Preet Bharara:

From Cafe and the Vox Media Podcast Network. Welcome to Stay tuned. I’m Preet Bharara.

Greg Ip:

As Kane said, when the facts change, I change my mind. And I see this positive combination of events and I think now maybe the probability of a recession is only say 50%. Why isn’t it lower?

Preet Bharara:

That’s Greg Ip. He’s the chief economics commentator at the Wall Street Journal, where his sharp and insightful analysis illuminates what can often feel like a foggy economic landscape. He joins me to shed light on some of the biggest questions about our economic outlook, like is the US actually headed for a recession? We also discussed President Biden’s strategy to stimulate growth across industries. Why higher prices may be sticking around longer than anticipated and the post-pandemic shifts in our work culture. That’s coming up. Stay tuned.

Q&A

Now let’s get to your questions.

As you might imagine, we’ve gotten a lot of questions this week about Trump’s fourth indictment, this time by a grand jury in Georgia, over his alleged attempts to overturn the results of the 2020 election. So instead of trying to answer them all here, I want to direct you to a free full length Cafe Insider episode we recorded soon after the indictment was unsealed. My co-host Joyce Vance and I broke down the charges against the former president and 18 of his allies and discussed the complicated nature of a criminal trial like this one. To listen, head to cafe.com/georgia. That’s cafe.com/georgia.

This question comes in an email from Mel who asks, “What’s your reaction to Garland’s appointment of a special counsel in the Hunter Biden investigation?” There’s a lot of speculation about this, a lot of commentary about this. You’ll recall that Hunter Biden was being investigated by the Delaware US Attorney’s Office and that Delaware US attorney David Weiss, had been appointed by Donald Trump, was held over in the Biden administration so that there would be some semblance of independence in his decision-making about Hunter Biden. The Attorney General Merrick Garland has said again and again and again that David Weiss has full authority and independence to make whatever decisions he was going to make about prosecuting or not prosecuting Hunter Biden, what the charges should be, what the disposition should be, that he had full control of all of that. Then during the plea proceeding or what was supposed to be a guilty plea proceeding to a couple of tax accounts and diversion on a gun count, things went south.

The judge was not satisfied that there was a meeting of the minds between the Justice Department and their prosecutors on the one hand and Hunter Biden and his lawyers on the other. So the plea was scuttled. Some people predicted that they would solve their differences and come back and actually have a successful guilty plea proceeding. That has not happened. The government has made it clear that this case will now likely go to trial and David Weiss then apparently asked Merrick Garland to be appointed under the regulations as a special counsel. Now, Hunter Biden’s lawyers and others have said that change is very little and they’re largely correct. As I said, Merrick Garland had given his word that David Weiss had all sorts of independent authority to make decisions as he saw fit. There are a few things that are a little bit different now that there’s an official appointment in elevation to special counsel status.

For one thing under the regulations that apply, now, David Weiss as special counsel at the conclusion of the matter, has to provide the Attorney General with a confidential report and the Attorney General can decide whether to make that report public or not, in redacted form or not. You’ll recall that that’s exactly what happened with special counsel Bob Mueller. And there was controversy about the report and what was redacted by Bill Barr, but that report would not have been required before last week. Second, although we’ve talked about how much independence David Weiss has, it is still the case that the Attorney General is his boss and has the ability and the right under the regulations to disagree with the prosecutorial decision that David Weiss might make.

If however, Merrick Garland vetoes some decision by David Weiss. He has to inform certain members of Congress. So you have a report requirement, you have a disclosure requirement to Congress and also under the guidelines, it’s a little bit harder I guess to fire David Weiss, remove him without cause. So all in all, I think it’s a good thing. I think it improves the optics of the situation. Of course, if you look at the reaction of Republicans, literally nothing would’ve satisfied them. They first claimed they wanted a special counsel appointed, some of them, they got one, and then they complained about that. As much as Merrick Garland tries to remove politics from the equation, the reactions on the part of many people across the political spectrum is going to remain infused with politics.

This question comes in an email from Isabella, who asks, “Jack Smith has requested a speedy trial for Trump’s January 6th case requesting that the start date be set for January 2nd. What is the likelihood of that happening?”

I think the likelihood of a trial happening that quickly in the January 6th case is quite low. There are going to be a lot of motions. There’s going to be a lot of clamoring by the Trump team to push that trial off. And a trial of this magnitude with these stakes and of this relatively interesting complexity to occur in federal court in under five months seems unusual, so I doubt it. Now, I will say, as some other people have pointed out, the judge has retained the option of using a speedy trial kind of as a cudgel on Donald Trump, if he continues to speak out or intimidate witnesses or behaves in a way that is contrary to what his bail conditions require.

She has said that she reserves the right to get to trial more quickly than she might’ve otherwise gone to trial. So it is still possible, I guess that trial will happen before the election. I don’t think it’ll happen on January 2nd, and of course they’re going to be competing trials in the three other matters and we’ll see how that gets coordinated if it gets coordinated at all. What I found sort of interesting in the government’s application for a trial to begin on January 2nd was their reference to the interests of the public in a speedy trial. Now, sort of traditionally, lawyers and judges and the parties think about a speedy trial as a right that helps the defendant, so they can get closure, they can get reposed, they can get on with their lives. But the government in its application to the court repeats over and over again, the importance of a speedy trial, not just for the defendant or for the defendant’s rights or the vindication of the defendant’s rights, but for the public to see that justice is done.

They repeat the aphorism justice delayed is justice denied. And the reason that’s interesting to me is that the government seems to be implying, and for good reason, but not stating explicitly that given the circumstances here, given who the defendant is… given that this person who is a defendant in this criminal case may be the president in a few months time, if the trial doesn’t occur in a speedy fashion, if the trial doesn’t occur before the election, it may never happen and justice will be actually and totally denied. Why is that? As I’ve said before, this is a Federal Justice Department case and if there’s no resolution of the matter, there’s no trial before the election, Donald Trump becomes the President once again, he has various options and means to make the case go away. He could direct his attorney general to make the case go away.

He could try to pardon himself, although that would be controversial and would be litigated, and he can also make the argument under the Office of Legal Counsel opinion that says that a sitting president as commander in chief, cannot be distracted by being criminally prosecuted. So it’s a little bit interesting to me that the government is not saying that explicitly, but that’s what’s on the table.

I’ll be right back with my conversation with Greg Ip.

THE INTERVIEW

Has the economy finally turned a corner? Does less inflation mean we’re headed in the right direction? My guest, Greg Ip, has been reporting on and deciphering economic issues for decades. Greg Ip, welcome back to the show.

Greg Ip:

Thanks for having me, Preet.

Preet Bharara:

As you said, just as we were beginning to record the interview, the economy is keeping you very busy. Is this busier than you’ve been for a while?

Greg Ip:

The last three years have been kind of nonstop. The pandemic unleashed an economic crisis as well as a health crisis. That was barely over when inflation began to become a problem. And then Russia invaded Ukraine and the inflation problem got a lot worse. And now we’re all talking about is it going to be a soft landing, a hard landing or no landing? And in the background there’s a presidential election starting to gear up, and President Biden is trying to make the case for Bidenomics. So yeah, a lot going on.

Preet Bharara:

So I don’t know what soft landing, hard landing means. I do know a little bit about the word recession, which is the word that’s been on everyone’s lips for a while now. Is there going to be a recession? Are we kind of in a recession? The textbook definition of recession is two consecutive negative quarters of growth. How come we’re not in a recession when everyone is predicting it just a year ago?

Greg Ip:

It all starts with the picture of inflation. Historically, when economic expansions got very mature, unemployment got very low, businesses started to run out of capacity, and so prices and wages would go up. The Federal Reserve would respond to this by raising interest rates. If we raise them enough because it was worried about inflation. You could see all those things roll over. Housing and activity would fall and the economy would go into recession. And so a lot of the prospects of going to recession now are really based on how successful the Fed is in getting inflation down without having to raise rates to such a level that causes that sort of a recession.

And stepping back for a moment, inflation got as high as 9% a year ago and it’s now down to 3%. So when we were at 9%, it was hard to envision getting it down to 2%, which is the Fed’s target, without really having to do a lot of damage to the economy. But now we’re at 3%. And people are saying, “Maybe we can get to 2% and we don’t need to have a recession.” So that’s kind of where we are right now.

Preet Bharara:

How much of the more optimistic outlook is a result of some of that bipartisan legislation that passed, like the Inflation Reduction Act and other things?

Greg Ip:

Almost none of it. This business cycle has been a little unusual. As I mentioned, you typically have a dynamic where after a few years demand gets very hot and you can see that in the demand for goods and services, the demand for workers and so forth. And that’s where the inflation originates. This one’s a little bit special because as almost everybody knows, after the pandemic you had all these supply chain disruptions. You couldn’t get furniture, you couldn’t get cars, you couldn’t hire. The pandemic just threw everything into a tizzy. Supply chains were screwed up, nobody wanted to work where they had moved or something like that. And it was that reduction in supply rather than a situation of excessive demand that pushed inflation as high as it did. And one of the clues to that, Preet, is the fact that it wasn’t just happening in the United States.

In fact, almost every single major country had a very high inflation rate. Now we added to that with a very large stimulus program. $1.9 trillion passed by President Biden and Democrats in early 2021. So he had this combination of restricted supply and elevated demand, and you don’t have to be a PhD economist to know that’s a recipe for higher inflation. Now fast-forward a few years and a couple of things have happened. A lot of those supply chain problems have worked themselves out. Turns out people have all the computers and exercise equipment that they need. Companies have been able to ramp up production of things like semiconductors that were missing early in the cycle. And energy prices, although they’re working their way back up again now are down a lot. And I mean a lot from the peaks they reached in the months after the Russian invasion.

And so that improving supply is a big part of why inflation has come down as much as it has. What about the other piece, softer demand? Well, that’s a factor too. The Federal Reserve has raised interest rates from like zero to over 5%. And anybody went shopping for a mortgage lately knows that that’s made it harder to buy a house. And that ripples through to all sorts of other demand like for furniture and renovations and carpets and so forth. So you now have a combination period of supply improving and moderately less demand. And those two things might set us up for a lower inflation rate without the necessity of just screwing the screws so tight that we end up in a recession. Did President Biden’s legislation help? Well, he had this Inflation Reduction Act, but it didn’t really do much to reduce inflation.

Preet Bharara:

It’s right there in the title. It’s in the title.

Greg Ip:

It’s in the title.

Preet Bharara:

What do you mean?

Greg Ip:

There was a brilliant piece of political marketing. There wasn’t really much inflation reduction going on in that act, to be honest. The most important parts of that act actually spent money. They didn’t save money. They were about spending money on electric vehicles, spending money on renewable energy and so forth. And you might have a view that that’s really important that we need to be at the forefront of those technologies. Climate change is important, but that’s not how you reduce inflation by spending more money on that sort of stuff. The stuff that was supposed to reduce inflation was essentially getting the IRS to crack down on rich people and collect more taxes.

That part’s barely gotten started. So no, the president’s legislation has done nothing to actually assist with the situation. There was of course, as you probably know, a debt ceiling showdown between Republicans and Biden a few months ago. And they did hammer out a deal, but that deal still has not been consummated. We’re still waiting for Congress to come up with the actual spending bills that fill out that deal. And even assuming they stick to the parameters of that deal, the reduction in spending is very, very tiny.

Preet Bharara:

You asked at the outset the question, will we have a soft landing or a hard landing? What would constitute a hard landing and what would constitute a soft landing and which do you predict?

Greg Ip:

Let’s actually suggest there are three possibilities. So a hard landing is we get inflation down, but it takes a recession to do it. A soft landing is we get inflation down, but it didn’t take a recession to do it. No landing is we don’t get inflation down at all. So how do I feel about all those three possibilities? Well, I’d say that if you’d asked me this question four or five months ago, I would’ve said the probability of a hard landing was about 70%. I just wasn’t seeing inflation making much progress from the 4 to 5% level down to 2%. But today we have made progress and it’s happened with the unemployment rates still staying very low at around 3.5%. So listen, I’m not like immune to the data. As Kane said, when the facts change, I change my mind and I see this positive combination of events and I think now maybe the probability of a recession is only say 50%. But why isn’t it lower?

Why don’t I feel that it ought to be like zero? Well, that’s because we still have this hardcore of inflation of about 3, or 4%, we call it the last mile. How do we get from that last three or 4% down to 2%? When I look at the very tight labor market, I look at UPS handing out 30% pay increases to its workers to avoid a strike. I see an economy that still seems to be kind of stuck in a mode of thinking that inflation is here to stay. And the Federal Reserve will not be happy with that. And unfortunately that tilts the odds towards the Fed keeping interest rates as high as they are now and possibly even higher and eventually weakening the economy enough to produce something that looks like a recession.

Preet Bharara:

Can you explain to people what the magic of 2% inflation is? Why 2%?

Greg Ip:

In the 70s and the 80s when inflation was quite high, like in double-digits, we knew we wanted inflation to be lower, but we didn’t have a strong view of just how low it should be. Now if you were a purist, you say the only good inflation rate is a zero inflation rate, money should not lose its value over time. But a lot of folks said, “Well, there’s a problem with zero.” For one thing with zero, a little bit of inflation actually adds a little bit of grease to the wheels of the labor market. Let’s say you’re an employer, times are tough. You need to cut back on your labor costs, you can lay people off or you can cut their pay, but if you’re raising your prices 2% a year, you can just freeze pay and that’s like a real pay cut of 2%.

And so it turns out that having a little bit of inflation actually lubricates the gears of the labor market. So people were of a view that a modestly positive inflation rate say 2% would be good. The other reason you don’t want to zero inflation rate is that the way the Federal Reserve stimulates the economy when it’s in recession is by lowering the cost of borrowing below the inflation rate so that you actually achieve a negative real interest rate. You can’t really do that if the inflation rate is zero because that would require negative interest rates, which are almost impossible. So those are two good reasons why you wanted a small positive inflation rate. And people arrived at the number two. And in 2012, the Federal Reserve formalized us and said, “Our objective is 2% inflation.” Now since then, you’ve heard people say, “Well, why not 3%?”

There’s no empirical evidence that tells us an economy does a lot worse with 3% inflation. Well, I’d say the main reason is habit. Now that everybody’s used to 2%, you don’t really want to go around and monkeying around with expectations right in the middle of that because the fear is if we decide to raise a target of 3%, people will say, “Well, wait a minute,” if you just raise it to 3%, maybe next year you’ll raise it to 4% and then to 5%, and then you’ve kind of completely lost the public. And psychology becomes completely unmoored like in the 70s.

Preet Bharara:

You say, and you’re brave enough to put a percentage on it, that there’s a 50% chance of a recession still. The S&P 500 I believe is up about 18% so far this year. What’s the consensus on Wall Street about a recession?

Greg Ip:

Well, the very fact that the S&P is up 18% tells me that the consistence on Wall Street is that there won’t be a recession because that is not the type of behavior you see on the market before a recession. Now a couple of caveats, a lot of that increase is just like five or six stocks. Some of it is excitement about artificial intelligence. And it’s hard to sort of relate that to what’s going on in the real economy. I’m old enough to remember the dotcom boom of 2000 to 2001, and boy, they were paying some pretty crazy prices for stocks back then. And of course we did have a recession shortly after that. So there’s that. But yeah, I think that optimism springs eternal on Wall Street and that each time a positive number has come out, they’ve tended to sort of see the glasses half full, not half empty.

But listen, that’s real people with real money on the line, and I’d say that’s one of the reasons I’m hesitant to be so confident that they’re actually will be a recession. The other market that you want to watch is the bond market where long-term interest rates are set. And there you see also a significant degree of optimism with the long-term tenure bond yield only at 4% and investors expecting inflation to return to 2% in a few years time. If investors conclude that they’re wrong, it’s highly unlikely that long-term interest rates can stay so low and that they’ll have to go up. And when long-term interest rates go up, that attracts money that might’ve otherwise gone into the stock market. And so I suppose what I’m saying here is that if the optimistic case about inflation turns out to be wrong, there are a lot of reasons to think that the markets simply cannot be as buoyant as they are today.

Preet Bharara:

As the market essentially, per your comments, already priced in the likelihood that there won’t be a recession. So in other words, if the outlook improves and more and more people like Greg Ip say that the likelihood of recession keeps going down and there’s a consensus among economists, that it becomes a very small percentage, when that consensus is reached, what happens to the market? Nothing?

Greg Ip:

First of all, I’m not a market expert and advice is worth what you pay for it. So just keep that in mind. But I will say the market tends to discount all the news that’s out there right away. So if the world turns out exactly as a market expects, I wouldn’t expect anything special to happen to the market. It’ll just sort of grind along. So if you ask me, my sense is that the greater risk of the market is that things don’t turn out the way they expect and that we do have higher inflation and a recession and that’s going to be problems.

Preet Bharara:

Has the effect of COVID and the pandemic largely receded with respect to the economy or are there still pockets of areas where the lingering pandemic still has an effect on our economic lives?

Greg Ip:

If you were to look at the supply chains that were most affected by the pandemic, you probably remember stories about 80 to 100 container ships wading off the coast of California to unload. That’s all gone. There’s no container ships waiting there any longer. The supply chains are working just fine. When we survey manufacturers and service companies, they have no trouble getting the parts they need. You walk into an appliance store or anything like that, they can have exactly the washing machine or the TV you want right away. So in that respect, I would say that there’s no evidence of the pandemic. Similarly in the labor market, we’ve made a lot of progress bringing back a lot of the people who left their jobs were moved to a different place in the initial months after the pandemic.

I would say that if you were looking at those things, we’ve largely survived that. Look, even the number of people who can’t work because they’re sick has gone down a lot and that’s a win for the economy and a win for our overall health. Where I do see some signs the pandemic continuing on, and this could last for a while, is this kind of ephemeral thing about people’s attitudes, workers in particular. Have you heard expressions like quiet quitting, work your wage, lazy girl job? Have you heard those?

Preet Bharara:

Yes.

Greg Ip:

So it speaks to this culture among young people today that career just isn’t as important as it used to be. And I detect, I don’t know if you’ve detected this, Preet, but I sort of detect among people in general sort of a rebalancing in their attitudes towards life and work with more emphasis on life and less on work. And we see this show up in things like the fight between bosses and workers about remote work. I don’t know any boss who loves it, to be honest. Most of them wish their people were all in the office right outside their door where he could order them around every day. And employees love it. Who wouldn’t? You don’t have to commute. You don’t have to find a special suit or put on makeup every morning. You can go to the gym, go pick up kids to the daycare, get that shopping trip done in the middle of the day and catch up in the evening.

So you have this fundamental difference between workers and employers about things like remote work. You have much more emphasis on things like paid time off and parental leave as opposed to actual pay increases, when employers are looking at holding onto their most valued employees. And this shows up in the data and interesting way. Even though we’re creating a lot of jobs, the jobs that people are working, they’re not spending as many hours on them. You look at a variety of data and surveys, you find that people are working less, fewer hours per person than they were before the pandemic. And I think that this speaks to a fundamental shift in attitudes that we’ve had. And that is a consequence of the pandemic.

It doesn’t show up in supply chains, it doesn’t show up in the infection statistics, but I think it does represent a cultural change which is affecting the workplace. And it’s something we have to grapple with because we are a country that is already running short of labor because of the aging of the baby boom. And because immigration has never really come back since the significant cutbacks we’ve had over the last few years. If the people we do have decided they want to work fewer hours, there’s going to be a real issue finding all the people necessary to do all the work that has to be done.

Preet Bharara:

Yeah. You wrote recently backing this up with data, the things you just said, that we seem to have a happier workforce. You write as follows, “The conference board in May reported that worker satisfaction rose sharply in 2022 from 2021 and reached its highest since the survey began in 1987. This isn’t because workers find their jobs more fulfilling, but because their jobs are consuming less of their life.” And then you say also, “Among the 18 components of the survey, interest in work made the smallest contribution to this year’s increased satisfaction. Work-life balance made the largest. Wages were somewhere near the middle.” Is this temporary or is this a sea change that will be permanent in the United States?

Greg Ip:

There’s a lot of people out there would think it’s temporary. They say, “Look, this is a really tight labor market. Three and a half percent unemployment, 1.2 vacant jobs for every unemployed person.” This is the kind of job market where workers can more or less set the terms of their engagement. The bargaining power is all on the side of the workers and you see that in things like the UPS, labor settlement or the settlement of the railroads and so forth. But there will one day be a recession, even if I don’t think it’s going to be a recession this year. There will one day be a recession and unemployment will be higher and maybe all that leverage goes away. All that bargaining power goes away and employers will finally be able to say to employees, “Show up to work in person, put in the 40 hours, put in the extra overtime,” and so forth.

And maybe the things that we think, maybe that tilt in favor of life instead of work starts to move back towards work instead of life. That’s one theory. And I know a lot of economists who see it that way. But I know a lot of people who don’t think it that way. They think something really permanent has changed. And we’ve seen this in history before when something happened in the culture that really changed attitudes. Back before World War I, World War II, for example, it was typical that people worked a six-day week. Then Henry Ford brought in the five-day work week, and that became actually formalized in law in 1938 when essentially the Fair Labor Standards Act said people who work more than 40 hours a week should get overtime.

And then after during World War II, there is a very large increase in the participation of women in the labor force. And after all the GIs came back from the war, some of those women stayed. Again, a sort of a cultural historical shift in attitudes towards work. And I think that the pandemic will have a similar lasting effect. I don’t know how big an effect, it’s quite possible that some of this tilt in favor of workers will go away when we have a downturn, but I think a lot of it will stay.

Preet Bharara:

How much of this trend if, you know, are we seeing in other countries like in Western Europe where already there’s limitations to how much people work? There’s a lot of vacation time, there’s paid family leave, and people generally, workers generally, if I read the polls correctly, are more happy and satisfied with their work-life balance even before the pandemic. What’s the trend there?

Greg Ip:

Well, we do know that in Europe, ours like in the United States, have not recovered to where they were before the pandemic. But importantly, as you’ve just pointed out, Europe has had a different attitude towards work than Americans for a very long time. In fact, you have basically seen the number of hours that the typical person in Europe works decline steadily over the last two or three decades, while it stayed relatively high in the United States. We used to see books with titles like the Overworked American, because Americans just for some reason seem to either because they had to or because they wanted to spend more hours at the grind, they had fewer holidays, they had fewer benefits and so forth.

So I suppose one way of interpreting what’s been going on, Preet, is that you could say this is a bit of a europeanization of the American worker. Are we at European levels? Not by a long shot. But if you just look at the survey data, what are employers offering their employees? More things like parental leave for fathers, not just mothers, more time off for sabbaticals and so forth, the sorts of things that have been commonplace in Europe for a very long time. So I think that adds to a bit of evidence that things are fundamentally changing in a way to make Americans just a little bit more like Europeans.

Preet Bharara:

Do you have a sense of the degree to which how hard a country’s labor force works affects their economic performance? And GDP?

Greg Ip:

If you look around the world, you’ll see that a lot of countries that are poor have what they call a very large informal sector. This means that very large proportions of their workforce really are not employed in a very efficient way. Think of people who are essentially standing by the side of the road selling knickknacks or people working on farms with very little to do. So around the world, you definitely see that poor countries tend to have a real problem adequately using the labor resources that they have. I wouldn’t say that necessarily reflects an attitude towards work. I don’t think the issue is that their workers don’t want to work.

Preet Bharara:

It’s a structural problem.

Greg Ip:

It’s a structural problem actually trying to create good paying work for a lot of these people. There are problems, whether it’s a regulation or taxes or crime that just militate against bringing these people into what we call the so-called formal sector where people work regular hours and they pay taxes and so forth.

Preet Bharara:

But if you compare like the United States and Finland for example, where you don’t presumably have those structural problems, is the United States ahead of countries like Finland? Because we work harder or for other reasons.

Greg Ip:

We certainly work more hours than countries in Western Europe. And the fact that our economic growth has tended to be higher than Western Europe over the last 20 or 30 years, suggested there is something to the notion that countries where people work longer hours tend to grow faster. But I think that over time, much more important than how many hours you work is how much you accomplish in an hour. And that’s what we call productivity. And that over time is much, much more important. And there the United States also tends to have an edge over Europe. Americans tend to be faster to deploy some of these new technologies, whether it’s social media or the internet, or automation and machinery and so forth. And so I think the greater lesson there is that the freedom among workers and employees to determine not just how many hours they work, but what they do in those hours is probably the model that works best.

And the folks who’ve done the most careful research of remote work, just to give you one example, they have found that the best solution isn’t necessarily five days a week of remote work, because that seems to cut off people from really important teamwork and feedback, but maybe a couple of days a week of remote work. And it is possible that employers can come up with a combination that actually makes the company more efficient because for example, they’re not spending a lot of money on office space that they don’t use.

Preet Bharara:

Yeah, that couple of days of remote work, I used to call that Saturday and Sunday.

Greg Ip:

You can add Monday and Friday to that now.

Preet Bharara:

So here’s maybe an unfair question, and I guess it depends on what perspective you’re coming from, productivity, human happiness or some other metric. Is there a view or do people opine on what the ideal workweek should be to maximize both worker overall happiness and productivity for the economy? If we have experts who have landed on 2% for the inflation rate, is there someone who’s going to say the ideal work week is 32 hours or something like that?

Greg Ip:

Well, periodically we do in fact put that down in law like we did in the 1930s. And then a few decades ago, France tried to actually put down in lie 32 hour work week. But by and large, economists believed that that was not successful. They noticed that this did not result in employers hiring more people to do the extra work of that fifth day, the French unemployment rate stayed high. And France’s economic performance lagged further behind that of the United States. So there’s kind of a hard arithmetic constraint here. If you want to buy all the nice things that work provides, whether it’s shelter, food, healthcare, a new car, a vacation education for your children, insurance, clothing, the fact of the matter is that has to come one of two ways. You either work more hours or you become more productive in those hours that you do work.

And the best, as we can tell, how productive you are is somewhat a random process. We can’t really predict when the next automobile or steam engine or internet or computer is going to come along. And those are the main drivers of productivity. We do have some control of the number of hours we work, but if we just simply passed a law that said, “Hey presto, you only have to work 32 hours instead of 40 hours without there being any mechanism for people to become more productive in those 32 hours,” we will be poor. We’ll be poor in a monetary sense and we’ll have to get used to the idea that there’s less that we can purchase as a result. If we as a society are okay with that, fine. But my perception is that we as a society are not okay with that. Most Americans still like to consume their lattes, their European or their Caribbean vacations and so forth.

Preet Bharara:

There’s a disconnect, I think, between the average work week we’re talking about for the ordinary worker, but no entrepreneur or nobody who is involved in the projects of creating these new technologies works 32 hours a week. Is there a normative value attached to working 32 or 35 or 40 hours a week? America wouldn’t be what it is. These companies that drive the S&P 500, and I’m not expressing a view here, I’m just observing, they were founded by and are run by people who worked double those hours. Am I right?

Greg Ip:

I think it’s probably broadly true. I think a couple of centuries ago, one sign of the aristocracy was how few hours you work. Today, to the extent there’s an aristocracy is represented by how many more hours you actually work. John Kenneth Galbraith, famous economist once observed the word work itself was very deceptive because it covered everything from stuff that was just incredibly difficult and mind-numbing, a terrible tedium, to stuff that other people found vigorous and enlightening and compelling and something they wanted to do more of. And the fact of the matter is there are people who are lucky enough to have that second type of work and they happily work 50, 60 hours a week because they find it so satisfying. These are the entrepreneurs you discussed, the people who’ve created the next artificial intelligence or the lawyers who keep practicing law until they’re in their 80s, or the doctors who remain sharp and can still handle a scalpel better than anybody else until they’re 70.

And then at the other end, there’s a lot of people who work these difficult grinding jobs that are more or less the same day in and day out and they wear down the body, they wear down the mind. In the old days, maybe you were a farmer and nowadays maybe you work in a fulfillment center. And those people are probably much more attracted to the idea of working fewer hours than that first group of people. And my sort of sense is that one of the reasons there is if you will, kind of like a war over remote work nowadays is that bosses in general come from that first group of people. They committed a lot of their life, a lot of their waking hours and some of their non-waking hours.

So climbing up that greasy pulp pole, being successful, contributing to the company, being the entrepreneur, the guy who basically got the brass ring. And not everybody has the same values and they look around and say, “How come everybody doesn’t feel the same way I do? How come everybody else doesn’t want to come in for like 30 or 40 or 50 hours a week?” And I have a suspicion. I can’t prove this, and I’ve had debates with my colleagues and friends about this, but I think that that fundamental differing point of view about the rewards to work are one of the reasons that these conflicts have arisen.

Preet Bharara:

As you’re talking, it’s reminding me of a controversy not that long ago. I think it used to be the case and I think this has gotten better, but I’m not an expert because I’m a lawyer, not a doctor. My father was a practicing pediatrician for many, many years and it used to be a point of pride among doctors a that it was a difficult profession to get into. You had to be very smart, you had to work very hard even to get into medical school and then to get licensed. But if you were a medical resident, famously you worked, I don’t know, like a million hours in a row. And when there used to be discussions about reforming that because maybe that’s not the best for patient health and patient wellbeing, I felt that some of this attitude you’re expressing generally applied specifically to the medical profession where doctors who would cut their teeth on staying up 48 hours at a time during a very difficult laborious residency. So well I did that. You have to do it too. And I think we’ve relaxed those requirements. Is there any truth in that?

Greg Ip:

I just don’t know the details about what’s happened in the medical field very well. Certainly one of the discussions you have across many professions, and I know that medicine is one of them, is that in particular as you’ve seen the proportion of women in those professions rise. I think among newly graduating doctors, they might be more than 50%, certainly in some fields like pediatrics and family medicine. And it’s often the case that women bring a different set of priorities. So they will often have much greater competing demands on their time from non-work needs such as child-raising. And so their arrival into the front ranks of many professions has also forced those professions to alter their attitudes towards how many hours can we expect people to work and what represents an optimal work-life balance.

And I think that probably most people who work in these fields have sort of seen that evolve over time. I suspect most of them also think it’s been a good thing. The old saying: nobody ever on his deathbed said, I wish I had spent more hours at the office. If people can come to that realization before they’re actually on their deathbeds, that’s probably a good thing. Yeah.

Preet Bharara:

I’ll be right back with Greg Ip after this.

So you mentioned AI, we’ve been talking about workforce policies and trends. Do you have a view, I’ve asked this question of others on the program, if AI is going to have a substantial effect on some of these issues we’re talking about in the workplace.

Greg Ip:

Let me answer that by going back a little bit on my own thinking about this. I’ve been covering economics and productivity and these issues for many decades, and I’m been around long enough to have known that this idea that the robots were going to take all our jobs is not a new one. In fact, you can actually go back to Elizabethan times and you can see concerns that, for example, the mechanical loom was going to put all the textile makers out of work. John Maynard Keynes in the 1920s speculated that automation would create so much leisure time, make so much work unnecessary that the big challenge would be finding what to do with all of our leisure time. We know that didn’t happen. And I like to use the example of spreadsheets for those who think AI is going to take all the jobs.

So in the late 1970s, early 1980s, the first spreadsheet programs came along, VisiCalc Lotus 1, 2, 3, and then eventually Microsoft Excel. And if your job was as a bookkeeper, which was basically entering numbers in large paper spreadsheets and then adding them up, this technology was devastating for you. And indeed, we do see that the number of people who had data entry and bookkeeping jobs plummeted, but at the same time we see an explosion in the number of jobs for people who had ways of manipulating the data with these brand new tools. Certified public accountants, financial analysts, management consultants, entire new professions sort of sprang up because of the tasks that this new technology made available.

And so that I think leads me to believe that if we survive spreadsheets, we’re going to probably survive AI too. All well and good. Then last fall, OpenAI came along and I, like many people started giving ChatGPT a few tries. And I would ask it questions that I was working on from my column. I actually asked it: is there any empirical research on how artificial intelligence affects journalism? And I was pretty taken aback by how good and how coherent the answers were. I began to think maybe my assumption that AI will never take all our jobs away needs to be revisited. There’s this whole expression in economics, a recession is when your neighbor loses his job. A depression is when you lose your job.

Preet Bharara:

When you lose your job. Yeah.

Greg Ip:

Exactly. And I began to think technological change is when your neighbor loses his job to a robot and the robot apocalypse is when you lose your job to a robot. And I began to think a little bit like maybe the robots have finally come for my jo. To cut to the chase, Preet, I don’t have a strong view yet of what’s going to happen. I’ve seen estimates that AI can basically cut in half the number of hours it takes to write software code or a legal memo or something like that. But I’m also well aware of the countless times over the last five or 10 years, whether it was driverless cars or driverless trucks or outsourcing radiologists where reality never quite lived up to the hype.

The fact of the matter is human beings, no matter how good their technology is, humans’ ability to learn and adapt moves at a human pace. So my strong belief, Preet is that AI will at the margins start to make a lot of difference to a lot of jobs, but it will happen more slowly than probably most of the profits and most of the proselytizers of AI think. We’re talking a 10-year process, not a two-year process.

Preet Bharara:

It’s interesting because other people, you’re right, are more aggressive in their prediction about how quickly it’ll disrupt. Look, I remember a time when we drove places and I think lots and lots of people in this country were employed as toll booth collectors. And they made change. It’s not a huge pocket of the economy, but I don’t know that there are any anymore. We’re very few. So there’ll be some change and I guess we’ll see. How much can you explain to folks what Bidenomics is?

Greg Ip:

I’ll try.

Preet Bharara:

Before you do that, even if it makes sense to ask this question first, why all of a sudden are people using the term Bidenomics? Is that something that’s been promoted by the president and his advisors?

Greg Ip:

Well, it’s not uncommon to hear any president’s name attached to the word onomics. There was Clintonomics-

Preet Bharara:

Reaganomics.

Greg Ip:

Reaganomics, yes, yes. Reaganomics was original, but there was Clintonomics. There was Rubinomics, which was named for his treasury secretary, Robert Rubin. There

Preet Bharara:

Was no Obamanomics because that doesn’t sound-

Greg Ip:

I am pretty sure I heard the term at least once, but I don’t think it was [inaudible 00:40:54].

Preet Bharara:

Well, there’s Obamacare. If your name ends in a vowel, it’s kind of hard.

Greg Ip:

Yeah, I’m pretty sure there was at least one Trumponomics, but Trump certainly lent his name to quite a few different things. So what’s Bidenomics? Well, I think the simple answer is that Biden would say that Bidenomics is his entire economic program. And he gives it these kind of bumper sticker names like it’s an economy that is built from the bottom up and the middle out. And I’m not really sure what that means, Preet. Every president claims that they’re the middle class president, right? Every president says they’re going to shake up the system, that Washington is going to start working for the middle class, not for the wealthy and elites and so forth. So I fundamentally don’t find anything original or enlightening about Biden saying it’s about the middle out. I would say that if you actually look at what Biden has done, there are two pieces to it.

The first piece of Bidenomics was the giant $1.9 trillion stimulus program that he enacted in early 2021. And his view was basically like, “Hey, the economy is recovering from this terrible pandemic. We need to do a lot to make sure that we don’t have a sluggish recovery before that everybody has a job, and we can use some of this money to do stuff we think is important, for example, expand the child tax credit.” The numbers were very large, but the concept that we’re going to pump a lot of government money in the economy is not that original. Trump did it in 2018 with his tax cut. Obama did it in 2009 with the Recovery Act. Bush did it with his tax cuts in 2001, 2003. There’s nothing fundamentally original about that part of Bidenomics. The more interesting part of Bidenomics is what came after that.

So he passed an infrastructure law that’s going to pump I think something like a 600 billion, a trillion dollars into infrastructure over 10 years. He passed a Chips and Science Act, which is directing over $50 billion towards semiconductor manufacturing, and he passed inflation reduction act, which as we discussed isn’t really about reducing inflation. It’s about pumping money into electric cars with subsidies and to renewable power. We’re talking trillions of dollars in money, where the government is very explicitly putting its thumb on the scale saying, “This is what we want the economy to do. We don’t want just the private market deciding what kind of economy we’ll have. We the government thinks we need more infrastructure, more manufacturing, more semiconductors, more research, more electric cars, more batteries, and we’re going to put taxpayer money where our mouth is.” That’s what’s really different about Bidenomics. You haven’t really seen prior presidents do that.

Even democratic presidents like Clinton, Obama fundamentally bought into the story that we are a private market economy, that it is best left up to private workers, employers, and investors where capital goes and where jobs are created, the government cannot out guess the private sector. What will be the next big technology? That particular philosophy goes by a number of names. Some people call it neoliberalism. I’m not sure what that means except that the people use it are usually the critics of it, but let’s call it neoliberalism for short. Bidenomics fundamentally breaks with neoliberalism. It does not buy the argument that the private sector is a superior allocator of resources. They think there’s all sorts of market failures. The private sector is why we depend too much on China for everything from electric car batteries to surgical masks. The private sector is why manufacturing jobs disappeared and manufacturing towns throughout the heartland are dying.

The private sector is why we have a climate crisis and other environmental issues. We need to break with neoliberalism fundamentally and substitute the government’s judgment for the market’s judgment. That to me is a truly revelationary aspect of Bidenomics. I wrote an article saying all that several months ago, based largely on a speech given by Jake Sullivan, who is President Biden’s national security advisor. That day, President Biden said, “People are calling this Bidenomics,” and he referenced that article. So I think I had something to do with why the president decided to grab this term and start trying to define it as [inaudible 00:44:46].

Preet Bharara:

Well done, Greg.

Greg Ip:

Needless to say, I think most people are listening to the president, not me, as they’re defining what it is. But the more fun, interesting question is what is Biden doing that other presidents have done before? And I think this view that the government actually needs to be a full partner in deciding what our economy does, that’s genuinely fresh. And it’s not the controversy, by the way. First of all, he’s borrowing a lot of money to do it, and this is a country that already had debt problem before he decided to run up more deficits to do that. And honestly, the jury is still out as to whether the government can consistently outguess the private market. There are instances of the government being a very powerful force for good. I would point to Operation Warp Speed, which was a government financed effort to get us a COVID vaccine.

It was incredibly successful. On the other hand, you may have heard of YRC, it’s a trucking company. This went bankrupt, and that’s despite getting a $700 million loan during the COVID. Didn’t look like a very successful application of government judgment there. The state of New York has given Tesla, or spent, I should say, spent roughly a billion dollars building a solar panel factory for Tesla that produces virtually no solar panels, not a great argument in favor of the government doing a good job of allocating capital. So even though this sort of theory of Biden, which goes by a very variety of news, but let’s call it say industrial policy, even though it’s relatively novel, the jury is still out as to whether it’s actually going to be successful.

Preet Bharara:

It’s a little bit interesting, you were referenced to Jake Sullivan in that speech he gave, and Biden’s mentioned that we’re talking about economic policy in terms of something that Jake Sullivan said, his national security advisor, rather than his treasury secretary or an economic advisor. Is there anything odd about that?

Greg Ip:

Very odd. There’s interesting, you notice it because a lot of people have noticed exactly the same thing. Wait a minute, why is the national security guy giving a speech about economics? I think there’s a couple reason for it. First of all, Jake is in some channeling of view that a lot of people on the domestic policy side also had. He just happens to be the person who sees the moment to actually articulate it. The other thing is that Jake’s been sort of like a key figure in democratic policy circles since the Obama administration. He was a top policy advisor in Hillary Clinton, and he was part of the policy shop in that campaign there. And needless to say, he, like almost everybody in that group were traumatized by Trump’s election that fall, and they spent a lot of the next two years trying to figure out what went wrong.

Where did the Democratic Party lose its connection to all those blue collar voters in places like Pennsylvania and Wisconsin who ended up putting Trump in the White House? And their view was that a big part of the reason they lost that connection was that they had bought into neoliberal policies like free trade. That they had said that efficiency and consumer benefits are the only consideration for when we do a trade deal. We’re not going to think about the effect on workers. We’re not going to think about the effect on the environment. And the political price Democrats paid for that was to have this revolt against them, when along came this populist, Donald Trump basically said both parties had sold them out to the so-called globalists.

So I think a lot of what you’re hearing from Jake Sullivan and other Democrats in articulating this new Bidenomics, is as much political as it is in economic transformation, believing that the way to essentially pull back some of those working class voters that they lost to Trump and to rebuild the Democratic coalition that gave Obama two terms in office is to essentially repudiate the neoliberal economics that they believe is at the root of this problem, and to embrace a more pro worker, pro manufacturing, pro industrial, let’s call it a protectionist view of economics.

Now, look, I’m not a political scientist. I get where they’re coming from. I’m not sure that their theory of the case is the right one. Trump did talk about making America great again. He did rail against the globalists, but in actual fact, he didn’t end up doing much for them. Like manufacturing didn’t show much of a recovery under Trump. There isn’t much evidence that his trade war with China brought any jobs back to the United States. And you might want to ask somebody else’s question, but I don’t perceive that his message by manufacturing is what got him the nomination in the Republican primary race, or for that matter, the White House, as opposed to, for example, some very strident rhetoric about immigrants.

Nowadays, here we are 2023, I don’t perceive that the fate of the manufacturing worker is the main thing that’s governing who’s going to win the primary in the Republican Party. I see a lot of discussion of cultural issues. I don’t see a lot of discussion of some of this stuff that Jake Sullivan is talking about. So whether he has the economic diagnosis correct, I’m not sure about it, but I understand the story. I’m not sure about the political diagnosis.

Preet Bharara:

I did want to ask you the role that a president or presidential administration plays in the economy. Obviously there’s some role you’ve said earlier, disagreeing with some other folks who have been in the program, that some of these bipartisan legislative successes have not done much to improve the economy. But Joe Biden is up for reelection in about 15 months, less than 15 months. At this point, is there anything that an administration can do to make sure for political purposes that the state of the economy is at its max when people go to the polls in a year, or at this point, are you just resting on your laurels, hoping things get better and continue to improve, and you just wield rhetoric? Or are there things that someone can do?

Greg Ip:

I think hard reality is that it’s mostly the second. I think that most of the factor that will determine the economy that is on voters’ minds when they go to vote next fall. That die has been cast. I think it depends primarily on what happens to inflation. We talked a little while ago about where inflation is headed. I think that if the president gets lucky, we’ll have inflation continuing to move down lower next year without a recession. And I think at a minimum that it may not be enough by itself to basically get his approval over 50% sweeping back into the White House. But I think in some sense it undoes or limits the damage. People right now have a very low opinion of the president’s handling of the economy. I think the best he can hope is that it doesn’t get worse and maybe gets a little bit better.

And I think that if we pull off the soft landing, which probably is more in the hands of the Federal Reserve than it is in the hands of the President, that will sort of staunch the bleeding. The stuff about factories, all the factories that are being built to build semiconductors or to make electric vehicle batteries. Those are great ribbon cutting ceremonies that give the president a chance to go out there and talk and connect with his base, which is blue collar workers and so forth. One of the ironies is that a lot of that activity is happening in red states. The factory in Tennessee, the factory in Alabama, they’re not probably going to deliver those states to the president in 2024. But look, it gives him something to talk about and let’s assume that he is reelected. I think it forms an interesting basis for his second term.

Jared Bernstein, who’s the chief economist on the Council of Economic Advisors for the President, the way he put it to me is this is the long game. When you try to make things, when you try to reshape the nature of investment in the country, we know that investment almost by definition is something that takes it while to pay off. So for the president, that manufacturing side to Bidenomics is the long game. The short game, the one that determines whether it gets reelected, that was the Recovery Act in 2021. To a certain extent, it was a lot of the steps he took to try and respond to the disruptions caused by the pandemic and by the Russian invasion of Ukraine. There might be little things he could do on that front, whether it’s how he manages the strategic petroleum reserve, but there isn’t a lot he can do about the inflation picture right now except to sit back and wait and hope for the best.

Preet Bharara:

Yeah. So I hear people say, and I think Joe Biden has said, “Look, inflation is coming down. It’s down to 3%, not the ideal 2% that we’ve been discussing.” Tell me if I’m doing the math correctly. So if you have inflation at 10% for a year, and your groceries cost 100 bucks at the beginning of that year, and then the 10% inflation arrives at the end of that year, your groceries are now $110. That’s significantly more, right?

Greg Ip:

That’s right.

Preet Bharara:

Even if the following year inflation goes back down to 3%, your groceries are still 110 plus some more at a lower rate of inflation, you’re still kind of screwed and that’s why you’re not crediting the president or anyone else with the 10% going down to 3% because you’re still paying a lot more. Is that right?

Greg Ip:

Yeah, that’s exactly right. And honestly, I think that’s a lot of why the public hasn’t yet fully given the president credit for the decline in inflation that we’ve seen.

Preet Bharara:

Because they’re not feeling it. Because they’re still hosed.

Greg Ip:

Exactly. Exactly. And this is where economists aren’t like normal people, right? Economists are obsessed with rates of change. And inflation is a rate of change. It’s a rate of change in prices. Hey, the rate of change was 10%, now it’s 3%. Isn’t that great?

Preet Bharara:

Yeah. But we’re still stuck. We’re still stuck.

Greg Ip:

Exactly. Yeah. Ordinary people don’t look at rates of change. They look at the price they’re actually paying and they say, “I don’t care that the price of groceries is only going up 3%. I’m still paying $110 when I was paying $100. When are you going to get back down to $100, Mr. Economist, Mr. President?”

Preet Bharara:

And that’s never happening.

Greg Ip:

That’s never happening.

Preet Bharara:

The groceries are 110 and they’re still going up more. And as you point out, consumers and citizens want to know when it’s going to go back to the 100 and that never ever happens.

Greg Ip:

That’s right. It’s never going back to $100.

Preet Bharara:

Right. Have we ever had, would it be called negative inflation or deflation?

Greg Ip:

Well, actually that’s interesting that you should ask because over the last 30, 40 years, the closest analogy we had was when we would periodically have these spikes in the price of oil, which would then flow through the gasoline. Think of the first and second Gulf Wars, for example. And in those cases, they actually did go back down.

Preet Bharara:

They did go back down, yeah.

Greg Ip:

Exactly. Gasoline would go from 250 to four, but then it would go back to 250. So people sort of expected this reversion to mean, and maybe that’s what they had in mind in this latest model. And in fact, gasoline that did go up to $5 did come back down below $4. But it’s not happening to anything else. That doesn’t happen-

Preet Bharara:

It doesn’t happen to eggs.

Greg Ip:

Eggs came back a little bit, but not all the way back. A price of a car is not going back to the price that you would’ve expected in 2019. That return ticket to visit your parents in Las Vegas or Orlando is not going back to what it was in 2019. The price that you pay for your lawn care or your haircut or childcare, those things aren’t going back because it costs a lot more now to hire a childcare provider, or a landscaper than it did. And those wages aren’t being rolled back to where they were in 2019. So I think that presents a bit of a perception problem for the president and for Americans.

Preet Bharara:

I want to… before letting you go, you mentioned industrial policy, and I alluded to this earlier in the interview, but I want to quote you and then ask you some questions about it. “Industrial policy differs in one crucial way from fiscal policy, and for that matter, monetary health education and all sorts of other policies, it lacks a rigorous economic foundation. Scholars and policymakers have no agreed definition of industrial policy.” Can you nonetheless take a shot at giving us a definition of industrial… What are we talking about when we’re talking about industrial policy?

Greg Ip:

So first of all, this question really matters, right? Because as we were just discussing, industrial policy is the government essentially committing its resources, its powers to influence the types of industry that the private sector indulges in. And so it can use tax rates, it can use tax credits, it can use subsidies, it can use tariff protection. It can use regulation to say, “We’re going to do more of this, and less of that.” And that’s industrial policy. And as we were discussing a few minutes ago, this president is putting a big push on industrial policy saying, “We need to do more on infrastructure. We need to do more on semiconductors. We need to do more on manufacturing. We’re going to have buy America policies,” all of which is the government putting. Its very large and noticeable thumb on the scale of what we do. But one of the concerns I have is that we don’t have a good economic framework for evaluating when industrial policy is actually a good thing. And in some sense, I actually blame economists, right? They’ve spent years.

Preet Bharara:

Yeah, why don’t we?

Greg Ip:

Yeah. Come on, guys.

Preet Bharara:

There’s a lot of people at think tanks and at universities and industrial policy has been a thing for a long time. So what gives?

Greg Ip:

Yeah. Yeah. They crank out countless papers on monetary policy, on tax policy. They can scrupulously analyze down to the last decimal place and argue about the implications of the last tax rate change, or the last interest rate change. Why haven’t they done that with industrial policy? I’d say there’s one overriding reason. First of all, because industrial policy involves the government meddling in the private market. It runs against a very strong presumption among most economists that private markets really are superior to deciding where to allocate resources. Economists recognize the markets sometimes fail. If you don’t have regulations, industry will pollute too much, right? Industry will cause us to spend too much, for example, on China, or it will mistreat people, invisible minorities or women. And those are appropriate places for the government to intervene and say, “Hey, less of this, more of that.” But they’re less convinced that there’s a case for the government to systematically intervene in the decisions about what industries to produce.

And they can easily look at examples, whether it’s CYLINDRA or YRC freight, for examples, when that went badly wrong. What we end up with is not a systematic study of the phenomena of industrial policy, but what I call dueling case studies. What about the internet? That was industrial policy. Oh yeah. Well, what about CYLINDRA? That was industrial policy too. And I think this is something where economists with their PhDs and their think tanks need to start putting more serious work so that we can start to make smart decisions. if this is the world we’re going into and judging by the enthusiasm, which with governments not just in the United States, but around the world, are rushing to industrial policy, this does look like the world of the future, we need much better economic tools to make sure we’re doing this efficiently.

Preet Bharara:

In a parallel context that, and we talk about all the time, there’s a discussion about how important it’s for hearts to change versus laws changing. So you can pass a law against segregation and laws against discrimination, but if the hearts and minds of people don’t change, it’s hard to get equality, right? Although the laws have some effect on that, and in a totally different context, I’m wondering on the issue of sustainable or renewable energy, there was this, what I thought was a quite optimistic article in the New York Times this past weekend about how not necessarily because of regulation or maybe in part because of it, but because of economic incentives and profit making motives, there has been a continuing and substantial shift that will further deepen going forward in investments in renewable energy versus fossil fuels.

Do you have a view about that article in that assessment? And then second, do you think that’s fueled ultimately by regulation, or is it fueled by other economic principles like profit motive?

Greg Ip:

So I think it’s a little bit of both. So let’s step back big picture. What’s the solution to getting to a net-zero economy? It’s to come up with technologies that generate renewable electricity or carbon-free electricity that don’t cost more and hopefully cost less than the power that we get from fossil fuels. And 20 years ago, that seemed like a pipe dream, but today there are actually quite a few different varieties of renewable technology that have achieved that. How is that possible? Well, first of all, part of it was innovation and technology is that innovators came up with new technologies for solar panels that were much more efficient and cheaper to produce. Part of it was just building larger windmills, which produce electricity at a lower per unit cost. Part of it was free trade, or if you want to say like more open trade or that terrible word neoliberalism.

Because as countries like Germany decided to expand their mandate for renewable electricities, China, which was the world’s largest and cheapest manufacturing power, significantly ramped up its output of solar panels until their prices fell so far that solar power was as cheap, if not cheaper than natural gas and certainly cheaper than coal. So if you’re asking the question, how did we get to where we are today on some of these technologies like solar and wind, it was a combination of innovation, learning by doing, some of which to be sure got a helping hand from the government, and it was a combination of good old neoliberal free trade hands-off. Now, I can hear people out there saying, wait a minute, China is not a neoliberal hands-off economy. They got a lots of help from the government. Yes, that’s true. Nonetheless, solar power would not be as cheap as it is today, absent the very low cost with supplies that we have got by virtue of trade with China.

What does this mean going forward? Well, you might argue that the solar power problem has been solved, although if you read the Wall Street Journal today, you’ll see there’s an article that says actually rising prices for a lot of the minerals used in solar and other types of renewable energy have been going up, and this has actually made solar power more expensive. So maybe most of the good news is behind us, but to finish the job of the transition, it’s not enough just to sort of say, we’ll have more solar and wind powered electricity and battery powered vehicles. What about aircraft? What about cement? What about steel making? What about agriculture? These are all sectors that generate significant amounts of greenhouse gases for which there are no obvious non-fossil fuel alternatives. And we need more innovation and more brainpower going into those areas. I’ll say actually, one of the really positive things about Biden’s Inflation Reduction Act is it has a very generous subsidy scheme for things like carbon capture and storage and hydrogen, which are technologies that might actually aid the transition in some of these tough to decarbonize sectors.

Preet Bharara:

Greg Ip, thanks so much for joining us.

Greg Ip:

Thanks for having me, Preet.

Preet Bharara:

My conversation with Greg IP continues for members of the Cafe Insider Community and the bonus for insiders, we discuss ways to improve economic literacy.

Greg Ip:

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Preet Bharara:

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Hey folks, I want to talk about something that I said last week. As I hope you know, at Cafe, we always strive to bring you the most accurate information and insightful analysis of the legal issues that we discuss on all of the podcasts that we put out. But last week I made a mistake and I want to correct it now. A listener had asked whether the Georgia election case against Trump is more important than the federal cases since the presidential pardon wouldn’t be on the table? So I answered that question. In the course of answering the question, I assumed that Georgia’s procedure mirrored that of many other states like New York, where the governor of the state, like the President of the United States, has the power to pardon and grand clemency. So I did what I should never do. I made an assumption. As Samuel L. Jackson once said in the movie, Long Kiss Goodbye, when you make an assumption, you make an ass out of you and Umption.

So I incorrectly said that Republican governor, Brian Kemp had the power to issue pardons and could pardon Donald Trump, but I was wrong. Pardons work differently in Georgia as it was quickly brought to my attention by diligent listeners. The state of Georgia actually has a board of pardons and paroles that determine who may receive a pardon. The board members are appointed by the governor to serve seven-year terms, and pardons for most offenses can only be granted once the individuals have completed their sentences and waited five years after their release. The board does, however, have the discretion depart an individual sentenced to death or to serve life in prison. The system was designed to insulate those responsible for executive pardons from political influence. It’s a pretty good idea. So thank you to our attentive listeners who alerted us to my mistake. I’m glad we had the opportunity to correct it and to learn something new in the process.

Well, that’s it for this episode of Stay Tuned. Thanks again to my guest, Greg Ip.

If you like what we do, rate and review the show on Apple Podcasts or wherever you listen. Every positive review helps new listeners find the show. Send me your questions about news, politics, and justice. Tweet them to me at Preet Bharara with the hashtag #AskPreet. You can also now reach me on Threads, or you can call and leave me a message at (669) 247-7338. That’s (669) 24-PREET. Or you can send an email to letters@cafe.com. Stay Tuned is presented by Cafe and the Vox Media Podcast Network. The executive producer is Tamara Sepper. The technical director is David Tatasciore. The senior producers are Adam Waller and Matthew Billy. And the cafe team is Noa Azulai, David Kurlander, Nat Weiner, Jake Kaplan, Namita Shah, and Claudia Hernández. Our music is by Andrew Dost. I’m your host, Prett Bharara. Stay tuned.