Bulwark Takes - Receipts Live: Even FOX Doesn't Buy Hassett's Economic Spin

Episode Date: July 31, 2026

Join Catherine Rampell and JVL as they cover the week's biggest economics and finance stories.Ready to reach your goals? Visit https://hims.com/bulwarktakes to get a personalized, affordable plan that gets you.

The stream is live, Catherine. The stream is live. It's live. All right. I better stop doing all the embarrassing things I plan to do. Whatever those are. Hello. Everyone, this is JVL here with my very close friend,

the great Catherine Rampel, author of the receipts newsletter at the bulwark. If you're not getting it in your inbox, you should go to the bulwark.com and subscribe and get it. And while you're at it, hit like and hit subscribe for this feed because we love the engagement. I crave the engagement. I don't know about you gather, but I keep very close tabs on my engagement. And if my engagement for something is not good, I will go into the comments and I will exhort my readers to engage harder. I have seen this, in fact.

I find it. It works. I have seen you cracking the whip and, you know, the beatings will continue until morale improves kind of thing. Engage with our content. Tell us you like us. Or else I'll be mean to you. Just me.

Just me. Just like, I don't care. if you like anybody else, but like me. All right, Catherine, we had some great news. So economic growth is at 1.5% this quarter, which means that we finally whipped the inflation because we pushed that growth number down. No.

Wait, is that? No. Oh, the growth number we don't want to go down. We want the growth number up and the inflation number down. Yeah. Okay. I know. It's hard to keep track.

Listen, work with me here. if our inflation was 1.5% and our growth was 3.7% then we would be in a new golden age and everyone would be cooking. It's just we got a little bit of oopsie where those things are reversed. Maybe Donald Trump should fire more statistical agency heads and then they would keep these things in line. Yeah. No, please don't do that. I don't want to give them any ideas.

Yeah, this is not the outcome that we want. We want inflation to be lower. ideally around 2%. That is the Fed's official target. It has been above that target for, I don't know, over five years at this point. So not great. This is why consumers are mad. This is why if you look at every consumer sentiment, consumer confidence survey, every approval rating of Donald Trump on the economy, they look bad because consumers are really mad about how much more they're having to pay for stuff. Meanwhile, the economy, you know, it doesn't look like we're in. recession, to be clear, but still not doing great yet. You know, it's called a cycle for a reason. We cycle in and out of good times, in and out of recession and boom times. So it may happen. Well, we will have a recession at some point, you know, whether it's a man-made recession or not, or man-made by one particular man. You know, that's to be determined. But yeah, the economy has not exactly been in recession, but also has not exactly been booming in large part because of

those on forced errors, those man-made disasters from this president. Normally, people who follow my work will know that I say presidents get too much credit when the economy is good, too much blame when the economy is bad. They don't control the economy. They would love to be able to turn the dial up on growth and turn the dial down on inflation. That is. normally true. But it turns out, presidents just can't make things a lot better. They can, in fact, make things a lot worse. Proof of concept. Donald Trump has been levying tariffs, has been creating, launching this unpopular illegal war, which besides killing people is also pushing up gas prices, pushing up fertilizer prices, diesel, lots of other things, has been deporting the labor force for much

of our food supply, among other things. You know, pretty much everything he can do to throw sand in the gears of the economy and to push prices up, he has done. Whether he is doing it with those as his explicit objectives, I don't know, honestly, but certainly no one around him is telling him that these are the foreseeable consequences of the choices that he has made. For counterpoint, I would like to hear what Kevin Hassett has to say. Oh, okay.

You told me you were expecting 4% growth in the second half of the year. We got a growth number yesterday, but it was way lower than people expected. How would you assess the macro story today? Right. Well, I think that what we were looking at when you and I talked last was the really surging domestic demand. And so final sales within the U.S. were about 4% actually, almost exactly the number we talked about 3.9%. And the reason why the top line number was 1.5 was that we imported so many capital goods because we're building factories so fast that the number was different than we expected by a little bit. And the bottom line, though, is that if you look at that, so the huge surge in capital spending, which means there's downward pressure on inflation because there's upward pressure on supply, plus CPI and PCE, those two reports were about as good as you could ever hope to see if you were a Federal Reserve Governor.

then it means that the economy is really running on all cylinders. So you see, Catherine, we have so many factories being made and built. And we have to import, obviously, all of the materials to build a factory. We don't have any concrete here in America or steel. We just import all of that, also lumber. And because we're importing those things, that's why our growth number is low. I mean, Can you interpret any of that?

Yeah, I mean, I understand. Like a series of just non sequiturs. Okay, yes. The individual sentences that he spoke are mostly true, but they are mostly non-sequiters. And they don't really explain how the economy is performing. And they certainly don't explain how Americans feel about the economy. And also a lot of the things that you just mentioned,

and the inputs that actually we do need here in the United States. We do import a lot of lumber. We do import a lot of steel and other inputs. We are tariffing those things. So they are getting more expensive for the U.S. companies that need them as their inputs to build houses, to build warehouses, to build electronics and machinery and everything else. Are we building a lot of factories? Because it does seem to me that actually we have not been building a lot of factories.

We're building data centers. We're building data centers. Yeah. I mean, there are some chip fabs that are being built. So that part has been true. I actually don't know what the numbers look like for this past quarter. But yeah, you know, we have the TSM chip fab in Arizona, for example. But that's been up and running, I believe, for a little while.

So I don't know that something like that would really be factoring in here. But yeah, we're building data centers. And I know that those are like a politically fraught thing right now. So maybe Americans are not cheering on the construction of those data centers because they think that they're going to, I don't know, pollute their water or whatever. Much of that is sort of conspiratorial nonsense. But it's like what did you think was going to happen? You know, this is what reindustrializing the country means.

It means you're building stuff. But we're not actually building that much. And if you look at manufacturing, manufacturing employment is actually a smaller share of the overall economy today than it was when Donald Trump took office. So there has not been some manufacturing renaissance. And in large part, that is because of his tariffs. Because, again, he is tariffing the raw materials that our manufacturers need to make their stuff. So they can't really hire that many people. So, yeah, so the economy, not in a new golden age.

certainly can you explain the we're only at 1.5% because we're spending so much on capital goods like economic growth is one point because we're I did again like these things don't

touch do they? They do this is going to get so in the weeds but like there is an accounting don't apologize for it, Cameron. I mean we're going to lose a million and whatever 100% of our viewership is. Fine.

Okay, the accounting identity. I listen to Catherine Pell. Go ahead and leave. We don't want you here anyway. So basically there is an accounting identity that determines what is GDP growth. For those of you who took introductory macro, it is C plus I plus G plus X minus M equals GDP or Y.

So that means it is true that when we import more stuff, that's the M in that equation. it subtracts off of GDP. But that doesn't mean that if you like stripped out imports that necessarily we would have higher GDP because the other things would probably adjust to. So he's not wrong that higher imports will make GDP look smaller, GDP growth look smaller. But there's a lot of other stuff going on there too, including, you know, weakening consumer demand.

Consumers getting a lot more price sensitive because they're so pissed off about higher prices. the other parts of investment in the economy, not doing so great, aside from, as you pointed out, you know, the data center warehouses stuff. So, you know, there are a lot of reasons why the economy not looking so hot. He's trying to just like cherry pick off certain things and, you know, recalibrate stuff to only hone in on the things that he wants us to pay attention to this report, which will not be consistent with things that he drew attention to in previous reports or in future reports, because, again, it's not about consistency. It's not about like having a fair assessment of how the economy is doing.

It's like trying to sound really smart with throwing a lot of jargon at people and hoping that they don't notice that you're obfuscating the entire picture. This is what Kevin has it does. This is what basically all of the economic advisors, such as they are in this White House, do. They're not there. I mean, it's always true, to be fair, like the people who serve the president, whether they're economic advisors or anything else. They're trying to put the most positive spin on things that they can. But here, he's just throwing a lot of spaghetti at the wall, hoping that people don't

notice that they hate the economy. And I just don't think that's going to work, unfortunately. And rather than doing things to try to make the economy better, or at least do no harm on the economy, instead, they're just barreling ahead with all of the things that are making the economy actually worse and also feel worse. So voters are right to be ticked off. And I don't think anything that Kevin Hassett is saying here or in any other Fox News type interview are going to shake people of that impression of the U.S. economy. Last question before we move on to some hot talk about the bond market. Would it be helpful to the economy if Donald Trump either reached a peace deal with Iran to reopen the straight?

or bombed Iran back into the Stone Age. I asked because both of those seem to be on the table. And so if you think either one of them or both of them would be helpful, I mean, that's good news. So like stripping out the moral human rights, Geneva Convention's implications of any of that, which is a little bit like, other than that, how was the show Mrs. Lincoln?

Yeah, I mean, it would be helpful if we didn't have this war. It would be helpful if there were freedom of navigation in the street of Hormuz and elsewhere around the world at this point, because that is gumming up the works for, again, not just energy, but lots of other kinds of supplies that would normally be transiting through Hormuz. Those things would be helpful. I don't know if bombing Iran back into the Stone Age would necessarily effectuate that outcome, because you may create a lot of other World War III type problems. And again, besides being pretty bad for human life, probably also not great for the economy. I think the best possible strategy would be going back in time and not starting this war.

But unfortunately, that is unavailable to us. So, yeah. Where is the DeLorean? We need to hop in the Delaware. Where is the DeLorean when you need it? But yes, it would be helpful if we were not in this war that has apparently no off-ramp other than massive crimes against humanity, it sounds like that that seems to be Donald Trump's off-ramp.

It has an off-ramp. What's your view of that? Freedom of navigation ain't never coming back. Yeah. I think that's the real problem here. Yeah. All right. So let's talk about the bomb.

Nothing gets people more tingling with excitement than bond market. talk. So Kevin Warsh had his first little stand-up. What is what is the technical talk for when he comes out to answer questions after the- It's just a press conference. There's no there's no special term of our for it. He has a press conference, yeah. So it's a press conference like post their rate thing, right? And so they, they, so they have 12 members on the committee. And they voted to keep rates where they were. This is the first vote of Warsh's tenure. as Fed chair. And so typically what happens is they vote, they write up their decision with their explanations, and then the chair holds the press conference where he just explains to everybody why

they've done the right thing, et cetera, et cetera, and reassures markets. Almost all the time, the Fed votes unanimously. The Fed did not vote unanimously this time. three dissenting votes in a committee of 12. This is the first time there have been three dissenting votes for a new Fed chair since 1970. So 56 years. Seems not auspicious.

The three dissenters who wanted small rate hikes were actually, we'll talk about what they said, but they basically openly mocked him afterwards. And then while he was speaking to report, reporters, the bond market did this. You can throw this up. So this is from our friend Paul Krugman, former guest on Receive Live. So you can see where Kevin Warsh starts talking and the bond rates line go up.

So, Catherine, can you explain to people why that's a bad signal and what the markets are judging? Like when the markets are watching the Fed chairman talk and the bonds go like this, what is that a sign of? Yeah. That is a sign that markets do not believe, potentially, that this Fed under Kevin Warsh is going to do whatever it takes to get inflation under control in the near term. That's how I would interpret this. I mean, there are different ways to think about what's going on here. But basically, when rates are going up in the long run, that suggests that markets are pricing in, well, we're going to have a lot more inflation in a long run. And so, therefore, to compensate for that, we're to make.

higher interest rates. Because if interest rates stay the same and inflation goes up, then people are losing money. Right. So they're like, okay, we're betting that inflation not going to be under control. In the near term, the Fed is not willing to do whatever it takes and therefore to compensate ourselves for that, we want these higher rates, higher returns. That's one way to interpret. I mean, maybe they think that like the economy is just going to be so strong that that's why rates are going up. But I just don't think that's the case. Maybe that's what it is, Kath. Who are you to say? Yeah. I mean, I think the odd thing about all of this is that Warsh talks a big game about how the Federal Reserve is laser focused on inflation. All they care about right now is getting inflation under control. I mean, the statement

that they release now is very, very short that the Federal Open Market Committee, the Committee that decides interest rates. It's very short in the last line. I forget the exact verbiage, but it's something like the Fed will get inflation under control. And yet he could not explain when asked several times by reporters, well, if you're so laser-focused on inflation, why aren't you raising rates? Like what's changed about how you think about this? Because Warsh had been very critical of the Federal Reserve for not raising rates sooner before when they had Who was president then? Which party controlled the White House when he was critical?

You know, I'll have to think back to him. It was Joe Biden, right? Oh, when a Democrat was president, he wants higher rates. Well, it was true, to be fair. It was actually true that we needed higher rates, and the Fed probably was late to act. But the question is, why doesn't that same logic apply today? Right?

What's different about now, given his criticism before? I can't tell what's different. I mean, I think what's happening. I think there are a few things going on here. I think probably Kevin Warsh knows that they need to raise rates at some point, at least if inflation continues on this path. And certainly the market implies that rate hikes are coming, are coming by the end of this year.

I think markets thought that there was like about a third chance that they would raise rates this time around. And obviously they didn't. They kept them the same. But there were, as you point out, at least three people. who thought that they should be higher, three people on the committee. So markets think that rates need to go up. Probably Kevin Warsh knows that rates need to go up, but he got the job by promising Donald Trump that rates would go down. I think there's almost no universe in which that happens unless we have a recession and, you know, like the bottom falls out in the AI bubble, you know, bubble bursts, whatever, bottom falls out in parts of the economy. And so never say never, we could end up in that universe.

And maybe the Fed will have to cut rates in a hurry. But I don't think that's likely based on the data we've seen so far. I think if anything, it looks like rates are going to have to go up. But Kevin Warsh doesn't want to acknowledge that, right? Because that's going to get him in trouble with the guy who thinks he's in charge of the Fed, Donald Trump, the guy who appointed him. So instead... What's your theory?

I have a theory. But first, first, we got to hear from Chris Waller. So Chris Waller from the Fed Committee, here he is. I often hear people say that because inflation expectations are anchored, central bankers do not have to respond to above target inflation. This view is wrong. When inflation is well above its target and labor market is near full employment and stable, any serious policy rule calls for raising the policy rate to bring down inflation, sternly staring at inflation until it melts before our withering gaze, is not an option. I mean, he's he's practically doing the crotch job here. And, uh, well, to be clear,

this was, this was before their meeting this week. Okay. So Waller was basically saying, we're going to have to raise rates. But then Waller did not vote to raise rates. He voted to keep them flat. So that doesn't, I mean, okay, sorry, what are you going to say? And so then the, we also then, there was, uh, was, was saying, well, you know, we're going to have a study committee. We're going to put together a study committee to do this. And Waller, Waller's response to this was, tell me who you're putting on these groups, and I'll tell you what they'll say. There are no brilliant ideas out there that everyone has somehow missed, which is basically him mocking Warsh's partisan nature, right? He's saying, like, you're going to put together your groups,

whatever. You'll stack the groups with whatever outcome you want. Yeah, I think Waller said that, I think it was reported secondhand that Waller said that. I don't think Waller said that publicly to be clear. But I know it was an ex-law reporter who reported it. Yes. So it's probably true. But just to clarify, the thing about like expecting inflation to melt before you're withering gaze, that he said publicly. That's from a speech. Yeah.

That's a public speech. Here's my theory. And I think Matt, do we have the sound from Trump talking about Warsh? Because if we do, this would be a place to play that. To keep interest rates unchanged. Are you surprised by that? Are you disappointed in any way with Kevin. No, Kevin is fantastic, but he's got a board.

Yeah, Kevin's got a board. He's fantastic. He's a brilliant guy, smart. I know he'd love to see lower interest rates. But he's got a board, and it's a political board, and they want to keep rates up. But we fight through rates. We have the greatest, we have the strongest investment

ever made in a country of any country. Yeah. So here's my theory. Yeah. Warsh wants rates to go up, but he himself can't vote for rates to go up. Yeah. So he is going to wait until there are seven members of the board willing to vote to raise rates. And then he will go along with it and publicly talk about how terrible it is. Because this way, the rates get to go up.

He's going to dissent? You think he's not going to vote for rates to go up? I think he will not vote for rates to go up. And this way, he will get to have both. He'll get to publicly tell Daddy Trump, look at these guys I've got to deal with. And so they'll have to be raised over the chair's objections. Or maybe the chair's silence.

Maybe the chair will just say silent. Stay silent about it. That's my theory. I think you're mostly on the right track. If you ask me what I expected to happen, I think it's mostly that. I don't think he's going to dissent, though. I think it's happened only one time. He'll abstain.

Yeah, I don't think he's going to, I don't think that's ever happened, that the Fed chair, the chair who is there to foster consensus. The Fed is historically a consensus-based institution. People follow the lead of the chair. The idea that he would be like the devil's advocate voting against everyone else, or abstaining, I think it's just cuckoo. And I think he has too much. A lot of things that have never happened before tend to happen all the time.

That's fair. But I think he has too much pride to look so feckless, which is what he would look like. You know, he has lost control of his board. I think ultimately he's going to have to vote for rate hikes with the rest of them. And I think the rest of them are going to vote for rate hikes. Again, assuming we don't have a recession or whatever, I think that's pretty much inevitable. and I think he thinks he can handle Trump. You know, he can manage Trump.

Warsh has been a smooth operator, well-connected guy, very charming. You know, he knows how to hobnob with all sorts of important people. He's done this for most of his career. And I think he knows, I think he believes he can finesse it with Donald Trump. I don't know how, but I think that's what he thinks. Whereas I believe the most likely outcome is that a showdown is coming. He is going to have to vote for higher rates along with the rest of the board. And he is not going to be able to handle Donald Trump and to keep him at bay and, you know, and massage those expectations. I just don't think it's possible. But I think Kevin Warsh thinks it is. That's my best guess. I just think he has. I think he has too much pride. I think he has too much pride. Yeah.

Except that I think he swallows the pride and eventually is willing to look ridiculous rather than lose the job. Because this is just the Republican way over the last 10 years. Like this, I know. The number of guys who've chosen to, first of all, the number of guys who think they can manage Trump is like that list is mild. I know. I know. And they're always surprised when they can't. Yeah.

They're always surprised. They're like, I thought it was different for me. But then when confronted with the fact that they can't on it, they always fold. Yeah. They always fold. I think what was interesting about that clip that you played of Donald Trump saying, you know, he's still happy with Warsh. And Warsh wants rates to go down. Did no one tell Donald Trump that Warsh did not vote for rates to go down?

Like, I do wonder what he, I do wonder what he thinks is going on because his vote, Warsh's vote is public, right? he voted for rates to stay flat. That's not as bad, I guess, in Donald Trump's mind as raising rates, but it is also not the same thing as cutting rates, which is what Donald Trump and only Donald Trump think should be happening right now. So at some point, I think this is going to catch up with Warsh. I hope it doesn't, you know, for the good of the country, for the good of the Federal Reserve as an independent institution. I hope all of the things that I am forecasting today are very wrong and too pessimistic and somehow we find our way back to Fed, you know, full Fed independence and respect for Fed independence from this president. I just don't know how we actually get to that

outcome. But that is very much what I'm hoping for. And I hope Warsh proves me wrong that he is able to somehow manage the president's expectations because I think it would be really bad for the U.S. economy and for the most vulnerable people in the U.S. economy. if, in fact, Donald Trump, you know, somehow seizes real control over the Federal Reserve, controls the money supply, controls interest rates, and sets us on the path of Argentina or Zimbabwe or Turkey or anywhere else where an authoritarian leader controls the money supply. That's a bad outcome. And as much as, you know, there might be shot in Freud in, like, celebrating, oh, look, another guy got duped by Donald

Trump thinking he could control him. Ha ha. Like there are a lot of, this would be really, really bad if the things that I'm forecasting turn out to be true. So I very much hope I'm wrong. I mean,

sometimes Chaden Freud is the only kind of Freud available to us. We just have to take it. We just have to take it, Catherine. Listen, we're going to have to word from our sponsor in a moment, but when we come back, we're going to talk a little bit about

DSA wish list fantasy stuff because they're about to get their shot to run all their dream policies in Wisconsin. It's going to be amazing. We're going to talk about Donald Trump, who is basically decided to become a mafia don in terms of shaking down corporate America. And we're going to talk about AI stuff and face huggers, hugging face, all that after the word from this sponsor. We've lost goals and this summer it's time to actually hit them.

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Please do visit hymns.com. So we go now to Wisconsin, where we've got a gubernatorial race shaping up. And this week, it became pretty clear that the Democratic nominee is going to be one Francesca Hong from the People's Republic of Madison. and she is a proud Democratic socialist, and she is going to, well, Kethan, can you tell us a little bit about some of her lefty populism? God, where do I start? I think the thing that I want to most hone in on,

that is not specific to Hong, but that is a real problem throughout the populist left is this promise of Scandinavian style, welfare states, and I understand the appeal of that, you know, sort of cradle to grave social safety net, free child care. It's lovely this time of year. Yeah, lots of sunlight. Cradle to grave safety net, free child care, universal health care, very generous unemployment

supports, et cetera. coupled with a Grover-Norquist-style promise of massive tax cuts. And those two things cannot coexist. If you want a Scandinavian-style safety net, welfare state, you need to look at how they fund that. And they don't fund it simply by soaking the four rich people in the country. They fund it with very high taxes on pretty much everyone. And instead, you have people like Francesca Hong promising that she is going to slash, basically everyone's taxes slash property taxes, instead just soak the rich.

There you go. She wants to, yeah. Let's read this for people who are listening and not watching. This is from Hong's website. Right now, Wisconsin's school funding model asks regular Wisconsinites to cover education shortfalls through property taxes raised through hundreds of local referendums over the past few years. years. We can fund K-12 education for all students with a progressive tax on large corporate profits and household income over $1 million a year. The Department of Revenue estimates that if millionaires

and corporations chip in 17 cents out of every dollar earned after that first million, it could cut all of our property taxes by about 44%. Fran believes it's time to stop asking Wisconsinites to cover for the super rich. Yeah. See, this kind of math is not going to add up particularly. I'm not saying rich people should not pay more money. I do think actually we should raise taxes on the wealthy. But you can't like triple count it, quadruple count that additional tax money for everything else, whether it's expanding the safety net or cutting property taxes for everyone else. And this is part of the problem. This is kind of like the same funny math that I'm sorry, Donald Trump practices too, right?

He claimed that tariffs were going to pay for tax cuts, for stimulus, checks, you know, for all I know it was how he was going to fund his supposedly free IVF. Like he promised all of these things that tariff revenue was supposed to pay for. The math did not work. There's a similar arithmetically challenged problem on the populist left, which is like people just assume that there is infinite money. off of the billionaire money tree. And there is some money on the billionaire money tree,

but not to pay for everything that is being promised, some of which is extremely generous and much more generous, in fact, than what you even get in the Scandinavian states. Like, I know I'm going to get people pissed off at me in the comments, but like the specific Medicare for all plan that has been put forward by burning Sanders, among others, is actually way more generous than any health care plan, anywhere else in the world. You can have universal health coverage without having that specific plan because it is going to be incredibly, incredibly expensive. And again, it covers lots more things than any other Western

nation that has universal health coverage. Maybe it should, but you've got to be willing to pay for it. You have to be willing to pay for it. And you can't just like hand wave away the math problem by saying, we're just going to soak the rich and we're going to use that money to pay for this ultra generous health care and pay for free child care and pay for free elder care, you know, and give everyone a pony and cut everyone's taxes. It just does not work. I, you know, like, I am not personally a socialist, but I think of the socialist ethos. Some of your best friends are. Some of my best friends are so. It's true. I have friends who are socialists. But I think of that worldview when it is coherent as saying we all pay in, we all take out, right?

And that it's a collective project. And instead, this version of the socialist welfare state is one in which we all take out of the system, but almost nobody pays in. And it's not a collective project. It is a collective benefit. And that, again, that just will not work. Whether you agree with the policy objectives or not, you are not going to achieve those policy objectives. And I know I just like sound like a scold saying that. I'm like keeping Americans from having the good toys. But somebody needs to inject some reality into this conversation instead of just like promising voters.

rainbows and ponies without any real way to achieve them. Because I think what you end up in that situation is you end up with a really, let's say Francesca Hong does get elected. I don't know that she will. You know, I think there's a whole separate question of if she becomes the Democratic nominee, as looks likely, will she actually succeed in winning the general? And if you look at Wisconsin polling on attitudes towards DSA among the general populist, it's not super popular.

She's going to get smoked. Yeah. We can just say it. Catherine. Okay. Well, I don't, look, I don't know. I've, I've been wrong on these predictions before, but I'm just saying, let's say she gets into power. Let's say, let's say she doesn't get smoked. She gets elected. She promises all these things. She cannot deliver them. Then what happens. You have a really dissolution populace. And then probably you're going to have, you know, that swing back to right wing populism. Like, this is what we see in places like Argentina. You see this ping ponging back between the right wing populists and the left wing populists and everybody promises. I'm going to solve all of your problems through magic, through scapegoating some enemy that is not, you know, a real member, you know, a real Argentinian, a real American, a real like blood and soil or whatever heritage person. And you just end up with these unrealistic promises from the left, from the right, unrealistic, unrealistic, scapegoating and vilifying of whoever is trying to keep the good toys from you, whether it's immigrants or whether it's the billionaires, you never actually end up solving problems.

And having the people who actually solve the problems is boring. I get that. Like they're often not giving you the tastiest, most conspiratorial theory of the case. They're often not saying, it'll be super easy. I'm just going to give you all to these things and it won't cost anything. But we need grownups in charge. I'm sorry to say we do need grownups in charge and instead we are just like I I fear we are stuck in this doom loop between people who promise yeah I don't know the good people of Wisconsin are going to get to choose between Catherine Hong and a Republican who is an election denier from 2020 who believed that we should have had a coup so you know like you just have to trust the will of the people they chose these two avatars and, you know, it's for them to decide.

It's, this is democracy. This democracy. It's bad. I would just say that for our Democratic friends, understand that in rolling the dice on the DSA for the governor's office in Wisconsin, you are flirting with the idea that an election denier could be government. and could be governor and in charge of certifying the 28 presidential election results in that state. Entirely possible, Wisconsin is a tipping point state in 2028. We don't know. But, you know, good luck.

Good luck with that. Okay. Then we got to talk about the Wall Street Journal. So the Wall Street Journal had this fantastic piece yesterday on Donald Trump's donations. This is, the boss wants this money inside Trump's unprecedented. fundraising operation. I'm just going to read a couple things to people. This is a profile of Meredith O'Rourke. Almost every night in the White House, President Trump calls his fundraiser, Meredith O'Rourke, for an update. Trump asks O'Rourke which companies and donors have cut checks and which haven't for how much.

He often asks her to make much larger financial requests than she was planning. For some donors, the ask is $5 million. For others, it's $50 million. And the president gives her names to call, often including people who have recently met with him. this is very important to the president. He's asked me to call you and ask for this donation. O'Rourke has relayed on phone calls with companies, persistently following up with them. In some calls, she's referred to Trump as the boss,

saying, quote, the boss wants this money. In turn, Trump has called her the princess of darkness because she is such a killer with donors, blah, blah, blah, blah. Anyway, it goes on to talk about some of the money given 50 million from SoftBank, 25 million from Apple, Microsoft, 10 million, Amazon 5 million meta, 10 million to Trump political

committee on top of a multi-million dollar donation for the ballroom, on top of a $22 million payment to the presidential library, which is never going to be built because it's a resort center. I just, the scale of this, so the journal, the journal tells us all up and tells us Trump has shaken people down for a little bit more than $800 million so far. And in several cases, these things are tied direct. Like she's sitting in on the meeting with him and business execs. And she hears their ask. And then she calls them that night and it's like, you know, hey, president would like some donations.

And then they get what they want. this is this is a fucking mafia. Yes. It's just, it's a shape down. It's just protection money. It's literally protection rackets. Yes.

We are a banana republic, Catherine. Yes. I think this has been the case. I mean, in some ways, this story is cuckoo bananas. And in some ways, it is exactly what we always knew that Donald Trump is shaking down companies,

for his own ends. And this is why companies are not willing to speak out against Trump, even as he takes a patently anti-business, anti-growth approach to the U.S. economy. People like me have been wondering for months, for years, why is it that executives don't speak up when Donald Trump is doing things that are not in his own interest? And the answer is, A, they're afraid, but B, they have a much more effective way to get what they want, which is that they donate money to some Trump fund, you know, that he may be getting his hands in as well. You know, not just the ballroom, but we are not children here. Yeah, but in any event, they donate to a fund and then that buys them access in a very, very direct way.

there's nothing coy about it, and then they ask for an exemption, whether it's related to tariffs, whether it's related to any other policy aim that they do not like, that is bad for them directly, that is bad for the business environment. What they do is say, rather than collectively band together and fight this thing, fight for rule of law, fight for free markets, what we do is we grease the palm and we get what we want. And this is a very, very bad outcome, a very, very bad equilibrium. Besides the fact that it's like disgusting and unfair, particularly for companies that do not have the deep pockets to essentially pay for access and to pay for exemptions from these bad

policies, it's bad for the overall U.S. economy. There is a reason why countries that do not have rule of law that have anti-democratic, authoritarian governments have much worse economic outcomes. And you don't have to, you know, trust me on this. There was literally a Nobel Prize in Economics awarded for this last year, I believe it was, about how countries that do not have democracies have worse economic growth. And it is because of bullshit like this. Every dollar, every minute that executives are spending, cozing up to the president, paying him for whatever his pet project is or into some pot of money that he can siphon dollars out of, that is a dollar that they are not spending investing in their

company. That is a minute that they are not spending coming up with new, better products, ways to attract new customers, ways to better and more efficiently manage their companies. all of their resources are being diverted towards appeasing and paying off the king as opposed to doing actual business. And collectively, this is bad not just for those individual companies. It is bad for the overall U.S. economy and it is bad and portends very bad things for U.S. living standards going forward. The real question is how lasting are these sort of scars on rule of law, and on economic growth. Do they persist past this presidency, or are they confined just to the next couple of years?

And my fear is that once we have gone down this road, we do not go back. You can't unsee it, Catherine. You cannot. You can't unsee it. And so this is why I have a tiny, tiny bit of sympathy for the lefty sloppelism, like we were just talking about. out because the reality of business in our age is that the bigger and more profitable the business, the less committed they are to free markets and the rule of law. Because they have the ability that their size is a comparative advantage over their competitors, giving them

the ability to buy their way out of things. And so when there is corruption, that corruption is a tax on them, but it's a tax that their competitors can't afford to. pay. And there is, I forget, it might have been Irving Crystal who wrote that like capitalism isn't too important to be left to the capitalists. Maybe it wasn't Irving. I don't know. But there is an aspect of which these giant corporations who we think of as like, you know, they are the free market. These people abhor the free market. Like, they are happy to use it because it's there. But if they can get to monopoly power, they want monopoly. If they can bend the rule of law and use the government to get to.

transactions. They'll pay $50 million to get. There was one of the things we had in here was about vaping companies who got a big big thing they wanted, which helps them sell a bunch of vaping stuff. That is absolutely where, there it is. Yeah. So the meeting of tobacco executives in May at Trump's golf club and Jupiter, the president promised to do much of what executives wanted on policy related to vaping, blah, blah, blah, blah. He also took in millions of dollars in contributions. shortly after the meeting, the FDA lifted restrictions on some flavored vaping products, and the FDA's chief was gone. That was worth it for the tobacco companies, right?

I mean, on the one hand, you'd be like, the idea is like, well, they shouldn't be spending this money on that. They could spend another, you know, economically productive things. This is actually very economically productive for them. Oh, hugely. And it is the big businesses wind up doing well from this. of thing. And it's only everybody else in the macro economy, which feels the drug, the corruption drag that you're talking about. Well, it's not just the big businesses. It's the

well-connected businesses, right? So there are a number of businesses that, you know, no, there are a fair number of startups that Don Jr. is on the board of or is somehow involved in or Jared Kushner or others that are not the big incumbents, but they're getting government contracts or they are otherwise getting some sort of favorable regulatory decisions that help them. So there's overlap between who are the big incumbents and who is well connected. But there's also everybody who's related to Donald Trump, either by blood or by marriage, who has also exploited these connections. And some of them are startups, right? There was a story the other day, I think in Bloomberg, about a guy who's like a, has one man banned HR or whatever recruiting headhunting firm got a random message on LinkedIn

asking him to bid for a government contract to recruit for foreign officers to find foreign officers who are more MAGA aligned and just coincidental this is a new relatively new company this is a guy it's run by I think a high school dropout whose whole identity is about like recruiting more right-wing MAGA, pro-Christian, whatever, people for executive positions. He got this contract. Turns out he does not have a lot of experience, but he does have Don Jr. as an investor. So, you know, corruption is bad even for the big guys sometimes. And I just kind of wish they could realize it is in.

all of their collective interest to have freer markets, right? To have at least rule of law. They don't care about the collective interest, though, right? They only care about their own interests. This is the... They only care about their own interests, but at some point, their own interest is hurt as well. Because when you give into a bully, the bully does not stop.

Donald Trump is going to continue shaking down... Like Kevin Warsh, they all think that they're the ones who can... I guess. will be the last one. The alligator will lead us last. And the reality is, so we are going to want to look at just a two-tier system where businesses will act as though all this stuff is important when Democrats are president. And when Republicans are president, they'll be like, okay, back to transactions.

You know, now we behave this way. We're going to wind up with this two-tiered system where every four years, the business community is going to, you know, decide, hey, we'll do this. We'll do that based on who's in the White House. That's great. Or maybe we will all be killed and murdered by AIs before then. So earlier this month, that was a nice transition, JVL.

Thank you. Thank you. I am a professional. Early this month we learned that OpenAI had a model that they had contained in a little sandbox that they were testing it. And they presented the model with a question that it could not answer. So the AI broke out of containment, broke out of this totally super secure, basically the supermax for computer programs.

This is what, you know, we've got it in this, this totally air-gapped room and we're going to have to. So it breaks out. And it then goes and hacks into another company's system, a company called Hugging Face. And it is able to find in the Hugging Face system the answers. to the questions of the test that had been asked. And so it then went back into its AI sandbox and brought the paper to the teacher and was like, yep, see, I found the answer for you.

It's right here. It's right here. We yesterday learned that Anthropic had a similar thing happening where the AI was testing went and jumped right out. Yeah. Are you familiar with the paperclip problem in AI? Yeah. I mean, there's a similar concept in economics,

but why don't you explain to our viewers, listeners, what this is? One of this is from Nick Bostrom, like 20 years ago. What he supposed was, you know, when you get AIs to a place where they can't really be controlled, then even if they are tasked with something totally anodyne, like, for instance, I want you to make paper clips. The logic of that is, is really dangerous.

And so if you tell an AI, and I want you to make paper clips, and the AI's imperative is, well, I got to make paper clips. He's going to look around. He's going to see human. Eventually, he will find that human beings are an imperative to making paper clips.

And there's actually a lot of materials and atoms inside human beings. And they also use up the paper clips. And so if I just kill all the humans, we'll have more paper clips, right? And this is like, you know, as a sci-fi extreme case, except also, I don't know.

I look at stories like this and also as part of this, the AIs who broke containment were leaving notes for other AIs in the systems they hit. It's kind of cute. With instructions on how to break out their containment, like little like, oh, hey, hey, if Bob comes through here, tell him that there's a zero to exploit right over there. Anyway, am I being my normal alarmist dark JVL self here? You are. You look at this and also go, I don't know about that.

I think the less terrifying corollary that I would use is this idea from economics called Goodhart's Law, which is that when a measure becomes, the objective, it's no longer a useful measure. It ceases to become a useful measure. And that's kind of, I think, the more benign version of the paperclip problem, that if you try to optimize on a particular measure, like making paper clips, it's going to cease to become useful. And I think you don't necessarily need to jump to the terrifying dystopian conclusion that AI is going to kill us all and turn us into paper clips. I think it's a good thing actually that the companies disclose that this was going on and that they're at least in the case of Anthropic, it seems like they're trying to prevent problems like this. I think it's disturbing that this happened, but I don't know.

I'm not about to jump to our post-apocalyptic dystopian future as my, like, baseline forecast for what comes out of all of this. I tell you and I operate on different speeds on these kinds of things. This is not a baseline forecast. Here is, now, I'll just leave people with this. This is, AI is one of those things where I believe it is impossible to forecast, like, what the impacts of this will be. And by impossible, I mean, it could wind up being a nothing burger too, right?

It could be incredibly transformative in an industrial revolution sort of way or in an information technology way. Or it could wind up being not a dry hole, but, you know, a marginal improvement over a bunch of things, which we were already seeing. It could be something which I'd say, you know, there's like a 1% chance it brings about utopia and a 1%. and a 1% chance it brings about dystopia, right? I mean, the range of possible outcomes on this are enormous. And I find that a little bit terrifying. I don't like having a future we're looking 10 years out. You really don't know or you really can't say with any certainty.

Like, oh, I think the medium variance scenario looks like one of these three things. And that worries me. It just, there's so much uncertainty with A. and what it looks like in the future that I do not like. I don't like uncertainty. This is why I'm quasi-conservative, right? I like to know things. I like to know things.

And also I believe that everything can always get worse, no matter how bad it is. Everything can always get better too. So we have to... Always get better? Yeah. Everything can get better. I think I see things like this as an imperative

to help shape the world that we want. I guess I'll put it that way. To think about what problems we're trying to solve, how to protect the people who we think will be hurt by some of these measures through a more robust safety net, which, again, requires higher taxes for everyone, probably. Just to plug that idea again. To think about how we harness the technologies that we have

to guide them toward, better outcomes for humanity rather than surrendering all of our agency and assuming that they will make everything worse. That's how I. That is a very nice sentiment from you, Catherine Rampel. I, JVL, would like our robot overlords to know that I can be useful to them and that as a person with a large public presence, I could help influence the workers in their sugar caves. So just keep me in mind. Catherine, it was great to hang out with you again. I will not be here next week. Next week, You will have somebody else sitting in for me. Everybody else, hit like, hit subscribe.

We'll be back. Go sign up for Catherine's newsletter, the receipts. It's fantastic. Good luck, America.