OLast weekend, US Democrats overcame months of political struggle to pass the Cut Inflation Act through the Senate, marking a major victory for President Joe Biden and ‘Bidenomics’ ahead of the mid-term election. – mandate in the United States.
The bill is the largest climate investment in US history, with $369 billion for climate and clean energy. It should get the United States two-thirds of the way to Paris Agreement commitments while reducing energy costs. It reduces healthcare costs for millions of Americans. It aims to fight inflation by directly cutting costs for individuals and reducing the deficit by closing tax loopholes and raising taxes on businesses and the wealthy.
The act is far from perfect. It’s the diminished descendant of the failed Build Back Better Act, a $2 billion package that would have radically expanded child care, free community college and subsidized health insurance, but didn’t ultimately failed to secure the support of Democratic Senator Joe Manchin (a necessity given the equally divided Senate). Gaining political support for the law required reversing climate ambition and broader plans to reduce costs for families; enable new drilling for fossil fuels; and carve-outs to shield private equity profits from the tax element of company law. For this reason, the law will and has already come under intense criticism from activists and climate groups.
However, in the face of fierce political opposition, this is a major, if not historic, achievement. It is also a victory for activists and economists who have consistently pushed and provided ideas to the Biden administration to pursue an alternative approach to the economy and the environment: a green industrial strategy that shapes the market to create good green jobs; social investment; worker power and employer incentives to deliver living wages, apprenticeships and profit sharing with communities; raising taxes on the wealthy to reduce inflation and help with costs, including through a new tax on stock buybacks that only serves to increase income for investors. These ideas are no longer stuck on the bench.
Historically, the United States and the United Kingdom have played a leading role in the intellectual development and political implementation of new ideas and new political paradigms. Whether we think of the postwar Keynesian consensus, the neoliberal revolution of Thatcher and Reagan, or the Third Way politics of Clinton and Blair, the two countries have tended to move in concert. Yet right now, in the context of the Cut Inflation Act in the US and the Conservative Party leadership race in the UK, our political orientations diverge.
The US has more to do than the UK when it comes to reducing climate emissions and building economic justice. The US has significantly higher levels of emissions (on an absolute and per capita basis) than the UK and the US is also the world’s largest producer of fossil fuels. Similarly, inequality in the United States is greater and poverty deeper than in the United Kingdom. Simply put: the land of opportunity is not suitable for too many American citizens.
But Democratic leaders are implementing a bold agenda to break deep political polarization and reset the shape and direction of what American economic success looks like. The irony, when you compare this with the UK, is that the conditions are much more favorable here for action commensurate with the scale of the climate and natural crisis, an economic strategy that favors ordinary people and places on wealth and profits, and for the extension of the collective supply of things and services on which we all rely. We have a head start on the basics of social democracy. Unlike in the United States, there is more cross-party consensus on the need for government action on the climate and natural crises. Actions taken now would be much less likely to be undone by an opposition victory than the fragile progressive gains in the United States.
The Conservatives, who have held power for more than a decade, have in recent years flirted with some of these ideas – from May’s mission-driven industrial strategy to Johnson’s net zero and leveling of pledges – recognizing the electoral benefits to do. Yet right now, conservatives are diving in the opposite direction to their American counterparts and debating – amid soaring inflation and an urgent cost of living – policies that are catnip. for conservative members such as high schools and corporate tax cuts, rather than looking around the world or looking at ways to solve the pressing problems of our time. Truss, widely seen as the frontrunner, has retreated to outdated tropes of financial support in the form of donations and has little say in how she would reach net zero, both for her own sake and in response to the cost of living crisis. . Nothing of substance is suggested to deal with the real rampant privatization of the NHS as those who can become deprived rather than languish on a waiting list.
It would be wrong to point the finger at the United States and claim that it is in order or that the lessons can be read simplistically. But Biden and the activists and researchers around him are ambitiously forging a new kind of economic policymaking that seeks to rapidly decarbonize, reduce pressures on family purses through collective provision, and tax wealth and profits to fund this and stifle inflationary pressures. The UK government – whoever leads it – should take notice of the new economy rather than be left behind.