Bidenomics can preserve support for capitalism

People are supposed to grow ever more conservative with age. The teenage dreamer becomes the middle-aged pragmatist, who in turn settles into late-life reaction. A curious feature of Joe Biden’s story is that it defies this classical arc. The New Democrat of yesteryear, tough on welfare and even tougher on criminals, is now the party’s most progressive candidate for the White House since the 1980s.

Nothing makes the point more resoundingly than his economic platform. A President Biden would spend upwards of $2tn on climate change abatement. The money, which doubles up as stimulus for a stricken economy, would not just fund research into clean energy but directly update America’s physical infrastructure.

There would also be more federal funding for schools in poor areas, for first-time homebuyers, for certain kinds of Social Security recipient. On healthcare, the former vice-president stops short of the left’s dream — Medicare for all — but he would build on the reforms of his old boss, Barack Obama. Taken together, says Moody’s Analytics, his plans call for “an additional $7.3tn in government spending over the next decade”. Neither Mr Obama nor Bill Clinton were quite as ambitious.

If the expenditure is novel, then so is the explicit willingness to tax. There is none of the coyness of the Clinton era, when Democrats tried to lose their reputation as the anti-success party. Mr Biden is clear that he would raise the top marginal rate for corporations and undo President Donald Trump’s tax cuts for people with an annual income above $400,000. Altogether, more than half of his proposed spending would be tax-funded, with the already-large deficit financing the remainder.

Whatever Mr Trump says, this is not a new Red Menace banging at the door of the private sector. Unless the Democrats take control of the Senate in next month’s election, most of these plans are moot. Even if they do, several Democratic senators represent conservative states, and might vote accordingly. And while Mr Biden envisages a greater role for the state than either Mr Clinton or Mr Obama, it would not be up there with the New Deal or the 1960s Great Society as a break from the status quo. In fact, given the leftward trend of US public opinion in recent years, he might have gone much further. Supporters of Bernie Sanders, the Vermont socialist, will certainly think so.

What Bidenomics does embody is a general re-assertion of government across the democratic world. Even before the coronavirus pandemic, the UK’s Conservative government dispensed with Thatcherism in favour of industrial strategy. French president Emmanuel Macron pursues supply-side reforms at home, yes, but also a protectionist line at EU level. Now, with the state cushioning the economic blow of the pandemic in most countries, the public realm has seldom been so important. The shift of the world’s largest economy into mildly social-democratic hands would confirm the trend.

Those in Mr Biden’s fiscal crosshairs would be forgiven for reaching nervously for their wallets. But they should also take the long view. Since John Maynard Keynes, the best case for state intervention has not been to abolish the market, but to preserve public support for it. An unchecked capitalism would not survive the electorate’s judgment. Sure enough, there have been times since the 2008 crash when popular resentment of inequality, especially among the young, has threatened to spill over into demands for total systemic change. If implemented, Bidenomics will make life more burdensome for business and for high-earners. But it might also avert a larger reckoning further down the line.

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