tv American Enterprise Institute Discussion on Economic Populism CSPAN October 30, 2020 12:15am-1:17am EDT
populist politics his combine standard republican tax cuts and deregulation with restriction policies of trade and immigration. and sometimes inflammatory those with lawmakers alike. have those policies been successful in going forward what lesson should policymakers apply with the left and the right? list two great guest first casey mulligan is a professor at the university of chicago serving as the chief economist the council of economic advisers with the trump administration from 2018 august 2019 and the most recent book just last month is your hired.
and michael is the director of economic policy studies here at aei author of the american dream is not dead. released february of the sheer. to start off casey will speak for about ten minutes then mike will offer a ten minute response and then we will have a panel discussion and toward the end at about 1045 we will do q&a. please submit your questions on twitter with #ask aei. >> good morning. i have some slides to share during my presentation good morning i really appreciate aei organizing this i want to
monetize your time you can find more in my new book readers have been time for also coming away agreeing that populism has a real substance. so let's start with the definition of populism. and in this book michael refers to putting the people against the elites. the people and the elites they are in court so i wonder if they are skeptical if they exist but as i explained in my book the only do exist as a group and to prove this is only a slight exaggeration to say we all know each other. even in the trump white house is 100 times of what it is in the general population.
second, it suggest the conflict is imagined are only manufactured by politicians. to the contrary, this is a real conflict from significant policy mistakes which the elites do not acknowledge, let alone fix. i will give you a couple of examples. drug overdoses tripled over ten years but those metric show washington remains oblivious as ever. federal policy is unwittingly fueling the epidemic whispering subsidies up and down the prescription drug supply chain. but at least in the years that i showed you illegal fentanyl did not loom large. during these years and decades before fentanyl would momentarily come into the us market and at the time people
would say the drug supply was present but the justice department would lead us back then in 2013, without any acknowledgment as to what was going on with opioids, the attorney general did this. >> most intense. >> the mandatory minimum sentences i had to impose with drug problems selling relatively small amounts of drugs in a nonviolent way to support a drug habit and had to go to jail for a five year mandatory minimum i feel comfortable doing that. >> announced he would no longer support mandatory minimums. immediately here comes the fentanyl and survey show record increases in the number that illicitly manufacture
opioids the trump campaign called off the opioid endemic on this epidemic this is a con is a fighter that deeply offended the elites. i will go easy on this point so take susan rice is new book she heard say american carnage and that was evident and how the president was saying farewell to the moral universe. she has 534 pages and not with the opioid epidemics with any real substance behind populism. so let's look closer at the data. what did the president say
with the inaugural address? drugs that have stolen too many lives with so much potential it's time to stop right here and right now. very clearly to go back and look at what he actually said to look at the drugs in the crime that are so when too many lives so the monthly data looks like the carnage did stop when the president said it would. it did not go down to zero i have more to say about that and so the new attorney general rescinded the older memo although i am concerned that some are still following
that approach. and with the individual mandate is a classic case for the regular people who have to under the fundamentally flawed theory. another thing they try to do is to force people with a beer budget to have a wine taste there are many examples with sick small dollar loans as jd vance explains in his best-selling book that could be a product to be 40 or $50 to have a short-term loan to pay hundreds of dollars from banks and landlords. but the so-called consumer finance protection bureau
nevermind was those consumers to help them pay the rent and childcare food and vacation and school supplies car payments, power utility, credit cards, medical, insurance premiums and student educational and groceries. and with those fda regulations with a protected drug manufacturers. this is not a question of cvs on the safety and efficacy because the formula so the charged brand-name prices for generic products.
so president trump ended that and 2017 this really her chinese and other foreign companies who previously secured themselves special favors and israeli manufacturer stock crashed and investors acknowledge was going on with more competition for generic drugs stemming from what the fda began doing in 2017. and with the consumer price index for prescription drugs and that it became negative for the first time in 46 years. deregulation is a dirty word in certain circles to call it the standard republican fair. so by itself translates into ongoing savings of 11 percent of prescription drugs generally which is a big deal especially for low income
families. i understand why any populist will reverse the savings and return to the privileges. trumps many regulatory changes in the cost to go back to running that regulatory state the way president bush and mcconnell work by two into those income groups and the lowest face higher expenses on - - and expenses with a total of 15 percent of the income. it's like doubling taxes that they pay. so to figure out how to ride populism in the biggest elected position in the world so achieve historic policy with those campaign promises. there are failures.
so thank you again for the presentation there is a lot in there for sure i encourage everybody to buy his book. you can find it on amazon and other places as well but is very thoughtful and worth your time regardless of what happens next month. i think this point and with those other iterations following president trump so i strongly encourage you to buy casey's book. and they have different views on this question thank you for
tuning in. but let me just dive in. where it is populism and to hear casey's presentation before he gave it with the people and the elites. so let me give a three-part definition the political stance putting the people against the elites. that is a key part of any definition of populism. and the people don't exist it does mean the economy is over done by populist and populism.
tax rate is something mitt romney would have done if elected and there would have been pressure on john mccain. that's been a standard goal of the policy for quite some time. deregulation, same thing. find me a republican who doesn't think the u.s. economy is too heavily regulated. so those are certainly parts of the president's policy. they are successful parts of the agenda but i wouldn't call them populist. instead, trade wars, attack on domestic institutions and international institutions, attacks on basic norms, hostility towards immigrants, hostility towards immigration. there i think those can point to the agenda as populist and the definition of populism. in addition, i would argue he typically enters the debate at
the discourse as a populist as well. that is a big part of the presidency. so, maybe the component of the president's populist agenda that he's made the most progress on i think is a trade war. so let's take a look at that in a little more detail. i would argue he was on his own terms. the terms of the trade war are the terms that are used by democrats and republicans who support protectionism, which is there's a group of workers, this part of the country that has been neglected by the elites and they are more interested in globalism and more interested in
overall economic performance than manufacturing workers and towns. so we need them to correct that in balance. even if those policies increase consumer prices, slow investment spending and slow overall economic growth, they are worth it because they afford special benefits to this group of neglected workers, in this case manufacturing workers or certain regions of the country. casing much of the inaugural address he spoke about hollowed out factory towns and the phrase was tombstones across the nation. this is what we are talking about. we were called when the trade war began and going on television holding up a can of campbell's soup saying this can will cost $1.5.
the idea we could spread the pain of the trade war over the entire nation and it isn't going to cost an extra penny to buy your can of soup. that's going to allow significant benefits to flow to manufacturing workers who, again, deserve special attention. the best decision i'm aware of the looks at this hypothesis is a 2019 paper by the economist that view what the effect of the trade war was on manufacturing. and they find that protections from import competition provided by the terrorists does, in isolation, increase manufacturing employment. so, looking at that one component, protection from import competition does increase employment by about 0.3%, under
the measure that they use. but of course that isn't all the trade wars do. trade wars also increase the costs to purchase the goods they need for production, to purchase intermediate goods in the production process. and it's estimated that that affect reduces employment by 1.1%. so, even there, the effect of the trade war on employment from increasing the cost of intermediate goods is significantly larger than the positive effect from protection from imports, and of course trade wars don't just happen. they are wars. the president doesn't just impose tariffs and that's the end of the story. nations retaliate. they also took that into account. three factors, protection from imports, increases in the cost of intermediate production and
they find that overall manufacturing employment was reduced by 1.4% under their measure and as a consequence of the trade war. so, here again, the trade war didn't work even on the populist terms. the populism seceded and the answer has to be known because the trade war heard manufacturing workers, which are the group the president argued needed special attention. of course the trade war had other effects as well. the reduction in the variety of important goods and higher prices with fewer exports which hurt the intensive firms particularly farms, lower stock returns, [inaudible] most of these are pretty
well-established. policy uncertainty from the trade war slowed business investment, which worked against the president's signature legislative accomplishment, which was the corporate tax production. the president returned with his right hand by reducing corporate tax rates and then he discouraged investment with his left hand by starting trade wars. so, the spillover effect, not only did the populism not work, but it also reduced to the effectiveness of the president's other objectives. a little example of this uncertainty, we are doing this for the christmas season -- let's go back to the summer of 2019 which seems like it was two or three years ago with all that has happened the past two months. in june, there was a 25% tariff on $250 billion of chinese
imports. later in the month of june, the president agreed not to impose these and then about five weeks later he abruptly changed his mind and imposed a 10% tariff on the remaining 300 billion of imports. then a few weeks after that, the president said we are not going to do that until december. when asked why he said we are doing this for the christmas season. that's a remarkable statement given that he has spent years telling the american people and telling businesses the trade war wouldn't have any adverse effect on them. this is an example of the kind of climate that is created when you enter into a trade war. how are businesses supposed to make these decisions when there's so much uncertainty about what the trade policy regime would be. this i think undermined the success of the 2017 tax law at
least for now. but, in addition, it undermined the argument that conservatives, analysts and economists put forward which is to respond to these incentives, and if we have a president biden and he raises the corporate tax rate and people on the right and economists that are more in favor of the free markets want to reduce the corporate tax rate again, they are going to have a much harder time doing that because of the presidents trade war. let me just say a word about the populist threat over the long-term. i think the key part of the presidents populism has been this racial ethnic and religious animosity. this must have some effect on consumer spending, on business formation, particularly
sustained over the longer term. the president has the protectionism and post-world war ii liberal international order as a direct threat to prosperity. those institutions and that regime have hit the bed rock of prosperity on both sides of the atlantic for seven decades, and by attacking it and by weakening it, the president risks threatening the foundation of that. and the rule of law the president has eroded the foundations of the economy by labeling the federal reserve chair man as an enemy. the president has hostility towards immigrants, threatens the united states as a global destination [inaudible] a longer run economic effect. the extent to which this damage
occurred over the last four years i think is surprising and considerable. the extent to which it will be lasting i think is more of an open question. but all of this i think is problematic from an economic perspective, and all of it i think flows from the presidents populism. these are all manifestations and i think they contribute [inaudible] the foundation of the president's message from the inaugural address is that people -- i think it just is not at odds with how the facts are not
in line with the economic record of the past three decades which is something i spent a lot of time on in my book. workers do enjoy the perks of their labor. the president has argued on each of these points that i'm wrong and i believe the evidence suggests the president is wrong and the populists are wrong. you hear the same charges on the left as well from senator sanders and senator warren, but i believe we can be confident. it is -- i think we should be optimistic and we should be our poor with this. we can be open to the world and we can be confident about the future. those are not just -- we can be confident, should be open and we
are not in a zero-sum conflict because that is what the economic record shows. so, thank you for tuning in, and i look forward to the discussion. >> thanks a lot, mike. i just want to frame this for a second. i believe mike was saying that the parts of the trump populism, which seem to have worked and were good ideas, or a sort of traditional republicanism, corporate tax cuts and the regulation and the parts of this populism, which in this view have been failures, the trade war and immigration, that's populism that reflects what we hear a lot about with [inaudible] and sometimes immigration. so, casey, is mike right? isn't that just republicanism and conservative economics of
tax cuts and deregulation? >> i think if you look -- and someone should do in an analysis given that he's done a lot of speeches. i think you will find the individual mandate and prescription drugs way more than trade. you take all of the years together there've been periods of time he was more of the site of trade, but every other day he's bragging about getting rid of the individual mandate. you want to say that to the republicans, okay i think it came from heritage, but whatever. i explain in the book the way that trump learned the mandate was terrible and he should get rid of it as a leader of the people. and not the elite. ignore what the experts were saying about how it's needed through the adverse election and
terrible analysis. and he's hearing it now from the people, not from washington. i explained that in the book, the same with the prescription. prescription drugs you hear about that in washington, but they are hearing it from the people. the prescription drug regulations were in there and in the bush administration, they tried to run for this pretty evenhandedly. the opioid epidemic in fact i explain in the book that is a bipartisan failure. the subsidies up and down the supply chain a lot of them came in and a lot of people worked for bush on those issues and are still in the trump administration and bearing out evidence of this. so, these are major things that the president has been doing and the republicans want to [inaudible] the tariffs, i think the first
of all, michael's latest portion if you look at the amount of revenue involved, it's like one of these deregulation's. it's fairly small. now, remember the reagan trade war. i don't either. but if you heard ragan talk about the free trade, it's beautiful. literally brings tears to my eyes to hear reagan talk about trade. but i explain once i actually look at what reagan did, he was every bit as protectionist as trump, okay? does that mean protectionism is populist or republican, i don't know. he's like the iconic republican. he was so protectionist. what he did differently and the reason there were not the trade wars as he had quotas and he protected the industry's quotas rathequotasrather than tariffs,s that the revenue of the extra money tha the consumers paid goo the foreign companies, rather than to the treasury. that is the big difference.
reagan had a very similar -- and that it doesn't say japan, china, otherwise it was the same thing. a lot of these property problems in japan and other places in east asia. reagan was threatening tariffs and protectionism and delivered this number of quotas to try to deal with that. and in the second term, reagan got the japanese and some other east asian countries to agree to some intellectual property protection, copyrights and so on. same thing going on with trump. in fact, trump has a lot of the reagan people. he has the number two trade guy from reagan, the speechwriter that worked on bring down the wall. so, there were a lot of the same people. protectionism i think is a bipartisan affair that has been around long before populism. michael, i would recommend look at the tariff list.
download bright heiser's list and look at what's there. the stuff you are talking about is tiny even relative to that list. we have outright [inaudible] but there's been no president. you can't make pickup trucks in a foreign country because there is a massive tariff that's been there forever and obama and bush never once dreamed about eliminating it. in fact, they promised the prohibitions, the jones act. bush, obama, reagan. they all promised the special interest that they were going to keep that prohibition on importing the cultural shipments. trump is the first one that hasn't promised that he would keep it. as i said in the book he tried and so far has failed to get rid of it, but he isn't telling the special interests that they can keep that. so, i think to settle this
debate we need to be grounded in what's actually said, and what's actually what the policies are. they are brilliant people with lots of things they say and lots of things they do, but i think as quantitative social scientists, we have ways to bring that together and you will see a different picture. >> mike, do you agree that the trade war -- maybe it isn't nearly as important as what you make it out to be particularly versus some of what he views as successes? >> no, i don't. you know, i agree with casey on the record that republican presidents have imposed trade protections. there's no question about that. president bush, president reagan did as well. but the general direction of u.s. trade policy under both republicans and democrats for
decades and decades have been towards greater openness and globalization and fewer barriers to trade. that doesn't mean that there were not ever protectionist policies put in place. it doesn't mean we had a tariff free world under president bush and president reagan and then all of a sudden all of the tariffs popped up under democrats. but it does mean that the kind of protectionist global trade system that was in place decades and decades ago as dismantled the system and has been a bipartisan project. now i think the success of presidents, starting with president bush, president obama were more aggressive towards the
trade practices. that was wholly justified. in the end, i believe that if missus clinton had one in 2016, she would have been more aggressive than obama was and if romney were president he would have been more aggressive than president obama was. what makes the president stand out is his hostility towards the entire region. his hostility towards free trade in general. and instead of rallying an international coalition about trade partners to isolate china and crackdown on the genuine and legitimate trade abuses, the president imposed tariffs on european allies and tariffs on our canadian allies. we talked about pulling out of nato and all these things. so, the president was left
without allies, which has made his policy much, much less effective than it should have been. the president's basic illiteracy about trade from understanding what trade deficits are and what they are not, you know, his adherence [inaudible] view of trade is predicted by all economists as unique and these are distinctly populist elements of the president's approach to trade policy. i don't think it can be accurately characterized as in keeping with the direction of the policies of both parties. and it does represent an aberration from what we have
seen. >> your response to that? >> i think we look at the numbers and you are not going to see trump an aberration relative to reagan. as long as the quotas are there, to measure under reagan you are not going to see a lot of threats. he said the quotas were instead. i don't know and a economist that is like the quotas are better than the tariffs let's give the money to the companies. that's why he didn't have a trade war by the way. he was giving money to the japanese companies while protecting our domestic companies, so of course they didn't fight back. people who were pulled from the reagan administration told me the japanese companies came to the white house and asked for the quotas and reagan gave it to them. i don't like protectionism but if you are going to do it at least do it in a way that brings revenue to the united states. >> as far as -- unless mike has
something to say -- i think a lot of people that think about the populist policy, there was certainly talk about trade and the trade war. as someone that watched a lot of trump rallies in 2015 and 2016, my impression was a pretty big part of the trump economics and also immigration. do you think that the policies have been good ideas and would you like to see them continue in the future administrations or even extended? >> i'm sharing this picture from the president announcing his immigration plan. i don't know if anybody was aware of what his plan was. eventually the canadian and australian plan, which is immigration should be legal, not illegal, and based on economic
contribution of the immigrants. that was his plan. privately with the president said, actually opening up the rose garden ceremony saying citizenship is the most precious thing america has to offer. privately he said that. he went the next step, which impressed me, he said we ought to be selling citizenship, which of course is what gary becker called the radical proposal for immigration reform what to have this fee. now he's a good politician and knows he isn't going to go out and try to sell that to congress, but the canadian and australian systems are point based systems. the kind of central plan way to imitate what the fee-based system what deliver. now of course, congress isn't going to do anything that the
president wants on immigration so you may say this isn't that meaningful, but this is his plan and this is the chance to do demonstrative acts. it was kind of an approximation to the gary becker plan. i was quite impressed with what the president has done with immigration in terms of policy. the rhetoric, i'm a policy analyst, not a speechwriter, but i look at the substance and i am pretty impressed. >> are you impressed by the president'residents immigrations or direction? >> i think that in terms of the substance of the specific postal, there were a lot of questions about the details of that proposal, but the basic idea that we should have a skill
-- move towards the skill-based immigration system and away from the immigration system is completely sound. i guess my own view is why not do both, why not just have a significantly larger number of high skilled emigrants and add that on top of what we are already doing. but that is a reasonable policy goal. again the details of the proposal needed some work, but the deals were overall architecture and philosophy. i agree with casey about that. i don't think we should judge the entirety of the president's work on immigration based on that one proposal, and again going back to the question whether it's succeeded or failed, part of the reason why
that didn't get traction is because the president has no credibility on the issue because of his extreme hostility towards immigrants and immigration. the travel ban on people from some muslim majority nations set the tone early in the administration on this, and all the way up until the pandemic when the trump administration attempted to say that people who were here on student visas if you can't attend class in person you have to go back to your home country, which was just outrageous public policy. the last four years have been kind of littered with that type of thing. and that has stopped any
kind of politics and policy that doesn't believe in constraints or maybe trade-offs either and republicans used to be very concerned about budget deficit and entitlement that has not been a big part of the trump and populism so far does that continue now worrying about deficits and entitlements? that's for the other party to worry about in power. >> that trump and populism you thank you are right of the president say we just spin that we are all a little bit faster is not concerned about the deficit.
>> i view that as a failure ultimately those fundamentals intergenerational equity but the problem is that children and the grandchildren the way to take a more holistic view of generational policy covid factors into that how do we treat the older people i know he's that unusual with generational and equity but certainly in that specific area of treasury bonds and bills he will put the burden on the future generation. >> is at the lack of interest or concern the used to be a big concern's.
>> i think there is bipartisan concern it's a concern that either party has and of course it's true that president trump significantly increases structure all budget deficit he did that with house speaker paul ryan and there was not a lot of concern about that from the republican party at the time the deficit went up significantly under george w. bush who established
additional entitlement program without a funding mechanism and of course the deficit went up under president obama as well. this is a bipartisan issue so where populism shows up with the president trump approach which is an aberration among republican presidents the enthusiasm for not cutting projected spending on social security and medicare with the entitlement spending and president trump not only just ignore that. and was social security on the 2016 campaign and actually in
>> we have the blackberry what is coming next. >> you ready for this one. [laughter] the iphone? >> something better. >> the populism will remain on man try to figure out what he did well there would go back to the elites are making mistakes and they are not acknowledging the mistakes mr. michael's book i agree with it's good for the wide swath of the population. but some people they like to do a job and if they don't do it well and subordinates are not doing it well, they have a right to be angry and they are angry with a the individual
populism involved in the post trump era? >>. >> and it does involve less than is commonly believed i think united states was on the cusp of extinguishing this way when the pandemic it. and i would note that when the economy was still weaker and with that purpose candidates would have had so there is a
pattern and you see it over the last century or even longer across democracies to have a big recession in the financial sector and you get with those parliamentary systems and we saw the sandwich and then as the recovery continues populism is receiving in the united states and the pandemic so my first answer to your question is the current firm this recession and may surge again because
we're in terrible shape the world means a lasting element and i hope the republican party because the president trump is more focused on providing economic opportunities than that previously has been. i hope is not just the white working class 20 percent are one third of the distribution but that would be a positive lasting legacy that justifiably should be a part of the political right
hopefully executed better but i would expect that would last but unfortunately the possibilities for immigrants and immigration will have some staying power on the political right of the united states. >> is there something missing from your definition and mine they are about the elite versus the people were calling sanders and warren populist the whole agenda is to give more power to the elite the people. >> they don't see it that way so i'm asking the question for
the clinton administration did about the price of heroin so these were to these trade arrangements that were not acknowledged. >> and that net benefit. >> it's hard to analyze there is a whole national security part of it and with immigration i'm coming from universities so bread the university sector has been given a lot of special favors among immigration and you can understand where the people would say they hate us that we