The Fifth Point of the Compass

I have to approach a topic like macroeconomics with a huge dose of humility. It’s not my area of expertise and never will be. While I can point out the (many) moral failings of the current U.S. heads of state with some sense of clarity, I’m not as willing to call out even plainly risky policies regarding global trade.

Even as I mourn my own investments taking a beating along with many of my fellow citizens, I am somewhat, perhaps begrudgingly, open to hearing about the whys and hows of reshaping economic fundamentals. I recognize that while my career has reaped the benefits of the post-industrial boom in knowledge work, others who are predisposed to working different types of jobs have not been as fortunate.

So it was with as much of an open mind as I can reliably maintain while still being beset by very real and legitimate financial anxieties that I approached Ross Douthat’s interview with Oren Cass (NYT gift article), founder of the conservative think tank American Compass. Cass, while acknowledging missteps in the implementation of the new tariffs, explains with some measure of clarity why the tariffs might be directionally the right path to take. Interestingly, I also heard roughly the same sentiment from Thomas Friedman on NPR a few days ago.

After all the back and forth, though, I think the speculation that wraps up the Cass interview ranks as the highest point on the plausibility scale (at least to my amateur mind). Douthat explains his “worst-case scenario”:

I do not think that the Trump administration will ride this exact policy mix all the way down into a recession. But I think there are reasons to think that Trump might stick with some bad policies. You have conceded throughout this conversation that any tariff regime probably comes with some cost to growth, hopefully modest, but some cost.

So you combine that cost with extra costs added by Trump’s nonoptimal policies with a general atmosphere of dismay and uncertainty, and that yields, if not a recession, at least, then, let’s say stagflation, somewhat higher prices from tariffs, and lower economic growth rates. The Republicans then lose Congress in the midterms. There’s no appetite for making these tariffs permanent via legislation because generally they’re extremely unpopular, but associated with Trump himself.

I’m not sure that’s the most undesirable outcome, if it ultimately rids us of the political albatross that has hung about our necks for a decade now.