Abundance Agenda, The New Right, and 2008 Retrospective w/ Noah Smith

So, you know, I do think it has a constituency, and I do think it's getting lots and lots of excitement among Democrats, liberals, etc. You know, when people say 'the left,' I automatically think of like, you know, Palestine protesters and Bernie fans. But if you mean like the more generalized left of America — the Democrats, liberals, etc., that half of the country — then yes, I absolutely think it is gaining lots of currency. People are really excited. And I did not expect that, because I thought, A, it's too wonky, and B, it's optimistic at a time when Trump is just smashing lots of American things. Like, try telling Donald Trump that we need abundance, we need to build this and that, when Donald Trump is busy destroying the auto industry with tariffs. Like, who knows? He's doing the exact opposite. So obviously there may be people in Donald Trump's administration, buried somewhere in the administration, who are trying to fight NEPA or make it easier to invest in America, who really are hoping against hope that somehow tariffs restore American manufacturing to this magic that Trump thinks they exert. Maybe they still would believe in something like abundance. But no, primarily it's something we know isn't going to happen soon. Maybe we can make it happen on the state and local level — maybe we can do YIMBY stuff and maybe be more efficient with state government; all those things we can make it happen. But then I think there's this general attitude of pessimism: Trump is just destroying America, and so what can we do with abundance — happy, sunny, blah blah. This is what I expected. What I did not expect is that everyone is like, woohoo, this is awesome!

And looking at that enthusiasm that has materialized for Ezra and Derek's book, and this whole notion in general, I have a few ideas of why that's true, of what's catching fire with people. But they're all sort of retroactive explanations that I didn't expect, and so, you know, you got to take those with a grain of salt.

Right, so I think there are two things. Number one, abundance represents sort of the idea of national unity, the idea of we're all in this together. Because when you — Ezra and Derek don't really say this, and one of my problems was that they didn't say this in the book, but they could have said it, and it makes a lot of sense, and I think it's driving what a lot of people like about it: that it's something that, you know, it's not going to unite the country, but it's something where you think in a nationalistic way, you think in terms of like, let's make our country better. You don't think of abundance for this group, disabundance for that other group. It's not a zero-sum thing, it's not class warfare, it's not 'here are our class enemies, let's defeat them,' right? Or 'here are racial enemies, let's defeat them' — let's elevate this race and disempower this race, let's elevate this group and disempower this other group or this class, etc. It's not any of that. It is a uniting, not a divisive kind of thing. And I think people really yearn for that after the 2010s and what the Democratic Party has sort of become, and what the progressive movement has become. People yearn for something to unite us. And the last time we saw that was Obama's first term, you know, with like hope and change and blah blah blah, like end the Iraq War, fix the Great Recession, and, you know, reform healthcare. That was this uniting mission of Obama. And he made pretty good progress on all three, but that's a story for another day.

Obama, underrated president, because wokeness broke out in the second term. People remember that and get mad about that, but that wasn't really his fault.

Number one, the stimulus bill was good. Yeah, it was expensive, it increased the debt, which we should have gotten rid of some of later, paid back some of later, but it was the right thing to do at the time. Financial regulation: Dodd-Frank has some problems with it, but overall the derivative stuff in there was really good, and made a 2008 crisis in the future basically — no one even talks about that anymore. There were some problems with it, with the way it handles what banks are allowed to do and bank profit and things — anyway, we can go into that later. Dodd-Frank, good thing. Get out of Iraq, good. We weren't entirely out of Iraq forever, because then ISIS popped up, we went back in Iraq, kicked their ass, and then got out for real. But certainly this whole idea where Iraq is an American project and we have the green zone and all this stuff, which we had known during the Bush years — Obama got rid of that, and Iraq didn't collapse into some Islamic fundamentalist state. I mean, ISIS came and then they were defeated. Iraq also didn't turn into like an Iranian proxy — Iran still has proxy militias there — but you know, we won the Iraq War, okay? I know people like to say we lost the Iraq War, and it's understandable to say that, because it weakened our geopolitical position, divided our society, destroyed global norms, and got a lot of people killed. That's bad. The Iraq War was a bad thing, and I wouldn't have done it, but we did win it. And Obama sort of realized that and just got out, and that was the right move.

So that was good. And then, you know, Obamacare was pretty good. I would have done a lot more cost control stuff there, but if you look at healthcare spending as a percentage of GDP around the time we did Obamacare, it starts to level off. So it's not like it did nothing, right? And some of that's due to Obamacare, some of that's maybe due to saturation — people just deciding, 'I can't spend any more money on fMRI, screw this crap.' So there's confounding factors here, but I think Obama did a lot of stuff to address all the problems that we had in 2008, right?

Also, Obama was much tougher on immigration than George Bush had been, and deported a lot more people. And under Obama, the number of illegal immigrants in the country shrank by about a million — the total number of illegal immigrants in America shrank by about a million. And even the independent estimates that say the baseline number of illegal immigrants was higher than the public census numbers claim — which is realistic, because illegal immigrants will hide from the census takers, right? Even those people say, well, according to us — and they looked at border crossing data, Mexican data, and all kinds of other sources, and just collated all these other sources — even they said the number of illegal immigrants fell by like a million during Obama's term in office. So, you know, I don't think that any possible thing we could do to remove illegal immigrants would be good, right? But I think that overall that was a good strategy. Like, you know, we did deport a million people. So you want to call that a mass deportation? Sure. We deported almost entirely criminals. Sure. So Obama didn't actually change the definition to say like, 'oh, we turn people back to the border, that's a deportation.' Well actually, we sort of did something like that, but that was under Bush. Obama started a mass deportation of criminals program, and so that's one reason why arrest rates among illegal immigrants fell so much. And now you can have guys at the Cato Institute saying, 'look, illegal immigrants commit less crime,' and people are like, 'what?' It's because we took the criminal ones and we mass-deported them. We deported like a tenth of the illegal immigrant population — the criminal tenth, right? And I know this because my sister did that. My sister was a lawyer for the Justice Department whose job was deporting illegal immigrants who commit crimes.

Yeah, we did a lot of that. So anyway, Obama did a lot of stuff. It was reasonable, it was centrist, it was, you know, for the good of all Americans kind of stuff, right? Fix healthcare, fix the economy, get out of Iraq, all this stuff. It was Mr. Hope and Change. And then, like, this had nothing to do with him being black. He was actually a fairly conservative black guy. Obama was basically like Captain Sisko from Deep Space Nine. We got a conservative black guy to run the country, and just as Sisko got rid of the Dominion, Obama kicked out illegal immigrants. Sisko ended a war. Okay, now, Obama was the real Sisko. That's a new post for the future.

So that's actually correct. Obama did fail to — of course, I mean, Bush and Clinton also failed with this. So it was like everyone since the Cold War sort of had this delusion that China was going to be our buddy if we just open our markets to them, and Obama shared this delusion, and it didn't work out. But everybody else had that delusion too. And Bush was the worst, letting all the de-industrialization happen under Bush, basically. If you look at manufacturing employment under Bush, because China entered the WTO then — that's when China entered the WTO — that's what de-industrialized us. And that was in 2001, right? The real 9/11. It fell right off a cliff, US manufacturing employment. But then Obama continued that, and it was bad. And like, he and Michelle Obama made this wishy-washy documentary, American Factory, about how, well, actually the Chinese are just naturally good at making everything, what can we do? And it was very stupid, you know, because of the military angle. They just did not recognize China as a threat at all, they didn't understand that stuff.

And on Russia, they basically sat there and scolded Russia as Russia took over Crimea and the Donbas, and didn't stand up to them. Then they started arming Ukraine, which was good by the way — like, Ukraine did not have the chops to stand up to Russia at that time. Like, Ukraine can stand up to Russia now. And increasingly, without external weaponry, Ukraine is standing up to Russia. By the way, have you heard about this? Ukraine just went ham on drone manufacturing and now makes like a bazillion military drones a year, and is increasingly replacing artillery, riflemen, and missiles with drones.

Yeah, they have their own, like a million little Andurils. They have a whole ton of companies making drones, yes they do. And Anduril recognizes this and is now like, 'hmm, we should make drones in Ukraine.' And so Anduril is like learning from the Ukrainians right now how to mass manufacture, right? Because Anduril doesn't know how to mass manufacture. They know how to prototype, they know how to invent shit. They don't know how to make a million things of it and make it efficiently. And Ukraine is teaching them, and they will be good because of this. Nothing like existential crisis to spur innovation.

Right. And so, and then like America withdrawing aid — we paused aid back in like '24, right? We stopped giving them as many artillery things to shoot, and they were like, 'okay, well, what are we going to do instead of artillery?' And they're running out of guys, because like, Ukraine — Russia just has a lot more guys than Ukraine, it's a much bigger country, it's like four times the size. And so they're like, 'okay, we'll just use drones, drones, drones, that's what we got.' And Ukraine, by the way, has like the best engineers, computer scientists, programmers, and innovators in all of the Soviet Union, right? If you look at where the people who made all the great Soviet weapons came from, a hugely disproportionate amount came from Ukraine. So basically, when Ukraine left, it was like — they are, you know, the Iowa of the USSR, because they produce the grain, and that's what everyone knows them for, and that's what their flag actually is: it's a field of grain, blue and then gold. But then so it's a grain field, but they're also like Silicon Valley and Texas. Imagine like Silicon Valley and Texas and Iowa got together and seceded from America, and that was a country, and then the rest of America is just like, 'girl, we're coming after you,' but can't get it past NEPA. Like, imagine that — that's basically like Ukraine fighting off Russia.

That's right. It's something Americans can all get behind. And why do you do abundance? Because Americans deserve more. You deserve more because you're an American. You got a Confederate flag on your pickup truck? I don't give a shit — you deserve electricity, you deserve a house, you deserve it because you're American, even if you have some beliefs I think are stupid and bad. Like, I don't like the Confederacy, it's a piece of shit, but like, you got a Confederate flag on your pickup truck, you're still getting a cheap house, you're still going to get electricity. It doesn't matter, right? You're like, you know... okay, you're a rich person who lives in a suburb, cool, you get to have cheap solar power, you get to have cheap batteries, you get to have cheaper electricity. Maybe you don't need it because you're rich — you get to have it. You get to have like, um, maybe I should shill for Impulse, you get a cool stove, I don't know — but that hasn't made it into the abundance agenda yet, unfortunately. But anyway, like...

You know, rich people need the government to work too. It would be nice if rich people could take a train, like in Japan, you know, billionaires take trains. Why do they take trains? Because it's nice and clean and everything works and it's on time and it's great. You know, a billionaire in New York will not take a train, they'll take a taxi. Train is for the middle class. And that's a problem. That's still — enough people take the train in New York to sustain it, but like, the rich people should have the ability to take a train, the rich people shouldn't have to worry about where to park their cars, it's still annoying to cruise around looking for parking or whatever — park at the garage and walk, or whatever. If you're a rich person, you can have abundance too. Like, abundance for everybody. Obviously rich people are going to have to pay higher taxes — that's just part of living in a country that works. But currently rich people pay higher taxes for a country that doesn't work. That's a little worse.

So 2008, we had this giant financial crisis. Lehman Brothers failed, Bear Stearns failed, and then all these other giant banks were on the verge of — they got bailed out, okay, because they bought all these stupid bonds that sucked and died, that were based on housing. And those bonds eventually made money, but it took them like 10 years to make money, and they ended up making money for the Fed because the Fed took it all off their hands. So at this time everyone was scared. Banks were scared to lend, so companies couldn't get money. Companies were scared to invest for the future because they didn't know what was happening. Consumers were scared to consume because their wealth was evaporating, and because banks weren't lending to their employers, and their employers might fire them, and unemployment was up. So everyone was just scared as hell — not irrationally scared, but reasonably scared. You had a coordination failure in the economy; the economy broke down. In economics we would call this a liquidity preference shock. What that means is: liquidity is like cash, preference is like 'I want cash,' shock is like 'suddenly I want cash.' Look, I translated from economics-ese, right? Econ language. A liquidity preference shock: suddenly everyone wants cash.

And when everyone wants cash at once, no one's spending it. Everyone wants cash, like in the bank account, or preferably like under the mattress, right? Cash under the mattress, give it to me. But what happens if everyone takes all their cash and sticks it under the mattress instead of spending it? Well, what happens then is companies can't get money, right? You're not spending money on like a new bed, a new washing machine, a new car, a bigger apartment — you're not spending money on anything. And when you're not spending money on anything, then companies can't invest, right? Companies are going to scale back. When companies scale back, what do they do? They fire people and they cut salaries. When you fire people and cut salaries, what do people do in response to that? Well, they stop spending. So as you can see, it's a little bit of a cycle there. This is called an aggregate demand shock. This is aggregate demand because nobody wants to spend — aggregate demand shock, lower agg demand. That's just a fancy John Maynard Keynes term for nobody wants to spend. And if nobody wants to spend, nobody can invest, nobody can build, because no one wants to spend. So the government comes in and says, 'okay, I will spend.'

You know, so usually aggregate demand shocks are small, and what you do is you cut interest rates. And when you cut interest rates, that says, 'okay, well now it's easier to spend. I didn't want to spend, but damn, look at these low interest rates, I better spend.' You know, it's a little intervention, minor intervention. But then when you get something as big and catastrophic as a 2008 crash, especially when interest rates go to zero and you can't even cut them anymore — the zero lower bound, they call that, because interest rates can't go below zero. Like, you can't charge people negative interest on bonds — like, 'hey, take this bond that shrinks every—' No, I don't want it. And so you can't get people to take a bond that doesn't pay interest; they'll just take cash instead because it pays zero interest or whatever. Anyway, point being that when all this happens and the economy seizes up, interest rate cuts can't do the job. So you can do QE, which is basically the Fed prints money and buys bonds from people and hopes that that does something. And then that probably does do something. And of course you can also address the root cause of it by bank bailouts, and especially by the Fed's sort of stealth bank bailout, where they printed a bunch of money and bought all those shitty mortgage-backed bonds off of all the banks. That was the real bailout, by the way, and it didn't cost the taxpayer a dime. In fact, it made money for the taxpayer, because 10 years later, when the housing market recovered, those bonds suddenly made money, right? And so the Fed was just able to hold on to them for a long time, because the Fed can't go bankrupt, despite what Ron Paul and Rand Paul may tell you. Yeah, so anyway, point being that you need to get the government to spend money, borrow and spend money, and it's the spender of last resort.

So the government, what should it spend money on? The answer is infrastructure and payments to the states. So like the states do education stuff like that, so you give some money to the states to keep the teachers hired and whatever, but mainly you build roads, right? You build bridges and you build power lines and you build all these things. It's a time to build, right? And it's especially good as a time to build because remember, interest rates are really low during a depression — a recession where interest rates hit zero is basically a depression. So during a depression you've got these low interest rates, zero basically happens, and then the government can borrow really, really cheaply. Borrow cheaply, build productive things. Build infrastructure. You can get some effect just from having the government take the money, bury it in a hole, and have people come and dig it up, right? That's what Keynes talked about. You can get some effect from that; it's not zero. And this is basically a temporary tax cut — that's exactly what a temporary tax cut is: have people dig the money out of a hole. You know, you could just give the money to people, and that's a temporary tax cut. And Obama did lots of that, and honestly he did too much of that. More of it should have been in terms of building some productive thing, because if you pay people money to build you a road, then not only do you accomplish the objective of injecting money into the economy to sort of jump-start the cycle of spending, but you also get a road on top of that. And we did that. The one problem was that because in the Great Recession there was this imperative of get money into the economy, we weren't very efficient about getting roads for our money. We spent money on California high-speed rail, and that money went to consultants and shit. And that ends up being just a very unfair kind of tax cut — like a tax cut for consultants; it's lobbing money at their heads.

And so the way we rushed money out the door, we did not make sure we got value for money, and this ended up having problems down the road, because now, as Ezra Klein and Derek Thompson would tell you, we don't have good systems for making sure that stuff actually gets built. So, by the way, remember I said DOGE is mostly an ideological purge? But actually they may try to end cost-plus contracting, which is something that would actually really get America building more. And Trump may take some action against NEPA, and that may get America building more. So Trump may do a couple abundance things, through no fault of his own. But anyway, those will not cancel the tariffs. But anyway, that's another story. The story is that that was what Obama did, that was good, but it was a problem of a different time, and it created problems down the road. Like, FDR solved a lot of problems of the Depression, and a lot of the ways in which he solved that ended up setting us up for some problems down the road. But that's fine, that's how things work. In the Cold War we solved the Cold War by de facto allying with China against Russia, and that helped us win because it distracted the Russians and freed us up to focus only on the Russians. And so we won the Cold War, that was great, but it strengthened China in a way that would ultimately build them up as a rival. The solution to one era's problems plants the seeds of the next era's problems.

Oh, so like, FDR made unions — FDR made this deal with unions to basically allow people to unionize, but then he made it shop by shop. So essentially you have massive amounts of resources wasted on people fighting unions, instead of just the whole sector getting together. Like in many countries what they do is the whole sector gets together and basically sets wages, like all the fast food workers within this one city, right? We don't have that. We have every fast food joint in America has a fight over whether to unionize, and so it's a giant waste of resources. And so that was sort of... Social Security is not a fully funded pension system, right? It's a pay-it-forward system. That was necessary then because — it wasn't necessary, we could have borrowed a hell of a lot of money to fully fund an alternative to Social Security that was a fully funded system. But FDR was deep into austerity; he did not want the government to borrow money, and so he was a very fiscally austerity-minded person. And because of that, we had Social Security be a pay-it-forward system, which is fine for a while until population growth slows, right? When you have a baby boom, when you have a fertility rate above replacement, then a pay-it-forward system actually works really well. This is actually a very classic result in economics: that when you have higher fertility rates, a pay-forward system is actually the most efficient thing you can do. So baby boom, it's the most efficient thing you can do. But when you get slow population growth, it's like, you don't have enough young people to pay — you need the old people to pay for themselves instead of the young people to pay for all the old people. Pretty simple way of understanding that. But because we didn't want to borrow a shit ton of money in the Depression, have our government go into a lot of debt — and we ended up doing that anyway in World War II, we borrowed money, but we didn't want to do it for the Depression because FDR didn't want it — we ended up making this pay-it-forward system that now is going to bite us a little bit, and we're going to have to cut benefits a lot more than if we had fully funded it.

And it built up debt. So now, like, as long as interest rates are low, you can carry debt. So we came into the Obama administration with a debt of 60% of GDP, we left it with a debt of 100% of GDP. That was all in response to the Great Recession. That's a lot of debt. And that means the more of a stock of debt you have, the more sensitive you are to interest rate hikes. So that meant that if inflation ever returned — which, spoiler, it did — and the Fed has to hike interest rates to control the inflation, what happens? The interest rates start going up on all the government debt as you roll it over; you have to roll it over at higher rates, and then the interest on government debt starts going up, and government interest expenses go up, and it starts crowding out the rest of the budget, which is exactly what you're seeing now.

Well, so inflation erodes that number, because the debt is priced in dollars and inflation decreases the value of a dollar, so it decreases debt to GDP. Inflation basically adds fake GDP to our GDP, but then the number of dollars we owe — it's like, a dollar matters less, so it's easy to pay back a dollar because our GDP is higher. And yes, it's with funny money, but that funny money really allows us to pay back debt more easily. So inflation erodes debt. In fact, during Biden, the inflation during Biden was so high that despite the fact that Biden was borrowing and spending way too much money, you actually saw debt to GDP go down over Biden's term.

It's part of the answer. So it's a third of the answer. A third of the answer is going to be a period of extended higher inflation. That's not going to be fun, but actually we had that in the 50s and 60s — our inflation was higher than it is now, or than it was during the 80s, 90s, and 2000s. And it helped erode the debt of World War II, right? We lived with like 3% inflation during that era, or 4%, 3-4% inflation, and you know what, it was fine. We were a happy country anyway. And so it's not the worst thing, but it's going to annoy people, and it's going to last for a while. You see inflation persist — like, inflation's going back up now because of tariffs. Inflation last month was like four and a half percent. Welcome back — it wasn't dead, it's back.