Trump’s Win Shows Limits of Biden’s Industrial Policy

by · NY Times

Trump Win Shows Political Limits of Biden’s Industrial Policy Vision

Long-term economic investments in domestic manufacturing were overshadowed by real-time anxiety over rent and grocery prices.

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President Biden speaking about the election and his economic legacy at the White House Thursday.
Credit...Anna Rose Layden for The New York Times

By Alan Rappeport

Reporting from Washington

When President Biden addressed the nation this week after a gutting election, his reflections on his economic legacy offered a glimpse into why Democrats were resoundingly defeated.

The efforts by the Biden-Harris administration to reshape American manufacturing were the most ambitious economic plans in a generation, but most voters had yet to see the fruits of those policies.

“We have legislation we passed that’s only now just really kicking in,” Mr. Biden said, explaining that a “vast majority” of the benefits from federal investments that his administration made would be felt over the next decade.

Legislation enacted by the Biden-Harris administration was designed to pump hundreds of billions of dollars into the United States economy to develop domestic clean energy and semiconductor sectors. The investments were likened to a modern-day New Deal that would make American supply chains less reliant on foreign adversaries while creating thousands of jobs, including for workers without a college degree.

But anger over more immediate and tangible economic issues — including rapid inflation and high mortgage rates — dwarfed optimism about factories that had yet to be built. That reality helped topple Vice President Kamala Harris’s campaign and showed the limits of industrial policy as a winning political strategy.

In the days since Mr. Trump’s victory, current and former Biden administration officials have been grappling both privately and publicly with why their economic strategy did not prove to be more popular. They have comforted themselves with the fact that inflation has led to the defeat of incumbent leaders around the world, although most of those governments were also struggling with weak economies, whereas growth in the United States remains robust.

In fact, some of America’s economic growth stems from the hefty investments the Biden administration has made in infrastructure, clean energy and chips.

Yet that strategy, which aimed at restoring manufacturing jobs lost to the forces of globalization, was not enough to keep Democrats in power. Despite nearly $1 trillion in clean energy manufacturing investments and the distribution of nearly $10 billion of tax credits for electric cars and green home upgrades, voters had a dim view of an agenda that the White House once proudly billed “Bidenomics.”

“Industrial policy is a long-term strategy, it takes many years to work,” said Jonas Nahm, a former industrial policy economist in the Biden administration who departed this summer. “It’s not something you can jam down in two years and hope for results.”

Mr. Nahm, a professor at the Johns Hopkins School of Advanced International Studies, noted that manufacturing employment makes up only around 8 percent of the United States labor market, and most people are not aware of how production of solar panels, batteries and microchips affect their lives. The Biden administration, he said, also could have done a better job getting the message out.

“It was never sold,” he said.

Many of the investments spurred by the Inflation Reduction Act of 2022 landed in red states, but this did not mean that they led to praise for Mr. Biden or Ms. Harris.

Some projects caused major backlash. A plan by Gotion, a subsidiary of a Chinese company, to build a $2.4 billion electric vehicle battery factory in Michigan, drew fierce opposition, leading residents to oust the township board that greenlit the factory.

JD Vance, now the vice president-elect, visited the area where the plant is being built in August to assail Mr. Biden and Ms. Harris for giving taxpayer money to a Chinese company.

Other investments have gone unnoticed or are unappreciated.

In Bartow County, Georgia, Qcells is building a $2.3 billion solar manufacturing plant and Hyundai and SK On are constructing a $5 billion battery plant. Those projects, which are set to benefit from Mr. Biden’s clean energy policies, will bring thousands of jobs to the heavily Republican county. Some local business owners say the influx of new construction workers has already helped boost sales, but it did little to convince them to vote for Mr. Biden.

Denise Hawkins, the co-owner of Boots and Buckshot, a shop that sells guns, shoes and hunting gear in Cartersville, Ga., said she has seen as much as a 10 percent increase in work boot sales since both plants began construction more than a year ago. Still, she said she gave little credit to Mr. Biden for the new projects.

“It’s great for our local economy,” said Ms. Hawkins, a supporter of Mr. Trump who said she was more concerned about immigration and the national debt. “But I don’t think they’re the most important thing right now.”

Mr. Trump’s victory has left members of Mr. Biden’s economic orbit wondering what they could have done differently. Some privately second-guessed the scale of the $1.9 trillion American Rescue Plan, expressing remorse that warnings that another round of stimulus — including direct checks to individuals — could amplify inflation were not heeded.

In a series of social media posts on Thursday, Bharat Ramamurti, former deputy director of the White House’s National Economic Council, lamented proposals from Democrats to boost housing supply in a few years, saying those were a tough sell to renters currently facing 25 percent rent increases. It is also unfortunate, he said, that 2022 legislation to cap out-of-pocket spending on prescription drugs for Medicare beneficiaries does not take effect until 2025.

Mr. Ramamurti said that he regretted that Democrats were unable to pass legislation that the Biden administration proposed that would have provided more cost-of-living benefits through housing and child tax credits.

“People should reflect on which part of the Democratic Party denied us those agenda items,” Mr. Ramamurti said, referring to moderate Democrats who opposed the “Build Back Better” bill.

An irony for Mr. Biden is that Mr. Trump could soon benefit from investments that Mr. Biden set in motion. Although Mr. Trump has said that he wants to repeal the Inflation Reduction Act, he is likely to meet resistance from Republicans.

In August, a group of 18 House Republicans sent a letter to Speaker Mike Johnson urging him to “prioritize business and market certainty” as he considers repealing the climate and tax law.

“Energy tax credits have spurred innovation, incentivized investment, and created good jobs in many parts of the country — including many districts represented by members of our conference,” the Republican lawmakers wrote.

This month, Mr. Johnson suggested that he would look to repeal the bipartisan CHIPS and Science Act. He then walked that back, explaining that he would look to “streamline” and improve the law, which provided more than $50 billion to the semiconductor manufacturing industry.

Mr. Trump could ultimately end up declaring that the new factories and jobs were his doing.

“The Trump administration will have the ability to claim a lot of the credit and wins for this,” said Todd Tucker, director of the industrial policy and trade program at the Roosevelt Institute.

Mr. Biden’s closest advisers believe he carried out a plan that he thought was best for the country’s economic prospects, regardless of whether Republicans or Democrats reap more of the benefits or how it played at the polls.

Jared Bernstein, the chairman of the White House Council of Economic Advisers, said he had no regrets about the Biden administration’s industrial policy efforts. The investments, he said, will pay off in the form of domestic jobs and economic growth for decades.

“It’s going to take some time for people to see and feel our actions in this space,” Mr. Bernstein said. “But I’m confident that will happen — that’s going to be part of President Biden’s legacy.”

Madeleine Ngo contributed reporting from Cartersville, Ga.

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