2026-10-11 15:31:44
Everyone except the die-hard faithful now realizes that Donald Trump’s second presidency is a colossal failure. The president is doing his best to gin up symbolic, minor controversies in order to activate negative polarization and distract from his spectacular failures on inflation, the Iran War, corruption, racial harmony, and so on. These include demanding that artificial intelligence be renamed “artificial superintelligence”, bellowing that he should have won the Nobel Peace Prize, and conducting an execution on live TV. The goal is to get Republicans fighting Democrats over these controversies, in order to trick everyone into focusing on how much they hate the other team instead of how much they hate Trump.
The trick will probably fail, just as Trump’s promise to give every American $5000 for voting Republican backfired. All of these little tempests-in-teapots simply reinforce what a cruel, selfish, petty buffoon Trump is. And Trump’s approval rating just drifts lower and lower:
Trump will probably lose the midterms, and become a lame duck president, spamming increasingly grandiose, unworkable executive orders while battling a stream of Congressional investigations.
That means the window is closing on my ability to force Democrats to reckon with their failures during the Biden years. If and when Trump loses a national election, there will be far less pressure for soul-searching on the left. And once the GOP is no longer in control of all three branches of government, the Democrats will be able to influence actual policy instead of sitting around rebuilding their brand.
So before that happens, I want to summon the last fading scraps of the self-reflection that Democrats and progressives were briefly forced into after Trump thumped Kamala Harris two years ago. When Trump won, I wrote four blog posts trying to explain where the Democrats had gone wrong:
So today I’m going to repost all four parts of my election post-mortem, so that the progressives and Democrats among my readers can take one final moment to reflect on how not to enable the rise of authoritarian rightist leaders in future election cycles.
I’ve made no secret of the fact that I think Trump is a terrible choice for America, but there’s no denying that the American people have made their choice. Trump is currently projected to win every single swing state. He outperformed his 2020 performance in every single county in the country. He’s projected to win a solid majority of the popular vote — the first time a Republican has done so since 2004. I still don’t like the Electoral College as an institution, but you can’t blame it for this result like you could for 2016. In fact, Trump’s victory was part of a more general Republican landslide — the GOP took the Senate and improved its majority in the House. A map of political shifts between 2020 and 2024 shows almost solid red.
I suppose a small silver lining here is that we won’t have to spend the next two months enduring waves of “Stop the Steal” election denials, lawsuits, and threats to repeat January 6th. Democracy delivered Trump a victory, and so Trump has little incentive to attack democracy.
In fact, that silver lining might extend to the long term too. Trump and the GOP won because nonwhite voters and working-class voters — traditional Democratic constituencies — shifted his way. Dems still won Hispanic, Black, and Asian voters overall, but their margins fell significantly from previous elections, while actually improving with White voters:
In fact, exit polls show Trump winning a solid majority of Hispanic men!
Update: Over at Matt Yglesias’ blog, Jed Kolko shows that heavily Hispanic areas swung harder toward Trump than any other parts of the country:
Ronald Reagan’s prophecy that Latinos would become Republicans is coming to pass.
Income has realigned as well. Democrats are now the party of the educated upper middle and wealthy class, but have lost their appeal to the middle and working classes:
This largely destroys the narrative that nonwhite immigration will demographically drown White Americans under a tide of imported minority votes. In fact, it vindicates my guest poster Wally Nowinski, who observed that high-turnout elections like this one now help Republicans, because marginal voters — working-class Americans and Hispanic Americans — now lean to the right:
At some point, Republicans are going to realize this, and hopefully become less anxious about America’s racial future. Hopefully they will also realize that any attempt to make voting harder actually hurts them in the future, because the impact would fall disproportionately on their own base.
I expect these realizations to take some time to sink in, but ultimately their effect could be very salutary for American democracy. In the days of Nixon and Reagan, Republicans never worried about democracy itself — it was obviously on their side. Even in 2004, Republicans could tell themselves that we lived in a “center-right nation”. Now, Trump’s victory, powered by lower-income Americans and Hispanic men, will hopefully convince the GOP that democracy is still a game they can win.
A democracy needs both major parties to believe they can win via persuasion rather than by organized resistance, and 2024 showed that Republicans can still do that — even if the method of persuasion is one that I personally wish hadn’t worked so well.
If you want an optimistic take, there it is.
So what other important lessons can we learn from this disappointing election result? I didn’t title this post “Why Trump won”, because I don’t think I really have a convincing answer — I’m not a political scientist, or even a political pundit. In fact, there are probably a bunch of reasons, not just one.
Nor am I going to be one of those pundits who tells you that if only Democrats had listened to my policy priorities, things would have gone very differently. In fact, few Americans care about my own policy priorities. My top issues are industrial policy and pro-democratic foreign policy. I definitely don’t think emphasizing those more, or doing more of those things, would have propelled Harris to victory. (I don’t think they would have hurt; I think voters just don’t care.)
But I do think there are some important lessons that we can already learn from this election, especially at the intersection of economics and politics. In particular, I see three big ones:
Identity politics — viewing racial groups as homogeneous “communities” to be targeted with appeals to collective grievances — is not an effective way of winning over Hispanic (or, probably, Asian) voters.
People care about inflation more than about unemployment.
The educated professional class has become dangerously out of touch with the rest of the country.
Instead of writing all of these in one post, I’m going to split it into three, because I think the lessons are each very important. Since I’ve already shown the racial and class breakdown of the exit polls, I’ll talk about how identity politics is failing Democrats. Whether or not you think identity politics drove voters into Trump’s arms, it certainly hasn’t done an effective job of retaining Hispanic voters. The whole approach needs a deep rethink.
In the 2010s, there was a big debate over identity politics, with scholars like Francis Fukuyama warning that treating the American electorate as a balkanized set of racial collectives was undermining democracy. Stacey Abrams and other progressive writers pushed back against Fukuyama, arguing that all politics is identity politics, and so Democrats should continue focusing on racial appeals.
Abrams et al. were right in the facile, definitional sense that people’s personal identification with larger groups, movements, and ideas — rather than their own personal economic interests — drives much of their political behavior. After all, if human beings were rational calculating machines, they wouldn’t even vote, given the incredibly low probability that any election will be decided by a single vote.1
But the 2024 election — even more than the 2020 election — makes it clear that most Hispanic and Asian voters don’t want to be appealed to based on the racial group of which they’re supposedly a part. For example, lenient policies toward asylum seekers from Latin America don’t seem to have won over many Hispanics:
In Hidalgo County, in South Texas — a Mexican American stronghold that Biden won with 58% of the vote in 2020 — Vice President Harris and Trump were virtually tied early Wednesday, with Harris leading by less than half a percentage point…In Cameron County, at the southern tip of Texas’ Rio Grande Valley, Trump led Harris, 52-47, according to early results. Biden won that county with 56% of the vote four years ago.
The whole notion that lenient policies on illegal and quasi-legal immigration would win inroads with Latinos was based on the idea that Hispanic Americans identify strongly with others of their same race. Political scientists call this the theory of “linked fate”.
Democrats clearly buy into this theory when they refer to racial groups as “communities”. This term has become ubiquitous in Democratic messaging — for example, Harris talked about her “economic agenda for the Latino community”.
But races are not communities. Our country is not like a segregated 1930-era city, where Black people live in a ghetto, Chinese people live in Chinatown, Italian people live in Little Italy, and so on. Hispanic and Asian Americans might share a sense of “linked fate” with others of their race, but it’s only one of many things they care about, and perhaps not even a major one.
The big exception, of course, is Black Americans, who continue to vote mostly like a racial bloc, despite Trump’s modest inroads with Black men. This has clearly influenced the Democrats’ view of how racial politics operates in America, and they’ve tried to apply the same mental model to Hispanics and Asians. This is explicit in California, where you hear the term “Black and brown” thrown around a lot.2
But it isn’t working. In fact, it’s backfiring. A recent paper by d’Urso and Roman found that use of the term “Latinx” actually made Hispanics vote for the Republicans in nontrivial numbers!
Group labels are political, but little theory and evidence explains how group labels shape politician evaluations…Latinos’ relationship with “Latinx,” a gender-inclusive label, is a theoretical test case. Using several datasets, we find: Latinos are less likely to support politicians who use “Latinx”…Latinos who oppose “Latinx” are less likely to support politicians who used or are associated with “Latinx”…Latinos in areas where “Latinx” is more salient are more likely to switch their vote toward Trump between 2016-2020[.]
One common interpretation of this result — and one the authors discuss — is that many Latinos are conservative, and that this makes them susceptible to “anti-LGBTQ+” labels. I’m highly skeptical of this interpretation. Outside small, highly educated, deeply progressive circles, who even knows that the purpose of the “x” in “Latinx” was to be trans-inclusive? Almost no one who is likely to be offended by the term is even aware of this.
Instead, what they hear is simply someone making up a weird label and applying it to them. It’s what sociologists call ascription — it’s someone making up a racial category for someone else and then stuffing them into it without their consent. The Occam’s Razor explanation for Hispanics’ dislike of “Latinx” is that it minoritizes them — it declares that they’re part of a special “community”, separate from other Americans.
Democrats’ purpose in assigning Americans to “communities”, of course, is not to exclude them, but to reward them — to hand them special prizes or favors via government policy. For example, the Biden administration had a whole policy oriented around giving government benefits specifically to “HSIs” — an abbreviation for “Hispanic-Serving Institutions”, i.e. colleges that a lot of Hispanic people tend to go to. Harris also had a plan for encouraging small banks to give Hispanic people more loans.
This is, fundamentally, a special-interest model of politics — it’s similar to the kind of quid pro quo that historically dominates much of urban machine politics. I’m not sure whether today’s Dems inherit their instinct for this kind of group giveaway from their old Tammany Hall days, but it’s recognizably similar to the way California cities hand out cash to favored nonprofits — especially because the programs are often targeted at colleges or banks or nonprofits or other organizations that claim to serve the racial “community” in question.
But there are notable downsides to this approach. First, unlike in a city, these targeted initiatives probably don’t make it through to the public consciousness. What Puerto Rican voter in Philadelphia even knows what the heck an “HSI” is? But more fundamentally, I think most Americans, including most Hispanic Americans, would rather be treated as individuals than as members of a racial “community”.
Identity has many components. For my part, I identify as an American, a Texan, a liberal, a rabbit keeper, a writer, a nerd, a PhD holder, a science fiction fan, a Jew, a white person, a Lithuanian-American, and so on.3 If politicians primarily spoke to me as part of the “Jewish community”, I would be annoyed, because I don’t necessarily want to be defined by that component of my identity. I don’t reject it, but I don’t want to be reduced to it either. And if politicians tried to appeal to me with policies targeted through Jewish organizations to benefit Jews, I would simply not care. In fact, I would be a little conflicted about accepting any of those benefits, since it would pigeonhole me into prioritizing an identity that exists as only one component among many.
Even more fundamentally, being constantly minoritized — being told to think of myself as a Jew first and as an American second — would pressure me to shrink the circle of people that I consider part of my own in-group. Because I think of myself as an American first and foremost, I feel like there are 330 million other people who share my primary identity — 330 million people on my “team”. But if I were to think of myself first and foremost as a Jewish person, that would shrink my in-group to only 16 million, almost none of whom live near me. It would make me feel more isolated, and might even cause me to start questioning whether the 323 million non-Jewish Americans who live all around me have my best interests in mind.
In other words, being set apart from your fellow countrymen and neighbors is generally not a desirable thing, even if the reason is to put you on a pedestal.
I suspect many Hispanic Americans feel the same way. Talking to Hispanic folks (remember, I’ve lived most of my life in either Texas or California) and reading books like The Diversity Paradox, The New Americans?, and The Great Demographic Illusion, it seems clear that most would like to think of themselves as regular Americans — not to give up or forget their national origins or ethnic identity, but to prioritize their American-ness.
The progressive movement of the 2010s told us that this was a bad thing. “Assimilation” became a dirty word in progressive circles, and the University of California told their faculty not to call the U.S. a “melting pot”. The implicit assumption was that given the choice, people would like to prioritize their racial and ethnic identities, and that only forcible conformity pressure from American institutions — or from White people — was preventing people of color doing that. The Democratic party’s embrace of identity politics — its habit of targeting racial “communities” with encouraging rhetoric and specific material benefits — was seen as a way to counteract the pressures of assimilation.
The conservative counter-narrative was that race relations had been fine right up until progressives started making everything in America about race. Conservatives always send me the following chart:
This is a powerful argument. If structural racism was really so entrenched before 2014, then why did two-thirds of Black adults say race relations were good? Essentially, the progressive story is that they were effectively bullied into saying this — or perhaps bullied into thinking it. The conservative story is that progressives created the decline in race relations by making everyone think about race all the time.
I suspect that neither of these stories gets it quite right, but that the conservative story is closer to the truth. Increasing the salience of racial divisions and racial conflict makes people mistrust their neighbors more. And although both sides were guilty of this in the 2010s, progressives were far more zealous and absolutist about it.
Essentially, the progressivism of the 2010s sought to turn American society into a sort of estate society, where people’s rights, privileges, and social roles would be mediated by their identity group. How your teachers and principals treated you, your relationship with the law, what colleges were available to you, what kind of parties you could go to, what jobs you could get hired for, how your bosses treated you at work, what kind of benefits you could expect from your government, and even how people walked past you on the street were to be determined by the race you were born into, rather than your own actions as an individual.
These race-based social relationships were to be enforced by a combination of DEI departments, lawsuits, social shaming, job loss, and so on. Ibram X. Kendi even suggested the totalitarian step of creating a constitutionally mandated “Department of Antiracism” to enforce race-based social relations at every level of society — all in the name of combatting “structural racism”, which Kendi couldn’t even define when asked.
Democratic party politicians never fully embraced this vision of the future, even in 2020-21. Some of these ideas were tried out in 2020-21, but they failed almost as quickly as they were tried, making basically everyone mad in the process. By 2024, Kamala Harris was tacking pretty strongly away from the racialized vision of America.
But that was too little, too late. People remember the individualistic Americanism largely prevailed in public life before 2014, and they remember the constant hyper-consciousness of race in 2014-21, and they know which one they like better. And although Democrats abandoned much of their woke rhetoric, the practice of targeting politics at specific “communities” has persisted. I suspect that it refreshes the bad memories of the racial conflicts of 2014-21.
All of this is a long-winded way of saying that Democrats’ racial targeting probably makes a lot of Hispanic people feel singled out and alienated in their own country, even if the purpose is to help them.
But that’s not all. Democrats’ identity politics flies strongly in the face of the narrative that has defined the American experience for many Hispanics.
To the extent that most Hispanic Americans do share a common experience, it’s the immigrant experience. Immigrants come to America seeking the American Dream of upward mobility and opportunity. And by and large, they achieve it. Their children tend to earn a lot more than they do, and their grandchildren earn even more.
This was the path that most immigrant groups have followed — the Irish, the Italians, the Lithuanians, the Chinese, and so on. For a while, people argued that Hispanics were different — that they would be permanently excluded from the American Dream. That turned out not to be true:
For many Hispanic Americans, their salient experience of America has not been one of racialized exclusion, but one of upward economic mobility and social inclusion. Economists have found that Hispanic incomes are converging to White levels across the generations. Once you control for the composition effect of new poor immigrants coming in, there’s strong income convergence across the generations:
We study the sources of racial and ethnic disparities in income using de-identified longitudinal data covering nearly the entire U.S. population from 1989-2015….[T]he intergenerational persistence of disparities varies substantially across racial groups. For example, Hispanic Americans are moving up significantly in the income distribution across generations because they have relatively high rates of intergenerational income mobility…
Hispanic Americans are moving up significantly in the income distribution across generations. For example, a model of intergenerational mobility analogous to Becker and Tomes (1979) predicts that the gap will shrink from the 22 percentile difference between Hispanic and white parents observed in our sample…to 6 percentiles in steady state…
Hispanics are on an upward trajectory across generations and may close most of the gap between their incomes and those of whites…Their low levels of income at present thus appear to to be primarily due to transitory factors.
In fact, despite composition effects from continued immigration, Hispanic wages have grown faster than White wages in America since the turn of the century:
Surveys unsurprisingly have found widespread economic optimism among Hispanics for many years. Hispanics are climbing the ladder of education:
Hispanic homeownership is rising strongly. And Hispanics are starting businesses at very high rates:
New businesses owned by Latinos accounted for 36% of launches in 2023…As of 2023, Latino entrepreneurs have established a staggering five million businesses across the United States, collectively generating over $800 billion in annual revenue…The rapid pace of this growth is further highlighted by the fact that the number of Latino/a-owned businesses surged by 34% from 2007 to 2019.
In other words, Hispanic Americans’ economic path looks reasonably similar to that of Italian Americans or Irish Americans.
In the 2010s, it became taboo to even talk about these successes in some progressive circles. The University of California’s 2015 speech guidelines told faculty not to say “America is the land of opportunity”. This was deemed to be a racist utterance, since it supposedly minimized the economic exclusion that many minority groups have faced.
But the fact is, America is the land of opportunity, especially for immigrants and their children. Hispanic Americans, broadly speaking, have been prime beneficiaries of that upward mobility — they have worked incredibly hard, gone to school, started businesses, learned English, and done everything else they were supposed to do. And America has rewarded them with economic success and social integration.
Compared to that self-bootstrapped success, racial preferences — DEI, affirmative action, preferential government contracts, and so on — are basically a booby prize. Yes, in reality, those policies can sometimes help accelerate Latino achievement. But the mere fact that they’re on offer — and that Democrats seemingly view them as permanent policies instead of temporary ones — sends the message that Hispanics are a permanently racialized, excluded, marginalized group. This message is often explicit — when Democrats and progressives talk about “marginalized groups”, which they often do, that term is generally supposed to include Hispanics.
Being a marginalized group is simply not part of anyone’s American Dream.
The tricky part for Democrats is that this is an approach that has largely worked with Black voters — or at least failed to alienate them. It will be difficult for Democrats to convince themselves that Hispanic voters are not going to work the same, after spending so many years believing they would. But the 2024 election, and the trend of the last few elections, makes it clear that the two are not going to work the same.
Identity politics allows Democrats to hold on to a supermajority of the Black vote, so I suspect it will never go away. But the Black vote is a smallish and shrinking part of the electorate, and even there, the power of idpol may be fading a bit. Meanwhile, Hispanic voters, Asian voters, and Middle Eastern voters are the future. Those groups are all strongly upwardly mobile, and mostly descended from people who came to America voluntarily in search of the American Dream. And although ethnic studies professors and progressive activists will happily tell you all about the Chinese Exclusion Act and post-9/11 Islamophobia, it’s just not the case that Hispanic, Asian, and Middle Eastern Americans have anything that compares to the history of slavery and segregation.
The Democrats need to move away from identity politics. And switching to class-based politics, as some have suggested, won’t really help. Biden was probably the most pro-union and pro-worker President America has had since the mid 20th century, and yet some prominent unions refused to endorse Harris.
Instead, Democrats need to retool their message to be about American identity, as it was in the New Deal days, and as it arguably was for Clinton and Obama. I believe Harris actually took steps in the right direction, but not enough, and not nearly soon enough — and she was probably the wrong person to sell the idea. My advice is not to be discouraged, and to keep at it — Walter Mondale and Michael Dukakis both went down to crushing defeats with centrist, positive messaging, but then Bill Clinton eventually figured out how to make the approach work.
Republicans will eventually screw up. Trump is old, and he has a lot of foolish and bad people around him, and his economic policy program is kind of a dead end. At some point, America will once more call upon the Democrats to save them from Republican mistakes, as they did in 2008 and in 1992. Democrats will have an easier time rising to that inevitable summons if they leave the identity politics of the 2010s behind. Because that stuff just isn’t getting the job done.
In 2021, there was a fierce debate, both within the Biden administration and among the general left-of-center commentariat, about how much to worry about inflation. For example, in May 2021, Larry Summers wrote:
Even six months ago, it was reasonable to regard slow growth, high unemployment and deflationary pressures as the predominant risk to the economy. Today, while continuing relief efforts are essential, the focus of our macroeconomic policy needs to change…Inflationary pressures are mounting…How much does it matter whether inflation accelerates? In general, increases in inflation disproportionately hurt the poor and are associated with reductions in trust in government. Progressives might consider the role that inflation played in electing Richard M. Nixon in 1968 and Ronald Reagan in 1980.
In February 2021, Olivier Blanchard, another prominent macroeconomist, wrote a detailed argument that the Biden administration was spending too much on Covid relief with the American Rescue Plan, and that this would generate a surge of inflation. The argument included a simple model whose predictions ended up being close to what actually happened.
Other economists pushed back hard against Blanchard and Summers, arguing that inflation was due to transitory factors, and that it was important to keep spending in order to preserve full employment. One of these was Paul Krugman, who declared himself “a card-carrying member of Team Transitory” — “Team Transitory” being those who thought inflation was mostly due to pandemic disruptions and would fade on its own. There was even a live debate between Krugman and Summers in early 2022. But by late 2022, Krugman issued a mea culpa, and admitted that Biden’s American Rescue Plan had exacerbated inflation:
In early 2021 there was an intense debate among economists about the likely consequences of the American Rescue Plan, the $1.9 trillion package enacted by a new Democratic president and a (barely) Democratic Congress. Some warned that the package would be dangerously inflationary; others were fairly relaxed. I was Team Relaxed. As it turned out, of course, that was a very bad call.
Economic analyses of the inflation surge of 2021-22 generally assign the American Rescue Plan some share of the blame.
Ignoring Summers’ warnings, and believing Team Transitory, might have cost the Democrats the 2024 election. I’m no political scientist, but there are reasons to believe that the burst of high inflation in 2021-22 was one factor in Kamala Harris’ loss.
The first reason we should think inflation mattered is that people pretty consistently said it mattered. On Gallup’s long-running “most important problem” survey, inflation consistently ranked as the most important specific economic problem that people mentioned, right behind “economy in general”.
A lot of other surveys showed similar results. And the percentage of people who told Gallup that the economy was “extremely important” to their presidential vote was unusually high — almost as high as in 2008, when the financial crisis had just devastated the U.S. economy:
And of course consumer sentiment was pretty low, even after adjusting for changes in methodology:
Now, it’s possible that this was mostly just Republicans complaining about inflation because it felt more substantive than talking only about more social/cultural grievances like wokeness, immigration, trans stuff, etc. After all, opinion on the economy shows a very partisan pattern depending on who’s in the White House:
It’s a pretty good bet that Republicans will suddenly “discover” that inflation in America is actually low now, and give Trump the credit.
But if you look historically and across countries, it really looks like inflation tends to make voters particularly mad. Research often finds that cumulative inflation over a President’s term in office — not just the current inflation rate — affects presidential approval and election performance. If you look at Gallup’s long-running survey, you’ll see that the inflation of the 1970s dominated Americans’ complaints even more than the unemployment of the Volcker recessions in the early 80s, or the recession of the early 90s:
And if you look at other countries, you’ll see that governing parties in every other rich country have seen their vote shares go down this year:
There are relatively few factors that are affecting all rich countries at the same time. A backlash over immigration is another possible common factor, but the list is basically just that plus inflation.
On top of that, there was a model that predicted the election outcome quite well. An interdisciplinary team of researchers created a model based on presidential approval ratings and economic conditions in each state, and they ended up predicting each state correctly:
It might be a fluke, but the same model got only one state wrong in 2020 (Georgia), so that’s pretty encouraging. In any case, the model relies partly on economic fundamentals — measures of the labor market and real wages. And real wages depend on inflation. So since labor markets are generally very strong all across America, the erosion of state-level wages by inflation is going to be the main economic factor that led this model to forecast a Trump victory.4
So I think it’s safe to say that while it’s possible inflation mattered less for Trump’s victory than people say on polls, it did matter at least somewhat.
Let’s talk a little about macroeconomics for a second. Most mainstream macroeconomic models assume that there’s some sort of short-term tradeoff between inflation and unemployment. If the Fed lowers interest rates or does quantitative easing or otherwise prints money, the general consensus is that unemployment will go down and inflation will go up. Similarly, if the government borrows and spends money and the Fed doesn’t counteract this by raising interest rates, the general consensus is that you’ll get faster growth, more jobs, and rising prices.5
Macroeconomic policy then becomes a question of how to strike the right balance. We want everyone to have a job. We don’t want inflation to go about 2%. But if we have to choose between these two things, how do we choose? In economic models, the relative degree that policymakers should care about inflation versus unemployment is determined by a social welfare function — basically, how much each of these economic ills makes regular people unhappy. A lot of economic research is dedicated to figuring out what that welfare function, and there’s not really a consensus.
But the experiences of the 1970s and the 2020s are teaching us that in America at least, people seem to get even madder about inflation than they do about unemployment. And the question is why. I actually wrote a post about this back in March of 2021, shortly after the American Rescue Plan was passed:
The basic story here comes from a survey Robert Shiller did in 1990. Basically, inflation tends to make people’s purchasing power go down, because their wages can’t keep up.6 This makes people poorer, and people do not like to be poorer.
The inflation of 2021-22 definitely made people poorer. In fact, the drop in real personal disposable income from mid-2021 to mid-2022 was more severe than the Great Recession or the 1970s inflation!7
This was caused by a combination of the end of pandemic relief, and falling real wages and other income due to inflation. In 2021 and 2022, Americans’ real wages suffered their biggest drop in postwar history, thanks to inflation8:
Remember, real wages are a key economic input that went into the model that managed to successfully predict every state’s election result. People really don’t like it when their real wages go down!
One key thing to understand is that this sudden impoverishment happened to most Americans. Rising consumer prices affect everyone, from the rich to the poor, the employed and the unemployed, the old and the young.
In a recession, on the other hand, the negative effects are largely concentrated. If you’re one of the unlucky people who loses their job, you take a huge hit. But if you’re not one of those people, you probably do OK. Maybe your wages grow more slowly for a few years, and maybe you have to stress out about the increased possibility of being laid off. But in general, the harms of inflation are diffuse while the harms of unemployment are concentrated.
If you’re a moral philosopher, an activist, or an economist estimating a social welfare function, you may prefer harming a lot of people a little bit with inflation to harming a few people a lot with unemployment. But a democracy doesn’t vote based on social welfare. It’s one person, one vote. So if unemployment harms 10 million people a lot, and inflation harms 200 million people by a moderate amount, it’s clear that inflation will directly harm a much larger number of voters.
The social welfare function and the “get your butt kicked in an election” function are two very different things.
I actually suspect that there are other reasons why inflation bothers voters even more than unemployment. Inflation is something that’s obviously beyond an individual’s control — if the price of eggs goes up, you can choose not to buy eggs, but otherwise there’s not much you can do. But unemployment is something that individuals do exercise some degree of control over — if you work a bunch of extra hours during a recession and establish a good relationship with your boss, maybe you can avoid getting laid off.
In general, I think people are less worried about risks they have some control over, even if the overall level of danger is higher. Look at how people are more afraid to fly than to take long road trips, despite road trips being much deadlier per mile. The leading theory is that in a car you have some control over your safety, while in a plane you have basically zero control. Similarly, I suspect that inflation makes people feel powerless, like being stuck in a crashing airplane.
In any case, this is probably an important area for survey research to explore. But in the meantime, Democrats need to remember that full employment doesn’t necessarily mean an economy that Americans are happy with. If it comes at the expense of rapid inflation, that price is going to be one that most Americans aren’t comfortable paying.
I’d like to say a little more about the debate over the American Rescue Plan in 2021. While Paul Krugman and Larry Summers viewed their argument in purely technical terms, some economists and commentators did come at the debate from an ideological angle. In general, spending more was considered the progressive position, while spending less in order to avoid high inflation was considered more centrist or moderate.
This makes sense — full employment disproportionately benefits the least well-off in society. The lowest-paid workers are often the first to be fired in a recession and the last to be hired in an expansion, so the longer you can keep an expansion going, the more poor people can have jobs. Also, full employment tends to push up wages, especially at the lower end of the scale — in fact, even as most Americans lost purchasing power during the inflation of 2021-22, the bottom 10% of American workers actually saw their real wages rise.
This July, I wrote about how some influential progressive think tanks basically push for full employment all the time, and downplay worries about inflation:
Some progressive economics commentators — I will not name names, because I’m trying to be a less confrontational blogger these days — also consistently downplayed the risks of inflation and extolled the many benefits of full employment during Biden’s tenure in office.9
In retrospect, whether or not this was a good move from a moral standpoint, it looks like a big mistake from an electoral standpoint.
I hope that these commentators are reevaluating their beliefs. And I hope that Democratic politicians, staffers, and donors are reevaluating the paradigm as well. Full employment is great, all things equal. But sometimes the price of full employment is too high — not just for the majority of Americans who have to endure years of erosion in their purchasing power, but for everyone who has to suffer from the election of leaders like Donald Trump.
Update: Good to see some left-leaning economists quickly coming to the same conclusions.
Our task now is to get the ear of Democratic politicians, which will probably require wresting it away from some progressive think tanks and Twitter posters.
I’ve been writing about the lessons that Democrats should take away from the big GOP victory. I’ve written about how identity politics is failing to attract Hispanic voters, and about how Dems cared too much about employment and not enough about inflation. The third big lesson, I think, is about class in America. The educated professional class is drifting away from the rest of the country, in terms of values, beliefs, and their information diet.
This election upended a lot of demographic trends that people had been very certain about only a few years ago. Trump seems to have produced a large-scale shift of Hispanic voters to the Republicans, and big cities swung harder toward the GOP than other areas. But there’s one key trend that this election didn’t reverse: education polarization. Trump was even more dominant among non-college voters than he was in the last two elections, while Harris won the highly educated by about as much as Biden did.
Over the years, the Democratic base has shifted decisively from the working class to the educated professional class:
This shift doomed Harris’ campaign, since people without college degrees outnumber their college-educated counterparts — in 2024, the latter were only 43% of the electorate.
And this weakness looks likely to be a long-term problem. In the past, when college education was steadily increasing, it was easy to think that college-educated voters would own the future. But in recent years, the rate of college enrollment has plateaued and begun to fall:
And the number of new college graduates fell in 2022, even as America’s total population grew.
As for why fewer Americans are getting a college education, I wrote a post about this back in July:
The short version is that tuition soared even as the earnings boost from a college degree shrank substantially, making college a less attractive value proposition. A lot of this had to do with colleges themselves boosting spending on administrators and facilities, and having to charge students more to pay for it.
If universities cut costs, cut tuition, and raised their value proposition, we could see enrollment rise again at some point, but I wouldn’t bet on that happening soon. Meanwhile, socialists’ plan for universal free college is dead on arrival; even Biden’s generous new student loan repayment provisions might prove to be temporary, since the fiscal cost is so huge. So a wave of taxpayer cash is not going to restore the trend of rising educational attainment.
In other words, Democrats’ education problem is here to stay. Unless Dems can figure out how to win back those non-college voters, they’re likely to be at a huge electoral disadvantage for the foreseeable future.
But winning back those voters would require the educated professional types who make up the backbone of the Democratic base and the progressive movement to figure out how to connect rhetorically with the less-educated masses, addressing their concerns, speaking to their values, and just speaking their language in general. And although it’s too early to tell, many of the reactions I’m seeing on social media are, to put it mildly, very unencouraging:
Obviously these are extreme examples, but in general it seems to me that the educated professional class has simply grown apart from the rest of the country over the past few decades.
The most important disconnect between educated professionals and the rest of America is about the problems they face on a day-to-day basis. Practically every problem that Trump voters cited is something that hits the working class harder than the professional class.
About a year ago, I found a really good place to get a haircut. The hairstylist, a Vietnamese immigrant woman in her 50s, was complaining about rampant theft from small businesses in the neighborhood. She said that if thieves stole less than $950, they wouldn’t even be arrested or prosecuted, creating an incentive for constant theft.
In fact, stealing less than $950 was still a crime, but there was a plebiscite in 2014 called Proposition 47 that changed it from a felony to a misdemeanor. (Prop 47 was mostly repealed this year, when California voters passed another ballot measure called Prop 36.) I’m not sure how big of a factor Prop 47 was, but for whatever reason, property crime in San Francisco did rise quite a lot in the late 2010s:
This mirrored a more general rise across the state10:
I am an educated professional, not a small local businessperson. I had heard about the big wave of car break-ins in San Francisco, but it took me a very long time to realize how common retail theft had become. To me, the wave of smash-and-grab attacks in the Bay Area was a sign of urban disorder and decay, and a force causing a bunch of downtown stores to close.
But to someone who owns a hair salon that gets robbed, or a convenience store that gets looted, that’s their livelihood. That could be their child’s ticket to college, or their ability to get the pipes fixed at their house, or their chance to get their car fixed. As an educated professional, I’m simply much less exposed to robbery and theft.
And on top of that, I’m an urban educated professional. Those who live out in the fancy suburbs are even more disconnected from the crime wave that afflicted America in 2020 and 2021. It’s lower-earning people in cities or poorer neighborhoods who bore the brunt of the explosion of disorder that followed in the wake of the Floyd protests.11
Stuff like “defund the police” is a luxury of the rich and mobile — i.e., of the educated professional class. It’s lower-income Americans and small business owners who need the police the most.
How about inflation? When defending the Biden economy, I often point out that real wages for people in the lower part of the distribution increased faster. That’s adjusted for inflation, but it’s adjusted for the overall state-level inflation rate. In fact, as the Minneapolis Fed’s Jeff Horwich explains, people who make less money have faced higher price increases since 2021, for two reasons. First, the things that lower-income and middle-income people spend a larger percent of their income on — especially housing — tended to go up in price a bit more:
The second reason is pretty obvious: Having less money makes drops in purchasing power harder to bear. If my cost of living went up by 10%, it would be a minor annoyance; to a working-class person that could very well be ruinous. No wonder lower-income people tend to notice price changes more:
So while educated professionals like myself were able to put the post-pandemic inflation behind us fairly quickly after it subsided in 2023, regular Americans probably felt a more lingering hurt.
How about the wave of asylum seekers that flooded across the border in the Biden years? Lower-skilled immigrants don’t actually tend to reduce wages for native-born working-class Americans. But a big part of the reason they don’t reduce wages is that native-born people respond to increased immigration by going back to school and climbing the skill ladder. That takes time and money.
Also, low-skilled immigrants directly compete with less-educated and lower-earning Americans for housing. Asylum seekers tend to be poor, meaning they will try to get apartments and houses in lower-income neighborhoods. The effect on local rents in those neighborhoods, and for those types of housing, will be greater than the overall citywide or statewide effect. Rent will go up for the American working class, differentially affecting their purchasing power in ways that don’t get captured by state-level or national statistics.
So although Biden did beat inflation, crime did go down, and Biden did eventually crack down on the border, I can understand why the traumas that working-class Americans had to suffer in 2020-2022 couldn’t be expunged just by some encouraging charts. And the fact that educated professionals were much more insulated from the disruptions of the pandemic and from Biden’s missteps in 2021 mean that they didn’t necessarily even see the need to acknowledge how hard these had been on everyone else.
This disconnect probably ended up alienating people without college degrees. Not only did it cause many progressives to support deeply unpopular things like “defund the police” on social media, but Democratic politicians who became used to talking to their educated progressive base probably got a distorted idea of what was troubling the rest of America.
I was taking an Uber with a friend a couple of weeks ago, and the driver went on a gigantic rant about how inflation is out of control, vaccines are ineffective and are causing all kinds of massive health problems, there are no jobs anymore, and so on. Listening to his rant drove home the fact that there are huge segments of the American populace that I’m just completely out of touch with.
Almost all of what he said was factually wrong, of course. Inflation is back down to a low level, and has been for years now. Employment is near all-time highs. Vaccines are safe and effective, and so on. But the fact that he believed in all of this stuff is a sign that there’s an information ecosystem out there that’s totally separate from the world of blogs and Washington Post articles and nerdy podcasts and Econ Twitter that comprises my own information diet.
In fact, this information disconnect is probably one reason why Trump won. Voters who knew about the positive data that I know about — and which I frequently talked about on this blog — went very strongly for Harris, while voters who had the same misapprehensions as my Uber driver went pretty strongly for Trump:
Now, people may simply be bullshitting on these polls — there’s research that shows that when you pay people to get these facts right, they tend to get them right. Saying “inflation is still high” might just be a way of saying “I like Trump”.
Also, note that all four of these questions are specifically phrased in such a way that the correct answer says something positive about Joe Biden’s tenure in office. If the questions had been things like “Overall, murder rates were higher under Biden than under Trump (True)”, or “Inflation in the U.S. since 2021 has been the highest of any four-year period since the 1970s (True)”, or “Since 2021, unauthorized border crossings have been higher than at any point since the early 2000s (True)”, it might have been Democrats getting the facts wrong instead of Republicans. (We’ll never know, of course, but Democrats do tend to show partisan bias on economic surveys.)
But it also seems likely that many of these less-educated Trump voters just don’t get nearly as much information about politics, economics, and public affairs. Highly educated folks consume a lot more news in general. And people who consume a lot more political news tended to vote for Harris:
And when they do consume news, it’s likely to be from different sources. Many election postmortems have focused on the fact that Joe Rogan, a popular podcast host with many blue-collar fans, interviewed both Donald Trump and JD Vance during the campaign, but not Kamala Harris or Tim Walz. Joe Rogan’s podcast has 18 million subscribers. In comparison, Fox News, the most popular cable news network, has somewhere around 2 million primetime viewers.12 Meanwhile, Barstool Sports, another news outlet that’s popular with blue-collar types, went solidly for Trump and reportedly refused Harris’ offer for an interview.
In other words, Democrats are still doing a good job of getting their message to educated Americans who consume lots of political news, but are increasingly failing to reach the non-college masses. That’s why listening to an Uber driver talk about politics can seem like meeting someone from another universe.
This is not to say that educated progressives get the facts right, while blue-collar conservatives get them wrong. In fact, highly educated progressives can talk themselves into believing some absolutely insane things. During the summer of 2020, a lawyer friend insisted to me that the institution of police grew out of the institution of American slavery (obviously wrong, since police emerged independently all over the world). A number of progressives also asserted to me that police don’t reduce crime (false). The oft-repeated progressive claim that slaves built America is also obviously false, since slaves were less than 10% of the population. A few educated progressives even fiercely defend intentional fabrication of results in the social sciences, on political grounds.
But whatever the various myths are on the left and right, they are different myths. And because educated professionals swim in entirely different information ecosystems, they have little clue how to reach the masses and tell their side of the story.13
“Her belly may be full, but her spirit will be empty.” — Jean-Luc Picard
The educated professional class has been growing apart from America’s other social classes for decades now. Part of this was due to the big shift in the U.S. economy — the rise of knowledge industries like IT, finance, biopharma, and business services pulled America’s talented people to coastal metros and college towns. As the economist Enrico Moretti showed in his excellent book The New Geography of Jobs, a city’s human capital — i.e., how many educated professionals live there — became the best predictor not only of economic success, but also various measures of public health and well-being.
For those with the talent to escape the bleakness of their hometowns, big cities like New York, San Francisco, and Minneapolis — or college towns like Ann Arbor, Madison, and Berkeley — became magical playgrounds, full of great restaurants and shops and bars, other educated professionals to date and marry, and plenty of money to be made. I was one of the people who made that escape.
But what happened to the places the talented people left behind? Bereft of their talent in an age when talent equals money, they stagnated economically — counties that voted for Biden in 2020 represented just over half of the electorate, but 70% of America’s total GDP. And without as many talented people to be local doctors, teachers, etc., those places saw their health deteriorate — drug use and obesity ran rampant. Even the well-documented decline of marriage among the less-educated could be partially due to talented professionals fleeing the area — without as many visible examples of economically successful educated people getting married and staying married and raising kids in two-parent families, some working-class people in left-behind towns may have simply abandoned the practice.
This is the first reason for the disconnect. The second, I think, was institutional. In earlier times, there were a number of institutions that regularly brought people together across social classes — the three main examples being churches, businesses, and the military. But after Vietnam, the U.S. Military shifted from a mass-participatory conscript force to an elite professional volunteer force. Business became increasingly fragmented, with much blue-collar work and low-level service work outsourced or automated. And church membership has declined14 in America, possibly as a result of the internet:
Combine this with the de-localization of American social life due to the car and the internet, and you have a recipe for extreme sorting. As Tyler Cowen writes in his book The Complacent Class, Americans have become increasingly expert at sorting themselves according to education, income, and other characteristics.
There was one public institution that managed to retain its broad functionality over this time period: College. American universities tried hard to recruit and mix people of diverse backgrounds, teach them healthy personal and social habits, and provide them with a rich community life that could be a model for their later adult communities. And to a large degree, this worked.
But it only worked for 40% of the population! The majority of Americans lacked the talent, the study habits, the inclination, the time, or (eventually) the money to get that four-year degree. So for that lucky 40%, colleges were church and army and work team all in one — an acceptable substitute for the tight-knit villages that the modern economy of the car and the internet had destroyed.
For the rest of the country there was nothing. There were daytime TV and televangelists and methamphetamine and conspiracy theories. There were strip-malls and NASCAR and hip-hop and Marvel movies. There were Fox News and Rush Limbaugh and Michael Savage. There was plenty of cheap land, big houses, cheap cars, and jobs in the vast service sector. But their upper caste had fled them for the playgrounds of college and the big city and the Google cafeteria.
But they were still part of the same country as the educated professionals. And so they all still voted in the same elections. So one day Donald Trump came along, and the classes were reunited by the institution of electoral democracy, in a very unpleasant and painful way.
After this crushing defeat, many educated progressives will turn to the idea of Bernie Sanders-style “class” politics as an alternative to the identity politics that failed so spectacularly. But this won’t work either.
First of all, Bernie himself underperformed Kamala Harris in this year’s election. Second, and more importantly, Biden has been the most pro-labor, pro-union President in many decades, and it availed the Democrats nothing. Biden raised overtime pay, strengthened unions with various new laws, revived factory construction with industrial policy, mandated the hiring of union workforces for federal contracts, became the first President to walk a picket line, funded vocational education and apprenticeships, banned noncompete clauses, and took dozens of other actions in support of the blue-collar working class.
Wages rose strongly for the working class, and inequality fell. Biden also enacted a lot of Bernie-style policies — canceling student debt, passing a huge climate bill, and increasing subsidies for health care.
And none of it helped Kamala Harris. The Teamsters union withheld their endorsement. The East Coast dockworkers’ union threatened a crippling strike just weeks before the election. All across the nation, steelworkers and other blue-collar union workers defied their leaders and organized in support of Donald Trump. Harris did win a slim majority of the union vote, but this probably came mostly from educated professional types, especially public unions.
The fact is, America just isn’t the industrial society it was in the 1950s. The broad blue-collar manufacturing laborer class is a thing of the past, and the fragments of that class that remain are often more focused on sociocultural issues than on pure pocketbook concerns. Most of the American non-college populace are non-unionized suburban service workers with no real class consciousness.
America, fundamentally, is an incredibly rich country with a sick society. We have higher consumption by far than people in any other country on the planet, and yet by and large, except for the few people who were lucky enough to receive the blessings of community and health from our one remaining functional institution, we’re a bunch of unhealthy socially isolated drug addicts.
As for the solution to all this, I don’t have an easy fix. In the long run our country needs to build new inclusive institutions — places where society’s classes mingle and cooperate. I don’t know what those can be, though of course I’ll think about the problem. But it will take a long time. Obviously, YIMBY policies that allow working-class people to live in big cities will help a bit, by putting the various classes in physical proximity, but without integrating institutions the effect will be marginal.
Nor do the educated right-wing professionals in the tech industry understand their new working-class political allies any better than the progressives do. Beyond helping to elect Donald Trump and annoy educated progressives, they don’t really have any plans to help those who lack the talent to work at SpaceX.
In the short term, what Democrats can do is to realize the extent of the problem, and begin doing everything they can to explore the culture and the information ecosystem of Americans who didn’t go to college. Get interviewed on Rogan and Barstool Sports and wherever, but don’t just get interviewed — immerse yourself in the culture. Don’t get your information about regular Americans from the activist groups who knock on your staffers’ doors, or from 20-something socialists who spout stale Marxist theory. Go meet them, find out what they care about, and think about how to give it to them.
Fixing America’s great class disconnect will take a long time, but there’s no better time to start.
Donald Trump’s victory in November 2024 wasn’t the only important election result. Big cities in California shifted away from so-called “progressive” governance. In San Francisco, progressive champion Aaron Peskin was soundly defeated in the mayoral race, and his vacated seat was won by a moderate. Peskin’s close ally, Dean Preston, was unseated by moderate challenger Bilal Mahmood, and the Board of Supervisors is expected to lose its progressive majority. In Los Angeles progressive district attorney George Gascón lost his reelection bid, while Oakland’s Pamela Price was recalled. This followed a national trend of progressive DAs getting the boot; meanwhile, San Francisco’s moderate DA Brooke Jenkins, who succeeded the notorious Chesa Boudin after the latter was recalled, easily cruised to reelection.
It’s possible to interpret these victories as part of a general revolt against progressive governance in big cities. At the local level that’s a good thing, since that governance has proven remarkably poor. But at the national level, the urban revolt against probably helped usher in another four years of Donald Trump. Although large metros still voted for the Democrats overall, they swung harder towards Trump than any other geographic region:
Derek Thompson has some more numbers:
In the past two cycles, Democrats could comfort themselves by counting on urban counties to continue moving left even as rural areas shifted right. That comfort was dashed last night, at least among counties with more than 90 percent of their results reported. In the New York City metro area, New York County (Manhattan) shifted nine points right, Kings County (Brooklyn) shifted 12 points right, Queens County shifted 21 points right, and Bronx County shifted 22 points right. In Florida, Orange County (Orlando) shifted 10 points right and Miami-Dade shifted 19 points right. In Texas, Harris County (Houston) and Bexar County (San Antonio) both shifted eight points right and Dallas County shifted 10 points right. In and around the “Blue Wall” states, Pennsylvania’s Philadelphia County shifted five points right, Michigan’s Wayne County (Detroit) shifted nine points right, and Illinois’ Cook County (Chicago) shifted 11 points right.
Josh Barro wrote an insightful post-election post arguing that big cities’ failure to curb urban disorder, fiscal waste, and soaring housing costs drove their inhabitants away from the Democratic party. Some key excerpts:
I write this to you from New York City, where we are governed by Democrats and we pay the highest taxes in the country, but that doesn’t mean we receive the best government services. Our transportation agencies are black holes for money, unable to deliver on their capital plans despite repeated increases in the dedicated taxes that fund them, because it costs four times as much per mile to build a subway line here as it does in France, and because union rules force the agency to overstaff itself, inflating operating costs. Half of bus riders don’t pay the fare, and MTA employees don’t try to make them. Emotionally-disturbed homeless people camp out on the transit system…even though police are all over the place (at great taxpayer expense) they don’t do much about it, and I can’t entirely blame them since our government lacks the legal authority to keep these people either in jail or in treatment. The city cannot stop people from shoplifting, so most of the merchandise at Duane Reade is in locked cabinets…[S]chools remain really expensive for taxpayers even as families move away, enrollment declines, and chronic absenteeism remains elevated. Currently, we are under state court order to spend billions of our dollars to house migrants in Midtown hotels that once housed tourists and business travelers. Housing costs are insane because the city makes it very hard to build anything — and it’s really expensive to travel here, partly because so many hotels are now full of migrants, and partly because the city council literally made it illegal to build new hotels. And as a result of all of this, we are shedding population — we’re probably going to lose three more congressional districts in the next reapportionment. And where are people moving to? To Sun Belt states, mostly run by Republicans, where it is possible to build housing and grow the economy…
[A]ll of this is why I think Democrats’ approach to the cost-of-living issues…has fallen so flat. The Democratic argument is, more or less, “look at all my programs” — all the things I’m going to have the government do to make life easier for you…I think Americans look around at how it goes when the government actually tries to help, and they have a healthy skepticism about how helpful the government is really going to be, and about whether the benefits are really going to flow to them. Democrats are making too many promises; they instead need to pick a few things for the government to do really well, with a focus on benefits to the broad public rather than to the people being paid to provide the services, instead of trying to do a zillion different things and doing them badly at great expense[.]
Of course I don’t know how big of a factor this was in Trump’s victory, but I’m not actually sure that even matters. Barro is largely correct about the sad state of blue cities, and it’s the inhabitants of those cities who are suffering the most from that failure of governance. The most important reason to fix those cities isn’t to help Democrats get elected at the national level, but because it would make life better for urban residents themselves. The swing toward Trump is simply an illustration of just how angry city dwellers are.
It’s important to remember that just a few years ago, the general consensus was that big cities in America were doing really well. In 2017, Will Wilkinson cited the success of American cities as a reason to reject Trump:
[W]hen Trump talks about cities, he presents a fearsome caricature that bears little resemblance to the real urban landscape…He persists in his efforts to slur cities as radioactive war zones because the fact that America’s diverse big cities are thriving relative to the whiter, less populous parts of the country suggests that the liberal experiment works…[T]he American metropolis is more peaceful and prosperous than it’s been in decades…Yes, cities have their share of failing schools. But they also have some of the best schools in the country and are hotbeds of reform and innovation…America’s most diverse, densely populated and well-educated cities are generating an increasing share of the country’s economic output.
Wilkinson’s paean to big cities was the culmination of decades of real success. In the middle of the 20th century, America’s cities had been hollowed out, by a combination of soaring urban crime and the lure of the suburbs. In the 1970s, big metropolises were still losing population. NYC almost went bankrupt.
Starting around the 1980s, though, America experienced an urban revival. Big cities began to gain back some of the population they had lost:
There were a number of reasons for this revival. One was the rise of knowledge industries like tech, finance, and business services, which tend to cluster together in cities. As Enrico Moretti shows in The New Geography of Jobs, human capital tended to cluster in big cities after around 1980 or so; Richard Florida also famously documented this in The Rise of the Creative Class. Here’s some data from Jed Kolko for 2000-2014 that’s pretty representative of the general shift:
A second reason for the revival was immigration — just like a century earlier, immigrants flocked to big cities.
Then in the 1990s, crime plummeted. In 1992, New York city had 2,245 murders. By 2016 it was down to 292:
The combination of the crime drop and the knowledge-industry boom made American cities great places to live, at least for a couple of decades. TV shows like Seinfeld and Friends and Sex and the City and How I Met Your Mother celebrated the lightheartedness of upper-class city life. Urban art and fashion and culture bloomed again, producing the hipster era.15
But the renaissance was short-lived. In the 2010s, the urban revival stalled, and the populations of big cities plateaued. The reason was simple: housing. Since the 70s, American cities had developed an entrenched culture of NIMBYism and a thicket of laws like rent control, which prevented cities from building new housing in order to accommodate the influx of population. As a result, rents rose. And since rich people — the same knowledge workers who were powering the urban boom — were better able to afford the rising cost of housing, it was middle-class and working-class people who were pushed out of the cities. New York, San Francisco, and the rest became playgrounds for the affluent.
More progressive cities in blue states consistently built less housing than cities in red states. Kahn (2011) found:
Traditional explanations for why some communities block new housing construction focus on incumbent home owner incentives to block entry. Local resident political ideology may also influence community permitting decisions. This paper uses city level panel data across California metropolitan areas from 2000 to 2008 to document that liberal cities grant fewer new housing permits than observationally similar cities located within the same metropolitan area. Cities experiencing a growth in their liberal voter share have a lower new housing permit growth rate.
As a result, progressive cities became less affordable:
This divide continues to this very day. Blue cities are still building a minuscule amount of housing:
At the same time, many blue cities were spending way beyond their means:
Some of this was due to the chronic problem of city pension obligations, which have grown more severe due to unrealistic assumptions about stock returns, the power of public-sector unions, and simple short-sightedness. But some was because local infrastructure and city services got very, very expensive — witness how New York City pays several times the cost per mile to build a new subway that a French city would pay.
Some of this ballooning cost is due to broken bidding processes and the erosion of state capacity. With their own departments having shrunk, progressive cities have been outsourcing more and more of their core functions to inefficient and often corrupt nonprofits. Recall the infamous case of La Sombrita, the ineffectual sun-shade that the Los Angeles Department of Transportation paid a nonprofit $200,000 to create:
San Francisco, as usual, is the worst offender, with a new nonprofit corruption scandal popping up every month or so.
In the late 2010s, blue cities brought yet another problem on themselves: urban disorder. Crime rates began rising in 2015, fueled by national unrest. But blue cities didn’t respond by cracking down on crime as they did in the 90s and 00s. Progressives in the late 2010s reviled and rejected “stop-and-frisk”, “broken windows policing”, and other tools that blue cities had used to keep order in previous decades. Instead, they elected a bunch of progressive prosecutors, enacted more permissive policies toward public drug use, passed laws that made it hard to use violence against shoplifters, and sometimes even reduced penalties for minor crimes.
The result was entirely predictable. Blue cities became increasingly afflicted by pervasive, low-level urban disorder — drug needles in children’s parks, epidemics of car break-ins, and so on. Female friends of mine in San Francisco started to report being followed for blocks, harassed on the train, or even slapped in the head by street people on their way to work. The housing crunch made the disorder much worse, of course, by exacerbating homelessness.
Then the pandemic and the riots hit, and the trend got turbocharged. Without “eyes on the street” to deter crime, and with police cowed or disgruntled by the protests of summer 2020, progressive cities became increasingly lawless, chaotic zones. Violent crime soared in 2020-21, with waves of attacks on vulnerable populations like Asian elders.16
Nowhere was the chaos more evident than in San Francisco. Although murder rates in SF stayed low, more minor crimes, like car break-ins and theft, skyrocketed:
And the epidemic of public drug use in SF got utterly out of control:
After the pandemic, there was an epidemic of store looting that continued for years, causing many of the stores in the downtown area to close.17
The American urban renaissance is now well and truly over. In the 2010s and early 2020s, many progressive cities squandered the massive windfall from the knowledge industry boom. With its seemingly invincible network effects and ever-increasing bounty of tax revenues, that boom seemed to convince progressive cities that they had infinite amounts of fiscal and social surplus to dispose of as they pleased — that they could tolerate crime and disorder, spend infinite money, and neglect the need to build new housing, and that none of this would end up mattering. That turned out to be wrong, and now the bill is coming due.
Reviving blue cities will require a number of big changes. Elections like the recent one in San Francisco will be needed to push out “progressive” leaders who want to continue the failed experiments of the last decade. A sensible policy is going to have combine material abundance with intolerance toward crime and disorder. I like the basic platform advanced by GrowSF, a San Francisco advocacy group that combines pro-housing and pro-infrastructure policies with a tough-on-crime approach. Here’s a list of just a few of their good ideas:
But fixing blue cities is going to require more than just waves of voter anger or a laundry list of good policies. It’s going to require a mindset change — a shift in people’s understanding of what a city should be and how it should be run.
The most important thing blue cities need to understand and internalize is that anarchy is not a form of welfare.
Many progressives believe that any actions to curb urban disorder — restrictions on sidewalk tents, making people pay for public transit, arresting people for nonviolent crime, and so on — represent the exclusion of marginalized people from public life. In the absence of a full-service cradle-to-grave welfare state, progressives think they can redistribute urban utility from the rich to the poor by basically letting anyone do anything they want.
But in fact, permissiveness toward the behaviors that create urban disorder destroy more value than they redistribute. When you don’t make people pay for public transit, you scare people off the train, thus causing the train to go bankrupt. Pretty soon neither the rich nor the poor have a train, and everyone is screwed. This is the tragedy of the commons.
Measures to curb disorder therefore represent defense of the commons. When Bay Area trains put in new stronger gates to prevent people from riding the train without paying, crime on the train fell and rider satisfaction increased. Similarly, measures to curb shoplifting — including punishing shoplifters and letting security guards and business owners defend their stores with violence — allow local businesses to keep operating, which means that poor and working-class urban residents have places to shop for their daily needs. And so on.
Second, Josh Barro is absolutely right when he says city services should “focus on benefits to the broad public rather than to the people being paid to provide the services”. In other words, progressive cities need to realize that costs are bad for the city government.
The habit of having cities overpay for everything is another form of highly inefficient redistribution. A bunch of people do get paid out — nonprofits, overstaffed contractors, expensive consultants — but at the end of the day the ballooning costs that result from all these payouts mean that cities don’t actually have the infrastructure or services they need. All too often, progressive cities are operated for the benefit of the people who get the money instead of the people who get the stuff.
That payout-focused behavior is driving cities to bankruptcy while worsening the quality of infrastructure and services alike. Cities need to replace consultants and nonprofits with civil servants, implement stricter oversight of outside contractors, improve their bidding processes, and in general do everything they can to bring down the cost of everything they do and provide better value to the citizenry.
Finally, cities must realize that housing is non-negotiable. Fundamentally, cities are places that people live — if people do not have houses to live in, you don’t actually have a city. Housing is what allows businesses to function, because most people live near to where they work. Housing is what allows retail to function, because it creates a sufficient density of customers. Housing sustains knowledge-industry network effects, by allowing more knowledge workers to live close to each other and exchange ideas. In most states, housing generates more tax revenue for the city as well. And of course, housing reduces homelessness.
Blue cities should therefore do absolutely whatever it takes to get a lot more housing. “Whatever it takes” includes upzoning, deregulation, planning, public housing, and cutting back on policies like rent control. The correct method of building housing is “any and all methods”. That’s what it means for a goal to be non-negotiable.
I loved the blue cities of fifteen years ago. They had already sown the seeds of their own decline, but in the brief moment between the chaos of the 1970s and the foolishness of the 2010s, America’s big blue cities were indeed the glory of the country. They can and should recapture that glory.
Actually, what would happen is that the number of voters would shrink until it’s so small that a single vote had a high probability of being decisive, and voters would all randomize whether they went out and voted. This, of course, is a silly fantasy, since humans do not behave like this.
Note that “Black” is capitalized in this expression but “brown” is not. This is really the way that progressives write it! The reason is academic theory — “Black” is supposed to be an identity group that its members have chosen for themselves, while “brown” and “white” are theorized to be ascriptive terms imposed from outside. Although the crosstabs of the 2024 election do lend a bit of support to that distinction, the weird capitalization behavior is still fairly precious and out of touch. Note that in this blog, I capitalize “White” as well as “Black”, consistent with Bloomberg and the Washington Post. But sometimes I forget to capitalize them, because I also just don’t care about stuff like this very much, and I think the nation would be better off if we all cared less about stuff like this.
I tried to put these in rough order of importance, but really it’s situational.
The other factors that influence elections — culture wars, charisma, narratives, and so on — are all represented by the presidential approval ratings that get fed into the model.
This effect will generally be magnified if nominal interest rates are at the zero lower bound, as they were in 2021.
This sounds like one of those bleedingly obvious things that economists need a research paper to prove to themselves, but which every normal person with half a brain already knows. In fact, it’s not. Inflation drives up wages as well as prices — there’s no obvious reason why wages should go up more slowly than prices during a period of high inflation. But in fact, that is what happens, and economists don’t know why.
Actually, not all income measures show the same thing. Real median personal income did much worse in the Great Recession than in the post-pandemic inflation. Real median household income fell significantly in both episodes.
Some of this was due to a composition effect — low-wage workers returning to work dragged down the average. But wage measures that control for composition effects also found that wages failed to keep up with inflation in 2021-22.
The most extreme form of this “macro-progressivism”, of course, is the cult-like movement known as MMT. Most macro-progressives want nothing to do with MMT, of course. But sometimes their beliefs can seem like MMT’s more reasonable, wonkish cousin — always pushing for a little more fiscal stimulus, rain or shine.
Shoplifting shows a decrease on this chart, but this is probably due to a drop in reporting rates. When you don’t think the police will do anything about shoplifting, you don’t tend to tell them when it happens, and it doesn’t get recorded.
And it was disproportionately Hispanic-owned, Asian-owned, and Black-owned small businesses that got looted that summer and afterwards. Small wonder that nonwhite voters shifted toward Trump!
All Things Considered, the most popular NPR program, has 14.7 million weekly listeners. Sean Hannity has about 14 million.
This is obviously true for me as well, of course. I don’t know for sure, but my bet is that almost all of my audience is college-educated.
Note that regular church attendance is actually pretty stable. It turns out that a lot of church members lie about going to church regularly, which you can see when you track their cell phones. But the people who only go to church services once in a while are still probably involved with the institution, which puts them in at least occasional contact with a bunch of people from other social classes.
But also producing lots of genuinely interesting and non-annoying culture as well!
Homeless people themselves, of course, are the most frequent victims of urban chaos, despite popular stereotypes of homeless people as predators.
The other reason for this was decreased foot traffic in the downtown area, caused by the rise of remote work.
2026-10-09 17:18:32
Back when I was a teenager, a lot of people were very into the Left Behind series. Evangelical Christianity was still very strong in those days, especially in Texas, and Left Behind blew up by putting Christian eschatology into page-turning airport-bookstore-novel form. People really believed that the stories in those novels weren’t just stories — they were glimpses of a very real future event. The Rapture — Jesus Christ’s gathering of the faithful to Heaven before the end of the world — is something that believers expect is going to happen one of these days.
Sometimes, these days, I feel as if it’s already happened. I look around at American culture and I wonder: Where did everybody go?
The mass culture of my youth is long gone. 76 million people watched the last episode of Seinfeld in 1998; fewer than 20 million watched the last episode of Game of Thrones two decades later. Right now I can’t even think of what an appropriate comparison would be. What’s the show that everyone watches?
In the 2010s, mass culture was replaced by meme culture. Everyone knew this photo and what it represented:
Social media feeds — Twitter and the Facebook wall — turned American society into a sort of digital hive mind. Feeling yourself being absorbed into that great unified consciousness could be an agonizing experience — mobs constantly punished any deviation from conformity, quirky unique subcultures were devoured and metabolized, everyone was forced into a cell with people they had spent their lives trying to escape. The hunt for virality was everything. Viral memes were the thoughts that drifted through the mind of the social media Borg.
There are almost no memes left. For so many years there was a steady drumbeat of images and phrases that people passed around among each other ad infinitum; now, I can’t even think of the last one that really made the rounds. Twitter — now X — has not died but is diminished in scope and relevance. At times it feels like a ghost town.
Where did everybody go? I would like to think that they’re offline, living as we lived in the Before Times, running through sunlit fields blasting each other with Super Soakers or playing Dungeons and Dragons in their living rooms. Or perhaps they’re in Signal and WhatsApp chats and Discord channels, talking with their friends in the comfort and safety of privacy. I would like to think that they rejected the digital hive mind for the ancient ways of individuality and Dunbar’s Number.
But my bet is that they’re just watching short form video. Over the last few years, the entire internet has steadily carcinized into a single type of app/website/media/entertainment — a vertically scrolling feed full of short video clips. Vine invented it, TikTok popularized it, and now every other site has copied this one dominant, all-conquering format. Already, vertical short-form video feeds are more dominant than every form of media except for social media itself:
But even this significantly understates the change. The term “social media” used to mean people writing things to each other or sending images on Facebook or Twitter; now, it’s mostly used to mean people watching videos:
Even the long-form video sites, like YouTube, are increasingly just short-form sites showing a bunch of clips. This shift has basically killed the original use of social media, turning it from a town square or conversation room into a form of purely passive entertainment:
I am not part of this trend. I had TikTok on my phone for a year or so, but I could never get into it; in 2021 I deleted the app. The videos all felt like some kind of bland snack that you keep eating even though you don’t really like it — everything seemed optimized to make you swipe to the next thing, like the programming in those hundreds of channels that only existed so that satellite TV could brag that it had 700 channels.
Mass culture is often absorbing; meme culture is delightful and horrifying in turn. Short-form video feels to me like anesthesia; the swiping is the point, not the content. As Jerry Seinfeld once said, “Men don’t care what’s on TV. They only care what else is on TV.” I suppose I’m the exception.
So here I am, alone at the end of culture. I feel like one of the people from the Left Behind series, waking up to find most of the people around me taken to digital Heaven.
Have you ever heard of “heavenbanning”? It’s not a real thing…yet. It’s the hypothetical idea that social media platforms could neutralize obstreperous users by replacing their entire feed with AI content that flatters and agrees with them. You’d think you’re interacting with other human beings, and that everybody just happens to love you and think you’re brilliant, while in reality you’re in solitary confinement with an LLM.
It’s possible to think of vertical short-form video feeds as a kind of heavenbanning. Your feed is curated by AI, tailored to your own preferences. The videos you see aren’t made by anyone you know, or (probably) by anyone you’ll ever meet. The people you know in real life don’t see the same videos you do, unless you share them. Eventually the world blurs together and you lose track of time:
Researchers at several universities in China, in a study involving more than 1,500 high-school students, found that their future time perspective was damaged by a steady diet of such short-form videos…Now, [short-form videos are] also making us less able to plan for the future, or even care about it.
Right now, short-form videos are mostly made by would-be human influencers or clipped from human-made long-form videos that few people actually watch. But in the very near future, much of what you see in your TikTok or Reels feed could be AI-generated. And as the cost of compute drops, AI will be able to generate personalized videos for everyone — content tailored not necessarily to delight you, but to keep you engaged, to keep you swiping, to keep you making in-app purchases.
When I was a kid, I used to wonder what all the dead people were doing in Heaven for all of those countless eons. Now I know what they’re doing. They’re swiping.
I think about the Great Filter sometimes. We’ve searched the skies for signs of alien intelligence for many decades, and found nothing — natural or artificial. The Great Filter is one possible explanation for the silence of the cosmos — it’s the idea that there’s some dread Thing in the Universe that destroys sentient species before they can spread out to the stars.
There are plenty of hypotheses as to what the Great Filter might be. Perhaps every sentient species destroys itself with nukes or bioweapons. Perhaps AI always tends to wipe out its organic creators before retreating into inaccessible virtual worlds. Perhaps there’s a race of killer robots silently cruising between the stars, slaughtering every organic species that looks like it might one day rise to become a threat.
Or perhaps it’s the smartphone. In previous decades, fertility decline was due to couples choosing to have fewer children; now, it’s increasingly about people never forming couples at all. The isolating effects of social media are one obvious culprit; it’s very hard to conceive a child while you’re on your phone.1 Myers and Hooper (2026) found that “access to the iPhone reduced births by 4.5–8.0% at ages 15–19 and 3.2–6.6% at ages 20–24”. Breen et al. (2026) found that “the expansion of 3G coverage [in Nigeria] during the study period led to a decline in fertility, corresponding to a 7% reduction in the annual probability of a woman having a birth.”
Given the timing and the microeconomic evidence, smartphones are the likeliest explanation for why instead of leveling out near 2, the total fertility rate in rich countries — and, increasingly, in middle-income countries — has busted right through that floor and headed down toward zero. Smartphones at least help to explain why Latin America now has an even lower birth rate than the EU.
Even without vertical short-form video, social media might still be enough to shrink the human race. Online interactions substitute for offline ones, but only one of the two can make a baby. But it’s hard to deny that vertical short-form video is even more isolating than other online activities — in the case of heavenbanning, it’s almost solipsistic. At least on X you can meet your mutuals. In the brave new world of AI-generated personalized short-form content, your “mutuals” will be made of matrices and computer chips.
Personally, I don’t like vertical short-form video because I think it’s pretty boring. But the fact that it could represent the euthanasia of our species seems like an additional downside. Perhaps it’s in the fundamental nature of intelligence to hack its own reward function — to find a way to give up striving and building and loving, and to simply hit the dopamine button until it starves itself ecstatically to death.
The next time you look at the night sky, you should wonder if instead of star empires and unearthly paradises, it’s simply a vast graveyard of short-form video fans. Such an outcome would be much gentler, but hardly less cataclysmic, than the end of Revelation.
But not impossible, of course.
2026-10-07 17:47:37
“Our nation was founded to perpetuate democratic principles. These principles are that each man is to be treated on his worth as a man without regard to the land from which his forefathers came and without regard to the creed which he professes. If the United States proves false to these principles of civil and religious liberty, it will have inflicted the greatest blow on the system of free popular government that has ever been inflicted. Here we have had a virgin continent on which to try the experiment of making out of divers race stocks a new nation[.]” — Teddy Roosevelt
The other day, Chris Rufo of the Manhattan Institute and right-wing pundit Jonathan Keeperman (also known as “Lomez”) aired an episode of their podcast entitled “The Indian Question”:
The title of the episode seems to be a reference to “the Jewish Question”, a term in 18th and 19th century Europe for the question of how Jews should be treated in European society. That term, of course, became notorious when it was associated with the Nazis’ “Final Solution”, which was billed as being a final solution to “the Jewish Question”. I assume that Rufo and Keeperman chose this rather incendiary title in order to grab attention. Well, they succeeded.
The episode was motivated by a debate that’s been raging across social media for weeks. It was kicked off by Bo French, the Republican nominee for Texas Railroad Commissioner, who tweeted outrage at a group of Indian American kids attending a University of Texas football game. I already wrote about that controversy three weeks ago:
Jonathan Keeperman (“Lomez”) invited me on his podcast to share my views and debate him, so I did. Here’s the episode that resulted:
Rufo was busy, so it was just Keeperman and me.1
Anyway, before I talk about the substance, I thought I should say something about the side debate of whether a liberal like myself should even go on right-wing podcasts like “Rufo and Lomez”. Throughout most of the 2010s, there was a popular notion that society should basically ignore and shun people like that, and that if we all simply shunned them, and pressured our friends and colleagues to shun them, they and their views would vanish from American society — or at least remain marginalized.
That approach failed. Anti-immigrant ideas didn’t remain marginalized — in fact, they took over the country, despite their continued unpopularity among the general American public. Are Rufo and Lomez pushing xenophobic ideas? Yes, of course they are. I’m not going to sugarcoat that fact just to be polite. But simply shouting “Those guys are XENOPHOBES!!” and keeping those guys out of polite society would be doubling down on a foolish, self-defeating strategy. The alternative was always to confront those viewpoints directly and defeat them in the court of public opinion, so that’s what I set out to do.
OK, anyway, on to the substance of the debate.
Keeperman and I began the debate by finding common ground. We both basically subscribe to the principle of nationalism — we believe that nation-states are exclusive clubs that exist for the benefit of their members, and that this is a basically good way to organize human society. We both think the United States of America is basically good — or at least, has been basically good throughout most of its history.
I explained my belief that liberal nationalism is the best ideology available — maybe for other countries, but certainly for the United States. All of our greatest successes as a country — victories in wars, successful policy reforms, integration of past waves of immigrants — have come from our use of the nation-state as a tool to promote individual rights, dignity, and empowerment. I told Keeperman that the Abundance Agenda is, at least implicitly, an expression of liberal nationalism — the movement is about creating abundance for Americans specifically, with the implicit premise being that Americans deserve abundance.
Keeperman disagrees about the liberal part, of course, but he does feel that he has the best interests of the United States in mind. His worry is that immigration is stoking ethnic conflict in America, because recent immigrant groups — for example, Indians — are not assimilating into American society like previous groups did.
To me, assimilation has always been about measurable behavior. If the children and grandchildren of immigrants act culturally American — if they speak English, intermarry, give their kids typical American names, go to college football games, climb the income ladder, move out of enclaves, and so on — then they’re assimilated. By all of these standards, the recent waves of immigrants — Mexicans, Chinese people, Indians, and so on — are assimilating just as fast as or faster than the East and South European wave did a century ago, or than the Irish and the Germans did two centuries ago.
The aspect of assimilation that Keeperman worries about most is national identity — the degree to which the children and grandchildren of immigrants feel bound up in a shared community and a shared identity with countrymen of different backgrounds. I agree that this is extremely important; many of the benefits of the nation-state, like the ability to provide public goods and welfare states, come from this sort of shared identity. It also probably leads to greater toleration of minorities (including immigrants). All of those goals should be very important to liberal nationalists.
Lomez — who is not a liberal, but cares about national cohesion nonetheless — worries that identity assimilation is lacking in the modern day. He argues that today’s immigrants retain their old-world allegiances much more strongly than the immigrants of a century ago — that second-generation Indian Americans in Texas still think of themselves as Indians rather than as Americans, and so on.
We do have lots of surveys about this, in fact. There’s a clear pattern — immigrants tend to identify more as their ethnicity than as “American”, but later generations are more likely to identify as “American”. Here’s a survey showing that third-generation Asian Americans are a lot more likely to identify as just “American”:
We see the same pattern even more strongly among Hispanics:
Second and third generation immigrants are also a lot less likely to describe themselves as “global citizens”.
Now, these could be generational effects — people identifying more as “American” as their families stay in America for longer — or they could be cohort effects. It’s possible that due to identity politics, plummeting patriotism, or to the ability to connect with co-ethnics abroad on the internet, recent cohorts of immigrants are less likely to want to identify as “American”.
In fact, we have some evidence that this is happening for Indians, specifically. In 2020, the Indian American Attitudes Survey found that the second generation was a lot more likely than the first (i.e., immigrant) generation to identify as “more American than Indian”:
But by 2024, that pattern was somewhat weaker, with more U.S.-born Indian Americans identifying as “more Indian than American” and “equally Indian and American” than four years prior:
This is just two survey snapshots, a few years apart. It would be helpful if we had had good longitudinal surveys asking people about American identity versus ethnic identity for decades. But we don’t, so we’re left to worry and speculate.
Without longer-term data, my guess is that this identity shift — to the degree that it’s real and not just survey noise — is a short-term response to political conditions. Indian Americans had full access to the internet in 2020, and they were just as able to talk to ethnic Indians in India or Australia or Canada. Identity politics — including institutions such as ethnic clubs at universities — had been around for decades, and the sentiment behind it was probably at its height in 2020.
Instead, my bet is that we’re seeing a reaction to the rise of the MAGA Right itself. It was in 2024 — right before the second survey wave — that anti-Indian attitudes became extremely popular among the online Right. 2024 is also when it became clear that a wave of anti-immigrant sentiment was sweeping the nation. My guess is that stronger ethnic identification among Indian Americans was probably a reaction to the perception that a substantial part of America was attacking Indians.
Keeperman — like other rightists I’ve talked to — seems to think that immigrant groups assimilate only under aggressive pressure from the majority. The model I usually hear is that of German Americans in World War I, who were the subject of feverish forced-assimilation campaigns — pressured to change their names, stop speaking German, and profess allegiance to America. In his discussion with Rufo, Keeperman argued that vocal anti-Indian racism was part of a “hazing process”.
My argument is that this is exactly backwards. Ethnic identity is fundamentally defensive in nature. Identity groups are like gangs — if you no longer feel like a part of the big gang (the nation), you’re probably going to turn to a smaller gang (your ethnic group) for protection and support. For this reason, forced-assimilation campaigns can suppress visible expressions of ethnic difference, but they strengthen ethnic identity itself.
There’s plenty of evidence to support this. Although forced-assimilation campaigns in WWI made some Germans change their names, they caused Germans as a whole to intermarry less and to volunteer less in World War II. Anti-Hispanic rhetoric tends to increase Hispanic identification, and perceived discrimination makes Hispanics more likely to identify with their ethnicity.
This pattern is likely to play out again, with the new rightist fad for anti-Indian bigotry. Bo French’s tweet, and the outpouring of support it received from the grassroots Right, is going to make some Indian Americans question whether America really accepts them — and whether they might have to turn to other Indians for support rather than their countrymen of other races.
Rufo and Keeperman’s “Indian Question” podcast is, of course, only going to make things worse. When your race’s mere existence in America is being described as a “question” by a senior fellow in the Manhattan Institute, you naturally tend to get a bit apprehensive — and a bit defensive. In the last ten minutes of my debate with Keeperman, I got very vehement and animated about the counterproductive nature of the anti-Indian rhetoric.
Keeperman argued that assimilation only worked so well in the 19th and 20th centuries because of “ethnogenesis” — we took a bunch of disparate European groups and made them all “White”. But I don’t think this is quite right. Yes, assimilation succeeded because of ethnogenesis, and yes, “White” ethnicity became more salient. But the ethnicity we tried to create in the 20th century was actually something else. It was “American”.
Attempts to create an “American” ethnicity date at least back to Teddy Roosevelt.2 These intensified in the New Deal years, and during and after World War II. This effort partially failed. Black Americans never became part of the “American” ethnicity, for a variety of reasons — geographic and legal segregation, linguistic differences, pervasive anti-Black racism, the memory of slavery, the rise of Black Nationalism, and so on. But for other racial minorities — Asians, Hispanics, and Middle Easterners — it partially succeeded.
The idea that the efforts of FDR, Truman, Eisenhower, LBJ, and other liberal nationalists of the mid 20th century were all about creating White identity is a recent conceit; if you read anything from the time period, you realize that this wasn’t the goal, even if it was one of the lasting results. To understand the mood of the time, you should listen to the patriotic song “Ballad for Americans”, by Paul Robeson, which was sung at the 1940 Republican national convention.3 Here’s a key excerpt:
Now hold on here.
What are you trying to give us?
Are you an American?Am I an American?
I’m just an….
Irish, Negro, Jewish, Italian,
French and English, Spanish, Russian,
Chinese, Polish, Scot, Hungarian,
Litvak, Swedish, Finnish, Canadian,
Greek and Turk and Czech,
And double-check American!
And that ain’t all!
I was baptized Baptist, Methodist,
Congregationalist,
Lutheran, Atheist, Roman Catholic,
Orthodox Jewish, Presbyterian,
Seventh Day Adventist, Mormon, Quaker,
Christian Scientist,
And lots more!You sure are something!
Our country’s strong, our country’s young,
And her greatest songs are yet unsung,
From her plains and mountains,
We have sprung to keep the faith
With those who went before.
We nobodies who are anybodies believe it.
We anybodies who are everybodies have no doubts!
This mood is utterly absent from both the modern Right and the modern Left. On the Right, there is no attempt at ethnogenesis — only perpetual fragmentation, suspicion, and finger-pointing. Here is what I wrote in my post three weeks ago:
It’s this pathological inability to understand alliances and coalition-building that will ultimately doom the New Right. Like the far Left, this is a movement built to exclude and divide and splinter — both because of the querulous personalities of rightists themselves, and because of the intransigence of a racial ideology that abhors any impurity. If they ever managed to see off the Hispanics and the Asians, the rightists would start in on the Greeks and the Italians, and so on. There’s no victory in sight — only eternal conflict. These are not nation-builders; they are nation-dismantlers.
Meanwhile, the progressive movement has tried its hand at ethnogenesis — POC and BIPOC were both essentially attempts to create new racial categories defined in opposition to the White category. But these attempts fell apart. And there hasn’t been an attempt to create a broadly shared American ethnicity, because the modern progressive movement is also obsessed with purity, exclusion, and tent-shrinking.
But if we are going to flourish as a nation, the project of creating an American ethnicity is essential. The rightist approach — bullying nonwhite people until they meekly suppress any evidence of their backgrounds — will backfire spectacularly. In fact, it is already backfiring. Instead, the right approach is the liberal nationalist one — to allow or even encourage people to value their roots, while also emphasizing that they’re all one unified people now. When it comes to assimilation, a big tent beats a small one, and carrots work better than sticks.
That’s why there is no “Indian Question”. There is only the question of what sort of nation America is to be. We must pick up the discarded project of our 20th century forebears, and make it work completely this time.
This made me sad, both because I wanted the chance to challenge Rufo in person over his promulgation of the “Hatians eating cats” rumor in 2024, and I thought it would be deliciously ironic to have a podcast in which two Jews and a second-generation Italian American with a Southeast Asian immigrant wife debated whether Indians belong in America. Oh well, maybe next time.
For a good history of Teddy Roosevelt’s racial ideas, I recommend the book American Crucible, by Gary Gerstle.
And, interestingly, at the Communist Party convention!
2026-10-05 16:12:53
Paul Krugman is the greatest econ writer in the world, and also a legendary economist. But I sometimes feel that he has a blind spot when it comes to the value of new technologies. In 1998 he famously wrote:
The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law’—which states that the number of potential connections in a network is proportional to the square of the number of participants—becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.
By the time he wrote that, America was already well into an IT-driven productivity boom that would temporarily interrupt the stagnation that had begun in the 1970s. The internet was surely part of that story; it allowed companies to reshuffle and optimize their supply chains for greater efficiency, find customers, suppliers, and workers more easily, conduct business communications cheaply and in greater depth, and so on. Dolfen et al. (2023) estimate large consumer gains from the rise of e-commerce, Barrero, Bloom, and Davis (2021) find large economic gains to households from high-quality internet access, and so on. The internet is a lot more than just people yelling at each other on forums and social media. (Krugman later argued that the internet’s economic impact had been disappointing, but I suppose that depends on your expectations.)
In 2011, Krugman wrote that American kitchens hadn’t changed much since 1957. I can forgive him for not being an early adopter of the air fryer or the Instant Pot, which came out in 2010, but he really should have given more consideration to countertop microwaves, food processors, Keurig-type coffee machines, crock pots, and induction stoves, all of which became available between 1957 and when he wrote the post.
So although it’s always dangerous to disagree with Paul, I am going to go ahead and push back on his argument that AI technology “does nothing” for most Americans:
He writes:
There is also, however, a more prosaic reasons for the public’s dislike of AI: This is a technology of, by and for oligarchs, with hardly any of the benefits trickling down to regular Americans…Or to put it a different way, never before in history have corporations spent so much money — playing a major role in soaring interest rates — to create so few jobs.
I think that this is basically wrong. Although we don’t know the long-term effects of AI on the distribution of income and wealth, right now we can see a substantial amount of economic benefit flowing — I wouldn’t say “trickling down”1 — to regular Americans.
This is not to say that regular Americans couldn’t stand to benefit more from the AI boom. I think they could. I like some (though not all) of Jared Bernstein’s ideas for spreading the benefits of the data center boom more broadly. But I think Krugman has underestimated the benefits of the data center buildout in terms of direct employment, and has basically ignored the fiscal, macroeconomic, and consumer benefits of the current AI boom.
Building data centers takes a lot of labor. But Krugman argues that data centers aren’t doing much in the way of providing construction jobs:
Given this spending surge, one should expect a sharp rise in nonresidential construction spending — basically construction for businesses rather than housing...But that’s not what we actually see. Nonresidential construction…has basically flatlined under Trump, despite the immense AI investment boom…[E]ven the physical construction of a data center involves relatively little construction.
He quotes Van Nieuwerburgh (2026), who shows that only about a third of the cost of a data center involves construction work.
But I don’t think Krugman proves his case here. First of all, if we’re talking about construction jobs, we should look at employment levels, not spending. And here we see an increase in construction jobs since the AI boom began in late 2022:
Construction has also increased as a percentage of the workforce:
And remember, this was at a time when Trump was deporting construction workers en masse — 13% of the construction workforce is undocumented, and deportations also have knock-on negative effects on the industry that result in the firing of native-born workers as well. This probably explains the pause in the increase of construction employment in 2025. But even that couldn’t stop construction’s rise.
And it’s exactly the type of construction workers who are required for building data centers who are seeing the biggest job gains:
Construction workers’ real wages have also risen since the middle of 2022:
You might be tempted to think that this is a composition effect from Trump deporting the lowest-paid construction workers in 2025. But in fact, there has been a big jump in construction workers’ wages relative to national average wages just this year:
These are all signs of healthy labor demand.
In fact, although estimates of the effect of the data center buildout on construction employment produce very different numbers, they all agree that it’s a significant positive impact. The state of Virginia, for example, produced the following numbers:
And of course these are just the numbers so far; the data center buildout is accelerating, and Goldman estimates that 500,000 new construction and trades jobs will have to be added by 2030 in order to sustain it.
So while you can argue that this boost to labor demand isn’t worth the costs of AI (whatever you think those are), we need to count it on the positive side of the ledger here.
Jobs aren’t the only way that the economic benefits of data centers get spread to ordinary Americans. There’s also the tax system. Data centers pay property taxes, sales taxes, corporate taxes, various fees, and so on — here’s a good explainer from the Tax Foundation. All in all, depending on their policies, local and state governments can reap large windfalls from data centers:
Those taxes go to pay for local public goods, like roads, public transit, and parks. They go to pay for public services like education and health care. Those expenditures all tend to benefit regular people. This is from a story in the New York Times about Loudoun County in Virginia:
A convergence of early fiber internet access and fast-track zoning has made Loudoun the data center hub of the world…Two decades into its experiment, Loudoun has become a case study for the rest of the nation on how to make data centers pay off. Thanks to the proliferation of the warehouses, the quiet bedroom community 30 minutes outside Washington, D.C., has transformed into a tech destination with trophy schools and libraries, and freshly tarred roads.
Now that doesn’t mean data centers are necessarily good for a city or state on net. There are real costs, too — electric power demands that put strain on the grid, nuisance noise, and so on. But the benefits are real, and they don’t come in the form of job creation.
And crucially, state and local governments can demand even more benefits whenever they want! They can raise taxes and fees — in fact, they can even raise them after a data center is already up and running, so that relocation to avoid higher taxes becomes less attractive of an option.
And before construction, they can demand “community benefit” agreements that are actually just additional taxes. Here’s what Jared Bernstein suggests:
Such agreements should include reduced electric and water rates for the surrounding community, funding for the local infrastructure upgrades (roads, substations, water systems) these facilities require anyway, and substantial investment in the schools, parks, and public goods that make a host community better off for having said yes.
Bernstein wants much more of this, of course, and better enforceability. But note that even as things stand, taxes and fees are substantial, and community benefits agreements are common.
I spent my early blogging years supporting Paul Krugman in his epic quest to remind people that aggregate demand is a real and important thing. But for whatever reason, Paul doesn’t mention the demand-side benefits of AI investment in his post.
When Donald Trump came into office, he did a bunch of things that should have clobbered the economy. He announced high tariffs on nearly all of America’s trading partners, then created massive uncertainty by walking some of these back, periodically announcing new ones, granting tons of exceptions, and striking opaque and confusing “deals”. On top of that, he deported large swaths of America’s workforce, visibly weakened the U.S. international alliance system, ran enormous deficits, and behaved in a lawless and corrupt manner that caused people around the world to question the long-term stability of the U.S. government.
All of this created huge amounts of policy uncertainty:
Uncertainty on this scale usually causes big economic problems. Businesses can’t invest if they don’t know if the president of the United States is going to destroy their business model with an executive order tomorrow. All of this Trumpian chaos and meddling should have caused a visible negative demand shock.
But it didn’t, because just as Trump was trying his best to hit the American economy over the head with a stick, the AI boom came along and pushed in the opposite direction. AI technology itself is a positive supply shock, of course, but the data center buildout is a positive demand shock.
How big of a shock? It’s hard to say, because causal estimates of aggregate demand are inherently difficult. But it’s clear that the data center boom has made up a large percent of economic growth for Trump’s entire second term so far:
Now as I mentioned, it’s hard to know whether we’d just be building something else instead if this boom wasn’t happening. Data center construction certainly crowds out some other forms of economic activity, by sucking up scarce labor, and by raising interest rates (which makes it harder to finance other projects).
But to believe that the AI boom isn’t having a big effect on aggregate demand would require some heroic assumptions. You’d have to assume very strong crowd-out. You’d have to assume that Trump’s tariffs and other irresponsible policies are having basically no effect on demand, so that there isn’t any negative shock in need of canceling out. You’d have to assume that “animal spirits” — i.e. corporate bullishness — basically don’t affect the business cycle. And so on.
I don’t think those assumptions are realistic. I think if you see one industry contributing a very large percentage to U.S. economic growth, your prior should be that it’s causing a positive demand shock.
And if so, that means that the AI boom is the only thing standing between countless regular Americans and Trump’s self-destructive chaos. According to Okun’s Law, shaving just 1 percentage point off of economic growth would throw almost a million Americans out of work. That would be bad for regular people.
This macroeconomic benefit is hidden; it’s the proverbial dog that didn’t bark. But it’s pretty significant.
So far, I’ve been talking about the benefits of the data center construction boom. But I should also mention the impact that AI technology is already having on consumers. Krugman’s post seems to treat AI and the data center buildout as synonymous, and jobs as the main (or only) way by which regular Americans might benefit from the new technology. But the truth is that AI is also something that lots of Americans already use, and seem to derive a lot of utility from.
By every measure I can find, AI has seen more rapid household adoption than any other consumer technology in recorded history. And what do Americans use AI for? Everything. This poll is from over a year ago, but already it showed the incredible diversity of use cases for consumer AI:
Here’s a more recent poll, asking what people regularly use AI for, rather than what they’ve ever used it for:
Medical advice and diagnosis has emerged as a particularly important consumer use case. But in general, Americans say chatbots make them more productive, informed, and creative:
This does not mean Americans like AI overall; in fact, they’re overwhelmingly negative on the technology. They’re afraid it’ll take their jobs, and increasingly afraid it’ll kill them. But there are real, substantial consumer benefits from AI that we shouldn’t ignore.
How substantial? In April of this year, Brynjolfsson et al. used surveys to estimate a total annual consumer surplus of $172 billion in the United States. That’s more than the run rate revenue of Anthropic and OpenAI combined, and certainly much much more than their combined profits would be even if they stopped spending anything on fixed costs right now. It’s about half of the annual profits of Nvidia.
So when Krugman says that “this is a technology of, by and for oligarchs, with hardly any of the benefits trickling down to regular Americans,” he’s just wrong. Just the consumer surplus alone is substantial. On top of that the data center boom is creating a significant amount of jobs, generating a significant amount of local and state tax revenue, and propping up the macroeconomy and the job market as a whole.
There are plenty of big problems with AI. Malicious use or accidents might wipe out our whole species in the not-too-distant future. Job loss hasn’t been a big deal so far, but it might eventually be huge. Cognitive weakness from overreliance on AI could affect our society in strange and negative ways that we have yet to even comprehend, much less reckon with. When you ask Americans why they hate AI, these are the things they’ll tell you. Anger at “oligarchs” monopolizing the wealth from AI doesn’t typically make the list, and I don’t think it’s a great way of framing the AI issue.
I’m kind of annoyed by the use of “trickling down” to describe the broad benefits of an investment boom. Yes, businesses make investment decisions, but this is the case in every boom, and for economic growth in general. By this definition, pretty much all benefits in the entire economy “trickle down”, except perhaps for the tiny amount produced by worker-owned co-ops.
2026-10-03 16:47:17
There’s a large market for “Trump is bad” posts. I wrote one of them back in May:
It’s easy to tune these posts out, for at least two reasons. One is partisanship — as a reader, I’m sure you know how hard it is to separate “Trump is bad” from “Trump made me mad”. The second is fatigue — you’ve heard the familiar litany of all of Trump’s outrages, and reading it one more time is both redundant and depressing.
Today I’m going to do something a little different, which is to ask: Why, exactly, has the second Trump presidency been such a failure?
Before I do that, we should establish that in the eyes of the nation, Trump’s second presidency has been a failure, at least so far. His approval rating, going into the midterm election, is at historic lows:
America was mildly disapproving of Trump in his first term; now, only his base is staying loyal. And even that base is eroding. On the cost of living — one of the key issues in 2024, and likely to be a key issue in the midterms — Republicans now disapprove of Trump:
Hilariously, a modest but growing number of people who voted for Trump in 2024 now say they never voted for him.
And despite the widespread belief that Trump’s cult of personality dominates the GOP, Republicans now tend to say they support the party rather than the president himself:
But nevertheless, the GOP is going to suffer from Trump’s unpopularity in the midterms. Prediction markets are increasingly sure that Dems will take the House, and they now also give Dems a better-than-even chance of winning the Senate, despite a very difficult map:
Polls showing Senate races moving toward the Dems might be overstating things, but polls have ended up understating Democratic support in special elections since Trump returned to power. Trump has resorted to desperately promising $5000 checks to every U.S. citizen if Republicans win the midterms. But so far, these wild bribe attempts are falling decidedly flat — in fact, they’re actively driving voters away.
All this is all the more remarkable because Democrats themselves are in disarray. The party has torn itself apart over Israel/Palestine, and the public is still deeply skeptical of Dems’ “woke” progressive ideology. But whereas Americans still trusted Republicans more on many issues in 2025, now they tend to trust Democrats on issues like the economy and immigration:
The GOP was more popular than the Dems as of one year ago; now that has reversed.
Even some of Trump’s most prominent allies are now distancing themselves from the president. Here’s Peter Thiel, one of the godfathers of the Tech Right:
I can’t rule out the possibility that someday we’ll all look back on Trump’s second presidency as a success. Perhaps winning the AI race will prove to be so much more important than everything else that Trump’s decision to stall AI regulation ends up swamping everything else he ever does.
But I don’t find it very useful to indulge in this kind of “too early to tell” speculation. The blunt fact is that Trump’s second term has already failed in the court of public opinion. This is an incredible, world-historic failure. And it didn’t have to be that way — Trump simply made a bunch of avoidable errors, for a mix of ideological and personal reasons.
2026-10-01 14:14:51
I’m having a lot of fun writing shorter posts and aggregating interesting items these days. A lot of people are putting out an astonishing amount of good content these days, and sometimes I just want to sit there absorbing it all.
Americans have been deeply pessimistic about AI for a while now, but their reasons for pessimism — or at least, the reasons they tell pollsters — have changed in recent months. Earlier this year, Americans were mostly concerned that AI would take their jobs. Now, they’re more concerned that AI is getting too powerful for humans to control:
Echelon didn’t poll people about the idea that autonomous AI would destroy humans on purpose. But they did ask about bioterror risk, which I’ve been yelling about for a while now. And it turns out that Americans are pretty worried about that:
Surprisingly, the issue hasn’t fallen victim to partisan polarization yet. As you can see in the chart above, Trump voters and Harris voters are about equally as concerned about humanity losing control of AI. And despite Trump’s staunch stance in favor of acceleration, a lot more Republicans want to slow AI development down:
Meanwhile, economists have gotten in on the AI risk debate — which is how you know it’s really gone mainstream. Drew Fudenberg and Andrew Koh have a new game theory paper about “pacing the frontier” — i.e., about whether it makes sense for top AI companies like Anthropic and OpenAI to slow down AI development in order to allow “alignment” research time to catch up.
It’s a very cool model. Basically, the idea is that every company has a competitive incentive to make its AI more powerful as fast as possible, in order to stay ahead of the other companies. But if you’re comfortably ahead, you can afford to slow down a little bit, for safety’s sake — because in this model, if AI gets too powerful before safety research can catch up, everyone could die. So you can get a sort of stop-start pattern where the leading company voluntarily slows down for a while, until its competitors start nipping at its heels again. You can almost sort of see this happening, with Anthropic refusing to allow the public to access Mythos earlier this year, and OpenAI recently pausing development of its top models after some of them hacked the government.
There’s also the case where there’s no clear market leader, in which case companies have to basically agree to all slow down together. In this case, what you really need is transparency — the companies have to all see that the others aren’t secretly racing ahead behind their backs. That might be easier said than done — it’s not clear how to monitor all the AI labs in the world to each other’s satisfaction.
But one positive result is that if the risk of “doom” is high enough, slowing down becomes the only rational option. That’s cool! Unfortunately, this is just one model, which might not hold in reality. Game theory was famously unreliable when people applied it to the Cold War — a small change in assumptions could flip the optimal strategy from “the only winning move is not to play” to “nuke em all and let God sort em out.” Game theory yielded important conceptual insights — especially the importance of “second strike” capability in preventing conflict — but it rarely gave definitive answers.
So where might this current model break down? I don’t think it’s clear how fast AI safety research is really advancing. If “pacing the frontier” only works by giving safety research time to catch up, and safety research isn’t really advancing, then we’re all in big trouble.
Anyway, Andrew Koh has a great thread summarizing the paper, and some folks made a fun online game based on the model if you’d like to play around and see how it works. Cool stuff!
Two years ago, in order to create a little urgency around reindustrialization, I wrote a post sizing up the “New Allies” (America, Europe, Japan, Korea, possibly India) and the “New Axis” (China and Russia). The comparison of raw manufacturing output was about equal, though China dominated a lot of the bottlenecks for raw materials processing and critical component manufacturing.
Now, Alexander Campbell has done another version of the “bottlenecks” comparison, but with nicer charts:
In this chart, he shows how the roles have basically reversed since WW2:
And here’s where we stand when it comes to the raw materials of the all-important Electric Tech stack:
The key here is that China doesn’t mine most of these minerals — it refines them. Other countries dig up the ore and ship it to China, and China uses a bunch of chemical engineering to turn them into usable materials for industry. Most of the world shipped their metal refining to China, because it’s a dirty, capital-intensive, low-margin industry. But now as a result, China controls a bunch of key industrial chokepoints.
The Trump administration, to their credit, is taking this seriously, and is launching lots of initiatives — international partnerships, industrial policies, even scrap metal conservation — to try to get out from under the Chinese thumb. But we need to do a lot more if we’re going to be able to sustain an independent industrial base without bowing and scraping to Xi Jinping.
I spent much of the last decade blogging about the rent crisis and the need to build more housing. In the post-pandemic inflation of 2021-22, rent stood out as a big sore spot — it was an expensive necessity whose price was going up very quickly. But I recently saw a chart from Apartment List showing that since 2022, rent has basically stabilized and even fallen back to its pre-pandemic trend:
This isn’t just because inflation fell. Inflation has stayed above target since 2022, but rent has actually fallen — at least if you believe Apartment List’s data. And there are also lots of stories out there about rents falling in expensive cities.
But what about affordability? I’d like to look at rent compared to median personal income, but median personal income data only comes out very slowly. Instead, we can compare rent to average hourly earnings for production and nonsupervisory workers, which tends to track median income decently well:
We can see that the 2010s rent crisis was very real. And we can also see that the pain from the post-pandemic inflation actually showed up a little later, in 2022-23 — probably because it takes time for leases to roll over.
But there’s some very good news on this chart. Although rent is still less affordable than it was in the 90s and 00s, it’s more affordable than it was in the late 2010s. In fact, rent appears to be on a downward trend relative to income — the Apartment List data is basically telling the right story.
So why has rent come down? Maybe because we just built more apartments than we've built since the 1980s:
And in fact, when we look at the cities where rents have fallen the most in recent years, it’s the cities where we built the most new apartments.
There might be other reasons too, but I think this looks like a win for good old YIMBY supply expansion. Keep building more apartments!!
Today in the eternally ongoing saga of “Is AI taking our jobs?”, we have several interesting items. First, we have wage data from Indeed, showing that workers in AI-exposed jobs have seen their wages increase much faster than workers in less-exposed jobs:
This is pretty simple to understand. AI “exposure” means a job contains tasks that AI could do. This basically just means “a job where you might use AI”. And since AI is the big thing booming in our economy right now, this means that more “AI-exposed” jobs are seeing lots of demand, which drives up wages.
Our second item is a new paper from Fairlie and Wu, finding that AI hasn’t raised unemployment among recent college grads:
Using CPS microdata, we provide the first estimates of the effects of AI on the unemployment of recent college graduates in June, July and August 2026…[W]e find that unemployment rates did not spike in summer 2026 relative to summer months in previous years and did not rise in a significant way relative to older college graduates or young workers without a college degree. We also provide the first analysis of an expanded definition of unemployment that includes those who report “wanting a job” which adds nearly two percentage points to the unemployment rate of recent college graduates but we find no evidence of a statistically significant increase in summer 2026 even after adding these “sidelined unemployed.”
And here’s a chart:
So that’s all good news. Now for the bad news: I think I’ve finally found a category of jobs that is getting displaced by AI. Translator and trucker and radiologist jobs have all held up in the age of AI, but digital media jobs are getting absolutely clobbered (even as live performing art jobs have held up fine):
This isn’t necessarily cause for panic — every new wave of technology has reduced the demand for certain occupations. But digital arts jobs are a dream for lots of people — a way to indulge your creative side while also getting paid. If AI is closing off that particular combination of gainful employment and personal fulfillment for millions of people in advanced countries, that’s very sad — even if humans aren’t replaced wholesale.
Donald Trump came into office with two basic policies — tariffs and mass deportations. The deportations were supposed to support the U.S. job market, freeing up jobs for the native-born, and raising their wages by reducing competition. Some of us always knew this was very unlikely to work, since immigrants are a source of labor demand in addition to being a source of labor supply. But the Trump administration never listens to folks like me, especially when immigration is involved.
So anyway, are the mass deportations working as Trump had hoped? Mike Konczal has a post in which he presents convincing evidence that no, they are not:
Native-born unemployment is higher now than in Biden’s last year:
And prime-age employment rates are lower:
If anything, Konczal shows, native-born workers are doing worse in the places with more deportations:
Anyway, Konczal has many more charts, and they all point in the same direction: Mass deportations have not helped native-born workers.
Of course, the real purpose of mass deportations wasn’t actually to help native-born workers — in fact, it wasn’t economic at all. But it’s still gratifying to see that basic economics was right and the Trump administration was overselling the benefits of immigration restriction.
A week ago I wrote that China’s new economic model — basically, paying any and every company to manufacture more and more of the same products — was already hitting a wall. I pointed out that investment is now falling, even in the manufacturing sector:
I also noticed this recent chart showing rapidly decelerating loan growth in China:
4.9% is around China’s total GDP growth rate.1 So this means that China’s economy is no longer being flooded with bank loans.
I’m going to write a post about this soon, but in a very real sense, bank loans are manufacturing. When you see a Chinese factory full of robot arms and fabulous machine tools, those were all financed with bank loans. If China’s banking system is no longer lending, that’s going to mean an investment slowdown. And unless AI picks up the slack with a very significant productivity boom, that means China’s growth will slow more.
A lot of people think of China’s banking system as an arm of the central government, but that’s not really true. While the central government does exert a lot of control over the banks, that control isn’t complete. And banks are very much in “balance sheet repair” mode right now, despite the government’s admonitions to hurl loans at manufacturing companies. ChinaTalk had an interesting interview with Rhodium Group’s Logan Wright, in which Wright argues that China’s financial system is fundamentally broken:
Wright says:
[I]t’s still underappreciated how central the financial system was to China’s growth over the past two decades, and how much the financial system’s problems now constrain that growth. Those are the parts that are broken…[I]f growth depends so much on the financial system, and the financial system now constrains growth, then a lot of China’s external messaging — that they’re economically successful and time is on their side — is simply wrong. It will become more obvious that it’s wrong.
The interview is very long and interesting, and I recommend reading it all the way through. But the basic argument is that although China’s state control of the banks allows them to avoid a financial crisis, it won’t allow them to avoid it for free — the price will be slow growth, zombie companies, and general economic sclerosis, a bit similar to what happened to Japan in the 1990s. I’ve been resisting that comparison for a long time, but it’s looking more and more apt.
I’m probably a lot more worried about AI bioterror risk than most people. But this isn’t just because I fear AI’s power in general. In fact, I’m pretty much not worried at all about cyber risk from AI — or maybe only very minimally worried.
Obviously, if AI-enabled hackers were able to cause massive blackouts during winter, or crash a bunch of cars, or zero out Americans’ bank accounts, that would cause a lot of chaos and destruction. But my instinct is that in the long run, the battle of hackers versus defenders ends up favoring the defense. The reason is that it’s probably possible to make any piece of software impregnable — if you just go over your code and very carefully remove all vulnerabilities, there’s just no way for a hacker to get in.
That means that as AI gets more powerful at reading, evaluating, and rewriting code, at some point the defense just wins. How long that takes, or how much money it takes, is another question, which is why I do think AI-driven cyberattacks are an issue — especially as AI-written code proliferates like wild, and AI capabilities temporarily overwhelm the security of human-written legacy code.
But it’s notable that although there have definitely been some AI hacking incidents — most famously the Hugging Face attack — there has been no major disaster or spectacular “9/11 of cyber” type attack yet. And the people at the labs seem pretty confident that the defense can eventually prevail:
This is why although cybersecurity makes an OK demonstration of increasing AI capabilities, and a good excuse to warn people about AI risk, it’s ultimately a lot less scary than, say, bioterror risk. Biology is different than code — the attack surface is far larger and far more poorly understood, and the consequences of a successful major attack are more dire.
Probably still a little higher, because the official growth rate is overstated.
