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What Is the Anti-Trumponomics Agenda? · Trumponomics

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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
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Speaker 2: and this is Trumpnomics, the podcast that looks at the
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Speaker 2: economic world of Donald Trump, how he's already shaped the
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Speaker 2: global economy, what on earth is going to happen next?
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Speaker 2: This week, we're actually taking a break from trump Panomics
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Speaker 2: to consider the alternative. We discuss every week how Donald
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Speaker 2: Trump is changing the US and the world, and we
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Speaker 2: hear quite a lot from people who think he's taking
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Speaker 2: us in the wrong direction economically or sometimes politically, but
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Speaker 2: we haven't spent much time on what a seriously alternative
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Speaker 2: agenda of policies might look like. Do the critics think
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Speaker 2: the answer to America's economic and political problems is simply
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Speaker 2: to turn back the clock, go back to Obama and
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Speaker 2: Biden near a policy, or do these times call for
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Speaker 2: an anti trumpnomics that's just as disruptive and radical as
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Speaker 2: what's been coming out of the White House. While the
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Speaker 2: answer matters for Democrats in the US obviously, who are
1:12
Speaker 2: hoping to win votes from the president's party in next
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Speaker 2: year's mid term elections and defeat Trump's candidate in twenty
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Speaker 2: twenty eight for that matter. But given that a version
1:21
Speaker 2: of Maga style populism is also building support and even
1:26
Speaker 2: in power now in many other parts of the world,
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Speaker 2: not least Europe, in the UK anyone else should also
1:33
Speaker 2: be thinking about it as well. The official Democratic candidate
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Speaker 2: for mayor of New York's around Mandani. While he has
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Speaker 2: his answer an aggressive left populist agenda challenging big business,
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Speaker 2: grocery prices, big oil, all in the name of tackling
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Speaker 2: the affordability crisis, and most of that makes the Democrat
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Speaker 2: establishment extremely nervous. But what's their suggestion. I'm not sure
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Speaker 2: we're hearing it from them or from mainstream politic in Europe. Well,
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Speaker 2: we're going to get into this with one of my
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Speaker 2: favorite substack columnists, Noah Smith, who wrote a column recently
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Speaker 2: on precisely this topic, and I'm delighted to say he's
2:12
Speaker 2: joined me to discuss it on a sunny Friday morning
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Speaker 2: in the first week of August. Noah, thank you very
2:18
Speaker 2: much for joining us.
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Speaker 3: Thanks for having me on.
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Speaker 2: It still pains me deeply that you're no longer a
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Speaker 2: Bloomberg columnist, but I see your substack is the second
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Speaker 2: most popular substack on economics and business, which is is
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Speaker 2: a brilliant achievement, and it's great that trumpnomics can still
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Speaker 2: lure you on occasionally. That column of yours that caught
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Speaker 2: my eye, I think the title was should Democrats go
2:43
Speaker 2: back to Neoliberalism? And I guess when we say neoliberalism,
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Speaker 2: we mean the kind of market oriented, centrist version of
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Speaker 2: progressivism that we saw under Bill Clinton and Barack Obama.
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Speaker 2: So let's start with that. I mean, should they go
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Speaker 2: back to neoliberalism?
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Speaker 1: Well, so you have to ask what does neoliberalism mean
3:02
Speaker 1: in practice? And in practice it basically means let the
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Speaker 1: free market do what it wants and then use government
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Speaker 1: to sort of redistribute income, wealth, et cetera. You know,
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Speaker 1: provide public goods like building infrastructure, things like that, and
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Speaker 1: then after that just let it be. It's a fairly
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Speaker 1: simple idea.
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Speaker 3: I feel like.
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Speaker 1: The degree to which this was working well is underrated. So,
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Speaker 1: for example, one thing you saw was that the US
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Speaker 1: welfare state grew and grew throughout the late nineties, despite
3:34
Speaker 1: Clinton's welfare reform the two thousands and the twenty tens,
3:37
Speaker 1: with food stamps, Section eight, housing vouchers, EITC, child tax
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Speaker 1: credit and these welfare programs which are either giving people
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Speaker 1: the basic necessities of life or just giving them cash
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Speaker 1: to buy whatever they want and doing it in a
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Speaker 1: way that didn't really discourage people from working, which is
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Speaker 1: pretty cool. And so poverty in America had dropped quite
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Speaker 1: a bit. And we haven't eliminated poverty in America, but
4:02
Speaker 1: if you look at the child poverty standard with a
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Speaker 1: supplemental poverty measure, for example, it had dropped just a
4:08
Speaker 1: huge amount. Obama Care had reduced the number of uninsured
4:12
Speaker 1: people to a pretty low level, and healthcare had stopped
4:17
Speaker 1: growing as a percentage of the cost in the economy. Actually,
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Speaker 1: and college tuition it's so expensive, except college tuition has
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Speaker 1: flattened out and has fallen in the last decade or so.
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Speaker 1: And economic growth has been mediocre, which means growth in
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Speaker 1: living standards for the median person has been fairly mediocre
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Speaker 1: since the seventies.
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Speaker 3: It's not zero.
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Speaker 1: The people who tell you that we got poor since
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Speaker 1: the seventies are just wrong. Wages definitely grew, but not
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Speaker 1: at quite as great a paces before, but the rest
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Speaker 1: of the developed world did worse than us, and was
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Speaker 1: arguably considerably less neoliberal than us, but yet did worse
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Speaker 1: on these media, income wages, living standards for the average person.
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Speaker 1: And so we're left asking what was the big harm?
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Speaker 1: ACT have problems with neoliberalism. I think there's ways we
5:02
Speaker 1: could do better, we could improve on that. But when
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Speaker 1: we just look at the base of it, is this
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Speaker 1: screaming for revolution? Is this something screaming to be torn up?
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Speaker 3: And why?
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Speaker 1: And that's the question that I think the critics of
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Speaker 1: neoliberalism have largely failed to answer.
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Speaker 2: There's a lot there, but I don't want to get
5:19
Speaker 2: sidetracked by that back because I think there's a broader
5:21
Speaker 2: thing which I think about. Even from the time I
5:24
Speaker 2: was in the US Treasury, was you know, the last
5:26
Speaker 2: time we had a budget surplus, It was the late nineties,
5:28
Speaker 2: early two thousands, some of the latter part of that
5:31
Speaker 2: Clinton era that you talk about, And of course we
5:34
Speaker 2: thought it was all our brilliant policies. And in the
5:37
Speaker 2: years after that, the fact that you continue to have
5:40
Speaker 2: decent growth, low inflation, policymakers, central bankers were all kind
5:44
Speaker 2: of congratulating themselves for having found the perfect policies, and
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Speaker 2: some of those you could call neoliberal, but in retrospect,
5:52
Speaker 2: there's certainly a view that says they were just lucky.
5:55
Speaker 2: There were just some profound disinflationary forces that were so
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Speaker 2: porting a much higher level of non inflationary growth. Policymakers
6:04
Speaker 2: kind of helped things along, and as you say, there
6:06
Speaker 2: were some very helpful interventions in terms of tax credits
6:09
Speaker 2: and other things. But ultimately it was a particularly benign
6:13
Speaker 2: confluence of global and technological forces which enabled that non
6:19
Speaker 2: inflationary growth. Rapid growth of employment particularly favored the US
6:25
Speaker 2: and that environment, the US was not penalized for continuing
6:30
Speaker 2: to run very large trade deficits, and other countries were
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Speaker 2: kind of benefiting from selling a lot to the US.
6:35
Speaker 2: But under the surface, risks were building up, particularly in
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Speaker 2: the financial system, which ultimately put us on a rather
6:43
Speaker 2: different path. But there were also things that naturally came
6:47
Speaker 2: to an end. Trade was never going to continue to
6:51
Speaker 2: become more than one hundred percent of the global economy.
6:54
Speaker 2: There were some things that were step changes in the
6:56
Speaker 2: global economy which the US benefited from. They related to
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Speaker 2: neoliberal but they were not going to endure. So I
7:02
Speaker 2: guess I would just ask you on that front. I mean,
7:04
Speaker 2: we look back at that period, but it's not clear
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Speaker 2: that going back to those policies in one way or
7:10
Speaker 2: another is just going to take us back to that era,
7:12
Speaker 2: which has changed in an awful lot of other ways.
7:15
Speaker 2: The world has moved on.
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Speaker 1: So what are the main things you see as having changed?
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Speaker 2: So, for a start, that China has gone through the
7:21
Speaker 2: expansion of the global labor force that produced a disinflationary
7:26
Speaker 2: wave and a kind of step change in the potential
7:29
Speaker 2: of the global economy that's worked its way through the
7:32
Speaker 2: China has now got a shrinking workforce, it's got rising
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Speaker 2: labor costs. There's no country that's waiting to sort of
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Speaker 2: replace China, even if we continue to have the kind
7:42
Speaker 2: of open global economy that we had. We don't know
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Speaker 2: what's going to happen with technological change, but it seems
7:48
Speaker 2: that the sort of balance of policies globally now is
7:54
Speaker 2: more likely to push up prices than to push them down.
7:57
Speaker 2: And we have these enormous investments that we would have
7:59
Speaker 2: to run to take if we were, for example, want
8:01
Speaker 2: to be serious about net zero. I mean, I just
8:04
Speaker 2: it just it feels like there's some quite big structural
8:08
Speaker 2: changes that actually kind of make things more expensive going forward.
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Speaker 1: I know, the situation has changed, But in terms of
8:15
Speaker 1: the actual challenges we need to address, I think before
8:17
Speaker 1: we think about the optimal policies that we need to
8:19
Speaker 1: address a set of challenges, we should probably think about
8:23
Speaker 1: what those challenges are and boil them down in as
8:26
Speaker 1: simple way as possible. So when I look at what
8:28
Speaker 1: those challenges are, I definitely think inflation right now is
8:32
Speaker 1: running at over two percent. It's ultimately like, you know,
8:38
Speaker 1: two and a half percent, two point eight percent. I mean,
8:40
Speaker 1: that's that's a little bit higher than we're used to.
8:43
Speaker 1: It's a little bit higher than the inflation target. But
8:45
Speaker 1: if you look at historical inflation in the United States,
8:47
Speaker 1: it's still pretty low. We had those two years of
8:49
Speaker 1: inflation under Biden, but we're not having that level of
8:52
Speaker 1: inflation now. And then as for climate change, we can
8:56
Speaker 1: talk about that how to allay climate change. I think
8:59
Speaker 1: if you get a lot of left just critics of neoliberalism,
9:01
Speaker 1: they'll talk about climate change is the main reason why
9:03
Speaker 1: we need to throw out our economic system and pull
9:05
Speaker 1: in a new economic system, and we can talk about that,
9:08
Speaker 1: but am I getting it all?
9:09
Speaker 3: What else is.
9:09
Speaker 2: Another thing I would add, which I think changes the
9:11
Speaker 2: sort of policy environment pretty fundamentally is what's happened to
9:17
Speaker 2: borrowing and to the debt public debt since that era,
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Speaker 2: which just constrains even the agenda for a neoliberal set
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Speaker 2: of policies, Does it not?
9:30
Speaker 1: Yes, I agree, it definitely does. I personally think that
9:34
Speaker 1: the national debt has becoming a major problem and needs
9:38
Speaker 1: to be dealt with. And there's only one way to
9:40
Speaker 1: deal with the national debt and the long term, which
9:43
Speaker 1: is austerity. And in the short term you can do
9:46
Speaker 1: things like force interest rates to be lower, or force
9:49
Speaker 1: banks to subsidize your debt. That's called financial oppression. Forcing
9:52
Speaker 1: interest rates to be lower's called fiscal dominance. And there's
9:55
Speaker 1: a bunch of shannigans you can do to sort of
9:58
Speaker 1: put off the day of reckoning. But in the long
9:59
Speaker 1: term you need austerity, and austerity is two things, tax
10:03
Speaker 1: increases and spending cuts. You must tax are people more
10:07
Speaker 1: and you must spend less to bring the budget into balance.
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Speaker 1: I'm not sure whether austerity is neoliberal or not.
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Speaker 3: I know that.
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Speaker 1: Certainly most people on the left would associate austerity and
10:20
Speaker 1: neoliberalism together. I would not necessarily because I think I
10:24
Speaker 1: feel like neoliberalism is more related to sort of structural
10:27
Speaker 1: microeconomic policies about how we interfere in the market, more
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Speaker 1: than it is about macroeconomic policies about what we do
10:33
Speaker 1: with the national debt. But if you want to call
10:36
Speaker 1: austerity neoliberalism, that's one more reason to take a second
10:38
Speaker 1: look at neoliberalism.
10:40
Speaker 3: Because I agree that the debt is a problem.
10:43
Speaker 2: You probably don't want to call it austerity, right, I mean,
10:46
Speaker 2: it's fiscal control, fiscal rigor deficit reduction.
10:51
Speaker 1: You know, we can call it whatever we want. But
10:53
Speaker 1: I think austerity is a good is a good name
10:55
Speaker 1: because you have to be austere. You have to you know,
10:59
Speaker 1: you get less stuff. You can't have your tax cut,
11:01
Speaker 1: you can't have your spending program. And people have to
11:04
Speaker 1: know that the debt is out of control, and so
11:07
Speaker 1: there's a limit to the amount of goodies we can get.
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Speaker 1: And I think that to people's credit. In the late
11:12
Speaker 1: eighties and early nineties, we had that moment where people
11:15
Speaker 1: embraced austerity. I remember, I don't really remember, but I've
11:17
Speaker 1: gone back intook but everyone in the nineteen ninety two election,
11:21
Speaker 1: Ross Perode, Bill Clinton, and even Georgia shelb Bush was
11:25
Speaker 1: talking about the need for deficit reduction, and we had
11:27
Speaker 1: this big deficit clock up on the outer wall of
11:29
Speaker 1: a big building in New York. Everybody was talking about
11:31
Speaker 1: the debt, the debt, the debt, and people were willing
11:34
Speaker 1: to accept spending cuts and tax increases to stop that
11:37
Speaker 1: national debt. Because we were willing to accept austerity. We
11:40
Speaker 1: didn't use the word austerity. We just said cut the deficit.
11:44
Speaker 1: And maybe that's what we can say, cut the deficit,
11:46
Speaker 1: but that's what we need. And so I don't know
11:49
Speaker 1: whether you want to call that neoliberal or not, but
11:51
Speaker 1: we do need it.
11:52
Speaker 2: We don't need to get tied up on labels. The
11:54
Speaker 2: reason I was pushed back in a bit on austerity,
11:55
Speaker 2: and obviously is partly because I was sitting in the
11:57
Speaker 2: UK when it was discussed in the nineties. It was
12:00
Speaker 2: not called austerity. When it was called austerity post global
12:03
Speaker 2: financial crisis, it was associated, particularly within UK, a conservative
12:07
Speaker 2: agenda which the same cuts would not have looked the
12:10
Speaker 2: same under a labor government. But I'm also reminded also
12:13
Speaker 2: in the nineteen nineties but when Sweden, for example, the
12:16
Speaker 2: Social Democrats were having to get on top of their
12:19
Speaker 2: debt situation. I was always struck by the way they
12:21
Speaker 2: talked about it, which was about this is about having
12:24
Speaker 2: the fiscal independence to do the things we want to
12:27
Speaker 2: do progressively. And as long as I'm beholden to the
12:30
Speaker 2: global bomb market, i am not free to do the
12:32
Speaker 2: progressive social democrat things I want to do. So if
12:36
Speaker 2: we do this hard work, it is actually a progressive
12:38
Speaker 2: policy because then you're not beholden to anyone and you
12:41
Speaker 2: can actually do what you want to do as a government.
12:44
Speaker 2: And there was a sort of an aspect of that
12:45
Speaker 2: with the Clinton agenda as well. I think the broader
12:48
Speaker 2: point is the things that we're talking about. You know,
12:51
Speaker 2: austerity is one thing we would probably both agree that
12:54
Speaker 2: you would also want to move away from the kind
12:56
Speaker 2: of protectionist agenda if you're following this kind of line
12:59
Speaker 2: of alternative policies, more neoliberal policies, you know, free trade
13:02
Speaker 2: or free trade would.
13:03
Speaker 3: Be part of that.
13:05
Speaker 2: But does the alternative to Trump have to find some
13:09
Speaker 2: way to tap into the populist mood while still being
13:12
Speaker 2: consistent with these policies, or do you think it's just
13:14
Speaker 2: a contradiction that we just have to persuade people that
13:18
Speaker 2: there's no need for populism because everything was doing fine before.
13:22
Speaker 1: Well, Americans and people in some other countries too, are angry.
13:27
Speaker 1: And there's this idea that a lot of people have
13:30
Speaker 1: that if people are angry, what you need to do
13:32
Speaker 1: is you need to change your economic system. And I
13:35
Speaker 1: think this idea comes fundamentally from the industrial age and
13:39
Speaker 1: from Marxism and the fact that for a long time,
13:43
Speaker 1: conditions for the working class are very bad under industrialism,
13:47
Speaker 1: and the idea was that this was making people mad,
13:50
Speaker 1: and that we need to change our economic system to
13:52
Speaker 1: make people less mad, and that when we implemented things
13:55
Speaker 1: like unions, weekends, child labor laws, labor standards, fair states,
14:00
Speaker 1: et cetera, people got less mad. And I think that
14:04
Speaker 1: was a major through line on a story in the
14:06
Speaker 1: twentieth century, the story of class conflict, and class conflict
14:10
Speaker 1: resolved through social democratic means as an alternative to communism,
14:16
Speaker 1: which was not an effective solution. You can tell that
14:20
Speaker 1: sort of potted story of the twentieth century. It's certainly
14:22
Speaker 1: not the only thing that was going on, but it
14:23
Speaker 1: was certainly a big part of what's going on. But
14:26
Speaker 1: now I think that when people are getting mad in
14:29
Speaker 1: developed countries, we instinctively reach for that same story. We
14:34
Speaker 1: instinctively reach for a repetition of that twentieth century story.
14:37
Speaker 1: We say people must be mad because they don't have
14:38
Speaker 1: enough stuff, they're economically deprived. But I think that by
14:43
Speaker 1: and large that's not true. I do think people do
14:46
Speaker 1: get mad at economic things. I think people were mad
14:48
Speaker 1: about inflation. We got two years of you know, five
14:51
Speaker 1: to eight percent inflation under Biden, and I think people
14:54
Speaker 1: were mad about that, and they were right to be mad.
14:57
Speaker 1: But I think that overall the anger that you see
15:00
Speaker 1: how is to do with a lot of things that
15:02
Speaker 1: don't look like what people are mad about in like
15:04
Speaker 1: nineteen twenty five. They're mad about social things. They're mad
15:08
Speaker 1: about the fact that they feel like their race, their religion,
15:12
Speaker 1: their gender, et cetera. Is getting discriminated against because they
15:16
Speaker 1: have people yelling hate at them on social media, and
15:18
Speaker 1: they have government policies that they feel are discriminatory towards them.
15:22
Speaker 1: They feel or they feel loss of status in society.
15:25
Speaker 1: They feel just a general lack of comedy, lack of nationhood, etc.
15:29
Speaker 1: From all the screaming on social media that happens, even
15:32
Speaker 1: if they don't identify that as the culprit. But that's,
15:35
Speaker 1: you know, they feel like they're countries against them. Immigration
15:38
Speaker 1: people are super mad about and we could talk about
15:40
Speaker 1: immigration as a neoliberal policy if you want, But I
15:43
Speaker 1: think the reason people are mad about immigration is not
15:45
Speaker 1: fundamentally economic. Immigrants don't hurt the native born workers, and
15:49
Speaker 1: when people say they do, I think it's a proxy.
15:51
Speaker 1: It's what they're really upset about is the fact that
15:54
Speaker 1: immigrants are changing their culture. Immigrants are changing their sense
15:59
Speaker 1: of what the nation is all about, and all this
16:02
Speaker 1: social stuff. And there's this thing called the politician syllogism.
16:06
Speaker 1: It says something must be done, this is something, Therefore,
16:11
Speaker 1: this must be done.
16:12
Speaker 3: Trump's people have.
16:13
Speaker 1: This attitude, certainly with respect to Trump's economic policies. They say,
16:17
Speaker 1: we don't like the way America is going. We have
16:19
Speaker 1: to do something. Trump flails around and just attacks everything
16:21
Speaker 1: in sight. They say, Okay, that's something. Something was done,
16:25
Speaker 1: and it was done by someone that we perceive to
16:26
Speaker 1: be on our side, to you know, to be on
16:29
Speaker 1: our team in the Great American Culture War, and he
16:32
Speaker 1: did a thing, and therefore that thing must have been good.
16:35
Speaker 2: I think we see it in polls that even when
16:40
Speaker 2: people give the president a lot of the benefit of
16:43
Speaker 2: the doubt even on the economic things, even when he
16:45
Speaker 2: says he's going to bring business back to the US
16:49
Speaker 2: or he's going to prevent jobs from going and then
16:51
Speaker 2: he brings in tariffs that actually make it harder to
16:55
Speaker 2: grow manufacturing in the US. You find that they know
16:58
Speaker 2: there's these overwhelming forces acting against them and even against
17:03
Speaker 2: Donald Trump, so they'll just give him credit for having tried,
17:06
Speaker 2: because nobody else was trying. Just thinking back on the
17:09
Speaker 2: powerful argument you make about people thinking they need to
17:13
Speaker 2: respond economically to challenges that certainly political challenges that have
17:19
Speaker 2: cultural and social routs, and the sort of how counterproductive
17:23
Speaker 2: it is to be thinking you have to have a
17:24
Speaker 2: whole new economic plan to respond to things that are
17:28
Speaker 2: actually not economically routed. So I guess one simplistic way
17:32
Speaker 2: of thinking, Okay, what's the implication of your analysis is
17:37
Speaker 2: on the economics front, a party or politicians who want
17:42
Speaker 2: to be a realistic alternative to Trump or the thing
17:46
Speaker 2: that will come after Donald Trump, you wait for Trump
17:49
Speaker 2: andnomics to implode economically because all that flailing around will
17:53
Speaker 2: ultimately show itself to be futile. And you concentrate on
18:00
Speaker 2: the cultural distrust that you face, and you stick to that,
18:06
Speaker 2: and implicitly your economic policy is that you're going to
18:08
Speaker 2: go back to Democrat policies circa I don't know middle
18:13
Speaker 2: of Obama's term. It's a simplification. But does that make sense? Well,
18:17
Speaker 2: what's wrong with that?
18:19
Speaker 3: Yes, that's pretty good.
18:20
Speaker 1: But then I think that instead of saying, Okay, guys,
18:23
Speaker 1: neoliberalism work, let's go back to that. I say that
18:26
Speaker 1: because it's provocative. I want to make people think about that.
18:28
Speaker 1: You know, you spent ten years saying that, like, neoliberalism
18:31
Speaker 1: has failed and we need something else.
18:33
Speaker 3: How true? Is that really?
18:35
Speaker 1: Reevaluate that baseline bedrock assumption that you had. Did that
18:39
Speaker 1: just come out of the Great Recession? Was it just
18:41
Speaker 1: a sort of a knee your twentieth century response to
18:45
Speaker 1: twenty first century problems like reevaluate that?
18:48
Speaker 3: And so that's why I said that. So, first of all,
18:50
Speaker 3: I do believe.
18:50
Speaker 1: That there's lots of things we need to do differently
18:52
Speaker 1: than we did in the twentieth century. For example, we
18:54
Speaker 1: need to focus much more on building more housing, on
18:58
Speaker 1: making easier to build. Land use is the great economic
19:00
Speaker 1: issue of our times, I think, and making housing cheaper
19:03
Speaker 1: and more abundant has got to be a big goal,
19:06
Speaker 1: and that's not something we focused on in nineteen eighty
19:08
Speaker 1: five or nineteen ninety five. Maybe in two thousand and
19:11
Speaker 1: five we focused on it by building out some exerbs.
19:13
Speaker 3: But then in.
19:14
Speaker 1: Terms of densifying our cities, making transit that works just
19:19
Speaker 1: allowing building everywhere. We've reached the limit of sprawl in
19:23
Speaker 1: terms of how far people are willing to commute. We
19:25
Speaker 1: now need to densify the suburbs and build duplexes and
19:29
Speaker 1: small apartment buildings and things like that can house a
19:32
Speaker 1: few more people in the suburbs. And yet when you
19:34
Speaker 1: look at what works on housing affordability, allowing more housing
19:39
Speaker 1: to be built, which is a neoliberal policy, is effective,
19:42
Speaker 1: it doesn't necessarily solve the whole problem. I mean, you
19:44
Speaker 1: have a demand shift of people moving to big cities
19:47
Speaker 1: and wanting to live in big cities because they're nicer.
19:49
Speaker 1: Young people and young higher earners move in, and that's
19:52
Speaker 1: a demand shock that raises prices, raises rents because you
19:58
Speaker 1: have all this new demand. But if you accommodate that
20:01
Speaker 1: demand by building a ton of housing like Austin has
20:03
Speaker 1: been doing, then you relieve a lot of that pressure
20:06
Speaker 1: and you prevent a lot of displacement of existing people,
20:09
Speaker 1: and you accommodate those shifts. If you want to call
20:12
Speaker 1: that a neoliberal policy, I'm happy to do that. Sometimes
20:15
Speaker 1: you can have the government actually promote housing, so like Singapore,
20:19
Speaker 1: the government goes out and builds a bunch of houses
20:20
Speaker 1: on the land that it owns. We can do that,
20:22
Speaker 1: we absolutely should do that. But most land is privately
20:26
Speaker 1: owned in urban areas and settled areas, and so that
20:29
Speaker 1: means that allowing construction on private land is a big deal,
20:34
Speaker 1: and government has to do things to support it, like
20:36
Speaker 1: build transit right or at least allow transit, facilitate transit,
20:40
Speaker 1: to make it easier for people who have like apartment
20:42
Speaker 1: buildings to get around without having to drive everywhere. Congestion
20:45
Speaker 1: pricing in New York, There's things like that. But then
20:47
Speaker 1: ultimately you've got to let people build housing. Is that
20:51
Speaker 1: a neoliberal policy if you want to call it that, Sure,
20:53
Speaker 1: it's an abundance policy. But I think the way things
20:57
Speaker 1: evolve back toward neoliberalism is simply looking at what Trump
21:00
Speaker 1: does and say and saying, look, that didn't work, Let's
21:03
Speaker 1: cut these tariffs. It's not like you say free trade
21:05
Speaker 1: is great. I love free trade. You instead say these
21:08
Speaker 1: tariffs suck. Let's get rid of that. It's hurting people.
21:12
Speaker 1: Point to the thing that's causing pain and make it
21:14
Speaker 1: go away. And so I think national debt it's bad,
21:17
Speaker 1: let's get rid of it, not get rid of it.
21:19
Speaker 1: But it's not making worse.
21:21
Speaker 3: Anything we can.
21:22
Speaker 2: You mentioned the abundance agenda. I mean, that's obviously the
21:24
Speaker 2: thing that's kind of lurking in many of these conversations.
21:27
Speaker 2: The book by Ezra Kline and Derek Thompson, which was
21:29
Speaker 2: kind of an initial manifesto for a different way for
21:32
Speaker 2: progressives to think about the road ahead. Although it's been
21:36
Speaker 2: endorsed a little bit by Zoramum dany I would say
21:39
Speaker 2: is quite different from what he's suggesting for New York.
21:42
Speaker 2: But the big point that that book makes is that
21:46
Speaker 2: some of the places where government works least well have
21:49
Speaker 2: been run by democrats for years. And your column you
21:52
Speaker 2: talk about a kind of need for a combination of
21:55
Speaker 2: neoliberalism and a development state that you see in East
21:58
Speaker 2: Asia places like a poor you're thinking about that on
22:01
Speaker 2: a state level as well. I mean, is that a
22:03
Speaker 2: place for democrats to prove competence.
22:07
Speaker 1: Yes, Democrats have run states and cities poorly, and progressive
22:14
Speaker 1: ideology does lots of things that make people poorer at
22:18
Speaker 1: the local and state level. You look at the places
22:21
Speaker 1: that are building the housing and that are having more
22:23
Speaker 1: efficient public services. These are run by Republicans. That should
22:26
Speaker 1: be unacceptable for people who think that big government is
22:29
Speaker 1: the answer.
22:29
Speaker 3: Big government is good.
22:31
Speaker 1: We need big government liberalism back, and we need to
22:34
Speaker 1: make it work.
22:35
Speaker 3: We need to make it effective.
22:37
Speaker 1: We need to stop paying ten times as much as
22:39
Speaker 1: other countries do for infrastructure for public services. We need
22:43
Speaker 1: to allow housing to be built, and not just housing.
22:46
Speaker 1: We need to allow shops. We need to allow people
22:47
Speaker 1: to open small businesses. We will make small business people
22:51
Speaker 1: just go through insane amounts of red tape to open
22:53
Speaker 1: small businesses. We need to let them. We need to
22:56
Speaker 1: get away from the idea that tolerating public disorder is
22:59
Speaker 1: a form of war welfare, and that we're reducing harm
23:01
Speaker 1: for poor people by allowing them to do fentanyl in
23:04
Speaker 1: the street and realize that's not actually helping poor people,
23:07
Speaker 1: and that failing to arrest shoplifters, the people who just
23:10
Speaker 1: loot stores, that's not a form of wealthy distribution. This
23:13
Speaker 1: is not robin hood. This is bad for poor people.
23:16
Speaker 1: It's destroying poor neighborhoods. Progressive governance has failed on so
23:20
Speaker 1: many fronts, so dramatically. Texas is building more solar power,
23:24
Speaker 1: wind power, and batteries than California by mile. That's unacceptable,
23:28
Speaker 1: even though California has a lot more people who it
23:30
Speaker 1: needs to deliver electricity to. It's unacceptable that a red state,
23:35
Speaker 1: simply by reducing regulation, you know, clean green energy is
23:38
Speaker 1: out building California in those energy technologies by a mile.
23:43
Speaker 1: So what I'm saying is progressive governance has failed at
23:46
Speaker 1: the state and local level, and it needs to improve,
23:49
Speaker 1: and then we need to recognize and deal with that
23:52
Speaker 1: failure instead of simply denying it and trying to look
23:54
Speaker 1: for someone to blame.
23:56
Speaker 2: I guess one pushback or at least a dissonance of
23:58
Speaker 2: what we're saying. You know, we really dumped on California
24:01
Speaker 2: and the dysfunctionality of the government there, But it does
24:04
Speaker 2: also produced some of the companies that you've just talked
24:06
Speaker 2: about that were associated with the biggest innovations in AI
24:11
Speaker 2: and in technology. Tesla managed to establish a pretty successful
24:14
Speaker 2: company in California to left you know, most of the
24:18
Speaker 2: most successful companies of our era, certainly the most important ones,
24:22
Speaker 2: have come from that supposedly impossible state. So something was
24:27
Speaker 2: going right in California.
24:29
Speaker 1: Well, California is a very strong network effect where Silicon
24:33
Speaker 1: valleys in California. So tech companies all move there because
24:35
Speaker 1: that's where the engineers are, and the engineers moved there
24:38
Speaker 1: because that's where the companies are, and they all moved there
24:39
Speaker 1: because that's where the financiers are, and the financiers moved
24:42
Speaker 1: there because that's where the companies are. And so there's
24:44
Speaker 1: this big network effect, right, But they.
24:46
Speaker 2: Managed to build those factories, you know, Tesla managed to
24:48
Speaker 2: build a big factory there initially.
24:50
Speaker 1: True, that's true, they did, although it was already built.
24:53
Speaker 1: It was the new Me factory. They took it over.
24:56
Speaker 1: They couldn't have built that factory new Oh yeah, that's interesting.
24:59
Speaker 1: I know this because I know people were trying to
25:00
Speaker 1: replicate this and building factories in California. Now, a network
25:03
Speaker 1: effect is a powerful thing, and it functions a bit
25:05
Speaker 1: like oil, you know, because you're essentially making your money
25:08
Speaker 1: from land, except instead of something that's under the land,
25:11
Speaker 1: it's simply the Land's location. You can kill a network effect,
25:15
Speaker 1: It's very hard. You have to make incredibly bad policies.
25:17
Speaker 1: But what California has been doing with its ineffective policies,
25:21
Speaker 1: it has been tapping the network effect tax in effect,
25:24
Speaker 1: taxing that network effect and exploiting it and using it
25:28
Speaker 1: for very inefficient forms of redistribution. And you've seen housing
25:33
Speaker 1: prices go through the roof and California not accommodating that
25:36
Speaker 1: by building more housing to house people. So the new
25:38
Speaker 1: people push out the old people, and people are fleeing
25:40
Speaker 1: the state of Californian drows. Yes, you've got all these
25:43
Speaker 1: great companies coming out of California. You know what else
25:45
Speaker 1: is coming out of California residents, and so they're moving,
25:48
Speaker 1: They're moving to Texas, they're moving to places where housing
25:50
Speaker 1: is cheaper because California did not accommodate the influx of
25:53
Speaker 1: people that came to work in those knowledge industries, those
25:56
Speaker 1: clustering industries. And so you've seen California refused to tax
26:01
Speaker 1: property and so have to do a bunch of taxes
26:03
Speaker 1: on businesses that are not tax stuff that are suffering,
26:06
Speaker 1: and those costs get passed on to people. California is
26:09
Speaker 1: very unaffordable in many ways, and.
26:11
Speaker 3: People are leaving.
26:12
Speaker 1: Yes, it's good to have like Google and whatever whatever
26:14
Speaker 1: come out of the state, right, it's good for the
26:16
Speaker 1: national economy, But people from California are actually not staying there,
26:20
Speaker 1: and ultimately people are voting with their.
26:22
Speaker 2: Feed I'm reminded a bit of the old joke about
26:25
Speaker 2: the guy in the Latin American country that's had multiple
26:28
Speaker 2: coups and populist governments, and he says he dreams of
26:32
Speaker 2: a time when people will be on the street with
26:34
Speaker 2: the banners saying moderation or death, and reading your columns
26:38
Speaker 2: say we need fewer ideological crusades and populist cludges and
26:41
Speaker 2: more competence and capacity. But is that exciting enough in
26:45
Speaker 2: this era? Is that a strategy that's going to get
26:49
Speaker 2: people elected? You know what, do we want competence and capacity?
26:52
Speaker 2: When do we want them? Now?
26:54
Speaker 3: Do people want excitement?
26:55
Speaker 2: Well, they've got used to that, so that action, that
26:58
Speaker 2: sort of action all the time.
27:00
Speaker 1: I think we're not living in a revolutionary era where
27:04
Speaker 1: people are thinking of bright hopes for the future. It's
27:07
Speaker 1: not excitement. It's not the hope of this shining utopian
27:12
Speaker 1: future that's driving policy, and I think that you do
27:15
Speaker 1: get times when people are driven by those positive future visions,
27:19
Speaker 1: and those are times of rapid economic growth, growth and
27:24
Speaker 1: living standard abundance, when people are confident. When people are
27:27
Speaker 1: feeling confident, they want those positive visions of the future.
27:31
Speaker 3: They believe in them.
27:33
Speaker 1: Right now, people are angry, and yes they're angry mostly
27:36
Speaker 1: about cultural issues, but also a lot of the things
27:39
Speaker 1: being done by people who get elected because of cultural
27:42
Speaker 1: issues are bad on the economic front, and people will
27:44
Speaker 1: get mad. People are mad at the Biden administration because
27:46
Speaker 1: of inflation, and so people are going to get mad
27:49
Speaker 1: at the Trump administration because terists are stupid. People get
27:52
Speaker 1: mad at progressive governance that fails at the city level.
27:55
Speaker 1: So do I think this is going to excite people?
27:57
Speaker 3: I don't know.
27:58
Speaker 1: I think what it can do and what it should
28:00
Speaker 1: do is harness anger. I don't need utopia to want
28:04
Speaker 1: to avoid dystopia, all right. I want to stop the pain.
28:09
Speaker 1: Why is Trump hurting us? Why is he canceling research
28:13
Speaker 1: into promising cancer cures? Why is he hurting us manufacturing
28:17
Speaker 1: by making it impossible for them to use their supply chains.
28:19
Speaker 1: Why are manufacturing people getting laid off?
28:21
Speaker 3: Right? Now, why are workers getting laid off? Why are
28:24
Speaker 3: we being hurt? We should be angry at that. We
28:26
Speaker 3: should be angry.
28:27
Speaker 1: I don't think like some kids in the Sunrise movement,
28:30
Speaker 1: like sitting around talking about utopia, is actually the electorate.
28:34
Speaker 1: The electorate is mad. They're not sitting there envisioning you know,
28:38
Speaker 1: luxury space, communism or whatever. They're actually simply sitting there
28:42
Speaker 1: thinking like why did my prices go up? Gar I'm angry,
28:46
Speaker 1: and so then like why is this grocery store? Why
28:49
Speaker 1: are these groceries a little more expensive? I'm angry and
28:51
Speaker 1: so harness that anger against the people who deserve the anger,
28:56
Speaker 1: which is maga at the national level and stupid progressive
29:01
Speaker 1: governance at the local level. Throw the bums out and
29:04
Speaker 1: get something that works. I'm excited to not be hurt anymore.
29:09
Speaker 2: Now, A Smith, thank you very much, thanks for having
29:12
Speaker 2: me on. Thanks for listening to Trump and Noomics from Bloomberg.
29:25
Speaker 2: It was hosted by Stephanie Flanders and I was joined
29:28
Speaker 2: by the economic blogger Noah Smith. This Trumponomics was produced
29:32
Speaker 2: by Moses and Sasadi and Tala Amadi with help from
29:36
Speaker 2: Amy Keene and special thanks to Rachel Lewis Chrisky and
29:39
Speaker 2: John Ring. Sound design is by Blake Maples and Sage
29:43
Speaker 2: Bowman is the head of Bloomberg Podcasts. To help others
29:50
Speaker 2: find Trump and nomics, please rate it and review it
29:52
Speaker 2: highly wherever you listen to it.