Opinion | This Is the Best Way for Joe Biden to Talk About the Economy
Since the early 2000s, most Americans have generally been dissatisfied with the economy, and many are insecure about their place in it. The dissatisfaction peaked during the Great Recession of 2007 to 2009 but persists, even as the economy is growing and unemployment and inflation combined are roughly where they were during the relatively upbeat days of the Kennedy administration. This is a stubborn, long-term disgruntlement.
Unlike short-term economic dissatisfaction, which lends itself to tinkering with interest rates and budgetary trade-offs, long-term dissatisfaction suggests a deeper, structural problem with the economy that requires more drastic measures. It is perhaps the signature achievement of the Biden administration that it has recognized this problem — specifically, the increasingly centralized, unbalanced nature of economic power in the United States over the past four decades — and is trying to address it.
But this policy wisdom also presents a political challenge. The administration’s strategy is unconventionally bold and far-reaching — an attempt to replace today’s toxic form of capitalism with an earlier, fairer model of free enterprise. Viewed through the narrow lens of conventional economic thinking, that strategy is easily misunderstood or overlooked, perhaps especially by its would-be allies in the political center and on the center-left. Today’s familiar left-right economic debates, for example, in which the left wins by taxing and spending and the right wins by cutting taxes, have precious little to do with the more ambitious vision of Biden’s administration.
Americans are desperate for a fundamentally different, fairer kind of economy, and Mr. Biden is working to give them one. The urgent challenge, politically, is helping voters understand that.
To appreciate the novelty of the Biden administration’s approach to the economy, it is worth remembering that over the past 40 years the orthodoxy on the center-left has been a tax-and-transfer strategy. It has meant tolerating or even encouraging corporate consolidation and profit while maintaining the expectation that those profits would be redistributed in the service of the less powerful and less well-off. The popular metaphor of a national pie suggested focusing first on growing the pie and then on dividing it up equitably.
This logic has been a favorite of those arguing for deregulation and tax cuts since the 1980s. It was also used extensively to promote the World Trade Organization and free trade policies: The idea was that increased profits would be used to compensate displaced workers later on. Today, the same thinking would permit mergers between credit card companies like Discover and Capital One: Even if they charged higher rates and fees, we could always redistribute the profits later.
The problem is that “later” never seems to come. The pie metaphor has always been misleading: An actual pie must be divided before being eaten. But corporate profits aren’t like that. They go directly to the owners and managers and usually stay there. Redistributing profits requires prying money out of some very strong hands, hands that become stronger the wealthier they get. In a political system in which money talks, the pie will rarely get divided.
The Biden administration, in a break with center-left orthodoxy, seeks to address economic inequality not through taxation and transfers but through policies that allow more people and businesses to earn wealth in the first place. That is the meaning of the somewhat mysterious liberal catchphrase “growing from the middle out.” The goal is not the redistribution but the predistribution of wealth, to use a term popularized by the political scientist Jacob Hacker.
This approach calls for a different kind of capitalism — one that opposes the centralization of economic power and favors a market in which wealth can be earned by people and businesses in a broader set of regions, drawn from a wider array of social classes and involving a more diverse set of industries.
Over the past three years of the Biden administration, you can see this philosophy at work in what may seem like different areas. It is at the heart of the Justice Department’s continuing New Deal-style antimonopoly campaign, which has already prevented dozens of unwise mergers (like the recent proposed acquisition of Spirit Airlines by JetBlue Airways). It undergirds Mr. Biden’s renewed support for organized labor, as well as his worker-centered trade policy and the increasingly combative approach to the economic threat posed by China. It explains the reinvigoration of industrial policy on Capitol Hill, most notably through supporting regional manufacturing like the huge semiconductor factories being built in Arizona by the Taiwan Semiconductor Manufacturing Company. It also underlies the administration’s campaign against junk fees across the economy, including the creation of a rule limiting credit card late fees that will save Americans an estimated $10 billion a year.
These efforts are usually discussed and understood separately. But they share an underlying logic: All are aimed at leveling imbalances of economic power, and all assume that the economy works better for most Americans when it is more competitive and when earning power is more broadly distributed. (I worked on some of these issues on the National Economic Council, where I served as a special assistant to the president for competition and tech policy.)
There is arguably nothing more American than the balancing of power. The authors of the Constitution of the United States believed that unaccountable and centralized power was the chief evil facing any nation. Had the founders been familiar with the modern American corporation, surely they would have wanted to check its power.
Americans understand this instinctually. The National Football League, the nation’s most popular and successful sports league, doesn’t allow the richest organizations in places like New York or Los Angeles to build unbeatable teams. It has developed a structure of competition that rebalances power by way of a draft, salary cap and other techniques. No one thinks it unusual that a small city like Kansas City, Mo., can become a football powerhouse. In its own way, the N.F.L. — widely accepted as fair by Americans — provides a model for the U.S. economy.
When overly focused on metrics like growth and employment, economic analysis can fail to grasp how most Americans actually experience the economy. Most people understand all too well that those in the broad economic middle of the country are having a much harder time than their parents did — and that something went seriously astray starting in the early 2000s. They want a more fundamental kind of economic change.
To succeed in the 2024 election, Mr. Biden needs to convince voters that he has begun a long fight against today’s toxic form of capitalism. He needs them to understand that he is making the economy fairer and more productive. He needs to explain that Donald Trump’s invocations of economic grievance are real and justified but that unlike Mr. Trump — who used those grievances to fuel tribal politics while doling out corporate tax cuts and other giveaways to wealthy friends and donors — he is actually doing something about it.
Tim Wu, a law professor at Columbia, is the author of “The Curse of Bigness: Antitrust in the New Gilded Age.” He served on the National Economic Council as a special assistant to the president for competition and tech policy from 2021 to 2023.
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