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Trump again defensively lashed out at a private business person who dares to predict that American consumers will suffer higher prices as a result of Trump’s tariffs.

Forget the childishness of Trump’s behavior. Overlook his cowardly refusal to take responsibility for whatever ill-consequences his policies inflict. Ignore the inconsistency of Trump’s actual actions with the boastful claims of his supporters that he tells it like it is. Disregard the unseemliness of the president of the United States behaving like a sixth-grade schoolyard bully.

Instead, recognize the inescapable reality that someone must pay the cost of Trump’s tariffs, and there are only three groups who are candidates to foot this bill (or to share in footing this bill): American consumers, American businesses, and foreign producers.

Trump angrily denies that his tariffs will raise prices for American consumers (except, perhaps, for parents who purchase dolls for their children). So that leaves American businesses and foreign producers.

Let’s assume for the moment that the entire burden of the tariffs is absorbed by American businesses. The result, of course, is a tax on the operation of these American enterprises. And because Trump’s tariffs, even just the baseline ones, are steep, this tax is heavy. The return on investment in the businesses that are absorbing his tariffs falls. Over time, these businesses will shrink as will employment in these businesses.

You’ll not charge me with venturing out on a limb to suppose that Trump would deny that his tariffs are a burdensome tax on many American businesses.

So that leaves foreign producers (or foreign merchants). Trump wants the American people to believe that the full brunt of his tariffs is borne by these foreigners. If the tariffs do not raise prices paid by American consumers, and do not cause American importers and American producers who use imported inputs to incur any tariff-related costs, it must be the case that the foreigners who export to America lower the prices of their exports by the full amount of the tariffs and do not reduce the quantities or the quality of the outputs that they export to the United States. (If foreigners reduce the quantities that they export to U.S., prices paid by Americans would rise even if foreigners lower the prices they charge by the full amount of the tariffs. The reason is that prices rise when supplies fall.)

This latter scenario is wildly unrealistic (and, unsurprisingly, inconsistent with the empirical record). Yet it is presumably the scenario that the president of the United States wants the American people to believe will prevail.

So let’s humor the president of the United States and grant that this widely unrealistic scenario will prevail – namely, again, that foreign producers and exporters will lower the prices they charge Americans for their exports by the full amount of Trump’s tariffs and not reduce the quantity or quality of what they export to the U.S.

What, then, becomes of Trump’s boast that his tariffs will spur increased manufacturing in the U.S.? What is the fate of his avowal that his tariffs will prevent us Americans from being dependent on foreigners for critical supplies?

That boast and avowal necessarily become empty. If tariffs don’t cause prices in the U.S. to rise – to rise either directly as tariffs are passed through as higher prices to American buyers, or to rise indirectly as American importers, and American firms that use imports as inputs, cut back on their sales and production – then American producers whose outputs compete with imports will confront the same amount of competition from imports that they confronted before the tariffs were raised.

With the post-tariff prices of imports unchanged, American buyers will have no incentive to shift their purchases from imports to domestically produced substitute goods. The American producers who are meant to be ‘protected’ by the tariffs will enjoy no protection whatsoever. Demand for their outputs will not rise and, thus, they’ll not increase their production. In turn, they’ll not employ more workers.
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Anyone who swallows all that Trump says about his tariffs is gullible. Such a person is someone who allows Trump to trap him or her into a logical impossibility. Either Trump himself is so astonishingly stupid as to not grasp the illogic of his claims, or – what is much more likely – Trump has no respect for his base. He treats the people in his base with contempt; he plays them as if they are stupid.

This outcome cannot be escaped by the cheap tack of pointing to Trump’s creds as a businessman or by the juvenile fun to be had by calling me (or any other economist) a pointy-headed, cosmopolitan, coddled, tenured, out-of-touch, ideologically benighted elite who doesn’t know what time it is. This outcome is a matter of ironclad logic: Either Trump’s tariffs do protect some American producers from foreign competition (in which case the tariffs must result in higher prices paid by Americans) or the tariffs don’t result in Americans paying higher prices (in which case the tariffs cannot possibly have any protective effect).

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Here’s a follow-up letter to a new correspondent.

Mr. K__:

Thanks for your follow-up email, and no need to apologize for what you call your “continued confusion about tariffs as taxes.” It’s I who apologize for communicating unclearly. So, especially because you’re not the only person who I managed to confuse, I’ll take one more stab at explaining my disagreement with John Lott.

As I read Lott’s op-ed, he criticizes economists for an offense that few of us commit, namely, refusing to see that tariffs can, in principle, serve as part of an ‘efficient’ (or least-inefficient) system of revenue collection. John mistakenly takes Phil Gramm’s, my, and other economists’ objections to the use of tariffs as tools of protectionism as being also objections to the use of tariffs as tools to raise revenue.

Perhaps Phil Gramm, Larry Summers, I, and other critics of Trump’s trade policy are unfair in taking Trump’s motives to be overwhelmingly protectionist. Perhaps because our eyes and ears are stuffed with the administration’s, and its NatCon fans’, incessant complaints of imaginary problems such as the “hollowing out” of America’s economy, of the dangers of U.S. trade deficits, of how foreign countries have long cheated Americans’ of economic opportunity, of the need to ‘reshore’ manufacturing, and of the damage done to the welfare of working Americans by cheap imports and foreign trade restrictions, we unjustly discount the seriousness of the administration’s boasts about the rivers of additional revenue the tariffs will allegedly raise. Still, the objections to Trump’s tariffs – and I am 100 percent certain about what Phil Gramm and I object to – are objections only to Trump’s protectionism.

Consider this analogy. Suppose that an informed economist, believing that the hysteria of environmental fanatics is wrongheaded and a source of harmful economic policies, expresses opposition to gargantuan hikes in carbon taxes that are imposed by a Democratic administration – an administration that is forever bragging that its carbon taxes will “solve” the long-standing scourge of climate change by creating a glorious “green energy” future. This economist opposes these carbon taxes because he believes both that the problem these taxes are said to ‘solve’ is unreal or dangerously exaggerated, and that the taxes themselves will be counterproductive; they’ll cause more harm than good.

So this economist publicly makes his case against carbon taxes. His case might be sound or unsound, but either way his opposition to carbon taxes is to their use as a tool for re-engineering the economy toward “green energy” through a draconian effort to significantly reduce carbon emissions.

Now along comes, say, Joe Stiglitz to accuse this economist of failing to understand that carbon taxes could well be part of an optimal fiscal system for raising revenue. Stiglitz correctly notes that all taxes distort private economic decision-making, so there’s nothing unique about carbon taxes on this front. Surely, Stiglitz explains, there is a real possibility that there exists some above-zero rate of carbon taxation that ought to be used, for fiscal purposes, so that taxes on other activities can be efficiently reduced.

In this hypothetical, Stiglitz misreads the economist’s objection to carbon taxes. The economist’s objection is to the punitive taxation of a category of economic activity that this economist believes – contrary to environmentalists – is productive and worthwhile. This economist argues that the economic engineering aimed at by carbon-tax proponents will worsen economic welfare, not improve it.

This economist’s objection isn’t to using carbon taxes as part of an optimal system of taxation; that is an entirely separate issue. This economist’s objection is to government efforts to re-engineer the economy away from carbon fuels and toward “green” energy. And so Stiglitz’s criticisms miss the mark.

I concede that there might be a subtlety in John Lott’s argument that I’m missing. He’s a serious, top-notch economist; disagreeing with him makes me uneasy. I’m not certain that my criticism of his op-ed is correct. But I am certain of this: Phil Gramm’s and my objections to Trump’s tariffs are objections exclusively to Trump’s protectionism; we did not intend to imply any objection to revenue tariffs.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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… is from pages 207-208 of the late E.G. West’s 1976 book, Adam Smith: The Man and His Works:

Smith’s views on the national debt and unbalanced budgets in particular revealed the full vigor of his opposition to mercantilists like [Sir James] Steuart. In issuing debt, governments deprived industry and commerce of capital and thereby caused an increase in current consumption. This was to the detriment of accumulation and growth. Unbalanced budgets were a menace to liberty. Once the sovereign developed a taste for borrowing he would realize an increase in his political power since he would no longer be so dependent on tax exactions.

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The Editorial Board of the Wall Street Journal rightly calls out the economically and ethically malignant cronyism of Trump’s new trade regime. Three slices:

President Trump views tariffs as a toll that he alone gets to set for access to U.S. markets. Now he’s charging fees on U.S. companies for the purported privilege of exporting artificial-intelligence chips to China. Mark this as another step toward government control of private business.

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Now we’re seeing the rest of the mosaic, and it’s not pretty. The Administration is demanding a 15% cut on sales of Nvidia’s H20 and AMD’s MI308 chips to China. Want to do business? Pay Paulie. It’s not clear whether the Administration plans to use the cash to pay down the deficit, spend it, or use it for its mooted sovereign wealth fund.

In any case, this is an export tax that Congress didn’t authorize. Will AMD or Nvidia challenge the political extortion in court? Selling chips in China may be more important to them than defending the legal principle that the government can’t willy-nilly shake down companies.

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Step by step, Mr. Trump is expanding the long arm of the state into more of the private economy. Will any Republican object? Alas, probably not.

Trump has managed to work one miracle: He’s prompted the Editorial Board of the Washington Post to channel Hayek and Milton Friedman. A slice from this editorial titled “Why government should not intervene in business”:

Trump’s side deal is best viewed as inappropriate state intervention in the U.S. economy. Word has gone out that CEOs can kiss the president’s ring by offering to give him something he wants and in return be exempted from whatever policy threatens to damage their business. In this way, companies deepen their dependence on government and on Trump personally.

The Wall Street Journal‘s Greg Ip describes what Trump is doing to the U.S. economy as “state capitalism” (an oxymoron, if you ask me). A slice:

This isn’t socialism, in which the state owns the means of production. It is more like state capitalism, a hybrid between socialism and capitalism in which the state guides the decisions of nominally private enterprises.

China calls its hybrid “socialism with Chinese characteristics.” The U.S. hasn’t gone as far as China or even milder practitioners of state capitalism such as Russia, Brazil and, at times, France. So call this variant “state capitalism with American characteristics.” It is still a sea change from the free market ethos the U.S. once embodied.

The great Clemson University economist, Bruce Yandle (who today celebrates his 92nd birthday) calls what Trump is doing “pay-to-play capitalism.” Two slices:

Trump ‘s pay-to-play trade deals are finally here. Japan, the EU, UK, and others seem ready to sign. At this point, it’s hard to tell if trade overall will be expanded or reduced. The U.S. is raising tariffs while other countries are reducing them. Details are still lacking or yet to be determined.

But we can be certain of one thing: Trump’s pay-to -play capitalism will determine who, what, when, and how much capital will be invested by major U.S. trading partners. The president seems to see himself as Colossus standing at the nation’s entry points rattling the keys to the kingdom. He will take care of his friends, if they pay, and punish his enemies. Politics trumps free market forces.

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There is no way for us know if the Trump version of pay-to-play capitalism will redefine how the American economy works in the long run. But in the short run, we can be certain that with large international investment being managed and tailored by the White House, at the margin, lobbying capabilities and getting along with the boss will tend to be more important than inventing new products and extending markets. In a word, the Trump approach centralizes economic decision making both in the United States and with our trading partners. Cartelization and hardening of the economic arteries is the result to fear.

Wall Street Journal columnist James Freeman is correct: “A new exaction on chip sales to Chinese customers is no way to maintain U.S. technology leadership.” A slice:

The burden of Trump taxes on imports is heavy enough on the U.S. economy and threatens to offset much of the benefit from the president’s other regulatory and tax policies. If the Trump administration now goes even further and begins to collect taxes on exports, it becomes harder to expect prosperity and nearly impossible to discern a coherent strategy for U.S. growth. Mr. Trump’s latest gambit could also create negative incentives for U.S. policy makers to tolerate the abuses of the Chinese Communist Party.

GMU Econ alum Dominic Pino ridicules the deranged letter – and, yes, the letter truly is deranged – sent yesterday by Trump administration lawyers to the clerk of the court that’s now considering the legality of Trump’s “Liberation Day” tariffs. A slice:

The Trump administration has invented a novel theory of trade law whereby the president has unilateral authority to declare unlimited tariffs on any country for any length of time and modify them at will, based on a law that never once uses the word “tariff” and was passed by Congress to limit the president’s trade powers. The International Economic Emergency Powers Act (IEEPA) has been on the books since 1977 and has never been used to impose tariffs before Trump’s second term. Understandably, courts have been skeptical of Trump’s assumption of an enumerated power of Congress, the tariff power. One federal court has already ruled Trump’s tariffs under IEEPA illegal, and the appeals court judges seemed skeptical during oral arguments on July 31.

Solicitor General D. John Sauer, the government’s attorney in the case before the appeals court, submitted a letter on Monday to the court requesting that the president’s tariff authority under IEEPA be maintained, not because it is lawful, but because overturning it would “have catastrophic consequences for our national security, foreign policy, and economy.”

If that sounds a little dramatic to you, that’s only scratching the surface of the hysterics in this letter.

About this deranged letter, Phil Magness tweets:

2 lessons in today’s wild DOJ filing:

1. Trump believes he’s about to lose badly on IEEPA’s merits, striking down his entire tariff agenda.

2. He’s pivoting to claiming tariffs are a “too big to fail” part of his econ agenda in a bid to get the courts to affirm them anyway.

Eric Boehm reveals the economic ignorance of Sen. Josh Hawley’s (R-MO) scheme to distribute “tariff rebate checks.”

Steven Kamin writes that “since president Trump declared ‘Liberation Day’ on April 2, the dark clouds already looming on the horizon of the global economy have grown thicker and darker.” A slice:

The extreme reaction of financial markets after Liberation Day appears mainly to have reflected shock and surprise that Trump would take such a capricious, chaotic and disruptive approach to trade policy. Since then, investors have become more accustomed (or numb) to the president’s unique style, and they have taken the drum beat of Trump’s more recent tariff threats in stride. With trade deals with the UK, Japan, the European Union and others being completed, markets are relieved that tariffs will be rising less than Trump has threatened and that a trade war appears to have been averted. Estimates by the Budget Lab (2025)now suggest that at current expected levels, the higher tariffs will push US real GDP growth down by 0.8% and boost prices by 2%: these effects would be unfortunate but probably not severe enough to roil US financial markets.

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… is from Jim Bacchus’s August 8, 2025, Cato@Liberty post titled “International Economic Chaos: Trump’s Remade Global Order”:

The tendency to count as wins for the president new terms for trade that, by any economic measure, are clearly losses for American businesses, workers, and consumers is a function of a pervasively cynical political atmosphere in which triumphs are based on the achievement of what is sought rather than on the actual merits of the result. Trump has “won” on trade because some countries have capitulated and other countries do not have the economic leverage to challenge the United States one-on-one, not because what he has supposedly won is worth winning for the American people and the American economy. Sought though it may be, trade protectionism is a form of slow economic suicide for the country that pursues it.

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Fareed Zakaria, writing in the Washington Post, eloquently corrects many of the fallacies believed by MAGA-types (and also by many – most? – progressives’) about the American economy. Two slices:

The Organization for Economic Cooperation and Development’s measure of median disposable household income in America was higher than in all but one advanced industrial economy as of 2021 — higher than Switzerland, Germany, Britain and Japan. The exception is tiny Luxembourg. In fact, America’s median disposable household income is about double that of Japan.

And as Noah Smith points out in an excellent essay, America’s median income has not been stagnant, as conventional wisdom tells us; it has been growing briskly over the decades. Smith notes that real median personal income has risen by 50 percent since the 1970s. Hourly wages, adjusted for inflation, are up substantially since the 1990s. And the hourly wages of the bottom third of Americans are up by even more: over 40 percent.

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Look at Flint, Michigan, and Greensboro, North Carolina — often seen as classic towns that were devastated by the loss of manufacturing. Over the past two and a half decades, real wage growth for the poorest is up more than 40 percent in Flint and over 26 percent in Greensboro.

These are not anecdotes. The Brookings Institution in 2018 looked at 185 urban industrial counties that had lots of manufacturing jobs in 1970 and discovered that 115 had managed to transition from manufacturing, improving residents’ well-being. Only 14 of these industrial communities could still be defined as “vulnerable.” Remember, unemployment in the United States has been close to a 50-year low for more than three years now.

My intrepid Mercatus Center colleague, Veronique de Rugy, writes that we Americans “better hope the Trump tariffs are transitory.”

Jim Bacchus decries Trump’s destruction of the rules-based global trading system. A slice:

While President Trump takes a victory lap following the capitulation of many of America’s trading partners to his arbitrary trade demands and the application of astronomical tariffs to imports from other countries worldwide, and while the piles of additional tariffs on US imports add more and more to the prices of purchased goods, it is worth pausing to note what has now been cast aside along with the long-established legal and economic arrangements of modern civilization. The loss of global public goods to humanity from these myopic and misguided US actions involves much more than may be immediately apparent in the accumulating effect of the tariffs as taxes on trade.

The flagrant violations of international law in the imposition of the tariffs are so numerous that few bother even to mention them anymore. Who continues to point out that these arbitrary actions by the United States are inconsistent with the basic laws of nondiscrimination that are supposed to guide and govern world trade under the auspices of the World Trade Organization (WTO)? Brazil and some other countries are seeking consultations on these illegal tariffs in WTO dispute settlement, but is it even certain that the United States will bother to show up in the Geneva legal proceedings? A request for consultations on a trade dispute must be heeded under WTO rules, but does that still matter?

Likewise, the domestic economic price of the tariffs is increasingly accepted as a given. Congress is intimidated to the point that it is unwilling to reclaim its constitutional authority over trade from the executive branch, and so arbitrary tariffs based on both unsound trade reasons and unpredictable nontrade reasons are now viewed as nearly inevitable. Although economists report that the tariffs are increasingly taking a toll on American competitiveness and the American cost of living, and although this toll will surely rise with the imposition of the latest global tariffs, this is providing little political motivation for change. We appear to have decided as a country simply to assume the existence of the added price of a certain portion of US protectionism in every international exchange of goods. The American people are losing, but Trump is “winning,” and this is largely what is reported.

Phil Magness accurately captures what it feels like to be a trade economist during the reign of Trump.

Reflecting on Trump’s firing of the commissioner of the Bureau of Labor Statistics, as well as Commerce secretary Howard Lutnick’s termination of the the Federal Economic Statistics Advisory Committee, William Silber understandably concludes that “fake economic news may arrive sooner than you think.” A slice:

Mr. Lutnick’s explanation for terminating the Federal Economic Statistics Advisory Committee made no sense. Input from disinterested experts drawn from across industry and academia is a good idea. But now it seems that Mr. Lutnick was taking marching orders to fulfill his boss’s desire to control economic data. On Aug. 1 President Trump fired the head of the Bureau of Labor Statistics, the agency that releases the government’s monthly employment report. The president claimed the most recent numbers were “phony” and “rigged” to make him and Republicans look bad.

Mr. Trump’s assertion that the numbers are rigged has no basis in fact. The employment data are often revised, like all numbers based on surveys, but no evidence impugns the objectivity of the government’s statistical releases. It may be that Mr. Trump cleared the way to appoint a BLS director who might help manipulate a politically more important statistical target.

George Leef understandably is a fan of Phil Magness’s book The 1619 Project Myth. Two slices:

It is useful to have frequent reminders that people often resort to deception to peddle their beliefs. The book The 1619 Project Myth by Phillip W. Magness is highly valuable in that regard, as it devastates the historical accuracy of “The 1619 Project” published by The New York Times.

That long magazine piece was the brainchild of one of its writers, Nikole Hannah-Jones, who used it to make her breathtaking claim that the true date of America’s founding was not 1776, but rather 1619, the year when the first slaves were landed in North America.

Why say that?

The answer is that, like so many “progressives,” Nikole Hannah-Jones wants to undermine the idea that the United States was founded to increase the people’s freedom and replace it with the notion that the nation’s founding was rooted in slavery and oppression. The American Revolution was fought, in her telling, to preserve slavery, which the colonists feared was going to be ended by the British government. Moreover, she and several of her co-authors maintained, the effects of slavery are still with us. What better way to get people to think of America as a terrible nation that’s in need of radical (or revolutionary) transformation?

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If there was ever the slightest doubt as to the political purpose of the 1619 Project, it was erased when Hannah-Jones, in the subsequent Hulu TV series based upon it, called for the nation to pay reparations for slavery. That idea has long been dismissed by scholars of all races as unjust and economically ruinous. Nevertheless, she blithely stated that reparations were needed to atone for our racist past and, to explain how we could pay for the trillions it would cost, told viewers that the government can afford anything it wants just by printing enough money. How do we know that? Because a few crank economists who subscribe to Modern Monetary Theory say so. Thus, the 1619 Project combines false history with ludicrous economics to promote the statist agenda.

Wall Street Journal columnist Andy Kessler celebrates the demise of “fuel efficiency” standards. A slice:

Tired of ugly cars and SUVs that all look the same? Check out crossovers like the Honda CR-V, the Ford Escape and the BMW XM—the last with a staggering $160,000 price tag. The three vehicles look almost identical—an unintended consequence, believe it or not, of 50-year-old Corporate Average Fuel Economy standards. But gasoline-mileage rules were effectively tossed in July’s One Big Beautiful Bill Act, which could usher in a new era of big, beautiful auto design.

Most didn’t notice CAFE’s demise. It turns out that you can’t kill mileage standards in a reconciliation bill, so Congress quietly zeroed out its penalties via Section 40006, which “eliminates the civil penalty for a violation by a manufacturer of the Corporate Average Fuel Economy standards.” Clever.

Steven Greenhut is correct: Trump and his MAGA followers are forever dishing out insults, yet when they themselves are the object of mocking humor, they – being thin-skinned, as all people without genuine self-assurance are – get furious.

The Editorial Board of the Wall Street Journal wisely warns of the dangers of having Stephen Miran on the board of the Federal Reserve. Two slices:

President Trump likes to stir things up, and he’s done it again with his choice of Stephen Miran to fill an open seat on the Federal Reserve Board of Governors. We can’t recall when a President nominated to the Fed someone whose abiding policy conviction is to weaken the U.S. dollar.

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But his ambition goes beyond tariffs. In that 2024 essay he laid out other policy options for negotiating a weaker dollar and diminishing its reserve-currency status. One idea is to tax foreigners who hold U.S. Treasury debt as an incentive to hold less of it. This would amount to a de facto default on current debt.

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… is from page 38 of Razeen Sally’s superb 1998 book, Classical Liberalism and International Economic Order:

Both Hume and Smith assail the mercantilist Weltanschauung of a zero-sum international marketplace with rigidly limited opportunities, inevitably leading to the presumption that one nation’s gain is another nation’s loss. Both forcefully expounded the opposing contention that international trade is mutually beneficial or positive-sum in nature: home employment and national wealth are fostered, not endangered, by free trade.

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… is from page 322 of the 1990 Liberty Fund edition of David Ramsay’s 1789 The History of the American Revolution; Ramsay here writes about the few weeks and months immediately following the promulgation of the Declaration of Independence:

The flattering prospects of an extensive commerce freed from British restrictions, and the honours and emoluments of office in independent states now began to glitter before the eyes of the colonists, and reconciled them to the difficulties of their situation.

DBx: Pictured here is David Ramsay (1749-1815).

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The Wall Street Journal‘s Tunku Varadarajan says this about Trump’s new tariffs on imports from India: “He has a point about New Delhi’s relationship with Russia, but 50% tariffs are a counterproductive policy.” A slice:

“Hang on a minute!” they’re sputtering in New Delhi. The biggest purchaser of Russian oil is China, which has binged on $158.7 billion worth of the stuff in the past 2½ years. That has put $39.4 billion more Chinese dollars than Indian ones into Mr. Putin’s war chest. Yet Mr. Trump has whacked India, not China, with Russia-related sanctions. This is part of a confounding pattern of trade warfare in which the president is notably more aggressive toward nonadversarial countries—allies and partners like Canada, Mexico, the European Union, Japan, South Korea and now India—than he is with most U.S. adversaries.

David Henderson revisits Jagdish Bhagwati’s splendid 1988 book, Protectionism.

Walter Olson busts the myth that “legal checks on a president’s power ‘diminish the votes of the citizens who Elected Him.’” A slice:

One might start by noting, as many Cato writers have over the years, that the concept of a presidential mandate is almost completely notional, even in landslide elections, let alone the sort won by Trump against Kamala Harris, in which the popular vote margin was 1.5 percent. Some of Trump’s voters, for sure, did back his position favoring mass deportations; others warmed instead to his talk on tax cuts, energy development, and staying out of overseas wars. Does he have a mandate for every issue he spoke about, for only some, or what? The divination of mandates inevitably depends on the discretion of each interpreter.

Reason‘s Eric Boehm isn’t surprised that the increasingly blurry line separating the private from the public – a blurriness only further encouraged by the Trump administration – fuels cronyism. [DBx: Trump’s collectivism is surely less ‘woke’ than is the collectivism that awaits us Americans when the Democrats return to power, but it’s collectivism nevertheless. And its collectivism of any sort – collectivism regardless of the language it uses and irrespective of the particular groups that it favors and those that it oppresses – that should be rejected.]

George Will reflects on Greg Mankiw’s sharp analysis of the public-debt crisis that increasingly looms in the United States. A slice:

There are, he [Mankiw] says, five ways to “stop this upward trajectory” of debt: extraordinary economic growth, government default, large-scale money creation, substantial cuts in government spending and large tax increases. The probability of each is low.

Extraordinary growth? The internet managed to “revolutionize” work and leisure without igniting extraordinary economic growth. Coming innovations (e.g., artificial intelligence, biotechnologies) will be life-changing but are unlikely “to establish an entirely new growth path.”

Government default? The United States “is not immune to the political and economic forces that can make default an attractive option.” When Franklin D. Roosevelt took the nation off the gold standard, many U.S. bonds had clauses ensuring their value in gold bullion. FDR abrogated those clauses. Although the Supreme Court upheld (5-4) his power to do this, it was, Mankiw says, “without doubt” a default.

In 2016, candidate Donald Trump, in an exchange with a reporter, was asked how he would handle the national debt. He answered: “renegotiate” it. “You go back and you say hey, guess what, the economy crashed, I’m going to give you back half.” Trump, Mankiw notes, has shown “that he is willing to expand the Overton Window (the range of policies and arguments deemed acceptable in political discourse). Remember this exchange the next time someone says that a default on U.S. government debt is unimaginable.”

Large-scale money creation? This would be intended to fuel inflation, which is slow-motion repudiation of debts. Bondholders are paid back in dollars worth much less than those they used to purchase the bonds.

Thanks to Alan Reynolds for endorsing Phil Gramm’s and my book, The Triumph of Economic Freedom.