The Bidenomics experiment is headed towards disaster
It has finally begun. This week, Americans will start making their choices in the Iowa caucus, the first step towards deciding which candidate will get their party’s nomination.
What happens in the midwestern state is widely viewed as a litmus test for the nation: much of the attention will be on the circus surrounding Donald Trump; much of the speculation will centre on whether the former President can conceivably find his way back to the White House.
But for anyone concerned about the impact of a new President on the global economy, there might be a more important consideration.
Bidenomics, as the current President grandly calls his programme of rebooting the American economy, is crashing in the polls.
In truth, it isn’t working, it is not making ordinary voters feel any richer, and that means whoever wins the Republican nomination has a strong chance of beating him – bringing the whole misguided experiment to an early close.
To listen to his more enthusiastic supporters, one would imagine President Biden is steaming ahead in the polls, to such a degree that it would make little difference who was selected as his Republican rival for the Presidency.
This is purportedly thanks to Bidenomics, which has used the energy and vision of an activist state to reboot American industry.
It has seized global leadership in the industries that will power the transition to Net Zero. It has taken the manufacturing fight to China, re-establishing American leadership of the global economy.
It has created millions of well-paid “green jobs” that have restored prosperity to former industrial regions and towns. It is a triumph, and one that should comfortably secure re-election.
The trouble is, the reality is rather different. In fact, Biden’s approval rating has dropped to just 33pc, the lowest for any incumbent President since George W Bush in 2006, while 58pc disapprove of his record.
On the economy, his approval rating has fallen to just 31pc, with the majority of Americans (56pc) disapproving of how he is handling it. Some 71pc, according to a new ABC News/Ipsos poll, say “the economy is in bad shape”.
No wonder, perhaps, that even Trump may beat him if he is the Republican candidate. And the more the President tries to make Bidenomics central to his campaign, the worse the polling numbers seem to get.
The voters are not buying it, and with good reason. Yes, the growth rate has been high recently, with the economy expanding by over 5pc on an annualised basis – figures that seem staggeringly good when viewed from this side of the Atlantic.
There has been some progress in shifting American trade closer to home, with Mexico last year overtaking China as the country’s largest trading partner.
And despite his commitment to fighting climate change, Biden has, to his credit, allowed new oil drilling projects to go ahead, with the US continuing its dominance as the world’s largest oil producer.
Crude and fuel oil are now its biggest exports (indeed, much of the out-performance of the American economy over the last decade can be explained by self-sufficiency in energy).
But there have been three big problems with the programme, and they have not passed voters by.
First, there has been a huge rise in the deficit to pay for it all. In December alone, the budget deficit came in at a massive $128 billion, a 52pc rise on the same month in 2022.
And that, remember, is at a time when the US is growing well, when unemployment is low, and there is no major crisis to deal with. In the first quarter of the current fiscal year, the deficit topped $500 billion.
In reality, wild spending is steadily bankrupting the US. Last August, Fitch Ratings cut America’s triple-A credit grade to a notch lower at AA+. More downgrades are possible in the years ahead because, at some point, the bill for all Biden’s spending will come due.
Next, it is stridently protectionist. Biden has boasted about his willingness to fight trade wars even more than Trump, slapping tariffs on a range of goods, and refusing to sign deals even with close allies such as the UK.
The trouble is, protectionism hurts consumers, driving up prices and reducing choice. It makes everyone worse off, and it is hardly surprising that the US electorate have noticed.
Finally, much of the money spent under the curiously-named Inflation Reduction Act is being handed to the few companies which are building the chip factories, battery plants and wind and solar power systems.
The big green giveaway might be making the President popular among some corporate executives and their shareholders, but has been unpopular with the auto industry workers who have seen their wages plummet. And there has been little sign of the “well-paid green jobs” that were promised.
Meanwhile, average food prices in US cities have risen by around 20pc since Biden took office. The average price for a gallon of gas is between a quarter and a third higher than pre-pandemic levels.
Bidenomics is becoming a vote loser, and rightly so. In a survey last year, a participant described the concept as a “jumbled mess”.
The programme is off-the-scale expensive, with some estimates suggesting the final bill could be more than $1 trillion; much of the money is being wasted; and very little of it will genuinely improve the long term growth rate, or do anything to make the average American feel better off.
As a result, the race is wide open. On the plus side, Bidenomics may come to an end soon, and the global economy may breathe easier again.
Voters have little interest in a big state industrial plan that benefits the few and risks impoverishing the many.
On the other hand, because Biden’s economic policy has made him so unpopular, even Donald Trump could beat him to the White House – with all the chaos that will bring.
