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The Two Sides of Biden’s Economic Plan

On paper, he seems obsessed with besting Trump as a trade warrior. But his rhetoric suggests he wants to pick a fight with the aristocrats.

Spencer Platt/Getty Images

Joe Biden gave a speech Thursday and released an economic plan. News coverage focused on the latter, which mimics President Donald Trump’s “Buy American” theme and promises that Biden will be more protectionist than Trump on trade. I preferred the speech.

The economic plan is a mixed bag of worthwhile proposals (such as boosting investment for research and development and protecting intellectual property) and empty promises (such as reviving manufacturing and repatriating supply chains). Biden pointed out that Trump is losing the trade war that he started, which is true. (Even PolitiFact says so.) Then he said a Biden administration will wage a tougher trade war than Trump. While I don’t doubt Biden will pursue a more surgical and strategically shrewd trade strategy against the Chinese, any notion that Biden will out-Trump Trump strikes me as highly implausible.

Biden’s economic record is that of an internationalist—not a doctrinaire free-trader, but a free-trader nonetheless. As senator, he voted for the North American Free Trade Agreement and to normalize trade relations with China. As vice president, he strongly supported the Trans-Pacific Partnership. That’s a problem in Midwestern battleground states like Michigan and Wisconsin. I’m inclined to think, though, that it isn’t a big problem: Biden’s up five or six points in Michigan and eight or nine points in Wisconsin. Voters there know that Biden is reliably pro-labor, and that’s what they like about him.

Biden’s Thursday speech, delivered just outside his hometown of Scranton, Pennsylvania, emphasized protecting workers (real Biden) over protecting industries (somewhat phony Biden). The phrase “Buy American,” which appeared more than a dozen times in the economic plan, appeared only twice in the Scranton speech. The word “union,” meanwhile, was sprinkled 15 or 16 times through the speech.

Biden talked about health care and how Trump “continues to try to wipe out Obamacare in the middle of a pandemic.” He said that “after months of doing nothing other than predicting the virus would disappear or, maybe, if you drank bleach, you may be OK, Trump has simply given up. He’s waved the white flag.” The hard-to-dispute nature of this statement is the main reason that a second Trump term grows unlikelier by the day.

But the most eloquent part of Biden’s speech was this: “We must reward work as much as we’ve rewarded wealth.” I’m not sure Biden has put it exactly this way before; I couldn’t find an earlier instance on Google. But I hope he repeats that sentence a lot going forward. It’s an admirably simple expression of three somewhat complicated, but very important, ideas.

The first of these ideas is “r > g,” Thomas Piketty’s observation that the return on capital (r) exceeds economic growth (g). In his 2014 book, Capital in the 21st Century, Piketty argued that “patrimonial capitalism,” which reigned prior to the twentieth century, has returned with a vengeance in the twenty-first century, rendering the dead wealthier than the living.

The second of these ideas is that wages are stagnating. After the Great Recession of 2007–9, it took seven years for household median income to recover fully, discounting inflationand even then, the median stood below where it was at the end of the prior recession, in 2000–1. In other words, it took 16 years for median household income to recover fully from the dot-com bust.

Incomes rose a bit faster under Trump, but in large part that was attributable to state-level minimum wage hikes that the GOP opposed. The good news was that the poor were gaining on the working class. The bad news was that the working class was no longer, economically speaking, an especially great destination. According to a team of researchers at Cornell, the quality of new jobs has been declining since 1990. Sixty-three percent of all jobs created during the past 30 years were low-wage and low-hour.

The third and final idea is that, as Emmanuel Saez and Gabriel Zucman wrote in their 2019 book, The Triumph of Injustice, the average effective U.S. tax rate on capital had, the year before—and for the first time in modern memory—fallen below the average effective tax rate on labor. Some have disputed this calculation on technical grounds, but there’s no gainsaying Saez and Zucman’s conclusion that the United States has, over the past two decades, and especially under President Donald Trump, drastically reduced taxation on capital.

One needn’t be a proponent of Karl Marx’s labor theory of value (I am not) to find this state of affairs very distressing. The enthronement of capital at the expense of wages, income, and economic growth itself is a winning theme for Democrats, and Biden has found an excellent way to distill it into a few words. Though for the record, I would add two more: “We must reward work at least as much as we’ve rewarded wealth.”