PRESIDENT BIDEN’S ADDRESS: SHOULD AMERICA LISTEN?
After the unprecedented, nearly 100 days into his presidency Joe Biden has finally delivered his address to Congress and to America. The address is the first comprehensive programmatic statement of what Biden’s administration has already done and what he plans to do in the future.
As many such addresses go, this one has its share of obligatory formulaic expressions of optimism and self-congratulatory praise. The piece is average in length, but it has a lot in it.
There are many details—some relevant and some not. A comprehensive analysis of everything that the address includes will certainly make the understanding of its main points and their potential consequences difficult. Therefore, this contribution takes a more selective approach. It will focus primarily on what looms large in the text and will pay less attention to the fine print.
The main goal of Biden’s address is to sell his The American Jobs Plan to the country. As Biden indicates in his address, the plan represents much more than just dealing with current difficulties.
It will provide the solution for the longstanding and most important problem that America faces—the problem of growth. Biden proposes to solve this problem by making a long-term investment in America.
As Biden puts it, the plan is “a once-in-a-generation investment in America itself” and the “largest jobs plan since World War II.” Although the plan calls for investment in the infrastructure, Biden’s conception of infrastructure is very broad. In addition to roads, bridges, and dams, it also includes education, childcare, the Internet, the new minimum wage, and much, much else. The scope of the plan is so huge that it dwarfs the price tag of 2.3 trillion dollars that is attached to it.
One of the main points related to the plan that critics bring up is how to pay for it. To Biden’s credit, he confronts this sticky point head-on. His answer is simple: America will pay for this plan by taxing the wealthy, not through deficit spending.
According to Biden, some 650 richest billionaires in America control the wealth of approximately $4 trillion. He proposes to increase taxes for the wealthiest 1% of Americans to 39.6%, or the level of taxation under George Bush. He specifically stresses that taxes for people who make less than $400,000 will not go up.
There is something here that does not quite add up. The tax of roughly 40% imposed on the richest people of America whose combined wealth is $4 trillion will yield something like $1.6 trillion, far short of the required initial sticker price of $2.3 trillion. Where will the balance of almost $700 billion come from? The plan does not explain.
Moreover, taxes on the rich should also have an adverse effect on their investments and, consequently, the production of wealth. After all, the reason why Reagan, Republicans, and Democrats under Clinton and Obama went along for lower taxes on the rich was not to make the rich richer. The intention was to stimulate investment and, thus, production growth.
Biden’s attack on the rich is rather disingenuous. The record of the relationship between the Democratic and corporate elites is clear. The Democrats have been playing footsies with the rich for many decades. Their neo-liberal approach effectively created the alliance between the political and corporate elites.
Under Clinton and Obama, the Democrats pursued the policy of promoting markets throughout the world that benefited the world’s most rich people. They were behind the so-called “shock therapy”—the policy that effectively robbed common Russians and created a narrow class of Russian oligarchs who controlled most of the country’s wealth. Biden also has strong connections with corporate giants and has used their deep pockets and influence in the past.
Taxing the rich is like throwing the pike into the water with small fish. The rich will find ways to offset their losses and re-distribute the tax burden onto smaller fry, for example, by increasing prices. They can also reduce production.
If Biden intends to finance his jobs plan by taxing the rich, he may very well find that the number of revenues will decline, in which case the Democrats will have to turn to familiar methods of financing their ventures—budget deficit. Turning to budget deficits may have other adverse consequences beyond the proverbial debt increase.
Countries like China and Russia have long looked with envy at America’s debt. That is the reason why they have been trying for quite some time to displace the dollar from its privileged position and use deficit spending the way America does. With the growing political turmoil in America and the country’s weakening power, on one hand, and China’s unstoppable growth, on the other hand, they just might succeed. In any event, America’s efforts to solve its problems at the expense of other countries are likely to contribute to growing international tensions.
There are also some questions as to whether the plan, as it is, will solve the problem of growth. Biden explains that nearly 90% of the infrastructure jobs his plan will create will not require a college degree and 75% will not require an associate degree. Today’s economic growth relies primarily on high-tech industries and on creativity and innovation. Jobs in infrastructure, while important and beneficial to many needy people, are not likely to be in the category that contributes most to growth in modern economies.
Apart from rather general and routine pledges of continued support for science and technology, Biden does not really address ways of enhancing creativity and innovation in the American economy.
There are other points in Biden’s address that are less central but are nevertheless significant. They are too many to discuss them all, but few examples are in order since they illustrate other shortcomings of Biden’s plan. For example, Biden proposes to increase the minimum wage to $15.
Critics have pointed out that this increase is likely to contribute to the growth of unemployment, particularly among individuals in the lower-income bracket, and may actually do more damage than good. Biden also states that the most serious terrorist threat to American security today comes from “white supremacist terrorism.” There are many Americans who will make an exception to this point.
They feel that organizations such as BLM and Antifa also pose a serious threat as they have terrorized for months American cities. Biden repeats his familiar call for reducing the number of guns owned by private individuals as a way to reduce violence in America.
However, he totally ignores the real danger that this ban may provoke more violence as lawful gun owners may try to protect what they see as their constitutional right. Biden talks at some length about his way of addressing climate change and developing renewable sources of energy.
However, he fails to recognize that the solution of climate problems will require more wealth production, rather than less. He also makes no mention of the effects that the cutting of fossil fuel production will have on those employed in this industry.
Finally, Biden calls on all Americans to come together in reconciliation. Reconciliation requires the recognition of validity and legitimacy of views and opinions other than one’s own. Yet Biden gives little indication that he recognizes the validity and legitimacy of the views and opinions of the 75 million Americans who voted against him in the last election. In the absence of such recognition, his plan looks increasingly as an attempt to simply buy their loyalty.
Biden’s address contains many points that have been first advanced by President Trump, such as “buy American” and “deny offshore tax havens” but offers no credit due to his rival. This lack of recognition of the views and opinions of his opponent does not indicate that Biden is sincere in his search for reconciliation.
Biden’s address is unlikely to produce a big impression. There are signs that common Americans are not taken by Biden’s attempt to win them over. Only 200 people attended Biden’s address. The Democrats used “coronavirus protocols” as an excuse for low attendance.
CBS data shows a little over 18,000 viewers simultaneously watching the event, but double the thumbs down to thumbs up. Yahoo Finance had a bit over 7,000 viewers on its Livestream, but negatives again far outweighed positives. In comparison, Steven Crowder’s live “fact check” of the Biden presidential address got 81 million votes.
In sum, on close examination, the American Jobs Plan appears to be much ado about very little. It does not solve the problem of growth that is the key to many of our woes. The plan is full of facile solutions that pay little attention to their potential negative impact. Future will show how Biden’s plan will play out.
However, the plan painfully resembles the traditional Democratic tax-and-spend approach—the approach that did not serve them well in the past and is unlikely to serve any better in the future.