Judging Freedom - Prof. Jeffrey Sachs : Trump and His War Destroying US Economy

Episode Date: August 10, 2026

Prof. Jeffrey Sachs : Trump and His War Destroying US EconomySee 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, August 10, 2006. Our apologies for the late start. You've been with us all day, you know that we have had internet gremlins, and apparently they are still here. Professor Jeffrey Sachs joins us. Professor Sachs, I want to prevail upon your expertise as a world-class economist, and I want to discuss the various aspects of Donald Trump's behaviorist president, which have profoundly affected the economy, competitiveness, standard of living, and future use of saved funds. So let's start with the war in Iran, a war of choice that the U.S. and Israel started without necessity in which they have now lost. How has the war, Professor Sachs, affected the lives of average Americans? Of course, this war, like so many of the wars,

the United States has fought in the last quarter century has been pure cost, no gain, absolutely useless, but harmful to American well-being. The war itself, of course, is costly. It will be tens of billions of dollars minimum in costs of direct military outlays. The numbers we've been getting of, say, 30 billion so far are not true. The cost is going to be much higher than that. The ramifications of the war for the U.S. economy and for the world economy, of course, are completely adverse. Oil prices and the prices of many other commodities have soared because the war disrupted international trade fundamentally. Americans know that they're paying outlandish prices at the gas pump. Standards of living have fallen as a result of this.

Wages don't keep up with the inflation induced by the war. Of course, the war is paid for by debt. So not only is it costly, we don't pay for it as we go. We pile on the debt. The public debt, as I think everybody knows now, is more than 100% of our national income and rising. And all projections are for a significant further rise of the debt. As the debt rises, so do interest costs because the credibility of the U.S. government to be able to fund itself diminishes because of the doubts of international wealth holders in investing in the United States. Those doubts increase. That has a further effect on the U.S. budget deficit and the amounts that need to be borrowed.

All in all, like the Iraq war, like the Ukraine war, which the United States did so much to provoke, like the wars in the Middle East that have been going on for years, partly at Israel's behest, partly at our own insanity in the United States policy circles. All of this is detrimental. were in a pattern now where the Trump administration, I think everyone's figured out, has no strategy, neither for the war nor for the economy. So I go to the store to buy food and I stop and fill up my car with gas. It now costs $25 or $30 more to fill up the car than it did six months ago.

My grocery bill is about $25 or $30 more, and I'm buying the same amount of food and household groceries than it was five or six months ago. How does the war and the killing in Iran, excuse me, in Iran, translate to more expensive gas and more expensive consumer products in the U.S.? Well, the more expensive prices at the gas pump are out. absolutely direct. The war distrable the flow of oil and natural gas.

The oil and natural gas produced in the Middle East passes through the Strait of Hormoz. The United States, Israel action effectively closed, a waterway that had been open until the United States launched its attack, and that pushed up gasoline prices at the pump. But it's not only the petrol, it's also all the things that are produced with energy products. And so fertilizer, for example, is another commodity produced in the Gulf region. the flow of fertilizer has been disrupted by the war.

That food prices down the road. And the war in Ukraine, another useless American adventure that started way back when, when the United States said, hey, why don't we move into Russia's neighborhood with NATO? And Russia said no, and we said, yes, we dare you to do something about it. That little fiasco also has disrupted the direct supplies of grains to world markets, as well as the supplies of fertilizer. So we don't have just one war going on. We have several disruptions. We also have not only the Strait of Pormuz disrupted, but we have the Red Sea and trade through the Suez Canal, increasingly at risk, paying. higher insurance costs if the ships go at all because the war is spreading in the region. All of this completely useless, completely unnecessary. Bibi Netanyahu sold Trump, who's pretty credulous,

not very bright bill of goods, and here we are, but it's the American people who are paying the actual bills at the gas pump and in the supermarkets. By the end of President Trump's four years in office, this term, at the rate at which the government has been borrowing and spending money, it will owe over $40 trillion to the individuals, countries, and entities that have lent it money. How can you get your arms around 40 trillion?

trillion. I mean, how much is that in interest payments? And I know this sounds ridiculous. Does the government borrow money to pay interest on borrowed money? Because if the answer is yes, and we did that to run our households, the mortgage company would be foreclosing by the end of the year. Well, look, the basic truth is Trump is a kind of bad. actor in a long string of bad actors. Washington has been, you know, not telling the American people the truth for decades now. Basically, as everybody understands, Congress is funded in its campaigns by rich people. Rich people have one basic rule, don't tax us. And so basically both parties for decades have voted for tax cuts that are unaffordable and just add to the debt. So we've been

running deficits for a quarter century, running up the debt. The debt in peacetime is at record highs in the United States, more than 100 percent of our national income. And therefore, If you pay three or four percentage points interest rate on the debt, and that interest rate is going up because it was low. But as the old debts come due and new debts are borrowed to pay the old debts, then the interest rate on the new debts rises. So we're now paying three percent of our gross national product. it'll be 4% of our gross national product just for the interest rate alone.

Our overall deficit is on the order of 6 to 7% of GDP year after year chronically. And by the way, Judge, nobody in Washington talks at all about this. This is not even an issue brought up by the Democrats against the Republicans or the Republicans against the Democrats. It's all one big game to keep campaign donors happy. Trump is the worst of it because, you know, he'll sell no principles at all. So the first great, one big, beautiful bill that he put forward basically is only real piece of legislation because everything else has been by executive order rather than by congressional action. but the one big piece of legislation was to cut taxes for the rich for years to come,

adding another roughly $5 trillion of debt over the next decade. The basic point is Washington in general and Trump magnified doesn't want to look ahead at all. And so we are in the most short run of short run perspectives with Trump. It's down to 15 minutes or a one day news cycle and then prevarication, try to figure out what to do next. It's all improv. But you can look ahead and say, this is completely going off the rails. So what kind of an environment is this to, in, to bring in tariffs. Tariffs are a sales tax paid on every product that comes into the United States

subject to the tariff. Supreme Court invalidated them. The President blasted the Supreme Court, now says he can reinstate them against countries that use slave or forced labor, for which he claims his trade Representative has conducted hearings and miraculously discovered that every country on the planet that trades with the United States, including our allies, use a slave or forced labor. The pretext is ridiculous. What about the economic effect? A midterm is coming. His base is deserting him. The popularity of the war is down around 32, 33%. The opposition to the war is in the high 60% people are suffering with paying more money and my hypothetical to fill up the car and the biweekly groceries. What kind of an environment is this into which to inject tariffs and what

effect will tariffs have on the economic activity of the United States? Well, Trump came into the second term with the idea that tariffs somehow fit the needs of the United States. And he put forward a lot of theories which were completely bizarre, totally bizarre. I can say so as an economist that has taught tariff policy for decades at Harvard University, Columbia University, and around the world, everything Trump said about tariffs was wrong. So what did he say. First, he said that the foreigners paid the tariff, that if you charge 20% tariff on European products, it'll be European exporters that have to cut their prices by 20% to get them into the U.S. market. Well, this has been categorically disproved. The whole idea is nonsense. What

study after study of the last year has shown is that, of course, it's Americans that, that pay the tariff. It's exactly what you said. It's a sales tax on imported goods. And the Americans pay that. The foreign exporters to the US market didn't cut their prices. They kept their prices.

And then the tariff was added onto that. Trump gave many explanations for the tariffs. All of them economically illiterate up the wazoo, I could say. First, he said that the tariffs are because the other countries are unfair to us. We run trade deficits with the rest of the world. Well, we run trade deficits because we have a huge budget deficit, which is like a national credit card. So we borrow to spend more than we make. And that's why we run deficits with the rest of the world. And then this guy says, as those deficits are proof that the other countries are cheating us.

This is the most basic illiteracy imaginable. You run a trade deficit or what we call a current account deficit, which is the comprehensive measure of the balance on goods and services. When you spend more than you earn or when equivalently you save less than you invest. So we're a low saving country because we borrow so much to fund the budget deficit, well, we save not enough for our investments. So we run an international deficit, a current account deficit, it's called. And Trump blame that on the rest of the world, absolutely bizarre. So he said, I'm going to put on tariffs in retaliation for the unfairness of the other.

other countries. Well, I said the first day, this is so illiterate or have no effect on our current account or trade deficit, if you will, but it will raise prices for American consumers and disrupt the international economy. That's exactly what it did. It raised the costs to Americans. They did pay another $150 billion or so, roughly 1,500 to 2,000. thousand dollars per household for Trump's tariffs. And then here's interesting fact. He did that not by going to Congress and getting legislation, as our Constitution says, because the Constitution is absolutely clear in Article 1, Section 8, that duties, international

tariffs belong to the prerogatives of Congress. That's a basic feature of American democracy that goes back to Britain, which is you don't pay taxes because the king says so. You pay taxes because your parliament or your Congress votes it. Well, Trump didn't do that. He just signed an executive order, said by the emergency powers vested in me, I declare tariffs against the rest of the world. And then gave this cockamamie reason for it, which made no sense at all. Now, the Supreme Court, a year later, invalidated this. Again, a kind of, duh, because the lower court invalidated it.

Then the administration appealed. It was invalidated again. Then it went to the Supreme Court. Supreme Court said, you don't have the power to do that. Even King George III didn't have the power to do that, much less King Donald. So the Supreme Court invalidated it. And then what happens? Well, households paid in extra costs for their consumer goods about $150 billion last year.

But now with the tariffs declared to be illegal, now the rebate is going to go to the companies that imported the goods and that added on the tariff as they passed the goods to the consumers. So the consumers are not going to get their money back. to be a wing fall to the companies that are the importers that passed along the tariffs to the consumers. You can't make this stuff up. But these, they would be clowns if it weren't so serious. They didn't think about this one bit, just improv. And you could tell, I've said so by the way, the first day, Trump does not have the legal authority to do what he does. He makes it up as he goes along. The same is true with this absurdity of forced labor declared against any countries in the world

that he wants to put tariffs. Of course, this is going to be declared illegal as well. It's just improv, but it's the American people who end up paying for this. Their wages do not keep up with prices. This is the basic point. Living standards go down. And that's what Trump is doing. Now, one more point I should add. Trump also had a theory that he's going to put on these tariffs and the jobs are going to flow back to the United States because he said, you know, what he's going to correct is the jobs went overseas. Well, the jobs in industry went to robots with those arms on the assembly line. That's where the jobs went. So he put on the tariffs said the jobs are going to come back. Well, we've lost 75,000 jobs in manufacturing from the start of Trump's tariff policy in January

2025 until today. Jobs don't come back. He's got the wrong model of what is happening to jobs in the economy. So he doesn't understand trade deficits. He doesn't understand where jobs are and are not being created and he put on this regressive tax in order to partially offset the absolutely shocking giveaway to the richest Americans in his one big beautiful bill. And then it was declared unconstitutional or illegal against the Constitution to close the whole thing. And now he's making up more reasons. How could the war's planners not have foreseen what would happen in the Strait of Hermuz and the economic effect to an everyday American?

How could his economic advisors, Scott Bessent, and I forget the other fellow's name, first name Kevin, not have advised him of the effect of tariffs and how if I paid. $35 for a toaster at Walmart that really costs 30. I'm not going to get the five bucks back, but Walmart will. How could they not have understood all of that? Do we understand it because of hindsight, or do we understand it because we know Basic Economics 101? Well, Basic Economics 101 should have been known from the first day. I'm going to say, not only did I know it,

I've been saying it from the very first day. None of this is a surprise at all. What is a surprise is how the United States arrived at this amateur hour. This is the surprise. That's a puzzle. How can a society of so much wealth and so much sophistication end up with this shit show? Sorry to say it. with no thinking, no true debate, no true deliberation, just executive orders that are bizarre and

without any underlying economic rationality or logic. Well, there are reasons for this. One is Washington has become so corrupt. It's a game of special interests, and Trump adds a feature that is really unusual. It's a game of family business. And so it's actually also gaming the nitty-gritty of day-to-day trades for his family members. But more generally, Washington became a game of Canada. Then you really do understand more that they're not talking about the common good. They're not talking about the average American, much less the people that are below.

the median. Maybe you could say that Trump has a certain kind of short-term rationality for the super rich who paid for his campaign. He's given mega Pentagon contracts to Elon Musk and to the other big tech titans who funded Trump's campaign to begin with. He's given all the prerogatives to them. He has probably created a financial bubble in the stock market, which is way overvalued, but he's created paper wealth for the richest Americans who own, of course, the predominant share of that wealth. Remember that the bottom half of the U.S. population, the bottom half owns about 1% of the stock market. So when Trump talks about, I make the stock market.

go up. He probably has in a short-term bubble. I think it's going to be a bubble that's going to crash in the future. But maybe he's done that for the super rich. But none of it has been rational or aimed at his voter base, which are working people who voted for Donald Trump because he said, I'm going to raise your living standards. I'm going to help you get decent work. I'm going to help you to afford things. I think everybody has figured out. It's been just the opposite. Professor Sachs, thank you very much.

I know it's the middle of the night where you are on the other side of the world, but thank you for joining us. Thank you for this lesson in Economics 101, which is apparently not even basically grasped in the Oval Office today, and for which we all suffer. Safe travels, Professor. Thank you for joining us. Thanks a lot.

See you next week. Sure. Coming up tomorrow Tuesday at 8 in the morning, Ambassador Chaz Freeman at 9 in the morning, Professor John Mearsheimer at 10 in the morning, Aaron Mote, at 11 in the morning, Scott Ritter, at 2 in the afternoon, Matt Ho, at 3 in the afternoon, Colonel Karen Kutkowski. Justice Napolitano for judging freedom.