Taking stock of Joe Biden’s economic record

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President Joe Biden successfully enacted four of the largest public investment and spending bills in post-World War II American history. Combined, the American Rescue Plan ($1.09 trillion), the Bipartisan Infrastructure Law ($1.2 trillion), the CHIPS and Science Act ($280 billion), and the Inflation Reduction Act ($891 billion) will see the government invest or spend $3.46 trillion by the time they are exhausted later this decade.

By the macro numbers, inflation is hovering a bit above the Federal Reserve’s target rate of between 2%, and unemployment is down to 4.2%. These would be remarkable achievements for any president. Yet Biden is leaving office with his approval ratings in the cellar.

What did Biden get wrong? The conventional answer is that he failed to give the people what they wanted. After the dust had settled from both the pandemic shortages and Biden’s post-pandemic relief spending, grocery prices were up 25%. And even as inflation plummeted from highs of about 9% to as low as 2.6%, interest rates were too high for many families to buy a home, and wages only barely kept ahead of inflation.

So what did Bidenomics, as it came to be known, actually deliver? Let’s take stock.

What Bidenomics was supposed to be

At the heart of Bidenomics is the notion that targeted public investment can attract more private investment, growing the economy and gradually weaning it off government support. The opposite — that tax cuts for corporations and the wealthy will trickle down into the rest of the economy and lift up the poor — has never been shown to work. The economists David Hope and Julian Limberg showed that in 2020, noting that “such reforms do not have any significant effect on economic growth and unemployment.”

As Biden said during a recent speech, the idea is not for government spending to replace private investment, but to take the risks the private sector won’t — and show that certain investments will work. Priming the pump then brings both private investment and the kind of economic activity that produces tax revenue to pay for those investments. That’s what happened when the Treasury and the Federal Reserve spent $634.8 billion in 2008 to 2009 to bail out the economy after the 2008 subprime mortgage debacle sparked the Great Recession under President George W. Bush. This turned out to be a great investment for the government: $743.8 billion came back by 2022 as interest, dividends, or fees or by companies buying back their stock warrants. That’s a profit of $109 billion, or 17%.

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Not a bad return for saving the entire U.S. economy.

The results of Bidenomics

Let’s take a look at the results.

The Inflation Reduction Act: Almost surely a misnomer, since it pumped yet more money into the economy at a time when interest rates are high, and has done less to reduce inflation than to support people at the lower end of the economic ladder and push long-term clean energy and climate protection goals.

Healthcare: Various provisions lowered out-of-pocket drug costs for seniors, capped insulin at $35 a month for diabetics (a massive life-saving issue for millions of affected Americans), and cut the cost of Obamacare so 80% of consumers can pay less than $10 a month for healthcare.

Clean energy: Attracted a promised $265 million in clean energy investments, three-quarters of it in counties with below-median incomes and 73% of it in counties that voted for Donald Trump in 2020. That helped create 330,000 jobs and saved 3.4 million families a total of $8.4 billion on more efficient home energy technology.

EVs: Funded a $7,500 tax credit for qualifying electric vehicles, benefiting more than 250,000 car buyers.

Taxes: Required billion-dollar corporations to pay at least a 15% corporate income tax, and a 1% tax on share buybacks, to encourage reinvestment rather than cashing out. This is expected to raise about $300 billion over 10 years.

IRS funding: Cut phone wait times from 28 minutes to three on average, and let 94% of taxpayers file electronically, as well as introducing a free tax system that actually competes with Intuit and H&R Block.

The CHIPS and Science Act: Invested $75 billion to jumpstart microchip manufacturing in the U.S., and break America’s reliance on Taiwan for most of its computer chips. That includes up to $52.7 billion in grants or loans, and another $24 billion in tax credits for chip production.

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The Bipartisan Infrastructure law: This money is slated for pretty much every kind of infrastructure across the country, much of which has been left to rot by cutbacks in federal, state, and local spending since the early years of the Reagan administration. A Brookings Institution study last year found that the grants were evenly distributed among the 50 states on a per capita basis, with no favoring of either red or blue states.

The top categories are:

• Transportation, where money has been allocated to everything from new high-speed rail links in California and Texas to a new rail tunnel in New York.
• Water mains, water treatment, and dams are getting a massive boost, and in a bid to make the U.S. more competitive, almost $50 billion is being spent to ensure all of the country has access to broadband wireless service.
• The money is even going to fix coastlines and shorelines to prevent erosion and keep waterways clear for shopping.

Helping red states: Biden knew his public investment plans would face opposition from Republicans in Congress, so he purposely placed many of the new factories in red states. “Not a politically smart thing to do, but I knew what I was doing,” Biden said recently at the Brookings Institution in Washington.

If those investments are halted, the backlash could come from Republican voters. Some 73% of private, strategic-sector investments announced since 2021 have gone to counties that Trump won in 2020.

By the end of November, Heather Boushey, the chief economist for Biden’s Investing in America Cabinet, released data showing that since Biden took office, the private sector had announced clean energy, semiconductor, and advanced manufacturing investments worth more than $1 trillion. “This government-enabled, private-sector-led approach contributed to the economy defying economist expectations and is crowding in private capital to critical sectors,” Boushey said.

So what’s gone wrong?

As economist James Kenneth Galbraith at the University of Texas, Austin, wrote recently in The Nation, if voters aren’t happy about good readings on the standard indicators of unemployment, inflation, and economic growth, “it must be because those indicators no longer connect to their sense of well-being.”

Galbraith comes from the left to suggest the problem with Bidenomics is not what it accomplished, but what it didn’t do: It didn’t generate much better pay for low-wage service jobs, it didn’t put to rest the fear many Americans have that their jobs are not secure, and it didn’t reverse the decline in real purchasing power.

Despite all the stimulus money, despite all the investment in infrastructure and construction jobs, and all the support — now ended — to give people healthcare and housing assistance — the rich were simply getting richer while the average Joe or Jane was still just one paycheck away from disaster.