JOE BIDEN´S EFFORT TO REMAKE THE ECONOMY IS AMBITIOUS, RISKY -- AND SELFISH / THE ECONOMIST

Economic reform

Joe Biden’s effort to remake the economy is ambitious, risky—and selfish

But America’s plan to spend $2trn could help save the planet

Get behind the wheel of an electric vehicle made in Detroit and drive south. 

The outline of a city that was once a byword for industrial decline fades in the rear-view mirror. 

Head into Ohio, where the battery under your feet was made. 

The semiconductors that regulate its charging speed were made there too, in a vast new factory that counts the Pentagon among its biggest customers. 

Recharge with electricity transmitted from one of West Virginia’s new nuclear plants, then start the long journey into the heartlands. 

After the endless wind farms of Kansas, you drive through Oklahoma’s vast solar fields, then loop back to the gulf coast. 

The trip ends by the water, the bright sun glinting off a spanking-new green-hydrogen plant.

This is America in 2033, if the Biden administration has its way. 

In the past two years Congress has passed three bills, on infrastructure, semiconductor chips and greenery, that will make $2trn available to reshape the economy. 

The idea is that, with government action, America can reindustrialise itself, bolster national security, revive left-behind places, cheer up blue-collar workers and dramatically reduce its carbon emissions all at the same time. 

It is the country’s most ambitious and dirigiste industrial policy for many decades. 

In a series of articles beginning this week, The Economist will be assessing President Joe Biden’s giant bet on transforming America.

Mr Biden is taking an epoch-making political gamble. 

He is acting on so many fronts because he had no choice. 

The only way to build a majority in Congress was to bolt a Democratic desire to act on climate change on to hawkish worries about the threat from China and the need to deal with left-behind places in the American heartland. 

On its own, each of these concerns is valid. 

But in terms of policy, the necessity to bind them together has led America into a second-best world. 

The goals will sometimes conflict, the protectionism will infuriate allies and the subsidies will create inefficiencies.

To grasp the scale of what is under way, follow the money. 

The Infrastructure Act makes $1.2trn available over ten years for roads, bridges and cables for a new green grid. 

The chips Act, which promotes making semiconductors in America, contains $280bn of spending. 

The Inflation Reduction Act contains $400bn in subsidies for green tech over ten years; some analysts suggest the true figure will be $800bn. 

The money is only part of the picture. 

With it comes a plethora of rules, from requirements that batteries be made in North America, to restrictions on tech imports and exports on grounds of national security.

A giant plan that has so many disparate objectives does not simply succeed or fail. 

Its full consequences may not become clear for many years. 

However, you do not have to be Ayn Rand to question whether the government is up to managing such an ambitious set of projects. 

For example, because American environmentalism has put preservation first, it takes more than a decade to obtain the necessary permits to connect a renewable project in Wyoming to California’s grid. 

Likewise, if industries are encouraged to focus on lobbying rather than innovating and competing, then costs will rise.

And some of the aims are contradictory. 

Requiring jobs to be in America would be good for some workers, no doubt. 

But if green products such as wind turbines become more expensive, then the green transition will become more expensive, too. 

And if other Western countries lose vital industries to America as they chase subsidies or duck import restrictions, then the alliances that underpin America’s security will suffer as a result.

Indeed, the entire enterprise may be hard to pull off for lack of affordable workers. 

The plan would never create lots of solid working-class jobs: in today’s manufacturing, robots staff the assembly lines. 

But America may also struggle to find enough of the short-term construction workers needed to build out green infrastructure. 

Unemployment is at 3.5%, a 50-year low. 

More immigration could help fill vacancies, but it is restricted. 

Policies intended to help women rejoin the labour market, such as early education, were stripped out of Mr Biden’s plans. 

Green subsidies therefore risk being diverted into higher wages.

The administration has an answer for its critics. 

It says that, if America can develop new technologies, build supply chains that are less dependent on China and drive down the cost of clean sources of energy, everyone will be better off. 

And America has significant advantages: a rich internal market, vast landscapes for solar and wind farms, pipelines for transporting hydrogen and reservoirs in which to store carbon. 

Its universities and venture capital make it a hub for green innovation. 

The country is already sucking in foreign investment to work alongside the subsidies. 

And the policy enjoys a degree of political consensus. 

Although Republicans are less keen on the green bits, they are even more hawkish on China and even more protectionist.

To help the plan realise its good intentions, three things need to happen. 

First, the effort going into boosting domestic industry needs to be matched by a sustained programme of trade diplomacy. 

One way to build a bloc in favour of a cheaper green transition would be to give foreign-made goods access to American subsidies (so long as they are not Chinese, Iranian or Russian). 

Second, subsidies should tilt towards technologies that are not yet commercially viable, such as new types of nuclear reactor and carbon capture and storage. 

Public money spent reshoring the manufacturing of solar panels that could be produced more cheaply elsewhere will be wasted. 

Third, to build new subsidised infrastructure, America needs reform of its permit laws, perhaps with a federal law that supersedes state and local concerns.

Half-full

For better or worse, Mr Biden’s blueprint for remaking the economy will change America profoundly. 

It may succeed in helping deal with an authoritarian China, keeping voters at home from embracing a more radical and destructive politics, and defying the gloomier predictions about the effects of climate change. 

But be under no illusions, it is audacious to believe that the way to cope with three problems which are too hard to tackle separately is to deal with them all at once.