Bidenomics isn't new and doesn't work.
President Biden describes Bidenomics as “building the economy from the bottom up and the middle out”. Bidenomics obviously aims at creating greater income equality. In a speech yesterday, Biden went into specifics as to how his goals might be achieved.
There are four key elements of Bidenomics. First, Bidenomics entails heavy public investment in infrastructure and research and development. Second, Bidenomics supports a strong labor movement, public support for American labor unions. Third, Bidenomics involves economic nationalism, protecting American businesses and “American jobs” from foreign competition. Biden also mentioned using competition to control consumer costs. Promoting competition is inconsistent with economic nationalism. Biden admits that jobs move overseas to take advantage of low labor costs. In order to make good on his promise to support wage demands from domestic labor unions Biden will have to shield their domestic employers from foreign competition. Fourth, Bidenomics favors a weak dollar and inflation as economic stimulus.
Biden claims that his track record over the past two years is one of proven success, though he also admits that the results of his policies have not been fully realized. Bidenomics is actually nothing new, it has a track record. A similar set of policies known as Mercantilism failed to deliver progress prior to the Industrial Revolution. Bidenomics is just one of many modern versions of mercantilism. These economic systems function according to interest group politics. How does this work?
Special interest groups act as “distributional coalitions” (to use the economics term). Distributional coalitions lobby the government for special privileges, to gain income for their members. Broader interest groups (taxpayers and consumers) lose income to special interests. Why? Narrow distributional coalitions organize and act at lower costs. If broad groups could organize more easily they would be powerful. Economist Mancur Olson observed that stable societies accumulate distributional coalitions over time. Accumulation of distributional coalitions slows economic growth1.
The ability of narrow coalitions to transfer incomes renders Biden's goal of building the economy from the bottom up and the middle out impossible. Worse still, distributional coalitions invest real resources in transferring money incomes. Investment in wealth transference is sheer economic waste. Countries prosper by investing in creating more wealth, not by investing in transferring existing wealth. Using wealth to transfer wealth is antithetical to economic progress2. The Biden administration frequently points out that unemployment rates are low. This is true, but irrelevant. Low unemployment rates are the result of unusual recent economic circumstances, not the result of Biden’s policies.
Biden mischaracterized free enterprise as a “failed theory of trickle down economics”. Biden misunderstands free enterprise, both theoretically and historically. Free market capitalism works just fine in theory, even when you account for real imperfections of this system. The historical record of modern capitalism is one of unparalleled success.
See Olson's brilliant book, The Rise and Decline of Nations.
See Gordon Tullock’s 1967 article The Welfare effects of Tariffs, Monopolies, and Theft.