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Shikha Dalmia: We are here today taping a segment of Zooming In with my friend, Veronique de Rugy. We’ve known each other for a very long time, but somehow haven’t been on a podcast together. You have written for The UnPopulist. You are an economist. You work with the Mercatus Center. You and I were colleagues for a while. It’s great to have you.
Let me start at the outset by asking you one question that I get asked a lot, especially by our center-left friends, which is: There were many right-wingers who supported Trump the second time because they thought, compared to any establishment alternative, he was going to be anti-war. And this was always mind-boggling to most people who had watched him in his first term, because he was not lacking in belligerence. I had actually written a piece about how he had vastly expanded America’s military footprint when it came to drone warfare.
You’re not a military expert, but there is an analogy in economics here, and especially for those who advocate free markets like you: many people voted for Trump because they thought he would be less meddlesome in markets than the alternative, in this case Kamala Harris. But how are they feeling in the second year of Trump’s first term? How are you feeling?
De Rugy: Well, I don’t know how they’re feeling, but I can tell you how I’m feeling. For sure, I knew he wasn’t going to be what I wanted, but I didn’t actually expect he would be as bad as he is. A lot of people who voted for him thinking he would be great on economic issues assumed that he would be the same Trump as in the first term. Obviously there were a lot of things that were really bad in the first term, even on the economic stuff in particular, like spending. It was bad. He just doesn’t care about this.
But people liked the tax cuts and they looked much more like the regular kind of Republican-type tax cuts. Tariffs were going to be bad, but I don’t think anyone could have actually foreseen just how remarkably worse he turned out to be. It’s just the scale, but also the breadth of the stuff he’s done on economic issues.
Now, if you’re asking me about the people who voted for him, I assume that there’s enough good that they can actually continue justifying it. [They] just tell themselves: “Kamala would not have done this.” And they’re right.
So I think with every president and every administration, you can find something that conforms to your views and make yourself feel better, tell yourself you never make any mistakes in your judgment.
Dalmia: Okay, yeah, you can tell yourself a story. I agree with that. And you would have to cherry-pick a whole lot of facts to make Trump’s economics look good. But let’s just look at the record here. I mean, in his first term, he was no slouch when it came to spending. And what’s interesting about Democrats is that they tax and spend. He was more tax-cut-and-spend, right? Like he cut taxes and then he raised spending.
De Rugy: In that sense, he is very much like a regular Republican, in my opinion.
Dalmia: Right. And the only time you actually get any spending cuts or deficit reduction is when you have a Democrat in the White House and a Republican Congress. The last time we had any kind of a federal surplus was under Clinton. And those days are long gone.
But this time it was very interesting because he came in with Elon Musk, who was not confirmed by the Senate. He appointed him czar of government-cutting through the DOGE program. And yet, one year after he’s been in office, there’s been a 4% increase in spending.
Forget debt, forget deficits—just plain spending has gone up 4%. And he released a budget which has a 42% surge in defense spending. That’s outside of the $200 billion that he’s asking for the Iran war as part of supplemental emergency spending. How is this sustainable? How is this not a black mark on him already?
De Rugy: Well, first, none of this is sustainable. But actually, I think you’re too generous with Trump when it comes to the spending. Because one of the things that I think we can say about him is that, while I said in his cut-taxes-and-increased-spending he looks like other Republicans, at the very least other Republicans paid lip service to small government and to cutting spending. He doesn’t care about this. He just doesn’t care about it.
“My fear of his presidency is not just through the budget. It's through literally everything he does. He's opened doors that people did not open before. What they've done is emulate some of what the Democrats were doing, while pushing it to a place the Democrats didn't actually ever dream of going. My fear across the board—whether it comes to the use of emergency powers or executive orders—is the attitude of 'let's do it and let the courts stop us.' It worries me on many levels.” — Veronique de Rugy
While a lot of the debt increase during his first term came because of COVID—he grew the debt by over $7 trillion and more than half of that was the COVID increase. But in the pre-COVID era during the first term, deficits were about to reach a trillion dollars while the economy was growing, with no emergency. I remember writing columns about how this is insane. And part of this was entitlement spending driving most of the deficit spending. But nonetheless, he just did not care about it.
This was not an issue in the first term, which is crazy precisely because he liked to brag about how the economy was doing great. But there’s no better time to actually pursue a reduction in deficit spending than when the economy is good—especially with wages growing. So he does not care about this.
During his entire campaign, there was none of this on the menu. And then all of a sudden Elon Musk said he was going to cut a trillion, $2 trillion of the deficit.
I fell for it a little bit. You know that. There was a little piece of me that thought, wouldn’t that be great? It turned out it wasn’t great at all. It didn’t materialize. It was going to cut two trillion, then one trillion, then $150 billion, and in the worst possible way. This budget is again talking about how it’s going after “woke” and DEI programs. It’s not going to scratch the surface of what we need to be doing to be fiscally responsible.
And you mentioned the new program. So, [the budget] raises defense spending by over $400 billion—I think it’s $445 billion—and they’re cutting non-defense discretionary spending by $73 billion. It’s not even trying—it’s barely trying—to offset any of the defense ramp-up. I assume there’ll be no meaningful offsetting of the $200 billion supplemental, either. And if it goes through reconciliation, it’s likely going to be much bigger. Because either way, you need to get it through Congress, which means there’s going to be some bargaining. And the final point is that the One Big Beautiful Bill had some really good features, but—I will give credit to some Republicans who demanded some level of offsetting—it was almost nothing. So you’re giving too much credit to the president. The president does not care about spending at all.
Dalmia: You said a part of you was happy—you allowed yourself to be slightly hopeful—when Elon Musk came along. I actually credit him for the opposite with me. I never cared for the Department of Education. And I suddenly started caring about it. Partly because of the way they were going about it. This was done completely unilaterally through executive action. Even though I really wish for the size of government to be much smaller, I don’t want Congress to become a completely neutered body. And yet that’s what happened. They did it through executive action. They did it through a guy who was not confirmed through the normal congressional process. And they caused a lot of disruption.
To me, they actually discredited the cause of limited government. That is a bigger problem. And what you have right now is a very, very weird situation where you arguably have a smaller government because there are fewer federal departments, some agencies have been cut and completely slashed—and yet it is more expensive. So, to me, they have maximized the damage on all ends.
De Rugy: Yeah, and they’ve really slashed very little. I mean, what they’ve mostly done is fire or let go—at great cost—some federal employees. I want the government to be really small, but that’s not the way to go about it. It was actually kind of an interesting exercise. When DOGE was announced, I had this little bit of excitement and thought, my God, maybe they’re going to reach out and we’re going to tell them how we think about how we should be going about this. And there was really none of that. They started just doing the stuff where they were going after the DEI line items and canceling grants and firing people and telling people to take a package. But there was no guiding theory. If I wanted to get to the world I wanted—I’m not saying there wouldn’t be a lot of chaos and discomfort and anxiety—but at the very least, I would want to be able to express the guiding theory behind what we’re doing. For instance: “This is not the role of the federal government; instead, it’s the role of the private sector or state and local government.” Or: “This is a government-granted privilege for companies.” There was none of that going on. So you just had the chaos and the feeling that it was politically targeted.
And while some of the stuff they were cutting overlapped with some of the stuff that would have been on my list for cutting, it was done in such a way that you would have none of the benefit.
Dalmia: The record of populist figures is always that they never cut spending. It’s just so much easier to throw subsidies and money at people and call it a day. So it’s very rare that spending goes down under populist leaders, which is one ...
De Rugy: ... It’s actually very rare that spending goes down.
Dalmia: Well, under populist leaders, it usually goes up many times over, because it’s a cheap way to buy votes. Which is another reason why I could never understand why the free-market side was even the least bit enamored of him. And the other problem—which we’ve touched on and which I want you to elaborate on—is that he’s been hyperactive in using executive authority. I mean, he has passed over 200 executive orders already, which is the most of any president in this century. I think FDR passed more than he did, but in this century at least, he’s really up there. And if he can do what he is doing to the budget through executive orders, how does he embolden future Democratic presidents?
De Rugy: My fear of his presidency is not just through the budget. It’s through literally everything he does. He’s opened doors that people did not open before. What they’ve done is emulate some of what the Democrats were doing, while pushing it to a place the Democrats didn’t actually ever dream of going. My fear across the board—whether it comes to the use of emergency powers or executive orders—is the attitude of “let’s do it and let the courts stop us.” It worries me on many levels.
Dalmia: Moving into slightly more positive territory—as you said, people can tell themselves a story about the good he has done. So talk to me about some of the more positive things that have come out of this administration on economics.
De Rugy: Some of these things are not really my area of expertise, so I’m basically reporting what I’ve read from other people. There is somewhat of a consensus that some of what he’s doing on AI is actually really good and important. Same for the agenda of energy abundance, which is important—the permitting reform, freeing energy supplies. Now, the way some of it is done is very Trump-like, where some of the stuff is good—all forms of energy are welcome—and then the other stuff is like, “Yeah, but we hate wind, so we’re going to go after that.”
“Chaos is a feature, not a bug of his governance—he actually thrives on it. He wants to be in the middle of all the news. If there's a little bit of calm, he's going to say something really outrageous just to get attention back on himself. Look at the way he's done tariff policy. The policy itself is bad enough, but the way he's implemented it has been the most insane, erratic, economically damaging approach—precisely because you can't count on anything. … The tariff stuff is the perfect illustration of pretty much everything that is wrong with Trumponomics. He wakes up on the wrong side of the bed and says, ‘You’re going to get a tariff.’ He sees an ad in Canada he doesn’t like that uses President Reagan’s image, and says, ‘Here you go, tariffs on Canada.’ And then removes them. He’s literally destroying the world trading order.” — Veronique de Rugy
But the administration’s basically liberated the crypto industry, for instance. The SEC is putting out actual clarifying rules around crypto that seem like they’re going to be important for the future of the technology. So there’s just been a lot of things for what will be a really important source of growth in the future. I think that’s pretty clear. And there are some efforts to rule out waste and abuse in Medicare and in healthcare. We’ll see. But those things are clearly happening. That’s not what most people talk about because that’s not the stuff he talks about. That’s done really in the background.
Dalmia: Right. And he may have deregulated the energy sector, but here we are with almost $5 a gallon in gas prices, because his populist instincts are manifesting themselves in Iran right now.
De Rugy: Well, I think this is the reason why we’re not going to know for a long time whether any of these very positive efforts pay off. Because the stuff that they’re trying to do that is good, from my perspective, there’s still always an odor of cronyism and favoritism to it. It’s always: “The companies that I pick are the ones who get to do things.” But the important deregulation—the permitting reform, the better permitting processes—it takes time to do well. Are they going to be able to finish the job and really deliver on this agenda? I don’t know. I just don’t know.
That’s always been my concern with him: the good stuff he wants to do is hard and takes a long time. It requires Congress for a lot of it, and he just doesn’t want to go through Congress. Meanwhile, all the really bad stuff he wants to do, he can do very easily. And this is why it’s all we ever see nonstop. And there’s also the fact that he likes to put himself at the center of the news at all times.
Dalmia: That’s a really good point. I mean, to take what he’s doing on AI, I’ve read a few pieces, which sounded pretty positive. One thing he’s doing is setting up a national AI policy so that you don’t have 50 states with 50 standards that are a hodgepodge of regulation that AI companies have to negotiate. And I think America is the world leader when it comes to AI partly because it has a somewhat more rational regulatory regime than European countries.
De Rugy: And he’s really doing it in a very different way than the Biden administration was, which was going the European way with a very precautionary principle [approach]. And that was going to be bad. We don’t know whether he’s going to deliver on the good, but we know for a fact that the Democrats would have done it the European way.
Dalmia: But then on the other hand—and here is where his authoritarianism comes in—Anthropic says that it has some problems with certain provisions in its contract [with the federal government] when it comes to surveillance, and he declares them a national security threat. He tries to destroy the company completely. He threatens to invoke the Defense Production Act to basically commandeer the company at the same time as he’s declaring them a national security risk.
And that goes to what you were saying earlier, which is that Democrats do industrial policy ... they’ve got this sense of: “We want to build these industries and we are going to use government subsidies and other incentives to do that.” Trump has taken that and gone so much further. He used the CHIPS Act—which is an act meant to subsidize our semiconductor production because apparently we’re losing manufacturing supremacy to Taiwan—to give Intel large sums of subsidies. And then in exchange, he does something that no president has ever done, at least not in non-emergency times: he demands an equity share in the company. He’s essentially partially nationalizing the company. So what he is doing is not industrial policy but “company policy.” He goes company by company, and if he likes a company, he will give it money and try to commandeer it. Or he will try to destroy the company, as he tried to do with Anthropic.
De Rugy: I think it’s state capitalism. So, take the CHIPS Act—all sorts of subsidies through the form of credits and loans and grants. Intel was getting an enormous amount of money: $8.9 billion. He doesn’t seem to be bothered by what usually bothers free-market people like me, which is that when you pick winners and losers by giving subsidies to some, often you extend subsidies to companies that were already in the process of doing what you’re now giving them subsidies for. That doesn’t bother him. He’s like: “If you’re going to get $8.9 billion from the government, I better get something out of it, and I’m taking a share.”
And the Democrats—Biden would have never dared doing this. You know who was calling for this? It was Bernie Sanders and Elizabeth Warren. That branch of the Democratic Party. And Trump’s just doing it. He’s also taken shares in, I think, 14 or 15 other companies. He has effectively partially nationalized the steel industry. When Nippon Steel wanted to buy U.S. Steel, the Biden administration very stupidly said no. Well, Trump comes and also says “no,” but in addition basically says, “Here’s what I’m going to do for your troubles”—and takes a golden share in U.S. Steel [that gives him a veto over the company’s decisions], something that, honestly, many Democrats would have loved to do but would have never even dared doing. And it sets a precedent.
“A lot of people who voted for him thinking he would be great on economic issues assumed that he would be the same Trump as in the first term. Obviously there were a lot of things that were really bad in the first term, even on the economic stuff in particular, like spending. It was bad. He just doesn’t care about this. But people liked the tax cuts and they looked much more like the regular kind of Republican-type tax cuts. Tariffs were going to be bad, but I don’t think anyone could have actually foreseen just how remarkably worse he turned out to be. It’s just the scale, but also the breadth of the stuff he’s done on economic issues.” — Veronique De Rugy
He’s basically doing the same thing in mining. On the issue of rare earth, there’s a real regulatory problem. The way they’re going about addressing this problem is taking shares in some mining companies, clearly giving them a leg up over other mining companies, setting floor prices, setting up a stockpile that is going to benefit some companies. It’s very obscure who the benefiting companies are and whether everyone will have access to the stockpile—but I don’t think so.
Dalmia: Right. And that’s my concern. So, he may have deregulated the AI industry or pursued relatively rational regulation. At the same time, he’s interfering and literally nationalizing major industries and companies. So what is to stop the next Democratic president from undoing whatever good he’s doing on AI using the exact same means—executive power, subsidies, nationalization, takeover—that he’s engaging in?
So, he came in as a right-wing populist. And Orbán came in as a right-wing populist. But if you examine the kinds of policies that right-wing populists engage in, they are actually indistinguishable from those of left-wing populists on economic issues, whether it is Hugo Chávez or Nicolás Maduro.
They want to court consumers too, [not just interfere with the production decisions of companies]. Trump’s making Elizabeth Warren-style moves to that end: capping interest rates on credit cards, telling Fannie Mae and Freddie Mac to buy mortgage securities to lower interest rates. Orbán did all of those things, as did Maduro and Chávez. So, at some point, the horseshoe really does converge.
De Rugy: Yeah, no, it really does. And this is why I always have a really hard time when people say, “Who do you think is worse and would have been worse?” Obviously, we don’t know what Harris would have done had she been president. I assume it would have been, from my perspective, things I didn’t like. And when I think of Trump, there’s basically all this stuff I hate—stuff where it would have been quite similar but on steroids.
But even the good stuff, the things you can say are objectively good from a free-market perspective—sometimes it’s done the wrong way, because it’s done through executive orders, so it can be reversed. But in the end, economic growth and freeing markets are not the only things that matter, right? We care about institutions. And on that perspective, you can’t help but look at the damage being done, and it is really, really significant.
Dalmia: Well, let’s talk about the institutional damage. This is another thing all populists have in common. They want to control executive agencies absolutely. They don’t believe in internal checks and balances. They don’t believe in watchdogs. One of the first things Trump did when he came in was fire all the inspectors general who keep an eye on public corruption and waste, fraud, and abuse in agencies.
De Rugy: And by the way, the Vault project, the rare earth project—they created this and gave, or want to give, a $10 billion direct loan from the Export-Import Bank, the largest in its history. And it has no inspector general.
Dalmia: Yeah, that’s interesting. And what he has done when it comes to federal economic agencies, whether it’s the Federal Reserve or the Bureau of Labor Statistics ... he has been interfering in their independent functioning.
All presidents are unhappy with the Federal Reserve chair, want certain monetary policies. But we have an independent Federal Reserve for a reason. We don’t want it to get politicized precisely because the benefits it can give are short-term but the damage is long-term and not on a president’s watch. Every president has been unhappy with the Fed. I remember George H.W. Bush actually said Alan Greenspan was responsible for his losing a second term because he wouldn’t lower interest rates.
And yet they kind of whispered about that behind the scenes. But Trump has not only openly berated a sitting Federal Reserve chair, but actually opened an investigation into him based on completely trumped-up, baseless charges. How do markets function properly when they cannot depend on an impartial and stable rule of law, based on sound, rational economic principles rather than the whim of one president?
De Rugy: Markets like stability, they like certainty. If they’re uncertain, it leads to a lot of paralysis. It’s not good. And we really can’t overstate how incredible what he’s done with the Federal Reserve is. I’ll temper it slightly by noting that the Federal Reserve is not entirely politically independent—it is created by Congress, the Fed chair is appointed by the president, and the chair has to appear before Congress. But traditionally, what independence means is that it doesn’t take orders from the president, and certainly not when the president is bullying the Fed chair into lowering rates.
“When the government actually takes ownership stakes in companies, it changes fundamentally the nature of the country you live in. The compact that exists between government and the private sector changes entirely. This is a step above and beyond. And it is not going to be a good outcome. It changes something fundamental about the nature of America. And there is no boom in the stock market that can compensate for that, in my opinion.” — Veronique de Rugy
We talk about fiscal dominance, making the Fed subservient to fiscal needs. This is the casebook version of that—the president literally saying “lower interest rates” for no other reason than wanting interest payments on the debt to go down—and then launching that investigation. Do you remember when he got a tour of the Fed with Chairman Powell, and then he was railing against him, and you had Powell standing next to him, clearly embarrassed, thinking, “I cannot believe I’m in this situation”? It’s crazy, and it is not good for markets.
Chaos is a feature, not a bug [of his governance]—he actually thrives on it. He wants to be in the middle of all the news. If there’s a little bit of calm, he’s going to say something really outrageous just to get attention back on himself. Look at the way he’s done tariff policy. The policy itself is bad enough, but the way he’s implemented it has been the most insane, erratic, economically damaging approach—precisely because you can’t count on anything.
Dalmia: Yeah, that was my next question—actually on trade policy and precisely how he has gone about conducting it. China is a bad actor on the world stage—a bit of a rogue regime. It violates intellectual property rights, it coerces technology transfers from companies. So there are real problems there.
But the problem Trump was focused on with China was the trade deficit. He declared an economic emergency based on the deficit that the U.S. runs with various countries and the world. Deficits—the whole argument that exports are good and imports are bad—was debunked by Adam Smith in 1776. Yet we are seeing a resurgence of really retrograde economic thinking. But the bigger problem, as you said, is that he has imposed these blanket tariffs on the world using his emergency powers, and then given selective reprieves to various countries and industries.
De Rugy: The tariff stuff is the perfect illustration of pretty much everything that is wrong with Trumponomics. First, the rationale for the intervention is insane, right? Do you remember Liberation Day tariffs? The calculation that went into what tariff each country got—I mean, the idea that actual economists put that together is just plain insane. It’s like a five-year-old with crayons.
There’s a lot of defenders of Trump—especially around the one-year anniversary of Liberation Day—saying the economists were wrong, that we haven’t had the economic impact they predicted. And that’s actually nonsense, because the reason some of the predictions about Liberation Day tariffs didn’t materialize is that we are not actually living under a regime of Liberation Day tariffs. When he put them on, markets went nuts. There was one theory floating around among those who were pushing him to do tariffs—that it was going to reduce interest rates because of a flight to safety into Treasuries. That didn’t happen because people had to rebalance their portfolios and were selling their Treasuries. So it was catastrophic. And then Kevin Hassett and Scott Bessent managed to get him in a room without Peter Navarro and got him to actually remove the worst of the Liberation Day tariffs.
But it was just so random—bad economics, completely demented, lots of tariffs on our friends for bad reasons. Then he removes them. He wakes up on the wrong side of the bed and says, “You’re going to get a tariff.” He sees an ad in Canada he doesn’t like that uses President Reagan’s image, and says, “Here you go, tariffs on Canada.” And then removes them.
He’s literally destroying the world trading order. The rules that existed relied on the principle that if you put a tariff on something, you have to put it on everyone—you can’t just pick and choose. He just trashed all of that. He was using emergency powers that he arguably did not have, but again his approach was: “I’m going to do it. Let’s try to see if they stop me.” And if the Supreme Court says, “You can’t,” he says, “Well, I’m going to do something else using a different statute.”
It encapsulates literally everything that is wrong with this president’s approach to economics, to dealing with people, to dealing with our friends, dealing with our enemies. In the first term you could say he was at least thinking about how to deal with China. Can we really say that in the second term, when he actually allows export of Nvidia chips to China in exchange for a kickback?
Dalmia: I grew up in socialist India, which was the king of protectionism. We had this import-substitution approach that kept the country known as the economic basket case of the world for like five decades after Independence. But now India has formed a free trade deal with Europe, and Mercosur countries have as well. And Canada is now integrating itself into what it calls a coalition of mid-tier powers. And ultimately, I think that’s where the reform currents are going to come from. The U.S. is going to start losing markets to other countries, and will either have to clean up its act or just face lower economic growth. Either way, it’s not going to be the champion of free trade as it has been. I think that has just gone permanently, or for a very long time.
De Rugy: Right. Instead, he went and basically bullied and belittled all of our trading partners as if they were worse than China and Russia. And now he’s also paying a price because he’s concerned that they’re not coming to his aid with the war in Iran.
Dalmia: Let me ask you the toughest question so far. As we’ve been talking, Trump’s blown up the rules-based trading order. He has politicized the Federal Reserve. He has replaced impartial regulatory enforcement with his personal discretion, which is common to populist authoritarians. He has done enormous institutional damage that makes markets less functional, because they rely on a stable, neutral, impartial rule of law. But here’s the question: What has been striking is that the economy hasn’t done poorly under him, and it’s possible he has made some positive structural changes to it—in terms of AI regulation, energy deregulation. But for those of us who approach markets from an ethical standpoint—we are free-market advocates not just for instrumental reasons, because markets produce prosperity for all, although they do, and that’s a big reason to be pro-market—but because they are a species of human freedom. They are an arena in which people engage in voluntary exchange.
“At the very least other Republicans paid lip service to small government and to cutting spending. He doesn't care about this. He just doesn't care about it. In the pre-COVID era during the first term, deficits were about to reach a trillion dollars while the economy was growing, with no emergency. I remember writing columns about how this is insane” — Veronique de Rugy
And people produce what they want to and trade what they want to and are not trying to fulfill a broader social collectivist goal or live by the edicts of an authoritarian. But if Trump’s formula of this draconian statism on trade and immigration—and immigration to me is partly an economic issue; it goes to the free flow of labor across borders—if this combination of draconian statism combined with deregulation in other areas leads to actually positive net economic growth, is that an advance for free markets or is it not? And if it is not, how will we make the case for free trade and more open immigration policies going forward?
De Rugy: I mean, this is actually the real damage for us. There’s the objective damage done to the country, but the damage to the reform cause, to the free-market cause, is real. The way DOGE went about cutting spending—it just makes the job so much harder for us to say, “No, no, no, there’s actually a good case to be made.” Who’s going to listen to us?
But I think you said something really important, which is that markets are not merely instrumentally valuable because they produce prosperity—though they do. They’re a form of human freedom. And it is true: The arena where people engage in voluntary exchange based on their own goals, free from coercion and free from the discretion of whoever holds power, is something we deeply value. And we are now in a regime that is basically the most permission-slip-type of regime there is.
You’re saying the market is doing well. But even when you really look at the sources of growth, it’s all in very narrow areas. And by the way, by its own stated goals, the administration is falling short—manufacturing is doing worse than it was. Those tariffs are not helping. Manufacturing jobs are going down. There’s a lot of frozen investment in these areas. But there’s enormous tariff exemptions for all things electronic and computing in order to serve AI. So those sectors are growing.
Can you say that ultimately, on net, we’re doing better? I don’t know. I think if this administration is going to be seen as having done anything positive down the road, it will be if it manages to actually set some frameworks for very important things—energy abundance, an AI framework, things like that. But right now, you can’t say the economy is doing so well. It’s not. There are areas that are just booming, but there are many others that aren’t.
Dalmia: I think what we’ll have to do—and primarily by “we” I mean you’ll have to do—is argue based on the opportunity cost of what we are losing. How much more our growth might have been, how much freer we might have been, had he not engaged in the selective deregulation on one side and over-regulation and draconian controls on the other. And it’s always a hard case to make because of the seen and the unseen problem. The economic growth that’s happening now—people can see that. What is missing, what doesn’t materialize because of his demented policies—people can’t see that. So to make that visible somehow.
De Rugy: Yeah. I mean, a lot of us are trying to make the case: He set goals for manufacturing and for what tariffs would achieve, and we can show that actually the opposite has happened—they’ve certainly not delivered on those goals. The goal of affordability: he’s failed on this and he’s doubled down with the war. Even before this, it wasn’t looking good because tariffs are an engine of raising prices in manufacturing, because most of what we import are inputs used in production.
And I think the case we also have to make is about what is lost when the government becomes really entangled with the private sector. Cronyism in the form of subsidies and loan guarantees and regulatory privilege is bad enough—I hate it, I’ve been fighting against it my whole life. But this is next-level. When the government actually takes ownership stakes [in companies], it changes fundamentally the nature of the country you live in. The compact that exists between government and the private sector changes entirely.
You guys ran a piece a while ago by Rachel Kleinfeld which showed that when you have a populist like this, especially one doing this kind of state capitalism, you get an artificial boost at the beginning, but it never lasts. And unfortunately, when you have that entanglement, the cost of extricating and separating the two becomes even harder, and the political feasibility of doing so becomes even more remote.
The government has always propped up a lot of companies, given a lot of tax credits and subsidies for this and that. But this is a step above and beyond. And it is not going to be a good outcome. It changes something fundamental about the nature of America. And there is no boom in the stock market that can compensate for that, in my opinion.
© The UnPopulist, 2026
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