How Trump might rewire Bidenomics
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President Biden and President-elect Trump. Photo illustration: Aïda Amer/Axios. Getty Images photos: Brendan Smialowski/AFP and Jim Watson/AFP
The outgoing Biden administration has pointed to its investments in U.S. manufacturing as signature economic achievements. One big question now is how much of that the new Trump administration will change or scrap.
- As it happens, an 11-month-old paper offers a preview.
Why it matters: The man tapped to be President-elect Trump's top White House economist published a detailed critique of President Biden's industrial policies last February. It offers a sense of the strategies for reindustrializing the U.S. economy sought by those with the president-elect's ear.
- Stephen Miran, Trump's designee to chair the Council of Economic Advisers, argued that industrial policy should focus on supply-side reforms that make it easier for companies to invest in factories, and be driven by demand from the defense industry.
- He is critical of heavy subsidies for electric cars and labor, environmental, and other regulations that, in Miran's view, make the U.S. too inhospitable to manufacturing.
What they're saying: "Bidenomics not only imposes onerous costs on industry in various ways — from incentives for unionization to special environmental restrictions — that raise the cost of production and work against the stated goal of expanding our industrial plant," Miran wrote for the Manhattan Institute, where he is an adjunct fellow.
- "[It] does so while targeting sectors of the economy for which there would be very little demand, absent government support to artificially lower prices," he adds.
- "A more robust form of reindustrialization would instead combine aggressive supply-side reform with demand support from defense-driven procurement," he wrote, "which would produce enormous positive economic spillovers."
Zoom in: Among other specific policies he critiques as counterproductive are EPA rules governing chipmakers, the Davis-Bacon Act (which includes wage requirements for public projects) and Occupational Safety and Health Administration rules on worker safety that he argues go overboard.
Flashback: Biden has made revitalizing U.S. manufacturing central to his domestic agenda — and his political identity.
- His signature legislation — the Inflation Reduction Act, Bipartisan Infrastructure Law, and CHIPS and Science Act — were meant to deploy hundreds of billions of dollars to encourage domestic manufacturing.
- But even some allies were critical of a thicket of rules attached to those dollars that may have made it cumbersome for manufacturers to take advantage. For example, chip manufacturers are required to make child care accessible to employees.
- On net, manufacturing employment is not meaningfully higher than it was before the pandemic (12.9 million jobs in December, versus 12.8 million in February 2020).
Reality check: Miran's will be one voice among many seeking to influence Trump on industrial policy, and the CEA job is more advisory than responsible for carrying out programs.
- Much of the policy detail of the Biden-era legislation is carried out by the Commerce Department, Treasury Department, and others.
- Should Trump seek to change or repeal the laws, it will require action from a closely divided Congress in which many Republican states have benefited from the investments.
