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President Joe Biden offers himself as champion of the working class and minorities, but his policies will leave more jobless and enable Donald Trump or another populist from the right to win in 2024.
The pandemic is accelerating changes in where we work and what we buy. That makes obsolete many storefronts, movie theaters, aircraft and even factories and is laying wreck to real-estate markets in poorly run progressive cities such as New York, San Francisco and Chicago.
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We all know how well the working class did under socialism in Eastern Europe.
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Biden’s $1,400 stimulus payments to unaffected households will be mostly saved or spent on Pelotons and imports from China, And not create many jobs for the 10 million, mostly lower-paid Americans rendered permanently unemployed by the pandemic.
Many of those folks have the wrong skills, are in the wrong places or are too old or poor to relocate. Biden’s $1.9 trillion package doesn’t do much to finance reskilling and relocation.
Too much demand
With the productive potential of the U.S. economy downsized, the stimulus package will create too much demand chasing too few goods, lots of imports and inflation and leave the 10 million unable to pay rent or put food on the table.
Rebuilding better requires smart investments—green policies that encourage a carbon-use-reducing investment that doesn’t outrun scientific advances. Otherwise government mandates and subsidies create buildings too expensive to attract tenants, electricity too expensive or unreliable for factories to compete with Chinese imports, and more working-class unemployment.
Canceling the Keystone XL Pipeline expansion and new drilling on federal lands destroys jobs in the oil industry, construction, machinery and steel industries. And Biden’s orders kill lower-paying service jobs in communities dependent on those activities.
Climate Change Czar John Kerry telling displaced workers that good jobs await in green industries was cynical. Those folks don’t have solar panel making skills, he’s not offering retraining and relocation assistance, and his comments only serve to further cultivate heartland suspicions that the Washington’s intelligentsia don’t give a tinker’s damn about blue-collar welfare.
Curtailing U.S. oil production simply shifts demand to foreign sources, because it does nothing to hasten factory construction for Tesla
TSLA,
the introduction of electric vehicles by GM
GM,
and Ford
F,
or improvements in battery technology that would make EVs truly competitive.
Drive down wages
More lenient immigration policies and pandemic-related job losses in Mexico will swell the ranks of illegal immigrants, and further drive down wages for less-skilled workers in crowded labor markets. Aren’t those the people Democrats want to help?
The aspiration for a grand alliance with Europe to confront China on technology theft and subsidized exports is a grand delusion. The Germans drive European Union trade policy and have just pushed hard for a new trade and investment agreement with Beijing.
Instead we must rely on high tech and particularly software-based industries and an emerging advantage in EVs—read Elon Musk—to drive new growth. And create demand in their communities for services that employ low-wage workers and minorities displaced disproportionately by the pandemic.
That requires trillions more in intellectual-property investments but federal support for R&D has been declining for years. The private sector has compensated with creative use of the tax code.
A good deal of U.S. innovation is by small startups, funded first by venture capitalists and then initial public offerings. Many fail but those that succeed yield huge capital gains for investors when their stocks go public and get preferential tax treatment—that’s how we counter China’s massive R&D subsidies.
Taxing capital
Biden and congressional Democrats want to dramatically boost taxes on capital gains. Senate Finance Committee Chairman Ron Wyden even wants to tax those annually—making untenable investments in startups that are succeeding, growing in value but not yet ready to go public.
Often the objective of startups is to become successful and then get purchased by a behemoth such as Google
GOOGL,
Apple
AAPL,
or Verizon
VZ,
Technology entrepreneurs are good at spotting difficult design problems but lack Musk’s flair for marketing or Tim Cook’s skills at government-business and international diplomacy.
Senate Antitrust Committee Chair Amy Klobuchar wants to make those mergers nearly impossible. As the Clayton Act is applied, the Justice Department or FTC must prove a merger will lessen competition to stop it. Instead she wants to place the burden on merging companies to prove there is virtually no chance of that happening.
That would be such as requiring Minnesota farmers to prove they have no bomb making intensions when purchasing fertilizer and displays the same contempt toward business and jobs creation as Vladimir Lenin. And we all know how well the working class did under socialism in Eastern Europe.
Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
