As the presidential elections loom on the horizon, the White House has taken a proactive stance with the launch of its new public relations campaign, “Bidenomics.” This fresh endeavor seeks to define President Joe Biden’s economic agenda that President Biden himself humorously admitted at a June 17 union rally in Philadelphia, is working even if he doesn’t quite understand it. This raises a pertinent question: What precisely is Bidenomics, and is it indeed functioning as intended?
Understanding the Pillars of Bidenomics
Bidenomics, as stated by a White House release, is grounded on three key pillars: significant “smart” government spending on renewable energy and semiconductors, endorsement of unions and domestic manufacturing, and fostering competition. The administration boasts that the strategy has been instrumental in the creation of more than 13 million jobs—including nearly 800,000 manufacturing jobs—and has sparked a manufacturing and clean energy boom.
The pillars of Bidenomics are enshrined in acts like the Creating Helpful Incentives to Produce Semiconductors and Science (CHIPS) Act of 2022, the Infrastructure Act of 2021, and the 2022 Inflation Reduction Act. These allocate colossal amounts for bolstering U.S. semiconductor manufacturing, “clean energy” projects, and additional funding for clean energy through tax incentives, loans, and grants.
Despite these strides, Jonathan Williams, Chief Economist at the American Legislative Exchange Council, cautions that Bidenomics can be characterized as a “trickle-down big government.” The overarching theme of the Biden administration, he argues, is the expansion of governmental power and spending.
Revisiting Industrial Policy and Centralized Control
National Security Advisor Jake Sullivan, despite his primary focus on security, has emerged as an unexpected spokesperson for Bidenomics. He maintains that when Biden took office, America’s industrial base was notably hollowed out. Sullivan positions Bidenomics as a deliberate, hands-on investment strategy that aims to stimulate innovation, decrease costs, and create employment opportunities, particularly in the clean-energy sector.
However, critics argue that the government’s attempts to influence private industry often result in wastage and failure. Renowned economist Arthur Laffer opines that the government isn’t suited for making profitable investments, and its influence might steer the private sector away from catering to consumer demands towards fulfilling governmental objectives.
Steve Hanke, a professor of economics at Johns Hopkins University, goes a step further, identifying Bidenomics as the application of government intervention to steer and reconstruct the economy as per White House preferences.
The strategy of the government picking winners and losers through tools such as taxes, subsidies, regulations, tariffs, quotas, and even outright bans is a contested approach. The bankruptcy of Solyndra, a solar panel manufacturer that received significant federal loan guarantees, serves as a pertinent example of the potential pitfalls of this strategy.
Consequences of Increased Government Spending and Policy Changes
Under Bidenomics, car manufacturers are being encouraged to switch from gasoline-powered vehicles to electric vehicles (EVs), a shift facilitated by consumer subsidies, manufacturing grants, and tighter emissions regulations. But, these changes come with their challenges, such as sourcing minerals for EV batteries and developing a robust enough U.S. electric grid to support EVs on a large scale.
Simultaneously, the Biden administration aims to decrease domestic production of oil, gas, and coal in favor of renewable energy sources, thereby necessitating reliance on mineral-rich countries that may not have the best relations with the U.S. This approach has led to increased dependence on China, which holds significant control over the refining of these minerals.
The substantial increase in government spending, to the tune of more than $4 trillion under the Biden administration, has been another contentious aspect of Bidenomics. This vast expenditure has been critiqued for drastically increasing the national debt-to-GDP ratio and potentially leading to a reversal of economic growth.
The Role ofation in Bidenomics
Biden’s stance on taxation is starkly different from previous administrations. The president has been vocal about his dissatisfaction with the effects of excessive tax cuts to the wealthy and large corporations and positions Bidenomics as an attempt to build the economy from the bottom up.
Inflation, tagged as “Bidenflation,” has led to effective tax hikes. Inflation has resulted in an increase in the nominal value of assets leading to higher capital gains taxes, even as actual purchasing power stagnates. Additionally, inflation has inadvertently pushed Americans into higher tax brackets, and these measures are seen as contributing to negative public sentiment towards Biden’s economic policies.
In conclusion, Bidenomics represents a new paradigm, bringing together big government, industrial policy, and centralized control. As the nation moves towards the presidential elections, it will be critical to monitor the impacts of Bidenomics, both its successes and potential shortcomings, to evaluate its overall effect on the American economy.
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