Justin Wolfers: Tariffs, Trade, and the Price of Incoherence

Summary

Podcast Summary: "Justin Wolfers: Tariffs, Trade, and the Price of Incoherence"

Podcast Information:

• Title: To The Contrary with Charlie Sykes
• Host/Author: Charlie Sykes
• Episode: Justin Wolfers: Tariffs, Trade, and the Price of Incoherence
• Release Date: July 8, 2025

---

Introduction

In the episode titled "Justin Wolfers: Tariffs, Trade, and the Price of Incoherence," host Charlie Sykes engages with renowned economist Justin Wolfers to dissect recent U.S. tariff policies. The conversation delves into the administration's tariff impositions on South Korea, Japan, and the BRICS nations, scrutinizing their coherence, economic rationale, and broader societal impacts.

---

**1. Unpacking the New Tariffs

Key Discussion Points:

• Tariff Announcements: Justin Wolfers begins by detailing the recent presidential announcement imposing a 25% tariff on South Korea and Japan, with threats of a 10% tariff on BRICS nations (Brazil, Russia, India, China, South Africa).

• Emotional Response vs. Analytical Approach: Wolfers expresses frustration over the incoherent nature of these policies, highlighting the emotional toll such abrupt decisions have on the economy.

• Quote Highlight:

  Justin Wolfers [02:33]: "I feel the economy. You do, too."

Analysis: Wolfers critiques the administration for lacking a clear, strategic approach to tariff implementation, suggesting that these moves are reactionary rather than part of a well-thought-out economic strategy.

---

**2. Economics as Cooperation, Not Competition

Key Discussion Points:

• Foundational Economics: Wolfers emphasizes that economics is fundamentally about cooperation and creating mutual benefits, rather than mere competition.

• Impact of Tariffs: He argues that tariffs introduce friction into trade, likening them to an unfair increase in transaction costs that hinder beneficial economic interactions.

• Quote Highlight:

  Justin Wolfers [10:05]: "Writing a letter to someone to explain what their tariff rate is is to a trade deal as masturbation is to sex."

Analysis: By framing tariffs as non-cooperative actions, Wolfers underscores the importance of collaborative efforts in international trade to foster economic growth and mutual prosperity.

---

**3. Critique of Tariff Implementation

Key Discussion Points:

• Arbitrary Nature of Tariffs: Wolfers mocks the arbitrary imposition of tariffs, questioning the logic behind specific percentage increases without clear economic justification.

• Bureaucratic Bottlenecks: He highlights the inefficiency within the White House, where only the President can sign off on deals, leading to delayed and ineffective negotiations.

• Quote Highlight:

  Justin Wolfers [06:02]: "Imagine if Charlie called me up and said, I want you to be on the podcast today, Justin. I said, yes, but you have to pay me 25% extra."

Analysis: The discussion points to systemic issues in the administration's approach to trade negotiations, suggesting that the lack of delegation and clear strategy undermines effective policy implementation.

---

**4. Negotiation Failures and International Relations

Key Discussion Points:

• Struggles with International Partners: Wolfers details how major trading partners like Japan have faced significant challenges in securing meaningful negotiations, leading to stalled or ineffective trade deals.

• Quote Highlight:

  Justin Wolfers [12:24]: "The Australians had hoped to get a sideline with Trump at the G7. Trump just left, so they didn't get a meeting."

Analysis: The inability to engage effectively with international partners reflects poorly on the administration's commitment to fostering stable and cooperative economic relationships.

---

**5. Fragility of Trade Agreements

Key Discussion Points:

• Trade Agreements as Commitments: Wolfers compares trade deals to marriages, emphasizing the need for lasting commitments to ensure mutual benefits.

• Inconsistent Policies: He criticizes President Trump's tendency to renege on agreements, undermining trust and the potential for future cooperation.

• Quote Highlight:

  Justin Wolfers [16:00]: "He is not going to give me anything if it hurts you politically because your signature is not worth anything."

Analysis: This analogy highlights the instability of trade agreements under the current administration, suggesting that such unpredictability hampers long-term economic planning and collaboration.

---

**6. Analysis of the Big Beautiful Bill

Key Discussion Points:

• Budgetary Implications: The conversation shifts to the recently signed Big Beautiful Bill, with Wolfers explaining its impact on the U.S. economy.

• Deficits and Surpluses: He breaks down the macroeconomic concepts of deficits (bringing future money to the present) and surpluses (saving for the future), criticizing the bill for exacerbating deficits without corresponding economic benefits.

• Quote Highlight:

  Justin Wolfers [24:39]: "If we're not in one of those situations, then we need to be sucking it away for when we are, which is to say we should be either in a surplus or a very small deficit."

Analysis: Wolfers argues that the Big Beautiful Bill represents fiscal irresponsibility, increasing the national deficit at a time when economic prudence calls for saving and preparing for potential future downturns.

---

**7. Distributional Effects and Moral Implications

Key Discussion Points:

• Tax Cuts and Spending Cuts: Wolfers details how the bill disproportionately benefits the wealthy through significant tax cuts while imposing spending cuts on programs like Medicaid, adversely affecting middle and lower-income Americans.

• Anti-Robin Hood Redistribution: He labels the budget as an "anti Robin Hood" approach, where wealth is redistributed from the majority to the top 0.1%, exacerbating economic inequality.

• Quote Highlight:

  Justin Wolfers [30:56]: "And this is an anti Robin Hood redistribution."

Analysis: The discussion highlights the ethical concerns surrounding the distributional impacts of the budget, emphasizing how policy decisions can deepen socioeconomic disparities.

---

**8. Ethical Considerations and Human Impact

Key Discussion Points:

• Humanizing Economic Data: Sykes and Wolfers discuss the importance of presenting economic data in a way that highlights its human impact, referencing Scott Besant's criticism of Larry Summers for focusing on the real-life consequences of Medicaid cuts.

• Quote Highlight:

  Justin Wolfers [36:48]: "Larry pointed out the human emotional face on what otherwise would have been a statistic."

Analysis: This segment underscores the necessity of considering the human dimension in economic policymaking, advocating for a more empathetic approach to understanding the repercussions of budgetary decisions.

---

**9. Concluding Thoughts on Economic Policy and Morality

Key Discussion Points:

• Moral Responsibility in Economics: Wolfers reiterates that economics is not merely an abstract field but one deeply intertwined with human well-being and societal values.

• Call to Action: Both hosts emphasize the critical need for policymakers to adhere to coherent, cooperative, and ethically sound economic strategies to foster a just and prosperous society.

• Quote Highlight:

  Justin Wolfers [43:22]: "I can't spend my whole day talking about them because I, too, will cry."

Analysis: The episode concludes with a poignant reminder of the moral obligations inherent in economic policymaking, advocating for a balance between analytical rigor and compassionate consideration of human impacts.

---

Notable Quotes:

1. Justin Wolfers [02:33]: "I feel the economy. You do, too."
2. Justin Wolfers [06:02]: "Imagine if Charlie called me up and said, I want you to be on the podcast today, Justin. I said, yes, but you have to pay me 25% extra."
3. Justin Wolfers [10:05]: "Writing a letter to someone to explain what their tariff rate is is to a trade deal as masturbation is to sex."
4. Justin Wolfers [16:00]: "He is not going to give me anything if it hurts you politically because your signature is not worth anything."
5. Justin Wolfers [24:39]: "If we're not in one of those situations, then we need to be sucking it away for when we are, which is to say we should be either in a surplus or a very small deficit."
6. Justin Wolfers [30:56]: "And this is an anti Robin Hood redistribution."
7. Justin Wolfers [36:48]: "Larry pointed out the human emotional face on what otherwise would have been a statistic."
8. Justin Wolfers [43:22]: "I can't spend my whole day talking about them because I, too, will cry."

---

Conclusion

In "Justin Wolfers: Tariffs, Trade, and the Price of Incoherence," Charlie Sykes and Justin Wolfers offer a critical examination of the current U.S. economic policies related to tariffs and budgeting. The episode underscores the detrimental effects of incoherent trade strategies, fiscal irresponsibility, and ethically questionable budgetary decisions. Through insightful dialogue, the hosts advocate for a more cooperative, transparent, and morally conscious approach to economic policymaking, emphasizing the profound human impacts of such decisions.

Transcript

[Monday.com Ad]

Oh, I'm not switching my team to some fancy work platform that somehow knows exactly how we work. And its AI features are literally saving us hours every day. We're big fans. And just like that, teams all around the world are falling for Monday.com with intuitive design, seamless AI capabilities, and custom workflows, it's the work platform your team will instantly click with. Head to Monday.com, the first work platform you'll love to use.

[BetterHelp Ad]

BetterHelp Online Therapy bought this 30 second ad to remind you right now, wherever you are, to unclench your jaw, relax your shoulders, take a deep breath in and out. Feels better, right? That's 15 seconds of self care. Imagine what you could do with more. Visit betterhelp.com randompodcast for 10% off your first month of therapy. No pressure, just help. But for now, just relax.

[Wix Ad]

You know where your business would be without you. Imagine where it could go with more of you. Well, with wix, you can create a website with more of your vision, your voice, your expertise. Wix gives you the freedom to truly own your brand and do it on your own with full customization and advanced AI tools that help turn your ideas into reality. Grow your business into your online brand. Because without you, your business is just business as usual. Go to wix.com.

[Charlie Sykes]

I'm Charlie Sykes. Welcome to the to The Contrary podcast. 90 deals in 90 days. The Big beautiful bill. Hey, the professor is in. We're joined once again by Justin Wolfers, who's going to explain all of this to us, I hope. Welcome back, Justin.

[Justin Wolfers]

Charlie.

[Charlie Sykes]

He's shaking his head already.

[Justin Wolfers]

I just.

[Charlie Sykes]

Wow. Yeah. Okay, what is today's wow? So it's Monday, which means what? We have new tariffs on. On what? South Korea and Japan, because that's what America needed to bring us up to date.

[Justin Wolfers]

Bring the viewers into my emotional state because I feel the economy. You do, too. You may not emote quite as much. And I just logged on to talk to Charlie and educate the audience and learned that the President just announced a 25% tariff on South Korea, a 25% tariff on Japan, and he's also threatening a 10% tariff on each of the BRICS nations. Was that Brazil, Russia, India, China, South Africa and their friends because they were rude about his bombing of Iran.

[Charlie Sykes]

Oh, really?

[Justin Wolfers]

And I just arrived having learned this news, and I feel it. The incoherence angers me. The. The. I mean, we'll be analytic, I promise. We'll be analytic, Charlie.

[Charlie Sykes]

No, no, let it go. Let it go. I want to hear. I Want to hear Justin Wolfers unplugged on this?

[Justin Wolfers]

Man, I know. I was just in the green room and Charlie said, let it all out. And I was like, not even my therapist says that. Let's be analytical. That's my job here, mate. I'm an economics teacher. I'm here to teach. I'm going to do the best I can.

[Charlie Sykes]

Okay? Japan and. Japan and South Korea, well, they've been ripping us off for so many years. Right, Justin.

[Justin Wolfers]

I'm going to go back. I want to remind the audience of something really, really important, because it's easy at moments like this for us to retreat to ideological sides, rehearsed speeches, anything like that. So I want to start with something joyful. Economics is about joy. Economics. A lot of people think economics is about competition, but it's not. It's about how we can each enrich each other, how we can live fuller, more beautiful lives. And so, in fact, the most important idea in economics is cooperation. How can Charlie and I get together and produce something more beautiful than we would apart? And I lack, for instance. So you can imagine there could be a Justin Wolfers podcast where I talk all by myself, and there'd be a Charlie Sykes one. Do you ever do those where you talk all by yourself, Charlie?

[Charlie Sykes]

I do. It's very boring. Yeah, yeah, yeah. Very unfortunate.

[Justin Wolfers]

When you have someone to talk to who knows things you don't and can ask questions that you can't, then the magic happens. And that's what economics is about. The reason we have competition is because you can't just tell people, go, cooperate. Competition provides a profit incentive. The profit incentive is for Japanese people to invent marvelous cars so that I can drive a Honda Odyssey and get my children to soccer practice safely. And to those engineers, I'm so very grateful. And I tell you what I'm going to do in return. I'm going to turn up to the University of Michigan and deliver economics lectures. And you should send your students over from the Ministry of Finance, and they will learn from me, and hopefully they'll learn a richer economics. And together, we just made each other better off. That's what economics is about. That's what international trade is about. And that's the starting point for any conversation about any of the politics or economics of this. Because what tariffs do is they make it more difficult. They add friction. It's sort of like, you know, imagine if Charlie called me up and said, I want you to be on the podcast today, Justin. I said, yes, but you have to pay me 25% extra. Charlie, what's 25% of zero, by the way? I do want to figure this out. Exactly.

[Charlie Sykes]

Maybe I should do that, though, right?

[Justin Wolfers]

You could.

[Charlie Sykes]

Because if you don't pay a tariff, then you're just ripping me off. Right? Isn't that the Trumpian take on this?

[Justin Wolfers]

Right? It's a mistake. It's an intellectual mistake with every fiber of my being. But I don't want to convince any of your audience by passion. I want to talk about ideas so that you can be part of this great economics discussion, this conversation, when we get to shape our future. But we can. What I want people to do is shape it as one where we share, we look after each other, we cooperate, we build a bigger pie. Someone said to me this week, who do you really admire, the pie baker or the Pie Slicer International trades about bacon pies. Bigger pies, beautiful pies. They could be apple pies, they could be blueberry pies, but they're big and they've got sugar on the crust and they taste delicious. The pie slicer is kind of an asshole. He's the guy who cuts it and says, here's what I get, here's what you get. He's doing almost nothing productive. And if he's pissing around while he's slicing the pie, trying to make your slice small and mine big, then I might choose not to bake with that guy. And if that's the case, he gets less pie and I get less pie. And we are currently led by a pie slicer.

[Charlie Sykes]

Yeah. And so we buy a lot of pie. We buy a lot of shit from the Koreans and the Japanese. I guess the first, most obvious question to ask is, is this going to stick? Is this going to be one of those on again, off again ones? Is the stock market going to, you know, have a, you know, it's going to throw up and then, and then Trump will whisper to his friends like, no, no, no, it's just. And then it's going to be off me. How do we know at this point whether we're actually going to be paying that 25% tariff on, on the next Toyota or Hyundai?

[Justin Wolfers]

I wish I had a high school teacher who graded me. The way, the way these guys get to do it, they seem to grade themselves and set their own deadlines. So if you remember how we got here, so called Liberation Day. They set tariffs on the rest. First of all, it never leaked what the tariffs would be. It's because they were still figuring it out the night before and they ended up using A formula which is the most incoherent thing I think I've ever seen. No economist. Not only has no economist alive defended it, but no one in the White House is willing to take the blame for it. If they believed in it, you'd be saying, yeah, I came up with this idea. But everyone seems to point at someone else because they understand how crazy it was. This was a formula that said that we had to levy high tariffs on Israel because of the tariffs they levy on us, but Israel was levying no tariffs at the time. This was a formula that said we had to levy a 50% tariff on Lesotho because Lesotho is such a dangerous threat to the United States. This was incoherent and absurd. So then they gave themselves 90 days to figure it out once it was pointed out to them that that homework won't work. Recently yesterday, Scott Besant said, well, actually, I know I've been telling you 90 deals in 90 days, but I'm going to push the deadline from July 9th to August. I will point out that Lutnik said, no, that's not right. And the President did. And then both of them then contradicted themselves, leaving all of us actually not knowing what the deadline is. And now we have these crazy high tariffs, which are basically the Japanese and the South Korean tariffs are basically the Liberation Day tariffs again. And so if that's the pattern. So we've gone from 90 deals in 90 days to two frameworks in 114 days. And then in the most Orwellian of ways, the White House is telling us that when you write a letter telling someone what tax you will impose on Americans when they import from your country, which is what a tariff rate is, they say, that's a deal. And every dictionary I've ever looked at says a deal involves more than one person generally. Charlie, I don't know how racy I can be on your show. Do you want to go there or not?

[Charlie Sykes]

Yeah, absolutely. We have an exclusive rating, no matter what.

[Justin Wolfers]

Wonderful.

[Charlie Sykes]

Because you know what? I'm going to drop a bomb sooner or later, so just go ahead. Yeah.

[Justin Wolfers]

And just. I'm actually going to do it analytically. I mean, this is a serious economics point. Writing a letter to someone to explain what their tariff rate is is to a trade deal as masturbation is to sex. You might be imagining someone else is there, but it's all a figment of your imagination. And the reality that someone else is not there means you have no way of exploring all the beautiful ways of making each other better off. That both sex and trade deals offer. So bersent and the White House have been doing the international trade version of masturbation and are sort of wondering why it's so good.

[Charlie Sykes]

Everything is better. Right? Just, just. But they're in a room by themselves.

[Justin Wolfers]

Well, they're failing to get the international economy pregnant, definitely. They're failing to discover the ways in which we can make each other better off. And that's what a trade deal is. That's just a definition. That's not an economist. A deal involves someone. Go on.

[Charlie Sykes]

So let's talk about the 90 day. The 90 deals in 90 days obviously has, has not taken place. Now, let's look at this from the point of view of the rest of the world. Why haven't there been any deals? Why is it, I mean, people get the letter and they go, screw this. I mean, I mean, in Trump world, in their fantasy world, everybody immediately drops to their knees and is, oh, yes, Mr. Trump, obviously we're going to give you what you want. But that's not happening. Right.

[Justin Wolfers]

Okay. Very, very interesting question and an important one. So every trade policy wonk I know in every country and some are very senior and some are more junior, has actually taken the White House very seriously, which is these tariffs were monstrously high and had the certainly have the potential to destroy both American economic growth and that in other countries. So they've all taken it seriously. And if you remember percent yesterday was saying the problem is some of these countries never called bersent 85 days ago was saying the phone was ringing off the hook.

[Charlie Sykes]

Yes.

[Justin Wolfers]

I remember that either one of those two things are true or neither of them are. But what I do know is that the countries that have tried to be taken seriously have struggled to get the Americans in a room. And it's the idea of doing 90 deals in 90 days was always absurd. First of all, think of the bandwidth you need for 90 countries. Think about the fact that a typical trade deal takes two years worth of negotiations and then think about the bandwidth inside this White House. And it's worse than that because this is a tariff policy driven entirely not out of the White House, but the Oval Office. There's only one man who can sign off, right? Normally you can send your underlings, your nerds to go and haggle over subsection B, part 3, but there's only one person who can sign. And in fact, when percent the Treasury Secretary has gone to negotiate with the Chinese, he's had to say, look, I like where we're at, but I got to Go back to my boss now. So there's something that wasn't reported at all in the American press was the Japanese have been engaged with the Americans very closely. The chief Japanese trade negotiator was in town about a week and a half ago. Couldn't get a meeting with bersent. He got two 15 minute phone calls and a meeting with Lutnik, but he needed to meet with Bersent. Extended his stay another day. Which one rarely would ask a global leader. And Japan is a very, very serious trading partner. Extended his stay another day, couldn't get a meeting. The Australians had hoped to get a sideline with Trump at the G7. Trump just left, so they didn't get a meeting.

[Charlie Sykes]

Why is that happening? I'm not sure I fully understand that.

[Justin Wolfers]

I don't think there's deep economics here. There could be, but I don't think there is. I think the simplest way to think about this is anytime there's actual work to be done. The problem with billionaires is they don't like doing work. Billionaires have lots of wonderful characteristics, but they're not used to actually doing things, being held accountable for them, knocking them off their checklist. So that's how you end up not only with only two frameworks in 90 days, those frameworks, which are worth very, very little for the United States, but also these other countries, can't get in the door. These guys are going out and there's a dinner this night, there's a fancy thing, then you've got to go and hold a press conference. When the Treasury Secretary said that he planned to nominate the president, that he thought the president should win a Nobel Peace Prize, the Treasury Secretary did make time to go on the Sunday shows and say that President Trump was the most economically literate president in the last hundred years, perhaps ever. So he's making time for things, but it's not for doing trade deals. Now, that's problem one. So it's just simply the lack of capacity in the White House. Now that's a real bottleneck if you're unwilling to delegate to staff. And the mercurial nature of this means that staff really can't do anything. Problem two is every set of negotiators that goes into the White House comes out and says, the problem is we don't know what they want. And if you think about the public.

[Charlie Sykes]

Policy by whim, right. I mean, you don't know. You don't know what or what mood they're going to be in on any given day.

[Justin Wolfers]

So I invite the audience just think, if you were advising Japan or Korea or Australia or Britain, what is it Trump wants? Now? You could say a slogan. You could say, I'll win. But what is that? Is it cheaper steel? Is it less paperwork at the ports? Is it a change in foreign policy?

[Charlie Sykes]

What is it?

[Justin Wolfers]

So that's the second thing, which is they don't know what they want. And actually, there's a third problem. And here I'm going to put my Australian hat back on. Australia has a free trade agreement with the United States. It's called the US Australia Free Trade Agreement. So you can sort of get a sense of what this does. It creates free trade between Australia and the US what should the Australian Prime. What can the Australian Prime Minister give up? It's free trade already. We already did it. Now, there's always in a free trade agreement. I want to give the full story. There's a couple of asterisks. Those asterisks. There's something really politically sensitive for my side and I can't get it through. And there's something politically sensitive for your side. You can't get it through. What we'll do is we'll create free trade in like 98% of all goods. And as an economist, let me tell you, that's free enough. The gains from that last 2% economically are small relative to the political costs. So if the Aussies were to call me, what would I tell them to do? And then that gets to the next problem. What's the point of a trade deal with Trump? And here's what you want to think about the Canadian story. They signed a free trade agreement with the United States. It's called nafta, occurred under Clinton, went through Congress, and it went through the Canadian Parliament, and it created free trade for decades. Then the first President Trump comes to power and says, I hate this. I'm going to rip it up. Rips it up unilaterally, says, we need to renegotiate this. Renegotiates it. Mostly just renames it the usmca. President Trump loses power, comes back in and says, which idiot negotiated this trade agreement with Canada? I hate it. I'm going to rip it up.

[Charlie Sykes]

So now happened in our timeline.

[Justin Wolfers]

And now if you're Canada, Mark Carney, what would you give up for an agreement with a leader who shows that every time he gets an agreement, he rips it up if it's inconvenient. So therefore, it's not worth anything to get the signature on the page? Normally, I'm going To give something up, you're going to give something up, but we're both better off because I'm going to give you something you value more. You're going to give me something I value more. You're not going to give me anything if it hurts you politically because your signature is not worth anything, there's no trouble.

[Charlie Sykes]

This is a fundamental principle, not just on the issue of tariffs, but virtually every entity that is negotiating with Trump at some point will realize this. Like the big law firms thought, if we cut a deal, we will be safe, it will be okay. And then they find out, no, you can't rely on that deal. He keep changing it. The big corporate media companies are finding out the same things. The universities are finding out the same things. Because, frankly, Trump has no problem whatsoever reneging on a deal, rewriting a deal, walking away from a deal. Right.

[Justin Wolfers]

He might even have a few ex wives who agree with you, who stood there for better, for worse, and sickness and in health, till death do us part.

[Charlie Sykes]

There's a history here.

[Justin Wolfers]

It is tempting to act that way because you can extract something if you do it once, but if you do it once, you eliminate the possibility of repeating cooperation. You can get what you want today, but you're not going to get what you want tomorrow.

[Charlie Sykes]

Yeah.

[Justin Wolfers]

Yeah. And again, thinking about human relationships is actually totally, totally reasonable, because a human relationship between, say, you and your wife is based upon the same economic foundation as international trade. Now, I understand people are going to find that objective, but what I mean is I'm going to invest in making this relationship better, in finding ways in which we can work better together than we would apart. And I'm going to do that, even if it means I lose some value with other people. I'm going to invest in this relationship. The President has shown that he's not going to. So this isn't worth much. And I want to add a really important thing about the economics and politics of this, because I think it's important that people understand it. The point of getting married is to create a lasting commitment. That means I'm now going to learn your favorite hobbies, because I know that we've got 50 years together playing Yuka or whatever it is. That's the point of a trade agreement as well. On one side of the border, we're going to invest in making this part of a car. On the other side of the border, we'll invest in making that part of the car. And together we can make better cars. That's the U.S. canadian border. I'm Describing right there. So in order to get people to be willing to make those commitments, you have to somehow make it so that it's hard to get out of, which is why it's hard to get divorced. I mean, it's not that hard, but your community might, your priest people might have words with you about it. And so the way you do that, just as it's hard to actually fully enforce that with marriage, it's hard to fully enforce that with trade. But you try. The way you do that is you pass the treaty or you pass the deal through Congress, that then makes it the law of the land in America until Congress repeals it. And Congress never gets anything done. So that means we're really committed. When we've done trade deals in history, this is always how it works. We will push it through our Congress, they'll push it through theirs. And that's a little bit of that till death do us part moment. Trump is uninterested in Congress. Everything he's done on trade has been an executive order that has two important implications. It means Trump alone can undo it tomorrow. It also means the next president, who may well be a Democrat, can and probably will undo it on the first day of their presidency. So that means that when he's imposing tariffs, he's not imposing them for a long time, he's imposing them for a short time, which then means no one's gonna bother making long run investments in the United States.

[Charlie Sykes]

The rules of the game. I mean, this is a fundamental issue. I'm thinking about something that conservatives used to understand, which is the importance of property rights, the rule of law, stable, stable ownership that you had. One of the things the government did that made a free market possible was that it would enforce laws of contract. You would know what was legal, what was not legal. Your rights would be protected within that. And countries that do not have, that don't have economic growth because people are not willing to make that long term commitment. One of the things that the United States has done is had that stability. So what you're describing in the world of tariffs is really kind of the fundamental of being able to have a working economy. Right. At least knowing what to expect and what you know, as opposed to waking up on Monday and realizing that the rules of the game have completely changed and that you've made investments now based on assumptions that no longer apply. Right.

[Justin Wolfers]

I want to put what you just said in context because it's really, really important. And I want to be clear. I just nodded with every word you said. It's absolutely clear what you said is true. The latest Nobel Prize in economics was actually given for insights like this. The idea that the rule of law is absolutely central to creating economic growth, that if you make an investment, you'll get the payoff, that there's stability that matters, that the democracy matters as well. This is actually a central insight of one part of economics, and it was also a foundational view in one part of my Republican, of the ideology of my Republican friends. And so I tend to be center left. Charlie, no one knows where you are anymore, but I'll let you speak for yourself. But I grew up. I grew up with what you're describing being the central tenet of what it was understood to be, a Republican economist. And I think it's correct. And what's striking is that Republicans have lost touch with it completely.

[Charlie Sykes]

Exactly. Completely. All right, let's switch gears just a little bit and put this in the context of the moment, which is also we've had the big beautiful bill signed into law, which I have received many, many text messages and emails assuring me that this is going to supercharge the economy and that we should not necessarily worry about deficits because there is what was the Phra. There's some growth fairy out there who is going to pay it all off. Your thoughts on the economic fallout from a pretty gigantic piece of legislation that just has been signed into law?

[Justin Wolfers]

Yeah, look, there's many lenses to think about this. Let me try and describe this the way I would talk to my undergraduate students and I mean my brilliant undergraduate students. So I'm not talking down to talk.

[Charlie Sykes]

To me like I'm a fifth grader when it comes to the economy.

[Justin Wolfers]

Really don't worry about you and your audience, but I want to create some structure around how we talk about this. What is a budget? And it's lots of things. One, it's a macroeconomic document. And the important part of macroeconomics and budgets is deficits and debts. If you think about what deficits and surpluses are, a deficit is when you take money from the future and you bring it to the present. And a surplus is when you take it from the present, give it to the future. So this is redistribution across time. Then the question for the macroeconomics of deficits, we can come back to debt later is what is the best time to be doing the spending? The basic intuition that most people have is when times are bad, you want to have stashed a bit of cash away so you can spend some money that you might have sucked away when times were good. So that then says, if you think the economy is in a reasonably good state right now. Actually, let me say something simpler. If the economy were in the depths of a recession or a war, we should be pulling some money from the future to the present. That is to say we should be running a deficit. If we're not in one of those situations, then we need to be sucking it away for when we are, which is to say we should be either in a surplus or a very small deficit. If you and I. If I went back to 2007, Charlie Sykes and said to him, he wasn't that old, that guy who's full of energy and very excited about economics, and I said to him, we're running a budget deficit of 6.4%. You would have said to me, holy smokes, that's the largest budget deficit of my lifetime. The economy must be really bad for us to have a budget deficit that large. It had never been that large before the financial crisis, even during the bad recessions we had earlier. That's the starting point before we got to this budget. Then the question is, do you think we should be trying to get back a little bit closer to balance, or should we be blowing it out more? I think it's obvious what we should be doing there, and they've done the opposite, which is they've blown it out enormously. So, Charlie, I said I want to go through three points, but let's pause on this first one. The first one is a budget is a macroeconomic statement. It's about moving spending power across time in order to balance the ups and downs of the business cycle. Given where we're at, we should probably be sucking it away just in case of the next Covid, the next war, the next oil shock, whatever it is. Let me pause there because I know you have amazing questions.

[Charlie Sykes]

No, no, no, keep going. I agree with you. In fact, I was sort of fixating on my 2007 self. If I'd been told this, you know, I had a radio show back in Wisconsin. I probably did 100 interviews or more or appearances with Paul Ryan, who was not at that time, Speaker. He was headed toward being Budget Committee chairman. And I would say that the heart of every one of those discussions was the warning about the inevitable debt crisis and how terrible it was and how this was the real challenge of fiscal conservative Republicans of our time was to somehow reign this. This conversation went on for years and years and years. And I certainly remember 2009, 2010, during the tea Party era, where fiscal Restraint was the heart and soul of the Republican Party. And to wake up today and realize that essentially the Republican Party has said, yeah, fuck it, we just really don't care about any of that stuff. We're willing to basically put the. Our foot on the accelerator in terms of intergenerational transfer of wealth is really vertiginous for me, personally. For me, just so you know.

[Justin Wolfers]

So I'm not as much of a deficit. What Charlie is, is what economists would call a deficit hawk. He thinks it's a bad idea. I'm less of a hawk, but even I'm a little bit worried. But actually, something you said really resonated with me, which is President Trump has been out all week boasting about having cut taxes, but he hasn't. Because if you keep spending high, eventually you have to pay for that spending. And the way you pay for it is with taxes. So therefore, he hasn't cut spending, he hasn't cut taxes. He's redistributed them from my generation to my kids generation.

[Charlie Sykes]

Exactly.

[Justin Wolfers]

If you want to cut taxes, the only way to cut the tax liabilities of the US Government is to cut spending. There's a wonderful discussion to be had about whether that's a good idea or a bad idea, but that is the only way. The President, frankly, is too afraid to do that because it requires courage. He did not cut taxes. He redistributed them. And I think every time I hear the word tax cut, it makes my blood boil. Now, I want to say the parentheses because I always want to be honest. They did. They cut taxes. Four trillion. But again, that was a redistribution. They cut spending. One trillion. So that's the extent to which he cut taxes. Of course, the extent to which he cut taxes was that he cut Medicaid from working.

[Charlie Sykes]

After saying they would not. Yeah, right. After saying they would not. And it's not clear even that Donald Trump fully, even to this moment, fully understands that they cut Medicaid, which is kind of one of those weird Trumpian twists, but I'm sorry, go ahead.

[Justin Wolfers]

So to the extent that he cut taxes, that's what he did. He screwed the poor in order to deliver it. Okay, so first thing that a budget is, is this macroeconomic thing. Second thing is it's distributional. You know, basically the government is we pass the hat around and then the minister decides who gets what. The minister, of course, in this case being the president.

[Charlie Sykes]

Winners and losers.

[Justin Wolfers]

Yeah. And that's okay. That's one of the reasons we have government. It's some People are down on their luck and they need to take something from that. And churches do that, families do that, governments do that. But what this budget does, there are three things it does in terms of distribution. Tax cuts that overwhelmingly help the rich. The top 0.1% of Americans each get an extra million bucks a year. It's extending the Trump tax cuts. Trump was clever enough to make them touch the middle class. So I can't say the middle class gets nothing, but overwhelmingly it helps the rich. Second part of the Trump budget, spending cuts. The spending cuts are on Medicaid. Predominantly they were on food stamps. I think that's not in the final version of the bill. Overwhelmingly working in middle class Americans. So they can't find these folks when it's time for tax cuts, but they can find them when it's time for spending cuts. The third thing, which is not in the budget, as I mentioned, it's all executive order is tariffs. Tariffs are like a sales tax. Now, if low income folks spend a larger share of their income than do high income folks, and so therefore tariffs take a larger proportion of the paycheck of low income folks than high income folks. You add those three things up and you discover that out of the latest out of this Trump policy trifecta, the richest one 10, they're going to be better off about $7,200 per year. The second richest one 10th, the upper, upper middle class come out dead even. And that means we've got to find this $7,200 somewhere. And it's paid by the 80% of Americans. And it's even worse than that, which is the very poorest Americans, the poorest 1/10, they're going to lose $2,600 per year out of this. And for them, that's real money. But basically, if you're in the 80%, you're worse off as a result. So that's the second thing a budget is. It's deciding how much of a Robin Hood to be. It's a distributional document. And this is an anti Robin Hood redistribution. And then the third thing of budget is, I want to say this out loud because I'm a teacher, but I'm going to back off because I'm an economist. I'm going to let you, Charlie, figure out what this means for you. And I challenge you in the audience to think about what it means for you. A budget is a statement of values. For instance, my family values education. So we save sock lots of money away for education. We don't value junk food very much. So we don't spend much money on junk food. The same is true of a federal budget. It's a moral document. It's a statement about what you value. And Charlie, I'm going to let you explore that part.

[Charlie Sykes]

No, I think that this speaks for itself. As you point out, when you're talking about $7200 for working class people, that is real. $1000 for a millionaire is, is, is the, is the coins they find in their couch. Right. You know, $1,000 for, you know, a working class person could make the difference between being able to get to work and not get to work. So what I thought was interesting, and I know you commented on this was that, you know, as they were celebrating this big victory and this is a big victory for Donald Trump. And you know, let's not gloss over this, you know, for, I mean, it may destroy the Republican Party in the midterms, but for Trump, he's feeling the wind at his back. But I was struck over the weekend and I think you were as well. Scott Besant went on the Sunday shows and seemed very, very thin skinned. They were very, very upset that former Treasury Secretary Larry Summers who said this was a disaster. And Larry Summers is not that left wing. He's actually kind of a, you know, anti inflation centrist. And he talked about how many people were going to die as a result of this from, from Medicaid and then, and then pointed out the, the short sighted spending cuts that might have contributed, we don't know for sure might have contributed to what happened down in Texas. And Scott Bessen has been tweeting and ranting and raving for the last 24 hours now about how terrible and how terribly callous Larry Summers was to point this out. Your reaction to that? Because I thought it was interesting that Scott Bessen seemed a little touchy on that issue.

[Justin Wolfers]

It's interesting. I generally try to stay out of Twitter beefs as much fun gossip as they provide. But what Larry did was simple arithmetic, which is there's an economics literature, there's people who study the effects of Medicaid and they study the effects on health and mortality. And so you can take those very serious estimates and think about how much they've cut from Medicaid and then from that back out, basically how many more Americans are going to die as a result of this? And the answer is in round numbers. Over the next decade, another 100,000Americans will die as a result of the Medicaid cuts. And Larry, the problem with numbers is they're dry yes. And maybe your eyes glazed over. And maybe you didn't actually think about the scene of death of 100,000Americans. And maybe you didn't think about the grief of every one of those funerals. And maybe you didn't think about the uncles and the aunts that will never be seen and the children who will grow up without loving parents. And so, in an attempt to make people register the humanity of it, he compared it to the Texas floods. And I think this is okay, because I think economists should be human. And the Texas floods rip your heart out and it looks horrible and it makes you cry. And I haven't checked the latest death count. But roughly speaking, Larry said this would be like if the Texas floods occurred every day for 2,000 days in a row.

[Charlie Sykes]

Wow. Wow.

[Justin Wolfers]

And thing about what he said is it wasn't wrong. And the thing that percent said. Now just, you know, economics are serious business. There is a very. We were just talking. Budget is a statement of values. There is a very serious moral calculus in deciding to give millionaires tax cuts and rip away health insurance for working and middle class Americans. Larry pointed out that calculus. It was simply, here's the balancing act you've done, Mr. Treasury Secretary. And what's most amazing. So Bersen went berserk. Oh, this is horribly callous. Like the guy who killed the 100,000. Not callous. The guy who mentions killing 100,000 people. Terribly callous. The most amazing thing is there's not a in. So Besynth's lost his banana here. I don't know what's going on with him. Honestly, if I had his job and his boss, I might too. So maybe I have some sympathy.

[Charlie Sykes]

Yeah.

[Justin Wolfers]

Not once has he said, Larry Summers is wrong. And if you want to win an argument, you attack the claim being made. Besynt has a whole staff of nerds at Treasury, PhD, economists. We've trained some of them at University of Michigan. Brilliant people. And if Besynt wanted to learn if this were false, he could have called the nerds. And he may have called the nerds. And the nerds probably said, actually, that's what you're doing. So not once did he say that Summers was wrong. He just said it was callous and it hurt his feelings that he pointed it out. And I want to go one step further. He then said, you know how we're in this post cancel culture world.

[Charlie Sykes]

Yes.

[Justin Wolfers]

He then called on every organization, including Harvard, that's associated with Larry Summers to disassociate themselves. He called for the removal of tenure of one of the leading economists of his generation from Harvard for saying something that was true. The regime who doesn't like what centre left or even centre centre left economists are saying and want them fired. Charlie, I'm going to stop talking now because I still have.

[Charlie Sykes]

No, no, no, no. I want to break down both. No, no. You made two, like, outstanding points. So this return of cancel culture, this is not just rhetorical with this administration, given the attacks on the university, on the attacks on Harvard, the attacks on nonprofits and, you know, the threats to shut down and. Or tax, you know, nonprofits in civil society. So this is not toothless. This is an administration which has proved its willingness to attack these institutions. So when they go after these institutions, because Larry Summers has criticized them, has engaged in free speech, this is. They're firing with real bullets. And so this. That is quite significant. But to your other point about why I think it's scratched the surface on Besant is that what is the famous quote, One death is a tragedy, a million death is a statistic. I want to say it's Stalin, but it's probably not that dramatic. But this is the problem over the years that when a number gets too big, you become numb to it. 100,000 deaths is no one you know, okay, if you say, imagine 20 people in your cub scout unit who were just killed, Imagine what that means to them. Imagine what that means to their parents. Suddenly you've put a human face on it. They are no longer statistical. And this is the power of what Larry Summers did. And I think it's actually a lesson to say instead of, don't go to the whiteboard with the big number and say, hey, a million people died of COVID Say the guy down the street died of COVID And the power of mentioning the Texas thing. And I think that's what triggered everybody, because I don't know about you, but I was telling my wife over the weekend, usually these stories don't affect me. I mean, they don't affect my mood. I mean, I watch them, I care about them. There was something about those little girls being swept away that I think hit people in a very, very visceral way. Because you realize these lives that were killed, destroyed, and as a parent and a grandparent, you also realize all of the other lives that are destroyed as a result. I mean, those parents will never be the same. Imagine being one of the camp counselors. Counselors. Imagine being the parents. I mean, it's just. It's. You don't need to explain how devastating is. So what Larry Summers did was he put that human emotional face on what otherwise would have been a statistic. And that got the attention of the Secretary of Treasury, who has decided now to roll out the big guns, which also proves the vulnerability of all of this. As long as it's an abstraction, they're okay with it. When you put a human face on it, they realize how vulnerable they are. And I think that also applies since, you know, across the board on immigration, people are willing to say, yeah, absolutely, deport the illegal immigrants until you put the face on, like this grandma who has been here for 40 years or this student who has just been snatched off the street. Those human faces and the. The. The identity, the stories are so compelling. And I guess this is kind of what you're trying to do is you take the abstraction of the dismal science of economy, of economics, and you try to make it relatable, which is obviously a dangerous weapon if you're the Trump administration at the moment. I'm sorry. So that was my take on that particular exchange.

[Justin Wolfers]

You know, I might sometimes go on a podcast and have fun and try and be a funny guy, because I desperately want you, the audience, that's who I'm looking in the eye right now, to understand what's going on. And underneath, the funny guy. I hope we all remember this isn't a game. I became an economist because of this. Because we save lives, because we enrich lives, we don't have to tell it in a scary story. Remember, I began this podcast by telling you about the beauty of what we can produce together. And I'm happy to be the optimist as much, but the stakes here are absolutely real. I can't spend my whole day talking about them because I, too, will cry. So for those of you who are following along and trying to keep track of the economic debate, I just want to say thank you and bless you.

[Charlie Sykes]

You know, what a great way to end this particular conversation, which we're going to have to extend and repeat some time. Justin, I appreciate it very much. It is always. I have a standard when I listen to a podcast or anything. Am I smarter after having listened to it? I'm smarter having talked to you. So thank you very much. I appreciate it.

[Justin Wolfers]

I appreciate you, Charlie.

[Charlie Sykes]

And thank you all for listening to this episode of to the Contrary Podcast. I'm Charlie Sykes. You know why we do this, why we continue to do this? Because more than ever, it is important to remind ourselves that we are not the crazy ones. Thank you.

[Samantha]

Breaking up is never easy. But saying goodbye to your old clunky work tools? Well, that's easy. Just repeat after me. It's not me, it's definitely you, you rigid, unfriendly software. It's time to freshen things up with Monday.com the first work platform you'll love to use. With stunning dashboards, customizable templates, and built in AI that actually works. Switching to a new work platform has never felt this good.

[BetterHelp Ad]

So move on to Monday.com betterhelp online therapy bought this 30 second ad to remind you right now, wherever you are, to unclench your jaw, relax your shoulders, take a deep breath in and out. Feels better, right? That's 15 seconds of self care. Imagine what you could do with more visit betterhelp.com randompodcast for 10% off your first month of therapy. No pressure, just help. But for now, just relax.

[Lowes Ad]

Lowes knows July 4th savings are worth celebrating right now. Get up to 40% off select major appliances and get an additional 10% off two or more select major appliances plus get three Scott's Naturescapes 1.5 q cubic foot mulch bags for just $10. These deals are coming in hot. Lowe's we help you save valid through 7 9. Selection varies by location while supplies last. Seelows.com for more details Excludes Alaska and Hawaii.

[Samantha]

Say hello to Samantha Hi there. Samantha built a SaaS platform that helps small businesses manage their workflow, but she needed a smarter way to reach decision makers.

[BetterHelp Ad]

That's where Acast came in. They helped me produce a professional audio ad which played to business owners and online ops leads using their audience attributes targeting tools. Suddenly my platform was showing up in the ears of the exact people I needed to reach.

[Samantha]

Now that's streamline marketing. Samantha, what's your tip for scaling smart?

[BetterHelp Ad]

Solve a real problem and make sure the right people hear about it.

[Samantha]

Promote your business with podcast ads on Acast. Get [e-mail] advertise.