The days of trickle-down economics are over

John Stoehr
March 23, 2024

If you read only headlines or news summaries for the State of the Union address, you almost certainly missed the bigger story, as most of them, at least those I have seen, were about optics and vibes.

Here’s CBS News with a representative sample: “Joe Biden on Thursday delivered his third State of the Union, taking a defiantly political tone amid the gridlock in Congress and addressing his predecessor and likely opponent, former President Donald Trump, ahead of what will likely be a nasty rematch between the two in November.”

True, but this is also true: The president delivered an era-defining speech – precisely, an era-ending speech. He closed a long chapter in American history that began in the last quarter of the last century when another Democratic president himself delivered another State of the Union address that itself ended a long chapter in American history.

“We know big government does not have all the answers,” Bill Clinton said in his 1996 State of the Union. “We know there’s not a program for every problem. We know and we have worked to give the American people a smaller, less bureaucratic government in Washington, and we have to give the American people one that lives within its means. The era of big government is over.”

Clinton went on to qualify that statement. (Though “the era of big government was over,” he said in the very next breath, people who need help shouldn’t be left to fend for themselves). But that’s what people remember, and that’s almost certainly what Clinton himself wanted people to remember in the run-up to that year’s election.

A Democratic president had picked up where his conservative predecessors had left off in rolling back some of the safety net and social justice programs in Franklin Roosevelt’s New Deal and Lyndon Johnson’s Great Society. Where Ronald Reagan and George HW Bush launched a period marked by low taxation and low regulation, and by the general retreat by the federal government from the economic lives of the citizenry, Bill Clinton deepened and consolidated it. It was “trickle-down economics,” but with a fresh face, “neoliberalism.”

From that period came virtually all the economic consequences that have haunted us for more than 20 years – the offshoring of jobs, the hollowing out of domestic manufacturing, the immiseration of the middle class, the celestial wealth of the .01 percent and, according to some thinkers, the rise of Donald Trump. We were told empowering the rich would empower us all, but all it did was make them greedier and meaner, make the rest of us poorer and meaner, and trigger endless combat over crumbs between everybody and everyone.

The conventional wisdom is that Joe Biden ran for president to save the soul of America. While that was true in the beginning of his 2020 campaign, his thinking changed, as it became clearer that the covid crisis, and the mismanagement of it, had exposed deep structural problems – such as the yawning gap between normal people and the very obscenely rich – that had been destabilizing the country for two decades. Saving the soul of America meant more than beating Trump and restoring order. It meant establishing a new economic order.

“The days of trickle-down economics are over,” Biden said Thursday.

That should have been the headline from last week’s address. It was era-defining, as was Clinton’s in 1996. Precisely, it was era-ending. Just as Clinton’s economic policies finally ended the presidencies of Roosevelt and Johnson, Biden’s economic policies are finally ending the presidencies of Reagan and Clinton. A huge portion of his speech was dedicated to illustrating just how the Democrats have been upending the last 40 years of economic thought, so that the federal government, long beholden to the few, is now serving the greater common good.

When the president talked about “America’s comeback,” he wasn’t just talking about rebounding from the worst public health and economic disaster in a century. He was talking about going back to the original republican idea that a government should be of, by and for the people. “America’s comeback is building a future of American possibilities, building an economy from the middle out and the bottom up, not the top down, investing in all America, in all Americans, to make sure everyone has a fair shot and we leave no one, no one behind,” he said.

He went further. By talking about what’s good for everyone, Biden was implicitly talking about what’s bad for a minority whose interests are at odds with the interests of the majority – in other words, billionaires, “Wall Street,” corporations and the GOP elites who serve them. Over and over, the president made clear where he stands: for people who work for a living and against people who own so much they don’t have to work. At one point, after hearing some Republican grumbling in objection to the claim the Trump tax cuts mostly benefited the very obscenely rich, the president turned to the TV cameras, and asked: “Folks at home, does anyone really think the tax code is fair?

“Do you really think the wealthy and big corporations need another $2 trillion tax break? I sure don’t. I’m going to keep fighting like hell to make it fair. Under my plan, nobody earning less than $400,000 a year will pay an additional penny in federal taxes. Nobody. Not one penny.”

Billionaires, “Wall Street,” corporations and the GOP elites who serve them – these are today’s equivalent of what Roosevelt once called “economic royalists” who hated the concept of investing in the greater common good, and by extension him. Roosevelt, knowing his political advantage with the people, famously said he welcomed their hate.

Biden never said that, but he expressed the same “bring it on” spirit. “Over 100 million of you can no longer be denied health insurance because of pre-existing conditions,” he said. “But my predecessor, and many in this chamber, want to take those prescription drugs away by repealing the Affordable Care Act. I am not going to let that happen.

“We stopped you 50 times before and we will stop you again.”

The implication couldn’t have been clearer. “We” meant the democratic will of the American people, with Biden as its champion. “You” meant special interests. “There are 1,000 billionaires in America,” Biden later said. “You know what the average federal tax is for these billionaires? They are making great sacrifices: 8.2 percent. That’s far less than the vast majority of Americans pay. No billionaire should pay a lower federal tax rate than a teacher, a sanitation worker or a nurse.”

It wasn’t just a speech. On Monday, the White House released a budget plan calling for increased taxes on major corporations and the rich to pay for programs that lower the cost of health care, housing and consumer good, all while paying off $3 trillion in debt over 10 years. The proposal is dead on arrival in a House controlled by Republicans, but that’s not the point. The point is getting Americans who are used to thinking in terms of scarcity, rather than abundance, to dream big.

“Imagine what we could do,” Biden said Monday, according to the Post, “from cutting the deficit, to providing child care, to providing health care, to continuing to provide our military with all they need. Folks, look, this is not beyond our capacity.”

We used to think so. We used to think, as Bill Clinton said, that we wanted “a smaller, less bureaucratic government in Washington,” one “that lives within its means.” Then came the covid crisis, and all the structural and destabilizing problems that it exposed. Biden could have limited himself to saving the soul of America. He could have tried to save the existing economic order. Thank God, he didn’t. Now he’s encouraging Americans to dream. If nothing else, that’s transformative.