Odd Lots - Brian Deese on the Legislative Legacy of President Biden's First Two Years

Episode Date: February 17, 2023

President Biden came into office with an incredibly slim legislative majority. And yet despite just 50 Democratic seats in the Senate, the first two years of Biden's Presidency saw the passage of some extremely ambitious laws. The potential exists for the infrastructure bill, the CHIPS Act, and the Inflation Reduction Act to reshape the economy in ways that we haven't seen in a long time. Brian Deese has been the head of the National Economic Council these last two years, and was thus directly involved in the passage and shaping of these laws. So what will they accomplish, and how will they ultimately be judged. We spoke to Brian in his final week in the NEC role about this new era of "industrial strategy", and what he learned during this two-year stint.See omnystudio.com/listener for privacy information.

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Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, you know, one of the things that I think is most surprising or striking

about the Biden administration or the first two years of the Biden administration is how slim the sort of congressional majority was, like just 50s, seats in the Senate, extremely narrow. And yet legislatively, an incredibly consequential two years, I would say. Yeah, I'm trying to think of all the big spending bills that have been passed, but you

had like the Inflation Reduction Act, you had a climate bill, you had the emergency sort of fiscal stuff that was announced right at the beginning of COVID. There's a lot that happened. Yeah. And of course, there was the Chips Act as well. So it was really consequential. Also usage of the Strategic Petroleum Reserve in kind of a novel way, just like a very big two years. And when we think about these bills, and, you know, Obama had a pretty big, his first two years were pretty big because Obamacare got passed during that time. You know, it seems to many, and I guess I would say I would include myself in that category that like not just are these sort of big pieces of legislation that got passed. but kind of a break from how past presidents have treated economic management specifically with things that seem to resemble like industrial policy.

Yes. It's funny that you said industrial policy because I see people use the term industrial strategy a lot. It's almost like industrial policy has like negative connotations. But you're right, you're right. It feels much more. I also don't know if interventionist is the right word, but it feels much more active in identifying choke points in the economy, things that are important either from a strategic perspective or maybe they're important for overall quality of life for Americans and prices and things like that, and then doing something about it. Right. Identifying, say, domestic battery consumption, identifying battery materials, identifying the need to have good chip fabrication domestically.

This was not an approach that Trump took. It wasn't an approach that Obama took. I don't think it was an approach that Bush took. So it feels very new. And so it is a good time to like take stock of what was done the last two years and sort of like, how will we evaluate ultimately the success of these pieces of legislation? Absolutely. And we really do have the perfect guess to do that.

Sometimes that line is like, okay, is like, for us that the perfect guess. In this case, I believe that actually is the case, because we are going to be speaking with Brian Dees. He is the head of the president's national economic council involved in all of these sort of major actions. And he's leaving. We're recording this, February 15th. This is his last week on the job. He's getting a very, I assume, much needed break. So, Brian, thank you so much for coming back on office.

lots. Thank you both for having me. I'm excited to be here. Thank you. So let's start with that. I mean, like, so I alluded to this in the beginning, but, you know, I would like your take on it, which is, A, you know, has Bidenomics, so to speak, been characterized as industrial policy and setting aside terminology, how much do you perceive this approach to economic management as having been a sort of major break from the likes of which we saw under Trump, Obama, and other previous presidents. Well, I think that we have a long history in the United States, going back to even the early days of this country, in experimenting or utilizing industrial strategies.

And you guys were talking about the industrial strategy, industrial policy, to different terms. I think it is the case that over the course of the last 40 years, there were forces that really pushed the concept of industrial policy into being viewed as a sort of dirty word or being viewed as somehow inconsistent with a capitalist market-based economic system and the things that you need. I also think over that time, the world has changed in pretty important and fundamental ways and has brought back into clear relief the economic need for something approximating an industrial strategy. And I think it's totally fair and right to look at the Biden economic strategy and this throughline

between, in particular the three big bills that were passed, the infrastructure bill, the Chips and Science Act and the Afflation Reduction Act, you see a common thread, which is use public investment to try to crowd in private investment. in key areas of the economy where we believe, for strategic or economic purposes, we want to increase productive potential. So clean energy, innovation, semiconductors, high value infrastructure, these are places where we are unapologetically saying the private market on its own is not going to generate sufficient industrial capacity or a sufficient output in the United States to meet our economic and security needs. And so therefore, we do need an explicit and active strategy,

I think the way I would frame it as an active and energetic government approach to try to lay the foundation and crowd in private capital at scale. So you mentioned America having a long history of industrial strategy. Can you expand on that a little bit more? Because I think you do tend to get or one does tend to see a knee-jerk reaction amongst Americans over government interference rather than perhaps government guiding, you know, more capital and more money into strategically important things and industries? Well, I think if you look back in history, we have seen some of our greatest moments and opportunities for innovation have been connected to this idea of having an industrial strategy.

Hamilton was, in fact, I think, the first principal thinker and doer to lay out the idea that having a government role in supporting the build-out of a domestic system of manufacturing was important for economic and national security reasons, and that the private market alone wasn't going to solve that. You saw it in Lincoln's time investing in the Intercontinental Railroad. You saw it in the 50s and the 60s in the wake of the Second World War, investing not only in physical infrastructure, but in our research and innovation base, Obviously, a lot of that connected to the space race.

But I think the best historical analog to what we're trying to do now is the 1960s, where you saw both a significant investment in physical infrastructure and also in our innovation infrastructure as well. You know, with the Chips Act, obviously there's a lot of consternation about the idea that, you know, the world needs semiconductors. And we produce fewer and fewer of them here domestically. and this is a reason to be concerned what happens if the supply were to be disrupted. With the inflation reduction act, you know, a big part of the goal there is accelerating the fight against climate change, but also there is this sort of geopolitical element, particularly

about China's dominance with certain materials for batteries and so forth. When it comes to passing legislation, how much does it help if the issue, if the issue at hand is somehow couched in real or perceived geopolitical competition? Well, I think a couple of things help. One is a clear connection to why is it important to build domestic industrial capacity here at home. And with respect to clean energy, you know, the United States has a competitive advantage with respect to energy, lower cost energy.

And we have an imperative to address the climate crisis. And the basic theory of the investments in the Inflation Reduction Act is around providing long-term technology neutral incentives to dramatically drive down the cost of low carbon and zero-carbon technologies in the United States at scale, which will have a global benefit, but will create significant economic strength here at home. So having that story and having that credible story, very important. Second thing that's important and is true of all of these investments, both but both on clean energy and semiconductors, is that they are explicitly place-based in the sense that if you're a member of Congress or you're thinking about this in terms of what is it actually going to mean, the goal is to encourage actual investments in places, particularly in places that have where their productive potential has not been fully realized. And that means parts of the country that have been, that have not fully benefited. from prior economic expansions.

That helps, too, because it allows people to see the way in which this might concretely help their district. And it's what you see. We see the changing politics of this on the ground. You see a number of either red or purple districts around the country where now there's a historic amount of investment in building it, whether it's a battery factory or new production of hydrogen or small modular nuclear reactors. and these become sources of jobs and economic opportunity and revitalization in their own right.

And then, you know, I think that they, I guess what I would say about the geopolitical point and part of your question is that I don't think any of this can be done and thought of in a vacuum. We've made mistakes in policy in the past of trying to think of the sort of free market, the global free market as a monolith. And one of the things, particularly in the process, post-pandemic environment is that we have to be very clear-eyed and realistic about the state of geopolitical and global economic competition. And so therefore, whether you have to identify those places and those areas where China through

non-market practices and a stated commitment to dominate certain industries has ended up expropriating technology and distorting the market in ways that we have to grapple with realistically and we can't ignore. And so that is certainly always part of the conversation. In some cases, it's a, you know, in some cases it adds an additional argument to the case. But in all cases, it has to be very present. We can't ignore those things anymore. So just on this note, I mean, there is a fine line between strategic industrial policy and protectionism and beggar thy neighbor type policies. And we have seen some U.S. allies make noise about, you know, some of the issues embedded in bills that happened past, you know, specifically the Inflation Reduction Act and maybe

the Chips Act. And then when it comes to China, specifically, we have seen the Biden administration, in some respects, go harder on China's technology sector than, you know, even the previous Trump administration. How do you encourage strategically important indexes? industrial initiatives and capabilities in the U.S. without causing issues or tensions with other countries? Yeah, it's a great question. Look, I think the first important thing is when we're identifying elements of an industrial strategy, it's important to recognize that with clean energy and semiconductors, you both have sectors or areas where the world, the global economy, is significantly short supply. So over the next decade, we're going to need to significantly advance the rate of semiconductor production, both legacy and cutting-edge semiconductor production all around the globe. Clean energy.

We are in every jurisdiction on the planet going to need to significantly scale clean energy production in terms of electrons, storage, distribution, transmission. That needs to happen everywhere. So when there is a globally a need for greater supply, you have less concern about the sort of traditional critique, which is that you have a fixed supply and then you're going to create an inefficient subsidy race to try to buy off a fixed supply. In both of these areas, you don't have that operating. That's number one. Number two is, if you look at the Inflation Reduction Act in particular, our allies don't really have anything to fear and have a lot to gain by the United States providing this long-term technology neutral set of incentives, the principle effect of which will be to drive down the cost of deployable clean energy technologies. So our investments, for example, in accelerating deployable, low-cost hydrogen or deployable, low-cost, small modular nuclear reactors, will have a very significant global benefit because it means those technologies are deployable at lower cost and greater scale worldwide. We've seen this in the past in Germany's investment in solar technology two decades ago, the United States investment in solar and wind technology a decade ago. And that generates benefits.

At the same time, it's also important that we take seriously and work with our partners and allies and identify common challenges. We all benefit from having more secure supply chains and clear access to the inputs and the components necessary to build out semiconductors, to build out clean energy inputs. We've all seen and we've all experienced what happens when those supply chains are brittle and they break. So there's a lot of opportunity to partner together. But in the main, when the world needs much greater supply, and you have the U.S. government stepping up and saying, we are going to drive greater supply in a way that drives down costs of deployable technology, that's a much more opportunity than constrained for the world economy.

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how does the administration balance, I guess, the need to build up some of that capability at home with the efficiencies and perhaps the lower, you know, the lower cost of production of Chinese-made renewable technology like solar panels? I think the experience of the last several years underscores how important it is for the United States and for our allies as well to have. have reliable access to secure supply chains that are not reliant on China dominating certain technologies and certain industries. We need to diversify those supply chains. That in the main means that we need to build capacity here in the United States, including, as you mentioned, in upstream solar technologies, including in upstream battery technologies.

A lot of the actual IP, the original technology, that has gone into these outputs was created in the United States. And over the course of a decade or two, the Chinese model was to take or expropriate that technology, use massive subsidies and non-market interventions with the goal of trying to then dominate those industries. That model is not something that we can rely on over the long term. need diversification. And so that has to be a priority and it has to be a geopolitical and an economic

priority to do so. And so the question is, how can you do that in a way that is the most efficient and effective? And that's what I think we're trying to do now, which is provide these long-term incentives. You know, I talk to a lot of companies and CEOs who are trying to assess the impact of the inflation reduction out, for example. And what I hear consistently is we now have the certainty that we need. These incentives are highly efficient because they are technology neutral and they're locked in for the long term. So we now have the certainty that we need to plan against that. And that's going to allow the kind of build out in the United States that I don't think we've seen in the past decade. I said in the introduction that the first two years,

these first two years of the Biden administration have been almost shockingly consequential. But in a way, like, I kind of think that might be premature because, well, the Chips Act and the inflation Reduction Act are both big bills that take on big challenges, we don't know that they're going to be a success. And I think the jury is obviously, you know, we're going to have to wait several years. You know, going to the Chipsack specifically, you know, at what point, I don't know, five years, 10 years, two years, what should we look at? What are the benchmarks that we should say this worked or didn't? Absolutely. And I think you are right that the proof of the pudding here is going to be in the execution and the implementation across time. With respect to the Chips Act, the most important

outcome metric, even across all of the outputs of semiconductor fabs that dot the landscape of the American economy, is have we changed that downward trajectory where we used to produce about 40% of the global chip capacity? And we're now down to 12%. Have we changed the trajectory where today none of the leading edge chips, the most cutting-edge technology, are made in the United States. And are we moving back to a place, not where the United States is producing

all of the world's chips, or even most of the world's chips, that's not, but the goal is to build capacity back to a place where we have the core elements of the innovation base around the chip technology and the core capabilities of manufacturing at scale through FABs in the United States.

We will be able to look forward and back a decade from now and say how far along that journey have we made. I think we're off to a very strong start. Even before we have given out the grants under the Chips Act, we're seeing companies across the sector and the industry and across the country moving forward and breaking ground on facilities. so we are off, I think, to a strong start, but the proof will be in the pudding there. And I would add, in addition to chips in the IRA, I wouldn't cite of the infrastructure investment.

Right. Because really the way that I think about this is you have to look at how those three pieces of legislation interact. And some of the investments that were in the infrastructure law are actually going to be key to unlocking the potential of the clean energy. and the semiconductor investments as well. Now, all of that has, you are right, all of that has to work together. There's lots of things that we need to keep an eye on

and keep focused on. The flip side of it though is, you know, it's been decades since the United States has been able to say that we now have enacted law through Congress and on the other side, these kind of multi-year public investment tools at the ready. And, you know, that really does represent to, you know, we're in a different place.

We're in a very different place than we were before. So I want to ask one more follow-up on CHIP specifically, and you mentioned, you know, the incentives to build fabs here. And as you said, there already have been announcements. It seems very likely that we are going to see more building. That being said, you know, when I think about, like, the crowding in effect that you mentioned and past positive experiences that the U.S. has had with it, you know, one of the stories is not just the

incentives of the public money, but the public buyer, the fact that whether it was the Defense Department, whether it was NASA, was a huge buyer of semiconductors in the past. And, you know, one of the things I read in Chip Wars was they were talking about how like the NASA in particular was a great accelerant of consumer tech because it, the miniaturization drive to fit technology onto the rocket accelerated gains that then helped create the consumer tech market because smaller things, you know, make for good. consumer products. Is that going to be a challenge? Like, that seems different than past successful areas of industrial strategy, the lack of that sort of like buyer of last resort for domestic made tech. And is that going to be a challenge? Well, you mentioned Chip Wars. It's a great book. And we have benefited from Chris Miller's, the author's insight. We've all learned from him in the last year, quite a bit. All the way. Yeah. I think. So it is absolutely. Absolutely the case. One of the underrepresented issues in the semiconductor market is recognizing

how important the customer is and the end customer is. And one of the most interesting conversations that we've had over the course last year was when the president went out to Phoenix to TSM, a groundbreaking for their second FAB. And we met there at TSM, not only with the leadership of that company, but with Tim Cook from Apple, Lisa Sue from AMD, other big consumers. And around the table, the conversation was very instructive to your point, which is that the outcomes here are as much about the end consumer as they are about the producer. And that interplay between the two is critical.

Now, to your question, where does the U.S. government play in being a buyer of last resort or being an innovator by dint of our purchasing power. Well, there's two parts of the semiconductor piece that are important. One is there are critical chip technologies for core national security priorities, for actual munitions and other elements of our national security complex, where we are, in fact, the buyer of last resort, and we have a huge incentive for innovation around downscaling, around durability in all manner of different weather conditions and otherwise.

So that is one element, and I think that that will become relevant. But the other part, the part of the Chips Act that people have paid less attention to is there's these big grants to encourage the building of FABs. But there's also $11 billion, a historically large amount of money to invest in building research and innovation close to the building of CHIPFABs to try to rejuvenate the innovation base and the research base for key leading edge chip technological applications. And that research will be done in conjunction with the Department of Defense, the other services will be done with the national labs. And that's also a key part of this, because at the end of the

day, if you don't actually create an ecosystem for innovation, then the fab you build, by the time you build it, will be sort of out of sync with where your customers are going to want to be down the road. Just on this note, you know, Joe kind of asked you the forward-looking question of how do you evaluate the success of all these programs. I'm going to ask you a backwards looking question. But I always wanted to, you know, I always wanted to hear your perspective on this. But how do you actually go about identifying these sorts of choke points in the U.S. economy in real time or these areas that require additional investment? Because some things, okay, sure, post-COVID, maybe they became obvious, like the fact that we had a bunch of ships waiting

to unload at the ports. That was something that we could see and everyone could talk about it. But what is the process for actually identifying these areas of strategic interest? Do people come to you and talk to you about, you know, potential investments or how does it work exactly? Well, it works in a couple of ways. The first is that a lot of what we have been focused on over the course of the last two years and really that 18-month period of really trying to design and craft and work with Congress on legislation,

was trying to execute and implement on identified priorities that people have been working on for several years. And even before we came into office, that the president as a candidate was identifying as priorities. And so particularly if you think about what is needed to drive the deployment of clean energy at scale and low cost, that's been work that has been underway scientifically, technologically, in policy terms for some significant set of years. But in terms of how we operate from the government side, one of the first things we did here in the first month in office was the president issued an executive order, and we launched this effort to try to study in a deep way supply chain resilience and supply chain vulnerabilities across the economy, to try to actually identify choke points where you had that intersection between economic and national security risks and also places of opportunity where you might be able to use public investment to actually solve a problem

that the private market on its own wasn't going to solve. And so we ran a process over six months and 12 months of trying to ask, are experts at the agencies, whether it was in biopharmaceutical products or semiconductors, or clean energy upstream components to say, tell us what you know about based on the existing research and data and otherwise, and try to pull that together into a more comprehensive diagnostic of where do we see the gaps, where do we see the challenges.

That work is hard work to do at the same time that we're in the frenzied pace of the ports are shutting, the ports are over clogged, or we have a particular problem around fertilizer, or, you know, or Vladimir Putin decided, to invade Ukraine, and we have all of these fast-moving issues in the world. But it's also important work to do to take advantage of the expertise and the embedded knowledge base across the executive branch. So we've tried to do those in tandem. I think some of the most important work that we have

done exists in those reports, for example. We have these now. We issued reports on the one-year anniversary of that that kind of went through these different six different key supply chains we studied and analyzed. Some of those conclusions were immediately adopted and built into, for example, the Chips Act as it ultimately passed because, you know, it took us in the legislative process a bit longer than we had originally anticipated to get that bill done. So it's a work in progress and iterative building on a work that's done before, but really trying to do that study at the same time that you're managing fire drills. Okay, so you mentioned the sort of like the fire drill, hair-on-fire challenge of dealing with all of these supply chain issues in real time, which is a good

opportunity for me to pivot a little bit to the current macro conditions because we have seen a lot of supply chain healing by almost any objective measure. I don't think there are the big lines at the ports the way there were. Many of the disruptions seemed to be fading. And yet, inflation still uncomfortably high. We got a CPI report that kind of came in line this week, but I think when people looked at it, they're like, this is not an economy where we're on some sort of like glide path down to 2%. Why is inflation still so persistently high in your view after all of the supply chain healing, a lot of the transitory factors having passed? Well, everything about the economy today is unique. And one of the things I take away from

two years is an extraordinary amount of humility that almost all of the confident projections about the ways in which past models applied to the current situation would operate, have proved to be at best challenged and often wrong. I think that if you look at the course of the last six months, if you look at the last two quarters, I think we continue to see that story, which is we have seen meaningful progress in inflation moderating into an environment where we have continued to see ongoing labor market resilience and ongoing resilience at the consumer level, the recent consumer data that we have gotten,

I think was surprising to some as well in that respect. And so I think that that moderation in the context of a resilient labor market and a resilient consumer was something that a lot of people thought was not going to come to pass over the course of the last six months. And so the question now going forward is, And we continue to see that progress in moderation on the inflation side without having to give up all of the economic gains associated with the resilient labor market and consumer and business balance sheets.

As I look forward, I certainly think there's a good and clear path for that to happen. It does involve some of the elements on the inflation side. The dynamics on goods and services and housing are all distinct right now. And so, while we always try to check ourselves from doing the kind of great decomposition of pulling every element in or out of the inflation numbers, which we've all done over the course of time, we know that the housing data that's in the inflation prints we're seeing now, probably. reflects actual economic circumstances from about six months ago. You guys have spent a lot of time on the housing-related topics, so I know you know that well. And so, you know, I think that if we look forward to the both to the next six months, but a little bit beyond, I do think that the fact that we've got a degree of resilience in our labor market and we have companies in no small part

because of our policy looking forward and investing through this transition gives us a set of economic strengths that very few other countries have right now to sort of navigate through this next leg of this long term. You know, you were the sort of unacknowledged inspiration for a recent odd thoughts episode about the price of plastic. And the idea that maybe, you know, packaging costs had gone up a lot and packaging is on virtually everything that we buy. Can you talk a little bit more in a sort of more granular way about unexpected pockets of inflation over the past few years?

What surprised you most in that respect? Or what do you think was most impactful for the overall American experience when it comes to higher prices? Well, I'll tell you one of my persistent sources of frustration and it goes to the issue that you were describing, which is why have we seen the kind of sticking? in inflation for packaged foods. So we've obviously looked a lot at food at home inflation, which is one of one of those bad wonky euphemisms, which actually means food that you buy at the grocery store. And that if you decompose food at the grocery store, we've seen meaningful, we've seen cooling overall in that category, but most in fresh foods and in meat

and other proteins where the really high run-up in some of those categories has come down quite significantly over the course of the last six months. We'll put eggs aside. Eggs is a separable issue because of the avian flu. The place where there's really been persistence is in these packaged goods and packaged products. And we have spent a lot of time on the phone with CEOs and teams at the major grocery stores and tried to understand what's going on there. When they interact with their suppliers, why is it that they're not able to put more pressure,

constructive pressure on them to bring prices down through the supply chain? And I think that there is an issue there that we need to spend more time on looking in the future around why and how the packaging itself of the food. Because in this category, most of the cost is not actually the food input itself. It's the packaging and it's the other elements that go in. You know, it's like you look at a box of cereal that principal cost is associated with the packaging and the like. And so that has been a persistently sticky worm. And I think it's been frustrating to some of the, some of the end retailers.

I think we are starting to see that. But the flow through has been frustrating and surprising that it takes a longer period of time for those, the changes in the upstream supply of the input components to actually flow through to the outputs. I think there are some competitive issues that probably would merit greater scrutiny when we get to the other side of this. I want to ask, I guess it's like a How DC Works question, and maybe I'm the only one interested in this, but, you know, like one area in which the Biden administration's approach seems to have clearly reduced inflation is through the SPR and the selling of oil.

reducing gasoline prices. It's something that we've talked a lot about on this show over the last year and a half or so. But my question is actually, you know, when they say, okay, we're going to sell oil from the SPR with this commitment to buy it. And then there's this long process where it's like, okay, the Department of Energy has to spend all this time coming up with the rules for the auction and the tender to buy back the oil at some point in the future, a necessary component. why does that take so long? I mean, everyone reports up to the same boss, the president. Why can't it be one of these things where the president says, I want to do this? And then it's like, and get the rules. And like the next week, they're like, all right, this is how we're going to do it. What is the sort of like process by which is like, we're still waiting on Department of Energy to come up with that explanation?

Like, why do things seem to take so long? You're like channeling my inner monologue of frustration as NEC director. on a daily basis What did you learn in this seat about how the executive branch actually operates? You have the desire to help a real difference? The College, LaCite,

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Subscribe today, wherever you get your podcast. Bloomberg's surveillance, essential listening each and every business day. Well, look, I mean, the specific example you're raising is, I think, a good example of both the ways in which you can move both really quickly and then also where you can't. So, you know, in the wake of, in the wake of Putin, about a year ago, right, in the wake of Putin's invasion, when we took a policy decision and the president took a policy decision that it was right and appropriate to execute a historically. large sale out of the Strategic Petroleum Reserve. That action happened on a very expedited basis. We went to our international allies. We had to convene within the IEA, the International Energy Agency, with our partners and allies, to get agreement around a coordinated response. We then needed to actually execute operationally to release oil from the reserve, which is actually not a single reserve.

it's a set of caverns, salt caverns underground where oil is stored. That happened historically fast and it historically large scale and stretched the physical capacity of the reserve itself in significant ways. And so one of the things that we're now facing is that there is a lot of operational and maintenance work that needs to take place in order to just maintain the capacity for these reserves. They're fascinating reserves. They actually are caverns that they, they aren't static. They actually breathe and they, you know, they sort of move back and forth because there are these physical facilities. And if you defer maintenance associated with them, then you're actually going

to reduce the ability to release from the reserves in a moment of crisis. So we're actually in a period right now where we need to prioritize some important maintenance on that front. It also underscores to my mind the need to do a larger infrastructure upgrade of the Strategic Petroleum Reserve itself to address some of these issues. There also is, to your point, though, this question of how do we move more nimbly to new ideas that we have not done before? So the idea of how the Department of Energy goes into the market and does a commitment to purchase down the forward price curve is an idea that in concept makes a lot of sense. In execution is novel.

And so from a legal and a practical and an operational perspective, you have to take the time to figure out how to do something that is novel. Certainly, I think I could name lots of examples where I personally would have liked to see that novel process work more quickly. There's also a lot of reasonable and prudent reasons why you don't want it to move too quickly because you don't want to do something that might have unintended consequences for, example, pushing the limits of the physical capacity of the reserve beyond the point at which

you would then take away an emergency release opportunity. Since you mentioned novel new ideas and just going back to the grocery aisle for a second and the idea of maybe lower input costs not necessarily being passed on to the consumer in a timely fashion, Biden has talked about this idea of corporate greed at various points and potential price gouging at a time when a lot of. of Americans are under pressure from higher prices. And I know there's the 15% corporate minimum tax included in the Inflation Reduction Act. But is there anything else that could be done on that front? I mean, Germany has been experimenting with price controls on gas. In the UK,

there's the windfall tax on oil and gas companies, which is something that Biden has mentioned. Is there more you can do on that? Well, the president's been talking in recent days about the rationale behind increasing the tax on corporate stock buybacks. We implemented a 1% tax, excise tax on buybacks in the Inflation Reduction Act. And in the President's budget that will come out in a couple of weeks, he will propose to quadruple that to a 4% excise tax. But I think the other thing to do in this context is, you know, it's less about greed because You know, there is a, that part of the constructive impulse of capitalism is for people to be motivated by, by profit. But instead identifying those parts of our economy where we have insufficient competition.

And so that profit motive turns into generating really negative outcomes for consumers or for workers. And so the other thing that I think this president has done and can do more of is trying to, be more aggressive about identifying places where either through regulatory or in some cases de-regulatory steps, we can increase competition in markets and actually reduce the ability for incumbents to actually generate profits in a way that actually has negative economic outcomes. My favorite example of this is on hearing aids where we, eliminated a rule that required hearing aids to be sold, required a prescription before you could get a hearing aid. And so now hearing aids can be sold over the counter at drugstores and the like.

That was a deregulatory step. But what it's done is that it's opened up this new playing field for competition where there's now new technological innovation to try to sell lower cost hearing aids. Those folks who are innovating are motivated by the ability to make a ton of money, but they're making a ton of money with more innovative products that will end up costing the end consumer less. And so, you know, that's the kind of step where you're using more fairer and more open competition to generate better economic outcomes. There's a lot of other places where there's opportunity to do that on the labor market with non-compete agreements, et cetera. I think that that's another place where this president and this administration can continue to break new ground. So I think it's fair to say that with Republicans having one control of Congress, that the legislative window for anything significant is certain is closed for the next two years. Maybe some marginal stuff.

You know, the one sort of area in which I don't perceive the Biden administration to have made major gains or built upon was, anything sort of related to permanent sort of welfare state expansion. The child tax credit was left to expire. Nothing was ultimately done on things like universal child care or expanding child care benefits, et cetera. In your view, sort of looking back like, why is that? Was it just, look, there's only so much that any Congress can really focus on. Was it the fault of high inflation and the fact that there is not an appetite to increase sort of social benefits spending at a time of high inflation that SAP's political will. Why was that a hard area to sort of consolidate or make gains up? Well, first one caveat to your point, which is that because of the expansions

that were first enacted in the rescue plan and then extended in the Inflation Reduction Act, This president has actually signed into law the largest structural expansion in health care coverage. The second largest since the 1960s, the largest being the Affordable Care Act, 30% increase in the number of people getting health care through the Affordable Care Act exchanges. And that has led to us having the lowest uninsured rate in history. So that, I think, is an important caveat, a non-trivial caveat to. but I take your overall point. I think that part of what we need to do is to break out of a narrative that looks at things like the child tax credit and more affordable and accessible child care as social programs

and make more clearly and aggressively the economic case with respect to labor supply and with respect to, you know, family balance sheets about why investing in kids and families in this country is a, is at core an economic priority and an economic issue that would actually have the impact of increasing labor supply and reducing price pressures in our economy across time, while also obviously generating better health and better educational outcomes for our kids. So I think the economic case is really quite compelling, but I think we need to make it and make it more clearly and avoid the sense in which that type of policy falls into a different category, a different category of social policy or family policy, and therefore is thought of differently. These need to be thought of as sort of core economic priorities and things that could help in accelerating this transition that we are in. The irony right now is that things that we could do right now that would increase labor supply

without adding to the federal deficit would be extraordinarily helpful in accelerating this transition that we are in, even as the Fed is engaged in a sort of in a monetary tightening cycle. Since we're doing your exit interview, can I ask, do you have any regrets or is there anything that you would have done differently? I mean, for instance, the big criticism of the American Rescue Plan was that perhaps it could have been more targeted so as to avoid a big bump in inflation or with the PPP, there's a lot of discussion about, you know, maybe that could have been more targeted too so that you would avoid some of the fraud issues that have since emerged. Is there anything you would have done differently?

You know, if I look back, there's on a daily and weekly basis, I think there's like there's, There's dozens of micro things that as I will have time to reflect, I probably will see opportunity for us to have done differently at the margin. On all of the big decisions, I think history will ultimately judge, but as we sit here today, I feel quite confident that the president and we made the right call, understanding that the legislative process is imperfect, you end up with imperfect pieces of legislation at the end of the day. I do think one thing that is a reality, but if you could have changed it, would have been better, is that you mentioned earlier, but if you think about it, the president

made the call for the American Rescue Plan on January 14th, 2021. He signed into law of the Inflation Reduction Act on August 16th, 2022. That's 579 days. It was a long time. It was a long process of legislative interaction, which was appropriate and necessary to try to get done what we were trying to get done in a very narrowly divided Congress. But I think it was also a wearing process, and it was more difficult for the American people to fully understand the thread of legislative sausage making over that long period. So, you know, in a perfect world, you could collapse that time and have gotten more quickly to the task of implementation that this administration is now in. We don't live in a perfect world. And at the end of the day,

more important is to get the right type of legislation done. But that's certainly something that, you know, that has been a reality of the past two years. Brian Dees, thank you so much for coming back on odd lots. And even though this is your last week at the administration doesn't mean this has to be the last time you come on, looking forward to talking again at some point. Really appreciate giving us an hour of your time. It was great. Thank you guys. And I look forward to talking to you. Thanks, Lime. Awesome. Thanks so much, Brian. Well, Tracy, I definitely thought that it was a treat getting to speak to Brian on his last week. And again, you know, it has been an extraordinary two years, but the proof that any of it will matter, you know, will come

in the years ahead of whether the dials turn on like our domestic capacity and all these things. Absolutely. I do think it is kind of crazy that we still don't necessarily seem to have a firm idea of exactly how inflation works. One of our oldest themes here. Yeah. For years, right? Well, yeah. Sorry to bring it up again. But, you know, for years it was wise and inflation higher. And now it's why is an inflation lower. And we're doing all these things. And it's, we haven't necessarily seen companies pass on the savings and it's going to take time for a lot of these efforts to come to fruition. Anyway, I thought that was a fascinating discussion. I loved his point about packaging and this idea that, you know, maybe there are sort of unappreciated factors

going into certain elements of inflation. Absolutely. You know, just also the sort of like the big historical ebbs and flows of, as he put it, a government that is active in the domestic economy, making prioritization, trying to crowd in investment. And it feels like, you know, it's like one of those things where like that really did go out of favor for a long time. For decades. For decades, probably I think the inflation of the 1970s following on some of the more active years in the 1960s helped kill that. So, you know, it would be interesting to see like how long this persists. And, you know, one of the striking things to me is like deficit politics, how much they've gone away, how much you don't really hear about

them, are people worrying about, you know, so much like there's clearly, I would say on both sides of the aisle for maybe different reasons, there's a greater appetite for the government to have like this like, you know, be an active economic player. Yeah. I do wonder, I have to say, in the future, what happens if, so now we're basically pulling forward a lot of investment. Yeah. And what happens if in a few years, you know, the economy starts to slow. Maybe the government is more constrained in its spending ability. I know you don't like to hear that, Joe. Or at least politically, like, feels more constrained.

And then what happens? Because it does feel like, yes, all of this is needed, but it also feels like you're sort of front loading a lot of this. Well, and then, you know, specifically, you know, and that's kind of why I asked that question about, well, what is the government's role as a buyer of last resort, which is that, okay, what happens if we build these semiconductor plants and then we have a downturn? So there's going to be downturns ahead in the future. And, you know, there is not a space race going on, et cetera. Like, are they going to be idle factories?

Are they going to be oversupplied factories selling cheap goods or, you know, a price war? Like, these are still like big questions about how all of this stuff will play out. Yeah. All right. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthall. You can follow me on Twitter at the stalwart. You can follow Brian. I think his personal, I suspect he'll be tweeting from at Brian's CDs, his personal account that he used before taking the job. I think he's probably going to go back to that account. But we'll see. Follow our producers, Carmen Rodriguez at Carmen Armin and dash Bennett at dash. bot follow all the Bloomberg podcasts at podcasts. And for more odd lots content, go to Bloomberg.com slash odd lots where we blog, post transcripts, and we have a newsletter that comes out every Friday. We'll go there and sign them. Thanks for listening.

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