SIEPR Economic Summit highlights policy challenges — and solutions — from the pandemic
Broken links in the supply chain. Gaps in education. Disparities in income. A deep deficit.
Two years into the pandemic, these were among the pressing issues highlighted during the 2022 SIEPR Economic Summit. The 18th Summit convened top leaders in government, business and academia to provide insights on the pandemic's fallout and ideas on the best paths forward. Their behind-the-scenes perspectives covered a lot of ground — from classrooms, factories and offices to truck stops and big shipping ports. Even home backyards.
The two-day event, held March 3-4 in a virtual format, featured a series of livestreamed discussions that not only outlined policy challenges, but also identified ways to address them. Students also gathered at SIEPR to watch the sessions online.
From the front line in Washington, D.C., Treasury Secretary Janet Yellen delivered the keynote address. Her remarks came on the heels of sanctions against Russia and President Biden’s State of the Union address.
Lisa Su, President and CEO of AMD; and Sal Khan, Founder and CEO of Khan Academy, were also featured speakers.
An underlying theme reverberated throughout the Summit sessions: The pandemic exacerbated what was already problematic.
As such, according to the panel discussions, the supply chain is the new black, but only after the pandemic gave it a big black eye. There’s fresh momentum to address learning divides in education between the haves and have-nots. The ‘tectonic’ shift to working from home is only the beginning of a redefined work life. The semiconductor industry has its work cut out with increasing demand. Inequality in China needs attention. And U.S. federal debt urgently needs to come down.
Highlights from the seven sessions — and links to the recordings of them — are below.
Yellen’s case for “modern supply-side economics”
Treasury Secretary Janet Yellen was already having a busy week. On Monday, the United States imposed severe sanctions against Russia following its invasion of Ukraine the previous week. And on Tuesday, President Biden outlined in his State of the Union address proposals to tackle the country’s pervasive racial and geographic economic inequalities.
Still, the Secretary carved time to speak on these topical issues at the Summit on Friday — her second appearance before the SIEPR community in five years. “SIEPR has an impressive track record of supporting high-quality, impactful economic policy research,” she said. “It’s an honor to be part of your Economic Summit.”
In her remarks, Yellen outlined the Biden administration’s agenda for addressing income disparities. And in a Q&A with her longtime friend, John Shoven, a former director and senior fellow emeritus at SIEPR, Yellen also addressed recent punitive measures that the United States, in coordination with other countries, have leveled against Russia for its war in Ukraine — measures she called “by far the most expansive sanctions package against an economy of this size.”
In other comments, Yellen said she believed that U.S. debt, which has soared during the pandemic, is at a “sustainable level” given historically low interest rates. She also reiterated her support for a politically independent Federal Reserve.
On domestic economic policy, Yellen described an agenda aimed at tapping the economic potential within disadvantaged communities. Traditional supply-side economics, she said, relies on tax cuts and deregulation to drive economic growth. But her version — which she calls “modern supply-side economics” — seeks to “expand our nation’s economic potential through productivity-enhancing investments pared with policies to boost labor supply.”
Yellen pointed to research showing the average wage of Black and Hispanic workers in their peak earning years is 75 percent that of whites. She also singled out a 2019 paper by Pete Klenow and Chad Jones, both senior fellows at SIEPR, showing that the entry of more women and minorities in highly skilled occupations like medicine accounted for up to 40 percent of gains in U.S. economic output between 1960 and 2010.
She reiterated that the Biden administration’s agenda for addressing inequities centers on tax-based incentives, such as an expansion of the Earned Income Tax Credit, and pro-family labor policies that include childcare subsidies. It also calls for universal high-speed access to the internet.
“All told,” Yellen said, the Biden administration’s proposed investments “represent one of the most ambitious expansions in training and education in our nation’s history — an investment program that would revitalize the preparedness of our nation’s workforce.”
Supply chains: Strengthen the weak links
Here’s the thing about chains of all types: They’re only as strong as their weakest link.
The world has been reminded of this fragility as massive breakdowns in supply chains have rippled throughout everyday life — and the global economy — these past two years. But there's hope that short- and long-term fixes are coming soon.
Top supply chain experts who spoke at the Summit’s kickoff panel pointed to several weak links: pre-pandemic consolidation within the shipping industry, insufficient warehouse and distribution space, outdated technology, and an acute driver shortage due largely to miserable working conditions.
“The pandemic laid bare what was an underlying reality: The goods-movement system, as a system, was straining in the best of times,” said John Porcari, the Port Envoy to the White House Supply Chain Disruptions Task Force. As consumers cut back on eating out and other services and loaded up instead on backyard barbecues and other goods, the system “couldn’t cope,” he said.
To Ed Renwick, the vice president of the Los Angeles Board of Harbor Commissioners, the underlying problem across the entire supply chain has been a hyper focus on finding money-saving efficiencies — without prioritizing resiliency. “The problem with resiliency,” he said, “is its inefficiency.” It means ships sitting around collecting dust, empty warehouse space, excess labor and equipment.
Now incentivized, supply chain players are moving to address core problems, the panelists said. Porcari noted that private and public funding is flowing, including the $17 billion earmarked for U.S. ports in the infrastructure law Congress passed last year. Uber Freight, whose digital platform matches truck owners with cargo shipments, is working to sustain what has suddenly become boom times for truckers. “We’re living in a golden age now of owner-operator,” said Lior Ron, Uber Freight’s co-founder and head.
Ron also said self-driving trucks will one day handle long- and middle-haul drives, enabling humans to take on shorter, more lifestyle-friendly routes.
And while General Motors ramps up car production this year, the company plans to improve supply chain resiliency by directly controlling semiconductor chip design and purchasing, said Elaine Buckberg, the company’s chief economist. “GM is completely shifting our approach to buying chips,” she said.
In a sign of just how mainstream supply chain issues have become, Ron noted that many retailers are promoting delivery times to attract customers. “Supply chain used to be this back-office thing that nobody cared about,” he said. “Now [it’s] part of marketing.”
Watch the discussion, moderated by The Wall Street Journal reporter Paul Berger.
“Supply chain used to be this back-office thing that nobody cared about. Now (it’s) part of marketing.” – Lior Ron
China’s “common prosperity” campaign: Slogan or policy?
In a nutshell, it’s “a bumper sticker” — but an important one, said Nicholas Lardy.
And considering China’s GDP growth since launching its economic reform in 1978, “this is nothing surprising,” fellow panelist Qian Wang said. What was once a nation of “common poverty” — where people were equally poor — is now a nation calling for “common prosperity.”
Lardy and Wang, two leading experts on China’s economy, were the featured speakers at the Summit session on China’s “common prosperity” policy — an agenda that President Xi Jinping initiated last year to narrow the enormous gap between the rich and poor.
The campaign, thus far, has played out in a tightening of industry regulations, a crackdown on billionaires to be more philanthropic, and punitive actions against influential celebrities.
The panelists, who delved into political and historical contexts as well as the policy challenges facing the world’s second-largest economy, agreed on the need for China to address economic inequality.
“Wealth inequality is very high in China no matter how you measure it,” Wang said. “It's not only threatening the sustainability of economic stability in the long term, but it’s also threatening social stability and ultimately, I'd say, political stability.”
But, the panelists said, policy solutions will have to extend into the nation’s infrastructure and regimes that deepened the multi-faceted divides — between the urban rich and rural poor, between those allowed to own property and those who cannot, and between state-owned and privately-owned enterprises.
For instance, Lardy said, “if you really wanted to improve the welfare at the bottom of the income distribution, you'd have to make fundamental changes in the way migrant workers are treated in China.”
Nonetheless, the campaign “is important because it recognizes that income inequality is very high,” and people’s growing concerns about it, Lardy said. “But in reality, I think it’s a slogan.”
“China is attacking the right issue,” Wang said, “but they need to take the right approach to achieve that goal.”
Watch the full discussion, moderated by Darrell Duffie, a SIEPR senior fellow and the Adams Distinguished Professor of Management and Professor of Finance at Stanford Graduate School of Business. Lardy is the Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics. Wang is Chief Asia-Pacific Economist at Vanguard.
“China is attacking the right issue, but they need to take the right approach to achieve that goal.” – Qian Wang
K-12 education: Does technology help or hurt?
Sal Khan, the founder and CEO of Khan Academy, was trying to turn the tide on troubling data even before the pandemic started. About 70 percent of students entering California’s community colleges — as well as most of those enrolling in the state university system — are so ill-prepared for basic math that they essentially have to relearn it starting at a 7th grade level.
The coronavirus crisis only exacerbated this and other gaps in K-12 learning, he said.
“Everything that was a problem (in education) before the pandemic is a bigger problem now,” said Khan, whose popular non-profit provides free online education worldwide. But the pandemic has also energized efforts to bridge divides.
Khan’s comments came at the start of Day 2 of the Summit, in a freewheeling discussion on whether technology improves or harms K-12 education. He was joined by another true believer in the power and promise of technology in schools: Katrina Stevens, CEO of The Tech Interactive, a science and technology center in San Jose.
“There’s a lot of money that gets misspent in (educational technology) because people aren’t recognizing when it works, for whom, and in what contexts,” Stevens said. “They are not measuring it in the way it needs to be measured.”
The pandemic, she said, highlighted this reality — and the price that disadvantaged students are paying because of it. “There’s a huge divide” between the haves and have-nots, Stevens said. Kids from lower-income communities “were sitting at McDonalds, because that is where the Wi-Fi was, trying to do their homework.”
The pandemic’s harmful effects go beyond the months of reading and writing learning losses, Stevens and Khan said. What worries Stevens are the alarming numbers of high school seniors who are now rethinking higher education: 17 percent on average say they are unsure now about their plan to go to college. For non-whites and those from lower socioeconomic statuses, that rate is 26 percent.
The good news, the panelists said, is the pandemic has now accelerated efforts to address disparities in educational access.
“There’s more energy than ever behind closing the digital divide,” Khan said. And there is “more energy than ever about thinking about alternative (student) credentialing structures, learning structures, and addressing learning loss.”
Technology should also play a very specific role for teachers, Stevens said. “What teachers do best is relationships, and technology should be designed around making it easier for teachers to have a more personalized experience with their kids,” she said. “Tech should never replace the teacher.”
Future of work: The ‘tectonic’ shifts have only begun
Ready for this? Remote and hybrid work are just the start.
When it comes to changes in how employees do their jobs and companies operate, the next five to 10 years will see “tectonic changes” in the workplace, said Hayden Brown, the CEO of Upwork, a digital platform that connects companies with freelance workers.
“We are actually starting to pull at the threads of how we change things — like the 9-to-5 workday, the 5-day workweek, the ways that work actually gets done, operationally (and) on the ground inside companies,” she said.
Brown was speaking on Day 2 of the Summit at a panel on the future of work. She was joined by Nicholas Bloom, a SIEPR senior fellow and the William Eberle Professor of Economics at Stanford, and Karin Kimbrough, the chief economist at LinkedIn.
SIEPR Director Mark Duggan, who moderated the conversation, started off by noting that the changes in how and where people work already are “having a gigantic impact on labor markets, urban centers, wages, and where people are choosing to live.”
Inevitably, there will be growing pains, Bloom said. Already, about 32 percent of employees say they want to work from home full-time while nearly 23 percent are eager to return to the office — either full-time or close to it. “Whatever policy you pick (as a manager),” he said, “you’re going to have people on either end who are not happy.”
Bloom suggested that decisions around remote versus hybrid should be made at the team level.
In a hybrid world, he added, battles are also brewing over choice versus coordination: Do workers pick when they come in, or do companies dictate the in-office days to maximize collaboration and coordination?
LinkedIn data on job listings and hiring trends revealed some interesting insights. Women, for example, are 27 percent more likely to apply for remote roles. Younger employees are increasingly searching for jobs that promise mentorship, and demand is high for architects and space planners as companies look to make their office spaces more fun and engaging to draw in workers.
Kimbrough said companies recognize, too, a potential diversity pay-off with remote jobs. “I see a lot of tech companies are casting a wider net location-wise (and saying), ‘I really want to find more diverse Latino talent or diverse Black talent, and I’m not going to find it in Seattle or in Palo Alto,” she said.
Watch the full discussion on how the future of work will not look like the past.
Getting to the core of chip shortages
Who would have predicted that semiconductors — the silent but essential computing component in so many everyday products — could one day become such a showstopper?
Not Lisa Su, President and CEO of chip giant AMD.
But as supply chain problems surfaced and demand for consumer products surged amid the pandemic, Su found her industry in the spotlight.
In his State of the Union address only three days before Su spoke at the SIEPR Economic Summit, President Biden called for greater investments in semiconductor production in the U.S.
“One of the things that's kind of cool,” Su said in a conversation moderated by SIEPR Director Mark Duggan, “is that, in the last 24 months, semiconductors have been the talk of the town.”
The backdrop of the current chip shortage — resulting in backlogs of everything from automobiles to washing machines — underscores the industry’s challenges.
“All of a sudden,” she said, “every CEO out there has now become a supply chain expert.”
Su gave a rundown of how the semiconductor industry has evolved — how a single chip relies on the design, fabrication, and manufacturing by multiple companies.
And while the semiconductor industry typically experiences cycles in product demands, the pandemic unleashed simultaneous high demand for computing equipment like PCs, gaming devices and mobile phones. And that triggered a supply shortage.
“The root cause is that demand absolutely exceeded anyone’s expectations,” Su said. “In the last 18 months, everything became hot.” And chip manufacturing — which takes months — could not keep pace.
As computing power gets more entrenched — in consumer electronics, medical devices, and cars — the long-term demand for semiconductors is expected to grow.
“I do believe that there is a ‘new normal’ in terms of the need for electronics in the world,” Su said. “And we have to figure out what the true sustainable demand is going forward.”
Investments in public-private partnerships, a skilled workforce, and R&D, are important, Su said.
She also emphasized the need to make supply chains more resilient and secure, and to have more chips made in the U.S.
“I'm very clear that that would be a good thing,” she said.
Federal spending: Where should the money go?
Multiple relief packages totaling $4.6 trillion. A U.S. budget deficit weighing in at $2.8 trillion for 2021 — the second-highest on record following the all-time high of $3.1 trillion in 2020.
This was the backdrop of a lively discussion at the Summit on the state of U.S. fiscal policy two years into the pandemic — all as the nation’s economy faces skyrocketing inflation, fallout from the Ukrainian crisis, and other powerful headwinds.
The panel discussion brought together experts who have played leading roles in developing federal economic policy: Peter Orszag, the former director of the Office of Management and Budget under President Obama who is now the CEO of Financial Advisory at Lazard; Kevin Hassett, who chaired the White House Council of Economic Advisers under President Trump and is now managing director of The Lindsey Group and a Distinguished Visiting Fellow at the Hoover Institution; and Melissa Kearney, director of The Aspen Economic Strategy Group and an economics professor at the University of Maryland.
Republicans and Democrats don’t agree on much these days, but the trio took the same 30,000-foot view: Massive government spending early in the pandemic saved the U.S. economy from disaster. “When economic historians look back, they’re going to be super impressed,” Hassett said.
The panelists also agreed the resulting budget deficit urgently needs to come down — although they highlighted different ways to achieve that.
Hassett said reining in rising prices by boosting interest rates won’t nearly be enough. “Fiscal policy needs to help with the problem,” he said. For example, it’s time to fix long-term entitlements, which include Social Security and Medicare, he said. “If you fix them, it gives you a surplus to fix other things. It also restores confidence.”
Kearney said entitlement reform would free up money for children — an often-overlooked demographic, including during the pandemic when widespread school shutdowns caused what she called “one of the biggest policy failures” of the pandemic.
“We spend massive amounts of money on taking care of the elderly (through Social Security and Medicare), but we have no promise of social insurance to kids,” Kearney said. She called for resurrecting last year’s proposal to permanently expand the Earned Income Tax Credit.
Orszag offered his playbook for managing government spending, which includes indexing Social Security benefits to longevity, to reflect the fact that people are living longer. And there is one area Orszag said he would like to see copious dollars thrown at: energy transition.
“I think climate risk dominates fiscal risk by a wide margin,” he said. “I’m in favor of (any investment) that passes a simple ‘might-it-help?’ test.”
Watch the discussion moderated by The New York Times reporter Jim Tankersley.
“When economic historians look back, they’re going to be super impressed.” – Kevin Hassett