

Krugman: One thing I think most people really don’t have a sense of — even if you’ve heard a number, you don’t have a sense of how rich the rich are. You know, this was a time years ago when inequality was a lot lower. But I remember when I was still at MIT — so it’s a long time ago — but I don’t remember who we had. You know, faculty was rolled out for lunch with some rich guy, and the president of MIT whispered, “If only we could get his daily fluctuation.”

Graves: Yeah, that’s how much money. And now it’s incredibly more so.

Krugman: Yeah. Fossil fuels was really, really big. Still is, I suppose. But lately we’ve been seeing a lot from crypto and tech. What’s your sense of what they’ve achieved? I mean, they’ve spent an enormous amount of money and obviously bought a lot into this last election. But where are we on that?

Graves: Well, I will say just briefly, one last note on the fossil fuel industry, there’s a great news story out in ProPublica this weekend about the money behind the effort to give immunity to the fossil fuel industry, to forbid liability, and have Congress do so and have the states try to help with that. And so that piece really details that spending, that includes some significant amount of spending by Leonard Leo, who is the guy who helped pack the US Supreme Court. And so that issue—the fossil fuel influence on policy, the effort to get them off the hook for the liability for the climate changes that are underway—that is an ongoing, active campaign by the industry, or by the industry’s proxies, by the groups that are advancing that agenda.

But you’re right, now with the fossil fuel industry in terms of influence, it is being rivaled by, I guess the new rich in a way, in terms of the tech industry and the tech billionaires. And their influence was enormous in a way. Before this election, they had tremendous capacity, due to their wealth, like the Peter Thiels and others, to spend in our elections or to back certain candidates and get their person in a position of power.

But now that you have this administration that is basically making deals with our public policy — which I personally would describe as bribery, but they have not been charged — where you have industry insiders who are getting benefits: the tech industry, the media industry, getting benefits from kissing up to Trump, from doing favorable coverage in essence for Trump, you have a corruption component, in my view, that is combining the effect of the wealth already. And you have the policy distortion. You have this additional component because Trump is so willing to basically bend policy to favor his friends or people who favor him.

And then the crypto money, that’s the darkest of the dark money. I used to think that the dark money coming in around the election—the money spent by C-4s or their related C-3s—was dark money, but crypto is the darkest money. I mean, it is inherently concealed in terms of who the money’s going to and who holds the money. And we now have a president and his family that is involved in crypto and adjacent to crypto operations in a way where who knows how much money is coming in and from what sources, foreign or domestic? And crypto has also sought to basically influence politicians on a bipartisan basis, giving money to Senate candidates on both sides of the aisle in order to try to limit the regulation of that industry.

Krugman: Yeah, I’ve always thought that we kind of underrated the influence, the importance of sheer actual personal corruption. It’s not just campaign finance, but it’s actually what you yourself get: a bonus for accommodating special interests. But it used to be that led to cushy jobs at think tanks. We used to talk about how if you lost an election, that’s okay. There’d be a Center for Fear and Loathing that would offer you a job. But now it’s actually millions of dollars in the new dark money that somehow flow to you personally. Or in the case of Trump, billions of dollars.

One thing I learned from Rick Perlstein, one of my favorite historians of this whole thing, is that there’s another industry which has always played a large role in funding, which is basically the quack medicine industry. I mean, in some sense, that’s what’s going on with RFK Jr. We think of it as just this crazy guy. But actually, there’s a lot of money there.

Graves: There’s an enormous amount of money there. This so-called MAHA movement —to “Make America Healthy Again”—has really taken advantage of the internet’s access to create these individual communities, where people are getting really selective science. And I use that term loosely. Dressed up as science. Again, it may be funded by industries that are benefiting from it. But you also just see the rise of this influencer culture in the US, where some of them are also paid by these companies to promote their products or promote their lifestyle. And it has become such an influential, distorting thing.

I mean, the notion that we would have a rejection of vaccines and vaccinations for children in the aftermath of eradicating in the US diseases like measles, in the aftermath of a whole period, you know, 50, 60, 70 years, of having a really successful public health policy for vaccination to prevent these childhood diseases that can maim kids or blind them or, you know, basically disable them for life. And yet you can have this surprisingly large number—though it’s still a small percentage of the American population—embrace attacks on that science. And do so despite all of the weight of evidence of how successful these vaccines have been in promoting the health of the American people. It’s extraordinary that this is taking hold.

But as you point out, it’s not just the marketplace of ideas. It’s a marketplace. And that marketplace is profiting from pushing quack remedies and profiting enormously from pushing remedies that don’t work. And we saw that in full scream during the pandemic, when quack treatments, which were not effective at all, were so widely embraced and promoted by some of the people profiting from them, and also by Donald Trump himself or his closest advisers.

And one of the things I looked at at that time — ultimately there was a New York Times story about this — but I took a close look at how RFK Jr.’s wealth himself had increased over time, moving from his role in the Riverkeepers to his role of prominence in this anti-vaccine movement. And you could just see, as he took more and more aggressive positions against vaccines, how much more he himself was paid. I think in 2021 or 2022, he was making half a million dollars a year from the nonprofit group that he was leading, attacking vaccinations. So he was benefiting himself personally from those attacks.

Krugman: You’ve sort of structured your book around John Roberts’ own biography and how that kind of parallels the history of the movement. So tell us about that a bit.

Graves: Yeah. Thank you so much, Paul. It was a labor of love to write this book, because I really think that it’s hard to understand what’s happened to America without understanding what’s happened to the Supreme Court. The Supreme Court under John Roberts has exerted extraordinary power. And has asserted power in ways that the court has not previously done, including when John Roberts orchestrated the destruction of Section 4 and Section 5 of the Voting Rights Act. And he’s now on the precipice of doing the same to Section 2 of the Voting Rights Act in the Louisiana vs. Callais case that the court has heard and will be decided this summer.

But what people don’t realize is that John Roberts cut his teeth on trying to block the extension of the Voting Rights Act, trying to block the repair of the Voting Rights Act after his mentor, Bill Rehnquist, helped destroy a significant component of that act, which was designed to prevent the dilution of Black votes.

Krugman: Right.

Graves: And so you have a person who was chosen for the Supreme Court not because they thought he would be fair, but because they thought he would be a ringer. And he spent his early days in the Reagan administration as a Reagan revolutionary at the top of the Justice Department, trying to block the renewal of the Voting Rights Act with the amendments to overturn a Supreme Court decision. He spent time at the White House counsel’s office for Reagan, trying to block civil rights enforcement. He has devoted his life to advancing this very far-right agenda.

And he was someone who, when he was nominated, was not met with any of the howls of “No More Souters,” which was the sort of campaign mantra from the Federalist Society of not wasting a Supreme Court seat on a fair judge. And so after Roberts was confirmed, Bush nominated his counsel, a Republican lawyer named Harriet Miers, to the bench. Robert Bork and these other right-wing leaders screamed that this was a betrayal of their movement, to appoint a Republican lawyer and not a loyalist. And so her nomination was pulled down and Alito was swapped in, and again, “No More Souters” was not chanted at him.

And so the Republicans were able to secure a court that is now operating like a lever of power, aiding Donald Trump, aiding the Republican Party at almost every turn. And that includes the counter-constitutional ruling John Roberts orchestrated in 2024, giving Donald Trump unprecedented immunity from criminal prosecution. And then he and his fellow Republican appointees married that decision with 24 rulings last year on the emergency docket, the shadow docket, basically telling Donald Trump he could go forward with extreme actions, extreme assertions of presidential power, that were contrary to the Constitution, statutes, regulations, but that he could proceed over the temporary restraining orders that lower court judges had issued. And so this court, in my view, is out of control. It’s in desperate need of reform. And John Roberts is helming this court that is on a path of destruction against our rights.

Krugman: So, shadow docket. I didn’t know what that was until I heard you talk about it. So explain to people what that means.

Graves: Yes. So what most people don’t know is that the Supreme Court has about 8,000 to 9,000 petitions every year, and it only takes about 60 cases. It chooses 60 cases. These are all matters of discretion. They’re not required to take any of these cases unless it’s a state versus state case. And so the court is taking fewer cases, and it’s basically creating a docket where one year it’s about destroying the separation of church and state, another year is destroying reproductive rights, another year it’s destroying regulation of industry and carbon.

And then it has this emergency docket, which typically has been used for death penalty appeals. Someone claims at the last minute, “Please stop my execution,” and the court will issue a ruling, without full briefing, without oral argument, on an emergency basis. That emergency docket has been deployed by John Roberts and his fellow appointees as a shadow docket to basically change the law in America in significant ways over this past year in terms of policies on immigration policy, or allowing these mass firings to go on, allowing the gutting of funding for sciences and more. The court has allowed those things without having full briefings, without having a full opinion on it. They’ve just reversed the decisions of lower court judges.

And it’s significant in many ways because—as Judge Michael Luttig has talked about—this is a huge lack of transparency, a way in which the court is operating outside the bounds. But also, it’s the case that in almost every one of those shadow docket cases — where, again, no oral argument, no real public discussion, no opinion written — the court has intervened and overturned lower court rulings that temporarily blocked Trump, after those lower courts made factual findings that people would suffer irreparable harm and that under the law they were likely to succeed. What the Roberts Court is saying is: “you’re not likely to succeed. We are basically pre-reversing those cases.”

Krugman: So the contrast is that something like the birthright citizenship — where probably they won’t do the most horrible thing, but there are formal arguments — that’s all in the glare of publicity. But a lot of the things they’re empowering — the sort of pogroms against immigrants — are being done just sort of, “Oh, by the way, the Supreme Court has, without any visible deliberation, suddenly said that what Stephen Miller wants is okay, right?”

Graves: Yes.

Krugman: That that’s really quite horrifying. Gosh.
So now let’s talk about the immunity issue. There’s been a lot of stuff in this since 2004 that is really horrifying. But the immunity for Trump is kind of the most glaring of them. And just tell us about that for a second.

Graves: Yes. This case that was issued by John Roberts — it was a 6-to-3 decision right before the election in 2024, and it invented immunity from criminal prosecution for a president. That’s never been the law in America. Ever. Not since the beginning. And that’s why there was a reaction to that decision, in part to have the introduction of the No Kings Act, because that immunity decision basically made Donald Trump king-like in his powers, by saying that he and any future president could not be held accountable for any crimes they committed.

When John Roberts wrote that opinion, he basically effectively pardoned Trump for the crimes he had committed. But he larded that opinion with additional assertions, trying to set the pardon power beyond any judicial or congressional review, asserting that there’s no limit on how a president can direct the Justice Department in its prosecutions, even though there have been longstanding limits in order to protect from the weaponization, the politicization, of the Justice Department to go after political enemies.

And so you have a situation now where you have a president who can commit crimes—and has committed crimes, in my view, and in the view of Jack Smith—who can commit crimes under John Roberts’ opinion. Hopefully this will be ultimately repudiated. He can pardon his co-conspirators, which is what he did when he pardoned the January 6th people who were convicted. But in essence, he could pardon any of his cabinet members or others—people on the ground in Minneapolis, for example—if he wanted to. He could pardon people who were engaging in illegal activity at his behest in foreign policy, war crimes, or domestically. And that would be okay under John Roberts. That is the essence of the destruction of the rule of law. If a president can break the laws, and he can order people to break the laws, and he can then give them immunity or pardon them for doing so, basically no law can hold.

And on top of all that, you know, it’s John Roberts who swears in Donald Trump on January 20th, 2025, where Donald Trump takes an oath to uphold the Constitution, to defend the Constitution. And yet John Roberts has just allowed Donald Trump to violate the Constitution in that immunity decision. A lot of people haven’t read the Constitution all the way through. I’m certain Donald Trump has never read more than maybe a sentence of it. But there are two duties in particular of the president in Article Two of the Constitution, and one is to uphold the Constitution. And nothing could be further from upholding the Constitution than breaking the law, than violating our criminal laws. And so John Roberts orchestrated this. It is a truly destructive decision that puts us all at risk.

And I hope that the people will come together to reform this decision, to reject it along with embracing court reform, like I’ve been working on with my work partner Alex Aronson at Court Accountability, and with our allies, to put together a really bold package of reform for the next possible opportunity to reform this court. But also to restore our rights and repeal—in essence reject—this immunity decision, which is counter-constitutional. It’s an anathema.

Krugman: So what would that mean? Hope for the best? Hope that we actually have a fair enough election in 2028 and a mass public revulsion against everything that’s been happening? How do we get out of this? Because the problem is a lot of these justices are still fairly young. So how do we get out of it?

Graves: Well, there are a lot of reforms that we’ve supported. For example, term limits, but also some jurisdictional changes for the court. I personally have been looking into court expansion and intermediate appellate court changes to try to deal with this court’s excesses and the fact that this court needs to be unpacked. The term limits would, if they were applied immediately, have an effect on removing three of the justices.

But I also think we need robust ethics reform, because the idea of taking secret gifts from billionaires, I mean, it’s outrageous. Or having a billionaire or a billionaire-funded group on the right funding a spouse, fueling a spouse’s income that feathers the nest of the justice. That’s outrageous and wrong. But there are so many other pieces that this court has dismantled, including the power to regulate carbon. That effort that the court has engaged in to try to kneecap the EPA [and rollback] voting rights, reproductive rights—there aree so many things where I think most of the American people really want changes. They want to get our rights back and expand them.

And so I’m hopeful that we can put together and be part of a movement that makes those reforms not just possible, but that people perceive how essential they are. Or this court—the Roberts Court—will continue to just dismantle our rights.

Krugman: Okay. Other than that, we’re doing great, right?

Graves: But you know, here’s the thing, Paul. There are more people than ever that are supporting these reforms. There is a growing reform movement. It’s hard to see, given the way Donald Trump captures the headlines and the legitimate controversies over the war and over the Epstein files and more. But beneath that, when you look at the polling, what you see is that people understand that this court is not trustworthy, cannot be trusted, and that we need to reform the court. And they also, on issue after issue, reject this administration’s policies, almost across the board. And so I think that there is a real desire for us to take a different path. A better path.

Krugman: That’s, I think, a hopeful note to end on.
Thanks so much for talking with me today.

All around the world, big, strong men with tears in their eyes are coming up to Donald Trump and saying, “Sir, you’re a loser.”

Hi, I’m Paul Krugman. A brief update on something that has palpably changed in the world in the last few days.

As regular watchers of Donald Trump and regular readers of mine know, Trump has a thing about insisting that people treat him with immense respect — the big strong men with tears in their eyes thing, “Sir” stories. And in particular about believing that the world despised America under Joe Biden and respects it now under his leadership, which was never true either in the first part or the second.

But it is true that until quite recently, many people in the world at least felt obliged to pretend to respect Trump, felt obliged to flatter him, to stifle the negative feelings that they were having about the course of the United States under current management. And maybe Trump actually took these kind of coerced professions of respect as reality. But in the last few days, suddenly the masks are off.

Volodymyr Zelensky just yesterday tweeted out a part of an interview that he gave in which he said, among other things, “In my view, Russia played the Americans again.”

So it was just saying, basically, that Trump is working with the Russians, which obviously he’s known and has surely thought for a long, long time. But to say it that openly is something new.

Zelensky — not a big strong man — but Zelensky is a tough guy. Keir Starmer, Prime Minister of Britain is, alas, not. But also Starmer just in a statement said that we’re tired of a world in which, I’ll quote, “bills go up or down on energy because of the actions of Putin or Trump.” Equivalence, Trump and Putin in the same sentence, in the same breath, that’s pretty stiff stuff.

And Starmer has been notable in trying to preserve the special relationship, avoid offending Trump, trying to make him get a few points off the tariff rate, whatever. But now Starmer is pretty much openly saying, you know, you are the problem and we don’t trust you.

What’s this about? Well, obviously, the United States went to war with a fourth rate power, Iran, and lost. Exactly how that plays out, we don’t know. But it was truly impressive how poorly the United States military and US strategic thinking has played out here.

The United States has also proved both temperamental and weak, lashing out at our erstwhile allies and veering between threats of war crimes and then what looks a whole lot like abject surrender.

So the world no longer either fears or trusts us. It turns out that our military might is not what it was cracked up to be, and our reliability is essentially zero at this point. We can’t count on the United States to do anything that it has promised. It’s a world in which the hegemon has basically gone AWOL. So that’s a big thing.

There’s another story which I think is important, which has kind of has been overshadowed by the debacle in Iran: The bigger ongoing war, which is Ukraine-Russia, is not going well for Russia. It is, if anything, tilting increasingly in Ukraine’s favor. Now, what’s interesting about that, why is that relevant?

Trump is basically on the side of Putin. He’s been unwilling and probably unable to just openly support Russia but has effectively pulled all aid from Ukraine, There’s essentially no money no military aid, no economic aid flowing from the US to Ukraine anymore — it’s all on the Europeans. The Europeans have still been buying some U.S. weapons and transferring them on to Ukraine, but that’s been largely choked off. And I think the assumption was that Ukraine would be in grave danger, would perhaps collapse without American support.

Not happening. What’s actually happening is that Ukraine appears to be gaining the upper hand in the drone war, which is what this war is mostly about. And Ukraine’s success in adapting to modern warfare has been so great that now it looks like there are a significant number of Ukrainian drones and to some extent maybe personnel already deployed in the Middle East, and that Middle Eastern nations other than Iran are quickly moving to strike deals with Ukraine, to buy Ukrainian equipment.

It’s kind of like, well, if you need help and Iran is still a menace, which it is, don’t count on the Americans, but maybe Ukraine knows how to do these things.

Obviously, that helps empower Zelensky to be open in saying what he really thinks about the United States.

Does this matter? Well, we’re not about to see the whole world turn on us. The United States may have threatened to seize Greenland, but I don’t think that Denmark is going to threaten to seize Alaska or anything like that. But it’s a big comedown, and it will hurt.

It’s a slow erosion, but having countries that trust you, that support you, is a very big asset in geopolitics. Losing all of that is therefore a big liability.

And this is my country. I’m not celebrating all of this, because I’d like to see America, particularly I’d like to see the next president, assuming that we actually have a legitimately elected president, inherit a brand that is not completely damaged and corrupted.

But that’s not where we’re going. It’s really looking pretty bad. And what can you say? We had the worst and the dumbest in charge. We still do. And that’s taking a toll on all of us.

The U.S. attack on Iran will end badly. It’s still not clear, however, exactly what that bad end will look like. The loudly announced cease-fire is on the edge, with Trump and the Iranian regime making very different claims about what was agreed to and the Strait of Hormuz still closed. As you can see in the chart above, prediction markets, after an initial bout of optimism, have turned highly skeptical about the prospects for a quick resolution.

And yesterday the spot price of oil — the cost of a barrel for immediate delivery, as opposed to the prices for delivery a month or two from now, which are what are usually quoted — hit a record high of almost $147 a barrel:

Source: Financial Times

There remain three plausible ways this could turn out:

1. U.S. strategic defeat: The Strait is reopened, but with Iran in control of the chokepoint and charging tolls on ships passing through

2. Quagmire: Having failed to impose its will with bombs, the U.S. sends in ground troops

3. Nightmare: Trump follows through on threats to annihilate Iran’s civilian infrastructure

One might have thought that (2) and (3) were off the table. After all, the past six weeks have delivered an object lesson in the limits of “lethality.” But MAGA doesn’t learn lessons. Pete Hegseth — who appears to be lying about why Iranian attacks on U.S. personnel succeeded — still has a job. Trump is still threatening everyone with ALL CAPS. And nothing should be taken for granted. That said, at this point (1) — with Iran the clear winner while America slinks away — is both the least bad and most likely outcome.

It’s a bitterly ironic result, and not only because a war that was meant to demonstrate U.S. power has instead demonstrated our impotence. Also, Trump has always been obsessed with the idea that fossil fuels are the key to U.S. power and prosperity. Now oil has made us weak while empowering and enriching our adversaries.

But how much will Hormuz-as-Iranian-tollbooth shift the global balance of power?

In Trump’s mind, control over fossil fuels is the essence of national greatness. In his inaugural address, Trump declared that

We will drill, baby, drill … We will be a rich nation again, and it is that liquid gold under our feet that will help to do it.

But this was obvious nonsense. For one thing, the narrative that woke environmentalists had hobbled U.S. fossil fuel production was at odds with the reality that fracking had in fact caused a boom in oil and gas production that began under Obama and continued under Republican and Democratic administrations alike:

It was also nonsense to claim that oil production can be the engine of prosperity for a nation like America, with its huge, diverse economy. The fracking boom, although huge in absolute terms, was relatively marginal in its economic impact. In 2025 the U.S. produced about 3 billion more barrels of oil than it did before the fracking surge. At 2025 prices, that was about $200 billion worth of oil. That’s a lot of money! But it’s less than 1 percent of U.S. GDP.

Meanwhile, Trump has been doing all he can to block development of wind and solar power, in the apparent belief that this will empower America. But what it actually does is empower regimes that are in a position to disrupt world oil supply, while having little to lose from chaos in the world economy. Which means, above all, Iran.

Yesterday Trump issued a pathetic warning:

They better stop now! Or what? We’ll bomb them?

In his second inaugural address Trump promised that “our country will flourish and be respected again all over the world.” Does anyone believe that starting an unnecessary war, then threatening to commit massive war crimes because we’re losing to a fourth-rate power, and finally, in the best case, essentially running away, has made America more respected?

Think about Gulf states that relied on America to protect them and preserve their access to world markets. Now they know that we can’t and won’t, while Iran holds a knife at their throats. They’re now looking to themselves for security — and starting to buy equipment and technology from Ukraine, which has learned the hard way how to fight a modern war.

Think about Asian and European nations that have swallowed Trump’s many insults, and mostly avoided retaliating against his tariffs, because they feared both U.S. power and the loss of U.S. support. Now America’s weakness and unreliability have been laid bare.

And yes, ships transiting the Gulf of Hormuz will probably end up paying large tolls to vicious theocrats. Are you tired of winning yet?

MUSICAL CODA

Happy Union Victory at Appomattox Day

Armageddon may (or may not) be on hold for a little while, so let’s talk about other issues, like the state of the economy — in particular, what’s going on with job growth, where important things are happening.

Are they good things or bad? Well, it’s a bad news/good news/but the good news is really bad news situation.

I’m not talking about the month-to-month numbers. You may have heard that the Bureau of Labor Statistics estimates that the U.S. economy added 178,000 jobs in March, after losing 133,000 jobs in February. Neither number tells you much except that monthly job numbers are noisy. Better to smooth them out, say by looking at the average change over the past 6 months. Here’s what that number, in thousands, looks like since the beginning of 2024:

Clearly, we’ve seen a huge employment slowdown, indeed an employment stall, with recent rates of job growth close to zero. Trump administration officials keep claiming that the economy is booming, but in terms of job creation it’s anything but.

That’s the bad news. The good news is that the employment stall has not led to a major worsening of the unemployment rate or other standard measures of the health of the labor market. Here, for example, is the percentage of prime-working-age adults with jobs, which remains high by historical standards:

But how can we have stalling job growth without rising unemployment? Clearly, the “breakeven” rate of job creation — the number of new jobs that must be added each month to keep up with growth in the labor force, and hence to avoid rising unemployment — has suddenly dropped. Multiple recent estimates suggest that breakeven employment growth is now close to zero.

There’s no mystery about why this has happened. It’s all about the crackdown on immigrants. The number of working-age native-born Americans has been falling for years, basically because we’re getting older, with most baby boomers already over 65. Labor force growth has therefore depended almost entirely on immigration — but in this ICE age, it’s dangerous to be an undocumented immigrant and, all too often, even to be a legal immigrant if your skin is the wrong color. So immigration, both legal and illegal, has dried up, and net immigration — the difference between the number of people coming and the number going — has plunged and may well have turned negative.

One way to think about what is happening is that we’ve stopped gaining jobs, but we’ve also stopped adding workers, so unemployment hasn’t risen a lot. But one can also turn this around and say that as a result of anti-immigrant policies we’ve stopped adding workers, but we have also stopped gaining jobs.

This is bad news for anyone who believed the predictions of immigration opponents. They claimed that cracking down on immigration would open up more jobs for native-born Americans, but this hasn’t happened. In fact, the unemployment rate for native-born workers has gone up under Trump, although not drastically:

Source

There’s also another way in which the plunge in breakeven employment growth is bad news: It makes America’s already problematic fiscal outlook considerably worse, because future tax receipts depend on future economic growth — and economic growth will be much slower with zero growth in the labor force than it would have been with growing labor supply.

Consider the budget proposal the Trump administration released last week. This proposal purports to be fiscally responsible, with debt as a percentage of GDP falling slightly over the next decade. But this relatively rosy fiscal outlook depends crucially on the assumption that the economy will grow rapidly, 3 percent a year on average. This is much higher than the 2 percent growth projected by the Federal Reserve and 1.8 percent growth projected by the Congressional Budget Office. But you can see why Trump’s officials want to believe it: Rapid growth would help pay for large increases in military spending and growing outlays on Medicare and Social Security as the population ages.

Yet with no growth in the labor force, thanks to anti-immigrant policies, economic growth will have to come entirely through rising productivity — increased output per worker-hour. And 3 percent productivity growth would be very high by historical standards — in fact, we have never achieved sustained productivity growth that high, even during the postwar boom and at the height of the internet boom:

It’s possible that we’ll have a record-breaking productivity boom as a result of AI, but we shouldn’t count on it. And if AI’s economic payoff is less than miraculous, the end of net immigration will lead to a slow-growth economy.

One point in particular that’s relevant given where we are politically: Donald Trump, Pete Hegseth and others envision a world of perpetual U.S. military dominance. But how can we maintain that dominance if, as the plunge in breakeven job growth suggests, we’ve entered an era of basically zero growth in our work force?

So when it comes to jobs, the bad news is that job growth has come to a screeching halt. The good news is that this hasn’t caused surging unemployment. But the bad news within the good news is that the disconnect between job growth and unemployment reflects a collapse in the inflow of immigrants, which is really bad for economic growth and America’s position in the world.

Are we great again yet?

MUSICAL CODA

So the world’s greatest military power went to war with a poor, medievalist theocracy. It was an incredibly uneven match. Here’s are the GDPs of Iran and the United States in 2024:

Yet Iran won. The Iranian regime has emerged far stronger than it was before, controlling the Strait of Hormuz and having demonstrated its ability to inflict damage on both its neighbors and the world economy. The U.S. has emerged far weaker, having demonstrated the limitations of its military technology, its strategic ineptitude and, when push comes to shove, its cowardice.

We’ve also destroyed our moral credibility: Trump may have TACOed at the last minute, but he threatened to commit gigantic war crimes — and for all practical purposes our political and civil institutions gave him permission to do so.

How did this happen? Naturally, the Iranian Minister of War credited divine intervention, declaring that “God deserves all the glory.” His nation, he said, fought with the “protection of divine providence. A massive effort with miraculous protection.”

Well, theocrats gonna theocrat.

But I lied. That wasn’t a quote from an Iranian official. That’s what Pete Hegseth, our self-proclaimed Secretary of War, said while claiming that one of the worst strategic defeats in American history was a great victory.

There will be many analyses by military and strategic experts of the Iran debacle. But let’s not lose sight of the larger picture: We were led to disaster by the boastful ignorance of men like Trump and Hegseth — boastful ignorance made even worse by claims that God supports whatever they want to do.

With men like that running America, major disasters were just a matter of time. I’d like to think that they have been chastened by this debacle, that they have learned something. But I don’t believe that for a minute.

God help us.

MUSICAL CODA

Don’t worry, I’m not the patient — Jack (above) is. But between that and events, no regular post this morning.

This is America’s darkest hour.

Hi, Paul Krugman with an update Tuesday morning. Earlier today, Donald Trump posted on Truth Social,

A whole civilization will die tonight, never to be brought back again.

Not going to be a problem if we ever do get the war crimes trial that all of this deserves. A statement of motive, intent is completely clear.

I don’t need to say how vile it is. It is shocking, although at some level, if you didn’t see this as a real possibility, then you weren’t paying attention. Not much to say here except to talk about how those of us who are not Donald Trump should behave.

First of all, any military commander given orders to start destroying civilian infrastructure in Iran should disobey that order, should say it, should not even quietly resign. This is a time to stand up and make it clear that this is totally unacceptable. This is a violation of everything that the military stands for. It’s a violation of everything that America stands for.

Second, any member of the Trump administration: to continue in your position doing your job as Trump takes America on the course of becoming a criminal nation, a criminal terrorist nation, you cannot continue in good conscience.

Particularly, if you play any role in making this happen, then you are a war criminal too. Then you ought to be brought up someday before an international tribunal. But even if you’re in a peripheral role, even just putting your head down and saying, well, I’m an assistant secretary at the agriculture department or something like that, that’s not good enough. This is not a regime that you can serve in good conscience.

Republican politicians, any Republican, I mean, there are people already saying, “oh, you know, I don’t approve of destroying civilizations, but” — that “but” makes you an accessory to the crime, if you are failing to stand up against it.

And I really don’t like this notion that only Democrats have agency. This is a very common thing. All of this is made possible by the lockstep slavish obedience of Republicans. Nonetheless, Democrats have a role here, too. And this is not a time to attack Trump’s war because it costs too much money or to attack it because it’s bad for energy markets or raises the price of groceries. I mean, it does do all of that. All of that is true. But we’re way past that point now. We’re at the point where you need to unambiguously condemn the immorality and criminality of what’s going on. No mincing of words.

Damned if I know what’s going to happen. I mean, at some level, I think that the civilization that may be destroyed tonight is our own. I mean, are we civilized if we do this kind of thing? If America as a nation doesn’t stand up against this, what are we?

So, God help us. Normal life will continue. It’s going to be a really weird thing to be out there, you know, grocery shopping and taking the subway and all of those things. But this is, in a way, the defining moment. The fate of the whole American idea is on the line.

I have no idea how this ends.

Source: NBER

With all the other terrible news right now, you may not have noticed that Donald Trump is in the process of killing American science.

OK, that’s an exaggeration — but not that much of an exaggeration. The Trump administration’s latest budget proposal calls for a gigantic increase in military spending combined with severe cuts to social programs. But as the chart above shows, it also calls for debilitating reductions in research funding.

Furthermore, Trump appointees have already been strangling science by sharply reducing the rate at which research grants are approved. Here, for example, is the number of new grants approved by the National Science Foundation:

Source: Nature

Large numbers of existing grants have also been frozen or terminated, especially in the study of infectious diseases.

Add to this a sharp drop in visas issued to foreign students, who often play a direct role in research and who help support academic departments that do research:

Put all of this together, and much U.S. scientific research is set to come to a screeching halt — not a few years from now, but over the course of the next year or two.

This new assault on U.S. science is taking place at a time when the role of American science in the world has already been greatly eroded. The chart below, based on research recently reported by the National Bureau of Economic Research, measures national strength in science by the share of publications in highly ranked journals. In the 1990s the United States had more such publications than the rest of the world combined. Since then we’ve dropped into third place — well behind China and slightly below the European Union. And this was before the Trump administration’s attack on science had time to take its full effect.

Source

Some erosion in U.S. scientific preeminence was inevitable given China’s growing sophistication and wealth. But we’ve also fallen behind Europe, even though everyone says that Europe is lagging economically and technologically. Claims about Europe’s underperformance are, in fact, dubious if one looks hard at the data. But it’s still striking to see America lagging.

What’s going on? There are presumably multiple factors behind America’s scientific lag. But even before Trump II the growing hostility of the U.S. right to science surely had some negative effect. And since the rise of MAGA G.O.P. attitudes toward science in general have become overwhelmingly hostile. This is true even for the Republican rank and file:

And while I haven’t been able to find good survey data, it’s obvious that the anti-science turn has been even more pronounced — and began earlier — among the Republican political elite. Chris Mooney published The Republican War on Science in 2005, and even then was describing a longstanding trend.

Why have Republicans turned so anti-science? Part of the answer is that they believe that scientists don’t support them. And they’re right! A study of who scientists give money to shows that only a small percentage gave money to Republicans even 20 years ago, and that almost none of them donate to Republicans now:

Social scientists have always been strongly pro-Democratic, while there used to be a significant number of physical, “hard” scientists supporting the GOP. But these days physicists are almost as uniformly Democratic, or at least non-Republican, as sociologists.

Why are there almost no Republican scientists? It’s not a mystery. GOP political orthodoxy includes positions that are at odds with the scientific consensus on multiple issues, ranging from the validity of the theory of evolution, to the reality of climate change, to the efficacy and safety of vaccines. In each case the scientific consensus is solidly grounded in evidence. But even before the rise of MAGA the U.S. right was increasingly hostile to evidence-based policymaking — especially, of course, where the evidence is unfavorable to fossil fuel interests or quack medicine, both financial mainstays of right-wing politics.

So scientists don’t support Republicans, and the feeling is mutual. Today’s Republican Party doesn’t like science or scientists. It doesn’t like having its preconceived views challenged by appeals to evidence. It knows that very few scientists are on its side electorally. In general, it sees scientific research as a threat to its grasp on political power.

Add in MAGA’s combination of rabid anti-intellectualism and allergy to any hint of criticism, and one has the makings of a drastic anti-science turn in policy. “Ignorance is strength” might was well be an official MAGA motto.

And as I said, we aren’t talking about something that will happen over the course of multiple years: The U.S. scientific enterprise is threatened with severe damage, even collapse, over just the next year.

There are many reasons to find this prospect horrifying: Think of all the beneficial advances, affecting almost every part of life, that won’t happen because U.S. science — still crucial to the world — has been eviscerated.

But think, also, of America’s international standing. Can a nation that has forfeited its role as a leader, or even a contender, in global science, still be a Great Power?

No.

MUSICAL CODA

Terrorism, according to ICE — yes, that ICE — “involves violence or the threat of violence against people or property to further a particular ideology.” The official website goes on to declare that “Terrorists do not care who they hurt or kill to achieve their goals.”

If you haven’t read Donald Trump’s Truth Social post from Sunday, above, take a minute to do so. Don’t rely on sanewashed descriptions in the media. And then tell me that Trump doesn’t perfectly fit his own officials’ definition of a terrorist.

Don’t tell me that his cause is just, that the Iranian regime is evil. That’s what terrorists always say, and even if it’s sometimes true, terrorism is defined by its means rather than its ends — by its attempt to achieve political goals by violently attacking the innocent.

And that’s exactly what Trump is doing: he’s threatening to attack civilian infrastructure if he doesn’t get his way. And since Trump is talking about targeting essential services — power plants! — this is a threatened attack on people as well as property.

Later on Sunday Trump told Axios that the U.S. is in “deep negotiations” with Iran. Forgive me for doubting that anything like that is happening. But he went on to say that if there isn’t a deal by Tuesday, “I am blowing up everything over there.”

He has issued these threats without even a pretense that we will be attacking military targets, and if anything he seems to relish rather than regret the death and suffering his actions will cause.

On second thought, however, I shouldn’t say that Trump is making a threat of violence; he’s promising violence. That vile post isn’t part of a negotiating strategy, since there is, after all, zero chance that Iran will open the Strait of Hormuz by tomorrow evening. The Iranian regime almost certainly couldn’t open the strait on short notice if it tried: Military control in Iran has, by all accounts, been decentralized to local commanders to limit the effects of U.S. and Israeli decapitation strikes. So there’s no way people in Tehran could order the whole Iranian military to stand down at short notice even if they wanted to.

And of course they don’t want to, because they think Iran is winning. And so do Trump and the people around him, even though they will never admit it.

For terrorism is a strategy of the weak. It’s what extremists do when they lack the ability to achieve their goals through military action or other non-criminal means.

And that’s where Trump and his officials find themselves. They inherited a powerful military (which they are rapidly degrading), but for all its firepower this military lacks the wherewithal to open the Strait of Hormuz to normal traffic. So the Trumpists are gearing up to impose suffering and death on innocent civilians instead, even though this suffering and death will do nothing to achieve America’s objectives.

I don’t know what Trump will do when his deadline passes and the Strait is still closed. He probably doesn’t know either. But he is promising to commit war crimes on a massive scale. And the duty of everyone with any influence who isn’t part of Trump’s inner circle is to do all they can to stop him.

Most immediately, military officers should be aware that they have the right and the duty to disobey illegal orders. It’s incredible that we have gotten to this point, especially so quickly, but here we are. You may recall that Admiral Alvin Holsey resigned in December, reportedly because he refused to be a party to illegal attacks on supposed drug boats. What Trump is now saying he will do is infinitely worse. And a refusal by senior officers to participate in war crimes may be the only thing that could stop this evil in its tracks.

Now is when we find out how completely our once honorable military has been corrupted.

Beyond the military, every politician, dare I say every public figure, in America should make it clear that Trump is not acting in their name.

This is not a time for Republicans who know — and most of them do know — that Trump has gone completely off the rails to remain obsequious for fear that he might endorse their primary opponents. One hopes that there are still a few genuine patriots left on that side of the aisle.

It is also not a time for Democrats to listen to strategists who urge them to stay silent on foreign policy and talk only about grocery prices. As it happens, that’s even bad political advice: Public disdain for Congressional Democrats has a lot to do with perceptions that they are weak and ineffectual, and ignoring Trump’s criminal madness will only reinforce that perception. And there has been no rally-around-the-flag effect from this war, which is growing more unpopular by the day.

But in any case, political considerations should take a back seat to civic duty.

The horrible but undeniable fact right now is that America has a terrorist president. And the whole world knows it. But we still have a chance to show the world that he is an aberration, that we are not a terrorist nation. And we can do that by standing up for the values that have always defined us.

Hi, I’m Paul Krugman. Sunday morning update. Yesterday, I talked about how awful Trump’s message about glory to God and all of that was, but it’s looking much, much worse today. I’ll quote Trump in a second.

But let me do a Heather Cox Richardson here and talk about history for a second. Think about what Abraham Lincoln, a president who was actually winning his war, said in his second inaugural. You’ve all probably heard the magnificent conclusion, which begins,

with malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in.

Determination, humility, decency, Now, let me read you Donald Trump’s Truth Social post from this morning:

Tuesday will be power plant day and bridge day, all wrapped up in one in Iran. There will be nothing like it. Open the fuckin strait, you crazy bastards, or you’ll be living in hell. Just watch. Praise be to Allah.

What happened to us? This is not the country we were supposed to be.

If Trump is actually going to give the order for massive war crimes, for destruction of civilian infrastructure, power plants, bridges, which will, among other things, lead to a lot of deaths in Iran, will the military obey it? A year ago, I would have said no.

But what we do know now is that, first of all, there turns out to be at least a significant MAGA component inside the officer corps. And we know that Pete Hexeth has been systematically corrupting, dismantling the military over the past 14 months. Generals who raise ethical concerns have been fired. Officers who even just want to be intelligent about warfare. and not believe that it’s all about warrior ethos and lethality have been fired, so it’s quite possible that there’s a quorum of officers who will follow instructions to commit war crimes.

You can get even more pessimistic. Tim Snyder has been arguing that we’re basically in preparation for a coup, that somehow or other the war will be a pretense and arguing that this insane expansion of military spending in the latest Trump budget is a bribe to the military.

I hope he’s wrong. But in any case, my God, if Trump gets his way, and if he doesn’t chicken out —and I think TACO is greatly overrated, I think all too often Trump actually does follow through on his insane stuff.

It’s entirely possible that basically by this time Tuesday, America will have established itself as one of the world’s great villains. I don’t want to be here, but, you know, be warned. This is happening. This is real.

It’s the most astonishing, awful thing that I’ve ever seen, and we’ve all seen a lot of awful things. Take care, I guess.

On July 15, 2007, the New York Times published an article titled “The richest of the rich, proud of a new Gilded Age.” The article was centered on a profile of Sanford Weill, CEO of Citigroup, who, like others in the financial industry, believed that they were leading America into a new era of prosperity — justifying their immense wealth — and that the government should scrap regulations that were getting in the way of financial innovation.

Exactly one year and two months later, Lehman Brothers failed, plunging the world into the worst financial crisis it had seen in more than 70 years. Many of the innovations of which Weill and others were so proud had, it turned out, created a system of poorly regulated financial institutions — so called “shadow banks” — that were exposed to a 21^st-century version of the vast wave of bank runs in 1930 and 1931 that turned an ordinary recession into the Great Depression.

But the 2008 crisis was 17 years ago, and political support for the precautions introduced after 2008 has waned. The Treasury Department is moving to gut the Office of Financial Research, which monitors risks of financial crisis. There is once again a push to deregulate, to embrace financial innovations like crypto that arguably recreate the risks that brought the world economy to its knees in 2008. Shadow banking has had a major revival; by some measures, as I’ll explain, shadow banks are bigger relative to the financial system as they were when Lehman collapsed. And it’s only reasonable to worry about the possibility of a new financial crisis.

At the moment these worries are centered on private credit — lending by institutions that, unlike banks, are effectively shielded from public disclosure and regulation. What’s actually on their books?

After two lenders went bust last fall, Jamie Dimon, CEO of JPMorgan Chase, made waves with his comment that “When you see one cockroach, there are probably more.”

The good news is that providers of private credit aren’t banks, so that even if they turn out to have a lot of junk on their books it probably won’t have as much negative impact as bank losses in 1930 or shadow bank losses in 2008. But these companies aren’t exactly not banks either. And the rise of private credit is part of a broader growth in weakly regulated financial institutions that is making all of us who remember 2008 increasingly nervous.

So, today’s primer will be about private credit and the broader re-risking of the financial system. Beyond the paywall I will address the following:

1. How financial crises happen

2. The growth of private credit and other “non-bank financial intermediaries”

3. The risks from private credit

4. The big picture: Is it 2008 again?

Read more

Not my usual thing. No economics, no analytics, just I felt I needed to say something. On Wednesday, Trump gave a speech, which was... pretty depressing. He was low energy, listless, and seemed to be disconnected from reality, insisting that everything is going great in this war and everything is going great across the board. And in terms of the closure of the Strait of Hormuz, well, it’s somebody else’s problem. And the Strait may naturally open by itself, which didn’t sound like leadership.

In some ways it sounded like Trump, always living in a fantasy world in which things are going his way. But if you thought about the outcome for the world, it seemed to be pointing towards the U.S. never admitting it openly, but implicitly basically giving up and leaving a stronger Iran, but with the Strait of Hormuz opening up — maybe with tolls collected by the regime in Iran, and just a diminished, weakened U.S., but better than some of the alternatives.

Today Trump put up a Truth Social post, which said that if Iran doesn’t open up the Strait of Hormuz within 48 hours, “all hell will reign down on them.” That was how he put it. All hell will rain down. Misspelled rain, but OK. And then finished it up with glory be to God. GOD in caps.

Wow. So first of all, this is a completely different picture suddenly. Aside from the Strait of Hormuz not being our problem to we will commit massive war crimes, presumably. That’s the only thing that makes sense here, unless they open it up, which is pretty bad.

And also... I don’t think Trump has ever said “glory be to God.” That doesn’t sound like him. That sounds almost as if Pete Hegseth wrote this post, which maybe in some sense he did. The misspellings and all do look like Trump in his own hand, but it feels like this is the influence of our religious fanatic Secretary of War, or as people in the Pentagon apparently call him the Secretary of War Crimes.

This is really bad. It’s hard to see what happens in 48 hours. It’s clear that Trump, for all his pretense of, “I’m always winning,” is aware of how completely he screwed things up, that he’s aware that he has basically led America into an epic strategic defeat. I don’t think he cares about that from the point of view of America, but he is realizing what this has done to him — that he will probably quite rapidly lose his grip on U.S., politics, and certainly to the extent that he cares about his legacy, it’s not going to be his wonderful ballroom. It’s going to be that he’s the man who single-handedly led America to one of its greatest defeats ever. But now what?

It would be one thing if he just kind of slunk away into the night, which is what we would have hoped would happen, but instead it sounds like he’s unable to accept it and that he is going to try and do something truly awful in an attempt to somehow redeem himself and the situation.

If we had a functioning democracy, this would be 25th Amendment time. This guy should not have any authority at all. Finger on the button, although I don’t think we’re talking about nukes, but he shouldn’t have any authority on matters of state violence when this is the kind of mood he’s in. Just in general, although religiosity is often expected of American leaders, saying glory be to God before you unleash violence, that is not what used to be the American way.

Anyway, I’m scared. I wonder very much what the next few days will bring because this is looking like basically a president who is losing it and unfortunately losing it in a way that can really make the world a much worse place very fast.

I guess enjoy the rest of your weekend.

Transcript

Janet Gornick Good evening. I’m Janet Gornick, Professor of Political Science and Sociology and Director of the Stone Center on Socio-Economic Inequality here at the Graduate Center. Our center is the co-host of this evening’s event in partnership with our Office of Public Programs. It’s my great pleasure to welcome you here this evening. Welcome to the in-person audience here in Proshansky Auditorium, and welcome to the large virtual audience as well. This evening’s event is one of the many public lectures, panels, and conversations offered here at the Graduate Center at the City University of New York throughout the year. And at the Graduate Center, we’re proud of our history of applying research and scholarship to address societal challenges, and tonight’s conversation fits in with that tradition. This evening, we are extremely pleased to welcome Professor Lina Khan to the Graduate Center. Her first time on our stage here. She’s well known to us and to many of you for her foundational work on antitrust and competition law, and more recently for her crucial role as co-chair of Mayor Zohran Mamdani’s transition team.

Professor Khan in just a few minutes will be joined in conversation with Professor Paul Krugman.

So let me first tell you what to expect this evening. After my brief introduction, our two guests will hold a conversation led by Professor Krugman. And while they’re conversing, audience members will have an opportunity to write questions on index cards that you picked up on your way in. The public program staff will come down the aisles at about 7:10 to collect your index cards, and they’ll be sorted and handed to Professor Krugman. So let me make a quick plea to those of you who submit questions. Please make them relatively brief and print as clearly as possible, ideally in block print so that Professor Krugman can read what you’ve written. Yep, that’s necessary.

And then starting at 7:30, our guest will address your questions, and we’ll close at 7:45.

So let me tell you briefly about Professor Lina Khan. A graduate of Williams College and Yale Law School, she got her start in antitrust as a business reporter and researcher, examining consolidation across markets from airlines to chicken farming. In 2017, during her third year at Yale Law School, the “Yale Law Journal” published her article called “Amazon’s Antitrust Paradox”. The article had a huge impact in legal circles, legal and business circles in the United States. And the following year, “The New York Times” described it as reframing decades of monopoly law.

Professor Khan then went on to serve as chair of the Federal Trade Commission from June 2021 until January of 2025. And while at the FTC, she focused on exercising the full suite of the FTC’s statutory authorities, regularly engaging with public audiences and ensuring that the agency updated its tools to accommodate the reality of new markets. Her priority initiatives included reinvigorating antitrust and consumer protection enforcement, tackling non-compete clauses, taking on illegal contact, conduct, excuse me, that deprives Americans of access to affordable high quality healthcare, and protecting people’s sensitive data from surveillance. Her work did not go unnoticed. In 2023, Yahoo Finance dubbed her the most feared person in Silicon Valley.

And now in her post-FTC Life, she’s Associate Professor at Columbia Law, and she served as, as I noted, the co-chair of Zohran Mamdani’s mayoral transition team. So this evening, this evening, Professor Krugman will query her about multiple aspects of her career and her work, focusing especially on questions related to affordability, antitrust, and inequality.

And before I step off the stage, let me say a few words about Paul Krugman, who is well known to many of us here at the Graduate Center, and surely to many in the audience as well. Paul Krugman is a research professor in the Graduate Center’s PhD program in economics and a senior scholar in the Stone Center. Before joining the Graduate Center in 2014, he was Professor of Economics and International Affairs at Princeton. Professor Krugman’s scholarship has been honored countless times, including in 2008 when he received the Nobel Memorial Prize in Economic Sciences for his work on international trade theory.

He’s the author of more than 200 articles and many books, most recently “Arguing with Zombies, Economics, Politics, and the Fight for a Better Future”. In addition to working with us here at the Graduate Center, he co-authors textbooks on micro and macroeconomics with Robin Wells. And of course, many of you know him best for his 25 years writing op-ed columns for “The New York Times”. Last year, he transitioned away from “The Times”, but he surely has not left the world of public engagement. You can now find him on Substack, where every day he’s writing, interviewing diverse thinkers and frequently posting music aimed at raising his readers’ spirits. So welcome to our two guests. Paul, I turn the evening over to you.

Krugman Thanks Janet. Okay, so I should admit to everybody that I have a conflict of interest here, which is I think everybody here wants to hear about the Mamdani administration and what it can do. But I really wanna talk about theories of monopoly power, dynamic strategies and network externalities. And so we will get to stuff that actually matters later, or matters to people here. But I wanna talk, I wanna start with a little bit of sort of intellectual biography.

So tell me, I’ve tried to read some of it, but tell us about your start working on antitrust. ‘Cause you started very, very early on the issues. And then wanna talk about Amazon and all that.

Khan Well, it’s so wonderful to be here, and a great honor to be in conversation with Professor Krugman. So I really got my start as a researcher and reporter. I, you know, graduated during the financial crisis and had originally wanted to be a business journalist. It was very difficult to find journalism jobs, and so I ended up landing at a think tank, where my job was really to do deep dives into various markets across the US economy, and in particular study how the structure of these markets had changed.

And so I would do, you know, spend months looking at the structure of, say, the book publishing industry or the chicken farming industry or the airline industry, and got a sense of how over decades we had gone from having,

in some cases, dozens of competitors to now increasingly, market after market just dominated by a very small number of companies. And my job was to document what the effects of that consolidation had been.

You know, sometimes the consolidation can actually be even more extreme than is visible to us. So if you go to the grocery store, you may see, you know, dozens of brands of laundry detergent or diapers or various kinds of snacks. But even there we see just a couple of companies control market after market, and so there’s actually an illusion of choice. And through doing this research, it was clear that oftentimes the purported benefits of consolidation had been overstated. And in fact, people were left much worse off, be it from the consumer perspective, where companies had started to use the lack of competition to jack up prices or deprive people of choices. But also for workers, for small businesses. I spent a lot of time studying agriculture markets in particular, where we’ve seen, you know, be it in chicken farming or meat processing or you know, beef, you have on the one hand, you know, tens of thousands of farmers, on the other hand, millions of consumers, but just four companies in market after market connecting them. And what that has meant practically is that consumers have been paying more for meat, even as farmers have been making less. And so there’s a clear economic impact.

But there was also just abuse of power that we were seeing, because oftentimes farmers’ entire livelihood could be dependent on just a single firm. And that firm would, you know, dictate terms, would engage in all sorts of abusive contractual practices. And so that got me interested in this body of law that we have in the United States, the antitrust and anti-monopoly laws that were designed precisely to prevent extreme concentrations of economic power. These laws go back to the Industrial Revolution where we had seen enormous technological progress, but similarly a lot of concentration of power.

And there was a concern among lawmakers that these new trusts and industrial titans were really abusing their power in ways that was leaving Americans worse off economically, but that it was also undermining core principles of freedom and liberty. And so that was really my entryway into this. And I just became fascinated by this question of how it was that we had so much consolidation in all these markets and extreme concentration of economic power, even as we had a set of laws on the books that were supposed to protect us from precisely that.

Krugman Okay, and I, yeah, I thought that was really revelatory that so many, you know, in economics textbooks, probably including mine, ours, we, you know, always present agriculture as the quintessential example of a highly competitive industry. But in practice it’s not. The farmers are competitive, the consumers are competitive, but the middlemen are the, okay. I kind of see how that led you to Amazon. So this is this, you know, standing in between. A lot of sellers, a lot of buyers, but someone, actually, that’s the original robber baron was the idea of the robber baron with this castle along the Rhine, extracting tolls from everybody who passes by. But tell me about the Amazon paper. Because I thought, you know, I read it, but I think people should know what it is you did, and I wanna follow up on that.

Khan You’re absolutely right that there are real parallels even among markets that can seem quite different, in that, you know, be it as a chicken farmer or as an author, if your livelihood is suddenly at the whims of a single gatekeeper or a dominant intermediary that is controlling access to markets, the type of abusive practices can actually start to look pretty similar, even in seemingly disparate markets.

So the Amazon paper similarly resulted from doing a lot of business and market research. I spent a lot of time talking to two sets of market participants. One was the set of businesses that were selling through Amazon, and the second was investors and financial analysts that were looking at Amazon more through a long-term financial prism. And this was around 2012, 2013. The kind of common policy wisdom in DC was that Amazon, along with these tech giants, you know, had revolutionized digital markets, that Amazon in particular was, you know, somewhat irrational. It kept losing money, it seemed to be, you know, relentlessly dedicated to making things cheap. And so the idea that Amazon could ever pose some kind of competition problem didn’t really compute for people, because we had come to interpret our antitrust laws primarily through the prism of what the effect on short-term prices would be. And so I ended up using a lot of that research to basically use Amazon to tell a broader story about how various changes in how we now do antitrust had created all sorts of blind spots.

You know, some of the core business practices that Amazon used to develop its network, to deepen its moat were business practices that in the ‘60s or ‘70s would’ve been viewed pretty skeptically by law enforcers. But because of this intellectual revolution that had been, you know, spurred by people like Robert Bork, by people kind of generally known as the Chicago School, that we were now oftentimes facilitating the very types of concentrations of power that these laws were supposed to be skeptical of. And so the article was about Amazon and about Amazon’s business practices, but it was really using the company to tell a deeper story about blind spots that I thought the current antitrust regime had.

Krugman And you got a tremendous amount of, both a lot of people paid attention, but also a lot of pushback, right? People were very upset. And it feels like it was a very long time ago, because in 2017, I guess when it was published, you know, how could you be critical of Amazon? And seems like it’s a very different world now.

Khan It was interesting. I mean, the piece came out in January or February of 2017, and then that summer, Amazon announced it was planning to buy Whole Foods. And I remember that was one of the first moments where the response to one of these big acquisitions seemed a little different, because it seemed to prompt this question for the public of, are there any limits, and what are those principles?

And so I remember that acquisition ended up spurring a lot of discussion in particular.

Krugman Yeah, I mean, what strikes me is that the idea that companies that have established these kind of network positions, these kind of centrality and everybody has to use them, that they would abuse that, seemed, you know, not many people were saying that 10 years ago. And nowadays it’s everywhere. It’s, I mean, the word of the year I guess like three years ago was Cory Doctorow’s enshittification, which was basically largely about Amazon and Facebook and all of these companies abusing their sort of central position in markets. And do you feel vindicated by all of that?

Khan You know, it’s good that there’s been collective learning about, you know, the challenges that these firms can pose, you know, resulting in major lawsuits being filed. You know, Google has now been found to be an illegal monopoly, you know, three times over in separate cases. The case against Amazon is still proceeding. So yeah, I mean, you know, I do think that there’s been a greater awareness of how these markets in particular can be prone to monopolization, right?

I think one of, the big shift was that in the early 2000s, there was a view that to set up one of these companies, all you need is, you know, a couple of high school dropouts in a garage with a good idea. And that the entry costs were very low, and that, if anything, the government should err on the side of inaction because these markets were so fast-moving, so dynamic that we didn’t want these, you know, arrogant government officials to start meddling. And so there was a, you know, almost a deliberate policy choice to err on the side of inaction from an antitrust and competition perspective. And I think, you know, fast forward even a decade from that time, there was a much greater recognition that actually there’s something about how these digital markets work, this concept of network effects, the ways that data advantages kind of reinforce themselves, that maybe these markets are even more prone to monopolization rather than less. And so maybe there should be more action and more scrutiny earlier. And so I think there was an inversion of some of those prior assumptions. –

Krugman Yeah, for people in the audience, network effects here really means that there’s a lot of these companies’ services that everybody uses, because everybody uses them, right? There’s a sort of circularity. I mean, you know, as many of us know, it’s really, really hard not to buy from Amazon now, and this is true of a lot of these companies. And you were talking about that quite early as a risk at a time when people were mostly praising it.

I’m gonna actually throw in a curveball though, which is not part of my plan here.

But one thing that, I don’t know if you’ve thought about this, but one thing that strikes me and that is really very different from the earlier antitrust debate was we would talk a lot about the power of, you know, General Motors, or the power of of corporations. But what’s interesting about this group is that these are not just corporations. They actually happen by and large to be sort of individual people, that Amazon is not just Amazon, but it’s Jeff Bezos. Facebook is not just Facebook, it’s Mark Zuckerberg. And this is, you know, this class of extraordinarily wealthy people, that’s something that’s kind of new, or it’s both new and old. It’s hearkening back to the 19th century. Have you thought about that at all?

Khan It’s a really interesting point. And it gets to the fact that, you know, there were massive intellectual and ideological changes in how we do antitrust. But that was just part and parcel of a broader set of changes that we’ve seen across laws. And that includes things like corporate governance. And so, you know, even if you look at how the boards are structured of a company like Facebook, there was much greater reliance on basically creating different segments of shares. And so basically creating kind of super-weighted shares and ownership for people like Mark Zuckerberg, so the types of corporate accountability that you might have had through a board previously really don’t exist for individuals like him. And so there’s been not only consolidation across markets, but consolidation of power within the firm and within the corporate structure, as you’re referencing,

Krugman Which means that we kind of get into the political arena as well, ‘cause that’s so important there. And I shouldn’t talk, but just plugging something that my former employer, “The Times” just had a report that said that in the 2024 campaign, 300 billionaires accounted for 19% of all political contributions in the United States, it’s really sort of 300 families, and a fair number of them are in fact these companies that you were writing about in 2017.

Okay, so you got into the political arena. You became a very young, very dynamic and very controversial chair of the FTC. So what was that like? Actually, how did that happen? How did you get, how did Joe Biden end up recruiting you?

Khan- I mean, you’ll have to ask him, you know, what that process was like for the White House. But for me, I had spent some time working as a staffer for a congressional committee. The judiciary committee has an antitrust subcommittee where we actually did a deep investigation into Facebook, Amazon, Apple, and Google and, you know, had been doing that work within government. When that wrapped up, I went back to academia and then, you know, the election happened and I got outreach to see if I’d be interested in serving at the Federal Trade Commission.

So it was a remarkable honor to get to take the helm there, especially during a time where it seemed there was a real appetite to rethink how we are using these laws, enforcing these laws. The Federal Trade Commission is an agency that was created back in 1914, has been given pretty significant powers by Congress, but for several decades, especially after the Reagan administration, had been kind of, you know, narrowing its ambition and really I think punching below its weight in some cases. And so it was an opportunity to come in and really reinvigorate the agency.

Krugman Okay, and so tell me about what you think were some of the notable targets, cases that you tried to go after, industries that you thought were interesting.

Khan- Well, we were, you know, the FTC is by all accounts a pretty small agency. At its peak when I was there, it was around 1400 employees. And so we had to be extraordinarily focused on prioritization, and, you know, every investigation you’re doing is another investigation you’re not doing. So there were several factors that we looked at, one of which was just how significant is this industry for people’s day-to-day lives? And something that rose to the top of course was healthcare, where across different parts of the healthcare supply chain, we have similarly seen a lot of consolidation, be it among hospitals, be it among pharmacies, be it among these middlemen known as pharmacy benefit managers.

And in healthcare in particular, we’ve seen not only horizontal consolidation, but also vertical integration. So the same player that is the health insurer is also owning the pharmacy, is also owning the pharmacy benefit manager. We’d also seen trends such as private equity coming in and rolling up different physician practices and then jacking up prices. And, you know, week after week, month after month, we would hear from Americans about just how devastating this was for their day-to-day lives. I mean, we would routinely hear from people about how they were having to ration lifesaving medicines, skip doses of lifesaving medicines, people who had had family members pass away because they didn’t wanna, you know, use up all their insulin because it was so expensive. And so the kind of stakes here are literally life or death. And so we spent a lot of time focused on healthcare markets. That included things like whenever pharmaceutical companies were trying to merge or buy one another, we would be especially vigilant to make sure that these mergers were not gonna be used to snuff out new innovative drugs that actually would have brought down prices.

We also looked very closely at these middlemen, these pharmacy benefit managers, because we’d heard a lot about how their practices were both contributing to higher drug prices, but also squeezing out independent pharmacies and resulting in higher prices there. So I would say, you know, I think the tech work of the FTC gets a lot of attention, but I think, you know, healthcare was just as important an area of focus for us.

Krugman Okay. And yeah, there were some of those, there were some sort of scandalous acquisitions and then exploitations involving drugs. I’m trying to remember now. I’m sure you know better than me. But there were some really drastic cases that made headlines. And did you feel that you made headway on those?

Khan Yeah, I mean, you know, one of the most notorious was Martin Shkreli, AKA Pharma Bro, who, you know, bought up a drug and jacked up the price thousands of percent. And you know, that was a case that the FTC litigated, the FTC won, and then also secured a lifetime ban for Martin Shkreli, where he is not allowed to be in the pharma industry anymore. There’s some other cases that are still ongoing in healthcare, but we did successfully stop hospital mergers across the country. There’s a lot of evidence that when hospitals merge, prices and costs tend to go up and quality tends to go down. We’ve also seen the rise of healthcare deserts across the country, where, you know, people are gonna have to drive, you know, over 100 miles to get to the nearest hospital as opposed to 10 miles. And so, you know, there’s a lot more work to be done there, but there was some progress.

The other big area of focus for us was labor markets, where, you know, there was a lot of attention on how market power affected consumers, but over the last decade we’ve also seen more and more economic research showing that labor markets can actually be much less competitive than people had previously assumed. And that that also ends up being bad for workers in terms of resulting in lower wages, more stagnant wages. We were very focused both on how mergers were affecting workers, and so if a merger would be proposed, we would look not just at its potential impact on, say, patients, but also on, say, healthcare workers. And then we were very focused on this issue of non-competes, with this contractual provision that basically locks workers in place. –

Krugman Yeah, people don’t know, again, non-competes, maybe a fair number of people in this audience have actually encountered it, but yeah, you non-compete is basically saying, you know, if you leave, you cannot basically work for somebody who’s competing with us, can’t take a job, you can’t yourself compete with us. It’s a tremendous lock on the labor market. And did you make any progress? I’m unclear exactly how far we got on that.

Khan Yeah, so these are provisions that started off in the C-suite, but basically have proliferated. So now a conservative estimate is that one in five Americans has been governed by a non-compete, and that these are affecting, you know, security guards, janitors, fast food workers, people making, you know, close to minimum wage.

And that these have a real abusive effect. I mean, when we put out, so basically we both brought lawsuits against coercive non-competes that resulted in companies dropping them for thousands of workers. For example, we brought a case against the security guard company in Michigan that had been locking down, you know, again, minimum wage-making security guards, preventing them from taking jobs that were better fits. And this was resulting in people’s wages being depressed.

We also put out a proposed rule that would basically eliminate the vast majority of non-competes in this country.

And when we put that out, we got 26,000 comments from people across the country, from every state. We heard, for example, from a bartender in Florida who shared how she had been harassed at her job. It spurred her to go find another job. And when she, you know, basically made moves to go start working at a different restaurant, her original employer basically threatened her with a lawsuit for tens of thousands of dollars. And so she had to choose basically, you know, do I try to escape this horrible work situation where I’m getting harassed, or do I basically risk becoming bankrupt because of this lawsuit? And so, you know, there’s a financial impact here, but there’s also just a real coercive impact on people’s day-to-day lives. And it was just horrifying, candidly, to just see all the ways that employers have abused these contractual provisions.

Krugman Okay, one more question about the past before we come up to New York City. Your time at the FTC coincided with the big inflation spike, which is like, roughly 2021 to 2023. And certainly up my alley, there was a lot of back and forth and quite angry debate about the role of monopoly power, about sellers’ inflation. How much of this is actually overheating of the economy or supply chain, and how much of this is just companies exploiting, you know, taking advantage, and who will notice if we raise prices now? And how much did you weigh in on that, and do you have views about it?

Khan- I mean, we certainly saw our job as making sure that no firm was, that Americans were not facing higher prices because of illegal business practices. And that took a couple of forms.

You know, when you have industries that are more concentrated, so if you have a smaller number of competitors, it can be easier for them effectively to collude. This is kind of, you know, anti-competition one-on-one, the idea that if you have three firms in a market, it’s gonna be much easier for them to basically fix pricesthan if you have 300 firms, where it’s just much more difficult to coordinate. And in as much as we had seen markets where you would now have had a smaller number of firms, and sometimes it seemed like they were using their earnings calls to even, you know, flag for one another that, “Hey, we think, you know, we’re gonna keep prices high,” and do some of that signaling. That was something that we monitored.

I think more generally though, there was this issue of how longstanding trends of consolidation had made markets more fragile, so that a single disaster in one place could drive up prices much more acutely. We saw this, for example, with infant formula, where back in 2022, there were major shortages in infant formula nationally. Infant formula is a market that has consolidated, there are four major manufacturers. And these shortages were a result of basically a contamination in one factory in America. And it was just an illustration of how concentrating production can also concentrate risk. And so that’s another way in which we saw a real relationship between diminishing competition and, you know, higher prices and more situations where you had greater vulnerability to abrupt spikes in prices.

Krugman Actually, that’s something I never thought of. Because I was aware very much during that period of how concentrated production was physically. It was always a kind of a shock to discover there was something that was used around the world, and a fire in one factory somewhere could disrupt. But I never really thought of that as being linked to, that the concentration was not just that the technology mandated it, but it was actually the market consolidation, was actually the monopolization. So you thought that that was a significant factor in all of that?

Khan- I mean, look, it’s, you know, you always want more empirical research figuring out what’s going on. And you wanna do, you know, market by market analysis. But certainly there were some markets where it did seem there was a relationship between increased physical concentration of production and, you know, greater susceptibility to these cascading risks.

Krugman Okay, well jump forward not that far in time, but move north a couple of hundred miles from DC. So how did you get, again, you may not know exactly, but how did you end up being associated with Mamdani? Was it during the campaign? Was it already before he won? And tell us about that.

Khan So yeah, when Assembly Member Mamdani was running for mayor last spring, he reached out and wanted to chat about, you know, different parts of his agenda and what he was thinking about, especially on this issue of affordability. He’s somebody that is extraordinarily curious, and he really wanted to understand and get to the bottom of what are the real drivers of increasing costs for people across the city, be it for them as consumers, be it for them as workers, be it for them as small businesses. And, you know, one of the first kind of videos that he did that really took off was one of him going to a halal cart driver, and saying, “Hey, I noticed that your chicken and rice used to cost $8 a couple years ago, and now it costs $10. Why is that, what happened?”

And so he was really oriented towards understanding substantively why is it that people are seeing higher prices? And so we, you know, met and spoke and chatted about, you know, what are some of the policy levers that New York City and a mayor in particular may have at his disposal? And so, you know, we stayed in touch. His team would kind of ask for feedback on some of their campaign proposals, on, you know, taking on corporate power. And so I was, you know, really thrilled to see him win, and then was honored to get to co-chair his transition.

Krugman Okay. And so you had, you were part of the transition, but not in the, or in addition to the usual sense. You had a team that was specifically working on these issues. You weren’t just sort of helping him pick the various offices?

Khan- So a main part of the job was helping assemble the team. I in particular was focused on the top economic and legal jobs. But alongside the appointments and personnel process, I was also helping on policy planning and wanting to make sure that, you know, coming in on day one as mayor, he had a robust set of options before him in terms of what he might be able to do to bring down costs. And so we had, you know, a little, a group of folks that were running those things down, be it in the context of small business or consumers or workers or energy. And so there was both a personnel and a policy component.

Krugman Okay, does that policy team still exist in some form? I mean, I know that you don’t formally have a role in this mayor’s administration, but do you still have a group of people that are working on this?

Khan So I mean, you know, now that he is mayor, he has a full team internally. We have kind of a loose coalition of folks outside that, you know, are still very eager to make sure that they are being provided, you know, policy options, and able to think expansively about what some of those tools and authorities may be.

So there is an ongoing policy process. I know there are a lot of organizations across the city that are kind of, you know, working on making sure that city hall is well-equipped when it comes with policy proposals.

Krugman Yeah, I have to say, it always shocks me when I think about how little I know about how anything is run in the city I live in. But anyway, it’s quite, it’s an enormous thing. How big is the city? There must, I have no idea how many employees the city even has, but it’s enormous.

Khan Yeah, I mean, it’s a huge bureaucracy. And it was really interesting just even having to learn kind of new agency acronyms and just like how the org chart works. And it’s phenomenal. I mean, it’s a enormous responsibility, and it spans everything from, you know, needing to make sure that when there’s a huge snowstorm, that, you know, snow’s plowed, that the streets are safe, to thinking more long term about things like housing, and how do we make sure that New York is a place where people can actually afford to live?

Krugman Yeah, we have a severe acronym shortage, by the way. I mean, I was having a whole conversation with somebody I know, who’s actually in the audience, about DOE. We were going back and forth, and it finally occurred to me that they were talking about the Department of Education. I was thinking of the Department of Energy in Washington. And so the conversation was total nonsense because we had two different DOEs.

Anyway. So let’s talk about affordability in New York. What are the areas where you, I mean, mayor has somewhat limited power, but maybe more than people think. What are some of the areas where you think that really things can be done? I wanna get into them a bit. And then well, if there may be some big ones that we need to talk about further.

But tell me, so I know that you’ve talked about, you’ve been, you know, the press reports have emphasized things like food delivery, real estate brokers’ fees. Can you tell us a little bit about each of those?

Khan So I think about it as different categories. You know, I think there’s one category that really is about taking on these extractive middlemen. And you know, you can call it market power, you can just call it corporate abuse. But I think we’ve seen across markets just this nickel and dimeing. You know, the proliferation of these junk fees, where a company will advertise one price, and by the time you go to check out it’s, you know, suddenly, you know, $20 more expensive because of these random service delivery fees, and you don’t really know who that’s going to or what it’s for.

We’ve seen things like the rise of subscription traps, where firms will make it very easy to sign up for a subscription, or you’ll be enrolled without even knowing, and then to cancel you have to jump through all of the hoops. And so, you know, there was a focus on some of these just bread and butter consumer protection issues. And so some of the first executive orders that the mayor signed were directing his administration across the board to be very focused on making sure that we had fair pricing, and that people were not being taken advantage of in this way, be it in the context of food delivery, be it in the context of housing.

The administration is doing these rental rip-off hearings to really hear from people about what are some of the worst abuses that they face from their landlords, be it in the context of these random fees or even in just, you know, basic conditions and habitability. So there is a corporate accountability plank to the affordability agenda that the mayor has been very open about wanting to double down on.

Then there’s a part of the affordability agenda that’s really about making sure that markets are fair and honest, and that in areas like housing, you know, that you can actually build. He’s also very focused on small business, and making sure that small businesses are not being squeezed, again, be it by arbitrary middlemen or by rules and regulations that are outdated or don’t make sense or were pushed at the behest of big firms, but don’t really make sense for small firms. And so those are just a couple of the kind of core pillars of how they’re thinking about affordability. –

Krugman So some of these things, I mean, food delivery, actually again, I didn’t really look into it until I started doing research for this talk, but food delivery is one of those, it’s a lot like, in some ways, like Amazon. The drivers are atomistic, a large group, and the customers are a large group, but then largely DoorDash and a couple of others just sort of stand in the middle. And it must be very similar issues to the kinds of things you were worried about.

Khan Yeah, there are a lot of analogies between how these dominant platforms operate and abuse their power, be it in the context of food delivery, be it in the context of ride sharing. And so there’s kind of a, you know, take on extractive middlemen, holds, you know, powerful corporations to account component. There is a component that’s about making sure that we don’t have, you know, regulations or red tape that are skewing the market away from allowing small businesses to compete. And then I would also say there’s a pillar that’s thinking about public options, and what are instances in which the state could actually be playing a more assertive role?

So this is, you know, gets to the fact that he talked about having public grocery stores, initially one in every borough, has rolled out plans for universal childcare. And so I would say, you know, there are different components of this, but it very much includes public options.

Krugman Okay, that’s really interesting. So that’s, by the way, that’s a really important point, that one way to deal with these things is to just have the public provide, not socialization, but the availability of a public version.

And so actually tell me what’s happening, I mean on... Sorry, two conflicting thoughts collided there and exploded. Anyway.

Actually tell me, talk about the grocery store thing, ‘cause that’s one of the things that people, you know, some people went wild negatively about. But it’s just a really interesting story about what you’re thinking there.

Khan Yeah, I mean, the mayor, during the campaign, talked about how there were parts of New York City where you have food deserts, and where you don’t really have access to affordable, healthy food. And, you know, one proposal that he put forward on the table was the idea that you could have public provisioning of groceries. And they’d do a pilot, there would be one in every borough. You know, some of the reaction to that was a little bit hysterical. But, you know, we have like, military bases across the countrywhere you have government-owned grocery stores. You know, it’s not as exotic as I think some of the critics assumed it was.

And it really gets to this point of, you know, you wanna make sure that the market is working honestly and fairly

Staff- Sorry to interrupt. Your microphone isn’t working very well. –

Khan Thank you. - Can I get this? - Yeah. You wanna make sure that the market is able to work fairly and honestly and competitively, but in some instances you’re gonna want to have the government also play a role, and basically, you know, provide additional competition. Again, not to own the entire market, but to provide an option and a competitive force in ways that could have a salutary effect too.

Krugman Okay, just another diversion here. But kind of along those lines, one of the things that, you were talking a lot about healthcare in your time at the FTC, and consolidation. And healthcare is an area where New York City actually has a lot of public, there are a lot of public options. I was actually kinda shocked, one of my students when I was teaching my class here did a paper on just how much of the New York City health system is in fact publicly-owned. Have you looked into that? I’m sure you must have.

Khan Yeah, it’s certainly something that is top of mind, as the mayor and his administration think about, you know, how do we make sure that the biggest, you know, pain points for people in terms of their monthly bills are being taken care of. Healthcare of course is a major one. And especially given what’s happening in DC resulting in, you know, skyrocketing premiums,

I think there’s a special obligation to make sure that cities and governments are using the full might of their leverage and authority to bring down prices. You know, you’ve seen even places like California announce things like public provisioning of insulin. During the recent governor’s race, you had now Governor Spanberger in Virginia talk about wanting to create a publicly-owned pharmacy benefit manager. So there certainly are a lot of proposals on the table that would have the city or the state play a much more muscular role in the direct public provisioning. I think there’s also a question of, once you have that government role, you know, how are you using that leverage?

One thing that the mayor also talked about during the campaign was, you know, wanting to look at things like the nonprofit status of hospitals, and whether that’s something that still fully makes sense, or wanting to make sure that the kind of, you know, hospitals are upholding their end of the bargain in terms of what they’re supposed to follow through on if they’re actually able to organize as nonprofits. So, you know, there’s a lot on the table there too.

Krugman The mayor has actually basically at least gotten, in principle has gotten the pre-K, the free pre-K. But the two big ones that are still very much up in the air, as far as I know. What do I know? I don’t, you know, I just live here. But the two that sort of are in really have gotten people sort of both cheering and wrapped up are the, first of all, the rent stabilization. Let’s talk about that first for a second. How involved have you been in that, and what do you think is happening?

Khan So that’s something that is basically decided by this Rent Guidelines Board. It’s, you know, a board where the mayor gets to appoint certain individuals. He’s announced who he wants to appoint. And so that’s a process that’s gonna play out in terms of them making, you know, independent determinations about what to do. And so that’s still in process.

Krugman Okay, and free buses. That’s the one that, you know, again, people go wild, and it’s really, it’s an interesting discussion. Do you wanna, do you have anything to say about that? Probably not. Well, tell me where you are on that. I don’t mean not to wanna talk about it, but I’m not sure if that’s, how much that’s in your wheelhouse, but.

Khan Yeah, I mean, you know, I think he has made the case for it very effectively in terms of just the enormous externalities in terms of the huge benefits that arise from having buses that are fast and free, and just why that’s so important for kind of, you know, making the city a better place to live. That is something that is kind of wrapped up in these broader budgetary discussions involving Albany. And so, you know, something that I’ll say, just stepping back, as you look across these different policy levers and authorities, there are some that are more unilaterally within the mayor’s control, or at least where control resides at the city level, so all you need is kind of city council plus the mayor. And then there are ones that really require the buy-in and agreement of Albany, be it the governor, be it the state assembly. And so it’s kind of a tapestry of what things can he do unilaterally versus kind of has to work very closely with other actors. –

Krugman Well, that kind of brings me to where I was planning to go anyway, which is the, you know, obviously you’re quite a heck of an economist, when that arises. But your background is law. And one of the things at least press reports suggest that you’ve really been doing is looking for, basically exploring what are the mayor’s powers? Anything you wanna talk about? ‘Cause that’s a really interesting, you know, kind of thing, that takes a lot of expertise that many of us don’t have. But how has that search gone? –

Khan Yeah, I mean, it’s really a project that is informed by my experience at the federal level, where I was pretty stunned to come into federal government and see all sorts of federal authorities, so laws that Congress had passed instructing federal agencies to enforce certain laws that had just been forgotten about. And you know, the laws existed on the books, but were not actively being enforced by agencies, sometimes because there was a sense that, oh, this has kind of fallen out of fashion, sometimes it just never was really prioritized by political leadership. And so, you know, oftentimes, especially in places like DC there’s a huge amount of conversation and discussion about new laws, and the need for new legislation, and we need, you know, Congress to do this and that. And I think that can sometimes detract from a real focus on what laws already exist, what tools already exist, what authorities already exist?

And so, you know, at the FTC, for example, we were very focused even on things like making sure companies are not lying about whether their products are made in America. This is something that Congress back in 1994 had instructed the FTC to start enforcing against, basically, you know, if a business is saying its products are made in America, but they’re actually made in China, you know, that’s illegal and they should be penalized. And there are certain consumer protection elements of that, but it’s also about creating a fair marketplace so that businesses that are honest are not losing out to firms that are being dishonest.

And so that was, you know, one thing that just the agency had not prioritized even enforcing that, you know, during my tenure we took more seriously. There were all sorts of other examples of, you know, laws that Congress had passed, you know, instructions they had given the FTC in terms of what to enforce. There’s this law that goes back to the Great Depression, the Robinson-Patman Act, that’s really about making sure we don’t have illegal forms of price discrimination, and that small businesses are having the same opportunities as large businesses in terms of the deals that are being offered. That’s something that the government stopped enforcing basically in the late 1990s. And we would actually have general counsels admit to us that they didn’t even advise their firms to abide by this law because there was just so much non-enforcement. And they were basically like, until and unless you guys start enforcing it, we’re not even gonna tell our executives that they have to follow this law.

So, you know, there was just a real sense of wanting to make sure we were using all of our tools, being faithful to the laws that Congress had passed, that kind of informed my desire to make sure that this mayoral administration was similarly gonna be kind of faithful, you know, executors of the laws that already exist. As well as wanting to make sure that, you know, given his focus on affordability, on wanting to make sure that, you know, working class New Yorkers can live here comfortably and with dignity, that he knew all of the tools and authorities that he has at his disposal to do that.

Krugman And are there any good examples comparable to sort of Robinson-Patman Act that are mayoral prerogatives that have not been exercised?

Khan Well interestingly, there are some city council efforts right now to think about whether there should be a New York City level of Robinson-Patman. So, you know, there are some discussions about that. You know, there’s a law that bans unconscionable practices in New York City that goes back to the 1970s that basically can presumably be activated to take on forms of unfair or, you know, unconscionable pricing, especially in context where people might be captive consumers. And so imagine a situation in which, you know, you’re a patient at a hospital, the hospital gives you, you know, some kind of Tylenol, but they end up billing like $60 for even though it costs, you know, $6 at the pharmacy down the street. You know, is that an unconscionable practice because you are basically a captive customer? Or similarly if you’re, you know, at a stadium or a concert venue, when you just have much fewer options, are there certain rules that firms should really be following in terms of how they do pricing? So that’s just kind of one bucket of, you know, of potential tools that may exist.

Krugman I’m sure that other people have suggested this, but there a little bit of an analogy, which you might not like, to Robert Moses, who was famously, you know, was expert at reading the fine print in legislation and finding things he could do. And there’s a little, I mean, hopefully with better intentions. But do you ever think of yourself as being sort of the good version of Robert Moses?

Khan I mean, I think, you know, any lawyer will think their job is to read the fine print very closely. And you know, I think when you’re coming into these types of jobs, there’s such an enormous responsibility, and oftentimes not a lot of time, right? You don’t know how much time you’re gonna have. And I think, you know, when you are elected with as strong a mandate as Mayor Mamdani has, I think you really have a huge obligation to make sure that you really are mining every single tool and authority that may exist to make life better for people. And that’s something he’s very committed to.

Krugman So the whole, I assume you must be thinking about this, but the whole concern, particularly, you know, if you read Murdoch publications and so on, is that all of this attempt to serve affordability, to help the working class, is gonna lead the businesses and the wealthy to flee the city. How are you feeling about all of that? Any comments on that?

Khan I mean, it’s interesting. I think we’ve heard a lot of speculation about that. I mean, the business press that I’ve read has suggested that actually we see kind of major, you know, Fortune 100 companies actually re-upping their leases and expanding their physical footprint in New York City rather than fleeing. The mayor’s point has also been that we’re already seeing an exodus in New York City, and that’s an exodus of working class people. And shouldn’t we be worried about working class people having to flee too? I think-- (audience applauding) You know, he’s also shared that in conversations with some of these same CEOs, they’ve recognized that policies that make New York City more affordable ultimately are gonna be good for their business oftentimes too, in as much as it allows more of their employees to actually live here and really expands the talent pool. So, you know, I think you’re always gonna hear some of that grumbling, and sometimes even hysteria. And of course, you wanna look closely at the research and, you know, at the empirics of what might actually happen. But I think, you know, there is a lot of evidence suggesting that some of these policies are gonna have just much greater impact than harm.

Krugman Okay, I can’t resist. One of my favorite lines in all this was, you know, some businesses actually have moved to Florida, but there was some Wall Street type who tried it and said, “The problem with moving to Florida is that you have to live in Florida.” So anyway. Okay, so you’re fairly optimistic that enough businesses and wealthy people see the benefits of a better New York for the people of New York will outweigh whatever taxes they might have to pay or regulations they might face.

Khan I mean, I think there are a whole bunch of data points that point in that direction, yes.

Krugman Thank you so much! It’s been great.

Khan Thank you.

The war goes on, and so does the global energy crisis. In fact, I believe that prices of oil futures remain too low given how much spot prices will need to rise to resolve the shortages that will hit once oil supplies that were shipped before the Strait of Hormuz was closed are exhausted.

But a better future is coming, despite Donald Trump’s assault on renewable energy as he tries to drag us back into the fossil fuel past. Regardless of Trump’s chest-thumping, America is not the world. We account for only 15 percent of global energy consumption, compared with China’s 28 percent. And the rest of the world is moving rapidly to renewables, thanks to a technological revolution in solar power, wind power, and, less visibly, batteries.

So let me take an optimism break and talk about why batteries may save the world.

The decline in battery prices has been incredible. It’s like nothing anyone has ever seen before. Big, strong men with tears in their eyes come up to me and say, “Sir, have you seen the progress in batteries?”:

Why does this matter?

First, cheap battery storage of electricity greatly mitigates the problem of intermittency — the sun doesn’t always shine, the wind doesn’t always blow. This was a major concern early in the renewable revolution. Some energy economists scolded me for my naïve optimism when I first wrote about solar technology way back in 2011. But solar + batteries provides round-the-clock power.

Here’s a graph of California’s electricity supply generated by renewables and batteries over the course of 24 hours on April 1 that illustrates my point:

During the middle of the day, California generates lots of electricity from solar. Much of it is poured into batteries, which provide electricity when the sun sets. Californians don’t even notice the switch.

Second, battery performance has soared as prices have plunged. Crucially, there has been a huge increase in batteries’ volumetric energy density: the amount of electricity that can be stored in a given space. Until a few years ago the energy density of gasoline gave internal combustion a huge advantage over electric vehicles. But no longer. Outside the U.S. electrification, the transition away from petroleum and towards electricity — particularly green-sourced electricity — is well underway:

Third, we should expect continuing rapid improvement in renewable energy. That’s because the progress in batteries has come from cumulative learning rather than scientific breakthroughs. Lithium-ion batteries are, in fact, a decades-old technology. Yet costs have fallen drastically and energy density risen thanks to an ongoing process of learning, which shows no sign of coming to an end.

Furthermore, we’ve seen rapid progress in all components of the green energy transformation, even though their underlying technologies have little in common. Solar panels, wind turbines, and batteries are very different, yet all have seen revolutionary improvements. This strongly suggests that the whole renewable energy complex is experiencing a virtuous circle: ever-growing use leads to falling costs and falling costs lead to ever-growing use.

If we ask where this virtuous circle is taking place, the answer is, largely in China with an assist from Europe. And the corollary is “not in America.” The United States has allowed itself to be far surpassed by China and is now only a peripheral player in the renewable revolution. Fortunately for the rest of the world, this means that the Trump administration’s hostility to renewable energy, its attempts to sabotage progress, won’t stop that revolution or even noticeably slow its momentum. True, Trump’s anti-green, pro-pollution tilt will serve to leave America further behind, but progress in fighting climate change and reducing the risks of global dependence on oil will continue.

So although we are now in the midst of a severe energy crisis that could easily go on for many months, this too shall pass. A better, cheaper, cleaner energy future is on the way, and not even Trump can stop it.

MUSICAL CODA

Donald Trump doesn’t even have the courage to run away.

Hi, I’m Paul Krugman. I’m not going to do a regular post today — it’s Thursday morning — because I wanted to wait and see what was in the big speech from Donald Trump last night. And I thought I could just do a short video about it.

It turns out that the speech was sort of an anticlimax, although not in a good way. Many people expected Trump to pull the mother of all TACOs, to declare victory and surrender. He did not do that. He declared victory, of course, but he did not actually announce an end to hostilities. On the contrary, he said we’re going to bomb Iran into the Stone Age. So add massive war crimes to your schedule.

There is clearly no strategy here. There’s no endgame. There’s nothing. It’s hard to tell, as always, whether Trump is delusional or just completely unable to admit something that he actually knows.

One of the moments that really struck me in the speech was him declaring that the whole world was extremely impressed by what happened. He said,

the whole world is watching and they can’t believe the power, strength and brilliance. They just can’t believe what they’re seeing. The world can’t believe what it’s seeing.

What it’s seeing is that the world’s greatest military power took on a fourth-rate power. Again, as I said the other day, Iran’s military budget is a rounding error in our military budget. And we lost. For all practical purposes, we’ve left ourselves in a much weaker position and Iran in a stronger position than it was before.

But Trump has to believe or has to claim that he believes that the whole world is extremely impressed. You might say, why do we care? Well, he cares, obviously. His whole thing is about dominance and believing that we’ve got the world awed by our strength.

If you want the real verdict on the speech, well, Brent oil futures were under $100 when Trump started speaking. They are over $108 as I record this. The oil market, I think is a more clear gauge, although the stock market has also reacted.

Basically, everybody said, oh my God, we thought that this was going to be at least the beginning of the end, and instead it looks like an endless quagmire. I still think that people are not fully taking into account the implications for global oil prices and everything else of the Strait of Hormuz remaining closed for the indefinite future.

So this is going to be really bad. But anyway, it was radically disappointing even to people who are, you know, the markets and a lot of people in the world were actually hoping that the United States would give up. I mean, it’ll be terrible. We really don’t want a medievalist theocracy empowered. But since this is heading nowhere except for, again, massive war crimes, better to end it. But we’re not getting that.

What really strikes me, and there’s obviously deeper stuff in here, but it is a question of character. It’s funny, I don’t think there’s a sort of, if you like, native English term for the Yiddish — but it’s effectively English now — word mensch. A mensch is literally a person, but it means somebody who takes responsibility for their actions, who accepts defeats as being defeats and tries to move on, who tries to improve, basically just being a mensch.

It’s hard to imagine somebody who’s less of a mensch than Donald Trump, except maybe for some of the members of his cabinet. It’s incredible that they’re so lacking in the basics of character.

The thing about what this means for America’s role in the world is not only that Trump and company are doing great damage, but the whole world is watching. They saw that this guy, and it wasn’t hard to see what kind of a person Trump was, that America elected this guy twice. It appears that the American public has completely lost sight of what it means to be a responsible, serious person.

I might say, since this masculinity posturing is such a part of it, they’ve forgotten what it is to be a man. Obviously, that applies to all genders. A country that will elect somebody like that twice is not a country anyone can rely on. And that is the ultimate lesson here.

We have Trump lecturing the world and saying, why are you cowards? Why don’t you come in and help us in this ill-conceived, disastrous war that we started without checking with you? But the reality is that the world is looking and saying, my God, what is wrong with America? They may still have a lot of bombs — although not as many as we started with — but it’s not a country anybody can trust for anything. And that, even more than the price of oil, is going to be the legacy of this war.

I guess have a great day.

Although I expected the war on Iran to be a disaster, I didn’t expect the Trump administration to be implicitly conceding defeat after barely a month. Yet that’s where we are:

The stock market has soared on the news of potential U.S surrender, which tells you something about how the war is going. Unfortunately, declaring victory and running away will be a lot more difficult than Trump thinks. For one thing, thousands of U.S. ground troops are on their way to the Persian Gulf, and it will be very hard to avoid succumbing to the temptation to use them, at which point we will have entered what Robert Pape calls the “escalation trap.”

At the same time, Trump’s claim that the blockade of the Strait of Hormuz is other countries’ problem is whistling in the dark. Trump is telling Europeans that if they lack the “courage” to seize the jet fuel they need — funny how the vastly larger U.S. military isn’t doing the job — they can just “buy from the U.S., we have plenty.” Here’s what has happened to the average price of jet fuel at major U.S. airports:

Does this look to you as if we have “plenty”? It doesn’t look that way to airline executives:

The reality is that U.S. prices of petroleum distillates and other products in which Persian Gulf nations are key producers have soared. The rise in gasoline prices, for which the national average just hit $4 a gallon, has made headlines. But other prices are also hugely important.

Most non-electric cars run on gasoline, but most trucks are fueled with diesel. And diesel prices are up even more than gasoline prices — approximately $1.70 per gallon as opposed to $1:

The feedstocks for fertilizer are largely manufactured from natural gas, and Persian Gulf nations were major producers, shipping their production out through the Strait of Hormuz, before the war. Here’s what has happened to the price of urea:

Source: Trading Economics

And where do you think plastic comes from? Here’s the price of polyethylene:

Source: Trading Economics

How important are these non-gasoline price shocks? The Energy Information Administration has a useful chart — the data are for 2022, but the numbers will look similar for the eve of the Iran War:

Less than half of U.S. consumption of petroleum products was gasoline. And the price of distillate fuel oil — mostly diesel — is up about 70 percent more than the price of gasoline. Add in soaring costs for fertilizer and feedstocks for plastic, and the surge in gas prices, even though it dominates headlines, is well under half of the economic story.

And who pays the higher prices of diesel, jet fuel, fertilizer and plastics? The answer is that these show up initially as costs to producers but will quickly be passed on to consumers in the form of higher prices for shipping and, indirectly, almost everything you buy.

How big is the non-gasoline price shock? We consume around 4 million barrels of diesel a day, which is about 60 billion gallons per year (there are 42 gallons per barrel.) The price of diesel is up $1.70 a gallon, so if prices were to stay at current levels, that alone would be a roughly $100 billion hit to consumers. Substantial additional hits will come from higher prices of jet fuel, fertilizer and petrochemicals.

And, of course, gasoline has gotten a lot more expensive too. Do you still think that the Strait of Hormuz is other countries’ problem?

Now, America produces a lot of oil, and the domestic oil industry will be earning large windfall profits even as U.S. consumers suffer. But so what? We don’t have any mechanism in place to capture and redistribute those windfall gains, so ordinary U.S. families will bear the full brunt of the global oil shock even though America is a net oil exporter.

There’s an additional, technical but important reason to be even more worried about soaring prices for diesel, jet fuel and industrial materials than about gasoline prices. It involves how the Federal Reserve is likely to react.

The Fed normally bases its decisions about whether to reduce or increase interest rates on “core” inflation — inflation excluding food and energy prices. The reason it does this is that food and energy prices are highly volatile and are usually a poor indicator of what inflation will be over the next few years. So the Fed tries to “look through” inflation fluctuations driven mainly by the prices of groceries and gasoline. For example, it didn’t raise rates in 2011, when there was a temporary uptick in inflation driven entirely by oil prices.

There is a major debate among monetary policy experts about whether the Fed can safely focus only on core inflation and look through the inflationary effects of the Hormuz blockade, which if unresolved will be the worst energy crisis in history. In any case, however, core inflation only excludes energy directly purchased by consumers. Oil-related price shocks such as soaring jet fuel and diesel prices, which raise the cost of doing business, aren’t excluded, which means that they will increase the Fed’s preferred measure of inflation. This will push the Fed toward raising interest rates or at least holding off on rate cuts.

The Fed could, in principle, try to look through the effects of the Strait crisis on business costs as well as direct effects on consumer prices. But given how nervous everyone is about the risk of 70s-type stagflation, it probably won’t.

So the diesel/jet fuel/plastics shock will lead, other things equal, to a more hawkish Fed — and an elevated risk of recession.

The moral here is that the United States retains a vital interest in seeing the Strait of Hormuz reopened. Much as Trump would like to declare victory and insist that the blockade is other countries’ problem, reality won’t oblige him.

MUSICAL CODA

So the world’s greatest military power went to war against a fourth rate nation whose military budget would be rounding error in our defense spending. And it appears that we lost.

Hi, Paul Krugman with a late night, well, evening update, which I don’t usually do, but I wanted to get this in before who knows what happens in the news tomorrow.

It’s Tuesday. It’s the day that the stock market rallied enormously, that the futures price of oil dropped precipitously, all on the happy news that the United States, at least based on Trump’s Truth Social, appears to be surrendering. Trump put up a Truth Social post saying that, you know, we don’t need to open the Strait of Hormuz. If the Europeans think they need it, they should go ahead and do it. And it’s up to them. And this is pretty amazing.

Of course, the idea that it only matters to the Europeans, that it doesn’t matter to us, is all wrong. And that will be a subject of a Substack post shortly. But it is pretty much a confession. Although it’s framed as we won, now let somebody else do the cleanup, the reality is it’s effectively a confession that, well, we lost. We can’t do this.

How the hell did we manage to do this? I mean, the objective reality is that this was never going to be... Maybe it wasn’t even going to be doable. There were reasons why we didn’t go to war with Iran, particularly why we didn’t go to war in a way that basically became an existential threat for the regime so that they have no compunction about creating lots of damage because the alternative result is annihilation for them personally. But everybody who thought about it even for a couple of minutes, anyone who knew anything, particularly anyone who’d been paying attention to four years of war in Ukraine … we know something about what modern war looks like and about the inability of countries that have conventional superior forces to avoid major damage from drones and missiles. So this was completely, unbelievably stupid.

How did we get there? Well, there was a very good article by Tobin Harshaw in Bloomberg, and mostly I’m just riffing off what he wrote, but I think that it deserves wider circulation. He resurrected a book I had forgotten about, a 1976 book by Norman Dixon called The Psychology of Military Incompetence. It was very British oriented, but the lessons apply; Dixon looked at the great military disasters of British history.

You might think there were many reasons why really bad decisions were made, but he actually said there was a kind of consistent pattern. That what happened was that you had military leaders, or people making military decisions, who for the most part shared two things. First, they believed, they had this atavistic, anachronistic belief that warfare is all about muscles and not about minds. which hasn’t been true for a very long time. And second, he argued that they are just generally anti-intellectual, anti-education.

So in some sense, it’s all about muscles and don’t give me all of these smarty-pants intellectuals who are telling me about why I’m doing it wrong. It’s an uncannily accurate portrait of Pete Hegseth, down to even seemingly minor details. Muscular Christianity is among the defining symptoms of the bad British military leaders that Dixon analyzed. So this is what happened.

This is not about specific bad judgments. It’s not, in a way, about the specifics of the case. It is that we were led into war by people who exemplified in the classic way how really bad military decisions are made. And it all comes down to believing in brute force and toughness and muscles — muscles in the age of drone warfare! — and hate intellectuals, hate learning.

What really gets me is that in a war where the deciding factor is having some intellectual understanding of what you’re doing, that a theocratic regime in Iran, which basically wants to bring back the Middle Ages, mostly got it right.

And the world’s leading haven of scientific thought, or we were at least until the current administration, got it completely wrong. It’s humiliating. It’s awful. And, you know, we will all be paying the price for this incredible defeat for probably for the rest of our lives.

Enjoy the evening.

Source: JP Morgan via Marketwatch

In normal times, about 20 percent of the world’s oil production passes through the Strait of Hormuz. That flow has been cut off except for Iranian oil and a handful of other vessels the Iranians are allowing through. This disruption has led to a large spike in oil futures prices:

Source: Trading Economics

But this price rise has been speculative, driven by the (justified) expectation of future shortages rather than a current lack of oil. In fact, so far deliveries to markets around the world haven’t declined, because shipping oil from the Persian Gulf to major markets takes 4-6 weeks. As a result there was a large quantity of oil already at sea, outside the Strait, when the war began.

However, this grace period is about to end. The oil crisis is about to get physical. The map at the top of this post shows J.P. Morgan’s estimates of when tankers from the Gulf will stop arriving at various destinations. Deliveries to Asian markets will end this week; deliveries to Europe will end next week.

And once the crisis gets physical, there will no longer be room for jawboning the markets. Since the war began there have been several occasions on which Donald Trump has been able to talk prices down by asserting that meaningful negotiations are underway with his invisible friends the Iranian regime, but that won’t work once the oil runs out. So prices will have to rise to whatever level destroys enough demand to match it to the available supply.

PS: The United States buys little oil from the Persian Gulf, but we can expect U.S. oil prices to rise in response to shortages around the world.

So how high will oil prices get? I’ve written about this before, but I thought it might be useful to update the analysis, emphasizing how uncertain the prospects are and the real risk of extremely high prices.

There are two big sources of uncertainty. The first is that we don’t know how much oil will manage to escape the Gulf. Right now oil supply is drastically curtailed, but not by the full 20 million barrels of oil a day that used to flow through the Strait of Hormuz. The Saudis have a pipeline that lets them ship some of their oil to the Red Sea; Oman has a pipeline that takes some oil around the Strait. And Iran has been letting millions of barrels of its own oil pass. Whether all these “leakages” will continue depends on the course of the war.

Second, how high must prices rise to choke off a given amount of demand? We know from previous oil shocks that the price elasticity of demand for crude oil is low — that is, even large price increases only cause small declines in demand. But in the current crisis it matters just how low that elasticity, a number that is impossible to estimate with any precision, really is.

So, what is a reasonable range of possibilities? I’ve considered three scenarios for the disruption to oil supply: a “low disruption” scenario in which supply is reduced “only” 8 percent from normal levels, a medium scenario in which supply falls 12 percent, and a high disruption scenario in which it falls 16 percent. I’ve also considered three alternatives for the price elasticity of oil demand: “high” at 0.2, medium at 0.15, and low at 0.1.

And I assume that in the absence of this war the Brent price would be $65 a barrel. In that case I get the following matrix:

Readers should know that Robin Brooks has done a conceptually similar analysis. My numbers, however, are more alarming — and I believe that you should be alarmed.

In particular, by presenting the analysis this way, I risk conveying the impression that we should assume a moderate, medium/medium outcome. That is not at all a safe assumption.

After all, what would it take to get to my “high disruption” scenario? That’s what might happen if Iranian oil exports are cut off, say by a U.S. attack on Kharg Island, and if supply via pipelines is hindered by Iranian retaliation against other Gulf oil facilities as well as attacks by the Houthis on Red Sea shipping. That is not an outlandish possibility. It is, in fact, exactly what we should expect if the Trump administration follows through on what appear to be its current war plans.

And if oil really does go to $200 or more, it’s all too easy to envisage a full-blown global economic crisis, with an inflation surge and quite likely a recession.

Ever since this war began I’ve noticed a sharp divide in sentiment among experts. Finance and macroeconomics experts have been relatively sanguine about our ability to ride out this storm. But talk to or read energy experts — people who focus on the physical side of the oil crisis — and their hair is on fire.

I’m mostly a macroeconomist. But my hair is definitely starting to smolder.

MUSICAL CODA

My apologies

TRANSCRIPT

Pete Hegseth believes in the lethality fairy, and that’s a very bad thing. Hi, Paul Krugman here.

Most people watching this probably don’t get the reference. In the aftermath of the 2008 financial crisis, a number of governments did what economic textbooks say is exactly the wrong thing. They slashed government spending in the face of mass unemployment. And they justified this in part by arguing that although, yeah, sure, if we slash spending and eliminate a bunch of jobs, that should be bad, could make things worse. never mind because it will improve confidence and that will lead to economic expansion. I, in an essay in 2010, called this believing in the “confidence fairy,” one of the coinages that seemed to stick.

And of course, the confidence fairy never arrived. Countries that created worse unemployment by engaging in austerity policies suffered worse unemployment. There was no rescue from improved confidence.

In this case, our Secretary of Defense, which is his legal title, although he calls himself the Secretary of War, continually argues that if only we get even more violent, if only we do even more damage, that this will somehow translate into success in Iran. He clearly relishes the thought of violence himself. He’s now holding prayer breakfasts, and in his prayer breakfast, he called upon the Lord to support us in “overwhelming violence of action against those who deserve no mercy.”

I think this is deeply un-American, but anyway, aside from the evilness — I don’t think there’s any other way to put it — of the world view, how is this supposed to work? If you look at the plans or ideas that are being bruited for using ground forces now, and that’s clearly very much sort the next step here, for using ground forces against Iran, well, yeah, you can seize Kharg Island, although hanging onto it could be very expensive, but then what?

You’ve cut off Iranian oil exports, we could do that anytime anyway, then what? You can, well, try to occupy some of Iran, but the relevant coastline is well over a thousand kilometers long. Missiles and drones can be fired from deep inside Iran. 10,000 soldiers, maybe, is not remotely enough to secure the Persian Gulf, let alone allow shipping to transit, let alone allow tankers to transit through the Strait of Hormuz. So this doesn’t make any sense, unless you somehow think that the sheer act of violence will shock and awe Iran into submission, which, if it was going to happen, would have happened already. Clearly not on the cards.

Hegseth is all, we are going to kill lots of people. Trump is vacillating. In his Truth Social post this morning, he started out by saying we are on the verge of successful negotiations, and we’ll get the Strait open soon because we’re having extremely good talks with the Iranians.

Other presidents have been accused of negotiating with themselves. Trump is negotiating with his imaginary friends. There’s no reason at all to believe that these talks are actually happening.

But he then pivots midway through the post, to saying, and if we don’t get this, then we’re going to start bombing civilian power plants and water supplies.

So give us what we want or we’ll commit a massive, massive war crime, which I hope is not going to happen. But even if it did, why would you think this would open up the Strait of Hormuz? So it’s this lust for violence with no actual coherent story about how that violence is going to produce results. It’s horrifying.

I really don’t know how this ends, except that it does feel as if this is a quagmire largely in the minds of top Trump officials, Trump himself and Hegseth, who having this utterly unshakable belief that hurting people will produce great results, respond to each failure of violence to produce results by getting even more destructive with no end game in sight.

Have a great day.