Bidenomics Is Unsustainable.

"The Biden administration claims its policies are bringing manufacturing jobs back to U.S. shores. But strikes by auto workers, healthcare workers, and Hollywood writers and actors demonstrate that key pillars of President Biden's economic agenda are bad for American industry. By heavily subsidizing unionization, Bidenomics is likely to raise production costs, drive more-frequent strikes, and erode America's international competitiveness.

The administration's fiscal glut includes many taxpayer-funded incentives for expanding industrial capacity. The Inflation Reduction Act's climate and energy subsidies are expected to surpass $1 trillion. While the inflationary effect is obvious, less appreciated is that these massive fiscal programs are designed to stimulate unionization.

The Inflation Reduction Act's manufacturing tax credits include "prevailing wage" requirements, which force firms that take the money to meet or exceed the average regional wage for that type of work. The requirements prevent firms from competing to reduce labor costs and effectively make unions wage setters. Forcing nonunionized employers to pay the same wages as unionized ones is unionization by other means.

In other programs, the requirements are even stricter. Applicants for the act's domestic manufacturing conversion grants are required to submit "Just Transition Plans" describing how they will retain or expand high-paying jobs. The application states that "higher scores will be given to projects that are likely to retain collective bargaining agreements."

Higher real wages are good. But to be sustainable, they must be driven by durable labor demand and productivity enhancements that make workers more valuable. Higher wages set by government decree or union fiat only lead to job losses. If wages are fixed above market levels, companies will naturally seek to cut back on the labor they use, resulting in a stagflationary combination of higher prices and lower employment. That's why the best policies for workers are those that foster labor demand, not that push wages above what the market will bear.

Consider this dynamic in the context of the auto industry. Ford recorded a $2 billion loss in 2022, and its CEO has made clear that meeting the United Auto Workers' demands for a 40% raise and a four-day workweek would drive the company out of business, resulting in job losses.

By contrast, China, a negligible force in global auto exports only two years ago, is poised to overtake Japan as the world's largest exporter in 2023. European Union leaders, afraid China's subsidized electric vehicles will ravage the EU's auto sector, accuse its electric-vehicle maker BYD of "flooding" the European auto market and are exploring import restrictions. While much of the U.S. industrial base has already moved overseas, making ourselves uncompetitive by deliberately pushing production costs higher is a great way to lose the manufacturers that stayed.

The Biden administration's policies erode rather than boost competitiveness. The subsidies have spurred a building spree, with construction spending on factories up by almost $100 billion over a year ago. But the workers employed in all these new facilities will likely be more unionized, and the administration has added a host of other labor requirements to receive funding. That means costlier labor and, very likely, more strikes.

Firms are tolerating unionization because of taxpayer subsidies. But eventually those subsidies will dry up, either because they've run their course in the original legislation or because politicians curtail or repeal them. When that happens, sectors built up around the Inflation Reduction Act will be left with enormously uneconomic production costs, dead in the water if exposed to global competition.

Mr. Biden's economic vision can last only as long as the taxpayer keeps paying for it and is unlikely to result in a sustainable increase in manufacturing capacity or jobs in America. Any reindustrialization ushered in by Bidenomics contains the seeds of its own unraveling." [1]

1. Bidenomics Is Unsustainable. Miran, Stephen. 
Wall Street Journal, Eastern edition; New York, N.Y.. 20 Sep 2023: A.17.