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      Competitor or adversary? The west struggles to define its relationship with Beijing

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      Competitor or adversary? The west struggles to define its relationship with BeijingChina, the US’s most vital trade partner and its main long-term competitor, presents the country with a sticky ‘pacing challenge’ If you want to solve a problem, it helps to be able to define it, but when it comes to a problem like China, western leaders have been struggling to find the right words.Liz Truss sought to designate China as a “threat” to Britain, but did not stay prime minister long enough for that to become established policy. Her successor, Rishi Sunak, has opted for the less combative “systemic challenge” but he is under pressure from backbench MPs to follow Truss’s path and call Beijing a “strategic threat”.Sunak has made clear he does not want the UK to be out of step with its allies on the issue, most importantly the US. In Washington, meanwhile, China designation is a delicate and evolving art.China ‘spy balloon’ wakes up world to new era of war at edge of spaceRead moreThe delicacy was apparent when a Chinese balloon sailed over the continental US earlier this month. The US declared the high-altitude airship and its payload to be designed for spying and shot it down once it was safely over the Atlantic. The secretary of state, Antony Blinken, cancelled a long-planned trip to Beijing to address bilateral tensions, but at the same time stressed that channels of communication would be kept open and that the US remained keen on a meeting when conditions allowed. Blinken may meet his counterpart, Wang Yi, as soon as this week, at the Munich security conference.The theme of US-China policy towards the end of the Trump administration was an all-encompassing decoupling, in which China was presented in mostly adversarial terms. Joe Biden has preferred to talk about “stiff competition”. His administration’s national defence strategy paper deemed Russia to be an “acute threat” while China was portrayed as the US’s only long-term “competitor”. In recent weeks, the official catchphrase for Beijing has been the slightly nebulous “pacing challenge”, suggesting the US is the world’s constant frontrunner with China ever closer to its shoulder.The problem with categorising China is that there are multiple aspects to its global role as it expands its presence on the world stage. For that reason, Democratic senator Chris Murphy has warned against digging up old cold war rhetoric.“You can’t use the terminology that we used for our conflict with the Soviet Union for our conflict with China,” Murphy told Foreign Policy. “It is apples and oranges. We had virtually no trade relationship with the Soviet Union. Our most vital trade relationship is with China. So I do worry about a bunch of Cold Warriors and Cold War enthusiasts thinking that you can run a competition with China like you ran a competition with the Soviet Union. It’s not the same thing.”With this in mind, Blinken has adopted a Swiss army penknife multi-tooled approach that is “competitive when it should be, collaborative when it can be and adversarial when it must be.”Washington is acutely aware that it has been complacent in its competition with China for global clout, having assumed that better US technology and its democratic model would win the day, only to find that African countries and other parts of the global south were sitting on their hands when the US called for support in the UN general assembly. Last year an old Pacific ally, Solomon Islands, signed a security pact with Beijing, denying entry to a US Coast Guard cutter not long after.The Biden administration now plans to beef up its diplomatic presence in the Pacific, reopening some shuttered missions. It has set up a “China house” in the state department to coordinate analysis and help counter China’s message around the world. On Wednesday, the deputy secretary of state, Wendy Sherman, summed up the new US approach as Washington takes on the People’s Republic of China (PRC) in the contest for hearts and minds in emerging economies.“It is not to say that the PRC can’t invest or that you should toss them out,” Sherman said at the Brookings Institution. Instead, she said the message will be: “Have your eyes wide open”.“Understand what you’re getting, understand what rules apply, what the norms are. Give us a chance, see what we have to offer. Let us compete and help you develop as a country in the ways that you choose,” Sherman said.As for collaboration with China, she said there was little choice other than to work with Beijing to address the climate emergency.“There is no doubt that we cannot meet the climate challenge without engagement with the PRC,” Sherman said. “It’s just not possible because we are both such large emitters and historic emitters.”At the same time, there are plenty of fields in which the US and China are adversaries. The balloon affair has just added another layer to a constant, escalating intelligence struggle between the two powers, in which Beijing has scored some remarkable successes in recent years, stealing designs for the F-35 fighter jet for example. Chinese hackers also stole the personal details of 22 million federal workers – current, former and prospective.Fears of China’s technological capabilities led Biden to introduce draconian export restrictions on semiconductors in October of last year, in an effort to strangle China’s microchip sector. It came close to an economic declaration of war, but Republicans in Congress are still trying to depict him as “soft on China”, calling on him to ban the TikTok app as a threat to national security. Some red states are considering bans on Chinese nationals buying land.It is in the military arena of course where the stakes are the highest and the risks of a competitive relationship becoming adversarial are greatest. Last week, the Pentagon informed Congress that China now had more missile silos than the US. It was an eye-catching claim, though most of the silos are empty and the US retains a substantial superiority in submarine and airborne launchers. China is estimated by the Federation of American Scientists to have 350 nuclear warheads. Even if that number tripled, as the Pentagon predicts it will, it will still be less than a fifth of the US stockpile.China’s long-term threat will depend ultimately on whether it is developing its military clout simply to deter or to attack, across the Taiwan Strait in particular. At the end of January, the head of US Air Mobility Command, Gen Mike Minihan, told other officers that his “gut” told him the US and China would be at war by 2025. It was an estimate quickly disowned by the rest of the Pentagon leadership, who shied away from such expressions of inevitability.US officials say that Xi Jinping is watching Russia’s military debacle in Ukraine with concern and maybe recalibrating his options. Opinions differ within the administration on how seriously Xi takes his pledge to reunite China, another reason it has wavered over the right terminology.There is agreement for now however that repeatedly deeming China to be a threat risks making matters worse, shaping policy in such a way that it becomes a self-fulfilling prophecy.TopicsChinaUS foreign policyBiden administrationUS politicsAsia PacificXi JinpingfeaturesReuse this content More

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      US could default this summer unless $31.4tn debt ceiling is raised, CBO warns

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      US could default this summer unless $31.4tn debt ceiling is raised, CBO warnsHistoric federal debt default could occur before July, cautions non-partisan agency The Congressional Budget Office (CBO) on Wednesday said the US treasury department will exhaust its ability to pay all its bills sometime between July and September, unless the current $31.4tn cap on borrowing is raised or suspended.In a report issued alongside its annual budget outlook, the non-partisan CBO cautioned that a historic federal debt default could occur before July if revenue flowing into the treasury in April – when most Americans typically submit annual income tax filings – lags expectations.US inflation eases again for seventh consecutive monthRead moreThe pace of incoming revenue, coupled with the performance of the US economy in the coming months, makes it difficult for government officials to predict the exact “X-date”, when the treasury could begin to default on many debt payments without action by Congress.“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government would be unable to pay its obligations fully,” the CBO report said. “As a result, the government would have to delay making payments for some activities, default on its debt obligations, or both.”Separately, the CBO said annual US budget deficits will average $2tn between 2024 and 2033, approaching pandemic-era records by the end of the decade – a forecast likely to stoke Republican demands for spending cuts.Meanwhile, the CBO estimated an unemployment rate of 4.7% this year, far above the current 3.4%.CBO director Phillip Swagel attributed the rise to higher interest rates that particularly are hitting the housing industry, coupled with slowing business investment.The sobering analysis reflects the full impact of recent spending legislation, including investments in clean energy and semiconductors and higher military spending, along with higher healthcare, pension and interest costs. It assumes no change in tax and spending laws over the next decade.“Over the long term, our projections suggest that changes in fiscal policy must be made to address the rising costs of interest and mitigate other adverse consequences of high and rising debt,” Swagel said in a statement.The need to raise the debt ceiling is driven by past spending laws and tax cuts, some enacted under Joe Biden’s predecessor, Donald Trump.Republicans, who control the House of Representatives, want to withhold a debt limit increase until Democrats agree to deep spending cuts. Democrats in turn say the debt limit should not be “held hostage” to Republican tactics over federal spending.After hitting the $31.4tn borrowing cap on 19 January, Treasury Secretary Janet Yellen said the treasury can keep up payments on debt and federal benefits and make other outlays at least through 5 June using cash receipts and extraordinary cash management measures.Year of the debt limitSo far in 2023, not a day has gone by on Capitol Hill without lawmakers jousting over the debt limit, as Democrats press for a quick, clean increase in treasury borrowing authority and Republicans insist on first nailing down significant reductions in future government spending.Social security and Medicare, the government’s popular pension plan and its healthcare program for Americans ages 65 and older, are at the center of the debt limit and government funding debate, as both parties also jockey to define the contours of the 2024 presidential and congressional election campaigns.“There has been a Republican drumbeat to cut social security and Medicare,” Senate majority leader Chuck Schumer, a Democrat, told reporters on Tuesday.Republican Senate minority leader Mitch McConnell has labored, without much success so far, to smother such talk.“Let me say one more time. There is no agenda on the part of Senate Republicans to revisit Medicare or social security. Period,” he said at a news conference.Most Americans do not closely follow Washington’s debt-ceiling saga, but they still worry it could hurt their finances, according to a Reuters/Ipsos public opinion poll conducted between 6-13 February.In that poll, 55% of US adults said they have heard little or nothing about the debate, but three-quarters of respondents said Congress must reach a deal because defaulting would add to their families’ financial stress, largely through potentially higher borrowing costs.TopicsUS economyBiden administrationJoe BidenUS politicsnewsReuse this content More

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      Tesla to expand supercharger stations to all electric vehicles, White House says

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      Tesla to expand supercharger stations to all electric vehicles, White House saysFunding for the EV charging network comes from the infrastructure bill that allocates $7.5bn to the expansion The White House is partnering with Tesla to expand electric vehicle charging infrastructure in the US, with the company opening at least 7,500 of its chargers to all electric vehicles (EVs) by the end of 2024, the White House announced on Wednesday.Tesla charging stations currently use a certain power connector that require non-Tesla EVs to use an adapter. The White House said that Tesla will work to include at least 3,500 new and existing 250 kW superchargers along highways and level 2 destination chargers at locations like hotels and restaurants across the country. Tesla is also planning to double its network of superchargers.Electric car enthusiasts tantalized by new idea: converting old vehiclesRead moreThe Biden administration in 2021 set goals of having 50% of new vehicle sales in the country to be EVs and 500,000 EV chargers along highways by 2030. The US currently has around 3m EVs on the road and about 60,000 charging stations across the country.The administration’s goals “have spurred network operators to accelerate the buildout of coast-to-coast EV charging networks”, the White House said in a statement. “Public dollars will supplement private investment by filling gaps, serving rural and hard to reach locations and building capacity in communities.”Along with its partnership with Tesla, the White House is working with other companies, including car manufacturers like General Motors, Mercedes-Benz and Volvo, to build out more chargers. Rental car company Hertz is working with BP to bring chargers to Hertz locations in major cities. Hertz is planning to make one-quarter of its fleet electric by 2024.Funding for the EV charging network expansion comes largely from the bipartisan infrastructure bill passed in 2021. The bill allocates $7.5bn for charging infrastructure, including a $2.5bn community grant program. In September, the White House said that all 50 states have plans to build chargers using funding from the bill.The announcement of the White House’s partnership with Tesla comes after reports that Tesla CEO Elon Musk met with White House officials, though not with Biden himself, in late January. The Washington Post reported that Musk met with John Podesta and Mitch Landrieu, top White House aides charged with implementing Biden’s clean infrastructure policies, on 27 January.Musk has clashed with the administration and other Democrats, particularly over labor unions. In the past, Biden praised GM and Ford, both which work with unions, for their EV efforts over Tesla. In a tweet last year, Musk called Biden “a damp [sock] puppet in human form” after Biden praised GM and Ford for “building more electric vehicles here at home than ever before”.Landrieu told reporters that partnerships with companies, including Tesla, took “many, many months” and that Musk was “very open [and] very constructive” in meetings with the administration.TopicsElectric, hybrid and low-emission carsTeslaBiden administrationUS politicsnewsReuse this content More

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      Biden drops candidate’s nomination to human rights post over Israel remarks

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      Biden drops candidate’s nomination to human rights post over Israel remarksProfessor says his selection was dropped for describing Israel as an ‘apartheid state’ and accusing Jeffries of being ‘bought’ by Aipac The Biden administration has withdrawn the nomination of a leading law professor to an international human rights post, for describing Israel as an “apartheid state” and accusing the top Democrat in Congress of being “bought” by pro-Israel groups.James Cavallaro, of Wesleyan and Yale universities, said he was told by the US state department on Tuesday it had dropped his selection to the Inter-American Commission on Human Rights (IACHR) “due to my statements denouncing apartheid in Israel/Palestine”.The withdrawal of his nomination followed an article by a New York Jewish newspaper, the Algemeiner, that also highlighted Cavallaro’s retweeting of a Guardian story about the gratification of pro-Israel groups at the election of the New York Democratic congressman Hakeem Jeffries as House minority leader.Jeffries is closely tied to the American Israel Public Affairs Committee (Aipac) and other hardline pro-Israel lobby groups. One of them, Pro-Israel America, was his largest single donor over the past year.Cavallaro retweeted the Guardian story with the comment: “Bought. Purchased. Controlled.”The state department spokesman, Ned Price, said the administration had not been acquainted with Cavallaro’s views when his nomination was announced on Friday.“We were not aware of the statements and writings,” he said. “His statements clearly do not reflect US policy, they are not a reflection of what we believe and they are inappropriate to say the least.”Cavallaro, who was IACHR president six years ago, said he reminded state department officials that Human Rights Watch, Amnesty International and the leading Israeli human rights group, BTselem, “have issued reports naming the conditions in Israel/Palestine as apartheid”.“My nomination would not have affected US policy on Israel. What has the withdrawal of my nomination achieved? The removal from the [IACHR] of the potential return of a committed, experienced advocate for human rights in the Americas,” he said on Twitter.Cavallaro described the withdrawal of his nomination as part of broader “censorship of human rights advocates who denounce apartheid in Israel”, making reference to the Harvard Kennedy School’s blocking of a post for the former Human Rights Watch director Kenneth Roth over his criticisms of Israeli policies. The school backed down following a public outcry.Cavallaro, the founder and director of the University Network for Human Rights, said he deleted “many” of his controversial tweets because he was “proactively and in good faith addressing concerns the state department had raised during the vetting process about public expressions of my personal views on US policy”.TopicsBiden administrationUS politicsJoe BidenHakeem JeffriesnewsReuse this content More

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      Biden appeals to governors for ‘less partisanship’ to help rebuild economy

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      Biden appeals to governors for ‘less partisanship’ to help rebuild economy President says at White House dinner that passage of infrastructure laws is evidence of ‘some bipartisan progress’ Joe Biden appealed to Republican and Democratic governors on Saturday to continue working across political divides to improve Americans’ lives and rebuild the economy after the hardships brought by the Covid-19 pandemic.Speaking at a black-tie dinner at the White House, the president told 31 governors that the passage of laws on investing in infrastructure and domestic manufacture of semiconductors was evidence of “some bipartisan progress” among Republicans and Democrats. Vice-President Kamala Harris was also in attendance.“I hope we’re going to get a little bit – I’m going to try – a little bit less partisan and work on things that we can really get done to change people’s lives,” Biden said after governor meetings in Washington this week.Biden said he was still “ready to fight, as you all are”, and though Republicans and Democrats would not always agree, it made a difference when they worked together.Republican governor Spencer Cox of Utah, vice-chairperson of the National Governors Association, said it was “very symbolic” to have Republicans and Democrats “breaking bread together” at the White House.Cox added that he believed the majority of Americans wanted to see more collaboration across the political aisle.“This is what is missing in our country,” he said, adding that “it’s hard to hate up close”.Notably absent from the dinner was Florida’s governor Ron DeSantis, a Republican who has challenged Biden’s agenda on a wide range of fronts, from gun safety to LGBTQ+ rights.Country music singer Brad Paisley played guitar and performed his song “American Saturday Night” after the dinner, telling the crowd he had swapped out the second line of the song “because it mentioned Russia and I don’t do that any more”. Russia’s military invaded Ukraine last year, and Biden’s administration has provided more than $30bn in security aid to Ukraine’s defenders.Instead, Paisley sang: “She’s got Brazilian leather boots on the pedal of a German car. There’s a Ukrainian flag hanging up behind the bar.”Biden’s remarks echoed his State of the Union address to Congress on Tuesday, when he challenged Republicans to help to unite the country.The bipartisan laws passed last year were game-changers for the US economy, New Jersey governor Phil Murphy, a Democrat, told reporters on Friday after the series of governor meetings at the White House.Murphy, who is chairperson of the National Governors Association, said states’ ability to work together on other issues, such as mental health, disproved the “narrative that politics has gotten completely divisive” and called the group a “beacon of bipartisan reality”.He said the association had appealed to lawmakers and the White House to end a dispute over raising the $31.4tn statutory debt ceiling before the Treasury department runs out of funds to pay US debts.Republicans want spending concessions from Biden, who has said he will not negotiate over raising the limit.Murphy said he left the meetings “more optimistic” about both sides’ willingness to negotiate while preserving social security, medicare and defense spending.TopicsJoe BidenUS politicsBiden administrationDemocratsRepublicansnewsReuse this content More

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      ‘Hot air’: Marjorie Taylor Greene in State of the Union balloon stunt

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      ‘Hot air’: Marjorie Taylor Greene in State of the Union balloon stuntRepublican extremist appears to reference Chinese surveillance dirigible by parading halls of Congress with white balloon Marjorie Taylor Greene appeared to tee up a State of the Union stunt on Tuesday, patrolling the halls of Congress with a large white balloon in reference to Republican criticism of Joe Biden over his handling of a flight over US territory by a Chinese surveillance dirigible.Now the Chinese ‘spy balloon’ is down, the question is: what was it for?Read more“Just an innocent white balloon everybody,” the Georgia extremist said, hours before Biden’s address to Congress, attempting to keep aloft the balloon saga which ended when it was shot down off the Carolinas on Saturday.Greene did not discuss the Pentagon disclosure that three Chinese balloons passed over the US during the presidency of Donald Trump, only for the Trump administration to fail to spot them.Biden’s national security adviser, Jake Sullivan, told reporters earlier improvements to surveillance under Biden “enhanced our capacity to be able to detect things that the Trump administration was unable to detect”.Greene’s promenade with a balloon prompted widespread criticism.Bonnie Watson Coleman, a New Jersey Democrat, said: “She has to do something with all that hot air.”But Greene is nothing if not a dedicated conspiracy theorist and controversialist. Elected in 2020, she was ejected from committees for threatening behaviour in 2021 but last month restored to key panels as an ally of Kevin McCarthy, the new Republican speaker.President Biden: “Instead of making the wealthy pay their fair share, some Republicans want Medicare and Social Security to sunset. I’m not saying it’s the majority.”Rep. Marjorie Taylor Greene: “Liar!” pic.twitter.com/OFUglFuBxC— CSPAN (@cspan) February 8, 2023
      US officials have explained that Biden wanted to shoot the balloon down three days before it was eventually popped with a missile, but was persuaded not to order the operation while it was over land, and might cause injury or destruction on the ground when brought down.China claims the balloon was for civilian meteorological research. Its downing stoked a confrontation with Beijing, as Antony Blinken, the secretary of state, cancelled a trip for talks.McCarthy – who has recently praised Greene – reportedly told Republicans not to plan any stunts in response to Biden’s speech.Greene did not have her balloon with her in the chamber. But she did make her mark when Biden accused Republicans of threatening social security and Medicare.“Liar!” Greene was seen to shout.TopicsState of the Union addressJoe BidenBiden administrationUS politicsUS CongressHouse of RepresentativesRepublicansnewsReuse this content More

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      Biden to outline optimistic vision for US’s future in State of Union address

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      Biden to outline optimistic vision for US’s future in State of Union addressPresident hopes to combat widespread sense of pessimism and to tout his accomplishments from first two years in office Joe Biden will outline an optimistic vision for the future of America in his second State of the Union address on Tuesday, White House officials said, hoping to combat the widespread sense of pessimism that surveys and polls have captured across the country.As he marks the halfway point of his first term, Biden is expected to tout his legislative accomplishments from his first two years in office – including the passage of the Inflation Reduction Act, the Bipartisan Infrastructure Law and the Chips Act.“This president is focused on delivering results for the American people, and we’ve seen him do that over and over and over again,” Kate Bedingfield, White House communications director, said. “We look forward to continuing to talk to the American people about the work that we are doing and the results that we’re delivering.”But polls show most Americans have not yet felt the impact of Biden’s policies in their everyday lives, particularly when it comes to their personal finances. Although inflation has started to cool after peaking at an alarming rate of 9.1% last summer, only 21% of Americans rate current economic conditions as positive, according to a recent Pew Research Center survey.Even the jobs market, which has been a bright spot for the US economy in recent months, does not inspire much confidence among the American public. The country’s unemployment rate hit a 53-year low of 3.4% last month, but just 34% of Americans say Biden has made progress on creating more good jobs for their communities, a new ABC News/Washington Post poll found.Brian Deese, the outgoing director of the National Economic Council, said Biden would acknowledge these challenges in his State of the Union speech.“The core message is: we have to make more progress, but people should feel optimism that because of what we have seen and because of the progress that we’ve made, that we know how to keep making progress,” Deese said Monday.Progress will now be even more difficult for Biden to achieve, however. With Republicans in control of the House of Representatives, Biden faces significant hurdles in advancing his legislative agenda. Previewing the president’s Tuesday speech, White House officials said he would work with the new House Republican majority to find areas of common ground.“We are going to work with Congress on a bipartisan basis to make progress on the issues that we’re talking about today,” Bedingfield said.But the relationship between Biden and the new House Republican speaker, Kevin McCarthy, has gotten off to a rocky start. McCarthy has demanded government spending cuts in exchange for raising the debt ceiling, but Biden has insisted on a “clean” bill to raise the nation’s borrowing limit with no strings attached. The treasury has warned that the US could be at risk of default unless the debt ceiling is raised by June.In an address Monday, McCarthy defended the Republican strategy of using the debt limit as a bargaining chip to extract spending cuts.“The debt limit is one of the most important opportunities Congress has to change course,” McCarthy argued.But the Republican’s speech was scant on details about exactly which programs his party would target. McCarthy said cuts to Medicare and social security – the largest federal spending programs – were “off the table” and told reporters Republicans would not raise taxes, leaving it unclear how his party plans to shrink the federal budget.Deese said Biden would explicitly make the case in his Tuesday speech that raising the federal borrowing limit was “Congress’s constitutional obligation” and the responsibility of all elected officials to ensure the United States does not default on its debt.Biden is prepared to hold separate talks with Republicans about fiscal discipline, Deese noted, but he has made clear he will not allow them to leverage the full faith and credit of the United States to force spending cuts.“You will hear an openness and, in fact, an eagerness to have a real serious conversation about the fiscal and economic priorities of the country and where we can find common ground,” Deese said. “That’s the kind of conversation you have in a normal budget process, and that’s the appropriate way to approach these things.”Biden will likely reiterate that message as he delivers his State of the Union speech, which he and his team have been crafting for weeks. Biden spent the weekend huddled at Camp David with advisers and his chief speechwriter, Vinay Reddy, fine-tuning the address. True to form, the president was “heavily engaged” in the drafting process, said White House press secretary Karine Jean-Pierre.“When you hear the speech there’ll be no question that this is a Joe Biden State of the Union speech.” she said.TopicsState of the Union addressJoe BidenBiden administrationDemocratsUS politicsUS economynewsReuse this content More

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      Biden has revived democratic capitalism – and changed the economic paradigm

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      Biden has revived democratic capitalism – and changed the economic paradigmRobert ReichThe president’s domestic successes offer a rebuke to disciples of Reagan: the ‘free market’ has never existed How can inflation be dropping at the same time job creation is soaring?Schools and universities are ground zero for America’s culture war | Moira DoneganRead moreIt has taken one of the oldest presidents in American history, who has been in politics for over half a century, to return the nation to an economic paradigm that dominated public life between 1933 and 1980, and is far superior to the one that has dominated it since.Call it democratic capitalism.The Great Crash of 1929 followed by the Great Depression taught the nation a crucial lesson that we forgot after Ronald Reagan’s presidency: the so-called “free market” does not exist. Markets are always and inevitably human creations. They reflect decisions by judges, legislators and government agencies as to how the market should be organized and enforced – and for whom.The economy that collapsed in 1929 was the consequence of decisions that organized the market for a monied elite, allowing nearly unlimited borrowing, encouraging people to gamble on Wall Street, suppressing labor unions, holding down wages, and permitting the Street to take huge risks with other people’s money.Franklin D Roosevelt and his administration reversed this. They reorganized the market to serve public purposes – stopping excessive borrowing and Wall Street gambling, encouraging labor unions, establishing social security and creating unemployment insurance, disability insurance and a 40-hour workweek. They used government spending to create more jobs. During the second world war, they controlled prices and put almost every American to work.Democratic and Republican administrations enlarged and extended democratic capitalism. Wall Street was regulated, as were television networks, airlines, railroads, and other common carriers. CEO pay was modest. Taxes on the highest earners financed public investments in infrastructure (such as the national highway system) and higher education.America’s postwar industrial policy spurred innovation. The Department of Defense developed satellite communications, container ships and the Internet. The National Institutes of Health did trailblazing basic research in biochemistry, DNA and infectious diseases.Public spending rose during economic downturns to encourage hiring. Even Richard Nixon admitted “we’re all Keynesians”. Antitrust enforcers broke up AT&T and other monopolies. Small businesses were protected from giant chain stores. By the 1960s, a third of all private-sector workers were unionized.Large corporations sought to be responsive to all their stakeholders – not just shareholders but employees, consumers, the communities where they produced goods and services, and the nation as a whole.Then came a giant U-turn. The Opec oil embargo of the 1970s brought double-digit inflation followed by the Fed chair Paul Volcker’s effort to “break the back” of inflation by raising interest rates so high the economy fell into deep recession.All of which prepared the ground for Reagan’s war on democratic capitalism.From 1981, a new bipartisan orthodoxy emerged that the so-called “free market” functioned well only if the government got out of the way (conveniently forgetting that the market required government). The goal of economic policy thereby shifted from public welfare to economic growth. And the means shifted from public oversight of the market to deregulation, free trade, privatization, “trickle-down” tax cuts, and deficit-reduction – all of which helped the monied interests make more money.What happened next? For 40 years, the economy grew but median wages stagnated. Inequalities of income and wealth ballooned. Wall Street reverted to the betting parlor it had been in the 1920s. Finance once again ruled the economy. Spurred by hostile takeovers, corporations began focusing solely on maximizing shareholder returns – which led them to fight unions, suppress wages, abandon their communities and outsource abroad.Corporations and the super-rich used their increasing wealth to corrupt politics with campaign donations – buying tax cuts, tax loopholes, government subsidies, bailouts, loan guarantees, non-bid government contracts and government forbearance from antitrust enforcement, allowing them to monopolize markets.Democratic capitalism, organized to serve public purposes, all but disappeared. It was replaced by corporate capitalism, organized to serve the monied interests.Joe Biden is reviving democratic capitalism.From the Obama administration’s mistake of spending too little to pull the economy out of the Great Recession, he learned that the pandemic required substantially greater spending, which would also give working families a cushion against adversity. So he pushed for the giant $1.9tn American Rescue Plan.This was followed by a $550bn initiative to rebuild bridges, roads, public transit, broadband, water and energy systems. And in 2022, the biggest investment in clean energy in American history – expanding wind and solar power, electric vehicles, carbon capture and sequestration, and hydrogen and small nuclear reactors. This was followed by the largest public investment ever in semiconductors, the building blocks of the next economy.Notably, these initiatives are targeted to companies that employ American workers.Biden has also embarked on altering the balance of power between capital and labor, as did FDR. Biden has put trustbusters at the head of the Federal Trade Commission and the Antitrust Division of the justice department. And he has remade the National Labor Relations Board into a strong advocate of labor unions.Unlike his Democratic predecessors, Biden has not sought to reduce trade barriers. In fact, he has retained several from the Trump administration. But unlike Trump, he has not given a huge tax cut to corporations and the wealthy. It’s also worth noting that in contrast with every president since Reagan, Biden has not filled his White House with former Wall Street executives. Not one of his economic advisers – not even his treasury secretary – is from the Street.I don’t want to overstate Biden’s accomplishments. His ambitions for childcare, eldercare, paid family and medical leave were thwarted by senators Joe Manchin and Kyrsten Sinema. And now he has to contend with a Republican House.Biden’s larger achievement has been to change the economic paradigm that has reigned since Reagan. He is teaching America a lesson we once knew but have forgotten: that the “free market” does not exist. It is designed. It either advances public purposes or it serves the monied interests.Biden’s democratic capitalism is neither socialism nor “big government”. It is, rather, a return to an era when government organized the market for the greater good.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
      TopicsState of the Union addressOpinionJoe BidenBiden administrationUS politicsDemocratsUS domestic policyUS economycommentReuse this content More