ECON-431 Fiscal Policy in the US

Robert Reich's article in the Harvard Business Review, "Why the US Needs an Industrial Policy," argues for the necessity of a strategic industrial policy to enhance U.S. global competitiveness. Reich critiques the “supply-side” approach, claiming that it is insufficient and potentially even harmful to disadvantaged communities. He advocates for an industrial policy that includes and emphasizes national goals such as housing, economic power balance, and worker rights, all without harming industrial competitiveness. The article also discusses the potential challenges of developing such a policy in the U.S. due to its complicated political landscape, stating that a coherent and publicly supported strategy is needed to ensure execution.

The article published by the Council on Foreign Relations discusses the history of industrial policy and the variety of ways industrial policies have been implemented in countries including the U.S. It reviews attitudes towards industrial policy and how it fell out of favor in the U.S. in the 1980’s and this became the Washington Consensus. The article goes on to explain how President Biden’s administration recognized the need to design a coordinated industrial policy to contend with climate change, unstable supply chains, China’s economic rise, and the decline in US competitiveness.

In this podcast interview on National Public Radio Reka Juhasz shares the results of her studies on industrial policy and its “taboo” nature in American politics. She points out that the general opinion on industrial policy is that its inefficient and perhaps, at times, even harmful. She then discusses instances of successful industrial policies throughout the world in history. She goes on to explain Biden’s new plan and theorizes what direction it may be heading.

This table from a publication of the Roosevelt Institute displays the various fiscal policy tools available to policy-makers when designing an industrial policy, as well as the expected outcome of using the different policy levers. It divides these tools into four categories: inputs (what goes into industrial policy), outputs (the result/what comes out of it), governance and ownership (the structure) and coordination (the collaboration across industries and sectors).

This section of a Roosevelt Institute Report discusses the challenges and limitations faced by the U.S. when trying to implement a comprehensive industrial policy and plan. The issues stem from historical obstacles such as racism, sexism, and judicial constraints. The source looks at U.S. industrial policy throughout history, focusing on different eras such as Hamiltonian, Long Nineteenth Century, New Deal/ Golden Age, and Neoliberal. The focus is directed to showing how barriers have impeded industrial policy efforts.

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