Biden’s Trickle Down 2.0

The President touted an economic record at the State of the Union address that largely consists of subsidies and contracts paid directly to many of the same large companies he frequently rails against.  These companies will make huge profits and pay executives big money, making it a new incarnation of the much maligned “trickle down” economics.

Earlier this week, President Joe Biden touted his economic achievements at the annual State of the Union address.  As he put it, “I ran for President to fundamentally change things, to make sure the economy works for everyone so we can all feel pride in what we do.  To build an economy from the bottom up and the middle out, not from the top down. Because when the middle class does well, the poor have a ladder up and the wealthy still do very well. We all do well.”  The fundamental changes he spoke about include the CHIPs and Science Act, which the President claimed was about “making sure the supply chain for America begins in America” and that “we will create hundreds of thousands of new jobs across the country.”  He was also proud of the Bipartisan Infrastructure Law, “the largest investment in infrastructure since President Eisenhower’s Interstate Highway System.  Already, we’ve funded over 20,000 projects, including at major airports from Boston to Atlanta to Portland.”  He continued, “These projects will put hundreds of thousands of people to work rebuilding our highways, bridges, railroads, tunnels, ports and airports, clean water, and high-speed internet across America.  Urban. Suburban. Rural. Tribal.  And we’re just getting started.”  The President went on to praise the Inflation Reduction Act, where the government is “rebuilding for the long term.  New electric grids able to weather the next major storm.  Roads and water systems to withstand the next big flood.  Clean energy to cut pollution and create jobs in communities too often left behind.  We’re building 500,000 electric vehicle charging stations installed across the country by tens of thousands of IBEW workers.”  Also worthy of mention his view, was the expansion of subsidies under the Affordable Care Act, claiming a “record 16 million people are enrolled…Thanks to the law I signed last year, millions are saving $800 a year on their premiums.”

My purpose is not to debate the merits of these claims, many of which even the mainstream media said were suspect across numerous fact checks.  Rather, I want to ask:  What do all these programs have in common?  Subsidies.  What are subsidies?  They are money paid to corporations, from car manufacturers to construction companies with health insurance providers in between.  Given the size of these projects, we can assume these companies are large, owned by rich people and managed by highly paid executives.  Contrary to the President’s leap from “building 500,000 electrical vehicle stations” to “tens of thousands” of union workers,” the money to build these stations will be paid directly to large corporations.  The workers will be hired after the fact and paid by those corporations after everyone else gets their cut and the company makes its profit.  To be sure, some of these subsidies like healthcare and parts of the Inflation Reduction Act pass through the hands of the consumer first, but it is not money they can spend as they see fit like a child tax credit.  The money is ultimately paid to the corporation, and once again these are large corporations of the sort that the President railed about later in his speech, claiming big corporations “aren’t just taking advantage of the tax code. They’re taking advantage of you, the American consumer.  Here’s my message to all of you out there: I have your back.”  This position is difficult to reconcile when he’s simultaneously shipping billions upon billions of dollars, well over a trillion, directly to many of these same corporations.

Once upon a time, we referred to this as the much-maligned “trickle down” economics.  The theory that putting more money in the hands of corporations and the wealthy would ultimately benefit the average worker.  As Wikipedia describes it simply enough, “Trickle-down economics is a term used in critical references to economic policies to say they disproportionately favor the upper end of the economic spectrum, i.e. wealthy investors and large corporations.”  The only difference between what the President touts as a huge success and the heavily criticized theory is that the government is picking the winners and losers, rather than the market.  The three tax cut packages passed by Ronald Reagan, George W. Bush, and Donald Trump, which are traditionally associated with trickle down economics, put money in the hands of corporations and the wealthy (along with the average person) by cutting rates across the board, allowing the companies and the people to decide how this money should be spent based on their own plans and needs.  The President, however, sees the government as a middle man.  He’s keen to fork over even more enormous amounts of cash, so long as he decides who gets it.  Proponents of the free market like myself believe this is inefficient and ripe with corruption, skewing the market towards unproductive, wasteful initiatives in many cases, but whatever your opinion on the merits, it does not change the fact that big companies and their fat cats are pocketing big dollars from a President who simultaneously claims they are screwing the American consumer.  No matter what you choose to call it, this is trickle down economics by another name.

This does not mean that every one of these projects or subsidies is unnecessary.  The government has a long history of funding construction for example, but this new subsidy for everything approach is distinct from the traditional progressive vision of economics.  Perhaps no one expressed it better than William Jennings Bryant, generally considered the first true progressive to run for the Presidency, in his legendary “Cross of Gold Speech” in 1896.  At the time, the government at the federal, state, and local level leveraged a combination of protective tariffs, grants of land, exclusive contracts, and other subsidies to protect favored businesses, frequently with direct pay offs to politicians, literally in public and in cash.  The economic thinking shared by a majority of both Republicans and Democrats favored a smoothly running business community above all else, or at least they said so after receiving a bribe.  As former President Rutherford B. Hayes wrote in 1886, “This is a government of the people, by the people and for the people no longer.  It is a government by the corporations, of the corporations and for the corporations.”  Railroads were among the dominant industries in the era known as the “Gilded Age,” and they were more than happy to eat the government trough.  The federal government alone helped finance these projects by granting 150 million acres of land among other things, which the corporations promptly sold to raise revenue.  Richard White, professor emeritus of history at Stanford University and author of The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896, noted that “Railroads need monopoly franchises and subsidies, and to get them, they are more than willing to bribe public officials.”  In one particularly egregious example, executives of the Union Pacific Railroad set up a fake company and overcharged the federal government for construction services by some $44 million over the course of just three years, the equivalent of almost three quarters of a billion dollars today.

Jennings Bryant, however, believed there was a better, more progressive way.  “There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.”  The humorist and social commentator Will Rogers neatly summed up this distinction in 1932, while criticizing President Herbert Hoover during the Great Depression.  “The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickles down. Put it uphill and let it go and it will reach the driest little spot. But he didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands. They saved the big banks, but the little ones went up the flue.”  The progressive legislation that followed the election of Franklin D. Roosevelt all trickled up.  Social Security put money directly in the hands of people to spend as they wanted, not in the hands of corporations to ultimately gift their products to the people.  The Works Project Administration directly hired millions, not relying on companies taking profits to do so.  Lyndon B. Johnson expanded the New Deal with the Great Society, and once again chose to put money in the hands of the people with a variety of welfare programs that provided direct payment or services rendered by the government.  This legacy, though to be sure I strongly disagree with much of it, lives on today in Senator Bernie Sanders, the democratic socialist from Vermont.  Senator Sanders’ “Medicare-for-All” plan, for example, does not funnel money through large insurance companies and ultimately subsidize executive salaries.  He proposes that we replace the entire private, for profit system with a government program.  This is a distinction with a huge difference:  The money the government and the consumer spend on health insurance no longer flows through private hands, a radical shift for better or worse than paying people to buy a company’s product.  Likewise, many of the Senator’s other proposals like the expanded child tax credit put money directly in the hands of people in the tradition of Williams Jennings Bryant.  To be sure, President Biden supports some of these policies, but the ones he touted and those he’s successfully been able to pass do not follow this mold.

Instead, they put more money in the hands of corporations, corporations that have over 12,000 lobbyists actively pushing the government to give them even more money and pass additional legislation and regulations that favor their business.  This is a repeat of the Gilded Age progressives in both parties fought so hard against.  If the President and the Democrats had their way, there would be even more subsidies.  Carbon taxes and cap and trade schemes to combat global warming are usually accompanied by subsidies to offset the increase in energy prices as they have done in Europe.  Additional subsidies are desired for child care and education, which may not go directly to private companies but would benefit large organizations where the leadership rakes in millions of dollars.  This is trickle down economics in a slightly different form, except without the benefit of the market to allocate the resources and with even riper opportunities for corruption unseen since the Gilded Age.  That the President is bragging about showering companies with huge dollars illustrates how far the progressive movement has fallen and how desperate they are simply to grow the government, rather than remain committed to their principles.  The ghosts of Jennings Bryant, Rogers, and others are surely turning over in their graves as the old saying goes.


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