Podcast Summary: How to Money - Episode #944: Tariffs, DOGE, and Your Money with Noahpinion
Release Date: February 12, 2025
Host: Joel and Matt
Guest: Noah Smith, Economist and Author of "noOpinion"
1. Introduction to the Episode
In this engaging episode of How to Money, hosts Joel and Matt welcome renowned economist Noah Smith, author of the Substack newsletter "noOpinion." The trio delves deep into the complexities of macroeconomics, exploring how large-scale economic policies and trends directly impact individual finances. Key topics include tariffs, national debt, declining birth rates, and the intricacies of the U.S. healthcare system.
2. Noah Smith on Media Evolution and Substack
Time Stamp: [03:59]
Joel opens the conversation by highlighting the shift from traditional media to platforms like Substack. Noah explains the advantages of Substack's email distribution, emphasizing its role in revitalizing the blogosphere by allowing writers to maintain a direct connection with their audience.
Noah Smith: “Substack is really bringing back the blogosphere. I paywall one out of three posts, which means that two out of three are free to read... [05:30]”
Noah contrasts this with legacy media, criticizing how traditional outlets amalgamate news reporting with op-ed writing, which stifles the unique voices of individual analysts.
3. Key Macroeconomic Indicators to Watch
Time Stamp: [14:19]
Noah shares his expertise on essential economic indicators that individuals should monitor to gauge the health of the economy:
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Five-Year Break-Even Inflation Expectations Rate: Serves as a reliable forecast for inflation, less volatile than actual inflation rates.
Noah Smith: “Keep an eye on that five-year break even because that gives a sense of people's expectations of inflation... [14:19]”
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Prime Age Employment to Population Ratio (Ages 25-54): Offers a clear picture of the employment landscape without the biases of labor force participation rates.
Noah Smith: “Look at the employment rate of people age 25 through 54. That's called the prime age employment rate... [14:19]”
These metrics help individuals understand broader economic trends and their potential impact on personal finances.
4. The Impact of Tariffs on the Economy
Time Stamp: [17:35] - [22:55]
The discussion shifts to tariffs, a hot-button issue influencing both the stock market and consumer prices. Noah analyzes the Trump administration's approach to tariffs, suggesting that the actual tariffs implemented are likely to be less severe than initially announced to avoid stock market turmoil.
Noah Smith: “Trump is guided by the stock market and whichever tariffs tank the stock market least or the tariffs Trump will keep... [18:59]”
He points out that while some tariffs will persist, their overall impact on the trade balance is minimal due to factors like currency adjustments and supply chain diversions.
Noah Smith: “Tariffs on a large number of goods from a large number of countries will not re-industrialize America. It will in fact hurt American industry... [22:55]”
Noah emphasizes that Trump's tariff strategy primarily creates policy uncertainty, which deters business investment and slows economic growth.
5. Government Debt, Spending, and Inflation
Time Stamp: [22:55] - [27:46]
Noah addresses the growing national debt and its implications for inflation. He critiques the Trump administration's tax cuts, arguing that they exacerbate the deficit and contribute to inflationary pressures.
Noah Smith: “Trump is on track to raise the deficit instead of decreasing it. That's an important thing to understand, and that is inflationary... [23:29]”
He explains the difference between Medicare and Medicaid, advocating for the replacement of Medicaid with more efficient cash benefits to reduce unnecessary welfare spending.
Noah Smith: “I would favor abolishing Medicaid and replacing it with cash benefits. Just mail checks to poor people... [27:49]”
Noah underscores the necessity of either cutting government spending or increasing taxes to manage the national debt effectively.
6. The Declining Birth Rate and Its Economic Consequences
Time Stamp: [30:34] - [39:44]
Joel and Matt steer the conversation towards the declining birth rates, a critical issue affecting long-term economic stability. Noah elaborates on the challenges posed by falling fertility rates, including the increasing old-age dependency ratio and its strain on social support systems.
Noah Smith: “We have absolutely no idea how to combat this. It is a big economic problem... [31:06]”
He highlights the inadequacy of current pro-natal policies and discusses the limited effectiveness of financial incentives in encouraging higher birth rates.
Noah Smith: “Countries have tried doing pro-natal policies... absolutely none of those have moved the needle... [32:00]”
Noah also touches on the broader implications for productivity growth, noting that an aging population can hinder innovation and economic dynamism.
7. Understanding the U.S. Healthcare System
Time Stamp: [39:44] - [45:29]
The discussion moves to U.S. healthcare, where Noah explains why Americans pay more for healthcare compared to other countries. He identifies the fragmentation of the insurance industry as a key factor that prevents insurers from negotiating better prices with providers.
Noah Smith: “We are richer. So of course richer people will spend more in health care... [39:44]”
He critiques the role of insurers as mere pass-through entities, burdened by high administrative costs without significant profit margins, leading to higher out-of-pocket expenses for consumers.
Noah Smith: “Insurance companies can't push back on high provider prices... [42:54]”
Noah compares the U.S. system unfavorably with other countries, suggesting that even if administrative efficiencies were improved, the fundamental structure still leads to excessive costs.
8. Perception vs. Reality in Economic Well-Being
Time Stamp: [45:29] - [49:04]
Noah discusses the disconnect between individual perceptions of economic health and the actual macroeconomic indicators. He observes that personal financial well-being often appears better than broader economic assessments suggest, influenced by media narratives and political biases.
Noah Smith: “People's ideas about culture and the negativity they see in the media about American culture and politics... [45:29]”
Despite acknowledging significant challenges like national debt and healthcare costs, Noah points out positive trends in productivity growth and entrepreneurial dynamism within the U.S. economy.
Noah Smith: “Productivity in America is increasing at a fairly rapid clip... [46:02]”
He attributes this to a dynamic labor market and robust entrepreneurship, which continue to drive economic resilience despite overarching fiscal issues.
9. Productivity and Technological Optimism
Time Stamp: [46:07] - [49:04]
Noah expresses optimism about the future of the American economy, grounded in increasing productivity and advancements in technology. He identifies AI, solar energy, and battery technology as pivotal areas that will drive future economic growth.
Noah Smith: “AI, solar and batteries go together really well. Also medical stuff like mRNA and synthetic biology, CRISPR... [48:52]”
He contrasts the U.S. with other developed nations, noting that while countries like Japan and China face productivity stagnation, the U.S. continues to innovate and adapt, maintaining its economic edge.
Noah Smith: “America is doing really well at this. ... AI is going to be a big deal that will help us a lot... [48:52]”
10. International Perspectives: Argentina's Economic Turnaround
Time Stamp: [53:02] - [56:54]
Noah provides an insightful analysis of Argentina's economic situation under President Javier Milei. Contrary to initial skepticism, Milei's austerity measures and anti-inflationary policies have led to economic stabilization and growth, mirroring lessons applicable to the U.S.
Noah Smith: “Argentina is doing all right and it's not suffering... [55:25]”
He warns, however, against overvaluing the Argentinian peso through currency pegging, cautioning that such measures can lead to future economic crises if not managed carefully.
Noah Smith: “Currency pegs in the long run can have bad consequences... [55:25]”
Noah concludes that Argentina's experience underscores the importance of combining austerity with hard money policies to combat inflation, a lesson that could inform U.S. economic strategies.
11. Concluding Insights and Takeaways
Time Stamp: [57:16] - [63:24]
As the episode wraps up, Joel and Matt draw parallels between national economic policies and personal finance strategies. They emphasize the importance of balancing spending and income to manage debt, highlighting that both government and individuals often face similar challenges in achieving financial stability.
Matt: “It's similar to personal finance, often requiring a combination of spending less and increasing income... [58:27]”
Joel adds a light-hearted note on declining birth rates, encouraging thoughtful consideration of parenthood not just for personal fulfillment but also for societal well-being.
Joel: “You should have more babies because four is not enough... [59:03]”
The hosts conclude by thanking Noah for his valuable insights, encouraging listeners to follow his Substack "noOpinion" for more economic analysis.
Notable Quotes
- Noah Smith: “We have absolutely no idea how to combat the declining birth rate. It is a big economic problem... [31:06]”
- Noah Smith: “Productivity in America is increasing at a fairly rapid clip. We grow productivity fast, we grow our wealth.” [46:02]
- Noah Smith: “America is doing really well at this. ... AI is going to be a big deal that will help us a lot... [48:52]”
- Noah Smith: “Tariffs on a large number of goods from a large number of countries will not re-industrialize America. It will in fact hurt American industry.” [22:55]
Final Thoughts
This episode of How to Money offers a comprehensive exploration of current economic challenges and trends, guided by Noah Smith's expert analysis. From the intricacies of trade policies and national debt to demographic shifts and healthcare costs, listeners gain a nuanced understanding of how macroeconomic factors influence personal finance. Noah's optimistic outlook on technological advancements provides a hopeful perspective amid complex economic landscapes, making this episode a must-listen for those seeking to navigate their financial journey with informed insights.