Friday, March 12, 2021

Economic Bidenism

Biden is leading a quiet revolution reports E.J. Dionne at the Washington Post.

(With thanks to our Editor-at-Large Sherry.)

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"Our economic package is a closely knit, carefully constructed plan to restore America’s economic strength and put our nation back on the road to prosperity,” the president declared in a speech from the Oval Office. “Each part of this package is vital.”

While President Biden could have said that about the $1.9 trillion economic rescue package the House sent to his desk on Wednesday, the words were President Ronald Reagan’s in support of his 25 percent across-the-board tax cut in July 1981.

Forty years ago, the victory of Reagan’s tax cut plan inaugurated a new ideological era, its core conviction summarized by a line in Reagan’s inaugural address that conservatives of a certain age can recite in their sleep: “In this present crisis, government is not the solution to our problem. Government is the problem.”

Passage of the Biden plan reflects the triumph of precisely the opposite view: that only active and competent government can get us out of the mess we’re in now. The willingness of Democrats to speed through a program of this size reflects the final shrugging off of Reagan-era constraints that made even liberal politicians gun-shy about government activism.

The shift away from top-down supply-side economics could not be more dramatic. The Reagan theory, reduced to its essence, was: Help the rich, and their investments will produce jobs and prosperity for everyone else. The Biden theory is bottom-up: Help middle-class and low-income Americans, and their purchasing power will drive an unprecedented era of growth.

The Tax Policy Center’s comparison of President Donald Trump’s corporate tax cuts and Biden’s rescue bill tells the tale of two theories. The benefits of Trump’s tax cut went overwhelmingly to the top 20 percent. Assistance from the Biden rescue reaches well into the middle class, but its biggest benefits go to the bottom 40 percent of the income structure.

This poses a danger to Republicans still clinging to the Reagan faith because the GOP’s less affluent supporters understand what’s going on.

A Pew Research Center survey this week found that Biden’s plan was supported by only 25 percent of upper-income Republicans and 37 percent of those with middle incomes. But among lower-income Republicans (those earning less than roughly $40,000 annually, who account for a quarter of all who identify with the GOP), fully 63 percent backed the plan. A resurgence of class politics could split the Republican Party in ways well beyond the capacity of Mr. Potato Head and the culture-war controversies around him to contain.

But there is another Reagan-era lesson. The country did not become more conservative because tens of millions suddenly embraced the economic theories of Friedrich Hayek and Milton Friedman any more than the current drift back to government activism arises from a mass rereading of John Maynard Keynes and John Kenneth Galbraith.

Politics is a “by their fruits shall ye know them” business. Reaganism solidified its hold because of the economic boom that began late in 1982. Conservatives were unrelenting in ascribing the good times to Reagan’s policies.

Biden’s team and Democratic strategists know they must sell the rescue plan hard and make sure voters know all that the administration is doing to end the pandemic and get the economy moving. “The most important thing is to go out there and tell people you did a lot so that when the economy starts to recover, they link the recovery to what you did,” said Guy Molyneux, a Democratic pollster.

This is exactly the argument Senate Minority Leader Mitch McConnell (R-Ky.) was trying to preempt when he told reporters, “We’re about to have a boom. And if we do have a boom, it will have absolutely nothing to do with this $1.9 trillion.”

The administration knows that the president must tout the impact of his achievement. Presidential travel in the coming weeks will be geared toward this objective. He must also get the nuts-and-bolts of implementation right — no small task on a program this large — as a prelude to the administration’s next big initiative: a long-term infrastructure and economic reconstruction program.

“We not only have to explain, execute, implement and deepen the effectiveness of what has just been done,” said Steve Ricchetti, a senior White House adviser, “but we also have to turn to the investment and recovery part of our agenda.”

There is nothing magical about the renewed popularity of government action. The pandemic flattened the private sector economy and demanded a mobilization of resources only government could command. The disparate health and economic impacts of covid–19 turned inequality from an abstract question into a life-or-death proposition.

Just as the stagflation crisis at the end of the 1970s gave birth to Reaganism, the current crisis might lead to a new disposition through which pragmatic forms of government activism add up to a quiet political revolution. Maybe we’ll call it Bidenism.

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