Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: For those who've been listening to us regularly, you might
Speaker 2: remember a conversation we had yesterday. It was with Bloomberg's
Speaker 2: Jordan Fabian, and it was about whether or not there
Speaker 2: was a focus in the White House. We asked him, Jordan,
Speaker 2: because it was another day of NonStop social media posts
Speaker 2: and flow of thoughts actions from President Trump and his administration.
Speaker 2: It is again today. It feels like it's been like
Speaker 2: that for a while, NonStop, maybe for the past year.
Speaker 2: Looking at that and really trying to figure out if
Speaker 2: there's a philosophy guiding President Trump and his closest advisors
Speaker 2: when it comes to his barrage of executive orders and
Speaker 2: daily challenges to the judicial system feeding a NonStop White
Speaker 2: House cycle is economic Nobel Laureate Drone Asamoglu. He took
Speaker 2: a step back to see if there's some sort of
Speaker 2: theory and wrote about it in a Bloomberg BusinessWeek piece.
Speaker 2: It's featured in the coming new issue that does really
Speaker 2: a deep dive into President Trump's first year in his
Speaker 2: second term. Jerome by the Way, Institute, Professor in the
Speaker 2: Department of Economics at the Massachusetts Institute of Technology Mit
Speaker 2: joins us from Cambridge. So nice to have you here
Speaker 2: with us, and this is a really thoughtful piece. You
Speaker 2: took a step back, you looked at this, and we're
Speaker 2: just trying to understand. You know, this NonStop White House
Speaker 2: news cycle. Is it about the president and his team
Speaker 2: controlling that news cycle? And this is what we all chase,
Speaker 2: you know, is it something more significant beyond just kind
Speaker 2: of a flood the zone concept that we often associate
Speaker 2: with President Trump and his team. What did you come
Speaker 2: up with?
Speaker 3: Well, thanks, thanks a lot having me on the program. Look,
Speaker 3: I mean, obviously there is a flood dozone element in there,
Speaker 3: and it looks chaotic. But in my mind, worryingly, there
Speaker 3: is a bit of a theory, which is that all
Speaker 3: of these actions are aimed at centralizing power in the
Speaker 3: hands of an executive presidency with fewer and weaker checks
Speaker 3: which come eor from institutions or norms. So even the
Speaker 3: foreign actions are all about increasing domestic power. Even the
Speaker 3: sort of unconventional appointments that are about weakening norms that
Speaker 3: control what the president can do and bringing in more
Speaker 3: loyalists that have now more room for maneuver because all
Speaker 3: the norms that had guided US political dynamics have been broken.
Speaker 1: So you write that it would have been viewed as
Speaker 1: completely unacceptable for Bill Clinton, George W. Bush, or Barack
Speaker 1: Obama to ask his attorney general or the DOJ to
Speaker 1: go after enemies. It would also have been considered beyond
Speaker 1: the pale for a president to invoke what you describe
Speaker 1: as a poorly documented crime emergency as a pretext for
Speaker 1: sending the National Guard into US cities, or for a
Speaker 1: president to continue to be involved in family business. Well
Speaker 1: in office, why is it being viewed, at least by
Speaker 1: members of Congress Republicans in Congress as acceptable for President
Speaker 1: Trump to do these things?
Speaker 3: Well, you know, part of the reason why those actions
Speaker 3: would not have been taken in the past is because
Speaker 3: they go against norms. There weren't explicit laws that said
Speaker 3: these things, so it was part of an institutional equilibrium
Speaker 3: with norms of acceptance and backed up by other politicians
Speaker 3: deviating and sort of distancing themselves if a president did that,
Speaker 3: or bigger sort of pushback from civil society or the media.
Speaker 3: But President Trump and his team have been breaking these
Speaker 3: norms systematically for the first year. But even if you
Speaker 3: go to the first term of the president, there was
Speaker 3: already the same attend and all of these have now
Speaker 3: culminated in Trump controlling the party and the rest of
Speaker 3: the party, even part of the judicial system, are no
Speaker 3: longer able to stand up to him, and all of
Speaker 3: the norms that would have helped them sort of mobilize
Speaker 3: around some sort of objection saying this is not acceptable.
Speaker 3: You know, we don't see them now. Recently for the
Speaker 3: FED case, a few senators have started making grambling, so
Speaker 3: perhaps there might be some limit to what the legislature
Speaker 3: is going to put up with. But the part of
Speaker 3: the agenda that is I think now very clearly visible
Speaker 3: is sort of break down one piece after another of
Speaker 3: this edifice that was constraining other presidents that are now
Speaker 3: gone for President Trump.
Speaker 2: So Deerron to basically right. We thought this checks and
Speaker 2: balances would work right three branches of the government. It
Speaker 2: made such sense, and it for so long has pretty
Speaker 2: much worked pretty well. But there was this strategy when
Speaker 2: it comes to the legal part, certainly of the government
Speaker 2: as well as the legislative. But let's just talk the
Speaker 2: legal part, because we did have you know, a judge
Speaker 2: saying dominion Energy can resume a win project that President
Speaker 2: Trump had halted, so we have seen him lose some
Speaker 2: of the judicial actions out there. Having said that, if
Speaker 2: he didn't have that in terms of the Supreme Court justices,
Speaker 2: would we not be maybe having this conversation today? Is
Speaker 2: that what's so much about it? Or is it all
Speaker 2: of it? That and the legislative side of it, and everybody,
Speaker 2: you know, even them GOP members of Congress saying yeah,
Speaker 2: do what you want to do. You know, it's kind
Speaker 2: of interesting because that's their job kind of being taken away.
Speaker 3: Yeah, I mean exactly the sort of separation of powers,
Speaker 3: would you know, not just the Congress and the judiciary,
Speaker 3: but also the independent agencies acting like the fourth Brunch.
Speaker 3: Those were the things that constrained presidents and if today
Speaker 3: those constraints were working, well, we wouldn't be in this
Speaker 3: turmoil in terms of the domestic situation. And part of
Speaker 3: the concern is that right now it's really the parts
Speaker 3: of the judicial brunch that are standing up against Trump indeed,
Speaker 3: But that's that's got its limits because there are a
Speaker 3: lot of Trump appointees, and the Supreme Court, with lots
Speaker 3: of Republican and Trump appointees, hasn't really taken a very
Speaker 3: strong stense either. So all of these are piling up
Speaker 3: and taking us more and more to a situation where
Speaker 3: I think many of the former sort of presidents or
Speaker 3: constitutional scholars would find very scary because the structure of
Speaker 3: US government wasn't meant to function this way.
Speaker 1: So then I'm trying to understand. And one thing that
Speaker 1: we do each and every day is we look at
Speaker 1: the markets, and we look at market reaction to these things,
Speaker 1: and I think a lot of people have been surprised
Speaker 1: that we haven't necessarily seen a bond market reaction to
Speaker 1: some of these moves. Markets were and have been kind
Speaker 1: of seen as a backstop here to at least some
Speaker 1: of the things that the president has said he will
Speaker 1: do or wants to do. Do you think are reacting
Speaker 1: to his decisions or do you think they're saying, hey,
Speaker 1: it's all fine and good at least up until now.
Speaker 3: Yeah, it is hard to understand why the markets haven't
Speaker 3: reacted more because some of the effects are already seen
Speaker 3: from the tariffs, And indeed, people you know, talk about
Speaker 3: the bond market now because the stock market hasn't reacted.
Speaker 3: But I think that just really underlies that, you know,
Speaker 3: the stock market is not the fifth branch of government.
Speaker 3: It's not really a hard constraint in the same way
Speaker 3: that the other ones were supposed to be on the
Speaker 3: sort of centralization of power in the hands of one
Speaker 3: person or one group, And the tariff debacle demonstrates that
Speaker 3: the administration is much bolder and is willing to take
Speaker 3: actions that could lead to market reactions, at least in
Speaker 3: the short run. Now some people are saying, Oh, it's
Speaker 3: the bond market really that we need to watch out for.
Speaker 3: I don't know why. You know, right now, the bond
Speaker 3: market would be much more important than the stock market,
Speaker 3: and sometimes both of them are things that both the
Speaker 3: administration and the business community are watching. But I wouldn't
Speaker 3: you know, bet on, you know, the market mechanism being
Speaker 3: a strong enough guardrail against this kind of executive imperial
Speaker 3: presidency emerging. And if it does, I think it has
Speaker 3: really sweeping implications for how business is done again. You
Speaker 3: can see that from the fact that the President Trump
Speaker 3: can invite people to his office and say give us
Speaker 3: twenty percent of your shares. Yeah, something.
Speaker 2: Yeah, there's just a moment after a moment where many
Speaker 2: would say this is it's kind of remarkable which I
Speaker 2: went Drona Asimoglu. He is economic Nobel laureate. He is
Speaker 2: also Institute professor in the Department of Economics at MIT,
Speaker 2: joining US from Cambridge. So I am curious is this lasting?
Speaker 2: Like I am wondering who this emboldens in terms of
Speaker 2: whoever might be in the White House next? Is this
Speaker 2: the playbook? The new US playbook?
Speaker 3: And to be sorry, that's what I'm worried about exactly.
Speaker 3: I mean, you know, because look, I mean Trump is
Speaker 3: an agent of change, He's really reshaping norms and institutions,
Speaker 3: but he is himself a symptom of what was wrong
Speaker 3: in some sense with the US system. There was a
Speaker 3: lot of inequality, there was a lot of discontent, and
Speaker 3: there was also some gridlock. You see more executive orders
Speaker 3: by Bush than by Obama than by Biden. So Trump is,
Speaker 3: you know, accelerating that trend, but he's continuing that trend.
Speaker 3: And I do not trust that the next Democrat or
Speaker 3: Republican is going to be much better behaved. Once the
Speaker 3: floodgates are open, I think we're going to go to
Speaker 3: a place where, you know, presidents could have much more
Speaker 3: arbitrary power, both in terms of their ideological agenda, but
Speaker 3: also in terms of corruption and kleptocracy.
Speaker 1: You know, you've study a lot, and part of your
Speaker 1: study has included the strength of institutions and the relationship
Speaker 1: between economic prosperity and the strength of these institutions, and
Speaker 1: on the implications of this for the United States. It's
Speaker 1: widely seen as an area of the world that has
Speaker 1: had transparency, It has markets that people pay a premium
Speaker 1: for as a result of that transparency, as a result
Speaker 1: of the regulatory environment. And I'm wondering, kind of to
Speaker 1: build on Carroll's question, what that means for the future
Speaker 1: of the US economy. If these norms are indeed shattered
Speaker 1: permanently or at least in the near future.
Speaker 3: We would be entering a completely unknown territory. I mean,
Speaker 3: there are so many advantages that we enjoy because of
Speaker 3: our institutions. Everybody wants to have investment in US assets, treasuries,
Speaker 3: corporate debt, stock market. Why. Because people trust US institutions,
Speaker 3: they want to be subject to US law if there's
Speaker 3: a dispute. This is a very dynamic entrepreneurial economy. Why
Speaker 3: people think that if they're successful, they're going to be
Speaker 3: able to take on the biggest companies and build their
Speaker 3: own business. Again, that depends on institutions. In many of
Speaker 3: the countries around the world. You see that incumbents crush
Speaker 3: every bit of competition. So if we start damaging that,
Speaker 3: the secret source of the US economy would be heavily
Speaker 3: damaged too.
Speaker 2: So we're not China, but we're something else. Just got
Speaker 2: about ten to fifteen seconds. Who are we?
Speaker 3: Yeah, well we are something else. I don't know where
Speaker 3: we're going. I mean state institutions are State capitalism is
Speaker 3: what people used to call China. While we're getting close
Speaker 3: to that.