Leader: A man of action

The US president’s economic radicalism shows how conservative orthodoxies are crumbling.

Joe Biden entered office unburdened by radical policy expectations. Throughout his election campaign he had emphasised that he was a moderate, “not a socialist”. Many spoke of the 78-year-old as a “transitional president” who had performed his principal role: the eviction of Donald Trump from the White House.

Yet in his first 100 days, as our US editor, Emily Tamkin writes, Mr Biden has been one of the most activist American presidents in recent history. Last month, he succeeded in passing his landmark $1.9trn (9 per cent of US GDP) economic relief bill – a stimulus more than twice as large as that enacted by Barack Obama in 2009. The bill included one-off payments of $1,400 for Americans earning up to $75,000, the extension of federal unemployment support ($300 a week), $350bn of financial aid to state and local governments and a more generous child tax credit of $3,000 per child for some families.

Not content with this, Mr Biden subsequently announced a $2trn American Jobs Plan, including $621bn to transform the US’s dilapidated transport infrastructure (with $174bn for the electric vehicle market), $100bn for high-speed broadband, $213bn for affordable and sustainable housing and $400bn for the care economy. To fund this largesse, he has pledged to raise US corporation tax from 21 per cent to 28 per cent and to pursue a global minimum corporate tax rate designed to end the “race to the bottom”.

There are limits to the US president’s radicalism: he has not pledged to deliver universal healthcare (as his rival Democratic candidates Bernie Sanders and Elizabeth Warren did) and his infrastructure programme, which is spread over eight years, is less transformative than it first appears. But Mr Biden’s radicalism still marks a decisive break with the economic conservatism of the Bill Clinton and Barack Obama eras. What accounts for this realignment?

It was after Mr Trump praised white supremacist protesters in Charlottesville in 2017 as “very fine people” that Mr Biden vowed to run for the presidency a third time. The recrudescence of the US far right has taught him the dangers of political caution. As Adam Tooze, the author of Crashed, an acclaimed book about the financial crisis, writes in his essay, Mr Biden’s approach is driven by “the realisation that the greatest threat to liberal democracy in the US is not macroeconomic instability, but social polarisation and Republican politics. If the Democrats are to steer the US away from the abyss, they must not lose the midterm elections in 2022 as Obama did in 2010 and Clinton did in 1994.”

Mr Biden’s fiscal activism is also shaped by Mr Trump in another respect. As president, the latter exposed the illusion of limits on US government borrowing when he introduced tax cuts worth $1.9trn in 2018. In doing so, as Stephanie Kelton, a former economic adviser to Mr Sanders, recently told the New Statesman, Mr Trump changed the terms of economic debate.

In recent decades the US and the UK have often moved in lockstep: Thatcherism, the Third Way and national populism were all transatlantic projects. Yet at a time when Labour should be drawing strength from Mr Biden’s radicalism, Keir Starmer’s party appears becalmed and adrift (not only in the polls). Instead, it is Boris Johnson’s Conservatives who are emulating Mr Biden. The stimulus announced by Rishi Sunak in the Budget (£65bn or 3 per cent of GDP) was paltry compared with the US president’s programme, but the Tories have astutely repositioned themselves for a new, more interventionist, post-pandemic economic era. The Chancellor has pledged to raise UK corporation tax from 19 per cent to 25 per cent and has increased infrastructure investment to its highest level as a share of GDP since the 1970s.

Faced with the consequences of Covid-19, populist insurgencies and punitive austerity, economic orthodoxy is crumbling. The future will belong to those politicians – of the left and right – who best understand and exploit this moment of flux.