Tag Archives: Biden economic policy

Fact Check 2.

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            The Biden administration’s Inflation Reduction Act (2022) includes tax rebates and other subsidies to encourage “clean energy” industries in the United States.  These include wind and solar power, and the battery industry.  The spending stretches over ten years and amounts to $370 billion.  The IRA also includes “Made-In-America” provisions that are intended to reverse the long-running “off-shoring” of dull, dreary, and occasionally dangerous manufacturing jobs to low-wage foreign countries.[1]  In particular, the IRA targets China, pushing American companies to move production either to home or to other foreign trading partners.[2]  One possible brake on the IRA’s effectiveness lies in China’s possession of the sources of some minerals that are critical for the transition to renewable energy.[3] 

            Social Security and Medicare face long-term problems with their financing.  Social Security payments come from a federal tax on payrolls.  For many years, workers paid in more than was paid out to beneficiaries.  This created a surplus that has been held in the Social  Security “trust fund.”  More recently, as “Baby Boomers” have shifted from labor force to the uneasy leisure force, more money has been paid out to beneficiaries than has been paid in by workers.  As a result, the “trust fund” is being depleted.  Medicare is financed in a similar way and confronts a similar problem.  The Medicare trust fund is predicted to be exhausted in 2031 and the Social Security trust fund in 2033.  After the trust funds are exhausted, the government will be able to pay beneficiaries only what comes in from current payroll taxes.  This will lead to a reduction in payments.  Payments would be reduced by about one-quarter.[4]  Unless,…

            Various Republicans—individuals and groups—have proposed “solutions.”[5]  One is simply to raise the retirement age to 70.[6]  Two to four more years of paying into the systems at their peak earning phase of life plus two to four years less of drawing benefits could help balance the books.  Others, including Ron DeSantis and Nikki Haley, have proposed creating a two-tiered system.  People over 40 would continue to receive their current deal, while those under 40 would face a higher retirement age and—probably—a different financing scheme. 

            How do the Trump and Biden administrations match up on economic issues when the first three years of each are compared?[7]  Biden (3.7 percent) Trump (3.6 percent) had about the same unemployment rate.  Biden had more manufacturing jobs created than did Trump (791K v. 419K).  Biden had a higher GDP growth than did Trump (3.4 percent v. 2.7 percent).  Trump had a better experience with inflation than did Biden (2.1 percent v. 5.7 percent).  Trump had a better experience with wage growth than did Biden (+ 3.0 percent v. -2.7 percent). 

[1] See: Offshoring – Wikipedia  If successful, the IRA will have lots of American workers once again missing fingers or toes and hacking up colored phlegm. 

[2] Which it what China continues to be. 

[3] Lisa Friedman, “Republican Debate Fact Check,” NYT, 29 September 2023. 

[4] Angelo Fichera, “Candidates Sparring Over Social Security and Medicare,” NYT, 8 January 2024. 

[5] Fichera, “Candidates Sparring.” 

[6] Some of the guys in my morning work-out group have blue-collar jobs.  At least three of them have suffered bad, on-the-job concussions.  Another had a finger-tip pinched off by a piece of machinery.  One of the ladies who rings up my groceries always has on a large hand and wrist brace.  It seems indecent that people who can work into their Seventies or even Eighties because they have staffs to do much of both their work and their family responsibilities should suggest that people unlike themselves just buckle down.  What do I mean, “seems”? 

[7] Jim Tankersley and Lazaro Gamio, “Which President Can Claim These Economic Wins?” NYT, 8 March 2024. 

Looking Forward in December 2020 1.

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            The recession of 2020 and beyond did not spring from “normal” causes.[1]  It sprang from the Covid-19 pandemic.  That pandemic continues to ravage the world, so a full recovery cannot begin.    Only widespread vaccination will allow the American economy to recover.  Estimates for that seem to run into mid-Summer 2021.[2]  An optimist might guess-timate that the economy will have fully recovered by the end of 2021. 

            The federal policy response to the Covid-triggered economic crisis[3] has been far more robust than the response to the 2009 financial crisis that led to the “Great Recession.”  Including the bill just signed—finally–by President Trump, the government spent more as a share of GDP over two years than the previous administration spent over five.  This may have contributed to avoiding the steep plunge in spending by states that helped deepen the crisis of a decade ago.  All this means that the economy did not sink into as deep peril as was the case ten years ago. 

Then, there are reasons to hope that the economy can make a sustained recovery.  The Federal Reserve Bank has promised to not raise interest rates until annual inflation hits two percent and all the Covid-caused unemployment has been absorbed.  This recession may not have done as much long-term damage as normal recessions.  Bankruptcies haven’t shot up the way one would expect, although they may still rise.  If many businesses are “only mostly dead,”[4] many could spring back.  If they do, then they will bring back employees while reviving pre-recession relationships with suppliers and customers.  A long drawn-out recovery is not fated. 

With a third of a million Americans dead from Covid-19 so far, it may seem petty to turn to the political effects.  Yet both parties are struggling to define their course in an environment without the disruptive factors of Donald Trump and Covid-19.  The outcome of these struggles will influence the direction of American society in the immediate future.  Would a rapid recovery dampen enthusiasm for any sweeping changes in economic organization or the role of government?  Would business people claim that they had “Built Back” during the recovery largely on their own?  Would it be difficult to blame anyone, other than the virus, for the recession?  Would Republicans want to fend off all calls for assistance to the “front-line” and “essential” workers once the crisis has passed, even if they try to restrict the scope of such definitions that President Biden would propose?  It is shaping up to look like at least two more years of tweaks to legislation.  Most of the action will come in nibbling rule-writing rather than in big new laws. 

[1] Greg Ip, “2021 Could Be (a Lot) Better Than You Think,” WSJ, 24 December 2020.  On Ip, see: https://en.wikipedia.org/wiki/Greg_Ip 

[2] See, for example, the chart on the front page of the WSJ, 12-13 December 2020.  However, that leaves aside places in the world where vaccination will take place later.  Will Egypt ever get around to vaccinating any but the elite? 

[3] This is different from the federal response to the health emergency itself.  Operation “Warp Speed” appears to have done an astonishing job of creating and now distributing the vaccines that offer the only real long-term solution.  No one would—or should—forgive President Trump for his relentless down-playing of the immediate dangers or his undermining of scientific opinion on short-term safety measures.  He had the chance to be seen as a great president  He muffed it 

[4] See the classic exposition of the distinction: https://www.youtube.com/watch?v=xbE8E1ez97M