Biden's Progressive Economic Policy Isn't the Apocalypse
(Bloomberg Opinion) -- The U.S. is in the middle of an ideological paradigm shift. After decades in the political wilderness, progressives now dominate culture and are poised to dominate economic policy as well. To some, this represents a terrifying prospect. But alternating ideological programs are an important part of how nations advance; the progressives need to have their serve.
President Joe Biden’s economic program is the most strongly progressive agenda that any president has pursued since Lyndon Johnson’s Great Society in 1964. It would transform welfare benefits, spend large amounts on infrastructure, science, education, housing and the environment, transform U.S. trade and industrial policy, and make big efforts toward racial equity. If his agenda passes in anything like the forms being currently proposed, it will alter the entire shape of the U.S. economy. And that will come on top of the cultural dominance that progressives have increasingly enjoyed for a decade.
The ascendancy of progressivism is naturally generating dismay among conservatives. The danger is that they’ll respond by using un-democratic means to try to halt the Biden Revolution in its tracks. That could include even more severe gerrymandering, electioneering or even further political violence like the Jan. 6 insurrection. Even if violence doesn’t erupt again, conservatives could turn to unhelpful ideas like the so-called Great Replacement theory — the belief that America’s political and social changes are being caused by immigration. That idea is already leading Republicans to endorse immigration restrictions that would deeply wound our economy.
Such fiery, last-ditch resistance isn’t warranted. Ideological resurgences like this are reasonably common in U.S. history. It happened in 1933 with the start of the New Deal, and again in 1981 with the Reagan Revolution. Each of those programs started out addressing the problems of the day, and ended up overreaching, opening space for renewed victories by the opposing party.
The New Deal, despite its early missteps, ended up creating enduring progressive institutions that transformed American society for the better. Social Security, modern labor law, unemployment benefits and banking regulation were among the program’s biggest successes. These were followed by Johnson’s Great Society programs, which were effective in reducing poverty.
But by the 1970s, cracks in the Democrats’ approach were beginning to show. High inflation and slow growth during that decade prompted a move toward tax cuts, tight money, deregulation and the addition of stringent work requirements to the welfare system. That backlash eventually congealed into Ronald Reagan’s market-centric economic program, which also added elements like free trade and a labor approach less favorable to unions.
That market-centric program — which was deepened and extended by Bill Clinton — seemed to deliver robust income growth in the 1980s and 1990s. But by the 2000s, it, too, had clearly overreached. George Bush’s tax cuts failed to stimulate business investment while they increased government deficits more than supply-side economists had predicted. Productivity growth, which ought to be unleashed by deregulation, fell after 2004. Wage growth, which should theoretically have gotten a boost from both tax cuts and deregulation, ticked up in the 90s but never attained the levels of the postwar boom.
Then in 2008, the financial crisis and the subsequent Great Recession demonstrated very clearly and painfully that deregulation had been taken too far. Meanwhile, the Reagan program was unable to address other problems in the economy, such as the rise of inequality.
In other words, Reaganomics started out as an attempt to address the problems of its time, but it eventually overreached. The same will undoubtedly happen to Bidenomics someday, if it isn’t strangled in its crib.
It’s not yet clear what form that overreach will take. Perhaps excessive enthusiasm for government-directed construction will lead to expensive boondoggle projects. Or high debt and deficits will eventually lead to rising inflation. New industrial policies might lead to misallocation of resources toward dead-end technologies, as sometimes happens even in the most skillfully managed systems. Or perhaps welfare benefits will eventually become so excessive that they start discouraging work on a large scale.
All of these future overreaches are easy to imagine, but they haven’t happened yet. And if Republicans manage to halt the Biden program by making use of the inequities of our electoral system, veto points in the legislature, and even threats of violence, it will be badly premature. Bidenomics needs to take its swing — it needs a chance to solve the problems of today, even if it ends up being inadequate to the problems that crop up 40 years from now.
So Republicans should adopt the attitude that my colleagues Michael Strain and Karl Smith have taken in their criticisms of the Biden agenda: to warn of pitfalls and dangers without waxing apocalyptic. Conservatives need to be the loyal opposition — to criticize the progressive program and slowly prepare their own comeback. Because that comeback will arrive someday; the right will get its turn at the serve again.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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