Bidenomics: A Giant Step Forward for Workers
Economic Policy and Worker Power
For the labor movement, the key criterion to assess economic policy is: how does it affect the relative strength of workers on the one side and corporate managers and capital owners on the other. Policy that weakens workers’ bargaining power will result in lower wages and greater inequality. Conversely, policy that bolsters workers’ power will raise wages and reduce inequality.
The broad middle class in America was built in the wake of the Great Depression and World War II. For nearly four decades, America enjoyed a growing economy in which the benefits were widely shared. The economy operated at close to full employment. As workers became more productive, wages rose at about the same pace. And America grew together, with the incomes of working people rising a bit faster than incomes at the top. This decades long stretch of low inequality—from roughly the mid-1930s to the mid-1970s—has been called “the Great Compression.”
Central to the “Great Compression” was the ability of workers to organize and bargain collectively. By the end of World War II, unions represented over one-third of the workforce. They were able to negotiate industry-wide agreements that set standards for wages, benefits, and working conditions. Nonunion companies had to compete to attract workers and to avoid union organizing.
Since the late 1970s, in response to a corporate political mobilization, economic policy in the United States has intentionally disempowered workers. The steady erosion of unions—which now represent only 7 percent of the private sector workforce and 36 percent of public workforce, with an overall rate of 10 percent—is the result of public policy that has allowed employers to engage in ever more aggressive practices to stymie union campaigns.
The results have been catastrophic.
Not only has there been a widening gap between the hourly compensation of a typical worker and productivity, but according to the Economic Policy Institute, in a study that appeared the year before the Covid pandemic,
Since 1979 the bottom 90 percent of the American workforce saw their pay shrink radically as a share of total income . . . had the 1979 share held constant, the bottom 90 percent of the American workforce would have had roughly $1.35 trillion in additional labor income in 2015, or about $10,800 per household.[1]
In what follows, I review the political economic history of how we got here, examine some failed efforts in the past that contain important lessons for the present, and assess the extent to which Biden represented a break with this past.
Disempowering Workers
In the late 1970s, corporate managers launched a renewed offensive against organized labor and government regulation. It was Jimmy Carter who asserted in the 1978 State of the Union that “Government cannot solve our problems, it can’t set our goals, it cannot define our vision. Government cannot eliminate poverty or provide a bountiful economy or reduce inflation or save our cities or cure illiteracy or provide energy.”
Carter also appointed Paul Volcker to be the Chairman of the Federal Reserve who immediately attacked inflation by driving interest rates up to levels previously unknown in U.S. history causing a brutal recession that resulted in millions of lost jobs.
Volcker’s hatred for a powerful labor movement was well known. William Greider, in his history of the Federal Reserve, reports:
[Volcker] carried in his pocket a little card on which he kept track of the latest wage settlements by major labor unions. From time to time, he called various people around the country and took soundings on the status of current contract negotiations. What is the UAW asking for? What does organized labor think? Volcker wanted wages to fall, the faster the better. In crude terms, the Fed was determined to break labor.[2]
By the early 1980s, unemployment was over 10 percent and millions more lived with what Orwell once called “the haunting terror of unemployment.” And when Reagan fired striking air traffic controllers in 1981—the leader of the strike hauled away in handcuffs—the attack on labor turned into a full-scale offensive.
Corporate lobbies drove trade and tax policies that rigged the rules of the global economy to protect investor rights but not worker rights or the environment. Companies used the threat of moving abroad to thwart union organizing drives and limit wage increases. Anti-union corporate consultants made fortunes devising strategies to trample labor laws. Reforms to update labor laws were blocked in Congress.
Bill Clinton won the presidency in 1992 by promising to “put people first.” After just a few months in Washington, Clinton abandoned that campaign promise. Instead, he gave in to pressure from his Treasury Secretary Bob Rubin, a Wall Street millionaire, and from Alan Greenspan at the Federal Reserve, to put deficit reduction ahead of the investments he had promised in his election campaign.
Unemployment declined in the late 1990s and there was a period when wages rose and the benefits of rising productivity were more widely shared. This gave some life to the austerity-generates-growth theory. But what that theory missed was that the source of economic growth that led to falling unemployment was not sustainable. A stock market bubble fueled demand by stockholders, and a dollar bubble helped keep prices down. As economists Dean Baker and Jared Bernstein put it: the late 1990s economy resembled a “Potemkin Village. . . . A significant source of demand was phony, the result of excessive speculation and false profits.”[3]
The bubbles of the late 1980s and 1990s were replicated in the 2000s in the housing and commercial real estate markets. Low interest rates facilitated rising home sales. And as sales rose, the price of homes rose. Homeowners used their newfound home equity to purchase cars and second homes. Construction boomed even while manufacturing floundered. When home prices threatened to discourage new purchases, banks and brokers, encouraged by the Fed, offered new subprime mortgage deals. When the banks became worried about risk from these mortgages, they invented elaborate financial instruments to cushion and spread the risk. And when housing prices finally stalled, the whole Ponzi scheme collapsed, and the 2008 recession, the most severe since the 1930s, began.
In response to the crisis, Obama proposed a stimulus that prevented an economic crash but that was inadequate to restore economic growth. Then in 2010 when unemployment was still near double digits, he made a disastrous turn toward austerity. As a result, the recovery from the recession was extremely slow. It took seventy-six months to gain back the jobs lost in the recession. This excruciatingly slow growth recovery surely contributed to the dissatisfaction that led to Trump’s victory in 2016.
Biden’s Break with the Past
By the time Biden won the presidency, the enthusiasm generated by the Sanders, and to a lesser extent Warren campaigns, combined with the impact of Occupy Wall Street, Black Lives Matter, the Green New Deal, and the growing support for trade unions, had moved the party left. Trump’s victory in 2016 led mainstream Democrats like Jake Sullivan (once a Hillary Clinton aide and now Biden’s National Security Advisor) to scrutinize their responsibility for Trump’s victory. Sullivan realized that centrist Democrats had lost touch with Middle America. “We need something audacious,” he said, “There needs to be a call to arms that can motivate people.”[4]
In the midst of the pandemic, Biden pledged to restore the economy, combat climate change, and address inequality—while not repeating the Obama administration’s mistake of responding, too, timidly to the economic crisis.[5]
Biden’s ambitious recovery package, originally labeled Build Back Better, was much larger and more ambitious—just short of $4 trillion during his first term according to a Moody’s Analytics estimate—than anything that had been proposed by Democrats since the 1960s.6 The American Jobs Plan called for $2 trillion in new spending on roads, bridges, mass transit, green and high-tech manufacturing, high-speed broadband, as well as upgrading care work. These proposals embraced industrial policy including additional subsidies for clean energy producers who met domestic content requirements and incentives for high labor standards.
In addition, he proposed the $1.8 trillion (over ten years) American Families Plan, which would have improved access to education and health care, by providing two years of universal pre-K, a new program of child care subsidies along with support for better pay for child care workers, as well as an expanded federal family and medical leave program. The plan would have also extended through 2025 the Child Tax Credit, which was part of pandemic relief.
Not surprisingly, Biden faced opposition, not only from Republicans and from Arizona’s Kyrsten Sinema and West Virginia’s Joe Manchin, but also from prominent Democratic economists like Larry Summers, a leading economic policymaker in the Obama and Clinton administrations. Summers called Biden’s policy “the most reckless economic policy in forty years.”
What emerged from Congress was whittled down but still significant:
Among the measures the Biden administration pushed through Congress are:
• The $1 trillion Infrastructure Investment and Jobs Act, providing funding for jobs building roads, bridges, passenger and freight rail, public transit, airports, and other projects. This is expected to support 772,000 jobs per year for a ten-year period.[7]
• The Inflation Reduction Act (IRA) which provides $370 billion in spending and tax credits in low-emission forms of energy, extends federal health-insurance subsidies, and enables the government to negotiate Medicare prescription drug prices.
• The $1.9 trillion American Rescue Plan, which in a break from how government has responded to past recessions, provided massive fiscal relief to counteract the negative economic impacts of the Covid shutdown. According to the Center on Budget and Policy Priorities, these measures “brought the U.S. poverty rate in 2020 to its lowest level on record in data back to 1967, and then to a new record low of 7.8 percent in 2021 . . ..” Government aid helped prevent a sharp rise in poverty for all major racial and ethnic groups and narrowed differences in poverty rates between groups, yet wide inequities remain.[8]
• The $280 billion CHIPS and Science Act to prop up the American chip manufacturing industry is the reason why the world’s leading chip makers—Samsung, TSMC, and Intel—are building major new plants in the U.S. Chip companies and supply chain partners have announced investments totaling $327 billion. There has been a stunning fifteen-fold increase in construction of manufacturing facilities for computing and electronics devices. By 2030 the United States will likely produce around 20 percent of the world’s most advanced chips, up from zero today.
Full Employment and Empowering Workers
The short-term results have been impressive. The unemployment rate has been below 4.0 percent for the last thirty months, the longest period of near full employment in over half a century. The strong labor market has also meant rising wages. As I write in June 2024, wages have surpassed inflation for thirteen straight months. And significantly, the most rapid pay increases have been for those with the lowest wages.[9] Remarkably, around one-third of the post-1980 rise in inequality was erased.[10] And the Black/white wage differential has fallen.[11]
It is noteworthy that the 2024 Economic Report of the President begins with a long chapter on the importance of full employment. Not since the Kennedy administration, over six decades ago, has full employment played such a central role in the economic policy of an American president.
The Report defines full employment as “an economy in which workers able and willing to work can obtain the jobs and hours they want” and rejects the destructive notion of the “natural rate of unemployment” as “impractical for policy purposes” . . . [and there is] “little evidence to suggest that persistently tight labor markets are necessarily costly in inflationary terms.” The Report goes on to detail how full employment increases the bargaining power of workers leading to higher wages while the poor, racial minorities, and women receive the largest benefits. As a result, racial inequality falls during periods of full employment.[12]
In addition to full employment, restoring workers’ bargaining power requires reforming labor law so that workers who want to form a union can do so, and strengthening enforcement of labor standards and workplace civil rights laws.
Biden has been more outspoken in support of unions—walking United Auto Workers (UAW) picket lines and supporting union organizing campaigns at Starbucks, Volkswagen, and Mercedes—than any president in U.S. history. Biden has endorsed the Protecting the Right to Organize (PRO) Act (the labor movement’s proposal for labor law reform) which would address many problems of anti-worker labor laws. But the votes are not there in Congress to pass it.
The Biden administration has however enacted aggressive regulatory and administrative reforms that have increased the power of workers vis-à-vis their employers. The National Labor Relations Board has expanded the number of workers eligible to join a union and limited the ability of employers to illegally thwart union drives (the most important reason why union density has declined).[13] And the Federal Trade Commission (FTC) has banned most noncompete clauses—employment provisions that ban workers at one company from working for, or starting, a competing business within a certain period of time after leaving a job—saying that they represent an unfair method of competition. The FTC ban is a meaningful assist for nonunion workers whose only source of leverage with their employers is their ability to quit and take a job somewhere else.[14]
Industrial Policy in a Hollowed-Out State
The four large spending bills passed in the first two years of the Biden administration represent the largest expansion of the federal government’s role in the economy since the New Deal.
For the first time in years, manufacturing is growing. By April 2024, $866 billion in new private sector investment commitments were made in American manufacturing much of it supporting the transition to a cleaner future.[15] This investment has helped to create 1.5 million manufacturing jobs since April 2020 and manufacturing construction hit $228 billion in 2024, a record high.[16]
These legislative initiatives will pour tens of billions of dollars into the nation’s innovation efforts. And while it will take years for these funds to be spent and to assess their effectiveness in reshaping the nation’s economy, this is a long overdue shift away from the neoliberal skepticism of government’s ability to address problems such as decaying infrastructure, climate change, and inequality.
Largely out of necessity, the new industrial policy relies on incentives for the private sector rather than a more direct government role. Four decades of anti-government narratives have left the instrument to carry out these policies—democratic government—in the words of economist Jeff Faux: “damaged, demoralized and distrusted.”[17]
The Biden administration has taken some steps toward linking government aid to programs that benefit workers or society. For example, chip manufacturers are being encouraged to provide their workers quality childcare and refrain from stock buybacks.18 Green energy projects receive more generous subsidies if they pay at least prevailing wages and support supply chains rooted in North America. And Biden has committed to delivering 40 percent of the overall benefits of climate, clean energy, and related federal investments to diverse low-income communities as well as rural areas and tribal reservations.
But if the new industrial policies are going to help workers organize, Biden must do more. Original versions of the IRA and the infrastructure law required companies receiving benefits to remain neutral in the face of potential union organizing drives. Those provisions were stripped from the final legislation, and the CHIPS Act lacks explicit provisions that the subsidies will result in union jobs. And despite statements from the administration that these programs will result in good paying union jobs, reporting in the American Prospect has documented that many companies receiving benefits under the new industrial policies are not creating union jobs.[19]
The federal government has helped labor make inroads in the South. Two recent union victories and first contracts at bus plants, International Union of Electrical Workers-Communications Workers of America at New Flyer in Anniston, Alabama and the Steelworkers at Blue Bird in Fort Valley Georgia, were both assisted by the federal government incentives provided to the companies for not resisting the union drives.[20]
The semiconductor industry is notoriously hostile to labor unions and many of the new chip factories are in right-to-work states like Arizona and Texas. There is some progress, however. Micron Technology, which is receiving funding from the CHIPS Act, has recently started negotiations with the Communications Workers of America for a labor peace agreement that would cover the chipmakers’ $50 billion, two-factory investment in New York. Micron’s New York investment which could reach hundred billion dollars could create as many as nine thousand manufacturing jobs over the next two decades.[21]
Whether or not the Biden industrial strategy will be transformational and empower workers, or just be another massive corporate subsidy, will depend on how strongly the administration conditions aid on respect for worker rights.
Beyond Bidenomics: The Socialization of Investment
At the dawn of the neoliberal era, in response to Carter’s conservative economics, socialist Michael Harrington organized Democratic Agenda, a coalition of unions, feminists, liberals, and religious activists centered around the demand for full employment. In the tradition of A. Philip Randolph and Bayard Rustin’s 1960s Freedom Budget, in 1977 Harrington wrote a manifesto Full Employment: The Issue and the Movement.[22]
Like other advocates for full employment, Harrington made the case that “full employment is the key to social justice in the United States today. No other progressive goal can be fully achieved without it.” “High unemployment,” Harrington said, “put labor on the defensive.” Minorities and women, the last hired and first fired, are special victims of unemployment. And full employment would make it more likely workers could align with the just demands of environmentalists. Harrington argued that unemployment was not inevitable, and he presented data showing there was not a tradeoff between unemployment and inflation.
But then Harrington took the argument a step further. Full employment, while meeting social need, he asserted was “a radical reform . . . which requires qualitative change in the society.” The problem was a system in which private interests monopolized the most vital decisions of public life. At the center of Harrington’s critique was a challenge to the capitalist monopoly over investment: “corporate domination of investment determines what gets produced.” And private investment decisions, based on a profit calculus, “cannot be counted on to arrest the rot in cities, to erect decent homes, to improve public transportation.”
For Harrington, full employment that met society’s needs required the socialization of investment.
This insight takes on special urgency today. The reliance on public subsidies to the private sector to address the climate crisis is, too, timid an approach. Brett Christophers, in his important book The Price Is Wrong: Why Capitalism Won’t Save the Planet, shows how cheaper renewable energy will not trigger an adequate energy transition. He explains:
The main economic reason why the decarbonization of electricity is progressing so much slower than we need it to, . . . is that most governments worldwide have effectively outsourced responsibility for developing, owning and operating solar and wind farms to profit oriented private sector actors, and yet the profits that such sectors expect to be able to earn from investment in these activities generally underwhelm. It is simply not a sufficiently attractive economic proposition.[23]
Biden has taken the first step, but a climate and energy policy to address the scale and urgency of decarbonization we need will require governments to take on the burden of substantially
developing, distributing, and owning renewable power.
Undoing neoliberalism—which Adolph Reed once characterized as creating a “capitalism without a working-class opposition”—and its damage will take time. And while the post-Covid economic recovery is strong, it is just as important to recognize that the U.S. economy is still characterized by millions of workers living in poverty, lacking basic rights to form a union, struggling to meet basic needs, and one lost paycheck away from despair.
Bidenomics is a break with four decades of policy that disempowered workers. This record was obscured by Biden’s ineffectiveness as a candidate and his inability to explain his accomplishments. Kamala Harris’ success will depend not only on the continuation and expansion of Biden’s economic agenda but her ability to tell a compelling story to those who have been left behind that the future need not be like the past.
At the same time, there are new signs of energized working-class opposition, as is evident in the UAW’s resurgence, Starbucks organizing, young people’s support for unions, and union victories in the South. The anxiety of the moment is that although each of these developments—Bidenomics and the current working-class resurgence—is significant, both are in their infancy, both are threatened, and their failure would be devastating.
Notes
1. Josh Bivens and Heidi Shierholz, What Labor Market Changes Have Generated Inequality and Wage Suppression (Washington, DC: Economic Policy Institute, 2018).
2. William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York: Simon & Schuster, 1989), 429.
3. Jared Bernstein and Dean Baker, The Benefits of Full Employment (Washington, DC: Economic Policy Institute, 2003), 83.
4. Greg Jaffe, “Lessons in Disaster: A Top Clinton Advisor Searches for Meaning in a Shocking Loss.” The Washington Post, July 14, 2017, available at https://www.washingtonpost.com/
world/national-security/lessons-in-disaster-atop-clinton-adviser-searches-for-meaning-ina-shocking-loss/2017/06/30/6ca81022-5453-11e7-b38e-35fd8e0c288f_story.html. See also Franklin Foer, The Last Politician (New York: Penguin Press 2023), 122-26.
5. Annie Linskey, Cleve R. Wootson, Jeff Stein, and Brady Dennis. “After One Year in Office, What Has Biden Done about the Four Crisis He Pledged to Address?” The Washington Post, January 20, 2022, available at https://www.washingtonpost.com/politics/interactive/2022/biden-covid-ra….
6. James Politi, “Bidenomics Sharp Shift to Left Touts Workers over Wealth,” Financial Times, September 28, 2020, available at https://www.ft.com/content/5bd190f5-9c0f-49bf-8a11-0dc9c18c991e.
7. Adam Hersh, ‘Build Back Better’ Agenda Will Ensure Strong Stable Recovery in Coming Years (Washington, DC: Economic Policy Institute, September 16, 2021).
8. Danilo Trisi, Government’s Pandemic Response Turned a Would-Be Poverty Surge into a Record Poverty Decline (Washington, DC: Center on Budget and Policy Priorities, August 2023). “In 2019, government policies cut child poverty by 40 percent. Bolstered by pandemic relief legislation, economic security programs cut child poverty by 60 percent in 2020 and 76 percent in 2021, both all-time highs. The Rescue Plan by itself lifted more people, including more children, above the poverty line with government assistance in a single year than any other piece of legislation enacted in more than 50 years. . . . Government policies helped keep 30 percent of all Black children and as many as 24 percent of Latino children above the poverty line in 2021, as well as 10 percent of Asian and White children.”
9. Elise Gould and Kathrine DeCourcy, Faster Wage Growth over the Last Four Years among Historically Disadvantaged Groups (Washington, DC: Economic Policy Institute, March 21, 2024). “Between 2019 and 2023, low-wage workers experienced historically fast real wage growth. The 10th percentile real hourly wage grew 12.1% over the four-year period . . . Faster wage growth at lower wage levels is a significant break from the forty years leading up to 2019. Over the last four years, middle-wage women, Black and Hispanic workers, young workers, workers with lower levels of education attainment, and parents experienced faster wage growth. Nevertheless, low-wage workers continue to suffer from grossly inadequate wages and middle-wage workers face significant gaps across demographic groups.”
10. David Autor, Arindrajit Dube, and Annie McGrew, “The Unexpected Compression: Competition at Work in the Low-Wage Labor Market,” National Bureau of Economic Research, Working Paper 31010, May 2024. This refers to the inequality in wage and salary income earned by individuals at the 90th percentile (those earning more than 90 percent of other workers) compared to the earnings of workers at the 10th percentile (those earning higher than the bottom 10 percent).
11. Elise Gould, A Record Breaking Recovery for Black and Hispanic Workers (Washington, DC: Economic Policy Institute, April 4, 2024).
12. Economic Report of the President (Washington, DC: U.S. Government Printing Office, 2024). The chapter on Full Employment is dedicated to Bill Spriggs, the chief economist of the AFLCIO who passed away in 2023.
13. Lynn Rhinehart, Celine McNicholas, and Margaret Poydock, The Biden Board: How President Biden’s NLRB Appointees Are Restoring and Supporting Workers’ Rights (Washington, DC: Economic Policy Institute, May 1, 2024).
14. National Employment Law Project, On the FTC’s Non-Competes Contract Rule, April 23, 2024.
15. See https://www.whitehouse.gov/invest/.
16. See https://fred.stlouisfed.org/series/MANEMP and https://fred.stlouisfed.org/series/TLMFGCONS.
17. Jeff Faux, The Public Sector We Need, Dissent, March 12, 2021, available at https://www.dissentmagazine.org/online_articles/the-public-sector-we-ne….
18. Stock buybacks are harmful because as the Communication Workers of America explains: “Stock buybacks are when companies buy back their own stock from shareholders on the open market rather than investing in workers or equipment. When a share is bought back, the company reduces the number of shares left in the market which raises the price of remaining shares. Company executives have every incentive to buy back stocks, since most of their compensation derives from stock, and a higher stock price makes them personally richer . . . While buybacks are very beneficial to corporate executives, they end up harming workers. Before the stock buyback explosion, companies would often use excess profits to increase worker pay and benefits, to invest in new equipment, or to expand into new markets and create more jobs.” See https://cwa-union.org/stock-buybacks-hurt-workers.
19. Lee Harris, “Industrial Policy without Industrial Unions,” American Prospect, September 28, 2022, available at https://prospect.org/labor/industrial-policy-without-industrial-unions/.
20. Luke Goldstein, “Has Organized Labor Finally Cracked the South,” American Prospect, May 2024, available at https://prospect.org/labor/2024-05-29-has-organized-labor-finally-crack….
21. “Chip Factories Are Unions’ Next Target in Test for Biden,” Bloomberg, May 24, 2024, available at https://www.bloomberg.com/news/articles/2024-05-24/chip-factories-becom…-
next-target-in-test-of-biden-s-commitment-to-labor.
22. Michael Harrington, Full Employment: The Issue and the Movement (New York: Institute for Democratic Socialism, 1977).
23. Brett Christophers, The Price Is Wrong: Why Capitalism Won’t Save the Planet (London: Verso, 2024), xiii.
Author Biography
Mark Levinson retired in 2022 after working for thirty-seven years in the labor movement as an economist for the United Auto Workers and the American Federation of State, County and Municipal Employees, and most recently as chief economist for UNITE, UNITE-HERE, and the SEIU. He is the book review editor at Dissent Magazine.