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Beyond the pandemic

Inside Biden’s America

President Biden has been in the White House for over six months and in that time has eschewed bipartisanship to pursue a bold fiscal stimulus plan, spurred by his ambition to put money in people’s pockets. He has shied away from asserting US muscle abroad and taken the US relationship with China in a new direction. Millions of Americans have also been vaccinated against COVID-19. Despite this, does President Biden have a plan for the challenges that lie ahead?

Global vaccination rates are dropping, and the investment necessary to keep supplies flowing is missing. The US is also lacking a clear agenda for COP26, billed as a critical moment in international efforts to tackle climate change. In the latest of our Big Conversations, James Harding and Mona Sutphen, White House Deputy Chief of Staff during the Obama administration from 2009 until 2011, discussed the dynamics of decision-making in the White House, and how that shapes the policies we see tested in the real world.


Here are the key takeaways:

The world is still closer to the beginning of the pandemic than the end, despite the rapid progress on vaccines. In recent weeks, the number of shots being administered has gone into precipitous decline, not just in the US but globally. Vaccine hesitancy is an issue, but limits to manufacturing and distribution of some products are far bigger problems. The manufacturing capacity necessary for global distribution, and for the boosters to respond to variants, doesn’t currently exist. It has to be built. This needs to be a global effort, but the US is not on strong enough terms with the powers that matter to pull it off.

The G7 at Carbis Bay fell so far short of expectations not because the Biden administration lacked ideas, but because it didn’t have a game plan. The schedule, at these events, is tight. They had to go in with a clear objective, but they weren’t sure what they wanted, so advancing whatever that was with other leaders was challenging. This may have been particularly messy because the global pandemic response involved almost half of the federal government – so there would have been a lot of competing interests.

The Biden administration has been less muscular in its international agenda than expected because it is attempting an important strategic turn: to move China to the front of the agenda and to relegate the Middle East to being a secondary concern. Clinton and Obama are among the former presidents who tried and failed to do this – but President Biden will succeed because Republicans and Democrats are in rare agreement that the US’s relationship with China will now be contentious.

A more competitive relationship with China is not necessarily a bad thing for the US because it could spur domestic investment in advanced industries. But Biden’s team may not understand just how difficult this change will be in terms of regulation for Europe, which is being pulled towards both Washington and Beijing.

President Biden’s overriding concern is to get money into middle-class pockets. This is the driving force behind his policies on tech, climate change and the pandemic response, all of which are geared towards upskilling US workers and getting people in lower income groups into sectors with rising demand for labour – and rising wages.

There is a lot of money heading into American voters’ pockets. But this carries a risk for the Democrats that the money people are getting through the fiscal stimulus packages will be eaten away by inflation. American savings rates are high, but not among those lower-middle-class groups. If interest rates creep up, it will be a disaster for people’s daily budgets. Even if it lasts, the extra cash is unlikely to lure Trump voters who are Republican and anti-Democrat over to Biden’s side. Because America is so partisan, people are likely to pocket the economic benefits and end up, politically, exactly where they were before.

The Democrats have learned the importance of keeping grassroots campaigners engaged and activists mobilised in between elections – something the Republicans were already doing. A lot of money is now being spent behind the scenes to make sure Democrats beyond the White House know what is going on in the electorate at all times.

The enduring cult of Donald Trump is set to cause the Republican Party problems, too. Trump has been endorsing candidates in the North Carolina Senate race who many feel can’t win the state, and criticising those who could. If that escalates, it could set the Republicans back. The question is, will Trump-supporting Republicans turn out for anybody other than Trump?

The Biden administration’s domestic tax plan is a political statement rather than what’s actually going to happen, not least because of the 50:50 split in the Senate. A lot of the most controversial elements – like proposed hikes in capital gains tax and income tax rises for higher earners – are not palatable even to members of his own party who serve electorates in high-wage areas. However, there does appear to be bipartisan support for higher corporate taxes so we can expect these to rise, although perhaps not to the suggested 28 per cent. Other things to watch out for are changes to some of the Trump-era reforms relating to net operating losses, global intangible low-taxed income (GILTI) and real estate taxes.

The international tax plan to coordinate on corporate and technology taxes could end up being far more meaningful. It is the only detailed proposal that the Biden administration has put forward – so is something his team is clearly takes very seriously. It has a chance because every G20 government is struggling with its public finances. Tech is the future of the economy, and governments need a plan on how to tax it. But it really needs everyone to agree – including countries like China and Saudi Arabia – whose stances are unclear.

President Biden was billed as the first ‘green’ president, but COP26 (the forthcoming UN climate summit in Glasgow) has the potential to be underwhelming. This isn’t solely the US’s fault – every government is in a different place on the environment and it’s therefore hard to agree international priorities. The Biden administration also has no idea what it needs to push for at COP26 because its own climate change package is baked into the as-yet undecided infrastructure bill. However, there are things it can do domestically that would make a bigger difference to the climate agenda than pure spending commitments – addressing financing architecture issues around tax equity and reforming America’s competitive energy markets for example. The government understands this and has the potential to make significant progress, but a lot of ‘heavy lifting’ stands in its way. Recent domestic politics have resulted in a lack of stability and certainty in the US approach to the energy transition, but if President Biden can deliver these structural reforms and unleash private capital to drive change, it will be very hard for future administrations to unwind.

As far as foreign policy is concerned, President Biden realised that there would never be a good time for a US president to leave Afghanistan. Now he has to figure out what infrastructure to leave behind, to prevent the country becoming a crucible for international terrorism. He may end up having to deploy more hard power than he had planned, but unlike previous presidents, he is not shy of using military force. He is someone who believes that if you draw a red line, and that line is crossed, you have to respond. Other world leaders, like Vladimir Putin, may see that Biden is doing a lot less realpolitik, but those things he does pursue, he will do properly.