Biden’s Back-Door Actions Could Reshape The Economy

Commentary

Sometimes when there's an obstruction blocking the main gate, it's smart to try the back door, where nobody's paying much attention. That's what the Biden administration seems to be doing with some little-noticed executive actions to start fixing some urgent national problems stemming from the coronavirus pandemic and climate change.

The obstacle in Biden's way is the closely divided and bitterly partisan Congress. Biden is trying to maneuver his legislative agenda through nonetheless, with a two-track process of infrastructure spending: first, a $579 billion brick-and-mortar program that he hopes will have Republican support; and then a plan, totaling perhaps trillions more, for social investment backed by Democrats. Let's hope Biden gets some of what he wants.

Meanwhile, the White House is quietly pursuing another approach to reform that doesn't need congressional approval. The bland name for this interagency strategy is the "Supply Chain Disruptions Task Force," but it's an early test of a much broader effort to use "industrial policy" to revive U.S. manufacturing and gain independence from foreign suppliers.

These under-the-radar initiatives were outlined recently by White House officials familiar with the details. Most of the initiatives address basic economic problems stemming from the pandemic and global warming. The idea is to use the executive powers of the presidency to advance the White House agenda without legislation, just as President Donald Trump did in his first year.

The authority for these programs is an executive order Biden issued in February, directing federal agencies "to strengthen the resilience of America's supply chains." In Biden's definition, that covers a lot of ground, from pharmaceuticals to electric vehicles to semiconductors and a thousand other things needed to build what the executive order describes as "a world-class American manufacturing base and workforce."

Take pharmaceuticals, whose importance was so viscerally obvious during the pandemic. It turns out that as much as 90% of America's supply of "active pharmaceutical ingredients," the drugs that keep us healthy, is manufactured abroad. This offshoring exposed a vulnerability, not only in terms of supply but also of quality, during COVID times.

So the Department of Health and Human Services is deciding which drugs the United States needs to produce at home. When that list is complete, the administration will consider how to encourage production in the United States – through government purchases, stockpiles or other incentives. The best strategy, obviously, would be a version of what happened with the coronavirus vaccines: U.S. companies were so innovative in drug design, testing and production that we didn't need foreign drugmakers.

The United States' power supply is vulnerable to disruption, too, as we saw in the freeze that crashed the Texas grid in February and the cyberattack that shut the Colonial Pipeline in May. The key to energy resilience (and also to reducing carbon emissions) is partly better battery technology.

So the Biden Energy Department launched a "National Blueprint for Lithium Batteries" in June, aimed at making the United States a dominant producer of this essential energy-saving tool by 2030. The document proposed public-private partnerships to secure raw materials, research and development and manufacturing capacity.

Electric vehicles are a big part of any rational attempt to lower carbon emissions. So in Biden's first week in office, he issued a "Buy American" order with a provision to purchase "clean electric vehicles." And in a subsequent order, he directed his National Climate Task Force to replace the federal fleet of more than 600,000 cars and trucks with zero-emission electric vehicles.

The White House also identified a potential shortage of critical materials used in high-tech products. The Defense Department is using grants, loan guarantees and other powers to ensure supplies. And working with Congress, the administration is drafting aggressive plans to keep innovation and production of advanced semiconductors at home.

Government intervention in the economy is a slippery slope. Policies that protect U.S. jobs at a cost of featherbedding and inefficiency are a mistake. But recent years have taught us that government policies are always picking winners and losers, even when the choices don't seem explicit. Weak health systems made us vulnerable to the pandemic; loose energy policies encouraged fossil fuel use and global warming; tax and spending policies squeezed the middle class.

As Biden struggles to pass his infrastructure bills in Congress, keep an eye on the things he's doing without congressional permission. There's a reason Biden has made President Franklin D. Roosevelt's portrait the most prominent in the Oval Office. He has quietly embarked on policies that will make the government considerably more involved in how the economy works.