By Chen Li
In March 2021, less than two months after taking office, President Joe Biden signed a USD 1.9 trillion relief package into law, with a series of other trillion-dollar bills waiting to be passed and implemented. This gave the world a glimpse of the so-called “Bidenomics”. Looking at Biden’s predecessors, from Ronald Reagan to Barrack Obama, they were all seen as proponents of neoliberalism, firmly believing in the market’s role in regulating the economy. However, under Biden’s leadership, a structural shift has occurred.
In the 1980s, then-President Ronald introduced “Reaganomics”, which was based on the economic philosophy of building a “small government”, reducing spending, cutting taxes, and avoiding wealth redistribution. Although the rich would become wealthier as a result, they would increase consumption and investment, causing wealth to trickle down from the top, ultimately benefiting all social classes. In this sense, Bidenomics can be seen as a full rejection of Reaganomics. In his 2022 budget proposal, Biden indicated that the budget reflected the fact that the “trickle-down theory” had never worked.
Bidenomics is actually rooted in the rise of new progressive economics, which became mainstream within the Democratic Party. New progressive economics emerged after the 2008 financial crisis as a critique of traditional neoliberal economics, emphasizing the active role of government in the economy. This “big government” approach differs somewhat from Keynesianism. Keynesianism stresses that demand is the key driver of economic growth, with the government needing to intervene through fiscal policy to stimulate demand and promote employment.
In contrast, new progressive economics emphasizes the government’s role in fostering long-term economic growth and stability. It argues that the government should not only intervene during crises but also promote structural reforms to address issues like inequality and economic instability. This school of thought advocates for social spending, anti-monopoly measures, industrial policy, and the promotion of social welfare, i.e., policies that lean heavily on the “big government” approach and downplay the role of the free market in economic development.
In a strict sense, it is difficult to classify new progressive economics as a fully formed school of economics because it is essentially a rebellion against traditional liberal economics. It represents a political application of economic ideas rather than a theoretical discipline. Although it has developed a coherent framework, it has considerable political elements. To fully understand this, it is necessary to review how new progressivism gained popularity within the Democratic Party.
The shift toward new progressivism within the Democratic Party occurred during Obama’s second term, when disappointment and dissatisfaction among the party’s progressive wing reached a peak. Progressives believed that Obama, constrained by traditional neoliberal economic ideas, was too sympathetic toward the financial industry and that his economic stimulus measures were insufficiently bold, thus calling for more thorough reforms. Inspired by the Occupy Wall Street movement and the We Are the 99% campaign, progressives began focusing their political donations on issues of inequality.
At the same time, the influence of new progressive ideas expanded under the advocacy of Harvard Law School professor and consumer rights expert Elizabeth Warren. Warren not only launched fierce critiques against Wall Street but also worked to combat the excessive concentration of power among tech giants and large corporations. After Trump’s election in 2016, elites within the Democratic Party began questioning the traditional ways of political operation. Organizations such as the Hewlett Foundation and the Ford Foundation began to promote the critique of neoliberalism as a new intellectual paradigm, while Omidyar Network began pushing the movement to “reimagine capitalism”.
Under the influence of new progressivism, left-wing figures within the Democratic Party began to push for antitrust movements against big corporations, populist policies, and new industrial policies. Regarding the Democratic Party’s shift to the left, Jake Sullivan wrote that the U.S. was at a “turning point”, disillusioned with the excesses of the free market and open to bold new policies. After taking office, President Biden also embraced new progressive ideas. For a long time, his administration had maintained close ties with labor unions and remained skeptical of the elite economists from top universities. With the emergence of the economic crisis caused by the pandemic, Biden appeared eager to position himself as a “Roosevelt-style President”, with Jake Sullivan, a lawyer by training, serving as his chief policy advisor during the campaign.
Guided by New Progressive thinking, the Biden administration introduced a USD 1.9 trillion pandemic recovery stimulus package. Traditional economists, such as Larry Summers, voiced complaints, arguing that the size of the stimulus was too large and far exceeded what economic analysis deemed necessary, warning that it would inevitably lead to inflation. As it turned out, these economists were not wrong. In the first two years of Biden’s presidency, U.S. prices surged, reaching a peak of 9.1% inflation in June 2022, marking the highest inflation rate in 40 years. At the same time, the Inflation Reduction Act and the CHIPS Act provided billions of dollars in tax credits and subsidies for industrial policies. This even led to criticism from left-wing figures within the Democratic Party, such as Elizabeth Warren, who questioned whether the U.S. Department of Commerce was too hasty in distributing funds without adequate oversight. To date, U.S. factory construction spending has doubled, but no one knows what the long-term return on these investments will be.
Under the new progressive ideas, the policy staff of the Biden administration also displayed characteristics that were different from those of the Obama administration, reflecting a trend of diminishing influence of economics at both the intellectual and political levels. New York Times columnist Ezra Klein noted that the influence of economists and financiers during Biden’s tenure was far weaker compared to the Obama administration, while the influence of nonprofit organizations, labor leaders, and progressive elite lawyers continued to grow. Biden’s policy team consists largely of graduates from Yale Law School, including Jake Sullivan, Jennifer Harris, and Lina Khan, among others.
The agenda of new progressivism has been largely realized, marking a victory for left-wing Democrats focused on gaining support from middle and lower-income groups, addressing national security concerns, and opposing corporate monopolies. However, the resulting damage to the free market and the economy has sparked public dissatisfaction. Polling data shows that many American voters are dissatisfied with the Biden administration’s economic policies, believing it has failed to effectively control rising prices. According to Gallup, the approval rating for the Biden administration’s economic policies stands at just 37%.
As Kamala Harris replaces Joe Biden as the Democratic presidential candidate, predicting whether she will carry on Biden’s legacy and continue to advance new progressive ideas becomes especially important. Some signs suggest that Harris may continue Biden’s approach. In August of this year, Harris’s campaign team announced that her economic advisory team would include Brian Deese, Biden’s former Director of the National Economic Council, and Bharat Ramamurti, who had previously worked as an aide to Elizabeth Warren. In a recent economic policy speech, Harris presented a progressive agenda centered on narrowing income inequality and expanding opportunities for marginalized groups. She advocated for strengthening union power, increasing taxes on the wealthy, and bolstering the social safety net for middle- and low-income families, positions that align with new progressive ideals. However, for now, winning the presidential election is Harris’s top priority, which means she is working to balance the interests of both her New Progressive supporters and her critics. She has sent signals to all factions. As Harris and her team continue to adjust their policy positions, observers remain cautious about whether she will fully adhere to the core principles of new progressive economics.
New progressive economics is gaining traction in the United States, but it is not so much a traditional economic theory as it is a political economy for a new era, deeply intertwined with political agendas. It represents a direct challenge to classical liberal economic thought, with the goal of reshaping capitalism. In the policy practices of the Biden administration, new progressive economics has been characterized by a strong political drive, seeking to expand the role of government in the economy to address inequality and secure support from middle- and low-income voters. However, these policies have also led to soaring inflation and have had negative consequences for the free market. Kamala Harris’s campaign suggests she may continue to champion the new progressive agenda. However, given the deep political polarization among voters, she is currently attempting to balance the interests of progressives with those of their critics. Whether the new progressive movement can maintain its influence within the Democratic Party and whether it will have a lasting global impact remain important questions to watch.
About the author:
Chen Li, Economic Research Fellow at ANBOUND
