I was headed to a market update meeting and ETF promotional event at the Chicago Board of Options (CBOE), the event consisted of ringing the closing bell at the exchange floor, and then a couple hours of meetings the next morning. And I was running late, of course I was running late.
Considering the holiday weekend was coming, and Chicago was setting up for the NASCAR street race, the traffic to the city was remarkably light. I made up time on the way up, even the traffic in the mid-afternoon on the notoriously bad "circle" was reasonable. "I might just make this whole thing work" I thought as I dropped into the West Loop, and into a mess of epic proportions.
As I decelerated off the Congress Parkway ramp, I was met with barricades and police cars. The streets in the West Loop were closed. "What the heck, how can they close the streets in the central financial district of a major city during the middle of the week?" I thought as I tried to figure out a plan B. I could see the hotel on my navigation map, but as I was being continually diverted by closed roads, I just couldn't seem to get within three blocks of it in a car.
I finally rolled down the window to talk to a police officer. "Hi, I have to get into the Marriot in there," I said, pointing past the barricade. "Sorry sir," he replied politely, "district is closed for another two hours until the President leaves, you'll have to park and walk in."
The President!!! I turned on CNBC radio, sure enough, President Biden was speaking at the Old Chicago Post Office, a block away, and then going to my same Marriot to glad-hand donors, at pretty much the same time as my arrival.
"Calamity" I thought as my blood pressure spiked, "and what the heck is this Bidenomics?" he's touting anyway. After pulling my suitcase for two blocks, being sniffed by a couple very well-mannered Secret Service dogs and going through a checkpoint that made the airport TSA look like a buff et line, I actually made my meeting on time. Making a mental note to research "Bidenomics" later that evening, I went on with my itinerary.
After ringing the bell, a meeting, reception and dinner it was time for some Bidenomics. I expected the topic to mostly involve some bragging about the economic recovery, new jobs, stock market, etc. But the Bidenomics I was learning about was more than that, and while President Biden is in the White House, I realized how important it was to understand this concept.
The official White House memo about this concept states, "Bidenomics is rooted in the simple idea that we need to grow the economy from the middle out and the bottom up — not the top down. An economy where we build more in America, empower and invest in American workers, and promote competition to lower costs for working families. Implementing that economic vision and plan — and decisively turning the page on the era of trickle-down economics — has been the defining project of the Biden presidency."
Ok, that's a lot, and very little. When I look at some of the policies underlying this statement the true vision becomes clear. Bidenomics is about massive targeted federal spending injected into preferred industries such as semi-conductors and renewable energy, intense regulation on non-preferred industries such as oil and gas and consistent objection to corporate consolidation and mergers which could thwart what is perceived by the government as competitive forces in the economy.
As the Biden administration came into office during the COVID crisis, only had Democratic Party control over Congress during the crisis period, and because it inherited the 2016 Trump tax laws which expire in 2026, it has been unable to affect tax policy, but the writing is on the wall with the trickle down economics line in the memo. If this administration gets a shot a tax policy, individual tax rates are likely to be made much more progressive and focused on higher rates for higher earning individuals.
These policies all form the foundation of a new type of federal economic policy, in what looks to me like a kind of "central planning light." Do I have concerns? Of course. My biggest concern involves the massive increase in federal spending as the government drives money toward certain industries. With the federal debt now at 130% of GDP, increasing borrowing to drive public money into private industry seems risky and has likely contributed to stubbornly high inflation. Beyond this, however, the government has never been a particularly skilled investor, so I am concerned about misallocated, borrowed government money.
At least, however, we now have a frame of reference to evaluate the economic philosophy of this administration. Now let's watch and see how it plays out over time.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. This material may contain forward looking statements; there are no guarantees that these outcomes will come to pass.
Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc. ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.