The real revolution in the massive stimulus plans promoted by the Democratic president to revive the economy is directed at the middle and working classes, who are once again the focus of government action.
Joe Biden wants to transform America, and he wants to do it quickly. The man Donald Trump called “Sleepy Joe” during the presidential campaign surprises today with the audacity and the rapidity by which he is lining up projects with colossal price tags. After the $1.9 trillion announced in March to stimulate the economy, he is looking to invest another $2.25 trillion to modernize the nation’s infrastructure and, beyond that, some $1 trillion for family assistance. The new Democratic president is not afraid of overdoing it and is drawing on the support of Americans who are pleased with the brisk vaccination campaign.
Above all, the tide has turned on the other side of the Atlantic. The time of the liberal credo of the Ronald Reagan era is over. The pandemic has marked the great return of the federal government. Behind Biden’s immense Keynesian bet, the lines of economic thinking are shifting. The “trickle-down” theory dear to Trump, by virtue of which the rewards to the richest will benefit all by extension, is no longer all the rage. Biden wants, among other things, to raise taxes on corporations from 21% to 28%. Likewise, the argument that an economy stretched to the point of overheating will see prices rise no longer deters political leaders. These massive plans will allow the United States to submit this principle to a real-life test.
Are these investments, which must still receive the approval of Congress, as revolutionary as their backers suggest? One-third of the $2.25 trillion, spent over eight years, will be dedicated to transportation infrastructure; the second third to industry, communication networks and housing; the final third to at-home health care. A large chunk of the total will fill decades of under-investment that followed the Reagan years. Along with its bridges, highways and rail systems in the United States are in terrible shape.
If these expenditures are meant to be colored by environment concerns, the component dedicated to energy transition yet lacks ambition. The Biden plan is not the promised “Green New Deal.” He proposes neither a rise in carbon prices, nor a gas tax capable of sensibly accelerating the green revolution.
In reality, the revolution is elsewhere. The working and middle classes are again the focus of public concern. They are the ones who, after 20 years, have suffered the consequences of deindustrialization and the automation of jobs. Trump sought to respond to their struggles with protectionism. Biden is benefiting from the urgency resulting from the losses during the COVID-19 pandemic to weave the social safety nets the country is lacking.
Apart from the $1,400 checks issued to adults earning less than $75,000 per year, Biden is looking to invest in housing and health care for the most vulnerable, improve digital access for rural areas, revisit tax credits for child care that will benefit the poorest households, and to reduce the cost of health insurance for the less well-off. Other social measures will be revealed in the weeks to come. If he succeeds in his bet, Biden will well and truly turn the page on Reaganomics. And, no doubt, more importantly for him, on Trumpism.