Speaker 1: Welcome to Out of Money. I'm Joel, I'm Matt.
Speaker 2: Today we're talking tariffs, doge and your Money with No Opinion.
Speaker 3: Yeah, Joel, So one of the benefits of hosting your
Speaker 3: own podcast is that you've got the opportunity to speak
Speaker 3: with some amazing folks who are much smarter than you.
Speaker 1: That is definitely the case.
Speaker 3: Today we're joined by economist Noah Smith, author of the
Speaker 3: sub stack No Opinion, where he takes these big, complex
Speaker 3: economic ideas and makes them easier.
Speaker 1: To understand for folks like us. Joel.
Speaker 3: I mean, we tend to focus more on micro econ factors. Right,
Speaker 3: we're a personal finance show, after all, it's still good
Speaker 3: to take a step back and to look at the
Speaker 3: big picture, to honestly to understand, like what's going on
Speaker 3: with the water that we're all swimming in. And given
Speaker 3: all that's been going on lately with tariffs, you know,
Speaker 3: this is a more timely episode. But we're also excited
Speaker 3: to get into some topics like declining birth rates, government spending,
Speaker 3: the economy overall plenty more today. No he actually he
Speaker 3: even believes that rabbits are underrated pets. And I don't
Speaker 3: know if we'll actually see ia eye on that one.
Speaker 3: Who knows. Maybe Noah, you can convince us. But thank
Speaker 3: you for joining us today on the podcast.
Speaker 4: Hey, great to be here. Thanks for having me on.
Speaker 1: We're glad to have you.
Speaker 4: Know.
Speaker 2: A first question we ask everyone who comes on the
Speaker 2: show is what do you like to splur John? Because
Speaker 2: I'm sure you're being smart, you're saving, you're being thoughtful
Speaker 2: about money for your future.
Speaker 1: What do you like to spour?
Speaker 4: John? In the here and now? Though? Besides maybe rabbit
Speaker 4: food splurgeh, I don't really splurge anything. Psychotherapy, I guess.
Speaker 2: Okay, yeah, all right, never heard of that one before,
Speaker 2: but I like that.
Speaker 4: Just you know, I spend almost nothing. I have like
Speaker 4: a you know, over an eighty percent savings rate.
Speaker 1: Holy cow.
Speaker 4: Yeah.
Speaker 1: Are you part of the fire movement?
Speaker 4: Noah, No, no, no, I'm already retired. Like this is
Speaker 4: this is retire this is my hobby. I'm just you know, yes,
Speaker 4: I'm making much more than I made when I was
Speaker 4: a working person. But you know it's it's if I
Speaker 4: if I called myself retired tomorrow, I would be doing
Speaker 4: the exact same thing I am now, and so I
Speaker 4: am essentially retired. I was fascinating fired I don't have
Speaker 4: enough to do that, Like I was fascinating that you
Speaker 4: talk about my personal finance.
Speaker 3: That you continue to do like what you've done before
Speaker 3: because you used to be over at Bloomberg. And just
Speaker 3: let's talk about media for a quick second, because you're
Speaker 3: over on substack writing. We've seen a lot of folks
Speaker 3: do this over time, where they're leaving some of these
Speaker 3: more legacy mainstream media outlets.
Speaker 1: How does that work?
Speaker 3: Can you talk to us about I guess quasi making
Speaker 3: a living writing content over on substack?
Speaker 4: Sure? Absolutely well. So the key to substack is email distribution.
Speaker 4: People get your newsletter in their email inbox every day,
Speaker 4: and so you don't have to worry about promoting each
Speaker 4: post on social media or you know, like having people
Speaker 4: have you in their RSS feeds or however else people
Speaker 4: get distribution. Email turns out to be just the the
Speaker 4: distribution method for blogs. Some people click on the link
Speaker 4: and read it as a web browser, you know, in
Speaker 4: their web browser. Some people you know, just read it
Speaker 4: in line in their emails, et cetera. And some people
Speaker 4: read it in the substack app. And there's all these
Speaker 4: ways to read it, but it turns out that email
Speaker 4: is just the killer app, and and so that's how
Speaker 4: blogs work now, and so substack is really bringing back
Speaker 4: the blogosphere. I pay weall one out of three posts,
Speaker 4: which means that two out of three are free to read.
Speaker 4: And so I only five percent of my audience is paid,
Speaker 4: which means that yeah, most of the people who are
Speaker 4: only reading the two out of three free posts. I
Speaker 4: could pay Weall a lot more, and I could probably
Speaker 4: extract a lot more income in the short term from
Speaker 4: people who read my blog. However, I've chosen not to
Speaker 4: do this because A I care about reach, and B
Speaker 4: I care about long term growth for the unpaid audience.
Speaker 1: And it's interesting.
Speaker 2: I feel like some players from Legacy Media you used
Speaker 2: to write for Legacy Media are kind of moving over
Speaker 2: to substack. I don't know if if Paul Krugman is
Speaker 2: like retiring or if he's like I don't I think
Speaker 2: I can make more money on substack.
Speaker 4: He's not he's not charging, and he doesn't plan to show.
Speaker 2: Oh really, okay, yeah, I think that's fascinating. Waiting for
Speaker 2: fun me think about some of the personalities that have
Speaker 2: was it. Jennifer Rubinstein from The Washington post who left
Speaker 2: and immediately had hundreds of thousands of subscribers. Is that
Speaker 2: going to happen more and more? Were people who built
Speaker 2: up sort of a readership in in like the legacy media,
Speaker 2: they're gonna switch over and do their own thing.
Speaker 4: Well, yes, absolutely, Basically legacy print media combined two things
Speaker 4: that didn't need to be combined. And this is a
Speaker 4: post I'm going to write soon because every year I
Speaker 4: write one sort of naval gazing post about the media
Speaker 4: industry or how to write a substack or something like that.
Speaker 4: That's I limit myself to one year basically, you know,
Speaker 4: how I write or something like that, sage gets made,
Speaker 4: How this sausage gets made. Yeah, I don't want to
Speaker 4: write too much about that, too much naval gazing, but
Speaker 4: I do that once a year, and so one here
Speaker 4: is going to be how the basically mainstream or legacy
Speaker 4: print media combined news reporting and analysis, which we decided
Speaker 4: to call op ed writing. And so actually those are
Speaker 4: two different enough things where the process for producing them
Speaker 4: is very different. Process for producing them well is very different.
Speaker 4: And unfortunately you talk to almost any person who edits
Speaker 4: op ed pieces, and they came from newsroom editing and
Speaker 4: they apply very similar techniques to editing op ed writers
Speaker 4: as they do to editing journalists and reporters, and the
Speaker 4: idea that many people even think of op ed writers
Speaker 4: as journalists, and in fact, many some op ed writers
Speaker 4: even were reporters before they switched to OpEd writing. So
Speaker 4: but in actuality, there are two extremely different skills. Reporting
Speaker 4: requires you to go cultivate sources to you know, sift
Speaker 4: through primary information and to tell truth from falsehood in
Speaker 4: a very narrow category of the world, where analysis or
Speaker 4: op ed writing requires you to draw a whole bunch
Speaker 4: of threads and read very broadly and synthesize, using it
Speaker 4: as sort of an analytical base, such as you know,
Speaker 4: economics or you know, sociology or history or something to
Speaker 4: kind of analyze these events. And so it's just two
Speaker 4: extremely different techniques. Also, OpEd writing employe's voice, which reporting
Speaker 4: should not. That's a stylistic thing. But when you know,
Speaker 4: for example, take Matt Levine. You know, he has this
Speaker 4: famous voice, this sort of this sort of like sort
Speaker 4: of droll sigh with which he talks about the finance world.
Speaker 4: And it's wonderful. It's a wonderful voice, but it's not
Speaker 4: the same as reporting, and now OpEd writers who are
Speaker 4: actually just analysts they you know, similar to like a
Speaker 4: stock analyst or a CIA analyst. Op ed writers are
Speaker 4: realizing that they can be free of editorial constraints, use
Speaker 4: their own voice, also use their own form factors for analysis,
Speaker 4: because for analysis slash op ed writing, the appropriate form
Speaker 4: factor is wildly divergent between topics and between people. And
Speaker 4: so you can have one person who writes seven thousand
Speaker 4: word posts with like a million, you know, references to
Speaker 4: scientific papers. You can have another person who writes like short, punchy,
Speaker 4: like very dramatically written essays, and you can have all
Speaker 4: these different kinds of things. And yet at these legacy
Speaker 4: media places, all the editors are editing the op ed
Speaker 4: writers as if they're all just basically reporters who are
Speaker 4: allowed to express opinions, which is an incredibly stultifying, narrow,
Speaker 4: confining vision for what op ed writing can be. Substack.
Speaker 4: The reason substack is succeeding is not just individualized email distribution,
Speaker 4: although I mean that's a little that's part of it,
Speaker 4: but mostly it is that it has freed op ed
Speaker 4: writers analysts to find their own voice and to use
Speaker 4: the to explore the full potential of the medium.
Speaker 1: It makes so much sense.
Speaker 3: Yeah, as opposed to an editor trying to edit down
Speaker 3: all these different writers to the cohesive voice as to
Speaker 3: what that location is trying to achieve.
Speaker 4: Right, and that voice inevitably sounds like the voice of
Speaker 4: a reporter too.
Speaker 1: Yeah, fascinating.
Speaker 3: Well, I wasn't expecting for us to talk about media.
Speaker 1: That'll be it, though, we'll keep it siloed. Man like.
Speaker 3: I appreciate that you attempt to stay apolitical as much
Speaker 3: as possible while you are talking about the economic impacts
Speaker 3: of political choices. You like to stick to the facts.
Speaker 3: But how would you describe your overall perspective or your
Speaker 3: overall philosophy on economics, Like who have have you been
Speaker 3: influenced the most? When it comes to how you approach
Speaker 3: the different economic ideas that you write about.
Speaker 4: So it's interesting because I'm pretty eclectic, I think, you know, politically,
Speaker 4: I'm a center left type. Politically, I'm like an Obama
Speaker 4: Clinton liberal, and I didn't shift strongly to the left
Speaker 4: and the twenty tens, and I'm not shifting very strongly
Speaker 4: to the right now. I'm just sort of where I
Speaker 4: was in two thousand and five, my basic politics have
Speaker 4: not shifted very much. But in terms of what economic
Speaker 4: approaches I endure, well, that's always evolving because I learned
Speaker 4: so much more all the time. But I've never been
Speaker 4: sort of as as I guess, neoliberal, as the other
Speaker 4: people on the center left tend to be. So if
Speaker 4: you read Jason Furman's article in Foreign Affairs Today, the
Speaker 4: Post Neoliberal Delusion, he says, some things that I think
Speaker 4: are very wrong, but then some things that are very right.
Speaker 4: And so I think that overall, I describe myself as
Speaker 4: an industrialist. I think that we need to intentionally build
Speaker 4: back up, you know, manufacturing in some other like high
Speaker 4: tech industries in America for strategic reasons, for you know,
Speaker 4: just good economic health in various ways. And I think
Speaker 4: this is a lot more possible to do than people believe.
Speaker 4: And so but at the same time I am I'm
Speaker 4: more in favor of trade with poor countries and you know,
Speaker 4: with with you know, other countries than most of the industrialists.
Speaker 4: And I'm much less I'm much more skeptical of like
Speaker 4: NEPA permitting laws and unions too. You know, I've nuanced
Speaker 4: in skeptical views unions, which sometimes I like, but sometimes
Speaker 4: I don't like, and so I think that there's no
Speaker 4: easy way to pigeonhole my economic viewpoint, and until I
Speaker 4: just write a big book explaining it, I think that
Speaker 4: I'm going to always be keeping people guessing as to
Speaker 4: what I really support because there's no easy word or
Speaker 4: name to put to my ideology. So so basically it's
Speaker 4: it's Noahism, which is a cobble together thing, and so
Speaker 4: I really just but before I do that, I'm going
Speaker 4: to write a book like Your Easy Guide to Macroeconomics,
Speaker 4: and that's my next book I'm going to write that
Speaker 4: I'll hopefully get done this year, and then maybe the
Speaker 4: next year I'll write a book like you know, Noah
Speaker 4: Smith's Total Philosophy of the Economy, and that book will
Speaker 4: completely destroy and eat my life because I'll be going
Speaker 4: out on a limb in so many ways that I'll
Speaker 4: be a perfectionist about it and just do exhaustive research
Speaker 4: and just argue with the you know, all these different
Speaker 4: people who disagree with me in a million different ways,
Speaker 4: and I'll become, you know, super depressed and end up
Speaker 4: as like a hermit living in the call.
Speaker 2: Well I mean it though, because yeah, read that, but
Speaker 2: I hope you survive mentally during that project.
Speaker 4: I'll do what I can. Well.
Speaker 2: I think that's actually part of what I love about
Speaker 2: what you write. I don't know what you're going to
Speaker 2: say before you say it. And there are a lot
Speaker 2: of people opinion writers in particularly the ed pages, and
Speaker 2: you're like, oh, it's that author. Well, I know what
Speaker 2: their opinion is going to be. And so yeah, the
Speaker 2: nuance I think is a part of your success on
Speaker 2: this podcast. No, we typically talk about personal finance, but
Speaker 2: macroeconomics policy, they impact all of us as individuals. Like
Speaker 2: there's there are direct connections between some of the things
Speaker 2: that happen, let's say in Washington, d C. In our
Speaker 2: day to day lives and maybe less than some people assume.
Speaker 2: But how do you see the relationship between like big
Speaker 2: picture shifts that are happening macroeconomic stuff and then the
Speaker 2: individual reality that we all faces as Americans and as consumers.
Speaker 4: That's a really good question because when you look at surveys,
Speaker 4: you see that people say that the macroeconomic environment is
Speaker 4: doing terrible, and then they say their personal finances are
Speaker 4: doing great and their city and state are doing pretty good,
Speaker 4: and the farther you get from you and your own circumstances.
Speaker 4: The worst people say things are doing. I interpret this
Speaker 4: to mean that people's ideas about culture and the negativity
Speaker 4: they see in the media about American culture and politics
Speaker 4: and stuff like that is bleeding into their assessments of
Speaker 4: the economy and especially one data point in my favor,
Speaker 4: is that you see huge partisan shifts here. So then
Speaker 4: as soon as you know, a Republican gets elected president,
Speaker 4: the democrats assessment of the economy just drops off a
Speaker 4: cliff in the Republican assessments of the economy sores into
Speaker 4: the stratosphere, and the overall numbers don't stay, that don't
Speaker 4: change much. And that's like literally overnight, literally overnight, literally overnight.
Speaker 3: What indicators, Noah, are you paying attention to that you
Speaker 3: think actually will have an impact on individuals, savers or investors,
Speaker 3: just the typical person that's out there. I'm curious, like,
Speaker 3: which sort of numbers or metrics are you keeping an
Speaker 3: eye on.
Speaker 4: Yeah, keep an eye on, first and foremost, the five
Speaker 4: year break even inflation expectations rate. That number has proven
Speaker 4: to it moves around less than actual inflation, which is
Speaker 4: good for a forecast. You don't want a forecast to
Speaker 4: move as much as the real thing. Like if you
Speaker 4: saw weather forecasters predict like, you know, frigid cold and
Speaker 4: searing heat one day after another, you'd be like, this
Speaker 4: weather forecaster needs to do fewer drugs. So then you
Speaker 4: want a forecast that's a little mild in its predictions.
Speaker 4: You want, like, you know, when there's a heat wave
Speaker 4: or a cold snap, you always want the weather forecaster
Speaker 4: to be a little bit surprised. So inflation expectations have
Speaker 4: done a good job of forecasting inflation, So you want
Speaker 4: to pay attention to that five year break even because
Speaker 4: that gives a sense of people's expectations of inflation once
Speaker 4: you include Fed policy. So when the five year break
Speaker 4: even rises, what that means is people expect inflationary pressures
Speaker 4: to rise and for the Fed to accommodate that instead
Speaker 4: of raising interest rates to force inflation back down. So
Speaker 4: then if people expect that, they're going to behave as
Speaker 4: if it's true, which turns into a self fulfilling prophecy
Speaker 4: because they want to raise prices ahead of everybody else,
Speaker 4: and so that you get a scramble to raise prices.
Speaker 4: So when you saw inflation go to like eight percent
Speaker 4: for you know, half a year or a year or
Speaker 4: however long it did. The post pandemic inflation, which was
Speaker 4: pretty severe. When you saw that happen, you did, you
Speaker 4: saw the five year break even rise to four percent
Speaker 4: three point five to four percent, and so it was
Speaker 4: a much lower swing, but it basically meant that people
Speaker 4: thought that the FED was losing control of inflation or
Speaker 4: were voluntarily giving up control, and that was what That
Speaker 4: rise in expectations is what actually aligned the FED into acting.
Speaker 4: And so that's the thing I would really if you
Speaker 4: want to see when inflation is going to return, keep
Speaker 4: an eye on the five year break even. And then
Speaker 4: you know, the other thing I always keep an eye
Speaker 4: on is the prime age employment to population ratio. Basically,
Speaker 4: adult American adults age twenty five through fifty four, how
Speaker 4: many of them are working. So most employment numbers sort
Speaker 4: of depend on some statistical slide of hand in terms
Speaker 4: of who calls themselves in the labor force, who claims
Speaker 4: that they're looking for work. So the unemployment rate and
Speaker 4: the labor force participation rate are both contaminated by this
Speaker 4: statistical weirdness of you know, do people say they're looking
Speaker 4: for work or not, whereas the employment rate, also called
Speaker 4: the employment to population ratio, those are the same thing.
Speaker 4: The employment rate is not contaminated by this. So whether
Speaker 4: you have a job doesn't depend on whether you say
Speaker 4: you're looking for a job, right, It's just whether you
Speaker 4: have a job, and so do you have a job
Speaker 4: or do you not have a job. And so you
Speaker 4: look at that, and then you know the of course
Speaker 4: there's like early retirements, which is affected by population aging,
Speaker 4: and then there's varying numbers that there's like rising and
Speaker 4: falling school enrollment and things like that, and so those
Speaker 4: things affect people under twenty five and over fifty four.
Speaker 4: But then if you look at twenty five through fifty four,
Speaker 4: you get a very clear picture of you know, sort
Speaker 4: of the macroeconomic employment situation. Look at the employment rate
Speaker 4: of people of people age twenty five through fifty four.
Speaker 4: That's called the prime age employment rate or the prime
Speaker 4: age employment to population ratio. So between that and the
Speaker 4: five year break even inflation rate, I think those are
Speaker 4: the two if I'm just going to check how the
Speaker 4: macroeconomy is doing today, those are the first two I
Speaker 4: look at.
Speaker 2: You just mentioned inflation for a second, I'm curious. Let's
Speaker 2: talk about terists for a second. How do you think, Well,
Speaker 2: it's like the teriffs that would have been that weren't
Speaker 2: that kind of were And it just feels like this
Speaker 2: seesaw kind of when it comes to will they or
Speaker 2: won't they? What's going to happen with tariffs, they get
Speaker 2: punted by a month and so I'm curious to hear
Speaker 2: what you think is going to happen there. But also,
Speaker 2: how is that going to impact inflation? I feel like
Speaker 2: it's commonly been understood from an economic perspective that tariffs
Speaker 2: will lead to higher prices for the end user, for
Speaker 2: the end consumer, for all Americans.
Speaker 1: But I don't know.
Speaker 2: It feels like maybe some of that line of thinking
Speaker 2: has shifted recently to that's fair.
Speaker 4: Yeah, So I think the actual tariffs we get will
Speaker 4: be much less than the tariffs that Trump initially announces
Speaker 4: almost every time. But that doesn't mean we're not going
Speaker 4: to get any tariffs. First of all, we are going
Speaker 4: to get some tariffs, and I don't know where they'll
Speaker 4: end up being. It. Basically, Trump, I think, is guided
Speaker 4: by this stock market, and whichever tariff's tank the stock
Speaker 4: market least or the tariffs Trump will keep. But I
Speaker 4: think that. But also because Trump doesn't really have an
Speaker 4: idea of a counterfactual, it means that the more the
Speaker 4: stock market rises for unrelated reasons like optimism about AI,
Speaker 4: I don't know whatever, the more it rises for unrelated reasons,
Speaker 4: the more tariffs will get because that will make Trump
Speaker 4: think stuff's doing okay, stock market's doing okay. Therefore it's
Speaker 4: okay to just put some more terrafts.
Speaker 1: Up because he thinks he influences.
Speaker 4: Everything, right, or at least, you know, maybe he thinks that,
Speaker 4: or maybe he just thinks that a rising stock market
Speaker 4: will provide cover for the for the terraft. So so
Speaker 4: it's really you know, but I think that basically, you
Speaker 4: see that when the stock market falls, Trump backs off
Speaker 4: pretty consistently, even if it only falls one percent. You know,
Speaker 4: it's like, I know, stocks go up, stocks go down.
Speaker 4: But then if you've got a good run of stocks
Speaker 4: and Trump is like feeling good and you know, yeah,
Speaker 4: So I think that that's my basic assessment. But I
Speaker 4: think that in it so, you're gonna get some teriffs.
Speaker 4: I don't know how much you got some during Trump's
Speaker 4: first term, and ultimately the effect was not very big
Speaker 4: because the United States dollar appreciated that Chinese yuan depreciated,
Speaker 4: China re routed some of its exports through Vietnam, and
Speaker 4: really the tariffs didn't do a lot, whereas so targeted
Speaker 4: tariffs do a lot. You can block specific Chinese products,
Speaker 4: but changing trade deficits through tariffs is extremely hard to do,
Speaker 4: and you basically have to raise tariffs so high that
Speaker 4: it starts breaking something in the economy, which will also
Speaker 4: entail stock market crash. So I don't think Trump is
Speaker 4: going to actually change the trade balance through tariffs at all,
Speaker 4: because he's going to back off of anything severe enough
Speaker 4: to actually do that. You see what I mean.
Speaker 3: Yeah, yeah, So do you think it's more just kind
Speaker 3: of I guess posturing and sort of the narrative of
Speaker 3: him being president of the United States that is also
Speaker 3: dictating how much he's sticking to his guns when it
Speaker 3: comes to some of these different tariffs.
Speaker 4: Yes, and so. But I also think that the main
Speaker 4: effect of these tariff threats is going to be policy uncertainty,
Speaker 4: and policy uncertainty hurts investment, and I think it's going
Speaker 4: to slow down the economy a bit because factory owners
Speaker 4: are not going to know where to build their factories,
Speaker 4: so they're gonna hold off.
Speaker 2: Uncertainty for businesses is typically the worst word, right, Like
Speaker 2: Trump is creating chaos, He's creating uncertainty.
Speaker 4: It's bad for business. Uh, there's tailwinds for business, but
Speaker 4: then there's uh, you know, there's head Trump is creating
Speaker 4: headwinds for business, and the more he instantly backs off,
Speaker 4: the less the headwinds will be because the more businesses
Speaker 4: will conclude. Okay, this is all just blowing smoke. Right
Speaker 4: at the beginning of a president's term, you think that
Speaker 4: everything might change, but by two years in you kind
Speaker 4: of know that, like whether or not he's going to
Speaker 4: break stuff, especially because Democrats will probably gain in the midterms. Yeah.
Speaker 4: So basically I think that if Trump keeps announcing tariffs
Speaker 4: and then canceling them the next day, that will create
Speaker 4: some reassurance that will mitigate the effect of policy uncertainty.
Speaker 1: Yeah.
Speaker 3: And also, at some point starts to feel like a
Speaker 3: bluff if you're another country, like, sure, oh the thing
Speaker 3: you said you were gonna do, you never and at
Speaker 3: some point you have to follow through to make other
Speaker 3: countries or you know, other peers feel like you're actually
Speaker 3: gonna do something along lines with primarily powaposturing on it. Yeah, yeah, Well,
Speaker 3: I mean do you think, I mean, is the geopolitical
Speaker 3: positioning and posturing is it worth like in the long term, right,
Speaker 3: because it seems like what we're talking about right now,
Speaker 3: is I guess the pain that the US consumer might
Speaker 3: experience in the short term. Do you think that near
Speaker 3: term pain is worth the long term overall health of
Speaker 3: the country. It's or protectionist instinct, right, yeah, that is
Speaker 3: that a healthy direction for us to go?
Speaker 4: So, I mean, so I basically just what I think
Speaker 4: is that tariffs are helpful, can be helpful for that,
Speaker 4: but they won't get there on their own. What you
Speaker 4: need is industrial policy. Biden actually got it right. So
Speaker 4: targeted tariffs with targeted industrial policies is the way we
Speaker 4: reindustrialize and that does work. Simply throwing up tariffs on
Speaker 4: all imported goods does not work. It's just it is
Speaker 4: not a thing that works economically. So you can say,
Speaker 4: is you know, if I like stick my face on
Speaker 4: this hot pan, is it worth the long term gains
Speaker 4: of you know, becoming a pegasus and you know, like
Speaker 4: unfortunately sticking your face on hot pan will not turn
Speaker 4: you into a Pegasus if it did, though, if it did,
Speaker 4: if it did, But so you're saying there's a chance.
Speaker 4: So that's that's the situation. We are here to blanket
Speaker 4: tariffs on a large number of goods from a large
Speaker 4: number of countries. Will not reindustrialize America. Yeah, all right,
Speaker 4: it will in fact hurt American industry.
Speaker 2: What's your take right now on I mean, let's maybe
Speaker 2: pivot talking about you know, government debt and doge the
Speaker 2: national debt. The national deficit has been growing like gangbusters
Speaker 2: and it hasn't mattered really who's in charge. Even the
Speaker 2: party for a while that talked about cutting government spending
Speaker 2: never seemed to get around actually doing it. But how
Speaker 2: much has government spending played a role in the inflation
Speaker 2: that we've seen? I know it was a lot of
Speaker 2: supply chain induced issues from COVID, but yeah, do you
Speaker 2: think government spending also plays a role in that? And
Speaker 2: how much of an actual issue is our country's massive
Speaker 2: debt load.
Speaker 4: It's a it's a big issue. In fact, it's a
Speaker 4: big problem. We need to cut spending and raise taxes. Unfortunately,
Speaker 4: the amount of spending that Trump will end up cutting
Speaker 4: is probably relatively modest, and the amount of tax cuts
Speaker 4: that Trump is planning is relatively large. So Trump is
Speaker 4: on track to raise the deficit, increase the deficit instead
Speaker 4: of decreasing it. That's an important thing to understand, and
Speaker 4: that is inflationary. Elon Musk is right when he says
Speaker 4: that deficits are inflationary because deficits carry the implication that
Speaker 4: down the road, the Fed is going to have to
Speaker 4: keep interest rates lower in order to support that costs
Speaker 4: on the debt, and that lower interest rates are inflationary.
Speaker 4: So deficits are absolutely inflationary. And so Trump's planned tax cuts,
Speaker 4: which I'm sure congressional Republicans will support, are inflationary, and
Speaker 4: they will expand the debt and they will outweigh whatever
Speaker 4: spending cuts DOGE can accomplish. If you look at the
Speaker 4: actual numbers of amount of spending that DOGE might be
Speaker 4: able to accomplish, even if it stretches the bounds of
Speaker 4: the law quite a bit, is actually relatively modest compared
Speaker 4: to the size of the tax cuts Trump as planned.
Speaker 3: So what you're saying is that DOGE isn't really going
Speaker 3: to be able to do it like truly, what needs
Speaker 3: to be cut back on. Are the like the untouchable
Speaker 3: spending items that no politicians is really willing right to
Speaker 3: even this administration to tackle at all, Right, the entitlement spending,
Speaker 3: so like you don't foresee there being much progress being made.
Speaker 4: I mean, are those are an issue? That's right, But
Speaker 4: we have two budget problems in America. The first budget
Speaker 4: problem is that our population growth has slowed so much
Speaker 4: that we're unable to support the Social Security and Medicare
Speaker 4: systems at the same level we've become accustomed to and
Speaker 4: are going to have to either cut benefits or massively
Speaker 4: increase immigration. So that's that's the first problem. This problem
Speaker 4: actually hasn't started to bite much yet because aging hasn't
Speaker 4: hit us as hard as it's going to hit us.
Speaker 4: So that's a problem actually for the future. The current
Speaker 4: debt problem is that we have not raised taxes to
Speaker 4: support the size of the welfare state that we have,
Speaker 4: and so we can either cut welfare spending, which is
Speaker 4: called medicaid, or we can and other health programs. Our
Speaker 4: welfare is mostly our welfare state. A lot of it
Speaker 4: is through health you know, healthcare, paying for often overpriced
Speaker 4: healthcare for Americans. So we can either cut welfare, we
Speaker 4: can raise taxes, but we can't just get away without
Speaker 4: doing either one of those. Military spending has been like
Speaker 4: really cut to the bone a lot. There's not much
Speaker 4: more gains there, especially with the international military environment getting
Speaker 4: more dangerous every day, so we can So basically, we
Speaker 4: can either slash medicaid, or we can raise taxes, or
Speaker 4: we can do some and Medicaid plus you know other
Speaker 4: health programs that we do that are fundamentally redistributionary. So
Speaker 4: so for the Medicare and Medicaid have similar names, but
Speaker 4: they're not similar programs. They both provide health insurance, you know,
Speaker 4: through the government, but they're very different kind of programs.
Speaker 4: Medicare is for old people. Medicaid is for poor people.
Speaker 4: So with medicare, you basically it's it's what's called social insurance.
Speaker 4: You pay into the system, and then if you happen
Speaker 4: to a person who gets more sick when you're old,
Speaker 4: you withdraw more than you paid in, whereas if you
Speaker 4: happen to be someone who didn't get sick, you put
Speaker 4: in more than you withdraw. So that's called insurance. And
Speaker 4: when you force everyone in society to do it, it's
Speaker 4: called social insurance. Medicaid is a welfare program for poor
Speaker 4: people to give them healthcare, where we tax everybody, the
Speaker 4: middle class, the rich, et cetera, and we use that
Speaker 4: tax money to give healthcare specifically to poor people, and
Speaker 4: almost no one in the country, you know, most of
Speaker 4: the people in the country will never see any benefits
Speaker 4: from medicaid. It's pure redistribution, essentially, and so it's redistribution
Speaker 4: in kind. I would favor abolishing Medicaid and replacing it
Speaker 4: with cash benefits, just mail checks to poor people. It
Speaker 4: would be much more efficient. We're probably not going to
Speaker 4: do it. The genius of medicaid was that they gave
Speaker 4: it a name similar to Medicare. People like social insurance.
Speaker 4: They don't necessarily like welfare and redistribution. But we named
Speaker 4: our biggest welfare program something that sounded very similar, you know,
Speaker 4: sound wise to our biggest social insurance program. And so
Speaker 4: because people like medicare, it's very hard to cut Medicaid
Speaker 4: because people hear that and they think you're cutting medicare.
Speaker 2: Tricky tricky naming conventions, very good trick there.
Speaker 3: No all right, you mentioned some of the future problems
Speaker 3: that we might be or that we will be facing
Speaker 3: in the future, specifically about when it comes to funding
Speaker 3: social security, so we'll get to maybe ways around that
Speaker 3: and more.
Speaker 1: Right after this our we're back to the break.
Speaker 2: We're still talking with Noah Smith talking about macroeconomics and
Speaker 2: kind of what's happening around us, especially as there's a
Speaker 2: lot changing. No you literally just hit on this right
Speaker 2: before the break too. Then another economic problem that's coming
Speaker 2: down the pike is the declining birth rate, and I
Speaker 2: feel like this is getting more attention and we're seeing
Speaker 2: it more starkly in other countries too, countries like Japan.
Speaker 2: What impact is that having there? What impact is that
Speaker 2: going to have here? And how do we combat something
Speaker 2: as kind of existential as not producing of humans.
Speaker 4: Do you want bad news first?
Speaker 1: Yeah? Yeah, start all right.
Speaker 4: The bad news is we have absolutely no idea how
Speaker 4: to come about this, and it is a big economic
Speaker 4: problem for reasons I'll explain. But many countries have tried
Speaker 4: doing pronatal policies, they've tried doing policies to get people
Speaker 4: to have more kids. Absolutely none of those have moved
Speaker 4: the needle. You've seen a very small effect of very
Speaker 4: large cash paouts, like if you basically give everyone like
Speaker 4: free day care and a bunch of money to have kids.
Speaker 4: You'll have like a little bit a few more kids
Speaker 4: in the margin, but it's not nearly of the size.
Speaker 4: So we're talking countries basically are at like one point
Speaker 4: five to one point six. They measure it in children
Speaker 4: per women. Sorry, maybe that's sexist, but that's how they
Speaker 4: measure it. That's total fertility. You need about two to
Speaker 4: two point one to sustain population, you know, at a
Speaker 4: constant level, because if you think about it, every couple
Speaker 4: has to have two kids to replace themselves, right yeah,
Speaker 4: and then and so you need to have two to
Speaker 4: two point one to replace yourself over that's called the
Speaker 4: replacement rate. Most rich countries are converging on one point
Speaker 4: six one point five or even lower. Some countries have lower.
Speaker 4: So we need policies that increase fertility by zero point
Speaker 4: five to zero point seven children per women per women.
Speaker 4: And when you do surveys that ask people how many
Speaker 4: children would you like to have, you see almost everyone
Speaker 4: says that they'd like to have it will so not
Speaker 4: almost everyone there, The average is a little is over
Speaker 4: to it's like you know, two point three two point four.
Speaker 4: In other words, people at least notionally at least they
Speaker 4: say to surveys that they want to have about the
Speaker 4: number of kids that would lead the population stability or
Speaker 4: even a little higher. So really, so that has a
Speaker 4: lot of people think that if you just make it
Speaker 4: people able to have that many kids, and they will.
Speaker 4: But it's possible people are just lying on the survey
Speaker 4: or just don't understand themselves very well and don't understand
Speaker 4: what they really want, et cetera, and don't really want
Speaker 4: that many kids, and so that's a possibility they just
Speaker 4: sort of say that because that's what their mom would
Speaker 4: like to hear them say. Anyway. But then, but then,
Speaker 4: so we need policies that will raise the fertility rate
Speaker 4: by point five to point seven children per woman, and
Speaker 4: we don't have those. We have policies that will raise
Speaker 4: the fertility rate by point one children child per woman.
Speaker 4: And while that's not nothing, it's also quite expensive, involves
Speaker 4: a lot of welfare payments to poor people, and you know,
Speaker 4: higher taxes and stuff like that. It's pretty expensive, and
Speaker 4: it's you know, and the effect is very small. So
Speaker 4: no one has discovered a way to fight this problem.
Speaker 4: We do not know how to do it yet. So
Speaker 4: it's currently a giant unsolved problem. Now, the question is
Speaker 4: why is it a problem. The first and most obvious
Speaker 4: reason is because when you have population aging, you have
Speaker 4: a whole bunch of retired people that you have to
Speaker 4: take care of. The old age dependency ratio just goes
Speaker 4: up and up and up. There's two ways to take
Speaker 4: care of old people. Either you can do it yourself
Speaker 4: at home, or you can pay a nursing home to
Speaker 4: take care of them, or assisted living center whatever you know, thing,
Speaker 4: you know, home care workers, whatever you can, you can
Speaker 4: pay for it, or you can do it yourself. You
Speaker 4: can take care of grandma, you know, at home. Right,
Speaker 4: but somehow the old people have to be taken care of.
Speaker 4: Old people can't really work, and so you can push
Speaker 4: up the retirement age to like, you know, you can
Speaker 4: push it up from like sixty five to like seventy two.
Speaker 4: But after that people become really unproductive really fast. And
Speaker 4: so so really you have all these retirees and then
Speaker 4: we have a much larger ratio of retirees to workers.
Speaker 4: So you know, Japan has a like only two workers
Speaker 4: per retiree. Now that's really really severe, and that means
Speaker 4: that it's a world of toil for workers because they're
Speaker 4: you know, imagine having to support you plus point five
Speaker 4: other people right when you work. That's that's just a
Speaker 4: huge burden. And the burden comes either through taxes or
Speaker 4: through the hours you have to spend doing elder care,
Speaker 4: which they do a lot of in Japan. And so
Speaker 4: that's the people focus on the idea of population shrinking,
Speaker 4: when in fact this is from population aging. This is
Speaker 4: from the change in the age structure of the popular
Speaker 4: old people become a higher percentage.
Speaker 3: Okay, so you just shared with us the bad news. Noah,
Speaker 3: what's the Is there any good news when it comes
Speaker 3: to the population shift that we're Oh.
Speaker 4: No, there's no good news. There's more bad news. There's
Speaker 4: more bad news. So in addition, so the way you
Speaker 4: sustain living standards in the face of collapsing population is
Speaker 4: to raise productivity. However, we have, unfortunately, we have pretty
Speaker 4: good evidence that an aging population reduces productivity growth having
Speaker 4: older people. So one reason could be that old that
Speaker 4: old people start managing the companies, and the companies aren't
Speaker 4: as able to like, hop on new technologies, new business models.
Speaker 4: They're not as inventive, not as creative. Old people just
Speaker 4: are sort of you know, can't teaching old dog new
Speaker 4: tricks kind of thing. That may be why. There's other
Speaker 4: possible reasons why, but having more young people is associated
Speaker 4: with higher productivity growth. So fewer young people, less productivity
Speaker 4: growth at the time when productivity growth is exactly what
Speaker 4: you need to balance out the effect of aging. More
Speaker 4: old people means few we're young scientists to discover your
Speaker 4: next big technological you know, productivity increasing innovations. And so
Speaker 4: that's something that Chad Jones. The economists talk a lot about, well.
Speaker 3: What about immigration, and you barely you quickly touched on
Speaker 3: this earlier. But I mean, obviously that debate's pretty fraught
Speaker 3: right now. But do you think the US just needs
Speaker 3: some more common sense immigration policy reform for that's right?
Speaker 4: Yeah? Well yeah, so see, the United States has this
Speaker 4: special ability to do skilled immigration, right. We can we
Speaker 4: can get not just the world's top few, best and brightest,
Speaker 4: but also just like very large masses of like people
Speaker 4: with college degrees who are like pretty good at doing
Speaker 4: you know, standard middle class jobs. We can do that.
Speaker 4: We can do that, right. Unfortunately, we're in the middle
Speaker 4: of this you know, Trump spasm of just anti immigration feelings.
Speaker 4: So you've seen on the right this rise in anti Indianism, right,
Speaker 4: anti Indian immigration specifically, Like all these rightists are just
Speaker 4: like screaming about Indian immigrants and how bad they are.
Speaker 4: But India is a country of one point four billion people,
Speaker 4: and that can solve that can help solve our population
Speaker 4: crisis in the short term. It's not going to fully
Speaker 4: solve it, and it's not going to be it's not
Speaker 4: going to solve it long term because India is getting richer,
Speaker 4: people aren't going to want to come like thirty years
Speaker 4: from now. And also because like India has a lot
Speaker 4: fewer kids now, so India is not going to have
Speaker 4: nearly as many people to send us of high qualifications
Speaker 4: like right now. So we're in this sort of golden
Speaker 4: age of this potential binans of Indian immigration, and we're
Speaker 4: not taking it. We're we're resisting it, partly because the
Speaker 4: Mega movement has decided that they don't like Indians and
Speaker 4: it sucks for America.
Speaker 2: But you think smart immigration policy could help correct a
Speaker 2: lot of the issues that we have when it comes
Speaker 2: to kind of demographics.
Speaker 4: Yes, absolutely, it's it will ameliorate them in the next
Speaker 4: thirty years. But then after thirty years we're in trouble
Speaker 4: because fertility rates falling everywhere, even like Africa is sort
Speaker 4: of the last bastion of high fertility rates used like Africa,
Speaker 4: like sub Siheran Africa has like four point two kids
Speaker 4: per woman. I want to say, four point two sounds
Speaker 4: like a lot, right, I mean, like for us that
Speaker 4: would be a ton. But that's down from six in
Speaker 4: just a few years.
Speaker 1: Wow.
Speaker 4: So yeah, so sub Sera in Africa will be at
Speaker 4: replacement fertility relatively soon. Things things are just continuing to
Speaker 4: plumb it. There's a few countries. There's like I think
Speaker 4: six countries where the fertility rates are still pretty high
Speaker 4: and are coming down only slowly, and those those countries
Speaker 4: are going to be sustaining the population of the rest
Speaker 4: of Africa. So you know, you're talking about like Niger, Somalia,
Speaker 4: Central African Republic and other places you know that you
Speaker 4: normal people may even have never heard of. And you've
Speaker 4: got like these Democratic Republic of the Congo is another one,
Speaker 4: and like you've got like six of these these these guys,
Speaker 4: and Democratic Republic of the Congo has more than half
Speaker 4: the population I think of the combined six. So basically
Speaker 4: you're gonna have, like you know, you're back to the
Speaker 4: cradle of humanity, sustaining the rest of humanity for a while.
Speaker 4: But even their popula, like fertility rates are falling, and
Speaker 4: as those countries get more you know, stable fertility rates
Speaker 4: will fall more, and so even those those countries will
Speaker 4: not be able to sustain humanity. All of humanity is
Speaker 4: trapped in this low fertility cycle and we don't know
Speaker 4: how to solve it yet.
Speaker 2: While we're talking about depressing stuff, let's talking about healthcare
Speaker 2: for a second, maybe just a bastion of hope I
Speaker 2: think on that front, and I feel like there's been
Speaker 2: this like recent kind of spotlight on the health insurance
Speaker 2: system after the shooting of the United Healthcare CEO, and
Speaker 2: actually took that topic head on. You wrote about why
Speaker 2: the insurance companies aren't to blame, although there is I
Speaker 2: think a lot of loathing about insurance companies from the
Speaker 2: American public. Can you explain what's going on in US
Speaker 2: healthcare and why we pay like so much more than
Speaker 2: the rest of the world for what we.
Speaker 4: Get, right, So, there's a number of reasons why we
Speaker 4: pay more. One is because we are are richer, So
Speaker 4: of course richer people will spend more in healthcare. But
Speaker 4: even once you control for that, we pay a lot
Speaker 4: more as a percentage of our GDP than other kind.
Speaker 4: So there's part of it, that part of our excess
Speaker 4: costs that you can't really explain with that unless you
Speaker 4: assume that as people get richer, they spend an exponentially
Speaker 4: increasing percentage of their income and healthcare, which would mean
Speaker 4: that by the time people get to about one hundred
Speaker 4: thousand dollars of income per year, they're spending all of
Speaker 4: their money in healthcare, which is obviously counterfactual. We know
Speaker 4: that rich people in America don't spend all their money
Speaker 4: in healthcare. So I will say that I spend more
Speaker 4: money in healthcare than I used to, but you know,
Speaker 4: it's one of the only things I'll splurge on a
Speaker 4: little bit, but honestly not even that much. So yeah,
Speaker 4: So basically there's this unexplained portion of costs, and part
Speaker 4: of it is because our insurance industry is so fragmented
Speaker 4: that insurers can't push back on high prices by providers.
Speaker 4: So when you go to the hospital, you know, pillows
Speaker 4: costing twenty five hundred dollars, or like, you know, an
Speaker 4: MRI that I got at UCSF cost the insurance company
Speaker 4: ten thousand dollars when at Simon med Imaging it would
Speaker 4: have cost one thousand dollars. So you've got a ten
Speaker 4: x cost difference there for an MRI. Now the UCSF
Speaker 4: will farm it out to a radiologist for an instant report,
Speaker 4: and that radiologist is good, But that's not worth a
Speaker 4: ten x cost difference, right, And so I don't think
Speaker 4: it is. And so you know, basically, insurers can't push
Speaker 4: back on high provider prices, and so insurers basically in
Speaker 4: America act as pass throughs. There are these incredibly low profit,
Speaker 4: low margin businesses, and everybody hates them, hates them, hates
Speaker 4: them because that's the part of the healthcare system that
Speaker 4: you deal with on a daily basis, Right, that's the
Speaker 4: part of the healthcare system that you're that they're they're
Speaker 4: the people who are paid to deliver you the bad
Speaker 4: news of like, oops, your coverage was denied on this thing,
Speaker 4: or like here's how much your deductible is? Right, your
Speaker 4: health your health insurance is how is who tells you
Speaker 4: how much to pay? And so you hate it because
Speaker 4: that's the part of the healthcare system that you interact with. However, ultimately,
Speaker 4: these are low profit margin businesses that are passing through
Speaker 4: costs from the providers. And when I say providers, I
Speaker 4: mean hospitals, I mean doctors, I mean the equipment providers,
Speaker 4: I mean the pharma companies. You know, those are all
Speaker 4: the providers. Those are the people actually give you the care.
Speaker 4: And you know, we have this weird interaction where you
Speaker 4: go in, you know, and the pharmacist is like, here's
Speaker 4: your drugs, and then the I guess they do make
Speaker 4: you pay a copay at the window, but then the
Speaker 4: doctors like, here's your care. I'm just caring for you.
Speaker 4: And it feels like you're in Cuba in a socialis
Speaker 4: system that just wants to wrap you in its loving
Speaker 4: arms and take care of you. And of course that
Speaker 4: same hospital is the one sending you your insure a
Speaker 4: giant bill which you're insured then struggles to pay, and
Speaker 4: you're insurer has to like figure out how to pass
Speaker 4: as much of the cost on as possible to you,
Speaker 4: or else they just go bust because they're such a
Speaker 4: low margin, low profit business, and so our interactions with
Speaker 4: the healthcare system. We have negative interactions with the part
Speaker 4: that's not making much profit and positive interactions with the
Speaker 4: people who are making all the profits.
Speaker 2: Do you think if our health insurance function a little
Speaker 2: bit more like car or home insurance, where that we
Speaker 2: would be more price sensitive to the care that we're receiving.
Speaker 2: I think about filing a homeowner insurance claim that the
Speaker 2: average person files a claim maybe two times in their
Speaker 2: life if they own a home for a few decades.
Speaker 2: And yet we're interacting with our health coverage all the
Speaker 2: time in order to instead take that one hundred and
Speaker 2: fifty two hundred dollars price of an appointment with the
Speaker 2: doctor down to twenty five or thirty dollars copay that
Speaker 2: insurance is constantly Is this friction involved with every single
Speaker 2: element of healthcare? If it was just involved less, especially
Speaker 2: in some of those less expensive healthcare endeavors, would that help,
Speaker 2: I don't know, fix the system at least to a
Speaker 2: certain degree.
Speaker 4: So the short answers, No, much of what you pay
Speaker 4: insurance for is not actually insurance, as you noted. So
Speaker 4: for example, you have a yearly check up with the doctor,
Speaker 4: that's not a risk, that's something you know you're going
Speaker 4: to need, right, and so yet the insurer is this
Speaker 4: sort of the designated person who pays for that, and
Speaker 4: you pay your insurance premium, so that really there is
Speaker 4: a little bit of administrative cost for that, right. So
Speaker 4: some paper pusher or excel jockey has to say like, okay,
Speaker 4: you went to your yearly checkup. Here's how much we
Speaker 4: pay for your yearly check out. Blah blah blah. It's
Speaker 4: extremely low cost actually to pass through those regular expenses.
Speaker 4: And then there's chronic expenses. So you're a person who
Speaker 4: you know you have the chronic back problem and you
Speaker 4: just keep going in again and again, and you don't
Speaker 4: know exactly how much you're gonna need to go in,
Speaker 4: so there is some risk there, but then essentially that
Speaker 4: is actually taken care of, so that actually is a risk.
Speaker 4: It's just like when you start having that chronic problem,
Speaker 4: that's when the risk sort of realizes. That's when the
Speaker 4: risk stort of manifests. And so in that sense, it
Speaker 4: really does act like insurance, even though once you've got
Speaker 4: those chronic injuries, then after that it looks very predictable.
Speaker 4: But then before the chronic injuries, it's the risk of
Speaker 4: whether you'll develop a chronic injury or not. So honestly,
Speaker 4: switching to health insurance that looks like true insurance would
Speaker 4: save us a little bit of money, but not a ton.
Speaker 4: And if you look at the countries that do health insurance,
Speaker 4: it's cheaply. That's not what any of them looks like.
Speaker 3: So we're talking about I guess a lot of negatives
Speaker 3: kind of touched on the bad news here and no
Speaker 3: you mentioned just how individuals like on a personal level,
Speaker 3: they think things are going pretty well. You back that
Speaker 3: out a little bit to the state it's fine. As
Speaker 3: a country, it seems like that we're doing pretty poorly,
Speaker 3: but compared to the rest of the world, we're actually
Speaker 3: doing pretty great. Like, what do you think is causing
Speaker 3: that disconnect between individuals' perception of how we're doing as
Speaker 3: a country versus how it actually is.
Speaker 4: Well. Okay, so first of all, I don't think we're doing,
Speaker 4: you know, badly as a country. I think the debt
Speaker 4: is a huge problem. Healthcare costs are big, but there
Speaker 4: is good news about healthcare, which is that healthcare cost
Speaker 4: growth has slowed a hell of a lot. Healthcare costs
Speaker 4: are no longer increasing as a fraction of GP. That
Speaker 4: is huge, and that will take a lot of pressure
Speaker 4: off the budget deficit. That will take a lot of
Speaker 4: pressure off of people's pocketbooks and wages. And so that's
Speaker 4: a piece of good news that's not commonly appreciated, but
Speaker 4: it's true. So there's some good news.
Speaker 1: Appreciate that. Finally, a little bit of silver lining.
Speaker 4: Yeah, and so so, so here's some great news about
Speaker 4: the American economy. Productivity in America is increasing at a
Speaker 4: fairly rapid clip. Productivity is the underlying generator of economic wealth.
Speaker 4: You know, you grow productivity fast, you you grow your wealth.
Speaker 4: That's it. That's how it works. And we've been having
Speaker 4: pretty high productivity growth historically, like much higher than the
Speaker 4: rest of the world. So like Japan, Korea, Europe, you know, UK,
Speaker 4: you know, even Australia and Canada. I guess Australia productivity
Speaker 4: has been growing a bit bit Canada, those places have
Speaker 4: been seeing a productivity stagnation while America has been seeing
Speaker 4: productivity growth. Why is that true, We don't know. But
Speaker 4: as best we can tell, our economy is more dynamic.
Speaker 4: We allow more a lot more labor reallocation. People are
Speaker 4: able to quit their job and get a different, better,
Speaker 4: job and and move around. You know, remote work is
Speaker 4: part of this, right, and so those that labor reallocation
Speaker 4: has been a big boon for America in ways that
Speaker 4: it has not been for other countries or people where
Speaker 4: labor markets are pretty rigid and people don't shift jobs
Speaker 4: very much. So Americaique, almost uniquely among rich countries, not uniquely,
Speaker 4: but almost uniquely, has had tons of labor reaccation and
Speaker 4: also a lot of entrepreneurship. So what you see, what
Speaker 4: you saw after the pandemic was tons and tons and
Speaker 4: tons of people started small businesses in America, especially Latinos.
Speaker 4: Disproportionately Latinos are finally like starting a lot of small businesses.
Speaker 4: And so you're seeing this and this is not but
Speaker 4: you also did see a boom in high tech entrepreneurship.
Speaker 4: So a lot more people are doing tech companies and
Speaker 4: which will provide a lot of growth, especially for the
Speaker 4: stock market blah black when some of those succeed. But
Speaker 4: at the grassroots, ground level of main street, you see
Speaker 4: a ton of people starting small businesses and this is
Speaker 4: absolutely great. This is great for dynamism small you know,
Speaker 4: in terms of value added growth, it's high tech startups
Speaker 4: that provide most of the value added growth over time.
Speaker 4: But in terms of the actual employment, it's small businesses
Speaker 4: that employ most of the people. And so I think
Speaker 4: that you're you're you're seeing a lot of these small
Speaker 4: businesses start and reallocating labor, people moving job to job,
Speaker 4: all this stuff. This is a lot of dynamism. So
Speaker 4: America is doing really well at this. Obviously, we've got
Speaker 4: technology on our side too. I think AI is going
Speaker 4: to be a big deal that will help us a lot.
Speaker 4: And I think batteries are a big deal that will
Speaker 4: help us a lot. Batteries and solar and cheap solar energy. Batteries,
Speaker 4: cheap solar and AI go together really well. Also medical
Speaker 4: stuff like you know, m RNA and synthetic biology, crisper
Speaker 4: and all that stuff that's important too. But I think
Speaker 4: that the biggest gains will come from those that that
Speaker 4: trio of technologies, AI, solar and batteries, the triple technological
Speaker 4: revolution of our times.
Speaker 2: Yeah, in your bio you call yourself a techno optimist.
Speaker 2: So do you think that like technology is a major
Speaker 2: solution to some of the problems that we face. Is
Speaker 2: that why maybe you see bright spots ahead?
Speaker 4: Yeah, So I think America's underlying fundamental economy is strong.
Speaker 4: I don't think Trumpian policy uncertainty can break it. I
Speaker 4: think that the debt is a big threat, especially in
Speaker 4: terms of inflation. I think that it will be painful
Speaker 4: if and when we cut you know, welfare spending, which
Speaker 4: we're going to do, and it'll probably be Medicaid that
Speaker 4: we cut. It will be painful if and when we
Speaker 4: raise taxes, which we will, and it will probably be
Speaker 4: middle class taxes that go up. And so I think
Speaker 4: that those things will be painful. But I think our
Speaker 4: underlying strength of our economy is strong. We're a very
Speaker 4: rich country. We're doing better than other rich countries. Even
Speaker 4: China now has economically stumbled. I think we've got not
Speaker 4: the brightest people running the country right now. But I
Speaker 4: think that you know, that's on us, all right.
Speaker 3: Well, I feel like we've talked a lot about our
Speaker 3: struggles here the stateside.
Speaker 1: But we're gonna take a quick break.
Speaker 3: And then after that, no, we're going to ask you
Speaker 3: perhaps about another country that seems like that they've been struggling,
Speaker 3: maybe have turned things around.
Speaker 1: We'll get to Vats right after this.
Speaker 2: We're back still talking with Noah Smith and no, we're
Speaker 2: just I was talking a lot about the United States,
Speaker 2: the country that we live in, are impacted by. But
Speaker 2: you recently wrote about Javier Malay, the fairly new president
Speaker 2: of Argentina, and it's been really interesting to see kind
Speaker 2: of his economic gravitational pull. It seems to be, i
Speaker 2: don't know, impacting at least some of the Western world.
Speaker 2: How do you think about and how would you maybe
Speaker 2: rate his efforts when it comes to turning around like
Speaker 2: a struggling Argentina economy and like what can we learn
Speaker 2: from that?
Speaker 4: Well, I'm actually pleasantly surprised. I think even my sort
Speaker 4: of neoliberal, austerity minded Argentinian friends like Martine Musteau who's
Speaker 4: the senator there were skeptical of Malay. He was at
Speaker 4: he was crazy. He was a wild man with crazy
Speaker 4: hair who had chainsaws. He's just like a if he
Speaker 4: do right, genetically genetically cloned dogs, just like grabbing his
Speaker 4: girlfriend's butt on camera, you know, all this stuff. He's
Speaker 4: just a silly guy, and he's just like, we're aesthetically
Speaker 4: superior to the left, you know. And that was a
Speaker 4: great interview. He's fun. But the idea was, oh, he's
Speaker 4: an idiot. Well he wasn't. He wasn't an idiot. He
Speaker 4: was just flamboyant. And it turns out that his policies
Speaker 4: are working, are much more effective than anyone had a
Speaker 4: right to think they. Basically, Argentina is a country that
Speaker 4: tries to maintain a you know, a European style welfare
Speaker 4: state without a European style income to support it. And
Speaker 4: Malay is cutting that. It's unsustainable. Malay's cutting that. But
Speaker 4: in doing that, he's actually making conditions better for a
Speaker 4: lot of people, because growth is Argentina had like a
Speaker 4: short sharp procession from his anti inflationary policies and now,
Speaker 4: you know, like we did in the early eighties, now
Speaker 4: it's returning to growth and you know, inflation's down, growth
Speaker 4: is up. People are you know, Argentina is doing all right,
Speaker 4: and you know it's not suffering. So so the dangers
Speaker 4: of Argentina pegs their currency to the dollar to beat inflation.
Speaker 4: Currency pegs in the long run can have bad consequences
Speaker 4: because then your currency gets overvalued. You tend to this
Speaker 4: sudden big drop and like a currency crisis, which brings
Speaker 4: inflation back and all this stuff. So so he's got
Speaker 4: to make sure not to peg the Argentinian peso too
Speaker 4: high and then but then I think so far he's
Speaker 4: doing really surprisingly.
Speaker 3: Well cutting the fact that he cut back. Do you
Speaker 3: think that that's the big takeaway? Is that a lesson
Speaker 3: for the US? So you know, we've already talked about
Speaker 3: just future spending on you know, on our part over
Speaker 3: here in the US.
Speaker 1: Is that the takeaway for us? Is that the lesson learned?
Speaker 4: Yes? So I think that basically austerity combined with hard
Speaker 4: money carries some costs in the short term, but it
Speaker 4: does stop inflation. So if you've got increasing inflation, as
Speaker 4: we may soon have from Trump's policies, that's how you
Speaker 4: beat it. And it is painful, but he managed to
Speaker 4: get Argentinians to uh to to accept that short term pain.
Speaker 2: Yeah, you seemed to thread the needle. Noah, thank you
Speaker 2: so much for joining us today on The show Man.
Speaker 2: Where can our listeners find out more about you, what
Speaker 2: you're up to and find your substack?
Speaker 4: Yeah, my substack is no opinion. That's N O A
Speaker 4: H P I N I O N. Some people mistakenly
Speaker 4: put an O in the middle of it and say
Speaker 4: it's Noah opinion and I don't understand why anyone does that,
Speaker 4: because it doesn't make a good pun. It's just just
Speaker 4: so you lose it.
Speaker 1: Yeah, if you actually write opinion in.
Speaker 4: There, I get. Yeah, it's Noah opinion and that's what
Speaker 4: it is anyway. So so go to that substack and
Speaker 4: you can read all my little post to posts and
Speaker 4: then i'll I'm I'm working on a book about explaining
Speaker 4: macroeconomics in simple terms, in fun terms that regular people
Speaker 4: can understand.
Speaker 1: Very cool.
Speaker 3: We will keep it an eye out for that. Yeah,
Speaker 3: Noah Smith, thanks for talking to us.
Speaker 4: Absolutely until next time.
Speaker 2: All Right, Matt didn't end up talking about rabbits at
Speaker 2: all in that conversation. I was, well, I'm surprised we
Speaker 2: should have brought it. Well, we did, but he didn't
Speaker 2: take the bait.
Speaker 1: You are the one. You've got more pets than I do,
Speaker 1: and you actually had a rabbit when you were younger.
Speaker 4: Dad.
Speaker 2: We did name Skittles. It got really fat and didn't
Speaker 2: really move, so that I did want to debate him
Speaker 2: on that topic a little bit because my rabbit was
Speaker 2: not a great pet. But yeah, what was your big
Speaker 2: takeaway from this combo that was not pet related? I'm
Speaker 2: going to have to go with. So we talked about
Speaker 2: the national.
Speaker 3: Debt and the growing deficit right and ultimately in the end,
Speaker 3: what Noah mentioned was that what it takes is going
Speaker 3: to it's a combination of two things. Increased taxes so
Speaker 3: higher amounts of money coming in or reduced spending the
Speaker 3: different programs at the government is shelling out on. And
Speaker 3: you know what, man, the same thing is true when
Speaker 3: it comes to our personal finances. And oftentimes we try
Speaker 3: to I don't know if it's either a silver bullet
Speaker 3: or we're looking for a way to make it a
Speaker 3: little more fancy, but finding some sort of solution that's
Speaker 3: going to get us to whatever our goals are with
Speaker 3: out the austere measures that are often necessary in order
Speaker 3: for us to in order for folks to call themselves
Speaker 3: out of debt, like specifically if they've got ridiculous amounts
Speaker 3: of credit card debt. It's like, man, what it's going
Speaker 3: to take is you spending much less than what you
Speaker 3: were spending, or somehow for you to find a way
Speaker 3: to matt drastically increase your income.
Speaker 1: But a little bit of both.
Speaker 3: Yeah, And typically it is a combination of both. But
Speaker 3: it's just a lot of times those two things, those
Speaker 3: two levers that we can pull, they get lost when
Speaker 3: we're talking about the federal government.
Speaker 1: Because it's such this large tangle of worms.
Speaker 3: It is kind of what it feels like just with
Speaker 3: all the bureaucracy involved, tough ship to move. Yeah yeah, yeah,
Speaker 3: But that was encouraging though, because it's it's a reminder
Speaker 3: that even at a very high level when it comes
Speaker 3: to the US economy, oftentimes that's it could be as
Speaker 3: simple as that. It's not rocket science. Yeah, doesn't mean
Speaker 3: it's easy. Yeah, but yeah, yeah, fairly straightforward.
Speaker 1: Yeah.
Speaker 3: I think my big takeaway Matt was was you should
Speaker 3: have more babies because for is not enough. We have
Speaker 3: a declining birth rate in this country. I thought about
Speaker 3: speaking of He's like, it's all on your shoulders. He's
Speaker 3: a four point two. I mean that would be a
Speaker 3: crazy large number of kids for a family. And I'm
Speaker 3: just like, well, that's that's what we got.
Speaker 1: Yeah. For where's your point too coming soon?
Speaker 3: Where's your what is it that's needed? Point five too?
Speaker 3: Point seven? Yes, that's what's needed.
Speaker 1: That's right. So yeah, just.
Speaker 2: To all of our listeners out there who are at
Speaker 2: least considering it parents, it's wonderful think about it a
Speaker 2: little more deeply for the good of the country.
Speaker 1: Okay, is this your actual takeaway? Well, are you joking?
Speaker 2: No, I'm kind of joking, but I'm kind of serious,
Speaker 2: Like I do think well, I mean that I'm trying
Speaker 2: to tell people who don't want to have kids to
Speaker 2: have kids, But I am saying like it's I think
Speaker 2: some people overestimate and we've talked about this on the show,
Speaker 2: how much it costs.
Speaker 1: To have a kid.
Speaker 2: You see the headlines, and I don't think it's as
Speaker 2: bad as as it might seem from a from a
Speaker 2: financial standpoint, And I don't think you have to be
Speaker 2: I'm not saying again, don't be prepared, don't think ahead,
Speaker 2: but I don't think it takes as much preparation or
Speaker 2: as much money as you think.
Speaker 1: It does to have a kid.
Speaker 2: And you're gonna cut back and spending in other ways
Speaker 2: when you have a kid, Like guess what, I don't
Speaker 2: go to nearly as many like concerts or fine dinners.
Speaker 1: Going out to eat as much as you so.
Speaker 2: You'll cut back in other ways. The joy that it
Speaker 2: provides is meaningful. Again, not trying to course people into
Speaker 2: doing something they're not interested in doing.
Speaker 3: But if it's something you're thinking about, yeah, no, I okay,
Speaker 3: I'll back you because there are a lot of different
Speaker 3: voices in our heads and within society that is telling
Speaker 3: us to.
Speaker 1: Not do that.
Speaker 3: Whether it's your employer, it's just like, oh, you know
Speaker 3: what that's going to mean, You're not going to get
Speaker 3: that promotion. Oh you know at least even internally that
Speaker 3: oh that means you're not going to be placed on
Speaker 3: this project. And even selfishly, there are different sort of
Speaker 3: achievements that we're trying to achieve and often and so
Speaker 3: when you have all these other voices speaking into us
Speaker 3: as individuals, it can be easy to not, I guess,
Speaker 3: necessarily say no to kids proactively. But what happens is
Speaker 3: that it happens by default. It's something that happens passively,
Speaker 3: and before you know it, you're a little bit older
Speaker 3: and you're like, well, shoot, I kind of I guess
Speaker 3: maybe I missed my window.
Speaker 1: And that's happening more and more in our sus.
Speaker 3: Yes, the reason is that I never got around to it,
Speaker 3: as opposed to it being something that you're like, well, no,
Speaker 3: I'm never going.
Speaker 1: To have kids.
Speaker 3: It's it's fewer folks who are saying that as a
Speaker 3: post of folks were saying, oh man, maybe later, yeah exactly,
Speaker 3: maybe later, or I just it just never happened. Yeah,
Speaker 3: And I just I do think not everyone. Some people
Speaker 3: literally go into that proactively and they say I don't
Speaker 3: want kids, and more power to you. But I think, yeah,
Speaker 3: I've seen too many people regret that they waited too
Speaker 3: late and then it became really difficult, if not impossible,
Speaker 3: And I just think there is there are a lot
Speaker 3: of intangible benefits. It's not that the kids are typically
Speaker 3: going to bring more money into your life, but there
Speaker 3: are a lot of beautiful things they bring into your life,
Speaker 3: absolutely non financially related. Yeah, today's message brought to you
Speaker 3: by trad husband Joe lars Guard was gonna be able
Speaker 3: to hear homeschool and his kids.
Speaker 1: Before you know it.
Speaker 2: Followed me on Instagram. Oh my gosh, they would murder
Speaker 2: me and maybe vice versa.
Speaker 3: All right, real quick, the beer you and I enjoyed
Speaker 3: today was called Melvin, which was an amber farmhouse ale by.
Speaker 1: Freak Folk Beer. What did you think about those?
Speaker 4: One?
Speaker 2: So this beer looks like it was named after a
Speaker 2: cat because they have a picture of cat on the bottle.
Speaker 3: And then it also says, in loving memory, oh poor Melvine.
Speaker 3: I'm guessing this was a brewery cat. Yeah, they dedicated
Speaker 3: this beer too.
Speaker 4: Well.
Speaker 3: I'm a cat dad myself, so I can get behind this.
Speaker 3: Although I like my cats, I don't love them.
Speaker 1: Is that okay? Can I say that?
Speaker 4: That's fine?
Speaker 1: I love my kids, I like my cats all.
Speaker 2: I think all amber beers should have to be sour
Speaker 2: per new dictation from Yeah Yeah, because I don't love
Speaker 2: amber beers, but an amber sour?
Speaker 1: Wow, maybe you really like this thing?
Speaker 4: It was.
Speaker 2: It was a nice combo of funky and sour and
Speaker 2: funky always like sounds like a weird word, I think
Speaker 2: to people, but there's something about a funky beer that
Speaker 2: really just does hit my mouth in a special way.
Speaker 3: It's like zestiness or the acidity. But with the kids
Speaker 3: use these a lot these days.
Speaker 4: I think.
Speaker 1: I think zesty is a hot word.
Speaker 3: Zibity. It's that tartness but with body. That's what I
Speaker 3: think of when you say funkiness, because it's not just
Speaker 3: like the sharpness that you get with like, let's say vinegar,
Speaker 3: but there's actual flavor behind it, right, it's oh maybe
Speaker 3: sort of like acidity is to vinegar as funky is
Speaker 3: to red wine vinegar. You know, like there's a little
Speaker 3: more flavors, more body, more. Yeah, just something more going on.
Speaker 2: Which I just used red wine vinegar in the making
Speaker 2: of a food product that well, you tried it earlier today,
Speaker 2: we'll talk about it. Oh, let's talk about it on
Speaker 2: maybe Fridays. Yeah, this this episode.
Speaker 4: Is going along.
Speaker 3: But yeah, Frank Folk Beer, first time we've had one
Speaker 3: by them, really good. Highly recommend nobody that's going to
Speaker 3: be it for this episode. So until next time, best
Speaker 3: Friends Out, best Friends Out.