Special topic: the 27th Harvard China Forum

During the Harvard China Forum on April 14, 2024, Jason Fuhrman, a professor of economics at Harvard University and former chairman of the White House National Economic Council, discussed in detail the current economic situation of the United States and its views on global climate policy in a conversation with Sina Finance. As a policy expert for many years and a former White House economic adviser, Professor Fuhrman's views cover a range of key issues from tax policy to environmental measures.

Professor Fuhrman pointed out that despite the strong global performance of the US economy, the current challenges are mainly high inflation and policy-making difficulties. He believes that despite the low unemployment rate, the persistence of inflation still poses problems for the Fed's policy-making. "the Fed now needs to be vigilant, neither raising rates in panic nor starting to cut rates."

On the tax policy front, Professor Fuhrman supports the Biden administration's proposal to raise taxes on high-income groups, which he believes will help reduce long-term accumulated inequality. "inequality in the United States has increased significantly over the past 50 years, and high-income groups can fully afford more taxes, and it is reasonable to use these funds to help more families gain more opportunities."

With regard to climate change, Professor Fuhrman stressed that a carbon tax was the most effective response mechanism, but he also acknowledged that it was politically difficult to adopt such policies. He noted that while subsidising clean energy was not the best option, it was a "very good measure" because it encouraged companies and consumers to switch to greener choices.

In terms of international cooperation, Professor Fuhrman pointed out that climate change is an important area of cooperation between China and the United States. "although cooperation is not perfect, continuous dialogue and cooperation is extremely important."

A record of the dialogue is attached:

See Economy: we want to focus on two topics today. The first is about the US economy, and the second is about global cooperation. First of all, help us understand the current state of the American economy. Although the unemployment rate is very low, the inflation rate is quite stubborn, which puts the Fed in a very difficult position. So, what policies do you think the government should pay attention to now?

Jason Furman: overall, the United States has high economic growth, low unemployment, and inflation has fallen sharply from its previous high, but it is still too stubborn and high. So I think the Fed can stay where it is and don't need to raise interest rates in panic, but it can't start cutting rates either.

Wise Economy: you are a tax expert, so I am curious about how the tax in the United States will change to balance the income inequality that many people are concerned about now. Many people talk about taxing the rich. But do you think this will work? Is this a good policy? Do you have any comment?

Jason Furman: yes, taxation is one of the biggest differences between the two major political parties. So in this year's election, President Biden proposed raising taxes on high-income families and using the money to help poor families, while former President Trump proposed tax cuts for high-income families. No tax laws will be passed this year. So the real decision rests with voters and the American people, who will choose between the two plans. Next year, I expect to see tax legislation. But the outcome depends largely on who wins the election.

Wise Economy: from your point of view, which policy is better, or what are the advantages and disadvantages of these two policies?

Jason Furman: I'm more supportive of Biden's approach. Inequality in the United States has increased significantly over the past 50 years, and although it has declined over the past few years, it is still very serious. I think the rich can afford more taxes, and we can use these funds to help more families get more opportunities.

Wise Economy: another issue that faces potential political resistance is the carbon tax. In fact, the US now seems to prefer subsidy-based incentives to carbon taxes. But you also said that subsidy-based incentives have not fully taken into account the impact of distribution. Could you elaborate further? Do you think the United States should be more inclined to carbon tax in the future?

Jason Furman: like most economists, I think a carbon tax is the most effective way to deal with climate change. By pricing carbon, it tells every company and every consumer to find ways to reduce carbon emissions.CountdowngameshowYou can also use the money you get from the carbon tax for any purpose you want. I think it is a good practice to issue it as a family return check. In this way, although people pay the carbon tax, they can basically get the money back by annual cheques. However, from a political point of view, it is very difficult to pass through such a plan. Therefore, what the United States has done, I think is very good, I do not think this isCountdowngameshowThe best thing you can do, but it's a very good thing-by subsidizing clean energy, wind, solar, electric cars, etc., to move the economy towards a zero-emission goal.

Wise Economy: but the other thing people worry about is how consistent this policy will be if there is another government next year. What do you think of this problem?

Jason Furman: some Republicans criticize these clean energy subsidies. But by next year, many enterprises, many workers and many consumers will rely on these subsidies, and I think these subsidies will stay. I don't think anyone will cancel them no matter who wins the election.

Wise Economy: governments around the world are also increasingly inclined to adopt industrial policies to deal with climate change. However, these economic measures may lead to higher costs or trade tensions while building a domestic clean energy industry and increasing the security of the domestic economy. Is it possible for different countries to coordinate their industrial policies? is it possible to coordinate and work together for a better future?

Jason Furman: I think we can try to coordinate industrial policy, but it's difficult because each country is passing its own plan in its own way. And it will never be perfect. There may be overcapacity in one area and insufficient capacity in another. But as long as countries pay attention to each other's practices, they can better solve these problems.

You know, the big problem for the future is not just industrial policy, if you are like Europe, they have a carbon trading system and are now imposing de facto tariffs on any country that does not have its own carbon pricing system. As a result, you will see more and more countries implementing such border adjustment systems in terms of carbon emissions. So whether it is subsidies or taxes, there are a lot of global coordination problems, there will be some friction. But overall, this is much better than taking no action at all, because many countries, including China and the United States, are taking very important steps to help combat climate change.

Wise Economy: about ESG-- environmental, social and governance standards-as a framework for evaluating companies, we see a lot of skepticism in the United States. Why?

Jason Furman: I highly doubt that investors should decide their investment companies according to the ESG environment, sustainability, and governance standards. I don't think investors are very good at deciding what these standards are. I think many investment companies are just trying to make huge profits by putting this label on things. I think it's the government's job to help solve environmental problems through regulations, taxes and subsidies, not what investors should do at the risk of losing money with profit.

Economy: from the perspective of international cooperation, what do you think are some of the key areas in which major economies can work together to achieve sustainable development in the future?

Jason Furman: climate change is the most important issue, and it is also an issue that the United States and China have worked together for a decade. It's not perfect, but we've been working together, which is very important and very good.

Sina stated that all the minutes of the meeting were arranged in shorthand and had not been reviewed by the speaker. Sina's publication of this article for the purpose of transmitting more information does not mean agreeing with its point of view or confirming its description.