Judging Freedom - Prof. Jeffrey Sachs : The Economic Consequences of Trump's War

Episode Date: May 11, 2026

Prof. Jeffrey Sachs : The Economic Consequences of Trump's WarSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Undeclared wars are commonplace. Pragically, our government engages in preemptive war, otherwise known as aggression with no complaints from the American people. Sadly, we have become accustomed to living with the illegitimate use of force by government. To develop a truly free society, the issue of initiating force must be understood and rejected. What if sometimes to love your country you had to alter or abolish the government? Jefferson was right? What if that government is best which governs least? What if it is dangerous to be right when the government is wrong? What if it is better to perish fighting for freedom than to live

as a slave? What if freedom's greatest hour of danger is now? Hi, everyone, Judge Andrew Napolitano here for judging freedom. Today is Monday, May 11, 2006, Professor Jeffrey Sachs, Now, thank you, Professor Sachs. Of course. I want to talk to you or actually listen to you on the economic effects of this Trump and Netanyahu war on Iran. But before we get there, just as a baseline, has the war achieved any of its objectives? No.

The war has gotten the U.S. and the world into a terrible bind. And we face an economic crisis worldwide. Of course, the way out of this is to stop doing what we were doing, which is attacking Iran, at least to try to go back to the status quo ante. But in terms of any stated goals by the United States, which varied over time in explanation, whether it was regime change or unconditional surrender or an national surrender or an national, end of Iran's nuclear program on American terms or an end of Iran's missile systems. Nothing remotely has been accomplished or will be accomplished. The United States does not have

the power through military force to compel such changes. And the whole war was based on And some failed plan or delusion that a decapitation strike would immediately create a pliant government in Iran. When that failed, basically the failure of the whole war was exposed. Iran maintains deterrence. Iran can do grave damage to the Gulf region, which produces substantial. share of the world's oil. And Iran can do grave damage to the neighboring countries and to Israel. The United States military understands that. I think Trump probably understands this well. So he got us into a colossal mess that's going to cost probably hundreds of billions of dollars one way or another.

And he should get out, but he's a very stubborn person. So the costs keep racking up rather than being ended by simply ending the terrible mistake that he made. The government says that the wars cost 25 billion. Others, retired military folks have said it's much closer to 100 billion. Yeah. It's a preposterous number. It's a lowball number that makes absolutely no sense. We'll find out the right numbers over time. But when the first message to Congress came that there would have to be a $200 billion supplemental.

And then when the budget for the next fiscal year went in increasing the defense or the military ask, we don't call it defense anymore. We call it the war department. The ask by about another half a trillion dollars, it's clear that the $25 billion is some very strange accounting, but not real. What has been the consequence of the war to American consumers? Basically, we have a sizable increase of oil and gas prices and all of the products that are produced by oil and gas. So a lot of petrochemicals, the fertilizer that farmers depend on and therefore food prices down the road. This has been a sizable, not devastating shock, but it could. could become devastating if we have a continuation of this grave blunder. Oil prices went from around $70 a barrel, a little bit less at some days, a little bit more, to what is now a little bit over $100 a barrel, about a 50% increase.

But shortages are very real, and the prices will continue to rise significantly. if the current situation just continues with an Iranian and a U.S. joint blockade, let's put it that way, of the Strait of Formuz. Very little is coming out from the region. Supplies are shrinking, reserves are shrinking of all of the commodities in question, and prices that will rise further. When it looks like there's some kind of agreement, the spot market price falls because the speculators expect a reopening of the straight.

When there's a failure of the negotiations such as they are, then the prices tend to rise fairly relentlessly. So we're in a situation right now of a very serious reduction of world energy supplies that will bite. They will hurt Americans. They will hurt people everywhere. Yes, there will be some offsetting windfalls for Exxon Mobil and Chevron, two big backers

of the Trump administration. And partly what we're seeing is the normal Washington policy for sale. This is Trump is, if anything, transactional. So he caters to the oil and gas industry. He caters to the Israel lobby. He caters to Silicon Valley, which is making a ton of money with the new digital killing machines. And these are his donor base, and American policy has been sold to them, and the American people have been sold down the river. They're going to suffer, and they are suffering.

And Trump's attitude is suck it up. It's not my problem. I'm a billionaire and my lobbies love it. So this is where we stand right now. The president spoke earlier today about a temporary reprieve on the gas tax, which is about a dollar a gallon. How cavalier is the government about debt? Debt.

What a quaint topic. We have run up debt now that is the part that's held by the public, not by other governmental units, is above 100% of the gross domestic product. It doesn't mean we're bankrupt, but it does mean that three to four percentage points of our national income. And roughly now almost a quarter of our total government revenues are going for interest payments. The interest payments are larger than pretty much all of the discretionary civilian budget now. So we have increased debt to a level of national income, not seen in peacetime history of the United States. Both parties are culprits. Ultimately, a corrupt political system is the culprit.

Starting back in the 1970s, the corporate sector effectively lobbied, and the Supreme Court did it to deregulate campaign finance, to open the spigots so that our government was put up for sale. And it's bought now, as I said, by Silicon Valley. It's bought by big oil. It's bought by the Israel lobby. It's bought by a number of powerful interests because they put in a huge amount of campaign financing. But one thing that the big donors say is don't tax us.

So basically, we haven't had a meaningful budget for decades. And we've been accumulating debt pretty much nonstop. at least for the last quarter century. And it's reaching proportions that are absolutely staggering and we'll pay for it down the road. But you think Trump thinks about anything more than the next 15 minutes on true social? I don't see any evidence for that. What has been the, what have been the economic consequences of the war in Israel? Well, one thing is that Israel's economy is basically now a war economy.

And Israel, even according to Netanyahu, is the new Sparta, meaning a state that is just organized for killing. It's a ruthless state. Its business is killing. Its business is spine. Its business is assassinations. It's, oops. Did we lose you, Professor Sachs? I'm here, but I don't see what happened. Oh, you can keep talking and perhaps your lips will catch up.

Okay, I'm sorry. So Israel is a military garrison state, and it is making money by, selling its spy systems, selling its Mossad services, selling its assassination machine. It's really amazing. I don't think we've gotten to the depths of how far Israel has fallen from normal, moral, and ethical behavior. But now the entire economy is basically oriented towards war. So on the one side, the point is that the stock market of Israel is booming. This is incredible. And Israeli military companies make money and give Israel influence in many parts of the world,

precisely because lots of governments want to buy into assassination services or spying or surveillance activities and so. on, it's a, it's grotesque in my view, what has happened. Of course, for the rest of the economy, hundreds of thousands, if not millions of people have left. The tourist sectors destroyed. The normal economy is destroyed, but Israel's not aiming to be a normal country. It's aiming to be a war machine right now. Professor Sachs, I'm going to ask you to log off and log on. Okay. So that, and I'll talk while you're doing this. If you could do it as quickly, as you can. I'll do it right away. Hopefully you'll be right back with us. We all know your face, but it'd be better to be able to see you as you're speaking to us. So Professor Sachs, who was

describing the bust and boom in Israel because of the war. We'll be back in just a minute, and I will ask them about China, Iran, and Russia, as well as the worldwide economy as a result of the war. and how the war planners in the Pentagon and in Tel Aviv could not have planned for these consequences. Professor Sachs, with us? I hope I'm back. Yes, you're back. The last thing we heard you say was that there are aspects of the Israeli economy that are booming because it has become a marketplace for war-related.

both licit and illicit, like assassinations, services. But how about to Israeli consumers and Israeli commercial life taking into account the devastation caused by Iran's retaliation? I'm sure that the dislocations to anything resembling normal life are profound. Basically, hundreds of thousands of people have left. Many will never come back. Many Israelis are disgusted by the state of affairs. In addition to being taken over by the war industry, it's been taken over by the most extreme religious zealots,

who act as if they want to really prove. provoke the end times. And so the normal daily life is utterly disrupted, keeping all these reservists in the military invading one country after another. Israel's at war all over the Middle East. It's about eight million Israeli Jews fighting across Lebanon,

Gaza, the West Bank, Syria, Iran, Yemen. Of course, the United States funds a great deal of this, so that keeps also the Israeli budget propped up. We should just slam the door and say this is the end of this, and Israel should get on with the peace and rebuilding its society as a normal society. I don't know the precise numbers and dislocations that have been involved to only the general point that the war machine revs, but the rest of the economy suffers. How has the war affected Iran's economy, destruction of infrastructure, tolls on the Gulf of Hormuz? Well, first, we should say a general point, which is that every economy in the world is hurt by this rise of energy prices and an energy scar—oh, my— nope. Okay. Good. I am. I hurt by the rise of energy prices and energy scarcity. It's just like chopping off a limb. to the world system by taking down a significant part of the actual flow of energy resources.

So in this sense, the world as a whole simply has less. And that is an unavoidable loss everywhere. Of course, there are some few places that have some windfalls, mainly oil and gas companies. that doesn't trickle down to average people, but it does fill the coffers of a few major oil producers around the world. But generally, this is a hard negative hit to the world. Now, on top of that are the military costs, which we talked about, and then the damage from the war itself. the massive destruction of civilian life, of buildings of downtown Tehran, of physical infrastructure. So these are tens or hundreds of billions of dollars of losses just over a few weeks. Of course,

our leaders treat this all as one big game. They even Trump's said when there was another round of fire that this is a slap. This is a game for these people. These are psychologically deranged people who think that the killing and the destruction is just par for the course. And when certain parts of your financial backers, certain groups are enjoying the windfall, you don't even notice that yourself. And since the windfall is, as I said, highly concentrated in Silicon Valley backers of Trump and in the oil and gas industry, which backs him, he probably feels this is going great.

How about China? How has the war affected the Chinese economy, Professor Sachs? China is an oil importer. a very smart and effective country. It is the most technologically innovative country in the world right now ahead of the United States because it's put its head down to get to work, to build the best electric vehicles, to build the lowest cost of renewable energy systems, to build the best humanoid robots to build the lowest cost, 5G digital systems and so forth. So China is doing well economically.

Its exports continue to grow. Its technological advances continue to be very rapid. Scientists from around the world are picking up stakes and moving to China because there's a lot build out of Chinese research and development. The universities are booming. They're hiring scientists from around the world. And in this context, the oil shock is felt, but it's certainly no crisis for China. China built up a lot of oil reserves. Some amount of oil continues to come through, even from Iran and the Gulf, of course. A lot comes through from Russia and from other Central Asian economies. And interestingly, China is by far, by far, the largest investor in wind and solar and

hydropower in the world. China's installing as much solar power capacity every year as all of the of the world combined. So China's going green, digital, building out a new energy system at remarkable speed. It's becoming an all-electric economy. While the United States is doubling down on the 20th century technology of internal combustion engine vehicles, China will produce most of the world's electric vehicles in the coming years. And within China, a majority of new car sales now, I'm not mistaken, are electric vehicles and the proportions continue to soar. All of this means that, yes, China will feel the squeeze from the reduced oil flows, but there's no desperation. And what this will do is accelerate China's energy transformation.

to nuclear, wind, solar, mega, hydro, very smart grids, electrification of transport rather than petrol. Actually, shipbuilding also is shifting to green fuels rather than normal fossil fuel-based shipping. So China's using this as actually a spur to what is already the world's fastest energy transformation underway. What leverage, if any, does President Trump have with China when he visits on Friday? None that I can see. None. Nothing. I don't see any of it.

He tried last year. a trade war. It lasted about 24 hours. China matched the U.S. tariffs and it raised the stakes with restrictions on rare earth magnet exports. The United States backed down. Of course, then later on, the Supreme Court said that Trump doesn't have the authority to put on those tariffs in the first place. And everybody knows that, even if it's forgotten in Trump's own mind when he threatened, new tariffs every day. And last week, another court struck down the follow-up tariff that Trump set when the first one was struck down by the Supreme Court. Now, the second one's going to be struck down as well, very predictably. In other words, Trump is a con-man. He's using powers he

doesn't have. He's a bit delusional, going to wars on premises that are absolutely false. The United States does not produce anything that I can see that China desperately needs. It used to be thought that the high-end chips were a kind of decisive make or break for China, but China itself is telling its companies, buy Huawei. You don't have to buy Nvidia. I understand that that NVIDIA will be represented on this trip to encourage the Chinese reopen the markets for purchases of NVIDIA chips. There is no choke point. There is no threat point. Actually, it would be nice if just for once in his life, Trump actually sat down with the counterpart and discussed the areas of cooperation rather than thinking that he has to hit someone in the nose first before he talks to them.

But right now he has nothing to hit with. He has no cards, as he likes to say. Last question. How has the war in Iran affected Russia? Well, Russia has basically enjoyed that windfall of oil profits because oil prices have risen significantly. Russia is exporting a lot of oil, especially to Asia. And so for Russia, this has been probably the one major economy that this is a net-net, a significant economic positive effect.

Having said that, it's really true that Russia does not want this war and doesn't want this instability. Russia's not looking for windfall profits. Actually, Russia has been playing an extremely responsible role, talking both to Iran and to the Gulf countries and trying to also tell President Trump, look, you made a mistake. You didn't get what you want. You can't get what you want. Don't even think about going farther because you'll blow up the world economy. And actually, nobody's going to like that very much. So what Russia has been doing behind the scenes is a very responsible role, not an opportunistic one. It's trying to end the war. It's telling the United States, stop what you're doing because it doesn't work. It was wrong to

begin with. Iran is an ally of ours. They're not going down the drain, and you can't defeat them. without devastating costs to the world. And at the same time, Russia goes out of its way every day to emphasize that it wants good relations with the Arab countries as well. And on the whole, it's playing a very stabilizing role in trying to find the way to peace. The main thing that is needed, very straightforwardly, is for Donald Trump to stop. He doesn't have to acknowledge the mistake. It's not in his character. He just needs to leave.

He can call it the greatest victory in the history of the world as far as we're all concerned. Just stop. Stop the blockade. Open up the straits. Go home. And this would be the best thing for America and the best thing for the world. Professor Sachs, thank you very much. We may call on you again, depending upon this week,

depending upon events or threatened events in China. But deeply appreciate all the analysis today. I know it's practically tomorrow where you are, but thank you for staying up late, my dear friend. Perfect. See you soon. Sure. All the best. Tomorrow Tuesday, at 8 in the morning, Ambassador Chess Freeman at 9 in the morning,

Professor John Mearsheimer, at 11 in the morning, Colonel Douglas McGregor at 2 in the afternoon. Matt Ho, at 3 in the afternoon, Colonel Karen Koukowski, a full day for you. Judge Napolitano for Judging Freedom.