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Anyone who reads WELT diligently knows how much bidenomics will change the USA.
Because what will really happen with the change of president in the White House has long been well described.
The pendulum of American economic policy will swing much further to the left under Joe Biden and a Democratic majority in Congress than ever before in the post-war period.
There will be a resurrection of the state.
A growing state economy will override the market economy.
Further increases in government spending will be financed with higher government debt.
The capitalist-libertarian course of Donald Trump and his republican supporters concentrated on the individual pursuit of happiness and recognized the engines of progress in their own productivity, market forces and profits.
The state, captured by a socio-economically detached two-coast elite, was considered a refuge for all political evils.
Some even questioned the state at all.
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The state bashing of Trump supporters, which is often unbearable for European minds, will give way to a revived state belief of the new government.
Centrist Joe Biden will listen to the radical fringes of the Democrats.
The new Vice President Kamala Harris will take care of that.
With it the left progressives get into the center of power.
This is not a trivial matter or nothing.
In view of the great age of Joe Biden, the Vice President is of outstanding importance in this case.
It is only a matter of time when it will inherit its predecessor politically for many years.
Joe Biden has no alternative
Contrary to what Europe hoped, multilateralism and transatlantic alliances are on the agenda for the majority of democratic congressmen, but not at the top.
“America First” has the highest priority.
Everything else - such as global leadership or a new world economic order - follows and is at best a means to an end: American success in the competition against China for geopolitical dominance, especially in cyberspace.
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State interventionism in favor of national interests will more than ever characterize American Democratic foreign trade policy.
The polarization of society, which was once again intensified under Donald Trump, the divergence of the two-coast elites and large sections of the population in the fly-over states of the Midwest, the deepened economic gap between rich and poor and the broad rift between digital -affected metropolises and starving industrial regions leave Joe Biden no alternative.
“Americans want less of a presence in the world and more of a commitment to their own affairs.
The new government must respond to this broad need, ”is how Daniel Friedrich Sturm describes the expectations of the US population.
The ideological core of bidenomics will be the Modern Monetary Theory (MMT).
It gives fiscal policy priority over monetary policy.
In doing so, it turns the dogma of monetarism on its head, which declared monetary policy to be the highest economic policy instrument for achieving the most important of all goals, monetary stability.
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In the MMT, it is much easier for the state to finance its activities.
According to the MMT textbook, if he needs money, he does not have to go into debt on the capital market.
Rather, he receives the funds directly and free of charge from the central bank.
Should inflation expectations arise, the state will collect the money again by collecting taxes and returning them to the central bank.
At this point, an intermediate remark is particularly important.
Because it is correct that in the macroeconomic guild outside of the USA there are hardly any votes in favor of the MMT - especially not from leading experts in the German-speaking area characterized by ordoliberalism and monetarism.
Rather, there is almost all-round harsh criticism of the MMT, ranging from "grotesque" mismanagement to "voodoo economics".
However, the devastating criticism of the theorists will not change the fact that the practitioners in the Biden government will evaluate the MMT very differently - that is, much more positively.
So: The point is not to insist on what should be done correctly in the USA from a German perspective, but what will actually be in the future, even if it is misleading from today's European perspective.
"New Deal" is coming
How much the MMT is already on the advance can be seen without much effort.
For example, the Biden government has announced a “New Deal” for America United that will tear down all the debt levees of the monetarist age.
With stimulus packages that are worth billions of dollars and are financed on credit, the new president opens all the floodgates on fiscal policy.
Almost every wish of the socialist party left is fulfilled.
Existing disagreements between the White House and Congress are being poured out with even more government spending.
There is no longer the slightest doubt that debt, and not fighting it, will determine bidenomics.
In addition, under the chairman Jerome Powell, appointed by Donald Trump and remaining in office, the US Federal Reserve implemented a fundamentally historically significant change in strategy.
It will tolerate higher inflation in the future and thus give fiscal policy more leeway than in the past.
The greater flexibility is likely to play a role as early as 2021.
It is to be expected that after the end of the pandemic - spurred on by the stimulus packages - a rapid economic upturn will set in.
Price hikes are likely to be the result.
But the Fed will stay calm and will probably not turn the interest rate screw for a long time - that too is more in line with MMT thinking and less with monetarism.
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A radical turning away from capitalist and market-economy dogmas, which were formative for the USA in the post-war period, contradicts orthodox macro textbooks.
But it is the intention and demand of the Democrats who brought Joe Biden to the White House.
Even more than Donald Trump, Joe Biden will do everything possible to modernize public infrastructure, roads, bridges, tunnels, airports, schools and hospitals, which will create jobs for millions of people.
In plain language: Bidenomics will not mess up with government spending - this should also apply to research and the search for new key technologies.
Bidenomics could thus boost the critical mass that drives sustainable economic growth in the US.
State consumption comes first, followed by further state and private investments - also in the digital and data economy.
This is the breeding ground for private innovations for application and implementation in new future markets - from decarbonization to life sciences, robotics and machine learning to artificial intelligence to overcome human stupidity.
In total, there are all the economically necessary components of a fuel for the golden 20s.
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