Last week, United States presidential candidates Kamala Harris and Donald Trump delivered hour-long speeches outlining their economic policies for the country if they win in November. This week on a special episode of Capitalisn’t, Bethany and Luigi weigh in on the candidates’ economic proposals. What makes this discussion particularly urgent is that neither candidate is espousing a traditional Republican or Democratic platform. Further, despite the length of their respective speeches, there were few specifics. Instead, both candidates are running on "vibes" more than detailed manifestos. With just under five weeks to go before Election Day, Bethany and Luigi sift through the proposals around taxes, tariffs, price gouging, and the “Opportunity Economy,” helping us separate the substance from the slogans.
Last week, United States presidential candidates Kamala Harris and Donald Trump delivered hour-long speeches outlining their economic policies for the country if they win in November. This week on a special episode of Capitalisn’t, Bethany and Luigi weigh in on the candidates’ economic proposals. What makes this discussion particularly urgent is that neither candidate is espousing a traditional Republican or Democratic platform. Further, despite the length of their respective speeches, there were few specifics. Instead, both candidates are running on "vibes" more than detailed manifestos. With just under five weeks to go before Election Day, Bethany and Luigi sift through the proposals around taxes, tariffs, price gouging, and the “Opportunity Economy,” helping us separate the substance from the slogans.
(upbeat music) - I'm Bethany McLean. - Did you ever have a moment of doubt about
capitalism and whether greed's a good idea? - And I'm Luigi Zingales. - We have
socialism for the very rich, rugged individualism for the poor. - And Mrs.
Capital Isn't, a podcast about what is working in capitalism. - First of all, tell
me, is there some society you know that doesn't run on greed? - And most
importantly, what isn't. We ought to do better by the people that get left behind.
I don't think we should have killed the capital system in the process. As everyone
knows, there is an election coming up soon. We thought it would be important to
look at the economic proposals that the two candidates are putting forward through
our unique lens. Which of their proposals are capital E's and which one are capital
isn't? Of course, this is a challenging exercise in several respects. As a friend of
mine said, both candidates are running on "vibes" more than specific proposals. What
makes this discussion particularly urgent and particularly interesting is that neither
candidate is espousing a traditional Republican or Democratic point of view.
Take tariffs. Before the Trump presidency, tariffs were pretty much a no -no for
Republicans, I think since Herbert Hoover, and we're talking 90 years ago,
Trump levied tithes on thousands of products valued approximately 380 billion in 2018
and 19. And the Biden administration, rather than lifting those tithes, has kept them
in place and in May 2024 announced new tithe hikes on additional 18 billion of
Chinese goods, including semiconductors and electric vehicles. Another example, the
Republican Party used to be the party of fiscal responsibility. That got blown out
of the water in the Trump administration. Some might say it got blown out of the
water in the Bush administration, but it really got blown out of the water in the
Trump administration, partly due to the pandemic, of course. But it does seem that
for both Republicans and Democrats, budgets no longer matter. So to be honest,
I think that the Republican party has not been the past party of fiscal
responsibility since at least Ronald Reagan. Yeah. But at least,
but at least they pretended to care about it, Luigi. At least they pretended to
care about it. Trump took it to a whole new level and he doesn't even pretend to
care. And it is true that Bush father actually basically lost the election because
he did care about fiscal possibility and increased taxes. So I think there was a
different element. But both candidates toss around sentences like opportunity economy.
This is Haris, which sounds great. But what it is is not exactly clear. Trump on
the other hand said the economy was terrible and inflation is killing people and is
the worst ever in America, which of course is not true. And his entire plan seems
to rest on getting energy prices down. Moody's had a great quote saying that
quantifying the macroeconomic impact of Trump policies is complicated by lack of
transparency and specificity requiring us to make assumptions regarding their design
and size. So we want to try to get underneath the talking points as best we can
and hear what the two candidates are actually saying and what it might mean. But
Luigi, before we get to that there, I have a couple of questions for you. So one
is that the economy always gets blamed on or credited to the president. Some of the
issues we're going to talk about are really big issues, but in terms of the well
-being of ordinary Americans and the direction of the stock market, two different
things, of course, how much do presidential policies matter? Is the economy a
separate beast from the president or is it inextricably linked to the president? I
think neither. We cannot blame or appraise the president for every little bleep in
GDP, and certainly we cannot blame them for something like COVID, but I think that
in the long term policies do matters. We have discussed many times in our podcast
the impact that the entry of China and the WTO had on the well -being of Americans
in general, but particularly the big Midwest. That was a policy choice was not
inevitable. And now we can argue that this was done in the best of assumptions to
try to bring China into the realm of democracies in the world. So I'm not
necessarily saying that it was a bad decision, but it is a decision with enormous
consequences. That's interesting. I was thinking when you were talking about the
famous quote from Benjamin Graham, who of course is Warren Buffett's mentor, and he
says about the market. In the short run, the market is a voting machine, but in
the long run, it's a weighing machine. And I was thinking that about, there's gotta
be some kind of analogy there with policy choices that in the short run, it may
swing wildly around and it doesn't seem to matter that much. But in the long run,
perhaps they matter very much indeed. Anyway, a second question for you that's
important given that Trump says all the time how terrible the economy is. Harris
obviously can't say that and doesn't seem to think it. Where do you think we are
now? - I think it depends very much your perspective. If you are living in one of
the two coasts and you are a boomer, you own a house, and 401k,
I think life is pretty good. If you live in the middle of the country, or you're
young and you don't own a house, or your salary has not kept up with inflation in
the last four years, you are pretty angry. I was listening to a podcast the other
day looking at the pivotal states, including Pennsylvania. There are these very
interesting statistics that if you look at counties where the per capita income was
below the one in 2019, there are only 20 % of the counties in the United States,
but 40 percent in Pennsylvania. Wow. That's a really interesting observation,
and we'll get to the Federal Reserve as part of our discussion and Fed policy. But
it certainly has seemed in recent decades that everything the Fed does either
benefits upper income Americans or doesn't hurt them, whereas the brutal impact of
things like higher interest rates, which we can debate how much that's the Fed, but
that affect lower income Americans who also don't stand to benefit from the stock
market soaring. And so I guess all of this does come back to how unequal our
society is in some ways. So where do you think we should get started, Luigi? My
inclination would be to start where most of the interest is in this moment,
which is number one, inflation or living standards of the median American.
I see in Harris to main proposal the introduction some form of limitation against
price gouging that already exist in many states and it's really for extreme situation
so I don't see how this will do much of an impact she talks also about capping
the price of more drugs already the Biden administration is cap the price of insulin
I think for only Medicare people and then trying to expand it. Price capping is a
pretty sort of brutal form of price control that works up to a point, but the
other aspect she's trying to push is on the issue of housing.
Let's face it, more than 30 % of many people's income is spent in housing,
so the price of housing is a very important aspect. Not so much as it enters in
the daily inflation because the way which then this is not perfect. But in term of
people's perception that they can't make it, I think that that's a big issue. She
has a proposal to actually subsidize first time by with $25 ,000.
And then she also has some form of child care subsidy. I don't think that her
approach is very much to try to fight the price increases is more to either sort
of regulate prices, that's the insulin, or to subsidize the man to alleviate the
pain. It seems to me that her proposals to include more drugs on the list where we
can't where we can't raise prices, including insulin seems seems to me to make
sense, but the proposals against price gouging on food and the idea that big
companies are just greedy and that's why prices are high seems to me to be to be
more flawed. So do you think I'm right in seeing drug prices and food prices in
two separate categories or would you lump them together and then we can get to
housing as its own issue?
- What I am showing my true colors here, what I think is lacking is a general view
of do we have a competition problem or not? Okay, so why drug prices are so high
is, in part, because we don't have enough competition in some sectors, or do we
have a cost problem? This is where Trump is closer to proposing a solution,
it's not necessarily a solution I love, but is going in the direction of say, let's
deregulate, deregulate, deregulate. There is a conservative website, so you might want
to check to what extent this is correct or not, but that computes the amount of
additional cost that is imposed by every regulation that is introduced.
And this is not a number they make up, it's a number that, by law, whoever
proposes the regulation has to present for the Federal Registry of Regulations,
something like that. They have to, finally, in how many hours will it take to do
and how much does it cost, etc. And so if you look at the last three and a half
years and not even four years of the Biden administration, you see that the
additional cost of regulation is 1 .7 trillion. If you look at the four years of
the Trump administration is 65 billion. Okay, so even the regulation does not mean
that you reduce the cost. I'm not prepared to swear on these numbers. What I find
it interesting is there is a gigantic gap. Well, I personally think that a lot of
regulation is very useful. Regulation does have a cost and that cost somehow is
transferring to prices. So if you are concerned about prices, I think what you want
is reduce the amount of overburden regulation and increase competition. Those would be
the two approaches. Either sort of by fear of regulating prices or subsidizing
demand. I'm not so sure is the right strategy. - Yeah, I guess I put drugs in a
different category because so many pharmaceuticals are affected by the decision by the
US government. One, at the behest of big pharma that the government couldn't
negotiate on the prices it paid for drugs. And the Biden administration creating a
list of drugs on which they would set the prices on which could be negotiated. I
think it's different when you have a big buyer like the government, that that's the
cost of medicines in a slightly different category than the cost of food. Is that
the right way to think about it? Oh, absolutely. But then I will put in the
question of competition. I would say, look, it's not that we're trying to regulate
prices. I think that the message is wrong. We're not trying to regulate prices is
that we don't have competition. And when you lack competition, then you need to find
an alternative in mechanism, which is not accepting whatever the pharmaceutical
companies want to ask. And by the way, mechanisms of reinportation of drugs that
creates more competition will help reducing those prices tremendously. But then you do
it more systematically. I think that the issue of ad hoc and announced just before
the election is a bit strange. And Housing is also, I think,
in its own category because isn't the issue here, at least as far as I can tell,
I did a speaking tour with the federal home loan banks in the Midwest and
everywhere I went, all these small towns throughout the Midwest, the community bankers
would say the biggest issue facing their community was the lack of supply of
housing. It's the lack of supply of housing that is making it totally unaffordable.
Isn't it a little bit perverse to be offering buyers $25 ,000.
I mean, that helps, obviously, people buy a house, but it just pushes up the price,
and it doesn't necessarily do anything about supply per your point about a
functioning market, right? - Absolutely. To the creditor of the highest proposal does
add some element on the supply side. So let's start back a second, because I think
there are two potential next year. The first one, which is dominant in the two
coasts, is the so -called NIMBY movement, not in buying backyard. Municipalities,
supported by the current owners, don't want to make available, for example,
multi -unit buildings that will increase the supply. The problem is an interesting
problem from, if you want a democratic point of view, because the federal government
cannot intervene massively on what the localities do. However,
there are a lot of ways you can do indirectly. So my favorite way would be to
say, you know, you can only deduct your property taxes if the municipalities is open
to build new buildings. Now, this would be nice because it would be done through
legislation, it would be transparent. You have more sneaky ways, which I don't like,
which is like saying Fannie and Freddie will only be authorized to make a loan to
firms that do X, Y and Z. Now, to be fair, the Biden administration has already
entered into this well because only housing with certain environmental properties
qualify. But introducing this mega -regulation through the creed of a bureaucrat inside
the administration is not my preferred thing. If I were the hardest of the Trump
administration, I would propose a law and say, look, a little bit like the Highway
Act that said, oh, we do subsidy to federal highway only if they have a speed
limit. This is for the two costs. And I think this would be dramatic. If you are
in the middle of the country, now there are some places like Las Vegas where
Federal land is a constraint. You know that most of the land outside of Las Vegas
is owned by the federal government and is not available for development. If you were
to make that available, of course, supply will increase. And that's what Trump wants
to do. I don't know what towns you are in mind. If you go to the famous infamous
Springfield, Ohio, where you have a sunny influx of migrants and see an increased
demand of housing, then the supply is not instantaneous and there are some initiative
to build more homes and the highest administration has some proposal to build more
homes could be the way to go. However, and we're going to talk later about
immigration, you might argue that one method is also to limit immigration at least
temporarily to so first build the house and then let people come. If you let them
come before you build the houses, then you have a problem. I can see on a national
level how that would appear to be true. I mean more people coming into the country
via immigration, demand for housing, that would mean fewer homes for the people who
are already here. But given that housing is so local and that immigration tends to
be pronounced in certain areas, is that actually what's happening? I think so. In a
sense, do you remember our interview with Leah Bustin? She did say that immigration
causes an increase in rent and in house prices. The report, the true report,
not the fantasy from Spring, Ohio, but do say that rent has gone up tremendously
and the locals are upset by that. And you can see this is, if you have an influx
of new people and in the short term, the supply of houses is pretty limited. Now
it can be only a temporary problem if the supply respond, but it is a problem
nonetheless. So do you think it's a problem that should be taken into account in
the immigration debate? Absolutely. Not in the direction necessarily saying we want
less immigrants, but to realize that if you want immigrants, you need to find a way
to actually increase the supply of housing and that you do create an inconvenience
for a bunch of people, which by the way, tend to be at the lower end of the
income distribution because if you are rich, first of all, you own your house and
your house prices go up, you are happy. If you don't own a house, you are the one
who pay most of the cost. I was also thinking about this quote from Moody's on
immigration, which was really interesting because the quote from Moody's said that
while the surge in immigration has presented many challenges to communities, quote,
"The benefit has been to significantly increase labor supply and help ease wage and
price pressures. This, in turn, has forestalled even more aggressive interest rate
hikes by the Federal Reserve and thus a possible recession. Reversing these
immigration flows as Trump is proposing will quickly result in a tighter job market
and foment wage and price pressures with immigrant heavy industries taking the
greatest hit. And I thought that was interesting, particularly the part about easing
wage pressures, because we've talked a lot about whether immigration affects wages at
the lower end. And it does seem to me that the consensus is becoming now that it
that it does. It's interesting, because I think the Moody's report is written from
the point of view of a stock market owner. Right. And so you see fomenting wage
increases. If you are on the other side of the divide, you're saying welcome wage
increases. Just remember that most people didn't make it up for the increase in
inflation. They're barely now making up for the increase in inflation. So fomenting
wage increases is a bit of a loaded term. - Should we go to tariffs? - Yeah.
- One of the things that fascinates me about the tariff argument, it does seem to
me that we very quickly, the political class very quickly flipped, and now almost
everyone in the political class is a believer in tariffs. When Trump first put
tariffs in place, this was, man, crazy Donald Trump. But the Biden administration
kept them, and no one's talking about getting rid of them. Trump is talking about
being far more aggressive on tariffs than than than Harris is, but no one's talking
about getting rid of them. So how is it that tariffs became acceptable in the
political class? And are they acceptable among economists or are tariffs still viewed
as effectively a tax increase and basically a bad idea? - I think that the way we
move is because people have seen tariffs at the very minimum as an instrumental
industrial policy. And to be fair, they've always been considered an instrumental
industrial policy and this is from Alexander Hamilton, the idea of tariffs to protect
the birth of the industry in the United States was absolutely a goal. They were
becoming passe because the infancy industry argument clearly did not apply very much
to the United States, at least for a long time, was not in the interest of the
United States to have other countries develop this argument. So I think that the
universal consensus was low tariffs is better. The divide that I see between Harris
and Trump is not whether to use type for industrial policy. In a sense, they might
have different industrial policy in mind, but they both see this as an instrument of
industrial policy. What Trump sees the type is is an instrument of bargaining. When
he says that he wants 10 % types to everybody, including our European allies or
whatever, and 60 % of China, there are two school of thoughts. One is say he means
what he says. And the other said, actually, it is simply the fact that he wants to
have a threat to bargain with Europe or whatever. Unfortunately,
this fundamental question is not really addressed. The fundamental question is that
with the perspective of today, the WTO agreement has been a mistake. It's been a
mistake. Why? Because we have not built in is to protect against dumping by other
nations most likely sort of China but not only China and so now it's a useless
agreement because nobody wants to be in it except maybe China and so I think that
the future is an alternative WTO agreement with at least among democracies how do
you reach this goal I think the idea of doing bilateral agreements, like it was
done with Mexico and Canada, and then extended, maybe to England, maybe to other,
to the EU and etc., and at the end include everybody, but China, then you basically
go to what you wanted to be at the beginning to a WTO with more rules.
And in this bilateral agreement, you can put more these mechanisms to block the
instrument of damping. This is the generous interpretation, if you want, of all the
mechanisms. The negative interpretation is that he doesn't understand the impact
tariffs on prices. We're discussing just before about inflation, and the question is
how much of that transfer into prices. And actually, I was reading last night in
preparation for for this paper written by a colleague of mine and also the managing
editor of the IMF and published an AI. So reliable paper looking at the impact on
prices of the tariffs that the Trump administration impose and also the retaliatory
prices that China impose on the United States. And what is interesting is actually
the reaction of prices is asymmetric, A list of the wholesale prices is asymmetric
because there is very little evidence that China cuts down on prices to absorb part
of the tariff. It's only like 10%. The United States are forced to cut down much
more, almost 50%, the level of the tariff. And the reason is very simple.
It's because the United States export to China commodities like soy. And so if There
is a tariff on American soy, but not Brazilian soy. The Chinese buys from the
Brazilian, and so the price of American soy has to almost go down as much as the
tariff in order to compete in the international market. It's different if you produce
a differentiated good. Let's take the cars, okay? So China supplies some parts of
the GM cars. If there is a tariff is not like GM goes and buy those parts from
Brazil, because Brazil does not produce them, they're not produced into specification,
blah, blah, blah, etc. So basically, GM is forced to spend more.
Now what is fascinating is that very little of this is translated in the short
term, in one or two years, into consumer prices. So you will expect that they
translate everything? No. In the short term, not much is translating the consumer
prices. The authors don't know whether companies sort of spread the cost of types
across tax products and non -tax products. So imagine that there are two types of
shaving cream, one that is tax and the other that is not. They increase the price
a little bit of both. And so the study cannot identify the difference very clearly.
But seems to me and that they might have reduced their margins. They have solved
some of this cost in their margins, which by the way, ironically, is what the
Hague's administration is trying to do with price control, which is to try to reduce
the margins of firms. Tyves do that the other way around. - When you read
everywhere, basically in any mainstream discussion of tariffs, the view is that
increasing tariffs is basically a tax increase. I take it from what you're saying
about this paper. It's not that simple at all. No, it's not as simple at all. In
the sense, it is true that if it's a homogeneous good and it's perfect competition,
all the conditions that economists normally assume, but in the real life don't apply,
then that statement is correct. That's fascinating. And that's the reason why I
wanted to see a recent paper, an authoritative paper, and this paper said, look,
when it comes to commodities, is almost true, not exactly true, but almost true. And
that's what actually we export. And so for us, we absorb part of the cost of the
tariffs that China imposes on US military culture. So that's a problem.
When it comes to other, the products we import is true that prices at the source
are not cut. So it is a tax for the whole sale.
But as you know, not all price increases to the whole sale are instantaneously
rebated to the level of prices. So if you see a change in exchange rate,
for example, you don't have an instantaneous change in prices retail. Eventually long
term, again, we economists that say, oh, imperfect competition, this is what happened.
Yeah, but we're never in perfect competition. So What happens? I think the bottom
line is there will be an increase in prices. Absolutely will be one to one.
Absolutely not. Over what time period? God only knows. That's fascinating.
So does that leave you with capital is or capital isn't on the question of tariffs
with either Trump's proposals or Harris's far tamer proposals? I am an old -fashioned
economist. I tend to be against the types in general. So I think overall is not a
good idea. However, if they're part of a meaningful industrial policy could be a
good idea, but they need to be paired with a lot of other things at the same
time. It's not because we put a tax on Chinese toys that all of a sudden we're
going to develop a toy industry. And by the way, I'm sorry for the kids, but if
there is an industry that I don't consider strategic, is the toy industry. - Right,
or perhaps a better example would be, it's not at all clear. In fact, it's not
true that by putting a tax on Chinese semiconductors that we're going to suddenly
redevelop semiconductor manufacturing capacity in this country, right? - No, but for
example, in the EV now, we might wanna discuss whether this is a good idea or a
bad idea, but If you think that the United States can catch up or Europe can catch
up to the production of EV by China, then putting a tax might be a good idea.
But remember, there are some costs because if you put the tax on EV, you're making
more difficult for people to do the right thing, which is the transition to an
electric vehicle and less pollution. So this is what kind of you are in a pickle.
So in other words, our grand goal of deciding whether each of these proposals where
a capital is or a capital isn't is really beautiful in theory, but gets really,
really difficult when you get into the weeds on it, because what might be a bad
idea and isolation might be a good idea as part of a larger picture. Yeah, and I
would like to add one thing, that Trump, logic of bargaining all the time. I think
he's not very strategic. So in business, he was smart enough to change partners all
the time. So you always find a full deal in business with him. But when you are
with nations and especially with allies, you are in a repeated relationship. And so,
yeah, you can threaten once, but you cannot threaten constantly and maintain the
relationship. The risk is that we're really unraveling in a beggar -your -neighbor
policy, which was one of the many causes of the Great Depression. Herbert Hoover,
he was the one who introduced tariffs, and the outcome wasn't good.
One other thing I did want to touch on, which is that Trump's answer to a lot of
things does appear to be based around more drilling and how that will lower energy
prices and that has struck me as somewhat foolish in the sense that both energy
prices are set on a world not natural gas natural gas is a local market oil prices
are set on a global level and so the ability for the US to drill more and bring
down oil prices is just not really how it works and then secondly or just as
importantly the ability of the US to drill more is also predicated on the market
and where prices are and whether the market is willing to finance drilling because
most of a lot of American oil supply comes from fracking. That's the swing supply
and fracking isn't profitable unless oil prices are high and you can't make publicly
traded companies drill if they're going to lose money on their production. So this
idea that we can simply drill more and that's going to reduce energy prices seems
to me to be fraught for a whole bunch of reasons. Do you think I'm right about
that, Luigi? I think you know more about fracking than I do, so I trust your
answer on fracking. I think in the last few years, we have seen U .S.
companies benefiting tremendously from lower price of gas because, as you said, the
market for gas is segmented. And there is an issue about the impact of this on
climate change, there is also an alternative that if some of the industries move to
China, in China, energy is produced still with coal. So one can make a global
climate change argument, say we should impose tariffs on China because of the carbon
content and favor local industry because if we could use in the United States with
gas and we kill cold production in China, at the global level,
the world is better off. Aubrey McLendon, who was one of the pioneers of natural
gas fracking, made lots of arguments. And it was obviously in his pocketbook
interest, but to transition to a natural gas economy. And I know natural gas is
complicated among environmentalists, but it's better than oil. And certainly, if you're
arguing for energy dependence or American control over prices, you would be in favor
of transitioning to natural gas wherever possible. But my understanding, this is worth
a separate episode, my understanding is that this point, solar and wind are so
cheap, it's really a pity not to try to take advantage of those more. So I think
that there are some bottlenecks in the process, but even Texas is going solar big
time. Yeah, oh yeah, I think Texas as a shockingly high percentage of its energy
being produced by alternative energy sources, which is not what you would think of
when you think Texas.
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/stiglerjir. Okay,
so I know you don't want to talk about taxes. We all agree taxes are really
boring, but it is also one of the great differentiations between Harris and Trump,
and it may be a differentiation that doesn't matter because perhaps neither one will
be able to pass their plans, but I think the two things that stand out to me most
about This proposal, and I think, by the way, the child tax credit is interesting
and great, but JD Vance has proposed the same things. They don't so much differ on
some of these details, but Harris definitely believes in a billionaire tax, and she
believes in raising corporate taxes. And do you have a view on either of those
issues? One can have a view on two grounds, one from an overall fiscal point of
view, and the other on a point of view of quality as a measure of fairness. From
a fiscal point of view, I think we are in a, may I say, freaking disaster.
And this is the level of deficit of the current administration, which is the Biden
administration, is really very elevated, given that we are still in an expansion,
so we're not in the middle of a recession, we're not in the middle of a COVID
crisis, we still run an unsustainable deficit at the level of debt to GDP that has
become dramatically high and with future prosperity in terms of growth of population
that are pretty slim. I feel like I'm leaving the same nightmare twice because when
I was like a kid this was the status of Italy in the early 80s. The result has
been abysmal because Italy, I don't know that necessarily caused the effect, But
Italy from the mid 90s to today has stopped growing completely in level of GDP per
capita. So I think that that is a nightmare for me. So I am more of a fiscal
hawk. Now, of course, I don't want crazy taxes, but I think a slight increase in
corporate taxes, I think is is a great idea. One aspect that it seems to me the
highest proposal is trying to Target is the fact that there is an enormous amount
of capital gains that are not taxed because they are transferred through inheritance.
So there is a loophole that if either you donate or you transfer through
inheritance, it appreciates stock. Nobody pays the capital gain on that appreciates
stock. I think that that's a loophole that needs to be closed. Certainly it to be
the clause, especially for enormous amount of wealth. So imposing it for people
without above $100 million, it seems that is really a drop in the bucket in terms
of reduces inequality, but a drop in the right direction. - Yeah, perhaps our whole
podcast should just boil down to whether or not the national debt and the budget
matters, because that for sure is the one thing that neither candidate is talking
about, which is how they're actually going to pay for their proposals, much less
reduce our stupendous debt. And whether or not it even matters, we've moved to a
MMT economy without anybody even officially embracing MMT. Most economists are at
least many, having thought that it doesn't really work. But it's actually pretty
insane. And I was thinking about this also as we discussed earlier about inflation
and interest rates, because if we don't get our debt under control, then in the
end, even the Fed starts to lose whatever control over interest rates it actually
has, right? Everybody is ignoring the proverbial elephant in the room, which is our
national debt, and the fact that if we don't get that under control, that is going
to sharply limit our options in the future. Yeah, I'm pretty sure, but I think
there is a conspiracy not to talk about this during election. Right, but isn't that
a problem? I mean, if in the end, everything else could be perfect and great, but
the national debt continues to explode, it's not going to be perfect and great for
very long, right? We're losing control over our future. So in the end, by not
talking about it, we're all just dancing around the issue that really matters. I
completely agree. I completely agree. So one thing that I, but this is more an
interesting nugget is the position on cryptos. You know,
Donald Trump recently has come out big, big time in favor of crypto against any
form of central bank digital currency, which means the ability of the central bank
to issue a digital currency that we can use. And it says today we have only
physical currency that individual can use, the paper dollars. There is no strong
reason why we shouldn't have a form of digital currency that people can use in the
same way in which we use the paper dollar for reasons that are not completely clear
to me, but even Viva Ramaswamy was completely against this from the beginning of his
campaign. Trump now has embraced this idea and his embrace crypto wants to make the
United States the capital of cryptos. Isn't he just positioning himself among his
base and trying to win for a crowd of people who might be independent voters,
particularly in Florida by saying this, because he was once anti -crypto, and now
he's pro -crypto. And what does it even mean to be pro -crypto? I view all of this
as an election game rather than as anything real or any evidence of a real policy.
But maybe I'm too cynical. - No, I think you're not cynical enough because I think
that this stuff will have consequences because first of all, Harris is more
moderately but trying to chase him a bit. Part of this explosion of the crypto
people is because the SEC has been pretty aggressive in trying to regulate crypto.
Last time I checked, I think even Harris was trying to take distance from the
position of Gensler as the SEC. Nobody wants to touch it also because they donate a
lot of money. We know now that in the midterm election, some vacant freed freed
donated a lot of money to both parties. If history is any guidance,
they're still doing that on both sides. And so the other thing that I would like
to discuss because is the lack of the rough that really is painful for me is the
lack of a real push for more competition policy. If If you are concerned about high
prices, I have a paper with Marafacha showing that in the United States people pay
a much higher cost of cell phone. Why? Because there are only three providers. You
go to Europe and cell phone works as well as here. You go to Germany, you go to
Denmark and cost a fraction of what it costs today here. So that's a tax, a tax
to consumers that is redistributed to shareholders and managers of the Verizon and AT
&T. You can apply this logic in many places. It would be natural to have a merge
of an aggressive competition policy to keep prices lower or even reduce prices in
some cases, like a cell phone industry would be a case. And this could be applied
to cell phone, housing, even energy, all the stuff above. And the fact that in
spite of the demand by consumers, because there is no doubt that voters are
concerned about high prices, in spite of this demand, we see no supply.
Why we see no supply? The cynical part of me is say because the people benefit
from these high prices are the one who finance both parties. Yeah. Oh,
I think you're - Right, I think where I'm getting on this whole discussion is that
what we're lacking is a grand unified theory that all these things bleed into other
things. And it's easy to pull on one little piece of it like tariffs or one little
piece of it like inflation and price controls. But if you just pull on that one
little piece of it, and you don't actually look at the larger quilt, the larger
fabric that you're either unraveling or knitting, then it really just doesn't make
any sense at all. And either neither candidate has a sense of any kind of grand
unified theory or doesn't want to take it on, or they view it as too complicated
for the American public, so they're not talking about it. I'm not sure which is
better, but I think that lack of a coherent framework is definitely a capital isn't,
at least in my view. And what is very humbling for a person who spent the last 30
years of his life teaching economics is that this is the first presidential race
where both candidates have an undergraduate degree in economics. Ain't good.
I had totally forgotten that. Oh my God. That just proves it, Luigi. Down with
economists. Down with economists. I don't think we have done a good job, I have
have to say.