Bidenomics is a dud. Across the political spectrum, pretty much everyone agrees that Biden’s economic policies have delivered higher inflation, more debt, and a lack of financial security, and that our nation is on the wrong track economically.
Biden’s economic and political teams are now searching for a new approach to get us back to the booming, pre-pandemic economy. This shouldn’t be too difficult. To paraphrase their predecessor, James Carville, "It’s the inflation, stupid."
Inflation is far and away the top economic concern for Americans right now. And Biden is shouldering nearly all the blame – for good reason. The only thing the Biden administration has done to address inflation is to rename his massive public works bill the "Inflation Reduction Act," despite the fact that, if anything, it could worsen inflation in the short term.
While the president continues to row the boat in the wrong direction, he has been somewhat fortunate that the Fed’s interest rate hikes have cooled inflation a bit, but these hikes have come at a significant cost. For instance, higher interest rates have made it more expensive to finance a car or buy a new home.
Additionally, these higher interest rates have made it more expensive for the government to borrow money – interest payments on the national debt have nearly doubled over the past three years. This has only exacerbated our debt problem and pushed us toward a debt spiral that becomes deeper by the minute.
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But all hope isn’t lost. Now that a short-term spending deal is in place, the president ought to work with Congress to reduce spending through the appropriations process. Just as a family would reduce spending on non-essential items during lean times, the federal government needs to trim down the monstrous budget.
He should also call for a debt commission to examine our long-term fiscal challenges and propose pragmatic solutions. This is an idea that enjoys bipartisan support on Capitol Hill.
BIDEN ADVISER POINTS TO INFLATION, JOB TRENDS AS GOOD SIGNS DESPITE VOTERS' DISSATISFACTION
Next, inflation can be tackled through better tax policy that encourages economic growth. This boils down to simple "supply and demand" economics, which tells us that if you make more stuff – or increase supply – prices will fall. Several provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) did just that. By providing a full and immediate deduction for investments in new machinery and manufacturing capacity, the tax bill helped American companies grow and prosper. Unfortunately, some of those provisions have fallen off the books or begun to expire. From a tax perspective, it is now significantly costlier to expand a factory or invest in R&D than it was just a couple years ago. That means we’re undermining our own economic productivity at a time when we desperately need to produce more things in order to drive down prices. Biden should work with Congress to fix this tax mess and stop shooting our economy in the foot.
And, recognizing that Biden’s political focus is generally oriented toward working Americans, there is plenty he can do to improve their tax headaches, too. For example, the Child Tax Credit has been a lifeline for growing families at a time of hyperinflation. While currently pegged at $2,000 per child, it is scheduled to revert to its pre-TCJA level of $1,000 at the end of 2025. There is strong bipartisan support for extending the bigger credit while also implementing reforms, such as providing a bonus credit of several hundred dollars for younger kids. This shouldn’t be a heavy lift.
Additionally, Biden could advocate for an expanded standard deduction, which is scheduled to be reduced by 50 percent in 2025, and he could call for an overhaul of the Earned Income Tax Credit, which benefits workers on the lower rungs on the economic ladder but has been plagued by fraud and erroneous payments. These can be achieved on a bipartisan basis.
There is no silver bullet to kill inflation and get our economy back to pre-pandemic levels, but all of the recommendations above would, in sum, get us much closer to those goals. And because Biden’s political future is dependent on a healthier economy, it’s time he abandoned the big-government orthodoxy that has gotten us into this mess. A bipartisan approach to cutting spending and improving tax policy ought to be a no-brainer as Biden contemplates a course correction from Bidenomics.
Brandon Arnold is the Executive Vice President of the National Taxpayers Union, a nonprofit that advocates for pro-taxpayer policy at all levels of government.
