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Showing posts with label war. Show all posts
Showing posts with label war. Show all posts

Tuesday, February 03, 2026

3: War

A Wonkish Note on Tariffs and Inflation There isn’t really a puzzle here .............. effective tariff rates have risen much less than headline rates. Partly this is because there have been some major carve-outs, like Apple’s exemption from tariffs on India. Partly it’s because high tariffs have led firms to take advantage of exemptions that were already on the books but weren’t worth the paperwork when tariffs were lower. ............. total customs duties as a percentage of GDP, i.e., the tax actually imposed by the Trump tariff hikes. These receipts rose from 0.3 percent of GDP pre-Trump to 1.1 percent, a rise of about 0.8 percentage points. And that can serve as a first-pass estimate of how much the tariffs should have added to inflation. ............. a first-pass estimate of how much inflationary impact we’d expect — around 0.8 percent, or a bit more. .............. the CPI is 0.8 percentage points higher than it would have been without the tariffs: ........... In late 2024 forecasters surveyed by the Philadelphia Fed expected 2.2 percent core PCE inflation — the Fed’s preferred measure — in 2025. We don’t have December 2025 numbers yet, but the Employ America nowcast says 3 percent for annual inflation in 2025, 0.8 percentage points above pre-Trump expectations. ...................

These two approaches give the same number — 0.8 percentage points — which is also the increase in customs duties as a share of GDP. Honestly, the results are almost too neat.

............. the inflationary effect of tariffs has been more or less in line with what we should have expected.

Kevin Warsh and Weathervane Economics A man with his finger in the political wind ........ the nomination of Kevin Warsh to head the Federal Reserve. ........... he’s more of a political weathervane: He’s for tight money when Democrats are in power, but all for running the printing presses hot when a Republican is in the White House. ............ Warsh has been extremely caustic, condemnatory and insulting about the Federal Reserve’s track record. But during the biggest, most consequential monetary debate of modern times, Warsh got it totally wrong — while the professional staff at the Fed got it mostly right. ................. Warsh continued to argue vociferously against easy money even after the inflation he predicted circa 2010 failed to materialize. Rather than changing his views, he came up with new arguments to justify an unchanging policy position, seemingly inventing new economic principles on the fly. ............ Warsh’s biggest effort to justify tight money in the face of low inflation and still-weak employment, made in 2015, was an intellectual mess. Larry Summers (I know, I know) called it “the single most confused analysis of monetary policy that I have read this year.” ................ He may be better than the alternatives, but that’s a very low bar, which mainly tells us how sorry a state economic policymaking — actually, policymaking of any kind — has reached in the age of Trump.

Federal Reserve 101 What America’s central bank does and why it matters ......... Donald Trump just selected Kevin Warsh as the next chairman of the Federal Reserve Board. It’s an … interesting … pick, since Warsh has been harshly critical of the institution he’s now supposed to run, accusing it of “grave errors” that deserve “opprobrium.”

American Democracy Will Not Die in Darkness Which means that it might — might — survive ......... The Washington Post adopted the slogan “Democracy dies in darkness” in February 2017. Some found it pompous, but it reflected a widespread theory about how authoritarianism could come to America. This theory, based on the experience of democratic erosion in nations like Hungary and the work of scholars like Steven Levitsky and Daniel Ziblatt, argued that autocracy wouldn’t be imposed by armed men beating and killing the regime’s opponents . ........... The trajectory of the Post itself shows how that could work. The newspaper that broke the story of Watergate and brought down Richard Nixon has been Bezosified, its editorial independence destroyed and its newsroom increasingly eviscerated. Many other institutions, from other media organizations to some universities to law firms, have also become enablers of the regime. Big business has caved almost completely. ..............

Almost everyone, myself included, underestimated how far MAGA would go in engaging in open violence and abuse of power against those it considers enemies. On the other hand, we overestimated the movement’s impulse control, its ability to mask its tyrannical goals until its power was fully consolidated.

............. Orbán doesn’t arrest journalists. And in Hungary if you walk the streets of Budapest or other Hungarian cities, you will not find heavily armed masked men abducting people. That doesn’t happen in Hungary. ........... It’s a horrifying picture. Yet the flip side of the naked extremism of the MAGA power grab is that it has produced a remarkably strong backlash. The size and determination of civil resistance to ICE has been incredible and inspiring, like nothing we’ve seen since the Civil Rights movement in the 1960s. Republicans are being punished at the polls: On Saturday a deep-red Texas Senate district that went Trump +17 in 2024 voted in a Democrat with a 15-point margin. ............. I keep asking two questions as ICE runs wild. First, what is the strategy here? How do Trump, Stephen Miller, etc. think this is going to work for them? Maybe their initial belief was that a display of force would shock and awe their opponents into submission. It’s not happening, yet they just keep ramping up the threats and violence, apparently not knowing how to do anything else. .....................

The obvious answer is that there isn’t any strategy.

These people aren’t evil masterminds — evil, yes, but masterminds, no. They’re just thugs too crude and undisciplined to control their own thuggishness. They were caught off guard by the strength of the resistance because the very concept of citizens standing up for their principles is alien to them, and they still can’t believe it’s real. ................... The second question is, how does this end? Most immediately, what will happen during and after the midterm elections? Everything points to a blue wave in November. Yet many people in MAGA simply can’t accept losing power — among other things, their actions over the past year mean that if they lose power, many of them will go to jail. ...................... Trump is now calling for “nationalizing” the midterms, meaning to put voting and the counting of votes under his administration’s control. He can’t do that, but his demand is a clear sign that he will not accept the public’ s verdict in November. .............. So it’s just being realistic to say that MAGA will try, somehow, to prevent voters from having their say. Will ICE try to prevent blue districts from voting? If that fails, will they reject the results, in a midterm version of Jan. 6? Call me alarmist, but remember: The alarmists have been right, and the people telling us to calm down have been wrong, every step of the way.

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