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Learning not to flinch

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Frustrating as the path to a reconciliation bill has been, Democratic positions on macroeconomic policy are a huge improvement from the Obama years:

But those appearances are deceiving. The U.S. economy has real problems, and inflation is certainly one of them. At the same time, America is enjoying an exceptionally swift economic recovery, rising household wealth, falling income inequality, a resurgence in labor’s economic power, and soaring capital investment. In these respects, Bidenomics has proved to be a smashing success.

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Nevertheless, if Biden’s economic vision hasn’t been fully realized, its core theoretical premises have been roundly confirmed. As expected, the ARP’s $1,400 checks and enhanced UI benefits bolstered household balance sheets and turbocharged consumption. This increased labor’s leverage over capital in two respects. First, it rendered employers more desperate for hired help to keep pace with rising demand. Second, it enabled workers to accrue a cushion of personal savings — and therefore the power to hold out for more-favorable employment opportunities without risking hunger or eviction. In July 2021, America’s unemployment rate was roughly two points higher than it had been on the eve of the pandemic, yet the median worker’s checking-account balance was higher than it had been before COVID.

The result is an exceptionally tight labor market. In August, the U.S. had more job openings than at any time in history. Employers that had refused to interview “unskilled” workers started “offering gift cards to applicants who show up for interviews, along with sign-on and retention bonuses, and sometimes immediate employment before drug screenings and background checks,” according to The Wall Street Journal.

Workers secured more income and economic power. Wages are rising faster for laborers in the bottom quartile of the income distribution than for those in the top quartile. Americans are quitting jobs at an unprecedented rate, confident in their capacity to find new and more-remunerative employment opportunities. October has witnessed America’s biggest strike wave in a generation with some unions using their newfound leverage to avenge past defeats and seek the restoration of pre-Reagan compensation standards.

Inverted Reaganomics works for the same reason Reaganomics doesn’t.

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