Bidenomics Works

From Philipp Plein's Billionaire clothing line, via Yahoo Sports. 

Heather Cox Richardson puts together a couple of things I really should have put together myself: Bidenomics, seen as a definitive turn from Reagan-era neoliberalism, and the amazing character of the US economy at the moment, as reflected in the current numbers on growth, unemployment, and consumer spending:

with the election of Republican president Ronald Reagan, lawmakers claimed that concentrating wealth on the “supply side” of the economy would enable wealthy investors and businessmen to manage the economy more efficiently than was possible when the government meddled, and the resulting economic growth would make the entire country more prosperous. 

The problem was that this system never produced the economic boom it promised. Instead, it moved money dramatically upward and hollowed out the American middle class while leaving poorer Americans significantly worse off. 

When they took office, President Joe Biden and Vice President Kamala Harris rejected “supply side” economics and vowed to restore buying power to the demand side of the economy: ordinary Americans. They invested in manufacturing, infrastructure, small businesses, and workers’ rights. And now, after years in which pundits said their policies would never work, the numbers are in. The U.S. economy is very strong indeed, and at least some voters who have backed Republicans for a generation are noticing, as United Auto Workers president Shawn Fain made clear yesterday when the union made a strong and early endorsement of President Biden.

It's not just a matter of steady and responsible stewardship, and it's not just the way inflation was tamed and a "soft landing" achieved when most of the economists were predicting a recession. It's the whole damn ocean liner starting to turn around. It's plausibly an answer to the question Brad DeLong was asking on Wednesday:

The problem is that nobody likes neoliberalism. And perhaps that problem is raised to critical mass by the fact that nobody is putting forward a clearly superior alternative. So nobody will be happy doing what Martin [Wolf] suggests.

But is there a better alternative? Right now I do not see one. So I think we are stuck.

It's what I thought I saw when the Biden White House first announced the Build Back Better program in March 2021, and I saw it in light of Biden's collaboration with Bernie Sanders and Elizabeth Warren and Warren's economists Saez and Zucman, turning his back on "market solutions" in favor of industrial planning focused on defense against climate change, and massive spending balanced by taxation of the wealthy: as I wrote,

You notice what's missing from this picture? Carbon tax, for one thing, and cap 'n' trade mechanisms, They're going to spend money on developing the electric cars and creating the mass transit systems and building the charging stations everywhere. They're going to spend money, raised from people earning over $400,000 a year, on retrofitting buildings, rather than give landlords tax incentives to do it themselves. They're talking about $700 billion in savings over the ten-year period by getting pharmaceutical companies to lower the prices Medicare pays for prescription drugs. It's the market solutions, precisely, that are missing from this plan; the Biden administration is contemplating central planning on a de Gaulle or Mitterand scale. 

This wasn't happening because Biden had shuffled down the Overton Corridor to get to the other side of its window, or abandoned his identity as a Moderate to become a Progressive; it was because he's a gifted politician, an artist of the possible as the saying goes, who saw an opportunity, in the devastation of Covid and worry about climate change, to do something really memorable.

What we got in the end of the process, after the intervention of Senators Manchin and Sinema, in the form of the Rescue America and "Inflation Reduction" Acts, was of course a lot less spectacular. Still and all! The additional taxation of the very wealthy was kind of indirect

• Prescription drug price reform to lower prices, including Medicare negotiation of drug prices for certain drugs (starting at 10 new ones per year by 2026, increasing to more than 20 additional ones per year^[35] by 2029)^[36][37] and rebates from drug makers who price gouge – $281 billion^[7][36][37]
• Imposing a selective 15% corporate minimum tax rate for companies with higher than $1 billion of annual financial statement income – $222 billion
• Increased tax enforcement – $181 billion^[7][38]
• Imposing a 1% excise tax on stock buybacks – $74 billion
• 2-year extension of the limitation on excess business losses – $53 billion^[7]

but it's a lot of money, $738 billion in deficit reduction, paid in by Pharma, the richest corporations, individual tax dodgers like Donald Trump (that's why Republicans are so determined to stop the "87,000 new IRS agents"—they're lying about the bill, of course, but the fear of the bill among their donors is genuine).

And it offers things we really need.

It's nowhere near enough, and yet it has, as Cox was saying, had a big effect. It hasn't really reduced inequality, but it's made a lot of hard lives somewhat easier. It's also offered serious evidence, as we see, that a demand-side approach to economic management led by progressive taxation and progressive spending can be very good for an economy (as it was between 1945 and 1980.

And it's only a down payment. There's so much more that could be done, from renewing the fully funded Child Tax Credit that lifted so many kids out of poverty in 2022-23 (something like that but on a much more modest scale is likely coming out of the current Senate negotiation) is probably coming back soon but the whole thing could be restored. A couple of hundred billion dollars in could be clawed back from the very rich under current law, but taxing unrealized capital gains for the rich could net $8.5 trillion. Biden and Harris are great, but we really need a better Congress. Vote and donate Democratic.