Podcast Summary: "Oren Cass, Paul Krugman & Mariana Mazzucato on Trumponomics"

On with Kara Swisher
Host: Kara Swisher
Guests:

• Oren Cass: Founder and Chief Economist of a conservative think tank, contributing opinion writer for the Financial Times and the New York Times, and a key advisor to Mitt Romney's presidential campaigns.
• Paul Krugman: Nobel Prize-winning economist and professor at the City University of New York's Graduate Center, known for his op-eds in the New York Times.
• Mariana Mazzucato: Professor of Economics at University College London, founding director of the UCL Institute for Innovation and Public Purpose, and an advisor to global policymakers.

Release Date: February 17, 2025

1. Introduction and Setting the Stage

Kara Swisher opens the episode by introducing the Trump administration's aggressive stance toward the federal government, highlighting the increase in prices and inflation despite Trump's promise to address these issues from day one. She sets the agenda to discuss tariffs, tax cuts, deregulation, industrial policy, AI, and the influence of private actors like Elon Musk on public policy.

Notable Quote:
Kara Swisher (00:22): "The price of eggs is up, people. Inflation is also up, which Trump said he would take care of on day one."

2. The Role of Private Actors and Executive Power

Kara probes into the unprecedented involvement of private individuals, particularly Elon Musk, in shaping federal policies. The discussion centers on the balance between executive branch authority and congressional oversight.

Mariana Mazzucato (05:04):
She argues that the current backlash from the right is a reaction to the Democratic Party's expansive use of executive power since the Obama administration. She emphasizes that both administrations have pushed the boundaries of executive authority, sometimes eroding checks and balances.

Kara Swisher (09:11):
Highlights the ideological motivations behind actions like defunding USAID, criticizing the lack of restraint and the overtly ideological justifications provided by figures like Elon Musk.

Notable Quotes:
Mariana Mazzucato (05:04): "It's all fun and games to do this until the other side is in power, and now the other side is in power."
Kara Swisher (09:11): "The idea that this is kind of tit for tat... that they did it, so we'll do it, is ludicrous."

3. Tariffs and Trade Policy

The panel delves into the Trump administration's proposed tariffs on steel and aluminum, debating their effectiveness and economic impact.

Oren Cass (18:54):
Supports tariffs, arguing that they can counteract unfair trade practices and protect domestic industries. He criticizes the blanket application of tariffs without strategic targeting.

Paul Krugman (21:06):
Challenges the notion that trade deficits are inherently problematic, stating that the US trade deficit is a reflection of its strong economy attracting foreign investment. He contends that tariffs are a blunt tool that can harm consumers by increasing prices.

Notable Quotes:
Oren Cass (18:54): "Tariffs can provide powerful leverage."
Paul Krugman (21:15): "Tariffs don't get us competitiveness... it's a lose-lose strategy."

4. Tax Cuts and Fiscal Responsibility

The conversation shifts to the ongoing debate over tax cuts, particularly the 2017 Tax Cut and Jobs Act, and the necessity of raising taxes to address the growing deficit.

Mariana Mazzucato (34:11):
Criticizes the Republican reluctance to raise taxes, labeling it fiscally irresponsible. She acknowledges emerging voices within the party that recognize the need for revenue to address deficits.

Kara Swisher (38:15):
Dismisses the feasibility of Trump's proposed tax cuts, arguing that they are based on unrealistic growth projections and neglect the need for sustainable revenue sources.

Notable Quotes:
Mariana Mazzucato (34:11): "Raising taxes... that's just fiscally irresponsible."
Kara Swisher (38:15): "Any economic plan that is premised on... raising the economy's growth rate... That's just pure fantasy."

5. Industrial Policy and Manufacturing Revival

The panel discusses the importance of industrial policy in revitalizing US manufacturing and ensuring national security.

Mariana Mazzucato (41:24):
Highlights manufacturing as a critical sector for innovation, national resilience, and job creation. She underscores the need for patient capital and strategic investments to rebuild productive capacity.

Oren Cass (41:24):
Supports the use of industrial policy to bring back manufacturing jobs, emphasizing the need for targeted strategies rather than broad tax cuts.

Notable Quotes:
Mariana Mazzucato (43:55): "There's nothing in economics that says free market allocation of capital is always the most productive."
Paul Krugman (16:23): "What matters is expanding the productive capacity of the economy."

6. Artificial Intelligence: Regulation and Economic Impact

Artificial Intelligence (AI) emerges as a pivotal topic, with discussions on its regulation and potential to reshape the economy.

Oren Cass (46:46):
Raises concerns about AI deregulation under the Trump administration and its global ramifications.

Mariana Mazzucato (53:44):
Advocates for Europe to lead in AI regulation, balancing innovation with societal and environmental considerations. She warns against reactive regulatory measures that may stifle technological advancement.

Paul Krugman (48:52):
Predicts a potential AI bubble similar to the 1999 internet bubble, cautioning against overvaluation and the consequences of a possible market crash, including a tech bailout.

Notable Quotes:
Kara Swisher (50:26): "This is what feels like the Internet bubble... a good bet that a lot of people are way overvaluing this stuff."
Paul Krugman (48:52): "There might be a tech bro bailout... How would Americans react to this crash?"

7. Closing Remarks and Key Takeaways

As the discussion wraps up, panelists highlight the critical economic issues to monitor and offer warnings about future fiscal and policy challenges.

Mariana Mazzucato (55:02):
Emphasizes the need for a sophisticated industrial strategy and fiscal responsibility to address long-term economic challenges.

Paul Krugman (56:44):
Advocates for shaping capitalism to be more inclusive and sustainable, warning against populist blame games that fail to address structural inequalities.

Kara Swisher (58:21):
Expresses concern over anti-immigrant sentiments and policies, arguing that large-scale deportations could have severe economic and humanitarian consequences.

Notable Quotes:
Paul Krugman (56:44): "Shaping markets, not fixing them, and having a pre-distributive lens on how to get those relationships right from the start."
Kara Swisher (58:21): "What could really screw up the US Economy over the next few years, it would be anti-immigrant sentiment run amok."

Key Takeaways

1. Balanced Use of Executive Power: Both Democratic and Republican administrations have expanded executive authority, sometimes at the expense of congressional oversight, leading to potential erosions of checks and balances.

2. Tariffs as a Double-Edged Sword: While tariffs can protect domestic industries, their broad application can harm consumers and may not effectively address underlying trade imbalances.

3. Fiscal Responsibility Over Tax Cuts: Sustainable economic growth requires responsible fiscal policies, including potential tax increases to address deficits rather than relying solely on tax cuts with unrealistic growth projections.

4. Strategic Industrial Policy: Revitalizing manufacturing and other key sectors through targeted investments and patient capital is essential for innovation, job creation, and national security.

5. Regulating AI Thoughtfully: Effective AI regulation should balance fostering innovation with safeguarding societal and environmental interests, avoiding reactive measures that could hinder technological progress.

6. Addressing Anti-Immigrant Policies: Large-scale deportations and anti-immigrant sentiment pose significant economic risks and humanitarian concerns, potentially disrupting key sectors dependent on immigrant labor.

By engaging with economists holding diverse viewpoints, the episode provides a comprehensive analysis of the Trump administration's economic policies, highlighting both supporting arguments and critical counterpoints. Listeners gain a nuanced understanding of the implications of tariffs, tax cuts, industrial strategy, and emerging technologies like AI on the broader American economy.