I completely understand the case Matt is making here. Trump is corruption made flesh. But I want to provide a good, honest, neoliberal shrill reminder that even *honest* trade tariffs are quite bad. When Americans buy stuff from foreigners, they typically do so because it's cheaper. Thus tariffs require Americans to pay more. This mechanically reduces incomes, and makes us poorer. It also reduces the productivity of the economy, by forcing us to shift more capital into obtaining inputs than would be the case without the tariffs (which leaves less capital for everything else). So it's a double whammy: poorer immediately, and poorer and economically weaker over the longer term, because of the hit to productivity and efficiency.
We no doubt do need a measure of industrial policy to ensure we can produce things like artillery shells, warships, attack drones and the like. And given the hostility of China, that list probably has to include things like microprocessors and pharmaceutical precursors.
But, really, we ought to be doing the minimum amount of trade restricting consistent with our national security needs. I remember thinking, shortly after the 2020 election: "Democrats in Congress ought to take advantage of this window to narrow the scope of the executive branch's power to restrict foreign trade." Pity they didn't. And too late now.
This piece melds nicely with Orenn Cass' interview on the Ezra Klein show. He legitimately thinks we can just fully build a domestic supply chain for semiconductors that is basically self-sustaining and barely imports much supplies. Which is at best misguided thinktank policy that will never materialize, and at worst something that Trump actually tries to impose and in turn makes our country poorer
I think that sounds right. For the most part, America's ability to engage in autarky is limited only by the country's willingness to accept a reduced standard of living.
Yep. That's also why I'm skeptical Trump is going to go full bore on a 10% tariff. Unless his economic team is truly delusional, they know that there would be incredibly political consequences to imposing such price increases on American consumers.
Isn't this just the bipartisan CHIPS policy if we don't get high-skilled engineers for it? I think those of us who are friend-shoring advocates need to bind together and insist on a several point plan for evaluating the "national security" relevance of an industry. Otherwise every single domestic US industry is going to cite national security and ask for their pound of flesh from the American consumer.
As a designer of ICs (chips), many or most new jellybean (broad market) designs go through a process of evaluating different foundries. Often the cost differences are quite small (a few percent) and things like shipping delays from a foundry to an assembly house come into play. So, while building a fully domestic supply chain from whole cloth might be impossible, small economic nudges could make significant changes in where the bulk of ICs were manufactured.
No doubt we could with enough money and motivation. We have the expertise to build and run the fabs, the biggest barrier is the lithography machines (and maybe metrology) but if we the government put enough emphasis on it I suspect we could offer the Netherlands enough that they wouldn't stop us from paying ASML to locate a secondary production location here and likely the same with Karl Zeiss. I believe the high quality sand is already US sourced.
It would be extremely expensive and take quite some time to implement (a decade or two) but I don't see why it's impossible. And once created I see no reason it wouldn't be self-sustaining. It's a very capital intensive industry and it's not like we don't have a perfectly adequate pool of talent to hire locally.
I don't think it's a good idea but it seems within the realm of possibility
And where we do need industrial policy it's probably better to just subsidize the creation of domestic (or friendly nation) manufacturing and supply chains.
Or apply "Buy America" or "Buy Friendly" restrictions on military and national security procurement and on supplier to military / national security contractors.
US military equipment should not be using chips sourced from China and if military suppliers also have a civilian business which does source chips from China (e.g. Boeing can put Chinese chips in a 737 Max, but not in a V-22) then there has to be a hard separation between those sides of the business.
One problem with this will be that officially designating countries as "friendly" is going to generate a lot of complaints: the whole point of the WTO and MFN status for China is that you don't get to designate a country as "more friendly" than China. Domestic preference is a lot easier to win an argument for in the global framework, but absent bilateral or multilateral treaties, preferring "friends" to "not-friends" is not really allowed. This is why the US should sign a trilateral agreement with the UK and EU/EEA and sign something like a TPP or TPP-lite with friendly nations in Asia so it can formally designate signatories to those treaties as "friendly" for the purposes of military and other procurement.
Note that the US can't restrict this to treaty allies: that would exclude Taiwan and Austria and Ireland, which are definitely friendly, but which are not treaty allies for good reasons (Taiwan because of the One-China Policy, Austria because the treaty ending WWII prohibits it from joining a military alliance, and Ireland because it refuses to ally with the UK for historical reasons). A set of trade agreements that defines certain countries as friendly (Canada, Mexico, the Europeans, the Asian democracies, Australia, New Zealand) would help (also, removing some of the trade restrictions on those countries, e.g. mutual recognition of safety certifications, would be a good idea).
Aside: I personally would be in favour of EU-style mutual freedom of movement with friendly, rich, democratic countries. I don't think that anyone benefits from how hard it is to get a work visa in Japan as an American or in America as a Japanese citizen. The US would probably want to limit how much of Eastern Europe it includes in this (ie not include the whole EU), but that's implicit in the "rich" bit of my "friendly, rich, democratic".
Being able to work in the US with just a British or French or German or Australian or Japanese or Canadian or (South) Korean passport would not wreak havoc on the US immigration system. As in the EU, you'd reserve the right to PNG people (declare them "persona non grata", ie say that this particular individual is not welcome), and you'd probably want a wider prohibition on people convicted of serious crimes (the equivalent of felons), but the general principle would be that an ordinary person can just get a job and move to another country without any bureaucracy.
Selfishly, the US could get the EU to agree with this for some countries but not others: the UK couldn't, but we could piggy-back on the US deal, and I'd really like to get back the right to travel to and live and work in at least a large section of the EU (and excluding the poorer bits of the East would resolve the immigration issue that the UK had which drove Brexit - no-one was complaining the country was overrun with French people).
Co-sign! It took Siemens like 8 months to get my temp. work visa for Germany and the steps they had to go through to prove no German could perform the job was crazy.
One of my big ideas is that we should use industrial policy and friendshoring to basically engage in a price war with China.
America can't make enormous amounts of crap anymore, nor is that our strength, but we CAN organize a massive global bloc of cooperating countries to compete with the wave of cheap silicon and batteries from China. China is now middle-income, which means there are PLENTY of places where it's cheaper to manufacture now, and just need to have their capacity built up.
So, instead of dumping trillions into subsidizing decrepit or too-immature national champions domestically, we embrace a world where all inputs become dramatically cheaper. And in the process, we undermine the CCP's stability by forcing them to subsidize their overcapacity more and more, while we sit at the top of a new free-world supply chain.
>we CAN organize a massive global bloc of cooperating countries.... there are PLENTY of places where it's cheaper to manufacture now
I agree with the gist of what you're saying here, but I'm not sure that there's 'plenty' of such places. There's a few, mostly in Asia where they're probably going to be pretty firmly in China's security orbit within the next decade or two. There's Mexico, sort of. But not only do all of these countries have their flaws, they all lack the massive scale of China. You could do some manufacturing in Vietnam, some in Mexico, some in Thailand..... but they're all too small on their own, and 2 out of those 3 are probably going to be taking orders from Beijing by 2035.
Except for India, which for reasons of being a messy democracy with the per-capita GDP of Sub-Saharan Africa, I suspect is never going to replicate China's 20th century. Too many veto points, a real court system and a bill of rights..... Not sure any democracy has ever gone from poor to rich on the East Asian model, that usually requires being an autocracy! Even Modi can't mildly reform their insane agricultural pricing laws, much less seize lands for factories, fix India's stupid labor protections, fight off militant unions, etc.
I basically agree with all this, but the issue is that
>US should sign a trilateral agreement with the UK and EU/EEA and sign something like a TPP or TPP-lite with friendly nations in Asia.... A set of trade agreements that defines certain countries as friendly (Canada, Mexico, the Europeans, the Asian democracies, Australia, New Zealand) would help (also, removing some of the trade restrictions on those countries, e.g. mutual recognition of safety certifications, would be a good idea
Would take 50-100 years to get passed. The US and the EU have been working on a free trade deal for decades now. The EU has been working on a free trade deal with South America for I believe 20 years, off and on. It just takes forever to get these kinds of things passed in rich democratic countries, there are so many stakeholders and voices etc. etc. Just the amount of detail that goes into something like 'safety certifications' and the number of industries involved is insane
I hate to harp on this but anyone who talks about the future looking normal in 5+ years is making a massive bet ok AI progress stalling in unexpected ways.
As an Irish citizen, I don’t think that Irish neutrality is now based on historical refusal to ally with the UK. That justification disappeared when the constitution was amended per the Good Friday Agreement to delete the territorial claim to Northern Ireland. The remaining justification is mainly that it’s popular. Regarding military entanglement with the UK, Ireland has been totally reliant on the RAF for air defense since the 1960s. Ireland has no radar, no missile defense, no interceptors.
I find this really dispiriting. Ireland should have effective defense forces and be in a position to offer useful capabilities to NATO. As it stands, we’d be more of an impediment.
I think that's the original reason for Ireland being neutral and now neutrality is just seen as being part of Irishness (the way it's part of Swissness) so it's a tradition that no longer has an underlying reason but remains popular.
God no, the navy is already falling behind because of the restrictions that prevent us from buying ships from the south Koreans.
Not buying chips from china is good because verification is very difficult. For most other things, I fear we are handicapping ourselves.
Realistically, the kind of threats we face are either unlikely to cut our ability to trade widely (war in Ukraine type stuff) or are likely to be huge high intensity near pear conflicts where the issue will be decided far before manufacturing gets involved. A WW2 style scenario that doesn't go nuclear is no longer very plausible.
It is, but usually politics makes it much easier to tax people through higher prices than through actual taxes. The Jones Act is the age-old case in point. It'd be way more efficient to just subsidize American shipbuilding, but the politics makes that seemingly impossible. so we're stuck with a relic of a law that raises costs and makes logistics much tougher.
I think Michael Pettis's point that due to China's large size and the international demand for US Treasuries the US is going to be subject to Industrial Policy whether the blue stockings in the Econ departments like it or not. So, it's better to be cleared about it.
That said a 10% tarrif on everything is not an actual Industrial policy, and adding exemptions for GOP donors doesn't make it so.
There are reasonable requirements we could make to sell Chinese EV’s here instead of outright banning them are taxing them to death.
Tariffs on Chinese solar cells are going from 25% to 50% this year. It’s insane we are trying to build a green future under these dumb burdens. It shouldn’t cost 20k to put solar panels on my house!
To be fair, that price tag is largely due to the inefficiency (in labor, balance of system, and cost of sales/permits/financing/time) of small scale installations of solar panels (and wiring, etc.) on (non-flat, non-standardized-shaped) roofs. On a per-watt basis, commercial solar farms are way cheaper than home systems (like, 1/3 the total installed cost, see https://www.nrel.gov/solar/market-research-analysis/solar-installed-system-cost.html), with commercial and industrial rooftops somewhere in the middle. You can buy (retail, not even wholesale) US-made solar panels for <$0.75/W today. Some as low as $0.50/W.
Yes. The costs of permitting and the over-regulation of utility interconnections has a big role in this. The comparison I find most instructive is with Australia, where solar installers earn the same wage as US installers, they are using the same imported panels and wire and inverters as US installers, the rooftops are at least roughly similar to US rooftops, but the full cost of rooftop residential installation is under $1 (USD) per watt, compared to $3+/watt in the US.
As long as we are discussing "friendshoring", I would argue that letting Australian regulators take over the US rooftop solar industry would do much more to increase solar uptake than lowering a 25% tariff on Chinese solar modules that are currently selling for 10 cents/watt on the spot market.
Protectionist sentiments aside there is a good strategic and human rights rationale for blocking the dumping of Chinese EVs and solar panels. Auto manufacturing is a key strategic industry. It would be quite rash I think to allow the Chinese to destroy it in the West. Noah Smith has some cogent remarks on this I can look up later.
I would think that if we actually want to build a green future, we should want to ensure future supply of solar panels continues to be available. Letting all domestic and friendly solar panel manufacturers go bankrupt so that we can get temporary cheap access to Chinese solar panels, which could get cut off at any moment in the future, doesn’t seem like a good strategy for building a green future. You would only do that if you think the next five years of climate policy is more important than the actual future.
China allows Tesla to sell cars there and Apple to sell phones and laptops, and the CCP are the most paranoid fucks on planet earth. Apparently their ability to vet potentially hostile equipment significantly exceeds America’s. That’s not good!
Doesn't China have vast insight on how those products are made, given that most of them (or most of their parts) are made in China? I don't think there is information symmetry here.
Could be a factor. But, like, don't we have smart engineers with sophisticated tools who can scan equipment, machinery and components? At the end of the day they still don't have a chip firm as advanced as Nvidia. But maybe they really are stronger in this area.
I'm not sure which is worse: the fact (if it's a fact) that their technical capacities in equipment vetting so exceed ours, or the fact that we're now paranoid to the point of restricting our car buyers more than they restrict theirs. Sigh.
It is more or less impossible to ensure that there isn't any hidden logic in an advanced microprocessor by examination. The amount of silicon needed for instructions like "if you read the following 64K sequence of data from a contiguous region of memory followed by instruction FOO, disable the cryptographic system" is _tiny_ compared to size of a modern chip, extremely easy to hide from physical examination, and would take approximately eternity to find via circuit testing.
Yes, no, maybe. I think Stuxnet was pretty illustrative of what's now possible. That worm / virus was insane. It literally crawled networks looking for Siemens Step7 systems to ultimately find the Iranian centrifuge controllers. https://en.wikipedia.org/wiki/Stuxnet
Also -- no one is restricting BYD from entering the US market. They just won the largest LADOT bus order. They can build cars here tomorrow if they wanted.
I think this is a legal concern more than a logistics/capacity concern. If the CCP wants to inspect anything in a Chinese factory, no one stops them. If the US Feds want to inspect something in an American factory, some lawyers tell them to go get a warrant. That warrant might be granted, sure, but the point is that the US government has to jump through more hoops to do any regulating. Which also means it costs more to do any regulating.
* Maybe warrant is not the right word, but there is a process.
And microphones. If you know that someone regularly conducts commercially sensitive work calls in their car, it's a small matter to spy on that if you have access to the car's data system.
On the bright side, you can use this concern to justify to your wife why you need to buy a Lotus -- "Honey, it's got practically no electronics in it! It's like a rolling Cone of Silence."
But will it fit on both sides of a tee shirt? Thanks for a great link - very interesting article that, among other things, informed me that we have a Deputy National Security Advisor for International Economics, which makes me feel a bit better...
Great issue to highlight. Since the free-trade consensus is dead, and a tarrif heavy system is also bad as you point out here, I wonder what a better system look like? It would be great if we could achieve a bipartisan consensus that friend-shoring is a good idea, then the limited tarriff regime could be focused on China and paired with subsidizing domestic production and/or production in friendly countries.
Possibly a better system would be, since tariffs are basically like a VAT except only on imported items, to implement a generally applicable VAT across the board on all products, domestically produced as well as imported. And then set the rates a bit higher on value adds that occur outside the US, or outside the US plus certain other that are treated as domestic.
No, I didn't say anything about how much higher the rate should be on value added outside the US versus domestically. What I'm saying is that if you want to design a tariff system that minimizes the opportunity President/administrative agencies micromanagement, it should be embedded as part of a coherent whole VAT tax system.
Because that what it is, a partial VAT, but people won't see it or think of it that way unless it's made blindingly obvious by actually making it just one component of an overall VAT system of general applicability.
I think the free-trade consensus is dead since China showed just how a free system could be subverted for nefarious ends (at least anticipating their move against Taiwan and their extant contributions to spreading totalitarianism).
Meh. Democrats enjoy industrial policy, intervening with regulations and picking and entrenching winners with their policies. Trump may be much sloppier, but this is pot calling kettle.
Being "sloppier" matters. It is unusual for Democrats to have a barely-concealed "you give me money, I give you policy" trade. That kind of politics is very corrosive, and one of the nice things about America is that that kind of corruption among officials is uncommon.
What? Have you not looked at large Democratic cities? Did you not see the EV baksheeh that conveniently left out Tesla? Who’s making money off the California high speed rail boondoggle? What’s going on with Menendez in New Jersey? I’m sure it’s all over the place if you care to look.
California high speed rail suffers from the problem that they are *required* to evaluate bids according to specific criteria, and only a few big companies can meet those criteria, and no human judgment is applied at all. It’s exactly the opposite of corruption - it’s anti-corruption policy driving prices up.
Menendez, and the various non-profits given official roles in San Francisco, really seem like corruption.
I have no idea what you’re talking about with “EV baksheesh”.
Corruption increases the more local you get and is worst in localities with the a dominant political affiliation the same as the state they are located in. This is true for both parties.
I think this topic is super interesting. I started my career in manufacturing / supply chain shutting down US factories and moving them to Mexico (e.g., residential breakers, lighting panels). I was then responsible for transferring rail propulsion component production (e.g.,, gearboxes, motors, inverters) from Germany to the US to meet Buy America provisions. I've spent a lot of time in factories. I think what Matt misses with his Buy America critique - which I think he gets from Alon Levy - is that these rail rolling stock contracts are *so* competitive that they get competed down to marginal cost and marginal cost with US production is going to be cheaper than globally sourced + massive finished stock transport costs. That's why Bombardier Transportation was acquired by Alstom. These are very thin margin contracts. Said more specifically because I did the calculations, the Siemens S70 (Avanto) produced in Sacramento for Houston's METRORail is *cheaper* than if it was built in the main production facility in Europe and imported because the Sacramento facility has now reached world-class production scale / capacities / efficiency.
Tying this back to this article ... the Samsung and LG washing machine story is a long one but it seems to have ended in a great spot. In 2013, the Obama administration imposed tariffs on imported washing machines from South Korea. They shifted production to China which led to a U.S. International Trade Commission anti-dumping investigation in 2016 that found the anti-dumping margins were 44.28%. In January 2018, Trump imposed tariffs of 20% to 50% on large residential washing machines. The tariffs expired in February 2023. Ok. So what happened? Samsung and LG both built massive US supply chains (same strategy as Bosch) and are building millions of washing machines a year here. Net net on pricing is they rose initially to match the tariff level and then fell just as quickly as production ramped.
Overall -- I think this is a huge win. But it's super interesting that Matt seems to be leaning way more into the ~ Libertarian view of just let capital and goods flow freely.
2. 'Second, according to an August 2019 examination of the tariffs’ effects by the United States’ International Trade Commission (ITC), which recommended the tariffs and is required by law to review them periodically, the tariffs have not produced a thriving domestic industry. Although capacity and employment reportedly increased, for example, actual production declined, “resulting in declining capacity utilization, lower productivity levels, and higher unit labor costs.” (The ITC also noted the aforementioned price increases.)'
The WSJ and Cato articles are WAY out of date. The pricing analysis focuses just on the first 4-8 months. Which the CPA article fully addresses. Point 2 is crazy. LG and Samsung are literally now producing millions of machines here a year and both are expanding their factories. The domestic industry is indeed thriving.
OMG. Yes. It's super hard just to transport them from Sacramento. A single car weighs 100k lbs and is 100 feet long and 13 feet tall. To say nothing about how risky even a slight drop would be for the undercarriage structure. .
EDIT: Just to provide more details, the cars are transported to their final destination from Sacramento by rail using special cars designed for rail-to-rail transfers.
Yes, but the high density and shock-sensitivity also apply to (say) automobiles. Indeed, automobiles are also transported inside the US on dedicated railcars. But automobiles also can be transported overseas, to the point that the general public considers final-assembly automobile plants in the US to typically be tariff engineering. That's why I focused on dimensional obstructions to placing such a vehicle in a shipping container; it's still not clear to me why the different size should make such a big difference.
EDIT: Which makes sense because once you've sunk the $300-500m to build the factory ... your pricing strategy is anchored to a lower marginal cost structure.
The rent control policy, as proposed, affects only large landlords, only existing buildings, and only rent increases above 5%, so it would be unlikely to have a big impact anywhere. That's leaving aside how it's very unlikely to pass even with a Democratic trifecta.
Yep, the policy design makes no sense as policy but is oriented around campaign messaging:
- the headline is a 5% cap to communicate to voters that Biden cares about cost-of-living issues, where housing is probably the most important single piece
- there's a broad exemption for "small" landlords (under 50 units!), which enables Biden to focus his rhetoric on corporate landlords, who don't have a lot of sympathizers (even though it makes the policy much less effective by failing to cover 50% of units)
- it's not technically a mandate but instead is a condition on being able to take the property depreciation deduction, which is completely nonsensical as policy but lets Biden portray it in terms of landlords keeping their end of the bargain in exchange for public support
- the two-year limit, together with an emphasis on increasing supply, together with the framing as a stopgap until new supply comes online, is intended to blunt criticism from center and center-left economists and those influenced by them
I don't particularly like it but it's politics. My biggest worry is that it will motivate housing activists in blue states to push for lower rent increase caps--in NY we now have 5% plus CPI which isn't crazy.
It's really outrageous to be behaving in this way. A bunch of resources will be consumed in formulating the policy, impacted parties figuring out how to comply, regulators figuring out how to enforce...and by the time that's done the policy will just disappear.
That's no excuse. Politicians making promises they have no intent of enacting and don't even think is a good idea themselves is how US politics ended up in the sorry state it's in.
There is a _long_ history of "temporary" rent control being extended permanently, to the point where one would need to be a bit of a fool to believe that wasn't the likely outcome (and plausibly explicit intent).
Several reasons to believe that won't happen here:
- Even if Dems get a trifecta in 2025 (itself unlikely), they are very unlikely to have one two years later. This is not a case of a state or local government consistently controlled by pro-tenant politicians.
- The reason "temporary" rent control can be sticky is because politicians are afraid of the payment shock as rents go up to market after expiration. The payment shock is big when controls are stringent and/or last a long time. Biden's proposal is neither. It's not very stringent: 5% is a high cap in a low-inflation economy (which we probably will have), so the wedge between the controlled price and the market price will be zero in most cases and low in the exceptions. And it lasts only two years so you won't see much compounding.
- The scope of the control also matters. Most Americans live in owner-occupied housing. Of the minority who rent, about half rent from landlords exempt because they own fewer than 50 units (and regulatory arbitrage may push that number up). Of those, most will face less than 10% market rent inflation over two years. So the people who stand to benefit from an extended exemption are not a large slice of the population and they are concentrated in deep blue cities--you would probably see some energy around extending it, but it's not an optimal distribution of concerned constituents for getting it through Congress.
I mean, maybe? But from an administration that has already tried to make multiple explicitly temporary relief programs permanent, "they are playing you" is frankly the way to bet.
It’s a bad policy. However, 45% of all rentals being impacted is not really true. 45% of all rentals would have the 5% rent increase cap. In the past year, primary shelter inflation has been around 5% and falling, so the majority of rent increases will be under 5% anyways making the policy non binding in most cases.
Right. If there’s a place that would have had a rent increase of 7% one year and 2% the next, a cap of 5% per year means they get 5% one year and 4% the next. It’s a brief pinch for the landlords that does cut revenues a bit in ways that might decrease the present expectation of future income streams a bit, but not very much.
10% tariffs are worse both because they literally affect everyone and because they are much more likely to happen. (Biden's rent control proposal requires congressional action and is very unlikely to pass either a Republican-controlled House or a Senate with a 60-vote filibuster), whereas, as Matt points out here, Trump can by and large impose the tariffs on his own recognizance because the idiots in Congress decades ago delegated most of their authority on the subject to the President.)
(Would also add that scope-wise, the most plausible Biden admin proposed parallel to the big Trump tarriff raise is the big unrealized capital gains tax. It’s also unlikely to happen, but if it did, it could have some weird economic distortion effects like asymmetrically discouraging liquid investment.)
Biden is "calling on Congress" to impose a 5% rent control, which means it's unlikely to even happen. As MY explained, tariff rates are set largely by the executive, so there are no obstacles to implementation.
Coincidentally, today also seems to be the first time this election cycle that the markets have paid attention to Trump’s commentary on trade and geopolitics and reacted dramatically— everything in the semiconductor and large-cap software space is tanking after he talked shit about TSMC.
(In his first term, a lot of market actors had a strong prior that Trump would always prioritize getting stocks up— I remember hearing an execution trader joking about Trump holding a gun to Jerome Powell’s head and making him buy assets until the COVID dip reversed. I wonder if this has started to change.)
I agree with the article, but I feel you could write a similar anti-Biden version. There are all kinds of regulations where the Biden administration gives exemptions to well connected groups (and a noticeable refusal to help companies linked to Musk) and Trump could argue without loyalty tests officials will continue favouring Biden supporting groups.
>and a noticeable refusal to help companies linked to Musk
is this actually true? i definitely agree there is *some* additional friction to Musk's companies, probably because of the personal disdain for him among the bureaucrat class, but 1) i don't think that has anything to do with the administration's political decisions and 2) he does eventually get things he needs. spacex still gets its launch permits, even if there's some absurd forced environmental handwringing along the way
The article describing Hitchhiker's Guide to the Galaxy as a fundamentally anticapitalist book is certainly one interpretation I suppose. My own personal read on the Vogons destroying the Earth was a satire of government bureaucracy, but I guess that doesn't fit with the tone of the article.
I saw yesterday that in the newest NASA budget, Congress asks NASA if there are any other customers for SLS besides NASA. The answer to that is no. If Congress pulls SLS funding, NASA will be relying on Musk to get humans into space.
> If Congress pulls SLS funding, NASA will be relying on Musk to get humans into space.
Not true; if Congress pulls SLS funding, NASA will be relying on Musk to get humans *to the moon or Mars*. For getting humans to space, they still have ULA and Boeing, because the commercial crew program specifically funded two bidders so they wouldn't be stuck if one failed.
I mean, he's literally doing it now. We and all of our (extremely rural) neighbors use Starlink, with excellent uptimes, more than enough bandwidth from home and work-from-home use, and reasonable cost.
Good piece. We can see the main purpose of this policy - it allows Trump to turn Mar a Lago into a countryside court, where he can receive the requests of the nobles and adjudicate on them as he pleases. To what extent this about wanting to receive bribes (directly or in kind) versus to what extent it's just that he likes making powerful people grovel I don't know (I'm sure plenty of both) but it's a pretty archaic approach to governance and won't help the country any.
I feel like the rationale for this is all just rather jumbled.
Like I’m somewhat convinced on the Chinese threat to a us based order is bad and the free trade era endangered security but like that idea doesn’t really lead to autarky it leads to an economy based on how friendly you are with the states and greater cooperation with allies in North America and Asia.
The policy of raising prices in hopes of spurring something something and then voila we will be more prosperous and secure seems under explained at the very least. That unrestrained trade policy power will deliver something we want only seems capable of dangerous results of not getting any goal.
I don’t quite understand why that hasn’t spread out from elites.
Like most people work in services and buy a lot of goods. Even if we unwound a lot of offshoring because of automation that wouldn’t change so much. And we have had a very live demonstration about how people feel when prices go up uniformly and wages go up in some sectors and people hate it.
because the general public is extremely stupid and illiterate and things that are actively making their lives worse are often very popular because they sound good. this is basically the root of why most latin american countries are in various states of economic catastrophe at all times. people like the tariffs, the tariffs happen, people get annoyed that things get more expensive but they are successfully mollified when they are given some non-tariff thing to blame (like corporate greed or elites or foreign meddling or whatever). rinse repeat for every other stupid populist idea
Honest question: should some basic economic literacy be a required part of the public K-12 curriculum? Precisely so voters have the knowledge to avoid the most basic dumbass mistakes when voting based on the economy?
Economics is a part of the 12th grade curriculum in many states. But as a former high school teacher I'd strongly caution against any assumption that something being taught means people will learn it. It still matters that we teach it and teach it properly, because that's how the top 20% of students will learn it. But it's typically a safe assumption that the median student will have very little durable learning -- they can't even be relied upon to remember things from junior year in their senior year.
I think the actual correct answer is to make institutions that are outside of or resistant to partisan control, like the Federal Reserve. If there was a "Fed of trade policy," than that institution would be the one setting tariffs and "industrial policy," and they would presumably be staffed by people who are cognizant of economics. Obviously this won't happen in a Trump administration (the political cronyism is a boon for him), but giving politicians less control of "the economy" is good because politicians have much shorter time horizons than institutions.
Why are we giving the currency manipulating Germans a free pass? They spent a lot of years with an artificially low currency, then didn’t even have the grace to bail out the Greeks without kvetching about it endlessly.
I'm a bit unsure how we should work together with our allies in Asia and the Americas means we shouldn't pursue strategies to encourage the Germans to do what we would like.
For the link-averse, this is an article by Jeff Maurer with the headline "Voters Are Furious About Inflation, Demand Measures That Would Make Inflation Worse: Democracy Gonna Democracy"
This just isn't true though, in 2022 the public elected Republicans to a narrow majority in the House of Representatives, rapidly culling additional spending proposals and reframing the entire budget argument towards tiny cuts. Democracy is not the problem here.
[Simpsons-style animated H.L. Mencken dressed as a bus driver tapping a sign reading, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."]
AIUI, voters usually judge incumbent candidates on the ends they achieve. Thus voters asking for the wrong means is usually OK as long as the desired ends are clear too, since politicians can prioritize the ends over the means.
That triangulation, however, requires a talented politician. I'm not sure Congress is paid enough to attract high-quality recruits.
I don’t think it’s the nature of our democracy that’s changed, rather I blame the nature of our elites.
Imagine a small village, one where no one moves to town and no one moves away. I would expect the villagers to be very good at achieving and enforcing consensus through informal coordination, in a way would be less true for residents of a big city with lots of transients.
Speaking as an outsider, my impression is that in moving from local nepotism (broadly construed) to global meritocracy, we made our ruling class more numerous and more porous. They’ve moved from the village to the city. There were plausibly gains in efficiency, but I don’t know that we’ve adequately grappled with the costs, the consequences incurred in making elite coordination more difficult.
By non-democratic bipartisan elite, do you the strengthening of the executive between Truman and Eisenhower in the early cold war? I haven't seen a single person explain how widespread tax hikes would get by without Congress stepping in, and Congress is the democracy. Congress today is generally for a lot of free trade, against most price controls, and has inherent limits on how much tax to raise, even on big bad corporations.
This article reminds me of Elon Musk's recent decision to openly endorse Trump and donate a big sum of money to a super PAC to help get him elected.
It is no secret that Trump is no fan of electric vehicles, but if getting on Trump's good side means that the new Trump tariffs on EV components are tailored to hit Ford/GM/etc. harder than Tesla, then Tesla gains a competitive advantage.
The $7500 tax credits also offer opportunities for similar gamesmanship. The law is so vague as to what qualifies and what doesn't, it gives the president a lot of power to reward and punish. Again, maybe getting of Trump's good sign means Tesla cars continue to get a small tax credit, while the competition gets nothing.
Wouldn’t it be better if developers could just bribe the zoning board? When the law is dysfunctional or too rigid, corruption can be a source of dynamism. This does not justify regulating vast sectors of the economy in order to create opportunities for bribery. But it does push back against the visceral horror many moderates and good citizens feel against corruption. I suspect some people would, intentionally or unintentionally, reduce GDP by $5 to stamp out $1 of bribes. That sort of moralism is silly.
No, it would be better to reform the zoning laws that so stifle economic activity that corruption is the only way to get things done.
What you're suggesting is the white-collar version of defund the police. The theory there was that the police are hopelessly oppressive and an obstacle to people living in freedom and enjoying their rights, and many of the criminal laws they selectively and unequally enforce, like low level drug possession, are BS anyway that could be repealed or ignored without serious consequence. So it would just be easier to bypass the police than to reform them. Seems like the same logic here, except tolerating a variety of nonviolent crimes instead of violent ones.
It’s certainly better to have good laws than graft, but good laws are difficult to come by, whereas the incentives for graft are obvious. Whether graft is better than strictly enforcing bad laws is a legitimate question
It's a legitimate way of identifying problem areas, areas where the laws on the books have so little legitimacy and value that large numbers of people feel it's better to just bypass them than enforce them or comply with them.
But if you believe in and value rule of law, it's not a legitimate solution. For that, there's no substitute to doing the work of slowly boring the hard boards. Gathering enough information to really understand and be able to assess the situation in it's entirety, and then identifying the underlying problem and focusing on fixing that. Not layering patches and epicycles on top of each other, each layer creating it's own new set of problems because the underlying problem was never addressed at the root.
corruption does not limit itself and it is not a genie easily put back in its bottle. most corrupt countries are thoroughly and totally corrupt in a way that completely prevents them from ever developing sane good governance regimes. rescuing a country from that level of corruption requires draconian measures cracking down on people who were just doing something that literally everyone else was doing and indeed that they were expected to do in order to advance their careers.
i won't pretend that it's possible to completely stamp it out, but a few decades of countenancing this or that form of corruption or graft in order to circumvent political paralysis that has locked in bad policy is basically how you destroy economic dynamism. a century of it and you have basically exactly what destroyed ancien regime France.
Then why hasn’t Italy collapsed yet? They seem better at building high speed rail at reasonable cost than we are. Strangely, the countries I see as least corrupt, England, Germany, Norway, the Netherlands, have much less high speed rail than places like Italy and Spain.
A lot of anti-anti-Trump commentary takes the form of, sure, what Trump did is terrible, but this superficially similar thing that I just made up doesn't sound so bad, does it?
I do not understand the impulse to play devil's advocate pro bono.
I don’t understand the urge to engage in gay sex, but I understand many men enjoy it. Think of devil’s advocacy as a kink I enjoy.
And perhaps a socially redeeming kink! My wife is afraid that Trump will prosecute her for being liberal and hyperbole flows fast and furious once people are talking about Trump.
It’s worth asking “how much was America hurt by Trump administration graft.” The best predictor of graft during a second Trump administration is the level of graft during the first. Sure, it might increase 20 or even 50%, but we can get a ballpark estimate from past experience. I don’t think graft is as serious a problem as, say, housing scarcity or the opiate epidemic, it’s probably not in my top ten.
The problem with normalizing graft is that it breeds more graft.
Making graft and corruption a faux pas forces folks to do it behind closed doors. It makes it tougher to coordinate and less profitable. So you get less of it, even if it's still a thing that happens regularly.
When it becomes fine and everyone says, "Well of course they bribed him! That's how you do it!", then you get more and more of it as everyone thinks they need to get their beak wet or they're a sucker.
When Trump was President, everyone (well, some of us anyways) was outraged by the obvious graft. If we stop being outraged, then the next guy will be even more corrupt, and the envelope will keep getting pushed as long as we allow it. If we create new paradigms that make it easier to do graft, we'll just continue to get more and more. Trump's corruption won't be a one-off, it'll be the first in a string of new, innovative ways to extract rents for personal gain as a political leader.
This is exactly what MY is warning about in the last graph. Even if you view Trump as a logical continuation of corruption from other recent presidents, you should still be interested in curtailing it and ensuring that we don't see continued 'innovation' in this area of the economy.
Graft is a question of degree. If there is too much graft, people will get pissed off, and you’ll get civil service reform. I’m not saying graft should be legal, I’m just wondering how much effort should be devoted to suppressing it. Looting the treasury should definitely be punished. Awarding contracts to friends who deliver projects on time and on budget is quite a bit different.
"It’s worth asking “how much was America hurt by Trump administration graft.” The best predictor of graft during a second Trump administration is the level of graft during the first. "
I think this is the wrong question and a substantive point addressed in the OP. MY is making the case that Trump's tariff policy massively expands his opportunity for graft. I'm agreeing with MY and further making the case that tolerating graft last time makes it likely that you'll get more next time.
The further point (that this trend, once begun, is difficult to reverse) wasn't made explicitly but seems intuitive to me.
I don't think graft is as serious a problem as the eventual heat death of the universe or the fact that the mass of men live lives of quiet desperation. It's possible, however, that we don't have to choose one side or the other.
If there were a case to be made that Trumpian graft is a price we pay to end housing scarcity or the opiate epidemic, that would be a case to be made. But no one is making that case. Do tariffs somehow address housing scarcity or the opiate epidemic? Does some other Trump policy address those in any way that has a good shot of being more effective than alternative policies?
I'm not sure we need any industrial policy. Yes, with our allies we need a electronic security policy that ensures we aren't using Chinese chips with backdoors or weaknesses they know about.
But short of that what we need is large stockpiles of things like artillery, more naval hulls etc etc and we are falling behind on those things because we are reluctant to buy from the south Koreans and other allies (they do ships so much more cheaply and quickly...we can build just the nuclear ones at home).
Realistically, the kind of threats we face are either unlikely to cut our ability to trade widely (war in Ukraine type stuff) or are likely to be huge high intensity near pear conflicts where the issue will be decided far before manufacturing gets involved.
We aren't Russia and we aren't -- nor should we plan to -- going to draw universal ire nor are we likely to have any need to grind our way into control of an unfriendly territory. If shit goes bad in Taiwan it will be decided either by a limited engagement that won't break our ability to import or by a very quick high intensity conflict that leaves neither side the time to rearm.
For that purpose we need to maximize our stockpiles by buying cheaply from allies (and even china when we can verify the products) not our manufacturing. Any long war that looks existential will become nuclear anyway.
I completely understand the case Matt is making here. Trump is corruption made flesh. But I want to provide a good, honest, neoliberal shrill reminder that even *honest* trade tariffs are quite bad. When Americans buy stuff from foreigners, they typically do so because it's cheaper. Thus tariffs require Americans to pay more. This mechanically reduces incomes, and makes us poorer. It also reduces the productivity of the economy, by forcing us to shift more capital into obtaining inputs than would be the case without the tariffs (which leaves less capital for everything else). So it's a double whammy: poorer immediately, and poorer and economically weaker over the longer term, because of the hit to productivity and efficiency.
We no doubt do need a measure of industrial policy to ensure we can produce things like artillery shells, warships, attack drones and the like. And given the hostility of China, that list probably has to include things like microprocessors and pharmaceutical precursors.
But, really, we ought to be doing the minimum amount of trade restricting consistent with our national security needs. I remember thinking, shortly after the 2020 election: "Democrats in Congress ought to take advantage of this window to narrow the scope of the executive branch's power to restrict foreign trade." Pity they didn't. And too late now.
This piece melds nicely with Orenn Cass' interview on the Ezra Klein show. He legitimately thinks we can just fully build a domestic supply chain for semiconductors that is basically self-sustaining and barely imports much supplies. Which is at best misguided thinktank policy that will never materialize, and at worst something that Trump actually tries to impose and in turn makes our country poorer
I think that sounds right. For the most part, America's ability to engage in autarky is limited only by the country's willingness to accept a reduced standard of living.
Yep. That's also why I'm skeptical Trump is going to go full bore on a 10% tariff. Unless his economic team is truly delusional, they know that there would be incredibly political consequences to imposing such price increases on American consumers.
For sure. There's a fair amount of policy demagoguery out of both campaigns this cycle.
And this "Import substitution" idea is not novel. Developing countries paired this with Soviet-style 5-year plans to disastrous results.
Isn't this just the bipartisan CHIPS policy if we don't get high-skilled engineers for it? I think those of us who are friend-shoring advocates need to bind together and insist on a several point plan for evaluating the "national security" relevance of an industry. Otherwise every single domestic US industry is going to cite national security and ask for their pound of flesh from the American consumer.
As a designer of ICs (chips), many or most new jellybean (broad market) designs go through a process of evaluating different foundries. Often the cost differences are quite small (a few percent) and things like shipping delays from a foundry to an assembly house come into play. So, while building a fully domestic supply chain from whole cloth might be impossible, small economic nudges could make significant changes in where the bulk of ICs were manufactured.
No doubt we could with enough money and motivation. We have the expertise to build and run the fabs, the biggest barrier is the lithography machines (and maybe metrology) but if we the government put enough emphasis on it I suspect we could offer the Netherlands enough that they wouldn't stop us from paying ASML to locate a secondary production location here and likely the same with Karl Zeiss. I believe the high quality sand is already US sourced.
It would be extremely expensive and take quite some time to implement (a decade or two) but I don't see why it's impossible. And once created I see no reason it wouldn't be self-sustaining. It's a very capital intensive industry and it's not like we don't have a perfectly adequate pool of talent to hire locally.
I don't think it's a good idea but it seems within the realm of possibility
And where we do need industrial policy it's probably better to just subsidize the creation of domestic (or friendly nation) manufacturing and supply chains.
Or apply "Buy America" or "Buy Friendly" restrictions on military and national security procurement and on supplier to military / national security contractors.
US military equipment should not be using chips sourced from China and if military suppliers also have a civilian business which does source chips from China (e.g. Boeing can put Chinese chips in a 737 Max, but not in a V-22) then there has to be a hard separation between those sides of the business.
One problem with this will be that officially designating countries as "friendly" is going to generate a lot of complaints: the whole point of the WTO and MFN status for China is that you don't get to designate a country as "more friendly" than China. Domestic preference is a lot easier to win an argument for in the global framework, but absent bilateral or multilateral treaties, preferring "friends" to "not-friends" is not really allowed. This is why the US should sign a trilateral agreement with the UK and EU/EEA and sign something like a TPP or TPP-lite with friendly nations in Asia so it can formally designate signatories to those treaties as "friendly" for the purposes of military and other procurement.
Note that the US can't restrict this to treaty allies: that would exclude Taiwan and Austria and Ireland, which are definitely friendly, but which are not treaty allies for good reasons (Taiwan because of the One-China Policy, Austria because the treaty ending WWII prohibits it from joining a military alliance, and Ireland because it refuses to ally with the UK for historical reasons). A set of trade agreements that defines certain countries as friendly (Canada, Mexico, the Europeans, the Asian democracies, Australia, New Zealand) would help (also, removing some of the trade restrictions on those countries, e.g. mutual recognition of safety certifications, would be a good idea).
Aside: I personally would be in favour of EU-style mutual freedom of movement with friendly, rich, democratic countries. I don't think that anyone benefits from how hard it is to get a work visa in Japan as an American or in America as a Japanese citizen. The US would probably want to limit how much of Eastern Europe it includes in this (ie not include the whole EU), but that's implicit in the "rich" bit of my "friendly, rich, democratic".
Being able to work in the US with just a British or French or German or Australian or Japanese or Canadian or (South) Korean passport would not wreak havoc on the US immigration system. As in the EU, you'd reserve the right to PNG people (declare them "persona non grata", ie say that this particular individual is not welcome), and you'd probably want a wider prohibition on people convicted of serious crimes (the equivalent of felons), but the general principle would be that an ordinary person can just get a job and move to another country without any bureaucracy.
Selfishly, the US could get the EU to agree with this for some countries but not others: the UK couldn't, but we could piggy-back on the US deal, and I'd really like to get back the right to travel to and live and work in at least a large section of the EU (and excluding the poorer bits of the East would resolve the immigration issue that the UK had which drove Brexit - no-one was complaining the country was overrun with French people).
Co-sign! It took Siemens like 8 months to get my temp. work visa for Germany and the steps they had to go through to prove no German could perform the job was crazy.
... and, seriously: who benefits from this relative to a bilateral treaty where people can just travel.
If we allow the free movement of goods and capital, then we should allow the free movement of people between places too.
Your plan results in a lot more Korean Fried Chicken joints.
One of my big ideas is that we should use industrial policy and friendshoring to basically engage in a price war with China.
America can't make enormous amounts of crap anymore, nor is that our strength, but we CAN organize a massive global bloc of cooperating countries to compete with the wave of cheap silicon and batteries from China. China is now middle-income, which means there are PLENTY of places where it's cheaper to manufacture now, and just need to have their capacity built up.
So, instead of dumping trillions into subsidizing decrepit or too-immature national champions domestically, we embrace a world where all inputs become dramatically cheaper. And in the process, we undermine the CCP's stability by forcing them to subsidize their overcapacity more and more, while we sit at the top of a new free-world supply chain.
>we CAN organize a massive global bloc of cooperating countries.... there are PLENTY of places where it's cheaper to manufacture now
I agree with the gist of what you're saying here, but I'm not sure that there's 'plenty' of such places. There's a few, mostly in Asia where they're probably going to be pretty firmly in China's security orbit within the next decade or two. There's Mexico, sort of. But not only do all of these countries have their flaws, they all lack the massive scale of China. You could do some manufacturing in Vietnam, some in Mexico, some in Thailand..... but they're all too small on their own, and 2 out of those 3 are probably going to be taking orders from Beijing by 2035.
Except for India, which for reasons of being a messy democracy with the per-capita GDP of Sub-Saharan Africa, I suspect is never going to replicate China's 20th century. Too many veto points, a real court system and a bill of rights..... Not sure any democracy has ever gone from poor to rich on the East Asian model, that usually requires being an autocracy! Even Modi can't mildly reform their insane agricultural pricing laws, much less seize lands for factories, fix India's stupid labor protections, fight off militant unions, etc.
Good criticisms. I don't have an immediate rebuttal, but I appreciate the constructive attitude.
I basically agree with all this, but the issue is that
>US should sign a trilateral agreement with the UK and EU/EEA and sign something like a TPP or TPP-lite with friendly nations in Asia.... A set of trade agreements that defines certain countries as friendly (Canada, Mexico, the Europeans, the Asian democracies, Australia, New Zealand) would help (also, removing some of the trade restrictions on those countries, e.g. mutual recognition of safety certifications, would be a good idea
Would take 50-100 years to get passed. The US and the EU have been working on a free trade deal for decades now. The EU has been working on a free trade deal with South America for I believe 20 years, off and on. It just takes forever to get these kinds of things passed in rich democratic countries, there are so many stakeholders and voices etc. etc. Just the amount of detail that goes into something like 'safety certifications' and the number of industries involved is insane
I hate to harp on this but anyone who talks about the future looking normal in 5+ years is making a massive bet ok AI progress stalling in unexpected ways.
"Buy Friendly" is a great phrasing that should get used more often.
As an Irish citizen, I don’t think that Irish neutrality is now based on historical refusal to ally with the UK. That justification disappeared when the constitution was amended per the Good Friday Agreement to delete the territorial claim to Northern Ireland. The remaining justification is mainly that it’s popular. Regarding military entanglement with the UK, Ireland has been totally reliant on the RAF for air defense since the 1960s. Ireland has no radar, no missile defense, no interceptors.
I find this really dispiriting. Ireland should have effective defense forces and be in a position to offer useful capabilities to NATO. As it stands, we’d be more of an impediment.
I think that's the original reason for Ireland being neutral and now neutrality is just seen as being part of Irishness (the way it's part of Swissness) so it's a tradition that no longer has an underlying reason but remains popular.
God no, the navy is already falling behind because of the restrictions that prevent us from buying ships from the south Koreans.
Not buying chips from china is good because verification is very difficult. For most other things, I fear we are handicapping ourselves.
Realistically, the kind of threats we face are either unlikely to cut our ability to trade widely (war in Ukraine type stuff) or are likely to be huge high intensity near pear conflicts where the issue will be decided far before manufacturing gets involved. A WW2 style scenario that doesn't go nuclear is no longer very plausible.
It is, but usually politics makes it much easier to tax people through higher prices than through actual taxes. The Jones Act is the age-old case in point. It'd be way more efficient to just subsidize American shipbuilding, but the politics makes that seemingly impossible. so we're stuck with a relic of a law that raises costs and makes logistics much tougher.
Did someone say, "the Jones Act"? [Rockin' guitars fade in] https://www.youtube.com/watch?v=k9-qPrOE_VM
I think Michael Pettis's point that due to China's large size and the international demand for US Treasuries the US is going to be subject to Industrial Policy whether the blue stockings in the Econ departments like it or not. So, it's better to be cleared about it.
That said a 10% tarrif on everything is not an actual Industrial policy, and adding exemptions for GOP donors doesn't make it so.
Let the people by BYD EV’s!
The CCP will certainly appreciate all those extra cameras in the US 👀
There are reasonable requirements we could make to sell Chinese EV’s here instead of outright banning them are taxing them to death.
Tariffs on Chinese solar cells are going from 25% to 50% this year. It’s insane we are trying to build a green future under these dumb burdens. It shouldn’t cost 20k to put solar panels on my house!
To be fair, that price tag is largely due to the inefficiency (in labor, balance of system, and cost of sales/permits/financing/time) of small scale installations of solar panels (and wiring, etc.) on (non-flat, non-standardized-shaped) roofs. On a per-watt basis, commercial solar farms are way cheaper than home systems (like, 1/3 the total installed cost, see https://www.nrel.gov/solar/market-research-analysis/solar-installed-system-cost.html), with commercial and industrial rooftops somewhere in the middle. You can buy (retail, not even wholesale) US-made solar panels for <$0.75/W today. Some as low as $0.50/W.
Yes. The costs of permitting and the over-regulation of utility interconnections has a big role in this. The comparison I find most instructive is with Australia, where solar installers earn the same wage as US installers, they are using the same imported panels and wire and inverters as US installers, the rooftops are at least roughly similar to US rooftops, but the full cost of rooftop residential installation is under $1 (USD) per watt, compared to $3+/watt in the US.
As long as we are discussing "friendshoring", I would argue that letting Australian regulators take over the US rooftop solar industry would do much more to increase solar uptake than lowering a 25% tariff on Chinese solar modules that are currently selling for 10 cents/watt on the spot market.
Protectionist sentiments aside there is a good strategic and human rights rationale for blocking the dumping of Chinese EVs and solar panels. Auto manufacturing is a key strategic industry. It would be quite rash I think to allow the Chinese to destroy it in the West. Noah Smith has some cogent remarks on this I can look up later.
I would think that if we actually want to build a green future, we should want to ensure future supply of solar panels continues to be available. Letting all domestic and friendly solar panel manufacturers go bankrupt so that we can get temporary cheap access to Chinese solar panels, which could get cut off at any moment in the future, doesn’t seem like a good strategy for building a green future. You would only do that if you think the next five years of climate policy is more important than the actual future.
China allows Tesla to sell cars there and Apple to sell phones and laptops, and the CCP are the most paranoid fucks on planet earth. Apparently their ability to vet potentially hostile equipment significantly exceeds America’s. That’s not good!
Doesn't China have vast insight on how those products are made, given that most of them (or most of their parts) are made in China? I don't think there is information symmetry here.
Could be a factor. But, like, don't we have smart engineers with sophisticated tools who can scan equipment, machinery and components? At the end of the day they still don't have a chip firm as advanced as Nvidia. But maybe they really are stronger in this area.
I'm not sure which is worse: the fact (if it's a fact) that their technical capacities in equipment vetting so exceed ours, or the fact that we're now paranoid to the point of restricting our car buyers more than they restrict theirs. Sigh.
It is more or less impossible to ensure that there isn't any hidden logic in an advanced microprocessor by examination. The amount of silicon needed for instructions like "if you read the following 64K sequence of data from a contiguous region of memory followed by instruction FOO, disable the cryptographic system" is _tiny_ compared to size of a modern chip, extremely easy to hide from physical examination, and would take approximately eternity to find via circuit testing.
Yes, no, maybe. I think Stuxnet was pretty illustrative of what's now possible. That worm / virus was insane. It literally crawled networks looking for Siemens Step7 systems to ultimately find the Iranian centrifuge controllers. https://en.wikipedia.org/wiki/Stuxnet
Also -- no one is restricting BYD from entering the US market. They just won the largest LADOT bus order. They can build cars here tomorrow if they wanted.
https://en.byd.com/news/byd-receives-largest-battery-electric-bus-order-in-u-s-history/
The former is much worse than the latter.
I think this is a legal concern more than a logistics/capacity concern. If the CCP wants to inspect anything in a Chinese factory, no one stops them. If the US Feds want to inspect something in an American factory, some lawyers tell them to go get a warrant. That warrant might be granted, sure, but the point is that the US government has to jump through more hoops to do any regulating. Which also means it costs more to do any regulating.
* Maybe warrant is not the right word, but there is a process.
And microphones. If you know that someone regularly conducts commercially sensitive work calls in their car, it's a small matter to spy on that if you have access to the car's data system.
Cars were one of last bastions of privacy. I hate that we’re losing that in order to turn them into smartphones. I don’t care to drive a smartphone.
Taking all the knobs and buttons away in favour of screens is also annoying. I hope consumers fight that trend.
On the bright side, you can use this concern to justify to your wife why you need to buy a Lotus -- "Honey, it's got practically no electronics in it! It's like a rolling Cone of Silence."
Or this: https://bringatrailer.com/listing/2008-aston-martin-db9-22/
I can think of a lot worse ways to spend $45k.
Say no to dumping!
Some good news on existing makes https://www.forbes.com/sites/jimgorzelany/2024/07/15/sales-surge-shows-the-electric-cars-death-may-have-been-greatly-exaggerated/
Here's how BYD prices in Europe: https://www.reuters.com/business/autos-transportation/why-byds-ev-exports-sell-twice-china-price-2024-04-26/
Would be the same story if they tried to compete in the US. Currently they have "no plans" to enter the US market.
Here’s a good explanation of how to intervene in markets in a more sophisticated and strategic manner. Hard to put on a bumper sticker I’ll grant…
https://www.ft.com/content/e948ae78-cfec-43c0-ad5e-2ff59d1555e9
But will it fit on both sides of a tee shirt? Thanks for a great link - very interesting article that, among other things, informed me that we have a Deputy National Security Advisor for International Economics, which makes me feel a bit better...
Great issue to highlight. Since the free-trade consensus is dead, and a tarrif heavy system is also bad as you point out here, I wonder what a better system look like? It would be great if we could achieve a bipartisan consensus that friend-shoring is a good idea, then the limited tarriff regime could be focused on China and paired with subsidizing domestic production and/or production in friendly countries.
> friend-shoring is a good idea
Coupled with "make more friends".
Is this about international relations, lifestyle advice, or AI alignment?
... Yes
Possibly a better system would be, since tariffs are basically like a VAT except only on imported items, to implement a generally applicable VAT across the board on all products, domestically produced as well as imported. And then set the rates a bit higher on value adds that occur outside the US, or outside the US plus certain other that are treated as domestic.
So.... you're just proposing a *lower* across-the-board tariff (plus an unrelated VAT)?
No, I didn't say anything about how much higher the rate should be on value added outside the US versus domestically. What I'm saying is that if you want to design a tariff system that minimizes the opportunity President/administrative agencies micromanagement, it should be embedded as part of a coherent whole VAT tax system.
Because that what it is, a partial VAT, but people won't see it or think of it that way unless it's made blindingly obvious by actually making it just one component of an overall VAT system of general applicability.
Is free trade dead? Or is it that we've let China become too dominant and need to corral them more?
In a Biden (or Democratic) second term, would we see lots of tariffs on nations other than China? I'm guessing no.
[James Harden eyeroll animated GIF, but instead of Harden it's a Canadian softwood lumberjack]
Fair point.
I think the free-trade consensus is dead since China showed just how a free system could be subverted for nefarious ends (at least anticipating their move against Taiwan and their extant contributions to spreading totalitarianism).
You should consider making this one available to the general public. A lot of conservatives and moderates should read it.
Think the whole week is free to read
Meh. Democrats enjoy industrial policy, intervening with regulations and picking and entrenching winners with their policies. Trump may be much sloppier, but this is pot calling kettle.
Matt isn't "Democrats", this response doesn't make sense.
why is it impossible to evaluate the merits of a thing independently of the partisan blame game?
i've noticed this over and over again in internet discourse and i genuinely don't even understand what the thought behind it is.
'this is bad? eh, who cares. the other side is also bad.' what?
So why would it be good to have two statist parties? Markets are good and having both parties ditch their support for them will be bad for everybody.
Except for the central planners in charge.
Being "sloppier" matters. It is unusual for Democrats to have a barely-concealed "you give me money, I give you policy" trade. That kind of politics is very corrosive, and one of the nice things about America is that that kind of corruption among officials is uncommon.
What? Have you not looked at large Democratic cities? Did you not see the EV baksheeh that conveniently left out Tesla? Who’s making money off the California high speed rail boondoggle? What’s going on with Menendez in New Jersey? I’m sure it’s all over the place if you care to look.
California high speed rail suffers from the problem that they are *required* to evaluate bids according to specific criteria, and only a few big companies can meet those criteria, and no human judgment is applied at all. It’s exactly the opposite of corruption - it’s anti-corruption policy driving prices up.
Menendez, and the various non-profits given official roles in San Francisco, really seem like corruption.
I have no idea what you’re talking about with “EV baksheesh”.
Biden's EV subsidies that required unionized workers.
Corruption increases the more local you get and is worst in localities with the a dominant political affiliation the same as the state they are located in. This is true for both parties.
I think this topic is super interesting. I started my career in manufacturing / supply chain shutting down US factories and moving them to Mexico (e.g., residential breakers, lighting panels). I was then responsible for transferring rail propulsion component production (e.g.,, gearboxes, motors, inverters) from Germany to the US to meet Buy America provisions. I've spent a lot of time in factories. I think what Matt misses with his Buy America critique - which I think he gets from Alon Levy - is that these rail rolling stock contracts are *so* competitive that they get competed down to marginal cost and marginal cost with US production is going to be cheaper than globally sourced + massive finished stock transport costs. That's why Bombardier Transportation was acquired by Alstom. These are very thin margin contracts. Said more specifically because I did the calculations, the Siemens S70 (Avanto) produced in Sacramento for Houston's METRORail is *cheaper* than if it was built in the main production facility in Europe and imported because the Sacramento facility has now reached world-class production scale / capacities / efficiency.
Tying this back to this article ... the Samsung and LG washing machine story is a long one but it seems to have ended in a great spot. In 2013, the Obama administration imposed tariffs on imported washing machines from South Korea. They shifted production to China which led to a U.S. International Trade Commission anti-dumping investigation in 2016 that found the anti-dumping margins were 44.28%. In January 2018, Trump imposed tariffs of 20% to 50% on large residential washing machines. The tariffs expired in February 2023. Ok. So what happened? Samsung and LG both built massive US supply chains (same strategy as Bosch) and are building millions of washing machines a year here. Net net on pricing is they rose initially to match the tariff level and then fell just as quickly as production ramped.
Overall -- I think this is a huge win. But it's super interesting that Matt seems to be leaning way more into the ~ Libertarian view of just let capital and goods flow freely.
https://prosperousamerica.org/economic-view-tariff-jumping-investment-the-success-of-the-2018-washing-machine-tariffs/
https://www.cbp.gov/trade/quota/bulletins/qb-23-505#:~:text=Quota%20Period%3A,and%20Chapter%2085%20duty%20rates.
This Cato piece strongly disagrees on your washing machine story I guess:
1. Supposedly raised prices on the washing machines https://www.wsj.com/articles/consumers-bore-cost-for-u-s-tariffs-on-washing-machines-paper-finds-11555936276
2. 'Second, according to an August 2019 examination of the tariffs’ effects by the United States’ International Trade Commission (ITC), which recommended the tariffs and is required by law to review them periodically, the tariffs have not produced a thriving domestic industry. Although capacity and employment reportedly increased, for example, actual production declined, “resulting in declining capacity utilization, lower productivity levels, and higher unit labor costs.” (The ITC also noted the aforementioned price increases.)'
https://www.cato.org/blog/will-president-trump-do-essential-medicines-what-he-did-washing-machines-lets-hope-not
The WSJ and Cato articles are WAY out of date. The pricing analysis focuses just on the first 4-8 months. Which the CPA article fully addresses. Point 2 is crazy. LG and Samsung are literally now producing millions of machines here a year and both are expanding their factories. The domestic industry is indeed thriving.
EDIT:
https://news.samsung.com/us/samsungs-road-to-success-south-carolina-seha-home-appliance-manufacturing-facility/
https://www.lg.com/us/press-release/lg-expands-tennessee-laundry-factory-operations-to-support-unprecedented-us-demand
"massive finished stock transport costs"
Why are these so expensive? Is it really that hard to fit rolling stock into a shipping container (or group of shipping containers "fused" together)?
OMG. Yes. It's super hard just to transport them from Sacramento. A single car weighs 100k lbs and is 100 feet long and 13 feet tall. To say nothing about how risky even a slight drop would be for the undercarriage structure. .
https://assets.new.siemens.com/siemens/assets/api/uuid:8bdeb615058534866abb0890338b4cfcc1110406/twin-cities-s70-data-sheet.pdf
EDIT: Just to provide more details, the cars are transported to their final destination from Sacramento by rail using special cars designed for rail-to-rail transfers.
Yes, but the high density and shock-sensitivity also apply to (say) automobiles. Indeed, automobiles are also transported inside the US on dedicated railcars. But automobiles also can be transported overseas, to the point that the general public considers final-assembly automobile plants in the US to typically be tariff engineering. That's why I focused on dimensional obstructions to placing such a vehicle in a shipping container; it's still not clear to me why the different size should make such a big difference.
Shipping containers are 40 feet long.
On washing machines, after everything settled out, how much, if any, do you think onshoring increased purchase cost?
None. Maybe down. By Jan 2020 CPI pricing returned to 2017 levels and look at the disconnect vs. CPI since 2022 peaks: https://data.bls.gov/timeseries/CUUR0000SEHK01.
Everything is coming down.
EDIT: Which makes sense because once you've sunk the $300-500m to build the factory ... your pricing strategy is anchored to a lower marginal cost structure.
Which policy is worse, Trump's 10% tariffs or Bidens 5% rent control?
The rent control policy, as proposed, affects only large landlords, only existing buildings, and only rent increases above 5%, so it would be unlikely to have a big impact anywhere. That's leaving aside how it's very unlikely to pass even with a Democratic trifecta.
It also lasts only two years and is explicitly intended as a stopgap. It's pretty meaningless
Almost like it was designed to be meaningless but sound good as campaign rhetoric...
Yep, the policy design makes no sense as policy but is oriented around campaign messaging:
- the headline is a 5% cap to communicate to voters that Biden cares about cost-of-living issues, where housing is probably the most important single piece
- there's a broad exemption for "small" landlords (under 50 units!), which enables Biden to focus his rhetoric on corporate landlords, who don't have a lot of sympathizers (even though it makes the policy much less effective by failing to cover 50% of units)
- it's not technically a mandate but instead is a condition on being able to take the property depreciation deduction, which is completely nonsensical as policy but lets Biden portray it in terms of landlords keeping their end of the bargain in exchange for public support
- the two-year limit, together with an emphasis on increasing supply, together with the framing as a stopgap until new supply comes online, is intended to blunt criticism from center and center-left economists and those influenced by them
I don't particularly like it but it's politics. My biggest worry is that it will motivate housing activists in blue states to push for lower rent increase caps--in NY we now have 5% plus CPI which isn't crazy.
It's really outrageous to be behaving in this way. A bunch of resources will be consumed in formulating the policy, impacted parties figuring out how to comply, regulators figuring out how to enforce...and by the time that's done the policy will just disappear.
Did you miss the part about how it would be unlikely to pass even with a Democrat trifecta and really appears to be a campaign sound-bite?
That's no excuse. Politicians making promises they have no intent of enacting and don't even think is a good idea themselves is how US politics ended up in the sorry state it's in.
So, we should take Biden seriously, but not literally?
There is a _long_ history of "temporary" rent control being extended permanently, to the point where one would need to be a bit of a fool to believe that wasn't the likely outcome (and plausibly explicit intent).
Several reasons to believe that won't happen here:
- Even if Dems get a trifecta in 2025 (itself unlikely), they are very unlikely to have one two years later. This is not a case of a state or local government consistently controlled by pro-tenant politicians.
- The reason "temporary" rent control can be sticky is because politicians are afraid of the payment shock as rents go up to market after expiration. The payment shock is big when controls are stringent and/or last a long time. Biden's proposal is neither. It's not very stringent: 5% is a high cap in a low-inflation economy (which we probably will have), so the wedge between the controlled price and the market price will be zero in most cases and low in the exceptions. And it lasts only two years so you won't see much compounding.
- The scope of the control also matters. Most Americans live in owner-occupied housing. Of the minority who rent, about half rent from landlords exempt because they own fewer than 50 units (and regulatory arbitrage may push that number up). Of those, most will face less than 10% market rent inflation over two years. So the people who stand to benefit from an extended exemption are not a large slice of the population and they are concentrated in deep blue cities--you would probably see some energy around extending it, but it's not an optimal distribution of concerned constituents for getting it through Congress.
I mean, maybe? But from an administration that has already tried to make multiple explicitly temporary relief programs permanent, "they are playing you" is frankly the way to bet.
45% of all rentals isn’t “big” to you?
It’s a bad policy. However, 45% of all rentals being impacted is not really true. 45% of all rentals would have the 5% rent increase cap. In the past year, primary shelter inflation has been around 5% and falling, so the majority of rent increases will be under 5% anyways making the policy non binding in most cases.
How many places see sustained more than 5% annual increases?
Right. If there’s a place that would have had a rent increase of 7% one year and 2% the next, a cap of 5% per year means they get 5% one year and 4% the next. It’s a brief pinch for the landlords that does cut revenues a bit in ways that might decrease the present expectation of future income streams a bit, but not very much.
I’d argue the tariffs because they will literally hit everyone. Own a home free and clear? Still going to pay higher prices for all the things.
10% tariffs are worse both because they literally affect everyone and because they are much more likely to happen. (Biden's rent control proposal requires congressional action and is very unlikely to pass either a Republican-controlled House or a Senate with a 60-vote filibuster), whereas, as Matt points out here, Trump can by and large impose the tariffs on his own recognizance because the idiots in Congress decades ago delegated most of their authority on the subject to the President.)
The tarriffs would be considerably worse. They’re also much more likely to actually happen.
(Would also add that scope-wise, the most plausible Biden admin proposed parallel to the big Trump tarriff raise is the big unrealized capital gains tax. It’s also unlikely to happen, but if it did, it could have some weird economic distortion effects like asymmetrically discouraging liquid investment.)
Biden is "calling on Congress" to impose a 5% rent control, which means it's unlikely to even happen. As MY explained, tariff rates are set largely by the executive, so there are no obstacles to implementation.
Trump’s tariffs. 5% a year isn’t much “control”.
Rent control is bad but Biden’s idea would have to get through Congress.
Tariffs are all in the hands of the president.
Coincidentally, today also seems to be the first time this election cycle that the markets have paid attention to Trump’s commentary on trade and geopolitics and reacted dramatically— everything in the semiconductor and large-cap software space is tanking after he talked shit about TSMC.
(In his first term, a lot of market actors had a strong prior that Trump would always prioritize getting stocks up— I remember hearing an execution trader joking about Trump holding a gun to Jerome Powell’s head and making him buy assets until the COVID dip reversed. I wonder if this has started to change.)
I agree with the article, but I feel you could write a similar anti-Biden version. There are all kinds of regulations where the Biden administration gives exemptions to well connected groups (and a noticeable refusal to help companies linked to Musk) and Trump could argue without loyalty tests officials will continue favouring Biden supporting groups.
Could you maybe write that article? As-described, your statement is too broad to be meaningful. Do you just mean stuff like Clean Air Act?
Either way, Matt's point about the economy-wide impact of Trump's proposed tariffs seem to set that case apart.
>and a noticeable refusal to help companies linked to Musk
is this actually true? i definitely agree there is *some* additional friction to Musk's companies, probably because of the personal disdain for him among the bureaucrat class, but 1) i don't think that has anything to do with the administration's political decisions and 2) he does eventually get things he needs. spacex still gets its launch permits, even if there's some absurd forced environmental handwringing along the way
The US government is absurdly reliant on Elon Musk. Ronan Farrow did some great reporting on this last year >> https://www.newyorker.com/magazine/2023/08/28/elon-musks-shadow-rule
The article describing Hitchhiker's Guide to the Galaxy as a fundamentally anticapitalist book is certainly one interpretation I suppose. My own personal read on the Vogons destroying the Earth was a satire of government bureaucracy, but I guess that doesn't fit with the tone of the article.
I saw yesterday that in the newest NASA budget, Congress asks NASA if there are any other customers for SLS besides NASA. The answer to that is no. If Congress pulls SLS funding, NASA will be relying on Musk to get humans into space.
I prefer that to where we were before relying entirely on the Russians to get into space. Congress willingly shot themselves in the foot on this one.
> If Congress pulls SLS funding, NASA will be relying on Musk to get humans into space.
Not true; if Congress pulls SLS funding, NASA will be relying on Musk to get humans *to the moon or Mars*. For getting humans to space, they still have ULA and Boeing, because the commercial crew program specifically funded two bidders so they wouldn't be stuck if one failed.
This seems quite bad, the administration has misspent billions on rural internet despite knowing Musk could deliver it much cheaper and quicker.
https://www.theverge.com/2023/12/12/23999070/spacex-starlink-fcc-rural-digital-opportunity-fund-fcc-rejected
https://www.google.com/amp/s/www.foxbusiness.com/politics/fcc-commissioner-hits-out-biden-admin-status-high-speed-internet-projects.amp
> despite knowing Musk could deliver it much cheaper and quicker.
You mean despite Musk’s claims that he could. They don’t believe him.
I mean, he's literally doing it now. We and all of our (extremely rural) neighbors use Starlink, with excellent uptimes, more than enough bandwidth from home and work-from-home use, and reasonable cost.
Good piece. We can see the main purpose of this policy - it allows Trump to turn Mar a Lago into a countryside court, where he can receive the requests of the nobles and adjudicate on them as he pleases. To what extent this about wanting to receive bribes (directly or in kind) versus to what extent it's just that he likes making powerful people grovel I don't know (I'm sure plenty of both) but it's a pretty archaic approach to governance and won't help the country any.
I feel like the rationale for this is all just rather jumbled.
Like I’m somewhat convinced on the Chinese threat to a us based order is bad and the free trade era endangered security but like that idea doesn’t really lead to autarky it leads to an economy based on how friendly you are with the states and greater cooperation with allies in North America and Asia.
The policy of raising prices in hopes of spurring something something and then voila we will be more prosperous and secure seems under explained at the very least. That unrestrained trade policy power will deliver something we want only seems capable of dangerous results of not getting any goal.
Tariffs are taxes that are popular. That is not common, and in itself is enough to explain to me the support we're seeing.
The pro-free trade movement was primarily driven by elite consensus, and our elites are no longer good at creating and maintaining consensus.
I don’t quite understand why that hasn’t spread out from elites.
Like most people work in services and buy a lot of goods. Even if we unwound a lot of offshoring because of automation that wouldn’t change so much. And we have had a very live demonstration about how people feel when prices go up uniformly and wages go up in some sectors and people hate it.
because the general public is extremely stupid and illiterate and things that are actively making their lives worse are often very popular because they sound good. this is basically the root of why most latin american countries are in various states of economic catastrophe at all times. people like the tariffs, the tariffs happen, people get annoyed that things get more expensive but they are successfully mollified when they are given some non-tariff thing to blame (like corporate greed or elites or foreign meddling or whatever). rinse repeat for every other stupid populist idea
Honest question: should some basic economic literacy be a required part of the public K-12 curriculum? Precisely so voters have the knowledge to avoid the most basic dumbass mistakes when voting based on the economy?
Economics is a part of the 12th grade curriculum in many states. But as a former high school teacher I'd strongly caution against any assumption that something being taught means people will learn it. It still matters that we teach it and teach it properly, because that's how the top 20% of students will learn it. But it's typically a safe assumption that the median student will have very little durable learning -- they can't even be relied upon to remember things from junior year in their senior year.
I think the actual correct answer is to make institutions that are outside of or resistant to partisan control, like the Federal Reserve. If there was a "Fed of trade policy," than that institution would be the one setting tariffs and "industrial policy," and they would presumably be staffed by people who are cognizant of economics. Obviously this won't happen in a Trump administration (the political cronyism is a boon for him), but giving politicians less control of "the economy" is good because politicians have much shorter time horizons than institutions.
That would be nice, but very difficult to implement on a national scale given the number of stakeholders who would be interested in sabotaging it.
Why are we giving the currency manipulating Germans a free pass? They spent a lot of years with an artificially low currency, then didn’t even have the grace to bail out the Greeks without kvetching about it endlessly.
I'm a bit unsure how we should work together with our allies in Asia and the Americas means we shouldn't pursue strategies to encourage the Germans to do what we would like.
I'm beginning to think that unfettered democracy and good economic policies are kinda sorta in conflict with one another.
Tariffs, rent control, and high taxes on corporations are popular, while things like carbon taxes and free trade are not.
We need to bring back the non-democratic bipartisan elite.
I'm just gonna leave this here: https://imightbewrong.substack.com/p/voters-are-furious-about-inflation?utm_source=publication-search
For the link-averse, this is an article by Jeff Maurer with the headline "Voters Are Furious About Inflation, Demand Measures That Would Make Inflation Worse: Democracy Gonna Democracy"
This just isn't true though, in 2022 the public elected Republicans to a narrow majority in the House of Representatives, rapidly culling additional spending proposals and reframing the entire budget argument towards tiny cuts. Democracy is not the problem here.
[Simpsons-style animated H.L. Mencken dressed as a bus driver tapping a sign reading, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."]
AIUI, voters usually judge incumbent candidates on the ends they achieve. Thus voters asking for the wrong means is usually OK as long as the desired ends are clear too, since politicians can prioritize the ends over the means.
That triangulation, however, requires a talented politician. I'm not sure Congress is paid enough to attract high-quality recruits.
I don’t think it’s the nature of our democracy that’s changed, rather I blame the nature of our elites.
Imagine a small village, one where no one moves to town and no one moves away. I would expect the villagers to be very good at achieving and enforcing consensus through informal coordination, in a way would be less true for residents of a big city with lots of transients.
Speaking as an outsider, my impression is that in moving from local nepotism (broadly construed) to global meritocracy, we made our ruling class more numerous and more porous. They’ve moved from the village to the city. There were plausibly gains in efficiency, but I don’t know that we’ve adequately grappled with the costs, the consequences incurred in making elite coordination more difficult.
By non-democratic bipartisan elite, do you the strengthening of the executive between Truman and Eisenhower in the early cold war? I haven't seen a single person explain how widespread tax hikes would get by without Congress stepping in, and Congress is the democracy. Congress today is generally for a lot of free trade, against most price controls, and has inherent limits on how much tax to raise, even on big bad corporations.
Thank you Adam Schiff
https://www.cnn.com/2024/07/17/politics/adam-schiff-joe-biden-congress/index.html
It's a shame to see Adam Schiff of all people become objectively pro-fascist. [/median Ridin' with Biden commenter]
hidin' behind Biden
In real time, the developing consensus seems to be that (1) Schiff has been bought off by donors and (2) Katie Porter would have been better.
I wish the donors would buy off more politicians to tell Biden to step down.
I just hope tariffs + Trump's interference at the Fed = the macroeconomic conditions for a Democratic comeback in 2026 and 2028.
And that we don't all starve. Also, that.
This article reminds me of Elon Musk's recent decision to openly endorse Trump and donate a big sum of money to a super PAC to help get him elected.
It is no secret that Trump is no fan of electric vehicles, but if getting on Trump's good side means that the new Trump tariffs on EV components are tailored to hit Ford/GM/etc. harder than Tesla, then Tesla gains a competitive advantage.
The $7500 tax credits also offer opportunities for similar gamesmanship. The law is so vague as to what qualifies and what doesn't, it gives the president a lot of power to reward and punish. Again, maybe getting of Trump's good sign means Tesla cars continue to get a small tax credit, while the competition gets nothing.
And, of course, getting on Trump's good side could have similar advantages for Elon in his other companies, such as SpaceX.
Wouldn’t it be better if developers could just bribe the zoning board? When the law is dysfunctional or too rigid, corruption can be a source of dynamism. This does not justify regulating vast sectors of the economy in order to create opportunities for bribery. But it does push back against the visceral horror many moderates and good citizens feel against corruption. I suspect some people would, intentionally or unintentionally, reduce GDP by $5 to stamp out $1 of bribes. That sort of moralism is silly.
This is more like proposing to increase the strictness of zoning regs so that the boards can extort more money from developers. Bad on both fronts.
No, it would be better to reform the zoning laws that so stifle economic activity that corruption is the only way to get things done.
What you're suggesting is the white-collar version of defund the police. The theory there was that the police are hopelessly oppressive and an obstacle to people living in freedom and enjoying their rights, and many of the criminal laws they selectively and unequally enforce, like low level drug possession, are BS anyway that could be repealed or ignored without serious consequence. So it would just be easier to bypass the police than to reform them. Seems like the same logic here, except tolerating a variety of nonviolent crimes instead of violent ones.
It’s certainly better to have good laws than graft, but good laws are difficult to come by, whereas the incentives for graft are obvious. Whether graft is better than strictly enforcing bad laws is a legitimate question
It's a legitimate way of identifying problem areas, areas where the laws on the books have so little legitimacy and value that large numbers of people feel it's better to just bypass them than enforce them or comply with them.
But if you believe in and value rule of law, it's not a legitimate solution. For that, there's no substitute to doing the work of slowly boring the hard boards. Gathering enough information to really understand and be able to assess the situation in it's entirety, and then identifying the underlying problem and focusing on fixing that. Not layering patches and epicycles on top of each other, each layer creating it's own new set of problems because the underlying problem was never addressed at the root.
But I think we can all agree that the worst situation of all is imposing new bad laws just to create new graft opportunities.
corruption does not limit itself and it is not a genie easily put back in its bottle. most corrupt countries are thoroughly and totally corrupt in a way that completely prevents them from ever developing sane good governance regimes. rescuing a country from that level of corruption requires draconian measures cracking down on people who were just doing something that literally everyone else was doing and indeed that they were expected to do in order to advance their careers.
i won't pretend that it's possible to completely stamp it out, but a few decades of countenancing this or that form of corruption or graft in order to circumvent political paralysis that has locked in bad policy is basically how you destroy economic dynamism. a century of it and you have basically exactly what destroyed ancien regime France.
Then why hasn’t Italy collapsed yet? They seem better at building high speed rail at reasonable cost than we are. Strangely, the countries I see as least corrupt, England, Germany, Norway, the Netherlands, have much less high speed rail than places like Italy and Spain.
Italy hasn't collapsed but it's significantly poorer than the other countries you mention.
Do Spain and Italy have corruption in their high speed rail industries, or do we just have outdated stereotypes about who is corrupt in Europe?
A lot of anti-anti-Trump commentary takes the form of, sure, what Trump did is terrible, but this superficially similar thing that I just made up doesn't sound so bad, does it?
I do not understand the impulse to play devil's advocate pro bono.
I don’t understand the urge to engage in gay sex, but I understand many men enjoy it. Think of devil’s advocacy as a kink I enjoy.
And perhaps a socially redeeming kink! My wife is afraid that Trump will prosecute her for being liberal and hyperbole flows fast and furious once people are talking about Trump.
It’s worth asking “how much was America hurt by Trump administration graft.” The best predictor of graft during a second Trump administration is the level of graft during the first. Sure, it might increase 20 or even 50%, but we can get a ballpark estimate from past experience. I don’t think graft is as serious a problem as, say, housing scarcity or the opiate epidemic, it’s probably not in my top ten.
The problem with normalizing graft is that it breeds more graft.
Making graft and corruption a faux pas forces folks to do it behind closed doors. It makes it tougher to coordinate and less profitable. So you get less of it, even if it's still a thing that happens regularly.
When it becomes fine and everyone says, "Well of course they bribed him! That's how you do it!", then you get more and more of it as everyone thinks they need to get their beak wet or they're a sucker.
When Trump was President, everyone (well, some of us anyways) was outraged by the obvious graft. If we stop being outraged, then the next guy will be even more corrupt, and the envelope will keep getting pushed as long as we allow it. If we create new paradigms that make it easier to do graft, we'll just continue to get more and more. Trump's corruption won't be a one-off, it'll be the first in a string of new, innovative ways to extract rents for personal gain as a political leader.
This is exactly what MY is warning about in the last graph. Even if you view Trump as a logical continuation of corruption from other recent presidents, you should still be interested in curtailing it and ensuring that we don't see continued 'innovation' in this area of the economy.
Graft is a question of degree. If there is too much graft, people will get pissed off, and you’ll get civil service reform. I’m not saying graft should be legal, I’m just wondering how much effort should be devoted to suppressing it. Looting the treasury should definitely be punished. Awarding contracts to friends who deliver projects on time and on budget is quite a bit different.
I agree with all of that. I'm responding to:
"It’s worth asking “how much was America hurt by Trump administration graft.” The best predictor of graft during a second Trump administration is the level of graft during the first. "
I think this is the wrong question and a substantive point addressed in the OP. MY is making the case that Trump's tariff policy massively expands his opportunity for graft. I'm agreeing with MY and further making the case that tolerating graft last time makes it likely that you'll get more next time.
The further point (that this trend, once begun, is difficult to reverse) wasn't made explicitly but seems intuitive to me.
Well, as a liberal it certainly isn't my intention to kink-shame.
I don't think graft is as serious a problem as the eventual heat death of the universe or the fact that the mass of men live lives of quiet desperation. It's possible, however, that we don't have to choose one side or the other.
If there were a case to be made that Trumpian graft is a price we pay to end housing scarcity or the opiate epidemic, that would be a case to be made. But no one is making that case. Do tariffs somehow address housing scarcity or the opiate epidemic? Does some other Trump policy address those in any way that has a good shot of being more effective than alternative policies?
That's what we do in Chicago with the aldermen. Seriously. It seems to work pretty well. Nearly everything is getting up-zoned.
I for one will welcome the new tannery setting up shop next to my home.
I'm not sure we need any industrial policy. Yes, with our allies we need a electronic security policy that ensures we aren't using Chinese chips with backdoors or weaknesses they know about.
But short of that what we need is large stockpiles of things like artillery, more naval hulls etc etc and we are falling behind on those things because we are reluctant to buy from the south Koreans and other allies (they do ships so much more cheaply and quickly...we can build just the nuclear ones at home).
Realistically, the kind of threats we face are either unlikely to cut our ability to trade widely (war in Ukraine type stuff) or are likely to be huge high intensity near pear conflicts where the issue will be decided far before manufacturing gets involved.
We aren't Russia and we aren't -- nor should we plan to -- going to draw universal ire nor are we likely to have any need to grind our way into control of an unfriendly territory. If shit goes bad in Taiwan it will be decided either by a limited engagement that won't break our ability to import or by a very quick high intensity conflict that leaves neither side the time to rearm.
For that purpose we need to maximize our stockpiles by buying cheaply from allies (and even china when we can verify the products) not our manufacturing. Any long war that looks existential will become nuclear anyway.