One can see this embrace of middle-out economics both in Biden’s words and in his policy agenda. The White House website describes Bidenomics as “centered around three key pillars”—public investments, empowering workers, and promoting competition—pillars that stand both in sharp contrast to the Reaganomics regime of tax cuts, wage suppression, and deregulation, and on a far stronger empirical foundation than the trickle-down alternative they seek to displace.
For example, Reaganomics argues that public investment inevitably “crowds out” the private investment it sees as “the heart of our economy,” yet “a core tenet of Bidenomics,” explains the White House, “is that targeted public investment can attract more private sector investment, rather than crowd it out.” This is a remarkably unorthodox assertion that implies an active role for public investment, not just in addressing market failures, but in helping markets work better to serve the needs of the American people. And it is an assertion that has quickly proven true. Just one year from its passage, the CHIPS and Science Act has already attracted $231 billion of private investment in domestic semiconductor manufacturing before a penny of the $39 billion it allocates for subsidies and incentives has even been spent. In the third quarter of 2023 real investment in U.S. factories hit an all-time high.
So much for the oft repeated warning against “crowding out.”
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