As President-elect Joe Biden and Vice President-elect Kamala Harris prepare their agenda, dealing with the pandemic and working to rebound the economy are certain to be key priorities. However, the Democratic Party still has a tough battle ahead in Georgia to flip control of the Senate, and it lost many seats in the House when most projections predicted that it was going to increase its majority.
Despite these setbacks, campaigning as a centrist, and winning several key states by narrow margins, the incoming Biden-Harris administration has already signaled that it is considering radical economic changes. In the final stretch of the campaign, Harris even posted a video on Twitter that claimed, “Equitable treatment means that we all end up at the same place.” Unfortunately for the incoming administration, this approach is at odds with what most people want.
First, it’s important to understand that America’s pre-COVID economy was actually doing very well. When 2020 began, poverty was at a historic low. Before the pandemic truly hit the United States in March, America’s economic expansion was the longest on record. The unemployment rate was extremely low, and incomes, especially for lower-income workers, were on the rise.
The current economic downturn is not the result of an over-leveraged economy or a housing bubble, but instead the inevitable consequence of a deadly virus. Fortunately, with two new vaccines from Pfizer and Moderna showing 95% and 94% effectiveness respectively, people are starting to see a light at the end of the tunnel. Human ingenuity in biotechnology always seemed poised to prevail.
People have already shown incredible resilience and optimism in dealing with the pandemic. In a recent nationally representative survey conducted by the Archbridge Institute, a majority, about three in four, reported that they had either achieved or were on their way to achieving the American dream. Even though many noted that the pandemic has pushed the American dream further out of reach, only one in 10 said that it was completely out of reach.
Meanwhile, in the same survey, when asked whether the most important goal of public policy should be to close the gap between rich and poor, ensure everyone has a fair chance of achieving success, or ensure Americans do not live in poverty, the majority of people, almost six in 10, said that it should be to ensure everyone has a fair chance of achieving success. Only two in 10 people seemed to agree with Harris’s “equality of outcomes” approach.
Rather than pursuing post-hoc income redistribution schemes aimed at achieving “equitable” outcomes, such as “forgiving” student loan debt (most of which is held by wealthier people) or adopting a $15 per hour federal minimum wage, the incoming Biden-Harris administration should instead focus on policies that empower people to succeed in the labor market in the first place. They should follow in the footsteps of the Obama administration, which worked with states to eliminate unnecessary and burdensome occupational licensing requirements that have been shown to decrease economic mobility.
Additionally, instead of pushing the first rung of the income ladder further out of reach by pricing out less skilled workers with a high federal minimum wage, the Biden-Harris administration should allow states to set their own rates based on what’s reasonable for them. Enabling younger and less skilled workers to build their human capital by working a job is an essential first step in climbing the income ladder later in life. By focusing on achieving short-term material “equity” rather than pursuing policies that will remove the barriers preventing people from building the skills necessary for success in the labor market, they are jeopardizing long-term prosperity. Many of the proposals floated by the incoming administration will likely slow down dynamism and restrict economic growth at a time when it’s needed most.
Despite its victory, the policy priorities of the incoming administration are out of sync with most people. If they are willing to stand up to the more radical wings of their party, the Biden-Harris administration has an opportunity to take a longer-term view of the economy by implementing reforms that empower people to build human capital and increase their capacity to generate wealth — rather than merely shuffling it around. Rebuilding that capacity and ensuring a strong economic recovery with robust economic growth should be the focus of the next administration as the fight against the coronavirus enters its next phase.