Economy

Remember the old quip about economists? “That’s all very in practice,” they say, “but how does it work out in theory?” Nobel laureate Paul Krugman of the New York Times is a splendid example of that sort of folly. On the evening of November 9, 2016, Krugman skirled that the election of Donald Trump would precipitate economic Armageddon. “If the question is when markets will recover,” he said, “a first-pass answer is never.” How could they recover since the nation had just elected an “irresponsible, ignorant man who takes his advice from all the wrong people,” that is to say, he didn’t take advice from people like Paul Krugman.Reality check: the day Krugman wrote that, the market closed at 18,589. In the last few days the Dow broke 50,000.

It began, as most things do under Donald Trump, with an idea that struck outside observers as a lark. An interested party – in this case, billionaire Ron Lauder – suggested to the President during his first term that the United States should acquire Greenland, a move that would represent the largest expansion of US territory since the purchase of Alaska from the Russians more than 150 years ago. The notion was reportedly considered and then left on the shelf, like so many ideas in Trump’s first term. Yet time away from the presidency gave it more resonance. Now the President is back on the case – and he seems very committed to the move, to the shock and horror of European observers who never took his Arctic ambitions seriously.

I hate to be the bearer of good news, but the US economy is doing quite well. A delayed government report shows that third-quarter GDP grew at 4.3 percent, hardly a record, but still healthy, the highest growth rate in two years. Last week’s inflation report showed a lower-than-expected number, and wage growth is exceeding inflation. Consumer spending is up, and, yes, the stock market is booming. Happy days are here again. The sky above is clear again. Many accounts on my X feed, which are either run by Democratic partisans or Iranian trolls or both, say that food-pantry lines are reaching record numbers this holiday season, and that poverty and homelessness are increasing even as the rich get richer. “Trump lies,” they said. Yes, and the sun is hot. What’s the point?

It’s becoming increasingly taxing for Donald Trump to defend his tariff policy. His latest gambit is to float the prospect of a $2,000 rebate to Americans from the tens of billions that the federal government has collected in tariffs. But will this prove any more successful than his previous attempts to justify his loopy tariffs?With the Supreme Court apparently poised to strike down his tariffs as a form of revenue collection designed to perform an end-run around Congress, Trump is scrambling. As usual, bravado prevails. On Sunday, he declared, “A dividend of at $2000 a person (not including high income people!) will be paid to everyone,” the president said on Truth Social.” Trump also dismissed his detractors as “FOOLS!

Donald Trump has punished European pharmaceutical companies by imposing 100 percent tariffs on their branded products unless they are prepared to set up a manufacturing plants in the US. That is one way of putting it, but why is the issue of tariffs so often seen from the point of view of the producers and so rarely seen from the position of the consumers? Besides punishing drugs companies, the President has also whacked the American public – or at least that section of the population which relies on patented medicines made outside the US. The cost of treatment for many of these patients will soar as a result. Does Trump think that people will somehow fail to realize this?

The Trump White House took a victory lap on Monday, declaring in its newsletter that the American economy is back – back bigger and better than ever. Core inflation is down. Industrial production is up. Claims for unemployment dropped. Tariff revenue rose. The newsletter even cites the Wall Street Journal—otherwise in bad odor in the Trump White House – for decreeing that the American economy is “regaining its swagger.” Is it time to splurge on a fancy vacation? As it happens, I’m currently visiting Vermont where the number of tourists is distinctly lower than in previous years.

I recently sat down to dinner with some very smart economists. I am the chief executive of an artificial intelligence company and so the conversation swiftly turned to the value of AI for the economy. The economists had many interesting things to say, both about the advantages of AI adoption and about the displacement effects on jobs. But about halfway through the dinner, another AI chief executive offered an opinion that struck me. He said: “I can’t quite articulate it, but I have a sense that what you are measuring with your GDP analysis is not what I care about. You treat this like an economic question. But it’s more like a geopolitical question.”  At a gut level, I knew exactly what he meant – but I also couldn’t clearly state the distinction.

The electoral risk to politicians involved in passing a dog's breakfast of a "big, beautiful bill" – and there have been too many of this century to count – is often overstated. Once bills this large and unwieldy are passed there are a litany of problems that emerge as Americans, dulled into frustration by the same old swamp, discover only too late which specific policies negatively affect their lives and businesses. But then there are also things they like about it too, and even measures that are initially unpopular find purchase. And I do mean purchase in both senses, as in literally bribing voters with their own money, as Barack Obama's Medicaid expansion did.

Give a country rare earth elements and it’ll have fighter jets, missiles and warships for a day. Force a country to extract and process its own rare earth elements and it’ll be safe from relying on countries run by unstable dictators forever.  Such is President Trump’s sensible line of thinking as he keeps up America's trade war with China. As China imposed export licensing restrictions on seven rare earth elements, or REEs, last week, Trump signed an Executive Order “launching an investigation into the national security risks posed by US reliance on imported processed critical minerals and their derivative products.” The administration is now pursuing a deal to procure REEs from Ukraine.