[Column] Can Bidenomics revive the US economy and “rebuild” America’s greatness?

Posted on : 2020-11-17 16:50 KST Modified on : 2020-11-17 16:50 KST
US president-elect faces daunting task of tackling the inequality that enabled Trump’s rise
Interim US President-elect Joe Biden gives a speech at Wilmington, Delaware, on Nov. 5. (Hankyoreh archives)
Interim US President-elect Joe Biden gives a speech at Wilmington, Delaware, on Nov. 5. (Hankyoreh archives)

Although disputes are still in progress, Joe Biden seems to have won the US presidential election. But he’s probably not very happy with how he got there. Once again, many pundits had predicted that Biden would cruise to victory, but 73 million people voted for Trump, and Biden barely squeaked by in the battleground states.

The election outcome was also disappointing for the Democratic Party, which had been hoping that a “blue wave” would sweep through Congress. Trump’s support declined among his base of elderly people and less-educated whites, but actually increased among Hispanics and less-educated people of color.

Trump’s rise in 2016 was fueled by the worsening inequality caused by globalization and by the discontent of those who’d been left behind. Economic polarization produces political polarization. Empirical research has shown that electoral districts that are more vulnerable to imports from China have seen their manufacturing sectors decline and suffered greater inequality. Politics in such districts tend to move toward the extremes, on either the left or right.

Clear fissures are now forming between different regions in the US. In this election, many more districts tilted either to the Democratic Party or to the Republican Party than in the past, meaning less independents and third-party voters.

It was typically urban centers that supported Biden. The GDP in these areas currently account for around 70% of the country’s GDP, up from 64% in the 2016 election. In other words, areas with higher income, higher levels of education, and fewer jobs at risk of automation tended to support Biden more than they’d supported Democratic candidates in the past.

Once again, Trump owed his strong showing in the election to the disenfranchised, to those who have been marginalized by the elites in an era of inequality. Trump may be on his way out, but Trumpism won’t be going anywhere.

The income and employment gap is already being exacerbated by the severe recession brought on by lockdowns during the pandemic. In the future, a Trumpian merger of nationalistic populism and plutocracy is likely to become the reigning ideology of the Republican Party.

But the mainstream of the Democratic Party, which has become the party of high income earners, academia and mainstream intellectuals, didn’t tackle inequality head on. It was the Democratic Party’s left wing that made great strides in this election, the faction led by Alexandria Ocasio-Cortez that advocates radical policies.

Increased fiscal spending, but no national health insurance plan

Can Biden’s economic policy surmount such rifts? His main economic policies are expanding fiscal expenditure and raising taxes on the rich. Biden pledged during his campaign to invest about US$2 trillion in clean energy and other aspects of infrastructure and US$2 trillion in education and childcare. He also pledged to divert US$7.3 trillion in fiscal spending to health insurance, purchasing US-made products, R&D, social welfare, and housing. That figure represents around 35% of GDP.

Biden plans to cover at least half of his fiscal expenditure plan by raising the highest tax rate (on income above US$400,000) from 37% to 39.6% and raising the corporate tax rate to 28%, after Trump lowered it to 21%. He has also suggested increasing the minimum wage to US$15 and taking steps to address the needs of workers.

Such measures seem designed to appease the left, in deference to current trends. But Biden’s plan doesn’t include a national health insurance program.

Since capitalism is currently groaning under the weight of recession and inequality, Biden’s economic policies can be seen as correctly expanding the role of the government in restoring capitalism to sound function.

Biden’s policies meant to play out over 10 years but likely to face opposition in Congress

But Biden’s fiscal expenditure plan is supposed to play out over 10 years, and it’s likely to face cutbacks in Congress. If the Democrats ultimately fail to gain a majority in the Senate, that could prevent the adoption of large-scale fiscal expansion, blunting the economic recovery just as during the Obama administration.

Another question is whether Biden’s policy is capable of reversing the inequality that grew even worse during Trump’s presidency. The Gini coefficient in the US rose from 0.479 in 2015 to 0.484 in 2019 as income inequality reached its worst level since World War II.

Big tech is the actual winner of election?

Some suggest that the undeclared winners of the US election are the IT firms that reap huge profits from their market dominance. Divided government — with the Democrats in the White House and the Republicans controlling the Senate — will make it harder to impose tougher antitrust regulations on Big Tech. Furthermore, Vice President-elect Kamala Harris has close ties with Silicon Valley.

Biden’s slogan is “build back better,” reflecting the big challenges he faces, which include beating COVID-19, engineering an economic recovery, fighting inequality, and responding to climate change.

It remains to be seen whether “Bidenomics” will be able to knit together a divided society and to actually build the US back better. But his success will depend upon political support and pressure from American citizens.

“Democracy is not a state. It is an act,” Harris said in a speech after her and Biden’s victory was declared. “It is only as strong as our willingness to fight for it.”

Democracy is where Americans must find the strength to overcome Trumpism, a consequence of inequality, and to “build back better.”

Lee Kang-kook
Lee Kang-kook

By Lee Kang-kook, professor of economics at Ritsumeikan University

Please direct comments or questions to [english@hani.co.kr]

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