ARI SHAPIRO, HOST:
During his State of the Union address last night, President Biden had to strike a balance, trying to assure Americans that he's taking action to address inflation without raising unrealistic hopes of a quick fix.
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PRESIDENT JOE BIDEN: Too many families are struggling to keep up with their bills. Inflation is robbing them of gains they thought otherwise they would be able to feel. I get it. That's why my top priority is getting prices under control.
SHAPIRO: One of the people setting these economic policies for the administration is Cecilia Rouse. She is the chair of the Council of Economic Advisers. Welcome back to ALL THINGS CONSIDERED.
CECILIA ROUSE: Thank you. It's a pleasure to be here.
SHAPIRO: Before we get to specific policy proposals that the president laid out last night, I want to start with the big picture. With inflation at its highest level in nearly 40 years, how quickly can Americans expect this trend to reverse?
ROUSE: This is a really important question, and it's important for people to understand that the U.S. economy starts 2022 from a position of relative strength. Over the past year, we've seen the fastest growth in our economy in nearly 40 years. We've seen one of the fastest drops in unemployment in - almost on history and the fastest improvement in labor force participation and employment. So we also have inflation, and that is a challenge, no doubt. Forecasters have been expecting that over the course of this year, inflation would moderate by about half and would continue to decline as supply chain challenges work themselves out, as we get the pandemic under control, as more people get back to work. But let's face it - inflation is largely the purview of the Federal Reserve. And I will just add that this is why it's so important for Congress to go ahead and confirm the five very qualified nominees that the president has nominated.
SHAPIRO: Does that mean that the policies the president laid out last night are not likely to have a substantial immediate impact, that ultimately this may be beyond the White House's control?
ROUSE: So the president understands the challenge that inflation brings to the American family. And he is doing all within his power to address that. So whether that is - he announced a release from the Strategic Petroleum Reserve to help address gas prices. He is working to improve our supply chains by working and making our ports work more efficiently. And if you look at the elements of Build Back Better, they are aimed at addressing costs - important costs for American families in child care, prescription, health care, energy costs. Those will take time.
SHAPIRO: He mentioned a few of those last night, but the Build Back Better plan did not pass Congress, does not seem likely to. Is any of that actually likely to become policy?
ROUSE: The president will remain focused on them. Economists agree that these are actually very important investments that we should be making in our economy. You're right, Ari; it requires the participation of Congress, so the president will keep fighting for that. But it's actually a very important part of his economic strategy.
SHAPIRO: Another element of the plan that the president laid out last night is to lower costs for families by making more things in the United States and becoming less reliant on foreign supply chains. Traditionally, products made in the U.S. tend to be more expensive because labor in the U.S. costs more than in developing countries. Why does the administration believe that this would actually bring prices down?
ROUSE: So the strategy of bringing more of our production here is designed around the fact that what we've learned through this pandemic - we now have the invasion of Russia into Ukraine - when we look at the global impact, we understand that there's value, especially in the longer term, to making more products here in the United States, that it's better value for us to be producing them here than to be relying on a global market.
SHAPIRO: You say this is important particularly in the longer term. Intel, to give one example, doesn't expect factories that it's building in Ohio to start producing chips until 2025. So we're really looking at several years out here.
ROUSE: Which is why it's important that we start today, that many of the most important investments we can make going forward will not just generate a return overnight. Some of the most important and impactful investments we can make in our economy do require action today, so that we can reap the benefits going forward.
SHAPIRO: Another step that many economists say would make a difference in the short term is reducing trade barriers, ending the Trump-era tariffs. Is the administration considering adjusting tariffs as one concrete, immediate way to fight inflation?
ROUSE: So the administration has been looking at all tools, and we are - have been doing a comprehensive review of the - of those tariffs. We want to do the tariffs and address the tariffs that make the most economic sense in order to assure that we're going to remain engaged in a global economy - because we are part of a global economy - and that make a lot of sense for the U.S. economy as well.
SHAPIRO: So no commitments one way or the other, necessarily.
ROUSE: I am not going to make commitments today.
SHAPIRO: Finally, the president has consistently said that the war in Ukraine could have economic impacts here at home. Do you have a sense of what those impacts are likely to be, how big they are likely to be? What should the American people expect?
ROUSE: So the president and our - working with our allies, is trying to impose economic sanctions on Russia that impose pain on the Russian economy and minimize the impacts on the U.S. economy. And so far, we've seen that the sanctions that have been imposed have been fairly effective at really, you know, having maximum impact on the Russian economy. But, you know, as the president said, we really can't expect to get through this, you know, Russia having invaded Ukraine, which is such a serious threat to democracy worldwide, without there being some costs here at home.
SHAPIRO: That's Cecilia Rouse, chair of the Council of Economic Advisers. Thank you for speaking with us today.
ROUSE: Thank you very much.
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