GP Short Notes

GP Short Notes # 618, 6 March 2022

Biden’s State of the Union Address: Focus on Building back better
D Suba Chandran

What happened?
On 1 March 2022, President Biden delivered his first “State of the Union” (SOTU) address to the US Congress. The SOTU address of the American Presidents, focus on the domestic and external priorities for the US and outline a strategy to deal with them. Biden’s address started with the war in Ukraine, President Putin’s aggression, sanctions against Russia, and domestic challenges, including inflation.

Biden’s address started with Putin’s Ukraine aggression. He said: “Russia’s Vladimir Putin sought to shake the very foundations of the free world, thinking he could make it bend to his menacing ways.  But he badly miscalculated… Putin’s latest attack on Ukraine was premeditated and totally unprovoked.  He rejected repeated — repeated efforts at diplomacy. He thought the West and NATO wouldn’t respond.  He thought he could divide us at home, in this chamber, in this nation.  He thought he could divide us in Europe as well. But Putin was wrong.  We are ready.  We are united.  And that’s what we did: We stayed united.”

Biden’s address also looked into measures the US has taken. He said: “ Together, along with our Allies, we are right now enforcing powerful economic sanctions.  We’re cutting off Russia’s largest banks from the international financial system; preventing Russia’s Central Bank from defending the Russian ruble, making Putin’s $630 billion war fund worthless.  We’re choking Russia’s access to technology that will sap its economic strength and weaken its military for years to come. Tonight, I say to the Russian oligarchs and the corrupt leaders who’ve bilked billions of dollars off this violent regime: No more.”

Third, Biden’s address also underlined, whether the US would get into a war directly with Russia over Ukraine. He said: “But let me be clear: Our forces are not engaged and will not engage in the conflict with Russian forces in Ukraine.  Our forces are not going to Europe to fight [in] Ukraine but to defend our NATO Allies in the event that Putin decides to keep moving west. For that purpose, we have mobilized American ground forces, air squadrons, ship deployments to protect NATO countries, including Poland, Romania, Latvia, Lithuania, and Estonia. And as I’ve made crystal clear, the United States and our Allies will defend every inch of territory that is NATO territory with the full force of our collective power — every single inch.”

Besides Ukraine and Russia, the rest of Biden’s address looked at internal challenges facing the US. He looked at the state of affairs and nailed the problem when he said: “We meet tonight in an America that has lived through two of the hardest years this nation has ever faced.  The pandemic has been punishing.  And so many families are living paycheck to paycheck, struggling to keep up with the rising cost of food, gas, housing, and so much more.” peopleIn response to the above problem within, Biden self-congratulated his “Rescue Plan” helping the working people and leave no one behind. He said: “It worked…it worked and created jobs — lots of jobs.  In fact, our economy created over 6.5 million new jobs just last year, more jobs in one year than ever before in the history of the United States of America.”

His address also focussed on the other major American challenge – the infrastructure. He said: “America used to have the best roads, bridges, and airports on Earth.  And now our infrastructure is ranked 13th in the world.  We won’t be able to compete for the jobs of the 21st century if we don’t fix it. That’s why it was so important to pass the Bipartisan Infrastructure Law.  And I thank my Republican friends who joined to invest and rebuild America — the single biggest investment in history.”

His address also focussed on the need to focus on innovation, and provide a level playing field vis-à-vis China. He said: “…to compete for the jobs of the future, we also need to level the playing field with China and other competitors.  That’s why it’s so important to pass the bipartisan Innovation Act sitting in Congress that will make record investments in emerging technologies and American manufacturing. We used to invest almost 2 per cent of our GDP in research and development.  We don’t now…China is.”

What is the background?
First, the focus on inflation and reducing the costs, but not the wages. While the first part of Biden’s address focussed on Ukraine, the second part looked at the most pressing issue the US is facing – inflation. Biden’s plan then, and his strategy now, has been consistent – before and after the elections – to reduce the costs without lowering the wages. However, his slogan of “build back better” does not have bipartisan support in Congress. Even his own party is divided and cannot reach a conclusion on how much needs to be spent and for how long.

Second, Biden’s continued emphasis on investing in an infrastructure decade. To achieve the above – arrest inflation and reduce the cost, Biden has also been consistent with his belief in investment in infrastructure. Biden’s idea of infrastructure investment is long term (he refers to an investment decade) and is comprehensive (from bridges to railways, including internet, ports, waterways and electric vehicles). While the idea is good, how deep the American pockets are to invest and where would these investments come from, remain the primary questions.

Third, the emphasis on innovation. There is a realization within the US that its innovation plans have slowed down, or China has overtaken it. To build back better, reduce the costs, and provide a level playing field, it is necessary not only for the US but also for all countries to invest in innovation. The bill currently in the Congress on “United States Innovation and Competition” looks at the following: semiconductor manufacturing, research and development, and supply chain security; funding for wireless supply chain innovation; programs and policies related to space exploration; sanctions on China for cybersecurity and human rights abuses; and initiatives pertaining to elementary and secondary education.

Fourth, the return to “Make in America” slogan. From Trump to Biden, there has been a new push to make in America so that the supply chains and the costs get cheaper. Also, from Trump to Biden, there is a realization that if the US has to play a larger global role, it has to be stronger within.

Fifth, the focus on Ukraine and Russia. Biden’s address goes with what the American strategy has been so far. The US does not want to engage Russia militarily in Europe; Biden’s SOTU address also made the same clear. However, it wants to impose the cost for Russia, through economic sanctions. The reason is apparent; from Trump to Biden, the primary challenge for the US is a rising China, and the White House does not want to get distracted from it. Biden’s decision to pull out from Afghanistan aims to address the primary American challenge (China); and he would like to stay the path and avoid an open confrontation with Russia.

What does it mean?
The primary challenge for the Biden administration is domestic – addressing inflation, reducing the costs without reducing the wages, rebuilding infrastructure, and building back better. The second challenge for Biden is to get bipartisan support to address the first; unfortunately, he does not have much support even within his party. The third challenge for Biden is China, and a more significant challenge in this context is how to avoid other challenges that would pull his attention away. With Putin’s aggression, he would have to face China and a resurgent Russia.

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