The Comedy Cellar: Live from the Table - Which Party is Better for the Economy in '24 with Jason Furman

Episode Date: October 10, 2024

Jason Furman is the Aetna Professor of the Practice of Economic Policy jointly at Harvard Kennedy School and the Department of Economics at Harvard University. He is the former top economic adviser to President Obama and a regular contributor to the Wall Street Journal, Project Syndicate and the editor of two books on economic policy. Furman holds a Ph.D. in economics from Harvard University.

This is Live from the Table, the official podcast of the world-famous comedy cellar, coming at you on Sirius XM 99 Raw Comedy. Also available as a podcast and available on YouTube, this is Dan Natterman with me. Noam Dorman, the owner of the world-famous comedy cellar. We have Perry Alashinbrand with us. And through the miracle of Riverside Teleconferencing Software, we have Jason Furman, Professor of the Practice of Economic policy jointly at Harvard Kennedy School and the Department of Economics at Harvard University. Former advisor to President Obama. Welcome, Jason Furman. Great to be with you again.

So, Professor Furman, you know, we have an election coming up next month. I don't know if you're aware. And I think a lot of people are trying to figure out which party will be a better steward of the economy. And you are one of the people that I most trust because you are someone who speaks against whatever the expression is. You speak out against the point of view that one would expect of you. You're not a partisan. You're right a lot of the time. You are associated with Larry Summers, who I also regard to be a brave voice for the truth wherever it leads him. So what I want to do today is kick around some of the issues that we hear about and get a wise position on them. Now, just to say, I did email a very, very important economist, someone you know, someone you respect.

And I asked him, hey, do you have any questions for Jason Furman? He said, see if you can get him speaking frankly about the total collapse of economic reasoning in the democratic party so let's start actually it was even a little saltier than that but let's let's start uh with that what do you think just you know just uh you could probably intuit it what do you think a respected economist meant when he would write a sentence like that? What are the things that really get under the skin that the Democrats claim to be for that economists say, come on, what are they talking about? Yeah, no, I, you know, I think this is all about comparison. And so we'll get to comparison at some point, but you wanted to start with the Democrats. So let's talk about that. And the growth of populism,

the growth of what sometimes calls itself post-neoliberalism, I'm not entirely sure what it means, to me has been somewhat troubling. And at its heart is this idea that all good things go together. You want to have your initiative and it can simultaneously hire disadvantaged people to build a climate project, to reduce carbon emissions and increase economic growth. And it'll pay for itself and won't even cost anything in the budget.

Every single good thing happens together. Because all good things correlate, right? All good things correlate. They all correlate. And when you have that, instead of cost-benefit analysis, which economists love to do, you have benefit-benefit analysis, because on every side of the ledger, there's benefits. And with benefit-benefit analysis, there's no limiting principle. You want to do anything and everything. There's no point to analysis other than just as propaganda to sell people on the thing you already want to do. And you see this in fiscal policy, the idea that you don't

need to ever worry about a budget deficit or things pay for themselves. You see it in competition policy, where one of the big things you deal with when a company grows big, partly that means it's doing bad things to people. Partly it would not have grown big if it wasn't doing really, really good things for people. And you need to balance those against each other. And you see it throughout the economy. So I think Democrats have gotten less good at thinking about trade-offs and using economics as a tool for doing that. You have a specific example? So, you know, there's some things where I think people got, you know, in math or in economics, my class, you don't just need the right answer. You need to show your work and show how you got the answer.

So some places people are getting what might be the right answer, but they're doing the work wrong. I would say something like industrial policy. We're putting all this money into building chip factories in the United States. Actually, that's a good thing to do because we need national security resilience from Taiwan. You'll also hear the argument that it's a great way to create middle class jobs. Let me tell you something, giving eight and a half billion dollars to Intel, which is one of the things that's done there, that's not a great way to create middle class jobs.

That's a really bad way to create middle class jobs. So the cost of the chips program is less efficient chips production and giving money to rich corporations. The benefit is more resilience in terms of our national security from Taiwan. When I do the math, I think it's a good idea. But when you have that type of reasoning, you end up in the wrong place. Where I think it's taken us wrong is the extensive Buy American requirements. channels, we should probably be buying the Chinese ones rather than the more expensive ones. Kamala Harris had a price gouging proposal. She's since sort of dialed it down to much, much less. But at first it sounded a lot like price controls. And that's a way of saying, hey, we're going to get lower prices, but we don't have to worry that people aren't going to make as

much stuff and sell as much stuff anymore. Yeah, well, let's go through that list. And by the way, I am tempted to concentrate on the Democrats because the flaws in the Republican stuff, the tariffs, which I do want to talk about, and the general mindlessness of some of their proposals, this gets very well covered in the media. You know, you have to be under a rock to not hear that tariffs are a dumb idea. But the Democratic proposals, I think because of the bias in the media, they don't get – they're not derided with the eye rolls and scoffs that the Republicans are. So that's really the reason I want to bring them out. But I do want to talk about both.

So price gouging, we agree. I mean, it sounds like price controls. It is price controls, right? There's no subtle difference between price gouging rules. I mean, look, the subtle difference, there's legislation that was proposed by Senator Warren and others have supported it as well, that basically says if

you're a company that raises your prices more than your costs went up, that you're presumed to have been in violation of antitrust unless you can prove you had a really good reason for it. That is basically price controls. I think that's a fair description of that proposal. And by the way, every year, roughly half of companies raise their prices more than their costs went up, and roughly half of them raise them less because there's different things affecting the cost side and the price side of the equation. So that's price controls. If you're talking about like – oh, sorry. No, no. It's interesting to me.

In some of this, I view everything through the eyes of a small businessman, right? And it's stunning to me sometimes how it's clear to me that the academics and the Senator Warrens of the world, they're so far removed from it that the things which come to me instantly through no ill will or bad faith in their part, it never even occurs to them. When I hear that, the first thing that occurs to me is that, okay, well, now the big corporations like Starbucks are going to be at a tremendous advantage to the mom and pop because they can weather the storm of limitations on their ability to raise prices. They make more money. They're more efficient. They can take losses for more time. They have

a million ways and relief valves to just starve and sit there happily while they're the mom and pop competitor who may already have a much lower profit margin and is not sophisticated and doesn't have the economies of scale. It starves to death under rules like this. And it's always a source of iron. I mean, I always see it as a ironic that the Democrats don't seem to realize that how many of their well-intentioned rules, in my opinion, are behind the fact that corporations, the large corporations, seem to be doing better and better, spreading like and they lament the Democrats, the loss of the mom and pop, that mom and pops just can't make it anymore because of all the landmines and rules of these

well-intentioned regulations. Am I onto something there? I think that's true in some cases, you know, I mean, like regulation, like everything, you don't want none of it. You don't want too much of it. You have to get it right. But definitely it's a thing that one should constantly worry about, that regulations can be easier to navigate for the big players than for the small ones. You know, I think this about, I worry this about, I worry this about artificial intelligence. Right now you have the big companies have gone out and testified that they would like to see artificial intelligence regulated. Sam Altman has said that. Google has said that. And there's some people who are like,

wow, this must be so dangerous that even the companies making it want to be regulated. How often do you hear anyone who wants to be regulated? Well, OpenAI will have an easier time navigating these regulations than the new startup competitor to open AI. And so, yes, I think maybe some regulation is needed in the AI space, but we should be very, very nervous when successful incumbents are out there supporting it and pushing for it. Can I just ask you, you mentioned that domestic chip production would not create middle class jobs. Why would that be? If there's factories, obviously there's going to be jobs for the middle class in those factories.

Maybe I'm misheard. A microchip factory has like almost no one in it. The people in it have master's degrees and are in fancy suits and all of that. Moreover, you just have to ask what else would have happened to that money. Whenever you spend money on one thing, you drive up the cost of building other things. So you build less stuff, maybe drive up interest rates a little bit as well. So in economics, you can't just look at the direct effect, which almost always is positive because you're doing something for someone. You have to ask, you know, what's the opportunity cost?

What's the second round effect? And look at all of that. So that's why I don't think it's a good strategy. Again, I don't think you would have given money to Intel to create middle class jobs. What if for another industry where there would be plenty of middle class jobs by bolstering domestic production and some other industry, would you be against just in general bolstering domestic production and some other industry? Would you be against just in general bolstering domestic production? I mean, there's a few things. One is I'm mostly in favor of when it comes to different sectors of the economy, a free market and letting

the market decide between those different sectors of the economy. I certainly wouldn't put a thumb on the scale for manufacturing, except in national security realm. So we did microchips, drones, the United States should make drones. We certainly should make our own battleships and the like. But for most other stuff for manufacturing, we should specialize in what we're good at. There's some things that we're really good at doing. And by the way, those are services. Those have a huge global market. They can often be more pleasant jobs. They pay really well. Manufacturing is actually not the type of pay it used to have. We should specialize in what we're good at,

and the market can figure that out. Next, price control is the same thing, I guess. Kamala wants national rent control. That would be awful as well, correct? Yeah. And look, I do. Yes. Well, Biden proposed it. I'm pretty sure she supports it, too. Not positive. You know, the original proposal as formulated was two years of you can't raise your rent above, I think, 5% a year. And if you do, you lose some of your depreciation deductions. The problem is anyone who's going out to build anything, they're doing a pro forma. They're looking over the next 10 or 20 years, what's the rate of return on this project going to be? And if you're not sure, are these controls going to get extended? Are they going to get expanded? You're not going to want to build as much.

And guess what? The source and root and core of all of our housing problems is that we're not building enough. Now, I do feel obligated to point out here, you know, this is not the only piece of our housing policy. In fact, the one that I've been thrilled to see her emphasizing is, you know, yimbyism. Yes, in my backyard, building more stuff, knocking down barriers to building a $40 billion subsidy for states and localities that come up with plans. All the different zoning rules and obstacles to, you know, building taller, having more density.

Aren't those mostly state and city? They're mostly state and city, but I do think that the bully pulpit matters. You know, we're making some great reforms here in the city of Cambridge, at least we're on track to make them. I hope they follow through and finish up. And in part, that's motivated by a national conversation

where different city councillors here heard that national conversation, got enthusiastic, wanted to do it here. And, you know, this $40 billion fund that if it passed would be putting a thumb on the scale of states and localities doing it as well. So I think the federal government, it's fair to say we spend money on infrastructure, we spend money on all sorts of things that is going to states that is affected by and affects the density with which, I don't know how to put this. I feel like my gut – look, I'm an empirical guy, and I only want what works. Believe me, of all the things that I might have a partisan reflex on, and I really don't have much of a partisan reflex on anything. Economics to me is the last thing I think should be partisan. I only care what works. And of course, economics is complicated because –

It works for whom? But the it's complicated by the fact that there's so little consensus among the economists on things. And then, of course, so many things in my lifetime. Maybe everything, very few things have ever turned out the way they were sold. I become. I've come to the opinion that there's a kind of hubris of tinkering that they're going to get in. They're going to do this little adjustment and that little adjustment and that little adjustment. And and and that somehow it's it's all it just never works out that way. And I just tell you, like where I'm coming from, I bought a building a year ago, last April. So so it's 18 months. I've had this building now on West 3rd Street. It's supposed to be a new comedy club. It was a McDonald's. And I've yet to drive the first nail into the wall there.

What I'm finding is that like some big document that you're asked to sign, the regulations are like an archaeological dig of everything that has ever gone wrong in 200 years. So like the last two months, I've been held up waiting for approval of the MTA, the subway system, because we're a certain number of feet catty corner from a subway. I'm speculating that sometime in the 1800s, somebody, you know, drove a jackhammer and it went into a subway tunnel. So now there's a rule that the MTA has to approve everything. And I just imagine that the opportunity cost of what I'm going through, which is hundreds of thousands of dollars plus whatever revenue, just the carrying cost, multiplied by everybody who has a project in every Democrat-controlled state, and probably Republicans won too, but more so in Democrat. The cost is so enormous. And they're tinkering with, well, we need this tax credit and this has, like, what is the logic that they think that it should

take almost two years just to get permitted? They built the Empire State Building in 13 months. I know that's kind of a demagogic point, but that should take two years just to be able to get your first nail. It's a freestanding building. There's no tenants. You can't imagine a more vanilla case where somebody should be able to say, yeah, go ahead, but you can't. And that to me. It is something that the Democrats seem to miss in their fascination with this small potatoes tinkering. What am I? Is that just a perspective error? Because that's my life. Look, do I think Democrats are a bit more of the villains in the over difficulty of building stuff in the United States? And by the way, it's much easier to build in France than it is in the you know over difficulty of building stuff in the united states and by the way it's much easier to build in france than it is in the united states um you know the the cost is much much lower um there and and not even talking about china um which is which is much

much cheaper to build in part part for reasons we wouldn't want to emulate here in the united states by the way you can get something built in Vegas very quickly, but go ahead. Yeah. So, but just to add, you know, a few things to it. First of all, don't blame the economists. I think most of us probably don't like this. Second, on the housing side, some of it is you need a permit for this, you need a permit for that. But some of you are just flat out not allowed to do something. Most of Cambridge where I live, and I'm pretty sure most of Manhattan, would not be allowed to be built at the height and in the way it is now if it hadn't been built before the rules were made. So some of it is just letting people build taller, build denser. You know, this isn't an issue for Manhattan, but leave less of a yard. For San

Francisco, how much parking do you need to have? All these types of rules, they're very, very deliberately designed on purpose to have people build less. You need to change them. That's on the residential side. The last thing I'd say is just to give you a glimmer of hope. I think this is increasingly appreciated. And I think it was just last week, maybe the week before, President Biden signed a law that passed, I would not be surprised if it was with more Republican votes than Democratic votes, I'm not sure though, to streamline the permitting process for semiconductor plants, the microchips we were talking about before. And the left of the Democratic Party was against this law. They wanted to see him veto it. A number of them thought it would hurt labor unions, hurt the environment, would be a big

problem. And he said, no, you know, it's really important. I said microchips are important. And I'm willing to, you know, ride roughshod over this community. So there's not been enough of that. I totally agree. And he can't reach out and deal with the problems you're facing as you're trying to build another awesome comedy seller. But I think there is more understanding and the movement for permitting reform, you know, is growing at the federal level. Well, it hasn't trickled down to me in any way I can see. And then a case like the other thing that comes to mind is this this guy in charge of the I mean, he's right out of central casting, this guy in charge of the Longshoremen Union or whatever it is, who says, do it. Give me what I want or I will cripple you.

He's he's threatening to cripple the United States of America. And I've read you would know better that their big issue is they don't want any automation. Well, now, again, I don't see the Democrats going to war with the unions. They managed to put it off until after the election, which seemed like a very cynical ploy to me. But if, you know, again, it's not partisan. I would want my president to say, you don't talk to the United States. You don't threaten to cripple the United States of America. That's not the cause of labor that we support. And we're not going to negotiate with you. We're going to automate because, of course, we have to automate.

Are you crazy? We're going to, like, what's the Milton Friedman thing? You know, then dig with spoons spoons that way we have more people that this is what they're saying that we should be we should freeze on in this point of time forever it's and then this reminds me of tariffs but go ahead what's your yeah am i wrong that the democrats are are are are weak when it comes to facing up to these unions i would love to hear more of an explanation of the benefits of automation um and by the way trade and automation there's a lot of analogies to it um the same the same union president you're talking about he went out and

it's not about trade it's about automation um he said easy passes have been terrible because we used to all the cars used to stop at the toll. They'd wait five minutes. They'd fumble for change. And at the other end of that process, there was a job for someone collecting that money. Well, I think there were precisely zero people persuaded by that argument because we'd all much rather have our easy passes and drive through the toll than do what we used to. A lot of other automation and trade is similar to that, but you don't observe it in the same direct way. So you put a tariff on dishwashers,

as President Trump did, or a tariff on electric vehicles, as this president did, and all of a sudden, people are going to be paying more as a result of that. And you're slowing down this very efficient process that is analogous to what's going on when the E-ZPass replaces the toll booth. The same thing when a Chinese EV that's better replaces another one. So almost all of these protecting jobs, whether it's through trade against automation, is the wrong instinct. But it's really hard to explain because, again, the costs are borne by a very concentrated small group. The benefits, you know, if you put obstacles in the way, the benefits of those obstacles, whether it's protectionism or stopping automation in the ports, the people who benefit know exactly who they are. And then the costs are spread out through everyone else. And even though those costs are really,

really large, you're getting in the way of it. So, yeah. Would I love to hear this explained more clearly by the political system? Absolutely. Well, just to let Daniel one second, it's just from a citizen's point of view, without regard to the specifics. And I'm about to ask you about Trump now. There just seems to especially from a small businessman's point of view, they just seem to be the enemies of progress, as it were. Seem to live in the Democratic Party and the Trump side, you know, they embrace intuitive but theoretically unsound principles like tariffs, like the obsession with the trade deficit. But at least in some way, they seem to be pulling in the right direction.

Dan, what do you want to say? Well, I just wanted to say regarding the toll booth operators or any other industry that finds itself upended by technology, is there a place – what do we do about all these people that lose their jobs? Maybe it was the only thing they were qualified to do. Maybe they put in years of study to do something that has found itself overnight, sort of rendered obsolete. What can we do for those people? Yeah, look, first of all, I think the thing he has right is, yes, you should care about those

people and you should be asking that question. The thing you don't want to do is stop the easy pass as a way to keep them on their jobs. But having a more vibrant economy that's creating more jobs is part of the answer. Having, you know, a better safety net. So if worse comes to worse, there's a set of things you still have is another part of the answer. For older workers,

there's a program called wage insurance that has been proposed that basically says you should be working at $60,000 a year. You're older. The best you can get now is $40,000. We'll pay half the difference for five years or something. So rather than unemployment insurance, which you only get if you don't work, this gives you insurance against getting a worse job. So I think there's some things.

Are they fully satisfactory? No. Would we all be collectively much worse off and poorer without this unintended consequences of them, whatever. But at least they care, except what was fracking when they said, let them learn to code or whatever it was. But I think that was just an unfortunate remark. But on your future, I want to get back to your future point. I think you're giving the Republican Party of today, or at least the Republican presidential ticket of today, way too much credit. I mean, these two people are enormously nostalgic for bringing back, you know, a manufacturing that maybe we had decades ago. J.D. Vance has talked about why would you want to get cheap toasters from abroad and implied that, like, having a toaster industry in the United States would be a great use. He said it was worth millions of dollars. One job was worth a million dollars. You know, like the idea that we should make toasters in the United States. I mean,

it's fine if people want to, but like it shouldn't be a goal of public policy to make toasters in the United States. They're, you know, they're, you know, they share the democratic hostility to the big tech companies. And by the way, I think the big tech companies, there are some issues there that should be addressed. But boy, do you know, would any other country in the world kill to have headquartered in their country the companies that we have here? So I see less of a future orientation in the Republican presidential ticket than maybe I've ever seen before. Let me put it to a different way. And this is maybe there's an answer here that I don't know. And that'll be great.

I went to Japan for two weeks this summer. And I spent also a week in Italy. In Japan, I paid very close attention. I did not see one single American car on the road. I went to Tokyo, Osaka, Kyoto, Hakone, Nara, not one single American car on the road, not even a luxury car. In Italy, I saw a handful. So I understand that the trade deficit doesn't matter. Let's separate them. Forget about what we're importing. What is going wrong? Do we just suck?

Like from my point of view, I'm like either we are just awful. Nobody wants our cars. Well, cars is representative of a lot of things, but cars. Or something about the trade policy is not working correctly. And if Trump is lashing out to try to figure out what it is, at least he's lashing out to try to figure out what it is because how can we not sell any cars or virtually no cars to an affluent country like Japan, a successful country like Italy, while our roads are full of Japanese cars. What is going wrong there? And believe me, I found one. There was one Jeep Cherokee, which is up on blocks like a mechanics blocks in one person's garage in Japan.

I was on the lookout for a single American car on the road in two weeks, not one. So what the hell is going on there? So. You know, it's not tariffs, first of all. There's not much in the way of tariffs on the European side or the what I said. I mean, I'm not saying it's tariffs or tariffs would even fix it, but I'm saying what is going wrong? Something is not right. Yeah. I mean, some of it is, you know, the things we're good at making are big and use a lot of gasoline. And in Europe, gasoline is really expensive. And in Japan, my guess is it's more

expensive than here. I'm not positive. But certainly Japanese um in terms of size of cars is um quite different so you know that's one of the issues but um yeah this is largely a set of choices about taste and you know different countries will buy different things and we either need to make better stuff or stop making it and those are the choices really so you think it's i don't think there the choices. I don't think there's something obviously unfair. What you're saying is that we suck. That in 20 years or whatever it is, we can't manage to build a single car that competes. Well, what about our car sales?

I see a lot of Teslas in Europe. I haven't been to Japan lately. Good for that. I didn't see one in Japan, but I don't know. But I don't think I have a lot of trouble swallowing. There are a lot of small American cars that get good gas mileage, that are hybrids, that are indistinguishable from Kias. And it's in Europe too.

I mean, something is wrong. Something is weird to me and I don't, is it the unions? I don't know. But we should know. Somebody should have a good answer for that. I mean, it was just amazing not to see a single American car in Japan.

Dan, what did you want to say? No, I mean, you said also this is maybe it's just Japan. Maybe in Europe they're selling like hotcakes, American cars. I mean, there's also an issue where they're made. A lot of American cars aren't made in America. A lot of Japanese cars aren't made in Japan. You can't really look at the brand of the car and understand what fraction of it was made and in what place. I mean, these things are, these are all global cars at this point.

But see, there's this kind of offset where when, when the, when Harris and Biden say dumb things, like we're going to fix prices or have national rent control, we say, well, yeah, but you know, we understand, we understand what they're, of course that's ridiculous, but at least they're, we understand they're trying to address the housing problem. They're trying to address the thing. But when J.D. Vance, who I'm, by the way, not a fan of J.D. Vance. I mean I find the guy repellent in so many ways. But when he says this dumb thing about toasters, we get very literal. How could he think that a toaster is worth when he's also in a almost

metaphorical way or in a politician's way trying to call attention to an issue? And I think the issue is real. So let me do one thing to disagree with you and then one thing to give you even more fodder for your view of how the intellectual ecosystem works. On the disagree part, I think it does matter that, you know, on both rent control and especially on the price gouging, they said things which were well-intentioned, a problem people cared about, you know, all that stuff he said. And the more criticism they got, the more they dialed it back and reduced it. Donald Trump proposed 10 percent tariffs across the board on every country, including on very good friends of ours like New Zealand, on stuff that we don't make in the United States like ballpoint pens. And when he encountered a firestorm of criticism, he's changed it from 10% tariffs to 20% tariffs. And so he really doubles down on his bad ideas that are gesture, maybe there's some sympathetic gesture, like you said,

but he doesn't seem to fine tune them on the campaign trail. Now, we don't know what he would do in government, whereas she tends to dial her bad house prices. And there were indignant Democrats all over Twitter, a lot of, you know, nerds and stuff saying, that's ridiculous. By the way, here's a study, you know, immigrants lower house prices because they build houses, they work in the construction industry, and, you know, they don't raise them to lower them. Anyway, I did a little bit of research, took me about 20 minutes to figure this out. Prior to 2020, there were actually Republicans arguing that immigrants were lowering house prices because they ruined the neighborhood. And a standard Democratic talking point was immigrants are great because they raise house prices

and they increase demand and housing wealth will go up. It was phrased, you know, more as the person who owns the house, you want the house to go up. And so a couple of years ago, it was Republicans saying this and Democrats saying that. And now some of the same people have flipped over. And now that house prices are a big problem and people are worried about it, all of a sudden the people that don't love immigrants say that it's because of the immigrants and the people that love immigrants say, no, no, it's not. So, you know, that to me is like an intellectually incoherent thing. But I think the truth here is that the Republicans have the sign right and the but have the magnitude wrong, which is when you get more immigrants, it does drive up house prices. But if you're frustrated by how expensive everything is right now, immigration

is a small part of that problem. Well, this is a problem on the left and the right. You know, Even – I'm reluctant to say it because, again, I'm hardly an election denier. I'm offended and I hate the election deniers. But it is true that in 2012, if you Google the New York Times, there were New York Times articles about how all the paper ballots were an opportunity for fraud. And that was quickly memory-hauled as soon as Trump was complaining about the paper ballots as an opportunity for fraud and that was quickly memory hauled as soon as trump was complaining about the paper ballots as an opportunity for fraud so um these things you know this is just the way politics is and um i almost never get used to it but um that's that's a flaw of my self um last time you were on as related to what your last thing you said you made news i don't even know if you were you know that our podcast was in the Wall Street Journal.

I didn't know I made news. Uh-oh, what did I do? Because I had asked you – I hope I put the quote. about the likelihood of inflation given when they had that $1.7 trillion, whatever it was. $1.9 trillion. Don't short sell it. Yeah. And you had said,

I have it here from the comments, I think on this one, most of the academic economists who do research in economics that I talked to actually agreed that it was too large, agreed that it would cause inflation, but most of them just do their research, might be afraid of rocking the boat. And he says, I think we made it harder to have opinions and put them out there, something like the school closures last year. Well, anyway, I'm not going

to read the whole thing, but your point was that there was a lot of pressure on economists in academia to toe the line on something which came from the Democratic Party. And, you know, that always worries me. You think it's still going on, or do you think they learned their lesson from the inflation? Right. I mean, first of all, most people don't feel the need to communicate with the public. And by the way, that's fine. I don't think everyone should be here recording a podcast with you today. Some people should be off doing great research and specializing in that and letting other people talk about what it is they find. But I do think that the people

who do choose to communicate with the public, yeah, it disappoints me when I see, you know, a very, very heavy thumb on the scale and the like. Now, I think economics is way better than almost any other discipline. There's a bunch of people here in the Harvard Economics Department who, at least in the past, have voted for Republicans. I don't know who, if anyone, voted for Donald Trump, but who would have voted for Mitt Romney or John McCain quite happily. I don't think that's true in an awful lot of other departments at Harvard. And if you go into a seminar, the set of incentives are to prove you're smarter than the next person. So if the person is presenting research that reaches a

liberal conclusion, rather than say like, yay, you reached a liberal conclusion. Aren't you awesome? You're going to be like, here's what you forgot and you ignored this. And this was correlation, not causation, et cetera. And so I think that does mean the research is pretty good and the like. But then what gets out does have a big filter on it and a big thumb on the scale. And that's a problem. Give me an example of what, you know, something that stayed with me. So when you guys, when the Trump was proposing his tax plan. And by the way, an interesting aside, you know, that in the Woodward book, it said that Trump actually wanted to raise taxes on the very wealthy as well. And whoever, what was it? Was it,

who's the guy? Cohn was that? What, who was the guy in his, uh, Gary Cohn was his NAC director says to him, Mr. President, you can't do that. You're a Republican. And Trump's like, what do you mean they could afford it? But anyway, I remember saying at the time, I'm sure it's not perfect, but I think it's better than the alternative. And I said, I guarantee you that when the Democrats have a chance to repeal Trump's tax plan, they won't do it because they say now it's not really a tax cut on the middle class. But when it's in the alternative and they have to repeal Trump's tax plan, they're going to realize, oh, it actually would be a tax increase on the middle class. And sure enough, when they took when Biden took office and had control of all of the all on all branches, the only part they wanted to repeal of Trump's awful tax plan was the deduction for state and the SALT tax, state and local.

What is the state and local taxes, the deduction of state local local, the SALT tax, state and local, what is it, state and local taxes, the deduction of state and local taxes, which of course benefits the wealthy. You know, how many people pay more than $10,000 in property taxes, upper middle class to wealthy people. So, again, it was just another example of how partisanship just distorted, like a black hole distorts time and space. Partisanship just distorts and mangles everything. And you just don't know what to trust anymore, what to believe. Can you give me? But oh, go ahead. No, look, some of these things is not before we got in. We didn't really get into this. You said, you know, what economics says, what economics says. You know, it doesn't say your values. And so I can't give you an economic proof as to whether the top tax rates should go up or down. If it goes up, there's some cost to that.

Some people are going to work a little bit less, create a few fewer jobs or whatever it is. And, by the way, there'll be more money available for whatever it is you want to use money for. And whether that's good or bad depends a lot on your values. I do think the two parties have a different view on this. If she wins, it is much more likely that the top tax rate returns to 39.6, which is what it was under Obama and Clinton. If Trump wins, it's much more likely the top tax rate stays and gets extended at the 37 percent that it is right now. And those are largely values differences. And I much prefer one of those values to the other. But that's not really an economic proof that I have. Is there truth to the to what I've read that that at least I think in the past 100 years, the economy does better under Democratic administrations than Republican administrations. That is a very strong empirical

fact. And I think it has to be some sort of coincidence. It's frankly hard for me to believe. But yes, it is factually correct that the stock market, economic growth, business investment systematically, at least for the last 50 years, I don't know, at the last 100, does better under Democratic presidents than Republicans. Different people have tried different ways to explain that. I don't think it's telling you some timeless truth, but I think it is making an important rebuttal to the counter argument. If your view is that Democrats destroy the economy, they're socialists, they don't know what they're doing, whatever, maybe they're a small negative, maybe they're a small positive, but whatever it is, they're not a large negative or you would

not have that empirical regularity. And that's just, look, I think when you're a Democrat, you sort of get the sign wrongs, like the housing thing. You think all the good things go together. When you're a Republican, you take the magnitude, you know, such and such is costly. And you make it sound like it costs 10 times more than it actually does. Before I know you have to go, could you give us, are there, does it exist two or three policies where there's actually an economic consensus on the order of the consensus of scientists on climate change or a consensus of doctors that smoking causes cancer? Can you get a consensus of economists to agree on two or three policies that the United States ought to adopt? Number one, I mean, there's some values at play here, but immigration, including high-skilled immigration. Now, you want it to be legal. You want it to be predictable. You want to enforce

the laws you have. But if you ask, you know, what's the way you could add half a point to the growth rate, that's the only tool we have that is big enough for that. Second of all, the tariffs, which we didn't go into gory detail on because you said it was obvious, and I agree with that. That's pretty broad agreement, not 100% agreement, but pretty broad agreement. And then the third is sort of a heading, but then the subheaders get more complicated, is, you know, it's a trite thing, but education is as close to a panacea. I mean, we were talking,

what can you do for those, you know, those workers in the tollbooths? Well, people with a college education have much lower unemployment rates. When they lose jobs, they're much more likely to be able to find another job. When a recession comes along, they're much less likely to lose a job. Now, what exactly that entails? Is it, you know, reforming the teachers unions for K through 12?

Is it spending more money on college? Is it a universal preschool plan? Probably less consensus on some of that. Well, I got to tell you, as an employer, I don't give much credit to a college education anymore. I mean, a Harvard education. I don't even give credit to a Harvard education because anybody who was graduated from Harvard, I bet you if they hadn't gone to Harvard, I'd be very impressed with them based on their high school education. I think to get into Harvard, you are already operating at a level above the college graduates that I see from B-tier schools on down. I don't put much stock in it. I can't even write simple paragraphs or do simple math.

It's kind of – I think college has just become something that people do. Anyway, well, all right. Go ahead. Can I slip in one more question? Yeah. But you were talking about certain industries that are vital to the national interest that are worth, what's the proper way to preserve those industries? For example, if Boeing gets into big trouble, I think they're not doing so great these days. We don't want to lose them. So what would be a proper way? Good question, thank you. Yeah, I mean, it's a very context dependent thing. That's not some universal answer. I think in general, trying to build up our industries is going to be a better strategy than trying to knock down, you know, others' industries. So less about tariffs and, you know, no one is advocating that we try to penalize Airbus

or something like that. So what you can do to build up your own industry, sometimes guaranteed purchases from the government can be a good tool. Maybe we should be buying more drones for the military and then we'll have, you know, they have to be made in America, then you'll have more drone factories. Sometimes it's, you know, some form of subsidy for the output. Now, to be clear, by the way, I don't think we need to do any of this right now for the airplane industry. But I agree with you, if for some reason we were in danger of losing an American airplane industry, we'd have to figure out, you know, what's the right tool for this circumstance.

Oh, can I adult you for one more? Sure, sure. Okay. Because I don't understand this. It seems wrong to me, but I think I saw on Twitter, I hope I'm remembering right, like a few months ago, you came out for it. They want to tax unrealized gains, which seems crazy to me because it goes up, it goes down, you get taxed for it when it went up and then the bottom falls out and you already paid the taxes.

But you seem to, unless I'm remembering wrong, you seem to think there was a workable way and a fair way to tax unrealized gains, correct? Yeah. So this is, I mean, look, it's not going to happen. I feel like I've spent more time talking about it than I feel like it, given the degree of passion I have on the topic, but let's do it. Let's do it. Let's do it. Yeah. There's a lot of nerdy economists across the political spectrum like this. The American Enterprise Institute, which is the conservative think tank, they like it there. They like it elsewhere. I'd say what the nerdy economists who like have in common is a very high regard for theory and a very low degree of practical worldliness.

And those go in both in two opposite directions on this. So the theory first is, you know, it's very arbitrary whether you realize a gain or not. By the way, when you only tax when it's realized, people hold on to things for longer. Maybe, you know Maybe your business would be in better hands with someone else. Probably you're not a good example of this, but maybe it would be. But you don't want to sell it to them

because you don't want to pay those capital gains. You shouldn't be inhibited by those capital gains. Your business should be in the best possible hands. Unfortunately, it is. So it's called lock-in. And in general, you want to have a broader base at a lower rate. And taxing gains at realization is a way of dramatically narrowing the base.

And then it requires a higher rate. So that's the nerd argument. The counter argument is a whole bunch of them, including the one you just made. If things go up, things go down, et cetera. Plus, how do you value, you know, what's comedy seller worth? A lot, trillions of dollars, I'm sure. But how exactly do you value it? Those are tricky things. The administration came forward with a proposal and they did things like rather than pay tax every time it goes up, you pay one fifth of the tax when it goes up every year for five years. And so if something goes from 100 to 150 and then falls back to 110, you just cancel the future taxes. Now, if it goes from 100 to 150 and then falls back to 90,

then you're in trouble, but not a huge amount of trouble. And that's actually pretty rare. So they tried to do some smoothing rules like that. They had certain valuation and deemed return rules. So I think they did a pretty good job of answering the real world stuff. But I agree. It's a complicated thing. I'm not totally positive that even their plan would work in the real world. The problem with all these tinkerings, as I call them, and is that, as I said, so many of them don't work out. And in business, you tinker, you trial and error.

I'm a huge believer in trial and error but the whole theory of trial and error is that you recognize the error and then and then change things uh discontinue previous behavior in government almost nothing is ever discontinued just another layer is built on top of it then another layer is built to to compensate on that and it just it's like I'm fascinated by this analogy. It happened since I was a kid, death by a thousand cuts because – and I've used it many times because the theory is that no single thing actually matters. But if you respect the analogy, you have to react to each thing as if it would kill you. Otherwise, you'll find yourself dead by a thousand cuts.

And economics, all these things, it really reminds me of that. I don't know, this little thing. Oh, so what's that going to cost? 0.001 of GDP. And you pile one on top of the other. Someday you wake up and say, oh, shit. Go ahead. Right. No, but I think that's, look, on the realized gains, unrealized gains, I mean, you might be right. You definitely might be right. I think that is a totally, totally, and I would not want to move forward with it unless it was subject to enormous amounts of scrutiny. And if it survived it and, you know, I'd feel much better if I sent out the country to do it. So you definitely might be right. I think in general, it is far more often that economists are the ones pointing these costs out rather than the ones. So I don't think this is

our fault. Yeah. No, I didn't actually didn't mean you're right. It's politics. Yeah. There's some things that may be our fault, but I think that one is not. All right, sir. You are.

We have to let him go. You want one last thing you want to say? I think he covered everything. I mean, do you want to get into the immigrant wages discussion? No, only because I want to respect his time because I want him to come on in the future. And I know that he's been very generous with it and obviously he's pressed for it. And I'm very, very honored to have you kind of as a friend of the show being on two times. And I was not snowing you when I said how much I respect you and regard you as one of the two or

three people in the country that I actually take seriously on economic matters that I feel that you're not just, as I said, completely distorted by partisanship. So we really appreciate having you on the show. You always have an open invitation to come to the club in person. Didn't you grow up around here or something? Sullivan Street. I saw Heston and Blaker right, right nearby. So when, when you come back to visit the old hood,

it'd be great if you'd stop in. And thank you, sir. I will take you up on that. Please do. Perry, I will give you my phone number too. Bye.

Bye. Bye.