Last month, when news emerged that the American economy grew by 2.4 percent in the second quarter of 2023, U.S. President Joe Biden responded by saying that the results were “Bidenomics in action.” Biden had reason to be pleased: Apart from the faster-than-expected growth, inflation has begun to cool and the chance of a recession this year has declined.

Bidenomics is rooted in a belief that the best way to grow the economy is from the middle out and the bottom up. But it’s also been a sweeping foray into industrial policy and protectionism, with the administration prioritizing domestic manufacturing and bringing jobs back home.

According to Biden’s top advisors, unfettered globalization and subsidies for big companies have led to a hollowing out of the United States’ industrial base. Bidenomics is a correction. But there are important critiques of the approach, which I explored in an interview on FP Live with Heather Boushey, one of the primary intellectual architects of Biden’s economic policy. Boushey is a member of the president’s Council of Economic Advisers and chief economist of the White House’s Investing in America Cabinet. FP subscribers can watch the full video interview in the box atop this page. What follows is a condensed and edited transcript.

Ravi Agrawal: Let’s start with the U.S. economy. Second-quarter growth of 2.4 percent is impressive. Polls show, however, that Americans aren’t too impressed. A Real Clear Politics average of polls shows that only 38 percent of Americans approve of Biden’s economic management, whereas 58 percent disapprove. Why do you think that’s the case?

Heather Boushey: It starts with the pandemic that upended our economy and our lives. While we have moved passed the recession caused by the pandemic—and the policies that we needed to have everybody stay home—it also sparked inflation around the United States and the world.

While inflation in the United States has been slowing down faster than it has among many of our economic competitors, American families are still working their way through challenges and stresses. As the president reminds us regularly, prices remain too high. We continue to do everything we can on our part to lower those costs facing families. That’s why the president has prioritized things like getting prescription drug prices down or dealing with things like junk fees.

The reality is that we have an unemployment rate that has been at lows we haven’t seen in over 50 years, and it’s stayed there for quite some time. We’ve seen people coming back into the labor force. We’ve seen GDP that beat expectations and the advance estimate for the second quarter. We’re seeing inflation slow and come back down to places it hadn’t been since 2021. All of this is really positive economic news.

RA: How would you define Bidenomics?

HB: The president’s mission has been to build an economy from the middle out and bottom up. To make sure that this economy benefits families all across the country, and particularly the American middle class.

Bidenomics has three pillars. The first is investing in America. We’re doing that through ramping up America’s infrastructure and making it fit our 21st-century needs. The president was able, in a bipartisan way, to get new investments in infrastructure across the finish line. Along with that, making investments in cutting edge technologies and building a clean energy economy.

The second pillar is empowering and educating workers and making it clear that people have the opportunity to join a union, and that they have access to good jobs. It’s why so many of our policies include things like prevailing wages or apprenticeships. This is the most pro-union president in my lifetime.

The third pillar of Bidenomics is making sure that we have fair competition. The first executive order he issued in 2021 had 72 specific actions that agencies were taking across the administration to promote fair and open competition.

U.S. Treasury Secretary Janet Yellen has talked a lot about how this is a modern supply-side agenda, and you can see that in the pillars, and you can see that in the president’s focus.

RA: I want to dive into some of the critiques of Bidenomics from. I’ll start with the writer Ezra Klein, who made a memorable analogy of the government’s approach as an everything bagel, to which you responded by tweeting a picture of a half-eaten everything bagel. And the critique is that the Biden administration is trying to do too much.

For example, the CHIPS and Science Act, which focuses on semiconductors, has riders that force companies receiving incentives to build daycare facilities near manufacturing sites. Applicants are also encouraged to offer transportation or housing assistance to employees. It’s admirable, of course, but it drives up costs, and it delays setup times.

Is Bidenomics trying to do too much?

HB: No, I don’t think so. Businesses have to make a series of decisions when they set up on where to locate, their suppliers, how they’re going to engage with the environment, and human resources. For too long, we have allowed too many of what we as economists would call the “negative externalities” to just be negative externalities that nobody has to internalize. A classic Econ 101 negative externality is environmental degradation. We have a whole agency here in the federal government, the Environmental Protection Agency, that is devoted to making sure that somebody internalizes those costs.

When we think about some of the human capital pieces, and workers, we are making sure that the U.S. government, backed by U.S. taxpayer money, is making investments in industries that are going to drive economic competitiveness and are important to the future of the country, both for national security and for economic security.

RA: Wouldn’t it be more effective to separate those two things? For example, you have a CHIPS Act that focuses purely on building fabrication plants—fabs—and then a separate policy that incentivizes daycare and elder care and all the other worker rights that we know are necessary.

HB: But that’s not the way the world works, right? You’re setting up a chip fab, making decisions as you’re setting it up; and you want to make sure you are making the right decisions, not leaving it all to just enforcement later. But making sure that, proactively, you’re saying, “These are our values; these are things that are important to the American people, and to communities.” These are also things that show improved productivity and outcomes for those businesses. We’re encouraging businesses to follow best-in-class practices. We’re helping push things in the right direction.

RA: I don’t think anyone’s questioning the intention here. Everything you’re saying is well-meaning. Ultimately, the critique is that these policies are slowing things down. Money isn’t being disbursed.

HB: I have not seen evidence that this is slowing things down. What I have seen in the data is a massive spike in the construction of manufacturing facilities across the country. The maps on invest.gov show all the places where we are making investments in infrastructure and the private-sector investments that have been announced. Those maps are filled with dots.

We know that it takes time to go through these processes. We need to make sure that we’re spending taxpayer dollars in a smart and sensible way. But there is also an urgency, and it’s actually been quite striking how fast many of these investments are going relative to what people predicted just a year ago, before the CHIPS and Science Act and the Inflation Reduction Act [IRA] were passed into law.

You will not find anybody in this administration who does not understand the imperative to move fast. We saw a semiconductor shortage during the pandemic that affected American consumers. It is affecting national security. This is an imperative. Building the clean-energy economy is an absolute imperative to move as quickly as possible. It has been all hands on deck, everybody rowing in that direction.

RA: Let me put another critique to you, from the economist Adam Posen. In his cover essay for Foreign Policy earlier this year, he argued that Bidenomics is essentially zero-sum economics. He points out four fallacies: that self-dealing is smart, that self-sufficiency is attainable, that more subsidies are better, and that local production is what matters. Each of these assumptions, according to Posen, are contradicted by recent economic history. Posen wrote that while Bidenomics might be popular, and might represent a set of worthy causes, the economics underpinning it will end up being self-defeating. What’s your comeback?

HB: One of the imperatives of the Inflation Reduction Act is the historic investment in building a clean energy economy. We know we will need 10 to 15 times the amount of money that we invested through the Inflation Reduction Act over a decade, globally every single year.

In the United States, our previous efforts to deal with the challenge of climate change fell flat on their face. They didn’t work. Economists were talking until they were blue in the face about needing a carbon tax. Nobody seemed to agree. There was a set of legislative pushes around cap and trade that also didn’t get across the finish line. That is because building that clean energy economy is exactly the kind of thing the government needs to help do.

The key sectors that we need to change with clean energy are transportation, electricity, and industry. And those are followed by agriculture and commercial and residential buildings. Each of these sectors has its own needs and its own challenges with making this transition. We have crafted specific policies for each of those sectors that meet the need as quickly as possible from the innovation to commercialization pipeline.

The subsidies aren’t just subsidies because we like giving away money. They are to help industry and consumers on both the supply and demand sides make this historic transition as quickly as possible, because the damage is already happening to the world around us. We can’t wait. Economic research has shown that a lot of these things can work. It is specific, targeted industrial strategies that help build an industry, not just one factory or one piece of the puzzle.

RA: Within that point, part of the critique is not industrial policy per se, but the protectionism part of it. That, for example, with electric vehicles, 40 percent of components have to be manufactured in America, and 80 percent by 2027. The critique is that it creates a world in which everyone is playing an industrial policy game.

HB: Looking at the facts on the ground, the problem is not that we are spending too much money on this. The problem is that we’re not spending enough money on it—and we’re trying to induce that.

This administration has been so focused on making sure that we are working with our friends, allies, and partners to bring everyone along, and to make sure that as we are crafting and building this clean energy economy.

OPEC controls about 40 percent of the world’s crude oil supply. China has systemically been able to focus its attention on getting control over core parts of the clean energy supply chain, to the tune of 80 to 90 percent. That is a monopoly and it’s risky for us. It’s risky for our allies. It’s risky for the future of building this clean energy transition. We need to make sure that there’s an open and competitive landscape here, but you have to start with the hand you’re dealt. We’re trying to make sure that we’re creating that diverse, resilient supply chain, not just here but globally. We have done a ton of work focused on our friends and allies to make sure that we are doing that. But we also do need to acknowledge that having one country dominate core parts of that supply chain has put us at risk.

RA: You mentioned how part of the plan is to bring allies along, but Europe has been very critical of the IRA. Even countries in East Asia have been critical of the fact that their biggest companies are now incentivized to invest in America rather than in their own countries because of U.S. subsidies. Doesn’t that go against some of what you’re saying about working with allies?

HB: The United States took a historic step that the world had long asked us to take—to build a clean energy economy. We did it in a way that worked for us politically, and it got across the finish line and it works for industry, and people, communities, and families. That was our number-one priority. One of the exciting outcomes is seeing other countries say they need to take big, bold steps because if they don’t, they’re going to be left behind the United States economically. We all need to be making these massive investments to build this clean energy economy.

Through making these investments and what we’ve seen in solar and wind in recent decades, we know this is going to lower the costs of clean energy, not just for the United States but around the world.

We’re using our resources and energy to do this and make this more affordable. We think that the biggest problem with the transition are the network effects and that you have to build new systems. This requires a lot of public investment and massive amounts of private investment. Once you do that, that is going to help lower costs for these goods around the world. That is something that will be helpful to our friends and allies.

RA: When the rest of the world thinks of “foreign policy for the middle class,” which is a buzz phrase for your administration and its policies, what it often hears is a variant of former U.S. President Donald Trump’s America First policy, and some of the protectionism we’ve been discussing right now. How do you see that?

HB: The United States has some of the highest economic inequality of any developed economy. As we’ve been thinking about a foreign policy for the middle class, we’re acknowledging the reality on the ground in the United States. We remain one of the richest countries the world has ever seen, and yet we have very high infant mortality rates, particularly in lower-income communities, particularly poor Black families, which is inexcusable given the enormous wealth that we have. We live in a country where we have high and growing mortality for people under the age of 40. That is way out of step with our economic competitors.

On foreign policy for the middle class specifically, we need to think about whether trade is benefiting American workers and communities. The job of the federal government is to make sure that we’re focused on general welfare. We have to start asking those questions and make sure we’re creating policy with an eye to whether or not it’s going to lead to economic security, and create good jobs for Americans all across the country.

A lot of people were surprised by the body of empirical research that was done looking at the effect of China joining the World Trade Organization in the 2000s, what that did to communities and how long that tail was. We knew that there would be an adjustment. But that adjustment was so long and those communities in many cases hadn’t recovered. That’s a real problem. You can’t just leave wholesale communities behind.

That does not mean we are looking to stop trade with China. We are looking to de-risk that relationship. But as we think about our trade policies, we have to think about what that means for American workers and American communities. This administration has said that economic security and competitiveness are going to be grounded in cutting-edge technologies around semiconductors and the like. It’s going to be around building a clean energy economy, because that is where economic competitiveness and security is going to come from.

RA: I hear you. But since you mentioned China, I think it’s fairly well documented that the Trump tariffs on China, which the Biden administration has kept in place, haven’t quite worked as planned. They haven’t brought net jobs home. They’ve hurt certain sectors of the U.S. economy. Why not drop the tariffs?

HB: My colleagues at the Office of the United States Trade Representative are working on that. You’ll also note that I have not actually spent time talking to you about tariffs. I’ve been talking to you about the kinds of policies that are focused on the industries that will be important for economic competitiveness moving forward.

RA: Underpinning a lot of what we’ve been discussing today is the notion of investing in America. You run the Investing in America Cabinet. Can America afford to keep investing? The budget deficit ballooned to 10 percent during the pandemic. I believe it’s expected to average about 6 percent in the coming years. According to Ruchir Sharma in the Financial Times, that is six times higher than other developed economies seem comfortable with. And then you’ve got rising interest payments on the debt. How does all of that add up?

HB: The president has been very clear. He has paid for the things that he has proposed—setting aside the emergency of the pandemic and the American Rescue Plan, the fulsome agenda that he put forward was paid for. That was always the case in his budget. He also has focused on reducing the deficit over time. You can see that clearly in the numbers.

He understands there cannot be spending without appropriate revenue. The United States has spent decades—the same decades that we saw rising economic inequality—lowering tax rates at the top and not enforcing the laws on the books. The president has focused on putting forth an agenda that would increase taxes at the very top of the income and wealth distribution and has not wavered from it. It’s been very important to him that we do not do anything that would raise taxes for anyone making less than $400,000 a year. He has been committed to raising taxes at the top to make sure that we can pay for the things we need.

One part of the question is revenue. The second part is we need to be making investments that are going to allow our economy and our communities to thrive. From clean energy to early care and education, and to ensuring that our infrastructure is up to the standards that we need for the 21st century, we must ask whether we are making investments that secure our future. We are trying, but we need partnership with Congress to make sure that we are raising taxes at the top to make sure that we are fully accounting for the benefits of these investments over time.