Transcript: Paul Krugman on Trump Voters Getting “Brutally Scammed”

The following is a lightly edited transcript of the January 14 episode of the Daily Blast podcast. Listen to it here.

Greg Sargent: This is The Daily Blast from The New Republic, produced and presented by the DSR network. I’m your host, Greg Sargent.

Donald Trump recently declared that the country he’s about to take charge of is a “disaster” and “a laughing stock all over the world.” Of course, that’s completely false, particularly on the economy. By many metrics, it’s actually quite good and certainly better than the wreckage that Trump handed off to Joe Biden in 2021, and our recovery from Covid has been the envy of the developed world. But Paul Krugman recently noticed something interesting. In one respect, that’s actually bad for Trump. As Krugman asked on his new Substack: How will Trump justify radical policies like across-the-board tariffs and mass deportations if things are going pretty well? One way is by lying to his supporters, outright scamming them and feeding them demagogic nonsense about things like the L.A. wildfires, all of which he’s already begun to do. Today, we’re talking to Paul Krugman about all of this. Paul, congrats on the new Substack. Good to have you back on.

Paul Krugman: Good to be back on.

Sargent: In your piece, you walked through several economic metrics. We have low unemployment. Inflation is also low now. But at the same time, as you pointed out, Trump is planning some very radical policies, and he presumably needs to say why they’re necessary. Can you talk about the disconnect and the potential political challenge this creates for him?

Krugman: Yeah. Trump has really radical policy ideas. I obviously think they’re terrible, but they are radical. He wants Smoot-Hawley-level tariffs. He wants mass deportations. He wants to take away the independence of the Federal Reserve. How do you justify all of that when we’re pretty much a Goldilocks economy? Inflation is very close to the target. We basically have full employment. By normal standards, this is about as good as it gets. So even under Trump, it’s a little bit hard to say, Now we need to ... If it’s not broken, so why do we need this enormous stick?

Sargent: Obviously, certain people would respond to what they’re hearing here and say, Well, but the economy doesn’t feel that great to people. On the other hand, as you’ve pointed out, we see this immediate switch in economic sentiment among Democrats and Republicans. Republicans now say the economy is great, Democrats now say they’re worried about inflation and the impact that could result from Trump’s policies. And by the way, the Democratic position is actually rational.

Krugman: Democratic views about inflation look a lot like what economists are saying. Republicans appear to believe that Trump can wave his hand imperiously and make prices go down. Also, I wrote about this a little while ago, even on the question “Are you better off than you were five years ago?”—not how’s the economy but how are you doing—we suddenly switched from a plurality of people saying they were worse off, which wasn’t true but that’s what people felt, to a plurality saying that they’re better off, which I think is, again, Republicans saying, Now that Trump is president-elect, everything is great. But even with all of that, how does he justify, again, doing ... Why change everything? Why suddenly do these really disruptive things that he’s been promising he’s going to do?

Sargent: And so you’d think Trump needs to come up with some other way to justify the policies. We’re already seeing this on both tariffs and deportations. I want to get to deportations later, but on tariffs for now, as you point out, Trump advisers are now talking about declaring a state of economic emergency as the legal rationale for a broad range of tariffs on many countries. He’s also talking about tariffs on Canada, and to justify that, he’s inventing something about Canada getting over on us. Paul, all these tariffs threaten to harm his supporters pretty acutely.

Krugman: If we take the totality of stuff that Trump seems to want to do—he wants to raise tariffs but cut taxes on high incomes—it’s basically that working-class voters are going to face higher prices and upper income voters are going to benefit from tax cuts. This really is very much contrary to their interests, then you add in all the other stuff. Even more than usual for a Republican, he appears to have an extremely regressive economic program in mind, one that really will effectively redistribute income away from working-class voters to the top.

Sargent: Clearly. I wonder whether there’s a way to see the Trump-MAGA campaign about turning Canada into a 51st state in this context too. On one level, this is rank expansionist nationalism, which should embarrass those who have tried to cast his nationalism as something benign. On another level, is he maybe trying to turn Canada into a new enemy in the minds of his supporters to sell the tariffs? Can you talk about the set of excuses he’s making for the tariffs now?

Krugman: He has this fixed notion that if a country sells more to us than they buy from us, then we are somehow subsidizing them, which makes no sense. But it is true that Canada runs a trade surplus with the United States. If you look at that, basically that trade surplus comes entirely, more than entirely, from oil. So they send us oil, which is useful, and we send them IOUs. Trump says crazy stuff like we’re going to seize Greenland or make Canada the 51st state or whatever. Is this a strategic smokescreen to take people’s minds off the fact that he’s about to raise their cost of living? Or is it Trump that’s just uninformed? Is he just looking at maps, which make Canada and Greenland look very big and thinking, Hey, that’s real estate? Nobody knows. The idea that he has no idea what he’s doing has a lot going for it.

Sargent: I wonder if there’s a vibes-based explanation here, where he’s just trying to say, OK, these are the people you should be hating on now, so when I smack them with tariffs, you should cheer.

Krugman: Yeah, although ... Maybe I’m wrong but even in red state America, it’s really hard to get a serious hate on for Canadians of all people.

Sargent: Well, you never know. He’s very good at this.

Krugman: Yeah, but this is crazy stuff, and particularly if you are a business person actually trying to do stuff. Canada and Mexico both; he’s threatening to impose high tariffs on both of our neighbors. And if you think about how is a car made, how is an American car made? Well, there’s really no such thing as an American car. There’s a North American car, which is components that are made in all three countries and the pieces of a car may cross the border in either direction seven or eight times before you arrive at a car. Slapping high tariffs on those particular borders is basically a body blow to U.S. manufacturing. And you would like to think that there’d be somebody who can go up to him and say, a big strong guy with tears in his eyes can go up to him and say, Mr. President, this is a really bad idea. I’m not sure that there is anybody in that position right now.

Sargent: Well, it’s interesting. He’s actually starting to put some plutocrats in place in his cabinet now, which is similar to what he did the first time around, right?

Krugman: No one should be surprised that he’s putting plutocrats in, but the question is, Are they plutocrats who have enough independence of mind and enough security to stand up and tell him when he’s wrong? So far, I see no sign of that. And the only ... Not in the cabinet but Elon Musk, maybe. But Musk is in a competition as to who can sound crazier there, so I don’t know that that’s going to help any.

There were some serious respected Wall Street heavyweights in the first Trump administration who really could steer him away from really destructive stuff, and it’s not clear if there’s anybody like that this time around.

Sargent: It’s funny, we often talk about Trump’s working-class base and his working-class white voter base and so forth, but there’s also a fairly large MAGA contingent represented by small business people, people who operate small manufacturing concerns and so forth. He just seems to have no concern for them at all. Aren’t those people that type of Trump supporter, the reactionary small business person? Aren’t those people going to get brutally scammed by tariffs here?

Krugman: A lot of people are going to get brutally scammed. Those are his most fervent supporters. It is, in fact, probably the local business elites are the most fervent MAGA types out there, more so even than the working class, but that doesn’t mean that Trump cares about their interests. Small business people are the people that he’s all through his life hired as contractors and then not pay, right? Scamming people like that is what his whole life has been around.

Sargent: That is certainly true. Your framework actually also helps explain why Trump falsely linked the terrorist attack in New Orleans to migrants. He’s going to need to sustain a rationale for mass deportations when those really get going if he’s able to do them. And the rationale will rest pretty much on nonstop lying and disinformation about immigrants. You probably just noticed the Laken Riley Act, which Republicans are pushing and Democrats disgracefully supported, also really designed to push the message that migrants are criminals. This is another area where his own voters will get acutely hurt by deportations, so he’s already peddling them a bill of goods.

Krugman: If you’re an economist and you’re trying to figure out what’s or which of ... If we take everything Trump said in the campaign seriously, the tariffs are really bad but the mass deportations are much, much worse. If you just look at the economy, ask where do we have large numbers of either undocumented immigrants or immigrants who are legally here but in fact would would probably get caught up in the sweeps. It would be agriculture, food processing, construction—those are whole sectors that really depend upon these workers. With the enormously disruptive inflationary—how are we going to rebuild Los Angeles, which I guess Trump doesn’t want to do, but how are we going to rebuild Florida after the next hurricane if we deported all the people who can actually do the building?

Sargent: Well, I’ve said this in a piece before, but we’re going to see the process deeply corrupted with some selective application of deportations happening. You could see these splashy raids in blue areas where Fox News has given footage, which is supposed to show that Trump is pacifying out-of-control blue areas that are saturated in migrant crime. Meanwhile, people in MAGA country who depend on migrant labor quietly get a little bit of forbearance. This has happened before in U.S. history.

Krugman: It actually definitely happened on tariffs during Trump’s first term. There were a lot of exemptions granted, and they were very much basically political supporters that got exemptions. On the immigrant thing though, I agree with you that this is what we’re likely to see. It’s going to be much more selective, and not in a strategic way but in a political way, than the claims. But if you were an undocumented immigrant in the United States, or a business person who employs undocumented immigrants, you will be heavily deterred. There’d be a lot of disruption even if federal agents don’t sweep in on the business. There’ll be a lot of people that fade away, going back if they can or just trying to stay away from highly visible employment. You can get a lot of economic disruption even if you try to make it a show. The show, in addition to persuading naive voters, may actually scare a lot of workers we need.

Sargent: Yes, and also I think that they’re going to use the government to produce a level of propaganda about “migrant crime” and other ways of blaming migrants for social problems that we can’t even anticipate yet.

Krugman: They talk about the economy, but even worse, how do you have a national emergency over a crime wave when, in fact, homicides are very close to the lowest level since we started collecting the numbers? But they can do it. And the whole migrant crime wave is nonexistent, except that it’s a big country and there’s always some example somewhere of an undocumented immigrant committing a murder. So you pounce on those, or you just invent as in the case in New Orleans. [It was] a U.S. citizen born in America but you just claim that it’s an undocumented immigrant, even though that’s flatly false.

Sargent: I think we’re going to see the force of the government put behind this propaganda too. You can see people at the agencies, pliant MAGA types, leaking information to the White House about this or that migrant crime, which then the White House press operation pushes.

Krugman: Sure. This is a broader question. I wrote about it in Substack the other day, but maybe it seems a lot of that’s true. I’m really very worried about corruption of government data. Trump cannot, in fact, bring grocery prices back down, but he can possibly corrupt the Bureau of Labor Statistics so that it ends up reporting that grocery prices are back down. That’s got to be ... That’s a standard authoritarian playbook, that always happens with authoritarian regimes. Why imagine that it won’t happen here?

Sargent: Well, using this framework, you can see why Trump and MAGA are doing a whole festival of propaganda and hate around the L.A. wildfires as well. Everything is going to be geared toward creating a perpetual sense that there are crises everywhere, that the enemy within is on the march, that our outside enemies are ripping us off, that things in blue states are spinning out of control, to justify all manner of radical disruptions. Do you anticipate something like this? Paul, how should Democrats try to counter this kind of thing? Or does Trump just have magical powers over our perceptions now, we should just give up?

Krugman: No, we don’t know what works for sure, but standing up to it and yelling at him. Among other things, a lot of what Trump says is scary, but it’s also ridiculous. And the most effective weapon that as far as we can tell about dictators, against authoritarian leaders—and Trump is certainly a wannabe or a partial—is in fact to ridicule them. And particularly, if we have a crackdown on criminal migrants that is actually just a couple of show raids, Democrats should be making a big point about it how he’s talked big and carries a tiny stick, should be pointing out how little he’s actually doing. And we’ll see. I always say there was Ceausescu in Romania, his downfall came when he was giving one of those endless multi-hour communist-style speeches, and people in the audience just started laughing. Yes, in some ways, we may be able to laugh Trump out of power.

Sargent: One hopes. Where do you see this all going in a big picture sense? How much damage do you think Trump can plausibly do to the economy? What’s your medium term prognosis?

Krugman: U.S. economy is enormous. It’s got a lot of an underlying dynamism. But Trump is actually striking at many of the key sources of that dynamism. Foreign-born workers are a central part of our economy. This relatively open ... The rules that surround international trade, the rules that Trump is ripping up, they were created by America because we thought that that kind of world was a better place for us to thrive. We’ve been pulling ahead on technology, but an administration that’s extremely hostile to universities and education is going to undermine that source of advantage as well. Basically all the things that make America exceptional—and we are really exceptional—all of those things are just happen to be the things that Trump wants ... Trump wants to turn the clock back to 1896, and that’s not good for the U.S. economy.

Sargent: So how do we weather that, or do we weather it? What emerges on the other side, do you think?

Krugman: Well, we have no idea really. We haven’t been here ever. But for supply chain problems and all of that, we wouldn’t be here now. It was not, in fact, a massive [win]; this was a very narrow election and popular vote.

I think we place a lot of hope on just lack of competence. Horrible thing to say, but it has been striking that in areas I know where there are people with genuine expertise—evil intentions but genuine expertise—that people expected to be hired by the administration, they have not been. It seems that actually knowing what you’re talking about is disqualifying for this government. And that does suggest that they’re going to actually manage to pull off less than they think. Who knows, but I think that a lot of people will be feeling a lot of buyer’s remorse. The surveys now show that basically Trump voters think he’s going to actually bring down grocery prices, but he’s not. And are they going to notice that? It’s going to be a Who are you going to believe, MAGA or your lying eyes? situation. And you have to hope that there’s a reservoir of fundamental decency in the country that will reassert itself, assuming we can weather the onslaught over the next couple of years.

Sargent: To that end, is he already scamming these Trump voters who have been told to expect lower prices?

Krugman: Well, he already said ... After having spent the entire campaign saying I’m to bring the price of groceries back down to what it was, then basically just a couple of weeks after the election, he said, Oh, getting prices down, that would be very hard. But what I find interesting is judging with the surveys, they haven’t gotten the memo. He said that not on Fox, I think, but he said it, but they still think he’s going to do what he promised during the campaign. So the scam is there is no plan.

Actually, one of the amazing things in general is, at this point, a week before Inauguration, we had a pretty good idea of what Biden was going to try to do. We had actually a very good idea of what Biden was going to try to do. We even had a reasonably good idea of what Trump was going to do in the first term. If I look at the range of things that might, actually we have no idea what the actual policies will be. And I don’t think that’s because there’s a lot of infighting in the administration or that they’re keeping things close to their chest. I think it’s because they haven’t gotten their act together. I just think that you have. Even though he’s not actually a formal government post, but Elon Musk with DOGE, the Department of Government Efficiency, their idea of how to reform the government seems to be to quote random tweets. That’s the sort of people we’re going to be dealing with over the next four years.

Sargent: Well, they’re certainly going to try to paper that over and create the impression that they’re running things with great competence.

Krugman: Yeah, well. Think of it as The Apprentice, which portrayed a multiply bankrupt real estate developer as a business genius. And we’re trying to run the world’s greatest nation like a TV show.

Sargent: It certainly feels like a TV show a lot of the time, just a really terrible one. Paul Krugman, thanks so much for coming on, man. Always great to talk to you.

Krugman: Great to talk to you.

Sargent: You’ve been listening to The Daily Blast with me, your host, Greg Sargent. The Daily Blast is a New Republic podcast and is produced by Riley Fessler and the DSR Network.