The Greenfield Report with Henry R. Greenfield
Welcome to "The Greenfield Reportwith Henry R. Greenfield," where 50+ years of world travels across 10 countries shape insightful takes on current geopolitical events. Join Robert for eye-opening global reports with practical local solutions, and enjoy guest appearances offering fresh perspectives. Embark on a journey of understanding and lively discussion.
The Greenfield Report with Henry R. Greenfield
Episode 22- Trump's Tariffs and the Future of Free Markets with Dr. Dan Mitchell
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Dr. Dan Mitchell, a leading advocate for limited government and free markets, pulls no punches in this eye-opening discussion about the precarious state of the global economy. As president of the Center for Freedom and Prosperity, Mitchell brings decades of expertise to bear on pressing issues that threaten American prosperity and stability.
The conversation begins with an unflinching assessment of Trump's trade policies, which Mitchell characterizes as creating dangerous uncertainty in global markets. "Sometimes he puts tariffs on, sometimes he takes them off... clearly we're moving in a protectionist direction. The only debate is how far and how fast we'll degenerate." Mitchell challenges Trump's fundamental belief that trade deficits indicate America is "losing," explaining how America's purchasing power actually reflects economic strength rather than weakness.
More alarming than trade disruptions is what Mitchell identifies as an approaching fiscal crisis driven by demographic realities. With aging populations and declining birth rates across developed nations, current entitlement systems become mathematically unsustainable. "Europe is 10 to 15 years farther down the road toward bigger government and demographic problems than the US," he explains, warning that America could face a Greek-style financial collapse without serious reforms to Medicare and Medicaid.
The discussion turns to America's dysfunctional healthcare system, where Mitchell pinpoints the root problem: third-party payment. With 90% of healthcare spending covered by someone other than the consumer at point of service, price sensitivity disappears, allowing costs to spiral upward unchecked. Mitchell highlights how sectors where consumers pay directly—like cosmetic surgery—see stable or declining prices, demonstrating market efficiency when allowed to function.
On China, Mitchell reflects on Washington's dramatic shift from optimism to suspicion over the past two decades. As someone who still regularly visits China to teach and engage with officials, he offers nuanced insights about Xi Jinping's regression from economic liberalization and what it means for global stability.
Perhaps most intriguing is Mitchell's advocacy for Swiss-style decentralization as a solution to American polarization. By allowing states greater autonomy and reducing federal control, Mitchell believes America could foster greater social cohesion despite its diversity.
Listen now to understand the economic forces shaping our world and discover pragmatic, freedom-oriented approaches to securing prosperity for future generations.
Introduction to The Greenfield Report
Speaker 1Welcome to the Greenfield Report with Henry R Greenfield, your gateway to understanding today's geopolitical landscape. With 50 years of experience across 10 countries, henry shares expert insights on world affairs, offering practical solutions and engaging guest perspectives. Dive into the Greenfield Report for lively discussions on the issues that matter.
Speaker 2This is Henry R Greenfield for the Greenfield Report reporting today, where we will today be meeting with a renowned economist and expert on areas ranging from monetary policy to the importance of the US dollar to free markets and his view on what is happening or not with the Trump tariff wars. We will add a special section in addition today on China, as our guest is one of the few American experts who continues to go to China and meet with senior Chinese officials and academics presenting at forums in China. Our guest today is Dr Dan Mitchell, who is the president of the Center for Freedom and Prosperity, a pro-market policy organization. Dr Mitchell specializes in fiscal policy, trade and comparative economic systems. He earned his PhD in economics from George Mason University and his daily columns can be read at wwwdanieljmitchellcom. Dr Mitchell and I met in Budapest, hungary, recently at a forum sponsored by the Danube Institute on free markets and what is happening or not in this area around the world. Dr Mitchell, welcome to the Greenfield Report.
Speaker 3Glad to be with you.
Speaker 2For our guests. Could you start by giving us an overview on your approach to free markets, as well as what's happening today, which I'm sorry to say is a lot about tariffs, and to give us some insights as to how you view the world is reacting to Trump these days on tariffs and how that fits with your approach to free markets?
Speaker 3I'm a big believer in having limited government and free markets and unfortunately, right now, trump's tariffs are creating a lot of uncertainty. Sometimes he puts them on, sometimes he takes them off, so we have no idea what the final result will be, but clearly we're moving in a protectionist direction. The only debate is how far and how fast will we degenerate to that position? But there's also another issue that worries me a lot, and that's the governments are just too big and spending too much and, with aging populations and poorly designed entitlement programs, I do worry that we're heading towards some sort of Greek style fiscal crisis, sort of a repeat of 2009. I don't know whether that'll happen six months from now or six years from now, but that's sort of the big long-term threat to global prosperity. The short-run threat to global prosperity are the Trump trade taxes.
Speaker 2The short-run threat to global prosperity are the Trump trade taxes. So you know I was going to ask you about that later, but you jumped right into it. I think it's quite important. Obviously you have in your talks here in Europe. I followed you and watched a lot of your presentations that you have made at conferences. You do not agree with the European approach from the EU, with their interventionist approach, with their, as you say, the social benefits sound great, but at the end of the day, how can you afford them? So would you like to speak to that just a bit, because we seem to be in the US to be kind of at loggerheads with trying to cut taxes but then at the same time, trying to keep benefits or not. But what is your view on that?
Speaker 3The big difference between the United States and Europe is that Europe is 10 to 15 years farther down the road toward bigger government and demographic problems than the US. The US has a medium-sized welfare state and demographic problems than the US. The US has a medium-sized welfare state. Europe, at least in general, has a large-sized welfare state, switzerland being an exception, and not all the countries are the same, of course. But here's the concern Both of our populations are getting older.
Speaker 3We're having fewer children. People are living longer. I have lots of gray hair, so I like the idea that we're all living longer but from an economic and fiscal perspective, that's actually very, very bad news, because a welfare state of modest size is affordable if you have what's called a population pyramid. You have a few old people in your population, but then a big generation of workers and an even bigger generation of children, because welfare states are mostly about redistributing money from workers of working age population to old people who are getting pensions and, of course, most health care expenditures. And I worry very much with the demographic aging of our populations that the US is heading toward where Europe is now and Europe is just heading toward another crisis like 2009 all over again, but the problems will be more intractable and I don't think anybody's going to be big enough to bail countries out when the you-know-what hits the fan.
Speaker 2Yeah, so obviously I live in Europe, so I understand that very much and I think you've spoken about it. Even I, who I consider myself to be slightly centered left, I also agree with you completely. It's the economist if you saw this week put in, it had a special on effectively, europe wants to have their cake and eat it too. Let's just put it that way. In other words, they want all the social benefits, but they do not have the population to support it. They do not have and you cannot just tax your way out of it. I agree with you. But just in keeping today on the US side, with the alchemy I'm going to call it of the current Trump tax cuts plus still trying to maintain at least most of the benefits, even though some will be cut, what do you think about as a different solution, which is on the cost side? Have you thought about that at all?
Speaker 3As an American taxpayer, it's very frustrating to look at what's happened to the Republican Party Ten years ago.
Speaker 3The Republican Party was enacting not getting into law because of course, obama was in the White House but the Republican Party in Congress was enacting budget resolutions that were predicated on very serious and very substantive Medicaid and Medicare reform.
Speaker 3Those are our two big government health care programs Medicaid for poor people, medicare for old people. And those Republican budgets under the leadership of Paul Ryan were great. I mean, they were maybe not quite Javier Malay in Argentina in terms of the boldness, but they were very serious proposals that would have dramatically slowed the growth of government spending. And, at the end of the day, when you're looking at fiscal policy, the most important variable is how fast is government growing on average compared to the growth of the private sector, the private sector, of course, being the tax base that's needed to support the government programs. So 10 years ago, republicans were seriously trying to address and fix our long run fiscal imbalance. Today, trump says don't touch Medicare, don't touch Social Security, don't touch Medicaid, and it really is a sad case of kicking the can down the road, and that's going to come back to bite us in a way that really worries me.
Trump's Tariffs and Market Uncertainty
Speaker 2So I want to sorry, I don't want to pound this one, but my view is this, and I'd like you to tell me I'm wrong if you believe I'm wrong. My belief is that we have a cost problem as well as a spending problem. We do even Trump pointed out we pay the highest drug prices. Okay, we have hospital corporations that are being controlled more and more by venture capitalists. These are just a couple of areas, Right, and it seems to me that we have layered on too much. We have the planned benefit managers not to get into medical policy, but we have a lot of layers in the system which make it very difficult to cut anything. Or maybe you don't agree with that.
Speaker 3I think America's health care system is certainly the most expensive and arguably one of the most inefficient systems in the world. And here's what I think is the fundamental problem, and a lot of health care wonks know this, but it certainly doesn't get discussed in terms of politicians very much. We have a massive problem in the United States with third party payer. 90% of healthcare spending in the US is paid for by somebody other than the consumer. Almost half the people, almost half of healthcare spending is directly financed by government through Medicaid, medicare, va and things like that. But even in the so-called private sector of healthcare, people are overwhelmingly buying healthcare with insurance dollars, not their own dollars. Now, of course, you could say it really is their money because it's taken out of their paycheck because of of uh, of their paycheck, because of the insurance plans. But at the actual point of sale you are not spending your own money for the most part in healthcare. And what incentive is there for me as a consumer to try to make sure I'm getting a good deal? And certainly providers if they know that consumers aren't very price sensitive because 90% of the spending will be paid for by someone other than them, at least again, at the point of sale. Providers love that system because they can make everything a lot more expensive, because they know there's not much price sensitivity. So here's the problem. Let's break it down to what really matters. Let's break it down to what really matters. We would have a much more efficient and better health care system if consumers were paying for all routine costs directly out of pocket. Obviously, you would still have insurance for large unexpected costs like having a heart attack or getting cancer, just the same way that our homeowner's insurance doesn't cover the cost of repainting your dining room or buying a new couch. It's for if you have a major fire or something like that. So we have over insurance or, in the case of government programs, over coverage, and it means that nobody, or almost nobody, cares about how much health care costs, and so we have very high prices because there's no competition on the consumer end and we have a lot of inefficiency because, of course, the system requires a huge amount of paperwork. So our health care system is not a free market health care system in the US. It is very expensive. It's definitely not buyers and sellers directly interacting, which is what you get in a free market situation.
Speaker 3Now, by the way, let me say one final thing. We do actually have a few sectors of our healthcare system where consumers are paying with their own money Things like laser eye surgery, things like cosmetic surgery. Those are areas where a genuine free market exists. And what do we see? Instead of healthcare costs growing like this, and Medicare and Medicaid and things like that, healthcare costs are flat or even coming down. So when we do allow the markets to operate, we actually do have a lower cost, efficient healthcare system. But unfortunately that doesn't describe most parts of our healthcare system.
Speaker 3And I'll say one other thing, because you mentioned about pharmaceutical prices. Say one other thing, because you mentioned about pharmaceutical prices. Here's the frustrating thing as an American Most drugs are developed and the main target audience is the US market, but there's a lot of expense in terms of research to produce new drugs. Well, other countries who have government-run healthcare systems or have a lot of price controls, they look at the marginal cost of producing a pill and they say okay to whatever pharmaceutical company Pfizer or something like that we'll pay you the marginal cost of producing the pill, plus 10% or 20%, whereas American consumers are paying the market price. Well, guess what the net result of that is?
Europe vs. US Welfare States
Speaker 3The entire R&D budget of the pharmaceutical industry is being borne by American consumers. Now, that's obviously not fair, but if we want R&D, if we want new drugs being developed, somebody has to pay that cost. And so the rest of the world is, in effect, free-r riding off American consumers being the ones paying market prices and, in effect, underwriting all R&D costs. Now the Trump administration, just like the Biden administration, thinks the answer to that is well, maybe we should slap price controls so that pharmaceutical companies can't impose the higher costs on American consumers. But if the net result of that is the whole world has price controls, we won't have R&D, or we won't have nearly as much, and we'll probably wind up. You know, you and me, robert, might be dying earlier than we otherwise would, because whatever drugs might save our lives 15 years or 20 years in the future aren't going to be developed.
Speaker 2Okay, first of all, I'm going to agree with you. It's not sustainable. Don't forget, I've lived in 10 countries, so I've got at least 10 different medical systems I've had to deal with in my life so far. The one that is most interesting and applicable is actually Australia, just for your information, they have a blended system which is very similar to what you're saying. In other words, if you want to go what's called a private option you pay more, even though your insurance is primarily for, let's say, additional costs. It's not for your bread and butter costs, kind of things.
Speaker 2Their big worry, by the way, when Trump came out in particular, was that they're going to have to start paying their own fair share, because they are doing exactly what you're saying. They negotiate on a national basis with Pfizer, merck, et cetera, and they get the lowest cost in the world, whereas the American consumers are carrying it. This is part of the problem, by the way, with the rest of the world. When they are mocking the US, they don't realize that in the United States, one way or another, the Americans have carried a lot of these costs, whether it's the development of China, which you go to quite often, right or whether it's this kind of area with the drug side. The United States has borne these costs and they are no longer sustainable. So again, as a libertarian, how does the United States get out of this cycle?
Speaker 3Well, that's a great question and unfortunately, I probably don't have a great answer, because unless somehow the US can force foreign countries to pay more which I don't know maybe Trump can use some executive order or something to say based on income. Use some executive order or something to say based on income. Countries can't buy American pharmaceuticals unless they pay instead of 20% above the marginal cost of producing a pill. Maybe they have to pay 50% or 100%, depending on their per capita income, and that would spread out the cost of allowing pharmaceutical companies to have R&D budgets. But I don't know. All I know is that the current system does disadvantage American consumers compared to foreign consumers. As you say, it's not sustainable. Something probably has to happen, but I don't know what it'll be. I worry, given the nature of politics, that we'll just wind up with global price controls and we won't get that R&D that is so crucial to future health care.
Speaker 2Well, obviously I'm in agreement with you on that, but let's move that back to Trump on his policies that are working or not working. So there's a lot of people who would agree with and I think you said this in Budapest as I was listening to you in principle, there's a lot of things you agree with the Trump policies, but it seems to the rest of the world that Trump spends more time going up and down, or what we would call blowing up the ship, than finding policies that are going to work in the long run. So therefore, the rest of the world really doesn't know what to do. So what do you see? You know, is Trump's policies? Are they working or are they not working, or are we missing something outside the United States?
Speaker 3I think it all depends what policy you're looking at On trade. The United States I think it all depends what policy you're looking at On trade. It is incredibly haphazard. That's presumably the issue most people outside America are focusing on because it affects them directly. And, depending on who you talk to in the administration, it's either pure protectionism, sort of like Peter Navarro and the Commerce Secretary Lutnick. These people seem to be genuine, true believing Smoot-Hawley 1930s style protectionists. You have other people in the administration who I think have a more rational perspective. There are bad trade policies in other countries.
Speaker 3Trump focuses on that. He's very obviously very fixated on whether other countries are treating American exports fairly or not, but he sort of ignores the fact that we have some of our own pre-existing protectionist policies in the United States. Now, in theory, back in the good old days when we used to have these, you know, like the Uruguay round of GATT negotiations and the WTO, you know the focus of the world was well, how can we sort of sort of jointly reduce our protectionist barriers to have more free trade? Trump? Here's the fundamental problem with Trump. He thinks a trade deficit by itself is a sign that somehow America is losing or being screwed or being treated unfairly? Now, of course that's not true. The US is bigger and richer than most countries. Now, of course that's not true. The US is bigger and richer than most countries. So of course we can afford to buy more from other countries than they can buy more from us.
Speaker 3Not only that, but oftentimes when foreigners earn money by selling to the US consumers, they like using that money to invest in the US economy. So the dollars come back to the US. I mean almost by definition, in some sort of macro perspective, there's balance. It's just that some dollars come back to buy American goods and services. Some dollars come back to be invested in the US economy, which, by and large, is a sign of American strength the fact that foreigners want to be purchasing American equities and bonds and things like that. The one exception is obviously foreigners buy a lot of US government debt. That's not bringing dollars back to the US in a productive way. That's bringing dollars back to the US in a way that just subsidizes our fiscal incontinence.
Speaker 2Yeah, so I think here, for me, the core principle is, as some other people I've interviewed in the past. They call this the financialization of the American economy versus the industrialization of the American economy. And if you looked at the Economist again not to mention them more than once, but they have a whole edition this week on the over-reliance on manufacturing as opposed to what you're talking about, which is accepting that the US economy has fundamentally changed and it has become a services and a financial economy and going back to an industrialized policy is just simply not going to work. What is your view on that?
Speaker 3Well, there are two things that I think are important to understand. First, manufacturing employment has fallen substantially. In the United States, however, manufacturing output as a share of GDP has been relatively stable. So the real story is is that the manufacturing sector has become a lot more productive. We need far fewer man hours to produce a car today or a ton of steel than we used to in the past. And, by the way, that's true everywhere in the world. Manufacturing jobs are declining as a share of the population. In China, it's just. It's a function of the productivity and the entrepreneurship of economic all economies, not just the US economy. So there's nothing wrong with manufacturing employment falling as a share of total employment if it simply means that we're more productive and that frees up labor to be in jobs that, by and large, people prefer. People prefer service-oriented jobs. In many cases they pay a lot more and certainly the work is a lot less physically taxing or physically dangerous.
Speaker 3Now let me shift from manufacturing over to the finance sector. I'm not a big fan of this idea that financialization quote unquote has been happening, or at least not in a negative sense. America's capital markets, I think, are the envy of the world. They're a very efficient system for directing capital to where it's going to generate the most growth and the highest rates of return, which, of course, even for those of us who aren't in the finance sector, that can rebound to our benefit in terms of higher wages, greater productivity, things like that.
Speaker 3Now, having said that, do we have some policies that I think are very silly, where the financial system, in effect, creates risks rather than reduces risk? I look at things like Fannie Mae and Freddie Mac, our two government-created entities that subsidize the housing sector. I look at things like Fannie Mae and Freddie Mac are two government created entities that subsidize the housing sector. I mean, that played a huge role in the 2008 financial crisis. So I love the manufacturing sector, I love the finance sector, I love the private sector because it's what's made. It's made us rich by historical standards and by comparative standards, and it's helping to spread prosperity all around the world. But that doesn't mean that I want industrial policy to subsidize manufacturing or that I want Fannie and Freddie creating systemic risk in the housing and finance sector.
Speaker 2So let me ask you put it to you in another way. That's very interesting. It would seem to me that what you are saying and again listening to your various talks that what was going on in the US economy was when Trump came in was not necessarily anything that needed to be dramatically changed, other than we could talk about taxes et cetera. But the big thing that you talked about, or your recommendation that, when I asked you that question in Budapest, was that you said that you would recommend that Trump would have done more gradual tariffs and not this up and down. Is this up and down kind of freaking out people like Jamie Dimon, who's talking about a recession or what's going on there?
Healthcare System Inefficiencies
Speaker 3My view is that Trump should have gone back to the old post-World War II consensus of multilateral negotiations to try to bring down trade barriers. And yes, maybe as part of that process, when you're dealing with countries that are very protectionist, like India overtly, and China more implicitly, okay, maybe you jack up tariffs on them a little bit as part of a negotiating thing, and this, of course, gets into this whole debate. Is Trump playing three-dimensional chess or is he just sort of blundering his way through? I fear it's more the latter than the former, because if he was doing something very clever, why is he imposing higher trade taxes on? You know, you mentioned Australia. Australia doesn't have big trade barriers to the US. I mean all these countries that we have free trade agreements with, and yet Trump is raising their trade taxes. He even raised trade taxes on the herd in McDonald Islands, which don't have any people and don't export anything. So some of it was amateur hour.
Speaker 3But this brings me back to what I already said, robert, which is that, unfortunately, trump thinks a trade deficit itself is the problem that needs to be addressed, and I just think that's fundamentally wrong. So, yes, I wish he was much more focused on. Okay, let's try to encourage some countries that are protectionist to lower their barriers and, by the way, as part of that, reduce some of the barriers that we still have. I think free trade is a good principle that has served the world well, and so many people in the Trump administration don't have that understanding, unfortunately, and the president is one of them. Let's talk about somebody who might have an. So many people in the Trump administration don't have that understanding, unfortunately, and the president is one of them.
Speaker 2Let's talk about somebody who might have an understanding right, my favorite person I don't want to call my favorite, but I think the last guardrail you mentioned Navarro, you mentioned Lutnik. My person who I actually have some confidence in and I want to know you know your learned opinion is Scott Besant. Do you believe that? How important is he, or am I exaggerating his importance in terms of, like, keeping the wheels on and not letting everything fall apart?
Speaker 3My assumption is. I don't know Scott Besant personally at all, but my assumption is that Besant and Kevin Hassett, the top economist in the White House, I assume that they're counseling Trump in the right direction and hopefully offsetting the bad advice from Lutnick and Navarro, but I'm obviously not privy to those discussions, so all I can say is is that I'm glad they're there. I assume they're doing good things. Now, having said that, I mean Besant. I think it was testifying on Capitol Hill just earlier this week. You know he made this preposterous argument that tariffs aren't taxes. Now, does he actually believe that? I'm sure he doesn't, but this administration forces people. In effect, if you want to continue in your position, you're basically forced to say things that are very silly, because otherwise Trump might take it the wrong way, and all of a sudden you're out on the street and Trump 1.0 is exactly what you said.
Speaker 2He has to say certain things in public, but you know after all he's a hedge fund manager originally. You know all the way back to the Soros days, and I think that he's learned how to, let's say, keep his powder dry and make a good economic decision. So I don't want to put too many laurels on his head, but I'm happy that he's there and I think you would agree, right.
Speaker 3I want there to be good people in the Trump White House, because presumably they're going to help steer Trump in the right direction. Because I don't think Trump has any sort of underlying economic philosophy. He sort of just approaches everything like it's some sort of business negotiation. He probably I mean he certainly probably has a bias that too much red tape is bad and excessive taxes are bad, but I don't think he really thinks deeply about economic policy more broadly.
Speaker 2Obviously, you're not very keen on what we would call industrial policy, especially not, let's say, the European side, but I want to ask you a question. Biden did something that classical or classic libertarians like you really are not very fond of, which is he was doing the pick winners and losers with his industrial policies, specifically on AI, solar, tsmc, which he pushed to bring back the chips. Do you feel that there is, in terms of your own beliefs and your own experience, a place for strategic industrial policy, or should we really let the free market dictate what happens?
Speaker 3I guess it depends how you define industrial policy. My preference is to bring the corporate tax rate down as low as possible, move from a depreciation system to full expensing, so companies are no longer penalized through the tax code for making new investments, and then let American industry do what it does best, which is to try to create goods and services that are attractive to consumers, because that's how they make money at the end of the day for their shareholders. I think that, as a general principle, unquestionably is the way to go. Now let me bend over backwards and sort of give the other perspective. Taiwan is obviously a major player for semiconductors and things like that. If you're sitting in the White House and you're thinking, hmm, china might not be a good actor on the global stage and maybe they'll invade Taiwan sometime in the next one to five years I mean, I hope that's not the case, but people in the White House should be thinking about those possibilities and if you know that a lot of American industry is reliant on high-end semiconductors from Taiwan and there is this non-zero threat that supplies from Taiwan could be totally disrupted, it would be a good idea to have alternative sources in the free world of high-end semiconductors, whether produced in America or produced in other friendly countries. So I can understand that there is an argument. How do you deal with that kind of situation? Do I think sort of just blind blundering open-ended subsidies to different semiconductor countries as semiconductor companies is the way to go? No, I don't.
Speaker 3But there was a rationale, there was a reason and a lot of economic policy and I'm sure you know this, robert, from having discussed so much over the years. A lot of economic policy is. Well, there is a little bit of an argument for this. But then you have to factor in the real world of how politics and the sausage making process will in effect twist it and distort it before you get to final legislation and you have to sort of decide cost and benefits. You know is a clumsy, politically influenced piece of legislation. Are the benefits worth it Because it'll achieve something, even though politicians are going to impose all these additional costs? That is an open and fair question. But suffice to say I think what Biden did was definitely a clumsy, ill-advised way of trying to address what is a genuine issue.
Speaker 2Okay, well, at least we're going to agree on that. Something should be done to make sure that TSMC doesn't get cut off if there was any kind of China military action towards Taiwan. That brings me to the China question, which is something that I was very intrigued on. Unfortunately, we didn't get into that when I last saw you speak, but you and your colleague both had pretty strong opinions and I think are you going to be on your way to China soon.
Speaker 3Yeah, I'll be teaching there for a week, actually more, like you know, 10 days in July.
Speaker 2And what are you going to be discussing there?
Speaker 3Mostly fiscal policy, but of course trade is inevitably going to be part of the discussion. Comparative economic systems here's the thing about China. 15, 20 years ago, almost everybody in Washington was very optimistic. China, of course, had done some economic liberalization. In the 1980s and 1990s they climbed out of sort of the terrible poverty that Maoist communism had created. They integrated themselves to some degree in the world economy and I think people were very optimistic, including me. I'll confess that China was going to evolve into sort of a normal market-oriented country, maybe not a Western-style democracy, but nonetheless a good trading partner and a valuable part of global commerce.
Trade Policy and Manufacturing Myths
Speaker 3There's a lot of concern now, and one of the big changes in Washington over the last 20 years is that both Republicans and Democrats are now much more, and especially in terms of misallocation of capital, you know favoritism, what companies are getting access to capital markets and subsidies and things like that you know. So China is moving in the wrong direction in terms of economic reform. But then also there's a lot of concern that China you know might be trying to cause might be a threat to global peace, and obviously I'm not any sort of expert on that piece of it, but I definitely know that people in Washington, republicans and Democrats alike, now view China with, at the very least, a lot more skepticism and suspicion, where there was this feeling of hope 15 to 20 years ago. Now the question is, what's China going to be 10 years from now or 15 years from now? I mean, hopefully this is just a temporary blip and that the concerns are unwarranted. But who knows? I can't make those predictions.
Speaker 2Yeah, you know my view on that. I think I mentioned to you my first time to China was 1981. So I remember those bad old days when cabbages were. You know my view on that. I think I mentioned to you my first time to China was 1981. So I remember those bad old days when cabbages were. You know what did you want for lunch? Cabbage, dinner cabbage, you know. So it was in Chinese.
Speaker 2I'm sure you know this word mayo. We don't have right kind of thing To today, where you have an abundance of many things. But I agree with you. Wto came in. It was not all bad. By the way, I work for American corporations that won on WTO, let's say on software, where we had a specific strategy at Autodesk to harvest that means to get the illegal copies to become legal. So it wasn't all a bad thing for a long time.
Speaker 2I would agree with you completely that Xi Jinping changed things dramatically for China and everybody else. The question is that you are asking, which is the fundamental question, is that is China reverting back to the 5,000 year China history, which is, you know, the center of the universe? As you know, the name implies that it's the center you know the Middle Kingdom, or is China moving? Is it going to once Xi Jinping passes from the scene? Is it going to be something else? Well, as you know, even in the case of Trump with the Republican Party, if you put enough of your followers in charge, whether it's JD Vance or somebody in China that is beneath Xi Jinping, the next generation is going to at least follow that for some period of time.
Speaker 2So my biggest concern and that's why I asked you about the strategic side, whether it's rare earth metals, as you know I'm sure you're quite well versed in this the US made its own. Sure you're quite well versed in this. The US made its own, you know, had its own rare earths metals system. They were refined in Indiana. We lost that because of, you know, china could do it cheaper. China did not have the environmental controls. So it seems to me and again, I don't think you're saying you disagree, but it's not easy for the government to pick the winners and the losers. But there are certain strategic areas. I hope you would agree that the United States needs to protect itself or at least find strong allies to do that type of work. Would you agree with that?
Speaker 3Yeah, I think we're on the same page in that regard. The one area, though, where I think we have to factor in Trump's thinking is he doesn't think it's OK if, say, canada is producing. He wants everything being produced in America. I'm a big believer that what Trump should have run on and what he should be trying to administer is global free trade among free nations, and that, in effect, can be sort of a carrot to encourage other nations to liberalize their both political and economic systems, but, again, he doesn't distinguish. He's protectionist against nations that are our closest allies and he's protectionist against countries that maybe are a problem.
Speaker 2I think that you've hit on the central issue for me with Trump, which is not the clumsiness on the tariffs, which is its own problem, but he's not fostering this type of strategy, which is to use the democratic countries, in particular, to do this kind of working together. In fact, he's a zero-sum game guy. So, before we end up here, I do want to ask you this is kind of important as a again, as a libertarian economist what would you do to change? Or is Trump on the right economic path with his one big beautiful bill? And if not, what would you recommend for him to change?
Speaker 3The problem with the one big beautiful bill is a sin of omission. There's really other than a little bit of anti-fraud provisions in terms of the Medicaid program. There's really no effort to contain the long run expansion of the burden of entitlement spending, and that is the biggest threat to America's fiscal health, just like it's the threat to the fiscal health of European countries and, by the way, something I didn't mention earlier. I mean, as a general principle, I'm critical of European fiscal policy, but you look at some countries like Denmark. You know the retirement age is going up to 70. They have budget surpluses. Their government debt is very small. I mean, their welfare state, from my perspective, is far too big.
Speaker 3But you can be a responsible left of center government. It's not impossible, it's just unusual. The problem in America is we have an irresponsible right of government because we're not controlling the growth of government spending. I like the idea, as a libertarian, of people having lower taxes but simply giving people a tax cut and it's actually not a tax cut, it's just mostly an extension of the 2017 tax cut. But keeping taxes low, especially for lower income and middle class people, I think that's wonderful, but it's not going to be sustainable if you don't have some sort of spending restraint at some point in the system. And here's another thing to remember you can't finance a big welfare state by taxing the rich. If you could do that, european countries would have done it. All the European countries that have bigger size welfare states, they finance them with big taxes on middle class and lower income people the VATs, the payroll taxes we already talked about.
Speaker 2You mentioned a very interesting one here. By the way, I have close family members, obviously, I live here. I know lots of people who live with these tax regimes, some more successfully than others. They're very complicated in the EU, but you did bring out one very interesting one which I want to ask you. It seems to me that eventually, trump is going to have to switch from his tariff regime to a VAT. Do you agree? And if so, I believe that's a step in the wrong direction, because now you're really transferring a heavy burden to young families, middle class, etc. So, anyway, what is your thoughts on on? Will a VAT come into place? Because he cannot pay for everything with tariffs, right?
China Relations and Strategic Concerns
Speaker 3Correct Tariffs. There's a big lapper curve with tariffs, because once your tariffs are getting you know 10, 20 percent or even some of these ridiculous levels that Trump is talking about you actually do close off global trade, and so it doesn't matter how high your tariffs are. If you have no imports, you're not going to collect any revenue. So there's a naturally limiting factor. I mean, alexander Hamilton understood this with the Federalist Papers, you know, 250 years ago or whatever it was. So if you leave government on autopilot, sooner or later there will be a value-added tax. Now I say that with unhappiness, just like sooner or later we're both going to die, robert. I wish that wasn't the case. But unless there's some medical miracle, you know, at some point in the next 30 or 40 years we're both going to say goodbye to the earth. I don't like making some predictions and I don't like making the prediction that we're going to have a value added tax. But unless Republicans decide to become more responsible or maybe Democrats become responsible like they were back during the Bill Clinton era, somehow, some way someone in Washington has to decide. We need to slow down the growth of government spending. My ideal system would be copying Switzerland, where they have something called a debt break, which is effectively a spending cap, and ever since voters implemented that back in the early 2000s, I mean Switzerland has gotten so much stronger, so much richer. Its fiscal policy is sort of the role model for the world. Its government spending burden as a share of GDP is lower than the United States. They've become richer than the United States.
Speaker 3So again, don't look at Europe as just one big blob. You have some very successful small government countries, like Switzerland. You have some successful big government countries, like Denmark, but a lot of countries you know France, italy, so on and so forth. You know their policies are not admirable. Now, by the way, you know not to get us off on a tangent, but do you know that Greece, a few years ago, adopted private retirement accounts and their long run pension spending as a share of GDP? According to OECD data is going to come down by two to three percentage points. So even in countries that you think of as being really misgoverned for years, you can find elements of good public policy. Here's the bottom line. The world is a laboratory and nations are the different experiments, and within nations, different issue areas are the experiments, and I think all those experiments both inside countries and across countries. Do teach us that it's important to contain the size and scope of government if you want to maximize prosperity for people.
Speaker 2Well, you know you've. I think we're actually a lot closer to each other than you believe. I think that there is a vast majority in the center in the United States and around the world that just want to get up in the morning, have a non-corrupt government, pay a reasonable tax and be able to live normally and have decent lives. But I think you've pointed out, Dr Mitchell, several really important points, one of which I hadn't thought enough about. But you are right that there is no such thing as a free medical system or a free lunch. It is true that you have to. Medical, as I've discussed with other people, is a case of rationing around the world, and the way to ration that, of course, is to let people at least pay something. And if you make it so that they're paying nothing, Now of course, in order to pay something, you got to pay them also a proper wage. So there's a lot of things involved there.
Speaker 2By the way, on the Switzerland thing, I do have very good friends. I live near to Switzerland. By the way, on the Switzerland thing, I do have very good friends, I live near to Switzerland and I can say this Switzerland has social cohesion, which right now the United States does not have enough of, but they have very strong social cohesion and people buy into that. So they believe in the system and they participate in the system and they do the right thing. By and large, I think that the United States, unfortunately with the two extremes, is moving away from that, blaming each other, and I don't think it's going to end well. Do you have any final remarks that you'd like to make? Maybe not on that?
Speaker 3subject. But before we go, well, I can't resist actually commenting on what you just said, because what's amazing about the social cohesion that you pinpoint in Switzerland is that it's in a country where you have French-speaking regions, italian-speaking regions, german-speaking regions. You even have Romanish. One of the big reasons for Swiss success is not only good economic policy, but the decentralization. You don't feel like if you're German speaking. You don't feel like the French speaking regions are your enemy because they're making their own decisions, whereas the German speaking cantons, they're making their decisions.
Speaker 3In the US, we have centralized so much government policy and obviously Florida is not the same as New York and Texas is not the same as California. I think some Swiss-style decentralization would solve a lot of our problems with national division. I mean, there's no question that people seem to dislike each other more. We're polarizing in terms of where we live. We're polarizing in terms of whether we like people. Heck, there's even data out there that people are polarizing in terms of whether we like people. Heck, there's even data out there that people are polarizing in terms of dating. Well, someone's of a different party. I'm not going to want to go out to dinner with them. That's probably not good and I like to think maybe I'm just an optimist, but I like to think a Swiss-style system of decentralization would be good for just the health of the American political system.
Speaker 2Well, I want to agree with you 100% because, as they say about in Switzerland, as you know, they have votes on everything in each cantonment, right? And they say that if you ask the typical Swiss citizen about some local measure, they'll tell you everything, what's going on, and they're thrilled to vote. But if you ask them who is the president of Switzerland, more than half would not know.
Speaker 3That is a very, very healthy sign for a country. You want to be able to live in a system where you can have a good, productive life without knowing who the politicians are. I mean, in some sense that might be the greatest measure of how successful a country is.
Speaker 2Well, you know, maybe I'm not going to say that you're going to say this, but I would recommend to President Trump to dial it back a little bit, okay, and let's let some of those states' rights keep on growing, as opposed to executive or federal control. Would you at least agree with that?
Speaker 3Oh, I definitely agree. But Trump is not going to dial it back. It is who he is and on one level it's entertaining, it's colorful, it certainly makes it interesting to look at the news. But wouldn't it be so much better if we didn't have to worry about that kind of drama in our lives? I for one think decentralization, smaller government and not having to pay attention to politics would be a very healthy long run outcome for the United States. And it doesn't mean we're going to live in my libertarian fantasy world of government only 5% of GDP. Maybe we'll be like Switzerland where government's 30% of GDP, but as long as there's enough breathing room for the private sector to function, in the grand scheme of things, would I prefer smaller government and growing 3% a year, compared to medium-sized government and growing 2.5% a year? Yes, I would. But you know what? We'll have a good life regardless with either one of those two approaches.
Speaker 2Well, I'll end by saying I'm sure this is a person. You don't agree very much with her, nancy Pelosi. Once, when she was challenged a couple of years ago, she said you guys are going to have to all get over it. In the end we're all capitalists. So I want to thank you for being on the Greenfield Report. This has been a fascinating time. If you don't mind, we may check back in with you after you come back from China. We'll be really interested to hear what your take is on China, especially at this pivotal moment in history. Today we have been speaking with Dr Dan Mitchell, who is a global expert on a whole host of areas, ranging from dollars and monetary policy to, obviously, economics, government and taxes. We want to thank you very much, dr Mitchell, and wish you well on your trip to China.
Speaker 3Well, thank you, I'm looking forward to it. I'm still, in the long run, an optimist that China will become a rich, successful, market-oriented country. The Chinese are rich everywhere they go in the world, except for in China. So if they liberalize, the sky's the limit for prosperity for China.
Speaker 2Well, thank you very much. This is Henry R Greenfield signing off with our special guest, Dr Dan Mitchell.
Speaker 1Thank you for joining us on the Greenfield Report with Henry R Greenfield. We hope today's insights into the ever-shifting geopolitical landscape have sparked your curiosity and broadened your perspective. Stay connected with us for more in-depth discussions and expert solutions. Until next time, keep exploring the world beyond the headlines.