Most Americans won’t head to the polls to choose their next president for more than a fortnight. The unseen battle to shape the economic course of the Biden administration that may be ushered in on November 3 is already under way, however.
Washington insiders argue the real “result” of the election will only become clear in the days after the vote. If victorious, Biden will quickly begin handing out the senior positions to shape policy under his presidency.
The 77-year-old is keeping the Democrats’ broad coalition of progressives and moderates together for now, unified by the fight against Donald Trump. The presidential candidate has also made a point of consulting a broad range of economists in the lead up to the vote. But his eventual choices for key posts like treasury secretary, and the leadership of the National Economic Council will signal which Democratic faction has truly won power.
Among Biden’s top three economic advisers are the “progressive” camp including Jared Bernstein, his previous chief economist and an adviser to the current campaign. Bernstein, who served under Barack Obama, has been outspoken on topics such as the losers from globalisation and the need for a higher minimum wage.
He calls Trump “duplicitous”, accuses him of fighting for the “donor class”, and tells The Sunday Telegraph: “There is a key role for government to play in making sure that working people get a share of a growing economy and that one of the most important aspects of that goal is ensuring workers have the bargaining power they lack.”
The message from Bernstein is that Bidenomics is about “making sure that middle class working families are getting a fair shake and access to the opportunities they need”.
Bernstein rejects Right-Left divides as “speculative and pretty meaningless” but most commentators put him to the left of centre. He shares Biden’s ear with Heather Boushey, a former adviser to Hillary Clinton, and one of the leading progressive voices in US economics as head of the Washington Centre for Equitable Growth. Boushey last year wrote that the American economy was “getting bigger, but not better” and that a “rising tide can’t lift all boats”. Ben Harris, another economic aide to Biden when he was vice-president under Obama, completes the main trio.
Randy Kroszner, a former Federal Reserve governor and economic adviser to George W Bush says of Biden’s economic plans: “There is a clear shift of focus away from a tax policy supporting business and investment and that would put more tax burden on business and investment.”
It is difficult to characterise Biden’s policy platform as dyed-in-the-wool socialism. His tax rises for households earning more than $400,000 leave all but the richest 1.8pc untouched. Of the $4 trillion in extra taxes earmarked over the next decade, more than half comes from business, including the unwinding of half of Trump’s corporation tax cut by taking the rate back to 28pc, according to Oxford Economics estimates – albeit still lower than the 35pc seen under Obama.
Conversely businesses are likely to benefit from the $2 trillion green stimulus under his plans – evidenced by the recent rise in climate related stocks. Bigger spending on healthcare and education also feature in his $7 trillion programme but the deficit takes almost as much of the strain as extra taxes over the course of the decade. “It doesn’t seem particularly onerous as a broad policy thrust,” ING’s US economist James Knightley says.
Notable by their absence are measures such as the billionaires’ wealth tax espoused by Elizabeth Warren, Biden’s challenger for the nomination in the primaries. The former senator calls on other voices who make the progressive camp nervous. One such is Jeff Zients, another long-time adviser to Obama as director of the National Economic Council. The multimillionaire entrepreneur was seen as Wall Street’s go-to man in the Obama administration and is one of the five co-chairs of Biden’s transition team.
A key role for Zients under Biden is likely to put the progressives’ noses out of joint, according to Owen Tedford, an analyst at Washington-based policy research firm Beacon Advisors. He says: “Jeff Zients was considered as someone pro-business but he has been criticised by the progressives. The progressive goal would be to have no Wall Street influence anywhere in the economics team, but that is not going to happen, it’s unrealistic. But Zients could be seen as being too pro-business and excluded because of that.”
Steve Richetti – another with business links and tipped as a potential Biden chief of staff – also makes the progressives twitchy. In a sign of the tensions in play Larry Summers, the academic and former treasury secretary to Bill Clinton, was chased away from the Biden camp this summer after a coalition of progressive groups wrote an open letter decrying his links to big business and an “abysmal” record on climate change.
Where the top jobs will go
Biden’s political background in business and tax-friendly Delaware hardly suggests a radical; nor do his previous clashes with Warren over the bankruptcy legislation he championed in 2005, which made it less easy for borrowers to shed debts. Yet Biden has now given ground to Warren on that particular issue, while his choice of Kamala Harris as a running mate is another nod to the progressive wing.
Observers expect the moderates to have a lock on the jobs with more policy heft, however. The hot favourite for the treasury role is Lael Brainard, a former official of the institution and now a dovish rate-setter at the Federal Reserve.
Knightley says: “She is seen as very much a centrist, a person who would not rock the boat and would go down well with Wall Street. She is certainly not a Warren type economist looking at a radical restructuring of the economy. What role does the VP actually have? Arguably the job of treasury secretary is much more important.
“You would imagine that Elizabeth Warren will have to make an appearance somewhere, probably on some sort of committee to investigate the future of banking. But it is still down to the president and the treasury secretary for the policy thrust.”
A broad coalition
Biden can’t simply abandon the progressives after winning office, as the predictions of a narrow Senate win for the Democrats will mean he still needs the support of Warren and fellow radical Bernie Sanders to get his legislation through Congress.
The Blues are unlikely to win the 60 seats in the Senate needed to make their legislation filibuster proof, so they are also likely to have to rely on moderate Republicans to get laws passed, which is likely to mean more compromises, or a “Biden-lite” spending programme.
Tedford says the Senate still has the power to approve presidential appointments, “so voices like Sanders and Warren will still have some influence”. He adds: “A lot of it will come down to Democratic control of the Senate – without that establishing an agenda at all will be a struggle, let alone a progressive agenda.”
That realpolitik is likely to dictate a pragmatic approach, acknowledging the impact of a pandemic where the biggest health and economic scars have fallen on the poorest, according to Greg Daco, Oxford’s chief US economist. He said: “He will be focused on the task in hand, pro-growth but redistributive. I would be massively surprised if there was a sharp jerk to the left. He is not going to turn into a Warren or a Sanders.”
- Read more: Is Biden a radical in moderate’s clothing?