Podcast Summary
Biden administration's interventionist economic policies: The Biden administration is taking an active and interventionist approach to economic management, as evidenced by the passage of major bills like the Inflation Reduction Act, the CHIPS Act, and the COVID-19 response.
The Biden administration is leaving a significant mark on economic management through its active and passive identification of strategic choke points in the economy and addressing them with legislation. This approach, which could be labeled industrial policy, is a departure from past presidents, including Trump and Obama, and marks a more interventionist approach to economic management, as seen in the passage of major bills like the Inflation Reduction Act, the CHIPS Act, and the response to COVID-19. Brian Deese, the head of the President's National Economic Council, who was involved in the implementation of these policies, confirms this perspective. While the success of these policies will be evaluated in the future, the administration's approach represents a shift towards a more proactive approach to addressing economic challenges.
Renewed focus on industrial strategy: The Biden administration's industrial strategy uses public investment to attract private investment in strategic areas like clean energy, innovation, and semiconductors, emphasizing the importance of building domestic industrial capacity and potential global benefits.
Over the last 40 years, the concept of industrial policy has been viewed negatively in the US due to a belief in minimal government interference. However, the changing economic landscape necessitates a renewed focus on industrial strategy. Historical examples like Hamilton's support for manufacturing and Lincoln's investment in infrastructure demonstrate the importance of government intervention in driving economic growth and innovation. The recent Biden administration's strategy, as seen in the Infrastructure Bill, Chips and Science Act, and Inflation Reduction Act, aims to use public investment to attract private investment in strategic areas like clean energy, innovation, and semiconductors. This approach is crucial as the private market alone may not meet the US's economic and security needs. Furthermore, the geopolitical competition angle can help in passing legislation by emphasizing the importance of building domestic industrial capacity and the potential global benefits of US investments.
Strategic industrial policies for economic opportunities and job creation: Investing in clean energy and semiconductors can bring significant economic benefits and job creation, but it's crucial to consider geopolitical implications and collaborate with allies to secure supply chains and access to necessary components.
Strategic industrial policies, such as investments in clean energy and semiconductors, can bring significant economic opportunities and job creation, especially in districts previously overlooked. However, it's crucial to consider the geopolitical implications and avoid creating tensions with other countries. The world needs greater supply in these areas, and the US government's role in driving down the cost of deployable technology can benefit the global economy rather than constrain it. The Inflation Reduction Act, for instance, can provide long-term technology-neutral incentives, benefiting both the US and its allies by driving down the cost of clean energy technologies. Collaboration and partnership with allies are essential to secure supply chains and access to necessary components.
Building up domestic supply chains in clean energy and semiconductors: The Biden administration is incentivizing companies to invest in US production for clean energy and semiconductors through the Inflation Reduction Act and CHIPS Act, aiming to reduce reliance on China and secure technology access.
The Biden administration is prioritizing the build-up of domestic supply chains, particularly in industries like clean energy and semiconductors, to reduce reliance on China and ensure secure access to technology. This involves providing long-term incentives for companies to invest in the US, with the Inflation Reduction Act and CHIPS Act aiming to change the trajectory of declining domestic production in these sectors. The success of these initiatives will depend on effective execution and implementation over time. The goal is to regain core innovation and manufacturing capabilities in the US, not necessarily to produce all or most of the world's chips or clean energy components.
New US laws boost semiconductors and clean energy with infrastructure investments: The CHIPS Act and Infrastructure Investment and Jobs Act mark a significant shift for the US in public investments in semiconductors and clean energy. Success depends on their interplay, with infrastructure investments crucial for unlocking potential and the US government playing a role as buyer and innovator.
The recent legislations, including the CHIPS Act and the Infrastructure Investment and Jobs Act, mark a significant shift for the US in terms of public investments in industries like semiconductors and clean energy. We're off to a strong start, with companies already announcing plans to build new facilities. However, the success of these investments depends on their interplay. The infrastructure law's investments, for instance, are crucial for unlocking the potential of the semiconductor and clean energy investments. Additionally, while the lack of a large public buyer for domestic tech might be a challenge in some industries, the US government can still play a role as a buyer of last resort for national security priorities and as an innovator through its purchasing power for leading-edge chip technology. The recent legislations also include substantial funds for research and innovation, which is essential for rejuvenating the innovation base in the semiconductor industry.
Identifying and addressing choke points in the US economy: The Biden administration proactively studied supply chain vulnerabilities and opportunities for public investment, leading to reports and policy changes like the CHIPS Act, but ongoing efforts are needed to combat high inflation.
Identifying and addressing choke points in the US economy requires a proactive approach that combines real-time analysis with long-term planning. The Biden administration identified strategic priorities through existing research and expert knowledge, and launched an initiative to study supply chain vulnerabilities and opportunities for public investment. This effort, which was ongoing even during crisis situations, led to reports and policy changes, such as the CHIPS Act. Despite progress in addressing supply chain issues, inflation remains high, demonstrating the importance of continuous effort in this area.
Navigating Economic Transition: Inflation, Housing, and Labor Market: The economy is making progress in moderating inflation while maintaining labor market and consumer resilience, but the housing sector and packaged goods pose challenges. The labor market and company investments provide unique strengths to navigate this economic transition.
The current economic situation is unique and unpredictable, with persistent inflation despite the healing of supply chain issues and the passing of transitory factors. The economy has shown meaningful progress in moderating inflation while maintaining labor market and consumer resilience, but the question is whether this progress can continue without sacrificing economic gains. The housing sector, in particular, is a distinct factor in the inflation dynamics, with housing data in the inflation prints reflecting economic circumstances from about 6 months ago. A persistent source of frustration is the stickiness of inflation for packaged goods, despite cooling overall in the food at home category. Grocery store CEOs have interacted with their suppliers but have not been able to put significant pressure on them to bring prices down. The resilience of the labor market and the investments of companies, in part due to policy, give the U.S. a unique set of economic strengths to navigate the next leg of this long-term economic transition.
The executive branch can act quickly in some areas but progress in others takes longer than expected: While the executive branch can take swift action in certain situations, addressing complex issues like inflation in the food industry requires more time and attention
While the executive branch can make decisions and act quickly in certain areas, such as releasing oil from the Strategic Petroleum Reserve in response to geopolitical events, there are other areas where progress seems to take longer than expected. For instance, the process of setting rules for the auction and tender to buy back oil from the SPR takes a significant amount of time. In the food industry, the cost of packaging and other inputs often outweighs the cost of the food itself, leading to frustration for retailers as changes in the upstream supply take a longer time to reach the consumer. The Biden administration's approach to reducing inflation through the SPR is an example of quick action, but other areas, like the packaging industry, require more attention and time to address persistently sticky issues.
Ensuring effectiveness of critical infrastructure during crises: Exploring new ideas for competition can lead to better economic outcomes, but careful execution is key to avoid unintended consequences. The Biden admin is interested in increasing competition and may focus on deregulatory steps.
Prioritizing maintenance and infrastructure upgrades in critical areas like the Strategic Petroleum Reserve is essential to ensure their effectiveness during crises. Additionally, exploring novel ideas like innovative procurement methods or regulatory changes to increase competition can lead to better economic outcomes for consumers. However, it's crucial to approach these new ideas with caution and careful execution to avoid unintended consequences. The Biden administration has shown an interest in this approach, as seen in their efforts to increase competition in industries like hearing aids and their proposed tax on corporate stock buybacks. With the legislative window for significant changes closed due to Republican control of Congress, the administration may focus on deregulatory steps to foster competition and reduce negative economic outcomes.
No significant advancements in universal childcare or expanding childcare benefits: The administration made important strides in health care coverage but missed opportunities to address childcare and labor supply, emphasizing the need to make a clearer economic case for these policies and avoid social labels.
Despite the expansions in health care coverage under the current administration, there were no significant advancements in areas like universal childcare or expanding childcare benefits. That was due to a combination of factors, including the focus of Congress, high inflation, and the perception of these policies as social programs rather than economic priorities. However, it's important to note that the administration signed into law the largest structural expansion in health care coverage since the 1960s, resulting in the lowest uninsured rate in history. To make progress in areas like childcare and labor supply, there's a need to make a clearer economic case for these policies and avoid categorizing them as social programs. The economic benefits, such as increasing labor supply and reducing price pressures, are compelling. Looking back, there may have been opportunities to improve specific policies, like the PPP, but overall, the administration made the right calls given the legislative process and the narrowly divided Congress. The long legislative process, which took over 500 days, made it possible to get important legislation done but also made it harder for the American people to fully understand the process.
Discussing Inflation and Government's Role in the Economy with Brian Deese: Brian Deese discussed the uncertainty of inflation, the government's active role in the economy, potential implications of investments, and the importance of considering long-term consequences.
During Brian Deese's last appearance on Odd Lots before leaving the administration, he discussed the current state of inflation and the government's role in the economy. Deese acknowledged the uncertainty surrounding inflation and the impact of various factors, such as packaging costs and historical trends. He also noted the shift in political priorities towards a more active role for the government in the economy, which has led to significant investments in areas like semiconductor manufacturing. However, there are concerns about the sustainability of this approach, especially if the government's spending ability is constrained in the future. The discussion also touched on the potential implications of these investments, such as idle factories or price wars during economic downturns. Overall, the conversation highlighted the complexities of managing inflation and the economy, as well as the importance of considering the long-term consequences of current policies.
Bloomberg Launches New Podcast 'Money Stuff': Bloomberg introduces a new podcast, Money Stuff, hosted by Matt Levine and Katie Greifeld, bringing Levine's popular finance newsletter to life weekly on podcast platforms.
Bloomberg is launching a new podcast called Money Stuff, hosted by Matt Levine and Katie Greifeld. Levine, who is well-known for his popular Wall Street finance newsletter, and Greifeld, a Bloomberg TV host, will bring the newsletter to life every Friday through the podcast. Listeners can tune in to Money Stuff on Apple Podcasts, Spotify, or any other podcast platform. The podcast promises to cover all the finance news and other interesting topics that make Levine's newsletter a hit. This collaboration is an exciting addition to the Bloomberg podcast lineup and is sure to attract a large audience interested in finance and Wall Street news.
