As Trump’s inauguration looms, outgoing president Joe Biden cuts a sad figure. “There is a sense he is already shrinking back, slowly fading into history,” wrote Crikey’s Charlie Lewis on Friday.
Old Joe certainly made his share of blunders during his time in office, some excusable and others not, such as America’s role in Gaza and his late campaign withdrawal.
Stumbling and withering away before our eyes, he must now hand the White House keys back to the man he vowed to defeat. As Charlie wrote, the latter moments of a president’s term tend to linger in the mind, and Biden’s are a tragic coda.
Nonetheless, the media’s understandable emphasis on the negatives leaves us vulnerable to forgetting Biden’s numerous positive achievements. Indeed, were it not for Gaza and his failed second run, Biden could credibly lay claim to being the most impactful progressive president since Franklin Delano Roosevelt, or at least Lyndon Johnson — no small feat for an aging one-termer.
Biden oversaw fundamental shifts in economic policymaking away from the neoliberal consensus. Particularly, he junked the notion that governments must err on the side of higher-than-necessary unemployment, so that employers can access a cheap pool of labour and discipline existing workers with the threat of easy replacement.
It is hard to overstate how pervasive and pernicious this status quo was across the Western world. In schools and universities in the 2000s and 2010s, my generation was told, more or less explicitly, that getting a desirable job was both a significant measure of our worth as human beings and also very difficult. Surmounting this barrier was life’s core moral challenge.
It required endlessly proving oneself in the hope of being chosen. An undergraduate degree became insufficient in many fields, with expensive master’s degrees proliferating. If one could afford to, one undertook multiple unpaid internships to stand out. Job applications became arduous multi-step processes, sometimes including unpaid “tasks” and “psychometric tests”. Then, those who managed to attain work in sought-after fields were told they were “lucky”, and therefore shouldn’t ask for much.
As I learned more about economics, I slowly realised things needn’t be this way. The process of attaining and keeping a good job was only so arduous because employers had so many desperate candidates (and because, relatedly, unions have been decimated). This “reserve army of labour” wasn’t some preordained state of nature, but the result of very specific economic policy choices, namely restrained government spending and hawkish interest rate policy.
Few leaders dared question that status quo, until Joe Biden. Each time the statisticians reported a record low unemployment rate, he urged his policy team to try for even lower. When business leaders began to squeal that they were, often for the first time in their professional lives, finding it difficult to fill positions and retain staff with existing wages and conditions, Biden told them bluntly, “Pay them more.”
The results of this paradigm shift were truly remarkable. By 2023 alone, lower-income American workers had recovered approximately 25% of the increase in wage inequality they suffered between Ronald Reagan’s and Donald Trump’s presidencies. By 2024, American wages were higher than they had ever been, thanks to employment also nearing an all-time high.
Why is it important to emphasise these gains? Because since Kamala Harris lost her presidential tilt, in part due to Biden’s perceived weakness on economic management, many former advocates of full employment are having doubts and many inflation hawks are jockeying for influence among the next crop of Democratic leaders. In response, key figures in shaping Bidenomics, such as US Treasury Secretary Janet Yellen, are seeking to defend their legacy.
Democrats certainly need to take inflation seriously. It hurt them at the ballot box. But they would be wrong to pin too much blame on Biden’s spending bills for the subsequent inflationary outburst. And they’d be wrong to therefore err on spending too little than too much in future crises, as Barack Obama’s team did after the global financial crisis.
As evidence from the US Treasury and multiple Federal Reserve branches shows, even if Biden had spent drastically less on infrastructure, renewable energy and social supports, about three-quarters of the inflation increase would have happened anyway due to COVID-related supply constraints. He might have shaved off one percentage point from America’s 2023 inflation peak, probably not enough to reduce consumer anger.
Indeed, to keep inflation at the Federal Reserve’s 2% target, Biden would have had to cut spending by so much as to cause unemployment to skyrocket to approximately 10-14%. He might have been able to Scrooge his way to stable prices, but only at massive social cost. And he probably would’ve lost popularity anyway for destroying so many jobs.
Further, the American political system is so sclerotic and clunky that perfectly calibrating spending for the optimal employment-inflation tradeoff is nearly impossible. Polarisation, gerrymandering and procedural anachronisms mean governing parties usually only have legislative majorities for brief windows, during which time they must ram through as many of their spending priorities as possible, with reaching across the aisle now practically unfeasible.
The Democrats’ most recent window unfortunately coincided with global supply shocks. But if they had refrained from striking while the iron was hot, they would have bitterly disappointed their supporters and Biden would have been seen as a do-nothing president. Again, he would have probably tanked in the polls. He could have later taken tough measures to reduce inflation, like raising taxes. But by then Republicans had won the House, and were never going to cooperate.
Biden was dealt a tough economic hand. His error was not in forging a new, fairer economic model, but in failing to convincingly make the case for it and vacate the race early enough so someone else could. If Democrats walk away from Biden’s achievements now, they risk throwing the baby out with the bathwater.
In Australia, treasurers Josh Frydenberg and Jim Chalmers followed Biden’s lead in screwing our unemployment rate down to historic lows. And the latest jobs report shows the party is still tentatively going. But the 2024 budget projected unemployment climbing again soon and it’s unclear whether the election campaign will see a contest over who can create the most jobs, or who can appease employers and the financial press with familiar promises of budget surpluses.
Australia followed the US’ move toward full employment. If America’s commitment wanes, we shouldn’t follow it in reverse.
Have something to say about this article? Write to us at letters@crikey.com.au. Please include your full name to be considered for publication in Crikey’s Your Say. We reserve the right to edit for length and clarity.
