It may be mission possible for Biden's Bigger is Better

WHEN it comes to political, economic and cultural trends in the West in recent decades, America has led the way, as it fashioned our Zeitgeist or the Spirit of the Age.

Former president Franklin D Roosevelt (FDR) and his New Deal programmes had set the stage for the birth of the modern welfare state. Hence very few Americans or Europeans would challenge today the notion that governments should assist the poor and the needy and determine fiscal policies.

Another American president, Ronald Reagan, had launched a new era in which free markets were seen as the main engine for economic growth and political freedoms. Even his Democratic successors have embraced Reaganism, or the so-called Neoliberalism creed, with former president Bill Clinton declaring: "The era of big government is over!"

President Joe Biden may not have stated that "the era of small government is over!" But the president does seem to be taking Reaganism head on, promoting an alternative and ambitious social-economic agenda that could, if successful, transform America's Zeitgeist.

In his address before Congress last week, President Biden proposed that the federal government under his leadership spend trillions and trillions of US dollars to turn around the economic crisis that has followed the Covid-19 pandemic, by shifting to a system in which the government, not the private sector, plays the central role in determining the well-being of the American people and in charting the nation's destiny.

Central to President Biden's new sweeping progressive agenda is the belief that America needs to reward work, not wealth; to protect the interests of a struggling middle class, not those of its corporate leaders.

As the president sees it, the high spending and taxing was part of the American tradition and a legitimate attempt to improve the lives of working-class Americans who have been forgotten during the years of economic boom in the country.

"No one should have to choose between a job and a pay cheque or taking care of themselves and a loved one, parents, spouse and child," he said. And, indeed, who could disagree with the view that Americans must help each other? Duh?

But making great ideas come true can cost a lot of money. The White House's ambitious agenda calls for really huge investments in healthcare, childcare and education, on fixing the country's physical and human infrastructure, on leading the global efforts to combat climate change, and on pursuing a form of industrial policy (although Biden administration officials would resist using the term "industrial policy").

Some of these ideas make sense even to Republicans, like spending to get rid of potholes on the road. Some may be inspiring. Yes, why shouldn't a rich country like America spend more on expanded childcare and healthcare subsidies, on preschool for children, on more family and medical leave, on free community college?

And, hey, why shouldn't the rich pay more in taxes, like they did in the 1950s and 1960s?

It may not be surprising therefore that enthusiastic Democrats, especially members of the party's progressive wing, led by the likes of Senator Bernie Sanders of Vermont and New York Representative Alexandra Cortez Ocasio, are celebrating. They are hoping that by going big, as opposed to the restrained reforms promoted by former presidents Clinton and Barack Obama, historians in the future would liken President Biden's social-economic programmes to those of the New Deal.

Indeed, they see President Biden's big plan for what it is - as a way of bidding farewell to the free market policies promoted by Mr Reagan and former British premier Margaret Thatcher, and as a historic step aimed at affirming a commitment to a traditional social contract by re-distributing the wealth of the country, from the rich to the poor and the middle class.

Supporters of Reaganism would argue that deregulating the American economy and opening it to more competition and reducing tax rates helped ignite the post-Cold War economic boom, a bullish stock market and the technological miracles of Silicon Valley.

Progressives, on the other hand, blame the same policies for growing social-economic inequalities, a crumbling industrial base, and growing unemployment. Solving them, they say, requires reversing the old policies.

It's difficult to argue with politicians and economists who contend that in the aftermath of the coronavirus pandemic, not to mention the 2008 financial crisis and the effects of globalisation and automation, there is a need to reassess some of the tenets of neo-liberalism and place more responsibility on activist governments to take care of those who have been left behind in the process.

But the question is whether there is national consensus in the United States in support of President Biden's plan to redistribute trillions of dollars of taxpayer money and use them to expand the reach of the government's social safety net, to extend the federal role in building infrastructure to speeding up Internet services, and to provide government support to American companies to compete with foreign rivals.

Indeed, the main challenge facing President Biden is political.

There are growing doubts that he would be able to mobilise a polarised American public and a divided Congress behind these massive government plans. Most Americans, including Republicans, support fixing the country's roads and bridges, and providing assistance to those who had lost their jobs during the pandemic. But there are no indications that the majority of Americans are now ready to back super-expensive government programmes in the name of promoting social-economic equality, or "equity" to use the left's more fashionable term.

After all, those whose social-economic interests President Biden is promising to advance - say, the majority of white blue-collar workers in states like Pennsylvania, Ohio and Michigan - had voted for Republican candidates in the 2020 election. They are certainly not enthusiastic towards Mr Biden's plans to shift more government resources to Blacks and Hispanics as part of an effort to deal with racial inequalities.

The bottom line is that President Biden faces strong opposition to many of his programmes from Republicans - and also some centrist Democrats - on Capitol Hill. And he has yet to explain how he would pay for all of them without imposing new taxes on middle class Americans. The president proposed raising taxes on families making more than US$400,000 a year. But that amounts to the income not of billionaires, but of many suburban middle class families who had voted for Candidate Biden in 2020.

And then there are the economic realities. The US economy has bounced back close to its pre-pandemic peak in the first quarter of the year and is now leading the global economic recovery. Gross domestic product grew at a remarkable 6.4 per cent rate in January through March, according to the US Commerce Department, with many expecting American output to grow between 6 per cent and 7 per cent in 2021.

All the signs are that households, many of them vaccinated and using the money they received from the administrations of presidents Donald Trump and Biden, are starting to spend again while the employment rate is returning to pre-pandemic levels. Some companies are even reporting difficulties in hiring new workers.

If that is the case, the sceptics would argue, then the last thing the economy needs now is a huge fiscal stimulus plan that, if anything, could re-ignite inflation fears and raise the deficit to new heights.

To put it in simple terms, the American economy was booming before the pandemic, and not thanks to fiscal stimulus programmes. At a time when all signs indicate that the economy is gradually returning to pre-Covid levels of growth and employment, it would be difficult to convince Americans that there is a need for the injection of trillions of government money, and in the process risk inflation.

President Biden could perhaps prove to be more successful politically and more effective in economic terms by promoting necessary and gradual reforms instead of pursuing a new New Deal, while starting a debate over possible structural economic changes to help deal with new global and technological challenges. He could get Congress and the public behind those more modest goals. After all, he was not elected to transform the Zeitgeist.