Joining us now is the laureate and there is a ned Philps Paul Krugman distinction. In the year where Professor Krugman took the trophy, he was the sole winner. I can't tell you within modern economics a special that is. I've been a fierce defender of his international economics, retiring from the New York Times colin where he's been a lightning rod of debate, and we are honored that we can speak our international economics forward with Paul Krugman. Paul,
thank you so much for joining Bloomberg this morning. If you had a cup of coffee in mar Lago with President elect Trump this morning, how would you brief President Trump?
I would ask, what on earth do you think you're doing? You know, it's we're looking at a US economy that this morning's Jaws report was really good. Everything is kind of coming up roses. It's soft landing everywhere. And yet he's prepared, or claims he preparing to go on this trade war against everybody. And the question really is why, what is it? Why do you want to do something so disruptive when you're inheriting an economy that is really looking pretty good.
I'm looking Paul Krugman.
It's something you taught with a piece of chalk at Princeton and at City College. The basic idea here is a tariff chart, which is the microeconomics in dynamics. We talked to Richard Clara the other day about the dead weight loss of tariffs for our listeners, the magnitude of terroriffs. Does it matter or is there just simply a dead weight loss to each American citizen?
Oh? No, the magnitude. I mean, one of the things that you learn from at studying the economics of tariffs is that tariffs at low rates do very very little harm. Would we had an average terraff of something like two to three percent, We do at the moment coming into this that if you ask you know, how much difference would it make if we got that down to zero,
The answer is basically invisible. But if you go from five percent to twenty five percent, which is what Trump's talking about for everybody and sixty percent for China, then it's roughly speaking, we think that the losses are to go up roughly as the square of the terriff freight. So with Trump talking not about a modest increase in tariffs, not about a terriffs on a few products, but across the board trade war sweet Holly Tarff levels that starts to become a really, really big deal.
Paul, I've been If you're in folks, the textbook on this is Krugman Opsfeld.
It's all again.
You throw Ken rogoff in as well, but Krugman ops Who. There's some adult textbooks out there of what Kruman invented for international economics. Paul, I've always defended you by saying the then diagram of Krugman economics and John Taylor economics at Stanford is pretty pretty tight. Can Kevin Hassett advise this president towards some form of tariff moderation or sanity?
Kevin Hassett has a history of basically saying whatever I mean. He's been a loyalist and a court here. I would be really shocked if he goes to you know, Tarras appears to be a real Trump obsession, and I'd be shocked if has it, or actually anybody stood up to Trump and said, mister President, you're thinking about this all wrong. You know, I've been writing for listeners. I'm retired from the Times, but not from life and I'm writing almost every day on my substack.
How do we your substick?
He needs to make a buck on this, That's what it is, Paul, Well, at the moment, how do they still see your writing as you've exited The Times?
Ol Krugman dot substack dot dot com. You just google Krugman substack and you'll find it. And look, you know, I'm free to it's a newsletter slash blog. And I mean, and one what I wrote the other day was we're seeing a continual dynamic where people who claim to be close to Trump but remain anonymous tell news you know, source of newspaper writers, Hey, he's not really as crazy as he sounds. And then Trump immediately reacts with a truth social post saying yes, I am.
So.
It does look like we're really talking about, uh, you know, in tarrace on a scale that we really have not seen. We're talking about a reversal of really ninety years of US policy. Yeah, trying to.
Where I wanted to go, professor. I mean, you know, I grew up on Global Wall Street, where and many of our listeners and viewers as well of internationalism being a fundamental business tenant. Now that's taken a back seat here over the last ten years. Is internationalism dead?
Well, probably in the form it was, Yeah, I mean a lot of this was USA geminy, and we thought that a more prosperous, peaceful world was in our interest. You know, what was good for the world was good for America, and we thought that freer trade was good for America, and we led the way. We built a world trading system kind of in us, in our own image. It's very rules bound, legalistic, it's you know, and it worked. We've managed to get everybody's tariffs down. We got to
a world of pretty close to free trade. We've been in the last couple of decades. The European Union, which is not very united many things, but is unified on trade policy, sort of co manage the system with US. Now we've gotten much more nationalistic, and even Biden was pursuing for I think pretty good reasons and pretty seriously nationalistic policies, specifically on technology and China. But so the age of full on more globalism is good. That's behind us.
That that really died about a decade ago. But there's a big difference between saying, Okay, we're going to be much more selective about this and maybe even be protectionists here and there and saying, you know, smooth Holly had the right idea, which is basically what Trump is saying.
Right, So, professor, you know, we had today's a big jobs day here on a global Wall Street, showing again the strength of the US labor market. That calls into question another one of the presidental policies, which is about immigration and what to do with the migrants that are already here. From an economic perspective, what would your how would you advise the president on thinking about immigration policy.
I mean, immigration has been one of the great strengths of the US economy, whatever else you may think about it. And I mean it's not actually a source of crime or any of the things that he says, but the immigration has been a tremendous safety valve, has helped to contain inflation. And the immigrants, particularly if I might say undocumented immigrants, they're not evenly spread across the US economy. There a really critical part of the labor force in
some particular sectors. If you want, if you're worried about agriculture or meat packing or construction, those are all sectors where we have an aging The native born population is agent the working age. Native born population is shrinking because we've had low fertility for a really long time, so that without immigration we would be basically we would be Japan. And so from an economic point of view, this is a hugely This is a tremendous self owned Paul.
Krugman with us. We are thrilled to these with us here with Cee you and my Qun's Stone Center and socio Economic Inequality among others, and affiliated also with Yellows, I should say, and of course he years at Princeton as well. I talked to him about his first paper once at Yale, which was in star Trek.
This is a few years ago, right, yeah, just after Ricardo. But the answer is the laureate Paul Krugman with us.
Thank you for the huge response to Professor Krugman with us this morning. Paul.
I've said this before, but I.
Guess there can be a tour of duty when you win a second Nobel Prize. You deserve a second Nobel Prize for your persistent discussion of wages and monopsony in America, Folks. Monopsony the model is a rubber plantation in Malaysia where the rubber plantation sets the price because they have power over all the farmers and the rubber trees in the manufacturing process. Professor Krugman, how is monopsony in America affecting our listeners in our viewers on YouTube?
Oh gosh, I mean, I'm in a way what it's telling you. I mean that the main monopsony issue on wages is is that it's okay to raise the minimum wage. I mean, is this is where we really started to take it seriously when you first had the work by Card and Krueger, now replicated by many people, which says
that local minimum wage increases don't actually reduce employments. It's it you eq on one on one unless you well, I have to say, even in my own textbook, we do talk through how a minimum wage can reduce employment, but it doesn't actually seem to happen in the United States. Now, that's because minimum wages are low in the United States. And you know, if if you set the minimum wage at forty dollars an hour, even I would accept that that would have some employment consequences. But so that's the
main place where it hurts. Although if you are you know, a small small supplier or something trying to pedal your stuff on Amazon. The fact you know that you've got a giant Beza size monopsimist certainly affects your business.
I mean, it's very interesting to see Paul Krewman and then the conservatives listening. I'm going to frame this, Paul is a liberality in a way, is a locke in individualism of conservative theory in America. Should we be more like Germany flat on their back? Should we be more like Sweden? Should we be more like France?
Well, I mean, ideally we should be more like Denmark, which is a place that does strong welfare states, strong unions, and does it well. It's you know, everybody's got. One of the things. I've spent many years teaching a course versus Princeton then than at CuNi on the ecnology of the welfare state comparing different countries, and one of the things you learn, first of all, the United States has a much more we have a much bigger welfare state than we like to imagine, but it's much smaller than
what European countries have. But there's no country that does everything right. US healthcare is a nightmare. US retirement system is actually pretty good. France, it's exactly the opposite. So it's not as simple more government is good. I mean, I think their conservatives always think that less government is good. Liberals progressives never think that more government is automatically good.
But there are certainly things where we should be doing more, and obviously that's on hold over the next few years. But there are lots We can learn a lot from other countries. So that's one thing I would say to you as an international economist. The biggest problem with Americans is that we don't actually seem to believe the rest of the world exists, and we don't think that we can learn lessons from things that other countries do.
Right, Professor, Most of the market participants that we speak to, particularly over the last several months, and they see a data point like today's non farm payils. So Nicoel, like the FEDES, engineered a pretty solid soft landing. What concerns you? What worries you about this US economy right here?
I think the US economy as of right now is in very good shape. Okay, I am worried. You know, I've been around a while and the whole ai fewer and although the money being thrown that that technology gives me definite nineteen ninety nine vibes the sense that we may be having even if there's even if the technology does do a lot of good stuff, and there's some indications that it will, the valuations look awfully high, and you can very easily imagine a kind of two thousand
and two thousand and one type. But the biggest concern for policy, I mean, if if you actually believe that Trump is going to do what he promised in the campaign with these massive talents, mass deportations, and let's not forget taking away a lot of the feral reserves independence we are, it's not at all hard to see us gratuitously.
I mean, we're in good shape right now. But we could very easily have a gratuitous outbreak of stagflation of America and it will be entirely coming top down from the from the White House very quickly.
Heref scrub Paul, we got to do this, Sircrubman won't come back the substack this morning. The real threat, the real threat of fake numbers.
Paul Krugman, are.
You suggesting the president and his administration will cook the books?
I think that's a very high possibility if you believe what I'm saying about inflation. Inflation is actually going to go up substantially. And do you really imagine that Trump will just sit there at and not say these are fake numbers, it's fake news and put pressure on the Bureau of Labor Statistics to produce better numbers. I mean, we've seen populist regimes do that all over the world.
Why imagine that it won't happen here? And I know that people, you know, people who've had long careers at the Bureau of Labor Statistics are really worried about this. So I'm just saying, you know, flag this. This is something to watch.
Paul, generous of your time. Thank you so much again. Paul Krugman in a New Life out. Do you got it from Adam Two's substack? Yeah, maybe we should do a substance.
And we should do that. Paul Krugman, thank you so much.
Don't know about Laureate of Princeton always in Cuney as well.