I’ll explain the differences between the Biden Plan and the EU Recovery Plan. Speak Sapelli
What are the objectives of the Biden Plan? What effects will it have on the US economy? And what are the differences with the Recovery Plan in Europe? Here are the answers of Giulio Sapelli, economist and economic historian, to Start Magazine
2.3 trillion dollars over eight years for a state investment program focused on infrastructure and new jobs, all with a nod to renewable energy and the ecological transition. Professor Sapelli, how do you rate Joe Biden's American Jobs Plan?
I think this is a definite turnaround in terms of the amount of investment. However, there is a feature of continuity with the line adopted by the Trump administration: using the Federal Reserve as a financier of social reproduction.
Who will be the beneficiaries of the Biden plan?
The Biden plan is a formidable boost to household income, to support the unemployed, but what is most striking about this loan is that it affects income brackets up to $ 70,000 and couples up to $ 150,000. This is therefore a loan that does not support poverty but helps the middle classes. The middle class which in the classification of North American sociology also included the working class.
It is still so?
Today in fact this is no longer the case; workers, also due to strong immigration and cheap labor, have seen their conditions deteriorate and need support. An anti-cyclical operation of great interest if we look at what is happening in Europe that what issues the resumption of the cycle and the very stability of democracy is the impoverishment of the middle classes ”.
As mentioned, the middle class and the workers, the so-called utility workers, were not neglected by Biden's revival plan even if there is no lack of conflicting opinions in this regard: Sean McGarvey, president of the stars and stripes builders union, argues that the transition to green economy could cost a wage drop of up to 75% for millions of workers
The big problem of American trade unions today is not only the lowering of wages, but above all that of the level of employment which is expected to be around 20%. Especially in the automotive sector, because an electric car is nothing more than a refrigerator placed on four wheels, it no longer has the 500/600 component input-output that an internal combustion car has. Leaving aside the great problem it poses for batteries, because many of these minerals that are used to assemble them are carcinogenic and difficult to dispose of. In this sense, however, even in the face of the 16 billion allocated for those who will lose their jobs, I see the Biden plan as an income support in this complex transition ”.
Are intervention in infrastructures and the increase in corporate taxation offset by relaunch policies?
Yes, also because with regard to the increase in corporate taxation, we must always keep in mind what actually happens: the ability of American multinationals and medium-sized enterprises to evade tax is very high. In the US, all citizens pay taxes, but even in this case there are tricks like moving your residence to states where the tax regime is more advantageous and Biden knows it very well.
Will the tax increase be relevant?
The increase in corporate taxes is not that significant, it is talked about to give a sop to the left of the Democratic Party, to the former voters of Sanders and to those few MPs who managed to hold up. I think it is a major attempt to eliminate what Robert Raich, the labor economist, called the "working poor". The disappearance of the working poor would be a mortal danger for American democracy because it is based on two pillars: the support of the working class and the middle classes, and gradually the integration of blacks and gitanos, severely tested with the Trump experience. It is certainly not with the “Black Lives Matters” demonstrations that the problem is resolved and Biden knows well that if he opens up to that front he leaves too much space for Ocasio-Cortez's democratic left wing.
So the plan risks not having robust political support?
I see this plan as the first attempt at American social mending. I am not sure, however, that Biden has in Vice President Harris a person capable of fostering this social mending having a past of aggravating inequalities as a prosecutor, where she certainly did not stand out for foresight and for understanding the need for this integration. On the political level, it does not seem to me that this economic plan of public intervention for the relaunch has sufficient political support, especially when looking at the cusp of American democracy ”.
Is it possible to make a comparison between the European Recovery Plan and the Biden Plan?
No, it is incomparable precisely because it comes from a profoundly different economic structure. Here secular deflation is the dogma, the question of the danger of inflation over 2%, which is a ridiculous thing, is something that European ordoliberalism has in common with that of North America: they come from very different intellectual histories but they are forms of capitalism / economic liberalism with unfolded financial leverage. But the United States has a central bank and a constitution. It is a federal state, you know what the individual states must do and what the central power must do.
Is the Biden plan Keynesian?
The American Jobs Plan is not a classic Keynesian plan, it is something more, I would call it Neokaleschian, by Michael Kalecki, a great economist who dealt with unemployment theory, because this plan aims to reject employment not only by increasing of income, the Keynesian multiplier, but with new investments, fixed capital. Making roads, making buildings, supporting the life of businesses is very different from a Keynesian project. It is a typical project of the more Schumpeterian traditions that exists in a current of American economists whose main interpreter is Paul Krugman .
The problem in Europe is therefore also that of not having a Fed-style ECB?
What is striking is that the member states are united only by treaties. Not having a constitution, not having a central bank that works like all the others but rather a public body of the economy governed by treaties which therefore cannot provide loans directly to current accounts but must limit itself to buying government bonds to support the banks and hoping in this way that capitalist circulation and also income will be restarted.
Who is ballasting economic policies in Europe?
Europe is being dragged into the land of poverty by the German Christian Democrat stupidity. Until the Christian-democratic domination in Germany ends, Europe is not saved. I think the Biden plan will also make itself felt in the Old Continent by changing the rules of the game. The rise of greens in Germany is proof of this, because the greens want the Stability Pact to be rewritten and will demand that it be done on the basis of the American Jobs Plan.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/vi-spiego-le-differenze-fra-piano-biden-e-recovery-plan-ue-parla-sapelli/ on Sat, 03 Apr 2021 07:09:24 +0000.