USA: Economy under Trump must be Biden’s target in elections – 7/3/2023 – Ezra Klein

US President Joe Biden has just offered a vision of what a Biden-Trump rematch could look like. Well, at least part of it.

The savagery of Donald Trump’s political style often obscures – at least for his critics – the more banal dimensions of his appeal. The Republican’s strongest argument, and what Biden should fear most in 2024, is the economic one.

In 2016, the former president ran as a wise businessman who would use his business savvy to serve the American people. “All my life I’ve been greedy, greedy, greedy,” he would say. “I took all the money I could. I’m very greedy. But now I want to be greedy for America.”

He said that the elites had betrayed the Americans. They took their jobs to China. They let their bridges, roads and buildings crumble. They respected the work they did — the work behind a computer screen that requires fancy degrees, the work that takes place in offices rather than factories and in metropolises rather than inner cities — and they looked down on the work you did. They got rich and you have nothing. Exit polls revealed that Trump won large majorities among those who considered the economy “fair” or “bad”.

During his presidency, however, he did not turn this criticism into an agenda. There were islands of action –commercial policy was the main one–, but the order of the day was inconsistency. Infrastructure weeks have come and gone. Tax cuts were targeted at the rich. There was no strategy for restoring US industrial competence or regaining the bargaining power of workers without a college degree.

But Trump was lucky to take office during an economic boom. And he maintained that boom. He worked with Republican congressmen to tax less and spend more — budget deficits be damned. He appointed Jay Powell to the Federal Reserve, and Powell kept money cheap and the job market hot. The unemployment rate, in February 2020, was 3.5%. Wages were rising and inflation was low.

Then Covid hit and Trump worked with Speaker of the House Nancy Pelosi to flood the economy with trillions of dollars in aid payments. Unemployment rose, but workers in general did not suffer. That’s the former president’s deepest well of strength in a 2024 rematch. Only about a third of voters approve of the work Biden has done on the economy. Polls show that Trump is by far the most trusted economic manager.

On Wednesday (28), in Chicago, the Democrat anticipated the counter-argument he will make in a very popular speech defining “Bidenomics” (Biden’s economy). The thesis is this: what Trump only promised, I delivered.

Biden defined his economic policies in contrast to “40 years of a trickle”. Trickle-down economics generally holds that tax cuts at the top will lead to prosperity at the bottom. The president is using it to describe a more expansive economic order — what is sometimes called “neoliberalism.”

Trickle-down, in his words, is “cutting public investment” and looking the other way when “three-quarters of US industries became more concentrated.” Forty years, as attentive readers will note, span not only the administrations of Donald Trump and George W. Bush, George HW Bush and Ronald Reagan, but also Bill Clinton and, yes, Barack Obama.

This is a point worth insisting on. The Biden administration is densely populated by veterans of the Obama and Clinton White Houses. But he does not see himself in comfortable continuity with these legacies. He sees himself, in important ways, as a break with them.

In May, Jake Sullivan, the president’s national security adviser (and a top adviser previously to Hillary Clinton and Obama), made this explicit during a speech at the Brookings Institution. Sullivan criticized the belief that “the type of growth doesn’t matter”. That led, he said, to administrations that allowed Wall Street to prosper while “critical industries like semiconductors and infrastructure atrophied.” He rejected the “assumption at the heart of all this policy: that markets always allocate capital productively and efficiently”.

And he made a modest “mea culpa” for his party. “Frankly, our domestic economic policies have also failed to fully account for the consequences of our international economic policies,” he said. By allowing globalization and automation to hollow out domestic manufacturing, the Democrats were part of a Washington consensus that has “eroded the socioeconomic foundations on which any strong and resilient democracy rests.”

Biden’s speech in Chicago tried to show that he was a Democrat who had learned these lessons. First, there was his emphasis on the place. “I believe every hard-working American should be able to say where he grew up and stay where he grew up,” he said. “That’s ‘bidenomics’.” He later repeated: “I believe that every American willing to work hard should get a job, no matter where he is – in the country, in small towns, in all parts of this country – to raise his children on a good wage and keep his roots where he grew up”.

I spoke with Jared Bernstein, chairman of Biden’s Council of Economic Advisers, about this reasoning. “One of the pretty bare bones assumptions of traditional economics is that you don’t have to worry about where you are because as long as there are good jobs somewhere, people will go there and get them,” Bernstein told me. “It doesn’t really work that way.” One of the reasons it doesn’t work that way is housing costs. “The idea that you can move from rural America, where housing is cheap, to America with expensive housing, even with the wage gap, is a bit far-fetched,” he said.

Biden’s response is built around the investments made by the Inflation Reduction Act and the bipartisan infrastructure bill. You don’t install wind and solar farms in Manhattan and San Francisco. You don’t necessarily do that in Democratic states either, much to the chagrin of governors.

He pointed to Weirton, West Virginia, “where a steel mill closed earlier in the century” and, because of him, an iron-to-air battery plant is “being built on the same site, bringing back 750 high-paying jobs, bringing back a sense of pride and hope for the future”. The Rocky Mountain Institute, a clean energy research firm, estimates that Republican states will receive $623 billion (R$3 trillion) in clean energy investments through 2030, compared to $354 billion (R$1.7 trillion ) for Democratic states.

All these industries, battery factories, electric vehicle charging stations and car factories give Biden his strongest line against Trump. After comparing the weeks of infrastructure Trump never delivered to “the decade of infrastructure” he did, he noted: “Building manufacturing facilities here on US soil grew by just 2% under my predecessor’s watch in four years. Two percent. In my government, it grew almost 100% in two years”.

The best thing he did for low-skilled workers was preside over a tight job market. Unemployment has been below 4% since February 2022, and workers who are usually on the sidelines are making gains. The black-white employment gap has nearly closed, and wage gains have been especially strong for workers without a college education. But the administration’s pride in those numbers only underscores the real problem it faces: Americans felt good about the economy under Trump. They don’t feel good about her under Biden.

The reason is simple: real wages are falling because inflation is rising. The President’s long-term investments, his efforts to rebuild American manufacturing and create millions of jobs by decarbonizing the American economy will take time to pay off. People have to live in the economy now, not a decade from now.

The good news – for both Biden and the US – is that real wages have risen in recent months. Inflation has more than halved since its peak. Analysts who confidently predicted a recession in 2023 are now dodging it. Mark Zandi of Moody’s Analytics thinks we will completely escape the crisis. The continuation of the good economic news could decide the election in 2024. Biden took the best ideas of his predecessor and followed them with a diligence and a focus that the Republican never had. But that won’t mean much if voters still want the Trump economy.