Less than six months into his term, it is probably too early to speculate what President Joe Biden’s legacy will be. Yet in some ways, Biden’s economic policy is already no less audacious than those of presidential heavyweights such as FDR, Lyndon B. Johnson, and Ronald Reagan.
Already in the first half-year of his presidency, the president has proposed $4 trillion in spending, partially to repair American infrastructure and partially to expand the social safety net. This level of government spending is not entirely unprecedented – World War II cost roughly the same amount – but is certainly greater than that of any president in modern history. By comparison, the Troubled Assets Relief Program, the Bush- and Obama-era Wall Street bailout, cost a relatively modest $700 billion.
While many of Biden’s proposals are conventional government spending on infrastructure and subsidies, others take the form of open-ended cash payments to Americans. Conservatives have decried this spending as wasteful and poorly targeted. However, some have argued that they function effectively as an expansion of the general welfare.
At Bloomberg Opinion, Noah Smith argues that Biden’s handouts are a contrast to President Johnson’s “Great Society” welfare programs of the 1960s. Smith observes that while Johnson’s handouts were conservative in nature – for instance, restricting payments to old and disabled people, and requiring the unemployed to search for work to receive unemployment benefits – Biden’s are far more open-ended and far less reliant on government bureaucracy and means testing.
In short, while Johnson’s approach was focused on specific needs, Biden’s stimulus checks have gone out to nearly all Americans without requiring them to navigate the byzantine complexity of the modern welfare state. Crucially, the checks themselves have not come with any conditions on how they can be used, and people are free to spend them as they see fit. While the cost has been high, most evidence suggests that the programs have been successful; income and consumption rose during the pandemic, despite high unemployment. Moreover, concerns that government handouts would incentivize Americans to refuse to work have mostly been unfounded. Although there is some debate over whether the $300 federal unemployment benefits are causing higher unemployment, a study by the Federal Reserve Bank of San Francisco found little evidence to support the link.
Smith notes that the attraction to cash benefits and the attraction to tax cuts stem from the same belief: that people understand better how to spend money than the government knows how to spend it on their behalf. Tax cuts, however, skew towards the rich, who pay the most taxes, and against the poor, who typically pay fewer and therefore have little to gain. Universal or semi-universal cash benefits, on the other hand, primarily benefit the poor; even if the dollar amounts are the same, the poor have more to gain from them than the rich do.
For better or worse, if “Reaganomics” was tax cuts, “Bidenomics”, if it exists ten or twenty years from now, will likely be identified with direct cash payments.
Trevor Filseth is a news reporter and writer for the National Interest.