Plain English with Derek Thompson - What America’s Bold New Economic Experiment Is Missing

Episode Date: May 24, 2024

The news media is very good at focusing on points of disagreement in our politics. Wherever Democrats and Republicans are butting heads, that's where we reliably find news coverage. When right and left disagree about trans rights, or the immigration border bill, or abortion, or January 6, or the indictments over January 6, you can bet that news coverage will be ample. But journalists like me sometimes have a harder time seeing through the lurid partisanship to focus on where both sides agree. It's these places, these subtle areas of agreements, these points of quiet fusion, where policy is actually made, where things actually happen. I’m offering you that wind up because I think something extraordinary is happening in American economics today. Something deeper than the headlines about lingering inflation. High grocery prices. Prohibitive interest rates. Stalled out housing markets. Quietly, and sometimes not so quietly, a new consensus is building in Washington concerning technology, and trade, and growth. It has three main parts: first, there is a newly aggressive approach to subsidizing the construction of new infrastructure, clean energy, and advanced computer chips that are integral to AI and military; second, there are new tariffs, or new taxes on certain imports, especially from China to protect US companies in these industries; and third, there are restrictions on Chinese technologies in the U.S., like Huawei and TikTok. Subsidies, tariffs, and restrictions are the new rage in Washington. Today’s guest is David Leonhardt, a longtime writer, columnist, and editor at The New York Times who currently runs their morning newsletter, The Morning. he is the author of the book Ours Was the Shining Future. We talk about the history of the old economic consensus, the death of Reaganism, the demise of the free trade standard, the strengths and weaknesses of the new economic consensus, what could go right in this new paradigm, and what could go horribly wrong. If you have questions, observations, or ideas for future episodes, email us at [e-mail]. Host: Derek Thompson Guest: David Leonhardt Producer: Devon Baroldi Links: David Leonhardt on neopopulism: https://www.nytimes.com/2024/05/19/briefing/centrism-washington-neopopulism.html Greg Ip on the three-legged stool of new industrial policy: https://www.wsj.com/economy/the-u-s-finally-has-a-strategy-to-compete-with-china-will-it-work-ce4ea6cf Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Stepping back just a bit, the news media is very good at focusing on points of disagreement in our politics. Whenever Democrats and Republicans are budding heads, that's where you'll reliably find a bunch of news. When right and left disagree about trans rights or the immigration border bill or abortion or January 6 or the indictments over January 6th. That's where you can count on news coverage being really ample. Lots of cable news segments, lots of podcasts and newsletters, newspaper articles. But journalists, the news media, people like me, sometimes have a harder time seeing through the lurid partisanship to focus on where both sides agree. And it's these places, these subtle areas of agreement, these points of quiet fusion, where policy is actually made, where things actually happen. I'm offering you that as a wind-up because I think something extraordinary is happening in American economics today, something just behind.

the headlines about lingering inflation, high grocery prices, prohibitive interest rates, stalled out housing markets. Quietly, and sometimes not so quietly, a new consensus is building in Washington about trade and technology and growth. This new consensus has three main parts. First, there is a newly aggressive approach to subsidizing the construction of new infrastructure, clean energy, and advanced computer chips that are integral to AI and the military. Second, there are new tariffs or new taxes on certain imports, especially from China to protect U.S. companies in these very industries. And third, there are restrictions on Chinese technologies in the U.S. like Huawei and TikTok.

Subsidies, tariffs, restrictions are the new rage in Washington. This new consensus, this new philosophy, this new paradigm is so young and nascent, it doesn't really have an official name yet. If you draw your salary from the Democratic Party, you might be inclined to call it Bidenomics. If you're an economist, you might be inclined to call it new industrial policy. And if you're New York Times writer, David Leonhardt, you call it neopopopopulism. In an essay for the Times last week, Leonhardt wrote that, quote, the centrism that guided Washington in the roughly quarter century after the end of the Cold War,

starting in the 1990s, alternately called the Washington Consensus or neoliberalism, was based on the idea that market economics had triumphed. By lowering trade barriers and ending the era of big government, the United States would both create prosperity for its own people and shape the world in its image, spreading democracy to China, Russia, and elsewhere. That hasn't worked out. End quote.

Today's guest is David Leonhardt, a longtime writer, columnist, and editor at the New York Times, who currently runs their morning newsletter, the morning, and as the author of the book, Ours was the Shining Future. Today, we talk about the history of the old and maybe dead economic consensus, the death of Reaganism, the demise of the free trade standard, the strengths and weaknesses of the new economic consensus, what could go right in this new paradigm, what could go horribly wrong,

and on top of all that, we have a bit of a debate about how immigration fits into this whole picture. I'm Derek Thompson. This is plain English. David Leonhardt, welcome to the show. Thank you, Derek. It's great to be here. I've been reading you since I became a professional salary journalist 16 years ago. That was the first year of the Obama administration in 2009. And this has famously been, the last 16 years, an era of deep and profound polarization in both the electorate and in Washington, D.C.

The Republican Party has moved to the right by many measures. The Democratic Party, I think, has clearly moved to the left. Each party sees the other as an existential threat. Negative polarization is essential. in the electorate. That means the number of people who essentially define their politics in opposition to the other, rather than construct their own sense of positive visions for the future has increased. Young Democrats and Republicans are less likely to say they will date across the political aisle. And this has culminated famously in some of the least productive Congresses in history over the last generation.

That's been the narrative for 16 years. And it feels like if you're a political commentator, trying to burn some time on cable news, one thing you can always say to fill 15 seconds is, Well, as we all know, America has never been more divided. But in a new essay for The New York Times, you call bullshit. You spot a narrative violation. What do you see? So I should give some credit where it's due. It was one of my editors who called me and said,

hey, can you try to make sense of the fact that we keep talking about the fact that the country is so polarized? And yet we keep reporting these stories on the home screen and good old print. front page of the New York Times about how Democrats save Republican Speaker Mike Johnson's job. Democrats and Republicans pass Ukraine funding. They pass a bill saying that China must sell TikTok. They pass an infrastructure bill that President Biden's pushing. They pass a semiconductor chips bill. And it's not just legislation, right? President Biden has kept many parts of President Trump's trade policy toward China and basically asked me to make sense of how is it? we have had so much bipartisan legislation. Now, we are a polarized country in so many ways,

as you just ticked through. And there are real ways in which the parties are more polarized and further apart than they have been in the past. And there are real threats to our democracy, and I want to be clear about all that. But at the same time that that's happening, we also see in some areas, not all areas, but in some areas, we see what feels like a bipartisan agreement. I called it neopopopulism, in which large parts of the Democratic Party and some parts of the Republican Party

agree on areas that are fairly central to policymaking. Let's take off some of these areas you've been talking about. you saw bipartisan motions to stop the removal of Mike Johnson's speaker. You have bipartisan votes on Ukraine-Aid, Israel-Aid, Taiwan-Aid, the TikTok sale, which is also foreign policy, I think something to note for the conversation we're about to have. And then in the Senate, 19 Republicans voted with 48 Democrats to support the infrastructure bill, and 17 Republicans voted with 46 Democrats to support the Chips and Science Act, which, among other things, subsidized semiconductor manufacturing.

I want to focus on the economic side of the ledger. There's a lot of bipartisanship that I think we can count off on the foreign policy side, despite all the debates about the future of Ukraine funding, but I do want to focus on the economic side of the ledger with you. Both Republicans and Democrats seem much more eager these days to subsidize key industries and enact tariffs on Chinese products. And I think in order to explain where this new Washington consensus comes from, we should do a little bit of history to add context.

How would you define the order? old Washington Consensus that you see unraveling? Well, you just used a nice phrase, Washington Consensus, which in fact has been a term of art for a long time. Another phrase that people use is neoliberalism. And the basic idea, which was ascendant in the 90s and the early odds, and understandably so, was that minimal government intervention and a free market economy was the way to go. And that's what led to to the trade liberalization of NAFTA. That's what led to the United States allowing China to join the WTO and be part of basically the global trading network as a full member. That's what led to a lot

of deregulation. Much of this happened under both Republican and Democratic presidents, right? NAFTA and Chinese trade liberalization, these were policies pursued by George H.W. Bush, Bill Clinton and George W. Bush. And this came in the wake of the Cold War when communism had failed, obviously, and the capitalism of the United States had succeeded. And a lot of people looked at that, and they said, okay, if communism has failed and capitalism has succeeded, we should go to an even more pure form of capitalism. We should deregulate. We should reduce taxes on rich people. We should not worry about labor unions. We should lower trade barriers. And what the, advocates for this said was this will bring prosperity, not just for rich people, but for all Americans,

and it will bring freedom to other countries. These promises were very specific. You can go back and look at the things that politicians said. They were somewhat scornful about people who suggested otherwise. I mean, Bill Clinton at this point notoriously said, China, good luck with trying to regulate the internet. It's like trying to staple jello to the wall, right? And everyone, kind of laughed. And I don't mean to pick on Bill Clinton. You could find similar things from the Bushes, from a lot of Republicans as well. And these promises just didn't work out. Jake Sullivan, Biden's national security advisor, who's also spent a lot of time on economic policy, has written that these were promises made and not kept. China isn't freer, it's less free. Russia isn't

freer, it's less free. Markets didn't bring democracy around the world. And as you know very well, Eric, by almost any measure, living standards for people in this country who are in the bottom 60%, 70% of the population, have not done great. My favorite statistic, it's the first chart in the book I recently published, is that the life expectancy in the United States is lower than in any high-income country in the world. And we can do similar stats on incomes and wealth and family structure, and you name it. But the promises of neoliberalism, however reasonable they may have been in the moment have absolutely not been kept. And I think that you see people from both the left and the right saying, wait a second, if that old system didn't work so well, maybe we should try

something else. You say something really interesting, which is that the construction of the neoliberal world order, the old Washington consensus, was forged in the wake of the end of the Cold War. I think one could even argue it was somewhat forged in the wake of the oil crisis, the 1970s and fears about secular stagnation that came out of the 1970s and the inflation that came out of the 1970s. How do we bring inflation down? How do we unleash the animal spirits of the economy? We cut taxes and cut regulation. That was old Reaganomics. And it's interesting to think that economic policy in America has always existed in tether with global realities, with geopolitical realities. And what we're seeing right now, it seems to me, and I'm very interested if you agree

with this analysis is that the new Washington consensus, what you called neopopopulism, and I'm curious about that terminology, so I'll ask about it later, but what we're calling the new Washington consensus is about our changing relationship to China. I think you summarized this pretty elegantly. There's been a couple Chinese shocks, you could say.

The economist David Auteur wrote about the most famous Chinese shock, which is that the districts in America with exposure to Chinese trade in the Great Lakes and Rust Belt areas saw higher male unemployment, more structural dislocation from the economy. But I think there's another Chinese shock that wasn't economic. It was more cultural or moral.

We realized that China would not become more liberal or more Americanized. As the country got richer, it would become more authoritarian in lockstep with its economic growth, something that a lot of people did not foresee. And now we see a more rich and powerful and authoritarian China as potentially representing a threat when it comes to our own security in things like semiconductor manufacturing. In your conversation with senators and representatives, how much would you say this new economic philosophy of more subsidies and more tariffs, this new Washington consensus? In your opinion, how much of this is basically just about China? I don't think it's just about China, but I think a lot of it is about China.

I think that if you imagine an alternate reality in which actually the neoliberal policies of the last, call it, 50 years had delivered wonderful prosperity to most Americans, I think we would be having a very different conversation, even if China had followed the exact path it had followed, right? Imagine a world in which incomes and wealth and life expectancy and various measures of social health all looked great in the United States, and China was rising without becoming more democratic. I think we would be having a different kind of conversation. So to me, the China piece of this is necessary but not sufficient. And multiple members of Congress are very clear to me. I mean, Susan Collins, I quote her in the piece, the Republican

senator from Maine, John Federman, the Democratic senator from Pennsylvania, I quote him in the piece. They say, look, China is a big part of this. And it's not just China. It's this emerging global alliance that includes on different issues, China, Russia, Iran, occasionally North Korea, and the Iran-funded groups like Hezbollah and Hamas and the Houthis that really do see themselves as challenging democracy. And I think that helps explain the TikTok bill, as you mentioned. I do think it absolutely helps explain the passage of the semiconductor bill. In some ways, it might even help explain the passage of the infrastructure bill, the idea that we need to be more competitive. This really is an echo of what we saw during the Cold War. I mean, one of the forces for bipartisan

cooperation during the Cold War, by no means the only one. That was a different era. The parties were weird and overlapping. But one of the forces for bipartisanship was this. notion of we face an existential threat from a foreign power. And I think you do see, it's not an accident that the bills where you have seen the bipartisan cooperation where it really gets over the line often have some connection to foreign policy generally and China in particularly. And as a kind of contrast, let's look at the child tax credit. I actually think it is another nice example of what I call neopopopopulism, and we can talk more about that term later. a new child tax credit has passed with an overwhelming bipartisan majority in the House.

For sort of internal congressional reasons, it hasn't passed the Senate. It seems like it may not this year, so who knows what will happen to it. But there really is a bipartisan deal to be done on the child tax credit. It very much fits with these ideas of we need to have the government do some things. But it's really hard to argue that the child tax credit is somehow directly related to the competition with China. It doesn't feel like an absolutely necessary bill the way semiconductors or TikTok or Ukraine does. And so it hasn't quite happened yet. I think we might agree about this, but I want to explore the possibility that we disagree about the centrality of China. I absolutely see, as you do, the underlying statistics about the economic struggles of, as you put at the bottom 60 percent, it is a statistical fact that the U.S.

lags its European neighbors and many Asian countries, East Asian countries, when it comes to average longevity, there is a problem to be solved here. But I see the New Washington consensus as being almost explicitly about China. Greg HIP, the columnist for the Wall Street Journal, said that the new industrial policy that's emerging in Washington is a three-legged stool. Leg number one is subsidies for things like semiconductor chips and electric vehicles. leg number two is tariffs, especially on Chinese goods that can compete with these American sectors. And leg number three is restrictions on Chinese companies like Huawei equipment and TikTok, which President Biden recently signed a law to force the divestiture of.

There are not equivalent bipartisan policies to increase life expectancy by expanding health care insurance that I see in Washington or reduce fentanyl addiction or reduce gun violence. or create a global campaign to seek out new diseases and prep vaccines that could stop pandemics before they start. We don't, it seems to me, have the bipartisan consensus to raise America's life expectancy as critical as that mission should be. I mean, you can imagine a presidential candidate running explicitly on the graph of American life expectancy falling behind Western Europe. Like, that could just be the entire presidential campaign. That doesn't exist to the same degree. that a bipartisan consensus on the risk of Chinese economic competition and geopolitical

adversity does exist. Do you agree with that, or is there some way that you think my analysis is getting things a bit off? I think you and I are close, but maybe we put the emphasis in a slightly different place. So I said maybe China contributed a little bit to the infrastructure bill, and maybe it did. But it didn't contribute that much to the infrastructure bill, and we still got a bipartisan infrastructure bill passed in a way that I just don't think we do in Paul Ryan's, Washington. in a Washington where neoliberalism is stronger than it is in today's Washington. And I agree with what you said.

We do not have, particularly from the Republican Party, we do not have a commitment to try to address many of these market failures today. But the way I would think about it is it's both the stagnation of living standards for so many Americans, and it is the fact that we have had, I didn't invent this phrase, but we've had the class inversion of U.S. politics, right, in which working class people increasingly vote Republican and professional people increasingly vote Democrat. And so what you've had, Trump, for all the ways that he is a destructive force and an anti-democratic force, and I don't in any way want to paper that over. Donald Trump is hostile to basic standards of American democracy. He also exposed a basic flaw in how the Republican Party defined itself. He ran for president in 2016, well to the left where the Republican Party

had been on a bunch of economic issues, right? He said free trade is actually bad. He said, I'm not going to cut your Social Security and Medicare the way Paul Ryan was going to do it. He ran very hard on immigration. The right-left politics of immigration are interesting. We can get into that if you want. But he was very much rejecting the neoliberal consensus. And boy, it didn't hurt him.

It helped him get the nomination. It helped him win the presidency. And so you've now seen the rise of these other Republicans in his mold. pieces of people like J.D. Vance and Josh Holly. And here's one thing I would think about. If this were all really about China, I don't think you would see J.D. Vance praising Lina Khan, Biden's very progressive, very anti-monopoly, head of the FTC, as the only member of the Biden administration doing a pretty good job. So to me, there are enough examples out there, infrastructure, this sort of fusion of the left and right on antitrust, some of the other little things bubbling along.

There are enough things out there to say this isn't solely about China. It is crucially about China, but it is also about the failures of laissez-faire economics and the fact that the Republican Party increasingly draws votes from working-class people. And in some ways that are authentic and in some ways that are just performative, the Republican Party is more interested in appealing to working-class voters than it used to be. I think it's a great answer. And I want to be really clear here that my philosophy is very much in line with the thesis that you're putting out.

Like, you know, your colleague, Esther Klein and I are reading a book about creating a new kind of progressive movement in America that prioritizes building things in order to solve America's most important problems. That is very much in line with the philosophy and goals of the infrastructure bill. Our book is not all about China. I just wonder whether the amount of bipartisan consensus that we're seeing in much of the emergence of new industrialism, how much of that is motivated by a thing. fear of China. To me, it's a lot, but to your point, it's hard to point out that J.D. Vance and

Lena Khan are shaking hands over tech monopolies because of policy coming out of the CCP. That's a very, very fair point. And you and I agree a lot of it's about China. And I actually think, look, there are dangers to it, right? There are dangers that involve racism, right? The same way the Cold War led to McCarthyism, which had a very strong anti-Semitic component to it, right, in terms of who was blacklisted. You can absolutely imagine how our new Cold War leads to not just an anti-China, but a broader anti-Asian sentiment in this country. That would be very dangerous. We have to guard against it. There are also really healthy aspects about the idea that the United States is now in a rivalry with an authoritarian country that does not have

many of the values that we have. It can play a unifying force. It can help bring Americans together. It can get us to do things that are really in our national interest, much as Sputnik famously led to this huge funding of science. And so I do actually think having international rivalries, even frightening ones, can lead countries to do really good things. The legacy of the spend, we did in World War II on the military and in the Cold War is just phenomenally positive. I mean, it's like all of modern life. It's satellites. It's the internet. I mean, that stuff came from this sense of, hey, we can't mess around. We got to be serious about this. Yeah, I was just about you how you feel about the historical fact, or at least to me the

historical perception that geopolitical insecurity seems to have been so critical for jump-starting periods of astonishing innovation on the part of government policy. You have the fact that during World War II, not only did we very famously invent nuclear technology, which has done a lot of bad, but also made possible the fact of nuclear reactors. We also invented penicillin during World War II. We took a weird mold discovery in the late 1920s and invented the first at-scale micro-antamicrobial medicine in world history. It saved tens of millions of people. You think about the fact that Sputnik, to your point, inspired the creation of ARPA, which was later named DARPA, which is famous for technologies from GPS, drones, the internet voice interface, weather satellites,

the personal computer, I mean, just a Cambrian explosion of, to your point, everything we think of, as being the modern world seems to have just erupted out of the big bang of DARPA, there is a possibility that geopolitical insecurity, for all the long-tail dangers, it can so obviously pose, is an extraordinary stimulant for exactly the sort of legislative innovation that can produce wonders for the world. So, I mean, just, I guess, one level deeper there, how do you balance the, the obvious dangers that we could face with the upcoming rival with China, with the possibility that this could theoretically be a new golden age for policymaking in D.C.

I mean, look, I wish, in large part on behalf of the citizens of China, I do wish China weren't taking this authoritarian term, right? I'm not saying it's a good development. But we in the United States, we can't change that. And so given that it's happening, given that there is this emerging alliance that includes Russia and North Korea and Iran and other groups at various points. The only thing we can do is think about how as Americans and as the United States, do we respond to that? And I think it's worth remembering with all the risks, just as you laid out, there's also

really the potential for good things. And that when you look at our history, threats, whether it's the World War II history, you just told whether it's the incredible economic development that Abraham Lincoln oversaw while also fighting the Civil War, there is this real history of things that focus the national mind and national attention can sometimes get us to do things that when we're sitting around feeling fat and happy and content as we were in the 90s and early odds, we just don't do. Now, there's no guarantee, right? We've got to actually do it. But it, but it's does, I think, increase the chances that will do some of this stuff.

The new economic paradigm that's emerging cries out for a name. The Biden administration calls it Bidenomics because, you know, little-known fact, presidents are actually constitutionally obligated to add the suffix anomics to their surname in order to epitomize their economic philosophy. Others call this industrial policy or neo-industrial policy. And for those who don't follow old economic debates, industrial policy is basically be a grab-bag term for state direction or support of specific economic sectors. I think my book editor wouldn't mind if this sort of approach to maximizing productivity and key sectors came to

be known as abundance economics. You call it neopopopulism. It's a really interesting phrase. Why neopopopulism? A few reasons. One, it is, I think, a reaction to neoliberalism. two, it isn't just the old version of populism. It's different in some important ways. We've been talking about some of those ways, right? The old version of populism was often agrarian. It didn't involve the rise of China. It didn't come after the lessons we've learned over the last 50 years.

And I do think it's important to remember that many of these policies are popular, and which is of course baked into the notion of populism. You know, it's really interesting when you look at what Americans think about the minimum wage, they think it should be higher. When you look at what Americans think, they're very much not socialists, but they do favor the government getting involved in the economy to provide good-paying jobs. They do absolutely favor confronting China. I mean, you know, if you hang out in circles like you and I hang out in Derek, you might think that the for sale of TikTok is unpopular because, you know, it kind of makes highly educated affluent people uncomfortable. It's hugely popular. Poll after poll after poll shows the American people like the forced sale of TikTok. And that, I think, leads to another thing, which is I'm deliberately asking people to grapple with the fact that I think in elite circles, the very notion of populism.

has a bad reputation. And yes, populism, I say this explicit in the article, can end up in really damaging ways. Populism can lead to authoritarianism. Trump displays some of the enormous risks that come with populism. But there are also risks on the other side. There are also risks of people who are relatively well off being dismissive in a democracy of the desires and the interests of people who are less well off. And I actually think the bigger problem we've had for most of the last few decades is that, is people who've been doing relatively well, whether it's policymakers, whether it's people at think tanks, whether it's people, journalists lucky enough to work in national publications like you and I do, whether it's the people who work on campaigns or donate to campaigns. I think often people in those

situations who've done pretty well over the last few decades have been dismissive of the interests of working class people. And I actually think our politics would be better if it had a little bit more populism in it. Look, immigration's a great example of this. And we can go deep into this if you want to. But, you know, you hang out, whether they're on the right or the left, with relatively elite people and talk about immigration. And all they talk about is how great it is. Right? It's like, we need more workers. We need this. Basically, it's all about pretending that it is a win-win, free lunch, there are no costs, it only benefits everyone. That isn't how most Americans feel. And I actually think the evidence is on their side. When you look at this, right, they say what you hear

the summary is, if it's immigration on net has relatively small costs and they're focused on low-income workers. Well, if you're a low-income worker, that doesn't sound so great, right? And so to me, a politics that both was respectful of the fact that Americans want a higher minimum wage, they want health insurance. But hey, you know what else? They're uncomfortable with some of the neoliberal policies, whether it's high trade or high immigration of the last few decades. I think our politics would be a little bit better with a little more populism. And so part of the reason I like the phrase is actually the fact that it rubs people when they hear it at first, not totally positively. They say, wait a second. How do I feel about that?

We're in a moment of increased bipartisanship on economic policy, but it would be the pundits fallacy to assume that all bipartisanship is inherently good, that all political fusion is inherently good. And I want to spend a little bit of time thinking about what the emerging economic paradigm is missing and where it could go wrong. So I'll give you two nominations for things that I think it might be missing. And you already mentioned one of them, although you came at it from an angle that goes a little bit against my priors, but you anticipated that it did. One is immigration. Right now, we have a plan to subsidize the manufacturing of semiconductor chips, but the manufacturing of semiconductor chips requires very specific skills that are not

in abundance among the current American workforce, I think. And there are some people saying, well, if we're going to build factories to compete with Taiwan and China in making advanced computer chips, you can't just build the factories. You also need a policy to bring in workers that have those skills. And we should maybe have a chipmaker visa to specifically allow high-skilled immigrants to come into the country and have a fast pass to a green card if they demonstrate these critical skills to help us compete with China geopolitically. So there's an immigration component of this that we haven't talked about. Another piece of this that Greg Gipp in the Wall Street Journal mentioned that I think is really important is that all of this attention being paid to making stuff in America can alide the fact that there is no obligation that America make all of this. America can't make everything that it needs.

We're not an autarky. We rely on trade. And maybe we need to spend much more time creating more free trade agreements. with our non-Shinese, non-Russian, non-Iranian, non-North Korean allies, so that we build up an ally base and Avengers squad of a free trade society that can compete with the new access powers that we see emerging. Take either one of these in terms of what you think is more interesting to you in terms of how it fits into the new economic paradigm, immigration or free trade. I'll take both, but I'll do it briefly. So I think that argument by Greg Gap is an important one

and a good one. And I do think your question was, how could this, whatever you want to call this, and it's not a consensus at this point, but it's maybe an emerging consensus. How could it go wrong? I do think one of it is that one way it could is the protectionism goes too far. And really what the U.S. needs is it needs to think about this in a very strategic way. And so cracking down on trade with Japan and Europe, for the most part, strikes me as counterproductive, which was basically, I think, part of Greg Ips argument, right? And so the U.S. needs to think about what are the areas that we really don't want to have free trade and why, right? Because we still are going to have a ton of trade.

We need to have a ton of trade. It's healthy. But be very clear about, okay, here's where we want tariffs. Here's where we want restrictions. China is hugely subsidizing these industries. We're not going to let them sell into our economy without tariffs, for example. But the notion that we're going to start slapping tariffs on our allies in Japan, South Korea, and Europe, I do think could really be damaging. So that's one area. I absolutely agree with you that part of what our economy needs is a really smart immigration policy that includes increasing immigration in some areas, probably exactly like the area that you just said, right? I think the mistake that both the progressive last and the kind of pro-business right make is they there's this there's this kind of condescending nature

toward concerns about immigration. It's like yes, yes, yes, you working class people are worried about immigration, but let's talk about the ways we need to expand immigration. I think the only way we're going to get a political solution to this is both. We have to take seriously the concerns about the massive amounts of immigration that we've had over the last several years, above and beyond what our law calls for. And if we want to marry that to some laws that say, hey, we need more workers who have PhDs, we need more workers who can build semiconductor chips. By the way, that would provide more competition for relatively well-off people, right? It would actually push against inequality. I think that would be great. But when you look

over the history of immigration over the last 60 years, I mentioned my book once before. I think my favorite chapter in terms of the research I did in my book was about the history of American immigration since 1965. What you see is that when major laws get passed, whether it's the 1965 reform, whether it's Reagan's reform, the promises on border security often aren't kept, and the promises on loosening the system are. So Reagan's amnesty, which I think was a very good policy from humanitarian and economic grounds, that really happened. Reagan's border. security stuff kind of happened. Barbara Jordan, the Democratic Congresswoman, who chaired Bill Clinton's commission,

said we should have a version of E-Verify in which all employers have to check whether someone's legal. That never happened. Some of the ways they said we should expand refugee policy did happen. And so again and again, Washington has basically said, oh, yes, you people who care about border security, just don't look here, but we do need to expand this. So I really think we need to expand it. I also think we have to take seriously the law and public opinion about what it means to have allowed

very, very high levels of lower income blue-collar immigration and how uncomfortable Americans are with that. It's not just Americans who are uncomfortable with it. It's every country in the world. So I think either one of those could go wrong. And we didn't even talk about other areas. I mean, you're the expert, not me, on all the ways that regulation could stifle industrial policy. That's really bad.

I worry a lot about education. We've kind of had both halves of our political spectrum really struggle with education the last few years, whether it's this universal voucherization on the right or whether it's some of the stuff on the left that says, you know, we don't need to worry about teaching kids algebra. So I think education is also a big area.

I just want to pause to hold on immigration for one more question because I think there's a little bit of a gap, I think, between the point that you're making and at least my prior. And it's possible that one more question might educate me a little bit more on your perspective because you have done more historical research on this. What I see in terms of immigration needs today is that at the global picture, we live in a world where fertility rates are in structural decline.

And just about every rich industrialized country is head. towards permanently declining populations, if not for immigration. And the U.S. is in this fantastically lucky position where many of the smartest people in the world want to come here. And a lot of people who don't have much of an education want to come here too. We are in enormous demand. And so you think, well, if we are an enormous demand, is there anywhere that we could potentially put new immigrants to work?

In construction right now, there are labor shortages, and 40% of construction workers in California, Texas, in New York are foreign-born, according to the NIHB. You have the new industrial policy emerging in Washington, D.C., really focused on decarb. Well, 20% of construction workers in wind turbines, electronic or electrical transmitters, and similar infrastructure are also foreign-born. The Chips and Science Act spends a lot of money jump-starting scientific research, an enormous share of the world's smartest people in AI, and people who hold PhDs are also

foreign-born, including those that study in the U.S. And you're very familiar with the statistics on how many of the most lucrative tech founders were not born in the U.S. They live here, started a billion-dollar companies, but they were born in Europe, in Asia, or elsewhere. So I see this enormous opportunity to, for America to grab the lead in immigration policy in a way that would net out in more science, more decarbed built, more houses built, which would help with the housing crisis and housing prices that a lot of people are frustrated with. But that absolutely, to your point, we have to make immigration a subject that doesn't constantly produce A1 crisis. So yes, there's an opportunity here to marry border security with a rational but expanded legalized immigration policy. I

I see it as an enormous low-hanging fruit win-win possibility for the U.S. Is there anything that I said there in my sort of defense of what I acknowledge to be the familiar old hat elite consensus ideas about, oh yeah, here, here, cheers, cheers for immigration, anything there that you feel strongly disagrees with the conclusions that you reached in your research for your book? I don't think you said anything that I consider to be false or wrong, but I think there are some other points I would add that you didn't mention. So many of us, and I'm among this group, like to talk about how incredibly rapid income gains were in the United States from the 1930s

through the 1970s. And yes, those were era, I mean, inequality fell during the, like for you and me, Derek, given I'm older than you, but like for the years we've been alive, inequality rising feels like some law of science, but it's not, right? In the 40s and 50s and 60s, the pay of working class and middle class people rose more rapidly in percent of terms than the pay of the wealthy. Not only that, even though these were decades of horrific racism, the white-black pay gap fell. The white-black life-expectancy gap fell. So these were, by any measure, these were decades when inequality was falling. And by the way, the white-black pay gap started falling well before the civil rights movement, mostly because labor unions started admitting large

numbers of black workers. What else was happening in the United States in the 1930s, 40s, 50s, and 60s? We had incredibly low immigration rates. Now, yes, our immigration policy during those decades was horrific. It said immigration must be really low and you basically have to be a white northern European. But let's just think for a minute about the levels, not the who we were admitting. We were admitting extremely low numbers of people and working class incomes. were rising really nicely. Now, that, of course, fits everything, we would, every basic notion of economics, right?

If the growth of the labor force is smaller, we would expect the wages to rise more, right? That makes sense. So then what happens? In 1965, we changed our immigration law. Within about a decade or so, we have a noticeably rising share of the foreign-borne population. We have very high levels of immigration,

much higher than the authors of the law promise, and what has happened over that exact same time frame. We have had really weak income growth for working class Americans. Now, the kind of pro-immigration elite argument says that is all a total coincidence. It is a total coincidence that over the last century, we had one long period of low immigration and falling inequality, and then another period of high immigration and rising inequality. It's totally wrong, and when working class people worry about high immigration, they're just ignorant and wrong. I don't think they are.

I don't think immigration is the main reason for those trends I just described. I think the decline of labor unions, I think the decline of tax on rich people are bigger reasons. But I think they play a role. And I actually think a lot of relatively high-income people get intuitively why immigration can hold down wages. why is that the doctors make it so hard for immigrants to come into this country and immediately become doctors, right? You have to have training in this country, which, of course, if you're 50 years old, you're not going to go back for training. There is no defense of that policy. It is a form of immigration restriction is a form of protectionism. It's because when it comes to their own income, doctors don't say, oh, oh, well, immigration won't affect my wages.

They get it, and they protect themselves from that wage competition. And so I absolutely agree with you. We need a strategic immigration policy that really admits more high-scale immigrants in the areas we need. We need to admit refugees from Xinjiang and Ukraine and Afghanistan and other places. But the immigration policy that we've had that Americans look at where it feels uncontrolled, it feels really high, it feels like the people setting policy expose others to wage competition that they don't expose themselves to. I don't think we can get. to the kind of smarter immigration policies until policymakers take those concerns of ordinary voters seriously. And I think it's a major problem, particularly with large parts of today's democratic leadership. We're going to close the tab in immigration,

but I just want to remind myself that I'm trying to reconcile the fact that on the one hand, I think I disagree in part because, we are seeing at this very moment that real wage growth is highest among the low income during a period of extraordinary expansion of immigration under Biden. I mean, the numbers just flew up when we flipped the calendar from Trump to Biden. But at the same time, at the level of abstract ideology, I absolutely agree with you

that the reason the AMA restricts the number of doctors, especially the number of international doctors, included the number of residency slots that could potentially lead to a growth in the overall physician population, the reason that they do this, I am absolutely convinced, is in order to protect the salaries of doctors. I do think that that is true. It looks like you have one more comment that you want to make maybe about immigration before we flip the cook. Look, I don't think immigration is the main thing here, but by most measures, real wages did better under Trump than under Biden, right? I think that's mostly about inflation. I don't think it's Biden's fault. But I actually just put together a chart yesterday using the employment cost

index and inflation. And I think by most measures, real wages did better under Trump than under Biden. So I really don't think immigration is the main thing going on there. I just don't think the last eight years contradicts the larger story of the last century. Because by my reading of the data, you don't, you don't see, oh, wages have done better when immigration has been higher over the last decade. Again, I don't think immigration is the main reason there. To me, it's just not disproving the notion that labor supply matters to wages. No, I appreciate it. And I appreciate that you're challenging some of my priors here.

It's interesting. And I'm writing about immigration right now, and I'm going to fold some of this into the piece. I want to talk a little bit about electric vehicles and then one question about Trump. There's a real conundrum, I think, with electric vehicles. Because on the one hand, when you think about what we are trying to accomplish with our clean energy policy, What is the end goal of America's clean energy policy? Of course, energy independence is great. Energy superabundance would be fantastic.

But we are trying to build clean energy because we're trying to decarbonize the world. We're trying to create electricity that doesn't choke the atmosphere with carbon emissions. And so we should, on the one hand, absolutely welcome cheap cars wherever they come from. And it turns out that China's BYD makes the most the cheapest pretty high quality,

it turns out, electric cars in the world. At the same time, we've essentially just slapped this tariff that says, nope, we're going to make it really, really difficult for Americans to buy BID cars in the future. None are currently sold, but to buy BYD cars in the future, because we want to protect American automotive industries that they can build a domestic electric vehicle base that can power our electric future. How do you reconcile this conundrum that we want to protect the U.S. economy in some ways, but also our energy policy is about decarbonizing the world. And so, of course, it seems like we should welcome the arrival of cheap electric vehicles that people want to buy.

How do we solve for both these things at the same time? I'm extremely worried about climate change. That's a very obvious opinion to have, but it's my genuine opinion. And I am generally very bullish on policies that try to get pollution out of our economy and try to slow climate change. One of the hardest things here, though, is we do live in a democracy. And we have seen not just in our country, but in Canada, in Australia, in Western Europe, when efforts to decarbonize the economy get ahead of public opinion, they tend to be doomed.

And I wrote an essay several years ago for The Times Magazine a little bit of a self-critical essay about how I think for too long I was too positive about a carbon tax or a cap and trade system because I'd listened to the economist and I was persuaded by them and I'm actually still persuaded by them that it's the best way to make a transition to a clean energy economy. The problem is in an era of really slow income growth for most workers in the United States and Europe, it's a nearly impossible political sell, right? Oh, you've been doing really badly. and also now we're going to tax nearly everything you do because we're taxing energy. It just doesn't work.

And, you know, we've seen governments put it into place. Not us, we never put it in place. But we've seen governments put it into place. And then basically withdraw it, right? We've seen it in Canada. We've seen it in parts of Europe. And so I think that I think Biden was very savvy about this. He moved away from that toward a system of we're going to subsidize clean energy to the tune of, you know, billions and billions and billions of dollars.

because that's politically feasible, right? And the nice plan, the economist drop where we tax carbon, maybe one day we'll get there with enough of a crisis, but it doesn't matter how elegant it is if democracies don't put it in place. That's a little bit how I think about electric vehicles and China. Look, there's a big part of me that would like to say all we should care about is climate change,

and so we should just have policies that are focused on that. But that's not reality. Climate change is a much lower priority for lower-income voters than for higher-income voters, much lower. And we have more lower-income voters than higher-income voters. And so I just think realistically, we need a climate policy that takes into account what is politically feasible, what is democratically sustainable, and also what fits with some larger geopolitical threats.

I mean, look, if we can't have a policy that both slows climate change and gives China some kind of backdoor ability to pull the plug on our economy in case of a war. We can't have that either. And so I also worry about it, but ultimately I don't think our climate policy can ignore political reality or geopolitical occurrence. There's an emerging theme here that I'm really interested in and that surprises me. Industrial policy, climate policy, immigration policy, one thing I'm hearing from you over and over again, any policy is only as good, as long as it's a sense.

If your policy is designed to implode democratically, you don't have a policy. You have a white paper that will be voted into law and then die after 18 months when a new administration comes in and reacts to the political reality. This is what we see with immigration, where people, I think, are rightly upset about the border or rightly upset about the way that it seems to disrupt their life and it makes it harder to have a long-range immigration policy. It's something we have to remember when we think about a carbon tax. I think when we think about industrial policy and weighing all of these things, how do we balance doing good with creating a plan that is popular enough to survive the fact that we

have elections every two years? I guess it wouldn't be a ringer podcast if I didn't bring in sports. The best ability is availability, right? As true for basketball players and football players as it is for legislation. Last question. Donald Trump, where does he fit into all of this? in a way, he's a part of this new consensus. One of the first things you said is that Joe Biden has been surprisingly

continuous of policies that originated under Donald Trump. On the other hand, he's hostile to basic democratic traditions. He doesn't seem to care about climate change at all. He doesn't seem to care about basic transfer power at all. If he becomes president, he might rip all of this off just out of spite on a lark because his ideology is much more personal than it is about public policy. Where do you see him fitting into what we're calling the new Washington Consensus and neopopulism? So I actually want to connect that to your previous very wise point about sustainability, democratic sustainability.

So the most direct answer to your question is Trump fits into it in that he moved the Republican Party away from neoliberalism, but he also represents this real threat to democratic norms in exactly the way that you just said. So that's the kind of short answer. And I agree with everything you said. He could rip it all up. He's a destructive force, even though he also exposed some of the ways in which Republican orthodoxy was wrong. All that's true. But I actually think that your really smart point and frame about lowercase D democratic sustainability

is in some ways the way to think about Trump. which is one of the mistakes that the center left has made in many countries, including our own, is to ignore the values, the views, the interests of working class people. Tomas Pickety, the economist, and some co-authors have written about this idea of a Brahman left, right? An increasingly upscale left, I'm guessing some of your listeners might be familiar with the Brahman left, right? the well-to-do suburbs of Boston and Washington and Los Angeles and San Francisco and New York and Chicago. And this Brahman left often says to working class people, you're not just wrong about the social issue, you're ignorant, maybe even you're hateful. And I think that whether it's on climate, whether it's on immigration, whether it's on patriotism, on religion, on some of these kind of divisive culture war issues.

I think that if our center left says to people, no, don't worry about the price of gas, or no, you're wrong to care about immigration, I think what that does is it undermines the lowercase D democratic sustainability of progressive policies and it opens the door to figures like Donald Trump, right? It absolutely opens the door to figures like Donald Trump. If the left actually mimics, the stereotype that the right has of the left, which is, you know, we don't care about your gas bill. We just care about climate change. We don't care about immigration. We're going to open the borders. You know, you name it. When the left mimics that sometimes unfair stereotype, but when the left makes it seem more fair, it makes more people say, huh, that guy Trump is unpleasant. He's selfish. He's rude. But I don't know. Maybe he's right. And so I would just really urge progressives to have a version of progressivism that includes a little bit more populism and a little bit less elitism, because ultimately I think that's a version of progressivism

that will be much more sustainable. David Leonhardt, thank you very much. Thank you, Derek. Thank you for listening. Plain English is produced by Devin Baroldi. We've got new episodes every Tuesday and Friday. If you like what you're hearing, give us five stars. and a nice review on Apple Podcasts or Spotify or wherever you get your podcast.

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