President Donald Trump is in the habit of declaring nearly all of his actions, no matter how symbolic or superficial, to be “historic.” But when it comes to the sweeping tariffs he put into place last week, the word fits the bill.
This episode seems to be quite a neat example of the profound differences between a Macroeconomist and a Microeconomist and the hustle game of "prediction" that has run through our public intellectuals.
Larry, a Macroeconomist (at least when the topic is Trump) is religious in his devotion to theoretical dogma and credentials. Like a Mayan priest reading fortune from the movements of the sun and moon, Larry predicts down to the dollar how much his Ryobi leaf blower will increase in price because of Trump's (as yet on hold) new trade policies- nevermind that the value of the tarrifs isn't set yet, nor are any trade deals finalized. Larry just knows! Like Paul Krugman knew Trump would plunge us into a recession in 2016 and Larry Summers et al knew we'd have a "hard landing" in 2022-23. The religion of Macroeconomics is never wrong, except when it is and then you can blame any one of a thousand externalities. If only someone with a PHD had crafted the policy! But not a PHD like the one Peter Navarro has in Economics from Harvard, not that kind! A different PHD that agrees with my theory!
Glenn, on the other hand, has made a brilliant career of using the science side of economics, the Micro-, if you will, to analyze human decision-making in the context of cultural, racial, and social patterns. Glenn is a student of humanity, not a soothsayer. He's a realist, one who uses evidence to show how small patterns that make sense in individual cases might be common to larger groups, and how they can repeat themselves and form trends. The Anatomy of Racial Inequality is a masterpiece of such thinking and I heartily recommend it to anyone who wishes to see how life and culture can be partially explained by math. Its predictions, if it contains any at all, are general. It's the type of work that maps out its limitations first and attempts to show how a social process works in economic terms. This is the opposite sort of goal to a Macroeconomsit's prediction about a trade war. The Microeconomist seeks to provide greater insight into the game that's underway, while the Macroeconomist wants to predict a specific global economic outcome that almost never materializes in the specified time frame.
Another great moment happens when Larry begins ranting about Trump being a Russian spy and Glenn asks for evidence. "I saw a Guardian article once about how Ivanna Trump was a Czech national," is Larry's reply. Case closed! This is all the evidence you need if you've already made up your mind - whether it's for a Macroeconomic prediction or an accusation of High Treason. Ask Paul Krugman and Larry Summers - If those two agree on anything you know there's something rotten going on - history will know it by the name "TDS", whether he tarrifs and threats thereof help us or not.
Dear SJ, Larry Kotlikoff here. Pls note that the tariffs on China are in place. So the leaf blower will cost dramatically more. Whether it's as much as I guessed, and it was a guess, we'll have to see. As for Trump's paused tariffs, he's tariffing every country at 10 percent. That's major and it's not on hold. What's not on hold is the uncertainty that his policy is generated. That will last as long as he's in office. What's not on hold is his threatening and insulting our allies. That has produced a growing boycott of U.S. exports and travel to the U.S. What's not on hold is the Chinese response to our attempt at imposing a trade embargo. As for Trump being an asset/agent of the Russians, read my Substack on the Manchurian Candidate (MC) risk. It doesn't matter whether he was turned or courted as the Guardian article alleges (I presumed based on some actual evidence, although I said, in the podcast, they didn't reveal their sources.) What matters is that he is acting as an MC would act. This is putting your financial future at risk. So, your love of Peter Navarro aside, your finances are at risk. You should take cover for your family's good if not your own.
This was a real disappointment - I listen because you usually bring out the best in your guests (and the scary thing was this was LK at his best). The unhinged ranting (Trump is a traitor? Thanks for calling him out on that one) and grab bag of complaints are embarrassing to this PhD economist (MIT). I didn't vote for Trump in any of the elections he's run in, I think his tariffs are nuts, but after listening to LK, I can see why Trump won and I almost wanted to have voted for him. My take away from LK was "How dare these peasants who lack PhDs have opinions about trade policy." His solutions are ridiculous to anyone with any knowledge of politics. All our problems can be solved with 8-10 bullet point solutions? Really? On what planet? We just need a billionaire and a military man to run on a third party ticket? Has this man never read any public choice theory? Hayek's Road to Serfdom? Does he even hear himself? I'd love to hear you engage with sensible critics and proponents of Trump's tariffs (for the latter, how about having Matt Taibbi, a fellow sub stacker, on? He's not doctrinaire, he's got an interesting argument out today (https://www.racket.news/p/burn-it-all-down ), and he at least makes rational arguments.
Hi Andy, I think Trump is a traitor and so do half of your fellow countrymen at this point. We are not all deranged. I never referred to anyone as a peasant. If you received a PhD from MIT in economics, I suggest you contact the economics faculty and see if you can find a single member who is endorsing Trump's trade policy. Feel free to email me when you do. As for 8-bullet-point solutions to major problems, I suggest your read them before you criticize. The book is called You're Hired. You can download it for free at kotlikoff.net. Unless we fundamentally reform our fiscal and financial and healthcare systems, we will reverse our march toward second-class economics status. And, yes, out-of-control bureaucratic systems can be replace by ones with simple rules. In New Zealand they have one rule, not 22,000 pages of rules, governing their Social Security system. The rule is Reach 65, and receive a check ever month -- the same check as everyone else. I don't favor such a system. I'm just illustrating that we have built bureaucratic institutions that are failing us. But taking a buzzsaw to them is no answer. Best, Larry
I was appalled listening to Larry. His embrace of conspiracy about the loyalty and patriotism of Trump was baffling. The suggestion that Trump’s policies suggest that he is acting like an agent of a foreign power was insane.
Rather than being the source of long term economic growth and prosperity, Buffet argues:
The allegory underscored a key point: Persistent trade deficits are not harmless abstractions — they transfer wealth, sovereignty, and productive capacity abroad.
John, Rather than be appalled, go to my substack and read my column about the trade deficit and why tariffs won't lower it. As I explain, our trade deficit reflects our failure to save and invest in our country. And our failure to save reflects our ongoing policy of taking from young savers and giving to old spenders. Please take a look at kotlikoff.net as well as that column on substack. best, Larry
Larry thank you for your response. I am familiar with the anti tariff pro free trade position. In general, I agree with the economic benefits arising from the free trade. However, the free trade advocates, such as yourself, ignore that economic benefits are not equitably distributed. There is a legitimate debate between the free trade advocates and the current protectionists about whether the economic benefits arising from almost unlimited free trade have been, or are on the whole equitably distributed. However, my concern with your comments was about the not too subtle implication that Trump’s support of tariffs and protectionism is not just wrong but suggests he is somehow either unpatriotic or under the influence of a foreign anti American forces. It seems fair to debate or disagree with Trump’s economic policy but to suggest that he is in essence a traitor is way off base.
I was so excited to listen to this podcast to learn about tariffs and economic policy. I wanted to understand why they were wrongheaded.
What a let down.
Instead, I got a tsunami of emotional, ad hominem attacks with a wildly disconnected supercilious polemic that came across like a petulant child throwing a tantrum.
Then it got WORSE when Larry drifts into BlueAnon territory and spews a bunch of tabloid nonsense that was tantamount to nothing but angry, paranoid opinions that I could hear at my local Starbucks next to any elite campus.
“Deranged,” “moron,” “stupid,” “lunatic,” “If you have a brain,”… this is from a respected PhD economist?
What a bizarre and sad interview. Glenn tired to get him on track, but it was futile. And to return the ad hominem attacks, Larry, if you’re going to turn into a political commentator, PLEASE go get a speaking coach. Listening to his start/stop/incomplete-sentence speaking style was downright painful.
Hi Maria, I'll take you perspective into account. I think Elon Musk used the term moron to describe the tariff policy maker, Navarro, and, by extension, the President. Did he throw a tantrum? I think these words apply to this administration. But that's besides the point. You personally should take steps to protect your finances from these policies and policymakers. best, Larry
Larry doesn't mention the reason it's so much more expensive to produce here vs China et al. Crushing taxes and regulations. We have offshored our pollution as well as manufacturing. Low level jobs are a pathway to better jobs.
Google comparative advantage. That's why it's so expensive to produce here relative to China and nothing Trump is doing will change that reality. best, Larry
Dr. Loury, the second your guest started quoting The Guardian on Trump, even if later he equivocated...........sigh. I had hoped he would not have Trump Derangement Syndrome.
Pls read my column on the Manchurian Candidate. Whether Trump is an agent or is acting on his own, he's already done permanent damage to our country, along with a few positive things, like sealing the border. It's on my substack. best, Larry
I have Bloomberg on for 3 hours every morning & 1-2 hours of CNBC for news, especially financial, and get a variety of more articulate & respected ECOMOMISTS I don't really follow the analysts as I find they are usually talking their book). I also listen to John Cochran out of Hoover & others on Youtube when I can. Yes, economics is complicated and there are several different schools of thought. Not having a financial background, I just try to make sense of available info and found this guy to be so out of left field. I'm not a Trump supporter as such but lean more toward this side than the Dems as I find most lean too socialist for my taste. My biggest issue with the administration is that I think they don't do a good job explaining the rationale. I have heard some financial & political pundits try to give some pretty good possible explanations of some policies, but even they say they aren't really sure of the "thinking". One example I've heard from a couple on the tariffs is the the high amounts now charged to several countries is that they are actually proxies for China. China either manufactures at home & then ships almost finished to another country or builds & funds manufacturing in these places (especially poorer countries) to avoid existing tarifs &/or restrictions here, the EU or other places.
Also as far as the stock market is concerned, most just say unless you really need the cash for the next 12-18 month, just hold & even make little additions when down. This is not structural downturn like the financial crisis, but more like other episodes of recession that recovered and when up in a relatively short time. Hopefully we all have diverse portfolios with some bond & commodities. Hang in!! The sun WILL come up tomorrow. (Didn't want to use the "light at the end..." as we know what that could mean.
Dear Nancy, We have 100 years of S&P data. That provides only 3 independent 30-year observations on the market's cumulative performance over 30 years. They are all good. The 30-year cumulative performance on the Japanese market, starting in 1989, was awful. In short, there is nothing in economics or economic history to support your optimism. I advise you to play it safe. The market has miles to fall before it sleeps. Just the full trade war by itself is enough to produce a major recession and a prolonged decline in U.S. equity values. best, Larry
I'm obviously not an economist and would caveat my own thoughts as the observations of a layman, but I was intrigued to hear Larry defend what seemed like orthodox neoliberal economic theory, the idea that countries should focus on their areas of comparative advantage while engaging in relatively free trade in order to maximize global output. I believe this notion was most succinctly articulated by the economist David Ricardo.
Larry pointed out that the era of industrialization had passed America by and that other countries could produce things at far lower cost than the United States. I wonder though if this conflates the sort of goods like Nike shoes that are increasingly being made in places like Vietnam because of cheap labor with the high tech manufacturing that both Trump and Biden have been trying to bring back to American shores.
Trump seems to me to espouse what might be referred to as Critical Trade Theory, the notion that any trade deficit with another country is ipso facto evidence of malfeasance. To the contrary, it seems that our trade deficit with poor countries like Lesotho or Vietnam may in fact make a lot of sense and should hardly be considered bad in the grand scheme of things. Although Trump rages against trade deficits in general, I wonder if his ire isn't primarily directed towards the countries of East Asia and certain European nations like Germany that sell us a lot of cars and high tech products. He's on multiple occasions accused Taiwan of stealing America's chip industry, something very different from the kind of low tech, cheap labor that poor countries sell to the United States.
Something like 90% of EV batteries and 100% of advanced semiconductors are made in East Asia today. The countries of East Asia certainly appear to have a comparative advantage in high tech manufacturing. The Biden and Trump administrations have identified this as a national security threat, in particular the fact that TSMC manufactures over 90% of the world's most advanced semiconductors. If China were to take Taiwan and gain control of TSMC fabs, it would almost certainly be highly deleterious to American tech in general, with significant resulting geopolitical implications. Yet, as numerous outlets have reported, TSMC's attempts to open up fabs in Phoenix have run into various obstacles. It appears that reshoring advanced manufacturing in America is at best a tedious and time consuming effort and not something that can be quickly accomplished. In Europe, an analogous effort to create a battery behemoth capable of reducing the continent's demand for East Asian battery technology resulted in Northvolt recently filing for bankruptcy.
I'm curious how American economists like Larry view the trade off between economic efficiency and national security. Neoliberal notions of comparative advantage certainly make a lot of sense when it comes to optimizing global output, yet I wonder given 21st century geopolitical realities if America can afford to cede high tech manufacturing to China and the other countries of East Asia. At a minimum it would seem to require an acceptance that the era of American hegemony is at an end. But the more relevant issue is whether or not America can in fact reshore high tech manufacturing even if it wanted to.
The entire Trump economic playbook is essentially a gambit to shore up American preeminence vis-a-vis China in the geopolitical contest over the commanding heights of the 21st century.
HI Yan, I think we need to protect industries that are vital to national security. But you don't do that by inviting China to embargo rare earth minerals that are critical to the defense industry. This is why I alluded to Trump not acting on behalf of our country. And this is just one of a very long list of examples. best, Larry
As an aside on historical economic thought, the leading American economist in the mid 19th century was Henry Carey, who was a strong proponent on protective tariffs. He was Lincoln's economic advisor. Many historians have said that the US was lucky that Lincoln listened to Carey instead of listening to British economists. US economic growth increased after the tariffs were introduced, and there were big price decreases (the opposite of what economic theory would predict) in the 2nd half of the 19th century.
Hi Bruce, The infant industry literature makes a reasonable case for tariffs for start up industries which have economies of scale. But that's not our situation. We don't have the counterfactual history to examine, so we can't say whether Carey was right or wrong. best, Larry
Kotlikoff expressed outrage that no degreed economists have input into Trump's policies. Okay, fair enough. Then a little later, he refers to Social Security as a Ponzi scheme. Well, Arthur Altmeyer, FDR's "Mr. Social Security" (FDR gave him that nickname) had a PhD in economics.
I think now's the time for a Democrat to condescendingly tell me, "It's complicated."
Social Security takes from the young and gives to the old. It then depends on the next set of young to pay for the current set of young. Yes, this sounds like a Ponzi scheme. On this one, I agree with Musk. best, Larry
Exactly in what sense isn't Social Security a Ponzi scheme? I'm paying into a system. That money immediately goes out to pay beneficiaries. The only way I'll get money out of the system is for future people to pay in.
We are a *long* way from there being any connection between "I pay in" and "I take out" beyond the expectation that future generations will pay in.
That seems to be the definition of a Ponzi scheme.
It's fairly easy to fix Social Security with minor adjustments, but there is currently a lack of political will. When FDR set this up, there was no way to accurately forecast longevity, how many children people would have, etc. 100 years in the future. Sensible changes would (1) increase the income cutoff so that higher income people had to contribute similar percentages as middle income people, (2) increase the retirement age because people live longer, etc. Dean Baker (seem the CEPR website) has done a good study on this.
As an aside, I have done very well on getting returns for my 401K/Rollover IRA, and my approach is much different than what Larry seems to be advocating.
I also disagree with some of Larry's comments on the federal health agencies. As Vinay Prasad has said those agencies got almost everything wrong on Covid-19 policy, and it seems to be because of incompetence. Jay Bhattacharya and Mart Makary have made similar comments, but they are more tactful than Prasad.
Larry seems like a smart guy, but some of his ideas seem off the wall.
Social Security has a $63 trillion unfunded liability. That's the Trustees Report's latest figure. Pls read You're Hired at kotlikoff.net. It's a free download book. Yes, we can continue to patch up this dysfunctional system, but it will always be too little too late. Operating on half a tumor and having the patient return in a year to operate on half of an even larger tumor is no solution. We need to retire the old and set up a modern new system. best, Larry
People like to exaggerate Social Security problems, often linking it to Medicare for that purpose. They say it will soon collapse, but that really means benefits would be cut by 25%. Not a good thing, but hardly a collapse.
It is ironic that the way the GPI is calculated (hedonic adjustments, substitution, etc.) has already had the effect of cutting Social Security in real dollars, perhaps by as much as that aforementioned 25%.
Upping the FICA cap seems pretty painless to me (I think the expansion should be at a reduced rate, since those high earners will get next to nothing for those additional dollars). Also modifications for increased life expectancy are logical. Those never gets anywhere because of people screaming "raise your taxes" or "take away your social security."
I bought Kotlikoff's book (and read it) after an earlier appearance on Glenn's show. It offered sound and logical advice, so I was fairly shocked at his commentary this time.
The economy was not free-trade before Trump started. If the rest of the world doesn't want to play by free-trade rules, then we need to protect ourselves.
The world might be the closest to free trade it ever has once the dust settles on these trade negoitations.
Madagascar is a poor country that doesn't import much from the US because it is poor. We, as a wealthy country, buy a massive amount of vanilla from Madagascar, because much of the world's vanilla is grown and produced there. It is not the US government of course, but US businesses and consumers who are buying the vanilla.
In what way would you say Madagascar is cheating us? And how exactly does forcing US consumers and businesses to either pay more for vanilla from Madagascar or do without or rely on inferior substitutes make us better off?
No one is saying we shouldn't import vanilla from Madagascar. If anything, the Trump admin is suggesting a tarrif to reflect access to the US market which you admit is massive for Malagasy vanilla. A tarrif which exists in the EU and elsewhere on the same Malagasy vanilla.
The reason Madagascar doesn't buy equipment or electronics from us is the same reason no one else buys that stuff from us - China makes those things with slaves for 1/1000th of the price which means we aren't competitive.
I certainly hope you are right. Just this morning I logged into my retirement account and reduced the percentage of stock exposure in my accounts. Although the market has always fluctuated, this time it feels significantly more ominous.
This episode seems to be quite a neat example of the profound differences between a Macroeconomist and a Microeconomist and the hustle game of "prediction" that has run through our public intellectuals.
Larry, a Macroeconomist (at least when the topic is Trump) is religious in his devotion to theoretical dogma and credentials. Like a Mayan priest reading fortune from the movements of the sun and moon, Larry predicts down to the dollar how much his Ryobi leaf blower will increase in price because of Trump's (as yet on hold) new trade policies- nevermind that the value of the tarrifs isn't set yet, nor are any trade deals finalized. Larry just knows! Like Paul Krugman knew Trump would plunge us into a recession in 2016 and Larry Summers et al knew we'd have a "hard landing" in 2022-23. The religion of Macroeconomics is never wrong, except when it is and then you can blame any one of a thousand externalities. If only someone with a PHD had crafted the policy! But not a PHD like the one Peter Navarro has in Economics from Harvard, not that kind! A different PHD that agrees with my theory!
Glenn, on the other hand, has made a brilliant career of using the science side of economics, the Micro-, if you will, to analyze human decision-making in the context of cultural, racial, and social patterns. Glenn is a student of humanity, not a soothsayer. He's a realist, one who uses evidence to show how small patterns that make sense in individual cases might be common to larger groups, and how they can repeat themselves and form trends. The Anatomy of Racial Inequality is a masterpiece of such thinking and I heartily recommend it to anyone who wishes to see how life and culture can be partially explained by math. Its predictions, if it contains any at all, are general. It's the type of work that maps out its limitations first and attempts to show how a social process works in economic terms. This is the opposite sort of goal to a Macroeconomsit's prediction about a trade war. The Microeconomist seeks to provide greater insight into the game that's underway, while the Macroeconomist wants to predict a specific global economic outcome that almost never materializes in the specified time frame.
Another great moment happens when Larry begins ranting about Trump being a Russian spy and Glenn asks for evidence. "I saw a Guardian article once about how Ivanna Trump was a Czech national," is Larry's reply. Case closed! This is all the evidence you need if you've already made up your mind - whether it's for a Macroeconomic prediction or an accusation of High Treason. Ask Paul Krugman and Larry Summers - If those two agree on anything you know there's something rotten going on - history will know it by the name "TDS", whether he tarrifs and threats thereof help us or not.
Dear SJ, Larry Kotlikoff here. Pls note that the tariffs on China are in place. So the leaf blower will cost dramatically more. Whether it's as much as I guessed, and it was a guess, we'll have to see. As for Trump's paused tariffs, he's tariffing every country at 10 percent. That's major and it's not on hold. What's not on hold is the uncertainty that his policy is generated. That will last as long as he's in office. What's not on hold is his threatening and insulting our allies. That has produced a growing boycott of U.S. exports and travel to the U.S. What's not on hold is the Chinese response to our attempt at imposing a trade embargo. As for Trump being an asset/agent of the Russians, read my Substack on the Manchurian Candidate (MC) risk. It doesn't matter whether he was turned or courted as the Guardian article alleges (I presumed based on some actual evidence, although I said, in the podcast, they didn't reveal their sources.) What matters is that he is acting as an MC would act. This is putting your financial future at risk. So, your love of Peter Navarro aside, your finances are at risk. You should take cover for your family's good if not your own.
Thanks for the reply, Larry. I'll be hoping for the best but your warning is judicious and I appreciate your concern.
This was a real disappointment - I listen because you usually bring out the best in your guests (and the scary thing was this was LK at his best). The unhinged ranting (Trump is a traitor? Thanks for calling him out on that one) and grab bag of complaints are embarrassing to this PhD economist (MIT). I didn't vote for Trump in any of the elections he's run in, I think his tariffs are nuts, but after listening to LK, I can see why Trump won and I almost wanted to have voted for him. My take away from LK was "How dare these peasants who lack PhDs have opinions about trade policy." His solutions are ridiculous to anyone with any knowledge of politics. All our problems can be solved with 8-10 bullet point solutions? Really? On what planet? We just need a billionaire and a military man to run on a third party ticket? Has this man never read any public choice theory? Hayek's Road to Serfdom? Does he even hear himself? I'd love to hear you engage with sensible critics and proponents of Trump's tariffs (for the latter, how about having Matt Taibbi, a fellow sub stacker, on? He's not doctrinaire, he's got an interesting argument out today (https://www.racket.news/p/burn-it-all-down ), and he at least makes rational arguments.
Hi Andy, I think Trump is a traitor and so do half of your fellow countrymen at this point. We are not all deranged. I never referred to anyone as a peasant. If you received a PhD from MIT in economics, I suggest you contact the economics faculty and see if you can find a single member who is endorsing Trump's trade policy. Feel free to email me when you do. As for 8-bullet-point solutions to major problems, I suggest your read them before you criticize. The book is called You're Hired. You can download it for free at kotlikoff.net. Unless we fundamentally reform our fiscal and financial and healthcare systems, we will reverse our march toward second-class economics status. And, yes, out-of-control bureaucratic systems can be replace by ones with simple rules. In New Zealand they have one rule, not 22,000 pages of rules, governing their Social Security system. The rule is Reach 65, and receive a check ever month -- the same check as everyone else. I don't favor such a system. I'm just illustrating that we have built bureaucratic institutions that are failing us. But taking a buzzsaw to them is no answer. Best, Larry
I was appalled listening to Larry. His embrace of conspiracy about the loyalty and patriotism of Trump was baffling. The suggestion that Trump’s policies suggest that he is acting like an agent of a foreign power was insane.
What he failed to discussed was the actual policies. In particular, is the neoliberal distain for trade imbalances valid. Warren Buffet in a recent article (https://www.barchart.com/story/news/31792341/warren-buffetts-dire-2003-warning-to-the-u-s-embodies-trumps-aggressive-trade-policy-americas-growing-trade-deficit-is-selling-the-nation-out-from-under-us#:~:text=In%202003%2C%20Warren%20Buffett%20%E2%80%94%20revered,nation%20out%20from%20under%20us.%E2%80%9D) questions the neoliberal consensus on trade imbalances.
Rather than being the source of long term economic growth and prosperity, Buffet argues:
The allegory underscored a key point: Persistent trade deficits are not harmless abstractions — they transfer wealth, sovereignty, and productive capacity abroad.
John, Rather than be appalled, go to my substack and read my column about the trade deficit and why tariffs won't lower it. As I explain, our trade deficit reflects our failure to save and invest in our country. And our failure to save reflects our ongoing policy of taking from young savers and giving to old spenders. Please take a look at kotlikoff.net as well as that column on substack. best, Larry
Larry thank you for your response. I am familiar with the anti tariff pro free trade position. In general, I agree with the economic benefits arising from the free trade. However, the free trade advocates, such as yourself, ignore that economic benefits are not equitably distributed. There is a legitimate debate between the free trade advocates and the current protectionists about whether the economic benefits arising from almost unlimited free trade have been, or are on the whole equitably distributed. However, my concern with your comments was about the not too subtle implication that Trump’s support of tariffs and protectionism is not just wrong but suggests he is somehow either unpatriotic or under the influence of a foreign anti American forces. It seems fair to debate or disagree with Trump’s economic policy but to suggest that he is in essence a traitor is way off base.
I was so excited to listen to this podcast to learn about tariffs and economic policy. I wanted to understand why they were wrongheaded.
What a let down.
Instead, I got a tsunami of emotional, ad hominem attacks with a wildly disconnected supercilious polemic that came across like a petulant child throwing a tantrum.
Then it got WORSE when Larry drifts into BlueAnon territory and spews a bunch of tabloid nonsense that was tantamount to nothing but angry, paranoid opinions that I could hear at my local Starbucks next to any elite campus.
“Deranged,” “moron,” “stupid,” “lunatic,” “If you have a brain,”… this is from a respected PhD economist?
What a bizarre and sad interview. Glenn tired to get him on track, but it was futile. And to return the ad hominem attacks, Larry, if you’re going to turn into a political commentator, PLEASE go get a speaking coach. Listening to his start/stop/incomplete-sentence speaking style was downright painful.
Hi Maria, I'll take you perspective into account. I think Elon Musk used the term moron to describe the tariff policy maker, Navarro, and, by extension, the President. Did he throw a tantrum? I think these words apply to this administration. But that's besides the point. You personally should take steps to protect your finances from these policies and policymakers. best, Larry
Ron Vara was the economist most influential in the formulation of the current tariffs?
He kept using the word rabid, which I think describes his point of view best.
Larry doesn't mention the reason it's so much more expensive to produce here vs China et al. Crushing taxes and regulations. We have offshored our pollution as well as manufacturing. Low level jobs are a pathway to better jobs.
Google comparative advantage. That's why it's so expensive to produce here relative to China and nothing Trump is doing will change that reality. best, Larry
Dr. Loury, the second your guest started quoting The Guardian on Trump, even if later he equivocated...........sigh. I had hoped he would not have Trump Derangement Syndrome.
I didn't quote the Guardian. I said they have an article you can read. I said they didn't provide any sources for their allegations. best, Larry
First part of this I was all like "Go Larry, get em'!"
Then Larry starts talking about Trump being a soviet agent and I wanted to crawl into my couch to escape...
Pls read my column on the Manchurian Candidate. Whether Trump is an agent or is acting on his own, he's already done permanent damage to our country, along with a few positive things, like sealing the border. It's on my substack. best, Larry
I have Bloomberg on for 3 hours every morning & 1-2 hours of CNBC for news, especially financial, and get a variety of more articulate & respected ECOMOMISTS I don't really follow the analysts as I find they are usually talking their book). I also listen to John Cochran out of Hoover & others on Youtube when I can. Yes, economics is complicated and there are several different schools of thought. Not having a financial background, I just try to make sense of available info and found this guy to be so out of left field. I'm not a Trump supporter as such but lean more toward this side than the Dems as I find most lean too socialist for my taste. My biggest issue with the administration is that I think they don't do a good job explaining the rationale. I have heard some financial & political pundits try to give some pretty good possible explanations of some policies, but even they say they aren't really sure of the "thinking". One example I've heard from a couple on the tariffs is the the high amounts now charged to several countries is that they are actually proxies for China. China either manufactures at home & then ships almost finished to another country or builds & funds manufacturing in these places (especially poorer countries) to avoid existing tarifs &/or restrictions here, the EU or other places.
Also as far as the stock market is concerned, most just say unless you really need the cash for the next 12-18 month, just hold & even make little additions when down. This is not structural downturn like the financial crisis, but more like other episodes of recession that recovered and when up in a relatively short time. Hopefully we all have diverse portfolios with some bond & commodities. Hang in!! The sun WILL come up tomorrow. (Didn't want to use the "light at the end..." as we know what that could mean.
Dear Nancy, We have 100 years of S&P data. That provides only 3 independent 30-year observations on the market's cumulative performance over 30 years. They are all good. The 30-year cumulative performance on the Japanese market, starting in 1989, was awful. In short, there is nothing in economics or economic history to support your optimism. I advise you to play it safe. The market has miles to fall before it sleeps. Just the full trade war by itself is enough to produce a major recession and a prolonged decline in U.S. equity values. best, Larry
I'm obviously not an economist and would caveat my own thoughts as the observations of a layman, but I was intrigued to hear Larry defend what seemed like orthodox neoliberal economic theory, the idea that countries should focus on their areas of comparative advantage while engaging in relatively free trade in order to maximize global output. I believe this notion was most succinctly articulated by the economist David Ricardo.
Larry pointed out that the era of industrialization had passed America by and that other countries could produce things at far lower cost than the United States. I wonder though if this conflates the sort of goods like Nike shoes that are increasingly being made in places like Vietnam because of cheap labor with the high tech manufacturing that both Trump and Biden have been trying to bring back to American shores.
Trump seems to me to espouse what might be referred to as Critical Trade Theory, the notion that any trade deficit with another country is ipso facto evidence of malfeasance. To the contrary, it seems that our trade deficit with poor countries like Lesotho or Vietnam may in fact make a lot of sense and should hardly be considered bad in the grand scheme of things. Although Trump rages against trade deficits in general, I wonder if his ire isn't primarily directed towards the countries of East Asia and certain European nations like Germany that sell us a lot of cars and high tech products. He's on multiple occasions accused Taiwan of stealing America's chip industry, something very different from the kind of low tech, cheap labor that poor countries sell to the United States.
Something like 90% of EV batteries and 100% of advanced semiconductors are made in East Asia today. The countries of East Asia certainly appear to have a comparative advantage in high tech manufacturing. The Biden and Trump administrations have identified this as a national security threat, in particular the fact that TSMC manufactures over 90% of the world's most advanced semiconductors. If China were to take Taiwan and gain control of TSMC fabs, it would almost certainly be highly deleterious to American tech in general, with significant resulting geopolitical implications. Yet, as numerous outlets have reported, TSMC's attempts to open up fabs in Phoenix have run into various obstacles. It appears that reshoring advanced manufacturing in America is at best a tedious and time consuming effort and not something that can be quickly accomplished. In Europe, an analogous effort to create a battery behemoth capable of reducing the continent's demand for East Asian battery technology resulted in Northvolt recently filing for bankruptcy.
https://restofworld.org/2024/tsmc-arizona-expansion/
https://www.economist.com/business/2024/11/28/after-northvolts-failure-who-will-make-europes-ev-batteries
I'm curious how American economists like Larry view the trade off between economic efficiency and national security. Neoliberal notions of comparative advantage certainly make a lot of sense when it comes to optimizing global output, yet I wonder given 21st century geopolitical realities if America can afford to cede high tech manufacturing to China and the other countries of East Asia. At a minimum it would seem to require an acceptance that the era of American hegemony is at an end. But the more relevant issue is whether or not America can in fact reshore high tech manufacturing even if it wanted to.
The entire Trump economic playbook is essentially a gambit to shore up American preeminence vis-a-vis China in the geopolitical contest over the commanding heights of the 21st century.
HI Yan, I think we need to protect industries that are vital to national security. But you don't do that by inviting China to embargo rare earth minerals that are critical to the defense industry. This is why I alluded to Trump not acting on behalf of our country. And this is just one of a very long list of examples. best, Larry
Good comments.
As an aside on historical economic thought, the leading American economist in the mid 19th century was Henry Carey, who was a strong proponent on protective tariffs. He was Lincoln's economic advisor. Many historians have said that the US was lucky that Lincoln listened to Carey instead of listening to British economists. US economic growth increased after the tariffs were introduced, and there were big price decreases (the opposite of what economic theory would predict) in the 2nd half of the 19th century.
https://en.wikipedia.org/wiki/Henry_Charles_Carey
Hi Bruce, The infant industry literature makes a reasonable case for tariffs for start up industries which have economies of scale. But that's not our situation. We don't have the counterfactual history to examine, so we can't say whether Carey was right or wrong. best, Larry
Isn't this what you posted on Q&A. If so, like it even more now than then.
My diagnosis: TDS.
Kotlikoff expressed outrage that no degreed economists have input into Trump's policies. Okay, fair enough. Then a little later, he refers to Social Security as a Ponzi scheme. Well, Arthur Altmeyer, FDR's "Mr. Social Security" (FDR gave him that nickname) had a PhD in economics.
I think now's the time for a Democrat to condescendingly tell me, "It's complicated."
Social Security takes from the young and gives to the old. It then depends on the next set of young to pay for the current set of young. Yes, this sounds like a Ponzi scheme. On this one, I agree with Musk. best, Larry
Exactly in what sense isn't Social Security a Ponzi scheme? I'm paying into a system. That money immediately goes out to pay beneficiaries. The only way I'll get money out of the system is for future people to pay in.
We are a *long* way from there being any connection between "I pay in" and "I take out" beyond the expectation that future generations will pay in.
That seems to be the definition of a Ponzi scheme.
It's fairly easy to fix Social Security with minor adjustments, but there is currently a lack of political will. When FDR set this up, there was no way to accurately forecast longevity, how many children people would have, etc. 100 years in the future. Sensible changes would (1) increase the income cutoff so that higher income people had to contribute similar percentages as middle income people, (2) increase the retirement age because people live longer, etc. Dean Baker (seem the CEPR website) has done a good study on this.
As an aside, I have done very well on getting returns for my 401K/Rollover IRA, and my approach is much different than what Larry seems to be advocating.
I also disagree with some of Larry's comments on the federal health agencies. As Vinay Prasad has said those agencies got almost everything wrong on Covid-19 policy, and it seems to be because of incompetence. Jay Bhattacharya and Mart Makary have made similar comments, but they are more tactful than Prasad.
Larry seems like a smart guy, but some of his ideas seem off the wall.
Social Security has a $63 trillion unfunded liability. That's the Trustees Report's latest figure. Pls read You're Hired at kotlikoff.net. It's a free download book. Yes, we can continue to patch up this dysfunctional system, but it will always be too little too late. Operating on half a tumor and having the patient return in a year to operate on half of an even larger tumor is no solution. We need to retire the old and set up a modern new system. best, Larry
People like to exaggerate Social Security problems, often linking it to Medicare for that purpose. They say it will soon collapse, but that really means benefits would be cut by 25%. Not a good thing, but hardly a collapse.
It is ironic that the way the GPI is calculated (hedonic adjustments, substitution, etc.) has already had the effect of cutting Social Security in real dollars, perhaps by as much as that aforementioned 25%.
Upping the FICA cap seems pretty painless to me (I think the expansion should be at a reduced rate, since those high earners will get next to nothing for those additional dollars). Also modifications for increased life expectancy are logical. Those never gets anywhere because of people screaming "raise your taxes" or "take away your social security."
I bought Kotlikoff's book (and read it) after an earlier appearance on Glenn's show. It offered sound and logical advice, so I was fairly shocked at his commentary this time.
This was an insightful discussion and very much appreciated at this financially unsteady time.
Thank you.
Kamala Harris was the best option.
The economy was not free-trade before Trump started. If the rest of the world doesn't want to play by free-trade rules, then we need to protect ourselves.
The world might be the closest to free trade it ever has once the dust settles on these trade negoitations.
Madagascar is a poor country that doesn't import much from the US because it is poor. We, as a wealthy country, buy a massive amount of vanilla from Madagascar, because much of the world's vanilla is grown and produced there. It is not the US government of course, but US businesses and consumers who are buying the vanilla.
In what way would you say Madagascar is cheating us? And how exactly does forcing US consumers and businesses to either pay more for vanilla from Madagascar or do without or rely on inferior substitutes make us better off?
No one is saying we shouldn't import vanilla from Madagascar. If anything, the Trump admin is suggesting a tarrif to reflect access to the US market which you admit is massive for Malagasy vanilla. A tarrif which exists in the EU and elsewhere on the same Malagasy vanilla.
The reason Madagascar doesn't buy equipment or electronics from us is the same reason no one else buys that stuff from us - China makes those things with slaves for 1/1000th of the price which means we aren't competitive.
I certainly hope you are right. Just this morning I logged into my retirement account and reduced the percentage of stock exposure in my accounts. Although the market has always fluctuated, this time it feels significantly more ominous.
So, you sold the dip?
Yep, but I know I probably shouldn't have.