In late June, President Joe Biden addressed the Old Post Office building in Chicago to announce a departure from the long-standing “trickle down” economic model that has shaped American politics for over four decades. Although he did not come up with the term, “Bidenomics” was coined by The Wall Street Journal and the Financial Times, as Biden himself acknowledged. However, the shift in economic approach that Bidenomics represents was intentional. It represents a deliberate effort by the White House to dismantle the free-market ideology that took hold during President Ronald Reagan’s tenure, which favored the private sector, the wealthy, monopolies, and employers over the public, the poor, small businesses, and workers.
After two years of working on significant economic legislation and implementing less visible government regulations, Biden is now ready to claim credit for what could be a transformative change in American politics and the economy. Reaganomics is being replaced by Bidenomics. According to President Biden and his administration, Bidenomics aims to establish a more active role for the government in strategically guiding key industries, which are deemed important for national and economic security. It also prioritizes worker empowerment and competition through the revitalization of labor unions and stricter antitrust enforcement.
The impact of these changes can be witnessed from various perspectives. Public investment is surging through initiatives such as the Inflation Reduction Act, bipartisan infrastructure law, and the CHIPS and Science Act. Additionally, decades of lenient antitrust policies are being reversed, and the regulatory review process is being revamped. As a result of the government’s public investment, private companies have already committed over $500 billion to factory investments across all states. Manufacturing construction is thriving, unemployment remains below 4% for an extended period, lower-wage workers are experiencing significant wage growth that contributes to reduced inequality, and real wage growth has overtaken inflation for the first time since the beginning of Biden’s presidency.
By delivering his speech in Chicago, Biden is making a significant bet that the positive economic trends will continue, allowing him to campaign for re-election based on the paradigm shift that is already underway. To complete this shift successfully, he needs to effectively convey its beginnings to the American public and emphasize the differences between his approach and those proposed by his Republican opponents. Will the positive effects of Bidenomics trickle down in time?
To understand the significance of this paradigm shift, it is crucial to recognize the previous economic model. Biden referred to it as “trickle-down economics” during his Chicago speech. This model was based on Reagan’s belief that cutting taxes for the rich would stimulate business investment and overall economic growth, with the benefits eventually reaching the middle and lower classes. The idea of “a rising tide lifting all boats” became synonymous with Reaganomics.
The neoliberal ideology emerged during the 1970s as a response to the economic challenges faced by the New Deal regime. This ideology dismissed the government’s role in the economy, favoring private financial institutions for economic governance. It prioritized free trade at the expense of local economies, championed industry deregulation, corporate consolidation, a smaller welfare state, and relied on the private sector’s autonomy.
Reagan implemented several changes aligned with this neoliberal ideology, such as tax cuts, reductions in welfare, suppressing labor strikes, deregulating businesses, and weakening antitrust enforcement. These changes ushered in a conservative era, leading President Clinton to declare, “The era of big government is over.” Despite some initial economic growth, the promised benefits failed to reach the majority of the population, resulting in significant wealth concentration at the top, wage stagnation, and inequality.
The neoliberal order faced a crisis during the 2008 global financial crisis and the subsequent Great Recession. The recovery was slow and uneven, revealing the inadequacy of austerity measures and free trade. This provided an opening for critiques of the existing economic order from right-wing populists like Donald Trump and democratic socialists like Bernie Sanders. However, it was Trump who initially capitalized on this dissatisfaction.
The Trump era marked a departure from the neoliberal consensus on trade, but internal divisions within the Republican Party and Trump’s personal limitations prevented a complete shift. This became apparent during the COVID-19 pandemic, when the government embarked on unprecedented spending to prevent business closures and financial ruin.
The four years of the Trump administration fueled academic research and think tanks associated with the Democratic Party. Activism surrounding movements like Occupy Wall Street and Bernie Sanders’ presidential campaign also created a grassroots network capable of supporting new economic ideas. This period of intellectual and policy ferment laid the groundwork for the pillars of Bidenomics: strategic public investment, stronger antitrust enforcement, and worker empowerment.
Bidenomics emphasizes a robust industrial policy guided by direct public investment. This approach, often referred to as a “new productivism” or a “mission economy,” envisions the government playing a curated role in the economy. The administration has absorbed Trump’s critiques, leading to what some consider the country’s first post-neoliberal administration.
Overall, Biden is betting on the positive economic news to continue, allowing him to run for re-election on the back of the paradigm shift already in motion. The success of Bidenomics hinges on effectively communicating its beginnings to the American public and differentiating it from the proposed alternatives by Republican opponents.