Recorded on inauguration day 2025, the conversation ends with economist Christopher Clarke, a self-described mainstream "big tent" economist, more optimistic than the host: Trump's tariffs and deportations will mean higher prices and subpar growth, perhaps a modest recession, but not a crash, and narrow congressional majorities, the filibuster and Trump's own limited competence will stop most of the radical agenda. The host remains worried that unified Republican control, TikTok's gratitude and a cultural shift to the right leave "nothing off the table".
Tariffs versus payroll taxes. Prompted by a viewer's claim that tariffs will replace payroll taxes, the two look up the figures live: imports of about $4.1 trillion, payroll revenue of $1.2 trillion, total federal revenue of $4.47 trillion in fiscal 2023. Clarke explains the contradiction in tariff goals — high tariffs to protect jobs, low ones to raise revenue — and shows a published chart estimating the US could replace only a few percent of revenue. He argues tariffs are worse than sales taxes because they block mutually beneficial exchange along arbitrary political borders and invite retaliation; the host adds that half of imports are inputs, so costs cascade down supply chains.
How bad would it be? The host asks whether 25–35% tariffs would cause a deep recession. Clarke says no: proposals are 25% on Canada and Mexico, 35% on China and 10% elsewhere; businesses have had months to prepare; and the US is large relative to its trade. He forecasts at most a one-point inflation bump. The host suggests repeated shocks since 2018 have made the US economy unusually agile, and that farmers accepted pain during the first trade war; Clarke notes they were paid billions in subsidies.
The Fed and Silicon Valley Bank. The host praises the Fed's soft landing; Clarke credits it but says Fed delay also caused much of the inflation, citing the Taylor-rule paper and Bernanke-coauthored work attributing 2–3 points to energy. The host argues a Musk–Thiel WhatsApp exchange triggered the 2023 SVB run after hours, when liquidity was unavailable; Clarke counters that runs are psychological and something would have set this one off.
Energy. Asked whether retaliation against US energy exports would raise world prices, Clarke notes US production of about 13 million barrels a day, crediting Obama, Trump and Biden. The host argues refining capacity, not crude, is the bottleneck, and that Keystone XL was a marginal 700,000 barrels a day.
Deportations. The host estimates up to a million undocumented farm workers out of about 3 million. Clarke cites the 1930s repatriation study and says deporting a million a year would need major legislation and time; the faster it happens, the bigger the hit.
Europe, China and the developing world. Clarke calls Europe anemic, citing Brexit and Chinese competition in advanced manufacturing. The host lists China's demographic and food-security problems — 1.2–1.3 men per woman in younger cohorts, 69% food self-sufficiency — but Clarke stays bullish on Chinese growth, since 900 million people earn under $3,600 a year, and dismisses breakup predictions. He calls Africa's prospects bright and recounts William Easterly conceding that recent growth vindicated market reforms; the host credits Chinese infrastructure and argues the US lets rivals overreach, citing Russia's losses and Assad's fall.
DEI and Trump's limits. On DEI, Clarke questions whether the programs ever worked and expects modest effects, noting the Respect for Marriage Act now codifies same-sex marriage. The host notes Republicans hold 31 of the 38 states needed for an amendment; Clarke bets against any amendment within two years and expects Musk to run something like a powerful think tank.