Caligula Reincarnated

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February 6, 2026 — Each time we think we have exhausted the question of what explains the crazy things that Donald Trump says and does, he comes out with something even crazier, which sends us back to the puzzle anew.

The first conclusion, popular during Trump’s first presidency, was that his assertions were never meant to be taken literally.  But as he has followed through on a growing number of threats, from seeking revenge against political opponents to attacking Venezuela and kidnapping its president, this explanation has lost plausibility. read more

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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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