The Pitch: Economic Update for December 14th, 2023
I wanted to direct your attention this week to an article that Civic Ventures founder Nick Hanauer published in Timemagazine under the headline “Bidenomics Is Real Economics.” In the piece, Nick makes the case that President Biden’s support for a middle-out economics platform is more than empty sloganeering—it’s the natural next step in a paradigm shift away from Reagan-era trickle-down economics and toward something new.
“Like Reaganomics before it, Bidenomics is largely an argument over economic cause and effect. Bidenomics argues that a large and thriving middle class is the primary cause of economic growth. ‘When the middle class does well, everybody does well,’ the President has repeatedly explained,” Nick writes. “This is the core proposition of Bidenomics: thatprosperity grows from the bottom up and the middle out. Reaganomics, by contrast, argues that wealthy “job creators” are the primary cause of economic growth.”
But plenty of presidents on both sides of the aisle have talked about the importance of centering the priorities of working-class Americans. The difference is that Biden’s policy agenda actually follows through: “The White House website describes Bidenomics as ‘centered around three key pillars’—public investments, empowering workers, and promoting competition—pillars that stand both in sharp contrast to the Reaganomics regime of tax cuts, wage suppression, and deregulation, and on a far stronger empirical foundation than the trickle-down alternative they seek to displace.”
As an example, Nick points out one major distinction between Reaganomics and Bidenomics: Reaganomics promoted corporate mergers and anticompetitive behaviors as a net plus for everyone, under the grounds that they improved efficiency. “The orthodox economic theories that inform Reaganomics insist that the market functions primarily as a self-organizing tool for efficiently allocating capital, and if efficiency can be maximized through market concentration or automation or offshoring (or union busting), then so be it,” he writes.
The difference is that “Bidenomics is grounded in modern economic theory that recognizes that, while markets are incredibly effective at evolving new solutions to human problems, they are often remarkably inefficient, and that what capital efficiencies they create can sometimes come with unacceptable amounts of economic and societal risk.”
In other words, just because it may be more efficient if one giant entity like Walmart controls retail and grocery operations within large swaths of the country doesn’t mean that it’s a net good. Walmart can jack up prices in areas where they’ve shuttered all their competitors, for instance, and they can suppress worker wages because nobody else is hiring. They’re also less likely to carry local goods, and money spent at Walmart is largely airlifted out of the community and into Walmart’s coffers. And as we learned during the pandemic, having one giant global supply chain dominated by a few corporate powers is a sure-fire way to create snags and disruptions that will then raise prices around the world.
Instead, Bidenomics is interested in investing in infrastructure and the supply chain to ensure that every business can participate in the economy. It’s also investing in factories and ensuring that those factories have good-paying jobs and benefits like on-site affordable child care. Building those semiconductors at home doesn’t just make us less vulnerable for when the supply chain does sputter to a stop—it also grows the paychecks of workers around the country, and those paychecks are spent in local economies, creating jobs.
“Bidenomics is working,” Nick concludes. But “That Biden has thus far failed to get credit from voters for his strong economy should not be surprising. Democrats never receive the credit they deserve for their economic accomplishments because they never before put forward a coherent theory of economic growth,” he writes. “But Biden is finally attempting to change this: ‘When the middle class does well, everybody does well,’ the President relentlessly explains. This is the core principle of Bidenomics.”
This is a piece that sets the stage for next year’s economic conversation, which will in turn be central to the presidential elections. I urge you to go read the whole article and share it with your friends and social groups because Nick is getting at something that too many economic pundits have failed to realize: We’re watching a new economic understanding being born in real-time, and that understanding could shape the next four decades just as much as Reagan’s trickle-down vision has altered the course of the past four decades—only this time for the better.