Adam Posen Has a Warning on the Danger of Bidenomics

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

Tracy, you know, we're still here at Jackson Hall.

Tracy Alloway (0:19)

We're hanging on.

Joe Weisenthal (0:20)

We're not really in the actual event space, so we're just sort of hanging out in the lobby looking for people who's like, hey, do you wanna come on the podcast?

Tracy Alloway (0:28)

And we found a person.

Joe Weisenthal (0:29)

We found a person. We have the perfect guest, actually. But one thing I'm really excited, one of the things we've been talking about already is this idea that monetary policy, it's always challenging. It's always challenging when you have things like COVID, the war, et cetera. But we're also in a period in which fiscal policies, macro policy, trade policy, industrial policy, these things that we talk about on Odd Lots all the time, like how do central bankers deal with them?

Tracy Alloway (0:57)

Absolutely. I feel like I've said this a number of times at this point, but one of the themes of this meeting seems to be how do central bankers get a better understanding of the real economy and then actually respond to it? So things like supply chain issues or booming fiscal spending, how does monetary policy actually react to that? And it is fairly new at a time when the unemployment rate is at multi-decade lows, we have this huge run-up in the deficit.

Joe Weisenthal (1:28)

Right, and we had, you know, people always talk about like the sort of 40-year period, but we really, you know, liberalization, globalization, et cetera. And then in the 2010s, sort of the fiscal activism, really taking a backseat, probably not enough by many people's accounts, so it was like demand management on the fiscal side.

And now we're getting the reverse, right? Because we had the aggressive expansion, but we're also having these in the US in particular, these very aggressive domestic investment plans, right? To climate semiconductors, it intersects with trade in a very big way, tensions with China, an attempt to move supply chains, particularly around advanced tech or clean tech on US shores.

And so how that's going to work, how should economists think about it? How should regulators think about it? How should central bankers think about it? Is sort of like a huge question that hangs over all this.

Tracy Alloway (2:18)

Absolutely, and you're right, we do have the perfect guest.

Joe Weisenthal (2:20)

We do have the perfect guest because he's someone who spans all of these topics. We're gonna be speaking with Adam Posen, President of the Peterson Institute for International Economics, also a former central banker, a member of the Monetary Policy Committee at the Bank of England, and someone who lately has been somewhat critical of the Biden administration and some of the domestic policy and trade choices that the administration has made. So let's have a conversation with Adam. Adam, thank you so much for coming on Odd Lots.

Adam Posen (2:48)

Thank you, Joe, and thank you for the generous introduction.

Joe Weisenthal (2:50)

Let's just jump right into it. You had a piece, I think, in March in foreign policy that's gotten a lot of attention. I still see people talking about it. Adam Tooze wrote about it recently in his chart book and said this is the sort of, I think in his view, one of the defining critiques.

We talk about this all the time. We've had people who run the CHIPS program and the IRA, et cetera, but big picture, what is your concern about some of the domestic policy choices being made right now?

Adam Posen (3:16)

Thank you for referring to my article, and it is a concern that not just the government's getting involved in industrial policy in the US. The US, as you've talked about previously, I've heard some episodes.

At various times in its history, there's been public investment by the US in technology. There's been more aggressive, less aggressive efforts. What I'm worried about are potentially four big things. First, so much of this has been cloaked as rescuing the industrial sector, and not so subtly buying the votes of angry white industrial workers who feel left behind in Wisconsin and Pennsylvania and West Virginia. And I understand that's a need. I'm not sure it's gonna work.

I'd like to think there's other ways to win an election. But the good news on that is several of the people who advocate this policy have now admitted, even if it goes well, we're talking affecting a few towns, several hundred thousand people, which matters but isn't gonna make a thing. The second thing which I'm much more concerned about is whenever you create a government program that's about giving money to individual companies and you combine it with this trade policy that's very much, as the president keeps saying, American made, American built, American exports.