Manuel Balce Ceneta/AP Photo
Federal Reserve Board Vice Chair Lael Brainard speaks at a conference in the Fed building in Washington on, Sept. 23, 2022.
President Biden's State of the Union address was an admirable expression of what has been an ideological and policy transformation—on industrial policy, on tougher regulation of economic concentration, and a pivot away from corporate globalism in favor of rebuilding America.
Biden's own instincts have been reinforced and carried out by a strong economic team led by Brian Deese, director of the National Economic Council, with the backing of White House chief of staff Ron Klain, and major contributions from Tim Wu, the White House coordinator of competition policy.
Now Deese, Klain and Wu are gone. The new White House chief of staff, Jeff Zients, is more conservative than Klain. Deese will be succeeded by Lael Brainard, currently vice-chair at the Federal Reserve.
Brainard has been good at the Fed. She is somewhat better on both monetary policy and bank regulatory policy than most members of the Fed's Board of Governors.
But on the signature Biden policies that fall under the purview of the National Economic Council, Brainard is a distinct step backwards. Among senior Biden officials, Brainard is about as corporate globalist as it gets.
Her government experience began in the Clinton administration, where she was part of the Rubin-Summers group that brought China into the World Trade Organization with fantasies about how that would make China a capitalist democracy. WTO membership did yield riches for investment bankers and outsourcing opportunities for corporations, but China remained more totalitarian than ever. Brainard was also involved in the implementation of NAFTA, another trade deal whose assumptions backfired.
Her next job in government, under President Obama, was as the Treasury's undersecretary for international affairs. When Brainard was being seriously considered for Treasury secretary early in the Biden administration, I did a full exploration of her record. I concluded that Brainard was moving cautiously in a more liberal direction on some issues such as community reinvestment but was far from the kind of progressive that Biden has turned out to be.
The problem now isn't just Brainard. A key aspect of the undertow is the career staff at agencies such as the State Department and the Office of the US Trade Representative, who have been steeped in the assumptions of corporate globalism.
Katherine Tai, who heads USTR, is deeply committed to Biden's agenda of putting the rebuilding of the US economy ahead of discredited assumptions about trade. But Tai doesn't have the personal connection to her president that other USTR heads had in the era when the neoliberal trade regime was being built.
Tai is relentlessly undermined by the career USTR staff, both in Washington and in Geneva. Senior people whom she did not appoint were imposed on her.
There is a globalist axis connecting the traditionalists at USTR with their allies at the Treasury. While Biden and Tai have resisted pressure to cut the strategic tariffs on Chinese exports, pending a “re-set” of the US China relationship that looks less plausible by the day, Treasury Secretary Janet Yellen and her senior colleagues have repeatedly and unhelpfully called the China tariffs taxes on American consumers.
Another global traditionalist in Team Biden is Kurt Campbell, who serves as Biden's top White House adviser on Asia. Before that, Campbell was assistant secretary of state for East Asian and Pacific Affairs under Hillary Clinton. If you read Campbell's articles going back several years, you will perceive a gradual evolution into more of a China hawk, but less so on Biden-style salutary economic nationalism. In one of his pieces for Foreign Affairs, he offers this caveat: “It would be misguided to build a neo-containment policy on the premise that the current Chinese state will eventually collapse, or with that as the objective.” That, of course, is a straw man.
As a counterweight to Brainard and the rest of the undertow, the reliably progressive Jared Bernstein was promoted to chair of the Council of Economic Advisers. This is a huge plus.
In a recent speech to the Aspen Security Forum, Campbell lauds Biden's major legislation including the IRA and the Chips and Science and the rebuilding America's tech leadership, but adds somewhat disdainfully: “This not without debate. It means a return to certain aspects of what in the past had been labelled industrial policy, with all its challenges.”
Campbell happens to be married to Lael Brainard. This is not to hold one spouse responsible for the views of the other, but they seem ideologically kindred souls.
Campbell is part of a triangle of traditionalists on trade and corporate globalism, which includes Rahm Emanuel, now ambassador to Japan, and Larry Summers, policy kibitzer without portfolio. For people who assumed that Emanuel was taking the ambassadorship as a career capper quasi-retirement, no such luck. He is a player on Asia policy and a corporate traditionalist.
As Brainard has moved up, she has repeatedly been praised by her former colleague Larry Summers. Though Summers has made himself persona non grata to Biden with his economically mistaken claims that Biden's public investment programs were a prime cause of the inflation and that we need higher interest rates and higher unemployment, you can bet that Summers remains chummy with Brainard.
As a counterweight to Brainard and the rest of the undertow, the reliably progressive Jared Bernstein was promoted to chair of the Council of Economic Advisers. This is a huge plus. Bernstein, former research chief of the Economic Policy Institute, served as Biden's own economic adviser in the Obama Administration, here he was often the only progressive in a coven of neoliberals dominated by Summers.
Bernstein has a personal relationship with Biden, and he will be in the room when important decisions are made. He is known as brilliant, affable, always careful to do his homework, and more of a thoughtful scholar than an infighter. However ever since Bill Clinton invented the National Economic Council to create a top-level post for Robert Rubin, the director of the National Economic Council has outranked the chair of the Council of Economic Advisors, which has been relegated to more technical work. Because of Biden's longstanding trust in Bernstein, whom he knows much better than he knows Brainard, one hopes that balance will change.
The other key progressive in a senior post at the White House is Bharat Ramamurti, the deputy director of the NEC. Ramamurti is a former senior staffer to Sen. Elizabeth Warren. In the White House release announcing the appointment of Brainard and the elevation of Bernstein, Biden also added to Ramamurti's job the title of advisor for strategic economic communications. This should help assure that Ramamurti will be in the room where policymaking happens. And Biden gave additional responsibilities to another progressive on the Council of Economic Advisers, Heather Boushey, who will also serve as chief economist to the President's Invest in America Cabinet.
To review all of this is to appreciate the immense residual power of the undertow, which resides not mainly in the individuals in government who embody the outmoded conventional wisdom, but with the potent corporate and financial whose interests they serve. For a Democratic administration to shift that imbalance is a never-ending struggle. It just got a little harder.
