Is 'Bidenomics' Just 'Bidenology' or 'Trumpology? Biden's ideology on economics often resembles his predecessors', though reoriented to embrace Democratic Party sacred cows.

• Author: Lemieux, Pierre

A strange jargon practice fuses the name of a political leader with the word "economics," creating such terms as "Bidenomics." It suggests the leader is employing some new theory or policy that shows economic genius or, in the view of his detractors, failure. Whatever the origin of "Bidenomics," President Joe Biden and his White House have actively turned it into a one-word campaign slogan. But what is its actual content? And how does it compare to his predecessor's "Trumponomics"?

In February 2023, the White House released a fact sheet titled "The Biden Economic Plan Is Working." It included at least one intriguing statement: "President Biden is a capitalist and believes that anyone should be able to become a millionaire or a billionaire. He also believes that it is wrong for America to have a tax code that results in America's wealthiest households paying a lower tax rate than working families." Which raises another question: Is Bidenomics a capitalist program?

Four months later, the White House published a statement titled "Bidenomics Is Working: The President's Plan Grows the Economy from the Middle Out and Bottom Up--Not the Top." The text is high on rhetoric and light on rational explanations. Bidenomics is described as "an economic vision centered around three key pillars," which we will discuss below. We will find that Bidenomics incorporates many disparate orientations and proposals, shooting in all directions and not necessarily coherently. One common thread is that they respect Democratic sacred cows and promote Biden's 2024 political ambitions and those of his party allies.

HAPPY SPENDING

Biden boasts that his current fiscal policy is "responsible." To be sure, Fiscal Year 2022's federal deficit was less than 2021's, which was less than then-president Donald Trump's last full fiscal year, FY 2020. (A reminder: the federal government's fiscal year begins on October 1 of the preceding calendar year.) On the other hand, FY 2023's deficit is expected to be more than 2022's, and to remain at a higher level every year until 2033, according to the Congressional Budget Office. All those trillion-dollar-plus deficits increase the federal debt held by the public. The increase in the public debt amounted $3.1 trillion during Biden's first nine quarters in the White House (up to and including the first quarter of 2023), which is a rate only slightly more responsible--or less irresponsible--than Trump's $7.2 trillion over his 16 quarters in office.

It should be acknowledged that both Biden's and Trump's largest deficit came during the COVID years of 2020-2021. But Trump rang up trillion-dollar deficits before the pandemic struck and Biden continues to do so. Under both Trump and Biden, the deficits were mainly caused by high expenditures rather than low tax revenues. Biden now seems intent to spend as if the federal government and taxpayers face no constraint and dependence on government is a virtue.

In July, international financier Ruchir Sharma wrote in the Financial Times that "American exceptionalism" now includes the worst public deficits in the developed world and the third highest public debt (in proportion of GDP), after Japan and Italy, in part because of Biden's "latter-day New Deal." The persistent federal deficit and Washington's unwillingness to address it were the main factor in Fitch Ratings' recent downgrade of the public debt.

The budget splurge over the last seven years, partly accommodated by an increased money supply by the Federal Reserve, has contributed to the highest U.S. inflation in four decades. Taking the ratio of the increase in the Treasury securities held by the Fed to the increase in the federal debt held by the public, we can estimate that the Fed accommodated, through an increase in the money supply, 31 percent of the deficits under Trump and, as of the end of the first quarter of this year, 21 percent of the deficits under Biden. After the beginning of 2021, the monetary base generally increased but at a decreasing rate, which likely explains, with the usual lag, the inflation reduction that started in mid-2022.

ANTITRUST AND THE REGULATION OF COMPETITION

One of the three "key pillars" of Bidenomics as identified by the White House is the promotion of competition. The president previously issued, in July 2021, an executive order "Promoting Competition in the American Economy." The order was meant to promote a "fair, open, and competitive marketplace." It is notable that "free" was not mentioned. "Freedom" and its cognates appear just once in the 17-page document, in the expression "economic freedom." But it was used to describe workers' "freedom" to switch jobs, which the Biden White House complains is being restricted by noncompete agreements (which no one is forced to sign), and to the collective power of unionized workers to "negotiate a higher wage" (as opposed to the individual freedom to work at a wage one thinks best given one's circumstances, even if lower than a government-determined or union-cartelized minimum wage). In contrast, the order uses the word "fair" and its cognates more than three dozen times.

Biden's order did correctly identify a real economic freedom problem, one caused by government: "restrictive licensing requirements" (generally at the state level). But the problem is considered only from the viewpoint of workers, not consumers. Administration proposals that do invoke consumers would in fact work against the latter's choices and welfare by preventing producers from providing the diversity of offerings that consumers want.

Biden's nomination of Lina Kahn, a 32-year-old Harvard Law School professor, as head of the Federal Trade Commission marked an attempt at expanding government antitrust action. Confirmed with the help of 21 Republican votes in the Senate, Khan has embarked on a crusade to extend the reach of existing law by developing new legal theories and filing more lawsuits. Mere "bigness" and high technology seem to be her chief concerns, rather than the longstanding consumer-welfare standard. The antitrust division of the Department of Justice has moved in the same direction. Large corporations are seen as the problem simply because of their size, though there appears to be no parallel concerns about big trade unions and big government.

Fortunately, the courts have been skeptical of this policy change, as shown by the failure of suits to block Meta Platforms' acquisition of reality-gaming company Within Unlimited, and Microsoft's acquisition of videogame publisher Activision Blizzard. Academic research and the empirical record have also revealed problems with the Biden administration's new antitrust theories. (See "Antitrust," p. 61.) Kahn's agency is also suing Amazon and Google while the Justice Department is investigating the Apple Store.

The international news magazine The Economist, despite being generally favorable to antitrust laws, has argued that the new crusade against bigness and high tech is unproductive. It threatens American research and development, of which one-fourth is done by the five largest high-tech firms. With nearly Schumpeterian accents, the venerable magazine defended the idea that "dealmaking, even involving big firms, is a vital part of healthy capitalism," which the new antitrust warriors in D.C. do not seem to understand. (See "A Celebrated and Puzzling Book," Summer 2022.) Competition provides its own remedy to concentration: large corporations are always threatened by actual or potential competition...