Allow me to bring to your attention...

David Autor makes much sense; how today's hard/soft data gap is different; student debt: the bigger picture.

I got so many good recommendations about things to watch, read, and listen to, I decided to keep it going and talk podcasts. The bar is low in that space, which isn’t a bad thing, but time being precious, the bar should be high.

This one easily clears it. It’s economist David Autor on the FT’s cleverly titled “Economics Show.” Autor, of China Shock fame, using extremely clear language with many connections to real world product, industry, and occupational examples, explains why Trump’s trade war is worse than ineffective; it’s destructive.

What’s especially useful about his rap, however, is where to go next, which, as readers here know, I’ve been leaning into a lot of late. Based on his highly influential work, Autor focuses on the geo-concentration of manufacturing job losses, and argues for a a way forward that has a lot in common with the first section in yesterday’s post: targeted policies in strategic sectors wherein we need to quickly become a lot more competitive than we are. In this sense, Trump’s trade war has not just a high cost—see markets today; huge risk-off moves in every corner—but a high opportunity cost.

The second half was about AI’s potential impact on firms and labor markets. I’m firmly in the camp that when it comes to AI, the ratio of what we say to what we know is uncomfortably high. But Autor made many resonant points, especially that one of the most important determinants of AIs economic impact is how quickly it diffuses through industry, jobs, and labor markets. The faster it spreads, the less time for a response/adjustment that brings workers along versus leaves them behind.

Real Data, Good. Soft Data, Market Bad…Really Bad

I lived for years in the Biden White House with a wide and persistent gap between good hard data and bad soft data. The elevated price level was a major driver of those bad vibes, such that progress against inflation—the rate of price changes, not a lower price level—provided little solace.

As I’ve underscored in many posts, including yesterday’s UI discussion, and as Greg Ip explores in some detail today, the gap between vibes and hard data is a wide as ever. Price levels and mortgage rates (6.9% today on the 30-yr fixed rate) still bother people, and the fact that Trump is not merely backtracking on promises to address these variables but making them worse, surely grates on people as well.

There is however, an important and salient difference between then and now: financial markets. Stocks, bonds, and the dollar are tanking today, as they have since Trump took office, excepting days when he dials back his agenda. In the Biden years, markets rarely swooned like this, as solid growth, strong consumer spending, full employment, disinflation (post-mid-’22), supported corporate profitability and thus equities. There certainly was no sign of a “sell-America” trade.

Instead, today we have:

The "Sell America" trade picked back up on Monday.

Stocks fell, with the Dow industrials dropping 1,200 points and on pace for their worst April since 1932, and the dollar hit fresh multiyear lows against the euro and other major currencies. Yields on longer-term Treasurys rose and gold surged to a fresh record high.

Markets are forward looking and, if their pessimism about the future turns out to be well-founded, which is where I think most of the probability mass lies, the hard data will meet the soft on the latter’s side of the field. On the other hand, the president often folds like a cheap suit. Perhaps if folks just take Navarro out for long lunches, the global economy can dodge a bullet.

But I’m not counting on it.

Student Debt: Bigger Picture

The Daily Episode today on the status of paying back student debt was characteristically well done, informative, and worrisome. This is complex area of policy and DOGE has gutted the Education Department in general and the loan office in particular. There’s a lot of pain coming in this space, as student debtors try to reconnect with their servicers and restart payments amidst Trumpian and DOGE-induced chaos. Not to mention that if the real economy does go south, many will face elevated stress servicing their student debt, with little hope that the administration will help them (it was, in fact, Trump 1 that first paused student debt payments during COVID).

While the discussion touched on larger issues in play here, they did not dig in to them. I’m suspect some listeners shared my thoughts along this line: We want and need people to go to college, both to realize their own intellectual and earnings potential and for America to have a chance at global competitiveness (i.e., if we regain our national sanity in that space, of course). So why do we make it so hard and expensive for them to do so?

That’s painting with a broad brush, of course. Children of affluent families continue to access college as they always have; at the other end of the spectrum, community college tuitions, especially with Pell Grants, are affordable (though for the many adults who chose this route, their living expenses are their main economic constraint). But when most middle class families on down think about college for their kids, it goes in the same affordability-crisis bucket as health care, child care, and housing.

The thing is: education is a public good. Advanced societies provide it for their citizenry because if it were private, it would likely be under-consumed from society’s optimal perspective. Starting almost two centuries ago, we broadly concluded that 12 years of publicly-funded education made sense. But surely 12 need a rethink. By now, 14, if not 16, makes more sense, right?

Think about this as you listen to the Daily episode, should you do so. Just under the surface, the two speakers are struggling with the tension between a public good that is semi-privatized, where private and public colleges seek tuition from families that often borrow from the federal government to pay their freight. Much like American-style health care, we’ve created a complex, private/public beast for an investment in human capital that is both essential to a successful society but increasingly hard for families to navigate and afford.

Like so much else, the Trump administration will only make this worse. But as the opposition party puts together what it’s for—a very important endeavor—resolving this public/private tension in a way that delivers higher-ed affordability must be a high priority.