City Journal's 10 Blocks: Episode Summary

Episode Title: Cost-Benefit Economics
Release Date: March 14, 2025
Host/Author: Manhattan Institute
Summary By: [Your Name]

Introduction to Cost-Benefit Economics

Jordan McGillis, Economics Editor of City Journal, and Alison Schrager, Senior Fellow at the Manhattan Institute, engage in a profound discussion on the recent economic policies of the Biden administration, critiqued through the lens of cost-benefit economics. The episode delves into Jason Furman’s critique of the administration's approach, highlighting the abandonment of traditional economic trade-offs and the rise of post-neoliberal ideologies.

Critique of the Biden Administration's Economic Policies

Alison Schrager introduces the conversation by referencing Jason Furman's essay in Foreign Affairs, which criticizes the Biden administration's economic strategies as a departure from orthodox economic principles.

Alison Schrager [00:27]:
"Jason was really calling out economic orthodox and how we need to return to those values. And that's true for both parties."

Key Points:

• Post-Neoliberal Delusion: Furman argues that the Biden administration has embraced economic policies that disregard traditional market trade-offs.
• Economic Ratings: Despite high government spending and positive labor initiatives, the administration faced poor economic ratings.

Jordan McGillis [00:27]:
"Alison, I don't think of myself as much of a partisan, but I must admit I took distinct pleasure in some recent center left on left economic criticism."

Interview with Jason Furman

Furman joins the podcast to provide an economist-to-economist perspective on the discussed themes.

Economic Performance Under Biden

Furman critiques the administration's portrayal of the economy, emphasizing that wage growth was overstated and largely occurred before Biden took office.

Jason Furman [03:16]:
"The economy wasn't as good as people were bragging about. ... wage growth that took place in the year before he was president."

Alison Schrager [04:25]:
"I think the narrative had emerged that everyone was doing better or particularly wage inequality had narrowed. I feel like we kind of missed that one."

Demand vs. Supply Side Policies

The conversation shifts to the administration's focus on boosting demand without adequately addressing supply-side factors, leading to inefficiencies and price increases.

Jason Furman [05:52]:
"They were run in a less businesslike manner than the CHIPS program... adding diversity requirements... contributed to the problem."

Alison Schrager [05:18]:
"The other thing that surprised me reading your columns, you talk a lot about how they boosted demand but didn't really do much about supply."

Abandonment of Economic Trade-Offs

Furman laments the political polarization that has led to a neglect of fundamental economic principles like trade-offs and cost-benefit analysis.

Jason Furman [09:27]:
"With Democrats, it's all good. ... Conservatives do cost analysis without having the benefit part in the equation."

Alison Schrager [08:24]:
"What do you think happened? Why did we abandon trade offs?"

Inflation and Monetary Policy

Furman discusses the persistent inflation post-pandemic, attributing it to a combination of supply shocks, labor market slack, and anchored expectations.

Jason Furman [13:01]:
"There's three pieces to it... supply shocks... slack... expectations... Jay Powell listened more to the people that were telling him to raise interest rates."

Alison Schrager [14:32]:
"Inflation is still like a good a hundred basis points higher than it was before pandemic. Why do you think that is?"

Labor Market Dynamics

The discussion turns to labor market participation rates, particularly among men, and the structural challenges in increasing employment.

Jason Furman [15:11]:
"Prime age employment rates for women... look at prime age employment rates for women in the United States compared to Europe."

Alison Schrager [15:38]:
"Why do you think that's been? And what do you think policymakers can do about it?"

Policy Recommendations

Furman suggests the necessity of recognizing and addressing structural issues in the labor market rather than relying solely on manufacturing revival, which he views as an inadequate solution.

Jason Furman [16:00]:
"I don't think manufacturing is the answer. They certainly have more active labor market policies in Europe."

Trade Policy and Tariffs

A significant portion of the episode is dedicated to the critique of current trade policies, particularly the use of tariffs and their economic implications.

Alison Schrager [20:32]:
"I think we've opened up a Pandora's box and it's gone way, way, way further than makes any sense at all."

Jason Furman [22:41]:
"If you just do benefit benefit analysis to get back to our theme from before, you're going to have a hard time convincing me."

Key Insights:

• Selective Protectionism: Furman differentiates between justifiable national security-related tariffs (e.g., sanctions on Russia) and economically detrimental tariffs imposed on industries like EVs and solar panels.
• Economic Costs vs. Benefits: Emphasizes the importance of comprehensive cost-benefit analyses in trade decisions to avoid politicizing economic policies.

Safety Net Expansion

The conversation also touches upon the expansion of the social safety net, with Furman advocating for targeted measures to support low-income individuals without overextending budget constraints.

Jason Furman [23:50]:
"I absolutely agree with you though that we have budget constraints. ... making sure everyone gets it would be the first, second and third place that I would use my dollars long before I got to raising the child tax credit for middle class families."

Comparative Analysis of Political Administrations

Furman compares the economic approaches of the Biden and Trump administrations, highlighting differences in protectionism, fiscal responsibility, and data utilization.

Jason Furman [24:56]:
"They're not taking the fiscal situation very seriously while they think that inflation is a problem on any given decision."

Alison Schrager [25:33]:
"I saw someone on X argue seriously that they just care more about the tenure than the stock market."

Future of the Democratic Party and Economic Policy

Alison Schrager and Jordan McGillis reflect on the potential for the Democratic Party to revert to more balanced economic discussions, influenced by voices like Furman.

Alison Schrager [27:11]:
"I'm not sure people in the party who are on that side are reading Foreign affairs much anyway."

Jason Furman [28:59]:
"It's very brave of him, I think, and I think we need definitely more policymakers and academics like him who are willing to call out his own side for weaknesses."

Conclusion

The episode concludes with a mutual appreciation for Jason Furman’s balanced critique and a cautious outlook on the future of economic policy within the Democratic Party. Schrager and McGillis emphasize the importance of incorporating cost-benefit analyses to foster more rational and effective economic policies.

Jordan McGillis [29:30]:
"As you point out though, with two years here in the political wilderness, it's going to be very easy for the Democrats to indicate that this is actually a Trump problem."

Alison Schrager [29:53]:
"They're always going to be pointing fingers at each other."

Notable Quotes

• Alison Schrager [00:19]:
  "Jason was really calling out economic orthodox and how we need to return to those values."

• Jason Furman [03:16]:
  "The economy wasn't as good as people were bragging about."

• Jason Furman [09:27]:
  "With Democrats, it's all good... Conservatives do cost analysis without having the benefit part in the equation."

• Jason Furman [22:41]:
  "If you just do benefit benefit analysis... you're going to have a hard time convincing me."

• Alison Schrager [24:36]:
  "What do you see the Trump administration doing that isn't heeding the lessons that the Biden administration should have learned."

Final Thoughts

This episode of City Journal's 10 Blocks offers a critical examination of recent economic policies through the expertise of Jason Furman. It underscores the necessity of pragmatic economic strategies that respect traditional trade-offs and emphasizes the importance of balanced cost-benefit analyses in policymaking. Listeners gain valuable insights into the complexities of modern economic challenges and the political dynamics that influence them.