One of the mysteries that will confuse scholars for generations to come is why many Americans of our time felt that Republicans could handle the economy better than Democrats. The statistics are clear–-for 60 years Democratic presidents have created more jobs while increasing the national debt far less than Republicans.
People seem scandalized that President Biden has chosen to invest in infrastructure and clean energy production instead of lowering taxes for the wealthy. Imagine, a president who sees replacing corroding water pipes as more important than helping a select few get larger yachts and fatter portfolios.
When the government runs a middling deficit, the economy grows. If the money is dispersed broadly, it benefits nearly everyone. If it goes to the top 10%, it reaches more hedge fund managers and fewer workers. Is that so hard to understand?
Republican President Eisenhower demonstrated this theory well. After an economically stagnant first term, he got Republicans to go along with building an interstate highway system because national defense required fast movement from one side of the country to the other. Demand for workers increased, gross national product grew, and Idahoans got fresh fruit in the winter.
President Biden’s plan to grow the economy “from the middle out and the bottom up” is working as well today. The Biden administration is making massive public investments in Internet access, roads and bridges, semiconductor production, wind and solar energy, and manufacturing.
And, now that inflation has dropped to three percent annually, real wages are going up.
Former Secretary of Labor Robert Reich gave some details. “Manufacturing construction in high-tech electronics…has quadrupled. Tens of billions in infrastructure spending has been funneled to the states for road, water system, and internet upgrades. More clean-energy manufacturing facilities have been announced in the last year than in the previous seven combined” (Reich blog, July 31).
And Biden’s latest budget request includes a healthy cut in the deficit.
There are now 3.3 million Amerians in the workforce than before the pandemic. Average wages have finally outpaced inflation. And many workers are negotiating better wages and conditions.
In 2022 there were 1,249 union elections–nearly 50% more than 2021–and 72% were successful. Some companies fought back by firing workers and refusing to negotiate contracts. The laws they violate have such limited penalties, however, that companies can ignore them. President Biden’s Task Force on Worker Organizing and Empowerment is recommending 70 changes in labor law–some long needed.
The Biden administration is also moving to weaken monopolies that hike prices for needed medicines.
Yet, Fitch–an international credit rating agency– just lowered the credit rating of the United States from AAA to AA+--not foretelling a disaster, but still raising the cost of government borrowing.
Why? Congress may crush economic growth.
The Republican-led U.S. House failed to pass needed budget bills prior to taking the entire month of August off. If the eight bills aren’t passed by Sept. 30, the government might have to shut down.
Congress could pass short extensions until they got the job done. But, if extremists want to up the pressure, they could refuse to.
And all of the budget bills coming out of the Republican-led House committees, make cuts substantially deeper than the June compromise to raise the debt ceiling in June required.
The Congress of 2021-2023 authorized the expenditures for infrastructure, but that means nothing if the current Congress refuses to budget for them.
Republicans could halt current economic expansion and job growth to chip away at a deficit caused by their own massive tax cuts for the wealthiest.