If there’s one thing the White House and its critics seem to agree on, it’s that the Biden administration’s approach to economic policy—which it has branded “Bidenomics”—is a sharp break from how things have been done for the past several decades. “Forty years ago, we chose the wrong path, in my view,” Joe Biden said at an event in July 2021. But what exactly was that wrong path—and what is Biden’s economic team trying to do differently?

In the 1970s, policy makers faced a conundrum. The long postwar boom seemed to have sputtered out. Inflation was rising while unemployment remained high—a combination that mainstream economists had previously thought impossible. Political leaders were under pressure to figure out what was holding back the economy.

A group of economists from the University of Chicago believed they had the answer: regulations. According to these theorists, the ideal economy was one in which money and goods flowed smoothly according to the laws of supply and demand. But regulations on American business introduced friction into the gears of capitalism, stifling economic growth. To get the economy growing again, leaders needed to remove those regulatory obstacles. Call it tweezer economics: Pluck out the inefficiencies clogging up the market, and growth would come roaring back.

[Joel Dodge: My hometown is getting a $100 billion dose of Bidenomics]

But the turbo-growth promised by the Chicago-school intellectuals never materialized. And so, in perhaps the most overlooked element of his economic agenda, Biden has thrown out the tweezers. Instead of trying to generate growth by removing micro-inefficiencies, his policies target growth directly through aggressive spending, creating a high-pressure macroeconomy. It’s an ambitious experiment. If that pressure can force businesses to step up their own competitive game and run more efficiently, Bidenomics could best the old order on its own terms.

The ’70s crisis was very real. Many observers on both the left and right blamed the situation on microeconomic conditions: Workers weren’t productive enough, and businesses weren’t growing enough. In the version of the story that took hold on the right, the culprit was a body of regulations that prevented corporations from running at maximum efficiency. An overreaching federal government had empowered favored groups—labor unions, consumer advocates, environmentalists, and racial and ethnic minorities—to get in the way of free-market capitalism.

For the Chicago intellectuals, the worst offender was antitrust policy. In 1958, the economist George Stigler wrote that businesses that reached a dominant position should be presumed to have done so because of their superior efficiency, because competition “sifts out the more efficient enterprise.” The tough antitrust enforcement of the ’50s and ’60s interfered with this process, he argued, prosecuting the very firms that contributed the most to economic growth. Corporations should be left alone to merge and grow large, lest government kill the geese that laid the golden eggs.

The economists Michael Jensen and William H. Meckling extended tweezer economics into a new realm. In 1976, they famously theorized that “agency costs”—the conflict between executives, who managed a company, and shareholders, who owned it—were holding back corporate efficiency. Executives, they argued, would rather go golfing than work to generate value for shareholders. The solution was to put shareholders in control. Executives should be paid in stocks, rather than flat salaries, to align their incentives. Combine that idea with looser antitrust law and there would be an active competition for control of corporations, especially via hostile takeovers. This, Jensen later wrote, would generate “large benefits for shareholders and for the economy as a whole.”

Another key drag on the economy, according to observers across the political spectrum, was the growing rebelliousness of the American worker. Armen Alchian and Harold Demsetz argued that workers needed bosses to protect themselves from their own free-riding inclinations. For businesses to function efficiently, bosses must be able to intensively monitor workers for shirking, and to fire them unilaterally if they were caught doing so. An obvious implication was that labor regulations—above all, laws protecting the rights of labor unions—had to be curtailed.

These ideas, and others like them, were behind many of America’s key economic policy changes since the ’70s. Stigler’s theory of the efficient monopolist eventually conquered both the judiciary and the executive branch; after Ronald Reagan took office, enforcement dwindled and corporate mergers soared. (This was the focus of Biden’s “wrong path” comments in 2021.) In corporate law, Jensen and Meckling’s doctrine of shareholder primacy is now virtually sacrosanct. Finally, the authority of employers over workers has expanded dramatically.

In short, the Chicago school got virtually everything it asked for. Big firms grew bigger, corporations prioritized their stock prices above all else, and private-sector unions were all but wiped out. But 40 years of tweezing out the inefficiencies allegedly holding back the economy did not revive the growth rates of the pre-stagflation era. The U.S. economy grew an average of 4 percent a year from 1948 to 1973. During the crisis years, from 1974 to 1979, it grew more slowly, on average only 3 percent a year. Then came the tweezers, and growth didn’t budge. From 1980 to 2007, it plodded along at the same 3 percent rate of the crisis years, before falling off a cliff after 2007—all the way down to 1.6 percent from 2008 to 2020.

Instead of prompting a return to growth, the policy revolution has made itself felt in other ways. The death of antitrust enforcement, far from unleashing dynamism and investment, may have held them back. The shareholder revolution helped hollow out the American industrial base and transfer massive wealth to financial engineers. And although the labor movement was defanged, the hoped-for productivity explosion never happened.

The post-tweezer era is just a few years old, but it has already scored some early successes. Most important, growth recovered remarkably quickly from the pandemic recession.The economy returned not only to pre-pandemic trends but to pre–Great Financial Crisis trends as well, suggesting that the prolonged pain of the post-financial-crisis recession was avoidable.

Biden’s first big legislative accomplishment was the $1.9 trillion American Rescue Plan Act of 2021, which unleashed a fiscal fire hose onto the U.S. economy. That law was followed by more legislation that went beyond merely increasing spending. The 2022 Inflation Reduction Act steered investment specifically toward fighting climate change. The law eschews the tweezer of, say, carbon taxes, which leave decisions to the wisdom of the market, in favor of direct federal interventions. For example, while previous policies relied nearly exclusively on the tax code to support investments in zero-carbon energy projects, the IRA contains provisions allowing nonprofit utilities that invest in zero-carbon power generation to obtain federal grants.

The IRA, along with the bipartisan CHIPS and Science Act of 2022, also aims to reduce regional inequalities by directing investments to left-behind rural and deindustrialized areas. That is a decisive break from the Chicago-school faith in letting capital flow to wherever it can generate the highest returns. Projects also get extra credit if they have labor peace agreements, prompting some employers to proactively reach labor contracts with unions in order to be the winning bidder on federally backed projects. These measures have already aided unions in wind-turbine and electric-bus manufacturing. Finally, in a departure from Jensen and Meckling’s doctrine of shareholder primacy, the IRA includes a provision to discourage companies from funneling cash to shareholders in the form of stock buybacks, steering them to reinvest in their businesses and employees instead. In other words, the government is investing with the sorts of “strings attached” that the ’70s generation blamed for inefficiency.

Some critics have questioned the wisdom of trying to satisfy too many constituencies with stimulus and infrastructure policy. They point out that the sometimes conflicting goals of unions, environmentalists, and the companies receiving federal funds may gum up and needlessly complicate policy implementation. In other words, by pursuing too many goals, the administration may meet none of them satisfactorily. That’s a real risk—but the Biden administration seems to be betting that some additional inefficiency is a cost worth paying if it builds new constituencies in support of pro-growth policy. If the administration can bring benefits to unions, environmentalists, and rural voters, it might assemble a lasting political coalition behind its vision of green growth.

[Franklin Foer: Biden declares war on the cult of efficiency]

The inverse is also true, of course. The post-tweezer revolution could all very easily fall apart. By many metrics, the U.S. economy is in spectacular shape—but voters continue to say they’re miserable. If Bidenomics isn’t popular, it’s unlikely to last. Meanwhile, the administration’s efforts to break up corporate monopolies are running into a buzzsaw of hostile judges steeped in Chicago-school doctrines. The Federal Reserve, in its effort to fight inflation, is stymieing new investment in housing, green energy, and more, by making borrowing more expensive.  

Yet the new model holds great promise. For nearly half a century, the government gave corporate America the hands-off policies it preferred, hoping the wealth would trickle down. Now the government is letting strong overall growth set the foundations for more efficient businesses. Corporations are being forced to use capacity more effectively to keep up with demand—and, thanks to a historically tight labor market, to vigorously compete to attract workers. If macro policy can not only generate overall growth but also compel firms to be more efficient, we might discover that the trade-off between economic strength and social welfare was never really a trade-off at all.

As president, Donald Trump imposed an array of deeply divisive immigration restrictions on both Latinos and Muslims. And yet from 2016 to 2020, he increased his share of the vote among both groups. Even some Latino and Muslim voters who opposed Trump’s immigration agenda moved to support him anyway because of his record on other issues, particularly the economy and conservative social priorities.

Now Trump and several of his rivals for the 2024 GOP presidential nomination are doubling down on the bet that they can target each group with harsh immigration policies without paying an electoral price.

For months, they have proposed an escalating succession of hard-line measures aimed at deterring mostly Latino undocumented migrants from crossing the southern border. And following the Hamas terror attack on Israel earlier this month, they rolled out a wave of exclusionary proposals aimed at Muslims. Trump has pledged that, if returned to the White House, he will restore his travel ban on people from a number of majority-Muslim nations, expand ideological screening of all potential immigrants to ensure that they agree with “our religion,” and deport foreign students in the United States who express hostility to Israel.

Trump and other GOP 2024 candidates such as Florida Governor Ron DeSantis have unveiled these proposals even as many Democratic-leaning activists warn that support for President Joe Biden is suffering in Latino and Muslim communities. Polls have consistently shown widespread discontent among Latinos over inflation and the economy. And many Muslim Americans are angry at Biden for his strong support of Israeli Prime Minister Benjamin Netanyahu, as he pursues his military campaign to destroy Hamas in Gaza. “There is a level of disgust and disbelief and disappointment at the administration’s handling of the crisis so far,” Edward Ahmed Mitchell, the national deputy director of the Council on American-Islamic Relations, told me.

The movement of some of these voters away from Biden produces a powerful incentive for Republicans to escalate their rhetorical and policy offensive against immigrant communities. It means that Trump could achieve the best of both worlds politically: offering a harsh anti-immigrant agenda that energizes the most xenophobic white voters in his coalition while still maintaining, or even growing, his support among immigrant communities drawn to him (or repelled by Democrats) on other issues.

That process already seems well under way in the agenda that Trump and other Republicans are advancing about the southern border. The fact that Trump’s vote among Hispanics improved in 2020, even after he implemented such aggressive policies as starting the border wall and separating migrant children from their parents, has undoubtedly encouraged him to go even further with his new proposals for mass deportation of undocumented migrants in the U.S. and military action against Mexico (both of which DeSantis has also endorsed).

Likewise, if Trump wins the 2024 election and more Muslim Americans vote for him than in 2020, despite his threats to target Muslim immigrants, he will undoubtedly feel emboldened in a second term to impose more exclusionary policies on that community. Stephen Miller, the hard-line architect of much of Trump’s immigration agenda as president, offered a preview of the deportation agenda that might be ahead when he posted a video of a recent pro-Palestinian demonstration and wrote that ICE agents “will be busy in 2025.”

Over his four years in office, Trump instituted policies more resistant to immigration than any president had since the 1920s, and repeatedly disparaged immigrants with openly racist language (including calling Mexicans “rapists” and decrying immigration from mostly Black “shithole countries”). He is now pushing beyond even that agenda. “What comes next will be … spectacular,” Miller posted recently.

As just a first step, Trump has proposed to reinstate all of the key policies he implemented that raised nearly insurmountable hurdles for those who sought to claim asylum in the U.S., including the “remain in Mexico” policy that required asylum seekers to stay in that country, typically in crowded and dangerous makeshift camps, while their cases were adjudicated. He’s promised to finish his border wall. And during his CNN town hall last spring, Trump refused to rule out reinstating the separation of migrant children from their parents, his most controversial policy. The Biden administration has reversed all of these policies, and it recently settled a lawsuit in which the federal government agreed not to restore the child-separation policy. Still, experts say that a reelected Trump would almost certainly seek to void or evade that agreement.

After the Hamas attack in Israel, Trump also pledged to bring back his travel ban. A bitterly divided Supreme Court upheld the rule in a 5–4 vote in 2018; if reelected, Trump could unilaterally restore the policy through executive action. “The legal framework,” Mitchell from the Council on American-Islamic Relations told me, “is still there just waiting to be used.”

But Trump has new ideas too. These include ending birthright citizenship (though his legal authority to do so is highly questionable) and launching military actions against Mexican drug cartels. In a speech to a conservative group earlier this year, he promised to “use all necessary state, local, federal, and military resources to carry out the largest domestic deportation operation in American history.”

He is also calling for requiring prospective immigrants from any country to pass intensified ideological screenings: “If you want to abolish the state of Israel, you’re disqualified; if you support Hamas or the ideology behind Hamas, you’re disqualified; and if you’re a communist, Marxist, or fascist, you are disqualified,” he said earlier this month in Iowa. Monday in New Hampshire, Trump raised the ante when he said he would bar entry for those who “don’t like our religion,” without explaining how he defined “our religion.” He’s pledged to deport students and other immigrants who express what he called “jihadist sympathies.”

David Leopold, a former president of the American Immigration Lawyers Association, says Trump’s record as president shows that it would be a mistake to dismiss even the most extreme of these proposals as simply campaign rhetoric designed to stir his crowds. “Every word that comes out of Donald Trump’s mouth ought to be taken seriously,” Leopold told me. If Trump returns to power, he said, we will see a version of his first term’s “anti-immigrant policy on steroids.”

While Trump was president, and his agenda was in the spotlight, most of his core immigration policies provoked majority opposition in polls. In a compilation of results from its annual American Values Survey polls late in Trump’s presidency, the nonpartisan Public Religion Research Institute (PRRI) found that just over half of Americans opposed his Muslim travel ban, about three-fifths opposed his border wall, and fully three-fourths opposed the child-separation policy.

But public tolerance for some of these ideas may be growing amid dissatisfaction with Biden’s record in managing the border and immigration. Less than a third of adults overall—and only about one-fourth of independents—said they approved of Biden’s handling of those issues in the latest annual American Values Survey, released yesterday. A recent national Marquette University Law School Poll found that Americans preferred Trump over Biden on controlling the border by nearly two to one.

A recent Quinnipiac University national poll found that a majority of Americans support building a border wall for the first time since the pollsters initially asked about the idea, in 2016. “With frustration building” over Biden’s record on immigration, “it looks to me that some of these more extreme ideas are gaining traction in the country,” Robert P. Jones, the president of PRRI, told me.

Even many in the communities that Trump’s immigration plans would most directly affect appear more focused on other issues. Every major data source on voting behavior agreed that Trump grew his vote among Latino voters from about three in 10 to nearly four in 10 from 2016 to 2020, largely around economic issues, but also because of gains among cultural conservatives. Though the GOP advance among Latinos stalled between the 2020 and 2022 elections, polls continue to record widespread dissatisfaction among them about inflation, which could further erode support for Democrats in 2024.

The Muslim American community is much smaller—Muslims account for only about 1 percent of the total U.S. population—so reliable information on its voting behavior is less available. Youssef Chouhoud, a political scientist at Christopher Newport University, told me that Trump’s vote among Muslim Americans nationwide improved from about one in six in 2016 to roughly one in three in 2020. Key to those 2020 gains, he said, was sympathy to conservative GOP arguments on issues such as LGBTQ rights and discussion of sexual orientation and gender identity in schools.

Now, Chouhoud and others note, those Republican gains are being reinforced by the backlash among many Muslim activists against Biden’s expansive support for Israel in the conflict with Hamas. Waleed Shahid, a Muslim American Democratic strategist who has worked for several liberal groups and candidates, says that leading Democrats are underestimating the visceral anger over Biden’s words and actions. “I think, unfortunately, Democratic leadership has their heads in the sand about this,” he told me.

Both Chouhoud and Shahid told me they believed that Trump’s return to anti-Muslim rhetoric reduces the odds that any significant number of voters from that community will abandon Biden to vote for the former president. But they both said they considered it likely that some Muslim American voters disillusioned with Biden might stay home or drift to third-party candidates. “The fact that this chorus” in the Muslim community “is so loud” in criticizing Biden, “even given the full knowledge” of Trump’s bellicose rhetoric, “is telling you that there is a groundswell of real animosity toward the policies that the Biden administration is enacting right now,” said Chouhoud, who is also a fellow at the Institute for Social Policy and Understanding, a nonpartisan group that studies issues concerning Muslim Americans. This discontent could matter most in the swing state of Michigan, where Muslims are a sizable constituency: A mobile billboard drove through the Detroit area this week displaying a message proclaiming that “Israel Bombs Children” and “Biden Pays For It.”

Shahid says he fears that the 2024 election won’t look like 2020’s—when Democrats of all stripes unified behind the common mission of ousting Trump from the White House. Instead, he thinks, the next election will more closely resemble that of 2016, when a decisive sliver of Democratic-leaning voters, particularly younger ones, backed the third-party candidates Gary Johnson and Jill Stein rather than Hillary Clinton.

“The Democratic base did not turn out for Hillary in 2016, even though Trump was a right-wing extremist,” Shahid told me. “People somehow have collective amnesia about this. But Biden is historically unpopular with the Democratic base.”

Of course Biden may regain Muslim voters’ trust if he can jump-start renewed negotiations between Israel and the Palestinians after the fighting concludes. Similarly, very few Latinos may now be aware of Trump’s proposals for mass deportation of undocumented migrants and military action against Mexico; if he’s the nominee, that would likely change—and prompt substantial resistance, especially among Mexican Americans.

Still, these tensions reveal a larger dynamic underpinning the potential 2024 rematch between the two men. On almost every front, Trump has formulated a 2024 agenda even more confrontational to Democratic constituencies and liberal priorities than he pursued during his four years in the White House. Yet disenchantment with Biden’s performance could be eroding the will to resist that agenda among key components of the party’s coalition, particularly young people and voters of color.

The pressure that the Middle East crisis is placing on Muslim American support for Biden, even as Trump directly threatens that community, shows how hard it may be for Democrats to maintain a united front—even against an opponent whom they consider an existential threat to all that they value.

If there’s one thing the White House and its critics seem to agree on, it’s that the Biden administration’s approach to economic policy—which it has branded “Bidenomics”—is a sharp break from how things have been done for the past several decades. “Forty years ago, we chose the wrong path, in my view,” Joe Biden said at an event in July 2021. But what exactly was that wrong path—and what is Biden’s economic team trying to do differently?

In the 1970s, policy makers faced a conundrum. The long postwar boom seemed to have sputtered out. Inflation was rising while unemployment remained high—a combination that mainstream economists had previously thought impossible. Political leaders were under pressure to figure out what was holding back the economy.

A group of economists from the University of Chicago believed they had the answer: regulations. According to these theorists, the ideal economy was one in which money and goods flowed smoothly according to the laws of supply and demand. But regulations on American business introduced friction into the gears of capitalism, stifling economic growth. To get the economy growing again, leaders needed to remove those regulatory obstacles. Call it tweezer economics: Pluck out the inefficiencies clogging up the market, and growth would come roaring back.

[Joel Dodge: My hometown is getting a $100 billion dose of Bidenomics]

But the turbo-growth promised by the Chicago-school intellectuals never materialized. And so, in perhaps the most overlooked element of his economic agenda, Biden has thrown out the tweezers. Instead of trying to generate growth by removing micro-inefficiencies, his policies target growth directly through aggressive spending, creating a high-pressure macroeconomy. It’s an ambitious experiment. If that pressure can force businesses to step up their own competitive game and run more efficiently, Bidenomics could best the old order on its own terms.

The ’70s crisis was very real. Many observers on both the left and right blamed the situation on microeconomic conditions: Workers weren’t productive enough, and businesses weren’t growing enough. In the version of the story that took hold on the right, the culprit was a body of regulations that prevented corporations from running at maximum efficiency. An overreaching federal government had empowered favored groups—labor unions, consumer advocates, environmentalists, and racial and ethnic minorities—to get in the way of free-market capitalism.

For the Chicago intellectuals, the worst offender was antitrust policy. In 1958, the economist George Stigler wrote that businesses that reached a dominant position should be presumed to have done so because of their superior efficiency, because competition “sifts out the more efficient enterprise.” The tough antitrust enforcement of the ’50s and ’60s interfered with this process, he argued, prosecuting the very firms that contributed the most to economic growth. Corporations should be left alone to merge and grow large, lest government kill the geese that laid the golden eggs.

The economists Michael Jensen and William H. Meckling extended tweezer economics into a new realm. In 1976, they famously theorized that “agency costs”—the conflict between executives, who managed a company, and shareholders, who owned it—were holding back corporate efficiency. Executives, they argued, would rather go golfing than work to generate value for shareholders. The solution was to put shareholders in control. Executives should be paid in stocks, rather than flat salaries, to align their incentives. Combine that idea with looser antitrust law and there would be an active competition for control of corporations, especially via hostile takeovers. This, Jensen later wrote, would generate “large benefits for shareholders and for the economy as a whole.”

Another key drag on the economy, according to observers across the political spectrum, was the growing rebelliousness of the American worker. Armen Alchian and Harold Demsetz argued that workers needed bosses to protect themselves from their own free-riding inclinations. For businesses to function efficiently, bosses must be able to intensively monitor workers for shirking, and to fire them unilaterally if they were caught doing so. An obvious implication was that labor regulations—above all, laws protecting the rights of labor unions—had to be curtailed.

These ideas, and others like them, were behind many of America’s key economic policy changes since the ’70s. Stigler’s theory of the efficient monopolist eventually conquered both the judiciary and the executive branch; after Ronald Reagan took office, enforcement dwindled and corporate mergers soared. (This was the focus of Biden’s “wrong path” comments in 2021.) In corporate law, Jensen and Meckling’s doctrine of shareholder primacy is now virtually sacrosanct. Finally, the authority of employers over workers has expanded dramatically.

In short, the Chicago school got virtually everything it asked for. Big firms grew bigger, corporations prioritized their stock prices above all else, and private-sector unions were all but wiped out. But 40 years of tweezing out the inefficiencies allegedly holding back the economy did not revive the growth rates of the pre-stagflation era. The U.S. economy grew an average of 4 percent a year from 1948 to 1973. During the crisis years, from 1974 to 1979, it grew more slowly, on average only 3 percent a year. Then came the tweezers, and growth didn’t budge. From 1980 to 2007, it plodded along at the same 3 percent rate of the crisis years, before falling off a cliff after 2007—all the way down to 1.6 percent from 2008 to 2020.

Instead of prompting a return to growth, the policy revolution has made itself felt in other ways. The death of antitrust enforcement, far from unleashing dynamism and investment, may have held them back. The shareholder revolution helped hollow out the American industrial base and transfer massive wealth to financial engineers. And although the labor movement was defanged, the hoped-for productivity explosion never happened.

The post-tweezer era is just a few years old, but it has already scored some early successes. Most important, growth recovered remarkably quickly from the pandemic recession.The economy returned not only to pre-pandemic trends but to pre–Great Financial Crisis trends as well, suggesting that the prolonged pain of the post-financial-crisis recession was avoidable.

Biden’s first big legislative accomplishment was the $1.9 trillion American Rescue Plan Act of 2021, which unleashed a fiscal fire hose onto the U.S. economy. That law was followed by more legislation that went beyond merely increasing spending. The 2022 Inflation Reduction Act steered investment specifically toward fighting climate change. The law eschews the tweezer of, say, carbon taxes, which leave decisions to the wisdom of the market, in favor of direct federal interventions. For example, while previous policies relied nearly exclusively on the tax code to support investments in zero-carbon energy projects, the IRA contains provisions allowing nonprofit utilities that invest in zero-carbon power generation to obtain federal grants.

The IRA, along with the bipartisan CHIPS and Science Act of 2022, also aims to reduce regional inequalities by directing investments to left-behind rural and deindustrialized areas. That is a decisive break from the Chicago-school faith in letting capital flow to wherever it can generate the highest returns. Projects also get extra credit if they have labor peace agreements, prompting some employers to proactively reach labor contracts with unions in order to be the winning bidder on federally backed projects. These measures have already aided unions in wind-turbine and electric-bus manufacturing. Finally, in a departure from Jensen and Meckling’s doctrine of shareholder primacy, the IRA includes a provision to discourage companies from funneling cash to shareholders in the form of stock buybacks, steering them to reinvest in their businesses and employees instead. In other words, the government is investing with the sorts of “strings attached” that the ’70s generation blamed for inefficiency.

Some critics have questioned the wisdom of trying to satisfy too many constituencies with stimulus and infrastructure policy. They point out that the sometimes conflicting goals of unions, environmentalists, and the companies receiving federal funds may gum up and needlessly complicate policy implementation. In other words, by pursuing too many goals, the administration may meet none of them satisfactorily. That’s a real risk—but the Biden administration seems to be betting that some additional inefficiency is a cost worth paying if it builds new constituencies in support of pro-growth policy. If the administration can bring benefits to unions, environmentalists, and rural voters, it might assemble a lasting political coalition behind its vision of green growth.

[Franklin Foer: Biden declares war on the cult of efficiency]

The inverse is also true, of course. The post-tweezer revolution could all very easily fall apart. By many metrics, the U.S. economy is in spectacular shape—but voters continue to say they’re miserable. If Bidenomics isn’t popular, it’s unlikely to last. Meanwhile, the administration’s efforts to break up corporate monopolies are running into a buzzsaw of hostile judges steeped in Chicago-school doctrines. The Federal Reserve, in its effort to fight inflation, is stymieing new investment in housing, green energy, and more, by making borrowing more expensive.  

Yet the new model holds great promise. For nearly half a century, the government gave corporate America the hands-off policies it preferred, hoping the wealth would trickle down. Now the government is letting strong overall growth set the foundations for more efficient businesses. Corporations are being forced to use capacity more effectively to keep up with demand—and, thanks to a historically tight labor market, to vigorously compete to attract workers. If macro policy can not only generate overall growth but also compel firms to be more efficient, we might discover that the trade-off between economic strength and social welfare was never really a trade-off at all.