An Interview With Bobby Kogan

Tariffs, shmariffs: The GOP budget is really extreme

Knowing that a truly shocking budget plan would be coming out soon, I talked about it with Bobby Kogan of the Center for American Progress, who has been my favorite guide to the atrocities. In case you’re wondering, I wasn’t trying to be cool or going to seed. I recorded this near the end of a long trip, from a patio in Lisbon during a power outage.

Transcript follows.

. . .

TRANSCRIPT:
Paul Krugman in Conversation with Bobby Kogan

(recorded 4/28/25)

PAUL KRUGMAN So hi everyone. I'm Paul Krugman. This is my latest interview and I'm talking to Bobby Kogan of the Center for American Progress, my go-to person for the fiscal freight train that is bearing down on us while everybody's paying attention to tariffs. I wanted to talk to him about it.

Just a quick explanation, if I look, you know, rather casual and strange, that's because I'm recording this in Lisbon and there is no electricity [today on the Iberian Peninsula]. And so I have outdoor light here and I'm going to use this location so apologies for my adaptive lenses. I'm looking either very dorky or very cool.

So hi, Bobby. I don't think we've met in person. I think it's all been reading each other's stuff.

BOBBY KOGAN Yes, this is the first time, but I'm excited.

PAUL KRUGMAN So, it’s been a pretty amazing hundred days, but almost all of my focus has been on tariffs and other things like DOGE and all of that. But meanwhile, there's a much more sort of conventional Republican plan of huge tax cuts and big benefit cuts. There is a legislative push which in normal times would have been occupying all of our attention and maybe should be getting some of it. And you know more about this certainly than I do or than anybody I know.

So I thought I would get you to talk about what's happening. And so, where are we, what is actually happening on the budget right now?

BOBBY KOGAN Yeah, and thanks so much for reaching out to me and having me on. So, Republicans right now are using a process known as budget reconciliation. What's special about budget reconciliation is that you can avoid a filibuster as long as you stick to the rules, right?

So obviously all sorts of presidents and parties propose all sorts of things that won't go anywhere. Budget reconciliation can use a simple majority trifecta to pass legislation. So Trump tax cuts rounds one and two were done in reconciliation. Clinton’s ‘93 deficit reduction package was done in reconciliation. ACA part two (after Dems lost the super majority) was done through reconciliation. Trump tax cuts round one was done through reconciliation. Both AARP and IRA were done through reconciliation. You can do big things, you just have to stick to the rules.

Right now, as of this recording, the House has been busy marking up the budget resolution, which is kind of the first step is the framework. And then what happens is the House goes first because it's tax legislation, so they are producing legislation. Every committee that has an instruction will have to go through the process. Each committee will have to vote it out. Then it'll go to the budget committee to be voted out, then the rules committee, then the full floor. And if the House can do that, then it goes over to the Senate. And they could choose to do the committee process, or they could choose to go straight to the floor and do voterama. It will change, and so it'll have to go back to the House at least once. Or you could do conference and then it theoretically can go to the desk for a signature.

What we are seeing is an enormous tax cut bill that would spike the deficit by—depending on the version we're seeing—three-ish to five-ish trillion dollars partially offset by huge cuts to Medicaid and huge cuts to food assistance and some other things. So the net package will be a huge deficit increase while taking away people's health care and people's food.

PAUL KRUGMAN Yeah, anyone who thinks that Trump is being populist should have in mind that this is sort of the most aggressively un-populist, anti-populist legislation. How big are we talking about? The tax cuts, I think, it's a very big budget number. How serious are the cuts that we're talking about to Medicaid and basically food stamps?

BOBBY KOGAN Yeah, so they are shooting for $1.5 to $2 trillion of spending cuts. We haven't seen the Medicaid proposal yet. I think no matter what they're doing, it will be the largest Medicaid cut in history. And the only question is, by how much, right? Are we talking $500 billion of Medicaid cuts, 600, 700, 800? They gave the Energy and Commerce committee an $880 billion instruction. But some of that will be things that aren't Medicaid. The majority of that will be Medicaid.

On food stamps, they're looking at cutting it in quarter. Basically, there was a Biden-era reassessment of the thrifty food plan that kind of Reworked it already. Anyway, that doesn't matter. They want to undo that. Right now the average benefit is a little bit more than $2

per person per meal. So already very meager. Already incredibly meager, they want to take it down to a buck sixty-seven per person per meal. Really pinching pennies from hungry families.

And so they do that and they would do cuts to student loan affordability. That actually just came out today, so I haven't had time to go through it. Right now, if you're a grad student and you've been paying for 25 years, we forgive the rest of your loans. They wanna kinda push that back and there are other things they wanna do to kinda make it tougher for folks who've been repaying their loans.

So that's what they want to do on the spending side. On the tax side, at the very least, they want to extend the Trump tax cuts, the expiring portion. So those are over a percent of GDP. It's about $4 trillion over nine years. Just doing that would make our debt situation about 50% worse. Right now, our fiscal gap is 2.1% of GDP. That would bump it up above 3%.

PAUL KRUGMAN So the fiscal gap measures what it would take to stabilize debt to GDP.

Well, put differently, the fiscal gap measures what is the net present value deficit reduction necessary to get debt at the end of the window that you care about to be equal to debt at the beginning of the window that you care about as a percentage of GDP. So if it's 100 now, what does it take to be 100 at the end of the window?

Because we already have a lot of existing debt and because the US economy grows, because we have inflation, you can run budget deficits year after year and the debt will only grow as fast as GDP, which is not a problem, or not necessarily a problem, but we are running deficits that are substantially bigger than the amount that is sustainable.

So, as you said, the gap between what we're doing and what is sustainable over the long term will kind of double, right?

BOBBY KOGAN Yeah. At the minimum, I think what they're looking at is around 50 percent, 50 percent worse. And then on top of that, they're looking at doing additional tax cuts. And we'll have to see. But some of the reporting implies that they will kind of jam a whole bunch into the first few years, which if they then go to extend it, it would be, you know, 100 percent worse.

So what we're looking at is somewhere in a range of making our debt situation up to 3% or maybe 4% higher than the current policy basis. We're looking at making it 50% to 100% worse.

PAUL KRUGMAN Okay, so huge increase in deficits, much larger debt at the end of 10 years, and that's despite really massive cuts. I mean, Medicaid now covers something like 80 million people, right? So, Medicaid is a huge part of healthcare in America. So we're talking about large numbers of people thrown off health insurance. (I taught a course in this stuff.) If we think about what we used to call welfare—we basically don't have that anymore, but food stamps is the biggest sort of poverty program we have in America. And we’re talking about savage cuts to that, right?

BOBBY KOGAN Yeah, we'll have to see exactly what they do, but we're talking five

to like 20 million people kicked off their health insurance. And incredibly poor folks who can't afford to make it up on their own. And then as you say, in food stamps, we're talking about severely worsening the hunger situation in America. The people who get food stamps are all very, very poor. It's already very meager. A lot of them still face food insecurity. And this would just make the situation way worse. All in pursuit of partially paying for, but not even getting close to paying for giant tax cuts that disproportionately go to the rich. These are tax cuts that, if you're in the top 0.1% are giving you like a quarter million dollar tax cut.

TC 10:00:00

PAUL KRUGMAN Yeah. This is the sort of thing where, in the past, Republicans have had plans like this, and focus groups are asked what they think of it, and they tend to refuse to believe that that's the actual plan, right? It's so extreme.

Okay, so this thing is barreling along towards us. Now, I think if we had a Trump administration official here, he would probably say, “but the tariffs will cover it.” So have you done any of the homework? I mean, I know people have been doing estimates of tariff revenue, but…

BOBBY KOGAN Yeah, so we have to know what our tariff policy is first to figure out what we're going to do. They have proposed high versions of tariffs that would get, you know, three-ish trillion dollars. So if you did all the tariffs and the cuts to Medicaid and SNAP and whatever, you could get much of the way there, not all the way there. You might still be looking at a trillion dollars depending on the House and the Senate’s different versions. You might be looking at still a trillion dollars of new debt over the decade.

But I guess the point that I would make is that was at the most extreme version of the tariffs and what they have been doing is ratcheting it back and back and back. And so I think the current iteration of tariffs might be under two-ish trillion and so therefore even still that pushes it up to maybe two or two and a half trillion dollars of new deficits and that's assuming that they aren't doing carve outs or walking it back. The more they walk it back the more they give carve outs to their industry. We're reading where Trump's buddies call him up and say “Please give a carve out just to my specific industry,” or whatever. That all pushes it back further and further. No matter what we're doing, we're looking at something that is not getting close to paying for it.

And the other point that I would make is it also makes the distribution even worse, right? So we're having tax cuts that disproportionately help the rich. We're having spending cuts that disproportionately hurt the poor. And then the tariffs are disproportionately hitting the poor also.

And it's, you know, it's not just me saying this. Paul Ryan's tax dude who wrote most of TCJA [Tax Cuts and Jobs Act, 2017] said that if you look at the tariff versus TCJA extension, that it was a tax increase on poor and working class Americans and a tax cut for the rich. Paul Ryan's dude who wrote the bill said that!

PAUL KRUGMAN TCJA was the Trump tax cut of 2017.

The thing about tariffs is, first of all, lower income people spend a higher share of their income.

Secondly, they spend more of it on goods rather than services, and the tariffs are on goods.

And probably, in terms of goods, it's more sort of Chinese stuff from Walmart.

So we think that it's really quite extremely regressive. It falls very heavily on lower earning families. Wow.

Back to legislative process, for a while there were some reports that deficit hawk members of the House would stand against some parts. They would insist that there be something that was a little bit less fiscally irresponsible. Is that completely by the by now? I mean, I think the House version is slightly less fiscally irresponsible than the Senate version.

BOBBY KOGAN The House version is maybe only $3 trillion of deficit increases, and the Senate version is $4 trillion. So it depends on how you want to look at it. I think there's no chance of what we're currently seeing, unless it all falls apart, which is possible. But there's no chance in what they're playing with that it's not going to be something that significantly worsens our fiscal outlook by lowering growth, increasing interest rates, and also increasing primary deficits, right? You know, kind of a triple threat for our debt situation.

PAUL KRUGMAN Okay, again, primary deficit is deficit not counting interest payments on the national debt. And with interest rates going up, that part also gets worse. So you're cutting into an already precarious fiscal position. Wow.

Talk to me for a minute about DOGE and the $2 trillion of spending cuts that Musk

promised.

BOBBY KOGAN

Sure, first he promised two trillion, then he promised one trillion, then he promised 150 billion, then he said 150 billion by next year, and now he says he's stepping back. In the macro, we aren't seeing much in the way of spending cuts. And in the micro, we're seeing destruction of core services. They're shifting stuff away from some critical spending.

Some of their stuff is held up in courts, some of it isn't. It's tough because they have, in many cases, not in all, but in many cases, they have legal discretion to kind of shift their activities.

And so if you stop these activities and then do it over here, that's totally legal. If you just stop it entirely, then it's an illegal impoundment. When the government says, “here's $40 billion,

do some of these activities,” you can choose to not do this activity and do that activity instead,

but you can't not use the money. And so it's really murky to figure out precisely what is going to be the end result of all of this.

But what we've seen in the data is a couple of core services have been destroyed, sometimes corruptly, sometimes non-corruptly, sometimes just incompetently. An example of a corrupt one is Head Start. As of April 15th, Senate Appropriations Committee had looked into Head Start grant making. Head Start is a program that helps poor families attend preschool and childcare

Facilities. They were 37% behind where they were last year in terms of making grants, but they broke it out by state, by states, and zero dollars had gone to Maine. Trump is feuding with the governor of Maine, and so just no money had gone to Maine. So there's that sort of stuff. That's profoundly illegal.

But as I say, in aggregate, there's been very little decrease in total spending. So it seems that some of it is just going after pet projects that they hate and destroying, as I say, core services.

We don't expect them to win in court for most of what they want to do, some of what they want to do, yes, but not most.

And...we hope that they will even listen to the court orders. In most cases so far, they have been finding clever ways to pretend that they are following the court order. They'll say, you know, they'll get a court order to stop this EO and then they'll do it anyway. And then they'll say, “well, we weren't doing it because of the EO. We were doing it because a new person involved said that we wanted to do it. So we agreed, we stopped the EO.”

PAUL KRUGMAN EO is an executive order, basically just a pronouncement from the top. The court says, “don't follow this directive from the White House.” And they actually do follow the directive, but say, “well, that wasn't because we were following the directive. It was because someone else told us to do it.”

BOBBY KOGAN Totally, yeah. So they've been finding clever ways that can buy time, but eventually courts have to deal with all of the stuff on the merits. And so we hope that they will follow court orders.

One more point that I want to make is that DOGE has also been fundamentally going against its alleged core mission of efficiency. Some of the people laid off at Heath and Human Services

include the people going after Medicare and Medicaid fraud, right? So in Medicare, there are huge cases of doctors in hospitals charging for procedures that they didn't actually do and relying on the fact that maybe the elderly person doesn't really remember all that was done.

There are people whose job it is to go after all this and DOGE laid off significant numbers of people in that group, right? So they're doing that. They're laying off IRS folks. That sort of stuff goes against their core mission of getting rid of waste, fraud and abuse. But what they're really doing is going after stuff they hate. They go for something that is completely legal and then they

illegally stop it because they hate the mission. They hate what's going on.

But in terms of what they allegedly are supposed to be doing, there isn't really much of that.

TC 20:00;00

PAUL KRUGMAN So, IRS. There have been some scary stories, but then I'm not sure what's actually happening about degradation of the IRS and whether we've created a climate that's so friendly to tax evasion that we're going to lose a lot of revenue. Do we know whether that's actually happening? There were some early reports, but then I don't know where we are right now.

BOBBY KOGAN We will know better in two weeks or maybe a week and a half. The April 15th data didn't look like revenue was coming in under. So it seemed like the nightmare scenario wasn't coming to play out, but there are tax extensions. You have to deal with the refunds which take a while to go out. So we saw the money coming in and we haven't seen yet when it gets trued up to exactly or what the net amount is going to be. But this year we seem to probably

be okay-ish.

The problem is, even if people kind of comply this year, the worry is that there are individual auditors who say, “I'm the only person in the world who's good at this. Last year I found $15 billion of fraud in this one very specific corporate thing.” If that person quits or was DOGE-ed or whatever, you know, eventually word gets around that it's easier to cheat in these sorts of ways.

So even if we aren't seeing it in the data yet, I think it doesn't mean that it ceases to

be a concern.

PAUL KRUGMAN There were a lot of scare stories, but it looks like probably, not yet.

Okay.

BOBBY KOGAN

We’ll know better in mid-May, but it seems like our April revenues were pretty good.

PAUL KRUGMAN

Okay, the thing that struck me is, if we're looking for waste, fraud, and abuse, the place

where we really know there's a tremendous amount of some—and I've seen numbers like $80 billion a year—is Medicare Advantage, which is a known thing, right? It's essentially insurance companies making their clients look sicker than they are so as to get more… You want to just explain how that works, because I think people don't know.

BOBBY KOGAN

That's exactly right. Medicare Advantage will “up code.” They will do some of their things based on how sick you might be. I think the right way to think about it is, they are not technically doing anything illegal. They are working within bad rules as a way to upcharge and charge more for

procedures than they really ought to based on statistics. There's a huge amount of savings you can get from Medicare Advantage. It depends how aggressive you want to be in kind of going

after the up coding and other gaming of the system like that. One version is, you could save a trillion dollars over the decade. If you go into Congressional Budget Office’s options to reduce the deficit, one version is a trillion dollars of savings.

The other point that I would make is there are honest to God, actual fraudulent payments. But in general, you have to spend money to go after fraudulent payments rather than cut the staff, right? So, as an example. There are Medicare's part A, B and D. Medicare Advantage is part C.

Medicare A is hospitals, that's traditional. B is specialists and, you know, doctors. And D is prescription drugs. There is bad stuff going on there. But if you get rid of the staff whose job it is to go after that, you have more fraud, not less fraud. Funding the people to go after it pays for itself multiple times over. But yes, there's huge waste in Medicare Advantage.

I don't want to necessarily say traditionally, but in recent years, there's been bipartisan support to go after it. But instead, what DOGE is doing is, you know, going after Big Bird, right? Like instead, what they're doing is trying to defund NPR. Yeah, which is a way of saying that the goal was never really about saving money or eliminating waste fraud and abuse. It's about eliminating things they don't like and profiteering by insurance companies is actually something they kind of like.

And actually going into that: In the 2011 Budget Control Act, which set budget caps for 2012, from 2012 to 2021, we had a special kind of exception to give money to combat fraud because the idea was during budget crunches, you might reprioritize away from the good governance stuff. And so they said, “oh, we'll make a special exception. We'll give you extra free money to combat fraud.”

And for the first two or three years, Republicans refused to fund the part that was going after Medicare fraud. They were happy to fund the parts going after unemployment insurance fraud.

They were happy to fund the parts going after disability insurance fraud. But they refused to fund the things going after Medicare fraud because, you know, they might've been happy about the Medicare fraud.

PAUL KRUGMAN Yeah. I guess, Trump is calling this “a big, beautiful bill.” But it’s the big, beautiful way to cut taxes for the rich and cut benefits for needy Americans.

So, what's the timeline? When do we get to see this actually appearing in Congress on the floor? Let's start with that. When is this going to actually hit the fan?

BOBBY KOGAN So, text has been starting to come out. We saw some text over the weekend and we saw more today. Let me think about what we've already seen. We've seen oversight, we've seen financial services. We saw ed and work workforce today. We saw Homeland Security yesterday. I think we're seeing judiciary today as well.

PAUL KRUGMAN We're seeing that, because the text has to be written, so it's directing or spending on departments, right?

BOBBY KOGAN Yeah, that's right. Different committees are instructed to increase or decrease the deficit. But basically, what we saw today, education and workforce was the first of the difficult ones for Republicans. And workforce was instructed to cut $330 billion. And that's primarily from making student loans and making it harder to pay off your student loans. We will see allegedly some of the harder ones maybe next week, maybe the week after. Some of them are getting pushed back. So of the hard stuff, we want to see their SNAP cuts, which will come from the Agriculture committee.

PAUL KRUGMAN Supplemental Nutrition Assistance Program, food stamps, although there aren't any stamps anymore, but yeah.

BOBBY KOGAN Right. We'll see their SNAP cuts in the Ag committee. The Medicaid cuts will come from Energy and Commerce.

PAUL KRUGMAN I was wondering why you were saying Energy and Commerce. I didn't realize that was where Medicaid was.

BOBBY KOGAN Yeah, that's right. Energy and Commerce has Medicaid, it has parts of Medicare, and it has some other things. What was so massive about it is, there's only $200 billion of non-health coverage stuff in Energy and Commerce. And Energy and Commerce has been instructed to save at least $880 billion. So that means a lot of what they're doing has to be health insurance coverage. There are ways they can get additional savings, but we're still looking at hundreds of billions of dollars of cuts to health coverage. So we'll see that sometime, and then we'll see the tax cuts, which comes from Ways and Means. We were supposed to see it next week, but they have now said, “oh, maybe not until June.”

So this is all I'm saying. If they could figure out the politics of what they wanted to do, this thing could be law in June. Process-wise, it would only take a couple weeks to go through the House and then a couple weeks to go through the Senate. But the issue is, they have no idea what they want to do because some people only said yes because they thought they were going to be guaranteed the largest Medicaid cuts ever and that was their price of going forward. And other people are only going forward with the hopes that they are not going to have to vote for the largest Medicaid cuts of all time ever.

A few people, not many, but a few people don't actually like the deficit increases. One of the CBO letters emphasizing the deficit increase and the impact on the economy from the deficit increases was a Republican member, David Schweickart. He asked CBO to tell him, what would it do to the debt if we permanently extended TCJA? And what would it do to interest rates? And what would it do to GDP?

PAUL KRUGMAN It almost sounds like he’s serious.

BOBBY KOGAN I think he's in the camp of, “what if we did only half that much?” Maybe he'd feel more comfortable. I don't think he's in the camp of not doing any of it at all. A few of them, not many, but a few of them are legitimately uncomfortable with the trajectory there. I mean, a lot of these people have debt counters at the top of their website. Mike Crapo, the Senate Finance Committee person, the guy who will be writing the tax bill over on the Senate side, has a debt counter at the top of his website. He says debt is an existential threat. And then he is writing a bill that would make the debt situation at least 50% worse. And so he is stuck pretending that it's free.

PAUL KRUGMAN And the CBO is still an honest broker, I gather. I mean, it's one of those things you would worry about eventually. But so far, not an issue? Not that they're necessarily right, but they will be doing an honest job of trying to score this stuff?

TC 30:00;00

BOBBY KOGAN

Yeah, 100%. The head for a while now, Phil Swagel, is a Republican. He's been there for a while. I think, you know, Phil is a very, very honest broker there. And I might have different priors on some stuff. But Phil would never do a data crime.

PAUL KRUGMAN

Yeah, because I remember 2017 when Trump was trying to repeal the Affordable Care Act and I actually took a “Waiting for Godot” poster and did some Photoshop on it to make it a “Waiting for CBO” poster because we were waiting to see what the coverage losses would be, what they would estimate and when the numbers came out it really had a devastating impact. It probably in the end convinced John McCain to vote against it. Any chance of a scenario like that this time?

We, CBO will once again produce coverage estimate impacts. Depending on what Republicans do, it could be more or less. One of the things that they are interested in doing is shifting costs onto states. And so depending on how states react to having to deal with the costs, that will increase or decrease the number of people kicked off.

But, as I say, we're looking at guaranteed many millions and potentially double digit millions of people kicked off of health insurance. I'm sure progressives will be asking, but ideally they will

ask for different impact numbers on hunger and food insecurity like impact on poverty, how many more people are being thrown into poverty?

And Democrats, and already one Republican are asking, “hey, if we do this, what is this gonna do to borrowing costs for households? What is this gonna do to real GNP per capita and that sort of stuff?”

PAUL KRUGMAN

That will probably fly right past people, but with the Supplemental Poverty Measure, we’ll want to ask how many people will be in poverty under the SPM and It surely will be a really big number.

BOBBY KOGAN Yeah, I mean, if you're getting rid of major anti-poverty programs,

shocker, it will have incredibly bad effects on poverty. I mean, not to put too fine a point on it, but if what they're proposing actually becomes law, it would be the single biggest transfer of wealth from the poor to the rich in a single bill in US history.

PAUL KRUGMAN Okay, so we just had the biggest tariff increase in history, so why not the biggest increase in a government created rise in poverty in history? That’s pretty much just par for the course now.

You're trying to analyze the numbers and so on, we're all guessing about the politics. But I'm trying to envision, if this comes to a head in June, we're probably looking at a time when people are feeling pretty stressed. The tariffs are going to really have hit consumer prices. Because of the supply chain concerns, we may not only have soaring inflation, but empty shelves. Any guesses on whether that will affect the political environment?

BOBBY KOGAN Yeah, I think it's tougher for Republicans than they have internalized. So much of the cost of what they are trying to do is tax cuts that are set to expire. So continuing that is costly as far as the deficit is concerned. The trajectory is, one way has debt do this, and the other has it go way higher. But I as an individual don't see my life as getting better. You know, the tariffs are a pure loss on me relative to continuing the status quo. So, Republicans have kind of pittances here in some way or the other.

But what people will actually see is meaningfully higher prices or lower wages, right? They'll see a tax cut that doesn't, as far as they're concerned, help them in any way, shape or form. And many of them will see some of their benefits going away, right? Many Republican voters are on Medicaid. Many Republican voters are on food stamps. That is something that I don't think Republicans have yet fully internalized. And I've got to imagine that what we are emphasizing

at the end of the day, is something that is disproportionately hurting the poor and disproportionately helping the rich. I can't imagine that that actually bodes very well for them.

Interestingly, their last tax cut, when they were doing this the first time, TCJA round one in 2017 was very, very, very unpopular. It's the only giant tax cut bill that I can think of that has ever been really, really in the red in terms of its polling. And I got to imagine this one, if it comes to pass, will be significantly worse.

PAUL KRUGMAN Okay, because this one is legislation that sort of wraps the tax cuts and the benefit cuts into a single bill. Ordinarily you're able to play on the disconnect. “Oh, we're cutting taxes, that's great for everybody.” And then, “the deficit is terrible, we need to cut benefits.”

But now they're putting it all in one bill. That has to be an issue.

BOBBY KOGAN

Totally. And even when in the Clinton era, they did a tax cut bill and then like six months later or whatever, they came and said, “okay, now it's time to do our Medicare cut bill.” Even with that, the ads were very brutal and Republicans backed off of that. Because, and it just so happened that they were roughly the same size. And so Democrats said, “you're cutting Medicare to pay for tax cuts for the rich.” They pulled their bill. One of them went on TV and said, “well, we're not cutting Medicare. You know, even CBO wouldn't say we're cutting Medicare. Anyone who could show that, here's a million dollars for you.”

Anyway, they settled out of court for an undisclosed amount. But, you know, they lost that in the public opinion. And this one is a direct tying.

PAUL KRUGMAN

Ugh. It's going to be fun. Not really. That's sarcasm.

It's going to be quite amazing.

I have to say, in my sort of tracking of what's going on, even fairly policy alert people are not thinking about this. Everyone's talking about tariffs, everyone's talking about the trade war, everyone's talking about all the non-economic stuff, but this is massive.

BOBBY KOGAN

Yeah, this is massive. It's being under discussed. And I'll just say this was actually the case last time. When ACA repeal was going through last time, it didn't really fully enter the public discourse until it had already passed the House and made its way to the Senate. A lot of people were paying attention in the House. A lot of the advocates obviously were doing great stuff. But in terms of like when it entered the full public discourse, it wasn't until we were really staring at it.

Similarly, a lot of folks don't know that we are staring at: a bill that would rip millions of people off of Medicaid, take food away from millions, you know, almost everyone on SNAP. Tens of millions of people. And really put our deficit situation in a significantly… I'm pretty dubby when it comes to the deficit, but, putting us at a 3% of GDP fiscal cap is NOT a great place to be in. And all as a way to do distributionally bad stuff that is disproportionately going to the rich.

PAUL KRUGMAN Yeah. And all of the world seemed a little bit less convinced that U.S.

government debt is a good thing to hold.

BOBBY KOGAN

Yeah, so that's actually the other thing. It's not just that they're putting the non-interest, primary deficits in a worse position. They're all like Trump at the same time. Debt stability comes from primary deficits. It comes from the level of debt. It comes from your growth, your G, and it comes from your interest rate, R. And the Trump policy is lowering G and increasing R star, right? He's increasing R. And that is a really bad place to be in.

Right now we have benefited from G minus R kind of being positive and he might make it

more towards zero or might make it negative. And that's a tough place to be in when you have large structural deficits and also an underlying situation that kind of exacerbates the underlying issue.

PAUL KRUGMAN Okay, I might put a note on this about G and R.

G is the economy's normal growth rate. R is the normal interest rate on government debt, and when G is larger than R, the level of debt is not much of a problem. But when it's less than R, woof.

All right, I have a feeling this has really been flying under the radar for a lot of people. In fact, I've barely been able to focus on it, but it's going to be one hell of a story soon. I might come back to you when stuff hits the fan, because it does look like a really big deal. Thanks for talking to me.

BOBBY KOGAN

Thanks so much for having me on.