Transcript: Ezra Klein Interviews Matthew Yglesias (2024)

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From New York Times Opinion, this is “The Ezra Klein Show.”

The last few years have given Donald Trump one great gift — inflation. Prices have risen so high so fast that a thick film of nostalgia has settled over Trump’s presidency. People don’t seem to remember the chaos of his administration, the mismanagement, the exhaustion of it. What they remember is that the economy was pretty good, that eggs and milk and gas and cars and homes were cheaper, that interest rates were lower.

I was walking in Park Slope in Brooklyn last weekend. I was at a street fair. And this guy was selling shirts that said, Donald Trump, make my wallet great again. Now, marketing Donald Trump to Park Slope liberals is going to be an uphill battle. But if you’re going to try it, that is the angle you would choose.

And I think Trump knows it’s the angle you would choose. I’ve been watching Trump’s rallies lately. I started because I was hearing how dark they’d gotten, how Trump was promising this unending cycle of revenge and retribution. I wanted to hear it for myself before I commented on it, and so I began just going through them.

And Trump does make those promises sometimes. But if the only picture of his rallies you get is from reading liberal coverage of the most fascist things he says, you miss their overarching mood and message. Revenge isn’t mainly what Trump talks about, at least not most of the time. He does talk about it sometimes.

What he mainly talks about is immigration and inflation, and what he’s best at talking about is inflation. And he has others talk about it, too. I was watching this one rally from May, where Trump had a Black woman who owned a vegan cafe, not the normal constituency you think about for Donald Trump, come up to endorse him.

This is part of his pitch. You don’t have to support storming the Capitol to want cheaper groceries. Anger over high prices have become this kind of nonideological argument for Donald Trump’s return.

But Trump’s candidacy has given Joe Biden one great gift. For all Trump’s talk about high prices, he has built his campaign around an incredibly bold, ambitious agenda to raise prices. A 10 percent tariff on imported goods, a 60 percent tariff on goods from China — these are huge sales tax increases on anything that comes in over the border — a mass deportation effort, a Federal Reserve chair who will listen to Donald Trump when Trump says jump or when he says, I guess, cut rates.

It is almost unimaginable to me that you would even think of running on this agenda at a time when what Americans are mad about is high prices. It is the most straightforward agenda to raise prices or raise inflation possible. And it’s a reminder of how Donald Trump actually governs, which is that, when the crisis he faces doesn’t match the worldview he already has, he just keeps going on with what he thought before, consequences be damned.

But I don’t think people really know that’s what Trump is promising to do. Trump is often covered in this weird policy-free zone as if nothing he says can be trusted enough to report on it so all you can report on are vibes and threats. But I do think the policy stakes here matter, and I think they get at something central about Trump’s campaign. And also, I think they are the way you should cover campaigns. You should listen to what the presidential candidates say they’re going to do and think about what it would mean if they did it.

So I invited my old friend, Matt Yglesias, who writes the great newsletter Slow Boring and who I used to co-host a policy podcast with to talk it through. As always, my email, ezrakleinshow@nytimes.com.

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Matt Yglesias, welcome back to the show.

Really glad to be here.

So we’re going to bring in some old-school weeds energy, for those of you who listen to the policy podcast Matt and I did back in the day, and dive into Donald Trump’s actually articulated economic plans. So I wanted to play a clip of Trump describing how he sees what he’s trying to do.

All right. So universal baseline tariffs — what he is proposing, from what he, said is a 10 percent tariff on imported goods, a 60 percent tariff, potentially, on all goods imported from China. Matt, what would that mean?

In a very literal, direct sense, it’s going to mean higher consumer prices on various kinds of things. The universal baseline tariff concept, it’s a little odd, actually, because, even in the realm of people who love tariffs and love trade protection, they normally try to think about industries that the United States competes in. Like you might want to help American steelworkers versus Chinese or Turkish steel workers. But there’s lots of stuff.

And we don’t really grow any coffee in the United States. And so the price of all that stuff is going to go up in a 10 percent tariff regime. You’re saying like, suddenly, American car companies that are based in Michigan, for example, import a lot of parts, car parts from Canada, from factories that are in Ontario.

And so it’s going to become more expensive to assemble a car or an airplane or any other kind of complex manufactured product in the United States if all of the inputs need to be taxed at 10 percent whereas a foreign producer, if you put the factory in Canada, that becomes a better place to build a car, to build an airplane, that kind of thing.

That piece of it feels pretty important to me. A lot of what we import are goods we use to make other things. And so if you’re increasing the cost of the things that American producers need to bring into the country in order to make the goods and products they sell outside of the country, then the goods and products they sell outside of the country are going to become more expensive.

And also, the rest of the world is not going to sit by while we tariff everything that they sell us and then do nothing. They’re going to put tariffs on everything we sell them.

So this idea that you’re going to make America more competitive and put American producers in a better position, at least when it comes to what we export, that doesn’t seem at all obvious. And on top of this, there’s this other thing that economists like jump up and down to tell you about tariffs, which is that it will also raise the prices on things that are made entirely in America, because American producers compete on price with foreign producers. If, all of a sudden, the things that come in from the outside become much more expensive, that gives American producers room to raise prices. And as we just saw with inflation, when they get room to raise prices, they do raise prices because they want to make bigger profits.

Right. It’s a trade off. So if you tax like all foreign raw metal, you do help American metal producers, but you hurt not only American consumers. But like I’ve never gone to the store and just bought aluminum. I buy things that are made out of aluminum. And so you’re going to hurt producers of more complicated kinds of goods.

The United States has lost a lot of manufacturing jobs over the years. But what we retain tends to be production of fairly complicated kinds of things, sort of high-end products. And you’re going to impair those kinds of industries, final assembly, if you tax the intermediate goods.

This was an issue during Trump’s previous presidency in which he did a fair amount of tariffs, smaller than what he’s talking about now. And part of what would happen is companies would come to the Commerce Department, and they would plead for exceptions. They would say, look, there’s a certain grade of metal that isn’t made in the United states, so I need you to give us a waiver on this so that we can keep making our more elaborate products. Sometimes you would get those waivers. Sometimes you wouldn’t. But that’s going to be a big question if you actually do this is, are you going to hammer American producers of complicated manufactured goods? Are you going to give them a lot of waivers? Or is it going to become something in between, where a whole thing for corporate America is kind of like begging and pleading to get favor from the White House?

Something we’ve seen in Argentina, which is a country that had a lot of import substitution policies over the years, is that these kind of decisions about who is allowed to import components and who isn’t becomes very politicized. Donald Trump, his campaign doesn’t do a lot of nuanced interviews in which they explain exactly how this kind of thing is going to work. But it could be much worse than it sounds on its face, depending on how you think those second and third-order consequences function.

So we have some estimates on the policy. So Adam Posen, who’s the president of the Peterson Institute for International Economics and a very respected economist in these areas, he’s estimated it would be about a 2 percent to 3 percent hike in the C.P.I. and the inflation measure.

Casey Mulligan, who is a very conservative economist who served on Trump’s Council of Economic Advisers, he said it’d be about a 1 percent hike. We’ve seen estimates it would be about $2,000 annually in new household costs that would be pretty concentrated on things like groceries. There’s been estimate about a half million jobs would be lost to this, G.D.P. down by about 0.5 percent to 1 percent.

And as best I can tell, the argument here is Trump just says, no, it wouldn’t. And the reason Trump says, no, it wouldn’t, if you read his interviews, is he says, look, we did some of this when I was president. We had a great economy, and everybody knows we had a great economy.

Now, these were smaller tariffs. And his basic view is that this would be paid for elsewhere, that, instead of passing these costs along to consumers, that, in order to maintain competitiveness in the US marketplace, producers in other countries are just going to eat this money. They’re just going to eat the cost but continue sort of exporting into America. And obviously, he sort of also believes you’ll have very strong substitution from American produced orders. How likely is that?

You get some of that, right? The incidents doesn’t fall exclusively on American consumers. I do think that when you’ve looked at studies of the tariffs that he did in the past, the bulk of the incidents falls on American consumers in most cases. It’s hard to know exactly what will happen because the foreign reaction is going to be important.

So far, for example, Biden has managed to put these tariffs on China without China retaliating against American producers, which is interesting. We don’t know how the world would react to this stuff that Trump is saying he would do. And we also don’t know what he’s going to do on fiscal policy, which would be a big influence on inflation interest rates.

We know that when he was president before, he cut taxes a lot, and then he grew military spending. But he also grew domestic spending. And that was stimulative to an economy that, at the time he took over, still had a fairly low labor force participation rate. Right now, we’ve got a larger share of working-aged people already employed than we’ve had in a generation, so it’s not clear where additional domestic production would come from.

I want to tap into the politics here of this for a minute, though, because, as you mentioned, there was a fair amount of tariff work done in Trump’s first term, much smaller than what we’re talking about here. But that was done in the context of low inflation, low prices. What everybody knows about the election this year is that prices are a huge problem.

The American people are angry about prices. They don’t want things to cost more. I think, in that context, if Joe Biden came out and said, I have a plan for making not literally everything but a huge amount of the goods consumed in America cost significantly more, up to 10 percent more, up to 60 percent more if they come from China, people would say, that’s insane.

You have a plan for raising prices almost across the board at a time when people say they’re angriest of anything about prices and price increases. And yet Donald Trump is lashing Biden on inflation and has the most straightforward policy you could possibly imagine to raise prices. The only thing that would be more straightforward is a complete across the board consumption tax of some kind, and those two things feel like they have not quite penetrated, like the difference between what Trump is saying his political approach is, which is that the Biden inflation era has been a disaster, and then what his policies say, which is he’s going to do a bunch of different things to raise prices, starting with tariffs.

Yeah. The clip that you played at the start of this segment, it really sounds like the kind of stuff that, at an abstract level that, say, like John Kerry was saying in 2004, which was a time when there was fairly high unemployment and people were talking about a jobless recovery, and so you had this pitch that I think pointy-headed economists never liked but that was at least in line with public sentiment, that it was like, we got to get people re-employed

Today, the unemployment rate is very low, but people are very upset about the price of groceries. And there’s a fertilizer — there’s something called potash that they import to fertilize crops. Almost all of the potash in the United States is imported. So you’re going to tax that, and you’re going to make it more expensive to grow food.

You’re going to make it more expensive to import foreign food products. We’ll talk later about immigration. It seems like it’ll just raise prices. It doesn’t even connect.

You look at that stretch of rhetoric. There’s not even a part of it where Trump is like, and here’s why that’s good. Here’s why that will cut prices. He says, we’re going to produce more stuff at home, but there’s no army of unemployed workers right now to go work in these new factories.

Even if it all works out brilliantly, and so tons of new things open up and we’re making everything at home, well, the people who are making that stuff would have to be the people who, right now, are working in hospitals.

They’re working as police officers. They’re working in child care centers. They’re working in restaurants. And so the price of something else would have to go up. It doesn’t make sense to me logically.

Something I would note about the Trump economy is that, during his time in office, inflation and interest rates did rise. It’s just that they rose from a very low level to a level that was, I think, perfectly acceptable by most people’s viewpoint. And so when Trump talks about this and when I think most people think about it, they say, well, inflation and interest rates were lower when Trump was president, so if we make Trump president again, we’ll go back to how it was.

But if you think about the directionality of change, Trump took office. He implemented an inflationary fiscal policy. He implemented these tariffs, and inflation and interest rates went up. They only went up a little bit, but they did go up.

And he’s now saying, well, I want to do what I did before but sort of more so. And you would expect the direction of change to be in the same direction that it was when he was president before, just we are starting from a level at which people are much more concerned about inflation and interest rates.

There’s at least some evidence, though, that this has worked out for him in the past. But the economist David Autor looked at the places that they’re most attempting to help. And I would say Autor is really the leading trade economist right now.

And what he found was, on the one hand, the tariffs didn’t seem to help very much. They didn’t change employment. They didn’t lead to a resurgence in manufacturing. A lot of the research here found that the price was simply passed on to the consumer.

But he did find that they were politically effective. They made people in those areas more likely to identify as Republicans and more likely to vote for Donald Trump.

Yeah. His finding there is that the places that hypothetically would have benefited from increased production thanks to the tariffs trended toward Trump. So particularly he gained in Ohio, even though there wasn’t a huge surge of new washing machine factories.

And I think, on an identity politics level — remember, this used to be Democrats’ whole line Obama in 2008 talked about how he was going to renegotiate NAFTA and bring back jobs to the Midwest. So that kind of pitch has always done well for the communities that it targets. And I see why he continues to roll with it.

I also see why the Biden administration has been more protectionist than prior Democratic administrations to try to match Trump.

It does get to something, I think interesting, in the economic policy choices here between Biden and Trump. You can imagine a choice between a previous Democratic administration and Trump, which is a much more free-trade regime and Trump’s mercantilism, protectionism, whatever you want to call it.

Biden has been much more sympathetic to the idea that you need to protect American industries and directly nurture and strengthen supply chains you want to have here. So semiconductors are a very good example and the CHIPS and Science Act. There’s a lot of stuff in the Inflation Reduction Act trying to bring more renewable energy production and supply chains here.

They’ve put pretty significant tariffs on at least some Chinese goods. Electric vehicles are a very big one. And so in a way, it feels to me like the choice here is not so much between a candidate who believes only in free trade and a candidate who believes only in protectionism as a candidate who believes in more targeted tariffs and subsidies and this other policy, which I think is almost like best understood as a kind of weird consumption tax.

I think that the Biden administration would characterize what they are doing as selective strategic tariffs to protect and foster certain key industries. And you can argue around the margin as to whether they fully lived up to that. But the very high tariff on Chinese electric cars and then a high but lower tariff on Chinese batteries to go into electric cars, it’s a good faith effort to foster an electric car manufacturing industry that is located in the United States of America.

And you can see that, to some extent, it is working. A bunch of companies have opened up electric car factories in the United States, or they’ve broken ground on them. And that includes foreign companies. So the Korean EV companies are starting production in the United States. So are the German ones.

And so that does raise the cost of electric cars relative to what it would be if we just sort of bought the cheap Chinese ones. But he’s trying to build it up. The 10 percent tax on everything is much more broad brush. I think there’s a real sense in which Biden has seized the middle ground, is how you would put it optimistically, between dogmatic free trade and kind of nutball protectionism.

It’s also a little hard to explain his position, though, because it’s very nuanced. It’s in the weeds of details. And of course, in practice, he’s very influenced by who’s lobbying him and what they think the swing states are.

Well, let me try to take another version of this from a more Trumpian perspective, which is, when Donald Trump runs in 2016 and he’s running against this more free-trade-oriented consensus that was dominant in both parties — right you had a more free-trade-oriented Republican Party but also one of the Democratic Party with things like the Trans-Pacific Partnership trade deal that Barack Obama had negotiated.

What you get there in that election is a lot of people saying, if we elect Donald Trump, the sky is going to fall economically. We’re going to have trade wars. He’s going to put retaliatory tariffs on us. It’s going to be terrible for the stock market.

And Trump comes into office, and mostly he does a lot of the things, although not all of them, that he said he was going to do. And the economy is more or less fine. I think the evidence is that his tariffs were not particularly helpful.

But the thing you see afterwards is not the Biden administration going all the way back to the pre-Trump consensus. Actually, they absorb a lot of what Trump and his team did, particularly on China, and keep it. They don’t roll back the tariffs on China. In fact, tariffs are higher on China now than they were when Trump was in office.

And something you’ll hear from people around Trump, Robert Lighthizer, who is Trump’s former trade rep and will probably be pretty significant in a next Trump administration, has made this point, is that, look, there’s a lot of pressure towards free trade among academic economists in the sort of Washington policy world. There’s funding from business groups. There’s a kind of intellectual consensus.

But we broke that once. And in fact, a lot of Democrats now think, yeah, you guys had a point on China. And breaking it even more again is in the right direction, that all these things people warned about happening mostly didn’t happen. The economy was fine. So who’s to say that won’t just happen again?

I think specifically on China, that that is a sound argument, that Biden has largely followed in Trump’s footsteps, that Jared Bernstein, who is the director of the Council of Economic Advisers, he was talking — gave a speech saying, we’re happy to import disinflation from China, but we don’t want to import deindustrialization.

So that’s an area where the consensus has moved toward Trump, has moved toward Lighthizer. That’s why I’ve been mostly talking about Trump’s plan to increase tariffs on countries that aren’t China because that’s where it’s hard for me to understand even how the internal logic of Trumpism works, that if we’re trying to gear up for geopolitical competition with China, why are we talking about raising taxes on things that are made in Canada?

How does that advance that kind of goal? But I think it’s on fiscal policy where you get closer to the metal on this. When you and I both worked at Vox, Trump was trying to pass a tax cut bill, and there were a bunch of Democrats who were upset that this was going to make the budget deficit much larger. And they were saying various negative things about that.

I wrote an article that ran in December 2017. And I said, I don’t like this tax bill. It’s very slanted toward rich people. But a higher budget deficit is going to be fine. The United States is nowhere near full employment. That was a controversial stance at the time. The Obama administration’s position was that the United States of America in 2016 was already at full employment. Trump’s economic policy was a bet on the idea that that wasn’t true, that you could bring the prime age employment population ratio up several percentage points.

I thought Trump was right at the time, and I said so. But not everybody agreed. Trump was right about that, and I think that it has won him good will from a lot of people.

I now think that he is wrong. If you look at the current Biden economy, we have an even higher share of prime-aged people working than we’re working in the past. We have an inflation problem. We have interest rates that have gone up a lot and that the Fed is using to keep a lid on demand.

I think that if you pour more fiscal stimulus on the economy right now, you’re going to have a very serious problem. But deficit hawks who cried wolf in 2016, 2017, or even going back to 2011, 2012, have burned through a lot of credibility with the American people, and it’s challenging to make this case to them.

Well, that gets to the other side, the output, in a way, of this tariff idea because the tariff idea will raise money for the government. The government collects tariffs. It is a way of funding the government. It is, in many ways, an alternative to at least directly placing taxes on your own people.

And Trump’s team has been very clear about what they want to spend the money on. So some percentage of Trump’s tax cuts will expire. They want to extend all the tax cuts. And they want to do another roughly $500 billion in tax cuts. How do you think about that, both as economic policy but also in the context of prices and interest rates?

One thing is that, if the tariffs would fully pay for extension of the Tax Cuts and Jobs Act, you could debate the merits of that, but it would make sense. But the numbers don’t come close to adding up. T.C.J.A. extension costs about $4.6 trillion over 10 years. The tariffs raise a much lower amount of money than that.

And so you’re going to have a higher budget deficit unless you have big spending cuts, where, again, Trump is committed to not cutting social security, to not cutting Medicare, to increasing the military budget. As you well know, Ezra, those three things are the lion’s share of federal spending. You could cut everything else by like 40 percent or something. But Trump doesn’t want to cut immigration enforcement, the opposite of that.

And so we’re going to have, I don’t know, like no national parks. There won’t be mail delivered. It’s hard to know.

Just huge deficits.

Right. So what he actually did when he was president, what George W. Bush did when he was president, is they just — the budget deficit got bigger. So when he took office, interest rates were really low. He made the deficit higher. Interest rates went up a little bit. It wasn’t like a huge deal, but they did go up.

Right now, interest rates are pretty high, and the deficit projection is to go up. We used to every week talk about these kind of little wonky policy details. And 10 years ago, there was this like fever pitch about the budget deficit, even longer than 10 years ago, in Washington.

And it was really like the boy who cried wolf, I think, about this kind of thing. People talked for so long, oh, the deficit. We need to reduce the deficit. There’s going to be a crisis, et cetera.

And people started tuning that out. I was not saying that in 2011, 2012, 2014, 2017. And now I’m really worried. I’m really upset that people sort of shot their credibility on that because it’s hard to get a mortgage right now. It has frozen up the housing market. People don’t want to build new houses even where they can get permission because the financing is so expensive. There’s a real problem for people who rely on loans to buy new cars. It’s a big imposition on people to have high consumer interest rates.

And Trump wants to do a really large tax cut for — a corporate tax cut for business owners, some middle-class tax cuts. But mostly this is going to go to high-income people, and it’s going to come out of the pockets of people who need to borrow money, which includes municipalities and small businesses who rely on bank loans to expand or to finance new equipment purchases.

And I think it could be really quite dire. But I also understand the mentality of people who feel like, well, they’ve been hearing about this forever, and it’s never really happened. So who cares?

I want to texture out that forever for a minute because this is one of the things that has always frustrated me about the Trump economy and the credit he gets for it. It’s true, of course, that, in 2011, 2012, the Obama administration makes a very big rhetorical pivot to deficit reduction. But their argument at that point is that we want to do short-term stimulus spending in a very depressed economy and long-term deficit reduction, so see spending go up over the next two, three, four years as part of a 10-year deal that brings it down.

And over and over and over again, Republicans say no. They say no to more stimulus spending. They say no to deals that would include any tax increases. Ultimately, you get these weird automatic cuts called the sequester. But that’s the Obama period.

Then Donald Trump comes in 2017, and he comes in with a Republican House. He comes in with a Republican Senate. The Speaker of the House is Paul Ryan. And the economy is stronger now. It is hotter. The unemployment rate is lower.

And what they do is they go on a jag of stimulus spending, which, as you’re saying, was sort of fine from the perspective of we weren’t in a position where we needed lower budget deficits. But in terms of the long-run picture, you actually would have wanted to do that in a more intelligent way. You didn’t need a ton of stimulus spending. You didn’t need to deficit finance all of it.

This is the classic Keynesian prescription. You do want to do some hoarding of the money when you’re in a good economy. So Trump gets a bunch of credit for that because it does continue the recovery we’re seeing under Obama. It does get us closer to full employment. And I think he deserves some credit for that.

But there is a way also in which he makes it then harder to respond in the future. Then you get Biden. You get the pandemic, a huge amount of stimulus spending. And now I think our debt situation is significant. The thing you’re worried about has happened. Interest rates are much higher. Inflation went up. We do need to start doing something about the debt.

And there’s just this way in which the ability of Republicans to just join together and spend whatever they want when they want to do it and the inability of Democrats to do it is really different. The Inflation Reduction Act was paid for. I think that was, at that point, the correct move. But it was paid for.

And so Trump, I think, should get some credit here. But there is this way in which what happened was not just that Democrats had made a pivot on deficit reduction. Part of that pivot was driven by Republicans who the exact second Donald Trump got into office, they abandoned it completely and began both spending and cutting taxes completely deficit financed in a way that has really materially affected our budget picture now.

Yeah, it’s true that, as soon as Trump became president, they did deficit increasing tax cuts. But then they also did deficit increasing spending hikes.

Yeah, they increased spending. It’s a really important point.

Right. And so the Trump economy consisted of Trump getting Republicans to agree to do what Obama had been saying they should do for a long time, except without the responsible part where you take care of the long-term future. And it’s like, it’s maddening. And it was maddening when it happened.

And you could tell — one reason I wrote this article saying like, let’s chill out a little bit about Trump and the deficit is that Obama, people were so fired up because they’d been there for years. Millions of people spent time unemployed because Republicans wouldn’t agree to more stimulus spending.

And then, as soon as a Republican was president, it was like, oh, haha, we were just kidding. And it’s like really one of the most cruel and sort of hideous things that’s ever happened. But, to your point, when Obama was president, Republicans in Congress deliberately kept the economy under stimulated in order to stimulate when Trump was president.

Now that Biden is president, the economy just isn’t under stimulated, so that kind of cynical game isn’t going to work. It’s not going to achieve anything. The debt level is higher. The inflation rate is higher. Interest rates are higher. The kind of expiration of Social Security and Medicare trust funds is closer in time. The labor market is in a stronger position.

And the question is like, what do we think is going to happen going forward? And Trump is doing this thing that he often does where he just says contradictory things to people, where, on the one hand, there’s this Trump campaign pledge that’s really irresponsible fiscal policy, where we’re going to have huge tax cuts and then don’t even worry about it. And then you have this idea that Russell Vought is kind of leaking to people that, well, we’re going to do —

Do you mind saying who he is?

He was OMB director for Trump at the end of his term and is, I guess, in line for a big Trump job in a second term. He is suggesting they’re going to do what’s called impoundment, which I think is just illegal. And the executive branch will refuse to spend money that Congress has appropriated.

And so if you are like a center-right businessman who likes the idea of corporate tax cuts but worries about the deficit, you’re supposed to think, oh no, Trump gets it. He’s going to cut spending.

But, if you’re like a voter at the rally, you’re supposed to think, gah, don’t worry about it. Trump is just bringing back the old, good times. Trump speaks a lot to the public at these rallies, where he just kind of rambles, but he doesn’t do traditional campaign work, where they release like white papers that explain what it is they want to do if they are elected. And then other people can look at them.

I think one of the lessons of Mitt Romney’s campaign is that it is not to your advantage if you’re a Republican to spell out the exact fiscal policy trade offs that you’re trying to make. And so we’re left in this phantasmagoria where I hesitate, I think everybody hesitates to say, look, this is going to be a catastrophe. We really are going to be in a Greece-like situation, an interest rate crisis, because nobody can tell how seriously to take Trump.

I don’t want to say as a prediction of the future that, if Trump wins, we’re going to have a budget crisis because I honestly don’t know what he’s going to do. But if he does what he says he’s going to do, then we are going to have a very real budgetary crisis, especially when you bring the immigration piece of this in, where things start getting even wilder in terms of at least what he’s committed to rhetorically.

Well, let’s bring that piece in, and let’s begin by showing what he’s saying rhetorically.

All right, the largest deportation operation in American history, Trump has been saying this a lot. There there are, obviously, ethical dimensions of it. But let me ask you about two other dimensions. One, does he have the authority to do this? Or does it have to be an act of Congress? And two, what are the consequences of a multimillion person deportation operation on the economy?

Traditionally, people have found that it is challenging to deport large numbers of people because you have to, first, find somebody who’s in the country without authorization. You have to detain them.

You then have to prove that they actually are an illegal immigrant. When this is talked about by politicians, they often act as if ICE agents have X-ray vision. But just because you might think somebody is here illegally, that doesn’t mean you’ve proven the case.

And so litigating the whole thing, actually going through deportation, getting them back to their home country is all very resource intensive. And so, in practice, when Donald Trump was president, the pace of deportations didn’t really go up relative to where it had been under Obama. Obama deported people at a higher rate than George W. Bush had because the number of personnel dedicated to it went up due to some laws that passed in Bush’s term.

Long story short, Trump is saying — and Stephen Miller has suggested to reporters — that they’re going to address this by basically bringing in people who aren’t immigration personnel, that they’re going to deputize local law enforcement, that they might bring the National Guard into it, that they are going to construct detention centers, all these kinds of things. Anything you do like that, there’s going to be lawsuits. There’s going to be people in Congress complaining.

I don’t really know what’s going to happen. I find people speculating about judicial rulings to be a little bit hard to parse. But, if it were to happen, Trump says he wants to shrink the work force by millions of people.

You can see tables, and it says that 23 percent of construction laborers in the United States are estimated to be undocumented workers. Say you could somehow make all those people disappear. Homebuilding is going to collapse.

And become much more expensive.

Right. If you look at like one sector and you say, OK, well, we’re going to get rid of 22 percent of maids and housekeeping cleaners are undocumented, so they all get deported. It’s sad for them.

Then, for the labor force, well, you’ve got to raise pay. And so that’s good for people who remain. But the cost of living goes up.

But, if you do this across the board, across sectors, you are talking about millions and millions of people. And, if you think through the implications of that, it makes the debt burden worse. It makes the Inflation situation worse.

I don’t want to say and nobody wants to say that this is great economic policy to have 11 to 12 million people in the country without permission, working under the table, using maybe fake Social Security numbers, maybe just getting paid cash. But the reason why there used to be a strong bipartisan push for some kind of legalization on top of border security measures is that the cost to the economy of actually getting rid of all of the undocumented workers would be very, very, very high.

So it seems much more practical to come up with a system to legalize at least most of them and then focus deportation resources on people who are committing other crimes, people who aren’t working, people who are sneaking across the border right away.

Again, Trump was president. The natural question to ask with any of these scare stories is like, well, he was president before, and what happened here? When Trump was president, he just — he didn’t step up interior enforcement. He talked a lot about it. He said on the campaign trail where there’s going to be a deportation force. He didn’t do that. None of that happened.

Now he says he’s going to do it more so than before. And his team says they’ve worked out the logistical problems, and they seem to enjoy it when liberal journalists write these scare stories. Oh, he’s going to do concentration camps.

You heard in that clip. It’s a huge applause line for him that he’s going to do the biggest deportation of all time. He doesn’t say that, when I was president, I did the biggest deportation of all time because he didn’t. So it’s hard to get your mind around, the legality, the logistics. But, if you were able to do it, the consequences would be quite devastating.

This interacts with the giant tariff plan, in a strange way. So take agriculture. I’m Californian. We have a big ag industry. A huge percentage of agricultural workers are undocumented immigrants.

So you might imagine the theory of the tariff plan is that, well, we import a bunch of fruits and vegetables. We’re going to make them more expensive. But at least the ones that we can grow in the U.S., that’s going to be a boon to the domestic agricultural industry.

But if you, at the same time, wipe out a bunch of the domestic agricultural work force, what you have is going to be very, very highly inflationary because you can’t change domestic production. In fact, domestic production may well drop. It’s also potentially contractionary.

Something people like Larry Summers have begun talking about is the idea that Trump’s policies could lead to stagflation, the sort of mixture of high inflation and low growth, which was predicted under Biden but never happened. We’ve had high growth. How do you see that possibility of stagflation?

Yeah, and I should add, we were talking about deportation of undocumented immigrants. But Trump is also proposing cuts to legal immigration. So I think 6 percent, 5 percent or 6 percent of the total labor force is undocumented immigrants. 20 percent is immigrants in total, which is a lot of legal immigrants. So Trump is saying he wants to deport undocumented people.

He’s saying he wants to cut off the flow of asylum seekers. He’s saying he wants to reduce the number of visas that are issued. And so with that smaller work force, we’re going to make more stuff at home? No, we’re just going to make less stuff overall.

It’s a very literal — if you kind of forget about prices, if you just think about quantities, the United States of America is going to produce less stuff with fewer workers. We have, right now, in the United States, a very large number of people who have retired. Population has aged, but they’re consuming things, goods and services, and they’re not producing anything.

And so we’re going to shrink the number of people in the United States to produce things for them, and we’re going to make it harder for them to buy things from abroad. And so what’s going to happen — like is my dad at age 70, he’s going to go to the Central Valley and start picking fruit because we got rid of the immigrants? Does that make sense?

It’s basic implication is, yes, a sharply lower rate of economic growth that isn’t addressable through stimulus. It’s just shrinking the productive capacity of the American economy unless you believe in a really magical impact of these tax cuts, which seems to be what Trump’s business community supporters are counting on. Or they’re just counting on him to not do the stuff that he does.

Yeah, I think they’re counting on him to not do a mass deportation. I think, when you read their thinking on him, it’s that he doesn’t do the crazier things he says he’s going to do. And so we’re just going to get the tax cuts, but he’s not going to deport millions of workers.

And maybe he won’t. But there is a weird way in which I don’t think you can — you cannot cover a presidential candidate and just assume that every single thing they say about policy cannot be taken seriously. It’s just not a reasonable way to think about elections.

Maybe he will deport millions of people. Maybe he won’t. But the guy has like four articulated policy ideas, and this is the one he talks about, I would say, the most. And so I think you have to take it seriously. At the very least, you have to take it seriously as his theory of how the economy should work. Maybe the deep state will stop him from running a mass deportation campaign. But Donald Trump clearly thinks it would be a good idea to run a mass deportation campaign.

And I want to pick up on something, which is that we consume two things — goods and services. The way the universal base tariff differs from, say, an across the board consumption tax, like a VAT, is it taxes goods, but it doesn’t really tax services. It applies to an imported good.

But it doesn’t apply to a house cleaner. Or it doesn’t apply to a physical therapist or a doctor, or a lot of the American economy is the provision of services. This does. If you do mass deportation, a huge percentage of the undocumented immigrant work force works in services, things like child care, and people need child care. They really can’t go without it unless they then leave the labor force.

If child care becomes significantly more expensive because a large percentage of child care workers are undocumented immigrants, then the only way for a lot of American families to manage the resulting price increase in child care is to pull, usually the mother but does not have to be, out of the work force so they can provide their own child care. But one way or another, this would strike at a place the tariff doesn’t, which is the price of services in America.

I think the Biden administration has struggled to talk about the impact of full employment on labor intensive services. You hear people complaining about how much a Big Mac costs under Biden. And it’s true that the price of fast food has gone up a lot, and that’s a contributor to inflation. It’s something that’s salient to people.

But that’s a consequence of the strength of the economy. When you have a strong labor market, the relative price of labor intensive services goes up. People aren’t always happy with that. I like to say, as a globalist cosmopolitan, this shows that immigration could be win win, that we could bring more people to do work that is low paid by American standards but high paid by the standards of Guatemala or Venezuela or Haiti. And everybody benefits.

That’s a tough sell to the public, which has various concerns. But Trump wants to roll it back in the opposite direction, and there may be some benefits to that. You won’t have the same number maybe of like buskers on the subway or other things that are bothering people. But the material economic cost of that will be large.

Well, there’s an answer from immigration restrictionists on the economics here, and it’s that we will pay American-born or at least legal resident workers more and that, look, there is a price at which Americans will pick strawberries, a price at which they currently — and more of them would — paint or lay roofs or whatever it might be. And this is a very straightforward policy to raise the wages of Americans and that labor force participation is up but it’s not at 100 percent of prime-age workers. And it could go higher than it is now.

And so the conversation you and I are having here reflects a lack of faith. It’s a buying into tenets of neoliberalism, which is to say that people only do these jobs at low wages. But no, the wages will go up. More people will do the jobs. And it would be fine, and we would have a healthier native-born and legally resident work force.

Yeah, if you think about just one sector of the economy, that’s clearly true. If we like kicked out all the British political pundits from America, that’s maybe just more opportunities for native-born takesters like me.

If you do it across the board, though, the question is like, yeah, like the nominal wages for everybody can go up.

But the actual human beings have to come from somewhere. So is the idea that women are going to have fewer kids and so nobody will need to be out on maternity leave? Is the idea that people aren’t going to retire and they’re going to do the work?

Because that’s certainly possible.

If you were talking about a traditional Republican administration, you might say, look, we’re going to get rid of immigrants. We’re going to cut taxes. We’re going to cut social security. We’re going to cut Medicare. And we’re going to have the labor force participation for people over 60 going way up.

And that’s how Japan, for example, has dealt with the shrinkage of its work force is that people are working longer and longer into their twilight years. And that works mathematically. Japan is both a lot poorer than the United States, and also people can’t retire as young as they’re able to in the United States. That sounds worse to me, but it functions.

If you want to make that pitch, that’s fine. I’d like to hear it, and I’d like to debate it. But a lot of this stems from kind of myths. So, when the last jobs report came out, it showed that 200,000-something new jobs had been created. And so Biden and the Democrats were like, this is great. The Biden economy is splendid. It’s amazing. And then conservatives came up with these counter charts. And they were like, ah, but the number of native-born Americans employed has gone down, and the number of foreign-born people has gone up. And so it’s like the immigrants are taking all your jobs.

But then you look at it mathematically, and it’s, well, what’s happened is, is that the number of working-aged native-born Americans getting jobs has gone up, but more and more Americans are retired. And I think that that would have to be the source of the additional labor.

And it’s not that I lack faith in the ability of the American people to delay retirement and keep swinging hammers to bear the load of this new, poorer America that Donald Trump is building. It’s that I don’t think that that’s desirable. I don’t think that that’s the vision that is being pitched to us by Trump and by Republicans.

They are making it out to be that there’s some huge group of secret unemployed people somewhere. But there’s a lot of people who work part time, and so you sometimes see people working at that. But well, all these jobs, they’re part-time jobs. But you can disaggregate that into who are the people who say they’re part time for economic reasons, meaning they want to work full-time hours, versus who are the people who are part time because maybe they’ve got kids in school. And so they like having a part-time job, and then they pick their kids up.

And it’s mostly the latter. It’s people who say they prefer a part-time job. Now, you can create the economic circ*mstances in which they can’t have the life that they want. They have to work full-time hours. They can’t go to school. They can’t retire.

But that sounds like a lot worse to me. But at least it would be a sort of a healthy, honest debate rather than this slightly fantastical one.

We’ve been talking about immigrant labor primarily here in lower-wage, lower-skill roles. But high-skill immigrant labor is actually a pretty important part of the economy and a place where a lot of growth and talent comes from in the industries that have an outsized effect on driving American growth and incomes — software engineers and skilled semiconductor engineers from other countries. And it does have some effect, potentially, on native-born wages but can have a much larger effect on the actual innovative output of the American economy.

But I feel like, in the overall fight over immigration right now and particularly asylum seekers, that this endless trillion dollar bill lying on the sidewalk for America keeps not getting picked up because Biden wants to look not as hard on immigration as Trump but tough on immigration. He’s just announced a bunch of new proposals and executive actions on the border recently. And so there’s no real constituency anymore that seems to be prioritizing high-skill immigration, even though of the things that America seems able to do to affect its long-term growth trajectory, very little has as much bang for the buck.

Yeah, I think that’s true. In Congress, it’s blocked because Republicans have decided that they don’t like immigrants, and Democrats take the view that legislative changes to immigration have to be comprehensive. That’s a construct going back to was it 2006, 2007? We were young when this all started, and it continued through the big push in 2013.

The idea is that’s the thing that the business community wants. So if you’re going to get the business community as a pressure group for comprehensive immigration reform, you need to hold that chip out, because if they get high-skill immigration for nothing, then they’re not going to be there when you need them to push a bigger, more comprehensive bill over the finish line with Republicans.

Exactly. And so like Darrell Issa had a bill in Obama’s second term that was just like, let’s let more foreign STEM workers in. And it seemed great, and I don’t really understand why somebody would object to it on the merits. But Democrats in Congress wouldn’t go for it because they’re holding out for this kind of larger deal.

And then I remember during the lame duck, after Biden won the election but before he was in, I was talking to some Democratic leaders in Congress. And I said like, would you guys consider revisiting your opposition to kind of piecemeal immigration reform? And they said, it’s going to depend on what the groups think. But the strategic calculus is still there.

An interesting thing about the bipartisan border security bill that Biden pushed for, that most Democrats voted for initially, and that Trump ultimately spiked, is that that involved Democrats getting off the comprehensive hill. It didn’t have a skilled immigration part.

But the old view had been skilled immigration, border security and a path to citizenship are like a three-legged stool, and the whole stool has to go together. Democrats showed that they came under enough political pressure from the public that they said, well, we can actually do border security on its own. Or rather, it became a new stool in which it was linked to Ukraine and Israel and other kinds of stuff.

And that made immigration advocates very unhappy. Immigration advocates who didn’t necessarily have a huge problem on the merits with the border security bill were like, wait, no, we can’t do this without doing protections for our people. And that’s one reason why, when it came up for a vote the second time in the senate, detached from the foreign aid stuff, it got much less Democratic support.

So one move you could see in the future is Democrats moving off this comprehensive construct and saying, look, we need to address border security because it’s something the public is demanding. We need to address skilled immigration because it’s just a good idea and it will suit the needs of the economy. And then dreamers, temporary protected status recipients, other undocumented people who we sympathize with are just going to be kind of left in limbo.

I think that would be a shame. I sympathize with the comprehensive immigration construct. But we’re also now into year — we’re past year 15 of this construct, and it has not delivered what it was supposed to. And so I can see the case for moving off of it.

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Speaking of another way politics is changing, Donald Trump appoints someone unexpectedly, this interesting economic policy analyst who many of us used to call up at the Bipartisan Policy Center to talk about the debt ceiling, this guy named Jay Powell to the Federal Reserve. And he becomes chair, and he does, I think, a really quite great job.

And Donald Trump has now turned quite a bit on Powell. Some of his tweets on this saying — and this is in 2019, to be fair, but that the Federal Reserve should get our interest rate down to zero or less, and we should then start to refinance our debt. Interest costs could be brought way down.

He calls Jay Powell a bonehead. He says, my only question is, who is our bigger enemy, Jay Powell or Chairman Xi? I think it is reasonable to say that Trump will not reappoint Powell if he wins the election and wants to appoint somebody who will be more pliant to him. If he does appoint somebody who is considered by markets to be more pliant to him politically while he is pursuing a bunch of these other policies we’ve talked about, what is the consequence of that for inflation?

This is a real case of Republican president privilege. If you think about, if there was a Republican in the White House and his Democratic opponent was saying, I want to increase the budget deficit, do trade protection and fire the Fed chair so that we can do interest rate cuts, Wall Street would be losing their minds over that. They’d be saying like, this is a catastrophe. We’re going to tip into the worst case, like hyperinflation, like total catastrophe, et cetera, et cetera.

Now, if you’re a Republican, you do get more latitude from investors and from Wall Street about this kind of thing. They like Republicans. They like them on taxes. They like them on regulation.

But they also trust them. They feel, in their hearts, that Democrats listen to a lot of left-wing college professors and that Republicans listen to smart, admirable businessmen. But, on its face, if you cut short-term interest rates while increasing the deficit and shrinking the work force, you’re going to have a total loss of credibility of the Central Bank, of credibility in the currency. The value of the dollar is going to go down.

One of the Trump administration leaks is that they want the value of the dollar to go down because that’s supposed to help manufacturing. That would be really bad for inflation.

Because he’s a Republican, Stephen Schwarzman and Bill Ackman and all these guys who have some problem with Biden are not talking about this. They don’t care. There’s no problem.

These are all big kind of hedge funders and finance guys you’re mentioning here.

Yeah, yeah, yeah. Finance guys — guys who know what they’re talking about. Look, when Trump was president before, we had this mini freak out.

Oh, he’s going to fire Janet Yellen. He’s going to put a hack in. But he put in Jay Powell, who was fine, who was good. And it was back channeled to me, and I’m sure you, too, at the time.

People were like, oh, Powell. He’s good. He’s solid. And we knew him. He was a Bipartisan Policy Center guy, moderate Republican, and it was all fine.

Maybe it’ll be fine.

Maybe Trump will take out his personal sense of grievance on Jay Powell. He’ll lose his job. But that’s fine. He’s in his 70s. He doesn’t need the gig.

And Trump will just put in someone else who’s reasonable. That could happen. Or we could have a catastrophe.

And I always — I’m never sure how to talk about the frontiers of what Trump says he’s going to do because I don’t want people to hear me forecasting that we are going to deport millions of people and cut interest rates to zero and add $5 trillion to the deficit and raise the price of all groceries because I’m not the one saying that’s what Trump is going to do.

Trump is the one saying that that’s what Trump is going to do. If you do that, the consequences for the basic financial welfare of American households is going to be catastrophic. If if you went to a fundraiser with him and he told you secretly, I’m not going to do any of that stuff, good for you. If you know exactly what he’s saying he’s not going to do, you should tell the world.

It’s challenging, journalistically, to cover someone who is known for lying a lot because people who are on his side wheeled out like, well, he doesn’t mean that. You can’t take him so literally.

All I really know how to do is cover what he’s saying, and what he’s saying is that he’s going to combine an inflationary fiscal policy with an inflationary monetary policy, which is going to — it’s not just going to raise inflation. It’s going to deanchor inflation expectations, as the economists say.

Even when prices were going up a lot in 2022, I believed that the Fed would raise interest rates and bring inflation back down. And that’s what happened.

Under Trump, if we go from 3 percent inflation to 4 percent, 5 percent, 6 percent and he is installing cronies at the Fed and he’s keeping interest rates down and he’s saying, well, I’m going to do this like debt refinancing, as if I’m a real estate baron, I’m going to say, I don’t know what’s going to happen next.

I think this guy is just compromising the long term stability of the country for his short-term interests. And I’m not going to want to make any kind of long-term investments in the United States. And that would be really bad.

We are accustomed in the United States of America to basic financial policy happening between the 40 yard lines. And Trump is saying, no, I’m going to go like way out there, out of sample stuff, the kinds of things that we’ve seen in foreign countries go catastrophically but that we have no experience of in the United States.

I find two things hard about covering Trump and forecasting this. So one is that he is so limited about the policies that he actually discusses. So, for all that he’s constantly out there, giving these hour, or hour-and-a-half, two-hour rambling rallies, he just kind of repeats himself a lot.

He doesn’t lay out lists of policies, and his campaign doesn’t release white papers with bullet points. And a lot of the things he does talk about are these massive and arguably symbolic policies. So what happens is people then begin covering things like the 2025 plan from Heritage and others. And there are these huge plans that are by a kind of integrated world of think tanks and conservative policy entrepreneurs. And maybe, but Trump has never endorsed that.

And then there’s a question of personnel. So people should go back and think about who Trump ended up appointing right at the beginning. You have them come in and name a bunch of highly credentialed people who either are the sort of people who he wanted respect from or the sort of people who were recommended to him or pushed to him by others in the party because he didn’t know how to do this and did not have his own people. So Gary Cohn, who’s a Goldman Sachs guy, becomes his national economic council lead. Steven Mnuchin, another Goldman Sachs guy, becomes his Treasury Secretary.

You have H.R. McMasters at National Security. You have Rex Tillerson, Exxon’s former C.E.O., at State. You have all these people who are not coming out of a weird Trumpist subculture. They’re coming out of the commanding heights of American business and the military, but most of them have a very bad experience.

So Tillerson famously blows up with Trump. McMasters famously blows up with Donald Trump. Gary Cohn, I think, does not look back on his time there fondly.

And over time, much more of the Republican Party becomes oriented towards Donald Trump, and there emerges of this big under 40-year-old cadre of Republicans and conservatives coming up who don’t, I think, see Trump so cynically as this weird, intuitive politician, who they can use to pursue their interest in ideology. They sort of believe that they are defining Trumpism. They’re coming behind this great leader and creating the thing that he’s talking about.

So there are many more people now who are much more personally committed to him. And his control of the party — his daughter-in-law is the R.N.C. chair now. His control of the party is much more foundational.

And so the people who, at one point, were bringing him candidates, like Jay Powell for Federal Reserve, we don’t know who those people will be next time. Donald Trump didn’t get to Powell because he liked the Bipartisan Policy Center. Somebody brought him Powell. So I do just think it’s, on the one hand, hard to cover this appropriately but, on the other hand, I think reasonable to think it would be different in a second term.

Two perspectives on this I’ve gotten is one person who was a career person who was a detailee to the National Security Council for several years, Trump’s administration, told me, you’ve got to tell people. The people who are going to be running the show in a second term are totally different. They’re way crazier. It’s much scarier. It’s going to be much worse.

Another person I know who was like not that important political appointee under Trump in his first term said, you liberals, you get this all wrong. The deal with Trump is that now he’s like not controlled by the conservative movement. He controls them, and he can be much more pragmatic than a conventional president, that Biden is like hostage to all these liberal interest groups but that Trump is just going to try to make good decisions as he sees it.

Those are consistent with each other as observations about the world but not the same observation about the world. And it heightens the uncertainty as to what is actually going on or what anybody thinks is practical and what anybody thinks is crazy. Trump’s coalition right now contains both people who insist that he’s going to be much tougher on China than Joe Biden and tougher on Iran and like a huge foreign policy hawk and people who say that like, no, Trump is the peace candidate who’s going to unwind all this great power conflict that’s happened under Biden.

Those things can’t both be true. He can’t both be the candidate of project 2025, who’s going to eliminate the deep state and govern without constraint, and also be the pragmatic moderate who signed the CARES Act. But he keeps us all guessing.

He’s a great entertainer on that level. And so new people are going to be coming in, and it seems more likely than not to me that the quality of the decision making is going to be much worse, that something we saw on Jan. 6 was a number of Trump administration cabinet people made these kind of protest gestures and resigned. It didn’t really matter.

There was only one to two weeks left in his administration. But they wanted to show that they’re people of integrity and decency. And now Trump knows who the people of integrity and decency are, and he’s not going to bring them back. We’re going to have the people who were like, this is fine. Let’s do insurrections. And that’s not great.

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Going back to the Fed issue, one of the things about most candidates — particularly when they get to the point where they’re a presidential nominee — is they’re so well associated with different factions in their own party that you can tell what would be the list of figures they would draw from. But Trump, as you say, is not really connected to the old Republican Party, and the Trump Republican Party is, in a way, still being born. We would really see it emerging in this second term.

You can look back at what he did at the Federal Reserve or who he wanted to put on in his first term on the board, which I think is interesting. So Jay Powell was this very establishment pick he made, in many ways a very surprising pick. But if you look at people they nominated, it got way weirder.

So they nominated Herman Cain, the former presidential candidate who ran a pizza company for a long time. They nominated Judy Shelton, who was somebody who had wanted the US to go back on to the gold standard. These nominations didn’t work out for them, but there was something happening in the Trump administration, where that top nomination he was convinced to make, Powell, his other nominees to the Federal Reserve Board did not look like that.

There’s a tendency for the people who are most loyal to Trump personally and who he likes best to be people who have very fringy ideas. He really likes people who have weird ideas about things, people who deviate really far from consensus and from professional norms. For all the reporting that’s happened on the Trump years, I think we don’t quite know like exactly what was the deal with Steve Mnuchin.

And how did he become Treasury Secretary and why? And like he was surprisingly reasonable, it turned out, about all kinds of things and did a pretty good job. But there were this handful of like walk-on characters who were not well known in D.C., who aren’t political establishment types and kind of like kept things together.

Are they coming back? What’s going on? Trump knows a lot of Wall Street people. I would think those people could talk him out of completely destroying the Federal Reserve’s credibility.

But again, it’s what he’s saying. I think it’s hard to discount just this kind of stated posture of Trump that he has these ideas that don’t make sense and that he wants to judge people based on their loyalty to him, which means people who are at least willing to pretend to agree with ideas that don’t make sense. And that’s quite dangerous.

I want to go to something you said about Trump having weird ideas. I think a way to read him, which is something you were getting at earlier, is Trump has very strong economic intuitions. The guy is a businessman. He didn’t just play one on television.

To the extent he’s a businessman, he was both a marketer and a real estate guy. And real estate people, they like low interest rates. Trump had intuitions about trade that were probably somewhat suppressed in the American political system and that there was, at least on China, some real room to move in that direction.

And so I think one way of reading Trump is that he had a set of intuitions that, paired or matched with the actual situation in the American economy and American politics in 2016 or 2017, did not really lead to disaster. He wanted to spend more money. He wanted to cut taxes. He wanted to run the economy fairly hot.

And it was a fairly good time for all of that. He wanted to push a little bit on trade. And there’s probably too much bipartisan consensus on trade before him, so pushing it back a little bit was not only not the end of the world but maybe even healthy.

But that economy had very certain dynamics, and it had very certain problems. And the problem coming out of the Obama economy was an unfinished economic recovery on the employment side. And now the employment side is pretty tight, and the issue is affordability of things like housing. The issue has been inflation.

And just not only has Trump not changed, as best I can tell, not only is he not come up with a new theory of what’s going on nor have the people around him, but he’s just going harder in the same direction he was in 2017. Just nothing has updated, but the situation has flipped almost entirely.

And put aside what you think about which of these policies he will actually enact. The fact that we’d be electing a guy with a theory of the economy that is completely now out of date to the economic problems we actually have, that’s meaningful. That’s a real problem.

The bet on Trump is that he was really, really insightful in coming to all these conclusions about the situation in 2017 and that he continues to be an insightful person and that anything he says to the contrary is just B.S. But it looks to me like Trump was just lucky, that he — I also — I hesitate to give him like too much credit for the strong economy in the first three years of his presidency because you look at any kind of like lines on a chart. And things were fine when Trump was president, but there’s no like break point, where like from 2016 —

No, he created fewer jobs per month in the first three years of his presidency than Obama did in the last three years of his presidency.

Right. Exactly. So it’s like, if you told people, oh, no, that was just like Obama’s third term and, for some reason, he’d put Republicans on the Supreme Court, you’d say, yeah, OK. It seems fine. The slow but steady recovery continued to be slow and steady.

I’ve been frustrated that Biden has not pivoted as much as I think he should in response to full employment and the rise of inflation. He will often talk as if it’s still 2021 and we need to create jobs. But there has been some turn from him.

There has been a move toward talking about reducing the deficit. The Inflation Reduction Act was not a huge deal for inflation, but it was disinflationary. They have retooled their agenda to some extent to deal with the problems that have arisen during their presidency. And they’ve shown, on immigration, a real willingness to change direction in the face of events that were not unfolding the way they wanted them to.

Trump is not telling us that he has any sensitivity to events or to the way that the world has changed. He’s just insisting that his presence in the White House will miraculously reverse the directionality of time. And I don’t think that that’s true.

You often get this question about whether Democrats should run against Donald Trump as a unique threat to democracy or whether they should try to run against him more as a normal Republican, a guy with bad economic ideas. And I don’t want to say you can’t do both or even more than both. I do think there’s some degree to which voters can hold a number of thoughts in their head.

But this is something that I don’t really see them running on, which is not that Trump is just like a normal Republican with normal bad Republican ideas, like cutting Medicaid and cutting Social Security and cutting taxes on rich people. But he’s actually uniquely ill suited to the moment, and maybe it’s just too hard of a case to make because people associate him with lower prices.

But one of the things about this agenda that I find interesting is it is not hard to understand. There is often in Republican Party policymaking a lot of effort going into hiding the ball. So you have these huge tax cut packages that have a lot of middle-class tax cuts that are there in part to obscure the giant upper-class tax cuts. Or you have these complicated deregulatory proposals.

And, with Trump, it’s really right there. It’s a proposal to add 10 percent to the cost of all goods or materials coming in over the border. It is a mass deportation plan that is both ethically, I think, quite horrendous. The image you were laying out earlier of trying to deputize this huge internal security force to, I guess, go house to house and pull people out of homes to try to prove they’re unauthorized immigrants and get them on a plane, it’s a hell of a thing to think about.

But also you just lose a lot of workers. His tax cuts, he just does want to do more tax cuts for corporations and rich people, and he’s been very straightforward about that. But also there is a simplicity to the way he thinks about policy that makes it easy to understand what side he is on.

And this year, he’s just come up with some really dumb policies. And particularly the giant tariff plan, I know it’s assumed that Trump is right, that people just think of everything as a zero sum fight between us and other countries. I don’t really think that’s true at this level, this idea that you’re going to add 10 percent to anything that Canada or France makes but also 60 percent to anything China makes.

Maybe it polls well, but I have more confidence in one’s ability to explain to the electorate what something means in that. It just feels to me, like as much as Trump sees inflation as a good issue for him, he has really created the raw material of it becoming a bad issue for him because it is the most simple possible policies to raise prices you could possibly imagine.

Yeah, and I do think you’ve seen some pivot from the Biden campaign to talk about this a little bit more. I’ve seen more articles in different newspapers being like, eh, these Trump policies, they seem like they’re going to make things more expensive.

You and I have been having this very neoliberal conversation here, and that’s like where I’m at seven days a week these days, churning out these takes about supply and demand and housing regulation and zoning and how immigrants are good, et cetera, et cetera. But there’s a lot of equity that’s been built up in progressive politics in the nonprofit space and the advocacy space and, to an extent, in the White House in the idea that we are transcending neoliberalism and moving into a grand new era of industrial policy. And we’re going to have a care economy and all these kind of other things.

And I think that those ideas get in the way sometimes of people on the left articulating that just kind of straightforward case against Trump because it positions Biden as a status quo figure, which is what the incumbent president is. And they don’t like that necessarily. And I think it’s preventing them from just making the most normal down-the-middle pitch, which is like, Trump wants to blow a hole in the deficit with $5 trillion of tax cuts, raise taxes on your avocados and then maybe destroy democracy to prevent interest rates from going up. It’s bad. But it does require Biden to position himself as a defender of orthodoxy, which I feel like, if you look at the long trajectory of Joe Biden as a person, is a role that he should be very comfortable in but isn’t the persona that this administration has taken on.

I think there’s a lot of truth to that. But I do think, at some point, you have to accept a real thing that has happened in American politics, which is Democrats are the party of normalcy, to some degree, and Republicans have become a party of a more “burn it all down” politics. And the point is not here that the status quo, but the point is you want to retain institutions and basic normal policymaking capacity and elections.

And that the Democratic Party Coalition — it’s a coalition now of a lot of institutions, including a lot of businesses. The Republican Party used to be this more institutional coalition, and now the Democratic Party is.

And I think Biden has some trouble making this argument cleanly, both for coalitional reasons and for reasons just related to his own politics and campaigning style now. But Trump really, I think, opens this up. If you look at the kind of Democrats who have been winning in swing states, people like Josh Shapiro and Gretchen Whitmer and Jared Polis, you see this very workaday like focused on the problems of the people, not huge grand ambitions and agendas.

And they’re winning the places that Joe Biden needs to win. Tammy Baldwin is expected to win in Wisconsin. She’s not the most thrillingly charismatic or ambitious politician, but she’s a politician who people believe is going to be out there working on their issues, day in and day out. Tony Evers, the Governor of Wisconsin, again, you don’t count flock from miles to listen to his speeches, but he’s somebody who people trust to pave the roads and manage the economy well.

And Trump, the weird thing about Trump is that he’s such an erratic, wild figure, and yet he’s now become associated with a kind of economic normalcy. And it’s axiomatic in a lot of politics that you don’t just have to go after your opponent’s weakness. You have to go after their strength.

And they have to go after Trump’s strength. If, at the end of the day, come November, people still give Trump a huge double-digit advantage on running the economy, it’s going to be hard, maybe not impossible, depending on what else Donald Trump does, but hard for Biden to win. But this is a really bad policy agenda, and if people understood it, it would be very unpopular. People do not want to pay more for everything.

That is like the core molten center of American politics right now. People do not like what a cup of coffee costs, and here is Donald Trump with an unambiguous plan to make a cup of coffee more expensive. You just can’t get away from it.

So, look, you have Trump laying out a hyperinflationary agenda on a platter. And I think it’s fair to say that Biden has not effectively taken advantage of that. So what do you think he needs to do?

I can come on your podcast and say, this is going to put Boeing at a huge disadvantage relative to Airbus and Comac in winning export contracts if you are putting tariffs on all these intermediate goods. But I think that to people who are skeptical, they’re going to be like, well, of course, Joe Biden and Matt and Ezra are saying this. That doesn’t convince me.

What would be convincing would be if the C.E.O. of Boeing was saying, look, I don’t want to wade into partisan politics, but this 10 percent universal tariff thing, that’s going to wreck my company. And people are not saying that. You are not hearing from corporate America that I don’t think it’s a good idea to pour fiscal fuel on the fire while talking about compromising the independence of the Federal Reserve.

What’s going to happen to the price of a Whopper if you deport 20 percent of the people who work in meatpacking plants? That’s something that the C.E.O. of Burger King could say to the world. And, unfortunately, I think the Biden administration has done a better job of convincing business executives that he’s a true blue economic populist than he has if convincing like working class voters of that.

And so it means you’re out there with a guy who’s leading in the polls, running on an agenda that like, on its face, would be completely contrary to what the public says they want. And nobody’s saying that.

It’s interesting. There was a Politico piece about Wall Street just coming back to Donald Trump and major Wall Street figures coming out to support him. And they have this quote from Kathie Wylde, who is president and C.E.O. of the Partnership for New York City, a nonprofit organization that represents the city’s top business leaders.

And she says Republicans are telling her, quote, “The threat to capitalism from the Democrats is more concerning than the threat to democracy from Trump.” There’s something wild about that. Democrats are in charge, and the stock market is at record highs.

But I think it gets to that dynamic you’re talking about. This piece is full of Wall Streeters talking about how Joe Biden is bad and maybe Donald Trump will be fine. But you don’t have a lot of quotes from, say, Jamie Dimon just saying sort of the obvious thing, which is that, oh, all of our research divisions say that if you elect Donald Trump and he does anything like what he’s talking about, it will be terrible for inflation and probably for us.

I think it’s like paradoxical, right? What has actually happened under the Biden administration is there was a big fiscal stimulus that was designed to get us to full employment. That worked. People can argue it went a little bit too far but whatever. It did what it was supposed to do.

There was a bill to subsidize technology-neutral, carbon-free energy, which has happened. There was a move to kind of establish consensus on a strategic approach to China that differs from the Bush-Obama approach. And that’s it. There’s no nationalization of industry, et cetera, et cetera, et cetera.

But there are more left wing people in positions of influence and authority than there used to be. You wrote a column early in the Biden administration, I think in maybe March or April of 2021, about how economics Ph.D.s and people with Wall Street experience had kind of like less purchase in Biden world than they had under Obama or Bill Clinton.

So there’s just like a mismatch, where I feel like that reality has not generated really dramatic left-wing policy in any area, but it has created a lot of alienating vibes among — people are good at rationalizing things. What is definitely true is that Donald Trump will deliver a large tax cut directly to the pockets of wealthy people.

And so if you’re in that position, you’re going to want to believe that the guy who’s going to give you money is good and that there’s important reasons to support him. And so it’s a little bit pushing on an open door there, but I think that it’s been problematic for Biden to elevate more leftist intellectuals in a way that hasn’t delivered dramatic policy change but seems to have really hurt his perception among small numbers of influential people whose opinion, I think, could really matter.

I think that’s a good place to end. Always our final question, what are three books you’d recommend to the audience?

Oh, man, I’ve been prepping on this the whole time. So I feel books — I want to just pick books I’ve been reading recently, not necessarily the all-time classics. But Linda Flanagan has a book called “Taking Back the Game,” which is about high-pressure youth sports, which, as the parent of a nine-year-old boy, I’ve become very cognizant of. It’s a weirdly problematic social crisis for America that I think people should care more about.

Eric Cline’s book, “1177 B.C.: The Year Civilization Collapsed,” has been recommended to me by so many people over the years. I finally read it. It’s fantastic. This is about things that happened thousands of years ago, but it’s really interesting.

And I came across a book by a guy named Paul Dickson called “The Rise of the G.I. Army” that’s about the effort to build up the World War II American military before Pearl Harbor and really making the case that the wisdom of the people who saw, in 1939, 1940, that America was going to need a powerful military in the future, it’s really interesting. it’s hard to find foresight in politics, and it’s nice to see that, at least in the past, it’s been possible.

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Matt Yglesias, thank you very much.

Thank you.

This episode of “The Ezra Klein Show” was produced by Rollin Hu. Fact-checking by Kate Sinclair and Mary Marge Locker. Mixing by Isaac Jones with Aman Sahota. Our senior editor is Claire Gordon. The show’s production team also includes Annie Galvin, Elias Isquith and Kristin Lin. Original music by Isaac Jones. Audience strategy by Kristina Samulewski and Shannon Busta. The executive producer of New York Times Opinion Audio is Annie-Rose Strasser. And special thanks to Sonia Herrero, Adam Posen and Michael Strain.