The Biden Economy

After thirteen paragraphs of blaming the Obama Administration for the phlegmatic economic growth from 2009-2016, the editors of the Wall Street Journal arrive at a destination that I think we should all agree about but probably won’t:

The Biden economic plan is best understood as Obamanomics pulled left by Bernie Sanders. He’d raise taxes by $3 trillion by his count—about $4 trillion by independent calculations. His spending plans run to at least $7.4 trillion, conservatively estimated. His labor proposals are the most pro-union since the 1935 Wagner Act. Regulations on health care, energy, transportation, technology and finance will multiply, often with a priority of reducing racial inequities rather than increasing opportunity.

The U.S. economy will have a growth spurt in 2021 as the pandemic ends no matter who wins the election. But over time these destructive policies will inevitably lead to slower growth. The Fed will be called to do even more, perhaps including bond purchases of private companies and modern monetary theory’s debt monetization. Asset holders will benefit more than wage earners.

That last sentence is a hat tip to an observation made earlier in the editorial—the reason for the increases in income and wealth inequality is precisely what you’d expect from the combined Obama Administration and Federal Reserve policies after the financial crisis. It doesn’t make a smidgeon of difference whether they intended those consequences or not.

I fault the Obama Administration for something rather different from the complaints of the WSJ editors. I think that Democrats have learned the wrong lessons from Franklin Delano Roosevelt’s first and second terms. Neither the New Deal nor Keynesian spending pulled the United States out of the Great Depression. That was not effected until after World War II had concluded, the American people had been saving ferociously during the course of the war, and the U. S. economy was the world’s only intact economy.

No, the lesson they should have learned is that FDR engaged in furious activity, trying one thing after another, through both of his first two terms. Here’s a quick list of the measures enacted into law just during his first term:

1933

Emergency Banking Relief Act
Beer-Wine Revenue Act
Civilian Conservation Corps (CCC)
Federal Emergency Relief Administration (FERA)
Agricultural Adjustment Act
Securities Act of 1933
Home Owners’ Loan Act of 1933
Banking Act of 1933
Farm Credit Act
National Industrial Recovery Act
Federal Surplus Relief Corporation
Civil Works Administration (CWA)
Public Works of Art Project (PWAP)

1934

Gold Reserve Act of 1934
Fish and Wildlife Coordination Act
Securities Act of 1934
National Housing Act

1935

Soil Conservation Act
Resettlement Administration (RA)
Works Progress Administration (WPA)
Rural Electrification Administration (REA)
Puerto Rico Reconstruction Administration (PRRA)
National Youth Administration (NYA)
Taylor Grazing Act
National Labor Relations Act
Treasury Relief Art Project (TRAP)
Social Security Act
Banking Act of 1935
Federal Project Number One

1936

Rural Electrification Act of 1936
Robinson-Patman Act

I’ve probably missed something in that list. By comparison after the passage of the American Recovery and Reinvestment Act, the Obama Administration turned its attention away from the economy towards health care. My point is not to defend any particular component of FDR’s first term actions but to point to their sheer number. I can’t imagine any modern administration, Democratic or Republican, with that sort of energy.

It is a fact that if you withdraw as much from the private sector (taxation) as Joe Biden has promised, however you utilize it you will produce less economic activity than would otherwise have been the case. The dramatic decline in U. S. domestic production activity over the years as a proportion of consumption (measured in imports) tells us conclusively that there will be little or no Keynesian multiplier from today’s government spending. VP Biden is promising to preside over a diminished U. S. economy, redistributing revenue as politics dictates. If you don’t have much to lose or you believe that some of those funds will make their way into your pockets, you may find that prospect attractive.