Noam Chomsky: Biden’s Foreign Policy Is Largely Indistinguishable From Trump’s

Noam Chomsky

President Joe Biden’s domestic policies, especially on the economic front, are quite encouraging, offering plenty of hope for a better future. The same, however, cannot be said about the administration’s foreign policy agenda, as Noam Chomsky’s penetrating insights and astute analysis reveal in this exclusive interview for Truthout. Chomsky is a world-famous public intellectual, Institute Professor Emeritus at MIT and Laureate Professor of Linguistics at the University of Arizona.

C.J. Polychroniou: Noam, two months after being in the White House, Biden’s foreign policy agenda is beginning to take shape. What are the signs so far of how the Biden administration intends to address the challenges to U.S. hegemony posed by its primary geopolitical rivals, namely Russia and China?

Noam Chomsky: The challenge to U.S. hegemony posed by Russia and particularly China has been a major theme of foreign policy discourse for some time, with persistent agreement on the severity of the threat.
The matter is plainly complex. It’s a good rule of thumb to cast a skeptical eye when there is general agreement on some complex issue. This is no exception.

What we generally find, I think, is that Russia and China sometimes deter U.S. actions to enforce its global hegemony in regions on their periphery that are of particular concern to them. One can ask whether they are justified in seeking to limit overwhelming U.S. power in this way, but that is a long distance from the way the challenge is commonly understood: as an effort to displace the U.S. global role in sustaining a liberal rule-based international order by new centers of hegemonic power.

Do Russia and China actually challenge U.S. hegemony in the ways commonly understood?
Russia is not a major actor in the world scene, apart from the military force that is a (very dangerous) residue of its earlier status as a second superpower. It does not begin to compare with the U.S. in outreach and influence.

China has undergone spectacular economic growth, but it is still far from approaching U.S. power in just about any dimension. It remains a relatively poor country, ranked 85th in the UN Human Development Index, between Brazil and Ecuador. The U.S., while not ranked near the top because of its poor social welfare record, is far above China. In military strength and global outreach (bases, forces in active combat), there is no comparison. U.S.-based multinationals have about half of world wealth and are first (sometimes second) in just about every category. China is far behind. China also faces serious internal problems (ecological, demographic, political). The U.S., in contrast, has internal and security advantages unmatched anywhere.

Take sanctions, a major instrument of world power for one country on Earth: the U.S. They are, furthermore, third-party sanctions. Disobey them, and you’re out of luck. You can be tossed out of the world financial system, or worse. It’s pretty much the same wherever we look.

If we look at history, we find regular echoes of Sen. Arthur Vandenberg’s 1947 advice to the president that he should “scare hell out of the American people” if he wanted to whip them up to a frenzy of fear over the Russian threat to take over the world. It would be necessary to be “clearer than truth,” as explained by Dean Acheson, one of the creators of the postwar order. He was referring to NSC-68 of 1950, a founding document of the Cold War, declassified decades later. Its rhetoric continues to resound in one or another form, again today about China.

NSC-68 called for a huge military build-up and imposition of discipline on our dangerously free society so that we can defend ourselves from the “slave state” with its “implacable purpose… to eliminate the challenge of freedom” everywhere, establishing “total power over all men [and] absolute authority over the rest of the world.” And so on, in an impressive flow.

China does confront U.S. power — in the South China Sea, not the Atlantic or Pacific. There is an economic challenge as well. In some areas, China is a world leader, notably renewable energy, where it is far ahead of other countries in both scale and quality. It is also the world’s manufacturing base, though profits go mostly elsewhere, to managers like Taiwan’s Foxconn or investors in Apple, which is increasingly reliant on intellectual property rights — the exorbitant patent rights that are a core part of the highly protectionist “free trade” agreements.

China’s global influence is surely expanding in investment, commerce, takeover of facilities (such as management of Israel’s major port). That influence is likely to expand if it moves forward with provision of vaccines virtually at cost in comparison with the West’s hoarding of vaccines and its impeding of distribution of a “People’s Vaccine” so as to protect corporate patents and profits. China is also advancing substantially in high technology, much to the consternation of the U.S., which is seeking to impede its development.

It is rather odd to regard all of this as a challenge to U.S. hegemony.

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Is Neoliberalism Dying? A Structuralist Approach To Predatory Global Capitalism And The Challenge of Reform*

CJ Polychroniou

Forty years of neoliberal rule have produced devastating effects on lower and working-class people and on the social fabric throughout the world: wages have stagnated, labor rights have been trampled, and economic inequalities have exploded. Neoliberalism has also proven detrimental to democracy as many forms of collective decision-making and even faith and trust in the ability of government to solve problems have been severely eroded by the marketization project. Citizens have been encouraged to think and act like consumers and powerful private interests have made a mockery of the idea of a common good. Moreover, trends of ongoing income and wealth inequality combined with job insecurity and the hijacking of the state by the economic elites has led to the eruption of popular anger, leading to the rise of a new generation of authoritarian rulers and to a concomitant attack on the traditional democratic order, along with an explosion of xenophobic rage and racism.

Nonetheless, neoliberalism has remained the hegemonic paradigm in the workings of contemporary capitalism and the operating framework of the global economy, even though this particular form of economic governance is prone to systemic crises and in spite of challenges and sporadic forms of resistance from below.
At least until now, that is. For the eruption of the pandemic appears to have discredited market fundamentalism and state interventionism has returned with vengeance throughout the West. We have seen massive monetary and fiscal packages introduced both in Europe and the United States in order to provide relief for unemployed workers and struggling businesses in ways that have not been seen in many decades. During the global financial crisis of 2008, the state bailed out the financial sector and turned a blind eye towards homeowners and the millions of people suffering from the consequences of “predatory capitalism” that neoliberalism gave rise to from the mid-1970s and continued to fuel throughout the next four decades. However, during the era of the pandemic, the state has come to some degree to the rescue of the entire economy, although still not as aggressively as economic thinking associated with the name and work of John Maynard Keynes would surely recommend for a crisis as severe as the one thrusted upon the world by the eruption of the Covid pandemic, which has created a classic capitalist crisis of accumulation.

Be that as it may, the question popping up suddenly (once again, we might add, since the same question popped up after the financial crisis of 2008) is whether the return of “Big Government” during the pandemic is signaling the end of neoliberalism.

My view on this matter is that it is too early to tell, and, more importantly, that neoliberalism is not going to wither away without an increased role of participatory democracy and the emergence of political vehicles (political parties and social movements) envisioning and fighting for an alternative social order. Neoliberalism is not merely an ideology or even a specific policy at this point, but an institutional component, a substructure, of the very capitalist system that has been built in the age of globalization, and thus the measures taken today to address the economic effects of the pandemic may be quite temporary and the world could easily return to “business as usual” once the pandemic has been brought under control.

Let me elaborate
Any effort to fully understand the nature of contemporary capitalism should begin with the recognition that the whole is indeed greater than the sum of its parts. It is also pertinent that we recognize the importance of structural causality in making sense of contemporary capitalist developments while avoiding methodological reductionism. As such, we need to look at the overall structure of the system; that is, we need to comprehend the different constitutive parts of the system that keep it together and running in ways which are harmful to the interests of the great majority of the population, dangerous to democracy and public values, and detrimental to the environment and earth’s ecosystem. Focusing on one element of the system while ignoring other things (perhaps because we think that they constitute incidental outcomes or processes of secondary nature) may limit our understanding by creating a flawed perspective about the dynamics and the contradictions of contemporary capitalism and thereby undermine our ability to propose sound and realistic solutions.

Now, we know what capitalism is, and how it basically works. It is a specific, historically determined mode of production, a ruthless economic system representing the most advanced form of commodity production. It is not an economic system designed to serve the needs of society as such, because the extraction of profit is the “logic” that drives capitalist commodity production. Not only that, but when left to operate without regulations, capitalism can wreak havoc on societies. Exploitation and inequality represent structural necessities of the system itself, and capital itself is nothing other than value that generates surplus value.

Moreover, capital accumulation is an anarchic and contradictory process, and with a constant need to expand, all of which result all too frequently in systemic crises that threaten to destroy capitalism itself and which, subsequently, mandate the intervention of the state in order to save the system from collapse. In the age of the financialization of capital, systemic crises have become far more frequent, and with greater severity, and government bailouts have emerged as the essential tool through which the system avoids a catastrophic collapse.

Capitalist expansion has taken place over the course of the past five centuries via different venues, ranging from plunder and exploitation, through trade, to investment in industry and the financialization of assets. However, the state has been the driving agency behind the spread and consolidation of capitalism from the very start. And it is no less the case than with the architecture of contemporary capitalism.

The landscape of contemporary capitalism has been structured around three interrelated elements: financialization, neoliberalism and globalization. All three of these components constitute part of a coherent whole which has given rise to an entity that can be briefly described as “predatory global capitalism.”

As such, contemporary capitalism is characterized by a political economy which revolves around finance capital, is based on a savage form of free market fundamentalism and thrives on a wave of globalizing processes and global financial networks that have produced global economic oligarchies with the capacity to influence the shaping of policymaking across nations.  Indeed, today’s brand of capitalism is particularly anti-democratic and simply incapable of functioning in a way conducive to maintaining sustainable and balanced growth. By waging vicious class warfare, the economic elite and their allies have managed in the contemporary era to roll back progress on the economic and social fronts by resurrecting the predatory, “free-market” capitalism that immiserated millions in the early 20th century while a handful of obscenely wealthy individuals controlled the bulk of the wealth.

The capitalist order we have in place today has its roots in the structural changes that took place in the accumulation process back in the mid-to-late 1970s. The 1970s was a decade of economic slowdown and inflationary pressures in the advanced capitalist world. The crisis, brought about by new technological innovations, declining rates of profit and the dissolution of the social structures of accumulation that had emerged after World War II, led to sluggish growth rates, high inflation and even higher rates of unemployment, bringing about a phenomenon that came to be known as “stagflation.”
From a policy point of view, “stagflation” signaled the end of an era in which there was a trade-off between inflation and unemployment (shown by the Phillips curve) and, by extension, the end of the dominance of the Keynesian school of thought.

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Chomsky: Biden’s Early Agenda Gives Hope, But Activist Pressure Must Not Cease

Noam Chomsky

Joe Biden’s first months in office have comprised a flurry of actions on the domestic front, including a historic stimulus bill. In this exclusive interview, the celebrated public intellectual Noam Chomsky shares his views on some key policies embraced by the Biden administration. Chomsky is Institute Professor Emeritus at MIT and Laureate Professor of Linguistics at the University of Arizona. His latest books are Climate Crisis and the Global Green New Deal: The Political Economy of Saving the Planet (co-authored with Robert Pollin and C. J. Polychroniou; Verso, 2020), Chomsky for Activists (Routledge, 2020) and Consequences of Capitalism: Manufacturing Discontent and Resistance(Haymarket Books, 2020).

C.J. Polychroniou: President Joe Biden has been in office for approximately two months now, in the course of which he has signed scores of executive orders meant to reverse the policies of Donald Trump. But he has also managed to pass a huge and ambitious stimulus bill unlike anything seen during peacetime. What’s your assessment of Biden’s actions so far to deal with the most pressing issues facing U.S. society: namely, the coronavirus pandemic and the pain caused to millions of Americans on account of the pandemic?

Noam Chomsky: Better than I’d anticipated. Considerably so.
The stimulus bill has its flaws, but considering the circumstances, it’s an impressive achievement. The circumstances are a highly disciplined opposition party dedicated to the principle announced years ago by its maximal leader, Mitch McConnell: If we are not in power, we must render the country ungovernable and block government legislative efforts, however beneficial they might be. Then the consequences can be blamed on the party in power, and we can take over. It worked well for Republicans in 2009 — with plenty of help from Obama. By 2010, the Democrats lost Congress, and the way was cleared to the 2016 debacle.

There’s every reason to suppose that the strategy will be renewed — this time under more complex circumstances. The voting base in the hands of Trump, who shares the objective but differs from McConnell on who will pick up the pieces: McConnell and the donor class, or Trump and the voting base he mobilized, almost half of whom worship him as the messenger God sent to save the country from … we can fill in our favorite fantasies, but should not overlook the fact that what may sound [ridiculous] has roots in the lives of the victims of the neoliberal globalization of the past 40 years — extended by Trump, apart from some rhetorical flourishes.

In those circumstances, passing a stimulus bill was a major accomplishment. Republicans who favor it, and know that their constituents do, nevertheless voted against it, in lockstep obedience to what the Central Committee determines. Some Democrats insisted on watering it down. But what finally passed has valuable elements, which could be a basis for moving on.

There are huge gaps. The bill surely should have contained an increase in the miserable minimum wage, an utter scandal. But that would have been very difficult in the face of total Republican opposition, along with a few Democrats. And there are other crucial features that are missing. Nevertheless, if the short-term measures on child poverty, income support, medical insurance and other basic needs can be extended, it would be a substantial step toward fulfilling the promise envisioned by such careful observers as Roosevelt Institute President Felicia Wong, who reflected that, “As I see it, both the scale and the direction of the American Rescue Plan break the neoliberal, deficits-and-inflation-come-first mold that has hollowed out our economy for a generation.” We haven’t seen anything that could elicit such hopes for a long time.

There is also hope in appointments on economic issues. Who would have imagined that a regular contributor to radical economics journals would be appointed to the Council of Economic Advisers (Heather Boushey), joined by the senior economic adviser of the labor-oriented Economic Policy Institute, (Jared Bernstein)?

Biden’s strong support for Amazon workers, and unions generally, is a welcome shift. Nothing like it has been heard from the chambers of power in many years. In a sharp reversal of Trump legislation, the tax changes raise incomes mostly for the poor, not the rich. Economic Policy Institute President Thea Lee summarizes the package by saying that it “will provide crucial support to millions of working families; dramatically reduce the race, gender, and income inequalities that were exacerbated by the crisis; and create the conditions for a truly robust recovery once the virus is under control and people are able to resume normal economic activity.” Optimistic, but within reach.
House Democrats have passed other important legislation. H.R. 1 protects voting rights, a critical matter now, with Republicans working overtime to try to block the votes of [people of color] and the poor, recognizing that this is the only way a minority party dedicated to wealth and corporate power can remain viable.

On the labor front, the House passed the Protecting the Right to Organize (PRO) Act, “a critical step toward restoring workers’ right to organize and bargain collectively,” the Economic Policy Institute reports, a fundamental right that “has been eroded for decades as employers exploited weaknesses in the current law.” It’ll probably be killed by the Senate. Even apart from party loyalty, there is little sympathy for working people in Republican ranks.
But even so, it’s a basis for organizing and education. It can be a step toward revitalizing the labor movement, a prime target of the neoliberal project since Reagan and Thatcher, who understood well that working people must be deprived of means to defend themselves from the assault.
Decline of union membership is by now recognized, even in the mainstream, to be a major factor in rising inequality — a phrase that translates to “robbery of the general public by a tiny fraction of super-rich.” The Economic Policy Institute has reviewed the facts regularly, most recently in a chart that graphically demonstrates the remarkable correlation between rising/falling union membership and falling/rising inequality.

More generally, there is a good opportunity to overcome the baleful legacy of Trump’s bitterly anti-labor Labor Department, headed by corporate lawyer Eugene Scalia, who used his term in office to eviscerate worker rights, notoriously during the pandemic. Scalia was perfectly chosen for the transformation of the Republicans to a “working-class party,” as hailed by Marco Rubio and Josh Hawley in a triumph of propaganda, or maybe sheer chutzpah.
Michael Regan’s appointment as Environmental Protection Agency administrator should replace corporate greed by science and human welfare in this essential agency, a move toward human decency that in this case is a prerequisite for survival.
It’s easy to find serious omissions and deficiencies in Biden’s programs on the domestic front, but there are signs of hope for emerging from the Trump nightmare and moving on to what really should, what really must be done. The hopes are, however, conditional. The temporary measures of the stimulus on child poverty and many other issues must be made permanent, and improved. Crucially, activist pressure must not cease. The masters of the universe pursue their class war relentlessly, and can only be countered by an aroused public opposition that is no less dedicated to the common good.

What do you think of Biden’s refusal to cancel $50,000 in student loans?

A bad decision. What the realistic options were, I don’t frankly know. Higher education at a high level should be recognized to be a basic right, freely available, as it is elsewhere: in our Mexican neighbor, in rich developed countries like Germany, France, the Nordic countries, and a great many others, with at most nominal fees. As it substantially was in the U.S. when it was a much poorer country than it is today. The postwar GI Bill of Rights provided free education for great numbers of white males who would never have gone to college otherwise. There is no reason why young people of any race should be denied the privilege today.

In light of the January 6 attack on the U.S. Capitol, Biden has vowed to fight domestic terrorism by passing a new law “that respects free speech and civil liberties.” Does the U.S. need a new domestic terrorism agenda?

A prior question is whether we should retain the current domestic terrorism agenda. There are strong reasons to question that. And any expansion should be a matter of serious concern. That aside, white supremacist violence is no laughing matter. Through the Trump years, the FBI and other monitors report steadily increasing white supremacist terror, by now covering almost all recorded terror. Armed militias are rampant — Trump’s “tough guys” as he’s admiringly called them. The problems can’t be overlooked, but have to be handled with great caution and a close eye on the temptations for abuse.

Biden has proposed a plan to strengthen the middle class by encouraging unionization and collective bargaining, and his recent affirmation of the rights of workers to unionize, which was widely interpreted as support for Amazon workers’ rights to organize in Alabama, has spread considerable enthusiasm among progressives. Indeed, Biden’s support for unions is in pace with the highly favorable ratings that unions have been receiving in the last couple of years. What’s behind the support for unions in the present era?

One reason is objective reality. The sharp rise in inequality is a growing curse, with extremely harmful effects across the society. As mentioned earlier, it closely tracks decline of unions, for reasons that are well understood. Historically, labor unions have been in the forefront of struggles for justice and rights. They also pioneered the environmental movement, as we’ve discussed before. Workers’ organizations are changing in character with the growth of service and knowledge-based economies. They have shared interests, and foster the values of solidarity and mutual aid on which the hope for a decent future rest. Many unions retain the world “international” in their names. It should not just be a symbol or a dream. The dire challenges we face have no borders. Global heating, pandemics, disarmament will be dealt with internationally, if at all. The same is true of labor rights and human rights more generally. At every level, associations of working people should once again be prominent, if not leading the way, toward a better world.

This interview has been lightly edited for clarity.


C.J. Polychroniou is a political economist/political scientist who has taught and worked in universities and research centers in Europe and the United States. His main research interests are in European economic integration, globalization, the political economy of the United States and the deconstruction of neoliberalism’s politico-economic project. He is a regular contributor to Truthout as well as a member of Truthout’s Public Intellectual Project. He has published several books and his articles have appeared in a variety of journals, magazines, newspapers and popular news websites. Many of his publications have been translated into several foreign languages, including Croatian, French, Greek, Italian, Portuguese, Spanish and Turkish. He is the author of Optimism Over Despair: Noam Chomsky On Capitalism, Empire, and Social Change, an anthology of interviews with Chomsky originally published at Truthoutand collected by Haymarket Books.

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Phasing Out Fossil Fuels Is Possible. These State-Level Plans Show How

Robert Pollin

When it comes to climate change, state governments across the United States have been way ahead of the federal government in providing leadership toward reducing carbon pollution and building a clean energy economy. For example, when Trump announced in 2017 his intention to withdraw the U.S. from the Paris Agreement, the governors of California, Washington and New York pledged to support the international agreement, and by 2019, more than 20 other states ended up joining this alliance to combat global warming.

Robert Pollin, distinguished professor of Economics and co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst, has been a driving force behind several U.S. states’ efforts to curb carbon emissions and make a transition to a green economy. In this exclusive Truthout interview, Pollin talks about how states can take crucial, proactive steps to build a clean energy future.

C.J. Polychroniou: Bob, you are the lead author of commissioned studies, produced with some of your colleagues at the Political Economy Research Institute of the University of Massachusetts at Amherst, to fight climate change for scores of U.S. states, including Pennsylvania, Ohio, West Virginia, Maine, Colorado, Washington, New York and California. The purpose of those studies is to show the way for states to attain critical reductions in carbon emissions while also embarking on a path of economy recovery and a just transition toward an environmentally sustainable environment. In general terms, how is this to be done, and is there a common strategy that all states can follow?

Robert Pollin: The basic framework that we have developed is the same for all states. For all states, we develop a path through which the state can reduce its carbon dioxide (CO2) emissions by roughly half as of 2030 and to transform into a zero emissions economy by 2050. These are the emissions reduction targets set out by the Intergovernmental Panel on Climate Change (the IPCC) that are meant to apply to the entire global economy. The IPCC — which is a UN agency that serves as a clearinghouse for climate change research — has concluded that these CO2 emissions reduction targets have to be met in order for we, the human race, to have a reasonable chance to stabilize the global average temperature at no more than 1.5 degrees Celsius above the preindustrial level, [the level of] about the year 1800.

The IPCC has concluded that stabilizing the global average temperature at no more than 1.5 degrees Celsius above preindustrial levels provides the only realistic chance for avoiding the most severe destructive impacts of climate change in terms of heat extremes, heavy precipitation, droughts, floods, sea level rise, biodiversity losses, and the corresponding impacts on health, livelihoods, food security, water supply and human security. Given that these emissions reduction targets must be met on a global scale, it follows that they also must be met in every state of the United States, with no exceptions, just like they must be met in every other country or region of the world with no exceptions.

By far the most important source of CO2 emissions entering the atmosphere is fossil fuel consumption — i.e., burning oil, coal and natural gas to produce energy. As such, the program we develop in all of the U.S. states centers on the state’s economy phasing out its entire fossil fuel industry — i.e., anything to do with producing or consuming oil, coal or natural gas — at a rate that will enable the state to hit the two IPCC emissions reduction targets: the 50 percent reduction by 2030 and zero emissions within the state by 2050.

Of course, meeting these emissions reduction targets raises a massive question right away: How can you phase out fossil fuels and still enable people to heat, light and cool their homes and workplaces; for cars, buses, trains and planes to keep running; and for industrial machinery of all types to keep operating?

It turns out that, in its basics, the answer is simple and achievable, in all the states we have studied (and everywhere else for that matter): to build a whole new clean energy infrastructure that will supplant the existing fossil fuel dominant infrastructure in each state. So the next major feature of our approach is to develop investment programs to dramatically raise energy efficiency standards in buildings, transportation systems and industrial equipment, and equally dramatically expand the supply of clean renewable energy sources, i.e. primarily solar and wind energy, but also geothermal, small-scale hydro, as well as low-emissions bioenergy.

For all but one of the states we have studied, we estimate that the amount of clean energy investments that are needed amounts to between 1-3 percent of all state economic activity, i.e. the state’s GDP (Gross Domestic Product). That can be a lot of money — like $6.6 billion in Washington State (1.2 percent of projected average GDP between 2021-2030), $22.6 billion in Pennsylvania (2.5 percent of projected average GDP between 2021-2030) and $76 billion in California (2.1 percent of projected average GDP between 2021-2030). But still, these spending levels, amounting to 1-3 percent of GDP, do still mean that something like 97-99 percent of all the state’s economic activity can be devoted to everything else besidesclean energy investments. West Virginia is the one outlier in the states we have studied so far. But even here, we estimate the investment program will need to be only somewhat higher, at 4.2 percent of the state’s projected average GDP for 2021-2030, equal to $3.6 billion per year.

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Hiking The Minimum Wage To $15 Is Key — But It’s Hardly A Living Wage

Robert Pollin

The federal minimum wage hasn’t increased in over a decade. After a brief but failed attempt by the Biden administration to raise it to $15 an hour, it will most likely remain at the current $7.25 for an indefinite time to come. This is a shame, for the economic benefits of wage hikes are beyond dispute, as many studies have shown, including those authored by Robert Pollin, distinguished professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst. Pollin is co-author of The Living Wage: Building a Fair Economy (1998) and A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States (2008) and has worked with many U.S. non-governmental organizations on creating living wage statutes at both the statewide and municipal levels. In this interview, Pollin discusses why, even though we must continue to push for a $15 minimum wage, we must also consider what a true living wage looks like.

C.J. Polychroniou: The general argument against raising the minimum wage is that it is bad for small business and the economy in general. Is there any truth in this claim?

Robert Pollin: Going through a bit of background will be helpful here. The federal minimum wage was last increased in July 2009, from $6.55 an hour to $7.25. So, no increase in 12 years. But actually, the situation is far worse than even what this suggests. That is because, at the very least, we have to factor in the effects of inflation on people’s ability to buy the things they need to live. Inflation means that the prices of food, housing, transportation, clothing and other necessities have been rising. So the minimum wage today would need to be $8.77 in order to buy what $7.25 could buy in 2009.

But there is still much more to the story once we take account of inflation. That is, after we factor in inflation, the U.S. minimum wage actually peaked in 1968, 52 years ago. In today’s dollars, after factoring in inflation, the federal minimum wage in 1968 was $11.90, 64 percent higher than today’s $7.25 figure. Further still, average labor productivity — i.e., the amount of goods or services an average worker can produce over the course of a day in the U.S. — has risen at an average rate of 1.9 percent per year since 1968. What if, starting in 1968, the federal minimum wage had risen every year in step with the 1.9 percent average increase in productivity as well as inflation? That would mean that minimum wage workers would get raises when they are producing more every day, but their raise would only equal exactly their 1.9 percent improvement in productivity but not a penny more. In that case, the federal minimum wage today would be $31.67 an hour — over four times higher than the actual federal minimum wage today.

Now if we go back to 1968, when the federal minimum wage was approximately $11.90 in today’s dollars, in fact the U.S. economy was booming. The official unemployment rate was 3.6 percent, i.e., less than half of the average 8.1 percent unemployment rate over 2020. So it is obvious that the U.S. economy can function just fine at a much higher federal minimum wage rate than the $7.25 rate that prevails today.

We also get basically the same result by looking at the experiences in recent years with minimum wage laws in U.S. states and living wage statues in some municipalities that are higher than the federal minimum wage. Right now, 29 states along with the District of Columbia operate with minimum wage rates higher than the federal minimum. The citywide minimum in Washington, D.C., is already at $15.00, and the State of Washington is next highest at $13.69. The evidence on the experiences in these states and cities is that businesses function at least as well if not better than those states that still operate at the federal $7.25 minimum. The employment opportunities in these states and cities are also at least as good if not better.

It is fair to ask: If businesses are mandated to pay higher wages than they would choose to pay otherwise, then why is it that we don’t see these businesses lay off employees or close up operations after they are forced to give raises? The answer is that the overwhelming majority of businesses don’t want to be forced to raise wages for their employees, but they learn to adjust. They might raise their prices modestly to cover their increased payroll. The businesses’ level of productivity is also likely to improve. This is because their workers become more committed to their jobs when they are paid at minimally decent levels. These productivity increases will not be enough to compensate for the businesses’ increased payroll, but they will help to partially cover some of their higher costs.

Finally, some businesses may just end up accepting modestly lower profits, even if reluctantly. To the extent this occurs, raising the minimum wage will end up advancing a more equal distribution of income between businesses and workers. This is after 40 years under neoliberalism in which inequality has risen relentlessly. The decline in the value of the minimum wage, after adjusting for inflation, has been a significant factor contributing to the overall rise in inequality under neoliberalism.

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Biden’s $1.9 Trillion Stimulus Is A Vital Beginning For A New New Deal

President Joe Biden

In his first three days in office, President Joe Biden signed no less than 30 executive orders and memorandums, many of which dismantle Trump’s policies. This is an impressive achievement by any standard, but only so much can be done with executive orders and it is all but certain that most legislation will be blocked by Republican senators, thanks to filibuster, and with the possible help of some Democrats. In the meantime, Biden has proposed a $1.9 trillion stimulus for the coronavirus-hit economy which includes, among other things, a third relief check, extending unemployment benefits, setting aside $400 billion for a nationwide vaccine program, expanding the child tax credit and raising the minimum wage to $15 per hour. One could say that Biden’s economic plan is inspired by FDR’s New Deal because nothing like it has ever been introduced during peacetime. But what exactly does this economic plan mean for households, for business and for climate change? What will be the impact of the stimulus on public debt? And what about reforms for the financial sector, which continues to reap huge profits when millions of Americans are struggling? Two progressive economists, Robert Pollin and Gerald Epstein, co-directors of the Political Economy Research Institute at the University of Massachusetts at Amherst, address some of these questions in an exclusive interview for Truthout.

C.J. Polychroniou: Bob, the pandemic, in addition to having killed more than 400,000 Americans so far, thanks to Trump’s reckless response, has had a severe impact on the U.S. economy: business closures, massive unemployment, huge decline in the gross domestic product, increase in multiple kinds of inequality. Obviously, with those disturbing realities in mind, Joe Biden has released an economic plan to combat COVID-19 and get the country back on track which, according to many analysts, is inspired by FDR’s New Deal. Can you talk a bit about Biden’s economic plan and offer your assessment with specific reference to how it will support individuals, households and business through the pandemic?

Prof.dr. Robert Pollin

Robert Pollin: The Biden administration has introduced a $1.9 trillion short-term economic stimulus program. It targets six main areas of spending: $1,400 in cash payments for people whose income is less than $75,000; $400 per week in supplemental unemployment insurance for laid-off workers; major support for state and local governments that are right now staring, collectively, at budget deficits of $500 billion or more; a major increase in spending on distributing COVID vaccines; and expanding the tax credit for families with children.

The total package amounts to about 9 percent of the economy’s overall level of activity — i.e., gross domestic product (GDP). This proposed Biden stimulus would also be on top of the $900 billion measure — equal to about 4 percent of GDP — that Congress and the Trump administration passed in December, as well as the $2 trillion package — equal to 10 percent of GDP — that was implemented last March. So, if the Biden proposal passes, it would mean that over the past 10 months, the federal government stimulus would add up to roughly 23 percent of GDP. And on top of that, since March, the Federal Reserve has purchased over $3 trillion in bonds — a 74 percent increase over their holdings as of last February — from Wall Street firms to bail them out and to keep pushing interest rates down on home mortgages, business loans and government bonds.

Overall, this level of economic stimulus since the COVID pandemic spread last March — which would amount to more than one-third of total GDP if the Biden proposal passes — has been historically unprecedented during peacetime. The only comparable level of government intervention was during World War II, when government deficit spending reached as high as 25 percent of GDP. But, of course, that spending was focused on fighting a world war.

The point, however, is that this level of public spending included in the current Biden proposal is absolutely necessary and, for that matter, will not be sufficient given the severity of the current economic crisis. Over the past nine months, 74 million people have filed to receive unemployment insurance. This is equal to fully 45 percent of the U.S. labor force. Meanwhile, as of the most recent data, nearly 20 percent of all U.S. households with children report that their families didn’t have enough to eat over the past week. That figure rises to 24 percent for African American households. Similarly, 26 percent of households with children report that they are unable to keep up with their rent. Amid all this, the Dow-Jones Industrial Average stock market index is up an incredible 68 percent since the initial stimulus program passed in March, thanks to both the stimulus and the Fed bailout having successfully propped up Wall Street.

Combating climate change seems to be one of the central objectives of Biden’s administration. How does Biden’s plan compare to the Green New Deal, especially the version of a “green economy” you have been fighting for over a decade now?

Pollin: The combined government spending injections since last March — totaling to roughly one-third of all spending in the economy if the current Biden proposal passes — don’t include a single dime to address the climate crisis. This is while we now know that 2020 was the second-hottest year on record. Biden has emphasized that he is going to take major action to address the climate crisis. Specifically, he has said that he will introduce a huge public investment-led program soon, that will be over and above the short-term stimulus measure to fight COVID and the ongoing recession.

On Wednesday, Biden signed a series of executive orders that will, among other things, suspend oil and gas leasing on federal government lands, transition the federal government’s stock of automobiles and trucks to an all-electric fleet, and create an Environmental Justice commitment in federal policies that will “address the disproportionate health, environmental, economic and climate impacts on disadvantaged communities.” Most broadly, Biden’s climate directive commits his administration to move the U.S. onto “an irreversible path to a net-zero economy by 2050.”

Nevertheless, for the most part, Biden has still not laid out his full-scale program for achieving the net-zero emissions goal. For now, we still need to look at what Biden proposed during the presidential campaign as a guide. That included both some positive as well as some seriously negative points. On the positive side, first, the overall level of investment spending that Biden proposed to deliver a zero-emissions economy by 2050 is in broad alignment with what I, as well as other researchers, have suggested is necessary. That is about 2-3 percent of GDP every year until we have built a clean energy infrastructure in the U.S., as well as contributed in a major way to building it throughout the rest of the world. For the next couple of years, that would mean about $400 billion per year in investments in the U.S. alone, including from both private as well as public sources.

Biden’s campaign proposal did also recognize the fact that building a clean energy economy will be a major new source of job creation throughout the economy, for people working in all kinds of jobs. Within this framework, Biden emphasized that labor unions will need to play a major role in ensuring that the jobs that are generated — upwards of about 4 million new jobs in total in the initial years — will be good-quality jobs, with decent wages, benefits and working conditions, and that women and people of color are included in getting their fair share of these newly generated opportunities. Finally, Biden’s campaign proposal did include just transition policies to support the workers, as well as their families and communities, who are now dependent on the oil, coal and gas industries for their livelihoods. Biden did also reemphasize this focus on creating good-quality union jobs in Wednesday’s directive. So far, so good.

On the down side, the Biden campaign proposal gives high priority to so-called carbon-capture technology and nuclear energy as major new sources of zero-emissions energy supply. Under carbon-capture technology, we keep burning coal, oil and natural gas to provide energy, but the technology entails literally capturing the carbon before it enters the atmosphere, and transporting it into gigantic underground storage areas, to presumably remain there for all time. The fossil fuel companies love this idea, since it keeps them in business. But at best, the technology remains unproven at commercial scale, despite decades of trying by the companies who desperately want it to work. Nuclear energy also presents huge public safety problems as well as being very expensive, despite having operated as an electricity source for 60 years now.

We need to insist that the centerpiece of the Biden climate program be investments to dramatically expand the supply of clean renewable energy sources — including solar, wind, geothermal, small-scale hydro and low-emissions bioenergy — along with investments to dramatically raise energy efficiency standards with public transportation, electric vehicles running on renewable energy and net zero energy buildings. That is the cleanest, cheapest and safest way to deliver a zero-emissions economy, and to do so in a way that greatly expands job opportunities.

Jerry, Biden’s plan for sparking the economy has some folks concerned because it will obviously increase the public debt, although Treasury Secretary Janet Yellen played down the debt issue in her confirmation hearings. Is there a need to be worried about deficits and a public debt surge when the economy is weak and millions of Americans are struggling? Moreover, how would you assess the Federal Reserve’s response to the COVID-19 crisis so far, and what else can the Fed do to revive the U.S. economy?

Prof.dr. Gerald Epstein

Gerald Epstein: Rich countries, especially those like the United States that can easily borrow at home and abroad in its own currency (the U.S. dollar is the main global currency), have a great deal of capacity to borrow for public spending. This is especially true when the cost of borrowing (interest rate) is well below the likely return on investment, as measured, for example, by the rate of growth of the economy. And now, U.S. interest rates on government debt is at historically low levels, below 1 percent in many cases. Keynesian and progressive economists have long understood this fact, but it has taken two major economic crises in the span of little more than a decade to convince even centrist and liberal economists and Democratic policy makers of this truth. Of course, Republicans, at least since Reagan, have understood that, when they are in power, they should have the government borrow a lot to fund tax cuts for the wealthy and subsidies for their pet constituencies, and then they should become austerity hawks when the Democrats are in power to block their initiatives and popularity. And of course, true to form, that is exactly what Mitch McConnell and the Republicans are doing now with respect to Biden’s spending initiatives. And, as usual, some of the right-wing Democrats are parroting these Republican talking points.

It is important to note that this capacity to run deficits and borrow is not absolute; it is best to be used to help achieve full employment, to deal with national health and other emergencies, to invest in green transformation and the positive support for the poor, people of color and working class. And it is many of these targets that the Biden administration and Democratic leadership in Congress are trying to reach with their spending initiatives. (Of course, they continue to propose spending excessive amounts on the military, as well.)

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