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Artillery Row

Letter from Washington: The meaning of Bidenomics

How revolutionary is the president’s economic agenda?

Joe Biden makes for a funny sort of revolutionary. His long Washington career hardly screams insurgent. He has always made a virtue of old-style compromise and bipartisanship. As a candidate, he preached moderation and said he saw himself “as a bridge, not as anything else.” He plays up his credentials as plain old Joe from Scranton, eager to remind you of “fun facts” about himself like his fondness for ice cream and aviator sunglasses.

If these signs point to middle-of-the-road policymaking, the early economic moves of the Biden administration have been anything but. The president’s $1.9 trillion Covid relief package was more generous than many expected, leaving moderates, not progressives, doing the grumbling. He has recalibrated government to put racial equity at the heart of everything it does, a step that would have been a tough sell in the Democratic Party of a decade ago. The current legislative focus, a $2 trillion infrastructure bill, is about a lot more than filling in potholes and repairing bridges. Climate change is a major focus, while a fifth of the funding goes to elderly and disabled care.

As Washington grapples with the details of the bill, Biden has been kicking back with historians, wondering what lessons his new new deal might take from the old new deal. The press continues to draw flattering comparisons to his old boss. Where Obama was cautious, Biden is gutsy, they enthuse. Not even a hundred days into his presidency, columnists are queuing up to proclaim him the heir to FDR. His ego suitably stroked, the president, one suspects, now looks in the mirror and sees not a “bridge” but something a lot more consequential.

At this stage, Biden’s surprising boldness is undeniable. A harder question, though, is whether or not his approach amounts to a revolution. Some certainly think so. More or less every other week since the inauguration, the New York Times columnist David Brooks has cheered the “transformational” Biden for “going big” and shifting “the whole paradigm of the role of government in American life”. Brooks’s colleague, Ezra Klein, argues that Biden’s early legislative steps amount to “a sweeping indictment of the prepandemic status quo as a disaster for both people and the planet” (he also notes the irony that, as a Senator and Vice President, Biden helped build this status quo.). Bloomberg’s Noah Smith calls the infrastructure bill an effort to “transform the nation” and a “serious and sweeping redirection of the entire US economy”.   

Neoliberalism is dead. Long live Bidenomics. Or so more and more commentators claim. Are they right?

In a number of important areas, America’s economic debates are completely transformed. Throughout the Covid relief negotiations and now the infrastructure bill, conventional wisdom thought the risks of doing too little outweighed the risks of doing too much. If an aversion to big spending was a feature of the neoliberal consensus, then that consensus certainly seems to be disintegrating. When Clinton’s Treasury Secretary Larry Summers led the charge against the American Rescue Package (making the unfashionable case that there is such a thing as too much), a younger generation of economists, some of whom now work for president Biden, met these criticisms with little more than an “Okay Boomer” eye roll.

Bidenomics remains more of a grab bag of popular policies than a coherent economic worldview

Rightly or wrongly, inflation is less of a concern than it once was, and there is a newfound appreciation of the merits of pushing unemployment as low as it can go. Elsewhere, the arguments about disincentives to work created by welfare programmes — once a point of cross-party agreement — are out of fashion. Add to this changed economic and political backdrop the new consensus on the threat from China and the Democratic determination to take bold action on climate change, and it is clear that Biden is operating in a very different environment to the last Democratic president.

Noah Smith thinks that Bidenomics is “aiming to create a two-track economy — a dynamic, internationally competitive innovation sector, and a domestically focused engine of mass employment and distributed prosperity.” Brian Deese, the director of Biden’s National Economic Council, has told the New York Times that the president’s economic agenda has three prongs: redistribute money downwards, transform America’s energy and transportation sectors because of climate change and, as the New York Times put it, “replicate the daring of the moon shot by investing big-time in research and development.”

But Bidenomics remains more of a grab bag of popular policies than a coherent economic worldview. The scale of the pandemic relief bill was first and foremost driven by politics, not economics. The pandemic created a window in which a new Democratic president could “build back better”, adding the party’s longstanding policy goals on to the cross-party supported emergency relief. This administration has systematically sorted through progressive wish lists, adopting the popular ideas and junking the unpopular ones.

The case for Bidenomics as a policy revolution also writes his predecessor out of the story. Last year, it was the Trump administration that broke with past approaches to economic crisis and pioneered large-scale direct cash stimulus as a response to the pandemic. Also taking its cue from Trump is Bidenomics’ focus on domestic manufacturing — complete with subsidies designed to supercharge microchip manufacturing and a promise to “buy American”. The forty-fifth president also made the most of the increasingly relaxed attitudes on fiscal policy, pushing unemployment numbers lower and lower rather than losing sleep over deficits and inflation.

Biden hasn’t even been in office for 100 days and so a lot of the theorising about his administration’s economic worldview feels premature. For now, it seems safe to say that Bidenonomics amounts to more than simply showering money on Democratic priorities. It reflects how much the financial crisis, followed by Trump, and then the pandemic, have transformed Washington’s economic and political debates. Only time will tell whether that means America has broken free from the neoliberal constraints of the past. Or is in for a rude re-awakening.

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