Aside from the general issues about Trump‘s tariff and his economic nationalism strategy, today’s actions against Canada and Mexico are inexplicable and dangerous. 1/8
First, the tariffs will raise prices on automobiles, gasoline, and all kinds of things that people buy. 2/8
Second, as the tariffs are passed on to consumers and then other firms raise prices to match their competitors higher prices, this will hurt American job creation by making American firms less competitive. Much of what we export, involves imported inputs. Cars move back-and-forth across the border between five and ten times during assembly. This makes the whole of North America much less competitive, relative to Europe and Japan. 3/8
Third, this will force our allies to retaliate, and I presume they will retaliate in ways that are designed to maximize our economic pain. 4/8
Fourth, it is hard to imagine a better way to increase migration on our southern border than by destabilizing the Mexican economy, as these tariffs set out to do. 5/8
Fifth, as the opening foreign policy move of a new Administration this punishes our closest allies and rewards our adversaries. The idea of diplomacy is to unite your allies and divide your adversaries. Why are we doing the opposite? 6/8
If the United States shows that it is willing to arbitrarily impose tariffs as a form of hostage taking for leverage, then other countries will find us a bad partner. This will undermine our economy, our power and our national security. 7/8
These actions are an important test for the American business community. They know this is not a pro-business strategy to promote economic growth. I hope business leaders have the courage to say so. 8/8
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I was very disappointed that the Harvard Law Student Government endorsed divesting in Israel. This following on what the Harvard Graduate Student Union did some time ago illustrates that there is a pervasive prejudice problem on the Harvard campus.
I continue to believe that BDS advocacy, if heeded, would represent anti-semitism in effect, if not intent.
Despite the fact that actions like this damage Harvard’s reputation and reflect on all in the Harvard community, academic freedom is a paramount value. Students have every right to speak as they wish. There are no grounds for discipline. And certainly there should be plenty of room for debate over Israeli policy. I certainly have profound disagreements with PM Netanyahu and with Israeli actions in Gaza. But academic freedom does not include freedom from criticism or responsibility.
In new NBER paper with @MA_Bolhuis, @juddcramer and Oskar Shulz, we argue that the unprecedented increase in borrowing costs is crucial to explaining the low consumer sentiment of the last two years. 1/N nber.org/papers/w32163
With higher rates, mortgage payments, car payments, and other credit payments required to finance everyday purchases have risen as well. It is not surprising that this would affect how consumers feel about the economy. 2/N
Since Okun invented his misery index in the 1970s, economists have looked at unemployment and the inflation rate to gauge consumer sentiment. But now that unemployment is low and inflation has declined, consumer sentiment remains depressed. 3/N
In nearly 50 years of @Harvard affiliation, I have never been as disillusioned and alienated as I am today.
The silence from Harvard’s leadership, so far, coupled with a vocal and widely reported student groups' statement blaming Israel solely, has allowed Harvard to appear at best neutral towards acts of terror against the Jewish state of Israel.
Unlike President Bacow’s strong statement of support for Ukraine after Putin’s invasion and the decision to fly the Ukraine flag over Harvard yard...rb.gy/zx7ff
@HarryStebbings asked me: What is the path out of US indebtedness?
First of all, we need to put it in perspective. A growing company can have a permanently growing debt. A growing economy can have a permanently growing government debt.
A company probably wouldn't think about its debt by comparing its debt to its earnings. It would probably be much more likely to compare its debt service to its cash flow or to compare its debt to the market value of its equity.
While I am glad to see that the “debt limit crisis” is in the rearview mirror, CBO projects budget deficits will exceed 7 percent of GDP and be on an upwards trajectory a decade from now.
For all of the post financial crisis/ pre-pandemic period I feared secular stagnation and opposed fiscal alarmism. But now I am alarmed because we are in new and dangerous territory.
Current CBO medium term deficit projections are twice as large as those when the Simpson- Bowles process was initiated in 2011 and substantially larger than those faced by the incoming Clinton administration in 1993.
Very good @WSJ interview with the very wise Bob Rubin on his new book, The Yellow Pad: Making Better Decisions in an Uncertain World, and the challenges facing the United States.
The fact that the US is the only country where a career like Bob Rubin’s is possible makes me--for all our problems--more optimistic about our prospects than those of any other country.
I learned an enormous amount from Bob @ finance & financial mkts but even more @ decision making & leadership. Long after the issue set has changed, Bob's insights @ thinking in probabilities, relying on disciplined & inclusive process, & getting best out of people will endure.