by Matthew Yglesias
A string of positive economic news — slowing inflation, an upward revision in gross domestic product, continued strength in the job market, signs of a nascent surge in factory construction — has the Biden administration going all out to define “Bidenomics” as the doctrine of our time.
As a basic exercise in credit-taking, it makes a lot of sense. The U.S. has had the strongest GDP recovery from the pandemic of any developed country in the world, and though inflation remains above target, it is currently lower than what any peer country is experiencing. Anything the White House can do to call attention to those facts is smart. Also, the time is right for a big push on these points because inflation has fallen enough that wages have finally started to rise faster than prices.
Still, Bidenomics as a doctrine looks an awful lot like an accident. Once upon a time in the era of Build Back Better, President Joe Biden’s economic vision had three major pillars that have all since crumbled. One was a view that an adequate recovery from the pandemic required a major investment in the “care economy,” with big new federal programs to subsidize child and elder care. Another was a legacy-defining push to slash child poverty with an expanded and fully refundable Child Tax Credit. The third was a move away from the Clinton- and Obama-era focus on long-term deficit reduction in favor of a view that new spending should be paid for but that fiscal discipline as such was not a major concern.
The first two of these fell by the wayside due to narrow congressional majorities, and the third was quietly abandoned by the administration as Build Back Better, or BBB, transmogrified into the Inflation Reduction Act. The IRA’s content was mostly the energy and health provisions of BBB, but it was also reworked to be a deficit reduction bill as a nod to concern about elevated inflation and in recognition of a new era of higher interest rates. The recently signed Fiscal Responsibility Act is, likewise, a deficit reducer.
Beyond that, Democratic operatives now characterize Bidenomics in terms of ideas like taxing the rich as a preferred path for deficit reduction rather than cutting Social Security and Medicare. This is good politics and sound policy, but it’s not remotely distinctive from Obamanomics or Clintonomics or, frankly, Mondalenomics — it’s exactly what Democrats have been saying ever since the Reagan Revolution. To the extent that there’s anything truly different about Bidenomics is that in distinction to Obama’s measured approach, Biden launched his administration with super-stimulative fiscal policy and helped achieve a very rapid recovery to employment rates that match or exceed where we were before the pandemic.
The idea that you should try really hard to make recessions brief and recoveries rapid sounds so banal as to be hardly worthy of proper noun status. And yet the fact is it’s a big difference from how policy was made in the first two decades of the 21st century. The slow and relatively “jobless” recovery from the tech stock bubble and the modest pace of the climb out of the deep hole of the Great Recession were the defining economic experiences of a generation.
Many of us expected the pandemic to produce a similarly sluggish recovery that would once again see millions of person-years of idleness and unemployment and new waves of young people entering a labor market that had no interest in them. Avoiding that outcome is genuinely worth celebrating. The inflation that was induced by being so insistent about it was genuinely troubling, but the fact that inflation has now diminished significantly without a recession is important. America’s year of soaring prices won’t leave scars on people’s lives the way mass unemployment does.
Meanwhile, the tight labor market is paying dividends in terms of diminished inequality and rising job satisfaction. Contemporary employers know they need to attract and retain workers. That means focusing more on how to treat people well and less on how to squeeze costs. That’s Bidenomics and it speaks to something deep in the hearts of a population that cares about economic fairness but is skeptical about grand plans for massive expansion of the welfare state.
But I hope that even as the administration takes its victory lap, it can see the landscape clearly. The emergence of ultra-low unemployment is an incredible win. But precisely because it’s a win, it’s not a repeatable path forward for economic growth that can deliver us four more quarters — or four more years — of solid results. Those who can be easily re-employed by creating a climate of robust demand have already been re-employed. Inflation has slowed and can decelerate further without a recession, but there isn’t going to be a big new round of expansionary spending.
And that leaves us with some more difficult questions for the future. For example, the premise of the Biden care agenda that America’s labor force participation rate — especially though not exclusively for women — is unusually low for a rich country remains true. And the economic recovery has not been even across geographies. Many states remain below their pre-pandemic employment peaks and most urban downtowns are reeling from falling commercial real estate values and population loss. The Federal Reserve’s interest rate increases have helped curb inflation but have also created a situation where high borrowing costs may limit mortgage lending and business investments.
These are better problems to have than the problems Bidenomics helped avoid. But they won’t be solved with the tools that have been used so far. To succeed, the newly brash, bold, self-congratulatory rhetoric is going to need to be paired with more creative policymaking and more attention to supply-side issues than we’ve seen so far.