{"id":826473,"date":"2025-02-12T11:13:11","date_gmt":"2025-02-12T17:13:11","guid":{"rendered":"https:\/\/newsycanuse.com\/index.php\/2025\/02\/12\/a-longtime-biden-adviser-gives-a-final-defense-of-bidenomics\/"},"modified":"2025-02-12T11:13:11","modified_gmt":"2025-02-12T17:13:11","slug":"a-longtime-biden-adviser-gives-a-final-defense-of-bidenomics","status":"publish","type":"post","link":"https:\/\/newsycanuse.com\/index.php\/2025\/02\/12\/a-longtime-biden-adviser-gives-a-final-defense-of-bidenomics\/","title":{"rendered":"A Longtime Biden Adviser Gives a Final Defense of Bidenomics"},"content":{"rendered":"
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Since November 6th, critics have pointed to Joe Biden<\/a>\u2019s economic policies as one explanation for Donald Trump<\/a>\u2019s victory. Many postmortems have focussed on the rising prices that soured voters. Meanwhile, The Atlantic\u2019s<\/em> Jonathan Chait argued<\/a> last week that Biden\u2019s costly efforts to stimulate manufacturing in the heartland had failed to win back working-class Democrats<\/a>. Dylan Matthews, of Vox, blamed<\/a> Biden\u2019s inability to prioritize and choose between his policy goals, which resulted in a \u201cfailed presidency that left Biden without much of an enduring domestic policy legacy.\u201d<\/p>\n

There is a long-standing tendency in the United States for one-term presidents\u2014Jimmy Carter, George H. W. Bush\u2014to be written off as flops, even if some of their policy achievements turn out to be consequential. (Carter created the Departments of Energy and Education; no Republican President since Bush has pushed through broad tax increases on corporations and the wealthy.) But the propensity to characterize Biden\u2019s time in office as a flop is especially problematic<\/a>. Whatever one thinks of his decision to run again or of his handling of Gaza, his Administration\u2019s drive to create a low-carbon economy by subsidizing the growth of green energy<\/a> and green manufacturing<\/a> was a historic development, and its records on jobs<\/a> and G.D.P. growth<\/a> are very strong. The December employment report from the Department of Labor showed that employers created another quarter of a million jobs last month, bringing the total since Biden was elected to more than 17.5 million, while the unemployment rate ticked down to 4.1 per cent. G.D.P. expanded at a rapid clip of 3.1 per cent in the third quarter of last year, and, according to the Federal Reserve Bank of Atlanta\u2019s GDPNow model, fourth-quarter growth is likely to clock in at three per cent. (An initial estimate of the actual figure will be announced at the end of the month.)<\/p>\n

Last week, I called Jared Bernstein, the chair of Biden\u2019s Council of Economic Advisers, for his final thoughts as he prepared to leave the post. The sixty-nine-year-old said he\u2019d already packed up his office, including a picture of Biden standing under a \u201cBidenomics\u201d sign, which was now hanging in his home\u2019s workout room, next to his stationary bike. Understandably, he was keen to frame the Biden record in a positive light. Earlier that morning, he had spoken on a panel at the Brookings Institution, a think tank situated about six blocks north of the White House. The event was held to mark the publication of the 2025 edition of the Economic Report of the President (E.R.P.), a congressionally mandated annual update. In his remarks at the session, Bernstein noted that, in terms of employment and growth, the economy has \u201coutperformed even the most optimistic forecasts over the last few years.\u201d He also acknowledged what he described as \u201ca forty-year inflationary spike,\u201d which saw the inflation rate rise to 9.1 per cent in June, 2022. In what sounded like a parting message to the incoming Trump economic team, he advocated a \u201cmiddle way\u201d on trade policy.<\/p>\n

In a break with the policies of past Democratic Administrations, the Biden Administration retained the tariffs on Chinese goods that Trump had introduced during his first term, and it imposed new restrictions of its own on exports of semiconductor chips and other high-tech products to China. Bernstein defended these restrictions on the ground that China\u2019s industrial dominance threatened American workers and also cited issues of national security. He noted that reduced imports from China had been offset by larger inflows from Mexico, Vietnam, and other countries. Without mentioning Trump directly, he said the Biden Administration had rejected \u201creductionist views like \u2018The trade deficit is a scorecard, and if it gets bigger you are losing.\u2019\u00a0\u201d<\/p>\n

During our conversation, Bernstein was more explicit in criticizing the populist electoral pledges<\/a> that Trump campaigned on, in his bid for a second term, which include universal tariffs on imports and mass deportations of undocumented workers<\/a>. \u201cTargeted tariffs can be useful, but I don\u2019t think that\u2019s the case of sweeping tariffs,\u201d he said. \u201cMass deportations would impact labor supply, particularly in sectors like construction. The combination of sweeping tariffs, mass deportations, and perhaps even compromising the independence of the Federal Reserve\u2014all of that is potentially very inflationary, as others have pointed out.\u201d<\/p>\n

Bernstein started advising then Vice-President Biden in 2008. He joined the Council of Economic Advisers at the beginning of the Administration, and he took over as chair in February, 2023. As a longtime economist at the liberal Economic Policy Institute, in Washington, he made his reputation during the nineteen-nineties by co-authoring, along with his colleague, the economist Lawrence Mishel, an invaluable biennial report on the \u201cState of Working America,\u201d which tracked wages, inequality, unemployment, and health-care coverage, among other things. He told me that his interest in labor issues and inequality was probably the reason that Biden chose him as an adviser. \u201cFair-slice economics\u2014that has always united me and the President,\u201d he said.<\/p>\n

When I asked Bernstein what element of the Biden record he was most proud of, he pointed to the maintenance of full employment even as the Federal Reserve raised interest rates sharply to bring inflation back toward its target of two per cent. \u201cThere were many experts who told us that, to get inflation down, we would have to accept a much higher unemployment rate,\u201d he said. \u201cThat was a trade-off we weren\u2019t willing to make.\u201d In his talk at the Brookings Institution, Bernstein cited some of the broader benefits of low rates of joblessness: a strong labor market can encourage employers to hire from a larger pool of candidates, thus providing more opportunities for minority workers, and increased \u200b\u200bcompetition for labor can incentivize firms to make productivity-enhancing investments. He also emphasized to me the significance of enhanced wage-bargaining leverage that tight labor markets give to employees. Boosting workers\u2019 bargaining power was a central element of Bidenomics<\/a>, he said. \u201cThat\u2019s also why he has been such a pro-union President\u2014the first to walk a picket line.\u201d<\/p>\n

Biden\u2019s concern about labor issues was genuine enough. (At the behest of the leaders of the United Steelworkers union, he recently blocked a Japanese takeover of U.S. Steel.) But, even with a narrow majority in the Senate during Biden\u2019s tenure, Democrats were unable to summon the sixty votes that would have been necessary to pass the PRO<\/em> Act, which would have made union organizing easier, and were unable to raise the federal minimum wage, which is still just $7.25 an hour. More consequential than Biden\u2019s gestures to organized labor were four big pieces of legislation that Congress passed during his first two years in office, which Bernstein hailed as unprecedented.<\/p>\n

As the E.R.P. explains, the $1.9-trillion American Rescue Plan Act<\/a> of 2021, which included cash payments of fourteen-hundred dollars to individuals in low- and middle-income families, strengthened household finances. The bipartisan $1.2-trillion Infrastructure Investment and Jobs Act<\/a> of 2021 led to a surge in building projects at the state and local levels. The eight-hundred-ninety-one-billion-dollar Inflation Reduction Act<\/a> of 2022, which provided subsidies and grants to makers of electric vehicles, electric batteries, and other green technologies, generated a surge in manufacturing investments. So did the two-hundred-eighty-billion-dollar CHIPS<\/em> and Science Act of 2022, which was designed to encourage onshoring of semiconductor manufacturing. Factory construction rose to record levels in 2024, and some new facilities, including a state-of-the-art plant in Arizona which is owned by Taiwan Semiconductor Manufacturing Company, are already up and running. \u201cIf there is any fairness to history, the temporary surge in inflation won\u2019t be Biden\u2019s lasting legacy,\u201d Bernstein said to me. \u201cI think the biggest Biden legacy will be the adoption of what he calls bottom-up, middle-out economics, and of an investment agenda that is creating new manufacturing industries in the United States.\u201d<\/p>\n<\/div>\n

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Rather than giving Biden credit for these developments, many voters blamed him<\/a> for the high cost of everything from groceries to car-insurance rates and mortgage loans. Ever since inflation spiked, economists have been debating whether the primary cause was pandemic-related disruptions<\/a> to the supply chain or strong demand created by federal spending programs. \u201cI don\u2019t want to give fiscal policy a pass,\u201d Bernstein said. \u201cIt was the collision of strong demand and constrained supply. You can\u2019t explain what happened without referring to both these things.\u201d Having conceded this point, however, Bernstein then defended Biden\u2019s spending policies, particularly the American Rescue Plan, as necessary to insure that the recovery from the pandemic was a strong one. \u201cThe amount of uncertainty there was has kind of disappeared down the COVID<\/em> amnesia hole,\u201d he noted. \u201cRemember, when we got there, almost nobody was vaccinated.\u201d Bernstein also pointed out that the cumulative rise in prices during the inflation spurt was similar across advanced countries, even though their spending policies diverged widely. \u201cThat tells you that the American Rescue Plan gets disproportionate blame,\u201d he said.<\/p>\n

As I\u2019ve written before<\/a>, I largely agree with this analysis. The fact that inflation started coming down in the second half of 2022, before the Fed\u2019s interest-rate hikes had had much impact on demand, is another strong indication that snarls in supply were primarily to blame for the earlier spike. However, I suggested to Bernstein that the Administration could have done a better job, early on, of acknowledging that soaring prices were undercutting Americans\u2019 purchasing power and causing considerable hardship and anger. Why, for example, didn\u2019t it create an inflation task force to co\u00f6rdinate efforts to counter rising prices and keep the public informed? The question prompted a vigorous defense. \u201cWe had a supply-chain-disruption task force that probably did more than anything else to bring down inflation,\u201d Bernstein said, with a hint of frustration in his voice. \u201cIt did a ton of work, in partnership with the private sector, to unsnarl supply chains.\u201d He also reminded me that the Biden Administration managed the Strategic Petroleum Reserve to stabilize gas prices, established the principle that Medicare should have the power to bargain with Big Pharma over the prices of drugs, and cracked down on hefty \u201cjunk fees,\u201d such as big charges for bank overdrafts and late payments on credit cards.<\/p>\n

Of course, none of this had much impact on the price of eggs or meat. Bernstein said there was a tendency in certain quarters to think that, if only the Administration had pulled some other lever, it could have reduced the cost of groceries. \u201cIt just doesn\u2019t work like that,\u201d he said. In a capitalist system, he went on, there are many parts of the economy, including the food sector, where the federal government has very little influence over prices. \u201cEnergy, health care, and junk fees were areas where we could make a difference, and we did,\u201d he said. \u201cGroceries\u2014that\u2019s a different story.\u201d<\/p>\n

In running for re\u00eblection, Trump seized on that story, of course. More recently, he admitted that bringing down grocery prices will be \u201cvery hard,\u201d and Bernstein suggested that this wouldn\u2019t be the only challenge that the new President will face. Although he\u2019s inheriting a strong economy with record job growth and rising household incomes, the experience of the past eight years means he is far more constrained, in an economic sense, than he was after his election in 2016, Bernstein argued. \u201cI think he had more degrees of freedom to fool around then than he has now.\u201d<\/p>\n

When Trump was inaugurated for the first time, in January of 2017, inflation was at 2.5 per cent, and in the ensuing five months it fell to 1.6 per cent, below the Fed\u2019s target rate. The unemployment rate was low\u20144.8 per cent\u2014but, as it turned out, there was still a good deal of spare capacity in the economy. The federal debt had risen rapidly since the global financial crisis of 2007-08, but interest rates on Treasury bonds were low\u2014about three per cent\u2014indicating that investors weren\u2019t too concerned about the fiscal outlook. In this environment, Trump had considerable flexibility to pursue his economic agenda, which, then as now, included tax cuts, a crackdown on immigration, and protectionism.<\/p>\n

The current economic environment is very different, Bernstein noted. Although inflation has come down, it\u2019s still running above the Fed\u2019s target rate, and recently it has risen slightly. The economy is operating at or close to full capacity. And, in the past few months, the yield on thirty-year Treasury bonds has risen from under four per cent to close to five per cent\u2014a considerable jump. Economists are divided about the causes of this development. Bernstein said it could reflect uncertainty about the Fed\u2019s policies, worries about inflation, or concerns about the impact of tariffs, deportations, and the fiscal outlook. Whatever the cause, he noted, \u201cthe bond market has been pricing in a premium that didn\u2019t exist six months ago.\u201d<\/p>\n

None of this necessarily portends an imminent crisis, and many on Wall Street remain upbeat about the economic prospects of a second Trump Presidency. But it does raise serious questions about how financial markets and the Fed will react if Trump goes full MAGA<\/em> on tariffs, tax cuts, and immigration. During his comments at the Brookings Institution, Bernstein revealed that he had talked with some of Trump\u2019s incoming economic advisers. When I asked him about these conversations, he declined to give any details, but he did say, \u201cI think they recognize we are handing them a strong economy, and I am certain they don\u2019t want to see high inflation or high interest rates. I think they want to be careful.\u201d Does Trump want to be careful? The next few weeks will answer that question.\u00a0\u2666<\/p>\n<\/div>\n

John Cassidy
Read More<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Since November 6th, critics have pointed to Joe Biden\u2019s economic policies as one explanation for Donald Trump\u2019s victory. Many postmortems have focussed on the rising prices that soured voters. Meanwhile, The Atlantic\u2019s Jonathan Chait argued last week that Biden\u2019s costly efforts to stimulate manufacturing in the heartland had failed to win back working-class Democrats. Dylan<\/p>\n","protected":false},"author":1,"featured_media":826474,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[65,81],"tags":[5245,5571],"class_list":{"0":"post-826473","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-biden","8":"category-longtime","9":"tag-biden","10":"tag-longtime"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/826473","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/comments?post=826473"}],"version-history":[{"count":0,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/826473\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media\/826474"}],"wp:attachment":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media?parent=826473"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/categories?post=826473"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/tags?post=826473"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}