At a speech in Chicago at the end of June, Joe Biden formally declared his economic philosophy of “Bidenomics.” He identified three pillars supporting this strategy: government investment in the economy, education, and greater regulation to promote competition. A fourth, implicit one can be added – using tariffs and subsidies to insulate the American economy from foreign competition.
It's easy to see the term Bidenomics as mere ornamentation to help out with the 2024 elections, which will fade after he wins or loses. After all, when’s the last time you heard of Clintonomics, Obamanomics or Trumponomics? The Biden campaign certainly minted the term with the upcoming elections in mind.
However, I believe that Bidenomics is a useful term to refer to a shift in America’s economic philosophy that has been underway throughout the last decade. It is a direct reaction to and repudiation of the “Reaganomic” orthodoxy that has dominated since the 1980s. While this shift in economic philosophy didn’t start with Biden, and probably won’t end with him, it is better reflected in him than in any other recent president. To consider this shift, it's worth looking at from where we’re coming.
Molded in the cold war, Reagan’s philosophy argued that free markets and free enterprise should be left essentially uninterrupted. His logic was simple enough. Markets are more efficient at promoting economic growth than the government, which is marred by corruption and inefficiency. Thus, if we leave markets to do their own thing, they will cause the American economy to grow, and these benefits, even if often driven by the top, will trickle down to the average worker. Simply put, government intervention helps few people. Reagan cut taxes, eliminated government regulation and allocation controls, and did exactly what you’d expect on the sticker – let the free markets determine the direction of the economy, rather than the body politic.
By contrast, in Biden’s words, Bidenomics “grows the economy from the middle out and the bottom up instead of just the top down.” Instead of allowing companies and markets to determine the direction of the economy from above, the government is sliding into the bottom of society to invest in regular workers. Each of his moves – government investment, education growth, promotion of competition, and tariffs – is intentionally a repudiation of Reagan’s neoliberal outlook. This is especially the case for tariffs and government investment.
Over the last few years, Biden has poured previously unimaginable amounts of money into the American economy – something anathema to Reaganite ideology. Biden’s covid era stimulus bill, The American Rescue Act, spent a mammoth $1.9T to control the economic damage inflicted by Covid-19. Add to this the $1.2T bipartisan infrastructure law to grow America’s infrastructure, $280B CHIPS Act to spur domestic industry, and the $500B Inflation Reduction Act to, among other things, promote infrastructure and green energy, and Biden’s levels of spending are unique in recent history, even for a Democratic president. At the same time, Biden has maintained Trump-era import restrictions on billions of dollars worth of Chinese goods.
Biden’s interventionist philosophy did not fully arrive with Biden. After all, most of our recent tariffs were interestingly implemented by Trump, a Republican, not Biden. However, Biden is the prime example of the current zeitgeist. Instead of the market being the primary driver of the economy, Biden’s principles really amount to a return to the belief that government and market should be joint pilots.
The problem which Bidenomics may be able to address is that unrestricted laissez-faire capitalism doesn’t actually serve the least well off in society very well. Despite a promise of economic growth “trickling down” in the last 40-50 years, real purchasing power of the average American worker has barely budged. Real wages for the bottom 90% of workers in America have only increased by 15% since 1980, despite workers having roughly 60-70% higher productivity. Meanwhile, the richest 1% have seen their real income increase by 143% in the same period.
Bidenomics promises to help reinvest the surpluses of productivity growth back into regular workers and common goods, so that they are able to reap some of the benefits of America’s dramatic growth. This is not a bad thing.
I can see two further benefits of “Bidenomics.” The first is that it expands a common but important principle – the idea that the government should promote common goods which are often not profitable enough or too risky for the average company to invest in. Biden’s $550B investment in infrastructure recognizes the fact that, while America sorely needs to update its existing infrastructure, a pure market system is not the best framework to do so within, as infrastructure is a common good which is unlikely to be profitable for most companies that build it. Biden’s $394B spend on energy and climate funding in the Inflation Reduction Act recognizes the fact that the government must drive climate progress when it is unprofitable for consumers or companies to do so. Bidenomics expands the principle that, while markets must fuel the economy, the government should underpin and drive it.
Secondly, Bidenomics gives the government a broader tool kit for dealing with national security issues. The Taiwan Strait crisis has demonstrated the vulnerability of the world’s supply chains and their dependence on East Asian semiconductors. The CHIPs Act promoting domestic semiconductor production not only allows America to expand its domestic industry – it also makes American companies’ supply chains less vulnerable to political fissures. Biden’s trade restrictions, such as banning China from importing certain key conductors, likewise adds to his geopolitical tool kit.
All this being said, Bidenomics is hardly a panacea. There are two probable down sides to the policy of Bidenomics that are worth mentioning. Firstly, government investment and control of the economy always carries with it the risk of inefficiency. This risk should not be overstated – many of Biden’s programs, such as forbidding non-compete clauses, are likely to instead promote competition and efficiency. Besides, efficiency is only valuable insofar as it helps people’s lives, something Reaganite economics has only achieved to a limited extent. However, it is worth saying.
Secondly, and more immediately, significant government investment carries the risk of driving inflation. While partially spurred by Russia’s invasion of Ukraine and a hot labor market, it is almost certain that Biden’s zealous stimulus played at least a part in driving the inflation rises we have seen over the last couple of years. This is certainly a risk posed by his strategies, which should be taken into account. However, it is worth noting that the economy is still doing well despite its recent inflation spike, and looks to be headed towards a soft landing. Contrary to many of its detractors, Bidenomics hardly seems to have brought the US economy to an apocalypse. Perhaps it is also the case that some inflation is worth it to promote other goals.
What inflation does show is that government investment and control of the economy, much like unrestricted free markets, won’t fix all the nation's ailments. I think what Bidenomics at its best represents is a return to the idea that government and markets should be partners in the economy. This is a principle which is sorely needed.