With the US economy booming, the job market growing and inflation retreating, the consensus is near-unanimous: Bidenomics has been vindicated. Allow me to offer a somewhat more sceptical perspective: not that President Joe Biden’s economic policies have failed, necessarily, but that it is too soon to call them a success.

I fully concede that the US has some pressing problems — deindustrialisation, infrastructure deficiencies, climate change and national-security issues related to semiconductor chips, to name a few — and that Bidenomics is an honest attempt to address them. What I take issue with is this new variant of industrial policy based on heavy government subsidies to private investment. The centrepiece of Bidenomics is the Inflation Reduction Act, passed in 2022, whose cost could top half a trillion dollars.

It is too soon to call Joe Biden’s economic policies a success.Credit: Bloomberg.

The biggest problem is that it’s not yet clear these investments are going to pay off. They are being paid for with borrowed money, not higher taxes or lower spending elsewhere. It is always possible to boost wages and employment in the short run by funding new investments with borrowed money. The critical question is whether those investments will succeed in the long run.

If they do not, today’s boom will eventually turn into a bust. Sooner or later, the federal government will have to pay for all this borrowing and spending, and that will mean some mix of (additional) tax rises and spending cuts. That contractionary fiscal policy will hurt the economy, giving back some or all of the gains it is reaping today. The net effect of this reversal of fiscal policy could even be negative.

Conversely, if the new investments do succeed, future output will be accordingly higher, and those fiscal retrenchments will be manageable. Defenders of Bidenomics tend to assume this scenario, but its likelihood is an open question. By the same token, of course, critics of Bidenomics shouldn’t assume that the worse-case scenario is most likely.

Speculation about their future success, however, obscures a deeper question about Bidenomics’ investments: are they wise? Or, to put another way: what’s the proper way to judge them?

After all, it is the scientific consensus that the world needs more green energy. I would state it slightly differently: what the world needs is to lower carbon emissions. It is not difficult to imagine a scenario in which the US has more green energy — and yet exports more oil and natural gas, stimulating the broader global demand for non-green energy.

It is not enough for the US to be greener. The goal should be to produce new technologies that are sufficiently cheap that most of the world will want to be greener, too. That might happen with Bidenomics, but it is hardly certain. Any solution to climate change, looking forward, will have to address China, and to some extent India and Africa as well. A different approach would have been to subsidise cheaper green technologies for global adoption, but that is not what Bidenomics did.