Is Joe Biden the new FDR? That’s one of the questions that has been percolating in the news media over the last few weeks, as we contemplate Joe Biden’s first 100 days.
Biden has proposed a lot of spending so far. Among other things he has:
- Proposed (and had approved by Congress) his $1.9 trillion Covid-19 relief package.
- Unveiled a $2 trillion infrastructure plan.
- Unveiled another $1.8 trillion American Families Plan.
That’s a lot of spending, my friends. (About $5.7 trillion, give or take a few hundred billion.)
Is that too much spending?
I have no idea.
Here is what I do know: the Republicans lost all their credibility on the deficit in 2017 when they enacted their Tax Cuts and Jobs Act, thereby blowing a $2.3 trillion hole in the deficit. It turned out to be a tax cuts but no jobs act, and while the corporate tax cuts were permanent, the income tax cuts for individuals were temporary, and they are already starting to go back up.
That’s why we now have major corporations like Amazon not paying any income tax at all.
These tax cuts were all premised on the trickle down theory, which might have worked back in the 1920s when capital was not yet global and corporate boards didn’t go around and buy back all of their own stock.
At least Biden’s spending proposals will have the benefit of the multiplier effect, where real jobs are actually created.
Take, for example, the “Big Dig,” where the city of Boston took their elevated Central Artery and brought it under ground, freeing up a lot of traffic. The Big Dig project lasted roughly from 1991 to 2007, and brought literally thousands of construction workers into the city of Boston. These construction workers had to:
- Find housing
- Buy food
- Buy clothes
- Pay for utilities
- Go to restaurants
- Get their cars repaired
- Buy new cars
- Get furniture
- Go to the movies
All of that had to be done locally, in the Boston area.
Then, the people working in real-estate, and food stores, and retail stores, and restaurants, and in car repair shops and dealerships, all benefited from the extra business these construction workers were bringing in. This, in turn, allowed them to spend more at various shops and establishments, which brought in more business for those places and their employees, and so the impact of this economic activity “multiplied” throughout the economy.
That’s how the multiplier effect works.
That’s what President Roosevelt did to help pull America out of the great depression. Among other things, he created the Public Works Administration, which built billions of dollars worth of roads, and bridges, and dams, and airports, and other infrastructure.
And that’s where the Biden comparison to Roosevelt comes in.
How will it all work out? Who knows. But at least Biden is trying very hard to pull the United States out of the pandemic-caused depression that we’ve been in, and if he succeeds, he may go down as one of our better Presidents.
But there is still a long way to go.