Assessing Biden’s Roosevelt ambitions
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A week before Joe Biden’s inauguration, I Write in my column The new US president will have to “vigorously promote in his first few months as president-not only an immediate rescue operation, but also a structural policy with endurance and a fundamental restructuring of the economy.” As we all know, this is his plan — as we all know, the 46th President admires the 32nd President Franklin D. Roosevelt, and he did just that.
Ten months, what can I say? Has Biden succeeded in a big way? In my opinion, in two senses, he did not. In the third one, he has.
The intention of the big push was clear from the beginning. At that time, the Biden administration formulated three plans: the American Rescue Plan, the American Employment Plan, and the American Family Plan. Each is large-scale, and the philosophy behind them is to break the past.As his team clearly explained, the idea behind all large spending plans is actually Supply economics: Expenditure that can increase economic productivity, but use the government instead of letting the government get out of trouble.
However, these two meanings that do not constitute a big push are as follows. First, Biden had to make the plans less ambitious in order for them to be passed in Congress. Although the first is the most successful passage of the US$1.9 trillion emergency pandemic stimulus plan to save the economy, even if the employment and family plans are not completely changed beyond recognition, at least to some extent they have been damaged by the running-in with Capitol Hill.
Original $2tn work plan The infrastructure costs reduced to 1.2 trillion US dollars accounted for only about half of the actual new expenditures.Some but not all $1.8tn Family Plan, And some climate incentives that are not part of the employment plan have been repackaged in the nearly $2 trillion “Rebuild Better” bill that has passed the House of Representatives-see excellent New York Times results illustration what is inside.There are some well-known issues that may require amendments to the bill Pass the Senate.
Second, scale is not the most important: Donald Trump’s tax cuts are also large. Even if Biden’s plan is passed, they will only partially meet my criteria, that is, “having staying power and fundamentally restructuring the economy.” Many spending plans are one-offs, which is not necessarily a bad thing, but by definition, they do not stay indefinitely. Some may be permanent and deliberately made temporarily to please Hill’s strange deficit scoring.But as David Dayen says: “The sustainability of these plans will make a difference between the transition to social welfare and the short-lived one.”
In contrast, Biden’s failure to fulfill his campaign promise to raise the minimum wage to $15 is indeed almost irreversible and has stimulated a profound structural transformation of the US labor market.Rather, this transformation is caused by Labor shortage, So it may be as short as they are. The best example of Biden’s policy that does meet my criteria is to make the child tax credit refundable (so even those who don’t pay or pay very little tax can get it), which basically creates a European style Child welfare, or universal basic income for families with children.
but. Compared with what most US presidents did in the first 10 months, Biden’s economics is significant. The two packages that have passed are large, and so is the third one. It seems likely that they will be passed soon.
Emergency spending has contributed to the largest fiscal stimulus in developed countries. We can see that US economic output has recovered like a phoenix from the epidemic, as well as the good performance of people’s income and consumption. (We can also see it in inflation, as I Explained last week We should be very relaxed. ) Despite all the flaws, better infrastructure and reconstruction plans will increase national income by a few percent, which will make the U.S. economy develop in a healthier, greener, and more productive direction.
The most important thing is that these plans are large enough to allow voters to notice the real difference in the actual situation. Biden and his party will demand their election rewards for this. But at least soon there will be something real and quite big for them to try to claim rewards.
I wrote an early hint last week Big consumption shifts from services to goodsAn important driver of inflation may be coming to an end. Another sign emerged this week that the service industry is reversing.this OECD report Global merchandise trade stabilized in the third quarter, while the service industry accelerated.
There is another sign that inflation is temporary: the Claire Jones report says Transportation costs are falling.