“Don’t Worry, Be Happy” – Bobby McFerrin

It is no longer necessary to guess at where President Biden intends to take the country. The only open questions are whether he will be able to scale the political hurdles en route to his destination, and what sort of country America will be should he get there. The road to this new America is not a smooth one. The Democrats will first have to retain control of congress in the 2022 elections, which will be a close-run thing. Republicans will benefit from the crisis at the southern border, a nervous-making inflationary spurt (prices up more than 4%), and new congressional seats shifted from Biden-won but population-losing industrial-belt states to growing Sun Belt states won by Trump. Democrats will benefit from Trump.

The threat of electoral defeat 18 months hence explains the urgency Democrats feel to lock in their extensive programme, now. Democratic Socialist Bernie Sanders, increasingly powerful as chairman of the senate budget committee and commander of troops on Biden’s left flank, is loudest in expressing impatience to see Biden’s proposals become law. Many of the ideas he has championed for decades, long before he took his new bride to Russia in 1988, where he criticized housing and health-care costs in America, have in some form found their way into the Biden program. A program that Alexandria Ocasio-Cortez says “has exceeded the expectations that progressives had.”

Biden intends to redistribute income from richer to poorer, and many of the geese headed for plucking agree that some such move is needed to restore faith in American capitalism. But the Biden program aims at more than transferring income and wealth to the needy. Its broader goal is to increase the permanent dependence – reliance if you prefer that word – on government not only of the poor, but of the middle and even capitalist class.

The Covid relief package provides that parents earning up to $150,000 per year will receive annual benefits of $3,000 for children ages six to seventeen and $3,600 for younger children. Married couple earning up to $400,000 per year would be eligible for the regular $2,000 per month regular child tax credit. In addition:

  • Government, meaning taxpayers, would fully cover the costs of child-care for “the most hard-pressed working families”, and no family regardless of income would pay more than 7% of its income for child-care.
  • Obamacare health insurance premiums will be more fully subsidized for as many as 29 million additional individuals, with families of four making as much as $103,000 – four times the poverty level – relieved of payment for their coverage according to the Kaiser Family Foundation.
  • All workers would be eligible for up to $4,000 per month of paid leave for about three months they can use “to bond with a new child” or care for dependents, among other reasons.
  • The cost of pre-kindergarten and two years of post-high school education at community colleges would be borne by government, which would also contribute $50 per month to the cost of Internet service for families who lost some income last year and earn $198,000 or less.

This is no mere war on poverty, and only in part a reward to “The great middle class [that] built this country,” as the President likes to put it. These benefits are extended to solidly middle-class couples with six-figure incomes to make millions of unpoor families newly entitled to and dependent on government largesse. It is a sweeping invitation to tens of millions of voters to rely on the state for taxpayer-funded maternity costs, child-care costs, education costs, healthcare costs, workplace benefits and more. The phrase cradle-to-grave leaps to mind.

Prospects for success rest on the assumption, widely cited by Biden’s team, that the pandemic has shown voters that Reagan was wrong when he said during his 1981 inaugural address,  “Government is not the solution to our problem,  government is the problem.”  Brian Deese, director of the White House National Economic Council contends that the expanded and activist government “must be a powerful force for good in the lives of Americans.”

All to be financed by increased taxes on earnings from work and investment. Once enacted, these benefits for middle class voters become difficult for politicians to snatch back: they would become permanent features of Biden’s new American economic system. The difficulty of rolling back the new features of the entitlement state explains why Republicans plan to minimize their attacks on many of these popular beneficences in 2022, and instead concentrate their attacks on Biden’s failure to control our southern border, his party’s attacks on traditional cultural values, a fiscal policy they regard as reckless, his failure to follow through on his promise to unify a polarized nation.

“Wall Street didn’t build this country” is another Biden mantra, and he doesn’t plan to rely on the financial sector to “build it back better”. Instead, he intends to adopt an industrial policy, with government, rather than consumers and investors, directing investment resources. Never mind the pile-up of bankruptcies when the then vice-president allocated reconstruction funds to favored green companies during his administration of the $831 billion Obama-Biden economic stimulus package after the Great Recession of 2007-2009.

In this, the President has the enthusiastic support of CEOs and investors, ever eager to sell their birthrights for a mess of government favors, and of trade unions, seeking to win members they have been unsuccessful in attracting in union-recognition elections. Chip manufacturers want the government to fund new factories, developers of wind farms and solar facilities want the subsidies they received as “infant industries” extended, trade unions want the protections provided by the United States-Mexico-Canada Agreement made more stringent.

Biden, a self-styled “union guy”, who won households containing union members by 16 percentage points, while breaking even in non-union households, also plans to change the structure of labor markets. He wants the regulators he has appointed to tilt the balance of negotiating power in unions’ favor so they can increase their current 6.3% share of the private-sector work force. The teachers’ unions’ unwillingness to allow many schools to re-open for full time person-to-person learning, the appalling mismanagement of union pension funds, and rampant corruption in many unions seem not to concern him.

Franklin Roosevelt declared war on the Great Depression. Lyndon Johnson declared war on poverty. Neither can rightly claim total victory: FDR did save capitalism but it took a war to get the American economy fully out of the depression, and Biden’s policies testify to the failure of LBJ’s programs to end poverty. Joe Biden has declared war on the delicately balanced system of incentives and transfer payments that has made America’s market economy, warts and all, the most productive the world has ever seen. If he prevails, America will not be, as hysterical Republicans claim, a socialist country. But it will be more like the higher tax, more comprehensive welfare states of, say, the European Union than an America in which highly incentivized workers have historically relied on their own efforts rather than their government for many of the services Biden now has on offer, for hard work rather than government checks to elevate their families’ circumstances. Yes, this system has not worked equally well for some groups that have been left behind. But those failings can be addressed with measured policies that preserve incentives to work and invest, rather than overheating the entire economy with massive spending programs that are already producing inflation at about twice the rate the Fed once considered its target.

The whole of the Biden program is greater than the sum of its parts when it comes to the impact on incentives. Whether the reduced pressure for self-reliance inherent in that program will make that old saw, “America innovates, China duplicates, Europe regulates”, less apt we cannot know for certain. But there is reason to worry.