Why voters rejected Bidenomics
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Illustration: Annelise Capossela/Axios
President Biden and a Democratic Congress took power in 2021 with a bold plan to propel the nation out of the pandemic, revitalize American industry and bolster the working class.
- It was a complete flop with voters.
Why it matters: In a scathing new essay on what went wrong with Biden-era economic policy, longtime Democratic economic adviser Jason Furman argues that the last administration was too quick to toss aside traditional economic orthodoxy around fiscal policy and other issues.
- That has implications for the new administration as well, Furman tells Axios, as the Trump team also rejects elements of mainstream economic thought on trade and tariffs.
Catch up quick: Furman, writing in Foreign Affairs, argues that the Biden administration's willingness to run the economy hot — to risk higher inflation in exchange for a turbo-charged rebound from the pandemic — turned out to be a bad bet.
- He writes that "the administration's desire to avoid repeating the mistakes of 2008 and its infatuation with the hot economy hypothesis cost the economy dearly," as inflation soared in 2021 and remains elevated four years later.
- The hot Biden-era job market did little to improve Americans' purchasing power, as inflation outstripped higher paychecks.
Meanwhile, the manufacturing revival the administration sought "has run up against the problem of crowding out," Furman argues, in which subsidies for semiconductors and green technology have been hamstrung by shortages and higher prices for materials, equipment and wages.
- High deficits, and the Fed's rate hikes meant to fight inflation, made it more expensive for companies to borrow and drove up the dollar, making U.S. manufacturers less competitive.
- The result: "The share of workers in manufacturing has continued to fall at the same rate as it did during the Obama and first Trump presidencies," he writes. "Manufacturing output has remained flat, as it has since 2014."
The intrigue: The new administration also seeks to create a manufacturing renaissance, though it's focused more on using tariffs, deregulation and pro-business tax policy to achieve it.
- Furman, who chaired President Obama's Council of Economic Advisers, argues that this approach carries similar risks to those that damaged the Biden economic legacy.
What they're saying: "President Trump is at serious risk of running headlong into the painful consequences of his choices," Furman tells Axios. "He has done even more than Biden to ignore economic analysis and trade-offs, whether they are in budgets or relations with our trading partners."
- "Unfortunately, you cannot simply pretend them away," he adds.
