A Retrospective on Bidenomics
This article appears in the April 2026 issue of The American Prospect magazine. If you’d like to receive our next issue in your mailbox, please subscribe here.
As an American political writer on the left, it is quite unusual to see one’s advice being followed. During Barack Obama’s presidency, I argued repeatedly that Democrats badly botched the response to the Great Recession. Thanks in part to backroom maneuverings from then-head of the National Economic Council Larry Summers, the stimulus package of 2009 was roughly half as big as it needed to be. As a result, unemployment was still 10 percent on Election Day 2010—a big reason why Democrats lost 63 seats in the House and six in the Senate, relinquishing full control of Congress that never returned for the duration of Obama’s presidency.
Fast-forward to 2021, and much to my surprise, ol’ Joe Biden and congressional Democrats did exactly what I and other critics recommended. With the economy still coming out of a very severe recession from the pandemic, Biden met the challenge with a $1.9 trillion stimulus. Then he did one better with a trillion-dollar climate bill, a big package of subsidies for advanced manufacturing, and another for infrastructure upgrades. All told, it was probably the most significant set of economic reforms from a Democratic president since the 1960s.
Alas, this did not seem to work out politically as well as I’d hoped. Though Democrats did not get blown out in 2022—they lost the House by a whisker and actually gained a seat in the Senate—it wasn’t the kind of victory that would have validated Biden’s economic approach. Then, of course, the party lost to Donald Trump in 2024.
Structural, supply-side reforms are particularly invisible to the layman and must be heavily promoted and advertised.
What happened, and more importantly, what can the next Democratic government learn? I’ve come to three tentative conclusions. First, progressive economic policy, if designed well, works great. The government does not have to contort itself to serve the whims of the self-regulating market. Policymakers can reach elbow-deep into the guts of the economy and shove things around to make it behave the way the American people need.
Second, progressive policy does not automatically produce political benefits even if it works. Full employment can easily be taken for granted. Structural, supply-side reforms like Biden’s climate policy are particularly invisible to the layman and must be heavily promoted and advertised. Conversely, progressive policy that is highly visible, like Biden’s expansion of the Child Tax Credit, is likely to lead to backlash if it expires just a year later.
Third and perhaps most importantly, the American people absolutely despise inflation. Much as it might pain me and other leftists to admit it, this is a nation that principally identifies as consumers, not workers. Any future president must keep that fact at front of mind for the foreseeable future.
I WILL START WITH THE SUBSTANCE of Biden’s economic record, which I’ll divide into four areas: labor market policy, industrial policy, tax policy, and the welfare state. On jobs, Biden has arguably the best record of any president, including Franklin Roosevelt, at least during peacetime.
In January 2021, the unemployment rate was 6.4 percent, and progress out of the pit of the pandemic recession was clearly slowing. Enter the American Rescue Plan Act (ARPA), a $1.9 trillion stimulus that featured a round of $1,400 stimulus checks, support for state and local government, an extension of expanded unemployment benefits, and several other elements. It also established a one-year expansion of the Child Tax Credit, which was reformed such that it required no income to claim, and also went out as a monthly check rather than as a tax refund.
This extra dollop of spending clearly stoked the economy, which reached full employment by the end of 2021, instead of the prior early-2025 trajectory. The years 2021 and 2022 were the strongest for job growth in 40 years, with 4.5 million jobs added in 2022. Unemployment plummeted below 4 percent and stayed there until June 2024.
All told, it was the tightest labor market since at least the 1960s, leading to a major wage compression, with wages at the bottom rising much faster than those at the top. Research by economists David Autor, Arin Dube, and Annie McGrew shows that about one-third of the post-1980 increase in wage inequality was rolled back in just a couple of years.
This is the clearest lesson of Bidenomics: If there is a recession, government spending can quickly and easily restore full employment. All you do is give ordinary people money, and if that doesn’t do the trick, give them some more. It really is that simple.
FDR, notably, did not achieve this with the New Deal. In 1937, on the advice of more conservative aides, he pivoted to austerity—spending cuts and tax increases—long before full employment had been reached, and Great Depression conditions came roaring back. It took the stupendous rearmament of the Second World War to actually get everyone back to work.
ARPA, along with the other pandemic rescue packages signed by Trump but largely designed by congressional Democrats, probably did stoke inflation somewhat. One analysis puts it at about a third, another puts it at two-thirds, while another says the “vast majority” of inflation was attributable to supply difficulties. Probably the true figure is in the middle somewhere.
At the time, looking at the economic lost decade after 2008, and the huge number of people in my generation whose lives and careers were permanently derailed by the crisis, I thought that a bit of moderate inflation would be worth risking to get people back to work. I was arguably right on the substance, but very wrong about the politics.
Americans went batty about price increases, with relentlessly negative media coverage and complaints about the soaring prices of groceries, electricity, rent, and food delivery rocketing around social media. By late 2021, 69 percent of adults disapproved of Biden on inflation, and the topic regularly topped polls of which issue was most important.
That said, a significant share of inflation came from post-pandemic supply chain difficulties, which could not be avoided. All around the world, there was a huge backlog of pent-up consumption, as well as a fairly durable shift in labor market norms as work-from-home became dramatically more common, leading to more spending on home construction and remodeling. Meanwhile, corporations with market power leveraged strong spending to extract from consumers; profit margins jumped in 2021 and have not meaningfully slowed down. Some of the gouging was truly staggering, like in ocean cargo shipping, where prices briefly increased tenfold, and the industry raked in more in the first three quarters of 2021 than it had from 2010 to 2020 combined.
As a result, almost every country in the world had a serious bout of inflation, regardless of its level of economic stimulus. It’s easy to imagine a counterfactual in which Biden undershot the stimulus, there was still a lot of inflation but without any labor market boom to compensate, and Dems lost even worse in 2022 and 2024.
America’s inflation hit a little bit faster and harder than in Europe, but it also came down faster. One clever paper by economist Mike Konczal examined how many reductions in particular prices were associated with more or fewer total purchases—thus providing a window into whether price hikes were solved with more production, or less buying. The answer was largely more purchases, at 73 percent of goods and 66 percent of services.
In other words, even if the Biden stimulus was a bit oversized, that helped the U.S. bust through various production bottlenecks with more goods and services, rather than everyone giving up and making do with less.
A notable component of Biden’s industrial policy was the revival of antitrust, which had been almost totally moribund for four decades.
By the same token, many of those production bottlenecks could be traced back to Obama’s undersized stimulus. This was most obvious in homebuilding, which was absolutely devastated by the Great Recession. After a peak in 2006, the number of construction employees crashed by 2.3 million and did not recover until 2022; new home starts fell to their lowest level since the end of the Second World War and took four years even to reach the previous record low. Half a generation of potential construction workers either quit the industry or never got started, and partly as a result, homebuilding became conservative, risk-averse, and quite monopolized.
When tens of millions of Americans were suddenly flush with pandemic savings and looking to upgrade or buy their first homes, that demand ran directly into a concentrated and highly sclerotic industry. Instead of a homebuilding boom, the surge of spending led to a sharp increase in home prices and rents, and an enormous one-off spike in the price of construction materials, particularly lumber.
It’s a prudential reason for future presidents to avoid economic stagnation, as well as heavy market concentration—you’ll be setting up future problems for your successor.
ON INDUSTRIAL POLICY, BIDEN probably can’t hold a candle to FDR, but he is still certainly in the upper echelon of presidents. The Inflation Reduction Act (IRA) and other policies subsidized production and purchase of solar panels, wind turbines, advanced batteries, electric vehicles, semiconductors, and other green technologies. It catalyzed a huge surge in factory investment, which more than tripled from $78 billion in the first quarter of 2021 to $240 billion in the third quarter of 2024.
In just a couple of years, America became mostly self-sufficient in module panel production. Grid-scale battery installations increased by about tenfold. Thanks in part to a healthy $7,500 consumer rebate, EVs jumped from about 3 percent of new car sales in 2021 to more than 10 percent at the end of 2023.
A notable component of Biden’s industrial policy was the revival of antitrust, which had been almost totally moribund for four decades. With Lina Khan at the FTC and Jonathan Kanter running the Antitrust Division at the Department of Justice, we saw aggressive action against monopolization and unfair business practices.
Building the legal cases for breakups takes time, and a generation of consolidation wasn’t going to be reversed in four years. But lawsuits against Google, Facebook, Amazon, Apple, Visa, Live Nation, and algorithmic price-fixing in rental housing and meatpacking were all teed up by January 2025, and a series of mergers in grocery retail, publishing, fashion, aviation, and more were blocked, to say nothing of the mergers that weren’t attempted because of the enforcement gauntlet.
Biden’s industrial policy also had some important implications for government financing. Conservative and neoliberal economists commonly speak about federal borrowing “crowding out” private investment, on the theory that there is a fixed pool of available dollars to be lent in the economy. If the state borrows, then there will be less left over for the private sector, and it will have to get those dollars by offering higher interest rates.
If we look at 10-year and 30-year interest rates on government debt, however, there was little sign of this happening from the IRA. That makes some intuitive sense; part of the intention of the law was to catalyze private investment with the government carrot, which indeed happened—only a small proportion of the manufacturing figure above was government spending. “Investment is usually a first-mover process,” said Alex Williams of the Common Wealth think tank. This is crowding in, not out.
On a theoretical level, if government borrowing is directed toward investment in productive enterprise that boosts GDP, the state’s ability to finance future debt payments will be increased, not decreased. Businesses routinely borrow using very similar logic—if Apple, say, borrows to build a factory to produce iPhones, its lender will be confident that they’ll use the resulting sales revenue to pay back the loan.
Biden’s record was not so good on taxation. He did nudge up taxes in a few places—including a corporate minimum tax in the IRA—and better still, obtained a one-off $80 billion in IRS funding for the agency to modernize its equipment and conduct more audits of rich people. Unfortunately, House Republicans clawed back most of the IRS funding before he even left office. On balance, these efforts had little effect on wealth inequality, which continued to soar. This is clearly having deranging effects on society.
While wage compression in the Biden years was notable, wages have become less important for defining the good life. “Today, an aspirational life requires property and asset wealth,” said economic writer Steve Randy Waldman. Modest increases in wages for fast-food employees are all well and good, but those workers get on TikTok or Instagram and are force-fed an airbrushed image of ultra-luxurious lifestyles. A down payment on a home is far out of reach for much of the working class, let alone meaningful quantities of equity ownership. More than 90 percent of the stock market is owned by the top tenth of households.
Biden’s most unforced economic error was not making the Child Tax Credit permanent from the start.
On the other hand, you have the rise of centibillionaires. As recent research from economist Gabriel Zucman demonstrates, the share of wealth held by the top 19 households—or the top 0.00001 percent—has roughly doubled since 2020. Half a bus full of people own $3.4 trillion, or more than 2 percent of all American wealth. We are talking about nation-state-sized treasuries held by people like Elon Musk, who use it to fund right-wing extremism and undermine democracy.
The Democratic Party has its own class of big-dollar donors, and as a result tends to be skittish about imposing a sufficiently rigorous taxation regime to make a dent in this inequality. But if the American republic is to survive into the medium term, it simply must be done. And looked at another way, it’s an opportunity—levy a steeply progressive wealth tax on net worths above, say, $50 billion, and you can collect a tremendous quantity of money while leaving almost every American totally untouched.
On the welfare state, Biden (again taking advice from progressive economists) should get some credit for the expansion of the Child Tax Credit, as well as the decision to change it to a monthly payment. For the first time, parents could claim it without any wages, meaning the very poorest people in the country could get it for the first time ever. He also deserves credit for patching a large hole in Obamacare, fixing the “subsidy cliff” that caused insurance costs to increase by many multiples if people made just one extra dollar in income.
Unfortunately, neither of those policies exists now, which leads us neatly into politics.
SO WHAT WENT WRONG POLITICALLY? Part of the problem is certainly communication, salesmanship, and the broader media environment. The rapid return to full employment was a major success but was not metabolized as such by the public. “Biden utterly failed at articulating and defending his program,” said Mark Levinson, a retired labor economist.
Bully pulpit aside, America lacks the sort of institutions, above all unions, that could have communicated to workers that rapidly rising wages and a superabundance of jobs were contingent situations created by policy. Instead, many concluded that they had gotten much better jobs thanks to their own efforts, while inflation was the government’s fault.
Similarly, industrial policy did not pay many political dividends. Polling shows that barely anyone even heard of the Inflation Reduction Act—itself a rather misleading title for a trillion-dollar climate bill—and though its subsidies were flowing strongly, factories take a long time to build.
Biden’s most unforced economic error, however, was not making the Child Tax Credit permanent from the start. In retrospect, expecting a single year of the program to be so popular that Joe Manchin would vote to support it again was gravely mistaken. It is much easier for politicians to refuse to vote than it is to take one.
The end of the brief CTC expansion made for a terribly toxic combination with the end of the pandemic pop-up welfare state. For about a year in 2020-2021, working-class Americans enjoyed a sort of functioning welfare state for the first time in U.S. history. In some ways, it was much more generous than the response in Europe. We did three rounds of stimulus checks—an ersatz universal basic income, unbelievably—and set up an unemployment system that was incomparably generous to low-wage workers.
The reason for this was prior comic ineptitude. U.S. unemployment programs—a patchwork of more than 50 separate systems funded in part by the federal government but administered by the states—mostly run on the ancient programming language COBOL, and it was therefore not possible to institute a Nordic-style wage replacement formula in the pinch. So congressional Democrats just tacked on an extra benefit of roughly the weekly average wage, $600 per week. That meant anyone making less than average made more on unemployment than they had at work—and for very low-wage workers, a lot more.
But it was all designed to expire, and it eventually did. Some of this was inevitable—it doesn’t really make sense to pay low-wage people much more in unemployment benefits than on the job. It makes for a silly incentive, which is why none of the Nordics have such a system (instead they have heavy wage compression so that all jobs pay a living wage). Similarly, ongoing $1,000 stimulus checks probably would have stoked untenable inflation sooner or later.
But Democrats could have made the expanded CTC permanent, or built out additional elements of a proper welfare state. Neither happened. “The number of people getting evicted, experiencing food insecurity, or children without health insurance—all these were higher when Biden left office than when he started,” said economist J.W. Mason.
In short, Biden ended up doing the exact opposite of what a progressive economist would recommend on the welfare state: He presided over a lot of very explicit, generally popular, and widely distributed benefits being taken away, and did not replace them with anything. That’s the thing conservative parties around the world have generally learned not to do over the decades—though it didn’t stop Republicans from passing immense cuts to Medicaid in the Big Beautiful Bill, and allowing Biden’s last welfare expansion, the increased health insurance subsidies in the Affordable Care Act, to expire. (If Biden’s term is any judge, they may come to regret that.)
The most obvious political lesson here is to avoid taking benefits away at all costs. Politically, it is probably better not to pass a benefit at all rather than do it just for a year or two. I think by now, most Democrats probably agree with that.
But there are also lessons about moderate Democrats’ unwillingness to share the fruits of economic growth, which creates enormous political hindrances for the party. Joe Manchin could be convinced to support a massive climate bill designed to create tons of green factories and jobs, but balked at the expanded Child Tax Credit because its recipients might spend the money on drugs. (Mysteriously, he did not apply the same logic to the smaller CTC, which remains to this day, or indeed to income writ large. After all, wages are spent on alcohol and drugs all the time.)
If there’s anything the pandemic illustrated, it’s that Americans are quite fond of large checks from the government.
Republicans are much more consistent about handing out cash money in the form of tax cuts. These go overwhelmingly to the rich, of course, but they are advertised as helping the masses. And if there’s anything the pandemic illustrated, it’s that Americans are quite fond of large checks from the government—the stimulus checks that went out under Trump and then again under Biden polled at 78 percent support.
The expanded CTC was a sign the party is shedding its historical allergy to the welfare state. But basic corruption is limiting the party’s ambitions. One of the central goals of the original Build Back Better agenda was to build out a system of paid family and sick leave. Given that the U.S. is one of only seven countries in the world without national paid family leave, this makes perfect sense. But when Rep. Richie Neal (D-MA), then chair of the House Ways and Means Committee, got hold of it, he mutilated it almost beyond recognition.
Rather than a Nordic-style centralized system in which the federal government pays for all new parents to get substantial paid leave, including a minimum benefit so those without work history would still be supported, Neal heaved up a classic American policy dog’s breakfast. It would have been a hyper-complicated mix of subsidies for private employer-provided paid leave, state paid leave, and then a residual federal program for those who weren’t eligible for the first two programs. It had no minimum benefit, leaving out the young or unemployed mothers who need the money the most. Life insurance companies would have administered the benefit and sought their own profits on top. And employers could have made money by enrolling for paid leave subsidies and then falsely denying their employees’ benefit claims.
Essentially, Neal would have made the paid leave system work like the Kafkaesque nightmare that is the American health care system, and the only reason for this was so that his insurance company paymasters could get a fat slice of the subsidies.
Politically, this deflated the momentum behind Build Back Better, as it shrank the universe of potential beneficiaries and led some to question whether it was worth passing at all. Neal disemboweled a central policy goal of the Democratic Party for decades for wholly corrupt reasons and then didn’t even get anything at the end of the process.
Many other parts of the American welfare state are still crying out for attention. Nobody seriously considered reforming the ridiculous jalopy unemployment system to meet a 21st-century standard. A group of House Democrats did propose automatic expanded unemployment insurance and stimulus checks for future recessions, which is a good idea, but would not have fixed the underlying structural problems with the system. Half the reason Democrats resorted to super-unemployment in 2020 was that in many conservative states like Florida, the system is explicitly designed not to work. Benefits are almost impossible to access, so as to whip people into the labor market through the threat of destitution, thereby increasing bosses’ leverage over their workers.
When it came time to deal with an instant mass unemployment crisis, this intentional lack of functionality was intolerable. But now it’s back to broken again, and who knows what future pandemics might be lurking in the melting Siberian permafrost.
All told, I think Biden deserves quite a lot of credit for getting a lot done with literally no margin for error in a 50-50 Senate. Yet he still failed to entrench his reforms, his designated successor lost the election, and now his legacy is being burned to the ground. The next Democratic president will have to aim higher.
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