Tag Archives: Krugman

The Problem With Mad Kings

Back in 2009, I wrote a book titled “Distrust, American Style,” in which I explored the role of trust in government and civil society. My research for that book involved dipping into the considerable scholarship on the subject, and confirmed the immense importance of trustworthy behavior by both governments and the various elements of our society. I traced the negative effects of then-emerging examples of untrustworthy behaviors–by businesses like Enron, by a variety of sports figures, and by religious figures. (Catholic Church scandals were in the news daily.)

I did not, however, turn my attention to the importance of trust to national economic performance. Paul Krugman has recently filled that void, explaining the likely, significantly negative consequences of having a madman and would-be king occupying the Oval Office.

Krugman began by focusing on the stupidity of the law firms that “bent the knee” to our mad king–pointing out what should have been blatantly obvious (and raising doubts about the intellectual and analytic bona fides of the fat-cat partners who cowered before Trump’s patently illegal threats.)

Less than a month ago many of America’s biggest law firms made deals with the White House in which they promised to end diversity, equity and inclusion (DEI) practices and to devote substantial resources to pro bono work on causes the administration supports. It was a shameful capitulation.

It was also stupid. Anyone who looked either at Donald Trump’s personal history or the history of authoritarian regimes in general would have realized that there’s no such thing as a deal with this administration. Whatever you think Trump and co. have agreed to, they will feel entirely free to make new demands whenever it suits them.

Those firms should have known that giving in to Trump just signals weakness, which leads him to demand further concessions.

Then Krugman explains why Trump’s mercurial behaviors are such a threat to the American economy. U.S. efforts to build an anti-China trade alliance are doomed to failure, Krugman says,  “Because nobody with any sense trusts the Trump administration to honor the terms of any deals it makes, whether they’re deals about pro bono work with law firms or tariff deals with other governments.”

And as more and more people realize that Trump and his minions can’t be trusted, the damage will spread from trade to finance. The international role of the dollar and, eventually, America’s ability to service its debt are very much at risk.

Why can’t Donald Trump be trusted? Partly because he’s Donald Trump. But even if he weren’t, absolute monarchs — which is what Trump is trying to become — are fundamentally untrustworthy. The ruler may sometimes choose to honor his promises, but it’s always his choice — a choice that can be changed at any moment. And his untrammeled power makes the nation he rules weaker, not stronger.

Krugman uses historical examples to buttress his central argument that reliance upon a nation’s commitment to the rule of law–a commitment that promises stability–is central to economic growth and prosperity. And as he says, Trump will be unable to make trade deals because nobody trusts his promises.

The international role of the dollar depends in significant part on the belief that the U.S. government can be trusted to behave responsibly. “Among other things, international investors normally assume that the president will respect the independence of the Federal Reserve and refrain from, say, arbitrarily rewriting the terms of federal debt.”

Krugman ends his economics lesson by writing that, “Even now, I don’t think businesses, investors and the public in general fully appreciate what it means that we’re all subject to the whims of a mad king. But they’ll learn.’

Actually, there are indications that the more sophisticated investors and businesspeople are beginning to understand the enormous consequences of installing this madman in office, and of surrounding him with sycophants and clowns unable to restrain his incoherence.

But I’m quite sure Krugman is correct when he says that the public in general doesn’t “get it.”

A couple of days ago, I quoted Frederich Hayek for his analysis of the conditions giving rise to the emergence of “the worst.” They were 1) a dumbed down populace, 2) a gullible electorate, and 3) scapegoats on which that demagogue can focus public enmity and anger. MAGA voters have proved Hayek prescient. Millions of Americans lack even rudimentary civic and economic literacy, and have been kept gullible by media outlets that tell them what they want to hear.

And as a recent Facebook meme has it, “This is all so unfair to people who were just voting their racism.”

Sic transit America…

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Politics And The Cities

Conversations over the last couple of weeks have focused my attention on a troubling aspect of political life that has been receiving less attention recently, due to the Trump/Musk hourly assaults on America’s government and constitution– the social and political divides between urban, suburban and rural Americans.

I recently ran into an old acquaintance who used to live near me, in the heart of the city. She’d subsequently moved to the very edge of suburbia, to an area one might characterize as “rural adjacent,” and in our catch-up conversation, she noted that several of her neighbors were afraid to go downtown (in one case, admitting to a fear of traveling south of 56th Street). Her new neighbors seemed amazed that she’d survived her years as an urban resident, and seemed unwilling to believe her description of urban life as safe.

Paul Krugman recently addressed that mindset. He began by describing a recent “evening out” in New York.

I had a civilized evening Tuesday. I did a public event at the CUNY Graduate Center, interviewing Zach Carter, author of The Price of Peace: Money, Democracy and the Life of John Maynard Keynes. Video of the event, which seemed to go well, should be available in a few days.

Then some of us took Zach out for dinner near the GC, which is just across the street from the Empire State Building. The conversation was great, and we lingered until almost 11, after which several of us walked over to the subway and took it home. And you know what happened?

Nothing. There were plenty of people out on the streets, which felt perfectly safe; so did the subway, which efficiently delivered us to our destinations.

Krugman documented the safety of his city, but he recognized that offering such evidence has become political, because trash talking about cities and urban life has become a constant theme in MAGA rhetoric.

According to Donald Trump, people in New York are afraid to go outside, because they can’t cross the street without getting mugged or raped. Just last Friday Sean Duffy, Trump’s transportation secretary, called the NYC subway a “shithole,” which nobody wants to ride. Spoiler: It isn’t.

The data confirms Krugman’s point, which raises the question, why has trash-talking about urban life become a MAGA theme?Krugman says that Trump’s hostility to immigrants impels him to portray urban areas with large numbers of immigrants as  crime-ridden dystopias. While that is undoubtedly part of it, it would be a mistake to ignore a more obvious motive: Trump’s constant efforts to restore White males to dominance over other Americans.

Black people, immigrants and various other “Others” tend to live in cities. Suburban developments and gated communities are slowly becoming more diverse racially, but not economically. Some small towns in Indiana have seen an influx of immigrants, mostly Hispanic, but they are the exception. When someone says they are “afraid” to come into an urban core, they are really communicating a belief that “those people” are dangerous. They might make an exception for the Black doctor who can afford the mini-mansion down the street, but they’re sure that their neighbor is unrepresentative.

There’s a reason that virtually every city in the U.S. with a population of 500,000 and above is Blue on political maps, and virtually every rural precinct is Red. Those of us who live with that dread word–diversity–are comfortable with the varied fabric of life produced by a diverse demography. Most of us celebrate it. We find that our daily lives are enriched, not threatened, by encounters with interesting people who don’t look or pray (or eat) like us. We are less likely than our rural relatives to believe that difference translates to threat, and more likely to enjoy the expanded foods, perspectives and entertainments that those differences offer.

We’re also more likely to accept the necessity of government. I still recall an observation I once read to the effect that when you live down an unpaved road a mile or so from your nearest neighbor, and throw your dinner scraps out the back door for the dogs and other critters, you tend to discount the importance of a government that provides services like roads and garbage collection.

Obviously, not every rural resident is fearful or racist, and plenty of urban dwellers are both–but the Blue and Red of that political map is instructive. MAGA is essentially a rural phenomenon.

It will be interesting to see what happens when the full effect of Trump’s insane economic policies hit the rural folks who have been voting their racial animosities rather than their economic interests.

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Unintended Consequences?

One of the dangers of even thoughtful policymaking is the possibility of unintended consequences; as I used to tell my students, even the best-intended legislative efforts can create unforeseen “spinoffs” that range from unfortunate to truly damaging. That’s why careful attention to policy details, consultation with people having expertise on the subject, and thorough review of available evidence are all so important.

So what happens when people in positions of authority are incapable of thoughtful policymaking and dismissive of evidence and expertise? We are about to face the consequences of policymaking by ignorant egomaniacs, and Paul Krugman has identified some of the most obvious.

Krugman notes that the new PM of Canada has ordered a review of that country’s plan to buy a substantial number of U.S.-made F-35 fighter jets, joining European nations that are similarly reconsidering their dependence on U.S. weapons.

This turn away from military dependence on the U.S. is understandable. America is no longer a reliable ally to the world’s democracies; indeed, between Trump’s turn toward Putin and his talk of annexing Canada and Greenland, we don’t look like an ally at all. Rumors that U.S. jets have a “kill switch” that would allow Trump to disable them at will are probably false, but sophisticated military equipment requires a lot of technical support, so you don’t want to buy it from a country you don’t trust.

He then considered several other emerging responses to the chaos being caused by our mad kings, pointing out that a nation “that can’t be trusted to honor agreements or follow the rule of law has to have monetary as well as political and diplomatic consequences.”

Several of those monetary consequences will be very damaging. Krugman says he’s been exploring the available data, and “U.S. exposure to foreign revulsion looks quite large.”

Military hardware isn’t the only export likely to suffer from our new rogue nation status. Our trade deficit in goods is partly offset by a surplus in services trade, but several of our major service exports will definitely be hurt by America’s turn to the dark side.

One of these is education. Many foreigners come to America to study, attracted by the quality of our colleges and universities. In 2023, the most recent year for which data are available, they spent more than $50 billion. But if you were a foreigner considering study in the U.S. next year, wouldn’t you be worried that you might find yourself arrested and deported for expressing what the current administration considers anti-American views? I would. So we can expect a hit to higher education, which, although we rarely think of it this way, is a major U.S. export.

Personal travel — basically tourism — was even bigger, more than $100 billion. But you can be sure that we’ll be seeing a lot fewer Canadians this year and next. And it won’t just be Canadians reconsidering their plans.

Media is already reporting cratering European tourism.

Krugman admits that he’s much more worried about Trump’s threat to our democracy than his bad economic policies. He also notes that– even in purely economic terms–the self-inflicted damage from tariffs and deportations is likely to outweigh the costs caused by other countries’ loss of trust in the United States. That said, those costs are real.

One way to think about this is to say that Trump is doing to America what Elon Musk is doing to Tesla, destroying a valuable brand through erratic behavior and repulsive ideology. Did I mention that Tesla sales in Europe appear to be cratering?

True, there are differences between a private business and a nation-state. I don’t think people visiting Tesla showrooms are subject to random arrest, or that Musk will kill your car if you say something he doesn’t like (although to be honest I’m not entirely sure on either count, especially since Musk seems to be running much of the government.) On the other hand, Tesla depends a lot more on buyer goodwill than the United States as a whole does.

Still, Trump’s belief that America holds all the cards, that the rest of the world needs access to our markets but we don’t need them, is all wrong. We are rapidly losing the world’s trust, and part of the cost will be financial.

I think it’s unlikely that either of our mad megalomaniacs considers the probable or improbable consequences of their actions. The hard core of MAGA cultists will refuse to acknowledge even the outcomes that negatively affect them (and the data suggests that Red states will likely bear the brunt).

We can only hope that a sufficient number of “softer” Trump supporters will realize that the costs of voting their racism have become too high.

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What They’re Breaking

Those of us who are aware of the “shock and awe” assault on America’s governance–and even those of us who are trying not to focus on the details of that assault–tend to shudder over our recognition that the Trump/Musk tantrum is doing immense damage. But few of us possess either the knowledge or the fortitude to enumerate what these know-nothing zealots are destroying.

In a recent Substack Letter, Paul Krugman provided a partial enumeration. He began by noting the difference between breaking ‘things” and breaking government processes.

“Move fast and break things” is sometimes an OK approach if the things in question are just hardware, which can be replaced. But what if the object that experiences “rapid unscheduled disassembly” is something whose continued functioning is crucial to people’s lives — say, something like the U.S. government?

As he points out, the (very) young techies Musk has sent into government agencies (Krugman dubs them “Muskenjugends”) share three characteristics:

First, they all seem to be extreme right-wing ideologues: whenever journalists investigate the social media trail of one of Musk’s operatives, what they find is horrifying. For example, Marko Elez, who had access to the Treasury Department’s central payments system, had in the recent past advocated racism and eugenics.

Second, they don’t know anything about the government agencies they’re supposedly going to make more efficient. That’s understandable. The federal government has around 2 million workers, many — I would say the vast majority — performing important public services, in a huge variety of fields. You can’t parachute into a government agency and expect to know in a matter of days which if any programs and employees are dispensable.

But the third characteristic of the Muskenjugend is that, like Musk himself, they’re arrogant. They believe that they can parachute into agencies and quickly identify what should be cut.

The Muskenjugend attack is compromising important–even essential–government operations. In their haste to “trim” the fedeeral workforce, Trump officials fired more than 300 staffers at the National Nuclear Security Administration, “apparently unaware that this agency oversees America’s nukes.”

The next day, realizing the enormity of the error, the agency tried to reinstate those workers — but was having trouble getting in touch, because the terminated workers had already been locked out of their government email accounts.

The administration also fired 3400 workers at the National Forest Service, which plays a critical role in fighting forest fires, and has mandated large layoffs at the Centers for Disease Control and Prevention (just as alarms are escalating about the potential for a bird flu pandemic.)  The CDC has been pressured to withhold reports, so Krugman notes that we might remain unaware of the next pandemic until it’s well underway.

Large layoffs have also decimated the Department of Health and Human Services. According to CBS, those layoffs have included half the officers of the Epidemic Intelligence Service, who play a critical role in identifying public health threats. There have also been layoffs at the FDA, which monitors the safety of food additives and medical devices.

And according to the union, despite an uptick in air disasters, several hundred workers have been fired at the Federal Aviation Administration.

The list goes on. But peering through the details, the overall strategy is clear: Musk and his minions decided to summarily fire as many federal workers as they could without making any effort to find out what these workers do and whether it’s important.

It’s easy to criticise the growth of government in the abstract. It is a lot harder to explain why government should not be making sure our foods are safe to eat and our aircraft safe to fly, among the many other functions that must be performed collectively in modern societies. It’s easy to point to excesses of red tape, to find fault with systems that seem faulty or have become obsolete. It is much harder to identify and correct the flaws while taking care to maintain essential safeguards.

It seems all too likely that Americans are about to learn the real costs of austerity theater. Many of the suddenly laid off workers were providing essential services. Nor should we underestimate the demoralization the vindictive layoffs have created even among those workers who still have their jobs (so far.)

So when we experience our next wave of devastating forest fires, when significant numbers of Americans begin dying from preventable diseases and faulty medical devices, remember: These disasters will be partly the fault of arrogant, ignorant men who decided to smash up a reasonably functional government.

And don’t get me started on the effects our “Nazification” and bowing to Putin while betraying Ukraine is having on America’s global stature…

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When Ignorance Meets Arrogance

In Federalist No. 1, Alexander Hamilton wrote

It has been frequently remarked that it seems to have been reserved to the people of this country, by their conduct and example, to decide the important question, whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend for their political constitutions on accident and force.

Reflection and choice require something entirely absent from Trump, Musk and their respective clown shows: knowledge and understanding.

MAGA’s ferocious assault on knowledge, expertise, and factual communication has given us today’s constitutional crisis–a crisis that reflects not just the massive civic ignorance of the general population, but the arrogance of the White Christian Nationalists who can–thanks to the Internet–choose such “facts” as they want to believe. Of course, as Hamilton would tell us, choosing false facts is not “reflection,” and ignoring both inconvenient facts and laws does not facilitate rational choice.

There is a chasm between the world inhabited by people who are capable of recognizing the current coup and the credulous souls and MAGA cultists who combine profound and visible ignorance with a wholly unearned arrogance–who take the laughable pronouncements from Trump and Musk at face value.

In a recent Substack letter, Paul Krugman described that chasm. 

Here’s where we are as a nation right now:

1. We may be in the middle of a trade war. Or maybe not

2. We’re in the middle of a constitutional crisis. No maybe.

3. We may be in the midst of a sort of digital coup, which might as a side consequence cause large parts of the federal government to cease functioning at all.

The unifying theme here, I guess, is that the federal government has been taken over by bad people who also are stunningly ignorant.

Krugman referenced the “concessions” made by Mexico and Canada, in return for Trump backing off his ridiculous tariffs.  Neither country agreed to do anything it wasn’t already doing--indeed, as Heather Cox Richardson has noted–these “concessions” confirmed agreements previously reached with the Biden administration.

As Krugman wrote,

The U.S., on the other hand, agreed to crack down on weapons shipments to Mexico. Trump will spin this as a victory; low-information voters and some intimidated media outlets may go along with the lie. But basically America backed down.

So is Trump the classic bully who runs away when someone stands up to him? It definitely looks that way.

Let’s be clear, however: this isn’t a case of no harm, no foul. By making the tariff threat in the first place, Trump made it clear that America is no longer a nation that honors its agreements. By caving at the first sign of opposition, he also made himself look weak. China must be very pleased at how all this has played out.

And as I argued the other day, the now ever-present threat of tariffs will have a chilling effect on business planning, inhibiting economic integration and damaging manufacturing.

Krugman described Musk’s effort to abolish USAID (which the man-child called a “viper’s nest of radical-left Marxists who hate America,”) pointing out that Musk not only isn’t president — he isn’t even a government official. Trump’s approval is irrelevant: shutting down an agency established by Congress is both illegal and unconstitutional.  Only Congress can legally abolish it.

This isn’t about saving money–USAID is responsible for a tiny fraction of the federal budget, although few voters understand enough about the federal budget to recognize how small a portion it is. Krugman observes that “in Musk’s worldview the mere fact of trying to help people in need makes you a radical-left Marxist who hates America.” And helping people is what USAID does; it funds humanitarian programs around the world. It feeds, medicates and vaccinates people. It saves lives.

Its termination–or even a pause–will cause many deaths.

And how many voters understand the enormity of the threat posed by the takeover of the Treasury’s computers by Musk’s interns?

Those systems control all federal payments, from grants to nonprofits to Social Security checks to salaries of federal workers. The potential for mischief is immense. 

Imagine that you’re a federal contractor who has made campaign donations to Democrats; suddenly the government stops paying what it owes you and brushes off inquiries by saying that they’re working on the problem. Or you’re a federal employee who, according to somebody in your office who has a personal grievance, has expressed sympathy for DEI; somehow your regularly scheduled salary payments stop being deposited into your bank account. Or even imagine that you’re a retiree who canvassed for Kamala Harris, and for some reason your checks from Social Security stop coming.

Don’t say they wouldn’t do such things. We’ve seen these people in action, and of course they would if they could.

As I type these words, America is in thrall to people who disregard the law, disregard court orders to stop, and whose arrogance deprives them of any understanding of the immense and long-lasting harm they are doing, as they play to the cheers of an equally ignorant cult.

Instead of “reflection and choice,” America is submitting to “accident and force.” And the rest of the world is watching.

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