Disaster Economics: Paul Krugman on the Trump Era and What Comes After

Wow. Um, hi everyone. Um, thank you all for coming. Thanks to the to the Y for having me here. It's uh uh interesting times to say the least. Um, when I was uh when I agreed to do this, which is really not that long ago, but still, I thought that this would be largely about um about tariffs, uh, and that we'd be talking, but um uh things move fast these days. I guess I don't know, we used to talk about internet time. Maybe it's Trump time. Things uh uh the the landscape shifts so drastically and so um uh uh scarily that it's hard to keep track. And as it happens, as we sit here, um the Senate is voting uh on the the one big beautiful uh bill act uh which uh if it if it passes, which is I I gather still somewhat up in the air, uh but if it passes uh will radically change our country just just like that.

Um, and actually before I get into the sort of substantive economic policy stuff, I just I I was I don't and I can't see anybody given the lighting. So I don't know I don't know how many people know that um the the one big beautiful bill act is the official title of the legislation. That's not that's not a uh that that's not a me making fun of it. That is what it is actually called. Um, and that that in itself tells you a story. Uh, as people may have been aware, uh, uh, uh, the president uses beautiful a lot. Uses more than anything else uses beautiful to mean anything he approves of. Uh, and it's it's it's a weird quirk. I don't know. It's a verbal tick that uh, I was trying to see if it has if if there's any subculture that from that it comes from. And I thought that I but it no one seems to know. just seems to be that's for some reason that's something he does and it's a weird verbal tick. Um and he said sort of almost in passing, you know, last last time he was in the White House, he tried to cut taxes for rich people, which he succeeded in, and tried to destroy healthc care for uh for a few tens of millions of people, which failed. And so this time he was going to do them both at the same time and as he says in one big beautiful bill. Um and Congress, the the House, the Senate, uh named the legislation that is being argued on the floor as we speak, the One Big Beautiful Bill Act, which is, you know, bizarre. This is the leader has a weird way of speaking and you are so uh um determined not to uh in any way offend or you know to curry favor with with the leader that you simply incorporate that. It's it basically uh this general feeling and this is not something that normally happens in republics, right? This is uh this is uh Washington DC turning into Pyongyang on the on the PTOAC. It really is something you'd expect uh Kim Jong-un to uh to be uh dealt with that way. Not not a US president, but that's where we are right now. And I I do think that is is significant in understanding where we are.

So what is happening um uh you can understand I think particularly the the one big beautiful bill act uh but a lot of what else is going on I I I have a kind of a unified theory to understand uh what uh what's going on in policy right now which is take basically everything good that has happened uh in America since uh uh since Barack Obama took office in 2009 and let's destroy it. That would be a it that that's a pretty good model for explaining a lot of what's in this legislation and some of the other things that are going on.

So uh we had um uh a uh uh we had health reform. Uh the afford Obamacare aka affordable care act is a you know highly it's it's a it's a Rube Goldberg device. It's a complicated set of legislation that is not the way anyone would have designed a health care system from scratch but uh nonetheless makes a huge amount of difference. And so we've we've if you uh count uh I I would say that of people who uh were uninsured um that were not undocumented uh immigrants, we've got something like 70% of them insured as a result of of of Obamacare, which does still makes us, you know, we're we're we're still the only advanced country without truly universal health care, but we're a lot closer to being a civiliz ized country on that front than we were. So, of course, the bill will savage that. We'll have in incredibly horrific cuts in in Medicaid which is a core piece of it and also also cuts in the other parts but above all Medicaid which will take the form not even of eliminating the program or reducing the categories of eligibility but instead creating a an obstacle course of paperwork that will make it extremely difficult for people to uh to to get through the application process. process and will uniquely hurt uh people with less formal education, people without internet connections, uh people, in other words, exactly the people who most need help will be excluded. So, it's an incredibly cruel measure and I think the uh this is Aaron Ser the cruelty is the point. This is a deliberate uh we're going to undo Obama's legacy on healthcare.

Um, we've had this incredible revolution in energy. uh solar and wind, renewable energy was a was kind of hippie- dippy pipe dream stuff uh in in in the 2000s. Uh and then suddenly everything fell into place. We suddenly have um a situation where uh uh fossil fuels in many cases are just plain not competitive. Coal really even without government intervention, coal would disappear from the energy landscape. Solar and wind are about 90% of recent additions to electricity generation capacity. Um so and we had a set of policies under Biden to um accelerate the transition to renewables. So this bill kills uh those subsidies and not just that actually imposes taxes special taxes on renewable energy. So it's a deliberate effort to kill the renewable energy revolution even though the technology wants the technology wants us to have clean energy but uh the uh the the party in power doesn't and so uh uh that's another big thing.

Um, the US economy has done really well relative to um other advanced economies at least in terms of growth. There are some other things we don't do so well on. Uh but we've we've been we've had high productivity growth and particularly we've really uh pulled ahead on technology. Uh and if you ask why well it's the immense it underlying that is the immense uh strength capability of US science. We are you know the leading place to do science in the world partly because we have critical government funding. uh partly because we have these great uni research universities uh and the rather the close links between the research universities and the government funding and business. So you know Silicon Valley starts basically around Stanford University uh the uh the uh US biotechnology industry really starts around uh MIT and and the and the hospital complex the in Boston and so on. Um so what we have is immediate uh cut uh something like 50% in US government support for scientific research uh plus uh tremendous uh attack on science within the government and we have uh uh you know the national institutes for health have effectively been paralyzed. Uh we have uh secretary of health we have Robert F. Kennedy Jr. um who I think nobody we knew that he was a something of a crank but I didn't think anybody realized quite how far uh he doesn't believe in the germ theory of disease he believes that my asthmas cause uh illness and so doesn't believe in infection so he's not just antivax he's anti-germ theory and this is heading you know our most important in many ways our most important scientific agency uh in the United States again you know what what went right for the United States After the 2000s, it was this really amazing success in technology which was based on science and our and our institutions of higher education. And so we're out to destroy them.

Um, and um then of course uh uh the health coverage uh the uh again we um it's so easy now to find fault with uh with Obamacare with the Affordable Care Act. It is certainly not the system that uh most of us would have designed. Although uh the the uh a really large part of what has done is expand Medicaid which is a you know Medicaid is a is a healthc care program for for low-income people. And so it is stingier, less uh you know uh more more restrictions, lower pay for uh health for doctors and and nurses than other programs. But uh nonetheless is uh infinitely better than than nothing. And in fact in a lot of ways Medicaid is uh is is the US version of of the kind of health care that many other advanced countries have. Um but um uh that's we're facing just really savage cuts and there's a there's a lot of of uh back and forth uh about exactly how many people are going to lose coverage but a reasonable number would be something like 16 million if this bill passes. Uh and it could be more than that and quite a few people will also be paying a lot more. Oh, know what I was going to say is that the imperfections, imperfect as the as the bill is, uh, as the the current healthcare system is, um, I think a lot of people have forgotten what it was like to live in a world where if you had a pre-existing medical condition, you and did not happen to have a job that came with generous health benefits, you were just out of luck. You just could not get covered. And I personally know people whose lives were saved by the fact that the uh that coverage for pre-existing conditions was made available through that health reform. And all of that is basically on the chopping block now.

So boy, am I sounding uh I I've been friends said you need to end with something upbeat. So I will try at the end of this, but uh but let's let's talk about that. Um the last thing I would say about uh uh where we are uh right good things that happened um America at least as I saw it uh uh just we became a more tolerant country a lot of ways. I I you know I've I've been around for a while um and tracked a lot of things through the uh ch changes in public attitude, changes in politics. Um uh the uh you know if you go back if we if we try to think about what what America was like uh in the Reagan years uh you know a clear majority of whites in America um u were opposed to interracial marriages. That's just just 40 years ago. We were a country where interracial marriages were were widely regarded as unacceptable. uh which I might say would be uh pretty bad for my personal life. Um the um and that that went from almost universal, you know, it went went from widespread disapproval to almost nobody at least being willing to admit that they were against interracial marriages. We went from um gay marriage being a uh possibly uh what swung the 2004 election to George W. push to it becoming very widely accepted in America. But we just in general became I would yeah certainly a more tolerant, more open, I would say a better society and of course all of that is now very very much under assault. uh and um and there's a there's a level of sort of raw bigotry on multiple fronts has it presumably it was always there but there was a point when people were afraid to at least to admit to having those attitudes and and so all of this is a it's the the great dismantling of uh I was say the dismantling of of a lot of what makes America great.

Okay, let me talk a little bit more about the specific things and then go on to the issues you might have expected me to be talking about or that I was expecting to talk about. But just let me say um uh two things. Um um uh first actually three things I'm turning into a Montipython routine which happens uh the uh um the um if this happens if the if Medicaid is really on the chopping block um it's going to be uh primarily through the imposition of work requirements. uh you have to prove that you're working or or at least trying to work uh in order to get Medicaid. Um what you need to know about that is it's an entirely bogus issue. Um there are to a first approximation no Medicaid recipients who could work but are choosing not to. there. There if you go down the list and you find out who who actually receives Medicaid, it's people uh with disabilities, uh seniors, quite a few uh um seniors receive Medicaid as well as Medicare. Um people who are have to um who are caregivers for for relatives. Um and about half of Medicaid recipients actually do work. Uh and the number of people who um at least on a crude classification could be working but aren't and are receiving Medicaid is very small. Um and probably most of them are just it's just because we aren't there there are uh circumstances that uh that aren't captured by the by the official data. So it's a it's basically a non problem. The idea it's it's it's like you know welfare queens driving Cadillacs. It's the modern equivalent. the Medicare recipient who just is is sitting on their couch and and can't be bothered to work is a is a fictional character and yet that is at the core of what's going on and um it's uh seen amazing stuff being said about how we're going to do this and we also actually as it happens um um I spent many years teaching a course first at Princeton then at CUNI on um economics of the welfare state which was mostly international comparisons And one of the things that you discover in uh all issues of things like health care and so on is that um most things that you might think of um have in fact been tried that it we don't lack evidence. It's not a shot in the dark and in particular we do know exactly what happens when you try to get more people working by imposing work requirements on Medicaid or other social programs. And the answer is that a lot of people lose coverage because you've uh created too many bureaucratic hoops for them to jump through and that essentially no people go to work. It's a so where the centerpiece of of this whole thing is is a is a policy that we know doesn't work. We know from recent experience in the United States uh in places like Georgia that it doesn't work. But nonetheless there we are.

Um, renewable energy. Um, you know, climate change terrifies me, uh, as it should all of us. Um but um the gods of technology gave us a great gift which was that just in time uh solar and wind became extremely co uh effective and efficient which meant that we had still do have uh the opportunity to drastically reduce uh greenhouse gases uh without sacrifice. We don't have to have uh I mean there's there was a good case for having a carbon tax and things like that but the the most uh but uh the fact the matter is just mild subsidies to encourage the adoption of these renewable energy technologies is probably enough to achieve a huge energy transition with no visible negative effect on their standard of living. and we were making a good start on that uh until January 20th and now it's all being rolled back.

Um, science, technology, education again uh the United States wasn't always the world scientific leader. Uh if you'd asked in uh in 1930 what what's the world science leading scientific nation, it would obviously have been Germany. Um and uh how did we get uh to being the scientific leader was partly through uh being a place that welcomed uh people from all around the world who had stuff to bring, who had useful talents to bring. It was partly through a lot of government funding and it was partly through a university system that was uh and is uh without par. I mean I I uh there are fine universities elsewhere in the world. I do a lot of traveling to you know European universities but uh they have a long way to catch up with or did have a long way to catch up with the US system which um among other things just because of the openness of American society has been so successful at attracting the the world's best talent. U I have I I get I get mail email. Um, I'm I think I'm the world's king of of uh of of hate mail. Um, and the uh uh but the two my two favorite uh genres are uh on the in anti-immigration stuff are uh first I actually do get seriously I get people who say you know how would you feel uh you know you're all blind about that but how would you feel if if New York was full of immigrants? Uh um and the other is I get is how would you feel if there were lots of immigrants competing for professor jobs and you should look at the composition of any leading department in the United States and you um anyway um so okay again we're putting all of that at risk I mean I I do know people there there are as we speak there are international scientific conferences being cancelled uh or moved outside the United States because people um may not be able to get visas or are afraid uh that uh that they may arrive and uh ICE will demand to look at their phone discover that they sent some texts critical of of Donald Trump and that they'll be uh sent back uh or even it's been happening now occasionally even imprisoned. So, uh, we we're we're rapidly destroying that scientific, uh, base that has been so crucial to our success.

Okay, let me talk about the things that I thought I was going to be talking about more. Um, oh, by the way, I will say that this is uh I just I just saw in today's paper uh um that that um uh the next step is they want is that the administration wants to start denaturalizing, taking away citizenship uh and um this is quite personal. I have relatives who, you know, have been here since they were uh seven years old. uh are US citizens actually who are also because of the family connections are also uh people of color and and uh with with Spanish-sp speakaking relatives so that they can will sometimes be out there speaking Spanish in public and um they all now carry passport cards with them uh to be able to wave in front of ICE but we already know from a number of incidents that that may not work they may say I don't see that I don't believe it's real and anyway so but then they could be losing the citizenship. So it it's incredible that is this America anyway.

Um, economics um there are two really big uh economic disruptions associated with with all of this. I mean the longer term I think the the destruction of of our scientific and educational base is what's if you want to ask what's going to happen to the US economy 15 years from now that may be the biggest thing but more immediately there are two things and tariffs have gained most of the attention uh as understandably we went drastic you know we went from uh roughly uh from a less than 3% average tariff on uh when when Trump took office um almost instantly up to what is now about something like a 17% average tariff. It varies uh by country. It varies by product. Um it is probably people have heard about of the the famous Smooth Holly tariff of 1930 uh which is often blamed for the great depression. I think that's actually being a bit unfair. There were a lot of reasons for the Great Depression, but still it was always, you know, the uh the scare story uh that that economists told people and you don't want to do Smooth Holly again, but we actually have now tariff rates that are very close uh to what we had after Smooth Holly. Um and Smoot Holly was after many decades of high protectionism whereas we went from near free trade to Smoot Holly level tariffs all at once in a world where trade is about three times as important relative to GDP as it was in 1930. So this is an enormous enormous shock to the system and worse yet it's a if it was permanent if we knew it was there then businesses could try to plan around it. Uh, one dirty little secret of of international trade is that while there's universal agreement among economists that tariffs are bad, uh, numerical estimates of how bad are probably not as large as many people think. But a tariff where you'd have no idea what tariffs will be next month, let alone next year. That is really bad. That makes planning pretty much impossible.

I'm going to waste a couple minutes. Uh I don't know if people you know there were two big tariff announcements on April 2nd on April and on April 9th and um um the April 2nd tariffs were that was liberation day. God God help us. Uh uh I I attended actual liberation day uh a few months ago because I was uh I was visiting Portugal where I have a long relationship and they their liberation day is they c celebrate the overthrow of the fascist government. Ours we celebrate tariffs. Um um but the um um the uh um the tariffs were totally changed after being one set of huge tariffs on April 2nd. We had a completely different set of tariffs. Although the average tariff turned out to have been about the same announced on April 9th. Um how did that happen? Well, it turns out we we have to know. I mean, let me say I I as people may be aware, you know, I I have had my problems with mainstream media, but we do need these reporters with insider access that it needs. And so, we know how it happened. We know that uh two of the less crazy members of the Trump economic team uh marched into the Oval Office uh while they knew that uh Peter Navaro, who was substantially crazier, was in another meeting elsewhere in the White House, got Trump to totally change the tariff policy, stayed in the office until he posted it on Truth Social. This is the world's greatest nation making enormously consequential economic policy. Uh and it's it's it's destructive. It's I it it must be nightmarish to be trying to run a business uh these days if you have any connection to international trade because you have literally no idea what the policy environment will be. Uh I mean we have a supposedly crucial date next week when all kinds of things will happen. But nobody thinks that whatever happens then will be the end of the story.

Um, if you ask me and I think probably most people who work on this um uh deportations are an even bigger economic issue than tariffs. Um and just leaving aside you know the the the human side and the and uh you know masked masked men who claim to be ICE agents but have no identification snatching people off the street again. Is this America? But the um um but just plain in terms of economic impact, one of the things that an issue I've not really done original work on but followed a lot over over decades is that we've learned that um immigrants really don't compete very much with nativeorn workers. You might think that they do, but it turns out that even if they have the same formal level of education, they take very different jobs. They take often jobs that are uh grueling or uh or dangerous that nativeorn Americans you understandably don't want to do and uh or they just may bring skills that in fact we don't have here. So that um if you look at uh so if you say well we're going to deport a million workers which looks quite plausible in the not too distant future it won't be a million workers spread from across the economy. It will be the core of the workforce that picks our crops. It will be the core of the workforce that does the heavy work in construction. It will be the core of the workforce in meat packing. Uh so there will be individual industries that are really hard hit. And a good guess is that the inflationary impact, the negative impact on our standard of living of deportations is going to be even bigger than the effect of tariffs. So um and we are now uh uh less than six months in uh and uh it it's it's quite a uh it's quite it's quite a uh a picture to paint.

Now um it's always a temptation to imagine that there's going to be uh imminent economic crisis because of policies you don't like. Uh, and that's usually it it it that's a bad um uh line to sell because um uh usually uh even if there is going to be a I I had an old teacher uh Rudy Dornbush at MIT uh who was great great international economist but uh may be best remembered for his Dorbush's law which says that the the crisis takes longer to happen than you can possibly imagine and then when it comes it happens faster than you can possibly imagine. And so I don't think that we would should be expecting necessarily to see everything fall apart, you know, next month. Uh but uh and uh of course the stock market, you know, God knows what what drives the stock market. Uh uh another of my teachers, Paul Samuelson, said, you know, the stock market has successfully predicted nine of the last five recessions. Uh so um but um you shouldn't be expecting catastrophe immediately but my god it's really wild stuff and and if you look at other markets uh I was god help me in Brazil for a day last week I should not have done that but the uh um the um uh but they they're looking at interest rates and the dollar and the fact that in the United States interest rates have gone up and the dollar has gone down which never happens here in America when interest rates go up. US investing in the United States becomes more attractive and the dollar goes up. And this combination of clearly people losing faith, international investors, whatever the stock market thinks, international investors are losing faith in America. You the Brazilians are all saying, "You look like us." Uh, and so we are starting to see signs that the US looks like an emerging market. Now, we're a long ways, I think, from uh, you know, classic emerging market debt crisis, but it's it's it's not good.

Um, how does this end? The uh the good news is that um uh one of my great fears as we entered this era was that that people would play would would basically fall for it for a long time. that the public would just sit back and and uh and you know celebrate, oh those those uh those uh criminal migrants are being uh rounded up and uh and all of those pesky energy regulations are going away and that sort of thing. And that is not what we're seeing. uh you know there's polls pole issue polling is always problematic but for what it's worth the uh the uh u the one big uh beautiful bill uh is uh polling worse than any legislation in uh in memory. Um and um uh there have been a number of special elections uh and so far uh uh Democrats in special elections have outperformed 2024 by 15 points. Uh so that uh the uh the public is not buying it. Um, and um, I don't know how many people, and again, I can't see anybody, but I don't know how many people, but uh, uh, went out for No King's Day. Uh, but, uh, uh, I I was there. There we go. Anyway, all right. Well, I don't really need to show um, and it it you know, this was we think that there were five or six million people protesting that day, myself included. And um that is saying that we actually have a fairly alert American public um that will push back. Now how it all plays out, you know, I have there are all kinds of fantasies you can have and we don't know and uh uh we don't even know what's happening with with with the bill being debated on the Senate floor as we speak. But I don't think that let let me say I I actually think that the vicious cuts to social programs that if this bill does pass that they will not last that in the end there will be just so much demand for at least a little bit of decency in this country that they will uh that they will be reversed. It will take time it'll take a lot of struggle um but it I think that will will be okay.

Um, other things. I don't know if we're ever going to get uh science education back to where they were. Uh, I don't think we're ever going to get the US um reputation in the world back to where it was because even if we get rid of this current regime, um the world will always know that we are the kind of country that could have such a regime. That's uh that's a major that that's that's a loss of of uh a a breach of trust that you don't ever recover from or takes a long long time. Um but weirdly I'm actually a lot more hopeful than I was uh three or four months ago. It does seem to me that there's uh uh that there's a a lot more uh underlying decency uh in the nation and a lot more push back than you might have feared. And let's hope that I'm right and uh and uh let's and I will have oh my uh uh I'm told I'm supposed to remind people that I have a Substack. uh that there's plenty to write about on the Substack, which is not a good reason to be going through hell, but uh but as a small compensation, at least personally, for it. It is these are wild times. And uh uh can I quote uh uh death of a salesman? Attention must be paid. Thank you all.

So, I believe that we're g I'm supposed to get index cards with questions. And here they come. Oh, there are so many that just came in. I couldn't go over all of them. So, just pick and choose what. Okay. Actually, I'll just go with the top one right away about um can Trump's policies cause a depression? Um I mean, can Yes. Um tariffs don't necessarily cause a depression or a recession. Um the um uh they're um they they make the economy less efficient, but you can um other countries Britain had about 25% tariffs in the 1950s. Um so quite even higher than what we have right now. It took a long time for them to get down to to relatively free trade. They also had very low unemployment. So, it's not that's not the issue. Now, I think what really is the issue here is the uncertainty is the craziness. The fact that no one knows what the policies will be. That's that's what might cause a a recession rather than a depression. It takes a whole lot to push an economy into a full-scale depression. Um, and we may be working on it, but I don't think we're there now.

Okay, um so much um economic challenges New York City faces as we approach the mayoral election. um you know um yeah uh I think it all comes down for New York to affordability. Almost everything else is really I mean in a lot of ways um I saw that after the mayoral election Steven Miller said this is what happens to a society when it allows unrestricted migration. And um New York society as a society looks pretty good. you know, we have the lowest homicide rate probably in the city's history. Uh we have uh a lot of um I I now know I was going to say, you know, I I do live on the Upper West Side, which is uh a little more affluent than than the average. Um but still, you know, go through when take you take a walk on Riverside Park if you want to feel good about humanity, just uh go go walking through any New York City park on a on a on a nice day. And it the u things are fine and we have inc we have incredibly diverse neighborhoods that work just fine as a society. I have relatives in in Jackson Heights. It it's uh but what we don't have is housing that regular people can afford. It's mostly housing. Uh so the uh the important thing for New York I I don't think that we're you know all of the billionaires saying I'm going to leave because you're about to elect a leftist Muslim mayor. uh that I don't first of all you know they they won't you know some the ones who will are the ones who were going to anyway but the fact of the matter is uh my f one of my favorite quotes there was a Bloomberg article about the mostly failing attempts to uh to move the financial industry to uh to Miami and uh and one of my favorite was some uh private equity guy saying that the trouble with with moving to Florida is that you have to live in Florida. Um and um uh I think the the attractions of the city are enormous, but it has to we have to build housing. How anyhow it I don't I don't even think it even if it's not affordable housing. If you build more high-end housing that frees up housing, it just the city needs to become uh just needs needs to provide more places to live so that it becomes more affordable again. And that you know that there are role models out there. There are giant cities that have much more affordable housing, which aren't necessarily the ones you think. I mean, I would never have imagined myself saying this, but gosh, in terms of of housing policy, I wish New York was more like Tokyo, which is at these days surprisingly affordable.

Um, yeah, I'm going to disregard the ones about uh uh the the the ones about about investing advice. This is this is a always even if I even if I knew something would really be a bit bad idea. But um uh you know what what president was most successful in implementing smart economic policy? Uh look, most of the times presidents don't have a lot of influence on on policy uh on on the economy. Uh we just don't policy changes at the presidential level are normally too small to really have move things very much. Most of the time the management of the economy is is up to the Federal Reserve rather than the president and and most you know presidential policy changes are too small. uh the only times really of that it matters is is times of crisis and yeah FDR uh made some mistakes but led us through and we emerged from the 1930s as a as a stronger economy stronger nation than we were and also a more equal nation which I think mattered. And although you know you say because of the election went the way it did, nobody wants to say nice things about Joe Biden. But the fact of the matter is the economic policy under the Biden administration was compared with any other country in the world extremely successful. We had a stronger recovery. We had some narrowing of of economic inequality. We maintained full employment. We did have a bout of inflation like everybody else, but we got rid of it without mass unemployment. So all the economists who said we were going to have to have a go through a a depression to get rid of that inflation were wrong. So all the economists who said we were going to have to have a go through a a depression to get rid of that inflation were wrong. Fortunately I wasn't one of them. And um the uh so you know this I would actually if if we didn't know that Democrats had lost the two the 2024 election I think people would be looking at the record of economic policy uh from 2021 to 2024 and saying that's a pretty good successful case of economic management.

This is actually a good one. What country do I think of as a as as a good model? Um, for Look, nobody's perfect. Um, every country has has its own quirks and negativities and and virtues. I mean, at least uh until just the other day, I I still think that America's openness uh was uh was something that nobody else could really match, even if they even if legally they were, you know, just as open as we were. The American society was more open to outsiders and changed than anyone else. Um but look, we look at uh look at at uh uh Denmark uh the Nordics in general, but Denmark um per capita GDP is is lower than it is here, but that turns out to be mostly because unlike Americans, the Danes actually take vacations. Um and so it's not clear to me that that's a problem. And there's no, you know, there there's nobody goes without healthcare because they can't afford it. Uh there's just no intense poverty of the kind that we have here. Which by the way, in case you want, no, yes, they have a uh uh ethnationalist political movement there. So just just doing the right thing, unfortunately, doesn't mean that you're safe from from the demons that that infect all of us. Um uh I've lately been spending some time in the Netherlands for various reasons and that's another country that again uh uh just the sort of uh the general decency of the society uh is just shows what's possible. Anyone who tells you no, you can't. It's impossible to have health care for everyone. It's impossible to uh to ensure that even in uh service occupations people earn decent wages. that it's impossible to uh to uh eradicate extreme poverty when I say look there are these countries over there that they're real they exist uh and they they they actually do all these things um and they also have life expecties that are you know four or five years longer than ours. So this is this is pretty uh uh uh uh that I would say any you know I I'm unfortunately we don't have a category here um but you know in Europe people will talk about social democrats a social democrat is someone who believes mostly in a market economy mostly profit driven uh you know economy which is mostly private business but with some regulation and a strong social safety net And I'm a social democrat and the social democracies of Europe actually do fine. And they've uh they're they're feeling a little blue because they have fallen behind a bit in advanced technology. Not clear to me that that even will persist. And it you might want to note that uh of the two countries I named uh uh the Netherlands the the uh high-end equipment for manufacturing uh semiconductor chips all comes from ASML a Dutch company and the uh uh and the weight loss drugs are coming from uh from Denmark. Um so it's it's it's not that they're not innovative.

Is debt has debt reached a point of no return? Um economically, arithmetically, no, not remotely. Uh rich countries with stable governments that borrow in their own currencies uh have enormous ability to cope with and eventually work down debt. US US debt is uh currently is about as high as a share of GDP as it was at the end of World War II. And we, you know, we dealt with that. Britain came out of World War II with debt that was 250% of GDP, two and a half times what we have in the United States. They never had a debt crisis. They just gradually dealt with it. Um, do we have the ability to deal with it? Sure. the uh US has the uh uh one of the lowest tax rates overall tax share of GDP in the advanced world. If we were to move even halfway to the average tax rates that other advanced countries have, um we would have no trouble at all getting our debt under control. Or you know, we could uh cut cut social benefits. We could actually uh um our healthcare is uniquely expensive. So if we could somehow reduce health care costs to something like what they are in other countries although Medicare has made more progress on that than people realize but still there's there's a lot to go uh that would also help but it you know all of that is really easy the arithmetic of of of getting us debt under control is really really easy just say we need to get some uh some powerful groups to accept change. We need to get people to accept the need for higher taxes. We need to get people to accept that we need to end the overpayments uh the Medicare advantage overpayments that are inflating the costs of Medicare. And yeah, try try making those arguments on the floor of of the Senate right now. So the problem is all political. It's it's not there's no fundamental, you know, level of unsupportable debt.

This kind of related question future social security Social security you know it's it's a weird very typically American actually that we we set up a system where it is kind of deliberately is set up to look like what it isn't. So social security looks like a pension fund where people pay in and then they get their money out. And if you treat it and the accounting is done as if it's a pension fund but it really isn't. It's just another government program that for uh accounting purposes we tied to a particular tax. So your FICA the FICA on your paycheck is applied to social security but there's nothing that says that social security has to be paid for out of FICA. And do we have does the United States have the resources to maintain promised social security benefits? Yes, not a problem. I mean uh you know um um almost all the baby boomers are now actually at retirement age. The the demographic bulge is pretty we're pretty we have another point or so of GDP of rising social security expenditures as aging proceeds. But it's not um it's really not a huge burden. What we do have is that it's turned out that for reasons uh not worth going into that the uh the fix that was the 1985 fix that was supposed to secure social security until without further changes until until 60 isn't going to get us there. But could we find the resources to top up the system and keep it going? Sure. If social it. If nothing is done, just the mechanics, nothing is done, social security benefits will drop by something like a quarter when the trust fund is exhausted sometime in the next uh uh decade or so. Possibly sooner. But um I it it's not it's again it's easy to do it to do something. And for what it's worth, I cannot really believe that this that that sharp benefits cut will be allowed to happen. that I think there are just too many people who would be, you know, um affluent Americans have no idea how critical social security is to most of the American people. For most people, it is really it is their retirement. And and I cannot believe that it will be allowed to to go under.

Um, yeah, someone's asking about surveillance technology and I have no idea is uh where's we're where that I mean a little scary I to some I I was uh actually two thing I was I was a fan of the old TV series Person of Interest where the conceit was that the US government already has a a system that monitors everything and then they built a whole elaborate plot around it. And then rather weirdly, I spent 16 weeks on a New Jersey grand jury, which is not a uh is not unfortunately the kind of grand jury where you indict, you know, uh uh members of Congress. It's it means that it in New Jersey, what that means is that once a week uh the police present the reasons they made an arrest and and 23 citizens need to vote on whether that's adequate grounds to go to trial, which it almost always is. But anyway, but one thing I learned is that actually person of interest was pretty much right. If you think that you're that you're private and that nobody is filming you, you are probably wrong. It is uh it's it's the uh security camera in the convenience store, the security camera in in the funeral home down the block. Some the the odds are very very they're all these, you know, petty. The other thing you realize is so much crime is just there still there used to be a TV show called America's Dumbest Criminals. Um, but anyway, there's so much so much crime is really just petty and stupid, but the the petty drug deals done on dead of night at 2 am uh on a deserted street, more often than not, they are in fact on camera. So So we're we're already there. This is how we live.

Um, I think I sort of question about about uh cuts to research funding. Look,

This is, this is really serious. I mean, uh, uh, uh, really glad that I didn't go into hard science because it's absolutely devastating because they, that what they do costs a lot of money. Uh, and I'm actually kind of glad not to be a young researcher anymore because the, the resources are, are there. God knows what's going to happen. This is the, the scale of the cuts is just almost unfathomable. And it's not just, I mean, the way it's been working is not simply that no new grants, but they're just sort of stopping payments on existing grants which, uh, you know, in the private sector with the breach of contract, I think actually is even for the public sector, but nonetheless, it's happening all over the place.

Um, okay. Uh, somebody wants to know the impacts of a weakened US dollar. Uh, look, it's, it, it helps US exports. It, um, uh, slightly reduces imports. It adds to inflation. One of the arguments was that tariffs weren't going to raise prices that much because the dollar would go up, and the dollar has gone down instead. And somebody just, this person just asked me to sign the card, and I have a problem, which is I've gone all digital and I have no pen. So anyway, sorry.

Uh, oh, this is actually, I like this. Where do I have an opinion different to the majority of leading economists? Um, it's one thing that people, you know, I, I'm a, I think a lot more orthodox than than many people imagine. Uh, that I, I very rarely, uh, certainly in my, you know, post-post-research public, uh, you know, journalistic career, it's amazing how often the most controversial, uh, read in the face of rage, things I've written are actually just basically Econ 101, uh, written, written in plain English. Um, I'm trying to think of of any place that really where I'm really all that heterodox, and it, it's hard to find. I mean, I maybe I, I've certainly been, uh, more relaxed about US government debt than than many economists, although I'm less, less relaxed now given, given where we are, uh, politically. Um, but not really outside the, the, the mainstream stuff.

I, that would be a really good question. I, it's, uh, I mean, part, you know, partly the things that I did when much younger that really were unorthodox and, uh, very different from the way people were talking. Um, I've lived long enough to see them become orthodoxy. So, so that they're no longer points of disagreement. Uh, so, uh, uh, not, not, I mean, I was worrying about something like the, uh, uh, post-2008 financial crisis, uh, about, about 10 years before it was fashionable. Uh, I was part of a group of of economists who looked at Japan and instead of saying, "Oh, they, the Japanese are messed up," saying, "Gosh, they, this could happen to us." Uh, and that was a very unorthodox view in 1998. Uh, although among the group, a small group of people who shared that concern was a guy by the name of, uh, Ben Bernanke. Don't know what happened to him. Um, but, um, but, uh, but at this point, those concerns, liquidity trap, to use the jargon, are, are just, are, are perfectly mainstream.

How can we transition to a single-payer system? I think that's, this is actually a very good question. Um, you know, we, let me talk about Obamacare. Um, we did not, I mean, a lot of people, if you'd asked, I think most economists who paid attention and thought about how to design, uh, how they would design a healthcare system if they could do it from scratch, they would have said single-payer, something like Medicare for All. Uh, in fact, uh, uh, one of my best friends, May Chung, who is the, uh, uh, the widow of Uwe Reinhardt, who was one of America's leading health economists, a colleague of mine when I was at Princeton. Um, and, uh, uh, May and Uwe actually designed Taiwan's healthcare system. They were in a position to do that, and, uh, and it's single-payer. It's basically a Medicare for All system. Um, underfunded now. So that's one of those things that becomes a problem. But still, um, but if you asked Uwe or May, are you, they're going to advocate Medicare for All for the United States? They would say no, because it's, it, the political lift is too hard. Uh, too many people have, uh, employer-based insurance, uh, and think it's okay. Um, and a real, the lesser problem is the insurance industry has a lot of political power. So, uh, we're going to have to do a compromise, uh, which we did. And, uh, but one more thing worth saying is that, you know, um, uh, 70 million people are on Medicaid. I think about 50 million on Medicare. Um, and, um, and particularly on Medicare, they're the expensive, you know, uh, healthcare gets a lot more expensive as you get older. So in terms of where the dollars go, the United States already has, uh, uh, more than half of health insurance spending in America is, in fact, coming from the government. We are, we're, we're a lot closer to having a single-payer system than people realize. Uh, it's just there are, uh, there are tens of millions of people who are still getting insurance through their employers. But it's, uh, uh, it, it, it would make less difference, I think, than people imagine.

Oh boy. Monetary and fiscal policy for the rest of the year and next year. Um, you know, that's obviously really, you know, that we have Trump yelling at, at the Fed to cut interest rates. Uh, and, uh, the fiscal policy is clearly disastrous. Uh, there are times when you really want to run large budget deficits, which basically are times of emergency, uh, during wars, the aftermath of severe financial crisis, um, and, uh, uh, global pandemics that bring the economy to a halt. Those are times when you really want to run big deficits. Uh, there is no warrant for running big deficits now, and yet we're doing it. So the fiscal policy is way out of whack.

Should the Fed be cutting interest rates? Uh, the answer is, I don't know. Uh, and, uh, because there's so much uncertainty about where we really are and what's happening, and, uh, and the, uh, uh, secret, Jerome Powell doesn't know either, right? They, it, it is an inherently very hard situation. If I were him, I'd be doing what he is, which is sitting on his hands and waiting for more evidence. And it may turn out that in retrospect, the Fed should have cut rates, but we don't know that now. And, uh, and it, we don't, I mean, just trying to imagine what the world economy will look like, let's say, in January 2026 is already the, uh, the range of possibilities is just huge. So what is the right policy right now? Uh, and I mean, in some sense, uh, paralyzed fear is the appropriate attitude.

Um, will manufacturing offshore help the economy? This is actually, and I, I will take just a couple more because I think we, we're all getting tired. Let me just say, I, what you, what people don't, I think, really understand is that the great, yeah. We used to be a country where manufacturing dominated the economy. Used to be, it's as late as, you know, like 1970, a quarter of the workforce was in manufacturing, and roughly the same share of GDP. Uh, that did not, and now it's about 10 instead of 25. And you say, well, that must be because we import everything, right? But that's actually not true. Um, it, we do have a deficit in manufactured goods, and manufacturing would be bigger, uh, than it is if we didn't have that trade deficit, but not all that much bigger. Uh, so my back-of-the-envelope says it would be 12.5% instead of 10%. Not, not a transformative change. You can look at Germany, which runs enormous trade surpluses. And Germany has more manufacturing than we do, but even Germany has way less manufacturing than it used to, and way less manufacturing than the United States used to. Um, and, um, the basically the reason we have so little manufacturing is that we do it so well, uh, that it doesn't take a whole lot of workers to produce manufactured goods. Uh, it's, it's the same, you know, we, the United States is a gigantic exporter of agricultural goods with almost no farmers, and, uh, basically the roughly the same thing has been happening, a little more, less drastically, but over time, the same thing to manufacturing.

Really good one here. Do I trust government-provided data, uh, any longer? Um, yes, for now, but the, the assault is underway. Uh, I was just yesterday looking for, uh, data on, on, uh, uh, energy use in crypto mining. And the Department of Energy still has a page with those data together with a note saying, "This page is no longer being maintained." So they're gradually shutting it down. How far the politicization goes, whether we do, uh, you know, whether, whether we become, um, a, like Argentina during the Kirchner years, uh, where, where it's all fake. Uh, I don't know. It's going to be, we're, we're watching, and I, I'm already, uh, and I have friends who are more seriously working on making sure that they have ways of taking independent private sector estimates and, uh, and using them to sort of keep a running check on the official data. Uh, so if it starts happening, we, we will know, but it, it, it's certainly something that's possible.

I'm going to conclude, uh, uh, but not really answering the question. Uh, so someone said, "Would Harry Seldon believe that Trump is the mule?" So the, the re, I pro, I don't think he fits the description at all. Uh, uh, the, uh, but, uh, if people don't know, um, I was a, I was definitely a teenage nerd, very much into Isaac Asimov's Foundation series, and in the Foundation novels, the, uh, mathematical social scientists, uh, uh, through their models, save galactic civilization, and I wanted to be one of those guys. Uh, and this was as close as I could get. Uh, so that's, that's sort of the story of my life. And there is, there is a TV show allegedly based on Foundation. And people tell me it's not bad, but I cannot bring myself to watch it because it bears no resemblance at all to the themes, to, to what, you know, they, they took this really quite, uh, unusual, uh, uh, interesting idea of Isaac Asimov's and turned it into Star Wars. And, uh, it may be a good version, but I can't bring myself to watch it. So, uh, but, uh, yeah, we're, it's, uh, and honestly, the, uh, the, the fundamentally implausible thing about, even though those were great novels by Asimov, the fundamentally implausible thing was to believe that human affairs can ever be predictable enough that your equations are going to be able to let you know what's going to happen 200 years out. I don't even know what's going to happen two months out.

I think that's the end of today's session. Thank you all. [Applause]