Oren Cass Notices One of Industrial Policy's Fatal Flaws
Cass says industrial policy will only work if the politicians can put aside political disagreements and partisan agendas. In other words, industrial policy will never work.
One prominent advocate of giving politicians more control over the economy seems to have realized one of the idea's fatal flaws.
All the politics.
In a nutshell, that's the complaint lodged by American Compass executive director and industrial policy superfan Oren Cass last week at a conference hosted by the Information Technology & Innovation Foundation. If only progressives would be willing to drop their own political goals, Cass argued, there could be bipartisan agreement about what's necessary to advance the "national good."
Cass was responding to a question from Wall Street Journal economic writer Greg Ip about the Biden administration's decision to mandate that semiconductor companies receiving subsidies through the CHIPS and Science Act to expand domestic manufacturing production must provide child care to construction workers and permanent employees. Cass called it "extraordinarily disappointing" to see a Democratic administration attaching Democratic goals to the CHIPS Act, which American Compass had cheered as it moved through Congress.
"This is the political obstacle right now to continuing to make progress in this direction," Cass said, referring to Democrats' eagerness to lard up industrial policy bills with seemingly unrelated issues. That includes not only the child care mandate but a ban on stock buy-backs, a requirement that union-approved "prevailing wages" are paid on CHIPS-funded construction projects, and more. Some of that was in the text of the bill when it passed—with the support of 17 Republican senators—and some of it, most notably the child care mandate, has been created by the Biden administration as it rolls out the specifics of the subsidy program.
That has poisoned the well for future bipartisan industrial policy deals, Cass argued. "If you are ever going to have a bipartisan consensus on making these kinds of investments, you have to be willing to take the social priorities on which there is no bipartisan agreement and put them to the side for the sake of the national good," he said.
We all might wish that the politicians would stop caring about everything except the issues we think are most important, but any serious understanding of American democracy requires starting out by understanding why that is highly unlikely. If your political project requires everyone in Washington to agree on the definition of the "national good" (or the "common good"), then your project is likely to fail.
Indeed, moments after Cass finished complaining about Democrats gumming up noble industrial policies with their silly social priorities, Rep. Ro Kanna (D–Calif.), who was sitting next to Cass onstage, jumped in to defend those goals. "If you want to get bipartisan commitment in the Congress, I think you can get it on issues of economic populism, which is both in industrial policy and in policy on child care, education, and health care."
This exchange is illustrative in a few different ways. For one, the fact that Khanna and Cass cannot put aside their political perspectives in a one-on-one discussion—even though both want to expand industrial policy—ought to give some indication of why it's insanity to expect a majority of Congress to do that.
Second, it highlights how arbitrary the notion of "national good" really is, even if Cass and others on the New Right think it's a self-evident truth. "Anyone building a fab who felt that offering child care was necessary to get the workforce they wanted, of course, could do that," Cass said at one point.
Hey, that sounds a lot like the free market approach that he often likes to criticize. He's right, of course, that the market would do a fine job of determining what benefits—including free child care—employers should offer to attract the right talent. Why not apply that thinking more generally? Anyone building a fab who felt that attracting investment was necessary to get the factory built could do that too. There are lots of ways to get child care and lots of ways to build a semiconductor factory that don't involve government mandates or subsidies, but Cass sees government funding as essential for one and superfluous for the other.
Unfortunately for pro-industrial-policy conservatives, the people actually in charge of this industrial policy don't agree. "Every one of the requirements—or they're not really requirements—nudges are for criteria or factors we think relate directly to the effectiveness of the project," Gina Raimondo recently told The New York Times' Ezra Klein. "You want to build a new fab that will require between 7,000 and 9,000 workers. The unemployment rate in the building trades is basically zero. If you don't find a way to attract women to become builders and pipe fitters and welders, you will not be successful. So you have to be thinking about child care."
Klein criticized this approach, calling it "everything-bagel liberalism." Piling unrelated goals and agendas onto industrial policy adds costs and delays to the projects the government is trying to fund. "Even if no single standard or mandate is decisive on its own," Klein writes, "the accumulation of them regularly dooms everything from housing projects to highway construction, and now seems to hang heavily over the CHIPS Act.
For Cass, the solution to this problem is convincing Congress and the White House to set aside politics when the national conservatives decide something is really, really important.
Here's a better idea: Stop giving politicians greater control over the economy. They will always use those powers to advance political agendas. If your preferred version of industrial policy only works when politics are removed from the process, then your industrial policy will never work.