In one of the few memorable lines from Tuesday's State of the Union address, President Joe Biden declared that competition is essential to a properly functioning economy.
"Capitalism without competition is not capitalism," the president declared. "It's exploitation."
A bit of a cliché, but State of the Union speeches tend to be full of those. What made the line particularly jarring, however, is that it was delivered just 10 minutes or so after Biden had extolled—to bipartisan applause—the use of government power to shield American companies from foreign competition by tightening so-called Buy American rules for federal infrastructure projects. Doing so, he argued, was not only going to strengthen the economy but was the patriotic and upstanding thing to do.
But the tension between those two moments isn't the result of poor speech writing or a temporary lack of clarity from the president. It's actually a nice illustration of a fundamental contradiction that's affected the Biden administration's economic policy for the past two years. Even as the White House and its Democratic allies in Congress press to ban noncompete agreements and bring antitrust cases against Google and Amazon, they are also ratcheting up protectionism for American manufacturers of everything from drywall to advanced computer chips.
Is competition essential to capitalism? Of course. But the Biden administration's view seems to be that it depends on who is doing the competing.
When companies force employees to sign noncompete agreements, that's bad. In July 2021, Biden ordered the Federal Trade Commission to find ways to "curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility." With federal action expected in the near future, Biden drove the point home in his speech on Tuesday, promising that banning noncompetes would mean that "companies have to compete for workers."
In the same speech, Biden called on Congress to pass the Protecting the Right to Organize (PRO) Act, which would effectively ban workers in many professions from being independent contractors. Worker mobility and increased competition for labor are good! Except when they're not, apparently.
Once you start looking for it, this contradiction seems to pop up in almost every major policy the Biden administration has pursued.
Take the Inflation Reduction Act, for example, which Biden touted on Tuesday night for being "the most significant investment ever to tackle the climate crisis."
One major component of the law is a 30 percent tax credit to offset the cost of installing solar panels on the roofs of American homes and businesses. It's a policy clearly intended to spur economic activity and competition in the rooftop solar market. But at the same time, the Biden administration has extended Trump-era tariffs on imported solar panels and their component parts, which drives up the cost of those products. Those imported products are somehow a national security concern, according to the Biden administration, but it's obvious that the tariffs are really just a way to protect American manufacturers from unwanted competition.
In a similar way, the 2021 infrastructure bill poured massive federal subsidies into expanding broadband networks—but requires that the money only be funneled to companies that build fiber-optic networks, not those that provide wireless internet connectivity.
Because competition is bad. Except when it's good, like in meat and poultry supply chains, which the Biden administration has goosed with federal subsidies because of a "lack of competition hurting consumers, producers, and our economy."
We need more competition, except when that competition is too competitive. What if one airline tries to compete by lowering ticket prices but makes up the difference by charging customers an added fee if they want to choose where to sit? That requires government intervention. "Baggage fees are bad enough," Biden said Tuesday, as he promised to ban the practice. "Airlines can't treat your child like a piece of baggage."
Consumers can't be trusted to sort through different pricing options to decide which is best for their needs, but it's also unfair for businesses to be too good at anticipating their customers' desires. One of the main arguments behind Democratic attempts to use antitrust law against Amazon and other Big Tech companies is that those firms promote some products or services at the expense of other comparable items. You know, like grocery stores do when they put a certain product on display at the end of an aisle. But different, somehow, because it's happening online.
Biden's Department of Justice, meanwhile, is pushing an antitrust case against Google supposed dominance of online advertising—even as the company's share of online ad revenue is declining. Thanks to, yes, competition.
All other examples aside, the best illustration of this contradiction is Biden's "Buy American" rules for federal infrastructure jobs. "When we do these projects, we're going to Buy American," Biden said Tuesday, before promising "new standards to require all construction materials used in federal infrastructure projects to be made in America. American-made lumber, glass, drywall, fiber optic cables."
There's no denying the fact that Buy American rules increase the cost of construction projects. The particular political benefits and economic drawbacks of these rules might be interesting, but somewhat beside the point here. What matters is that Buy American laws are fundamentally anti-competitive. In the marketplace for government procurement, Biden is saying, less competition is desirable. There's nothing wrong with drywall made in Canada, but we're going to exclude it from consideration anyway.
"Barring import competition for a broader range of procurement funded by federal grants also has the potential to increase the market power of domestic producers in industries that are already highly concentrated, possibly leading to higher project costs," the Congressional Research Service concluded in a 2021 report examining the details of Biden's infrastructure law.
Increasing the market power of already concentrated industry leaders? In a slightly different context, that might be the sort of thing that Biden or Sens. Amy Klobuchar (D–Minn.) or Elizabeth Warren (D–Mass.) would be eager to take down. Instead, Biden got bipartisan applause for promising to limit competition.
The frustrating thing about all this is that Biden's not wrong when he says competition is essential to capitalism. And the really frustrating thing is that his policies are helping create rather than prevent the "exploitation" that he says will result from less competition in the marketplace. In this case, it's the exploitation of taxpayers, who will get less government-built infrastructure than they otherwise would have received.
Biden is right: Competition is essential. Now, he should apply that argument more consistently.
The post For Joe Biden, Competition Is Essential. Except When It Must Be Banned. appeared first on Reason.com.
