Meet the author of Biden's industrial strategy

In this episode, Brian Deese, outgoing director of the National
Economic Council and an influential advisor to President Biden,
discusses the opportunities and challenges in Democrats’ new
focus on industrial policy.


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transcript)


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Text transcript:


David Roberts


Brian Deese has had a remarkable two years. As President Joe
Biden’s top economic advisor and director the National Economic
Council, he has played a key role in defining and implementing
Biden's policy approach.


In April of last year, he delivered some “remarks on a modern
American industrial strategy” that laid out a vigorous approach
to investing in economic sectors deemed important to national and
economic security.


And by all accounts Deese played a pivotal role in seeing the
strategy into law, through the Infrastructure Investment and Jobs
Act (IIJA), the CHIPS and Science Act, and the Inflation
Reduction Act, which together amount to the greatest reinvestment
in US infrastructure and manufacturing — and, specifically, clean
energy industries — in generations.


The pivot to unapologetic industrial policy is a big change for
Democrats. Deese has moved in those circles for a long time — ten
years ago he was a young wunderkind advisor to Obama, making The
New Republic’s list of “Washington's most powerful, least famous
people” — so as he prepares to depart the administration, I was
eager to talk with him about what the shift to industrial policy
means, why the US needs to onshore key supply chains, and the
work ahead for Democrats in implementing their new laws.


All right, then. Brian Deese, welcome to Volts. Thank you so much
for coming.


Brian Deese


Oh, I'm really happy to be here.


David Roberts


I had, I'll say, a little banter, maybe a couple of jokes
scheduled here for the front end of the pod. But then I looked at
my list of questions for you, and we don't have time for any
jokes, Brian. We don't have time for any banter.


Brian Deese


Very serious, very quick.


David Roberts


We got to get deadly serious right off the bat here. So let's
start here in 2012. Ten years ago, you were the deputy director
of the NEC under Obama. And in 2022, ten years later, you were
the director of the NEC under Biden. And I'm just curious how
things have changed, how America's sort of strategic economic
outlook has changed in that ten years. And specifically, I'm
curious whether the sort of vigorous investment in industrial
policy that we're going to talk about here in a little bit, the
kind of stuff that has been going on under Biden, whether you
were recommending that to Obama at the time, or whether there's
something importantly unique about this present moment.


Brian Deese


Well, look, I think a lot of the world has changed since that
period, both in policy and economic terms. If you think back to
2012, we were both right on the back end of a historic and
transformational policy accomplishment in the enactment of the
Affordable Care Acts, which changed the fabric of our economic
and social safety net in important ways right on the front end of
that implementation. And at the same time, in a period of very
challenging and slow recovery from the Great Recession that was
made worse by a failure of policy, a failure of the ability for
Congress to overcome Republican opposition at the time, to invest
more, to try to help to drive a stronger recovery. You look over
those ten years, we live through a period that a number of people
have characterized as secular stagnation where our output was
constrained and that had a lot of impacts on quality, on labor
markets.


And then of course, we lived through this once in a century event
of the global pandemic and in many ways historically
unprecedented in modern human history. And I think that that
helped to bring to the forefront a set of economic challenges
that had persisted over that decade and much longer. But we're
now really to the floor, particularly the vulnerability of supply
chains and the weaknesses in our industrial capacity as a
country. And so those things together helped to crystallize the
economic strategy that Biden as a candidate put out in 2020 and
really have been pursuing, that in some important ways have
similarities to things we were promoting at the time.


Significant investment in physical infrastructure is something
that has been clearly necessary for a long time, but in some ways
have important differences. I think we've got a different
approach to clean energy and clean energy deployment at scale,
which I'm sure we'll get into here, but also the prioritization
of key geostrategic priorities like rebuilding semiconductor
capacity here in the United States. So I think the landscape
looks very different now economically both because of some of
these significant economic changes but also policy changes as
well.


David Roberts


What you're talking about and sort of what's come to the fore
over the last ten years policy wise goes under the umbrella term
of industrial policy. There's been a lot of kind of hype and talk
lately about kind of the return of industrial policy. But I'm not
totally sure that average listeners really have a sense of what
that means. So maybe just let's just start by saying what do we
mean by having versus not having an industrial policy? And where
has industrial policy been for the last like two or three decades
versus the last two or three years which has seen a really
vertiginous sort of pivot around this subject.


So maybe let's just start by defining what we're talking about.


Brian Deese


Yeah, sure. And look, I use the term industrial strategy, which
is obviously very similar to industrial policy, but a bit broader
in ways that I'll explain. And I think at its core, the idea
behind an industrial strategy is that the private market on its
own, private actors operating to maximize their own utility, will
end up under investing in areas of the economy that have
strategic and economic significance and that by using targeted
public investment you can unlock greater economic opportunity and
crowd in greater private investment in those areas. And so an
example of this is in physical infrastructure that allows you to
unlock productive capacity of the economy.


And we have a great history of this in the United States, from
the interstate highway system to the intercontinental railroad,
where public investments in laying the foundation for private
capital helped unlock greater productivity, greater innovation
across the United States. I think what happened is that in the
late 1970s, early 80s, there was a broader philosophical push
around what now people talk about as trickle down economics that
basically at its core had the view that any government or
intervention was by definition going to pervert markets and crowd
out private capital. And so the dominant paradigm became one of
tax cuts, often skewed toward the highest income folks. Thus, the
trickle down but also deregulation getting the government out of
the way in all cases.


And I think that that philosophy helped to feed a sense that if
you were doing industrial policy, it was in fact a dirty word.
You were, by definition, perverting a private market or picking
winners, the government picking winners versus picking losers.
And as a result, a lot of the policy conversations steered away
from even mentioning the word. And so I think that obviously that
has changed. And it's changed. Things have changed certainly
earlier than the last couple of years. But I think in the last
couple of years, particularly in the wake of the pandemic,
there's been more of a recognition that some of these basic ideas
of having active and energetic government investment to help
crowd in and build more capacity in strategically important areas
is not only not a dirty word, it's absolutely necessary to
address the economic and national security priorities we face.


David Roberts


And I think one could fairly argue that there's no such thing as
a giant industrialized wealthy democracy that does not have some
sort of industrial strategy. It's just whether you're upfront and
honest about it right. Or whether it's sort of buried in the tax
code and you're sort of quasi-ashamed about it, but you can't,
practically speaking, literally just let the market do whatever.
It's not practical industrial strategy has always been there.


Brian Deese


Well, that's right. And I would say that one of the interesting
things about, I think, the evolution and the reinvigoration of
this conversation, this public conversation, is that one of the
hallmarks of effective industrial strategy is transparency.


David Roberts


Exactly.


Brian Deese


And so we back our way into potentially really self-defeating the
industrial strategy approaches when we, as you say, we end up
there. We don't admit it or we don't acknowledge or we don't
actually identify what are our policy goals. Transparency is a
key element of, I think, doing industrial strategy effectively,
both for economic reasons and for political economy as well, so
that people can understand why you're doing what you're doing and
then can hold you accountable to whether the thing you were
trying to get done actually happens.


David Roberts


Right. And this notion of picking winners, I guess I'm curious
sort of how the US. learned to stop worrying and love picking
winners. All the traditional sort of objections to this,
government doesn't know what's going to be next, government makes
bad bets, government distorts things. What do you make of those
worries? I mean, are you worried about making some bad bets or
getting some things wrong? How do you think about the dangers of
picking winners, which are real dangers?


Brian Deese


Yeah, like any critique, there's a kernel of something really
important in that catchphrase of the government shouldn't pick
winners and losers. And I think that the caution, the important
caution is the closer that the government gets to actually
directly picking individual companies or individual
counterparties in a way where there is a sort of a high stakes
economic interest there. You do need to worry about waste, you
need to worry about corruption. And we know that in different
countries and different parts of our history, those things
certainly are worthy of being paranoid about. But I think the
core mistake that people extended from that critique for too long
was to say that that was a concern that meant that you shouldn't
engage in the enterprise altogether.


And one of the things that I believe and I think that we have
tried to build into our policy approach is wherever possible, the
best way, I believe, to try to drive industrial strategy outcomes
is to provide long term and technology neutral incentives to
encourage investment where the government is not actually going
in and identifying and picking a particular winner. Now, there
are some cases where that is necessary. And we could talk about
the semiconductor program that we're putting in place where
because our capacity has eroded as a country and because of the
scale necessary to build semiconductor fabrication capabilities,
there are only a small handful of companies around the world who
even have that capability. And so in that case, we needed to
design a policy that was going to provide grants directly to
companies on a competitive basis.


But precisely because of that, we are putting an extraordinary
amount of thought into the way to run that competitive process in
a way that guards against some of the downside risk and captures
some of the upside opportunities, but wherever possible. And a
lot of what is in the Inflation Reduction Act around clean energy
is actually trying to lay that foundation of signaling to private
companies and the private market that there will be long term
predictable incentives in place. But then not having the
government say, we think that this particular technological
application is going to be more successful than this.


David Roberts


Right. More like picking winning areas of investment than picking
winning companies, right?


Brian Deese


Yeah. The way I like to think about this is look, if you want to
know our American industrial strategy in a nutshell right now, we
have identified three broad areas that we believe will have big
returns in terms of productive capacity and our economic and
national security. And those are infrastructure innovation with
semiconductors at the center of it and clean energy. And so we
are picking those. We're picking broadly that those are areas
that for geostrategic reasons and for economic reasons and for
what we know about, where you can get productivity enhancements
in our economy. But then wherever possible within those, we're
not trying to say the government is best positioned to figure out
whether this particular technology for generating clean hydrogen
in this particular application is going to be more effective than
this other one.


We're trying to say we need more clean energy capacity. Clean
energy supply. We need it faster and cheaper than we have gotten
it to date. That's an existential project. And if we do it in the
United States, we'll build manufacturing industrial capacity
here, we'll be able to capture greater export share of a very
fast growing global market. And for all those reasons, that's the
industrial strategy part of this.


David Roberts


That segues nicely to my next question, which is that a big part
of the thrust of the big three bills that were passed — the
Infrastructure Act, CHIPS, and the Inflation Reduction Act — is
onshoring, basically bringing more of the supply chain into the
US. So let's just talk about that a little bit. The case for
onshoring, if I put my sort of conventional economist hat on, it
doesn't fit very well, it's too tight, it constrains blood flow
in my brain.


Brian Deese


But I wish we were on video so I could see that hat.


David Roberts


Yeah, you can imagine me grimacing while I'm wearing it. But the
traditional economist take is why not just buy whether it's
semiconductors or lithium-ion batteries or the materials for
lithium ion batteries, why not just buy them wherever in the
world they could be made for cheapest? Would it not benefit all
global consumers if whoever can make those for the cheapest makes
them and sells them to everybody else? This is sort of the basic
Econ 101 justification for trade, right? For international trade
is specialization. Some people can do things cheaper than others.
Why do we need to make these things domestically?


What is the threat exactly of international supply chains which
are, it should be pointed out, ubiquitous. Like most of the stuff
we get and use in the US. We don't make here. We don't dominate
the supply chain. So why in these particular areas do we need to
bring mining and processing and manufacturing the whole supply
chain into the US.


Brian Deese


So I think there's two broad answers to that question. The first
is the rise of China in the global economic system. And the
second is the embedded risk that we have now seen made explicit
around brittle and just in time supply chains. So let me take the
two in order. The first is that that kind of stylized. Let's just
try to find the lowest cost producer. Again, there is a lot that
we shouldn't look through and we should harvest in that basic
intuition. But one of the things that it misses is that over the
course of the last 20 years, China's rise in the global economy
has been achieved through non market economic means in many
instances.


And so the Chinese economic model, where you either steal or
expropriate technology, use significant non-market subsidies and
other tools to build capacity to then dominate particular
industries, is a constructive challenge to that basic model. And
there are some clear national security implications where there
are technologies that we believe, for national security reasons,
we need to deny in certain instances.


David Roberts


Can I press on that just a little bit? Because this is I find
that a lot of people refer to the danger of China dominating,
say, the lithium-ion battery supply chain in those terms, sort of
vaguely like it's national security. It's a threat. And I find it
all a little hand-wavy. So I just like to hear what concretely do
we think China would or could do? Like, China selling us a bunch
of stuff? That's a two way relationship. It hurts them also if
they cut us off from buying the stuff they're making so tangibly,
what do we worry China might do?


Brian Deese


Right? So, look, and I think you're right that it's important
that we be specific in these contexts and in our policy to avoid
broad-brush characterizations. First, there are certain direct
military applications for cutting edge technology that we have to
be particularly aware of. And without going into the kind of
detail that I shouldn't. If you look at, for example, the export
control regime that we have put in place for leading-edge
semiconductor technology, we are trying to be quite intentional
about being specific and tailored and targeted in those purposes,
but in controlling some leading-edge, the most sort of advanced
chip technology because of its direct use application, in
particular military applications.


Okay, so that's one category. There's a second category about the
fact that if part of the Chinese model is to employ slave labor
or to violate basic rights and norms, that you don't want to be
reliant on a dominant supplier where the basic technological
capacity to produce key inputs is subject to those outcomes. And
so the upstream solar supply chain is a good example of this.
Right. Where over the course of the last decade plus, because of
a variety of different means and tools, China dominates those
markets and does so in ways that we can't rely.


It creates instability because we can't rely on a producer, where
if the production is only done as a function of unacceptable
basic human behavior, then the technology and the capacity
doesn't exist elsewhere to pivot. And you've created an acute
supply chain vulnerability.


David Roberts


Yeah, I guess another way of putting that is if there's only one
producer, none of the buyers have any leverage over the producer,
basically.


Brian Deese


That's right. And that's why I think that the second piece of
where I think conceptually why we should care is this notion of
supply chain resilience. And one of the things that we did when
we first came into office, the first month it was February of
2021 was the president issues an executive order to identify the
key supply chains and do a full forensic analysis of where the
vulnerabilities and the chokes points were, where you had the
dynamic you just described of one dominant technological owner or
one dominant supplier, where you might create those types of
vulnerabilities.


Right? And the answer to those questions is not and should not
always be that you just need to bring every one of those supply
chains to the United States and have the production happening
here.


David Roberts


I assuming you even could do that.


Brian Deese


Because it's neither feasible nor advisable to try to have all of
it in the United States. But at the same time, there's clear
lessons and clear outcomes where having homegrown industrial
capacity and the technological and the innovation benefits that
come from that is an absolute necessity. So there are areas like
leading-edge semiconductor production where we in the United
States do need to have that homegrown capacity to produce and the
technological spillovers that come from that. That does not mean
that the goal is that the United States is going to produce all
or even most of the leading-edge semiconductors that are produced
in the United States.


But once you have that capacity and you have more diversification
of players who are capable of doing it, you're reducing your
vulnerability. And that's true of the upstream battery supply
chain, of the solar supply chain as well.


David Roberts


So it's mainly about resilience and national security.


Brian Deese


Yeah. And I think you are right, and it is right to push
policymakers to be specific rather than vague about the
applications in those contexts because there is a risk, as you
say, of just sort of justifying any particular market
intervention on those terms. But I think that because of the work
in the analysis that we've done, at least in the areas where we
have taken seriously and put into place industrial strategy
policies, I think that we can demonstrate what does resilience
mean? Right? What does it mean? What is the goal in terms of
trying to get leading-edge semiconductor production here into the
United States?


And certainly as we go and we implement and execute, we should be
held to account, to actually identifying those goals and then
seeing if we are meeting them.


David Roberts


What about those cases? And it does seem like there could be
cases where industrial strategy is in some tension with climate
strategy. And so, as an example, let's take these EV credits in
the IRA. They are the new version. The new generation of EV
credits are tied to some pretty strict domestic content
requirements and domestic manufacturing requirements, arguably so
strict that no one meets them yet. So it seems like, intuitively,
I can see how that's good for industrial strategy, maybe even
good for the US economy and good for resilience to manufacture
and do more of that stuff onshore.


But it also seems like, intuitively, that's going to slow down
the spread of EVs in the US. If we are putting a speed bump,
basically between us and us adoption of EVs from a climate
perspective, you just want to lower emissions as fast as
possible, as much as possible, the cheapest, fastest way you can.
And this is not the cheapest, fastest way. Right? Deliberately
it's not. It's got an eye to resilience and redundancy. So how do
you think through that tension?


Brian Deese


I actually think that to have a durable, effective climate
strategy that also operates with the urgency that the issue
deserves, you have to factor in this concept of resilience or
you're not going to succeed across longer periods of time. And I
think the upstream solar supply chain example that we were just
discussing illustrates that. If the idea into the current global
market with the reality of how China and other actors operate, is
that a narrow, fastest, cheapest without any factoring in
anything else mentality results in China dominating key input
components. To the degree that there is no other producer, then
it's not a durable strategy to reduce emissions over the time
period that we need to do this.


Because even as we act with urgency, this is a project that is
going to operate across the next two decades and longer. And so I
think that you need to have strategies that are focused on
driving down those costs as quickly as feasible, but factoring in
that cost reductions into brittle and unreliable supply chains
are not actually going to deliver those cost reductions in a
reliable way over longer time frames. So the electric vehicle
credit example that you raised, again, the legislative process is
imperfect, and there's lots of ways in which the bills are
imperfect.


David Roberts


That's the kindest way I've ever heard it described.


Brian Deese


Well, I had a but there, which is the status quo prior to the
enactment of this law, was that the credits had a very different
structure whereby many of the leading electric vehicle producers
had grown themselves out of getting any credit.


David Roberts


Yeah.


Brian Deese


And so the status quo ante was not unmitigated credits
everywhere. This approach sets a different bar. Not once you sell
200,000 vehicles, you no longer get a credit. And instead it sets
the bar of saying, can you move more quickly to try to get to
more resilient supply chains? And while I recognize that that
does have some of the impacts that you're describing, I will also
say, having talked to a number of the companies that operate in
this space, a number have said to me, look, I'll be honest. When
this bill was in its final drafting stages, we were incredibly
concerned about all of this.


And in the weeks and months afterward, it has totally changed our
behavior. We are reorienting. We are investing in particular
ways. Interesting things that we thought were hard or impossible
may still be hard, but we're now making them possible. And so,
look, we'll have to see. And as I said, I wouldn't claim that
we've got that element or some other elements perfect, but it's a
high bar to drive toward a different goal.


David Roberts


Looking back on this in ten years, say, do you think our move to
onshore some of the supply chain will look faster and easier than
we anticipated in advance?


Brian Deese


Look, I think any strategy to address the climate crisis today
needs to do at least two things. One, is have a credible way to
massively drive down the cost curves of deployable technologies
to decarbonize the power sector, the transportation sector, the
built environment, et cetera. And two, to do so in a way that
creates resilient supply chains for the input components for all
of that building that we're going to need. And that the strategy
that will succeed in really driving the mission direction we
need. We'll have to have both of those components. And so I am
hopeful that because of the action that we have taken over the
last two years, we've given the United States now a historic set
of tools to achieve both of those outcomes and to achieve both
those outcomes at a scale and a speed that many would have
thought was not possible even a couple of years ago.


That doesn't guarantee success in the outcome, but it certainly
puts us in a very different position than we were a couple of
years ago.


David Roberts


Let's turn a bit and talk about one of our favorite subjects here
on Volts, namely administrative capacity. I would say that
serious industrial strategy needs administrative capacity, right?
It's almost axiomatic. And so Rob Meyer had a piece in the New
York Times recently, sort of making the case that the recent US
ambitions, as expressed by these three bills, especially IRA, are
somewhat exceeding our administrative capacity. In Germany, for
instance, you have government departments that work very closely
with certain industrial sectors, sort of hand in glove to do some
planning and to adapt along the way to see what those sectors
need.


We don't really have that. And tax credits are kind of a blunt
instrument, a blunt force tool, I guess. We have the Loan
Programs Office in DOE, which is doing amazing things under
Jigar. But our administrative capacity in the federal government
in the US seems to have withered a little bit over the last
several decades of this kind of neoliberal period we've been
going through. Do you think we have the administrative capacity
necessary to do something of this scale and speed?


Brian Deese


Well, look, I appreciate the challenge, and Rob and I went back
and forth on, I think what his thoughtful New York Times speaks
to this effect. I think the answer is that we need to build that
administrative capacity. But the one thing that we can't do is we
can't wait for the chicken to produce the egg at the stylized
utopia where the United States builds all the administrative
capacity necessary for this kind of big national project and then
and only then gets to passing the legislation is not only not how
our political system works, but the intensity of the need for
speed on clean energy and climate change doesn't really give us
the luxury of doing that. But I would say do we need to build
more administrative capacity across the board?


Yes. Are we making big strides and innovating in new ways? Yes.
You mentioned LPO and the work that Secretary Granholm and Jigar
are doing. There are other great examples of that. We've stood up
a joint program office between the Department of Transportation
and the Department of Energy to do electric vehicle charging
implementation across the country and showing how do you actually
build the administrative capacity to get two different agencies
to work together with 50 states to coordinate to actually do
that. So yes, we are building that car while we charge it or
whatever the right analogy is.


But we're showing good results. A lot of people said you're never
going to get all 50 states to even apply for this because some
don't even have the capacity to do so. But through an iterative
process of building capacity at the federal level, building
capacity at the state level, we just yesterday, we're recording
this on the 16th, yesterday released the Electric Vehicle
guidance for how we're going to get interoperability standards.
We worked with key companies, including Tesla around them,
announcing for the first time to open up parts of their network.
These things need to work together.


But I think the right answer to that constructive challenge is
how do we build this at the same speed and urgency that we need
to address the issue. Last point, I'll say you made the point
about tax credits. Tax credits are blunt, but they can be
enormously effective in the American system. Right. We're going
to do this in the American system in a way that is different than
some of the European models and otherwise. And having long term
technology neutral tax incentives is among the most powerful and
efficient ways to give private capital providers the incentive to
pull forward investment.


And we know that that investment is among the most powerful ways
to drive cost curves down and it also requires less
administrative capacity to your point. So, I wouldn't discount
that, even as I agree that there are a number of places where we
need to build up that capability and we need to do it quickly.


David Roberts


Yeah, but by no means do I want to bad mouth tax credits — they
made the point many times. They are the quiet workhorses of the
progress made thus far. They don't get as much attention and
argument and sort of team sports as you get around other
policies, but they've been in the background for decades now,
just chugging away with demonstrable results. So, administrative
capacity is one aspect of implementation, but implementation of
course, is a broader subject, a big thorny subject. There's a
common critique of sort of people on the left that they fight and
fight and get a bill passed and then they go home and watch
Netflix.


And of course with something big like this, three big bills like
this, all the devil is in the details in the implementation. So
I'm sort of curious how you think about trying to avoid what Leah
Stokes calls in her great book "The Fog of Implementation". Sort
of just curious what are your worries implementation-wise? What
are you worried could go wrong and how are you thinking about
just following up and making sure this is done well?


Brian Deese


Yeah, well, I think one of the key elements is to maintain
consistent leadership and urgency from the president, from the
White House, from the key leaders across federal agencies, and to
make sure that there is a consistent effort to try to connect the
technical and the programmatic implementation with concrete
outcomes that people can see in their lives and in their
communities.


And obviously that's important from a political perspective, but
I actually think it's quite important in maintaining the kind of
culture and dynamic to avoid that fog of implementation that
there needs to be a kind of urgency to being able to say if we
are undertaking a national project to eliminate lead pipes in 10
million homes and 400,000 schools, that everyone involved in that
process, from the EPA administrator down to the regional EPA
offices down to the state grantees and onward understand that
there are targets and metrics and milestones and you want to go
into communities and you want to be able to show and demonstrate
when that is happening because that's going to keep people
forward, leaning forward rather than leaning back. Other big
things that will keep me up at night issues is we do need to
reform and change the way that we do permitting.


That's not just an issue of federal permitting, it's state and
local. And the other thing is, I do think that there's a need to,
at the grassroots and the community level, help connect and
unlock the enthusiasm and the openness to recognize that a
particular investment, again, be it in a wind farm or a small
scale nuclear facility or in a rail corridor, is actually
connected to this larger project. And there's not only an
openness and acceptance, but an enthusiasm around trying to move
more quickly rather than putting up roadblocks.


David Roberts


What about workforce? I hear from all over these days like, we
don't have enough electricians, we don't have enough plumbers, we
don't have enough sort of trade. We're moving into this period
where there's going to be a frenzy of building and construction
work and just the need for trade labor and we seem short on it.
How much do you worry about that and what sort of things are the
Feds doing to kind of help with that?


Brian Deese


It's an enormous priority. And for this year 2023 and next year
2024, connecting more people with these new job and career
opportunities has got to be a top priority of implementation, I
would say. While I recognize and I hear often the concern, I also
think a lot of people are missing how much opportunity there is
there because for the first time, and this is to go back to our
very early conversation about sort of secular stagnation dynamics
of having output below potential, we have a dynamic now where
incentives are really aligned. Private companies are prepared to
invest in job training and invest in paying workers and showing
them that there are career paths and opportunities.


And so a lot of the opportunity is making sure that we are
connecting those employers with the training providers that we
know work effectively and efficiently, community colleges, union
registered apprenticeship programs, et cetera, and then going and
being proactive about reaching out to workers and communities
that may have been overlooked. Right. So we are looking to try to
get a million more women working in the trades and in
construction than we've had in this country. And there's
extraordinary job opportunities, extraordinary career
opportunities. And I think one of the reasons why you see such a
gender split is that employers and trainers in that space have
either explicitly or implicitly built these things in ways that
they haven't reached out to those communities.


And so we're going to have to be creative about doing things like
that. But I think this also creates a lot of opportunity to bring
more people into these trades and to do so in a way where you're
giving them more upward mobility as well.


David Roberts


Another big subject that I know you probably had to address a
bunch, but I would like to just grapple with a little bit are the
sort of foreign policy / trade implications of all this. It looks
to me like these three bills represent a pretty explicit pivot
away from the sort of free trade consensus that has reigned in US
politics in both parties really for decades now. And you see sort
of trade partners in South Korea and Europe kind of freaking out
about this a little bit. They're calling the stuff in the IRA
"protectionism". They're sort of threatening protectionist
policies of their own.


Are you worried that this sort of dramatic disruption of the free
trade status quo is going to run afoul of some longtime trade
relationships? Do you worry about this sort of global trade
regime holding together amidst this?


Brian Deese


I don't. And here's why: The first is that the Inflation
Reduction Act itself is going to be enormously beneficial to our
trading partners and allies. And I think that we are making real
progress with our European partners and others in helping them
see and understand that that's the case. And that's because at
core, the Inflation Reduction Act reflects two things. One, the
United States meeting and stepping up to its obligation to
actually meet its clean energy and climate commitments in a
credible way, which is a priority that many of our allies,
including our European partners but also others, have been urging
the United States to do for years.


And also a commitment to use US taxpayer dollars to dramatically
accelerate cost reductions in key next generation clean energy
technologies that the world needs in these countries need as
well. Now, we also all share the need to have more secure and
resilient supply chains to the conversation we're having earlier.
And the other, I think key and important part is that we are
operating into a sector, we're talking about clean energy in this
context where the world is way short supply. So we need
dramatically more deployed clean energy technologies and
capabilities in the United States. We need that in Europe, we
need that in Canada, we need that in Australia, we need that
across Asia, we need that everywhere.


So the United States stepping up and showing a viable scalable
model to do so, in a way that will help drive down global costs,
and in a way that puts the United States in a credible position
to meet our commitments actually creates much more opportunity
than constraint. And what it requires is harmonization and
effective economic diplomacy and making sure that there is
transparency and making sure that we are not doing things that
would create unproductive or inefficient subsidy races. But at
the core, the United States stepping up and investing in our own
industrial capacity in these spaces is first and foremost the
right thing to do for our country, the right thing to do for our
workers and communities. But it also will have these global
benefits as well. And I think that we will, over the course of
this year, have a lot of opportunity to actually build
partnerships against this.


David Roberts


So you're not worried about sort of like if we put domestic
requirements and we put, say, a border adjustment or something
like that, and then another nation will do it, and then we'll
ramp ours up and they'll ramp theirs up and you will end up in
trade wars. That will slow the sort of act as a slowing force on
the spread of these technologies. You just don't think that's
going to manifest?


Brian Deese


Look, I think you're identifying a risk. But I would say from
where I sit, both on the substance and the economic diplomacy of
this, there is more opportunity than risk in that area. So it's
always a risk. It's always a risk that you should take seriously.
But if we were having this conversation several years ago, the
dominant conversation would be whether, how and in what context
could you ever envision building a durable political coalition in
the United States to pass any meaningful legislation that would
increase clean energy and energy security and do so in a way that
would put the United States in a position where it could actually
sit at a table with the Europeans and talk credibly about them
how to increase global ambition. And that would be the
conversation, right? We are in a different conversation that
certainly it has risks, but it's a higher class conversation if
the goal is how to deploy clean energy globally at scale.


David Roberts


Good problems to have. Another sort of aspect of that similar
family of worries is that if the US follows China's lead and
starts sort of lavishly subsidizing its own industry and the EU
follows, the US. Starts lavishly subsidizing its own industries,
these developed nations sort of look inward. There's a worry sort
of floating around that developing nations will end up sort of
getting screwed, not getting the investment they need. So how do
you sort of balance the need, which you've laid out here, for the
US. To invest in itself, for a bunch of reasons, with the
parallel need for developed nations to invest in helping
developing nations build capacity themselves and lower their own
emissions?


Do you think those are in tension at all?


Brian Deese


I don't think they need to be, and in fact, I think that they can
operate together. But you're right to absolutely raise the issue.
Look, I think it is incredibly important for the credibility of
global climate progress for the United States to be able to
credibly meet its own commitments. And that's important for
developing as well as developed countries, number one. Number
two, the United States being a place where we are investing
taxpayer money to drive down technologies that will be
particularly important in deployed applications in developing
economies means that developing economies can also benefit from
driving down those cost curves as well.


But I think it also goes to the need for the United States and
other countries together to continue to increase our game in
building partnerships with key developing countries to
demonstrate that we can together bring climate finance at very
significant scale into their economies to help drive this
transition.


David Roberts


Because that has not been happening, right?


Brian Deese


Well, look, I would say there is a model that we need to build on
the JETP initiative that we have launched, which stands for Just
Energy Transition Partnership with South Africa and Indonesia,
the partnership we launched with Egypt at the COP this year.
These are models to demonstrate the potential of US investment,
lower cost clean energy technologies, policy reforms to create
more stable investment environments in these countries, and then
the ability to actually bring private capital at scale into big,
important projects. That's what it's going to take, but we're
going to have to do that at a scale that we have not done yet.
But I think the action that we're taking in the United States
creates significantly more opportunity for that than constraint.


Again, it's sort of a similar, I guess I would say a similar
story. Much work yet to be done, but we're definitely better
positioned having taken the action that we have in the United
States than if we hadn't.


David Roberts


Right. Let's talk then about the US being slow. This has been an
increasing subject of conversation in liberal circles recently.
I'm sure you've heard and seen this idea that US is entering this
period where we badly need to rebuild ourselves, our industries,
our infrastructure, not just because of climate, just because a
lot of it is falling apart. We just have been under investing for
a long time. But when we do invest, it's very slow and this
manifests in a bunch of different areas. But I'm just curious how
you untangle all those factors that are going into making the US
building in the US slow and expensive.


How do you increase the pace without running roughshod over
vulnerable communities? The fight over permitting reform did not
auger well for this debate. It did not seem to suggest that it
was going to be easy to resolve this debate. So just on the big
picture level, how do you think about the US. Being slow and
expensive and what can the federal level, what can you do to
shake that loose?


Brian Deese


Yeah, I think it may be the biggest and most significant
challenge that we face. And to go to your question about what we
at the federal level we can do, we can commit to and then execute
on doing business differently. Right. So we need to have the kind
of accountability and transparency around project timelines that
we have not always had in the past. We need to deploy
efficiencies and creativity and innovation that we know is out
there, but deploy it at a much broader scale. Some things that
sound very simple, like we have a program called Dig Once, right,
where we are coordinating between road projects and broadband
projects and transmission projects.


So that if we're going to have a right of way, we should be
trying to operate all of the digging projects that we're going to
do as much as we possibly can in the same right of way at the
same time. Now that sounds simple, but actually it's an
innovation that if deployed, can have a geometric impact on
speed. But then there's also more sophisticated design,
technological approaches that we can use and we can borrow from
other countries and we can do things like you had mentioned,
labor. One of the things on these big complicated projects that
project sponsors are finding is having a project labor agreement
working up front to actually demonstrate how you're going to make
sure that you've got the right people on the right time to do the
work that is needed in a quality way.


Helps to reduce bottlenecks, helps to reduce cost overruns and
time overruns. And so those are all things that we at the federal
government can do, we've got to do in a more systematic way and
at scale. Having legislation that would give some key reforms to
the permitting process would help on that score. But there is
also a lot that we can keep doing and working. And you made a
really important point. We have to demonstrate that we can do all
of this in a way that also builds more fairly than we have in the
past. And so there's nothing simple about that project.


But we do have I often hear these conversations about permitting
that move immediately to a certain sense of defeatism. Well, the
United States just moves slowly and things cost a lot and
therefore this is all going to go sideways. And I think we can
point to practical examples of success and then we need to build
on those.


David Roberts


One of the big bottlenecks in terms of building, in terms of
things going slowly is transmission and energy, long distance
transmission famously holding back the rest of the clean energy
economy and it's just very difficult to build. There's landowner
NIMBYs, there's state NIMBYs county NIMBYs, there's baroque
bureaucracy on and on. There was some stuff in the Infrastructure
Act, I believe, that did some good on transmission, a little bit
in IRA. The permitting reform didn't end up going through. So
that was the biggest thing. So I'm curious now that sort of the
period of legislating is probably over what tools are left in the
Biden administration's toolbox that can shake loose transmission
and get that moving.


Do you guys have ideas on that score?


Brian Deese


We do. It's a great question. It's a super important policy.
We've been working hard at this. I don't want to get too far
ahead of where we will be,and our agencies will be shortly. But I
think I could say that I think you'll see from us shortly that
there are tools within our existing authority, under existing
statutes that will allow us to very significantly prioritize and
streamline the process at the federal level in terms of agency
approvals and also use our federal authorities in ways that
create stronger and more significant incentives for not only
project sponsors, but also states and localities, municipalities
to operate in line as well.


And one of the things that to go back to the culture point that I
was making earlier, one of the things that we have now, ever
since the infrastructure bill passed, is Secretary Granholm.
She's got it, she's trying to make it famous, this map where
she's got the transmission lines that need to get built right and
they need to get built and they need to get built at scale. And
to the point about success, we can already identify that there
are a handful on that map that have moved from yellow to green
and are moving forward in a way that was not true a year ago or
even six months ago. But these additional authorities, I think
you'll see us moving out on in the course of the next couple of
months will give us more to work with and I think make 2023 a
year where we can really accelerate on that front.


David Roberts


Sweet. One other follow up on the slowness question another big
area of congestion is housing. This is also a hot topic lately. I
think it feels like it's become more and more clear to more and
more people that constraints on housing in high economic
opportunity areas is not just a local issue. It is in the
aggregate having serious macroeconomic effects on the US. It is a
serious in other words, it is a serious nationwide problem, not
just sort of quirk of coastal states. What, if anything, can the
feds do? Because so much of that is local or state.


Are there levers available at the federal level that can shake
that mess loose a little bit?


Brian Deese


I'm so glad you raised this question. It's a hugely important
issue and we have a housing supply crisis in the United States,
which is a crisis that has developed over the course of years,
basically going back to the Great Financial Crisis. And if we
don't build more supply of affordable and dense housing, then we
get exactly the dynamics that you just described and it's harder
for people to move to opportunity and find affordable places to
live.


We have been dogged on this issue and there's a couple of things
that we can do. The first is that we can build into some of our
existing federal grant programs and new federal grant programs in
the investments in infrastructure and otherwise incentives that
says that if localities actually have more coherent land use and
zoning policies that encourage this type of building, then that's
going to be a plus up for them in receiving federal grants for
something like, for example, public transportation, which makes a
lot of sense if you think about it, which is we shouldn't be
spending federal dollars on public transportation into an
environment where they're not going to build coherent housing.


Secretary Buttigieg has done this in a couple of ways, but we've
never done before and we're now franchising that to other grant
programs. The second is we could pass legislation. The Low Income
Housing Tax Credit and something called the Neighborhood Homes
Tax Credit. Bipartisan support for these pieces of legislation
that provide incentives for people to build dense rental,
multifamily and single family housing, again in areas where they
have local land use policies that encourage this type of
building. And there's bipartisan support for that type of
legislation. I know that there have been conversations across
time of trying to advance this.


Both of those steps are things that we could do. You are right
that the decisions operate in many cases at the state or the
local level, but we can provide a powerful incentive to encourage
and invest in those communities that are doing the right thing.


David Roberts


Could have done a whole pod on politics but I mostly left that
out. But I'm just curious. Looking back now, it seems striking
that Democrats went into this latest session heads full of
extremely ambitious dreams. The original Build Back Better Bill
was robust. Let's say it had a little bit of everything in it
over time. We just saw that get stripped down and stripped down
and stripped down but somehow the climate piece, the clean energy
piece, survived more or less intact through that entire sausage
making process. What are we to make of that? Does it all just
come down to sort of like whether Joe Manchin woke up on the
right side of the bed or are there larger political lessons to be
learned from the sort of resilience of this one piece of the
Democratic agenda?


Brian Deese


One of the takeaways that I have is that it has been important
for us to change the policy and the political approaches to
trying to radically and dramatically build clean energy capacity
in the United States. And that one of the important parts of how
President Biden has approached this. And frankly, Democrats in
Congress — and a lot of Republicans too — is to focus on this as
about building our capacity, our manufacturing capacity and our
energy security by dint of having more homegrown, affordable,
reliable energy and to do that and to build a strategy that can
achieve very significant climate ambition. But it is based
fundamentally on that investment opportunity.


And that has, I hope and expect, will be an important takeaway
over the last couple of years is that even as this process has
been challenging and winding across time, if you look across the
infrastructure bill as well as the CHIPS bill, but also,
obviously, the Inflation Reduction Act. What you see is that
these types of investment approaches have a lot of salience. And
they have a lot of salience because they're focused on places and
people and giving people economic opportunity and helping to
drive significant emissions reductions across the country. But
based on that core opportunity, I think that is very different
from the political conversation that we had in 2009 and 2010 on
this issue.


It's different than the conversations we've even had over the
course of the decade since and I'm hopeful that it will lead to a
more durable political environment for us to drive forward these
policy pieces that are going to be hugely important for our
economy and our country and our planet in the future.


David Roberts


You are credited alongside Chuck Schumer with bringing Manchin
around. I don't suppose you want to give us any secret insight on
what was the magic key, the magic phrase, what sort of sorcery
achieved that?


Brian Deese


No. Look, Joe Manchin is an independent thinker, independent
minded guy. And he has spent an enormous amount of time thinking
about these issues. And he has always, throughout this process,
prioritized the importance of energy security and moving on the
climate goals and the climate priorities that we needed to move
with a focus on American capacity and energy security. And I
think that he always brought a ton of insight into what was
necessary. And a lot of this was about listening and
understanding and understanding places where we had principal
disagreements, but at the end of the day, trying to get at those
core issues where the policies themselves were less at odds.


And so Senator Manchin always has and always will operate
independently based on his own principles. But I was fortunate
enough to be part of this process, part of a team to ultimately
get us to the finish line. It was a long process, that's for
sure, but better for the country that we're on the other side of
it.


David Roberts


Just in terms of being placed kind of at the center of history
and seeing things unfold. It's been quite a two years you've
lived through there at the center of everything, so I hope you're
able to catch up on some sleep.


Brian Deese


Well, thank you for that. And I hope that we can continue to have
these conversations about what I think are a set of incredibly
important climate and clean energy challenges, but also a really
high class set of challenges compared to where we were a couple
of years ago. And so that's what leaves me pretty fundamentally
optimistic about all this.


David Roberts


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