0:00

Looking forward to a thing in a few

0:02

weeks. Yeah, I don't know if I'll end up

0:04

being there, but I'm hoping to. I'm hoping

0:06

to. It's been. What do you guys have,

0:08

like, a liberal cuddle party? Or what are

0:10

you doing? Yeah, yeah. Larry takes a bunch of

0:12

MDMA and we all sort of go into

0:14

the corner and hang out together.

0:16

God, that sounds incredible. Liberalism is

0:18

wonderful. It's called something else. Sorry

0:21

Nikki. Is our cryptos are joining

0:23

us or no? He's a I'm talking

0:25

to now. It looks like he

0:27

is. Oh zing. This is gonna

0:29

be great. This would be like

0:31

ratings bonanza. All right, we do

0:33

have David Sachs here. David. I'm

0:35

sure you have a quick time

0:38

on. Look at sexy. It's good.

0:40

It's good. It's so presidential. It

0:42

looks thin. Oh, he looks

0:44

fabulous. All right. Here we

0:46

got three. Two. All

0:54

right, everybody welcome back to

0:56

the number one podcast in

0:59

the world. I'm your

1:01

host, Jason Calicanis, with

1:03

my besties, Chemah Polyhapatia,

1:05

our chairman dictator,

1:08

and live from, well, the administration.

1:11

Mr. David Sachs, our czar

1:13

for AI and crypto, and

1:16

amazingly, two fantastic guests

1:18

this week. We have New

1:20

York Times writer and host of the

1:22

Ezra Klein podcast. He's got a new

1:25

book with Derek Thompson, Abundance, and he

1:27

co-founded Vox in 2014, and he's our

1:29

guest here today before Trump ships him

1:31

to El Salvador. Please welcome Ezra Klein.

1:34

How are you, sir? Glad to be

1:36

here. My final hours of freedom. Okay,

1:38

great. Good to be here. Sorry, sex.

1:41

And with us, of course, Larry, Summers,

1:43

economist, former Treasury Secretary, under

1:45

Clinton, former Director of the...

1:47

National Economic Council under Obama

1:49

and the president of Harvard

1:51

from 2001 to 2006. Thanks

1:54

for coming Larry. Good to be with

1:56

you. Okay, we have a lot to get to

1:58

here, so we might as well talk about the

2:00

big news of tariffs. It's day 80

2:03

of the Trump presidency,

2:05

a second term, and Trump

2:07

tweeted that he paused tariffs

2:09

for everyone but China on

2:11

Wednesday. Basically, let me just

2:14

cue up the details, Larry, and

2:16

then we'll get your take on

2:18

all of this. Just one week

2:20

after Liberation Day, Trump announced

2:23

on Truth Social, that in

2:25

effect he was raising tariffs

2:27

against China 125 percent. based

2:30

on their lack of respect, quote

2:32

unquote, instead of negotiating, and

2:34

that he was pausing reciprocal

2:36

tariffs on all other countries

2:39

for 90 days, and markets ripped

2:41

10% every he posted this. And

2:43

today, Thursday, when we tape, there's

2:45

been a massive sell-off on Wall Street,

2:47

so the roller coaster ride continues.

2:49

What it will be on Friday

2:52

when you consume this podcast is

2:54

anyone's guest. S&P is down

2:56

5% today. For context, the

2:58

S&P was at... 5,700 pre-liberation

3:00

day. So about a 9%

3:03

drop after these wild swings.

3:05

And in fact, this has

3:07

been historic volatility.

3:10

Here are the top selloffs

3:12

in history. As you can see,

3:14

three of them came during

3:16

the financial crisis. Three of

3:18

them came during the financial

3:21

crisis. Three of them came

3:23

during the financial crisis.

3:25

Three of them came

3:27

during COVID. tariffs. Also,

3:30

in the gainers, you have

3:32

these big rebounds. Wednesday's

3:34

9.5% recovery was number

3:36

three. The administration says

3:39

this was all part of a

3:41

master plan. We'll hear more about

3:43

that later. And that they laid

3:45

a trap for China. They laid

3:47

a trap. Bessent has been

3:49

the spokesperson during this

3:52

retreat or whatever we're going

3:54

to call the pause and quote.

3:56

This was driven by the president's strategy. He

3:58

and I had a long talk on Sunday,

4:01

and this was his strategy all the long.

4:03

I don't think we need to play the

4:05

clip. That's the gist of it. The White

4:07

House account then tweeted, in all caps,

4:09

my favorite way to tweet, do not

4:12

retaliate, and you will be rewarded. Wall

4:14

Street Journal, on the other side,

4:16

posted a story about why Trump

4:18

blinked. The Chronicle, the decision as

4:20

being affected by Jamie Diamond, who

4:22

went on Fox to express fears

4:24

of recession while saying the terrorists

4:26

were valid. and that he knew the Trump

4:28

and Cabinet will be watching him on Fox,

4:31

other banking executives who felt they didn't have

4:33

a lot of influence in this administration,

4:35

according to the Wall Street

4:37

Journal, started lobbying Republican lawmakers,

4:39

that the Trump tariff plan would tank

4:41

the economy, the White House, chief of

4:44

staff, Susie Wiles, started receiving calls from

4:46

executives and lobbyists expressing concerns, and

4:48

the Wall Street Journal reports that Trump

4:50

was influenced heavily by Besson. They were

4:53

flooded with... worried calls from Wall

4:55

Street and that the

4:57

president was lobbied to find

4:59

an off-ramp. Trump ultimately

5:02

relied on his

5:04

instincts according to

5:06

the administration. Larry, is

5:08

this Fordy chess? Or is

5:10

this something else? What are your

5:12

thoughts? This is dangerous work

5:15

with a sledgehammer on a

5:17

pretty sensitive machine, which

5:19

is the global economy.

5:21

that's having really

5:23

serious consequences. First,

5:26

it's important to

5:28

understand that there's more

5:30

tariffs that are around than

5:33

you described. Even after the

5:35

big back off, there's a

5:37

10% across the board tariff,

5:39

a range of structural tariffs

5:42

like on steel and automobiles,

5:44

and a range of new

5:46

tariff threats like on

5:49

pharmaceuticals. Here's a kind

5:51

of market-based estimate of

5:53

what the damage that the market

5:56

thinks this is all doing to

5:58

the US economy is. markets

6:01

down, let's take today's number

6:03

9%. If that's right, that

6:05

would be about $4 trillion.

6:07

Of course, at $4 trillion

6:09

since Liberation Day, of

6:11

course markets were down coming

6:14

into Liberation Day

6:16

because of some anticipation

6:18

of these policies. So

6:20

let's be conservative and

6:22

say these policies have

6:24

taken $6 trillion off

6:26

the stock market. Now, the

6:28

stock market only measures

6:31

the adverse impact on

6:33

corporate profits, not the adverse

6:35

impact on consumers. So you

6:37

need to add to that

6:40

stock market number. One way

6:42

of thinking about adding to

6:44

it would be to say

6:46

that corporate profits were 10%

6:49

of the economy. So you

6:51

could argue for multiplying by

6:53

a factor of 10. but maybe

6:55

that's being too exaggerating or

6:58

too bold. So let's multiply

7:00

by a factor of five.

7:02

And what you get is a

7:04

loss in the $30 trillion range

7:06

as the present value as

7:08

estimated by markets of

7:11

what's being done. Now I

7:13

know that Trump administration

7:15

sometimes likes to say it's

7:18

working for Main Street, not

7:20

Wall Street. I noticed that

7:23

they were pretty excited about

7:25

the stock market rally

7:28

yesterday in a way

7:30

that wouldn't really

7:32

go with not caring

7:34

about markets. So

7:36

I think what markets

7:39

are seeing, what's true, which

7:41

is three things. This is

7:43

an inflation shock

7:45

because you're adding to

7:48

prices. CEO of Amazon got

7:50

it right, the Secretary of

7:53

the Treasury got it wrong,

7:55

increases in tariffs of this

7:57

magnitude, the overwhelming part of

7:59

them. will be passed on

8:01

to consumers. So you've got

8:04

an inflation shop. When

8:06

you raise the prices of

8:08

people and their income, at

8:10

least in the short run

8:13

is the same, they're poorer,

8:15

and that means they

8:17

can afford less stuff, and

8:19

that pushes the economy

8:21

down, and so you've got

8:24

higher inflation, and

8:26

you've got more less

8:28

demand. and therefore more

8:30

unemployment, all of

8:32

that's bad for the

8:34

economy and companies. And

8:36

the last thing, which

8:38

I think is profoundly

8:41

important, is we

8:43

are trading like an emerging

8:45

market country right now.

8:48

For serious countries, for

8:50

the United States, the

8:52

pattern is that when the

8:54

world gets riskier... The

8:57

bonds go down in yield

8:59

and the currency goes up

9:01

in value because people

9:04

come for the safe haven

9:06

When they're a country

9:09

like Argentina Then

9:11

the assets all move

9:13

together falling stock prices

9:16

go with higher bond yields

9:19

go with a weakening

9:21

currency and show because

9:23

of our erratic

9:25

behavior surrounding America

9:28

from the traditional zeitgeist

9:30

surrounding America to the

9:32

kind of zeitgeist that

9:35

surrounded Juan Perron's

9:37

Argentina. And that goes

9:39

with all the other things that

9:41

are happening. The more protectionism,

9:44

denying the independence

9:46

of the central bank,

9:49

fiscal irresponsibility. breakdown

9:51

of traditional boundaries

9:54

between government and

9:56

business, substantial cronyism

9:58

as a strategy,

10:01

authoritarian tendencies

10:03

towards the opposition,

10:06

lack of total

10:08

respect for judiciary.

10:11

What we're seeing

10:13

is a is a pattern

10:16

of America being governed

10:18

on the kind of

10:20

one Perone Argentina model

10:23

and That sometimes produces

10:25

some benefits for some

10:27

people in the short

10:30

run. That sometimes generates

10:32

popularity for it. Perone

10:34

kept coming back in

10:37

Argentina, but ultimately it's

10:39

extremely costly for a society.

10:42

You've heard Larry's take on

10:45

all of this. Larry's giving it

10:47

about a B-plus on the Harvard

10:49

grade scale, which might be inflated.

10:52

I'm not sure. Sachs. Obviously,

10:54

in the administration, you cover

10:56

two things, AI, and of

10:58

course, crypto. And you're a member

11:01

of the pod, so let's get

11:03

your take on what happened this

11:05

week with these tariffs. Even the

11:08

most ardent supporters of

11:10

Trump have felt this is chaotic,

11:12

not well executed, not

11:14

communicated well. What is your

11:16

take? Sachs on how this was

11:19

executed, and could this have

11:21

been done better? Well, I think

11:23

what happened if you go back to

11:25

liberation day was only eight days ago

11:27

is April 2nd if I had told

11:29

you on April 1st That Donald

11:31

Trump would find a way to

11:34

get the entire world to Eagerly embrace

11:36

a 10% tariff on the American

11:38

market and not only were they not

11:40

complained, but they'd actually be

11:42

relieved that it was only 10%

11:45

You would have said that would

11:47

be an April foolstroke if I had

11:49

told you eight days ago or nine days

11:51

ago that Trump would find a way to

11:53

accelerate the United States' decoupling from

11:55

China, which is something he's long wanted

11:57

to do, and that Wall Street would

11:59

basically... breathe a sigh of relief over that, you

12:01

would have said that there's no way that

12:03

could happen. If I had told you eight

12:05

or nine days ago that President Trump figured

12:08

out a way to assert a presidential

12:10

power in a way that gives America

12:12

extraordinary leverage over virtually every

12:14

country in the world, you would have said,

12:16

well, I don't believe it. I don't, you know,

12:18

what is that power? And he proceeded to do that.

12:21

And now basically every country in the

12:23

world except for China is coming to

12:25

Washington seeking to negotiate a new

12:27

trade deal for the United States. on better

12:30

terms for the US. Who told me any

12:32

of that a few days ago I would

12:34

have believed you and I would have

12:36

thought the consequences would be a

12:39

substantially deteriorated American economy

12:41

and a substantially less

12:43

secure. I don't think we know

12:46

that. I don't think we know

12:48

that. It's not any surprise. There's

12:50

nothing surprising about the fact that the

12:52

United States has the power to

12:54

extort Lesoto. And that's the

12:56

country that was singled out. in

12:59

the Trump formula for the highest

13:01

level of protection. There is no

13:03

surprise that the United States

13:06

has the capacity to isolate

13:08

itself. It will be very

13:10

very costly. South Korea is

13:12

coming to Washington. Everybody's going

13:14

to try to cut a

13:16

deal. Everyone's going to come

13:18

to Washington. Never would have

13:20

occurred to anyone with experience

13:23

in government that the United

13:25

States would have any difficulty.

13:27

getting any major country to come

13:29

send a representative to the United

13:32

States to have a discussion and

13:34

a negotiation with a United States

13:36

on a matter that was of concern to

13:39

the United States. Never could possibly have

13:41

come us any surprise. Let me let

13:43

Sachs reply to that and then Ezra

13:45

I'm going to bring you in. Sachs,

13:47

go ahead you reply? Then why didn't

13:49

they Larry? Do you think that... All these

13:52

countries were going to renegotiate their trade deals with

13:54

the US if President Trump asked nicely if he

13:56

said pretty pleased to renegotiate our trade deals so

13:58

you take down your trade. that they would have

14:00

done it, if he had said pretty pleased with

14:03

a cherry on top. That's not the way

14:05

these things work. He had to establish

14:07

the leverage in the negotiation first. And

14:09

the fact of the matter is he's

14:11

the first president in decades who's been

14:13

willing to do that. You don't get anywhere

14:16

by just asking nicely. And I think

14:18

that what President Trump did over the

14:20

last eight days is, A, establish the leverage,

14:22

and B, get all these countries to

14:24

now want to negotiate a new trade

14:26

deal with the United States. Why do

14:29

markets think it's so

14:31

terrible for the American economy?

14:33

Maybe the market's just completely

14:35

wrong, but at least another

14:37

possibility is that the market's

14:40

judging this, that the market,

14:42

I mean, job of markets

14:45

is to look forward. It's

14:47

to look past the immediate,

14:49

it's to see what the

14:51

long run consequence are going

14:53

to be. And markets are

14:55

making a pretty devastatingly negative

14:57

judgment. Larry, that's not true.

14:59

That feels emotional and nice,

15:01

but it's just not accurate.

15:03

So let's just establish a

15:06

couple facts about quote-unquote the

15:08

markets. Number one, there are two

15:10

markets and they behave totally differently

15:12

and sometimes inversely to each

15:14

other. There's the stock market

15:16

and there's the bond market. With

15:19

respect to the stock market, what

15:21

they are debating and you're right,

15:23

Larry, is what is the effective

15:25

long-term rate of return a dollar needs

15:27

to generate in order to pay me

15:30

back that dollar. That is what the

15:32

fundamental stock market does. And what

15:34

we have seen for many years

15:36

with train imbalances, trade deficits, and

15:39

close to zero interest rates,

15:41

of which more of that happened

15:43

under Democrats and Republicans, we

15:45

have allowed the stock market

15:48

to inflate past historical averages.

15:50

What we've actually seen happen in

15:52

the last week is what most

15:55

people would call mean reversion. The

15:57

stock market is still way above

15:59

work. was last year, two years ago,

16:01

three years ago. What has happened is

16:04

that the Ford multiples have compressed. So

16:06

that's number one. That's the fact. You

16:08

can debate whether that's bad or good.

16:10

And I'm willing to debate that

16:12

with you. Okay, now let's go

16:14

to bonds. Yeah. And then with respect

16:17

to bonds, what we are seeing now

16:19

is there are two very complicated issues.

16:21

And we don't know what the unknown known

16:23

is. And let me be very specific.

16:25

In the last two days, we saw

16:27

one part of the bond market. totally

16:30

get out of whack. And what we

16:32

know is that the yields changed

16:34

materially in a very acute

16:36

way, which is atypical of

16:38

how the bond market

16:40

typically digests a philosophical

16:43

change in approach to

16:45

policy. Normally when you see

16:47

an acute reaction in the

16:49

bond market, the underlying reason

16:51

tends to be some

16:53

financial calamity in a

16:56

participant. What we heard in the

16:58

last 24 hours is a lot of

17:00

this move may have been attributed to

17:02

an enormous levered bet on

17:04

US treasuries by a Japanese hedge fund.

17:06

It will take three and four

17:08

and five and six weeks for us

17:11

to really know. Separately, what we

17:13

do know though, where the structural

17:15

complexity of the market, and this

17:17

is where Larry, I agree with

17:19

you, is acute and important

17:21

to observe, is in the

17:24

credit markets for private companies.

17:26

And that is where you have to pay

17:28

a lot of attention. Okay, Larry,

17:30

let me let you respond to

17:33

Chemat's response to you, and then

17:35

Ezra, I promise you're going

17:37

to come in next. Larry, go

17:39

ahead. As you well know, the

17:42

vast majority of

17:45

financial thinking emphasizes

17:48

changes in the

17:50

earnings prospects of

17:53

companies. associated with

17:56

the strength of

17:59

the That's

18:01

got a lot to do. Negative

18:03

prospects for the economy has a

18:06

lot to do with why the

18:08

economy, why the stock market has

18:10

turned downwards. The farm

18:13

exchange market's very big,

18:15

and it's a big referendum

18:17

on whether people have confidence

18:19

in the United States. And

18:22

somehow, tariffs reduce imports

18:24

are supposed to reduce dollar

18:26

selling and make the currency

18:28

go up. And not only is

18:31

the currency not going up,

18:33

it's going down substantially. So

18:35

we're seeing a pattern, maybe it's

18:37

all just due to one Japanese

18:40

hedge fund, but maybe we're

18:42

seeing a pattern that's three

18:44

days. That really looks pretty

18:46

much like the Argentine pattern.

18:48

Ezra, you are hearing this

18:50

debate. I think there's no

18:52

debate that this was done

18:54

in a very extreme fashion at

18:56

a minimum. Do you wonder...

18:58

if this could have been done in a

19:00

more gradual or thoughtful way, which are take

19:02

on the execution here by the administration of

19:05

these tariffs, and their response to the

19:07

markets. I can't say I wonder if

19:09

it could have been done in a

19:11

more gradual and thoughtful way. It could

19:13

have. I defer to Larry on the

19:15

markets. I'm more of a connoisseur of

19:18

arguments, and something I've been thinking about

19:20

over the past very long eight days, is

19:22

covering the 2020-24 election and

19:24

covering Donald Trump's tariff promises.

19:27

And it was a thing that liberals

19:29

like me were doing, where we would

19:31

do these shows and say, Donald Trump

19:33

is promising a 10% to 20% global

19:35

tariff, and then a 65% tariff on

19:38

China. And if he does that,

19:40

it'll have this set of effects,

19:42

higher prices, it'll create financial

19:44

uncertainty, etc. And what I

19:46

would be told, like the

19:49

counterargument, was, oh, you libs, you always

19:51

take him, literally, when you should

19:53

be taking him seriously. He said, he's

19:55

not going to do that. That's just a

19:57

negotiating ploy. And this was the common law.

20:00

from Trump allies on Wall Street.

20:02

And then I watched as he began doing

20:04

not just that, but layering a

20:06

series of them bilateral tariffs on

20:08

top of that plan. The markets

20:10

began freaking out. While they were

20:12

freaking out, a bunch of his

20:14

defenders said, no, no, no, actually

20:16

these tariffs, which we told you

20:18

were never going to happen, are

20:20

actually a great idea. We need

20:22

to reset the entire global financial

20:24

system, and you can't ship those

20:27

tectonic plates without creating a few

20:29

earthquakes. Then at the moment the tariffs

20:31

paused, the 90-day pause on the tariffs

20:33

on top of the 10% and the

20:35

China tariff, then I heard, nope, that

20:38

pause is genius, having you read the

20:40

art of the deal. And what I would

20:42

observe from this is it usually when

20:44

an idea is good. You don't

20:46

need people jumping back and forth on

20:48

it so often, going between these tariffs

20:50

are a bad idea, but they're a

20:53

smart negotiating ploy, to these tariffs plus

20:55

are an actually great idea, and you

20:57

should all calm down, as Trump said.

20:59

You should all be cool, back to

21:01

know these tariffs are a great idea.

21:03

I think something I'd love to hear

21:05

from David. It's very hard to break

21:07

the pattern being a podcast host. I would

21:09

like to hear what the measure of success

21:11

in two years is. Right we can sit

21:13

here and speculate about the effect of

21:16

these and I'm much more on on

21:18

Larry side the one I'm hearing from

21:20

from chamoth and David, but If

21:22

what are your measures what in

21:25

two years good question if manufacturing

21:27

You know employment or whatever is

21:29

below X will you be unhappy

21:31

if GDP is what what is

21:33

a sort of objective yardstick where

21:35

we could come back in 700

21:37

days and say did this work out or

21:39

was this a bad idea? I would say probably

21:42

the biggest thing would be whether

21:44

the US can re-industrialize to some

21:46

extent so that we're not completely

21:48

dependent for our supply chains on

21:50

a potentially hostile adversary. And what is

21:52

the measure of that? Is it the

21:54

quantity of manufacturing we're making? Is it

21:56

the share of manufacturing? It's a hard

21:59

thing to understand. You know, during COVID, we

22:01

learn. I'm just asking you to send it very

22:03

tightly. I am saying it concisely. During

22:05

COVID, we discovered that we were

22:07

horribly dependent on a supply chain from

22:09

China for some of our most

22:11

essential products for pharmaceuticals for other

22:13

medical gear that we needed during COVID.

22:15

Sure. So what would be, if you

22:17

were to put a metric on it?

22:19

Just as one example, but we've also

22:21

learned that our entire supply chain for

22:23

all sorts of industrial products now. is

22:25

dependent on China and other countries. So let's

22:28

be more precise. We have 4% unemployment

22:30

at the record low of our lifetimes. And

22:32

do you think Americans want to work in

22:34

these factories? And if so, which

22:36

factories? Obviously pharmaceuticals, that's a dependency. Obviously,

22:39

building ships and weapons, that's a dependency.

22:41

I think we can all agree on

22:43

that. And that might be hundreds, low

22:46

hundreds of thousands of jobs. Do you

22:48

believe we should be making jeans here

22:50

again? What would be the objective measure

22:53

of success, like a certain number of

22:55

jobs, certain number of factories, certain types

22:57

of factors? Because the other piece that

23:00

I don't understand, and maybe you can

23:02

inform me here, Sachs, is number one,

23:04

who's going to do this work if

23:06

we're going to be deporting millions of

23:09

people, and we have the lowest unemployment

23:11

of our lifetimes, and we have automation

23:13

coming to these factories, and Americans don't

23:16

want to take these jobs historically. How

23:18

is this all going to work? a

23:20

bit farcible to me that we're going

23:23

to bring these things back. I don't

23:25

think the millions of Americans who lost

23:27

their jobs in the heartland because we

23:30

let China into the WTO, which is

23:32

something that Larry I think supported

23:34

in champion. We're talking about

23:37

decades ago, though, right? That's what

23:39

started this whole thing. Yeah, okay.

23:41

I don't think those millions of

23:43

people want to lose their jobs.

23:45

So you're talking nonsense. What are

23:48

you talking about, David? David? Larry,

23:50

you just did an interview with Neil Ferguson. Can

23:52

I ask my question? Can I ask my question?

23:54

Can I just want to get to talk for

23:56

two seconds before I get interrupted. You guys get

23:58

five 10 minutes speeches. Finish your thoughts. three minutes

24:00

and then I get to speak for two

24:02

seconds then you interrupt me you speak for

24:04

five or ten minutes. Go right ahead. Larry

24:07

I just saw you do an interview with Neil

24:09

Ferguson where he asked you was it a

24:11

good idea to bring China to the WTO?

24:13

Was it a good idea to give them

24:15

permanent normal trade relation status?

24:17

Basically MFN which is something that

24:20

Bill Clinton did in 2000 and I met

24:22

it was bipartisan George W

24:24

Bush continued it was and you were

24:26

defending this as a good idea for the

24:28

country. What was the result of that over

24:30

the past 25 years? Millions of industrial

24:32

jobs were lost or export to China.

24:35

Millions of factories shut down. The United

24:37

States has a diminished and hollowed-out

24:39

industrial base. We certainly can't make

24:41

the products of the future like

24:43

drones or semiconductors. Jason, just to

24:45

answer your question, yeah, obviously some

24:47

industries are more strategic than others.

24:50

Do I personally care about Sneakers

24:52

or textiles? No, I personally don't.

24:54

Do I care about semiconductors? Absolutely.

24:56

Do I care about circuit boards?

24:58

Do I care about drones? Do

25:00

I care about robots? Do I care about

25:03

EVs and cars? Absolutely. Okay.

25:05

Those industries, we are no longer

25:07

in a position. We are no

25:09

longer in a position as a

25:12

country to make those products because

25:14

we exported our entire supply chain

25:16

deal and manufacturing base to China.

25:18

I have three questions. Go ahead,

25:21

three questions for you. One, can you

25:23

name a single trade barrier

25:25

that was reduced by the

25:27

United States associated with

25:30

China accession, a single

25:32

restriction that existed

25:34

in the United States

25:36

that had not been in place

25:39

for five years before that

25:41

we removed during China's WTO

25:43

accession? Can you name one? I

25:45

don't think we should have done

25:47

any of it, Larry. We threw

25:49

open up markets of Chinese goods.

25:51

What restriction, your thesis, is

25:53

that we threw open the market

25:55

and therefore we exposed ourselves to

25:57

all of this China thing. And

26:00

question I'm asking you is, can

26:02

you name any restriction

26:04

on Chinese exports to the

26:07

United States that was in

26:09

effect in 1999 and was removed

26:11

by our WTO accession in

26:13

2000? Can you name any

26:15

such restriction? Just name one

26:17

for it. This was a policy

26:19

that built up over time

26:21

and was basically made permanent.

26:23

Hold on it. It was

26:26

made permanent when we walked

26:28

China to the WTO. and

26:30

gave them MFN status. I'm

26:32

sorry, I'm sorry, David. I'll

26:34

ask the question one more

26:36

time. We had given them

26:38

MFN status 15 years before.

26:41

No one, they had MFN status.

26:43

They had it for 15

26:45

years. There was not a

26:48

single reduction in a barrier to

26:50

Chinese trade. So the way in

26:52

which you're describing it

26:55

is just bears no resemblance.

26:57

What was the point to the

26:59

WTO? What was the point of

27:01

bringing them into the WTO? The

27:04

point of bringing them into the

27:06

WTO was to use the leverage

27:08

that we had to win a

27:10

whole variety of concessions that enabled

27:13

us to. Larry, let's be honest.

27:15

You guys... This is an extraordinary

27:17

idea. It's called reciprocity. This is

27:19

an extraordinary... Let's move on the

27:22

history here. Let's move forward. I

27:24

want to respond to this. You're

27:26

denying history. All right, listen... This is

27:28

a bad deal. Hold on a second.

27:30

I want to... Let's go back to this.

27:32

Just a minute. I just want to know that

27:34

the whole argument you are making

27:36

is about increased exports to the United

27:39

States that had bad consequences. And

27:41

so I'm just going to keep

27:43

asking you. What barrier that

27:45

previously existed? Okay, I'll name

27:47

them. I'll name them. I'll name them.

27:49

I'll name them. Number one. Prior

27:52

to the WTO, China imposed a

27:54

bunch of export duties and taxes

27:56

on a whole bunch of goods

27:58

to control outflow. Okay, that prioritized

28:01

domestic supply. As part of coming

28:03

into the WTO, China said, hey, hold

28:05

on, we'll limit these export duties to

28:07

only a specific set of products. And

28:10

then they capped those duties at agreed

28:12

rates. Number two, they eliminated export

28:14

quotas. They historically had export quotas

28:16

to manage the volume of goods.

28:19

Under that WTO commitment, they

28:21

agreed to phase out all

28:23

those quantitative restrictions on exports,

28:25

except were explicitly justified under

28:27

WTO. Number three, they removed the

28:30

export licensing restrictions. Number four,

28:32

they ended state trading monopolies

28:34

for exports. Number five, they

28:36

liberalized foreign trade rights. The point is,

28:38

people thought that China was going to

28:40

be a honeypot of economic activity,

28:42

and it turned out to be

28:44

a sucking sound, a grand sucking

28:46

sound of opportunity, where the globalist

28:48

corporations saw a massive labor arbitrage.

28:50

So it's fair to say that it was

28:52

done with the best of intentions, but it was

28:55

a bad deal. I really want to say that rather

28:57

than having 30 minutes of debate over something that

28:59

happened in the 90s, I would like to go back to this

29:01

question. I keep not hearing. I will answer your question because that

29:03

was a great question. I would like to hear from David, but

29:05

I love yours too. Yeah, I want to, yeah, I want to,

29:07

hold on, I never got a chance to, I don't have a

29:09

currency to just begin talking in an anecdotal way. This is not

29:11

an anecdotal, okay, so we want to go forward. So forward, I

29:13

would like, I would like, I would like, I would like, I

29:15

would like, I would like, I would like, I would like, I

29:17

would like, I would like, I would like, I, I would like,

29:19

I would like, I, I would like, I, I, I, I, I,

29:21

I, I, I, I, I, I, I, I, I mean, I mean,

29:23

I mean, I mean, I mean, I mean, I, Hold on a

29:25

second. Give me what indices you're going to look for, where if

29:27

it's, if in four, two years, it is under X, I can

29:29

come back and we can have a conversation.

29:31

Here's some metrics. As Rob, so sorry,

29:33

you didn't have metrics for you, okay?

29:35

Let's go back to Bill Clinton's speech

29:37

that was given at John Hopkins on

29:39

March 9th 2000. He was asking about

29:41

four, David, four looking metrics. What would

29:43

you think would be successful two years

29:45

from now? Not the history lesson. Hold

29:47

on, we haven't finished the debate about

29:49

China and PMTR, okay? But my question

29:51

predated that debate. Yeah, we're trying to

29:53

get the subject. Let's just finish up

29:55

on this topic, okay. Okay, we'll let

29:57

you get the last one. Go ahead.

30:00

So March 9th 2000, Bill Clinton

30:02

announces P&TR at Johns Hopkins. It's

30:04

a very famous speech. Larry, you can tell

30:06

us about how it got written. Anyway, Bill

30:08

Clinton promises several things. He makes

30:10

a number of arguments for P&TR.

30:12

He does not think that this

30:14

does nothing. Larry, your argument is

30:16

that Bill Clinton didn't do anything. You're

30:19

saying that somehow it happened under Reagan

30:21

or something like that. That's not what

30:23

Bill Clinton was arguing. He said, number

30:25

one. There'd be huge economic benefits for

30:28

the U.S. He says, quote, by this

30:30

agreement we will increase exports of American

30:32

products. He means to China. That will

30:34

create American jobs. Okay, did that happen

30:37

the way we intend it? I don't think

30:39

so. Number two is, he believed that... Have

30:41

you looked at the data on export

30:43

flows from the United States to China?

30:45

It actually did happen at a quite

30:47

substantial rate. But with huge trade deficits

30:49

for the United States. You're arguing

30:52

that they did not actually a discriminatory way

30:54

towards our products This idea that Americans could

30:56

just do business in China the way that

30:58

they could do business here is ridiculous Anyone

31:00

who tried to do business over there knows

31:02

you have to create a JV You have

31:04

to get a local partner given 51%

31:06

It was extraordinarily difficult. We were

31:08

discriminated against Larry. It's ridiculous to

31:10

try and claim that somehow this

31:12

was an equal relationship. Okay and we

31:14

imported far more from them than we ever

31:17

exported to them so Bill Clinton was wrong

31:19

about that number two He said that signing

31:21

Pntr and bringing China to WTO

31:23

would promote democracy in China, that

31:25

we would export one of democracy's

31:27

most cherished values economic freedom. Did

31:29

that happen? I don't think so.

31:31

He said this would strengthen global

31:33

trade by ensuring China adhere to

31:35

international trade rules, reducing trade barriers and

31:37

resolving disputes through WTO. Did that happen?

31:40

I don't think so. And then he

31:42

said on national security, he said it

31:44

would improve our national security. to bring

31:46

China to WTO and help make them

31:48

rich, he said, quote, if we don't

31:50

deal with China in this way, we'll

31:52

increase the prospect, they will turn in

31:54

work. That's not what happened. We helped

31:56

make China rich. We've exported millions of

31:58

jobs to them. They built a... their

32:00

economy and their supply chain to

32:02

the point where now they are

32:04

a global competitor to the United

32:06

States. They're a pure competitor. We

32:08

turned that baby dragon into a

32:10

drogon-sized monster that can now challenge us

32:13

in Asia and across the world for

32:15

primacy. Why in the world we have

32:17

done that? Just for national security reasons.

32:19

That was a very foolish thing to do.

32:21

Okay, so Larry, I guess I have

32:24

to let you maybe self-grade. How did

32:26

you guys do? Is there any regrets?

32:28

as Sachs is pointing out there. Obviously

32:30

China has not magically become a democracy,

32:33

but I guess you could argue they

32:35

do have a middle class now. We

32:37

haven't gone to war with them, so

32:39

I guess you could argue that this

32:41

has been good for relations, but to

32:44

Sachs's point, they are incredibly powerful

32:46

and they are top adversary. How

32:48

would you grade the history of this so

32:50

we can move forward? I was a

32:52

surging, growing, reforming, double-digit

32:55

rage. That it was

32:57

before there was any

32:59

WTO agreement. The WTO agreement

33:02

did not change a single

33:05

rule that represented a

33:07

U.S. restriction on

33:09

imports from China. It

33:12

did change a variety of

33:14

rules, not as far as

33:16

I would have liked, that

33:18

let the United States

33:20

export more to

33:22

China. and the protected

33:25

United States intellectual

33:27

property in China, and that

33:30

brought China more closely into

33:32

the international system.

33:34

You need a counterfactual

33:37

for what would have happened

33:39

if China had been excluded

33:41

from the World Trade

33:44

Organization. That counterfactual

33:47

is not that they would not have

33:49

sold goods to the United

33:51

States. The principle had

33:53

already been crossed 15

33:56

years before. Not a

33:58

single restriction. was

34:00

reduced. So look, anything you

34:02

would have done differently? But

34:04

I just don't get, I

34:06

don't get the whole mindset

34:09

here. I understand that we should

34:11

have done more as a

34:13

country for the rush belt

34:15

and invested in it much

34:17

more heavily. If I was worried

34:19

about dependence and strategic

34:22

and all that, the last

34:24

policy I would have wanted

34:26

to abolish was the chips

34:28

act. That's the largest boldest

34:31

thing the United States has

34:33

ever done to avoid dependence

34:35

in a national security area.

34:38

The Trump administration has killed

34:40

all of that. You heard

34:43

Ezra's original question and the

34:45

history here from Larry and

34:47

David. Looking at, there are some

34:49

industries that we need

34:52

strategically pharma military cars.

34:54

These are fairly obvious rare

34:56

earth minerals are obvious. But

34:58

we also have the lowest

35:00

unemployment of our lifetimes. And

35:02

Americans probably don't want to

35:05

work in factories en masse.

35:07

What is your take on

35:09

going forward some metrics that

35:11

this administration should, not sacks

35:14

of saying this, you're saying

35:16

it. What would you measure this

35:18

success as in terms of

35:20

onshoring and reducing dependencies if

35:22

to Ezra's point two years

35:24

from now we were degraded?

35:26

Give us some specifics here,

35:29

Trima. There is a major issue that

35:31

the United States has that's

35:33

much bigger than China, which can be

35:35

framed in the lens of

35:37

resiliency and the ability to

35:40

defend for ourselves. There are

35:42

supply chains that have many single

35:44

points of failure, and independent

35:47

of whichever country that single

35:49

point of failure exists. It could

35:52

be an ally or it could be

35:54

a foe or it could be a frenomy.

35:56

That creates risk and

35:58

I think what we are learning,

36:00

and David's right, it was really

36:02

highlighted during COVID, we are not

36:04

in a position to take care

36:06

of what we need. So if I

36:09

had to very precisely answer Ezra's

36:11

question, I would say that we need

36:13

to measure and protect four

36:15

critical areas. Everything

36:17

else I think we can deal

36:20

with, some inefficiency, some single points

36:22

of failure, but the following four

36:24

areas Ezra, I would say, are

36:27

sacrosanct. Number one. is all of

36:29

the technology, both the chips, as well

36:31

as the enabling technology

36:33

around artificial intelligence.

36:36

It must be a robust,

36:38

largely American supply chain. It

36:40

must. You cannot have single points

36:42

of failure outside the United States,

36:44

because what you see is even

36:47

in allied countries, their posture towards

36:49

things like free speech and other

36:51

things can ebb and flow. their

36:53

posture on trade, their posture on

36:55

defense. Okay, so that's number one,

36:57

can change. Ships, got it. Number

36:59

two is energy. We have a

37:02

critical deficit of electrons in America.

37:04

We do not have the capability we

37:06

need to make the energy we need

37:09

quickly in many ways. We have supply chain

37:11

issues on net gas. We have critical

37:13

supply chains that can be shut

37:16

off by China around photovoltaics. So

37:18

whether you believe in coal, whether you

37:20

believe in not gas, whether you believe

37:22

in clean energy, we are in a

37:24

very fast pace. We got to shore

37:26

that up. Okay, I think we're in

37:28

agreement to keep going. Number three

37:31

are there are critical material

37:33

inputs that drive the material

37:35

science of the future. Rare earths

37:37

are an example, going back to

37:39

chips, things like phosphorus even. So

37:42

we have a critical minerals.

37:44

and rare earths and material science

37:46

input problem. And then the fourth,

37:48

Ezra, are pharma APIs so that

37:50

when American citizens get sick, we

37:52

have the ability to not

37:55

just make it, but also design it

37:57

and manufacture it because some of these

37:59

APIs the active principle ingredients for

38:02

many of the drugs require

38:04

very convoluted and complicated processes,

38:06

cold chains, and the like.

38:09

And again, there, we depend on folks

38:11

whose view of the United States can

38:13

change in real time. So if I had to

38:15

say to you as for what I would expect

38:17

is if the United States government,

38:20

whoever was in charge, would put those

38:22

four things on a board, then detail out

38:24

all of the key inputs, measure how

38:27

much we can make ourselves versus import.

38:29

and then basically try to level that playing

38:31

field, we would be in a very good

38:33

place. A couple things, because I think I

38:35

probably agree with all of that, and what

38:37

it sounds like is an excellent argument for

38:40

Joe Biden's policies, which were functionally,

38:42

maybe not the pharmacist, just literally

38:44

that, let's pull out semiconductors and

38:46

semiconductor supply chain, let's pull out

38:48

energy. Let's plot a couple of

38:50

things like that. You know, what

38:52

was it? A high fence around

38:55

a small garden was what Jake

38:57

Sullivan called it. Let's particularly try

38:59

to restrict the supply chain export

39:01

of AI critical materials to China.

39:03

They had a whole set of policies

39:05

about this. Now, the Trump administration, the

39:07

thing we are in theory here discussing,

39:10

is an extraordinarily broad-based set

39:12

of policies. It is tariffs

39:14

on not just China, it's

39:16

on critical industries like Chamath

39:18

is talking about. but it's on,

39:20

you know, mangoes and avocados and,

39:22

you know, lumber from Canada and

39:24

basically everything else. I guess there's

39:26

an argument I could sort of

39:28

extract out of this that the

39:30

Biden administration believed what they called

39:32

French shoring, which is that you

39:34

want to create an integrated supply

39:36

chain of allied countries that we

39:38

can work with and that we

39:40

can rely on and the Trump

39:42

administration. I think believe something, depending on

39:44

who's talking more like that the entire

39:46

supply chain needs to be onshore to

39:48

America specifically. But one of the problems,

39:50

and the reason I keep trying to

39:52

push people to be very clear about

39:54

their arguments and very clear about their

39:56

metrics, is that I feel like there's

39:58

this Kings Cup of what we're trying to

40:01

achieve here, where one day it's that we're

40:03

trying to achieve the re-industrialization of the American

40:05

heartland, and the next we're trying to replace

40:07

the income tax with tariff income, and then

40:10

the next we're just using it as all-purpose

40:12

surplus leverage against any country that does anything

40:14

we don't like. And the next day we're

40:17

using it for an entirely third purpose, and

40:19

maybe we're just going to use it to

40:21

isolate China, but to bring in our friends.

40:23

But none of these, you can't do all

40:26

of these things at once, and it needs

40:28

to be very stable if you're going

40:30

to get companies to do these long-term

40:32

cap-ex investment decisions that take decades to

40:34

play out. Nobody I know. In the

40:37

markets, you guys didn't want to change

40:39

anything. You guys didn't want to change

40:41

anything about anything. I wasn't in the

40:44

Biden administration number one. I'm treating Ezra

40:46

and Larry as a team. I would love

40:48

to change all here. I just want to

40:50

make sure I would have to change all

40:53

kinds of things. You mean the Democrats didn't

40:55

want to change? Of course. Let's see if

40:57

we can... Larry won't even admit that PNTR

40:59

did anything. Can we not keep doing PNTR

41:01

for a minute? But let's look forward and

41:03

not backwards. Look at the CHIPS Act, look

41:05

at the IRA Act. They did the exact

41:07

things we're talking about. Lari, go ahead.

41:10

Let's see if we can find a little bit

41:12

of agreement of agreement. I may

41:14

not agree in every detail, but

41:16

I broadly agree with Jamal's agenda.

41:19

And I'll go a little further

41:21

than that, Ezra. I think Joe

41:23

Biden's attachment to energy security

41:26

was kind of selective

41:28

and heavily oriented to

41:30

green technologies, not others.

41:32

I thought canceling the

41:34

Keystone pipeline was a

41:36

clear mistake. I thought

41:38

the stopping a variety

41:40

of things involving liquid

41:42

natural gas were a

41:44

clear mistake. So I

41:46

think the Biden administration's

41:48

approach to regulation that

41:50

empowered every NGO with respect

41:53

to stopping transmission lines,

41:55

with respect to

41:57

constructing power plants.

42:00

because of the importance

42:02

of democratic constituencies was

42:04

a mistake. So I

42:06

think energy security is

42:08

a central objective of

42:10

policy and that there's

42:12

a lot of room to

42:14

move beyond what the Biden

42:16

administration did. I actually believe

42:18

that very strongly and agree

42:20

with Chamoth and David. What

42:23

I don't understand is

42:25

chips. Absolutely right. The chips

42:27

act was all about... making there

42:29

be an American semiconductor

42:32

industry with production in

42:34

the United States as

42:36

a central priority. The

42:38

Trump administration has declared

42:41

war on that. Rare earths. You

42:43

want to have a strategic

42:45

petroleum reserve for any rare

42:47

earth. You want to do

42:49

more mining in the areas

42:51

that Chamoth says we should

42:53

in the United States or

42:55

in friendly countries. I am all for

42:57

that. Here's what I

42:59

cannot understand, Jamal. They

43:01

don't see how your

43:04

resilience agenda drives

43:06

anywhere near Liberation

43:08

Day and the emphasis on

43:11

tariffs. It drives towards

43:13

a set of specific

43:16

industrial policies, perhaps

43:19

including tariffs, in

43:21

some particular product

43:24

areas, but steel from

43:26

Canada. Anything

43:28

from Lesotho, any natural

43:31

resource product across

43:33

the board tariffs on

43:36

everything, I think you are

43:38

absolutely right about resilience

43:41

and that traditional conventional

43:43

economics has given it

43:46

too little thought and

43:48

that COVID pointed that

43:51

up as a central

43:53

issue. can't understand

43:55

is why Donald

43:58

Trump's echoing of Lee

44:00

Ayacoco from the 80s about tariffs

44:02

is responsive to any of that. But

44:04

this is the point I'm trying to draw

44:07

around Biden. I'm not saying I agree

44:09

with every way the Biden administration

44:11

defined its objectives. I just read

44:13

an entire book about the failures

44:16

of democratic policy making in this

44:18

specific era. What I am saying

44:20

is a Biden administration's view of

44:23

trade. was that there are targeted

44:25

industries, we should be putting a

44:27

lot of both domestic policy and

44:29

international policy into play in order

44:32

to protect and reassure or French

44:34

shore. And the Trump administration's view

44:36

is that you have a generalized problem

44:38

running all across the world that requires

44:41

highly general policies, that then when I

44:43

ask people to defend it, they sort

44:45

of move to this targeted argument. Donald

44:48

Trump's view, we can, I feel like

44:50

we end up making something that is

44:52

not that complicated. into something much

44:54

more complex than it is. Since

44:56

the 80s, you know, Larry's point

44:58

about Lei Koca, Donald Trump has

45:00

appeared to hold the view that

45:03

any time the US is operating

45:05

at a trade deficit with someone else.

45:07

that is evidence we are being ripped

45:10

off. And that is how you get

45:12

at least the initial set of tariffs

45:14

here that work off of bilateral trade

45:16

deficits and try to correct every single

45:18

one with every single country, be it

45:21

Lesotho or a collection of islands inhabited

45:23

by penguins. I just I think it's

45:25

really important to be connected to the

45:27

policy that was actually announced and not

45:30

sort of projecting all of our own

45:32

onto it. Like yes, Larry's right that

45:34

you could have a different set of critical...

45:36

industries than Biden did. The Biden team was

45:39

very focused on clean energy over other kinds

45:41

of energy. I also did not agree with

45:43

like the liquid gas pause. I thought there

45:45

was some, you know, there, and we did

45:47

not do nearly enough on things like permitting

45:49

reform. Right. There's a lot you could have

45:52

done that they didn't do. But if what

45:54

you have in your head is a targeted

45:56

idea of reshoring specific industries or

45:58

nearshoring or what which is

46:00

kind of what I'm hearing

46:02

from a number of people

46:05

on this call, then it

46:07

seems like you would want

46:09

targeted policies. And what we

46:11

have is not targeted policies,

46:13

it's broad-based policies, a 90-day

46:15

pause on larger broad-based

46:17

policies, and a huge trade war

46:20

with China. I would like to

46:22

hear a defense from somebody,

46:24

from somebody, sensible

46:27

theory. to say that the United

46:29

States is being exploited

46:31

by any country where the overall

46:33

pattern of trade is such that we

46:36

are running a trade deficit. And

46:38

maybe in the process you

46:40

could explain to me why my grocery

46:42

store is exploiting me because

46:45

I'm running a massive trade

46:47

deficit with that. Okay, trade

46:49

deficit, Shimatha Sachs. Who

46:51

wants to take it? I can start

46:53

the maybe Saxon Saxon. So let

46:56

me actually start by giving some

46:58

credit to where Biden did do

47:00

a few things, right? Just in the

47:02

spirit of finding some common ground. Inside

47:05

the IRA, I think that there were

47:07

two things, and I've said this

47:09

pretty repeatedly, but I just want

47:11

to put it on the record again.

47:13

The ITC credits and the ITC transfer

47:15

markets for those credits, the

47:18

tax equity markets, are critical

47:20

industries in America. to support

47:22

private investment in all kinds

47:25

of very complicated markets,

47:27

energy markets being the most

47:29

important. And what the Biden administration

47:31

did to their credit was

47:34

remove the uncertainty because those

47:36

things had to be renewed over and over

47:38

again and they gave us a very long

47:40

window where we could underwrite investments.

47:42

To your point Ezra, that was

47:44

smart. But it's important to

47:47

also remember that in order to

47:49

get Biden's budget done. What they did

47:51

was they had mansion roll over on

47:53

permitting reform. And Ezra, you know this

47:55

probably better than all of us, when

47:57

you look inside of the CHIPS Act as

47:59

smart... as that initial policy was, if

48:01

you ask, why has nothing actually happened?

48:04

Why have no fabs actually been

48:06

built other than grandiose statements?

48:08

The answer is that, which you speak to in

48:10

your book. It's just this complete

48:12

malaise and inability to actually

48:14

get these things permitted and turned on

48:17

even when it's right. So I just

48:19

want to acknowledge that that's there. So

48:21

Larry, very, very importantly to your question,

48:24

the thing that we have to acknowledge

48:26

is that in certain countries, What you

48:28

have is a very blurry line

48:30

between private and public industry. And

48:32

they have this very tight coupling. And

48:34

again, I hate to go back to

48:37

China, but it is the best example

48:39

of this, where what do they have? I choose

48:41

one other country just for the sake

48:43

of it. We can use Korea, we can

48:45

use Japan, we can use Germany,

48:47

okay? There are instances where

48:49

the government balance sheets support

48:52

private industry. They can support them

48:54

in three different ways. Number

48:56

one. is the tax credits that they

48:58

can use, the subsidies that they can

49:01

use to build the things that they

49:03

need. Number two is how then they

49:05

can support that in the active

49:07

selling and engagement in public spot

49:10

markets to shape the demand curve of

49:12

the things that are made. And then

49:14

number three is the taxation on the

49:16

back end, the terms of repayment

49:19

and the capital cycle. Those

49:21

are things that in the

49:23

United States we overwhelmingly turn the

49:25

responsibility over to the private

49:28

markets to do. We are the

49:30

cleanest, the purest form of

49:32

capitalism in that sense. But

49:34

many other countries are shades of this.

49:36

And again, let's not talk about China,

49:39

which is a thing. So Larry, hold

49:41

on a second. So Larry, so what

49:43

do you have is how do you

49:45

defend dumping? How do you defend spot

49:48

market manipulation that drives

49:50

American companies out of

49:52

business? How do you

49:54

fight that? Here's the problem.

49:56

President Trump had

49:59

announced a broadening of

50:01

anti-dumping law to

50:03

confront a variety of

50:05

instances of what the

50:07

administration after careful economic

50:10

analysis saw as inappropriate

50:13

subsidy. I might or might not

50:16

have thought that they were doing

50:18

that in the right way, but

50:20

we wouldn't be having this

50:22

argument. The front pages

50:25

would not be about tariff policy

50:27

day after day after day. and

50:29

the stock market would not be

50:31

down by $5 trillion. The

50:33

central thing we are discussing

50:36

is not whether there are

50:38

sensible modifications to trade policy

50:40

to respond to bad practices

50:43

in other countries or to

50:45

promote resilience. Those are

50:47

technical debates that frankly aren't

50:49

that interesting to a large

50:52

number of people. The question...

50:54

is whether declaring that we need

50:56

a whole new era of

50:58

U.S. economic policy around universal

51:01

tariffs against everything is

51:03

a rational step, is a

51:05

rational step, is a rational step

51:08

forward or, and what I would

51:10

say, bilateral trade surpluses, as a

51:12

judge. Now we're talking about the

51:14

Monte Carlo simulation of how to

51:16

achieve the outcome. And what I

51:18

am saying is there is just

51:21

as much as you and I

51:23

want to guess. The fundamental

51:25

and honest answer is none of

51:27

us know. The people in the White House,

51:29

what they know, they will share a little

51:32

bit at a time. Because the reality

51:34

is, if what you wanted was

51:36

a white paper, or if what you wanted

51:38

was paint by numbers, I think

51:40

back to David's point, all that

51:42

would do is just take any

51:45

lovers that they had and give

51:47

people the opportunity to shape their

51:49

response. And I think in traditional

51:51

game theory, and again... In traditional

51:54

game theory, I think the right thing to do

51:56

is when you're playing poker, you play street

51:58

by street. What's the flop? a set

52:00

of actions. What's the turn? Make a

52:02

set of actions. What's the river? Make a

52:04

set of actions. And I think if

52:06

you're going to play to win, this is

52:09

what they should do. Keep their cards very,

52:11

very close to the vest.

52:13

Realize that you can't necessarily

52:15

surgically go and attack the lithium

52:17

market first, then the rare earth market

52:19

second, because it all goes back to

52:21

the same balance sheet. It's the same

52:24

actor, over and over. I think there's

52:26

a useful analogy to draw here.

52:28

An article Mark Danner wrote in the

52:30

New York Review of Books many years

52:32

ago about the Iraq War. And it's

52:34

an article that has stuck in my

52:37

mind forever. Because what he says about it

52:39

is that one of the difficulties of

52:41

the politics of the Iraq War is

52:43

there was no one war. There was

52:45

everybody's private war. that they were projecting

52:47

on to the Bush administration. You have

52:49

the liberal humanitarian vision of why we

52:51

were going to war and what that

52:53

war would look like. You had a

52:55

realist vision for it. You had a

52:57

vision that was more about weapons of

52:59

mass destruction and keeping the homeland safe

53:01

from terrorism. You had people believe there

53:03

was an Iraq al-Qaeda connection. There were

53:05

really dozens of these, which is how

53:07

you got as broad a coalition behind

53:09

as bad a policy as that together,

53:11

because everybody said, You know, there being a little

53:13

bit vague about what's really going on here

53:16

and why we're really doing this, but I

53:18

bet you, if you go into their heart

53:20

of hearts, what they want is the thing

53:22

I want, even though the policy doesn't

53:24

quite match what policy you would

53:26

get from starting from my premises. And

53:28

that's really what I hear here. I

53:31

hear it on this show, but I

53:33

hear it in general in the discussion

53:35

around this, that there are a lot

53:37

of different objectives being projected onto Donald

53:40

Trump and his trade war. the objectives do

53:42

not fit the policies we're seeing. The

53:44

objectives are not stably articulated by Donald

53:46

Trump or the people around him, nor

53:48

is any specific objective being articulated in

53:50

a stable way without contradicting objectives also

53:53

being articulated at the same time. And

53:55

look, maybe in the end, and this

53:57

is why I want to push you

53:59

all on. metrics, you get something you

54:01

like out of this. But you're giving

54:03

away a lot of clarity just on

54:06

the trust that what is happening is

54:08

people are keeping a good hand of

54:10

cards with a good strategy of poker

54:13

hidden from you. As opposed to what's happening

54:15

is what we seem to be seeing

54:17

in public, which is Donald Trump is

54:19

a chaotic and erratic person, they are

54:21

making policy in a chaotic and erratic

54:24

way, that policy is having chaotic and

54:26

erratic consequences, and then they are operating

54:28

and moving on the fly in a

54:31

chaotic fashion. Sachs, you heard Ezra say

54:33

that he feels this administration is being

54:35

a bit chaotic in the approach here.

54:37

What's the counter to that you've heard

54:40

in the approach here? Maybe you could

54:42

clarify what your position is. Is this

54:44

too chaotic or is this crazy? What

54:47

I'm hearing is a bunch of

54:49

process objections to Trump's policy and

54:51

I'm hearing a bunch of nitpicking.

54:53

What about Lesotho or whatever?

54:55

Okay. Look, this is a very

54:58

unrealistic view of politics when we've

55:00

had a bipartisan consensus in Washington

55:02

for decades that unfettered free

55:04

trade is a good thing. No matter

55:07

how big our trade deficit has got,

55:09

no matter how unfair the trade practices

55:11

got. No matter how many millions of

55:13

our jobs and factories got exported overseas.

55:15

This has been the bipartisan consensus

55:18

in Washington. And Larry, you're right

55:20

that it started before the Clinton

55:22

administration and the George W. Bush

55:24

administration definitely accelerated it, but

55:27

there has absolutely been a bipartisan

55:29

consensus in Washington that this sort of

55:31

unfettered free trade policy was good for

55:33

the country. Now how do you change that? Now

55:35

look, you can nitpick this and you

55:37

can make all the process objections you

55:40

want. But Donald Trump has changed the

55:42

conversation. Let me finish. Let me finish.

55:44

You keep saying I've offered a process

55:46

of suggestion when I'm objecting to the

55:48

absence of clear goals. Can I finish

55:50

Ezra? You were pointing to Donald Trump's views

55:53

when he was a public figure in

55:55

the 1990s and 1990s, as somehow he

55:57

was wrong. He was one of the few

55:59

people in the. a few public figures in

56:01

America who was right about this. I

56:03

think most people today would say he

56:05

was right about this, that throwing open

56:07

our markets to these foreign products

56:10

without thinking about the consequences

56:12

was a mistake. You guys

56:14

have me completely confused. Really you

56:16

do? No, I'm confused about the

56:18

incurrence of your position. Larry. David.

56:20

You still believe that the Clinton

56:23

administration, let's call it a bipartisan

56:25

consensus that era, was correct. Well,

56:27

at the same time, you're arguing

56:29

that P&TR didn't do anything. I

56:31

think it is really telling that

56:33

you are so much more loath

56:36

to defend what we are seeing

56:38

than to attack what has been.

56:40

If you want to, it's fine,

56:42

like, I guess you could have,

56:44

it would be interesting to have

56:46

you and, to me, they're the

56:49

same thing. If you, to me,

56:51

they're the same thing, if you,

56:53

be interested of you and Larry,

56:56

that's a thing they keep actually

56:58

doing. I would like somebody to

57:00

explain to me here. I understood

57:03

Chamaf. Chamaf, resilience,

57:06

central, four sectors.

57:08

Are we more resilience

57:11

in the four sectors?

57:13

What's the answer two

57:15

years from now? I got that.

57:17

I agree. All that. I

57:19

cannot make any linkage

57:22

between a 10% across the

57:24

board tariff. a tariff

57:26

on steel, a tariff on automobiles,

57:29

and much of what the rest

57:31

of the president says,

57:34

and your very valid objectives.

57:37

I hear David give this

57:39

free trade, his destroyed America,

57:42

and we're going to undo

57:44

that, and this rated

57:46

the heartland, all the stuff.

57:48

And I just want to understand

57:50

how we'll know whether we have

57:53

to. Oh, I can't answer this

57:55

too. Go ahead, go ahead, David. All

57:57

right, look, Larry, and Ezra, welcome to

57:59

our political... coalition, different people

58:01

have different objectives, dislike different

58:04

people at different objectives for

58:06

the policy that we had in place

58:08

25 years ago. Okay? There are some people

58:10

who think that we should have

58:12

an across-the-board 10% tariff to raise

58:14

revenue because the country needs revenue and

58:16

that that would be a better way

58:19

to raise revenue than to say have

58:21

income taxes or capital gains taxes. Stan

58:23

Druckenmiller, who's not a fan of tariffs,

58:25

nonetheless said that he would support a

58:27

10% tariff. as a way to raise

58:29

revenue. Okay, that's his point of view.

58:31

There are other people, and I would say I'm

58:33

more someone who thinks about

58:35

the geopolitical consequence of this, who

58:37

think it was a huge mistake to throw up

58:39

in our markets to Chinese products,

58:41

basically feeding their economy to the point

58:44

where they could become a pure competitor

58:46

of the United States, and threaten the

58:48

US, the threat in the US world

58:50

order. There are different people, hold on,

58:52

there's different people with different objectives. One

58:55

more time, because you are, you are just

58:57

not speaking not speaking. truth. I

58:59

want to know one

59:01

restriction that the United

59:03

States had on Chinese

59:06

products that was

59:08

changed in the year 2000.

59:10

You said seven times,

59:12

throw open our market

59:14

to Chinese products.

59:16

I want to know one example

59:19

in which the United States

59:22

opened its market

59:24

in 1999 or 2000. Just

59:26

one. The point of P&T

59:28

are... Well, the point... Can you name

59:31

one product where restrictions were

59:33

reduced? Okay, David, name it. Listen,

59:35

you're mischaracterizing what P&TR did. We

59:38

can play this like a rock

59:40

game if you want. People can

59:42

go ahead and grock this question

59:45

and they'll get this answer. Look,

59:47

the answer is that before P&TR,

59:49

China was granted MFN on

59:51

a year-by-year basis by Congress,

59:54

correct? P&T-N-T-R made it permanent.

59:56

and China. So it created

59:58

permanence and it created a

1:00:00

certain expectation. What did that

1:00:02

enable? Massive investment by

1:00:05

US companies in China. So all

1:00:07

the bean counters from McKenzie

1:00:09

started talking about outsourcing

1:00:11

and just-in-time manufacturing. They started

1:00:14

moving the factories over there

1:00:16

in a much greater way.

1:00:18

You know, the Mitt Romney's and private

1:00:20

equity said this is a great idea.

1:00:23

Let's move all of our manufacturing. Could

1:00:25

we agree that whether or not it

1:00:27

was the WTO move? Hold on, the

1:00:29

bankers on Wall Street got to financialize

1:00:31

and securitize all sorts of new products,

1:00:34

okay? That was the result of P&TR. The thing

1:00:36

we have to decide really right now as a

1:00:38

country is if the thing that you all are

1:00:40

trying to replace this with is better, right, if

1:00:42

it will work. And so I want to go

1:00:44

back to what you said a minute ago, David,

1:00:46

when you're like, welcome to political coalitions.

1:00:48

Larry has been in politics a

1:00:50

long time, because Treasury Secretary, I've covered

1:00:53

politics for a long time. I'm

1:00:55

familiar with political coalitions. In fact, a

1:00:57

lot of my book is currently

1:00:59

about the problems in the way the

1:01:01

Democratic coalition, with too many objectives

1:01:03

all at once, can end up destroying

1:01:06

the ability of the policy to actually

1:01:08

achieve a clear goal. So this is

1:01:10

precisely the non procedural objection I am

1:01:12

bringing here. This is why I think

1:01:14

it is dangerous to be... treating an

1:01:16

upheaval of the entire global financial system

1:01:19

without a clearly defined objective that is

1:01:21

connected to a policy. And so the

1:01:23

question is, if the idea is that there

1:01:25

are all these different players here who

1:01:27

have all these different policy objectives, that

1:01:29

we connect to all these different policies

1:01:31

and everybody's getting a little bit of

1:01:34

them and Trump is kind of flipping

1:01:36

back and forth through different versions of

1:01:38

them, you could end up, despite yes,

1:01:40

whatever mistakes are made in the free

1:01:42

trade consensus, which I do agree that

1:01:44

we had. you could end up with

1:01:46

a bad next, not even consensus, just

1:01:49

a bad next policy. A unclear coalition

1:01:51

that is fighting with itself and is

1:01:53

making policy without a strong process can

1:01:55

create not like nitpicky procedural

1:01:58

problems, but actual damage. and

1:02:00

disasters. Chemoth, let's try to

1:02:02

look forward here. This obviously

1:02:05

has been a cataclysmic,

1:02:07

chaotic, intense, whatever description you

1:02:10

want to use of the

1:02:12

past week. Productive. Okay,

1:02:14

sure. And it's certainly created massive

1:02:16

swings in the market. Is this

1:02:19

all going to cause a recession?

1:02:21

Is this too violent of an

1:02:24

approach to markets? That is, I

1:02:26

think, a valid... criticism

1:02:28

that people have, including, you know, the

1:02:30

majority of business leaders are saying, hey,

1:02:33

I think I have to start layoffs.

1:02:35

You had United Airlines say, we're not

1:02:37

going to give any guidance. This

1:02:39

feels to business leaders, Republican

1:02:41

business leaders primarily, and market

1:02:44

participants, as just far too chaotic,

1:02:46

and they can't plan. And if they can't

1:02:48

plan, then they stop planning, which then

1:02:51

is going to cause layoffs, it's going

1:02:53

to cost bankruptcies. and who knows what

1:02:55

the second and third order consequences are

1:02:57

going to be. So what's going to

1:02:59

happen here over the next couple of

1:03:01

weeks and months? So just on the

1:03:04

recession question, and I'd like to give

1:03:06

an answer to Ezra and Larry. I

1:03:08

think that, and I've said this for

1:03:10

about a year, it was clear to

1:03:12

me that we were sneakily in a recession

1:03:14

before. And the reason was the

1:03:16

vast amounts of money and deficits

1:03:19

that were being pumped into government

1:03:21

services. that perverted the

1:03:24

actual GDP picture in

1:03:26

America. So as Doge sort of

1:03:28

slows down that money flow, and as

1:03:30

the consensus in Congress gets

1:03:33

to a better budget, I think that

1:03:35

you're going to see that the government

1:03:38

was probably responsible for 100

1:03:40

to 150 basis points of

1:03:43

just waste. And if you take

1:03:45

that out, you will technically

1:03:47

be in a recession. That was

1:03:49

independent of these tariffs. And

1:03:52

I think that that's where the

1:03:54

true economy Jason was. And I think

1:03:56

that we're going to just find that

1:03:58

out. So that's that. where we go from

1:04:00

here, I can give you an anecdote and I'll

1:04:03

give you a projection. The anecdote is this

1:04:05

weekend, my wife and I were in bed,

1:04:07

and a person called me, very

1:04:09

successful businessman, who was representing

1:04:11

the president of a country,

1:04:13

saying, hey, Chmoth, I need some

1:04:15

advice, what do we do here? And we

1:04:18

walked through the three things that he

1:04:20

and his government, that they government, were

1:04:22

trying to figure out because they wanted

1:04:24

an off-ramp. They were like, I'm ready

1:04:26

to cry uncle. We're ready to tap out.

1:04:28

And again, he was calling me as a

1:04:30

private citizen, but I think this conversation was

1:04:32

very instructive. Number one, he's like, look, we

1:04:34

have these really high tariffs on inbound American

1:04:36

products, we're happy to cut these things to zero.

1:04:38

And I said, well, you should do that. Second, while we were

1:04:41

exploring, he's like, yeah, you know, we have an enormous

1:04:43

capital purchase with Airbus. I said, cancel it, swap it

1:04:45

to Boeing. He's like, done. And then the third, which

1:04:47

was interesting, which was interesting, is, he's

1:04:49

like, he's like, he's like, he's like, he's like, he's

1:04:51

like, he's like, he's, he's, he's, he's, he's, he's, he's, he's,

1:04:53

he's, he's, he's, he's, he's, he's, he's, he's, he's, he's, he's,

1:04:55

he's, he's, he's, he's, he's, he's, And I said, well, who

1:04:57

do you give that concession to right now? And it was a

1:05:00

non-American company. And I said, well, why wouldn't you just RFP

1:05:02

that to an American business and let them compete? And he's like, we'd

1:05:04

be open to that as well. So he said, you know, we're getting

1:05:06

prepared. We want to find a way to talk to the

1:05:08

Trump administration. And I'm like, great, however I can be helpful,

1:05:10

I'll be helpful to you. I got off the phone. I looked at my wife. I

1:05:12

looked at my wife. I looked at my wife. I looked at my wife. I looked at

1:05:14

my wife. I looked at my wife. I looked at my wife. I looked at my wife.

1:05:16

I looked at my wife. I looked at my wife. I looked at my wife. I looked

1:05:18

at my wife. I looked at my wife. I looked at my wife. I looked at my

1:05:21

wife. I looked at my wife. I looked at my wife. I looked at my wife.

1:05:23

I looked at of these 75 countries do a deal

1:05:25

anywhere remotely close to this? This was

1:05:27

an enormous win. So let me give you my

1:05:29

projection Jason of what the art of the

1:05:31

deal could be here. What you do is you

1:05:34

can rewrite Breton Woods 2.0. What was

1:05:36

Breton Woods 1.0, it was fixing exchange

1:05:38

rates, it was setting up the IMF,

1:05:40

it was setting up the World Bank.

1:05:42

Those were the conditions on the ground post

1:05:44

World War II, it made a lot of

1:05:46

sense. What would we do if we had

1:05:48

to write the Maralago Accords right now? I

1:05:50

think what we would do is work

1:05:52

backwards from the question that Ezra asked

1:05:55

and the answer that I gave. How do we

1:05:57

create resiliency in these critical

1:05:59

marks? Number one, a framework for

1:06:01

that. Number two is how do we

1:06:03

create limits for government sponsored

1:06:05

intervention against capital for profit

1:06:08

companies, many of whom are

1:06:10

American, so that we can

1:06:12

actually compete on a level playing field.

1:06:14

And then number three, very simply,

1:06:16

if you can do business in my country,

1:06:18

why can I not do business in

1:06:20

yours? And I'll just give you that

1:06:22

story for one second. I was responsible.

1:06:25

I was the head. of every single

1:06:27

entity of Facebook outside of

1:06:29

the United States. I opened

1:06:31

every market. My team and

1:06:33

I created a framework for

1:06:36

dominating. We figured out how

1:06:38

to crack Brazil, India, Russia, you

1:06:40

know, the one market that we

1:06:42

never could ever make a single

1:06:44

iota of progress? Say it,

1:06:46

Jason, with me. China, China, Russia, Iran.

1:06:48

We want in Russia. So my point

1:06:51

is, in every single market except one,

1:06:53

is it that we were... just lucky

1:06:55

in 174 markets and one we were

1:06:58

stupid? No. So I think that

1:07:00

the Marlago Accords, this sort of

1:07:02

Breton Woods 2.0, is the outcome

1:07:04

Ezra. It will basically use tariffs

1:07:06

as a way to get these

1:07:08

governments to a table and allow us

1:07:11

to negotiate a much fairer economic quid

1:07:13

pro quo. Here's my concern with this

1:07:15

fear, and I want to leave out,

1:07:17

but I'll leave the sort of question

1:07:19

of what the real economy looked like

1:07:22

to Larry. in which what is happening

1:07:24

is a business leader who represents a

1:07:26

country is calling you and saying, okay,

1:07:28

what do we need to do to

1:07:31

deal? Right, they're coming to Donald Trump,

1:07:33

and they are going to come to

1:07:35

Donald Trump. As Larry said earlier, there's

1:07:37

no doubt that the US economic

1:07:39

leverage is enormous. And virtually every country

1:07:41

faced with our might is going to

1:07:44

try to cut a deal with us.

1:07:46

But then there's a call they're not

1:07:48

making to you, that they're making

1:07:50

to someone else, which is we have

1:07:52

allowed. or we have approached the US as

1:07:54

a functionally benign partner for a very

1:07:56

long time. And now they're becoming

1:07:59

a dangerous... partner. They are very

1:08:01

very strong and they will use

1:08:03

that strength to crush countries

1:08:05

smaller than them when it suits

1:08:08

the whims of a personalist

1:08:10

regime run by a person who

1:08:12

his feelings even about people

1:08:14

that the US or countries

1:08:16

US traditionally considered allies like

1:08:19

Canada or much of Europe

1:08:21

change. And so yes on the one

1:08:23

hand for the next year or two

1:08:25

we want to avoid getting a big

1:08:27

tariff slept on us. And so we

1:08:29

got to figure out what is it that

1:08:31

if we offer it to Donald Trump, he

1:08:34

will say to himself, that was enough

1:08:36

of a give that, you know, I can move on

1:08:38

to someone else. I can make them the

1:08:40

focus of my ire. And on the other

1:08:42

hand, they're going to begin

1:08:44

to build fortresses and deals

1:08:46

and partnerships and approaches that make

1:08:49

sure they are less exposed to our ability

1:08:51

to wield this power against them

1:08:53

in the future. But before I came

1:08:55

on the show, I had gone on X and I saw

1:08:57

a clip of you going around where you're

1:08:59

saying that one of the problems with

1:09:01

the Biden administration was

1:09:03

that you couldn't get anybody on

1:09:05

the phone. And in the Trump

1:09:07

administration, you make the call, the deputy chief

1:09:10

of staff picks up, you say, hey, I

1:09:12

need you to talk to this company, they're

1:09:14

freaking out about the tariffs, the deputy chief

1:09:16

of staff, tell us a company, they work

1:09:19

something out. No, no, not that they

1:09:21

work something out, they listen. They listen.

1:09:23

They listen. They listen. by individual relationships,

1:09:25

by who can get their calls answered,

1:09:27

not by rules it feel clear and

1:09:29

stable. That's how the Biden administration worked,

1:09:31

Ezra. That's not what Hamas said. And

1:09:33

that's not what I said. Well, Trump,

1:09:35

you can explain. No, Ezra, you're trying

1:09:37

to make it sound like corruption. Hold

1:09:40

on my, I, hold on Biden, it

1:09:42

was George Clooney that was making the

1:09:44

call. Who cares what George Clooney thinks?

1:09:46

Didn't you just say on, well, I

1:09:48

was very, very critical by doing that.

1:09:50

As I saw that clip, Ezra, what

1:09:52

Jamal said, is simply that the White

1:09:55

House listens, where he calls, whereas he

1:09:57

can get his calls returned by the

1:09:59

Obama. administration. Great. I think we're

1:10:01

actually not saying something all that.

1:10:03

No, you made it sound like

1:10:05

corruption. Well, I'm saying, well, I

1:10:07

actually do think what Trump is working

1:10:10

through is deal by deal patronage based

1:10:12

on how he sees the company. I'm

1:10:14

sorry, the other country. That's not what

1:10:16

happened. As for can I just make

1:10:18

sure that this is clear? Yes. This

1:10:20

is a 150 year old American business.

1:10:22

I have no interest in that company

1:10:25

except a friendship. These are Americans hiring Americans

1:10:27

trying to compete with China who were

1:10:29

very negatively affected and all I said

1:10:31

was why don't you have a chance

1:10:33

to explain what's happening on the ground

1:10:35

My point that I was trying to

1:10:37

make and maybe I didn't make it

1:10:40

clear enough So let me set the

1:10:42

record straight the Trump administration what I

1:10:44

have seen as a businessman is willing to

1:10:46

hear the conditions on the ground as

1:10:48

a businessman when I was building Ezra

1:10:51

just to be clear critical rare earth

1:10:53

supplies for America under the Biden

1:10:55

administration to compete with China

1:10:58

under the Biden administration, AI

1:11:00

chips to be the best

1:11:02

inference solution under the Biden

1:11:04

administration, I couldn't get a call back.

1:11:07

That's just the facts. Not because

1:11:09

I wanted anything, just to tell

1:11:11

them what was going on. So fair

1:11:13

enough. Okay, fair enough. I am not telling

1:11:16

you that the Biden administration should

1:11:18

have returned your calls. What I

1:11:20

am saying is that the degree

1:11:22

to which Trump first And then

1:11:24

everybody around him as an example

1:11:26

of him, because culture comes from

1:11:29

the top, is working off this kind

1:11:31

of individual call and deal making, worries

1:11:33

me because I believe that you had

1:11:35

every one of these calls you're saying,

1:11:37

and they went exactly the way you

1:11:39

say they went. And then the calls

1:11:41

that you are not getting, and they

1:11:43

are saying that a 10% across the

1:11:45

board tariff was too broad, and we

1:11:48

need to go industry by industry. And

1:11:50

now you're saying. that it's going to

1:11:52

be too particular and he shouldn't do

1:11:54

country-by-country negotiations. You're listening to people. Listen

1:11:56

to people is not deal-making Ezra. It's

1:11:58

just listening to people. really going to

1:12:00

be here and tell me that the

1:12:03

way Trump himself works is not individual

1:12:05

deal making. Here's what I've seen. David

1:12:07

sees. David sees. Is this really, is

1:12:10

this really the argument here? I will

1:12:12

tell you what I've seen and David's

1:12:14

seen much more. What I have seen from

1:12:16

the president is he takes in

1:12:18

hundreds of opinions and starts to

1:12:20

figure out what the ground truth

1:12:22

is. And the reason is when you only

1:12:25

listen to one or two, every president

1:12:27

probably deals with this. You have

1:12:29

this information asymmetry problem because you

1:12:31

are the president of the United

1:12:33

States. And so how do you

1:12:36

cut through it? You talk to

1:12:38

hundreds and hundreds of people and you

1:12:40

triangulate what the truth is. So it's

1:12:42

not like he's giving any favor, he's

1:12:44

collecting information. That is a

1:12:47

good process. You want the most powerful

1:12:49

person in the world to get to

1:12:51

the ground truth. Go ahead, Larry. I am

1:12:53

all for information gathering. I agree

1:12:55

that the Biden administration. did not

1:12:57

do as good a job as

1:13:00

it could have of maintaining

1:13:02

relations with the business

1:13:04

community. I agree that

1:13:06

it's a good idea for there to

1:13:08

be quite extensive connection.

1:13:10

I am also appalled by

1:13:13

the half dozen phone calls I

1:13:15

have gotten from prominent

1:13:17

people in business who

1:13:19

have said I'm used to being

1:13:21

shaken down when I try to do

1:13:23

business in some parts of the

1:13:26

world. It's a new experience

1:13:28

to be shaken down by

1:13:30

representatives of the President of

1:13:32

the United States. What's the

1:13:34

shakedown? And when you have

1:13:36

close connections, you help us,

1:13:39

you contribute this way. That

1:13:41

makes no sense at all.

1:13:43

What the President has been

1:13:45

trying to do is encourage

1:13:47

domestic investment. Maybe it is

1:13:50

an erroneous perception to which I

1:13:52

have been exposed repeatedly. But

1:13:54

it is a but it is

1:13:56

a pervasive total nonsense. You

1:13:58

guys are very It is a

1:14:01

perception that is shared by

1:14:03

almost everyone who has experienced

1:14:06

in the conflict of interest

1:14:08

area, who has looked at

1:14:10

the situation of the situation

1:14:12

of Trump administration

1:14:15

officials and those working

1:14:17

as special government employees

1:14:19

in the Trump administration.

1:14:22

What are you saying? I just

1:14:24

went through that whole process, Larry.

1:14:26

What does that mean? I can speak

1:14:28

to this because I just went through this

1:14:30

process. It took forever. It took like months.

1:14:33

I went through the same process everyone else

1:14:35

goes through. The OGE career staff have to

1:14:37

go through all of your disclosures and they

1:14:39

figure out what the conflicts are and then

1:14:41

you have to divest them. Okay, it's the

1:14:43

same process that everyone goes through. So you're

1:14:46

all over the place making all sorts of accusations

1:14:48

here. So if you have some proof or

1:14:50

you want to accuse someone, then why don't

1:14:52

you just do it? But otherwise what you're

1:14:54

saying is just not true. It's not

1:14:57

backed up by anything. Great. They shut

1:14:59

down Eric Adams. That's a direct accusation

1:15:01

that happened in public. They shook down

1:15:04

Eric Adams because they put him in

1:15:06

his pocket. That's a big deal, y'all.

1:15:08

Like that is a way they are

1:15:10

doing business here. You guys are all

1:15:13

over the map making wild accusations. First,

1:15:15

it was... Hold on a second. Two

1:15:17

seconds ago. Because of their discomfort of

1:15:19

their discomfort with being overruled.

1:15:22

by your colleagues in the Trump administration.

1:15:25

So the suggestion that you

1:15:27

have been held to the

1:15:29

same ethical standards that I

1:15:32

was held and that other

1:15:34

members of previous administrations, including

1:15:36

the Bush administration, were held, unfortunately

1:15:39

is not right. Well, that's false.

1:15:41

All right. Well, there's two issues here.

1:15:43

You may not be familiar with my situation,

1:15:46

but I had to divest a lot as

1:15:48

I talked about in the show. In any

1:15:50

event, you guys are all over the map

1:15:52

making wild accusations. Two seconds ago, the shakedown

1:15:54

was at the level of companies. Then all

1:15:56

of a sudden, it was OGE and Ethics.

1:15:58

Then it was something... It's not that I

1:16:01

don't want to hear it. Nobody's making

1:16:03

it. I like that you're like, who's

1:16:05

Eric Adams? We're not making it. No,

1:16:07

I know Eric Adams says I supported

1:16:09

him on this show. I know he

1:16:11

is. It's a straightforward way that Trump

1:16:13

does business at every level at which

1:16:15

he operates. And so it is happening

1:16:17

at every level of his administration. I

1:16:19

know you don't want to hear it.

1:16:21

It's not that I don't want to

1:16:23

hear it. You know how it started

1:16:25

it. I don't want to hear it.

1:16:28

something Jamal said on another podcast where

1:16:30

all he said was that I can get my

1:16:32

phone calls returned by this White House where I

1:16:34

couldn't with Obama or Biden even though I was

1:16:36

a big donor. Hold on and you guys

1:16:38

have somehow morphed that into some sort of

1:16:40

like broad ranging accusations of corruption or

1:16:42

something like that. When you have no

1:16:45

evidence, no clear about what the accusation

1:16:47

of the way Donald Trump works is.

1:16:49

Ezra, your accusation of me tried to

1:16:51

infer some form of corruption or some

1:16:53

form of deal making. None of that

1:16:55

happened. What I, again, I'll tell you.

1:16:57

I connected the White House so they could

1:16:59

hear on the ground what's happening from

1:17:01

a company who was very negatively impacted

1:17:03

by the tariffs so that they had

1:17:06

the complexion of that feedback as well.

1:17:08

Do you deny the possibility that your

1:17:10

experience with the Trump administration might be

1:17:12

different than people who they feel are

1:17:14

less allied to them than you are?

1:17:16

Ezra, I'm willing to. It's a straightforward

1:17:18

question. What are you sure that you're a

1:17:20

good sample? I don't even know what we're

1:17:22

talking about anymore. Ultimately, what we're talking about

1:17:25

right now is that people who donate to

1:17:27

politicians have unique access to politicians. I think

1:17:29

we can all agree that's not true. Okay,

1:17:31

just to be very clear, I have given

1:17:33

way more to the Democrats. then I've given

1:17:35

to Donald Trump. And you were disappointed about

1:17:37

that. And you say anything about your donations.

1:17:39

I said about where you're allied now. And

1:17:41

by the way, like, what's crazy is I

1:17:43

was the same intellectual person I was under

1:17:45

Biden that I am under Trump. It's just

1:17:47

that it seems like the Trump administration is like, well,

1:17:50

this is a smart guy with some opinions that

1:17:52

me listen. Biden, and by the way, and Larry,

1:17:54

you and you know this, these are some very close

1:17:56

friends of hours that we share mutually that

1:17:58

we share mutually that would not. even return

1:18:00

my calls. So it is a little

1:18:02

personal for me as well, Ezra, just

1:18:04

to be honest with you. I'm not

1:18:06

going to go there, but the point

1:18:08

is I have never, I have never seen a

1:18:11

single iota of any form

1:18:13

of anything other than just

1:18:15

gathering information from the Trump.

1:18:17

They've never asked me for anything.

1:18:19

They've never tried to direct me to

1:18:21

do anything. They just want to know

1:18:24

what's going on when you ask them.

1:18:26

Hey, can you talk to such and such

1:18:28

a person? quite a number

1:18:30

of the nation's major law

1:18:32

firms. It is not the

1:18:34

experience of quite a number

1:18:36

of the nation's business leaders.

1:18:39

It is not the

1:18:41

experience of quite a number

1:18:43

of the nation's universities

1:18:46

that I am neither the first

1:18:48

nor the hundredth person

1:18:51

referencing efforts at

1:18:53

extortion to use the movie

1:18:55

The Godfather. as a metaphor for

1:18:57

the four aspects of the way in which

1:19:00

our country is being governed. What

1:19:02

a surprise democratic universities and democratic

1:19:04

law firms are making accusations.

1:19:06

All right let's move on.

1:19:08

We think we've missed the

1:19:11

tariff issue and I think we can

1:19:13

all agree that if you donate money

1:19:15

you might have better access to politicians.

1:19:17

I want to talk about the future.

1:19:19

Especially Jason if you give 10% to

1:19:22

the big guy then you really get

1:19:24

access. Remember that? We can do these

1:19:26

allegations all day long if you, you

1:19:28

know, yeah. There's a long list of

1:19:31

people who've made donations and there's a

1:19:33

long list of favorable things that have

1:19:35

happened to them after across all

1:19:37

administrations. And we can debate cause

1:19:39

and correlation all day long here.

1:19:42

But I wanted to talk about

1:19:44

the future of the Democratic Party

1:19:46

while we're here. Ezra, you have been

1:19:48

on a tour talking about exactly

1:19:50

how incompetent. terrible of

1:19:53

a campaign they ran. What is the

1:19:55

future? And I'll let Larry get his

1:19:57

two cents in here as well. Is

1:19:59

there any? saving this party? And if so, what

1:20:01

would it look like? Well, there's the problem

1:20:03

of the party in the campaign. Let

1:20:06

me bracket that, because my book Abundance

1:20:08

is more about how Democrats govern, both

1:20:10

the state and local and federal level,

1:20:12

and some of the pathologies of governance,

1:20:14

they make it hard for liberals to achieve their

1:20:16

goals. There are versions of this on the

1:20:18

right, but I'm not really writing about that

1:20:20

in this. So my book Abundance, Derek Thompson,

1:20:23

is about the tendency Democrats have to subsidize

1:20:25

things where they are choking off the

1:20:27

supply of the supply of the thing.

1:20:29

they want people to have more of.

1:20:31

So think about housing in California, you

1:20:34

get rental vouchers from the federal government,

1:20:36

but we make it incredibly hard to

1:20:38

build homes. Clean Energy, which a lot

1:20:40

of the Biden administration's policies were about

1:20:42

putting huge subsidies behind the building of

1:20:44

more clean energy, but they didn't really

1:20:46

do anything to make the permitting, the

1:20:49

city capacity to do all of that,

1:20:51

capable of building that amount of clean

1:20:53

energy at the pace, they foresaw as

1:20:55

building it, right that they wanted us

1:20:57

to build it. And behind this, and

1:20:59

I can sort of go into a

1:21:01

lot of detail here, but it's a

1:21:03

diminishment of state capacity that comes from

1:21:05

wrapping the state itself. in red tape

1:21:07

and regulation. I think we think and

1:21:09

have an intuitive way of thinking about

1:21:12

the idea of deregulation on the private

1:21:14

sector, right, when the government is imposing

1:21:16

regulations on private companies and it's making

1:21:18

it hard for those companies to act

1:21:20

to do business, etc. But this happens

1:21:22

first and foremost on the government itself.

1:21:25

One of my favorite examples I've been

1:21:27

using lately. There's a new RAND report

1:21:29

that looks at how much it costs

1:21:31

to construct a square foot of housing

1:21:33

in California, in Texas, and Colorado.

1:21:35

And it does it on two kinds of

1:21:37

housing market rate, and it does it

1:21:40

on affordable housing, subsidized by the public

1:21:42

sector. And the cost of creating

1:21:44

housing in California, market rate, is

1:21:46

2X in California, what it is

1:21:48

in Texas. But when you get

1:21:50

into that publicly subsidized housing, where

1:21:52

you have all these new standards

1:21:54

and rules and regulations being triggered

1:21:56

by the addition of public money,

1:21:58

it goes up to about 4.4X. And so

1:22:00

you have this real problem, I

1:22:02

think, in a way of governing

1:22:04

that evolved in the 70s, the

1:22:06

80s, there's a kind of small

1:22:09

government version of the Democratic Party,

1:22:11

the new left, more individualistic, that

1:22:13

was worried about too much exercise

1:22:15

of government power. And now that

1:22:17

we are in a different world

1:22:19

with different problems, we're thinking about

1:22:21

re-industrializing, we have a housing shortage.

1:22:23

and you have things like the bide administration

1:22:25

which really are thinking about how to build

1:22:27

a lot more in America but you don't

1:22:29

have either a policy architecture or I would

1:22:32

say a governing culture that makes that

1:22:34

possible. Yeah, and so a lot of

1:22:36

this came from Francis Fuka Yama, I

1:22:38

think, and Votocracy, Vatocracy. How do you

1:22:40

pronounce this? Fukiyama is a great sort

1:22:42

of related concept of vitocracy, which is

1:22:44

the... Vetocracy. But you also got another

1:22:47

great concept since we're bringing up Fukiyama,

1:22:49

which is that neoliberalism, which you've sort

1:22:51

of been talking about here with the

1:22:53

WTO and other things, he says, people

1:22:55

think about it as the veneration of

1:22:57

the veneration of the market. And I

1:22:59

think that explains a lot more about

1:23:01

the world we're in than people recognize.

1:23:04

As you can agree with this, Francis

1:23:06

Fukuyam is probably one of the most

1:23:08

polarizing modern academics in America. As you

1:23:11

read and people end up in their

1:23:13

very pro-Fukuyama or they think Fukuyamas and

1:23:15

say, yeah, I mean, look, because what

1:23:18

happened is, I mean, just to uplevel

1:23:20

this for a second, is that you

1:23:22

had Fukuyamah right the end of history,

1:23:25

which basically said that democratic capitalism is

1:23:27

the end of the end, And that philosophy

1:23:29

then animated, I would say, a

1:23:31

neoliberal and neo-conservative consensus in Washington

1:23:34

for 25 years. And there were

1:23:36

three key pillars of that, let's

1:23:38

call it, globalist consensus. Number one,

1:23:40

we'd have open borders, free flow

1:23:43

of labor. In fact, the Wall

1:23:45

Street Journal editorial page, which is

1:23:47

considered to be conservative, actually

1:23:49

supported a constitutional amendment saying

1:23:51

that we'd have open borders.

1:23:54

Number two, we'd have open flows

1:23:56

of trade and capital. So basically

1:23:58

the... unfettered free trade. And then

1:24:00

number three, the third leg

1:24:02

of it was Paxamericana. We deploy

1:24:04

American troops all over the world

1:24:07

to defend this consensus because they'd

1:24:09

be greeted as liberators, not

1:24:12

occupiers. I think all three pillars

1:24:14

have been refuted. And the person

1:24:16

who has represented the shift

1:24:18

in this consensus to, I'd say,

1:24:20

a new agenda of economic nationalism

1:24:23

and geopolitical nationalism

1:24:25

is Donald Trump. I was

1:24:27

going to guess that when you

1:24:29

have, listen, when you have a

1:24:31

bipartisan consensus, end of history and

1:24:33

the last man is a much

1:24:35

more complicated question. Let me finish

1:24:37

the point here, because I'm kind

1:24:39

of on a roll here. Yeah,

1:24:42

keep wrapping around, bring it home.

1:24:44

When you have a bipartisan consensus

1:24:46

that included both Bush

1:24:48

Republicans and Clinton Democrats

1:24:51

around these three pillars of

1:24:53

globalism, and then I'd say that

1:24:55

country turns against that. That's not

1:24:57

going to be a smooth process. That

1:24:59

is going to be potentially a violent

1:25:01

process. It's going to be a disruptive

1:25:03

process. And you guys want to raise like

1:25:06

all these nippy objections and process or

1:25:08

whatever. Donald Trump is bringing that

1:25:10

realignment. But the real question, the

1:25:12

real question is, was that consensus correct?

1:25:14

Or was it a failure? I would

1:25:16

argue as a failure. Larry, let me

1:25:18

ask you a question then, when you

1:25:21

see something like doge happening and people

1:25:23

start taking a bit of a... a

1:25:25

more unilateral, a quicker, a less veto-based

1:25:27

approach. Is that encouraging to you,

1:25:29

Larry? Do you think that's the

1:25:31

right way to do it? Because

1:25:33

we haven't been able to get

1:25:35

the government smaller since Clinton. So

1:25:37

are you pro-dosh, not dosh? And

1:25:39

do you think this sort of objection

1:25:42

to, hey, we're going too fast, too

1:25:44

violently, maybe that's what we need to

1:25:46

do at times. And then I'll go

1:25:48

back to you Ezra to answer the

1:25:51

same question. the promiscuous distribution

1:25:53

of the veto power,

1:25:55

he's broadly right that we need

1:25:57

to be able to do more things.

1:26:00

more quickly in the state

1:26:02

if we're to be an

1:26:04

effective government. I think

1:26:06

we need much more reform.

1:26:09

I think Democrats have

1:26:11

allowed themselves excessively

1:26:13

to become hostage

1:26:16

to particular groups,

1:26:18

particular traditional

1:26:21

concerns, and have

1:26:23

lost touch in important

1:26:25

ways with an American mainstream.

1:26:27

And I think that insofar

1:26:30

as the election outcomes in

1:26:32

recent years have not been

1:26:34

what they wanted, that is

1:26:37

an important contribution

1:26:40

to how that has happened. And

1:26:42

I agree with David that

1:26:44

Donald Trump represents

1:26:47

a transformative and

1:26:49

profoundly different ideology

1:26:51

that has been present in

1:26:54

governing America before. I

1:26:56

do believe that it is.

1:26:58

fundamentally not new

1:27:00

under the sun, just new

1:27:03

in America. It is the

1:27:06

one-parone approach, which

1:27:08

is very familiar

1:27:10

to students of

1:27:12

Latin American history

1:27:15

in particular, and

1:27:17

that the general experience

1:27:19

of that approach

1:27:22

is that it's leaders.

1:27:24

particularly when

1:27:26

they have galvanizing personalities,

1:27:30

can be very popular

1:27:32

for a substantial

1:27:34

period of time, but

1:27:36

that they are very rarely

1:27:39

remembered well by historians

1:27:42

of their countries. And

1:27:44

so my best judgment

1:27:47

is that this project

1:27:49

is going to end

1:27:51

in disastrous failure. despite

1:27:54

having put its finger

1:27:56

on some important

1:27:58

concerns and issues. Of

1:28:01

course there should be

1:28:03

much more aggressive reform

1:28:06

of the government than

1:28:08

there is, but that does

1:28:10

not excuse or mean

1:28:13

that it is likely to

1:28:15

work out well for some

1:28:17

of the mindless savagery

1:28:20

that the dose is bringing

1:28:23

to traditional American

1:28:25

institutions. I was going

1:28:27

to work out well.

1:28:30

And to take just

1:28:32

one example, my

1:28:34

belief is that the

1:28:36

revenue loss from the doses

1:28:38

destruction of

1:28:41

significant part of

1:28:43

the functioning of our

1:28:46

nation's tax collection

1:28:48

system is likely to

1:28:50

exceed in terms of

1:28:52

contributing more to

1:28:54

the deficit than any

1:28:56

savings. Can you describe? What do you mean

1:28:58

by that? What do you mean by that?

1:29:00

What is this? They identified the right thing,

1:29:02

but they're executing on it too much. Go

1:29:04

ahead, Jamal. No, no, no. I have two

1:29:07

questions. Larry, just tactically, what do you mean

1:29:09

by the destruction of the revenue collecting mechanism?

1:29:11

That's question number one, which was just, I

1:29:13

just want to understand what you meant. But

1:29:15

second question, which is more broadly, if Larry,

1:29:17

if you were president for a day, just give us

1:29:19

the Larry Summers plan, like what is

1:29:21

the counterfactual to what is the counterfactual

1:29:24

to what's happening now. You can include

1:29:26

tariffs you can include doge.

1:29:28

I just want to understand

1:29:31

how you would frame the solution

1:29:33

to what ails us So

1:29:35

maybe tactically just talk about

1:29:38

the collections part because

1:29:40

you referenced it and then

1:29:42

just more strategically

1:29:44

what the Larry Summers 2.0 plan

1:29:46

is We are firing en masse people

1:29:49

whose job it is to audit people

1:29:51

like you and the results of

1:29:54

that is that we are

1:29:56

losing revenue directly. We

1:29:58

are losing revenue. you further

1:30:00

because people once audited go straight

1:30:02

in subsequent years and we are

1:30:04

losing revenue because more and more people

1:30:07

are playing the audit lottery engaging

1:30:09

in problematic practices in the expectation

1:30:11

that they will not that they will

1:30:13

not be caught. Let me tell

1:30:15

you my experience. I get audited

1:30:17

every year automatically and the reason you

1:30:19

get audited every single year is

1:30:21

typically the way that you acquire

1:30:23

your wealth. creates complexity, 700, 800, 900

1:30:26

page tax filings. Now, you don't

1:30:28

do that yourself. What happens is

1:30:30

you typically pay a large big four

1:30:32

accounting for millions of dollars to

1:30:34

do it. Deloitte, PWC, Anderson, etc.

1:30:36

Every year that I've been audited, the

1:30:38

biggest delta has been about a

1:30:40

thousand bucks. In this case, I

1:30:42

actually was owed a thousand by the

1:30:45

U.S. government last year, which was...

1:30:47

Well, you spend it on. I'll

1:30:49

spend it everywhere. So, Larry, just so

1:30:51

you know... I'm well aware of

1:30:53

everything you just said, and I

1:30:55

have no doubt about your personal integrity.

1:30:57

It's not the honey pot you

1:30:59

think it is. Less than a

1:31:01

quarter of people with incomes over $10

1:31:04

million dollars are audited. So lucky...

1:31:06

It's just not true. Let me

1:31:08

ask you a question. Is it not

1:31:10

true that everybody is, that everybody

1:31:12

is audited? I get the sense.

1:31:14

Larry, you're, you like Doge, but you

1:31:16

don't like the execution. Got it.

1:31:19

Ezra. You talk about your book. We

1:31:21

got to move faster. We got

1:31:23

to do things faster. We got

1:31:25

to take more risk. So are you

1:31:27

pro-dose or not? And if you

1:31:29

look at the Democratic, if you

1:31:31

look at this administration, whether it's Trump,

1:31:34

Joe Rogan, Besson, Howard, even Trump

1:31:36

himself, are Clinton Democrats. I thought

1:31:38

you were gonna say Clinton, I don't

1:31:40

matter. Ezra, are you. happy about

1:31:42

those? Your book seems to be

1:31:44

a plan to do doge-like things. I

1:31:46

think building state capacity is two

1:31:48

dimensions. One is what the state

1:31:50

can do, and the second is it

1:31:53

rules under which it doesn't. Doge

1:31:55

seems to me to be fundamentally

1:31:57

destructive of state capacity. First, and this

1:31:59

goes again to my endless frustration

1:32:01

that I feel like goals are

1:32:03

not clearly laid out in the Trump

1:32:05

administration. What are the measures we

1:32:07

are looking at and how will

1:32:09

they achieve them? Is it just trying

1:32:12

to cut spending? But they've been

1:32:14

very clear. But that's not efficiency,

1:32:16

right? I could save a trillion dollars.

1:32:18

That's not? No. I could save

1:32:20

a trillion dollars in ways that

1:32:22

will make the... Let's put it this

1:32:24

way. What Larry was just saying,

1:32:26

right, if you cut everybody at

1:32:28

the IRS, just cut every single one

1:32:31

of them, on the Doge measure

1:32:33

of how much did you did

1:32:35

you save in headcount? that will look

1:32:37

like it counted up towards your

1:32:39

save a trillion dollars goal. But

1:32:41

in terms of what Larry is saying,

1:32:44

which is the long-term efficiency of

1:32:46

US tax collections, you would have just

1:32:48

made the IRS much much much

1:32:50

less efficient. We get that, but

1:32:52

they've also cut all these efficient software

1:32:54

and consulting nonsense. There is some

1:32:56

stuff I am not going to

1:32:58

tell you that there are zero-dosh cuts

1:33:01

that made sense. But I am

1:33:03

going to say that what I

1:33:05

see them doing overall is highly destructive

1:33:07

state capacity. Or similarly, a lot

1:33:09

of things happening around USAID and

1:33:11

say PEPFAR funding, is PEPFAR efficient? I

1:33:13

mean, yes, you save money by

1:33:15

not giving HIV retrovirals to children

1:33:17

in Africa, but I think it is

1:33:20

good that you do that, right?

1:33:22

So that's not the kind of

1:33:24

efficiency I'm looking for. I am interested

1:33:26

in state capacity that is connected

1:33:28

to achieving specific. goals. I've talked

1:33:30

to a bunch of the people around

1:33:32