In this episode, we go deep on industrial policy with Todd Tucker of the Roosevelt Institute. We discuss what it is, why it’s needed, what Biden’s particular version of it looks like, and how it could evolve if he wins a second term.
Text transcript:
David Roberts
In case you hadn't heard, neoliberalism is out. Industrial policy — focused government action and investment meant to shape the economy — is in.
The Biden administration has been quite explicit about this, in high-profile speeches from National Security Advisor Jake Sullivan and National Economic Council Director Brian Deese. It has resolved to take a more active hand in determining which industries grow in the US, and where, and what kind of jobs are created. I had Deese on Volts last February to walk through the administration's thinking.
But there's a lot more to say about industrial policy and how Biden is doing it. The Roosevelt Institute has just published a package of essays exploring what works in industrial policy and how the US could improve its efforts, so I got in touch with Todd Tucker, the political scientist who leads Roosevelt’s work on the subject.
We talked about what industrial policy is and why it's needed and then got into Biden's particular version of it — how it stands up to various criticisms and what might be done to improve it if Biden gets a second chance. This one's a bit nerdy but it will give you tons to think about.
All right, then, with no further ado, Todd Tucker of the Roosevelt Institute. Welcome to Volts. Thank you so much for coming.
Todd Tucker
Thanks so much for having me. Huge fan. Glad to be on.
David Roberts
So we're here today to talk about the subject of the hour. It's on everyone's tongue: industrial policy. Loyal Volts listeners will recall that we had Brian Deese on last year from the administration, from the Biden administration, talking about sort of like how Biden envisions, how the administration envisions its own industrial policy, what it's trying to do and why. But I thought since everybody's talking about it and since there's a lot of discussion these days about kind of what's missing and what could come next, I thought it'd be nice to step back and kind of get a little more of an overview of the subject, dig a little bit more into what Biden's looks like and what a better or next version could look like. And Roosevelt Institute just had this series of essays on this, and this is something you cover as a political scientist. So with all that preamble out of the way, maybe let's just start by defining industrial policy.
What do we mean when we talk about industrial policy?
Todd Tucker
Yeah, sure. Industrial policy is a lot like economic development. And the way that those things get kind of debated in the faculty lounges of various universities, which is that for as many people as write or think about it, you probably have just about as many definitions of what it is.
David Roberts
We should make that clear that there is no such thing as exactly what it means. Everybody means a little bit something different, so just give us your sort of best go at it.
Todd Tucker
Yeah, everybody means something a little bit different. I mean, there's some very narrow and some very broad definitions. So I'll just canvass those for a second before pivoting to my favorite definition. And of course, I'm right and everybody else is wrong.
David Roberts
That's why I'm having you on.
Todd Tucker
But I think that there are some folks that treat industrial policy very broadly as essentially a synonym for economic policy. So you have some political scientists and economists that sort of say any kind of government intervention at all could be considered as industrial policy. You have other folks that go very narrow, and they sort of say, if it's not a toolkit like a subsidy or a tariff, then it's not industrial policy, or that industrial policy only has to do with heavy industry and sort of heavy manufacturing. Right?
David Roberts
Right.
Todd Tucker
Those are some of the various definitions out there. I use a different one that I think is becoming more conventionally accepted within economics and social science more generally, which really goes by the intention of the policy. So if the intention of government policy is to change the composition of industries in the economy, then that counts as industrial policy. So essentially, there are industries that we want to see more of: let's develop those. There are industries we'd like to see less of: let's wind down those. But it's basically anytime the government is not neutral as to which industries are surviving and thriving in the economy, then that can be considered industrial policy.
David Roberts
And a bunch of different kinds of policy could be passed with that kind of intent, sort of tax policy or tariffs, trade policy, even foreign policy. There's a lot of different things you could do with altering the character of the industrial base in mind.
Todd Tucker
That's right. And I think that an industrial policy is sort of one particular intervention to build up or wind down an industry. And then if you put that in the context of what's sometimes called planning, industrial planning, or the economist Mariana Mazzucato calls it missions, then that's basically when you have a whole bunch of different industrial strategies that are kind of tied together and working in conjunction to basically smooth out the transitions between different industries. So you could imagine having a trade policy that was going to expose either more or less of your economy to competition that might displace people.
So then, if you have a complementary industrial strategy for the service sector, then that might be a place where you could absorb some of those people that are let go.
David Roberts
Yeah. Worth emphasizing this point that it's not just about boosting industries you like. Industrial policy can also involve how to wind down industries that are on the way out for whatever reason or that you want to shepherd out. Both sides of the —
Todd Tucker
Both sides of that equation. Yeah.
David Roberts
So that's industrial policy, basically a policy that's meant to sort of move money and status around, among, in between industries — elevating some, winding some down, that kind of thing. And we should say — it's funny, I was listening to this NPR piece on industrial policy just a couple of days ago, and they just were kind of going overboard, I thought. Saying that industrial policy is like the policy that was scared to say its name and was shameful in the halls of academia for years and years, and now a few brave iconoclasts are daring to say the words. I'm just like, "come on."
But it is true, I think, that industrial policy, trying to fiddle with the industrial composition of the economy was looked down on by mainstream economics for a long time and probably maybe like in total still is like. What's your read on the status of industrial policy in economics.
Todd Tucker
David, I mean, such a good question. I'm old enough to remember 2019, which is when we were thinking of sort of formally launching an industrial policy program at the Roosevelt Institute. And I can't tell you how many meetings I was in where we were thinking, "Is the branding of industrial policy so terrible that us sort of stepping in and sort of claiming it as a topic worthy of study and doing policy work around, is that too much of a bad association?" And I think, you know, it's true. The US never stopped doing industrial policy. We've always had industrial policy of one kind or another.
David Roberts
Crucial point.
Todd Tucker
But largely in the defense sector, was where a lot of that was focused. So it's true that it wasn't widely accepted that there can or should be an industrial policy for the civilian economy. Like, there were certain people in certain niches of government that quietly used tools to kind of nudge the industrial composition of the country, but it was not something that was widely accepted. And I think that that kind of gets to, in a way — we've defined what industrial policy is, let's say a word about what it isn't, kind of the inverse of it: which is really letting the market decide which industries are going to survive or thrive.
Right. And that was, of course, the dominant economic paradigm in the US and globally since the 1970s.
David Roberts
The famed neoliberalism, I believe, is —
Todd Tucker
The famed neoliberalism, that's right. And the Washington Consensus. And it goes by different names. But I mean, the posture that folks in DC definitely had was that government is going to be bad if it tries to direct the industrial composition and economy, so it shouldn't try to do it. And so that was sort of the operating code and the philosophy that was dominant for a long time. So to kind of say, "No, there actually is a public interest in deciding which industries survive and thrive, and government is going to step into that role." That was controversial and —
David Roberts
Can do so competently.
Todd Tucker
Can do so competently, and there's good existential reasons in some cases to do it, right? So, I think that even though it's kind of a "do what we say, not what we do" kind of thing, the posture that Washington was projecting onto the world through the World Bank and the IMF and the World Trade Organization was "get government out of the way of making decisions about industry."
David Roberts
Yeah. But I want to emphasize before we go on, and I'll try to restrain myself because we could talk about this forever, I could rant about this forever, but I just want to put it on the record before we move on: it is not possible to govern a large, modern, wealthy democracy without industrial policy. It's not really a choice about whether to do it. You always are doing it and we always have been doing it. And so you see that because it couldn't speak its name in public, because you can't do it above board, because we're all sort of pretending that we're not doing it,
it gets shoved into the background and shoved way deep into the tax code where no one notices it. Right? And consequently, it's like often very crappy, often ineffective, and often serves the interests of oligarchs — you know what I mean? But it's there, it exists. We're doing industrial policies. So I think it's just like absolutely salutary, absolutely healthy that we're now being honest about the fact that we're doing it and talking publicly about what we want to do with it. It's just the illusion — like any industry that a country really cares about, right? Look at defense, look at energy.
There's no laissez-faire, there's no market deciding in energy. You're not going to let markets decide whether people have energy or not. Right? So it always happens when you care about an industry, there was just this weird orthodoxy, like we're all supposed to pretend that we're free marketeers. So I just think it's good that we're talking about this. Anyway, I'll leave it there. So the next thing I want to talk about is sort of, you know, industrial policy as you've defined it, is very broad, could include a lot of different things. So let's just talk briefly about what Biden's looks like.
And we should say, and I should say upfront, that there's what Dems might have wanted to have done, right, what they might have wanted to do industrial policy wise, and then there's what they were capable of pulling off. So I think it's good to keep those two distinct. But what are the sort of characteristics of Biden's industrial policy.
Todd Tucker
Yeah, absolutely. You know, we can get more, if you're interested in it, the sort of the prehistory of how Biden came to even sort of be moving in this direction if you want. But I mean, let's define a little bit about what Biden is doing. So if you go back to 2020, middle of 2020, there was a series of Build Back Better plans that were put out and Made in America plans. And there were a whole bunch — kind of like Elizabeth Warren. There was a lot of plans that started coming out at a given point, and it was a very heavy dose of industrial policy.
They weren't necessarily calling it that at the time, using that phrase. And still sometimes they like to use "industrial strategy" rather than "industrial policy," which is fine, whatever. But I think it's important to note they were not talking about an industrial strategy for absolutely everything in the economy, right? It was a fairly narrow subset of industries, what economists would call upstream industries, right? It's kind of the — you mentioned energy. But it's like the things that the rest of the economy kind of relies on. And that's the focus of Biden's industrial policy. That's the focus of a lot of countries successful industrial policies, which is focusing on those things that are inputs into almost everything else that is produced in the economy.
So that is clean energy, that is semiconductors, that is some sectors like steel, that are used in a bunch of things, right? That is really where they are focusing their energy. And they're doing it with a handful of tools. They're not using the entire toolkit that's ever been used domestically or internationally. They're using a sort of certain subset of tools. You mentioned the tax code. A lot of this is going through the tax code. A lot of this is going through the forms of tax credits.
David Roberts
And I should just say, to repeat myself, this is because of the friggin filibuster. You can't pass normal bills anymore. So everything goes through reconciliation, which means everything goes through the tax code.
Todd Tucker
Reconciliation forces know weird design choices in policy, right, at least. But I think, you know, looking at climate specific policy, there's also other factors, right. Like the Supreme Court being what it is, the Senate being what it is. Right. You can imagine a variety of different ways of tackling decarbonization, including things like carbon taxes, including things like regulation. But we've had a difficult time getting those through our institutions. So on some level you're kind of left with industrial policy almost by default, even if you don't love the idea, right? Because it really is the thing, it is the tool that you can use to make progress quickly at the size and scale that we need for the climate transition.
So that's kind of the "why" they've settled on industrial policy. Again, if you would have asked me a few years ago is the US going to do a big industrial policy push, I would have said "you're crazy." I think that we were thinking at Roosevelt that this might be something that gets taken up in 2030 or something. Right. But then basically Covid and the climate crisis and a bunch of things sped up the conversation.
David Roberts
It was a lurch. It's continually surprising to me just how quickly industrial policy went from verboten to kind of like everybody's thing.
Todd Tucker
That's right. That's right. So a couple of different tools that they're using. You know, tax credits. Which are not — I agree with you, there's a long history of the US trying to hide the ball through the tax code when it comes to things. But I would say that the tax credits that the administration are doing are different and a little interesting in that there's a lot of different conditions and incentives that are placed sort of embedded within them. Some folks call it the layer cake of IRA subsidies, right?
David Roberts
Yes, we're going to touch on that later.
Todd Tucker
Yeah. The 30% production tax credit or investment tax credit, if you just make the thing that we want you to make, whether that's green hydrogen or clean manufacturing. And then you can get additional subsidies if you pay your workers prevailing wages, if you use domestic content, if you invest in poor communities. Right. There's kind of all these ways that you could actually end up getting, depending on the project, potentially up to 70% of the project paid for.
David Roberts
If you can't do just rules and regulations, you end up trying to accomplish everything through the tax code. Right. I mean, that's kind of what that's about. There's no other way to do that stuff. So you have to find some way of attaching it to money.
Todd Tucker
Yeah. And it's an interesting balance. Right. Because we can maybe talk about this more. But one way of doing this would be to require that companies do all this stuff to get any money. And then there's kind of a more market-friendly way of doing it, sort of an in-between way of doing it, which sort of says, "Okay, you, company, decide whether you want 30% or whether you want 70%. If you want 70%, we're going to ask more of you, but otherwise, you can get the 30%. So you figure out if the economics works and then come back to us with a plan."
Right. So that's the tax credit part of it. That's a similar sort of structure for both IRA and for CHIPS, the semiconductor law. And then there's sort of a second pot of money — I know you had Jigar Shah on recently that he's in charge of managing — which is the grants and loans out of the Loan Programs Office. And CHIPS' office has a similar structure. Right. And again, it's sort of not the corporate welfare that one might imagine when you hear about the government writing checks to companies, because there's this competitive process where companies have to kind of come up with a pretty serious proposal on community engagement, on labor engagement, on a lot of different things if they want to get the maximum number of points that they could potentially get.
David Roberts
Yeah, I should just put this out there — and Jigar would yell at me if I don't — it's just like the process of applying for LPO, for Loan Programs Office loans, is incredibly rigorous. It's like more rigorous than it is to get VC money or any other kind of money. Like, it's incredibly difficult to get through that gauntlet.
Todd Tucker
Yeah. And yet companies are lining up out the door to apply for the money, more grants than they can process.
David Roberts
And you also — we can touch on this later, too — but they're talking about setting up a green bank. I think that's going forward, and that would sort of fall in that second bucket similarly, yes?
Todd Tucker
That's right, yeah. So the EPA (Environmental Protection Agency) will have a greenhouse gas reduction fund that will be sort of the nation's first, effectively, green bank that would then sort of pass through projects at the state and local level, and tribal governments and others can apply for that money. And then there's a lot of state green banks that are already kind of in existence that will be tapping into that money to do projects. And so basically, now we're a year, almost two years since these big legislations were passed, and we're starting to sort of see the initial big announcements made about which projects are getting the money.
So that's starting to happen on an almost weekly basis.
David Roberts
Yeah, the green bank is just kind of in the process of getting stood up. I mean, one of the many reasons I would like Trump not to win, is that I want to see what this green bank looks like. I'm very excited for it to get going and get operating because there's a lot of really successful — I mean, you talk about, like, can industrial policy work? There's a lot of great success stories out of those state green banks. I mean, it's a proven model.
Todd Tucker
That's right. And then just finally to round it out, I mean, there's a whole range of other tools, both demand and supply side tools the government's using to promote the industries it wants to promote, using things like the Buy Clean Initiative, which is a procurement program. There's tariff and trade tools. So there's a wide range of other tools that are being deployed kind of in support of that core strategy of tax credits and grants and loans.
David Roberts
Right. Okay, so that's Biden's industrial policy. Let's go through, by way of kind of hashing it over and discussing it a little bit. You list four objections to it, and I kind of want to walk through them one at a time just because I think it'll help give more shape to that policy and help us address some of people's questions. So objection number one is, I guess, the simplest, which is just the very conventional economic objection that industrial policy doesn't work, that government is bad at picking winners, and that government ends up, inevitably ends up captured by the industries it is trying to encourage and thus does wasteful spending.
You know, conventional, "the whole thing doesn't work." And that's mostly, I think, a conservative line. Although I think if you are a lefty, you could look at the unholy nightmare that is the military industrial complex in this country and kind of find some sympathy with that critique. Like government — it's nice that government could do good things, but in practice, they're just going to be in hock to big defense developers and big money, and they're not going to do good things. So it'd be better if they didn't try. So this is too big an objection to cover in one podcast, probably much less one small part of a podcast.
But what's the sort of response to that, which I'm sure is the first thing you run into when you talk about this, when you set up this program, et cetera, just like, "oh, that industrial policy that doesn't work."
Todd Tucker
Yeah, that's right. And I think you're right to also note that there's kind of right-leaning versions of this critique and there's left-leaning versions as well. And they kind of end up converging in kind of an interesting way. But there's kind of two aspects, I would say, to the more libertarian conservative critique of industrial policy. One is basically a critique that government lacks enough information to be able to do the complex planning exercises. So that's often associated with Friedrich Hayek and other libertarian economists.
David Roberts
Very classic old school economists.
Todd Tucker
Exactly. So that's the information problem, which is government's never going to know as much as a bunch of dispersed market actors kind of on their own can put together. And basically, the price mechanism that all of those market actors end up sort of calling into being is sort of the perfect distillation of all the information anybody would need to know about anything. And government's never going to be able to replicate.
David Roberts
The hive mind finds the true price of things.
Todd Tucker
That's right. And sort of the second version of that argument, which is sometimes associated with the public choice school of economics or of social science generally, is basically to sort of analogize government to private actors and sort of say in the same way that Adam Smith and neoclassical economists tell us that homo economicus is this interest maximizing tool — orientation for humans to have. Government's the same. So government is out for its own bottom line, essentially. And so if you put government in the room with industry, they will try to be very transactional and get money for themselves through either more or less severe examples of corruption.
So basically, either way you look at this, whether it's the information problem or sort of the public choice and corruption problem, industrial policy is essentially impossible.
David Roberts
Right. Conceptually. Which is hilarious to me that I just feel like if you're an economic tradition that concludes that industrial policy is impossible, you're left explaining, you know, centuries of industrial policy.
Todd Tucker
That's right. You know, from the rise of China to the rise of the US, I mean, there's a lot that you have to black box.
David Roberts
Right. It was all an illusion or things would have been even better if they hadn't tried industrial policy. Right. I mean, you end up kind of forcing yourself into some weird arguments.
Todd Tucker
That's right. And that's often you sort of see that libertarian argument. Right. Which is that "we don't know whether libertarianism will work because it's never been fully tried." Right. As long as there's some residual government, we haven't really been running a libertarian experiment. Right. So that's kind of the more right-wing version of it. But I will say, since the '70s, I think one of the characteristics of liberalism in the United States, but also abroad, is that certain segments of the left got very skeptical that the government could ever be anything other than a junior partner to business, you know, and that if it tried to get too close to business, it would inevitably be captured.
So some of the work by historians like Gary Gerstle or Paul Sabin, that sort of look at what we call the Nader tradition — the Ralph Nader tradition in the United States — definitely had its own version of deregulation and skepticism about the viability of industrial policy. So, you know, whether it's the more libertarian or the more sort of Naderite flavor, you know, it ends up kind of pointing in the same direction, which is the state should probably be trying to do less in a lot of ways when it comes to industry.
David Roberts
Right. So we obviously can't thoroughly answer those objections here. But what's sort of the capsule response to the information problem?
Todd Tucker
Well, I mean, government collects a lot of information. In fact, some would argue that, I know you had Sabeel Rahman on, and part of his job was managing the paperwork flow in government. Government has the capacity to actually know quite a lot, and there's ways that it does that every day through the regulatory process. There's ways that we've done it in the past by using things like the Defense Production Act to get a lot of information about things that are happening in the economy. So in a way, if you're looking at solving really complex informational problems, the government's probably the entity in society that's best well situated to try to resolve some of those problems.
And I think that it just also counsels, in its extreme form, the information argument really counsels for there being no government at all.
David Roberts
I know. And for trusting whatever the market does almost like a friggin deity, like it must know best. What can we say? What can you do?
Todd Tucker
Yeah, I think there's an absence of a limiting principle to that argument that I think kind of just makes it fairly weak.
David Roberts
One thing I feel like is underappreciated is that you don't always need perfect information, that lots of times kind of a blunt force move in one direction can get you — you can move in the right direction even if you're slightly off on your target. As long as you're sort of responsive to feedback and willing to tweak along the way, you don't always need perfect information.
Todd Tucker
That's right. Part of the answer to the Hayekian information problem is that there's this thing called market failures. That are very acceptable within the mainstream of economics. Right. There are reasons — there are instances where private actors, left to their own devices, are either going to produce too much of something we don't want or produce too little of something we do want. So this is called negative externalities or positive externalities, right. Where I think environmentalist and climate folks are very comfortable and familiar with the idea of the negative externality, because that's the fossil fuel industry writ large.
Right. The firms that produce in that sector are not internalizing the social cost of their production in the form of emissions, so therefore government should tax it.
David Roberts
Right. And one other thing to say here is that it might be true that markets collectively have all the kind of proximate short term information, but I don't see any reason to think that the market, either individuals within it or collectively, are going to be necessarily cognizant of 30 year problems or 50 year problems — of things like climate change. You know what I mean? There's knowledge and there's knowledge.
Todd Tucker
That's right. Yeah. Markets are going to be pretty faulty when it comes to intergenerational equity questions. And I think that that gets to sort of the second question here on is it impossible for the state to do this in a non corrupt way, right? I don't know, has anybody read any of the stories about WeWork or the crypto industry? There's a lot of selfishness out there, and it strikes me that the vast majority of it, and the most quantitatively important part of it is coming from the private sector. So if you're worried about short termism or corruption, it seems like there's a lot of that in the private sector.
And I think there's a lot of pretty good civil servants out there.
David Roberts
And there are governments that work well. Like, we can point at them like they are possible.
Todd Tucker
That's right. Good government is possible. And so if you accept that good government is possible, then industrial policy could be possible, too.
David Roberts
Right? Okay, so we've justified the existence of industrial policy. Let's move on to some more specific charges that get levied at Biden's industrial policy. The next one is — and I'm really interested in your response to this — the next one is what you want from industrial policy is cheap inputs, basically to encourage particular industries, and you should be agnostic about where the inputs come from, basically. There's a kind of critique that says you should do an industrial policy, but the supply chain stuff, the insisting that the mining and manufacturing and assembly take place here rather than there, in America rather than in China, is in some sense extraneous to what ought to be the goal of industrial policy.
So I'm curious, what's your take on that?
Todd Tucker
Yeah, it's a thorny question for sure, and I think that there's a lack of a pithy answer that I have, but I'll give it a try. What is the climate crisis challenge? It is a global problem, yes. And it's not going to be resolved by any one country acting on its own. At the same time, the unit of analysis that is doing the policy change is at the nation-state level. And so the climate transition has to be acceptable to nation-states and to polities within those nation-states, to the people. Right. And we know from all the science and literature on energy transitions is that these things are extremely disruptive.
Right. When some industries are being phased out, others are being phased in, there's a lot of distributional impacts that happen when that takes place. And if you don't manage the politics of this stuff well, then you risk political blowback and then whatever climate tool you thought you were using ends up getting repealed by the next government. Right. And that becomes something for the opposition party in whatever country it is to rally around.
David Roberts
Right. So it's essentially a political argument for doing that side of things then.
Todd Tucker
A strong part of it is about managing political coalitions, but then another part of it is about resilience. Right. Like we sort of saw from the COVID crisis, what happens when governments aren't planning to have available supplies from sources they can trust, right, at key moments. So that doesn't mean that you have to onshore or reshore absolutely all production. And in fact, I think that when you look at sectors like solar or whatever, for the foreseeable future, we're going to continue to have China dominating those supply chains.
David Roberts
Yeah. There's no prospect of us taking the whole thing from them.
Todd Tucker
But maybe we could get to 5% of the market, maybe 10%, maybe with allies 20%, right? That there would be some reserve capacity there that would be sort of resilient to geopolitical or economic shocks of different kinds.
David Roberts
Right. So if you're going to do industrial policy, you need to bring the domestic audience along, which means you need to let them enjoy some of the manufacturing benefits and some of the supply chain benefits and not just the cheap goods that result. And there's a foreign policy, sort of like, resilience against having your industrial policy get sandbagged by hostile nations, as we saw earlier this year. Related, sort of related objection is what you're hearing from Europe, which is that a lot of these rules the US is passing amount to protectionism. Is there a principled distinction between industrial policy and protectionism?
Is protectionism just like a negatively freighted word used to describe the same thing, or how do you think about that relationship?
Todd Tucker
Well, yeah, you've jumped on a particular bugbear of mine on the trade debate, which is that when you're talking to trade lawyers and trade economists, everything under the sun gets refracted through what it does or doesn't do for trade, right? So you either have tariff barriers or you have what's called non-tariff barriers. And it turns out that non-tariff barriers mean all government policy, whether that's consumer protection, labor rights —
David Roberts
Right. Everything is in some sense industrial policy, which means everything is in some sense protectionism, if you sort of interpret it broadly enough, like you're affecting imports and exports, you're affecting trade, almost anything, you do.
Todd Tucker
And so China and Europe, definitely after the IRA was passed, complained about it. But I mean, it's important to note that part of the reason the US is doing industrial policy is just to catch up with what those countries are already doing. Europe has a long history of industrial policy. In fact, the leading institution in Germany, the KfW, that funds a lot of green energy and green transition stuff over there, was an export of ours from the Marshall plan where we set up a basically FDR New-Deal-style bank in Germany that's been operating all these years, even long after we got rid of our own.
So Europe was far ahead of the US on a lot of this stuff. China was definitely far ahead of the US with its Made in China 2025 plan. And going back even further, various iterations of industrial policy to try to maximize their own market share in a lot of rising industries. So the US is really just kind of playing catch up. You know, a lot of European and Asian firms are among those benefiting from the Loans Program Office and other tax credits. So this isn't a trade war, right. There's a lot of opening here for everybody. And I think that's kind of where this difference between sort of the positive externality versus negative externality gets us, which is that when it comes to clean energy, the problem is there's nowhere near enough of it, right.
Like, we want a lot more of it. Trade rules tend to be more interesting and useful, like when you have too much of something on markets, right. And you're basically like, "China's producing too much steel and it's getting in the way of our steel." So let's have some kind of trade resolution. You know, as Brian Deese is fond of saying, there's enough room here for everybody that wants to get in these sectors. And we're very far from a saturation point. So that's where tools like subsidies become super useful.
David Roberts
Every question I ask you today could be a whole pod. But are you worried at all that the World Bank and this sort of international trade structure we've set up, which is very much premised on the idea that sort of protectionism is de facto a bad thing and illegal under some international regimes, is that a threat to Biden's industrial policy, that international regime?
Todd Tucker
I don't think so, for a few reasons. I mean, one is that the US, despite, again, sometimes what they say, the US has been quite frustrated with the World Trade Organization since, almost since going back to when it went into effect in 1995.
David Roberts
It seems like everybody's kind of frustrated with it at some point or another.
Todd Tucker
Yeah, the Battle in Seattle happened in your hometown, right, in '99. And increasingly what was happening is that members of both political parties were really frustrated with the direction that the agency was taking. And so what happened is during the Obama years, you started basically having kind of a form of what might call today "quiet quitting" at the WTO, where basically the US was refusing to sort of, they were blocking the addition of additional judges to be on the top court there. And then that got continued under Trump and then got continued under Biden. So right now, the institution still, you know, does a lot of stuff in Geneva.
They put out a lot of reports. They have a bunch of meetings. But in terms of, you know, it's no longer the Supreme Court of world trade the way it was for a lot of the neoliberal era.
David Roberts
Interesting.
Todd Tucker
So I don't think, you know, does Biden have a foreign policy problem that he needs to spend more time on? Yes, absolutely. But I think that the trade architecture per se is not going to be the place where a lot of those questions get resolved. It'll kind of just be resolved through good old-fashioned diplomacy and cooperation and other ways.
David Roberts
Got it. Okay. Third, moving on to the third objection to Biden's industrial policy, which in this one, I think, more or less comes from the left. I think the left critique says "we are trying through all sorts of baroque and indirect methods to induce or beg or lead the private sector into investing enough into this stuff, and that is just not going to work. And basically, we should be using public money and this whole thing should be much more government-led and less private sector-led." And in this capacity, I want to cite Brett Christopher's book, which maybe you've heard of?
Todd Tucker
Yup.
David Roberts
Yeah. Which basically says the profits coming out of clean energy are not going — they do not match the profits that come out of fossil fuels and never will. And ergo, you're never going to get the private sector to lead this thing on its own. And we should shift the whole focus much more to public money and the public sector. What do you make of that?
Todd Tucker
Well, I mean, so the empirical argument is that firms aren't going to do this. I mean, I think we have some counter evidence, right, of the last few years, which is all of the — we're seeing more manufacturing construction than we've seen since the records have been kept.
David Roberts
Yeah, but also some counter-counter evidence. Right. Like we've seen offshore wind pulling out of things and we've seen maybe EVs not going as fast as we want, or just like you ultimately can't control the private sector in too fine-grained a way, it's going to do what it's going to do.
Todd Tucker
So, I agree with a lot of that. So I will sort of allow that that's a very important part of the conversation. But I think that, again, sort of the counter evidence is that we've had a 40% increase since CHIPS and IRA of clean energy investment. There's more manufacturing construction happening at any point in recent history.
David Roberts
It's wild. Hundreds of billions of dollars flooding.
Todd Tucker
It's huge. I mean, it's really unprecedented. I mean, you do have to go back to the Eisenhower or Roosevelt years to find anything on this scale. And so there is clearly a lot of private market appetite for this. And I think that there's a lot of people out there that think that they will be making profits on some of this. And that's kind of why I think a lot of this investment is happening. But I will say, I think there's something really to the argument that Biden is too reliant on the private sector in terms of the strategy that they're taking.
And I think that you mentioned sort of the case A of that. Right. Which is what's been happening, disappointing results in offshore wind; which is that we sort of trusted this company — which let's bracket for a minute, that it is actually majority owned by a government, Ørsted is majority owned by the Danish government — but setting that aside, we basically trusted this company to kind of make its own projections, write its own contracts, right, do all these things. And then at the end of the day, they didn't have inflation adjustment in their contracts.
David Roberts
Well, and we jacked up interest rates, too.
Todd Tucker
We jacked up interest rates. There was, like, supply chain problems they hadn't planned for. Right. And so in that moment, instead of these projects being canceled, what we could have had with a more robust public sector role is a public bank of some kind, right. Like a Federal Reserve for industry. They could have stepped in with low or no interest financing and made the math work. Right. And we could have used that same agency to make sure that the steel that you needed or the turbines that you needed were directed to you rather than to some crypto farm.
Right. You could have done stuff like that. And it is because we've relied so much on the private sector. And granted, I mean, we're giving them really generous subsidies, but in some cases, because of the economics of it, or because of competence issues, or because of short sightedness or whatever thing might be plaguing any particular project, we're sort of at the mercy of these private actors.
David Roberts
What Brian Deese would say, what he has said publicly is, if you look at, you know, because we just had a couple of reports come out sort of assessing what's happened since this legislation. And what it shows is that roughly there have been, I think it's six dollars from the private sector invested for every dollar of government money spent. So if you listen to Brian Deese, that just shows, like, our public money is leveraging private money. And I think the sort of counter to this argument that we're discussing would just be like, it's just not practically or politically or economically possible for governments to cough up all of that money.
The only pool of capital big enough is the private sector.
Todd Tucker
Yeah, I mean, I'm not an austerity-minded person, but, I mean, if you tell me that some policy we're going to do is going to free up five or six times that amount of resources, and I can spend federal resources in other directions on social services or something, that's pretty appealing. It might be hard to turn that down. But yes, I think that there is going to be a private sector role, and I think that you have to look at what is the right counterfactual. I mean, in the US, we have a largely privately owned energy facility.
We're not starting — the starting point is not sort of some, you know, totally publicly owned and accountable energy structure. It's something with a lot of private action. And I think that if you look at the sum total of IRA and the other Biden laws, it's going to start to move the direction towards more public ownership through things like direct pay, which allows entities that don't otherwise owe federal tax to get a direct check from the government. So this is going to make it possible for nonprofits and local governments to actually do more energy production directly themselves.
David Roberts
Okay, fourth objection. The fourth objection was well captured by Ezra Klein as the accusation that Biden, and Biden encouraged by the left, is indulging in "everything bagel liberalism." I.e., we want to boost clean energy, right? And in the instruments we're using to boost clean energy, we're also attaching all these conditions. You have to do it this way, not this way. You have to hire the right kind of people, the right kind of workforce. You have to draw your inputs from the right places. You have to invest in the right types of communities, basically like larding onto our industrial policy all these other goals, all these other social goals, any one of which might be laudable on its own.
But if you end up trying to squeeze them all into industrial policy, you're just going to end up with an ineffective industrial policy. This is a common critique. There's a whole sort of faction of the left now that's come around to this kind of critique. Now, what do you make of that?
Todd Tucker
Well, I think this gets at some of what we said earlier in the conversation, which is, is the purpose of industrial policy to maximize a given widget, or is it to do economic development right for the country as a whole? And I think the theory behind Bidenomics is that these energy transitions are incredibly disruptive. And we're a fossil fuel economy, unlike some of our partners in Europe. So if you're not attentive to some of these distributional trade-offs and have plans in place to deal with them, even if the only thing you care about is the widget maximization of a given factory, even if that's your only thing in life that gets you up in the morning, the longevity of that enterprise is imperiled if you don't have a political strategy and sort of a transition strategy in place.
And so that's where you end up having a lot of these things like labor requirements, like supply chain requirements or incentives. And I think, again, it's notable that despite the apparent length of the number of different conditions or considerations that are being put in place. As we've said several times now, companies are lining up to apply for this stuff. And so there's a lot of takeup that's out there. And I think if you look at some of the things that government is asking companies and applicants to think about, it's going to look pretty close to the things your C suite and your board would be asking you about anyway, which is, do you have an HR department?
Are you legally allowed to operate in the place where you're trying to do business? What are the HR benefits, right? I mean, it's the kinds of things a smart board would be asking anyway of these investments. And I think you got to think about it kind of from the governance perspective here. If government spending and using public dollars ended up producing a semiconductor factory that was paying substandard wages and was like a sweatshop condition, how long do you think that program would exist? Everybody from Bernie Sanders to Donald Trump to Ted Cruz would be campaigning for president on getting rid of those government sweatshop factories, right?
So I think for the success, again, just purely for the success of the widget maximization, you want to have this be politically sustainable and seen and admired. And I think that, again, sort of, that is the theory here, is that a lot of this money — in the United States, we have this big problem that one of the two major political parties denies that climate change is a problem, right? So how does the US regain international credibility on climate? Well, it does so by putting a lot of jobs and money into every congressional district in the country.
So that even if Marjorie Taylor Greene doesn't agree that climate change is a problem, the solar panel workers in her district want her to keep the subsidies going. I think that, again, this is not just a microeconomic utility maximization kind of challenge. This is, in fact, a broader kind of developmental challenge.
David Roberts
So do you see any force to that critique? Like, does it worry you at all how much is getting put on the bagel?
Todd Tucker
It's sometimes a kind of difficult to parse argument because it's sort of saying that as a political or a messaging strategy, government should be ex-ante broadcasting the fact that it understands that parts of its coalition are demanding different things. Right. And I think that until it's clear that a given factor is the factor that's holding up a lot of projects, I think — you know, I haven't seen that the Biden administration is unwilling to make concessions or sort of change its strategy when something's not working. You know, I look most closely — or one example of this is in the solar panel trade space, right, where Biden did something that was really unprecedented and very unpopular with manufacturing unions, which is sort of, even before the Department of Commerce ruled on whether there was unfair trade, they just said "for the next two years, we're suspending collection of tariffs no matter what the Department of Commerce decides."
And so that was very unprecedented. That was very much upsetting the everything bagel coalitional dynamic. Right. But they did it because they have solar deployment goals and they want to meet those. So I think the bigger risk, and Dave Dayen and other people have written about this, is that when it comes to these hard choices, if every time we're making a trade-off, it's against supporting good union jobs in the United States, through, you know, making concessions on the supply chain requirements or what have you, that is dangerous. That's dangerous politically. It's also dangerous — it's not good equity wise for helping those workers.
So I think we have to — trade-offs will emerge and they will be tackled, and hopefully it won't always be on the backs of the working class I would say.
David Roberts
Yeah, by way of summarizing this before you move on, I guess my reaction is just the idea that you have to do a lot of this stuff to keep your coalition together and to make the industrial policy accepted by the polity makes total sense to me. You hear a lot of this around the permitting debate, too. Like, you have to do some amount of community involvement up front, or else it just takes longer later. And it's sort of kind of a parallel argument here, which is like, you have to do some things to make your coalition happy or else all your policy is going to get thrown out.
I get that argument on an abstract level. It's just the one thing that bothers me is just like, I feel like we're flopping around in an absence of good research or empirical data about how much, right — like, what is the balance between speed and these sort of coalitional concessions? I feel like we're just throwing a dart into the dark trying to hit the right mark. I mean, maybe Biden's doing too much of it, maybe too little. But how do you even know? And what's the counterfactual? It's such a fog.
Todd Tucker
No, it's a very foggy argument. I mean, I think that some of the best social science on this looks at things like one of the major factors in whether projects go quickly or slowly is government capacity. Right? So in states and counties that invest more in government capacity, they end up processing all this stuff a lot quicker and you can get things out the door. After the New Deal kind of imploded, we devolved a lot of industrial policy expertise and capacity to the state level. And some states do really well and other states do pretty poorly.
But California, for all of its reputation as a regulatory behemoth, doesn't have the same kinds of economic development agencies that South Carolina does. Right. So there are looks and differences in capacity, and it doesn't always end up shaking out the way you would think.
David Roberts
Right. I think one thing we could certainly agree on is if you're going to do your industrial policy as an everything bagel, i.e., if you're going to pursue multiple goals at once, you need to attend that with investment in government capacity.
Todd Tucker
Yeah, absolutely. And I think that is a lot of the unfinished business, frankly, which is, there were proposals, for instance, the House of Representatives version of the Chips and Science Act, that would have dramatically expanded government with the number of full-time employees whose job it was to think about supply chain challenges, right?
David Roberts
So simple.
Todd Tucker
And that didn't make it through. So there's definitely some unfinished business.
David Roberts
I know the political system does not sufficiently respect government capacity and state capacity, as is my lonely quest over here in my little corner of the world to try to get people to pay attention to that. Okay, so those are some of the objections that have been flying around. And then I guess you could say that the Roosevelt package of essays amounts to a critique of its own of Biden's industrial policy, which I think you could sort of summarize as: it is using an unnecessarily narrow slice of the tools available to do this kind of thing. Is that fair?
I mean, it's a very diverse set of essays, but I think that's kind of the theme is like, there are lots more tools on the table here that he could be using.
Todd Tucker
Yeah, there's tools that were on the cutting room floor of Build Back Better. There's stuff that our trading partners do already that we could be learning from. I think that — look, I mean, I don't want to minimize the impressive successes of the policies that have happened so far. Like we said, there's nothing on record as impressive in terms of the manufacturing construction.
David Roberts
With a 50 vote. Yeah, 50 votes in the friggin' Senate. I mean, not to harp on this again, it's a friggin' miracle that any of it happened.
Todd Tucker
It's a complete miracle. And I think that if you and I rewound the clock to the summer of 2022, when it sort of seems like absolutely nothing was going to happen. Roosevelt we were doing papers — which is actually not irrelevant to the question you just asked — but we were doing papers like, what is the maximal thing that the government can do if there's no legislation at all. Right? And so we were looking at things like the Defense Production Act and climate emergencies and all sorts of other things that would have been interesting tools, because that was like how sure we were or how suspicious we were that there might not be any bill at all.
Right? So I think it's very impressive what they've been able to do and the results of the historic results of the midterm election and the fact that McCarthy and the Republicans came in saying that their number one goal was to gut IRA and roll it back, and then they weren't able to do it. I mean, those are clear indications of some policy and political success there.
David Roberts
Yeah. So one of the kind of critiques or suggestions that I want to spend a minute or two on is about sort of public financial institutions. We mentioned this a little bit earlier. So Biden has the LPO, the Loan Programs Office, which has been absolutely revived from almost nothing to now just like billions and billions of dollars flying out the door. And then he's setting up this green bank, this big fund that will, I think, mostly be sending out money to state green banks, but also, I think, directly funding some projects. So there are some public financing tools on the table.
But my sense from the essay is that something grander than that is possible. Like, what do you imagine in terms of public financial institutions?
Todd Tucker
Yeah. So if you look back to the New Deal, which of course, contractually, at the Roosevelt Institute, we're obligated to do in absolutely everything. So, I've got to get my FDR mention in there. The way that the New Deal and the World War II economic mobilization and conversion worked as well as they did was because there was an entity called the Reconstruction Finance Corporation that was set up in '32, greatly expanded over the coming years, and it was a public bank. It had the ability to stand up a bunch of different subsidiaries, to develop expertise on different industries, whether that was rubber or whether that was metals, different things.
Different subsidiaries could be stood up or stood down to fund production of things that we thought were important to make more of or to convert factories that were making cars to making weapons, right. So all of that takes money. And the Reconstruction Finance Corporation was the place where that money came out and talk about everything bagel critique: they used that power to make sure that unions were being recognized in facilities and that workers were being paid well. And they used the full power of the government really to make sure that that money was being used towards the best and highest public use.
And so, that was how we did those things. That was like how we financed it, how we governed those things was through that financial toolkit, publicly available, publicly accountable — you know you're saved from the imperative of making a profit, necessarily, which makes you able to take on more risk and do riskier things.
David Roberts
Yes. Yeah, because we should just say, I'm not telling you anything you don't know. But just to put it plainly, a lot of the problem here and a lot of the critique of the Brett Christopher's book and of similar books is just that what's needed here is some patient capital that's willing to wait a while and that's willing to accept lower than whatever the sort of market standard returns. Right. We need patient, modest — with modest expectations capital. And really the only place to find that kind of capital is public money.
Todd Tucker
That's right. And I mean, in some industries, and at some moments in history, for given industries, you need things like very much the startup part of the capital, and then in other more mature industries, sometimes you just have a project that, for whatever reason, isn't appealing to Wall Street. Right. So having that public capacity and public financing is like a really good thing. It was the thing that made us do the best industrial policy we've ever done, which is from the '30s and '40s. That was how we did it. Was a Federal Reserve for industry type entity. It was so smart that we exported it to Europe through the Marshall Plan.
And now it turns out that some of the biggest financial players in the global economy are, in fact, publicly owned. The essay by Saule Omarova from Cornell Law School that we included in this collection, "Industrial Policy 2025: Bringing the State Back In (Again)," looks at Norway, which has a sovereign wealth fund that is the single largest shareholder on the planet and has the ability to shape the decisions of firms in all sorts of industries and all sorts of countries. This is not something like the Chinese economic model or something extreme like that. This is the kind of thing that our trading partners use to help them solve concrete industrial problems and concrete developmental problems.
David Roberts
Yeah, this is something I always think of when I hear about the devastating effect of high interest rates on these investments and the investments in offshore wind. I was like, well, if we really think this is a public priority, we could offer those wind companies public financing at a lower rate. We're not slaves to the market here. So I guess I'm wondering how serious of a proposal is this? How politically realistic is it to set up a public bank in the US? When I contemplate the possibility, I just imagine the finance sector, which is extremely powerful here for dumb reasons, absolutely just lighting on fire anybody who mentioned this. Do you see this as a realistic option?
Todd Tucker
Well, it's funny; I've talked to folks in the financial sector about some of these ideas for the last few years now, and some among them sort of say, "You are trying to put us out of business, aren't you, with this idea?" The interesting thing is a lot of them would love to work at a place like that, right? They actually think that could be a good thing if the public sector had more capacity in that respect.
David Roberts
Please put us out of business.
Todd Tucker
"I'd love to be paid what Federal Reserve economists are paid," which is not chump change, "but get to do something exciting and public minded." You know, there are some people that would like to see that. So look, is it serious? I mean, you know, one answer to that is we've done it before, so we could do it again if we wanted to. Right? That's kind of the simplest answer. But I think it's also that there are a number of different proposals that are out there in Congress, even that have bipartisan support.
David Roberts
Postal banking, right, is in that family.
Todd Tucker
But then there was a bill introduced by, I believe, Romney and Chris Coons, in the last Congress for an Industrial Finance Corporation, IFC. No coincidence that it's pretty close to RFC, right? An Industrial Finance Corporation that would fund a lot of these kinds of projects. There's bipartisan buy into this. And I think that kind of gets at one thing that's sort of interesting about how industrial policy is coded relative to some other issue areas, which is that if you're a Bernie Sanders or Elizabeth Warren type, you hear industrial policy and the emphasis goes on the policy, right.
That this is a government- and public-minded thing. I think for other folks, more centrist, more Republicans, they like the industrial part of it, right. Like the business side of it. And so I think that there are ways in which industrial policy not only can be painted, but truly is something that can help serve capitalism, right, and serve capitalists and be in their best interest because it's the government solving coordination problems or solving financing problems that any business needs to resolve in order to get up and get going. So I think that it's not as unrealistic as you would think.
David Roberts
Well, and you cite in some of the essays, like we have examples in recent history of industrial policy in other countries that very much served those countries' private sectors, China being the obvious example.
Todd Tucker
But also Europe. I mean, Europe has all these institutions that were making it a green energy, clean energy leader when the US was still on the sidelines. Right. So there's a lot of these institutions around the world and a lot more than you would think. And it gives me some confidence that the US could do what almost every other country and trading partner that we interact with is already doing.
David Roberts
Well, my friend Justin wants me to ask relatedly, you know, the Biden administration seems to have when it comes to the sort of real economy, right, stuff, manufacturing, embraced industrial policy pretty unabashedly. But when it comes to the aforementioned finance sector, which is problematic for a number of reasons, it seems gun-shy, you know, the SEC is in the midst of backing off. I think there was an effort to force companies to disclose their climate risk that I think they backed off on. It seems like they're not as vigorous in their industrial policy-mindedness when it comes to the finance sector as they are for other parts of the economy.
Does that ring true to you?
Todd Tucker
Yeah, I mean, I think that this is where industrial policy can be a wind-up or a wind-down tool. And I think that we're seeing a lot on the wind-up side, which is great. We're not seeing as much on the wind-down side when it comes to finance, fossil fuels, you name it, there are little hints of progress there. I think Biden's budget from last year that he sent to Congress had things like taxing crypto's energy use. There were some things like that that would be indications of where a second term could go and build some power.
But I think, you know, it's a bit of a sequencing thing as well. Right. Which is that if you read the Financial Times or the Wall Street Journal or international opinion pages, you'll often see that Biden's policy is all carrots and no sticks. Right. That's kind of the wrap on it. And what I would argue is that it's more a sequencing thing of carrots before sticks because it makes the math work better.
David Roberts
I feel like this is what climate policy learned over the last decade or two, right, basically. Because they tried to do it the other way around.
Todd Tucker
It's no coincidence that within weeks of the IRA passing, you had California bumping up its phase-out of internal combustion engines. You had ideas like the methane fee. You started seeing more serious discussion of carrots once it didn't seem like a death sentence to be asking corporations to do some of the things we were asking of them.
David Roberts
Here's a question that you're probably in no position to answer, but I don't think anybody else is either, so I might as well ask you: what do you think are the chances that industrial policy as executed by the Biden administration can change the politics of rural America? I think, you know, speaking of everything bagel, I think if you talk to administration officials, off the record, they will say, quite frankly, like, we're concerned about democracy falling apart and we're desperately trying to funnel money into these areas so they don't just go full fascist. You know what I mean? And I think that's not just America, too.
I think the leaders of lots of sort of industrialized democracies are kind of thinking like, we have a political problem on our hands, and industrial policy is one way to try to address it. Do you think it's an effective way of addressing rural politics or it's going to work?
Todd Tucker
Yeah, I mean, aren't farmers marching on Berlin as we speak? This is a huge thing where it's basically for 30, 40 years, countries have allowed their industrial and rural heartlands to be hollowed out with nothing to replace it, right. So no wonder that people's faith in government is as low as it is in many, many sectors. And that's before we even get to communities of color and distrust with the government for criminal justice and other reasons. So, yeah, there's a lot of — we haven't been doing a good job of giving people in western democracies a reason to like western democracies.
And so I think that by showing that government can solve problems and can help create jobs and can do so in red districts and blue districts, can do so in the US and in other countries, that is a play to try to shore up the resilience of democracy. Jake Sullivan, the national security advisor, gave a big speech at Brookings last year that got a lot of notice. And the throughline of that speech — I mean, there's a lot of different policy elements and ideas for international cooperation in a variety of ways — but the through line of it is we're going to build, and by showing we can build, we're going to restore democracy.
And it was a pretty audacious and bold argument.
David Roberts
It's audacious, it's a bold effort. But here we are, like two years out, and I'm waiting, waiting for politics to show some shift.
Todd Tucker
Well, and this is where I think that, yes, on a day to day basis, things can feel pretty dire, especially if you spend more time than you should on Twitter or X or wherever.
David Roberts
Who does that?
Todd Tucker
But look at the election outcomes. You know, the special election outcomes. I'm from Kentucky. Kentucky governor was reelected by running on clean energy stuff. There's been some encouraging signs, and it's not the usual thing you see when an incumbent party has midterm elections. Right. Like it's actually been really favorable by any kind of relevant historical standard. So I think that it's having some success.
I think also I was at a Third Way speech that Tim Ryan gave some time ago after his election loss at Ohio Senate. And he was saying, "We got pretty close with even just the idea that there might be some CHIPS, investments in Ohio, like we got within shooting distance." And Sherrod Brown in 2024 is going to have a lot better time because there's actually going to be people who are already employed at these places. I think that some of this is about the Democratic Party trying to have across the board, across the country political strategy.
Some of it's about giving climate goodies and jobs to red districts and red states so that they end up being better on climate. So the sum total of it, we'll know a lot more after the 2024 races as to whether it actually paid off.
David Roberts
It's so tense because all these investments are just getting there. A lot of these programs are just getting stood up. A lot of the rebates are just going out. It's just not quite going to be up and running as fully as you'd like it to be when this election happens. So if we could just get through the election, so much will happen in the four years after that. And I just feel much better about it. But I feel like it's like the election is happening too early in this process for me to feel comfortable about it.
Todd Tucker
Well, and if you don't, I think that the idea with giving all these goodies to different districts is that it makes it less likely the Republicans will repeal IRA. And I think that this is a ten year program, and so there's a lot of time still, and I don't think he's going to have a way to repeal it that doesn't get vetoed or that Congress is going to say something about. So I think, I feel reasonably confident that this policy regime will be in place in ways that, frankly, I don't for some other, you know — I think if there was a Republican trifecta, you would start to see rollbacks on some of, frankly, the more everything-bagel parts of the plan, right.
The environmental justice plans, those kind of things, I think are in more danger than the sort of core IRA subsidies.
David Roberts
Yeah, but just have to insert, there's big question marks there. Like could be that Palpatine decides to dissolve the Senate and take absolute power. Like, who knows what could happen.
Todd Tucker
There are a lot of uncertainties in 2024, for sure.
David Roberts
So, so many. All right, well, we need to wrap up. We've gone a little bit over. This has been fascinating. Like any one corner of this we could do, like I said, a whole episode on. But just, I guess by way of concluding, in the spirit of this essay collection, what would be your kind of two or three things that you would suggest to the Biden administration to supplement its industrial policy should it get a second term and a Congress capable of doing things which, as we just noted, is highly uncertain. But if they do, what would you put on their radar in terms of industrial policy?
Todd Tucker
I would say three things, and I'll give the three things that I feel like are closest in, in the Overton window sense that they might actually be able to be enacted. I already mentioned the idea of the National Development Bank. That is crucial. All of our trading partners have this as an institution. It would have solved the offshore wind problem. We wouldn't have had that problem. So it's good just on pure market economics terms, that is a reasonable institution to have one that was contemplated in certain versions of Build Back Better. So this is not a totally crazy idea and in fact, could be quite helpful.
I think the second thing is actually, it's a little adjacent to industrial policy, but really important, which is labor law reform. Like the PRO Act. Right.
David Roberts
Yes.
Todd Tucker
If you're worried that the CHIPS Program Office or Jigar Shah through their individual grant making, is not going to solve the problems of the working men and women of this country through every program that they have know grant that they have to approve, you're probably right. And so the answer to that, I think, is to make it so that it's not just the firms that are getting money from the government that have to respect unions, but that any firm operating in the United States has to respect unions, right? And so —
David Roberts
Would be real cool.
Todd Tucker
Intel may like unions, they may hate unions, but if they have to deal with one because their US production requires it, that would be a way to, I think, make the industrial policy proper part of this go smoother and go quicker is if you didn't have to also solve all of these dense social problems.
David Roberts
And plus Elon Musk's tears would be such sweet recompense.
Todd Tucker
That's right. And, you know, there are ways, and we have essays in the report that go through this, but there are ways to sort of pair what's called sectoral bargaining with industrial strategy, which would basically be like, "Okay, we don't need the electric vehicle companies worrying about whether one of them or another of them have a better deal with the workers and their facilities. Let's just have the same bulk floor and standards across all these firms." So, I think that would be a way to solve a bunch of problems at once. And then, I think the third thing, which we also get into in the collection, is thinking more about what the public is getting in return for the facilities and the factories that do really well.
Right. There's no reason that we couldn't replenish the coffers of all of these great programs that we're standing up by having the government share in on the upside, on the equity side from some of these investments. Again, that's not crazy. That's something a lot of our trading partners do. And it's smart on its own terms because it helps replenish those coffers. But then it also gives the government a little bit more steer, you know, because they'd be a board member essentially. Right. A lot of these companies, and that's what France does, that's what Germany does. That's a way, if you're worried about these companies sort of pocketing this money and just running away with it, a way to ensure that is to have a steady hand on the board that the public sector could represent.
So I think those would be sort of the top three ideas that I would put forward.
David Roberts
Oh, fantastic. Fantastic. Oh, to live in a world where those things happen. Well, thank you so much, Todd. This is absolutely fascinating stuff. And like I said, if we make it through this hell of a year, it will be so interesting to see this stuff unfold over the next four years. I mean, just from a political science point of view, never mind your basic nationalist American pride and all that, and climate and everything else, just learning how these things work and seeing how they work is just going to teach us a lot of fascinating stuff, I think.
Todd Tucker
That's right. Well, and I think that this is something I tell my students, it's like because the everything-bagelness of this means that no two projects are going to look alike. Some are going to use union, some aren't. Some are going to use supply chain, some aren't. We're going to have a lot of data to compare to kind of know what things are working, what things aren't, and we're going to have some interesting quasi natural experiments to study. So there's a lot of cool stuff that comes from the way this is structured, some of which can make you want to pull your hair out, but in other ways actually will make for really good research projects.
David Roberts
Awesome. All right, on that note, we'll wrap it up. Thanks so much, Todd.
Todd Tucker
Thank you.
David Roberts
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Industrial policy: what it is, how Biden's doing it, and how it could be done better