Why Did the Left Misunderstand the Biden Economy?
SMC Editorial Board Note: This piece is not an official caucus statement, but the opinion of the author and is republished from Socialist Forum.
It’s not easy to understand our current world. The 2020s began with a global pandemic that scrambled our daily lives, along with the entire economic system. This continues to produce wild swings across the ideological and intellectual spectrum about what’s to come next. A sudden interest in supply chain logistics, constant fears over a recession, and an uncertainty over what central bank rate hikes would do to their respective economies. In previous crises, the left was able to offer a better accounting than mainstream sources about what’s happening in the world. I’m not convinced that the left has a better explanation this time around, and this deficiency has weakened our political position.
The Bernie Sanders movement received fuel through an indignant “I told you so” attitude concerning matters of real substance. The failure of Barack Obama and other western heads of government to lead a full-scale recovery from the 2008 financial crisis subsequently helped legitimize socialist economic critiques and policy responses. Then the hubris of mainstream liberals to both mispredict and express profound disgust after the United Kingdom’s Brexit vote and the election of Donald Trump in 2016 only amplified this sense of self-assured righteousness. This near decade of failure by the center allowed the rise of both the far right and the socialist left. The Covid pandemic arrived at the tail end of Bernie’s second defeated presidential campaign, where both the severity of the crisis and lessons learned over the decade produced global government action. A brief ideological victory could be claimed, but a rapid rise in inflation suddenly shelved interest in expansive economic policies.
The Joe Biden administration faced a political challenge, but political thinkers, particularly on the left, appeared caught flat-footed. The vindication of pandemic relief programs—the child tax credit alone decreased child poverty by 30%—were quickly sidelined by economic anxiety over rising food prices, even though the reality of near 15% unemployment was less than two years prior. Few took on the political risk to argue that the cost of higher prices was worth paying to help prevent a depression-era explosion of the unemployment rate. By the time inflation set in in late 2021, left-leaning outlets like the Intercept called it “good,” writers like Jacobin editor Seth Ackerman repeatedly dismissed it, and modern monetary theory-influenced thinkers, like the hosts of Bloomberg’s Odd Lots podcasts, described it as “transitory.” Yet, by the summer of 2022, with inflation at a four-decade high, such dismissals were no longer tenable.
The right constantly balked about inflation, but when the 2022 midterms loomed they appeared gleeful to face an opposition dealing with a lesser economic hand. Liberals, and their leftward flank, initially sidestepped the question and found continued electoral success running against MAGA-extremist candidates like Herschel Walker and Blake Masters. The lack of electoral backlash following economic concerns showed that the issue, while important, wasn’t the only thing motivating voters.
Even if electorally better off than expected, liberals found it harder to avoid the topic of inflation as it persisted into 2023, now with a presidential election looming with a deeply unpopular incumbent. Liberals, following the left’s lead, now harped further on broken supply chains, corporate price gouging, and the war in Ukraine to give a holistic accounting for this economic blight. Citing all those factors helped avoid calling out fiscal decisions by the Donald Trump and Joe Biden administrations that helped many working-class Americans but were designed to maintain our unequal society (this has been forgotten, but, AOC voted against the initial Covid relief bill that provided a massive bailout for big business that quickly morphed into stock buybacks.) The abdication of a comprehensive federal legislative response to inflation beyond the misleadingly named “Inflation Reduction Act” helped reaffirm the legitimacy of Federal Reserve chair Jerome Powell as the man tasked to save our economy.
Under Powell, the Federal Reserve enacted the sharpest rise in interest rates in decades, even if not high by historical standards, in an effort to reduce inflation. Since 2022, Biden and Powell have spoken from the same script by repeatedly emphasizing the harms of rising prices on American families, while never forgetting to tout the relative strength of the US labor market. Progressive commentators like Sam Seder of the Majority Report frequently seized upon Powell’s actions as putting the screws to workers. But for all his steely talk of bringing the “pain”, the Fed chair’s actions didn’t meaningfully cool the labor market enough to make that pain a reality.
Now that inflation is receding, there’s a scramble to understand what observers did and didn’t get right about the Biden economy over the last couple years. Stronger than expected GDP growth since the pandemic brought an end to recession calls, and near 50 year lows in unemployment and a 50 basis point Federal cut flies much in the face of most left commentary since 2022. Yet, polls show Americans aren’t happy and are struggling to meet the higher prices of goods. These economic cross-currents produced ever more muddled analysis from the American left.
Did the Left Misunderstand Inflation?
When the early Biden administration seemed genuinely committed to passing an expansive version of Build Back Better, and even perhaps the PRO Act, there was little incentive for the left, socialists and progressives alike, to mount a full-throated criticism of it. Once inflation rose too fast to ignore, any response was perceived to be an attack on the few gains working people made from pandemic-era government programs and an excuse to walk back Biden’s relief programs. However, once the Fed began to raise rates and the idea of “transitory” inflation fell apart, the left turned to historical analogies for explanations.
These explanations cited the decisions of former Fed chair Paul Volcker and the massive interest rate spike of late 1970s and early 1980s, which was adopted at least in part to undercut working-class living standards and bargaining power. This produced commentary in Jacobin that Biden and Powell sought a modern-day Volcker shock to induce a recession heading into the midterm election. Such an analysis fits quite well with the longstanding portrait of Democrats as hapless losers digging their own grave one often encounters on the left. But this time at least, the “I told you so” mode of analysis did not fit the reality of the situation.
America’s unemployment rate didn’t suddenly, or even gradually, increase. Instead, it remained around 4% throughout this entire hiking cycle, a nearly fifty- year low. Democrats overperformed in the 2022 midterms despite assumptions of a “red wave.” The party kept the Senate and might have kept the House had New York Democrats not bungled their attempt to gerrymander the state’s electoral maps to their advantage. Workers increased their level of strike activity to the highest level in many years, unions gained a foothold at major corporate employers like Starbucks and Amazon, and there has been moderate wage growth. The layoffs that could be attributed to Fed policy remain concentrated in the digital media, finance, and tech sectors. All of these sectors, particularly tech, benefitted disproportionately from the exceptionally loose monetary policy of the last decade and the fleeting pandemic-rearranged social order that saw a massive surge of technology-based startups (remember Peloton, anyone?)
Despite this, many commentators on the left took a maximally critical view of the Biden administration’s economic policies. While alleging that Biden and Powell sought to throw the economy into recession, there was little commentary on how the Biden National Economic Council (NEC) speaks positively about unions, stresses a commitment to maintaining a low level of unemployment, and pokes at bad corporate practices. These words were backed up by a historically strong National Labor Relations Board, Federal Trade Commission, and Department of Justice Antitrust Division. Contrast this to Bill Clinton’s former NEC head Larry Summers, who in the last few years consistently called for Volker-esque solutions to inflation (higher interest rates and unemployment). A clearer window of opportunity opened during the Democratic administration, a window that had been closed for a number of decades prior.
This isn’t to dismiss or overlook clear economic policy failures by the Biden administration, including expiration of the child care tax credit, the refusal to fight harder to cancel student loans, or the massive corporate giveaway that made up most of the Inflation Reduction Act. The “here today, gone tomorrow” quality to these programs and promises didn’t allow a lasting constituency to be built that would’ve stood ready to fight back against the center-right’s desire to roll back these emergency actions. Few on the left would look at the end of these programs, many of which meaningfully reduced poverty among children and families, as anything but a failure of the Biden administration. Yet, left-wing voices calling for the permanent extension of these programs were largely absent;, instead much effort was spent casting inflation as little more than a media creation or repeating the prognostications of recession one often found in the business press. These frameworks offered little clarity regarding the left’s organizing priorities at that moment.
What Should the Left Learn?
What if Bernie Sanders won the presidency in 2020 and came into office facing the same inflationary pressures the Biden administration did? Americans rightfully aren’t happy to pay more for food after decades of stagnant wages. Doug Henwood sharply argued in Jacobin that the left was too sanguine with rising inflation back in 2022: “There’s a good reason people don’t like inflation. The last thing they need to hear from elites is that they’re wrong in feeling that way. It’s not surprising coming from liberals, but socialists shouldn’t sing backup.” We cannot build a world worth fighting for when we don’t take proper accounting of economic and state actions. Nor by telling people the pain they feel is both not happening, is in fact “good,” and that the government cannot help them.
Despite some posturing early in the Biden years, the left isn’t in the rooms that make federal level economic policy. Yet it’s extremely important to understand the course of direction set at that level as it shapes the parameters of our own local fights. The Biden administration pitched the IRA and its support for the NLRB as empowering American workers in the context of boosting domestic manufacturing and increasing domestic manufacturing. The left doesn’t need to bear hug these policies, premised as they are on economic competition with geopolitical rivals like China. Even so, it cannot be denied that some of these policies, particularly the Biden administration’s support for an active NLRB helped to advance fights the left waged well before Biden came to office.
The years-long fight by NYC-DSA for the Build Public Renewables Act was partly aided by subsidies for wind and solar power in the Inflation Reduction Act. The national response to economic changes shapes the ground on which we organize, so it’s important to avoid getting caught up in fighting the last ideological war. Our long-standing calls for increased taxes on the rich, empowering unions, and taking control of public resources for green investment remain vital and necessary. Now, we enter a second Trump administration riding a wave of global anti-incumbent backlash that stemmed, to a significant extent, from the inflation the left routinely ignored. The challenges before us must be approached by understanding what political actors are doing and not what our own ideology assumes.