How Is The Economy Really Doing?

Summary

Podcast Summary: The Find Out Podcast

Episode: "How Is The Economy Really Doing?"

Date: February 3, 2026
Guests: Tim (Host), Rich (Host), Zach (Host), Justin Wolfers (Economist)

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Overview

This episode tackles the real state of the U.S. economy during Trump’s second term, featuring a candid and often humorous interview with acclaimed economist Justin Wolfers. The hosts challenge political narratives, ask how everyday Americans are faring, and dig deep into economic myths, policies, and anxieties gripping the country in 2026. Wolfers provides clear-eyed context for headline stats, exposes common myths around trickle-down economics, and ultimately urges a renewed focus on the foundational institutions underlying American prosperity.

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Key Discussion Points and Insights

1. State of the Economy: The B Minus Debate

• Initial Grade: Justin Wolfers recently graded the U.S. economy a "B minus," generating debate on what that really means in today's context.
  • Wolfers' Rationale:
    • The economy inherited at the start of Trump’s second term was "in pretty good shape" (01:43).
    • "A slowly rising unemployment rate is worse than it ought to be… Inflation hasn’t come down as quickly as we might have hoped… The President relentlessly lies about this." (03:47)
    • Government deficit spending is propping up a “B minus” economy: "A huge amount of government money is supporting what at the moment is a B minus economy." (05:23)
  • Grade Inflation Joke: American grading inflation means a B minus isn’t what it used to be—“In your age, you might have called it the gentleman C.” (07:04)

2. Rising Prices, Tariffs, and Policy Failures

• Tariffs as a Regressive Tax:
  • Wolfers explains the flawed logic: "A giant tax increase on the American consumers in the form of tariffs is not the best way to lower prices." (07:43)
  • U.S. producers match price increases, hurting consumers across the board. (08:27)
  • Tariffs and insurance premiums are rising, while attacks on the Federal Reserve stoke inflation further. (08:51)
  • Memorable Quote: "Pretty much everything this bloke has done... ends up being something that would raise prices rather than lower them." (09:31)

3. How Does the Average American Feel?

• Consumer Confidence Hits All-Time Lows:
  • University of Michigan’s own consumer confidence survey shows, "Consumer confidence right now is at the lowest level it’s ever been… People feel more miserable [now] than in 2020 or 2008." (10:03–11:13)
  • Policy Trust Collapse: "The share of Americans who rate the quality of our macroeconomic policy as poor has never been higher." (12:03)
• Implication: Disillusionment with leadership is not just a civic problem, it's bad economics—as it undermines long-term investments by individuals.

4. Trickle-Down Economics Debunked (Again)

• Historic Trends: "Trump’s tax bill was the single biggest redistribution from poor to rich in a single bill in American history… Largest redistribution in American history." (13:03)
• Tariffs as “Screw the Poor” Tax: Tariffs hit low- and middle-income Americans harder, providing no benefit to working folks. (13:03–15:04)
• Why Do People Still Buy In?
  • Despite clear evidence it doesn’t work, “Trickle-down” persists as a narrative.
  • Wolfers: “Turns out when sharing is optional, they often choose not to do it.” (16:17)
  • Political reflex for the rich, with little attempt to justify it anymore. (16:30)

5. Economic Luck, Timing, and Party Messaging

• Is It Luck or Policy?
  • The cyclical pattern: Democrats inherit crises, dig out of them, and appear to underperform due to lagging perception. Republicans often blamed less because of timing. (17:36–18:20)
  • Wolfers: “We don’t have enough data to say anything particularly clear about this.” (19:10)

6. Deficits, Debt, and “Fiscal Responsibility” Myths

• Who Really Bloats the Deficit?
  • "Reagan blew out the deficit. Bush blew out the deficit. Trump blew out the deficit… The idea that Republicans are the party of fiscal responsibility has not been true for a single day of my life." (19:48–20:23)
• Debt Spiral Politics:
  • New dynamic: run up deficits so the other party can’t spend—deliberate political strategy since the Bush era. (24:00–25:30)
  • Wolfers: "Every dollar I spend is a dollar less for them to spend." (26:00)

7. What Happens If We Don’t Address the Debt?

• Are We Greece or Japan?
  • "Japan’s debt is basically double ours. Nothing bad's happened to Japan… But it could also go bad fast, as in Greece or Argentina." (31:42)
  • U.S. is "miles away" from a fiscal collapse, but continuing to run up debt limits the ability to respond to future crises. (34:26)

8. Debt as Investment vs. Frat-House Beer

• Good vs. Bad Borrowing Analogy:
  • Borrowing for a high-return investment (e.g. education, infrastructure) makes sense.
  • "Borrowing $40,000 to spend on beer while doing nothing to raise your future purchasing power is a really bad idea." (36:23)
  • Wolfers is skeptical that current deficits are making worthwhile investments. (38:12)

9. Tariffs, Corporate Taxes & Industrial Policy Nuances

• Tariffs: Wolfers disagrees with most tactical tariffs—there’s little evidence they work as intended, and current policy is erratic and non-strategic. (40:18–44:48)
• Carrots vs. Sticks: Incentivizing (e.g. the CHIPS Act), not threatening, is typically more effective at reshoring business. (45:52)
• On Factory Jobs & Nostalgia:
  • "Factory jobs are what rich people think poor people want." (46:35)
  • Most workers want better for their children—service sector jobs are valuable and should not be romanticized less than manufacturing. (48:11)

10. Core Prescription: The Role of Institutions

• The Real Key to Prosperity:
  • Rich countries are built on strong institutions—contract law, rule of law, property rights, an independent central bank, and functional democracy. (50:52–54:00)
  • Current threats: Erosion of democratic norms, cronyism, leader-first over rule-based governance.
  • Wolfers: "Perhaps the greatest economic flaw of the current President is an attempt to overturn an election… We shouldn’t even be at a point where that’s a question." (52:24)
  • Rebuilding and protecting these institutions is the real foundation for American prosperity.

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Notable Quotes and Memorable Moments

• On Grade Inflation and Economic Grades
  "When I say B minus, I mean taking full account of American grade inflation and the fact that we’re all special today."
  —Justin Wolfers (05:44)

• Tariffs as ‘Screw the Poor’ Tax
  "Tariffs are what we call a regressive tax. If you want simpler language, it’s called a screw the poor tax."
  —Justin Wolfers (14:21)

• On Trickle-Down Economics
  "Turns out when you find ways for the rich to get rich, the rich get rich. Turns out when sharing is optional, they often choose not to do it."
  —Justin Wolfers (16:17)

• On Political Strategy with Deficits
  "Every dollar I spend is a dollar less for them to spend… Trump is just trying to make sure there’s no money left for the next Democrat."
  —Justin Wolfers (25:38)

• Are We Like Japan or Greece?
  "Japan’s debt is basically double ours. Nothing bad’s happened to Japan… A different answer is lots of things turn to shit. We’ve seen this happen in countries like Greece, in countries like Argentina and so on."
  —Justin Wolfers (31:42)

• On Factory vs. Service Jobs
  "Factory jobs are what rich people think poor people want… I have no particular sympathy for saying we need to save these jobs rather than others… Service sector work is noble."
  —Justin Wolfers (46:35–48:11)

• On Institutions as the Heart of Prosperity
  "The answer appears to be that what matters is what we call institutions… My greatest fear is that what has been undermined more than any news story we’ve talked about, is those foundations in the United States."
  —Justin Wolfers (50:52–54:00)

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Timestamps for Important Segments

• 01:43 — Justin Wolfers on grading the economy, what’s working and what’s not
• 03:47 — Reality of jobs, inflation, and political spin
• 05:44 — What does a “B minus” mean in 2026 America?
• 09:31 — Why Trump’s price-lowering promises have failed
• 10:03 — Consumer confidence and what Americans really feel
• 13:03 — How Trump’s tax and tariff policies redistribute wealth
• 16:17 — Why trickle-down still doesn’t work
• 19:48 — The “fiscal responsibility” myth
• 24:00 — Deficit as partisan political weapon
• 31:42 — U.S. debt: Are we in danger? Japan vs. Greece as models
• 38:12 — Are we borrowing for the future or current consumption?
• 46:35 — Romanticizing factory jobs vs. today’s realities
• 50:52 — Institutions: the real driver of prosperity
• 52:24 — The economic and democratic dangers of eroding institutions

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Tone and Personality

• Candid: Direct and no-nonsense economic analysis with regular use of humor and strong language.
• Irreverent: Frequent jokes about grade inflation, golden dicks, and hugging for deficit reduction.
• Empathetic: Real concern for everyday Americans and their struggles, with a focus on honest, practical answers.
• Collaborative: A genuine attempt by hosts and guest to create a space for economic understanding without tribalism or echo chambers.

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Final Reflection

Justin Wolfers encourages listeners to look beyond the day-to-day chaos and partisan back-and-forth, focusing instead on the fundamental institutions that have historically made America prosperous. The episode debunks economic myths, exposes politically motivated narratives, and highlights the importance of trust, cooperation, and honest governance in building a stable economy for all.

For more, follow @JustinWolfers on major socials—or just tune into The Find Out Podcast for more unvarnished talk on America in the Trump era.

Transcript

[Tim]

Foreign.

[Rich]

Hey, everybody. Welcome back to the Find out podcast. You've got Tim, Rich and Zach today. And we're going to take a little bit of a break, talking about, you know, ICE going into all of our communities and, you know, shooting people and everything. But we're going to talk about something.

[Tim]

They're done. They're done, right?

[Rich]

Oh, are they done now? That's all over.

[Tim]

I heard they were done.

[Rich]

Well, we're going to move. We're going to move to the state of the economy because we've actually got one of the top economists in the United States. We have Justin Wolfers with us, who is an Australian economist and public policy scholar, and he is a professor of economics and public policy at the Gerald R. Ford School of Public Policy at the University of Michigan. Justin, thanks for joining us today, mate.

[Justin Wolfers]

Good to be here. I'm also an American, by the way.

[Rich]

Oh, you are? Oh, I'm sorry, I was, I was reading your Wikipedia page. So I'm gonna have to. I'm gonna have to.

[Zach]

Great research being done on ourselves.

[Rich]

Oh, God, yeah, we, we go real deep here. I was reading the first paragraph off, but anyway, so. So, Justin, so tell us, just generally speaking, I saw you gave a grade for the US Economy recently and I think it was a B minus. So we are hearing everything from the economy is amazing. It's great. It's never been better to. We are basically on the precipice of a recession. Nice. In your opinion, generally at the 10,000 foot level, where are we economically? Like, what's working and what's not?

[Tim]

Not. Yeah.

[Justin Wolfers]

Let me start. You just said, I've heard this enormous range of commentary. I don't think that's true, actually. You've heard the president say that we're off the charts. Great. When lying liars lie, I tend to think, you know, I'm just going to like, pretend he never spoke. Because when you don't speak truths, you don't deserve a seat at my table.

[Zach]

Yep.

[Justin Wolfers]

So what we have is a range from people who really believe it's quite healthy to people who believe are on the cusp of a recession. All of those things might be true. Let me give you a few ways of thinking about this. So, first of all, the economy at the beginning of 2025, beginning of the Trump term, was in pretty good shape. To be clear that this is not a partisan remark. The economy in 2019, on the eve of the pandemic. So during the first Trump term was in pretty good shape. So in each case, you know, things can go. Okay. Unemployment was low, inflation was a bit high, and we might want it, but was edging back down to where the Fed wanted it. So that's what the President inherited. And the good thing about economies is they move slowly. Whatever economic news, like the talking heads on CNBC and so on, don't. But actual economies move slowly. And so you heard a lot of doom and gloom, but actually the economy kept on keeping on. Now, when I say it kept on keeping on, we didn't end a recession. Things didn't turn south. The world is still here. But it's also been a year in which the unemployment rate has continued to rise. What do we want? We want to get the unemployment rate as low as we can get it. And then we just want it steady. So anytime it's rising, we must be doing worse than what we can do. That says we're not producing as much stuff, we're not employing as many people as we might otherwise. That's one part of the economy. I think it's the most important. Jobs are a big part of how we define ourselves. They have an important social meeting. They're how we look after ourselves and our families. Being unemployed sucks. And when there's not enough jobs, it's not just a question of those who lose their jobs. People stay in their jobs that they can't find new opportunities, they can't get pay rises and so on. So slowly rising unemployment is worse than it ought to be. The wood slowly there gives you some wiggle room. Inflation hasn't come down as quickly as we might have hoped. And folks I'm sure have noticed prices continuing to rise. The President relentlessly lies about this. He lies that he's gotten prices down. It's an absurd lie because unlike him, the rest of us go to the store, right? The rest of us know what groceries are.

[Zach]

It's a crazy.

[Justin Wolfers]

Well, he was in Iowa the other day and he's been lying for months, saying gas is a buck 99. And every time he says it, it gets fact checked. So he went to Iowa where it's not true. Still not true. It's still never been true. And he said, got even better. It's now down to a buck 85. Oh, great. So the imaginary economy is doing terrific. The one we live in a little less so. And then I want to bore everyone with that sort of stuff. Economists are forced to talk about the budget deficit. Look, here's the simple logic of budgets. What you want to do is stash some extra money away during good times so you can have a cash splash, help people out when times are bad. If you thought times were really, really, really bad right now, you might think it's okay to have a deficit as big as we do. If you thought that things were kind of okay, maybe we should be at roundabout neutral. We're miles from that. And so what we have is a huge amount of money, government money, supporting what at the moment is, you know, a B minus economy. You know, when I say B minus, let me be clear to those of you who earned your degrees years or decades ago. A B minus wasn't a bad grade for some of us. I've got kids in the American school system right now. Everyone gets an A. Just lovely. When I say B minus, I mean, taking full account of American grade inflation and the fact that we're all special today.

[Rich]

I clearly wasn't either.

[Tim]

But yeah, yeah, C's get degrees. Was like, you guys would all be.

[Justin Wolfers]

Straight A students these days.

[Zach]

I don't know.

[Tim]

He's, he's, he, he's not wrong in that. Like, my, my daughter is in seventh grade and she gets multiple chances to do all of her work. Like, you can just be bad at it and get it wrong and you can just come back like, usually within two weeks, but it's like a rolling two weeks for every assignment. So you can always come back and bring back a new version of the thing and then they will just change the grade on it until you learn it. Which, like, is a better way of teaching someone some. But like, are, are you, are you grading for the test in that sense? No. Oh, man.

[Justin Wolfers]

Not.

[Tim]

But are you making sure kids learn shit? Yeah, so, like, I actually, like.

[Zach]

So B minus is terrible then.

[Rich]

So, yeah.

[Tim]

You gotta give up to le to land at a big.

[Rich]

So all of a sudden I thought you were kind of lukewarm on the, on the economy, but now the B minus feels, feels more like a C minus in like 1997 terms or something like that. Or is that, is that fair to say your age?

[Justin Wolfers]

In your age, you might have called it the gentleman C, but we called it a gentleman C because gentlemen got them. Sure. It was sort of like coasting and you know, okay, that was me actually.

[Tim]

That was me too. So that's fair.

[Rich]

My mom is nodding her head wherever she's listening, she's like, this is, this is Tim, and she's a teacher.

[Tim]

So you applied yourself, Tim, if you applied yourself.

[Rich]

Oh my God, the amount of times I heard that. But, but so, so just. So let me ask you this. So with the Prices going up. Are you to suggest that a giant tax increase on the American consumers in the terms of a tariff is not the best way to lower prices?

[Justin Wolfers]

Oh, mate.

[Rich]

Because, I mean, I'm being told it is.

[Justin Wolfers]

Yeah. No. So let me put this directly in the political context. The political context is the President ran on lower prices.

[Tim]

Yeah.

[Justin Wolfers]

He said on day one he was going to work to get prices down. What has he subsequently done? He imposes tariffs, taxes on goods that Americans import. Now, lots of people might think that's okay. The easy way to avoid paying that tax is don't buy the import. But guess what? You might say, I'm not going to buy the Samsung washing machine. I'm going to buy the GE1. It's made in America. But guess what? The moment GE's competitors raise their prices, guess what GE does.

[Tim]

Yep.

[Justin Wolfers]

Turns out Americans raise their prices to match those of their foreign competitors. It's also the case that a lot of American firms use inputs, for instance, steel, where there's very high tariffs, taxes. And so they're passing those along. So one, is bunged on tariffs. Two, we've still got a complete lack of clarity about what's going to happen to health insurance.

[Zach]

Right.

[Justin Wolfers]

And it looks like a lot of people's premiums might rise quite substantially. Three, he's relentlessly attacked the Federal Reserve. Now you might say, why does that matter? Well, if the Federal Reserve can be independent and be left alone to do its job, it can more effectively bring inflation down. And if you undermine it, you lead people to believe that inflation might be higher in the future. And that in itself is enough to actually cause inflation. And that, by the way, also raises interest rates. And there goes your mortgage payment. Up, up, up. And so pretty much everything this bloke has done is it ended up being something that would raise prices rather than lowering them.

[Zach]

Yeah. That's not surprising. I'm curious because I know from an economic perspective, you look at a lot of the metrics and you can go, all right, this is a B minus economy, because some of the metrics that don't really affect the average American are okay and always really stable with America. But what would your grade be for the average American who's struggling just like to living paycheck to paycheck, because the economy does not feel like a B minus to them. It feels very different. So if you strip out all of the traditional economic metrics that economists look at and just look at it through the eyes of like an average American, what would you grade it at right now?

[Justin Wolfers]

So one way we could do that is we could just ask typical Americans. And so that's what's called a measure of consumer confidence. In fact, my university, the University of Michigan, surveys hundreds of people every month asking them, how do you feel about the future of the economy? Consumer confidence right now is at the lowest level it's ever been. Darker, worse. I mean, actually, Zach, it's stunning because I want you to think about how bad things have been at certain moments. Do you remember the terror of 2000? Sorry, 2020.

[Zach]

Oh, yeah.

[Justin Wolfers]

Like, we're sitting at home, we can't do work, and we don't know if this virus is ever going to go away and we're more miserable.

[Tim]

Right.

[Justin Wolfers]

And I'm old enough to remember when Lehman Brothers collapsed, triggering financial crisis, that meant we didn' would wake up and have a banking system.

[Rich]

Right.

[Zach]

This is still.

[Justin Wolfers]

People feel more miserable.

[Rich]

Man, that's crazy.

[Tim]

Leader who was at least capable of getting, like, I had confidence in our leaders getting us out. At least in 2009, it was like, we're on the early edge of a smart guy being in charge or a smart president being in charge. And.

[Rich]

But we had to wait. We had to rely on George W. Bush there, the guy who destroyed our surpluses and lied us into a war and then did a massive tax cut. So, like, I was pretty scared.

[Tim]

I will say that was 2008, though. But that was like the worst. But the point is 2008. Right, right.

[Rich]

But even that, it's worse now than it was, what, that September or August or September when that, when Lehman crashed. Like, that was literally a. Like, are we going to end up in a depression? And the fact that it's worse now is, is, is telling.

[Zach]

It's. Yeah, it's extremely.

[Tim]

I mean, we have three years of Trump ahead of us still.

[Justin Wolfers]

Let's, let's stick with Rich's comment for. So Rich says he thinks it's because of the quality of leadership. So I'm just going to throw on another statistic for you. This same survey asks, what do you think about the quality of our macroeconomic policy and the share of Americans who rate it as poor has never been higher.

[Zach]

Right.

[Justin Wolfers]

Of course, we have lost trust in our leadership, and that, you know, is a matter of civics and blah, blah, blah. You guys talk about that all the time. I'm sure it might worry you, but as a matter of economics is really quite problematic because am I going to invest in an education? Am I willing to buy a house? Does it make sense to get an Education, does it make sense? These are very long run decisions and if people feel they can't plan, they may be less likely to make those investments.

[Zach]

Right, that makes sense.

[Rich]

Well, let me ask you this then, because here is another thing that we have seen over and over again. I assume that you do not agree that when you give massive tax cuts to millionaires and billionaires that that then because you're giving these people all this extra money, that it doesn't come raining down on the rest of us and lift us all back up as we've been told since the 80s? I believe so.

[Justin Wolfers]

Tim, you're actually making, I think, a really fundamentally important point and I want to step even further back before we step into it. Every day we wake up to a new news cycle, a new outrage of the day, a new kerfuffle. There's all sorts of bullshit nonsense going on. What we have to do is step back from what he says and look at what he does. That's actually a very important exercise when it comes to economics because every day there's a new debate, should we do this? He called that person fat. He called that person ugly. Whatever. Right? Totally unlike my middle school experience. What has he actually done? Well, I can think of two things. One is his tax bill is the budget. The Trump budget was the single biggest redistribution from poor to rich in a single bill in American history. It was the anti Robin Hood take from the poor give to the rich. Largest redistribution in American history. Separate from that, you add tariffs. And the thing about tariffs is tariffs are like a sales tax. Well, the higher your income, the lesser your money is spent. So therefore the less a sales tax hits you. So tariffs are what we call a regressive tax. If you want simpler language, it's called a screw the poor tax. It's a larger chunk of the paycheck of low and middle income Americans than for the wealthy. So what has he actually done? He's found he finds the wealthy when it comes to tax cuts. He finds middle and low income Americans when it comes to tariff hikes. And when it comes to cutting government programs, the only ones he cuts, Medicaid, for instance, those that affect low income Americans. So we spend less to help low income folks tax them more and give bigger tax cuts to the top end.

[Rich]

Now here's an interesting question for you because I have struggled with this for a long time because we saw Ronald Reagan do this, we saw George W. Bush do this. Now we've seen Donald Trump do it twice. Like I guess what's confusing to Me is like, first of all, it's very clear it doesn't work economically. But like, how do we convince people of that? Because this seems to me like we've done it like four, five, six times now and it never has the stimulative effect that they claim. So I guess one, how do we explain this to people? And two, I assume they know this and just don't care, but they say the trickle down thing because it sounds good. Am I on to something?

[Justin Wolfers]

The rest of the audience in on what you just said? So what we've had is folks giving tax cuts to the rich. Now for several generations, this was the heart of Reagan and the heart of Thatcher. If you want to sound very fancy British back then. They justified it. They said, what will happen is this will stimulate investment, employment growth, it will trickle down from the rich to the poor. We try to. Turns out when you find ways for the rich to get rich, the rich get rich. Turns out when sharing is optional, they often choose not to do it.

[Tim]

Right.

[Justin Wolfers]

The question that I want to ask you, Tim, is you said, I think that's the economic theory again. This time I'm not sure they even bothered, to be honest.

[Tim]

True.

[Justin Wolfers]

I don't think they even went out and really said, you know what we can do? We can help working in middle class Americans by providing new opportunities for investments among the rich. I think we have a billionaire president who's beholden to the billionaire class who just did this as a reflex. And I don't think he actually really tried to win the argument at all. I think they've given up on the theory and it's just like we're in control. We take the big half. I might be wrong about that, but it didn't. You're the first person to ask me that question in a long time because.

[Tim]

It is all crazy. Like he wants to.

[Rich]

Sorry, I'm just like, yeah, go ahead. Well, I just. Sorry, I don't mean to cut you off rich, but I'm just like, to me it just seems like the ground like truth here that like you were saying, like, you know, there are different political parties who have different philosophies of how to stimulate economy. And I think, and this is, I would say a blame for people on the left, not economists, for politicians. But like this, it's been proven to not work, like over and over, like.

[Justin Wolfers]

For the rich make rich people rich.

[Zach]

Right?

[Justin Wolfers]

Being proven to work.

[Zach]

Yes, yes. Here's the important thing. Like the question becomes how much of this is the economic lag? Right. Because so much of the effect of this is not seen instantaneously. Takes years and years to develop. And how much of it is luck too? Because when you look at the last Democratic presidents, you have Obama and Biden both inheriting a disastrous situation that they work their way out of effectively, but they're not, you know, people are still sort of reeling from the initial effect. You know, One was Covid, one was 2008. How much of it is just really bad luck in terms of timing for Democrats, where they can't message their way out because it seems as if they've been bad. Where in reality they've been the one digging people out of the mistakes of the right. Does that play the role? I think it does.

[Justin Wolfers]

So there's a story people on the left like to tell. It is that left wing presidents are good for the economy and right wing presidents are bad. Sure. It does turn out, by the way, most right wing presidents in recent decades have managed to have a healthy recession under their watch equally. I don't think blaming Donald Trump for this, for a virus coming over from Wuhan, is clearly an outcome of economic policy. Correct?

[Zach]

Right.

[Justin Wolfers]

There's a story on the right they like to tell, which is Republicans are good for economic policy and Democrats are bad. The problem is much simpler than that, which is when you only get one new observation every four years. We don't have enough data to say anything particularly clear about this.

[Zach]

Right.

[Justin Wolfers]

You know, because who, how far back in history do you want to go? Do you want to look over the entire last century? Does it make sense to include the Great Depression?

[Tim]

Right.

[Justin Wolfers]

Who do you want to score the depression against? On and on it goes. So you could have a different way of looking at this, which is, what are some of the other stereotypes that people carry around in their head? So one that's really important is people carry around the stereotype that Republicans are the party of fiscal responsibility. So this is a case where the budget balance is literally the result of the decisions of the president and Congress. Like, there's no luck. There's no Chinese, there's no virus, there's no financial crisis. They're like, this is what we're doing.

[Tim]

Yeah.

[Justin Wolfers]

Reagan blew out the deficit. Bush blew out the deficit. Trump blew out the deficit. Trump came back and blew out the deficit again. Did I leave out one of the Bushes? There's so many of them.

[Rich]

I'm sure they both fucked up.

[Justin Wolfers]

Royalists. Obama reigned it in. Biden didn't really, but was in the middle of a once in a century crisis. The Idea that Republicans are the party of fiscal responsibility has not been true for a single day of my life. And I was born in December 1972.

[Tim]

Only because you mentioned it. I went and looked it up when Ronald Reagan took office. Does anyone want to, does anyone not name Justin? Want to guess what the national debt was? Not the deficit, but the actual national. Oh God.

[Zach]

It's when he took office. Tiny 1980, small, I don't know, millions, 20 billion.

[Justin Wolfers]

16% of GDP is my guess.

[Tim]

908 billion. That was the whole national debt. That is less than the deficit in one year before the pandemic took, took hold.

[Rich]

Well, that's the 20 budget deficit, I believe essentially the defense.

[Tim]

Yes.

[Justin Wolfers]

Yeah.

[Tim]

And our interest payment under 1 trillion. And so what is it now? It's so 32 trillion. It goes up by like 2 trillion a year.

[Justin Wolfers]

Right.

[Tim]

It's, it's absolutely mind boggling. But no, like Justin's point, this is like put on a hat like, you know, what's the make America great again version of this? Since Ronald Reagan took office, we went from 1 trillion to 33 or whatever, got off a trillion in national debt. And before that it was relatively flat the whole time. So the second somebody came around with this supply side Reaganomics trickle down, that is literally the Spark that started 30 plus trillion dollars in, in debt. And they're still telling us it's going to, it's going to trickle down on us. And the MAGA is like, but like Justin, to your point, I think that we, they finally stopped making that argument. So maybe we should stop trying to refute it because Trump is building a $400 million ballroom, right? He wants to build like a 250 foot fucking golden arch or something now across the river. Like he's just doing like Saddam Hussein shit. Like he's just building golden shrines everywhere that he looks where there's empty grass. And meanwhile he's amassed what, 3 billion in extra wealth in a calendar year personally. So maybe what's the next way that we talk about this since we're not to your point? Nobody's even talking about supplies that trickle down anymore. They're just like, oh yeah, Trump is God and he builds golden castles. That's what we do now.

[Justin Wolfers]

Rich, what's most amazing to me is that none of these amazing things that the President is building are phallic. That's been quite striking. I was expecting something, you know, where's.

[Tim]

The golden dick rocket?

[Rich]

Well, we already got one though, right? I mean there's already Washington.

[Zach]

Yeah, that's True. We could build a big, wouldn't you.

[Justin Wolfers]

Expect, a few hundred feet right up in the air.

[Rich]

I would think so, you know. Well, I wanna.

[Tim]

There's a chaos inside of it.

[Rich]

Oh, yeah.

[Justin Wolfers]

It's like I just. If you're the architect, what would you make the ball sack out of, mate?

[Tim]

Probably like something I scraped out of the grease traps. All right, all right. It had the, like the smoky chicken skin.

[Rich]

I am. I'm gonna do the worst transition of all time. So Dick Cheney once said, that's a pretty good transition.

[Tim]

Best transition I've ever. So Dick slid right into that. Thank you.

[Zach]

Thank you. Oh, come on.

[Rich]

Dick Cheney once said this was during Iraq. So he said deficits don't matter. And we are now at a 33, 32, $33 trillion deficit. And we have heard people, non politicians, I should say, mostly screaming and yelling about the debt and how dangerous it is. How dangerous is it and how close are we to a real catastrophe if we don't start addressing this $33 trillion debt that we've got.

[Tim]

38 and a half trillion. Is that right now? Holy fuck.

[Justin Wolfers]

It'll be 39 by the end of this paragraph.

[Rich]

Yeah, right.

[Tim]

38 fucking trillion.

[Justin Wolfers]

Let me come back and try and address Rich's question, which is what's going on? What's our theory of what. What's going on? Because I think we can use that to frame the answer to your question, Tim. So, yeah, I'm going to do a horrible job answering your question, but I'm going to invite you to ask it again. So look, first go around. Reagan says cut taxes. People will work so hard, will actually raise money, May have believed it. It's possible. Clearly not true. Fast forward though, and we've played this game enough times and I think there's actually a very different story, but it's one that may be more worrying for the future. So look, what if the story is this? I'm currently in power, but the other guys are going to be in power maybe in four years time. Every dollar I spend is a dollar less for them to spend. I think I'm a good guy. I think they're bad guys. Therefore my job as a responsible Republican is to spend all the money before a Democrat gets elected. You actually hear a lot of this rhetoric actually coming out of Republican think tanks. And you have more or less since the Bush era. So once they understood that Reagan's. It'll all take care of itself isn't true, we have a completely different purely political rationale now. Here's the problem, right? So you run up a big deficit, Clinton solves it, right. Then we have another go at it and then Obama solves it. And so what you've got time and again is clean up on aisle three and a Democrat advised by centrist Wall street responsible care about the budget types. And you may or may not like that, but that's just been the case says we're the grown ups in the room. Let's fix this. So here's, I think in any sense of trying to, any way of trying to make sense of what Trump's doing, he's just trying to make sure there's no money left for the next Democrat. Here's the problem. If you're advising the next Democrat, are you going to advise him to be the fool yet again?

[Zach]

Right. No, no.

[Justin Wolfers]

The answer is, I think it's a hard question.

[Rich]

Well, I don't think, I know that.

[Justin Wolfers]

There's no one else in the room, right?

[Rich]

Well, I, I just think that like, you know, Democrats are going to be out for vengeance, right? Like, and, and for somebody to come in and say, yeah, yeah, yeah, like, you know, Trump was bad but like we can't, you know, we can't give you universal health care, we can't give you for the debt. I think they, I, while that may financially and fiscally make a lot of sense, I just don't see them doing it because I'd be from a political.

[Justin Wolfers]

Want to do what we know, we know. We, we know what needs to happen, which is we've never ra money as the US Government likes to spend.

[Tim]

Right.

[Justin Wolfers]

So we need tax hikes somewhere or we need to reinvent our notion of government to fit into the very small bathtub we're drowning it in right now.

[Rich]

Right.

[Justin Wolfers]

The in. Likewise, we don't raise enough money for our current Social Security system. What everyone's trying to do is make it the next guy's job to fix.

[Tim]

Right.

[Justin Wolfers]

Because those fixes are unpopular.

[Tim]

Right?

[Zach]

That's true.

[Justin Wolfers]

And I mean it as a literal and serious question. If you're advising the next president, we know it needs to be fixed, would you advise the next Democratic president to fix it or would you advise them to play chicken and let the next Republican take the unpopular action?

[Rich]

I mean, this is the problem, right? Because I was on the Obama campaign and I was in the Obama administration and like we talked a lot about that stuff like, you know, every cabinet agency like being, being the adults. But I think the challenge politically is that being the adults doesn't have any rewards.

[Zach]

Right?

[Rich]

Right. I mean it. I mean, I don't want to see a depression, don't get me wrong. And I know, like, it can get really bad, but like, you know, it's like Trump gets to come in or Bush gets to come in and cut taxes and look like a hero, and then we have to like, roll the back and you don't get anything in return, but you get a more fiscally sound base. But, like, then the far lefts, for example, are like, well, you're just as bad as the Republicans. And our coalition is not as airtight as I think the Republican coalition. So from a practical matter, I would very much be like, yes, let's be the adults and do that. But like, it's getting harder and harder to tell Democrats to, to push for that, because what is like, you know, we don't want Trump anymore, and then we're going to bring you stability and people are going to go yawn. You know, it's a hard problem. So, like, I don't, I actually don't know how to do it because Dems do care about policy and they look at the numbers and, you know, and they like, are trying to help as many people as possible, but, like, the reward we get is basically a double middle finger every four to eight years. And now we've ended up with a guy who bankrupted casinos and has convinced, you know, tens of millions of Americans he's a good businessman. So I, I don't actually know the answ to this. It's a, it's a really hard one.

[Zach]

I don't think anybody does, so.

[Rich]

Well, just let me ask. I'm gonna, I am. You're rich is gonna fix it.

[Tim]

Okay. That's what he said. I got a fit. No, I have a fix. I gotta fix those, those smash rooms where you, like, break things with a bat for like $50. Whatever the next president auctions off, or not even auctions off, just like for $5 a hit, you can go to that ballroom with a hammer and you just get one swing. Oh, I would say so. Then you got right. 90 million Americans, like, like five, six hits each. Boom. We just closed the deficit and the.

[Rich]

Tourism dollars going to D.C. right.

[Tim]

Right. Maybe stimulus.

[Rich]

So can we ask the economics professor if he thinks that that is a sound approach to solving our deficit?

[Justin Wolfers]

It's not even going to do.

[Zach]

Nah, you don't have to answer that.

[Justin Wolfers]

There's two parts here, man. One, I want to line up and take a swing. And then the other part of me remembers that that is not the Model of masculinity I want to bring into.

[Tim]

The world.

[Justin Wolfers]

And that violence solves nothing.

[Zach]

Yeah, yeah.

[Tim]

Think of all the jobs that we create.

[Justin Wolfers]

My counter policy, okay, Rich sets up in the ballroom a hug stand. You can come in and hug Rich for five bucks a piece of Rich. How's your hugging going, mate?

[Rich]

No one's gonna pay that.

[Tim]

I'm. I'm a. I'm a very good hugger. You know, I've got. I've got kids. I'm a soy boy.

[Justin Wolfers]

You look like a ferociously good hugger.

[Tim]

I'm very, very good. My beard always smells nice. Like I know exactly what I'm in it for.

[Justin Wolfers]

So what are you putting in there to make it smell nice, mate?

[Tim]

Geez, what do I have right now? It's.

[Rich]

You say cheese.

[Tim]

It's like. It's like.

[Zach]

Is that what you said?

[Tim]

Oh, geez.

[Rich]

Oh, geez.

[Tim]

I think it's like tobacco and mahogany or something is like this. I've never smoked tobacco, but.

[Rich]

Are you wrong, Burgundy. Like, what is this? You have many leather bound books behind you there and the. The Blur or what?

[Tim]

Let's. Let's not pretend that, that we didn't hug when I was in Brooklyn.

[Rich]

We did hug. We did hug. You are. You are a good hug.

[Tim]

Come on.

[Rich]

Well, all right, back to reality here for a second, though. That was a nice, nice trip. So just to tell us, so how. This is a hard. This is kind of the question, but I've changed it a little bit. Like, what would happen if the debt, right. Got to this unsuspect? Like, what. What happens if. Let's. I don't know what the number is. Right. Nobody probably knows, but, like, there is a tipping point, right, where it becomes too much for us to be able to sustain. So if we don't deal with this, like, what. What's going to happen?

[Zach]

Great question.

[Rich]

Oh, thank you.

[Justin Wolfers]

And the answer is. I have two or three lectures in my class where we talk about this. So you want two or three minutes on this? Terrific, thanks. Look, one answer is nothing immediately. Another answer is no one really knows. So we've got examples of countries like Japan. Japan's debt is basically double ours. Nothing bad's happened to Japan. Japan, a few wobbles last week, but that's not a big deal. Japan has managed to borrow much, much more than us. And he's looking a. Okay. A different answer is lots of things turn to shit. We've seen this happen in countries like Greece, in countries like Argentina and so on. Let me just explain the basic macroeconomics, the dynamics of it all. So it's actually here's the world we're currently in. Everyone believes the US government can pay our debt, right? So therefore they charge us low interest rates. Because they're charging us low interest rates, we can make the monthly payments, not a problem. What happens though, if the world wakes up one day and is worried we can't pay our debt? This is what happened to Greece. Well, then they're going to jack up the interest rates, right? When you owe a lot of money, if the interest rates go up, it becomes really hard to make your monthly payment, in which case we can't repay, in which case they jack up the interest rates, in which case we can't repay, in which case then we're shut out of global markets, which means we have no ability to borrow from the future. Whether we here as the US government narrowly or whether that spreads to state and local governments and whether that spreads to American businesses depends on which crisis we get to have. So I want you to notice though that there's sort of what economists call equilibria, which just means two things that could happen. Everything's good because everything's good, and because everything's good, everything keeps being good. People worry that things are bad. Because things are bad, things become bad. And if you keep your debt low, even if the rest of the world wakes up worried about you, if they jack up the interest rates, you can still pay it, right? The highest you get your debt, the bigger the problems that causes and so therefore the more susceptible you are to this. So that's the first order economics. It could one day cause an economic crisis or it might not. Ask Japan.

[Zach]

Yeah, I mean, that's the part where I'm like. Because right now it's what, a trillion dollars a year paying the interest on this, Right?

[Tim]

Just the interest that it's 970 billion in. That's the fiscal year where I'm like just in interest.

[Zach]

At what number in interest payments per year does it become literally impossible to make either payments on that or meet the demands of the other giant buckets of expenses?

[Justin Wolfers]

We're miles away from that being a problem. Okay, that's good. So the thing is, it's a multi layered problem. Let me give you some other ways of thinking about this. What do we want to do on average? What we want to do is sock away money when times are bad, so we've got more money to spend when time. Sorry. Sock away money when times are good, so we've got more money to spend when times are bad. The more we're in debt, the harder it's going to be for us to splash money out next time. So basically what we're doing today is we're spending money in 2026 instead of during the next pandemic, instead of during the next financial crisis, instead of during the next war.

[Tim]

That's fair.

[Justin Wolfers]

And then the question is, is that a good trade off?

[Zach]

Right.

[Justin Wolfers]

I reckon the answer is no. I would rather have another trillion or so for the next pandemic, the next recession, the next war, the next crisis of some form. Then there's the microeconomics of it all, which is in some sense just code for common sense. Look, debt's not necessarily a bad thing. I say to my students all the time, go and get a student loan. Go to college, get an education. Here's why. The average college graduate over the course of their lifetime, will earn more than a high school graduate by more than a million dollars. So if college costs you less than a million, it sounds like a good deal. And it costs a lot less than a million. So borrowing today to boost your future, purchasing future incomes, which will make it easy to repay those student loans. Now, it doesn't work for everyone. We have to acknowledge that. And there are predators in this space and there are shitty colleges and so on, and those are all really big problems. But socking away money for an investment that's likely to pay off is a good idea. I mean, borrowing money for an investment will pay off. Now. Also, Michigan has, we have frat houses and we have some people, some students who come here and never leave their frat house. They never come to my lectures, which are. My lectures are insightful, interesting.

[Rich]

Well, you have students to sign up and they don't show up.

[Justin Wolfers]

Some of them and realize they're borrowing 40 grand a year for this and they're staying for a kegger. Now, borrowing $40,000 to spend on beer while doing nothing to raise your futures, purchasing future income is a really bad idea. It's a way of screwing up middle age. You're going to be hungover and broke.

[Tim]

Yep.

[Justin Wolfers]

One of those is hard. Both of them's terrible.

[Rich]

Well, I have an important question. Like. But, but. So would you say that if you were a student at Trump University, would that be a good investment?

[Tim]

Studentism? Wait, wait.

[Rich]

I want to hear his answer.

[Tim]

Wait.

[Justin Wolfers]

Trump University, surprisingly enough, is no longer accredited.

[Rich]

True. Gee, I wonder why.

[Justin Wolfers]

Was it Adam?

[Tim]

Witch hunt.

[Justin Wolfers]

He might be about to reopen, who knows? But look, the point is the logic of Borrowing for a student loan is no different than the logic of borrowing for anything. And the question is, are we running up this debt? Because we are enhancing our earnings potential for the future, and it'll be easier to pay off these debts once we're rich. And you could imagine things like government investments and research and development that look like that. Government spending on early childhood education has a huge payoff, and in fact, we end up making money out of that. So if we were going into debt to do that, or are we doing the equivalent of drinking beer at the frat house now, you know, we can be glib. We can say, well, the ballroom is a little bit like drinking beer at the frat house. This is when I have to remind you $400 million is a large amount of money for a person and a tiny amount of money.

[Tim]

Right.

[Justin Wolfers]

For a country. And so you have to dig a little deeper than that. But I'm not really confident that we're making a bunch of great investments right now.

[Zach]

No, I mean, that's. That's obvious. But I have a question, because I'm going to make an admission that's not fun to make, but I've made it multiple times on the show is I'm a former Republican, so a lot of that was.

[Tim]

Jesus.

[Zach]

Faulty economic theories that I had that were proven to be incorrect. But there are still some I carry with me. And it sort of falls into the talk we're having about, like, why people vote for Republicans in general because they look at this like. Like you said, common sense sort of things. Some of them still stick with me. And I have to, since I have you, I have to see if I'm right to hang on to some of these things. An example would be I like lower corporate taxes because I do think that it does stimulate their ability to actually be more active in the marketplace. I could be wrong. But also, I like tactical tariffs. I think they make sense if you're going to, you know, you could dominate markets with it. You can even certain places push and make revenue. You know, Trump's tariffs are not great, but he's making a shit ton of money. Was almost like half a trillion dollars a year. I also like lower spending on that.

[Justin Wolfers]

I'm going to pause on that.

[Tim]

Yeah.

[Justin Wolfers]

Zach, if you want to say this is clearly business expertise, that when you tax people, you raise revenue.

[Tim]

Right.

[Justin Wolfers]

I just want to point out that's arithmetic.

[Rich]

Right.

[Zach]

But the point.

[Justin Wolfers]

Making money is the most absurd fucking thing I've ever heard.

[Zach]

Right. No.

[Justin Wolfers]

Do you know how much he makes out of the income tax?

[Zach]

Yeah, a lot.

[Justin Wolfers]

I mean, what a great business model. Send people a tax invoice and make them pay it.

[Tim]

Right.

[Zach]

But the question is, is it better with it or without it? Like, even with like tariffs, we've all thought it would be this highly inflationary disastrous thing. It's turned out to be a low level of inflation compared to what we thought. So these are the things where I look at and go, economically it sounds easy to criticize some of this stuff, but then you go, well, what's the truth of it? Do these things actually end up being somewhat beneficial? But they're buried under the rest of it, which is a giant pile of bullshit. But there's like useful nuggets that aren't being used. That's sort of where I personally stand in my own politics now, where it's like, overall this trickle down bullshit doesn't work. But there are pieces within it that actually could if they were within a better system. That's sort of my question.

[Justin Wolfers]

Great. A great, great question. And actually I think a really important one and I think it really clarifies the current moment. I can't give you an across the board, but let's take them one at a time. Yeah, tactical tariffs, it's going to give you my top line. I disagree with you and it doesn't matter. You might be right. And that's fine. When you're saying tactical tariffs, you're saying in this specific industry where there is a specific need, we have a bunch of nerds study it and they think if we did this for a couple of years, we could get an American company that would be dominant and blah, blah, blah, blah.

[Zach]

We do chips and things like that. You know, that kind of stuff.

[Justin Wolfers]

Right. Does that look like what we're doing right now?

[Zach]

No, definitely not.

[Justin Wolfers]

This is not so. The point is, the only thing that the thing you believe in and we're not arguing about tactical tariffs, has in common with what the President's doing is the word tariff.

[Zach]

Right, right. He did actually do tactical tariffs in his first term. His second term he just did blanket tariffs.

[Justin Wolfers]

Okay, well, let's go back to the first term and we'll have a look at what the washing machine tariffs did.

[Zach]

Yeah, they weren't.

[Justin Wolfers]

The washing machine tariffs raised the price of washing machines. They raised the price of American made washing machines as well as foreign made washing machines. They had a very, very small impact on employment. And so basically the American consumer was paying. I have to try and remember the number. I think something like $3 million more in washing Mach per job created. So that's not great.

[Tim]

You know, give that person some cash. It's not a good one for you, Zach.

[Zach]

Well, it depends on the market. You could silo that out. That's true.

[Justin Wolfers]

We don't need to beat Zach up here, which is. No, no, no.

[Rich]

We can. We can.

[Zach]

Let me try this as well. Let's not forget that he left in.

[Justin Wolfers]

Place a lot of these tariffs. Practical. But let's just leave it aside. It doesn't matter. Because what the President has done is not a tactical tariff.

[Zach]

No, no, no.

[Justin Wolfers]

Chaos around the world.

[Zach]

Yeah.

[Justin Wolfers]

If. By the way, here's. If you want a tariff to work, here's at least one thing you have to do. The idea is you make it more profitable to business in America than elsewhere, and then I'll build a factory. Okay. If I'm thinking about building a factory in America, what I care about is not the current tariff rate.

[Zach]

No.

[Justin Wolfers]

What I care about is the future tariff rates over the next 50 years in which my factory will be up.

[Zach]

Yes.

[Justin Wolfers]

Has Trump convinced you that any tariff rate will be higher in 2029 than it was in 2024?

[Zach]

No.

[Justin Wolfers]

He can't convince you that the ones he announces on Monday will be there on Tuesday?

[Zach]

No. That's incoherent.

[Tim]

Right.

[Justin Wolfers]

So there is literally no way. There is no way we can get the upside of Trump's tariffs because they're on again, off again.

[Tim]

Right, of course.

[Zach]

No, that.

[Rich]

Yeah.

[Tim]

Like, so if you. If you took the exact. Because, yes, 100%. I love it. And. And I love being told that my inner dialogue is not incorrect when I think about this by somebody who's significantly smarter than me. But when he started rolling out, rich tobacco and mahogany smell, delightful. If you took the exact opposite approach and you said, in 10 years, tariffs on these things are going to be fucking ridiculous. Therefore, if you want to make a shit ton of money at that point, hire the workers, build the factories. We are. We are internalizing this. Here's the plan. You work with the business leaders, you secure the property.

[Justin Wolfers]

You.

[Tim]

You give them tax, you know, you give them stimulus to build the factories like there. I mean, that's kind of what the CHIPS act was. There's a smart way to do this, and then there's the complete opposite, which is everything is terrible now. And then I'm going to slowly whittle it back, which. Only that's why the corporations are eating it right now. I think they showed that something like 70 or 80% of tariffs right now, or for 2025 were absorbed by corporations because they didn't believe they were going to last long enough for it to fuck up their value delivery with their customers. And so they were like, we're just going to eat it. Now they're running out of those margins that can absorb all those tariffs. And so even if they change nothing, I think it's expected to get significantly worse in 2026 if he doesn't start cutting these things.

[Zach]

They also raised those margins during COVID too. So they're just like kind of trimming back to pre Covid margins in a lot of cases.

[Justin Wolfers]

Let me take this point one step further, which is if you want a policy to stimulate investment, it has to be seen as more than temporary.

[Tim]

Right.

[Justin Wolfers]

It's actually really easy to do that. The way you do it is you pass it through Congress.

[Zach]

Yes.

[Justin Wolfers]

Because what do we know about Congress? Congress can't get anything done. So once it's through, it will never undo it.

[Tim]

Right.

[Justin Wolfers]

And the President has shown no interest in that. Everything's through executive order, which means literally day one of the next President could all go away.

[Tim]

Right, Right.

[Zach]

And will, there's no question about that.

[Tim]

Well, let me ask most of his bullshit in the first term.

[Rich]

So to compare the two, you know, Rich mentioned the CHIPS act, which I think is a, is a woefully under discussed policy that I think we've already seen results from. So, so basically through Congress, the CHIPS act essentially gave billions of dollars of tax credits and incentives for businesses to move from other countries here. And I think, correct me if I'm wrong, but we have seen movement of, of some businesses. I knew there's at least a couple in Germany that are moving to the US because of the CHIPS act. Like incentivizing people seems like a much better way to encourage them to come here rather than to basically threaten to destroy them.

[Tim]

Right.

[Rich]

If they don't come. But then I also don't have a lever of like, I could hold these for five years. So like, doesn't it strike you, I mean, I'm giving you a loaded question here, but wouldn't you say that carrots are better than sticks when you are trying to move businesses internationally to the United States?

[Justin Wolfers]

I don't know. Both could work. Like if you leave a stick out in this, if you leave a carrot out in the sun long enough, it becomes like a stick, you can hit people with it. That's true. Yeah, that's true. It depends on the carrot. Look, let me go back. I am not a fan of what is Commonly called industrial policy. Now, that puts me at odds with many people on the left who sort of think what we need to do is have some clever nerds in government reinvent manufacturing and we'll create blue collar jobs. That was sort of the Biden thing. And Trump has got the same rhetoric, but he wants to do it with tariffs. And all of this is, I'm gonna save factories.

[Zach]

Yes.

[Justin Wolfers]

Let me tell you the first thing. I think that factory jobs are what rich people think poor people want.

[Rich]

Yeah.

[Zach]

Yes.

[Tim]

I don't want a factory job.

[Justin Wolfers]

And I've been to factories. They don't look that great. And every factory, if you look at surveys of factory workers, their ambitions for their kids are not walk in to do monotonous, heavy, loud work. They want their kids to have more creative, higher paying, less physically painful jobs than they did. So I have literally, no. This makes me deeply unpopular, but I have no particular sympathy for saying we need to save these jobs rather than others. I also think there's a long economic history of this. The US Used to be predominantly an agricultural economy. We all lived on farms. We'd grow food for ourselves, then we lived on farms. When we grew food for each other, then we invented factories, and people left the land for the factories. And do you know what the populace back then used to say? We've got to look after the American farm because all these people are moving, of course, to these highfalutin, fancy factories. Now what's happened is we've moved up the value chain and we're now in the service sector. And what we have is these people who remember the 1960s who are like, well, that was the path to the American middle class. We've got to stop this move out of the factories into the service sector. But I happen to think that service sector work is noble. I happen to think. No, that it pays well. I know that it can indulge many people's passions. I, you know, I'm just okay with, you know, all jobs matter.

[Tim]

It also 1000%. I love that so much, because I don't. Yeah, I don't want to work in a. In a factory making iPhones. Like, I don't want to do that. Like, if that's the only option for a person to make a living and provide for their family. Yes. Let's make sure that jobs exist for people. Like, yes. As a. As a baseline. But I heard a roofer a long time ago, they said, like, what would you give to. What advice would you give to somebody getting into roofing? And he Just said, don't get into roofing. And that was the whole, that was all of the advice. Like my kids, they love like painting and music. The idea of them trading in these things that bring them so much joy and no pain at all. Like no physical pain and lasting damage and going to, you know. Well, I had to give up art because I'm making bumpers now. That would kind of break my heart because my kids aren't passionate about making things with their hands. I do know people who do love making things with their hands. They should be able to do that by choice and make a good living. So I think that's, I think that's a really good, healthy perspective, honestly for everybody to have. And also understand, like this is a big country, we need jobs everywhere. But let's stop romanticizing from 20, 30, 50 years ago just because like that meant something back then. Well, we're in the information economy now. We have the Internet now. We didn't have the Internet when, when people were making stuff in factories in the 60s. This is a different world. And that means the, you know, a happy future has to look a little bit different than maybe even we can imagine.

[Rich]

Yeah, I mean I'm a perfect example of that. I grew up in a, in a shipbuilding community in Bath, Maine that the largest private employer in Maine is Bath Ironworks. My dad worked there, my grandfather worked there. And the thing that my dad always told me and he's, he's passed away, so I'm not giving any secrets away, but he was like, don't work here, get out, explore. But seriously, that, I mean it's, it's basically a factory. They're building Aegis class destroyers for the, for the Navy. They get contracts for it and these are well paying jobs with health care and all these benefits. But like everybody, most people that you talk to that work there, not just my dad who had a white collar job there, by the way, they all say the same thing, so it is very true. So we have very limited time left. I want to ask you a very difficult question. If you were the next President of the United States, President Wolfers, because you are a United States citizen, what economic policies would you institute to grow the economy?

[Justin Wolfers]

Yeah, first of all, I'd check in on the Constitution because.

[Rich]

Yeah, sorry. Or the Prime Minister or. Yeah, the Prime Minister of Australia. Same idea.

[Zach]

Right.

[Justin Wolfers]

So let me speak to. I think the economic issue no one speaks enough about. You might think I'm going to say inequality, but I'm not. We are very well equipped to talk about some issues because they're all, they're on the news. The latest GDP report comes out. CNN calls me, I say blah blah blah. They say bl blah blah, we blah blah blah about it, right? We even did it at the start of this podcast. I want you to step back and ask a deeper question. And that question is why are some countries rich and some poor? The United States is rich. I was born in Papua New Guinea. Papua New guinea is a country of grinding poverty, low literacy rates, very high rates of maternal mortality. Kids die in childbirth, People sometimes are hungry, high murder rate. And economists have asked versions of this question now for decades. And sometimes we'll look at the experience over as long as a million years, sometimes 100 years, sometimes a thousand years, sometimes the last few decades. Sometimes we look at every country, sometimes we look at specific case studies, sometimes we're doing quantitative analysis, sometimes we're telling histories. The answer appears to be that what matters is what we call institutions. Institutions are the rules of the game. So the rules of the game in the United States are we respect contracts, we respect the rule of law. If you happen to own something, I'm not allowed to steal it. And the state will help enforce those property rights. They're the incentives for research and development which could part of our intellectual property laws. And on and on it goes. It's an independent central bank. It's a functional democracy. That means that when the leadership pursues their own self interest rather than those of the rest of us, we kick the bums out. And my greatest fear is that what has been undermined more than any news story we've talked about is those foundations in the United States, in fact, by this telling of the story, perhaps the greatest economic flaw of the current President is an attempt to overturn an election because nothing does more to undermine the quality of our governance than not being accountable to the people. And there are deep questions whether he has undermined democracy. I just going to put it out there that we shouldn't even be at a point where that's a question, right? And so then we've been talking more recently about the independence of the central bank. If we think about the public service, to cite, lots of people think of public servants as bums. I happen to think of them as noble people. These are many of my students who want to make a difference in public life. And so you think about if at the moment, if you think about what the President's undermined. The President has systematically tried to enrich himself and his family. He's invited foreign Countries to essentially bribe him in a variety of ways that yield payoffs for him and in return he's enriching folks elsewhere. What he's done is he's got a system of, some people call it crony capitalism, but basically he's the king. And if you come and compliment him and you give him a nice bar of gold or you bow or you kiss the ring, then you get blessed. And if not, he'll come after your company. And what that does is it moves competition between companies from being something they fight in the marketplace. Right. Fighting in the marketplace is how you ensure the best companies survive, the best products survive. It's what ensures that prices go down and quality goes up. We're moving competition from that to who can best kiss the ring. And the thing is, a shitty product can kiss the ring, a shitty product at a high price. And so this is the foundation of what foundations of American capitalism and I think the foundations of our prosperity. And so look, that was a long, fancy, self important academic answer to your question. But I think rebuilding those institutions and fortifying them and understanding how important they are and making them so that they're going to be completely resistant to attack in the future, that's how we take American prosperity and lock it in the box and say you're here to stay.

[Rich]

That's great. I heard Rich has got a very.

[Tim]

Important question for you.

[Rich]

So are you going to double?

[Tim]

I'm going to, I have to plus one on that because I think it's, it's such a, I'm going to be thinking about that response for a while. But I, because I think, I love that it's not a political response in like what is wrong with what's happening Because I think we all see it and we, this is what we hear from Mag is like, I know that we can look at the magazine, be like, yeah, well they're secretly racist or they're secretly sexist. Those things might also be true. And I think in a lot of cases they are. But it's also not insane to assume that they are not lying. When they look around the world or they look around the country and they say, I feel like I've been lied to. I feel like I was told if I was Christian, if I got married, if I worked hard, that I would have a house and a wife and kids and a middle class life. And they understand that those, that the rules that needed to be in place, especially like to our conversation earlier, you know, since the 80s, the rules that had to be in place for Those things to be true, especially around union work and fair pay, have broken and they're falling apart, and we know who broke them. But the people in charge of the MAGA side are saying it's because of refugees and it's because of immigrants and it's because women and black people and gay people are taking, you know, from you in this zero sum game where we know that that's all, but they have observed that the rules have been broken and they are being. And they're eating it on behalf, you know, of somebody else. They just don't know exactly who that is. Keeping it focused on that core working class argument is so, I think, insanely important if we're going to get through this absolute fucking dystopian hellscape that we found ourselves in. And I do have a question, Tim, but it's unrelated to that topic.

[Rich]

Wait, go ahead, Justin.

[Justin Wolfers]

Then we'll go back. I know we're out of time, but what I want to do actually is try and give an intellectual framework that gives birth to what you just said. So a very natural way of thinking about an economy is that it's all about competition. And if I win, you lose. And so if I felt that me and my people are not getting what we feel we deserve, there's that primal roar, and I want to take it back from someone else. That's the competition view in reality. And I mean, when you bring it back to its barest essentials. Economic life is about cooperation, not competition. Right. I came on your podcast today because I wanted to enrich your conversation. You make your podcast because you want your listeners to think they listen to the ads because that's a price that they're willing to pay you to get to be a part of that. Right? And what you're doing is you're enriching their lives. And by listening to the advertising they're getting you paid, they're enriching your lives. Economics is fundamentally about how can I make you better off in a way where you swap and you find a way to make me better off. And so what that means is if I'm feeling like I'm not getting what I deserve, I need to figure out ways to find and give voice new opportunities for cooperation. It's not that I want to tariff China to hell. I want to trade with China. I want to use their strengths and make them mine. I want us to work together to be more productive. And if we're talking in particular about China, are there ways that we can build better working class jobs? And there are. Right. So if they're going to screw in the tiny screws on the phone, we're going to write the software. And that's a job I bet you want your kids to do. And that's cooperation.

[Rich]

Well, that. So good luck, Rich. Topping that to end the show.

[Tim]

So go for it. I have to, because I've talked to economists, I've talked to Australians, but I've never talked to Australian economists. And so I have to ask this question. If we talked about recessions and everything, if. If the economy, like the global economy really starts to go down the toilet, does it spin the opposite direction in Australia? Perfect.

[Rich]

Yeah. That's a great. That was great to end.

[Tim]

Sorry. I'm sorry. I thought of that like half an hour ago and I was like, I can't even. I can't even think.

[Rich]

Justin, he actually texted us and he was like, I've got the. I've got the most important question to end on. And that is what he came up with. That is our show in a nutshell.

[Tim]

I told you I'm a dad, right? Yeah.

[Zach]

Yeah. It's like.

[Rich]

Well, Justin, thank you. Thank you very much. I will give you better than a B minus on this. And I'm not grading on a. On a curve here. I wish we had curves. I never had any of that.

[Tim]

But great.

[Rich]

But, Justin, thank you very much. This is. I actually, you know, like, sometimes people say that the economic stuff is. Is maybe not the most exciting. You know, you're an economist, so you probably think it's all exciting. But I thought this was a really great conversation. I learned a lot from it. And it was especially thinking about the sort of like, you know, we can all be in this together. We don't have to separate people in order to have an economy that works, which is really important. And I hope a lot of people on the left have been listening to this because I think there is stuff with, you know, hopefully a couple of the 3,000 candidates for president that we're going to see on the Democratic side will pick up this messaging because I think it's a. I think it's a winner. So, Justin, thank you very much. And everybody, where. Where can they. Where. Where do you want to. What do you want to plug while you're on here? I know you said your YouTube channel, you want to focus more on that, but where can people connect with you?

[Justin Wolfers]

You can find me on all the socials is at Justin Wolfers. I'm trying to launch my YouTube right now. And we'll see if it's up there. But otherwise, you know, I think economics is a wonderful conversation to be part of. And I'm always talking about it. And so whether it's Instagram or Twitter or Blue sky or threads or TikTok or whatever the hell it is, I'll be over there talking about it.

[Zach]

Great.

[Rich]

All right. Well, everybody go follow Justin. Thank you very much. Justin Wolfhurst, economic professor at the Ford School at the University of Michigan. Thank you very much. And everybody, we will be back on Thursday. Have a great week, everybody.