Why didn’t Trump’s tariffs crash the economy in 2025?

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December 31, 2025 — As Donald Trump took office last January, most economists worried that he might adopt the high tariffs he had campaigned on, raising prices of consumer goods and inputs that US households and firms had to pay.  The result would be an increase in inflation, at the same time as a fall in real income.  As a supply shock, it would not be the sort of development that the Federal Reserve could counteract. The damage would be especially large if other countries chose to retaliate with tariffs of their own. read more

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How will unsustainable US debt end?

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November 30, 2025 — US debt in the hand of the public now stands at 99 % of GDP.  The Congressional Budget Office [CBO] projects that it will reach 107% of GDP by 2027, thereby surpassing the longstanding record from the end of World War II.  The projections of the ratio of debt to GDP show an ever-upward path, the definition of unsustainability.

Discussions of the US national debt are often launched via an old quote from Herb Stein (CEA Chair under Nixon): “If something cannot go on forever, it will stop.”  But what form will the stop take?  There are six ways that an unsustainable debt path can come to an end: faster economic growth, lower interest rates, default, inflation, financial repression, and fiscal austerity.  In the US case, one is tempted to scratch all six off the list, one by one.  But that would leave us in violation of Stein’s Law. read more

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Abundance

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November 2, 2025 —  In search of an alternative vision to MAGA that might appeal to common-sense working Americans, some Democrats have rallied around the word “abundance.”  That is the title of a recent book by Ezra Klein and Derek Thompson, touted as a once-in-a-generation, paradigm-shifting revelation.

To begin, let me say that Ezra Klein is one of my favorite columnists and podcasters.

To the extent that abundance can be used as an effective political slogan, I am all ears.  In its favor, “abundance” is short enough to fit onto a bumper sticker, the word is neither too common in speech nor too uncommon, and it sounds like something we should all want.  It could fulfill the purpose of Democrats admitting past mistakes, which at this point is de rigueur if they are to develop an effective political strategy.  But abundance seems to me an arrow that is not particularly well-aimed. read more

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