Why Biden’s Economic Ambitions Fell Short

DAN KURTZ-PHELAN

Jason, thank you for the trenchant and provocative new essay—it’s called “The Post Neoliberal Delusion and the Tragedy of Bidenomics”—and thanks as well for joining me today.

JASON FURMAN

Thanks for having me, and thanks for publishing the piece.

DAN KURTZ-PHELAN

The piece is, as the title suggests, a fairly harsh assessment of the Biden administration’s economic policy. But it’s also, I think, a warning about where things are headed now, both under Trump, and also an intervention in a way, in a kind of just-beginning intellectual and political battle about the future of economic policy, especially among Democrats and on the left. I want to get to all of those dimensions of the piece and the argument, but I want to start actually somewhat broader.

The piece is of course very critical, and persuasively so, on lots of key issues. But for all the agitation and concern about our politics and the current administration and the grim assessment about the state of the U.S. economy you hear from a lot of Americans, and that we certainly heard in the context of the last presidential campaign, when you do step back and consider the United States in a global context, there is a sense that it’s doing pretty well economically actually, maybe kind of singularly well. If you look at percentage of global GDP that it represents, that is essentially unchanged from the height of unipolarity in the 1990s, the dominance of tech companies and innovation, the comparison to other developed economies, and especially Europe, the stagnating Chinese economy. So when you step back and you see the remarkable performance of the United States, in many ways that’s a bigger story across the last three administrations. I mean, what does that kind of macro account get right or wrong as you look at the details in this piece?

JASON FURMAN

Yeah, so I agree with everything you just said. I would rather have the U.S. economy than any other economy in the world. We have better productivity growth than most any other advanced economy. We have more favorable demography, and we’ve also had a strong inflow of immigrants attracted to the United States. I think you are also right to highlight that that goes across three administrations. That wasn’t some sort of inflection point that happened in the last couple of years. If you sat in the economy in 2019 and looked at the growth rate in the three years before, or you sit in the year 2025 and look at the growth rate in the three years before, they’re quite similar: quite similar overall growth, quite similar productivity growth. In one of them, Trump is president, the other one, Biden is president. So I think that does tell you something structural about the U.S. economy. And then there’s an important question of: what can you do to nurture and advance that, or at least not get in the way of it, versus what you do that risks all of the progress that we’ve made.

DAN KURTZ-PHELAN

And just to focus on that risk before we get to the piece, as you see the fairly astonishing early moves from the Trump administration over the first few weeks since he took office, is there anything in there that you think represents a risk that could kind of compromise again that record over several administrations?

JASON FURMAN

Yeah, I think trade restrictions—there’s a static way of modeling them through comparative advantage that I think misses out that trade is very closely related to innovation, both because of the competition that comes from trade, the specialization, the learning from doing that you get with scale. And so all of that affects productivity. The uncertainty we’ve seen may cause some pullback in business investment; higher interest rates, which we could get as a result of all of this reduces some speculative activity; and then immigration and science also are absolutely key. So yes, I look at what I’m seeing right now and worry not that it’s going to cause a recession in the next quarter, but much more what it will do to our productivity growth, our labor force growth, over the medium and longer term.

DAN KURTZ-PHELAN

Let me turn to the piece. As you note early on in the essay, the Biden team was in many ways starting with a critique of a previous economic policy paradigm that’s often called, derisively, “neoliberalism.” When you look at the critique that was one of the kind of core assumptions of Bidenomics as you see it, how would you first of all just characterize that critique, and then when you think about it, what does it get right and wrong, when you look back at that record over several administrations prior to Biden?

JASON FURMAN

Yeah, so the post-neoliberal critique, I think at its heart, was skeptical about notions of scarcity and budget constraints—thought that economic analysis sort of nickel-and-dimed things by putting those front and center, and that if you went with something that was more of a combined economics and politics, that you could unleash a greater set of ambitions. And then there’s a specific set of things: that could be a hot economy for the macroeconomy; industrial policy that doesn’t place markets at the center; climate change through something like a Green New Deal, rather than through market mechanisms like cap-and-trade. And all of these were supposed to be ways of doing things that were better, that were larger scale, and that also were more politically doable and politically durable.

DAN KURTZ-PHELAN

And the Biden people would say, and often did say quite explicitly, that they were making up for the failures of two previous Democratic administrations. You served in both of those in more junior roles in the Clinton administration, then in quite senior roles in the Obama administration. The Biden people would say that got us the financial crisis and then a fairly slow recovery, the gutting of the manufacturing base, and the political reaction that, in their analysis, got us Trump the first time around.

It doesn’t seem accidental that a lot of the people who were shaping economic policy in the Biden administration had been part of the Obama administration, especially, and were very cognizant of some of the shortcomings of the Obama policy. When you look at those records, and again, that kind of critique of what would in some parts of this debate be called the neoliberal record of those two administrations, what do you see as valid? What are the parts of that that you think get the story right and in what ways are we kind of getting the diagnosis wrong as we look at those two administrations?

JASON FURMAN

Yeah, so I’ve been upfront that I think the stimulus was insufficient during the financial crisis, and that contributed to the slow recovery. I think that was largely Congress’s fault and that the president tried and that they reduced it. I think within the administration it was largely, insofar as there was anyone on the wrong side of it, it was more people coming at it from the political end, which I think people don’t appreciate. Economists wanted bigger stimulus and political people said, “Actually that’s really unpopular.” And the political people in some ways were doing their job too. So I agree with that. Again, we can debate sort of who said what and did what when, but in terms of economic policy, I agree too little was done.

On trade, I’m of a more mixed view. I think the literature on things like the China shock dramatically overstates the net impact that China had. It had some reallocation impact, but we were losing manufacturing jobs at a much faster pace in the 1980s and1990s. If declining manufacturing leads to populism, instead of Ronald Reagan, we should have had Donald Trump winning in the year 1980. So you have this explanation that is almost equally true, if not more true decades ago than now, that people are trotting out now. So I don’t think the decline in manufacturing was primarily due to those policies, and the fact that it continued under Trump and Biden helps vindicate that view. But I think it is possible that things like the Trans-Pacific Partnership were good policies. I defended them; I strongly believe in that defense. It’s possible that they politically were more harmful than good. And that maybe Obama and his successors would’ve been better served if we had put less effort into that. That’s a political question I’m not sure of the answer to.

DAN KURTZ-PHELAN

So I think it’s worth, as we get into this conversation, by giving as kind of straightforward and perhaps intellectually charitable as possible, a definition of Bidenomics. As you saw the response they put together that was based on that critique, how would you characterize it in its basic strategy and assumptions?

JASON FURMAN

I mean, the tricky thing with any president is they’re judged more for what they got done than what they proposed. So he proposed a set of things related to infrastructure and industrial structure of the economy, and also proposed a set of things related to families and child tax credit. And the first set of things got done and the second set didn’t. So does Bidenomics have both of those, because he wanted both of them? Or should we think of Bidenomics as only having the former, the “stuff” things, not the latter, the “people” things. And an awful lot of people who said “This is the most transformative president since FDR” were implicitly saying the “people” stuff actually didn’t matter. The big thing and important thing was what was done on infrastructure and industrial production.

So I think it probably is fair, but not totally unambiguous, to say Bidenomics was about big amounts of spending, running the economy very hot, and trying to redo the industrial structure. And instead of emphasizing programs for people, emphasizing what I would call “stuff,” and approaching it with a certain intersectionality: you can strengthen labor unions and strengthen childcare, and have LGBTQ protections in your job programs, and build more infrastructure and try to do all of those things at once.

DAN KURTZ-PHELAN

And to have in all of those efforts a fairly heavy role for public policy and for government and shaping where investment went and what regulations around different industries were. I mean, there was a much more kind of sense of government involvement as being a productive force, rather than the assumptions for previous decades that it was at best had a mixed record or even a negative one.

JASON FURMAN

And, look, there’s a lot of continuity. Bill Clinton said, “The era of big government is over,” but he, you know, expanded government in various ways and contracted government in other ways. So part of the difference is rhetorical. There was no “big government is over” type of language coming out of President Biden. But part of it, I do think, is real and it reflected a skepticism about the primacy of markets and a skepticism of the idea that we should identify market failures and solve them, which I think is the rhetorical frame that economists use and, to some degree, was used more in previous administrations, and instead started from the premise that we’re going to start in a different way.

DAN KURTZ-PHELAN

Defenders of the administration would note that there have been some fairly remarkable things about the economic record of this administration. And you do grant in the piece that, quoting you here, “The macroeconomic outcomes have been impressive. The U.S. economy has bounced back much faster than it did after previous recessions.” Was that a reflection of structural strengths of the economy or were there parts of the Biden policy, especially early on, that you think account for that quicker recovery?

JASON FURMAN

I think the 2020 policies, both fiscal policies and monetary, were absolutely essential ingredients to that recovery. They both helped keep the economy and financial system together and gave people a lot of extra money so that when the economy reopened they would be in a position to spend it. I am not at all convinced that the big stimulus in March 2021 was really needed. Lots of other countries did not do another round then; they also recovered very quickly. On the employment side, many of them recovered even more quickly than the United States did. The economy was growing very quickly even before that stimulus plan passed. And there was all this dry powder, bank accounts were higher than they’d ever been, credit card debt lower. So I just don’t think looking back at it that much, if any, of it was necessary.

DAN KURTZ-PHELAN

So much of what’s damning in the record and in the details you have in the piece comes down, of course, to inflation. You note that beginning in 2021, as the country recovered from the pandemic, the country experienced the most sustained inflation since the early 1980s. The inflation rate soared from around two percent to a high of nine percent, and the price level—the average price of all goods and services—rose by about 20 percent over four years. There are so many details in this piece that make clear the toll of that, whether it’s on the lack of real wage growth over those years, the fact that the child tax credit actually collapsed over the course of the Biden administration when you look at the effects of inflation, and then the most, I think, remarkable figures is that, even though there was this enormous and long-sought bipartisan infrastructure bill that poured money into infrastructure nationally, you note that, in fact, infrastructure spending fell because of the effects of inflation.

JASON FURMAN

Exactly. People think of inflation as taking this political toll, and it certainly did. It also took a toll on workers. But if you look at the core things that Biden was trying to accomplish: more investment in infrastructure; we ended up with less. Expanding the child tax credit; it ended up smaller in purchasing power. Raising the minimum wage; it ended up smaller in purchasing power. There’s a lot of government, by the way, that also was shrunk in real terms as well. So inflation really went to the heart and core and undermined a lot of what otherwise might have been accomplished.

DAN KURTZ-PHELAN

The defenders of the administration, during the administration and still, will point to the global comparisons and note that inflation has been high in developed economies all across the globe. It could be that part of the reason why Kamala Harris did better than incumbents or representatives of incumbent parties elsewhere is that inflation has come down much more in the United States than it did in other advanced democracies. And you can point to lots of reasons why that would be a global problem, whether it’s supply chain snarls and the weirdness of COVID and the post-COVID recovery, and then, of course, Ukraine and what that did to energy prices, especially. You were skeptical that there is a global story that absolves the administration. Why is that?

JASON FURMAN

So first of all, I think some people are pretty selective. They use international evidence to say, “Oh, inflation wasn't the United States’ fault because it happened everywhere,” but then they don’t look at the international evidence on all the other economies that recovered quickly too, to say, “Well, maybe it wasn’t the United States that made the recovery so fast.” So people need to be careful. Related to that is, “Everything good that happened is because of policy; everything that bad that happened is bad luck that has nothing to do with policy.” So you have to be a little bit careful about being consistent about it. In terms of the international comparison on inflation, first of all, I just have never ever heard anyone say that the Great Depression wasn’t partly the fault of U.S. policymakers just because there was a depression somewhere else, or that the financial crisis and Great Recession had nothing to do with American policymakers because they had it elsewhere. So I just had never heard that argument before. For some reason, it gets made quite a lot here.

The second thing to say is everyone did overstimulate to some degree. If you look in Europe, they largely kept real disposable personal income on the same track it was on before in economies that were incapable of producing enough to satisfy that income. In the United States, we actually raised real disposable personal income, so everyone did too much. And then the shock that hit the rest of the world was much larger than the shock that hit the United States. Natural gas prices went up to $100 per million BTU [British thermal units] in Europe. That’s sort of like if oil prices went up to maybe $800 a barrel here. If that had happened, I think a lot of people would say, like, “Hey, the inflation we’re getting is because of the $800-a-barrel oil,” and they’d be right.

DAN KURTZ-PHELAN

Just so I understand that point about the comparison to the Great Depression and the financial crisis, part of global inflation was a result of American policy, whether that was monetary policy or stimulus spending.

JASON FURMAN

Yeah, that’s also an important part of it. So you look at something like durable goods spending. That went up a lot in the United States in 2021, 30 percent above what it was before COVID. You don’t see an increase like that at all in Europe. And goods prices are set globally, so U.S. demand for goods goes up, it raises the goods prices in the entire world, and also strengthened the dollar, which exports some of the inflation from the United States abroad.

DAN KURTZ-PHELAN

So you focus on two major policy mistakes, as you see it, that drove inflation. The first is the American Rescue Plan, the big stimulus package that Congress passed in early 2021. You think that should have been something like six or $700 billion, instead of $1.9 trillion, as it was. You also mentioned the Fed moving too slowly to address inflation through interest rates. I think it waited until March 2022, if I have those dates right, when the spike started several months before that, in 2021. How do you tease apart those two causes? Which do you think bears more blame and, since the piece, of course, focuses on the administration, how much was Fed policy the real problem?

JASON FURMAN

I think the Fed’s mistake in some sense was more egregious and unforgivable, but less consequential than the administration’s mistake. Why is it more egregious and unforgivable? Well, the administration made a mistake in March of 2021. I think it was a knowable mistake at the time, but COVID was surging, plus fiscal policy always has a large dose of politics. The Fed made the mistake over and over and over again, even as the data became clearer. And they have a lot of PhDs and not a lot of politicians in their ranks. So I do think it’s harder to explain what the Fed did. It also is the case, once that amount of money was sloshing around in the economy, even starting to raise interest rates in the summer of 2021, I don’t think would’ve put a whole lot of dent in the inflation that ensued.

DAN KURTZ-PHELAN

Let me focus on the kind of counterfactual with one more question. If you’d been in your old job as chair of the Council of Economic Advisors or at the National Economic Council or Treasury Secretary, all of those rolled into one, what policy options do you think there were that would’ve gotten a better outcome on inflation that the Biden administration didn’t use? Obviously there’s the Rescue Plan, but were there other things that you think could and should have been done that would’ve gotten us a dramatically different outcome?

JASON FURMAN

So after the Rescue Plan, they got the most important thing right, which was appointing good people to the Fed and really having the Fed’s back. And that’s not easy. The Fed was raising interest rates really aggressively. A lot of presidents would’ve been complaining about it. They didn’t. So they got that right.

The second thing was on supply chains. They did some things to help make them better, but they also did some other things at the same time to make them worse and make them more complicated. And finally, they had a big internal debate about whether to lower tariffs, especially the ones that President Trump had imposed on China, that would’ve taken a couple tenths off the inflation rate, and every tenth matters. So that was, to me, a missed opportunity.

DAN KURTZ-PHELAN

So I’m going to come back to the tariffs question because that is, of course, so central to economic policy now and for the Trump administration, but just to linger on another part of Bidenomics—and I think this has stretched again across multiple administrations—there’s a kind of gap between what you hear from many economists and what you hear from most policy makers and politicians on this, and that is around the focus on manufacturing and the erosion and the manufacturing base in the United States. Joe Biden said, as you noted in the piece, that rebuilding the backbone of America manufacturing unions in the middle class would be one of his administration’s main goals. And you note that this hope for a manufacturing renaissance just did not happen even though there was, in fact, a lot of effort and several legislatively successful initiatives that were meant to drive that. What was the result and why did it not get us the outcome that Joe Biden said he was focused on at the beginning of the administration?

JASON FURMAN

So first of all, there’s a question of whether you should want more manufacturing. I think there is an argument for it in certain key sectors that are important for our national security. So I support it in semiconductors, but not across the board as a middle-class job strategy or something like that. But the big issue was crowd-out. It’s just a standard economic concept that I teach in my class. And the issue is if you subsidize a favored sector, you get more stuff in that sector. And they have a lot to point to in terms of microchip fabs being built and, you know, clean energy production and the like. But you also get higher interest rates and higher construction costs and a stronger dollar, all of which hurts every other sector of manufacturing that didn’t get the subsidies.

And so what you’ve seen is in some ways, almost a little bit like the China shock. Things that got a benefit are growing. Other things are atrophying, there’s more turnover. In this case some of that turnover is a good thing because it’s tilting us more towards things that are important for our national security, even if they actually aren’t the highest value added, productive parts of the economy. Microchip fabrication is actually not that important and productive a thing economically, but it’s important for national security. But at the same time there’s just been all this turnover that it’s caused, and churn, and crowdout. And I felt some of that was minimized. And by the way, it’s okay with me if politicians aren’t totally frank in public about trade-offs. I get worried when people in private don’t seem to understand them and take them fully into account because that’s when I think you might get the wrong answers coming out.

DAN KURTZ-PHELAN

And there you mean you think that the kind of economic policy makers had fooled themselves to some degree. What’s the critique there?

JASON FURMAN

Yeah, so I think, take something like climate change, carbon tax, and I am not begrudging that they couldn’t pass a carbon tax. I think that was a political constraint, but a carbon tax, you can take the revenue and give it to households, maybe give it in a lump sum manner, and it’s a very progressive policy thing. There were a lot of people that fooled themselves into thinking that giving out subsidies to corporations is somehow progressive. No, it’s not. That might be a good way to reduce carbon emissions politically, although it’s limited in terms of scale, but it’s worth doing. But you should be a little bit haunted by the fact that you’re giving a lot of money to companies. A lot of that is going as shareholders. Most people who are affected by it aren’t getting any of the money because it’s just the few lucky people that end up with the jobs and don’t build a whole economic philosophy around, you know, our climate plan is a green new deal that’s creating, middle class jobs when it’s not, and it’s not a great way to, to go about creating them.

DAN KURTZ-PHELAN

The national security case has, I think, become very, very central to this discussion, at least as we see it at Foreign Affairs. That tends to be an argument for much of the focus on the manufacturing base, on, you know, kind of supply chain security and resiliency. How do you circumscribe that in the right way? I mean, it’s very easy to take almost anything and claim that it’s essential to our national security. And you often see industries making that case for their own economic reasons. How would you as a policy maker define that in the right way and what kind of counts as real national security?

JASON FURMAN

I think this is a really tricky and important issue, and some of the best stuff I’ve read about it is in Foreign Affairs. And it’s something that academics actually are behind on and need to do more work about how to combine economic and national security considerations. I personally don’t know exactly where to draw the line, but the type of thinking I’m comfortable with is cost benefit thinking. So you see that with Russia sanctions. We put sanctions on Russia, no one said that was going to strengthen the American middle class or return manufacturing to America or increase economic growth. We all understood that we were paying a cost by putting sanctions on Russia, and then we understood that it had a national security benefit. And I think quite reasonably the benefit outweighed that cost. That’s the way I see it in these other domains as well.

If you’re trying to get lower value added industries like chip fabrication as opposed to what Nvidia does, which is chip design or what Apple does, which is beginning to end design to marketing, Nvidia and Apple are much higher value added from an economic perspective. They’re the type of companies you want in the United States, not Foxconn and TSMC and what they do with assembling phones and fabricating microchips. But absolutely, I think there’s an important national security reason to have those. And the conversations that I find most persuasive are ones that acknowledge and recognize that these are actually lower value added, they’re less productive, they’re not a great way to create jobs in America, but it’s worth the cost. Just like our defense budget, no one argues, or no one that I respect would argue our defense budget is a great way to create jobs or a great source of utility for Americans. We do it to serve another purpose. so people that have a realistic sense of the costs and a realistic sense of the benefits, and then can be in a conversation about how to trade them off against each other. That’s the conversation I’d like to see more of.

DAN KURTZ-PHELAN

I’m simply admiring the problem here, but that becomes very complicated. I think when it gets to the question of the US Chinese economic relationship where someone can paint the scenario where, you know, China’s trying to deter the United States from intervening in the Taiwan Strait in a war and cutting off the supply of whatever import that is critical to our economic functioning, even if it doesn’t really matter for the defense, industrial base becomes an economic threat. You know, I see how you kind of get to decoupling with China quite quickly once you follow that logic. And again, I don’t know exactly where you draw that line, but it seems very challenging.

JASON FURMAN

It’s a challenging line to draw, but one, I’m more comfortable with people drawing it who recognize that the economic benefits and gains from trade with China are just massive for the United States. And second, from a national security perspective, we don’t just want to reduce the risk we face if China cuts us off. We also want to reduce the chances that China cuts us off, the chances that China invades Taiwan. And sometimes I look at some of these steps—and this is way outside my lane—and worry that, yes, if there is a military conflict, we’ve degraded China a tiny bit, but we’ve also increased the chances of that conflict and net net that may not make us safer.

DAN KURTZ-PHELAN

One thing you did not mention in the piece that was very central to the presidential campaign, and I think had probably positive economic effects—or I would guess that you would say they had positive economic effects, but had pretty damaging political effects—was of course the politics of migration, the surge of immigrants after the end of COVID. How do you kind of see the cost-benefit there, if we can, think about it, in that sense, there were surely effects on inflation and productivity and demographics that were quite positive in the United States because of that surge of inflation.

JASON FURMAN

Yeah, so I’ve written about and analyzed the immigration surge and what that means for the economy elsewhere. It didn’t fit in this piece ‘cause the editors would only give me so many words, plus it didn’t seem like a deliberate economic strategy, even if it was incredibly consequential. Economically, the United States had probably about ten million people that came during this period of time. That increased our potential economic growth. It enabled us to grow faster without inflation. I don’t think it brought inflation down because it increased both supply and demand and I think did it roughly in equal measure. There’s other people who have a different view of that, but I—I think I’m right and they’re wrong, but who knows? It’s worth debating.

The issue was there was a bunch of that immigration was not legal, and it wasn’t something that the American people seemed super enthusiastic about and want to happen. And so here, once again, we care about multiple things. If all you cared about was GDP or the power of the United States, which depends on the aggregate amount of GDP, then the more immigrants the better. But people also care about the rule of law, the sense of whether their country has things under control or not. And having a better combination of the two of those would be wonderful to have. Of course, it would take legislation that I don’t think would’ve been possible to pass in the last four years and will be even harder in the next four.

DAN KURTZ-PHELAN

Another source of continuity across the Trump and Biden administrations has been the use of tariffs. So Trump is obviously using them much more broadly and recklessly and often without a very clear rationale. And Biden was much more targeted, but, the administration did keep the tariffs on China, mostly in place and was not exactly eager to pursue new free trade policies, new free trade agreements.

This is a fascinating dynamic where, you know, there’s a just incredible gap between what you hear from economists, even progressive economists and what you hear from politicians and the policy makers around tariffs. There’s this kind of consensus among most economists that they have some, you know, limited utility but not nearly the utility that policymakers think. And then of course administration after administration resorts to them. What explains that gap? I mean, how do you think about that? You’ve been in the room arguing about this with multiple presidents. How do they see it, and why does that kind of economic analysis not fully persuade them?

JASON FURMAN

So first of all, my own views are tariffs and trade are pretty orthodox unreconstructed enthusiasm for it with a footnote for well-defined national security deviations. Some of it’s just not super intuitive. The idea that a trade deficit reflects an imbalance between how much a country invests and how much a country saves. That is a proposition that is a hundred percent certain to be true. It’s an accounting identity and so many people just don’t understand it and don’t understand the implications of it. The fact that when you place a tariff on imports, you are also effectively taxing your exports and you end up both with less imports and with less exports. That’s something that I am 99.9 percent sure is true and is barely a part of the political discussions.

But more broadly, just this mentality that, um, you know, economists basically are almost more enthusiastic about imports than exports because we think that’s what people value and want, and exports are the painful price you pay in order to have those imports. And the political system almost starts with exactly the opposite. Imports were somehow taking advantage of us and exports are the thing that you really want. So I don’t have a great answer to your question other than a certain amount of despair, but economists have been despairing about this for, you know, as long as they’ve been talking about comparative advantage.

DAN KURTZ-PHELAN

I think it was just yesterday that Trump signed 25 percent tariffs on all steel and aluminum imports. A lot of those come from very close American allies and partners. I think Canada is the biggest source of those imports, but it’s also Brazil and Japan and, and Taiwan and lots of other countries that are important to our national security and to kind of important relationships. How do you expect the kind of Trump trade policy and the effects of those tariffs to play out?

JASON FURMAN

Economically bad and national security bad? So to me it seems really lose lose that, as you just noted, a lot of these tariffs are falling on our allies. You know, whether steel comes from the United States or comes from Canada, it’s roughly the same thing in terms of U.S. national security. It’ll hurt downstream manufacturing. So the industries that use steel in their production, it’ll, you know, add some to the inflationary pressures, um, that we face. And what I worry about is that President Trump is just getting started. This is in his first couple weeks. He’s already done more than he did in his first year and a half as president last time around. And, and a lot more could be coming and, and ultimately for him, you know, you could be charitable and steelman the case for tariffs. I think the proposition that he just loves tariffs and thinks somehow they’ll help Americans and hurt other people and just deeply, deeply believes that that’s largely the way to understand them. And then everything else is a detail in terms of how it manifests itself.

DAN KURTZ-PHELAN

As you make sense of the early reactions from other governments. Do you fear a kind of escalatory retaliatory cycle that would get us into very kind of scary places in terms of the international economy?

JASON FURMAN

That’s a risk. But there’s also the possibility that there’ll be like Canada and Mexico were, which were pretty smart about offering very symbolic concessions that I think their people were okay with in their countries and worked for President Trump. China has not been very escalatory about the whole process and you know, it’s perfectly possible that all of this ends up in a more favorable settlement with China. I’m skeptical, I’m skeptical in part because I think President Trump is willing to be effectively bought off with symbolic things. Last time he got an agreement to buy American stuff, I didn’t think that was that great an agreement to start with. Didn’t think that would be what we were trying to accomplish. And regardless, they never really followed up and he never really called them on it. So there’s a range of possibilities here. Some of them are quite good, but we’re putting this instrument in the hands of someone who genuinely believes in them. And so broadly speaking, I think it’s much more likely that bad comes out of that than good.

DAN KURTZ-PHELAN

One of the fascinating developments in American politics over the last eight or nine years is that both the Republican and Democratic parties have turned against the quote unquote neoliberal economic policies of previous administrations. Are there ways in which you see continuity in the kind of basic thinking around these questions between Biden and Trump that go beyond just tariffs?

JASON FURMAN

I mean, you know, economists have played a smaller role in both of those administrations. And that’s not just on, you know, political things like trade. It’s also, you look at the details of how the Affordable Care Act was designed. There were a lot of economists both within the government and that side working on that. Now you look at the IRA and climate, there are a lot of economists who are perfectly willing to say, Hey, we can’t do a carbon tax, so let’s get the subsidies, right? They didn’t have a lot of input into the design of the inflation reduction Act. So even when it comes to technocratic things, you know, in both the Clinton and Obama administration, there were excellent chief economists at the labor department, and they did a lot of evidence-based policy making when it came to say, training programs or whatever it is. That’s just not something you had in the Trump or Biden administration. So just less technocrats, less economists and, you know, still a decent amount of them. I’m not saying it’s like from a hundred to zero, I’m not saying the two administrations are the same, but some of the post neoliberalism and the populist nationalism has in common a sort of channel the will of the people and not let it be intermediated by a bunch of annoying analysts.

DAN KURTZ-PHELAN

One thing you note in the piece that was an additional source of problems was the just kind of obstacles to getting things done to really expanding supply, whether that’s of houses or of building new factories or developing clean energy building transmission lines in the United States. I’m quoting you here: “The administration’s laser-like focus on the demand side came at the expense of addressing impediments to supply such excessive obstacles to permitting processes related to building infrastructure.” Do you see some upside, some opportunity in the kind of deregulatory agenda that seems to be very front and center in the Trump administration?

JASON FURMAN

Yeah, I mean, I sort of wish we could have had Democratic spending on infrastructure and then like more Republicans in certain of the agencies who were willing to, you know, do what needed to be done to implement it. And yeah, infrastructure and investment depends not just on the amount the government spends, but on a whole set of rules around them. And the balance of those rules has gone to a pretty bad place and everyone recognizes it. President Obama complained about it, but we frankly didn’t get much of it done because I’d go into a room and there’d be a bunch of people from the Environmental Protection Agency and they would know a hundred details. I didn’t know a hundred statutes I didn’t know, and I’d be working on 20 different topics. This would be their only topic. And you sort of walk outta the room defeated by it, and you had a sense that they weren’t right, but you couldn’t quite prove it and overcome it. And I think that happened over and over again in this administration as well. And that might be one of the silver linings we get from a Trump administration is overcoming some of that just enormous amounts of inertia that’s built up.

DAN KURTZ-PHELAN

Is there any way to model or anticipate the economic effects of, I’m not even quite sure how to characterize this ‘cause it’s been so kind of out of the norm in the last few weeks, but the kind of control of private sector actors like Elon Musk and the oligarchy in the sense that the administration can be bought off and, you know, getting rid of the Foreign Corrupt Practices Act. There’s this kind of full category of things that just allow private sector actors to influence policy and ways that they were at least constrained from doing before. Do you imagine that having a major economic effect or just a kind of corrosive political effect?

JASON FURMAN

I think it’s more corrosive politically than economically. It’s a minus, not a plus, but my guess is it’s a small minus. And there’s a tendency if you’re an economic person to want to make everything into an economic problem. Um, there could be things that are really bad that aren’t measured in terms of GDP and are measured other ways. And I think this is probably one of them.

DAN KURTZ-PHELAN

So you know, that one of the core tenets of post-neoliberal thinking, and this I think applies across administrations as well, is a sense that deficits just don’t matter in the way that we once thought they did. You wrote a piece in, I believe, 2019 in Foreign Affairs with Larry Summers I think it was called “Washington’s Deficit Obsession.” You know, a lot of that was a political argument that Republicans talk about deficits when they’re out of power, but then do nothing about it once they’re in. So Democrats shouldn’t be the only administrations that really focus on cutting deficits. But some of it was a sense that we’d be able to see the signs that the deficit was becoming a problem before we had to do something about it and we would kind of have time to act. As you reflect back on that piece, is there anything you would change about that analysis? And are we now at the moment where we should start freaking out? Are we kind of seeing the signs that this is becoming a real problem?

JASON FURMAN

It’s a lot of people on the deficit that are stopped clocks. It’s always a crisis for them or it’s never a problem for them. And I’m just not one of those people. I change my mind on this. I changed my mind. I think mostly because the world changes and reality changes. Some of it may be that I over torque in one direction or the other, or have better thoughts over time, but in 2019, interest rates were too low now interest rates are too high now the debt is much higher than it was in 2019. We did too little stimulus in the wake of the financial crisis. We did too much stimulus this time. So I don’t think there’s a, “It never matters” or “It always is a crisis.” That is the answer here. It’s figuring out how to get the balance right. And right now, based on our fiscal trajectory, our interest rates, the impediments to growth in our economy. And all of that leads you to the same direction of being worried today in a way that didn’t make sense to worry frankly, six years ago.

DAN KURTZ-PHELAN

What would a crisis look like? What would cause you to become really concerned that we’re approaching a really scary point soon?

JASON FURMAN

There’s not a lot of models of a crisis in a country like the United States that borrows in its own currency and handles its own money. But there are things—in the early 1990s, for example, Canada had a big spike in interest rates. I think they went up about 300 basis points and it got really ugly. They had a political system that was pretty functional, sat down and did a big deficit reduction plan and got everything back together again, um, for their country. In some ways, that’s a favorable story. They approached the brink and somehow got past it. In other ways, if, you know, the 10-year treasury goes up to eight and a half percent from five point a half percent, that would be a pretty scary thing for the entire global economy. And how functional would I count on the U.S. political system to be in handling it? I’m not sure.

DAN KURTZ-PHELAN

So to go back to the new essay, it was of course more retrospective than it was about crafting a new approach, but it was motivated, I think, by a desire to start the fight over what comes next. And you are not obviously a huge fan of the post neoliberal view, but nor are you a defender of neoliberalism as it’s called in all of its dimensions. As you think about what a kind of post post neoliberal synthesis might look like, if you kind of take the best elements of both, what are the ingredients there, what are the questions that you think we should be working through at this point as we think about what that approach might look like?

JASON FURMAN

So first of all, I’d love to be back in your pages to flesh out a more affirmative, forward-looking agenda. Part of it is about productivity and growth. This is what some people are calling an abundance agenda. I’m really excited for the book that Ezra Klein and Derek Thompson are going to have on that topic. And just with a growing pie, you can deal with a lot of issues and there are a lot of impediments to growing the pie on the supply side. Some of them are traditional Republican concerns about overregulation. Some of them are quite different. So that’s one part of it.

Second is I have old fashioned traditional views of a belief in redistribution. I think that there are people that can afford to pay more in taxes, and I think there’s much more we can do, especially in terms of investing in children and reorienting our fiscal system more around children.

Finally, there’s a problem that’s really vexed me, and I don’t know the exact answer to it, but the employment rate in the United States is for prime age workers, 25 to 54, not as good as many other advanced economies. It took a bigger blow in the last couple of recessions than it did in many other countries. I don’t think that totally liberal and free labor markets are the way to handle it. And so trying to understand what we can do to sustainably approach a full employment economy, which I don’t think is about over-torquing demand, but again, trying to understand what’s going on on the supply side, that’s been an impediment there.

DAN KURTZ-PHELAN

What about the industrial policy piece of this? What’s the right way to think about that as a tool or, I guess Brian Deese, the head of Biden’s National Economic Council, called an industrial strategy when he was on the podcast a few months ago.

JASON FURMAN

I think industrial policy is an intriguing area. There are more economists who are approaching it in a reasonably open-minded way these days, observations like basically no country developed a semiconductor industry without a substantial amount of government involvement. So trying to understand the intersection of national security, supply chain resilience, you know, what it’s like when you’re dealing with competitors and countries that aren’t always good faith in the international system. I think that’s an important thing to figure out. I don’t think it’s actually going to be central to the wellbeing of most Americans economically. I don’t think it’s going to be that important to our politics. But it definitely matters to our safety and resilience as a country.

DAN KURTZ-PHELAN

Well, let’s close with an agreement to revisit some of these forward looking questions in our pages. But Jason, for now, thank you so much for the piece and for joining me today.

JASON FURMAN

Thanks for having me.