Hand stumbles down the stairs of Air Force One; trips over a sandbag on stage to fall on his face when presenting diplomas at the US Air Force Academy; he garbles his words with alarming regularity. It’s easy to dismiss President Joe Biden as a senile 80-year-old idiot. However, many Democrats and some Republicans already consider him as significant a Democratic president as Franklin Roosevelt or Lyndon Johnson. He’s dramatically changing the face of America around Democratic priorities: reindustrializing to support blue-collar jobs and wages, fighting climate change head-on, investing massively in science and education, doing more for the poorest and, above all, rejuvenating America’s declining public. infrastructure
But unlike his famous predecessors, he has never had his big majorities in Congress, and after November’s midterm elections he doesn’t even control the House of Representatives. He has had to rely on shrewdness, political savvy, and reading Washington’s runes better than anyone alive. For the past few months we have been warned of financial Armageddon as an unrelenting Republican Party forced the US into default, only to be averted if the administration acceded to its demands for government spending cuts to avoid going through an artificial debt. ceiling limit Tomorrow was supposed to be the witches day when the default occurred and a financial crisis engulfed the world. Instead, last week the shrewd Biden once again outmaneuvered his opponents and struck a massively weighted deal in his favor that was voted in by overwhelming majorities. It was an extraordinary victory, and when invited to claim it as such, he replied: “Do you think that will help me pass it?” First rule of Washington politics, from which the affable Biden has never deviated: always allow the losers to save face because you will soon have to cut another deal with them.
The American right threatens to cut public spending, but does not have the bottle to face the political consequences
Yet what lay behind the Republican retreat is important not only to American politics but to our own. The increasingly ideological American right, so influential among British conservatives, has long abandoned fiscal conservatism as a dead end. He goes through the motions of crunching threats to cut public spending, but he doesn’t have the guts to deal with the political consequences: the decimation of social programs beloved by his own base and which any Republican presidential candidate needs conserve to have a hope in 2024. Instead, the new terrain is the fight against “the awakening” – from the banning of drag queen reading hours to the penalty of investment companies that invest in principles ” environmental, social and governance” – tied to traditional anti-abortion social conservatism along with a dose. of America First nationalism. It is, in effect, Donald Trump’s policy. The horrible cocktail might work in the US, although I don’t doubt it enough to win a national presidential election. It certainly won’t work in Britain.
Biden’s negotiating tactics were manual. Publicly, he took House Leader Kevin McCarthy’s threats to cut $4.5 trillion in spending over a decade seriously, talking up the threat and returning early from the G7 summit to negotiate, showing the depth of their concern. Privately, he knew the Republican would back down: Cuts on this scale would mean social programs would be decimated, given that so much federal spending is on defense, which Republicans didn’t want to touch. This was not in 2011, when the Republicans used the same tactic and he meant it, when his libertarian right to cut taxes was in check; now they are also big spenders.
Biden read the mood swing well: He knows his opponents better than they know themselves. He took over the key negotiations, I’m told, that forced reality home to McCarthy, who successively reduced his demand to a cut figure of $1.5 trillion, helping him save the face. But even that was greatly exaggerated due to a series of off-balance sheet operations. Federal spending will eventually be reduced by 0.2%, if that, for the next 10 years, while all the big spending programs on chips, infrastructure and green investment that Biden has negotiated are intact. An impressive victory.
There are problems ahead: the US, accounting 15% of world GDP, you can comfortably afford an expenditure of this scale, but you will only have to increase your tax base. The Tax Service has been emptied over the years. As a first step, Biden wants to increase his ability to go after the super-rich, barely taxed Americans, an area where McCarthy got a spending cut, if not a decisive one. But before 2030 the US will have to raise taxes. This will not reduce its growth: as the The Institute of Government recently reported, there is little or no evidence that tax cuts have any impact on growth. But it will force a major political battle into the open.
Meanwhile, Bidenomics defines the new consensus, which the US Treasury Secretary Janet Yellen describes as “the modern side of supply” economy, laid out in perhaps the best statement of social democratic economic analysis ever to come out of Washington, in 2022. Economic Report of the President. On her recent trip to Washington, shadow chancellor Rachel Reeves met the key architects, including Yellen, all endorsing his own version of modern supply-side economics that he has been developing since he got the job in 2021. At its simplest, this is a commitment to ambitious public investment, especially above zero, in a deliberate partnership with business as a basis for economic growth. It’s working in the US. It will work in the UK.
British Conservatives are in a parallel position to McCarthy’s Republicans. They may deplore public spending and the big state in principle, but shrink from the consequences of putting their ideology into action. They find themselves giving aid to new technologies and supporting the green transition as political and economic necessities without believing in either, so their approach is lukewarm, ad hoc, unconvinced. They are tempted to follow the US into the poison thicket of being anti-woke, but Britain is a far more liberal and peaceful society than the heartland of the US Midwest. And around the corner comes the specter of having to raise, not lower, taxes. Both Britain and the US may be in the thick of national elections in the autumn of 2024. For the first time in 40 years, not only does the liberal left have the best case; with a tailwind, they can go all the way.
Will Hutton is a columnist for the Observer
