The rejection of Bidenomics
It's still the way forward, but the country doesn't realize it yet
Last April, I argued that Joe Biden and his team were putting together an economic policy program that would break decisively with the past 40 years and address the challenges of the 20s. This program, I argued, rested on three pillars:
Investment (both government and private)
Cash benefits
Care jobs
This agenda has recently been largely ground to a halt by the vicissitudes of American politics. On the plus side, the administration did manage to pass one modest bipartisan investment bill, but much of it was just the kind of big lump-sum infrastructure maintenance stuff that we do every decade to keep our existing roads and bridges from crumbling. A bill to support the semiconductor industry and modestly increase science funding also now looks likely to pass, though the science funding part has been significantly watered down from the original vision. These are modest successes — the kind of start that could be built on.
The largest piece of Biden’s planned investment, however, was climate-related — a big push to rapidly replace fossil fuels with renewable energy. That was mostly contained in the Build Back Better bill, which Joe Manchin — the pivotal vote in the Senate — now declares is “dead”. While Manchin claims he’s interested in a big climate spending bill, he also constantly talks about the need for austerity; that implies he’s not likely to embrace the kind of numbers that would really make a difference to the overall U.S. investment rate. Progressives are feeling rightfully frustrated.
Manchin’s stonewalling of BBB also takes the other two pillars of Bidenomics mostly off the table for now. Paid parental leave and universal pre-K appear to be off the table. And the child tax credit, the centerpiece of Biden’s transformation of the welfare state, was allowed to expire at the end of 2021. Researchers estimate that this will immediately throw a large number of American kids back into poverty:
And to top it all off, Republicans are expected to do very well in the midterm elections this November. Unless something big changes, they’ll probably take back at least one house of Congress. At that point Manchin’s vote becomes largely irrelevant, as Congress will stonewall Biden’s big plans until 2025 at the earliest.
If you’re disappointed in this outcome, you’re not alone.
Why has Bidenomics ground to a halt?
It’s worth taking a moment to ask why this is happening. The easy, simple explanation is that the Dems only hold the Senate by a one-vote margin, and Joe Manchin is a fairly conservative dude. And that is true. But I don’t think it’s the whole answer.
Another part of the answer is that Democrats didn’t come out with a very focused bill. Many pundits noted that the first version of Build Back Better looked like a kitchen-sink progressive wish list, often with slapdash implementation. In addition to the spending programs, it repealed the cap on the SALT deduction — a tax cut for the upper middle class and wealthy that would have cost as much as Biden’s entire climate investment program.
That sort of omnibus bill is encouraged by the U.S.’ dysfunctional institutions. Because of the filibuster, the Democratic majority in Congress is effectively limited to one spending bill per year, so there’s a natural tendency to make put their entire wish list in one piece of legislation. But that kind of bill is very hard to sell to the public — the phrase “Build Back Better” doesn’t mean much to the average American, but it’s very difficult to give the bill a self-explanatory name because of it’s lack of focus. Call it “Biden’s climate bill”, and people would rightly point out that most of it isn’t about the climate. Call it “Biden’s family support bill”, and people would rightfully point out that it’s mostly not about that either. In fact, there was no one thing that it was mostly about. I don’t know whether selling the bill harder would have resulted in a wave of public anger against Manchin that would have forced him to relent, but at least it would have nice to be able to try.
The right thing to do would have been to accept from the very start that Dems have to prioritize, and keep the bill focused on a couple of programs (preferably climate investment and the extension of the child tax credit). But the Democrats are less of a cohesive ideologically-driven party than a collection of interest groups that each feels marginalized and generally refuses to subordinate its own priorities.
Another reason BBB stalled is inflation. The bill wouldn’t have raised deficits enough to cause substantial inflationary pressure, but Manchin doesn’t know that, nor do his constituents (in fact, most people have no idea how inflation-fighting policy works). People hear that pumping cash into the economy is inflationary, and prices are rising faster than their paychecks, and they’re mad and scared, and so they’re more reluctant to embark on bold new spending agendas. An effort to sell BBB as the antidote to inflation seems to have failed to win broad buy-in.
And besides inflation, there’s the possibility that Americans are worried about the pace of social change, and are expressing their worry by fighting against policy change. The same grumpy reactionary energy that’s leading cities across America to ramp up police funding and fueling backlashes against “critical race theory” in schools could be spilling over into the realm of fiscal policy.
But on top of all this, we supporters of Bidenomics simply have to accept that many of its core ideas just aren’t that popular among the American public. FiveThirtyEight reported that polls in late November and early December showed weak support for the bill:
It’s not clear how big of a deal it will be to most Americans that the vote on the Build Back Better Act is delayed, but support for the bill at this point isn’t overwhelming. Following the passage of the bill in the House, Morning Consult/Politico’s poll found that 47 percent of registered voters supported the bill and 40 percent opposed it. Similarly, an NPR/Marist Poll conducted Nov. 30 through Dec. 6 found that 41 percent of adults supported the bill, while 34 percent said they opposed it.
Meanwhile, Americans liked the child tax credit, but generally oppose making it permanent. Here are the results of a Morning Consult poll in December:
Continuing the child tax credit for at least one more year has the backing of 47 percent of voters but is opposed by 42 percent.
Two-thirds of Democrats said the benefit should be continued, but 3 in 5 Republicans said it should not be. Independent voters are almost evenly divided.
Beyond the question of the one-year extension, half of voters (51 percent) say the expanded child tax credit payments should not be made permanent, compared with 35 percent who say they should be.
My own read on this is that Americans have become afflicted with a scarcity mindset — so afraid that people they don’t like will get something good that they refuse to do things that are interest in the nation overall.
And as for green energy investment, the sad fact is that even after wildfires, droughts, hurricanes, and coastal flooding, Americans still don’t think of climate change as a very high priority. Most polls show climate way, way down the list of America’s most pressing issues, often coming in in the low single digits. I have my suspicions as to why this is the case — I think Americans are generally unaware of the rapid progress in green energy, and still think that fighting climate change means making big economic sacrifices. This, I think, is why neither the dire warnings of climate scientists nor the earnest efforts of Democrats nor the increasingly despairing screeching of the Left seems to have convinced Americans that it’s time for a Green New Deal; they mistakenly see it as a demand for sacrifice instead of an opportunity for abundance. That messaging needs to change.
So although I think we’d all like to tell ourselves that it was just Manchin, the truth is more discouraging — Build Back Better was stymied in part because Americans just aren’t that enthusiastic about either the bill or the most important ideas in it.
Bidenomics is still the way forward
The thwarting of Bidenomics reminds me a bit of the way that Southern Democrats allied with Republicans to bring FDR’s New Deal agenda to a halt after 1937. Ultimately, it was World War 2 that ended the Depression, and it was the postwar presidents — Truman, Eisenhower, Kennedy, Johnson and Nixon — who fulfilled the full sweeping vision of FDR’s progressive agenda.
I’m also slightly reminded of how Ronald Reagan failed to meaningfully cut government spending or reform the welfare state at all, and how his deregulatory efforts were relatively minor, and how his tax cuts had to be partially reversed due to panic about deficits. Ultimately it was Bill Clinton and George W. Bush who fulfilled the Reaganite dreams of deregulation, welfare reform, and tax cuts.
So even transformative presidents often get stymied. That doesn’t mean Biden is destined to be transformative, of course — he could just end up being Jimmy Carter 2, a good guy whose efforts go unrecognized and who gets caught up in the tide of a conservative backlash. But I think the fundamental strength and importance of the Bidenomics agenda has little to do with Biden himself, and will long outlive his presidency.
The reason is simply that we need the things Bidenomics wants. The U.S. is investing less than it used to — the private sector a little less, and the public sector a lot less.
The decline is far more apparently when you look at the net numbers. Private investment has recently tended more toward software and other things that depreciate more rapidly than physical infrastructure, so net domestic private investment has trended down:
And here are the numbers for net nondefense federal government investment as a percent of GDP:
The drought of investment has left us with a creaking, outdated infrastructure that gave rise to supply chain problems and exacerbated inflation. It has also allowed America to lose high-tech manufacturing market share to China for 20 years, threatening to hollow out the country’s industrial commons and make us into an agricultural backwater. And it has created a housing shortage, choking off urban productivity, raising rent burdens, and forcing the working class out of desirable cities.
We simply need to invest more, as a nation. We need to invest more in science and technology, in infrastructure, in housing. And climate change is a huge and pressing problem — not something for the far future, but something that’s here, at our throats right now. Refusing to address that challenge — especially when doing so would actually give us cheaper and more abundant energy! — would be a self-inflicted would of mind-boggling proportions.
As for cash benefits, they remain our best chance to transition to a simpler, more effective welfare state. Our current blizzard of confusing programs, strict means-testing, and onerous work requirements absorbs far too much time and resources while still letting too many people fall through the cracks. Simple, near-universal benefits like the child tax credit allow people to spend their cash on whatever they want, and cut out the overhead of administering complex programs. Cash is the future of the welfare state, and Manchin has done nothing to change that.
So while Bidenomics-as-legislation has been stalled, Bidenomics-as-idea will live on, because it’s the only sensible program to address the challenges of the modern world. We may have to wait for other leaders to implement that program, and Biden may ultimately not get the credit. But it’s what needs to be done, and that won’t change any time soon.
Wow, this is a great way to sum up something I think about all the time: "But the Democrats are less of a cohesive ideologically-driven party than a collection of interest groups that each feels marginalized and generally refuses to subordinate its own priorities."
Noah - you often go too deep in the weeds even for me, a 35-year wall street vet. But this one was simple, correct and utterly brilliant. Particularly the part of 'old man' Biden being the least loved but simply the absolutely only right man for the job right now - and likely never to receive the credit for it. Bravo.