How Bidenomics Has Finally Defeated ReaganomicsTRICKLE DOWN IS DONE: Two years into his presidency, Joe Biden has revolutionized America’s economic policy—both home and abroad
The last thing many of us expected when Joe Biden became president was that he would be a revolutionary. But just over two years into Biden’s presidency, there is no doubt that he has done more to dramatically transform U.S. policy and thinking in more areas than any of his predecessors since Franklin Roosevelt.
America had failed to adequately invest in its infrastructure for over six decades when Biden made it a priority once again. Biden’s prioritized investment in combating climate change to a degree that no past administration ever did. On foreign policy, he executed the pivot away from a Middle East and terrorism focus to a long-term commitment to placing the Indo-Pacific region and our rivalry with China atop our list of priorities.
Remarkably, he did this while simultaneously handling the threats associated with Europe’s largest land war since World War II and reinvigorating America’s most important alliance, NATO, in a way few thought possible just years ago. He stopped the impetus toward isolation and inaction internationally of the presidencies that immediately preceded his.
What is more, none of the transformations cited above are actually the biggest the Biden administration has overseen.
From day one, Biden has profoundly transformed U.S. economic policy—and related social and international policies. Biden is the man who finally slew Reaganomics and the huckster’s brew of “trickle-down” and “the markets know best” policies at its core. He is the one who at last put an end to the “Washington consensus” that has served the rich worldwide and left the poor to struggle with too little support. He, at last, ended the slavish deference of Washington neoliberals to Wall Street, and the consequent grotesque growth in inequality and injustice it has fueled.
Importantly, Biden not just talked the talk of the revolutionary, he has walked the walk. He has systematically taken steps to prioritize economic approaches that benefited America’s middle class and those who were left behind, approaches that sought fairness in our tax codes and their enforcement, approaches that strengthened the U.S. from within in an effort to better compete and succeed internationally.
Some of the steps he has taken were major but received too little attention, such as the effort (led by Treasury Secretary Janet Yellen) to create a minimum tax to be paid by corporations worldwide. Some of the bold changes were revealed in policy choices that made headlines—like his decision to place the concerns of the people working in the real economy ahead of the preferences of Wall Street in his American Rescue Plan, his initiative to invest in our infrastructure in the Bipartisan Infrastructure Bill, and his steps to invest in our green economy and combat rising costs for average Americans in the Inflation Reduction Act.
When I was a senior economic official in the Clinton administration, had I mentioned “industrial policy” in a meeting I would have immediately been shown the door. But Biden, through the CHIPS and Science Act illustrated that it was now not only okay to discuss such ideas, but that he would go further and implement them—because they would help create jobs and because they would strengthen U.S. national security.
"From day one, Biden has profoundly transformed U.S. economic policy—and related social and international policies.”Last week, in Washington, National Security Adviser Jake Sullivan delivered a speech at the Brookings Institution that helped tie together many of the core principles underlying Biden’s views and actions. It was certainly the most significant economic speech ever given by a U.S. national security adviser. But then again, it was clear even before he arrived in office that Sullivan would become the most economically savvy and active national security adviser in U.S. history. Work he had been actively involved in, like the Carnegie Endowment’s initiative on Making U.S. Foreign Policy Work Better for the Middle Class was quickly seen to translate into action. Sullivan also wrote on related subjects, including on the fact that foreign policy and economic policy were more deeply intertwined than often acknowledged (by foreign policy experts who were less economically astute) as in an article he wrote for Foreign Policy in 2020 with Jennifer Harris called, “America Needs a New Economic Philosophy. Foreign Policy Experts Can Help.”
Sullivan’s speech began with the assertion that because many of the economic policies of the past were not serving most Americans or our interests, that “this moment demands that we forge a new consensus”—something he described as “a modern industrial and innovation strategy.”
He enumerated its goals to be a strategy that “invests in the sources of our own economic and technological strength, that promotes diversified and resilient global supply chains, that sets high standards for everything from labor and the environment to trusted technology and good governance, that deploys capital to deliver on public goods like climate and health.”
Sullivan’s speech went on to explain that from the outset, Biden and his team saw the country as facing “four fundamental challenges.” These included the hollowing out of the U.S. industrial base.
Here he took a clear shot at Reaganomics when he noted that “the vision of public investment that energized the American project… had faded,” giving way to “a set of ideas that championed tax-cutting and deregulation, privatization over public action and trade liberalization as an end in itself.” Going further, he argued that a core mistake of these recent past policies was that they were based on the deeply flawed idea “that markets always allocate capital productively and efficiently.” Recent experience with markets shifting much of our critical productive capacity, jobs, and many supply chains overseas—made clear during the COVID-19 pandemic—illustrated this.
A second challenge he cited was “adapting to a new environment defined by geopolitical and security competition.” Here, his point was that (in the past) economic integration was hoped to “make nations more responsible and open and that the global order would be more peaceful and cooperative” and that “it didn’t turn out that way.” Here, he cites China as exhibit A.
The climate crisis was the third of the four challenges and, critically, at the core of the core of Biden’s ideas, I believe, was “inequality and its damage to democracy.” Again, in this instance, he specifically cites the core elements of Reaganomics (and the Reaganomics-lite embraced by recent Democratic administrations), such as “trickle-down economic policies—policies like regressive tax cuts, deep cuts to public investment, unchecked corporate concentration and active measures to undermine” unions.
Sullivan’s speech then went on to describe Biden’s “foreign policy for the middle class.” He identified a key element as recognizing that we need a national industrial strategy to compete and protect ourselves in a world in which all of our competitors have such an approach. Specifically, he cited the focus the administration has had on revitalizing our semi-conductor and clean-energy production sectors. The second component of the strategy he identified is “working with our partners to ensure they are building capacity, resilience and inclusiveness too.” Here, as evidence of progress he cited the close coordination between the administration and our closest allies on these issues.
The third step—especially welcome to me as a former trade official—is “moving beyond traditional trade deals to innovative new international economic partnerships focused on the core challenges of our time.” This point addresses a criticism of the administration by some that it does not have an active trade policy. Sullivan’s central point was that primarily seeking to reduce tariffs without addressing climate, enforcement, or security concerns is inadequate.
Fourth, Sullivan described the administration’s objective of “mobilizing trillions in investment into emerging economies—with solutions that those countries are fashioning on their own but with capital enabled by a different brand of U.S. diplomacy.” A key element of this approach has been “a major effort to evolve the multilateral development banks so they are up to the big challenges of today.”
“Markets don’t have consciences, neither do they take into consideration the security interests of nations.”The final point of the plan is the administration’s effort to protect “our foundational technologies with a small yard and a high fence.” This approach, perhaps the one of Sullivan’s points about which I am most skeptical (because I am not sure it is truly feasible in a global economy such as the one we have today) is designed around the worthy goal of helping to ensure that “next generation technologies work for, not against, our democracies and our security.”
Again, the subtext here is China—and keeping that country from gaining advantages in key technologies that could put us at risk.
I’ve spoken with experts about this and they do not think any steps we take will slow down China from acquiring such technologies for more than just a few years. But, certainly the goal is consistent with the other changes described in Sullivan’s speech, and is more forward-looking and strategically framed than many of America’s recent past economic policies.
Sullivan concluded by describing success. “The world,” he said, “needs an international economic system that works for our wage-earners, works for our industries, works for our climate, works for our national security, and works for the world’s poorest and most vulnerable countries.”
The response to the speech and to the policies of the administration indicates how significant the shifts it describes are. In just one illustration of this, Carlos Roa wrote in The National Interest that the National Security Adviser’s “remarks mark a profound shift in American strategic and economic thinking; a confession that much of what the United States has been doing and saying for decades has been wrong, and a recognition that painful and urgent reform is necessary.”
Some old school economists who have been peddling the failed or damaging policies the administration has sought to undo decried the fact that the new approaches represented too much meddling with markets by government officials.
But of course, that is just the point. Biden, Sullivan, Yellen, and their team have finally acknowledged that growth for its own sake—or good performance by markets—are not the only metrics we should have as we make economic policy decisions.
Markets don’t have consciences, neither do they take into consideration the security interests of nations. Companies are by law required to place their bottom line interests ahead of the interests of the rest of society. Therefore, government has an obligation to step in and take steps to ensure that critical social goods are advanced.
Finally, after many decades of deferring to the financial and corporate interests who also happen to be big political donors, a president and his team have come along to say, “enough.” It is time to make economic decisions that serve all the people and address the damage done by the policies of the past.
https://www.thedailybeast.com/how-bidenomics-has-finally-defeated-reaganomics
