Can’t We Stop Yammering About Paradigm Shifts?
(Bloomberg Opinion) -- President Joe Biden’s $1.9 trillion economic relief and stimulus law has been hailed on the progressive left as the beacon of a new era in economic policy, in which the neoliberalism that has defined Republican and Democratic policy-making for decades is being ushered out the door.
Biden himself claimed that “it changes the paradigm.” A writer at Vox agreed, and even gave it a name: “post-material materialism.” David Brooks, no lefty progressive, argued in the New York Times that “the whole paradigm of the role of government in American life is shifting.” Many conservatives agree, but they tend to bemoan it instead of celebrating.
All sides would do well to tone down the hype. The American Rescue Plan is a law of significant consequence, but not a break from the bipartisan consensus about the benefits of markets and the proper role of government that has created policy guardrails for the past four decades. Odds are that Biden’s plans for infrastructure, energy and health care won’t be, either.
Biden added a $300 federal supplement to standard, state-provided unemployment benefits, which will be in place through September. This makes unemployment assistance more generous. But it hardly transforms a program intended, as always, to help households pay the bills while they are unemployed, and to give them space to find a job that is a good fit for their background and interest.
A paradigm change would have changed these goals. For example, it could have argued that the unemployed should be entitled to maintain their previous standard of living for as long as it takes for them to find a job that paid as well as the job they lost. Instead of something this radical, Biden opted for something more sensible: just make existing benefits more generous.
Or take the one-time, $1,400 checks to households that are part of the relief package. The goal is to boost demand in a weak economy by giving households extra cash, while also helping households that are truly struggling. That’s a classic blend of Keynesian stimulus and economic relief. A paradigm shift would have required a different goal — say, making the checks monthly rather than one-time, with the argument that the government should provide all households with a regular and generous income in perpetuity.
Something that is transformational can’t be temporary, and hardly any of the legislation changes things permanently. The unemployment benefits and stimulus checks are temporary. So is aid to state and local governments, public health and vaccine measures, and money for schools. These are big-ticket items.
The U.S. has also used many of the same recession-fighting measures in the past, weakening any claim Biden has to inaugurating a new era of fiscal policy. Checks to households, generous unemployment benefits, public-health measures to address the virus, support for small businesses and a stronger safety net were all part of the Cares Act, the $1.8 trillion economic relief and stimulus law signed in March 2020 by President Donald Trump. President George W. Bush put stimulus checks in the mail to households in 2001 and 2008.
But while the relief law as a whole doesn’t represent a new era of fiscal policy, some components of it might.
Trump’s 2017 tax law doubled the tax credit for children from $1,000 to $2,000 per child. It also allowed for up to $1,400 of the credit to be refundable, so that households with earnings above $2,500 can receive up to that amount even if they don’t owe income tax. Biden expanded the credit to $3,000 for children ages 6 to 17, $3,600 for younger children, made the credit fully refundable and waived the $2,500 earnings requirement.
That’s not a paradigm shift. But one aspect of the expansion might be: Part of it will be doled out in monthly checks, not in a once-a-year lump sum, and Democrats hope to make it permanent. If that happens, households may start thinking of it as an income rather than as a component of their tax refund. It will be tempting for future politicians to crank up the monthly amount. That really could be transformative.
Supporters will point to the size of the package as something new. It isn’t. The Cares Act was roughly the same size. And providing this much fiscal support during an expanding economy can be seen simply as an unusual response to a unique circumstance or — as I argued earlier this month — as a policy mistake, one that is unlikely to be repeated.
Biden’s developing proposal to spend trillions on improving U.S. infrastructure will surely be out of the same playbook both parties have used for decades. Will his future plans on climate or health care usher in a fundamental change in economic policy? Turning the health care system entirely over to the government — as some of his progressive supporters would like — certainly would be. Setting a date in the next decade or two after which you can’t drive a gas-powered car would be, as well.
But my guess is that Biden is more likely to use a classic combination of regulation and subsidies to expand access to health care and to encourage the use of alternative energy. These efforts may be aggressive. They may even go down in the history books. But they will rest on familiar terrain.
The nation elected Joe Biden and got Joe Biden — not Bernie Sanders in Biden clothing. The Biden who sits in the Oval Office today is a few clicks further to the left than I had expected. But progressives should stop exaggerating and conservatives should stop doom-saying. The democratic-socialist revolution has not begun.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”
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