Economist Jason Furman on Biden's Economic Failures and the Future of AI

Biden's Economic Policies and Their Impact

Jason Furman, a Harvard economist and former advisor to President Obama, has been critical of President Biden's economic policies. He argues that several of Biden's major spending initiatives have failed to deliver on their promises:

• The $1.9 trillion American Rescue Plan primarily resulted in inflation rather than accelerating economic recovery
• Student loan relief was "egregious" and an abuse of presidential authority
• Infrastructure spending drove up prices instead of increasing actual infrastructure due to new rules and constraints
• Climate initiatives included inefficient subsidies for domestic manufacturing of things like solar panels
• The CHIPS Act will likely result in worse and more expensive microchips, though it may have national security benefits

Furman contends that many of these policies involved spending far more money than was needed to achieve their goals, contributing to inflation and other economic issues.

Evolving Views on National Debt and Deficits

Furman acknowledges that his thinking on government debt and deficits has "zigzagged" over the years. While he previously argued with Larry Summers that debt concerns shouldn't prevent important spending, he has become more worried about debt levels recently:

• Higher interest rates make debt more costly and concerning
• The debt-to-GDP ratio has increased significantly
• Large and persistent debt can reduce long-term economic growth

He now advocates for trying to balance the primary budget deficit (excluding interest payments) and implementing strict pay-as-you-go rules for new spending. Furman believes politicians need to take debt more seriously, potentially spurred by higher interest rates or looming trust fund expirations.

Thoughts on Entitlement Reform

On entitlement programs like Social Security and Medicare, Furman favors tweaks to the existing system rather than radical reforms:

• Extending payroll taxes to cover health insurance premiums
• Reducing benefits for higher-income recipients
• Gradually increasing retirement ages
• Potentially adding private savings accounts on top of the existing system

He emphasizes that any major changes would need to be bipartisan given the political challenges involved.

Artificial Intelligence and Its Economic Impact

Furman has become more optimistic about AI's potential in recent years, revising his earlier skepticism:

• AI is advancing faster than many experts predicted
• It's creating new types of jobs, not just eliminating existing ones
• Smaller companies and startups have been able to innovate in AI, not just tech giants

However, he still believes the main economic problem is too little AI and automation, not too much. Furman sees AI as a source of much-needed productivity growth.

Free Trade and Protectionism

Furman remains a strong advocate for free trade and globalization, criticizing protectionist policies:

• Trump's tariffs are based on flawed economic reasoning
• Imports benefit the economy and trade deficits aren't inherently bad
• Protectionist policies hurt both consumers and export-oriented workers

He worries that Trump has shifted the "Overton window" on trade, making high tariffs seem more reasonable.

The Role of Economics in Policymaking

While still believing in Keynesian approaches to managing the economy, Furman has become more skeptical of relying solely on expert discretion:

• He now favors more rules-based approaches to fiscal and monetary policy
• Automatic stabilizers that adjust spending based on economic conditions
• Requiring policymakers to explain deviations from established formulas

Furman sees value in having diverse ideological perspectives within economics to improve policymaking.

Technological Change and Job Displacement

On concerns about AI and automation eliminating jobs, Furman emphasizes historical precedent:

• Past waves of automation created new types of jobs, not mass unemployment
• Market processes help people and businesses adapt in ways central planners can't anticipate
• Some disruption is inevitable, but overall economic gains tend to outweigh losses

He argues for focusing on the long-term benefits of productivity growth rather than short-term fears.

Conclusion

Jason Furman offers a nuanced perspective on current economic challenges, combining traditional neoliberal views with evolving thoughts on issues like government debt and AI. While critical of recent policy directions, he remains optimistic about the potential for market-driven innovation and productivity growth to improve living standards. Furman's insights highlight the complex tradeoffs policymakers face in managing the modern economy.

Article created from: https://www.youtube.com/watch?v=KogDw5ZRcl0