Administration or a new term of an Old Administration depending what happens, but in time for the stocktaking going around the world on how to open the economy when the u. S. Has behaved as it has for the past four years, but also equally importantly, when we are all facing the vulnerabilities that came out of the pandemic. Before introducing my colleagues that will be speaking today to the National Economic council and the economic advisers and trade policy and industrial policy about the u. S. , china dialogue, let me say a couple of words about the rebuilding project. We come from different classes but they reinforce each other paid we went through decades in which they went handinhand, the International Peace and posterity. That has not gone well since the Global Financial crisis and the pandemic has intensified those actions. Face, real risk we all Climate Change, technological slowdown and oppression and disinformation and the loss of privacy are all rising in a world in which these are threats faced by all humans here they are economic threats because the Economic Policy choices and. Ctivities affect how badly we need a global approach to get back to a world where we can confront these pandemics. It does not mean going back to the mobilization fantasies of the late 1990s. We have chosen where it rebuilding and we need to reassess what is going on in the World Economy and what parts are salvageable and what parts are essential and what parts can be restored. This is meant to be a practical exercise, so my colleagues and i including all the fellows from the Peterson Institute plus Research Analysts and members of the board a writing brief memos to senior policymakers around the world on what they should be doing christoph and that is what we are going to hear today and what they should stop doing immediately which is what we will also here today. Over the coming months through the end of the year, we will be rolling these out in trenches. Last week we rolled outlast weeo the secretary of commerce in the u. S. And to the trade representative as well as associated senior officials including evan greenberg. We will in two weeks have Larry Summers kampeter blair henry speaking about with the treasury should do. And then we will shift to the International Sphere and International Organizations and european organizations and what they should be doing to rebuild the Global Economy. Starting in january, we will put out a comprehensive land developing some proposals we have made from priorities and we will continue to track how the Global Economy is coming together. I am grateful to all my colleagues and our Board Members who are participating in board us into who support stakeholders who want us to come up with practical ideas to be within the sense of very realistic and we are talking to whoever is in office about what you can do better but to be ambitious and not constrained by shortterm politics and push for what can be done realistically. We are not wedded to the old ways, we are embedded to empirical reality. Our emphasis on the u. S. Administration on europe and International Organizations is not to say that the people on the other continents of africa of latin america of Asia Eastern Europe are not stakeholders at the table. Quite the opposite and we do not feel we should be presuming to talk for them. First and foremost, the u. S. Has to get its house in order and rebuild the Global Economy. Solutionsve economic are existential rights we face and must be targeted and they must be based in practical rebuilding. They must be global. Please join us in this effort. First, let me turn to my colleague, a nonresident senior fellow at peterson. Jason has been one of the extraordinary Economic Policymakers of the last 20 years, serving in a variety of senior roles in both the clinton and obama administrations, and in particular as chairman of the council of economic advisors in president obamas second term. Jason, weve asked you to address what the criminal with the National Economic council should do particularly in the area of interNational Economics. Jason thank you so much, adam, for organizing this excellent rebuilding series, and including me. I served as Deputy Director of the National Economic council during the last financial crisis. I walked in the door of the white house on january 21, 2009, into the second floor of the is much larger as a share of the in 2009. Ow than it was the difference is, the Interest Rates are much lower than they result,2009 and as a interest debt is lower today than it has been for much of u. S. History, much of postwar history. Rate adjustedest that means the United States can borrow money and repay it with money thats even less valuable in the future. Some of that is a byproduct of the crisis itself, but much of that was true even before the crisis. Even in january and february of this year. That gives effectively an unlimited amount of room to respond to the short term problems with fiscal measures, as much as is needed, and it doesnt give unlimited license for longer term policies. I still think they should be paid for so that the debt isnt increasing above and beyond what would happen in the baseline. But it takes any pressure off from considerations about active deficit reduction. The third important difference from 2009 is in 2009, the United States had unleashed the crisis on the world. We had caused it. We had spread it around the world, and at least for the first year or two, the United States was the most severely impacted in the world. The u. S. Economy was reeling. This time around, the United States did not cause the immediate crisis. Moreover, in part because of the very large initial fiscal response, one that tragically has not been followed through on and been allowed to lapse, but the initial was so large, the monetary response was so quick, effective and decisive, that the u. S. Economy has actually suffered less than many other economies around the world, especially in europe. That puts the United States in a better position to help lead a rebuilding of the Global Economy. That rebuilding of the Global Economy is absolutely necessary, if americans were immune to the virus that causes covid19, but that virus had ravaged the rest of the world the way that it has , we still would have likely had a recession in the United States, just from the global shock that covid19 is causing. The United States playing a role to rebuild the economy is important for rebuilding the economy is important the sake of the u. S. Economy. Other shoes of the have not dropped. Load out of capital emerging markets, it was terrifying that we might have a wave of emerging market debt crises. The United States be in a better position economically to show leadership. As a side note chinas economy has fared even better than the United States because its done a better job of getting its virus under control but you havent seen china taking steps, like bilateral debt forgiveness, leading the g20 and the like. The United States is the only country that can do that. It hasnt done it to date. The immediate priority for the National Economic council for the white house, for the entire government. I am delighted to be part of this project, i think it is truly important. Priorities andcy President Council of economic advisers that would strengthen the u. S. Economy while fostering rebuilding and recovery. In my remarks today, i want to emphasize three points. The First Priority is that we need to deploy additional fiscal stimulus to support the u. S. Recovery from the pandemic recession and over the longer run, strength automatic fiscal stabilizers. Background, the early recovery showed a sharp rebound in aggregate demand. We saw that in employment come in consumer spending, and many other indicators. But that was the good news. The bad news is that the recovery has been only partial to date. September, 11n million above the it will drop which is terrific, in some respects. Nonetheless, we are only halfway back. We still need to create or recreate 11 million more jobs to get back to where we were in february. And the pace of recovery has slowed way down. The september change in payrolls was about 600,000. As you can probably calculate in your head, that rate of increase is going to take a very long the millions and millions of jobs we need to get back to full employment. But i dont think that we can even count on this floor piece of improvement continuing. Policy reportcal of the early stages of the recovery in as we know, most of those measures were either one off or to have expired. At a minimum, to avoid recovery stalling, i recommend that we had more funding for states and additional aid for small businesses. We also need to reinstate supplements to unemployment periodts and extend the of extended unemployment eligibility. The short term. Looking at what needs to be done over the longer run, we should recognize that fiscal stimulus during periods of economic weakness, not just the downturn, but in many past, the downturns in this country and in other countries has been to small, too shortlived, and is too susceptible to shortterm political wrangling. A failure to pass more stimulus in the last three months demonstrates this point literally. And the fact that Monetary Policy is likely to be constrained by issues for the first you will future means that countercyclical fiscal policy is just going to have to play a much larger role fighting recessions going forward. To point being that we need expand automatic stabilizers in the countercyclical fiscal the reliedt is not on discretionary fiscal policies seeing changes. There are a number of good proposals out there for doing so and this is building off what jason said, that basically involves being much more generous and in particular, leaving stimulus to economic commissions. Foodxample, you could have stamps, enhanced unemployment insurance, higher medicaid spending and lower payable tax rates. Alternative on when the unemployment rate, which is a certain threshold, and then turn off again when it comes back down. So thats the First Priority i have for you. More needed priority is strengthening u. S. Social programs. The consequences of the pandemic for employment, income, and the wellbeing of American Families have highlighted preexisting weaknesses in u. S. Economic and social systems. Losses,rus cases, job and business failures have all occurred disproportionately among people with less income and education and among members of disadvantaged racial minority groups. In other words, the pandemic has really underscored the need to of thehen the safety disbursement harms of recession on more vulnerable groups. Strengthening the cyclical it in a reduce the likelihood way that dampened the pace of recovery. That is going to be true in this recession, is going to be true in recessions going forward. To emphasize the longerterm benefits of more spending on social programs. There is a growing body of evidence that shows that many of those programs represent crucial investments in peoples future lives. Studies have documented, for poor children exposed to medicaid, food stamps, public housing, and highquality preschool experience more Economic Security as adults decades later than the otherwise would have. Makes a, the evidence case for providing more support for programs that benefit poor children and their parents not just because they believe relieve moments, but longterm benefits. The benefits would accrue for more than those directly affected. Ander potential output higher tax revenues, lower future spending, safety net programs, and fewer funds. Creating more economic mobility is also likely to strengthen our social fabric which would be another benefit for everyone, not just those directly affected. Ofle we are on the topic investment in people, i should also note that we need to do more to broaden access to higher education. Also, college pays off well as an investment or most people. To reform the Student Loan Program so that there are when the investment turns out to be a poor one. We should also greatly expand the lowincome families, to reduce the need for state loans in the first place. And we should provide more Financial Support for community in order to create a Standard Alternative for high value, low high high profit colleges. Even with the pandemic, recession is behind us, we will very likely be facing a longerterm challenge of low productivity growth. The investments in people i just discussed will help, but its also important that we invest in other things including public structures. Infrastructure investment in the United States now represents a lower percentage of gdp than in most years of the past halfcentury. The quality of Infrastructure Investment is declining road to that of other countries. Relative to that of other countries. In addition, adequate public discourage Foreign Investment and trade in the United States. Need to focus additional spending on projects with high returns in order to avoid going nowhere and as part of that, we need to recognize that its important to fund repairs of existing capital rather than focusing solely on flashy new projects. Also, guns u. S. Infrastructure is less important than getting what is needed built and getting value from the dollars that the United States spends. We should allow for Competitive Bidding for construction, installation and maintenance of long security sensitive parts of u. S. Infrastructure and we should insist that foreign governments allow the same opportunities for u. S. Firms. So those are my three priorities. I want to pick up on what jason was saying about how to figure out the budget. Including reducing federal budget deficits relative to those projected under current law. I agree with jason that given these historically low Interest Rates, the accumulation of federal debt is not one of the countries they get economic challenges right now. Trying to pay for fiscal mealtime the counterproductive, we all agree on that. Going beyond that, i think it is sufficient that any increase is discretionary or ongoing federal spending related to these priorities is accompanied by an increase in federal revenues. Thank you for letting me discuss what i think our priority should be and i look forward to your question. Thank you. Thes great to have interpretation of investments not just in children but in Human Capital and infrastructure capital. But wepay lip service have to take advantage of the opportunity. Theof the hallmarks of Trump Administration in its first and perhaps only term is policy anddustrial trade policy created a new office of manufacturing and trade in the white house. Irvin to discuss the issues raised by u. S. Industrial policy in such an approach. Doug is im sorry, i dont have his name chair with me, but is a distinguished professor at Dartmouth College and has served as a senior staff economist. He is a nonresident senior fellow. He is the author of the definitive history of american trade policy in a very beautiful paperback edition as well as free trade under fire and a host of other extremely important books about history and reality in u. S. Economic policy. Doug, over to you, please. A you very much, it is a pleasure to be here. As adam mentioned, in 2017, trump established a new outfit in the white house, the office of trade and Manufacturing Policy to abide the president on measures to strengthen u. S. Based manufacturing. Veryis going to be a important issue moving forward for the next administration, but it might come as a surprise that even though i think the issues are important, i also proposed abolishing the office for a couple of reasons. One is that it duplicates many of the function in other agencies in the executive branch. It duplicates what the Commerce Department does, defense department, ustr in terms of trade and manufacturing and it is not clear what its Precise Mission is. Because it is a recently established, it has no established expertise in the a large doesnt have come experienced staff, and has no formal policy role or authority, and no institutional standing and recognized by congress. The office could perform a coordinating role in terms of coordinating trade and Manufacturing Policy across various agencies, but the National Economic council already performs that role. One person could be deputized to provide more coordination, but its not clear that we need this office. Of whatof whether the next administration decides to do with this office and regardless of the exact form it takes, theres no doubt that the new administration will have to deal with issues of bipartisan concern about the health and the state of u. S. Manufacturing. There they concerns about the vulnerability of Global Supply chains. The desirability of having a domestic sourcing base in terms of manufactured products and other related things. And does the recent developments of course have given greater urgency to these concerns. One is the pandemic which gives a Public Health rationale for ensuring that we have a strong healthc base for reasons. And of course, National Security in china. Again, many agencies are involved in formulating Administration Policy and the National Security area, involve the National Security council, the defense department. Nih, the fda, health and human services. Many agencies have a say and a stake in this. In terms of moving forward, i think what is necessary is the administration would have to seriously that he using this interagency process what is needed moving forward in terms of domestic manufacturing capabilities, in terms of supply chain. I think we need to have a clarity the public and to the business as well as what our and how to best achieve those objectives. Aey dont necessarily require Business Management capability, it could be for certain products. [audio cutting out] National Security or Public Health emergency. Raising the idea serious study. That is a term for i dont think it really matters what s visceral reaction is industrial trade and regulatory policies. The question is that it shouldnt doing. Thats why we need a very comprehensive study of these issues we are losing some of your sound, so could you repeat what you just said, please. Sure. Matters are very important for study i cant support from the government or what policies should be. Principal policies first can you hear it, adam . Can, please go ahead. Ok. I want to offer three broad principles to guide policy moves. The first is a selfsufficient is that selfsufficiency should not be the goal. Without tremendous gains from trade, there is much less portability to supply chains that has been sometimes referred in the press. Here i would recommend a. Onderful episode of tradewinds last week, she had simon from the university of geneva talking about a recent paper of his which was very important which talks about exaggeration of overdependence, the robustness of supply chains, and things of that sort. The goal should be to keep trade open, but provide security for those areas where we think we need additional support. The second point would be to avoid industrial policy, namely protectionism. Does notnism distinguish between reliable and unreliable sources of supply, it does not distinguish between friendly and on from the allies from which we get imported goods. When we moved to a protectionist solution, we tend to alienate retaliation against many u. S. Exports which are manufactured undermining our ability to help out the very sector of manufacturing that we are trying to support. In addition, what protectionism does is raise domestic prices. That hurts downstream industries. A classic example of this is the steel industry. In the Trump Administration, they try to help out a very basic Large Manufacturing sector, the steel industry, but by imposing tariffs, they raise prices hurt downstream steel use in other industries. Motor Companies Reported that its costs rose by over 1 billion last year. What this does, by arming the downstream industries, undermining their Competitive Position, other domestic and foreign suppliers arise and it hurts jobs. Foreign jobs still. Protectionism in the Manufacturing Sector overall. Dr. Sari, doug, we just lost you again. Doug, we just lost you again. I encourage everyone to read his memo. And last point about the insufficiency and selfdefeating nature of trying to derive manufacture performance protection and trying to derive resilience through selfsufficiency being notcontradictory are just on, the evidence doesnt support it and we have seen that right now in the pandemic and development of u. S. Manufacturing. Doug, we apologies to were unfortunately losing too much of your sound in this last bit. We will put out more by doug in a little while. I am now going to have to turn away from doug, which i regret, but im excited to turn to nicholas. He is a senior fellow at the Peterson Institute where he has been with us for nearly 20 years after a distinguished career in academia. He is the leader not only of china studies at our institute that arguably the leading americanbased economic analyst of china in the world. I mean, in the u. S. Outside china. Arerecent books of his hardhitting, intellectually sound and important books. Agoal from a few years which documents this contrast with some of the fantasy varies being put up at the moment, it was a private sector in china that led to chinas growth. The state first because it was a no old look no holds barred from someone about how the state has come back in under president xi in recent years. And importantly that this does have cost. As a critical part of the white the u. S. Sion, strategic dialogue, whatever it will be renamed, this dialogue being constructed is critical to the Global Economy and all of our wellbeing. We ask nick to give us his advice to the chair of the u. S. China economic dialogue. Over to you. Nick thank you. The first thing you will recognize is that any policy directed towards dealing with the challenge that china represents has to be part of a comprehensive program of u. S. That focuses on rebuilding a troubling infrastructure crumbling infrastructure, rebuilding our support for research and development, and certainly, a smarter immigration policy that brings in scientists and technicians to improve the productivity of the u. S. Economy. I think what weve seen in the last few years is a policy that seems designed not to enhance the u. S. Economy, but to try to slow the rise of china. My view is that slowing chinas economic rise is not a viable Economic Policy in the medium and long runs, and i will come back to that. The second major suggestion i have is that we need a more prevent they to kind of internal bureaucratic squabbling that has led in recent years to a very disjointed policy to address chinas economic fraud. I think this policy should oflude a rigorous estimate the cost to the United States of weaponizing trade policies, by weaponizing trade policies, i mean, for example, export controls and secondary sanctions. Currently, these policies are being weaponize with no little or no regard to the cost of u. S. Consumers, u. S. Businesses, or to the longterm Competitive Position of the United States. I think that is the second major change that we would have to have on china. Coming back to why i think chinas rise is likely to continue, i think any process of negotiation with china needs to recognize that given chinas relatively low level of per capita output, there is substantial potential for further economic convergence, and that means that china is likely to continue to grow more rapidly than the United States and that eventually, chinas economy will surpass that of the United States at least in terms and i think the corollary of that is that chinas Global Economic growth and influence will continue to expand. And just to enhance what jason said, we certainly see that right now with the covid pandemic globally. China was the first to get the virus under control, it has had recoveryrong vshaped while the United States and many other countries around the world are struggling with multiple ves of infections, hospitalizations, and deaths. Will be the china only economy this year to register positive Economic Growth and by 2021, chinas economy is likely to be about 10 larger than it was in 2019, and that is a situation that otherot be shared by many advanced economies or any economies around the globe. Some may come close, but i believe you will see china will be likely to be the only economy with a 20 expansion over a twoyear period. China is also out performing on the trade front. In september, chinas exports and imports measured in dollars rose by 10 and 30 respectively. China is doing well in terms of Economic Growth, is doing very well in terms of its participation in global trade. Make isl point i would that i think a policy of economic decoupling from china is likely to be a high cost, low benefit policy the United States and is a nonstarter for u. S. Allies and partners. As i mentioned, given chinas other countries are not likely to participate in a decoupling strategy, so decoupling is likely to look Something Like a unilateral decoupling from china, resulting in u. S. Selfisolation from the most important source of global trade and Economic Growth. I think even a narrow decoupling in technology, for example, is likely to lead to a substantial reduction in revenues of american Semi Conductor firms, a decline in the research and development firms, and if this continues for anytime, the United States could lose this longstanding Global Leadership position in an industry that is crucial for u. S. Economic competitiveness and National Security. I think those are the main points to be kept in mind as we resume a systematic economic dialogue with china. Thank you, so much, nick. Not beingnce of unrealistic about what the u. S. Can and cannot achieve with china and what chinas former abilities and benefits are is critical and its not about just being nice for being suckered as some would put the rhetoric, and you very carefully, rightly stayed away from that kind of ink. Its about accepting the reality that china exists, it is large, but also has that interaction with it is critical. This is the spirit in which i think all of our speakers today spoke. Exchanged thet chat, we will record in full his remarks again later today and post them on the website. They are well worth everyone hearing. Now, let us open it up to questions. For those of you can, please use the q a function on the zoom chat. In the interest of time i will gather the questions but we will attribute them to the person posting them. To start off, joan west of the World Trade Center asks for Climate Change, can we get more about how this plays into the rebuilding the Global Economy initiative and in particular, going to jason and karens remarks, but also obviously there is the China Cooperation aspect of this as well. Karen andjason, then then doug on Climate Change. Entire time onmy this incredibly important topic. The Paris Agreement was in one sense a very good framework. The best we have ever had because we got almost every country in the world in. But it got almost every country in the world in because it lets every country in the world decide what it wanted to do and decide how it was going to do it. It was going for brett over strength. Breadth over strength. Countries could do better and build more on the commitment that they had made. And that process only works if countries like the United States are actively engaged both internationally and the paris domestically, putting something forward. The ideasat a lot of about spending money to deal with Climate Change play a role. More recharging stations, more subsidies for wind and solar. But were never going to get to 80 or 100 net emissions productions by 2050 without also a price on carbon to lead to more sweeping and widespread economy,hroughout the individuals, and businesses. The United States can do that policy, all on its own. But it would work a whole lot better on this if the other countries are doing it so it is not partly undone by leakage and manufacturing your ships from the United States to other countries, hurting our economy and undoing some of what we wanted to do on Climate Change. That is the importance of the border adjustment that i talked about in my opening remarks and in creating a system where you dont have mutual cheerleading to get other countries on board, you also have a concrete incentive for other countries to get on board. Of that, my maybe my trade colleagues here get nervous about it, i think should operate through trading. Thank you. Will keep this short because basically i agree with everything jason said. So, absolutely, Climate Change has got to be part of the agenda. A running theme in a memo i wrote was the need to invest in the future and the three types of investments i was thinking to ere children and infrastructure offending climate and technology, i had to choose two of the three. That is one that is very important for a whole bunch of reasons. Thank you. Nic, anything to add on the china front . Has steppedchina forward for the first time a very ambitious agenda to be carbonneutral in a few decades, and they havent laid out how they are going to do it, but i think its very encouraging that they are embracing it, so clearly is a country we could work with if we had a more enlightened policy on our end thank you. Im not going to turn to doug. We have a question. In making if the settlement is an efficient and more effective so that the u. S. Can be more engaged in a positive role in the system. We talk about this if it at the event last week but in your role as advising the white house on trade policy, how would you tackle the wto and especially the settlement issue . I do want to make one comment on a change which came up. Here in this house. An important solar panel. So, that, in terms of jobs, there are many more jobs in solar and installation industry than Solar Panel Production industry. And for Climate Change, it raises the cost of imposing purchasing the solar panels. Chado, i would defer to but one of the problems is the United States has complained about the dispute Settlement System without putting forward a positive agenda for change. I think once we identify what exactly the united date wants out of the disputes system, then we can move forward. Unless there is a positive proposal for change, we are going to be in this deadline. Thank you. Before moving onto the next section of questions, there are some questions about where to find the memos that the speakers took part from. On the website, all of the memos and videos are going to be continuing to publish on a rolling basis, new ideas, new videos, new explainers. Tore is a way to subscribe the rebuilding the Global Economy project and get our newsletter and get always uptodate. So, thank you for the interest. Jason, you pointed at me for International Cooperation on mark asks can you elaborate a bit more about what specific changes could and should be considered by the u. S. As part of his international process, and how that would affect the large corporations who pay no taxes. Thanks for that question. Let me just give an overarching principle for that and then i will do the details he would be nice if every country in the world to get into the room and agree on a new Corporate Tax system. I think that is hard to imagine. I think you can aim for its similar to what i said on Climate Change, something that one country does that puts pressure on other countries to do the same thing and it is more of a race to the top instead of what the tax system is right now which is a race to the bottom. The United States has a tax taxision called global low intangible income. It was passed in 2017. It is based on the right idea that you have to pay at least a certain minimum tax break on the income you earn overseas if it was earned in a low tax country in a way that looks like it was linked to economic activities. For example, through intangible. As the provision is written in the United States, it has two important laws. One is that you would do it based on your worldwide income. Its really important to do it on your or country income because if you do it worldwide, you can use investments in one country to offset another. You can locate a lot of things in the Cayman Islands and then somehow get out of paying taxes by doing something somewhere else in the world. Beyou are pretending to earning income in the Cayman Islands, it is really important that minimum tax applies the use of it is done on a country by country basis. Second, it could be a higher tax rate. If you did that, it would reduce some of the incentives other countries have to lower their tax rate to attract activity because that would benefit american multinationals. Other companies have incentive to adopt a similar policy and it would essentially create a de facto floor on the global Corporate Tax scale. Thank you, jason. Emily blanchard asks following up on your critical reminder importancen forms of advancing investing in cap, given that education is almost entirely funded and designed by state and local governments in the u. S. , what the u. S. Federal government do for investment in u. S. Human capital . What specifically would you suggest . Sure. Education is done at the state and local level, particularly if you are talking about higher education. There are very important federal components. Mentioned, we have discovered program that is working for many, many people. It is not working for everyone. There are forms that we need to do, we should also just be thinking about more federal grants to lowincome students to support their College Education through the program as opposed to having them take months first. , thehird thing i would say federal government could push a lot more money to Work Community colleges which i think it should do. Some of thems, have excellent track record but not all of them do. I think some money should come with reforms to make them more effective. Particular
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