Impact of Biden's economic agenda may be felt long after his presidency

 

U.S. President Joe Biden may not have gotten much credit politically for the thousands of grants and public investments his administration showered across the country, with airport or road projects in places like South Carolina and Wyoming unlikely to dent former President Donald Trump's locked-in status in those deeply conservative states.

It may take years, moreover, to reveal whether what Biden attempted - jump-starting a post-carbon energy transition, reshoring tech production, spreading the wealth to less-prosperous cities, and rebuilding degraded infrastructure - will pay off as his supporters argue in higher productivity, more-secure supply chains, and as a down payment on addressing climate change.

Critics would say the Democratic president ran up the deficit, picked winners in place of private markets, overstepped on issues like student loan forgiveness and anti-trust enforcement, and stoked inflation.

Yet as Biden bowed out of his reelection bid on Sunday, neither supporters nor opponents doubted his ambition to be an economically transformative president by pressing a playbook of progressive economic ideas gestating since the 2007-2009 financial crisis.

Biden didn't wade into the more aggressive and controversial tax ideas some Democrats have pushed to redistribute wealth and income, though that informed ideas like boosting Internal Revenue Service collection efforts.

But he did bring back what used to be called "industrial policy," rebranded it as supply-side economics with a liberal tilt, and tried to tackle problems he felt were either strategic - the need to boost domestic semiconductor production - or moral - underwriting child care and student loans.

Biden's program was "big, dramatic," said Mark Muro, a senior fellow at the Brookings Institution's Metropolitan Policy Program and an advocate of the president's focus on seeding technology investment in areas that have fallen behind economically.

"Biden was able to break through a decade or more of gridlock, 'small ball,' and skepticism about government to go big with a major experiment with investment - in technology, green energy, and infrastructure," Muro said. "Running through it all has been a compelling design focus on places and inclusion" to spread the benefits of innovation beyond traditional hubs like San Francisco and Boston.

'NOT LEGACY-DEFINING'

It was also expensive as well expansive, arguably exacerbating an outbreak of inflation in 2022, was more skeptical of globalization than the vision of Biden's Democratic predecessors, Barack Obama and Bill Clinton, and embraced a broad view of the federal government's role.

Over a consequential first two years, Biden pushed four major pieces of economic legislation through Congress.

One pillar of that program, the $1 trillion infrastructure bill in 2021, was "very reasonable, the type of things you could imagine previous presidents doing," said Michael Strain, a resident scholar and director of economic policy studies at the American Enterprise Institute.

But "that was not legacy-defining. What the president wanted to do was be the next FDR (Franklin Delano Roosevelt), the next Lyndon Johnson," Strain said, referring to the Democratic presidents who introduced the New Deal and Great Society programs that greatly expanded the government's economic footprint in the 1930s and 1960s.

At its worst, Strain said he regarded Biden's spending as "reckless," with government debt now equal to 6% of national economic output, the sort of hole usually seen during a recession. Strain also frowned on "silly gimmicks like student debt forgiveness" that have expanded the border of federal help for increasingly middle-class families.

It is hardly the dark travesty painted by Trump, who is seeking to win back the White House after losing the 2020 election to Biden. The unemployment rate under Biden had its longest run below 4% since the 1960s, lasting more than two years. The wage gains enjoyed by U.S. workers have been strongest for lower-paid occupations, and for many have kept pace with inflation.

'MAKING A DIFFERENCE'

In fact, Biden and Trump arguably share one important economic trait: The use of deficit spending to keep growth above trend.

Trump relied on a standing Republic playbook of tax cuts that were not offset with spending reductions, while Biden's was something of a new approach for Democrats.

Biden, as Obama's vice president, had a ringside seat for the Democratic president's efforts to counter the 2007-2009 financial crisis with programs now considered too tepid.

The recovery from that deep recession was grindingly slow and scarring. The lesson seemed clear: When a crisis hits, the response should be fast and large.

That was the logic behind Biden's first major economic bill, the $1.9 trillion American Rescue Plan. Enacted less than two months after Biden's Jan. 20, 2021 inauguration, it extended many of the stimulus, unemployment, and other payments rolled out by Trump at the outset of the COVID-19 pandemic.

While the recovery effort from the health crisis extended past the end of Trump's term and was largely carried out with bipartisan support, the net result was an unemployment rate that returned to the mid-4% range in about 18 months after the pandemic-triggered recession. By contrast, it took more than seven years to reach that level of joblessness after the financial crisis - a turgid recovery that was particularly tough for blue-collar America and which helped fuel Trump's rise.

Subsequent bills included the bipartisan infrastructure plan, money to boost U.S. semiconductor chip production, and the Inflation Reduction Act, perhaps Biden's most controversial initiative for including incentives for green energy production and electric vehicles in a bill ostensibly to address rising prices.

Some of those programs might well be reversed if Trump wins the Nov. 5 election.

But much of what Biden set in motion is likely to endure, said Mark Zandi, the chief economist at Moody's Analytics.

The country got through the pandemic with less economic damage than feared, and if the cost of that was inflation, the alternative could have been far more painful in terms of chronic unemployment and lost production, Zandi said. Likewise, the investment in infrastructure and chip production - something seen in the jump in factory investment and the number of road crews spread across U.S. cities - is largely out the door.

It isn't on the scale of what Roosevelt did to address the Great Depression, Zandi said, but it mattered.

"I view it as expansive, large, making a difference, but in the context of traditional macroeconomic policy, not as transformative or changing the playing field," he said. "We are on the same playing field. He just played with bigger players and more muscle."

Delta Air Lines struggled for a fourth straight day to recover from a worldwide technology outage caused by a faulty software update, stranding tens of thousands of passengers and drawing unwanted attention from the federal government.

The airline’s chief executive said it would take “another couple days” before “the worst is clearly behind us.” Delta’s chief information officer said Monday that the airline was still trying to fix a vital crew-scheduling program.

Other carriers were returning to nearly normal levels of service disruptions, intensifying the glare on Delta’s relatively weaker response to the outage that hit airlines, hospitals, and businesses around the world.

Transportation Secretary Pete Buttigieg spoke to Delta CEO Ed Bastian on Sunday about the airline’s high number of cancellations since Friday. Buttigieg said his agency had received “hundreds of complaints” about Delta, and he expects the airline to provide hotels and meals for travelers who are delayed and to issue quick refunds to customers who don’t want to be rebooked on a later flight.

“No one should be stranded at an airport overnight or stuck on hold for hours waiting to talk to a customer service agent,” Buttigieg said. He vowed to help Delta passengers by enforcing air travel consumer-protection rules.

Bastian said in a video for employees that he told Buttigieg, “You do not need to remind me. I know, because we do our very best, particularly in tough times, taking care of our customers.”

Delta has canceled more than 5,500 flights since the outage started early Friday morning, including at least 700 flights canceled on Monday, according to aviation data provider Cirium. Delta and its regional affiliates accounted for about two-thirds of all cancellations worldwide Monday, including nearly all the ones in the United States.

United Airlines was the next-worst performer since the onset of the outage, canceling nearly 1,500 flights. United canceled only 17 Monday flights by late morning, however.

Other airlines that were caught up in the first round of groundings also returned mostly to normal operations by Monday. That included American Airlines, Spirit Airlines, Frontier Airlines, and Allegiant Air.

Bastian, the Delta CEO, said in a message to customers Sunday that the airline was continuing to restore operations that were disrupted. One of the tools Delta uses to track crews was affected and could not process the high number of changes triggered by the outage.

“The technology issue occurred on the busiest travel weekend of the summer, with our booked loads exceeding 90%, limiting our re-accommodation capabilities,” Bastian wrote. Loads are the percentage of sold seats on each flight.

Airlines have large, layered technology systems, and crew-tracking programs are often among the oldest systems. When the outage began Friday, it also affected systems used to check in passengers and make pre-flight calculations about aircraft weight and balance, airlines reported. United and America reported intermittent problems communicating with crews in the air, contributing to their decisions to briefly ground all flights.

Some airlines, including Southwest and Alaska, do not use CrowdStrike, the provider of cybersecurity software whose faulty upgrade to Microsoft Windows triggered the outages. Those carriers saw relatively few cancellations.

Delta, however, said that “upward of half” its IT systems are Windows-based. The airline said the outage forced IT employees to manually repair and reboot each affected system and synchronize applications so they start working together.

“It is going to take another couple of days before we are in a position to say that ... the worst is clearly behind us,” Bastian told employees Monday. “Today will be a better day than yesterday, and hopefully Tuesday and Wednesday will be that much better again.”

In the same video, Delta Chief Information Officer Rahul Samant said two applications were particularly difficult to restart on Friday: One that manages traffic at Hartsfield–Jackson Atlanta International Airport, Delta’s biggest hub, and another that assigns pilots and flight attendants to flights.

Technicians had gotten the crew-scheduling program running, “but we have a catch-up to do,” and new issues keep arising, Samant said.

Atlanta-based Delta said it is offering waivers to make it easier for customers to reschedule trips.

That was of little help to Jason Helmes, a fitness coach who was trying to get home to Detroit from Denver. His flight on Sunday was delayed three times before it was canceled; by the time the plane finally pushed back from the gate, the pilots were at the end of their legally allowed shift.

“Everyone was just stranded. No information on hotels. No information on what to do next,” Helmes said. “They said, ‘Go down to the luggage carousel, your luggage should be there.’ There were thousands of bags down there. I found my luggage — I got lucky.”

Helmes said Delta offered to rebook him on Wednesday, but he worried that flight would also be canceled. He booked a Tuesday flight home on Frontier Airlines — one of the carriers that has largely recovered. He is saving his receipts, including a hotel room, in hopes that Delta will reimburse him.

“For the last 10 years, I’ve been exclusively on Delta,” he said. “This has me double-thinking about that.”

Delta’s meltdown is reminiscent of the December 2022 debacle that caused Southwest Airlines to cancel nearly 17,000 flights over 15 days. After a federal investigation of Southwest’s compliance with consumer-protection rules, the airline agreed to pay a $35 million fine as part of a $140 million settlement with the Transportation Department.

Southwest’s breakdown started during a winter storm, but the airline’s recovery took unusually long because of problems with a crew-scheduling system -- a striking similarity to Delta’s current mess.

The airline industry might be the most visible victim of the worldwide tech problems caused by the faulty software update from Texas-based cybersecurity firm CrowdStrike. Microsoft said the glitch affected 8.5 million machines. CrowdStrike says it has deployed a fix, but experts say it could take days or even weeks to repair every affected computer.

 For nearly a month, momentum in the U.S. presidential race has favored Donald Trump and his Republican Party. After a disastrous debate performance by President Joe Biden in June and sagging poll numbers, his big-money backers, opened a new tab and faced a situation akin to holding a sinking stock: stuck in a flailing investment with an unclear payoff for any new dollars. Biden’s decision on Sunday to drop out and endorse Vice President Kamala Harris has changed the picture, drawing $50 million in donations - the best Democratic fundraising day of the campaign. Spending now offers a boost for donors’ effectiveness and the lure of influence in a consolidating effort.

Beyond the gusher of small-dollar donations, Harris racked up critical endorsements from fellow elected officials, including those once seen as rivals to her candidacy, like Pennsylvania Governor Josh Shapiro, Michigan Governor Gretchen Whitmer, and Illinois Governor J.B. Pritzker. Joining the rush to get behind the vice president now could help her sew up the nomination, and offer backers the promise of more influence as a support network resetting a campaign.

Essentially, think of this as dollar-cost averaging. As an investor might buy more stock after a rout to lower their cost basis and leave more headroom for a recovery to benefit their portfolio, political spenders can back the Democratic Party at what might be its nadir. After all, the current president was beginning to look like dead money, trailing in the polls and down to a low of 10% odds of victory on betting market PredictIt. Harris also doesn’t have the same established political apparatus that Biden built over decades, allowing new sources of influence to rise within her inner circle and the rest of the party. Success is far from guaranteed, but there’s more room for upside.

That’s especially true if Harris’s political momentum proves to be self-reinforcing. Eye-popping fundraising totals could draw more donors from the sidelines, while endorsements and positive media attention have in the past produced polling boosts, opening new tabs. Already, Trump’s odds in betting markets are down from their peak. His campaign now must reorient after spending time and money preparing to face Biden.

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If Harris manages to win, she’ll also be eligible to run for a second term, and whoever she picks as running mate will be a major party figure going forward. The stasis of the 2024 campaign has irrevocably broken; donors stand to benefit from the shake-up.

U.S. Vice President Kamala Harris’s campaign raised more than $50 million in her first day as a candidate for president, as major party leaders and donors offered support for her candidacy.

President Joe Biden said on July 21 that he would end his reelection campaign and endorsed Harris as his chosen successor, following weeks of uncertainty within the Democratic Party.