A new economic agenda for America
Pro-growth policies on their own won’t address the concerns of voters worried about the cost of living
Glenn Hubbard
The results of last week’s midterm elections amounted to a significant rejection of the current trajectory of US economic policy.
Voters were anxious about the impact that the Trump administration’s policies have had on affordability and the outlook for growth and jobs, as well as its light-touch approach to the regulation of artificial intelligence.
Democrats also faced concerns about the effect that some progressive policies might have on already significant federal budget deficits.
An opening exists, therefore, for a new bipartisan agenda focused on growth and full participation in the economy.
The twin growth engines of recent decades — technological advances and globalisation — caused disruptions that left many people and places believing they weren’t participating in the economy’s upside.
The AI revolution is exacerbating such anxieties.
Although certain policies introduced over the past decade — pro-investment tax changes in 2017’s Tax Cuts and Jobs Act and 2025’s One Big Beautiful Bill Act, for example — have helped the pro-growth agenda, tariffs and inflation have affected both economic prospects and popular sentiment.
So while tax incentives and regulatory reform are important, three additional steps are required.
First, federal support for basic scientific research is critical for expanding the economy and generates high rates of return.
The government should also support applied research centres around the country to encourage commercial applications of new ideas.
AI-assisted research will be important in driving future productivity growth, so reforms that allow modernisation and the expansion of electricity transmission will be vital.
Second, a renewal of support for open markets is needed.
While present policy can justify exceptions to openness for reasons of national security or to protect critical supply chains, broad interference in trade is counter-productive.
Across-the-board tariffs raise the cost of important intermediate goods for US industry, and studies conclude that American consumers and firms have borne most of the costs.
Tax reform can address justifiable concerns that companies lack sufficient incentives to invest and grow in America.
A cash flow tax, in which investment is expensed and interest is not deductible, would encourage investment, reduce leverage and more effectively tax the profits of large firms with market power.
Adding so-called border adjustments would remove the incentive for both US and non-US companies to locate assets, employment or profits abroad.
Third, while acting aggressively against illegal immigration is warranted, broad limits on high-skilled immigration — as evidenced in recent attacks on H1-B visas for skilled workers or optional practical training authorisation for non-US students to gain work experience in technical jobs — are inimical to growth.
As for the full participation plank of the new economic agenda, this needs to be designed to reconnect individuals to work in the face of the structural shifts that accompany technological progress and trade — growth and disruption are two sides of the same coin, after all.
Elements of a full-participation approach include an expanded earned income tax credit to bolster rewards to work; better individualised training to adapt to new employment opportunities through personal re-employment accounts; and federal support for community colleges, the local engines of training and retraining.
Workers facing long-term job loss could be offered wage insurance that pays part of the difference between a previous wage and a lower initial wage in a new type of job.
Initiatives of this sort can bolster public support for AI investments that enhance productivity, assuaging worries that these would lead to future job losses.
These policies are a practical response to voters’ reasonable concerns about the future — and provide a potent alternative to populist economic nationalism.
Their emphasis on helping those who have been shut out of the labour market would appeal to progressives.
Meanwhile, they offer conservatives support for open markets and economic growth.
The midterms showed that the American public is concerned above all about the cost of living.
A “growth and participation” agenda is the right place to start economically and the best way to address voters’ rejection of the status quo.
The writer, a professor of economics and finance at Columbia University, was chair of the US Council of Economic Advisers under President George W Bush
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