From neoliberalim to neopopulism, politics takes a familiar turn in the US.
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- Biden versus Trump: It is time to compare the economic doctrines of the two US Presidents, and also with earlier ones. Interestingly, it seems that the "Biden doctrine" is more similar to Trump's, than Obama's.
- Neo-populism: Biden is evolving his own version of neo-populist economic doctrines, which is sharply at odds with the neoliberal doctrines followed by Bill Clinton or Obama. Biden, to that extent, is completing what Trump left unfinished.
- What Trump did: He sided with the "left behind" White blue-collar workers, though himself behing a plutocrat, and cut corporate taxes, thereby weakening labour vis-a-vis capital even more. But he had some true populist elements, quite different from purely pro-Big Business approach of Republicans.
- Position on key issues: Clinton, Bush and Obama administrations all were pro trade-liberalization. They wanted a strong dollar, to reduce import prices, and support the working class' purchasing power. They knew that income and wealth inequality was rising. They all supported the Fed's independence, and wanted price stability. They all were friendly with Big Tech, Big Business and Wall Street, doing all the deregulation that has led to the massive oligopolistic power the world sees today.
- What they did: These political policies ensured that the trade liberalisation and rising technological advances would boost corporate profits. Inequality rose sharply, and the only benefit to consumers was that some of the gains were passed onto them through lower prices. That's it.
- This neoliberal belief thought that "trickle down" will happen, but Trump reversed that with the nationalist approach to neo-populism; Biden is crystallizing it!
- Biden is also inward-looking and nationalistic in trade policy, is not cutting tariffs introduced by Trump, and pushing "Buy American"
- He is pushing more Sino-American decoupling and race for domination across sectors
- Debt monetisation: The US has now moved into a phase of permanent debt monetization, de facto not de jure, whose goal is a weaker dollar.
- So now, if inflation rises, Fed will neglect it for some time, because an anti-inflation monetary policy will lead to market crash and recession
- That's a sharp break from US Fed's approach in 1991-2016 period
- Large twin deficits of US make a strong dollar impossible for now (though Biden doesn't openly favour a weaker dollar as Trump did, but is okay with it as long as it pushes US exports)
- Reversing inequality: Biden is going for large direct transfers and lower taxes for workers, unemployed and those left behind.
- Trump started this with the $2 tr CARES Act and the $900 b stimulus in 2020
- Biden got a $1.9 tr stimulus passed, and is working on another $4 tr infra spending
- Biden wants more progressive taxation, but the ability to raise taxes is constrained
- So large fiscal deficits (due to spendings) will be debt-financed, and then monetised by the Fed
- Biden is acting against Big Tech and Big Business, through antitrust enforcement, regulatory changes and finally, new laws!
- Goal - take more of national income away from capital, and give to labour and wages.
- Problem is inequality: It's pointless criticising Biden, because social inequality is so steep now that politically he has no choice. If he does not do much, then social strife, and eventually, revolution will happen.
- Learning: The pendulum has shifted from neoliberal to neopopulist. But Fed will remain in a debt trap, due to massive public and private debts. Any negative shock due to de-globalisation will also hurt. Other risks are - US China decoupling, societal ageing, migration restrictions, curbs on corporates, cyber attacks, climate change and the Pandemic.
- Summary: Loose fiscal and monetary policies will help raise labour's share of income, but if GDP does not grow consistently, stagflation (and stagflationary debt crisis) will eventually set it.
- EXAM QUESTIONS: (1) Explain the reasons for the economic pendulum in US swinging from neoliberal to neopopulist. (2) What are the risks in the present day economic policies of President Biden? List and explain. (3) Explain the evolution of the American fiscal thought, since the 1990s, and how it changed with time due to pressures internal and external.
#Biden #Trump #Obama #PoliticalPhilosophies
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