WEBVTT - Dr. Paul Krugman Talks Jobs and Economic Policy

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<v Speaker 1>Joining us now is the laureate and there is a

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<v Speaker 1>ned Philps Paul Krugman distinction. In the year where Professor

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<v Speaker 1>Krugman took the trophy, he was the sole winner. I

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<v Speaker 1>can't tell you within modern economics a special that is.

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<v Speaker 1>I've been a fierce defender of his international economics, retiring

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<v Speaker 1>from the New York Times colin where he's been a

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<v Speaker 1>lightning rod of debate, and we are honored that we

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<v Speaker 1>can speak our international economics forward with Paul Krugman. Paul,

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<v Speaker 1>thank you so much for joining Bloomberg this morning. If

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<v Speaker 1>you had a cup of coffee in mar Lago with

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<v Speaker 1>President elect Trump this morning, how would you brief President Trump?

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<v Speaker 2>I would ask, what on earth do you think you're doing?

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<v Speaker 2>You know, it's we're looking at a US economy that

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<v Speaker 2>this morning's Jaws report was really good. Everything is kind

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<v Speaker 2>of coming up roses. It's soft landing everywhere. And yet

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<v Speaker 2>he's prepared, or claims he preparing to go on this

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<v Speaker 2>trade war against everybody. And the question really is why,

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<v Speaker 2>what is it? Why do you want to do something

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<v Speaker 2>so disruptive when you're inheriting an economy that is really

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<v Speaker 2>looking pretty good.

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<v Speaker 3>I'm looking Paul Krugman.

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<v Speaker 1>It's something you taught with a piece of chalk at

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<v Speaker 1>Princeton and at City College. The basic idea here is

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<v Speaker 1>a tariff chart, which is the microeconomics in dynamics. We

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<v Speaker 1>talked to Richard Clara the other day about the dead

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<v Speaker 1>weight loss of tariffs for our listeners, the magnitude of terroriffs.

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<v Speaker 1>Does it matter or is there just simply a dead

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<v Speaker 1>weight loss to each American citizen?

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<v Speaker 2>Oh? No, the magnitude. I mean, one of the things

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<v Speaker 2>that you learn from at studying the economics of tariffs

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<v Speaker 2>is that tariffs at low rates do very very little harm.

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<v Speaker 2>Would we had an average terraff of something like two

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<v Speaker 2>to three percent, We do at the moment coming into

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<v Speaker 2>this that if you ask you know, how much difference

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<v Speaker 2>would it make if we got that down to zero,

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<v Speaker 2>The answer is basically invisible. But if you go from

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<v Speaker 2>five percent to twenty five percent, which is what Trump's

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<v Speaker 2>talking about for everybody and sixty percent for China, then

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<v Speaker 2>it's roughly speaking, we think that the losses are to

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<v Speaker 2>go up roughly as the square of the terriff freight.

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<v Speaker 2>So with Trump talking not about a modest increase in tariffs,

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<v Speaker 2>not about a terriffs on a few products, but across

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<v Speaker 2>the board trade war sweet Holly Tarff levels that starts

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<v Speaker 2>to become a really, really big deal.

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<v Speaker 1>Paul, I've been If you're in folks, the textbook on

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<v Speaker 1>this is Krugman Opsfeld.

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<v Speaker 3>It's all again.

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<v Speaker 1>You throw Ken rogoff in as well, but Krugman ops Who.

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<v Speaker 1>There's some adult textbooks out there of what Kruman invented

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<v Speaker 1>for international economics. Paul, I've always defended you by saying

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<v Speaker 1>the then diagram of Krugman economics and John Taylor economics

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<v Speaker 1>at Stanford is pretty pretty tight. Can Kevin Hassett advise

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<v Speaker 1>this president towards some form of tariff moderation or sanity?

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<v Speaker 2>Kevin Hassett has a history of basically saying whatever I mean.

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<v Speaker 2>He's been a loyalist and a court here. I would

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<v Speaker 2>be really shocked if he goes to you know, Tarras

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<v Speaker 2>appears to be a real Trump obsession, and I'd be

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<v Speaker 2>shocked if has it, or actually anybody stood up to

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<v Speaker 2>Trump and said, mister President, you're thinking about this all wrong.

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<v Speaker 2>You know, I've been writing for listeners. I'm retired from

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<v Speaker 2>the Times, but not from life and I'm writing almost

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<v Speaker 2>every day on my substack.

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<v Speaker 3>How do we your substick?

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<v Speaker 1>He needs to make a buck on this, That's what

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<v Speaker 1>it is, Paul, Well, at the moment, how do they

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<v Speaker 1>still see your writing as you've exited The Times?

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<v Speaker 2>Ol Krugman dot substack dot dot com. You just google

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<v Speaker 2>Krugman substack and you'll find it. And look, you know,

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<v Speaker 2>I'm free to it's a newsletter slash blog. And I mean,

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<v Speaker 2>and one what I wrote the other day was we're

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<v Speaker 2>seeing a continual dynamic where people who claim to be

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<v Speaker 2>close to Trump but remain anonymous tell news you know,

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<v Speaker 2>source of newspaper writers, Hey, he's not really as crazy

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<v Speaker 2>as he sounds. And then Trump immediately reacts with a

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<v Speaker 2>truth social post saying yes, I am.

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<v Speaker 3>So.

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<v Speaker 2>It does look like we're really talking about, uh, you know,

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<v Speaker 2>in tarrace on a scale that we really have not seen.

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<v Speaker 2>We're talking about a reversal of really ninety years of

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<v Speaker 2>US policy. Yeah, trying to.

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<v Speaker 4>Where I wanted to go, professor. I mean, you know,

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<v Speaker 4>I grew up on Global Wall Street, where and many

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<v Speaker 4>of our listeners and viewers as well of internationalism being

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<v Speaker 4>a fundamental business tenant. Now that's taken a back seat

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<v Speaker 4>here over the last ten years. Is internationalism dead?

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<v Speaker 2>Well, probably in the form it was, Yeah, I mean

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<v Speaker 2>a lot of this was USA geminy, and we thought

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<v Speaker 2>that a more prosperous, peaceful world was in our interest.

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<v Speaker 2>You know, what was good for the world was good

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<v Speaker 2>for America, and we thought that freer trade was good

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<v Speaker 2>for America, and we led the way. We built a

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<v Speaker 2>world trading system kind of in us, in our own image.

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<v Speaker 2>It's very rules bound, legalistic, it's you know, and it worked.

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<v Speaker 2>We've managed to get everybody's tariffs down. We got to

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<v Speaker 2>a world of pretty close to free trade. We've been

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<v Speaker 2>in the last couple of decades. The European Union, which

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<v Speaker 2>is not very united many things, but is unified on

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<v Speaker 2>trade policy, sort of co manage the system with US.

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<v Speaker 2>Now we've gotten much more nationalistic, and even Biden was

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<v Speaker 2>pursuing for I think pretty good reasons and pretty seriously

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<v Speaker 2>nationalistic policies, specifically on technology and China. But so the

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<v Speaker 2>age of full on more globalism is good. That's behind us.

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<v Speaker 2>That that really died about a decade ago. But there's

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<v Speaker 2>a big difference between saying, Okay, we're going to be

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<v Speaker 2>much more selective about this and maybe even be protectionists

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<v Speaker 2>here and there and saying, you know, smooth Holly had

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<v Speaker 2>the right idea, which is basically what Trump is saying.

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<v Speaker 4>Right, So, professor, you know, we had today's a big

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<v Speaker 4>jobs day here on a global Wall Street, showing again

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<v Speaker 4>the strength of the US labor market. That calls into

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<v Speaker 4>question another one of the presidental policies, which is about

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<v Speaker 4>immigration and what to do with the migrants that are

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<v Speaker 4>already here. From an economic perspective, what would your how

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<v Speaker 4>would you advise the president on thinking about immigration policy.

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<v Speaker 2>I mean, immigration has been one of the great strengths

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<v Speaker 2>of the US economy, whatever else you may think about it.

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<v Speaker 2>And I mean it's not actually a source of crime

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<v Speaker 2>or any of the things that he says, but the

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<v Speaker 2>immigration has been a tremendous safety valve, has helped to

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<v Speaker 2>contain inflation. And the immigrants, particularly if I might say

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<v Speaker 2>undocumented immigrants, they're not evenly spread across the US economy.

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<v Speaker 2>There a really critical part of the labor force in

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<v Speaker 2>some particular sectors. If you want, if you're worried about

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<v Speaker 2>agriculture or meat packing or construction, those are all sectors

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<v Speaker 2>where we have an aging The native born population is

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<v Speaker 2>agent the working age. Native born population is shrinking because

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<v Speaker 2>we've had low fertility for a really long time, so

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<v Speaker 2>that without immigration we would be basically we would be Japan.

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<v Speaker 2>And so from an economic point of view, this is

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<v Speaker 2>a hugely This is a tremendous self owned Paul.

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<v Speaker 1>Krugman with us. We are thrilled to these with us

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<v Speaker 1>here with Cee you and my Qun's Stone Center and

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<v Speaker 1>socio Economic Inequality among others, and affiliated also with Yellows,

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<v Speaker 1>I should say, and of course he years at Princeton

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<v Speaker 1>as well. I talked to him about his first paper

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<v Speaker 1>once at Yale, which was in star Trek.

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<v Speaker 3>This is a few years ago, right, yeah, just after Ricardo.

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<v Speaker 3>But the answer is the laureate Paul Krugman with us.

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<v Speaker 1>Thank you for the huge response to Professor Krugman with

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<v Speaker 1>us this morning. Paul.

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<v Speaker 3>I've said this before, but I.

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<v Speaker 1>Guess there can be a tour of duty when you

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<v Speaker 1>win a second Nobel Prize. You deserve a second Nobel

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<v Speaker 1>Prize for your persistent discussion of wages and monopsony in America, Folks.

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<v Speaker 1>Monopsony the model is a rubber plantation in Malaysia where

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<v Speaker 1>the rubber plantation sets the price because they have power

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<v Speaker 1>over all the farmers and the rubber trees in the

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<v Speaker 1>manufacturing process. Professor Krugman, how is monopsony in America affecting

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<v Speaker 1>our listeners in our viewers on YouTube?

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<v Speaker 2>Oh gosh, I mean, I'm in a way what it's

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<v Speaker 2>telling you. I mean that the main monopsony issue on

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<v Speaker 2>wages is is that it's okay to raise the minimum wage.

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<v Speaker 2>I mean, is this is where we really started to

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<v Speaker 2>take it seriously when you first had the work by

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<v Speaker 2>Card and Krueger, now replicated by many people, which says

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<v Speaker 2>that local minimum wage increases don't actually reduce employments. It's

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<v Speaker 2>it you eq on one on one unless you well,

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<v Speaker 2>I have to say, even in my own textbook, we

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<v Speaker 2>do talk through how a minimum wage can reduce employment,

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<v Speaker 2>but it doesn't actually seem to happen in the United States. Now,

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<v Speaker 2>that's because minimum wages are low in the United States.

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<v Speaker 2>And you know, if if you set the minimum wage

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<v Speaker 2>at forty dollars an hour, even I would accept that

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<v Speaker 2>that would have some employment consequences. But so that's the

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<v Speaker 2>main place where it hurts. Although if you are you know,

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<v Speaker 2>a small small supplier or something trying to pedal your

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<v Speaker 2>stuff on Amazon. The fact you know that you've got

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<v Speaker 2>a giant Beza size monopsimist certainly affects your business.

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<v Speaker 1>I mean, it's very interesting to see Paul Krewman and

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<v Speaker 1>then the conservatives listening. I'm going to frame this, Paul

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<v Speaker 1>is a liberality in a way, is a locke in

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<v Speaker 1>individualism of conservative theory in America. Should we be more

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<v Speaker 1>like Germany flat on their back? Should we be more

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<v Speaker 1>like Sweden? Should we be more like France?

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<v Speaker 2>Well, I mean, ideally we should be more like Denmark,

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<v Speaker 2>which is a place that does strong welfare states, strong unions,

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<v Speaker 2>and does it well. It's you know, everybody's got. One

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<v Speaker 2>of the things. I've spent many years teaching a course

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<v Speaker 2>versus Princeton then than at CuNi on the ecnology of

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<v Speaker 2>the welfare state comparing different countries, and one of the

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<v Speaker 2>things you learn, first of all, the United States has

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<v Speaker 2>a much more we have a much bigger welfare state

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<v Speaker 2>than we like to imagine, but it's much smaller than

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<v Speaker 2>what European countries have. But there's no country that does

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<v Speaker 2>everything right. US healthcare is a nightmare. US retirement system

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<v Speaker 2>is actually pretty good. France, it's exactly the opposite. So

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<v Speaker 2>it's not as simple more government is good. I mean,

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<v Speaker 2>I think their conservatives always think that less government is good.

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<v Speaker 2>Liberals progressives never think that more government is automatically good.

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<v Speaker 2>But there are certainly things where we should be doing more,

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<v Speaker 2>and obviously that's on hold over the next few years.

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<v Speaker 2>But there are lots We can learn a lot from

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<v Speaker 2>other countries. So that's one thing I would say to

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<v Speaker 2>you as an international economist. The biggest problem with Americans

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<v Speaker 2>is that we don't actually seem to believe the rest

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<v Speaker 2>of the world exists, and we don't think that we

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<v Speaker 2>can learn lessons from things that other countries do.

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<v Speaker 4>Right, Professor, Most of the market participants that we speak to,

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<v Speaker 4>particularly over the last several months, and they see a

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<v Speaker 4>data point like today's non farm payils. So Nicoel, like

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<v Speaker 4>the FEDES, engineered a pretty solid soft landing. What concerns you?

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<v Speaker 4>What worries you about this US economy right here?

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<v Speaker 2>I think the US economy as of right now is

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<v Speaker 2>in very good shape. Okay, I am worried. You know,

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<v Speaker 2>I've been around a while and the whole ai fewer

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<v Speaker 2>and although the money being thrown that that technology gives

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<v Speaker 2>me definite nineteen ninety nine vibes the sense that we

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<v Speaker 2>may be having even if there's even if the technology

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<v Speaker 2>does do a lot of good stuff, and there's some

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<v Speaker 2>indications that it will, the valuations look awfully high, and

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<v Speaker 2>you can very easily imagine a kind of two thousand

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<v Speaker 2>and two thousand and one type. But the biggest concern

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<v Speaker 2>for policy, I mean, if if you actually believe that

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<v Speaker 2>Trump is going to do what he promised in the

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<v Speaker 2>campaign with these massive talents, mass deportations, and let's not

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<v Speaker 2>forget taking away a lot of the feral reserves independence

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<v Speaker 2>we are, it's not at all hard to see us gratuitously.

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<v Speaker 2>I mean, we're in good shape right now. But we

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<v Speaker 2>could very easily have a gratuitous outbreak of stagflation of

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<v Speaker 2>America and it will be entirely coming top down from

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<v Speaker 2>the from the White House very quickly.

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<v Speaker 1>Heref scrub Paul, we got to do this, Sircrubman won't

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<v Speaker 1>come back the substack this morning. The real threat, the

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<v Speaker 1>real threat of fake numbers.

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<v Speaker 3>Paul Krugman, are.

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<v Speaker 1>You suggesting the president and his administration will cook the books?

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<v Speaker 2>I think that's a very high possibility if you believe

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<v Speaker 2>what I'm saying about inflation. Inflation is actually going to

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<v Speaker 2>go up substantially. And do you really imagine that Trump

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<v Speaker 2>will just sit there at and not say these are

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<v Speaker 2>fake numbers, it's fake news and put pressure on the

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<v Speaker 2>Bureau of Labor Statistics to produce better numbers. I mean,

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<v Speaker 2>we've seen populist regimes do that all over the world.

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<v Speaker 2>Why imagine that it won't happen here? And I know

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<v Speaker 2>that people, you know, people who've had long careers at

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<v Speaker 2>the Bureau of Labor Statistics are really worried about this.

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<v Speaker 2>So I'm just saying, you know, flag this. This is

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<v Speaker 2>something to watch.

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<v Speaker 1>Paul, generous of your time. Thank you so much again.

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<v Speaker 1>Paul Krugman in a New Life out. Do you got

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<v Speaker 1>it from Adam Two's substack? Yeah, maybe we should do

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<v Speaker 1>a substance.

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<v Speaker 3>And we should do that. Paul Krugman, thank you so much.

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<v Speaker 1>Don't know about Laureate of Princeton always in Cuney as well.