The stories you want. The opinions that matter.
No, thanks
@DeanBaker13
Donald Trump

Bad Economic Vibes Are Still Emanating From Trump's Betrayal Of His Own Voters

Sometimes, something that seems too absurd to be taken seriously really should be taken seriously. As Paul Krugman argued a couple of days ago, Trump backers’ sense of betrayal by Trump may actually explain much of the negative attitude being reported by surveys of consumer sentiment.

There has been an ongoing debate among economists as to why households are so negative on the economy. The problem is that the economy seems reasonably good by most measures. The unemployment rate, at 4.3 percent, is relatively low by historical standards. Real wages are at least modestly outpacing inflation. People are buying big-ticket items like cars at a healthy pace and still going out to restaurants.

Many of us have argued that much of the apparent prosperity can be explained by the top quintile spending based on their stock gains. There surely is some truth to this. I have noted that spending at fast-food restaurants, which is presumably driven primarily by the behavior of more moderate-income households, has been stagnating since last summer and has been weak since 2023. Other measures, like delinquency rates for mortgages held by moderate-income households and student loans, suggest serious financial stress. Still, it doesn’t add up to record low rates of consumer sentiment.

My friend, Jared Bernstein, has argued that people are unhappy even if inflation has slowed from pandemic peaks, because prices are still high. The argument is that people expect prices to fall back to where they were before the pandemic or at least be lower than they are now.

As much as I respect my friend and former colleague, I can’t buy this one because I remember the 1980s. We had very high inflation in the 70s and early 80s, which then fell to more manageable levels (three to four percent) by the middle of the decade. People were generally happy that inflation had fallen to a moderate pace. I don’t recall anyone complaining that prices were still high. I’m sure such people existed, but their voices were not being amplified by major media outlets, so no one took this complaint seriously. I find it hard to accept that consumer psychology has changed so vastly in the last four decades.

This brings me back to Paul Krugman’s argument that the main reason sentiment is low is that people feel Trump betrayed them. This requires a small step back. Measures of consumer sentiment have a strong partisan slant. Democrats say the economy is terrible when a Republican is in the White House and vice versa. This has always been the case, but the tendency has gotten more extreme in the last two decades, and it’s stronger for Republicans than Democrats.

Anyhow, sentiment was already low at the time of the 2024 election, and then we got the expected switch with Republicans saying things were good and Democrats saying things were terrible. But a big part of the reason that Republicans said things were good is they actually believed Donald Trump’s promise to bring prices down. They expected there would be zero inflation in the year after Donald Trump took office. That is literally what they answered in surveys.

This is where polarization explains a lot. I’m sorry, but all my friends and acquaintances and I know Donald Trump lies all the time. As an economist, I also know that it is not possible to have a general decline in the price level without a serious recession.

Therefore, I knew Trump’s promise to lower prices on day one was absurd. What I could not imagine was that millions of Trump’s supporters took his promise seriously. I confess to being sufficiently out of touch with tens of millions of my fellow citizens that I really had no idea what they thought about the world.

I don’t mean to mock their lack of knowledge. Most people are not economists and don’t follow economics closely. They also distrust Democrats and the media, sometimes for good reasons. Therefore, they thought it was plausible that Trump would send prices downward shortly after he took office.

Now these Trump backers feel betrayed. They expected lower prices and instead got higher inflation due to tariffs, mass deportations, and now Trump’s war. If we have a story where the Democrats feel the economy is terrible because a Republican is in the White House, and pursuing some genuinely terrible policies, and Republicans saying the economy is terrible because they feel their president has betrayed them, we get a situation where most people say the economy is terrible.

That seems a plausible explanation for the seeming disconnect between an at least moderately healthy economy and record-low levels of consumer sentiment. I’m open to other stories, but at the moment, this one seems the most compelling.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Kevin Warsh

Warsh's Answer About The 2020 Election Disqualified Him As Fed Chairman

I’ve been on the road, so I didn’t have time to post yesterday. But I did want to quickly comment on a news item I saw. On Tuesday, Democrats on the Senate Banking Committee asked Kevin Warsh, Trump’s nominee for Fed chair: “Who won the 2020 presidential election?”

Several commentators referred to this as a political question. Sorry, but there is nothing political about this question. It is a simple factual question, like adding together 2+2.

There is no ambiguity about who won the 2020 election. Biden won by more than seven million votes, a landslide in Trumpian terminology. (Trump routinely calls his 2024 victory a “landslide.” Biden’s margin was more than three times as large.)

Trump may be unable to acknowledge his loss, but his whining does not change reality. The simple fact is that Biden won in 2020, by a lot, and everyone knows this. There is no set of facts about the vote totals in dispute.

Trump’s yelling about some unidentifiable “fraud” changes nothing. He has had more than five years to produce evidence in court to prove that the numbers were not counted accurately or that there were millions of fraudulent votes. He has produced nothing. No serious person can question the 2020 results based on the Trump complaints.

The question for Warsh was simply whether he could say something that he knows to be true, when it will cause Trump to get angry. That is a perfect test of his ability to be an independent Fed chair.

Warsh gave a clear answer. He will do what Trump wants him to do, even when that means making a fool of himself in front of the whole country. This is not someone who should be Fed chair.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Elon Musk

No, We Don't Need Billionaires -- Or Gross Inequality -- For Prosperity And Progress

The Economist gave us a classically sloppy piece last week, telling us that we need the mega-wealthy types like Elon Musk and Mark Zuckerberg. The argument is largely tautological.

It points out that the mega-rich have been responsible for the diffusion of important technologies. There is considerable truth to that, but this is because we have structured the economy in ways that allowed people to get super-rich by gaining control of important technologies. If we had structured the economy differently, we wouldn’t have super-rich people responsible for tech's spread.

For example, who was the mega-rich person for the near-universal acceptance of the polio vaccine, not just in the United States but around the world? This vaccine has saved tens of millions of lives over the last 70 years. Its developer, Jonas Salk, never bothered to patent it, saying the knowledge belonged to the world.

There is a similar story with insulin. The developers, Frederick Banting, Charles Best, and James Collip, sold their rights for $1 each in 1923. Tens of millions of diabetes patients have been able to live relatively normal lives as a result of their discovery, but no one got rich from it. (This has not prevented drug companies from making huge sums by patenting various processing techniques and charging markups of several hundred percent.)

We don’t just have to look to medicine. There were great innovations in most areas attributable to people who did not get ridiculously rich. It was not Steve Jobs and Apple who invented the mouse, although they did popularize it. The invention was by Douglas Engelbart in 1963, a researcher at Stanford Research Institute.

There is a similar story with DOS, the Microsoft operating system that has been used in billions of computers around the world. This was not invented by Bill Gates and his team, but rather by Tim Paterson, a software engineer working for Seattle Computer Products.

And the Internet came out of a military project, the ARPANET for connecting computer systems. No one got insanely rich from this innovation either.

We have structured the system so that someone like Bill Gates can gain control over a technology like DOS and become ridiculously rich by popularizing it, but it doesn’t follow that DOS, or perhaps a better system, might not have been widely adopted in a comparable time frame without someone like Bill Gates getting very rich.

The Economist piece is just looking at the ridiculously rich people of the last century and a half and implying that the innovations they are associated with would not have taken place otherwise. That is a logical leap bordering on absurdity.

Capitalism Can Be Structured Differently

To be clear, this is not a question of whether or not we want capitalism. I’ll leave that one to others. But as I have argued repeatedly, capitalism is an infinitely malleable system. It can be structured in an endless number of different ways, some of which will lead to far less inequality. We seem to have structured it in a way to maximize inequality.

I’ll give some of my favorites below, but the list is far from comprehensive. I’ll also skip anti-trust for two reasons. First, antitrust policy is an important issue, but everyone talks about it. With some notable exceptions (e.g. the lawsuit against Microsoft in 1998), the watchdogs have largely been asleep for the last forty five years, but they did briefly awaken under Biden.

The other reason I am less fond of talking about antitrust is that it requires government action. (Actually, private actors can sue as well, but it’s difficult.) I like to focus on the ways in which the government actively structures the market to take money from everyone else and give it to the rich and very rich.

Government-granted patent and copyright monopolies

This one always leads the list, both because there is a huge amount of money at stake and these monopolies are so obviously the result of government action. Capitalism is still capitalism if the government doesn’t hand out these monopolies.

Patents and copyright monopolies are government policies to promote innovation and creative work, but there are alternative mechanisms that can be used. And even if it uses these monopolies, they can be shorter and weaker, transferring less money from the rest of us to the monopoly holders.

There is easily over $1 trillion a year in income at stake with these monopolies. That figure is over one-third of all after-tax corporate profits. The largest chunk is with prescription drugs and other pharmaceutical products, where we likely spend over $750 billion this year on items that would likely cost us less than $150 billion in a free market, a gap of $600 billion.

Software is another case where these monopolies matter hugely. Bill Gates and Larry Ellison are two of the richest people in the world because the government gives Microsoft and Oracle monopolies on their software.

The importance of these monopolies to both the economy and inequality should be obvious. And we can use alternative mechanisms, most obviously publicly-funded research. We used to support more than $50 billion in biomedical research through the National Institutes of Health.

We would have to triple or quadruple this to replace the research supported by patent monopolies. But publicly supported research would have the advantage that it could be open source. Taking away the patent monopolies would also take away the industry’s incentive to lie about the safety and effectiveness of their drugs, as they did in a big way in the opioid crisis.

We can also have more public funding in other areas, including for creative work. We may want to still use patents, but we can make accepting much shorter patents a condition of getting access to publicly funded research. (See Chapter Five of Rigged [it’s free] for an outline of this story.)

Let the Financial Industry Enjoy the Free Market

The billionaires of Wall Street like to pretend they are swashbuckling capitalists, at least until they sink themselves with their greed, when they run to the government and demand a bailout. They did in a huge way in the 2008-09 financial crisis, when they pushed the Big Lie that we would face a Second Great Depression if the government didn’t come to their rescue.

This was an obvious lie since we learned the secret for getting out of a depression 70 years earlier: it’s called “spending money.” We did this in a big way with World War II, but spending on wars doesn’t magically affect the economy in a way that’s different from government spending on things like healthcare and solar panels. This is pretty simple stuff, but if you tried to say this back when Wall Street was demanding taxpayer dollars, you weren’t invited to the discussion.

And we don’t have to go back to the ancient history of the financial crisis. Just a few years ago, Trump crypto czar David Sachs was leading the charge for a bailout of Silicon Valley Bank, where his friends apparently parked a lot of cash. Capitalism is still capitalism if the government doesn’t bail out banks that put themselves into bankruptcy.

And we don’t have to exempt the financial industry from the sort of sales taxes most states impose on items like food and clothes. A modest sales tax on financial assets (e.g. 0.1 percent on stock trades and 0.01 percent on derivatives) would likely cut the size of the industry in half, eliminating an enormous amount of waste, as well as really big fortunes.

And since we’re talking about leveling the playing field, we should end the carried interest loophole that allows hedge fund and private equity partners, some of the richest people in the country, to pay the 20 percent capital gains tax rate instead of the normal 37 percent rate. The ostensible rationale is that they are paid on commission, like realtors or car salespeople.

Whack Private Equity: The Structure of Bankruptcy Laws Is Not Intrinsic to Capitalism

One of the big games for private equity (PE) firms is to strip assets from the companies they buy. They have the companies pay big dividends to the PE partners, often taking on debt for the companies (not the PE firm) to make the payment. They also sell off real estate or other assets and pocket the money themselves.

This puts the PE firm in a perfect win-win situation. If they can keep the company in business and then take it public again, they make a fortune, since they likely have already recovered most or all of their investment by stripping its assets. If the company ends up in bankruptcy, they just walk away, screwing its creditors, which can include suppliers, landlords, and workers with pensions.

One way to alter the equation is to restructure bankruptcy law to make PE companies that control other companies responsible for their liabilities. If a company that controls another company is responsible for its liabilities in bankruptcy, we still have capitalism.

Make Non-Compete Agreements Unenforceable

A non-compete agreement is a clause in an employment contract that prohibits a worker from working for a competitor or starting their own business in the same field. There is a limited rationale, for example, when top researchers have access to a company’s latest product designs. But non-compete agreements have proliferated in the last quarter century to the point that a sandwich chain was prohibiting its workers from being employed elsewhere.

The laws on this can be changed, as Biden’s Federal Trade Commission tried to do, so that most non-competes would not be enforceable. If anyone thinks that not enforcing all contracts is inconsistent with capitalism, think again. In most states, a contract that an employer signs with a union, requiring all workers to pay a union representation fee, is not enforceable. (They call it “right-to-work.”)

The government always sets boundaries on which contracts it will enforce. Those boundaries don’t have to be set in a way that hugely favors employers. There are many other issues with labor-capital relations where the rules have been written to favor employers. Again, these can be changed.

Capitalism Needs to be Restructured to Produce Less Inequality

It is incredibly lazy to treat the massive inequality we see as the natural outcome of capitalism. It is understandable that the people who benefit from this inequality would make that claim, but it is bizarre that the people seeking greater equality would as well. It’s fine to try to tax back some of the wealth that we have handed to the billionaires, but the much better solution is to not give it to them in the first place.

Getting back to The Economist’s basic argument, maybe a greed-crazed billionaire will lead home computers or social media to spread slightly faster than would otherwise be the case, but so what? Would we have suffered enormously if we all got our first PC a year later than we did?

And the flip side of this story, apart from handing enormous wealth and power to a tiny group of people, is that the billionaires are often total jerks. We don’t have to look back to ancient history to see examples of mega mistakes by the mega-rich. Mark Zuckerberg threw over $80 billion in the toilet, pushing his “Metaverse,” which went nowhere. We can survive just fine without such nonsense.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Are The Republicans Actually Killing You? Probably, If You Live In A Red State

Are The Republicans Actually Killing You? Probably, If You Live In A Red State

When we look at data on life expectancy, that seems like a reasonable question to ask. We can argue over the causes and mechanisms, but it is an undeniable fact that people in states that are controlled by Republicans have much shorter life expectancies than people who live in states controlled by Democrats.

To make the story more interesting, I included some international comparisons.

The first thing I should point out is that the international data are not entirely comparable to the data on life expectancies in U.S. states. The international data are taken from the Worldometer, which in turn comes from the United Nations. The state data are from the Centers for Disease Control (CDC). The U.S. average is about two years higher in the Worldometer data than in the average in the CDC data, so it would be appropriate to add around two years to the state data to make an apples-to-apples comparison.

Nonetheless, the international data are still striking. Even adding two years to the state data, life expectancy in Hawaii, our best performing state, would still be well below life expectancy in Japan, South Korea, Australia, Italy, France, Spain, and even Canada.

The story gets worse as we go down the list. Adding two years to life expectancy in Florida still leaves it below Albania and Cost Rica. Texas is neck and neck with China. Even adding two years to the CDC estimate, Indiana and South Carolina are slightly below Hungary. Kentucky is tied with Mexico and only slightly above Bangladesh. The bottom two, Mississippi and West Virginia, can still boast about being somewhat ahead of Russia and India.

The domestic comparisons are also striking. The top five states are all solidly Democratic. Utah is the only Republican state to break the top 10 at number eight. Two others, Idaho and Nebraska, crack the top 15. The Republican giants, Florida and Texas, rank 19 and 27, respectively.

Just as Democratic states dominate the top 10, Republican states own nine of the bottom 10 positions. Only Democratic New Mexico, at number 43, makes it into the bottom 10.

But beyond the rankings, these numbers are a really big deal in terms of people’s health and lives. A person living in Hawaii can expect to live almost eight years longer than a person living in West Virginia. Even moving away a few notches from the extremes, a person living in California can expect to live 5.5 years longer than a person living in Tennessee.

These are enormous differences that really matter in people’s lives, literally. There is a long list of explanations for these gaps, which I am certainly not sufficiently knowledgeable about to get into. But I can look at outcomes, and those are not good.

Can we blame Republican policies? When you have states in the deep South that have been controlled by Republicans for decades, and before that, Democrats who had the same political views as today’s Republicans, it seems fair. If the story was reversed, Fox News would be screaming endlessly about the short life expectancies in Democratic states.

The relevant factors clearly are a result of long historical processes, but these gaps have been there a long time. I first noticed this picture when I was in college almost fifty years ago. The story I was willing to believe was that the South had still not recovered from the Civil War, even though that was more than one hundred years in the distance at that point.

It is now 50 years later. China went from being a poor developing country to the world’s largest economy in that time. South Korea went from having one of the lowest standards of living in the world to European standards of living in 50 years. At this point, it’s pretty hard to blame a war that ended 160 years ago. It looks like the bad policies pursued by Republican states is costing their people years of life.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Taking Iran's Oil: Mr. Arithmetic Helps Trump Calculate Profits And Costs Of Imperialism

Taking Iran's Oil: Mr. Arithmetic Helps Trump Calculate Profits And Costs Of Imperialism

Yesterday, Donald Trump raised the possibility of taking Iran’s oil. He has also suggested that we would or are taking Venezuela’s oil. Trump seems to believe that there is some great windfall to be had by taking other countries’ oil. This may be true for Trump’s family or friends, insofar as they can directly profit from the seized oil, but it is not likely to work out well for the country as a whole.

We know Donald Trump is a reality TV show star, so he is not very familiar with business or economics. But Mr. Arithmetic has kindly offered to help him out on this one.

There are many unknowns in this story, but we can start with the amount of oil at stake. Before Trump Israeli Prime Minister Benjamin Netanyahu began the war, Iran was producing between 3.5 million to 4.5 million barrels per day. It uses roughly 1 million barrels daily domestically, so that leaves exports between 2.5 million and 3.5 million barrels. Let’s take the midpoint of 3 million barrels. That comes to exports of 1.1 billion over the course of a year.

The price of oil has soared as a result of the war, but presumably, if there is some future date where Trump has seized Iran’s oil, everything is back online, and things are more or less back to the pre-war situation. That means oil will be selling for around $60 a barrel.

Iran is a very low-cost producer: its oil is easy to get to, unlike the fracked oil in Texas. Its costs are estimated at around $10 a barrel. That would leave Trump with a profit of $50 per barrel. That comes to roughly $55 billion over the course of a year. (I’m assuming that Trump wouldn’t expect to profit on the Iranian oil that Iran uses, but who knows?)

Trump originally planned to ask for $200 billion to cover the cost of his war. In that story, he could recover the costs in less than four years. That looks like a pretty good payback. After the fourth year, we could be pocketing $55 billion annually from Iran’s oil.

But that apparently is only part of the story. Trump now says that he needs to raise annual U.S. military spending by $500 billion due to all the enemies he has made with his threats and wars. That picture doesn’t look so good. With the U.S. spending an additional $500 billion a year on its military, and getting $55 billion a year from Iran’s oil, we would get paid back precisely never.

Source: Author's calculations (see text)

But wait, it gets worse. The world is turning rapidly away from fossil fuel consumption, a trend that is being hugely accelerated by Donald Trump’s war. Close to 60 percent of the new cars sold in China are electric vehicles, and that figure is rising rapidly. The European Union is not far behind. EVs are already comparably priced or cheaper than conventional cars, and their costs have been falling rapidly. They are far cheaper to operate and maintain.

Solar and wind energy are already cheaper than fossil fuel energy, and that gap is sure to grow in the decades ahead. Also, the price of battery storage has plummeted, making the shift to clean energy even more attractive.

With demand for oil likely falling sharply in the next two or three decades, the value of the oil Trump is considering seizing from Iran will likely be falling as well. But the costs we incur from having made new enemies around the world will be enduring, even if we don’t need the extra $500 billion he is demanding.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Orange Man Goes Green? How Trump's Attack On Iran Is Advancing Clean Energy

Orange Man Goes Green? How Trump's Attack On Iran Is Advancing Clean Energy

Donald Trump has an incredibly childish obsession with outdoing his predecessors, who he constantly derides as stupid and corrupt. There is, of course, no evidence for Trump’s charges, like the supposedly terrible economy he inherited from Biden, but Donald Trump is not a man who feels constrained by reality.

While Trump does everything he can to reverse policies to promote clean energy, overturn trade agreements (including his own), and undermine security pacts, there is one area where Trump looks to substantially outpace the work of his predecessors.

This is in promoting the transition to a non-fossil fuel-based economy. As much as Trump loves oil and coal and seems to relish the prospect of destroying the planet for our kids, his reckless attack on Iran will do a hundred times more to promote clean energy worldwide than all the incentives in Biden’s Inflation Reduction Act.

There is both the direct effect of higher oil and gas prices resulting from the closing of the Straits of Hormuz, but also a more important indirect effect. Trump has shown the world that it is dangerous to rely on imported oil and natural gas as energy sources.

This applies not only to imports from the Middle East, which apparently any jerk can shut down on a whim. The risks probably apply even more strongly to reliance on the United States as an exporter, Trump’s preferred outcome.

In his tariff games, Trump showed he can be incredibly arbitrary and capricious. He claimed that countries were “ripping us off” because they sell us stuff. There is nothing resembling logic to Trump’s claim. Do Walmart or Costco rip people off when they buy things from those stores?

But it gets worse. He imposed 50 percent tariffs on Brazil’s exports because it prosecuted Trump’s friend for trying to overthrow the government. India also faces 50 percent tariffs on its exports to the U.S. because its prime minister refused to nominate Trump for a Nobel Peace Prize. And Switzerland got hit with a 39 percent tariff because Trump didn’t like the way its president talked.

The rest of the world would likely much rather take its risks with countries like Iran and Libya than rely on getting oil and gas from Donald Trump’s America. At least there is usually some logic to when these countries threaten to reduce output or raise prices.

The rise in oil and gas prices following the closure of the Straits is making clean energy far more competitive than was already the case. Even with oil at $60 a barrel, and natural gas correspondingly cheap, the vast majority of electricity coming on-line across the globe was renewable. This shift will only accelerate, with oil prices up 70 percent and natural gas having close to doubled. While prices may fall back some if the Straits are reopened soon, they are unlikely to return to their pre-war levels for several years in almost any circumstances.

And the price of wind and solar energy continues to fall, driven primarily by low-cost Chinese manufacturers. Chinese electric vehicles will also become hugely more popular as a result of Donald Trump’s war. These cars are already cheaper to purchase than comparable traditional cars, and Trump has just added roughly $500 a year to the operating cost of a gas-burning vehicle. Already 60 percent of the cars sold in China are electric, with EVs holding a comparable share in Europe. The same is the case in many developing countries. The EV share will likely quickly move towards 100 percent thanks to Trump’s war.

It certainly was not the best way to promote a green transition, but no one can deny that Trump’s war is effective. Who knows how much damage the war will ultimately cause in terms of property destruction, the environment, and lives lost. The latter will include both direct effects from the war and likely much larger indirect effects from higher energy and food prices. But one positive outcome is that we will be moving far more rapidly toward a green economy.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.


Market Plunge: How Trump's Inept 'Wealth Tax' Smacks His Billionaire Buddies

Market Plunge: How Trump's Inept 'Wealth Tax' Smacks His Billionaire Buddies

There is an effort by several progressive unions and other organizations to put a five percent wealth tax for the state’s billionaires on California’s ballot this fall. It’s not clear they will succeed in getting it on the ballot or how the initiative will do (I’m in), but Donald Trump has already one-upped them. Thanks to his management of the economy and his decision to go to war in Iran, he has reduced the wealth of the country’s richest people by far more than the sponsors of this initiative could ever hope.

In 2026 to date, the S&P 500, a broad measure of the stock market, is down by almost 7.0 percent. The NASDAQ, which is where the tech companies controlled by folks like Elon Musk and Mark Zuckerberg live, is down by almost 10 percent. That means Trump may have cost Musk $60 billion, and that’s in just three months. Who knows where he will be by the end of the year.

If anyone thinks I’m being perverse by celebrating a decline in the stock market, try thinking again, or just thinking for the first time. The stock market is not a measure of economic well-being. It is a measure of the wealth of people who own stock.

There are three basic reasons for the stock market to rise. The first is the expectation that the economy will grow more rapidly and that corporate profits will therefore rise more rapidly along with the rest of the economy. The second is that investors expect that after-tax profits will rise at the expense of wages or due to lower taxes. The third is due to a bubble, or “irrational exuberance” to use former Fed Chair Alan Greenspan’s great term.

Only the first reason reflects good news for the economy. The other two are negatives from the standpoint of the bulk of the population. There is no reason for the rest of us to be applauding a shift from wages to profits or a larger share of the tax burden to be left to ordinary workers. Nor should we be delighted about a bubble that distorts investment decisions and gives the rich even more disproportionate ability to command economic resources while it lasts.

I’ll leave it to others to speculate on the main causes of the decline in the market this year, but I would put my money mostly on number three, a bit less irrational exuberance, but also a bit of number one, more pessimism about future growth prospects. But regardless of the cause, the rich are considerably less rich because of Trump’s actions.

I know that even many progressives will find rooting against the stock market difficult to stomach, but let me urge using your head instead of looking at your 401(k). The rich own half of all corporate stock. When the market goes up, they get richer compared to everyone else. That is definitional. For progressives to both root for a rising stock market and then complain about wealth inequality is like the old joke about the kid who kills his parents and then begs for mercy because he’s an orphan. But serious economists do this for real.

To be clear, I have long emphasized focusing on income inequality rather than wealth inequality, partly for this reason. But no one cares what I say. I’ll also mention that the complaint that we should be worried about wealth buying political power is equally off base. Elon Musk, with $300 billion rather than $600 billion, still has far too much power. (And tell me your plan to cut his wealth in half with tax policy.) If we’re going to be serious, we have to address structural issues on controlling the media. (Sorry folks, it matters more what people see between the political ads than what they see in the ads.)

Just to be clear, I know many non-rich people (like me) also have money in the stock market. They will lose too when the market tumbles. I’ll make two points on this issue.

First, if you’re looking for a policy that doesn’t hit anyone you care about, you should go into a different line of work. Such policies do not exist in this world.

I recall working with a coalition pushing for a financial transactions tax that could raise close to $150 billion a year (0.5% of GDP), overwhelmingly at the expense of the financial industry. A major concern was that this could also hit middle-income people with their 401(k)s.

That was not altogether wrong, but what we were talking about was someone with $200k in their retirement account may have to pay $40 a year due to the tax.[1] Really, this is a big problem?

The other point is that if we are primarily lowering stock prices by getting rid of irrational exuberance, then the income flows from 401(k) stock holdings will be little affected. This means that $80k in stock may still provide the same capital gains and dividends as $100k did in a bubble-inflated stock market. I know that it will be hard for the folks who just lost 20 percent of their wealth to stomach, but I am an economist, not a psychologist.

Trump’s war in Iran is abhorrent for many reasons, first and foremost the needless loss of life, but it is imposing real costs on the world economy. His tariff and immigration policies are also horrible, as are his efforts to increase greenhouse gas emissions. But insofar as these have led to a loss of wealth for the rich jerks that have been buying favors from him, I will shed no tears.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Inflation Rising As Trump's Confused Economics (And Iran War) Drive Costs Up

Inflation Rising As Trump's Confused Economics (And Iran War) Drive Costs Up

We know Donald Trump gets easily confused. During his campaign, he repeatedly insisted that he would keep us out of a war in Iran. Now, after being in office less than 14 months he started an unprovoked war in Iran. Trump obviously couldn’t remember whether he was supposed to avoid a war in the Middle East or start one.

It seems he is facing the same problem when it comes to inflation and prices. He promised to bring prices down on the first day of his presidency. While inflation had been falling to the Fed’s 2.0 percent inflation target before Trump was elected, it is now close to 3.0 % and looks to be heading higher, and that was even before the impact of his war against Iran.

We got the latest news on this front yesterday when the Bureau of Labor Statistics released February data on import prices. Non-fuel import prices rose by 1.1 percent in the month. Import prices are erratic on a monthly basis, but this followed a 0.8% rise in January. Year-over-year non-fuel import prices are up 2.5 percent.

Prices of all imports excluding fuels since April 2023Source: US Bureau of Labor Statistics via FRED

There are two important issues to keep in mind when thinking about the impact this will have on the inflation households see. The first is that this index tracks prices before any tariffs are imposed. These are the prices charged when goods come off the boat. Trump’s tariffs are added onto these prices.

If exporters were eating the tariffs, as Trump promised us, then import prices would be falling. That is clearly not what we are seeing.

The other important item to note is that these data are for February. That is before the war on Iran sent the price of oil, natural gas, and many other commodities soaring. As bad as the February data look, March is virtually certain to be worse.

This reinforces the story we saw with the February Producer Price Index (PPI). The core PPI rose 0.5 percent in February and is up 3.5 percent over the last year. The relationship between inflation at the wholesale level (the PPI) and the retail level (the CPI) is not one-to-one, but it’s a safe bet that if we see higher inflation at the wholesale level, it will be coming out of consumers’ pocketbooks down the road.

The pickup in inflation is not a surprise; it is a completely predictable result of Trump policies of tariffs, mass deportations, and ad hoc dictates to private corporations (e.g., shutting down windfarms). It is not a story of hyperinflation, as some doomsayers may have forecast, but it is a story of higher inflation that eats into consumers’ purchasing power. That’s what you get when you turn the keys of government over to a confused old man.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.



That $200 Billion Expenditure On Trump's Iran 'Excursion' Is Real Money

That $200 Billion Expenditure On Trump's Iran 'Excursion' Is Real Money

Most people have little understanding of what is big or small in the federal budget, in large part because the media have made a conscious decision to not inform people. Rather than taking ten seconds to indicate what share of the budget a particular item is, they just write huge numbers in the millions or billions, knowing they are completely meaningless to almost everyone who sees them.

With this in mind, I thought it would be useful to write a piece pointing out that the $200 billion (2.9 percent of the budget) Trump plans to ask to cover the cost of his war in Iran is, in fact, a big deal. While this is still less than what we spend on huge social programs like Social Security, Medicare, and Medicaid, it is far larger than most of the items that are subject of major political debates.

Just to mention a few, we can start with the fraud in Minnesota in social programs that the Justice Department has uncovered. To date, this comes to $250 million. Trump has claimed there is $19 billion in fraud, but Trump also has claimed he has arranged for $18 trillion in foreign investment into the country and that he will reduce drug prices by 1500 percent. Numbers don’t have the same meaning for Trump and his team as they do for the rest of us.

While it is likely that the total figure for fraud will go higher, it almost certainly is not the earth-shattering scandal that Team Trump has claimed. After all, a childcare center refusing to let a random clown with a camera crew film the kids is not evidence of fraud. Where there is money on the table, whether in the public or private sector, some will be misspent or stolen. Trump has chosen to make a big deal out of the fraud in Minnesota because at least some of it involves Somali immigrants, but that is evidence of Trump’s racism, not a massive fraud problem.

The next item is the $550 million in annual funding for the Corporation for Public Broadcasting. Trump apparently felt it was important to save taxpayers this money rather than helping to fund Big Bird and National Public Radio. This spending comes to a bit less than $4 a household.

Then we have the Biden childcare agenda that would have cost $42.4 billion a year. This set of proposals would have made childcare affordable for the vast majority of people in the country.

The last item for comparison is the extension of the enhanced Obamacare subsidies that was the basis for the government shutdown in the fall. This would cost roughly $27 billion for a single year.[1]

If you’re wondering where the bars are for the Minnesota fraud or funding for public broadcasting, I didn’t forget them. The bars are too small to be visible next to Trump’s Iran war budget. The childcare programs and Obamacare subsidies are visible, but an order of magnitude smaller than what Trump is asking for.

The point here is that the war is a really big deal in terms of the budget. The biggest impact is, of course, the lives lost and put in danger by the war. And the economic impact on the United States and world is enormous. But this is also a huge budget issue. It is the sort of expenditure that a president would ordinarily feel they have to make a serious case for and not just demand the money from Congress.

But I suppose Trump thinks that since his mandate was almost as large as Hillary Clinton’s in 2016, he has more authority than most presidents. Congress and the country need to bring some reality to this story.

[1] The sources for the chart are Corporation for Public Broadcasting, MN fraud https://www.kwtx.com/2026/01/02/everything-we-know-about-minnesotas-massive-fraud-schemes/ , Childcare proposal https://democrats-budget.house.gov/resources/fact-sheet/president-bidens-2025-budget-uplifts-families-and-children , and Obamacare subsidies https://www.cbo.gov/system/files/2025-09/61734-Health.pdf.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.


Behind Vance's Fraudulent 'Anti-Fraud' Task Force, A Racist Myth

Behind Vance's Fraudulent 'Anti-Fraud' Task Force, A Racist Myth

Fans of pet-eating migrant stories are thrilled to hear that Vice President JD Vance is heading up an anti-fraud task force operating out of the White House. As best anyone can tell, the purpose is to drum up absurd allegations of fraud against prominent Democrats, like California Governor Gavin Newsom and Illinois Governor JB Pritzker.

If the reference to pet-eating migrant stories is too obscure, let me remind everyone. During the presidential campaign, Vance admitted that he invented stories about Haitian immigrants eating people’s pets in Springfield, Ohio, to advance the Trump ticket’s anti-immigrant political agenda. This is important background when considering the sincerity of his new anti-fraud crusade.

The other important background item is that Trump just gave us an anti-fraud crusade last year. Doesn’t anyone remember Elon Musk running around with his chainsaw and his “super-high IQ” DOGE boys? He was supposed to find trillions of dollars of fraud and send us all $5k dividend checks. I still haven’t gotten my check.

What fraud is JD Vance’s team going to find that Elon Musk’s crew somehow missed? We don’t have to believe that Musk is some sort of super-genius, but surely he is not completely incompetent. He had a large team of anti-fraud crusaders that invaded one government agency after another. If there was large-scale fraud, it’s hard to believe they couldn’t produce at least some evidence.

But the Republicans all seem super-excited about this rerun. They even got Trump’s top all-purpose adviser, Steven Miller, to hype the project. Miller said:

“I believe, and I know President Trump believes, that when this theft is exposed, we will see that if all of it were stopped, it would be enough to balance the budget, ….. The extraction of wealth from American taxpayers to people who don’t belong here is the primary cause of the national debt.”

This statement tells everything there is to know about Vance’s fraud project. It is yet one more chance to yell about black and brown-skinned people ruining the country. Exploiting racism is the one thing Trump does better than anyone else.

Just to remind the number challenged, there is no remotely plausible world where fraud connected with undocumented immigrants can be anywhere in the ballpark of explaining the national debt. The national debt is roughly $39 trillion or $39,000,000 million. The economy is $31 trillion, and the federal budget is a bit over $7 trillion.

It would take some really fantastic stories to somehow get to $39 trillion in fraud from whatever portion of the budget might wrongly be paid to undocumented immigrants. This is obvious to everyone remotely familiar with the budget.

Right off the bat almost three-quarters of the budget goes to Social Security, Medicare, Veterans benefits, the military, and interest on the debt. Even Elon Musk didn’t try to claim large-scale fraud by immigrants in these areas after his team examined them. Most of the rest is Medicaid and other healthcare programs for which undocumented immigrants are not eligible. Maybe Miller thinks undocumented immigrants are getting farm subsidies.

Surely there is some amount of fraud that immigrants do commit, but we’re talking millions, maybe hundreds of millions. Taken over decades, it could get into the low billions, almost certainly less than 0.01 percent of the federal debt. And immigrants pay tens of billions of taxes, which means the net effect is almost certainly to reduce the deficits and debt.

Miller’s use of outlandish numbers to describe the size of the fraud that Vance’s gang will find makes its purpose clear. This fraud task force is yet another Trump effort to push racist lies to attack political opponents and nothing more.

While fraud is a real problem, Trump has fired most of the people who investigate it, specifically the independent Inspector Generals of individual departments and agencies. He also has sought to cut back the budget of the Government Accountability Office, an independent congressional agency. Meanwhile, Trump has been pardoning convicted fraudsters as quickly as they can shovel him the payoffs.

Everyone should be clear that Vance’s latest toy is nothing but crude racism and has nothing to do with a genuine search for fraud. When Trump started yelling crazy numbers about fraud in Minnesota, Democrats all ran for cover and threw Tim Walz, a successful and popular governor, under the bus. This may have been partly motivated by a desire to get rid of a potential contender for the 2024 presidential nomination, but it was nonetheless shameful.

Sleazy racism should not be rewarded. Serious accusations of fraud need to be investigated, but Team Trump’s cry of “Black people, fraud,” only deserves contempt.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.


Bessent and Lutnick with Trump in Oval Office

Bessent And Lutnick's Fantasy Stock Earnings Won't Finance Your Retirement

We all know how Trump likes to make up crazy numbers, which his lackeys then repeat. He has $18 trillion in foreign investment coming into the country. He won the 2020 election by millions of votes. He is lowering drug prices by 1500%.

We can usually just laugh these off as the ramblings of an old man suffering from dementia. But there is one crazy Trump number that it is important people know should not be taken seriously. This is the claim on stock returns that lackeys like Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick tout when telling people how much money their new-born kid can get from their Trump accounts.

In their telling, the $1000 that the government is putting into the Trump accounts, starting this year, will grow to more than $590,000 when the kid reaches retirement age. If their families are able to put the full $5,000 allowed into the account, they will have more than $2.5 million when they reach retirement, and that assumes no further contributions. (They can put up to $5,000 a year into the account.)

That’s a serious chunk of money, even if we cut it by four to adjust for projected inflation over this period. It’s also serious nonsense. The problem is that there is no plausible story whereby the stock market can provide the 10 percent nominal return the Bessent-Lutnick gang is pushing. In their story, price-to-earnings ratios would have to go through the roof.

By 2093, when our newborn kid plans to cash out the fortune in their Trump account, their 10 percent compounded returns would imply a price-to-earnings ratio (PE) of almost 1400. The problem is that if the Trump accounts are growing at the rate of 10 percent a year, the economy and corporate profits are only growing at a bit less than 4.0 percent annually. This causes the PE to go through the roof.

This is not an old problem. Some of us have been trying to point this one out to arithmetic fans ever since the Social Security privatization debates of the 1990s. While the stock market has historically provided returns that were higher than the economy’s rate of growth, this was possible because the PE in the stock market has averaged around 14 to 1. It is currently close to 40 to 1.

The simplest way to calculate the real rate of return consistent with a stable PE is to simply take the reciprocal of the PE ratio. When the PE ratio is 14, the sustainable real rate of return is 7.1 percent percent. Adding in inflation that has averaged close to 3.0 percent, gets the 10.0 percent that we can see going back 100 years.

But with the current PE close to 40, this sort of rate of return is not possible unless the PE gets ever higher. The sustainable real rate of return would be just over 2.5 percent. Adding in projected inflation of 2.3 percent gets us to 4.8 percent, well below the Bessent-Lutnick promise.

The moral of this story is that, just as no one in their right mind would take health advice from RFK Jr., no one in their right mind should take financial advice from the Bessent-Lutnick gang. As the saying goes, do your own research.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Spiking Oil Prices Will Damage Economy Even As US Keeps Pumping Crude

Spiking Oil Prices Will Damage Economy Even As US Keeps Pumping Crude

There has been a lot of sloppy commentary from people who should know better about who is being hit hardest by the runup in oil and natural gas prices since the start of the war in Iran. There’s a simple story where the countries in Europe and East Asia are the big losers, because they produce relatively little of their own oil. By contrast, the United States is supposedly relatively well-off since we are largely self-sufficient and in fact a net exporter of natural gas.

While the point about the U.S. having large oil and gas production is important, it distorts the impact in important ways. The simplest way to think about the surge in oil and natural gas prices is as a big tax on consumers of these products.

When people pay $3.50 at the pumps, instead of the $2.80 we paid a month ago, this would be the same thing to consumers as if the government imposed a 70 cent a gallon gas tax. There would be a similar story with higher prices for home heating oil or natural gas. From the standpoint of consumers, the price increases are the same as if they just got hit with a big tax increase.

The difference is that instead of the money going to the government, as it would with a tax, it’s going to the oil and gas industry, Donald Trump’s campaign contributors. In principle, for a country like the United States, which is largely self-sufficient in oil and gas, if we could just rebate the money people paid in higher prices back to consumers, all would be fine.

But that sort of rebate would require big taxes, like a windfall profit tax, on the oil and gas industry. Since this industry is very powerful politically, this sort of recycling of higher revenue is not very likely. Therefore, for those of us who don’t have a lot of stock in oil and gas companies, the impact of higher prices is what we pay at the pump or for heating our homes. It doesn’t make a great deal of difference whether the people getting that money live in Houston or Saudi Arabia, it’s not going to us.

From that vantage point, if we do a cross-country comparison of the hit from higher oil and gas prices, it really just depends on how much of the stuff we consume relative to our income. By this measure, the United States does not fare especially well.

U.S. oil consumption per unit of GDP is pretty much in the middle of the pack for wealthy countries. We use slightly less oil per dollar than Spain and Japan, and far less than Canada. South Korea uses more than twice as much oil per dollar of GDP than the United States.[1]

By contrast, the other European countries use less oil per unit of GDP. Italy and Germany both use somewhat less oil per unit of GDP, while France uses about one-third as much, and the UK just over half as much. Both China and India using considerably more oil per unit of GDP, with India using more than twice as much.

The story with natural gas is somewhat more complicated. Here, domestic production does matter, since natural gas is far more expensive to ship overseas. Prices in Europe and Asia can be two to four times higher than in the United States. Therefore, the loss of natural gas from the Middle East will be a big hit to Europe and Asia, while having limited impact on the U.S.

Most European countries use considerably less natural gas per unit of GDP than the U.S. Italy uses roughly a quarter less, while Germany, Spain, and the UK all use about half as much. France only uses about a third as much natural gas as the United States.

In East Asia, Japan uses about 30 percent less per unit of GDP, while South Korea uses about 20 percent more. China uses about 25 percent less, while India uses half as much.

In terms of who gets the biggest hit by the flow and oil and gas from the Middle East being cut off, it seems clear that the East Asian countries will see the worst effects. Japan, and especially South Korea, will be hard hit by both higher oil and higher gas prices.

Consumers in European countries will mostly see less of an impact from the rise in oil prices than consumers in the United States. On the other hand, since natural gas prices are likely to rise much more outside the U.S., Europe and Asia are likely to see much more impact, as the huge domestic production limits the impact in the United States.

The cutoff of oil from the Middle East is a huge blow to the world economy and will likely cause a recession if it lasts for a long period of time. The takeaway here is that while the large amount of natural gas production in the United States insulates it from the impact seen by European and East Asian countries, greater domestic oil production does not do much to help consumers paying more at the pump.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Medicines For The People: Drugs Are Cheap Unless Patents Jack Up The Price

Medicines For The People: Drugs Are Cheap Unless Patents Jack Up The Price

It is common for people in elite circles to engage in magical thinking unconnected to reality. For example, it is common for people engaged in policy debates to claim that we can get returns in the stock market totally unconnected to the rate of growth in the economy or current levels of the price-to-earnings ratio in the stock market. (We can’t). That leads ostensibly serious people to project we can get stock returns of 10% a year indefinitely, even when the price to earnings ratio in the market is already near 40 to 1.

It also was the standard wisdom that we could reduce tariff barriers to manufactured goods without any substantial negative impact on employment and wages. Even when the data clearly showed that a soaring trade deficit was costing millions of manufacturing jobs, most of the people who dominate policy debates denied reality.

In this vein, it is a widespread view among policy types that we can’t get innovation without patent monopolies. This should strike the reality-based community as pretty whacked out. After all, patent monopolies are one way to provide incentives for innovation, but why in the world would any serious person think it’s the only way? It has been shown that people will work for money.

This is especially problematic in the case of prescription drugs. Drugs are almost invariably cheap to manufacture and distribute. Most drugs would sell for just five or ten dollars per prescription in a free market, but they can cost hundreds or even thousands of dollars because we give a drug company a patent monopoly.

And as everyone who has taken any economics knows, these patent-protected prices are an invitation for corruption. When a company can sell a drug for $500 that costs $5 to manufacture and distribute, they have an enormous incentive to lie about its safety and effectiveness in order to get as many people as possible to buy it.

We saw this corruption most dramatically with the opioid crisis, where the manufacturers of the new generation of opioids misrepresented their addictiveness in order to have them prescribed as widely as possible. This is an extreme case, but the problem of misrepresented research is widely recognized. Medical journals have to contend with ghost-authored articles and the medical associations have to worry that conference speakers are being paid by drug companies.

This sort of corruption would be largely eliminated if we simply paid for the research upfront and let new drugs be sold in a free market without patent monopolies or related protections. This is where Rep. Rashida Tlaib’s (D-MI) Medicines for the People Act comes in. The idea is to create a new division of the National Institutes of Health, the National Institute for Biomedical Research and Development.

This institute will be charged with developing drugs in important areas where it is responsible for everything from the basic research, developing an actual drug and doing clinical trials, and bringing it through the FDA approval process. At that point, since it has all rights to the drug, the institute could allow the drug to be sold at a low free market price.

In addition to the advantage of having cheap drugs and removing most of the incentive for corruption in the industry, the advanced funding of research should also allow for greater transparency and quicker sharing of research results. With patent monopoly financing, drug companies have incentive to squirrel away findings until they can secure them with a patent. By contrast, the institute’s interest is in promoting good healthcare. To that end, it would want to publicize any notable finding as quickly as possible.

Obviously, Rep. Tlaib’s bill is not about to pass. Republicans control both houses of Congress and are not likely to give it a warm reception. Even if the Democrats controlled Congress, it’s not clear that Tlaib’s bill would have much better prospects.

But Tlaib’s bill can be a jumping off point for a debate on the best way for financing the development of new drugs. It is absurd that an archaic system like patent financing can continue into the 21st century unquestioned.

We can do much better with an alternative system like the one outlined in her proposal. We need to at least have the discussion.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Toddler Trump Goes To War, With No Concern For The Consequences

Toddler Trump Goes To War, With No Concern For The Consequences

We are now six days into Trump’s war on Iran, and his team is still trying to figure out the reason. We started with regime change, but Trump quickly decided that he might be okay with leaving someone from the current government in charge.

Then he went with the need to keep Iran from having nuclear weapons. That one didn’t work very well either since he was still boasting about having obliterated Iran’s nuclear weapons program in his attacks last summer.

Team Trump then shifted to the need to strike preemptively. This story went that Israel was about to attack, and we knew that if Israel attacked Iran would retaliate against U.S. forces in the region. Therefore, we had to attack first, along with Israel.

That one may be closest to reality, but it does put Trump in the embarrassing position of admitting that he allowed Netanyahu to drag the United States into a war that doesn’t make much sense from the standpoint of the United States. As Marjorie Taylor Greene and other MAGA stalwarts are pointing out, this is not very America First!

War Without Warning or Planning

Trump not only lacked a reason to go to war; it seems his team didn’t bother to do any planning. Three days after the war began and Iran started sending drones and missiles around the Middle East, it suddenly occurred to Team Trump that they should try to evacuate U.S. citizens from the region.

That is likely a good idea, but the sort of thing competent governments plan before they go to war. It is truly amazing that Trump apparently was completely unprepared for what was almost a certain outcome of his war.

It is worth comparing this failure to the problems associated with Biden’s withdrawal from Afghanistan. Biden managed to get almost 130,000 people out of Afghanistan as the regime we had supported there was collapsing. This was a very impressive accomplishment. These were people who had worked with the U.S. military. Their lives and the lives of their family members would be endangered if they were not able to get out of the country. There were 13 U.S. soldiers who will killed in a terrorist incident near the airport from which most people were being evacuated.

That was a tragic event, but in the larger context, the withdrawal went remarkably smoothly given the extraordinary circumstances. And just to be clear, it was Trump who put Biden in this situation, having already negotiated a withdrawal with the Taliban before Biden came into office. Nonetheless, news outlets like the New York Times, Washington Post, and National Public Radio felt obligated to refer to the withdrawal as “disastrous” when referring to it in their news stories for the rest of his presidency.

It will be interesting to see how they refer to this incredible mess-up by the Trump administration. Presumably Trump knew in advance that war was likely. The State Department could have issued warnings to U.S. citizens in the region. They also should have developed contingency plans to withdraw people once the war started, recognizing that it was likely airports in the region would be closed.

None of this happened. Now they are in the situation of telling hundreds of thousands of U.S. citizens you’re on your own in trying to make travel arrangements to get to safety in the middle of a war zone. The level of incompetence is orders of magnitude greater than any failures by the Biden administration in the Afghanistan withdrawal.

The United States Screws Its Former Allies

When George W. Bush attacked Iraq in 2003, he made his plans very clear to U.S. allies, and in fact to the whole world. The attack may have been unjustified, but it was not a secret to anyone. The same was true of his father’s attack on Iraq in the first Gulf War. In both cases U.S. allies knew what to expect well in advance and could plan accordingly.

That is not the case with Trump’s war on Iran. The U.S. was apparently unprepared for Iran’s military response and so are U.S. allies. This is a huge deal for East Asian countries that are heavily dependent on oil from the region and European countries that badly need liquid natural gas from the Persian Gulf countries, especially as they have mostly cut imports from Russia. The jump in the price of oil and natural gas is yet another shock to these countries’ economies, after the earlier shock from the Trump tariffs.

If it wasn’t already completely clear, with the exception of Israel, none of the United States’ traditional allies can count on the United States support, either militarily or economically. The Trump administration is at best indifferent, if not outright hostile, to countries that are committed to democracy and the rule of law.

The fact that a blockage of the Straits of Hormuz might be a serious economic hit to much of the world seems to have not weighed into Trump’s decision to go to war at all. If the blockage is only for a few days, the impact will end up being limited, but if it lasts for months, the hit will be comparable or even larger than the impact of the sanctions most rich countries imposed on Russian oil and gas after the invasion of Ukraine.

As far as whether the blockage of the Straits is likely to continue for long, part will depend on Iran’s ability to fire missiles and drones, but part will depend on Trump’s decision as to whether to continue the war or seek a negotiated settlement. On that point, he is again playing reality TV show host, telling the world to stay tuned and we’ll see what he feels like.

One positive outcome from this war is that it should further accelerate the shift to clean energy. Now that the world recognizes how fragile its access to traditional fossil fuels is, it has become a huge natural security matter for them to quickly shift to sources of energy that can’t be turned off. It was already the case that renewable energy accounted for the vast majority of new energy being added in most countries, even the United States. But the war should prompt countries to accelerate the pace at which they add wind and solar, allowing them to retire facilities relying on fossil fuels.

The same story applies with electric vehicles. They already account for the bulk of vehicle sales in China and some other markets. This is in large part because they are as cheap as gas-powered vehicles to buy, and much cheaper to operate. Countries are likely now to push quickly to get towards 100% electric vehicles among new sales and replacing many of the older gas-fueled cars still on the road.

Those of us in the United States who lived through Donald Trump’s first presidency know that he is not a person who thinks carefully about his actions and their long-term consequences. Trump began to demonstrate this point to the world clearly with his hare-brained tariff scheme where he sought to punish countries for trading with us. This war without reason removes any doubt that Trump is a threat to world peace and economic stability. The world needs to move away from any dependence on the United States as quickly as possible and now they all know this.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Are There Frauds Worse Than That Minnesota Case? Let's Look Again At Donald Trump

Are There Frauds Worse Than That Minnesota Case? Let's Look Again At Donald Trump

The Trump administration has decided to make fraud in government programs in Minnesota into a national crisis requiring massive intervention by ICE and Border Patrol (don’t ask) because it was done in part by Black immigrants from Somalia. While Trump and his Republican minions have been hyperventilating over this fraud, it is worth using a little arithmetic to try to put in perspective.

Of course, arithmetic is not popular in elite circles. Even many liberals have yelled that we have to be very concerned about the Minnesota fraud, apparently because some of it was done by Black people and the Republicans are yelling about it. But I’ll confess to being an old-fashioned type who doesn’t think fraud by Black people is any worse than fraud by white people, even if Republicans yell about it. So, let’s do the numbers.

As best we can tell the amount of fraud in Minnesota in the federal pandemic-related programs the Trump gang is yelling about came to $250 million. (The ringleader was actually white.) There undoubtedly is additional fraud that will be found, but this is what we know about to date.

Trump has touted a figure of $20 billion, but there is no obvious basis in reality for this number. Remember, Trump has repeated boasted about $18 trillion in foreign investment coming into the country, that he won the 2020 election by millions of votes and that he will bring drug prices down by 1500 percent. Trump’s numbers often have nothing to do with the real world.

Let’s just ignore the Trump craziness and go with the $250 million figure of known fraud. By comparison, the inspector general of the Small Business Administration, Hannibal Ware, estimated fraud in the Paycheck Protection Program initiated in Trump’s first term was $200 billion. That would be equal to 800 Minnesota frauds.

In case you’re wondering how this fraud was dealt with, Trump didn’t send in ICE. Instead, Trump fired Mr. Ware, who is Black. He promoted the director of the Small Business Administration, Linda McMahon, to be education secretary in his current term.

There are other cases of much larger fraud that don’t seem to draw as much attention, much less the involvement of ICE, as the Minnesota fraud. For example, the Medicare Payments Advisory Commission estimates that Medicare loses about $40 billion a year to private insurers in the Medicare Advantage program because insurers exaggerate the severity of their patients’ healthcare conditions. This would be equal to 160 Minnesota frauds, also apparently without bringing the involvement of ICE.

We can also look to Donald Trump’s whack-job lawsuits. He has discovered that he can bring any lawsuit he wants against the government, for any amount, and then tell his lackeys to settle. He brought a $230 million case against the Justice Department because it prosecuted him for trying to overthrow the government and stealing classified government. He is apparently directing Attorney General Bondi to hand him the cash. This payment would be a bit more than 0.9 Minnesota frauds.

He is also suing the Internal Revenue Service for $10 billion because it allowed his tax returns for two years to leak. (Prior presidents have made their tax returns public, which Trump promised to do as well.) While it’s not clear what damages Trump could claim (a suit by another leak victim was settled with an apology), he apparently is ordering the IRS to also hand over the cash. While this settlement will have to be reviewed by a judge, it would be equal to 40 Minnesota frauds. (The Justice Department case is an administrative proceeding and requires no judicial review.)

One other item to throw into the mix, just so people can know where the money goes, is Trump’s plan to increase annual military spending by $500 billion. This would add more than $5 trillion to the debt over a decade, for those keeping score on such things. It seems the rationale is that we need more money to protect ourselves from the new enemies Trump has made. Anyhow, this increase in the military budget of 50 percent would be equal to 2000 Minnesota frauds.

To be clear, we absolutely should take seriously fraud in public social welfare programs, like what happened in Minnesota. This money is effectively being stolen from people who badly need it. Most of these programs are underfunded and the money going to fraudsters comes out of the pockets of the people standing in line who don’t get support they need.

However, we also need to keep the amount of fraud in context. Most of our tax dollars are not going to fraudsters from Somalia. In fact, if there had never been a penny of fraudulent payments to people from Somalia, it would not even be a rounding error in our budget data.

We know that Republicans, and especially Trump, exploit racism at every opportunity. Arithmetic may not be an adequate weapon to combat racism, but it can be a useful one. And decent people should use it.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

Stock Market Has Performed Poorly Under Trump -- And Now Is Headed Down

Stock Market Has Performed Poorly Under Trump -- And Now Is Headed Down

In keeping with his usual manner of confusing big and small, past and present, and up and down, Donald Trump is confused about the movements in the stock market since he took office, and especially in the current year. I recently did a piece pointing out that since Donald Trump took office, the U.S. stock market has had one of the worst performances of any major stock market.

But the story is even worse in the current year. In the first two months of this year, while foreign stock markets have shot ahead, the S&P 500 is just barely in positive territory, rising by less than 0.5 percent. That might not sound great, but it’s better than the return in the formerly high-flying NASDAQ, home of the big tech companies. The NASDAQ fell by 2.5 percent since the start of the year.

Compare that to 4.2 percent gain someone would have had in the Italian stock market since the start of the year, the 5.3 percent gain in the French market, or the 9.9 percent gain in the U.K. If investors wanted to go to a bit more exotic realms they would have gotten an 11.1 percent gain in Mexico, a 16.9 percent return in Japan, and a 17.2 percent return in Brazil. And then there is the grand prize winner for the first two months of 2026, South Korea with a 49.7 percent return.

Source: Yahoo Finance


Last weekend in Texas, Trump told a story about a big strong man with tears in his eyes said that he had to thank him. According to Trump, the man began with the obligatory “sir,” and then said he had made so much money with his 401(k) that it even improved his sex life with his wife.

Given how the stock market has performed under Trump, we must assume that the big guy shorted the market.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.