The Absurdity of Trump's Economic Agenda Explained Simply

[00:00:00] Speaker 1: well guys i have a question for you we actually debated this before we made that video president trump says that he has brought 21 trillion dollars into america we made the choice to take it [00:00:16] Justin Wolfers: seriously was that the right choice i think so yeah president trump claims he's brought in 21 trillion dollars in new investment to the united states since he took office in 2025. justin you recently made a video explaining how false that number is the white house actually has a list of commitments on their own website that only adds up to 11.3 trillion and even those numbers are shaky in addition to debunking this claim you give us a list of six questions we can use to assess these enormous numbers that politicians and business leaders claim today i'm going to bring you some questions from the audience about that piece i'm augusta and i'm a producer here at [00:01:00] Speaker 1: platypus economics now i'm justin wolfers and this is the professor is in think about this as office hours in which augusta brings me your questions and i know there's a lot okay so the first question is so [00:01:13] Justin Wolfers: trump was falsely claiming that the u.s has all of this new investment why in economic terms would we want that much foreign investment wouldn't that mean that so much of the country was owned by foreign investors [00:01:30] Speaker 1: i love this question it's a totally serious question and i'm sorry i'm just laughing at the absurdity of the moments that the president made up a number about something that you may not want anyway it's funny at so many levels but um let me give you the case for if we had a lot of unemployed people wouldn't it be great if someone came and built a factory here that gave those people jobs fair enough now realize if someone who's abroad builds a factory here and the factory makes profits guess who the profits go to them and so in countries that have persistently been subject to huge foreign inflows the population in fact does make exactly your observation it was our audience's observation i know we got to give we got to give them so much credit this shows a deep understanding and appreciation of um international financial accounts which is actually pretty tricky but basically the point is if the money's coming in it's coming in to buy stuff and now then we're increasingly living in a world owned by foreigners this is absurd the president made a claim about foreign investment he basically said i'm selling more of america to foreigners it doesn't sound like his nationalist populist rhetoric i would like americans to work in factories owned by chinese companies that doesn't sound very mega but that's literally what the idea of foreign investment is um it turns out the president's other great obsession is trade deficits and the two it turns out you've got a link this this can be a hard thing to teach but the easy way to think about it is every time someone uh an american buys something from abroad we have to sell u.s dollars [00:03:21] Justin Wolfers: which means someone has to buy the u.s dollar we have to sell in u.s dollars we have to sell the dollars themselves [00:03:26] Speaker 1: sorry if i want to buy something from france yeah i have to sell u.s dollars and buy euros to buy that bottle of wine oh i see okay right another way of saying that is whenever there's a flow of goods in one direction is a flow of finances in the other so when the president says that what he wants is more foreign investment it is necessarily the case that that will lead to a larger trade deficit they're two sides of the same coin you can't have a low trade deficit and a lot of money coming in from abroad and a fixed exchange rate all three literally cannot coexist at the same time all of which is to say if the president is serious about his boasts then his boasts are increasing foreign investment flows america is increasing in america and its economic infrastructure is increasingly owned by foreigners that does in fact create jobs for americans so i'm not saying it's bad it would be a nationalist who would call that bad and the flip side of that must mean a larger trade deficit look how do you make sense of all of this at this point you can't um this is incoherence this is a failure to understand just how international commerce works um i don't have a better answer for you than that i what we try to do here in platypus economics is give every view a sensible thoughtful coherent airing that's what we did with the 21 trillion dollar number i could have just gotten on and screamed it's wrong it's a lie but we took it seriously your observation is if it's foreigners investing in the united states then foreigners are buying stuff parts of the united states the answer is yes [00:05:12] Justin Wolfers: okay so rather than continuing to dig into more absurdity let's talk about something really nerdy [00:05:17] Speaker 1: that a lot of people brought up in our comments i just want to say international financial accounts are pretty nerdy so if you want to go extra nerd from that that's some next level augusta going on [00:05:26] Justin Wolfers: those are very cool to me very very cool many of our international friends canadians australians especially but people from all over brought up or asked about why the us isn't on the metric system i was wondering if you could talk about the incredibly weird way that we deal with [00:05:43] Speaker 1: standardizing numbers in america wow i've often wondered this so as an australian the metric system is obvious it's smart it's sensible and it's insane not to be on it the only thing more insane than not being on the metric system is choosing to be on a different system than the rest of the world because the only thing you want out of a system of weights and measures they're a linguistic convention is to use the same convention everyone else does and the other 7.7 billion people on earth measure the size of their drill bits in millimeters and we measure ours in eighths and sixteenths so that means we have fewer drill bits available to us um this is not the answer to the question but by the way this would be a very positive policy if you were president trump if what you wanted was less engagement with the rest of the world you would make it harder for others to do business with us what are some things that make life easier similar linguistic conventions like millimeters centimeters kilometers which some people call kilometers [00:06:51] Justin Wolfers: it depends where you were raised um are there other ways of saying miles uh football field that's not miles that's a football field but you know that's the way that americans measure things in football fields they always say in books like it was it's like the length of a football field that's like the measurement americans have besides miles okay right okay so what you would want to [00:07:17] Speaker 1: do so in fact our failure to adopt the metric system is sort of like a tariff but worse the tariff makes it harder for others to do business with us and us to do business with them but it doesn't even raise revenue in fact creates all sorts of economic waste the only thing we could do that would be even more wasteful would be to make up our own language that no one else spoke and be relentlessly monolingual um we're fortunate in the us we happen to speak english a lot of americans don't speak a second language a lot of people in europe and through the rest of the world do um but english has turned out to become i love this the lingua franca of global business see i used french to talk about english fancy huh this is the point where i think i need to rely on you augusta i as i understand the story and you can tell me if it's true the whole world got together in a big committee and we love committees or the rest of the world does particularly the europeans have committees for forming committees and the big committee said we got dumb ways of doing measurement let's do smart ways and by the way the metric system it's just add zeros or subtract zeros it is smart nothing no one can defend the inch the foot how many feet are at a mile how many you are an incredibly highly educated person you're not even sure how many feet are in a mile isn't that amazing what a terrible system that is everyone's going to comment and say that they know and i'm the only person who doesn't know that i wonder if you are the only person could you comment if you also don't know just to make not just to make augusta feel good but also to round out the economics of all of this okay as i understand the story well you know we had committees subcommittees the committee on weights and measurements the committee on temperatures all of that and the whole world was going to move forward i remember when australia moved forward i don't remember i was not oh i was a baby i was nursing at the time our stamps postage stamps would educate you on what these things were because we used to have pounds shillings and pence we used to have miles and inches and all that stuff we we got off it we moved to metric never looked back no one has no one in australia in the history of australia no one's ever said crikey i wish we'd go back to that more complicated system and by the way every time we enter a recession where people say oh do we have good shovel ready projects my favorite anti-recession measure is because you have to make new street signs and everything right is next recession is when we should move to metric because a whole lot of people are unemployed and they could basically join the metric workforce going around to signs and painting over them things like that look i'll admit it every now and then i google myself you know just to see what the internet thinks it knows about me and it's unsettling how much information is just sitting there for sale your name address phone number old addresses sometimes even the names of your relatives that's the business model for data brokers they collect this stuff they bundle it up into a profile and they sell access to it and that then makes scams and phishing and identity theft and harassment and doxing a whole lot easier that's why i use delete me it's a hands-free service that finds your information on hundreds of data broker and people search sites and it gets it removed and it keeps checking throughout the year because sometimes these sites they can put it right back up on my first scan delete me found and removed 56 pieces of my personal information and it saved me about seven hours i reckon of fiddly work as an economist i'm pleased to report that's an excellent return on time invested delete me has been doing this for more than 15 years and the wire cutter named it its top data removal service get 20 off any delete me consumer planet join delete me.com slash wolfers with code wolfers w-o-l-f-e-r-s or use the qr kate on your screen that's join delete me dot com slash wolfers and use code wolfers as i understand it remember i said it's it's it's nothing more than a linguistic convention i say to you how uh how tall is that book behind you and you would say you know nine inches eight and a half maybe and i would instead say you know 20 centimeters technology can solve linguistic problems let me give an example that i believe is true in the early days of fax machines faxes basically speak to each other in a language you know when the fact says [00:11:49] Justin Wolfers: do you want a live act out of fax uh i've never used one no sorry i don't know what they sound like [00:11:57] Speaker 1: okay have you ever had someone fax your page of jokes at work because it was the early 80s [00:12:03] Justin Wolfers: no you know i have not well that's what they used to do so the corporate fax machine would just have a [00:12:10] Speaker 1: page of dumb jokes just like the early days of email had a page of dumb jokes sure that sounds great and then it makes that sound uh yes so as i that's a language and basically it's saying hi are you there yeah i am could you send it over yep i'm ready as i understand that there were in fact several different languages so my facts could only speak to other faxes in the same language and then a different company's facts could only speak to other companies other faxes in the same company um that's like one set of faxes is metric another set of faxes is in the imperial system then they basically invented a fax that could speak all the languages and then the linguistic conventions no longer mattered in some sense where they're right now which is um a fairly standard thing on the internet is i might write gdp today is 32 trillion dollars and whether it has commas in it or not that's a different linguistic convention your web browser will choose to reformat it accordingly in different countries so if you're in germany it might have periods rather than commas so technology can solve the problem and so if we're all walking around having my ai talk to your ai we might end up like faxes which is you'll speak imperial and i'll speak um metric and we'll still understand each other because my ai will translate for your ai and you and i will never ever meet in real space where we have to confront the realities of your absurd measurement system [00:13:40] Justin Wolfers: just so everyone knows i did not run this by just i never run these by just ahead of time this is all [00:13:44] Speaker 1: new to me i know so the office hours you look right now sometimes people do arrive in my office and i'm still yammering at them 20 minutes later and they're looking at their watch and they're like professor wolfers i just had five minutes and i'm like sit down i've got economics to discuss we're going to talk about feet the measurement thank you for clarifying um so there's actually a very famous paper in economics by paul david about the qwerty keyboard okay so we all type on a qwerty keyboard the qwerty keyboard is again just a convention it turns out the reason the keys are laid out that way is actually from the old days of manual typewriters uh in the old days of manual typewriters you didn't want to type too fast or else the clickety clacks would get stuck so they actually designed qwerty to slow down how fast you typed but the thing is what i wanted to do is learn to type on whatever keyboard my mum used and she wanted to type on the one she'd learned when she was at school and then you wanted to learn to type on whichever ones you grew up with which happen to be the ones from your father's generation and on it goes and so we've inherited and stuck with a bad standard because once the standard becomes entrenched i want to learn on the type of keyboard that i'll be able to buy elsewhere in fact there was another form of keyboard born another layout called dvorak which was an efficient standard it's the decimal system of keyboards but you would basically need a global community to say hey can we all move to dvorak so that next time you buy a laptop it would have the right keyboard on it so this is just the world can get stuck [00:15:17] Justin Wolfers: on bad inefficient pointless standards okay well now i have a bit of a controversial question for you so in the video that you recently put out you used a used a metaphor an analogy actually about the solar system to explain the 21 trillion dollar claim so professor wolfers is pluto a planet [00:15:45] Speaker 1: pluto is a wonderful disney character whether pluto is a planet is not a question of science but once again linguistic convention pluto is ever whatever you want it to be now augusta i want to come back to you several people came up to this in the comments so that idea of using the solar system i want to give full credit to you you came up with that as the way of scaling that and then i thought about it now i'm going to sound mean i don't think it was a good analogy because people don't know how far away things are in space yeah that's it's a very serious teaching point um you just nailed it right so the point is to take something that we have no idea about the scale of 21 trillion dollars and turn it into something we do have an idea of the scale of now things i've never been to pluto i've never been to i don't know i don't know how far away these things are i'm told they're quite a ways away so turning something i don't understand its scale to a different scale i don't understand doesn't add clarity um so several people called this out in the comments and so i just want to come back and share this with everyone else what i use when i normally teach economics is actually a scale that all of us i think is in fact human i do think this is useful and it's not a criticism of you because i elected to go with your wonderful idea think about hundred dollar bills so a pile of hundred dollar bills a pile of a hundred of them is about that thick right and that's ten thousand dollars and a million dollars is a hundred of those piles so one way to think about this is a briefcase a standard briefcase like the kind you would put a handcuff on and walk to the bank like that like in a movie a briefcase is a million dollars of hundreds you were doing singles i'm doing hundreds so then what is a billion dollars it's a thousand briefcases another way of thinking about that is think about a yellow school bus how many briefcases could you fit in the yellow school bus roughly a thousand so therefore a billion dollars is a school bus full of hundred dollar bills what is a trillion dollars a trillion dollars is a thousand school buses what does that look like well let's think about going to the big house which is the big field here at university of michigan and driving school buses onto the field maybe two layers deep maybe not it depends how big the school buses are so basically filling a football stadium with school buses so a million dollars is a briefcase a billion dollars is a school bus and a trillion dollars is a football stadium and those at least are scales that i think we all understand um by the way pluto is not a planet sorry to the 90s kids watching wow wow sorry i mean you and your big government types who want to tell people what things are and what things mean that's fine for you but it's not okay by me oh so now you do want to take a side i want to take a side that we all get to cheers and create our own beauty in our own lives augusta i have a question for you we actually debated this before we made that video president trump says that he has brought 21 trillion dollars into america every part of that claim is absurd the white house says it's 13 trillion every part of that claim is absurd the president claims he has individual countries small gulf states who are willing to send us a trillion every part of that claims this is absurd resting on nonsense on a bed of horseshit we made the choice to take it seriously was that the right choice [00:19:26] Justin Wolfers: i think so yeah i mean we took it seriously and then said it was wrong and it may be that we get a lot of a lot of unserious claims out of the white house but it is still the president of the united states so it's good to fact check those things i think when you have special expertise which you do [00:19:46] Speaker 1: i think you've got me convinced i mean we decided to do the analysis so you do have me convinced um i just want to acknowledge some uncertainty about whether that's the right thing whether stuff that's nonsense on its face should be taken seriously i guess the counter argument to me might be is it obvious on its face to everyone else that it's nonsense and if it's not then my role as a teacher is to teach and so we got in there and we taught the controversy maybe that was the right thing um i mean this is an ongoing question my what i want us to do a platypus economics is teach the world economics if teaching that nonsense is nonsense does that distract us from our mission or is that our mission i i feel genuinely puzzled these are puzzling times these are puzzling times i think you've nailed it mate [00:20:37] Justin Wolfers: and that's it for our show uh if you liked what you saw if you learned something please like and subscribe to platypus economics you can follow us on youtube you can follow us on substack we're on all social media and don't forget to like and subscribe and download the platypus economics podcast wherever [00:20:51] Speaker 1: you get your shows and thanks folks for your questions i love the fact that you challenge us on everything that we do and hopefully some of our answers are also a little bit helpful looking forward to continuing the conversation until then stay curious