The fact that so few people can actually understand this conversation is most of the reason we are where we are. Thanks so much for insisting on having informed discussions!
I would take issue with the idea that the “orange maniac” is running the country. The orange maniac is texting, sleeping, and being medicated while incompetent and corrupt lackeys make disastrous decisions and create even more disastrous policies. When Trump drops dead or goes the way of Mitch McConnell and becomes the “imaginary friend” that only his closest staff can see and hear, the oligarchs and his administration will still be in charge.
Paul Krugman published a piece yesterday making the case against bond market panic. Earlier today I published one arguing that the preconditions for fiscal dominance are assembling. Read the headlines and you would think we disagree about everything. Read the arguments and the overlap is large.
Understand the contrasting and similar views to a point. Wish there was a means of instantly understanding short handed and simple references, I presume, like debt scolds and nominal anchor. But I shall learn as I go: appreciate your thought and analysis.
“The US is the largest consumer-based economy on the planet, and that makes it highly vulnerable to direct action that the government can’t control in any way. If you protest on the streets, they can send in the army to crush the protest. If you go on strike, they can encourage employers to fire you, but there is absolutely NOTHING they can do to make you press the ‘buy now’ or ‘order now’ button. They can’t intimidate you, fire tear gas or pepper balls at you. You are the one with the economic gun in your hand, and those delivering the tyranny are, despite what they may think, at your mercy. You quite literally hold ALL the cards.”
“The time has come for Americans to understand that true change in an age of corporate capture and authoritarian drift cannot be achieved without discomfort. Real reform—whether against a corrupt government or a predatory market—has always depended on sustained moral pressure from the people, and that pressure must be felt economically.”
“Sacrifice has always been the price of renewal. Democracy, if it is to survive, cannot be the cheap luxury item of a populace too comfortable to fight for it.
The Trump regime can be resisted through civic courage, legal challenge, and organization. But it can also be starved—one deliberate, withheld dollar at a time.”
It looks like consumers are resisting, wether it is as political resistance or economic pressure I couldn’t say. But, my guess is that it’s both.
There’s this headline from Fortune: “Walmart’s sales growth falls to 6-year low as Middle American shoppers go on strike”,
And, this from CNN: “Retail sales fell 0.6% in July from the prior month, the Commerce Department said Friday, down from June’s 0.2% and marking the steepest drop since May 2025. Those figures are adjusted for seasonal swings but not inflation. A separate report from the University of Michigan showed that consumer sentiment declined about 8% early this month to a preliminary reading of 51, ending a two-month streak of rising sentiment.”
Is a child supported dollar-wise with food, education, and a rational job the same thing as if you spent the same amount of money servicing a national debt? One of these fundings is supporting the future of the human race and the production of societies, histories, and economies. One is paying down past obligations raised to fund growth and innovation resulting in high sales by business and owner activities. Do you have to choose between these two funding avenues? What if you don't!
Refraining from buying stuff as a consumer requirement can be stopped too. Reward? Loss? What do we really need as individuals? Clean food, water, air, home, workplace, and retirement home! We need fun too. Nonetheless, we need loads less than we think, and the time spent being alive for other reasons than buying can be so quiet, relaxing, and great fun! The Earth is a beautiful place to live. We can still hike (good reason to keep our parks). Let's work to keep it that way! So, yeah, it is work to care for Earth climate and environment, but also to care for all humans, and all the living! We are ingenuous! We are creative! We can be free! We can do it!
A few years ago, I actually spent 5 years living in a beautiful old log cabin, deep in the woods, surrounded by 100s of acres of old growth forests, abundant wildlife, silence that was deafening, under the Milky Way. Watching the seasons slowly change. Simple, easy, peaceful solitude. Far from the madding crowd.
Einstein once said - “The most beautiful thing we can experience is the mysterious. It is the source of all true art and all science. He to whom this emotion is a stranger, who can no longer pause to wonder and stand rapt in awe, is as good as dead: his eyes are closed.”
He was right. There’s so much beauty in the world…
AND what so many people don’t grasp or appreciate is that whatever we do to the environment, to this planet, to “Mother Earth” - to that which actually sustains us - we ultimately do to ourselves.
I keep a list of bookmarked links, things I could/might someday purchase. Then every few months I cull that list realizing most of it is stuff I just didn't and don't need. It works for me.
No, you can't always get what you wantYou can't always get what you wantYou can't always get what you wantBut if you try sometime you'll findYou get what you need
Sympathy for the Devil and Satan's Characteristics
Sympathy for the Devil
By Mick Jagger and Keith Richards
“Please allow me to introduce myself
I'm a man of wealth and taste
I've been around for a long, long year
Stole many a man's soul and faith
I was 'round when Jesus Christ
Had his moment of doubt and pain
Made damn sure that Pilate
Washed his hands and sealed his fate
Pleased to meet you
Hope you guess my name
But what's puzzlin' you
Is the nature of my game
Stuck around St. Petersburg
When I saw it was a time for a change
Killed the Tsar and his ministers
Anastasia screamed in vain
I rode a tank, held a general's rank
When the blitzkrieg raged
And the bodies stank
I watched with glee
While your kings and queens
Fought for ten decades
For the gods they made
I shouted out
"Who killed the Kennedy's?"
When after all
It was you and me
Just as every cop is a criminal
And all the sinners saints
As heads is tails, just call me Lucifer
'Cause I'm in need of some restraint
So if you meet me, have some courtesy
Have some sympathy, and some taste
Use all your well-learned politeness
Or I'll lay your soul to waste”
The following is Biblical in nature, but non believers can still appreciate it as symbolic.
Satan's characteristics
Satan's characteristics include being the great adversary, deceiver, accuser, and tempter, known for pride, cunning, and a desire to destroy God's creation, often appearing as an "angel of light" to lead people astray. He's a powerful, spirit- being with a will, though not omnipotent, who uses lies, schemes, and subtlety to oppose God, seeking to corrupt and ruin humanity.
Key Characteristics
• Adversary & Opposer: His name means "adversary," and he actively opposes God and His people.
• Deceiver & Liar: He is the "father of lies," presenting false images of reality and hiding his true motives.
• Tempter: He tempts people to sin, tailoring temptations to individual weaknesses.
• Accuser: He brings charges against the righteous.
• Proud & Malicious: He is characterized by pride and envy, desiring to elevate himself and bring others to ruin.
• Powerful but Limited: He possesses great power, but is not omnipotent, omniscient, or omnipresent, and will ultimately face punishment.
• Fierce & Cruel: Described as a "roaring lion" seeking whom he may devour, he embodies evil and destruction.
• Cunning & Subtle: He uses craftiness and deceitful schemes to corrupt minds.
• Destroyer: His goal is to kill, steal, and destroy, bringing people into rebellion against goodness.
All of the above seems so familiar.
Please: Resist. Stop cooperating. Stop spending. Stop the fascist takeover.
Thank you for restacking, and sharing, to help Spread the Word!
Yes. It’s oddly prophetic for these chaotic, deceitful, divisive, malicious, violent, subversive, destructive times under the trump regime, “often appearing as an "angel of light" … and “I alone can fix it”.
“The US is the largest consumer-based economy on the planet, and that makes it highly vulnerable …”
And any economy that’s based solely on endless consumption is simply unsustainable and will eventually collapse.
Particularly when the top 1% control the wealth AND simultaneously receive massive financial subsidies from the government!
Are we now witnessing the early stages of another Great Depression?
And who or what’s left to “bail out” the oligarchic kleptocrats this time?
Taxpayers? AGAIN? When almost 50% of America households are struggling to survive?
It appears we’re living in a modern day fiefdom!
“Approximately 49% of U.S. families (nearly half of all households) lack the resources to cover essential everyday expenses and live securely, according to research from the Urban Institute and the Brookings Institution.”
It is still somewhat debateable as to whether the world will experience the Trump "depression". However, it seems more and more likely that we will experience the "Trump recession". America tends to forget that it is part of a global economy and, right now, the global economy is stuttering from Trump's war and Trump's tariffs. And he is too psychotically obsessed to end either one.
Trump is hopelessly out of his mind. There should be a straightjacket and lockup at Walter Reed in his near future, instead I expect more TrumpZilla Unchained. As Dr. Krugman reported very early this a.m. Trump is threatening to use the military against the 'bond market' to calm interest rates. That's purely bats*** crazy.
Regarding Bonds though, as an investor seeking profits I wouldn't buy bonds now. There's far too much upward pressure on inflation and interest rates eroding their value. But if you're retired and looking for income, yields are rising so certain bonds might be attractive to buy and hold.
I always read Dr. Krugman's post (pretty much my only Substack) because I learn something. However, I found his conversation to be mainly between him and his guest, MEANDERING by not getting more quickly to the point, and leaving much of the audience out of the conversation. I finally got the points, which we all know: (1) We won't BEGIN to solve the problem until Democrats take control of part of the government this November 2026 - unless there is a "national emergency", (2) issue enforceable subpoenas of trump officials, (3) Democrats stop acting like fiscally-irresponsible Republicans by raising tax on the very high earners and include in those taxes, a wealth tax, and (4) reverse trump's damage (chronologically) to social, economic and, now, military policies.
I sped up the audio to 1.5 and so got to the point more quickly:
US debt, and economic issues in general, can be resolved by a normal government acting normally. "Normal" meaning a government reacts to its environment rather than just gaslighting the public.
The US is likely to elect autocratic presidents in the future; so even if Democrats sweep in 2028, that is not enough to make sane government permanent.
Even if the US succeeds in making sane government permanent, it will take longer than our lifetimes to convince US allies that the US is reliable.
"(2) issue enforceable subpoenas of trump officials,"
(2) is a very widely held misconception. Congress holds no "enforcement powers". The US Constitution separated legislative (make law) from Executive power (enforce law).
Who and what entity holds the Federal power to enforce Congressional subpoenas? AG T Blanche and DoJ.
All this leads to the very likely prospect of Democratic Congressmen looking ever more inept and powerless while foolishly thumping the table and shouting at an empty chair.
You will benefit greatly from more historical reading on US national politics since Nixon. Failing that if you stop posting your uninformed opinion, we may forget your recent bloviating
I think the meandering, in this case, is due to this being a conversation, and being unscripted. Try clicking the read more button, it enables me to find the pertinent information much more quickly.
Well, I agree with you but with caveats. The orange maniac is "running the country" in the sense that he can do things like almost single-handedly start a war against the advice of anyone sensible left in the gov't. And that, of course, has an impact on pretty much everything else - esp. the economy given that wholly unpredictable shut-down of the Strait of Hormuz. /s
This is a conversation that I wish we had more often. According to the Constitution, the President cannot unilaterally do anything. She or he needs approval from Congress to prosecute a war, raise tariffs, or control intra-country commerce. The Congress that Americans elected has repeatedly allowed the unmitigated disaster that is the Iran conflict, tariffs, and the bullying and forced selling of stock in American companies to continue. ALL of them need to be held responsible. The Senate can hold up a Supreme Court justice vote, but can't stop a war of choice? I call bullshit on all of it. The other two Branches of government are as corrupt as the Executive Branch, which is why this all continues.
Absolutely. To Donald Trump, anything that impedes his freedom to do whatever he wants whenever he wants is an affront. But to the nation, those impediments and bureaucratic processes are a feature, not a bug.
Although war is certainly a different and faster-moving thing from what it was 250 years ago, we still shouldn't allow the US to enter an offensive war on one man's whim. Fifty-one people, from all parts of the country, provides a lot more safety and reality-checking.
Tariffs, likewise, are in Congress's power, not the President's. This is for a practical reason: tariffs "work" to encourage domestic industry only if they're expected to last long enough to repay a company's investment. Getting a tariff through Congress takes a while, and repealing it takes equally long, so that kind of tariff can work, while tariffs imposed through one man's whim (and changed again on a whim the next day) cannot possibly work. The total freedom of action that Trump prizes so highly is exactly what prevents his tariffs from having their desired effects.
The Constitution doesn't specify a separation between the Presidency and law enforcement, but we've had one since Watergate, and Trump has reminded us all why we needed it: if laws are enforced vindictively on the President's political opponents, and not at all on the President's supporters or donors, the entire apparatus of law loses credibility. And since the Constitution centers the purpose of government on the creation and application of laws, that means the whole government loses credibility.
The orange maniac is mostly focused on doing favors for those willing to donate to his personal capital fund. The others like RV are white nationalist focused on destroying the government.
Can't say I agree with your contention that the OM is not running the country because he's too sick or medicated to do so. After all Hitler was in control of Germany's war effort right up to the very end despite his being as medicated as any stoner during the last 4 years of WW II. He basically became a physical and mental basket case right after he realized that he wasn't going to get the quick win he needed against Russia after July 1941, but still managed to function thanks to Theo Morell's injecting him with cocktails of cocaine, vitamins, methamphetamine and lots of other stuff.
I think Trump's going through the same type of regimen. He's getting enough drugs to keep going and stay more or less in control of his administration, at least when it comes to the big decisions.
The most significant explanation in the information provided by Bernstein that revealed the cause of the debt was the tax cuts created by Republicans which were supported by Democrats. However, the tax cuts also blocked the funding required to solve problems such as affordability and the Democrats did not object. Economics can’t be understood without explaining the impact of politics and Republican political lying about economics with the lying funded and supported by oligarchs and corporations blocks the understanding by voters.
I would be interested in either Paul or Jared reflecting on the application of Modern Monetary Theory (MMT) to this discussion and whether or not it might change their perspective on what is causing higher interest rates, the extent to which debt is “ unsustainable” and what an incoming Democratic truly reforming government ought to do and can do. I took away the idea from the conversation that a few years ago global excess savings led to low interest rates for a while convincing many we had entered a period of secular stagnation but now we have massive debt fuelled investment ( AI , energy transition infrastructure , defence spending , climatic events etc) so interest rates are higher, a basic demand and supply equation or I could be being too simplistic perhaps? There were lots of reasons put forward to explain higher interest rates but is it not the case that central banks set interest rates and not the market? The market rate is surely a function of the cash rate set by the central bank. I think there is a case to be made that the collapse of the rules based order, however illusory it was, is perhaps causing the price of money to be higher than otherwise. In short the US, big tech and big fossil are out of control and destroying the world as we know it as fast as possible. We are all going to pay because collectively they are all in the profit extraction business.
Has there been any polity, anywhere and at any time that has as one of its governing principles in its charter -- a constitutional amendment in our system -- an absolute limit on the amount of wealth a person or 'person' can accumulate? Specifically because of all the problems of governance an oligarchy can cause?
Or would this be something entirely novel? In my ideal (amended) constitution this would certainly be a priority, filed under the heading 'by the people for the people'. Oh and I'd take a page from those commies over in Europe and have another amendment that explicitly says an individual's right to privacy is guaranteed and absolute.
But what do I know? I'm just a retired mathematician :-(
Day-to-day DJT and his kakistocratic administration are "running" the country. Nothing will change on the day-to-day unless and until the success of Republican Party strategy to achieve governing majorities from a minority of the electorate is unwound. Unwound is used here in a sense very similar to Dr Krugman and J Bernstein discussion about unwinding tax cuts to address debt ratios. That is leave who did what and when to the historians. Focus on future requirements of necessary repairs and get to the hard work of making those repairs.
If 2026 ushers in slim Democratic majorities I worry investigations will produce nothing, waste time and focus and most critically squander the spreading of dissatisfaction of the American voter with DJT, his kakistocratic administration and the chaos preserved by the Republican Party. As attractive as it is dole out punishment it takes time and punishment is a distraction from J Bernstein's suggestion to futureproof the government from the next authoritarian. Let history penalize the culprits.
What might future proofing look like? For starters crafting legislation to unwind the morass of emergency powers legislation Congress recklessly ceded to the Executive. Assuming slim (a couple three vote margin) Democratic majorities even miniscule changes requires the public support of the "quietly concerned" Republicans to override certainty of DJT veto. That support happens by persuading enough Republicans the tide is so strong their "We are all afraid" and quite unspoken concern turns from losing a primary to a genuine fear of the Republican Party implosion and vanishing from the American political landscape.
Before the guffaws form consider party disintegration, while rare, has happened. The last time in was the 19th century when Lincoln and the new Republican Party replaced the Whigs as the party committed to championing all Americans rights and the principles of representative government in the Declaration of Independence instead of the Whigs isolated power brokers and narrow economic interests.
As surely as the next sun rise, if the Democrats instead convene investigations and seek to punish bad actors, Congressional Republicans will see their future remains in the primaries and will use their public voice to rally MAGA and then....
I would be interested in either Paul or Jared reflecting on the application of Modern Monetary Theory (MMT) to this discussion and whether or not it might change their perspective on what is causing higher interest rates, the extent to which debt is “ unsustainable” and what an incoming Democratic truly reforming government ought to do and can do. I took away the idea from the conversation that a few years ago global excess savings led to low interest rates for a while convincing many we had entered a period of secular stagnation but now we have massive debt fuelled investment ( AI , energy transition infrastructure , defence spending , climatic events etc) so interest rates are higher, a basic demand and supply equation or I could be being too simplistic perhaps? There were lots of reasons put forward to explain higher interest rates but is it not the case that central banks set interest rates and not the market? The market rate is surely a function of the cash rate set by the central bank. I think there is a case to be made that the collapse of the rules based order, however illusory it was, is perhaps causing the price of money to be higher than otherwise. In short the US, big tech and big fossil are out of control and destroying the world as we know it as fast as possible. We are all going to pay because collectively they are all in the profit extraction business. They are going to keep going until they are stopped.
Highly recommend reading Gil Duran's book: "The Nerd Reich: Silicon Valley Fascism and the War on Democracy" which reveals astonishing facts about some of those incompetent and corrupt lackeys who are behind what is happening in this regime.
The lunatics are running the asylum and those lunatics, along with their infatuated fans, think they're smarter than anybody else. Their goal is to destroy our economy, the American dollar, our democracy, and our country—and a major player is Peter Thiel, who can take a bow for getting the man who once equated Trump to Hitler anointed his Vice President. Yes, that would be Shady Vance.
Here's the bit in this conversation that gets me: the $9-to-$10 return on every dollar spent on IRS enforcement. That number tells me that the debt story isn't as much about rates as it is about who the code is actually enforced against. The tax gap Bernstein describes, concentrated almost entirely at the top of the income distribution, exists because enforcement capacity has been deliberately starved because, yes, we defunded the IRS. When the biggest trigger for an audit is taking the EITC, that's a problem.
Actually it is about both. It makes zero sense to reform the tax structure if the taxes cannot be efficiently collected. But simply making the IRS effective will not provide adequate revenue.
agreed, enforcement of what exists might be easier (just fund it) than tax reform. But there is no doubt that both should happen! Both take a political will that is absent.
The law/enforcement problem created by the Trump administration is much bigger than IRS & tax code. Trump is both decapitating fraud investigation and, through pay for pardons, making white collar escape a financial calculation for the fraudsters.
I'm nearing retirement and not making much money at this point. Even my state disallowed whatever EITC Turbotax had calculated. Oh, yeah - they wanted a photo of my Social Security card. I wonder where that is? I told them to look to the dark web - as most everyone there has a copy of my social security number.
The "tax gap" reveals another problem: The IRS cannot just hire skilled auditors able to unravel sophisticated tax cheats; it has to train them. That requires hiring CPAs willing to be trained. That requires trainees not be fired after the next election.
The government is run by, and for, white collar criminals and money launderers. If you send $1000 to Iran, the FBI will be on your doorstep. But literally hundreds of billions of dollars of drug running and foreign government corruption proceeds have been cycled through the US banking, trust, and real estate systems, and nobody ever gets "caught".
Informative, smart. But I read this having just read a climate Substack on how this year’s outsize El Niño is redistributing planetary heat in ways that are going to inflict huge economic pain through floods, fires, fish kills and crop failures. So I would like to hear the economists reckoning with that, in particular when they talk about growth as the means of reducing debt. Growth means fossil fuel expansion unless we turn a sharp corner toward renewables. You want a good investment for hoarded money? Solar , wind, batteries. We’re in a desperate race against the clock of catastrophic global warming.
This gets to one of the most dishonest aspects of economics, which is the failure to include damage into the calculations. For example, electricity produced by coal-fired power plants should have a surcharge to pay for the health damages caused by their pollution and to pay for the removal and sequestration of carbon dioxide emissions. Were we to do so the decarbonization of the economy would be rapid, and the conversion process would produce many new jobs and businesses.
I agree. It has a very limited role, potentially applicable only at major sources. I did a couple of pieces on CCS on my substack a while back. At that time the cost of capture alone was ca $1000 per ton of CO2 removed with hopes of reducing the cost tenfold. In the interim I don't think there has been any progress.
On the other hand the geoengineering prospects such as stratospheric aerosol injection are terrifying. I wrote about this too. Sorry for blowing my own horn
Q: If the US economy grows at 2% per year, how many years will it take to double in size?
A: If you answer 36 without using any electronic device, you are in the company of 42% of people across the OECD, but only 18% across the US.
The solution to economic calculations not including environmental damage is simple: include it. The problem is that too many people cannor do economic calculations at all. So if the people in charge don't want to include environmental damage in economic calculations, who's going to challenge them?
Thank you. I have great appreciation for Paul Krugman, but watched to the very end wondering if either would even mention climate change. AI is a huge distraction and worse, with all the “investment” in fossil fueled data centers.
I am saying corporate welfare will prevail. 2 1/2 years sounds like forever right now . I just hope we get a democratic takeover of the House and Senate to keep our president busy during that time.
Daniel Dennett the American philosopher who sadly passed 2 year ago, expressed concern that we are creating systems that we do not understand what they can do. And yet here we are releasing AI and other tech into the world at breakneck speed without a clue how to rein them in all for greed and power. I am not hopeful.
We have always created systems we (i.e., the masses) do not understand, yet embrace. I don't understand how electricity works, but I know I couldn't live without it.
I think the US empire is collapsing. All empires must fall, and I think the US has finally overstepped its ability to control the world and extract its resources, even while the US people get poorer and more of us struggle to afford basic needs like housing. I think the empire has finally overextended both globally and at home. Millions of people homeless in the US, a losing war of aggression against Iran, total loss of legitimacy in the eyes of the world, and drowning in debt to the oligarchs who set up this whole house of cards to begin with.
Seems like there came a point in the second century AD when the Roman Empire lost its golden-age stability and entered a long spiral of political corruption, economic trouble, and military strain. I'm saying this is where the US empire is now. It wasn't built in a day and won't fall in a day, but the fall has commenced.
It's happening because the top-heavy weight of the empire itself is unstable. The US people are also suffering. Half the working class is struggling so badly and millions of people are literally homeless. We have elders living in cars so the US can try to overthrow Iran.
If by "top heavy" you mean oligarchic wealth and power, agree 💯. As happened in Russia when Soviet Union collapsed- Putin allowed his oligarchs to grab the national wealth of the Russian people and move it out of the country. The Mafioso American regime is doing same. The inequality and debt mismanagement started with Reagan and "trickle down" economic theory HOAX. The power of oligarchs and foreign enemies amonst us, has now overtaken all parts of the framework of our system of governance. They will try to steal election. Only We the People can save and rebuild this country.
Well the US overthrew Mosaddegh in Iran in 1953 and Arbenz in Guatemala in 1954. The US has consistently overthrown democratically elected governments whenever they ran counter to US "interests" which means the interests of the US capitalist class, not the interests of the US people in general. The US has gone out of its way to go and ruin other countries time after time after time in this way, Indonesia and Vietnam and Honduras and El Salvador and Nicaragua and Cuba and so many others. Venezuela recently -- still holding a kidnapped leader and his wife. This is an aggressive empire that goes out and harms the whole world on purpose for the rich to get ever richer. It's not a partisian thing, either. Both of the fake parties are in the same game.
The date assigned to when the Roman Empire ended depends on whose history book you're reading: I took a few courses in German from the Goethe Institute and was surprised to see the end of the Roman Empire dated as November, 1919, when Kaiser Wilhelm abdicated. "Kaiser" is German for "Ceasar".
I know this is a US-focused blog, but I would love to read an analysis from you about Canada walking away from the CUSMA table last night --- told from the Canadian perspective and what it will mean for Canada's economy.
Your question impacts Americans a lot... and so behind in this forum; I will try to answer, and sorry it's a long answer.
First a clarification: Canada did not walk away from the USMCA; Canada walked away from Trump's deal to avoid imposing 50% tariffs under section 308 of the Smoot-Hawley tariff act. The USMCA will remain in effect until 2036.
IMPACT ON THE US
We can break Trump's tariff action into three levels: tactical, operational, and strategic.
Tactical is where we feel the pain. US businesses are now paying 50% more for the affected imports today than they were yesterday.
"Operational" is the level where businesses and bureaucracy deal with it.
Will the US bureaucracy be able to keep the tariffs collected? Probably not. Legal experts seem to think the section 308 tariffs are less legal than the "Liberation Day" tariffs and that's why they were not used for Liberation Day.
Will US businesses pay the tariffs? No. They will either not sell products that depend on the impacted imports, or declare bankruptcy and not sell anything at all.
Will Canadian business relocate to the US? Probably not to a significant extent, given that the tariffs may not be legally enforceable over the medium to long term.
"Strategic" is level where we consider how the tariffs support governer objectives.
What does the Trump administration seek to achieve? JD Vance let slip in a private fundraising speech that (at least) one attendee secretly recorded and leaked to the Canadian Press that the Trump administration seeks to force Canada to follow Trump's directions much as Congress and state governments do now.
IMPACT ON CANADA
The section 308 tariffs affect about $20B in trade. The people who earn their living from this trade will have to find something else to do.
Here is where the Canadian government knows something the US government does not know: The Canadian government knows the Canadian electorate will NOT do Trump's bidding. This means the Canadian government has a plan for what the Canadians impacted by the section 308 tariffs will do, and US government has no corresponding plan for impacted Americans.
THE NET RESULT
Canada will redirect the $20B in resources to developing trade with other nations, will supply bridge financing for impacted businesses that can recover sales, and shutdown funding for that that cannot. This will show up as flat to slightly negative GDP growth and increased employment.
The US will continue loosing jobs, small business bankruptcies will rise.
Will Canada retaliate? Maybe. I can't think of a retaliatory action Canada could take that will be more painful for Americans than the policies Trump is already following. Since the pain Trump's policies cause Americans now does not lead the Administration to change policy, I don't think retaliation would either. But the Canadian government is much smarter than I am.
I'm sure Krugman is very interested in Canada's resistance to Trump and the Republican party's war on America's former allies and embrace of totalitarian dictatorships with failed economies like North Korea and Russia.
I love this stuff! Open and honest discussion of subjects upon which we may or may not agree. But we're all looking for the same thing. The solution! I'm reminded of the Hegelian triangle. Thesis, antithesis, synthesis. This kind of discussion is how we move forward. But it takes humility and honesty. Which are are commodities these days. Not here though. Thank you Paul for all that you bring forward. Did I mention that I love this stuff?
I have to get going this morning, but I must say this after listening to the interview. I don't want to go back to the way it was. It was never that good for us working/middle class people. Saying it was doesn't make it so. We must do better, even if it means structural change to the Constitution by amendment or rewriting.
I know those who are still doing fairly well won't want to amend the Constitution, but how long will you be doing fairly well in a system that has always been rigged on behalf of the wealthy. Even if we gain some ground as we did with the New Deal, we will end up fighting for our survival again eventually unless we change the foundational document.
Trump and his minions have exposed every weakness in our system but change will be incremental and depends on voters understanding real issues instead of culture war nonsense. A vital first step is funding the IRS so they have the technical resources and staff to enforce current tax laws.
Absolutely, Nancy Janitz. Putin got his wish (in spades) that his puppet (and the rest of that payroll) would destroy US democracy, its respect for the rule of law, and its stature in the world. That he thought Russia would be the benefactor, however, when it was obvious that China would be, maybe as early as 2016, is curious. Maybe that provides a glimmer of hope?
The Current US Population is Aging and There Are not Enough Babies born in recent years to Be in the Workforce and to subsidize the Social Security System for the Boomer generation that is now retiring :
They are so ignorant of the history of our country that was founded by immigrants from the European Colonies and the fact that we stole the land from the Native Americans Indians and put them on reservations 🤨🤴🏼🧠🏛️⚖️🗳️💙🙏
Every year the US has a lottery in which 50,000 chances to apply for a Green Card are raffled off. About 20 Million people participated last year. All more than willing to come to the US to live, to work, to procreate. With so many people on stand-by, how can "experts" talk about "not enough babies being born". Unless they think US citizens are a better kind of people. Also, if there is currently a shortage of human beings being added to the US population, why are you kicking out so many? Especially immigrants tend to have stripes on their heart and stars in their eyes.
In the late 1950s I was reading articles about the declining birth rate, so that we would be dependent upon immigration to pay for social security and health care in general for the foreseeable future.
It’s very reassuring to know that there are real VSP’s who are genuinely engaged in honestly plotting a rational course through our current chaos, and even more gratifying to get to watch them in action.
As soon as Dems take over we are going to be back in “the sky is falling”, anti-deficit mode. The media has got to stop indulging that tiresome cycle. We must fund the IRS and start taxing capital accumulation. We must tear back down the unitary executive. We must “do something” about Citizen’s United. We ought to end gerrymandering. We should shore up Obamacare. But there is so much repair that needs doing, I think it would be a mistake to engage too quickly to ratchet up government spend with any sort of major and very controversial new spending programs. Better to fix government first before major expansion.
The American people and the whole world are watching - if we don't convincingly permanently eliminate any possibility of another Trump-like presidency, everyone will consider any other positive government accomplishment temporary..
First, if deficits are justified based on the ratio of GDP growth to interest rates, isn’t that argument corrupted or weakened if economic growth is not even across all taxpayers but flows disproportionally to the top 1% of taxpayers? And, if tax cuts disproportionally benefit the top 1% of taxpayers, doesn’t that weaken the argument even further?
Second, since national debt is dollar denominated debt, wouldn’t runaway inflation solve the debt crisis? In other words, are we headed toward a situation where the only solution to manage the national debt is to print money to service and pay down the debt?
Growth is supposed to help solve the equation, but if too much of that growth accumulates un-taxed in the hands of an elite, it doesn’t “do its thing.” The people who claim we need to lower taxes to promote growth are undermining their own theory by concentrating on low taxes for the so-called super-producers.
Jim Wilton: I think runaway inflation will be trumps next move. Printing money. How he thinks his ill-gotten billions will not lose value is an interesting question. But then he’s not the sharpest pencil in any pack.
This was a great conversation with complex matters expressed in understandable language. Problem is most of the people who should be paying attention are not. Funding the IRS, is a no brainer, but when Biden attempted to do so the R’s were hair on fire exclaiming that ment armed IRS agents kicking down the doors of small businesses in Iowa. If Dems regain power R’s will suddenly discover deficits and debt and will against tax and spend Dems. They will also keep promoting faux culture war issues - guns, gays,God and transgender athletes. Unless voters are willing to reject that nonsense, understand and support the views expressed by P.K. And Jared I fear we may repeat the doom loop. It is imperative to stay the course long enough to make real progress in correcting tRumpian and GOP damage. It will take more than one term of Dem rule.
“if you take the Bush and the Trump tax cuts out of the mix, our fiscal scene would look fine”
An analogy-
When Republicans are in power, they essentially accept all those applications for credit cards that come in the mail. Then they have a big party, and max out the cards.
Democrats win back power and the inherited credit card debt. And struggle with the debt payments a bit.
The debt continues to grow to unmanageable levels.
It is a Republican ploy to force tax cuts for the rich. While justifying the need to cut everything else for the remaining 95%.
While making Democrats always seem like the bad guys. It is huge, continual deficit spending by Republicans.
Professor Krugman thinks the US is relatively impervious to its own debt as it can print its own money. I don't understand that, but what are the danger points for the US economy? What can crash the economy?
I imagine that the current executive and legislative majorities, if the mid-terms result in a Democrat Congress, are clearly capable of arranging a default on U.S. Treasury debt before those Democrats are sworn in. I think that would crash the economy like a kamikaze hitting the powder locker of our ship of state..
Mother Nature, as earlier comments noted. The persistence in ignoring global climate change - or maybe it’s more a matter of great difficulty to bring this salient variable in - is telling us how thin the ice is. Merrily we roll along…
The fact that so few people can actually understand this conversation is most of the reason we are where we are. Thanks so much for insisting on having informed discussions!
I would take issue with the idea that the “orange maniac” is running the country. The orange maniac is texting, sleeping, and being medicated while incompetent and corrupt lackeys make disastrous decisions and create even more disastrous policies. When Trump drops dead or goes the way of Mitch McConnell and becomes the “imaginary friend” that only his closest staff can see and hear, the oligarchs and his administration will still be in charge.
Completely agree . Wow thank both of them for making Saturday morning a positive and informative affair
Paul Krugman published a piece yesterday making the case against bond market panic. Earlier today I published one arguing that the preconditions for fiscal dominance are assembling. Read the headlines and you would think we disagree about everything. Read the arguments and the overlap is large.
https://marcusnunes.substack.com/p/no-crisis-is-not-the-same-as-no-problem
Reading this conversation provided needed context to the other article. I advise all to read both together.
Understand the contrasting and similar views to a point. Wish there was a means of instantly understanding short handed and simple references, I presume, like debt scolds and nominal anchor. But I shall learn as I go: appreciate your thought and analysis.
Starve the Corporate Beast
From Truth Matters:
“The US is the largest consumer-based economy on the planet, and that makes it highly vulnerable to direct action that the government can’t control in any way. If you protest on the streets, they can send in the army to crush the protest. If you go on strike, they can encourage employers to fire you, but there is absolutely NOTHING they can do to make you press the ‘buy now’ or ‘order now’ button. They can’t intimidate you, fire tear gas or pepper balls at you. You are the one with the economic gun in your hand, and those delivering the tyranny are, despite what they may think, at your mercy. You quite literally hold ALL the cards.”
https://politicsusa46.substack.com/p/thy-symbolism-is-chilling-the-outlook?r=5f62tm&utm_medium=ios
From Mark Mansour
“The time has come for Americans to understand that true change in an age of corporate capture and authoritarian drift cannot be achieved without discomfort. Real reform—whether against a corrupt government or a predatory market—has always depended on sustained moral pressure from the people, and that pressure must be felt economically.”
https://mmansour.substack.com/p/its-time-to-recognize-that-this-ordeal?r=5f62tm&utm_medium=ios
From Mark Mansour:
“Sacrifice has always been the price of renewal. Democracy, if it is to survive, cannot be the cheap luxury item of a populace too comfortable to fight for it.
The Trump regime can be resisted through civic courage, legal challenge, and organization. But it can also be starved—one deliberate, withheld dollar at a time.”
https://mmansour.substack.com/p/its-time-to-recognize-that-this-ordeal?r=5f62tm&utm_medium=ios
Please: Resist. Stop cooperating. Stop spending. Stop the fascist takeover.
Thank you for restacking, and sharing, to help Spread the Word!
It looks like consumers are resisting, wether it is as political resistance or economic pressure I couldn’t say. But, my guess is that it’s both.
There’s this headline from Fortune: “Walmart’s sales growth falls to 6-year low as Middle American shoppers go on strike”,
And, this from CNN: “Retail sales fell 0.6% in July from the prior month, the Commerce Department said Friday, down from June’s 0.2% and marking the steepest drop since May 2025. Those figures are adjusted for seasonal swings but not inflation. A separate report from the University of Michigan showed that consumer sentiment declined about 8% early this month to a preliminary reading of 51, ending a two-month streak of rising sentiment.”
Reward and Loss.
Is a child supported dollar-wise with food, education, and a rational job the same thing as if you spent the same amount of money servicing a national debt? One of these fundings is supporting the future of the human race and the production of societies, histories, and economies. One is paying down past obligations raised to fund growth and innovation resulting in high sales by business and owner activities. Do you have to choose between these two funding avenues? What if you don't!
Refraining from buying stuff as a consumer requirement can be stopped too. Reward? Loss? What do we really need as individuals? Clean food, water, air, home, workplace, and retirement home! We need fun too. Nonetheless, we need loads less than we think, and the time spent being alive for other reasons than buying can be so quiet, relaxing, and great fun! The Earth is a beautiful place to live. We can still hike (good reason to keep our parks). Let's work to keep it that way! So, yeah, it is work to care for Earth climate and environment, but also to care for all humans, and all the living! We are ingenuous! We are creative! We can be free! We can do it!
A few years ago, I actually spent 5 years living in a beautiful old log cabin, deep in the woods, surrounded by 100s of acres of old growth forests, abundant wildlife, silence that was deafening, under the Milky Way. Watching the seasons slowly change. Simple, easy, peaceful solitude. Far from the madding crowd.
Einstein once said - “The most beautiful thing we can experience is the mysterious. It is the source of all true art and all science. He to whom this emotion is a stranger, who can no longer pause to wonder and stand rapt in awe, is as good as dead: his eyes are closed.”
He was right. There’s so much beauty in the world…
AND what so many people don’t grasp or appreciate is that whatever we do to the environment, to this planet, to “Mother Earth” - to that which actually sustains us - we ultimately do to ourselves.
I keep a list of bookmarked links, things I could/might someday purchase. Then every few months I cull that list realizing most of it is stuff I just didn't and don't need. It works for me.
Yes, there’s a distinction between “wants” and “needs”. And as the years fly by, the list tends to get shorter, for both! At least for me…
No, you can't always get what you wantYou can't always get what you wantYou can't always get what you wantBut if you try sometime you'll findYou get what you need
I could immediately hear Jagger singing that song as soon as I read it!
Iconic. The music of my youth.
And the perfect response. Thank you!
Here’s one I posted recently. Stones influenced
Sympathy for the Devil and Satan's Characteristics
Sympathy for the Devil
By Mick Jagger and Keith Richards
“Please allow me to introduce myself
I'm a man of wealth and taste
I've been around for a long, long year
Stole many a man's soul and faith
I was 'round when Jesus Christ
Had his moment of doubt and pain
Made damn sure that Pilate
Washed his hands and sealed his fate
Pleased to meet you
Hope you guess my name
But what's puzzlin' you
Is the nature of my game
Stuck around St. Petersburg
When I saw it was a time for a change
Killed the Tsar and his ministers
Anastasia screamed in vain
I rode a tank, held a general's rank
When the blitzkrieg raged
And the bodies stank
I watched with glee
While your kings and queens
Fought for ten decades
For the gods they made
I shouted out
"Who killed the Kennedy's?"
When after all
It was you and me
Just as every cop is a criminal
And all the sinners saints
As heads is tails, just call me Lucifer
'Cause I'm in need of some restraint
So if you meet me, have some courtesy
Have some sympathy, and some taste
Use all your well-learned politeness
Or I'll lay your soul to waste”
The following is Biblical in nature, but non believers can still appreciate it as symbolic.
Satan's characteristics
Satan's characteristics include being the great adversary, deceiver, accuser, and tempter, known for pride, cunning, and a desire to destroy God's creation, often appearing as an "angel of light" to lead people astray. He's a powerful, spirit- being with a will, though not omnipotent, who uses lies, schemes, and subtlety to oppose God, seeking to corrupt and ruin humanity.
Key Characteristics
• Adversary & Opposer: His name means "adversary," and he actively opposes God and His people.
• Deceiver & Liar: He is the "father of lies," presenting false images of reality and hiding his true motives.
• Tempter: He tempts people to sin, tailoring temptations to individual weaknesses.
• Accuser: He brings charges against the righteous.
• Proud & Malicious: He is characterized by pride and envy, desiring to elevate himself and bring others to ruin.
• Powerful but Limited: He possesses great power, but is not omnipotent, omniscient, or omnipresent, and will ultimately face punishment.
• Fierce & Cruel: Described as a "roaring lion" seeking whom he may devour, he embodies evil and destruction.
• Cunning & Subtle: He uses craftiness and deceitful schemes to corrupt minds.
• Destroyer: His goal is to kill, steal, and destroy, bringing people into rebellion against goodness.
All of the above seems so familiar.
Please: Resist. Stop cooperating. Stop spending. Stop the fascist takeover.
Thank you for restacking, and sharing, to help Spread the Word!
Yes. It’s oddly prophetic for these chaotic, deceitful, divisive, malicious, violent, subversive, destructive times under the trump regime, “often appearing as an "angel of light" … and “I alone can fix it”.
And thanks for sharing the analysis.
“The US is the largest consumer-based economy on the planet, and that makes it highly vulnerable …”
And any economy that’s based solely on endless consumption is simply unsustainable and will eventually collapse.
Particularly when the top 1% control the wealth AND simultaneously receive massive financial subsidies from the government!
Are we now witnessing the early stages of another Great Depression?
And who or what’s left to “bail out” the oligarchic kleptocrats this time?
Taxpayers? AGAIN? When almost 50% of America households are struggling to survive?
It appears we’re living in a modern day fiefdom!
“Approximately 49% of U.S. families (nearly half of all households) lack the resources to cover essential everyday expenses and live securely, according to research from the Urban Institute and the Brookings Institution.”
https://www.urban.org/data-tools/american-affordability-tracker
It is still somewhat debateable as to whether the world will experience the Trump "depression". However, it seems more and more likely that we will experience the "Trump recession". America tends to forget that it is part of a global economy and, right now, the global economy is stuttering from Trump's war and Trump's tariffs. And he is too psychotically obsessed to end either one.
Trump is hopelessly out of his mind. There should be a straightjacket and lockup at Walter Reed in his near future, instead I expect more TrumpZilla Unchained. As Dr. Krugman reported very early this a.m. Trump is threatening to use the military against the 'bond market' to calm interest rates. That's purely bats*** crazy.
Regarding Bonds though, as an investor seeking profits I wouldn't buy bonds now. There's far too much upward pressure on inflation and interest rates eroding their value. But if you're retired and looking for income, yields are rising so certain bonds might be attractive to buy and hold.
World leaders have been paying close attention to Trump”s shenanigans and they’re shifting alliances accordingly.
And in my pea-brain opinion, it remains to be seen whether America can or will even try to prevent a “worse-case-scenario” outcome.
Meanwhile, the oligarchs who funded trump’s campaign are doing quite well! And they have quick “escape hatches” if need be.
Some might go so far as to say that it is economic wage slavery. Not too far from serfdom in the Middle Ages.
Agree. In fact I made a similar comment in my earlier response above 👆🏼
“It appears we’re living in a modern day fiefdom!”
I always read Dr. Krugman's post (pretty much my only Substack) because I learn something. However, I found his conversation to be mainly between him and his guest, MEANDERING by not getting more quickly to the point, and leaving much of the audience out of the conversation. I finally got the points, which we all know: (1) We won't BEGIN to solve the problem until Democrats take control of part of the government this November 2026 - unless there is a "national emergency", (2) issue enforceable subpoenas of trump officials, (3) Democrats stop acting like fiscally-irresponsible Republicans by raising tax on the very high earners and include in those taxes, a wealth tax, and (4) reverse trump's damage (chronologically) to social, economic and, now, military policies.
I sped up the audio to 1.5 and so got to the point more quickly:
US debt, and economic issues in general, can be resolved by a normal government acting normally. "Normal" meaning a government reacts to its environment rather than just gaslighting the public.
The US is likely to elect autocratic presidents in the future; so even if Democrats sweep in 2028, that is not enough to make sane government permanent.
Even if the US succeeds in making sane government permanent, it will take longer than our lifetimes to convince US allies that the US is reliable.
Paul Krugman's five paragraph essays are posted every Sunday behind the paywall.
"(2) issue enforceable subpoenas of trump officials,"
(2) is a very widely held misconception. Congress holds no "enforcement powers". The US Constitution separated legislative (make law) from Executive power (enforce law).
Who and what entity holds the Federal power to enforce Congressional subpoenas? AG T Blanche and DoJ.
All this leads to the very likely prospect of Democratic Congressmen looking ever more inept and powerless while foolishly thumping the table and shouting at an empty chair.
I saw what you did there :-) I'd give this more likes if I could.
You will benefit greatly from more historical reading on US national politics since Nixon. Failing that if you stop posting your uninformed opinion, we may forget your recent bloviating
I think the meandering, in this case, is due to this being a conversation, and being unscripted. Try clicking the read more button, it enables me to find the pertinent information much more quickly.
Totally agree. I read the entire article, hoping for at least a brief conclusive remark or bottom line!
Well, I agree with you but with caveats. The orange maniac is "running the country" in the sense that he can do things like almost single-handedly start a war against the advice of anyone sensible left in the gov't. And that, of course, has an impact on pretty much everything else - esp. the economy given that wholly unpredictable shut-down of the Strait of Hormuz. /s
This is a conversation that I wish we had more often. According to the Constitution, the President cannot unilaterally do anything. She or he needs approval from Congress to prosecute a war, raise tariffs, or control intra-country commerce. The Congress that Americans elected has repeatedly allowed the unmitigated disaster that is the Iran conflict, tariffs, and the bullying and forced selling of stock in American companies to continue. ALL of them need to be held responsible. The Senate can hold up a Supreme Court justice vote, but can't stop a war of choice? I call bullshit on all of it. The other two Branches of government are as corrupt as the Executive Branch, which is why this all continues.
Absolutely. To Donald Trump, anything that impedes his freedom to do whatever he wants whenever he wants is an affront. But to the nation, those impediments and bureaucratic processes are a feature, not a bug.
Although war is certainly a different and faster-moving thing from what it was 250 years ago, we still shouldn't allow the US to enter an offensive war on one man's whim. Fifty-one people, from all parts of the country, provides a lot more safety and reality-checking.
Tariffs, likewise, are in Congress's power, not the President's. This is for a practical reason: tariffs "work" to encourage domestic industry only if they're expected to last long enough to repay a company's investment. Getting a tariff through Congress takes a while, and repealing it takes equally long, so that kind of tariff can work, while tariffs imposed through one man's whim (and changed again on a whim the next day) cannot possibly work. The total freedom of action that Trump prizes so highly is exactly what prevents his tariffs from having their desired effects.
The Constitution doesn't specify a separation between the Presidency and law enforcement, but we've had one since Watergate, and Trump has reminded us all why we needed it: if laws are enforced vindictively on the President's political opponents, and not at all on the President's supporters or donors, the entire apparatus of law loses credibility. And since the Constitution centers the purpose of government on the creation and application of laws, that means the whole government loses credibility.
The orange maniac is mostly focused on doing favors for those willing to donate to his personal capital fund. The others like RV are white nationalist focused on destroying the government.
To add a footnote to your statement, "so few people can actually understand this conversation".
FINRA studies used by the Federal Reserve identify that only 18% of Americans can reliably calculate compound interest, versus 42% across the OECD.
This tells me that the lack of understanding is not an accident.
And a dumbed-down citizenry is easy prey, which is apparently part of the “plan” …
As I keep saying: go metric! Give your children a simple, logical system.
Can't say I agree with your contention that the OM is not running the country because he's too sick or medicated to do so. After all Hitler was in control of Germany's war effort right up to the very end despite his being as medicated as any stoner during the last 4 years of WW II. He basically became a physical and mental basket case right after he realized that he wasn't going to get the quick win he needed against Russia after July 1941, but still managed to function thanks to Theo Morell's injecting him with cocktails of cocaine, vitamins, methamphetamine and lots of other stuff.
I think Trump's going through the same type of regimen. He's getting enough drugs to keep going and stay more or less in control of his administration, at least when it comes to the big decisions.
He is running the country but the Project 2025 people at the Heritage Centre gave him many of his policies.
The most significant explanation in the information provided by Bernstein that revealed the cause of the debt was the tax cuts created by Republicans which were supported by Democrats. However, the tax cuts also blocked the funding required to solve problems such as affordability and the Democrats did not object. Economics can’t be understood without explaining the impact of politics and Republican political lying about economics with the lying funded and supported by oligarchs and corporations blocks the understanding by voters.
I would be interested in either Paul or Jared reflecting on the application of Modern Monetary Theory (MMT) to this discussion and whether or not it might change their perspective on what is causing higher interest rates, the extent to which debt is “ unsustainable” and what an incoming Democratic truly reforming government ought to do and can do. I took away the idea from the conversation that a few years ago global excess savings led to low interest rates for a while convincing many we had entered a period of secular stagnation but now we have massive debt fuelled investment ( AI , energy transition infrastructure , defence spending , climatic events etc) so interest rates are higher, a basic demand and supply equation or I could be being too simplistic perhaps? There were lots of reasons put forward to explain higher interest rates but is it not the case that central banks set interest rates and not the market? The market rate is surely a function of the cash rate set by the central bank. I think there is a case to be made that the collapse of the rules based order, however illusory it was, is perhaps causing the price of money to be higher than otherwise. In short the US, big tech and big fossil are out of control and destroying the world as we know it as fast as possible. We are all going to pay because collectively they are all in the profit extraction business.
Mr. Bernstein was interviewed in the MMT documentary "Finding the Money". It did not go well.
Thanks I will try and find it to review.
Your perspective on this would be much appreciated and educational
Has there been any polity, anywhere and at any time that has as one of its governing principles in its charter -- a constitutional amendment in our system -- an absolute limit on the amount of wealth a person or 'person' can accumulate? Specifically because of all the problems of governance an oligarchy can cause?
Or would this be something entirely novel? In my ideal (amended) constitution this would certainly be a priority, filed under the heading 'by the people for the people'. Oh and I'd take a page from those commies over in Europe and have another amendment that explicitly says an individual's right to privacy is guaranteed and absolute.
But what do I know? I'm just a retired mathematician :-(
Day-to-day DJT and his kakistocratic administration are "running" the country. Nothing will change on the day-to-day unless and until the success of Republican Party strategy to achieve governing majorities from a minority of the electorate is unwound. Unwound is used here in a sense very similar to Dr Krugman and J Bernstein discussion about unwinding tax cuts to address debt ratios. That is leave who did what and when to the historians. Focus on future requirements of necessary repairs and get to the hard work of making those repairs.
If 2026 ushers in slim Democratic majorities I worry investigations will produce nothing, waste time and focus and most critically squander the spreading of dissatisfaction of the American voter with DJT, his kakistocratic administration and the chaos preserved by the Republican Party. As attractive as it is dole out punishment it takes time and punishment is a distraction from J Bernstein's suggestion to futureproof the government from the next authoritarian. Let history penalize the culprits.
What might future proofing look like? For starters crafting legislation to unwind the morass of emergency powers legislation Congress recklessly ceded to the Executive. Assuming slim (a couple three vote margin) Democratic majorities even miniscule changes requires the public support of the "quietly concerned" Republicans to override certainty of DJT veto. That support happens by persuading enough Republicans the tide is so strong their "We are all afraid" and quite unspoken concern turns from losing a primary to a genuine fear of the Republican Party implosion and vanishing from the American political landscape.
Before the guffaws form consider party disintegration, while rare, has happened. The last time in was the 19th century when Lincoln and the new Republican Party replaced the Whigs as the party committed to championing all Americans rights and the principles of representative government in the Declaration of Independence instead of the Whigs isolated power brokers and narrow economic interests.
As surely as the next sun rise, if the Democrats instead convene investigations and seek to punish bad actors, Congressional Republicans will see their future remains in the primaries and will use their public voice to rally MAGA and then....
Cleaning up will be a huge challenge.
I would be interested in either Paul or Jared reflecting on the application of Modern Monetary Theory (MMT) to this discussion and whether or not it might change their perspective on what is causing higher interest rates, the extent to which debt is “ unsustainable” and what an incoming Democratic truly reforming government ought to do and can do. I took away the idea from the conversation that a few years ago global excess savings led to low interest rates for a while convincing many we had entered a period of secular stagnation but now we have massive debt fuelled investment ( AI , energy transition infrastructure , defence spending , climatic events etc) so interest rates are higher, a basic demand and supply equation or I could be being too simplistic perhaps? There were lots of reasons put forward to explain higher interest rates but is it not the case that central banks set interest rates and not the market? The market rate is surely a function of the cash rate set by the central bank. I think there is a case to be made that the collapse of the rules based order, however illusory it was, is perhaps causing the price of money to be higher than otherwise. In short the US, big tech and big fossil are out of control and destroying the world as we know it as fast as possible. We are all going to pay because collectively they are all in the profit extraction business. They are going to keep going until they are stopped.
Highly recommend reading Gil Duran's book: "The Nerd Reich: Silicon Valley Fascism and the War on Democracy" which reveals astonishing facts about some of those incompetent and corrupt lackeys who are behind what is happening in this regime.
The lunatics are running the asylum and those lunatics, along with their infatuated fans, think they're smarter than anybody else. Their goal is to destroy our economy, the American dollar, our democracy, and our country—and a major player is Peter Thiel, who can take a bow for getting the man who once equated Trump to Hitler anointed his Vice President. Yes, that would be Shady Vance.
The Project 2025 people aren’t going anywhere.
Wuth any luck, in the next Dem admin, they'll all be going to gitmo while the FBI and CIA root out all their sources of foreign money.
Let’s hope!
Here's the bit in this conversation that gets me: the $9-to-$10 return on every dollar spent on IRS enforcement. That number tells me that the debt story isn't as much about rates as it is about who the code is actually enforced against. The tax gap Bernstein describes, concentrated almost entirely at the top of the income distribution, exists because enforcement capacity has been deliberately starved because, yes, we defunded the IRS. When the biggest trigger for an audit is taking the EITC, that's a problem.
Actually it is about both. It makes zero sense to reform the tax structure if the taxes cannot be efficiently collected. But simply making the IRS effective will not provide adequate revenue.
agreed, enforcement of what exists might be easier (just fund it) than tax reform. But there is no doubt that both should happen! Both take a political will that is absent.
The law/enforcement problem created by the Trump administration is much bigger than IRS & tax code. Trump is both decapitating fraud investigation and, through pay for pardons, making white collar escape a financial calculation for the fraudsters.
All while issuing pardons to white collar criminals who have bribed him....
They agreed that high income tax breaks must be clawed back. I’m sure you heard that, too.
And they also both agreed; not the first challenge to tackle & most definitely not the only one either
I'm nearing retirement and not making much money at this point. Even my state disallowed whatever EITC Turbotax had calculated. Oh, yeah - they wanted a photo of my Social Security card. I wonder where that is? I told them to look to the dark web - as most everyone there has a copy of my social security number.
Haha
If we spend 20B more on the IRS and get 200B, that is a good start, but only 10% of the problem. We need a fleet of solutions.
an armada!
The "tax gap" reveals another problem: The IRS cannot just hire skilled auditors able to unravel sophisticated tax cheats; it has to train them. That requires hiring CPAs willing to be trained. That requires trainees not be fired after the next election.
“Defund the IRS” is the rallying cry of the rich. Trump is obliging.
It is why the economy is as screwed up as it is.
The government is run by, and for, white collar criminals and money launderers. If you send $1000 to Iran, the FBI will be on your doorstep. But literally hundreds of billions of dollars of drug running and foreign government corruption proceeds have been cycled through the US banking, trust, and real estate systems, and nobody ever gets "caught".
Informative, smart. But I read this having just read a climate Substack on how this year’s outsize El Niño is redistributing planetary heat in ways that are going to inflict huge economic pain through floods, fires, fish kills and crop failures. So I would like to hear the economists reckoning with that, in particular when they talk about growth as the means of reducing debt. Growth means fossil fuel expansion unless we turn a sharp corner toward renewables. You want a good investment for hoarded money? Solar , wind, batteries. We’re in a desperate race against the clock of catastrophic global warming.
This gets to one of the most dishonest aspects of economics, which is the failure to include damage into the calculations. For example, electricity produced by coal-fired power plants should have a surcharge to pay for the health damages caused by their pollution and to pay for the removal and sequestration of carbon dioxide emissions. Were we to do so the decarbonization of the economy would be rapid, and the conversion process would produce many new jobs and businesses.
Pls don’t be putting too many of your eggs into the sequestration basket. It’s full of egg-sized holes.
I agree. It has a very limited role, potentially applicable only at major sources. I did a couple of pieces on CCS on my substack a while back. At that time the cost of capture alone was ca $1000 per ton of CO2 removed with hopes of reducing the cost tenfold. In the interim I don't think there has been any progress.
On the other hand the geoengineering prospects such as stratospheric aerosol injection are terrifying. I wrote about this too. Sorry for blowing my own horn
The best and by far the most effective geoengineering I've read about is simple weathering.
Yep. Rock dust. The numbers look very good. OTOH, it takes a lot of energy to grind up a block of, say, limestone.
Q: If the US economy grows at 2% per year, how many years will it take to double in size?
A: If you answer 36 without using any electronic device, you are in the company of 42% of people across the OECD, but only 18% across the US.
The solution to economic calculations not including environmental damage is simple: include it. The problem is that too many people cannor do economic calculations at all. So if the people in charge don't want to include environmental damage in economic calculations, who's going to challenge them?
"Rule of 72"
Thank you. I have great appreciation for Paul Krugman, but watched to the very end wondering if either would even mention climate change. AI is a huge distraction and worse, with all the “investment” in fossil fueled data centers.
I agree. Climate change is the unspoken absolute. Mother Nature always wins.
Also, is the economy really doing well with all the circular spending on AI
Is it really even spending when it’s so highly leveraged? There’s no actual money anywhere, just theoretical debt.
Agree. It’s absolutely essential that the global warming deniers be voted out.
It is guaranteed that if the AI buildout bubble busts our president will do everything in his power to reimburse his corporate friends at our expense.
Fuginugly: when not if?
So what you're saying is the bubble will burst eventually (and I agree) but you're ho[ping that it doesn't for the next two-and-a-half years.
I am saying corporate welfare will prevail. 2 1/2 years sounds like forever right now . I just hope we get a democratic takeover of the House and Senate to keep our president busy during that time.
Daniel Dennett the American philosopher who sadly passed 2 year ago, expressed concern that we are creating systems that we do not understand what they can do. And yet here we are releasing AI and other tech into the world at breakneck speed without a clue how to rein them in all for greed and power. I am not hopeful.
We have always created systems we (i.e., the masses) do not understand, yet embrace. I don't understand how electricity works, but I know I couldn't live without it.
You may have to if all the data centers drain the grid.
Hear, hear!!
I think the US empire is collapsing. All empires must fall, and I think the US has finally overstepped its ability to control the world and extract its resources, even while the US people get poorer and more of us struggle to afford basic needs like housing. I think the empire has finally overextended both globally and at home. Millions of people homeless in the US, a losing war of aggression against Iran, total loss of legitimacy in the eyes of the world, and drowning in debt to the oligarchs who set up this whole house of cards to begin with.
Rome didn't fall. It transitioned gradually over centuries.
Seems like there came a point in the second century AD when the Roman Empire lost its golden-age stability and entered a long spiral of political corruption, economic trouble, and military strain. I'm saying this is where the US empire is now. It wasn't built in a day and won't fall in a day, but the fall has commenced.
Certainly there are foreign enemies who want to make it happen.
It's happening because the top-heavy weight of the empire itself is unstable. The US people are also suffering. Half the working class is struggling so badly and millions of people are literally homeless. We have elders living in cars so the US can try to overthrow Iran.
If by "top heavy" you mean oligarchic wealth and power, agree 💯. As happened in Russia when Soviet Union collapsed- Putin allowed his oligarchs to grab the national wealth of the Russian people and move it out of the country. The Mafioso American regime is doing same. The inequality and debt mismanagement started with Reagan and "trickle down" economic theory HOAX. The power of oligarchs and foreign enemies amonst us, has now overtaken all parts of the framework of our system of governance. They will try to steal election. Only We the People can save and rebuild this country.
Well the US overthrew Mosaddegh in Iran in 1953 and Arbenz in Guatemala in 1954. The US has consistently overthrown democratically elected governments whenever they ran counter to US "interests" which means the interests of the US capitalist class, not the interests of the US people in general. The US has gone out of its way to go and ruin other countries time after time after time in this way, Indonesia and Vietnam and Honduras and El Salvador and Nicaragua and Cuba and so many others. Venezuela recently -- still holding a kidnapped leader and his wife. This is an aggressive empire that goes out and harms the whole world on purpose for the rich to get ever richer. It's not a partisian thing, either. Both of the fake parties are in the same game.
But we have solutions for that! I just read that in many places in the US it is now illegal to sleep in your car. Another problem solved.
The date assigned to when the Roman Empire ended depends on whose history book you're reading: I took a few courses in German from the Goethe Institute and was surprised to see the end of the Roman Empire dated as November, 1919, when Kaiser Wilhelm abdicated. "Kaiser" is German for "Ceasar".
And the Russian equivalent for Caesar is Tsar.
Did you see this (the emphasis is on military)? It’s mostly free.
https://phillipspobrien.substack.com/p/midweek-update-24-the-usa-is-not
Yes, when oligarchs take over and decide they can loot the empire without consequences, the common interest collapses and so does the Empire.
We've been moving toward oligachy for 50+ years.
I know this is a US-focused blog, but I would love to read an analysis from you about Canada walking away from the CUSMA table last night --- told from the Canadian perspective and what it will mean for Canada's economy.
Your question impacts Americans a lot... and so behind in this forum; I will try to answer, and sorry it's a long answer.
First a clarification: Canada did not walk away from the USMCA; Canada walked away from Trump's deal to avoid imposing 50% tariffs under section 308 of the Smoot-Hawley tariff act. The USMCA will remain in effect until 2036.
IMPACT ON THE US
We can break Trump's tariff action into three levels: tactical, operational, and strategic.
Tactical is where we feel the pain. US businesses are now paying 50% more for the affected imports today than they were yesterday.
"Operational" is the level where businesses and bureaucracy deal with it.
Will the US bureaucracy be able to keep the tariffs collected? Probably not. Legal experts seem to think the section 308 tariffs are less legal than the "Liberation Day" tariffs and that's why they were not used for Liberation Day.
Will US businesses pay the tariffs? No. They will either not sell products that depend on the impacted imports, or declare bankruptcy and not sell anything at all.
Will Canadian business relocate to the US? Probably not to a significant extent, given that the tariffs may not be legally enforceable over the medium to long term.
"Strategic" is level where we consider how the tariffs support governer objectives.
What does the Trump administration seek to achieve? JD Vance let slip in a private fundraising speech that (at least) one attendee secretly recorded and leaked to the Canadian Press that the Trump administration seeks to force Canada to follow Trump's directions much as Congress and state governments do now.
IMPACT ON CANADA
The section 308 tariffs affect about $20B in trade. The people who earn their living from this trade will have to find something else to do.
Here is where the Canadian government knows something the US government does not know: The Canadian government knows the Canadian electorate will NOT do Trump's bidding. This means the Canadian government has a plan for what the Canadians impacted by the section 308 tariffs will do, and US government has no corresponding plan for impacted Americans.
THE NET RESULT
Canada will redirect the $20B in resources to developing trade with other nations, will supply bridge financing for impacted businesses that can recover sales, and shutdown funding for that that cannot. This will show up as flat to slightly negative GDP growth and increased employment.
The US will continue loosing jobs, small business bankruptcies will rise.
Will Canada retaliate? Maybe. I can't think of a retaliatory action Canada could take that will be more painful for Americans than the policies Trump is already following. Since the pain Trump's policies cause Americans now does not lead the Administration to change policy, I don't think retaliation would either. But the Canadian government is much smarter than I am.
Krugman et al. aren't very interested in Canada.
I'm sure Krugman is very interested in Canada's resistance to Trump and the Republican party's war on America's former allies and embrace of totalitarian dictatorships with failed economies like North Korea and Russia.
Look at Dean blundell Substack for informative Canadian
I completely agree. I’m also Canadian.
I love this stuff! Open and honest discussion of subjects upon which we may or may not agree. But we're all looking for the same thing. The solution! I'm reminded of the Hegelian triangle. Thesis, antithesis, synthesis. This kind of discussion is how we move forward. But it takes humility and honesty. Which are are commodities these days. Not here though. Thank you Paul for all that you bring forward. Did I mention that I love this stuff?
Yes. I was about to post that their intellectual humility was the thing I liked best.
Sure.
I have to get going this morning, but I must say this after listening to the interview. I don't want to go back to the way it was. It was never that good for us working/middle class people. Saying it was doesn't make it so. We must do better, even if it means structural change to the Constitution by amendment or rewriting.
I know those who are still doing fairly well won't want to amend the Constitution, but how long will you be doing fairly well in a system that has always been rigged on behalf of the wealthy. Even if we gain some ground as we did with the New Deal, we will end up fighting for our survival again eventually unless we change the foundational document.
Trump and his minions have exposed every weakness in our system but change will be incremental and depends on voters understanding real issues instead of culture war nonsense. A vital first step is funding the IRS so they have the technical resources and staff to enforce current tax laws.
Jeffrey Winters in his recent book, “The Blind Spot,” makes a great case for increasing IRS funding.
China has replaced the USA as the most reliable trade partner
Absolutely, Nancy Janitz. Putin got his wish (in spades) that his puppet (and the rest of that payroll) would destroy US democracy, its respect for the rule of law, and its stature in the world. That he thought Russia would be the benefactor, however, when it was obvious that China would be, maybe as early as 2016, is curious. Maybe that provides a glimmer of hope?
The Current US Population is Aging and There Are not Enough Babies born in recent years to Be in the Workforce and to subsidize the Social Security System for the Boomer generation that is now retiring :
Immigration is a life line for the economy and all of us. Always has been.
Except the MAGA crowd don’t even want legal immigration.
They are so ignorant of the history of our country that was founded by immigrants from the European Colonies and the fact that we stole the land from the Native Americans Indians and put them on reservations 🤨🤴🏼🧠🏛️⚖️🗳️💙🙏
Indeed
True!
Which leads to the question: why does the US treat work-bound legal immigrants so badly?
Every year the US has a lottery in which 50,000 chances to apply for a Green Card are raffled off. About 20 Million people participated last year. All more than willing to come to the US to live, to work, to procreate. With so many people on stand-by, how can "experts" talk about "not enough babies being born". Unless they think US citizens are a better kind of people. Also, if there is currently a shortage of human beings being added to the US population, why are you kicking out so many? Especially immigrants tend to have stripes on their heart and stars in their eyes.
In the late 1950s I was reading articles about the declining birth rate, so that we would be dependent upon immigration to pay for social security and health care in general for the foreseeable future.
It’s very reassuring to know that there are real VSP’s who are genuinely engaged in honestly plotting a rational course through our current chaos, and even more gratifying to get to watch them in action.
As soon as Dems take over we are going to be back in “the sky is falling”, anti-deficit mode. The media has got to stop indulging that tiresome cycle. We must fund the IRS and start taxing capital accumulation. We must tear back down the unitary executive. We must “do something” about Citizen’s United. We ought to end gerrymandering. We should shore up Obamacare. But there is so much repair that needs doing, I think it would be a mistake to engage too quickly to ratchet up government spend with any sort of major and very controversial new spending programs. Better to fix government first before major expansion.
if the dems allow their neoliberals and overpaid consultants to make tax and investment policy, we are all doomed except the 1%
Hear, hear!!
The American people and the whole world are watching - if we don't convincingly permanently eliminate any possibility of another Trump-like presidency, everyone will consider any other positive government accomplishment temporary..
I have two questions.
First, if deficits are justified based on the ratio of GDP growth to interest rates, isn’t that argument corrupted or weakened if economic growth is not even across all taxpayers but flows disproportionally to the top 1% of taxpayers? And, if tax cuts disproportionally benefit the top 1% of taxpayers, doesn’t that weaken the argument even further?
Second, since national debt is dollar denominated debt, wouldn’t runaway inflation solve the debt crisis? In other words, are we headed toward a situation where the only solution to manage the national debt is to print money to service and pay down the debt?
Growth is supposed to help solve the equation, but if too much of that growth accumulates un-taxed in the hands of an elite, it doesn’t “do its thing.” The people who claim we need to lower taxes to promote growth are undermining their own theory by concentrating on low taxes for the so-called super-producers.
Jim Wilton: I think runaway inflation will be trumps next move. Printing money. How he thinks his ill-gotten billions will not lose value is an interesting question. But then he’s not the sharpest pencil in any pack.
This was a great conversation with complex matters expressed in understandable language. Problem is most of the people who should be paying attention are not. Funding the IRS, is a no brainer, but when Biden attempted to do so the R’s were hair on fire exclaiming that ment armed IRS agents kicking down the doors of small businesses in Iowa. If Dems regain power R’s will suddenly discover deficits and debt and will against tax and spend Dems. They will also keep promoting faux culture war issues - guns, gays,God and transgender athletes. Unless voters are willing to reject that nonsense, understand and support the views expressed by P.K. And Jared I fear we may repeat the doom loop. It is imperative to stay the course long enough to make real progress in correcting tRumpian and GOP damage. It will take more than one term of Dem rule.
In simplistic terms-
“if you take the Bush and the Trump tax cuts out of the mix, our fiscal scene would look fine”
An analogy-
When Republicans are in power, they essentially accept all those applications for credit cards that come in the mail. Then they have a big party, and max out the cards.
Democrats win back power and the inherited credit card debt. And struggle with the debt payments a bit.
The debt continues to grow to unmanageable levels.
It is a Republican ploy to force tax cuts for the rich. While justifying the need to cut everything else for the remaining 95%.
While making Democrats always seem like the bad guys. It is huge, continual deficit spending by Republicans.
Professor Krugman thinks the US is relatively impervious to its own debt as it can print its own money. I don't understand that, but what are the danger points for the US economy? What can crash the economy?
I imagine that the current executive and legislative majorities, if the mid-terms result in a Democrat Congress, are clearly capable of arranging a default on U.S. Treasury debt before those Democrats are sworn in. I think that would crash the economy like a kamikaze hitting the powder locker of our ship of state..
Absit Omen.
Mother Nature, as earlier comments noted. The persistence in ignoring global climate change - or maybe it’s more a matter of great difficulty to bring this salient variable in - is telling us how thin the ice is. Merrily we roll along…