Biden Economics Worked - But it is Time

In 1936, John Maynard Keynes’ book the General Theory of Employment, Interest and Money was published. It was during the depths of the Great Depression that the ideas in that classic book described how the economies of Western Europe and America had descended into a prolonged decline in economic activity. Unemployment rates of over 30 percent, bank failures, stock market crashes, soup lines and the near destruction of Western democracy was the nature of those times. Keynes’ solution was to put aside the traditional economic policies being promoted, namely that workers should accept lower wages to make them more attractive to employers. Keynes showed that this and other free market policies failed to understand what we now call macroeconomics. Keynes proffered that the only way to get the economy back on track was for the federal government to spend money that it did not have, i.e., deficit spending.  At a time when balanced budgets were the dominant belief, his solution was economic heresy. But it worked. 

Fast forward to 2020. On January 22, in response to a question about whether he was concerned about COVID, President Trump said, “No. Not at all. And we have it totally under control. It is one person coming from China, and we have it under control. It is going to be fine.” As late as August 5, 2020, Trump stated, “It is going away. No question in my mind that it will go away, hopefully sooner rather than later.” We were in the midst of a full-blown pandemic. And while, more Americans died from COVID during the Biden Administration, the problem started with Trump’s inaction and dissemination of false and misleading information which caused confusion, understated the magnitude of the situation and wreaked havoc.   

Notably, Trump’s denial of COVID 19 pandemic contributed to him losing the 2020 election. America wanted and needed new leadership.  

Instead of the laisez-faire attitude of Trump, the incoming Biden Administration took a hyper activist and robust federal approach reminiscent of the Keynesian approach to the Great Depression. Fundamentally that approach focuses on the here and now.  

President Biden signed the $1.9 trillion American Rescue Plan on March 11, 2021, less than two months after taking office. This landmark legislation put cash into the hands of Americans earning less than $80,000 per year. That money was necessary to replace the lost earnings of workers who had been furloughed.  The bill also extended unemployment insurance payments to $300 per week, and temporarily extended the child tax credit, increasing the amount to $3,000 per child for children between ages 6 and 17 and $3,600 for children under 6. Importantly, the child tax credit resulted in the single largest reduction in childhood poverty in the nation’s history. The bill also enacted the $7.25 billion Paycheck Protection Program which supported small businesses and nonprofit organizations in continuing to employ their workers during the time the economy was effectively shut down. The bill invested over $128 billion in local school districts to support towns and cities in red and blue states. The bill also provided for low-income Americans, restaurants, and renters. 

We seem to have forgotten that these programs prevented the U.S. economy from slipping into a prolonged and catastrophic depression. It is a human trait that we do not take heed to the warnings of disasters that we narrowly escape.   

The result of this bill and other Biden Administration executive orders and legislation, the Inflation Reduction Act in particular, along with the very real supply chain problems was the reason we experienced the inflation of recent years. The Federal Reserve did its job in the face of these massive Keynesian expansionary policies by increasing interest rates knowing that inflation would be a consequence of the Biden Administration’s actions. Biden economics worked. 

While there are differences of opinion among professional economists on whether President Biden went too far in his expansionary policies, there is no respectable economist who believes that if no action had been taken, the U.S. economy would have recovered as quickly as it did.  

President Biden’s management of this crisis was masterful. His emphasis on building the recovery from the middle out instead of from the top down demonstrated clearly that President Trump’s trickle-down economics with its corporate tax cuts and tax cuts for billionaires and deregulation of industries, was not only not necessary but damaging to the economy and society.  

There is unrelenting focus now on President Biden’s age. Biden’s age is an unfixable problem in the face of a surging Trump campaign. It is with great sadness, that I find myself in favor of continuing the Biden approach to our economic and social problems without President Biden at the top of the ticket. HIs legacy has a better chance of enduring only if Democrats control the White House and both Houses of Congress. I simply do not see a path to victory with Biden at the top of the ticket. The goal should be winning and nothing else..We will see what happens come election day. But whatever happens, we all owe President Biden a thank you.