Thursday, May 13, 2021

Joe Biden must pull out all the stops, early, for structural change

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When Democrats won both seats in Georgia’s Senate last week, US President-elect Joe Biden hailed the victory – which brings his party into congressional control – with a declaration that voters “want action on the crises we face and they want it now.” It was undoubtedly a aware An echo of Franklin D. Roosevelt’s inaugural address in 1933, when the president of the New Deal vowed “to act – and to act now”.

Roosevelt, as Mr. Biden will do, took office amid a deep economic crisis. The same was true for Barack Obama, of whom Mr. Biden was vice-president. The two predecessors acted to end the economic downturn. But only one has fundamentally reshaped the way the US economy works.

Beyond the stimulus policies, FDR took advantage of its crisis to implement major structural changes in a very short time. These reorganized economic relationships were politically rigid and difficult to reverse once in place: deposit insurance, mortgage reinsurance and social security. The federal minimum wage followed in his second term. The programs provided long-term economic security to those they covered, even though many were unfairly designed to exclude black Americans.

In contrast, the only transformative policy of the Obama-Biden administration was health care reform. Even that was partial, giving health insurance to 20 million Americans in 2016, but leaving 27m without he. When the pandemic hit, the U.S. economy did not perform much better for many than it did the last time Mr. Biden entered the White House.

The most historic part of his task is now the same as that of Roosevelt. It is to end, for this generation and future generations, the endemic economic insecurity that has driven too many Americans to abandon liberal democratic standards. To be successful, he, like FDR, must use the first months of his presidency to make a big effort – not just on immediate bailouts, but on structural policies that endure and fundamentally restructure the economy.

He has already taken such a turn. A federal minimum wage of $ 15 an hour will be politically difficult to overturn. If properly enforced and bolstered by an automatic adjustment tied to average wages, it will also permanently ban poverty-stricken work in America. The consequences are incalculable. But more is needed to end economic insecurity.

The most immediate way to do this is to put money in people’s hands. That’s why Democrats and Republicans have twice agreed to send direct payments to Americans in the past year. Mr. Biden and his allies in Congress appear poised to take the latest $ 600 check to $ 2,000. Yet, as satisfying as it is to offer voters a quick cash gift, it does not create structural change.

Economic precariousness was deeply rooted in the United States before this crisis. Infamous, four in 10 people did not have $ 400 in cash savings for minor emergencies. Such insecurity is not resolved with a single direct payment. Instead, Mr Biden should ask Congress to introduce small but steady unconditional payments to citizens – say $ 120 per month to start, roughly the same amount each year as the one-time top-up envisioned, with the same decrease. for higher incomes. It could be paid in the form of a refundable tax credit, a universal basic income in short, except the name.

What about taxes? It is not necessary to raise them today. But eventually, such a permanent payment program, along with the infrastructure and social spending Mr Biden announced, will need to be funded. It is tempting for the new administration to reverse Donald Trump’s tax cuts in 2017. But the new taxes are a more sustainable alternative.

There is no better time to justify the kind of multi-million dollar wealth tax advocated by Senators Elizabeth Warren and Bernie Sanders – at least on a temporary basis. Polls suggest it is a popular idea, even among Republicans. If the choice is between a wealth tax and higher income taxes, many wealthy will prefer the former.

Carbon taxes can also gain wide support, if they are redistributed as additional direct payments to citizens. “Carbon dividends” are already benefiting bipartisan support, including former Republican statesmen. Once in place, it would be a courageous politician who would try to take away the monthly household carbon dividend check.

Two other promises made by Mr Biden may also permanently reshape the economy: completing health coverage for the uninsured and fighting corruption, money laundering and financial secrecy. Corruption and kleptocracy are the companion anti-democratic politics and bad economic governance everywhere. Congress is starting to realize this, as the new bipartisan ban on anonymous front companies shows.

Some would argue that such policies must wait until the current economic emergency is resolved. But the longer the wait, the greater the risk that Mr. Biden’s skinny majority will diminish, or that such moves will push back Republicans who are currently seeking political redemption. It’s a rare time for Mr. Biden to push through big changes. It will not last.

Therefore, in the spirit of FDR’s “bold experiment”, its administration should treat long-term transformation as urgently as short-term rescue. If so, Mr. Biden will be remembered more for the former than for the latter.

martin.sandbu@ft.com

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