America at 250

Plus, what's on my mind

I’ve heard from enough of you who’d like a Substack from me that, here on the eve of America’s 250^th, I’m finally going to start one. It will be irregular, and a warning in advance that it might consist largely of stuff I have been publishing elsewhere. (I have a day job, after all!) But here we go…

There’s no doubt that America is in a gloomy mood on its 250^th, with polling showing that most Americans think the country is on the wrong track and that our best days are behind us. We seem to be unable to figure out how to keep a pond of water on the National Mall from filling with algae, and a former Fox News commentator is now prosecuting a former Olympian for touching a torn piece of the pool’s liner. As others have pointed out, however, gloom around a major anniversary is something of a national tradition at this point. We were gloomy in 1976, in the wake of losing the Vietnam War, President Nixon’s criminality, high inflation, and a burgeoning national debt. In August 1925, a year before the 150^th, 40,000 Klansmen paraded down Pennsylvania Avenue. In short, we’ve been here before.

Aside from my law practice, I spend most of my mental energy thinking about international economics and geopolitics. With that in mind, it strikes me that today is like 1976 not only in the malaise in the national zeitgeist, but also in the manner in which my country is going through an intellectual and policy paradigm shift, as we turn the geopolitical page on America’s “unipolar moment” that emerged after the collapse of the Soviet empire and the economic page on the neoliberal consensus that shaped economic thinking for essentially my entire life.

It is fair to see Reagan’s election in 1980 as the dawn of the neoliberal era and Bill Clinton’s 1996 SOTU comment that “the era of big government is over” as its consolidation. But the intellectual foundation for the paradigm really began to take hold in the 1970s. Edward Crane, Charles Koch, and Murray Rothbard founded the Cato Institute in January 1977. Milton and Rose Friedman published Free to Choose, which brought many of their economic ideas to a popular audience, in January 1980. Congress deregulated the airlines in 1978. (Yes, I know some progressives today rue that decision). Free-market economics was moving rapidly from a fringe theory into the political mainstream.

The same thing is happening today, albeit potentially on an even faster timeline due to President Trump’s bull-in-a-China-shop personality, the collapse of intellectual elites in both parties, and the energy for new ideas from a restive American public.

In the last 18 months, our economic and national security establishment went from complaining about China’s state capitalism to emulating it, with announced plans to take government equity stakes in more than 20 companies so far, and apparent plans to take shares in the AI behemoths as well. At this pace, America won’t just have a sovereign wealth fund at the end of Trump’s term, it’ll have a sovereign wealth fund with hundreds of holdings worth hundreds of billions of dollars.

Twenty-seven years after Bruce Ackerman and Anne Alstott published The Stakeholder Society, we have Trump Accounts, in which the government, philanthropists, and companies currying favor with the Trump Administration all contribute to financial nest eggs for kids. (Regardless of your politics, if you have kids, do sign them up for a Trump Account. It’ll add up for them over time).

I remember sitting with Brian Deese in his office early in the Biden Administration, along with a number of colleagues, debating whether the Biden Administration should embrace the phrase “industrial policy,” or whether it was too politically toxic. A few years later, after the CHIPS Act, the Inflation Reduction Act’s green subsidies, the Pentagon’s Office of Strategic Capital, Trump’s “Section 232” tariffs, and growing policy support for industrial policy for sectors from shipbuilding to pharmaceuticals, we all seem to have become industrial policy-ists now.

I don’t know how the intellectual framework for this ferment will sort itself out. Presumably the Hewlett Foundation and others will continue to fund the smart people in the Academy and elsewhere to write the books to distill it all, while other voices will continue to defend a more traditional free-market approach to the U.S. economy. Meanwhile, Zohran Mamdani will continue to charm us all: whatever you think of his policy ideas, who can’t help but smile at the images of him, in a full suit, jumping into an NYC municipal pool to beat the sweltering heat? That heat risks making our celebrations tomorrow a little sweatier than we’d ideally like them to be.

What I’m thinking about:

What is the future of American economic power? I have a new piece out for the Carnegie Endowment on the future of American economic power. I argue that Trump has the most ambitious agenda for American economic power and hegemony of any president in decades, but that his clear interest in hegemony (both economically and with respect to places like Greenland and Venezuela) has also triggered a backlash that may ultimately undermine U.S. economic power. I also trace the history of how the U.S. thought about its economic power and shifted, post-9/11, from economic system building to weaponizing economic interdependence. It is an analytic think-tank piece and does not offer policy prescriptions (much less legal advice) but hopefully some number of you find it interesting. And if you aren’t interested in economics, the essay is just one of a Carnegie compendium of pieces on the future of American power across multiple domains.

Count me skeptical of the U.S. government owning stakes in the big AI companies. There is a place for government equity investments, for example in low-return strategic supply chains that the U.S. has a security interest in on-shoring or friend-shoring (think critical minerals), or in emerging national security technologies that don’t have as much commercial application. And we definitely need to regulate and tax the AI companies and their customers. But gimmicky proposals to give 5% of an AI company to the government strike me as a transparent bid to avoid taxation and regulation—while taxation and regulation would ultimately raise more money for the government and result in more, and less political, oversight of AI than would equity. Plus, don’t get me started on the risks of Presidents appointing their cronies to the boards of AI companies, who will then prod the companies to develop AI that spits out politically favored results.

Trump’s new 301 tariffs will likely kick off later this month: The current 10% Section 122 tariffs sunset after July 23^rd, and my sense is that the U.S. Trade Representative is working hard to finalize the 301 “Forced Labor” tariffs to be ready to come into force, at a 10% or 12.5% rate (depending on the country), by July 24^th. Interestingly, given regulatory timelines, at this point those 301 tariffs will likely be the only tariffs in place later this month, since at this point USTR almost certainly cannot impose its planned “industrial overcapacity” tariffs as well until sometime in mid-August. (USTR has not yet released its report for that investigation, and it would need to subject any proposed tariffs to notice-and-comment processes). As a result, we probably will not see the full recreation of the President’s “IEEPA” tariff rates until later this year.

Of course, the 301 tariffs will, like Trump’s previous IEEPA tariffs and current Section 122 tariffs, be subject to litigation. While 301 is definitely a tariff statute and has held up well in the courts in the past, Trump is using it in a fundamentally new way that differs from Congress’s intended purpose, and this will be interesting litigation to watch.

Finally, let me know what you think. This is a new endeavor for me, and I’d welcome feedback. (And by all means unsubscribe if you have no interest).

Wishing you a very happy Fourth of July.