Summary of "This Instability May Be Worth It. Here's Why."

Interesting Times with Ross Douthat
Host: Ross Douthat, New York Times Opinion
Guest: Oren Kass, Founder of American Compass
Release Date: April 10, 2025

Introduction: The Impact of Trump's Tariff Regime

In the debut episode of Interesting Times with Ross Douthat, host Ross Douthat delves into the economic turmoil unleashed by former President Donald Trump's aggressive tariff policies. These tariffs have led to plummeting stock markets, heightened global uncertainty, and widespread recession fears. To unpack the origins and potential consequences of these policies, Douthat engages in a comprehensive discussion with Oren Kass, founder of the populist conservative think tank American Compass.

Ross Douthat [00:01]: "Donald Trump has taken a sledgehammer to the global economy as his new tariff regime yields crashing stock markets, rising global uncertainty, and widespread fears of a recession."

Challenging the Optimistic Economic Narrative

Douthat begins by questioning the prevailing narrative that the U.S. economy was in robust health at the onset of Trump's re-election, marked by low unemployment, decreasing inflation, and a booming stock market. Oren Kass counters this view by distinguishing between cyclical economic indicators and the long-term secular decline in economic well-being for the average American family.

Oren Kass [02:45]: "We've seen real decay... the ability to achieve middle-class security... has deteriorated."

Kass argues that while GDP and income metrics might show growth, they mask underlying issues such as increased reliance on dual-income households, dependence on government assistance, and rising inequality. This divergence has fueled political discontent and contributed to Trump's political success.

Deindustrialization and Its Societal Effects

The conversation shifts to the deindustrialization trend, which Kass identifies as a fundamental problem exacerbated by globalization and trade agreements like NAFTA. He asserts that the hollowing out of the manufacturing sector has led to significant job losses and diminished opportunities for non-college-educated workers.

Oren Kass [08:15]: "The loss of manufacturing has been a serious problem... leads to a real loss of opportunity for people."

Kass emphasizes that the decline in manufacturing jobs has not only economic but also social repercussions, contributing to issues like opioid addiction and family instability among displaced workers.

Manufacturing vs. Service Sector Jobs

Ross Douthat probes the necessity of manufacturing jobs in a modern, wealthier economy. He questions whether service sector jobs, which contribute to higher GDP and lower consumer prices, can adequately replace manufacturing roles both economically and socially.

Ross Douthat [10:09]: "Why is a service sector job... not just as good as a world with many more manufacturing jobs?"

Kass responds by highlighting the geographic and social benefits of manufacturing jobs. Manufacturing industries are often located outside major urban centers, promoting economic diversity and stability across different regions. Additionally, manufacturing provides viable employment opportunities for workers without college degrees, offering competitive wages compared to comparable service jobs.

Oren Kass [11:59]: "Manufacturing provides an incredibly valuable diversification... especially for people with less levels of formal education."

The Future of Manufacturing in an Automated Era

Addressing concerns about automation, Douthat asks whether modern manufacturing jobs, increasingly driven by AI and robotics, can still serve the same social and economic roles as traditional factory jobs.

Ross Douthat [13:19]: "Are those the kind of workers who are likely to be hired in the factory of the future that is highly, highly automated?"

Kass acknowledges that while advanced manufacturing will require higher skills, initiatives like partnerships with community colleges and labor unions are creating new opportunities. However, he concedes that not all affected workers will easily transition into these roles, indicating a need for broader societal engagement and support.

Oren Kass [15:29]: "Something we need to do... think about how to engage those folks."

Economic Costs and Benefits of Tariffs

The discussion turns to the economic implications of imposing tariffs. Douthat raises the traditional economic argument that tariffs can lower overall societal wealth by increasing import costs, questioning whether the benefits of reshoring manufacturing justify these costs.

Ross Douthat [16:17]: "Should we be willing to make some points off GDP to have more people working... in upstate New York and central Ohio?"

Kass responds by advocating for a long-term perspective, suggesting that the short-term costs of tariffs are outweighed by the benefits of a stronger, more resilient domestic economy.

Oren Kass [16:17]: "I think if we're asking sort of looking across the next generation or two, what trajectory is the right one for the American economy? I absolutely think that we'll be much better off if we make a commitment to reindustrialization."

National Security and Industrial Policy

Douthat explores another justification for tariffs: national security. He inquires whether tariffs aimed at reducing dependence on geopolitical rivals like China are effective or if alternative industrial policies might achieve similar goals without the associated economic drawbacks.

Ross Douthat [22:35]: "Isn't that partially just a case for industrial policy... support those industries? Why not just make that part of our spending program?"

Kass supports a blended approach, favoring targeted industrial policies for critical sectors while maintaining broader tariff policies to encourage general domestic manufacturing growth.

Oren Kass [23:19]: "I always emphasize that I actually see tariffs as the much more free market position... leave more to the market to figure out."

Evaluating Trump's Tariff Implementation

Ross Douthat critiques the Trump administration's tariff strategy, suggesting that the approach may be overly aggressive and poorly structured. He questions the viability of reciprocal, country-by-country tariffs, arguing that such a broad and unfocused strategy could lead to economic inefficiency and political backlash.

Ross Douthat [34:14]: "Isn't that just daft?"

Kass counters by drawing parallels to historical precedents, such as Reagan's successful negotiations with Japan, where targeted tariffs led to favorable trade agreements.

Oren Kass [34:56]: "The Japanese example... an enormous success, certainly for the U.S. economy."

However, he acknowledges the challenges of scaling such an approach to multiple countries simultaneously, contrasting effective bilateral negotiations with the current broad tariff strategy.

Potential Paths Forward and Worst-Case Scenarios

Looking ahead, Douthat poses hypothetical scenarios about the Trump administration's ability to recalibrate its tariff policies amidst economic instability. He outlines a worst-case scenario where inconsistent policies lead to increased uncertainty, economic stagnation, and the eventual dismantling of tariff measures by subsequent administrations.

Ross Douthat [45:05]: "There are reasons to think that Trump might stick with some bad policies... yields... stagflation."

Kass responds by emphasizing the importance of clear communication and policy credibility. He suggests that phased implementations and well-articulated long-term goals could mitigate costs and enhance the effectiveness of tariffs.

Oren Kass [43:10]: "Yes, there's plenty of room to sort of correct course... enormous improvement in reducing the costs and increasing the potential benefits."

In discussing the worst-case scenario, Kass highlights two primary concerns: the direct economic harm from poorly implemented tariffs and the potential erosion of support for reindustrialization efforts.

Oren Kass [45:23]: "The very real cost is actual harm to real people... discredited in the eyes of the American people."

Conclusion: Navigating Economic Instability

The episode concludes on a cautiously pessimistic note, with Douthat expressing doubts about the Trump administration's tariff policies and their long-term viability. Kass remains focused on the necessity of reindustrialization, advocating for measured and strategic policy adjustments to balance short-term costs with long-term economic resilience.

Ross Douthat [46:17]: "I think that note of pessimism is a good place to end because I'm feeling fairly pessimistic about this policy course at the moment."

Oren Kass [46:33]: "American Compass will do our policy work as best we can for as long as we can."

Key Takeaways and Insights

• Economic Indicators vs. Real Well-being: Traditional metrics like GDP growth and income levels may not fully capture the economic struggles of the average American family, highlighting the need for broader measures of economic health.

• Deindustrialization Impact: The decline in manufacturing jobs has profound social and economic effects, underscoring the importance of policies aimed at revitalizing this sector.

• Tariff Strategy: While tariffs can incentivize domestic manufacturing and address national security concerns, their implementation requires careful consideration of economic costs, phased approaches, and clear long-term goals to avoid unintended negative consequences.

• Industrial Policy: A combination of targeted industrial policies for critical sectors and broader tariff measures may offer a balanced path toward economic resilience and reduced dependence on unfavorable trade partners.

• Policy Credibility: Consistent and transparent communication is crucial for the successful adoption and effectiveness of tariff policies, preventing market uncertainty and ensuring policy goals are met.

Notable Quotes

• Oren Kass [02:45]: "We've seen real decay... the ability to achieve middle-class security... has deteriorated."

• Oren Kass [08:15]: "The loss of manufacturing has been a serious problem... leads to a real loss of opportunity for people."

• Ross Douthat [10:09]: "Why is a service sector job... not just as good as a world with many more manufacturing jobs?"

• Oren Kass [11:59]: "Manufacturing provides an incredibly valuable diversification... especially for people with less levels of formal education."

• Oren Kass [16:17]: "I absolutely think that we'll be much better off if we make a commitment to reindustrialization."

• Oren Kass [23:19]: "I always emphasize that I actually see tariffs as the much more free market position... leave more to the market to figure out."

• Oren Kass [34:56]: "The Japanese example... an enormous success, certainly for the U.S. economy."

• Oren Kass [43:10]: "Yes, there's plenty of room to sort of correct course... enormous improvement in reducing the costs and increasing the potential benefits."

• Oren Kass [45:23]: "The very real cost is actual harm to real people... discredited in the eyes of the American people."

This episode offers a nuanced exploration of the complexities surrounding tariff policies and their broader implications for the U.S. economy and society. Oren Kass provides a critical perspective on the current administration's approach, emphasizing the need for strategic, phased, and communicative policy measures to navigate the challenges of deindustrialization and economic instability.