Will Biden be an uber-Keynesian president?

Aug 15, 2020

Likely next president Biden is instinctively a builder and collaborator who cares deeply about people. His plans are progressive but he faces major obstacles.

The Washington roadblock

The main obstacle to a successful Biden presidency will be Washington itself. It is dominated by two neo ideas: neoliberalism and neoconservatism. They are two sides of the same coin, one focusing on economics, the other military/strategic, both forming a narrative of global primacy which pays scant heed to people and their welfare, within the US or elsewhere. A Biden presidency will have to overcome the hurdles that the neos, with deep hostility to China, will erect, as well as deal with chronic social and economic problems domestically.

Just who is Biden?

If Joseph Robinette Biden is sworn in after the Nov 3 election, he will be a very-ripe 78. Of Catholic Irish-English descent, he has chaired the Senate Foreign Relations Committee and before that the Senate Judiciary Committee. Though his father was once wealthy, the wealth had been lost by the time he was born. He was once ranked as among the least wealthy persons in Congress.

His wife Jill has a PhD in education and still teaches. Their daughter is a social worker. Hunter, his son with his first wife, who was killed in a motor accident, is an attorney and lobbyist.

Biden does not brook BS. He has a habit of being candidly outspoken, which earned him a label from critics of being gaffe-prone. As vice-president to Obama, he was credited as being a useful contrarian against group-think policies.

He is said to be a foreign policy expert, which was useful for Obama. He has been described as a “liberal internationalist” and a “moderate democrat”, a supporter of an international order and cooperation with other countries of like mind, but not of war as a means to maintain US global primacy.

From all his speeches and actions, he is inclined to want a cooperative negotiated relationship with other countries, is a supporter of treaties, agreements and international organisations like the WHO and Nafta, but is prepared to push back if necessary.

Onhis progressive economics

Both he and his neo opponents are in fact now Keynesians, in the sense that Keynes suggested that in general, weak economies need additional stimulus. The main difference is that neos throw money at the financial markets and national security without addressing the fundamental social problems facing America.

Biden, on the other hand, wants to throw money directly into job creation programmes, into critical infrastructure and industries, into education and skills for a new economy. He recently criticised Trump for being “singularly focused” on the stock market, despite his pledges to revive factories.

He laid some markers in Foreign Affairs in January: “To win the competition for the future against China or anyone else, the US must sharpen its innovative edge and unite the economic might of democracies around the world to counter abusive economic practices and reduce inequality.

“Our trade policy has to start at home, by strengthening our greatest asset—our middle class—and making sure that everyone can share in the success of the country, no matter one’s race, gender, zip code, religion, sexual orientation, or disability.”

A cornerstone of a Biden presidency will be a targeted Keynesian economics plan, a manufacturing and innovation plan composed of four planks, the first having been released. This will cost $700 billion, $400 billion in government procurement of items such as clean vehicles, building materials and medical supplies, and a $300 billion investment in R&D in areas ranging from health to defence to artificial intelligence and biotechnology.

The plan is to create 5 million jobs and be partially paid for by repealing some of Trunp’s tax cuts, the campaign said. Training programmes for digital and technological skills will be included. An industry policy is taking shape. He will also strengthen labour unions, tighten the government’s “buy American” provisions, pass a manufacturing tax credit, and build on a programme for businesses owned by people of colour to apply for federal contracts.

“This is our moment to imagine and to build a new American economy for our families and for our communities. An economy where every American has a chance to get a fair return for the work they put in,” Biden said.

And dealing with China

Biden will engage with China on matters of mutual interest but is likely to push back if China attempts to expand further militarily into the Pacific. He is on record as saying more naval forces should be in the Pacific region. “We should be moving 60 percent of our sea power to that part of the world to let, in fact, the Chinese understand that they’re not going to get any further.”

Biden knows Xi well. Both, as VPs, met regularly. The NYT reported that they convened at least eight times, formally, took walks, shot baskets at a rural Chinese school and spent more than 25 hours dining privately. This will be useful because Biden believes in knowing well the person and his vital interests when negotiating.

China will very much be a central campaign issue. Both sides have accused the other of being soft on China. Even after the election, China will be a hot topic, especially in the lead-up to the next congressional elections and as Biden seeks a second term. Among the continuing issues will be human rights, disputed islands, Xinjiang, HK, Taiwan, intellectual property and trade practices in general.

He will likely reach some form of understanding with Xi, which will disappoint China hawks who want complete decoupling and open hostilities. Both camps generally accept that complete economic decoupling is now impossible. Even Trump’s trade representative Robert Lighthizer recently said so.

The message from the Democrats is that instead of just trying to slow China down, the US should be trying to run faster.

The NYT says Biden is a foreign-policy pragmatist, not an ideologue. For a decade before the Iraq War, he was known as a hawk, but more recently he has become a chastened skeptic of foreign intervention.

Biden has yet to unveil a China policy but his campaign gives some pointers. His presidency will recognise that China is “a fundamentally different actor when it comes to international trade and economics”, but rather than trying to influence its political and economic systems and practices to become more Western, “if that’s the system that we’re confronted with, how do you change rules around it so that the playing field is more level and the global system is more fair?”, an adviser said.

Some parts of the security establishment would agree with Biden. In a February Foreign Policy piece, two former members of the National Intelligence Council staff argued that the US “now faces a world in which power is increasingly measured and exercised in economic terms.”

Competing effectively with China, they wrote, will require a careful husbanding of the US economy in key sectors — like technology and telecommunications — through the use of industrial policy, antitrust efforts, and the blending of foreign and economic policy.

“While military power will still matter, the emerging great-power competition between the United States and China will ultimately turn on how effectively each country stewards its national economy and shapes the global economy,” they wrote.

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