""Bidenomics Is Real Economics" Excerpt 2 [...]...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. P - So much for the oft repeated warning against “crowding out.”"
Bidenomics’ focus on “empowering” workers is an equally radical departure from an economic orthodoxy whose theories disingenuously ignore the role of power in determining economic outcomes while employing policies that do all they can to disempower workers. Reagan infamously broke the air traffic controllers union in 1981, firing all 11,345 striking workers and vindictively banning them from public service for life. Corporate America quickly followed his lead. Over the next four decades private sector union membership plummeted .. https://www.epi.org/unequalpower/publications/private-sector-unions-corporate-legal-erosion/ .. from over 20 percent in 1980 to barely 6 percent in 2020, an erosion of worker power that is exacerbated by a $7.25 an hour federal minimum wage that would be 63 percent higher today (nearly $12 an hour) had the wage Reagan inherited merely kept pace with inflation. By contrast, when Biden broke with tradition to join striking auto workers on the picket lines, he sent a clear a message that the balance of power was shifting. A few weeks later, Ford agreed .. https://www.cnbc.com/2023/11/17/uaw-ford-workers-ratify-new-contract.html .. to a contract that delivers auto workers an effective 33 percent raise. Stellantis, GM, and even non-unionized automakers quickly followed.
Contrary to the charts in the Econ 101 textbooks, employers don’t pay you what you’re worth. They pay you what you have the power to negotiate. When worker power erodes, so do real wages.
In fact, the stagnant wages of the past forty years are best understood as a feature of Reaganomics, not a bug. It is an economic ideology that sees wage suppression as an essential tool for keeping inflation low and profits high. This is the conventional wisdom that led the Federal Reserve to attempt to drive down inflation by driving up unemployment and that prompted former Clinton Treasury Secretary Larry Summers to austerely warn last year that “we need two years of 7.5% unemployment” to tame inflation. (Spoiler alert: we didn’t! .. https://www.reuters.com/markets/us/us-economy-uncharted-waters-inflation-falls-with-low-unemployment-study-2023-08-10/ ) The anti-worker bias implicit in this wisdom—that what’s bad for workers must be good for the economy, and vice versa—is what leads pundits to loudly criticize Bidenomics for “piggybacking rushed child-care initiatives onto unrelated semiconductor manufacturing objectives .. https://www.washingtonpost.com/opinions/2023/03/02/biden-chips-childcare-ira-industrial/ ,” as if creating good jobs with good benefits is somehow “unrelated” to the objective of bringing manufacturing jobs back home.
On antitrust as on most economic issues, Reaganomics simply asks us to place our faith in the infinite wisdom of the market. If the winners from market competition use their market dominance to establish an uncompetitive market, the Reaganomics antitrust regime was okay with that, as long as, in theory, consumers don’t suffer higher prices as a result. That’s the argument that has permitted, for example, Office Depot and Staples to accumulate 69 percent of the office supply market, Lowe’s and Home Depot, combined, 90 percent of the home improvement store business, and CVS, Walgreens, and Rite Aid an astounding 99 percent of drug stores .. https://www.openmarketsinstitute.org/learn/monopoly-by-the-numbers . Working on the assumption that consumers ultimately benefit from the efficiencies inherent in such economies of scale, antitrust enforcers looked the other way from the obvious anticompetitive consequences.
The Taiwan Semiconductor Manufacturing Co. facility under construction in Phoenix, Arizona, US, on Tuesday, Dec. 6, 2022. TSMC today announced plans to boost its investment in the state to $40 billion and construct a second production facility, following major customers urging the Taiwanese chipmaker to build more advanced semiconductors in the US. Caitlin O'Hara-Bloomberg/Getty Images
This emphasis on efficiency illustrates a fundamental disagreement between Reaganomics and Bidenomics. The orthodox economic theories that inform Reaganomics insist that the market functions primarily as a self-organizing tool for efficiently allocating capital, and if efficiency can be maximized through market concentration or automation or offshoring (or union busting), then so be it. By contrast, Bidenomics is grounded in modern economic theory that recognizes that, while markets are incredibly effective at evolving new solutions to human problems, they are often remarkably inefficient, and that what capital efficiencies they create can sometimes come with unacceptable amounts of economic and societal risk. For example, the capital efficiencies that arguably came from relying on “just in time” deliveries of masks and gowns and gloves and other basic medical supplies offshored to low-cost Chinese manufacturers surely cost American lives during the early months of the COVID-19 pandemic, while the subsequent shortage of semiconductors, mostly designed in America but efficiently manufactured overseas, ground our automobile industry to a halt for want of a domestic supply at any price.
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