Never having worked in government at a high level (I was a summer intern once a long time ago), I am only vaguely familiar with the idea of bolstering your "legacy" at the end of your time in office. But people who seem to know what they are talking about say this is a real thing that happens, and these people also seem to think this David Ignatius Washington Post piece is trying to do this for Biden administration National Security Advisor Jake Sullivan. The piece focuses mainly on foreign policy, but there was also this bit on economics:
Sullivan came to the White House with a “big idea,” which was that “the American middle class is a national security asset,” as he put it to me. Since 2016, he had been ruminating that there was a disconnect between the United States’ grandiose notion of “exceptionalism” and the experience of ordinary people who felt left behind in the rush to globalization. When Biden was elected in 2020, Sullivan initially wanted a White House job in which he could oversee economic revitalization rather than something at the NSC.
Sullivan’s populist economics were initially out of step with the Democratic establishment. I remember chiding him in the fall of 2016 for encouraging Clinton to reject the Trans-Pacific Partnership, a cornerstone of free trade. The conversation took place at a fancy conference in Aspen, Colorado, where, as Sullivan remembers, the hotel had a menu for dogs. He was adamant that the Democratic elite was missing something fundamental. What he was seeing on the campaign trail that year was an angry, resentful America.
Looking back, Sullivan was right to break with neoliberal orthodoxy. Paradoxically, his lasting achievement in the Biden White House might be in economic rather than foreign policy. With NSC aide Tarun Chhabra, he provided the intellectual firepower for the Chips and Science Act, supply-chain management, infrastructure legislation and other aspects of Biden’s “industrial policy.”
I have a few reactions to all this.
First, in his position as National Security Advisor, Sullivan had more to say than I expected on domestic and international economic policy. My sense when he started had been that he was more of an international relations and national security person than an economics person, but nevertheless he appears to have strong opinions about international economic issues and it's interesting to hear that he "initially wanted a White House job in which he could oversee economic revitalization." He gave a big speech about these issues in 2023, and in my comments at the time, I pointed out what I thought were some flaws in his understanding of U.S. and international trade policy. I see similar problems in the excerpt quoted above. Has there really been a "rush to globalization"? It seems to me that it has all been pretty slow and plodding, with protectionism strongly embedded in both the domestic and international parts of the system.
There is a view out there that the U.S. has been practicing an extreme version of free trade for many years now, but people who work in trade policy know that's not the case. Every "free trade agreement" has a wide range of carveouts. For example, domestic industries have been using anti-dumping laws to protect themselves from import competition all along (this avenue was ratcheted up in 1980 with the shift of dumping/countervail calculations from Treasury to Commerce). Here are just a few examples from the supposedly free trading "neoliberal" 1990s:
- 2.36%-55.77% duties on canned pineapple from Thailand in 1995
- up to 61.67% duties on bicycles from China in 1996
- 4.16%-188.45% duties on tomatoes from Mexico in 1996
- 6.28%-243.87% duties on preserved mushrooms from India in 1998
- up to 54.55% duties on non-frozen apple juice from China in 1999
As another example, U.S. farm subsidies have been used extensively for decades, with careful carveouts from WTO rules providing a legal basis. (For those of us who have been complaining about farm subsidies all these years, the Biden administration's semiconductor subsidies aren't that new and surprising.)
Second, I have no idea what "the American middle class is a national security asset" means, but putting that aside, I wonder what exactly he has in mind when he uses the term "middle class." Does Sullivan think he is middle class? He seems to have objections to the "Democratic elite," but isn't he part of this elite? More generally on the middle class, what percentage of Americans think they are middle class? My sense is that the number is fairly high, which makes me think the category might be so broad that the term is not that useful. The middle class is not a monolith, and if you say you want to help the middle class, you should probably explain which middle class people you think you are helping and how exactly you are doing so.
Several Biden administration policies are mentioned above in this regard. What impact are they having on the middle class broadly speaking? For some of these policies, if there are benefits, from what I can tell they go to a small sub-set of the middle class. To evaluate the overall impact, these benefits need to be balanced against the harms to others in the middle class. To illustrate this, whatever you think of semiconductor subsidies as a matter of economic or security policy, there aren't many people benefitting economically in the short term (a few big companies and their employees mainly), while the middle class as a whole is helping to pay the bill for these subsidies. It's worth talking to people in the middle class to see what they think of things like this, but my sense is this does not happen much in practice. Instead, there is a think tank/White House convergence around what the middle class needs, and then the administration and its allies try to sell the idea to the rest of Washington. What do all of the many millions of people in the middle class think of the idea? Were there alternative ways to achieve the policy goals -- without spending taxpayer money this way -- that some middle class people might have preferred? What do people in the middle class want the administration's priorities to be? These are questions that don't get as much attention as they should.
Relatedly, free trade and globalization have come under attack in recent years (even though we have never been close to having free trade, as noted above), but now that industrial policy has undergone a revival, it's time to put that under the microscope. To what extent are the "ordinary people" referred to in the Washington Post article helped by industrial policy? A significant aspect of the Biden administration's industrial policy seems to mean subsidies to big corporations. People sometimes characterize certain free market policies as "trickle down economics," but aren't corporate subsidies also trickle down economics, in the sense that some portion of the corporate subsidies will trickle down to the ordinary people who work for the company?
As to the politics of all this, in the 2024 election, American voters didn't seem very impressed by the Biden administration's economic policies. Sullivan and other advocates of these policies may want to think about why that was. I can imagine the answer they will give is the one Sullivan offered in the article: “[A focus on rebuilding U.S. economic strength and the middle class is] a strategy measured in decades, where elections are measured in two to four years.” Clearly, he believes in his preferred policies, and isn't going to let the election outcome affect his view that, in the long run, they will pay off. However, it may be worth reflecting on the possibility that, as suggested above, the Biden administration's economic policies were crafted without talking to enough people in the middle class and simply don't reflect what this group most wanted from Biden when they voted for him in 2020.
