Aren’t we just in a MAGA Reactionary Cultural Revolution: except, unless there’s a whiff of pedophilia, billionaires are spared — no re-education required. Basically, stupidity and superstition are exalted, knowledge and science trashed.
The only metric to keep an eye on is wage growth for the bottom 40%, the rest in my view is noise (politically speaking). The bottom 40% is where the always unhappy swing voters reside.
Trump won those making under 100K, a remarkable achievement for a GOP candidate made possible by two big Biden failures:
1. Biden's migration surge really did inconvenience the bottom 40% as they competed for scarce resources.
2. Biden's blue collar focused construction jobs had no where near the effect needed to counteract the inflation pain from 2022-2023.
Now Trump has pushed out a mixed bag of policies that affect the bottom 40%
- Net migration is zero or negative: At constant GDP, this should put upward pressure on wages for the bottom 40% but GDP is likely to be lower. So hard to say exactly how it will work out. My guess is jobs favoring men (data center construction) will see wage gains as migrant men who compete for these jobs are removed from the equation. So on net a positive.
- Tariffs: The size of the economy will be smaller and a number of small businesses will go bust if tariffs persist as seems likely. Meanwhile prices of goods will be higher. On net a negative for the bottom 40%. There are some models that suggest tariffs, even at liberation day levels would be a mere ripple as services dominate the economy. So only time will tell.
- Medicaid and SNAP cuts: I am not sure how politically salient these are. This may turn out to be a mirage like the over turning of Roe ended up being as states adjust to cushion the blow and the salience of the issue is attenuated as a result.
- No tax on tips/overtime: This is peanuts in the larger scheme of things. But if the stock market continues to do well and props up spending from the top 20%, this may be a slight positive.
I know the polls don't look good right now for Trump on the economy but 15 months is a long time in the political-economy. I wouldn't be totally surprised if the (data center boom + no migration) leaves the Trump-Biden-Trump voters feeling vindicated by November 2026.
On the other hand if even 10% of what the AI CEOs are predicting comes to pass then the swing voter in 2026 maybe a jobless new college grad and their worried parents. This is where perhaps the opportunity lies for Dems.
I know you already know this, but if the *only* thing that matters is INCOME GO UP for bottom 40%, that's really crappy, because there are tons of ways Trump can screw up/has been screwing up our country that don't show up in lower middle class income growth. Examples:
1. Destroying non-profit scientific research will have repercussions both for the economy (I read that each $1 of NIH funding results in $2.3 of economic activity) and for human well-being (that NIH-funded researcher who might have developed a cure for Alzheimer's is gone bye-bye)
2. Do you live in an area prone to hurricanes, wildfires, flash floods? Whoopsie, NOAA is gone bye-bye and so is FEMA, good luck/thoughts/prayers the next time a natural disaster strikes
3. Your elderly mom's/grandma's nursing home was staffed 80% by illegal immigrants who have been arrested/self-deported rather than risk Alligator Alcatraz, now the nursing home has to jack up their rates to attract enough citizen workers who want high(er) wages for giving sponge baths and diaper changes to incontinent dementia patients
4. The US going from the Leader of the Free World to a laughingstock among the world's small-l liberal democracies can't be good for us long-term, no matter what the America First-ers say; that's not even bringing up extreme tail risks, like, historians in 2050 will talk about how Trump crapping on NATO was a warning sign for the unraveling of the post-WWII world order that led to the breakout of WWIII in 2039
5. Just, the enshittification/kakistocracy/stocking the Cabinet with yes-men and -women who are some combination of clueless, extremists, and douchebags is bad on principle, even if you can't point out a specific way in which this leads to lower wages for the bottom 40%.
6. How prepared are we for the next pandemic? [laughs while sobbing] What if the next pandemic is something way more deadly than COVID-19, like, a super-transmissible version of Ebola? [laughs while sobbing harder]
7. Trump is busy screwing over the EPA and gutting Biden-era investments in clean energy; enjoy higher levels of greenhouse gases and atmospheric and water pollutants!
As I said in my post I am talking purely about political relevance.
I wear my Trump Derangement Syndrome (TDS) label as proudly as anyone one but I suspect that any number of terrible things Trump does to groups who are not swing voters will have little political relevance. The researchers getting their research cut never voted Trump anyway or lived in deep blue districts where their Trump votes mattered little. Trump doesn't care if CA voters suffer under Medicaid cuts. Its politically irrelevant to him. The same goes for the rest.
So the only thing that matters is if those that explicitly switched their votes from Biden in 2020 to Trump in 2024 regret their vote and either reverse course or stay home in 2026, 2028. That is what I will be looking for and because I don't trust opinion polling, I will use income growth among the low income cohort as a more accurate gauge of political reality.
How electorally relevant are the bottom 40% of the income distribution? You suggest they are disproportionately represented among swing voters, but I think they’re even more disproportionately represented among non-voters. I don’t know how that nets out.
The main point is that among the actual voters who voted, there was a massive swing in the 30K - 100K cohort from Biden to Trump. The 30K - 50K cohort represents 16% of actual voters and these are voters making well under median wage. The bottom 40% of voters extends well into the 50K-100K cohort which only increases the electoral importance of the cohort.
It actually doesn’t seem to directly apply to the Covid vaccines (though he may have separate actions where he is refusing to approve updated versions of those?). It seems to be actually about a contract to develop new mRNA based flu vaccines that could be updated faster (and perhaps more broadly targeted) than the current egg-based system. (The article had some weirdness about “whole cell” vaccines, which obviously doesn’t make sense for viruses, that don’t have cells.)
The NYT article looks like it’s a rejection of mRNA vaccines in general. This will hamper plans to develop mRNA vaccines against pancreatic and colon cancer, among other things.
Yeah the long term damage from research cuts will be hard to reverse. We have to hope that Europe will pick up some of the slack created by this insanity.
Matt writes, "In the first quarter, a lot of companies were importing stuff they didn’t actually use or sell in order to get ahead of the tariffs, and this showed up as GDP shrinking."
I thought that subtracting imports from the GDP was just an accounting identity and shouldn't be used to characterize the strength of the economy, but it's really hard to look at negative 0.5 percent in the number and not say the GDP was shrinking.
And if Matt falls for that trap (?) then there's a real problem with how even those in the know can transmit information about how the economy is doing to the rest of us.
Just average over the two quarters. Looks like the sign of the errors caused by outsized front running is reversed from Q1 and Q2. So we don't need to worry about accounting identities not being respected.
Fair enough, there was a whole article by Noah Smith on this very point, the idea being that the accounting identity seems not to be perfectly respected in the way our GDP is reported. But regardless, since we expect any leakage in one direction to correct itself in the opposite direction the next quarter, by averaging we don't have to worry about it.
One thing that confuses me about the tariffs is that everyone seems to take it for granted that the courts will uphold them, even though they seem to be obviously illegal with almost no defense beyond that Trump wants them, and both the Court of International Trade and the U.S. Court of Appeals for the Federal Circuit have either ruled against them or seem likely to rule against them. The Supreme Court has been deferential to Trump, but giving the president the ability to raise taxes on a whim is really not the sort of thing that would make Republican justices inclined to give Trump the benefit of the doubt. Obviously potentially refunding billions of dollars would be massive news and would change the political environment significantly, but nobody seems to be talking about this, even though it is certainly very possible.
Now if the GOP controlled congress actually “passes” the tariff then it’s all legal right? I thought it’s unconstitutional because he is usurping the prerogative of congress.
The Supreme Court is not going to let one of Trump's signature policies founder on minor questions of constitutitionality. It is just not going to happen.
It's a major question and this is not an issue like gun rights or voting rights where they'd be inclined to give Republicans the benefit of the doubt. I can guarantee that all six Republicans are very supportive of free trade in general and I think there's a very good chance that carving out this massive expansion of presidential power will be a bridge too far for at least two of them.
I think the Supreme Court is stuck because if they strike it down and Trump ignores them....then what's the next move? At least that's my read of some of their recent decisions. I don't think they are (all) actually Trump enablers but I think they somewhat accurately judge the political climate that they will lose more legitimacy (at least in the short run) by opposing Trump than finding excuses to let it slide.
That feels like wishful thinking. Thomas and Scalito are all in on 'Trump as king and this is good'. Gorsuch and Kavanaugh are Team Republican(r) and won't do anything to damage their party's programme. John Roberts might have qualms, but he does not want the court to get away from him. Coney Barrett's allegiances are the least clear, but even if she comes down against the tariffs, it's not enough.
I agree on Thomas and Alito (although Thomas is idiosyncratic), but Gorsuch in particular has been willing to challenge Republican orthodoxy, as has Roberts.
I'm not saying the Court WILL rule a certain way, but it seems short-sighted to assume they will for sure rule in favor of Trump here.
Nah. They are just going to find a way to kick the can down the road and signal to Trump that he can levy the tariffs if he changes his rationale or something like that. We are way past the point where we can take this SCOTUS seriously.
On a different topic: on the ground reporting on Sudan that gets into why the UAE and others are involved so heavily in Sudan. One answer is that there are substantial gold and other mineral concessions, but everyone on the ground has theories. Very interesting discussion on the breakdown of the liberal order and what happens when order completely breaks down: anarchy. Ethnic cleansing is discussed in Darfur, but the author states pretty directly that most people don't really care that much. The discussions with USAID workers and UN humanitarian officials is quite bleak. The discussions with the exiled prime minister (now in exile) Hamdok are also depressing. Worth your while to read if only to grapple with the ongoing disaster and where it came from.
Thanks! I happen to have a neighbor who is from Sudan, and he's been anguished for a couple of years about the situation there. He had to pay to hustle his sisters and mother to Cairo for safety. It's all such a mess.
Unfortunately, the readership for that kind of article will always lose out to a hot take on an interpersonal issue that the average internet person will feel like they can have an opinion on.
>If Democrats want to make economic policies that are good for poor people, I think this makes tariff repeal a compelling agenda item.<
This.
Also, a corollary to the "we'll be too dependent on tariff revenue" I've seen various people claim is that Trump's tariffs will simply be too *popular* to jettison or reduce, so a future president will feel excessively constrained not just fiscally—but also politically—to repeal them.
I'm very skeptical this is so, especially if, as seems likely, the country is going to experience a period of reduced prosperity. I also think there's an opportunity to push the "freedom" angle: in a free society, people should be able to spend their hard-earned dollars however they like. That line of attack has broad appeal, I believe, including to plenty of centrists and conservatives.
It's not that tariffs will be popular, but their salience will go down as businesses get accustomed to them. Removing them will blow a budget hole without the benefits becoming immediately obvious to consumers as prices are sticky. But stocks will go up as corporations will be able to funnel tariff relief into margins. Reversing the tariffs in a fiscally responsible way will be tricky.
This is another incidence of "Trump doesn't care about the reasoning you use to support him." The people who attempted to intellectualize Trumpism told everybody that life isn't all about GDP and made some vague noises that reducing the number of immigrants and stifling trade would bring back US manufacturing and give us "meaning" or something. Ok, how's all that "meaning" going? And of course if you want to stay in Trump's good graces, you can't point out that we're not actually bringing back manufacturing, this all has to be part of the plan.
The people who tried to polish Trump's intellectual turds (CNBC is full of them) look like fools but it does not matter. They are tied to Trump at an emotional level via in-group solidarity. Just tax the hell out of them if we ever get a chance. That is the right thing to do economically and morally in my view.
I am optimistic the US will SURVIVE Trump's idiocy. The idea that it's not damaging is idiotic. Of course it's damaging. There are a myriad of ways that Trump's boorish nature hurts us the big ones being:
1. He's made the US an unreliable partner, which undermines our ability to act as a leader in the future. Why should anyone trust the US right now? The only reason Trump can get away with this is that they have little choice...for now. But 'for now' is not inevitable to last forever.
2. He's dragging down the economy. Sure, we can still grow in spite of Trump: but we could have had more. That hurts us even if it's not 'that bad' for most Americans.
3. He's destroying our ability to make better policy later. Instead of having a stable foundation on which to build: the next President (God willing: not a Trumpist) will have to repair a lot of damage instead of build higher.
Trump is such a freaking clown. It still boggles my mind so many Americans duped themselves into voting for him.
The underlying fundamentals are hard to shift even with the likes of Trump. Bush was super unpopular abroad and then Obama. It doesn’t take much to revive American popularity
Bush was unpopular, but I don’t think he unilaterally broke many (any?) agreements other countries were counting on. Now that Trump has directly done things like end NAFTA and the Iran agreement, and then broke every rule of the WTO, and canceled contracts with domestic grantees, no one will have any interest in relying on agreements with the American government any more.
Not really a comparable situation. Trump is the proof of concept that American democracy and institutions are fundamentally weak and unstable. Also, there's no Obama v. 2 waiting in the wings.
A poorer, weaker United States with no guaranteed rights for non-citizens (or even many citizens) is not going to be a magnet for talent and skilled immigration. And that, much more than anything else, has been the engine of American success for the past century.
Can't say I agree on AI and Energy being strong suits for the US going forward. Both rely on physical infrastructure which the US is woefully underequipped to build out. Plus AI success is in many ways a worse problem than AI failure, as ending huge numbers of white collar jobs will make the US far less receptive to immigration, not more. And not all paper-pushers are Democrats.
Unpopular take, but dems making economic policy on the basis that it's good for poor people is what got us into this mess to begin with. I feel like a broken record but the median voter isn't poor and the dem coalition's reverse trickle down thesis (basically all boats rise on policies good for economic security at the low end) have generated little political return thus far. Seriously - we ran the experiment, voters saw the ACA, more attention paid to labor laws, antitrust, SNAP increases, etc and said nope. We need popularism as a governing thesis if dems want to win.
Yeah, the American middle class dwarfs the American poor class. And policies that hurt the middle class to help the poor will face electoral backlash just because of the size of the middle class.
And especially the relative voting propensity of the classes. On the other hand, helping the upper middle class at the expense of the lower middle class has done well for democrats in local elections.
The biggest story I see here is an argument that the President has too much power and we need to adjust our checks and balances. But it won’t happen because both parties think the excess power is good as long as they’re the ones controlling it.
I don't think you have to be that cynical to think there's a problem. Congresspersons can get reelected indefinitely by not standing out. That means deferring everything to someone else (courts, agencies, the President). A voting record really only ever seems to get used against you, so the rational choice is to avoid voting, avoid going on the record, and just ride incumbency bias for decades in a high status job with decent pay but amazing perks. Senators only get paid $170,000 a year but can hobnob seamlessly with billionaires.
Was the jobs report really OK? Yes the weakness was driven in part by reduced supply but not a lot of demand, either, particularly outside health care. Clear fingerprints of tariff-driven caution among employers.
This last decade seems to be like rearranging the deck chairs on the Titanic. The federal debt grows to catastrophic heights and we have a gambling mentality in place. Ray Dalio and others have showed how at least three economic cycles are all peaking around now, as evidenced by the everything bubble. My own economic mysticism suggests another cycle---the Warren Buffet timeline. Dude was born right after the 1929 crash---talk about timing! He's had an upward trajectory for 95 years to invest in and now he's stepping down from Berkshire Hathaway.
"There’s no great boom in American manufacturing jobs or championing of the working class."
I think Matt is underplaying how massive the supply chain shift to localize production (or "zero-distance) that has just happened across the global multi-nationals. Nearly every auto OEM has announced new US plants or expansion of US plants (at the expense of Canada and Mexico). The major pharma companies just announced $250B in new manufacturing investment. Hilariously, Haier - a Chinese company which bought GE Appliances - is moving production from China to Louisville because they need to compete with Samsung and LG's new US production facilities.
Here's their statement:
“We are bringing laundry production to our global headquarters in Louisville because manufacturing in the U.S. is fundamental to our ‘zero-distance’ business strategy to make appliances as close as possible to our customers and consumers,” said Kevin Nolan, president and CEO, GE Appliances. “This decision is our most recent product reshoring and aligns with the current economic and policy environment.”
Isn't production different from jobs though? I think Matt is narrowly arguing about their being more manufacturing jobs rather than more production, which he knows is dumb, but what the public ultimately seems to care about.
I don't think so. I think plants are what people think about and all jobs associated with running a plant are coded as "manufacturing jobs". Same reason Tesla's gigafactory is considered "manufacturing" even though it's ~ fully automated.
My general sense when people talk about a "decline in American manufacturing," they're gesturing at the decline in the percentage of people who work in the manufacturing industry and a vague sense that things were better in the past when more Americans worked in manufacturing. To suggest otherwise wouldn't really make sense, since manufacturing output is substantially higher than in the past due to productivity gains. I think Matt is getting at that this whole theory of tariffs--> increase in manufacturing jobs is misplaced for multiple reasons, one of which is that there never will be a large share of Americans who work in manufacturing again.
From the 70s-2000 we had ~ 17m manufacturing employees. That total employees rate was stable because each plant had to deliver annual productivity increases. Post-NAFTA we closed something like 90,000 individual plants / factories and outsourced ~ 5m jobs. But it's always the factory that's the center node in the analysis.
My prior is that tariffs alone won't bring a manufacturing boom, you need to do more than that (try to minimize labor costs or provide cheaper access capital). Would what you were talking about be found in manufacturing construction spending or R&D spending? Remember some graph where Biden's policies did increasing manufacturing construction spending but once Trump came in that it went back down.
Not R&D spend but definitely US deployed CapEx. But it's bigger than just this round of tariffs. It goes back to Trump's initial tariffs on China and Biden's continuation / maybe even slight escalation of the "trade-war". There's a global shift towards more local production that accelerated post-COVID (i.e., supply chain resiliency) and then yeah now with the even higher tariff barriers.
EDIT: In terms of tracking the changes you can just listen to the earnings calls and follow the investor press releases. This is all the CEOs are talking about:
There's a reason we test out policies with statistics, not press releases, and the statistics overwhelmingly point to no meaningful increase of manufacturing jobs.
Nonsense. These CapEx investments were all just formally approved by the boards and will now be flowing into operating budgets. You're not fucking with public company press releases. These have all gone through three layers of approvals.
People tend to put out press releases for openings, not closings. You only collected ones for openings. I could use the same method to argue that NAFTA supercharged US manufacturing employment in the '90s (look at the new auto plants foreign manufacturers put up in the south!). Conventional economics would expect a contraction in manufacturing jobs, and lo and behold, the statistics back this up.
"People tend to put out press releases for openings, not closings." Of course, because capital investments of this size are material and have to be disclosed after a board vote. But the bigger point is there's something like $1T of capital investment coming to localize production in the US. Whatever you think of tariffs, this is the current supply chain trend.
I propose the following plan for national greatness:
1. Statistics exist to prove success, not to measure economic performance.
2. Administrators who do not produce correct figures that prove policies are successful must be purged. They are enemies of the people.
3. We need a Central Statistical Administration to report on the truth.
These are bulletproof and have been demonstrated to work.
In a 25 year period they led to a 16 fold increase in industrial output, a 50 fold increase in machine building, a 10 fold increase in national income.
For details please see Central Statistical Administration (TSSU) report on the Soviet economy in 1956.
Aren’t we just in a MAGA Reactionary Cultural Revolution: except, unless there’s a whiff of pedophilia, billionaires are spared — no re-education required. Basically, stupidity and superstition are exalted, knowledge and science trashed.
The only metric to keep an eye on is wage growth for the bottom 40%, the rest in my view is noise (politically speaking). The bottom 40% is where the always unhappy swing voters reside.
Trump won those making under 100K, a remarkable achievement for a GOP candidate made possible by two big Biden failures:
1. Biden's migration surge really did inconvenience the bottom 40% as they competed for scarce resources.
2. Biden's blue collar focused construction jobs had no where near the effect needed to counteract the inflation pain from 2022-2023.
Now Trump has pushed out a mixed bag of policies that affect the bottom 40%
- Net migration is zero or negative: At constant GDP, this should put upward pressure on wages for the bottom 40% but GDP is likely to be lower. So hard to say exactly how it will work out. My guess is jobs favoring men (data center construction) will see wage gains as migrant men who compete for these jobs are removed from the equation. So on net a positive.
- Tariffs: The size of the economy will be smaller and a number of small businesses will go bust if tariffs persist as seems likely. Meanwhile prices of goods will be higher. On net a negative for the bottom 40%. There are some models that suggest tariffs, even at liberation day levels would be a mere ripple as services dominate the economy. So only time will tell.
- Medicaid and SNAP cuts: I am not sure how politically salient these are. This may turn out to be a mirage like the over turning of Roe ended up being as states adjust to cushion the blow and the salience of the issue is attenuated as a result.
- No tax on tips/overtime: This is peanuts in the larger scheme of things. But if the stock market continues to do well and props up spending from the top 20%, this may be a slight positive.
I know the polls don't look good right now for Trump on the economy but 15 months is a long time in the political-economy. I wouldn't be totally surprised if the (data center boom + no migration) leaves the Trump-Biden-Trump voters feeling vindicated by November 2026.
On the other hand if even 10% of what the AI CEOs are predicting comes to pass then the swing voter in 2026 maybe a jobless new college grad and their worried parents. This is where perhaps the opportunity lies for Dems.
I know you already know this, but if the *only* thing that matters is INCOME GO UP for bottom 40%, that's really crappy, because there are tons of ways Trump can screw up/has been screwing up our country that don't show up in lower middle class income growth. Examples:
1. Destroying non-profit scientific research will have repercussions both for the economy (I read that each $1 of NIH funding results in $2.3 of economic activity) and for human well-being (that NIH-funded researcher who might have developed a cure for Alzheimer's is gone bye-bye)
2. Do you live in an area prone to hurricanes, wildfires, flash floods? Whoopsie, NOAA is gone bye-bye and so is FEMA, good luck/thoughts/prayers the next time a natural disaster strikes
3. Your elderly mom's/grandma's nursing home was staffed 80% by illegal immigrants who have been arrested/self-deported rather than risk Alligator Alcatraz, now the nursing home has to jack up their rates to attract enough citizen workers who want high(er) wages for giving sponge baths and diaper changes to incontinent dementia patients
4. The US going from the Leader of the Free World to a laughingstock among the world's small-l liberal democracies can't be good for us long-term, no matter what the America First-ers say; that's not even bringing up extreme tail risks, like, historians in 2050 will talk about how Trump crapping on NATO was a warning sign for the unraveling of the post-WWII world order that led to the breakout of WWIII in 2039
5. Just, the enshittification/kakistocracy/stocking the Cabinet with yes-men and -women who are some combination of clueless, extremists, and douchebags is bad on principle, even if you can't point out a specific way in which this leads to lower wages for the bottom 40%.
6. How prepared are we for the next pandemic? [laughs while sobbing] What if the next pandemic is something way more deadly than COVID-19, like, a super-transmissible version of Ebola? [laughs while sobbing harder]
7. Trump is busy screwing over the EPA and gutting Biden-era investments in clean energy; enjoy higher levels of greenhouse gases and atmospheric and water pollutants!
As I said in my post I am talking purely about political relevance.
I wear my Trump Derangement Syndrome (TDS) label as proudly as anyone one but I suspect that any number of terrible things Trump does to groups who are not swing voters will have little political relevance. The researchers getting their research cut never voted Trump anyway or lived in deep blue districts where their Trump votes mattered little. Trump doesn't care if CA voters suffer under Medicaid cuts. Its politically irrelevant to him. The same goes for the rest.
So the only thing that matters is if those that explicitly switched their votes from Biden in 2020 to Trump in 2024 regret their vote and either reverse course or stay home in 2026, 2028. That is what I will be looking for and because I don't trust opinion polling, I will use income growth among the low income cohort as a more accurate gauge of political reality.
How electorally relevant are the bottom 40% of the income distribution? You suggest they are disproportionately represented among swing voters, but I think they’re even more disproportionately represented among non-voters. I don’t know how that nets out.
The main point is that among the actual voters who voted, there was a massive swing in the 30K - 100K cohort from Biden to Trump. The 30K - 50K cohort represents 16% of actual voters and these are voters making well under median wage. The bottom 40% of voters extends well into the 50K-100K cohort which only increases the electoral importance of the cohort.
Getting yourself a nice 8 point win in a group that is at least 16% of all voters is not negligible at all. https://en.wikipedia.org/wiki/2024_United_States_presidential_election
If these voters making 30K-50K are happier in 2026 than in 2024, that may help the GOP.
In other fun news, Bobby Brainworms has cancelled nearly $500 million worth of contracts for mRNA vaccines. It's in the NYT.
Is this only for COVID or in general for the mRNA platform?
It actually doesn’t seem to directly apply to the Covid vaccines (though he may have separate actions where he is refusing to approve updated versions of those?). It seems to be actually about a contract to develop new mRNA based flu vaccines that could be updated faster (and perhaps more broadly targeted) than the current egg-based system. (The article had some weirdness about “whole cell” vaccines, which obviously doesn’t make sense for viruses, that don’t have cells.)
The NYT article looks like it’s a rejection of mRNA vaccines in general. This will hamper plans to develop mRNA vaccines against pancreatic and colon cancer, among other things.
Yeah the long term damage from research cuts will be hard to reverse. We have to hope that Europe will pick up some of the slack created by this insanity.
Matt writes, "In the first quarter, a lot of companies were importing stuff they didn’t actually use or sell in order to get ahead of the tariffs, and this showed up as GDP shrinking."
I thought that subtracting imports from the GDP was just an accounting identity and shouldn't be used to characterize the strength of the economy, but it's really hard to look at negative 0.5 percent in the number and not say the GDP was shrinking.
And if Matt falls for that trap (?) then there's a real problem with how even those in the know can transmit information about how the economy is doing to the rest of us.
Just average over the two quarters. Looks like the sign of the errors caused by outsized front running is reversed from Q1 and Q2. So we don't need to worry about accounting identities not being respected.
I'm just referring to his plain words that the economy shrank in the first quarter. Is that how we're supposed to interpret a surge of imports?
Fair enough, there was a whole article by Noah Smith on this very point, the idea being that the accounting identity seems not to be perfectly respected in the way our GDP is reported. But regardless, since we expect any leakage in one direction to correct itself in the opposite direction the next quarter, by averaging we don't have to worry about it.
If this keeps up maybe the Democrats won't need that "reckoning" that Ruy Texeira et al. talk about. Hell, maybe Harris can run it back.
One thing that confuses me about the tariffs is that everyone seems to take it for granted that the courts will uphold them, even though they seem to be obviously illegal with almost no defense beyond that Trump wants them, and both the Court of International Trade and the U.S. Court of Appeals for the Federal Circuit have either ruled against them or seem likely to rule against them. The Supreme Court has been deferential to Trump, but giving the president the ability to raise taxes on a whim is really not the sort of thing that would make Republican justices inclined to give Trump the benefit of the doubt. Obviously potentially refunding billions of dollars would be massive news and would change the political environment significantly, but nobody seems to be talking about this, even though it is certainly very possible.
Now if the GOP controlled congress actually “passes” the tariff then it’s all legal right? I thought it’s unconstitutional because he is usurping the prerogative of congress.
The Supreme Court is not going to let one of Trump's signature policies founder on minor questions of constitutitionality. It is just not going to happen.
It's a major question and this is not an issue like gun rights or voting rights where they'd be inclined to give Republicans the benefit of the doubt. I can guarantee that all six Republicans are very supportive of free trade in general and I think there's a very good chance that carving out this massive expansion of presidential power will be a bridge too far for at least two of them.
I think the Supreme Court is stuck because if they strike it down and Trump ignores them....then what's the next move? At least that's my read of some of their recent decisions. I don't think they are (all) actually Trump enablers but I think they somewhat accurately judge the political climate that they will lose more legitimacy (at least in the short run) by opposing Trump than finding excuses to let it slide.
That feels like wishful thinking. Thomas and Scalito are all in on 'Trump as king and this is good'. Gorsuch and Kavanaugh are Team Republican(r) and won't do anything to damage their party's programme. John Roberts might have qualms, but he does not want the court to get away from him. Coney Barrett's allegiances are the least clear, but even if she comes down against the tariffs, it's not enough.
I agree on Thomas and Alito (although Thomas is idiosyncratic), but Gorsuch in particular has been willing to challenge Republican orthodoxy, as has Roberts.
I'm not saying the Court WILL rule a certain way, but it seems short-sighted to assume they will for sure rule in favor of Trump here.
Nah. They are just going to find a way to kick the can down the road and signal to Trump that he can levy the tariffs if he changes his rationale or something like that. We are way past the point where we can take this SCOTUS seriously.
On a different topic: on the ground reporting on Sudan that gets into why the UAE and others are involved so heavily in Sudan. One answer is that there are substantial gold and other mineral concessions, but everyone on the ground has theories. Very interesting discussion on the breakdown of the liberal order and what happens when order completely breaks down: anarchy. Ethnic cleansing is discussed in Darfur, but the author states pretty directly that most people don't really care that much. The discussions with USAID workers and UN humanitarian officials is quite bleak. The discussions with the exiled prime minister (now in exile) Hamdok are also depressing. Worth your while to read if only to grapple with the ongoing disaster and where it came from.
https://www.theatlantic.com/magazine/archive/2025/09/sudan-civil-war-humanitarian-crisis/683563/
Thanks! I happen to have a neighbor who is from Sudan, and he's been anguished for a couple of years about the situation there. He had to pay to hustle his sisters and mother to Cairo for safety. It's all such a mess.
I’m glad he got his family out. It’s a terrible situation and I don’t think it’s getting much international attention.
Unfortunately, the readership for that kind of article will always lose out to a hot take on an interpersonal issue that the average internet person will feel like they can have an opinion on.
>If Democrats want to make economic policies that are good for poor people, I think this makes tariff repeal a compelling agenda item.<
This.
Also, a corollary to the "we'll be too dependent on tariff revenue" I've seen various people claim is that Trump's tariffs will simply be too *popular* to jettison or reduce, so a future president will feel excessively constrained not just fiscally—but also politically—to repeal them.
I'm very skeptical this is so, especially if, as seems likely, the country is going to experience a period of reduced prosperity. I also think there's an opportunity to push the "freedom" angle: in a free society, people should be able to spend their hard-earned dollars however they like. That line of attack has broad appeal, I believe, including to plenty of centrists and conservatives.
It's not that tariffs will be popular, but their salience will go down as businesses get accustomed to them. Removing them will blow a budget hole without the benefits becoming immediately obvious to consumers as prices are sticky. But stocks will go up as corporations will be able to funnel tariff relief into margins. Reversing the tariffs in a fiscally responsible way will be tricky.
This is another incidence of "Trump doesn't care about the reasoning you use to support him." The people who attempted to intellectualize Trumpism told everybody that life isn't all about GDP and made some vague noises that reducing the number of immigrants and stifling trade would bring back US manufacturing and give us "meaning" or something. Ok, how's all that "meaning" going? And of course if you want to stay in Trump's good graces, you can't point out that we're not actually bringing back manufacturing, this all has to be part of the plan.
TLDR stop trying to intellectualize the guy.
The people who tried to polish Trump's intellectual turds (CNBC is full of them) look like fools but it does not matter. They are tied to Trump at an emotional level via in-group solidarity. Just tax the hell out of them if we ever get a chance. That is the right thing to do economically and morally in my view.
I am optimistic the US will SURVIVE Trump's idiocy. The idea that it's not damaging is idiotic. Of course it's damaging. There are a myriad of ways that Trump's boorish nature hurts us the big ones being:
1. He's made the US an unreliable partner, which undermines our ability to act as a leader in the future. Why should anyone trust the US right now? The only reason Trump can get away with this is that they have little choice...for now. But 'for now' is not inevitable to last forever.
2. He's dragging down the economy. Sure, we can still grow in spite of Trump: but we could have had more. That hurts us even if it's not 'that bad' for most Americans.
3. He's destroying our ability to make better policy later. Instead of having a stable foundation on which to build: the next President (God willing: not a Trumpist) will have to repair a lot of damage instead of build higher.
Trump is such a freaking clown. It still boggles my mind so many Americans duped themselves into voting for him.
The underlying fundamentals are hard to shift even with the likes of Trump. Bush was super unpopular abroad and then Obama. It doesn’t take much to revive American popularity
Bush was unpopular, but I don’t think he unilaterally broke many (any?) agreements other countries were counting on. Now that Trump has directly done things like end NAFTA and the Iran agreement, and then broke every rule of the WTO, and canceled contracts with domestic grantees, no one will have any interest in relying on agreements with the American government any more.
Bush withdrew from ABM and the Kyoto Agreement. He went to war across the Middle East. People have short memories. So they will with Trump.
Not really a comparable situation. Trump is the proof of concept that American democracy and institutions are fundamentally weak and unstable. Also, there's no Obama v. 2 waiting in the wings.
A poorer, weaker United States with no guaranteed rights for non-citizens (or even many citizens) is not going to be a magnet for talent and skilled immigration. And that, much more than anything else, has been the engine of American success for the past century.
“…also there’s no Obama v2 waiting in the wings…”
Comparable to 2004-2006 in the USA. The fundamentals in the USA: AI and Energy are strong.
People are forgetful. Plus money talks. Once Obama v2 comes along and the above companies are offering big salaries, talent will come back.
As of yet, I haven’t seen any evidence in history to the contrary but sure Trump 2 could be the president that breaks USA streak.
Can't say I agree on AI and Energy being strong suits for the US going forward. Both rely on physical infrastructure which the US is woefully underequipped to build out. Plus AI success is in many ways a worse problem than AI failure, as ending huge numbers of white collar jobs will make the US far less receptive to immigration, not more. And not all paper-pushers are Democrats.
Sure. I’d buy that as a probable scenario.
I think Trump has done more damage than Bush
And that’s saying a lot
Unpopular take, but dems making economic policy on the basis that it's good for poor people is what got us into this mess to begin with. I feel like a broken record but the median voter isn't poor and the dem coalition's reverse trickle down thesis (basically all boats rise on policies good for economic security at the low end) have generated little political return thus far. Seriously - we ran the experiment, voters saw the ACA, more attention paid to labor laws, antitrust, SNAP increases, etc and said nope. We need popularism as a governing thesis if dems want to win.
Yeah, the American middle class dwarfs the American poor class. And policies that hurt the middle class to help the poor will face electoral backlash just because of the size of the middle class.
And especially the relative voting propensity of the classes. On the other hand, helping the upper middle class at the expense of the lower middle class has done well for democrats in local elections.
The biggest story I see here is an argument that the President has too much power and we need to adjust our checks and balances. But it won’t happen because both parties think the excess power is good as long as they’re the ones controlling it.
I don't think you have to be that cynical to think there's a problem. Congresspersons can get reelected indefinitely by not standing out. That means deferring everything to someone else (courts, agencies, the President). A voting record really only ever seems to get used against you, so the rational choice is to avoid voting, avoid going on the record, and just ride incumbency bias for decades in a high status job with decent pay but amazing perks. Senators only get paid $170,000 a year but can hobnob seamlessly with billionaires.
Was the jobs report really OK? Yes the weakness was driven in part by reduced supply but not a lot of demand, either, particularly outside health care. Clear fingerprints of tariff-driven caution among employers.
This last decade seems to be like rearranging the deck chairs on the Titanic. The federal debt grows to catastrophic heights and we have a gambling mentality in place. Ray Dalio and others have showed how at least three economic cycles are all peaking around now, as evidenced by the everything bubble. My own economic mysticism suggests another cycle---the Warren Buffet timeline. Dude was born right after the 1929 crash---talk about timing! He's had an upward trajectory for 95 years to invest in and now he's stepping down from Berkshire Hathaway.
"There’s no great boom in American manufacturing jobs or championing of the working class."
I think Matt is underplaying how massive the supply chain shift to localize production (or "zero-distance) that has just happened across the global multi-nationals. Nearly every auto OEM has announced new US plants or expansion of US plants (at the expense of Canada and Mexico). The major pharma companies just announced $250B in new manufacturing investment. Hilariously, Haier - a Chinese company which bought GE Appliances - is moving production from China to Louisville because they need to compete with Samsung and LG's new US production facilities.
Here's their statement:
“We are bringing laundry production to our global headquarters in Louisville because manufacturing in the U.S. is fundamental to our ‘zero-distance’ business strategy to make appliances as close as possible to our customers and consumers,” said Kevin Nolan, president and CEO, GE Appliances. “This decision is our most recent product reshoring and aligns with the current economic and policy environment.”
This is happening in every industrial sector.
Isn't production different from jobs though? I think Matt is narrowly arguing about their being more manufacturing jobs rather than more production, which he knows is dumb, but what the public ultimately seems to care about.
I don't think so. I think plants are what people think about and all jobs associated with running a plant are coded as "manufacturing jobs". Same reason Tesla's gigafactory is considered "manufacturing" even though it's ~ fully automated.
My general sense when people talk about a "decline in American manufacturing," they're gesturing at the decline in the percentage of people who work in the manufacturing industry and a vague sense that things were better in the past when more Americans worked in manufacturing. To suggest otherwise wouldn't really make sense, since manufacturing output is substantially higher than in the past due to productivity gains. I think Matt is getting at that this whole theory of tariffs--> increase in manufacturing jobs is misplaced for multiple reasons, one of which is that there never will be a large share of Americans who work in manufacturing again.
I think when people talk about a decline in American manufacturing they're talking about this chart: https://fred.stlouisfed.org/series/MANEMP
From the 70s-2000 we had ~ 17m manufacturing employees. That total employees rate was stable because each plant had to deliver annual productivity increases. Post-NAFTA we closed something like 90,000 individual plants / factories and outsourced ~ 5m jobs. But it's always the factory that's the center node in the analysis.
My prior is that tariffs alone won't bring a manufacturing boom, you need to do more than that (try to minimize labor costs or provide cheaper access capital). Would what you were talking about be found in manufacturing construction spending or R&D spending? Remember some graph where Biden's policies did increasing manufacturing construction spending but once Trump came in that it went back down.
Not R&D spend but definitely US deployed CapEx. But it's bigger than just this round of tariffs. It goes back to Trump's initial tariffs on China and Biden's continuation / maybe even slight escalation of the "trade-war". There's a global shift towards more local production that accelerated post-COVID (i.e., supply chain resiliency) and then yeah now with the even higher tariff barriers.
EDIT: In terms of tracking the changes you can just listen to the earnings calls and follow the investor press releases. This is all the CEOs are talking about:
https://investor.lilly.com/news-releases/news-release-details/lilly-plans-more-double-us-manufacturing-investment-2020
https://nam.org/manufacturing-wins-jj-invests-more-than-55-billion-33568/
https://www.reuters.com/sustainability/boards-policy-regulation/astrazeneca-unveils-50-billion-us-investment-pharma-tariff-threat-looms-2025-07-21/
https://investors.biogen.com/news-releases/news-release-details/biogen-announces-2-billion-manufacturing-investment-north
https://news.gm.com/home.detail.html/Pages/news/us/en/2025/jun/0611-plants.html
https://www.hyundainews.com/en-us/releases/4404
https://www.cnbc.com/2025/02/02/hondas-new-ev-production-revolution-begins-with-1-billion-in-ohio.html
https://apnews.com/article/siemens-3256320c6977e21c679b2286ca45d694
There's a reason we test out policies with statistics, not press releases, and the statistics overwhelmingly point to no meaningful increase of manufacturing jobs.
Indeed.
https://edition.cnn.com/2025/07/11/business/jobs-trump-tariffs-manufacturing
Nonsense. These CapEx investments were all just formally approved by the boards and will now be flowing into operating budgets. You're not fucking with public company press releases. These have all gone through three layers of approvals.
People tend to put out press releases for openings, not closings. You only collected ones for openings. I could use the same method to argue that NAFTA supercharged US manufacturing employment in the '90s (look at the new auto plants foreign manufacturers put up in the south!). Conventional economics would expect a contraction in manufacturing jobs, and lo and behold, the statistics back this up.
"People tend to put out press releases for openings, not closings." Of course, because capital investments of this size are material and have to be disclosed after a board vote. But the bigger point is there's something like $1T of capital investment coming to localize production in the US. Whatever you think of tariffs, this is the current supply chain trend.
I propose the following plan for national greatness:
1. Statistics exist to prove success, not to measure economic performance.
2. Administrators who do not produce correct figures that prove policies are successful must be purged. They are enemies of the people.
3. We need a Central Statistical Administration to report on the truth.
These are bulletproof and have been demonstrated to work.
In a 25 year period they led to a 16 fold increase in industrial output, a 50 fold increase in machine building, a 10 fold increase in national income.
For details please see Central Statistical Administration (TSSU) report on the Soviet economy in 1956.
And yet the common folk still insist that they're starving. How do we convince them that their bellies are, in fact, full?
If their stomachs growl, let it be a song of loyalty.
If their mouths are dry, let them drink deeply from the well of ideological purity.
The Party nourishes not with bread alone, but with truth.
Their hunger is not suffering—it is devotion.
Send them on vacation to our far eastern republics so they come to understand what starvation actually looks like.