Trump Hits Second-Term Low as Midterms Approach

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1:02Paul Krugman:I'm Ari Melber. We are tracking a lot of developments, and our special upcoming guest is Nobel Prize-winning economist and longtime author and New York Times writer Paul Krugman as Trump's poll numbers crash, going the opposite direction of these rising prices. But we begin with the music and that season that we are in. If you know what it means, another election night in America, depending on where you live. There are Americans going to the polls in four different states, some of them quite key when you look at the battlegrounds for the midterms. Florida, big one, Wyoming, Alaska, and one special election out there in California.

1:40Paul Krugman:Donald Trump is dragging down the Republican Party in these primaries and races. That is clear. New polling shows him at an all-time low of 33 percent approval. and the big, tough number for Republicans is that 64 % disapproval, a strong negative. And this is a party that has tied itself to Trump more than any other modern president. We all know about the loyalty, fear of Trump, the inability to confront him, which is becoming a drag in these midterms. Then you have the economy. Voters now trust Democrats over Republicans by about seven points. And it's no outlier. The six-point edge there on the Financial Times poll.

2:22Paul Krugman:Or if you check Fox News, right, margin of error, whatever you think about Fox's polling operation, they find Republicans down nine, Dems up nine, however you say it, it's a spread. Gas and oil is up. We're six months into a war that Donald Trump famously and falsely promised would have been long over by now. Many losing patience, including some Republicans who were speaking in Florida on the way to those primary voting opportunities I mentioned. This was today. What do you make of this war? Is it benefiting your life at all? It's absolutely ridiculous for you in there in the first place. It's my tax dollars, but I ain't got no choice.

3:03It's got to be fun, this war, that I didn't even choose. Are you benefiting from this war? No. Who's benefiting from it? Look at fuel prices. Hexet don't have an idea what he's doing. When you think of this war, what's the one word that comes to your mind? Absolutely unnecessary. Is the war helping your life at all? No. Well, I know. Everything is too expensive. Does this war feel America first?

3:31Paul Krugman:No.

3:35Paul Krugman:People know what's going on. Trump, meanwhile, enriching himself and then fixating on those vanity projects we keep hearing about. He was posting today about our work on the White House columns, he says, has gone beautifully. This is his focus. One of the things about his incessant use of social media, which many have said raise questions about why he's up so late, his mental acuity and other things. But it also does show where his head is at. If any Republican is running for Congress claiming, well, they're working on these issues, the prices are ending the war. It often doesn't seem to be the case out of the president's own mouth.

4:11Paul Krugman:I want to bring in someone that we rely on, especially to make sense of all these economic indicators, Nobel Prize winning economists. Paul Krugman, author of the Paul Krugman Substack, longtime writer and author. Welcome back. Hi there. When you see both the gas prices and some of these wider indicators, it looks like the Trump economy is not working great. What is sort of the signal to noise that you think we should focus on to understand where we are at? I mean, this is not, you know, the poetic justice, if it were a complete catastrophe economy. This is not the 2008 financial crisis. This is not the stagflation of the 70s, but it is not great.

4:55It is job growth is way, way down. Inflation is running persistently hot. And of course, the things that people can see, gas prices, diesel prices are even worse. And interest rates, try to get a mortgage, try to finance a car loan. This is not a good economy. And the contrast with what Trump promised, cut energy prices in half, he would stop grocery price inflation on day one, is immense. And the thing is, you know, we had we had some troubles in 2022 under Biden, but those were arguably not his fault. I mean, they weren't his fault. And this is absolutely totally. You know, this is one man did this.

5:40Paul Krugman:You mentioned loans. When you look at how a lot of folks who struggle to make ends meet and the gas prices really had people making tradeoffs this summer between, you know, canceling maybe one weekend trip with the kids or camping or whatnot. we've seen what looks like a migration to credit card debt. ABC has this headline about that rising over 1.26 trillion actually gets near an all-time record. How do you read that? What does that mean? I think what this is telling us is that a lot of people are under stress. You know, we look at the average and we find that wages have lagged prices, but only by a little bit according to the official numbers, but there's a lot of variation in that.

6:25And when you have things in, things doing as, when the economy is as relatively weak as it is now, when inflation is running hot and it's running much hotter for some things than others, there's a lot of people who are definitely hurting. So, you know, it's, we talk a lot about vibe session. Is this just bad feelings? And no, it's not. This is really, this is not an economy that is delivering. And again, the contrast with what people were promised has got to be hitting a lot of people hard.

6:56Paul Krugman:Yeah, you keep mentioning that, Paul, and I think it's pretty striking because, you know, when we looked at the exit polls in 24, which can be a bit more reliable than all of these early polls, we saw voters were laser focused on affordability and prices, as you mentioned. Trump ran on it, didn't do anything about it. Mom Donnie in New York ran on affordability as well, and he's getting criticized for how much he's trying to do about it. But I don't even think his critics would say he's not working on the things that he promised, whether that's different tax structures, other ways to meet people's needs in New York.

7:34Paul Krugman:I want to show GDP growth also slowing. So when you look at the big macro picture, you have that and you also have you see that slowing there. And then you have high U.S. debt. You've written before about how Republicans seem to talk about it when they're not in office. So there's no easy overnight solution there. But you have 40 trillion in debt and a slowing GDP. What do you see there? Okay. The interest rates are up. Probably there's a little bit, though probably not mostly, that the markets are starting to get concerned about the debt, but the deficit, which is the amount that you add to debt each year.

8:15The deficit is really, really high. I mean, this is not the biggest deficit we've ever seen as a share of GDP, but it is pretty much the biggest deficit we've had when there isn't an emergency. You know, we had a big deficit during COVID. Well, you know, a lot of aid had to be given. We had a big deficit after the financial crisis 15 years ago. But to have a 6 % of GDP budget deficit when, yeah, there's, I was going to say no war. There is a war, but it's not a, even by the scale of World War II, it's not an enormously expensive war when there's no national emergency, when the economy is, you know, sluggish, but not in a recession, that's crazy.

8:54And if you go and start to dig into that, you ask, why is the deficit so big? The answer is basically tax cuts between the various, you know, Trump tax cuts most recently, the big, beautiful bill, the ones he did in 2017, and some legacy still from W. Bush's tax cuts. If we hadn't had those tax cuts, we'd be fine in fiscal terms. So what drives me crazy, by the way, you show the polling. So, okay, we now have, by a seven-point margin, Americans think Democrats are better on the economy. Why is that only seven points? And why was it ever the other way around? If we go off the long history, I mean, we have a repeated cycle here where Republicans blow up the deficit, blow up the debt, act irresponsibly.

9:37Then a Democrat comes in and kind of fixes the mess, and then they do it again. And it's a tremendous, I guess there's still a public belief that billionaires must know something about economic management, because that's the only way I can make sense of this.

9:50Paul Krugman:Well, I think that's partly right. When you think about what the party's sort of macro reputation is, the GOP has been more tied to bankers and the 1 % and the prosperity. And so at least when times are good, that's an association. But as you say, whether that means that's delivered out to anyone else, I think is a big question. I'm curious where you stand on what is, at least in the public realm, and increasing skepticism of the way that our financial system is backing the AI and big tech in a rush. We've been reporting more on that. And while there may be great advances here over the long term that can help people if done responsibly, the rush, the piling on of the debt, and even some of the deregulation on the Trump side, rather than trying to get control of this, has a lot of financial questions.

10:42Paul Krugman:I'd love for you to tackle that. And then I'll mention in our viewers, I think, no, compared to, say, three or four years ago where this was all hypothetical, kind of, hey, someday it'll be like a sci-fi movie or the Jetsons. Now people are seeing these data centers in their community. They're seeing the addiction issues in social media and chat GPT and other things. And there's a lot more political grassroots skepticism. I give you the floor on all of that. Yeah. So, I mean, this what we're calling AI is it's amazing. I mean, I still remember when it was completely, you know, being able to hold what felt like a plain English conversation with a computer.

11:18That was unthinkable six, seven years ago. And there it is. And it does have its uses. But first of all, is it an epical, you know, transformational technology? Vertik is still very much out on that. You can see, actually, you see very little of it in the kind of productivity numbers. Now, maybe there's more to come. But even if it is, even if it does accelerate growth, that doesn't mean that these companies are going to get back all the money they're plowing in. So that's and there's a particularly one of the things you hear. It sounds mysterious, but what they call circular financing, which is that and the way I think about it, it's kind of as if it's the California gold rush.

12:02And the only people really making money are not the people searching for gold, but the saloon keepers and the brothel operators who are lending the prospectors the money with which to spend at their establishment. So is this a real business? And there's still a lot of that about the whole AI boom and lots of reasons to doubt that even if this is a successful technology, whether the companies are going to make money. And then there is this real sense, I think, that the opposite of the data centers is partly, you know, they're real. They use a lot of water. They use a lot of electricity. They do not bring jobs to the communities where they locate.

12:41So they're a bad thing. And then I think everybody, except for maybe 15 people in Silicon Valley, everybody feels that this stuff is being forced on our throats, that we didn't ask for this. And then you have a lot of governments, including the federal government under Trump, which are sort of saying, you must use this. And we're going to throw taxpayer resources behind this thing. And never mind the downsides, never mind the questions, which, you know, if only we would get that kind of treatment for things like health care. you know, things that actually help people directly. So this is, yeah.

13:17Paul Krugman:Let me get you, Paul, on the point you just mentioned, though, the financing, because, you know, people are hearing more about this. And if all this money is backed by all these big institutions and big enough banks, if it later crashes the economy or has other problems, it's going to affect all of us. And so you're referring to something we've reported on and the fact that some of the big chip companies who say, oh, we're selling this valuable stuff, are also organizing and backstopping, you know, they're sellers. And you're the economist, not me. But, you know, if you're selling ice cream in the summer, you usually have buyers.

13:50Paul Krugman:The ice cream truck doesn't also have to go convince people they want to buy this. And so at the risk of oversimplifying and stepping on your turf, can you give us your view of what level of a problem that is? The other day, the chip guy is saying they're going to get Goldman and other guys to give them half a trillion more to their potential buyers. Yeah, I mean, the scary thing here is, I mean, the big, the hyperscalers, the companies that are spending huge amounts, they start out. This is not some guy starting an innovative thing in their garage. This is pre-existing monopolists. We're talking about Facebook and Microsoft and Amazon are the big spenders.

14:30And they, before this AI thing started, they had huge, huge profits coming from the fact that basically we're stock using their products. And for a little while, it was, well, why should we worry? Because they have all this money and they're spending out of their cash flow. And maybe it's not the smartest spending, but what's the issue? But they're now all going into debt. They're now selling bonds. You have these sort of the most profitable companies in the history of the world having to go into debt to finance this massive spending on AI and related stuff. That should be, that's scary. I mean, it's given that the economic returns to this, and certainly the profitability returns are still very much speculative.

15:09We don't know. And if history is in a guide, a lot of this is not going to end up being worth it. Even if in the year 2030 or 2035, we all have AI on our phones and I'm not sure that's a happy prospect. But even if this is kind of a Jetsons future, that doesn't mean that the companies who are pouring in all this money are going to ever get their money back.

15:32Paul Krugman:Yeah, really great points and I think affects a lot of people. So we appreciate your sobriety there. Professor Krugman stays. We had Molly Jongfast on this conversation when we're back in 90 seconds. Sure. For the mountain kind, it's the peace and quiet of a winter forest. The joy of carving a beautiful ark across a freshly groomed ski slope. Warm smiles around the fireplace after a day on the mountain. discovering your new favorite dish in a historic charming town. It's all of the things that make a trip to Park City so special. Learn more at visitparkcity.com. Park City, Utah, for the mountain kind.

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17:50So I just say this. So for you to pay a tiny little bit more for your gasoline, So remember that when you have to pay a little bit more, you're at four dollars. It's OK. I mean, it's I'm not I'm not I'll ever apologize. I did the right thing.

18:10Paul Krugman:That's Donald Trump's message, not one that Republicans like with voters going out today in these primaries. We're joined by Molly John Fast and Paul Krugman is still with us. Molly, your view of where the economy is mattering in these races. Yeah. I mean, look, people don't like it when things are more expensive. And these gas prices are really a loser for him. And again, Trump never sold this war to anyone. He never went out and tried to make a case for it. And so you have people who, you know, you have shifting explanations from this administration as to why this war is happening. And that in itself is so, you know, you have him saying it's about nukes.

18:53You have other people saying it's about freedom. You have this, you have that. And again, if you know, if you need the American people to get on board with paying more, you have to give them a reason why you're doing it. Yeah.

19:05Paul Krugman:And Molly, you know, the professor mentioned that we're not quite at the peak of the 70s tagflation, but Trump increasingly has a Jimmy Carter style problem, maybe Carter light, but it's Iran cornering him. it's being out of touch with the actual facts, economic data, gas prices from Iran, and then a wider kind of inflation problem that he very much promised to fix and hasn't. Yeah, I mean, look, Jimmy Carter was in many ways an incredible peacemaker who went on to spend the rest of his post-presidential years doing amazing humanitarian work. Molly, hold on, I'm not talking about the peace. I'm talking about the sweater.

19:49Paul Krugman:Not the piece, but go on. Right, exactly. But yes, I think the point is apt. And look, these polling numbers are pretty much, I mean, they're historically low. And he is in, you know, he's in, yet again, a real problem of his own making, right? Tariffs, that was his idea, right? All of this foreign adventuring, that was his idea. You know, at every point, cutting government food surveillance so you have problems with the lettuce and the, you know, and the beef shortage. I mean, all of that was Trump. These were problems of Trump's own making. So in that way, it's different. But I do think that sort of period where he can't kind of get his sea legs with inflation is similar.

20:38Paul Krugman:Professor, your thoughts on any of the above? Yeah, I mean, actually, I would say that, I mean, Carter, it didn't work very well, but he did. You know, he called on Americans to be prepared to make sacrifices. And the sweater was about trying to say, I'm part of it. I'm going to live. I'm going to be in a not that well heated room and wear a sweater. does Trump ever show any sign that, you know, he feels our pain and he's planning to share the burden? I mean, this is, and he's minimizing it. I mean, it would be one thing. I don't know if it would work, but, you know, it's not a Churchill. I have nothing to offer, but blood, toil, tears, and sweat.

21:14It is, you're complaining, little people. Why do you care that you can't afford gasoline? And it's an amazing thing. And again, the kind of miracle is that his numbers aren't even lower. But this is a guy who, you know, is raking in billions through corruption and is showing absolutely no empathy. And he's got a cost of living crisis that is entirely of his own doing. So I'm in a way shocked that people, anyone still has, I mean, I'm not really shocked because we know about America, but still it is kind of amazing that even 33 % of the public has a positive view of what he's doing.

21:49Paul Krugman:Yeah, although as you know, in our polarized times, That's very low, Professor. Do you think there's something here where, yeah, the political polling is starting to follow the other kind of more hard data we have, which we discussed earlier in the show, the credit card debt, what people are going through? Yeah, some of the recent consumer, you know, we have various measures of consumer confidence, consumer sentiment. And they are showing for the first time a significant erosion even among Republicans. So, you know, what we know is, you know, in America, consumer sentiment is very much partisan, especially on the Republican side.

22:27They go from saying the economy is horrible to the economy is going great the day after the election. But now they are eroding, too. Now, it's still heavily tilted by partisan affiliation, but less than it was, which is saying that this is breaking through even to the person on the street.

22:47Paul Krugman:Yeah. Yeah. Really interesting. Again, when we follow that, including the results tonight, Paul Krugman and Molly Jong-Fast, my thanks to both of you. Coming up, we have the related story of MAGA voices turning against Trump. And after Kimmel won, apparently winning begets strength because ABC News is doing something really unusual. I'm going to explain. They're the ones taking Trump to court today. That's a brand new story we have for you as Rosie O'Donnell punches back on that very network.