Shamai Weisberg was no expert on politics, and he generally tuned out heated debates about Republicans vs. Democrats or Trump vs. Deep State. But this was different. The world had obviously shifted dramatically with the election of President Joe Biden. Together with his allies in the Democrat-controlled Congress, the 46th president of the United State clearly has ambitions to remake the American economy while pushing an exceedingly liberal agenda. Beyond the serious ramifications for social norms and morality in the country, Shamai wondered what the economic future now held.
What’s the new president’s economic agenda? How might Bidenomics affect the everyman financially?
Down Memory Lane
My very first Gelt Guide article ran four years ago and was titled “Investing in Trumpian Times.” Then-President Trump’s plan to turbo-charge the economy was straightforward. His pro-business, low-tax agenda, though tempered by political drama and tariff frictions, proved very successful. The economy powered forward strongly until the pandemic hit. Even then, Trump signed off on creative bipartisan COVID support that worked spectacularly, protecting the country from the grave damage that economists had feared.
A New “New Deal”
President Biden’s economic plans are much more invasive and far-reaching. His goal isn’t to simply unleash America’s economy, but to remake it, to accomplish long-wished-for liberal aims. It’s therefore much harder to predict the winners and losers of proposed legislation and the myriad ripple effects Biden’s makeover may trigger. In this article we will outline the key agenda points being pushed now in Washington and the likely effects of these changes. In the next article we’ll provide some specifics for maximizing the potential benefits and protecting ourselves from the potential harm of President Biden’s proposed “New Deal.”
Agenda Item Number 1: COVID Relief
President Joe Biden says his top priority is COVID assistance, which is reflected in the $1.9 trillion American Rescue Plan. Key items include funds for vaccination, testing, and contract tracing; $1,400 stimulus checks; extended unemployment benefits; a massive expansion of child tax credits (super-valuable to those with large families); support for local governments and schools; expanded social assistance for food, rent, and mortgages; and funding for PPP. While everyone wants to contain the pandemic, the bill is heavily tilted toward liberal spending agendas. Therefore, the bill is being rammed through Congress on a partisan basis.
Agenda Item Number 2: Addressing Poverty and “Equity”
Part of the aforementioned liberal agenda included in the COVID bill is reducing systemic poverty and lack of economic fairness. Democrats have long sought to expand social programs, drastically raise employee wages, and minimize the gaps between the wealthiest and poorest Americans. The varied levers they hope to pull include expanded child tax credits, minimum wage requirements, student loan forgiveness, and regulations favoring some Americans based on race, gender, or segments that are supposedly being discriminated against by the system.
Agenda Item Number 3: Strengthening American Workers
Unions played an important part in Biden’s election, and they plan to collect. Liberals aim to strengthen the hands of American labor with regulations favoring unions, as well as increasing “buy American” clauses. Although Donald Trump is the one who had the guts to take on China and levy significant tariffs even on allies, expect Democrats to gladly take up his mantle in this one regard. How ironic, since broad usage of tariffs were the most questionable part of Trump’s economic plan.
Agenda Item Number 4: Greening America’s Economy
Climate change is the stuff of nightmares for Democrats, and President Joe Biden is prepared to save the planet. His plan to “decarbonize” the United States would require a massive overhaul of multiple industries, including energy, transportation, and real estate, over just a few decades. And he is prepared to spend many trillions to do so, despite the significant uncertainty surrounding the whole issue.
But while these are Biden’s core economic focuses, many questions remain about the direct and indirect ramifications of all the change he is aiming for.
Biden Helping Families
While the frum world is very concerned about much of the social agendas that liberals are pushing, the proposals to expand child tax credits may be very favorable to those with large families. There are serious conversations about providing ongoing assistance of as much as $3,600 per child to middle-income families. It remains to be seen how this will be offset by other credits, but it’s looking like this policy may send significant support to frum families. On the other hand, those above certain cutoffs may get squeezed harder. There are always winners and losers in policy shifts.
But Taxes are Going Up
There is also the obvious question of who is paying for all these goodies. While Biden says he’s aiming to raise funds only from those earning at least $400,000, it’s likely that the sheer size of the spending will require a broader tax rise. Also, while that sum seems like a fortune to a non-frum family of four living in Idaho, a frum family of 10 earning $400,000 often does not have much “fat” to trim after current taxes, ma’aser, full tuitions, and other obligations. Biden years may prove very painful for our communities’ upper earners.
Effects on Inflation and Rates
While socialists say they’re looking out for the little guy, their policies often hurt everyone. There’s a limit to how much taxes can be raised from a narrow group of people. President Biden will probably lean heavily on borrowing to fund his pet projects. The burden of inflation and interest rates increases, often the result of out-of-control deficit spending, is borne by all—and the lower classes are hit harder than everyone else.
Populism is a Lose-Lose Path
Similarly, by burdening companies with higher labor costs, increased taxes and regulations, jobs are lost and America’s economic dynamism falters. In fact, the proposal to raise minimum wages states clearly in the fine print that over a million jobs are projected to be lost thereby. It’s highly ironic that the fairness outcry has been loudest as unemployment fell to record lows and economic prosperity for all Americans rose sharply (pre-pandemic).
For better or worse, though, these changes are coming. For a more detailed approach toward dealing with these changes, click here.
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