Bidenomics Part 2—Surviving and Thriving in a Socialist Financial Storm

May 15, 2021

Career / Business

Mr. Todres Fisher is considering financial hibernation. President Joe Biden is pushing forward a liberal remake of the economic system backed by a Democrat-controlled Congress, and Todres is fearful for the security of his real estate business and stock portfolio. Liberals are fervently anti-landlord and radical, bringing along costly “green” regulations and minimum-wage hikes. Furthermore, Washington’s plans for vast social services expenditure and aggressive tax hikes increase the likelihood of a terrible business environment.

Is the Biden economy going to crash? Is it time to sell it all and wait out the liberal storm?

Don’t Panic

As with many of my articles, this one is based loosely on a conversation I had with a friend. I’m no fan of President Joe Biden’s liberal agenda. But, as I explained to this panicked fellow, the extent of his fears is probably overblown. Not everything on the extreme liberal’s wish list will pass Congress. And government policies that may be fiscally unwise in the long run may provide neutral or even positive short-term effects. In fact, with a bit of mazal and sechel, businesses and individuals can position themselves to survive or even thrive under the upcoming wave of liberal economic spending.

Political Realities First

The first thing to consider is how much of Biden’s proposed agenda will actually become reality. Congressional Democrats have just a razor-thin majority control in Congress. Reaching party unanimity may be impossible for the most controversial social and legislative items. There’s a spectrum of positions in a political party; a Democrat senator from Pennsylvania will tend to be much less polarized than one from California. An overly ambitious “Green Deal” for example will be a hard sell in blue states whose economies depend heavily on oil (New Mexico, Colorado, Pennsylvania), coal (West Virginia), and auto production (Michigan, Illinois, Ohio).

Threats and Opportunities

I pointed out to my friend that along with threats to his business, financial sea changes offer opportunities as well. A government mandate that buildings must be made more energy efficient could come with significant subsidies. Perhaps building owners will come out ahead on the balance as they do now with solar retrofits. New pro-tenant policies could include a massive expansion of Section 8 rental assistance, bolstering rents and occupancy. Even terrible policies can create losers and winners. Beyond voting, it’s not our job to worry about the optimal design of the political system—just to manage and hopefully prosper within it.

Double-Edged Swords

Deficit spending and inflation are also double-edged swords. At some level, these become toxic to an economy. But at which point? And when might the USA reach it? No one knows for sure. This unknown is a bit frightening, but in the short run, at least, pumping money into an economy usually boosts income and wealth. Biden’s plans to spend many trillions may crash the economy soon—or goose it further for an indeterminate time period. This reality explains how stocks and real estate have continued booming despite Biden’s anti-business stances. Again—bad policy doesn’t automatically translate into immediate financial malaise.

Don’t Build a Maginot Line

To reiterate, I don’t like at least 90% of Joe Biden’s economic platform. And there’s definitely a good chance the investment and economic environments will falter in the upcoming years. But hunkering down and avoiding all potential growth to play fearful financial defense isn’t wise either. This path is the equivalent of establishing a financial Maginot Line. That 15-mile-long network of forts, towers, and trenches was supposed to offer France a virtually impenetrable line of defense against an attack from the north. But the German army simply drove their tanks around the Maginot Line, crushing France in a matter of days.

Resilience Over Strength

The world is too complex for a deep but narrow Maginot-like defense. Instead, building broad resilience against multiple unknown scenarios is a much better preparation for an onslaught—military or financial. In the financial sense, resilience begins with a well-balanced diversified portfolio and or business structure. Maintaining liquidity, varied product lines, and good staff and processes offers the strength of flexible endurance. By constructing a stable but adaptable financial foundation, Todres can quickly adjust to oncoming threats and capitalize on opportunities.

Be Alert and Speedy

In times of drastic change, it’s important to stay in the loop about changes to tax policy, business regulations, and resultant industry shifts. Accountants, attorneys, trade associations, and social service organizations are good sources to watch, along with yours truly, your astute Gelt Guide columnist. Even those without managerial or executive duties should be alert to proposed changes that may affect them and their families. Hashem’s will unfolds in surprising ways—it’s our job to calmly do the hishtadlus that seems appropriate for the particular scenarios sent our way—not overthink them.

Financial Sea Changes

One important quirk, mentioned recently by columnist Eliezer Stein, is when policies pushed by radically liberal politicians indirectly support large traditional families. His example was subsidized health insurance, but President Biden’s anti-poverty agenda may have an even larger financial effect on the budgets of frum families. For 2021, couples earning under $150,000 may get as much as $5,000 per child from Uncle Sam! And there are serious conversations about making this largesse for parents permanent. Such a policy would obviously provide a massive boost to our communities’ lower- and middle-income families. Keep an eye on this potentially earth-shattering development.

With Unknown Ripple Effects

But what about those earning slightly above the arbitrary cutoffs? Bizarrely, net of stimulus, a large family earning $160,000 may fare far worse financially than another earning $150,000. Will cutting back work become the norm? Will limiting the labor pool drive up wages for everyone else? What would that do to businesses that are already struggling to hire? And what happens to an economy when those earning more money are penalized? How will additional heavy taxation on upper earners affect the whole trickle-down effect?

It’s Out of Our Hands—As Always

We see again that we don’t know precisely who stands to gain or lose from various proposals. And we can’t fight city hall to fix the system on our own. What we can do is remain flexible, alert, and responsive to how these rules may affect our families, businesses, friends, and community. Come what may, let’s try to be prepared, not panicked. And, as always, we daven that s’vet zahn git fahr di Yidden.