What America’s Bold, New Economic Experiment Is Missing

The news media is very good at focusing on points of disagreement in our politics. Wherever Democrats and Republicans are butting heads, that’s where we reliably find news coverage. When right and left disagree about trans rights, or the border bill, or abortion, or January 6, or the indictments over January 6, you can bet that news coverage will be ample. But journalists like me sometimes have a harder time seeing through the lurid partisanship to focus on where both sides agree. It’s these places, these subtle areas of agreements, these points of quiet fusion, where policy is actually made, where things actually happen.

I’m offering you that windup because I think something extraordinary is happening in American economics today. Something deeper than the headlines about lingering inflation. High grocery prices. Prohibitive interest rates. Stalled-out housing markets.

Quietly, and sometimes not so quietly, a new consensus is building in Washington concerning technology, trade, and growth. It has three main parts: First, there is a newly aggressive approach to subsidizing the construction of new infrastructure, clean energy, and advanced computer chips that are integral to AI and the military; second, there are new tariffs, or new taxes, on certain imports, especially from China, to protect U.S. companies in these industries; and third, there are restrictions on Chinese technologies in the U.S., such as Huawei and TikTok. Subsidies, tariffs, and restrictions are the new rage in Washington.

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

If you have questions, observations, or ideas for future episodes, email us at [email protected].

In the following excerpt, David Leonhardt and Derek examine the areas where Republicans and Democrats agree when it comes to policymaking and how American views on economics have changed.

Derek Thompson: I’ve been reading you since I became a professional salary journalist 16 years ago. That was the first year of the Obama administration, in 2009, and this has famously been, the last 16 years, an era of deep and profound polarization in both the electorate and in Washington, D.C. The Republican Party has moved to the right by many measures. The Democratic Party, I think, has clearly moved to the left. Each party sees the other as an existential threat. Negative polarization is ascendant in the electorate; that means the number of people who essentially define their politics in opposition to the other rather than construct their own sense of positive visions for the future has increased.

Young Democrats and Republicans are less likely to say they will date across the political aisle. And this has culminated famously in some of the least productive Congresses in history over the last generation. That’s been the narrative for 16 years, and it feels like if you’re a political commentator trying to burn some time on cable news, one thing that you can always say to fill 15 seconds is, “Well, as we all know, America has never been more divided.” But in a new essay for The New York Times, you call bullshit. You spot a narrative violation. What do you see?

David Leonhardt: So I should give some credit where it’s due. It was one of my editors who called me and said, “Hey, can you try to make sense of the fact that we keep talking about the fact that the country is so polarized and yet we keep reporting these stories on the home screen and good old print front page of The New York Times about how Democrats save Republican Speaker Mike Johnson’s job? Democrats and Republicans pass Ukraine funding. They pass a bill saying that China must sell TikTok. They pass an infrastructure bill that President Biden’s pushing. They pass a semiconductor chips bill.”

And it’s not just legislation, right? President Biden has kept many parts of President Trump’s trade policy toward China. And [my editor] basically asked me to make sense of how is it that we have had so much bipartisan legislation. Now, we are a polarized country in so many ways, as you just ticked through. And there are real ways in which the parties are more polarized and further apart than they have been in the past. And there are real threats to our democracy, and I want to be clear about all that. But at the same time that that’s happening, we also see in some areas—not all areas, but in some areas—what feels like a bipartisan agreement. I called it neopopulism, in which large parts of the Democratic Party and some parts of the Republican Party agree on areas that are fairly central to policymaking.

Thompson: Let’s tick off some of these areas you’ve been talking about. You saw bipartisan motions to stop the removal of Mike Johnson, the speaker. You have bipartisan votes on Ukraine aid, Israel aid, Taiwan aid, the TikTok sale, which is also foreign policy (I think something to note for the conversation we’re about to have). And then in the Senate, 19 Republicans voted with 48 Democrats to support the infrastructure bill, and 17 Republicans voted with 46 Democrats to support the CHIPS and Science Act, which, among other things, subsidized semiconductor manufacturing.

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

Leonhardt: Well, you just used a nice phrase, “Washington consensus,” which in fact has been a term of art for a long time. Another phrase that people use is “neoliberalism.” And the basic idea, which was ascendant in the ’90s and the early aughts, and understandably so, was that minimal government intervention and a free market economy was the way to go. And that’s what led to the trade liberalization of NAFTA. That’s what led to the United States allowing China to join the WTO and be part of basically the global trading network as a full member. That’s what led to a lot of deregulation. Much of this happened under both Republican and Democratic presidents, right? NAFTA and Chinese trade liberalization, these were policies pursued by George H. W. Bush, Bill Clinton, and George W. Bush. And this came in the wake of the Cold War when communism had failed, obviously, and capitalism in the United States had succeeded.

And a lot of people looked at that and they said, “OK, if communism has failed and capitalism has succeeded, we should go to an even more pure form of capitalism. We should deregulate. We should reduce taxes on rich people. We should not worry about labor unions. We should lower trade barriers.” And what the advocates for this said was, “This will bring prosperity not just for rich people, but for all Americans. And it will bring freedom to other countries.” These promises were very specific. You can go back and look at the things that politicians said. They were somewhat scornful about people who suggested otherwise. I mean, Bill Clinton at this point notoriously said, “China, good luck with trying to regulate the internet. It’s like trying to staple Jell-O to the wall.” Right? And everyone kind of laughed. And I don’t mean to pick on Bill Clinton. You could find similar things from the Bushes, from a lot of Republicans as well.

And these promises just didn’t work out. Jake Sullivan, Biden’s national security adviser, who’s also spent a lot of time on economic policy, has written that these were promises made and not kept. China isn’t freer. It’s less free. Russia isn’t freer. It’s less free. Markets didn’t bring democracy around the world. And as you know very well, Derek, by almost any measure, living standards for people in this country who are in the bottom 60 percent, 70 percent of the population have not done great. My favorite statistic—it’s the first chart in the book I recently published—is that the life expectancy in the United States is lower than in any high-income country in the world. And we can do similar stats on incomes and wealth and family structure and you name it. But the promises of neoliberalism, however reasonable they may have been in the moment, have absolutely not been kept. And I think that you see people from both the left and the right saying, “Wait a second, if that old system didn’t work so well, maybe we should try something else.”

This excerpt was edited for clarity. Listen to the rest of the episode here and follow the Plain English feed on Spotify.

Host: Derek Thompson
Guest: David Leonhardt
Producer: Devon Baroldi

Subscribe: Spotify