Bidenomics: Exploring Different Perspectives
Why some think it's good, and I think it's contradictory
“Bidenomics” has been a political flashpoint in the United States as Democrats, and specifically Joe Biden, seek to implement their vision for the future of the US economy. To understand Bidenomics, this essay will explore what the core objectives of Bidenomics are, what kinds of policies have been enacted and/or are planned to meet those objectives, what the differences are between Bidenomics and Reaganomics, and what the different perspectives of American political and economic commentators and researchers are.
Understanding what Bidenomics is as a policy platform is paramount to comprehend its effects on the American economy and its future outlook. The official aim of Bidenomics is to “rebuild the economy from the middle out and the bottom up” (The White House, 2023). According to official communication from the White House, Bidenomics consists of three key pillars to accomplish this goal; these are making strategic public investments, empowering workers in order to grow the middle class, and promoting competition (The White House, 2023). The focus on public investment involves rebuilding infrastructure, supporting domestic manufacturing, and investing in critical industries like semiconductors and clean energy (The White House, 2023). By making these strategic public investments, the administration aims to shore up American domestic production capacity, protect domestic jobs, and attract further private sector investment. In addition to protecting jobs, the Biden administration is aiming to empower workers through promoting access to education and supporting unionization. Finally, the third pillar of Bidenomics is promoting competition. On the legislative side for example, the Biden administration has implemented over-the-counter sales of hearing aids and legislation to lower prescription drug costs (The White House, 2023). On the regulatory side, the administration has worked closely with other government officials such as Lina Khan of the Federal Trade Commission (FTC), who are working to more strictly enforce antitrust rules in order to protect consumers and enable free-market competition (Fung & Thorbecke, 2023). With public investment, worker empowerment, and promoting competition all at the forefront, Bidenomics is a plan that seeks to strengthen the American economy for the benefit of the average American.
In order to carry out the defined objectives of Bidenomics, the administration has enacted many fiscal, monetary, industrial, investment, and trade policies. Fiscally, the administration has placed a lot of importance on public investment, which does mean that government spending has stayed high even after the pandemic has concluded (Reiff, 2023). The initial hallmark of this aim was The American Rescue Plan, a $1.9 trillion stimulus, while the Inflation Reduction Act and the CHIPS and Science Act came later. While the Biden administration has emphasized the importance of reducing the government’s deficit and have taken some steps to do so, in practice they have prioritized more strategic spending over austerity measures that would reduce the government’s deficit (Reiff, 2023). In terms of monetary policy, it has been rather contractionary under the Biden administration. The Federal Reserve has raised their federal funds rate by five percentage points since March 2022 in order to lower the US’s high inflation (Tepper, 2023). However, the Federal Reserve’s actions are not directly controlled by the Biden Administration, and therefore their monetary policy can’t be taken at face value as the actual policy of Bidenomics. Bidenomics’ fiscal policy of strong government spending has somewhat counteracted the monetary policy of the Federal Reserve, with large amounts of public stimulus and investment continuing to contribute to the expansion of the money supply and therefore inflation. Biden’s industrial policies can be largely described as strengthening domestic capabilities while supporting workers and labour unions. This ties in well with Bidenomics’ investment policies, which consist of strategic public investments in key industries such as semiconductors in order to further strengthen domestic capabilities and induce more private sector investment (Helhoski, 2023). In terms of trade policy, Biden has largely maintained President Trump-era policies including targeted tariffs and has shied away from creating new trade deals (Lynch, 2023). This is in stark contrast to decades of American policy that emphasized free trade and globalization, and instead aligns with Biden’s agenda of favouring domestic industries while being tough on foreign economies such as China (Lynch, 2023). While this does theoretically serve domestic American workers, it certainly hurts the US on the global stage, with many countries and international organizations accusing the US of engaging in protectionism (Rashish, 2023). While many aspects of these policies complement each other, Bidenomics is not completely cohesive, with some contradictions and conflicts specifically in monetary, fiscal, and trade policy.
The term Bidenomics is itself a play on Reaganomics, the colloquial term for President Ronald Reagan’s economic policies in the 1980s (Stein, 2023). While both sets of policies share similar names, they are in fact opposite on most policy points. Reaganomics had a focus on “trickle down economics”, the idea that economic benefits for corporations and the rich would trickle down to help everyone in the economy including the middle and lower classes (Reiff, 2023). To this end, Reaganomics instituted massive tax cuts for corporations and the top individual income tax brackets, deregulated businesses, and ended union contracts (Reiff, 2023). This is in direct contrast to Bidenomics’ approach of strengthening the economy from the bottom up and focusing on the average worker. Biden has supported unions instead of working against them, and supports increasing taxes on corporations and the wealthy instead of decreasing them (Reiff, 2023). These tax increases then fuel public investment, rather than private under Reaganomics, in infrastructure and public works (Reiff, 2023). Both models do advocate for higher levels of government spending, but in different areas; Reaganomics policies doubled the US defense budget during Reagan’s time in office, while Biden has focused spending on the aforementioned infrastructure and public investment in crucial domestic industries (Reiff, 2023). While Bidenomics and Reaganomics may be phonetically similar, they could not be more different in practice with an opposite approach to building the economy; bottom-up, and top-down, respectively.
As with almost any political policy in the United States, there is much debate around the efficacy and long term impact of Bidenomics and how it will either strengthen or weaken the US economy. Views in favour of Bidenomics policies include one from the Center for American Progress, which points out the positive impact of Bidenomics specific to young people and therefore the future of the economy. Specifically, they say that the strong labour market, union wins, and climate investments are improving outcomes for young people (Vela & Weise, 2023). Another affirmative view of Bidenomics comes from Robert Reich, who posits that Bidenomics policies have successfully gotten the American economy back on track after the pandemic. He says that economic growth has accelerated under Bidenomics while also pointing out that inflation has come down and real wages are beginning to rise (Reich, 2023). In addition, Timothy Noah, in The New Republic, praises the effects of Bidenomics’ bottom-up approach. Republican-governed states, which are on average poorer than Democratic-governed states, have seen the largest income increases during Biden’s term (Noah, 2023). Regardless of state governance, Bidenomics seems to have done its job of growing the economy for the benefit of the most vulnerable workers. In contrast, there are many opposing views of Bidenomics including those of Robert Romano. Looking at real incomes, Romano found that the largest increases were captured by demographics that were most likely to vote for Biden, suggesting that Bidenomics policies may be targeted for political reasons (Romano, 2023). In addition, Brandon Weichert argues that high government spending is creating more problems than it is solving. Specifically, he posits that the increasing national deficit has prolonged inflation and thus necessitated higher interest rates from the Federal Reserve, damaging the economy and hurting the middle class rather than helping it (Weichert, 2023). Finally, David Catron points out that many voters are dissatisfied with the current state of the economy (Catron, 2023). Even with the recent improvement in inflation, income growth, and job creation, many of these indicators are still worse than when Biden first took office, leaving many voters dissatisfied and looking for a different approach (Catron, 2023). While many point out that Bidenomics has indeed helped many segments of the middle and lower classes in ways that will last, others suggest that the negative effects of government spending and the uncertain state of the economy will hurt it more in the long run.
My personal opinion of Bidenomics is that the intention is certainly good, and that it is much more intuitive than Reaganomics, but that it also suffers from a few key flaws. First, supporting unions is intuitively a good policy, but it can actually end up hurting some of the very people Biden claims to support. With such gains in union wages and bargaining power, the dichotomy between the union “insiders” and “outsiders” increases; existing union members benefit greatly from higher wages, while those without a job will now have a harder time finding one since demand for labour decreases with higher wages, preventing the labour market from clearing as it would in equilibrium. This hurts the poorest Americans the most, something that Biden claims to be against. Another flaw in Bidenomics stems from its investment policies. Using public investment to incentivise private investment can work, but coupled with many new regulations the effectiveness of this tactic can rapidly decrease due to overregulation. Finally, Bidenomics isn’t helped by what preceded it; under President Donald Trump, government spending levels were already extremely high from pandemic stimulus, and these policies themselves would already have had a lagging effect on inflation. By doubling down and continuing to spend, Biden further increased the money supply and therefore inflation, worsening the position of the economy and worrying consumers. These flaws do undercut a lot of what Bidenomics is trying to accomplish, but I think that only time will tell how effective Bidenomics ends up being.
In conclusion, Bidenomics is a wide-reaching and ambitious plan for the future of the US economy. Bidenomics seeks to build the economy from the bottom-up, rather than the top-down. To this end, Bidenomics entails strong public investment, empowering workers, and promoting competition. These hallmarks are then supported by specific actions related to fiscal policy, monetary policy, industrial policy, investment, and trade. Like any other political platform, Bidenomics has many supporters and detractors, and the platform itself can often be somewhat contradictory with notable flaws. With so much data that support both sides of the argument, the only way to know for sure how Bidenomics will continue to affect inflation, employment, and jobs in the long term is to wait and measure the effects.
References
Catron, D. (2023, November 26). Bidenomics: The High Price of Gaslighting. The American Spectator. https://spectator.org/bidenomics-the-high-price-of-gaslighting/
Fung, B., & Thorbecke, C. (2023, October 17). Lina Khan’s rise was heralded as an antitrust revolution. Now she has to pull it off. CNN Business. https://www.cnn.com/2023/10/16/tech/lina-khan-risk-takers/index.html
Helhoski, A. (2023, November 7). Bidenomics Explained. NerdWallet. https://www.nerdwallet.com/article/finance/bidenomics-explained
Lynch, D. J. (2023, August 28). Biden’s course for U.S. on trade breaks with Clinton and Obama. Washington Post. https://www.washingtonpost.com/business/2023/08/27/biden-trade-trump/
Noah, T. (2023, July 12). You’ll Be Very Surprised Who’s Benefiting Most From Bidenomics. The New Republic. https://newrepublic.com/article/174252/bidenomics-benefits-red-states-more-blue-states
Rashish, P. S. (2023, November 27). Bidenomics Is Still Incomplete. Foreign Policy. https://foreignpolicy.com/2023/07/12/bidenomics-is-still-incomplete/
Reich, R. (2023, August 2). ‘Bidenomics’ is working – which means Biden and the Democrats may win too. The Guardian. https://www.theguardian.com/commentisfree/2023/aug/02/bidenomics-is-working-which-means-biden-and-the-democrats-may-win-too
Reiff, N. (2023, November 17). Bidenomics: How Joe Biden’s Policies Are Shaping the U.S. Economy. Investopedia. https://www.investopedia.com/bidenomics-8363974
Romano, R. (2023, September 17). Commentary: Bidenomics Is Hurting Families. The Florida Capital Star. https://floridacapitalstar.com/commentary/commentary-bidenomics-is-hurting-families/gastarnewsstaff/2023/09/17/
Stein, J. (2023, August 23). 5 pillars of Biden’s economic revolution. The Washington Post. https://www.washingtonpost.com/business/2023/08/12/biden-economic-plan-pillars-impact/
Tepper, T. (2023, October 17). Federal Funds Rate History 1990 to 2023. Forbes Advisor. https://www.forbes.com/advisor/investing/fed-funds-rate-history/
The White House. (2023, June 28). Bidenomics Is Working: The President’s Plan Grows the Economy from the Middle Out and Bottom Up—Not the Top Down. The White House. https://www.whitehouse.gov/briefing-room/statements-releases/2023/06/28/bidenomics-is-working-the-presidents-plan-grows-the-economy-from-the-middle-out-and-bottom-up-not-the-top-down/
Vela, J., & Weise, C. (2023, October 5). 6 Ways Bidenomics Is Delivering for Young People. Center for American Progress. https://www.americanprogress.org/article/6-ways-bidenomics-is-delivering-for-young-people/
Weichert, B. (2023, November 5). Bidenomics Is Dead. 19FortyFive. https://www.19fortyfive.com/2023/11/bidenomics-is-dead/
This writing was originally submitted as coursework at the University of Toronto. It was only posted online after being fully graded and returned, although the post may be backdated to better reflect when it was actually written.