Bidenomics Is a Populist Gridlock Buster. Uh-Oh.
(Bloomberg Opinion) -- Joe Biden says he wants to subdue divisive politics, and the economic policy program he rolled out last week shares key elements of the nationalist vision that dominates the Republican Party under President Donald Trump. The prospect of constructive bipartisan engagement is welcome, but the populist proposals sketched out by the presumptive Democratic presidential nominee are not.
If elected in November, Biden would have a chance to draw Republican support for substantial parts of the agenda he laid out in a speech last week in Pennsylvania. But that’s largely because of the influence Trumpian populism and economic nationalism have had on a previously internationalist Republican Party.
A key part of Biden’s populist economic vision involves reviving manufacturing. He called for $400 billion in spending on materials and products made in the U.S. as part of a “Buy American” program, along with $300 billion in research and development to spur domestic innovation and support domestic production. He touted the crafting of a national industrial policy and downplayed the role of finance in creating prosperity. “It’s way past time we put an end to the era of shareholder capitalism,” Biden declared.
To the conservative ear, this sounded familiar. Ever since Trump’s 2016 victory, some Republicans have taken similar positions. Florida Senator Marco Rubio, for example, is also critical of shareholder capitalism. He’s called for “a 21st-century pro-American industrial policy,” in part to revive domestic manufacturing. When asked about Biden’s speech in a television interview Monday morning, Rubio said “it’s great to see” Biden discussing the need to rebuild the U.S.’s manufacturing base.
In response to the coronavirus pandemic, Rubio joined with Democratic Senator Elizabeth Warren and others on a bill calling for strengthening “Buy American” provisions to support the domestic market for medical goods.
Senator Josh Hawley of Missouri, a rising star of conservative populism, is warmer to government intervention in the economy than Republican senators have typically been. This spring he announced a proposal to offer government-backed, low-interest loans for capital expenditures to businesses that bring production back to the U.S. from abroad. Rubio and Hawley have praised labor unions, as Biden did in Pennsylvania. Another Republican senator, Tom Cotton of Arkansas, recently joined Hawley and several other senators from both parties, including Minority Leader Chuck Schumer, to introduce the American Foundries Act of 2020 that aimed to boost the domestic production of semiconductor chips.
The collapse of the free-trade consensus that has dominated U.S. economic policy for decades would give a President Biden a chance to muster bipartisan support for his pro-manufacturing, industrial-policy agenda.
Would that be good for the country?
Protectionism and industrial policy, including buy-American mandates, raise consumer prices and the prices of goods businesses use for production, reducing domestic competitiveness. They invite corruption and cronyism, and can increase the burden on taxpayers for government procurement. They lead to diplomatic friction and invite retaliation. The U.S. trade war with China probably hurt manufacturing employment — the intended beneficiary — in addition to serving as a drag on the economy overall.
Rather than giving pride of place to manufacturing jobs, it would be better for economic policy makers to focus on how the middle of the labor market is changing. Mid-wage manufacturing jobs are shrinking as a share of total employment. But as I show in my new book, “The American Dream Is Not Dead: (But Populism Could Kill It),” a new middle is taking its place. Its fastest growing occupations include health technologists and technicians, heating and air conditioning mechanics and installers, computer support specialists, and self-enrichment education teachers, among others. It would be better for politicians to focus on connecting workers to new and growing opportunities, rather than trying to turn the clock back by promoting manufacturing.
Beyond industrial policy and showering manufacturing with special attention, Biden highlighted the need to make child care more affordable, along with lowering the cost of prescription drugs and finding a solution to surprise medical bills that insured patients often receive for services outside their coverage. All these issues are ripe for productive bipartisan cooperation with the right presidential leadership. Concern about China’s unfair trade practices — which Biden mentioned in his speech and would need to address if elected — now extends widely throughout the political right as well as among union supporters on the Democratic left. The U.S. needs to crack down on China with a sound, multinational strategy, competently executed.
There are key parts of Biden’s plan that would struggle to find support among either traditional or populist Republicans. For example, he called for an optional government health insurance program in addition to the subsidies for private insurance already offered by Obamacare. He wants to raise the corporate tax rate from 21% to 28%, a particularly terrible idea in an economy as weak as the U.S.’s will be in 2021. His plan to raise the minimum wage to $15 per hour would be devastating to low-wage workers by slashing their job opportunities.
Biden’s variant of economic nationalism is both a challenge and a response to Trump’s flavor of populism. I had hoped that Biden would move the U.S. beyond populism. He still might, campaigning as a populist to win and then governing as a mainstream, center-left Democrat. But the vision he is offering voters suggests otherwise.
The fact that this vision harmonizes with conservative populism is far from a guarantee of bipartisan cooperation. The pressure on Republican lawmakers to oppose any Democratic agenda would be very strong.
But if Biden’s first year as president does bring bipartisan success, he will have Trump to thank.
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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