Suzanne Lynch: Biden brings back big government with a bang

It may not feel like it, but something of a quiet revolution is under way in the United States. Gone is the frenetic tweeting and head-spinning news cycles of the Trump years. Instead, Joe Biden has brought a sense of calm and order to Washington. But the arrival of a more low-key presidency shouldn’t be interpreted as a scaling-back of ambition. On the contrary, the first 100 days of the Biden presidency has seen an array of policy initiatives that could have profound implications for the US economy.

The 100-day mark is an arbitrary date. It was Franklin D Roosevelt who first set the 100-day standard against which all future presidents would be measured. In fact, Biden may prove to be the US president most comparable to FDR, whose New Deal programme tackled the deep economic depression of the 1930s and ushered in a new era of government intervention and state support.

The leftward tilt of the Biden administration has been one of the surprising turns of the post-Trump era. The 78-year-old political veteran is an unlikely radical. With more than four decades of experience in Washington he ran as a centrist candidate, someone who could appeal to the middle ground and disaffected traditional Democratic voters who backed Trump in 2016. In fact, in his first 100 days he has governed further to the left than some of his primary rivals for the Democratic nomination like Bernie Sanders and Elizabeth Warren could have imagined.

With the Covid pandemic dominating his priority list on assuming office on January 20th, Biden embarked on an ambitious economic as well as public health agenda. In addition to ramping up vaccine distribution (some credit for which should be given to the Trump administration), he focused his domestic strategy on securing political support for an ambitious Covid economic package. The $1.9 trillion American Rescue Plan was signed into law on March 12th, and direct stimulus cheques were soon sent to taxpayers. Burned by the experience of the Obama presidency, when the White House scaled back its ambitions for the 2009 economic recovery plan to win Republican support only for Republicans to vote against the package anyway, Biden’s team decided to go big, pushing the legislation through Congress without Republican support via a technical trick known as budget reconciliation.

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A two-stage infrastructure package followed: $2.3 trillion for traditional projects such as roads, bridges and broadband, and a $1.8 trillion “soft” infrastructure package announced this week during his address to Congress focused on childcare, paid leave for workers and some free education tuition. Following two similar stimulus packages worth up to $3 trillion last year, Biden’s blitz of spending represents a colossal injection of cash into the US economy.

Like many governments around the world, the Biden administration will finance the spending through borrowing as it capitalises on historically low interest rates, but also via tax hikes. Biden has proposed an increase in the corporate tax rate and changes to the way multinationals are taxed (which could adversely affect Ireland) as well as income tax rises and a new capital gains tax that will apply to high-earners.

A radical recalibration

Some economic commentators have raised eyebrows. Former Treasury Secretary Larry Summers has warned that the US economy does not need such levels of stimulus, which could drive inflation, while also arguing that the package should be more targeted at those who need help. Like many countries across the world, the administration is likely facing an exacerbation of the divide between rich and poor in a post-pandemic world given that those in lower-paid, less secure jobs have borne the brunt of the economic costs of the pandemic, while many of the well-paid have amassed savings.

But others see a radical recalibration of US economic orthodoxy in the Biden plans, hailing measures such as the expanded child tax credit as a real turning point in the US’s attitude towards the role of government in society. The pandemic gives Biden political cover to push through these measures, while Democratic control of both houses of Congress, albeit by the slimmest of margins in the senate, may help him deliver as he said at this week’s address a “once in a generation investment in America”.

While Biden’s economic ambition may be a gamble, particularly given inflationary concerns, it undoubtedly marks a very different kind of Democratic politics from 25 years ago when Bill Clinton declared that the era of big government was over.

Carbon emissions

As for other policy areas, Biden in his first 100 days has followed through on many of his campaign promises. On climate change, he re-entered the Paris climate agreement, and committed to halving the United States’ carbon emissions by 2030. On foreign policy, he signalled the US intention to re-enter the Iran nuclear deal and also pledged to withdraw all US troops from Afghanistan by September – a controversial decision, amid concerns that it is a win for the Taliban and will send Afghanistan back into civil war.

Other decisions have also proved contentious. Biden badly misjudged his own party by keeping the cap on refugees entering the US the same as the previous administration’s levels, only to reverse the decision following backlash from Democrats. The US was also slow in sharing its surplus vaccines and helping countries struggling with the pandemic like India – discrediting Biden’s claims that the US is back at the international table following the isolationism of the Trump presidency.

Nonetheless, as Biden now turns his legislative focus to gaining support in Congress for his two-step infrastructure package, his argument for an enhanced role for the state in society could be transformational. It’s very early days, but showing that big government is back could prove to be one of the lasting legacies of the Biden presidency.

Suzanne Lynch is Washington correspondent