Trump is either ‘lying or stupid’ — Prof. Justin Wolfers gives Trump an F grade on the economy

I will say overwhelmingly the most incoherent, chaotic, unhelpful economic policy of my lifetime and it's not close.This bloke gets an F and it's not close and it's not me. I'm not giving an ideological perspective here.You can call any economist in the world and they will give you a long list of just profound cell phones that were completely unnecessary.

Hello and welcome to the Trump Report.I'm Maddie Hale.You know what, guys?We're going to move away from Iran today.We're going to move away from a lot of the domestic stories and we're going to focus on the economy today.We're going to break this down in layman's terms and get all into it, into tariffs, into these GDP figures, into inflation, into kind of how the U .

S.is going with the economy since Trump was inaugurated last January.So no better person to bring into the show, Professor of Economics at Michigan University and the founder of Platypus Economics, Justin Wolfers.Welcome to the Trump Report.

Justin Wolfers Matty, what a good idea to have an Australian talking to an Australian on a British show about America.

Welcome to the new globalisation.audience do love Justin, but he's usually on with my colleague Fergus, who stepped away from the show.And so I have had the luxury of bringing a fellow Aussie, and not even just an Aussie, a fellow Sydney sider, a fellow Harbour Beach lover, Justin, to kind of break this down.Now, everyone knows that when you have two Australians talking about news, the requirement really is no BS, and it is breaking things down into layman's terms, as I've said.So let's start off.Now, we're going to start with just over a week ago, the latest GDP figures show that the US economy had grown an annualised rate of around 1 .5 % in the second quarter.

This was down from the 2 .1 % in the first quarter and this was well below economists expectations.So Trump keeps talking about this economic boom, thisgolden age for America, Justin, although his previous, you know, the administration had previously been talking about a 4 to 6 % growth.But is the economy actually booming or is Trump overselling the picture?

Yeah, so let's, you just saw a whole lot of numbers, folks, which is what economics journalists do.So let's slow down because I'm a teacher.2 % is normal.Below 0 % is a recession, and 4 % or 5 % is what the president promised.So 2 % is normal and healthy.We're at 1 .5%.

So there's a few things you learn from that.You learn that we're less than healthy.You learn that we're within spitting distance of healthy.So from that, you learn that the doom and gloom the economy is in the whole story is wrong.we are closer to healthy than doom and gloomers would have us believe.So that's one framing.

And a second framing is, of course, the president told us he's going to have the economy growing at 4 % until the next week on the campaign trail.He remembered the number five was bigger.So then he said 5%.And then for the first 18 months of the Trump administration, they've not gotten those numbers.And every quarter they've said, don't worry, it's coming soon.This quarter, the previous quarter we've been promised is soon, but soon never happened in a year and a half in.

It looks like we're not going to hit the astronomical growth rates that we had been promised.That is a surprise to exactly no one who knows math or economics.

So Justin, for years, Republicans have enjoyed a clear advantage on the economy when it comes to voters and voter, I guess, support.So a new Reuters and Ipsos poll has shown that that has essentially disappeared.So for the first time in nearly a decade, 37 percent of voters say that they actuallytrust the Democratic Party more on the economy compared with 36 % for Republicans, while Trump's overall approval rating has fallen to 35%.Has Trump just lost the one issue that made him politically untouchable, do you think?

Political Untouchable is the sort of colourful language I'd expect from an Australian journalist.I'm going to push that aside.Sorry to tease you there, Mattie, because I want to get to the economics of what's going on there.Look, the perceived advantage that Republicans are the party you elect when you care about the economy, that's been there for literally decades.What's striking is how hard it is to move that.For instance, people tend to believe that Republicans are better in terms of balancing the budget.

The reality is Reagan blew out the budget, Bush blew out the budget, Clinton repaired the budget, Obama repaired the budget, and then Trump 1 blew out the budget, and Trump 2 blew out the budget.a belief among the general public that hasn't been true for 60 years.So that's on one part of economic policy, the budget.What's happened with the current president is he then came up with a very unconventional set of economic policies.He's pro tariff, for instance.But the thing that's remarkable about this president is, unlike all previous ones, he hasn't tried to win the battle of ideas.

You normally go out to the American people, you explain to them the theory of the case, you look them in the eye, you tell them why what you're doing is a good thing.Trump has just thrown tariffs out willy -nilly at anyone who burps or farts in front of him.And he's lost the battle of ideas because serious people sit down and they talk about these things and the American people have come to see that tariffs are unhelpful, they're hurting America's standing on the world stage and they're hurting their individual wallets.What's striking is if you ask specifically about the tariff issue, which is a very easy populistissue to win with the general public, because you basically say, understanding you're not quite telling the truth, you basically say foreigners are going to pay taxes, and no one likes foreigners, I speak as one, and the idea that we should make more stuff in America has a lot of populist appeal, yet still by a factor of two to one the American people are against this.It's unbelievable.

It's normally a very easy political argument to win.Congress is against this.It's one of the reasons why the President has not once gone to Congress with any of his tariffs.He wouldn't have any of the legal problems he's currently having if he'd actually gone and said, we have a Republican House, a Republican Senate, and a Republican President.Why don't I take my really good idea and persuade other people of the value of them?He hasn't tried.

And as a result, he's lost that battle of ideas.And then I think the, I'm going to go on for a long time because I'm a professor.That's what I'm paid to do, Maddy.But I think there's two other things people have noticed.One, this is a chaotic White House.Anyone who has a family friend who's in business knows that that family friend right now is just suffering whiplash.

They don't know what the tariff rate is.They don't know what the budget position is.They don't know what future interest rates are going to be.And to be honest, some people are not even sure we're going to have another election.That tremendous whiplash is bad.And then one other thing, and then we'll get back to actually making this a conversation rather than a rant, is there are deep concerns, I think quite broadly, about the competence of the administration.

This is the worst economic team I've ever seen in my lifetime, and it's not even close.The president's understanding of economics probably at the University of Michigan would not earn him a passing grade.And even when they have ideas,

And we're going to get further into tariffs and the way they've played out in a minute, but I want to get your thoughts because you mentioned the way that the Trump administration is handling the economy on a broader spectrum and how he would be graded.One of the more interesting economic themes this week with economists has been this thing called a K -shape economy.Corporate profits have hit records high, but workers' share of the economy has fallen to a record low.Is this why Americans feel that the economy is basically not working for them, even if those on Wall Street are celebrating?

Yeah.Yes, but I'm going to tease you for a moment.May I do that?

Go for it.

You have the journalist instinct for the let's simplify it.No, I'm going to slow us down and You know, so you might find me the most boring guest you've ever had.Sorry about that, Maddie.

I'm just happy with an accent, Justin.

Well, so am I. Maybe we should just talk to each other for a while.Look, Right, so the claim of a K -shaped recovery, let me just explain what that is.It's that folks at the top end, their lives are getting better.They're wealthy.Folks at the bottom end, their lives are getting worse.Or you could say, not getting better quickly.

And so that sort of looks like the letter K. And economists love letters.Today is brought to you by the letter K. The administration has pushed back against this very strongly.In fact, yesterday, Treasury Secretary Scott Percent published some numbers where he claimed to say.the K -shaped economy is not a reality.Now, he actually showed that he's badly briefed and not very good at economics.He showed that among workers, folks at the lower wage workers were getting faster wage gains right now than the higher wage workers.

He forgot to adjust for inflation, and what that meant was actually he was showing everyone was barely getting any gains at all.But he turns out he's right, the numbers he showed are real, which is among workers, higher wage workers are doing better than lower wage workers.But that's not all of income.It's very easy for us to say wages, therefore income, because you and I are basically wage workers, right?Well, actually, I'm not, Matty.I have my own business, Platypus Economics.

So we earn capital income as well.Or if you were retired, you would have a big 401k, and that earns capital income, money paid to the owners of businesses.And so what's striking is the extent to which the share of the pie going to workers is now at an all -time high.and the share going to capital is at an all -time high.And it turns out capital income, you know, profits and the like, companies are predominantly owned by richer Americans.So that rise in the share going to capital income is also a rise in the share going to the wealthy.

The fall in the share going to labour income means a fall in the share that goes to all of us.And so I think that's the very simple reconciliation, which is, yeah, the stock market's doing pretty great, but that stock market is owned by the wealthy few.The share of the pie going to workers has fallen, even if within the group of workers it's a little more equal.The fact that so much more is going to workers is why we actually... percent actually ended up convincing me that there's more to the K -shaped economy than I had realized before.And then you asked the final sort of dramatic question, which was,is this why the punters are revolting?

And I think that's part of it.But I also think you can't escape the inflation story.Inflation is miserable.It feels like there's a dark and personal force that's taking away your ability to get by.People saw that they suffered through it during COVID, they see it again, they're suffering through it again.

Well, you know, inflation is sitting at 3 .5 percent, well above the target of 2 percent.The Fed reserves 2 percent.And John Williams, the New York Fed president, he said that inflation, yes, it's moving in the right direction.But if it doesn't keep falling, the Fed is prepared to raise these interest rates again.Now, Trump, of course, he's repeatedly claiming that we're bringing these prices down.But is John Williams essentially saying that Trump's economy isn't out of the woods yet?

Well, let me actually slow down because there was a point there.So I'll keep doing this economics professor thing, mate, but that's who you called.So it's on you, Maddie.

We're fine with it.You can condescend us.

Oh, wow.I'm not condescending.I love to teach.

I'm not a business journalist.You have to talk.

I wasn't condescending to you.I care about our audience, Maddie.

I want people to learn economics.

So that's why I want to draw a distinction.What the president promised was that prices would go down.Things would get cheaper.What's happened is the inflation rate has come down.They're very different things.The inflation rate is the rate of change of prices.

So prices are going up.They were going up rapidly.Now they're merely going up fast.The president promised us they'd go down.So we are 100 million, 110 bazillion miles away from the president delivering on what he said he'd deliver.By the way, it's usually unhealthy to bring prices down.

It was an irresponsible statement.It was incoherent.Those of us who do this for a living knew that, but the president either was lying or stupid.when he said it.Okay.So we're not bringing prices down.

And if you are hoping for that, don't be mad at me. I'm just an economist.Be mad at the guy who lied to you.

And we are.

People are.So the inflation rate is coming down.That's good news.That's what John said.John Williams said.It's coming down slowly.

And inflation at this point, look, the standard way economists think about this is we have suffered a supply shock, a supply shock being Iran, being tariffs, being Ukraine.It's the way the supply shock plays out is the cost of doing businesses goes up, therefore prices have to go up.Now, the thing I want you to notice is prices might go up from medium to high to reflect high costs, but there's no reason for them to keep rising.And so that then says the rate of change of prices will be high in the transition period, but it will fall back to normal.And so then the hope is inflation just falls back to normal.The problem is inflation now has been above the Fed's target for five years, more than five years.

And at some point, folks lose faith and they lose patience.And that's what folks are worried about.And so, yes, inflation remains a very big open wound.both among the punters and also in terms of what we can do with economic policy.

OK, let's let's get into tariffs now, because I want to get your thoughts on this new 15 percent tariff on imported polysilicon.This was announced yesterday.It's a key material used in solar panels and computer chips.So basically, Trump said that he wants America relying less on these imports from China.With this new 15 % tariff, is reducing America's reliance on Chinese polysilicon worth the cost, or are American consumers once again being asked to foot the bill for Trump's trade agenda?

So again, just to go back one step, Trump's trade agenda is based on a theory that tariffs will be helpful.And this is just one example of that trade agenda.The problem is, it's actually very foundational, which is Trump seems to see international trade in zero sum terms, where if someone else is selling stuff, they're gaining and we're losing.Now, I actually imported something, this shirt I imported.It cost me $40.To Trump, therefore, America just lost $40.

But he forgot something.I sent 40 pieces of paper that have dead presidents on them over to China, and I got this shirt back.What he forgot is I got the shirt back.So if I send someone pieces of paper and they send me cotton, who won and who lost?The problem is Trump sees everything as a competition.that they won and I lost.

But actually, what happened was I worked for an hour, earned that 40 bucks and sent it over to China and got a shirt back.If I tried to make the shirt myself, it would take me 10 hours.So actually, I gained nine hours.What happened was a miracle of cooperation.And that's the right way of thinking about international trade.The only reason people ever trade, whether it's with their spouse, their best mate, or someone on the other side of the world is, I think I'm going to end up better off as a result of this.

That's how I feel.And the other person wants to send me stuff because they think they're going to end up better off as a result.So the view is basically we can produce more together than we can apart.So the moment you disrupt trade, what you're doing, and I think there's a much more helpful language is to say you're disrupting cooperation.So what was that fancy word?You're polysilicate.

You're very good.

Polysilicon.

Polysilicon.Wow.

I wonder what that is. who knows, used for computer chips and solar panels.I mean, half these words that come out of these trade deals.Justin, are over my head.

No, it's over all of us, mate.Let's just say, don't you remember a simpler time?It's not your fault, Maddie.It's the president's fault.There was a simpler time when you could do your job without knowing what polysilicate is.There was a time, I'm not going to admit this in front of your audience, but there was a time I didn't even know where the Strait of Hormuz was.

I thought that boats just went from the Middle East and turned up in America, and I didn't realize there were all these straits.By the way, fun fact, Maddie, the Strait of Hormuz, you look at it on a map, I've had to learn this, it's actually kind of a kink.It's a kink.They should call it the kink of Hormuz.

I know.We should rephrase this show, Dumb Bogans, explaining the world.

Maddie, you're going to have to explain to our audience what a bogan is. I know.

What's the American term for it?God, I don't even know.But let's move on because I want to use Canada as an example when it comes to these tariffs.So Trump this week, he was speaking at this campaign event in Vegas.He called Canadians nasty when he was referencing, you know, tariffs and basically saying that the United States...

Let's pause right there.I want to pause right there.Have you ever met a Canadian?

They are the nicest people in the world.And shout out to the Canadians who watch the Trump Report because they love it.

I love my Canadians.I was on, I mean, the idea that Canadians are nasty is the most ridiculous thing in the world.Look, I'm going to offend some Canadians right now.Tim Hortons is rubbish.Now, the Canadians will say, no, Tim's is great because they're comparing Tim Hortons to American coffee.And like, honestly, American coffee sucks too, Maddie, where you and I come from, real coffee.

Okay, back, I want to, Canadians are nasty.Could you even, I was on an interview with the Canadians a few months back.And I said, I just want to say on behalf of Americans, because I carry an American passport, I said, I want to apologize for the way the peoplehas treated your country.He does not represent all of us.And my favorite moment in this whole trade war was the Canadian broadcaster said, I'm sorry that you have to apologize.

That's how nice Canadians are.And by the way, the president's not succeeding because the thing is, people in the United States actually know Canadians.They're just across the border.I'm from Michigan.They're literally 20 miles across a bridge from me.My brother -in -law is Canadian.

My brother lives in Toronto.But I'm going to prove that by saying Toronto.That's how you say it, apparently.So this is all nonsense and bullshit.I don't know if I can swear on your show.This is all nonsense.

Now, let me let you answer your question.Sorry about that.

No, I appreciate it.And I'm sure, you know, my guest and I yesterday, we went to town on these comments.So the Canadians are going to think, wow, two days in a row, this show has gone into bat for me.So we're all for it.

Yeah.Yeah.I mean, Canadians, honestly, they're going to be just happy to be seen.They're going to be like, someone noticed.We're here.Isn't that nice?

Anyway, I want to talk to you about this because basically, Canada's economy is proving to be more resilient maybe than expected after these tariffs.The GDP grew by 3 .4 % last quarter, well above the Bank of Canada's 2 .5 forecast, so exports beyond the US are now at the highest share since 1981.Are Trump's tariff, is his tariff strategy backfiring by pushing one of America's closest trading partners to become less reliant on the United States?

Yeah.So let me give the Canadian, there's two parts to that.One is what's going on with Canada and what's going on with US Canadian relations.So what's going on with Canada?So far through the trade war, Canada is an interesting quiet secret, which is the president threatens to invade.He's very bellicose and so on.

So early on in the Trump presidency, he imposed the largest possible tariffs on Canada.If you remember the fentanyl tariffs, it was kind of a crazy thing.The first thing the president did, having never mentioned Canada on the campaign trail, was he went after the Canadians, which was like, oh, no one's bingo card.They're not a geopolitical rival.They're not a trade rival.They're our friends and brothers.

So they got hit harder than anyone in the world.Then, of course, you know, I know this will surprise you, the president backed off his tariffs, and then he invented new ones, and then he backed off, and then he invented new ones.But somewhere along the way, he invented this very interesting carve out, which is, he said, Canada has a free trade agreement with the United States, it used to be called NAFTA, it's now called USMCA, and in Canada, they call it KUSMA.And he said, any goods that fall under that agreement are not subject to the new Trump tariffs.Which actually then, and basically the Canadians went rushed to get everything certified.And it actually ended up meaning that Canada went from having the highest tariffs from the United States to the lowest.

Very close to zero.And the Canadians understood this and so they just shut up about it.Every other country had a worse deal.Then what happened most recently was the president added a new 50 % tariff on certain Canadian goods as part of his retaliation campaign.That got rid of the special USMCA slash CUSMA exemption, which puts Canada back on a similar footing to everyone else again.So that's the history of Canada.

You might say Canada's sort of done okay.Let me actually temper that a little.The Canadian economy is so linked to the US economy.It's a very, very tight linkage.Canada's exports as a share of output is so much larger.It's a very open trade -centric economy.

The US is actually not a very trading economy.So it turns out the disruptions to that relationship really are super duper economically meaningful.And while I love to cheer for an underdog, it actually has been very damaging to Canada.So the latest quarterly GDP number says something, but it doesn't matter.The deeper thing is these disruptions have been unusually painful for Canada.Let me come back to the second part of your question, which is actually our friends have sort of battled and figured out a new strategy, and they have.

So you can think about Mark Carney gave a speech where he sort of said the middle powers.He called Canada a middle power, which is so polite, so Canadian.Rather than saying smaller countries, rather than saying almost big countries, Canada said we're middle sized.By the way, so is Australia.So it's a middle power.I think Britain might be a middle power even.

Used to be a major power, but the sun set on that empire.Sorry to the British viewers.So Canada and many other countries have realized the United States has become an unreliable partner.And so what do you do when someone becomes an unreliable partner?My advice to my 16 year old daughter has been dump that bloke.This is not romance.

You can have more than one partner.And so what you do is you form relationships around the United States.And so this has hurt the United States in ways in which I don't think the Americans realize.Not that it's a secret, but our news cycle, as you would well know, Mattie, running the Trump Report, is so bonkers that there's no space for the fact that Canadians aren't buying wine, Canadians aren't coming across the border for tourism, Canadians are not sending their students to our universities.Individual Canadian families now are picking up everything they look at in the supermarket and only buying American when they've got no other option.There has to be large economic consequences of this.

It just hasn't bought any space in the United States.

Or do you think it hasn't really trickled down to see the full picture yet?Because, yeah, I want to get your thoughts.We know that basically by Trump alienating these allies through his trading agenda, it means that you see Canada and Mexico, Europe, the UK, whatever, being pushed into the arms of other trading partners.So they'll find these things elsewhere and that in itself will end up hurting Americans.But I want to get your thoughts on how you think this will hurt Americans.Who loses out in America?

How does the US consumer ultimately pay the price for this?

So look, if everyone goes and look, if you're the bully who sits at the lunch table, and then eventually everyone realizes they can just go sit another table without you, the bully loses.And that metaphorically is the play that's going on right now.Kids sit at the lunch table with a bully and get beaten up by that guy for a few weeks before they get up and move.So this is a long run play.So the things you talked about, I think it was sort of a deep underlying rewiring of who can you trust, how much, how should we move forward on trade and on defense.And you know, will countries like Britain or Canada or Australia remember the fact, not just that there was one president who acted extremely idiosyncratically and abandoned decades of cooperation, but also the American people elected that bloke twice.

And so even as the President leaves, the American people remain the same.And that's a very difficult wound.to repair.What that in turn means is that this sets in train just sort of a weakening of American soft power that will play out over decades.So you're not going to see it in a quarterly GDP report, but you are going to see it in sort of lost opportunities for our kids.in just a different set of global arrangements in the future that America's place in the world is fundamentally changed.

You know, for instance, scientific associations will not have their Next at your conference in the United States so a bunch of the short run a bunch of Las Vegas hotel rooms will go empty because you can't have an international conference in a country where you can't be sure everyone gets across the border.So in the short run that shows up as fewer hotel bookings in Las Vegas in the long run.One of the reasons scientists come to live in America is so it's easy to get to those conferences.So in the long run, it's going to mean that the US as a centre of scientific excellence sort of starts to diminish.And you can see how that has very long run, but very slow consequences.

Well, to kind of wrap that up, you're obviously a professor, as we mentioned.If you were to give Trump a year and a half back in office and grade his overall tariff and economic policies, what grade would you give him, Justin?

I want to qualify the following, which is I'm a very bad historian and I've only lived in the US for 30 years, but I will say overwhelmingly the most incoherent, chaotic, unhelpful economic policy of my lifetime, and it's not close.One of the things that professors do at the end of the year, I get all of my grades from all of my students, and I really hate to fail students.I really hate it.And, you know, it's on me to make sure they learn enough that they don't.But basically, every year, I'm always surprised that there's a nice belch of people.And then there's just like a few out here who've done so poorly.

I don't even understand what happened, right?It's as if we're speaking a different language.And in this case, those are the folks who get an F. On economic policy, this bloke gets an F. And it's not close.And it's not me. I'm not giving an ideological perspective here.You can call any economist in the world, and they will give you a long list of just profound cell phones that were completely unnecessary.So that's on policy.

But I want to come back.You could say the economy's doing OK.And the answer is, that's where we began.The answer is, it is.We're not in a recession.We haven't tanked things.

The US still stands.Partly, there's a little bit of luck there, which is AI is holding up so much of the American economy right now.And assuming you don't want to give the president credit for inventing AI, then we're being held up by some other factor.The other is too much of the way we describe economics is about next month and next quarter.And the damage that he's doing is ultimately going to be damage that plays out in yours and my kids' lifetimes.

Just a final question, Justin, you're less than I guess we're 10 minutes away from the latest US jobs report.What are you expecting to see?I know you can't give it a great prediction, but do you have any sort of prediction?

Mate, it's so exciting, isn't it?

You're such a nerd that this is your Christmas.

Absolutely.I was once a 20 something who worked at the Reserve Bank of Australia.That's the Australian equivalent of the Fed.And my job, everyone gets a different job.And my job was the employment guy.So the day the jobs numbers would come out was my big day.

I'd sparkle.I would get to brief the governor.It would be great.And then I went from there.I moved over to the U .S.

and I met my partner, Betsy Stevenson, who was chief economist at the Department of Labor.And that was her big day.So they would publish the numbers.She would brief the Labor secretary.They'd go on a media tour.So then that was really sparkly.

And then she moved on to the Council of Economic Advisers.And I was working at the New York Times.And it's such a big day in both of those places.And just to tell you,how exciting it is, there was a point my nanny walked in and she said, oh, Justin, it's jobs day today.And I was like, yes, it is.

That's how this works in my household.Maddy, you just did something I'm not silly enough to answer, which is you said, before the number comes out, what's it going to be?And this goes to air after.So the only thing that can happen is I can look bad.So I'm not going to do that.What I am gonna do is give your audience a very quick lesson on why we care so much, if I may. I think that's more useful, okay?

This hits the front page of the US papers every month.It's not that employment's the only thing that matters.It's that what we want, which always trying to take the pulse of the economy, but many of our measures of the economy that are most reliable are only released three or four months after the month happened.Well, that's not very, if what we wanna do is know what was happening in July and today's early August, Knowing we'll find out in like October or November is not very helpful.Well, the payrolls report comes out very early.Like today's early August, we'll find out what happened in July, that's great.

The second thing is, relative to other sources of economic data, there's more signal and less noise.They talk to literally tens of thousands of firms, tens of thousands of households.Having said all that, it's still not perfect.It's just the least imperfect indicator that we've got.So that's why everyone's so excited.And then what you'll see if you ever walk down Wall Street is they're all excited because we learned all this big news, which means it's going to have really big implications for financial news.

And for me, what it means is I've been thinking about the state of the economy.You know, we think it's sort of like a, you know, is it a B plus?Is it a B minus?Today is sort of like a really strong midterm time for me to update the grades based on that.So that's what's going on today.

All right.Well, Justin Wolfers, thank you so much for joining The Trump Report.It was great to get your expert analysis on the state of the economy..S.S.

economy.A great pleasure, Maddie.Let's do this again.