WSJ: Bidenomics Failed the First Time

Claims that he’ll spur growth ignore that his policies are a repeat of the stagnant Obama years.

By Phil Gramm and Mike Solon

Nov. 1, 2020 2:06 pm ET

No candidate for president with a legacy of 36 years in the Senate and eight in the West Wing should need an economic projection to tell voters what his policies will do. Like it or not, Joe Biden has a record. To obscure that record, Mr. Biden and his team have turned to rewritten history and, even worse, abstract projections to try to convince voters that the same policies that gave us the weakest recovery since the Great Depression will work miracles now, if we simply double down on taxing, spending and regulating.

Mr. Biden plans to raise taxes by three times as much as President Obama did, increase spending by 2.7 times as much, and regulate the economy at levels never before seen in America. He and his campaign refer constantly to projections by Penn Wharton, Moody’s Analytics, the University of Oxford and Goldman Sachs, which claim that the Biden economic program would produce prosperity. But why would Mr. Biden use models and projections of his souped up rerun of the Obama-Biden program when he has the hard facts of what that program actually achieved?

In early 2010 after the recession had ended, the Obama-Biden administration projected a 3.7% average increase in gross domestic product over the next seven years. The Congressional Budget Office projected 3.3% growth for the same period, while the Federal Reserve predicted growth between 3.5% and 4% through 2014. Instead, growth for the remainder of the Obama-Biden administration tanked to an 80-year low of 2.2% as its policies kicked in. Repeatedly during the 2010-16 recovery, the CBO was forced to slash its projections. GDP in 2016 alone was $1.7 trillion below the 2010 forecast, costing Americans an average of $5,238 that year. As growth faltered, federal revenues fell and debt soared.

The Obama-Biden administration blamed “secular stagnation,” but when President Trump changed policies the clouds of stagnation lifted. Census data says 2019 median household income hit an all-time high, and grew more than six times as much as average annual growth during seven years of the Obama-era recovery. The poverty rate fell more in the first two years under Mr. Trump than in all seven “recovery years” combined under Obama-Biden. Median earnings for men rose 11% more from 2017 through 2019 under Mr. Trump’s policies than during the previous seven years. Incredibly, earnings for women rose 42% more in 2019 alone than in seven years during the entire Obama-Biden recovery.

Though the Obama-Biden administration defended its economic agenda, the American people didn’t buy it. Aggregating the results of 554 polls conducted during the recovery, RealClearPolitics found that respondents disapproved of the Obama-Biden economic performance by a margin of 11.4 percentage points. In contrast, respondents before the pandemic approved of Mr. Trump’s performance on the economy by a 17-point margin. Even now, despite the Covid-induced economic shutdown, Mr. Trump’s rating on the economy is still positive. The economy is Mr. Biden’s greatest weakness and Mr. Trump’s greatest strength, so Team Biden continues to tell Americans that their memories are at fault, not Mr. Biden’s policies.

The economist Jason Furman, an architect of the Obama-Biden economy and proponent of Mr. Biden’s agenda, claimed in these pages that Mr. Biden’s tax hikes would be “broadly consistent with the tax systems under the successful economies of Presidents Clinton and Obama.” Successful? GDP growth averaged 3.9% under Mr. Clinton but only 1.6% under Mr. Obama. Real median household income rose $7,658 under Mr. Clinton but less than half that under Mr. Obama. The poverty rate fell 24% under Mr. Clinton but less than 4% under Mr. Obama.

It isn’t by chance that the recoveries under Presidents Clinton and Obama played out so differently. After Mr. Clinton raised taxes and tried to nationalize health care, voters rejected his policies in 1994 by electing a Republican Congress, and Mr. Clinton changed policies: cutting spending, balancing the budget, reforming welfare, reducing taxes and restraining regulations. Mr. Obama was also checked by voters in 2010, by the election of a Republican House, after he raised taxes, nationalized individual health insurance and smothered the economy in regulation. Yet his administration changed nothing and doubled down on taxes, regulations and debt. Does Mr. Biden’s agenda sound more like the second Clinton term or the Obama-Biden program on steroids?

Mr. Furman claims Mr. Trump’s 2017 tax cut had, by 2019, “limited revenues to 16% of gross domestic product. That’s the lowest share in half a century, with the exception of recessions and the following years.” Yet Mr. Furman failed to note that the “following years” he was referring to were the eight years of his own Obama-Biden administration, when revenues averaged only 16.1% of GDP—less than the 16.3% the CBO reported for 2019. As a share of GDP, the 2019 revenues that followed Mr. Trump’s tax cut exceeded the average Obama tax-hike-enhanced revenue levels of 2009-16. How is that possible? Obama-Biden lost more from slower growth than they gained from higher taxes. By embracing tax rates over growth rates, the Obama-Biden administration generated less income for American workers and the government.

How could anyone believe that after a progressive program of tax, spend and regulatory control failed during the Obama-Biden administration, Biden-Harris could succeed with a socialist program of taxes, spending and controls at levels Mr. Obama never dared? Those who vote for Biden-Harris because they want more government—even at the cost of less income and freedom for American families—will get what they are voting for. Those who believe they can have more government and more opportunity and freedom at the same time will be disappointed. Those who vote for Biden-Harris because they hate Donald Trump may end up wondering if it was worth it. 

If Biden-Harris-Sanders-Warren-Pelosi-AOC control the White House and Congress, and kill the fossil-fuel industry with the Green New Deal, override state right-to-work laws, pack the Supreme Court, pack the Senate by admitting the District of Columbia and Puerto Rico as states, expand the spending blowout and raise marginal tax rates to over 50%, will this still be the same country you were born in or came to seeking refuge and opportunity?

Mr. Gramm is a former chairman of the Senate Banking Committee. Mr. Solon is a partner of U.S. Policy Metrics.