Casey Mulligan on the Book “You’re Hired! Untold Successes and Failures of a Populist President”

[0:00:00 Speaker 0] Mm hmm. Welcome to Policy McCombs. A data focused conversation on trade offs. I’m Carlos Car Value from the Salem Center for Policy at the University of Texas at Austin. Welcome, everyone. Today is February 1st 2021 we are joined by Casey Mulligan, professor of economics from the University of Chicago and former chief economist of the White House Council of Economic Advisers. During the Trump Administration cases, research expands many areas, including taxation regulations, Social Security, labor, economics, et cetera. Casey also, uh, wrote recently the book. You’re hired on those successes and failures of a populist president, and that’s where we’re gonna start our conversation a little bit. So, Casey, Welcome. Welcome to Osama comes. Thank you. Uh, yeah, Let’s talk about the book a little bit To start. Um, there’s there’s a lot of information. There’s a lot of super interesting, uh, stories. And but from your perspective, what was the main objective? What was your main objective? The big takeaway. You want the readers to get out of it? Well, when I started the project, you know, I have noticed how even myself, when I went to the White House, I didn’t know what to expect Me. People weren’t really saying what was happening. Um, they were saying a lot of things that I knew weren’t true. Knew from experience about the Affordable Care Act and other things. Lot of things aren’t true in the news, but then what is true? And I got there and I realized, Wow, it’s really interesting what’s happening people are gonna be interested in if I don’t tell these stories that nobody will. So that that was my, uh, launching point. Um And then as I started to put together what I observed, um, you know, I saw some very strong themes there and populism being one of them. Well, what does it mean? A lot of people in and academics and news don’t really know what it is. I just think it’s a bunch of upset people or for maybe no reason. Um, and try try to explain what that is, and it’s based on real substance. Um, and definitely motivates the president and president understands where his support comes from. It’s not from Washington, D. C. It’s not from the New York area. Um, and he he understood that every minute of every day and often reminded us you know how he got in the White House. And it wasn’t from either Democrats or Republicans in terms of those who are normally politically active supporting them. And so the book ends up being. It really is a social science findings, if you will, but delivered throughout bunch of stories about the president who was very entertaining person. We can all agree on that, at least and and so so you you emphasize populism. And so whatever you’re running definition of popular populism, then, uh, you know, people are who aren’t normally part of the bureaucracy and making the decisions in the government and other major institutions tend to be people, if nothing else, by their location and the flyover country, Um, they have suffered from policy failures, real policy failures, not maybe some imagined ones as well. But there are definitely real policy failures. Um, that aren’t even beginning to be acknowledged. Um, and Donald Trump, the candidate was an entrepreneur who recognize this and grab that opportunity to when his first election, he really ever ran. It happened to be the biggest election in the world, and you know, so it really it’s a It is a class conflict, but more of the classes, the people who run the institutions. Maybe you want to say Ivy Leaguers, something of that sort versus everybody else, but it’s not and imagined conflict like the Bears versus the Packers or something like that. Green Bay People versus Chicago people. It’s not a real conflict between us there, but there is a real conflict. Um, between the those the ruling class, the Ivy Leaguers and everyone else because there are policy mistakes that need to be fixed. The people out there and fly over country. No, it and they’re having trouble getting anyone who has the power to make these decisions to actually here. Yeah, So one of the, um, you mentioned one of the numbers you mentioned that I think is striking the very beginning. You say that there are about 600 people in D. C. There are accountable to voters and there are half a million, I think, employees to the federal government. They’re like, you know, working in and completely unaccountable and the accountability coming to them there’s, like, multiple layers. So So it’s It’s like when you contrast those two numbers you see the That’s sort of that’s what you call the ruling class for the ruling class. The things that they do, the things that they might be even outside of the scope of of over the control of the people that are elected to begin with and you use an example that I think is is very strong in the in the in the book where where you talk about your the C A findings on on the impact of some policies earlier policies by other administrations on on the opioid on the opioid crisis on the increased consumption of opioids and therefore addictions and and and death that came as a result of that, uh, and how much they fought the sort of establishment in D. C. Fought. Even those findings tell us a little bit about that. Yeah, we we, uh oh, that was one of the president’s priorities, and he got that on the campaign trail. I mean, people were upset that they’re going to funerals of young, middle aged people, and he promised to do something about it. I believe his 20th of Executive Order, which was in the first month or so, launched some initiatives to look at that. Um, and you know, everyone in the government, at least the political appointees that weren’t career people felt pressure to contribute to that, regardless of their field, in our field being economics. And we had looked at that at the University of Chicago before, as part of our health economics research. I wouldn’t say it was an emphasis, but it’s something we worked on, and it became an emphasis when we got there. What is economics? Have said anything to say about that? Well, we look at the prices and the quantities, the quantities. That’s the definition of the crisis, right, that there’s so much consumption. And that’s But what about the price is very natural thing for an economist to do. We looked at that, and we were pretty surprised to see how much prices we were looking when we’re in the White House were looking mostly at prescription opioid prices. They had fallen a lot by a factor of more than five, um, partly through insurance. Opioids during the opioid epidemic became covered by insurance, and that made them a lot of cheaper in terms of out of pocket costs. Um, some of the major opioids came off patent. So you had opioids being a lot cheaper and that something that you might want If you understand where things are coming from, you might want to understand what’s going on with, really with the supply of all periods. Um, and that you know, the insurance part was from the government number one. Medicare. It’s called Party, um, Medicare’s our federal program. Massive federal program for elderly people’s health insurance. Um, it did not cover prescription drugs for most of the history of Medicare until 2000 and six. And then that created coverage for elderly people. And you covered pretty much all pharmaceuticals, including opioids. And part of what happened was with opioids being so cheap to the senior citizens, they would bring them home and huge bottles, even though they might only need it. Three or four. They come home with a bottle of 90 and you sit around the house. Maybe the grandson would take it. Maybe the cleaning lady would steal it. You know, some of these older people small fraction, but some of them would sell them, um, and those who sell. As in any market, there are a few who do the selling and they do massive volumes. And so one thing that was observed. And we noted this in our report that as you look when we created that program, you look at the elderly, uh, counties with more elderly people and therefore more people eligible for the program. You found deaths going up among non elderly people. So beware you dips and dips the people off the program. And you can control group, um, and the people, the Medicare. That program was created in the Bush administration and some of the veterans of that who are very proud of the program and it’s amazing program A number of ways they were running Trump’s health department, and they did not want to talk about the contribution of their program that they were proud of to fueling the opioid crisis. So we had a lot of battle that I would write about it in Chapter four, Um, being even allowed to say in public what I just told you. And that’s the sort of, uh, the ruling class fighting right. The notion that people internally like, well, no can can be blamed even though we have now data and indications of the policies that mean potentially positive. There’s negative aspects of it not be willing to engage in those and trying to fix those. It’s not that they didn’t want to fix it right, but they just didn’t want to own it. The fact that you can’t you can’t fix when you don’t acknowledge another example of this, um, was I mentioned the president’s executive order early in his term. They created a commission. Um, and that commission also took a look at Well, how is the government contributing? Um, that Chris Christie ran that commission and it found the government contributing in some other ways. For especially there were. They had created subsidies for doctors, um, who prescribe more opioids. The sense of what the way it worked is if your patients, when they left the hospital and they responded to the survey and they weren’t happy with the pain management, then you wouldn’t get the subsidy, and this was a multi billion dollars a year program. Um, and doctors quickly understood you send home people with a nice bottle of opioids and you’ll get a good grade on the survey and you’ll get a lot of money. Um, that that started around 2000 and two or three. The Chris Christie Commission was in 2017, and it recommended. Let’s get rid of that. We had many years without that program. Let’s try and not having it anymore. And the bureaucracy very much fought back. And I point out in the book, I pointed to the page of the Federal Register that nobody reads. But there is the bureaucracy fighting back, saying that, you know, the president told us to get rid of the subsidy, but we don’t really think it had any effect, totally defined economics, that when you subsidize something, you get more of it. Um, so they definitely fighting back to this day. Um, yeah, and and, uh, the you mentioned a deadline. You call it in the book, the the Samaritans dilemma. Right? And you subsidize something, you get more of it. You mentioned the line in the book multiple times, and I think that’s also something that I’m going to talk in a little bit more about the fact that it seems that forgetting those basic basic ideas that are unquestionable in in our circles that well, demand curves are negative, sloping and you make it cheaper. People gonna consume more of it when you make it cheaper through a subsidy or to make it cheaper directly by by by by, by providing incentives for the doctors prescribe more, there’ll be more of it. Um, and it seems that that that type of thinking is not necessarily all that present in policy making, uh, these days. And did you find that when you get in? And I guess one of the one of the things that you discuss a lot about is the fact that that there’s a lot of myths around around, um, thinking through regulations in the federal government, the myth that let’s go there. Let’s just describe the myths that you that you describe in the book the Three Myths of Federal Federal Regulation. Okay, Yeah, the one is things that were really the primary thing. I dedicated my time, too. There was analyzing regulations. The president was doing so much on regulation, and it people aren’t really aware because there’s so many each one. It’s kind of small. It’s not like the tax law. One law got lots of attention regulations. There’s literally hundreds of thousands. The flow forget about the stock and the I was dedicated to that. And and I try to use some modern techniques computing power to try to wrap my mind around these hundreds. One of the things I found and I’ll confess I had kind of drank the Kool Aid by reading The New York Times and The Wall Street Journal. When we talk about regulation, they always had a picture of a smokestack, as if all regulation or nearly all regulation is about the environment. And so the number one myth is that’s not true in terms of the new regulations, let’s say regulations that came about in the 21st century. Very few of them, let’s say 10 15% our environmental. Among the regulations that the president was removing or reforming again, very small fraction. We’re environmental. They got all the publicity, and but that’s very small fraction. And I’m not just counting absolute regulations. Also look at the costs and benefits of these regulations. Very small fraction of the cost and benefits are environmental. Um, if I had to name the biggest ones Food and Drug Administration, which everyone can agree with me now? When I was writing the book we didn’t have. Covid. Uh huh. President was trying to get to reform the Food and Drug Administration so that products could get to market more easily and more cheaply. That’s something incredibly valuable even before covid. And now that we got our vaccine so quickly, we can all agree, Yeah, that’s that’s much more valuable than anything you could do with fracking regulations. Um, regulation around the Internet, that that neutrality and some of these privacy regulations were making Internet more expensive. Uh, and the president got rid of them. That’s worth a lot. We spend a lot on the Internet. Uh, most families, even ones who are low income, commonly have three Internet connections. Three contracts with maid with a cell phone and other cell phone at home, and making that cheaper and betters it is very valuable. Got way past any kind of fracking regulation and again and covid. Maybe you didn’t notice, but if we had net neutrality, I’m not sure Netflix would have been working at, you know, having investment in the capacity of our an Internet for several years before this pandemic came along. Really made it nice for for us to be able to continue some semblance of living through virtual means like we’re doing now. The Europeans didn’t have such an easy time because they do have something like not neutrally, generally heavily regulated there. So that’s the first myth. The second meth is that, um, regulations are made smart by career bureaucrats who are looking at the costs and benefits rather than the politics. Maybe they aren’t looking at the politics, but they’re not looking at the costs and benefits essentially all the regulations and there are a few exceptions, and they happen to be environmental one. So it intersects with that other one. I think the environmental regulations end up in court, so they do have to look at costs and benefits. But again, you look at these regulations that I mentioned the F D A. The, um, Internet. There’s no notion of opportunity costs. Um, to them, the costs of regulations is just the paperwork. How long does it take you to read? And I think example, I like to give is the stay at home orders. Your governor makes a two page stay at home order and you have a small business. How long does it take you as a small business owner to read that order. That’s the cost, and that’s it. That’s all. There is no opportunity cost. And you know that’s a joke. It takes the small business owner maybe 10 minutes, and he’s He’s an important guy, so we’ll call his times where the $100 an hour. It’s just a few bucks cost. That’s what they do when they when they calculate what their regulations are going to cost the people. Um, and then the third myth trying to remember what I put another myth I talk about is that regulations are good for the poor and they’re not. You mentioned you mentioned the myth that the burden of paperwork is part of the It’s a big, big yeah, Okay, so I forgot to mention the one there, So yeah, the the costs are primarily paperwork, so they might create a regulation that forces you to interact with the government on computer. And they’ll call that deregulation even in the Trump administration, and do that I would complain and said, You’re forcing somebody to do something that’s that’s a cost to them. But, oh, there’s less paper, right, because it’s not computer doesn’t regulation, right. So So that that that that sort of loops back to something that I mean particularly second myth. The fact that there is this notion that somehow the ruling class, the bureaucracy that’s 500,000 people involved in the government are taking seriously the idea of when they’re writing a rule. They’re doing the cost benefit analysis necessary to understand the trade offs that that rule is imposing to people. And and, you know, your experience was that very little that takes place if none, um, and you have an example in the book that that is is disturbing in a lot of ways is the is the, um, the rebate rule that was was trying. There was an attempt by by HHS to change a particular rule of how basically, to stop, um, negotiation between businesses, businesses, be the pharmaceutical companies and insurers provider on providing rebates to customers on on certain drugs. We don’t have to go to the details of what that is. But the point that relates to here is that there was something that HHS was trying to do, that having obviously a huge cost benefit associated with prices might go up, it’s gonna go down. Uh, maybe more access. The drug is gonna be available or not, But that process you describe in detail and there is, like, multiple attempts to bypass what even see a was doing as a set of economists are better trained in providing this type of input, right? Once the bureaucracy noticed that, Well, you know, I don’t like that answer. I don’t like the or cost benefit analysis gonna go find my own. Um, that’s scary. And and and it’s again, very typical. Um, you know that that role at first when I got there, I was worried. How am I going to teach opportunity costs and things like that? And I quickly realized I don’t have to teach it. It’s already there’s already a manual for how to do government regulation. That’s actually very well written, very economic sense of what’s called Circular A four. And it talks about opportunity cost, and it says things like, you know, price control. Be careful. Your standard of proof ought to be higher for a price control because you’re really interfering with the market and how information flows and things like that and that rebate rule is a price control. Um, and but they just don’t follow it. I mean, they totally ignore. Um and I just kind of make my job. It’s just regulation meeting after regulation. And I said, Can we follow your own rules? I understand I’m new to the building, but you have this 20 year old set of rules that you say you follow. Let’s follow it. Um, and it worked for a while with the rebate roll. With that, the president did have it withdrawn after I left. And after Tom Philipson left, who worked with me on that, the bureaucracy brought it back. So it actually is a rule. Now, I’m kind of interested to see what President Biden does with it. The pharmaceutical companies love it because it’s doesn’t really president give discounts to customers anymore. And I think Biden is pretty well supported by pharmaceutical companies. So I’m I bet that rule stay, but we’ll see. So all right, So go back to the Chicago school here, and I think that, you know, the Samaritans dilemma is like a staple of the Chicago price theory and the sort of the entire tradition of the School of thought that you’re clearly a very strong representative of your time and see a was very much you mentioned that a lot in the book. All this person had a Chicago PhD. This person had Chicago. PH. You so clearly That’s something that that feature intensively in your experience to see a that particular way of thinking and and And you know, people that might listen to this might think, Oh, there’s different ways of thinking in the sense that there is a also a set of preferences. Oh, you have a preference for this type of tool, somebody else’s preference for different types of tools. And to the extent that is true, that that’s right, that there is some some some some truth to that. But there are some things they’re almost like scientific to a point where it’s akin to an engineer questioning gravity. Um, and and the man curves downward. Sloping is something that yes, we can find examples of things are not like that. But there are exceptions to that rule, just like you mentioned price controls like yeah, you can find examples where that might be appropriate, but the proof of of of and when you say that that in previous CIA reports to the president, economic reports the president, you know, the word margin was not mentioned. The supply demand analysis are are are just non existent. So you have I think you say that your your teams had something like 17 supply and demand analysis. Uh, during one year, whereas Obama White House had over eight years like one, Um, I have a hard time understanding What are the economists? They’re not your team or the team that in this particular situation, if we’re doing what it is that they’re using, as far as tools are just there to justify choices that the politicians are making or really honestly trying to assess scientifically the cost manifest certain choices and they just use a set of tools. There clearly are not. You know what people educated Chicago would do? Well, yeah. I mean, they’re there to support. Yeah, their person who appoints them. Uh, it’s also true with me, and I explained early in the book how I was asked to work in the Bush administration a couple times, and there are different obstacles to making that happen. I mean, it’s not ever easy and but one was, I’m not sure I can support. I’m not a fan of privatizing Social Security. I was not a fan of the Iraq war based on my economic analysis. I’m not talking about any kind of extracurricular interests. I’m I have, which I do have. But it was based on that. And whereas President Trump was one of the first presidents in a long time where the basic staples of economics are very supportive of much of what he was trying to do, not very big rule, not some other things. But it was very supportive of so many things he was trying to do. Um and so it’s not an accident. We had so many Chicago Ph. D s in the building. They that economics in general was very supportive of this president. But since this president was undoing, a lot of what the previous president was doing was not be supportive so that, you know, President Obama would want to appoint somebody who would not be too quick to think about. When you subsidize something, you get more of it. This just going to interfere with their daily workflow. So I think that that is a Yeah, but I guess I guess my my, uh maybe I’m being naive on on you come in. You have a set of ideas, your training in particular way and the questions the way you’re addressing questions are using those set of tools and and and those set of tools get the answers right. What I’m trying to understand is that is that when you have a set of economists sitting there and sure a policy comes in and they have a reason to to to put that policy There’s a political reason there’s whatever choice they have to put a policy in front of the and that it doesn’t have to be the Obama group, say, the Bush group or whatever, Um, or the set of economies in the room like, Well, let’s forget about what we know scientifically and just try to try to find whatever tools are available to justify this, or they’re like, Oh, no, no, no. Are set of tools to say that that is a bad idea. Therefore, we need to walk away and let them find some other set of economists. When, when, When, When you see economists going around saying Yeah, I’m not worried about a $15 raise, the minimum wage. Are they being true to discipline? Or they’re just trying to find, like this motivated reasoning say, Well, no. Right now, I think it’s okay and and and see what I’m saying. I Well, I know I’m asking you to impute on the profession, but I can tell you how it goes down. So, for example, you know, I wrote a book about Obama’s stimulus and how it was subsidizing unemployment, and I asked Austin Goolsbee, who was at the CIA at the time he was chair for part of that time and member for another part. I’m like, What the heck are you doing? You just multiply and using a multiplier and ignore all the micro economic incentives. What are you doing? And he said, Well, that project was Christina’s because she was the macro. So there was a division of labor that gives the macro, and I guess there’s parts of macro that don’t think when you subsidize something, you get more of it. I think, um, I might say, What’s this? An empirical question you’re going to measure empirically, I don’t care what the theory says if it’s not fitting the data. Um, and she used a multiplier analysis and she was epically wrong. You know, in the current administration, the Cecilia Roose is very solid. Um, but it’s not an accident that the two other members of the CIA are not really from from our professor discipline. You know, I think Jared Bernstein has a sociology PhD or something like that. So he’s not going to be too quick to say, Oh, demand curve, slope down. And he does not demand as the fight curves, not something he really uses. He might use the word sometimes, um, and then boo. She would be the other one. She has economics, training, but not in the standard circles. And it’s not an accident that the that those are the type of people that are appointed. So that’s one way it goes down this kind of a division of labor. Um, you know the other way that it goes down as it means you’re so busy, you kind of pick up, pick up on the things where you can contribute the most Instead of dragging down your boss. Your boss has a lot of tasks, and you say boss, give me the task that I can be helpful One instead of the ones I gotta kind of, you know, ruin the party. And a lot of that also may happen in private. So, for example, with the with the tariffs, we did write about the tariffs and our washing machine. The quantity washing machines went down, the price went up. You can see our publications of that. But there was more in private that went on. So when senators would come to talk about the tariffs, you know, has it was our leader and took on that he would give the kind of standard Yukon analysis of that. And then Navarro would be there, too. Um, provide another point of view, if you want to call it that. So that’s another thing that happens at the advice gets given in private rather than public. If it’s critical. Yeah, I guess it’s a good point. 2222 You have two topics in the book that are topics that I don’t know. As as somebody like me would always, you know, there was maybe most critical of the Trump administration was on the stance on immigration trade. Um and you do provide actually a very e con nuanced view of those two even policies in a way that I think most even Chicago economist would not necessarily go there and think in those terms and maybe brush it off and not think about it. Well, you’re raising the price of something that you think you should have a price anyway, Right, uh, comes to immigration. And in the in, the in the in the in the, um in the Jaros point was like he was saying that we do this through quotas all the time. Even free trade administrations were doing this through quotas, and that’s something that is way more problematic as as as to the markets than than than then the tariffs would be so. But I guess my point is that there’s ways justify even that those two ideas and they might not tell us a little bit about that. I think that and I don’t know about justifying. Maybe it doesn’t context. When I wrote the book, I was out of the administration, so I was having more freedom to say as loudly as I want. I mean, we talked about all these things But, um, I could give it more emphasis when I was gone. Just context. What’s historical context when politicians use words? But I got news flash for you. The words they use aren’t always matching their actions. Uh, and I saw compare Ronald Reagan, who was an actor by the way. I love Ronald Reagan, but he said these beautiful things about free trade, but it wasn’t what he was doing. Uh, I wish he and Trump were doing what Reagan said, but neither were really some of the worst tariffs that we have have been in my entire lifetime. The chicken tax. 25% tax on imported pickup trucks. There are no imported pickup trucks because of this. Most cars in America, although not any shoulder in Washington, D. C. Or in New York, our pickup trucks, um, this again. Another example. One of these policy failures that flyover America suffers from the chicken tax, and then the Jones Act is a It’s even worse than a high tariffs of Prohibition and foreign ships or crew moving cargo along the coast of our United States. So as a result, there’s no way in the world to move natural gas from the parts of America that have it to the parts of America that have cold winters. You can’t do that by voting is prohibited by law. So these are restrictions on international trade that are much, much more costly than 10% on Chinese goods or whatever. Got all the attention. Um, yeah, the Jon Jones asked to ask that there’s 22 things I want to point out. There. You use an example that is incredibly powerful. All folks in Massachusetts consuming natural gas natural gas comes from Russia. Massachusetts supposed to go from Texas to Massachusetts, right? Because you don’t have ships that fit. There’s no There’s no Jones Act act, UH, compatible ships that can take natural gas from Texas to Massachusetts, which will be a third of the price than bringing it from from from from from from Russia. And then there are Jones Act well, their ships that can take the gas from Texas and send it elsewhere in the world because that’s an international route. I mean, it’s just that’s just ludicrous that we have that restriction and and, you know, it’s something that hasn’t been around since 1915 is that correct. Yeah. And this is one of these, uh, it’s actually had 100. Your birthday last year. So it was 1920 19. Uh, there was a predecessor to it called the Merchant Marine Act. I think of 1915. It also was was involved. But the Yeah, this is This was frustrating to me. I was in the White House, and then my colleagues back in academia are just totally tearing us apart for all your an administration that has tariffs on Chinese goods, you know, you’re going to burn it out. Like, where have you been on these terrible, terrible tariffs had been around your whole lifetime. Are you even aware of them? You probably don’t buy a pickup, so you’re not, But this is. Mm. You know, you you want to fix the big problems. You don’t want to introduce smallish problems, But you don’t wanna You would like to fix the big ones. And President Trump worked on the drones act. That’s part of what I discussed in the book. I mean, the bureaucracy beat them back, but he worked on that, and I think he eventually will get there on the Jones Act and He also worked on the chicken tax, Um, and cutting either of these by a small what would seem like a small amount of be incredibly valuable to the American consumer and worker. So let’s talk about some some numbers here that I think it’s it’s again. We talked about the economic profession and and, um, in terms of understanding what happened in the last four years, For example, Uh, so the last four years we experienced the highest, the fastest increase in medium household. How the whole household income in a very long time. It’s a real medium. Household income went up before 2020 before the pandemic hit by like $5000 I think per household, that’s almost a 10% increase. It’s something you know, if you look at, the graphs are like, you have this, you know, sort of like change in the river. That’s just very clear. 4000 of that came up in the very last year between 18 and 19. It was this big shot up right between 18 and 19, and so you you have a lot of numbers in the book talking about what what CIA was estimating. The result of some of the policies that were put in place. So how would you break down that number in terms of policies that were put in place that led to that? Because whatever we did, you did there. Hopefully, those things we can keep doing it so that, you know, there’s nothing more important, I think, and raise medium household income. Um, and if they think, focusing the big things. Right. So what are the big things that that you see responsible for that giant growth? Well, yeah, that particular number. Um, I’ve put it there will be three or four pieces to it. So one piece, I think, would be a measurement error. I think part of that big jump again. I’m just the basin in me. Says when you have a big change, Um, part of it’s probably measurement error. Um, and there’s some issues, you know, that they the activity occurred in 2019, but I believe they did some of the measurement during the pandemic. You know, Are you tracking down the sample and all that? So I say measurement would be part of the tax law is important. Um, especially that’s a median number. So It’s kind of waiting the middle class more compared to averages, which would put a lot more weight on the highest income people. And there we knew that, you know, blue collar wages were increasing a lot. And it’s what we expected, you know, from bringing our business tax rate into line with the rest of the world. Um, that’s what happened. The timing is right. The types of workers it was affecting was right. Um and then the regulation would be another part. There was a lot of labor regulation that got removed, um, and then regulations on consumer products which go into the C p. The allows us to calculate the real median household income. So those are kind of kind of the pieces, and there are probably other factors. So I said 4/4 1 would be, you know, other factors I haven’t named. I think those certainly those first three need a close look. You I think the book mentioned something like your overall estimation of the impact of deregulation exercises that took place in last four years or something about $4000. And I think that was the number you came up with, right? annual income. You know, once other regulations took effect. So one of them the single biggest one out of hundreds. So it’s still not a majority, but it’s the single biggest would be the backhand off the auto regulations. You know, saying, you know, it’s okay if there are some cars on the road, there are an electric something like that that’s something incredibly valuable. But that wasn’t going to go in until 2025 2026 2027. Um, and now Biden may end up putting it in, but so these regulations, and for good reason, I mean, they take sometime of the time you ride him to the time they go into effect to the time that the consumer experiences it. Many of them do now. There are some. We gave examples, and they’re not trivial. The Internet is something that went in immediately. Internet prices dropped like Iraq in March 2017, the very same time that the president and Congress is working on that prescription drug prices. They took within about a year of opening entry, especially in the manufacturing generics. We saw drug prices coming down, so there’s some that were immediate but others that were would have played out over a period of time. Just, uh, you mentioned the drug, the drug prescription drug decrease. Uh, there was a episode that you describe where, um you know, number CP. You have a read on the CPI numbers before everybody else does right in the White House. And there was you saw the effect of the regulatory reform that was put in place that would decrease costs of prescription drugs. And I was there in the c p i in front of you. Uh, Lois and I remember the comparison said it was something like a big decrease relative to the, you know, the history of C P. I on that on that category for a long, long time. And and and yet, I mean the sort of like media filter on that information. It’s just unbelievable. The fact that the c p. I was no longer evidence was deemed fake news right away. Just because Orange man said it. Therefore, it’s bad, and therefore it cannot be true. It’s unbelievable, uh, that episode, but and again, I think the episode of Like I think most of my colleagues here most of our students. Most of the people that read The New York Times or even the Wall Street Journal might not be attuned to the to the to the facts of those policies and economic growth in household income over the past over the past four years. And that’s that’s That’s sad because not because of whatever giving credit to anybody, just that Well, I hope those policies are staying place so that, you know, this can continue. Right. Um anyway, so sorry that I ran just on on that on that on the media, but yeah, that was I opening to me. Uh, and the orange man didn’t say it. I said it. It went on His twitter, therefore became a lie. And they said that we were using the c p. I to measure prescription drug prices, which is very standard, of course, way to measure prices in various industries and for the whole economy. Um, and this is something we were using even before the good news chain. It’s not something we cherry pick. And the headline that was the New York Times. The headline that was in the small town newspaper where I grew up was President claims drug prices fell based on no evidence. I mean, how could they lie anymore? But you know, it’s not new either, right? That’s not new either. I think in the sense that in the sense that one of the episodes that that I particularly frustrated with is that I’m a statistician, I really like to think about, Okay, you make a prediction today. I want to evaluate the quality of predictions on a sequence and you had over the Obama years every single economic agency we’re making predictions about growth that were out, basically that did not materialize. They were above the actual data for eight years in a row. And now, during the trump years, you have the reverse. Is that is that by chance it’s something so at some point, to start believing it’s not by chance by design, right? I mean we Theoretically, we expected that with our approach and our approach to saying that things like adding costly regulations will something will bring down growth, removing them or just stop adding them. We’ll bring up growth. Removing them will bring up growth even more. And if you have a forecaster who’s not paying attention to that regulation. And, yes, they were over predict while the regulations are put in and under predict while they’re taken out. And it’s a fact that these forecasters do not pay attention to regulation for macro forecasting. Somebody like Sandy is not opening the Federal Register ever to look at what’s being written in there. What’s being foisted upon people. He has more macro approaches, if you want. He’s looking at aggregate time series. The Congressional Budget Office, the Federal Reserve. They’re not looking at Internet regulations. Labor regulations. If they are they, they never say a word about them. So that’s the theory, would say they would be surprised. And then the facts show that they were surprised. Right? Right. Um, all right, let’s let’s move to to something you wrote during uh, during the campaign, you have Kevin Hassett, the former, the former, I think chairman of the council, Economic advisers and some others wrote a projection of the impact of the Bidens agenda on the economy. And so what are the three things that there are three things that you listed there, uh, as potential things that would reduce. I’m gonna read here. Basically, uh, they would reduce uh, GDP going forward would be the reverse of the 2017 tax cuts, the reversal of the regulatory reform and expansion of subsidies in particular, and health insurance and clean energy. Those are three things that are the sort of drivers of the of the report, Um, and the assessment being that over the long run to combine effect of that of those those policies would lead to an 8% decrease in long run GDP growth. Like, uh, not not a percent decrease, but like less than what would have been and would have 6500, uh, real household income decreased by 2030. So that that’s the those are the numbers. So, like a big, potentially decreasing potential GDP growth. Essentially, um, of those when you look now and now we have a Biden administration taking place. What are what are the main sort of, uh, worries you have in terms of the things that you think are more more likely to materialize in terms of policy. And what are the one of those? What are the ones that you really were being very costly? Um, you know, that’s a bit more of a political question that I thought about. But I gotta confess, this is the amateur part of my brain working. But they I mean, the energy wanted just so costly. You know, the idea that number one, essentially all the cars will have to be electric. So we’re all going to be plugging in cars, which is going to be a big demand for electricity, Right? At the same time, we’re going to eliminate 70% of the ways we have of making electricity. Uh, it’s hard to think of a dumber idea than that. And I have enough faith in the political process that people harmed. Yeah, the people on a flower country are ignored too much, but if you make them scream enough, they will be heard. So I’m kind of optimistic that that won’t happen, that I can’t say I’ve seen any concrete moves of that type other than mansion kind of pivotal senator, saying he’s not in favor of this green New Deal stuff. I’m not sure I’ve seen the Biden administration do anything to acknowledge that their plans are overly ambitious. Um, probably the more likely one would be the the health insurance making obamacare subsidies, even bigger. I mean, they’re already massive, but he wants to make them even bigger. Of course, there are means tested unemployment and employment tested. So it’s another subsidy for people either have low income or don’t have full time job. And that that that basically adds on to the things that you wrote about during the Obama years, right, That you’re just basically getting people not to work. Right. So you’re providing more subsidies for people not to work. And that’s going to be a huge source of, uh, slow down in growth. As a result, especially full time work. Yeah. Now that, uh, it tends to hit lower skilled people so that obamacare policy will affect GDP because most people do contribute to GDP. But their contributions may be less than proportional, maybe by definition of low skill. But it will show up a lot in the full time employment numbers because those are more democratic measures of economic activity, right? Right. And and at the same time, and at the same time, if you if you if the push to a much higher minimum wage better than mandated minimum wage, that might be those numbers might be pretty big right again. The minimum wage of $15 an hour might not have them that big of an impact on GDP, but it will have a big impact on low skill employment. I think that’s that’s I don’t know that assessment, you know, price controls you need to look hard at. And the minimum wage is a price control its way out of whack. I mean, it’s more than doubling, right. So at least in the States that are still kind of at the federal, uh, and that will have a lot of costs whether the costs show up as unemployment or not. Uh, I’m not firmly committed on that. I’m not sure the theory points me that way. Um, I want to know more how it’s implemented. You know, it could well, let me understand. What do you mean by the theory? Doesn’t pointed that way that that higher price control in this situation wouldn’t lead to less demand. Well, because first of all, that out of a job is not a commodity. So I understand if you fix the price of gold that some number that’s different than what is trading in New York today, you’re going to find either massive amounts or a huge shortage. The jobs are in a commodity, so we say $15 an hour. Other aspects of the job, of which there are many, many aspects of the job other than its wage can change and will change. Um, you know, it could be something as simple as we just don’t have jobs in rural areas anymore. We put them on urban areas and make those people commute that it could be that presumably, be a combination of these things. Um, you want to get that high? Probably all these things. So it would be employment and other things. But I think it’s a mistake to sit obsessed too much with the employment, because that’s only one way. The cost will one of the symptoms of its costs, and there’ll be other symptoms, even holding employment concept. There will be costs, and one of them seems to be one of the easiest things for the agenda. To to pass on is going to be some sort of repeal of the tax cuts. I think that they need 50 votes in the Senate only to do that, um so raising the corporate tax that I’ll be shocked if we don’t see that happening the next year. Um, I’m more optimistic than you. Really? You know that we were out of line with the rest of the world. This was something Democrats acknowledged, Right? We’re gonna go back on the line with the rest of the world. It’s just repealing it. Now. If it’s rewriting it, way raising it, I don’t think it goes back to 35. It goes back to 28 or something like that. Raising it Then I could see that it would be an easier lift politically, everything to to raise it, but not just repeal. Now, I don’t know. In terms of the mechanics of the Legislature, What Whether repealing is easier than rewriting, I don’t know. But from from from your analysis, C a is that how how, how relevant that particular decision was right. How back for? I mean, I sort of like and think about the channels, but I don’t know. Do you have a ballpark number of of the sort of like the What is that 1% increase their tells us in G. D. P. For example. Um well, I think we found the There’s a lot of the tax law, but corporate rate part of things, um, going from 35 or six down to 21. I think that’s where it went that that would raise wages in the long run. Wish we think you get to the long run in five or six or seven or eight years pretty close. I mean, it’s a dynamical system, so you never get there. But you get close. Um, and the wages would be about three or $4000 per worker, um, per year, so that that’s the kind of effect that we projected. And that’s partly because more businesses will be created and then more businesses will get bigger. They’ll need more employees. So but also the productivity. I mean, a lot of the capital’s pretty severely misallocated is way too much capital and housing relative to business. And so, by narrowing that differential, do the taxes that that’s been right. One of the reasons taxes, taxes is a big reason for that. So narrowing that differential just made productivity. Even if you have no, uh, effect on that amount of capital, just allocating it better means that each unit of capital deliver more value. Alright, let’s let’s let’s close it up by talking about the pandemic a bit. And we didn’t you mentioned a couple of things early on, but, uh, two things I wanted to to ask you. You wrote a blog post awhile ago saying, I think the title was how economics helped end the pandemic. Um, describe that a little bit. And if there’s two episodes in particular that I think are very, very influential, and people will be nice for people to pay attention to Yeah, we, um yeah, and it I think what I wrote in that blog was really the entire profession. I’m going to give the number of Chicago a lot of credit. Samp Eltman Many, many years ago, writing about how the FDA, um, slows and or and sometimes totally prevents valuable products from reaching the marketplace. Milton Friedman pushed on that number of Chicago but also outside of Chicago. And I think I gave examples in that blog. Host Peter Temin had a book about it from M. I T. So we economists as a profession have been complaining about drug regulation and the cost of it, um, and their opportunity costs. Uh, we complain about that for my lifetime and then some, Um, and we know how to analyze that. And And we brought that to the White House. Um, and we work on getting FDA regulation of the way. And in the first case, that FDA actually was successful and scaling itself back was a generic drug approvals. And and so the president? Yeah, that allowing a manufacturer actually make a generic drug. It’s hard to believe you have to be able to prove for this like the drugs been around forever. It’s coming off patent. Why can’t people make it? Well, you need the FDA approval and that system had been gained and so you could make tons of money making generic drugs if you could, you know, get the FDA to be on your side. So that gave all of us a lot of experience with FDA deregulation, Um, including the president. And then the next project we went on to and this is in 2018. There was no covid. Um, he said, Well, what if there’s a pandemic? You know, what was that kind of cost? Um, is there anything you can do to mitigate the cost, and we again came back the f d a. Um and we wrote a report saying Pandemics if they come and they will come there once every 2025 years thing when they come, they’re gonna cost a lot. And you can mitigate that. And your number one way of mitigating is speedy vaccine approval. Um, and we released a report on that. Nobody noticed, but we did that. The president made an executive order, the president said, And that order the number one defense against pandemics is speedy vaccine approval. And then when Kobe did come along, we were ready and the president was ready. Um, not just ready with the idea. We can all say speedy approval, but how do you make it speed? The bureaucracy is not a ship that you turn so easily. But the president had his hand on the wheel and he had realized how hard he has to turn to make the thing turned. And and he was able to get operation work speed underway that yeah, it’s provided money for vaccine development, but especially it’s sped up the approval, and they it’s interesting thing how would have been different if we hadn’t brought all that background to the table and the experience of that. So the president on down knew what to do when more FDA deregulation was needed. Now, I would love to see a lot more like more deregulation on tests. Um, more deregulation in some of these 3rd and 4th vaccines. Even that vaccine came out by the end of the year, which Dr Fauci said it was impossible because Dr Fauci took it for granted that you have to have a long approval process. He didn’t read our report, by the way, his job. We sent him the report. He should have read it, but it was before covid. So he wasn’t busy. But, um, you know, he said it couldn’t be done. And by the end of the year, we did it by the end of year, but actually could have been done in May. You know, people started to receive the Moderna vaccine people Not nice in men. No. In March and March, back the same day that we were shutting schools here in Chicago was this day that people were starting to get the Moderna vaccine and no, we shouldn’t have vaccinated a million people a day back then because you want to learn about the vaccine. But we should have been giving it out on a much bigger scale and allowing people to come and ask for it if they wanted in June, July, August. So it could have been quicker. That’s one of the first times I think we’re going to have the opportunity costs, like, easily measured. We had this thing and the delay of the F D A gave us whatever extra 400,000 deaths, Probably. Okay, so we need to show me that that is, you know, in expectation at least that a mistake would have would have lied to, you know, or allowing people to experiment more easily with it would lead to to a higher number of deaths. And I think it’s gonna be a hard time. You know, FDA is actually anti Beijing by the right, so I know, I know. And they actually it’s funny because they actually are OK with basin reasoning. In very extreme things, there are like devices for, like, cancer, you know, some terminal cancer type stuff because they know that they need a speedier experimentation. There is the same exact thing when you think for the cost that we’re all facing as a nation as a world. Uh, but that that’s sort of the bureaucrats don’t talk, right. They don’t. They don’t they don’t have. There’s an opportunity for positions to get involved. You can figure out how to crack that FDA, not as the Beijing Beijing is very important. You don’t want to say thou shalt have a sample of 30,000. What do you mean? If the 1st 1000 shows it’s incredibly effective? Do we need the next 29? You know, I don’t have to tell you based on how this works, right? That’s not done. I mean, you know, shelves, right, Right. Prior the prior you have on even these vaccines on for for this virus is their suppliers are not, You know, they’re pretty clear that they’re not that dangerous. If you made a mistake there, it’s not so bad. So So that’s where that’s where I think the trade off is just not take into account at all. All right, so final question on the pandemic, and then we can wrap up again. We talked about opportunity costs to talk about trade offs we talked about so that I think that training that you have in your mind and everything you think about, how do you What was your sort of, like impression of the progression epidemic? And, uh, you mentioned already to stay at home orders without any assessment of trade offs? Um, I mean, I’ve been saying that I’ve been complaining, yelling, writing whatever I could throughout the pandemic about what I thought was just unbelievable, uh, naive responses that we did. Well, what was your and I don’t want to bias your answer here, but what was your sort of like reaction? You know, starting march and so on to what we did is as a country, as a world, really. We had to have a had vaccine quickly. I mean, that was our view before this ever came along. And so I was relieved that that path was acknowledged early and taken, so that was a relief. I was also disheartened, knowing that all these agencies are going to not ignore the car, they’re going to totally ignore the cost. You even have Fauci bragging when his testimony that economics is not his area. But actually you’re wrong, buddy. You mean you’re You’re required by executive orders dating back years to assess the economic cost of your regulations. But he bragged he was bragging about how he doesn’t even have a clue. Uh, and so you know this These are going to be done without regard to the costs. Um, so I wasn’t surprised that that played off that way. I’d say the thing that surprised me was the schools even today. I mean, we’re hearing very first you set and the schools aren’t open in the city of Chicago. I mean, that is ridiculous. Um, and I guess I didn’t appreciate, you know, there’s there’s some interest groups who will just step on Children for just a couple dollars gain for themselves. It’s not even clear that the gains here, that’s that’s That’s what’s really crazy to me. It’s not even clear to me. I see. I know that teachers unions the reason why schools are not open, but why they’re working from home in some ways. And exactly what the difference probably is like a convenience gain. It’s like, minuscule. Probably it’s a miniscule thing, and they’re willing to step on the kid together and that’s I wouldn’t have predicted, Is it? Is it Is it maybe, like, just like a misreading completely of the risk they face? They really that it’s not really because they’re living their lives. Otherwise, I think most people are living their lives going out and whatever. So that’s not I mean, is that old saying that you’re paid to when you’re paid to not understand something, then you’re going to not understand it. So I’m sure they’re not taking a field trip to the local Catholic school to see how they’re doing. Um, you know, in a private sector, you have an incentive to pay attention. Well, how? My competitor to him? What are they doing? Good. That I can imitate. What are they doing? Bad that I can avoid? Um, so I don’t know what’s in their hearts, but I know that there’s incentives to have barriers to entry into their hearts and their minds, right? Well, and you saw that very clearly in places where they try to force the private schools not to open either You had that in California. You had that. One of the examples of this is not in the U. S. Is in Portugal. Um, they outlaw online learning for private schools. They said No, you cannot do it because the private the public schools are not gonna do it because they were fighting like, Well, that’s not our job to do this online thing. So then the government came in and said, Alright, the private schools cannot do either to let and and And that that was like, you know, I think there was a somehow constitutionally, that was overturned in Portugal. But like, you see the extremes to which I think people special interest will go, uh, to protect their their I’m a little surprised by that, too, that this is done while we’re all watching. I kind of figured that kind of stuff happens when we’re not watching, but they do it while we’re watching that. It shows how little power we have. Uh, you know, I was awakening year for me in terms of like our professions. I think just I don’t know, I’m very disheartening. A lot of ways positive in other ways, too. I think that the fact that that that warp speed is a great example of how the power of economics coming in and helping, um, and I wish more would take more of that and another of the of the other side. Anyway, Casey, thank you so much. It’s great. We went over and over time already. Great conversation. I look forward to talk this afternoon. Thanks for listening to policy on McCombs. Mhm. Mhm. Yeah