Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR network. I’m your host, Greg Sargent.
Paul Krugman: Good to be back on.
Krugman: Yeah. Trump has really radical policy ideas. I obviously think they’re terrible, but they are radically once smooth, holy level terrorists. He wants mass deportations. He wants to take away the independence of the Federal Reserve. How do you justify all of that when we’re pretty much a Goldilocks economy? Inflation is very close to the target. We basically have full employment. By normal standards, this is about as good as it gets. So even under Trump, it’s a little bit hard to say, Now we need to ... If it’s not broken, so why do we need this enormous stick?
Krugman: Democratic views about inflation look a lot like what economists are saying. Republicans appear to believe that Trump can wave his hand imperiously and make prices go down. Also, I wrote about this a little while ago, even on the question “Are you better off than you were five years ago?”—not how’s the economy but how are you doing—we suddenly switched from a plurality of people saying they were worse off, which wasn’t true but that’s what people felt, to a plurality saying that they’re better off, which I think is, again, Republicans saying, Now that Trump is president-elect, everything is great. But even with all of that, how does he justify, again, doing ... Why change everything? Why suddenly do these really disruptive things that he’s been promising he’s going to do?
Krugman: If we take the totality of stuff that Trump seems to want to do—he wants to raise tariffs but cut taxes on high incomes—it’s basically that working-class voters are going to face higher prices and upper income voters are going to benefit from tax cuts. This really is very much contrary to their interests, then you add in all the other stuff. Even more than usual for a Republican, he appears to have an extremely regressive economic program in mind, one that really will effectively redistribute income away from working-class voters to the top.
Krugman: The biggest of ... He has this fixed notion that if a country sells more to us than they buy from us, then we are somehow subsidizing them, which makes no sense. But it is true that Canada runs a trade surplus with the United States. If you look at that, basically that trade surplus comes entirely, more than entirely, from oil. So they send us oil, which is useful, and we send them IOUs. Trump says crazy stuff like we’re going to seize Greenland or make Canada the 51st state or whatever. Is this a strategic smokescreen to take people’s minds off the fact that he’s about to raise their cost of living? Or is it Trump that’s just uninformed? Is he just looking at maps, which make Canada and Greenland look very big and thinking, Hey, that’s real estate? Nobody knows. The idea that he has no idea what he’s doing has a lot going for it.
Krugman: Yeah, although ... Maybe I’m wrong but even in red state America, it’s really hard to get a serious hate on for Canadians of all people.
Krugman: Yeah, but this is crazy stuff, and particularly if you are a business person actually trying to do stuff. Canada and Mexico both; he’s threatening to impose high tariffs on both of our neighbors. And if you think about how is a car made, how is an American car made? Well, there’s really no such thing as an American car. There’s a North American car, which is components that are made in all three countries and the pieces of a car may cross the border in either direction seven or eight times before you arrive at a car. Slapping high tariffs on those particular borders is basically a body blow to U.S. manufacturing. And you would like to think that there’d be somebody who can go up to him and say, a big strong guy with tears in his eyes can go up to him and say, Mr. President, this is a really bad idea. I’m not sure that there is anybody in that position right now.
Krugman: No one should be surprised that he’s putting plutocrats in, but the question is, Are they plutocrats who have enough independence of mind and enough security to stand up and tell him when he’s wrong? So far, I see no sign of that. And the only ... Not in the cabinet but Elon Musk, maybe. But Musk is in a competition as to who can sound crazier there, so I don’t know that that’s going to help any.
Sargent: It’s funny, we often talk about Trump’s working-class base and his working-class white voter base and so forth, but there’s also a fairly large MAGA contingent represented by small business people, people who operate small manufacturing concerns and so forth. He just seems to have no concern for them at all. Aren’t those people that type of Trump supporter, the reactionary small business person? Aren’t those people going to get brutally scammed by tariffs here?
Sargent: That is certainly true. Your framework actually also helps explain why Trump falsely linked the terrorist attack in New Orleans to migrants. He’s going to need to sustain a rationale for mass deportations when those really get going if he’s able to do them. And the rationale will rest pretty much on nonstop lying and disinformation about immigrants. You probably just noticed the Laken Riley Act, which Republicans are pushing and Democrats disgracefully support it, also really designed to push the message that migrants are criminals. This is another area where his own voters will get acutely hurt by deportations, so he’s already peddling them a bill of goods.
Sargent: Well, I’ve said this in a piece before, but we’re going to see the process deeply corrupted with some selective application of deportations happening. You could see these splashy raids in blue areas where Fox News has given footage, which is supposed to show that Trump is pacifying out-of-control blue areas that are saturated in migrant crime. Meanwhile, people in MAGA country who depend on migrant labor quietly get a little bit of forbearance. This has happened before in U.S. history.
Sargent: Yes, and also I think that they’re going to use the government to produce a level of propaganda about “migrant crime” and other ways of blaming migrants for social problems that we can’t even anticipate yet.
Sargent: I think we’re going to see the force of the government put behind this propaganda too. You can see people at the agencies, pliant MAGA types, leaking information to the White House about this or that migrant crime, which then the White House press operation pushes.
Sargent: Well, using this framework, you can see why Trump and MAGA are doing a whole festival of propaganda and hate around the L.A. wildfires as well. Everything is going to be geared toward creating a perpetual sense that there are crises everywhere, that the enemy within is on the march, that our outside enemies are ripping us off, that things in blue states are spinning out of control, to justify all manner of radical disruptions. Do you anticipate something like this? Paul, how should Democrats try to counter this kind of thing? Or does Trump just have magical powers over our perceptions now, we should just give up?
Sargent: One hopes. Where do you see this all going in a big picture sense? How much damage do you think Trump can plausibly do to the economy? What’s your medium term prognosis?
Sargent: So how do we weather that, or do we weather it? What emerges on the other side, do you think?
I think we place a lot of hope on just lack of competence. Horrible thing to say, but it has been striking that in areas I know where there are people with genuine expertise—evil intentions but genuine expertise—that people expected to be hired by the administration, they have not been. It seems that actually knowing what you’re talking about is disqualifying for this government. And that does suggest that they’re going to actually manage to pull off less than they think. Who knows, but I think that a lot of people will be feeling a lot of buyer’s remorse. The surveys now show that basically Trump voters think he’s going to actually bring down grocery prices, but he’s not. And are they going to notice that? It’s going to be a Who are you going to believe, MAGA or your lying eyes? situation. And you have to hope that there’s a reservoir of fundamental decency in the country that will reassert itself, assuming we can weather the onslaught over the next couple of years.
Krugman: Well, he already said ... After having spent the entire campaign saying I’m to bring the price of groceries back down to what it was, then basically just a couple of weeks after the election, he said, Oh, getting prices down, that would be very hard. But what I find interesting is judging with the surveys, they haven’t gotten the memo. He said that not on Fox, I think, but he said it, but they still think he’s going to do what he promised during the campaign. So the scam is there is no plan.
Sargent: Well, they’re certainly going to try to paper that over and create the impression that they’re running things with great competence.
Sargent: It certainly feels like a TV show a lot of the time, just a really terrible one. Paul Krugman, thanks so much for coming on, man. Always great to talk to you.
Sargent: You’ve been listening to The Daily Blast with me, your host, Greg Sargent. The Daily Blast is a New Republic podcast and is produced by Riley Fessler and the DSR Network.
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