The Costs of Chaos

Summary

Talking Feds — "The Costs of Chaos" (October 27, 2025)

Host: Harry Litman
Guests: Paul Krugman, Stephanie Ruhle, Justin Wolfers

---

Overview

This episode delves into the multifaceted costs of political and economic chaos under President Trump, particularly focusing on the impact of lawless attacks on U.S. institutions, the ongoing government shutdown, volatility driven by tariffs and trade policy, the boom (and worries) surrounding artificial intelligence, and the risks to long-term U.S. prosperity. Economic luminaries Paul Krugman, Stephanie Ruhle, and Justin Wolfers join Harry Litman for a comprehensive discussion on how the erosion of rule of law and institutional norms is already warping both the economy and the prospects for America's future.

---

Key Discussion Points & Insights

1. The Consequences of the Prolonged Government Shutdown

• Direct Economic Impact

  • Wolfers frames the macroeconomic impact as "probably pretty small," but immediately calls the shutdown "pointlessly destructive" ([04:18]).
  • Ruhle points out the real-world pain for federal workers and small businesses, especially in D.C., emphasizing "the harm disproportionately falls on some rather than others" ([05:52]).
  • Krugman on health care fallout: Without subsidies, ACA premiums are set to "double 114%" for many, especially in red states ([06:22]). He calls it "an enormous financial hit to a lot of people" and says Republican inaction is "cruel and...stupid."

• Political Theater & Nonchalance

  • The group agrees both parties are now openly fighting over ACA subsidies, but Republicans offer "a grand total of nothing" as a replacement ([08:12] Ruhle).
  • Krugman observes that Republicans’ indifference stems from ignorance, stating, "Name me 10 Republican members of Congress who actually understand how the Affordable Care Act works. I bet there aren't" ([09:07]).

• Notable Quote

  • Ruhle: "Even if the impact big picture is negligible, it's negligent. Show me any company...where leadership takes their notebooks and goes home for four weeks. That doesn’t happen." ([04:52])

2. Inflation & Data Amid Institutional Strain

• Static and Uncertain Signals
  • Inflation data is up, but Krugman calls interpreting monthly economic data "a real black art," highlighting that visible price hikes, not statistics, drive public anxiety ([10:44]).
  • Wolfers shifts focus to the import price index, revealing Americans "are paying" the tariffs—it's just a matter of how costs are absorbed ([11:50]).
  • Ruhle: "You cannot lie to [the public] about what their healthcare and grocery bills cost. It will burn you. People vote on what affects them, not what offends them." ([13:28])

3. The AI Boom and Persistent Pessimism

• Uneven Prosperity

  • Krugman compares the current AI-fueled stock bubble to the exuberant 1990s but notes today's economy is "a kind of frozen economy...not a good economy," with stagnant hiring and surging long-term unemployment ([15:28]).
  • Ruhle: "You do have those...mega tech companies that are not harmed by mass deportations and tariffs. They are doing extraordinarily well...However...they have direct access to this White House" ([16:49]).
  • The lack of AI regulation raises deep concerns: "The fact that AI is basically facing no regulation in this country should scare us to our core. But for most people that's too abstract...We're thinking about rent, gas prices and London broils." ([17:42] Ruhle)

• Favor Economy in the White House

  • Ruhle: Corporate leaders’ calculation is "I have to play the hand that I've been dealt...I’ve got access inside this White House" ([17:42]).
  • The panel agrees: Corporate contributions to Trump projects, especially the infamous ballroom, always come with strings attached ([18:56]).
  • Krugman: "They feel that they need to be embarrassingly slavish in their praise because you can be ruined." ([19:45])

4. Institutional Decay and Economic Foundations

• Rule of Law as Economic Bedrock

  • Litman and Ruhle recall how investment giants like Blackstone avoided Russia for lack of rule of law, "which is exactly where we're headed right now" ([24:44]).
  • Wolfers: "What is it that makes Argentina Argentina and America America?...Nothing else matters as much as the quality of American political and economic institutions." ([25:22])
    "You don’t see [institutional breakdown] in a quarterly number...What happens is my kids are going to be in an economy with 20% less opportunity...the cost of a populist leader." ([25:22])

• Short-termism vs. Long-term Prosperity

  • Ruhle: "We live...in the ultimate of short termism. Wisdom lies in long termism, and it's just not where we are, unfortunately." ([34:07])

• Immigration and Innovation

  • Wolfers: Immigrants are a cornerstone of U.S. economic dynamism, and restricting them is "a cataclysm" ([35:08]).
  • Litman notes almost half of U.S. Nobel laureates are foreign-born; Silicon Valley’s population is nearly majority foreign-born ([35:08]).

5. Tariffs: Unpredictable and Politicized

• Tariffs as Political Tools

  • Ruhle: "Every single day at that White House, business leaders are coming in the side door...We are quietly rolling back tariffs because the White House knows it's economically crippling" ([39:07]).
  • Yet, public rhetoric and new tariffs—some based on presidential grudges—have left industries "paralyzed" ([41:31]).

• Separation of Powers Abandoned

  • Wolfers: "Congress has the power to set tariffs. It's all over the moment Congressional Republicans remember that." ([41:49])
  • Ruhle: "Congress has the legal power...Congress doesn't have the guttural power to set tariffs because they're cowering..." ([42:05])

6. Authoritarianism and Its Economic Toll

• Institutions Eroded

  • Krugman: "We thought he would be protectionist. We didn’t think he was going to go have insane tariffs...We didn’t envision masked thugs grabbing people off the streets. Suddenly we are a very different country." ([27:59])
  • Ruhle: "The co-mingling of his private business, his family business and the government looks like it's going full throttle and not going to stop." ([43:54])

• Enduring Damage

  • Litman sees the task of restoring the rule of law as "the work of generations" ([44:56]).
  • Wolfers: "The mark of a good government is that the leader doesn't actually need to know the name of any player on the field...Trump misunderstands his role. He thinks he's the coach...It's a horrible way of running a football game or an economy." ([47:46])

---

Notable Quotes & Memorable Moments

• On the Negligence of Shutdowns
  Ruhle ([04:52]):
  "Show me anyone in the business world that if the two sides of a board, if management can't agree, they take their notebooks and go home for four weeks. That doesn't happen. And the fact that we elect our leaders to...work together and legislate, and they just can't do it is just disgraceful."

• On Obamacare Subsidies
  Krugman ([06:22]):
  "The best estimates are...the actual amount that people pay...will see their premiums on average double 114%. It's much more uneven than that. So...impossible financial burden...disproportionately...in red states. This is huge...It's cruel and it's also stupid."

• On the Illusion of Prosperity
  Krugman ([15:28]):
  "There's a feeling that great things were happening for everybody...We don’t have that feeling now...I'm writing about this and we are in a kind of a frozen economy. We're not having mass layoffs, but companies aren't hiring."

• On Institutional Decay
  Wolfers ([25:22]):
  "When you're talking about the value of institutions...Nothing matters more than that...the received wisdom is institutions, the critical factor...that's where all the stakes are...my kids are going to be in an economy with 20% less opportunity...the cost of a populist leader."

• On Favor Politics & Market Distortion
  Ruhle ([18:56]):
  "There's no corporation or private donor writing a check for $100 million cuz they feel like it. They're all getting something out of it."

• On the Danger of Leadership Style
  Wolfers ([47:46]):
  "The mark of a good manager, of a good coach is knowing the names of all the players. Trump misunderstands his role. He thinks he's the coach...It's a horrible way of running an economy."

---

Timestamps for Critical Segments

• Introduction & Overview: Economy under Trump – [00:36]
• Shutdown: Economic Effects & ACA Subsidies – [03:49] to [10:12]
• Inflation, Tariffs and Price Realities – [10:12] to [14:29]
• AI and the Frozen Economy – [15:28] to [18:56]
• Institutions, Favor Economy, and Rule of Law – [23:21] to [27:59]
• Immigration and Long-term Institutional Decay – [34:07] to [36:21]
• Tariffs as Uncertainty Engines – [38:34] to [43:54]
• Restoring Rule of Law and Prosperity – [44:56] to [47:57]

---

Summary

The panel paints a sobering picture of an America where once-stable institutions underpinning prosperity are under siege, with consequences that reach far beyond the daily headlines. From the "negligent" Congressional deadlock that caused the shutdown, to erratic trade policies that paralyze industries, to the elite’s short-term opportunism amidst broader economic stagnation, the conversation returns again and again to the centrality of the rule of law and open institutions in sustaining long-term national wealth and innovation.

Paul Krugman and Justin Wolfers draw on historical and international context to warn that America’s economic exceptionalism is fragile, not innate, and is already being eroded by "banana republic" policies. Stephanie Ruhle contends the business elite’s complicity—chasing access and advantage—exacerbates the damage.

Harry Litman closes by underscoring the Herculean task of restoring trust, norms, and function to U.S. institutions, with all agreeing that the true economic cost of chaos may not be immediately visible but will be felt for generations unless reversed.

---

Final Note:
For listeners and readers: The heart of this episode’s warning is that the foundations of prosperity—institutions, rule of law, predictability—are eroding. The bill for chaos, say the panelists, comes eventually. And the tab may be larger than anyone bargained for.

Transcript

[A]

Running a business comes with a lot of what ifs, but luckily there's a simple answer to Shopify. It's the commerce platform behind millions of businesses, including Thrive Cosmetics and Momofuku, and it'll help you with everything you need, from website design and marketing to boosting sales and expanding operations. Shopify can get the job done and make your dream a reality. Turn those what ifs into Sign up for your $1 per month [e-mail] SpecialOffer.

[B]

Welcome to Talking Feds, a roundtable that brings together prominent former federal officials and special guests for a dynamic discussion of the most important political and legal topics of the day. I'm Harry Littman. It's our periodic economic episode where I'm joined by some of the country's best analysts for a deep look at at what Trump is doing to American economic life. We'll bear down in particular on how Trump's lawless megalomaniacal attacks on institutions are already having deep effects, direct and indirect, on the prospects for long term prosperity. The shutdown continues to dominate the front pages and the business pages, and with hundreds of thousands of federal employees missing paychecks, families around the country are starting to feel the consequences. As chances for a showdown compromise languished in Washington, Trump headed abroad to try to craft a trade deal with China. The president is bullish as ever on tariffs, deploying them as instruments of his own personal caprice and general thirst for revenge. Trump's favored countries, meanwhile, receive special treatment from the president, such as his $20 billion bailout for Argentina. And perhaps the most noteworthy developments in recent economic life are the colossal investment in artificial intelligence as well as its burgeoning use trends that are near guaranteed to continue for years to come. What consequences AI will have for the country's economic life are less straightforward to anticipate. To work out the real world impact of Trump's attacks on financial institutions, the casualties of his trade wars and the general state of the economy. I'm thrilled to welcome a panel of three of the country's finest economic analysts and they are Paul Krugman, one of the world's most prominent economists. He was wrote his must read column at the New York Times for 25 years, and these days you can find his writing at his essential substack, which is simply under his name, Paul Krugman. Thank you so much for joining as always.

[C]

Hi there. Hi there.

[B]

Stephanie Rule, the host of MSNBC's the 11th Hour and the senior business analyst for NBC News. She previously was managing editor and anchor for Bloomberg Television and editor at large for Bloomberg News and spent over a decade as a senior executive in the finance industry. Steph Rule, always a pleasure to welcome you.

[D]

Thank you for having me.

[B]

And Justin Wolfers, a professor of public policy and economics at the University of Michigan and a visiting professor of economics at the University of Sydney, as well as a contributing columnist for the New York Times and frequent analyst on tv, especially on Stephanie's show.

[D]

Indeed he is.

[C]

Wow.

[B]

Justin, thanks so much for being here.

[E]

Yeah.

[C]

Wow.

[B]

All right. We gotta talk a little about the shutdown, though. I want to move with some dispatch through it. A shutdown isn't presumed to have a really big economic impact. But four weeks, Justin, in particular, you've been keeping an eye on this as this extends further and further. Is the normal thing thought that it's sort of negligible in overall economic impact? Does that actually have to be thrown out the window?

[E]

So two things are true. In terms of its direct measured effect on macroeconomic aggregates, it's probably pretty small. And it's dumb. Like, we paid the taxes. We have the staff out there who are meant to be doing things and are excited to go to work. And effectively, what we have is a war between Democrats and Republicans in which what they're doing is they're burning our tax dollars to each prove to the how much they dislike the other, to force the other to back down. It's a pointlessly destructive way of doing politics, but I guess that's the only way we do politics these days.

[D]

And I would say even if the impact big picture is negligible, it's negligent, right? Show me any company, show me anyone in the business world that if the two sides of a board, if management can't agree, they take their notebooks and go home for four weeks. That doesn't happen. And the fact that we elect our leaders to come up with public policy, to work together and legislate, and they just can't do it is just disgraceful. And again, like, yes, what if long term there wouldn't be a big impact? Is that what you say to small businesses in Washington, D.C. right now, who for the last four weeks have had no class trips, no tourists, nobody going to the museums? I'm sure we wouldn't be saying that. And so while it might be smart politics or the only politics that Democrats can play right now, they have such little leverage. We cannot forget that this is just a disgrace, that this is where we are in terms of our Congress not getting the job done.

[B]

And as you point out there's also, whatever the economic impact, the harm disproportionately falls on some rather than others. The shutdown right now has become a fight over these health care subsidies. Just this morning we get from the Post that the Obamacare prerequisite premiums are set to rise by 30% on average. Paul, you've called it the coming premium apocalypse. What is the wider economic fallout if these premiums go up as much as predicted?

[C]

30%. I think that's the market premiums. That's what they charge pre subsidy. And then people are losing the subsidies. And the best estimates are that on average, the actual amount that people pay the 20, there's 24 million people on a bond care, 22 million of them are subsidized. Those people will see their premiums on average double 114%. Excessive precision from KFF. And it's much more uneven than that. So quite a few people were actually talking about impossible financial burden. The reason that the premiums have gone up so much, even not counting the subsidies, is that we are expecting a lot of healthy people to drop out of the risk pool because the cost of getting health insurance becomes too much. And if you're not currently sick, you say, all right, I can't do this. And so this is an enormous financial hit to a lot of people. And it's disproportionately, it turns out, in red states and red districts for a lot of reasons. But this is huge. I mean, and you know, the Democrats have basically said we are not going to, you know, you need our votes to pass this thing. You have given us absolutely no say in policy. This is something you need our votes. You need to show give us something. And we're going to insist that. And they've chosen this. It's not clear that this is necessarily the most important issue. Sort of like return to rule of law would be. Thank you. But this is an issue that plays with the public because it matters. And I'm actually surprised that Republicans didn't preemptively move to extend these subsidies, at least through the midterms. It's cruel and it's also stupid.

[B]

There is a feel of sort of neener, neener. The reason they're not doing it is just because the Dems kind of want to.

[D]

But, Harry, it's taken us to week four to finally say out loud on both sides, this is about Obamacare subsidies. We were all here four weeks ago when the argument was Democrats are just looking to give healthcare to illegal immigrants. Illegal immigrants are filling our emergency rooms and Americans can't get medical treatment. We had to deal with 1, 2, 3 weeks of hearing that. And I don't think anybody out there right now is out there praising the awesomeness of Obamacare. I don't think anyone is saying this system's great. We should just do it. But as much as the president despises the Affordable Care Act, Republicans have offered a grand total of nothing when it comes to a replacement.

[B]

And there is a weird nonchalance about the whole thing. They don't seem to be, as you compared with a company in any sense, sort of impacted or trying hard to make solutions.

[C]

Yeah, it's this nonchalance on a couple of levels because obviously they allow. You know, it's funny because they delayed some of the other horrible stuff that's in the one big beautiful bill past the midterms. So the big, the really savage Medicaid cuts, the really savage food stamp cuts, they were not out of the goodness of their hearts, but out of political calculation. They postponed those things, but I think they just fell through the cracks. I think they name me 10 Republican members of Congress who actually understand how the Affordable Care act works. I bet there aren't. So this is negligence. And now it's just this sort of. It's got Obama's name on it. What baffles me is not that they're, you know, the cruelty of the three, but they think that they're going on about illegal immigrants and the Democrats, that that's going to actually work, that they actually think that anybody who isn't already part of the cult is going to be persuaded.

[E]

You guys are way too pessimistic. I watched the news. I heard there's a whole new plan coming in two weeks.

[C]

Yeah, I've seen that for. How many weeks has it been that we've had? Yeah, yeah.

[E]

10 years.

[B]

Prosperity is just around the corner. We've known that for a long time. This is a show in and of itself. But it won't be this show because I want to cover so much territory. Having the benefit of you guys. Let's move briefly to inflation, noting, by the way, one of the problems with the shutdown is that it's going to be hard to get certain vital economic data. But we did get reports that inflation is up 3% from the same time last year, rising faster than any time since January. What do those numbers tell you about the state of the economy?

[C]

I mean, monthly economic data, interpreting the tea leaves there, that's a real black art. There are so many special factors And I think we basically learn nothing. The tariffs are starting to show up in consumer prices, but it's slower, I think, than we might have expected so far. Businesses are eating a lot of it through. You're holding prices and eating it through profit margins, which they will not do long term. But they're kind of waiting for the, they're waiting for the big trade deals which are also going to happen in two weeks and about to happen for two weeks, for about six months now. And so it's an unsustainable position, but this is going to be a slow drip. And it's funny because the sense that from the public, from surveys, from conversations, people think that prices are going up a lot. And I don't think the numbers are cooked, but I think in some sense the sense of dread and the highly visible increases in some prices are what's mattering more certainly politically than the CPI report, which will be the last CPI report until the government reopens.

[E]

I want to suggest that we all stop looking so hard at the CPI if we're talking about tariffs. And look instead of my favorite index, which is the import price index. So what we've seen is we know there's tariff revenue coming in. Do you see that in the Treasury? We know that import prices aren't falling. That tells us just as a matter of arithmetic, that Americans are paying it. When we go looking in the cpi, we're falling for someone else's trick, which is are we paying it at the store or are we paying it through our 401k? I actually don't care that much. I mean, there's political salience and I care a little bit. But parsing the CPI to find evidence of the tariffs is pointless because we know the tariffs are somewhere. They either on a corporate profit and loss statement or they're on the stickers.

[C]

Yeah, fair enough. I mean, it's Americans, you know, a lot of small businesses are screaming now or going under.

[E]

Right?

[C]

And that's because the tariffs. So the fact that the CPI is fairly modest so far doesn't, you know, in some ways it's worse to have all these businesses under stress.

[D]

Large companies could have front loaded in the spring inventory in a way that small businesses couldn't. But one thing I would point out, the President has been saying over and over, there's no inflation, grocery prices are down. Even if we're not getting economic data that we should be getting, it doesn't make sense. How can you have a president who says grocery prices are all down while at the Same time he is admitting that meat prices are up and his solution for that is to import beef from Argentina, which will then only hurt our cattle ranchers. Right next door are the soybean farmers who are hurting because of the trade war. So regardless of what economic data we're looking at, we also have a White House that's just over and over telling people things that aren't true and where I think this could burn the President. You can tell your supporters things that aren't true if they don't see it. Right. You can tell my mother that there are caravans of criminals coming from Venezuela through the border in Texas and in New Jersey. She doesn't see it, so she will believe you. But you cannot lie to her and tell her how much London broil costs at shoprite cuz she buys it every week. And this could burn the President when he's lying to the American people about what their lives cost, about what their healthcare costs, about what their grocery bills cost. It will burn you. Right? People vote on what affects them, not offends them.

[E]

Steph, I think you're too quick to call people dishonest here. What you're saying is absolutely right that meat prices are high in America, soybean prices are low because we can't sell it. The obvious implication is the White House is populated by vegetarians.

[B]

There you go.

[E]

And they're really enjoying tofu and all sorts of price cuts. And I think that's all right.

[B]

Steph, you've been all over this Argentinian thing and why it's a sort of just a perfect paradigm of all the erraticness. I wanted just to get back to a second something you said, Paul, and this sort of doer quality of so many, both consumers and small businesses, you know, we're in the middle of what people are calling a kind of AI bump that maybe in the absence of which we'd be looking at a recession. But you compared it to the sort of high spirits of the 90s and under Clinton and you've noted, and maybe this is outside the bailiwick of economists, but that this one, even as we have a similar kind of bubble, it's accompanied by a general lack of confidence in the economy, a kind of source pessimism about what's going forward. Why do you think that's happening here relative to other bubbles?

[C]

Yeah, I mean there's a lot that you know and some of the numbers and some of the feel does resemble. I'm older than anybody else here, but I remember the late 90s very well. And, and there was, there was a feeling of exuberance. There was a feeling that great things were happening for everybody. And we don't have that feeling now. I don't think it's just psychological though. I think there are aspects of that too. I mean, I think there's just so much bad, scary news out there. But it's also true that I've been writing about this and we are in a kind of a frozen economy. We're not having mass layoffs, but companies aren't hiring. If you should happen to lose your job, it's much, much harder to find a job. Back in the late 90s, we used to talk about hiring was based on the mirror test. If your breath would fog a mirror, if you are alive, you get hired because it was that good a labor market. Now it's really hard. Overall, unemployment isn't very high, but long term unemployment has been spiking because once you've lost your job, you can't find another one. So I think people are feeling a lot of anxiety even if wages are still rising some, although not as much as they were. But this is not a good economy. And if it weren't for the AI and the stock market being driven by wild optimism about AI, it wouldn't look at all like a good economy.

[D]

I would just say you do have those, you know, the magnificent seven mega tech companies that are not harmed by mass deportations and tariffs. They are doing extraordinarily well, or at least their stock prices are. However, There are more CEOs that are okay or even happy with this White House than we realize. So for weeks I think we've been saying, why haven't any CEOs been standing up and speaking out? Where's the business Roundtable? I think they're not speaking out publicly. A lot of them, the big, big ones, because they don't need to, because they have direct access to this White House. CEOs from Fortune 500 companies are in this White House all day, every day. And Saturday they can call the President, they can call Howard Lutnick, they can call Scott Bessant, and from their perspective.

[B]

And they can call Steph Rule. A lot of them talk Sota of oche to you.

[D]

It seems them do. Yes. But they are living, and I'm not defending them, but they're living in a world of short termism. And while they might not big picture like Donald Trump, why they might not have voted for him, many of their position is I have to play the hand that I've been dealt And I've got access inside this White House. And they're in there wheeling and dealing for themselves. Look at all those tech leaders, right? Those tech leaders that are surrounding the President all have giant stakes in AI. AI is going to change every element of the way we live our lives. So they're happy to go to the White House and tap dance for him and in return have a new frontier with absolutely no regulation. The fact that AI is basically facing no regulation in this country should scare us to our core. But for most people that's too abstract a thing to think about. We're thinking about rent, gas prices and London broils. But what we're seeing with the control and the access business leaders have to this President who is putting, I'm not gonna say putting the White House up for sale, but look at the ballroom. Look at it being funded by corporations and private donors. There's no corporation or private donor writing a check for $100 million cuz they feel like it. They're all getting something out of it.

[B]

Yeah, and he runs a favor economy. Look, did you hear, you know, he just decided I won't send troops to San Francisco. That's because some big time later. Oh, you can't not to San Francisco. Let's stay with AI for a second if we can and maybe go at it more broadly. Because the key promise of AI is that it will stimulate the thinking, calculating, writing, et cetera that humans do. And so the logical result should be a huge productivity boom on the one hand, mass layoffs on the other. So far I think there's not much sign of either. Are those expectations wrong or what's the broader impact socially?

[E]

Way too early to see it. Remember we all just typed into ChatGPT our first sentences two years ago if that the industrial revolution took 70 years to take hold.

[C]

Yeah. Although one thing I will worry is I think it'll take years before we know what the impact is. But the interesting thing is we're having these massive real investments, never mind the financial stuff. Lots and lots of money is being poured into data centers. And there's one big difference from the 90s. Lots of money was poured into fiber optic cables which then sat empty dark fiber for many years, but now are in use because fiber optic cables last. Turns out that data centers depreciate really fast. All the data centers that are being built now, if we don't actually figure out what to do with them, by the time we do figure out what to do, it will all have depreciated. So this is A real genuine waste of resources in a way that is quite different from the 1990s. I think that the big guns, they have access to the White House. They're also scared. There's a lot of, you know, this is a White House that doesn't do rule of law. It just does retribution. And so a lot of these guys are both, you know, they can go in there and say, here's $100 million I want to favor, but also they feel that they need to be embarrassingly slavish in their praise because you can be ruined.

[D]

But Paul, I'm not saying I would be braver than them, but it's so short sighted. Think about when the President, when he first went after law firms, right? When he first went after Paul Weiss. I don't know, why was it dei? If all the other law firms that are competitors to Paul Weiss at that moment would have locked arms and said, no, we're going to stand together, the President would have had nothing. Instead, the minute he goes after Paul Weiss, all of Paul Weiss's competition pick up the phone, call their clients, and they're poaching them. And so if you actually saw Industries, because to your exact point, they are scared. And so they'll pay the president the $100 million here, the $100 million there. But the thing is, it doesn't mean you've bought him. You've rented him for the hour. He could still turn on you tomorrow.

[C]

Well, yeah, I mean, look, Jimmy Kimmel struck a big blow for Liberty by showing. Hey, you know, sometimes capitulating to these guys is actually bad business. And for what it's worth, universities are actually behaving pretty well right now. Almost everybody's refusing to sign that compact, that deal. Yeah.

[D]

And that's hard to do.

[B]

Yeah.

[D]

I feel like when we say, why aren't more people standing up? It's easier said than done.

[C]

Right?

[E]

So there is one thing that's different here, Steph. I'm totally sympathetic. We should all act with integrity. And sometimes that's easier to do together than apart. That's what higher ed should do. That's what CEOs should do. That's what law firms should do. This the stuff he's doing to Comey and Letitia James, going after individuals and putting them in jail, you can't lock arms around that. So this is now, what happens if the next CEO who comes in and he says, I want 10% of your company, and if the answer's no, you personally find yourself facing jail time? You know, this is Banana republic stuff. This is un American. But I think that fear is genuine.

[B]

Well, now we are in my backyard. Nothing's more offensive or abysmal than that to me. But it does frame a question because you guys just in the last three minutes have mentioned all kinds of institutions of civil society, rule of law, et cetera. And Paul, you've been talking about it a lot in your columns. What's your sense of the economic impact of just having a president who is so indifferent to the rule of law, so self centered, so erratic, chaotic. How do these general problems resolve in actual economic terms?

[C]

Yeah, I mean, you want instant payback for this stuff, and it's not. It's more like termites that eat at the foundations of the economy, probably don't get a financial crisis. The one thing I will say is that in the past, a lot of people have tried the same thing that Trump is trying, which is consolidate, win an election. And then than consolidate authoritarian rule. They've also stepped in at a time when the economy was doing badly and economic orthodoxy was actually destructive. Hitler was able to preside over a boom because his predecessor was a gold standard fanatic. Orban was able to consolidate in Hungary because European austerity was devastating the Hungarian economy. And Orban basically stopped that. Here Trump comes in with an economy that, although people were pretty pissed because of the previous inflation, was actually doing pretty well. And slowly it's going downhill. And what I was talking about before, about the kind of frozen, no higher economy, I think that Trump's policies have a lot to do with that. Who's going to make an investment when.

[B]

You have his policies across the board?

[C]

Yeah. What will the tariff rate on Canada be next week now that Trump has decided that quoting Ronald Reagan is a vicious assault on him? So this is an economy where people kind of sit frozen, throw a few hundred million dollars at gilding the ballroom, but otherwise they don't make investments.

[D]

Respecting the rule of law and having three separate but equal branches of government is one of the key components of American exceptionalism. It's why people invest their money here. I can remember eight years ago interviewing Steve Schwarzman from Blackstone, obviously one of the biggest private equity giants in the world. I specifically remember him saying, under no circumstance would they ever invest in Russia, regardless of an opportunity that seemed good, that seemed attractive, because they can't trust the rule of law, because at any moment the government could step in and take a piece of your business or shut down this business, which is exactly where we're headed right now.

[E]

Can I Add on to this. I think this is the whole game, please. So, Harry, I'm just going to have a go at you for fun, but I'm moderately serious. You begin the conversation by asking about the latest monthly inflation number. Doesn't matter. We can talk about the latest GDP number. Either the economy grew by 0.5% or 0.7%. When you're talking about the value of institutions, you're talking about a question. Why is the United States rich? Why is Australia rich? And why is the country of my birth, Papua New guinea, in grinding poverty? Nothing matters more than that. And the received wisdom in economics today is institutions, the critical factor. Papua New guinea is a beautiful country. It has incredibly fertile soil and has all sorts of mining rights, but they can't get the institutions right. I'm not saying this guy, that Trump is about to make his Papua New guinea, but I am saying that's where all the stakes are. What's extremely difficult, and Stephanie's been amazing on this, by the way, but what's extremely difficult about this is you don't see it in a quarterly number, right? What happens is we wake up and my kids are going to be in an economy with 20% less opportunity. And 20% is a serious number, by the way. That's a rough estimate of the cost of a populist leader. You know, 15, 20%, something like that. One of the things I want Paul to help me do, I want you to help me do, Harry and Stephanie is developing a language for this because it's not the language of economics journalism, because we've grown up in a functional first world economy with functional institutions. But you know, what is it that makes Argentina Argentina and America America? What is it that has caused hyperinflation in Turkey, Erdogan style interference with the equivalent of the Fed. And this is everything. Nothing else matters as much as the quality of American political and economic institutions.

[D]

And the fact that right now some of the biggest names, the greatest minds in finance, are saying nothing because they are becoming mind blowingly wealthy. In the last nine months, what we've seen in the crypto universe, what we've seen in private investing opportunities because of the President, God only knows the types of companies that the government is suddenly investing in. When you're watching the stock moves extraordinarily just before the President makes an announcement. We don't even know the people who are becoming mind blowingly wealthy, but I guarantee many of them are, are people that we would want to be speaking up and speaking on behalf of our democracy and Our functioning economy, they're not. Cuz their mouths are filled with cash right now.

[C]

Look, we came in when Trump won the election with a lot of bad expectations about what might happen. I think we have to say that Trump has exceeded our expectations. On the downside that this is at every level, it's just worse than anyone could have imagined. We thought he would be protectionist. We didn't think he was gonna go. Go have insane terrorists. We thought he was going to not care much about rule of law. We didn't think he was going to be trying to prosecute everybody who annoyed him. And I didn't envision masked thugs grabbing people off the streets. So this is. Suddenly we are a very different country. Suddenly we are looking very much like a banana republic. Terms we're not supposed to use, but God knows we're achieving it. And this takes a toll. Now, the thing is, I think people are not as blind and not as materialistic as we sometimes think. I mean, there's this kind of cynical view that all that people care about is grocery prices, and they sure do care about grocery prices. But I think this stuff also does make an impact. Now, it remains to be seen whether the public outrage, the fact that Americans are saying, hey, this is not the country I thought I lived in is going to be enough to stop it. That's the big question.

[B]

And it's the question I should say I wrestle with kind of every day. And I'm really. I don't know if excited is the right word here, but very, very interested to hear you put it in those terms. And I am a kindergarten student next to all you on economics. But I do have the sense that his erraticness, his corruption, et cetera, means who the hell would want to do business with him? Just a quick example from the law you've heard about. He wants to get $230 million from the Justice Department. The law is so contrary to that. But we have something that businesses depend on, the Federal Torts Claims act, that where the sovereign says, we will do certain causes of action, we won't do others, but everybody can depend on that and the consistency of the US as an economic entity and first world player, but also as a social, cultural, democratic one. It just feels to me, and I'm very excited to be discussing it with you economic experts, that all this crap he's pulling everywhere has that impact.

[D]

I don't know. Because at the same time, right this week, you got a guy like Bill Ackman saying Donald Trump's the most pro business president we've seen in modern history. So everything that you're saying, I don't disagree with. But as we say that, right, Markets are up, what, 30% since Liberation Day. So if you run an actual business, it's been devastating for you to try to figure out what in the world this administration is doing. Can you hire, are you firing, what are you doing? If you have a chance to go see this president, do you have a gold bar with his face on it to give him as a gift? If you run an actual business, this has been so difficult. But if you are, I say merely if you're just an investor or if you're a trader, this volatility hasn't necessarily been bad for you. Volatility. I mean, look at what JP Morgan, look what Goldman Sachs earnings have been. They've been extraordinary. But the markets and earnings from banks and trading revenue out of banks is completely different from where the everyday economy is.

[E]

Let me try and draw those two threads together. So, first of all, Harry, I'm really glad that our democracy falling apart means that we finally think lawyers are relevant and that you're excited to be part of the conversation.

[B]

It had to happen sometime.

[D]

Let's be clear, Justin. It doesn't matter what happens in the economy. Lawyers always win.

[B]

They always. Yeah. Yes. They've got the vig at all times. Correct. Go ahead.

[E]

Glory of my life. But let me try and draw the threads together. Cause Steph's right, top end of town is saying all sorts of very positive things. And nerds like me are saying all sorts of negative things based on the rule of law. How can both be true? So this is the point that Steph's making. I just want to re articulate it. Our current economy consists of a bunch of existing large dominant firms. They all have a line into the White House. In a healthy economy, they're always fighting. They're always worried the next big thing's coming up behind them.

[F]

Right?

[E]

What killed IBM was two blokes in a garage in Cupertino who founded a company called Apple. Those blokes. There are blokes in a garage in Cupertino. There might even be some sheilas there, too, trying to invent something right now. And they don't have a line to the White House. So what you have is a policy that does well in defending the elderly, but destroys the unborn. And it's the unborn firms and ideas that we worry about because they're the future of the economy. That's why you're not gonna see it either. On television, you can't interview the unborn. The idea that didn't happen, the innovation no one thought of, Right? And so you can't see it on television. We're not gonna see it in the quarterly numbers. But we do know that's how a healthy capitalist economy works, is one generation takes over from the last creative destruction. And that also ties to another version of this, which is what is one of the great engines of American innovation. It's people with funny accents, immigrants. This is a country Steph gave her version of American exceptionalism, my version of American exceptionalism. The reason I came to this country was this is a country where you can turn to your mate, look him in the eye and say, I want to be the world's best at something. You can aspire, you can strive, you can innovate. And that is all of the beautiful energy behind creative destruction. Those folks are being told you're not welcome anymore. And those folks, if you just look at any major American corporation, the ideas are coming from immigrants. We get the job done. And so again, we're looking at the ideas that are not gonna be born over the next 20, 30, 40 years. And that's what I worry about. So Steph's right, Top end of town's very happy. They'll give you positive interviews today. But it's the guys who would or should be dominating our future economy that I'm worried about.

[D]

And what's interesting about that, Harry, I could be wrong, but of the magnificent seven tech companies, I think four of them have immigrants running them. And understanding the importance and the excellence of having an economy in a country that welcomes immigrants legally takes a long term view. But right now we're in the ultimate of short termism. And I would bet tons of families whose kids are applying to University of Michigan right now, where Justin is, are saying, well, this might be an easier year because there's less international Students like people. He's smiling. Because they are, it's true, because people are. We live, whether it's business or privately or certainly our lawmakers, we're living in a time of ultimate short termism. Wisdom lies in long termism, and it's just not where we are, unfortunately.

[B]

Look, it's so true. And that's exactly what an equal playing field means. Just a couple data on what you. You've said, Justin.

[E]

Well, that's so impressive. A lawyer who's got to use data. I love it, Harry.

[B]

Correct. Okay, are you ready? Tell me if I blunder or not. Number one, the Silicon Valley county is maybe one of the very few in the United States which has almost more foreign born people than us born. And number two, we have the most, by a good margin, Nobel prize winners in the world. Almost half of them were foreign born. They came here, the best and brightest, et cetera. And it's just a cataclysm what he is doing. And I just wanna say one thing to you, Steph. I think that basic dynamic that you identified with corporate leaders, that's how he's done it. That's sort of the selfish ethos of Project 2025. Why is Paul Weiss so stupid? Cuz somebody stands up who is now making not $10 million a year for them but 100 million and says if you do this, I'm taking my book elsewhere. And they all cower. So it's the sort of individual already big fish that trump so advantages that is distorting what would otherwise be, you know, growth bets on the Future, Diversity Projects, etc.

[D]

To write him a check for the ballroom, right? They're happy to say, here's $25 million for the ballroom. And you see some people say, well, you know, lots of presidents have renovated the White House. Isn't it good that it's not taxpayer dollars? No, it's not good because Nobody's writing a $25 million check for free. They're getting something on the other side and we don't know what that something.

[B]

Is, but it's not long term. Growth in the economy, I think is pretty. All right. It is now time for a spirited debate brought to you by our sponsor, Total Wine and more. Each episode you'll be hearing an expert talk about the pros and cons of a particular issue in the world of wine, spirit and beverages.

[C]

Thank you, Harry.

[F]

In today's spirited debate, we discuss adding the right amount of water to a glass of whiskey without turning it into a whiskey river. The thought of adding water to any golden brown whiskey might bring tears to the eyes of some whiskey drinkers. But for others, adding a few drops of water to your glass has its merits and actually improves and enhances the flavor. The phrase open up refers to the release of the extra flavor you taste by adding those drops of water. And here's a little bit of science that helps reinforce that theory. When water is added to whiskey, it releases the glycol, which is partially responsible for the smoky and spicy flavor. When guaiacol is released, it rises to the surface so the aromas are more easily noticeable, allowing your palate to experience the smell and flavor that imparts on the drink. And while there's really no right or wrong way, some say adding a splash of water brings out the best in your glass of whiskey. Of course, going overboard with the water has diminishing returns. Watering down the whiskey and proving once again that moderation almost always wins. So the next time you're thirsting for a little experimenting of your own, stop into your local Total Wine and More for a whiskey selection that suits every budget. And that's a scientific fact. So find what you love and love what you find only at Total Wine and More. Cheers.

[B]

Thanks to our friends at Total Wine and More for today's a spirited debate. Let's talk briefly about tariffs. Cause they're such a big part of his, you know, overall economic planning.

[E]

Wait for this. Terrific. Let's do it.

[C]

Okay.

[B]

Like a drunk flying a jet plane. But it seems to me that they are now part and parcel of an overall irrational sociopathic strategy driven by the smallest kinds of needs.

[D]

They are. But make no mistake, the President still talks a really big game on tariffs, and he imposes big ones. But I promise you, every single day at that White House business leaders are coming in the side door and cutting deals with Howard Lutnick. And we are quietly, and I'm glad we are quietly rolling back tariffs because the White House knows it's economically crippling, especially for some industries. Right? We don't grow cocoa here. We do not grow bananas here. It doesn't make sense to have draconian tariffs on things that we cannot grow or manufacture here. So the President still has his top line trade war. Look what's happening with China. Of course, now we're punishing Canada, but the tariffs aren't having as bad of an impact as we thought they were going to have because a lot of them haven't been implemented or they're not as bad as we thought they were going to be. Justin, what do you think?

[E]

I think everything you think, Steph, you.

[D]

Know that that's why I book them on my show all the time.

[E]

I think the one thing we've learned over the past couple of weeks that's arguably new is this telenovela is not going away. So look, I confidently. This is the most confident forecast I can possibly make. I confidently predict full employment for trade economists over the next four years. We saw the two most egregious examples were a 50% tariff on Brazil because they wanted to put in jail on an insurrectionist instead of giving him a lifetime appointment. How that helps the American people is beyond me. And now we in trade negotiations with Canada because the President was unaware that historically, Republicans, and in particular Ronald Reagan were in favor of free trade. It's another tool of power. That's Steph's point. And it's still going on. You know, last Friday, we were back to 100% tariff on China. Then he forgot to actually put in place an executive order. Weird. We've had two threats now of 100% tariff on foreign films, which has caused those industries to go upside down. He keeps forgetting to follow through on that. I'm not gonna remind him, but. So this is gonna go on, which means everyone's gonna have to have a political scientist in their front office.

[D]

But the thing is, Justin, even if he doesn't follow through, what it does is freeze those businesses. Right. So I think that some people say, don't worry, the president doesn't actually follow through and do it, even if he doesn't follow through.

[C]

Except for.

[D]

In the meantime, it paralyzes industries.

[E]

I have just been back from a couple of weeks in Australia, and it's paralyzing what the Aussies want to do, it's paralyzing. When you talk to anyone from any other country, it's paralyzing what they're doing. When you talk to anyone who runs real business, it's paralyzing them. So I want to just emphasize one, the most boring point. And, Harry, this is right over the plate for you, mate.

[B]

I'm ready.

[E]

Congress has the power to set tariffs. It's all over the moment. Congressional Republicans. Remember that. Congressional Republicans hate tariffs. All over.

[B]

Would that it were so simple.

[D]

No, here's where Justin's wrong. Here's where Justin's wrong. Congress has the legal power to set tariffs. Congress doesn't have the guttural power to set tariffs because they're cowering and doing whatever the President wants them to do. Which is so interesting because he's literally taking power away from them. And they're saying, please, sir, thank you. Do it again.

[E]

Yep. I love the fact that you used guttural power as your term of art.

[B]

Repeatedly and at every turn, honestly, again, because we now are in my strike zone. And it is again and again. And it's. You know, if you go back to the founding, they were really worried about the person of charisma who would. But they had a solution, and separation of powers and Congress pushing back and jealously guarding its prerogatives. And guess what? That whole part has failed. That part is really stunning. I'm going to keep all three of your pictures in my Wallet. And every time I'm going to say, you know, five times a week on different venues. All these problems with the rule of law are economic problems. Justin Steff and Paul said it themselves. And his love of making individual deals, he can like do a general categorical ban and then say, come to me and I'll do you a favor. That's really the same model as in the rule of law. And it's what makes the economy fundamentally unpredictable. So I just want to take the sort of long range view of how all these things are really of a piece of, including in particular the economy. Yeah. And the damages that we're facing. Is that all fair? Will you give me that one, Justin? Yeah.

[D]

But I would argue that the President is so, so happy right now, significantly happier than he was in his first term when he was told over and over, no, Congress has this power, the Department of Justice has this power. The emoluments clause stands in the way now. He has blown through all of it. And while, you know, Paul was saying earlier, people are outraged, people are upset. They might be. He's not. He is wealthier than he has ever been. The co mingling of his private business, his family business and the government looks like it's going full throttle and not going to stop. And so while people may be struggling, while business may be uncertain, I would say this President is thrilled with what the last 277 days have meant for him. And if he does get paid the $230 million he's asking the Department of Justice, that is taxpayers to pay him for basically his legal fees, it's like he won Yahtzee.

[C]

Yeah.

[B]

Unlawfully. And another way to say that is we're teetering on the edge of autocracy. But, Justin, I know you want to come in. Let me just broaden the question a little bit. When I think about the rule of law and the damage at doj, you know, even when in my sanguine moments, I think if they all went away tomorrow, it's the work of generations to restore the cultural norms, the rule of law, the stability and the like. So I wonder if you could sort of speak to that also economically. What kind of Herculean task awaits us as a country assuming we dodge the biggest bullet of retaining the American experiment.

[E]

Yeah. So I love the idea that you're going to carry around photos of Steph, Paul and I in your wallet. I just want to make sure you get me on a good hair day because I'm really struggling today.

[B]

You're pretty sensitive about that today on the left side, huh? Send it to me. Send it to me.

[E]

Yeah, absolutely. Look, I prefer not to rant about the man. I prefer to talk about economics. So let me step back and explain a little bit of an economic framework for why I think what the President's getting wrong. But I want to start by endorsing your point, Harry. Often when we talk, hear lawyers talk, we think they're making the case for justice. And often they are.

[B]

Here.

[E]

It's the case for justice and the case for prosperity. That's the commingling. That's the important thing here. Look, here's the way the theory of the case, Capitalism, markets, works. We have a government. It sets down a set of rules and it enforces the rules. And the players go out there and compete like hell. And actually, that's how the NFL works. And it's a pretty great spectacle, super competitive. I love to watch it. I actually prefer college football. Go blue.

[D]

It's easy to love college football when you work at Michigan.

[B]

It's impossible not to.

[C]

Even now.

[E]

I'm about to ask you about your undergrad, Steph.

[B]

My sister hates sports, but she's there. She can't help it. Anyway, go ahead.

[E]

If you don't have a useful set of rules and you don't enforce them, it's a shitty game. It's a bunch of big boofy blokes jumping around on top of each other. No one wants to see that. The role of the government, therefore, is to write rules and enforce them. Therefore, the mark of a good government is that the leader doesn't actually need to know the name of any player on the field because they just write rules. And the rules are impersonal. They apply to everyone equally. The mark of a good manager, of a good coach is knowing the names of all the players. Trump misunderstands his role. He thinks he's the coach. He calls these guys into the White House and he fires them up and tells them what to do. That's how he ran the Trump Organization. It's probably a good way of running a private company. It's a horrible way of running a football game or an economy. And every time you hear that, he knows someone's first name is actually a mark of failure.

[B]

That's brilliant, Steph.

[D]

He gets the last word. No way. Justin gets the last word today.

[B]

What he said. Okay.

[D]

Yeah.

[E]

So Steph is on the record saying, go blue. I love it.

[D]

There you go.

[B]

There you have it. I'm not.

[D]

It's not American to root against Tom Brady No, I'm on the record.

[B]

Go Blue Jays. Thank you very much to Paul, Stephanie and Justin. As you might have noticed, Paul had to leave a few minutes early, but Stephanie and Justin more than picked up the conversation. And thank you listeners for tuning in to Talking Feds. If you like what you've heard, please tell a friend to subscribe to us on Apple Podcasts or wherever they get their podcasts. And please take a moment to rate and review the show. You can also subscribe to us on YouTube where we are posting full episodes and my daily takes on top legal stories. Check us out as well on [e-mail] where I'll be posting two or three bulletins a week breaking down the various threats to constitutional norms and the rule of law. And Talking Feds has joined forces with the contrarian I'm a founding contributor to this bold new media venture committed to reviving the diversity of opinion that feels increasingly rare in today's news landscape, where legacy media seems to be tacking toward Trump for business reasons rather than editorial ones. Rest assured, we're still the same scrappy independent podcast you've come to know and trust, just now linked up with an ambitious project designed for this pivotal moment in our nation's legal and political discourse. Find out [e-mail] thanks for tuning in, and don't worry, as long as you need answers, the Feds will keep talking. Talking Feds is produced by Luke Cregan and Katie Uptshaw, Becca Haveian, sound Engineering by Matt McGardell, Rosie Dawn Griffin, David Lieberman, Hamsa Mahadranathan, Emma Maynard and Hallie Necker are our contributing writers and production assistants by Akshay Turbailu and Sebastian Navarro. Our music, as ever, is by the amazing Philip Glass. Talking Feds is a production of Delito, llc. I'm Harry Littman. Talk to you later.

[C]

Sam.