Trump Abandons Netanyahu ! — Iran Just Did the Unthinkable! | Jeffrey Sachs

[00:00:00]So, Professor, while we have you here today, we wanted to lean into your expertise as an economist to help us assess what is going on here with the economic fallout from the Iran war. We as we have some pretty interesting comments here from Kevin Hassett, who is a top economic advisor to the president, who is seeing positive signs in the fact that Americans are spending more. Let's take a listen to that.

[00:00:23]>> One of the reasons is that people are spending more on gas, but they're also spending more on everything else. That's just groceries, but restaurants and so on. And I think that that's the sign that you would see when people are optimistic about the about the future.

[00:00:37]So, generally what we see when people are worried they're going to lose their job, which they shouldn't be because initial claims for unemployment insurance is about the lowest they've ever been. When they're worried they're going to lose their job, that's where they stop spending like crazy and start saving money because they're worried they might not have to pay they might have the money for their payments paying their rent. And so, what we're seeing right now is spending based on optimism about the future. And if you consider how big the boom is going to be here.

[00:01:01]Like right now, Atlanta Fed GDP now is about a 4% growth for the current quarter. You look at how big the boom will be when the straits open, then it's reasonable for people to be optimistic.

[00:01:11]>> Well, we hope there is reason for optimism with the straight and beyond.

[00:01:15]>> So, Professor he says, "Oh, not only are they spending more on gas, they're spending more on everything."

[00:01:19]>> Was that AI generated, by the way?

[00:01:21][laughter] >> That's real.

[00:01:22]>> up. That's real. He's actually said it twice.

[00:01:24]>> [snorts] >> That that's that smile seemed uh completely phony.

[00:01:28]Uh and of course every word he was saying was a lie because consumer confidence has plummeted. People are suffering. Uh the American economy has two parts to it. There is a digital and war industry, which is booming. Let's say it's booming on Pentagon contracts.

[00:01:49]It's booming on war.

[00:01:51]So, if you look at Silicon Valley and you look at the AI bubble and now AI bubble for autonomous weapons and Palantir information systems and the like. Yeah, this is good if you happen to be the few people that own our government, but for the rest of Americans they can't believe what's going on and that's why Trump's approval rating reached the the grand number of 34% against I think it's 58% disapproval rating in the most recent Economist poll, but somewhere around there 58 to 60%. People are disgusted.

[00:02:35]They can't pay their bills.

[00:02:37]The United States budget is totally a joke. 7% of GDP budget deficit. Trump's asking for a $500 billion increase of military spending.

[00:02:53]This is nuts. This is exactly what we're seeing in the domestic management that the rest of the world is watching in the American escapades in the Gulf. Complete incompetence. And I hope they pay Hassett well because you know, to be a grown person and stand up and say such nonsense.

[00:03:17]I hope he gets some compensation for that.

[00:03:20]>> Well, we have another one for you. Here he is talking about credit card debt.

[00:03:23]Let's take a listen.

[00:03:24]>> Credit card debt though, cuz that's another issue. Wall Street Journal says in the first quarter of this year the percentage of credit card balances that were at least 90 days delinquent rose to 13.12% according to data released in May by the Federal Reserve Bank of New York.

[00:03:38]That's the highest level in 15 years and the most since the period following the 2008 financial crisis. Um people say they're using those cards to get through necessities because they can't afford what's going on.

[00:03:50]So, your message to them?

[00:03:52]>> Right. Well, we talked to the CEOs of the credit card companies all the time and we do see some increased stress like the numbers that the Wall Street Journal quotes. But, for the most part, the delinquency is different from default and there's not any kind of threat, the financial threat to the credit card companies that they don't feel like that they're heading towards default scenarios. It's just that people are taking a little bit longer.

[00:04:17]>> He assures us there that the credit card companies are going to be okay. As for the customers, he's not so sure.

[00:04:23]>> I I love that smile. I just have to keep emphasizing that. This This is a This is This is quite a a a commentator. But, yes, you know, it's also absurd. They talk to the CEOs. I'm sure the CEOs are doing just fine, thank you. But, the people whose credit card bills from necessities, as the Fox News was kind enough to remind us, is soaring. So, we have two Americas. One has most of the people in it. They're not feeling well. They hate this war by overwhelming majorities. They can't pay their bills.

[00:05:05]They are falling further and further behind. And then we have the CEO class, of course, and we have Anduril and we have Palantir.

[00:05:16]We have all of the big tech companies.

[00:05:19]They're having a glorious time. War is good business and things are revving up.

[00:05:23]>> I wanted to ask you more about your analysis earlier of how this is kind of bifurcated economy. And what I've been seeing is, you know, in previous eras, it's not like the star stock market was perfectly predictive of the well-being of the average American. But, you could imagine there was at least some sort of correlation. Now, it seems to be a reverse indicator that the better the stock market does because it is all consolidated, you know, concentrated into these AI tech companies, the better the stock market does, the more that the average American suffers because what they're being rewarded for with these AI companies is their ability to replace human workers. And I wonder if you see it the same and how you're analyzing that impact at this point.

[00:06:09]>> There are two things going on. One is exactly what you said and it's a deep trend which did not start with AI. It started with automation, robotics already more than 40 years ago. And we see it in one key very interesting number. You can take the national income in the United States and ask what part goes to workers and what part goes to capital income.

[00:06:38]And when I was a student of economics in a you know, graduate school decades ago, in in the late 70s, we used to say that the share that would go to workers was about 2/3 of the total national income.

[00:06:56]Now, just the most recent data puts it at about 50%. In other words, it's gone from about.65 to.5.

[00:07:07]That is a big deal. What's happening is more and more of the national income that's produced is going to profits, is going to corporate earnings, is going to uh rents, to ownership of patents and so forth. And what workers get is absolutely falling as a share, but for a great part of our society, what workers get is falling in absolute terms. And AI will speed that up.

[00:07:42]Artificial intelligence substitutes these algorithms for human labor and whatever anyone says, this is a process that's been going on for decades and wages are stagnant or falling for those segments of the labor force where that substitution can occur. 20 Let's say 30 years ago, it was people on the assembly line.

[00:08:09]Those jobs didn't go to China. Those jobs went to the robots.

[00:08:13]Now the jobs are going to Claude and to others. And this is happening actually with a new swath. We know it's with the the college graduates this year. They're not finding jobs when they come out.

[00:08:29]And this is showing up as this shift of national income.

[00:08:34]The second thing that's happening, I think most likely, this is always a judgment that only can be made ex post is that we really have a bubble.

[00:08:45]We really have the Elon Musk thrill that we got the gazillion dollar companies and the trillion dollar man and and all the rest.

[00:08:55]I see no way personally that the valuations that are being put on big tech and on the IPOs can in any way be justified because one of the core features of these technologies is that they diffuse. There really is competition. There isn't somehow control by the first mover.

[00:09:20]China runs AI on an open source stack because it's trying to compete with the United States. So it's trying to get users all over the world. That means there's going to be a lot of open source ways to access this very powerful technology. and all these huge huge revenues that are being anticipated by these companies that are now you know, 50 times earnings or 100 times earnings or infinite cuz there are no earnings.

[00:09:51]I don't think this is going to materialize in the way that is expected.

[00:09:55]So, on top of the fundamental shift towards profits, which I think is real and deep, there's also, I think, a a financial bubble >> Mhm.

[00:10:05]>> uh that is underway.

[00:10:06]>> Professor, when we zoom out a bit, again, you know, looking to your own work and what you've looked at in the classroom, what are the parallels in history to these types of forces? To people coming out in the workforce in the midst of great technological change, of a great amount of wealth concentrated in potentially bubble assets. What does that look like and manifest in a society?

[00:10:27]>> Well, this has happened repeatedly.

[00:10:30]These technologies we call GPT, uh general-purpose technologies, which means uh something like the steam engine, uh which was the great invention of uh 250 years ago, created the factory world and not just in uh one sector, but across the economy and it created the railroad and many other things.

[00:10:54]Electrification was a general-purpose technology. AI is a general-purpose technology, an extraordinarily powerful one in my view.

[00:11:04]I don't believe it's hyped. I think it's uh amazing and real.

[00:11:09]But, what you find with general-purpose technologies is that generally they raise overall output in the economy, but dramatically redistribute the output as well. Uh in uh the first Industrial Revolution with the steam engine, there were uh vast numbers of losers. The economy started to boom, especially in Britain, which was the first industrialized nation, but those masses in the satanic mills, these were women and children who used to have jobs in rural areas, for instance, spinning yarns. All of that went away with mechanization. They ended up as a degraded workers, and it was exactly that what we call immiseration, becoming more miserable, that led Karl Marx and Friedrich Engels to issue the Communist Manifesto in uh the 18 late 1840s.

[00:12:14]So, that was real. Then, over time, new institutions were developed to share the the increase of output. Actually, Bismarck in the new German state in the 1870s and 1880s invented public pensions as a way to ensure that this booming economy would help more and more people.

[00:12:40]Well, this has been a repeated phenomenon.

[00:12:44]Big technological advance, the overall size of the economy increases, but the way that the pie is divided in the proverbial expression, changes dramatically, and we're going to have that with AI as well. And the American political system for at least 50 years has been don't help anyone.

[00:13:10]We're on our own.

[00:13:12]You know, good luck to you. And in an AI era, that would prove devastating.

[00:13:19]Now, Trump uh appealed to those who are suffering uh both in 2016 and 2024 and I I clever political messaging that was fundamentally false. He said China took your jobs.

[00:13:38]He said the migrants took your jobs.

[00:13:42]He didn't say technology has changed how we live and redistributed the national income. That is the right answer. There are no jobs coming back from China. By the way, I go to Chinese factories all the time. They don't have workers in them anymore because they're all automated. There aren't jobs coming back from China. I what we have is a technological revolution basically positive actually in that it we can do more. We can be more clever.

[00:14:15]We can have more sophisticated drug discovery or better health care diagnostics or many other things.

[00:14:24]But it's not going to fall equally. It's going to immiserize part of our society unless we actually decide for the first time in more than half a century to act like a society rather than to act like a group of individuals out in a brutal competition with each other.

[00:14:44]But we don't even have that kind of understanding in our political discourse right now. But the AI is moving forward relentlessly with or without it. And by the way, the number of meetings every day in every sector talking about loss of jobs, reshuffling of the workforce. This is happening everywhere right now and we don't have any public policy framework and we won't under Trump. This is something way beyond him.

[00:15:15]>> I think we do have a public policy framework under Trump. Rather than going in the direction of making sure that people will not be immiserated. What they've done is you mentioned earlier they want to dramatically increase he's already increased the defense budget dramatically but he wants to up it even further and then we've also seen this tremendous increase in the domestic law enforcement budget and an emphasis on mass surveillance etc. So it seems like the direction they want to go in is a sort of crackdown authoritarian crackdown.

[00:15:43]>> That's absolutely correct.

[00:15:45]>> If they're unhappy are not going to have the ability or will be too afraid to to get out of line.

[00:15:51]>> That's exactly right but I would just add one more point to that which is that specifically the surveillance state and specifically the war economy are big business precisely for the AI industry. So it's not only incidental that they want to crack down these are goldmines for them more war phenomenal.

[00:16:13]Look at the the biggest booming stock market in the world right now is Israel because it's basically a war machine.

[00:16:20]It's it's basically a surveillance intelligence and military machine so war is good for the for not not for the people but for the for the stock market.

[00:16:32]>> Well do you see the introduction of AI as you mentioned before we've had general purpose technologies introduced before you know they over time once you had a transition they benefited I think that the population overall although there are some that may dispute that but the difference may be twofold number one how quickly AI has been developed and is being disseminated and number two you know previous general purpose technologies were meant to replace like the horse for example. This is explicitly meant to replace human beings and the developers of it will tell you that and tell you things like we intend to make all of human labor irrelevant human beings effectively irrelevant to you know productivity growth and economic output etc. So do you see it as a more grave threat to the you know to the prosperity and happiness of mankind than previous general purpose technologies?

[00:17:32]>> Well, it's happening so much faster than anything else and we have metrics which we call adoption rates. How long does it take a certain number of users to use the technology and we've never seen anything like what we have right now. Chat GPT is announced and within weeks it's a hundreds of millions of users worldwide. So we're seeing something that is happening completely at an unprecedented scale and I think that that will continue. Um in terms of what it means for human well-being >> Mhm.

[00:18:10]>> It there are two issues. One issue is the distributional issue. Uh that uh we say gainers economically could compensate those who lose because the overall pie grows. Elon Musk, you know, he doesn't really need a trillion dollars of personal net worth or whatever 600 or 700 billion. I didn't check this morning. He doesn't need that. Uh so if we actually distributed well-being in our country, we could have a broader gain.

[00:18:43]Then there's the the meaning of life and the meaning of work question which is that these technologies in a fair society would mean less work. Uh the the robots can do physical labor uh and the AI can do cognitive work of various kinds. Is that a good thing?

[00:19:07]In principle, again, if it's done thoughtfully, it could very well be a good thing because we would have more time for friends, for family, for leisure, for culture, for exploration, for other things if the drudge work is actually carried out mechanically. And so per se earlier technologies, it's not true that they've always created new jobs to replace the old jobs. We actually work less hours per day on average than 100 years ago by far as as a matter of fact.

[00:19:47]The numbers are quite astounding. The average work time of an adult American is about 3 hours 20 minutes at this point, something like that. That's for an economy of a 30 trillion dollar output. Now, that counts weekend time, that counts retirement time, that counts time in school, that counts vacation time, leisure time and so on, but the point is we don't work like our grandparents and great-grandparents did. They worked not only at physical labor, but they worked around the clock maybe 6 days a week.

[00:20:27]And this is a big change and on the whole I believe it's a a plus.

[00:20:33]But American society as we've been discussing is quite distinctive. It's barely a society. Our political system is so corrupted it's not regarded as a society, it's regarded as a a group of particular interests of which Silicon Valley itself is interest group number one. It's more powerful than every other interest group. Partly because the generals are desperate for this technology. The military, the government has put its hands into Palantir.

[00:21:05]Palantir is more important than the rest of our government. They're watching everything we do. They're building the surveillance state. So, in this sense, we have a political and ethical problem that's quite fundamental in this country. And again, with this current gang, these are gangsters. They're not in any way, shape, or form even remotely aware or interested in these questions.