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Dec. 4, 2024 - Epoch Times
21:54
How Trump Can Unleash Production and Prosperity: Jeffrey Tucker
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As we approached the election, the financial press was assuring us that everybody's happy, everybody's doing well, our incomes are up, the jobs are plentiful.
And then there was an intuition on the part of the public that none of this is true.
I mean, there was like, well, I'm not so sure about this.
A lot of what we're faced right now is kind of this terrible thicket of compliance, that if we can revisit that thing and really do something dramatic, And the Trump administration is talking about it.
We could see that all the problems that they're facing just pushed aside and overwhelmed by exposure of wealth creation and entrepreneurship and innovation and optimism and joy that comes with that old-fashioned idea of freedom.
We're launching a special American Thought Leaders series during this post-election transition period where I will be interviewing former and possible future Trump administration officials, as well as subject matter experts, to understand what the incoming American administration's policies in 2025 may look like for America, Canada and the world.
To start off, I'm sitting down today with economist Jeffrey Tucker, founder and president of the Brownstone Institute and a senior economics columnist at the Epoch Times, to understand the tough economic reality the incoming Trump administration faces and what might be done about it.
Jeffrey Tucker, such a pleasure to have you back on American Thought Leaders.
Good to be here.
Thank you.
You know, you had a piece maybe a week ago, a week and a half ago about a recession that will be backdated, meaning that we'll really see it In 2025 you're expecting, but it really is just going to be a look back at the real numbers way back to 2022. I think that's going to happen.
And the foreshadowing of that was actually the jobs numbers that came out a week before the election, if not a few days before the election, that showed catastrophic numbers.
I think the numbers were so low that it's negligible.
And it's almost like we're coming to terms with reality.
But I think that as the data collection is getting more honest and recovering from the lockdown period and all the disruption, that we're just getting better numbers.
And the numbers look terrible.
I'm fully expecting we're going to see some revised numbers going into next year.
And they'll recognize that we've been in a technical recession for the better part of two years.
Or three, yeah.
Let's lay out what this looks like.
Your report is very interesting.
40% over the last four years basically is huge.
Yeah, in a technical recession since 2022. I should add something very interesting when I came out with that report.
I fully expected people were going to tear it apart.
And when I talked to the two economists who wrote it, I said, you need to show all your work.
I need full citations and everything of everything you do so that your results can be replicated.
You know, we don't want to be like epidemiologists here.
We want to show our work.
That's a little dig there.
And so they did it and I have to tell you, Jan, that report has gotten vast amounts of attention.
Not one message, not one hint of dispute of these numbers has come along since we released that thing.
I think you're postulating inflation is the big issue.
Whoever it is that would have inherited this mandate is going to have to deal with that.
And it's not an easy fix.
It's not an easy fix.
And of course on the campaign trail everybody says I'm going to bring prices down.
There isn't a mechanism that the President of the United States has to do that.
And we can explore various ideas that have been thrown around out there and it's fine.
I'll just throw this out.
I think that one of the promises of this new administration, especially with the Tech people with Elon Musk involved, a lot of innovation, basically the idea of unleashing prosperity, unleashing innovation, unleashing production.
This is always supposed to somehow deal with economic problems, isn't it?
Well, you kind of jumped to my conclusion in a way, which is fine.
My own view is that that is the best hope for reducing inflation.
That's what one would think would be a...
Well, you wouldn't normally think that because I tell you, if you read the financial press and if you have any point in the last 30, 40, 50 years, what you always hear is that inflation is caused by an overheated economy.
You've heard this, right?
So I've heard that, but I've always found it to be bizarre.
And keep in mind, just for the benefit of the viewers, I'm just in the process of learning economics through these wonderful little books like the one you described in some giant ones, like basic economics.
Yeah, that's a big one.
But that never made sense to me.
I'm glad to hear that.
I'm glad to hear that.
And I was hoping we would get to this topic because under the old Keynesian scenario, it's like upside down economics, really.
The idea is that the economy overheats.
These metaphors you get in economics.
Why are we talking about overheating?
Overheating what?
Is there a pan on the stove or something like an economy as a soup?
Anyway, overheating drives inflation.
That is simply not true.
And you just only need to look at the logic of supply and demand.
If you can increase the supply of goods and services and the same amount is being And the demand remains the same, then that's going to reduce the price.
I mean, it just is.
You're going to get lower prices with more production rather than higher prices.
That just remains true.
So a greater amount of productivity and growth is going to have overall an effect of downward price pressure.
And that's a good thing.
But what is this argument for the overheating then?
Because as I said, it doesn't come intuitively to me to imagine that someone would...
You said people would argue this and you made an argument against it.
Well, it has to do with what's called the old ISLM framework of the Keynesian hydraulics, you know, where there's...
Way over my head.
And truly, you can read the general theory of Keynes' book from 1984, I think it was, and read all about it.
But basically, he turned classical economics upside down and shoved all sorts of new aggregates together that don't belong together and posited You know, a new operation of a new machine, that would require experts to manage everything, whether it be an inflation, unemployment trade-off with the so-called Phillips curve, so you could drive one down by driving the other up, and just all these crazy things, aggregate demand, aggregate supply.
And it just enraptured a generation of economists, or two, or three, or four.
And we've yet to kind of unplug that from the public mind.
But the bottom line, you're telling me that there just isn't a good argument for this at all.
No.
No.
So we don't need to consider it.
Is that what you're telling me?
No, I think that's right.
And if there's one takeaway, I would say that.
Economic growth mitigates against inflation.
Again, but to me that's the intuitive, obvious thing that one might expect, right?
You know, which reminds me, one of the raps against the Trump administration that I'm hearing right now, whispered in my ear, he doesn't have enough economists advising him.
Now you'd think my response would be, oh no, that's terrible.
But maybe that's my first response.
My second response is, hmm...
Maybe that sounds so bad!
Do you know what I mean?
Well, you have people that are enthusiastic about building things, right?
I mean, this is...
Well, here's a huge topic, right?
You know, the gutted manufacturing sector of America that everyone that I've talked to that I've found credible tells me, and again, it's kind of intuitive, this must come back.
There's no winning scenario without that.
Interesting.
Yeah, that's a problematic one.
You're good at leaping all over the place.
I'm not sure that's good.
Well, I mean, no, it's fine.
But the manufacturing problem is a big problem because it traces back 40 years.
And it's fascinating to me that we've gone 40 years and And gutted the country of dozens of industries for which we once had all the infrastructure, all the institutional knowledge, all the talent, all the skills and all the markets and all the supply chains and now they're all gone.
That is an incredible thing to have happened to a country.
And I look back at my own writings and with some degree of shock that I would write about this and I used to believe the old line that this is just free trader work.
Hey, this is great.
And I read it now and I can't believe that I'm the writer of those things because it's not correct.
I've spent some time revisiting the works of David Ricardo and David Hume, the early trade theorist, and then also A man who I count as a mentor, Gottfried Hobbler, who was largely the architect of the General Agreement on Tariffs and Trade in the waning years of World War II, who gave us the free trade world.
They never anticipated anything like this would happen.
because they expected there would be this sort of flow mechanism that would go back and forth, this specie flow mechanism that imports and exports would balance out based to the flow of gold would cause prices to rise in one country and discourage this specie flow mechanism that imports and exports would balance out based to the flow of gold would cause prices to rise
And so there would be this kind of flow mechanism that really did, it broke at the same time that American manufacturing began to leave our shores, and that would have been, you know, after 1970 or 71.
Jeffrey, we're going to take a quick break right now, and we'll be right back.
And And we're back with president and founder of the Brownstone Institute, Jeffrey Tucker.
Well, when you're talking about these foes, it reminds me of, you know, if you read Robert Lighthizer, the former and possibly the incoming, I mean, if I was going to guess, I would guess he's going to play a very important role in trade policy.
But his philosophy is simply this, as I understood from his book and confirmed from speaking to him, is simply that...
If there's a sustained trade deficit between two trading partners over time, of course there's going to have been flow over short time periods, but ultimately then someone is gaming the system.
So you're going to use the tools in your arsenal, one of them is tariffs.
I saw a headline recently, Arch Protectionist.
These terms are thrown around a lot.
But as I understood it, the tariff or whatever item is just simply a tool.
It's a tool, and I would argue that it's probably a bandit, but it's also an inevitable result of You're going to have tariffs under these conditions.
You're just not going to continue to experience these kind of blood-bread increasing trade deficits forever and see our country go from a nation of makers and doers into a country of debtors.
You see why I'm kind of dragging us into this area, which was one of the thinking, because you kind of need that for there to be economic prosperity in the first place.
It seems obvious.
I think what you really need is what the market needs.
What I'm suggesting is that it's an unnatural situation where you have a country with all the infrastructure, all the skill, all the markets, all the supply chains, and all the innovation, all the energy, just be depleted like that.
This looks like the work of some sort of mercenary army that came in and just gutted major swaths of the country.
I have doubts that there's any point in trying to restore it exactly as it was, but nonetheless, There are ways in which we can inspire the creation of a new manufacturing sector, and I think we're poised to do that.
I don't think tariffs alone are going to achieve that.
I'll tell you, just very quickly, something that I think I wrote about in the article is that there are a number of motivations for tariffs.
One is to raise revenue, and Trump's We've talked about that and mercifully even raised the prospect of going back to an 1880s, 1890s kind of situation where there's no income tax and that all the revenue funding of the government comes from tariffs.
And I have to say, that sounds like a decent tradeoff to me.
But that requires a revenue flow.
On the other hand, the goal of protecting our industries from what people call unfair competition from abroad requires less trade.
So if you're doing the tariffs for purposes of revenue, that is potentially, at some point, working at cross-purposes with your desire to use tariffs for protecting industry.
You see what I mean?
So the revenue requires a continual flow of trade.
The objective of protecting your industry against low-wage competition from abroad requires throttling down trade.
So there's some magic point in there that You get the maximum of both effects, which I presume is what Trump is going for.
I'm not sure that we know exactly where that is.
I certainly wouldn't.
The most memorable image to me, right, of the last, I don't know, however long, is this 12-story rocket landing In these calipers.
And the innovation that it took to achieve that.
And the reason that it could exist, that there's this thriving space industry in America.
It's because they protected them from the Chinese regime's predatory practices on everything else.
Are we sure about that?
Okay, but it's got to play some role, surely it does.
But there's also the innovation and the mind of Elon Musk.
Well, no, so that's all absolutely the case, right?
I think the way that the Wolf Amendment worked was it just said, you know, this is a very sensitive area of technology.
You just can't work with Chinese companies on it.
So in other words, there wasn't that technology transfer deal that happened with every single time you made a partnership and worked together.
Yeah, yeah.
So it just kept that innovation at home a little longer, just a little longer.
Something like that happened with the steel industry in the United States in the 1880s and 1890s.
When we're speaking about China, we should not forget the basis on which China is expanding its industrial capacity.
With a direct purpose of competing with the U.S. with a low-wage, high-tech model to eat American industries, right?
The basis on which they're doing that is in large part, in substantial part, funded by their stash, gigantic stash, of U.S. dollars sitting in their central bank.
U.S. dollar assets in the form of U.S. debt.
Those are serving as the basis of their industrial production model.
They copied the whole scheme from Japan.
In both cases, they're serving as collateral for expanding their industrial base, for their own form of industrial planning.
And it's kind of, it's a simple model and a cheesy one.
What is America doing?
Let's eat it.
That's it.
And that's what's happening right now with all the green energy stuff, right?
Under Biden and before, the U.S. decided, all right, we've given up toys and shipbuilding and tools and steel and And textiles and clothing and household appliances and semiconductors.
Too bad.
But now we can have solar panels and other things associated with clean, green energy, right?
So wind turbines and the like.
Well, that has been fun, I suppose, why it lasted, but that's not going to last very long.
I mean, China's all over it.
It's crazy.
I mean, that is not sustainable.
And I'm curious, and we have to remember, too, that all those industries in the U.S. are entirely subsidized.
By the federal government.
So I'm looking at the Trump administration.
Including the EV market, I might add.
Which has, by the way, seen a ton of innovation.
That's remarkable.
And I should have mentioned, but not as much innovation as we see in China, apparently, reportedly.
So I don't know.
And also that's being dialed back because of the lack of consumer market.
I mean, Elon's really the only, you know, profitable producer in this sector.
But, yeah, I shouldn't mention that.
But I'm trying to figure out where the Trump administration is going to go on this.
I mean, I'm I think it's a decent guess and assumption they're going to unplug all that stuff because it's just only sustained by federal subsidies.
That's what he means by drill, baby, drill.
It's not just drilling oil, which he says liquid gold is under our feet.
And it's true.
I mean, I'm from West Texas originally, and when I go back home, driving across all those miles for hours and hours and hours, knowing for sure That there are oceans of oil under our feet, over expanses.
And seeing the landscape entirely populated by these wind turbines everywhere.
What are we doing?
We've got wind turbines all over the place, killing the birds and everything else.
Well, there's oceans of energy under our feet.
On the face of it, it's obviously crazy.
So Trump has talked about this openly.
I'm guessing that we're going to unplug the green energy stuff.
But also, the other thing is that once you end the market for that, that also unplugs China's market for that nonsense, too.
Is it all nonsense, really?
Some people say it's not.
It's just overblown.
Well, sure.
The idea is it's subsidized for a good cause.
Well, I don't know.
I have my doubts about central planning, that Washington knows what kind of energy we ought to use.
I mean, it doesn't really make sense to me.
And by the way, I would say the same thing.
There are some people, I think, that exaggerate.
The merit of oil and gas, so-called fossil fuels.
You can get carried away with that.
I'm a believer in markets.
Let's let the markets decide.
Let's subsidize things as little as possible and see what naturally emerges in the most efficient production.
But I don't think for the US it's going to be wind turbines and solar.
Actually, in the Biden administration, they have started making fossil fuels much more available.
That was for one purpose only.
That was to dial back the public theory about the price of gas.
That was it.
I don't know if it's quite gotten to the drilling stage, but it seems like the Trump administration has a head start in this area now.
Well, which raises another point.
It's a point about which I could be critical of a lot of the rhetoric on the campaign trail by Trump saying that the inflation was caused by the wreckage of the energy markets and that those drove up prices and those drove up the cost of production and those Prices bleeded out to all the other prices and so on and so on.
Okay, that's a campaign trail, but that is not a rigorous analysis of the cause of inflation.
And it follows that just by freeing up the oil markets and drilling, that's not going to drive down inflation.
That's not.
So I would be critical of Trump for that sort of analytics.
It's simply untrue.
On the other hand, Trump's critics are wrong to think that his tariff policies are going to drive up inflation.
You hear this all the time.
Oh, Trump's going to unleash inflation with his tariffs.
It's not going to increase inflation.
It's going to increase the price of relative goods and services by those goods that are most affected, namely imported goods.
Well, Jeffrey Tucker, such a pleasure to have you on again.
Thank you, Jan.
Thank you all for joining Jeffrey Tucker and me on this episode of American Thought Leaders.
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