Redburn Reads (March 24, 2025)

Chairman Trump

I’m a little over half-way on Lisa’s and my month-long travels in the Southwest (I’m writing this from the 138-year old Stater Hotel in Durango, Colorado,). But so much is happening so fast that I felt compelled to at least try to offer a few thoughts on the craziness we are all trying to make sense of.

Photos by Tom Redburn from the Bisti Wilderness in northwest New Mexico and Lower Antelope Slot Canyon near Page, Arizona. We live in a beautiful country, don’t we?

Donald Trump is bent on making Americans poorer again. Except for a favored few.

For all Trump’s incoherence, the effect of what passes for MAGA economic policy today is clear: while Trump intends to raise taxes (tariffs) on the goods most Americans buy, Republicans in Congress are bent on keeping personal and corporate taxes low for the richest Americans.

But tariffs (even combined with the spending cuts the GOP wants to impose on everything from life-saving medical innovations and health care for tens of millions of Americans to support for veterans and a safe air transportation system) can’t raise anywhere close to enough money to offset extending tax cuts for another decade. One consequence: widening the federal budget deficit even further. Moreover they will raise the cost of most consumer goods, starting with cars and household appliances made from steel and aluminum, adding to the inflation that Trump claimed he would tame on his first day in office and putting pressure on the Federal Reserve to raise interest rates..

On top of that, Trump’s corrupt approach to governance is built around dispensing favors to those who bend the knee and offer him rewards for his magniminity. At the head of the line, of course, are Elon Musk, Jeff Bezos, and many of their fellow tech titans. Expect other corporate leaders seeking tariff exceptions and regulatory relief for their businesses to join the queue.

I realize that weakening what is still a healthy economy may not be the worst thing Trump is doing, compared to causing countless deaths from cutting off foreign aid and risking the return of infectious diseases in the United States, illegally firing thousands of government workers, destroying the Western alliance, and transgressing the Constitution by defying the rule of law and refusing to follow legitimate rulings by federal judges.

But in the end, if Trump is to be brought down, it’s more likely that he will be rejected by the American public for making their lives more miserable than for a ruinous foreign policy and breaking democratic norms.

Let’s start with Trump’s regent, Elon Musk, who is engaged in an elaborate sleight of hand, doing real damage to some of the essential functions of government (including enabling tax cheats to steal billions by cutting IRS enforcement) without any hope of actually reducing the budget deficit. Here’s a video post by Betsey Stevenson, an economist at the University of Michigan who served on President Obama’s Council of Economic Advisers.

BetseyStevenson (@Betsey Stevenson) posted: The Musk cuts are a spectacle saving a few billion and primarily designed to dazzle us into looking away from trillions of dollars in tax cuts. It's not about government savings or efficiency, it's performance art. https://x.com/betseystevenson/status/1894523664344690793?s=51&t=fc5he6jyufdqV_PMNPU2iw

In the meantime, Musk looks set to extract billions of dollars from the federal government for his companies, all of which were built initially on subsidies from the taxpayers. Already, Trump has set out to weaken Musk’s electric vehicle rivals by quashing federal support for setting up electric charging networks that would compete with Tesla’s extensive network (established in part with earlier federal subsidies).

As for Musk’s other businesses, Eric Lipton, the invaluable New York Times investigative reporter, has a deep dive into how Musk’s space-oriented companies will also benefit from helping Trump win office again.

Within the Trump administration’s Defense Department, Elon Musk’s SpaceX rocketry is being trumpeted as the nifty new way the Pentagon could move military cargo rapidly around the globe.

In the Commerce Department, SpaceX’s Starlink satellite internet service will now be fully eligible for the federal government’s $42 billion rural broadband push, after being largely shut out during the Biden era.

At NASA, after repeated nudges by Mr. Musk, the agency is being squeezed to turn its focus to Mars, allowing SpaceX to pursue federal contracts to deliver the first humans to the distant planet.

And at the Federal Aviation Administration and the White House itself, Starlink satellite dishes have recently been installed, to expand federal government internet access. . .

“The odds of Elon getting whatever Elon wants are much higher today,” said Blair Levin, a former F.C.C. official turned market analyst. “He is in the White House and Mar-a-Lago. No one ever anticipated that an industry competitor would have access to those kinds of levers of power.”. . .

Mr. Musk has argued he is not personally involved in pursuing SpaceX contracts. But federal contracting systems require the government to avoid not only actual conflicts of interest, but even the appearance of them.

“By any objective standard, this is inappropriate,” said Steven Schooner, a former government contracts lawyer who is now a professor studying government procurement at George Washington University.

“Given the power he wields and the access he enjoys,” Mr. Schooner added, “we just have never seen anything like this.”

Corruption in government does real damage, but, at least for now, it won’t strike at the heart of what makes the American economy tick.

But Trump’s overall agenda, rather than going after the genuine shortcoming of the economy (for example, an affordability crunch for too many Americans struggling because of housing shortages, costly childcare, and expensive medical care), seems determined to undermine America’s fundamental strengths.

Writing for his new Substack newsletter, Paul Krugman, in a piece headlined “Making Sweatshops Great Again,” highlights the stupidity underlying the Trump regime’s claim that its tariffs will bring back the kind of manufacturing that once employed many of our country’s huddled masses.

No serious person mourns the offshoring of apparel employment. Clothing production is a low-tech industry that even in its heyday mostly employed immigrants who, despite being represented by a powerful union, were paid low wages and often faced harsh working conditions. For a poor nation like Bangladesh, apparel jobs are a big step up from the alternatives. But American workers have better, and better-paying, things to do.

As I said, no serious person wants the apparel industry to come back. But Donald Trump’s economic team aren’t serious people. Last week Howard Lutnick, the commerce secretary, went on CNBC to declare that Trump’s tariffs will bring back U.S. production of t-shirts, sneakers and towels:

His hosts started laughing, but there’s no reason to believe that either he or his boss get the joke. And their nostalgia for industries of the past seems to be matched by surprising hostility toward industries of the future. . .

[D]uring his speech to Congress last week, Trump veered off into a demand that Congress repeal that (CHIPs) act, which he called a “horrible, horrible thing.”

It’s not at all clear what he has against the act, although according to the New York Times many semiconductor companies attribute his hostility simply to “personal animus” toward former President Biden. And given the way the Musk/Trump administration has been behaving, companies aren’t just worried that future contracts will be canceled; they’re worried that the government may renege on contracts it has already signed, and maybe even try to claw back money it has already spent.

As you might imagine, all of this will have a chilling effect on U.S. technology development even if Trump doesn’t manage to repeal the act.

So what do you get if you put Lutnick’s remarks and Trump’s diatribe together? You get a picture of an administration that wants to use tariffs to bring back the low-wage, low-technology industries of the past, while killing policies promoting the industries of the future. Apparently they envision an America that produces sneakers, but doesn’t produce semiconductors.

Why is the White House pursuing such an insane policy? Nobody really knows, but the economist Noah Smith has an interesting comparison between Trump and China’s Mao ZeDong.

In one darkly hilarious moment, Trump’s Secretary of Agriculture told Americans to deal with sky-high egg prices by raising chickens in their back yard:

How did we go from “Make America Great Again” to “Everyone needs to become a backyard chicken farmer”? Did Mao Zedong rise from the dead and take over the U.S.A. while I wasn’t looking?

In fact, I do think something a little like that is happening. Unless Trump is being paid by America’s enemies to destroy the country’s economy — something I think is pretty unlikely — what we’re looking at here is an ideological project. Like Mao did in China in the 1960s, Trump is taking a baseball bat to the U.S. economy in order to follow his deeply held ideological beliefs.

But which ideology? I wrote that DOGE is an ideological project, but that’s all about anti-wokeness. Trump’s ideology isn’t the same as Elon’s; he isn’t raising tariffs in order to get rid of DEI or kick trans people off of women’s sports teams. Although his motives are always a bit murky, my best guess is that this is about a different ideology. This is about economic self-reliance.

Many types of ideological regimes emphasize a desire for self-sufficiency. North Korea has juche. Stalin had the Iron Curtain. Juan Peron had Peronism in Argentina. China’s Ming Dynasty and the Tokugawa shoguns of Japan had closed-country policies. Xi Jinping has emphasized economic self-reliance over rapid growth.

Trump ultimately isn’t much different. His inherent suspicion of other countries makes him want to be less dependent on them. To Trump, this goal is much more important than Americans’ prosperity. It’s more important than manufacturing strength or the fate of the working class. It’s a political goal whose value to Trump can’t be measured in dollars or jobs or production numbers. . .

It’s now clear that Trump’s tariffs were never a bluff, that he really means to enact as many of them as he can, and that his delaying tactics are just a way to ease America into the pain of being a poorer, more economically isolated country. It’s only going to get worse. And the uncertainty of exactly when and whom the tariffs are going to bite simply adds to the overall climate of fear and uncertainty.

America voted for a guy they thought would deregulate the economy and fix inflation — a modern-day Reagan. Instead they got a dime-store Mao, who would be happy to impoverish his nation just to see it be less reliant on the rest of the world. I think a little buyer’s remorse is in order.

We can only hope so – before it’s too late.