“Regular readers know that I have a longstanding interest in comparisons between the U.S. and European economies — largely because that comparison is important for geopolitics and economic policy, but also because it’s intellectually interesting. The conventional wisdom among elites on both sides of the Atlantic is that Europe is falling far behind. But I’m a skeptic. And I have some new thoughts about the issue. So I thought I’d do a wonkish post, aimed primarily at economists, to explain what I think is going on.” (02/25/26)
“Around the world, powerful men are facing consequences for their actions. Former Brazilian President Jair Bolsonaro was convicted of trying to overthrow the government in a January 6–style coup, as was his South Korean counterpart, Yoon Suk Yuol. Marcin Romanowski, the former deputy justice minister in the right-wing Polish government, is in hiding in Hungary, accused of misusing public funds. The former Prince Andrew — Andrew Mountbatten-Windsor — became the first member of the British Royal Family in several centuries to be arrested; he’s been accused of crimes related to his relationship with the late sex-trafficking financier Jeffrey Epstein. They’re all unfortunate not to be American. Otherwise they probably would have gotten away scot-free.” (02/25/26)
“A budget deficit occurs when the federal government spends more than it collects in revenue. It reflects fiscal policy choices. By contrast, the trade deficit is an accounting outcome. It simply means Americans buy more goods and services from abroad than foreigners buy from us. Treating the trade deficit as if it were the budget deficit leads to policy distortions. If you believe it represents money being ‘lost,’ you impose tariffs as a corrective tool. Those tariffs raise costs, invite retaliation, and shift supply chains without eliminating the macroeconomic forces producing the deficit in the first place. The result is higher prices at home and little measurable change in the overall balance. The trade deficit would be a concern if capital were not flowing into the United States. But the imbalance is matched — dollar-for-dollar — by capital flowing into the country.” (02/25/26)
“As U.S. forces mass in the Middle East, Iran faces the threat of major strikes by the world’s most powerful military, potentially targeting its leaders, military, nuclear sites and critical infrastructure. Iran has nowhere near the same capabilities, and is even more vulnerable after last year’s war launched by Israel and recent anti-government protests. But it could still inflict pain on American forces and allies, and may feel it has to if the Islamic Republic’s survival is at stake. While Iran suffered major losses last June, it still has hundreds of missiles capable of hitting Israel, according to Israel’s estimates. Iran boasts a much larger arsenal of shorter-range missiles capable of hitting U.S. bases in Gulf countries and offshore American forces, soon to be joined by a second aircraft carrier.” (02/26/26)
“Two sets of peace negotiations are scheduled for Thursday in Geneva – direct talks between the United States and Ukraine, and indirect talks (mediated by Oman) between the U.S. and Iran. The parallel assemblies are likely to place strong demands on the multitasking skills of U.S. envoys Steve Witkoff and Jared Kushner – and to underscore the potential pros and cons of practicing diplomacy through special envoys chosen from outside the ranks of traditional career diplomats. ‘The ability to seize a historical moment’ in international events is a critical skill, according to Stuart Eizenstat, former U.S. ambassador to the European Union. At the same time, he cautioned in an interview with Tufts University’s Fletcher School, ‘Be wary of going for home runs. Don’t try to get too much. … Instead, go for singles and doubles.’ Patience, persistence, creativity, flexibility, and a willingness to listen are some of the qualities that undergird successful diplomacy.” (02/25/26)
“For this year’s State of the Union address, as usual, the president was the center of attention. That’s just where Donald Trump lives, so it’s no wonder that he broke his record for the length of the nationally televised speech. He was the star of his own unreality show, with an audience of tens of millions. In front of him, idolatrous Republican lawmakers popped up and down to applaud like clowns in wind-up music boxes of old. In fact, a president comes to the Capitol as a guest in Congress’[s] home, there only by invitation of the speaker of the House. It’s a historical nod to the separation of powers so essential to America’s system of government. But of course Trump acts as though he owns the place.” (02/25/26)
“Anthropic signed a contract with the Pentagon last summer. It originally said the Pentagon had to follow Anthropic’s Usage Policy like everyone else. In January, the Pentagon attempted to renegotiate, asking to ditch the Usage Policy and instead have Anthropic’s AIs available for ‘all lawful purposes.’ Anthropic demurred, asking for a guarantee that their AIs would not be used for mass surveillance of American citizens or no-human-in-the-loop killbots. The Pentagon refused the guarantees, demanding that Anthropic accept the renegotiation unconditionally and threatening ‘consequences’ if they refused. … The idea of declaring a US company to be a foreign adversary, potentially destroying it, just because it’s not allowing the Pentagon to unilaterally renegotiate its contract is not normal practice. It’s insane Third World bullshit that nobody would have considered within the Overton Window a week ago.” (02/25/26)
“There are three things to remember if the U.S. goes to war with Iran: It was never about nuclear weapons, it was never about helping the Iranian people, and Iran was genuinely negotiating a diplomatic solution.” (02/26/26)
“During President Donald Trump’s State of the Union address on Tuesday, he claimed to be working to improve affordability for U.S. families. But Trump didn’t talk about the root cause of these affordability problems: the long-running rise in inequality. And he didn’t call for the single most-effective way to reverse this inequality: raising taxes significantly on the ultra-rich families and corporations. In a new Economic Policy Institute report, I highlight how we got here and offer meaningful solutions to tackle growing inequality through wealth taxation. The link between inequality and affordability is clear: Affordability improves when incomes (mostly wages and public benefits for typical families) grow faster than prices. Rising inequality means that the economy’s average growth rate is buoyed by stratospheric growth at the top and hence no longer maps onto what is available to typical families to help them afford a secure and decent life.” (02/25/26)
