December 11, 2024
Yesterday, President Joe Biden spoke at the Brookings Institution, where he gave a major speech on the American economy. He contrasted his approach with the supply-side economics of the forty years before he took office, an approach the incoming administration of Donald Trump has said he would reinstate. Biden urged Trump and his team not to destroy the seeds of growth planted over the past four years. And he laid out the extraordinary successes of his administration as a benchmark going forward.
The president noted that Trump is inheriting a strong economy. Biden shifted the U.S. economy from 40 years of supply-side economics that had transferred about $50 trillion from the bottom 90% to the top 1% and hollowed out the middle class.
By investing in the American people, the Biden team expanded the economy from “the middle out and the bottom up,” as Biden says, and created an economy that he rightfully called “the envy of the world.” Biden listed the numbers: more than 16 million new jobs, the most in any four-year presidential term in U.S. history; low unemployment; a record 20 million applications for the establishment of new businesses; the stock market hitting record highs.
Biden called out that in the two years since Congress passed the Inflation Reduction Act and the CHIPS and Science Act, the private sector has jumped on the public investments to invest more than a trillion dollars in clean energy and advanced manufacturing.
Disruptions from the pandemic—especially the snarling of supply chains—and Russian president Vladimir Putin’s attack on Ukraine created a global spike in inflation; the administration brought those rates back to around the Fed’s target of 2%.
Biden pointed out that “[l]ike most…[great] economic developments, this one is neither red nor blue, and America’s progress is everyone’s progress.”
But voters’ election of Donald Trump last month threatens Biden’s reworking of the economy. Trump and his team embrace the supply-side economics Biden abandoned. They argue that the way to nurture the economy is to free up money at the top of the economy through deregulation and tax cuts. Investors will then establish new industries and jobs more efficiently than they could if the government intervened. Those new businesses, the theory goes, will raise wages for all Americans and everyone will thrive.
Trump and MAGA Republicans have made it clear they intend to restore supply-side economics.
The first priority of the incoming Republican majority is to extend the 2017 Trump tax cuts, many of which are due to expire in 2025. Those tax cuts added almost $2 trillion to budget deficits, but there is little evidence that they produced the economic growth their supporters promised. At the same time, the income tax cuts delivered an average tax cut of $252,300 to households in the top 0.1%, $61,090 to households in the top 1%, but just $457 to the bottom 60% of American households. The corporate tax cuts were even more skewed to the wealthy.
In the Washington Post yesterday, Catherine Rampell noted that Republicans’ claim that extending those cuts isn’t extraordinarily expensive means “getting rid of math.”
At a time when Republicans like Elon Musk and Vivek Ramaswamy, who are leading the new “Department of Government Efficiency,” are clamoring for cuts of $2 trillion from the budget, the Congressional Budget Office estimates that extending the tax cuts will add more than $4 trillion to the federal deficit over the next ten years. Republicans who will chair the House and Senate finance committees, Representative Jason Smith (R-MO) and Senator Mike Crapo (R-ID), say that extending the cuts shouldn’t count as adding to the deficit because they would simply be extending the status quo.
Trump has also indicated he plans to turn the country over to billionaires, both by putting them into government and by letting them act as they wish. Last night, on social media, President-elect Trump posted: “Any person or company investing ONE BILLION DOLLARS, OR MORE, in the United States of America, will receive fully expedited approvals and permits, including, but in no way limited to, all Environmental approvals. GET READY TO ROCK!!!”
Biden called out the contrast between these two economic visions, saying that the key question for the American people is “do we continue to grow the economy from the middle out and the bottom up, investing in all of America and Americans, supporting unions and working families as we have the past four years? Or do we…backslide to an economy that’s benefited those at the top, while working people and the middle class struggle…for a fair share of growth and [for an] economic theory that encouraged industries and…livelihoods to be shipped overseas?”
Biden explained that for decades Republicans had slashed taxes for the very wealthy and the biggest corporations while cutting public investment in infrastructure, education, and research and development. Jobs and factories moved overseas where labor was cheaper. To offset the costs of tax cuts, Biden said, ‘advocates of trickle-down economics ripped the social safety net by trying to privatize Social Security and Medicare, trying to deny access to affordable health care and prescription drugs.” He added, “Lifting the fortunes of the very wealthy often meant taking the rights of workers away to unionize and bargain collectively.”
This approach to the economy “meant rewarding short-termism in pursuit of short-term profits [and] extraordinary high executive pay, instead of making long-term investments…. As a consequence, our…infrastructure fell…behind. A flood of cheap imports hollowed out our factory towns.”
“Economic opportunity and innovation became more concentrated in [a] few major cities, while the heartland and communities were left behind. Scientific discoveries and inventions developed in America were commercialized in countries like China, bolstering their manufacturing investment and jobs instead of [our] economy. Even before the pandemic, this economic agenda was clearly failing. Working- and middle-class families were being hurt.”
“[W]hen the pandemic hit,” Biden said, “we found out how vulnerable America was.” Supply chains failed, and prices soared.
Biden told the audience that he “came into office with a different vision for America…: grow the economy from the middle out and the bottom up; invest in America and American products. And when that happens, everybody does…well…no matter where they lived, whether they went to college or not.”
“I was determined to restore U.S. leadership in industries of the future,” he said. The Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act “mark the most significant investment in America since the New Deal,” with new factories bringing good jobs that are rejuvenating towns that had been left behind in the past decades. Biden said he required that the government buy American goods as the country invested in “modernizing our roads; our bridges; our ports; our airports; our clean water system; affordable, high-speed Internet systems; and so much more.”
Eighty percent of working-age Americans have jobs, and the average after-tax income is up almost $4,000 since before the pandemic, significantly outpacing inflation.
Biden and his team worked to restore competition in the economy—just today, the huge grocery chain Albertsons gave up on its merger with another huge grocery chain, Kroger, after Biden’s Federal Trade Commission sued to block the merger because it would raise prices and lower workers’ wages by eliminating competition—and their negotiations with big pharma have dramatically cut the costs of prescription drugs for seniors. The administration cut junk fees, capping the cost of overdraft fees, for example, from an average of $35 to $5.
Biden quoted Jeffrey Sonnenfeld and Stephen Henriques in Time magazine a month ago, saying: “President-elect Trump is receiving the strongest economy in modern history, which is the envy of the world.”
In his speech, Biden noted that it would be “politically costly and economically unsound” to disrupt the decisions and investments the nation has made over the past four years, and he urged Trump to leave them in place. “Will the next president stop a new electric battery factory in Liberty, North Carolina, that will create thousands of jobs?” he asked. “[W]ill we deny seniors living in red states $35-a-month insulin?”
In their article, Sonnenfeld and Henriques noted: “President Trump will likely claim he waved a magic wand on January 20 and the economic clouds cleared,” and they urged people: “Don’t Give Trump Credit for the Success of the Biden Economy.”
Biden gave yesterday’s speech in part to put down benchmarks against which we should measure Trump’s economic policies. “During my presidency, we created [16] million new jobs in America” and saw “the lowest average unemployment rate of…any administration in 50 years.” Economic growth has been a strong 3% on average, and inflation is near 2 percent, he said.
“[T]hese are simple, well-established economic benchmarks used to measure the strength of any economy, the success or failure of any president’s four years in office. They’re not political, rhetorical opinions. They’re just facts,” Biden said, “simple facts. As President Reagan called them, ‘stubborn facts.’”
Biden is willing to bet that if the American people pay attention to those facts, they will recognize that his approach to the economy, rather than supply-side economics, works best for everyone.
Today the NASDAQ Composite index, which focuses on tech stocks, broke 20,000 for the first time.
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Notes:
https://time.com/5888024/50-trillion-income-inequality-america/
https://apnews.com/article/kroger-albertsons-79e366723d7287b2df71d96730fba76e
https://time.com/7176493/trump-credit-success-biden-economy-inflation/
https://taxpolicycenter.org/briefing-book/how-did-tcja-affect-federal-budget-outlook
https://www.washingtonpost.com/opinions/2024/12/10/trump-tax-policy-math-gop/
Bluesky:
Heather sadly leaves out the one most salient fact:
The tens of millions who voted for the convicted criminal need no facts, only fantasy.
When they attended those American schools all hollowed out of humanities -- humanities all gone -- reality TV and far-right entertainment sensationalism filled that void.
People hunger for fiction, for stories. The convicted criminal can spin yarns, con games, and fantasyland with a straight face -- as well as with "bing-bing-boing-bong" and lugubrious dance moves. But as those tens of millions have never read a whole novel, of any kind, they lack sober perspective on the madness they inhabit.
Biden's message is too complicated for average voters to understand. Democrats are great policy wonks, but most people don't think in those terms. Historians and economists will hopefully give Biden credit for his plan and execution.