In late June, the president gave a major speech championing his economic policies, embracing a label that his critics had once used derisively: “Bidenomics.” Joe Biden’s address was as much a political statement as an economic one. He must convince a public steeped in Reaganomics—small government, low taxes, and antagonism toward anything federal—that a muscular, government-forward approach is the best way to grow our economy, make it more equitable, and build a decarbonized future. The president must overcome cynicism that anything good is happening in the economy and make a case for what comes next.
If this political dynamic doesn’t change, Bidenomics could become a cudgel used by Republicans to browbeat Democrats. This would be a near-term headache for the party but a long-term tragedy if the president’s welcome economic strategy were thrown out before it could fully flower.
Unsurprisingly, conservatives are trying to brand Bidenomics as a toxic brew of overregulation, inflationary government spending, and wasted taxpayer money. So, the Bidenomics speech trumpeting undeniably good economic news was a massive political bet.
But it is one he can win. In August 1983, Ronald Reagan’s approval rating was 43 percent. As the economy improved, it would grow more than 10 points by the end of that year. Biden’s June job approval rating was the same as Reagan’s 40 years ago—43 percent. Moreover, recent focus groups with independents and “soft partisan” voters in swing districts show a shift toward voters believing the economy is improving.
For the president, this is promising. Now, here are three ways he can build on his Bidenomics speech:
First, keep telling the story of how government helps people economically. Poll after poll shows that Americans cannot name anything good the president has done for the economy—or them. But Biden has a coherent view, and he must repeatedly paint that picture until voters—whether or not they agree with him—understand what he believes went wrong with the economy, what he’s done to right those ills, and, ultimately, what he stands for.
Second, talk specifically about Bidenomics. In some ways, it is not particularly complicated. But this government investment-led approach is new for a public used to a free-markets-always approach. Biden’s successes require explanations, whether it’s how pandemic spending led to healthy labor markets or how the incentives built into Bidenomics yielded more clean manufacturing throughout the United States, making the economy more resilient for the next crisis.
Third, finish the job. In two years, and with a rancorous Congress, Biden has done big things, including investing in the American people and jobs; building critical infrastructure such as roads and bridges, airports, and broadband; and catalyzing investment in a green economy. These policies are delivering material successes. The president has also made antimonopoly one of the pillars of Bidenomics, as well he should. As the Washington Monthly and the Roosevelt Institute have long argued, stronger antitrust laws and enforcement are vital weapons in the fight against the consolidation of corporate power that raises consumer prices, diminishes choice, distorts healthy markets, lowers wages, and exacerbates inequality.
Bidenomics was no accident. The president came to office determined to bury Reaganomics. In June, he did not hide his disdain. “Under trickle-down economics,” he said, “it didn’t matter where you made things, as long as you helped the company’s bottom line, even if that meant seeing jobs and industries go overseas for cheaper labor. Supply chains and key products moved overseas. The entire towns and communities from where I lived out there and through the Midwest were shut down, hollowed out. I mean literally hollowed out.”
Biden’s narrative is clear about the root of the problem—a relentless focus on capital and profit and a global premium on cheap labor that has destroyed industries and regions—allowing for obscene wealth inequality. The president’s story points toward a solution: renewed investment, led by Washington but invested in America and Americans, with public money drawing private money off the sidelines.
The Bidenomics speech was also notable for what it did not say. It did not cite the inevitability of technological change undermining the middle class. It did not blame workers who lack skills or haven’t sufficiently invested in themselves. It laid the blame squarely on political decisions from the top.
Economic growth is possible, Biden said, when it begins “from the middle out and the bottom up, instead of just the top down. When that happens, everybody does well.”
This vision will come to fruition because unlike the Reagan approach—which turbocharged inequality—Bidenomics can claim broad-based successes. Now, Americans need to hear about them.
The Biden team has rightfully bragged about its economic achievements, which include the most robust post-COVID recovery of any major economy and lower unemployment than anyone thought possible three years ago. The administration can point to 13 million new jobs with higher wages, better benefits, and more predictable scheduling. And, after several years of rising prices, the U.S. can now claim one of the lowest inflation levels across advanced economies.
The most tangible Biden benefit for voters was the success of the American Rescue Plan (ARP). Devised in contrast to a more modest recovery package after the 2008 financial crisis and based on arguments many of us had been making for years, the ARP invested directly in American workers and families via an expanded Child Tax Credit, stronger unemployment insurance, funds for renters, small businesses, and state and local governments critical to everything from education to housing. This investment led to a dynamic labor market and higher wages, especially for those at the bottom of the income distribution.
The longer-term plan—Team Biden’s move from rescue and recovery to reform—was to address the economic fragility revealed by the pandemic and the accelerating climate crisis—investing over a trillion dollars in infrastructure, building safer, stronger supply chains, and creating jobs via government investment into everything from semiconductors to renewables.
Industrial policy, which just a few short years ago was “the policy that shall not be named,” became cutting-edge. The government was no longer going to pretend to be hands-off. Instead, it would craft markets guided by goals—such as decarbonization—and use public money to incentivize private investments. So far, judging by the number of jobs and investment announcements the White House touts, the paradigm change is paying off.
Of course, the ultimate success of Bidenomics will depend on implementing the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act. An enormous challenge for the Biden administration is that much of the money made available by this legislation is not out the door and will have a limited impact before the 2024 election. Strong governance across the federal government—alignment, and prioritization—will matter, given these laws’ breadth and complexity. Many of us who have been arguing for industrial policy for years will be pushing to ensure that public funds do not line corporate coffers but yield public benefit: a cleaner economy, one that is more inclusive in terms of race, gender, and region.
Beyond implementing existing legislation, an essential part of the president’s argument has been that we need to finish the job. This is correct. Cementing the shift to Bidenomics requires more. Most critical is a focus on wealth and taxation. Lost in the excitement about the U.S. government’s newfound ability to pursue North Star goals for our society is something more profound: generationally worsening inequality. Capital accumulation by the ultra-wealthy has gotten even worse over the last five years. Despite the policy change and public investment, we have seen, this radical inequality remains tragically entrenched. It is also, as Roosevelt Institute Fellow Darrick Hamilton has long argued, a tangible, material effect of generations of racist laws and norms that have severely limited the ability of Black Americans to accumulate and pass on capital.
This level of inequality is economically senseless and morally indefensible. And it must be fixed through better wealth-focused policies, including more—and more progressive—taxation than we have seen on the table from this administration.
If Bidenomics is to replace Reaganomics, it must deal with wealth and capital head-on. It has yet to tackle the obscene concentration of wealth that is the hallmark of our time. Until Bidenomics tackles it, inequality will fester. Whether the president is truly ready to do this remains an open question. For years, his worker-focused approach and public investment industrial strategy have been clear to many of us. But a new economic order requires going beyond an embrace of the sunny side of post-neoliberalism, with far more carrots than sticks.
Biden must be willing to tackle corporate power by combining his welcome antitrust push with capital taxation. His most recent combination of proposals—a billionaires’ minimum income tax, taxing capital gains at the same rate as labor income, and a tax on stock buybacks—is good. But even during his Bidenomics speech, the president dismissed the “old, old days of 70 percent tax.” This was a mistake, given that the top rate in the mid-20th century, under both Democratic and Republican presidents, and during the nation’s greatest growth and shared prosperity, was closer to 90 percent. And, notably, Biden has never embraced a more progressive universal inheritance or wealth taxation. Economist Thomas Piketty has challenged us to imagine trillions more spent on public goods like health care, housing, and education through the funds these taxes could raise.
But reducing inequality is also essential as a matter of political power. Conservatives and some left neoliberal detractors are challenging Biden’s economic vision, but the president must not give up on a paradigm shift. Wealthy power players continue to advocate Reaganomics in ways that redound to their economic benefit—lower taxation is better for them even if it is worse for society. They also continue to use their wealth to influence political outcomes. It is also politically advantageous for Biden to tangibly and visibly narrow inequality. Voters must see the gap between the rich and the rest of America shrinking and understand that it is due to government action.
As the historian Gary Gerstle reminds us, moving from one economic order to another takes time. Bidenomics will only emerge as the next economic paradigm when it can both show the impact of workforce investments, infrastructure spending, and industrial policy—and tame the constituencies made powerful by Reaganomics. The president’s embrace of Bidenomics is an important start.