Bidenomics: The Broader Context

This past Thursday President Biden signed into law his coronavirus relief package, which amounts to $1.9 trillion of new outlays. Even the most hardened cynic would be hard pressed to find much here that smells rotten. The new policy is indeed far removed from anything advanced by Trump and his manipulators over the past four years. It alone provides reason for hope, perhaps even for a new era of “Bidenomics.”

The package contains money for a variety of purposes. Notably absent from most of it is big business. Ok, it might be naïve to assume that they won’t end up getting some cut of the total. Nevertheless, the main provisions include:

1) $300 per week added to unemployment benefits until at least September 6^th

2) A 100 percent subsidy of COBRA insurance premiums for newly unemployed through the end of September

3) A $1,400 stimulus check per taxpayer earning $75,000 or less

4) $350 billion to state and local governments 

5) $130 billion for schools

6) About $36 billion to small businesses, including about $7 billion more for the paycheck protection program

7) A few hundred billion for health care, including Covid-19 vaccines, etc.

8) Expansion of the child credit, both in size and scope

9) Increase in the Earned Income Tax Credit

10) At least $40 billion for assistance to low-income families with rent and mortgage payments as well as aid for the homeless

It seems like plenty. But does it really herald a new era of Bidenomics? The truth is that it is simply too early to tell. As I noted in an earlier post, Joe Biden comes from the neoliberal wing of the Democratic party. As such, he and his followers, unlike Bernie Sanders, have no interest in unnecessarily rocking the boat. Biden’s (likely more liberal, admittedly) puppeteers might tolerate the present deal given the unique situation the country presently faces. But there are probably many among the elite who hope that it will be “one and done.”

Still, anyone familiar with history knows that FDR similarly desired a return to a pro-business status quo after dealing with the economic crisis of the early 1930s. But circumstances conspired against him. Today, in 2021, conditions are in many ways quite different from those during the Great Depression. But in their ripeness for a wholesale economic paradigm shift they appear to be more similar than many realize.

And it would be about time. Even though big-D democrats often don’t like to acknowledge it, Reaganomics long outlasted Reagan. Repeated tax cuts for the rich, mass deregulation, austerity for the poor and middle classes alongside welfare for corporate America and the military – none of it abated under Democrats Clinton and Obama, who nonetheless nibbled around the edges to garner all manner of misleading headlines. Reaganomics – or, if you prefer, supply-side economics or neoliberalism – is still with us after 40 years. Could present conditions finally spell its demise?

Biden’s stimulus package is certainly unprecedented in size. Really, $1.9 trillion is a lot of money. And the effect on our budget deficit will be far reaching. Already, the Congressional Budget Office projects that the deficit for 2021 will be almost $2.3 trillion, or 10.3 percent of GDP. And it also projects the national debt to increase to 107 percent of GDP in the next decade.

What are the likely consequences? Simple arithmetic dictates either that the Federal government will be even more in hock to the wealthy through continued issuance of Treasury bonds; or that it will substantially increase taxes on the rich over the next 10-20 years to reduce its debt burden. For those not troubled by the debt, there is also the option of continuing to print money (euphemistically referred to as “quantitative easing”), although really it only amounts to the Fed buying the Treasury’s new debt.

The first option was standard Reaganomic practice, with increasing resort to the third option following the financial crisis of 2008-9. And – surprise – you probably don’t need an advanced math degree to understand that it contributed to a notable increase in both income and wealth inequality since about 1980. So, let us then hope that the second option is close at hand. Make no mistake: There would be many in Congress who would fight tooth and nail any move to raise taxes on the rich. But the demise of Reaganomics, if it were indeed imminent, could open the door to what until recently seemed inconceivable.

Still, all things considered, the present $1.9 trillion sum is not nearly enough. The country is immensely large and economic misery is vast. Furthermore, it is well known that the country’s infrastructure is in a precarious state. Realistically the stimulus bill is not likely to be much more than a stopgap, albeit a crucial one. 

But Biden, to his credit, already appears to be aiming for a follow-up in the form of a much-needed infrastructure bill. Even if likely to encounter opposition from Republicans and conservative Democrats, a sizable bill is likely to please many different constituencies. We might therefore not be entirely unjustified in calling the present package a “good start.” And, of course, in hoping there is much more in the offing. 

What will determine whether the present stimulus is a one-off or a harbinger of a new era? We need to see what follows in the coming months. A major infrastructure deal of, say, $1 trillion or more would support the latter view. And making the now-universal child credit permanent, as some Democrats hope can be done, would be a huge step towards a European-style welfare state. 

And then, of course, there is climate change. As much as Nancy Pelosi and other establishment Democrats ridicule the idea of a “Green New Deal,” Biden has at least supported the idea in principle. As I noted in a recent post some major climate legislation seems at some point inevitable. A policy mix that combined the $1.9 trillion coronavirus relief with major infrastructure spending, permanent child credits, and a Green New Deal would surely be indicative of a new era. And even if Biden were merely reacting to challenging economic conditions, such a major change in economic philosophy would warrant the moniker “Bidenomics.”