By Laura Gillies
Joe Biden has spent his fair share of time in the White House over the past couple of decades. First, he was Barack Obama’s Vice President from 2009 through to 2017 and one Trump presidential term later, he’s back. This time as president. And just as Obama walked into an economic crisis created by the sub-prime lending market, Biden has walked into a similar economic situation, this time created by a ‘once-in-a-century’ pandemic.
It’s blatantly clear that Biden meticulously followed the same playbook Obama used in 2009 by coming to the rapid conclusion that a giant economic stimulus package was required to drive the American and global economy forward, whilst building back better.
Although President Biden initially sought to inject just over $3 trillion into the U.S. economy, it soon became obvious that such a sizeable stimulus would need to be broken into two tranches. In November, less than a year after he was sworn in, Biden successfully drove an Infrastructure bill through the House and Senate that appropriated $1.2 trillion to stimulate the U.S. economy. The second portion of the plan was packed as the Build Back Better plan, billed at $1.75 trillion. What does ‘better’ mean? The aim of the act is to invest more into children and caregiving, combat climate change, expand affordable health care and strengthen the middle class. A very noble set of goals, but not all share that view—unfortunately for him not all the objection is from the Republican Party. The partisan nature of U.S. politics will, by definition, result in opposition to a bill that is central to the current administration. But even beyond that, the Republican party, which with Trump as the de-facto king maker still leans very heavily to the right, has taken strong opposition to the climate elements of the bill as well as any strengthening of Obama Care. However, the most vociferous opponent to the bill is not a Republican but comes from a lonesome voice within the Democratic party: Joe Manchin, a centrist Democratic Senator from the very industrial and economically challenged coal producing state of West Virginia. Given his support base and his political future, Manchin acts as the lone Senator blocking the passage of the Biden’s presidency defining Bill.
Manchin has “expressed concerns about climate proposals and extensions to monthly child tax credit payments as his objection” to the act. Evidently, the Senator is focused on sustaining the existing jobs within his own state and any legislation to drive out fossil fuels is either not in the interests of his constituents or his own political future. With a 50/50 split in the Senate, things are finely balanced—if all Democratic Senators were to vote in favor the decision would fall to Vice President Kamala Harris as the tie-breaking vote. However, it is clear Manchin is not going to support the bill and has accordingly it been set aside until well into 2022.
In the meantime, it is likely that there will be a lot of horse trading within the Democratic party to make the act acceptable to all factions even though it is clear that the majority of Americans are broadly supportive of the policies comprised within the bill. Having used the holidays as a cooling-off period, the President and his party return to congress in 2022 determined to find a way to bridge their differences with Manchin and to find a way to reach an enabling compromise. Bizarrely, the thing that is probably working in Biden’s favor is the resurgence of coronavirus in the form of the Omicron variant that is now beginning to rage through America and slow up the economy once again.
By any standards, the magnitude of the stimulus package is enormous. Compared to Obama’s stimulus bill of $831 billion following the financial crisis, it is a staggering amount of money at $3 trillion. Controlling the inflation evident throughout developed economies through interest increases is essential as stimulus is passed to support economic recovery. Biden’s legacy will likely be determined by his ability to corral his entire party behind the Build Back Better bill. Plus, given his own falling popularity in the polls, there is enormous personal gain to be had from its passing. The economic direction of the entire nation is contingent on its success and all eyes will be focused on Washington through the cold winter months, looking for the right outcome.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.