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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is director of the Center-Left Renewal project at the Progressive Policy Institute and former Labour executive director of policy 2020-22
As the Labour party looks increasingly likely to form the next UK government, it would do well to heed the warnings as well as the successes of the Biden administration’s investment programme unfolding in America.
Undoubtedly ambitious, the programme can reasonably claim to have contributed to the relatively strong growth and jobs rate in the US — hence Labour leader Keir Starmer’s desire to set out an economic plan that follows in its wake. Wages are up in America and inflation is coming down. With less than a year until the election, the US administration should have cause for optimism.
But the polling for President Joe Biden is dire, with the latest surveys placing him behind former president Donald Trump in key swing states that will determine the outcome of the overall contest. There are loud murmurings about a Democrat challenger to be the “next generation” figure. The party’s problems don’t start and end with a judgment on Biden, however. Their economic policies — much heralded by the centre-left worldwide, not just in the UK — are just not landing with the voters the Democrats need. Not yet, anyway.
Despite the headline economic performance, less than a third of US voters say the nation’s economy is good. When asked which president from the past 30 years has done the most for working families, just 12 per cent of working-class voters polled by YouGov for the Progressive Policy Institute chose Biden; 44 per cent said Donald Trump, well ahead of any rival including Bill Clinton, Barack Obama and George W Bush.
The Republicans outperform the Democrats on which party is trusted to manage a growing economy and to keep public debt and deficits under control. So Democratic strategists hoping that the headline performance will filter through to voters before the next election are taking a big gamble.
Labour has long looked across the Atlantic for inspiration, and this new generation is no exception. There have been overt references to Biden’s policies in pronouncements by Starmer and Rachel Reeves, shadow chancellor, and the Labour party has its own infrastructure investment programme, gestating in opposition. It’s already under attack from the Conservative chancellor. (Jeremy Hunt rejects Biden-style policies as “some distortive global subsidy race”.) Battle lines are being drawn, and Labour needs to arm itself.
So why aren’t Americans more favourably disposed to an economic approach that seems, on the face of it, to be delivering the goods?
The individual components of the Biden administration’s policies are actually quite popular with voters who back the Inflation Reduction Act by 46 per cent compared with 32 per cent who oppose it. Certainly, they are more popular than the abstract framing of “Bidenomics”, which has no positive associations for a population stung by higher prices and named after a president they associate with tough times.
However, working-class voters in particular are sceptical that they will be the ones to benefit from the White House’s investments, not helped by Biden’s choice to write off $127bn of student debt. The survey shows they actually attribute stimulus spending to overheating the economy.
US voters have a clear preference for government policies to bring down rising prices, reduce the high cost of essentials and provide affordable training programmes to boost skills and earnings.
Households everywhere are feeling the pinch, and they want to know that the government is on their side with pragmatic solutions. They are doubtful that more trade wars will bring greater economic prosperity, favouring stronger trading relationships with allies and more resilience in domestic supply chains.
There is no reason why a Trumpian economic agenda should prevail if the Democrats can translate the economy’s positive headline data into the money in people’s pockets, and get the message out that this holds hope for a brighter future.
Labour also should not shy away from an active state that steers the economy to greater prosperity. Investing in the US has been good for America’s workers and businesses, just as investing in Britain would be good for workers and businesses — if it is done well. But the lesson is that big plans are no substitute for policies that bring direct benefits to people’s everyday finances. Only then will the electorate feel they will be better off voting for change.