American Thought Leaders - Peter St Onge: Will Trump and DOGE Succeed in Gutting the Regulatory State?

Episode Date: March 16, 2025

In this episode, we dive into President Donald Trump’s multi-pronged strategy to revitalize America’s economy, from aggressive reciprocal tariffs to massive DOGE cuts, and a large-scale deregulation effort to promote business growth.The Code of Federal Regulations is now over 190,000 pages long. A 2017 Auburn University study found that each federal regulator effectively “costs the U.S. economy the equivalent of 138 private sector jobs per year.” The researchers said that equated to a $11 million annual loss for the U.S. economy for every additional regulator.What will be the impacts of the Trump administration’s policies? Will they usher in economic prosperity or will America have to head into a recession first?Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

You are listening to American Thought Leaders. If you enjoy our content, please leave us a five-star rating on this platform. There are hundreds of thousands of federal regulations, the vast majority of them, they're crony, they're bought by lobbyists. And the main goal of them is either to get bailouts, to offload some of their costs onto the public, or to ban the competition. In this episode, we sit down with economist Peter St. Ange, a Mises Institute fellow. We dive deep into Trump's strategy to revitalize the American economy and what roadblocks may lie ahead. What Trump is doing is that he is very good at spotting the details of a negotiation, of understanding who holds which cards.

And when he looks at Europe, the striking thing about really every one of our trade partners is that they need us a heck of a lot more than we need them. Is America headed into a recession? What are the precedents? We've actually been through this before. So if you look at the end of World War II, so in 1946, we demobilized 11 million soldiers. GDP dropped by 11.2%. Yes, it was a brutal recession in 1946, immediately followed by one of the golden ages leading up through the 1950s into the mid-1960s.

This is American Thought Leaders, and I'm Jan Jekielek. Peter St. Ange, such a pleasure to have you on American Thought Leaders. Thank you for having me on. So of course, I've been following your work quite a bit, and you're very prolific on X, on social media. And you wrote something the other week that, frankly, is quite shocking. other week that, frankly, is quite shocking. For every single federal regulator that's kept on the job, there's 138 private sector jobs that get destroyed. It's hard to fathom how this could be the case. The reason is because federal regulations, one of the great myths of government is that regulations exist because there's some public need and people organize and they stand up in their local community centers and they bake cookies and somehow they power through against the man.

And in reality, regulations are bought. They're bought by lobbyists. And this has been true since the beginning of regulation. They are generally bought by large incumbents, for instance, Wall Street bankers. They have big budgets. They use those budgets to put senators on speed dial. And then when they need a regulation written, they call up the senators. The people who actually write the regulations tend to be employed by those big companies.

And the main goal of them is either to get bailouts, to offload some of their costs onto the public, or to ban the competition. If you look at 2008, for example, that's a really nice example of this. So 2008 was a disgrace. Wall Street made billions of dollars, and then by basically taking huge risks, So 2008 was a disgrace. Wall Street made billions of dollars.

And then by basically taking huge risks, taking gambles, hiding the gambles they were taking. And then when they went against them, they handed it all to taxpayers. And what was cute is that, of course, the public was angry. They were angry on the left. They had Occupy Wall Street. They were angry on the right.

They had the Tea Party. And had Occupy Wall Street. They were angry on the right. They had the Tea Party. And the response was that Wall Street said, we've been naughty. We need you to regulate us. And they wrote the regulations, of course, because who else is going to write regulations? Wall Street knows how the financial system works. The people doing the bake sales aren't

going to write competent regulations. They are going to get hustled. So now when you look at, it's kind of a fun chart, when you look at the number of banks that were started in the US, it's very, very hard to start banks because there's a lot of regulations that are bought by Wall Street. They make it almost impossible. So they screwed up. They got something like $800 billion worth of bailout.

And in return, their penance was that they rewrote the financial rules to outlaw competition and to keep it all for themselves, to monopolize finance into an oligopoly. So the end result is that the regulations chase out our own job creators. Peter, forgive me. This feels to me like a very extreme position about regulations because obviously, without any regulations, corporate America would run amok. Having zero regulation cannot be the right answer, even if the preponderance of regulation is indeed exactly as you described. Where does this actual needed and valuable regulation come in? Or is your position that it simply doesn't exist? It doesn't exist with a caveat. We can ask what happened before we had the regulatory state,

and the federal government was of course much, much smaller. But how did you deal with companies behaving badly back in the 1800s? And that was dealt with by the tort system, so negligence rules. So if a company was poisoning your soup, then you had a case, you could take them to court and then you would get compensation for that. And that was the main deterrent against companies. What happened is during the progressive era, so this is about 1900 to about 1915 or so, that was really the heyday of the progressive era.

Of course, it's continued. But during that era, the regulatory state rose up. That was one of the main creations of the progressive era. But something else they did was capture the legal system by specifically by trial lawyer associations. The American Bar Association was actually a union. It's a sanctioned, almost a official union of lawyers. These captured the legal system and converted into something very different today, where realistically, if you don't have means, you can't participate in the legal system on an equal footing anymore. There's a great movie called, I think it's called Unforgiven. It's a western from way back in the day. And the opening scene, she goes out, she wants to hire, I think it's a bounty hunter to track down the guy who killed her father.

And there's some legal transactions in the beginning of that. And it's just absolutely striking to see how simple and straightforward the legal system was before the lawyers took it over. So if you got rid of the regulations today, it would be an absolute mess. Because the lawyers and then the corporations who pay those lawyers, they have essentially weaponized the legal system against regular people.

So if you change it today, it would be an absolute disaster. Companies would indeed poison you because you wouldn't be able to do anything about it. They would just outbid you in the legal process. They would have lawyers to run you around circles for the rest of your life, take away your house in the meantime.

So you really, you know, 95% of the regulatory state you could get rid of without any consequences. That last little nugget of 5%, that is doing something. It's very corrupt, but it is doing something at that point. You know, when and if we get to that point, then we can have a conversation about pairing that last bit of regulation together with legal reform, tort reform. But until then, I think the main point, given what we're working with, is that there are hundreds of thousands of federal regulations. The vast majority of them, they're crony. You can get rid of them with very little consequences, very little negative consequences, and a lot of positive consequences in terms of new entrants,

being able to come into the industry and create jobs and create prosperity. Fascinating. Let's talk about Doge very briefly. One of the arguments that's been leveled against Doge, I've heard a lot of positive arguments certainly certainly. But one of the arguments that's been leveled against Doge is that it seems too arbitrary. There's too much being taken out. It's unclear. I'm thinking about these regulations. If you're saying there's 5% that are doing something, 95% that aren't, if you get rid of the wrong 5%, you could create a mess for exactly the reasons you just described. Is it possible this is the situation with DOJ? Yeah, it's always tricky if you're reforming a large organization. The US government employs

about 2.4 million civilian workers. They have budgets, of course, about $6 trillion that they spend. It is by far the largest organization on Earth, well outside of China anyway. It's a very, very large organization. It is dysfunctional, I think, by all accounts. No matter which side of the political aisle you're on, people recognize that the federal government is dysfunctional. It's also protected by a lot of basically crony rules that have been inserted in there by government unions, by organizations and government workers. Government workers, ever since sort of the inception of the bureaucratic state, they've

always voted left. They've sent their political donations to the left, they've aided the left, which is quite natural, right? The people who work for the government, of course, want a larger government. And so that means that they've had the ability, whenever the Democrats are in power, they've had the ability to insert these sort of barriers. And so if you're trying to shrink it, if you're talking about a private company,

you can just go in there and look through what's efficient, what's inefficient, and then cut the fat. With the federal government, it's very, very tricky because they've inserted sort of all of these tripwires and traps and fake doors. And so they have to go after what they're able to go after initially. So to give an example, when you join the federal government, the first year you are a probationary worker. It's much easier to fire you. You don't yet have all of those government union roles. Now, what they're currently doing is targeting those

probationary workers because they're the low hanging fruit. In a perfect world, they would not do that, right? Instead, they would look at all of the employees and they would say, I don't care how long you've been here, are you good at your job or are you not? And of course, they know that this is what Trump does in his organizations, this is what Elon specifically did with Twitter. He did not fire everybody who was there one year. Rather, he looked at everybody and saw if they were good workers or not. But because of all of those trap doors and tripwires inserted into sort of the federal to protect the federal bureaucracy, they have to do it that way.

Now, they've made a couple of mistakes. I think they laid off, there were some nuclear inspectors or something where they rehired them within like 12 hours. Elon has said that that's going to happen. When you throw in the postal workers in the military, you're talking close to 5 million people. If you're trying to trim a 5 million person, completely dysfunctional organization, yes, you're going to make mistakes in both directions. Is it as simple as saying, remove those regulators and you've created this many jobs? You start the game with a certain number of regulations, and then you hire regulators

and the regulators create new regulations. And so at this stage of the game, ideally, you would get rid of the regulators, so they stop creating new ones. But you would also get rid of the unnecessary regulations themselves. And both Elon and Vivek had talked about that since the beginning of Doge,

that one of the goals is going to be to go through and identify which regulations, not just useless, but which ones are unauthorized, which ones lack congressional authority. Get rid of those, and at that point, I mean, you should get rid of the regulator because they're not doing anything, they're not enforcing anything.

And so that really follows from a very important Supreme Court decision last year called Loper-Bright v. Raimondo. And that was a case that asked whether executive rules had the same weight as Congress. So the way that our constitutional system works is that Congress is supposed to come up with laws. But in fact, well over 90% of the effective laws that we have to follow are actually rules that were written by

the executive branch. They have no congressional authority. And so the case was over whether the executive has the right to effectively write laws, just make up laws that don't have congressional authority. And the Supreme Court said no. And so in a perfect world, what would have happened at that point is that Joe Biden's administration would have sat back and said, okay, this is very important because it means that the vast majority of what we're doing is unconstitutional. And so we have to go back and review all of these rules and see which one the Supreme Court just said are unconstitutional.

So effectively what Trump is doing is enforcing the will of the Supreme Court, which the rogue Biden administration had been ignoring. What it means for us on the ground is you could slash back of the envelope 90, 95% of regulations because they don't have congressional authority. So there are thousands and thousands of regulations that are put out every year. It'll make you sick if you go and look at the list just month after month, while Congress passes very, very few of those. And so the idea would be go back to the few rules that Congress does pass.

If Congress is unable to pass a rule to regulate how big the trout you can catch is or something like that, then that means that, you know, the federal government is therefore silent on it. And so the people have the right to do that. So it expands the scope for liberty, but it also of course creates a lot of business opportunities where small businesses especially can enter a space, entrepreneurs can come in, create new businesses, and then eventually expand them.

So, absolutely fascinating, first of all, how you're framing all this for me. What do you think of how DOGE has been conducted thus far? I think it's been incredible. It's something that both parties have been trying for decades. This is not a Republican issue. Both Bill Clinton, even Obama, they tried to rationalize government to make it more efficient. We know big government does not have all the answers. We know there's not a program for more efficient. one that lives within its means. The era of big government is over. Al Gore famously, you know, he was going to make the government more efficient.

He was carrying around an ashtray, it was like an $800 ashtray from the Pentagon or something. This has been a longstanding issue that has been recognized by both parties. And it's actually interesting. Doge itself was created by Barack Obama. It was called the U.S. Digital Service, USDS. And he created that in the aftermath of the Obamacare website fiasco. So that was very embarrassing. And they said, okay, the federal government is dysfunctional. We're going to create this agency whose job is to go through and find efficiencies over or above all technical efficiencies. So they gave them a huge amount of power to go into each agency and look at how they're doing

things and then make it better. And so what I don't know whose idea it was but what Trump and Elon did was they simply took that instead of US digital service now it's the US Doge service he simply renamed the organization which Obama had created and had given all that authority. He renamed it, it already had authority, it already had you know budget for staff and And so that is Doge. So this notion that Doge is some outside creation, no, it was created by Obama. And it was created because there's a longstanding need recognized by all parties to rationalize the federal government to make it more efficient. It's just that when it's Trump doing it, the Democrats go nuts.

When it was Clinton doing it, Clinton laid off several hundred thousand federal workers, not a peep. That was all about efficiency. It made a lot of sense, is what New York Times tells us. When Trump does it, it's literally destroying democracy. What about this idea Trump kind of upped his game in terms of for every new regulation or rule created, you have to cut some number. Now it's up to 10 from what I understand. It's rookie numbers. I'm going to get that to 50. But yeah, no, it's fantastic. In his first term, I think he had said it was three for one or two for one, and that ended up being seven. And so like any manager, now he's going for a stretch goal here, so he's going for three for one or two for one, and that ended up being seven. And so like any manager,

now he's going for a stretch goal here. So he's going for 10 for one. The question is also, how much does the regulation cost, right? So if you put in one big regulation, you take out 10 tiny ones, which is traditionally, that's what the federal government tries to do,

because every agency is trying to keep power. It wants to keep power because power is budget. Budget is how you get ahead in Washington. Apparently, it's how you get a golden parachute when you're done with the whole gig. So, you know, you have to kind of prevent them from gaming that. Now, that takes us back to Doge. That's a big reason why you want to lay off so many people is you want to make sure that they're not gaming it.

They're not trying to follow the letter of the law while violating the spirit, which is of course something that we've seen an awful lot of these past four years, certainly, but arguably really this past hundred years. Let's actually talk about the economy. We've been hearing about lots of real structural problems with the economy. The debt, the amount of money that's been printed in the last few years, the accelerating interest payments on the debt. At the same time, basically since inauguration, inflation—and I have this by quite reputable numbers from the folks over at Truflation—has gone down to something like 1.4% pretty steady. I don't even understand how that works, given the reality of the previous years, given the amount of money printing and so forth. So can you give me a picture of what you

think the economic reality for the U.S. is right now? So that's a big question. There's a lot of parts to it. Breaking OK, so you've got three numbers that I think people really care about. One of them is inflation, one of them is growth, and one of them is jobs. And if we start with inflation, the big story at the moment is that we've got this overhang from the Biden administration. The numbers that we're getting right now are really the tail end of Biden's numbers. The reason is that it takes a while to collate most of these statistics. So the numbers that we've been recently getting have been sort of the final report card for Biden.

Those have been pretty bad. So Biden's final month inflation rate was an annualized 5.7%. That was his parting gift to Trump. Economic growth, GDP growth was about 2.3%. That's fairly good. There's a big caveat there, however, which is that if we go back through the Biden administration, about half of economic growth has just been increases in government spending. That is not sustainable.

That's not actually creating prosperity. It shows up as GDP, but it's not creating prosperity. So if you discount for that, then we're probably closer to about 1.2%, which is pretty bad because the population grows about 1.2%. In other words, that's flat, that is stagflation. So 5.7% inflation per capita, 0% economic growth. Biden gave Trump stagflation. And the problem is that it takes a while to turn those around. So traditionally, for example, when

you look at Federal Reserve interest rate cuts, which is the main way that the Fed tries to influence inflation, there's a delay of about 12 to 18 months on those. Those take quite a while to work through the economy. That means that if Biden handed Trump stagflation, in theory, the first 12 to 18 months of Trump could still have all that inflation in it. So how do you fix that?

How do you bend the curve on it faster? The main way you do that is cutting government spending. You can cut government spending or you can try to grow the economy very quickly. Spending they've been trying very hard to do that with Doge. Democrats have been fighting every step of the way. Some of that has been through lawfare, for example, trying to force them to hand out USAID money, things like this. On growth, which is the other way to do it,

that also, it usually takes a while, right? It takes a while for people to start a new factory or to drill a new hole for oil. So Trump is trying to accelerate that as quick as possible. What he's really doing is following the playbook from what he did last time on a lot of these issues. So last time around in his first term, Trump's main emphasis was taxes, regulations,

and then drilling oil, right? Taxes, if you cut taxes, that then allows businesses to grow, you get a lot more companies. If you cut regulations that also allows them to grow, it's fewer burdens. Also, you know, you can open up virgin territory for new entrepreneurs to come in. Something important to remember on regulations is that across the board, regulations hit small companies much, much harder than big companies. The National Association of Manufacturing Estimates is about two to one. So for small companies, the regulatory burden per employee is north of $40,000.

It's darn close to their salary. And if you think about this logically, if you've got a whole bunch of new regulations on hiring, on diversity, on emissions, whatever it is. If you're Burger King, you've got a dedicated compliance group who is analyzing those, figuring out the cheapest way to do it, and then giving exact instructions to each franchisee. They say, buy this product,

install it like this, boom, boom. If you're a mom and pop, forget about it. The costs are going to be outrageous. So a lot of companies actually fold because of all those regulations. But at any rate, that's what Trump was trying to do in his first term was to use taxes and regulations to grow business. The reason you're doing that is that inflation is fundamentally how much money is chasing how much stuff. If you can grow the economy, then you got more stuff. And so inflation comes down. On the other hand, if you're not growing the economy, if you're just printing more money, then inflation goes up. That's exactly what happened under

Biden. So Trump is trying to follow that script, but it takes time. And so the question is, over the next six to nine months, let's say, before the new companies kick in, when we still have the overhang from Biden's stagflation, I think that's really the danger zone. That's what, you know, when you look at the stock market, for example, when it's somebody called it a kangaroo market, right? It's not a bull market. It's not a bear market. It's a kangaroo.

It's all over the place. A lot of that has to do with the market trying to figure out what they think is going to happen in the next six to nine months under Trump. In other words, we don't really know where things are going to go. We know that Trump is doing the right things. The trick is that all of these have delays on them. It takes time to start businesses, it takes time for interest rates to feed through the economy, takes time for banks to make loans based on economy. It takes time for banks to make loans based on liquidity. All of these things have delays. And when we look back at historical

numbers, a lot of the good stuff Trump is doing is not going to kick in for possibly up to a year. It's interesting. You mentioned there are two approaches. One is that you can cut spending, the other one is you can create prosperity. I'll get you to explain to me how prosperity is created. That's a great question. There are books that have been written on this, of course. But when you're doing the cutting spending side of things, you mentioned that a significant portion of the jobs growth, for example, and the economic growth was actually that government spending in the first place. So you're actually cutting the economy itself. So it almost seems like you have to do the other part, the increasing prosperity. Otherwise, you're going to end up in a dark

place. Or correct me if I'm wrong. You're going to end up in a recession, right? So if you look at Argentina, for example, Javier Malé has been a model for what DOJ is aiming to do. And Javier Malé came into an economy that was going through a hyperinflation. The real economic growth was in free fall. It was just an absolute mess in Argentina. And what he did was slashed the federal government. He campaigned with a chainsaw, and maybe viewers have seen him afuera afuera

throwing out ministries from a whiteboard. He cut 6% of GDP in government spending, which in US terms is like cutting close to $2 trillion in annual spending. Massive cuts. So he cut 6%. Now that means that on paper, GDP is gonna go down by 6% because GDP includes government. Now what actually happened in Argentina is that in that first year, GDP growth only went down by 3.5%, meaning that the private sector almost immediately jumped in

and made up for half of all the government cuts. One year later, the projections for Argentina's GDP now are around 8% growth, right? So in other words, what happened in Argentina, you cut $1, the private sector immediately grew by 33 cents, and then the following year, it grew by like $1.50, right? So it's incredibly good for the prosperity of the country.

Your cancer is a strong word, but you are losing fat. And you're losing fat fast. If you cut 6%, it takes time to build the muscle. Going by Argentina, it was surprisingly fast. But yes, in the meantime, you did have that 3.5% drop. Now, Argentina does not have a very robust

welfare state. We have an overgrown welfare state in this country. You're eligible for Medicaid, for welfare, for unemployment benefits. So, if we have something like a 3.5% recession here, I think in terms of public opinion, there are a lot of people, just going by my interactions on X, for example, a lot of people understand that we're going to have to go through a difficult period to make the country healthy again. But even so, even with three and a half percent, you know, a three and a half percent recession, it's not going to be nearly as bad as Argentina because we have that large welfare state. Now, we've actually been through this before. So if you look at the end of World War II, so 1946, we demobilized 11.2 million soldiers. It was an enormous, that was close to 10%

of the entire population. It was close to a fifth of the workforce. So we demobilized them because the war was over. And GDP dropped by 11, I'm sorry, we demobilized 11 million. GDP dropped by 11.2%. It was one of the worst recessions in American history. It was Great Depression level. Everybody understood you have to do it because what, are you going to pay 11 million guys to march around in a circle? Obviously, for the good of the country, you have to get them back into the private sector.

You have to pound the swords into plowshares. And that's what we did. And yes, it was a brutal recession in 1946, immediately followed by one of the golden ages leading up through the 1950s into the mid 1960s. So I think highlighting, you know, this has happened before. Every time a war is over, you have this exact situation. You have an enormous amount of people who are, they're doing something good, but they're not doing something economically useful, right?

Blowing up bridges in Italy is not actually building the American economy. So you're trying to transfer these people from a wasteful activity, i.e. working for the government today or blowing up bridges in 1945. You're trying to bring them over to do something productive. You are going to have a hit to GDP. Now the wider question is, should we even be counting government in GDP? So Howard Lutnick, the new commerce secretary, he said that they're going to start reporting both numbers with government spending and numbers without government spending for transparency to give people an idea of what's actually happening

to the productive economy, not to those 5 million government workers. I mean, absolutely fascinating. So very briefly, how is prosperity created? In brief, you take assets that are not being used very efficiently and you combine them to make something better. So the iconic example would be Robinson Caruso. He runs out every day. He grabs fish out of the stream, takes him a couple hours to get a hold of a fish because he's not very good at it. And then he's sitting there one evening and he decides to build

a net. So he grabs fronds and he weaves them together and he's got a net. Now he's got the net, he can catch more fish. He's got a bunch of leisure. He can use some of that leisure to make it a better net or to come up with other, you know, to build a house and so on. So fundamentally, you take your time, you take the things that are around you in the environment, you combine them together in ever better ways. Another metaphor that's often used is a recipe. So if you are a not very good chef, then you can take amazing ingredients

and make something disgusting. On the other hand, if you practice and if you learn, then you can take the same ingredients and make something a lot better. So economic growth fundamentally is those. It's getting a hold of the resources that are already around us, those that are given to us by nature or by God, and then combining those in ways that create things that are better and better. How do we know they're better? Because people are willing to pay for them. And so when, you know, how do you get there for an economy? The recipe for Adam Smith, he was writing in 1776 in The Wealth of Nations,

coincidentally the same as our birthday. And he wrote it was, let's see, peace, easy taxes, and a tolerable administration of justice. And that pretty much sums it up. As long as you're not at war, as long as your taxes are not too high, and as long as you have some semblance of natural law, in other words, you own what you produce, you own yourself, as long as you have those three things, then you are going to be rich. And this is validated throughout history. When those three things click,

countries can get astoundingly rich. You know, if you take Asia, for example, after World War II, people generally assume that Asia outside Japan was not going to be very wealthy. And I think it's absolutely shocked people. For many countries in Asia, they did have peace, tolerable administration of justice, easy taxes, and indeed they got rich. Many countries are now far richer than the U.S. Countries like Hong Kong, for example, Taiwan is far richer than Europe is. Japan and Korea have, of course, matched Europe. So it's not complicated. It's a very simple recipe to make a country rich.

Unfortunately, there's a lot of profits in getting in the way of that. So there's a lot of profits in becoming corrupt. There's a lot of profits in war, unfortunately. There's a lot of profits in tax. If you are in the government, you'd like to hand that out to your friends. One thing that struck me as you were talking about 1946, this deep recession immediately followed by a Golden Age. I'm wondering if President Trump, when he talks about America having entered this Golden Age right now, if he isn't alluding to exactly that process. Is

that what you think? I think he is. I think that he and a lot of Republicans look back in the 1950s as an economic golden age. Trump is surprisingly aware of American economic history. He's talked a lot about the period before the income tax, for example, the 19th century, when the government subsisted almost exclusively on tariffs. There was no income tax, for example, the 19th century, when the government subsisted almost exclusively on tariffs. There was no income tax. There was no Federal Reserve. He's surprisingly familiar with these things for a president. I think he's far more intellectually curious than, say, Barack Obama, certainly than people give him credit for. But yeah, I think he's interested in the 1950s economy. In many ways, demobilizing our overgrown

federal Leviathan is very similar to demobilizing after a war. Fascinating. You mentioned a bunch of different states. I think you mentioned the administrative state, the regulatory state, and the deep state. Are all these the same thing in your lexicon? They're coming from the same thing. Murray Rothbard, the economic historian, he thought that the beginning of the sort of, I guess we'll call it independent bureaucracy for now, came with the 1873 Pendleton Act. And so this was passed in the wake of the Civil War and it was marketed as a way to cut down on government corruption because government is always corrupt. This is a fact of nature.

And so the idea was that you would have these technocrats, these independent experts modeled on like college professors who back then were considered unbiased. And these would be like a Jedi council that would sort of sit above the world and they would just decide things not based on politics, but based on expertise. Now here we are after COVID, we can see how that turned out. I think that's been a disappointment. But at any rate, what that did do was created a federal bureaucracy that was independent of politics.

Now the problem is, if it's independent of politics, that means it's independent of voters. Because the voters are the, through problem is, if it's independent of politics, that means it's independent of voters. Because the voters are the, through their politicians, right, via elections, the only way that the voters can exert any influence on the federal government is through the politicians. So if a government is independent of politicians, it's independent of voters.

So at that point, who is it serving? And again, from COVID, we can see it's very naive to imagine that these people are just sort of neutrally, you know, the Jedi Council that considers all opinions equally. They're serving somebody. And in particular, that sort of an institution or an arrangement is going to attract political entrepreneurs. It's going to attract lobbyists. It's going to attract bribery, corruption. We saw, for example, there were FDA approval panels where people were literally being paid or they had a financial interest in the drug being approved.

It's fairly shocking, but this is what you would expect, right? If it's quote unquote independent, if it's independent of the voters, it's going to be seized by somebody. Nature abhors a vacuum. It then bulletproofed itself, right? It created unions, it created work rules. Generally, these were passed by Congress. so there's a legal issue now whether Congress actually had the authority to do any of that because Congress does not control the executive

branch. But setting that aside, it sort of armored itself and bulletproofed itself over the decades until it metastasized into what we have today, which is this two plus million bureaucracy that lords over us. And sort of by design, they're independent to the people, right? They are the overlords. They're sort of an occupying army. And so what Doge is trying to do, what Trump is trying to do, which to reimpose democratic oversight on these people, they're very upset about it because they view the government as their, it belongs to them.

It's their property. The $2 billion going for transgender operas in Peru or whatever it is, that is their thing. They're probably getting kickbacks on the other side of it, but one way or the other, they view that as belonging to them. They're very angry that the president, who's the representative of the people, he's the only representative of the people in the executive branch, they're very upset that he's coming in and breaking up their game. You mentioned tariffs instead of taxes. This is something that I know that the executive branch has been looking into. I think the president has mentioned this specifically. Let's talk about tariffs. Let's talk about tariffs. How do you view, for example, this big new approach that the president has been touting, and we're about to see how it's going to work or not, is these

reciprocal tariffs. In situations where there's a significant imbalance in terms of what sort of tariffs are being levied, they're going to be equalized based on what the other side is doing. What do you think is going to happen? Yeah, so a tariff fundamentally is similar to a sales tax, and it's a tax on imported goods. The trick is that, generally speaking, other countries are putting a lot more tariffs on us than we've been putting on them. Now they're not all sort of tariffs written out on paper. A lot of them are non-tariff barriers. So they'll block our imports, you know,

by claiming some environmental or some health rule. Many of them are VATs, which are a type of income tax or a type of sales tax that most countries in the world impose. Those hit our goods if we sell stuff to France, but then France exempts its own products. So there's a variety of barriers that countries put on us. And for Europe, for example, they tax us at roughly 18% more than we tax them. What Trump is doing is that he is very good at spotting the details of a negotiation, okay,

of understanding who holds which cards and then seeing whether he can get a better deal. And when he looks at Europe, you know, the striking thing about really every one of our trade partners is that they need us a heck of a lot more than we need them. So to give a flavor, something like one to two percent of the American economy is producing for export to Canada or to Mexico. On the other hand, one fifth, 20 percent of the Canadian economy is producing for export to the U.S. One third of the Mexican economy is producing for export to the U.S. That means that we have massive leverage

over these countries. Now, we could just make them dance to entertain us, but specifically what Trump is interested in doing is getting them to lower those barriers. And what he's saying is, if you get rid of your barriers, we you get rid of your barriers, we'll get rid of our barriers. But in the meantime, we're gonna calculate how much we think you're tariffing us with those non-tariff barriers and the VAT tax and all this, and we're gonna put the exact same on you.

And so because the US economy is so important, right? Mexico cannot give up a third of its economy. They have riots. They can't do it. And so what Trump is sort of doing is recognizing the enormous leverage we have over these countries. Now, that's not even to speak of the military. So there's a number of countries in the world that only exist because the American taxpayer covers their bills for military. It's true of Europe. It's true of Japan, Korea, certainly it's true of Taiwan. It is outrageous that any of these countries

should have any trade barriers whatsoever against us, given what we give to them. So Trump recognizes this. I think the biggest shock of it has been why for the past 80 years has America been running around shining everybody's shoes when we always had 10 to one leverage over these countries? You can debate perhaps there's something corrupt going on there

that senators in the US get sweetheart jobs when they leave office. There may be quite a bit of that. I hope Doge might look, and I think they will. But for the moment, what Trump is doing that's different from previous administrations is he's recognizing that, saying to other countries, if you are going to terrify us, not just terrify, if you're going to do other outrageous things. So for example, Columbia didn't want to take back its illegal immigrants, criminal illegal immigrants. They said,

no, no thanks. We don't want them. And so Trump threatened 25% tariffs. So he is putting countries into line when they've been abusing the U.S. in the past. Do you think that Doge will be able to cut $2 trillion as Elon Musk has identified as the number? The trick is Congress. Trump wants to. Congress is the problem. Elon wants to, I think Trump wants to, Congress is the problem. Congress is a drunk 16-year-old with a credit card. They always have been. They will grab ahold of every dollar and they'll find another way to spend it. So for example, Trump is trying to wind down the Ukraine War. He's trying to resolve the Middle East conflict. And yet Republicans in Congress are trying to increase the military budget, which is already obscenely high.

So, right, I think they need to be kept on a very short leash. The question there is Republican voters are 90 or 95 percent with Trump. There is, I know whenever I talk about Republicans in Congress, there is a lot of frustration with them. But I think that traditionally, the dynamics in Congress, the way they've worked is that the mainstream media, the left-wing legacy media, was able to be the filter. They could whisper into ears, they could manipulate reality, they could gaslight voters.

And so Republicans in Congress have, they sort of have an institutional culture where they lean left because if they go to the right, right, if they actually try to cut government, say, media will come after them. Whereas if they go left, media will cover for them with voters. And I think one of the biggest lessons

of the 2024 election was that those days are gone. They rolled out the H-word every single day, the Austrian corporal. They rolled that out every single day in the last week. That had been very taboo in the old days. They went for broke and it didn't work. And so I think that Republicans in Congress are behind the curve. They don't understand that those old days of left-wing media covering for left-wing policy, those are gone. Now the media, whether it's EPOC,

whether it's people like me, we are the people who are talking with Republican voters. I think what is likely to happen in 2026 is that there's gonna be a lot of primaries where a lot of rhinos, a lot of left-wing Republicans are going to get knocked out. That is then going to serve as a warning to the rest of them, and they'll straighten up. But for the moment, I think there's still a lot of Republicans in Congress who would

rather take all the Doge savings and just find something else to spend it on. It could be farm subsidies. It could be more military. And Democrats, of course, always want to spend more money. That's the whole point. So I'm less optimistic than I was in the beginning, simply because Congress doesn't seem to be appropriately afraid of the voters yet. I wanted to go back to tariffs for a moment and just to talk about, let's say you're the Canadian government and let's leave politics out of it. What would be the optimal thing for the Canadians to do? I'm Canadian, by the way. We have a large Canadian viewership of

American thought leaders. What would be the optimal thing for the Canadian government to do in this scenario where, as you say, the U.S. has this 10 to 1 leverage or whatever it is, huge leverage? You've got optimal on two levels. One of them is if the Canadian government cared about the well-being of the Canadian people. And then the next question is if the Canadian government cared about the well-being of itself. If we start with the first, in a perfectly logical world where Justin Trudeau truly cares about every Canadian, then he would go through these various trade distortions that Trump is complaining about. Things like, you know, there's enormous tariffs

on American milk, for example, coming into Canada. US banks functionally cannot operate in Canada. So, you know, you would go through each of those one by one and he would sit down with Trump, and you would say, okay, here's the barriers that I think we're putting on you, and then we're going to get rid of these. Can you get rid of the ones that are hitting us, like timber and things like this? And you would sort of sit down and rationally even them out.

Basically take away any reason for Trump to be upset by getting rid of as many barriers as possible. If this gave you a world where there's genuine free trade between the U.S. and Canada, as if they were each other's states, that would be, as an economist, that would be fantastic for both sides. So that's if they're being perfectly rational. The next question is, what do people actually do? Humans are crooked timber after all, and people are self-interested. And there, I think something concerning is happening in Canada, may happen in other countries, is that there is a sort of rally around the flag that goes on where Canadians might feel like the country itself is

being attacked. There's reason for them to feel that way, given how Trump talks. But anyway, they might feel that way and actually rally around whoever the leader happens to be at the moment. Canadians have a bit of what you would call an oppositional identity. I've tested my assumption of this, which I felt was the case for years and years and years with other Canadians, and everyone's agreed with me thus far. Essentially, the rhetoric that the President of the United States is using in Canada is precisely whatever embers of nationalism exist. What are you saying? Governor Trudeau? Wait, 51st state? What is this? That's just the reality. Yeah, Trump is making America much more nationalist, and he's making every other country much more nationalist as well.

Yeah. I mean, it's a fascinating development in all of this. Which I'm not necessarily opposed to. So I am a huge fan of MAGA. I'm also a huge fan of Canadians looking after Canada first. Taiwan should be Taiwan first. Japan should be Japan first. Every country should love their own country first. If a national leader is not loyal to their own

people, who exactly are they serving? Who are they supposed to be serving? United Nations? Big businesses? Who else is there? So again, you've got to serve somebody in life. It seems to be appropriate that the Canadian government does indeed serve the Canadian people and fights for them. One of the things that seems obvious to me and I want to get you to comment on is that, for many reasons, but in particular because of this huge push to offshore manufacturing over the last 30, 40 years from the U.S. Essentially, the U.S. manufacturing industry has been gutted, and it simply has to be rebuilt to have a proper America first policy if that is to exist. I think that's the case for any country. The question is, how to do it, given the complexities of the existing system of Communist China holding so much U.S. debt, of the way the financial flows work in the world,

of our addiction to cheap goods, so to speak, from other places, how to get that manufacturing back, given all of these complex realities? Dealing with China first, I think that it's a little bit of a bogeyman in the sense that China very much does not want to stop exporting to the US. If they do that, tens of millions of Chinese workers will be unemployed. China already has significant social disturbances. They have riots. There was a bank run, I think last year, where they had the tanks come out and parade around the street. China's got a lot of problems. They are not interested in gutting their own manufacturers.

If you look at Trump's tariffs first time around, Beijing covered them. Beijing stepped in and wrote checks to companies to cover the tariffs. Why? Because China is extraordinarily unstable. They are very, very afraid of what happens when you get instability. So when you get people who say China is going to cut off our toy supply or pharmaceutical supply, they wouldn't there in the near term. In terms of what the long game is here, I think that what you're trying to do is to bring production back into your country. And if we go back to that Adam Smith, tolerable administration, PECZ taxes, it's not rocket science.

If you lower business taxes especially, but ideally income taxes, if you lower those taxes and you get rid of the stupid regulations so that the burdens are not as high, and then together with that, you put these tariffs on to punish companies for being outside the country, you can absolutely bring production back into the US. If you imagine, for example, one of the things Trump has floated is having really high tariffs and then getting rid of the income tax. Just for argument's sake, if the United States... So today, the US is one quarter of world GDP, is a tremendous market. So if you had a 25% tariff on everybody outside of the US, or you could produce in the US

where you would get zero, you would pay zero income tax, and you had very few number of dumb regulations that you had to follow, everybody would be moving it. Chinese companies would be falling over themselves to move to the US. Beijing would have to block them. So I think it can absolutely work. The trick is there is some pain in the middle. So indeed, Chinese toys and toasters are going to be more expensive in the interim, depending on whether Beijing covers it again. There is going to be some pain in the middle. But what he's aiming at here, it is absolutely possible, but it would take dramatic reductions in taxes, which would take dramatic reductions in spending, and it would take dramatic reductions in regulations. For a lot of that, he is going to need Congress to play ball, which comes back to the voters. Is Congress feeling the heat from the

voters? I've heard considerable debate on this and very credible debate. Do you think the American public has the stamina or the wherewithal to tighten up the belt that we've mentioned a few times in this conversation. It's going to be necessary to see this through. Where about the fly a plan that's never been flown before, which is that we have had a left-wing media ever since Pulitzer in 1890. We've had 130 years of left-wing media. In that world where that left-wing media was framing everything, I would have said, absolutely not. It ain't gonna work.

We have a different media now, right? The Trump's voters, in order to pull the lever for Trump, after all the things that media was saying about him, you have to have been completely unplugged or opened your eyes to understand what the legacy media is. So we've never driven this car. We've never flown this plane. We don't know exactly. I suspect that Trump supporters are on board. They are willing to suffer some pain. I put out polls on X every so often. My supporters are overwhelmingly Trump voters. And it's like 85, 90% of people

say, let's do it. We can tighten our belts because they know what's on the other side of it. Given that Trump won the election, if he keeps Trump voters, then that's that. It doesn't matter. The Democrats will keep complaining, but it doesn't matter. If he wants to get moderate Republicans on board there, he's going to have to appeal to the independents. You can even get moderate Democrats in theory. For that, it's going to be that battle royale between the left-wing legacy media and the new media. Again, people like us, thousands of other people like us out there on social media. We don't know the answer to that question yet. Well, it's going to be interesting to be sure be sure. Let's talk about China for a moment. You've had some

very interesting analyses. You've been described China as entering a doom loop. You've called their situation China's going pear-shaped into a doom loop. Explain to me what this imagery means exactly. What's happening over there? The pear-shaped doom loop. China is a fascinating mix because on the micro level, on the firm level, the individual company, it's surprisingly free market. You can do a lot of things. You can get things done very, very quickly. If you look, for example, at new technologies, so if you take electric vehicles, at one point there was something like 110 companies

in China making electric vehicles. All right, that is a shocking degree of entrepreneurship. I think a lot of that speaks to the vibrancy of Chinese culture. Chinese, I used to work in a big toy company in Japan, and we competed with Chinese. They are on the ball. They're sharp. They're smart. They're fast. So I think on a micro level, China is just incredibly powerful. And I think Americans need to be very, very aware of that. However, it's run by communists. And there is this top-down bureaucracy that allocates capital and manipulates interest rates. It is arguably worse than the European Union in terms of how it screws up the economy.

You can feel for the individual companies, they're hustling, they're doing their best, but they have this monster on top of them that's screwing things up. If I may jump in, and they also function basically at the behest of the regime, at any moment, they can get shut down. It's not quite as free as maybe you portrayed it. Absolutely. And by the way, that's a model that China is trying to export to the entire world. They sit down with Saudi Arabia or with countries in Africa and they say, look, we're going to help you. You know, we want to access your oil and in return, we're going to build you a

railroad line or something. But then they also give them advice and they say, listen, free up the companies, but zero political rights. Okay. That is the exact, that's the Chinese recipe. And that is what they're trying to export to the whole world. So where the Chinese economy is right now, it's flirting with deflation, it's flirting with recession.

And the reason is because the central government flooded so much money into industries where they essentially picked the winners. So this is, it's a bit like Japan in the 1980s, but on steroids, right? Back then you had meatade, MITI, and they would sort of sit there, the Jedi Council with the big brains, and they would decide what the next industry is gonna be. And then they would flood capital out to that.

And then you would get something like 110 EV companies. Now, notably, almost all of that 110 EV companies are bust. So the illustration is not only that Chinese have an amazing amount of entrepreneurial verve, but also So the illustration is not only that Chinese have an amazing amount of entrepreneurial verve, but also that the government is so stupid in how it allocates company. Because if you create 100 companies, if you dump money out to build 100 companies or 110, and then 90% of those goes bust, you are wasting enormous amounts of capital. There's people who live in China who talk about how their local bus, their bus stop was rebuilt like five times

because the local government had to juice up the GDP numbers so it could show that to the central government. There's just an enormous shocking amount of waste in China. And a lot of that comes out as overproduction. And so they are currently dumping a whole lot of products, selling them below cost because they got this essentially free capital from the central government. So there's an enormous amount of waste in China. There's actually more, when you tally up all the levels of debt in China, it's higher than most Western countries. And you've got this

massive overcapacity. That massive overcapacity and the dumping it causes, that's causing a lot of trade friction with Trump, of course, but also with the European Union. So the EU has put tariffs on Chinese EVs, for example. There are probably going to be more industries where trade partners put tariffs on China specifically because they're dumping all this capacity, because the central government dumped money into it. So it's sort of the classic central planning mistake. They fall in love with some industry or with some idea, they dump metric tons of capital into it, and then you end up getting a boom bust

in all these industries. And when those are happening at once, then that can affect the entire economy. Well, and they also have certain products in industries and companies which are of strategic importance to them. For example, Huawei comes to mind. I've talked with diplomats from a number of countries that have allowed Huawei in, and they all said exactly the same thing, hey, they gave us such a great deal. I always said to them, well, you got a good deal because they offered to you below cost because they have an interest in having their infrastructure in your country. Absolutely. China does engage in a lot of unfair trade practices. One of the most infamous is that it forces tech transfer. So if you want to operate in China, then you literally

have to train your competitors. And companies will do this because they're looking at the short run. They're not thinking about the long game. But if you're Huawei and you're essentially cloning Cisco technology that you didn't have to develop, you could just copy it because Cisco was forced to share it with you, that's a heck of a deal. There's a lot of unfair trade practices that go on specifically with China, which is why I think there's a lot more sympathy for what Trump is doing with China than even with other countries. What does it mean that it's in a doom loop? What is the outcome of that? A doom loop is the idea that your economy declines and then the governance gets worse because of the declining economy. For example, if the government is forced to spend more

to cover failed factories, the tariffs, for example, Beijing the government is forced to spend more to cover failed factories, the tariffs, for example, Beijing stepping in and paying those tariffs, is all very expensive. And if the economy is shrinking underneath you and the requirements for government action are actually growing, then the term for that is a doom loop. This happens in American cities, can happen to Western countries if you get a really bad recession. And then the government responds to the recession by actually increasing its intervention in the economy. But that's exactly what's happening in China right now.

One of the fears in China is that if you look at bonds, China is actually starting to look a lot like Japan did in the 1990s. So bond markets are starting to ask, is China entering a long stagnation where bad central planning decisions are combining with bad demographics, the Chinese population shrinking and close to 2 million per year, which is quite a big number. And so whether those are combining so that the sort of glory days of the Chinese miracle over. If you look at the Chinese leaders

since Deng Xiaoping, so Deng was who really liberalized the Chinese economy. And the leaders since then generally averaged around eight, nine percent economic growth every year. This is why most people our age will think of China as being this miracle economy. But under President Xi, it's been half or less of that. It's been 3%, 4%. That's pretty normal for a poor country. In other words, the Chinese miracle is, what, 15 years out of date at this point. You look at stocks in Shanghai.

They've been flat since 2008. So a lot in China, you know, I think there's still this idea in the West that China can do no wrong, almost worshipful view of China. China's got a lot of issues. And at this point, I think it's really 50-50 whether it enters that doom loop and becomes Japan

or does, you know, maybe she is replaced or maybe she sees the writing on the wall and men sees evil ways and at least goes back to some of his predecessors like Hu Jintao. What is the impact on the US of this whole thing? Foreign direct investment has gone basically to zero now, to your point. People see it as not a good environment. Thank goodness. I don't know how familiar you are with the Chinese companies listing on US exchanges via these VIEs that are shell companies in the Cayman Islands. I just got recent numbers for how much money is invested through those vehicles. It's an estimated

$700 billion that Americans have invested into something which the SEC warns might actually be illegal from the Chinese perspective, and that you're not actually owning anything tangible. That also on the flip side, it gives us a leverage point against China that if a lot of the Chinese champions are held overseas, then the U.S., whether it's listed in the Caribbean or whether it's in New York, we obviously have leverage over that. I think it's honestly perfect timing for Trump. honestly, perfect timing for Trump. I mean, Trump is in a situation where China has to dump in order to stay alive. And he's also in a situation where she has been so bothersome to foreign companies in China.

I often joke that, you know, building a factory and investing in China is like dating a stripper. Like it's fine in normal times, but you never know when you're gonna have some drama. I think that's really true. Companies that have significant operations in China have to pay attention to the politics. They have to constantly be aware. There are many cases where foreign CEOs have been detained, held hostage essentially, in

order to put pressure on them. So if companies are already a little bit dissatisfied with their relationship with China, they're already moving offshore to places like Vietnam or even Ethiopia for clothing. They're trying to get out of China to begin with. And then you've got China dumping, which sort of encourages other countries like Europe to sort of form a united front against China. I think, I mean, the timing is almost providential for Donald Trump. It's everything he wants because he is trying to lure companies out of China, and he's trying to get other countries to get together to put up a wall against China, partly to encourage China to behave better, but partly to lure those companies away. So I think China is very much concerned about

what's happening right now. As we finish up here, you're actually bullish on the US economy. That's the sense I'm getting from you, given all of these realities and all of this money printing and frankly, this huge debt that needs to be dealt with. I've been imagining it of threading a needle to actually get it all right to get through to the other side, to get to the golden age that President Trump has been promising. You seem to think it's more likely than threading a needle. I think it is. I would not be surprised if we had a fairly severe recession the next year or two. We're overdue.

We haven't had one in a very long time, since 2008. The 2020 recession was engineered. It was not a natural recession. It would not be shocking if we did, but long-term, I am extremely bullish. The reason is because golden ages can end one of two ways. One of them is that they go into terminal decline and it is uninterrupted and that's that. And then it stays down for potentially centuries. The other is that you get that political cycle. What is it? Good times make weak men, bad times make strong men. That's a more than 2,000 year old observation

that you have that cycle. It stands the historical test of time. For me, what has made me really bullish is that I was shocked that Trump won. When you look at the institutions that were arrayed against him, go back to the COVID days where every organization in our country, and really across the West, the American Association

of Actuaries had strong opinions about BLM. It was weird. It was like the entire country had been taken over. It was like invasion of the body snatchers. And then to go from that to where we are now, where Trump won and he's just completely disassembling the entire left, this tells me that we are on that cycle. Okay, we are in the hard times make strong men stage.

We're not out of the game. And if you're on that cycle, then you got a long ways to go. So I am extraordinarily bullish. What happens in the next 12 to 18 months? It could go either way. We have this stagflationary hangover from Biden, a lot of good things Trump's doing are going to take time. There's lawfare, there's Congress standing in the way. There's a lot of what ifs. But long term, I am very, very bullish on the U.S. Things could change dramatically in just two years, right? Elections, as they say, have consequences, and in four years, for that matter.

Yeah, absolutely. Right. And we'll see what happens in 2026. Does the media succeed in poisoning Trump against voters or does it backfire? So, yeah, we'll have information along the way. We're already seeing popularity numbers where Trump is actually rising in the polls. And again, he's being just uniformly attacked by all of the sort of traditional institutions and societies. So the fact that he's becoming more popular, this makes me think that a majority of the people may have broken free. And if that's the case, then America is going to go into a golden age. Well, I thought it was fascinating. I saw a poll from CBS following the State of the Union,

which we're filming right now, the day after the State of the Union, something like 76% of viewers were positive towards the message on CBS. That wasn't a number I would have expected. It's astounding. Yeah, and that was about 25 points higher than the share of Republicans who were watching. So either all independents loved the speech or a significant number of Democrats are walking away from the party. So yeah, I am very, very optimistic right now. Well, Peter St. John's, any final thoughts? No, just to say that, if you look at what a difference it's been since 2021, the dark days of COVID, this is one

for the history books. We are living history right now. Peter St. Ange, it's such a pleasure to have had you on. Thank you. Thank you for having me, Ange. Thank you all for joining Peter St. Ange and me on this episode of American Thought Leaders. I'm your host, Jan Jekielek. You are listening to American Thought Leaders. If you find this episode valuable, please share it with a friend you think might also enjoy it.