Axios

With the Israeli government this week passing the first in a series of significant changes to its judicial system, the country’s startups and investors are bracing themselves for turbulence.

Why it matters: Israel may have less than a quarter of California’s population, but its tech industry has been punching above its weight for a long time.

When is capitalism illegal? According to the Biden administration, the answer might be found in college admissions.

Why it matters: Allocating scarce resources to the rich is unremarkable elsewhere in the economy, but is increasingly anathema in the Ivy League.

The U.S. economy continues on its glide path to the elusive "soft landing," even in the face of 11 rate hikes and counting. That's in large part because we spent the 15 years before the rate hikes steadily deleveraging and ensuring that debtors couldn't easily fall victim to a credit crunch.

Why it matters: Rate hikes in many other countries, especially the UK, hurt most of the population very rapidly, thanks to their high homeownership rate and how short-term their mortgages are.

A fascinating glimpse behind the curtain of private-bank wealth management is offered in a deposition that became available online this week.

Why it matters: It's the sworn testimony of Jes Staley, the former head of JPMorgan's head of wealth management and friend of Jeffrey Epstein.

Discrimination based on body size is common and persistent in American workplaces — but it's largely left out of diversity and inclusion training, and overlooked in employment law.

Why it matters: There's an economic cost to not being thin.

Dominating social media feeds, the mocktail is seemingly everywhere this summer.

Why it matters: The nonalcoholic beverage sector is expanding rapidly as alcohol consumption declines — a trend driven by Gen Z and millennials.

Your eyes have not been deceiving you — out-of-office messages have been on the rise.

Driving the news: More working adults took vacation days in the first six months of this year than in any other January-to-June stretch in over a decade, WSJ reports from government data.

Johnson & Johnson's second attempt to put its talc liabilities into bankruptcy collapsed Friday when a federal judge dismissed the case.

Why it matters: J&J faces some 38,000 lawsuits from people and their survivors claiming that the company's talc-based powder caused cancer — and it's trying to settle them all at once in bankruptcy court. J&J has repeatedly denied the allegations.

Dodging vape pens, cellphones and even human ashes is apparently part of the needed skill set for musicians on tour.

Driving the news: Performers including Drake, Pink, Billie Eilish and Taylor Swift this year have all been hit, or nearly hit, by various flying objects while performing.

Cricket's latest push in the U.S. will be marked this weekend with a first-ever Major League Cricket championship match.

Why it matters: The nascent league is being funded by big names in tech and has launched amid a fierce battle for sports content rights.

Despite the current boom in artificial intelligence tools enabling businesses to infuse some of the technology, startups aren't spending huge amounts on it yet.

Why it matters: A number of companies, big and small, have rushed to deploy tools like OpenAI's ChatGPT into their own products, but so far the use of AI remains experimental for startups.

New numbers released Thursday showed the U.S. economy expanded at a perkier-than-expected rate in the second quarter.

Why it matters: Earlier this year, there was a lot of talk among investors and economists that the U.S. was likely hit a recession in 2023. It hasn't.

Today, we introduce Axios Macro Happy Hour, in which we sit down with a prominent economic thinker or policymaker over a beverage or three for a wide-ranging discussion. They pick the location, Axios covers the tab.

• For this first edition, Neil Irwin traveled to Portland, Maine, to speak with Brian Deese, who was President Biden's top White House economic adviser until earlier this year.

We met at Oxbow Blending & Bottling, the downtown Portland location of a brewery that takes its Maine origins seriously. Deese arrived looking rested, a contrast to when he was given the unenviable task of spinning last year's bad inflation numbers from the White House briefing room.

• Deese was in the white-hot center of the most eventful stretch of economic policymaking in memory, helping push the Bipartisan Infrastructure Law, Inflation Reduction Act, and CHIPS and Science Act through tumultuous legislative paths.
• They collectively form the core of what the White House now sells as Bidenomics.

After I settled on a glass of Oxbow's Farmhouse Pale Ale and Deese on Maine Grown, a farmhouse ale made with all Maine-produced grain and hops, we claimed an outdoor picnic table. I started with the obvious question for a longtime professional contact who you haven't seen in many months: What have you been up to?

• "I've been decompressing, spending a lot of time with my kids and my wife and my extended family, reintroducing myself to them," he told me.
• I wondered if five months in Maine — far from the White House hothouse — had given him perspective he wished he had when in office. "There's an inevitable telescoping that happens in jobs like the public service roles like the one that I was in where you have to, by nature of the job, sweat every daily challenge even if you're trying to keep your eye on the big picture," he said.
• "So there's something very useful about being able to step back, being out of Washington and out of that situation, to reinforce how, as much as those daily challenges feel like they matter in the short term, what really matters is getting the big calls right at the big moments on the big issues."
• "The advice I give to my colleagues that are still there is as hard as it is, figure out ways to structure in your day and in your week, structured time and structured engagement with people who are outside of that sphere" of policy and politics circles, "because oftentimes the best perspective and the best advice actually comes from people who are outside that sphere."

Deese has also been figuring 0ut his next job which, it was recently announced, is as an innovation fellow at MIT. So what does that mean?

• The role "is across all aspects of MIT," he said, "which gives me the opportunity to work with and collaborate with everybody from the economists and social scientists who work there to the engineers and the innovators across the board," with a particular focus on how to execute industrial strategy in the United States.
• "One of the reflections I have of this burst of policymaking we've done over the last couple of years is that we don't have, in the academy, in the non-profit sector, in the private sector, enough depth and serious thinking about how to actually effectuate industrial strategies."
• "I think over the last couple of decades, in part because of the ideological issues around the topic, I think people have spent less time thinking carefully and kind of building that muscle memory."
• "So I'd like to do some of that, and I think MIT is going to offer a pretty good platform to do that. They've also made a big commitment to say, 'How can we train all of our science and engineering technical capabilities against accelerated solutions to solve climate change?'"

The muscle memory concept was intriguing; he was essentially saying that America has partly forgotten how to do big, ambitious things by deploying public funds. I pushed on what the economic and policy technocracy has lost.

• "If you grew up in economic policy over the last couple of decades, it's highly likely that you spent at least some time if not a lot of time thinking about optimal design of social transfer programs like the [Earned Income Tax Credit] or the child tax credit. It's likely that you thought a lot about labor market policy and financial regulation, too," Deese said.
• "It's less likely that you spend time thinking about optimal land use policy or the ways in which federal and state and local incentives can interact for good or for bad to try to encourage economic development of a particular type in a particular place."
• "So it's not just that these issues are hard; it's just also that as a universe of people who think about economics and economic policy and then do economic policy for a living, there has just been relatively less emphasis," he said.

It's not just a lack of focus, however. Many people from his own intellectual tribe — left-of-center economists — are outright hostile to the idea, skeptical of the government's ability to steer investment effectively.

• "Right, I think that part of the reason that's the case is because there has been kind of a negative shadow cast around the entire concept of industrial policy. And as a result, a lot of people haven't wanted to stand in the shadow. A lot of the concerns people raise are valid, but one of the implications of that is that we understand less."
• "Even if you are in the camp, which I am not, that the vast majority of industrial policy interventions are likely to not be successful, it's still in the national interest to have a kind of deep and open-minded exploration of the ways in which policy tools can work better or worse, can fail or not fail."

I asked Deese, now that the legislation he helped enact is being implemented, what he has been pleasantly surprised by and what worries him.

• "I think the biggest upside surprise is economically, the economic response to the combination of these three pieces of legislation. And so if we look at it in terms of committed investment, economic activity and variety of metrics is a more significant economic response than to any piece of legislation in 70 years."
• "That's significantly outpaced our expectations. So that's the positive."
• "I think what has surprised me — well, what concerns me the most, what keeps me up the most at night — is that providing long-term stable incentives for private investment in these areas is necessary but not sufficient to actually generate the outcomes that we need. And that a lot of those other sufficient conditions are going to be really hard."

New York Times columnist Ezra Klein (as it happens, a friend and former colleague who first introduced me to Deese back in Obama's first term because Washington is an extremely small town) has criticized Biden industrial policy for its "everything bagel"-like qualities.

• Isn't layering requirements for domestic components, child care and lots of other things on public investments likely to keep them from happening with the urgency and scale needed to decarbonize the economy or ensure domestic semiconductor supplies, I ask Deese?
• "I always found the analogy kind of funny because if you think about innovations that have affected your and my life, the fact that you can get [an] everything bagel for the same cost as a plain bagel, the everything bagel unambiguously tastes better, in my view.
• "To me, it is actually an example of capitalism at its finest. My bagel shop doesn't upsell me for an everything bagel. I've said that to Ezra and I've thought to myself. It's a great capitalist innovation."

On the substance, Deese sees the issue differently. "I think there's something important to the concern, but I actually worry that we appropriately diagnose what are the constraints to actually building at scale."

• "To actually solve the climate crisis, we now have to build at a scale and speed we never have in this country, at least since the Industrial Revolution. And that is going to be challenging, and there are going to be constraints to that."
• "But I actually think that it's much more about everything bagel localism than liberalism. And we're seeing this play out: The constraints to growth and building at scale operate principally when you get down to the very local level, and they operate by interests that are either trying to protect a rent or an economic interest or averse to change in growth."
• "So to me, I think that concern is the right concern, but I'm not sure it's the right diagnosis."

In other words, the real obstacle to these investments working is not the odd child care requirement, but broad-based restrictions on building things in the United States, ostensibly for environmental protection purposes.

• "We do need a new form of environmentalism in the United States that actually understands what's relevant when you are principally trying to contain climate change," Deese said. "Think globally, act urgently is about building scale and capacity for clean energy."

For our next beverage, Deese switches to the Farmhouse Pale Ale and I switch to Seaworthy, a pale lager. We snack on some duck fat fries from a stand next to the brewery, affirming that everything is better fried in duck fat.

• And here I bring up one of the macroeconomic questions that lingers over Bidenomics. Isn't the rhetorical emphasis on creating good jobs out of whack with the actual world we're in, of a sub-4% jobless rate, employers struggling to find workers and market forces driving wage gains?

Isn't emphasis on "creating jobs" something that made sense in the depressed economy of 2009 but not so much today?

• "Look," Deese said, "I think the most important focus is how do we increase productivity in a way that actually sustains over the long term, and how do we improve job quality and as a result improve standards of living in this country?"
• "That's a roundabout way of saying that when I think about the combined impact of these three pieces of legislation, I think about is it going to actually help in creating a structural increase in productivity growth in the United States? I'm optimistic that it will."
• "And in doing so, is it actually going to improve job quality, improve wages across the board and in growing sectors of the economy? If we accomplish those two things, it will be an extraordinary thing for the economy."

He translates that idea into nerd-speak: "The incredibly non-political talking point way to say it would be, can we sustain the recent labor market gains through this cycle and actually achieve a new equilibrium of higher productivity, higher wage growth, higher GDP growth as a result of this set of policy intervention?"

There is a historical analogue, he argues, in the height of the Cold War, which featured massive investment, high productivity and wage growth, fueled by public investment.

• "If you look at the second half of the 1950s and the early 1960s, what were we doing as a country? We're using public investment in infrastructure and innovation. It was motivated by different goals at the time — [the] space race and the Cold War was behind all of it — but you can see the trajectory. You have to go back to that time to see a similar period in terms of that the quantity of public investment."
• "But I think equally important in terms of the analogue between then and now is a long-term campaign of public investment that private actors can rely on that is not designed to stimulate the economy in the short term."
• "It's not to try to create jobs in the sense of stimulating aggregate demand but instead designed to do something else, which is crowd more private capital and private investment into a place but for those public investments."

He continues, "I actually think that the economic logic is again more basic and rooted in our history as a country than people might recognize, which is that the private market on its own in all three of these areas is likely to underinvest compared to where our economic and national security goals should be."

• "One of the key metrics I think of the success of this strategy is, do we actually see private capital shifting toward these areas in a way that actually increases total aggregate investment?"

I ask about political economy: Are these benefits sufficiently widespread that they can persist no matter how the political winds shift?

• "If you think how to get the political economy and something like this right, I think we've got a better shot here than a lot of prior efforts precisely because the economics and the politics are overlaid."
• "Some of the best opportunities to make investments in semiconductor facilities and battery manufacturing facilities are in places that have not seen that kind of investment in a long time."
• "And I think that's in some ways more important than red or blue, that is delivering economic opportunity in places that might have sort of written off the idea that they could be part of an economic transition."

Is that enough to prevent all this from being ripped up the next time a Republican president takes office? In answering, he gave an entirely unsurprising endorsement of his former boss for re-election.

• "I mean, I certainly hope so. ... It's funny, no one's asked me this question yet. My view about my former boss is I'm hoping he's still going to be president, right?"

I ask Deese what he misses most, and least, from serving in the White House now that he is five months removed from it.

• The answer to what he misses most was immediate: "the people."
• "The challenge in those jobs is they're all-encompassing and you're working all the time. I mean, it makes sense, right? But the upside is that you just get an extraordinary intersection of talent and purpose. It's pretty hard to beat."

And what he misses least? "Oh my God, the list is long."

• "I will always have an enormous respect for people who engage in public service because the thing that you actually have to sacrifice is your time is never your own."
• "Even when you're not working, you can always be pulled somewhere. And the ability to be a good parent, a good partner, a good friend in that context is tough. So what it means is that they're literally like tours. So yeah, I don't miss that."

Final question, as Deese prepares to go pick up his kids from camp — the kind of thing that didn't happen during two years in the White House. What would the success of these investments look like?

• "So one, have we seen durable increases in productivity capacity and wages and outcomes for middle-class families?"
• "Number two, have we achieved the policy goals that you can associate with each of these three pieces of legislation? Do we have more resilient manufacturing capacity to produce semiconductor chips? Have we achieved our climate goals and in a way that has actually retained the U.S.' advantage as a low-cost consumer and provider of energy? And have we meaningfully upgraded our infrastructure in ways that you can measure and monitor?"
• "I do think that if we're disciplined and we stay focused as a country, actually we will be able to both tell and see in pretty concrete and specific ways whether these things work."

Final tab:

Oxbow Blending & Bottling

2x Farmhouse Pale Ale: $12

Maine Grown farmhouse ale: $6

2x Seaworthy pale lager: $12

Duck fat fries with garlic mayo: $7

Tax, service fee and tip: $11.50

Grand total: $48.50

A deluge of economic data released Friday show America's inflation problem is continuing to ease.

Driving the news: The Federal Reserve's go-to measure of inflation cooled meaningfully last month. Separate data showed that wage growth — which was feared to stoke further price gains — continued to decelerate in the second quarter.

Ladies and gentlemen, the weekend ... has fundamentally changed.

The big picture: Thanks to the rise of remote work, more professionals are stretching their weekends beyond the usual Friday night to Sunday night span, they're taking more trips, and spending more on experiences.

A series of four groundbreaking studies published Thursday in Science and Nature reveal new details about the role that the world's largest social media platform played in driving polarization during the 2020 election and beyond.

Why it matters: The study represents one of the largest data sets ever captured by researchers about the use of social media during an election. The findings may help regulators and tech firms better navigate future elections.

The 2023 primetime Emmy Awards have been postponed due to the ongoing writers and actors strikes that have brought Hollywood to a halt, Variety first reported Thursday.

Why it matters: It's the first time the Emmys have been delayed since September 2001, following the 9/11 terrorist attacks.

The Axios executives who report directly to me are offering some very direct feedback of me in our midyear reviews.

• A common theme: "Jim should get the hell out of the weeds and focus on what he does best."

Why it matters: They're right. I am susceptible to one of the biggest problems in the modern workplace: wasting time on things better handled by someone else — or not done at all.