President Joe Biden’s economic policy, termed “Bidenomics,” is, in fact, government intervention in the economy reflecting a distrust of markets’ self-regulating abilities, an economic researcher said.
Mr. Biden pitched his economic plan in a major address in Chicago on June 28, trying to persuade Americans that his strategy is producing record-breaking job creation and investment despite widespread discontent over his handling of the economy.
The president attempted to define his economic strategy as a substantial departure from the “trickle-down” economic model that he claims his predecessor, Donald Trump, has followed.
Biden’s Economic Policies
“Trickle-down “economics is “a bit of a misnomer,” Mr. Gregg said in an interview at Epoch TV’s “Crossroads” program on June 28.The term describes the idea that when the economy is allowed to operate freely, lots of people get wealthy, some get wealthier than others which may happen due to better business choices they made, or their entrepreneurial skills, or because they were just lucky, he explained.
“As wealth grows, particularly at the upper-income levels of society, those people have more money to spend, they also have much more resources to invest,“ Mr. Gregg continued, and that spending and investing “tends to create growth across the economy and down the income stream.”
Bidenomics does not espouse this idea, and is based on the premise that “the government needs to act to engage in active redistribution of resources, both in terms of from wealthier income groups to those on the lower income scale, but also between economic sectors and even within economic sectors, on the presumption being that those types of interventions will produce—what [would be regarded] as fairer distributions of wealth throughout the economy,” Mr. Gregg said.
But these types of government interventions rarely bring the desired results and instead create “all sorts of disincentives for people to invest, to accumulate capital, or to be entrepreneurial,” Mr. Gregg asserted.
Trump’s Versus Biden’s Economic Policies
The Trump administration used a protectionist approach toward trade policies, particularly with regard to China, and many of those policies were retained by the Biden administration, Mr. Gregg said.
The Biden administration’s economic policies differ from the Trump administration’s economic policies in two main aspects, he said.
One is that the Biden administration uses “the selective interventions into different parts of the economy to try and produce better outcomes that would otherwise be delivered by markets,” Mr. Gregg said.
The other one is that the Biden administration not only believes that it should intervene in particular segments of the economy but the intervention also should incorporate “progressive causes,” such as “ ESG and DEI, into its industrial policies, Mr. Gregg said, calling it “woke capitalism.”
The Trump administration was against pushing ESG and DEI into economic policies.
ESG is a set of environmental, social, and governance standards used to rate companies and inform investment decisions. For example, one of the ESG factors is greenhouse gas emissions.
DEI stands for diversity, equity, and inclusion aspects, which have become key indicators to identify which companies are considered employers of choice, according to the U.S. Chamber of Commerce.
Effects of Bidenomics
According to a White House statement, under Bidenomics, the unemployment rate fell below 4 percent in January 2022 and has stayed there since then. Also, inflation-adjusted manufacturing construction spending has grown by nearly 100 percent in the last two years due to Mr. Biden’s economic policies, the statement said, attributing the growth to Mr. Biden’s industrial policies in infrastructure, semiconductor, and clean energy sectors.
“The economy is still bouncing back from COVID-19,” Mr. Gregg said. “There was so much of the economy that was basically locked down and forbidden from functioning [during the pandemic].”
To a certain extent, the unemployment rate decrease and the increase in spending are “a reaction to and an aftermath of government interventions when it came to COVID,” Mr. Gregg said.
The White House statement also touted wage increases during the Biden administration.
Mr. Gregg said that “wage rises have certainly been going on, but that’s nothing to do with interventionism.”
“That’s to do with the fact that we have labor market shortages, and in labor market shortages, employers are prepared to pay more by way of wages, salary, and benefits than they would in the context of a labor market [where more people had had actively looking for work],” Mr. Gregg explained.
Critique of Interventionism
Interventionist economic policies are not new, Mr. Gregg said. Interventionist policies fell out of favor in the late 1970s, but they have been making a pretty big comeback across the globe and across America over the past 10 years, he added. “This reflects a broad trend across the American political spectrum and across western economies right now.”State interventionism is not socialism where the government takes over strategically critical sectors of the economy and tries to run them like it was in the former Soviet Union and former Eastern Bloc countries, Mr. Gregg said.
It is when the government tries to manage “from the top down broad settings of the economy” and “particular sectors of economic development” while allowing markets to function in certain ways, allowing prices to convey signals to market participants, and preserving private property, Mr. Gregg explained.
In order to engage in even limited interventions, a government needs to have all knowledge about what is going on in the economy, including consumer wants and needs, and supply and demand for goods and services, in the short run and in the long run, Mr. Gregg said.
“The brutal reality is that no one individual, no politburo, no president, no administration, no government can possibly know all those things. So when they act as if they do, it tends to produce counterproductive results, one of which is a massive misallocation of scarce resources of capital and labor across the economy.”
