Show Notes
Transcript At this point, it’s almost a commonplace to say that under DonaldTrump, America has become a kakistocracy, ruled by the worst. But I don’tthink it’s fully appreciated the extent to which we’ve also become a cheatistocracy, ruled by the most corrupt. Today’s commentary is a follow-upon yesterday’s primer, which was about the role of tax evasion both in leading to or contributing to our downward spiral into oligarchy and also as a surprisingly large factor in the budget deficit and therefore in America’s debt problem. Before I get to tax evasion, let me say something about where I’ve been going in my kind of intellectual journey into understanding oligarchy. As an economist, normally my instinct is to think about the invisible hand, to think about market forces, about technology as driving what happens to society. And even now there’s at least some extent to which the rise of kind of garden variety inequality, the rise of the top quintile at the expense of the middle, may be partially explained by the bias of technology towards higher formal skills, although that may be ending now with AI and all of that. But as I began to focus on oligarchy, on the very small number of people who have enormous wealth, enormous income, but the wealth is an even bigger factor — there are a really handful of people who have come to play such a large role.In our society, in our economy, and above all, of course, in our politics— I was forced more or less by the numbers to say this is not about the invisible hand. This is not about market forces. It isn’t even mostly about technology. Yeah, some technologies create winner-take-all markets that make people int he right place extremely wealthy. But the really big factor that’s driven us from the relatively equal society that we were 50 years ago — not obviously anywhere close to truly equal, but nothing like the dominance of a tiny elite that we have now — the really important factor is policy and above all tax policy. We basically stopped imposing progressive taxes that limited the growth of enormous fortunes. And sure enough, as the tax barriers to accumulation of excessive wealth went away, excessive wealth began to concentrate. This is, in many ways, the fundamental story. We got rid of, we ended the Gilded Age with its dominance by, as FDR said, the power of organized money, largely by taxing a lot of that organized money away. And we got back to something which in many ways is worse than the Gilded Age by taking away those taxes and allowing vast fortunes to snowball and buy themselves enormous political power, which allows them to snowball even further. One factor in all of that is the rise of simply not paying taxes that you’re supposed to pay. A lot of it is reductionist statutory tax rates. We tax corporate profits at a far lower rate than we did In the 1950s, we tax top incomes at a much, much lower rate than we did in the 1950s. But what’s also true is that we simply allow people to get away with not paying taxes to an enormous extent, to almost surely a much greater extent than used to be the case. The numbers are big, and in the primer I go through the tax gap. The money owed but not in fact collected is certainly north of $600 billion a year. It is something like 40% or more of the U.S. federal budget deficit. It is a major contributing factor to the accumulation of vast fortunes. What is striking is that far from really making an effort to rein in that tax gap, for the most part politically our system has moved to let it rip, has basically tried to make America safe for tax cheats. This is something that overwhelmingly benefits people with high incomes and large wealth because people with really big incomes, people who are extremely wealthy, for one thing, they just have much more complicated income. It’s much, much harder to track down and audit someone who has multiple businesses, some of which are dummy businesses, some of which may be real, but nonetheless are con
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. . . TRANSCRIPT: Paul Krugman in Conversation with David Nir and G. Elliott Morris (recorded 10/1/26) Paul Krugman: Like almost everybody I know, I spend about 17 hours a day thinking about the midterms, and I’ve got G. Elliott Morris and David Nir from Strength in Numbers and The Downballot here to talk to me about: What do we know? What’s going to happen? What are the indicators? And then maybe some broader issues about what the heck we think is going on in U.S. politics. So, hi, guys. Welcome. Elliott Morris: Hey, thanks, Paul. David Nir: Paul, it’s a pleasure. Krugman: So, yeah, as we record this, I guess it’s one month and two days before the midterms, and if I believe you guys, the polling and other indicators, which David will talk about, seem to be almost kind of shocking right now. Elliott, I just looked at your Fifty Plus One post, and I believe you now have 99% odds of Democrats controlling the House. Morris: Yeah, well, it’s October, Paul. So we’re in what I consider spooky probability territory. 99% is when you start to go, “I hope these models are parameterized correctly.” Look, the way to unpack this: Our model at 50 Plus One shows a 99% chance that the Democrats will win 218 seats or more. 99% seems very large. As the forecaster, I don’t want to be wrong on the 99, but it makes sense when you look at the numbers on paper. So, let’s take 2018 as a comparison case. That’s when Democrats won 235 seats in the House. That year, the generic ballot—which is a question that asks people how they will vote in their local congressional district, for which party they will vote—that has Democrats up somewhere between 8 and 9 points. Democrats won in 2018, leading the polls by about 8 or 9 points. They actually won the House popular vote by seven and a half points or so, if you account for some weirdness with, like, uncontested seats. So we are in a more favorable environment, if the polls are right, than 2018. And we also have a lot of other district-level indicators pointing the same way. Krugman: But, I mean, the gerrymandering was fairly extreme before this, and if we go back to the beginning of this year, it was looking a little iffy, if I recall. Morris: Yeah. So gerrymandering seems to have shifted maybe a handful of seats at most to the Republicans, accounting for some pretty rosy polling, for example, in South Texas and in Florida for the Democrats, where there’s been a larger shift than the national shift, which is about 10 or 11 percentage points. So if we are around eight points, our model says Democrats need to win the House popular vote by about three and a half points. So there’s room for the polls to be wrong by about five. The average expected error for the polls at this point, 30 days before the election, is about three and a half percentage points. So we’re looking at a larger-than-average error in the polls. And then if you account for other indicators, district-level surveys, the race raters like we do, that’s how we get up to that 99. But yeah, I acknowledge this is a very, very large probability. Nir: And Paul, just to address your point about the gerrymandering, which did heavily favor the GOP, it’s important to remember that Republicans were not doing that from a position of strength. They were doing it from a position of weakness, precisely because they knew that they were facing a very difficult midterm election. And they definitely—I can say this with certainty—definitely will not pick up, they will not flip, all of the seats that they targeted in Texas and Florida and elsewhere. And that has a lot to do with the quality of candidate recruitment on both sides. And also, in particular in Texas and Florida as well, has a lot to do with Latino voters moving back against Trump after moving heavily for him in 2024. So, 2024 in a lot of ways was a high watermark. And so when you’re looking at how Trump performed in these districts two years ago, in a lot of cases, expect really a lot of fallback for th
Transcript On September 28th Jamie Dimon, CEO of JPMorgan Chase, one of the most prominent, most successful financial figures in the United States, published an article in the Wall Street Journal titled, “The Hell with Trump, Let’s Go Back to Globalism.” Okay, that’s a lie. That wasn’t what the article was titled, but it was, in effect, what it said. And it was a very interesting message to be coming at this moment in time. I think Dimon’s op-ed can be viewed as a harbinger of a big shift in the business community’s political positions and its attitudes that may be coming in the very near future — in effect a bet that Trump and MAGA in general are going to be in the rearview mirror, not too far from now. Now, a word about Dimon. He’s an extraordinarily successful financial leader. He navigated the 2008 financial crisis and aftermath better than almost anyone else in Wall Street. He had the good sense to limit JP Morgan’s exposure to the practices that helped to create that financial crisis. He is also a very, very smart political operator. He has had a talent for not making enemies, for staying at least on decent relationships with administrations from both parties, which is no mean feat in 21st century America. He certainly did not join the cavalcade of business leaders rushing to prostrate themselves at Trump’s feet after the 2024 election, and yet he was subtle enough about his restraint to not get put on Trump’s enemies list. So,you know, his political judgment should be trusted. His economic judgment, all right, being a great businessman is not at all the same thing as being a great economist. And there’s no particular reason to think that he is always right about economic affairs. But that is, in a way, mostly beside the point. So what did Dimon call for? Well, he basically said, we need to repair theWestern alliance. We need to bring the Western world, the advanced democracies, above all the United States and Europe, back together in part as a way to stand up against the threat of a rising China. And his proposal for how to do that was to negotiate a free trade agreement between the United States and the European Union. That’s quite something. That’s a very un-MAGA position to take. You want to bear in mind that, first of all, we’re currently under a government of people who do not at all believe in the virtues of free trade. In fact, are extremely hostile to globalism. Certainly don’t believe in binding international agreements. Maybe they want agreements that bind other countries, but not them. And they are also not of the mind that we have a lot of shared values with the democratic governments of Europe. The MAGA position, if anything, is that they like the anti-democratic forces in Europe. J.D. Vance essentially campaigned for Viktor Orban in Hungary. Trump officials have been quite clear that they have sympathy for the AfD in Germany. So if we have common values with some Europeans, the Europeans with whom they have common values are neo-Nazis. And Trump’s de facto support for Putin in his invasion of Ukraine has been alarmingly clear over the past two years. What we’re seeing here is Jamie Dimon basically saying that I don’t care about any of that. I don’t believe that you people are going to be in charge. And I think that we can go back to trying to rebuild bridges to Western Europe. Now, it’s kind of interesting the way he phrases it. He puts a lot of it in terms that I suspect are intended to appeal to economic conservatives in the United States who are not MAGA types. He sells his proposal in part as an incentive for Europe to conduct pro-business, pro-economic reforms. He cites the Draghi report on European Competitiveness, which has been very influential in Europe. And points to him for even knowing about it! There are probably not a lot of people in the United States who have read the Draghi Report, absorbed its lessons. I myself have read it. I have had some criticisms of some of the analysis in
Transcript Will crypto crash the blue wave? Probably not a question you’ve been asking, but you should. Paul Krugman here with a video update for September 22nd. I want to talk about something that was a very big deal in the way we talked about the 2024 election, which was the role of the cryptocurrency industry. We’re talking about it a lot less this time, I think largely because AI has stolen the limelight. But crypto is still out there. And while it has not succeeded in creating a viable business in the normal sense, it has been extraordinarily successful at buying political influence. And they’re set to do it again. Now, the background here is, as I record this, the midterm elections look, based upon polling, based upon just impressions, looks like a big blue wave. Elliot Morris gives the Democrats a 97% chance of taking the House and two-to-one odds of taking the Senate. But there’s still a few weeks to go and it looks like there’s a big wave of right-wing money that’s going to come crashing in. We don’t know how effective that will be. The role of money in politics, particularly of last-minute advertising blitzes, is somewhat unclear. But it is coming and crypto is going to be a pretty big part of it. Based on Open Secrets, which tracks campaign financing, it appears that the crypto industry, which spent big in 2024, is going to spend even bigger in 2026, which is unusual because midterms are usually lower stakes than presidential years: They don’t usually involve as much spending. But this industry is going to go all in. The crypto political strategy has been to knock out candidates that it considers hostile. And that is a strategy that was very effective in the last election cycle. They spent money in primaries knocking out Democrats, because Democrats were by no means united in their skepticism about crypto, but in some cases in favor. They knocked out Democrats in favor of other Democrats in primaries. And then in the general election, they spent quite a lot, not entirely on Republicans, but there were some big cases. And then Ohio spending was a particular success story. And in general, crypto became seen in Washington as a force to be afraid of. Not a force that has actually managed to get anywhere in the economy. It’s nothing like AI, which is everywhere. Crypto is still barely used for legitimate transactions. According to the Federal Reserve, only 2% of Americans have actually used crypto to buy something other than assets. So basically non-speculative crypto use remains trivial. And that’s after many years of trying to market this stuff. But the political effectiveness has been huge, and it has intimidated a lot of politicians. Back in February, Chuck Schumer warned his colleagues not to do too much to offend Fairshake, the big crypto lobbying group. Crypto has also, in addition to campaign contributions, done a lot of what in the old days, we would call bribery. There’s a lot of money that flows from the crypto industry to politicians and their relatives, and not just Trump. I don’t really want to ask too much about why there’s a lot of money going into a firm founded by Senator Gillibrand’s son. So there’s a big financial issue. Now, the Clarity Act posed as “we’re going to establish a sound regulatory framework, especially for stablecoins” — cryptocurrencies that supposedly have a guaranteed value in dollars. Why exactly did Democrats turn on it? I mean, on the merits, they were right to be against this because whatever one may say, the purpose of the Clarity Act was to kind of legitimize cryptocurrency in the economy and particularly to legitimize stablecoins, which are, once you cut through the jargon and all of that, essentially poorly regulated banks. It would essentially be posing new threats to the stability of the financial system and undermining banking regulation, which is something, of course, that the Trump administration and its allies are trying to do anyway, but this would have been anoth
. . . TRANSCRIPT: Paul Krugman in Conversation with Henry Farrell and Abraham Newman (recorded 9/10/26) Paul Krugman: So, it’s a world full of choke points. Weaponized interdependence is a term I think coined by Henry Farrell and Abe Newman. Certainly I learned it from them. And there’s a big conference—not including them for some reason—taking place at the European Central Bank a few days after we record this. And so I thought I would talk again with my two favorite international relations people (although now I’m thinking of some friends who will be upset by my saying that.) But anyway, hi guys. Both: It’s great to be here. Paul Krugman: There was a seminal 2019 paper by the two of you, and then a book called Underground Empire. Anybody want to tell me what you meant by that? And let’s talk about the history, and then this weirdly more weaponized moment than anyone expected that we’re living in. Henry Farrell: Maybe I’ll take a first stab at it. So really, where this came from was that we had finished a long book looking at fights between the United States and European Union over privacy. And as part of that, one of the things we had looked at was the SWIFT system, which is a system which you use when you’re making bank transfers. It’s a messaging system that makes sure that the money gets to the right place, and that everything gets reconciled properly at the end of the day. And so Abe pointed out after we had finished this, he said, “Well, nobody’s written anything about SWIFT, and there’s something interesting and important with geopolitics going on.” And I was working with a statistical physicist who does a lot of work on networks and network dynamics, and so he thought that we could come up with something on this. And so we began to write. And we began to figure out that there was something really going on, which I think had been going on in plain sight for a number of years, but which nobody had really been able to put their finger on in such a way that they could actually sort of crystallize what the phenomenon was. And this was what we called “weaponized interdependence.” And the idea behind it was very straightforward. You know, we’ve been living for decades in a highly interdependent global economy, and the ways in which both political economy people in international relations and, I think, most economists had thought about it was in terms of the enormous efficiency advantages that flow from this. Because, if you think about interdependence in terms of trade theory, even in terms of the simple benefits of specialization that Adam Smith talked about a couple of centuries ago, the more interdependence you’re able to use, the better you’re able to achieve various outcomes collectively. But we began to think about the ways in which this relied upon all of these really boring-seeming networks, such as SWIFT, and the ways in which these networks had increasingly and quietly become a target of international coercion, especially at that stage coming from the United States. So we argued that if you had two conditions—one, a network which had some degree of centralization, so that there were some kinds of choke points in the network; and secondly, you had some great power which had a means of putting pressure on the actors that were in charge of those choke points—that you would begin to get the conditions where a weaponized interdependence could begin to happen. That is, that that great power could begin to weaponize that choke point against others. And then our argument was that this could also set a longer dynamic in train, because our fundamental sense was that this was not an equilibrium. This was not something that was sticky and was static unless the weaponizing power was extremely careful, and that the more that a power like the United States sought to weaponize choke points against its adversaries—and here the U.S. used a dollar clearing system as a means of cutting Iran and other countries out of the global banking
Transcript “Mary had a little lamb, but when she saw it sicken, she sent it off to Packingtown, and now it’s labeled chicken.” Hi, Paul Krugman here. That’s a little ditty that was circulating, I can’t find any original source, around 1905, when Upton Sinclair published “The Jungle” — about the meatpacking industry, one of the sort of founding documents of the progressive movement. The topic today is Donald Trump and beef, because here we are back in Upton Sinclair territory. So you may have seen that last month Trump announced, given that we have high beef prices, that he was going to allow the tariff-free import of 300,000 tons of ground beef. Rather oddly, he didn’t say from where and wouldn’t say from where for a while. And then eventually said, well, from Argentina, Brazil, and other places. There has been a substantial uproar over these imports of ground beef because of concerns about safety. You know, if he won’t even say where it’s coming from or whether the countries involved are going to be practicing food safety, that is kind of an issue. And it turns out it’s not just, you know, not just woke liberal types but ranchers, lawmakers and food safety experts who were very concerned about the plan and were not reassured when Trump said the meat is “very clean and very good.” Okay, little by little details are coming out about how all of this happened. It turns out that the initial plan to allow the beef imports was announced the day after a closed door meeting between Trump and a Brazilian meat packing billionaire who is a major donor to Trump. And they went right ahead and announced the plan, although again without details. There doesn’t seem to have been much discussion of how this would work, of the concerns. After some initial blowback — even ranchers are concerned that people might become worried about the safety of U.S. beef — Trump announced that he was going to also allow farmers and ranchers to process their own beef rather than having to go through the regular meatpacking companies. But it turned out that the ranchers hate that too, because what they want is for people to believe that beef is safe. They want to be assured that there are quality standards being upheld. And now that we have at least some information about the origins of the beef, we are even less reassured. In fact, just the other day, the European Union banned beef imports from Brazil because Brazil was not adhering to EU standards on the use of antibiotics. So there are, in fact, real concerns here about safety. Okay, this is quite a story, and beef is not that trivial a product, but there’s a lot of secondary implications here. The first is that this is a very Trumpian story. It’s got this sort of characteristic combination of raw corruption and raw incompetence. Raw might not have been the best word to use here, but anyway. The corruption: Obviously, this was a decision made because somebody who has given Trump’s campaign and possibly Trump himself money had a meeting with him and got an immediate policy change. So this certainly looks like undue influence. We don’t know exactly how it happened because it was a closed-door meeting. Also, shouldn’t somebody have been in the room to or at least passed on this before it was announced to say, you know, is this a good idea? Shouldn’t there have been somebody from the Agriculture Department, somebody from the U.S. Trade Representative’s Office, but certainly someone from food safety to pass judgment or give some warning? In a normal administration, any kind of decision like this involves a process in which multiple agencies get a chance to weigh in and in which somebody who knows something gets to say, look, there are real problems with this idea. But obviously that didn’t happen here. And basically it doesn’t happen in this administration. This is an administration that does not like experts. Does not listen to expertise. That’s not just a result of particular personnel decisions that Trump ma