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On the latest episode of GoodFellows, senior fellows John Cochrane, H.R. McMaster, and Niall Ferguson, and moderator and distinguished policy fellow Bill Whalen sit down together for a special in-person conversation on the current state of the economy, politics, and world affairs.
The performance and popularity of the Trump administration are themes throughout, as the guys analyze what’s gone well and where the president and his team would be wise to change course.
Quote of the Day
Bill Whalen asks: Does artificial intelligence have a public relations problem? Niall Ferguson thinks so, and explains why:
[AI] has an image problem. And I think it’s not surprising because after all, Sam Altman of OpenAI raised money, vast quantities of money with the following pitch: Our technology is so awesome that best case, everybody’s going to be unemployed and worst case, there will be human extinction. Now this turned out to be a great pitch to investors. Voters [are] not so enthusiastic about it. And when you look at the polling, it’s striking how much anti-AI sentiment there now is, including amongst Republican voters. A great deal of local resistance to data centers being built. This has become a really significant issue ahead of the midterms. So yeah, I think AI does have an image problem and I don’t think enough thought was given to this when the hundreds of millions of dollars were being raised with apocalyptic pitches.
The Central Issue: Why is Trump Unpopular?
Niall Ferguson lays out the paradox as he sees it:
The [US] economy is performing enviably from the vantage point of just about any other part of the world, but the voters are disgruntled. Affordability is their number one preoccupation. . . President Trump in the first hundred days of his second term delivered, I’ve often said it on this show, on just about every one of his campaign pledges. Something that hasn’t really been seen since Franklin Roosevelt was president, in the beginning of his long presidency. And yet the voters, having got what they voted for, shrug their shoulders and say, “Affordability.” They’re disgruntled. And that is I think the great puzzle of Trump’s second term. He ought to be more popular given the strength of the US economy, but no good deed goes unpunished.
Leading H.R. McMaster to offer his theory of Trump’s dilemma:
What [Trump] can’t escape though, he can’t really get out of the politics of subtraction and doubling down on really what he thinks his base wants to hear. I mean, if you look at his agenda, which is deregulation, fostering economic growth, border security and energy security, a strong defense, I mean who’s going to argue with that? It’s all positive. But the way he goes about it, always having to kind of disparage the people who’ve come before him, the other party, he just becomes his own worst enemy.
John Cochrane says various trade and regulatory policies, taken together, might explain the current performance of the US economy. But he, too, is puzzled by the current negative sentiment among voters about the economy:
I think to some extent, the good Trump and the bad Trump are balancing. The tariffs are damaging to the US economy, but they’re sand in the gears; they’re not a bomb on the economy. On the other hand, the deregulation effort and some of the tax reforms have pushed the economy up. So to some extent you’re seeing a balance between the two, but. . . [the economy] trundles along and makes do. . . The interesting thing is the economic story, the narrative, the, “Oh, it’s unaffordable. Life is terrible.” It’s strange that that story has been so strong while the economy itself, 4% unemployment, GDP growth continuing along. Yes, inflation, but wages are going up as well as prices. But there is that pessimistic storyline. I’m not a social historian, so I don’t understand where that’s coming from.
Key Takeaways
Should Russian Athletes Be Allowed to Compete for Russia in the 2028 Olympics?
Niall Ferguson doesn’t think so: “It’s grotesque to relax these sanctions at a time when, as H.R. just pointed out, the war in Ukraine is escalating, particularly the air war. So there’s no justification for changing the treatment of Russian athletes. If it was right to exclude them at the beginning of this conflict, it’s crazy to lift that ban when the war is raging and the Ukrainian casualties from ballistic missile strikes aimed directly at residential centers [are ongoing]. As long as those are going on, war crimes are being committed.”
What’s Going on in Ukraine?
Examining the challenges facing invading Russian forces, Former National Security Advisor H.R. McMaster notes that the future of the conflict largely “depends on the degree to which Putin may be convinced that he cannot continue the war at an acceptable cost and risk. So you’ve seen him in recent days in military uniform going around to probably what are staged, like maybe Hollywood set type situations where he’s giving directions and saying that they’re winning and so forth. But I think the Russian people increasingly see beyond that because they can’t get fuel. They’re getting in fist fights at fuel lines and of course the casualties are mounting. . . So [while Putin is] doubling down in Donetsk and Luhansk. . . they’re just impaling themselves on these defenses and taking more and more casualties. They’re taking the equivalent of casualties of the US casualties in the Vietnam War every three months.“
Should the US Government Take an Ownership Stake in AI Companies?
This is the sort of issue that can transform John Cochrane into the Grumpy Economist. As he says: “Well, this is an idea that Trump and [Senator Bernie] Sanders share because Trump likes. . . the government owning stock. Only 5% though, not 50%. Now let me point out the federal government already owns 21% of every corporation in the country. Why? We have corporate income tax. And so essentially they’re getting that dividend. So the difference between explicit stock and taxes is voting rights. And when you’re a significant shareholder, even 5%, you have significant pressure. So we’ve seen this before, the history of governments having equity stakes in companies and immediately what they do is [say], “Oh, you can’t close down that plant. Oh no, you can’t fire those workers. Oh, we need free daycare over here,” and so on and so forth. So on the good idea, bad idea scorecard, I’ll go with Javier Milei: Government ownership of stock with voting rights is a terrible idea.“
Recommended Reading
At War With Ourselves by H.R. McMaster
Parting Wisdom
Niall Ferguson reflects on the challenge that AI tools present the education system, and outlines his recommendations to preserve the essential components of students’ learning:
The problem is that if people are using AI at early ages in high school or in university, they do not learn to think. They can delegate the whole process, [starting with] the research: Summarize the readings for me so I don’t have to read them. The thinking: Hey, give me an essay framework. And then the writing, that gets delegated right now to large language models. If we allow that to be the norm of our universities, we’ll produce a generation of people who don’t have cognitive capability. So this is a big risk and it’s why at the University of Austin, I’ve been pushing very hard to get away from assignments that can be done on ChatGPT to classroom testing, to oral examinations, to handwritten exams. We’ve got to preserve the system of learning that equips people once they graduate to use large language models in an intelligent way. But they’ve got to learn first. They have to learn to think. They have to learn to write.
That wraps up this GoodFellows conversation guide. If you like this companion to the show, or have any recommendations for future conversation guides, please let us know in the comments below.
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution, Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.
Niall Ferguson is the Milbank Family Senior Fellow at the Hoover Institution, Stanford University. He is the author of sixteen books, including The Ascent of Money, Civilization, and Doom; columnist with the Free Press; founder of Greenmantle; and co-founder of the University of Austin.
H. R. McMaster is the Fouad and Michelle Ajami Senior Fellow at the Hoover Institution, Stanford University and distinguished visiting fellow at Arizona State University. He is author of the bestselling books Dereliction of Duty, Battlegrounds, and At War With Ourselves.