Tangled Up in Blue with Rep. Ro Khanna: Tariffs, Trump, and Progressive Capitalism

>> Bill Whalen: It's Monday, April 28, 2025. And welcome back to Goodfellows. A Hoover Institution broadcast examining social, economic, political and geopolitical concerns. I'm Bill Whelan. I'm a Hoover Distinguished Policy Fellow slash moderator. Looking forward to a conversation featuring three of the brightest minds I know. The Goodfellows, as we call them.

I'm referring of course, to the historian Sir Niall Ferguson, economist John Cochrane, and former Presidential national security advisor, Lieutenant General H.R. McMaster. Niall, John and H.R are all Hoover Senior Fellows. Gentlemen, a two part show today. In the second part, we're going to look at the Trump administration at day 100 handout grades, assess progress.

But first we're going to talk to a neighbor of ours, and I'm referring to Congressman Ro Khanna. He is our neighbor because he represents the 17th congressional district here in California, which spans the southern portion of Silicon Valley, which is just south of the Hoover Institution and Stanford University.

Congressman Khanna serves on the House Armed Services Committee and the Select Committee on the Strategic Competition between the United States and the Chinese Communist Party. Ro Khanna is one of Congress's leading progressive voices. Which raises a question, sir. You graduated with an economics degree from the University of Chicago, home to such economic luminaries as Milton Friedman, Gary Becker, and of course, our own John Cochran.

All Hoover fellows, my question to you, sir. How does someone with all that economic wisdom at his disposal somehow end up in California as a very outspoken progressive?
>> Congressman Ro Khanna: I had Gary Vecker for price theory. A brilliant, brilliant mind. And I have a great fondness for my education at University of Chicago.

Not just the education on economics, but more importantly the education on philosophy and humanities and really the tradition of philosophic thought that gives rise to the American Republic. I call myself a progressive capitalist. I mean, even Milton Friedman and people like Robert Lucas or Becker would have acknowledged that markets don't always work.

And one of the places that the markets have failed this country has been the hollowing out of factory towns, the decimation of rural America. Wealth has piled up in my district, in New York and Seattle, and yet a lot of communities have been left out. We've gone from 53rd in income inequality to 128.

And what I believe is that we need to focus on the economic revitalization of places across this country and the federal government partnership with technology leaders in the private sector to do that within a framework of free enterprise.
>> John H. Cochrane: As the other University of Chicago, I detect a little bit in you, and I'm curious if you'd like to say yes or no?

There's this new movement within the Democratic Party, the YIMBY movement in California that recognizes, we have a housing problem. Maybe the fact we don't let people build houses has something to do with it. Let's them build houses. It takes forever to get permits to connect a windmill to the grid.

Why don't. If you want an energy transition or energy at all, maybe we need to do that. Sir, I see some commonality between the techno optimist, libertarians. Some of them hang out with Republicans, some of them hang out with Democrats. I wonder if you would call yourself among or at least sympathetic to that group which can, from the University of Chicago, can head left or right to their party affiliation.

>> Congressman Ro Khanna: Yes, I'm a gimby. I believe that California has had bad housing laws. The zoning laws have been too restrictive, the burdens on building have been too restrictive. We need to be honest about that. We need to be honest about the burdens we've put on building things in America.

And so I am sympathetic to that. And I've endorsed a number of the recent state bills, which I rarely do. But there's a bill going currently through the California legislature to make it easier to bill more housing, and I have supported them.
>> Bill Whalen: Congressman, I want to get into three policy areas with you and what time we have with you.

Let's start off with the question of tariffs and then maybe segue into executive orders, which is a favorite John Cochran hobby horse these days. You represent a district that is home to Apple and Nvidia. What's your thoughts on where you think this is going? And I have this question to you, sir.

As I understand it, the national security, the emergency acts that the president used to invoke tariffs, they also say the tariffs can be eliminated via a joint resolution of Congress. I believe that's the case. If that's true, where's Congress?
>> Congressman Ro Khanna: Well, you don't have to study economics under Gary Becker at the University of Chicago to know that Donald Trump's tariff policy is the most economically nonsensical policy of any modern American administration.

He's committing the cardinal sin in American politics. He's destroying people's money and destroying people's wealth. And this is why we're going to have not only wins in 26 and 28, but the potential for landslide wins and a realignment. Now, look, I am for the use of strategic tariffs if China is engaged in unfair competition and dumping things.

But this idea of having blanket tariffs on every country is increasing the price of inputs and manufacturers and you can't just protect things before building them. I mean, a lot of these tariffs we don't have even have the industry here. And so there are people like Don Bacon, a Republican who is a Nember Esco member who's calling for a repeal of these tariffs on co sponsoring his legislation.

I hope the speaker will bring it to the floor for a vote. Because what Trump is doing is hurting the working class, he's hurting manufacturing, and he's engaged in an economic policy of self destruction. If I wanted to, and I'll go yield, if I wanted to destroy the American economy, I would do the type of terrorist he did.

I would declare more on universities like the one you're broadcasting for me, and I would cut science and education funding and I would have policies to say we don't want any immigrants in America through fear. And he's trying really hard. Now, fortunately, America is a great country and will survive this, but boy, he's trying to really hurt the American experiment.

>> Niall Ferguson: Roy there's one thing that puzzles me because it's not like Donald Trump concealed his intentions from voters. He campaigned explicitly pledging reciprocal tariffs to take on the universities, all the things that you've just referred to. So how do you explain the fact that your party lost the presidential election to a man who said he was going to do these things?

>> Congressman Ro Khanna: I don't think voters paid attention to all the details of what he said. I'm not sure they believed he was going to do all of the things he said. Voters were upset with inflation. They were upset that we didn't do enough on the border and 8 million undocumented or more came across.

They were upset that for 40 years this country has betrayed factory towns and rural communities. And they saw Donald Trump is at least willing to fight for those communities, even if they didn't look at his prescriptions. But the good news for the Democrats now is that we've had eight years of, will have had eight years of Trump and it will prove empty for the towns like Lorraine, Ohio and Johnstown, Pennsylvania.

That doesn't mean Democrats can win by default, but we have an opportunity to reject the types of things that led to the hollowing out of those communities to offer a new economic vision. I call it a new economic patriotism. And to earn back people's trust. So there was a lot of discontent with the status quo in our party, and that's how Trump won.

>> John H. Cochrane: I'm curious for what you did not say, cuz these tariffs were undertaken under a declaration of national emergency by executive order, which is a strange way to run a country as well as a strange way to put in tariffs. And so, I'm curious that you're not saying Congress needs to take this authority back, and not rule by executive order under declarations of national emergency.

And maybe you'll take the chance to do it. But also, Biden kept the first Trump tariffs in place, which I thought was pretty sad. Perhaps, the experience of these tariffs will be enough to have Democrats come out and resolutely be, we are the party of free trade next time around.

Can I hope for that?
>> Congressman Ro Khanna: Well, I agree with you on that. It should be Congress and not executive order. And I guess maybe, I'm a little bit jaded about Washington, D.C, and jaded that the speaker is actually gonna put this bill that Bacon has for a vote.

But I'm a co sponsor of basically reclaiming Congress's authority on matters of tariffs. And certainly, you shouldn't have this kind of overreach of executive power unless there's a real emergency. We read war, or something that constituted it. It could get litigated in the courts. But the simple thing is, for the speaker, Speaker Johnson, to put it for a vote.

I think you would get a lot of Republicans voting with me. Now, look, I am not an absolute free trader. I am not a protectionist. I'm for strategic trade. But the biggest thing is, before you can protect industry, you need to build industry. And this is where I believe you need federal financing, you need investment in DARPA and SF.

You need investment in our universities, you need investment in our workforce. You need to say if you build it, the government will buy it, as the president did with Operation Warp Speed, and as we did with NASA and the semiconductors. And we need a comprehensive policy. And if tariffs then are one component of it, if we're doing hydrogen steel in America and we wanna make sure that Europe isn't dumping it or China isn't dumping it, I'm open to that use.

But not blanket tariffs, and not tariffs divorced from a broader policy like Hamilton or FDR, to build industry in this country, or Reagan had with the Plaza Accords and with SEMATECH, with semiconductors.
>> H. R. McMaster: Yeah, thank you, just answer the question I was gonna ask you actually. Because this ties to your work on the China Select Committee or the Select Committee on the Chinese Communist Party.

What do you think is the appropriate Congressman, combination of tools of economic statecraft? Given, first of all, what you've already described is really the loss of critical elements of our industrial base. The degree to which supply chains have become overly reliant on single points of failure controlled by the Chinese Communist Party.

I mean, what's your vision of how to employ the various tools of economic statecraft, export controls, tariffs, as you mentioned, investments, inbound and outbound investments, screening and so forth. Do you have some ideas about how Congress can help advance an agenda that the counters, really China's weaponization of its mercantile status model against us, while preserving the advantages of our free market economic system and our unbridled entrepreneurship?

>> Congressman Ro Khanna: Well, you've done a lot of excellent work in this area and testified in front of our committee. But the key is, in first is, we need to maintain our technology supremacy. We need to make sure that we are leading when it comes to AI, when its comes to quantum and the integration of that into our military.

And I thought that, Michael Bloomberg did a great report on sort of adopting some of the emerging technology into the Pentagon. And it's a long project that we need to make sure we're at the cutting edge of getting emerging technology in, and reform of the procurement process. Second, we need to make sure that in critical industries, we are developing that in the United States.

I would say, advanced steel, advanced chip building, aluminum, pill development, the semiconductors. So in this way, Trump and I and Vance share the same goal. I just don't think his goal is going to be achieved without federal investment, without federal procurement, without workforce development. Okay, you're gonna tariff China.

That doesn't mean the electronic manufacturing is gonna come back to the United States. It's gonna go to Malaysia, Vietnam. We need to have manufacturing hubs, and that's related to universities and funding, for that in the workforce to be able to do it. And then we need to be able to source critical minerals not from China.

I mean, there are allies like India and others that have a rare earth materials, critical minerals. We need a comprehensive strategy about how we get some of these things not from China.
>> John H. Cochrane: Could I ask how we're gonna do that while avoiding the litany of boondoggles in the past?

I think the most classic example is, the California high speed train, which was going to leapfrog our technological advance. And here we are 15 years later, having done nothing but build what I think will be 100 years from now, a monument to American inefficiency, viaducts for a train that never went anywhere.

Our history of doing anything with subsidies. The Jones Act protected shipping. We have no ship industry. Our steel has been protected and federally subsidized for 50 years. We're so far behind Japan in steel technology. We needed them to buy US steel. And there's costs, if you want $100 billion chip investment, that means you can't buy 10 aircraft carriers.

So I'm a little suspicious, not at how wonderful it would be in theory, but how our American government is in practice, historically unable to do anything but create things. Occasionally, wonderful things, a rocket to the moon at astronomical cost, but everything at astronomical cost.
>> Congressman Ro Khanna: Well, I think the history of the country is one of the federal government working with the private sector to industrialize.

Most famously, of course, Roosevelt's Reconstruction Finance Corporation, that basically industrialized America. And as you know, the unemployment rate fell from 18%, largely the new deal was fine, but didn't really lower rates until 1941, where unemployment rate falls to 4% because of the financing of a lot of the industry in the United States.

And then, of course, this goes back to Lincoln with the land grant colleges, and his funding of the Homestead Act, and the policies that were gonna lead to the modernization of the economy. And Hamilton, most famously with his report on manufacturing and his call for partnership. But I think there are checks that we need.

One is, it should have a private sector capital match, which you didn't have in California. I mean, there were a lot of problems there, but I think that provides some market check as opposed to what China is doing. And secondly, it should look to involving the local community and business leaders and have efficiency and outcome, I mean, and measurable results.

Things that Andy Grove talked about that often is missing in government execution. And finally, even if there was some small efficiency costs, I believe that the national security independence and the social cohesion, by not having hollowed out towns across America is worth it. That the unbridled free market, even if it maximizes for efficiency, isn't maximizing for national unity and national strength.

>> John H. Cochrane: Sounds like JD Vance.
>> Bill Whalen: Congressman, let's talk about Silicon Valley for a minute. It's not as it was in 2016, when Marc Andreessen said that Hillary Clinton was the, quote, obvious choice for president. We saw Trump make inroads. The question, sir, is did Trump make inroads based on his policy or getting back to what Niall suggested, did he benefit from Democrat miscues?

You look at the Biden administration, you see antitrust enforcement to discourage mergers, new regulations on AI calling for taxing unrealized capital gains, and so forth. Is there a lesson here for your party moving forward?
>> Congressman Ro Khanna: Well, he capitalized on a number of things. One, I think he went to these communities and he said, you've been shafted and I'm gonna speak for you.

Two, he spoke to a nostalgia in America. I mean, look, if you were campaigning in India, you could never say, let's make India great again and go back to the 1950s because no one would wanna go backwards. But when you're a great country like America, appeals to nostalgia can work.

And he had a nostalgic appeal to a simpler life, to a simpler economy, to a less diverse nation. I don't think that's ultimately the American ethos. I think the ethos is moving, future oriented. And that's where the Democratic Party should contrast. What we should say is, we get the economic prosperity of the future.

We're not Luddites like Lutnick. We don't want the screws and screwing coming here. We're not Luddites like the Trump administration, appointing an education secretary who doesn't know the difference between AI and A1. We understand the modern economy, we understand modern wealth generation, and we want this everywhere. But I think Trump spoke emotionally to people who felt shafted, ignored, leapt out of globalization.

And I think he spoke to people who left, felt that their culture was disappearing, their way of life was disappearing, and that they weren't respected, that they were looked down upon with elites, by elites. And so, and he spoke candidly, he sounded the alarm on China. I don't agree with all of his approaches, but I think he was the first president really to say, when he ran in 16, that we've got to have a different approach on China and the China shop.

So we need to absorb all of this and have a compelling vision going forward. I mean, I voted for Donald Trump's impeachment twice, and I oppose things he does. But that's the easy part. The harder part is to say, we have a messy democracy in America. What are people telling us?

Well, it wasn't working. And how are we going to have a vision forward that brings this country together and learns the lessons of almost half the country voted For Donald Trump.
>> Niall Ferguson: One of the things that really struck me about the election was last year was that there were huge swings to Trump in blue states.

And part of what we saw was a repudiation of the Democratic candidate. But the Democratic Party, and I think those of us who've spent time in California get why that was. We get why people in Silicon Valley turned away from your party. And it's because we see all around us the consequences of misguided progressive policies.

I've seen San Francisco turn from one of the most beautiful cities in the world into a kind of hellscape, at least in parts of the city. And that's not the market that's caused that, that's misguided progressive policies. Standards of education in California are woefully low. They're low because the teachers union dictates what goes on in the schools in California.

And I could go on. The problems of California are 100% the consequence of bad governance, which is 100% the fault of the Democratic Party. And it's not only in California. You go to Illinois and you'll hear the same problems. The question I have for you is, what is your party going to do to win back the credibility?

It's not enough just to be against Donald Trump. You've got to rid yourself of a terrible track record of running states into the ground. What's the answer to that?
>> Congressman Ro Khanna: Well, first of all, the balance. I agree with some of the critique, but we've got 37 times the venture capital of Boston and we're producing more wealth than anywhere in the world in Silicon Valley.

>> Niall Ferguson: Despite.
>> Congressman Ro Khanna: No, it's because of government investing.
>> Niall Ferguson: The miracle that the California private sector does so well, considering what the Democratic Party does to screw public provision of goods.
>> John H. Cochrane: We are living for Texas as fast as they can.
>> Congressman Ro Khanna: It's because we're welcoming up immigrants.

It's because we invested in community colleges. It's because of DARPA investment, of NSF investment, that the policies that the Democratic Party stood for, which has led to the biggest wealth generation. And this is why I think I'll go toe to toe with anyone to say there's no one who represents more modern wealth generation than I do.

I understand what it takes to build wealth, and I wanna do that in creating economic independence around the country. Now, are there problems in public safety? Yes, but my district has the safest cities in the country. Four of them in the top 15. Sunnyvale, Fremont, San Jose and Santa Clara.

We invest in our police, we have good relationships with law enforcement. You have new mayors like Dan Lurie, Matt Mahan, Rod Solwan, who prioritize public safety getting elected. And then the fundamental problem though is I've had people from Silicon Valley reach out to me say we hated Kamala, we hated Trump, we thought we were gonna make more money under Trump.

And I said, how is that working out? Okay, maybe you didn't like some of the administrative straight of Biden. At least he didn't destroy capital markets. So I think the buffoonery of the Trump administration's economic policy is going to create a situation where a Democrat wins. Now the question is, are we gonna go back to the status quo and not have self introspection of where we made mistakes?

Some of it in the types of things you and are talking about. And Ezra has talked about an abundance agenda and bad regulatory policies, some of it in overlooking large parts of this country. And I don't want us to just go back, I don't want our slogan to be bring America back like Biden.

I want our slogan to be we've got a great vision for the future and introspective about places where the Democratic Party has been wrong as well.
>> Bill Whalen: Congressman, you recently said the Democratic Party's quote and I quote, old guard needs to go. Who's in the old guard?
>> Congressman Ro Khanna: Schumer, I mean, obviously it's his decision in terms of what he wants to do, but he's clearly not resonating now.

I'm glad that Durbin passed the torch to, to a next generation. I think that you've got to allow a new generation of leaders to step up. Look, it's not exactly that this political class has been the greatest generation. I mean, the greatest generation got World War I, World War and then defeated.

There was a generation that defeated communism, that built civil rights. I look at the last 40 years, what have they done? The income inequality has skyrocketed. We got into blunders in Iraq, blunders in Afghanistan. It's not gonna be a great chapter of American leadership. So step aside, give a new generation a chance.

>> John H. Cochrane: What big ideas would you recommend for that new generation? We have gaping wounds, immigration system that I think we agree is more or less of something that's dysfunctional needs to be oriented around good economic immigrants and not a sort of an asylum system that isn't working. We have a tax system that is not raising much revenue at extraordinary marginal rates.

We have entitlements that are, we either need European style taxes or we need fundamental entitlement reform. Are you guys ready to stand up and offer not just as Niall suggested. Look at the shining cities, cities that we're now running successfully. Sort of the way the Republicans will point to Texas and Florida, to which many of our businesses are running.

But look to us for the ability to finally make progress on the kind of the big gaping wounds that get passed from party to party as each one votes the other one out every four years.
>> Congressman Ro Khanna: Yeah, I'm just on the last one. I don't think that they're all running to Texas or Florida.

I mean, AI is mostly in my district District. And I would bet very strongly on Silicon Valley continuing to dominate the economic landscape over the next 15, 20 years. The venture capital is still in our district. Now, I would like it to be more diffuse, but the argument for Silicon Valley is still very, very strong in terms of the models of investing in science and research and immigration.

I believe that the biggest challenge for America needs to be tackling geographical economic inequality and economic inequality, that we should have a Marshall Plan for America. Looking at Lorraine, Ohio, Down River, Michigan, Johnstown, Pennsylvania, having new tech academies, new advanced manufacturing. A call for the economic renaissance of this country in every part of America.

I mean, Britain had the leveling up initiative, it didn't quite take off. But you look at the problem of western democracy, it is a problem of eastern Germany not keeping up with Western Germany. Of the industrialized England not keeping up with industrialized England. Deindustrialized America not keeping up with the knowledge economy.

And you've gone in America from 53rd to 128th in income inequality. We need to solve that by bringing economic growth and prosperity to areas that haven't had it and by increasing, in my view, minimum wage for working class, having higher taxes on billionaires. And we can go back to the 97 tax rates and raise $5 trillion of revenue.

Now, am I open to comprehensive solutions on these issues? Absolutely, we should be for a comprehensive immigration reform. I've even said that Democrats should talk about legalization. I'm for citizenship, but at least let's get legalization. I mean, let's look at what can actually advance the ball on some of these issues we've been stuck in.

>> H. R. McMaster: Hey, Congressman, can I ask you? One aspect of this you haven't mentioned yet is deregulation. And of course, California is notorious for having so many barriers to being able to build anything. And we have a colleague here at Hoover, Leo Hanian, who's done a really great job of sort of cataloging what could be done to unleash the power of private capital and so forth to get to some of the issues you're talking about right here in California.

In terms of invigoration of the defense industrial base, or industrial base broadly, as well as a supply chain resilience. Can you see in some sort of an bipartisan effort to support President Trump's deregulation agenda?
>> Congressman Ro Khanna: Do I think that there it's too hard to get permits on things?

Absolutely, and certainly in California, but more generally. I mean, I think this is a fair critique of the Biden administration that was too hard to build. I mean, the broadband bill, we can depend whether to blame Congress for all the requirements that were put up or the administration.

But the idea that we allocated that in 2021 and five years later is when the first disbursement goes out is utterly ridiculous. So I'm not gonna defend the status quo. What I will say is if you talk to Pat Gelsinger at Intel and you ask him why are the Intel factories not fully succeeding in Ohio, he would put regulatory burdens and permitting at number four or five.

He would say the biggest challenge is Wall Street and their dislike of capital expenditure. The fact that they haven't been able to get that there was not an incentive on buying. The fact that there isn't skilled immigrants in a workforce that's ready to go. So in my view, it's not that I question or defend the regulatory bureaucracy.

I think it is too glib, too easy to simply say, if only we had regulatory reform, America would build. It's sort of like a painless solution. We don't have to pay any money for it, federal government doesn't have to do anything. It's just the bureaucracy. And I'm not doubting that that's part of the challenge.

But the reality is we're gonna, in my view, have to invest in our workforce, in our federal investment, in procurement policies. And it's gonna cost money, and that money needs to be raised through taxes. And this is where I believe that the President Trump's agenda is insufficient.
>> Bill Whalen: Final question for you, Congressman Connor, we sure appreciate your time.

You've been on Capitol Hill for about a decade now. You're not quite 50 years old. You clearly are interested in the future of your party. What's holding you back from running in 2028? And if you don't wanna run, who do you think should run? Do all signs point to AOC?

>> Congressman Ro Khanna: Well, I believe that the Democratic Party's biggest mistake is we really haven't had a truly competitive election since 2008. I mean, we basically had Hillary Clinton that's standing and waiting, and Bernie Sanders put up a fight. But that was a process where the whole party had coalesced around Hillary, the whole party coalesced around Joe Biden, the whole party coalesced around Kamala Harris.

I'll tell you, whoever the pundits think is not gonna be the nominee, that is my only bet. But I'd love to see 10, 15 people. Wes Moore, Josh Shapiro, Whitmer, Buttigieg, AOC if she wants, I mean, whoever the people are, to run and to provide a vision and to have a dynamic, contested battle of ideas.

And I hope, by the way, that's on the other side. For the life of me, don't understand why ambitious Republicans aren't saying Vance Trump's economic policy is a disaster. And Cruz is doing it to some extent, but our Holly. And I'm gonna have a different vision because I think Vance is a highly overrated candidate.

And I think he doesn't have Trump's charm. He's not gonna connect with black and Latino men the way Trump does. And so I would like to see a contested primary on both sides where good ideas emerge and a new generation emerges.
>> Bill Whalen: Okay, we're gonna leave it there, Congressman, thanks for joining us today and good luck on Capitol Hill.

>> Congressman Ro Khanna: Thank you, appreciate it.
>> Bill Whalen: We now move on to the b block and a conversation about the Trump presidency this week, including the 100 day mark of the Trump presidency, which in America is a good time to look at progress. Gentlemen, I want you to do two things for me.

I want you to put on your professors caps and hand out grades. And I want you to offer two grades, one being a specific policy area, your expertise, and the second being overall performance. HR, let's start with you. I want you to hand out a grade for Trump on national security and then let's follow up with overall performance grade.

>> H. R. McMaster: Okay, so what I'll say, of course, everybody's focused at this moment, many people are, anyway, on what the course is gonna be on Ukraine and Russia. And on taking advantage, I think, of what are opportunities when President Trump came in with a Russia that was in a profoundly weak position.

And his opportunity, I think, to put more pressure on Putin. And maybe make more rapid and sincere effective progress toward a ceasefire and an agreement. I think President Trump has kind of blown that. He's blown it, he's done the opposite of what would have been more effective, which would be to support Ukraine and put pressure on Russian states, put pressure on Ukraine.

And seems to be driven by this idea that he could accommodate Russian defined, Putin defined security concerns as the best path toward an enduring peace. So on Russia and Ukraine, I give him a D.
>> Bill Whalen: A D, overall?
>> H. R. McMaster: Overall, in foreign policy, I give a B, the reason is I'm kinda comparing him to what the alternative would have been.

And he has been able to reverse, I think a lot of the previous policies that were unwise, especially in the Middle East in particular, vis a vis the Houthis, with the support for Israel. And I think what will ultimately happen, which is more pressure on Iran. And I think he's kind of stumbling in to the recognition that China is the primary problem from a trade and economic perspective.

Hopefully, there'll be an alleviation of some of the higher tariffs on allies and partners and a real focus on China is the problem. And a thought out approach to economic statecraft such as that we We recommended in a recent paper and John by murder boarding us with the other economists I think really helped us improve considerably.

>> Bill Whalen: Professor Cochrane scribbling notes as I see grade him on economics and then give an overall grade.
>> John H. Cochrane: The hated notepad by which I don't-
>> H. R. McMaster: Don't ask John what grade he would give me on that, cuz.
>> John H. Cochrane: Shows capacity for improvement listens, that's very important. It started great, first day executive orders saying we're not gonna commit energy suicide.

We're not gonna commit suicide by regulating AI to death, and then it kept going in that direction. Yes, it's a first hundred days of wild stuff, big important structural issues like taxes still remained but out of the box. That looked great also asterisk out of the box, I'm uncomfortable with rule by executive decree.

We wanna do things that last by legislation and norms and so forth, but out of the box you stop some immediate damage from happening. You build the economy and then you're able to follow up to make stuff more permanent. So that was promising, of course now we have the face plant of the tariffs, an indication also of a process not going well.

They seem likely to cause a big economic slowdown at least if not a recession if they aren't pulled off quickly. They're also a foreign policy disaster, we've pissed off all of our friends and allies. That will be damage, I think they will pull back and we'll have some sort of face saving trade deal.

And some sort of tariffs rather than plunge the economy into a financial crisis and a recession, I think Trump's smart enough to do that. But the damage is done and that will cost him politically and for the opportunity to keep the wonderful stuff going and to solidify it into law.

So that's too bad, and I do wanna push back on HR, China is a security challenge, but trade with China is not an economic problem. They send us stuff is wonderful, globalization is wonderful and necessary. The economic problem is the security is gonna cost us trillions of dollars if we decouple in national security.

So be darn sure you've done your cost benefit analysis on that one, you wanted a grade. It's still the midterm and so I don't like to tell students their final grade, it's still before the midterm. But you started well, you did real badly on the last in class exam, room for improvement, and we'll see if you're able to recover from that one.

>> Bill Whalen: So he doesn't get a grade, he gets a come see the teacher note.
>> John H. Cochrane: Yes, come for office hours, and we'll see if we can straighten you out a little bit.
>> Bill Whalen: Okay, Professor Ferguson, I want two sets of grades out of you, one is to grade him on his performance vis a vis the vibe shift, and then secondly, the overall performance.

>> Niall Ferguson: Well, H.L Menken once famously said, democracy is the theory that the common people know what they want and deserve to get it good and hard. And that seems to me very appropriate because they are getting it good and hard. I'm impressed by the fact that President Trump has executed in almost every single campaign pledge he made back during the campaign.

I remember going through all 37 campaign videos that he recorded, and they covered everything from the border to accreditors in higher education, to trade, reciprocal tariffs. It was all there if you care to look, and you've got to give him an A for delivering what the common people voted for.

It's hard for me to think of an administration that was so explicit on the campaign trail about what it was gonna do. Normally, politicians are very vague about what they're gonna do in the campaign trail. You'll remember that Vice President Harris essentially wouldn't reveal anything about what she was gonna do.

Well, Trump gave you 37 very specific policies which were translated within 100 days into executive actions of one sort or another. You can't deny that that's kind of how it's supposed to work and rarely does. Now, if you just remind yourself that ultimately presidents are not accountable to professors and we aren't the ones giving grades, the question is, how are the voters liking it?

What's interesting is that they've already cooled quite a bit, if one looks at the most recent polling on a variety of issues that. Well, they did vote for back last year, and that's before the economic consequences of the tariffs have made themselves felt. So I think we should hold back from giving grades, the way the system works is that the public gives a grade next year in November at the midterms.

But that's not really the final word because they get to vote on who will succeed President Trump another two years after that. It's a little early to give out grades on results, but in terms of delivering what he said he was gonna do, it's an A, I mean, he's delivered the way FDR delivered in 1933.

There's no question, whether you think it's gonna work or not is a whole different question.
>> H. R. McMaster: You could tell that Niall used to teach at Harvard where there's really high grade inflation and.
>> Niall Ferguson: I was never responsible for that great inflation, I'll have you know.
>> John H. Cochrane: I wanna disagree with that, remember, FDR campaigned on balancing the budget.

He definitely did not promise to do stuff, he sort of generically, well, I'll deal with the emergency. But he did not have a detailed campaign promises and he broke the ones, he did this. We are faced with an A B choice and that's the problem in American elections.

And I read this last election as well as several of the previous ones, primarily as voting the bums out. Rather than endorsements of specific campaign policy promises of Trump or Biden when he was elected. I think Trump is making the same mistake as Biden did to take a fairly narrow majority that was mostly voting against the previous one as a mandate for every point of the policy plank.

Because people know to take him, is it seriously or literally with a grain of salt, when he says, yeah, let's get rid of taxes on tips. Now that's not Hillary Clinton 72 page policy proposal worked out on how tips work. It's an idea and everybody understood that that's kind of a general philosophy, but not necessarily a campaign pledge.

So I think making good on those pledges, which is he is very good at making good on those pledges. But I'm not convinced that's what people voted him in to do in the end. We vote for presidents for judgment, for how they handle problems as they arise, for the events dear boy, not for enacting a preselected program.Sorry, H.R.

>> H. R. McMaster: No, I was just gonna say I agree with you guys that all this is a work in progress and I don't know if we're gonna get to it. So I just wanted to mention because we've had this announcement of a three day ceasefire that Russia has agreed to from I think 9th to 11th May.

But hey, it's Putin being the KGB operator again, right? So after the latest onslaught, the mass murder attack on Kiev, President Trump got angry and so they stop Vladimir. So he's now trying to back up a little bit, but he's trying to do so in a way by having a ceasefire around Victory Day to protect Victory Day, because it would be a tremendous Tremendous embarrassment to him if something happened then.

And what he does is he tries to cultivate this idea that, Russia and the United States are just natural friends because of the World War II alliance. And of course, this is why it's really dangerous if you don't know history or know it only superficially. Because the United States and the Soviet Union were allies in World War II only after the Molotov Ribbentro Act.

Only after the Soviet Union had no option but to become an ally of the United States after the Russian, or the Nazi Germany invasion in Operation Barbarossa. So anyway, I just wanted to get that context out there that there is room for improvement, right? These grades are not final, butI hope that President Trump has come to the realization that Putin is just, is trying to play him.

>> Bill Whalen: I want to ask you guys your thoughts on three principles in the Trump administration. And each of these gentlemen represents what we might call a cautionary tale. Niall, let's begin with Marco Rubio, who I think you might agree is the anti Henry Kissinger when it comes to being a Secretary of state.

Is there a cautionary tale here?
>> Niall Ferguson: Well, Marco Rubio is not the first Secretary of State to be somewhat marginalized in the making of foreign policy. This is something of a tradition. In fact, Richard Nixon did it to Bill Rogers, who was his Secretary of State when Kissinger was National Security Adviser.

What's interesting about the Trump team is that there is a National Security adviser, Mike Waltz, but he's also been sidelined so that Steve Witkoff is doing most of the really important negotiations. That's the interesting part here. And I think Marco Ruby is actually doing okay in maintaining a semblance of credibility under these circumstances.

My bet is that Wyckoff will not remain for very long in this position because he is not making the kind of headway that President Trump needs to have not only with respect to Ukraine. But also with respect to the Middle East. And that's not surprising because really, Steve Witkoff is in over his head negotiating with the likes of Vladimir Putin.

So I think Marco Rubio is positioning himself quite carefully for the next phase of the presidency when Trump admits that it's a little bit more complex than a real estate deal. What he's trying to do with Ukraine and indeed with Iran.
>> Bill Whalen: All right, HR Secretary of Defense Pete Hegg said that an alternate universe, it might be you running the Pentagon.

>> H. R. McMaster: Hey, I'll tell with the people leaving and then making the statements and so forth. I think what you're seeing is, is not only difficulties associated with the secretary and maybe his preparedness for the job. But also some of the people who have come, who have come in to the Department of Defense.

What really I find concerning and because I do want President Trump to succeed. Is there was this firing of certain members of the National Security Council staff after Laura Loomer whispered in his ear. Well, these were people who were extraordinarily effective and would have been effective at driving the President's policy while he was firing these really hyper competent people.

The Department of Defense has been populated by a lot of people who have been funded and supported by the Koch foundation and who are in kind of the Neo Islanders camp. And you know what? Hey, President Trump is not a big fan of the Koch Foundation. And so I think you're seeing some of these tensions play out in the Department of Defense largely because of some of the first people they hired there.

So what I'm hoping for is they'll bring in some reasoned internationalists who are on the President Trump's side of peace through strength. And recognize that that strength comes in large measure through strong alliances and forward positioned, capable joint American forces, US Forces. Who can demonstrate to potential enemies that they can't accomplish their objectives through the use of force.

And so I've been encouraged by some of what's happening in the Pentagon. Of course getting rid of all the kind of reified philosophy, postmodernist identity politics, critical theory nonsense. That's good, that's a positive and a focus on, on war fighting. That's a positive. I think they want to streamline procurement.

The deputy in the Department of Defense, Steve Feinberg, extraordinarily capable guy. So it's not all bad in the Department of Defense. But I think what's happened is they brought in some of the wrong people because these are people who are really good at insinuating themselves into various departments and agencies.

And I hope that also the President recognizes he was being very well served by some of those people he fired. And there's been the slow takeover of the Department of Defense who I, by people who I don't think reflect his agenda.
>> Bill Whalen: All right, this is Be Kind to John Cochran day.

I'm going to give you the big juicy one, John Elon Musk.
>> John H. Cochrane: I thought you were going to give me Jerome Powell.
>> Bill Whalen: Want take Powell if you want to but I think Musk is maybe more interesting here.
>> John H. Cochrane: I think Powell's way more interesting. Musk ran this Doge thing for a while.

It was very interesting, kind of going after numbers with it, a very limited remit, and now he's. He's off to other things. So I don't know. What else is there to say about Mr Musk?
>> Bill Whalen: Okay. Okay, go after Jerome Powell.
>> John H. Cochrane: Yeah, well, that's where this is the problem with the Goodfellas.

I get an answer already for the question I think that's coming, and then you throw me a different one. Anything intelligent to say? Powell's the interesting guy at the moment, of course, because the tariffs are going to be a huge stagflationary shock. So do you raise interest rates to fight the inflation?

Do you lower interest rates to try and offset the damage of tariffs to the economy? Which is a little bit like giving a cappuccino to someone who's had a heart attack. It's not obvious how lower interest rates are going to convince someone to build a factory when they're waiting to see what happens with the tariffs.

But you got to give Powell immense credit as a politician, and I say this with reverence, with admiration. He has steered the waters in Washington, edging just enough towards. We're going to look at climate risks to the financial system to keep the Democrats happy without actually printing money to buy windmills the way other central bankers have.

And then steers right back. Just enough. He's kept his job and looks likely to keep it through two of the greatest institutional failures the Fed has ever seen. The big inflation and then how Silicon Valley bank showed that the whole regulatory apparatus was. Was rotten. And keeping your job is the first, most important thing to being effective in the future.

So hats off to doing. I would have been much more principled than I would have been fired on the second day. So I watch that navigation with some admiration.
>> Bill Whalen: Okay, Niall, what about J.D. Vance?
>> Niall Ferguson: Well, Vice President Vance and I had our disagreements early on in this administration, and since then he's been a little less active on social media, which I think has to be a good sign.

He remains something of the administration's attack dog, and that's especially true where Europe is concerned. Hence his appearance in Greenland, which, of course, the President covets as territory he'd rather the US Ran than Denmark. But I do think that the role of vice president is an inherently difficult one.

You can just fade into irrelevance or you can become altogether too prominent and come to grief that way. That was the fate of Spiro Agnew. I think Vance is an important part of this administration. You'll see that he's often in the signal chats that get leaked to The Atlantic.

And I think that's important because, of course he's supposed to be the successor, and this is a really tough thing to pull off. Most of those who've attempted to go from vice president to president have failed, like Kamala Harris last year. So he's worth watching, not just as vice president, but as the, the heir presumptive.

And I think at this point he will ultimately stand or fall on the success of President Trump's agenda. My view is that the economic consequences of the tariffs are gonna hit the economy hard here. I think John and I agree and it's going to be a very tough second half of the year for the administration's economic agenda, and that is also going to be a problem for Vice President Vance.

>> John H. Cochrane: I wanna follow up on that because HR mentioned the next phase and got me thinking what the next phase is if things play out as it's starting to seem. So if you look at number of ships coming across the ocean from China is plummeting, you look at interviews about spending plans of corporations, they're plummeting.

So if indeed what happens next in the next six months is a deep economic contraction and financial one flight from Treasuries, interest rates going up. If that's where we go next, then I think the next phase is the rats jumping from the sinking ship phase. Remember, a lot of people are going along with how wonderful the emperor's clothes are.

Even many people who ought to know better are saying wonderful things about tariffs because they know Trump's wrath. But that kinda economic disaster would be politically disastrous, and the mechanisms for holding people in and loyalty fall apart quickly. So just in all the personalities we're talking about, and they're jockeying for what are they gonna do next?

There is a moment in all of these things where the shell falls apart and everyone says, my God, how do I save myself? That will be from Palo Alto, entertaining to watch, but for the poor people involved, big bets have to be made promptly.
>> Niall Ferguson: Can I just say, I don't think we're talking about the right person yet, because the most important person in the administration right now is Treasury Secretary Scott Besant.

>> John H. Cochrane: Yes.
>> Niall Ferguson: Who had to come in and explain that the reciprocal tariffs of Liberation Day were about to blow up the bond market and persuade the president to at least postpone the reciprocal tariffs? We saw really quite dramatic events in the past month. Just because the financial crisis didn't happen doesn't mean we didn't get pretty close to it around about April 9th.

So Secretary Bessant has been a crucial player in stabilizing the situation and dialing back the more aggressive protectionism favored by, say, Peter Navarro. I'm also gonna disagree with John about Jay Powell. Jay Powell has not, in fact, been a tremendously successful Fed chair. He was too late in dealing with the inflation problem generated in 2021.

And he is probably going to be too late to realize that he needs to adjust monetary policy in response to this big shock that you just described, John, passing through the economy. And when President Trump called him too late, Jay Powell, there was some truth in that. It's good that Trump pulled back from firing Powell because I think that would have been very disturbing to markets.

But I also want to give a shout out to our colleague Kevin Warsh for a truly brilliant speech last week at the International Monetary Fund. Which set up pretty persuasively the case for making him Jay Powell's successor when Powell's term expires next year. So let's not forget that Trump administration is a shape shifting same thing.

And the people we talk about this year may not be the same people we talk about next year. We should watch our colleague Kevin Warsh and keep our fingers crossed that he does, in fact, succeed Jay Powell.
>> H. R. McMaster: And hey, just a plug here too for Kevin Hassett, who's I'm sure doing a fantastic job, at the NEC and then, and also Jameson Greer.

He's very competent, and he's got his hands full. I mean, I don't know how many bilateral trade agreements you can do in, like in the two month period, but I mean, that's what he's trying to do. And we should be thankful that you've got a really competent USTR at this moment who shares the President's agenda.

He's not a, he's certainly not a free trader, John but he's a good man, and I think he'll get quite a bit done. Probably not everything he needs to get done in terms of these bilateral trade agreements.
>> John H. Cochrane: I just want to thank Niall for correcting the misimpression I gave.

The Fed has in fact gone through to and heading into a third massive institutional failures. They went all in on treating Covid as a demand problem, not a supply problem. Printed 3 trillion of money and helped the treasury hand it out and then sat on their hands for an entire year as inflation went nuts.

And I think, Powell is as chair, partly to blame for that. What I was praising him for was his ability to keep his job despite all that, which, fired or no fired, he has enough support in Washington to not be fired or not be forced out, which most mortals would have been.

>> Bill Whalen: Gentlemen, we'll leave it there, and we'll move on to the lightning round. All right, first question, a week ago, Pope Francis passed away after 12 years as head of the Catholic Church. I watched Conclave over the weekend I don't know if the three of you have seen it or not.

I'm curious as to what you thought about it, reminder, Niall, that Ray Fines is really an excellent actor, by the way.
>> Niall Ferguson: Yes.
>> Bill Whalen: Question for you gentlemen I'm not sure if any of you are Catholic, by the way, but a question. If any of you happen to be one of the voting cardinals, what would you be looking for in a pope?

>> Niall Ferguson: I want to simply recuse myself as a staunch Protestant from offering any opinion on the activities of the Roman Catholic Church. I do agree with you about the quality of Ralph Fiennes's performance in Conclave, though, that film has the most ludicrous ending of any film I've seen in the last 10 years.

>> Bill Whalen: I do agree.
>> Niall Ferguson: And I would recommend my Catholic friends perhaps skip the last 10 minutes.
>> Bill Whalen: Right, but what I'm getting at is really the direction of the Catholic Church moving forward.
>> Niall Ferguson: I'll leave that to others.
>> John H. Cochrane: I'll chime in as a lapsed Catholic and a son of a converted Catholic who had read the minutes of the Council of Trent in Latin and could quote from them.

Which has something to do with my lapse from the true faith, the Catholic Church faces a existential question. Do we go in the direction of sort of modern woke left wing Americans want to go, which many Protestant churches have gone to? Are we into social justice and left wing politics.

Or do we go to the kinda traditional Catholic religion that has, views on homosexuality, women, the priesthood, and so forth that aren't popular with that but are very popular, say, in Africa? Do we, are we and increasingly popular in the U.S. we mentioned together in our last meeting how religion is coming back.

So I don't know the answer and no longer a Catholic, so I can't tell them what to do. But I certainly can see what the question is that they're going to wrestle with.
>> Bill Whalen: HR
>> H. R. McMaster: I had the honor of meeting Pope Francis when I traveled with President Trump to the Vatican.

I write about that in the book, but I also just wrote about it in a new series on Substack called History We Don't Know. And, in it, I reflected a little bit on just the nature of Pope Francis's Pontificate and his emphasis on being a shepherd. I think we could all take his example in terms of his humility, his focus on service and his focus on those who are the least fortunate in society and to try to make a real difference there.

And I then I offered some advice for whoever comes in based on a part of the book that was cut out of what was published. And that's been a little bit of a disappointment from my perspective in terms of the churches taking on authoritarian regimes and being kind of having a soft spot for people like those who are in charge in Cuba.

The Cuban army, Ortega Nicaragua Maduro in Venezuela, and I would say especially the really poor decision the church made to cave to the Chinese Communist Party and allow the Chinese Communist Party to nominate bishops in that country. So anyway, I hope that they take whoever the new Pope is, and I think it's quite likely that he is from Africa or from the Philippines or somewhere where the Church is growing and vibrant.

Whoever comes in, though, I hope they're tougher on authoritarian regimes.
>> John H. Cochrane: I just want to add to that, for 2,000 years, the Catholic Church has been pretty soft on authoritarian regimes and not really a fan of democracy and very much not a fan of markets, including the most recent Pope.

And yet democracy, freedom and markets have been the things that have raised the life of the poorest among us greater than anything else and I would hope that the Church would discover freedom.
>> Bill Whalen: All right, a simple yes, no, and why question deal. Should Harvard be tax exempt?

>> Niall Ferguson: I think that's a general question about universities, isn't about how we treat them, and it shouldn't be a specific question about Harvard. My sense is that if you remove that tax treatment from one university, you'd have to remove it from them all. And I can't see that that's the right way to solve the problems that we've seen not only at Harvard, but right across higher education.

>> John H. Cochrane: I have an extreme view that we should get rid of the whole tax exempt nonprofit structure. So many wonderful things in America, it started as a good hearted thing, but has now morphed into a situation where tax exemption is a tax break break for rich people, not for poor people you get to give your money and take it off your very high income taxes.

And it has turned into support broadly for political advocacy. So many nonprofits are either tax dodges for the estate tax or ways of funneling money from taxpayers into political, partisan, political advocacy. Universities aren't the worst, but universities are part of that, so I'm for lowering the rates, broadening the base, and that includes getting rid of the entire nonprofit system and if you want to not make a profit, good on you don't have to make a profit.

>> Bill Whalen: All right, our final question, Niall, I always try to find something that relates to life in the UK and I found this wonderful story in of all places, the Edinburgh Evening News. And it reports, Niall, the survey of 2,000 UK residents asked to name their favorite takeaway food, the winner was Chinese cuisine, followed by fish and chips, pizza, Indian cuisine, American fast food.

Niall, if we did a dumpster dive in the bins outside Shea Ferguson, would we find oodles and oodles of Chinese takeout boxes?
>> Niall Ferguson: Well, this is a sign that the CCP's reach and their plan for world domination is boundless. Of course, all good Edinburgh and Glasgow boys eat haggis suppers if they get the chance, and that can't be obtained outside Scotland.

Haggis supper for those interested is consists of a deep fried haggis, which is of course the Scottish national dish combined with what Americans call French fries. And if you have never had a haggis supper, you've never really tested your cardiovascular system.
>> Bill Whalen: It's also the classic example of don't know what you're eating, you don't want to know what hug is exactly is.

HR, what's your favorite to go food?
>> H. R. McMaster: I'll say I do love Asian food, I think it's great for takeout. Some foods that you like are, I think are the best sometimes they just don't travel well, so I think Asian food is good. But also, lately you'll hear in Palo Alto, I've been trying, I've been trying to slim down a little bit.

I don't know if you guys have noticed but I'm trying to switch to maybe some sushi and Japanese food within the genre of Asian food.
>> Bill Whalen: John,
>> Niall Ferguson: speak for America.
>> John H. Cochrane: Yeah, I should lie and say burgers. No chicken fried steak with fries and gooey sauce over the fries, that's America.

>> H. R. McMaster: Sausage gravy, put some sausage gravy on that.
>> John H. Cochrane: Or, fish and chips, I love a good fish and chips, but it has to be out of the fryer. So we tend to go for sushi, which is delicious and travels well and of course, pizza, which you increasingly can get pretty darn good Italian style pizza in the US, I'm a snob, having spent a lot of my childhood in Florence.

But a lot of that graces the recycling bin outside the Corcoran Pharma household.
>> Bill Whalen: John and HR Raise important points, so much good food that you order to go just doesn't translate when it comes home, I don't know if it's because it's stuffed in a styrofoam or plastic box or not.

And John, you're right about pizza, it's kind of idiot proof when you get to end of the day, let's close the show by sticking with you.
>> John H. Cochrane: No, pizza has to be made with really good ingredients by someone who knows what they're doing, and when you order it, turn the oven on so you can bring it in and have it hot when it comes out.

Then you pour olive oil over it, you must have extra olive oil and say three pears facing Rome and hope you get something pretty good.
>> Bill Whalen: Well, you do live in Palo Alto, don't you? John, let's close the show. Tell us what you're doing in Boston, what's going on in the Cochran family and also why don't you touch on something that's happened in Massachusetts in April, a historical commemoration.

>> John H. Cochrane: I am in Lexington, Massachusetts, anxiously awaiting the arrival of our second grandchild, which I look forward to. And it does bring to mind, we are in Lexington, Massachusetts, where a week ago they reenacted the Battle of Lexington and Concord, which we should be celebrating. It was strangely silent around the country around this most important celebration here.

I wasn't here, but I gather they celebrated it at the historically correct time. The celebration was at 5 o'clock in the morning along with a reenactment. So that is something we should take joy in this week. Also, I think we should take a little thought and sorrow. It's the 50th anniversary of the fall of Saigon and the end of the Vietnam War.

So important anniversaries come and time to remember who we are and where we came from.
>> Bill Whalen: Okay, well said, gentlemen, that we bid ado for this episode of Goodfellows but we will be back soon with new topics, new conversation. Until then, take care and as always, thanks for watching.
>> Presenter: If you enjoyed this show and are interested in watching more content featuring HR McMaster, watch Battlegrounds also available @ hoover.org.