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One Big Problem With Trumponomics: The President Can't Do Arithmetic

One Big Problem With Trumponomics: The President Can't Do Arithmetic

It is striking that many people feel the need to claim that Donald Trump has some coherent economic plan for the country. It’s understandable that Trump’s team likes to pretend that his random ramblings and angry acts of revenge are all part of some grand strategy, but why would anyone not on his payroll play along with this obvious absurdity?

To anyone paying attention, it should be pretty clear that Donald Trump is clueless about the economy. Just to take an obvious example to make the point: Trump has repeatedly promised to lower drug prices by 800, 900, or even 1,500 percent. As he rightly says, no one thought it was possible.

It wouldn’t be a big deal that he got confused once or twice and forgot that you can’t lower prices by more than 100 percent, unless you envision drug companies paying people to use their drugs. But Trump has done this repeatedly, over many months.

This tells us two things. First, he really doesn’t have even a basic understanding of arithmetic and percentages. That would be bad in and of itself. After all the president is sometimes directly negotiating deals and it would be bad if he agreed to something and then had to call back his negotiating partner and tell them he didn’t understand what he had agreed to.

But the other issue is even more serious. Surely people like Treasury Secretary Scott Bessent and Kevin Hassett, Trump’s National Economic Advisor, understand percentages. But apparently, they are too scared of Trump to explain how they work. Instead, they let him go out week after week and make a fool of himself by making nonsensical promises on lowering drug prices.

This fact is crucial if we are trying to assess whether Trump has a coherent economic strategy. The point is he is obviously confused about many things when it comes to the economy. He seems to think that other countries pay tariffs and send the U.S. checks. He also seems to think that wind and solar power are very expensive sources of energy. And he seems to think that the economy was collapsing when he took office.

All of these claims are 180 degrees at odds with reality, but it is extremely unlikely that his aides would be able to correct him on these or other absurd views that Trump seems to hold. Given how out of touch Trump is with reality and the inability of his aides to correct him on anything, why would anyone think that he has a coherent economic strategy?

As many of us have pointed out, even most hard-core free traders will concede tariffs can serve a useful purpose. They can be used strategically to build up important industries. This is what Biden tried to do when he used tariffs, along with subsidies and regulatory changes, to promote domestic production of advanced computer chips, electric vehicles, batteries, and wind and solar and other forms of clean energy.

But what is the coherence in a tariff policy when some of the highest tariffs, like Trump’s 50 percent tariff on imported steel, are reserved for intermediate goods that are inputs for other manufacturing industries? How does it make sense to impose an extra 10 percentage point tariff on imports from Canada because Trump didn’t like a television ad they ran during the World Series? And India got whacked with a tariff of 50 percent on its exports because its president would not support Trump’s drive to get a Nobel Peace Prize.

Anyone trying to weave together these and other tariff decisions by Trump, along with many other economic decisions he has made since taking office, is really stretching if they think they can find anything coherent. It is bad for the country and the world that policy in the United States is being determined by a man child who has no idea what he is doing beyond stuffing his pockets, but that is the reality.

There may be a market for thoughtful pieces describing the grand Trump strategy in major intellectual outlets, but that is yet one more example of market failure. There ain’t nothing there.

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.

What's Next? Maybe Government Will Pay $2 Trillion For Making Trump Sad

What's Next? Maybe Government Will Pay $2 Trillion For Making Trump Sad

Trump hasn’t taken $2 trillion from taxpayers yet, but we should be prepared for that possibility. The story, which cannot possibly be given too much attention, is Trump’s demand that his Justice Department hand him $230 million because he doesn’t like the way he was treated over alleged crimes. This is straight-out theft from the government.

For a little orientation, it is extremely difficult for people being investigated or prosecuted for crimes to ever collect damages from the government, even when the government has engaged in totally improper behavior, as the New York Times pointed out in a piece this morning. Furthermore, it is difficult to see anything improper in the investigations and prosecutions pursued against Trump.

Starting with the so-called “Russia Hoax,” we have as a matter of public record that Donald Trump Jr. arranged a meeting, involving the two other top people on Trump’s 2016 campaign, the purpose of which was to get dirt from the Russian government on Trump’s opponent. Whether or not anything Trump personally did involved a crime requires a greater knowledge of specifics and the law than I possess, but it seems hard to maintain that there was nothing warranting investigation.

In the documents case, Trump refused to turn over documents in his possession that were repeatedly requested by the National Archives. His lawyers also gave false information about the documents that were still in Trump’s possession. Again, that certainly seems like something meriting investigation, although Trump nixed his own prosecution after he won the election.

There is a similar story with the prosecutions around his efforts to overturn the 2020 election. In addition to sponsoring the January 6th attack on the Capitol, Trump also threatened the secretary of state of Georgia with prosecution if he didn’t “find” 11,780 votes for him. It’s a pretty serious stretch to say this didn’t warrant investigation.

But beyond the absurdity of the claim that Trump was poorly treated, it’s worth asking what the $230 million demanded by Trump has to do with reality? Even if all the investigations were improper, what damage did Trump suffer? He had legal fees, but how high could these have possibly been? If he paid $1,000 an hour for his lawyers, and had 2,000 billable hours on each case, that would get to $6 million. That’s less than three percent of what Trump is demanding.

I suppose the rest of the $230 million is supposed to be for “pain and suffering,” Donald Trump’s feelings were hurt. In that case the government would be giving Trump more than 100 times what a typical worker would earn in a lifetime for his hurt feelings.

But worse than the absurdity of this story is the fact that there is no one to stop him. If the attorney general doesn’t give Trump the money he is demanding (she will), he would just fire her and find an attorney general who will.

Congress could in principle put a check on this, for example by impeaching Trump for blatantly illegal actions, but Speaker Mike Johnson says he doesn’t know anything about it, and therefore has no comment. Since the payment was already widely reported at the time, we should probably assume that Johnson will never know anything about it. In other words, if Trump wants to take $230 million from the taxpayers, he has a green light.

How do we get from $230 million to $2 trillion? Well, if Trump can get the government to write any check he wants, there is no reason for him not to go really big. He even has a story ready and waiting.

Trump claims to have brought in $20 trillion to the country in foreign investment. This claim has nothing to do with the real world. The tiny grain of truth in Trump’s claim is that he has gotten vague commitments from various countries of future investments as part of his trade deals, that may come to a bit more than one-twentieth of this sum. But reality has no place in Trump world.

Since Trump is running around claiming he has gotten $20 trillion for the country, it seems perfectly reasonable that he should get a commission, say 10 percent. This would get him $2 trillion. I’m sure he’ll even promise to give much of it to charity.

Yes, that is completely absurd, but there is no reason to believe that anyone would stop Trump from such a ridiculous money grab. Maybe Trump will be satisfied pocketing our $230 million, but don’t bet on 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.


Still No Jobs Report, But Trump's Labor Market Isn't Looking Good

Still No Jobs Report, But Trump's Labor Market Isn't Looking Good

Donald Trump refuses to release the September jobs report. While the ostensible reason is the government shutdown that began October 1, two days before the scheduled release date, Trump could decide the release was an essential government function.

Also, according to Erica Groshen, a former commissioner of the Bureau of Labor Statistics (BLS), the release was almost certainly prepared and ready to go by the first. Ordinarily, the president would not see the report until the afternoon before the release, but Donald Trump has made it clear he doesn’t care about rules and norms. We can assume that he has seen the report, and based on its contents, Trump decided not to make it public.

Anyhow, without actually seeing the report, all we can do is speculate. But there is some labor market data coming from private sources, which do give us information.

A friend called my attention to the job listing firm Indeed’s index of job postings. It shows continuing weakening of the labor market.

While all of us have been saying that we are in a low hiring, low firing labor market, where there is little job turnover, that has been true since the spring. What is striking in this graph is that the listing index continues to move downward. The index for the beginning of October was more than 5 percent below the index number at the start of April.

This means that, in order not to have a deterioration in the labor market, we would also have to see a decline in the number of people quitting or being fired of five percent. That could be the case, there was a sharp fall in the number of separations BLS reported for August in the JOLTS data. (We don’t have September data.)

However, the monthly data are highly erratic. The average for the last three months (June, July, August) was less than 0.5 percent below the average for the prior three months (March, April, May). This would indicate little change in the firing/quit story to match the decline in hiring shown by the Indeed index.

We should be cautious about making too much of this index. It is useful, but it is just one piece of data, but we have to try to use what is available until Trump chooses to share the government data with the rest of us.

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.

How Do Democrats Negotiate With A President Who Says He Can Negate Any Deal?

How Do Democrats Negotiate With A President Who Says He Can Negate Any Deal?

I’ll confess to just being an economist and not a lawyer or a political consultant, but my mother did raise me to have some common sense. In this shutdown, and actually before, Donald Trump is claiming that he could choose not to spend any funds he doesn’t feel like spending. He has carried it further with the shutdown, canceling major infrastructure projects in states and congressional districts represented by Democrats, but the point is that Trump claims discretion to do whatever he wants with federal spending.

The Republicans in Congress, and possibly the Republican Supreme Court, also say this is okay. If Trump wants to refuse to spend money appropriated by Congress, even if the only reason is to punish his political opponents, this is apparently fine with Republican politicians.

In fact, Trump has gone so far as to pronounce himself generous for having given money allocated by Congress to blue states. This is like the bank teller calling themselves generous for giving you the $200 you withdrew from your checking account. But that is where our politics is right now.

In this context, what possible reason could the Democrats have for making a deal? Trump and the Republicans are openly telling them it means nothing. It would be like negotiating the price of a renovation project with a building owner, when the owner openly tells you that they will pay you only what they feel like, regardless of the negotiated price. (Yeah, I know that’s what Trump did in his business.)

Anyhow, maybe I’m missing something, but this seems an important part of the current impasse which is not getting anywhere near the attention it deserves. With prior presidents this would not have been an issue. It had long been the understanding, upheld by the courts, that the president must spend funds appropriated by Congress.

But with Trump and the Calvin Ball Republicans making up whatever rules they want, and the Roberts Supreme Court finding the justification in the Constitution, a deal doesn’t mean what it used to mean. It’s true that you can’t run a country this way, but there is no reason for the Democratic Party to give cover to a crazy charade.

There can be no deal without some real rules that Trump is bound by. Even a Republican politician should be able to understand that.

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.

GOP 'Glory Days'? The Insurance Market Before Obamacare Was A Nightmare

GOP 'Glory Days'? The Insurance Market Before Obamacare Was A Nightmare

The Republicans seem to hope that most people have no knowledge or memory of the insurance market before Obama pushed the Affordable Care Act (ACA) through Congress. Most people would probably not like to go back there.

The big problem with the pre-ACA insurance market is that insurers don’t like to insure people with health issues. This might be too complicated for a Republican politician, but it is pretty straightforward to ordinary people.

Most people are reasonably healthy. For that reason, insurers are happy to cover them. From the standpoint of an insurer, covering a healthy person just means that someone is sending you a check every month. It’s a good deal, if you can get it.

But covering people with serious health issues is a totally different ball game. These people actually cost insurers money. They have to pay for doctors’ and hospital bills, drugs, therapy, and all sorts of other expenses.

Since insurers are much smarter than Republican politicians pretend to be, they could avoid paying the bills for people with serious health conditions by just refusing to insure them in the first place. If someone had a history of cancer or heart disease, insurers could just refuse to offer them coverage. People with health problems are money losers for insurers, they want to cover the people who just send them checks.

Some states put restrictions on insurers’ ability to reject people for pre-existing conditions. The response in that case was to simply charge people with health issues a much higher premium. That meant that a cancer survivor or person with heart disease might pay a premium three or four times as high as a person in generally good health. This would make the policy unaffordable for most people with health issues.

Even if they do end up paying the bill, the insurer will have limited their losses by collecting high premiums. And, who knows, not all cancer survivors have recurrences, maybe the insurer can just put those higher premiums in the bank.

Then there was also the trick of rescission. This meant that an insurer would go over the health forms that people were required to submit before getting insurance, to see if there was some basis for cancelling the policy. This could mean, for example, that an insurer could cancel the policy of a cancer patient because they had failed to list a visit to the hospital on an insurance form. As a result, instead of getting stuck with tens or hundreds of thousands of dollars of bills, the insurer could stick the patient with it by claiming they lied when they took out the policy.

This is what the Republicans are telling us was the golden age of the health insurance industry, that was ruined by Obamacare. Obamacare required that insurers issue policies to people without regard to their health and also required that everyone within an age group pay the same premium.

Remarkably, after the passage of Obamacare, healthcare cost growth slowed sharply. This is the exact opposite of what the Republicans are running around saying.

In the decade before Obamacare passed, from 2000-2010, healthcare costs increased 4.0 percentage points as a share of GDP — the equivalent of more than $1.2 trillion in today’s economy. By contrast, in the 15 years since its passage, health care costs have increased by just 1.4 percentage points. If healthcare costs had continued to increase at the pre-ACA rate, we would be spending another $1.4 trillion year, $11,000 per household, on healthcare.

This doesn’t mean our current healthcare system is great. It is very far from it. Insurers still have an enormous incentive to deny claims and refuse needed treatment. Their abuses can be restrained with serious regulation, but we know the Trump administration doesn’t like any regulations that limit corporate profits, so look for much worse insurer abuses in the years ahead. In a sane world, we would have something like the Canadian universal Medicare system and save hundreds of billions a year on insurance costs.

We also pay way too much for drugs and medical equipment. Drugs are almost invariably cheap to manufacture and distribute. It is government-granted patent monopolies that make them expensive. That is absurdity of the tragic choices many people are forced to make when they have to struggle to find tens or hundreds of thousands of dollars to pay for a life-saving drug. The drug is actually cheap; we just make it expensive with patents. If drug research and development were financed through direct public funding, as we already do to a substantial extent with the National Institutes of Health, no one would have to struggle to pay for the drugs they need.

I won’t give the full sales pitch for Medicare for all here, I just want to make the point that saving Obamacare should not be the final goal. But the key point is that Republicans are pushing total nonsense in arguing that the pre-ACA insurance market was something anyone in their right mind would want to see again. For my part, when it comes to glory days, I’ll stick with the Boss.

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.

AI Bubble Drives Up Prices, Harms The Environment And Deserves To Burst

AI Bubble Drives Up Prices, Harms The Environment And Deserves To Burst

I heard people who read the column I wrote last week on the AI bubble complain that, by rooting for its collapse, I was hoping for the failure of the U.S. economy. Nothing could be further from the truth.

The logic of a run-up in asset prices being a bubble is that it is not grounded in reality; it is fake. The best analogy would be counterfeit money. Suppose some brilliant person devised a way to make up trillions of dollars of counterfeit money that we would all accept as real money, because we couldn’t tell the difference.

While the counterfeiter was working at their printing press, it might actually look like a good thing for the economy. After all, they and their friends would be buying all sorts of things with their counterfeit money. This would be driving demand in the economy and creating jobs. If someone exposed the counterfeiters, this demand and the jobs they create would disappear.

This is all true, but a deeper look shows the darker side. First, they don’t just create demand, they also drive up prices. This can be seen very clearly with the AI bubble.

Most immediately, data centers are massive power hogs. They are the main reason electricity prices have gone up more than 7.0 percent in the last year. Electricity inflation is likely to be even more rapid in the year ahead as Trump cancels wind and solar facilities that were supposed to come online in the near future.

In addition to driving up electricity prices, these data centers also generate pollution. This is not just the global impact of greenhouse gas emissions, but also the local impact of pollutants from coal or gas-powered plants. Also, the data centers are huge water hogs, requiring millions of gallons annually for cooling the computer systems.

Without an AI bubble, we would be building data centers at a much slower pace. And they would be doing far less damage to the environment. And the workers building the data centers might be building things we need more, like housing.

There is also inflation resulting from the fortunes that AI has generated due to the run-up in AI-related stocks. Big shareholders have the ability to buy more and bigger homes. This is certainly a factor behind sky high house prices in desirable cities like New York, San Francisco, Seattle, and Los Angeles.

These cities do all need more housing, but the fact that multi-millionaires can afford huge houses and multiple huge houses, surely also plays a role. If their AI stock prices fell back to earth maybe they would only be able to afford a somewhat normal very rich person’s house and maybe just one or two, rather five or ten.

And there would be less money devoted to all the high-end services devoted to the ultra-rich gang. That means fewer doctors and health care personnel committed to elaborate cosmetic surgeries, leaving more room to provide healthcare to normal people. And we would have fewer high-end restaurants, high-fashion stores, and other businesses catering to the whims of the rich and very rich.

And the AI gang would have less money to buy politicians and media outlets to enrich themselves even further. A good crash of the AI bubble, along with crypto, would give the rest of us more of a fighting chance to save democracy. Letting the rich get so much control over the means of communication was a political failing of catastrophic proportions, but there may still be an opportunity to set things right.

Anyhow, we can’t know when or how the AI bubble will burst. But no one should ever be hesitant to hope that a bubble will burst. Perhaps I and others have misidentified it as a bubble, but if we are right in that characterization, the sooner it bursts, the better. No apologies.

Why Tariffs Trump Promised (But Didn't Deliver) Haven't Harmed U.S. Economy More

Why Tariffs Trump Promised (But Didn't Deliver) Haven't Harmed U.S. Economy More

A threatened tariff that is never implemented does not hurt the economy as much as a threatened tariff that is actually implemented. That simple point seems to have eluded Matthew Lynn, a financial columnist whose Washington Post column’s title told readers, “Economists were wrong about tariffs. They need to figure out why.”

While I agree that economists do tend to over-react to tariffs, and oversell the benefits of lowering them, the simple reason economists were wrong is that the tariffs Trump threatened on April 2, “Liberation Day,” were never implemented.

The tariffs Trump promised us on April 2 averaged well over 20 percent. The current nominal effective tariff rate is 17.9 percent, as calculated by the Yale Budget Lab. The reason for emphasizing “nominal” is that this is the rate we would be paying if companies actually paid the tariff rates Trump puts down on paper for a specific country and item. But the actual rate that companies end up paying is often much less than this.

As Trump advertises, he likes to make deals. So, if CEOs head down to Mar-a-Lago bearing gifts, they can get lower tariff rates or even exemptions. Apple CEO Tim Cook led the way with his gift of a gold medallion to Trump on national TV. As a result, Apple is exempt from Trump’s 100 percent tariff on semi-conductors as well as his tariff on smartphones. With other companies (generally large companies) making similar deals, the effective tariff rate is far below the nominal rate.

We can easily calculate the effective tariff rate by looking at how much money the government is collecting in tariffs. According to the Treasury Department, it took in $30 billion in August, an increase of $23 billion from last August. Annualizing that gap, the increase in tariffs comes to $276 billion, an amount equal to about 8.5 percent of current goods imports. That is the actual increase in the tariff rate.

That will still be a hit to trade, but far less than the hit from the tariffs Trump advertised on April 2nd. If economists can be blamed in projecting out the impact of the April 2nd tariffs, it is for failing to recognize that Trump is a corrupt blowhard, and what he says on any given day has little to do with what he actually does. Hopefully, economists have learned their lesson here.

Of course, just because the tariffs ended up being far lower than advertised doesn’t mean they aren’t having a negative impact on the economy. Trump has hit the country with a massive tax increase, probably the largest ever seen. The increase is equal to 0.9 percent of GDP. Taking that over a 10-year budget horizon, as is generally done, it comes to $3.1 trillion. In other words, it’s real money.

And tariffs are taxes like any other tax. Donald Trump may think they have some mystical quality, but Donald Trump’s imagination doesn’t affect the economy. A tax increase of $276 billion pulls money out of consumers’ pockets and will slow the economy.

We are already seeing evidence of a weaker labor market, the unemployment rate had risen to 4.3 percent in August, up from 4.0 percent in January. (Trump won’t let us see the September jobs report, which was prepared before the shutdown.) This weakness will grow over time. Remember, many of these tariffs were originally delayed. Also, some tariff increases have the effect of pulling consumption forward, such as the ending of the de minimis exemption which led to a big surge in on-line sales in August. But there is no doubt that the tariffs are pulling money out of the economy and slowing growth, as economists predicted.

The other more important point about the harm tariffs do to the economy, as opposed to something like a sales tax, is that they are erratic, since Trump takes pride in changing them all the time. This both makes it difficult to make long-term investment plans and also enables businesses to get special privileges due to their bribes and access. This will hurt longer term growth since companies aren’t succeeding because they are innovative or efficient, but because they are friends with Donald Trump.

I suppose the Washington Post under its new leadership didn’t think it could make this point on its opinion page, but that is the reality.

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.

No, Donald: Treasury Doesn't Keep Tariff Revenues On A Separate 'Shelf'

No, Donald: Treasury Doesn't Keep Tariff Revenues On A Separate 'Shelf'

Donald Trump has made a political career by making absurd claims about the world. It started with his first major entree into national politics, which was the claim that President Obama was actually born in Kenya, not the United States.

Trump never produced any evidence for this assertion but ran around the country claiming that Obama was not qualified to be president, as a result of being born outside the country. He only gave up this absurd claim during his 2016 presidential campaign and decided it was all somehow Hillary Clinton’s fault.

His next big invented reality was that he somehow won the 2020 election, even though he had zero evidence. According to Trump, there were millions of dead people who voted, millions of votes from non-citizens and millions of his own votes not counted. In almost five years he has produced zero evidence for any of these claims, but that doesn’t stop him from pushing them.

Now Trump is inventing massive violent uprisings in Chicago, Portland, and other major cities by radical leftists. Again, he has absolutely zero evidence for these uprisings. He somehow can’t produce any pictures, or other evidence, even as these cities are supposedly being burned down. The pictures we do see are of people walking dogs, playing in parks, listening to music outdoors and enjoying other activities that would be expected in cities experiencing peaceful days.

These absurd Trump claims are all outside my usual economic bailiwick, but as a fan of democracy, it’s hard not to take notice. I may have nothing special to offer in pointing out the absurdity of these Trump claims, but I do have something to offer on an absurd claim about tariff revenue.

As people likely know, Trump likes to boast about how much money the government is collecting from tariffs. Since tariffs are a tax we pay on the goods we import, it is unusual for a politician to boast about how much he is taxing his constituents, but whatever.

But beyond Trump’s confusion about where tariff revenue comes from, he also seems confused about how the Treasury accounts for it. He has repeatedly told reporters that the Treasury is getting money but didn’t know where it came from. He then tells them to “look on the tariff shelf.”

As I’ve said before, the inside of Trump’s head is a dangerous place. I have no idea what he does or does not know, but I can say for certain that the Treasury Department knows exactly how much money is coming in every month and how much is coming from tariffs.

It publishes the Monthly Treasury Statement, which has precise numbers both for how much money is coming in each month and where it is coming from, including tariffs. It is inconceivable that anyone in any position of responsibility at the Treasury would have any confusion about how much money is coming from tariffs.

In short, Trump’s claims about people at Treasury being surprised by the amount of revenue pulled in by Trump’s taxes are complete nonsense. Who knows if he believes them or not.

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.


Trump's Healthcare Record Is A Ridiculous Flop -- But Media Never Notice

Trump's Healthcare Record Is A Ridiculous Flop -- But Media Never Notice

Trump routinely says things that would get a homeless person institutionalized, but his comments on healthcare have not gotten nearly the ridicule they deserve. In his gaggle today with reporters, Trump said that Obamacare was horrible and that they were going to fix it.

For folks who have spent the last decade under a rock, a description that apparently applies to most of the Washington press corps, Trump has continually promised the public that he would produce a “terrific” healthcare plan that would provide good care at low prices. He first made these promises during his 2016 campaign but never delivered one by the election.

Once he was in office, Trump several times promised a healthcare plan “soon” or “in two weeks,” but soon or two weeks never came. He got voted out and then tried to overthrow the government without ever producing a plan to submit to Congress.

He announced his plan to run for president again in the fall of 2022, which gave him two full years prior to the election to develop a plan. Yet in his debate with Vice-President Harris in August of last year, Trump could only say that he has “concepts of a plan.”

Now, more than a year later, Trump tells the media that Obamacare is horrible, but they will come up with a plan? This is like a life-long alcoholic telling you they will stop drinking in two weeks.

Yet, Trump can make this absurd assertion about Obamacare, which did increase coverage and slow cost growth, and not get laughed out of the park.

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.

Elon Musk

What To Do About Right-Wing (And Far Right) Control Of Social Media

As Trump and his gang of loony right-wingers run wild, it seems that the Democrats have adopted the slogan, “What can you do?” We all know racism and sexism are powerful forces, but if all you can do is genuflect in front of them, just shut the eff up. We need to try to find ways to work around them; anyone who is convinced that effort is futile should take up gardening or whatever. We don’t need your words of doom.

That is all tangential to the topic I want to address: the right’s dominance of social media and Section 230. To remind folks, Section 230 protects social media platforms from liability for third party content. This means that unlike print or broadcast media, which can be sued for carrying defamatory content from third parties, X, Facebook, and TikTok can freely profit from defamatory lies.

To my mind, this should change. It seems defenders of Section 230 are determined to avoid any rational discussion of the issue. My prior posts on the topic have been greeted with assertions that I am proposing that the government censor speech.

How can this be government censorship when I am not even proposing the government play any role in determining what speech is acceptable? I am just arguing that private individuals and corporations should have the same sort of protection against defamatory material spread on the Internet as they do against defamatory material spread by print or broadcast media.

Few seem to consider our current defamation laws government censorship. How can it amount to government censorship if a comparable structure is put in place for the Internet?

To be clear, we need to tailor the rules differently for the Internet than for print and broadcast media. Elon Musk and Mark Zuckerberg can’t be expected to monitor the hundreds of millions of items posted daily for defamatory material. But they can respond to takedown notices, just as they already do in the case of alleged copyright infringement. Under the 1998 Digital Millennium Copyright Act, Internet sites are required to remove allegedly infringing material promptly after notification, otherwise they risk a lawsuit for infringement.

A similar standard can be applied for defamation. The person defamed would have to notify Musk or Zuckerberg of the material and specify why it is defamatory. The platforms would have some period of time to review the case and determine whether or not it warrants removal. The law could also specify that they post a correction indicating that the site had previously posted the defamatory item, as newspapers and broadcast outlets typically do, but that is the sort of thing that can be debated in structuring the law.

The logic of applying the law to the social media site, and not just the person posting the material, is both that they magnify the damage, and they profit from it. If a person is yelling on the street that their neighbor is a pedophile, the neighbor is probably not harmed much by it.

But if they buy an ad saying the neighbor is a pedophile and pay Elon Musk or Mark Zuckerberg to post it to tens of millions of people on their platforms, the neighbor very likely is hurt. Any newspaper or broadcast outlet would refuse to take such an ad, precisely because they know they would be faced with a serious defamation suit. Because of Section 230, Musk or Zuckerberg can just pocket the money and let the neighbor worry about having their life ruined.

It’s also worth pointing out that the same issue arises even if Musk or Zuckerberg are not directly paid to post the defamatory material. Both sites make their money by selling ads to their audience. If spreading defamatory material helps them get a larger audience, they profit from it, even if less directly.

To see how this could work, let me refer to an actual case I saw recently. A few days ago, a prominent right-wing influencer tweeted on X an assertion that could easily be shown to be a lie, about a Democratic politician. If anyone believed the lie, it would be damaging to the politician. (I’m leaving identifying information out to avoid any possible embarrassment to the politician in question.)

While the politician does have the option of filing a defamation suit against the influencer, because of Section 230, they would have no case against Elon Musk. If my preferred policy was in effect, they would send Musk a notice, informing him of the defamatory tweet, explaining how it was defamatory and how it could be determined that it was not true.

Musk would then have some, presumably short, time period to review the complaint and make a decision about taking down the tweet. He could also be required to post a correction to the people who follow the influencer (my preferred option). If he chose to leave the defamatory tweet posted, then he could also be sued along with the influencer.

If anyone considers this an excessive burden, remember print and broadcast outlets face this burden all the time. And if anyone wants to argue that rich people will just sue every site for defamation, they already have that option with print and broadcast media. We need to design a system that protects against abusive defamation suits. If we have failed in that area, who gives a damn whether or not social media platforms enjoy protection?

Some people have argued that if we allow social media companies to be sued for carrying defamatory material, they will just censor everything from the left. This is an absurd fear given the reality we face. Elon Musk, Mark Zuckerberg, and the rest can and do already censor pieces from the left they don’t like.

This in fact is a right guaranteed by the First Amendment. They are private platforms. They can take down any item they don’t like or structure their algorithms so that almost no one will see them. They might use a repeal of Section 230 protection as an excuse to remove material from the left, but this would only be doing something they wanted to do anyhow and already had the full legal right to do. (There may be some issues with the terms of service, but that would not be affected by Section 230.)

Restructuring Section 230 Could Downsize Giant Platforms

The dominance of social media by a small number of giant platforms is dangerous for democracy. And that would be true even if the owners were not all right-wing loons. A restructuring of Section 230 can be done in a way that would work to at least partially offset the network effects that push people towards the giant platforms.

We could have a revised Section 230 that leaves in place the current protection for sites that don’t rely on advertising or selling personal information. That would mean that sites that survive on subscriptions or donations could continue to operate just as they do now.

I don’t know how much this change would affect the viability of the giant platforms in their current form. I’ve heard people knowledgeable about social media assure me that it would just mean that Facebook and X have to hire a few more lawyers, but no big deal. I also have been assured that they would not be able to continue their current mode of operation and would have to become subscription based.

For my part, I will confess to not knowing how much impact it would have. It would unambiguously raise their costs. Whether that means a substantial hit to their profits or a need to fundamentally change their model, I have no idea. But it is difficult to see a rationale for not holding this type of media responsible for circulating defamatory material in the same way as print and broadcast media. If doing so also downsizes Elon Musk and Mark Zuckerberg’s platforms, all the better.

To be clear, I have no illusion that a Republican Congress would pass this sort of restructuring of Section 230, or that Trump would sign it, if some miracle happened. But it is still worth getting ideas like this on the table in the event we ever return to democratic government. It also should prompt some clearer thinking among progressives, and they can see what the Democrats missed while they were on their summer vacation for the last three decades.

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.

Ominous Economic Indicators In The 'Fast-Food Consumption Index'

Ominous Economic Indicators In The 'Fast-Food Consumption Index'

For the last several years I have relied on real (inflation-adjusted) spending at fast food restaurants as a useful gage of consumer sentiment. I began this during the pandemic recovery when the media were constantly telling us that people were struggling to make ends meet.

While this is always true in a country with a weak social safety net and extreme income inequality, the question any serious person asks is whether it’s getting worse or better. I kept pointing to the data showing that, at least for those at the bottom, it seemed to be getting better.

Wages in the lowest paying sector, hotels and restaurants, were substantially outpacing inflation. Also, analysis of wage data in the Current Population Survey showed that workers in the bottom decile of the wage distribution had the fastest real wage growth in half a century, with their wages outpacing inflation by 15 percent between 2019 and 2024.

To be clear, no one in their right mind would say that workers at the bottom of the wage distribution had it good. An inflation-adjusted $17.25 an hour in 2024 might be a lot better than $15.00 in 2019, but that is not the sort of pay on which someone could support themselves very well, and certainly not raise kids. Nonetheless, real wages were at least moving in the right direction, which they had not for much of the past five decades.

Anyhow, the pundits insisted that they didn’t care what the data showed, people didn’t feel they were doing well. It is hard to get into people’s heads. I know reporters are apparently experts at telling us what people really think, but most of us are not capable of mind reading.

We can look to what people say, but in a country of 330 million people, we could always find someone saying almost anything. It’s true that we saw lots of people quoted in news accounts telling us things were awful, but that was the decision of people writing the news to find people saying things were awful.

There is polling data, but that also ends up being ambiguous. People tended to answer questions about the economy in general very negatively, but they usually described their own situation as being relatively positive. Most people don’t have any direct knowledge of the economy as a whole. They get tidbits from the media, on social media, or their friends and co-workers. For this reason, their personal assessments of the economy have to be taken with a grain of salt.

There is an old saying that economists look at what people do, not what they say. There is some wisdom in this approach. People may say they think the economy is good or bad because they have been told this is the case, but their spending presumably reflects their own perception of their financial situation. For this reason, if we can measure what people are spending, we can get an idea of how they view their finances.

However, this does raise the problem of distribution. A grossly disproportionate share of spending is done by the top quintile of the income distribution. If aggregate consumption rises it could be because these people are seeing big stock gains, not because typical workers are doing better. In fact, recent research shows the richest 10 percent of households account for nearly half of all consumption.

This is my reason for turning to the fast-food consumption index. While rich people also go to McDonalds and KFC, it is unlikely they increase their visits much when the stock market rises. In fact, having more money may lead them to eat at more expensive sit-down restaurants instead of fast-food restaurants.

This means that changes in fast-food consumption are likely to primarily reflect changes in spending by lower and middle-income people, not the rich. With the revised consumption data released last week, we can see an interesting and not very good pattern in fast-food spending.

In 2021, 2022, and 2023, real fast-food spending was growing at an average annual rate of 5.4 percent, considerably faster than the 2.9 percent growth rate in the decade prior to the pandemic. But spending largely stagnated in 2024. Real spending in December of 2024 was actually 1.0 percent less than it had been in December of 2023. That stagnation has continued into 2025. Spending in August was less than 0.1 percent higher than it had been in December of 2023. This suggests that most workers do not feel they are doing well these days.

That fits the story with real wages in the hotel and restaurant industry. Real hourly wages for non-supervisory workers are less than 0.8 percent above their level in December of 2023. On the positive side, at least real wages are not falling, as was often the case in prior decades, but a gain of 0.8 percent in almost two years is not much to boast about.

With the revised data, there is more of a case that the labor market was weakening in 2024. It looks like it is continuing to weaken in 2025. Perhaps something on the horizon will turn that story around, but there look to be many more potential negatives than positives for the near future.

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.

Trump's Weak Economy Grew 1.5 Percent In First Half Of 2025

Trump's Weak Economy Grew 1.5 Percent In First Half Of 2025

Some folks have gotten a bit carried away with the revisions that put the second quarter growth rate at 3.8 percent. That does look impressive in isolation, but it is important to remember the economy shrank at a 0.6 percent rate in the first quarter.

That puts the average at 1.6 percent for the first half of the year. That’s not terrible but it is hardly cause for celebration. Remember, the economy grew 2.4 percent last year and the vast majority of forecasters expected growth at this rate to continue.

And we really do need to look at the two quarters together. Just as unusual factors were responsible for the fall in GDP we saw in the first quarter, they are also responsible for the strong growth reported for the second quarter.

To take the most notable example, the lower trade deficit added 4.83 percentage points (PP) to growth in the second quarter. A pre-tariff surge in the trade deficit subtracted 4.63 PP from growth in the first quarter. Only a devoted Trumper would focus on the second quarter number without mentioning the first quarter jump in the trade deficit.

Moving beyond the irregular numbers, we get that non-residential fixed investment added 0.98 PP to growth in the second quarter after adding 1.24 PP in the first quarter. The first quarter growth was partly due to pre-tariff stockpiling but the second quarter growth on top of this indicates we are looking at something sort of real. This is the AI boom. If that turns into a bust, we will see this growth quickly reversed.

Consumption accounts for the bulk of GDP and here the story is pretty blah. The second quarter’s growth rate was a healthy 2.5 percent, accounting for 1.68 PP of the quarter’s growth. But this followed a growth rate of just 0.6 percent in the first quarter, leaving an average of rate of 1.6 percent for the first half. That’s not horrible, but certainly not great.

We also have seen evidence that the growth in consumption has been concentrated among higher income people who are spending their stock gains. That is consistent with my simple measure of looking at real spending at fast food restaurants. I consider this useful since it’s unlikely that rich people increase their consumption of fast food because their stock portfolio is worth more.

And spending on fast food has to rank as largely a discretionary purchase. It is one thing that is relatively easy to cut back on if a family has to tighten its belts. Real spending at fast food restaurants was just 0.3 percent higher in the second quarter than the average for 2024. That doesn’t look like most people are feeling good about the economy.

Today, we will get new data on consumption for August, along with revisions for prior months’ data. Maybe that will show a different story, but for now, it looks like we have a weak economy that is being sustained by the AI boom. That boom could go on for a while and keep the economy moving forward, but it may not.

Reprinted with permission from Dean Baker.

Tariffs Can Serve The Public Interest (But Not Trump's Wacky Version)

Tariffs Can Serve The Public Interest (But Not Trump's Wacky Version)

I know many people have been saying in the wake of Charlie Kirk’s killing that we have to reach out to our political opponents to lower the temperature of political debate. In that spirit, I will make a case for Donald Trump’s favorite word: tariffs.

Many of the criticisms of Trump’s tariffs have been overblown. Tariffs by themselves will not crash the economy. Tariffs are a tax; as such they pull money out of people’s pockets and leave them with less to spend.

This undoubtedly has been a major factor in the slowdown in growth in 2025. Donald Trump has unilaterally imposed the largest tax increase ever and it has had an impact on the economy.

Tariffs have been used by many countries, including the United States, to industrialize and build up key industries. This was the intention of the tariffs that Biden imposed as part of the CHIPS Act and Inflation Reduction Act. Biden wanted to build up U.S. capacity in advanced computer chips, as well as batteries, solar and wind energy and electric vehicles.

Trump’s tariffs are not in the same vein. If there is any logic to the rates assigned to different products and countries, no one has been able to untangle it. It’s clear that campaign contributions matter, as does the willingness of foreign leaders to appease Trump.

But tariffs do raise revenue. There are questions about how much revenue we need to raise. I take seriously the admonishment from the Modern Monetary Theory economists that taxes are about reducing demand in the economy, not raising revenue for a government like the United States that prints its own currency.

We can print the money we need to finance things like health care and childcare, as long as we are not pushing the economy beyond its capacities and causing inflation. But whatever the economics may be, we have to live in a reality where deficit hawks have the power to shut down any spending they decide is leading to excessively large deficits.

There are more progressive ways to raise revenue. We can raise the top marginal tax rate substantially, getting more money out of the rich while leaving the bulk of the population untouched. We can force companies to give us non-voting shares of stock in place of income tax payments. That way we could be sure that we actually collect the tax rate we target. And we can have a sales tax on stock transactions, just as we do on the sales of shoes and computers.

But insofar as we need more revenue, tariffs are not necessarily a bad place to look. Many people across the political spectrum have long argued for a value-added tax (VAT), in effect a national sales tax. The United States is one of the few wealthy countries that does not have a VAT. A VAT is undeniably regressive, low- and middle-income people pay a higher share of their income in taxes than the rich. But if it funds progressive policies, like national health care, free college, childcare and other programs that benefit the poor and middle class, the net effect could still be progressive.

Tariffs can be seen as similar to a VAT. It only taxes a subset of items; goods not services and only imported ones, but it has the advantage of being a relatively easy tax to collect. We impose the tax when goods show up at the port.

Trump has made the process more difficult by having wildly different rates on the same products from different countries and different products from the same countries. It also doesn’t help that he constantly changes the tax rates depending on how he feels and who might have gotten him angry.

Setting up a VAT would require a new administrative structure to ensure that goods get taxed at each step of the production process. This means that, for example, in the case of cars, the steel would be taxed, each part would be taxed, the tires would be taxed. The tax on all these items then would get rolled into the price of the car.

In principle, this would be the better route to go, since the same revenue could be raised with a much lower tax rate. But a uniform tariff rate of say 15 percent on all items imported from all countries would not be a terrible way to go, if it is locked in.

The impact of a 15 percent tariff would be similar to the impact of a 15 percent drop in the value of the dollar in its effect on the cost of imports. A drop in the dollar also would make U.S. exports cheaper to people in other countries, which the tariff does not, so it has less effect on the trade deficit. However, the United States and its trading partners could adjust to a tariff of 15 percent, just like they can adjust to a decline in the dollar, as long as the tariffs are not constantly changing.

For this reason, if the U.S. were to go the route of relying on an import tax as way of raising revenue it would be important to lock in the rate. That would require unambiguous legislation from Congress setting the rate with extremely limited powers for the president to alter it for short periods of time. In order to make this clear to Chief Justice John Roberts and the Supreme Court, they should probably use all caps in the legislation and incorporate the full text of the first paragraph of Article 1, Section 8 of the Constitution.

There is still the issue of an import tax being regressive, but that is the same issue that arises with a VAT. The key point would be that it would be offsetting spending on health care, childcare, and education, not Donald Trump’s tax cuts for the rich and the grift by his family, friends and campaign contributors, or his ICE army. Most people would probably consider that a good deal.

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.

Shakedown Shack: Everyday Corruption In Trump's White House

Shakedown Shack: Everyday Corruption In Trump's White House

Corruption is always a potential problem in government, although if we get beyond the idiocy about the “Biden crime family,” the last two Democratic administrations were remarkably scandal free. However, Donald Trump is determined to make scandal the normal course of events so that it is not even newsworthy. His corruption is in plain view, all the time. Rather than deny it, the Trump administration says, “So what?”

It’s hard to know where to begin. While in the White House, Trump initiated his own crypto coin and quickly got billions of dollars in investments from people seeking favors. The most notable payoff along these lines was the government of Abu Dhabi, which got access to advanced computer chips after putting $2 billion into Trump’s stablecoins.

Then there were the big contributors who had hundreds of millions of dollars of fines that were effectively forgiven. Last week, the New York Times reported on three major Trump contributors who had cases before the Securities and Exchange dropped which potentially could have led to hundreds of millions of dollars in penalties. And then there is the case involving border czar Tom Homan, who took $50,000 in cash as part of an FBI sting operation. The Justice Department dropped the case, saying nothing to see here.

But these are all ad hoc acts of corruption. The real fun is when corruption is institutionalized. That is how we should understand Trump’s proposal to charge $100,000 for each H-1B visa. While details of the proposal keep changing, like whether it is a one-time charge, whether it is assessed again at renewal after three years, or whether it is annual, the basic point is clear. Trump wants to charge companies a big chunk of money to bring in skilled foreign workers.

The visa plan includes the unsurprising provision that Trump will have the option to grant favored businesses an exemption from this fee. The cash registers at the White House are probably already running wild. It should be a huge potential bonanza for Trump and his family.

If the point is to prevent businesses from hiring foreign workers to undercut U.S. workers’ pay, there are ways to achieve this goal that benefit workers rather than Donald Trump’s pocketbook. For example, the government could raise the minimum pay for a worker on an H-1B visa from the current $60,000 to $100,000, or even higher. Remember, these are supposed to be highly skilled positions. The rules could also be changed to make it easier for H-1B workers to change jobs, in effect allowing them to take the best offer, just like any other worker. But there would be no money in these changes for Donald Trump.

Trump’s approach to H-1B visas is similar to his approach to tariffs. He put in place a policy that allows him enormous discretion in its application. In the case of tariffs, he essentially invited CEOs to come to Mar-a-Lago to kiss his rear and hand him bribes in order to be exempted. (See Tim Cook and Apple.) Tariffs also have this effect for foreign heads of state. They can give Trump material gifts, like his plane from Qater, or do things like invite Trump to meet with the King of England or nominate him for the Nobel Peace Prize.

This is how we have to understand economic policy under Trump. It’s about designing a system to maximize the opportunities for grift for Trump and his family.

Not only does Trump not care about the impact of his policies on the lives of ordinary people; he doesn’t even know how they are getting by. Trump keeps insisting that prices are down and that people are paying $2.00 for a gallon of gas. (The average is over $3.00.) And Trump’s aides are too scared to correct him.

It is a foolish exercise to try to make sense of Trump’s major actions on the economy as economic policy. They are about lining his pockets and making people bow down to him. By this measure, Trump’s policies are doing very well.

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.

Learning From Kimmel's Fall: The Rich Don't Have To Control The Media

Learning From Kimmel's Fall: The Rich Don't Have To Control The Media

Like every other sane person, I was outraged at seeing Jimmy Kimmel getting fired because he was making fun of Donald Trump. (Spare me the crap about ridiculing the killing of Charlie Kirk. He unambiguously condemned the killing and expressed sympathy for Mr. Kirk’s family and friends, something Trump and most Republicans have been unable to do for the victims of right-wing violence.)

Kimmel’s sin, like that of his previously fired friend Stephan Colbert, was making fun of Donald Trump. Trump has directly said that he will order the head of the Federal Communications Commission, a formerly independent agency, to take away the broadcast licenses from stations that carry comedians making fun of him. Trump might be immensely obese, but he has very thin skin.

The threat of taking away licenses is a bit complicated because the networks don’t directly hold the broadcast licenses, individual stations that air network broadcasts do. If the FCC were following normal procedures, it would take considerable time and effort to strip these stations of their licenses.

And if the FCC was actually following the law in the process, it’s not clear it would be even able to do it. After all, having a comedian make fun of the president for a few hours a week would not ordinarily be sufficient to establish the case that the station wasn’t broadcasting in the public interest. But Donald Trump could probably declare another national emergency (people are making fun of him) and use it as the basis for overriding the normal procedures.

But ABC wasn’t prepared to go the full legal route. Nexstar, which owns 32 ABC affiliate stations, announced that it was no longer going to carry Kimmel’s show. Sinclair Broadcast Group, which owns even more affiliates, also objected to Kimmel. Both media companies will need regulatory approval from Trump’s FCC for various expansion plans, as does ABC’s parent company, Disney. This made dumping Kimmel an easy call.

Losing late night comedians is not the only loss from this crackdown on freedom of the press. CBS was recently taken over by David Ellison, the right-wing son of centi-billionaire Larry Ellison, the right-winger who will now be controlling TikTok under the deal crafted by Donald Trump, in addition to CNN. We already have Mega MAGA whack job Elon Musk controlling Twitter (now “X”), and newly converted MAGA groupie Mark Zuckerberg controlling Facebook and Instagram. The prospects for independent media in the U.S. don’t look very good just now.

People should not completely despair, we do have progressive podcasts, such as Pod Save America and MeidasTouch that draw millions of viewers each week. Many others have large followings. By comparison, Kimmel’s audience on ABC was down to just 1.1 million a night. Viewership of the network new shows is also tumbling into the low single-digit millions. By comparison, Walter Cronkite used to get almost 30 million viewers every night in a country half as large as it is now. So, there is still some basis for hope.

But the fact that so many on the left apparently felt that media outlets owned and controlled by rich people could be trusted to give us unbiased information showed an incredible lack of foresight and has led to a disaster of major proportions. This did not have to happen.

It was, and hopefully still is, possible to build up an alternative media structure that does not rely on the goodwill of the rich. We could look to establish a system of individual tax credits, similar to what exists now with the charitable contribution tax deduction, for supporting journalism. The idea is that everyone would have a sum of money (e.g. $100) to support the journalistic outlet of their choice.

This sort of tax credit system could support a vast amount of alternative media. The arithmetic is straightforward. If 200 million people used a $100 credit, this could fund $20 billion a year of journalistic work. That could pay a huge number of people to research, write, and present news stories, and to make jokes about the president.

Not all of what would be supported by this money would be good and not all of it would be progressive. The MAGA folks would have their tax credits too and they could use them to give us even more Fox News. But the point is that there should be enough money on the table to support solid reporting that will ensure real news will be available to those who want it.

And hopefully, some of the people getting the credits will be a bit more creative than our current crop of liberal politicians and pundits and could actually make their presentations interesting. This could allow progressive views to reach a wider audience. And the best part is that no billionaire could shut it down because they were offended by something someone said.

It would have been great if this sort of structure had been put in place decades ago, but next to no one on the left felt that media mattered. It isn’t too late to push forward with this sort of system now, clearly not at the national level, but it certainly can be done at the state or local level. In fact, Katie Wilson, the leading candidate for mayor of Seattle, is a big proponent of this sort of system for the city.

Anyhow, we can’t change what we did or didn’t do in the past, but we can choose the best route for going forward. We need to take the media seriously and that means not trusting civic minded billionaires but rather democratizing the ownership of the media. The tax credit system is a possible plan, if there are better ones, let’s get them on the table.

Reprinted with permission from Deanbaker22.

https://www.freepik.com/premium-ai-image/man-shock-as-stock-market-charts-plunge-large-monitor_341143433.htm

Bursting The AI Bubble Just Might Be Better For (Almost) Everyone

It has become common in recent months for people in the business press to note both that AI stocks seem to be in a bubble and that this bubble is driving the economy. In many ways this situation looks similar to the late 1990s tech bubble.

At that time, price-to-earnings ratios in the stock market were roughly the same as they are today. The soaring market then was also driving the economy, as people were consuming based on their new bubble-generated wealth. Also, the insane valuations of many new Internet companies was leading to an investment boom in the tech sector.

When the bubble finally burst, we got the 2001 recession. While this downturn was mild from a GDP perspective, the story was much worse if we focus on the labor market. We did not get back the jobs lost in the recession for four full years. At the time, it was the longest period without job growth since the Great Depression.

Anyhow, the immediate impact of the collapse of the AI bubble will undoubtedly be negative, but there are reasons to still think it would be good for the economy and for most workers. This is best demonstrated by a recent analysis from Moody’s which shows that all the real spending growth over the last year has come from the top quintile of the income distribution. Everyone else has been just treading water.

This fits with other data that show weakening nominal wage growth, with the wage increases for workers in the lowest paying jobs not even keeping pace with inflation. It’s not surprising that consumption for these workers would be stagnating or falling.

To see how this relates to the AI bubble, we can think of the economy as being like a huge bathtub with an open drain. We have two faucets that put water into the tub. The goal is to keep the tub filled but not overfilled. This would correspond to the labor market being at full employment and the economy operating at its capacity.

If the water flows into the tub too slowly, we have unemployment and excess capacity. We are wasting economic potential and workers are being denied the opportunity to work. If the water flows into the tub too quickly, the bathtub overflows and we get water all over the floor. This would be the inflation story.

The two faucets are labeled “rich people” and “ordinary workers.” At the moment, the rich people faucet is wide open, and the water is gushing out. This is the money generated by the AI bubble. There is just a trickle coming out of the ordinary workers faucet.

When the AI bubble bursts, the water coming out of the rich people faucet will also slow to a trickle. This means water will be draining out faster than it is flowing in, and the water level in the tub will drop. This would mean a recession, and an increase in unemployment.

That is bad news for everyone, but the lower water level in the tub means that we have the option to turn the flow from the ordinary workers faucet higher, without causing the tub to overflow. And we do know how to turn the flow higher.

The easiest route is for increasing the flow is to simply have the Federal Reserve Board lower interest rates. That will somewhat boost demand by allowing more people to buy homes and to a lesser extent cars and other big-ticket items. People will also refinance mortgages at lower rates, freeing up money to spend on other things. Lower rates will also provide a modest boost to investment.

The other route for increasing the flow from the ordinary workers faucet is to have the government increase spending. It can boost spending in areas like healthcare, education, and childcare. This would both provide real benefits to people and also stimulate the economy. It can also reestablish and enhance the subsidies for a green transition that Trump killed earlier this year. This will both create jobs and have near-term and long-term environmental benefits.

There is of course no guarantee that Congress will boost spending enough to again fill the bathtub, possibly leaving us with high unemployment for a long period of time. That was the story after both the collapse of the tech bubble in 2000-01 and the collapse of the housing bubble 2007-09.

But this is a political obstacle, not an economic one. The collapse of the AI bubble will create the room the economy needs for policies that would make the lives of tens of millions of people far better. This is why we should all be fans of the collapse and not worry that we are cheering against the home team. For the vast majority in this country, the stock market is not the home team.

Reprinted with permission from Dean Baker.

Lisa Cook

Lying With Impunity: Nepo Billionaire Pulte Framed Lisa Cook

A few weeks back, Bill Pulte, the Federal Housing Finance Agency Director (FHFA) and the billionaire heir to a housing construction firm, claimed to have found evidence that Federal Reserve Board Governor Lisa Cook had committed mortgage fraud. Donald Trump immediately tried to fire Cook from her position at the Fed, with the intention of getting another seat on the Fed’s seven-person board.

This attempted firing raised several serious questions. Most immediately, whether the FHFA Director is supposed to be rifling through the mortgage documents of Trump’s political opponents.

Previously, Pulte had claimed to have found evidence that California Senator Adam Schiff had committed mortgage fraud. Schiff had led the first impeachment case against Trump in 2019, as a member of the House. Pulte also claimed to have found evidence of mortgage fraud by Letitia James, the Attorney General of New York, who had gotten a civil conviction against Trump for, among other things, lying on loan forms.

But it also raised questions about Trump’s power as president. While the Republican Supreme Court claimed to find wording in the Constitution that allowed the president to freely fire members of ostensibly independent agencies like the Federal Trade Commission, which overseas antitrust law, and the National Labor Relations Board, which monitors labor law violations, it also apparently found wording that prevented the president from behaving similarly towards the Fed.

The Republican Supreme Court’s argument for the Fed’s special treatment was a bit more complicated, but it would only be a slight simplification to say that it was because the Fed is important. The Court apparently accepted the argument of the vast majority of economists that it would be bad news to have a Fed under the complete control of the president. For this reason, they appeared to leave in place the pre-existing standard for appointees of independent agencies, that they could only be removed for cause.

This is where Pulte’s accusation appeared useful. Trump could now pronounce Cook, a Black woman (like Letitia James), guilty of mortgage fraud, and therefore someone who could be fired for cause. This was never the open and shut case that Trump and his sycophants claimed.

First, it was not clear that what Cook had allegedly done amounted to fraud. According to Pulte, she had listed two different homes as primary residences on mortgage applications. If true, this might violate the law, but it is a common breach that is rarely prosecuted. It turns out three Trump cabinet members, as well as Mr. Pulte’s parents, seem to have done the same thing. If Cook’s actions had violated the law, it probably ranks as something somewhat more serious than a traffic ticket, but considerably less serious than the spousal abuse that Trump laughed off as a real crime earlier this week.

There was also the second point, that the alleged offense had occurred prior to Cook’s appointment to the Fed. Can “cause” refer to an action someone had done before being appointed to office?

There were allegations of sexual assault against Trump Defense Secretary Pete Hegseth before his appointment. RFK Jr. was an admitted heroin addict in his youth. While both cabinet members are political appointees, who clearly hold their positions at the president’s discretion, would these past offenses in principle be grounds for removal for cause?

And then there is the final point. Cook was never proven to have done anything wrong. All Trump had was Pulte’s accusation of wrongdoing.

It turns out Pulte’s accusation is not worth very much. NBC News, among other news outlets, obtained loan documents showing that Cook had identified her Atlanta house as a “vacation home,” which would seem to be in full compliance with the law. The question is now whether Trump can fire a Fed governor over a seemingly false allegation from one of his political appointees. That seems to be a pretty clear-cut loss for Team Trump, but I can’t speak for the Republican Supreme Court.

Since we’re on the topic of Trump lies, let me digress for a moment to the assassination of Charlie Kirk. First, no one should in any way applaud this act. As my eighth-grade teacher told the 13-year-old idiots celebrating the shooting of George Wallace in 1972, you kill the movement, not the man. Like Wallace, Kirk was a real human being, with friends and family. His death is a tragedy.

But moving to the broader political context, Team Trump moved to weaponize the shooting before the body was even cold, blaming the left for the killing at a point where they knew nothing about the shooter. They looked to purges of the media, schools and universities, and all other institutions.

Now that the suspect, Tyler Robinson, is in custody, it appears that the motivation for the killing was more likely to have come from the right than from the left. It’s still early, and more information will surely come out, but one thing that seems clear from this shooting is that it was done by a troubled young man who had too easy access to guns. The same is true of Thomas Cook, the 20-year-old man who shot Donald Trump in Butler Pennsylvania last summer.

Trump and his supporters are quick to blame these shootings on a mysterious “they,” implying that it is somehow part of a grand plot by the left. But like the charges against Cook, the story of the plot is a lie, invented entirely by Team Trump. Lying is apparently a way of life for those born into families with billions, but the rest of the country should not have to suffer the consequences of the lies from the rich and very rich.

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 site.

Reprinted with permission from Dean Baker