Margaret Spellings (5:49)

Okay, well, here I am in the middle of these brainiac scholars, and I'm just a simple person. I feel sorry for Margaret, trying to get some things done in Washington and build on a career of having done that with the Congress. And so, professor, great to be in your class this evening. Likewise, I'm sure. So, a couple of observations. I think the American people obviously are susceptible at the moment to the. Is nativism, nationalism, isolationism. And I think a lot of people think those things have been brought on because of a lot of progressivism that they've seen in institutions and failure of institutions, public services and so forth to respond and meet their needs, give them opportunity, et cetera. So here we are in this condition. And what I'm observing is that our system, of course, is built to sustain this and other rough patches and moments and so forth through our three branches of government. The courts, I think, are for the most part, doing what they're supposed to do. Obviously, we have an assertive, aggressive, whatever word you want to use, executive. But the failure at the moment, obviously, is in the Article 1 branch, the legislative branch, the Congress, when are they going to assert their jurisdiction and come to the party? And. And my remit running the Bipartisan Policy Center. And I'm here to tell you not all is lost. Some of the best people that are more likely to come together are in cycle and trying to ride the wave of politics and survive. So it is. It's a challenging time. But not all is lost. Our institutions can and will hold.

David Kennedy (7:38)

And Minerva, in a conversation with a group of historians, your former boss, President George W. Bush, in March of 2006, opened the discussion by saying, There are three things going on in this country that really bother me and I hope we can have a discussion about them. This is what, 19 years ago?

Margaret Spellings (7:58)

20 years ago? Nearly. Yeah.

David Kennedy (7:59)

Just about three things happening in this country that really bother me. I hope we can have a discussion about them. Isolationism, protectionism, and nativism. Okay, that was 19 years ago.

Margaret Spellings (8:10)

Okay. Well, I go around saying about 100 times a week, it ain't the Bush administration.

Jim Steyer (8:20)

How do you answer that? I'm kidding, Neil. Thank you. It's so good to have you here, Neil.

Neil Ferguson (8:26)

Well, it's the first time I've set foot in a Stanford classroom in many years, so it's rather an odd feeling. Let me take this question in two parts. The post World War II order ended long ago. Long ago. It ended in 1991 with the collapse of the Soviet Union, because the true post World War II order was not characterized by complete American dominance. It was characterized by there being two superpowers quite quickly, two nuclear superpowers, because the Soviets very quickly acquired the technology to have the atomic bomb. And so we must understand that, agreeable though it was, to imagine a new era of collective security based around the United nations and the other institutions that David mentioned from the outset, those were essentially gridlocks, because the Soviets and the United States had a veto on the UN Security Council and very, very little could get done for that reason. So the true architecture of the post1945 order was the architecture of the Cold War. And for the subsequent decades up to the 1980s, there was a competition between two ideologically opposed superpowers. That competition was economic, it was technological, and it was geopolitical in ways that were in some ways familiar. But the fact of nuclear weapons made it a different order from any order that had existed before, something George Orwell understood immediately. Almost as soon as he heard the news of the bombs being dropped on Hiroshima and Nagasaki, he wrote an astonishing piece called you and the Atomic Bomb in the Tribune, arguing that from now on, the world would be divided between three, he said, three atomic superpowers. He envisioned, again, presciently. So often, Orwell saw the future. China would be one in his vision, and he argued that the rest of the world would essentially be at the mercy of these nuclear empires. That order ended in the late 1980s when I was a graduate student living in Berlin, and it was clearly over with the collapse of the Soviet Union. We then had an interwar period that lasted up until around, I would say, 2012, but maybe you might say 2015, depending on whether you think the world revolves around the United States. If you think the world revolves around the United States. It ended when Donald Trump came down that escalator and said he was running for president. And finally, somebody channeled the nativism and protectionism that George Bush was worried about in 2006. I had moved to the US to teach at NYU in 2002. I couldn't figure out by 2006 where the protectionist candidates were. I was asking my friends in political science, where are the protectionist candidates? Your entire manufacturing base is being sucked out of the country by globalization, and there are no protectionist candidates. It's strange. So it wasn't until 2015 that there was one, and that was Donald Trump. But I don't think the world entirely revolves around the United States, because the thing that really brought the interwar peace to an end was the rise of Xi Jinping in China and the emergence of China as a new superpower, also running at least nominally on Marxist Leninist software, but a new superpower economically close to the equal of the United states by, say, 2016, certainly on a purchasing power parity basis. We've been in a second Cold War order since around then. So that's how I think about the geopolitics. The post1945 order is long gone. We had this extraordinary period, the interwar period of globalization and peace, and we all thought the end of history had come and we were all going to live in this kind of Fukuyama esque liberal capitalist order. And that turned out to be wrong because China did not have 1989. It had the opposite of 1989. It had Tiananmen Square, not the Berlin Wall. The second point I want to make has to do with the domestic politics of the United States, which is a separate issue, or at least I think it needs to be dealt with separately. The United States that won World War II or helped the United Kingdom win World War II, to be more accurate, because you were nowhere to be seen until the Japanese attacked you at Pearl Harbor.

Margaret Spellings (13:09)

No, I didn't.

Neil Ferguson (13:10)

But the United States that was one of the victors of World War II, along with Britain and the Soviet Union, was not some liberal idyll. It was the United States of Jim Crow, of segregation. It was the United States that had resisted entry into World War II, where isolationists had been a very powerful force in politics. And so let's not romanticize the United States of 1945. It was also the United States of a very powerful executive branch, because the 1930s and 1940s saw a massive expansion in the power of the presidency under fdr. The TFS kicked us off with some segments from the news. They were entirely skewed because they essentially were clips to suggest the dark side of Republicanism. But where was the dark side of the Democratic Party? If you'd been balanced, you'd have shown the Democrats candidate to be mayor of New York meeting with an imam who, although he wasn't prosecuted after 9 11, celebrated the 911 attacks. And I wouldn't like to see his social media feed up close. So when we are trying to think about the United States today, I think we should resist the temptation to hyperventilate in the way that I think too often people do on university campuses. Harvard as well as Stanford, the United States has been through periods of extreme polarization and political violence that put all of this into the shade. I mean, we only need to remember the American Civil War or just think about the atmosphere in American politics in the period after 1945. Think of Joe McCarthy's extraordinarily vicious campaign against suspected communists. They turned out actually to be some Communists. He wasn't entirely wrong. Or just Fast forward to 1968, 69 into the early 70s, a time of huge turmoil on campuses as well as in inner cities. Again, I think we mistake social media for reality and we think some terrible upheaval is happening, but it's mostly only happening on Twitter rather than in real life. So I think one can get excited about President Trump. People here were very excited the first time he got elected, but I'm struggling to see it as the huge historical break that it seems to many anxious liberals. We can come back to that. But I think it's important to see the connection between these two separate domains. President Trump would not be president if the Democrats and Republicans had had a credible response to the rise of China. They did not. On the contrary, they told Americans, it's win, win. The rise of China is going to be good for America. And that consensus, which lasted from Clinton to Bush, which essentially opened the door to China to join the World Trade Organization and did nothing about the rise of China, welcomed it. Read the last Obama National Security Strategy by Susan Rice, if you want to see what I mean. Trump was the first person to enter American politics and say, this is a problem and we need to do something about it. Of course, American voters in the heartland, far from a place like this, were like, you bet. And that's why he's won again. So it's. To me, it's quite clear that the rise of China is the principal explanation for Trump's ascendancy. It was crucial to his campaign, and it is, of course, the number one item of business on his agenda today.

Jim Steyer (17:02)

David, I would love to hear your response to what Neil just said, because I think it's a really. No, I'm being serious because. Well, take your time.

David Kennedy (17:11)

Neil and I have disagreed about this before, and I think. And I disagree with a lot of people about this, and I think I'm in the minority, but I take my tuition about China from a Singaporean diplomat whose name I can never pronounce because it's about 18 syllables long. But he said something.

Neil Ferguson (17:26)

Kishore Mahbubani. Is it Kishore Mabubani?

Margaret Spellings (17:29)

No.

David Kennedy (17:32)

I'm going to attempt to Pronounce this Billahari Kasakana. Okay. And he said the essentials of both America and China are nationalism. They're both states that are very invested in nationalist ideologies. But he said the Americans want everyone to become like China.

Jim Steyer (17:52)

Pardon me?

David Kennedy (17:52)

Americans want everyone to become like Americans. And the Chinese believe nobody can be like China. Now, what that suggests to me is that there's a. Neil, I know you're fond of the term Cold War 2.0. It seems to me there's an element in the original Cold War that is conspicuously absent from the competition with China, and that's ideological competition. I don't think the Chinese have any systematic program to export their system of governance and their ideology to other societies. The Soviets did, and that was what made that long confrontation so fraught. But I think the Chinese have a wholly different orientation. And I think this is. I admit I'm in a minority on this, on this stage maybe, as well as everywhere else, but I think it's possible, it's impossible to imagine doing business with China.

Jim Steyer (18:37)

Margaret, any thoughts? Anura, you can respond on that, too.

Neil Ferguson (18:40)

Happy to.

Margaret Spellings (18:42)

Well, it's frankly one of the few places of bipartisan energy that people do see China as a threat in many, many ways for that reason. But also, you know, we're getting our heads handed to us in education and human capital and whatnot. So certainly, you know, a scary time, a scary issue, but I mean, does it matter? We better get to work.

Neil Ferguson (19:08)

The one thing I would say in response to David is that it's not right to say there's no Chinese blueprint for world order. It's not accidental that China's principal allies in the world today are Russia, Iran and North Korea. They may not be ideologically aligned, but they are all authoritarian states opposed to democracy and the rule of law. They work together, to use a term from the 1930s or 1940s, as an axis. I think it's now consensus to call them an axis, though I was one of the first people to do it. And I think this axis has a clear program which is anti democratic. And that is why the Chinese export not only hostility to democracy, but also all the equipment you need, if you're an authoritarian, to keep your population under surveillance. The number of countries, number of governments importing Chinese surveillance technology, particularly in what people call the Global south, is, runs into the dozens. And this is why there is an ideological character to this Cold War as well as a technological one. And also, it's worth remembering, as Rushdoshi shows in his recent book that Xi Jinping and those around him remain committed to Marxism Leninism. I think this is something that people in the west find hard to understand because they only really pay attention to the speeches that Xi makes at Davos, which are tailored for a Western audience. But Rush, who was in the last administration, shows in his book that if you read what the Chinese Communist Party say to one another, they remain firmly committed to a version of Marxism Leninism. And Xi Jinping thought is just Marxism Leninism, Maoism plus Xi Jinping thought.

Jim Steyer (21:02)

So, David, let me. But I want to go back to when Neil just said that he thinks that 1991 really marked that. And you said that actually you thought there was 80 years. Right. So that's a significant. That's a 30 year difference, approximate 30, 35 year difference. How would you respond to that and to the idea that 91 was really sort of the turning point in the global order as opposed to much more recently, because we had Tom Friedman here in the class opening night talking about. I would say much more. It might be a more traditional view, Neil, about how this is the first time where we've just ceded the international stage.

Neil Ferguson (21:48)

By the way, I think that's just wrong.

Jim Steyer (21:49)

Okay, but fair enough, fair enough. And you'll have a chance and you can go on to that. But David, how do you respond to Neil's point, though? Because you were Talking about an 80 year period and it's basically Neil saying, no, it's closer to a 45 year period.

David Kennedy (22:05)

Well, I chose 80 because it's been 80 years since 1945. Certainly the history of that eight decades is not just one continuous thread that's consistent all the way along. And I really wouldn't disagree in any way strenuously with some kind of punctuation point or cadence that marked around 1991 when the Soviet Union disappears. No real argument with that. And in fact, one could argue, Neil, this is another subject. We could go into much greater detail maybe on another occasion, that the full logic of those institutions of international collaboration and free trade and so on that were set in place in 1945 only came fully into their own in the 1990s. And that was an opportunity to really upgrade and improve on that set of institutions. The one conspicuous one missing, I've always thought was something that would better manage international capital flows or oversee them and be some kind of prophylaxis against global financial meltdown and so on. Something you know better than I do. So, yeah, I think there is something. There's an inflection point when the Soviet Union disappears. No question about it. I've long thought that we missed an opportunity as a country to exercise whatever leadership capacity we had in the 90s to really go out reforming and upgrading that set of international institutions that we'd created at the end of World War II. Now, one that we did again is we ushered China into the WTO, which was the successor to a 1940s institution, the General Agreement on Tariffs and Trade. That didn't work out precisely the way a lot of people anticipated. I think, again, Neil, I think we don't disagree about this, that the hope that China and the WTO would economically modernize and therefore democratize and liberalize, that turned out to be a pretty vain aspiration. I still repeat my original point, however, that I think that China is not necessarily either an urgently military or ideological rival the way the Soviet Union was.

Neil Ferguson (24:07)

It's worth adding that the phrase New World Order was used by George H.W. bush in the wake of the collapse of the Soviet Union. He was much. And indeed the phrase became one viewed with great suspicion on both the left and the right. But that indicates the perception of those in power at the time that an era had ended with the collapse of the Soviet Union and there would need to be some New World Order after it. This was also a preoccupation of Henry Kissinger, who wrote the book World Order, in an attempt to convey that we had a kind of choice of world orders, but. But the one that had been created in 1945 by the Allied victory was over with the Soviet.

David Kennedy (24:52)

But Kissinger and others thought he wasn't alone in, let's say, just to mark it, 1991, that the United States now had hegemonic power. Who was it the French foreign minister coined the term hyper power? Something even greater than hyperpower sounds better in French. Yeah, but the point is that that was a moment when it appeared the United States had tremendous capacity to really reshape the international system. And I think it largely failed to do that.

Jim Steyer (25:22)

Okay, so let me. I want to pick up. We're going to come back to institutions and we're going to talk about academic institutions. By the way, you know, John Levin is going to be here in a couple of weeks and we're going to talk about Stanford with a couple of other very major university leaders in the United States, and we're going to get to that partly for one of the reasons, because Neil started a university in Texas. But Neil, you said something about the rule of law in the United States. So I'm a former prosecutor. Okay. And, and, and which was a very interesting point in my career. And, and I have never in my lifetime and I and we're going to have a class in two weeks about the United States Supreme Court with three really distinguished scholars on on the roll of court. I have never in my lifetime and I don't believe I'm the I do not believe I've ever seen an administration take over the Justice Department, which has always been, by the way, under Republican and Democratic presidents. Doesn't matter an independent body. And I will think about how the Justice Department, by the way, was extremely problematic for President Clinton when he was president was extremely problematic actually for President Biden at times and also for probably both President Bush's at times. But now where you have a situation where you literally have a president and what to me looked like or to many people and yes to me look like a president telling, firing legitimate, really senior prosecutors, many of whom are conservative Republicans, but who will not do his bidding to attack his enemies in cases of that seem to be, on the surface at least, pure political vengeance, whether it's Jim Comey, whether it's Letitia James in New York. I think Bolton is in his own category perhaps, but it's still an act of political vengeance. I want to ask David, maybe I'll ask you first, Margaret, because you are the head of the Bipartisan Policy center. That to me is and then putting in basically toadies. I mean, what he did in Virginia is shocking. Firing the U.S. attorney. Right. Again, I'm saying this as a that just doesn't happen. And so I do think that is an attack on the rule of law and the failure to separate to think of the Justice Department as an arm of the executive branch as opposed to an independent Justice Department. So I'd be interested, Margaret, to hear your thoughts about that and Neil, for you to respond, because I don't agree with you about the rule of law standpoint at this point in the United States. And again, we're going to cover that in other classes. But I think it's a very important issue to raise just given the current state of acrimony and vengeance politics.

Margaret Spellings (28:07)

Yeah. Of all the things going on, this is one I really worry about the most, honestly, and the lawfare and the various elements of it. And there are only two people that two bodies that can do something about it. One is the Congress, as they consider people for confirmation and et cetera, oversight of the Justice Department and the courts who are attending to and dealing with this in real time. And we have to hope and pray that our system holds. But I think, you know, one of the things I worry about in the long sense is that it's corrosive to how people feel about justice in our country. Obviously, you know, is it a rigged system, folks, et cetera. And I mean, is there, is it righteous on some level for President Trump to feel aggrieved because of his experience? Probably. So what?

Jim Steyer (29:06)

No, David, I'd be interested, but Neil, I'm totally giving you a chance to respond to it because I think it's a really important, important moment in history. And again, I think of it primarily through the lens of a prosecutor where pretty much everybody in my office checked their politics at the door and had clear jobs to do and followed those jobs. And there was no way we were going to listen to the governor or the president about how we were supposed to do that. But I don't see, I don't know

Margaret Spellings (29:30)

that it would be. No way, Jim. I mean, you know, not no way. Come on. Yeah, I mean, you know, we're all what we are, but to the extent and the off with your head and the, we'll get another one and you know, the toady feature, et cetera, I mean, I think that's different, but shit, of course, pardon me, I'm a Texan, I can't have that.

Jim Steyer (29:52)

Is that the first or last time that word has been used in this class this year?

Margaret Spellings (29:56)

You know, is it, Are there politics involved? You know? Yeah, yeah.

Jim Steyer (30:01)

But David. Any thoughts on that, Neil? And then I'll have a.

David Kennedy (30:05)

Well, I'm not sure if Margaret exceeds my level of worry about this, but mine's pretty high.

Jim Steyer (30:10)

Yeah.

David Kennedy (30:11)

And as part of a bigger picture, we have polling data that's pretty unimpeachable about our society's confidence in major institutions.

Margaret Spellings (30:21)

Right.

David Kennedy (30:21)

And certainly one of the most foundational institutions is the concept and the Department of Justice. And to the extent that we're further corroding and compromising the public's confidence in the integrity of this crucial institution, in this crucial concept, I think it's really, really long term damage. Once you disabuse people of their faith in the probity and integrity of these institutions, it's very hard to reconstitute. Let me add another element which only came to my attention in the last couple of days. It's sort of related to this and it has to do with the role of the Judge Advocate General officers in the armed forces. They're the lawyers in the armed forces and they're typically the Tradition is that they're embedded in whatever their unit is, and they're there to make sure that the rules of engagement are understood and observed and that collateral damage, especially in urban warfare, is closely monitored and so on and so forth. It's my understanding that the Trump administration has. And the department, the secretary of defense, Mr. Higseth, has stripped the Jags out of all kinds of units. And in that speech he gave them in Quantico, he essentially said, you're going to be subject to less restraint in the way you exercise force than has been the case for the last umpteen years. So, again, it's removing a legal voice or check. Yes. From. Or constraint, let's say a little more neutrally, on the unleashing of unlimited violence by the armed forces. So it's another area where legal constraints and the idea of justice is weakening.

Neil Ferguson (31:57)

Let's remember that history is in the title of the course. I think we should avoid getting into a kind of partisan debate. The question is, are you right, Jim, to say that the Department of Justice should be independent? The executive branch? That's not right. Actually, the Federal Reserve is independent, but the Department of Justice is not. The Constitution doesn't define it as independent. And in the eyes of Republicans, it was anything but independent. One of the interesting features under which president. Under. Well, it was not independent under Joe Biden. The perception of Republicans is that the lawfare was not initiated by President Trump, it was initiated against him. And I think it would be very hard to argue that every single case that was brought against President Trump after 2020 was not politically motivated. Unusually, President Trump had four years to think about what did not go right about his first term. This has only been possible once before, a long, long time ago. And so in the four years that they had to think about it, Trump and his advisors concluded that one of the reasons that they had been so frustrated and had not fulfilled their objectives was the hostility of the Washington bureaucracy, and not only in the Department of Justice. Now, ask yourself, how did Washington vote in the last election? I'll tell you, 90%. For Vice President Harris, the idea that

Jim Steyer (33:45)

Washington, D.C. you're talking about Washington, D.C.

Neil Ferguson (33:48)

so the idea that the federal bureaucracy is unpolitical is, I think, wholly implausible. It's as unpolitical as the Stanford faculty, who were also about 90% Democrat. So I think we need to be historically minded here. It's far from the first time that there have been fights over these kinds of issues. If you ask veterans of the Nixon administration, they'll tell you that the Department of Justice made common cause with the New York Times and the Washington Post and Harvard and all the usual list of enemies to get rid of Nixon. And that's the historical piece that's interesting to me. When you're trying to understand Trump, don't make the mistake of so many columnists over the last 10 years of comparing him to interwar European dictators. This is a category error. It's completely mad and seems to me to betray a complete ignorance of what those interwar dictatorships were like. Illustration. Right now, there are 419 cases in the courts that are against the administration is fighting on all fronts. Multiple cases. It will not win them all. I can assure you that in interwar Italy under Mussolini or Germany under Hitler, that wasn't the way it worked. So let's just be clear. Trump's a very American figure. His roots are in American political traditions like protectionism, like nativism, the key object. Oh, even easy money. I mean, you don't need to be as erudite as David Kennedy to know that Trumpism has deep roots in 19th century politics. And Trump even tells you that his heroes are William McKinley, or before that, it was Andrew Jackson. The other important hero here is Richard Nixon. And this is a key to understanding Trump. I tell my friends here and at Harvard, Donald Trump is Richard Nixon's revenge on you, on liberal America. And he has the same enemies list. It is Harvard, it's the Washington Post and the New York Times, and it's the Department of Justice and the bureaucracy, Hollywood. I mean, Nixon didn't use deep State, but he would always talk about the bureaucracy. They knew one another. This is the fascinating historical detail that when Trump was on the make in the 80s as a real estate guy, he met Richard Nixon, who was trying to repair what little was left of his reputation, and they had dinner together. And it was Pat Nixon who spotted Trump's political potential. There's a letter where Nixon says, pat saw you on the late show last night, thinks you have a big future in politics. So the key to understanding much that we're seeing here is the Nixonian feature, the Nixonian part of Trump. And this is a much more important analogy than people realize. In particular, you can tell people by their enemies. They have the same enemies.

Jim Steyer (36:49)

So let me ask you this to follow up on that. So, look, I'm old enough to remember the Richard Nixon era fairly well. So Richard Nixon didn't try to. I want to go out and talk about the Federal Reserve, because I'm talking about institutions and the economy. Would you argue that Donald Trump is not trying to. You earlier said that the Federal Reserve needs to be impartial. Would you suggest he's not trying, he's

Neil Ferguson (37:15)

leaning on it almost as much as Lyndon Johnson did.

Jim Steyer (37:19)

That I do not recall.

Neil Ferguson (37:20)

But perhaps Professor Kennedy could, whether you recall it or not. I mean, presidents have lent on the Federal Reserve before to this extent.

Jim Steyer (37:27)

To this extent.

David Kennedy (37:28)

David Johnson was not unusual for presidents to try to get the Federal Reserve to behave the way the President wants

Jim Steyer (37:36)

them to, but then to threaten to fire them or to fire them and to act on that. I agree with you that jawboning, but I think that is, I think it's different when you fire or threaten to fire people. Right.

David Kennedy (37:47)

Well, to Neil's point, he hasn't fired anybody yet.

Jim Steyer (37:51)

We tried to fire, and it was

Margaret Spellings (37:54)

one of the 419 cases that Neil's talking.

Jim Steyer (37:57)

And the reason I said it, no, but I actually think it's a really important thing because about what we're talking about, I do want to talk about institutions in general. And actually you said something in one of the readings that we assigned the class for today. Neil, in your book the Politics of Catastrophe, I mentioned to you this before where you argued that the true source of catastrophe lies in political and bureaucratic failure. Making that case now, including leaders inability to coordinate institutions. How do you, what do you think is happening now in terms of leaders ability to coordinate institutions? Do you think it's being handled well or not? Because if that's your thesis, how does that play? How do you see that playing out right now in America?

Neil Ferguson (38:40)

Well, I wrote a piece for the Wall Street Journal at the weekend saying Trump is the disruptor in chief who this time is approaching the problem in the spirit of no More Mr. Nice Guy, which is kind of funny when you think of, of Trump ever having been a nice guy. But the goal here is not to make the mistakes of the first term and to be hoodwinked by the bureaucracy. And so the people at the America First Institute who helped plan the second term had a very clear set of objectives, which is to go in hard against the deep state, against the various elements of the bureaucracy that you know are hostile to you and, and fight a pretty tough fight, knowing that you're going to be in the courts a lot and knowing that you won't win all these cases. But there hasn't been since Roosevelt such a barrage of executive orders as we saw in the first hundred days. This was a calculated strategy to try and disrupt the federal bureaucracy that they felt had impeded them in the first term. Now, is it going to, quote, unquote, work? Depends what you mean by work. We saw the failure of Doge Elon's idea that he could somehow slim down the federal government the way he slimmed down Twitter, and that was a fail.

Jim Steyer (39:57)

And it was a failure with Twitter, too.

Neil Ferguson (39:59)

Well, that's another question. I think it's not been a failure with Twitter, but it's clear that it was a failure with the federal government. And now we're in this second phase, which is kind of Lawfare Round 2, where this time Trump and his people are going after their political enemies. And it's difficult to say that he started it. I don't know quite how this turns out. Let me give you a skeptical view. I think that if you look at the polling, the disruptor in chief is losing altitude. I mean, even Inauguration Day, he's only favorability plus 6 percentage points. He's now about minus 7. And that's before the pain of the tariffs has really made its way to consumers. It's with the economy still around 2% growth, I sense that the Trump administration is likely to lose momentum next year, especially if the economy slows and it'll slow, especially if there's a big asset price correction around the AI bubble, at which point the midterms will suddenly be very near, very real and very losable for the president. And if the Democrats win back the House, I don't think they particularly deserve to, but if they do, which is what we expect historically, then we'll probably be into the third impeachment before too long. And heaven knows he's given them enough material to work with. So, I mean, I, I've been impressed by the sheer energy with which they've gone about this, the sense in which the things they said they would do last year, I mean, if you looked at the campaign website, there were 37 videos in which Trump said exactly what he was gonna do. Every single thing has been done. He's delivered on almost every one of those pledges, from reciprocal tariffs to going after Harvard.

David Kennedy (41:57)

And.

Neil Ferguson (41:58)

And he should therefore be ahead in the polls massively, because it's rare that the President says all these things and then does them and does them inside a year. But the public is sort of thermostatic. And so the public voted to crack down on immigration, and they voted because they were mad about inflation. And now that they're confronted with deportations, the response is kind of, ah, not quite that much. It's that great H.L. mencken line about democracy is the theory that the public knows what it wants and deserves to get it good and hard. The American voters, at least the ones who voted for Trump, are getting it good and hard. And at some point they're going to recoil from this, I think. So in that sense, to go back to your initial point, it may seem like a great historical suzuru to you right now. I think it will lose momentum and you'll see much less of a break in American domestic politics. I mean, they're just going to lose a bunch of these cases, and at some point, if they lose the House, Congress will come back to life. It's not like the separation of powers has been abolished. It's just we're having an imperial presidency phase. But the executive branch periodically stretches and pushes. Trump is not the first president to try and push the envelope for the the executive branch. He's like the 10th or maybe more. David and so I don't see this as a huge discontinuity in the way that you implied it was.

Jim Steyer (43:22)

That's interesting, Margaret.

Margaret Spellings (43:24)

I'm going into Jim so the implications of this is kind of this reframing of the federal compact with states and local governments. You asked us about, you know, that compact and are things working well. And so, you know, time marches on and states have the ball now on holy crap, we can't get anybody on the phone at the fill in the blank department. What are we going to do about what? And then of course, the one big beautiful and the cuts and Medicaid and so forth, the fraud requirements, on and on and on. So we're going to see major reductions that they're going to have to figure out how to eat and deal with. And that's going to come off the height of K12 and public higher education primarily, and reduce social safety debt. So the point is, yes, assertive executive lawfare, et cetera. All that's true. But what does it mean? And what it means is states and localities are going to have to figure out how to navigate the way through because the issues are still there. Thing number one. The other thing that kind of is just befuddling to me about the Trump administration is it's not that they're fiscal stewards, wise fiscal stewards. I mean, we're like on a trajectory like this that is nuts and unsustainable. I mean, abolish the Department of Education, but get rid of all the stuff they're doing and say states, you got that? We don't care anymore about a federal prerogative around education, at least there's some intellectual integrity there. But to send out the money and have no requirement, no mission, no remit, that's a bad deal for taxpayers. So we gotta get our story straight. But what's happening in reality is people still still have to deal with the policy implications of all this stuff when they show up tomorrow morning.

Jim Steyer (45:04)

Yep. David, respond to what both Neil and.

David Kennedy (45:09)

Yeah, well, Neil took the Menken words right out of my mouth because I was thinking the exact same statement. And it's a look historians, younger historians are going to spend the next generation or two trying to figure out the dynamics of this extraordinary moment that we're living through. But I think one thesis or hypothesis is that a lot of the vote for Trump on both occasions, well, all three occasions was in some degree performative and symbolic. And it was a way to give the middle finger to elites who've been condescending to a lot of people in this country for a generation or more. And when they get it good and hard and actually get the have to live through the consequences of these policies, when they go into place, they're probably going to change their mind about some things.

Neil Ferguson (45:53)

My favorite example of this was immigration. Where you polled people pre election last year, more than 50% wanted reduction in immigration. Most recent poll by Gallup, it's 31%. That's a huge number.

David Kennedy (46:05)

Related pair of numbers is people approve of the ceiling or the closing down the border, but they don't approve at all of the mass deportation tactics that are being deployed.

Jim Steyer (46:16)

So I just want to make one point for, for what I told you to look for on Wednesday. You're going to talk about, we're going to talk about this next week. So this is in the world, my real job.

David Kennedy (46:28)

Right.

Jim Steyer (46:29)

So in the middle of the budget bill, there was an effort to preempt all state regulation of technology. And I happen to run the largest organization in the United States, actually globally, the world and the world that regulates technology. And there was an effort to preempt anything we do, even though Congress has not the branch, number one, has not passed a meaningful law regulating technology in over two and a half decades. Right. Giving the AI companies and the bubble that you're predicting, because I want to talk about the economy next, an effort to completely preempt everything we're doing. As I said, read the announcement on Wednesday and then follow this over the course of the quarter while you have Professor Steyer here talking about what's going to happen. But how can you approach that? How can you justify that, and I'm not just saying this to you, Neil, is if you're not going to, if you're not going to regulate it out of Washington and you are going to devolve that responsibility of the state, and I'm not really asking you guys, I'm really saying it to everyone, then how are you going to run this if the states aren't allowed to do it? And the only thing the federal government does, and this came straight from David Sacks, my former student, and the White House. There should be no ability of states to regulate tech. By the way, the people we went to were Marsha Blackburn, Josh Hawley, a bunch of Republican senators who really are the people who turn the tide. We used Kristen Salty Sanderson to do polling on this, all Republicans, to show that this was an insane strategy. But, but my question on that one is if you say we're gonna withdraw from that, but the states are gonna. Margaret, it's sort of what you were saying, but then you're not allowing the states to do it, then you're really in a free for all situation. And I make that, again as my point in my day job, not in my Stanford role. But it's a really interesting challenge that we're gonna face.

Margaret Spellings (48:27)

But Jim, you also need to say that, yes, California, but also Texas and Ohio, please.

Jim Steyer (48:31)

Texas, Utah are big states had. And then California, New York and the four states. So it's a really bipartisan, nonpartisan effort. Okay. I do want to talk about the economy because I think. And the other thing I want to talk about is institutions. We could go on to many things. But I do want to hear your thoughts collectively, one, about what Neil has said. Again, Neil, thank you. These will actually frame some really interesting questions for us tonight about the state of the economy. And David, your sense of Neil's sense that. And you too, Margaret, come on, you ran the economy under President Bush or helped oversee that for eight years. Where do you think this economy is going? And I would specifically talk about the tariffs, too, and about sort of. I don't know if it's a coherent policy or not, but it's certainly one that has challenged a lot of the traditional norms. Where do you see that going, David? Margaret. And also you, Neil, economically. And then I am going to ask about higher ed too, before we get to the questions from the TAs, which I'm sure will be interesting. But how do you see the economy going and how stewardship of the economy is going right now?

David Kennedy (49:45)

Jim, as you well know, history is an empirical discipline,

Margaret Spellings (49:51)

damn it.

David Kennedy (49:52)

We only deal with hard, verifiable data. We have no data from the future, by definition.

Jim Steyer (49:58)

Correct.

David Kennedy (49:59)

So we're not in the prediction business, although some of us nonetheless venture to make predictions. Anyway, look, I think one of the leading characteristics of the economy that we've lived in for the last many years that has political actionable consequence is income and wealth disparities. And I had occasion just recently to look up some of these numbers. In 1975, no, pardon me, 1960 was my baseline. The ratio of the CEO of a Fortune 500 company salary to the median employee in that company was 20 to

Jim Steyer (50:34)

1, 20 to 1.

David Kennedy (50:35)

Now it's 258 to 1. So that, I mean, that's just a seismic change in the relationship of one tier of individuals in this society to others. That's not a Trump problem or a Biden problem. That's just built into the architecture and dynamics of the economy. Over the last two or three generations, we, I think many people have been groping for a way to come to grips with that taxation policy I think is probably not the most effective way to address it. But I don't know what the answer is. But I think if we don't do something to mitigate the effects of this kind of two tier economy that we have, where some people are doing extremely well and others are not doing terribly well at all, there's going to be political agitation around that until the end of time unless we somehow get a grip on it.

Margaret Spellings (51:24)

And the cures are affordable housing, education and health. And so that's a whole blob of things that we can get into, but we don't have time.

Jim Steyer (51:33)

But speak about a high level because

Margaret Spellings (51:35)

I think, yeah, but I also want to say, I mean this, the debt and deficit problem is, wow, unsustainable. And you know, we've been saying we've been crying wool for 40 years, nobody believes us. But you know, for real, a lot of people who, political and economic and otherwise, and Neil can say more about it, but the solutions are, look, we have to build more affordable housing faster. And you know, we're sitting in a hotbed of unaffordable housing. We are indeed, with local restrictions and whatnot proffered by you. And when we see red state, why are people moving to red states? Because they can buy a house and not a lot more complicated than that. Often schools are better. The data shows that red states are doing better on reading. And so I'm just observing and doing the math here and then of course around health as well. So that's, that's the stew of things it's going to take to deal with that problem. But on the debt and deficit stuff, we've got to get ahold of entitlements in a much smarter way. And we're not. I mean, so doge, it's ridiculous. Cut the Department of Education. Fine, cut it. It's a rounding error. But until we really confront the hard math of entitlement programs, we're sunk.

Neil Ferguson (52:53)

Margaret's right about that. I wrote a piece at the beginning of the year in which I conjured up Ferguson's Law because I thought I should have a law.

Jim Steyer (53:05)

You're a sir, actually, so you might

Neil Ferguson (53:08)

as well have a law modestly attributed to Adam Ferguson, the great 18th century Scottish thinker, but it was really my idea. So the idea is that if you're a great power and you consistently spend more on interest payments on your debt than on defense, you will not be a great power for much longer. And the great thing about Ferguson's Law is it holds for all the empires since Castile in the 16th century. So the US is in an unsustainable fiscal situation because it crossed that threshold last year. And if you fast forward looking at the Congressional Budget Office data, it only gets worse until by around 2040, at this rate, we'll be spending twice as much on interest on the federal debt as we spend on defense. So that's point one. And that will carry on until the entitlement reform was finally forced on some hapless president who will be a one term president of Spectacular in 2030.

Margaret Spellings (54:03)

I mean, it's right around the corner, folks.

Neil Ferguson (54:05)

But President Trump's great crime really is that it's to simply refuse to address that issue by ring fencing Medicare and Social Security. The second point is this. If you had told every member of the Stanford Economics Department a year ago that the US effective average tariff rate would be back to where it was in 1934, by the beginning of this academic year, they would all have said there'll be a recession, there'll be a stock market crash, maybe it's going to be a catastrophe. And here we are. We've basically increased the average effective tariff rate by a factor of 10 relative to where it was pre Trump. And recession. I don't see it. Where is it? Where's the recession? What about the market crash? Sorry, the markets hit new highs until last week's punch up with China over rare earths. So it's a problem for all of you who are majoring in economics that economics is currently being humiliated by Donald Trump. I can. And put it no more strongly than that, because if you remember, at least a dozen, I think it was close to 20 Nobel laureates wrote a letter last October. I think it was saying that if Donald Trump was reelected, it would be an economic catastrophe, and that's why everybody had to vote for Kamala Harris. And if that economic catastrophe doesn't materialize, I don't know. Do they give back the Nobel Prizes? I suspect not, but they probably should.

Jim Steyer (55:39)

Okay, but you would agree that we don't know yet. I mean, this is so early on. And the truth is whether it's the.

Neil Ferguson (55:48)

That's what I mean. At some point, things slow. There probably is a market correction. I think they expect it in Washington. I've heard numbers like 20%. I think it's. There's a sense that this party will be interrupted. But it's still very odd that we could see such a change in US Trade policy, such a drastic change. And the economic consequences thus far have been remarkably small.

David Kennedy (56:15)

But it's also off the top of your head. I don't. What's the percentage of GDP that's imports?

Neil Ferguson (56:21)

Oh, it's relatively.

David Kennedy (56:22)

I think it's around 10% or something.

Neil Ferguson (56:25)

Well, the current account deficit is what, 6, 7% of GDP. So imports are like some vastly larger number relative to gdp. But the US Is a relatively closed economy compared with, oh, I don't know, most of the rest of the world's economies, certainly all the European economies. Just to come back to this issue of international order, the significance of the tariffs is partly a revenue stream. I mean, it's going to bring in a substantial amount of money this year that will offset some of the tax cuts in the one big, beautiful bill. But the real point of the tariffs is it's part of Trump's economic strategy against China. Of course, it's against not only China, but China has been on the receiving end of the highest tariffs. And that's not accidental. Now, you can debate whether it's a very blunt instrument. I would say it's a very blunt instrument compared with, say, export controls and semiconductors. But I think one has to understand this trade policy and the tech policy policy in the context of what I called Cold War ii, because ultimately, Trump is trying to prevent China's ascent. We're trying to avoid China overtaking us. And this is one, I think, way of doing that. It's a real problem for China because China heavily relies on exports. That is its engine of growth. And so if you turn the world into a much more protectionist world. That is a huge problem for seasoned people, no question.

Jim Steyer (57:51)

But don't you think it's a huge problem for the United States?

Neil Ferguson (57:53)

It's a much smaller problem for the United States. You're in a comparative sense and that's just demonstrably true.

David Kennedy (57:59)

Well, for two reasons. Much closer, especially Neil's already said compared to other countries, this is a relatively closed economy, less dependent on imports than most others. Secondly, there's some reason to believe that a lot of producers, vendors, seen the tariff era coming, stockpiled a lot of inventory before the tariffs took effect. And so we've yet to see the full effect of whatever price pressure, upward pressure.

Neil Ferguson (58:23)

But even the Yale budget lab, they're pretty anti Trump, are still talking about an inflation increase of 1, you know, 1 point something percent. It's not, it's nothing compared with the 9% inflation you had in the summer of 2022, which is what the voters were so mad about.

Jim Steyer (58:41)

Neil, a life lesson that you've gotten that you and now that you've founded a new university that you think folks here and in our much broader audience under 25 should learn you are almost

Neil Ferguson (58:54)

certainly not reading enough books. That is my simple, simple piece of advice. You need to read more books. The decline of literacy is one of the most shocking features of our society today. Really. Alarmingly, roughly a third of American teenagers do not read books at all, which is a drastic decline relative to where we were, say back in the 1980s. And a society that doesn't read books is not actually able to learn the great lessons of history and civilization. This generation, currently undergraduates and graduates, are reading measurably far, far less than previous generations. And that's bad. So just my advice to anyone under 25 is just read 10 to 100 times more books than you are currently reading. That's all it is. It's my only piece of advice.

Jim Steyer (59:53)

That's great. I hope the Steyer children are listening. Sorry, I lecture my own.

Neil Ferguson (59:58)

Throw away your device, free yourselves from tyranny and read books.

Jim Steyer (60:03)

That's a great answer.

Margaret Spellings (60:04)

Yeah, Margaret, Yeah, that's a great answer. And by the way, only about a third of American eighth graders can read on grade level. So we also need to get that going so that they can read more books. Just. P.S. let's see what advice or optimism. Well, put them together. I want to pick up on the mention of the no Kings rally because you know, if you were around anywhere, you kind of ran into them, whether you were out in of front running errands or I happened to be downtown D.C. on Saturday morning. And it's not antifa. I mean, it's like people, you, your neighbor. And the thing that I am encouraged by is that, look, the American people have not had a chance, other than through some of this polling that Neil's talking about, to really give their two cents about what they think about the Trump agenda and the Trump administration. And we're about to have that. So put yourself on the field of play, go to the polls, you know, assert yourself, and we'll see how it all works out. I believe that people got it good and hard and there'll be some course correcting and that's the way it's supposed to work. If it does work that way,

Jim Steyer (61:10)

that's great. Professor Kennedy.

David Kennedy (61:15)

Well, I'm especially pleased to end on a note of agreement with Neil because we don't always agree, but I have a simple one word piece of advice for young people. Read. If you'd like me to elaborate, read a lot.

Jim Steyer (61:33)

And on that note, this has been an absolutely great discussion. Neil Ferguson, Margaret Spellings, thank you. A special thanks to all of you for checking out this episode of which side of History. Please make sure that you subscribe to my YouTube channel and and like this video and please leave a comment. I'm Jim Steyer and this is which side of History?