Donald Trump’s 2016 victory inspired a revolution in economic thinking among Democrats. His 2024 restoration now threatens to kill off that revolution for good.
Following the 2016 election, a large share of the American left-of-center concluded that Trump’s victory could be blamed, at least in part, on half a century of “neoliberal” economic policy that was too deferential to free markets. When Joe Biden took office in 2021, his administration adopted a new, more populist approach, sometimes called “post-neoliberalism” or simply “Bidenomics,” centered on a much more active role for government in the economy. Its supporters believed that the new approach would not only help achieve key national goals but also help Democrats win back the working class.
Then, in 2024, working-class voters abandoned Democrats even more thoroughly than they had eight years prior. For many economists, pundits, and party insiders, the obvious upshot was that Biden’s economic populism had failed. Headlines such as “The Architects of Bidenomics Are in Denial” (The Wall Street Journal), “How Bidenomics Boosted Growth but Failed Americans” (The Financial Times), and “Why Bidenomics Was Such a Bust” (The Nation) proliferated in the weeks and months following the election. Perhaps the most comprehensive critique came from Jason Furman, who chaired Barack Obama’s Council of Economic Advisers and is now a sort of unofficial spokesperson of center-left economics. In a February Foreign Affairs essay titled “The Post-Neoliberal Delusion,” Furman argued that Biden’s economic policies had caused inflation to spike, failed to help the working class, and ultimately generated a backlash that Trump rode right back to the White House. “Policymakers should never again ignore the basics in pursuit of fanciful heterodox solutions,” Furman concluded.
The backlash to Bidenomics has set off a heated debate among the economics intelligentsia, including lengthy rebuttals from several of Biden’s former senior advisers. The outcome of that debate will go a long way toward shaping the agenda that Democrats adopt to try to win back working-class support—and, ultimately, power—from the Trump coalition. Did Democrats lose in 2024 despite Biden’s embrace of post-neoliberalism, or because of it?
The term neoliberalism is infamously hard to define—and, on both the left and the populist right, often devolves into a catchall meme for everything bad in the world—but the long-standing bipartisan consensus that it describes is real and meaningful. Starting in the late 1970s, leaders in both parties embraced free trade, disavowed large-scale public investment (sometimes called “industrial policy”), favored market-friendly solutions to big social problems, and backed away from antitrust enforcement. Underlying those choices was a belief that free markets should largely be left to their own devices to maximize economic growth. The central economic disagreement between the parties was over tax rates and the size of the social safety net.
The fallout of the 2008 financial crisis, and the growing gap between the country’s haves and have-nots, convinced much of the American left that neoliberalism had been a failure. That view caught on even more widely after 2016, when working-class voters—especially in the places that had fallen behind during the era of neoliberalism and globalization—flocked to Trump.
Some on the left first responded to this failure by flirting with Bernie Sanders–style democratic socialism. But the set of ideas that eventually won out, associated more with Elizabeth Warren and her acolytes, argued that capitalism needs to be reformed, not rejected. First, the government should be more willing to intervene to pursue important goals that free markets won’t address on their own, such as slashing carbon emissions and building domestic supply chains. Second, instead of just redistributing existing resources, government should make the distribution of resources more equal to begin with, namely by creating well-paying, unionized jobs for middle-class workers. Third, and perhaps most important, policies should be designed not only to maximize economic efficiency but also to generate positive political outcomes.
The Biden administration, which was packed with Warren disciples, embraced this approach. Its economic agenda centered on three laws—the Inflation Reduction Act, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act—designed to encourage private investment in important sectors and create a blue-collar-jobs boom. (Biden also followed a post-neoliberal path on trade and antitrust, but the effects of those shifts are not as immediate or measurable, so they’ve featured less in the current debate.)
On the investment front, the administration’s efforts worked wonders. In 2024 alone, private companies invested more in building factories for computer and electronics manufacturing in the U.S. than they had in the 20 years before CHIPS was passed. The world’s leading semiconductor manufacturer, TSMC, is spending $165 billion to expand its sprawling megafactory in Arizona. Investment in clean-energy technology and infrastructure increased by 71 percent in the years following the passage of the IRA, and the law is projected to more than double the yearly pace at which the U.S. lowers emissions, according to estimates from Princeton University’s REPEAT Project. About a year into the law’s implementation, three-quarters of announced investment was slated for counties with a median income below the national average.
The promised manufacturing-jobs boom, however, has not yet materialized. In fact, on Biden’s watch, the share of American workers in manufacturing continued its long-term decline. But it is perhaps too early to declare Biden’s efforts there an outright failure: During his presidency, investment in building new factories more than tripled, to its highest level on record. All of those factories need to be built before they can employ workers. In the meantime, there has been job growth—just in the construction sector, not in manufacturing.
Perhaps most crucially, the Biden agenda was designed to be politically resilient. For decades, Democrats’ go-to policy to fight climate change was imposing a price or tax on carbon. Economists argued that this would be the most efficient way to lower emissions. But carbon taxes are deeply unpopular among voters—they are, after all, taxes—and climate policies that raise prices tend to inspire political backlash. No carbon tax had any chance of getting through Congress during Biden’s tenure, and even if it had somehow become law, it would probably have been repealed by a subsequent Republican majority. So the Biden administration tried a completely different strategy. Rather than making dirty energy more expensive, the IRA aimed to make clean energy cheaper—so much cheaper that consumers would switch over to it voluntarily.
The approach proved to be a political winner. Most major policies tend to mobilize voters against the party that passed them. (Think of the Affordable Care Act or the 2017 tax cut.) Not the Inflation Reduction Act. Republican politicians barely mentioned the law on the campaign trail in 2022 or 2024, apart from occasionally trying to take credit for it themselves.
The ultimate test is whether the law can now survive a Republican trifecta that is desperate to offset the fiscally dangerous effects of extending the 2017 tax cuts. Yesterday, the House Ways and Means Committee released an initial proposal that would obliterate most of the IRA’s clean-energy tax credits and, according to Heatmap News, “appears to amount to a back-door full repeal of the climate law.” The final shape of the GOP’s must-pass tax bill is yet to be determined, however, and the fact that roughly 80 percent of IRA investments so far have gone to red congressional districts makes the politics of repeal complex. According to E&E News by Politico, Capitol Hill “has been flooded lately with clean energy lobbyists and companies” begging lawmakers to preserve the IRA, and, in mid-March, 21 House Republicans wrote an open letter to congressional leadership asking them to preserve the legislation’s central tax credits. A functional repeal of the IRA would be a crushing defeat for Biden’s economic experiment. If, however, core portions of the law survive, one of post-neoliberalism’s central conceits will be validated: that policy should be designed to be politically durable, even if it means that economists consider it “inefficient.”
The critics of post-neoliberalism acknowledge most of its successes. For them, however, the Biden administration’s wins were merely the subplot of a story that ended in complete, avoidable disaster.
The first critique is that, despite all of the investment, very little stuff was actually built. The Bipartisan Infrastructure Law, for instance, included funding for half a million elective-vehicle charging stations; three years after its passage, just 58 charging stations were up and running. The same law’s $42 billion investment to expand rural broadband had yet to connect a single household by the end of Biden’s term. According to a Financial Times investigation from August, 40 percent of the large manufacturing projects announced in the year following the passage of the IRA and CHIPS were either delayed significantly or paused indefinitely. Many were set back by, among other things, the complex thicket of rules and requirements that apply to any large project in the United States.
This helps explain why post-neoliberal policies failed to pay off politically for Democrats last year. Publicly funded broadband or charging stations or factories mean little to voters until they’ve actually been built and can be experienced firsthand. “The Biden administration believed in the politics of delivery,” Ezra Klein wrote in The New York Times last month. “But the bills it passed will complete projects so slowly that it will be Trump, or even his successor, who benefits politically.”
Many former Biden officials accept the core of that analysis. “It’s clear we didn’t do enough to make it easier to build,” Brian Deese, the head of Biden’s National Economic Council, told me. He points out that the administration issued several executive orders to fast-track projects and supported multiple (failed) legislative attempts to reform the onerous federal permitting process. But those efforts proved to be too little and too late. Perhaps if the post-neoliberals had been more attentive from the beginning to the ways in which government can get in the way of its own goals, they might have had more success.
Some critics go beyond saying that post-neoliberalism didn’t deliver—they argue that Bidenomics was politically harmful. The story goes something like this: In the spring of 2021, the Biden administration, influenced by post-neoliberal ideas, passed a $1.9 trillion stimulus package known as the American Rescue Plan (ARP). The stimulus payments provided consumers with record amounts of savings, and when the economy reopened, they spent like never before. With too much money chasing too few goods, inflation spiked. Consumer sentiment cratered, and Trump rode a wave of mass frustration back to the White House. This, Furman told me, is the “tragedy of Bidenomics”: The economic philosophy that was supposed to counter Trump triggered the inflationary crisis that brought him back to power.
Biden’s defenders dispute just about every part of that story. They point out that rich countries around the world experienced high inflation despite the fact that none passed stimulus bills remotely as big as the U.S. did, and that voters nearly everywhere responded to this inflationary malaise by throwing out incumbent leaders. A global trend, Biden’s defenders argue, must have a global explanation: not the stimulus, but the coronavirus pandemic.
From there, the debate devolves into more technical points. When you dig into the specifics, however, it turns out that there isn’t as much disagreement as first appears. Jared Bernstein, who chaired Biden’s Council of Economic Advisers, told me that the ARP probably contributed 0.5 to two points to inflation; Furman argues that it was closer to three points. That difference is significant, but it probably would not have radically changed what Americans thought about the economy.
A separate question is whether the size of the pandemic stimulus was actually inspired by post-neoliberal economics in the first place. According to Biden officials, the question of whether the Rescue Plan should have been $2 trillion, $1 trillion, or $500 billion had much more to do with risk management than with ideology. “The idea that the Rescue Plan’s size reflected an embrace of some brand-new economic theory is ridiculous,” Bernstein told me. The administration ultimately concluded that in the face of uncertainty, it was better to err on the side of doing too much stimulus, and risking some inflation, as opposed to doing too little, and risking high unemployment. That belief was by no means exclusive to post-neoliberal progressives. In late 2020, the Trump-appointed Federal Reserve Chair Jerome Powell warned that “too little support” from policy makers “would lead to a weak recovery, creating unnecessary hardship for households and businesses,” whereas “the risks of overdoing it seem, for now, to be smaller.”
Both its critics and defenders tend to treat the Biden presidency as a natural experiment in the effectiveness of post-neoliberal ideas. But the sources of political success and failure don’t always map neatly onto ideology. Perhaps the Biden administration’s gravest political mistake was to preside over what appears to have been the largest surge of migration in American history. And open borders, which are a form of eliminating barriers to free markets for the sake of maximizing economic growth, are a longtime fantasy of some free-market economists. In that sense, one might argue that the administration’s error here was being too neoliberal.
The post-neoliberals interpreted Trump’s 2016 victory as the product of a failed economic paradigm and convinced themselves that by correcting those failures, they could completely shift American politics. They were wrong. Today, however, it is their critics who are at risk of making the same mistake. For all of its flaws, post-neoliberalism was a healthy correction to an economic system that was often too deferential to markets and too inattentive to the realities of politics. Abandoning it over its failures would be easy; the challenge is to find a way to build on its successes.
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