A decade ago it was common to hear Republicans complaining about “Obamanomics,” but the term conveyed little meaning. “Bidenomics,” by contrast, does indeed describe a coherent set of economic policies that differ in substantial ways from what came before.
President Obama’s crowning economic achievement was the recovery from the global financial crisis—at the time the sharpest downturn since the Great Depression. But Obama relied far too heavily on the neoliberal playbook. He showed little appetite for challenging the dominance of market thinking or indeed the power and position of the financial sector. His solution was to shore up the large financial institutions that caused the crisis by making sure they had enough capital. He made no effort to bail out the ordinary homeowners who suffered immensely from the greed of Wall Street. As a result, more than 9 million families lost their homes. Unemployment stayed too high for too long. Peaking at 10 percent of the labor force at the end of 2009, it took until the latter half of 2015 to fall to 5 percent. And 95 percent of the income gains in the three years after the financial crisis went to the top 1 percent.
The extent of the problem was laid bare by economists Atif Mian and Amir Sufi in their book, House of Debt. They showed that the real problem was less financial fragility than excessive household debt, which held back spending and led to job losses. This, in their view, was what really caused the deep recession. The key point is that the architects of the Obama strategy misdiagnosed the problem as a lack of confidence in the financial sector, so they focused on protecting bankers and creditors rather than addressing deep-rooted problems in the real economy. A crisis that should have occasioned a radical reappraisal of neoliberal thinking instead led to its further entrenchment.
The doctrines of neoliberalism rose to prominence with the Reagan Revolution in the early 1980s. Simply put, neoliberalism taught that what matters most in an economy is efficiency and growth, and that those are best achieved by unlocking the dynamism of the private sector. All impediments to this dynamism need to be removed, especially where the state is involved. Accordingly, neoliberals pushed for low taxes, deregulation, privatization, a paring back of the welfare state, and an unshackled financial sector. As I argue in my book Cathonomics, neoliberalism largely failed even on its own terms: it did not deliver rising productivity and long-term economic growth. It also left massive inequality and major social and political upheaval in its wake. But its elegant simplicity seduced a lot of people. As the 1990s progressed, neoliberalism spread far and wide, across the world and across the aisle. In the United States, Presidents Clinton and Obama both failed to challenge its hegemony.
But things have begun to change. In his approach to economic policy, President Biden has broken with the neoliberal paradigm in substantial ways. A distinctive “Bidenonomics” can be recognized in five different areas: Keynesian demand management, pro-family social policy, infrastructure spending, industrial policy, and actions to push the energy transition.