Categories: Economic News

With the victories in Congress, the imprint of Biden on the American economy emerges


It has been an important month for Bidenomics.

After a year marked by internal Democratic dysfunction, Congress has in recent weeks suddenly introduced a series of bills that will help form the core of President Biden’s economic record before lawmakers face voters in the 2022 mid-term elections.

Beyond the economic rescue package and the bipartisan infrastructure bill passed last year, Congress just this month also passed a $280 billion measure to expand health care for veterans, a $280 billion dollars to counter the economic rise of China and the The Inflation Reduction Act focused on addressing the climate crisis, reducing health care costs and raising taxes on large corporations.

The recent victories, in particular, have sharpened the Biden administration’s imprint on the American economy. His presidency combines some traditional features of Democratic policymaking, such as pursuing higher taxes and expanding access to health care, with a new focus on reviving domestic industry through targeted investments, the support of American labor and the suppression of monopolistic companies through a greater emphasis on antitrust. execution

The start of Biden’s term has been defined by pitched battles over short-term economic circumstances: The president has touted his 2021 bailout plan as leading to the biggest single-year jobs boom in US history United, while critics have attacked that same policy for exacerbating the fastest price increases in four decades. The latest string of legislative victories, however, turns the battle over “bidenomics” into one about the long-term trajectory of the country’s tax code, the energy sector and other structural parts of the country’s economy, even though the ‘threat of inflation continues to dominate even. these debates.

“There is a much greater comfort with industrial policy, ‘Buy America’ to engage internationally, pro-union policy and pro-competition policy,” said Jason Furman, who served as senior economist at the Obama administration. “Some of those things were in Obama, but there’s more and it’s more central to Biden.”

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White House officials say the new legislation aims to expand U.S. manufacturing capacity, with hundreds of billions of dollars invested in sectors such as infrastructure, semiconductors and renewable energy, will ensure that the overall economy continues to grow for the coming years. Those economic gains will be passed on to workers, they say, through their efforts to manage a tight labor market fueled by the bailout, meaning workers have the bargaining power to ensure the benefits are widely felt.

“When it comes to establishing a lasting legacy in terms of existentially necessary economic transformation, history may put President Biden in the same sentence as FDR and LBJ,” said Jared Bernstein, a member of the House Council of Economic Advisers. Blanca, in an interview, referring to the Democratic presidents Franklin D. Roosevelt and Lyndon B. Johnson, who introduced major changes in the American economy such as Social Security and Medicare. “And President Biden gets an asterisk, because he’s building that legacy in an environment of intense partisanship and a razor-thin majority.”

Still, at least so far, Biden’s economic reputation has been overwhelmingly defined by one weakness: inflation. Biden’s first major bill, the $1.9 trillion American Rescue Plan, boosted economic demand, which many economists have said led to the fastest rise in U.S. prices in decades.

Rising food, housing and energy prices, while easing, have weighed on US budgets, wiping out the benefits of widespread wage gains. Polls have consistently shown that the public is generally furious about high prices, and it remains unclear whether the sum of his legislative achievements can overcome that frustration.

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The dangers to today’s economy threaten to overturn the Biden administration’s claims of long-term progress and transformation. If the Federal Reserve moves too quickly to fight inflation, unemployment could rise and the economy could slip back into recession. But failure to stop inflation would also spell political and economic disaster for the administration.

“Inflation hits everybody everywhere with everything, and that’s a shame for the administration. Unless they fix it, it’s not going to matter much anymore,” said Frank Luntz, a pollster and analyst. Luntz said inflation trumped all issues for voters, even when guns and abortion dominated the news. “Nothing else comes close, because nothing affects more people in more places in more communities across the country.”

The White House is also forced to grapple with the failure of key parts of Biden’s campaign promises. Democrats in 2020 made sweeping changes to the nation’s safety net, as Biden campaigned to create a new “care economy” with new programs for child care, paid family leave and elder care.

Those aspirations have largely died in Congress, despite the administration’s efforts. Some analysts say the Biden presidency is poised to do less to expand the welfare state than former Democratic presidents Bill Clinton and Barack Obama, who pushed for more significant changes to the U.S. health care system. The White House approved a one-year extension of the child tax credit in its 2021 rescue plan as the centerpiece of its plan to reduce child poverty, hoping to build popular support for the program to guarantee its continuous extension. But that measure expired at the end of last year with little chance of being renewed soon.

“The administration misjudged what the covid crisis could do for major policy change and misjudged what the feedback effects of the policies they implemented for a year would be,” said Josh McCabe, a historian of welfare policy and senior analyst at the Niskanen Center. a center-right think tank. “They started with a very ambitious agenda, thinking there was a political window, but they turned out to be completely wrong.”

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Instead, Biden’s economic legacy will largely be the product of congressional negotiations, which were determined more by Sen. Joe Manchin III (DW.Va.) — the 50th Democratic vote in Congress — than by the White House . Many of the policies that centrist Democrats agreed to support had also been supported by President Donald Trump. Trump emphasized the need for action on prescription drugs, reviving American manufacturing and fighting the rise of China, which are now key pieces of Biden’s agenda. Biden has also largely maintained the controversial tariffs Trump imposed on China, although some economists have said removing them would help ease inflation.

“Conceptually, there’s a lot of overlap with President Trump’s agenda and the agenda of parts of the Republican Party,” said Stephen Miran, who served as a Treasury Department official during the Trump administration and is the co-founder of of Amberwave Partners, an investment. background

In an interview with The Post, White House National Economic Council Director Brian Deese said Biden “achieved some of the most significant bipartisan accomplishments in decades, including what the former president has asked for but failed to do do”.

But the White House has also taken actions criticized by American corporations in major changes in the direction of the Trump presidency. Biden, for example, has taken a broad approach to cracking down on outsized corporate power, reflecting an emerging Democratic consensus that a handful of megacorporations have stifled competition in the American economy. Biden appointed an antitrust hawk to head the Federal Trade Commission, and his Justice Department is in the process of overhauling guidelines for large corporate mergers. The White House has taken steps to impose greater oversight on the shipping industry, which was deregulated under Clinton, through new legislation that reduces the higher costs of international shipping. In addition, the Inflation Reduction Act includes a tax on the few dozen shipping companies with more than $1 billion in annual profits.

“It’s a big change from the Reagan consensus that was carried out by the Obama administration,” said Sarah Miller, executive director of the American Economic Liberties Project, a think tank that supports aggressive antitrust policy.

Biden has also overseen a very different economic recovery than Obama, who struggled with the slow pace of job and wage gains after the Great Recession. While the stimulus rescue plan exacerbated inflation, it also avoided the deep labor market scars that followed the last recession. Those robust gains are the centerpiece of Biden’s efforts to empower workers, in part because Congress defeated efforts to fulfill Biden’s campaign promises to raise the minimum wage and make it easier for workers to unionize.

By increasing demand for workers, resulting in strong job creation and a record number of job openings, workers have ended up with more leverage in the workplace to negotiate higher wages and benefits. (Biden has also taken token actions to boost union efforts, such as inviting Amazon labor leaders to the White House.)

“We don’t face the long-term damage to workers that we did previously,” said Claudia Sahm, an economist who worked at the Federal Reserve. “I don’t see that labor institutions have changed, but we have seen the bargaining power of workers return.”

Biden’s ultimate economic legacy may come down to the Lower Inflation Act, which finally passed after months of difficult negotiations without a single GOP vote. The legislation is the largest climate bill ever passed, and Democrats hope it will also revive American manufacturing by reviving the nation’s industrial base, with the goal of repairing supply chains exposed as fragile by the war in Ukraine and the coronavirus pandemic.

Beyond the bill’s energy savings, its most direct benefit to consumers may be prescription drug reforms that would require Medicare to negotiate prices for some of the nation’s most expensive drugs. This measure would take until 2026 to come into force — after this year’s legislatures and the 2024 presidential elections — without knowing to what extent voters will feel it.

“Compared to most presidents, he’s had a hard time getting anything out of his campaign platform,” said Doug Holtz-Eakin, a GOP policy analyst who ran the Congressional Budget Office and is skeptical of the climate measures of the plan. “Now he has that piece, and the question is whether he defines the legacy.”


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