In Brief: Bidenomics Is Unsustainable
Subsidies for unions will drive labor costs up, making the U.S. uncompetitive.
Joe Biden has tried to make the most of the term “Bidenomics,” but voters aren’t buying it. The Manhattan Institute’s Stephen Miran it’s also not sustainable.
The Biden administration claims its policies are bringing manufacturing jobs back to U.S. shores. But strikes by auto workers, healthcare workers, and Hollywood writers and actors demonstrate that key pillars of President Biden’s economic agenda are bad for American industry. By heavily subsidizing unionization, Bidenomics is likely to raise production costs, drive more-frequent strikes, and erode America’s international competitiveness.
The administration’s fiscal glut includes many taxpayer-funded incentives for expanding industrial capacity. The Inflation Reduction Act’s climate and energy subsidies are expected to surpass $1 trillion. While the inflationary effect is obvious, less appreciated is that these massive fiscal programs are designed to stimulate unionization.
The Inflation Reduction Act’s manufacturing tax credits include “prevailing wage” requirements, which force firms that take the money to meet or exceed the average regional wage for that type of work. The requirements prevent firms from competing to reduce labor costs and effectively make unions wage setters. Forcing nonunionized employers to pay the same wages as unionized ones is unionization by other means.
In other places, Biden’s push for unions is even stronger and stricter. That may sound great to a lot of people, but Miran argues:
Higher real wages are good. But to be sustainable, they must be driven by durable labor demand and productivity enhancements that make workers more valuable. Higher wages set by government decree or union fiat only lead to job losses.
He goes on to highlight the UAW strike against the Big Three automakers, as well as the shifting of so many jobs overseas. Biden is trying to paper over that with taxpayer money, and it just can’t stay that way. Miran concludes:
Firms are tolerating unionization because of taxpayer subsidies. But eventually those subsidies will dry up, either because they’ve run their course in the original legislation or because politicians curtail or repeal them. When that happens, sectors built up around the Inflation Reduction Act will be left with enormously uneconomic production costs, dead in the water if exposed to global competition.
Mr. Biden’s economic vision can last only as long as the taxpayer keeps paying for it and is unlikely to result in a sustainable increase in manufacturing capacity or jobs in America. Any reindustrialization ushered in by Bidenomics contains the seeds of its own unraveling.
Wall Street Journal subscribers can read the whole thing here.
Start a conversation using these share links: