A Bidenomics Primer

 

America’s economy is having a remarkably successful sea change that The Wall Street Journal and Financial Times first labeled “Bidenomics.” The term is now widely used, including by Biden, for his Administration’s economic policy shift. How does Bidenomics differ from what came before, and how successful has it been in two and a half years? 

Since the Reagan era forty years ago, American economic policy has been based on the supply-side, or “trickle down,” theory that if the rich get richer through lower taxes and business deregulation, much of their greater wealth will trickle down to the rest of us through more jobs and higher wages that businesses can then afford. This hasn’t happened; indeed, the wealth gap between the rich and the rest has increased dramatically. 

As summarized in The Huffington Post, trickle-down policies “favored the private sector over the public, the financial well-being of the rich over the poor, the support of monopolies over small and local business, and the empowerment of bosses over workers.” The result has been to reward wealth, not work.

Bidenomics does the opposite, growing the economy from “the bottom up and the middle out” as the President often says. How is this done? Mostly, through four key Congressional Acts:

 

·       The American Rescue Plan Act of 2021, a response to the severe Covid-19 recession, that made cash payments to lower- and middle-income individuals; extended unemployment benefits; expanded child tax credits; helped fund schools and state, local, and tribal governments with budget shortfalls; helped fund small businesses; and paid for a national vaccine program. Low- and middle-income households received more than 70% of the benefits. No Republican voted for it.

·       The Infrastructure Investment and Jobs Act of 2021, which invests in roads and bridges, clean power, passenger and freight rail, expanded broadband access, public transportation, clean drinking water, and other public benefits. Passed with bipartisan support.

·       The CHIPS and Science Act of 2022 that provides funds and tax credits for U.S. companies producing computer chips in the U.S. and money for research in AI, robotics, quantum computing, and other advanced  technologies. Passed with bipartisan support.

·       The Inflation Reduction Act of 2022 will significantly reduce carbon emissions using renewable energy technologies, improves health insurance affordability, lowers Medicare drug costs, funds the IRS to better enforce tax reporting, and implements a 15% minimum corporate tax. No Republican voted for it.

 

The results are convincing: With government taking a more active role, the U.S. has had the best economic recovery from the pandemic of any country; GDP has risen steadily; stocks are up nearly 20% this year and on the best run in six years; worker pay has risen faster than inflation, which has declined from 7% a year ago to 3.1% now; consumer spending (the demand side of the economy) is up; the gender pay gap is the smallest in history with women’s earnings at 84% of men’s; and unemployment is the lowest since 1969. 

In addition, unions are growing and becoming more influential thanks partly to new pro-labor policies by the National Labor Relations Board. Importantly, Biden appointed two Board members with union backgrounds.

For the past three years, most economists forecast a painful recession now or soon, but a combination of Bidenomics and careful interest rate increases by the Federal Reserve have eased those fears. Economists now foresee a so-called “soft landing” rather than a hard recession. 

Last month, Republican representative Marjorie Taylor Greene, who voted for none of the above Acts, accused Biden of following the legacies of FDR and LBJ by creating “big government programs” to address healthcare, education, rural poverty, and other issues. Asked to respond, Biden said, “I approve of this message.” Good answer.