Two Cheers for Pragmatism

Two Cheers for Pragmatism

Bidenomics sought to solve big problems in a context of narrow congressional majorities.

The economic policy achievements of the Biden administration are not philosophically coherent enough to merit their own intellectual label. Instead, the successes are mostly the result of ad hoc opportunism. That’s not a criticism. The White House locked down policy wins in important areas when possible. But other key progressive priorities were squelched, leaving the Bidenomics project unfinished.

The case for Bidenomics as opportunism rather than grand philosophy is clear if one traces the history of the administration’s policy accomplishments and failures.

The Boldness of the American Rescue Plan

Of all the Biden administration’s initiatives, the American Rescue Plan (ARP) broke most sharply with economic orthodoxy. This judgment might surprise some. The ARP was in some ways a straightforward fiscal stimulus, while the suite of legislation that followed is often categorized as “industrial policy,” signifying a larger departure from what came before. But the ARP was passed in March 2021, when the feeling of pandemic crisis offered extra political elbow room—and the effects of this are visible in the details.

Fiscal stimulus was previously treated as a supporting player in recovery from economic crises, with the Federal Reserve’s monetary policy leading the way. This approach had its most spectacular failure in the wake of the Great Recession and financial crises of 2008–09. The initial stimulus packages passed by the George W. Bush and Barack Obama administrations were severely underpowered. Many in the Obama administration and their allies reasoned that even if the packages weren’t large enough, they could always come back and do more later. But the Republicans who took control of Congress in the 2010 elections, along with dozens of statehouses and governorships, saw little political advantage in helping generate faster economic recovery. Fiscal policy became steeply contractionary, and the result was a lost decade of unrealized potential growth.

The Biden administration learned from this history and decided to go big with its stimulus package. Economically, it has been a spectacular success. Full employment was restored almost a full decade faster than it was after the Great Recession, and hourly pay growth for low-wage workers has far exceeded other recoveries. The United States now has among the lowest unemployment rates and the lowest inflation rates in the developed world. Politically, the go-big approach has been tarred with generating a burst of inflation from 2021 to 2023. There is little basis for this argument: rising inflation was a global phenomenon that hit literally every advanced country around the world due to the shocks of the pandemic and the Russian invasion of Ukraine. But even judged politically, going into a 2024 election with low unemployment, solid growth in real (inflation-adjusted) wages, and normalized inflation seems like...