Read on Twitter
I wrote a story for the NYT Magazine this week about Biden’s radical ideas for transforming the economy once the pandemic is over--by spending well over $1 trillion to turbo-charge new industries. https://www.nytimes.com/2021/02/11/magazine/biden-economy.html
2) The underlying concept is one that economists have dismissed for decades, but which Biden is attempting to bring back into fashion in a big way: Industrial policy.
3) Economists generally say the market should decide which industries get big infusions of capital. Biden is saying, “Actually, the government is going to handle it for a bit, thx.” And there’s some cutting-edge economic research to back him up. https://www.nber.org/system/files/working_papers/w18048/w18048.pdf
4) The Chinese do an aggressive form of this, identifying industries they want to dominate in their five-year plans, then throwing $100s of billions of dollars at them through super cheap inputs, land, financing. https://www.nber.org/system/files/working_papers/w26075/w26075.pdf
5) Biden will probably lean more on conventional tax incentives, but we’ll see a similar amount of spending in some cases, like on electric vehicles.
6) Biden aides are developing a plan that will call for 100s of billions of dollars over a decade to incentivize the purchase of electric vehicles, to help stand up new plants or retool old ones, to build out charging stations.
7) Interestingly, this isn’t so much a shift to the left as a shift toward economic nationalism. Several Republicans, like Mitt Romney, Marco Rubio and Tom Cotton, have indicated support for U.S. manufacturing because they worry China is starting to dominate these areas.
8) As Biden’s longtime friend and ally Sen. Chris Coons told me: “20 years ago, we would have had a huge ideological fight that this was ‘industrial policy.’ Today our No. 1 competitor globally is a unitary, state-controlled economy.” We have no choice, in other words.
9) Anyway, I was surprised at the level of ambition from Biden, a politician with a reputation for tacking to the middle and playing it safe. That’s emphatically not what’s going on here. https://www.nytimes.com/2021/02/11/magazine/biden-economy.html
