Trump wants both low taxes and low interest rates. I hope that he doesn’t get it.
For the last ten days of my Principles of Macroeconomics course, I emphasize the aggregate supply and aggregate demand model coupled with monetary offset. What’s monetary offset? It says that, given some target and administrative insulation, the Federal Reserve can ‘offset’ the aggregate demand effects of government fiscal policy. It’s what gives us a relatively stable economy, despite big fiscal policy changes from administration to administration.
For example, if the Fed has a 2% inflation target, then they have an idea of how much total spending in the economy (NGDP) must change. If the federal government changes tax revenues or spends more, then the Fed can increase or decrease the money supply in order to achieve the NGDP growth rate that will realize their target. For example, after the 2017 Tax and Jobs Act lowered taxes, the Federal Funds rate rose in 2018. The effect of the tax cuts on NGDP were *offset* by monetary policy tightening to keep inflation near 2%.
If the Fed doesn’t engage in monetary offset, then fiscal policy has a bigger impact on the business cycle, causing more erratic bouts of unemployment and inflation. The economy would be less stable. Importantly, monetary offset works in both directions. It prevents tight fiscal policy from driving us into a national depression, and loose fiscal policy from fueling inflation. That’s good since politicians face an incentive/speed/knowledge/political problem.
Personally, I would love lower taxes and lower interest rates. I’d get to enjoy more of my income rather than sending it to uncle Sam and, after refinancing, I’d pay less to service my debts. BUT, the same is true for everyone else too. All of that greater spending would result in higher prices and persistent inflation.
Right now, low taxes and high spending meant that the government is running persistent budget deficits – it’s borrowing money. That’s stimulative. If the Fed lowers interest rates, individuals would refinance and borrow more. That’s also stimulative. If both fiscal and monetary policy are stimulative as part of achieving the Fed’s target, then there is nothing wrong. But deviation from that policy goal brings economic turbulence.
The US, like every geopolitical entity to ever exist, has produced global public goods (i.e. international security, defeating the Nazis, etc) and global public bads (greenhouse gases, failed interference in other countries, etc).
I would like to posit something very simple: the greatest public good the United States has ever produced is the option to leave where you are and emigrate to the United States. If a country and its leadership is failing, non-trivial fractions of their population had the viable option to pack their bags and walk out the door. Perhaps unfairly, this is doubly true for their best, brightest, and most endowed with resources, making the threat all the more salient. It’s voting with your feet i.e. Tiebout effects writ large.
If you are a failing nation, your options become to watch your population dissipate or put up a wall blocking exit. Either that or, you know, actively take steps to improve your country so that fewer people wish to leave their home and start over elsewhere. The ramifications of stifled immigraion to the United States will be felt for decades, and not just in the United States in the form of an enervated economy and betrayal of our core civic values, but globally in weakended constraints on every failing regime.
A bit over 40% of current U.S. farm workers are illegal immigrants. In some regions and sectors, the percentage is much higher. The work is often uncomfortable and dangerous, and far from the cool urban centers. This is work that very few U.S. born workers would consider doing, unless the pay was very high, so it would be difficult to replace the immigrant labor on farms in the near term. I don’t know how much the need for manpower would change if cheap illegal workers were not available, and therefore productivity was supplemented with automation.
It apparently didn’t occur to some members of the administration that deporting a lot of these workers (and frightening the rest into hiding) would have a crippling effect on American agriculture. Sure enough, there have recently been reports in some areas of workers not showing up and crops going unharvested.
It is difficult for me as a non-expert to determine how severe and widespread the problems actually are so far. Anti-Trump sources naturally emphasize the genuine problems that do exist and predict apocalyptic melt-down, whereas other sources are more measured. I suspect that the largest agribusinesses have kept better abreast of the law, while smaller operations have cut legal corners and may have that catch up to them. For instance, a small meat packer in Omaha reported operating at only 30% capacity after ICE raids, whereas the CEO of giant Tyson Foods claimed that “every one who works at Tyson Foods is authorized to do so,” and that the company “is in complete compliance” with all the immigration regulations.
With at least some of these wholly predictable problems from mass deportations now becoming reality, the administration is undergoing internal debates and policy adjustments in response. On June 12, President Trump very candidly acknowledged the issue, writing on Truth Social, “Our great Farmers and people in the hotel and leisure business have been stating that our very aggressive policy on immigration is taking very good, long-time workers away from them, with those jobs being almost impossible to replace…. We must protect our Farmers, but get the CRIMINALS OUT OF THE USA. Changes are coming!”
The next day, ICE official Tatum King wrote regional leaders to halt investigations of the agricultural industry, along with hotels and restaurants. That directive was apparently walked back a few days later, under pressure from outraged conservative supporters and from Deputy White House Chief of Staff Stephen Miller. Miller, an immigration hard-liner, wants to double the ICE deportation quota, up to 3,000 per day.
This issue could go in various ways from here. Hard-liners on the left and on the right have a way of pushing their agendas to unpalatable extremes. It can be argued that the Democrats could easily have won in 2024 had their policies been more moderate. Similarly, if immigration hard-liners get their way now, I predict that the result will be their worst nightmare: a public revulsion against enforcing immigration laws in general. If farmers and restaurateurs start going bust, and food shortages and price spikes appear in the supermarket, public support for the administration and its project of deporting illegal immigrants will reverse in a big way. Some right-wing pundits would not be bothered by an electoral debacle, since their style is to stay constantly outraged, and (as the liberal news outlets currently demonstrate), it is easier to project non-stop outrage when your party is out of power.
An optimist, however, might see in this controversy an opening for some sort of long-term, rational solution to the farm worker issue. Agricultural Secretary Brooke Rollins has proposed expansion of the H-2A visa program, which allows for temporary agricultural worker residency to fill labor shortages. This is somewhat similar to the European guest worker programs, though with significant differences. H-2A requires the farmer to provide housing and take legal responsibility for his or her workers. H-2B visas allow for temporary non-agricultural workers, without as much employer responsibility. A bill was introduced into Congress with bi-partisan support to modernize the H-2A program, so that legislative effort may have legs. Maybe there can be a (gasp!) compromise.
President Trump last week came out strongly in favor of this sort of solution, with a surprisingly positive take on the (illegal) workers who have worked diligently on a farm for years. By “put you in charge” he is seems to refer to the responsibilities that H-2A employers undertake for their employers, and perhaps extending that to H-2B employers. He acknowledges that the far-right will not be happy, but hopes “they’ll understand.” From Newsweek:
“We’re working on legislation right now where – farmers, look, they know better. They work with them for years. You had cases where…people have worked for a farm, on a farm for 14, 15 years and they get thrown out pretty viciously and we can’t do it. We gotta work with the farmers, and people that have hotels and leisure properties too,” he said at the Iowa State Fairgrounds in Des Moines on Thursday.
“We’re gonna work with them and we’re gonna work very strong and smart, and we’re gonna put you in charge. We’re gonna make you responsible and I think that that’s going to make a lot of people happy. Now, serious radical right people, who I also happen to like a lot, they may not be quite as happy but they’ll understand. Won’t they? Do you think so?”
It’s not AGI, it’s barely even regular AI, when an LLM is this heavily directed. This appears to be very real over on Twitter. What’s most telling is the thinness of the prompts that yield very specific responses that, suffice it to say, Grok would not have provided even 3 months ago.
Musk has adjusted Grok’s algorithm so it’s now a neo-Nazi.Pretty cool that almost every progressive commentator, elected official and organization still uses Musk’s X algorithm to communicate with the public! Good job guys.
I’ll simply say this: no one has declined more in my estimation in my entire life than Elon Musk. I thought he was an engineering genius not even 5 years ago, perhaps awkward in some ways, but earnest. Now he is (or is working very diligently to project an identity of) a white supremacist desperate to play off of traditional racist and antisemitic fears to maintain his own status and influence. His ambition and resources have been combined with a monstrous agenda, and the world is much worse for it. It’s tragic in every way.
With regards to AI, there needs to be more discussion of the market for AIs, plural. I think a lot of people are operating off the assumption that AI will be like Google or VHS. A natural monopoly; one AI to rule them all and bind them. I’m not so sure. I think there is a very real chance that AI’s will find niches. That different algorithms will create different families of bespoke AIs. It feels like the world is already siloed into echo chambers of entertainment- and identity-based news feeds. If AI allows us each to get bespoke answers, serving our own person confirmation biases, to each and every question, is that better or worse? In a counter intuitive way, it could actually be better. You can’t get communities and cults of one. It might be better for the world if the news became something you couldn’t create effective propaganda out of.
It goes almost without saying that there is absolutely no economic rationale for such a tax. It’s almost a perfect inversion of a classic optimal Pigouvian tax. There is no way to frame this other than as rent-seeking run amok.
So, will rising oil prices help to further cement the role of solar power even as subsidies dry up? Or will we see a doubling down on rent seeking efforts to keep non-fossil fuel energy sources at bay? Who’s to say!
The term comes from wrestling, which is fitting because for years I’ve been stealing Dana Gould’s line “Politics is just professional wrestling in suits.” There are limits to my casual theft, though. I will not pretend that I am the first to observe that politics has deeply internalized the kayfabe code of vehemently declaring beliefs or expectations in no way actually held while simultaneously understanding that your rivals are doing the same.
I am curious whether you can undermine your own political agenda or influence by going too far, by committing too much to a fictional worldview. Much like Serpico, if you go too deep you can lose track of the real you. Grandstanding in front of the cameras is one thing, but if you want to trade in the political marketplace, you need to be able to credibly do so in good faith. I can’t help but wonder if part of the inability of Congress to assert it’s constitutional power in face of Executive overreach is a political market failue. Has the information and signal quality between represenatives been so eroded that prices and, in turn, exchanges can’t emerge?
On a more optimistic note, however, I expect that at some point a political party will find advantage in have better norms of credible signaling if only because they will have an easier time solving their own collective action problem. The question remains, though, at what point will the political advantage of superior collective action dominate the electoral advantage of earnestly lying to voters?
“Cruikshank played a crucial role in terminating Reconstruction and launching the one-party, segregationist regime of “Jim Crow” that prevailed in the South until the 1960s. The circuit court opinion of Justice Joseph Bradley unleashed the second and decisive phase of Reconstruction-era terrorism…” – Pope, James Gray. “Snubbed Landmark: Why United States v. Cruikshank (1876) Belongs at the Heart of the American Constitutional Canon.” Harv. CR-CLL Rev. 49 (2014): 385.
The Civil War was over, but the seceding states remained in open conflict with the federal government. Southern states, particulary those with majority Black populations, were desperate to terminate institutional reconstruction and purge the federal agents tasked with ensuring Black voting rights. The levers of state government were still in White hands, but that control was becoming tenuous. It is not wholly outlandish to suggest that Jim Crow as we know it may never have come to be if the US Supreme Court had not handed down a now infamous decision that effectively left Black men and women to fend for themselves. Freed from slavery only 13 years earlier, they now had to contend with state and local governments intent on maintaining the status quo of White supremacy in every way possible. It would be nearly a hundred years before the Voting Rights Act of 1965 would begin to restore the franchise to Black individuals.
California is in full conflict with federal government as we speak. Federal agents under the moniker of ICE are attempting to detain and subsequently deport individuals they deem to be of questionable legal residence. There have been multiple examples of individuals with fully legal claims to residence in the form of green cards, student visas, or full blown birthright citizenship who have been taken into custody by ICE and CBP agents (masked, armed, and in full military fatigues). Absent familial notification or any form of due process, there was always the question of whether a state authority would ever treat these takings of individuals as extralegal kidnappings.
Am I using inflammatory language? I’m not sure that I am. ICE and CBP officials have make strong declarations that they believe themselves to be unbeholden to court decisions, due process, or the Constitution. State and local law enforcement in California have made it clear that they will not aid ICE in any way shape or form save preventing violence in the streets as protesters have arrived in sufficient numbers that ICE agents were effectively herded into narrow spaces and prevented from exiting with the individuals they had detained.
Just in case it is not patently obvious how I feel on the matter, the protesters are on the right side of history. The federal government is overreaching in a more gratuitous and unconstitutional manner than at any moment in the previous 40 years. This is, in terms of our federalist structure, the inverse of Jim Crow and Cruikshank. State governments are in position to defend the liberties and rights of their residents against the extralegal encroachment of federal agents. If anything, I find myself grateful that such a standoff is occurring in California, a state with the scale and resources to stand against the federal government. I know the Trump administration is threatening to “cut off” California from federal money, but that’s a strange tactic. California net loses between $71 and 83 billion per year in federal spending minus taxes paid by residents. California is the 4th largest economy in the world. California is a mess, their housing market is atrocious, they manage their forests and wildfire prevention quite poorly, but it is nonetheless the single most economically important state in the US by a cavernous margin. California can say “no” to the federal government. They may find themselves with national guard troops on their streets. They can ask then ask them to be removed. They can ask ICE and CBP to leave.
This is a significant test of our federalist republic. Cruikshank served as the political fulcrum of its time by denying the federal government’s obligation to intervene and in doing so handed the power to deny basic constitutional rights to state and local governments, and the country has in many ways never wholly recovered. As we speak the federal government is taking action on behalf of the current presidential administration to deny basic constitutional rights. How a state’s ability to protect those rights against the federal government on behalf of its residents plays out may be the political fulcrum of our next 50 years.
Which isn’t to say that there aren’t monsters who have found their way into and adjacent to power, but they are always limited by the beliefs held by the people on the ground doing the dirty work. The revelation in the quote below is that for all the cruelty and uncertainty being imposed by ICE, USBP, and the agents deputized from local law enforcement, it isn’t meeting the ambitions of those who want more than terror and lib-owning headlines. They know their days are limited and that to make the America, at the margin, as Whiter as is possible, and to do so they need the broadest possible net cast based on little more than racial/ethnic density:
The Washington Examiner (the conservative news outlet) reports that Stephen Miller screamed at ICE officials: "What do you mean you're going after criminals? Why aren't you at Home Depot? Why aren't you at 7-Eleven?" Kinda blows up the narrative that they care about public safety.
What’s limiting them is that for as much selection as there is on politics, information sources, and social networks into the individual agents on the ground, their aren’t enough who actually want to maximize thecruelty and racial homogeneity. Most, I strongly suspect, just want to do their jobs. Many, I hope, no doubt do buy the false narratives of immigrant criminality, but those who mirror the darkest ambitions are probably (hopefully) too few in number to produce the outcomes desired by the architects of the current national travesty that shames us all.
So keep doing to the little things that keep the false narrives from becoming folk wisdom. The conversations across weak social ties that run counter to the fear-mongering and deception. Every agent and field officer who, consciously or unconsciously, finds themselves doubting the wholesale slandering of immigrants and racial groups is more sand in the gears slowing a machine that is on borrowed political time. Every day lost is a day won. Every TACO a month. Every court case a quarter. Just keep slowing it down.
According to the U.S. Department of Agriculture, feral hogs cause approximately $2.5 billion in agricultural damages each year…Nearly 300 native plant and animal species in the U.S. are in rapid decline because of feral swine, and many of the species are already at risk, according to Animal and Plant Health Inspection Service. The swine also carry at least 40 parasites, 30 bacterial and viral illnesses, and can infect humans, livestock and other animals with diseases like brucellosis and tuberculosis.
…They will also feed on tree seeds and seedlings, causing significant damage in forests, groves and plantations… Rooting — digging for foods below the surface of the ground — destabilizes the soil surface, uprooting or weakening native vegetation, damaging lawns and causing erosion. Their wallowing behavior destroys small ponds and stream banks, which may affect water quality. They also prey upon ground-nesting wildlife, including sea turtles. Wild hogs compete for food with other game animals such as deer, turkeys and squirrels, and they may consume the nests and young of many reptiles, ground-nesting birds and mammals.
Pigs are smart (ahead of dogs and horses), tough, and adaptable, and they breed very quickly. The protected, overfed, calm hogs you see on farms quickly turn lean and mean if they have to fend for themselves in the wild. You pretty much only see female pigs or castrated males on the farm, since whole males (boars) are intrinsically aggressive and destructive. But vigorous 200-pound boars, with their 3 inch-long, razor-sharp tusks, are well-represented in feral swine.
This is a growing problem. The population of wild pigs in the southern third of the U.S. has increased significantly in the past few decades. There have historically been some wild pigs in spots like Florida and Texas, escapees from Spanish settlers long ago. But they seem to be spreading northward, largely because hunters transplant them:
From 1982 to 2016, the wild pig population in the United States increased from 2.4 million to an estimated 6.9 million, with 2.6 million estimated to be residing in Texas alone. The population in the United States continues to grow rapidly due to their high reproduction rate, generalist diet, and lack of natural predators. Wild pigs have expanded their range in the United States from 18 States in 1982 to 35 States in 2016. It was recently estimated that the rate of northward range expansion by wild pigs accelerated from approximately 4 miles to 7.8 miles per year from 1982 to 2012 (12). This rapid range expansion can be attributed to an estimated 18-21% annual population growth and an ability to thrive across various environments, however, one of the leading causes is the human-mediated transportation of wild pigs for hunting purposes.
As for pigs attacking and killing humans, a definitive study was recently made in 2023 by Mayer, et al., covering 2000-2019. This report includes informative tables and charts, such as:
and
Comparison of mean annual number of human fatalities from attacks by various wild animals for time periods ranging between 2000 and 2019. From Mayer, et al.
About half of these fatalities occurred in rural regions of India. Government policies there prohibit farmers from killing marauding pigs, so farmers try to chase them away from their fields with rakes and stones. Sometimes that provokes the pig to attack, slashing at thigh level and often lacerating the femoral artery. But a disturbing 39% of deadly attacks were unprovoked, including a horrific case with an elderly woman in Texas. So danger to humans is an issue, though for perspective, far more people are killed each year by snakes (100,000), rabid dogs (30,000), and crocodiles (1000). In the U.S., over 100 people are killed a year, and 30,000 injured, by collisions with deer (see here for a market-based solution for this problem).
What to do? Hunters in many states are free to blast away at feral pigs year-round, since they are considered a harmful, invasive (non-native) species. Paradoxically, however, allowing hunting of pigs can be counterproductive: amateur hunting does not eliminate enough pigs to stop their spread, and it incentivizes hunters to transport pigs to new regions to make for more targets. For instance, Arkansas allows hunting and even transport of pigs, and has seen swine populations skyrocket. The state of Missouri, next door, took the enlightened approach of banning hunting and transport, leaving population control to wildlife professionals. By removing the sport-hunting incentive, Missouri removed the incentive to transport them, which stymied their spread.
To control pig populations, the pros mainly set up baited large corrals, and monitor them remotely with webcams. After several weeks, the local pigs get comfortable coming there to feed. When the cameras show that every single pig in the herd is in the corral, the gate is sprung shut remotely. Then the pros drive out to, er, euthanize the pigs. The goal is to wipe out the entire herd, and leave no sadder-but-wiser survivors who will be harder to catch next time. Once a hog population has become established in an area, it typically takes ongoing eradication efforts to keep the numbers down.
If you want to do your own part to reduce the surplus swine population, the following notable opportunity came to my attention: for a largish fee the Helibacon company will train you in firing automatic weapons and take you up in a chopper where you can mow down a marauding herd in the low Texas scrubland. It sounds like a guy thing, but Helibacon reminds us that full auto is for ladies, too. See also PorkChoppersAviation for similar service.
This is actually a fine example of a free market solution to a problem: wild hogs were such a problem for landowners that they were paying expensive professional helo hunters to take out herds, but in Texas, “All that changed in 2011, when the state legislature passed the so-called pork chopper law, which allowed hunters to pay to shoot feral hogs out of helicopters – and a new business model was born.” Hunters are happy to pay to hunt, helo companies are happy to take their money, and landowners are happy to have pigs reduced for free. Voila, voluntary exchange creates value…
Economist Writing Every Day 