Capitalisn’t: Harris vs. Trump—Economics Beyond the ‘Vibes’

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: As everyone knows, there is an election coming up soon. We thought it would be important to look at the economic proposals that the two candidates are putting forward through our unique lens. Which of their proposals are capital-is, and which ones are capitalisn’t?

Bethany: Of course, this is a challenging exercise in several respects. As a friend of mine said, both candidates are running on vibes more than specific proposals.

Luigi: What makes this discussion particularly urgent and particularly interesting is that neither candidate is espousing a traditional Republican or Democratic point of view.

Take tariffs. Before the Trump presidency, tariffs were pretty much a no-no for Republicans, I think since Herbert Hoover, and we’re talking 90 years ago. Trump levied tariffs on thousands of products, valued at approximately $380 billion in 2018 and ’19.

The Biden administration, rather than lifting those tariffs, has kept them in place. And in May 2024, it announced new tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles.

Bethany: Another example: the Republican Party used to be the party of fiscal responsibility. That got blown out of the water in the Trump administration. Some might say it got blown out of the water in the Bush administration, but it really got blown out of the water in the Trump administration, partly due to the pandemic, of course. But it does seem that for both Republicans and Democrats, budgets no longer matter.

Luigi: Now, to be honest, I think that the Republican Party has not been the party of fiscal responsibility since at least Ronald Reagan.

Bethany: Yeah. But at least they pretended—

Luigi: That’s true.

Bethany: —to care about it, Luigi. At least they pretended to care about it. Trump took it to a whole new level, and he doesn’t even pretend to care.

Luigi: And it is true that Bush’s father basically lost the election because he did care about fiscal responsibility and increased taxes, so I think that was a different element.

Both candidates toss around phrases like “opportunity economy”—this is Harris—which sounds great, but what it is is not exactly clear. Trump, on the other hand, says that the economy is terrible and that inflation is killing people and is the worst ever in America, which, of course, is not true.

His entire plan seems to rest on getting energy prices down. Moody’s had a great quote saying that “quantifying the macroeconomic impact of Trump’s policies is complicated by their lack of transparency and specificity, requiring us to make assumptions regarding their design and size.”

Bethany: We want to try to get underneath the talking points as best we can and hear what the two candidates are actually saying and what it might mean.

Luigi, before we get to that, I have a couple of questions for you. One is that the economy always gets blamed on or credited to the President. Some of the issues we’re going to talk about are really big issues. But in terms of the well-being of ordinary Americans and the direction of the stock market—two different things, of course—how much do presidential policies matter? Is the economy a separate beast from the president, or is it inextricably linked to the president?

Luigi: I think neither, in the sense that we cannot blame or praise the president for every little blip in GDP. And certainly, we cannot blame them for something like COVID.

But I think that in the long term, policies do matter. We have discussed many times on our podcast the impact that the entry of China into the WTO had on the well-being of Americans in general but particularly in the Midwest.

That was a policy choice. It was not inevitable. Now, we can argue that this was done for the best of intentions to try to bring China into the realm of democracies in the world. I’m not necessarily saying that it was a bad decision, but it is a decision with enormous consequences.

Bethany: That’s interesting. I was thinking, when you were talking, about the famous quote from Benjamin Graham, who, of course, is Warren Buffett’s mentor. He says about the market, “In the short run, the market is a voting machine, but in the long run, it’s a weighing machine.”

There’s got to be some analogy there with policy choices that in the short run it may swing wildly around, and it doesn’t seem to matter that much, but in the long run, perhaps they matter very much indeed.

Anyway. A second question for you that’s important, given that Trump says all the time how terrible the economy is. Harris, obviously, can’t say that and doesn’t seem to think it. Where do you think we are now?

Luigi: I think it depends very much on your perspective. If you are living on one of the two coasts and you are a boomer, you own a house and a 401(k), I think life is pretty good.

If you live in the middle of the country, or you’re young and you don’t own a house, or your salary has not kept up with inflation in the last four years, you are pretty angry. I was listening to a podcast the other day looking at the pivotal states, including Pennsylvania. They had this very interesting statistic. If you look at counties where the per-capita income was below the level of 2019, they are only 20 percent of the counties in the United States, but 40 percent of the counties in Pennsylvania.

Bethany: Wow. That’s a really interesting observation. We’ll get to the Federal Reserve as part of our discussion and Fed policy. But it certainly has seemed in recent decades that everything the Fed does either benefits upper-income Americans or doesn’t hurt them.

On the other hand, the brutal impact of things like higher interest rates . . . We can debate how much that’s the Fed, but that affects lower-income Americans who also don’t stand to benefit from the stock market soaring. I guess all of this does come back to how unequal our society is, in some ways.

Where do you think we should get started, Luigi?

Luigi: My inclination would be to start where most of the interest is in this moment, which is, number one, inflation or living standards of the median American.

I see from Harris two main proposals. First, the introduction of some form of limitation against price gouging that already exists in many states. It’s really for extreme situations, so I don’t see how this will have much of an impact. She also talks about capping the prices of more drugs. The Biden administration already has capped the price of insulin—I think only for people on Medicare, and then is trying to expand it. Price capping is a sort of brutal form of price control that works, up to a point.

But the other aspect she’s trying to push is on the issue of housing. Let’s face it, more than 30 percent of many people’s incomes is spent on housing, so the price of housing is a very important aspect—not so much as it enters into daily inflation discussions, because the way in which it enters is not perfect, but in terms of people’s perceptions that they can’t make it, I think that that’s a big issue. She has a proposal to actually subsidize first-time homebuyers with $25,000.

Then she also has some form of a childcare subsidy. I don’t think that her approach is to try to fight the price increases very much. It’s more to either regulate prices—that’s the insulin—or to subsidize demand to alleviate the pain.

Bethany: It seems to me that her proposals to include more drugs on the list where we can’t raise prices, including insulin, make sense. But the proposals against price gouging on food, and the idea that big companies are just greedy, and that’s why prices are high, seems to me to be more flawed.

Do you think I’m right in seeing drug prices and food prices in two separate categories, or would you lump them together? And then, we can get to housing as its own issue.

Luigi: I’m showing my true colors here. What I think is lacking is a general view of whether we have a competition problem or not. Are drug prices so high in part because we don’t have enough competition in some sectors, or do we have a cost problem?

This is where Trump is closer to, I think, proposing a solution. It’s not necessarily a solution I love, but he is going in the direction of saying, “Let’s deregulate, deregulate, deregulate.”

This is from a conservative website, so you might want to check to what extent this is correct or not, that computes the amount of additional cost that is imposed by every regulation that is introduced. This is not a number they make up. It’s a number that, by law, whoever proposed the regulation has to present for the Federal Register. They have to file how many hours it will take to complete, how much it costs, et cetera, et cetera.

If you look at the last three and a half years of the Biden administration, you see that the additional cost of regulation is $1.7 trillion. If you look at the four years of the Trump administration, it’s $65 billion. Even deregulation does not mean that you reduce the costs.

I’m not prepared to swear by these numbers. What I find interesting is there is a gigantic gap. While I personally think that a lot of regulation is very useful, regulation does have a cost, and that cost somehow is transferred into prices. If you are concerned about prices, I think what you want is to reduce the amount of overly burdensome regulation and increase competition. Those would be the two approaches. Either regulating prices by fiat or subsidizing demand . . . I’m not so sure those are the right strategies.

Bethany: I guess I’d put drugs in a different category because so many pharmaceuticals are affected by the decisions of the US government. At the behest of big pharma, the government couldn’t negotiate the prices it paid for drugs, until the Biden administration created a list of drugs on which they would set the prices and which could be negotiated.

I think it’s different when you have a big buyer like the government. That puts the cost of medicines in a slightly different category than the cost of food. Is that the right way to think about it?

Luigi: Oh, absolutely. But then I would add the question of competition. I would say, look, it’s not that we’re trying to regulate prices. I think that the message is wrong. We’re not trying to regulate prices; it’s that we don’t have competition. When you lack competition, then you need to find an alternative pricing mechanism, which is not accepting whatever the pharmaceutical companies want to ask.

By the way, the mechanism of reimporting drugs creates more competition that would help in reducing those prices tremendously. But then you do it more systematically. I think that the issue of ad hoc and announced just before the election is a bit strange.

Bethany: Housing is also, I think, in its own category. I did a speaking tour with the Federal Home Loan Banks in the Midwest, and everywhere I went, all these small towns throughout the Midwest, the community bankers would say the biggest issue facing their community was the lack of supply of housing. It’s the lack of supply of housing that is making it totally unaffordable.

Isn’t it a little bit perverse to be offering buyers $25,000? I mean, that obviously helps people buy a house, but it just pushes up the price, and it doesn’t necessarily do anything about supply, per your point, about a functioning market, right?

Luigi: Absolutely. To the credit of the Harris proposal, it does add some element on the supply side. Let’s step back a second. I think there are two potential bottlenecks here. The first one, which is dominant on the two coasts, is the so-called NIMBY movement, Not in My Backyard. Municipalities supported by the current owners don’t want to make available, for example, multiunit buildings that would increase the supply.

The problem is interesting from a democratic point of view because the federal government cannot massively intervene in what the localities do. However, there are a lot of ways you can do it indirectly. My favorite way would be to say you can only deduct your property taxes if the municipality is open to building new buildings. Now, this would be nice because it would be done through legislation. It would be transparent. You have more sneaky ways which I don’t like, such as saying Fannie Mae and Freddie Mac will only be authorized to make loans to firms that do X, Y, and Z.

Now, to be fair, the Biden administration has already touched this third rail because only housing with certain environmental properties qualifies. But introducing this mega-regulation through the decree of a bureaucrat inside an administration is not my preferred thing.

If I were the Harris or the Trump administration, I would propose a law a little bit like the Highway Act that says we subsidize federal highways only if they have a speed limit. This is for the two coasts, and I think this would be dramatic.

Now, there are some places like Las Vegas where federal land is a constraint. You know that most of the land outside of Las Vegas is owned by the federal government and is not available for development. If you were to make that available, of course, supply would increase, and that’s what Trump wants to do.

I don’t know what towns you had in mind. If you go to the famous or infamous Springfield, Ohio, where you have a sudden influx of migrants and you see an increased demand for housing, then the supply is not instantaneous and there, some initiatives to build more homes—and the Harris administration has some proposals to build more homes—could be the way to go.

However—and we are going to talk later about immigration—you might argue that one method is also to limit immigration, at least temporarily. First build the houses, and then let people come. If you let them come before you build the houses, then you have a problem.

Bethany: I could see on a national level how that would appear to be true, that more people coming into the country via immigration would increase demand for housing. That would mean fewer homes for the people who are already here. But given that housing is so local and that immigration tends to be pronounced in certain areas, is that actually what’s happening?

Luigi: I think so. Do you remember our interview with Leah Boustan? She did say that immigration causes an increase in rent and in house prices. The true reports—not the fantasies—from Springfield, Ohio, do say that rent has gone up tremendously, and the locals are upset by that. And you can see, if you have an influx of new people, in the short term, the supply of houses is pretty limited. Now, it can be only a temporary problem if the supply responds, but it is a problem, nonetheless.

Bethany: Do you think it’s a problem that should be taken into account in the immigration debate?

Luigi: Absolutely. Not in the direction of necessarily saying we want fewer immigrants, but to realize that if you want immigrants, you need to find a way to actually increase the supply of housing. You do create an inconvenience for a bunch of people, who, by the way, tend to be at the lower end of the income distribution. If you are rich, first of all, you own your house. And if your house prices go up, you’re happy. If you don’t own a house, you are the one who pays most of the cost.

Bethany: I was also thinking about this quote from Moody’s on immigration, which was really interesting. The quote from Moody’s said that while the surge in immigration has presented many challenges to communities, “the benefit has been to significantly increase labor supply and help ease wage and price pressures. This, in turn, has forestalled even more aggressive interest-rate hikes by the Federal Reserve and, thus, a possible recession. Reversing these immigration flows, as Trump is proposing, will quickly result in a tighter job market and foment wage and price pressures with immigrant-heavy industries taking the greatest hit.”

I thought that was interesting, particularly the part about easing wage pressures, because we’ve talked a lot about whether immigration affects wages at the lower end. It does seem to me that the consensus is becoming now that it does.

Luigi: It’s interesting because I think the Moody’s report is written from the point of view of a stock-market owner.

Bethany: Right.

Luigi: And so, you see, “fomenting wage increases.” If you are on the other side of the divide, you’re saying, “Welcome, wage increases.” Remember that most people didn’t make up for the increase in inflation. They’re barely now making up for the increase in inflation. So, “fomenting wage increases” is a bit of a loaded term.

Bethany: Should we go to tariffs?

Luigi: Yeah.

Bethany: One of the things that fascinates me about the tariff argument . . . It does seem to me that we very quickly . . . The political class very quickly flipped, and now almost everyone in the political class is a believer in tariffs.

When Trump first put tariffs in place, this was, man, crazy Donald Trump. But the Biden administration kept them, and no one’s talking about getting rid of them. Trump is talking about being far more aggressive on tariffs than Harris is, but no one’s talking about getting rid of them. So, how is it that tariffs became acceptable in the political class? And are they acceptable among economists, or are tariffs still viewed as effectively a tax increase and basically a bad idea?

Luigi: I think that the way we’ve moved is because people have seen tariffs, at the very minimum, as an instrument of industrial policy. To be fair, they’ve always been considered an instrument of industrial policy. From Alexander Hamilton, the idea of tariffs to protect the birth of industry in the United States was absolutely a goal. They were becoming passé because the infancy-industry argument clearly did not apply very much to the United States anymore, at least for a long time. It was not in the interest of the United States to have other countries develop this argument. So, I think that the universal consensus was low tariffs are better.

The divide that I see between Harris and Trump is not whether to use tariffs for industrial policy. They might have different industrial policy in mind, but they both see this as an instrument of industrial policy. What Trump sees in tariffs is an instrument of bargaining.

When he says that he wants 10 percent tariffs for everybody, including our European allies, and 60 percent for China, there are two schools of thought. One says, he means what he says. The other says, actually, it is simply the fact that he wants to have a threat to bargain with Europe.

Unfortunately, this fundamental question is not really addressed. The fundamental question is that, from the perspective of today, the WTO agreement has been a mistake. Why? We have not built in a mechanism to protect against dumping by other nations—most likely China, but not only China. And so, now, it’s a useless agreement because nobody wants to be in it, except maybe China.

I think that the future is an alternative WTO agreement, at least among democracies. How do you reach this goal? I think the idea of doing bilateral agreements, as was done with Mexico and Canada, and then extended maybe to England, maybe to the EU, et cetera. In the end, include everybody but China.

Then you basically go back to what you wanted it to be at the beginning, to a WTO with more rules. In this bilateral agreement, you can put in more serious mechanisms to block the instrument of dumping. This is the generous interpretation, if you want, of the mechanism.

The negative interpretation is that he doesn’t understand the impact tariffs have on prices. We were discussing just before about inflation, and the question is, how much of that transfers into prices? Actually, I was reading last night in preparation for this a paper written by a colleague of mine, and also the managing editor of the IMF, and published in American Economic Review, so, a reliable paper—looking at the impact on prices of the tariffs that the Trump administration imposed, and also the retaliatory prices that China imposed on the United States.

Actually, the reaction of prices is asymmetric. At least, for the wholesale prices, it’s asymmetric because there is very little evidence that China cuts down on prices to absorb part of the tariffs. It’s only 10 percent. The United States is forced to cut down much more, almost 50 percent, the level of the tariffs.

The reason is very simple. The United States exports to China commodities like soy. If there is a tariff on American soy but not Brazilian soy, the Chinese buy from the Brazilians. And so, the price of American soy has to go down almost as much as the tariff in order to compete in international markets.

It’s different if you produce a differentiated good. Let’s take cars. China supplies some parts for GM cars. If there is a tariff, it’s not like GM goes and buys those parts from Brazil, because Brazil does not produce them, they’re not producing them to specification, et cetera, et cetera. Basically, GM is forced to spend more.

Now, what is fascinating is that very little of this is translated in the short term, in one or two years, into consumer prices. Would you expect that they translate everything? No. In the short term, not much is translated into consumer prices. The authors don’t know whether companies sort of spread the cost of tariffs across taxed products and nontaxed products.

Imagine that there are two types of shaving cream, one that is taxed and the other that is not. They increase the price of both a little bit. And so, the study cannot identify the difference very clearly. It seems to me that they reduce their margins, they absorb some of this cost in their margins—which, by the way, ironically, is what the Harris administration is trying to do with price controls, which is to try to reduce the margins of firms. Tariffs do that the other way around.

Bethany: You read everywhere, basically, in any mainstream discussion of tariffs, the view is that increasing tariffs is basically a tax increase. I take it from what you’re saying about this paper that it’s not that simple at all.

Luigi: No, it’s not that simple at all. It is true that if it’s a homogeneous good, and it’s perfect competition—all the conditions that economists normally assume but in real life don’t apply—then that statement is correct.

Bethany: That’s fascinating.

Luigi: That’s why I wanted to see a recent paper, an authoritative paper. This paper said, look, when it comes to commodities, it’s almost true. Not exactly true but almost true. That’s what, actually, we export.

For us, we absorb part of the cost of the tariffs that China imposes on US agriculture. That’s a problem. With the products we import, it’s true that prices at the source are not cut, so it is a tax increase for the wholesaler. But, as you know, not all price increases to the wholesaler are instantaneously rebated to the level of prices. If you see a change in the exchange rate, for example, you don’t have an instantaneous change in prices at retail.

Again, we economists tend to say, “Oh, in perfect competition, this is what happens.” Yeah, but we’re never in perfect competition. What happens? The bottom line is there will be an increase in prices, absolutely. Will it be one to one? Absolutely not. Over what time period? God only knows.

Bethany: That’s fascinating. So, does that leave you with a capital-is or capitalisn’t on the question of tariffs with either Trump’s proposals or Harris’s far tamer proposals?

Luigi: I am an old-fashioned economist. I tend to be against tariffs in general. I think, overall, it’s not a good idea. However, if they are part of a meaningful industrial policy, it could be a good idea, but they need to be paired with a lot of other things at the same time. It’s not because we put a tax on Chinese toys that all of a sudden, we’re going to develop a toy industry. By the way, I’m sorry for the kids, but an industry that I don’t consider strategic is the toy industry.

Bethany: Right. Perhaps a better example would be, it’s not at all clear—in fact, it’s not true—that by putting a tax on Chinese semiconductors that we’re going to suddenly redevelop semiconductor manufacturing capacity in this country, right?

Luigi: No. But, for example, in the EV market, we might want to discuss whether this is a good idea or a bad idea. If you think that the United States can catch up or Europe or can catch up to the production of EVs by China, then putting a tax on them might be a good idea.

But remember, there are some costs. If you put a tax on EVs, you’re making it more difficult for people to do the right thing, which is the transition to an electric vehicle and less pollution. You are in a pickle.

Bethany: In other words, our grand goal of deciding whether each of these proposals were a capital-is or a capitalisn’t is really beautiful in theory but gets really, really difficult when you get into the weeds on it. What might be a bad idea in isolation might be a good idea as part of a larger picture.

Luigi: I would like to add one thing. Trump’s logic of bargaining all the time, I think, is not very strategic. In business, he was smart enough to change partners all the time, so you always find a fool doing business with him.

When you are with nations, and especially with allies, you are in a repeated relationship. And so, yeah, you can threaten once, but you cannot threaten constantly and maintain the relationship. The risk is that we really unravel in a beggar-your-neighbor policy, which was one of the many causes of the Great Depression. Herbert Hoover was the one who introduced tariffs, and the outcome wasn’t good.

Bethany: One other thing I did want to touch on is that Trump’s answer to a lot of things does appear to be based around more drilling and how that will lower energy prices. That has struck me as somewhat foolish in the sense that energy prices are set on a world . . . not natural gas, natural gas is a local market. Oil prices are set on a global level. The ability for the US to drill more and bring down oil prices is just not really how it works.

Secondly, or just as importantly, the ability of the US to drill more is also predicated on the market and where prices are, and whether the market is willing to finance drilling. A lot of American oil supply comes from fracking. That’s the swing supply. And fracking isn’t profitable unless oil prices are high.

You can’t make publicly traded companies drill if they’re going to lose money on their production. This idea that we can simply drill more and that’s going to reduce energy prices seems to me to be fraught for a whole bunch of reasons. Do you think I’m right about that, Luigi?

Luigi: I think you know more about fracking than I do, so I trust your answer on fracking. I think in the last few years, we have seen US companies benefiting tremendously from the lower price of gas because, as you said, the market for gas is segmented, and there is an issue about the impact of this on climate change.

There is also an alternative that if some of the industries move to China, in China, energy is still produced with coal. So, one can make a global climate-change argument by saying we should impose tariffs on China because of the carbon content and favor local industry. If we produce in the United States with gas, and we kill coal production in China, at the global level, the world is better off.

Bethany: Aubrey McClendon, who was one of the pioneers of natural-gas fracking, made lots of arguments—which were, obviously, in his pocketbook interest—to transition to a natural-gas economy. I know natural gas is complicated among environmentalists, but it’s better than oil. Certainly, if you’re arguing for energy independence or American control over prices, you would be in favor of transitioning to natural gas wherever possible.

Luigi: This is worth a separate episode. My understanding is, at this point, solar and wind are so cheap that it’s really a pity not to try to take advantage of those more. I think that there are some bottlenecks in the process. Even Texas is going solar big time.

Bethany: Oh, yeah. I think Texas has a shockingly high percentage of its energy being produced by alternative-energy sources, which is not what you would think of when you think Texas.

I know you don’t want to talk about taxes. We all agree taxes are really boring, but it is also one of the great differentiations between Harris and Trump. It may be a differentiation that doesn’t matter because, perhaps, neither one will be able to pass their plans.

The two things that stand out to me most about Harris’s proposal . . . and I think, by the way, the child-tax credit is interesting and great, but JD Vance has proposed the same thing, so they don’t so much differ on some of these details. But Harris definitely believes in a billionaire tax, and she believes in raising corporate taxes. Do you have a view on either of those issues?

Luigi: One can have a view on two grounds, one from an overall fiscal point of view and the other from a point of view of equality as a measure of fairness.

From a fiscal point of view, I think we are in, may I say, a freaking disaster. The level of deficit spending of the current administration, which is the Biden administration, is really very elevated, given that we are still in an expansion. We’re not in the middle of a recession; we’re not in the middle of a COVID crisis. We still ran an unsustainable deficit at the level of debt to GDP that has become dramatically high, and with future prospects in terms of the growth of the population that are pretty slim.

I feel like I’m living the same nightmare twice. When I was a kid, this was the status of Italy in the early ’80s. The result has been abysmal. I don’t know that it necessarily is cause and effect, but Italy from the mid-’90s to today has completely stopped growing in the level of GDP per capita. That is a nightmare for me. So, I am more of a fiscal hawk.

Now, of course, I don’t want crazy taxes, but I think a slight increase in corporate taxes is a great idea. One aspect that it seems to me the Harris proposal is trying to target is the fact that there is an enormous amount of capital gains that are not taxed because they are transferred through inheritance. So, there is a loophole. If you either donate or transfer through inheritance the appreciated stock, nobody pays the capital gains on that appreciated stock.

I think that that’s a loophole that needs to be closed, especially for enormous amounts of wealth. Imposing it for people above $100 million, it seems that is really a drop in the bucket in terms of reducing inequality, but it is a drop in the right direction.

Bethany: Perhaps our whole podcast should just boil down to whether or not the national debt and the budget matter. That, for sure, is the one thing that neither candidate is talking about, which is how they’re actually going to pay for their proposals, much less reduce our stupendous debt, and whether or not it even matters.

We’ve moved to an MMT economy without anybody even officially embracing MMT—most economists, or at least many, having thought that it doesn’t really work. But it’s actually pretty insane. I was thinking about this also, as we discussed earlier, about inflation and interest rates. If we don’t get our debt under control then, in the end, even the Fed starts to lose whatever control over interest rates it actually has, right?

Everybody is ignoring the proverbial elephant in the room, which is our national debt. If we don’t get that under control, that is going to sharply limit our options in the future.

Luigi: Yeah, I’m pretty sure. But I think there is a conspiracy not to talk about this during the election.

Bethany: Right? But isn’t that a problem? I mean, if in the end, everything else could be perfect and great, but the national debt continues to explode, it’s not going to be perfect and great for very long, right? We’re losing control over our future. In the end, by not talking about it, we’re all just dancing around the issue that really matters.

Luigi: I completely agree. I completely agree.

But more of an interesting nugget is the position on cryptos. Donald Trump recently has come out big, big time in favor of crypto. He is against any form of central-bank digital currency, which means the ability of the central bank to issue a digital currency that we can use.

As of today, we have only physical currency that individuals can use, paper dollars. There is no strong reason why we shouldn’t have a form of digital currency that people can use in the same way in which we use the paper dollar. For reasons that are not completely clear to me, even Vivek Ramaswamy was completely against this from the beginning of his campaign. Trump now has embraced this idea and wants to make the United States the capital of cryptos.

Bethany: Isn’t he just positioning himself among his base and trying to win over a crowd of people who might be independent voters, particularly in Florida, by saying this? Because he was once anti-crypto, and now, he’s pro-crypto. And what does it even mean to be pro-crypto? I view all of this as the election game rather than as anything real or any evidence of real policy. But maybe I’m too cynical.

Luigi: No, I think you’re not cynical enough. Because I think that this stuff will have consequences. First of all, Harris is more moderate but trying to chase him a bit. Part of this explosion of the crypto people is because the SEC has been pretty aggressive in trying to regulate crypto. Last time I checked, I think even Harris was trying to distance herself from the position of the SEC. Nobody wants to touch it.

Also, they donate a lot of money. We know now that in the midterm elections, Sam Bankman-Fried donated a lot of money to both parties. If history is any guidance, they’re still doing that on both sides.

The other thing that I would like to discuss that really is painful for me is the lack of a real push for more competition policy. I have a paper with Mara Faccio showing that in the United States, people pay a much higher cost for cell phones. Why? Because there are only three providers. You go to Europe, and cell phones work as well as they do here—you go to Germany, you go to Denmark—and they cost a fraction of what they cost here today. So, that’s a tax—a tax to consumers that is basically redistributed to shareholders and managers of Verizon and AT&T.

You can apply this logic in many places. It would be natural to have emerge an aggressive competition policy to keep prices lower or even reduce prices, in some cases. The cell-phone industry would be a case. And this could be applied to cell phones, housing, even energy, all the stuff above.

There is no doubt that voters are concerned about high prices. In spite of this demand, we see no supply. Why do we see no supply? The cynical part of me says it’s because the people who benefit from these high prices are the ones who finance both parties.

Bethany: No, I think you’re right. I think where I’m getting on this whole discussion is that what we’re lacking is a grand unified theory that all these things bleed into other things. It’s easy to pull on one little piece of it, like tariffs, or one little piece of it, like inflation and price controls.

But if you just pull on that one little piece of it, and you don’t actually look at the larger quilt, the larger fabric that you’re either unraveling or knitting, then it really just doesn’t make any sense at all. Neither candidate has a sense of any grand unified theory or doesn’t want to take it on. Or they view it as too complicated for the American public, so they’re not talking about it. I’m not sure which is better. That lack of a coherent framework is definitely a capital-isn’t, at least in my view.

Luigi: What is very humbling for a person who spent the last 30 years of his life teaching economics is that this is the first presidential race where both candidates have an undergraduate degree in economics. It ain’t good.

Bethany: I had totally forgotten that. Oh, my God. That just proves it, Luigi. Down with economists! Down with economists!

Luigi: I don’t think we have done a good job, I have to say.