Administration's Policies Undermine Long-Term US Prosperity

Prof G Markets · December 19, 2025 · Listen to Original Episode →

Original Title:

TL;DR

The administration's policies, particularly tariffs and trade restrictions, are fundamentally eroding American purchasing power by increasing prices without corresponding wage growth, leading to a persistent decrease in real wages and quality of life.
The current administration's approach to AI is characterized by a lack of proactive regulation and a "laissez-faire" philosophy, which risks creating significant collateral damage and exacerbating labor market disruptions.
The US stock market's performance, often cited as a success, lags behind many developed countries when adjusted for global comparisons, suggesting that domestic market gains are not universally outperforming international counterparts.
The administration's actions are undermining the institutional foundations of American prosperity, with long-term negative consequences that may not manifest for decades, impacting future economic growth and innovation.
The US is actively alienating potential human capital and disrupting decades-old trade relationships, creating a legacy of diminished prosperity that future administrations will struggle to repair.
The administration's policies are disproportionately benefiting the wealthiest 1%, who are increasingly mobile and may disengage from the US, leaving behind a polarized society with decaying infrastructure and resources.
The speed of AI adoption is a critical factor determining whether it acts as a substitute for labor, leading to job losses, or a complement, enhancing productivity and creating new roles.

Deep Dive

The current administration's economic policies, particularly regarding tariffs and AI regulation, represent a fundamental undermining of America's long-term prosperity, with consequences that will manifest over decades rather than immediately. While some economic indicators may appear stable, the foundational institutions and international relationships that underpin American economic strength are being eroded, leading to a projected decrease in future economic size and opportunity for generations to come.

The administration's approach to tariffs, characterized by a lack of understanding of basic economic principles, has led to persistent price increases without corresponding wage growth, diminishing real purchasing power for millions. This is compounded by retaliatory tariffs from other nations, shrinking export markets and further reducing overall prosperity. Similarly, the haphazard approach to AI, characterized by a lack of regulation and a laissez-faire philosophy, risks either a chaotic labor market with widespread job displacement or a winner-take-all scenario favoring a few monopolistic entities, both of which have significant negative societal implications. Furthermore, the administration's restrictive immigration and visa policies are actively harming key export industries like higher education and research, driving away talent and investment to other countries, and damaging America's global standing and soft power. This destruction of institutional foundations and international ties, while seemingly less impactful in the short term, poses a profound and lasting threat to the nation's economic future.

The critical takeaway is that the current economic strategy prioritizes short-term political narratives over long-term economic health, creating a legacy of diminished prosperity and potentially irreversible damage to the nation's competitive advantage. The true cost of these policies will only become apparent in the coming decades, impacting future generations' economic well-being.

Action Items

Audit AI adoption: Assess current AI integration across 3-5 key business functions to identify potential productivity gains or risks.
Analyze trade policy impact: Quantify the effect of current tariffs on import costs and consumer purchasing power over the next 1-2 years.
Develop immigration human capital strategy: Outline a plan to attract and retain top global talent, focusing on long-term economic benefits.
Evaluate regulatory framework for AI: Draft proposals for AI regulation that balance innovation with societal protection and ethical considerations.
Assess global competitiveness: Compare US economic performance and trade relationships against 3-5 key international competitors over the past 2-3 years.

Key Quotes

"The policy processes have been a disaster. The man, 10 years after declaring that his number one economic priority was tariffs, the man who had run two election campaigns and in fact won one four-year term as president, arrived and still didn't have a tariff agenda, even though he'd written one several times, announced one on the White House lawn on so-called Liberation Day and was forced to back off within seven days, giving you a sense of how chaotic it was."

This quote highlights the perceived lack of coherent economic policy, specifically regarding trade, under the Trump administration. The speaker points to a disconnect between stated priorities and actual implementation, suggesting a chaotic and reactive approach rather than strategic planning.

"I'm not going to tell you it's the worst thing I've ever heard. I've spent the whole last six months telling you it's a bad idea. I really think it's a bad idea. It's because it's not often that a single president can use their failure to understand economics 101 to cost 340 million people a moderate but not huge amount of money."

This statement addresses the impact of tariffs, suggesting they are a bad policy but not catastrophic on a national scale, though still detrimental to individual citizens. The speaker emphasizes that the core issue is a misunderstanding of basic economic principles leading to widespread negative consequences.

"The problem isn't the tariff and it never has been that tariffs are going to cause a hyperinflation it's that they're going to cause prices to rise without wages keeping up and that is immensely more painful that fundamentally undermines your real wage your quality of life what you can afford forever whereas regular inflation is a transitory thing."

Here, the speaker distinguishes the negative impact of tariffs from typical inflation. While tariffs might not cause runaway price increases, the crucial difference highlighted is their effect on purchasing power by eroding real wages, which is presented as a more damaging and persistent economic problem.

"The man fired the head of the bureau of labor statistics. I will tell you Betsy and I were on vacation, Betsy my partner, fellow economist, and she woke me up at 6 AM and said he fired the BLS commissioner. So for folks at home who don't understand how weird that is, my partner woke me at 6 AM in a in in quite some distress. This is something you have not seen from a non-autocrat anywhere in the world ever."

This quote focuses on a specific action taken by the administration--the firing of the Bureau of Labor Statistics commissioner--and frames it as an unprecedented and alarming move. The speaker emphasizes the shock and concern this generated, even among economists, suggesting it undermines institutional independence.

"The standard center left answer is always looked to the Nordic countries -- they have healthy welfare states and a real commitment to looking after each other. There are deep questions about how much one can apply that to the United States... I'm not sure I'm that pessimistic about our ability to be race blind."

This passage discusses potential models for economic policy, referencing the Nordic countries as a common example for social welfare. However, the speaker raises questions about the direct applicability of their model to the United States, hinting at cultural or societal differences, while expressing cautious optimism about the US's ability to overcome such challenges.

"I think the biggest disruption is yet to come. [...] I think it is the biggest disruption to the labor market in decades. I'm just not yet confident where it's going to land."

This quote highlights the transformative potential of Artificial Intelligence (AI). The speaker views AI as a major force that will significantly alter the job market, but acknowledges the uncertainty surrounding the exact nature and extent of these changes.

Resources

External Resources

People

Justin Wolfers - Professor of Public Policy and Economics at the University of Michigan, guest on the podcast.
Ed Elson - Co-host of the podcast.
Scott Galloway - Co-host of the podcast.
Betsy - Partner of one of the hosts, fellow economist.
Jay Powell - Federal Reserve Chair.
Sam Altman - Mentioned in relation to AI company valuations.
Mark Carney - Former Governor of the Bank of England and Bank of Canada, mentioned regarding quantitative targets for reducing exposure to the US.
Jonathan Haidt - Mentioned in relation to the impact of social media on American youth.
Heather Cox Richardson - Historian, mentioned regarding America's ability to bounce back from crises.
Warren Buffett - Investor, mentioned regarding betting against America.
Claire Miller - Producer of the podcast.
Allison Weiss - Producer of the podcast.
Benjamin Spencer - Engineer of the podcast.
Dan Chalon - Research associate, mentioned regarding podcasting and self-actualization.
Isabella Kinsel - Research team member.
Chris Nudenhue - Research team member.
Mia Silverio - Research team member.
Drew Burrows - Technical director.
Catherine Dylan - Executive producer.

Organizations & Institutions

University of Michigan - Affiliation of Justin Wolfers.
Federal Reserve (Fed) - Central banking system of the United States.
Bureau of Labor Statistics (BLS) - Government agency responsible for labor market data.
Morgan Stanley - Mentioned in relation to total return indices.
OpenAI - AI company.
Google - Technology company, mentioned in relation to AI and business software.
Anthropic - AI company.
Microsoft - Technology company.
Pro Football Focus (PFF) - Mentioned as a data source.
New England Patriots - Professional football team, mentioned as an example.
NFL (National Football League) - Professional American football league.
Carmax - Company mentioned in an advertisement.
Blinds.com - Company mentioned in an advertisement.
Public.com - Investment platform, mentioned in an advertisement.
LinkedIn - Professional networking platform.
Odoo - Business software platform, mentioned in an advertisement.
Disney - Company mentioned in relation to cost savings.
JPMorgan - Financial institution, mentioned in relation to cost savings.
China - Country mentioned in relation to trade and tariffs.
Denmark - Country mentioned in relation to stock market returns.
New Zealand - Country mentioned in relation to stock market returns.
Australia - Country mentioned in relation to stock market returns, economic policy, and institutions.
Germany - Country mentioned in relation to stock market returns.
Italy - Country mentioned in relation to stock market returns.
Japan - Country mentioned in relation to stock market returns.
Portugal - Country mentioned in relation to stock market returns.
Spain - Country mentioned in relation to stock market returns.
Canada - Country mentioned in relation to stock market returns and trade.
European Union (EU) - Mentioned in relation to tariffs.
South Korea - Country mentioned in relation to trade.
Brazil - Country mentioned in relation to trade.
Dubai - City mentioned as a potential relocation destination for the wealthy.
Milan - City mentioned as a potential relocation destination for the wealthy.
London - City mentioned as a potential relocation destination for the wealthy.
France - Country mentioned in relation to taxation and the wealthy.
The Wall Street Journal - Publication mentioned for an article.
MSNBC - Television network.
The Boyer Lectures - Public lecture series in Australia.

Websites & Online Resources

odu.com - Website for Odoo business software.
public.com/propg - Website for Public.com promotion.
linkedin.com/markets - Website for LinkedIn Jobs.
profitymarkets.com - Website for Prof G Markets newsletter.
podcastchoices.com/adchoices - Website for ad choices.

Other Resources

AI (Artificial Intelligence) - Discussed as a major disruption to the labor market and economy.
Tariffs - Discussed as a policy impacting inflation, purchasing power, and trade relationships.
Counterfactual thinking - Economic concept mentioned in relation to stock market analysis.
Countermeasures - Mentioned in relation to retaliatory tariffs.
Onshoring - Concept mentioned in relation to supply chain strategies.
Friendshoring - Concept mentioned in relation to supply chain strategies.
Superannuation funds - Mentioned in relation to Australia's economic system.
Social media laws - Mentioned in relation to Australia.
Gerrymandering - Political concept mentioned in relation to Australia.
Compulsory voting - Electoral concept mentioned in relation to Australia.
Preferential voting - Electoral concept mentioned in relation to Australia.
H1B visas - Visa program for skilled workers, discussed in relation to US immigration policy.
Deep fakes - Mentioned in relation to political marketplace distortion.
Executive order - Mentioned in relation to AI regulation.
Cackastocracy - Term used to describe government.
Data dividend - Concept for compensating individuals for their data.
Winner take all market - Market structure concept.
Labor-saving - Aspect of AI adoption.
Complementarity - Aspect of AI adoption.
Substitute for labor - Aspect of AI adoption.
Soft power - Concept related to international influence.
ROI (Return on Investment) - Financial metric.
GDP (Gross Domestic Product) - Economic metric.
Welfare state - Concept related to social safety nets.
Constitutional crises - Historical events in the US.
Democracy - Political system.
Masculinity - Social construct discussed in relation to men's groups.