Interview with Cecilia Rouse (President of the Brookings Institution, Chair of the Council of Economic Advisers under President Biden)
Cecilia Rouse served as the Chair of the Council of Economic Advisers (CEA) between 2021-2023 under President Biden. Before joining the Administration, she served as the Dean of the Princeton School of Public and International Affairs. She also previously served as a member of the Council of Economic Advisers from 2009 to 2011 under President Obama, and as Special Assistant to the President at the National Economic Council from 1998 to 1999 under President Clinton. She is currently the president of the Brookings Institution and the Katzman-Ernst Professor in the Economics of Education at Princeton University.
Interview conducted January 29, 2025
Q: How would you characterise “Bidenomics” and its objectives? How did the US economy perform under Biden?
Bidenomics is about rethinking the role of the state in the economy. It’s about recognising there is a role for the federal government in delivering public goods and addressing large externalities. It’s about the public sector working alongside the private sector.
Coming on the heels of the pandemic, I think this role became quite stark. A pandemic is a classic case of negative externalities: if you cough on me or breathe on me, I can get sick. So, we ask, “What’s the government’s role in addressing that?” We saw many dimensions of the public sector’s role during the pandemic.
At the very beginning, when the public health experts said we needed to stay away from one another, we essentially powered down the economy to limit in-person interactions. The public sector then stepped in with the Families First Act, the CARES Act, and so on, to ensure that while we wanted fewer private exchanges (to stop people from interacting physically), people could still buy food, pay rent, and take care of necessities. If we’d let economic activity go to zero, we’d have plunged into a deep depression with enormous human suffering. As a result, the public sector said, “We need to step in since we’ve asked for a severe limit on economic activity.”
Second, COVID-19 was a virus for which we had no known immunity. Operation Warp Speed was a fascinating example of collaboration between the public and private sectors, starting with public investment in mRNA technology, followed by grants and guaranteed markets for companies that produced vaccines. Many people believe that the combination of grants up front and a guaranteed market later helped speed vaccine development. We got vaccines in record time.
If you then add in investment in roads and bridges, along with climate initiatives, Bidenomics was also about saying, “There’s a proper role for the public sector, and it’s been neglected for too long.”
Another aspect of Bidenomics focuses on rising inequality. It is about caring for the average American—working-class Americans, union workers—and ensuring the economy works for everyone. Rather than just assuming a rising tide lifts all boats, it also places more emphasis on helping those who are less fortunate or are middle-income earners. I personally characterise Bidenomics as those two main elements: (1) reaffirming the public sector’s proper role, and (2) addressing growing inequality.
Q: Most of the people we have spoken to emphasise the macroeconomic parts of Biden’s agenda. You’ve focused on microeconomics. Is that emphasis deliberate?
I’m a micro-, labour-economist who was playing a macro role at the Council of Economic Advisers! But if we look at it from a macro perspective, that macro strength followed from some of the micro decisions.
There was so much federal support—not just from the federal government but also the Federal Reserve— that our financial markets stayed liquid (unlike in the Great Recession). We learned that lesson from 2008–2009. This time the public sector, writ large, kept the economy humming. As a result, if we look at initial weekly unemployment insurance claims, they were around 207,000 at the beginning of March 2020. By early April, they reached over 6 million per week. That was a precipitous nosedive in the labour market—about 10 times higher than the Great Recession’s peak. However, if we look back overall, we ended up with the fastest recovery of any deep recession since World War II. US GDP growth outperformed most other developed countries.
All that fiscal support, along with the Fed’s actions, kept GDP and the economy going, generating a red-hot labour market. But we also had supply chain disruptions that we didn’t fully appreciate. We could see some issues at the start, like PPE and masks, but I don’t think we realised that shifting from consumption of services to goods (goods need transport, etc.) would cause pressures elsewhere. That contributed to a spike in inflation.
Looking back, we’ll have a better understanding of whether all that public support was worth it on balance. We can discuss why it was so large, but that’s a key characteristic of Bidenomics. However, I didn’t lead with it because I don’t think we went in intending to create such a red-hot labour market. It flowed from those earlier steps.
Q: The US saw a bigger spike in unemployment during the crisis, and a stronger reallocation of labour across the economy as a result. Was that deliberate, and would you adopt the same approach again?
That’s a really good question. When the pandemic was starting, I remember doing an event with Glenn Hubbard (former Chair of the CEA and Dean of Columbia Business School). I believe he and I agreed that the US just doesn’t have the data systems to pay people to remain employed by their current employer. We haven’t linked up our data systems to be able to do so. Rather workers separated from employers and we paid unemployment insurance, and then workers needed to find new employment. We also agreed that for the US, those separations could lead to more innovation and better job matching as people reconnected. But if the economy had stalled, as in the Great Recession, there could be scarring and longer unemployment spells. As it turned out, workers benefited because the economy kept going. Thankfully, with vaccines arriving quickly and a strong labour market, workers had a lot of choice, which ultimately benefited them. It certainly could have gone differently, though.
Q: You refer to the labour market being “hot.” How much of what you’ve described is simply a macro story of high demand, and how much is due to other policies or structural features of the US labour market?
I’m a micro person, so I won’t claim to capture every macro nuance, but I believe it was predominantly a macro story. That said, the fact that our economy had become so digitised mattered. Many people could work remotely, which allowed for more resilience. Also, there was substantial support for all kinds of workers. At the low end, essential workers bore the brunt of health risks, but they also received extra support—rental assistance, expanded health insurance benefits, paused student loans, childcare assistance, etc.
The childcare sector itself was severely hit, and the American Rescue Plan included money for childcare centres. So, although early on female labour force participation took a big hit, as childcare centres and schools reopened, we saw a record rebound, especially among women aged 25–54. Female labour force participation returned to and even surpassed pre-pandemic levels. Combining these elements—technology readiness, a strong economy, and varied and relatively generous support—helped keep activity moving.
Q: Some have argued the American Rescue Plan was too large and fuelled inflation. In hindsight, do you think the scale of the package was a mistake?
Calling it a “mistake” implies more precision in policymaking than typically exists. First, Congress has its own priorities, so the final numbers weren’t entirely the White House’s alone. Second, the concern was a repeat of the jobless recovery after the Great Recession. This time, the recession was far deeper. Initially (when the CARES and Families First Acts were passed) we didn’t even have vaccines. By the time of the American Rescue Plan (ARP), vaccines were brand new, and we didn’t know how durable they’d be, how much they’d reduce transmission, or how quickly we could distribute them. We worried the pandemic might drag on.
The thinking was, “We may not get another chance for fiscal support. Let’s err on the side of doing too much.” We didn’t know by January 2021 that we’d be able to turn the pandemic corner so quickly. We turned it around in part because the Biden team (especially Jeff Zients and his team, among others) was aggressive in getting shots in arms. But that outcome wasn’t guaranteed early on.
Q: There was also a view that Obama-era fiscal stimulus had been too small, so you didn’t want to repeat that. Is that fair?
Yes, that’s correct. When originally designed the American Recovery and Reinvestment Act (ARRA) in 2009 was based on data that later got revised downward; the economy was weaker than realised. Add in the fact that Joe Biden took office after four years of Trump, in the aftermath of George Floyd’s murder, and in the midst of a pandemic. The mood in the country was different. So there were multiple reasons for doing a large fiscal measure.
Q: Critics say that unlike Europe—where inflation was partly a supply shock—US inflation was more demand-driven, which hurt Democrats politically in 2022 and 2024. Do you see that as a fair trade-off?
It might be partly fair, which is why people need to assess its costs and benefits carefully. It is worth noting that some also argue that the large fiscal support helped Democrats get two Senate seats in Georgia, enabling many judicial appointments. This is to say it’s complicated. Ultimately, people will write long books about this.
Q: How much would you say the Biden agenda was focused on labour markets? Is this lost in a discussion that focuses on macroeconomics and industrial policy?
One key component that didn’t pass was the American Families Plan, which some people mocked for calling childcare “infrastructure.”
I’d defend that phrasing—I may need a road to drive to work, and I also need someone to care for my kids so I can go to work. This is about updating institutions. In the past, one parent stayed home; now, in many households, all parents/caregivers work, so childcare is necessary. We also have a demographic shift: the baby boom generation is retiring, which squeezes many people between caring for aging parents and young children. Bidenomics recognised that, in today’s labour market, we need expanded childcare and eldercare. Other countries are ahead of us on this. Biden wanted that as part of the “infrastructure” conversation, but it did not pass.
Q: You mention the legislative barriers to reform. Do you have reflections on how the administration’s ambitious agenda translated into legislation? Where would you have liked to go further, and what barriers did you face?
Remember that in the US, the President has a “bully pulpit,” but in terms of actual legislation, he can only sign or veto what Congress passes.
There was a part of Biden’s agenda that didn’t get done: the American Families Plan. On the other hand, the Inflation Reduction Act was a historic climate investment, which I believe we needed. Perhaps it wasn’t the only way to begin to address climate change, but it was an important step. The CHIPS and Science Act partly included place-based policy to address geographic inequality—areas of the country with too little economic activity—and also to address national security risks in semiconductor supply chains, highlighted by the pandemic.
The piece that remains undone is updating our systems for today’s world: lowering the cost of childcare, implementing paid leave, and so on. If we want higher fertility rates or just want to help families, we have to reduce the cost of childcare. Paid leave is also critical, so people can stay home when they are ill or when they need to take care of children or elderly parents. Many countries already have these policies, but we haven’t caught up in the US. The upshot is that the Biden agenda, especially on those issues, faced a 50–50 Senate, and that made it very tough.
Q: Some in the UK see industrial policy as the real core of Bidenomics, whereas you’ve been emphasising the labour market. Where would you say the balance lies?
I think it’s both. Place-based policy involves generating jobs for working-class Americans left behind. Advanced manufacturing is capital-intensive, but it still brings indirect economic activity. At the same time, we learned from the pandemic that relying too much on distant supply chains could be risky. Many advanced chips come from Taiwan; if China blockades Taiwan, that’s a huge vulnerability. There is also a national security rationale.
It’s too early to say if it will succeed. We’re still building the fabrication facilities (“fabs”), and the market can be volatile. In my view, we should allow the public sector to take some risks and try new things—some may fail. But we know many Americans are not thriving. We have “deaths of despair,” an opioid crisis, falling life expectancy. Trying something different is warranted.
Q: Others have discussed an evolution of Bidenomics over time, towards a greater emphasis on national security issues and supply chain concerns. Do you think the Bidenomics agenda evolved that way, and if so was it mainly because facts on the ground changed (e.g., Russia’s invasion of Ukraine)?
Mostly the agenda was a response to the belief that the United States had long deferred investment in infrastructure that could best be done with the assistance of the public sector. At the same time, parts of it evolved as we learned more about the value of having some capacity to have domestic production of some critical items, such as advanced semiconductor chips, and not fully rely on imports. The value of domestic production was largely driven by national security concerns.
Q: What are the lessons you learned from the Biden experiments in place-based policy?
We in the US have tried place-based policies before (e.g., enterprise zones, empowerment zones, the New Markets Tax Credit). The results have been mixed—some successes, some less so. What we’re seeing now is somewhat different in scale and structure.
It’s an experiment. There’s a reason the private sector isn’t rushing to rural areas on its own. The question is, “Can we kill two birds with one stone by building massive semiconductor fabs in places not typically known for advanced manufacturing?” Ideally, we address the national security risk of being too dependent on foreign production, while also stimulating economic activity in left-behind areas.
Will it work? We’ll see. But the rationale is that advanced fabs wouldn’t really fit in downtown Manhattan, so placing them in parts of the country that have land, some skilled labour, and need jobs might be an opportunity.
Q: Some commentators have welcomed the administration’s labour market approach but criticised the emphasis on place-based policies and industrial policy as anti-market and inefficiently protectionist. Is that fair?
It may not be entirely wrong from a purely theoretical economics perspective—which argues, “If industry dies in one place, people should move to places with more economic opportunity.” Therefore the policy has largely been to encourage people to move to areas where there are many jobs. Unfortunately, that hasn’t worked well so far because people don’t always move; they have communities, families, social ties. So the Biden administration’s perspective was, “We still have people in these areas who need opportunities, and if we want them to transition away from, say, coal mining, we need an alternative strategy.” Let’s at least try an alternative.
I’m not claiming these new policies will definitely succeed but hoping that pure market forces alone will lift all boats hasn’t solved regional distress. Meanwhile, the national security community sees real risks with depending on China, so we have to factor that in as well. It’s a tension between economists who prefer free trade and security experts who worry about vulnerabilities.
Q: How do you reconcile the US’ strong economic performance over the last two years with the anti-incumbent vote in 2024?
Politics isn’t only about raw economic performance. If you look globally, many incumbents who managed through COVID faced headwinds. We see populism rising in many places—often because of globalisation pressures, immigration, and cultural or identity concerns. In the US, there’s a constant immigration debate. People worry about losing their place in line, or about changing social norms. It’s not just about the economy in a narrow sense.
It shows that economics isn’t the sole driver of votes. People have broader concerns — immigration, cultural issues, inequality, housing, healthcare, homelessness, and so forth. Many Americans’ lives are precarious. Even if GDP growth is good on paper, large swaths of the population feel left behind or anxious.
Q: What can other advanced economies learn from Bidenomics?
Every country is different, so there’s no one-size-fits-all. But one lesson is that a strong labour market really can deliver for lower-wage workers.
Another is that while globalisation can increase the size of the overall pie, we have to take seriously the losers. Some countries do a better job of social welfare than the US, but we still haven’t fully addressed the distributional consequences of global trade and new technology. The same goes for the tech sector, where network effects create huge profits for a few companies and individuals. We need a better way to share the gains.
Universal Basic Income (UBI) is one idea, but that alone doesn’t give people meaningful work. We have to figure out how to let more people share in these returns while maintaining a dynamic economy.
Q: What is the biggest positive you take away, and what is the biggest concern going forward?
The biggest positive is that we got through the pandemic—although we lost far too many lives, the public sector played a crucial role in preventing even more deaths and an even worse economic downturn. We managed a reasonably strong economic recovery.
The negative is that it was extremely traumatic, and we’re still healing. We’re knitting our economies and social norms back together. The educational losses for children, especially the poorest, are profound and will have long-term consequences. We still don’t fully know how that scarring will play out, but we will have to face it.
ENDS