When the Democrats won Georgia’s two Senate seats last week, US president-elect Joe Biden greeted the victory — which brings his party control of Congress — with a statement that voters “want action on the crises we face and they want it right now”. It was undoubtedly a conscious echo of Franklin D Roosevelt’s 1933 inauguration speech, when the New Deal president vowed “action — and action now”.
Roosevelt, as Mr Biden will, took office amid a deep economic crisis. So did Barack Obama, whom Mr Biden served as vice-president. Both predecessors acted to end the economic downturn. But only one fundamentally reshaped the way the US economy worked.
Beyond recovery policies, FDR used his crisis to roll out big structural changes in very little time. These reordered economic relations, were politically sticky and were hard to reverse once in place: deposit insurance, mortgage reinsurance and social security. The federal minimum wage followed in his second term. The programmes imparted long-term economic security to those they covered, even though several were unconscionably designed to exclude black Americans.
In contrast, the Obama-Biden administration’s only transformative policy was health reform. Even that was partial, giving 20m Americans health insurance in 2016 but leaving 27m without it. When the pandemic hit, the US economy worked no better for many than it had last time Mr Biden entered the White House.
The most historic part of his task now is the same as Roosevelt’s. It is to end, for this and future generations, the endemic economic insecurity that has made too many Americans give up on liberal democratic norms. To succeed, he must, like FDR, use the first few months of his presidency for a big push — not just on immediate rescue operations but on structural policies that have staying power and fundamentally restructure the economy.
He has already committed to one such shift. A $15 an hour federal minimum wage will be politically difficult to overturn. If properly enforced and strengthened with an automatic adjustment linked to average wages, it will also banish poverty-pay work from the US for good. The consequences are incalculable. But more is needed to end economic insecurity.
The most immediate way of doing this is to put money in people’s hands. This is why Democrats and Republicans have agreed twice in the past year to send direct payments to Americans. Mr Biden and his congressional allies seem set to boost the last $600 cheque to $2,000. Yet, satisfying as it may be to deliver a quick cash gift to voters, it does not create structural change.
Economic precarity was deeply rooted in the US before this crisis. Infamously, four in 10 people did not have $400 in liquid savings for minor emergencies. Such insecurity is not solved by a single direct payment. Instead, Mr Biden should ask Congress to introduce modest but regular unconditional payments to citizens — say $120 a month to start, about the same each year as the contemplated one-off top-up, with the same taper for higher earners. It could be paid as a refundable tax credit, a universal basic income in all but name.
What about taxes? There is no need to raise them today. But eventually such a permanent payout programme, plus the infrastructure and social spending Mr Biden has signalled is coming, will need to be funded. It is tempting for the new administration to undo Donald Trump’s 2017 tax cuts. But an alternative with more staying power is new taxes.
There is no better time to justify the sort of multimillionaire wealth tax advocated by Senators Elizabeth Warren and Bernie Sanders — at least on a temporary basis. Polls suggest it is a popular idea, even among Republicans. If the choice is between a wealth tax and higher income taxes, many of the rich will prefer the former.
Carbon taxes can also gain broad support, if redistributed as additional direct payments to citizens. “Carbon dividends” already enjoy some bipartisan support, including from Republican elder statesmen. Once in place, it would be a brave politician who tried to take households’ monthly carbon dividend cheque away from them.
Two more promises Mr Biden has made can also permanently reshape the economy: completing health coverage of the uninsured and cracking down on corruption, money laundering and financial secrecy. Corruption and kleptocracy are the companion of anti-democratic politics and poor economic governance everywhere. Congress is beginning to realise this, as the new bipartisan ban on anonymous shell companies shows.
Some will say such policies must wait until the current economic emergency has been addressed. But the longer the wait, the bigger the risk that Mr Biden’s razor-thin majority will shrink, or that such measures will repel Republicans currently seeking political redemption. It is a rare moment of opportunity for Mr Biden to push through big changes. It will not last.
That is why, in the spirit of FDR’s “bold experimentation”, his administration should treat long-term transformation with as much urgency as short-term rescue. If it does so, Mr Biden will be remembered more for the former than the latter.
Get alerts on US economy when a new story is published