Paul Krugman Podcast

No time for a regular post today, so here’s a video.

Transcript

When Donald Trump took us to war with Iran, he dismissed warnings from the experts, from the military, from the intelligence community, saying that this was a highly risky proposition. Now he wants to bring that same level of clarity and judgment to monetary policy, and we should all be very afraid.

Hi, Paul Krugman here. Today, I’m going to do a video rather than a proper post because I just have too much stuff going on. I’ve been too busy to actually do the charts and quantitative analysis that would be involved in actually writing a post about this stuff. I’m recording this on Wednesday afternoon.

The news to which I’m reacting is that in the midst of everything else that’s going on, Trump is doubling down on his attempt to turn the Federal Reserve into a personalized institution that will do what he wants, and never mind the fact that it’s set up to have substantial independence, never mind the fact that there’s a long tradition of respecting the Fed’s independence. Trump thinks that he should be, as George Bush would say, the decider on monetary policy.

This would be a bad thing even if Trump was somebody who generally had good judgment. Monetary policy, what the Fed does — control of short-term interest rates, control of the money supply— monetary policy is technical. Doing it right does require that you know quite a lot about what’s going on. It’s something that you really do want, technocrats at least having a strong role in the decision-making process. And in fact we generally leave it up to technocrats.

Part of the reason for doing that is it’s too easy. It doesn’t require legislation to change interest rates. It just requires a phone call to the open market desk in New York City. So it’s really easy for a president who wants to rev up the economy, wants to juice things up before an election or just plain has crackpot economic ideas, it’s just too easy for a president to do a lot of damage.

So we put layers of insulation. Members of the Federal Reserve Board are appointed for long terms. The whole setup is one that is designed to at least take some time. It doesn’t allow a madman in the Oval Office to muck with monetary policy.

It’s especially bad if the guy in the Oval Office is somebody like Trump, who is impulsive, very much short-term reward-centered, and, of course, doesn’t read, doesn’t study, doesn’t listen to experts. And we know that Trump has a bee in his bonnet, that interest rates should be drastically lower than they are now, which is simply not supported by any of the facts about what’s happening to the economy.

Inflation is running hotter than it should be. The Fed has a target of 2 percent inflation on the PCE price index. It’s actually running at around 3.

That’s not good conditions for a rate cut. The economy doesn’t need a rate cut, at least it doesn’t appear to right now. We’re not in a recession. So technocrats at the Federal Reserve will not actually deliver the rate cuts Trump wants unless he’s able to exert personal control.

Now, the way he’s been trying to do that is itself outrageous. His minions at the Justice Department have tried to force Lisa Cook off the Federal Reserve Board based on totally spurious charges about her mortgage applications long before she was at the Fed. And they’re trying to force Powell out over allegations of cost overruns in Federal Reserve construction projects. This is crazy stuff, and nobody takes it seriously. Nobody thinks those are genuine charges. This is all about trying to use the mechanisms of the Justice Department to intimidate monetary policy makers and turn them into instruments of the presidential will.

The presidential will here, aside from being utterly self-centered, is also deeply uninformed. If you read what Trump has had to say about monetary policy, it’s clear that he doesn’t think of interest rates as a tool to manage the economy, as a tool to control inflation, and so on. He thinks of low interest rates as a gold star that you get if we have a great economy. So he keeps on saying that it’s a wonderful golden age, the economy is terrific, none of which is actually true. It’s not a golden age. Inflation is running high.

None of that is true, but in any case, that’s not how it works. Monetary policy is not a reward for good behavior. It’s not a reward for achievement. It’s something that is a tool for keeping the economy on an even keel. If he does get his way, this will be bad.

The Federal Reserve has credibility, the fact that people making decisions, particularly decisions about pricing, believe that the Fed will keep the economy on an even keel, that it will not allow inflation to remain stubbornly too high. It did allow some inflation for 21-22, which was arguably the right thing to do to allow some, but it quickly took the steps needed to bring it back down again. And that credibility, the fact that people believed that the Fed would do the right thing actually helped it to do the right thing, allowed us to have “immaculate disinflation,” a big fall in the inflation rate without a big rise in the unemployment rate.

If Trump gets his way, that will all be gone. The credibility of the Federal Reserve will be shot. Now, I don’t think he’ll get his way there. I don’t think he will get his way on monetary policy. But he might.

And more than that, what the fight over the Fed is telling us is that Trump has learned nothing. You would think that the debacle in Iran would lead to some loss of self-confidence, some dent in the arrogant ignorance, the belief that just because the intelligence agencies and the generals and the admirals say that this is very risky and what about the Strait of Hormuz, never mind, I know this will be a quick, easy war.

And apparently the fact that it hasn’t turned out that way hasn’t led to any questioning of his own impeccable, perfect judgment. So the attack on the Fed is a bad thing in itself, and it’s also a symptom of “this is not a guy who should be in the White House.”

And the fact that he still commands so much deference from his own party and so much timidity on the part of people who should be standing up to him really makes me worried about the future of America and the world.

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Transcript

HCR: Hey, everybody here from Bonita Springs, Florida and Elgin, Illinois and Portland, Oregon and Seattle, Washington, Fairbanks, Alaska. Boy, it must be getting beautiful up there right now. Newfoundland, Canada, Oak Park, Illinois. Still, we do not have a duplicate Plano, Texas. Then we got I think we got Oak Park, Illinois. That’s two Illinois.

We got Cuyahoga Falls, Ohio, Vienna, Austria. Where is our Facebook? from Albuquerque, New Mexico, Dublin, Ohio. And Kristen is here from Facebook. So welcome, everybody. And here, Dr. Krugman and I go again with Lunch Money. Hey, Paul, how are you?

PK: Hi, I’m good. How are you?

HCR: I’m good. We have spring here, finally, which is unbelievable.

PK: We’re hitting 86 this afternoon in New York.

HCR: Oh, I can be there in about three hours. We’re not going to be 60.

PK: So yeah, here from beautiful New York City, actually more or less across the street from the Empire State Building. This is my academic office.

HCR: Oh, that’s nice. That’s nice. I’m just across from trees. Listen, so the world is changing so quickly that it’s kind of hard to get your mind around it. And one of the things that jumped out to me this week was the degree to which we’re focusing on the loss of soft power. We’re looking at the loss of you know, the idea of American military dominance. That’s another question. But I’m really interested in what it means for the U.S. economy to have taken such a dramatic turn away from dominance around the world.

And what got me thinking was I did an interview the other day with Vanessa Williamson of the Brookings Institution about taxes, right? And she really offhandedly said, well, you know, we have this thing in economics called the resource curse, where if you have a country that has a reliance on an easily accessible resource like gold or oil or whatever, it means that they don’t really the leaders don’t really have to pay any attention to the people, because they can just dig it out of the ground.

And she said, I’ve always kind of thought that maybe America’s resource curse was the fact that we were the world’s reserve currency. So we could borrow as much money as we wanted at really low prices. But that’s changing. And she just kind of threw it out there. And I thought, oh, my heavens, I have never thought about this at all that way. And I thought to come to you and say, I don’t know if she was right. I don’t know if this makes any sense at all, but what are we looking at in terms of the economy with the extraordinary instability of the United States on the world stage right now?

PK: Okay, so let me first of all just say that, one resource curse that we have in the U.S. is an actual resource curse. We would not be rejecting renewable energy, we would not be rejecting electrotech, probably, if we didn’t have all of this oil and gas. That in some sense, our politics are kind of polluted by the power of our own fossil fuel industry. And that’s actually probably ending up being an economic disadvantage. So just to say that we’re not that different from countries that actually have mineral resources that end up to be negatives, not positive for them.

On the dollar: I do need to say that that’s one of those things where the people who have studied it most tend to think that the special role of the dollar is least important. And it’s people who haven’t who tend to think that it must be tremendously important.

So, okay, the dollar is the overwhelmingly dominant currency of international business. If somebody in Brazil wants to do business with somebody in Malaysia, the stuff’s going to be invoiced in dollars. The debts are going to be in dollars. And those private uses of the dollar are more important than the official reserves, although that’s part of it as well.

HCR: Can I stop you for a second there? And for them to do that exchange, it has to go through the SWIFT bank, right? Probably, yes. Can you explain all this stuff?

Yeah. So there’s an interbank market. So if you’re going to exchange reais in Brazil for Malaysian ringgit banks that are going to do the deal. And the interbank markets are all against dollars. There is no market where you can exchange Brazilian currency for Malaysian currency directly. The banks will sell one for dollars and then use dollars to buy the other.

The interbank market is conducted primarily through this thing called SWIFT, which I forgot what the acronym stands for, but anyway, it’s the electronic settlement system based in Belgium, rather oddly, but effectively answering to the United States. There are ways around it, but it’s by far the most convenient way to, to do these transactions. And the role of the dollar gives the U S government a lot of power.

Everything that goes through SWIFT is revealed to the National Security Agency. The United States can effectively veto transactions. Because everybody needs to have an account at a U.S. bank in order to do basically any business anywhere in the world, the U.S. government can blockade transactions. And so this is an extremely powerful lever of power. Actually, I’ll recommend a book by friends of mine, Henry Farrell and Abe Newman, called Underground Empire, which is all about these invisible channels of power, and the currency stuff is a big part of it.

There are ways around it. The United States has tried to embargo Iranian transactions for many years, and the Iranians have costly, kludgy workarounds, but they do have workarounds. The Chinese yuan has done nothing as international currency, but people do make deals that involve using China’s banking system to get around the U.S. blockade. But it’s still a big influence of the United States.

So, okay, this is really important.

Now, some think that the dollar is about to collapse, that people are going to stop using dollars. Yeah, if we are crazy enough, we can do that, but it’s really hard.

I think I’m getting a little nonlinear here, but anyway, the best essay I’ve ever seen on this — the best paper I’ve ever read, but it’s just in the form of an essay, no math, no diagrams, was on the dollar. It was an old article by, my late teacher, Charlie Kindleberger, called The Politics of International Money and International Language, in which he said that the role of the dollar in the world economy is like the role of English. Everybody in the world who needs to communicate does it in English, because everybody else does it. Everybody uses dollars because everybody else does it. And that’s actually extremely hard to dislodge.

Even if United States policy is crazy, it’ll take a lot to change that. Think about what it would take for us to start doing international business in Mandarin. That’s not going to happen overnight.

Sorry, I’m going on too long. I haven’t let you get a word.

HCR: No, no, no. This is great.

Does all of this translate into the United States can borrow without limit?

PK: Well, first of all, we are not the only country that can borrow a lot. It turns out that if you are looking at the ability to run large trade deficits year after year, the United States has done that, but so has Australia. So has Britain.

So it’s not actually the case that the United States has a unique ability to borrow. We are impressive in the ability to borrow in dollar denominated debt. Not that we get free borrowing, but that U.S. borrowers — the government, but also corporations —issue debt that’s payable in dollars, which does give the United States some autonomy. If the dollar plunges on world markets, so do our debts. So we’re insulated from that particular concern. But it’s not unique. We aren’t uniquely able to run big deficits.

Whether we get cheaper borrowing or more borrowing, whatever the effect is, it’s not strong enough to be clear. for the signal to overwhelm the noise. You try and look for, is America able to borrow more cheaply than Britain or Japan? Maybe, but you can’t really see it in the data. It’s not overwhelming.

So at a basic level, I don’t think that the resource curse story vis-a-vis the dollar is especially compelling. I would say that the role of financial services qualifies, although that’s much bigger for Britain than for the United States. I mean, Britain really suffers, everything in Britain except for London suffers from the city of London’s role in international finance, but the United States a little bit.

But I think it’s more a psychological thing, a sense of impunity that the United States tends to have because of the role of the dollar. We don’t think about, nobody ever thinks about a U.S. financial crisis and the IMF having to come in. And maybe we should.

HCR: So that was just sort of a starting point because what that did, whether or not that was something that I should be staying up at night about, was it really made me think about, you know, I look at the politics of where we are and I look at soft power and I look at the cultural norms and so on And certainly I look at individual pieces of the fact, for example, that oil is getting very expensive and therefore we’re going to see inflation, more inflation than we’re already seeing and so on. But on a cosmic level, you know, on a really big level, what does it mean for the what is the instability that we are seeing coming out of the Trump administration? And you can define that however you wish. What does that mean for the American people? I mean, like literally, I don’t even know where to start with that. Does it mean nothing? I can’t imagine that.

Does it just mean inflation? You suggested it doesn’t mean that we have to worry about not any longer being able to borrow. What does it mean?

PK: Okay. So, the U.S. is, less of a trading nation than almost anybody else. We’re less dependent on export related jobs than anybody else. But that doesn’t mean zero. It’s actually quite large. And I’ve been thinking about this a lot. I mean, the United States has really made it sort of dead obvious that we are we’re not reliable. We’re not serious people. You cannot trust the United States to behave. You cannot trust the United States to honor its promises. You cannot trust the United States to behave rationally. Sorry to say that, but that’s where we are right now.

This has to have some negative effects. There’s some sort of almost crude mechanical stuff that people don’t think about. I never looked at this, before, but how much does the US export economy depend on selling arms? Just plain selling military equipment.

It turns out that more than 10% of our exports is military equipment. I had no idea myself, and I should know these things. And Mark Carney, Prime Minister of Canada, just said, we will no longer spend 70 cents of every defense dollar on the United States, right? And around the world, governments must be thinking about that. Should their next fighter plane, should their next anti-aircraft system be U.S.? Partly because the U.S. is not reliable, partly because it turns out that maybe U.S. military technology is not quite as supreme as we thought, given what’s happened the past six weeks.

So that right there, that’s probably millions of jobs in the United States that are directly or indirectly linked to the world, having relied on our weapons, which it probably won’t do to the same extent anymore.

PK: So I’m sitting in my academic office here. One of America’s biggest, biggest exports is higher education.

HCR: Yeah.

PK: Right. We get a a lot of foreign students. We’ve just, we just had Mayor Mamdani here this morning, uh, believe it or not, um, for an event. And we were all talking about how the student, foreign students who are very big here at CUNY, but throughout the U.S. educational system, they’re not coming anymore. We’re having a big hit. And if you think it’s just those academics, but even if you’re not in academia, there’s a lot of jobs, employment opportunities, and also our scientific base that is ultimately dependent on foreign students.

Also, there are some reports this morning that hotels are slashing prices. They were expecting to be able to rent out a lot of rooms for the World Cup, but the world is not going to come to this World Cup because it’s in Trump’s America.

So putting all that together: the U.S. economy is so huge that even all of this it’s very unlikely to subtract even 1% from U.S. GDP.

But 1% of U.S. GDP is $300 billion a year. So this is all, in the end, fairly big stuff.

HCR: So I want to be clear that people understand. When foreign students come to the United States of America, they pay full freight. U.S. students often get discounts through scholarships, through simply rake-offs, through, you know, they pay quite a bit less for their tuition dollars than foreign students do. So increasingly higher education has focused, and sometimes prep schools as well, have focused on attracting foreign students to basically to make their ends meet. So you’re seeing in a lot of universities right now, not only cuts coming from the administration, but also the loss of these foreign students on which a lot of the tuition depended.

So there’s a real crisis going on in higher education. Lots of people don’t understand that this is not just a question of getting widespread good intellectual talent. It’s also dollars.

PK: That’s right. I mean, education is a business, among other things. I mean, it’s a lot of money. There’s kind of synergistic effects as well. I mean, the foreign students... It’s not just that they pay in full and the domestic students don’t. It’s also just having more students.

So we’re able to maintain the size of the U.S. educational system in part because of the foreign students. Advanced degree students are also a large part of the workforce for U.S. research. So it’s all pretty critical.

Now, there’s also foreign tourists. Again, Carney, I think in that same speech where he talked about the defense dollars, he started with a joke: “Has anybody drunk any bourbon lately?” And, of course in Canada, basically no, and they’re also not coming as tourists. So turning yourself into a global pariah, which is what we’ve been doing is, bad for business. There are there are worse things than being bad for business, but it is also bad for business.

HCR: Well, so what about the long term? Because you’re talking about slower growth. You’re talking about a more stagnant economy. But, you know, I’m watching the the Trump administration trying basically to move us back to the 19th century dependence on old technologies, including petrochemical, you know, including fossil fuels.

And watching China and the rest of the world moving forward toward new technologies … I have a sister who’s a marine biologist in another country, and she has been saying to us for years that if the U.S. didn’t get its act together, the next generation of appliances and of technologies and of energy are going all to be keyed to Asia and not to the United States of America. And Biden and his team seemed to be aware of this and to work really desperately with the Inflation Reduction Act, among other things, to try to bring America up to speed and the Chips and Science Act to compete with China and to regain control of that future. And I’m watching us just piss that away and thinking, What does this look like in terms of jobs, in terms of technology, in terms of producing energy and so on in the future? And how long down the road are we looking at that problem? And is it recoverable?

PK: Okay. Some friends of mine who are in the kind of energy future space say that, look, at this point, effectively, the United States and China are offering to the whole world two different visions of what your energy future will look like. China, even though the Chinese themselves still burn a lot of coal, which we wish they would phase out quickly, but China is basically saying the future lies in wind and solar and batteries and electric cars and buy our technology and you can enter that wonderful world. The United States is saying No, none of that stuff. That’s bad. Windmills kill birds or something.

Anyway, we’re saying reject that vision of the future. What we need is hydrocarbons, back to oil and gas. And hey, we have lots of oil and gas, which because we do all this fracking, and we can supply you. You can buy your oil from the United States. you can get liquefied natural gas from the United States, and that’s the route you should go.

Now, that was probably a losing proposition to begin with, because the fact of the matter is that at this point, the sort of clean energy technologies are getting just plain cheaper, even aside from all of the environmental issues and so on.

They’re just getting cheaper. But In any case, would you now trust this America to be your supplier of LNG? Who knows whether Trump or the next Trump-like U.S. president will decide that you’re not our friend and cut off your supplies of resources. We used to be the country that whatever else you could say, America honored its promises. And we are not that country anymore. We’re not reliable. It’s unfortunate but unfortunately, I think it’s true that people consider China a more reliable, rational player than the United States, and this has a direct impact on that choice.

And you can see it’s happening overwhelmingly. The world is not rushing to install new gas-fired power plants. It is rushing to install solar panels, of which 80% are made in China. So, that is bad, although a world in which China produces the equipment that allows us all to have abundant energy is not such a terrible world, but still does mean that the U.S. is losing out on that. But I also worry that the United States will refuse to use this technology. So we will be, in some sense, the last country that still has internal combustion cars and still has fossil fuel power plants when the whole rest of the world has moved on to a better cleaner and cheaper technology

HCR: Well the cost of gas is certainly making a lot of people who loved their big trucks rethink that up here although as you yourself have pointed out it takes about 10 years for the fleet to turn over.

PK: Right, that’s one of those shocking little things i didn’t know. I’ve been around for a while and i remember when you know we used to say, well, cars stay on the road for nine years. It’s now 14 years. And that’s partly because Detroit, the big auto companies kind of made a decision not to sell affordable cars, that they would focus on SUVs and luxury vehicles. And then people who didn’t make a lot of money would rely on secondhand vehicles. So we turn over our auto fleet very, very rarely. And that means that if we don’t start moving to the future, we will be stuck.

And of course, the autos are the visible part of it. But it’s just a lot of our infrastructure that, you know, we’re not doing a whole lot of building in this country. And so that means, among other things, that we are stuck with legacy energy systems, legacy industrial systems. And we’re building that legacy right now. And it’s not the right one.

HCR: OK, so I’m going to ask you this and it’s just an observation. And if you feel like you don’t want to answer it, I totally get that. But it’s a little hard to miss the fact that the countries where Trump has exerted his power are ones that control a lot of oil and and, you know, Iran and Venezuela. And do you and of course, he works very closely with Vladimir Putin, whose money depends on oil and the sale of oil and that internationally. Do you think that that is playing a role in the places that Trump is trying to gain control over?

Or is that just me with a tinfoil hat over here in my study in Maine?

PK: You don’t want to dismiss that sort of thinking, but I think in some ways you may be imputing too much calculation and rationality.

HCR:That’s fair.

PK: If Trump was trying to seize the oil in Iran, then that’s insanity. He sometimes talks as if we can just go in and take the oil, and it’s like, you know, 20 million barrels a day is the amount that flows through the Strait of Hormuz. You don’t just take that, right? And are you really thinking that we can occupy Iran? Now, it’s actually funny. I have to give some, I guess, credit. Venezuela has turned out to be less of a disaster than I expected because it is a completely corrupt regime, and Trump has basically been able to kill off the old capo and install a new capo who is just as bad as the old one, but gives him a cut.

HCR: That’s what Iran was about.

PK: That’s what they thought was going to happen in Iran, and the current management of the United States is continually surprised to learn that other countries are real, have real ideology and nationalism of their own. So that’s not going to happen.

I actually think that the channels here are generally subtler.

It’s not that Trump and Hegseth and executives of the major oil companies sat down and plotted this thing together to seize the oil. But it’s been clear all along that current U.S. government is much more comfortable with petro-state oligarchs, whether it be Vladimir Putin or Mohammed bin Salman, that those are more their kind of people than, you know, basically American workers, and that more, I think, out of instinct than calculation, they do tend to follow policies that are favorable to them.

So one of the many conspiracy theories is that this whole war was about raising the price of oil to help Putin. Well, I don’t think it was, I think that’s been a consequence, but I don’t think it was carefully calculated to do that.

HCR: Yeah. Yeah. I’m afraid I’d agree with you on that one. So here’s another question for you. This has been an issue in the United States. The attempt to wean ourselves off of fossil fuels and to work in renewables, which as you say are now cheaper than fossil fuels. And I’d love to have you explain that a little bit more closely. But then what what can we do? What can ordinary American consumers do to say to the administration or to say to the country, we don’t want to be left back in? All I can think of is the Spindle Top oil gusher, which was, you know, incredible when it happened. But it was also more than 100 years ago versus where we could be going.

So, why is it cheap? What do you mean when you say it’s cheap? Renewables are cheaper than fossil fuels at this point.

PK: Well, literally, I mean, there’s something called levelized cost, which is an estimate basically of how much it’s going to take to generate electricity over the lifetime of a power plant or power facility. And the levelized cost for solar and wind are clearly well below coal fired power plants and they’re sort of about even with or dropping below natural gas fired power plants. So if you are a utility company making a decision now should I build another gas turbine electric generation facility or should I build a solar farm or a wind farm um it’s right now just on the sheer dollars and cents you would probably go for the renewables you go for solar or wind.

There was a critical problem that we used to have, which was that the sun doesn’t always shine and the wind doesn’t always blow. But there’s also been spectacular progress in batteries. So battery technology has become more effective and immensely cheaper. And all of the renewable related stuff, green energy, has had incredible learning curves. As we accumulate experience, the costs just keep falling. So they are now all cost competitive or more so and that will keep on happening. So on a typical day now in both California and Texas — anyway, most of the electricity on a typical day will be generated by solar and wind. Some of it will be fed into batteries during the day and then the lights will stay on at night because you have the batteries. That is where technology wants us to go. So that’s the big transformation.

And of course, electric cars have gone from being cumbersome to actually being, you know, on my Substack I had the other day, I just had a photo of a BYD car and it’s pretty spiffy and the range problems have rapidly diminished. So, you know, this whole the technology of, um, uh, non-fossil fuel future is pretty much already here.

And it works. It works on dollars and cents and it works in terms of reliability. Um, now I’m not, I lost the second half where you were.

HCR: So, so what, you know, I, I suspect most of the people listening here are not going to disagree. And I certainly don’t. And I’m not even talking about the cost of, you know, data centers, which are sending, uh, electric bills through the roof, the cost of diesel, especially right now, which is prohibitive for farmers and fishermen.

I’m just talking about a lot of us would like to see this future and thought we were achieving it. And now we’re looking at an administration and therefore perhaps downstream different kinds of industries that are moving us backward and not forward. And how does one, a normal everyday American put pressure on a country to change their economic behavior, not just their political behavior, that’s my back, but their economic behavior. What do we do? I mean, there’s people who are talking about general strikes. There are people who are talking about at least a May Day strike.

You know, how do we make this future happen for us and not just for the rest of the world?

PK: I’m not sure that I have an answer there. I mean, politically, I think it’s going to take a while before we get back to the Biden era subsidies for the energy future, which is terrible.

But at the minimum, we can really demand that we that the US government not actively block the energy future. What’s been going on under Trump is that they’ve been refusing federal permits for wind farms, for solar farms. There’s really conspicuous cases of offshore wind farms that they’ve been trying to force to cancel midway through construction. They’ve been losing court cases on most of those. But there are just hundreds of smaller developments where more quietly permits are being denied. So we have a government that is actively hostile, not just refuses to spend money on green energy, but is actively trying to suppress it.

And I think that political activism to to say stop getting in the way is relatively likely to succeed. You as an individual, I don’t know. I mean, that’s kind of not how it works. Right. I say I’m not a good role model here. I still drive an internal combustion car, which happens to be 20 years old.

So I guess I’m OK. Am I right? Yeah, it’s 20 years old. So I think I’m forgiven for not ditching it for a new car yet. But as for the power of individual purchases and even boycotts, not sure. I don’t think we’re going to get general strikes over energy policy, but election outcomes will have a huge impact here.

HCR So now we’re back on my turf.

PK Yes, we are. I’m sorry. That’s the thing about living in something that still has at least some of the institutions of democracy is that votes matter.

HCR: Well, amen to that. And we certainly saw that last weekend in Hungary. Listen, I could talk to you forever. Thank you for doing this. And we, and thank you everybody for being here and we’ll do it again. Is it, is it next month?

PK I think so.

HCR I haven’t actually looked at the calendar, so I have no idea, but it’s always a pleasure, Paul. I hope you get a chance to get outside in this gorgeous weather.

PK I think, I think I’m going to take myself out for dinner. Robin’s away, but even though it’s a luxury, I don’t have outdoor seating at my New York apartment. So I think I’m going to go find someplace that does have outdoor seating.

HCR Well, and do you know, I love New York anyway, but one of the things I just, this is so obvious, but just blows me away about New York is you can get any food from anywhere around the world in New York city. It’s just, I mean, I’m in Maine and we’re very lucky for so many reasons here, but like, I can’t get food from Bhutan for, for at least, you know, a long drive.

PK Oh gosh. Whenever you’re here, let’s go to Jackson Heights. If you’ve ever been there, there must be 30 national cuisines on every block.

HCR That’s just so cool.

Anyway, thank you, everybody, for being here. And we will see you again the next time Lunch Money Regroups. Thanks for being here.

PK Take care, all.

HCR Thanks, Paul.

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Transcript

What is Hungary to us or we to Hungary?

Hi, Paul Krugman here. A Saturday morning update ahead of the big election in Hungary taking place tomorrow. The eyes of the world are upon Budapest.

It’s a little odd that Hungary is so much the focus of a lot of people, myself included. It has about the same population as New Jersey, about a quarter of New Jersey’s GDP.

It’s not a big place, but it’s symbolic. It is a role model for right-wing authoritarians everywhere. It still formally has the institutions of democracy, but has for the past 16 years been a one party state — ruled by a right-wing authoritarian ethno-nationalist regime that enforces its will partly by rigging elections, partly through an extensive system of crony capitalism that rewards its friends and punishes its enemies.

In other words, it’s a MAGA kind of place. It’s what they would like to do to the United States, although with less sophistication and more brutality.

Donald Trump has been frantically trying to keep Viktor Orban in power, largely in ways that demonstrate that he really doesn’t understand how the world views him. Sending JD Vance to campaign for Orban is not helpful to Orban. It’s a boost to the opposition. Spewing frantically on Truth Social about how important it is that Orban win is, again, a gift to the Hungarian opposition.

The system is still very rigged in Hungary, but there’s pretty good reason to hope that the popular wave against Orban and Fidesz is so large that it will sweep away all of the rigging that they’ve imposed to try and keep themselves in power.

We’ll all be watching the polls eagerly tomorrow. What struck me, however, as something new is that lately, at the very end, Trump is now saying, oh, elect Orban and I will help you out economically. And just yesterday, he put up a post saying that if Orban is re-elected, that the Economic Might of the United States will come in to aid Hungary and its well-deserved prosperity and all of that.

Which is interesting because it’s an illustration of the megalomania, the delusions of grandeur that really afflict the current U.S. administration, a complete inability to have a sense of the limits of American power.

What Hungary is to us or what Hungary is to MAGA is clear, but what are we to Hungary? Look at Hungarian trade. It is a relatively open economy, which depends a lot on its role as a relatively low-cost manufacturing platform, which it has been able to maintain despite the crony capitalism and all of that.

Where does Hungary export to? Well, about 80% of its exports go to either the European Union, or Britain has a little bit on top. So essentially the democracies of Western Europe are where 80% of Hungarian exports go. How much does it export to the United States? 3.5%. Basically, Hungary, for practical purposes, does no business with the United States.

This is mostly about gravity: The “gravity equation” in international trade says among other things that trade depends very much inversely on the distance between countries. Hungary is in the middle of Europe. It’s going to inevitably do a lot of trade with Europe. And that’s even larger because the special role that Hungary has taken is that of being a a manufacturing platform for relatively low-wage pieces of the European manufacturing sector. In a way, kind of like Mexico is for North American manufacturing.

By the way, the fact that German companies in particular have invested a lot in Hungarian production is a large part of the reason that the European Union has been so derelict in trying to rein in Orbán and his destruction of democracy. But in any case, the point is that there’s just no way that the United States is going to be an important economic partner for a small country in the middle of Europe. It’s a complete misunderstanding of how big, how important, how powerful the United States is.

It is in a way kind of the economic counterpart of imagining that the United States can easily effect regime change and bludgeon Iran into submission. This is not who we are. It’s not our role. We are not big enough. We are not the sole global superpower. And in any case, being a superpower isn’t what it used to be. So all of this will be ignored by the Hungarians.

The one thing that may happen is that the clear message that Trump favors Orban may be the straw that breaks the camel’s back, maybe the final, tipping point that removes Orban from power.

I’m not counting any paprika chickens before they’re hatched. There is a kind of a nightmare here about what happens if there’s a clear attempt to simply overrule, defraud the Hungarian electorate, not just the rigging that has worked so far, but something even more extreme. And then will the Europeans ever live up to their own values, their own ideals?

I hope we don’t come to that point. But anyway, whatever is happening, one thing that’s clear is that U.S. economic partnership or lack thereof with Hungary doesn’t make a damn bit of difference.

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Lisa Graves is a legal activist and the author of a remarkable and terrifying book, Without Precedent, that documents the assault on democracy via the story of John Roberts. I spoke with her about how America has come to its current state, and what the future may hold:

. . .

TRANSCRIPT: Paul Krugman in Conversation with Lisa Graves

(recorded 4/9/26)

Paul Krugman: I’m speaking today with Lisa Graves, author of an incredibly revelatory and deeply disturbing book called Without Precedent, about the Roberts Court and what it has done to America. And...hi, Lisa. Welcome on.

Lisa Graves: Paul, thank you so much for having me on. It’s an honor to be here with you. And thank you for your kind words about my book.

Krugman: I guess I was first sort of seriously alerted to what was happening at the Supreme Court in 2000, with the stolen election and all that. But I have to say, I don’t think I fully appreciated what Citizens United would do. And so why don’t you give us a little background on what has happened, the court and its role and what’s been happening to America?

Graves: Well, I really appreciate your starting with Bush v. Gore, because that in some ways is the beginning of this period. It’s a precursor in a way to what we’ve been experiencing. And that was when the US Supreme Court, in a sharply partisan decision — although not all the Republicans voted to stop the recount — five Republicans voted to stop the recount in 2000, in Florida. And the effect of that was to give George W. Bush the presidency and with it, not just the power to, in essence, make war with the consent of Congress, but also the power to remake the courts, the Supreme Court in particular.

And by the way, as part of my research for the book, I looked into what was happening at that time, and it turned out that Clarence Thomas’s wife Ginni Thomas was working for the Heritage Foundation on the predecessor to Project 2025 — basically Project 2000. And she was screening people for positions in the potential George W. Bush administration. And Clarence Thomas didn’t recuse himself from that case. By the way, that five-four decision — it would have been four-four. The count would have been allowed to proceed. And the count that actually occurred with news organizations after the fact, after Bush was sworn in, showed that Gore would have won Florida and would have become the president of the United States.

By the way, after Thomas voted to effectively make George W. Bush the president, Ginni Thomas was given a promotion as the liaison from the Heritage Foundation to the White House, and she became the highest paid non-board member of the Heritage Foundation. And so she was rewarded very well for her work and, basically, for the consequence of her husband’s decision to vote to stop that recount.

So that was really a moment where I think a lot of people didn’t understand what was happening. And because that decision happened so quickly, there were no motions for Thomas to recuse himself. It just was a very rapid, very political, partisan decision by the court. And it is really a precursor to what’s happened next, which is that George W. Bush was reelected as an incumbent, or elected anew in 2004. And there were two vacancies that came up immediately. It was for O’Connor’s seat and Rehnquist’s seat. And John Roberts got the role of chief justice, and Sam Alito got the role of associate justice.

And then to fast forward to your question about Citizens United, again, this is a 5-to-4 decision issued by the Roberts Court, where Clarence Thomas sat on that case — the fifth vote, in essence, on that case — even though a billionaire named Harlan Crowe had staked his wife Ginni Thomas with $500,000 to launch a group to take advantage of the decision to come in Citizens United, to allow these so-called C4 groups under the IRS code to spend unlimited money to influence elections. And Clarence Thomas did not recuse himself from that case, and even had the audacity to write a concurring opinion saying that disclosure of money being spent by these groups — who the sources are — would chill speech, meaning money, like the money to his wife, which he did not disclose.

And so that decision unleashed a tsunami of cash into our elections, where candidates are routinely outspent by the outside groups. And this has given a disproportionate, and extraordinarily disproportionate, power to billionaires in our society, in America, to secretly influence elections in order to get people into positions of power to advance their interests, like the huge tax breaks that Donald Trump signed into law at the behest of Charles Koch and his groups in the first term of President Trump. And again, similarly, in this second term of Donald Trump, the extension of those deeply unfair and destructive tax cuts for the richest few.

Krugman: You kind of described what Citizens United is, but let’s talk more about that. Citizens United is the birth of super PACs, right?

Graves: Yes.

Krugman: And it’s basically saying that outside players — but it ends up being largely billionaires — can put lots of money with some basically tissue-thin restrictions on what they can do, but can basically put in unlimited amounts of money to influence political campaigns.

Graves: That’s right. And so Citizens United was a decision that basically asserted that under the First Amendment, money is speech, and that outside groups that were not coordinating with the candidate — so-called independent expenditures — they could spend unlimited money, and they were not subject to the rules that the Bipartisan Campaign Reform Act, BiCRA, otherwise known as McCain-Feingold, sought to put in place to deal with this sort of what they were calling soft money — money that was outside the campaigns that was not required to be disclosed.

So Citizens United and its progeny — a case called Speech Now vs. FEC — that’s what spawned these super PACs, where you have enormous money going into PACs, political action committees. That money can be million-dollar, even $10 million checks. For the super PACs that are operating in a particular way, they have to disclose their donors. But for the C-4 groups, which are these other nonprofits, they don’t have to disclose their donors.

And so what it’s created is a situation in which, on the one hand, a billionaire can now give millions to a super PAC in a way that they could not give directly to the candidate. They couldn’t just write a check to the presidential candidate or congressional candidate. They can do it now in an unlimited amount through the super PACs. And then separately, they can give tens of millions of dollars — unlimited money — secretly to a C-4 group that runs so-called issue ads. Those are the ads that say vote for or against this person, or call them because you oppose their policy. But it’s really obviously about influencing the election, and that’s the dark money that’s being spent in our elections.

Krugman: The Times found that 300 billionaires represented 19% of all campaign financing in the 2024 cycle. But I’m not sure how they know. Are the C-4s even in there? It may be more than that, right?

Graves: It’s certainly more than that. And only under certain circumstances can you actually see some of the funding of a C-4, based on how it’s related — who’s funding it, if who’s funding it is known. So for example, if a foundation gives to a C-4, if it has the capacity through a trust or a foundation to give to a C-4, that sort of giving is required to be disclosed. But if an individual, a billionaire like Charles Koch, writes a check to the C-4, that is not disclosed. It’s only if it comes through a nonprofit entity that you can see just a glimpse of the sources of that funding.

So whenever I talk to reporters who are doing those calculations about how much money is being spent by billionaires, I always tell them that their counts are going to be extraordinarily under the actual reality, because we know that these outside groups, these C-4 groups, are spending hundreds of millions of dollars cumulatively in the election cycle, and the only people who know who’s giving to them are the groups themselves. And probably some of the candidates know who’s giving to those C-4s.

Krugman: Wow. So if we look at someone like Peter Thiel, who basically bought a Senate seat for JD Vance. I don’t actually know the number, but the numbers we see may actually be only the tip of the iceberg.

Graves: That’s correct. There are a couple of rules in states and also at the federal level for certain types of independent expenditures, or if you have what’s known as a 527 group under the IRS code, that is allowed to spend directly in elections. But even then, what you see is a shell game. So for example, the Republican State Leadership Committee, RSLC, has created a subgroup to target state Supreme Court races. And it’s the sole funder of the subgroup. So when the subgroup discloses who funds it, it’s disclosing its parent organization. So it doesn’t disclose how much of that money is from Leonard Leo, or how much of that money is from Charles Koch or Koch Industries or the oil companies that goes into the bigger pool of funds.

And so there are all these ways in which I believe that most of the money that’s being spent in our elections in America is not disclosed. It’s not disclosed under the campaign finance reports of the candidates, of the party, or the super PACs, because it’s the C-4 money that is most potent, because it’s the vehicle that allows them to hide the true funders — the biggest funders of these operations.

Krugman: If we look at issues like energy and climate policy, there’s obviously huge amounts of fossil fuel money flowing into elections, but there’s also huge amounts of money going into supporting pseudo research at think tanks, which is a kind of whole universe. And if they’re already supplying a very large part of campaign finance, then add in all of this stuff, and we really live in a political environment that’s very much determined by big money.

Graves: That’s really true, and while the C-4 spending sometimes is not described as political, it’s obviously political. It’s obviously spent around the elections to influence the outcome of the elections. And it’s often spent on ads, which is why there was a bill that was introduced by members of Congress that was called S1 in the previous Congress, which was designed to basically say, if you’re going to spend money around the elections, it really needs to be disclosed.

But as you point out, in some ways that enormous money that’s coming in around our elections is, in a way, the tip of the iceberg, because there’s this whole other structure where fossil fuel companies and fossil fuel CEOs like Charles Koch and others, are spending enormous sums year after year on these so-called think tanks — or as some people call them, “stink tanks.”

Krugman: Heh.

Graves: But really, these are entities that have been stood up over the past few decades to generate research findings that are informed basically by the funders who are funding that research, in order to assail efforts to mitigate climate change, for example.

And when you look at the nonprofit infrastructure in the United States, the United States has a thing that is known internally, in essence, by the experts as “the independent sector.” We have the private sector, the public sector meaning government, and the independent sector—and that’s the nonprofit sector. And it is an enormous part of the US economy. That’s like churches and hospitals and colleges. But a significant portion of that nonprofit spending is going into policy operations, operations that describe themselves as informing the public, as public education — not public schools, but educating the public.

And the fossil fuel industry has played a big role in funding a number of these groups that are at the forefront of basically “studies” — and I’ll use that term loosely — but studies that then are cited by some members of Congress as a basis for objecting to the reality of climate change, or objecting to government efforts to intervene and try to mitigate climate change. And so it’s a massive distortion machine. We sort of swim in a political environment, a political and social environment, which has been greatly influenced, swayed by the amount of so-called research that these groups are putting out in order to advance the industry’s interests.

And this is part of what’s known as a third-party strategy that the tobacco industry really helped pioneer in America, where they were trying to fend off efforts to regulate tobacco and its cancer-causing effects. And so they didn’t want to run ads, for example, saying “tobacco companies say tobacco is just fine” — although they did say smoking was good for you — but they put forward doctors and, you know, so-called studies saying it was safe, even though the actual independent science was showing that there were carcinogenic effects in some instances of smoking.

And so that third-party tactic is what the fossil fuel industry and its CEOs are using. They don’t think that people would believe them if they ran an ad saying, “Hey, I’m Charles Koch. Trust me, all this fossil fuel money that’s making me the 23rd richest person in the world — it’s great for everyone. The planet isn’t on fire, and we can solve everything.” You know, instead, what happens is they fund these groups that do bus tours and they lobby Congress, or they do all these influence campaigns. And the objective is to protect the industry basically at all costs.

And there was a book that was written a couple of years ago about how in Koch world, both the for-profit part of Koch Industries—which is now known as Koch—and in their nonprofit empire, carbon was job one.

Krugman: Right. And there’ve been some studies— I think by Oreskes and others—that demonstrated how among the alleged scientific papers that disputed the consensus about climate change, the percentage funded by the fossil fuel industry was basically 100. That this is an entirely manufactured thing by special interests. So you place a big emphasis on fossil fuels. Tobacco is kind of where the strategy begins. But fossil fuels are, in your view, at the root of this perversion of the U.S. system.

Graves: Well, I think it’s a key component of it. Other than, I suppose, the war industry.

Krugman: Right.

Graves: Which is related. The fossil fuel industry is the most lucrative field of business in the world. And they’ve made so much money, you know, selling fossil fuels. And there’s a real intolerance for any limit. And in fact, when you look at a lot of the groups that have been funded in the US that are part of attacks on the EPA, attacks on the power of the Environmental Protection Agency to regulate carbon, when you trace those back, you can see money from the coal industry and coal barons. You see money from the natural gas—otherwise known as the methane gas—producers, the frackers and the compressing companies for those fracking for the gas and oil industries.

And you can see within that what’s happened: a number of these big CEOs — for example, the largest seller of compressed gas compressors in the United States for these big fracking operations — they’re paid an enormous amount for running these companies. And then they create a nonprofit that then fuels groups like the Heritage Foundation, American Enterprise Institute, and these other entities that are at the forefront of trying to stop congressional efforts to regulate carbon or to mitigate climate change.

Krugman: So, I mean, we’ve seen a lot of certainly favorable tax treatment for fossil fuels forever. But still, you know, I’ve been around for a while. I remember the 70s when, in response to the oil crises, we did get price controls and windfall profits taxes. They may not have been great policy, but it’s kind of unthinkable that we would do that now. What changed, do you think? Why did the U.S. system become so much more porous to this kind of influence?

Graves: Well, I so appreciate your raising that, Paul, because the timing of that coincides with a memo that was written by a person who became a justice on the Supreme Court. It’s called the Powell memo. It was written by Lewis Powell to the Chamber of Commerce. And that was just months before Powell was nominated by Nixon to the Supreme Court. And in that memo, the Powell memo, he wrote that American businesses needed to play a greater role in American society. And I think this is a laughable assertion. He asserted in 1971 that no one had less influence on public policy in America than the American businessman. That wasn’t true then. It’s certainly not true now.

And that memo helped spawn a new generation of investment in trying to capture these levers of power. And so demi-billionaires like Richard Mellon Scaife and others rose to that call to create this apparatus to oppose government regulation. For example, Scaife helped fund some of these early think tanks in the 1970s. But another key figure in that time was Charles Koch, when he had just inherited his father’s company in the late 1960s. He was very involved in these early right-wing movements. He personally, actively objected to those price controls. He started seeding groups in the Libertarian Party, an adjacent movement, before he ultimately tried to co-opt the Republican Party and move this into the mainstream of that Republican Party agenda, you know, with the help of Reagan, who had deeply antagonistic views toward regulation.

When you look at that period, that’s when Charles Koch, as a young man, claimed that America under Nixon was basically socialist because we dared to have any price controls. And then, in response to the efforts of Congress and the White House to address the oil crisis and the challenges that America was facing in terms of the energy crisis and the like, Charles Koch actually opposed the creation of a Department of Energy for the United States of America. He objected to that. And so those are very early parts of this movement that most people don’t know happened. You know, it’s obviously before Google. It was a bit below the radar. But that helped seed decades now — the 80s, 90s, the 2000s into the present moment — where those initial investments really took hold.

And I guess the key in some ways to their success is that I always describe Charles Koch as being the deepest, longest, most enduring funder of this effort to attack the regulation of carbon and the like. And he’s been at it now for, you know, going on 50, coming up on 60 years, really.

Krugman: Right, so this is going back to the Powell memo in, like, 1970–71. So this is 55 years now. I guess what you’re saying is that the billionaires got smarter and learned to play the long game.

Graves: Yes.

Krugman: It’s the power of long-term thinking, except not on behalf of the human race.

Graves: Yeah. It’s astonishing, because you can see there’s all these different assessments of progressive funding versus so-called conservative funding, and there has not been the type of investment in this infrastructure to push these fringe ideas into the mainstream on the left. It is just not how the funding works on the left. The right has billionaires and families of billionaires and children of children — proto-billionaires, you know, multi-multimillionaires back in the day — whose families have been at this for decades now. You can see it through the foundation work they’ve done, and how the different foundations have spawned other foundations.

And so on the right you see a very deep investment in moving these fringe ideas into reality, into legally binding rules for us, including to the Supreme Court. And on the left — for example, on the Supreme Court, or in the middle to the left there — there was this effort to not capture the Supreme Court, to try to put people on the court who had a reputation for fairness, and not because they were going to be someone who was driving the law to the left. But the right has been really disciplined in this court-capture plan, along with its plan to capture these other levers of power.

Krugman: Yeah. I think to some extent unions used to be the kind of long-term strategic players such as they were on the at least moderate left. But we all know what happened to unions. Although that’s another story.

Graves: But can I add in there? Because part of what we saw was how Reagan came in with this hostility to unions, even though he’d led the Screen Actors Guild. He came in with this real effort to try to break the unions. And then that was met, ultimately, in the longer run, with big funding from these big foundations, including the Bradley Foundation, which had one of the biggest reserves in the country, and it was targeting unions to break unions, but also to break their political power, their political influence.

But when I traced this back, this so-called “right to work” movement — which is not about the right to work, but the right to break unions in these states — what you can see in the historical record is one of the early funders of that effort was Fred Koch. Charles Koch’s father, in the 1950s, was one of the big backers of this long-term campaign to limit the power of unions, the power of people to organize in unions, and also to basically try to break their political power.

Krugman: Wow. So that means these are sort of dynastic efforts. I haven’t really thought about that. But, you know, we talk about the institutions, but it’s actually also these sort of personalized dynasties, which is just amazing.

Graves: Yes, so Dick Scaife and the Mellon fortune. It’s the Mellon Banking Corporation. Andrew Mellon was Treasury Secretary under Coolidge and Hoover, and ended up basically losing his cabinet seat due to a financial scandal. So that Mellon banking fortune became basically Richard Scaife’s fortune. That’s the origin of it.

Krugman: Because back in the day, you know, pre-Citizens United, when you looked at right-wing think tanks and all of that, it turns out there was sort of Bradley or Mellon-Scaife money behind almost all of them. But now I think it’s a bigger pool.

Graves: It is a bigger pool. We have more billionaires now, or more people in that class — that 0.000001.

Krugman: Yeah, I think it’s four zeroes and a one. But I always forget.

Graves: Yeah. And it’s interesting, because I used to occasionally talk to reporters about David Koch when he was alive, and they’d say, “Oh, but he’s given so much money to the theater or to cancer research,” but they’ve given less money, in some ways at the time, to political operations, although that’s now increased. And I would say it costs a lot more money to build a building than it does to actually buy policy, unfortunately, in America.

And so what’s happened is we have this political class of super-elite, super-rich people who have extraordinary sums at their disposal. So, for example, one of the richest men in America and in the world is a guy named Jeffrey Yass. He got rich on TikTok and also on these super-fast trades on Wall Street. He’s the richest guy in Pennsylvania. When he drops $1 million, $10 million in a race — let’s just put that ballpark out — it’s a huge sum, but from the standpoint of a dollar per dollar, the ratio is the equivalent of an ordinary American buying a coffee and a bagel once a week. It’s just nothing to them.

Krugman: I think it’s less true now, but still quite true, that given how much political decisions can influence the wealth of the wealthy, the amount that is spent to influence elections is actually still a pretty small number.

Graves: Yes, it really is. I mean, when Elon Musk was dropping 100 million or 10 million a year in these different races, he has so much money. I think at one point I calculated how much he was making per minute, or how much, in theory, his net worth was per minute. And what he was dropping in the races was nothing. It was pocket change to him. Basically, it would be pocket change to an ordinary American. Their wealth is so vast. And so, interestingly, even though they’ve invested a lot of money — people like Musk and Koch — in our elections, they still, in essence, don’t over-invest. They could spend a lot more and still not have it make a dent into their holdings.

Krugman: One thing I think most people really don’t have a sense of — even if you’ve heard a number, you don’t have a sense of how rich the rich are. You know, this was a time years ago when inequality was a lot lower. But I remember when I was still at MIT — so it’s a long time ago — but I don’t remember who we had. You know, faculty was rolled out for lunch with some rich guy, and the president of MIT whispered, “If only we could get his daily fluctuation.”

Graves: Yeah, that’s how much money. And now it’s incredibly more so.

Krugman: Yeah. Fossil fuels was really, really big. Still is, I suppose. But lately we’ve been seeing a lot from crypto and tech. What’s your sense of what they’ve achieved? I mean, they’ve spent an enormous amount of money and obviously bought a lot into this last election. But where are we on that?

Graves: Well, I will say just briefly, one last note on the fossil fuel industry, there’s a great news story out in ProPublica this weekend about the money behind the effort to give immunity to the fossil fuel industry, to forbid liability, and have Congress do so and have the states try to help with that. And so that piece really details that spending, that includes some significant amount of spending by Leonard Leo, who is the guy who helped pack the US Supreme Court. And so that issue—the fossil fuel influence on policy, the effort to get them off the hook for the liability for the climate changes that are underway—that is an ongoing, active campaign by the industry, or by the industry’s proxies, by the groups that are advancing that agenda.

But you’re right, now with the fossil fuel industry in terms of influence, it is being rivaled by, I guess the new rich in a way, in terms of the tech industry and the tech billionaires. And their influence was enormous in a way. Before this election, they had tremendous capacity, due to their wealth, like the Peter Thiels and others, to spend in our elections or to back certain candidates and get their person in a position of power.

But now that you have this administration that is basically making deals with our public policy — which I personally would describe as bribery, but they have not been charged — where you have industry insiders who are getting benefits: the tech industry, the media industry, getting benefits from kissing up to Trump, from doing favorable coverage in essence for Trump, you have a corruption component, in my view, that is combining the effect of the wealth already. And you have the policy distortion. You have this additional component because Trump is so willing to basically bend policy to favor his friends or people who favor him.

And then the crypto money, that’s the darkest of the dark money. I used to think that the dark money coming in around the election—the money spent by C-4s or their related C-3s—was dark money, but crypto is the darkest money. I mean, it is inherently concealed in terms of who the money’s going to and who holds the money. And we now have a president and his family that is involved in crypto and adjacent to crypto operations in a way where who knows how much money is coming in and from what sources, foreign or domestic? And crypto has also sought to basically influence politicians on a bipartisan basis, giving money to Senate candidates on both sides of the aisle in order to try to limit the regulation of that industry.

Krugman: Yeah, I’ve always thought that we kind of underrated the influence, the importance of sheer actual personal corruption. It’s not just campaign finance, but it’s actually what you yourself get: a bonus for accommodating special interests. But it used to be that led to cushy jobs at think tanks. We used to talk about how if you lost an election, that’s okay. There’d be a Center for Fear and Loathing that would offer you a job. But now it’s actually millions of dollars in the new dark money that somehow flow to you personally. Or in the case of Trump, billions of dollars.

One thing I learned from Rick Perlstein, one of my favorite historians of this whole thing, is that there’s another industry which has always played a large role in funding, which is basically the quack medicine industry. I mean, in some sense, that’s what’s going on with RFK Jr. We think of it as just this crazy guy. But actually, there’s a lot of money there.

Graves: There’s an enormous amount of money there. This so-called MAHA movement —to “Make America Healthy Again”—has really taken advantage of the internet’s access to create these individual communities, where people are getting really selective science. And I use that term loosely. Dressed up as science. Again, it may be funded by industries that are benefiting from it. But you also just see the rise of this influencer culture in the US, where some of them are also paid by these companies to promote their products or promote their lifestyle. And it has become such an influential, distorting thing.

I mean, the notion that we would have a rejection of vaccines and vaccinations for children in the aftermath of eradicating in the US diseases like measles, in the aftermath of a whole period, you know, 50, 60, 70 years, of having a really successful public health policy for vaccination to prevent these childhood diseases that can maim kids or blind them or, you know, basically disable them for life. And yet you can have this surprisingly large number—though it’s still a small percentage of the American population—embrace attacks on that science. And do so despite all of the weight of evidence of how successful these vaccines have been in promoting the health of the American people. It’s extraordinary that this is taking hold.

But as you point out, it’s not just the marketplace of ideas. It’s a marketplace. And that marketplace is profiting from pushing quack remedies and profiting enormously from pushing remedies that don’t work. And we saw that in full scream during the pandemic, when quack treatments, which were not effective at all, were so widely embraced and promoted by some of the people profiting from them, and also by Donald Trump himself or his closest advisers.

And one of the things I looked at at that time — ultimately there was a New York Times story about this — but I took a close look at how RFK Jr.’s wealth himself had increased over time, moving from his role in the Riverkeepers to his role of prominence in this anti-vaccine movement. And you could just see, as he took more and more aggressive positions against vaccines, how much more he himself was paid. I think in 2021 or 2022, he was making half a million dollars a year from the nonprofit group that he was leading, attacking vaccinations. So he was benefiting himself personally from those attacks.

Krugman: You’ve sort of structured your book around John Roberts’ own biography and how that kind of parallels the history of the movement. So tell us about that a bit.

Graves: Yeah. Thank you so much, Paul. It was a labor of love to write this book, because I really think that it’s hard to understand what’s happened to America without understanding what’s happened to the Supreme Court. The Supreme Court under John Roberts has exerted extraordinary power. And has asserted power in ways that the court has not previously done, including when John Roberts orchestrated the destruction of Section 4 and Section 5 of the Voting Rights Act. And he’s now on the precipice of doing the same to Section 2 of the Voting Rights Act in the Louisiana vs. Callais case that the court has heard and will be decided this summer.

But what people don’t realize is that John Roberts cut his teeth on trying to block the extension of the Voting Rights Act, trying to block the repair of the Voting Rights Act after his mentor, Bill Rehnquist, helped destroy a significant component of that act, which was designed to prevent the dilution of Black votes.

Krugman: Right.

Graves: And so you have a person who was chosen for the Supreme Court not because they thought he would be fair, but because they thought he would be a ringer. And he spent his early days in the Reagan administration as a Reagan revolutionary at the top of the Justice Department, trying to block the renewal of the Voting Rights Act with the amendments to overturn a Supreme Court decision. He spent time at the White House counsel’s office for Reagan, trying to block civil rights enforcement. He has devoted his life to advancing this very far-right agenda.

And he was someone who, when he was nominated, was not met with any of the howls of “No More Souters,” which was the sort of campaign mantra from the Federalist Society of not wasting a Supreme Court seat on a fair judge. And so after Roberts was confirmed, Bush nominated his counsel, a Republican lawyer named Harriet Miers, to the bench. Robert Bork and these other right-wing leaders screamed that this was a betrayal of their movement, to appoint a Republican lawyer and not a loyalist. And so her nomination was pulled down and Alito was swapped in, and again, “No More Souters” was not chanted at him.

And so the Republicans were able to secure a court that is now operating like a lever of power, aiding Donald Trump, aiding the Republican Party at almost every turn. And that includes the counter-constitutional ruling John Roberts orchestrated in 2024, giving Donald Trump unprecedented immunity from criminal prosecution. And then he and his fellow Republican appointees married that decision with 24 rulings last year on the emergency docket, the shadow docket, basically telling Donald Trump he could go forward with extreme actions, extreme assertions of presidential power, that were contrary to the Constitution, statutes, regulations, but that he could proceed over the temporary restraining orders that lower court judges had issued. And so this court, in my view, is out of control. It’s in desperate need of reform. And John Roberts is helming this court that is on a path of destruction against our rights.

Krugman: So, shadow docket. I didn’t know what that was until I heard you talk about it. So explain to people what that means.

Graves: Yes. So what most people don’t know is that the Supreme Court has about 8,000 to 9,000 petitions every year, and it only takes about 60 cases. It chooses 60 cases. These are all matters of discretion. They’re not required to take any of these cases unless it’s a state versus state case. And so the court is taking fewer cases, and it’s basically creating a docket where one year it’s about destroying the separation of church and state, another year is destroying reproductive rights, another year it’s destroying regulation of industry and carbon.

And then it has this emergency docket, which typically has been used for death penalty appeals. Someone claims at the last minute, “Please stop my execution,” and the court will issue a ruling, without full briefing, without oral argument, on an emergency basis. That emergency docket has been deployed by John Roberts and his fellow appointees as a shadow docket to basically change the law in America in significant ways over this past year in terms of policies on immigration policy, or allowing these mass firings to go on, allowing the gutting of funding for sciences and more. The court has allowed those things without having full briefings, without having a full opinion on it. They’ve just reversed the decisions of lower court judges.

And it’s significant in many ways because—as Judge Michael Luttig has talked about—this is a huge lack of transparency, a way in which the court is operating outside the bounds. But also, it’s the case that in almost every one of those shadow docket cases — where, again, no oral argument, no real public discussion, no opinion written — the court has intervened and overturned lower court rulings that temporarily blocked Trump, after those lower courts made factual findings that people would suffer irreparable harm and that under the law they were likely to succeed. What the Roberts Court is saying is: “you’re not likely to succeed. We are basically pre-reversing those cases.”

Krugman: So the contrast is that something like the birthright citizenship — where probably they won’t do the most horrible thing, but there are formal arguments — that’s all in the glare of publicity. But a lot of the things they’re empowering — the sort of pogroms against immigrants — are being done just sort of, “Oh, by the way, the Supreme Court has, without any visible deliberation, suddenly said that what Stephen Miller wants is okay, right?”

Graves: Yes.

Krugman: That that’s really quite horrifying. Gosh.So now let’s talk about the immunity issue. There’s been a lot of stuff in this since 2004 that is really horrifying. But the immunity for Trump is kind of the most glaring of them. And just tell us about that for a second.

Graves: Yes. This case that was issued by John Roberts — it was a 6-to-3 decision right before the election in 2024, and it invented immunity from criminal prosecution for a president. That’s never been the law in America. Ever. Not since the beginning. And that’s why there was a reaction to that decision, in part to have the introduction of the No Kings Act, because that immunity decision basically made Donald Trump king-like in his powers, by saying that he and any future president could not be held accountable for any crimes they committed.

When John Roberts wrote that opinion, he basically effectively pardoned Trump for the crimes he had committed. But he larded that opinion with additional assertions, trying to set the pardon power beyond any judicial or congressional review, asserting that there’s no limit on how a president can direct the Justice Department in its prosecutions, even though there have been longstanding limits in order to protect from the weaponization, the politicization, of the Justice Department to go after political enemies.

And so you have a situation now where you have a president who can commit crimes—and has committed crimes, in my view, and in the view of Jack Smith—who can commit crimes under John Roberts’ opinion. Hopefully this will be ultimately repudiated. He can pardon his co-conspirators, which is what he did when he pardoned the January 6th people who were convicted. But in essence, he could pardon any of his cabinet members or others—people on the ground in Minneapolis, for example—if he wanted to. He could pardon people who were engaging in illegal activity at his behest in foreign policy, war crimes, or domestically. And that would be okay under John Roberts. That is the essence of the destruction of the rule of law. If a president can break the laws, and he can order people to break the laws, and he can then give them immunity or pardon them for doing so, basically no law can hold.

And on top of all that, you know, it’s John Roberts who swears in Donald Trump on January 20th, 2025, where Donald Trump takes an oath to uphold the Constitution, to defend the Constitution. And yet John Roberts has just allowed Donald Trump to violate the Constitution in that immunity decision. A lot of people haven’t read the Constitution all the way through. I’m certain Donald Trump has never read more than maybe a sentence of it. But there are two duties in particular of the president in Article Two of the Constitution, and one is to uphold the Constitution. And nothing could be further from upholding the Constitution than breaking the law, than violating our criminal laws. And so John Roberts orchestrated this. It is a truly destructive decision that puts us all at risk.

And I hope that the people will come together to reform this decision, to reject it along with embracing court reform, like I’ve been working on with my work partner Alex Aronson at Court Accountability, and with our allies, to put together a really bold package of reform for the next possible opportunity to reform this court. But also to restore our rights and repeal—in essence reject—this immunity decision, which is counter-constitutional. It’s an anathema.

Krugman: So what would that mean? Hope for the best? Hope that we actually have a fair enough election in 2028 and a mass public revulsion against everything that’s been happening? How do we get out of this? Because the problem is a lot of these justices are still fairly young. So how do we get out of it?

Graves: Well, there are a lot of reforms that we’ve supported. For example, term limits, but also some jurisdictional changes for the court. I personally have been looking into court expansion and intermediate appellate court changes to try to deal with this court’s excesses and the fact that this court needs to be unpacked. The term limits would, if they were applied immediately, have an effect on removing three of the justices.

But I also think we need robust ethics reform, because the idea of taking secret gifts from billionaires, I mean, it’s outrageous. Or having a billionaire or a billionaire-funded group on the right funding a spouse, fueling a spouse’s income that feathers the nest of the justice. That’s outrageous and wrong. But there are so many other pieces that this court has dismantled, including the power to regulate carbon. That effort that the court has engaged in to try to kneecap the EPA [and rollback] voting rights, reproductive rights—there aree so many things where I think most of the American people really want changes. They want to get our rights back and expand them.

And so I’m hopeful that we can put together and be part of a movement that makes those reforms not just possible, but that people perceive how essential they are. Or this court—the Roberts Court—will continue to just dismantle our rights.

Krugman: Okay. Other than that, we’re doing great, right?

Graves: But you know, here’s the thing, Paul. There are more people than ever that are supporting these reforms. There is a growing reform movement. It’s hard to see, given the way Donald Trump captures the headlines and the legitimate controversies over the war and over the Epstein files and more. But beneath that, when you look at the polling, what you see is that people understand that this court is not trustworthy, cannot be trusted, and that we need to reform the court. And they also, on issue after issue, reject this administration’s policies, almost across the board. And so I think that there is a real desire for us to take a different path. A better path.

Krugman: That’s, I think, a hopeful note to end on.Thanks so much for talking with me today.

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Transcript

All around the world, big, strong men with tears in their eyes are coming up to Donald Trump and saying, “Sir, you’re a loser.”

Hi, I’m Paul Krugman. A brief update on something that has palpably changed in the world in the last few days.

As regular watchers of Donald Trump and regular readers of mine know, Trump has a thing about insisting that people treat him with immense respect — the big strong men with tears in their eyes thing, “Sir” stories. And in particular about believing that the world despised America under Joe Biden and respects it now under his leadership, which was never true either in the first part or the second.

But it is true that until quite recently, many people in the world at least felt obliged to pretend to respect Trump, felt obliged to flatter him, to stifle the negative feelings that they were having about the course of the United States under current management. And maybe Trump actually took these kind of coerced professions of respect as reality. But in the last few days, suddenly the masks are off.

Volodymyr Zelensky just yesterday tweeted out a part of an interview that he gave in which he said, among other things, “In my view, Russia played the Americans again.”

So it was just saying, basically, that Trump is working with the Russians, which obviously he’s known and has surely thought for a long, long time. But to say it that openly is something new.

Zelensky — not a big strong man — but Zelensky is a tough guy. Keir Starmer, Prime Minister of Britain is, alas, not. But also Starmer just in a statement said that we’re tired of a world in which, I’ll quote, “bills go up or down on energy because of the actions of Putin or Trump.” Equivalence, Trump and Putin in the same sentence, in the same breath, that’s pretty stiff stuff.

And Starmer has been notable in trying to preserve the special relationship, avoid offending Trump, trying to make him get a few points off the tariff rate, whatever. But now Starmer is pretty much openly saying, you know, you are the problem and we don’t trust you.

What’s this about? Well, obviously, the United States went to war with a fourth rate power, Iran, and lost. Exactly how that plays out, we don’t know. But it was truly impressive how poorly the United States military and US strategic thinking has played out here.

The United States has also proved both temperamental and weak, lashing out at our erstwhile allies and veering between threats of war crimes and then what looks a whole lot like abject surrender.

So the world no longer either fears or trusts us. It turns out that our military might is not what it was cracked up to be, and our reliability is essentially zero at this point. We can’t count on the United States to do anything that it has promised. It’s a world in which the hegemon has basically gone AWOL. So that’s a big thing.

There’s another story which I think is important, which has kind of has been overshadowed by the debacle in Iran: The bigger ongoing war, which is Ukraine-Russia, is not going well for Russia. It is, if anything, tilting increasingly in Ukraine’s favor. Now, what’s interesting about that, why is that relevant?

Trump is basically on the side of Putin. He’s been unwilling and probably unable to just openly support Russia but has effectively pulled all aid from Ukraine, There’s essentially no money no military aid, no economic aid flowing from the US to Ukraine anymore — it’s all on the Europeans. The Europeans have still been buying some U.S. weapons and transferring them on to Ukraine, but that’s been largely choked off. And I think the assumption was that Ukraine would be in grave danger, would perhaps collapse without American support.

Not happening. What’s actually happening is that Ukraine appears to be gaining the upper hand in the drone war, which is what this war is mostly about. And Ukraine’s success in adapting to modern warfare has been so great that now it looks like there are a significant number of Ukrainian drones and to some extent maybe personnel already deployed in the Middle East, and that Middle Eastern nations other than Iran are quickly moving to strike deals with Ukraine, to buy Ukrainian equipment.

It’s kind of like, well, if you need help and Iran is still a menace, which it is, don’t count on the Americans, but maybe Ukraine knows how to do these things.

Obviously, that helps empower Zelensky to be open in saying what he really thinks about the United States.

Does this matter? Well, we’re not about to see the whole world turn on us. The United States may have threatened to seize Greenland, but I don’t think that Denmark is going to threaten to seize Alaska or anything like that. But it’s a big comedown, and it will hurt.

It’s a slow erosion, but having countries that trust you, that support you, is a very big asset in geopolitics. Losing all of that is therefore a big liability.

And this is my country. I’m not celebrating all of this, because I’d like to see America, particularly I’d like to see the next president, assuming that we actually have a legitimately elected president, inherit a brand that is not completely damaged and corrupted.

But that’s not where we’re going. It’s really looking pretty bad. And what can you say? We had the worst and the dumbest in charge. We still do. And that’s taking a toll on all of us.

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Transcript

This is America’s darkest hour.

Hi, Paul Krugman with an update Tuesday morning. Earlier today, Donald Trump posted on Truth Social,

A whole civilization will die tonight, never to be brought back again.

Not going to be a problem if we ever do get the war crimes trial that all of this deserves. A statement of motive, intent is completely clear.

I don’t need to say how vile it is. It is shocking, although at some level, if you didn’t see this as a real possibility, then you weren’t paying attention. Not much to say here except to talk about how those of us who are not Donald Trump should behave.

First of all, any military commander given orders to start destroying civilian infrastructure in Iran should disobey that order, should say it, should not even quietly resign. This is a time to stand up and make it clear that this is totally unacceptable. This is a violation of everything that the military stands for. It’s a violation of everything that America stands for.

Second, any member of the Trump administration: to continue in your position doing your job as Trump takes America on the course of becoming a criminal nation, a criminal terrorist nation, you cannot continue in good conscience.

Particularly, if you play any role in making this happen, then you are a war criminal too. Then you ought to be brought up someday before an international tribunal. But even if you’re in a peripheral role, even just putting your head down and saying, well, I’m an assistant secretary at the agriculture department or something like that, that’s not good enough. This is not a regime that you can serve in good conscience.

Republican politicians, any Republican, I mean, there are people already saying, “oh, you know, I don’t approve of destroying civilizations, but” — that “but” makes you an accessory to the crime, if you are failing to stand up against it.

And I really don’t like this notion that only Democrats have agency. This is a very common thing. All of this is made possible by the lockstep slavish obedience of Republicans. Nonetheless, Democrats have a role here, too. And this is not a time to attack Trump’s war because it costs too much money or to attack it because it’s bad for energy markets or raises the price of groceries. I mean, it does do all of that. All of that is true. But we’re way past that point now. We’re at the point where you need to unambiguously condemn the immorality and criminality of what’s going on. No mincing of words.

Damned if I know what’s going to happen. I mean, at some level, I think that the civilization that may be destroyed tonight is our own. I mean, are we civilized if we do this kind of thing? If America as a nation doesn’t stand up against this, what are we?

So, God help us. Normal life will continue. It’s going to be a really weird thing to be out there, you know, grocery shopping and taking the subway and all of those things. But this is, in a way, the defining moment. The fate of the whole American idea is on the line.

I have no idea how this ends.

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America as we knew it may end Tuesday.

Hi, I’m Paul Krugman. Sunday morning update. Yesterday, I talked about how awful Trump’s message about glory to God and all of that was, but it’s looking much, much worse today. I’ll quote Trump in a second.

But let me do a Heather Cox Richardson here and talk about history for a second. Think about what Abraham Lincoln, a president who was actually winning his war, said in his second inaugural. You’ve all probably heard the magnificent conclusion, which begins,

with malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in.

Determination, humility, decency, Now, let me read you Donald Trump’s Truth Social post from this morning:

Tuesday will be power plant day and bridge day, all wrapped up in one in Iran. There will be nothing like it. Open the f****n strait, you crazy b******s, or you’ll be living in hell. Just watch. Praise be to Allah.

What happened to us? This is not the country we were supposed to be.

If Trump is actually going to give the order for massive war crimes, for destruction of civilian infrastructure, power plants, bridges, which will, among other things, lead to a lot of deaths in Iran, will the military obey it? A year ago, I would have said no.

But what we do know now is that, first of all, there turns out to be at least a significant MAGA component inside the officer corps. And we know that Pete Hexeth has been systematically corrupting, dismantling the military over the past 14 months. Generals who raise ethical concerns have been fired. Officers who even just want to be intelligent about warfare. and not believe that it’s all about warrior ethos and lethality have been fired, so it’s quite possible that there’s a quorum of officers who will follow instructions to commit war crimes.

You can get even more pessimistic. Tim Snyder has been arguing that we’re basically in preparation for a coup, that somehow or other the war will be a pretense and arguing that this insane expansion of military spending in the latest Trump budget is a bribe to the military.

I hope he’s wrong. But in any case, my God, if Trump gets his way, and if he doesn’t chicken out —and I think TACO is greatly overrated, I think all too often Trump actually does follow through on his insane stuff.

It’s entirely possible that basically by this time Tuesday, America will have established itself as one of the world’s great villains. I don’t want to be here, but, you know, be warned. This is happening. This is real.

It’s the most astonishing, awful thing that I’ve ever seen, and we’ve all seen a lot of awful things. Take care, I guess.

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Donald Trump isn’t sounding like himself, and that’s terrifying. Hi, Paul Krugman here with a brief update on Saturday afternoon.

Not my usual thing. No economics, no analytics, just I felt I needed to say something. On Wednesday, Trump gave a speech, which was... pretty depressing. He was low energy, listless, and seemed to be disconnected from reality, insisting that everything is going great in this war and everything is going great across the board. And in terms of the closure of the Strait of Hormuz, well, it’s somebody else’s problem. And the Strait may naturally open by itself, which didn’t sound like leadership.

In some ways it sounded like Trump, always living in a fantasy world in which things are going his way. But if you thought about the outcome for the world, it seemed to be pointing towards the U.S. never admitting it openly, but implicitly basically giving up and leaving a stronger Iran, but with the Strait of Hormuz opening up — maybe with tolls collected by the regime in Iran, and just a diminished, weakened U.S., but better than some of the alternatives.

Today Trump put up a Truth Social post, which said that if Iran doesn’t open up the Strait of Hormuz within 48 hours, “all hell will reign down on them.” That was how he put it. All hell will rain down. Misspelled rain, but OK. And then finished it up with glory be to God. GOD in caps.

Wow. So first of all, this is a completely different picture suddenly. Aside from the Strait of Hormuz not being our problem to we will commit massive war crimes, presumably. That’s the only thing that makes sense here, unless they open it up, which is pretty bad.

And also... I don’t think Trump has ever said “glory be to God.” That doesn’t sound like him. That sounds almost as if Pete Hegseth wrote this post, which maybe in some sense he did. The misspellings and all do look like Trump in his own hand, but it feels like this is the influence of our religious fanatic Secretary of War, or as people in the Pentagon apparently call him the Secretary of War Crimes.

This is really bad. It’s hard to see what happens in 48 hours. It’s clear that Trump, for all his pretense of, “I’m always winning,” is aware of how completely he screwed things up, that he’s aware that he has basically led America into an epic strategic defeat. I don’t think he cares about that from the point of view of America, but he is realizing what this has done to him — that he will probably quite rapidly lose his grip on U.S., politics, and certainly to the extent that he cares about his legacy, it’s not going to be his wonderful ballroom. It’s going to be that he’s the man who single-handedly led America to one of its greatest defeats ever. But now what?

It would be one thing if he just kind of slunk away into the night, which is what we would have hoped would happen, but instead it sounds like he’s unable to accept it and that he is going to try and do something truly awful in an attempt to somehow redeem himself and the situation.

If we had a functioning democracy, this would be 25th Amendment time. This guy should not have any authority at all. Finger on the button, although I don’t think we’re talking about nukes, but he shouldn’t have any authority on matters of state violence when this is the kind of mood he’s in. Just in general, although religiosity is often expected of American leaders, saying glory be to God before you unleash violence, that is not what used to be the American way.

Anyway, I’m scared. I wonder very much what the next few days will bring because this is looking like basically a president who is losing it and unfortunately losing it in a way that can really make the world a much worse place very fast.

I guess enjoy the rest of your weekend.

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A short video rather than my usual morning post

Donald Trump doesn’t even have the courage to run away.

Hi, I’m Paul Krugman. I’m not going to do a regular post today — it’s Thursday morning — because I wanted to wait and see what was in the big speech from Donald Trump last night. And I thought I could just do a short video about it.

It turns out that the speech was sort of an anticlimax, although not in a good way. Many people expected Trump to pull the mother of all TACOs, to declare victory and surrender. He did not do that. He declared victory, of course, but he did not actually announce an end to hostilities. On the contrary, he said we’re going to bomb Iran into the Stone Age. So add massive war crimes to your schedule.

There is clearly no strategy here. There’s no endgame. There’s nothing. It’s hard to tell, as always, whether Trump is delusional or just completely unable to admit something that he actually knows.

One of the moments that really struck me in the speech was him declaring that the whole world was extremely impressed by what happened. He said,

the whole world is watching and they can’t believe the power, strength and brilliance. They just can’t believe what they’re seeing. The world can’t believe what it’s seeing.

What it’s seeing is that the world’s greatest military power took on a fourth-rate power. Again, as I said the other day, Iran’s military budget is a rounding error in our military budget. And we lost. For all practical purposes, we’ve left ourselves in a much weaker position and Iran in a stronger position than it was before.

But Trump has to believe or has to claim that he believes that the whole world is extremely impressed. You might say, why do we care? Well, he cares, obviously. His whole thing is about dominance and believing that we’ve got the world awed by our strength.

If you want the real verdict on the speech, well, Brent oil futures were under $100 when Trump started speaking. They are over $108 as I record this. The oil market, I think is a more clear gauge, although the stock market has also reacted.

Basically, everybody said, oh my God, we thought that this was going to be at least the beginning of the end, and instead it looks like an endless quagmire. I still think that people are not fully taking into account the implications for global oil prices and everything else of the Strait of Hormuz remaining closed for the indefinite future.

So this is going to be really bad. But anyway, it was radically disappointing even to people who are, you know, the markets and a lot of people in the world were actually hoping that the United States would give up. I mean, it’ll be terrible. We really don’t want a medievalist theocracy empowered. But since this is heading nowhere except for, again, massive war crimes, better to end it. But we’re not getting that.

What really strikes me, and there’s obviously deeper stuff in here, but it is a question of character. It’s funny, I don’t think there’s a sort of, if you like, native English term for the Yiddish — but it’s effectively English now — word mensch. A mensch is literally a person, but it means somebody who takes responsibility for their actions, who accepts defeats as being defeats and tries to move on, who tries to improve, basically just being a mensch.

It’s hard to imagine somebody who’s less of a mensch than Donald Trump, except maybe for some of the members of his cabinet. It’s incredible that they’re so lacking in the basics of character.

The thing about what this means for America’s role in the world is not only that Trump and company are doing great damage, but the whole world is watching. They saw that this guy, and it wasn’t hard to see what kind of a person Trump was, that America elected this guy twice. It appears that the American public has completely lost sight of what it means to be a responsible, serious person.

I might say, since this masculinity posturing is such a part of it, they’ve forgotten what it is to be a man. Obviously, that applies to all genders. A country that will elect somebody like that twice is not a country anyone can rely on. And that is the ultimate lesson here.

We have Trump lecturing the world and saying, why are you cowards? Why don’t you come in and help us in this ill-conceived, disastrous war that we started without checking with you? But the reality is that the world is looking and saying, my God, what is wrong with America? They may still have a lot of bombs — although not as many as we started with — but it’s not a country anybody can trust for anything. And that, even more than the price of oil, is going to be the legacy of this war.

I guess have a great day.

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Transcript

So the world’s greatest military power went to war against a fourth rate nation whose military budget would be rounding error in our defense spending. And it appears that we lost.

Hi, Paul Krugman with a late night, well, evening update, which I don’t usually do, but I wanted to get this in before who knows what happens in the news tomorrow.

It’s Tuesday. It’s the day that the stock market rallied enormously, that the futures price of oil dropped precipitously, all on the happy news that the United States, at least based on Trump’s Truth Social, appears to be surrendering. Trump put up a Truth Social post saying that, you know, we don’t need to open the Strait of Hormuz. If the Europeans think they need it, they should go ahead and do it. And it’s up to them. And this is pretty amazing.

Of course, the idea that it only matters to the Europeans, that it doesn’t matter to us, is all wrong. And that will be a subject of a Substack post shortly. But it is pretty much a confession. Although it’s framed as we won, now let somebody else do the cleanup, the reality is it’s effectively a confession that, well, we lost. We can’t do this.

How the hell did we manage to do this? I mean, the objective reality is that this was never going to be... Maybe it wasn’t even going to be doable. There were reasons why we didn’t go to war with Iran, particularly why we didn’t go to war in a way that basically became an existential threat for the regime so that they have no compunction about creating lots of damage because the alternative result is annihilation for them personally. But everybody who thought about it even for a couple of minutes, anyone who knew anything, particularly anyone who’d been paying attention to four years of war in Ukraine … we know something about what modern war looks like and about the inability of countries that have conventional superior forces to avoid major damage from drones and missiles. So this was completely, unbelievably stupid.

How did we get there? Well, there was a very good article by Tobin Harshaw in Bloomberg, and mostly I’m just riffing off what he wrote, but I think that it deserves wider circulation. He resurrected a book I had forgotten about, a 1976 book by Norman Dixon called The Psychology of Military Incompetence. It was very British oriented, but the lessons apply; Dixon looked at the great military disasters of British history.

You might think there were many reasons why really bad decisions were made, but he actually said there was a kind of consistent pattern. That what happened was that you had military leaders, or people making military decisions, who for the most part shared two things. First, they believed, they had this atavistic, anachronistic belief that warfare is all about muscles and not about minds. which hasn’t been true for a very long time. And second, he argued that they are just generally anti-intellectual, anti-education.

So in some sense, it’s all about muscles and don’t give me all of these smarty-pants intellectuals who are telling me about why I’m doing it wrong. It’s an uncannily accurate portrait of Pete Hegseth, down to even seemingly minor details. Muscular Christianity is among the defining symptoms of the bad British military leaders that Dixon analyzed. So this is what happened.

This is not about specific bad judgments. It’s not, in a way, about the specifics of the case. It is that we were led into war by people who exemplified in the classic way how really bad military decisions are made. And it all comes down to believing in brute force and toughness and muscles — muscles in the age of drone warfare! — and hate intellectuals, hate learning.

What really gets me is that in a war where the deciding factor is having some intellectual understanding of what you’re doing, that a theocratic regime in Iran, which basically wants to bring back the Middle Ages, mostly got it right.

And the world’s leading haven of scientific thought, or we were at least until the current administration, got it completely wrong. It’s humiliating. It’s awful. And, you know, we will all be paying the price for this incredible defeat for probably for the rest of our lives.

Enjoy the evening.

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