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Apromise of economic nationalism, an expensive infrastructure bill that’s really a make-work program, prejudice against foreigners, denunciations of Wall Street — Joe Biden is running the 2016 Trump campaign against Donald Trump in 2020.
Joe Biden gave a big economic speech in Pennsylvania yesterday, and his economic agenda has three parts: 1) a $400 billion federal spending spree with some additional “Buy American” rules attached to it; 2) a somewhat more modest ($300 billion) raft of subsidies for politically connected industries (electric vehicles, telecoms) that we are going to pretend is a research-and-development program; 3) a very large tax increase (by some estimates, the largest proposed in modern times) to pay for No. 1 and No. 2. You will recognize this as approximately the same bulls—t that Donald Trump was peddling in 2016 and Barack Obama was peddling in 2008 and 2012. It is the same crap that has at various times been peddled by figures such as George Wallace, Ross Perot, and Pat Buchanan, and by relatively minor figures such as Ted Strickland. It is nonsense, but it never goes out of fashion.
The United States does have some pressing infrastructure needs. A Biden administration would almost certainly prevent those needs from being met, because the most important infrastructure work in progress or under consideration consists of privately built energy infrastructure, especially oil and gas pipelines. Biden, who needs the votes (and, more important, the donations) of well-heeled suburban progressives who believe that their lights are kept on by the diligent efforts of unicorns, opposes such projects. Making it more difficult and more expensive to move petroleum between wells, refineries, and consumers devalues trillions of dollars’ worth of American wealth, leaving Americans poorer — “economic nationalism” is funny that way.
In a sane world, the infrastructure to-do list would precede the dollar figure: If the federal government needs to do x, y, and z (and there is much that does need doing), then the federal government should bid out those projects and ask Congress for funding. We do things the opposite way: Biden is following the longstanding Washington convention of putting a few hundred billion dollars on the table and then basically asking who wants it. Rest assured that Washington will find some way to spend the money. We pass a big federal highway bill every couple of years, and the highways continue to decay. And we do big infrastructure bills from time to time, too: President Trump wants a $1 trillion election-year bill that probably is not going to pass. Barack Obama signed an $800 billion stimulus-and-infrastructure bill into law in 2009, with no evident effect on federal infrastructure. A $305 billion infrastructure bill was passed in 2015. Finding somebody to soak up the money isn’t a problem — but actually improving infrastructure in an economically efficient way is more difficult.
Biden says that this will be a boon to the working class, because he will attach restrictions to the money that will require the purchase of U.S.-made products. Again, this is familiar stuff: President Trump issued extensive buy-American rules in 2017 and expanded them in 2019.
We think about this stuff the wrong way. There is a role for federal stimulus efforts, and there is a role for federal infrastructure spending — but these are not the same thing. If the federal government needs to build a highway overpass, it should buy what it needs from the most efficient suppliers with no self-serving domestic favoritism and without subordinating the project to other political considerations. It should just build the best overpass it can as prudently as it can. (Which is not always the same thing as doing it as cheaply as possible.) The federal government works for the whole American people, not the concrete contractors or the rebar manufacturers. Infrastructure development should be implemented through a bottom-up process, with projects considered individually on their own merits; instead, we ask Congress to fill a great big trough and then pretend that we don’t know politicians are pigs.
There is a big role for the federal government to pay in funding basic research, but what Biden proposes is targeted subsidies for politically connected industry groups. He has, for example, proposed billions of dollars in subsidies for electric-vehicle charging stations that almost certainly are not needed — the automakers themselves already are building them as fast as actual EV sales can justify. (Volkswagen is doing this as part of its settlement in the diesel-fraud matter.) Biden proposes to put billions more into high-speed railroads in a country that largely lacks the density to make rail travel practical even as the federal government neglects the existing transit infrastructure for which it is responsible. If you think that the American political class can run a railroad, then ask yourself why in New York City the cream of the progressive management class spends five to 20 times as much per track mile on subway lines as big cities in Europe do. Tesla and BMW can build their own charging networks; we would be far better off putting that money into university-based basic-science research. But we won’t do that, because it doesn’t immediately create blue-collar make-work jobs for Biden et al. to boast about.
There’s a lot of déjà vu here. Biden complains that Trump mistakes the stock market for the real economy. Trump made the same complaint about Obama. Biden’s buy-American rules are a variation on Trump’s main theme, and both parties’ superstitious belief that imports are bad for Americans is based in an irrational prejudice against foreigners, an entrenched bias that economists have been studying for years. Biden would undo some of the tax cuts that Trump signed into law and add some new taxes, but even on that front there is surprising similarity. Trump is more of a born-again Republican on taxes today, but in 2016 he complained long and loud about Wall Street traders beating the tax man, and both Biden and Trump would seek to exempt the middle class (which Biden effectively defines for tax purposes as those earning up to $400,000 a year!) from paying the bill for the government they want. The Democrats want to build a Nordic welfare state, but almost none of them will seriously consider laying Nordic-style taxes on the middle class.
Biden’s economic nationalism rests on the same basic assumptions as Trump’s economic nationalism, which are substantially the same as Barack Obama’s assumptions or Marco Rubio’s assumptions. And those assumptions are erroneous. Washington is not going to clever its way out of the facts of economic life.
Because of the hysteria of the moment, it is very difficult for Democrats to see a plain fact: Joe Biden is a lot more like Donald Trump than unlike him. He is a more polished Trump with more-conventional Washington manners. His character is a lot like Trump’s — he is vain, vicious, and reflexively dishonest — and his fundamental policy assumptions are a lot like Trump’s, too. If he is elected president, he is likely to fail in similar ways for similar reasons. For the friends of economic liberalism, 2020 is going to be a choice between testicular cancer on the left or testicular cancer on the right.