The president is owning his economy. And his plan is a radical pivot from decades of laissez-faire capitalism.
The last time anyone in America linked “nomics” to a name, a former actor and governor occupied the White House.
Then, in the early 1980s, it was Reaganomics. The idea seemed simple: reduce the growth of government in the economy, cut tax rates on income from both labor and capital, slash regulations and prune the growth of the money supply to reduce inflation.
“Only by reducing the growth of government,” Reagan said in 1981, “can we increase the growth of the economy.”
Economists still debate whether it worked. On the plus side, inflation fell from record heights, the stock market boomed and, as the Gipper left office, the economy was enjoying the longest expansion in the post-war period. On the downside, those who depended on social programs saw them cut sharply, income inequality worsened, and – by the tail end of Reagan’s two terms – a stock market that had soared was beginning to crumble, and lax regulation led to insider trading scandals on Wall Street.
On Wednesday, President Joe Biden touted his own “Bidenomics” in what aides portrayed as a major speech defining both the economic achievements of the first two years of his presidency and the centerpiece of his reelection campaign.
In Biden’s view, this economic policy is industrial policy writ large: Put the power and the money of the government behind innovation, targeting key industries and try to prepare the economy for the 21st century.
Simply put, it is the polar opposite of Reaganomics.
“Bidenomics is about the future,” he declared Wednesday in a speech in Chicago. “Bidenomics is just another way of saying: Restore the American dream.”
Bidenomics “is a real contrast and it strikes at the heart of working folks’ needs,” says Karla Walter, senior director of employment policy at the Center for American Progress. Writing last year about the triad of bills Biden got through Congress dealing with infrastructure, manufacturing and economic investments, she said: “Together, these laws represent American-style industrial policy.”
Walter says the key elements of Bidenomics is that the laws have mechanisms to ensure that recipients of federal aid adhere to policies such as paying fair wages, hiring from a diverse pool of workers and a commitment to apprenticeship programs.
The president’s embrace of an economic message comes exactly a year after the consumer price index hit 9.1%, a level not seen for 40 years. And it comes as barely a third of Americans, 34%, say they approve of Biden’s handling of the economy in a recent poll by The Associated Press-NORC Center for Public Affairs Research.
Biden does have something to crow about. Inflation has fallen to 4%, still a high number but one headed in the right direction, nearly 300,000 jobs have been created each of the last three months, and the economy is growing as economists keep pushing back the date of when the next recession will occur.
Indeed, the government raised its estimate of first quarter economic growth to 2% annually on Thursday, up from 1.3% previously.
Meanwhile, legislation championed by Biden – including the Bipartisan Infrastructure Law, the Chips and Science Act, and the Inflation Reduction Act – has spurred a surge in investment in high-tech manufacturing, clean energy and hum-drum projects like water and sewer improvements.
“The President’s economic strategy has powered the strongest recovery of any major economy in the world,” said a briefing paper from senior White House aides that was released Monday ahead of the speech. “Among leading economies, the United States has had the highest economic growth since the pandemic and currently has the lowest level of inflation. This progress wasn’t inevitable or an accident – it has been a direct result of Bidenomics.”
A paper issued Monday by economists at the Treasury Department found that real manufacturing construction, after inflation, doubled since the end of 2021.
“The boom is principally driven by construction for computer, electronic, and electrical manufacturing,” Treasury officials Eric Van Nostrand, Tara Sinclair and Sarmath Gupta wrote. “Today, the computer/electronic segment is the dominant component of U.S. manufacturing construction.”
The paper noted that this boom “has not been offset by reduced spending on other manufacturing construction.”
Republicans see things differently, of course. Bidenomics is “economic disaster where government causes decades-high inflation, high gas prices, lower paychecks, and crippling uncertainty that leaves Americans worse off,” House Speaker Kevin McCarthy tweeted on Wednesday.
There’s a few things wrong with that argument: Most economists believe that the recent spate of inflation was largely caused by the easy money policies of the Federal Reserve that go back well before Biden took office and were exacerbated by the coronavirus. Gas prices have fallen by a third from a year ago, wages have been rising of late, and the most recent consumer sentiment surveys say people are feeling better about the future and their finances.
On Tuesday, the Conference Board released its June consumer survey, finding that Americans were feeling more upbeat about the economy and their own financial condition.
“Assessments of the present situation rose in June on sunnier views of both business and employment conditions,” said Dana Peterson, chief economist for the business organization. “Indeed, the spread between consumers saying jobs are ‘plentiful’ versus ‘not so plentiful’ widened, indicating upbeat feelings about a labor market that continues to outperform. Likewise, expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability.”
The Republican message is hardly consistent. Even as McCarthy derided Biden, Republican Sen. Tommy Tubberville of Alabama tweeted about the money his state would be receiving to improve internet service in his state–the result of a law Biden proposed and that Tubberville voted against.
It’s not that Republicans are against government spending, of course. They pushed mightily for an increase in the defense budget during the recent standoff over the debt ceiling. Since 9/11, more than half of the defense spending has gone to private companies such as Lockheed Martin and Northrop Grumman.
The health care industry accounts for 18% of the U.S. economy and more than a third of it, 34%, is paid for by the federal government. Even the internet was a creation of the government that funded the early Pentagon research before it became adopted by academia and then commercialized by the private tech giants.
And Wall Street, often touted by free-market advocates as evidence of the superiority of private firms in allocating capital, relies heavily on the “full faith and credit” of the U.S. government to market its wares.
None of that is likely to make a difference when everyday citizens go to the polls, however.
“Republicans are kind of lost for Biden,” says Chris Jackson, vice president and head of polling at Ipsos. “The key group is independents and the key thing is they just aren’t paying a lot of day-to-day attention to the daily news cycle.”
Compounding the challenge for the president, Jackson adds, is that when his firm polls would-be voters, people tend to be much more familiar with negative statements about the economy than the positive ones.
Even though Biden rode into office as the adult who could take charge of the government’s patchwork response to COVID-19, “he’s a little bedeviled in that the worst that was expected didn’t happen.”
The economy has actually proved far more resilient than anyone expected back in 2020, and the labor market has remained especially strong. While inflation is certainly a major concern, even that did not stop Americans from spending money – aided by huge amounts of direct payments from the federal government and record-low interest rates (until a year ago) from the Federal Reserve.
Whether voters will reward Biden for his efforts, many of which are still in their infancy, is unclear. As for the Republicans, it is not as if they are preaching a message of hope for the future, preferring to target drag queens and defending the confederacy. The party’s front-runner, meanwhile, is largely focused on litigating the 2020 election.
The problem with that strategy? Trump lost.
Source : usnews