(2025-02-05) Scanlon FAFOnomics: How Chaos Became America's Economic Strategy

Kyla Scanlon: FAFOnomics: How Chaos Became America's Economic Strategy. The recent tariff drama- 25% proposed (then unproposed, then maybe-proposed-again) on Canada and Mexico, 10% on China - isn't just trade policy. Add in a sovereign wealth fund, a litany of executive orders, and Elon Musk's DOGE, and you've got something more deliberate: chaos as strategy.

The Founding Fathers would freak right now, full stop. They fought against taxation without representation and now we're watching private actors gain unprecedented control over public finances with a concerning pushback to attempts of transparency (as Jamie Raskin said “We don’t have a 4th branch of government called Elon Musk.”)

Yes, America needs change. But change without wisdom isn't reform, it's recklessness.

The goal isn't good governance; it's capturing attention at any cost. And it's working! While we debate whether each new crisis is legal, ethical, or even real1(as we should) the broader transformation of American fiscal policy continues.

And of course, there is an important point to all of this, which is that it is all noise. It’s what Tyler Cowen and Ezra Klein have both pointed out as strategic chaos: overwhelming the public's already limited capacity for attention until exhaustion sets in.

a fundamental restructuring of America's relationship with the world is taking place. To understand it, we need to start with the most basic question facing our economy: Can America do it all alone?

Can We Really Afford Isolationism?

The justification is America first. But in reality, it’s just America unplugging itself from the global economy while expecting all the perks.

This is where FAFOnomics meets economic reality: America's version of self-sufficiency is built on a foundation of global interdependence. Take Tesla, for example. It could not exist without China. That’s why Musk is fighting tariffs on Chinese graphite imports - his entire operation depends on materials from abroad. But in many ways, America is just a bigger Tesla, dependent on the world while pretending it’s not.

As the Tax Foundation and others have pointed out, this global recycling of dollars is what has allowed America to borrow cheaply and sustain massive deficits. We're not just importing goods, we're importing the capital that funds our rather expensive way of life.

Foreign sellers accumulate US dollars...
Those dollars flow back as investments like US stocks, government bonds, real estate, and infrastructure. Good!

We like to think of tariffs, a tax on imports, as a way to protect American industry. But in reality, they are a tax on American consumers, an affront to our closest allies, and a gamble that the global financial system won’t retaliate

We’re not punishing foreign competitors. We’re pushing them toward each other

Dollars

The fundamental assumption behind these tariffs - that they'll bring manufacturing jobs back to America, make people buy American products etc - ignores the lessons from Donald Trump's first term.

Trust

Now, we are entering a world of “temporary pain”, treating Canada and Mexico, who have both come to our aid many times, as competitors.

The worse the economy gets, the more extreme and erratic the leadership response becomes. And that’s the real feedback loop we’re stuck in - economic chaos isn’t just a byproduct of bad policy, it’s the fuel for further political radicalization.
If you can’t deliver prosperity, you need to deliver an enemy, and tariffs, USAID cuts, and privatized governance all serve that purpose. Instead of fixing the fundamentals, leadership is breaking more things, faster, ensuring that the next crisis is always more distracting than the last.

What if other countries decide that if America doesn't want their goods, it doesn't want their capital either?

A Changing World Order

Conventional wisdom says that America is in a new Cold War with China. But as I’ve said a few times, evidence suggests America is actually in a cold war with itself:

Like all great powers in decline, we're doing it while convinced we're actually becoming stronger.

3. Who Really Controls American Finances?

If the tariffs are a sign of America’s economic confusion, Musk’s control over the U.S. Treasury payment system is a sign of something much darker: the privatization of the American state itself.

Giving DOGE even "read-only" access4 raises profound questions about the separation of private and public interests, especially given Musk's business empire and its complex relationships with government contracts.

The Way Forward

China, Europe, and even Canada are watching America burn diplomatic capital in real time. And while we’re busy taxing maple syrup and tequila, they’re cutting deals with each other on energy, tech, and global security.

America's real strength has never been in our ability to bully our trading partners. It's been in our ability to create a system where other nations want to trade with us, want to invest in us, want to partner with us. Right now we're not just fighting our trading partners, we're fighting basic economic reality.

So what happens next? If America is in decline, is it managing that process—or accelerating it? Here are four possible futures:

• Managed Decline
• Crisis and Reset
• FAFOnomics to the end:
• Artificial Intelligence