Freakonomics Radio - 533. Will the Democrats “Make America Great Again”?

Episode Date: February 9, 2023

For decades, the U.S. let globalization run its course and hoped China would be an ally. Now the Biden administration is spending billions to bring high-tech manufacturing back home. Is this the beginning of a new industrial policy — or just another round of corporate welfare?

Just to give you a sense for it, for a long time, the budget of the Commerce Department has been approximately $10 billion. Which in Washington is spare change. Which is not a ton of money, exactly. Now, I am managing about $150 billion. That is Gina Raimondo, the Secretary of Commerce in the Biden administration. What we are trying to do here really hasn't been done in decades in the United States, if ever, in terms of the size and scale of it and level of complexity. And what are they trying to do?

Between the three big pieces of legislation passed in President Biden's first two years, the bipartisan infrastructure law, the Inflation Reduction Act, and the Chips and Science Act, the Democrats are trying to fundamentally reshape American industrial policy. Today on Freakonomics Radio, with all those billions to disperse, how do we know it'll be put to its best use and doesn't become just another round of corporate welfare? This isn't corporate welfare. This is an investment to achieve a set of national security goals to keep America safe. We hear from another senior administration official about why the timing is so important. Our national and economic security depends on it.

And what about the big bet the U.S. made on treating China like an ally? That bet is no longer defensible. Make America great again is the other team's slogan, but it sure feels like the Democratic White House is running with it. We'll get the inside view starting right now. This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. You may have noticed we don't do a lot of politics on this show, and we don't interview a lot of politicians. Why? Well, it seems we often don't speak the same language. In fact,

politicians don't have much to say that isn't scripted or at least pre-digested. But we have found a couple exceptions in the past, and Gina Raimondo is one of them. We first interviewed her in 2018 for an episode called How to Be a Modern Democrat and Win. We interviewed her again in April of 2020 for an episode called How Do You Reopen a Country? At the time, she was the governor of Rhode Island, where she was known for challenging the labor unions, partnering with Republicans, running a business-friendly government, and generally getting things done without a lot of drama. During the 2020 presidential campaign, she was vetted as Biden's vice presidential running mate, but didn't get that job. When Biden won, she was considered a strong candidate for the Secretary of Health and Human Services, but didn't get that either. What she did get was the top job in the Commerce Department, which you would be forgiven for not knowing much about. This is a

cabinet-level position, but unlike state or justice or defense, commerce has traditionally been a bit sleepy. Traditionally, at least, with those three big pieces of legislation I mentioned earlier, infrastructure, chips, and the Inflation Reduction Act. That has changed, and Gina Raimondo's job got a lot more central. Yeah, I seem to find myself in the middle of every big project, which keeps me very busy. Busy how? I might be having a meeting with members of the Senate to talk about how we're going to implement the CHIPS bill. I might be having a bilateral discussion with one of my counterparts from a country in the Indo-Pacific because I'm leading the Indo-Pacific economic framework. Last night, for example, I had a reception with the Indian

ambassador and a coalition of Indian businesses. I then had dinner with Chuck Schumer to talk about any number of issues. Might be managing my own team. You know, the Commerce Department is massive, 50,000 employees. So later today, for example, I'm having a department-wide discussion with the Patent and Trademark Office who report into me, the Census reports into me. So, you know, there's never a dull moment. When you talk with Chuck Schumer, what does he ask for? Because he seems to be pretty unshy, let's say. Unshy, yes. He is very unshy. You know, he's totally committed to the people of New York.

He never asks for any, at least in my experience, he's never asked me for anything for him. I've never really talked about his politics with him. He says, how are you implementing this? He often makes the case for New York that this is why Buffalo or Albany or Binghamton has amazing resources and would be a good place for us to invest money and how those communities need it. When it comes to investing in communities that need it, Raimondo has a personal history. She grew up in Providence, Rhode Island, where her father worked as a chemist for 26 years at a Bulova watch factory. But like a lot of people who worked in manufacturing, especially in the industrial Northeast and Midwest, he saw his

job disappear when the company moved operations to China. The same thing would happen in Buffalo and Binghamton, Toledo and Cleveland, down into the textile and furniture belt in the Carolinas. The U.S. had bet big on an economic and political partnership with China that, as we now know, didn't turn out so well for American workers. Gina Raimondo was on a different track. High school valedictorian, an economics degree at Harvard, then a law degree and a PhD in sociology.

She worked in venture capital for a while before becoming Rhode Island's treasurer and then governor. From there, Commerce Secretary may not have looked like the sexiest job, but it's a good fit for Raimondo. The department's mission is to create the conditions for economic growth and opportunity for all communities. So the Commerce Department, when you look at the constituent bureaus and agencies, they strike me at least as sort of a hodgepodge. Some of them are well-known, like NOAA, National Oceanic and Atmospheric Administration. There's the U.S. Patent Trademark Office, the Census Bureau, and then there's much lesser-known ones. Can you name for me a bureau or agency that doesn't fall under commerce that maybe should?

And I was actually thinking about the FAA, the Federal Aviation Administration. It's under DOT, which makes sense, but I'm curious if it were under commerce, all these recent airline snafus we've been reading about, for instance, what would you do about that? I would totally defer to my good friend Pete Buttigieg, who is doing a great job, who has his hands full.

That does not belong under commerce. Name something that's not under commerce that maybe should. When I travel internationally, my counterparts in other countries are the Minister of Commerce, sometimes the Minister of Trade, but also the digital minister. Most other countries have a technology minister or a digital minister, and we need that. I think that ought to reside more properly in the Commerce Department. When I first became Commerce Secretary and I looked at these 13 bureaus ranging, as you said, you know, everything from fish to space to the weather service to patents to census to ITA. I spent a long time trying to figure out how do I, you know, you said hodgepodge.

How do I unify the hodgepodge? And the through line that I landed on was competitiveness, enhancing America's ability to compete. As I understand it, no commerce department in recent history, maybe even in deeper history, has ever had the leverage that you've got now. Can you describe how that came to be? Was it that you were the right person at the right time to intersect with all these initiatives? Or is it that you were the person whose competence, let's call it, was something that all these initiatives? Or is it that you were the person whose competence, let's call it, was something that all these initiatives needed to be run through? I think if there's an option C, you gave me A and B, I think option C is President Biden is an extraordinary leader with a big vision that calls for big investments in technology, manufacturing, skilled workforce,

infrastructure, and a lot of that runs through the Commerce Department. One mechanism for this increase in leverage and raw spending power is the Chips and Science Act. It was signed by President Biden in August of 2022 with the major goal of reshoring the manufacturing of semiconductor chips, especially the more sophisticated chips used for military and intelligence purposes. Around 75% of overall chip production today

is in East Asia. The Chips Act is designed to bring a big chunk of that production back to the U.S. Here's Biden from his recent State of the Union address. We're going to make sure the supply chain for America begins in America. The CHIPS Act was passed with bipartisan support. Raimondo had a lead role in the negotiations. For a time, it was not looking good. I mean, that was so dead. So dead.

In fact, there was a point where Mitch McConnell tweeted out, Chips is dead, or something to the effect of that. And it prompted me to call him again and say, no, it can't be dead. What can we do to resurrect it? What does it have to look like? And I spent that entire weekend actually on the phone with Republican senators, essentially saying, what do we have to do to make this happen? And what did you need to do? What did it need to look like? We reduced the scope of the bill. So that's what we did.

In short, I won't go into the weeds, but we reduced it to the bare essence of investments in chips and science and technology. The Republicans in the Senate just needed a win. They needed to look like they were skinning this bill down so it wasn't a liberal wish list. Ultimately, 17 Republican senators and 24 Republican House members voted for the bill. The final version allocates $50 billion in subsidies, including tax credits and grants, to be distributed by the Commerce Department. To be fair, a large sum of private capital, some $200 billion, has already been pledged in this direction in anticipation of the government incentives. But with this new tranche of government money, firms will apply for funds to not only build chip manufacturing facilities in the U.S., but also to boost research and training programs. So what would success look like?

Success, 10 years from now, looks like, you know, the United States university system pumping out a million electrical engineers a year, high school students all over the country learning the skills to join the semiconductor industry, producing enough chips in the United States, reshoring a lot of the semiconductor industry, producing enough chips in the United States, reshoring a lot of the supply chain, making sure we're getting our critical minerals from allies. So critics of this idea, and they come from a variety of angles, one line of argument is that

this is just a kind of corporate welfare on steroids, that even though theoretically smaller and less leveraged firms could win these bids and these grants, that probably it will be more of an Intel bonanza and so on. So tell me what you're doing to ensure that's not the case. This isn't corporate welfare. This is an investment to achieve a set of national security goals to keep America safe. Right now, it is not safe that we buy 90% of sophisticated semiconductors from one company in Taiwan. Not safe, not good. The United States military needs access to those chips. You mentioned Intel. There are a small handful of companies in the world that can make leading-edge, sophisticated semiconductor chips. I'm not going to pretend that there's a lot of startups in the business of manufacturing at

scale leading-edge chips, because there aren't. So these big companies, Intel, Taiwan Semiconductor, Samsung, they're the only ones that can do it. I expect they will apply. There are other monies, though, that will go to smaller companies. Chemical companies, circuit board companies, I hope they do apply. And if they show us they can get the job done, they will get money. It is not a bonanza. It's a funny word you've used. I like the word, but this is not a bonanza. I don't like giving money to big companies, okay? These are huge profitable companies. I don't like it either, but it's necessary. It will create, I think, a quarter of a million to a half a million good manufacturing and

construction jobs in America. But look, we are in such a bad spot right now because we've taken our eye off the ball and allowed our manufacturing base to wither and atrophy. We have to make an investment to get back where we need to be. So some would say that that withering and atrophy are really a product of the same dynamic that we're talking about now, which is some people call it government capture, right? That firms and corporations have gotten really, really good at building up leverage against or within the U.S. government so that they get the subsidies, they pay very low taxes, and they don't need to offer many protections to employees and to

consumers. So there are those who argue that our free market economy has really turned against the average American for sure. So I understand what you're saying now, that this is not more of that. On the other hand, if it's a 10-year plan that Intel or NVIDIA or TSMC has, whatever, you personally are long gone by then from government, unless you're president. I mean, you could very well become president shortly. We can talk about that later. You say we're not going to let it happen. But, you know, these firms have the best lawyers, the best accountants in the world, and they seem to keep winning. And I'm curious, you are not your standard Democrat. You're known as a business friendly Democrat. You've done a lot of tax reduction that other Democrats have not.

But I'm really curious how you think about the larger problem, if you think it's a problem of government capture by firms. Oh, boy, I could. This is I have so many thoughts on this. Cancel your afternoon appointment, Secretary Raimondo. I would love to have a cup of coffee and we'll have a chat. You know, President Biden, he's going to be the president, but not 12 years from now. But we're going to put it in train. And I think we have the ability to do that. And it isn't just business friendly. This actually isn't business friendly

at all, right? Like, I'm not sure TSMC wants to be doing this so much in the United States. Intel, you know, it's cheaper and easier in some ways for them to do this in other countries. We need them to do this in the United States of America. So we're working with them to do this. And it's going to be labor friendly. They can't take this money and then go provide poor workplaces, shut out unions and, you know, not provide good jobs. This is not a blank check, right? This is not a blank check. Any company that takes this money is going to be called upon to make commitments around providing good wages, providing good workplaces, prohibitions on stock buybacks, investments in

workforce, investments in good high- quality union jobs in the construction force, investments in research and development, working with the government. So there's a lot of strings attached here. What about non-competes? You know, one of the things I did as governor that I got no notice for because it's kind of nerdy, but it's one of the things I'm most proud of is I outlawed non-competes for low-wage, low-skill workers. I worked with the legislature to do that. Now, one could ask why the heck low-wage, low-skill jobs have non-competes in the first place, really, right? I mean, doesn't that go against the very idea of why it was first proposed for proprietary information and so on?

Absolutely. It's horrible. I learned about it by talking to a guy at a polling place. I was campaigning at a polling place in a very poor neighborhood in Providence. And this fellow worked at a, I won't say the company, but a retail operation. What's it rhyme with? At a retail operation. And he got a slightly better job at another retail operation. And he said his boss told him he couldn't take it. They got into the weeds of it and was outraged to learn that, you know, someone who works at a pizza place or a grocery store

or a sandwich shop could be locked into a low-wage job because of a non-compete. And so I worked with the legislature and we outlawed low-wage non-competes. My own view, I mean, having been in the venture business, I can make an argument there should be no non-competes or very, very limited non-competes. Even between a Google and an Amazon and a Facebook? Yeah, you could make the argument. There's no non-competes in California. I mean, legally. Correct. But there's also been proven collusion between these firms, right? Which is bad and illegal. So I'm just saying the non-competes have been way overused to essentially hold people's wages down to the benefit of companies.

One could argue we should get rid of them totally. limited, narrowly tailored fashion to actually protect a company's know-how and IP, which is fair, but it's time to rein them in because it's holding wages down. So there was a recent New York Times profile of you with the following headline, a rising star in the Biden administration faces a $100 billion test. That $100 billion being the money your commerce department will be distributing to help reshore American manufacturing, especially of computer chips, and also to build out green and clean infrastructure. The subhead of the article was, Gina Raimondo, the commerce secretary, has made a career of tackling increasingly larger challenges.

Could the next one be too big? I'd like to hear your reaction to that. And I have to say, as much as I'm rooting for you, it does seem like an awfully big plate full of things that you have a major hand in. Listen, it's hard. I've been in government for a dozen years. I was the governor. I had my share of successes and my share of mistakes. But I feel great about our chances of meeting the mission, which is to say, you know, 10 years from now, we will have a vibrant, deep, diverse, thriving semiconductor supply chain ecosystem in the United States of America. And, you know, look, you can watch. Let's watch and see if we can pull it off. I think we can in the way we structure these deals, put enough guardrails around what they can and can't do with the money and enough accountability so that at the end of the day, it isn't, like I said, padding their bottom line. leads to a resurgence of research and development and semiconductor manufacturing and innovation, by the way, in the United States. You know, that's a whole point. Everyone talks about how

research and development leads to manufacturing. The fact is manufacturing leads to a lot of innovation. And when we lost all of our manufacturing to Asia in search of cheap labor, we lost a ton of innovation and ability to innovate. After the break, what does all this mean for the economic competition between the U.S. and China? They're not interested in a fair competition with the United States. I'm Stephen Dubner. This is Freakonomics Radio. We will be right back. So, Secretary Raimondo, you gave a speech last year at MIT on the 50th anniversary of the opening of relations between the U.S. and China. And you argued that things didn't turn out the way the U.S. had planned. Not only has economic cooperation fallen short, but you said, quote, some thought that China would take

its place alongside the U.S. and other advanced economies to become a pillar of the post-war liberal international order. But over the past decade, China's leaders have made clear they do not plan to pursue political and economic reform. So this is a big deal. It's a big turning point, obviously, this moment in history, and you're at the center of it. Can you first give a brief assessment of where you see U.S.-China economic relations right now? Yes. So I would say, you know say we are fierce competitors. Where it's in our interest to work with China, we will do that. And where it's in our interest to protect our technology or IP so that doesn't get into the hands of, for decades, we made a bet that if we traded more with China, if we had more dialogue with China, they would, you know, come around to our way of thinking, have a more open economy and a more, you know, democratic or open society.

That bet is no longer defensible. They've made it very clear they're not interested in that. They've moved to a more authoritative, autocratic form of government. Their massive subsidies of their own companies, you know, either breaking the rules or tilting things in their favor so much have made it crystal clear they're not interested in a fair competition with the United States. So what I'd say is we need to compete. My money's on us all day, every day. We need to trade. You know, there's a lot of American jobs supported by trade. So the more we can sell to China, the better. Although, as I said, it's hard because they don't play by the rules. But we also have to be very clear-eyed about the fact that they are pursuing a strategy to secure American technology, like in semiconductors or in artificial intelligence, where we are ahead of them. They

want this for their military. We can't allow that. We just can't allow it. So is this the beginning of the end of the economic globalization that our politicians and economists from a couple decades ago were telling us was the way of the future and would really benefit everyone, including the U.S.? Look, right now, the United States makes 0% of leading edge chips in America. 0%. That is just untenable, leaves us vulnerable. I'm not suggesting that we will make 100% of all we consume in America.

We're always going to be buying a certain amount from countries all over the world and companies in other countries. But to be so vulnerable for such an important product is, you know, we can't, that's just not safe. It doesn't make any sense. But are you trying to double dip here in relocating or locating these chip manufacturing processes and jobs to the U.S.? In other words, there are European countries that are competing to locate those factories there. But it seems like your administration is pushing

hard. In fact, Taiwan Semiconductor, the biggest chip builder in the world, is now building a foundry in Arizona. And we would assume, I would assume, that that comes with an awful lot of government incentive or subsidy. So why is it important not only that the U.S. have access to chips being built outside of Taiwan, which seems to make an awful lot of sense. I mean, it made sense at the time when it started, Taiwan had a little bit more liberty. But now, why does all this need to happen in the U.S.? And that's why I ask if you're double dipping, trying to have access not only to the technology that you need, but also create these jobs when that might not be the best combination. I mean, look, we all learn very, very painfully during COVID how hard it is to not be able to

buy important equipment or medicine or chips when you need it. At the time I was the governor of Rhode Island, I was up all night every night calling around the globe, literally calling, you know, random businesses in Vietnam, trying to cut a deal to buy ventilators and masks early in the days of the pandemic. So we need, and it's not an exaggeration to say that chips underpin our entire digital economy. Like this is as much about digital security and data security as anything else. So yes, we need them in America, on our shores, so that when we need chips for artificial intelligence, medical devices, military equipment, we can have them made in America. An area that I'm not working on, but active pharmaceutical ingredients, you know, the basic ingredients that go into a lot of

critical pharmaceuticals, we don't make any in America. We buy nearly all from China and India. So it's just common sense. Fentanyl is a big problem in this country. And a lot of it, at least the precursor chemicals, come from China. I've read that Washington's efforts to deal with Beijing on this have been hurt by the fact that China was so ticked off about Nancy Pelosi's visit to Taiwan. I'm curious to know, given everything that you were thinking about with China and Taiwan and chips and all these other things, do you think that visit, I'm not, I know you know Nancy Pelosi and respect her, I'm not expecting you to say that that was a mistake, but I'm curious how you think

about that. Yeah, so this is an easy one. I don't know. I don't, I have no idea. I'm not at all involved in that fentanyl discussion or any of the other ramifications of, if any, by the way, of her going. I wasn't involved in that. I do know it's a massive problem. I was just with the president in Mexico two, three weeks ago. So much fentanyl is coming into the United States from Mexico, much of which started in China.

And it was a top topic that we talked to Lopez Obrador about. It's, by the way, it doesn't get enough coverage for what it's worth. You don't know how many people I knew personally in Rhode Island who lost their 20-something-year-old kids to fentanyl overdoses. It is brutal. Talk me through your thinking and the administration's thinking when you ban the export of certain chips and chip making equipment to China. I'm curious how you think about how that offends the Chinese and what they might do to retribute. How concerned are you that this turns into a cold or even a warm or hot war? I am not terribly concerned

because I think we're doing it the right way. We are telegraphing clearly our strategy. We are being really precise about what it is that we're controlling. You know, what we rolled out in my department last October was really narrowly tailored and specific. It's not commodity goods or commodity chips or chips that they need to put in their, you know, cars and telephones. It's specific technology that they have telegraphed they want

for the military. But we would be kind of stupid to allow that. I think you will see this year even more dialogue. You know, Secretary Blinken is heading over. I think you'll see other cabinet officials heading over. Talking is really important. Dialogue, channels of communication, clarity, really important. And so we will do that. As it turned out, Secretary of State Lincoln did not make his planned trip to China.

The trip was canceled after the discovery of a Chinese balloon flying across the continental United States. The Chinese said it was a civilian aircraft that had gone off course. The U.S. said it was a spy balloon. The U.S. asked the Chinese to divert the balloon. The Chinese refused. Ultimately, President Biden ordered the balloon to be shot down by fighter jets. And it was. The Chinese duly announced their strong discontent

and protest. And Secretary of State Blinken, for now, is staying home. Coming up after the break, even if the Biden administration's reshoring of manufacturing is a step in the right direction, is it maybe too big of a step? I'm so glad that you asked this question. I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. On the same day we interviewed Commerce Secretary Gina Raimondo, we also interviewed President Biden's chief economic policymaker. My name is Brian Deese, and I'm the director of the National Economic Council at the White House. Two days later, it was announced that Deese, after two years in the job, will soon be leaving. Let's assume this decision had nothing to do with our interview.

Deese was one of the youngest NEC directors in history. He had worked on economic policy in the Obama administration, and during the Trump presidency, he was global head of sustainable investing at the gigantic asset management firm BlackRock. We asked Deese to first describe the mission of the National Economic Council. The NEC is a team that sits within the White House whose goal is to coordinate economic policy. So to make sure that all of the members of the president's economic team can have a way of effectively filtering in their views and also that the president can provide clear direction to his entire team and make sure the executive branch is working and not working at cross purposes. So from the outside, it sounds as if you're acting somewhat like an air traffic controller.

I think that's a fair analogy. I think sometimes air traffic controller, sometimes orchestra conductor. How about a herder of cats sometimes, I'm guessing? Yeah, I think if you put air traffic controller, cat herder, and orchestra conductor in a blender, you would start to get close to it. Deese was an architect of all three signature bills signed during Biden's first two years, the trillion dollar bipartisan infrastructure bill, the Inflation Reduction Act, which devotes $430 billion to green energy and climate change initiatives, as well as extending the Affordable Care Act and the Chips and Science Act, which will spend at least $50 billion through Gina Raimondo's Commerce Department.

I think that because of the legislation that we have been able to pass over the course of the last two years, one of the most important things that we can do as an administration is invest in America in infrastructure and innovation and clean energy. So all this investing in America, the bipartisan infrastructure law, the Chips and Science Act, the Inflation Reduction Act, which is, I just have to say, a very strange name if you read what's actually in it, but we don't have to go there right now. It's expensive. This is a massive, massive investment, which is one word for it.

Others would use different words, and those others would say that, oh my goodness, this is going to add so much to the national debt. This is such a democratic thing to do, the big, big, big, big spending. So talk about that issue for a moment. How much do you care about that debt and what is the payoff of that investment and how will that help address the debt, et cetera? Well, I'm glad you raised the Inflation Reduction Act because actually that's a good example of how to do this kind of policy in a way that not only invests in the country but reduces the deficit. So that bill on its own is projected to reduce the deficit by more than $200 billion over the next decade because it includes not only investments in America and lower health care costs and climate change, but more than offsets the cost of that by reducing drug costs for Medicare and by tax reforms that will have large corporations pay a minimum of 15%. One of the biggest critiques of the American economy is

that we might fall back into what some economists refer to as secular stagnation, that we might have subpar growth going forward. If you wanted a strategy to address that, you would say, how do we invest in areas where we're going to have high productive return, where we're going to get productivity enhancements out of our investments? And frankly, infrastructure, innovation, R&D, and clean energy are some of the highest return areas. Correct me if I'm wrong. The Inflation Reduction Act does offer tax incentives and provisions to move manufacturing, clean energy, EV manufacturing, etc., to the U.S. And I've heard from some people that that threatens to disrupt not only our relationship with China, but our relationship with EU countries. And some EU officials, I understand,

are talking about, well, if the U.S. is trying to cut us out, then maybe China becomes our ally. Can you walk me through that problem? Look, the Inflation Reduction Act is the most ambitious investment in climate in U.S. history and represents the United States stepping up to its responsibility that European and other country governments have been saying for a while for the United States to actually meet the moment on climate. The principal way that the Inflation Reduction Act does that is to provide long-term technology neutral incentives for investment in the kind of clean energy technology that we're going to need at scale here in the United States. When we do that, we accomplish a couple of things. First, we build clean energy manufacturing here in America. Second, we hit our climate goals,

which is incredibly important for U.S. leadership in the world. But third, we drive down the cost of deploying particularly early-stage clean energy technology like hydrogen or carbon capture and sequestration technology. When we drive down those costs, it creates a dividend for other economies in Europe and across the world. In fact, there was a recent study that actually showed that in a number of these technologies, the investment of U.S. taxpayer dollars is going to drive down global costs of deployed technologies by 15 to 30 percent. So our European partners have nothing to fear from the Inflation Reduction Act and a lot to gain from this act as well.

There is a new economics working paper by Gordon Hansen at Harvard's Kennedy School, which argues that as the transition toward more sustainable energy moves forward, the U.S. will see a profound disruption in the communities that currently dedicate themselves to carbon-intensive industries. In other words, places where oil and gas jobs are very prominent now throughout the U.S. will be hurt and that we need to, quote, avoid repeating the painful adjustment to globalization and automation, which in recent decades brought concentrated job loss and long-lasting economic distress to local labor markets. Looking back 20, 30 years ago, all the smart money, people like you, people in government and in economics and academia said economic globalization will be the rising tide that

lifts all boats, even U.S. boats, even when our manufacturing jobs disappear. Everyone pretty much agrees now that that was wrong. The conventional wisdom turned out to be largely mistaken. So I am curious to hear your thoughts on how severe you think the problem is this time by displacing or eliminating those many, many, many jobs that now exist that pay well, and what can be done about it. I'm so glad that you asked this question. It is the case that too much of American history has been about undervaluing the importance of the communities and the regions of this country that powered the country by building energy and producing energy. The kind of new

manufacturing that we need, often resource intensive, often relying on critical minerals or metals, is actually well calibrated to happen in some of these areas, traditional areas. So we're seeing, for example, large solar arrays going up at the interconnects of old coal plants that the market had made not effective but now brings new opportunity. We're seeing in Idaho, within the four walls of a shuttered coal plant, the first small modular nuclear reactor facility ever in the United States. You think about hydrogen. You think about the applications for carbon capture and sequestration. The opportunity to do this work in the communities and in the regions that have actually

either powered the country or disproportionately borne the brunt of pollution in this country, the opportunity there is extraordinary. It's a cliche by now, but everybody says it, so I'm going to say it too. The government is not good at picking winners. I don't know if we actually even know that that's true or not true, but I'm going to say a word that might give you some PTSD from your days in the Obama administration. Solyndra, the solar panel manufacturer, which went bust after about half a billion dollars in government funding. When you think about investing in clean energy, chip making, et cetera, et cetera, how do you avoid that kind of scenario

when you are dispersing such a big pot of money going forward? We need to look at this as a portfolio approach. We need to provide those incentives to lay the foundation for innovation across different technologies, but try to say, look, what we want to see is lower carbon technologies that build more energy security in the United States. And whether that's an application in hydrogen or in nuclear or in advanced offshore wind, we want to see that competition for private capital and innovation unleashed here in the United States in a way that actually drives the cost curves down more quickly. And so that's the principal role that government incentives should provide. We need to be very careful with taxpayer dollars, judicious.

We are going to be hard-nosed in our negotiation with the private sector. And that, again, is Commerce Secretary Gina Raimondo. I plan to be as sharp a negotiator as possible. The economist Mariana Mazzucato has argued that the U.S. government has historically been terrible at getting a return on its R&D investments across computer tech, biotech, and so on. Many of the technologies and inventions that end up making billions or trillions of dollars for private companies, that they're derived in part from government-funded research, but the government does not get a share of those profits, and the government isn't even very good at collecting corporate taxes on those profits. I'm curious for your take on that, especially when it comes

to the CHIPS Act. I think government should share in the upside. You know, keep your eye on what I do with the CHIPS money, because it may be that we move down the path of sharing in some of the upside. Our job in government isn't to make a profit. I think the right way to think about this is the return is a national security return. So if we invest this money, and some years from now, we are less dependent on Taiwan and China, then that's our return. Our return isn't X percent return on our money. Having said that, it's on us policymakers to be crystal clear about defining what is the return we're trying to achieve, right? If it's a certain number of jobs created, then let's make sure we do

that. X percent of the supply chain back to America, then that is our return. All of that being said, I have always felt that sharing upside focuses the mind. And so I think when we're rolling out the chips money, you may see that we are proposing some shared upside, not because I think we should try to make money, but because I think it aligns incentives. It gives these companies an incentive to be honest about their financial situation and puts us both on the same playing field. I wonder, when it comes to politics, so much of the public's attention and the media's attention is consumed by the name-calling, the partisan fighting, the infighting, the horse races, you know, essentially treating politics as a sport, as opposed to primarily

having a governing function. How costly do you think that environment, that tone is to politicians and their civil servant partners in terms of actually getting stuff done? I think it's hugely costly. So significantly costly. Listen, from the beginning of time, politicians want to be popular, they want to get reelected, they have to raise money to get reelected. That is the way it has always been and probably always will be. But the 24-7 news cycle, the ungodly amounts of money that need to be raised, the quote-unquote dark money has made it all so much worse and made politics an even more substance-free endeavor. And we just have to try to get the pendulum swung back to a place of reasonableness because the consequences are just so enormous. Look at the problems we're dealing with, the threat that China poses, the income inequality that's destroying our democracy, the poison that is racism. I mean, we got to get to work on this. And it is all doable. But I think that what you put your finger on is, in my judgment,

the biggest problem in America. Getting that right will make every decision better. There are those who argue that this problem is a result of the political construct, which is essentially a fantastic duopoly, right? And therefore, you choke off competition, not just from third and fourth and whatever parties, but different voices within a party and so on. It seems to me like you are somewhat of an exception to the rule. You've worked across the aisle a lot. You've done a lot of initiatives that a Democrat might think of as a Republican initiative and so on. Do you have any advice for others to become a little bit, you know, more consciously bipartisan to the point where partisanship doesn't seem to be the point of it?

Oh, I don't know why anyone needs my advice, but I think you just have to really ask yourself every day, why am I doing this? There's a lot of ways to make a living. There's a lot of ways to make a mark on the world. There's a lot of ways to spend a career and a life. Public service is an honorable way to spend a career, but you have to check yourself every day, every week. Why am I doing this? And the minute it becomes about you, you should resign. Like, it's got to be about the people you serve and using your position as a force for good, which it can be. You know, it really can be.

So what share of elected politicians in D.C., let's say, if they had that conversation with themselves should resign. Well, that's between them and their mirror and their conscience. So I'm not going to say. But look, I think most people come here to do the right thing. There are exceptions and I'm not going to say who. By the way, I took this job because President Biden is firmly in that camp. That guy knows his why. He's been doing it for 40 years. He is humble. He is bipartisan. I learn from him every day. How do you answer the question, when are you running for president, by the way? I usually answer, I don't plan to do that. I'm doing my job. Right. But I mean, you don't plan to do that. But I mean,

you're building quite an extraordinary track record for a presidential run. Let's just say, theoretically, is it a job now that you're seeing it up close and personal? Is it a job that you think would be suited to your skills and temperament? You know, I like being a public executive. I love my current job. I loved my old job. I'd love a lot of different jobs. So I don't have some secret plan to run. I'm just going to keep doing what I'm doing and do my best at it. Let me ask you one more real question. You studied at Econ as a Harvard undergrad, then a law degree from Yale, but then a PhD in sociology at Oxford.

I know very few lawyers who then go to get a PhD in sociology. What were you thinking as your life course? And is this where you ended up at all related to that? So would you like the made for radio answer or the real honest answer? Real honest. So after college, I studied at Oxford. You got a Rhodes scholarship. Yes, I was a Rhodes scholar. So if you get that, you don't not go to Oxford, plainly? Correct. If you get that, you don't not

go. And I started studying economics and then I switched to sociology. At that time, there was no behavioral economics and such, and I wanted to study things like social norms and emotion and how they led to people making decisions instead of just quote-unquote rational factors. So I switched from econ to sociology. The truth of the matter is, I spent a lot of time in the pub and traveling and with a lot of friends when I was at Oxford. So it took me a little longer to actually get the degree.

So not as incongruous as it seems, perhaps. Correct. If I weren't such a slacker while at Oxford, I probably could have gotten it done. Yeah, you're a real big slacker. Okay, listen, do me a favor. The next time you have like five to ten spare hours, call me because I really want to continue this conversation because you're a lot of fun to talk to and I appreciate the job you're doing. You're nice to say that. Maybe we could just, yeah, have a cup of coffee sometime. Anytime.

Your people have my contact stuff, or at least of my people. I have fewer people than you. I have a cup of coffee sometime. Anytime. Your people have my contact stuff, or at least of my people. I have fewer people than you. I have a lot of people. I long for the day when I can just get in the car and drive myself wherever I want to go. Well, that'll come, and then you'll long for the day

when you had all those people. You know, it's probably true. That was Commerce Secretary Gina Raimondo and the outgoing National Economic Council Director Brian Deese. Coming up next time on Freakonomics Radio, why does the most monotonous job in the world pay $1 million? All hell broke loose. Oh, my God. It was bad. Everything you always wanted to know about a job you didn't even know existed. That's next time on the show.

Until then, take care of yourself and, if you can, someone else, too. Freakonomics Radio is produced by Stitcher and Renbud Radio. You can find our entire archive on any podcast app or at Freakonomics.com, where we also publish links to the underlying research. You can also leave a comment there or sign up for our newsletter. We can also be reached at radio at Freakonomics.com. And now you can also find our episodes on YouTube. If you know someone who doesn't listen to podcasts, but spends a lot of time on YouTube, tell them to go to youtube.com slash at Freakonomics. That's the at sign followed by Freakonomics. This episode was produced by Zach Lipinski and mixed by Greg Rippin with help from Jeremy Johnston. Our staff also includes Morgan Levy, Ryan Kelly,

Catherine Moncure, Alina Kullman, Rebecca Lee Douglas, Julie Canfor, Eleanor Osborne, Jasmine Klinger, Daria Klenert, Emma Terrell, Lyric Bowditch, and Elsa Hernandez. Our executive team is Neil Carruth, Gabriel Roth, and me, Stephen Dubner. Our theme song is Mr. Fortune by The Hitchhikers. All the other music was composed by Luis Guerra. As always, thanks for listening. By the way, I'm sorry to keep you. I was two minutes away and then the president closed down the road. Yeah, he's on his way here,

so he's going to mess us up twice today then. Lovely.