Liberty and Leadership
TFAS has reached 53,000 students and professionals through their academic programs, fellowships and seminars. Representing more than 140 countries, TFAS alumni are courageous leaders throughout the world – forging careers in politics, government, public policy, business, philanthropy, law and the media. Join TFAS President, Roger Ream, as he reconnects with these outstanding alumni to share experiences, swap career stories, and find out what makes their leadership journey unique. The Liberty and Leadership podcast is produced at Podville Media in Washington, D.C. If you have a comment or question for the show, please drop us an email at podcast@TFAS.org.
Liberty and Leadership
The False Promise of Government-Driven Growth with Dominic Pino
Roger welcomes Dominic Pino, the Thomas L. Rhodes journalism fellow at the National Review Institute, for a wide-ranging conversation on why both political parties are drifting away from free-market principles—and what that means for the United States’ economic future.
They discuss the growing embrace of industrial policy, the return of tariffs and subsidies, and the bipartisan belief that government should play a bigger role in steering the economy. Pino breaks down why this approach has historically failed, why politicians are often poor at picking winners and losers, and why market-driven growth remains the most effective path to prosperity. They also touch on entitlement spending, the misunderstood nature of trade deficits, and how public skepticism of economic expertise is shaping policy debates.
Dominic Pino hosts the “Econception” podcast and is a former William F. Buckley Jr. Fellow in Political Journalism and a National Review editorial intern. He also was a 2020 Political Studies Fellow with the Hertog Foundation and has held internships with ALEC, the Heritage Foundation and the Tax Foundation. He holds both a bachelor’s and master’s degree in economics from George Mason University. While at Mason, he served as an opinion editor of Fourth Estate, the university’s student paper.
The Liberty + Leadership Podcast is hosted by TFAS president Roger Ream and produced by Podville Media. If you have a comment or question for the show, please email us at podcast@TFAS.org. To support TFAS and its mission, please visit TFAS.org/support.
Welcome to the Liberty and Leadership Podcast, a conversation with TFAS alumni, faculty and friends who are making an impact. Today I'm your host, roger Ream. It's a pleasure to welcome Dominic Pino to today's show. Dominic is the Thomas L Rhodes Journalism Fellow at the National Review Institute, a fellowship funded by the Bradley Foundation. Prior to his current position, he was the William F Buckley Jr Fellow in Political Journalism and a National Review Editorial Intern. Dominic was also a 2020 Political Studies Fellow with the Hertog Foundation and has had past internships with ALEC, the Heritage Foundation and the Tax Foundation. He holds both a bachelor's and master's degree in economics from George Mason University and during his time there was opinion editor of Fourth Estate Mason's student newspaper. We are pleased that Dominic is a regular participant in programs we sponsor at TFAS for young professionals. Dominic, thank you for in programs we sponsor at TFAS for young professionals. Dominic, thank you for joining the Liberty and Leadership podcast.
Speaker 2:Thanks so much for having me.
Speaker 1:Well, I think it's great to have an economist on today, because there's so much going on in the world, and particularly the United States, related to economics, but globally as well. So I've got a lot of questions about economics and economic policy and I know you'll clear the air on all of them when we get done with it. But I should add that you write a feature in National Review each month. In their print magazine called the Stat, you grab some very interesting topical issue and you give a stat about it. You recently had one on the surplus that the US runs in terms of services. Could you touch on that? I think the number was maybe you remember it was $290-some billion.
Speaker 2:Yeah, first of all, I just want to say I'm not an economist. I write about economics but I'm not an economist myself. But yeah, the US trade deficit is something that's been talked about a lot with the president and a lot of people around him. It's a meaningless number, the first thing to know about the trade deficit. It doesn't matter. But when people invoke the trade deficit as a justification for tariffs, as a justification for whatever their preferred industrial policy might be, for some reason the services trade just gets completely ignored.
Speaker 2:And we would expect the United States, because it's a very, very rich country, to specialize more in services. This is what happens all around the world. As countries become richer, they specialize more in services, and because the US is the world's richest country, we would expect it to be very far along that process. And sure enough. If you look at the trade balance for services, the US has a large trade surplus in services. Now, there's basically no tariffs on services at all. Tariffs really only apply to goods. So it's not some result of like better trade policy, it's just a result of what the US specializes in and what it doesn't specialize in. And so if trade surpluses are inherently good which, again, they're not. They just don't matter one way or the other. But if trade surpluses are inherently good which again they're not they just don't matter one way or the other. But if trade surpluses are inherently good, why doesn't the services surplus ever count for protectionists?
Speaker 1:People are alarmed about the trade deficit. Is that just an accounting matter, or are we really accumulating debts that we're going to have to repay in the future?
Speaker 2:No, we're not accumulating debts. What the trade deficit is is it's just an accounting statistic that tallies up all of the goods that come into the country in a year and all the goods that go out, and then, if you subtract those from each other, you get a negative number right now, because the US imports much more than it exports.
Speaker 1:Because we're a rich country. We're a rich country.
Speaker 2:We have the richest consumers in the world that spend a large share of their income as well. Other countries that have lower trade deficits oftentimes have lower consumer spending. They'll have higher savings rates than the United States does, and so what you end up finding, actually, is that the trade deficit is more related to things like that than it is to trade policy, and we know that.
Speaker 2:Efforts to restrict imports. You know you'll reduce the imports, but they'll often reduce exports as well, because when a country imposes tariffs on goods that come from another country, that other country will retaliate, oftentimes and try to block exports as well, and then the currency will change and appreciate and make it more difficult for US exports to be sold in that way as well. And so what you end up having is this thing that was undertaken to reduce the trade deficit ends up really not changing the trade deficit at all, and we saw this during Trump's first term, when there were massive tariffs on China and on steel and aluminum and certain other specific products. The balance of trade didn't change all that much. The last time that the US trade deficit really declined was the Great Recession, because consumers got poorer and people weren't working, and so people couldn't afford to buy as much. So, again, it really has more to do with the overall economic trends than it does with trade policy.
Speaker 1:So if a country is running a trade deficit or a trade surplus, that really doesn't tell you anything about whether it's increasing the number of manufacturing jobs or decreasing the number of manufacturing jobs. It's kind of irrelevant to that fact, right?
Speaker 2:Definitely. I mean, it doesn't tell you really anything about the health of a country's economy. Angola runs a trade surplus, and so does Australia.
Speaker 1:They export diamonds, huh. Yeah, angola, exactly, they don't buy a lot and oil, so they don't buy a lot of products from the rest of the world.
Speaker 2:Uh-huh. But Australia is a rich country. They run a trade surplus. But then you look at, the UK runs a trade deficit. It's a rich country, and so does Uganda, which is a poor country. There's really no correlation at all.
Speaker 1:And it doesn't mean we have a debt we have to pay in the future. No, not at deficit, probably with our grocery stores.
Speaker 2:Oh yeah.
Speaker 1:And it doesn't mean that we at some point we're going to be in trouble with our grocery store because we have had a deficit year after year after year with them.
Speaker 2:That's exactly right. I mean, the important thing to remember is that individuals trade with each other. Countries don't. You know, countries keep a track of accounting statistics for the purposes of national accounts, but the actual economic activity is done between individuals and between businesses. Just because those individuals and businesses happen to be in another country doesn't change the fact that trade was mutually beneficial for both sides. You know, one of the great advances that the founding fathers made when they started this country was to abolish all trade barriers within the United States, you know, between the 13 colonies, and that was a pretty radical idea at the time. You know France at that time had a lot of internal trade barriers. Canada still has internal trade barriers today Between different provinces.
Speaker 2:Between the different provinces, yeah, yeah, and it's a huge political issue up there because it creates all kinds of deadweight loss in their economy and it really holds back the Canadian economy from doing as well as it could. The US and the founding US and the founding fathers saw that and solved that problem 250 years ago. And as the country expanded westward, that free trade zone grew and grew and grew and that was a big part of what helped to make the United States rich as it was growing, and that was basically the world's first and largest free trade zone at that time. And so it goes all the way back to the founding generation. I mean, we talk about how the founding fathers also had tariffs.
Speaker 2:There were tariffs at that time and they were responsible for a large part of the government's revenue. But the reason for that was that every country at that time used tariffs to fund their governments, because tariffs are really easy taxes to collect. You put a customs official at a port. He collects the tariffs on goods as they come in. As countries get richer, they move to other forms of taxation, like the income tax or the sales tax, which are less economically distortive than tariffs are. They are usually more steady and stable sources of revenue, but they're more complicated to administer, so you have to have a certain level of national wealth and sort of sophistication in your government in order to do that, and so that's exactly what we saw in the United States. Again, this is a trend we see all over the world Today. The only countries that really rely on tariffs for the revenue are generally poor countries.
Speaker 1:And when we did rely on tariffs for a large portion of the government's revenue, the government was much smaller.
Speaker 2:Yeah, yeah, yeah. If you want to have a government the size we had in 1800, I would gladly fund it with tariffs. But that would mean no Medicaid, no Medicare, no Social Security, a much smaller military. It would be completely unrecognizable to Americans today the size of that federal government. Again, I think the federal government's much too big right now. But as long as we have those obligations that we have to fund, doing so with an income tax and with I would love to see a national consumption tax, for example, but there's no reason to think that tariffs are a particularly good way to do that.
Speaker 1:In your recent stat in National Review you posted 96% was the stat and that is the proportion of the growth of government employment that's been at the state and local level in the past. I guess it was a decade or so, but could you talk some about that? And you know, we all think the federal government's growing so big and that it's overwhelming state and local governments, and certainly it is in terms of the power shift to the federal government. But this is just an explosion of employment at state and local government and I know often state and local governments they're the operational deliverer of programs that the federal government mandates. So I'm interested in hearing more about that. 96%.
Speaker 2:Yeah, yeah, so the number goes back to 1955. That's the first year that the Bureau of Labor Statistics keeps track separately of federal, state and local government employment and obviously we all know the federal government is much more powerful, bigger than it was in 1955. 1955 is before the Great Society. You might expect that a lot of that growth in government employment would come from the federal government, because government employment has surged since 1955. It's grown at about twice the rate of the population growth over that same span. So it's not just because we're a bigger country that it really is growing relative to that as well. But if you look at the actual growth, a lot of it comes from state and local government, nearly all of it, in fact. State and local government have both increased their employment by over 300% since 1955. One of the cool things I found as I was doing this is actually the total state government employment for all 50 states combined was lower than federal government employment as recently as 1972. And now it's just like crazy to even imagine that all 50 states put together would have less government employment than the federal government.
Speaker 2:There's other factors going on here. Right, as you said, a lot of federal programs get administered by the states, and so the federal government's responsible for part of that growth. But state governments are responsible for a lot of this growth too In sectors such as education. You see enormous surges in employment in the education sector with basically no improvements for student outcomes, and now we see a declining public school population in a lot of places as school choice expands and as people have fewer kids, and so, despite all of that, the employment in government keeps going up. And so I think a mistake that we can make as supporters of limited government to say you know, employment is the problem when the federal government is much too powerful, and it's not because they've hired a bunch of people, it's not because employment is too big, it's actually because of the laws and regulations that come out of Washington DC that give those bureaucrats lots and lots of power, even if there's not that many more of them than there were 50 years ago.
Speaker 1:I recall an old joke Ronald Reagan used to tell about a man coming into his job at the Department of Agriculture and his colleague who sits next to him is crying. This guy says what's wrong? What's wrong? He said my farmer died At some point. I guess maybe there were more bureaucrats in the Department of Agriculture than there were farmers. Another stat that you had recently, which was interesting, you know, maybe I would say random in some sense, but fascinating was that the economy of Poland, I guess was per capita GDP of Poland was going to surpass Japan in 2026. Right, what kind of led you to that stat? And what do you see happening in Poland and not happening in Japan, or why is that trend happening?
Speaker 2:Yeah, poland is a really interesting example of what economic freedom can do for society. You know, poland was a communist country until 1989 and was very poor, as all communist countries are, and all that you had to do was get rid of the communism, add good, stable, free market policies, which they did under their deputy prime minister at the time, who was an economist, and they did the thing that's supposed to not work, which is shock therapy. It was actually sort of similar to what Javier Millet is doing in Argentina right now, and they said you know, we're just going to dot markets and we're going to stick to it. And it was difficult at times. Unemployment rate went up, as you would expect when you know all these government jobs go away and all that kind of thing, but they stuck to it and they have grown at about 4% a year for the last 30 years and it's astonishing that a country that was that poor can now be that wealthy. The statistic that I picked out is by 2026, if the growth forecasts are anything close to being right, they will surpass Japan in GDP per capita when adjusted for purchasing power.
Speaker 2:And so the Japanese in the 1980s were supposed to be the world beaters. They were supposed to be the ones who had it all figured out, because they had this great industrial policy and they were going to dominate electronics and they were going to dominate in cars and they were going to take over the world. What happened was the industrial policy played out and they've had 30 years of stagnation. Poland really had no industrial policy. They just said we're going to let markets run, and they've been able to grow at 4% a year.
Speaker 2:They did not have a great recession in Poland. It didn't happen. It's a really astonishing accomplishment. Now, part of their success, too, is that they joined the European Union, which puts them in a free trade zone with a lot of different European countries. They got development aid from the European Union that helps. That's not nothing, but the real difference, because you can compare Poland's performance to other countries that joined the EU at the same time, and all those countries are better off today than they were when they joined, but Poland has leapfrogged several of them. That shows you that there's something different going on with Poland's policies, and it's those market reforms that are really making the difference.
Speaker 1:I'm old enough to remember in the late 70s and 80s when Japan's model was the rage and people were saying we need to adopt that and thankfully we didn't and we've continued to have some strong economic growth. But today there are those nationalist conservatives who seem to be calling for that. I've seen Senator Josh Hawley concerned about growing monopoly power and industries and wanting government to manage the economy. Maybe Vice President Vance has done likewise and others. What do you make of this call for government to somehow conduct industrial policy? Coming from you know these elites who are in power in our country.
Speaker 2:It's a problem. I think we saw Joe Biden was the champion of this when he was president. Right, we had the infrastructure bill first, which was supposed to be this massive, you know, job creator industrial policy bill through the government providing funds for infrastructure projects. We've seen a lot of those not take off. We had the broadband expansion program $40 billion put into expanding rural broadband services. They have built nothing. It was. This bill was signed in 2021.
Speaker 1:But they probably spent some of the money.
Speaker 2:Oh, yeah, I'm sure, I'm sure some people spent the money, but yeah, no, they haven't built anything. The famous example with the electric vehicle chargers they appropriated like $5 billion to build this huge charging network and they've built a couple dozen since then. Then Biden did the CHIPS Act for semiconductors, which you know had some bipartisan buy-in but was mostly Democrat bill, which had some bipartisan buy-in but was mostly Democrat bill, and their signature project in Columbus and in Arizona are not doing as well as you would expect if it was really such an urgent national emergency to increase semiconductor production. Michael Strain at American Enterprise Institute talks about how the American Semiconductor Trade Group not a unbiased source on this said that because of the CHIPS Act, us production will go from 11% of global total to 14%, which, okay. What difference does that make for national security? Going 11% to 14%? And the bill is going to spend $50 billion to do this. It's completely crazy.
Speaker 2:And then you look at the so-called Inflation Reduction Act, which was a huge industrial policy bill for green energy, and you see, you know Republicans are trying to scale some of that back now. They should just repeal the entire thing. But that is industrial policy. That is what these guys say that they want, and it was the signature economic agenda item of the previous president of the opposite party of them. I think it would be helpful to have a little bit more partisanship here, actually to try to say you know what we're going, to differentiate ourselves from the Democrats, rather than just trying to copy what they do and improve on it.
Speaker 2:Because you know, the reason this stuff doesn't work is not because Democrats don't know how to do it. It's because no one knows how to do it doesn't work is not because Democrats don't know how to do it. It's because no one knows how to do it. No one knows how to plan an economy. No one knows how to pick which industries are the ones to support and which ones are the ones to leave behind. And if industrial policy worked really well, the United States green energy sector should be like the best industry in the country. I mean, the Inflation Reduction Act is not the first time we've subsidized green energy, and this goes back at least to the 70s with synthetic fuels, with Jimmy Carter and all that stuff. But we've been doing this stuff forever and yet the industry is still convinced that it needs a trillion dollars of subsidies, otherwise it's not going to work. That doesn't sound like success to me.
Speaker 1:It seems as though the contradictory views in that on the one hand, politicians at least resist the Joseph Schumpeter's idea of creative destruction, that there is constant change in a dynamic free market economy and some industries will go by the wayside, new ones will come up and replace them with new technology, while at the same time you know they want to freeze things. You know, senator Hawley, in something you wrote recently, was upset that you know four companies control 80 percent of the meat processing business.
Speaker 2:Which was also a Biden line, by the way.
Speaker 1:So should we be worried about monopolies gaining power and controlling our economy and ripping us off?
Speaker 2:We should be. I mean, that is a thing that could happen, but it doesn't happen a lot right now. The question that should always be asked whenever someone puts out some number there you can pick an industry, there's always some number of. Like you know, this many companies controls this percentage of the market? For the meatpacking one, it's always like four companies control 80% or something like that.
Speaker 1:It seems like there's always one company who has the largest market share.
Speaker 2:Yeah, yeah, I mean the first point is one of them has to be the largest. I mean, this is any ordinal ranking of anything. One of them has to be the top. But the other problem is how many companies should control 80% of the market. They never say If you double the number to eight instead of four, would that be enough? Would that be like fine? Does it have to be 11? I mean, like, what's the number? No one knows.
Speaker 2:And this is why US antitrust policy is not actually made on those grounds. It's how it gets talked about all the time in public. But since the 1970s we have something called the Consumer Welfare Standard which says the way we're going to enforce antitrust policy is this hurting consumers? Are consumers worse off because of higher prices, reduced options? And you have to go out there and prove that that is happening, and that's what courts rule on in these cases and that's what all the case law has said since at least the late 70s. And so that's a much better way to think about this. Right, because there are real advantages to consumers from big companies, because big companies have economies of scale and they can pass on savings from their economies of scale to consumers.
Speaker 2:I just wrote a big piece about the longtime CEO of FedEx, fred Smith, and FedEx is a good example of this. They're a gigantic company. They employ like 500,000 people, billions and billions of dollars of revenue, but as a result of being a gigantic company, they can provide services to customers that a smaller company couldn't. They can fly, they have trucks and airplanes to pick up a package in one part of the country and send it to another part of the country without it ever having to go to a different company. That was their big advance in the logistics industry was their ability to do that door to door for a package. I'm happy that FedEx can do that. Other companies do this as well UPS, dhl. It's a very competitive industry, but it's a big company.
Speaker 2:If it was smaller, would that be better for consumers? No, of course not. The important thing that matters is do they have monopoly power, which is determined not by how many companies there are, but by their actual behavior? Are they raising prices and restricting output? Those are the two things that economists look for when determining if something is a monopoly, and we don't see that happening in that sector. We don't see that happening in the meat sector. We don't see that happening in most of the American economy.
Speaker 2:The other issue that these guys run into with competition is a lot of them, like Hawley, are also protectionists. Well, protectionism is a reduction in competition, right? One industry that people love to hate is airlines. Airlines do have very concentrated power. That we see. One of the reasons for that is the entire US domestic market for air travel is walled off from foreign competition. That's not how it works in Europe. Right In the European Union, you can have different air carriers from different countries operating within and between those different countries, and, as a result, they have a much more competitive air sector there. They have lower prices for a lot of budget airlines, and we can do that here, too, if we allow more competition from other countries. Anytime you protect an industry from foreign competition, you are asking them to raise prices. You're asking them to make things worse off for consumers. So again, it would be a little bit easier to take these concerns seriously if they were at least consistent about supporting competition all the time.
Speaker 1:A lot of this reminds me of something the late Alan Meltzer wrote about, and that is that the reason government grows is that the benefits are very concentrated and the costs are diffused. If government protects an industry, they get a big benefit from it. So they'll have lobbyists work for that subsidy or that protection from competition, but the cost is borne by, you know, 100 million consumers and there's very little motive for a taxpayer or a consumer to fight some bill in Congress that you know is going to cost them a few cents maybe. And I guess that's why you see this protection in many areas, like airlines I assume that's domestic airlines that want to keep out foreign competitors from serving the American market.
Speaker 1:And you see that throughout the world of tariffs the president has been advocating tariffs and he's got some advisors who are very enthusiastic about tariffs, but they seem to have a muddled number of reasons they often offer. Sometimes they say it's to raise revenue, like we talked about earlier, other times it's to bring back manufacturing jobs, and yet other times it's just a weapon to try to bring out a level playing field and get other countries to reduce barriers to our goods. Do you think his effort to, if it is indeed to accomplish lowering barriers that other countries offer. Is that a real concern, that we should try to be pressuring other countries to lower barriers, and is this a tool that will help accomplish that?
Speaker 2:No, I don't think any of those justifications are very good. So for getting other countries to reduce their barriers, you know the US has very low trade barriers in general. In certain specific sectors it has very high ones, right, but in general it has very low trade barriers, and other rich countries, on average, have even lower trade barriers. The US, for example, is one of the top users, already before Trump, of countervailing duties, which are anti-dumping tariffs, which are the idea that if other countries are producing something and selling it too cheaply, we will raise the price in order to protect the domestic price, and the US uses that more than anyone. The US also uses lots of non-tariff barriers for all sorts of different things, even though we have a pretty low average tariff rate, but basically all the rich countries in the world do this.
Speaker 2:Like I was saying before, the real story on tariffs is the shift towards income taxes and towards more general consumption taxes that we've seen all around the world as just better ways to raise revenue for governments, and so the only countries that really have high trade barriers are poor countries. We see that all over the place, and most US trade is done with other rich countries. This is another sort of myth about foreign trade that is all about taking from these poor countries and all this stuff. Most US trade is done with Canada and Mexico, because they're right next to us, and the European Union and China. China's not as rich as the rest of those countries, but by no means the poorest country in the world. They're very much middle-income country and that's where most US trade happens, and so the idea that these countries are ripping us off by having these really high trade barriers is not true, and the Trump administration ripped up all the trade agreements that we already had which had reduced trade barriers, and so that was how we did this previously.
Speaker 1:Including one. He negotiated with Mexico and Canada.
Speaker 2:Yeah, exactly. But you know, during the George W Bush administration, for example, the US very nearly had a trade agreement with almost every country in Latin America. We had the Central American Free Trade Agreement. There's free trade agreements with Peru, with Chile and a couple of other countries, and this was like a priority of the administration at that time to expand US trade and get other countries to reduce their trade barriers. So how do you do that? You go send diplomats over there and negotiate and they argue about it for a couple of years and then you get a treaty and you sign it with Congress, and that's what the US was doing.
Speaker 2:And then Trump came along in 2016 and said no, we're not going to do that anymore. Biden continued that, by the way, take the exact same position that we're not going to prioritize getting more free trade agreements. And now Trump has ripped up the ones that we already had, including the one with Israel, by the way, which we're standing by in this major conflict right now. Israel was the first bilateral trade agreement the United States made in 1985. And Israel, right before Trump announced these tariffs, said that it was going to get rid of 100% of its tariffs on US goods. There were only a handful of goods that had any tariffs at all. Because, like I said, we already had this free trade agreement no-transcript. And then Trump still puts 17% tariffs on Israeli goods.
Speaker 2:So, yeah, the idea that it's about reducing other countries' trade barriers is obviously not true by the administration's own actions. And then, as far as this revenue versus protection point, a tariff can only do one or the other. If a tariff is raising revenue, that means that the goods are still coming into the country because goods coming into the country, that's how they get taxed. If a tariff is protecting domestic industry, that means goods aren't coming into the country because the industry is protected, which means there's no revenue coming in. So you can either do one or the other. You can't do both at the same time, and the fact the administration thinks that they can should tell you that they really don't know what they're doing.
Speaker 1:As we record, this Congress is working on what's been called the big, beautiful bill that the president wants to sign. It covers a lot of ground, including extending personal tax cuts that were passed in the first Trump administration. It shows that we will run deficits way out into the future. It does nothing to. In fact, it exacerbates the annual deficits of the federal government and the national debt. Do you see any way the US can deal with this issue before it comes to a head in a crisis in the future? They're already, I think, scheduled to see major cuts in Social Security.
Speaker 1:I remember someone I know in Sweden once telling me it's impossible to have both government health care and a defense budget, and he said here in Sweden this was 10, 15 years ago. He said we're blessed to have the United States provide our defense so we can do social welfare state, but the US is in a point where you know we seem to have to have a defense budget and yet we're seeing vast expansion in Medicaid and government welfare programs. Does this lead to a major crisis in the future, you think, or is there a way to turn this around?
Speaker 2:Well, I'm glad you brought up Sweden, because they actually fixed their entitlement system For most of the 20th century. They had an enormous public sector with a social democratic government, and they did exactly what Margaret Thatcher said would happen they ran out of other people's money, and so, when they did in the 1990s, they had a moderate government and they came together and hashed out a thing to fix their retirement system and it worked. And Sweden's retirement system is doing perfectly fine now, and so it's possible it can be done. We've seen it other places, but the US right now is definitely on pace to just continue to ignore the problem, and this you know Republicans ignore it, democrats ignore it.
Speaker 2:The crazy thing is is that we seem to be ignoring it more as it gets worse. At least back in like 2010, there was like talk about reducing the deficit, and we had a commission about reducing the deficit and we had politicians that would at least pretend to be concerned about it, and now we don't even have that for the most part. I mean, there's a handful that still do, but in general, they don't seem to care. You know they might not care, but like bondholders will, and we've seen a problem already with rising bond yields, which puts upward pressure on interest rates, which then makes the deficit even worse because the government has to pay higher interest in order to borrow. And we've seen credit rating downgrades now from all three major credit rating agencies, and so those should be warning signs to Washington DC, even if this other stuff isn't.
Speaker 2:But what did they do last year? We just had the Social Security trustees report come out saying that, you know, social Security will have automatic benefit cuts in less than 10 years 23 percent. I think yeah, yeah, yeah. And what did they do last year on? Social Security Politicians came to Washington DC right before Christmas and passed in a bipartisan bill an expansion of Social Security for government workers. That's what's going on, and they mentioned it in the trustees report as one of the reasons why the program is going to be going bankrupt slightly sooner, a couple months sooner than they thought it would. It's completely irresponsible. They do it, like I said, right before Christmas, stuff like that, so when no one's paying attention, they don't seem willing to learn a lesson.
Speaker 1:The only way out of this is if we can sustain strong economic growth, in a sense, and outgrow the national debt as a percentage of GDP. Now that means growth rates of I don't know 4%, 5%, 6%. That's hard to accomplish, but it is possible. I guess. If you can reduce the regulatory burden on the economy and make sure taxes don't disincentivize companies to grow and expand, is it possible that economic growth could save us from this problem.
Speaker 2:I don't think so. I mean I think it's possible we could have sustained growth above 3%. Above 4% is really hard to see. I mean it's just, the US is a rich country. Rich countries around the world generally have lower population growth, which means they have lower economic growth.
Speaker 1:Immigration can.
Speaker 2:Yeah, the US has an advantage because of immigration, right. That's one of the reasons why our growth has generally been higher than a lot of other developed countries that don't have that. But I don't see there's any way to grow out of it. What the US needs to do is they need to cut spending a lot. We've seen, you know, a sort of ratchet effect from COVID, where you had this enormous surge in emergency spending that a lot of people supported and a lot of it was justified. There was a real emergency there, but then the emergency ends. You need to get rid of all of it, and we haven't.
Speaker 2:The spending level today is about a trillion dollars a year higher than it was if it had continued on its trend in 2019. And it's lower than it was at the peak of COVID, but it's still higher than the pre-COVID trend, and the pre-COVID trend was already bad. So we're already in a tough spot. If you look at the projections from Congressional Budget Office out over 30 years, revenue is pretty stable as a percentage of the economy, we're right around 17% 18% of the economy of tax revenue for the federal government, right. So it's not like we have a problem of declining revenue. We have a problem of soaring spending, and what we've seen is that that spending is supposed to continue to rise, and the biggest reason is entitlements.
Speaker 2:But now we have the problem of all the borrowing fund. Entitlements means that interest payments actually become a huge part of the debt, and it's entirely possible that by 2050, half of all federal revenue will be going to just pay interest. That's before you pay anything for any of the benefits that people get, for the military, for law enforcement, for any of that stuff that the government does. It's going to be just going to interest payments. That's completely irresponsible. Politicians should know this I think a lot of them do but they just don't have the courage yet. And voters? You know voters bear responsibility too, because they don't vote for people that promise to cut spending. You know they vote for people who might promise to cut unpopular spending on foreign aid, for example, but they don't vote for people who promise to cut entitlements, and that's the source of the problem.
Speaker 1:You're the Thomas L Rhodes fellow at National Review. Who was Thomas Rhodes?
Speaker 2:He was president of National Review and then he was also leader in the Bradley Foundation, based in Milwaukee, as you mentioned before. Bradley Foundation supports my fellowship and they named it in honor of him because he was such an important and influential guy in both organizations, stalwart defender of free markets and of the American idea.
Speaker 1:And we learned before we started recording today that we're both from Wisconsin. That's a great state, that's right. You have a podcast sponsored through AIER, american Institute for Economic Research, called Econception.
Speaker 2:Yeah.
Speaker 1:Say something about the podcast, because I'm sure people would like to find that and listen to it.
Speaker 2:Yeah, yeah, you can find any major podcast platform it's called Econception and we just look through the economic events of the day and the broader concepts that are behind those events, and so we try to talk about why socialism doesn't work, why free markets do work, and we deal with the complexity of modern economy right, because there's not a lot of simple stories out there and try to break down the complicated stuff that's going on in a way that people can understand. The slogan I have for it is you know, the economy is complicated. Nobody has all the answers, but markets work. We do know that. We know markets work, and so using that insight to try to make policy better, to try to explain what's going on, that's what we're all about.
Speaker 1:Last thing I wanted to ask was I know you've participated in programs at TFAS, discussions groups and things like that. How's that been beneficial to you?
Speaker 2:Has it helped expand your network? Oh, definitely. Several other people at National Review go to these things as well. It's a great place to connect with people in DC who are working in similar fields. You talk to people that are writing about all sorts of interesting stuff in a lot of the journalism programs and things like that, and so it's great to be able to meet them and have a place to do that at TFAS.
Speaker 1:Great. Thank you for joining me today on the Liberty and Leadership Podcast. Thanks, roger. Thank you for listening to the Liberty and Leadership Podcast. If you have a comment or question, please drop us an email at podcast at tfasorg, and be sure to subscribe to the show on your favorite podcast app and leave a five-star review. Liberty and Leadership is produced at Podville Media. I'm your host, roger Ream, and until next time, show courage in things, large and small.
