Biden and Harris Broke the Suffocating “Washington Consensus” on Economics

Biden and Harris Broke the Suffocating "Washington Consensus" on Economics. They put a stake through neoliberalism. Now, the vice president has to convince voters that her antitrust, trade, and public investment policies, unlike Trump’s, will improve their lives.

The post Biden and Harris Broke the Suffocating “Washington Consensus” on Economics appeared first on Washington Monthly.

As Kamala Harris campaigns for president, one of her challenges is the economic record of the administration she still serves. Of course, she can point out that we have the strongest economy in decades, seen in metrics such as the Dow Jones Industrial Average, GDP growth, and jobs paying a living wage. She can also highlight the administration’s success in passing landmark economic legislation, which has resulted in massive investments in long-neglected infrastructure, rebuilding America’s hollowed-out industrial base, and regaining America’s competitive edge in critical technologies.

Yet, polls show that most Americans think the administration has done an abysmal job on the economy and that Donald Trump has done and will do better.

One oft-cited explanation is inflation. Even though it’s slowed dramatically over the last two years, the cost of living is up more than 20 percent since the Biden-Harris team took office in January 2021. When swing voters think of “Bidenomics,” they too often think first of high-priced eggs. Worse, though wages have been rising faster than inflation since early 2022, they are not fully back to the levels seen at the end of the Trump administration.

So what can Harris do? Continuing to tell voters they are better off than they think they are risks seeming out of touch. Defending the status quo is dangerous when the electorate is desperate for change.

However, Harris has a profound opportunity to present herself as a change agent while embracing Joe Biden’s legacy. To do that, she must do a better job than the president in explaining how their administration has been rebalancing power in favor of the little guy. It’s a populist revolution that most people have never heard of.

One reason most voters and much of the media are oblivious to this story is that Biden has always viewed himself, and been viewed by others, as an institutionalist who values regular order and working across the aisle. Yet when Biden first sat behind the Resolute Desk in 2021, he made appointments and policy changes that challenged principles that elites in both parties have used for 40 years to entrench their power and privilege.

These principles have gone under different banners in different decades. In the 1990s, policy wonks often referred to them as “the Washington Consensus.” Today, the mindset is called “neoliberalism,” a core belief that market capitalism is a self-stabilizing system and that if left undisturbed by government regulation, it will spread broad prosperity and freedom across the globe.

Just as fish don’t know they are in the water, it can be easy to miss how completely the governing principles behind this mindset have transformed America’s political economy over the last two generations. An early example was Jimmy Carter’s administration’s sharp turn from the New Deal order when it joined Republicans in deregulating key industries like airlines and railroads.

The same principles soon animated Ronald Reagan’s case against “Big Government” while informing the thinking of many mainstream Democrats who supported the Gipper’s banking deregulation and retreat from antitrust enforcement. As a result, Wall Street gained over Main Street, and leverage buyout artists picked apart industrial America.

Similarly, a bipartisan consensus that the government must not “pick winners and losers” led to the defunding and dismantlement of many of America’s long-standing industrial policies. These included bipartisan votes under Reagan virtually eliminating America’s shipping and shipbuilding industries.

In the 1990s, a similar faith in free markets informed Bill Clinton’s embrace of free trade with China. Later, it prevented Barack Obama from proposing anywhere near the levels of stimulus spending needed for a speedy recovery from the Great Recession. Like all the “serious people” in Washington, Obama and his advisors believed that government spending for big-ticket items, such as matching the Europeans and the Chinese building a high-speed rail network, would make the nation poorer by “crowding out” productive private investment in the “real” economy.

Biden bought into the neoliberal mindset for most of his adult life. Just a year after passing a modest fiscal stimulus to get the economy back on track, the Obama-Biden administration proposed a leaner budget while millions of Americans remained unemployed. After the disastrous 2010 midterms, they signed on to spending cuts. Yet 11 years later, when Biden dealt with the pandemic-caused recession, he broke from the Washington Consensus by pushing a massive $1.4 trillion stimulus program, the American Rescue Plan, through Congress. Lawrence Summers, the National Economic Council chair during the Obama administration, articulated the outraged Washington Consensus when he blasted President Biden for enacting the “least responsible” economic policy in 40 years.

At the same time, Biden pulled other policy levers to undo the long reign of neoliberalism. There was his switch on industrial policy. According to the Washington Consensus, this term was categorically suspect and akin to socialism because it implied that voters and public officials could know better than “the market” where society should put its resources.

Biden not only didn’t hesitate to use the term but also put his shoulder into passing three foundational laws—the Infrastructure and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act—that established an overt, well-funded industrial policy of a kind and of a scale not seen the days of Franklin Roosevelt. It wasn’t a matter of picking individual winners and losers. It was a matter of returning to a long American tradition, stymied during the reign of neoliberalism, of using government to channel market competition toward national purposes and socially valuable ends.

Similarly, Biden broke free of the Washington Consensus on trade. While steering clear of the clumsily drawn and often self-defeating tariffs levied by the Trump administration, Biden embraced a radical new trade policy. As coordinated by his trade ambassador, Katherine Tai, it makes selective use of tariffs to check unfair competition and build supply chain resiliency while also bargaining for trade agreements that elevate labor and environmental standards.

Most consequentially, Biden challenged the Washington Consensus on antitrust and other competition policies. This break began with his appointment of Lina Kahn as chair of the Federal Trade Commission and Jonathan Kanter as head of the Department of Justice’s Antitrust Division. Both were leading figures in a burgeoning anti-monopoly movement that viewed the increasing concentration of corporate power—including the growing control of giant platforms like Facebook and Google over the information environment—as grave threats to economic security, regional equality, and a healthy democracy.

Biden followed through with an unprecedented, all-of-government executive order that called on agencies to take 72 actions to foster competition and protect consumers and workers against monopolies. This led not only to an aggressive crackdown on things like junk fees and non-compete contracts but also to revolutionary new prosecutorial guidelines in antitrust enforcement. The Justice Department began filing and winning antitrust cases based not just on how monopolies affected consumer prices but on how they hurt small businesses and independent contractors.

Sadly, the Biden administration never quite figured out how to properly communicate the epoch-making significance of the new course on which it was steering the ship of state. Part of the problem is unavoidable—akin to one President Harry Truman faced as he wooed voters who worried more about post-war high prices than rebuilding Europe. While Biden’s policies will, if continued, rebalance political and economic power over time, many have little identifiable impact on people’s day-to-day lives.

But there’s also been a problem with the messaging. In describing “Bidenomics,” the administration often said it was a program to “grow the economy from the middle out and bottom up—not from top down.” That’s so vague that a swing voter might conclude that Bidenomics means taking money from some people and giving it to others, which sounds suspiciously like socialism. Instead, Bidenomics is mostly about rolling back monopoly power so that we can preserve our democracy and compete equally in pursuing the American dream.

The administration also missed an important opportunity two years ago when it did little to connect the price spike Americans felt at the pump and in the supermarket to monopolies. Abundant evidence existed then, and even more is available now, that corporations used shortages caused by the pandemic as a cover for jacking up prices and reaping windfall profits. Failure to drive home this message left voters believing that the Biden-Harris administration caused inflation through excess government spending.

Failure to communicate the administration’s war on monopoly and its rationale carries another danger. Swing voters may conclude that Republicans, not Democrats, are defenders of the little guy. This is especially true after the elevation of Senator J. D. Vance, who, despite his ties to Silicon Valley billionaires famous for defending monopoly, often poses as a trust-busting tribune of the people. Vice President Harris will serve herself and the country if she shows why she’s the real defender of the common man and how her policies are working to save our democratic republic from the oligarchs.

The post Biden and Harris Broke the Suffocating “Washington Consensus” on Economics appeared first on Washington Monthly.