Bidenonmics
Five months before the 2020 elections a number of polls revealed that Joe Biden was favored over Donald Trump by roughly 9% overall as well as in a number of individual respects. Those same polls, however, also reflected that Biden trailed Trump by an equal percentage when judged on who would better manage the nation’s economy. That prompted me to write an article entitled “The Myth of Republican Economic Managerial Superiority.” As explained in that article, the public’s perception was wholly devoid of an empirical basis. Since an attack on Biden’s economic prowess had worked so well in 2020, Republicans and their allies in the right-wing media have resurrected it in the current election cycle. Whether it will work again remains to be seen.
On January 20, 2021, the day President Biden was inaugurated, the nation suffered 4,374 Covid deaths, a single-day record and 40% more deaths than the nation had suffered in the 9/11 attacks. The high death toll the nation was then experiencing created a significant drag on the nation’s economy. In response, President Biden embarked on an ambitious legislative agenda. Relying on the “reconciliation process” (which enabled it to circumvent the Senate’s filibuster rule), his administration enacted the $1.9 trillion American Rescue Plan Act of 2021. That was followed shortly thereafter by the enactment of the $53 billion CHIPS and Science Act of 2022 and the $1.2 trillion Infrastructure Investment and Jobs Act.
With the added help of the Covid vaccines that had become available in late December, 2020, the nation’s economy began to reawaken. Shortly thereafter, however, the nation began to experience a rise in inflation. Economists initially attributed that resurgence in inflation to world-wide supply chain disruptions. For example, food processors that had been directing much of their output to restaurants, had been compelled by the pandemic to repackage and redirect the bulk of their produce for distribution through supermarkets as most Americans were no longer dining in restaurants. The pandemic also led to rows of empty shelves in supermarkets and higher food prices. Similarly, as Americans were being forced to spend more time in their homes, they began increasing their expenditures for home appliances and furnishings leading to shortages and price increases for those products. This also created a shortage of computer chips in the U.S. which were needed for the production of both new cars as well as home appliances. This, in turn, sent used car prices soaring because car buyers were not able to purchase new vehicles.
The large amounts of monies which the federal government was injecting into the nation’s economy certainly added to the upward pressure on prices as the economy continued to recover. By December 2021 a number of highly respected economists, including Lawrence Summers, who had served as the Treasury Secretary in the Obama administration, began warning that the government’s capital infusions into the economy were fueling inflationary pressures. Shortly thereafter, the Federal Reserve, fearing a repeat of the “stagflation” that had gripped the nation’s economy in the late 1970s and early 1980s, began to respond by slowly raising interest rates.
One of the lessons learned by economists from that era was that if inflation is allowed to go unchecked, it takes on a life of its own as businesses tend to continue to raise their prices in anticipation of future cost increases. This results in what economists have dubbed a “wage-price spiral.” Notwithstanding the Fed’s interest rate increases, the nation’s economy continued to expand. This led most economists to express concern that the Fed’s determination to cool the nation’s economy was going to result in an over-reaction (sometimes referred to as a “hard landing”), sending it into a recession.
By early 2022 inflation had become a world-wide problem owing both to the Covid pandemic as well as the War in Ukraine which was causing major disruptions in the markets for grain as well as for petroleum and natural gas. Widespread warnings of runaway inflation and an impending recession was just too good an opportunity for Republican politicians and their allies in the right-wing media to ignore. They took every opportunity to harp on increases in energy and food prices, things that virtually every American family was then facing. This, in turn, gave many businesses “cover” to raise their prices causing a wave of price gouging. For example, Exxon, Chevron and ConocoPhillips were able to report record profits in 2022. By February 2022, inflation in the U.S. was running at just under 8% year-over-year with no sign of abating.
In response, the Biden administration, which had been striving unsuccessfully to enact legislation to retard climate change, decided to follow the example set by Republicans in naming their 2017 tax cut legislation (the “Tax Cuts and Jobs Act of 2017”). It recast its climate bill, reducing the level of expenditures and denominating it as “The Inflation Reduction Act of 2022.” This wide-ranging piece of legislation, while pouring $369 billion into efforts to combat climate change, also increased projected tax revenues and strengthened a number of other welfare programs with the CBO projecting that it would reduce the nation’s deficit by $300 billion over ten years.
Not to be out-maneuvered by a Democratic administration in framing its messaging, Republicans, seeking to take advantage of the fact that the American public was once again being confronted by an unsettled economy, coined a new word: “Bidenonmics.” Marrying an unpopular subject to a political opponent is the same type of messaging technique they had used in their attacks on the Affordable Care Act which they had dubbed “Obamacare.” Because the Republican voter base receives its news from the Fox News Channel and other purveyors of Republican propaganda, this campaign has been enjoying significant success. According to the Five Thirty-Eight website President Biden is currently viewed favorably by only 40.8% of Americans and unfavorably by 55.1% of Americans.
Of course, most Americans have little idea about the true state of the nation’s economy much less President Biden’s agenda for managing it. All they know (or more accurately, what they have been told) is that the prices of gasoline and groceries are up and a recession is on its way, and this means that Bidenomics must be bad. It’s a little like Governor DeSantis’ attacking Democratic policies as being “woke.” The base doesn’t know what “woke” means, but it must be bad if this is what the “libs” like.
The mystery around “Bidenomics” began to dissipate last week when Representative Marjorie Taylor Greene made a presentation at the “Turning Point’s Live Action Conference” in which she tried to attack the Biden administration’s economic policies as being “socialistic” and a continuation of FDR’s “New Deal” and Lyndon Johnson’s “Great Society.” She explained that they “expand social welfare programs and ultimately raise taxes to fund these programs” just like FDR’s Social Security and Johnson’s Medicare programs. The Biden administration was quick to reply that it was happy to find something on which it could agree with Ms. Greene. Despite the “socialism” slur, most Americans are strongly in favor of both Social Security and Medicare, so much so that in negotiating around the debt ceiling impasse earlier this year, House Speaker McCarthy was careful not to seek cuts in either of these programs.
The Biden economic agenda is the antithesis of “Reaganomics” which calls for lower taxes, reduced business regulation and cuts in social welfare programs. It seeks to rebuild the nation’s economy from “the bottom up and the middle out” by focusing on three things: social welfare, physical infrastructure and technological innovation. Social welfare encompasses a broad range of programs the overall purposes of which are to put Americans in a position to maximize their well-being and productivity. This includes helping Americans maintain their heath and raise their level of education. It also includes providing them with affordable childcare and a safety net during their retirement. Infrastructure improvements not only consist of repairing and building road, bridges, ports and airports but also upgrading public transportation and available electrical and broadband service. Technological innovation consists of providing economic support for universities to conduct basic scientific research and incentives for private industry to develop new products and services that will enable a nation with a high living standard to compete with countries that can dominate the markets for yesterday’s products owing to their lower labor costs.
Since Republicans unleased their attack on Bidenomics, the economic news has turned brighter. Inflation has dropped from an annual rate of 8% to 3% and the signs are growing stronger that the economy is going to have a “soft landing.” Paul Krugman attributes this mostly to the Biden administration’s efforts to address supply chain problems while bolstering economic growth and lowering unemployment. It's not just that inflation is declining along with the possibility of a recession, but Biden’s record in managing the economy is not only looking good, but literally puts Trump’s record to shame. During the first two years of President Biden’s administration the nation’s economy grew at an average annual rate of 4.0% while 12 million new jobs were added. (For a more complete picture of the nation’s economy during the first 26 months Biden has been president (see “Biden’s Numbers, April Update.”) By contrast, during Trump’s presidency our nation’s GDP grew at an average annual rate of 1.18% and total employment dropped by 2.9 million jobs. (For a more complete picture of the nation’s economy while Trump was president see “Trump’s Final Numbers.”)
This places Republicans in a serious dilemma. At present, it seems highly likely that former President Trump is going to win the nomination to be their Party’s presidential nominee. Republicans (and Trump) were counting on two avenues of attack, the first being Biden’s age. Of course, there is very little difference in the ages of these two men; they will both be octogenarians when our next president is inaugurated in January 2025. Moreover, while Biden has been careful in his public remarks and has largely avoided many of the gaffes that he has made in the past, Trump has become more and more unhinged in his remarks. His list of perceived enemies grows with each passing day and he has announced how he will weaponize the federal government against his enemies if he is re-elected, seemingly oblivious that this very type of action is now being decried by House Republicans in their committee hearings.
As a fellow octogenarian I would be among the first to assert that advanced age unequivocally has a detrimental effect on one’s mental processes even though admittedly it does affect individuals differently. But this problem is magnified when the president chooses his advisors based upon their personal loyalty to him rather than their expertise and proven ability. In this regard, Trump’s habit of hiring individuals he hears on the Fox News Channel (Dr. Scott Atlas and Tom Fitton being prime examples) makes him particularly vulnerable.
The Republicans’ second line of attack is Biden’s perceived inability to properly guide the nation’s economy. So far this strategy is looking shaky. As explained above, Biden’s record to date on managing the economy has been exemplary. Since World War II only two U.S. presidents (John Kennedy and Lyndon Johnson) have achieved an average rate of economic growth in excess of 4%. Biden is now on track to be the third. Admittedly, much can happen over the next 17 months, particularly when you consider that the President is not likely to get any support from the Republican members of Congress who have shown all signs that they intend to carry on the tradition established by Newt Gingrich and currently championed by Mitch McConnell to do everything in their power to prevent the President from carrying out his agenda.
Therefore, it seems unlikely that the Biden administration is going to be able to enact any additional legislation that will help bolster the nation’s economy. That, however, may not be a problem as the legislation already passed largely remains to be implemented and that will be more than enough to keep the economy growing. In addition, we can expect that the Biden administration will be concentrating on resurrecting the nation’s dormant anti-trust policies and enhancing the bargaining power of workers. Among its most important undertakings will be to make sure that the voting public is made aware of his administration’s achievements.
The stars also may be aligned to help the President. President Clinton achieved a 3.88% average annual rate of GDP growth while in office even though he was under constant attack by the Republicans who controlled both houses of Congress during six of the eight years of his presidency. It wasn’t that he enjoyed bipartisan support for his legislative agenda. Far to the contrary, during his two terms in office the federal government was shut down twice. What helped Clinton was the fact that the nation was in the midst of the “information revolution” during which businesses were able to expand rapidly by taking advantage of the internet and the new information technology made possible by it. You might recall this as the “dot.com” era when new companies were being formed at a rapid pace.
Biden seems to be in line for a similar economic boost with the artificial intelligence revolution which is now just beginning. While it’s difficult to predict all of the ramification of the AI revolution, one thing seems clear: businesses will be able to do things both faster and cheaper. More importantly, AI will make many things possible which currently cannot be achieved. In short, it will facilitate the creation of whole new industries and that should supercharge the nation’s economy. Sometimes having good luck is the best formula for success.