This series examines the historic investment by the Biden administration in a far-reaching set of programs that, if successful, would begin to remake the nation’s social contract. From the American Rescue Plan to the Inflation Reduction Act to the CHIPS Act, Capital & Main will report on the federal government’s bold new economic paradigm and how it plays out in workplaces and communities across the country
Four months after taking the oath of office, President Joe Biden gave a speech at Cuyahoga Community College in Cleveland to introduce his budget proposal. Leaning into the microphone, he raised his voice and talked about “creating a new paradigm — one that rewards work, the working people in this nation, not just those at the top.” He laid out a plan to resurrect the working class through funding for health care and education, and outlined a newly aggressive industrial policy and economic nationalism, directly contrasting it with the trickle-down economics of the last four decades — under both Democratic and Republican presidents — that saw “the stock market and corporate profits and executive pay as the sole measure of our economic success.”
Since that speech almost two years ago, Biden has pushed through some of the biggest government programs in American history — the American Rescue Plan Act, the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act. In total, they allocate $3.8 trillion in spending. And the impact they’ve had is enormous — the largest-ever investment in public transit; helping U.S. companies add over 750,000 manufacturing jobs and announce nearly $300 billion in manufacturing investments; awarding the greatest number of federal contracting dollars to small businesses, including disadvantaged small businesses; reducing child poverty by 46% and lifting 5.3 million people in total out of poverty from 2020 to 2021; and expanding broadband access. That’s just a partial list since much of the money is still being spent.
More broadly, the president’s real accomplishment has been to commit his party to a new economic paradigm, as he signaled in his speech in Cleveland, upending a model that has ruled since the Reagan era and been supported by Democratic presidents such as President Clinton, who declared that “the era of big government is over.”
Under Biden, big government is back — sparking a manufacturing renaissance, pushing a strong climate agenda, expanding health care access and reducing poverty — on a scale not seen since the Great Society programs of the 1960s and the New Deal during the Great Depression.
The pandemic’s threat to the global economy called for drastic measures, ones that progressive economists had been planning and researching for years.
“It’s a new age,” says Anton Korinek, an economics professor at the University of Virginia. “Compared to anything we’ve seen in the last 50 years, industrial policy has really seen a resurgence — we see that in interventions directed at green energy in the IRA [Inflation Reduction Act] and on a very large scale in boosting domestic research and manufacturing of semiconductors with the CHIPS Act.”
Korinek is struck by the forcefulness of Biden’s industrial policy — to strategically steer advances in certain sectors of the economy. Robert Pollin, founding co-director of the Political Economy Research Institute, highlights how the administration is asserting that the government will play a central role in rebuilding our infrastructure and transitioning the economy from fossil fuels to clean energy. “That is a paradigm shift — a clean economy that is good for jobs,” says Pollin.
It marks a clear pivot from the bipartisan consensus that prevailed since the late 1970s — a limited role for government, faith in the private sector and the free market, and prioritizing inflation reduction over full employment. That approach relied on indirect investment incentives like capital gains tax cuts or depreciation allowances, in the belief that the success of the private sector and wealthy business leaders would trickle down to the rest of the workforce. As a result, profits spiked for the largest corporations and the wealthy while wages stagnated for middle-class and working-class Americans, dramatically increasing income inequality.
During the early 2000s, some progressive economists started pushing for a larger role for government and an aggressive new industrial policy — with “public purpose injected into every aspect of the economy,” says Madeline Janis, co-founder and co-executive director of Jobs to Move America. But their voices were muted at the start of the century and even during the Obama years, amid the urgency of the Great Recession, and they were largely sidelined in favor of neoliberal policies such as bailing out the big banks whose risky practices played a critical role in sinking the economy.
But the pandemic’s shock to society and its threat to the global economy called for drastic measures, ones that these economists had been planning and researching for years. “What we saw during the COVID lockdown was a recognition that we’re seeing a possible huge economic depression on a scale we haven’t seen in many decades,” says Pollin. “And that prompted massive, unprecedented levels of government intervention to stave off an economic collapse.”
“There is a lot of household labor that is unpaid labor — child rearing, elder care — and the idea of family allowances, which is basically universal income for families, is a good way of recognizing this fact.”~ Robert Pollin, Political Economy Research Institute
That included tens of billions of dollars a year in research spending, large-scale construction of green energy infrastructure such as electric grids and charging stations, retrofits of existing infrastructure such as lead removal and repair of existing infrastructure including roads and bridges. What stands out from these programs is how directed they are, notes Pollin. “Bidenomics doesn’t just turn the knobs and hope that useful investment comes out — it actively directs investment into particular sectors like green energy and particular activities like science.”
That paradigm also involves a rethinking of the forces affecting families, especially working-class and middle-class families, and how roles have changed in recent decades. “There is a lot of household labor that is unpaid labor — child rearing, elder care — and the idea of family allowances, which is basically universal income for families, is a good way of recognizing this fact,” says Pollin. New programs like funding for consumer-directed, in-person home health care and expansion of established programs like Medicaid are part of the new model, with the recognition that the government is there to support families.
But the new economic paradigm is not just about big government — if anything, the public workforce has shrunk under Biden, with government employment as of January still 438,000 jobs short of its pre-pandemic peak. It’s more about a rethinking of the role of government in our lives and what it should be in a democratic society, says Janis. “Is the purpose of a new industrial policy just to inject money into the private sector — ‘Let them do their thing’ — or is the purpose to change people’s lives, create good jobs, create better and healthier communities, address historic racism and gender inequality and poverty?”
She contrasts previous government subsidies to Tesla, “which made a hugely profitable company that treats its workers horribly and is notoriously anti-union,” with a new Department of Energy program focused on the mineral mining required for batteries that favors grants to companies that include community benefits programs in their proposals. Similarly, she notes that the Department of Commerce recently included in its notice of funding opportunities a requirement that companies “have to make a commitment to good jobs and child care.”
Echoing the adage that you should never let a serious crisis go to waste, Janis says, “We have this historic opportunity to do things better, to do things right.” She emphasizes that government funds for private companies should be considered an investment, and that conditions attached to that funding shouldn’t be regarded as strings attached but a way to ensure return on investment. “The conditions come with a public purpose — companies should have to say how many jobs they’ll create, what are the wages and benefits, what kind of hiring will they do, how will they make sure their activities don’t negatively impact the surrounding communities.”
Longtime labor organizers and community advocates remain hopeful that the renewed vigor of the federal government could have a lasting impact on a state and local level. Roxana Tynan, executive director of the Los Angeles Alliance for a New Economy (LAANE), says that there have been such low expectations for federal funding in recent decades that these programs “could be transformative if properly implemented, but the devil is always in the details.”
