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Aug. 6, 2021, 10:30 a.m. EDT

Why Biden’s economic policies are more like Trump’s than Obama’s

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Nouriel Roubini

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Biden also will be channeling a public backlash against Big Business and Big Tech that started under Trump. His administration has already taken steps to curb corporate power through antitrust enforcement, regulatory changes, and eventually legislation. In each case, the goal is to reapportion some share of national income from capital and profits to labor and wages.

Inequality breeds populism or revolution

Biden has thus come out of the gate with a neo-populist economic agenda closer to Trump’s than to that of the Obama administration. But this doctrinal shift is not surprising. Whenever inequality becomes excessive, politicians—of both right and left—become more populist. The alternative is to let unchecked inequality become a source of social strife or, in extreme cases, civil war or revolution

It was inevitable that the U.S. economic-policy pendulum would swing from neoliberal to neo-populist. But this shift, while necessary, will bring risks of its own. Massive private and public debts mean that the Fed will remain in a debt trap. Moreover, the economy will be vulnerable to negative supply shocks from de-globalization, U.S.-China decoupling, societal aging, migration restrictions, the curbing of the corporate sector, cyberattacks, climate change, and the COVID-19 pandemic.

Loose fiscal and monetary policies may help to increase labor’s share of income for now. But, over time, the same factors could trigger higher inflation or even stagflation (if those sharp negative supply shocks emerge). If policies to reduce inequality lead to unsustainable increases in private and public debts, the stage could be set for the kind of stagflationary debt crisis I warned about earlier this summer.

Nouriel Roubini is CEO of Roubini Macro Associates and co-CEO of TheBoomBust.com.

This commentary was published with permission of Project Syndicate — Biden’s Neo-Populist Economic Doctrine.

More challenging ideas from Project Syndicate

Roubini: The looming stagflationary debt crisis will deliver a one-two punch to markets and economies

Stiglitz: Savor your chocolate. Enjoy your dividends. Enslaved children may have grown the cocoa that made it all possible.

Acemoglu: Our fragile democracy depends on a robust economic recovery for all, so this is no time to slam on the brakes out of inflationary fears

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