President Biden’s inauguration comes at a moment of serious division in the United States. Urgent domestic issues and a shifting international context have created some major challenges for the American leadership. Although he may be eager to put the “Trump factor” behind him with a long series of executive orders right from the start, the new president must also lay out a broader strategy.
Top priority goes to confronting the ongoing pandemic, with the more direct involvement of the federal government and the executive branch and an effort at rebuilding American political and social cohesion around a clear set of rules and action plans. This in terms of both health policies and economic relief for families, industry and individual states with their budgetary problems.
With that in mind, some executive orders could be considered indispensable to the task of rapidly undoing that portion of Trump’s policy initiatives that, in turn, were not the result of Congressional deliberation. These will certainly not be sufficient however to handle the various emergencies already underway; what is needed is broader political consensus, which is far from assured given the Democratic Party’s limited majority in both houses of Congress.
As a general approach, Biden will be referring back to 2008 when the Obama administration was grappling with a very serious economic crisis and its social and political repercussions. He will be adopting a method very similar to Obama’s with regard to transformations in sectors such as energy, transport and the difficult adaptation of many jobs
The economic agenda that has thus far emerged is based on a very costly stimulus package set to have a massive impact on the public debt, but that the majority of economic and business analysts have acknowledged as necessary. Equally essential will be this spring’s new federal budget and what resources it will actually have earmarked for infrastructure and the green/sustainable conversion, key planks in the Democratic platform.
Raising the minimum wage could also be an important ingredient in this framework, and one to be assessed carefully for its aggregate effects on the creation of jobs. No radical changes are expected however in the tax structure, at least over the short term, although there will probably be some redistributive measures (a possible increase in corporate taxes, tax exemptions for the poorer segments of the society and some adjustments for the middle class).
The overall approach will be oriented, in any case, toward issues of social justice, although the president’s team is fairly moderate; a case in point is Janet Yellen as Secretary of the Treasury, a figure considered quite “market-friendly” and inclined toward cautious and gradual measures.
The greatest constraint on economic policies will not be tax-related, but rather political in nature; the underlying question is how much the administration can do solely by means of executive orders without, at the same time, triggering the obstruction of the Republic Party. The pandemic is clearly the main threat to American economic dynamism, but many of its associated issues have taken on an ideological character that makes compromise difficult. Further constraints on government action will stem from the international context, given the need for a reform of the multilateral system that, having already been impossible for the second Obama administration, is even more complex today.
Regarding foreign policy, a renewed US international representation must stand on a solid domestic foundation, as Biden himself systematically underlined throughout his electoral campaign and up to the inauguration. America’s global presence will follow a less costly and exposed trajectory for a long time (especially in the Middle East region, with the possible exception of Iran), and new efforts will be made at fruitful cooperation with allies and partners where possible. The orientation of some key administration figures is substantially interventionist, but will have to deal with a different world than that of just a few years ago and with the burden of domestic priorities.
The China question will dominate the transatlantic agenda in terms of trade and manufacturing, with an important impact on strategic technologies and investments. In any case, a much needed dialogue will certainly be launched and, moreover, a certain degree of collaboration from China is going to be indispensable in at least some sectors such as climate, terrorism, global health and cyber-security.
It remains to be seen how the sometimes ambiguous and delicate “defense of democracy” will be articulated in global terms if the aim is to avoid a head-on ideological collision with some authoritarian yet highly influential governments. Moreover, the presence of “illiberal” regimes – even within the European Union itself – often necessitates difficult choices, and shades of grey are more the norm than clear black and white distinctions.
Pressure on Europeans to play a more active role in the case of security is destined to increase. So-called “strategic autonomy” could even become a secondary issue if Europeans are collectively willing to make a greater effort through concrete action, in the Mediterranean region to begin with.
From the more specific standpoint of trade, the international scenario is very different to that of the 1990s, but even as compared with the period when the Obama administration ran into considerable difficulty in handling China’s ascent to an even predominant position in some sectors. Biden will address economic recovery and revived diplomatic impetus in terms that will reflect positively on US negotiating power abroad. Examples of this could include commitments to seaport and airport infrastructure and greater American participation in the field of vaccines and healthcare policies. There is a potential link therefore between the domestic and international dimensions. Forging trade agreements calls for a better understanding of the reasons behind some recent failures, focusing more closely on objections to economic liberalization – a problem that has obviously contributed to domestic US fractures and that intersects with social policies (as important for Biden as for European governments). The experience of the pandemic has also brought out added concerns for a healthcare sector that needs to strike a balance between international cooperation and the reliability of essential supplies.
A thorny yet inevitable issue is going to be the taxation of web giants; here, even though it will not disappear entirely, the transatlantic divide could be narrowed through efforts at greater regulation. Approaches on both shores of the Atlantic remain different, but there could be partial convergence on some fundamental standards and rules of the game.
Regarding the role of the dollar and monetary policy, it was stressed that managing the dollar/euro relationship remains possibly the best way to cultivate transatlantic relations, not least in light of China’s financial, and not only trade, offensive. A careful eye should be kept on the trend toward the euro’s greater autonomy as a reserve currency.