In an effort to advance equality, environmental protection and other social goals, President-elect Joe Biden has proposed an ambitious and historic agenda, particularly in four areas: taxation, health insurance, regulation and energy policy. His full agenda would significantly reduce productivity, discourage work and discourage investment. Coauthors Hassett, Fitzgerald, Kallen and I estimate that following this path would reduce median (“middle class”) annual family income about $6,500 by the year 2030. Employment would drop by about five million jobs.
Most of Biden's agenda requires congressional action, but the Senate will have more than 50 members (Republicans plus moderate Democrats) who do not favor such radical changes. That will make it difficult to raise taxes, fund a health insurance public option and other expansions of ObamaCare, resurrect the costly and politically unpopular individual mandate or get Congress to appropriate enough subsidy dollars to allow renewable energy to overtake fossil fuels.
That leaves federal agency regulation as the primary tool Biden would have left. As President Trump is apt to explain, regulations are "stealth taxation, especially on the poor."
The key regulatory agencies will be the Federal Communications Commission, the Department of Labor, the Department of Transportation, the Department of Health and Human Services, the Environmental Protection Agency and the Consumer Financial Protection Bureau. If a Biden presidency is anything like Barack Obama’s, these are the agencies that will be taking the biggest steps to hinder competition and reduce productivity. Offering the flimsiest claims of "net social benefits," the agencies will write regulations as requested by large banks, trial lawyers, major health insurance companies, Big Tech companies, labor unions, drug manufacturers and environmental lobbies.
Consumers will likely be squeezed the hardest as a Biden administration regulates the business of health. President Trump removed Obama's prohibitions against the most affordable health insurance plans (maligned as "junk plans") that consumers strongly prefer to ObamaCare. Biden will likely prohibit them again in the name of "making ObamaCare better."
President Trump also told the Food and Drug Administration to get out of the way of competition in generic drug manufacturing and the Centers for Medicare and Medicaid Services to encourage citizens to have private health insurance rather than Medicaid. These are two reasons why 2018 was the first time in almost half a century that retail prescription drug prices actually fell. But Trump's approach also took power away from Washington bureaucrats, who are eager for President-elect Biden to give it back.
Biden's Department of Transportation could require that vehicle manufacturers produce primarily electric vehicles, which is one of Biden's ambitious climate goals. We estimate that this policy by itself would increase the quality-adjusted price of new cars and pickups by more than $12,000. In the aggregate, that would cost consumers about $186 billion annually. This policy would have minimal environmental benefit, and might even harm the environment, because fossil fuels would be satisfying the additional electricity demand, while much rare-earth mining would be required to manufacture so many batteries.
A vocal former President Trump could also use his megaphone to shine a light on onerous new regulations. Congress can also do, and has done, a few things to slow Biden's regulatory machine. All of Biden's Cabinet and other senior officials in the regulatory agencies must be approved by the Senate. An important part of President Trump's deregulatory agenda was his 16 uses of the Congressional Review Act, which not only removed costly Obama regulations but also prevented the agencies from reconsidering such regulations without a new act of Congress. This Trump legacy will be especially valuable in preventing costly Democratic priorities in the regulation of telecommunications and consumer finance.
All together, the restrained version of Biden's agenda would reduce median household incomes by an estimated $1,700, rather than the $6,500 for the full agenda. And his agenda would cost about 800,000 jobs in the long run rather than five million for the full agenda.
Casey B. Mulligan, professor of economics at the University of Chicago, served as chief economist of the White House Council of Economic Advisers from 2018 to 2019. His new book, "You're Hired! Untold Successes and Failures of a Populist President," explains how President Trump has clashed with special interests in his quest to cut federal regulation.