Biden’s Economic Agenda

By Neil Tamhankar and Eshan Gupta

On March 1, President Biden gave his State of the Union address (he reports that the state of our union is strong). He expressed American support for the Ukrainian people and the defense of democracy worldwide. He also talked about issues ranging from inflation to the U.S. competing with China in the 21st century. In fact, the majority of his speech was focused on economic issues and his solutions. The Biden administration is clearly focused on the economy. What exactly is Biden’s economic plan?

The Guiding Message

Biden has portrayed himself as our generation’s Franklin Delano Roosevelt, the 32nd president who brought the nation out of the Great Depression. Whether he is as great as FDR is up for debate, but there are certainly similarities in their visions for the American economy. FDR’s New Deal built America’s middle class, and one of Biden’s main themes is rebuilding the middle class. “Build the economy from the bottom up and the middle out, not from the top down” was a recurring message in his address. He wants to fix the economy by helping the lower socioeconomic classes, not focusing on the rich. FDR also introduced the idea of social spending (like direct payments to Americans), a policy Biden used in the American Rescue Plan to revive the economy after the Covid crash. Biden may not be FDR, but his plan for the future of the U.S economy has the potential to be as transformative as the New Deal. Let’s get into the details of his agenda.

Infrastructure

At first glance, this may seem like an incredibly boring topic to discuss, but the infrastructure of a nation is the backbone of its economy. A more advanced and efficient infrastructure can provide support for a stronger economy. It can lead to job creation, increases in GDP (the overall output of a country), and general increases in the quality of life. The infrastructure of a country consists of the basic “physical systems” that the country runs on like transportation facilities (think: highways, subways, bridges), power, water, and communications. In his speech, Biden said that the U.S infrastructure now ranks 13th in the world. Rapid and substantial investments in infrastructure are necessary for the U.S to be able to compete with other nations. 

Biden’s goal is to spend $1.3 trillion to modernize our infrastructure over the next decade. It will include $50 billion on repairing roads, highways and bridges (transportation), $20 billion on rural broadband infrastructure (internet), and $400 billion for clean energy R&D. How exactly will these actions improve the economy? The transportation investments will allow Americans to move more easily from one place to another, increasing economic productivity. For example, people will be able to get to their jobs more quickly. They will be able to run errands more quickly. These actions may not seem major, but if millions of Americans can do them faster, productivity naturally increases. The rural broadband investment will give internet access to people in rural areas, making them more able to network with people far away and even find work online. The green energy investments won’t technically improve the economy much, but they are necessary if we want any hope of averting a climate crisis, which brings us to the next part of Biden’s plan.

The Green Economy

Biden wants to shift the American economy to a low carbon, sustainable economy, with the goal of attaining net-zero emissions by 2050. A sustainable economy is an economy that stays within the confines of our planet’s resources. It will not emit large amounts of pollution or produce large amounts of waste while also protecting the environment. The problem is that the current infrastructure practices are harming the environment, from our energy sources (they produce carbon emissions) to construction (the manufacturing of cement also produces CO2 emissions). The president has already invested in electric vehicles, specifically EV chargers. In early February, the Biden administration implemented a plan to give $5 billion to states to fund the construction of EV chargers over the next five years. This action increases the efficiency of the electric vehicle sector, making it easier for EV owners to drive around the country. It also reduces costs for EV companies who would normally have to build the chargers themselves, like Tesla. Reduced cost and increased efficiency in this sector will result in increased demand for electric vehicles, reducing transportation emissions. 

Electric vehicle investments aren’t the only green economy policy the Biden administration is focusing on. They also plan on subsidizing the clean energy industry. Essentially, they want to pay money to companies that produce solar, wind, and electric energy to increase production so that these energy sources can eventually replace fossil fuels entirely. The companies will be incentivized to increase production because of the subsidy payments they are receiving from the government. With the extra cash, the companies will even be able to offer lower prices, which will increase demand for clean energy because it will be cheaper (law of demand). These measures will almost certainly shift the economy to a more sustainable way of life.

Made in America

Biden has repeatedly emphasized decreasing America’s reliance on foreign supply chains (where goods are produced in other countries) and producing everything we need ourselves. That means boosting manufacturing, technology, and the production of every good in between. It also means investments in research and development to produce the highest quality products. This ties in with Biden’s message on labor - increasing production in the U.S will naturally lead to lower unemployment. Theoretically, these will be high paying, union jobs (another main point in Biden’s view on labor). One major problem that these investments would solve is the semiconductor shortage the nation is currently experiencing. The shortage could have been softened if more semiconductors were produced in the U.S. instead of being imported from foreign countries. To that end, Intel is spending $20 billion to build a semiconductor factory in Ohio in an effort to close the gap between domestic semiconductor production and foreign imports.

Competing with China

China has emerged as America’s main economic rival, and Biden has prioritized advancing America’s abilities to continue competing with China. He has advocated passing the COMPETES Act and the United States Innovation and Competition Act (USICA). They both provide support for domestic semiconductor manufacturing. USICA, in particular, will allow the U.S. to compete with China on a higher level. It provides funding for space exploration programs, imposes sanctions on China for human rights violations, and includes initiatives for teaching computer science in lower levels of education (advancing America’s cyber capabilities).

Inflation

Finally, Biden discussed how he would fight inflation. This is one issue he has been somewhat vague on. He claimed he would lower pharmaceutical prices, childcare prices, and energy costs. However, these actions are not the cure to inflation. They merely treat the symptoms (high prices). Price controls have proven to be particularly ineffective, even harmful solutions. Take Venezuela. In the early 2000s, Venezuela’s government instituted price ceilings on food to ensure food prices did not get too high. However, with the lower prices, food producers were unable to afford the costs of making the food, leading to shortages. This is an extreme case, but price controls can interfere with the free market in damaging ways. So if price controls aren’t the way to fight inflation, what is? The best way to combat inflation is by slowing down the economy, via interest rate increases (like the Fed plans on doing throughout this year) or by raising taxes (this doesn’t sound fun, but higher taxes will lead to less spending, which slows down the economy). It will take time, though, and Biden wants to ease Americans’ inflation pain as quickly as possible, so he is instituting the above price controls in addition to the interest rate increases.

To recap: Biden’s economic plan focuses on modernizing the U.S infrastructure, shifting to a sustainable economy, increasing production in America while decreasing reliance on foreign supply chains, and beating China in economic competition. Whether any part of his plan succeeds is up to Congress and remains to be seen.