The original space race was between the US and the Soviet Union; and for a long time (1960s-1980s) the Soviet Union launched the most rockets. By the early 2000s, the US and Europe ran at roughly the same pace in terms of the number of launches and payload (satellites) put into orbit. Now the US is far ahead of everyone, but China is coming up fast.

The sustained American success is not only the result of cumulative investments by NASA, but a concerted effort to have the private sector take the lead in the launch business. Also the European Union appears to have (arguably) underinvested in this activity. The US now has a lot more satellites than everyone else combined.

Does this confer a lasting advantage either on the US as a nation or on particular companies, such as SpaceX? The answer depends presumably on how other countries (and companies) respond – as well as whether Low Earth Orbit and Radio Spectrum Allocation can accommodate a lot more satellites. (Watch out for the Kessler Syndrome!)

How much of a broader innovation edge results from leading the way into space? There were great hopes for this in the 1960s — but then there were questions whether the evidence that the “space program helps economic development” was compelling. (Simon and Jonathan Gruber discuss this experience in Jump-Starting America.)

With SpaceX becoming so dominant in launch and low earth orbit communications, has the US political economy changed and even created the modern equivalent of an East India Company (as argued by Alessio Terzi and Stefano Marcuzzi)? Will this undermine the US process of creative destruction (as emphasized as a problem for Europe by Philippe Aghion, winner of the 2025 Nobel Prize in Economics).

Some additional reading:

This useful paper on the history of commerce in space: “Evolution of the Space Economy: Government Space to Commercial Space and New Space,” by Walter Peeters. Or read this Federal Aviation Administration 2023 short excerpt ‘Origins of the Commercial Space Industry’.

A comprehensive Report on the Space Economy, by the European Space Agency, covers 2023 and 2024.

A concise analysis of the current SpaceX situation and valuation, “Is Elon Musk’s SpaceX Really Worth $1.75 trillion?” by John Cassidy of the New Yorker.

Other resources we found useful include: Orbital Radar, and Jonathan’s Space Report (lots of raw data!)

And here is a link to Arthur C. Clarke’s 1945 proposal for Geostationary Satellite Communications. As for Howard Hughes, read this short bio ‘The Life and Legacy of Howard Hughes: Aviator, Filmmaker, and Billionaire’ or tune in to watch Leonardo DiCaprio’s portray Hughes in Martin Scorsese’s ‘The Aviator’.

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Watch here: ‘Gensler Flags Risks in SpaceX Debut’ 8:48

Gary says SpaceX’s record setting IPO is part of a new era of Mega-IPOs raising questions of valuations, governance, and the future of AI. He also highlights the Financial Stability Risks in Artificial Intelligence as well as the legal fights over prediction markets.

Join Gary & Simon on June 15 for their upcoming Episode 16: The Business of Space.

Later, in Episode 17 they’ll explore what the new era of AI Mega IPOs – SpaceX, followed possibly by Anthropic & OpenAI – means to the markets, AI development, the US, and you.

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CNBC ‘Squawk Box’ Interview on Regulating Sports Betting 10:14

Read Bloomberg’s ‘Gary Gensler Says Kalshi Is Flat Wrong: Sports Bets Aren’t Swaps’

Gary filed an Amicus in Kalshi vs. Schuler in the U.S. 6th Circuit Court of Appeals regarding the case between Kalshi, Ohio, and Tennessee over the application of state gaming laws.

The case boils down to the question of what, if anything, Congress did in 2010’s Dodd-Frank financial reform with regard to sports betting. Kalshi contends that Congress made the CFTC a nationwide sports betting regulator and denied states their traditional police power to regulate gaming, including sports betting.

The answer—from someone who was there—is that Congress did nothing of the sort.

Also John Lothian’s posted ‘Gary Gensler has now Weighed in Directly on Prediction Market Debate’ with this fun AI generated image:

Gensler Amicus 6th Circuit 6

847KB ∙ PDF file

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You can also listen to Gary & Simon discuss Prediction Markets in ‘Episode Five: Prediction Markets’

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Cuba has played an outsize role in American politics over the past 65 years, including: the Bay of Pigs (April 1961), the Cuban missile crisis (October 1962), the 1996 Helms-Burton Act, Elián González (1999), the partial thaw under President Obama, and that thaw being undone by the first Trump Administration.

What should we make of the current confrontation, including the message sent in Spanish by Secretary of State Marco Rubio on May 20, 2026 regarding “a new relationship between the U.S. and Cuba?'“

Will the US invade Cuba? Might the Cuban economy soon be crushed by the tightening trade embargo, including the severe limits on imported oil? Or could there be an amicable pathway towards economic reform and liberalization?

From the American perspective, is this more about a long legacy of messaging (Remember the Maine!) or the Donroe doctrine or electoral politics in Florida (and Republican primaries)? Is there any geopolitical rationale for wanting to overthrow the Cuban regime? If the US does exercise effective control over Cuban politics, and evicts military-backed GAESA from its leading role, will Washington provide generous aid or other means for Cuba to get back on its feet?

There is some macroeconomic information on Cuba available through the World Bank, but we would strongly caution against taking this at face value. Cuba withdrew from the International Monetary Fund in 1964; consequently, without IMF quality control, these data likely are inaccurate and perhaps misleading. Cuba is in deep economic and humanitarian crisis.

Here are a couple of classic articles for your consideration:

‘Cuba Refrozen’, by David Rieff, Foreign Affairs, July 1, 1996.

‘Farewell, Fidel’, by Michael J. Bustamante, Foreign Affairs, November 27, 2016.

And for summary assessments:

‘What’s Next for Cuba?’ A Project Syndicate roundtable, March 26, 2026.

‘Cuba on the Brink’, by Michael J. Bustamante, Foreign Affairs, Jan 1, 2026.

Along with some other recent articles representing a range of views:

‘Pentagon puts building blocks in place for Cuba invasion’, Paul McCleary, Politico, April 27, 2026.

‘Cuba’s Only Choice: A Deal with Washington is the Island’s Best Hope’ by Michael J. Bustamante and Ricardo Herrero, Foreign Affairs, May 29, 2026.

‘Attacking Cuba would be a huge mistake’, The Economist, April 27, 2026.

‘Ada Ferrer on Cuba: What Threat Can a Declining Cuba Be?’ Weekend Interview, Bloomberg, April 29, 2026

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Gary Gensler discusses Artificial Intelligence and the current Mega-IPO boom as SpaceX, Anthropic, and OpenAI all seek to go public. With U.S. AI infrastructure capital expenditures tripling in just two years to an estimated to be $750 billion this year — these firms will need to find sustainable revenue models to warrant these AI investments and their own targeted valuations.

Watch Bloomberg’s full interview here: ‘Fmr. SEC Chair: Giants Like SpaceX Need to Find Revenue Model’

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Over the past decade, there has been increasing debate over whether and how the US can or should use industrial policy – meaning policies that benefit particular sectors (or even specific firms). Over the past 250 years, the US has often said “we don’t do industrial policy”, but – arguably – the US has used industrial policy in every decade of its history. The question now is: what version will maintain political support? Everyone wants to strengthen national security and economic resiliency, but how much efficiency or fiscal resources is the US willing to sacrifice? How much are we willing to pay to promote sectors that we regard as strategically important?

On the history of American thinking underlying industrial policy, take a look at Ganesh Sitaraman’s essay, from September 2020 including this from Ganesh:

“The reality is that industrial policy is not limited to active planning or strategy … Tax breaks for specific industries, sectoral deregulation, tariff reductions, and global standards-setting can all have precisely the same effects.”

Alexander Hamilton’s contributed to the debate is his famous 1791 “Report on the Subject of Manufactures.” James Madison’s case for national infrastructure can be found in his ask to Congress for “internal improvements” in 1815. For Benjamin Franklin’s personal contributions to science, see this Franklin Institute material.

A more modern perspective on economic development-through-investment-in-science is best represented by Vannevar Bush’s Science: The Endless Frontier, published in 1945. In 2019, Simon and Jonathan Gruber published Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, recommending a big expansion of science – commercializing more ideas, building the ensuing businesses as much as possible in the US, and creating more good jobs for Americans. The experience with Sputnik is discussed in their Chapter 2.

For a look at industrial policy around the globe take a look at this recent World Bank report ‘Overview, Industrial Policy for Development’. In the podcast, we refer to a recent publication from MIT: Priority Technologies: Ensuring US Security and Shared Prosperity, edited by Elisabeth Reynolds. This includes material on critical minerals, semiconductors, drones, biomanufacturing, and advanced manufacturing. (Simon wrote the foreword.)

To understand the views of two of President Biden’s then most influential advisors on industrial policies read Brian Deese’s ‘Executing a Modern American Industrial Strategy’ and Jake Sullivan’s ‘Renewing American Economic Leadership’. To keep up on industrial policy discussions, as Gary mentions in the podcast, subscribe to the substack of Mike Schmidt, Todd Fisher, and Sara Meyers, ‘Factory Settings’.

Does China have an industrial policy? Most people would say: definitely, yes. If this assessment is correct, can the US afford not to have a matching policy, at least to some extent?

“The Malaise Speech” was President Jimmy Carter’s address to the nation on Energy and National Goals, broadcast July 15, 1979. As Gary mentions, this led to the rise and fall of the U.S. Synthetic Fuels Corporation. Energy policy, though, has remained important in shaping opportunities – for example, see this recent report on the development of the shale oil and gas sector.

We also mention Mariana Mazzucato’s famous Ted Talk, and Graham Allison’s even more famous idea the “Thucydides Trap”.

For the case against what they define as industrial policy, the Cato Institute has been consistent over the decades, including: in 2021, Questioning Industrial Policy; and at least as far back as 1984, with The Case Against “Industrial Policy”. Relevant also is Anne Krueger’s famous warning about the rise of a “rent-seeking society.”

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Gary Gensler discusses with Jessica Dean that it was never the intention of Congress in 2010 when passing post Great Financial Crisis Dodd-Frank reforms to cover sports betting or give the Commodity Futures Trading Commission, which he then chaired, authority as the national gaming authority. Gary shares that the then Senate Majority Leader, Harry Reid of Nevada, ‘would have thrown us out of his office if we had asked for such authority.’

You can also listen to Gary & Simon discuss Prediction Markets in ‘Episode Five: Prediction Markets’

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Former CFTC Chair Gary Gensler discusses the President’s call for the Commodity Futures Trading Commission to have exclusive authority over prediction markets’ sports contracts.

CNBC ‘Squawk on the Street’ full interview with former CFTC Chair Gensler 11:26

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When we started researching and teaching about AI in the late 2010s, there were policy debates about AI ethics or what later came to be called “responsible AI.” In those years, as machine learning was increasingly used in decisions about who gets opportunities in our economy — e.g., consumer loans, entry to college, employment, healthcare, or insurance — responsible AI was mostly about the accuracy, bias, and explainability of the algorithms. Given AI’s insatiable use of data there also were concerns about data privacy and surveillance.

As AI capabilities have increased since the release of ChatGPT in late 2022, public expectations — and unease — have expanded, leading to broader definitions of what “responsible” AI might mean moving forward. There is now growing concern about deepfakes and intimate imagery, as well as about AI’s impact on mental health, on children, and education more broadly. The impact on jobs also looms large.

The public also is increasingly concerned about the business models of AI companies, including the boom in data center investment, effects on electricity prices, and the potential for AI agents to run amok. While numerous U.S. states have enacted AI related laws, many in the AI industry have resisted the imposition of meaningful federal legal safeguards, but public opinion may now be shifting. Further, companies using the preview of Anthropic Claude Mythos coding model have uncovered thousands of bugs in their own software — highlighting the real risks of threat actors using AI to disrupt critical parts of our economy.

What is the right public policy response? How is it best to both promote the public good and innovation? Are there ways to steer AI development in a better direction? What exactly would that involve? And how does the technology race with China play into these considerations?

Gary has written and spoken extensively about a wide range of analytical, business, and public policy issues in the context of AI. Here are some of his most relevant items (listed in reverse chronological order by medium):

Podcasts

‘On AI in Finance’, EconoFact podcast with Micheal Klein, May 3, 2026

‘Episode Seven: Artificial Intelligence’, Power and Consequences podcast with Simon, April 14, 2026 (i.e., part of our podcast series, within which we expect to have many discussions of AI).

‘Trump, Trade, and AI Growth’, VoxTalks Economics podcast, January 2026

Writings

‘Artificial Intelligence Development and Policy Landscape’, December 2025, published as part of our co-edited CEPR volume, The Economic Consequences of the Second Trump Administration.

‘AI, Finance, Movies, and the Law’, Yale Law School Remarks, February 13, 2024

‘Isaac Newton to AI’, National Press Club Remarks, July 17, 2023

‘Deep Learning and Financial Stability’, with Lily Bailey, November 2020, which might seem like a long time ago but still has quite a bit of relevance.

Short Videos (3 -4 minutes each), when Gary was Chair of the Securities and Exchange Commission: part of Office Hours with Gary Gensler. Released February-October 2024.

AI, Investors, Issuers, & the Markets

Systemic Risk in Artificial Intelligence

Fraud and Deception in Artificial Intelligence

Conflicts of Interest in Artificial Intelligence

AI Washing

Simon also has written about AI, for example in Power and Progress: Our 1,000 Year Struggle Over Technology and Prosperity, with Daron Acemoglu, which attempts to put this latest technological transformation in broad historical context (actually more than 1000 years!). The mini-comic version of this book, which emphasizes the issues through the lens of what AI may bring, is available for free via the MIT Stone Center for Inequality and Shaping the Future of Work.

And here is a link to Geoffrey Hinton’s Nobel banquet speech from December 2024 discussed in this podcast. It is chilling. Everyone should read it.

Note: In this episode we don’t focus on the key issue of how AI will impact jobs. We covered this in part of episode seven of Power and Consequences (linked above), and plan to pick this topic up in a further episode (or more than one!) soon.

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When he steps into his new role, Mr. Warsh and the Federal Reserve will face a high dose of significant economic uncertainties: the Iran War supply shock; the Artificial Intelligence infrastructure investment demand shock; and continuing uncertainties related to tariffs, declining net migration, and the precise extent of fiscal stimulus from last year’s tax bill. Regarding AI, Mr. Warsh recently wrote that it may lower prices (or slow inflation) and could create the space for interest rate cuts. Former senior officials Jared Bernstein and Janet Yellen (both Democrats) caution that AI currently is driving an investment boom, tending (all other things being equal) to create inflationary pressure. The difficulties surrounding the reopening of the Strait of Hormuz also means that energy prices are likely to stay higher for longer.

Adding to these substantive economic debates, Mr. Warsh faces the challenge of maintaining Federal Reserve independence. Mr. Warsh may reasonably be considered to have been somewhat of a hawk historically, i.e., someone who puts relatively more weight on controlling inflation. But how will he square these views with the position, stated many times, by President Trump that interest rates – short-term and longer-term – should be significantly lower, and that the Fed Chair should make this happen?

Mr. Warsh also has expressed his share of criticisms of Fed policy in recent years. Though he supported extraordinary measures by the Federal Reserve in the immediate aftermath of the 2008 Financial Crisis, by 2010 then Governor Warsh was of the opinion that “expanding the Fed’s balance sheet is not a free option.” He supported strong action by the Fed in support of the economy when COVID arrived, but subsequently argued against the expansion of quantitative easing and spoke out in favor of tighter Fed policy in 2021-22.

The long-standing views of incoming Chairman Warsh on the Fed are clearly articulated in an April 2025 speech to the G30, available through the Hoover Institution. This includes the position that, "The Fed has acted more as a general-purpose agency of government than a narrow central bank."

Mr. Warsh is strongly not in favor of the current size of the Fed’s balance sheet and what this implies for the operation of monetary policy. As we discuss in the podcast, trimming the size of the Fed’s balance sheet, while it bears consideration, is likely to put upward pressure on long-term interest rates, the key benchmark for mortgages.

Shrinking the Fed’s balance sheet may also face resistance from other Fed Governors. For one such view, see this speech last week by Fed Governor Michael Barr. If this is not enough Fed speeches for you, try this speech by Chairman Jay Powell and this speech by Governor Christopher J. Waller!

We covered the basics of central banking in Episode Two: The Federal Reserve and Monetary Policy which includes an accompanying newsletter with links to reading that can help you dig deeper into particular issues.

In 2010, Simon and James Kwak published 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, arguing that deregulation played a key role in encouraging risk-taking and overleveraged bets placed by big banks in the run-up to the 2008 crisis. The subsequent Dodd-Frank financial reforms made the financial system safer on multiple dimensions. More recently, however, the Federal Reserve has proposed updated rules that might allow banks to carry more debt relative to loss-absorbing equity buffers. For more on this, see Simon’s testimony to the House Financial Services Committee in December 2025. (Simon is co-chair of the CFA Institute Systemic Risk Council, a group of former officials and financial market participants that focuses a great deal on the direction of regulation for big banks in the U.S.)

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We are happy to share additional content here on central banking, as suggested by Eileen Tipoe and her colleagues at Core Econ (Curriculum in Open-access Resources in Economics) a UK non-profit distributing educational/textbook materials for free. (Simon is on the board.)

· CORE Insight ‘Too big to fail’ explores the global financial crisis and subsequent reforms aimed to address the problems that arise when banks become too big to be allowed to fail.

· CORE Insight ‘Financing American government’ Sections 4-7 explain how the Federal Reserve conducts monetary policy; Sections 1-3 focus on the Treasury and government borrowing.

· The Economy 2.0, Unit 5.9: ‘Monetary policy and inflation targeting’ discusses central bank independence and why it is crucial for inflation targeting.

· The Economy 2.0, Unit 8: ‘Economic dynamics: Financial and environmental crises’ Sections 8.4-8.8 discuss the US housing price bubble; Sections 8.9-8.10 discuss financial system instability and the role of central banks.

Watch on YouTube here: ‘Winning the AI Race is Not Enough’

MIT Professors Simon Johnson & Elisabeth Reynolds discuss ‘Priority Technologies; Ensuring US Security and Shared Prosperity’ their recent book project on how six technology sectors may determine the future of America’s leadership.

You also can listen here on Bloomberg Talks: Simon Johnson & Elisabeth Reynolds

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The transformation of China since the late 1970s is simply amazing. From being a poor country, left behind by the industrial revolution and then traumatized by invasion, followed with decades of communist misrule, China has become the world’s second largest economy. Extreme poverty has substantially been eradicated, and a large middle class has emerged. All of this has been made possible by a tight focus on exporting manufactured goods – with 17 percent of the world’s population, China now accounts for perhaps 35 percent of world manufacturing output (that statistic is the share of gross production; China’s share of world manufacturing value added is 29 percent in the latest available data).

Weaknesses, though, are also apparent. Wages of less skilled workers have long been held down—i.e., not everyone has participated equally in the decades long boom (and China has become almost as unequal as the US). While China’s current account surplus is not at its record peak as a share of the economy, it is still around 3.5 percent of Gross Domestic Product; this remains a source of friction with trading partners. Further, the Chinese government has a large budget deficit; its “cyclically adjusted primary balance” is minus 7 percent of GDP, and general government gross debt is about 100 percent of GDP. (All of these macro numbers and more are available from the IMF data mapper.) In addition, the Chinese property market is still a mess.

Some additional reading that we would like to recommend:

-Former MIT President Rafael Reif has observed the rise of science and technology in China, and recommends that we take it seriously including by increasing our commitments to invention.

-In Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, Jonathan Gruber and Simon argued that China is taking pages from the playbook that made America prosperous and the #1 technological superpower after 1940. The U.S. should respond by … increasing its commitments to invention, tapping talent all across the United States, and building more American companies based on new ideas.

On the rise and fall of Japan’s share of global manufacturing, “The World’s Top Ten Manufacturing Nations Since 1970” and its headline graphic are quite informative.

Here are some good background notes on issues for the summit:

-from Patricia M. Kim at the Brookings Institution on Five Things to Watch;

-from the Council on Foreign Relations on the US-China Trade Relationship;

-and big picture from the US-China Economics and Security Commission.

One issue, though, may overshadow everything at the summit: the US-Iran conflict and how to reopen (and keep open) the Strait of Hormuz. For more on this issue and why/how China might decide to help, please see “Is A Lasting US-Iran Deal Now Possible? Overcoming Time Inconsistency and Political Debt Overhang”, Policy Insight 150 from the Center for Economic Policy Research, by Simon and Amir Kermani.

And here’s the “Joint Statement Following Discussions With Leaders of the People’s Republic of China,” dated Shanghai, February 27, 1972.

Simon’s science fiction recommendation for this week is The Three-Body Problem, by Liu Cixin. The material about science during the Cultural Revolution is particularly compelling.

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Watch here: ‘SEC Moves to End Quarterly Reporting Requirement’

Former SEC Chair Gary Gensler joins David Gura and Christina Ruffini to discuss the SEC’s recent proposal to allow public companies to file semi-annual reports rather than quarterly — a hallmark of U.S. capital market transparency for ninety years.

Gary also discussed China - U.S. relationship in the context of President Trump’s upcoming visit with President Xi of China.

You also can listen to Gary & Simon discuss China in our upcoming Episode Eleven on China and China - U.S. relationship.

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The May 3rd article is available here: ‘Trillions in Retirement Dollars Flow Into Opaque Trusts’

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This pressure on the rule of law is evident not just in the United States – it is part of a much broader process of “backsliding” across a wide range of democracies. In recent decades, we’ve seen presidents, prime ministers, and other elected leaders move to centralize political decision-making at the expense of legislatures, the judiciary, political opponents, the media, and civil societies. Along with this, we’ve seen legal systems used to pursue opponents and reduce access to due process for some or all people. Where backsliding happens, there is typically an increase in corruption.

In the U.S., we’ve also witnessed the Trump administration’s unprecedented assertion of executive power - through what’s known as the ‘unitary executive theory’ - which has fundamentally shifted the relationship between the president and White House staff, on the one hand, and administrative agencies and their personnel on the other.

Democratic backsliding, centralization of authority, and related executive supremacy is likely to damage economic growth and undermine shared prosperity. In turn, this can lead to more frustration – and political extremes that can further undermine legal systems, civil liberties, and productive investments. Can the rule of law - as opposed to the “rule of men” - again become predominant? How exactly?

In terms of further reading, we recommend the following:

Susan C. Stokes’ book, The Backsliders: Why Leaders Undermine Their Own Democracies, is excellent on the broader process seen over the past 1-2 decades across many countries.

On where institutions (including and supporting the rule of law) came from, and why it proved so advantageous when the rule of law held for most people, you can watch Simon’s Nobel Prize lecture (this link includes the slides), or read it.

For the Massachusetts Constitution of 1780 and a really interesting discussion of its context and the influential thought of John Adams, see this page.

Both Gary and Simon recommend during the podcast: John Coates on The Rule of Law, which was Chapter 2 in our edited CEPR volume on The Economic Consequences of the Second Trump Administration. This is a wonderfully concise exposition of all the main points, applied to the modern United States.

For the current balance of power within the executive branch, see Presidential Supremacy Over Administrative Agencies, by Gary and Lev Menand, which was also a chapter in our recent CEPR volume. Not without reason, in the podcast Gary refers to himself as the “last chair of an independent Securities and Exchange Commission.”

For the Louis Brandeis story, mentioned by Gary towards the end of our discussion, see this fascinating account.

For more on the Magna Carta and its role in the development of limits on arbitrary rule, see this explanation from the UK Parliament. Keep in mind, though, that between 1215 and the emergence of modern democracies in the nineteenth century, there were many kings (and their acolytes) who claimed there was some sort of “divine right” that permitted or encouraged the chief executive to do whatever he (or she) wanted.

For more on what happened to shared prosperity in the United States (and elsewhere), see the discussion in Power and Progress: Our 1000-Year Struggle Over Technology and Prosperity by Simon and Daron Acemoglu, particularly chapters 8 through 10. Also available (for free!) is the mini-comic version, which highlights the role of technology in history and again during the age of Artificial Intelligence. There is a real risk that the current path of development and deployment for AI will further widen income inequality — and increase disaffection in a way that feeds political extremism.

Gary Gensler joins EconoFact Chat’s Executive Editor Micheal Klein to discuss ‘On AI in Finance’ — the opportunities, risks, & challenges.

You also can listen to Gary & Simon in ‘Episode Seven: Artificial Intelligence’

Or Gary in this VoxTalks Economics (January 2026) podcast: ‘Trump, Trade, and AI Growth’ or read his Artificial Intelligence Development and Policy Landscape (CEPR Press, December 2025).

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We discuss the key question of this moment, for the midterm elections, and beyond: who actually pays the taxes that are known as tariffs? The answer is… well, listen to the episode on any podcast platform or by downloading the audio file here.

We put developments in historical context and explain how we have financed our recent current account deficits. Spoiler alert: foreign residents like investing in the U.S., although we do need to worry about how much of that investment is productive.

We also walk through the basics, including important jargon such as the balance of trade, the current account, the balance of payments, and “Most Favored Nation”. All helpful material for when you read about trade policy or get drawn into a debate on the topic. If you want even more substance, look at the range of views discussed below.

Here’s Gary’s speech from 2023, linking strong capital markets (including proper regulation of those markets) with the international role of the U.S. dollar – and our ability to finance current account deficits.

In our conversation, Gary highlights this important essay by Michael Strain of the American Enterprise Institute, arguing that the positive impact of the Trump tariffs on US manufacturing is likely to be limited, at best.

For more on historical US trade Deficits, you can consult this source (the Federal Reserve Bank of St. Louis is typically reliable).

In recent months, Simon wrote two op eds on these issues with Stan Veuger of the American Enterprise Institute:

• on the legal and economic problems with the Liberation Day tariffs imposed in 2025. A majority on the Supreme Court seemed to listen to arguments such as these when ruling that these tariffs were illegal.

• on the latest (2026) arguments put forward by the Trump Administration, justifying their so-called Section 122 Tariffs

These op eds respectively drew on amicus briefs that Simon and many other economists signed – thanks again to Stan for his leadership on these.

• before the Supreme Court, in Learning Resources/V.O.S. Selections

• in the US Court of International Trade, Burlap and Barrel case

How do tariffs affect prices? See this piece from the St Louis Fed. And the work of Alberto Cavallo on this topic is excellent and typically definitive

To go even deeper on particular dimensions, we recommend:

‘State of Tariffs’, Yale Budget Lab, March 9, 2026

‘National Trade Estimate Report on Non-tariff Barriers and Regulatory Capture’, Coalition for New Trade, March 2026

‘Adapting Trade Policy for Supply Chain Resilience’, USTR, January, 2025. (For our MIT class, we required reading pages 1 – 9).

‘Supply Chain Resilience’, Katherine Tai, Remarks at the National Press Club, June 2023 . Katherine was US Trade Representative under President Biden.

In the CEPR volume on the (Preliminary!) Economic Consequences of the Second Trump Administration that Gary and Simon helped to edit in 2025, see these chapters which all address the burning issue of who really pays for tariffs:

• Kim Clausing: on the distributional consequences of the Trump tariffs.

• Marcelo Olarreaga and Sara Santander: Who Pays for US Tariffs?

• Arnaud Costinot and Andres Rodriguez-Clare: What you really need to know about tariffs.

And for even more reading!! (All from ’TheEconomic Consequences of the Second Trump Administration: A Preliminary Assessment’, CEPR Press, December 1, 2025.)

• ‘From MFN to “Reciprocal Tariffs', Kevin Hjortshøj O’Rourke, Chapter 22.

• ‘Trumpian Tariffs- What, Why, What Next?’ Richard Baldwin, Chapter 23.

• ‘Second Round Estimations of the Effects of Reciprocal Tariffs’, Bouët, de Vaulchier, Guimbard, Mitaritonna, and Zheng, Chapter 25.

• ‘National Security Tariffs on the Auto Industry’ , Head, Mayer, Vicard, and Wibaux, Chapter 29.

Gary Gensler discusses with Richard Quest charges brought against an Army soldier involved in planning the US raid on Venezuela’s leader Nicolás Maduro in January and then allegedly bet $32,000 on prediction markets making over $400,000 on insider information. Having been CFTC Chair on the insider trading laws used to charge the sergeant, Gary shares that more needs to be done by Congress to better promote trust in markets and our government.

You can learn more by listening to Gary & Simon discuss Prediction Markets in ‘Episode Five: Prediction Markets’

The newsletter that accompanies our podcasts frequently recommends material from the book we co-edited in 2025, The Economic Consequences of the Second Trump Administration, A Preliminary Assessment, published by the Center for Economic Policy Research (the Second Edition came out in December!). The hard-working team at CEPR has now made it possible to download individual chapters (although you are still welcome to download the entire book for free from the CEPR website).

By episode, here are the relevant links.

Episode 1: Immigration

• ‘Immigration and Border Policies’ Anna Maria Mayda and Giovanni Peri, Chapter 4.

https://cepr.org/chapters/immigration-and-border-policies

• ‘Rural Economies and Communities’, Mary Hendrickson and David Peters, Chapter 19.

https://cepr.org/chapters/rural-economies-and-communities

Episode 2: The Federal Reserve and Monetary Policy

• ‘The Financial Sector and Global Dollar System’, Gary Gensler, Lev Menand, and Joshua Younger, Chapter 10.

https://cepr.org/chapters/financial-sector-and-global-dollar-system

• ‘The Federal Reserve, the New Administration, and the Outlook for the Economy and Monetary Policy’, William B. English, Chapter 11.

https://cepr.org/chapters/federal-reserve-new-administration-and-outlook-economy-and-monetary-policy

• ‘Dollar Dominance and the Trump Administration’, Steven B. Kamin, Chapter 12.

https://cepr.org/chapters/dollar-dominance-and-trump-administration

Episode 4: Is Greenland Next?

• “Greenland” by Bo Lidegaard, Mira Kleist and Nick Bæk Heilman, Chapter 37.

https://cepr.org/chapters/greenland

Episode 7: Artificial Intelligence

• Artificial Intelligence Development and Policy Landscape, by Gary Gensler, Chapter 7.

https://cepr.org/chapters/artificial-intelligence-development-and-policy-landscape

Episode 8: Why Don’t the Wealthy Pay More Taxes?

• “Fiscal Policy and Debt Sustainability,” Antonio Fatás and Ugo Panizza, Chapter 9.

https://cepr.org/chapters/fiscal-policy-and-debt-sustainability

• “The Aftermath of Tariffs”, by Kim Clausing, Chapter 24.

https://cepr.org/chapters/aftermath-tariffs

Thanks very much to everyone who worked on the book — and on making these research findings so readily available!

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In our latest Power and Consequences podcast episode, we (Gary Gensler and Simon Johnson) discuss the US tax system, with a focus on how it developed over 250 years – and where it may go next. Discussions about taxes can sometimes seem a little dry or even boring, but our take is that nothing is more important if you want to understand who has power and what this means in modern America.

America has long been seen as the land of opportunity in which rising up the income, social, and wealth ladders has been an important aspiration for many people. But why do wealthy folks pay less tax than in some other countries … particularly when they paid significantly more tax relative to their income/wealth in the 1950s and 1960s? When did attitudes and politics change to allow repeated tax cuts for the very rich? Is it sustainable for the wealthiest in American society to have lower average tax rates than people who live on substantially less money?

Could the next turn in American politics be towards reducing taxes for middle income people? There is plenty of rhetoric about this from the Second Trump Administration. Their tariffs, though, are a regressive consumption tax (falling more on the less well-off) and their overall package of changes so far disproportionately favors the very rich. There are signs that Democrats are becoming interested in new tax cuts, focused on middle income people and families.

If taxes are cut further, what will happen to our budget deficit? What might that imply for the path for our national debt that may already be unsustainable? We’ll explore these questions and more in upcoming podcasts on U.S. debt, deficits, and the dollar.

For a class session recently at MIT Sloan, we assigned the following three items.

“Tax Reform After the One Big Beautiful Bill Act”. David Kamin, Tax Notes Federal, November 10, 2025. David is one of the country’s leading tax law experts; he and Gary have worked closely together in the past.

“Fiscal Policy and Debt Sustainability,” Antonio Fatás and Ugo Panizza, Chapter 9 in The Economic Consequences of The Second Trump Administration: A Preliminary Assessment, CEPR Press, December 1, 2025. Please go to the book’s website and download entire the book (it’s free!) and then locate the chapter: Two Europeans take a hard look at American public finances.

“Tax Refunds and the One Big Beautiful Bill Act” Erica York and Garrett Watson, Tax Foundation, January 15, 2026. An excellent primer on the 2025 tax legislation.

For a broader read on taxation, try “The Price of Democracy: The Revolutionary Power of Taxation in American History” by Vanessa Williamson of the Brookings Institution.

And for another deep dive into the history, including how exactly the evolution of the international financial system allowed American debt to become so large, take a look at “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You”, by Simon Johnson and James Kwak.

Here’s the paper we discuss, “How Much Tax Do US Billionaires Pay? Evidence from Administrative Data”, by Akcan S. Balkir, Emmanuel Saez, Danny Yagan, and Gabriel Zucman. In a long set of papers by themselves and with colleagues, Saez and Zucman have changed how many people think about these issues – and about potential policies.

And here’s a paper by Kim Clausing and Mary Lovely explaining why tariffs are regressive and attempting to anticipate what will be the effects of the Trump tariffs, when these finally settle down. See Figure 6 on p.15 for the bottom line. See also Kim Clausing’s chapter “The Aftermath of Tariffs” in The Economic Consequences of the Second Trump Administration.

There are two proposals for a different approach to tax cuts now circulating. For both the Yale Budget Lab offers detailed assessments.

-On “Senator Booker’s Keep Your Pay Act”, by Yale Budget Lab, March 12, 2026. Estimated to cost $5.4 trillion over 10 years.

-On “Senator Van Hollen’s Working Americans’ Tax Cut Act”, Yale Budget Lab, March 12, 2026. Full proposal “would be budget-neutral over the next decade.”

You also may wish to read this New York Times article published just after we recorded this podcast: ‘Are Democrats Becoming a Party of Tax Cuts?’

And here’s Simon’s Science Fiction recommendation: A Memory Called Empire by Arkady Martine. A compelling vision of what happens when technology makes a society productive but power remains concentrated (and the rich don’t pay much tax)… in Arkady Martine’s compelling version, it’s a return to imperial pomp and power, with unbelievable wealth alongside tragic poverty.