For decades, the conservative story of trickle-down economics—including, particularly tax cuts for the wealthy and corporations, cutting funding for the common good, and deregulation to promote corporate profits at the expense of workers—, was all the rage. Supposedly, it would create much faster growth. Yet massive inequality amid sluggish growth has proven this argument wrong.
The country needs faster productivity growth, more innovation, and faster technological advances to address the current and looming challenges of climate change, an aging society, and massive inequality, to name just some of those challenges. President Biden has proposed and started to enact an agenda that will accelerate economic growth and build the foundation for stronger longer-term growth. In addition, it will also make sure that the vast majority of Americans benefit from faster growth. If fully enacted, President Biden’s agenda will allow the country to tackle its looming challenges.
President Biden’s agenda could generate real, lasting economic growth. This would especially follow if his American Jobs Plan — a large economic package amounting to more than $2 trillion dollars in spending investments over the years ahead – were enacted. At about $2.25 trillion in public investments, plus another $400 billion in clean energy incentives, the American Jobs Plan might be one of the biggest public investments in economic growth, jobs, and workers since the New Deal. It also constitutes a return of government to fulfilling its responsibility to lay the foundation for sustained prolonged economic growth in America.
Economic growth has been very slow over much of the past two decades, averaging an annualized 1.8 percent during the last business cycle, from the end of 2007 to the end of 2019. Less investment, high inequality, and widespread income uncertainty have all contributed to lower productivity growth. During the last business cycle, labor productivity growth averaged 1.4 percent, or half of what it was during the preceding two business cycles. This was also the slowest productivity growth of any business cycle since the late 1970s.
President Biden’s jobs plans focuses on boosting productivity growth and expanding the capacity of the economy to grow without igniting inflation. How will these investments spur growth? The key is that President Biden’s plan will ensure that the workers and businesses will have cutting- edge technology at their disposal and that they will have the resources, including time, to grow and contribute their skills and talents. The capital base grows with investments in infrastructure such as ports, roads, water, electric and internet infrastructure. A stronger capital base will lower the costs of doing business and hence boost private investment in manufacturing and other sectors where business investment has been weak for over a decade. And President Biden’s plan supports workers in caring for the elderly and people with disabilities, which will provide many workers with an opportunity to stay in the labor force and pursue their careers while enabling a fulfilled workforce.
Infrastructure investments will also provide another positive follow-on effect. This necessary spending will also speed the recovery in crucial sectors and get people back into jobs to prevent the skill loss that poses real threats to productivity growth d GDP for decades to come. Manufacturing jobs are down half a million from the start of this recession, down 1.5 million from the start of the last recession, and down 4.7 million from the recession before that. Construction jobs never fully recovered the great recession and are down more than four4 percent from a year ago.
The care investments are especially well-timed and well-targeted to some of the hardest hit parts of the labor market. Nursing homes have shed 11.5% of employees in the last year, child care jobs are down more than 16%, while state and local governments employ 1 million fewer educators than a year ago. Most of these care workers are women, especially women of color, and the vast majority of unpaid care work is borne by women, as well.
President Biden will likely announce an additional suite of policies soon, designed to spur growth by investing directly in people and their potential in the labor market. Paid leave, universal pre-k, and free community college will lead to growth – but even more importantly, they will make a meaningful difference in the financial stability of families, and in who gets to share in the benefits of a growing economy.
Overcoming decades of lackluster and unequally-shared economic growth requires large investments. The American Jobs Plan delivers a series of investments of historic proportions that enables a transition to an environmentally sustainable economy that may grow at higher levels, delivering high-quality jobs and more broadly distributed economic benefits to all people.
President Biden’s jobs proposals invest in infrastructure that is continually modernized to mitigate challenges like climate change, in early education to support every student and future worker, and in a care economy that allows all men and women to be productive—that is the path to sustained economic growth that benefits all Americans. This is a historic opportunity to change course from the past decades of disappointing economic performance, and demonstrate the real path to sustained economic growth that benefits working and middle class Americans—, not just the wealthy.