transcript

Speaker 1:
[00:06] From the historic campus of Hillsdale College in Hillsdale, Michigan, where the good, the true and the beautiful are taught, nurtured and honored, this is the Radio Free Hillsdale Hour, bringing the activity and education of the college to listeners across the country.

Speaker 2:
[00:24] If we can make real cuts to government spending and therefore to borrowing, because all marginal spending is borrowed, and also rain in the Fed, make all those things happen and you can get inflation back down.

Speaker 3:
[00:37] This is your host, Scot Bertram. Welcome to the Radio Free Hillsdale Hour. That was EJ. Antoni. He's chief economist with the Heritage Foundation board heritage.org. We talk in depth with him today about the economy, present and future. Also later on in today's program, Nathan Herring from Hillsdale's Physics Department tells us about the great physicist, Michael Faraday. First, we're joined by EJ. Antoni. He is chief economist at the Heritage Foundation board heritage.org. He's here on Hillsdale's campus as part of our annual business conference, sponsored by the Hutchinson Center for Commerce and Freedom. EJ., thanks so much for joining us.

Speaker 2:
[01:16] Scott, my pleasure. Thank you for having me.

Speaker 3:
[01:18] I look forward to talking to you a bit about the topic of your lecture here, which is prospects for economic growth and a few other matters as we go along the way. For listeners who aren't following closely economic data every day, like you do on your X feed, there are all sorts of charts and graphs there. How would you describe the current state of our economy in plain terms?

Speaker 2:
[01:39] Oh, goodness. I would have given you a very different answer than two months ago. That's for sure. I was extremely bullish on the year. We really had, I think, all the dials lining up. Everything seemed to be, almost everything seemed to be pointing in the right direction. And unfortunately, the Iran War has really just thrown the economy a huge curveball. Really, really has. I like to say, I think the philosophy majors will appreciate this here on campus, that low oil prices were a necessary, but not sufficient, condition for the president's economic agenda and for really strong economic growth. That's gone now, right? That has been completely thrown out the window. So the outlook has become extremely mixed. And not only that, Scot, but if we look at the confidence interval here, in other words, all right, what's the lower bound and what's the upper bound? In other words, we think economic growth outlook is going to fall somewhere in this range. That range has broadened enormously to the point where recessions are back on the table for this year. I think it's unlikely, but it's certainly back on the table. The reason for that is because nobody has any idea how the heck this war is going to play out. Nobody has any idea what's really going to happen. We keep hearing all these announcements of things like ceasefires. And then it turns out it's not true. Or one side says it is, and another side says it's not. And the strait is open, the strait is closed. I mean, it's just, it's just, oh my gosh, it'll give you a headache just trying to follow it. Because it changes minute by minute.

Speaker 3:
[03:06] Right. And I've heard other economists say, and I would imagine you agree, one thing markets hate is uncertainty. And if there's one thing that the Iran War has brought us, at least temporarily, it's a bit more uncertainty.

Speaker 2:
[03:18] Oh, yeah, a bit. That's yeah, that's the understatement of the day, right? So you're absolutely right. Markets hate uncertainty. And unfortunately, that's what we have in spades right now. Now, I will say markets do seem to be pricing in that the war is not going to last forever, that it's going to be more or less resolved over the next few months, and that oil prices are going to be back down. A lot of times, people get confused because they see the oil prices on the news, and those are typically for futures contracts. In other words, you're looking at oil that's going to be delivered. Typically, it's like two to four months in advance, depending on which contract you're looking at, depending on whether you're talking about the global benchmark or the American benchmark for oil, etc. But if you look at dated prices, in other words, this is crude oil getting delivered immediately or close to it, those prices are still up 120, 130 in some cases. In other words, because of the shortage that exists today, not four months from now, but today, refineries are beyond desperate to get their hands on product today because we're missing a fifth of the world's supply. So, you're having to see all of the supply come out of stockpiles, whether that's the strategic petroleum reserve here at home or private stockpiles here and abroad. Japan's got an enormous stockpile, so that's really been helping them weather the storm for now, at least. That's the dynamic that's at play right now.

Speaker 3:
[04:42] On the topic of the AI revolution, there is necessary and needed energy to power the data centers that power artificial intelligence, and there's lots of conflict and lots of debate over those data centers across the US. From a purely economic perspective, is there an incentive to have those centers shored somewhere inside the United States as opposed to elsewhere?

Speaker 2:
[05:07] Well, I think you're seeing that right now with the conflict with Iran, right? Where they have launched missile strikes at different data centers within the region and are threatening to do more. So, yeah, there's definitely a risk, absolutely, I think. Well, I should say depending on where you located. Obviously, there are, I think, some overseas locations that would be a heck of a lot safer. But the reason why you're seeing data centers in some of the places you are is because you want them near energy sources, because it is a purely energy intensive industry. So that's where the push for fast tracking small modular nuclear reactors here at home is, I think, really gaining steam. No pun intended, because you do want to minimize things like transmission, because there's energy loss associated with transmission, right? So you want it right there at the source. And unfortunately, this is coming at a really bad time, because we're not building all of these data centers on the back of four years of a Trump economy with an energy boom. No, we had exactly the opposite under Biden, where coal, oil, natural gas were all getting hamstrung, and they were subsidizing wind and solar, which are terrible matches for these data centers. And so at the same time, you have this ramp up in demand, you have seen a decline in supply. And it's not just a decline in overall supply, but it's a decline in reliability, which is also a huge, huge problem. So again, it's that double whammy of lower supply, higher demand. And that's where you're getting these big increases in prices today in terms of electricity rates.

Speaker 3:
[06:53] EJ. Antoni with us, Chief Economist for The Heritage Foundation, more at heritage.org. Talk housing a bit. That's a major issue. And there's lots of people complaining about the cost of housing, of course. I saw you post this past week, though. Sediment has fallen in April, consumer sediment when it comes to housing, prices are being cut, foot traffic has declined. So what's going on right now in the housing market?

Speaker 2:
[07:15] You know, when we look at surveys, both of homebuilder sentiment and then also the different consumer surveys, and there's there's a bunch out there, whether it's, you know, the consumer sentiment survey, consumer expectations, right? There's there's a lot. But in all of these different surveys, what we're finding is that the housing market just basically remains frozen over, right? The violent changes in interest rates that we saw, the Fed keeping rates way too low for way too long. And all of their money creation allowed people to bid up the price of homes to never-before-seen levels. And then the very fast rate at which they had to raise those rates caused essentially this bizarre situation where people have golden handcuffs. They're trapped in their home. They can't sell their house because they're sitting on a mortgage rate below 3%. Selling it means they're going to get a new mortgage at literally twice the interest rate. They're not going to be able to afford the same kind of home. And, you know, it's become a huge, huge problem. And so unfortunately, the only way to get out of this is going to be for home prices to decline. And in some ways, it will be a repeat of, you know, 2007, 8, 9, where a lot of folks are underwater. And that's just the harsh reality. This is the problem with government manipulating markets, right? But yeah, that's what it's going to take is going to be home prices coming down. And you are actually seeing that in a few markets, particularly those where you have seen local law enforcement cooperating with federal law enforcement to get rid of illegal aliens. Now, you know, unfortunately, the federal efforts there really seem to have fallen off a cliff to a certain extent. So I don't think the deportations are really going to continue much. So you're not going to get help there in terms of reducing demand by removing illegal aliens, but where you are going to continue to see help, and this coincidentally is a lot of the places that have been removing the illegal aliens, it's places where they're building. You look at Austin, you look at Dallas, Dallas, Fort Worth, I should say, you look at Miami, you look at Tampa, places where they, Phoenix, places where they have been building, like just going gangbusters on construction, and now all these housing units that they started construction on a couple of years ago, they're now all that supply is coming online, and that huge increase in supply is driving down rents, it's driving down home prices, and that's where you're finding affordability. They're really the only kinds of places in the nation where you're seeing any kind of affordability in terms of the housing market right now. So again, prices have just got to come down to make things more affordable, otherwise it'll take literally decades before incomes increase to the point where that's going to make up for the increased home prices. I mean, literally, there's only a handful of major metro areas in the entire country where the median household income today can afford the median price home.

Speaker 3:
[09:57] EJ. Antoni is with us. He is Chief Economist with the Heritage Foundation, more at heritage.org. We'll continue our conversation with him in just a moment. But first I want to remind you to make plans now to see Revolutionary America in theaters, May 31st, June 1st and June 2nd. Revolutionary America is the debut for Hillsdale College on the big screen. It tells the story of the American founding, the greatest political achievement in history. The documentary is produced by Hillsdale Studios, narrated by Tom Selleck and it features interviews with prominent scholars and commentators who will help you see the Revolution through the eyes of the Americans who lived it. Expert commentary, historical documents, compelling cinematography, and beautiful music experience the Revolution like never before. hillsdale.edu/film. Find a theater near you and get your tickets for Revolutionary America. hillsdale.edu/film. May 31st, June 1st, June 2nd. At a theater near you, find more at hillsdale.edu/film. EJ. Antoni continues with us. He's chief economist for the Heritage Foundation, heritage.org. EJ. Prices and prices at the pump, prices at the grocery store, they are not rising as high under President Biden, clearly, but they are still rising. People feel that and they're not seeing prices decline. Is there any real way to cause those prices to decline without some economic catastrophe to cause that to happen?

Speaker 2:
[11:38] Well, this is one of the reasons why the economic forecasts have just altered so much with the Iran War. If we look at a lot of different prices, the inflation rate had basically gone to zero. In other words, they had stopped going up and some of the inflation rates had actually started turning negative before the Iran War. In other words, prices had actually started coming down. And if we looked at the trends and if we looked at supply chain information, et cetera, it was very clear that a lot of food prices that had basically stopped increasing were set to decline later this year. Now with the Iran War, all of that's gone out the window. A lot of that has to do with the fertilizer crisis. We talk about the oil crisis and we should, but the reason we're talking about it is because it's so apparent. Every time we go to fill up, which for a lot of us is every single week, so even more than that, you're hit with it, right? You know, it hits you right in the face because you can see the price of the pump. You're seeing how much it takes you to fill up. But what about the fertilizer crisis? We have lost almost, roughly, the same percentage of global fertilizer output as global oil output as a result of this conflict. But nobody's talking about it. Why? Because it hasn't hit the consumer yet. Farmers are seeing it, but it's not going to trickle down to food prices for several months from now. So come September, October, and later depending on the food product we're talking about, that's when you're going to start to see the higher food prices picking in as a result of this conflict. And again, it's very unfortunate, and it's not just food, it's a lot of other things. I mean, think about everything that we use, or I should say, think about everything that is made out of oil and gas, right? It's not just fertilizer. Every, plastic is everywhere in your life, right? All the price of plastics is going up. You're seeing chemical blend stocks that are used to make those plastics have already increased as a result of the shortage. But it's going to take a while to work its way through supply chains from the raw materials to the manufacturing processes. It's got to go to the wholesaler and then to the retailer before the consumer finally sees those price increases. Look under Biden, you had blowout government spending and the Fed printing tons of money right away in his administration. Inflation doesn't peak for another 18 months. Again, these things take time and unfortunately, you are going to see in the months ahead sustained inflation because of what has happened with Iran. It's just the unfortunate reality that we have to grapple with now. Now, sorry to get to your other question though on is there a way to not have this bad inflation? Unfortunately a lot is just baked into the cake at this point and energy prices are not going to go back down to where they were before the war. They will go back down but not quite as low because at this point you have had energy infrastructure damaged or destroyed. So that's supply that's going to be offline for a while. Qatar, for example, has a gas field that's going to take three to five years to get it back to its previous levels of production. OK, so again, that's just baked into the cake. But if we can actually get Doge back, if we can make real cuts to government spending and not add another 200 billion dollars with a Pentagon supplemental, you know, make real cuts to spending and therefore to borrowing because all marginal spending is borrowed and also rain in the Fed. Hopefully, Kevin Warsh will do that if he is confirmed later this year. Make all those things happen and you can get inflation back down. But I mean, that's tough. It is not easy to to put the toothpaste back in the tube.

Speaker 3:
[15:18] Yeah, EJ. Antoni with us, Chief Economist for The Heritage Foundation, heritage.org. We hear a lot about productivity when it comes to the strength of our economy. Why is that such a key factor? How is the US doing on that front?

Speaker 2:
[15:31] Well, productivity is where we get real wage growth. You know, if you can be more productive, and I'm experiencing this right now with AI, I can tell you firsthand, although, you know, anecdotes are just that, but it's also borne out in the macroeconomic data. Individuals are becoming more productive as they use AI. You know, I personally am able to literally take on additional projects now that I previously wouldn't have had the time for because I've become so much more efficient. And what is that doing for me? Well, it's increasing my income, and it's doing the same for a lot of folks. You're seeing it much more, obviously, in white-collar industries than you are in blue-collar, but it's just like going back to blue-collar for a second. If you were to hand a worker on an assembly line, power tools, when he previously only had hand tools, he is going to be so much more productive. So that capital investment makes the worker more productive. And now, because he's more productive, he can command a higher wage. And so his income goes up. And that's exactly now what's happening with AI. It's just happening in the service sector predominantly instead of in the manufacturing sector. And yes, you're gonna see some job destruction because of that, but you're also seeing job creation. And the job creation outweighs the job destruction. So all of that to say the AI revolution is increasing productivity in a big way. That's a driver of economic growth. That's where you get real wage growth. People are better off as a result of that.

Speaker 3:
[16:57] I heard economists for years warning about the national debt and saying, well, you're not gonna like it when interest rates rise, the service that debt. We kept adding debt. Interest rates have now risen. So, how big of a problem is the national debt? Is it a drag in our growth or a drag in our potential growth down the road when we're pushing closer to $40 trillion?

Speaker 2:
[17:22] Oh, it's a huge drag, and it's a huge problem. And this is where, though, I will say, you know, Scott, I really fault a lot of the fiscal hawks and people who, you know, I'm sure they had the best of intentions, but they've been the boy who cried wolf for so many years. I mean, literally, for, what, four decades, we have had people on our side, friends and allies, who have been saying, like, this is going to be apocalyptic. But they kept assigning dates to it, or, you know, they'd come up with certain thresholds like debt as a percentage of GDP, which I hate that measure, by the way, because it's comparing a stock and a flow, and those things are not the same, right? It's apples and oranges to a certain extent. But they come up with all these different, you know, kind of red lines. And as we keep crossing them, everybody says, oh, well, I guess it's not that important, right? And then they think the national debt doesn't affect them. Well, did the 40-year high inflation caused by the national debt, did that affect you? I think it did. So, but regardless, it is absolutely impacting growth. It is artificially pushing up interest rates, which clearly impacts growth. And we are spending a tremendous amount of money now, well over a trillion dollars, right? I think we're going to run at about $1.3 trillion dollars this fiscal year to finance the debt. In other words, to pay the interest on it. So yeah, I'd say that's a drag on the real economy. I'd say that's an expense that we could be using for other things. Absolutely. EJ.

Speaker 3:
[18:49] Antoni with us. He's Chief Economist at the Heritage Foundation, heritage.org, as we are almost halfway through, approaching halfway through the second Trump term. What kind of decisions will be before this administration on an economic front that he might have to confront? And which ones will be most durable? Which ones can last if there is a change in party power in the White House?

Speaker 2:
[19:16] Oh, that's a good question. Now, I suppose take all this with a grain of salt because I'm a monetary scientist, not a political scientist, right? But I have to imagine that when the Democrats get power, things like the filibuster are just going to go out the window. You know, and I'm not even, I'm not even like a huge fan of the filibuster, honestly, because like, why was the Missouri Compromise such a big deal, right? It was because the Senate only needed 50 plus one votes, 50 percent plus one, obviously not 50, because there weren't 100 senators back then, we didn't have 50 states, but it was 50 percent plus one. So it's not as if the filibuster was enshrined in the Constitution by our founding fathers. I feel like we have this reverence for the filibuster that, I'm not sure where it comes from, I guess, but whatever the case, I just, again, I have to imagine that as soon as the Dems get back into power, they will blow up the filibuster and ram through literally whatever they want. With all that as background, I'm not sure how durable anything is going to be. We're trying to cobble together another reconciliation bill this year. Why? Again, why not just say, we're done with the filibuster and go back to 50 plus one and voila, just pass a regular bill? In fact, not just one spending bill, do all 12. Do regular order and get everybody on record. I'm sick of this lack of accountability for people in Congress. So the president's facing a lot of headwinds, though, not politically, back to economics. He's facing a lot of economic headwinds, virtually all of which are stemming from this war with Iran. Again, two months ago, I would have said the dials are really lining up here. Regulatory reform, tax reform. I think we're on the right track with the budget, not that we're where we need to be, but again, we're on the right track. We're moving in the right direction, at least. And now, unfortunately, I think the budget's moving in the wrong direction. It seems like we've kind of given up on deportations, which is troubling, because that was also helping on a lot of fronts economically. I'm hoping that we can get more tax reform done with another reconciliation bill. We will see. And I hope they really keep their foot on the gas in terms of deregulation. So again, it's a very mixed outlook. And I would love to say that the president has a nice laundry list of things, or a bucket list, that he could get done that would be durable and long lasting. But I just, I don't know. Again, given where the Democrats are, I have to imagine they're just gonna blow up the filibuster as soon as they get in. And nothing's durable at that point.

Speaker 3:
[21:58] Yeah. On the labor market, we see jobs reports each month, a little up, a little down in places. We look inside, and I hear people talking about, you have to look at the difference between the private sector jobs created and the public sector jobs created. What do those numbers look like and what are the trends there, what should that indicate to us?

Speaker 2:
[22:16] One of the difficulties with looking at these jobs reports is that if you do only look at the headline, it can be very deceptive. Under Biden, particularly the second half of the Biden administration, they were adding so many federal bureaucrats that it was goosing the jobs numbers. And so it made the economy look like it was great. The labor market, I should say, looked like it was great. Like we're adding all these jobs. They're just a bunch of government workers doing nothing productive. How is that helping anybody? So that was very, very bad. Now under Trump, though, we've seen exactly the opposite. I mean, they've axed more than 10% of the federal workforce. You have to go all the way back to 1966. Six decades ago, I'm not exaggerating, to find a lower print in terms of the number of private payrolls, or excuse me, public payrolls, so government sector. That's been really, really tremendous for freeing up all of that labor. However, it is dragging down the headline jobs number. So again, what looked great under Biden was actually a sign of decay. What looks bad under Trump is actually a sign of the reprivatization and therefore growth of the real economy. Now, that being said, even the private sector job growth over the last year has been lackluster. We just got to recognize that that's the truth of the matter.

Speaker 3:
[23:29] EJ. Antoni, you've co-written a piece at Heritage about the impending crisis for social security, which is another issue we've heard about now for a couple of decades. What should we know and what can be done about the impending crisis?

Speaker 2:
[23:45] So, essentially, we're only a few years away here from the trust fund running out. And the whole trust fund thing is, I mean, it's just garbage marketing, right?

Speaker 3:
[23:53] There's no lockbox. Yeah.

Speaker 2:
[23:55] I mean, the whole thing, the whole thing was just a giant basically advertising scheme cooked up by the Roosevelt administration to try to sell the American people on what is literally a Ponzi scheme. If you, if your business plan was literally identical, Scott, literally identical to Social Security and you tried to create a business like that, the government would not allow you to do it. And if you did have a business like that, the government would shut you down and throw you in jail for fraud. Because again, it is a literal Ponzi scheme. People who are retired today are not paid for by the savings that they paid into the system. They are paid for by today's workers. And so as long as you have this exponential growth in population and therefore people working and people paying into the system, the system is theoretically sustainable. You need that, again, that exponential growth rate because that is how you keep a Ponzi scheme going. Well, as soon as that stopped, which basically stopped with the baby boomers, as soon as birth rates started to decline, they didn't even have to go. You didn't even have to get negative. In other words, you're below replacement. Even before that, just declining birth rates meant the system was doomed. And look, the future at this point, the future has arrived. We're literally only a few years away from having to do mandatory cuts. In other words, it's not that checks are gonna stop going out, but you're gonna see a smaller check. So if you're a retiree right now who's already getting your check, guess what? Your amount's gonna get cut in literally just a few years here. That's where we are.

Speaker 3:
[25:31] I've seen a few studies look at the potential effect of the partial privatization of social security proposed by George W. Bush, which did not go anywhere at that point 20 some years ago. Is that an idea still worth pursuing and expending political capital on? Would that help to solve the social security problem?

Speaker 2:
[25:51] Yeah, I think it's the only solution, honestly. And it's a relatively clean solution, too. Look, here's the big problem that you're gonna have to wrestle with, though. Again, because the system is set up as a Ponzi scheme, you are... Let's look at it as like a free enterprise business here. Imagine somebody coming to you and asking you to invest in a fund and saying, look, I already have a bunch of investors in the fund, and I need you to invest in the fund so that I can pay them the money I promised them. And you say, okay, what's my rate of return gonna be? Oh, no, no, no, you don't have a rate of return. You're not actually gonna get anything back from the fund. You're not even gonna get your principal back. Wait, excuse me, what? What? No, no, I'm not investing in that. Well, that's basically what we're gonna have to ask people to do. We have already promised all this money to retirees and even people who are close to retirement because honestly, how do you pull the rug out from somebody like that, right? So you're basically gonna have to force young people who are paying in right now to continue paying in and acknowledge to them, look, sorry, nothing's gonna be there for you. You're not actually gonna get a return on this. Now, exactly how you do that functionally, what that looks like, I'm not sure if you just get rid of those particular payroll taxes and you just take it out of the general fund and you have to increase marginal tax rates. I'm not exactly sure what the best way to do that is. Unfortunately, there is no good way to do it because it's just a terrible problem and there are no good answers here. But that being said, I think Trump accounts are, or something like them at least, is a really good off ramp here. What you're going to have to do is say to people, all right, you're going to take some of your money, you're going to put it into the market, and you are going to get a really great rate of return because that's what our market does in the United States. And unlike Social Security, where you have a net negative rate of return, the vast majority of people anyway, you're actually going to have a positive return and a very large positive return. And so I think that is probably your only viable off ramp. To say to people, look, you're not going to have Social Security, but you are going to have something better, at least. And then from there, then you can transition into making the program completely voluntary. Where you say to people, look, if you don't even want to put money into the system, then fine. Then you don't have to. If you want to go do something else, totally fine. Maybe instead of putting money to the market, if you have a business idea, you want to just put it into that or maybe you just want to do real estate on your own. So it's not even that you're putting money into the market via a REIT, a real estate investment trust. But maybe it's, no, I just want to manage my own real estate period. So again, I think that's basically the only way to get out of this. That's the transition steps you have to take. Number one, you got to get rid of Social Security for younger generations while still requiring them to pay in, which is obviously really tough to sell politically. Everybody's got to have something like a Trump account and then eventually just make that optional.

Speaker 3:
[28:58] Let's try to end on a positive note, perhaps, which is...

Speaker 2:
[29:01] Well, then let's talk about something other than economics.

Speaker 3:
[29:03] Well, I'm going to give you a chance to spin your own yarn, so to speak. Crystal Ball, next five years, what's the best case scenario? Sketch out what would be a best case scenario for the US economy over the next few years.

Speaker 2:
[29:17] Oh, goodness. I would say, starting with today, you got to end Iran. You got to... I don't mean end the country. I mean the conflict. You got to just get the heck out of there. Cut your losses. If, you know, frankly, if they want to toll the strait, who cares? Let them, even at the higher end of the rates they're talking about, it amounts to only about a dollar a barrel in terms of oil, right? Obviously it'll be different for other types of cargo, but it's a dollar a barrel. So what? I mean, that's that's not much that is that that's, you know, a what, a percent and a half. I mean, it's going back to prewar rates. Yeah, it's insignificant. Let them do it. Who cares? Get the heck out of the Middle East. And that goes for a lot of different regions around the world as well. Get America the heck out and then just drill baby drill here at home. Fast track the energy infrastructure. We have so much energy we need to get back to being not just energy independent, but energy dominant. And we talk about how we're a net exporter, right? And that's true in terms of oil, but only if you include oil derivatives like gasoline, diesel, and other kinds of fuels that you distill out of and create out of oil. If you just look at crude, we're actually a net importer still, which is one of the problems with all these supertankers coming here now to fill up and people think, oh, that's great. Where's the oil coming from? I mean, our net production is something like half of what was previously flowing out of the Strait of Hormuz. So even if we kept no oil for ourselves, which obviously is impossible, but even if we did that, you're still not going to be able to fill up all these tankers. So we're just depleting all of our reserves to do it right now. So energy dominance has to be part of it. It just has to. Look, energy affects the price of everything we do and everything we buy. That's why during Trump's first year, we were seeing such great downward pressure on inflation, that unfortunately has now been reversed and we're dealing with the opposite. But get rid of, sorry, let me put it this way. Get energy prices back down. That's a huge help. And then you just got to go after government spending. I mean, with forget the scalpel, it needs the chainsaw. It really does. It needs the hatchet. So cut like crazy. Continue cutting the number of government workers and also cut regulation like crazy. The deregulatory efforts of this administration, I think, are the it's kind of the unsung economic hero, so to speak. So they really need to continue to keep their foot on the gas in that regard. And as far as monetary policy goes. Undo as much as you can, everything that has happened since really Greenspan or pre Greenspan, no more too big to fail, no more bailouts. We forget Greenspan was really the start of that with long term capital management in the 90s. You got to start undoing all of that. You got to get back to a stable dollar. No more 2% inflation target that was dreamt up in New Zealand. Basically, it was what they thought they could get away with. No, let's go back to actually having stable currency. Ideally, obviously, there's no central bank at all. But if you're going to have a central bank, at least give it that that stable currency mandate. So, you know, look, you you make progress in all of these areas five years from now. I think you are looking at something like a golden age, as opposed to just a gilded age.

Speaker 3:
[32:38] EJ. Antoni is chief economist for the Heritage Foundation, heritage.org here on Hillsdale's campus, part of our annual business conference sponsored by the Hutchinson Center for Commerce and Freedom. EJ., thanks so much for joining us.

Speaker 2:
[32:51] Scott, my pleasure. Thank you for having me.

Speaker 3:
[32:54] Up next, Nathan Herring from Hillsdale's Physics Department tells us all about the great physicist Michael Faraday. I'm Scott Bertram. This is The Radio Free Hillsdale Hour. Welcome back to The Radio Free Hillsdale Hour. I'm Scot Bertram. Be sure to find us on X. We're at Hillsdale Radio. You can find more about Hillsdale College Audio at HC Podcasts. We're joined by Dr. Nathan Herring, Assistant Professor of Physics at Hillsdale College. Dr. Herring, thanks for joining us.

Speaker 4:
[33:38] Oh, my pleasure. Thanks for having me.

Speaker 3:
[33:39] We continue our profiles of great physicists, and today talking about Michael Faraday. Why is Faraday considered one of the most important experimental physicists in history?

Speaker 4:
[33:50] Yeah, Albert Einstein once remarked that Michael Faraday was, in his mind, inarguably the greatest experimental scientist in human history. That's an extremely bold claim. Why do people make that claim? And it's because Faraday's experiments were not only very ingenious, and we'll talk a little bit later about what are some of the things he did, but very creative approaches to building off of work that his predecessors had done, but then also extremely detailed in his analysis of what was done. His lab notebooks were so clearly written that later thinkers could just take the notebooks and use them to reproduce the experiment for themselves. So he just had a great experimental practice, and then also the things he discovered were truly revolutionary. So for that, you can't ask for a better career as an experimentalist to do an experiment that makes a lasting impact and to do it in a way that other people can check your work and verify that you've done it correctly. Yeah, it's just a gold standard.

Speaker 3:
[34:55] What were Faraday's biggest discoveries? How are they still shaping science and technology today?

Speaker 4:
[35:01] Absolutely. So Faraday begins his scientific career as a chemist. And he actually discovers a number of chemical compounds. He's working in the lab of Sir Humphrey Davies as his research assistant. He discovers a number of chemical compound, new chemical compounds involving chlorine and carbon. And he's the first to discover the organic compound benzene, which is an important hydrocarbon that appears in substances like petroleum. He is also the first to introduce the concept of the force field. This idea of an extended substance that fills all of space, that can exert forces on other things. So this field concept today is central to how we understand fundamental physics. He introduced it as a way of visualizing the electrical and magnetic interactions that he was investigating. And then he uses this concept, as I said, in explaining the results of his various electromagnetic experiments, which leads to the discovery of so-called electromagnetic induction. And this is the mechanism which allows you to generate electricity from magnetic effects. And this is the principle behind which our modern electrical plants produce the power that powers our world. So we are literally using Faraday's discovery right now to keep the lights on in this building, to record this interview. This same principle is also behind electrical transformers. You know, many neighborhoods, you'll have a transformer. Box nearby, it can explode in the winter when it gets very cold here in Michigan. But these transformers allow you to convert large electrical voltages to smaller electrical voltages or vice versa. And so they're extremely important when you are, you know, you have one source of electricity that you want to use to power many different types of electrical components. And then he also used his discoveries to build the first electric motor, right? So which was an example of how you could convert electrical energy into the mechanical motion of a macroscopic object. And of course, electrical motors are used all over the place in modern engineering. Yep.

Speaker 3:
[37:07] Faraday came from very humble beginnings. He had very little formal education. How does someone like that become such a towering scientific figure?

Speaker 4:
[37:16] Absolutely. Faraday is a great story. I think Hollywood should make a biopic about his life. He's just really an incredible person. The more you learn about him, the more you admire him. He was born in 1791 to an extremely poor family in London. His father was a blacksmith. His family did not have the ability to send him to formal schooling. So he basically just learned how to write and read and do very basic arithmetic. His fortunes changed a little bit when he was 14 and became the apprentice to a book binder. And what this allowed him to do is read a bunch of books because as the office he was working for were binding these texts, he could read them. And so he made great advantage of this and embarked on an extremely detailed and rigorous course of self-study, reading voraciously in topics, particularly in the sciences, chemistry and physics. In particular, he was apparently captivated by Jane Marsit's Conversations on Chemistry and Isaac Watts' Books on Logic. He started doing his own kind of small experiments at home. And this is where he develops his technique of just keeping very detailed accounts of what he's seeing. He develops the ability to sketch very well, to draw his experimental apparatuses that he's using. In 1812, a customer of the bookshop that he's working at, gives him tickets to attend a lecture by Sir Humphry Davies, who's a preeminent chemist at the Royal Institute. And he attended the lecture. He took meticulous notes, copied them into a bound volume, and then sent them to Davy, Humphry Davy, along with a request for a job. And Davy was impressed. He did initially reject Faraday because of his lack of formal schooling. But after being injured in a lab accident, he recognized that this young man would be the kind of perfect assistant who could carry out the work that he was envisioning. So he was hired as an assistant in Davy's lab in 1813. He initially experienced a lot of mistreatment. Davy sort of treated him like essentially a slave, a scientific slave to carry out the investigations that he was envisioning. But access to this laboratory equipment did afford Faraday the chance to do some of his own studies. And he did so and began to kind of keep his own notes. Eventually, Davy introduces him to some other leading physicists of the time, other popular scientists such as Ampere. And in doing so, Faraday got to learn about what sorts of questions were of importance in European science at that time. And so he begins doing his own investigations. Like I said, he publishes those results, and they pretty quickly game, garner him national and international acclaim. And so he uses that to then launch his own career. He eventually becomes elected to the Royal Society and becomes a professor. All of this, mind you, without technically holding any university degree in any subject.

Speaker 3:
[40:26] Talking with Dr. Nathan Herring about Michael Faraday, these profiles of great physicists that we talk about. You said he is considered one of the greatest experimentalists. What made his approach to experiments so powerful?

Speaker 4:
[40:40] Yes. Faraday had what we would call today strong physical intuition. He could imagine the physical relationships between things that others saw as just disconnected facts. So he could invent some sort of picture in his mind of what might be going on. But then this is the key part. He was deeply skeptical of his own understanding of basically anything. He's got this wonderful quote, there is nothing quite as frightening as someone who knows they are right. So he would always subject any of these kind of mental images he had in his mind. He would figure out how could I investigate that? If that's really true, what else must be true about nature? Then design an experiment to look for that thing. Then iterate on that experiment, sometimes hundreds of different designs, always trying to isolate what could be potentially confounding variables. And this patient skeptical approach allowed him to look at a phenomenon from many, many different angles, as I said, sometimes hundreds of times. And he was also known for being extremely precise. He kept detailed but simple to follow notes on all of his experiments, as well as clear drawings of the apparatus. And his notebooks were so well documented that later thinkers, like I said, just used them to carry out updated designs of his experiments, sometimes just literally doing the experiment he had done decades before. So I think this approach of having the ability to visualize what must be true of the things that you're seeing in your apparatus, but then combining that with a distrust of your own immediate interpretation of what must be going on, made him a great experimentalist.

Speaker 3:
[42:29] Is there a particular dramatic or brilliant experiment that he conducted that we can explain for listeners?

Speaker 4:
[42:36] Yes, absolutely. The famous Faraday Cage, probably one of his most dramatic examples. So the the physicist, the French physicist Auguste Coulomb, had speculated that electric charges in the case of metals or other conductors, that the electric charge in such a system always resides on the surface. And so that would mean if Faraday envisioned, well, if that's true, I should be able to build some sort of container, a cage out of a conducting material. And I should be able to deposit as much electrical charge on this conductor as I would like. And yet anything inside the cage should be shielded from that electricity. And so he built such an apparatus, he placed inside it an electroscope, which at the time was a device for measuring electric charge. So he has this cage, he connects that change to an electric generator by a current carrying wire, charges up the exterior of the cage and notices that the electroscope inside is completely unaffected. So the interior of the cage is perfectly shielded from any electricity outside the cage. And then he can repeat this experiment placing himself inside the cage and he doesn't get electrocuted. I mean, we're actually familiar with this effect because if your car is struck by lightning, you should actually be, if your car is made of a conductor, you will be shielded from the effects of that electricity provided it doesn't somehow cause a spark and explode your engine. But if the electricity should harmlessly propagate along the exterior of the car and you won't even notice inside.

Speaker 3:
[44:14] Faraday also gave famous public lectures including for children. What made him also such a gifted communicator of science?

Speaker 4:
[44:23] Faraday is our first example of, at least the first example I'm aware of, of a scientist who really understood the importance of public outreach, and knew that the way to do effective outreach was to show and not tell. So he would always bring some exciting demonstrations. He gave these famous Christmas lectures after he was elected to the Royal Society. He would give the Christmas lecture annually, and in one case even the Queen of England attended. And he would often start his lectures with just some sort of elaborate demonstration, like the Faraday Cage, and ask the audience to speculate, why does that happen, before then revealing his understanding of the phenomenon. Sometimes he would start by, you know, he would ask them a question about kind of to probe their intuitions about why something works, and then present a demonstration which would challenge that interpretation. And today we would recognize this as just very effective pedagogy. When teaching science, it's very important to assess what intuitions do we already have about why something works, and then to subject those intuitions to an experiment which can either verify or contradict those intuitions. And he was just a master at doing this, and believed strongly in the importance of doing it, and brought a lot of charisma to these demonstrations. And additionally, because of his humble background, because he didn't have a university education, he wasn't a particularly mathematically inclined physicist. He didn't know calculus. He barely knew algebra. I think he also was someone who could appreciate the kind of confusion that was likely to set into the mind of someone seeing all of this for the first time.

Speaker 3:
[46:08] Did other famous scientists of his time recognize his importance, or did that come later?

Speaker 4:
[46:15] Faraday is an example of someone who does achieve fame in his own lifetime. Despite his humble beginnings, basically once he publishes those results on electromagnetic induction, he quickly becomes a household name and is well-respected by his peers. Then certainly later thinkers like Maxwell and Einstein held him in extremely high regard. He's one of the three physicists that Einstein had always had a portrait of in his office. Maxwell, whom we'll talk about later in this program series, Maxwell, who is often called the father of modern electromagnetic theory, was always very insistent on giving credit to Faraday, whose work he built upon.

Speaker 3:
[46:59] If you could give one of Faraday's virtues or his lessons, put that into the hands of your students, what would that be?

Speaker 4:
[47:10] Faraday is an example of disciplined curiosity and humility. What do I mean by that? He was an intensely curious person. He read voraciously. He did many of his own experiments, but he did this in a disciplined way. He took meticulous notes. He was always worried that someone else understood what he was doing better than him. So he was very attentive to what had been written about the subject prior to him. So he investigated the things he was curious about in a structured way, reading the books of others, doing his own experiments, but not just doing it sort of haphazardly, but doing it in an organized way. And when you do that, that level of self study, you can go very far. You can teach yourself a lot. He also had, though, this trait of humility, this idea that whatever his first instinct about why something was happening, whatever that first instinct was, you should be suspicious of it. It may not be as simple as you think. You should check and double check. And in his case, amazingly, many of his first instincts were correct. But I think that humility is something that we should all try to embody. We should strongly resist the temptation to believe that we understand something more than we actually do. And we should actively seek information, which in the process of doing so, will stretch our understanding as we learn from others.

Speaker 3:
[48:36] Dr. Nathan Herring, Assistant Professor of Physics at Hillsdale College. These profiles of great physicists. We talk about Michael Faraday. Dr. Herring, thanks so much for joining us here on The Radio Free Hillsdale Hour.

Speaker 4:
[48:49] Thanks.

Speaker 3:
[48:50] That will wrap up this edition of The Radio Free Hillsdale Hour. Our thanks to EJ. Antoni, Chief Economist with The Heritage Foundation, and Nathan Herring from Hillsdale's Physics Department. Remember, you can hear new episodes every week on this station. You also can find extended versions of some of our interviews or listen anytime to the podcast. Find it at podcast.hillsdale.edu or wherever you get your audio. Until next week, I'm Scot Bertram, and this has been The Radio Free Hillsdale Hour.