Reading this felt like watching the slow march toward a long-overdue Dies irae-a reckoning not just for Trumpism or protectionism, but for every ideological tribe that's played fast and loose with economic reality. Neoliberals, populists, deficit doves, nationalist dreamers, free speech hypocrites-all of them, each convinced they had the keys to the kingdom, now standing in line to hear the judgment bell ring.
It's like we're approaching the final movement of a symphony we've been ignoring for years. The notes have been there-the unsustainable deficits, the abandonment of expertise, the hollowing of institutions-but now the crescendo hits, and no faction gets to walk away clean. Everyone gets their verse in the Dies irae.
I'm not rooting for chaos. I'm just tired of the smug certainty across the spectrum that they alone were right, as if reality was a mere inconvenience. The market doesn't care about your politics. Bond yields don't respect vibes. And sooner or later, everyone will have to pay the piper-whether they were singing neoliberal hymns or populist chants.
I like a good Requiem mass as much as the next guy. But doomsaying about the debt is a little like doomsaying about asset bubbles. Eventually some economic turmoil is going to come that would be easier to handle if our debt were lower, and you'll be the one looking smug.
Across the spectrum you have people who want services and taxes versus those who want no services and no taxes. They both got their own politically easy half, and the debt exploded. I don't think most people think it's not a problem, we just can't agree on how to fix it. Give me your solution and I'll show you 47% of the electorate who will vote against you right off the bat.
You're right that political gridlock makes fiscal reform incredibly difficult-and that both parties have indulged in the politically easy half of the equation. But acknowledging the difficulty is not the same as denying the urgency.
The problem with the "eventually something bad will happen" framing is that it treats fiscal instability as a background risk, like a natural disaster, rather than a structural vulnerability we're actively deepening. It's not just that debt might make future crises harder to manage-it's that the debt itself is becoming the crisis, especially as rising interest rates turn what was once manageable into a compounding liability.
Yes, any solution will alienate a large chunk of the electorate. But the fact that a solution is politically unpopular doesn't make the underlying math go away. Bond markets don't care that 47% of voters will be upset. They care whether the US can service its debt without crowding out investment, fueling inflation, or triggering a loss of confidence.
So no, I'm not doomsaying for drama's sake. I'm saying that we've built a system on denial, and the bill is coming due. The longer we pretend that the only problem is political disagreement, the more we guarantee that the eventual reckoning will be disorderly, not deliberative.
Germany's Schuldenbremse was never just a fiscal rule-it was a statement of faith. Passed under Merkel's first cabinet, it locked in ordoliberal discipline: no deficits, no debt, just a balanced budget and a belief that markets behave best when governments don't. It was Germany's answer to the chaos of 2008, and for a while, it seemed unshakable.
But now the tide's turning. The 2025 election brought in a coalition ready to loosen the bolts. Defense, infrastructure, climate-suddenly, the old rules feel more like obstacles than virtues. The Bundestag voted to ease the brake, and even the Bundesrat signed off. Turns out, even the most disciplined economies eventually admit that strict rules don't build bridges-or tanks.
That is interesting--I had not heard about that. It's way outside my expertise area, but part of the USA's problem (as I understand it) is that we have a nominal debt ceiling, where a "percentage of GDP" one would seem to make more sense. Googling "German debt brake" teaches me that Germany's rule is for annual deficits in excess of 0.35% of GDP--which sounds smart, relative to our rule.
All of which is to say: it would be a baby step, but it seems to me it would be a worthwhile, bipartisan effort to update America's debt-ceiling rule to something that on the one hand has teeth, but on the other hand uses appropriate mathematics for a fiat-currency country and doesn't lead to a crisis every 6-12 months.
Yes, the US debt limit is weird. Just badly designed from a technical point of view.
Also there's another big difference: in Germany the executive is put together by whoever has the majority of the legislative (simplifying a bit, but not much). The legislative passed the budget, but that also automatically authorises spending to go with it. (Including any debt necessary.)
I heard it's a bit strange in the US, where Congress somehow tells the executive what to spend on but doesn't automatically authorise the spending? I don't know all the details there, but I remember it was really weird.
" the truth is always the exact opposite of what Trump says." Exaggeration alert! Unless you really think that the amount of regulation and taxation we have is just fine and that there is no problem with wokeism in academia.
Good catch--I should have said frequently. When Trump criticizes others, it's almost always for flaws that he himself has. (Stupidity, corruption, dishonesty, sloppiness with secrets, etc.)
Like the term anti-anti-Trumper, this is my first time seeing it.
You are right that we are down but not ready to concede that we are out yet. Think of litigation. Sometimes, it takes many years of ups and downs before a conclusion is reached. All Trump needs to stay the course is 1/3 of Congress and agreement from a court that trade with China is a national security threat. I never thought the national emergency was the trade deficit, but China? I'd buy that, but I don't know. That depends on the judge.
Trump maneuvered China into making the threat credible in my mind.
I'm not sure your point. Suppose the courts decide China is a national security threat--what does that accomplish? We put sanction on Japan in the late 1930s--how'd that work out?
That's a very good point about Japan. I don't know alternative history well, so I can't say. As of today, I'd say it worked out in Europe but not so well in Asia.
Without national security threats, tariffs would be illegal without congressional authority. He can veto any legislation eliminating the tariffs right now, so he only needs 1/3 of Congress. Court can disagree with him that it is a national emergency. I think it is, but obviously, I'm in the minority.
Ignoring the legal issue, there is one key issue that those opposed to the tariffs are missing:
Indirect national security costs are associated with our allies and our trading with China or a country subject to its influence or control. Basic cost accounting states that goods should be charged at their full cost. This is no different than a tax on cigarettes or gasoline, although I like the example of a business with a positive gross margin and an operating loss due to unallocated costs better.
The ultimate goal should be to develop a system for imposing tariffs on those goods wherever they go, not just in the US. This involves rough tools right now, but they can be developed.
The argument disappears if allies increase their defense spending to the point that they could be helpful AND impose similar tariffs on China. I also can't say with certainty that it won't impose more pain on US than China. Still, if anyone dispassionately examined the issue, the only argument I see for not imposing is that China and countries like Iran do not present a threat.
Defense spending is greatly overrated--Russia cannot even defeat Ukraine. The key is for Nato to stick together as an alliance, and stop worrying about defense spending figures.
People say "we're defending Germany". Not really; as a practical matter we are defending the Baltic states, and perhaps Finland and Poland.
Same thing in East Asia. China isn't going to attack Japan, but might attack Taiwan.
You recently made the argument that we need NATO because without NATO Russia would take over Europe. Now you are making the argument that Russia is so weak that they cannot, in your own words, 'even defeat Ukraine".
Which is it? How can they be the big bad monster, and the little weakling all at the same time.
No, I didn't say they would take over Europe. But wars are costly even if you don't lose--ask the Ukrainians. In addition, there is a risk that a Russian attack on Europe might eventually go nuclear. I've consistently warned of the risk of miscalculations.
Can't say I know you are wrong, although I am prepared to fight over Taiwan more than I am willing to do over Ukraine. The threat is an argument for imposing tariffs on Taiwan in certain circumstances too.
Please allow me to advance another argument. China's subsidies are altering the dynamics of comparative advantage, which lowers long-term growth rates for the world, including the US. I'm willing to impose tariffs to incentivize them to adopt something closer to a market-based system. I don't really "buy" this argument as I think Chinese citizens are bearing most of the costs. Still, I wanted to write it down to make me feel better as I don't like seeing all the cheap shots being taken at Trump.
Yes, he is a liar and a borderline thug, but he's our thug, and I believe he is doing what he thinks is best for the US citizens who elected him.
"Yes, he is a liar and a borderline thug, but he's our thug, and I believe he is doing what he thinks is best for the US citizens who elected him."
Please, he only cares about himself. How is that not obvious? I don't understand how Americans can watch films and TV and quickly figure out who are actually the bad guys, but cannot recognize the nature of an almost cartoonish bad guy like Trump? Is it best for US citizens if he presides over by far the most corrupt administration in history? What are we even talking about here?
He rewards people who are loyal to him, and I think he has significant negotiating leverage.
The only two things I worry about are (1) his willingness to take unwarranted risks. I can't do much about that, but I've seen such risks work out incredibly well. It shocks me how rarely they have gone south when you have negotiating leverage, but they occasionally go south (2) He will also cut corners, but my attitude is that we suffer from gridlock that raises risks I don't like.
He is a once-in-a-hundred-year event so that we will return to normal (or close) in a few years. Hopefully, he will clean up some things or start us on the path to cleaning them up, and then we will clean up after him.
That is true, although we might disagree on what is in the long-term interests of the United States. I don't care too much about the decrease in 401(k)s driven by money flowing out of US equity markets, even if it hurts me, because some things come before personal interest.
It's not like money flowing in or out. (Other markets aren't up, either. Stock markets aren't driven by some hydraulic fluid.) It's market participants' consensus about the value of US companies shifting.
There certainly is an element of values shifting. I couldn't tell you what is driving the changes, but I'm unwilling to give up because equity (and bond) values move, assuming the policy is reasonable. It is just one of many factors to be considered. I am also fine with a recession, mainly because I view it as inevitable and usually with some positives.
I agree with a lot of this, but I think the Bluesky libs are clearly in the up column too. Millions of liberals saw this disaster coming, even if they didn’t predict all of the details. Personally, I had a number of deep objections to wokeness, but I saw maga as being infinitely worse; and I think millions of Democrats made a similar calculation when they voted for Harris.
Scott, thank you for your ideological conviction and not shying away from the reality our country is facing. I wish more economists with blogs shared your ideological conviction. I'm very disappointed in the relative silence of many of the public intellectuals I've long followed.
Also - on the topic of recent movies, I may have missed it but I don't think I've read whether you saw last year's 'I'm Still Here', taking place in Brazil's military dictatorship of the mid 20th century? Eerie authoritarian similarities with where present day America seems headed aside, it was 2024's best film for me. Incredible acting, captivating imagery of 70s Rio, and a fantastic soundtrack supporting a gripping and deeply moving true story. I'm curious what you thought of it, if you saw it. And if not, I highly recommend a watch.
"I'm very disappointed in the relative silence of many of the public intellectuals I've long followed."
This is the first time in my life when I've found that many people are terrified to criticize the president. Even high level people like CEOs and senators. This country has changed beyond recognition.
On the anti-anti-communists, I'm talking about leftists that rolled their eyes when you criticized the Soviet Union. Reagan was correct--it really was an evil empire.
I agree that Goldwater was too hawkish--heck, even LBJ was too hawkish.
On neoliberalism you could always read my SSRN paper "The Great Danes" (free online)
"S&P Global Ratings warned that if the U.S. fully implements reciprocal tariffs announced on April 2, major Asia-Pacific economies like India, China, and Japan could see their GDP growth fall by 0.2–0.4 percentage points over the next two years."
That's it? And that is if Trump's ham-handed tariffs are fully implemented?
Short-term pain, but long term gain - at least for blue collar class.
Stock market goes down, and 70% of the world cheers. We want to bring globalists to their knees no matter what the costs. I'd rather sleep in a hammock and fish for food, then be a mere cog for the ologipoly/oligarchy, which so many of you call free markets. It's a market of course, but not a free one - and that's for damn sure.
Noobdy cares about being broke, when they are already broke.
Larry Summers and Ezra Klein punted on All In Pod and admitted that letting China into the WTO was bad on net. Larry actually opened by claiming he didn't do it.
They ALSO BOTH AGREED that we must measure and protect IN THE US:
1) All tech around AI - TOTAL US SUPPLY CHAIN.
2) Energy - not just cheap oil, natural gas, etc- including infrastructure, transformers, transmission, all of it. Scott, it's bc of #1. We have to DOUBLE Texas energy production by 2040 for AI and as we blow past the CA population.
3) Some rare earths - which require not only mercantilist mining
4) Pharmas APIs
AND they agreed that on these we cannot listen to unions/Democrats/EPA/bureaucracy
Scott, the rest of the stuff is "for our trading partners to make instead of China"
IF you can get your head around those points, I think you can make a decent argument for when and how we let up on China. I think they are an easier beat than most do.
Judging from what I see from afar (but first-hand, not that long ago), Americans need junk food, booze and pot, tattoo parlors, and cheap entertainment (TV, internet).
I have long said Trump has the personality and character flaws of any other dozen men put together.
I am a fan of tariffs, but not as implemented.
A true globalist---not a US nationalist---might argue in favor of US tariffs, perhaps about 25%.
If global exports are roughly subsidized by 25% (I think this roughly true), then manufacturing is not being sourced where least inputs are needed, but rather where subsidies are greatest.
Inefficient production globally is being subsidized to enter world export markets.
A 25% tariff would result in manufacturing again being sourced where true economic inputs are least.
I think this is roughly true.
But! A true US nationalist would say, "But US consumers and economy benefit when other nations restrict domestic living standards to subsidize exports that we benefit from."
US nationalists would favor lots of subsidized imports (provided the US can stay resilient in the face of cut-offs).
I like Angus Deaton, Michael Pettis, Dani Rodrik.
Even Peter Navarro, though mostly as I feel he was a victim of a politicized prosecution (no, this does not mean I like Trump. Just that the Biden Justice Dept would have never prosecuted a D-Party economist who refused to testify before Congress).
I think China may be in a more precarious position if demographic figures go further in the wrong direction. Also China is the ultimate controlled economy so will eventually lose out to the US - willing to have a 25 year bet on this if you like. I think the CCP will collapse in the next 5-10 yrs anyway.
The million man swim to Taiwan would be a catastrophe for them, a non martial nation of single child sons - they won’t take Taiwan unless the Taiwanese want to go that way which they might.
Could you comment on the DRAM wars of the 80s 90s . I like what you said about globalization not being optimal (what is) . Would any sort of industrial policy have been worthwhile for say chips back then.
Also it seems somewhat strange to me that almost all fab went to Taiwan - obviously their workforce is probably more disciplined than us and Europe , but you’d think there’d be enough Germans and Dutch to have a fab after all tsmc is German Dutch.
A most liberal economist probably still believes in national defense industry- chip favs not on the other side of the pacific was at least a strategic mistake - be interested in your expertise on whether there were some select policies worthwhile in this direction.
At any rate I don’t think we need to be in any sort of war with china or anyone else , as long as we build chips, steel, ships, pharmaceuticals in the west.
In fact all we need is to link German industry with Russian materials and energy - oh wait :)
"Also China is the ultimate controlled economy so will eventually lose out to the US - willing to have a 25 year bet on this if you like."
You must be new to my blogging, as I've consistently argued that they will not catch the US, unless they were to radically liberalize their economy.) BTW, it's not the "ultimate controlled economy", it's a mixed economy.
I don't see any big problem with the Germans buying Russian gas. After the Ukraine War broke out, they found alternatives. And it forced Russia to pay a price for its invasion---a loss of European markets.
In general, I think people vastly overstate the importance of relying on imports of important commodities like energy and chips. I worry about war, not economic dependency. And trade reduces the risk of war. I might recommend a few trade policies on national interest grounds, but not many.
We didn't need more industrial policy in the 1980s and 1990s, we needed radically less government regulation in areas like housing construction. Nimbyism was the biggest cause of stagnating living standards, along with health care regulations, bad monetary policy, Iraq War, etc.
I am not totally convinced though of these ups and downs. I would love it to be that way. Then I see the news. I find it shocking that a large plurality of Americans still support Trump and his bizarre crew of witch doctors. Congress does not move a finger. SCOTUS rules but only the executive has guns, so the two other powers are ... powerless. As for immigration, even now with the unthinkable events surrounding the deportations to El Salvador, apparently a majority of Americans are net positive on Trumps' immigration "policy" (really just a string of extrajudicial cruelties). America still believes in this.
Agreed on that and I really found it commendable from Hanania and Ferguson especially, to change tack immediately. Also Scott Alexander's mea culpa on "edgelords". A bit less enthused by others, such as Tyler Cowen and Robin Hanson who maintained ambivalence before the election, and in my mind still do. And who knows perhaps the reality takes a little longer to percolate down to the public general. It seems though that the public general has a high tolerance for the obvious cruelty on display and I find that shocking. Unlike the Germans in '33, America has a clear precedent, the entire 20th Century. So I find this very disheartening.
On the theme: throughout the 30s, Austria had actually resisted the rise of the Nazis. There was an attempted coup by Nazis against an Austrian strongman chancellor, Dr Engelbert Dollfuss, who got murdered in the process. The succeeding governments held out against the German Nazis until the Anschluss. During that time, various Nazis who had become illegal in Austria, moved to Germany into exile to live their dream and escape Austrian justice. When they came back in the wake of Hitler during the Anschluss, they had seen the reality in Germany and were a lot less enthused than the assorted Austrians welcoming them. They had seen what it was like inside.
So with the precedent of the 20th Century and having seen the first months of this administration I am genuinely shocked at the approval ratings - percentage wise it's more than Hitler's plurality in 33 in the German parliament, which had no precedent to inform opinion. And America has no lost WWI, no Weimar style hyperinflation, and no Great Depression to cite as excuse for the rise of this administration and the quiet acquiescence of so many.
The German playbook had a few milestones. First the concentration of power into the executive following Carl Schmitt. Then the justification of repression using the "Dolchstosslegende" (claiming that the communists had stabbed Germany in the back and 'stole' victory in WWI). So far this should sound familiar to recent events. Then Germany had the arson attack on its Congress, the Reichstag, used for more repression against, umm, terrorists. Purge of erstwhile supporters (the SA) become too powerful in "The night the long knives". Finally years later the Kristallnacht unleashing the "gerechter Volkszorn" ("justified popular anger") against businesses owned by the declared enemy, and the annexation of a smaller neighbor of similar culture. Wonder if any of this will come to pass in the US too.
BTW you may have missed out on one of the biggest "ups": China itself. The US has basically delivered all of South East Asia to China on a silver platter, with sides. Europe is sufficiently softened up for wooing to come (from Boeing to Airbus, easy), Africa is already a done deal, BRICS should be in the pocket soon as China easily dominates. There won't be much left for America to take, save Greenland.
Europe should of course be closer to China while truly decolonising herself from the US. But that's yet another story
Lots of good points. I think that many intellectuals are having trouble processing the fact that America is not the country they have always thought it was---which leads to political miscalculations.
China may gain in a relative sense, unfortunately the US is playing a negative sum game for the entire world.
Another possible "up" ... Singapore specifically, might be able to pick up some of the soon to be incapacitated top scientists in the US and offer them a new home... becoming a science center of excellence has long been a goal for Singapore, and the facilities for receiving the science refugees from the US to come are already there.
Reading this felt like watching the slow march toward a long-overdue Dies irae-a reckoning not just for Trumpism or protectionism, but for every ideological tribe that's played fast and loose with economic reality. Neoliberals, populists, deficit doves, nationalist dreamers, free speech hypocrites-all of them, each convinced they had the keys to the kingdom, now standing in line to hear the judgment bell ring.
It's like we're approaching the final movement of a symphony we've been ignoring for years. The notes have been there-the unsustainable deficits, the abandonment of expertise, the hollowing of institutions-but now the crescendo hits, and no faction gets to walk away clean. Everyone gets their verse in the Dies irae.
I'm not rooting for chaos. I'm just tired of the smug certainty across the spectrum that they alone were right, as if reality was a mere inconvenience. The market doesn't care about your politics. Bond yields don't respect vibes. And sooner or later, everyone will have to pay the piper-whether they were singing neoliberal hymns or populist chants.
"The market doesn’t care about your politics."
Exactly.
This comment is 83% chatgpt. lol
This comment is 100% grok. lol
Yeah, the people who comment with AI are friggen weird. word choice alone gives it away.
I like a good Requiem mass as much as the next guy. But doomsaying about the debt is a little like doomsaying about asset bubbles. Eventually some economic turmoil is going to come that would be easier to handle if our debt were lower, and you'll be the one looking smug.
Across the spectrum you have people who want services and taxes versus those who want no services and no taxes. They both got their own politically easy half, and the debt exploded. I don't think most people think it's not a problem, we just can't agree on how to fix it. Give me your solution and I'll show you 47% of the electorate who will vote against you right off the bat.
You're right that political gridlock makes fiscal reform incredibly difficult-and that both parties have indulged in the politically easy half of the equation. But acknowledging the difficulty is not the same as denying the urgency.
The problem with the "eventually something bad will happen" framing is that it treats fiscal instability as a background risk, like a natural disaster, rather than a structural vulnerability we're actively deepening. It's not just that debt might make future crises harder to manage-it's that the debt itself is becoming the crisis, especially as rising interest rates turn what was once manageable into a compounding liability.
Yes, any solution will alienate a large chunk of the electorate. But the fact that a solution is politically unpopular doesn't make the underlying math go away. Bond markets don't care that 47% of voters will be upset. They care whether the US can service its debt without crowding out investment, fueling inflation, or triggering a loss of confidence.
So no, I'm not doomsaying for drama's sake. I'm saying that we've built a system on denial, and the bill is coming due. The longer we pretend that the only problem is political disagreement, the more we guarantee that the eventual reckoning will be disorderly, not deliberative.
Right on. It will be interesting to see what (if anything) we do about it, or whether this train is just going over the cliff.
It's interesting that the Germans managed to pass a 'debt brake' that forces their government's hands there.
But they just had an election on the issue and it looks like the side that wants to defang the brake won.
Germany's Schuldenbremse was never just a fiscal rule-it was a statement of faith. Passed under Merkel's first cabinet, it locked in ordoliberal discipline: no deficits, no debt, just a balanced budget and a belief that markets behave best when governments don't. It was Germany's answer to the chaos of 2008, and for a while, it seemed unshakable.
But now the tide's turning. The 2025 election brought in a coalition ready to loosen the bolts. Defense, infrastructure, climate-suddenly, the old rules feel more like obstacles than virtues. The Bundestag voted to ease the brake, and even the Bundesrat signed off. Turns out, even the most disciplined economies eventually admit that strict rules don't build bridges-or tanks.
- [More detail about the law] https://www.bundesfinanzministerium.de/Content/EN/Downloads/Public-Finances/germanys-federal-debt-rule.pdf?__blob=publicationFile&v=5
- [Change is coming] https://www.nytimes.com/2025/03/18/world/europe/germany-debt-brake.html
That is interesting--I had not heard about that. It's way outside my expertise area, but part of the USA's problem (as I understand it) is that we have a nominal debt ceiling, where a "percentage of GDP" one would seem to make more sense. Googling "German debt brake" teaches me that Germany's rule is for annual deficits in excess of 0.35% of GDP--which sounds smart, relative to our rule.
All of which is to say: it would be a baby step, but it seems to me it would be a worthwhile, bipartisan effort to update America's debt-ceiling rule to something that on the one hand has teeth, but on the other hand uses appropriate mathematics for a fiat-currency country and doesn't lead to a crisis every 6-12 months.
Yes, the US debt limit is weird. Just badly designed from a technical point of view.
Also there's another big difference: in Germany the executive is put together by whoever has the majority of the legislative (simplifying a bit, but not much). The legislative passed the budget, but that also automatically authorises spending to go with it. (Including any debt necessary.)
I heard it's a bit strange in the US, where Congress somehow tells the executive what to spend on but doesn't automatically authorise the spending? I don't know all the details there, but I remember it was really weird.
" the truth is always the exact opposite of what Trump says." Exaggeration alert! Unless you really think that the amount of regulation and taxation we have is just fine and that there is no problem with wokeism in academia.
Good catch--I should have said frequently. When Trump criticizes others, it's almost always for flaws that he himself has. (Stupidity, corruption, dishonesty, sloppiness with secrets, etc.)
Like the term anti-anti-Trumper, this is my first time seeing it.
You are right that we are down but not ready to concede that we are out yet. Think of litigation. Sometimes, it takes many years of ups and downs before a conclusion is reached. All Trump needs to stay the course is 1/3 of Congress and agreement from a court that trade with China is a national security threat. I never thought the national emergency was the trade deficit, but China? I'd buy that, but I don't know. That depends on the judge.
Trump maneuvered China into making the threat credible in my mind.
I'm not sure your point. Suppose the courts decide China is a national security threat--what does that accomplish? We put sanction on Japan in the late 1930s--how'd that work out?
That's a very good point about Japan. I don't know alternative history well, so I can't say. As of today, I'd say it worked out in Europe but not so well in Asia.
Without national security threats, tariffs would be illegal without congressional authority. He can veto any legislation eliminating the tariffs right now, so he only needs 1/3 of Congress. Court can disagree with him that it is a national emergency. I think it is, but obviously, I'm in the minority.
Ignoring the legal issue, there is one key issue that those opposed to the tariffs are missing:
Indirect national security costs are associated with our allies and our trading with China or a country subject to its influence or control. Basic cost accounting states that goods should be charged at their full cost. This is no different than a tax on cigarettes or gasoline, although I like the example of a business with a positive gross margin and an operating loss due to unallocated costs better.
The ultimate goal should be to develop a system for imposing tariffs on those goods wherever they go, not just in the US. This involves rough tools right now, but they can be developed.
The argument disappears if allies increase their defense spending to the point that they could be helpful AND impose similar tariffs on China. I also can't say with certainty that it won't impose more pain on US than China. Still, if anyone dispassionately examined the issue, the only argument I see for not imposing is that China and countries like Iran do not present a threat.
Defense spending is greatly overrated--Russia cannot even defeat Ukraine. The key is for Nato to stick together as an alliance, and stop worrying about defense spending figures.
People say "we're defending Germany". Not really; as a practical matter we are defending the Baltic states, and perhaps Finland and Poland.
Same thing in East Asia. China isn't going to attack Japan, but might attack Taiwan.
You recently made the argument that we need NATO because without NATO Russia would take over Europe. Now you are making the argument that Russia is so weak that they cannot, in your own words, 'even defeat Ukraine".
Which is it? How can they be the big bad monster, and the little weakling all at the same time.
No, I didn't say they would take over Europe. But wars are costly even if you don't lose--ask the Ukrainians. In addition, there is a risk that a Russian attack on Europe might eventually go nuclear. I've consistently warned of the risk of miscalculations.
Russia cannot even defeat Ukraine. Really? Ever heard of a Nuke?
Are you really this stupid?
Is, in your opinion, Putin stupid too, for not nuking UA when he can?
yo, the stupid one - look up the map of the front lines now vs. Nov. 2022. You would not be able to see much difference.
So much for the nukes.
What would be the point of nuking a place you want to make part of your country?
Can't say I know you are wrong, although I am prepared to fight over Taiwan more than I am willing to do over Ukraine. The threat is an argument for imposing tariffs on Taiwan in certain circumstances too.
Please allow me to advance another argument. China's subsidies are altering the dynamics of comparative advantage, which lowers long-term growth rates for the world, including the US. I'm willing to impose tariffs to incentivize them to adopt something closer to a market-based system. I don't really "buy" this argument as I think Chinese citizens are bearing most of the costs. Still, I wanted to write it down to make me feel better as I don't like seeing all the cheap shots being taken at Trump.
Yes, he is a liar and a borderline thug, but he's our thug, and I believe he is doing what he thinks is best for the US citizens who elected him.
"Yes, he is a liar and a borderline thug, but he's our thug, and I believe he is doing what he thinks is best for the US citizens who elected him."
Please, he only cares about himself. How is that not obvious? I don't understand how Americans can watch films and TV and quickly figure out who are actually the bad guys, but cannot recognize the nature of an almost cartoonish bad guy like Trump? Is it best for US citizens if he presides over by far the most corrupt administration in history? What are we even talking about here?
He rewards people who are loyal to him, and I think he has significant negotiating leverage.
The only two things I worry about are (1) his willingness to take unwarranted risks. I can't do much about that, but I've seen such risks work out incredibly well. It shocks me how rarely they have gone south when you have negotiating leverage, but they occasionally go south (2) He will also cut corners, but my attitude is that we suffer from gridlock that raises risks I don't like.
He is a once-in-a-hundred-year event so that we will return to normal (or close) in a few years. Hopefully, he will clean up some things or start us on the path to cleaning them up, and then we will clean up after him.
Congress or the courts siding with Trump won't get the economy out of the gutter, though.
That is true, although we might disagree on what is in the long-term interests of the United States. I don't care too much about the decrease in 401(k)s driven by money flowing out of US equity markets, even if it hurts me, because some things come before personal interest.
It's not like money flowing in or out. (Other markets aren't up, either. Stock markets aren't driven by some hydraulic fluid.) It's market participants' consensus about the value of US companies shifting.
There certainly is an element of values shifting. I couldn't tell you what is driving the changes, but I'm unwilling to give up because equity (and bond) values move, assuming the policy is reasonable. It is just one of many factors to be considered. I am also fine with a recession, mainly because I view it as inevitable and usually with some positives.
I agree with a lot of this, but I think the Bluesky libs are clearly in the up column too. Millions of liberals saw this disaster coming, even if they didn’t predict all of the details. Personally, I had a number of deep objections to wokeness, but I saw maga as being infinitely worse; and I think millions of Democrats made a similar calculation when they voted for Harris.
Good points.
Scott, thank you for your ideological conviction and not shying away from the reality our country is facing. I wish more economists with blogs shared your ideological conviction. I'm very disappointed in the relative silence of many of the public intellectuals I've long followed.
Also - on the topic of recent movies, I may have missed it but I don't think I've read whether you saw last year's 'I'm Still Here', taking place in Brazil's military dictatorship of the mid 20th century? Eerie authoritarian similarities with where present day America seems headed aside, it was 2024's best film for me. Incredible acting, captivating imagery of 70s Rio, and a fantastic soundtrack supporting a gripping and deeply moving true story. I'm curious what you thought of it, if you saw it. And if not, I highly recommend a watch.
"I'm very disappointed in the relative silence of many of the public intellectuals I've long followed."
This is the first time in my life when I've found that many people are terrified to criticize the president. Even high level people like CEOs and senators. This country has changed beyond recognition.
Maybe the scariest thing is the way Big Law has been cowed.
What does TDS stand for? (I think of Total Dissolved Solids.)
"Trump Derangement Syndrome", which is the label put on people that see Trump clearly, by people that do not see him clearly.
you caught tds :(
lol - a cynic is what an idealist calls a realist :)
TDS is a phrase coined by a transparently obvious pathological conman that inoculates his dupes from recognizing the Con via projection.
Cult leaders and shyster evangelical ministers use the same tool all the time. B
"They will say _____ about me but they all are evil, deranged, Marxist, pedophile, Deep State etc. etc."
Some of us knew Decades ago-
"Beware always of the loudmouth
taking advantage of the situation
and appealing to a crowd's meanest nature."
-Jimmy Breslin about Donald Trump in 1989
(Jimmy won a Pulitzer for being a
“Champion of ordinary Citizens")
Sumner, what is the best neoliberal book? I am reading Free to Choose by Friedman and plan to read the Road to Serfdom
"Indeed I’d put it third on the list, behind his hyper-nationalistic foreign policy and his domestic authoritarianism."
I would put it second, I think, behind the chaotic foreign aid cuts.
"In contrast, Democrats have been quite disappointing in their criticism, mostly focusing on the wrong issues."
Solid agree, Sumner.
"the anti-anti-communists that were largely discredited after 1989."
The anti-anti-communists were basically right, though. Say what you will, but Goldwater's foreign policy was insane; vastly inferior to Stevenson's.
"Those who suggested that we needed to hold politicians to high standards now look vindicated. "
Basically agree.
On the anti-anti-communists, I'm talking about leftists that rolled their eyes when you criticized the Soviet Union. Reagan was correct--it really was an evil empire.
I agree that Goldwater was too hawkish--heck, even LBJ was too hawkish.
On neoliberalism you could always read my SSRN paper "The Great Danes" (free online)
OT, but in the ballpark.
Are tariffs all that important?
"S&P Global Ratings warned that if the U.S. fully implements reciprocal tariffs announced on April 2, major Asia-Pacific economies like India, China, and Japan could see their GDP growth fall by 0.2–0.4 percentage points over the next two years."
That's it? And that is if Trump's ham-handed tariffs are fully implemented?
Well, I am happy with Trump's policy choices.
Short-term pain, but long term gain - at least for blue collar class.
Stock market goes down, and 70% of the world cheers. We want to bring globalists to their knees no matter what the costs. I'd rather sleep in a hammock and fish for food, then be a mere cog for the ologipoly/oligarchy, which so many of you call free markets. It's a market of course, but not a free one - and that's for damn sure.
Noobdy cares about being broke, when they are already broke.
Larry Summers and Ezra Klein punted on All In Pod and admitted that letting China into the WTO was bad on net. Larry actually opened by claiming he didn't do it.
They ALSO BOTH AGREED that we must measure and protect IN THE US:
1) All tech around AI - TOTAL US SUPPLY CHAIN.
2) Energy - not just cheap oil, natural gas, etc- including infrastructure, transformers, transmission, all of it. Scott, it's bc of #1. We have to DOUBLE Texas energy production by 2040 for AI and as we blow past the CA population.
3) Some rare earths - which require not only mercantilist mining
4) Pharmas APIs
AND they agreed that on these we cannot listen to unions/Democrats/EPA/bureaucracy
Scott, the rest of the stuff is "for our trading partners to make instead of China"
IF you can get your head around those points, I think you can make a decent argument for when and how we let up on China. I think they are an easier beat than most do.
https://www.youtube.com/watch?v=KcmMOZKnKAk
The Monty Python skit Brave Brave Sir Robin is what came naturally to my mind.
Judging from what I see from afar (but first-hand, not that long ago), Americans need junk food, booze and pot, tattoo parlors, and cheap entertainment (TV, internet).
Those are largely homegrown.
Can China really win a trade war?
Getting harder to defend Trump, isn't it?
I have long said Trump has the personality and character flaws of any other dozen men put together.
I am a fan of tariffs, but not as implemented.
A true globalist---not a US nationalist---might argue in favor of US tariffs, perhaps about 25%.
If global exports are roughly subsidized by 25% (I think this roughly true), then manufacturing is not being sourced where least inputs are needed, but rather where subsidies are greatest.
Inefficient production globally is being subsidized to enter world export markets.
A 25% tariff would result in manufacturing again being sourced where true economic inputs are least.
I think this is roughly true.
But! A true US nationalist would say, "But US consumers and economy benefit when other nations restrict domestic living standards to subsidize exports that we benefit from."
US nationalists would favor lots of subsidized imports (provided the US can stay resilient in the face of cut-offs).
I like Angus Deaton, Michael Pettis, Dani Rodrik.
Even Peter Navarro, though mostly as I feel he was a victim of a politicized prosecution (no, this does not mean I like Trump. Just that the Biden Justice Dept would have never prosecuted a D-Party economist who refused to testify before Congress).
Maybe I am a pariah. So it goes.
I am not laughing. I just wish I was man enough for you.
Btw, the party in Australia is, in fact spelled 'Labor', despite the standard Australian spelling of Labour.
I think the use of conservative for MAGA is wrong. They are almost revolutionaries or at the least radicals
The conservatives are he resistance to very abrupt change.
Terminology matters. I'm now a conservative, not a radical.
Fair point.
Hi Scott,
I think China may be in a more precarious position if demographic figures go further in the wrong direction. Also China is the ultimate controlled economy so will eventually lose out to the US - willing to have a 25 year bet on this if you like. I think the CCP will collapse in the next 5-10 yrs anyway.
The million man swim to Taiwan would be a catastrophe for them, a non martial nation of single child sons - they won’t take Taiwan unless the Taiwanese want to go that way which they might.
Could you comment on the DRAM wars of the 80s 90s . I like what you said about globalization not being optimal (what is) . Would any sort of industrial policy have been worthwhile for say chips back then.
Also it seems somewhat strange to me that almost all fab went to Taiwan - obviously their workforce is probably more disciplined than us and Europe , but you’d think there’d be enough Germans and Dutch to have a fab after all tsmc is German Dutch.
A most liberal economist probably still believes in national defense industry- chip favs not on the other side of the pacific was at least a strategic mistake - be interested in your expertise on whether there were some select policies worthwhile in this direction.
At any rate I don’t think we need to be in any sort of war with china or anyone else , as long as we build chips, steel, ships, pharmaceuticals in the west.
In fact all we need is to link German industry with Russian materials and energy - oh wait :)
"Also China is the ultimate controlled economy so will eventually lose out to the US - willing to have a 25 year bet on this if you like."
You must be new to my blogging, as I've consistently argued that they will not catch the US, unless they were to radically liberalize their economy.) BTW, it's not the "ultimate controlled economy", it's a mixed economy.
I don't see any big problem with the Germans buying Russian gas. After the Ukraine War broke out, they found alternatives. And it forced Russia to pay a price for its invasion---a loss of European markets.
In general, I think people vastly overstate the importance of relying on imports of important commodities like energy and chips. I worry about war, not economic dependency. And trade reduces the risk of war. I might recommend a few trade policies on national interest grounds, but not many.
We didn't need more industrial policy in the 1980s and 1990s, we needed radically less government regulation in areas like housing construction. Nimbyism was the biggest cause of stagnating living standards, along with health care regulations, bad monetary policy, Iraq War, etc.
Somewhat new to your blogging https://en.m.wikipedia.org/w/index.php?title=Market_monetarism&action=history&dir=prev
lol :)
Yep - peace gives rise to everything else.
Whoops asml not tsmc
Astute as usual.
I am not totally convinced though of these ups and downs. I would love it to be that way. Then I see the news. I find it shocking that a large plurality of Americans still support Trump and his bizarre crew of witch doctors. Congress does not move a finger. SCOTUS rules but only the executive has guns, so the two other powers are ... powerless. As for immigration, even now with the unthinkable events surrounding the deportations to El Salvador, apparently a majority of Americans are net positive on Trumps' immigration "policy" (really just a string of extrajudicial cruelties). America still believes in this.
I suppose I thinking here of the views of intellectuals. I'm seeing a change in attitude among people like Niall Ferguson and Richard Hanania.
Agreed on that and I really found it commendable from Hanania and Ferguson especially, to change tack immediately. Also Scott Alexander's mea culpa on "edgelords". A bit less enthused by others, such as Tyler Cowen and Robin Hanson who maintained ambivalence before the election, and in my mind still do. And who knows perhaps the reality takes a little longer to percolate down to the public general. It seems though that the public general has a high tolerance for the obvious cruelty on display and I find that shocking. Unlike the Germans in '33, America has a clear precedent, the entire 20th Century. So I find this very disheartening.
On the theme: throughout the 30s, Austria had actually resisted the rise of the Nazis. There was an attempted coup by Nazis against an Austrian strongman chancellor, Dr Engelbert Dollfuss, who got murdered in the process. The succeeding governments held out against the German Nazis until the Anschluss. During that time, various Nazis who had become illegal in Austria, moved to Germany into exile to live their dream and escape Austrian justice. When they came back in the wake of Hitler during the Anschluss, they had seen the reality in Germany and were a lot less enthused than the assorted Austrians welcoming them. They had seen what it was like inside.
So with the precedent of the 20th Century and having seen the first months of this administration I am genuinely shocked at the approval ratings - percentage wise it's more than Hitler's plurality in 33 in the German parliament, which had no precedent to inform opinion. And America has no lost WWI, no Weimar style hyperinflation, and no Great Depression to cite as excuse for the rise of this administration and the quiet acquiescence of so many.
The German playbook had a few milestones. First the concentration of power into the executive following Carl Schmitt. Then the justification of repression using the "Dolchstosslegende" (claiming that the communists had stabbed Germany in the back and 'stole' victory in WWI). So far this should sound familiar to recent events. Then Germany had the arson attack on its Congress, the Reichstag, used for more repression against, umm, terrorists. Purge of erstwhile supporters (the SA) become too powerful in "The night the long knives". Finally years later the Kristallnacht unleashing the "gerechter Volkszorn" ("justified popular anger") against businesses owned by the declared enemy, and the annexation of a smaller neighbor of similar culture. Wonder if any of this will come to pass in the US too.
BTW you may have missed out on one of the biggest "ups": China itself. The US has basically delivered all of South East Asia to China on a silver platter, with sides. Europe is sufficiently softened up for wooing to come (from Boeing to Airbus, easy), Africa is already a done deal, BRICS should be in the pocket soon as China easily dominates. There won't be much left for America to take, save Greenland.
Europe should of course be closer to China while truly decolonising herself from the US. But that's yet another story
Lots of good points. I think that many intellectuals are having trouble processing the fact that America is not the country they have always thought it was---which leads to political miscalculations.
China may gain in a relative sense, unfortunately the US is playing a negative sum game for the entire world.
Another possible "up" ... Singapore specifically, might be able to pick up some of the soon to be incapacitated top scientists in the US and offer them a new home... becoming a science center of excellence has long been a goal for Singapore, and the facilities for receiving the science refugees from the US to come are already there.