Beach Reading for Wonks (July 16, 2025)

Welcome to Home & Away. This will be a somewhat truncated version of the newsletter as (Delta Airlines permitting) I am off to Detroit later today to debate (or maybe just have a conversation with) Jake Sullivan at a conference called “Reindustrialize 2.0,” which the hosts describe as “an annual revival that convenes leaders across technology, industry and government to accelerate American manufacturing.” You now know as much as I do.

A few thoughts and suggestions before I go. You will, I expect, be relieved that I have nothing much to say about the Epstein case. Full disclosure: despite the official finding of death by suicide, my gut tells me he was killed. Too many coincidences involving guards, cameras, the Wired article from last week that concluded the metadata on the video indicates it was edited, you name it. As for what is going on now, either there was nothing there all along (which raises all sorts of questions about the prominence of the case and the prosecutions) or there was and now what we have is a cover-up. I lean toward the latter explanation. The only thing I am confident of when it comes to the Epstein saga is that we have not heard the end of it.

Arms and the Man

There is the welcome news that President Trump will be selling some military equipment to European allies, which will allow them in turn to ship to Ukraine weapons in their inventories without significantly diminishing their own stockpiles (and readiness). But the big question remains whether Trump is prepared to make a sustained commitment to Ukraine’s defense, something that would require a willingness to provide a range of weapons that would allow it not only to better defend itself but to strike deep inside Russia. Only by holding off Russian forces on the battlefield and bringing the cost of the war to Putin will the table be set for fruitful negotiations. We’ll see.

Trump has also threatened to impose secondary sanctions in fifty days against those that import goods from Russia. (Direct sanctions are less of a threat, as Russia exports only $3 billion annually to the United States.) The problem with secondary or indirect sanctions is that China, the leading importer of Russian energy, is in a strong position to retaliate by cutting off our access to rare earth minerals, an area where we remain almost wholly reliant on China. We also have to ask ourselves if we want our relations with India and Turkey (both of which also import a good deal of energy from Russia) to hinge on this issue when Putin would likely press ahead in Ukraine regardless of what added economic costs we impose.

Penny Lane

I want to riff for a moment on the theme of penny wise, pound foolish. The idiom, as I expect you know, refers to decisions that save a small amount of money in the near term but risk costing a great deal over time. It is attributed to Robert Burton, who in 1621 wrote “The Anatomy of Melancholy,” which I will admit is not on my summer reading list but perhaps ought to be given all that is going on both at Home & Away.

I raise this now because penny wise, pound foolish behavior increasingly characterizes the Trump administration and its Republican allies in Congress. Think about it: gutting the United States Agency for International Development (USAID) and the Voice of America, firing a large number foreign service officers and civil servants (including Russia and Ukraine experts) at the State Department, and cutting back funding for basic research, universities, the Centers for Disease Control, the National Institutes of Health, FEMA, and Medicaid.

All of these moves are ill-advised. First, in every case the savings in absolute terms or as a share of the federal budget are negligible. But the consequences in terms of health and lost innovation promise to be large. Second, this mentality underscores the argument that DOGE was never about efficiency (which could and should be improved) but instead was about shrinking the so-called Deep State, which is just a pejorative phrase for much-needed governmental capacity. And third, if anyone in Washington is serious about reducing the debt, they might consider raising the corporate tax rate, means-testing social security and gradually raising the retirement age, taxing carried interest, and reversing the dumbest of all cuts, those that reduce the ability of the IRS to collect revenues needed to pay for all that government does.

Four Reads for You

Three pieces that ran in the New York Times are well worth your time. One is a devastating indictment of Bibi Netanyahu. Based on exhaustive reporting and more than one hundred interviews, the piece reaches three conclusions: “In the years preceding the war, Netanyahu’s approach to Hamas helped to strengthen the group, giving it space to secretly prepare for war. In the months before that war, Netanyahu’s push to undermine Israel’s judiciary widened already-deep rifts within Israeli society and weakened its military, making Israel appear vulnerable and encouraging Hamas to ready its attack. And once the war began, Netanyahu’s decisions were at times colored predominantly by political and personal need instead of only military or national necessity.”

Needless to say, not everyone will agree. What is clear, however, is that Israel’s response in Gaza to the events of October 7 (which have gone far beyond degrading Hamas) is difficult, perhaps impossible, to justify, costing it dearly in the region and around the world.

The second article I want to highlight is a thoughtful analysis co-authored by David Autor and Gordon Hanson, “We warned About the First China Shock. The Next One Will Be Worse.” We should take the authors seriously; they wrote perhaps the most cited article on the first China shock, estimating that the United States lost over two million jobs to China from 1999 to 2011. Unlike China Shock 1.0, which was driven by China flooding the world with relatively cheap manufactured goods, China Shock 2.0 comes from a successful industrial strategy where the Chinese government concentrates investment in just about all the areas associated with today’s innovation and strategic competition, from AI and robotics to biotech, batteries, and solar energy.

By contrast, we are spending most of our time and energy imposing tariffs that will do little or nothing to spur innovation at home. As they write, “One thing that tariffs alone will never do is make the United States an attractive place to innovate. Yes, tariffs belong in our trade arsenal — but as precision munitions, not as land mines that maim foes, friends and noncombatants equally.” What’s more, tariffs are increasing inflationary pressures and wreaking havoc on our closest relationships around the world, outcomes that far exceed the value of any funds tariffs bring in.

The authors make the case for working with our traditional trading partners rather that going to war with them; the costs of the United States deciding not to join what was the Trans-Pacific Partnership (a bipartisan error, by the way) grows by the day. Second, they suggest we invite China to build factories here. They also suggest the U.S. government make funds available (in a manner akin to venture capital) to support new enterprises and select some areas for large, long-term investment. And last, they argue for resurrecting and refining Trade Adjustment Assistance, programs to help displaced workers transition and gain new skills that would make them employable in a dynamic, competitive economy.

The third piece dovetails with the one just above. Written by Peter Baker, the journalist who knows Trump about as well as anyone, it paints a picture that the 47^th president wants to go back to a nostalgic past at a time China is leaving the past behind and embracing the future. Peter captures it well: “On matters big and small, Mr. Trump has hit the rewind button. At the broadest level, he has endeavored to reverse the globalization and internationalism that have defined U.S. leadership around the globe since World War II, under presidents of both parties. But even at a more prosaic level, it has become evident that Mr. Trump, 79, the oldest president ever inaugurated, simply prefers things the way he remembers them from his youth, or even before that.”

A fourth piece appeared in the Financial Times. Written by my friend Gillian Tett, “The New Age of Geoeconomics” explains how strategic and national security considerations are increasingly “trumping,” or at least influencing, economic decisions. This is true, although I am also struck by how much of Trump’s foreign policy emphasizes perceived economic interests to the detriment of actual strategic considerations (as at least someone like me sees them). Read it if you can navigate the paywall.

And that’s it for now. Enjoy the British Open, or more accurately The Open or The Open Championship, the fourth and final golf major of the year, to be played in the rain this Thursday through Sunday in Northern Ireland. I will be watching it when I am not out on the golf course myself playing a game that bears only a passing resemblance to what you will see on your screen.

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