United States International Relations

Credit…Rose WongFeatureBidenomics 101: Inside the White House’s Plans to Bring Jobs BackIn public and private, Biden and his advisers have signaled some dramatic interventions to revive U.S. manufacturing. Will they really happen?Credit…Rose WongSupported byContinue reading the main storyFeb. 11, 2021, 5:00 a.m. ETListen to This ArticleAudio Recording by AudmTo hear more audio stories from publishers like The New York Times, download Audm for iPhone or Android.Anyone searching for an economic road map to the Biden presidency might find hints of one in a 40-page research paper written, appropriately enough, by the United Automobile Workers union. The document, originally published in 2018 and titled “Taking the High Road: Strategies for a Fair E.V. Future,” argued that even in the face of foreign competition, the American automobile industry could continue to provide well-paying manufacturing jobs — but only if the government invested huge sums in electric vehicles. The technology highlighted in the report, like prismatic cells for storing electrical charges, was cutting-edge, but the economic thinking behind it was decidedly old-school. Some passages, in their America First-ness, read as if they could have appeared in a Ross Perot ad from 1992 — or, for that matter, a Trump ad from 2016. The U.A.W.’s researchers insisted, for example, that critical parts like batteries must be produced at home, not by rival industrial powers. “The economic potential of E.V.s will be lost if their components are imported,” they wrote. “Advanced vehicle technology should be treated as a strategic sector to be protected and built in the U.S.”Last spring, the document drew the attention of Joe Biden’s presidential campaign. Biden had begun his run with fewer sweeping economic proposals than his rivals: His would in many ways be a return-to-normalcy campaign, offering to take voters back to some vague status quo ante, when the steady hand of the Obama administration guided the country. Then the pandemic struck, and millions were fired or furloughed. By last April, the economy was in free fall, and Biden’s policy ambitions were growing. He wanted a plan that felt big enough for the moment. Campaign aides began to spitball. Biden had already suggested initiatives in areas like infrastructure, claiming that spending on highways and broadband would lift the economy. Now they wondered: Should he continue in this vein? Emphasize longstanding concerns like working families? The middle class? Before long, Ron Klain, a senior adviser and now President Biden’s chief of staff, intervened to urge that they focus primarily on jobs. Trump’s approval rating on the economy had stayed improbably high even as the pandemic raged, and Klain believed that a jobs plan would allow Biden to attack Trump’s perceived strength. Biden agreed and instructed his team to think both expansively and practically. In Zoom call after Zoom call, he pleaded with them to identify jobs in manufacturing and energy that would not require workers to undergo years of retraining or uproot their families. When aides eventually described the ideas in the U.A.W. paper, Biden became animated. The notion that spending billions to upgrade plants and subsidize car-buying could save the livelihoods of today’s workers — not merely create jobs for their kids — excited him. It promised a marriage of present and future. “His view matched up so well with the U.A.W. paper,” says Gene Sperling, a former top White House economic adviser who helped Biden develop his economic plan. “It fit his view that a ‘jobs of the future’ strategy had to include retooling factories and giving current workers a path to keep working.” In the end, the paper’s ideas weren’t just endorsed by Biden. Its ethos came to suffuse the entirety of his broader economic agenda, known as Build Back Better. This plan, unveiled by the campaign last July, called for $400 billion in government procurement to go to American-made equipment and $300 billion for research and development, with hundreds of billions more in subsidies to promote the making and purchase of domestic products. “I do not buy for one second that the vitality of American manufacturing is a thing of the past,” Biden said in his speech introducing the agenda.After the election, it became clear that these themes had been more than mere campaign flourishes. One of Biden’s first high-profile meetings of the transition included Mary Barra, the chief executive of General Motors, and Rory Gamble, the U.A.W. president. “He took a very strong position on electric vehicles,” Gamble told me. “He said we had to keep manufacturing in this country. I was really happy to hear that.”If Gamble sounded pleasantly surprised, it was for good reason. The prospect of using the government to bring about a major economic transformation is something of a departure for Biden. Throughout his career, he has kept to the center of the road. News coverage and political opponents alike have long noted the way he stakes out positions that are overwhelmingly popular within the Democratic Party. As the party has moved to the left on economic issues since the Obama era, so has Biden, putting forward a gigantic pandemic-relief bill, for example, and a call for a $15-per-hour minimum wage. But resolving to invest vast amounts in American industries isn’t an exercise in difference-splitting, like positioning yourself halfway between those who would spend $1 trillion and $3 trillion. For that matter, it isn’t even an obvious lurch to the left. It’s a shift toward the kind of economic nationalism that has, over the decades, found support across the ideological spectrum. What Biden wants to do represents a rethinking of the country’s economic posture: seeking to promote certain sectors — like green-energy production and the manufacture of wind turbines, say — so as not to cede them to competitors in Europe and Asia. It is a deviation from the free-trade gospel that the two most recent Democratic presidents preached and that Biden embraced at earlier points in his career. It is a form of chauvinism in some ways more ambitious than Trump’s, as manifested through haphazard tariffs and trade wars. “The package that they put together is the closest thing we’ve had to a broad industrial policy for generations, really,” says Scott Paul, the president of the Alliance for American Manufacturing, a trade association founded by the United Steelworkers union and a handful of large manufacturers.The approach is far from riskless, even within Biden’s own base: A focus on building up American industry can conflict with other progressive priorities, like addressing climate change more immediately or reining in corporate power. And it might encounter resistance from some of Biden’s own advisers and much of the party’s policymaking elite, who tend to consider such economic nationalism counterproductive and passé. Biden’s new Treasury secretary, Janet Yellen, said just last year that the manufacturing diaspora has been a major boon for the global economy. As one of few people to both lead Treasury and serve as the chair of the Federal Reserve, she is likely to exert enormous influence, both through her public utterances and her private recommendations. But if Biden and his more activist advisers are able to make good on their promises, the White House’s economic policy over the next four years will look very different from that of the most recent Democratic administration. They hope to modernize key industries and counter an economic threat from China, swiftly emerging as the world’s other superpower. They may even scramble political coalitions at home. “There are a lot of areas of potential overlap,” says Oren Cass, a former Republican policy aide and the founder of American Compass, which pushes to make conservatism more worker-friendly. Cass, whose research and advocacy group has argued for rebuilding manufacturing and reducing Wall Street’s influence over the economy, adds: “There’s a hypothetical governing majority to be drawn around the things we’re talking about that doesn’t exist within either party.”Janet Yellen, Biden’s new Treasury secretary, was previously the Federal Reserve chair.Credit…Getty ImagesRelief and recovery. They sound vaguely synonymous, but in the months since Biden and his aides began using them to describe their economic agenda, they have invested each term with a distinct meaning. Relief refers to the money Biden has proposed to spend in order to end the pandemic and tide over the millions of people suffering through it. Recovery describes the administration’s hopes for transforming the economy after the health crisis so that it is cleaner and more equitable than before.The phrasing goes back at least to President Franklin D. Roosevelt, who promoted a similar agenda of relief and recovery during the Great Depression. (He included a third variable in his equation: “reform.”) The terms as Biden deploys them hint at a distinction that runs deeper than just short-term versus long-term: They signify two very different philosophies of government. Biden’s relief plan, an opening offer in the current legislative negotiations, is largely an expression of modern liberalism, which holds that the federal government must spend more and expand its influence during times of acute need. The proposed plan, which totals $1.9 trillion, allocates money to fight the pandemic and its depredations in various ways: to accelerate vaccinations; to increase access to testing, health care and child care; to help schools reopen safely; to prop up small businesses; to enable the hardest hit to stay in their homes; and to make unemployment benefits and food stamps more generous. (The plan also includes a few unorthodox ideas, like hiring 100,000 public-health workers.)Seen in that light, it is mostly the size of Biden’s Covid-relief plan that is truly remarkable. Back in 2009, President Barack Obama proposed to address what was then the worst economic crisis since the 1930s with a relief plan less than half as large as what Biden has asked for. Yet even many Democrats at the time worried about its effect on the deficit. Two of the top figures on Obama’s economic team, Treasury Secretary Timothy Geithner and Office of Management and Budget Director Peter Orszag, urged Obama to demonstrate, after its passage, that he was reducing the deficit.Today, while it’s likely that Congress will shave money from Biden’s relief package, there is broad agreement in his party and among a wide range of economists that there is little risk from running a substantially larger deficit to end the crisis. “Fiscal room is not the constraint,” says Jason Furman, an economics professor at Harvard and former White House aide, using economist-speak to mean deficit concerns. “I was always in favor of more stimulus in 2009. I don’t think fiscal space was a constraint then. But it was more of a constraint then than now.” (Furman’s White House colleague Lawrence Summers recently said in a column that Biden should consider shrinking his relief bill to avoid the risk of inflation, though Summers agrees that a large bill is helpful.)After the relief, however, the Biden team will put forward a recovery plan that includes some uncontroversial ideas, like fixing roads and bridges, but also contains elements that go beyond the comfort zone of many center-left economists. The sticking point is what’s known as industrial policy, meaning large-scale efforts to build up particular industries or sectors. While industrial policy is by no means foreign to the United States — any federally subsidized or managed expansion of an industry might qualify (think military contractors) — the caricature that comes to mind, even for many liberals, is Soviet-era central planning. The term carries with it a whiff of stigma. The prospect of using industrial policy to shrink the economy’s carbon footprint has circulated for years as a kind of theoretical ambition. The phrase “Green New Deal” has been around since at least 2007, when the New York Times opinion columnist Thomas L. Friedman used it to describe a hypothetical “huge industrial project” to slow climate change. The Obama administration took a modest first step, spending about $90 billion on green-energy projects in its 2009 stimulus package. But in recent years, the notion has gathered momentum on the left flank of the Democratic Party. In early 2019, Representative Alexandria Ocasio-Cortez of New York introduced a resolution calling for a Green New Deal that would put the economy on a path to zero net greenhouse-gas emissions while investing in the “industry of the United States” and creating “millions of good, high-wage jobs,” though it was vague on details. Later that year, a plan from Senator Elizabeth Warren of Massachusetts, then a presidential candidate, said the government should spend $1.5 trillion over a decade to buy American-made clean-energy technology. The same day, Biden announced a climate plan that referred favorably to the Green New Deal, although it was not as focused on manufacturing and jobs.That such proposals migrated, in the span of less than a year, from the party’s left to its centrist nominee underscores how quickly Biden’s economic philosophy has been evolving. They are also somewhat controversial, even on the left, unlike the relief portion of his agenda. In part, that’s because these provisions would most likely increase the price of clean technologies, which can be imported more cheaply from abroad. “My view is, if you think climate change is the biggest challenge facing the country, you’d want to have the most efficient and cheapest infrastructure to deal with it,” Furman says. “You should want to make sure a lot of solar and wind energy is produced in the United States. You shouldn’t care nearly as much where panels and turbines are produced.”When mainstream economists question the idea of singling out particular businesses, sectors or industries, as a widely cited 1990 paper by the economist Anne O. Kruger did, they argue that government intervention is likely to prop up companies that can’t otherwise justify such investment or to pad the margins of those that can succeed on their own. Yet recent research — a study of government support for British manufacturers, for example, or a study of government support for Chinese industries like plastics and computers — has found that subsidies can make industries healthier or more productive even over the long term.“Manufacturing has an outsize contribution to overall innovation and productivity,” says Dani Rodrik, an economist at Harvard. He is part of a small group within the profession’s mainstream that clashed for decades with fellow economists by detailing the drawbacks of free trade and the benefits of industrial policy. A growing body of evidence on the harm done to workers by a trade agreement with China, which other economists played down at the time, has increasingly vindicated him. The idea of spending government funds to preserve or create domestic manufacturing jobs has a well-documented political appeal, especially among blue-collar workers, even as economists insisted that it was futile or self-defeating. But now, Rodrik says, even some economists are more open-minded: “Lo and behold, people start to do research on Chinese policy, and it turns out some of it is quite effective.” Brian Deese, Biden’s top economic aide, was previously Obama’s senior adviser on climate and energy policy.Credit…Getty ImagesAs a rising political star in the 1980s, Biden sometimes channeled the self-consciously centrist thinking that was then coming into vogue among Democrats like Gary Hart. He warned about the risks of micromanaging the economy and chided unions that defended the status quo. But even when he aligned with the new centrists — Biden and Hart shared a political strategist — Biden retained a distinctly blue-collar sensibility. He called for a “new era of American economic nationalism” in the speech that framed his 1988 presidential campaign. He derided fundamentalist beliefs in free trade and proposed using tariffs on imports to fund retraining for workers. He consistently backed pro-union legislation. “If you came into our waiting room in 1973 or 1978,” says Ted Kaufman, Biden’s longtime Senate chief of staff, “you’d see a group of people from the A.F.L.-C.I.O. on one side of the room and a group from the Chamber of Commerce on other side.”In the 2000s, as globalization coincided with significant job losses and the decline of industrial towns in the United States, Biden’s populist sympathies appeared to gradually supplant the centrist instincts that had led him to back — albeit without much passion — the major trade agreements of the Clinton era. “Everybody who was involved in business or government in the 1980s or 1990s has seen some of the promise of globalization come through, but a lot of the harm has been unexpectedly broader, sharper, deeper,” says Senator Chris Coons of Delaware, a longtime Biden friend and ally. “He believes we need to change direction on trade.” That view now appears to be ascendant, if not yet the consensus, among the Democrats’ policymaking class. Indeed, one lingering divide within the party is between those who have undergone a similar evolution as Biden and those who have not; Biden’s economic advisers come from both camps.Gene Sperling exemplifies those who have, like Biden, moved left. As President Bill Clinton’s top economic adviser in the late ’90s, he shared Clinton’s view that free-trade deals would benefit the country if accompanied by worker training and a more generous safety net. After Republicans largely rejected such spending, Sperling and Clinton believed it was still worth expanding trade with China, as long as the deals included ways to protect against floods of cheap imports. But when it became clear in the 2000s that the rise in Chinese imports was producing “such devastating impacts,” as Sperling writes in a recent book, he changed his position.As Obama’s top White House economic adviser, Sperling began making the case in 2011 for directing support to manufacturers through government subsidies. In 2016, he encouraged Hillary Clinton to campaign in opposition to the Trans-Pacific Partnership, the 12-country trade deal that the Obama administration had spent years negotiating, later saying on television that Clinton wanted to “put T.P.P. in the rearview mirror” and prioritize “clear job-creating measures.” “I got a lot of [expletive] for that,” Sperling says, alluding to the reaction of his former White House colleagues. While Sperling has not joined the Biden administration, he has been a mentor to several senior economic aides who have.One of them, also in what might be called the more nationalist camp of advisers, is Brian Deese; he now fills the role that Sperling did for Obama, as the top economic aide in Biden’s White House. Deese got his start in Democratic policy circles as an assistant to Sperling in the early 2000s. As a member of Obama’s auto-industry task force in 2009, he was responsible for establishing a program that would help hundreds of suppliers threatened by the looming collapse of the American auto industry. “I got to see up front what the stakes were,” Deese says. “If you let go of this industrial company, it directly employs about 50,000 hourly employees. But you also have more than one million jobs and a bunch of spillover economic benefits at stake.” He helped persuade Obama to save Chrysler over the opposition of some of the president’s economists.When Deese became Obama’s senior adviser on climate and energy policy in the final years of the administration, it began to dawn on him that two of his interests were merging: government support for manufacturing, and forestalling the climate apocalypse. “Some of the biggest opportunities,” he says, “were at the intersection of strategic procurement, what some people would call straight-out industrial policy, and the work we needed to do as a country to scale markets for clean-energy innovation.” A number of Biden’s advisers have arrived at similar positions. Jennifer Granholm, who was the governor of Michigan during the auto bailout and who has close ties to both organized labor and manufacturers, is Biden’s pick for energy secretary. Katherine Tai, Biden’s choice for U.S. trade representative, helped negotiate the stricter worker protections in the revision of the North American Free Trade Agreement that passed Congress last year, a priority for labor. Stef Feldman and Jared Bernstein, two current White House officials who helped shape the campaign’s economic proposals, worked for Biden during his days as vice president, when he oversaw the implementation of Obama’s stimulus package and had close contact with unions. The other camp of Biden advisers, though, seems to be more sanguine about the benefits of globalization and more skeptical about indulging populist economic ideas. Wally Adeyemo, for example, who is Biden’s pick for deputy Treasury secretary, helped negotiate a provision in the Trans-Pacific Partnership and was defending the pact even as Sperling was panning it on TV in 2016. Adeyemo, who started in the Obama administration as an aide to Geithner at Treasury before rising to become a top White House official, made the rounds in Washington that year arguing the benefits of free trade and raising concerns about protectionism. He has appeared to shun the idea of the government investing directly in domestic industries: “It’s critical that the private sector play the leading role in deciding how to allocate capital,” he said at a forum in 2016. Still, Adeyemo has also worked for Elizabeth Warren and, colleagues say, has close relationships with figures on the left.One early answer to the question of where Biden will come down on these issues is his promise to tighten rules requiring the government to buy American-made goods. In January, he signed executive orders directing his administration to review the waivers that let agencies to do business with foreign suppliers and contractors. The most consequential of these loopholes, known as the trade-pact waiver, is one that allows federal agencies to essentially treat companies in dozens of countries as American suppliers if they have trade relations with the United States. When the U.S. government buys cars from Japan or washing machines from Mexico, for example, it is satisfying current federal Buy American requirements.Those who support revoking the waiver — which could create a backlash among many allies who see the move as a form of protectionism — are cheered by Biden’s initial action but worry that he might lose his nerve, at a moment when the government is about to spend trillions of dollars. “This is a fine first step: It lays out the right vision,” says Lori Wallach, a trade expert at the liberal group Public Citizen. “But it would be a huge policy problem and political liability to offshore a chunk of the Covid stimulus because of the Buy American trade-pact waiver.”Wally Adeyemo, Biden’s deputy Treasury secretary, was previously a top White House official.Credit…Getty ImagesThe fear that Biden might recoil from more activist policies dates back to the campaign. Last spring, when aides became concerned that Biden might get sticker shock from the price of the economic plans his advisers were floating, one of them had an idea: He reached out to the most recent Federal Reserve chair, Janet Yellen, and asked her what she thought about spending a few trillion dollars to prop up the economy, end the health crisis and ignite a recovery. She answered promptly. “What I told the campaign,” Yellen recalled to me recently, “was this is something we can afford, and in a way, we can’t afford not to do it.” Biden was reassured. Yellen, a former economics professor at the University of California, Berkeley, and the first woman to serve as either Fed chair or Treasury secretary, is in some respects a typical Biden appointee: acceptable to both the establishment and liberal wings of the party, admired for her competence and experience. Unlike many of her colleagues, however, she often inspires genuine enthusiasm across the ideological spectrum. Hedge-fund managers concerned about the overall lack of financial-market experience on Biden’s team were effusive in praising her to me. At the same, she also warms many hearts on the left, a rarity in a Treasury secretary, whose job is to oversee areas like tax policy, bank regulation, the sale of government debt and economic ties with other countries. “You had to have somebody in the Treasury role who could look the American people in the eye as an incredibly esteemed, gravitas-wielding macroeconomist,” says Felicia Wong, the president of the Roosevelt Institute, a progressive nonprofit. She has also, Wong notes, “done a lot to try diversifying the economics profession.”Yellen may even be the rare technocrat with feminist-icon meme potential, in the tradition of Ruth Bader Ginsburg (“Notorious R.B.G.”) and Elizabeth Warren (“Nevertheless, she persisted”). A few days after Yellen’s Senate confirmation hearing, a “Hamilton”-esque tribute by the rapper Dessa premiered on public radio; it has since been played online more than 200,000 times. (“She’s 5-foot-nothing, but hand to God/She can pop a collar, she can rock a power bob.”) The comparison with Warren is instructive. Just as Warren, from her perch atop a congressional panel overseeing the Wall Street bailout in 2008 and 2009, second-guessed the insiders who ran the banks, Yellen has made her reputation partly through dissenting from the groupthink of the financial establishment. A few years earlier, at the Fed, where she ran its West Coast regional bank, Yellen pointed out to colleagues that the housing boom looked increasingly like a mania. “One of the reasons she actually had a much better ability to see what was happening was that she was in San Francisco; she was an outsider; she was not in the Washington bubble,” says Dennis Kelleher, the chief executive of Better Markets, a Wall Street watchdog group. Warren appeared to recognize a fellow traveler when, in 2013, she led a group of senators who publicly urged Obama to elevate Yellen to the Fed chair over Lawrence Summers. She also backed Yellen’s appointment to Treasury last fall. In this way, Yellen has become the most visible edge of Warren’s personnel-based strategy of nudging the party leftward; she has quietly lobbied to place sympathetic policymakers in key administration positions, often with former Warren aides serving beneath them. (Neera Tanden, a former Hillary Clinton aide who is Biden’s pick for budget director, is also a sometime Warren ally; Yellen has hired a former Warren aide as a deputy chief of staff.) The efforts of politicians like Warren have been abetted by a network of increasingly vocal groups — including the Roosevelt Institute and the Revolving Door Project — clamoring for progressive nominees over more business-friendly choices.The way Yellen has used her bully pulpits over the years suggests that her priorities overlap with Warren’s, even if her views are not quite as populist. In one of her early speeches as Fed chair, a position Yellen held from 2014 to 2018, she dwelled on the topic of rising inequality and “whether this trend is compatible with values rooted in our nation’s history.” The speech prompted criticism from a prominent House Republican, who accused Yellen of “sticking your nose in places that you have no business.” But like many center-left economists, Yellen tends to emphasize the struggles of those near the bottom more than the excesses of the 1 percent. When I spoke with her in January, she riffed at length about policies like training that could help workers without a college degree, but she didn’t mention raising taxes on the wealthy, a major goal of progressives. (Yellen, who earned more than $7 million giving speeches to large banks and other businesses as a private citizen over the past two years, appeared during her confirmation process to embrace Biden’s proposal to raise taxes on investment income for those making more than $1 million.) Yellen has struck a similar stance — that of the reformer rather than the revolutionary — when it comes to regulating Wall Street. In 2017, she was in her third year as Fed chair, and Trump said he was considering reappointing her to a second four-year term. If she was intent on keeping the job, it might have suited her to muse publicly about a possible rollback of Obama-era financial reforms, which the Fed played a central role in implementing — and which Trump had derided. Yellen leaned mostly in the opposite direction instead, arguing in a speech that the reforms had made the financial system much safer. Still, Yellen has stopped short of championing certain progressive causes, for example resisting calls from the left to break up large banks. But the issue on which Yellen has arguably been most out of step with both the left and her new boss is globalization, particularly the questions of whether to subsidize the building of domestic factories or to let American firms outsource their manufacturing needs to workers abroad. At an event with the World Bank president in February 2020, Yellen, a self-proclaimed free-trader, worried that a populist backlash was threatening the benefits of globalization and said that “the growth of trade that we have seen over the last 50 years in development of global supply chains has been one of the most important factors boosting growth all around the world.” Biden has essentially called for slowing this 50-year trend, so it’s easy to imagine a rift opening between them that could deprive him of Yellen’s greatest asset as Treasury secretary — her ability to confer credibility on his main economic initiatives, both with financial markets and among wavering legislators.Even as she has risen in the world of government, Yellen has retained a distinctly academic sensibility. She speaks in the language of medians and distributions and will refer to investment returns that are “far in excess of” zero (as opposed to, you know, “high”). She is not a professorial prude, however, oblivious to shifting realities. One topic that consumed her days as the chief economist in the Clinton White House was the Kyoto Protocol, the 1997 global agreement to reduce greenhouse-gas emissions. At the time, many economists were concerned about how much it would cost to lower emissions as quickly as environmentalists recommended and were skeptical about committing to formal targets. Clinton’s own Treasury Department was initially resistant. But Vice President Al Gore and Clinton himself were enthusiastic about the agreement, and Yellen was eager to make the economic case. “I definitely saw the need to do it,” she told me. “There were debates about what was the right pace.”When I asked Yellen whether she had concerns about Biden’s Buy American agenda, which didn’t seem to square with her opinions about international trade, she emphasized views that were more in line with the president’s. “The trend toward globalization has resulted in losses for workers, and the time has come to really remedy that — the impact has been simply so negative on such a large share of the population,” she said. “The focus needs to be on inequality and low-wage workers and improving their lot.”And what about the sort of industrial policy that would entail large government backing for, say, making electric-car batteries domestically? “One would want to look at the specifics of any particular proposal,” she said, “but generally, I think there is a case for it.” Katherine Tai, Biden’s choice for U.S. trade representative, helped negotiate stricter worker protections in the revision of NAFTA. Credit…Getty ImagesIn the days after the Democrats clinched control of Congress by winning two Senate seats in Georgia, Representative Peter DeFazio of Oregon, the powerful chairman of the transportation committee, exchanged several texts with Steve Ricchetti, who would soon be a top Biden White House aide. Biden’s team had spent the transition gaming out legislation, but the exercises had an air of unreality as long as Republicans appeared likely to control the Senate. Now the plans were suddenly viable, and DeFazio wanted to gauge the timetable that Ricchetti and his colleagues had in mind. “I originally said, ‘I can be ready to go by March or April,’” DeFazio recalls. “He said, ‘We want to go faster than that.’”DeFazio is one of a small handful of lawmakers who will have an outsize influence on what Biden is able to accomplish economically. To call him a supporter of far-reaching economic legislation would be an understatement. He was one of the few members of Congress who voted against Obama’s stimulus package because he found it too timid, and last year he helped shepherd a $1.5 trillion bill through the House that included large pots of money for rail, broadband internet, zero-emission buses and charging stations. (It did not pass the Senate.) As big as that price tag was, he was not averse to increasing it. When I pointed out that Biden’s campaign proposal appeared to call for spending more on equipment like electric vehicles, he quickly proclaimed himself open to the amount. But powerful allies invariably have their own priorities too, and DeFazio is no exception. He rhapsodized to me about new bridges and tunnels and talked up the benefits of pedestrian-friendly streets. Then he added this pitch: For less than $10 billion, the U.S. Postal Service could convert its delivery vehicles to an all-electric fleet. “The fleet is decrepit, dirty, falling apart,” he said. “It’s over 30 years old.” With Democrats in control of Congress, the problem for Biden may not be passing some version of his economic agenda so much as sorting through the sheer volume of asks suddenly pouring in from hundreds of members and industry groups. Representative Ro Khanna of California, for one, has introduced a bill that would spend $100 billion over five years to fund research in industries like quantum computing, robotics and biotechnology and to situate tech hubs in areas hit hard by deindustrialization. Most of “the top 20 universities in the world are American — places like the University of Wisconsin, University of Michigan, which are dispersed across the country,” says Khanna, who represents parts of Silicon Valley and was a co-chair of Bernie Sanders’s presidential campaign. “There’s no reason we can’t see innovation and next-generation technology in these communities.” Wind-turbine manufacturers, whose supply chain goes through Europe, Asia and Canada, are seeking tax breaks for domestic production. So is the solar industry, which currently imports most of its assembled panels from Malaysia and Vietnam. The semiconductor industry has lobbied for tens of billions of dollars to upgrade production facilities and build new ones, on the grounds that semiconductors are a foundational technology — sort of like mechanically engineered stem cells that power everything from 5G mobile networks to autonomous vehicles and the internet of things. John Neuffer, the chief executive of the Semiconductor Industry Association, says supply shortages during the pandemic have focused minds in Washington on the importance of domestic production. Many of these proposals — and dozens more, like money to manufacture medical equipment, to buy e-scooters and other “micromobility” vehicles, to build “smart” pavement that can digitally connect cars to roads — made cameo appearances in Biden’s campaign, and the administration has expressed interest in pursuing them.Deese, who has been overseeing Biden’s economic plans, told me that the priority when it comes to industrial support will be those areas where subsidies can encourage companies to spend money on factories and technology in the near term that they might not otherwise spend for years — “pulling forward” their investments, as he puts it.Rodrik, the Harvard economist who is sympathetic to industrial policy, says the practice should really be seen as a way to ensure that American companies continue to innovate, more than as a means of vastly increasing employment. But Deese argues that the transition to a cleaner economy — installing solar panels, plugging abandoned oil wells, retrofitting buildings to make them more efficient — will generate lots of new jobs, even if manufacturing equipment doesn’t produce as many as desired. And he adds that we shouldn’t underestimate the job-creation potential of new equipment either.As a rough model, he points to a Senate bill, based partly on the U.A.W. electric-vehicles paper, that would spend some $400 billion over a decade on cash rebates for consumers who buy U.S.-assembled electric or hybrid cars. The bill, proposed by Senators Chuck Schumer of New York and Debbie Stabenow of Michigan, would also spend close to $50 billion funding the construction of charging stations nationally and provide nearly $20 billion in subsidies to help manufacturers build new plants and upgrade existing ones. “It’s the basic theory of the case,” Deese says. “Significant consumer incentives coupled with retooling for factories and a build-out of infrastructure.” The deal for manufacturers would become still more compelling with regulations mandating lower vehicle emissions and a commitment by the government to buy clean energy and clean equipment — a process Biden initiated with an executive order he signed in late January. Or, put another way, the Postal Service may soon be in luck. “It’s the largest fleet operator in the federal government,” DeFazio says. “It would be a huge boost to get production going on made in America, from the little delivery vans up through the semis.”Jennifer Granholm, Biden’s energy secretary, was the governor of Michigan during the auto bailout.Credit…Getty ImagesEven as Biden emphasized “unity” at the very start of his presidency — he used the word eight times in his inaugural speech, precisely seven times more than his predecessor on the same occasion — he has been prepared all along to pass his agenda on a party-line vote if necessary. David Kamin, now a White House aide, spent time during the campaign figuring out how to enact key economic plans through a maneuver known as reconciliation, in the event that Democrats came to control the Senate. This allows spending- and tax-related legislation to pass the chamber with a simple majority, rather than the 60 votes needed to overcome a filibuster. (It is a quirk of Senate nomenclature that “reconciliation” expressly does not require a party to make nice with the other.) Still, as Biden knows well from his decades as a senator, it would almost certainly behoove him to expand the coalition beyond his partisan ranks. Given the party’s threadbare margin — which literally comes down to Vice President Kamala Harris’s tiebreaking vote — it’s far from assured that he can secure his agenda with only Democratic support. It’s not hard to spot the possible defections. On the left, Biden may face grumbling from environmentalists who favor a more aggressive timetable for reducing emissions, which would mean importing a large supply of solar panels and car batteries from abroad, not the more pedestrian pace that would allow American manufacturers to scale up. “It’s a very real tension,” says Jason Walsh, a former Obama Energy Department official who now leads the BlueGreen Alliance, a coalition of unions and environmental groups that advocates a low-carbon economy that also increases the number of union workers. “You’re describing my job.” Even with electric cars, the problem is clear: Schumer’s bill provides the bulk of its incentives for vehicles assembled in the United States, even if the battery — the most valuable component — comes from abroad. That’s partly out of necessity, because it could take years to build up the capacity of domestic battery plants. A growing number of progressives have also been focusing, in recent years, on reining in corporate giants like Google and Amazon; their position is that these companies abuse their market power to kneecap competitors and take advantage of consumers. Some of the activists and politicians involved in this effort are skeptical that industrial policy will amount to much more than funneling taxpayer money to wealthy corporations. “I worry about it,” says Matt Stoller, the research director for the American Economic Liberties Project, an antimonopoly advocacy group. “I hope when they put this together, they’re not just giving money to monopolists.” Stoller concedes that industrial policy can be effective, but only if designed and implemented correctly. He cites the successful creation of coronavirus vaccines as an example. In that case, the pharmaceutical companies that produced a viable vaccine stood to earn far bigger profits than those that didn’t. “The government didn’t just write checks to Pfizer,” Stoller says. “It told seven companies: ‘Go develop a vaccine — it’s a competition. Compete.’”And then there is the near-inevitability that one or two senators will use their decisive vote to dictate the terms of a bill — most likely when a conservative Democrat balks at the cost. By contrast, says Rahm Emanuel, who served as Obama’s first chief of staff, the possibility of passing legislation with Republican votes shifts power back into Biden’s hands. “If they think you’re assembling something bigger,” Emanuel says, “you slightly dilute their leverage.”There is a pool of Republicans who, at least in theory, may support investments in emissions-reducing technologies. Several Republican senators hail from states that would directly benefit, including Kansas and the Dakotas, located in one of the largest wind corridors in North America. And as fossil-fuel companies continue losing wealth and stature, their influence over the Republican Party may recede. For the moment, it’s much easier to imagine Republicans backing industrial policy that steers clear of climate change. Several Republicans have partnered with Democrats on legislation that promotes other fields, like robotics and biotechnology, including Khanna’s research-and-development funding bill. Last year, Schumer, now the Democratic majority leader, worked with Republicans to add a measure to the annual military spending bill in order to create multiple programs that will invest in advanced semiconductors. The amendment passed 96 to 4, though the government has yet to allocate money to the new programs, which would cost tens of billions to fund fully. “The idea of keeping America No.1 in cutting-edge technology does not have a partisan division,” Schumer told me. “It’s sort of like the old days on defense.”Neera Tanden, Biden’s budget director, was previously a Hillary Clinton aide.Credit…Getty ImagesThe analogy is even more apt than he suggests. When Republicans think about American industry, they tend to invoke a single geopolitical adversary: China. “The emergence of China as an economic power, as well as a military and geopolitical power, is perhaps the greatest issue we face in this decade and the next one,” Senator Mitt Romney of Utah told me in late January. “We innovate; they steal innovation. We play by the trade rules; they play by their own rules.”A handful of other Republican senators, including Tom Cotton of Arkansas, Josh Hawley of Missouri and Marco Rubio of Florida, have taken similar positions. At times they have made statements and put out reports that, with only minor alterations, could have been issued by an industrial union. Two years ago, the Senate’s small-business committee, which Rubio led, produced a report arguing that manufacturing jobs are better-paying and more stable than the service-sector alternatives for typical workers, and that manufacturing brings greater economic benefits to communities. Romney and other Republican hawks on China tend to tell a story about American passivity. There is data that supports their view. From 2001 to 2007, the number of U.S. manufacturing jobs, which had hovered near 18 million for more than a generation, dropped by more than three million. According to a 2012 paper titled “The Surprisingly Swift Decline of U.S. Manufacturing Employment,” the plunge was most likely a result of the U.S. decision to permanently normalize trade relations with China in 2000. This allowed the Chinese to ramp up production of export goods without fear that they would be abruptly locked out of American markets.Many economists argue that the so-called China shock was a historical anomaly, driven by the rapid industrialization of a very large and very poor country, and that it was mostly over by the early part of the last decade. “Since then, one also sees that trade growth slowed down considerably, at the same time as in the U.S. the loss of manufacturing jobs basically ended,” says David Dorn, an economist at the University of Zurich. But that doesn’t mean Chinese companies can’t continue to seize market share from their American rivals. A 2012 book by the Harvard business professors Gary Pisano and Willy Shih made the case that when it comes to manufacturing, strength yields strength, and weakness yields weakness. They showed that the offshoring to Asia of the consumer-electronics industry, which executives believed was becoming too commoditized to be worth keeping entirely in the U.S., had weakened America’s so-called industrial commons — the ecosystem of research, engineering and manufacturing know-how that creates innovative products. In effect, getting out of the business of making stereos and TVs in the 1960s and ’70s made it harder for American manufacturers to produce more sophisticated technologies like advanced batteries. The Chinese, of course, took the other side of the bet — gaining know-how by starting with simpler products, which then led to the making of more sophisticated ones. That’s partly why the China shock started with exports of products like textiles and steel and eventually included smartphones. Rubio has noted with alarm that the Chinese government is now poised for far more ambitious conquests — robotics, electric vehicles, biotech — through a program called Made in China 2025. In his committee’s report, Rubio referred to this as “a foreign actor’s plan for the domination of critical commercial sectors at the expense of American industries.” A RAND study describes the Chinese effort to compete with companies like Boeing by partnering with suppliers to develop rival products that Chinese customers are then required to buy. “They have the ability to pressure Chinese airlines, which are state-owned, into buying the COMAC product,” Shih says, referring to the state-owned airplane maker.Biden has raised similar concerns about China’s industrial ambitions, while Yellen, at her confirmation hearing, called out China’s “illegal subsidies to corporations,” among other practices. And yet the response favored by Biden and even some Republicans is not so different from the subsidies that Yellen denounced. China is effectively forcing other countries to adopt some of its own industrial policies, because a free market in which only one side plays by the rules isn’t so much a market as a sucker’s game. “In a world of state competition for valuable industries, a domestic policy of neutrality is itself a selection of priority,” Rubio’s report concluded.There is good reason to doubt whether these bipartisan concerns will result in cooperation on actual policy. It may be revealing that in my correspondence with Rubio’s office, his aides showed no interest in commenting on the substantial overlap between Biden’s extensive manufacturing agenda and their boss’s.Still, after decades of free-market orthodoxy in which protectionism became taboo among both parties’ elites, it is the rise of China, above all else, that is bringing nationalistic management of the economy back into the political mainstream. “Twenty years ago, we would have had a huge ideological fight that this was ‘industrial policy,’” Chris Coons told me, referring to Biden’s economic agenda. “Today our No. 1 competitor globally is — look up ‘industrial policy’ in the dictionary: It’s a unitary, state-controlled economy.”Noam Scheiber is a Chicago-based reporter for The Times who covers labor and the workplace. He is the author of “The Escape Artists,” a book about Barack Obama’s first term.Headshots: Mark Wilson/Getty Images; Alex Wong/Getty Images; Chip Somodevilla/Getty Images; Jim Watson-Pool/Getty ImagesAdvertisementContinue reading the main story More