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Editor’s Voicemail

After today’s poetry, the prose

After today’s poetry, the prose

In his Inaugural Address, Joe Biden will present himself as America’s first green president. Good. But his presidency will be defined by other concerns


transcript

Joe Biden will today stake his claim to being America’s first green president. His Inaugural Address will rally the United States to lead the world in tackling the climate crisis. Then, he’ll head to the Oval Office and he’ll return America to the Paris climate accords. He’ll rescind the Keystone XL pipeline permit. And he and his team will set about encouraging wind farms, restoring wildlife protections and accelerating the use of renewables. 

Hallelujah. This is not radicalism; it’s realism. It’s a handbrake turn in US government, back to the rational. In fact, Mr Biden has shown he has a knack for making the obvious sound bold – take, for example, his promise of 100 million jabs in his first 100 days, and the requirement that masks be worn on government property and for interstate travel. 

But beyond the indelible phrases of his Inaugural and the promises that he makes to the world today, the challenge before him in the next four years is going to be more practical. The measure of his administration, and the test for the Democrats, will be incomes and inequality.

I’m James Harding, I’m the editor and co-founder of Tortoise, and I want to suggest in this week’s Editor’s Voicemail that the green agenda won’t be enough to define progressive politics in America. Instead, the stubborn problems of opportunity and inequality will be the anvil of the Biden presidency.

Because the US jobs market was humming less than a year ago – and neither the Republicans nor, for certain, Donald Trump will let the Biden administration forget it. In February last year, before the pandemic struck, unemployment was at 3.5 per cent. Black employment and wages were both up. The percentage of Americans living in poverty was down to 10.5 per cent in 2019; that’s 1.3 percentage points lower than the previous year, according to the Census Bureau, and, in fact, the lowest it’s been since 1959. On jobs and on poverty, Biden’s America has to improve on benchmarks set by Trump.

And this will involve political choices, even philosophical ones.

To begin with, the Biden presidency will have to reset America’s tolerance for government debt, starting with the $1.9 trillion pandemic stimulus package. But pretty soon, the Democrats are likely to want to make permanent his proposed tax cuts and credits aimed at lower income families – and that means making the case for a debt-to-GDP ratio well over 100 per cent and, most likely, at historic highs. Democrats will have to get used to being badged the debt party. 

Then, there’s jobs. For now, the Treasury and the Fed seem aligned on getting Americans back to work. Unemployment was nearly 7 per cent in December. But the consensus on making the jobs the priority will, at some point, begin to fray. Jay Powell, the Fed Chairman, has signalled he’s in no hurry to raise interest rates. He’ll keep them low until unemployment gets down towards 4 per cent, which could take a few years. But, no doubt, when inflation returns – and it will, most likely, sooner than unemployment falls – the Fed will be under pressure to push up interest rates to secure prices and the dollar. That, though, puts a squeeze on indebted Americans, on mortgage holders and on businesses that borrow to grow.

Of course, Mr Biden has already chosen his first fight over the political economy. He is proposing to raise the federal minimum wage to $15 from $7.25. This is popular with the public – a similar proposal just passed in Florida – and it is loved by his Democrat base. But it’s already rallying Republicans and the Conservative commentariat who warn that it will deter businesses from hiring: they cite the minimum wage proposal as Exhibit A in the argument that the Democrats will hurt the people they hope to help. 

In time, there’s going to be tax. If the decade after the financial crisis is anything to go by, the coming years of low interest rates will, once again, boost the fortunes of the wealthy. Trump’s response was a cheerful shrug: he cut taxes and pumped the stock markets. Biden, on the other hand, is proposing to increase the top rate of tax from 37 per cent to nearly 40 per cent, as well as corporate income tax from 21 per cent to 28 per cent. Of course, whatever the president suggests will be very different from what Congress ultimately agrees. But, as with debt, jobs, inflation and wages, his proposals on tax foreshadow the fault lines in Biden’s America.

The Washington battles over economic opportunity and inequality will determine the success of Biden’s presidency more than the politics of the moment, as defined by Covid-19, by climate, by civil rights and the Constitution, might suggest.

These are, of course, old battles. And, to be fair, they are also battles for tomorrow. Today, America’s return to the fellowship of nations tackling the climate crisis will dominate the headlines, as the 46th president of the United States will invite Americans to dream again and ask the rest of the world once more to believe in a “city upon a hill”.