Recorded on March 22, 2023, this talk — “The Modern American Industrial Strategy: Building a Clean Energy Economy from the Bottom Up and Middle Out” — features Heather Boushey, a member of President Biden’s Council of Economic Advisers and Chief Economist to the Invest in America Cabinet.
Boushey is co-founder of the Washington Center for Equitable Growth, where she was President and CEO from 2013-2020. She previously served as chief economist for Secretary Clinton’s 2016 transition team and as an economist for the Center for American Progress, the Joint Economic Committee of the U.S. Congress, the Center for Economic and Policy Research, and the Economic Policy Institute. This talk was co-sponsored by the Berkeley Society and Economy Initiative (BESI), the Network for a New Political Economy (N2PE), the Stone Center on Wealth and Income Inequality, and Social Science Matrix.
The Biden-Harris Administration began at a time of intersecting crises, including the pandemic, rising inequality, stagnating economic growth, and the large and growing costs of climate change. The President, in partnership with Congress and state and local governments, took rapid action with policies that have spurred the strongest and most equitable economic and labor market recovery in modern history — including legislation to enhance the resilience of our supply chains, rebuild our physical infrastructure, and accelerate the transition to a clean energy economy. These historic measures, together forming the core of the Modern American Industrial Strategy, were designed with an understanding that strategic public investments are essential to achieving the full potential of our nation’s economy — one built from the bottom up and middle out, where the gains of economic growth are shared.
Heather Boushey, “Building a Clean Energy Economy from the Bottom Up and Middle Out”
[PAUL PIERSON] Good afternoon and welcome. I’m delighted to have people here today to hear this really important, interesting talk that we’re going to hear. I’m Paul Pierson. I’m the director of the Berkeley Economy and Society Initiative, which is cosponsoring this talk along with the Network for a New Political Economy and the Stone Center on Wealth and Income Inequality.
And before I introduce our speaker, just one quick note for those of you who are on Zoom. I wanted to remind you that you can submit questions through the Q&A feature on the Zoom site. And if you have any AV trouble and would like assistance, you can send a message in the chat function, and we’ll try to help you out.
So last night, a few hundred thousand people in the Bay Area lost power due to high winds. So maybe it’s a good day to hear about the clean energy economy and building infrastructure. But the winds of change on economic policy and thinking about the economy have been blowing hard in Washington.
And I can’t think of anybody better to talk about that with us than Heather Boushey, who’s been at the very center of this process for over a decade. Prior to joining President Biden’s Council of Economic Advisors, she served as the Chief Economist for the Clinton-Kaine transition team. And she was the co-founder and the longtime president of the Washington Center for Equitable Growth.
Dr. Boushey has long been a leading voice in stressing that family policy is economic policy and in developing and promoting the ideas that have brought much needed attention to the care economy. And, today, she’s going to talk to us about the clean energy economy. And, Heather, we couldn’t be happier to have you here with us. Thank you for coming.
[HEATHER BOUSHEY] Thank you. Thank you, Paul. Thank you for inviting me to be here today to come up and get to see your new matrix. This is all very exciting. And to be able to be with you, I couldn’t be happier to be able to join you today.
So a lot of times, people ask me, what it is that an economist working for the president does? So I thought I would just start by spending a couple, just like– I don’t know– a few sentences. I am one of the members of the Council of Economic Advisors. And now I’m also the Chief Economist for the president’s Invest in America subcabinet.
And we, the Council of Economic Advisors, we get up each and every day thinking about the economics behind the president’s agenda and how we can deliver on that agenda in a way that is good for the economy, how we can enact policies so that the economy actually delivers on the president’s goals. And the president has made clear, I feel like gazillions of times at this point, that his goal is to build an economy from the bottom up and middle out.
He wants an economy where growth is strong, sustainable, where gains are broadly shared, where the economy is stable, not just strong, where our industries are globally competitive, where we have a strong and vibrant middle class, where we run our economy on clean energy and we bring down carbon emissions, and where we move beyond longstanding inequities. And so we at the CEA, we help the president as he is thinking about the economics behind how we’re going to do this.
And so today’s conversation, what I want to spend the next little bit of time talking to you about is about the president’s economic blueprint to reach his goals– what motivated it, what it is, why we believe that the evidence shows us that will be effective, and what successes that we’re already seeing. So that’s my opening slide here.
So, also, just a warning, this is a new slide deck. So while I feel very comfortable with all the material, if I’m like, oh, wait, which slide is this, just please no judgments here. I did have a late delayed flight because of weather. So we are here to talk about climate, so all the things.
So I want to start with the fact that the president came into office at the time of both immediate and long-simmering crises. It’s something he talked about a lot on the campaign. And we had the immediate crisis of the global pandemic and the pandemic-related recession.
And then candidate Biden also saw deeper structural challenges. And there were four or five of them I want to go through. So the first is that we learned a lot during the pandemic about how brittle our supply chains were, something that I think many of us were not talking about prepandemic, but we all learned.
And one analyst estimated that during the COVID-19 pandemic, a global semiconductor shortage affected as many as 169 separate industries. And this is a chart that shows the prices related to the contribution of vehicle prices to year-on-year inflation between 2019 and 2023. In 2021, all vehicles contribute about a third of annual core CPI inflation. And, of course, semiconductors were a big part of that.
There are the things going on in used cars. But in terms of new vehicles, just wanted to connect the dots between the semiconductor crisis and prices people faced. And the US share of modern semiconductor manufacturing capacity has dropped about 25 percentage points since 1990. So we saw that a factory closure somewhere around the world could affect what US consumers could buy but, more importantly, what prices we were paying.
The second big challenge that we saw– and I think this also was shown during the pandemic, but we knew that it had been emerging– is greater market concentration and less overall economic competitiveness. According to one estimate, since late 1990s, over 75% of US industries have experienced an increase in concentration levels. This is something that I know economists have been especially focused on.
What is this rising concentration mean? And the president, of course, has been focused on this. We will get to that.
The third crisis, the third challenge that the president had identified as a candidate is, of course, the growing issue of climate damages. This is a chart of the number of billion-dollar natural disasters, which have become increasingly common. I mean, Paul, as you said, I don’t have to tell anyone in California, I’m guessing, just how challenging this is.
But we know that there’s been an increase in the number of billion-dollar disasters rising from around five annually to over 20 in the past 40 years. We just got a new report this week from the UN IPCC that the frequency of events is likely to continue. And we know that there’s enormous costs associated with this, both in terms of the immediate addressing the damages, but what this does to state and local budgets, the federal budget, and the like and what this does to insurance markets and all sorts of different challenges that families face.
And then the other challenge– and this is a chart that is near and dear to the president’s heart. Near and dear is a weird way to describe a chart, also a kind of grumpy chart. But I will say that one of the things– and I’ve worked with the president a little bit before this campaign and over the years.
And this chart, which I think of as the Economic Policy Institute special– so, Larry Mishel, if you’re watching, I did say that. But this chart shows the gap between productivity and wages over time. And what it shows is that in the post-World War II period leading up to the late 1990s when the economy grew, when productivity grew, workers saw their wages rise commensurate.
But then since then, productivity has been growing. And yet workers’ wages haven’t been rising in lockstep. And that means someone has been gaining, has been accruing the gains of economic growth. But that has not been going to workers.
There are so many slides that I could show you on rising inequality. We could talk about rising wealth concentration. We could talk about rising inequality, looking at debt styles. I know that Emmanuel Saez and Gabriel Zucman were here and all of that work looking at that.
We could talk about the decline in economic mobility. But I think this chart is one that particularly speaks to the economic agenda that I’m going to talk about, which is, how do we reconnect the dots, reconnect what is happening in our economy to what it means for workers and families, a core goal of the Biden administration, and what it means to grow from the bottom up and middle out?
So the president came into office, and he called for a new course of action. And the first step in this new course of action from day one was to contain the pandemic and get the economy back on track. So in January of 2021, over the three months prior to the president’s inauguration, jobs were being created to the tune of 60,000 per month, which, if you follow the labor market, is very small, especially given the big hole we were in, in terms of the economy.
We were still suffering from the widespread pandemic. I did not bring charts on that today, because I wanted to focus, keep us moving. I think we all remember how bad that was.
And the very first thing that we focused on was the American Rescue Plan, which brought forth the fastest and most equitable economic recovery in decades. We deployed the policy tools that we had, worked to make sure that states, communities, localities had the resources they needed to get schools reopen, to get the vaccines out there to contain the pandemic and make sure that businesses and communities and families could weather the crisis and get back on track.
So we gave lots of money to child care centers around the country, lots of money to families, lots of money to schools to get everything going again.
So the outcome of that– and I will say this is one of the charts that I’m very proud to be able to have served in this administration. And this one brings me personally great joy that looking– we have seen the sharpest job market recovery relative to previous recoveries. And this is important because a pandemic recession is different.
During the pandemic, when we all knew that the virus was amongst us and we didn’t have the tools to fight it, it was really important that we shut down the economy, send people home for a while. So, of course, we cut off economic activity. But what we also needed to see is that activity coming back really quickly as soon as things were back up and running again.
And this chart shows that we have seen that in terms of jobs. So the dark blue line that goes in a sharp V down and then back up, that’s the 2020 recovery in terms of payroll employment. We’ve created almost 12 million jobs since the president took office. In the last year, we’ve seen the lowest unemployment rate on record for Black men, Hispanic workers, and workers without a high school degree.
We’ve seen this two strongest years of small business applications on record. Because of this, the United States leads the G7, which is the other advanced economies, in the pandemic economic recovery. And so this is really an important set of accomplishments.
And we can talk in the Q&A, if you would like, about some of the challenges that we’ve also faced. I don’t want to ignore the fact that, of course, prices have been high over this period. We have seen inflation. And I’m happy to talk about that, but I do want to emphasize the strength of this economic recovery.
I also want to emphasize that this recovery was particularly good for workers at the bottom of the wage distribution. This is a figure that builds on work that the– I believe it’s the Atlanta Fed. Apologies if I’m getting it wrong. I can never quite remember which fed it is.
But looking at wage growth by quartile and what is important here– I don’t have a little thing. But what is important here is down here at the end, you can see this dark line, which is the bottom quartile, has seen the sharpest growth in yearly nominal wages over workers in the top quartile, the third quartile or the second quartile, meaning that as we’ve had this recovery, we’ve seen workers at the bottom see economic gains.
So, again, when the president says he wants to build an economy from the bottom up and middle out, these are the kinds of outcomes he is looking to see. One more chart because I’m at Berkeley, I thought I would bring my Blanchet, Saez, and Zucman. This is their new real-time inequality chart.
And this shows real market income by income group. It’s looking at the top 10%, the next 40%, and the bottom half.
And, here, we can see that the bottom half has seen the strongest income growth relative to the top half, again, evidence that we’ve been growing this economy in a way that has been very inclusive, which I think is especially important given how many challenges families have faced in terms of high prices, but also just the challenges of the pandemic on top of that, which we know had severe equity implications in terms of which communities were hit the hardest.
Finally, one more indicator of the strength of the first step of the president’s plan to get the economy back on track has been that we’ve seen that family balance sheets are stronger than they were prepandemic. And this has been ongoing that we’ve been tracking this at the Council of Economic Advisors, just making sure that we’re getting a sense of just how this recovery is flowing.
One of the questions that I get asked all the time, especially when I go on television, is are we in a recession? Are we going to have a recession? Where we are seeing the data right now, things certainly are not– unemployment rates at near historic lows do not in themselves indicate we are in a recession. Of course, we’re seeing some challenges over the past 10 days with finance, which we won’t get into today.
But this economy has been able to adapt to– a variety of challenges have been thrown at it, various variants of the virus that have popped up. And we’ve had the resources to deal with them. Of course, Putin’s unprovoked war on the Ukraine, which has upended global energy prices, caused this large spike in energy prices that have been challenging.
Those have, in large part, come back down, including gas prices. And we are seeing that there’s still some strength in family balance sheets. So all of that bodes well for this recovery so far.
And now I want to move on from the immediate economic challenges to what I want to spend the most of my time talking about, which are the deeper structural challenges. As an economist who’d been working for a long time and had started an organization focused on the economic paradigm, having been candidate and then President Biden say that he wanted to change the paradigm feels very powerful. I want to spend a little bit of time talking today about what that means.
But what the president meant when he said that is that he repeatedly has said that recovering from the pandemic recession wasn’t good enough. During the campaign in the early years, we talked about the need to build back better. He knew that the challenges facing our economy– climate change and its effects, rising economic concentration, fragile supply chains, inequality, especially inequality by place and by race and ethnicity– these were structural challenges.
And so it wasn’t enough to get back to where we were. We needed to move. We needed to do better, which was core to the Build Back Better frame.
And in August, we laid all of this out in an economic blueprint for what the president is trying to achieve with his economic agenda. And this blueprint laid out five core pillars. And all of this, by the way, can fit on one tweet. So if you’re looking for a tweet, you can do this. You have to shorten the words a little bit.
But the first is to empower workers, to make sure that workers benefit from the economic recovery. The second is to focus on making it and building it in America. The president talks a lot about how our best days are not behind us, that we can build big things here in the United States. Giving families some breathing room– the president has made it very clear that his priority is to get prices down for families to deal with inflation and the high cost families are facing.
To make industry more competitive, less concentrated, more resilient, we need to deal with the challenges in our global supply chains. We need to deal with the challenges of rising economic concentration, what that means for workers, what that means for consumers, what that means for the little guy for small businesses.
And we need to make sure that we are rewarding work and not wealth. I said that wrong. I’m tired, so it’s like a little slip there. Rewarding work, not wealth.
The president has made very clear from day one, and is also clear on the budget that he just released a couple of weeks ago, that under his watch, he will not raise taxes on anyone making less than 400,000. He has also put forth a budget this year on top of being able to reduce deficits already, a budget this year that would reduce the deficit over the next decade by $3 trillion, doing that by focusing on fixing the tax code to make sure those at the top pay their fair share, so a very important value.
And, also, I believe, a lot of Berkeley folks have done a lot of research showing how those kinds of tax policies can be good for the economy. So I would refer you to the econ department. And you can talk more about that with our friends Danny and all the rest there. Wonderful.
So here’s the goals. So how are we going to get there? So to build this economy from the bottom up and middle out, we have to make strategic investments. So where step one was to contain the pandemic and get the economy back on track, step two was to identify and deliver on the strategic public investments that are essential to achieving the full potential of our nation’s economy.
And a lot of this was laid out during the campaign. And a lot of it has been refined over the course of the pandemic and built into a set of policies. So I’m going to walk you through the arc of this, but a set of policies working hand in hand with Congress.
So while we haven’t gotten everything done that the president set out to do, I do want to lay out to you how we thought about these strategic investments and why we think that there’s economic evidence that shows that this is a path that’s going to deliver on that bottom up, middle out strategy that the president is calling for and what the evidence we’re already seeing.
So the first thing is that– the fundamental idea here is that what we make it in America and how we make it matters. And I want to emphasize that this is a longstanding American idea. American policymakers have always cared about what we make here. There are a lot of strategic reasons to think so.
But what we make is, what are the strategic industries? What are the places where, if we don’t produce this here or have a sense of how we’re going to get it, we’re going to be creating challenges for ourselves. Again, think about the fragile supply chains and how, during the middle of a pandemic, we could not get enough face masks. We didn’t have the personal protective equipment that everybody needed.
Or think about the challenge that we faced with infant formula more recently, or think about the challenges that we face with semiconductors. What is it that is actually important for Americans? Then I will spent a lot of time talking about clean energy and why that is strategically important. But it really requires us to think hard about the areas where relying on private industry on its own will not or has not yet mobilized the investments necessary to achieve our core economic and national security interests.
So we’ve long had a strategy for defense industries. We know that it’s important that we have the capacity to make airplanes that can fly around and defend our country and all the other things that we need for defense. And they’ve long had an industrial strategy to make that happen.
And, of course, the military has long had a robust set of policies around that to make sure that they’re delivering that in a way that works for communities. I often think of their commitment to child care. And we can talk about that in the Q&A because I’m not going to talk about that too much up here, but wanted to at least ping that there.
We’ve also long had investments in other kinds of industries, investments in public universities, roads, railroads, public sector dollars building our industrial base and America’s middle class around the country. We put together the kinds of industries we needed to put a man on the moon. We put together the kinds of industries that we needed when it mattered to the United States.
And, today, we have an enormous set of significant challenges in front of us. And that is why one of the first things the president did when he took office, because we knew how brittle our supply chains were, was to ask a number of agencies across government to identify key strategic supply chains, few among them in energy, and to go through and say, what is going on with these supply chains? How can we make sure that we are having access to the things that we need, particularly, again, in the energy space?
And, of course, we all know that climate change is one of the biggest threats we’ve ever faced to our national, our economic security. It’s an existential threat. And that is why a series of pieces of legislation– the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act– are targeted to make the necessary investments in these most critical technologies, identifying where along the innovation to commercialization pipeline new investments are needed and how we can spur that.
So that is the what. So I want to get into the how. So the second part is how we make it. How is a very important piece of the puzzle. And we’ve seen a lot of this, just to pause for a moment before you read the slide. And I’ll get to this in a moment as well.
But a couple of weeks ago, the Department of Commerce released a Notice of Funding Opportunity for entities that want to apply for money to build a semiconductor factory, or they call them fabs. I guess they’re fabulous. It’s a new word I’ve had to learn, their fabs, these semiconductor fabrication plants.
We released this. And in it were a series of steps that weren’t just about making these tiny little semiconductors, but about how we make it. And it was very interesting to watch the national debate about whether or not how matters.
So I’m going to come back to that in a moment. But I want to just put that in the back of our minds as we’re thinking about what we mean by how. If we’re going to use taxpayer dollars to invest in strategic industries where the private sector is not already making those investments, how we do it is going to matter.
In my window, in my office at the Council of Economic Advisors, I can see down the mall a little bit. And I’m often reminded that there’s a whole bunch of agencies that the federal government has set up to deal with a variety of economic and social issues. We have an Environmental Protection Agency.
So we need to make sure that when we are inducing new private capital that we are not adding to– I think which one is this? Number 4– that we are not adding to environmental damage. If we are allowing these new investments that we’re making to add to the problems that we’re creating for this agency down the line, we wouldn’t be making good investments. We have to think about that from the get-go.
So how we make it means using public investment in the public interest, spurring private investment in innovation, shaping the market to make sure it works for American workers, families, and communities, as well as our national security and economic competitiveness. It means using or developing the policy tools to facilitate these investments.
And so these are the five core pillars that we’ve been talking about a lot inside the administration. So first is that we are working to crowd in private investment by spending government dollars strategically. That is the focus of particularly the Inflation Reduction Act and the CHIPS and Science Act, which is we’re going to put a lot of federal dollars out there and encourage private market to crowd in those dollars. And we know that that is an important place to start.
Second is that we need to make sure that we are shaping markets in a procompetitive way. One of the things that we did early on in the administration that the president did– and I believe it was May of 2021– was a executive order that put in place a whole-of-government effort around market structure and competition. In that executive order, there were 72 specific actions that he was directing agencies to take to be more competitive, to make sure that they were not fostering economic concentration across industries as they were doing other things.
So we’ve often thought of market structure as just this thing over there that the Federal Trade Commission or the Department of Justice deals with. And we’ve said, no, this is everybody’s problem. If you’re doing a reg, a regulation, if you’re spending money, you have to think about how we as policymakers are shaping markets. So as we are making these investments in strategic industries, the how, how are we shaping markets is of utmost importance.
Promote macroeconomic stability– so we want to make sure that we are not adding to macroeconomic instability as we are doing this. I’ll get to this in a moment. But one thing that we have been working on at the Council of Economic Advisors with the Office of Management and Budget is, how do we integrate climate change and transition risk and opportunity into our macroeconomic forecasting? So a little bit separate, but as we’re thinking about these investments that we’re making, we have to think about what the macroeconomic implications may be.
And then number 5, number da da, da, da. Mitigate, I already mentioned that one. And then making sure that we are creating good jobs– we need to make sure that we are always thinking about the kinds of jobs that we’re creating.
Again, I think about the Department of Labor where you have a Division of Occupational Health and Safety, you have a Wage and Hour Division who are enforcing the nation’s labor laws and making sure that we are doing our part to have good outcomes for workers. And so as we are making these investments, are we taking all that into account and focusing on the good jobs that the president wants to see?
And I know that this is a challenging issue for some. But the president has also been very clear that it’s not just what we invest in and how we do, but where, that it is important that some things are made here in the United States. And so I want to just put up a few notes on why we think it is important that we have industry in this country.
First is to think about the nearly half century of economic inequality. What does it mean to foster good jobs? How do we think about the role of economic policy?
We know there’s been a lot of economic research in recent years on the role that opening up the United States to competition in terms of trade with China, allowing them into the WTO in the year 2000, what that did to particular communities around the country, called the China shock literature, that those economic effects were long lasting.
So we need to make sure that we are thinking about how government policy is affecting good jobs and communities all across the country. In the president’s word, “Too many people have been left behind in the past, and too many people were treated like they were invisible.” So how do we do that? And that making things in America and what we make matters.
The second is about economic competitiveness. We know because there’s a lot of research on this that shows that there was a theory many decades ago that the United States could focus on just the intellectual pieces of the production process, just the engineering, or the very highly sophisticated and all of the manufacturing and production could be done somewhere else. But we also know from a lot of literature on agglomeration and the effects of that, that we need both the strength in manufacturing as well as the ability to invent and commercialize future generations of technology.
We need to make sure that our supply chains aren’t brittle, but are resilient. And that requires thinking about place and where things are produced around the world.
One statistic here that comes to my mind a lot and that came out of looking at all of the supply chain reports that the president had the agencies do, one thing that is true is that OPEC is an important oligopoly in the world. We know that when OPEC affects oil prices, that affects– or changes prices or their supply, it affects everyone. OPEC only controls 40% of the world’s oil supply. And yet that is one of the most– it’s like the textbook case of an oligopoly.
Yet when you look at the clean energy supply chain, China currently controls over 80% of core parts of that supply chain. That is a monopolization of a supply chain that is incredibly important to our future, to economic competitiveness. And so thinking about place-based strategies is really important, especially as we’re thinking about what it means to be market shaping and to have a competitive economy.
And then, finally, the administration has been doing a lot of work with friends and allies around how to think about the pieces of the president’s vision and what kinds of partnerships. And I want to just elevate something that happened just last– I think it was last week, that is really important, which is the United States and the EU have now forged a new partnership on critical minerals.
The president, working with European Commission President von der Leyen, worked to immediately begin negotiations on a targeted critical minerals agreement so that relevant critical minerals extracted or processed in the European Union will count towards requirements for the electric vehicle credit, which I will get to in a minute. And this is an important piece of the puzzle about creating that resiliency in supply chains, but thinking about place-based strategies.
There’s other things I could focus on there, but I’m watchful of time. And I want to move on to focusing on the new toolkit that we are developing as we are thinking about this strategy. So if we are focusing on what we make in the United States, thinking about what is strategically important, how we do it, so how are we actually executing on that? And now we get some little graphics, moving on in the slide deck.
So we know that this modern American industrial strategy will require a new toolkit. And so there are four basic components of this that are top of mind. So the first is that we are tapping into the productive potential of people and places across the country.
And you can think of this in terms of not just looking at a model, but looking at a map, tapping into the potential all across the United States, targeting employment growth in economically distressed areas where you can get a big return on investment, and by leveraging dormant infrastructure assets and skill-ready workforces, also focused on supercharging innovation by triggering these agglomeration benefits in new research and development hubs. So it’s the first one.
A second tool in our toolbox is to provide long-term incentives to encourage the private sector to invest at massive scale. So a big part of what the administration is doing– and I’ll show you some visuals on this in a second– is creating that demand signal. Here is where we’re going, especially on clean energy, sending that strong demand signal, coupled with regulations that give investors certainty of where we’re headed to spur those mature technologies, to deploy more quickly and pull innovation into the market faster. And our goal is for this to reduce prices for families and create high-quality jobs for workers.
Third is to encourage. And so I’m transitioning a little bit here. I really want to hone in on our specific strategies around clean energy. So the president has been thinking about the CHIPS and Science Act. I’m going to leave that aside for a moment and really focus on what this means in clean energy because this– and I will use this as just a moment to segue for a second.
When I took my role at the Council of Economic Advisors, and the very first conversation I had with CeCe Rouse on our portfolios– because this president, his three members of the Council of Economic Advisors are all, first and foremost, labor economists– myself, CeCe Rouse, and Jared Bernstein. And that was a unique configuration.
And so the first question is like, who’s going to do what? It’s not all labor. But my first conversation with Chair Rouse was that I wanted the climate portfolio for this reason, which is that if you look out over the next 10 to 50 years and you care about where jobs are going to be created in the United States, thinking about our movement to clean energy seems to me probably the most important industrial question, because this is the industry that’s going to be leading the future.
We are all on a race to save the planet as quickly as we can. And there’s a lot of things that we need to invent, produce at scale, and export and produce all around the world. And so we need to be encouraging these investments throughout these clean energy supply chains as quickly as possible. But that both creates opportunities and challenges. But this is, I think, how we’re going to create good jobs across the country. So that was just a little bit of a segue there.
But back to the slide here, this last bullet, I think, is incredibly important. As we’re thinking about our toolkit, we’ve been focused on facilitating a government-enabled, private sector-led economy. What can we do so that government is shaping the market in the direction that we want it to go, and yet we are still getting all of that innovation, all of the wonderful things that the private sector brings to the table and lower costs over time? So our toolkit has been put together with all of this front of mind.
So I wanted to spend just a couple of seconds on some of the economic arguments and evidence behind this. As I think about this agenda that we have been putting together in the Biden administration, I have often thought about– and, actually, I don’t have in my notes here exactly where he said it.
But Dani Rodrik has called this kind of theory of the case productivism, which is a reorientation toward an economic policy framework that’s rooted in production, work and localism instead of finance consumerism and globalism. And you can see that here, we’re prioritizing what we make, how we make it, where we make it as the core economic question that we need to be focused on.
Janet Yellen has spoken and written about a new modern supply-side economics. She said, and I want to quote here, “Modern supply-side economics prioritizes labor supply, human capital, public infrastructure, research and development, and investments in a sustainable environment. These focus areas are all aimed at increasing economic growth and addressing longer-term structural problems, particularly inequality.”
Chair Rouse has called– and we just released a new economic report of the president. But in the last years, we focused a lot on calling for government to be a partner, not a rival, to private action. So those are some of the big-picture economic themes that we’re focused on here.
But in terms of focusing just on the clean energy piece, I wanted to put up my favorite quote from an economist about how some of our ideas are connected to the cutting edge of where folks are thinking. This is a quote from Daron Acemoglu. We had him talked to some folks about– as we were thinking about some of these issues.
And he has written that, quote, “The climate crisis demands that we consider more radical ideas” than just think– and this is my brackets– just thinking about pricing. “If we can reach a consensus on the need for massive investments in the clean-energy transition, perhaps we can agree to orient that spending around the creation of good jobs.
That might well violate the Tinbergen principle that the best way to neutralize a market failure is with a policy instrument designed specifically for that purpose. But if it helps to prevent the deepening of social, economic, and political fault lines that have appeared in many Western advanced economies, it will have been well worth it.”
So for a long time, as we thought about what to do about climate, the first best answer that economists gave was to focus on pricing, carbon tax. That’s the obvious thing to do. It’s a bad thing. Tax it. That’s the obvious thing to do.
But what we have learned– we’ve learned a number of things. One, not clear that there is a political path to actually do that. So, personally, I was like, how long do we have to wait for people to realize that that’s the best idea? And that seemed like too long.
But second– and I think this is really important. And there’s been a lot of especially political science research on this question. As it turns out, different industries have different needs. And it is not just that we need to get rid of emissions. That is important for the climate. That’s super important.
If you’re a climate scientist, that is like 100% job one. That is what you’re thinking about. Hi, I’m a labor economist. What I care about is, how are we going to do this in a way that creates industries and jobs and doesn’t just destroy our economy in a way that would be both politically unpalatable and also add to the structural challenges that I talked about at the beginning of this slide?
There are people that work at manufacturing facilities that produce cars that run on gasoline. If we just start taxing all of that but don’t have a plan, then what happens to them? How do how do we adapt? And that is the challenge that we’ve brought on.
So in the beginning where I talked about what we make, strategic investments, our strategic investments in clean energy are grounded in the idea that we need to make sure that we are facilitating this building of a new clean energy economy and not just assuming that the market will do everything on its own if we do not provide that support.
So I wanted to put up Daron’s quote here because I thought that that was– I feel like people smarter than me were saying similar things. So that’s always a good thing. Go to the experts.
OK, so as we’ve thought through, I think the other thing, I just wanted to note on the economics of this. So one of the challenges– if you’re an economist or an economist-akin audience member, one of the challenges with doing the kinds of industrial strategy that we are involved in is whether or not you feel that we are just picking in winners and losers. Oh, my goodness, this is so inefficient, even if you think that a carbon tax was maybe not politically palatable or maybe even if you thought that there were other policies.
So I wanted to just spend a couple of moments on noting that so much of what we have focused on are building the kind of productivity-enhancing infrastructure that we need to be building as well as solving specific market failures. But as we’ve thought about these market failures, we’ve thought about them broadly. And I think that’s an important piece of the puzzle.
In 2021, early on in the administration, the Council of Economic Advisors, we put out a paper called Innovation, Investment, and Inclusion– Accelerating the Clean Energy Transition and Creating Good Jobs. And, there, we laid out the series of market failures that we saw in this energy transition.
And, of course, there is the negative externality of emissions. But there are also a number of classic market failures. One that we’ve spent a lot of time on in the administration is thinking about coordination problems.
So think of the challenge with electric vehicles. Very difficult to think, I’m going to go out and buy an electric vehicle if there isn’t a network available for you to charge that vehicle, or if there is a network. But it doesn’t use your charger, because there’s been a private actor who’s been trying to monopolize it and not sharing those chargers with everybody.
So those are the classic kinds of problems where we believe that government can play a role helping to set standards, but also to solve this chicken and egg problems. Which comes first, the charging network or the electric vehicles? So we said, yes, let’s do both.
So in our policies, we have both spent $7.5 billion on a nationwide charging network as well as supported the development of electric vehicles. But I think I want to just elevate that many of the ways that we’ve targeted the specifics of our industrial strategy are grounded in strong economic principles trying to solve these classic problems of externalities, coordination failures, various sets of market structure questions.
So now I’m going to just take a few more minutes to go through some specifics. Hold on here. And then I want to get to questions of what we’re actually doing. So this is the theory of the case. And now I want to get to the legislation, which is the core pieces of the toolkit that we’ve put in place.
So by now, I’m sure everyone is familiar with the Bipartisan Infrastructure Law, also known as the IIJA, which I don’t know what it stands for. But we call it the Bipartisan Infrastructure Law because, very proudly, it was bipartisan, hundreds of billions of dollars for all sorts of things across the United States.
I will note that the 7.5 billion, there’s a really set of interesting papers by Jim Stock and colleagues on how this money that we’re spending on the network may be some of the most efficient dollars that we’re spending, moving the electric vehicle transition– which was good to hear, because it’s a small amount of money, but also could be very impactful– but money on the power grid and the like.
And then the Inflation Reduction Act, which passed in the summer in August– loans and grants to industry, clean energy production investment tax credits, consumer tax credits, all of which focused on spurring this new vital industry that we need to build a clean energy economy.
Now, there’s a lot of details in all of this. And I’m going to put up a very difficult slide for you to read. Oh, no, I’m not. Wait, hold on. Wait, I thought– wait a minute, my notes– we’re going to just skip this one. There we go. We’re just going to go to the difficult side to read.
So I wanted to put this one up. Even though it’s difficult to read– and I don’t like slides like this because I can’t see very well sometimes. But the reason I wanted to put that up there is that we are doing all of these things to spur a new clean energy economy.
And as we are doing so, we are making sure that this is good for communities, using every tool in our toolbox. So all of these little numbers and little details here are different elements of different pieces of the legislation that focus on things like prevailing wages and apprenticeship requirements. So there’s a set of the credits to businesses that say, if you want this credit, it will be increased by 5% times for projects that meet prevailing wage and apprenticeship requirements.
There are also various ones where there’s a 30% credit for projects meeting these requirements. These are additions, usually, on top of things where we are making sure that we are adding domestic content requirements, focusing on energy communities and low and moderate-income communities so that you get more of a tax credit if you put your investment in places that need it most, so trying to leverage these public dollars in a way that can induce private capital to the places where it will be most effective.
The two at the bottom around Direct Pay is making sure that entities that do not generally benefit from income tax credits, like state, local, and tribal governments, nonprofits or churches, can also benefit from some of these, which is a small thing, but could be huge to those organizations and being able to benefit from them.
I mentioned earlier the CHIP’s Notice of Funding Opportunity and how they were doing this as well. They said that applicants for major projects have to include a detailed plan for providing affordable, high-quality child care to both the construction and fab workers. And they have to pay prevailing wages while encouraging them to create high-quality jobs.
So we’ve decided on these strategic industries. And we’re investing in them in a way that will hopefully address– doing our best using all the tools in our toolkit to address these longer-term structural issues.
So I’m going to skip this next slide, and I’m going to go straight to some success. OK, so building the economy from the bottom up, some successes– so we are already spurring private investment in construction and manufacturing.
So these charts go from 2010 through 2022. You can see an uptick in real manufacturing construction being put in place that is equivalent to the run-up in the recovery from the Great Recession in the early teens. And this is real electronics manufacturing put in place, so millions of US dollars, a spike there.
Our goal is to crowd in private investment. So this is publicly enabled but private sector driven. And you can see this in some of these numbers.
Here is a map. This is one that the president likes to tweet out a lot. Manufacturing is on the rise. For a while, we were all saying, everything’s on the rise.
So we’re already seeing companies responding to the president’s investments. We were able to start tracking this within weeks of the Inflation Reduction Act being signed. So the president signs this law putting all of these subsidies in place. And, very quickly, the private sector started to act. And I think in clean energy, this is so important.
The president told the country, told the world these are the strategically important industries we need to be focused on. We need to make sure that this is what we are doing, and the private sector has acted. And you can see they’re all across the country. And it’s too small to read all of that. But if you go to the president’s Twitter feed, you will be able to see this chart.
The next one, we’ve seen that manufacturing employment has been growing apace. We’ve seen the fastest two-year manufacturing job growth in nearly 40 years. And the economy has added nearly 800,000 jobs in manufacturing. Again, like the earlier chart I showed you on overall total payroll employment, this has been the fastest growth relative to other economic recoveries.
I’m sure somebody is asking or thinking, gosh, Heather, is everybody going to become a manufacturing worker in the United States? Probably the answer to that question is no. But in terms of being able to build things and make things in the United States and have some greater resiliency in our supply chains and also the innovation and technological advances in clean energy, this is certainly an important achievement.
These are some cool maps from the Department of Energy, focusing on new investments in battery manufacturing and supply chain investments and American-made solar happening all across the country. So, again, these are a little bit small. But these are available on the Department of Energy’s website. Again, you can see these investments going up all over the country.
North American battery cell manufacturing is now set to grow nearly 15-fold by 2030 based on tracked announcements, enough for 10 to 13 million electric vehicles. Nearly 40% of these announcements have been announced since the passage of the Inflation Reduction Act.
In August of 2021, the president did an event where he had the big three auto companies and the UAW, and he said, we want to make sure that by 2030, half of all auto sales in the United States be electric vehicles. We are now on track to make enough batteries to do so.
Yay. I’m just like, OK, great. Yeah, little confetti here. Since [INAUDIBLE], it’s nice to set a goal and meet a goal, even when you thought– we did the analysis on that. Could we do this? And yes, it was theoretically possible. But I don’t know where all the pieces come into play. So it’s very exciting.
We’ve seen over 95 gigawatts of domestic solar equipment manufacturing capacity has been announced across the country as well. We have seen– and then I think this is just some stats on different investments that have been announced or things that are happening. We’ve seen electric vehicle shares are projected to be 56% to 67% for light duty. I think you can read all of these. I do want to get to Q&A.
So I have a couple more– let me just see here. So I have a couple more brag slides, just going to go through them and let you just mull on all of the accomplishments.
This new National Renewable Energy Laboratory study just came out that said that, combined, the Bipartisan Infrastructure and the IRA are– you can read the things. Make clean energy more abundant, slash power sector emissions, deliver cost savings, but some good assessments of just how far we are going.
And for those of you who really are focused on emissions, because if that’s why you care about climate change its emissions, not just jobs like me, we are seeing that the emissions reductions are significant. And we are on track. At this point, we believe by our analysis and other outsiders to meet the president’s goal of cutting emissions in half relative to 2005 by the president by 2030, which is important for us to meet our Paris Agreement goals.
And a lot of this is being done through the Loans Program Office. I skipped that slide in the interest of time. It’s one of the offices that is making the investments. They are giving loans to cutting-edge companies across the country to help spur this clean energy transition.
So this is an assessment of how much money has gone out. As of February 2023, they do a monthly assessment. Again, this is on the web page, but just to show how much is going out. And this is where their applications and activities are.
So with that, I’m going to stop because I wanted to stop five minutes ago. I have too many slides because I’m just too excited to tell you about all the things we’ve accomplished.
Just to end, I think what is important here is that the president came into office understanding that there were a series of economic challenges, an immediate crisis, long-term structural issues. He said, we needed to build back better. We need to build an economy from the bottom up and middle out.
The core way that, in his view, we needed to do that was to change our thinking from just assuming that if we just let our hands go and let markets do whatever they wanted, everything would be OK and focus on the strategic places where government could really make a difference and making sure that we do that in a way that benefits people in communities all across the country. That is the core economics behind this and economics, because I’m here at the matrix that has been informed by lots of social science researchers, not just economists.
And I think we are already– as I’ve shown, there’s a lot of evidence that this kind of approach can show good strong results. With that, I will stop. Thank you.
[PAUL PIERSON] So we’ve got some questions online. But I always think that we should start by rewarding people who have made the trek here. So Eva can walk around. And if you raise your hand, we’ll get some questions.
[AUDIENCE MEMBER] I’m going to start with the softball question.
[HEATHER BOUSHEY] Tell me who you are.
[AUDIENCE MEMBER] Yeah, I’m Larry Magid. I teach at the Goldman School of Public Policy here on campus. So I’m curious about the structure of the president’s– and I’m going to try to say this right– the Invest in America cabinet. So who’s in it? How is it structured? What is your role? And are there specific goals that that cabinet has set?
[HEATHER BOUSHEY] I’m going to cheat because I have a note on who’s in it right here. And I have my– yeah. So the Invest in America cabinet was announced. The president gave a major economic speech on January 26.
And in it, he said that he was forming this new cabinet. It was about the same time that Ron Klain got his well-deserved time away from the White House, and Jeff Zients took on as Chief of Staff. And there was a lot of discussion about really moving fully into implementation, although, of course, we were doing that before.
The subcabinet includes Department of Commerce, Department of Labor, Department of Transportation, the Treasury, the Department of Energy, and Health and Human Services. And the purpose is to focus on implementing the variety of pieces of legislation that the president has put into place. So one of the wonderful things about a democracy is that you don’t always know how things are going to end up.
So the president was able to get the bipartisan infrastructure laws passed earlier than the other pieces of his agenda. So, of course, when that happened, he brought in Mitch Landrieu to help to head up the implementation of the Bipartisan Infrastructure Law. He’d also earlier brought in Gene Sperling to head up the implementation of the American Rescue Plan.
But then once the Inflation Reduction Act and the CHIPS and Science Act were passed, wanted to really make sure that everybody is focused on executing on all of these together because the American people don’t see specific pieces of legislation. They see the outcomes they want to see in the world. And these are a package so that you need the infrastructure.
You need the power grids. You need the EV charging stations to go with the investments that are happening in the other pieces of legislation. So that’s what the subcabinet is focused on.
I’m the chief economist. Never know what a chief economist does. I think my job is to help people, help the community understand what the economics of this are and how we can do this in a way that will have the desired economic outcomes. Thanks. That was a great little– pshoo.
[AUDIENCE MEMBER] Hi. I’m Jonas Meckling. I teach climate and clean energy politics. Thanks so much for a fascinating overview. I have questions about the government’s ability to make and manage these investments.
The first one is around bureaucratic capacity. It takes a lot of government officials to make these investments. We’ve seen changes to the Department of Energy, for instance, the Office of Infrastructure. How concerned are you about this becoming a bottleneck for implementing these investments? And if so, what kind of changes would you like to see?
The second one is around coordination. You mentioned the coordination market failures. What mechanisms does the federal government have to coordinate across agencies, but also with state governments in making these investments for clean energy future?
[HEATHER BOUSHEY] OK, coordinated across state governments– so in terms of bureaucratic, I mean– so I think that that is a great question. There is, I will say, a couple of things. One, there is an enormous resource of incredibly talented civil servants and political appointees across government that are dedicated getting up each and every day figure out how to do this.
The Department of Energy has hired or is hiring– I don’t want to give a number, because I’m not sure exactly how many– but lots of people to help execute on this. So this is something certainly that they are focused on each and every day. I can tell you from where I sit, something like the Loans Program Office or the other offices are doing the hard work to lay out the strategic needs and then how they are going to implement and execute on them.
So, for example, there are a set of– and I probably– so the slides that I showed you from the Loans Program Office gives you a sense of their strategic investments. They have also released a series of pathways reports. I have too many pieces of paper here. And they don’t have page numbers, so I won’t be able to find them.
But those were just released, I believe, earlier this week that lay out the strategic ways that they are guiding their investment decisions. And so I think my answer to you is that people understand the challenge and are stepping up to it.
I think the other question we need to ask ourselves is, if not us, who? And so what I saw in the supply chain reports that came out earlier in the administration is that the private sector created a set of supply chains– these were their independent decisions– that are very difficult to track. If you talk to the supply chain people, they’ll start throwing up these charts that just literally look like bowls of spaghetti. You don’t know what’s coming from where and how you track it.
So as agencies went out there to look at, how do we make sure that the things that we really need to get to where they need to go that are of national importance, government is particularly equipped to be able to help provide that guidance and that analysis. And I think you saw that in those supply chain reports, to ask some of those tough questions.
Your second question was coordination. I think you said coordination across federal and state. Is that what you’re asking? Or across agencies?
Federal and state.
- So, well, I think that the Invest for America subcabinet is emblematic of the kinds of coordination. There is a daily coordination across agencies. But I think when the president put that forward, he wanted to make sure that at the highest level, there was that connective tissue to make sure that– as one of my colleagues says who works on industrial organizations, she’ll look at these things. She’s like, there’s a lot of steel in all of these.
Are all the right people across agencies talking to each other about how we’re making sure that we are producing that clean steel? We’ve got the green steel deal with Europe that we are still talking about, the steel and aluminum. Like, are we thinking about all these pieces and how that’s fitting into everyone’s plans? And yes, people are coordinating and working on that.
I will say, in some ways, the pandemic, challenging as it was, my experience in government is that because Zoom is so easy, I’m on a video call with someone from an agency multiple times a day. And I’m at the CEA. I’m not even at the NSC, or I’m not on one of the policy councils. So there’s a lot of connective work happening across those teams.
[AUDIENCE MEMBER] Thanks. Thanks for sharing all this and all of the great work. I wanted to ask about another part of innovation policy. So we’re talking about industrial policy and all the new work being on it.
But people like Fred Bloch have been writing about how the US has had a hidden developmental state and an industrial policy over many decades of a lot of innovation coming through the military, DARPA, et cetera. And then the model, typically, is that those inventions are provided open source, free. The government doesn’t retain any intellectual property rights.
And then they get taken up by people in Silicon Valley and elsewhere and then often wind up privatizing a lot of profits. And I was wondering if there are parts of this that address some of that issue. And I know that one of the people who’s advocating for this now is Mariana Mazzucato, for instance, the idea that the government should retain some kind of a residual right to participate in some of the upside. And so I just wanted to see if there’s anything to say about that.
[HEATHER BOUSHEY] That is a great question. I do not want to misspeak. So let me pause on that question because I don’t have the notes that I am looking for. I mean, I think that that is a great question.
One thing I wanted to note is that I– and I think this is where the administration is really pushing into new areas. So there’s a lot of– so the economists will be the first one to tell you that things that government should invest in are research and– like, the early stage research, the science bit of it.
I think that one of the challenges that we have both identified and are trying to fix right now is that that’s super important. Yes, we should do it and especially in clean energy, given the urgency, but also in some other sectors. And semiconductors is certainly one of them.
There is a role for government on not just on the pure research side, but on the getting to commercialization side. And so that brings up new issues, which we’re getting at. If it’s science, if it’s research that anyone can benefit, OK. But once you’re getting into, how is it that you’re going to help a particular firm move faster to create clean energy vehicles, or how are you going to help a particular firm make the kind of green hydrogen that we want, how do you think about some of those?
So I think there are great questions to ask. I would want to consult– I don’t have my notes that I would want to give someone the specific answers. But I’m happy to follow up with you on that. And then there’s a question. There’s questions here.
[AUDIENCE MEMBER] Steve Vogel, Political Science and Political Economy. In terms of supply chain resilience, I just would love to get your thoughts on how we wrap our heads around, what makes a sector or a technology more or less strategic? As you suggested, the definition of strategic used to be strategic in a military sense. And, obviously, you’re thinking about something much more expansive.
So if we’re replacing that definition, then what do we replace it with? Are there principles or modes of analysis that can help us think through what needs to be made here versus what doesn’t?
[HEATHER BOUSHEY] Yeah, that is the question, Steven. I mean, that is literally the question. And I have spent a lot of time mulling on that and knowing that that is like, where does it end? Where does it end? What do we think is important?
I think, especially myself, I saw that over the pandemic, when it started to feel like everything was on government– we were going to save Christmas the first year because we’re making sure that things got to market. And there was a little bit like, where’s the responsibility?
But I think that gets to the thing that is so important, which is that in a crisis, people turn to government. So part of my answer back to you is that’s actually the question we need to be thinking about right now. We started off with Paul talking about last night’s weather. Extreme weather is happening all across the country, all across the world.
We know that we are living in a time that is more uncertain, more volatile, potentially more chaotic than humans have faced before because of the nature of climate change and the damages. And we know that things like the pandemic– I’m not a real scientist. Economist here. But I understand from people that study viruses is that these things may become more common as we have climate change.
So I think a question that we need to ask now that might be different than in 1952 or 1972 or 1982 is, how do we as societies make this transition to build clean energy economies and make that as smooth as easy as possible? And that feels to me like– that is certainly where this administration has come down. But I think that there’s a deeper set of answers, one that all of you that are here at Berkeley– I mean, this is the conversation we need to have.
But I will segue going to something that I did not talk about up here. But I’ve become a little like, ugh, with– as I mentioned, we have been working on incorporating climate risk and transition risk and opportunity into our macroeconomic forecasting. One of the things that I’ve learned through this work is that our energy models, our climate models– looking at you, climate people– they assume a transition.
Most of these models use carbon pricing to say, here, today, we use fossil fuels. Tomorrow, we’re going to do something different. It’s going to be awesome. But we’re going to get from here to there by assuming a price transition. But all of this stuff in the middle, literally everything that I just spent the last almost hour talking about, that is messy and complicated.
And to your question, where does it end, what industries are strategic, well, it seems to me that the most important thing is that we build this clean energy economy as quickly as possible and as smoothly as possible. And we get all the private capital to help us do it. And we make sure that it delivers for communities. That seems like where we need to start. I’ll stop there, pontificating.
[AUDIENCE MEMBER] Thanks. Hi, Heather Haveman, Sociology and–
I just want to [INAUDIBLE] Heather.
The other Heather.
So I want to thank you, first of all, for the child care provision in the CHIPS and Science Act because I know that that matters to you. And it matters to many working parents. But I also want to ask you about how the government plans on dealing with not just in bringing business in, but also dealing with resistance from existing business, because there’s always going to be a sense of winning and losing in this world.
I mean, it’s been heartening that the automobile industry was like, oh, no, raising emission standards is actually good fo us, when the former guy’s administration was pushing back on that. But there’s also been pushback on all sorts of antigreen economy stuff from existing industries, like coal and natural gas and oil. So how do we shift them to make them part of the solution rather than part of a continuing problem?
[HEATHER BOUSHEY] I think it’s a great question. A couple of answers– the first one is that our basic tactic is throw money at– like, let’s focus on making this palatable. So let’s throw money at this challenge rather than– I mean, again, the economists’ preferred method here was a pricing mechanism. Let’s make it harder to do.
Let’s make something more expensive so then people will say, OK, well let’s do this other thing. Let’s actually make that easier. And then let’s figure out how to make this hard thing go away. I think that creates a lot of opportunity.
It creates a lot of opportunity to say, oh well, I’m over here doing this thing. The writing is now on the wall. I think that’s what’s so powerful about the maps that I showed you. Those people haven’t gotten a tax credit yet. They haven’t seen a single dollar. And yet they’re announcing all of this investment. It’s a demand signal.
So some of that capital is coming from the folks that may feel like, oh, wait. They weren’t going to– I mean, I don’t have analysis on that data. But I have to imagine that private capital is making choices. So you’re creating opportunity so that those that might lose out they have something else they can go into. So I think that’s the first thing.
Any economist will say, oh, maybe that’s not so efficient. I don’t know. Let’s just get it done. I think that’s kind of we have to focus on. What’s most efficient is getting it done. I think that’s the first thing.
The second thing is that the administration has been focused like a laser on making sure that communities left behind aren’t left behind. So one of the first things that he did was set up the Energy Communities Task Force, which has been working around the country to focus on energy communities. What do they need? How do we support them through this transition? How do we make sure that resources are going there?
That slide I showed– that all those little details, making sure that investments go to disadvantaged communities so that those communities aren’t left behind, so that those potential entrepreneurs can get access to this money and credit. So I think there’s also a question of, who’s been left behind for 50 years? And what do they want? So I think that’s also–
So yesterday– what is today? Wednesday, so either Tuesday or Monday. Time, it’s a concept. The president vetoed the ESG rule saying that, hey, environmental, among other things, matters in our investments.
And, again, those are those signals that we think that as investors are looking to make decisions, they should be taking these into account. So continuing to push back on the narrative that you can’t make money doing this, I think, is an important piece of the puzzle.
I spent the morning at a conference over at the Haas Building on climate finance, listening to people talk about how there is so much need for investment. There’s so much money to be made. It’s a little bit like there’s no reason for anyone to be left behind.
The other thing I will note is that the thing about transitioning to clean energy away from fossil fuels is that there’s a lot more stuff to build. So, again, there’s a lot of money to be made building the things that we need, building the solar panels, the wind turbines, all of the things rather than just the person who happens to own the plot of land where the natural resource is. So there’s a lot of opportunity there as well. So I think focus on the positive. That’s all I got.
[AUDIENCE MEMBER] Thank you. I’m Dennis Best. I’m a doctoral student here at Berkeley in the Energy and Resources group and, also, a graduate affiliate in the Center for Latin American Studies. I have a question regarding coordination broadly and the mechanisms for coordination, going back to the maps that you showed, and then, also, the questions about local content.
As we know, coming from the perspective of California, our industries are heavily dependent on labor migration and heavily dependent on the interdependencies historically in North America and, particularly, at the US-Mexican border. I would like to understand a little bit more about the questions about– I attended in 2018 a EPRI and IEA discussion about capacity market trading on the energy side.
And then we think about the industrialization that requires that energy capacity. So I would like to ask you about the mechanisms for coordination to deal with some of those questions about local content and as they relate to questions about migration flows across the maps that you showed.
[HEATHER BOUSHEY] So I understood the words. I didn’t quite understand the question. Apologies.
[AUDIENCE MEMBER] The coordination question, you said we have a bunch of bureaucratic forces working within questions of coordination as one of the things. So as we talk about the 10% local content clauses that you showed and other questions about local content, I’m interested to understand, what is the scope of thinking about that in a North American context? And then what are the mechanisms that are established or that would be developed to deal with those questions about local content?
[HEATHER BOUSHEY] So those are in process. So the Treasury is working on the tax– so a lot of those are through the tax code. So the Treasury Department is working through the rules on how to define all of that and work through those challenges.
What the president has made clear is that– and what the Senate has made clear in the law that they passed is that domestic content matters. Of course, we have trade deals with countries. And some of these definitions are being worked out as we speak. But making sure that the United States has the capacity to produce here is a core part of the president’s agenda. I don’t know if that got at your full question. But I’m happy to talk to you.
[PAUL PIERSON] So we’re almost out of time. We’ve got a bunch of online questions. But we’re not going to get to most of them, I’m afraid. But there’s one here that I thought might be a good place to end, pulling you a little bit out from the specifics of your talk, but I think really appropriate for this audience.
“Could you comment on how you’ve seen economist ideas about what is economically possible in the US evolve and filter through the bureaucracy and how these have shifted between the Obama and the current administration?”
[HEATHER BOUSHEY] Well, that’s a big question. So economists are– we’re an interesting bunch. So I’ll say a couple of things. One, right before I joined the campaign, the Biden campaign, I had published a book called Unbound, where I wrote about what I called a paradigm shift in economics, focusing on how to think about inequality.
But through that work that we did at the center that I ran and the research that I did for the book, seeing that there was a lot of work in economics questioning some of the simple assumptions around the equity-efficiency tradeoff and new data, new methods were allowing us to ask new and different questions. And I think you see that in the policy world. I think you see that in the transition between what happened during the Obama administration and what happened here. I also think you see a difference in the political landscape in which we’re working.
In the Obama administration, there was that whole discussion around how big the recovery should be. It was capped below a trillion. They did all this. It was a very, very slow jobs recovery.
And that was, of course, influenced by the economic advice that the president got, but also the political reality. This president did not want to make that mistake. But, also, there was a lot of economic evidence that showed, hey, we could make these investments in people and communities, and we could see outcomes.
Now, and thank you, nobody, for asking me about inflation. But that, of course, was one of the challenges that we’ve been dealing with. But it’s not just been us. It’s been global. You cannot pin all of that on the money that we spent through the American Rescue Plan, given the fact that it wasn’t just us that has experienced that, even though it is certainly a piece of the puzzle.
So I think that the political economy in which economics is functioning is both different politically, but also within the profession. And the willingness to take on the real-world challenges, I think, is what the hallmark of the colleagues that I see in the administration. We have a number of things that we need to move on. We need to move on them on them quickly. And we need to make sure that we are doing the best that we can given the tools we have, not just what the best might be in a textbook chart.
I don’t want to say that other people made decisions that way. But that is certainly not the way we’re making decisions.
[PAUL PIERSON] OK, before we finish, I wanted to make sure that I thank the amazing Matrix staff, Eva and Chuck in particular, for putting this event together. Thank you all for coming rather than darting off for a spring break. And most of all, Heather, thank you so much for sharing your time with us and sharing your ideas and your work.