Going forward what lesson should policymakers learn from this recent rise of populism on both the left and the right . Today i were discussing these issues with two great guests, first Casey Mulligan is professor of economics at university of chicago and he served as chief economist for the council of economic advisers in the Trump Administration from september 2015 august 20 because most recent book released last month is your hired, untold successes and failures. Michael strain is a john scholar and director of Economic Policy studies here aei, the author of the American Dream is not dead but populism could kill it, released in february of this year. Heres how the event is going to go. To start up k she will speak for about ten minutes and then mike will offer a ten minute response and after that we will have a Panel Discussion for a while, and towards the end of the discussion about 10 45 we will do a q a so please submit your questions on twitter with the hashtag ask aei econ. With that, professor mulligan. Good morning. I have some slides to share during my presentation. So good morning. I really appreciate aei organizing this. Im going to economize your time today and you can find a lot more in my new book, and readers have been having fun but coming away agreeing somewhat the populism has some real substance. So lets start with the definition of populism. In his book michael refers to hitting the people against the elites. The people and elites are in quotes so i take that to mean he and others might be skeptical whether these groups actually exist. As i explained in my book the elites really do exist as a group and prove its only a slight exaggeration to say we all know each other. Theres one piece of data even the Trump White House incidence of harvard graduate is 100 times what it is in the general population. Second, the pitting word i think suggests that the conflict is imagined or only manufactured by politicians. To the contrary, this is a real conflict. People have been suffering from significant policy mistakes which the elite cannot acknowledge let alone fix. In the short time today i will give you a couple of examples. Drug overdoses tripled over about ten years but as various s metrics in my book shows, washington remains as oblivious as ever. Total policy was unwittingly fueling this epidemic with, for example, subsidies i went out the Prescription Drug supply chain. But at least in the years i showed you, illegal fentanyl did not loom large. During these years and decades before, fentanyl would momentarily coming to the u. S. Market, and at the time people would say our drug supply was getting poisoned by the department of justice every time it back. Then in 2013 without any acknowledgment as what was going on with opioids, the attorney general did this. The most intense, where had is mandatory minimum sentences that i i had to impose on peope who had drug problems can result relatively small amount of drugs in a nonviolent way to support a drug habit they had and medico to jail for a fiveyear mandatory minimum for ten years and i didnt feel comfortable doing that. As attorney general, holder announced he would no longer support mandatory minimums for lowlevel drug crimes. Immediately. The fentanyl. Immediately surveys showed record increases in the number of people using illicitly manufactured opioids. The Trump Campaign about the Opioid Epidemic. This is a major part of the american carnage that trump cited in his inaugural address which of course deeply offended the elites. I will go easy on michael on this but lets instead take susan rice as new book which begins the very beginning of the book, the opening of the book she talks about share trump say american carnage in his address, and that was evidence she says of his unthinkable cynicism and ugliness and how our present was saying farewell to the moral universe. I quarter. She has 53434 pages in the book that not one has room to mention the Opioid Epidemic drug overdoses or any real substance behind populism. So lets look closer at the address and that the monthly data. What did the president say in his inaugural address . Drugs have stolen too many lies and rob our country so much potential. This american stops right here and right now. Very clearly wants to go back and look at what he actually said, he is referring to the drugs and the crime that have stolen too many lies early, before the natural death. Now i admit that the data, the monthly data are noisy, but it sure looks like the carnage did stop exactly when our president said it would. Now, the death did not good and as you and and i will have moro say about that, but part of what happened in january 2017 is the new attorney general that the president put in rescinded the holder memo. Although i am concerned that some u. S. Attorneys out there are still following the holder approach. Trump campaign loudly also lobbied against obamas individual mandate. The individual mandate is a classic case where regular people had to suffer under a fundamentally flawed theory from the socalled experts. Another thing they tried to do is to force people with their budgets to have wine taster i give many examples in the book but lets take small dollar loans. As j. D. Vance explained in his bestselling book about lyra country, small dollar loans can be a convenient and valuable product for people. They can pay 40 or 50 to get a small shortterm loan that allows them to avoid hundreds of dollars in late fees and penalties from banks, landlords, collectors, et cetera. But the socalled Consumer FinanceProtection Bureau puts that 40 in their annual Percentage Rate formula and concludes that nobody should be allowed to purchase such a service. Nevermind the 600,000 consumers who wrote cfpb begging to keep the loan, to help them pay, i quote, for rent, child care, food, vacation, school supplies, car payments, power utility bills, credit card bills, groceries, medical bills, insurance premiums and student educational costs. The last one i want to show you with the little time i have is how fda regulations protected generic drug manufacturers from competition. This is not a question of safety and efficacy because the formula in any generic drug has been in use for many years. The Companies Break the system so they could charge brandname prices for generic products. President trump ended that begin in 2017. This really hurt chinese and other Foreign Companies who had previously secured themselves special favors. An israeli manufactures stock crashed and analysts readily dollars with whats going on with more competition in the market for generic drugs stemming from what fda began doing in 2017. Most important, important, consumer saw it. I show here Consumer Price index for Prescription Drugs, and we see that it became negative for the first time in 46 years. I understand that deregulation is the dirty work in certain circles they call themselves populace. Jim called the regulations the standard republican fare. Trumps fta deregulation by itself translates into ongoing savings of about 11 of Prescription Drugs generally, which is a big deal especially for low income families. I dont understand why any populist would want to reverse these savings and return to the companies the privileges of excessive regulation created for them. Trumps many regulatory changes add up to real savings. These are my estimates of what it would cost to go back to running the regulatory state the way president bush and obama were. I have broken consumers down into five income groups. You can see that the Lowest Income Group would face lower wages and higher expenses such as the Prescription Drugs i showed you that total 15 of the income. That would be like doubling their taxes that they pay. The way i see it chop has been a political entrepreneur who figured out how to write populism into winning the biggest elected position in the world. And then achieving historic policy successes pursuant to some at least of his campaign promises. There are failures, too. The subtitle of my book is successes and failures. So maybe trump is a political version of the blackberry. Historical progress but to be supplanted i something even better. What i can assure you is that the people continue to suffer from significant policy mistakes, and they know it, even while the elite continue to fail to acknowledge and even hiding as explained in my book, hiding evidence about the failures, resting on real fundamentals, populism is not going away even when trump does. Thank you. Are right, great. Now we have ten minutes or so from mike strain. Apologies. I was muted. Thank you, casey, for the thoughtful presentation. Let me share my screen so i can get that working. There we go. Okay. So thank you again, doctor mulligan, for the thoughtful presentation, theres a lot there are sure and i encourage everyone to buy caseys book. You can find it on amazon and other places as well. Very thoughtful and certainly worth your time, regardless of what happens next month. I think caseys point that populism may be here to stay and that maybe there are other iterations of populism following President Trump is certainly a thoughtful pieces and one that come all people interested in politics and economics and policy should read. I would strongly encourage you to buy his book. My book, the American Dream is not dead, i think you dont buy the subtitle subtitle, casey and i have different views on this question. Im delighted to be having this conversation today and thank everybody for tune in and also thank everybody who wants the video later on. Let me die in. What is populism rex casey touched on this and quoted me, and i didnt hear his presentation before he gave it. I heard it for the first time with the audience so youll see the scare quotes in your about the people and the elite site. If i i heard his presentation i mightve taken those out. Let me give a threepart definition. Aggressively pitting people against the elites i think is a key part of any definition of populism. This does that mean the elites dont exist in the people dont exist, but it does mean that i think the economy is overdone by populace and populism, that the economy is less strong than the populace would lead you to believe. An emphasis on the decency of the people at the corruption of the elite, i part of populism that the elites are rigging the system against the people. Thats a common phrase you hear Elizabeth Warren or senator sanders use, for example, as well as the president. Finally, and embrace of pessimism, things are terrible, the trajectory is bad for the nation, for individuals, and effort to to close the country and to turn inward. Immigrants are the problem. Globalists are the problem. Globalization is the problem. We are losing abroad. Theres a zerosum mentality. We turn in and focus on ourselves and we need to do that because things are really terrible. That i think its a way that i think about populism. So lets talk about trumpian populism. Its important to identify which of the president initiatives are populist and why. With a president ordered scrambled eggs for breakfast thats not a populist act. Lots of people of scrambled eggs for breakfast and certain of everything the president has done is populist, but there are quite a few things that are. The best part of the president s agenda, casey talked a lot about one in his presentation, deregulation. Thats been successful. The 2017 tax law, particularly the Corporate Tax provisions in that law i think are very successful, and they are the best parts of the president s overall Economic Policy agenda. I wouldnt include those as populist. I think reducing the Corporate Income tax rate is something that mitt romney wouldve done if you were elected. The wouldve been a lot of pressure on john mccain to do that if you were elected. Thats been a standard goal of republican conservative Economic Policy for quite some time. Deregulation, same thing. Find me a republican who doesnt think that the u. S. Economy is too heavily regulated. So those are parts of the president s policy agenda and they are successful parts of the policy agenda but i wouldnt call the populist. Instead, trade wars, attacks on domestic institutions, attacks on international institutions, attacks on basic norms, hostility towards immigrants, hostility towards immigration. There i think those components of the president s agenda are populist and meet the definition of populism that i put out at the beginning. In addition i would argue the president typically enters the public debate of the discourse as a populist as well, and thats a big part of his presidency. Maybe the component of the president s populist agenda that he is make the most progress on i think is the trade war, so lets just take a look at that in a little more detail. I would argue the trade work didnt work even on its own terms. The terms of the trade war are the Standard Terms that are used by democrats and republicans who support protectionism, which is that theres this group of workers, these parts of the country that have been neglected by the elites, and the elites are more interested in globalism and more interested in Overall Economic performance, which presumably will help them, then they are in manufacturing workers in manufacturing towns. So when you some protectionist policies in order to correct that imbalance. And even if those policies increase Consumer Prices, slow investment spending, slow Overall Economic growth, they are worth it because they afford special benefit to this group of neglected workers comp in this case manufacturing workers or certain neglected regions of the country. Casey mentioned the president inaugural address, carnage. He talked about holdout factory towns, scattered like tombstos across the nation to this is what were talking about. Recall when the trade war begin commerce secretary wilbur ross going on television link of a can of campbells soup and saying this can will cost you 1. 5 cents or two since more than it otherwise would. The idea is that we can spread the pain of the trade war over the entire nation, and its really not going to be that bad. Its going to cost you an extra penny to buy your can of soup but thats going to have significant benefits to flow to manufacturing workers who again deserve special attention. The best piece of evidence i am aware of the looks of this hypothesis is a 20 and two Federal Reserve economist lan and pierce. They do a seems to be a pretty careful job of trying to identify what the effect of the trade war was on manufacturing. They find that protection from import competition provided by the tariffs does in isolation increase manufacturing employment. Looking at that one component, protection from import competition, actually does increase employment by about 0. 3 unto the measure that they use. That is not all that trade were stupid trade was also increased the costs businesses face to purchase the goods that the need for production, to purchase intermediate goods in the production process. Land and pierce estimate that effect reduces employment by 1. 1 . So even though there the effect of the trade war on employment from increasing the cost of intermediate is significantly larger than the positive effect from protection from imports. And, of course, trade wars dont just happen. They are wars. Theres a tit for tat. President doesnt just impose tariffs and thats the end of the story. Nations retaliate and the also took that into account. They took into account three factors, protection from imports, increases in the cost of intermediate cost to production and tit for tat. They find that overall manufacturing employment was reduced by 1. 4 . Here again the trade war didnt work even on the populist terms. A specialist trumpian populism succeed, for the trade were santa has to be no because they trade war hurt manufacturing workers which are the group that the president argued needed special attention. And, of course, the treatment of effects as well, reduction of variety of imported goods that u. S. Consumers could enjoy higher prices, the consumers fewer exports which are export intensive firms, particularly farms, lower stock returns and higher default risk which give must be part of the tit for tat. Most of these are pretty well established that most of the items are pretty wellestablished. Also be inserted from the trade war slowed Business Investment which work against the president signature legislative accomplishment which was the Corporate Tax reduction. The president encouraged investment with his right hand by reducing Corporate Tax rates and then he discouraged investment with his left hand by starting trade wars. So the spillover effect, not only did trumpian populism network for the populist objectives, it also reduced the effectiveness of the president s of their objectives. A little example of this uncertainty. We are doing this for the christmas season, a court from the president. Lets go back to the summit of community which seems like it was two or 300 years ago based on all thats happened in the past few months. In june the u. S. Had been imposing 25 tariff on to a 50 billion on chinese import. Later in the message and the president president agreed not to impose additional chairs and restart trade negotiations with china. About five weeks with the president abruptly changed his mind and imposed a 10 tariff on the remaining 300 billion of imports effective september 1. A few weeks after that the president said we will not do that until the summer. When asked what the president said we are doing this for the christmas season. Thats a remarkable statement of the president given he has spent years telling the American People and businesses the trade war data in adverse effec