05/30/2024
Borrowed from someone much more knowledgeable in the financial world than myself . . . Please read it all. It is extremely informative!
We all have heard the term “Bidenomics”.
Most individuals that I talk to have heard the term used by the media but remain unable to define it.
I went to discover what “Bidenomics” is. I was surprised, it is a real economic platform. It was a part of the current administration’s election platform in 2020. At some point someone called it “Bidenomics” and it stuck with the media.
Here is what “Bidenomics” is and how it has affected the economy.
“Bidenomics” has 6 major points. Here are the 6 points:
Run the economy hot.
Make Unions stronger.
Revitalize American Manufacturing through green energy.
Rein in corporate power and break up monopolies, raise taxes.
“Expand the safety net”.
Increase Revenues
Each point was defined as:
1. Run the economy hot with the passage of the American Rescue Plan.
This was a $1.9t stimulus package passed by the 117th United States Congress on March 11, 2021. The United States Congress at this time was democratically controlled in both the House and the Senate.
Continue to run the economy hot.
2. Make unions stronger.
It was not a labor initiative per se -- Its main point was to give unions greater power at the bargaining table. The main points:
Change the NLRB board by appointing staunch labor allies.
Applying federal funds in an effort to tie larger unions for use on unionized labor strikes.
Meeting publicly with leaders trying to unionize workplaces. (show support)
Pushing for tougher penalties on firms that violate labor laws to ban mandatory anti-union meetings.
3. Revitalize American Manufacturing through green energy initiatives.
Focus on the development of clean energy industry manufacturing.
Provide billions of dollars in economic credits to firms that support new plants and facilities.
4. Rein in corporate power and break up monopolies through raised corporate taxes.
Created a large antitrust agenda to mute the power of large corporations, particularly in breaking up monopolies and cracking down on “junk fees”.
Pushing the Federal Trade Commission (FTC) and Department of Justice (DOJ)
To be more aggressive in blocking large corporate mergers.
To make service fees appear to be cheaper than they are.
To ban employee agreements, specifically “non-competes agreements.”
To make corporations pay their fair share of taxes.
5. Expand the safety net.
To get approval on the biggest expansion of social programs.
Expanded childcare benefits and tax credits.
Expand food stamp programs.
Expand public health through Medicaid programs and redefine entry levels.
Expanding Housing subsidies.
Expanding Education credits.
Cancel student loan debt.
Medicare to add Dental programs.
Increase Prescription programs.
Equal benefits for citizens and non-citizens.
6. Increase Revenue
To increase taxation.
Allow the expiration of the Trump Tax Cuts.
Limit 1031 Real Estate in-kind exchanges to a max of $500k.
Tax carried interest as ordinary income tax.
To tighten estate tax rules.
Eliminate step up in basis.
Reduce estate tax exemptions to $1.0m per person.
Other taxation methods.
Create a 25% billionaire minimum tax on unrealized capital gains.
Expand Internal Revenue Service (IRS) funding.
Was each piece of the plan implemented and how has it affected the economy?
Point 1: The American Rescue Plan
The passage of the American Rescue Plan in March 2021. This was a $1.9 trillion dollar stimulus to push past a sluggish economy and to re**rd any thoughts of a recession. This was the second stimulus plan passed by Congress. Inflation had averaged 1.5% since the last economic downturn in 2007. Post the introduction of the American Rescue Plan the economy surged 6% in its 1st year. By mid-2022 inflation was at 9.1% year over year.
Most economists agree “This was the central point of inflation”. The economy ran hot and the money supply was abounding.
Since then, the word stimulus has been superseded by the new term budget. The budget has grown from $3.5t in 2020 to the current $6.2t per year. The administration and Congress continue to overheat the economy by flooding the markets with trillions of dollars.
The unintended consequence:
The money supply is too great, the economy can’t absorb it.
The stock market is oversold by most analysts and experts. The market can’t naturally correct until money stops pouring into it.
Inflation won’t cool until Congress addresses the budget appropriately.
Point 2: Make unions stronger.
The plan was to tie infrastructure giants and unions together using the federal funds through the American Rescue Plan.
The UAW went after the big 3 automotive companies’ and held them hostage with long strikes.
The Teamsters went after the transportation and logistics industry with the potential of a strike at UPS and Fed Ex.
The American Labor Union unionized Amazon.
The Service Workers Union went after Starbucks employees.
Select locations of Amazon and Starbucks are now unionized and represented by their respective unions. Results increased labor and service costs at these locations.
The Auto Union forced strikes at General Motors, Ford, and Stilantus (Chrysler). All happened concurrently. The result. These companies had to yield to significant wage and benefit increases. A new union representation was also voted in at Volkswagen.
The unintended consequences:
Increased costs are being passed on to the consumers.
American automotive industry is less competitive to foreign pricing.
Companies are reconsidering relocating manufacturing to other countries, ultimately costing jobs.
Each Union has its footprint in our inflationary cost of food, gas, shelter, and core daily items sold at every Walmart, Target, and Dollar General.
Point 3: Invest in America
The majority of dollars have been directed to green energy. The policymakers have chosen to stop investing in fossil technology in an effort to revive domestic manufacturing through clean energy. Many of the newly derived clean companies have already closed their doors due to cash flow issues when the government intervention of stimulus stopped. Remember Protera, Lordstown Motors, Arrival, and Volta?
Billions have been spent, but yet unrealized in economic activity. The plan was for 500,000 charging stations throughout America, yet only 8 have been built to date.
Longer-term issues with the automotive industry will come to fruition if we continue forward. The United Auto Workers Union is not happy with the long-term EV plan. It only takes 40% of the current autoworkers to produce electric vehicles vs similar fossil fuel vehicles. The auto industry experts see looming industry layoffs ahead (2025 and beyond) if we continue on the EV policy path.
The utility companies have also been severely impacted by the push for clean energy. Nuclear, coal, and natural gas plants that produce the nation’s energy grid have been taken offline or are scheduled to be taken offline, in favor of solar or wind energy generation. Consumer utility bills are up 30-50% depending upon your geographic area since 2021.
Not all is bad. The American Rescue Plan did have infrastructure as a secondary component. We see improvement in a decaying public works system. I believe you can see road construction everywhere. This is the feel-good part of the plan but represents only 12% of the plan’s funding.
Point 4: to rein in corporate power by breaking up monopolies and cracking down on fees.
Focusing on Airline mergers and hidden financial fees certainly grabbed the headlines.
Or did it just deviate the attention from the “Magnificent 7” (Meta, Google, Amazon, Apple, Nivida, Microsoft, and Tesla)? These companies make up 87% of last year’s S&P 500 performance. The remaining 493 companies made an average of 4% in returns. Maybe we are aiming at the wrong companies in terms of monopolies.
Mergers and acquisitions were suppressed by 60% from 2021 to 2022.
Point 5: “Expand the Safety Net”.
This means to grow social programs. Much has been implemented, and much more is planned.
36 million families were sent $92 billion in relief through the Advanced Child Tax Credit.
The Treasury has distributed to 16 million workers advanced benefits from the American Rescue Plan ($2,500 each)
$400 billion has been distributed for added Economic Impact Payments.
The Emergency Rental Assistance (ERA) program sent 5 million payments for rent and mortgage assistance. This represents over $65 billion in payments.
It’s estimated that 70% of Americans are dependent upon the government for some type of support, up from 46% in 2020.
The Tax Foundation General Equilibrium model shows these programs will add $2.104 trillion dollars per year to the annual budget. Nothing highlights how backward our government spending has become than the proposal to decrease discretionary spending, which actually adds $767 billion dollars to the budget.
Analysts believe social program growth is the single largest contributor to increasing inflation and reducing the unemployment rate. When an individual receives free benefits and stops looking for a job, they are no longer counted as unemployed, as they reduce the available worker pool.
No one is talking about the Border crisis in terms of cost. More than $1.0 trillion has been spent on immigration. We see the direct results in the unfairness of the system to the American family.
Immigrants are provided Shelter.
Immigrants are provided goods and services.
Immigrants are provided with enhanced food credits or credit cards.
Immigrants are provided with free transportation (Air or Bus).
Immigrants are provided with free Healthcare.
Immigrants are mostly immune from prosecution.
Point 6: Increased Taxation.
Instead of slowing the economy the natural way through the Federal Reserve increasing interest rates, “Bidenomics” plans to increase tax collections as the main effort to slow the economy.
The guise will be to tax corporations “fairly”, or to raise taxes on those that make over $400,000 annually. You do know that is code for small business owners since 80% of those who make over $400,000 are small business owners.
In political theory, “raising minimum wages was going to improve the quality of the American worker”. In most cases, the American worker is in the same place post-inflation, as costs to corporations and businesses were passed along to the American consumer. Inflation overpowered the wage increase.
Secondarily, historically, raising corporate taxes is inflationary in nature. Corporations will pass along the increased costs to the consumer.
Corporations, small businesses, and the government work the same way. As the government increases its costs through the “social safety net”, just like a corporation, the government will pass along its increases to you in the form of increased taxes.
In the end, the American consumer will pay for the increases.
Next time you hear the term “Bidenomics”, I hope you will be able to understand the term better and understand its effect on our economy. IT IS NOT GOOD!
