Talking With Azeem Azhar

The Court Sides With Dictatorship — and Chaos

For all my interviews and more, subscribe on YouTube [https://www.youtube.com/@PKrugman]. Note: It’s Lisa Cook, not Lisa Graves. Talking to Lisa Graves shortly. Earlier today, the Supreme Court declared war on U.S. democracy. It also declared war, basically, on modern society, on everything it takes to function in the 21st century. And I’m not sure that people understand that yet. Hi, Paul Krugman with a quick video update. I’ll have more on this tomorrow. Really shocking decisions handed down by the Supreme Court. There were a couple that were not awful. Lisa Cook gets to stay at the Federal Reserve, although that in itself is a huge contradiction to the important stuff that the court did. I mean, Lisa is important and the Fed is important, but much more important is Humphrey’s Executor, which is the generations-long precedent that says that when Congress creates an independent agency, it is independent. It’s able to make decisions. Of course, the president has some role. Typically, the president can choose the agency’s head subject to congressional approval, but the president can’t just go and fire officials that he doesn’t like for whatever reason or for no reason, because the agencies that operate the U.S. government and basically run our society are supposed to be professional. They’re supposed to be following their legal mandate. They’re not supposed to be personal tools of a dictator in the White House. Well, the court just scrapped that. Now, lawyers, people who are legal experts, can do a better job of explaining just what went down. But what I think is important to understand is not only does this give essentially dictatorial powers to the occupant of the White House, but it also makes it extremely difficult for the economy to function. It makes it extremely difficult for society to function. We live in a complicated world, a world of technology, where there are all kinds of spillovers, all kinds of ways in which it’s important that there be well-established ground rules. If you’re a business, take the example of medicines and foodstuffs, where we have an FDA, Federal Drug Administration, that is charged with ensuring that products that people consume are safe. We do that for very good reason. We know that not just that that there have been examples, historically, of products that were foods, medicines that were not at all safe, but also that people want some assurance. The fact that something has been FDA approved is a bit of a warranty, that it might turn out to be very harmful, but probably not. Businesses that want to invest in developing stuff need to know that there are some ground rules that determine what they can and cannot sell. Now imagine that all these decisions are made by political appointees who are loyalists to the president, who basically do whatever the president wants, whatever the people around the president want. Do you want to invest in something where you have absolutely no idea what the ground rules will be, whether it will be approved or not? Do you want to invest in a whole business line when, for all you know, the White House will abruptly decide that your product isn’t safe and that a competitor’s product is, based on spurious grounds? And what would cause those decisions to happen? Well, how about the fact that some businesses are better at the business of bribing the president and his family than others. And if you think that this is outlandish — you know, a few years ago you might have said this was outlandish, things like that wouldn’t really happen — well, as we speak, these things are happening all the time. So you are setting up a situation in which, you know, it’s a little bit like traffic laws. Traffic laws, yeah, they can be annoying, but aren’t we all kind of glad that there are in fact rules about when you can turn and when you can go through an intersection? In order to function, in order to drive your car around you need to have a set of stable traffic rules, not a situation in which a police officer can decide you broke the law and the other guy did not because I say what the law is. And especially not where the police officer does that based upon who’s been paying him off or who he expects to be paid off. The real world is far more complex than traffic rules but we need those rules and we need some stability and those rules cannot be specified with every letter, every punctuation mark set by Congress. The world is too complicated and changes too much. You need to have standing ethos, standing doctrine at the agencies that make modern life possible. Now all of that is gone. Now, it just adds to it that all of this is being done to empower a president who is the worst possible person for this job. This is not somebody you want supervising anything, everything that Trump touches turns to crud because he doesn’t care and he doesn’t actually understand or recognize that there’s such a thing as expertise as knowing what you’re doing. So this would be terrible even if we had a temporarily competent administration. But now you’re doing all of this, the Supreme Court is doing all of this to empower the guy who brought you the Reflecting Pool, who brought you the Iran war. Utter nightmare. Now, what will happen, hopefully, we emerge at the other end having fended off dictatorship. Then, I mean, as everybody knows, this Supreme Court is not actually empowering the presidency. It is empowering this president. And as soon as there’s a Democrat in the White House, suddenly there will be all kinds of restrictions on what that person can do. Well, this cannot go on. This is a clear argument that says we have to one way or another disempower the Supreme Court. I don’t know enough to tell you what is the best route to do that but court packing or something else is going to have to happen. Because this has been the clearest signal yet that we have six people (there are three who are not part of it, but we have six people) who are fundamentally hostile to democracy, fundamentally hostile to the modern world and determined to put the catastrophically bad leader that we currently have sitting in the White House in charge of everything, which is a nightmare scenario on every level. Take care, I guess. Get full access to Paul Krugman at paulkrugman.substack.com/subscribe [https://paulkrugman.substack.com/subscribe?utm_medium=podcast&utm_campaign=CTA_4]

Corruption for Make Benefit Glorious Family of Trump

For all my interviews and more, subscribe on YouTube [https://www.youtube.com/@PKrugman]. Transcript It’s kind of hard to believe, but the original Borat movie was 20 years ago. It’s time for a second sequel. And I already have the title. It would be Corruption for Make Benefit Glorious Family of Trump. I hope that some of my listeners are young enough to not remember the original Borat movie. But it was a mockumentary, a satire, in which Sacha Baron Cohen pretended to be a journalist from Kazakhstan investigating and interviewing Americans about American mores. It was not about Kazakhstan, although he did insult the country along the way. The reason I think about it is that today’s New York Times has a piece that reports, investigative reporting, on an immense mining deal in Kazakhstan, which, what do you know, turns out to be a big profit center for the Trump sons and also the sons of Howard Lutnick, the Commerce Secretary. Check out the investigative reporting for the details, but basically here’s another one, another big one. It’s part of an immense series of corrupt deals, often with petrostates — which Kazakhstan is — that financially benefit Donald Trump and his family and some of his cronies and cabinet members as well and their families. It’s all on a truly epic scale. This is a message I have been trying to get across. I don’t think many people even now understand just how much of a departure what’s happening now is from past US history. I still see people saying we might be, could be heading for another Gilded Age. But we have a level of concentration of wealth in the hands of a few people that is something like three times what it was at the peak of the Gilded Age. We’re in a super duper Gilded Age. And I sometimes hear people say, well, could we be returning to old kinds of corruption? Might we have another Teapot Dome scandal? Well, my God. Teapot Dome was a scandal actually involving mineral rights and bribes during the Harding administration, although not bribes to the president’s family, which is, again, something entirely new. The scale of the bribes was about $500,000: adjusting for inflation, that’s something like $9 million today. So how much has Trump enriched himself since returning to the White House about 500 days ago? The answer is certainly more than four billion dollars, almost certainly more than four and a half, maybe five billion dollars. Divide that by 500 and we basically have a Teapot Dome sized corruption scandal on an average day under Trump. So it’s basically day after day of scandals as big or bigger than Teapot Dome. Our corrupt grandfathers, great-grandfathers were pikers compared with this, just as the Gilded Age robber barons were pikers compared with the modern-day tech bros. This is obviously not good. It’s actually quite horrifying. How did we so quickly descend into becoming a truly massively corrupt country on a level that we used to think of as being associated only with tinpot dictators in the third world? And yet here we are. This ought to be a political issue and it ought to be a legal issue as soon as the government is back in the hands of people who actually take the rule of law seriously. Again, without going into the details of the deal, it’s surely illegal. I mean, it’s illegal under the Emoluments Clause. Probably since there are definitely Kazakhs on the take as well, it’s illegal under the Foreign Corrupt Practices Act. This is just, it’s illegal up the wazoo. Of course, it will not be prosecuted as long as Trump is in the White House. But forget any Democrat who isn’t promising to go after this massive corruption when they regain power. If they don’t, then none of this matters, but that should be a core part of anybody’s platform. I’m not a political expert — sometimes I think nobody is — but my God, again, this corruption is so blatant. And it does resonate with people. It’s really clear that corruption at the top and the sense that ordinary people are paying the price while people with power enrich themselves is an effective popular issue. That is actually the issue that brought Viktor Orban down in Hungary, which is one of the hopeful signs for what may happen to America going down the pike. So here we are, just to remind you that this scandal, it’s a huge thing. It’s page one in the New York Times, but in a way it’s actually kind of ordinary, since even this size of scandal is happening every few weeks these days. Do not make the mistake of treating what’s going on as in any sense normal. This is hugely abnormal, and I believe that the American people will understand that it’s abnormal even if pundits get bored of talking about the corruption. So drive it home, maybe for make benefit American people instead of the Trump family. Get full access to Paul Krugman at paulkrugman.substack.com/subscribe [https://paulkrugman.substack.com/subscribe?utm_medium=podcast&utm_campaign=CTA_4]

On Holding Elon Musk Accountable

For all my interviews and more, subscribe on YouTube [https://www.youtube.com/@PKrugman]. Transcript For most of last year, Elon Musk was the second most powerful man in America. He was running a large part of the government’s budget. And during that time, he established a track record of evil incompetence. I mean, really evil and really incompetent on enormous scales. And why aren’t people talking about it more? Hi, I’m Paul Krugman, doing a brief follow-on to my discussion that was posted earlier today with Ro Khanna, the Congressman from Silicon Valley, who’s a very interesting guy in many ways. One of the things that has made him especially interesting in the last few days is that he said something entirely reasonable, which is that if Democrats retake Congress, they should hold investigations into the role of Elon Musk as head of DOGE, the sort of not exactly but effectively government agency, in destroying USAID, the agency that was the principal channel for aid to the most desperate, poorest people in the world. That’s entirely reasonable, and Khanna went on to say that there are credible estimates that the cancellation, the destruction of Doge has led to millions of unnecessary deaths, including millions of children — which is exactly true. There are studies that say that there is both in the field evidence of widespread death as a result of the cancellation and, of course reasonable health models. Because what do you think happens when you cut away tens of billions of dollars of aid to people who are living right on the edge? So of course it’s a reasonable thing to say. Musk, of course, responded not by saying, no, it’s not true or something like that. He did say that not a single person has died because of those cuts, which is utterly implausible. But he also went on to say that he was going to sue Khanna, though he hasn’t actually so far, and that Khanna should be in prison for saying — not even saying that Musk killed people, but that there are studies that say that he killed people. It’s quite evil and so much for free speech. Musk is very much like Trump, somebody who can dish it out but can’t take it, can’t even handle the kind of criticism that any public figure should expect to receive. Honestly, you shouldn’t be at all in the public domain unless you’re prepared to deal with a lot of insults and accusations. When you have the kind of role that Musk did that would come with the package even if he had done a decent or non-catastrophic job. But of course he didn’t. And so let’s talk first about the evil. It’s not just that Musk more or less personally set out to destroy this aid agency set out to cut off healthcare, nutritional assistance, just basic necessities of life for millions and millions of extremely desperate people. But he did so callously, carelessly, he even actually tweeted out, oh, “I just fed USAID to the wood chipper and I could have gone to some great parties instead.” What can you say? This is an extraordinarily evil act. It came in the context of somebody who made enormous promises about what he was going to do. People have kind of forgotten that Musk came into DOGE promising to find trillions of dollars in waste, which he would eliminate, none of which happened. Overall, it’s pretty clear that DOGE actually worsened the budget deficit at least a little bit. He also made specific claims along the way, most notably his claim that there were something like 20 million dead people receiving Social Security benefits. That was because the 19-year-olds that he put in positions of great influence, the Muskrats, whatever you want to call them, didn’t understand government databases. You know, you get parachuted into an agency with access to the computer system but absolutely no knowledge of what the agency does or how it does it and then couple that with a kind of arrogance — believing that these people must all be stupid and I can just sit down for a day or two with their data and find vast waste and fraud. Well, nobody in a position of responsibility should believe that kind of thing. It’s possible that Big Balls and his other hench people actually believed that they knew what they were doing. But my god, if you’re put in charge of a hugely important government function, you don’t assume that everybody there is an idiot and that your neophyte attaches have somehow stumbled on things that nobody else noticed. And of course, Social Security is so pervasive, such a large part of everybody’s life, that the idea that there could be tens of millions of dead beneficiaries and nobody has noticed it, that’s completely crazy. You even wonder, did Musk really believe that? Does he even have a notion that some things are true and some things are not? But in any case, there you are. And so it was a total disaster. He left the government not, clearly not because Trump thought that he was too extreme, too bad a guy, but because it was so clear that he did not know what he was doing. And the reports of alleged savings from DOGE: it was starting to get embarrassing because it was so easy for news organizations to find out that the claims were utterly false, that none of what they claimed was happening was actually happening. So he left. and then he goes back to his companies and becomes at least temporarily a trillionaire with an enormous public offering. Why didn’t people think that his record with enormous public responsibility was somehow relevant to his financial future? I mean, if a guy who can convince himself that there are 20 million dead Social Security recipients, who can convince himself that you can massively slash foreign aid and it’s all waste and fraud and nobody will be hurt — why would you trust that person to run a company? And furthermore, the character flaws that are revealed here — flaws is what too weak a word, but anyway — when you have somebody who refuses to acknowledge uncomfortable reality, refuses to acknowledge error, who responds to any perfectly truthful statement that reflects badly on him by saying, I want that guy put in jail. — those are not the character traits that make for an effective manager. If you can’t accept that you are ever wrong, how are you ever going to get things right? Because things will go wrong, and you will make mistakes. We all do. So all of this seems terribly relevant, and yet it says something, I guess, about America that people piled in to SpaceX stock, although some of that has come off now. It really was clearly an early frenzy, a fear of missing out frenzy. There are now reports that SpaceX also sold bonds, which itself is a little troubling. Why should they be needing to go into debt right away? What is that about? And those bonds have already lost some of their value, which is much more serious than the stock coming down. When bonds lose value, that’s because people think that there is now a risk that this company might default, might not be able to honor its promises. So seeing those bonds start to trade at a discount almost immediately is a pretty bad sign for the company. But again, why did anybody believe any of this? Musk is a horrible, terrible person and has the blood of millions of children on his hands. Let’s be clear. Yes, it’s not something that has been proven, but it’s close to. It’s so overwhelmingly likely that it clearly has to be true. And he’s also a weak personality — very much like Trump again — he can’t take criticism, he can’t admit error. So what does it say ultimately about our society that so many people are willing to throw money at this guy and that they’re so willing to forgive the incredible failures that he carried out, the incredible disaster of his time in a position of public responsibility. And I don’t really know the answer to that. There’s a real question about how it is we got at our current age of irresponsible oligarchs and with so little public backlash. And it’s starting to develop. But still, the fact that Elon Musk is still in business, let alone the world’s richest man, is in some sense an indictment of all of us. On that happy note, take care. Get full access to Paul Krugman at paulkrugman.substack.com/subscribe [https://paulkrugman.substack.com/subscribe?utm_medium=podcast&utm_campaign=CTA_4]

Catching Up With Ro Khanna

For all my interviews and more, subscribe on YouTube [https://www.youtube.com/@PKrugman]. Ro Khanna represents a large part of Silicon Valley, and not surprisingly is a very smart guy. Perhaps more surprisingly, he’s also a very interesting progressive, who has drawn considerable ire from the tech lords, with Elon Musk most recently calling for his imprisonment. I caught up with him Friday: TRANSCRIPT: Paul Krugman in Conversation with Congressman Ro Khanna (recorded 6/26/26) Paul Krugman: I’m talking again to Rep. Ro Khanna [https://khanna.house.gov/], the Representative for Cupertino, as it were, representing the heart of Silicon Valley in ways that don’t always please the tech oligarchs. I had planned to ask about AI, but there’s so much going on and Ro is right in the middle. So, welcome to this interview. Ro Khanna: Well, I’m honored to be back on. I usually just read you to learn, but I’m glad we’re going to get to have another conversation. Krugman: As it happens, tech-related politics is really central now. And you seem to be in the middle of at least three big issues: Elon Musk, AI generally, and the California Wealth Tax Initiative. I want to talk about all of those, but maybe let’s start with Elon Musk, who has called you evil, which is a great honor. Do you want to talk about that controversy and where you came in here? Because I think it’s very interesting. Khanna: Well, he’s called me evil, he’s threatened to sue me, and he’s threatened to jail me. I have this quaint idea, Paul, that in a democracy, Elon Musk should have one vote. He doesn’t seem to think that, and the reason he has been so triggered is that I not only cited a Lancet study [https://www.thelancet.com/article/S0140-6736(25)01186-9/fulltext]—which said that his USAID cuts could potentially lead to the deaths of 4.5 million children and over 10 million adults—but I also cited an Atul Gawande/ Boston study showing that some of these deaths have already taken place [https://www.foreign.senate.gov/press/dem/release/the-dangerous-consequences-of-funding-cuts-to-us-global-health-programs]. This triggered him, not just because I cited these studies, but because I said he’s going to have to come before the House Oversight Committee when we take back the majority; we’re going to have the power to subpoena him. And, of course, defying a congressional subpoena could lead to contempt of Congress and penalties. And so he’s been spending the last few days obsessively tweeting about me. You would think if you had $1 trillion, you’d have better things to do, but this is what’s occupying him. Krugman: Yeah, let’s back up a bit. One of the things that I found really kind of astonishing in the whole discussion—and obviously, SpaceX went public and there was amazingly little discussion of Musk’s role at DOGE where he was a quasi-government official. I guess it was kind of weird what the legal basis for all of that was—but this had immense impacts. And as you say, one of them was that he just, more or less by personal fiat, eliminated USAID, which is our premier aid agency. Do you have any thoughts just generally about what Musk did at DOGE? I think it’s a hell of a story, so let’s start with that. Khanna: The keywords you used were “by personal fiat.” I mean, he literally went there, didn’t consult Congress, didn’t report to Congress, and just started cutting programs that Congress had explicitly authorized. And no one stopped him. We voted to subpoena him, but he defied coming in and explaining anything to Congress. By some accounts, he cut 83% of the programs that were at USAID. And some of these programs are to feed some of the poorest people in the world; some are to provide medicines to some of the poorest people in the world. So, you literally had the world’s richest person hurting the world’s poorest people. And he was doing it with no accountability, in defiance of Congress. Congress then fortunately restored some of these programs, so he was not able to end all of them. But the USAID programs are a shadow of their former self. They now are scattered in administration, and many were so disrupted that these academic studies have shown that it potentially could—or in some cases already has—led to the deaths of some of the poorest people and children in the world. Krugman: Yeah, the important thing is what he did. But the attitude also at the time... I think he said something like, “Oh, I just fed USAID to the wood chipper, and I could have gone to some great parties instead,” as if it was, you know, annoying that he had to go out there and cut off medical aid for millions of children. Khanna: Yeah, it was total arrogance. He said it was all fraud, but of course, he then didn’t have the guts to come before Congress or the American people and explain where he found fraud. He didn’t consult any of these programs. It’s not like he was on a plane to Africa or a plane to other parts of the world where these programs were being administered. And for someone who was going to go after cuts to the federal budget, instead of starting at the Department of Defense, which is 65% or so of the discretionary federal budget, he decides to start with an administration with less than 1% of the federal budget. It was a purely ideological agenda that, turns out, has real-world consequences—especially with this Ebola outbreak. I mean, one of the things he cut was the oversight and testing in places like the Republic of the Congo, and now we’re seeing the consequences. Krugman: And his reaction has been really quite over the top, considering, you know, if you’re any kind of public figure, you expect to be facing criticism. Khanna: It’s just denial, right? I think he said that not a single person has died because of his cuts, which is totally implausible. He said, “there’s not a single documented case.” And he said that everything he cut was simply a fraud, and that these academic studies are totally fraudulent. Granted, the Lancet study is a model of what could happen, but the Atul Gawande study is actually a documentation of actual deaths that have taken place. And there are a lot of anecdotal statements which Nicholas Kristof and a lot of people have reported on. Krugman: And now he’s threatening to sue you. Presumably, I don’t think we’re that far gone that there’s any chance that such a suit would prevail, but how much of that is an actual burden on you? Khanna: Well, I put it into Grok to see how strong a case Elon has, and Grok doesn’t think he has a very strong case. So there’s that. Krugman: In case anybody doesn’t know, Grok is Elon Musk’s or xAI’s LLM. It’s a competitor to ChatGPT and Claude, except it’s not really a competitor because it’s awful, right? But yeah. Khanna: I would have a better case of defamation given what he has said about me. But, of course, I believe in free speech, Paul. I thought he did, too, and I would never think of suing someone for calling me a robber or calling me names. That’s the First Amendment. But I’ll tell you what it does: it creates a doubt in other people who are on the Oversight Committee—you know, “Is this really worth the bother? Should we really criticize Musk?” So that’s one thing. Obviously, Musk has more than one vote. He’s got millions of dollars that he can spend on candidates, but now it turns out it’s not enough for him to just have the ability to support Super PACs; he also wants to be able to intimidate any public official who dares to go against him. It’s not just that he would spend money against them, but that he could actually sue them. And so if you’re a member of Congress, you’re thinking, “Well, do I really want this fight? Or maybe we could just focus on the hundred other issues.” So, it’s less about the headache for me and more about the signal he’s sending to other elected officials. Krugman: So you aren’t trying to do a GoFundMe for a legal defense or anything like that? Because I know people who have faced other spurious lawsuits and it’s actually cost them money, even though there’s no chance of it prevailing. They feel that they do need to hire people, but you’re not in a position where you are personally feeling liable? Or are you just well-positioned to sort of weather this? Khanna: Well, he hasn’t sued yet. If he does sue, it will be a drain on resources and we would have to raise funds. We would. But I don’t want to have people do something before there is an actual lawsuit. We’ll see what he does. But that’s exactly what his strategy is, whether it’s against someone like me or just a message to others that he has unlimited resources and he can make your life very, very difficult. Krugman: Okay. And he’s also called for you... I guess there was nothing specific about why, but for you to be put in jail, which is even more amazing. Khanna: Yes. And ordinarily you would kind of laugh it off because he’s a private person with no power. But of course, in this administration, him calling for that and the way the Justice Department works—there are political motives to how they’ve been operating. I mean, they have the governor of California and his wife that they’re threatening along with Adam Schiff... the list is long how they have operated. Krugman: Yeah. I’m a friend of Lisa Cook at the Federal Reserve and for her, this has been much more. She was, in fact, targeted and all of that by essentially the same gang. So yeah, it’s quite something. Just the last bit: Musk has also then gone out with this claim that USAID somehow is responsible for COVID, and also went full-in on the conspiracy theories about COVID. Do you have any comment on that, just since it came up in this context? Khanna: It’s so nonsensical. I don’t even understand what he’s talking about. I think what he is trying to argue is that the lab that some people believe was the testing ground for the virus somehow is connected to USAID, but he just puts these things out there with no evidence and for ideological reasons. The reality is the large part of USAID was to help poor people with food and medicine, and it had support from everyone from George W. Bush on. Krugman: Yeah. I’m pretty sure that USAID doesn’t actually spend money creating labs in China. Khanna: I’m 99% sure that’s true. I mean, Paul, you and I usually check things before we say something definitively. Elon doesn’t have any of those filters, so he’s just throwing these things out there. Krugman: Yeah. It’s pretty terrifying. The world’s richest man with a very strong political in with the U.S. government and... just, wow. Well, that was in the news so I thought I’d ask. Khanna: He does have a huge platform, right? I mean, he has 240 million followers. So him saying, “Okay, I’m going to sue Khanna. Khanna is a horrible, evil human being,” you know, has more reach by far than when I go on Meet the Press or ABC News. And he’s putting out basic falsehoods, so it’s a real danger. Krugman: Yeah. Okay, let’s move on. So the technology of the moment is AI. Last time we talked, which is a while back now—I mean, a while back in tech time, anyway—we were talking about crypto, and there’s a little bit of the distracted boyfriend thing where people are looking now at AI instead of crypto. But AI does look really much more substantive. You can actually almost start to see its impact on productivity, maybe on layoffs. So it looks like a serious technology. And you’ve been staking out a position which is calling for a lot more intervention and regulation. Do you want to talk about what you think is happening and what needs to be done? Khanna: Well, so far, AI has been enriching tech lords and tech billionaires, but it’s caused deep anxiety with ordinary Americans. And I would argue that there are four things we need to do. We need to first care about jobs. Now, here’s the good news, Professor Krugman: it used to be that the people who cared about a jobs program were folks in de-industrialized communities—blue-collar, or people who had lost factory jobs. Now you have kids at Brown, kids at Yale who are worried about whether they’re going to have a job. So I think there’s an opportunity for a broad coalition to have the most ambitious jobs agenda in a generation. And what does that look like? I would say first, it means taxing agentic AI more than we tax human workers. This is not my idea; it’s Daron Acemoglu’s idea [https://news.mit.edu/2020/3-questions-daron-acemoglu-us-tax-system-automation-1015], which is basically that the tax code is biased towards capital. If you have to hire someone, you’ve got to pay their health insurance and you’ve got to pay a payroll tax. If you want to have an agentic AI worker or a robot, you don’t have to pay that. So, neutralizing that tax code. Second, we should—and I’ve argued this—have a “Work for America” program, a federal jobs program for young people out of school, out of trade school, or out of college to rebuild communities, maybe to come to the federal government. Maybe they go to a community that they didn’t grow up in. This can be akin to military service and can help rebuild not just the physical infrastructure of America, but the social infrastructure. Third, bargaining power for employees. So, not just go retrain them, but give them an actual say in the company if there are going to be layoffs. What role will they have? If there’s going to be displacement, what jobs would they have? Are they going to get a share of the profits from the increase in AI productivity? Are they going to get time off with the increased productivity? And finally, a sense of ensuring that jobs are there, that there’s intervention in having humans in the loop in various jobs—whether that’s the four million truck drivers and thinking about their role, or whether it’s jobs making decisions about people’s healthcare or making decisions about their finances. Krugman: So, yeah, I mean, a few things to unpack here. One is, obviously, nobody really knows what this is going to be, but we are starting to see, or we think we’re seeing, real job impacts and income impacts from AI. Probably. If you had to say, where would we be seeing these things first? It would be kind of in your district, right? So, what do we actually see? What are you hearing from your own constituents? Khanna: First, it’s much harder to get hired into these tech jobs. There’s a lot of anxiety from 21-, 22-, and 23-year-olds and their parents. The job market used to be, even at a place like Stanford, “Okay, I’m going to get 10 or 15 offers before I’m done with my senior year.” Now, they’re lucky to get a job, or it’s much harder to get a good job. Second, there have been a fair amount of tech layoffs. Now, some people are arguing that was because they overhired in the pandemic and they’re correcting for that, but it’s hard to imagine that AI is not at least part of the factor in that, and that it’s not just a correction for overhiring. And then third, just the sense of what the new jobs in these tech companies are going to look like in terms of being able to implement AI or use AI, and what computer science is going to look like in different schools. Krugman: Yeah, it is interesting what you just said, which is that we have a better chance of getting action because the jobs at stake here are sort of high-education rather than blue-collar work. In a way, that’s an indictment of our politics—that in some sense, we think Stanford graduates feeling aggrieved carry more weight than ten blue-collar workers in Ohio. But on the other hand, it is really striking, right? Obviously, you’re hearing from people who are just seeing that entry-level jobs are not there. To what extent is this actually manageable? Can we channel this, or is this technology just going to sweep away efforts at, particularly, job retention? Khanna: I do think it’s manageable in that there are a lot of human tasks, in my view, that can’t simply be automated: goal setting, team building, and the origination of customized new ideas for settings. And there’s a lot of work, public work, that can be done—whether it’s opening new parks, whether it’s helping represent people who are underserved, whether it’s making government services better, whether it’s providing counseling, whether it’s providing teaching, or whether it’s providing childcare. So, in my view, there is a role for a robust federal jobs program, and it could help in de-industrialized areas and for factory jobs. And we should keep in mind, we wanted to do this years ago when we saw the devastating effects of globalization, but our politics, for whatever reason, didn’t allow it. And now you have a much broader set of people with anxiety. Of course, it’s not the Great Depression when FDR had 20 to 30% unemployment and a total collapse in demand, but it is one where you meet an average person who’s concerned about it. And I think there is polling showing 30 to 40% of Americans are anxious about jobs. That seems to me to provide a moment where a politician coming with a jobs agenda or intervention in the free market would have a reception which, in a lot of the last 30 or 40 years, has been very hard to get. People just say you’re interfering in the markets. Krugman: Just to say—I mean, you kind of implicitly said this—but in effect, you’re calling for something like a WPA (Works Progress Administration) or CCC, ‘30s-style, but at least in part for tech workers, not just for people with shovels, but people doing skilled—I hate that word—but high-education-content work. Have you put any kind of numbers to this, or is it just a general outline at this point? Khanna: I wrote an op-ed called “Work for America” in The Wall Street Journal, and it was about $50 billion a year, which I said you could fund through an AI token tax. And it would be hiring anyone out of high school or out of college for jobs to open a park, to help with their local community, to teach, or to come to the federal government to do something. What I was particularly excited about is that kids growing up in Fremont, in my district, could go to Middletown, Ohio, to do something there so that you’re building things. And it would help for folks who may be displaced. And I explicitly said it was inspired by FDR’s Works Progress Administration, which hired 8 million people. Of course, that’s where the “boondoggle” idea came from, because some people back then said some of those jobs weren’t real—they were criticizing it. But my understanding, and you’re a better student of history, is that it did work in creating meaningful employment and many meaningful projects, and certainly helped the social infrastructure of the country. Krugman: I want to come back to jobs in a second, but you’re basically at least accepting as a strong possibility that this technology is biased towards capital and away from labor. Are you seeing that? Is that really what’s happening? Khanna: We’re certainly seeing it in terms of the explosion of wealth in my district and with billionaires. And we’ll get to the idea of a billionaire tax, but I mean, they have reaped massive amounts of benefit from the AI revolution, and we haven’t been seeing that for the average worker or even the average tech worker. They’re not reaping the rewards in the way that a few people have. And you’re seeing this also in terms of, certainly, the difficulty in entry-level jobs. I mean, when I was at Suffolk University and giving one of the commencement speeches, the line that got the most applause was when I said we need to tax agentic AI more than human workers. Young people are concerned about AI, and I don’t think their fears are totally irrational; I think they’re finding the job market to be harder. And I have a lot of cases in my district of people at these tech companies who are being laid off or told that they need to be let go. Now, you talk to the tech leaders and they’ll say there are other factors too—they’ll cite overhiring in the pandemic, they’ll say they’re just adjusting. So, I don’t know if there are academic studies that show it’s correlated completely to AI, but I certainly think it is one of the variables. And I think there was one study at Stanford showing that for young people in automatable jobs, AI had contributed. Krugman: Okay, you gave a commencement talk and got a positive response, unlike Eric Schmidt and, there have been multiple instances, but I guess Eric Schmidt is the famous one, the former CEO of Google, giving a commencement address in which he started to talk about AI and immediately got massive boos from the students. Khanna: I took the opposite tack. I said AI is not doing your generation a good service, and it’s something that we need to be tackling—not preaching all the benefits of AI. And it was a surprise to me because that was not the place where I expected to get applause. It was not the central part of my address, but the two places that got the most applause were calling for a billionaire tax and calling for a jobs program and taxing AI, which I was almost going to keep out of it because I thought, “Is that too political?” But the students, actually, that’s what resonated with them. Krugman: And so, at least conceptually, there are two separate issues. There’s a wealth tax, which I want to get to in a bit, but you’re talking about essentially—you call it a token tax—a tax basically on the use of AI. Are we able to implement that? Do you think it can be done reasonably well? Khanna: I do. It seems to me that’s the easiest thing because right now there’s a cost, of course, to the use of AI. And there’s a large debate, by the way, about what that cost is because it’s fairly expensive. It turns out it’s fairly expensive in terms of the energy consumption of AI; it’s expensive in terms of the capital expenditure for data centers, which is a whole separate conversation. And so, the question of labor displacement, I think, also depends upon how much AI costs actually come down or don’t come down. But right now, companies are paying a lot for the use of these tokens, which is basically the output of AI when you type something into ChatGPT. And so, if you just put a tax on that, that would both disincentivize automation and would raise revenue. Krugman: I’m not aware of an earlier parallel where there was something—sort of an output of machinery at some level—that could be compared in a way with labor. And of course, aside from income taxes, the FICA on every paycheck shows that we tax labor. And you’re just saying that we should do something for the stuff that’s coming from AI capital, right? Khanna: Yeah. That’s exactly right. And simply put, the idea right now is that it’s not just that people have a higher degree of variability because you could get sick, you need to be with your kids, or you have to pay health insurance. We’re not taxing what these tech people are saying is labor-replacing, and so we should tax that. Krugman: Okay. Now, people’s immediate reaction is, “Oh, but we’re in a competitive race with China.” What’s your answer to people who say, “Oh, you know, if we start to tax this stuff, we will forfeit the lead to other countries. It’s a great international race.” Khanna: Well, first of all, even China is changing its policies. I read recently that some of the court decisions in China are saying you can’t lay off people based on AI, and they have almost 18% youth unemployment. When I went there, a lot of the young folks didn’t want to work in the factories, and they’re concerned about losing jobs. So, I think China itself is realizing that having just unregulated AI is not healthy for society. The second thing is we want to compete with excellence. That’s always been the American aspiration—that we want to have products that have the highest standards. We want to have high safety standards, the highest set of standards in terms of privacy. So, if we’re producing AI that is safe, where agentic AI isn’t going to go do crazy things and isn’t going to engage in surveillance, then that should be something that we can export and be a model for the world. I don’t think we have to have a race to the bottom in the type of AI we produce. Krugman: Okay. And AI that’s safe, which, of course, is one of the big concerns. Any thoughts on the runaway models? Grok, which you mentioned, apparently was used for targeting in Iran with not-very-good results. Are you hearing anything, or is there any movement on intervention—basically congressional action to try and avoid some of these dangers from AI? Khanna: There hasn’t been, because this administration has basically said, “Let the tech billionaires do whatever they want.” The only time they’ve shown any interest in regulation is with Mythos, Anthropic’s latest model, which could detect cyber vulnerabilities. And it’s unclear whether their concern is simply motivated by the unsafety of Anthropic’s model or is retribution because Dario Amodei got into a fight with Pete Hegseth. But other than that issue, the administration has basically said, “Do whatever you want.” And it’s really scary because usually, even by these tech leaders’ own worries, they say, “This is transformational. This is going to change the world. This is the most important technology since fire.” Well, if that’s really the case, we have a federal agency for electricity, we have a federal agency for nuclear weapons and nuclear power—why wouldn’t we have a federal agency for AI, on your own terms? And yet there’s been no effort to do that. Krugman: Okay, for listeners, by the way, Amodei is the CEO of Anthropic. The two big models out there are OpenAI’s ChatGPT and Claude, which is Anthropic. Most of the buzz that I’m hearing about usability involves Claude, but Anthropic is politically not that aligned with the administration and has particularly said that it will not allow its AI to be used for autonomous weapons, and that has made them on the outs. And it’s really very hard, right? When the administration lays down rules or policies on AI, you can never tell whether they’re really concerned or whether they’re just trying to punish a company that isn’t on their side. That’s what you’re saying about Mythos, right? Khanna: Exactly. And I mean, given the administration’s history in general on retribution across so many places, but also in this explicit retribution against Anthropic... there, Amodei basically said that he didn’t think technology should be used in a way that would violate privacy. He didn’t think AI should be used to make decisions about what to strike without human judgment. Hegseth didn’t like that; they had a whole fight. And so now that they have Mythos, it may be that there really should be regulations and export controls because this technology is explosive and could cause cyber vulnerabilities. The problem is we don’t know, because the administration also has a motive for retribution, and they’ve lost the credibility of any independence. Krugman: Yeah, that makes it especially hard now. All right. It’s actually amazing how much impact Anthropic’s products are having. I’ve been talking with senior financial types on stuff, and it’s amazing how often I hear, “Well, I was thinking about that, so I asked Claude.” It really is shocking how—you know, we’re not talking about saying, “I had my staff go and look it up,” it’s, “I went and asked Claude myself.” So, like it or not, this is the world we’re in now. Okay, it seems to me that your whole vision is a step beyond. I mean, if you go back to actually quite early on when they were still making apocalyptic warnings and Sam Altman was saying, “Oh, well, given AI, we’re going to have to have something like—” I don’t think he exactly used these words, but something like, “We’re going to have to have taxes on capital to pay for universal basic income.” And that’s kind of the Silicon Valley vision. But your idea is more that we should have taxes on the wealth that’s been created to help provide for job programs. So, it’s not just that we’re going to give people money so they can sit at home and let the machines do stuff, but we’re going to subsidize ways that give people work. Khanna: Absolutely. And that work could be childcare, it could be home care, it could be new types of industry, it could be helping provide better government services, or it could be doing something meaningful in the community. I believe we have the need for productive work, and that the federal government should play that role. And by the way, the hypocrisy of some of these tech folk saying, “Just tax me so we can have universal income”—well, they’re not willing to pay the tax. I mean, when you look at Sam Altman’s proposal on universal basic income, which is, “Take a 2% tax on my company every year in terms of equity shares,” if you just did the math on that, after five years, maybe every year, each American would get about a $1,000. That’s not exactly universal income. So, I’m not for just taxing and giving everyone a check and saying work doesn’t matter. I don’t think that’s a healthy society, but they’re not even willing to do the first part of that, which is pay the tax. It’s just empty rhetoric. Krugman: Yeah. I always had a problem that these proposals for UBI—even if they raised enough money—the amounts are not enough to live on, and also just collecting what we used to call welfare is not a substitute for actually having meaningful work. So, let’s talk first about the California proposal for a one-time wealth tax, which you are supporting, but is amazingly controversial even within the Democratic Party. Tell me about the proposal and some of the criticisms. Khanna: There are three million people in California who risk losing their healthcare because of the big, ugly bill that Trump passed, which everyone acknowledges cuts Medicaid and cuts the subsidies in the Affordable Care Act. So, that’s a fact that everyone acknowledges—that these folks are going to lose their healthcare. The second fact that people acknowledge is that there are about 200,000 healthcare workers—nurses, aides, hospital workers—who are going to lose their jobs. And what this program, this ballot initiative, says is: let’s have a one-time 5% tax on billionaires. There are about 250 of these billionaires. Their worth, as Gabriel Zucman’s work shows, is about $2 trillion. That is the equivalent—and I’m not saying it’s the same thing—but it’s the equivalent of about half of California’s GDP. There are 250 people who are worth that. And if you tax them one time at 5%, you could literally raise about $100 billion and make sure that we cover all of these Californians, and that we don’t lose 200,000 jobs. The ballot designers went and said, “Okay, let’s just do 2%,” and that proposal was rejected. That would have raised $40 billion and staved off the crisis for two years. And so now we’re going to the ballot on this. These 250 billionaires, by the way, have made about 150% over the last three years. Their wealth has increased 150% largely because of AI, and yet they’re not willing to pay a 5% one-time tax to make sure that Californians don’t lose healthcare. Krugman: It always astonishes me how small the number of people that we’re talking about is, right? It still annoys me when people talk about the 1%, because we’re talking about a tiny, tiny fraction of 1%—just 250 people in California. But it’s a quite significant amount of money that could be raised by such a tax, right? So, the first question people ask is: won’t they all just decamp, leave? What would be the possibilities for avoidance—not evasion, since evasion is illegal, but avoidance is not—so that everyone won’t just pull up stakes? Khanna: So, first of all, we have actual data on this. We know that in Q1 of 2026, 85% of venture capital in America went to California—the highest ever. And this is months after the state ballot initiative was announced, and when you’re seeing reports of Sergey Brin and others leaving. So, in terms of capital investment into California, it has only increased since the announcement of the ballot initiative. And that’s obvious; no one thinks that the AI revolution is happening in Miami or happening in Austin. It’s happening in Silicon Valley. It’s happening in my district and the surrounding areas. So, you may be losing some individuals, but you’re not losing the capital into Silicon Valley, and that’s just what the data shows. The second thing is, okay, maybe you lose some of these individuals, but as Zucman’s work has shown, these billionaires are only paying about 2.5% of the total general fund in California. And the reason they’re paying so little is because they basically weren’t being taxed—I mean, they don’t have income. And so, if you lose a few people, it’s not some devastating blow to the tax revenue of the state, and you’re not losing the capital investment. And the final point is, if you haven’t moved already, you’re subject to the tax the way it was designed: it’s one-time, and it’s based on whether you were in the state by the end of last year or not. Krugman: Okay, that’s really important. It’s a retroactive tax, in a way. It is a levy, but that’s kind of okay, so there would be no possibility of people avoiding it. But I guess one criticism has been that while they can’t avoid this tax, they won’t pay income tax in the future. But you’re saying that they basically weren’t paying income tax before. Khanna: And the irony of it is, what’s the point of making money? Part of it is you get to do things that you want to do. One of the most basic things that people want to do is live where they want to live. And the idea that you would be a billionaire and then not want to live where your family is, or where you like, or where you grew up, or where you find it most fulfilling simply because of tax considerations seems to be quite ironic. And the truth is that there are a lot of billionaires who will grumble and say all of that, but aren’t going to be leaving California. Krugman: One of my favorite lines was about the attempts to turn Miami into the new Wall Street. There was some Wall Street guy who told Bloomberg, “The trouble with moving to Florida is that you have to live in Florida.” There’s a California version of that. So, this would be a one-time California thing. Do you have a vision for what an attempt to kind of make AI and just general technology less of something for a few hundred people would look like? What would America 2035 look like if we could have a Ro Khanna vision of policy? Khanna: We would have a new social contract. We would be taxing these billionaires and trillionaires, and that would raise about $4 trillion if you did it at 5% a year. You would have other basic taxes—have an actual effective corporate tax rate that is at least 28%; right now, they’re not even paying 21%. You would have capital taxed the same as ordinary income. You would have a step-up in basis. You’d raise that revenue rate— Krugman: We should mention “a step-up in basis.” Why don’t you explain what it means? Khanna: Well, that’s when these people die and their kids get their estate. But if they had huge stock appreciation in their lives, their kids don’t have to pay taxes on that stock appreciation. Krugman: Yeah. We’ve got a system in which a large part of capital income is basically never taxed. So you’re talking about eliminating that. Khanna: Why would we have a system that’s already capital-biased, where basically, if you have this capital, you’re making money in your sleep and you’re paying less taxes than someone who’s a doctor or nurse or a factory worker who pays ordinary income tax? That should be leveled. And when people say, “Do billionaires deserve what they make?” I don’t deny that they have built something often of value, and that they’re hard-working, and that they’re entrepreneurial. I’m just saying that the system—because of the way we tax capital less, because of the way that corporate taxes aren’t really collected, because of the fact that we don’t have a wealth tax, because of the way we have allowed the estate tax to operate—has allowed for the accumulation of extraordinary wealth beyond what a system with a rational tax code would allow. And so if we had a rational tax code, we’d have all of this revenue, and then you could do things like having universal childcare at $10 a day, having a thousand new trade schools, having free public college (which we had in California in 1960, and in many places as well), having a jobs program, making sure that we had a livable wage and union bargaining power, and expanding healthcare. I mean, I’m ultimately for a single-payer, Medicare-for-All system, but at least expanding it, doing things like dental, vision, hearing, and making sure that we had drug negotiation. All of this is to say something very simple: when I go around the country and I say Elon Musk has become a trillionaire, I’m met with huge boos. And when I talk about these tech billionaires, huge boos. That was not always the case in America where people would just boo successful business leaders. It should be a wake-up call that most people don’t think that their lives are improving, even though we’re generating more wealth than ever before. And my view is: why can’t we have a society, if we’re generating all this wealth, where most Americans feel like they have more economic security? And how do we do this? And the last point I would say is, I’m the nice guy. I’m 49 years old, about to turn 50. You know, the folks in their 30s, the folks who are winning in New York, they’re not as nice as me saying, “Okay, let’s just have a new social contract.” They want to rip the total system down. They’ve had it. They want a total revolution. And so, either we’re going to have this transformation, or we’re going to have a far more radical new generation that is totally upset at society. Krugman: So, you’re basically saying you can do these reforms, you can do something that will spread the benefits, create societal sharing, or the pitchforks and torches will be coming for you. Is that a good way to summarize it? Khanna: [Laughs] That’s my message. I’ll say pay it as an anti-revolution tax. But you know what? Even in my district, Paul, when I have town halls and I say, “What do you think of a billionaire tax?”—and I remember in one of the most affluent districts in the world—90% of folks will raise their hand: “Yes, it’s a good idea.” To your point, this is not talking about the 1%. I can’t do the math, but the 0.0001%. Everyone wants them to pay taxes. The doctors do, the investment bankers do. And then there will be people who say, “No, Ro, I disagree.” I say, “Why is that?” And they’ll say, “Well, why is it just 5%? I want 20%.” I mean, they’re not thinking of the wealth tax necessarily and what consequences that would have. But this is the sentiment, not just in Pennsylvania, Michigan, or Ohio; this is the sentiment in my district. And I think a lot of people are oblivious to the anger and the anxiety young people have. They can’t buy a house, they have huge debt, they don’t think their lives are going to resemble their parents’, and don’t understand why that’s the case in a nation that’s producing so much wealth. I mean, you’ve done a lot of work on this, and I’d ask you, in development economics and often in the developing world, there’s a trade-off between economic development and economic fairness, right? But it seems to me what’s so ironic in our case is that trade-offs don’t need to exist. We’re producing all this wealth; it’s simply a matter of values that we’re not allowing most Americans to have economic security. Krugman: That might be a good coda here. I mean, it is an extraordinary thing that we don’t seem to be facing a trade-off. It really is the case that in almost every respect except the wealth of a few hundred people, this kind of fairness agenda looks positive. So, how are you feeling about the politics of it? Do you think you’re getting traction? Khanna: I do. You know, they poured in $1 million-plus against me with my primary opponent [a Democrat who opposed the wealth tax]. And California’s a weird system: Democrats, Republicans, we all run together. I got 62%, my challenger got 6%, and the Republicans got the rest. So, I think that was a bit of a wake-up call for some of these folks that, you know, democracy still works. And I’m very, very optimistic heading into the midterms that this central idea of fairness is one that’s resonating with many people. And I am confident we’re going to take back the House. Krugman: Okay. The congressman from Silicon Valley says democracy may still work. I think that’s a really optimistic punchline. Thanks so much for talking with me. Get full access to Paul Krugman at paulkrugman.substack.com/subscribe [https://paulkrugman.substack.com/subscribe?utm_medium=podcast&utm_campaign=CTA_4]

The Chips Are Down

For all my interviews and more, subscribe on YouTube [https://www.youtube.com/@PKrugman]. A short talk in lieu of a post. Back on full duty tomorrow. Transcript: Hi, Paul Krugman here. I’m recording this on Tuesday afternoon. I just won’t have time to write a normal post for tomorrow when you’ll see this. And I would take the day off, except it seemed to me as if people might want some reaction to the carnage that’s been going on, at least in part of the tech sector and stock markets around the world, which has been pretty remarkable. It’s really tempting to say that it’s deeply meaningful. But in general, you want to be very cautious about putting too much stake in stock market events. I’ll come back to that in a minute. But it is striking enough that it does seem to be worth commenting on. So what’s happened? There’s been a fall in tech stocks very much concentrated in semiconductors. The Philadelphia Semiconductor Index was down almost 8%. on Tuesday. The KOSPI Korean Index, which is largely a semiconductor index, was down just about 10% sort of the previous day or the same day, you know, time zones. And there was a 2.2% fall in the NASDAQ. We’ve seen a lot of decline in tech stocks, things related above all to chips. What’s going on there? Part of the answer is that trying to understand why the market does what it does is, generally speaking, a mug’s game. In this case, however, it does seem that part of what’s happening, probably a large part of what’s happening, is that the tone, the rhetoric surrounding use of AI, and hence the demand for compute, has really shifted quite a lot just very recently. All of a sudden, we have a spate of studies that seem to show that, yeah, AI models allow people to churn out a lot more stuff, but the actual payoff to that stuff is much, much smaller than the volume of stuff that they’re churning out, most obviously lines of code, but just in general. AI lets you do much more, but how productive that is in terms of the ultimate goals of a business, let alone economic growth and quality of life is much more doubtful. On top of that you have a rather abrupt, jarring turn in business strategy. Up until just the other day a lot of businesses were more or less whipping their workers into using AI — you know, we’re going to judge you on how much you’re using AI whether or not you really want to whether or not you yourself think it’s valuable. We’re actually going to score you, we’re going to require that you do tokenmaxxing. And then, with compute getting scarce and with the price of chips having gone through the roof, suddenly the AI companies began charging and the marginal cost of using a lot of tokens became really, really very high. And suddenly companies were saying, oh wait, stop. We want you to economize on your use of tokens and hence to ultimately reduce the demand for compute. And that’s a sudden U-turn. This is part of a broader phenomenon, which I’m going to write about very soon, which is that there is a kind of lack of organicness to the AI boom. There are people who are using it because it looks great. They’re using it because it’s fun. I have colleagues who are just mucking around with Claude and finding some uses for it. But there’s also a large amount of Corporate America that thinks that this is the way it has to go. Fear of missing out, not by the individual investor, but by the corporate bureaucracy. And then pressure from the financial markets, saying, you know, your company better be on the cutting edge of AI or else. All of which is very fragile. It’s a kind of a bubble, but not in the normal sort of asset price form. It’s more of a kind of fad, almost a social delusion. And that, it seems likely, certainly got ahead of itself. Now, I’m reading way too much into these stock prices. And so let me give you a little bit of a caution on all of that. So yeah, the Philadelphia Semiconductor Index was down 8% in a day, which is one hell of a drop. But it was up 157% over the past year. So you want to have some perspective here. This is a stunning setback, but the fact of the matter is that over the course of a year, these stocks have been incredibly high-performing. The KOSPI, the Korean index, was down 10%, strictly speaking, 9.99%. But anyway, it was down 10%. But after that 10% fall, it was up 172% over the year. So we’re not talking about a catastrophe. We’re not yet talking about, we aren’t even talking about a Bitcoin level of disappointment for investors. But okay, it’s a break in the trend. The other thing we should say: the famous old line by my teacher and colleague, Paul Samuelson, was that the stock market had predicted nine of the last five recessions. There’s many more than that now. In fact, just over the course of the past year and a half, we’ve had two major stock market declines that turned out to be false alarms. There was a big decline in April of 2025 after Liberation Day, the Trump tariffs, because there was a lot of people just sort of, it’s chaos, terrible things may happen. While the tariffs have been a bad thing, they did not cause an economic catastrophe and stocks recovered the losses that they experienced then. And then there was another round of major stock declines associated with the Iran war. Of course, the Iran war has been a complete debacle and a disaster, and we’ll be paying a price for that for a very long time. But the consequences for short-run macroeconomics were more modest than many people, myself included, expected. And it appears that the Strait of Hormuz is going to gradually open because the United States basically said, okay, you win. It won’t literally say that, but in practice, that’s what we’re doing. So that is going to be over. So it’s not that uncommon for the markets to react as if something terrible is about to happen and be wrong. And so you really don’t want to assume — there’s a real temptation to assume — that because there’s so much money involved, a big decline in markets must be signaling that something is really very much amiss in the fundamentals, that where there’s smoke, there’s fire. And sometimes, no, there’s just smoke, no fire. So this might not be that big a deal. But it comes at a moment when the rhetoric really has shifted. You can see that there’s just a kind of a walking back. There was a really striking interview just the other day with Satya Nadella of Microsoft. Microsoft is actually a consumer of AI, rather than a producer. They have tools you can use within Microsoft products, but I think they run basically off OpenAI. And Nadella was pretty scathing about saying, you know, we can’t give all of this power and all this money to the big AI companies, and we should be using cheaper models. And hinted that Microsoft may start making use of DeepSeek, the Chinese model, which is less comprehensive. In general, the Chinese models are less comprehensive, but immensely cheaper, and among other things, just do a lot less computation. That’s kind of the core of why they’re cheaper. And in that case, the picture changes a lot. What bearing does all of this have on AI and the future of the economy and AI and the future of humanity? Well, part of what we’re seeing may not be so much disappointment in what AI can do as realizing that this extremely compute-intensive AI is not essential. And maybe you can still get whatever the big productivity benefits are and still possibly the big labor-displacing effects without quite so much compute. But it’s not entirely separate either. I think we need to be saying that this is what a quasi-bubble quasi-bursting might look like. Take care. 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